Internship Report ZTBL Hailey College

INTERNSHIP REPORT
ZARAI TARAQIATI BANK LTD.

Submited to:
Sir, Fida Hussain Bukhari
Submitted by: Adnan Ijaz M08MBA071 Specialization in Finance
MBA Banking & Finance 2008-2010
Hailey College of Banking & Finance University of Punjab
Internship Report on Zarai Taraqiati Bank Ltd.
2010
In the name of ALLAH the most benificent, the most merciful
Internship Report on Zarai Taraqiati Bank Ltd. 2010
ACKNOWLEDGEMENT
I have great sense of gratitude for the most Beneficent and Merciful Allah who h
as always helped me in all matters of life .I tried but He rewarded me more than
the tried. I have deep feelings for whole of my family, in general, and for my
Father, my Mother and my elder brother, in particular .They have always soothed
me, elevated me and their words and du a has floated me in the deep seas of trou
bles. All of my successes are due to the prayers of my family. I am thankful to
all of my teachers and my class fellows and friends whom cheerfulness and guidan
ce is an asset for me .I am especially thankful to the bank staff who has given
me opportunity to get precious practical knowledge and also for their guidance d
uring my internship. Without the help of all these I was not able to complete th
is report.
3
2010
Preface
This Internship report is the compulsion put in by Hailey College of Banking and
Finance for the award of master degree in business administration. In order to
accomplish the task of completion of the degree, I choose the renowned and reput
ed organization that is the Zari Taraqiati Bank Ltd. I went through 6 weeks inte
rnship training in the bank in order to perceive the true art and the practical
picture of banks working and to go through the process by which the organization
is making very good out of its limited resources. The report is based on the in
troduction of the bank, products offered, financial analysis and assignments I h
andled during my internship. The report is divided into two main parts; the firs
t part includes the introduction of bank, its products and financial analysis wh
ile the second part is based on the assignments I handled during my internship.
I am positive that the college will oblige me by giving its recommendation and c
onsent for the approval of the degree and the purpose for which I have gone thro
ugh training and report writing procedure will be served positively.
Table of Contents
Part One ____________________________________________________________________ 8
Ch. 1: Introduction of Zarai Tarqiati Bank Ltd. ________________________________
_____ 8 Chapter 1 ______________________________________________________________
_____ 9 History ________________________________________________________________
___ 9 Credit Rating ____________________________________________________________
11 Corporate Vision _________________________________________________________ 1
2 Corporate Mission _______________________________________________________ 12 C
orporate Objectives _______________________________________________________ 13 T
ransformation of ZTBL to R.F.I of the country and road to excellence. __________
____ 14 Branch Network _________________________________________________________
__ 16 Management Hierarchy _____________________________________________________
17 Board of Directors _________________________________________________________
19 A Brief Resume of President _______________________________________________
20 Kissan Support Services Ltd. ________________________________________________
_ KSS Aim ________________________________________________________________ KSS O
peration ___________________________________________________________ Objectives
______________________________________________________________ Services/Activiti
es so far undertaken by KSS ___________________________________ 23 23 23 23 24
Chapter 2 __________________________________________________________________ 25
Products and Services ______________________________________________________ 25
ZTBL Locker Facility ______________________________________________________ 25 P
roducts offered to Meet Finance Need of Farmers ______________________________ 2
6 Types of Loans Advanced __________________________________________________ 26
Loan Schemes _____________________________________________________________ Super
vised agriculture scheme: _____________________________________________ Zarkhaiz
(one window operation) ___________________________________________ Sada Bahar S
cheme ______________________________________________________ Tea financing schem
e _____________________________________________________ Crop maximization projec
t _________________________________________________ PER ACRE CREDIT LIMITS _____
_______________________________________________ Major Crops ____________________
________________________________________ Minor Crops ___________________________
_________________________________ Growing Agro Forest Trees_____________________
____________________________ Growing Orchards __________________________________
_____________________ Mature Orchard/Fruits crops ______________________________
_________________ 27 27 27 27 28 28 30 30 30 31 31 32
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33 33 33 34
Types of Security __________________________________________________________ Imm
ovable Property______________________________________________________ Moveable P
roperty and Guarantees _________________________________________ Personal Surety
_________________________________________________________
Debt Equity Ratio __________________________________________________________ 35
Repayment Periods ________________________________________________________ 36 Re
covery Procedure ________________________________________________________ A) Rec
overy Schedule _____________________________________________________ b) Issuance
of Notices ____________________________________________________ c) Legal Action
__________________________________________________________ d) Rescheduling of L
oan Repayment Facility ___________________________________ d) Down Payment for R
escheduling of Loans __________________________________ 36 36 36 36 37 37
Chapter 3 __________________________________________________________________ 38
Horizontal Analysis of Balance Sheet __________________________________________
38 Vertical Analysis of Balance Sheet __________________________________________
__ 39 Horizontal Analysis of Profit & Loss _____________________________________
______ 40 Vertical Analysis of Profit & Loss ___________________________________
___________ 42 Interpetation of Horizontal and Vertical Analysis _______________
_________________ 44 Interpetation of Horizontal and Vertical Analysis of Balanc
e Sheet __________________ 49 Cash and Balance with Treasury Banks _____________
____________________________ 49 Ratios _________________________________________
__________________________ 52 Key Financial Trends of 2009 _____________________
____________________________ 55 Credit Risk_____________________________________
___________________________ Market Risk_________________________________________
____________________ Liquidity _________________________________________________
______________ Profitability ___________________________________________________
__________ Capitalization ______________________________________________________
_____ 57 58 59 60 60
Chapter 4 __________________________________________________________________ 65
SWOT Analysis ____________________________________________________________ Stren
gths ______________________________________________________________ Weaknesses _
___________________________________________________________ Opportunities ______
_____________________________________________________ Threats __________________
______________________________________________ 65 65 66 67 68
Part Two ___________________________________________________________________ 69
Ch. 5: Assignments I handled during my Internship. _____________________________
__ 69
Chapter 5 __________________________________________________________________ 70
Organogram of Mian Channu Branch __________________________________________ 70 R
edemption of loan ________________________________________________________ 71 Op
ening of Current Account _________________________________________________ 1: Ac
quiring Original CNIC _________________________________________________ 2: Filli
ng Current Account Form _____________________________________________ 3: Filling
of Know Your Customer Form _______________________________________ 4: Current A
ccount Specimen Card __________________________________________ 5: Registering n
ame in the Current Account Register (Issuance of A/C No.) ___________ 6: Filling
of Deposit Slip of starting amount ____________________________________ 7: Sign
ing by AMO and Manager ____________________________________________ 8: Issuance
of Cheque book ________________________________________________ 9: Opening accou
nt in the ledger of bank _____________________________________ ZTBL Flood Relief
Fund 2010 _______________________________________________ Writing of Vouchers _
_______________________________________________________ 1. Debit Voucher _______
__________________________________________________ 2. Credit Voucher ___________
_____________________________________________ 3. Transfer Voucher ______________
________________________________________ 74 74 74 75 76 76 77 77 78 78 81 83 83
83 83
Sample of Debit/Credit Voucher ______________________________________________ 84
Sample of Transfer Voucher _________________________________________________ 89
Daily Transaction Scroll _____________________________________________________
90 Making Entries in the Ledgers _______________________________________________
_ 92 Disbursement and Recovery Entries _________________________________________
__ 92 Revolving SBS Loan _______________________________________________________
_ 94 Opening and Closing Cash __________________________________________________
_ 97 Key Register ____________________________________________________________ 9
7 Safe Register: ___________________________________________________________ 97
Dispatch and Diary _________________________________________________________ 98
Recommendations _________________________________________________________ 98 Con
clusion ______________________________________________________________ 100
7
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Part One
Ch. 1: Ch. 2: Ch. 3: Ch. 4: Introduction of Zarai Tarqiati Bank Ltd. Products Of
fered Financial Analysis SWOT Analysis
Chapter 1
The Zarai Taraqiati Bank Limited (ZTBL) (formerly known as Agricultural Developm
ent Bank of Pakistan) is the largest public sector financial development institu
tion with a wide network of 27 Zonal Offices, 9 Audit Zones and 352 branches in
Pakistan. The bank serves around half a million clients annually and has over on
e million accumulated account holders.
History
Pakistan is an agricultural country and more than 60% of its population is worki
ng related to agriculture. A development in the agricultural sector will no doub
t result in the development of the whole country. To keep With a view to meet th
is basic need the Agricultural Development Finance Corporation was set-up in 195
1, and was entrusted with the task of providing financial facilities for the dev
elopment and modernization of agriculture, including: Forestry, Fishery, Animal
Husbandry, Poultry, Dairy Farming. Later on the Agricultural Development Bank of
Pakistan was also established in September 1957, under the Agricultural Develop
ment Bank Act. The Bank is to provide credit in cash or in kind, warehousing and
storage facilities to agriculturists, cooperative societies and other bodies, o
f which the majority of members are agriculturists. As the functions of the Agri
cultural Development Finance Corporation and Agricultural Development Bank were
similar and since both were working with capital provided by the Government, the
y were merged into one organization known as Agricultural Development Bank of Pa
kistan on February 18. 1961. The Agricultural Development 9
2010
Bank of Pakistan was a banking company for the purpose of the Banking Companies
Ordinance and the State Bank of Pakistan Act. On 14 December 2002 the Federal Go
vernment has converted the Agricultural Development Bank of Pakistan (ADBP) into
Zarai Taraqiati Bank Ltd (ZTBL) and the new venture has started its operation w
ith immediate effect. The new corporate structure redefines the banks statue as
a public limited company with an independent Board of Directors promulgated unde
r the presidential ordinance which, aims at ensuring good governance, autonomy,
delivering high quality, viable and timely financial services to a greater numbe
r of clientele in the agricultural and rural segment of the country with adequat
e returns to the stakeholder. After this incorporation all the assets and liabil
ities of ADBP became the assets and liabilities of ZTBL. This restructure was ca
rried out with the aim to improve the working and role of bank in the agricultur
al development. The bank is completely owned by the government and it has head o
ffice in Islamabad. Ownership Type of Institution Established President & CEO Eq
uity Headquarters Total Deposits Total Disbursement Homepage Government Speciali
zed Bank 1961 Muhammad Zaka Ashraf 18.7 Billion (2009) Islamabad, Pakistan PKR 8
.8 billion (as Dec.31st, 2009) PKR 77.7 billion (as Dec.31st, 2009) www.ztbl.com
.pk
ZTBL is providing affordable, rural and agriculture financial services to the ru
ral Pakistan, comprising 68 % of the total population. The Bank through a countr
y-wide network of 352 branches is serving around half a million clients annually
and over one million accumulated account holders with the average loan size of
around Rs.89,000.
Credit Rating
In August 2010, ZTBL continued to achieve AAA credit rating by JCR-VIS. Year 201
0 2009 Entity AAA/ A-1+ AAA/ A-1+ Stand Alone B+/ B B+/ B Outlook Stable Stable
The credit rating of the bank is due to the reason that bank enjoys sovereign gu
arantee of the federal government that covers its debt obligations to State Bank
of Pakistan (SBP) and ensures safety of deposits under the Banks (Nationalizati
on) Act 1974. The bank s lending book is largely funded through SBP s credit lin
es while contribution from deposits remains nominal. ZTBL is actively exploring
different options for resource mobilization including bilateral/multilateral arr
angements with financial institutions. In case these efforts materialize; it wou
ld diversify the existing funding source of the bank, thereby reducing reliance
on the SBP.
11
2010
Corporate Vision
Dedicated to serve the needs of the farming community, by delivering financial p
roducts and technical services on a competitive and sustainable basis, in a conv
enient, efficient and professional manner, leading to success of the Bank and th
e farmers.
Corporate Mission
To play effective role in the promotion of economic growth, by enhancing the ava
ilability of credit to the agriculture sector, through reliable access to sustai
nable financing, special lending programs, technical assistance, and other produ
cts & services, and to promote career development opportunities for increasing p
rofessionalism and technical proficiencies of employees.
Corporate Objectives
1. Develop and operate as a financially and operationally sustainable R.F.I of t
he country. 2. Assist rural community, particularly the small farmers, in raisin
g their productivity and income levels through timely delivery of credit, adviso
ry and ancillary services. 3. Build ZTBL's image as a proactive, client friendly
, financially & operationally sustainable with indigenous product deployment. 4.
Establish and provide backward and forward linkages to strengthen agri. value a
dded commodity chains. 5. Engage in public - private and wholesale - retail part
nership to deepen outreach and reduce operating cost. 6. To function as a rural
commercial bank to mobilize rural capital formation and to commercialize the agr
iculture sector by delivering the true value of credit to the client. 7. Provide
a wide range of risk insurance products to its clients. 8. Open up its venues o
f operation to Domestic & International Banking Industry to avail comparative ad
vantages.
13
2010
Transformation of ZTBL to R.F.I of the country and road to excellence.
The conversion of ADBP into ZTBL had a conditionality of the Asian Development B
ank (ADB) loan framework as per which a restructuring exercise was initiated. Th
e restructuring process entailed ADB s Rural Finance Sector Development Program
(RFSDP) with the objective to transform ZTBL into a sustainable Rural Finance In
stitution. It also included the up-gradation of Information technology (IT) infr
astructure for which funds from ADB s loan were to be utilized. Healthy and well
-functioning rural finance markets are directly related to achieving the two key
national policy objectives of accelerating rural/agriculture growth and reducin
g poverty. The realization of these objectives depends on the simultaneity of de
velopments in rural finance and non-financial markets to foster the creation of
diverse sources of rural finance to build sustainable financial institutions, an
d stimulate products and capital flows in the rural sector. For this, rural fina
nce must be seen as an integral part of equitable development within a framework
of macroeconomic stability. For the majority, access to affordable rural financ
e services is also important to enable them to compete in the post-World Trade O
rganization scenario. Inability to compete because of high financial costs could
reduce income of the majority of farmers and rural clients, particularly the sm
all and subsistence clients. Lack of access to affordable rural finance services
will also prevent the clients from switching to non-farm activities. The ZTBL r
estructuring plan covering the following; y Governance: establish an environment
that facilitates good governance and accountability; y Systems: modernize opera
tions through use of technology, networking, and communication tools; y Business
processes: streamline products and delivery systems so as to reduce transaction
costs, simplify operations, and increase outreach; y Products and services: int
roduce products and services that are financially economically viable; y Human r
esource development: improve standards and skills of management and staff and st
rengthen training capacity; and y Information Technology: establish new hardware
and software platform to support MIS, accounting system including forensic acco
unting, and risk
Internship Report on Zarai Taraqiati Bank Ltd. 2010 management functions.
The reforms shall establish ZTBL as a key R.F.I of the country. By expanding its
private sector role, the bank aims to establish network of high tech rural and
agri. financial services through intermediations under public private participat
ion and whole-sale retail lending mechanism.
15
2010
Branch Network
Head Office
Islamabad, Pakistan Details of Regional Offices
Punjab
Sindh
Balochistan
Khaber Pakhtunkhaw
Abbottabad 7 Branches Mingora 15 Branches Peshawar 20 Branches
Gilgit Balitistan
Gilgit 7 Branches
Islamabad 13 Branches Multan 8 Branches D.G.Khan 6 Branches Sahiwal 15 Branches
Lahore 20 Branches Gujranwala 18 Branches Bahawalpur 13 Branches Faisalabad 20 B
ranches Sargodha 16 Branches Vehari 11 Branches
Karachi 15 Branches Hyderabad 14 Branches Mirpur Khas 14 Branches Sukkur 15 Bran
ches Larkana 18 Branches S.B. Nazirabad 14 Branches
D.I. Khan 14 Branches Turbat 6 Branches Quetta 18 Branches D.M. Jamali 7 Branche
s
Total Zones
Total Audit Zones Total Branches
27 9 352
Muzafargarh 11 Branches
R.Y. Khan 7 Branches
Muzafar.Abad 10 Branches
Management Hierarchy
The general direction and superintendence of the affairs of the bank are entrust
ed to a 12 members Board of Directors consisting of a chairman appointed by the
Federal Government, the Federal Government officers from the Ministries of Finan
ce and Food and Agriculture, four officers of the four Provincial Governments an
d one non official nominated by each province. One member on this board represen
ts the State Bank of Pakistan also. However, at present the bank has 7 directors
including chairman. The bank also has a president appointed by the federal gove
rnment and a company secretary. In ZTBL, the president supervises and directs th
e Chief Executive Officer who supervises and directs the Head of Department, who
then supervise and direct the officers under them. The management hierarchy of
bank is as follows;
President
CEO (Chief Executive Officer)
Audit Dep. Head
Credit Dep. Head
HRM Dep. Head
Risk Management dep. Head
Officers
Officers
Officers
Officers
17
2010
Earlier the bank was functioning like a pure government institution and permissi
on has to be sought on every step for moving forward. Now the bank management bo
ard will be fully empowered to run the affairs of the ZTBL. More than 2,000 empl
oyees of the bank have opted for Voluntary Golden Hand Shake Scheme, offered by
the bank to its employees. Bank has established a task force for improving the o
perational performance of the staff and it was monitoring the disbursement, reco
very operations and performance of field functionaries. The task force comprised
10-15 officers and each officer will head a desk exclusively to monitor 3-4 reg
ions. This task force will be responsible to evaluate performance of each MCO, M
anager and Regional Manager on the achievement of bank s policies regarding cred
it and recovery periodically.
Board of Directors
Syed Qamar-Uz-Zaman Shah Chairman Board Mr. Muhammad Ashraf President/ CEO Zaka
Mrs. Nazrat Bashir Director
Mr. Shafqat Naghmi Director
Hussain
Mr. Muhammad Mohmand Director
Iftikhar
Khan
Mr. Tauqir Ahmad Faiq Director
Dr. Khalid Ahmad Khokhar Director
Mr. Imam Bux Sheikh Director
Mr. Muazam Ali Company Secretary
19
2010
A Brief Resume of President
Mr. Muhammad Zaka Ashraf
Present Portfolios y President/Chief Executive Officer, Zarai Taraqiati Bank Ltd
. y Chairman & Chief Executive, Ashraf Group of Industries y Chairman, Pakistan
Sugar Mills Association (Punjab Zone) from October, 2006 (Second Tenure) y Chair
man, Sugarcane Research & Development Company, Agriculture Department, Governmen
t of Punjab y President, Petarian Association, Lahore y Patron-in-Chief Sindh Ab
adgar Welfare Association (Sindh) Posts Held y Advisor to Chief Minister Sindh f
rom 1989 to 1990 y Member Executive Committee, Lahore Chamber of Commerce & Indu
stry from October 2002 to September 2004 y Central Chairman All Pakistan Sugar M
ills Association from October 2004 to October 2006 y Vice Chairman of The Federa
tion of Pakistan Chambers of Commerce & IndustryÂ¶s Standing Committee on Â³Food & Agric
ultureÂ´ from January 2007 to December 2007 Academic Institutions y Member Board of
Governors of Sadiq Public School, Bahawalpur, from 1st January 1989 to 2008
Ms. Nazrat Bashir
Director Ms. Nazrat Bashir belongs to District Management Group of Civil Service
s of Pakistan. She is Masters in Economics from New York University, New York, U
SA and Master in Psychology from Peshawar University, Peshawar. She has extensiv
ely traveled abroad and has attended various international Seminars and Conferen
ces such as on Micro Finance, Anti Money Laundering, and Instruments of Financia
l Markets etc. Domestically too she has attended various programmes in some of v
ery prestigious institutions of Pakistan. She possesses 29 years of administrati
ve experience in government service in economic & financial policy and its imple
mentation. At present, she is working as Additional Finance Secretary, Internal
Finance, Finance Division, GoP, Islamabad. She is a certified Director on the Pa
nel of Pakistan Institute of Corporate Governance (PICG). Besides Zarai Taraqiat
i Bank Limited, she is on the Board of Directors of National Investment Trust (N
IT) and NBP.
21
2010
Mr. Shafqat Hussain Nagmi Director Mr. Shafqat Hussain Naghmi is a civil servant
from DMG Group and currently posted as an Additional Secretary I in Federal Min
istry of Commerce, Islamabad. Previously he was posted as Chief Operating Office
r (COO) in Pakistan Cricket Board.
Tauqir Ahmad Faiq
Director Tauqir Ahmad Faiq represents the Ministry of Food and Agriculture, Gove
rnment of Pakistan on ASF s Board of Directors. An expert in District Management
, Secretariat Affairs, Development Project Management and International Cooperat
ion with combined experience of 34 years having held the office of Secretary at
Government of Punjab s Zakat and Usher, and Social Welfare Departments; he is cu
rrently Additional Secretary at the Ministry of Food and Agriculture, Government
of Pakistan. Tauqir Ahmad Faiq has served as Director General Lahore Developmen
t Authority Government of Punjab and has also been member the Board of Revenue a
nd Population Welfare Department of Government of Punjab.
Kissan Support Services Ltd.
Subsidiary of ZTBL
Kissan Support Services Ltd. Is a subsidiary of ZTBL which is established with a
capital investment of 100 Million to help ZTBL in the achievement of its object
ive and also to make availability of trained human capital to the bank.
KSS Aim
To provide support staff to ZTBL & under take its non core activities.
KSS Operation
Kissan support services operates under its Memorandum & Articles of Association.
Objectives
The main objective of KSS are following: y To provide to the Bank all kinds of s
upport staff and ancillary services y To plan, organize and establish training f
acilities to impart training to the bank s staff y Drip Irrigation System to ass
ist the bank clients in marketing of their product and provide storage facilitie
s y To assist the bank clients in marketing of their product and provide storage
facilities y To provide welfare services to the employees of the Bank including
education, vocational training, sports and recreation facilities y To invest an
y surplus money of the company not immediately required y To carry on any busine
ss, which may seem to the company capable of being conveniently carried on y To
liaison & establish contracts with agricultural research organizations for devel
opment of efficient, effective and appropriate technologies y To carry on busine
ss of providing consultancy, advisory and other agency services and support serv
ices to Zarai Taraqiati Bank Limited 23
2010
y To provide to the Bank s clients quality products and services for efficient a
nd improved farming y Etc.
Services/Activities so far undertaken by KSS
y Security Services to ZTBL y Recruitment/provision of staff y janitorial Servic
es provided to: a. ZTBL Head office buildings b. Ztbl Farms c. Staff college d.
Printing stationery office e. AV Unit f. Old record office g. Sports club h. War
ehouse y Management of Sports Activities y Management of Sports Activities y Pho
tocopy Services y Day to day minor repair and maintenance of ZTBL HQ Buildings
Chapter 2
Products and Services
ZTBL Locker Facility
Zarai Taraqiati Bank Ltd. apart from its core functional activity marked with co
untry based agri-business, has started to serve its valued customers by offering
lockers facility. Initially, this facility is being offered at following 11 bra
nches:S.No 1 2 3 4 5 6 7 8 9 10 11 Name of Branch Islamabad Branch Main Branch L
ahore Peshawar Branch Gujranwala Branch Faisalabad Branch Multan Branch Sahiwal
Branch Sargodha Branch Khan Pur Branch Shafi Court Branch Main Branch Gulshan-e-
Johar
Following are the approved rates for rent of lockers and key deposits against wh
ich lockers will be allocated: Type Small Specification 6-1/2"x41/2"x23" Rent Pe
r Annum Rent after grace period Key Deposit Rs.1,200/Rs.1,500/Rs. 5,000/Rs.1,800
/Rs.2,500/Rs.2,250/Rs.3,125/Rs. 10,000/Rs. 15,000/-
Medium 13-1/2"x41/2"x23" Large 13-1/2"x81/2"x23"
Life Time Locker Facility On lump-sum payment of locker rent for ten years entit
le the lessee to avail the locker facility for life time, without key deposit. 2
5
2010
Products offered to Meet Finance Need of Farmers
Zarai Taraqiati Bank Limited (ZTBL) is a specialized bank providing agricultural
credit in rural areas of the country. Pakistan is an agricultural country and n
ear about 60% of its population is working directly or indirectly related to agr
iculture industry. But instead of being an agricultural country Pakistan is stil
l not gaining benefits from this sector which it can gain. Some time we even doe
s not able to fulfill our food requirement and sometime we have bumper crop but
does not have facilities to store them properly, in this way we are wasting our
resources. To gain benefit from agriculture sector it is required to be moderniz
ed to increase the per acre production and also to build warehouses to store. Th
e main hindrance in the modernization of agriculture is the unavailability of fi
nance. The other financial institutions feel reluctant in giving finance to farm
ers due to high level of risk in the production of this field. To facilitate far
mers and to help in modernization of agriculture sector the government has estab
lished this bank which is contributing its part in achieving government objectiv
e from many decades. ZTBL is offering a blend of products to fulfill the need of
different types of customers.
Types of Loans Advanced
1. Short Term Loans
Short term loans are loans for shorter period of less than a year. It includes,
crop production working capital loans recoverable in lump sum commencing after t
he harvest/marketing of respective crops and within maximum period of 12 months.
2. Medium Term Loans
Medium term loans are for a period of more than a year but less than 5 years. In
includes, dairy farming and livestock etc. The installments of these loans are
usually paid able in quarterly or half yearly basis.
3. Long Term Loans
Long term loans are for a period of more than 5 years. These are development loa
ns which require large amount and also need some time to show its result in the
shape of better production. It includes loans for tractor, agricultural machiner
y, poultry farming, godowns and orchard in yearly/half yearly installments withi
n maximum period of 8 years.
Loan Schemes
ZTBL is offering the following loan schemes to the farmers.
Supervised agriculture scheme:
Under this scheme agriculture loans are given for short, medium and long term lo
ans up to Rs. 1.00 million per borrower/per case. The loans are sanctioned for I
n Fats, livestock, orchard, tractor, agricultural machinery, tube well and irrig
ation facilities etc. under the scheme besides provision of credit, information
are provided to the farmers for planning the farm, production, guidance for impl
ementation of the scheme, marketing and repayment of loans.
Zarkhaiz (one window operation)
For timely and conveniently provision of credit to purchase inputs, loans are pr
ovided to the borrowers under One Window Operation being conducted twice a week
during Rabi and Kharif seasons. Applications processed on the same day whereas s
anction payments are made within three days at Branch. For Rabi Crops one window
operation from October to January and for Kharif Crops from April to September
each year which is extendable as per requirement of particular area.
Sada Bahar Scheme
For providing timely input loans for crops and working capital for poultry and f
ishery etc, the Bank has launched a Sada Bahar Scheme. Assessment for inputs req
uirements for the whole year is made at the time of first application. The amoun
t so assessed is treated as Revolving Limit provided it is within the security l
imit. The Managers are authorized to sanction such loan limits up to Rs.O.500 mi
llion. Scheme s main features are as under: y Revolving Credit Limit is fixed to
cater production credit and ancillary requirements of the farmers during one ye
ar period. 27
2010
y The documentation once completed remains applicable for three years with yearl
y cleanup/renewal without any further documents. y The borrowers can draw the cr
edit in lump sum or in installments according to his requirement. y Like-wise he
can repay in lump sum or in installments during the year when his cash position
allows him. y Pass Book containing transactions in his SBS Account is supplied
to every borrower free of cost.
Tea financing scheme
In order to increase the tea cultivation in District Mansehra, Swat, Mutta, Shan
gla par and Dir in Malakand Division, tea financing scheme has been introduced w
hich would not only save the hard earned foreign exchange but would also help im
prove the socioeconomic condition of the inhabitants of the area. The salient fu
tures of the scheme are given as under: y Maximum Credit Ceiling of Rs.60, 000/-
per acre has been fixed. y Farmers owing land up to five acres are eligible to
avail loans. y Credit will be given in 3 installments: first year Rs.30, 000/-,
2nd year Rs.15,000/- 3rd year Rs.15,000/- provided the disbursed loan is used pr
operly. y The credit would be repayable within 1 year with 6 years grace period
with prescribed markup of 9% per annum. Rebate of 1 % will be allowed in mark-up
on timely repayment and proper utilization of the loan.
Crop maximization project
Ministry of Food, Agriculture and Livestock (MINF AL), Government of Pakistan ha
s launched Crop Maximization Project in 109 villages in various districts throug
hout the country to increase the productivity/yield of crops. Under the project
MINFAL has to provide funds of Rs, 299.893 million to ZTBL for disbursing loans
to the project farmers
Internship Report on Zarai Taraqiati Bank Ltd. 2010 for purchase of inputs. Till
the time funds of Rs.468 Million have since been received by the Bank for the p
urpose. These funds are to be revolved for meeting input credit needs in the pro
ject villages till 30th June, 2014 after which Bank will return the principal am
ount to MINFAL. Accordingly Credit needs of the project farmers are being met by
respective ZTBL branches through Village Organizations formed for the purpose.
Duly the currency of the project Bank is authorized to charge 4% per annum mark-
up on loans to project growers to meet its operational cost, however in case of
default Bank s normal rate of return i.e. 9% p will be applicable.
29
2010
PER ACRE CREDIT LIMITS
Major Crops
Wheat Paddy (Rice) Sugarcane Cotton Maize 16,000 19,000 30,000 21,000 20,000
Minor Crops
Overall Credit Limit Per Borrower Sada Bahar Scheme under one window operation o
r otherwise Rs.1.000 Million Rs.0.500 Million
Potato Tobacco Mustard Mung Tomato Mash Lentil Groundnut Sunflower Soyabean Cano
la Rape Seed Til(Sesame) Suger beet
36000 29000 11000 19000 3000 11000 14000 15000 12000 13000 11000 12500 12000
Bajra Jawar Gram Guara Caster Oil Barlay Berceme Janter Garloc Turmeric Ginger L
acern & Shaftal
11000 11000 12000 3000 6000 9000 4900 4000 26000 25000 30000 4500
Growing Agro Forest Trees
SNo. 1 Trees Bamboo 1st Year 34,000 2nd Year 8,000 3rd Year 3,000
Growing Orchards
S. No. 1 2 3 4 5 6 7 8 9 Trees Mango Citrus Apple Banana Jujuba Guava Coconut Pa
lm Oil Dated 1st Year 24,000 21,000 23,000 29,000 19,000 21,000 29,000 18,000 33
,000 2nd Year 13,000 12,000 12,000 20,000 9,000 12,000 6,000 6,000 12,000 3rd Ye
ar 13,000 11,000 12,000 23,000 10,000 11,000 6,000 7,000 11,000 4th Year 13,000
13,000 12,,000 30,000 10,000 13,000 7,000 7,000 12,000 5th Year 14,000 13,000 14
,000 26,000 10,000 13,000 8,000 7,000 13,000
31
2010
Mature Orchard/Fruits crops
Pear Loquat Plum Apple Papaya Almond Coconut Lichi Cherry Mango Apricot Banana P
each Citrus 24000 24000 33000 37000 22600 32000 21000 32000 33000 37000 31000 37
000 32000 34000 Dates Strawberry Tea Guava Pomegrante Palm Olive Oil Walnut Pers
imen Zizi Phus(Bher) Melon Water Melon Musk Melon 31000 25000 60000 24000 33000
22000 13000 23000 15000 25000 16000 16000 16000
Types of Security
Immovable Property
Agricultural Land
y y y y Under Pass Book System 80% Outside Pass Book System 70% Under Alienabili
ty Certificate 66% Commercial/Industrial Land under Pass Book 80%
Outside Passbook System
y y y y Urban Residential/Commercial Plots in all localities outside Pass Book 7
5% Alienability Certificate 66% Residential/Commercial Buildings 70% Lease hold
rights of a leased land of CDA/KDA with 99 years lease 70%
Moveable Property and Guarantees
1. Unconditional Bank guarantee from scheduled Banks
Up to maximum amount of an un-conditional Bank guarantee after keeping sufficien
t margin for un-paid mark-up, cost, charges and expenses.
2. Guarantee issued by Central or Provincial Government
Full amount of loan plus return and other charges.
3. Government securities
85% of face value or market value whichever is less.
4. Defense Savings & FEB Certificates
75% of value of certificates presented as security.
33
2010
5. Fix Term Deposits Receipts
85% of face value of deposits receipts.
6. NIT Units
80% of the face value or market value whichever is less.
7. Life Insurance policies
85% of surrender value
8. Pledge of Potatoes/Seed Potatoes price or market value which ever is less
Up to 75% of Govt. support.
Personal Surety
Against a bond with two sureties under General Credit and one surety in Special
Schemes up to Rs.25,000/- or Up to 50% of appraised value of properties of suret
ies.
Debt Equity Ratio
For Tubewell/Tractors/Implements/Attachments/Equipments
All kinds of Tubewells/ Turbines New Tractor 25% Within 5 years in annual/bi-ann
ual installments commencing one year after first disbursement Within 8 years in
monthly/quarterly or half yearly installments to be decided by Manager in consul
tation with borrower. Within 5 years in monthly/quarterly or half yearly install
ments to be decided by the Manager in consultation with borrower.
Used Tractor, Equipments/ attachments/ implements and used tractor
No equity but 10% of the loan is to be needed in PLS Account -do-
Except Tubewell/Tractors/Implements/ Attachments/Equipments Production Loan upto
Rs.0.100 Million Land holding upto 25 acres/loan amount upto Rs.0.2 Million Lan
d holding beyond 25 acres to 50 acres/loan amount beyond Rs.0.2 Million upto Rs.
0.5 Million Land holding beyond 50 acres/loan amount beyond Rs.0.5 Million upto
Rs.1 Million. NIL 15% 25% 30%
35
2010
Repayment Periods
S. No. 1 Types of Loans Recovery Period
Short Term Loans Medium Term Loans Long Term Loans Crop production working capit
al loans recoverable in lump sum commencing after the harvest/marketing of respe
ctive crops and within maximum period of 12 months. Dairy farming and livestock
etc. In yearly/half yearly/monthly installments and within maximum period of 5 y
ears. Tractor, agricultural machinery, poultry farming, godowns and orchard iIn
yearly/half yearly installments within maximum period of 8 years and. above.
2
3
Recovery Procedure
A) Recovery Schedule
y Recovery schedule in each loan case as per terms of sanction of loan is fixed
and communicated to the borrowers after disbursement of loan. y In case of defau
lt or failure in repayment of any installment on due date the mark-up shall cont
inue to be charged and last installment due to this may differ from the amount o
f installments fixed at the time of disbursement.
b) Issuance of Notices
y Demand notice is issued before the due date of every installment. y A Legal No
tice is issued one month after the due date informing the borrower that if the a
mount is not repaid within next one month, further legal action will be taken to
recover the dues.
c) Legal Action
y Legal action can be initiated against the defaulter if loan is not repaid even
after expiry of legal Notice period. y Where the court in bank's favour has dec
reed a case, account is to be settled by recovery of amount from the auction of
the mortgaged property. y The bank may purchase the mortgaged property if consid
ered feasible to dispose it off later on through auction or in any manner deemed
fit for getting the best price.
Internship Report on Zarai Taraqiati Bank Ltd. 2010 y The bank may dispose off t
he mortgaged properties of defaulters for satisfaction of its dues with out inte
rvention of courts under Financial Institutions (Recovery of Finances) Ordinance
2001.Rescheduling of Loan Repayment Facility .
d) Rescheduling of Loan Repayment Facility
y ZTBL allows rescheduling of repayment of installments to its borrowers in orde
r to maintain credit discipline and to mitigate their genuine problems in real h
ardship cases and in areas declared as calamity hit by the respective Provincial
Governments y The Rescheduling facility is to be considered by bank on case to-
case basis and is to be allowed on borrower's request only. y The relaxation in
recovery period shall not be allowed beyond one year in any case. y The borrower
s shall have to execute a supplementary loan agreement on Non Judicial y Stamp P
aper of appropriate value to give legal cover to extended period. y The borrower
s shall have to pay the return for the extended period.
d) Down Payment for Rescheduling of Loans
Rescheduling Number 1st 2nd 3rd Rate of down payment as against due installments
to be rescheduled 10% 20% 30%
37
2010
Chapter 3
Horizontal Analysis of Balance Sheet
Particulars
ASSETS
Cash & balances with treasury banks Balances with other banks Lendings to financ
ial institutions Investments - net Advances - net Operating fixed assets Other a
ssets - net
2008
%
8.695 973.720 77.413 28.689 16.981 -8.284 21.936
2007
%
31.983 707.497 166.845 12.842 -11.432 1.860 11.267
2006
%
-18.724 426.058 97.724 13.212 -16.375 -10.364 1.813
2005
%
-0.532 428.274 349.899 -2.595 -29.360 -14.614 -0.098
2004
%
100 100 100 100 100 100 100
LIABILITIES
Bills payable Borrowings Deposits and other accounts Sub-ordinated loans Liabili
ties against assets subject to finance lease Deferred tax liability Other liabil
ities 210.675 0.000 73.764 0.000 86.149 19.942 32.729 98.915 0.000 38.465 0.000
46.641 10.705 14.307 39.962 0.000 -7.681 0.000 9.006 1.418 3.948 19.402 0.000 -1
5.296 0.000 3.013 -0.086 -0.162 100 100 100 100 100 100 100
NET ASSETS REPRESENTED BY
Share capital Reserves Unappropriated profit Surplus on revaluation of assets -
net of tax
5.500 404.287 278.696 30.315 260.729 32.729
0.000 162.741 112.925 10.222 400.125 14.307
0.000 66.838 17.022 2.245 164.838 3.948
0.000 13.928 -18.478 -0.998 78.773 -0.162
100 100 100 100 100 100
Note: In this Horizontal Analysis the year 2004 is taken as a base year to calcu
late the
change in other financial years. All the columns are representing change with re
spect to 2004.
Vertical Analysis of Balance Sheet
Particulars
ASSETS Cash & balances with treasury banks Balances with other banks Lendings to
financial institutions Investments - net Advances - net Operating fixed assets
Other assets - net
2008
%
2007
%
2006
%
2005
%
2004
%
1.693 2.253 1.516 15.518 12.790 9.106 0.000 0.000 0.000 4.940 8.143 6.594 68.324
65.655 71.987 1.117 0.927 0.956 8.408 10.233 9.841 100.000 100.000 100.000
1.891 1.899 9.319 1.762 0.000 0.000 15.290 3.395 63.121 64.739 0.823 1.164 9.554
11.178 100.000 100.000
LIABILITIES Bills payable Borrowings Deposits and other accounts Sub-ordinated l
oans Liabilities against assets subject to finance lease Deferred tax liability
Other liabilities NET ASSETS REPRESENTED BY Share capital Reserves Unappropriate
d profit Surplus on revaluation of assets net of tax
0.722 60.320 6.385 3.771
0.501 65.353 5.512 4.086
0.385 71.338 4.012 4.460
0.333 72.412 3.736 4.527
0.279 72.350 4.407 4.523
0.000 0.000 0.000 0.218 0.152 0.011 28.584 24.396 19.796 100.000 100.000 100.000
100.000 100.000 100.000
0.000 0.000 0.000 0.000 18.989 18.418 100.000 100.000 100.000 100.000
74.223 83.179 89.669 6.438 3.966 2.715 19.339 12.855 7.616 100.000 100.000 100.0
00 2.847 4.584 2.669 100.000 100.000 100.000
92.606 91.682 1.914 1.664 5.480 6.655 100.000 100.000 1.876 1.048 100.000 100.00
0
39
2010
Horizontal Analysis of Profit & Loss
Particulars
Mark-up/return/interest earned Mark-up/return/interest expensed Net mark-up/inte
rest income Provision against non-performing loans and advances Provision/(rever
sal) for diminution in the value of investment Write offs under Government relie
f packages Bad debts written off directly Net mark-up/interest income after prov
isions NON MARK-UP/INTEREST INCOME Fee, commission and brokerage income Dividend
income Other income Total non mark-up/interest income NON MARK-UP/INTEREST EXPE
NSES Administrative expenses Provision against other assets Provision for stolen
fixed assets Other charges Total non mark-up/interest expenses PROFIT BEFORE TA
XATION Taxation - Current - Prior years - Deferred 85.474 12392.995 55.459 2574.
166 13.261 54846.182 7.184 379.466 0.000 0.000
2008 %
4.501 11.279 0.224 -43.546 27.355 0.000 -16.749 14.982
2007 %
-13.362 9.002 -27.473 -9.279 -168.737 4286.557 58.214 -101.980
2006 %
-26.024 -10.618 -35.745 -48.118 913.026 15739.293 65.541 -123.815
2005 %
-15.825 -87.507 29.405 38.920 -158.617 0.000 105.258 -36.551
2004 %
0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
82.822 89.283 514.594 506.732 144.932
-2.988 -64.283 509.536 500.567 57.249
5.560 7.133 486.610 478.468 35.344
30.996 7.133 -11.859 -12.217 -30.120
0.000 0.000 0.000 0.000 0.000
98.750 241.700 241.700 175.783
58.105 55.455 52.854 25.485
73.490 -100.000 -44.586 -56.772
6.965 -107.828 -107.828 -92.363
0.000 0.000 0.000 0.000
266600.000 2231120.000 189060.000 12240.000 175.638 49.299 -54.893 -92.483
0.000 0.000
PROFIT AFTER TAXATION Unappropriated profit brought forward Profit available for
appropriation Transfer to statutory reserve Transfer to contingency reserve 291
.769 455.289 346.096 346.096 235.049 55.548 205.182 105.262 105.262 33.028 -36.7
75 112.603 12.854 12.854 -43.548 -119.457 160.791 -26.348 -26.348 -117.742 0.000
0.000 0.000 0.000 0.000
Profit caried forward
Basic earnings per share (Rupees)
Note: In this Horizontal Analysis the year 2004 is taken as a base year to calcu
late the
change in other financial years. All the columns are representing change with re
spect to 2004.
41
2010
Vertical Analysis of Profit & Loss
Particulars
Mark-up/return/interest earned Mark-up/return/interest expensed Net mark-up/inte
rest income Provision against non-performing loans and advances Provision/(rever
sal) for diminution in the value of investment Write offs under Government relie
f packages Bad debts written off directly Net mark-up/interest income after prov
isions NON MARK-UP/INTEREST INCOME Fee, commission and brokerage income Dividend
income Other income Total non mark-up/interest income NON MARK-UP/INTEREST EXPE
NSES Administrative expenses Provision against other assets Provision for stolen
fixed assets Other charges Total non mark-up/interest expenses PROFIT BEFORE TA
XATION Taxation - Current - Prior years - Deferred PROFIT AFTER TAXATION
2008 %
170.058 70.058 100.000 99.934 0.066 0.000 0.000 100.000 34.539
2007 %
194.831 94.831 100.000 84.502 -0.019 15.517 0.000 100.000 -0.926
2006 %
187.772 87.772 100.000 46.186 0.264 53.549 0.000 100.000 -12.946
2005 %
106.091 6.091 100.000 99.740 -0.012 0.273 0.000 100.000 66.804
2004 %
163.098 63.098 100.000 147.368 0.043 0.000 0.000 100.000 73.574
0.076 0.197 99.727 100.000
0.041 0.038 99.922 100.000
0.046 0.117 99.837 100.000
0.377 0.771 98.853 100.000
0.252 0.631 98.451 100.000
100.000 92.994 6.934 0.053 0.019 100.000 45.070 100.000 100.052 0.909 -0.961 100
.052 58.644
100.000 97.983 1.866 0.000 0.151 100.000 31.938 100.000 84.049 1.103 14.848 84.0
49 50.603
100.000 65.056 34.937 0.000 0.007 100.000 0.000 100.000 95.833 0.000 4.167 95.83
3 37.410
100.000 99.855 0.494 0.000 0.145 100.000 -3.619 100.000 101.605 0.000 -1.605 101
.605 -17.641
100.000 99.651 0.110 0.000 0.000 100.000 32.306 100.000 99.999 0.000 0.001 99.99
9 66.776
Unappropriated profit brought forward Profit available for appropriation Transfe
r to statutory reserve Transfer to contingency reserve
Profit caried forward
41.356 100.000 0.000 0.000 100.000
49.397 100.000 0.000 0.000 100.000
62.590 100.000 0.000 0.000 100.000
117.641 100.000 0.000 4.096 100.000
33.224 100.000 13.355 0.000 100.000
Note:
The Financial statement for the year of 2009 is not available online. ZTBL is go
vernment institute and it is not listed in any stock exchange. I have tried to g
et copy of financial statement from the offices of bank but I failed to find any
copy from the branch where I have completed my internship then I have contacted
zonal offices and they also did not have any copy of the financial statement of
year 2009. With the reference of branch manager I have requested it from the He
ad Office but I came to know that publication department has not published the f
inancial statement for the year 2009. The last financial statement which is avai
lable in the printed form is of year 2007. The financial statement of year 2008
is also not available in printed form however it is available on internet in the
excel format which does not include director and auditor report. This is the re
ason that the horizontal and vertical analysis is done from 2004 to 2008. Howeve
r, the Key Financial Trends of year 2009 is included in the report which I have
obtained from the credit rating report published by Japan Credit Rating Agency o
n August 2010. The internship report also includes a glimpse view of banks perfo
rmance from 1997 till 2009 which I have collected from the bank s website, other
websites and newspapers.
43
2010
Interpetation of Horizontal and Vertical Analysis
Markup/ Return/ Interest Earned
Markup/return/interest earned is the amount which the bank earns from its primar
y function of lending money to its customers. Increase in this income shows that
bank is growing, the reason of this growth can be either the increase in custom
er base or in the increase of rate of lending. When I compare the markup/return/
interest earned by the bank in the past 5 years it shows that the bank has impro
ved its primary function in recent years. The year from 2005 to 2007 shows a dec
line in this income which is a clear sign that in that specific years the bank p
erformance was not satisfactory, the reason of this performance can be the polit
ical unrest in the country due to which sufficient attention couldn t be given t
o bank s working or it can be result of large NPL s. In the notes related to mar
kup/return/interest earned it shows that the bank is earning a major part of its
income from the loans given to customers, the bank has less focus of investment
. However, it is earning a handsome amount from the placement which it has made
with other banks.
Markup/Return/ Interest Expensed
Markup/Return/ Interest Expensed is the expense of bank on taking deposits and b
orrowings from the SBP. This expense shows an increase as compared to previous y
ears which shows that bank s cost of deposits and borrowings has been increased.
This increase can be due to two reasons, it can be due to increase in the amoun
t of deposits and borrowing or it can be due to increase in the rate the bank of
fered on deposits and on borrowing from SBP. In the notes it shows that bank is
paying a large amount on borrowing from the SBP rather than on the deposits. It
can be due to two reasons that either bank has deposits in the current account o
n which it has to pay no or less cost or it is due to less deposits. From the am
ount of deposits in the balance sheet it is clear that the deposits of bank are
not of significant amount as compared to borrowing. I also know that bank is wor
king manly on the amount borrowed from SBP rather than on deposits collected fro
m the general public and institutes. An increase in markup/return/interest expen
sed is not a bad sign if the markup/return/interest income is also increasing, h
owever if the increase in expense is more than the increase in the income than i
t will be a negative sign. From the vertical analysis of Profit and Loss account
it is clear that the income is
Internship Report on Zarai Taraqiati Bank Ltd. 2010 much more than the expense w
hich shows that the bank has cushion to confront with other expenses incurred du
e to secondary functions of the bank which is a positive sign.
Net Markup/Interest Income
It is the income which the bank is earning after paying the markup/return/intere
st expensed. From the horizontal analysis of the profit and loss it is clear tha
t there are many ups and downs in this income which is result of decline in the
markup/return/interest income of the bank. But in the year 2008 it shows recover
y and it is increased as compared to previous two years of 2006 and 2007. When I
look net income in terms of amount in the profit and loss accounts of last five
years I find it positive and a handsome amount to bear the other expenses of th
e bank. Because the horizontal analysis is showing result by taking 2004 as a ba
se year that is why in the year 2006 and 2007 it shows negative sign which means
that in these two years the net income of the bank has been decreases as compar
ed to year 2004. But in the year 2008 it again shows recovery.
Provision again Non-Performing Loans
This shows the cost bank is charging to it P&L account against those loans which
may become bad debts; almost all banks try to reduce this cost. This shows the
customer base of the bank to which bank is lending, the lesser the cost the bett
er and trustworthy client base the bank has. Horizontal analysis of P&L A/C show
s the decline in the recent years in this provision which is a positive sign for
the bank. Which shows that bank s credit and recovery departments has improved
their workings.
Provision/ (reversal) against diminution in the value of investment
This shows any provision required to charge or reverse for the investment made b
y the bank. An increase in the provision shows that the investments of the banks
are declining in value which will definitely result in loss and if the provisio
n made before is reversed it shows that the value of the investment is increasin
g. The horizontal analysis of the P&L account shows that the provision created b
y the bank is reduced in 2008 as compare to 2007 which is a positive sign. The r
eason of large provision in 2007 can be due to uncertainty in the stock market e
tc.
Write offs under Government Relief Packages
45
2010
ZTBL is a government bank due to which the government can ask it to give relief
to loanees of particular regions of category which also increase the cost for th
e bank. The flood of 2010 is expected to increase this cost in this financial ye
ar too because a large number of farmers have been effected with this flood and
they are not in the situation to return their borrowed amount to the bank. For t
he year 2008 there is not any amount which is asked by the government to write o
ff but in the year of 2007 and 2006 there is some amount which banks directly wr
itten off on the instructions of the government.
Net markup/ Interest income after provisions
This is net income after charging provisions. An increase in this income is a po
sitive sign which can be due to two reasons that either the net markup/return/in
terest income has increased or the provision required to be charged by the bank
is reduced due to less number of NPL s loans. So, if the net markup/interest inc
ome after provision is increasing it is a positive sign because the bank will ha
ve more amounts to pay its other expenses like admin expenses etc. and it will r
esult in more Gross Profit.
Non Markup/Interest Income
It is the income which the bank in earning from its secondary functions. An incr
ease in this income is also a positive sign it shows that the bank is also makin
g its secondary functions profitable. The secondary functions shows the amount e
arned from the commission charged in the services offered by the bank, the divid
end income etc. But this income may also have a portion of income gained by the
bank by the sale of scrap or old machinery etc. It is not a positive sign if thi
s income is larger part of total non markup/interest income. Because, the bank w
ill not have the scrap to sale in all years and having larger part of this incom
e of sale of scrap will definitely depicts that the bank s profitability can be
affected in the coming years. However, if the bank has sold old machinery and in
the meanwhile new machinery is added in the assets of the bank than it will be
a positive sign because it will show that the bank is working on BMR (Balancing,
Modernizing and Restructuring) which will result in better performance. The pro
fit and loss account of the bank is showing an increase in the non markup/intere
st income which is a positive sign. The vertical analysis of the profit and loss
shows that other income is the larger part in non markup/interest income and fr
om the notes it is clear that in the other income, the amount recovered which ha
s been written off previously is making a bigger portion. Recovering a previousl
y written off loan is a positive sign because it is causing an increase in the i
ncome of the bank.
Non Markup/Interest Expenses
It consist on the expenses bank payed for admin expenses and some other expenses
. But the admin expenses is usually a large part of this non markup/interest exp
enses and also it is most important expenditure to have a look upen because it s
hows that whether the bank is utilizing its human capital efficiently or not. A
larger admin expenses is not a negative sign if it is also increasing the income
of the bank. However, if the percentage change in the increase in the admin exp
enses is more than the percentage in the increase in the income than it is a neg
ative sign beacause is paying more to increase its income. Almost all banks try
to control this income so that to increase their income. The ratio of Admin Expe
nses to Deposits is used to check the cost bank is facing on collecting of depos
its which is the main source of money bank required to lend to others to make in
come. However, in ZTBL the bank relies on borrowing from SBP more than on deposi
ts so the efficiency of admin expenses can not be judge from the ratio of admin
expenses to deposits. So, it is difficult to say anything about the cost of admi
n expenses. From the horizontal analysis it is clear that the admin expenses has
been increased in 2008 but the profit of the bank is also increased so it is no
t a negative sign. By looking in the notices of financial statement it is found
that admin expenses consists on a number of expenses, salaries of the staff no d
oubt a major a part of it but other expenses like traveling expenses, motor vehi
cal cost of repairing etc are also effecting this cost a lot. Because I know tha
t the MCO scheme has become a major part of the bank s working so increase in th
e cost of traveling, rapairing is not a surprise.
Profit before Taxation
The profit before taxation has been significantly increased in the recent years,
the financial statement for the 2009 is still not available on internet nor in
print format but some key facts which has been published by the bank for the 200
9 shows that bank continues making profit in year 2009 also. When I look in the
previous year it found that the profit before taxation is 2.5 times more than it
was in 2004. However, the increase in the profitiability is not constant there
are ups and downs in it. Like in 2005 and 2006 the profit of the bank has been d
ecresed as comapred to 2004 and in 2007 it again started increasing and this con
tinues till 2009 which have result of more than 2 Billion.
Taxation
Due to increase in the profit the tax has been also increased, it is almost doub
led in the last 5 years like the profit of the bank which has been also doubled.
So, it not a negative sign. By compare the increse in the profit before tax and
the increase in tax, I come to know that the increase in the tax is less than i
ncrease in profit which can be due to two 47
2010
reason that whether the rate of tax is not increased as the income of the bank o
r the bank is managing its tax efficiently.
Profit after Tax
The after tax profit of the bank continued to increase in the recent years which
is a good sign and also shows that bank has improved its working a lot than few
years before. The profit for the year 2008 is almost 300% more than the 2004 wh
ich show that the profit of the bank is tripled in last five years. The same tre
nd continued in 2009 in which the bank also made a record profit.
Interpetation of Horizontal and Vertical Analysis of Balance Sheet
Cash and Balance with Treasury Banks
It shows the amount placed with SBP in order to fulfill the requirement of banki
ng companies ordinance, 1962. There is a decline in the amount with respect to p
revious year, the reason of it can be the decrease in the volume of deposits due
to which the bank is not required to maintain higher placement with SBP. Howeve
r, the deposits also show an increase in it, so the reason of this decrease in t
he cash and balances with treasure bank is uncertain. One other can be this that
the bank has placed higher amount with SBP than required in the previous year a
nd that is why in this year the bank has withdrawal the money from its account w
ith SBP.
Balances with other Banks
Horizontal analysis of Balance sheet shows significant increase in the placement
with other banks. It is not a good sign if the placement is in ideal state and
is not generating any revenue for the bank. However, from the notes of ZTBL it i
s clear that the bank has placed amount with other banks in the accounts which a
re giving markup to the bank. Placing money with other institutions is not a goo
d thing for any bank when does on a large scale because it cannot generate enoug
h money to compensate the opportunity cost the bank is bearing on not investing
or advancing this money to its customers. However, the case of ZTBL is different
. It borrows money from SBP at fewer rates and lends it to farmers. The rate it
charges to farmers is less than the prevailing rate in the market (currently 9%)
so by depositing money with other financial institution it can earn more than t
he rate it is offering to its clients. Because it is an institute developed just
for the improvement of agricultural sector so the bank s main focus is on lendi
ng rather than investing.
Investments-net
There are ups and downs in the amount of investment made by the bank in the prev
ious five years. From the notes to the account it is clear that bank usually inv
est in less risky investment like Market Treasury Bills and Pakistan Investment
Bonds. The less risky investment will result in less gain on investment but here
the return on investment is not the main focus of the bank. The money the bank
owns is largely consist on the borrowed money from SBP, so the bank cannot use t
he borrowed money in a more risky adventure.
49
2010
Advances-net
The bank continues to increase the amount of advances to facilitate more and mor
e farmers every year. The data of 2009 shows a record increase in lending to far
mers; the bank has disbursed 77.7 Billion rupees in 2009 as compared to 70.7 Bil
lion in 2008. The percentage increase in the horizontal analysis also shows this
continuous increase in the trend of advancing.
Operating Fixed Assets
The assets of the bank are also increased in 2008 and in 2009 the president of t
he bank also announced to increase it further by constructing new buildings. Inc
rease in the fix assets shows that the bank is optimistic about its future.
Borrowings
It is the amount which bank has borrowed from SBP. There is no change in this lo
an from 2004 the reason is that neither SBP has given new loan to ZTBL nor ZTBL
has returned any principal amount of loan back to SBP due to which the amount of
loan borrowed remain unchanged. ZTBL and SBP is now negotiating on terms and co
nditions of returning principal amount in 15 equal installments.
Deposits
Deposits are the backbone in any bank operations because the primary function of
any bank is to take deposit from depositors and then lend it again to other who
needs it. But as I have written before ZTBL does not rely on deposits more like
any other bank. However, in recent years the bank is trying to shift its depend
ence from SBP to other resources and due to this it starts increasing its deposi
ts by marketing. But the efforts in this respect is still need improvements as t
he products offered by ZTBL is not as attractive as offered by other commercial
banks.
Share Capital
In 2008 the bank has issued bonus shares to increase its paid up capital. The re
ason of this increase can be the requirement of SBP to maintain a minimum equity
level. Currently the paid up capital of the bank is 12.5 Billion.
Reserves
Reserves are made for the development of the organization or for the contingenci
es which can affect in the future. There is continuous increase in the reserves
of the bank from last five years which is a good sign. These reserves also inclu
de the statutory reserve requirement according to banking companies ordinance, 1
962.
Surplus on Revaluation of Assets-Net of Tax
It is surplus amount which is the bank expect to get if it will sell these asset
s. The market conditions never remain certain; the price of anything can rise or
fall in matter of second. This is the reason that organizations use to revalue
their assets to record their value according to prevailing market rates. The rev
aluation of fixed assets also helps banks in raising their equity which result i
n more lending power of the bank.
Conclusion
Although the bank needs improvements in many fields, the overall performance of
the bank is satisfactory. The bank has made many efforts in the recent years and
it is clearly visible in the result of its financial statements. The reduction
in NPL s is also a positive sign and will definitely result in good performance.
Besides a government institution the bank has made before tax profit of 4.9 Bil
lion which is great achievement. If the process of improvement continues than it
can make more profit in the upcoming years and its success will also result imp
rovement in financing facilities to people of rural area.
51
2010
Ratios
Ratios Avg. Rate of lending Avg. Rate of borrowing Admin Expenses Cost of funds
Spread 2008 % 11.297 6.156 83.322 89.479 -78.182 2007 % 10.190 6.150 87.643 93.7
93 -83.603 2006 % 8.929 5.177 95.770 100.947 -92.017 2005 % 10.377 0.727 98.778
99.505 -89.128 2004 % 14.174 5.766 78.062 83.828 -69.654
The reason of negative spread is that the bank use to borrow from SBP rather tha
n getting deposits from the general public due to which the ratio of admin expen
ses depicts a large cost than expected because this ratio is calculated by divid
ing admin expenses with the deposits. In my opinion the admin expenses is requir
ed to be calculated by adding borrowing also with the deposit. For example if we
will calculate this ratio by adding borrowing with deposits than the result for
2008 will be 7.975 rather than 83.322 which is acceptable. By calculating all a
dmin expenses with this formula the result of spread will be like this.
Ratios Avg. Rate of lending Avg. Rate of borrowing Admin Expenses Cost of funds
Spread
2008 % 11.297 6.156 7.975 14.131 -2.834
2007 % 10.190 6.150 6.817 12.967 -2.777
2006 % 8.929 5.177 5.099 10.276 -1.346
2005 % 10.377 0.727 4.846 5.573 4.804
2004 % 14.174 5.766 4.482 10.248 3.926
Ratios Net markup to total income Return on assets Return on Equity Breakup Valu
e Infection Ratio Provision to classified advances Advances to deposits
2008 % 84.239 2.542 15.418 12.605 16.697 60.426 1433.485
2007 % 65.875 1.106 7.238 11.546 23.686 55.227 1631.690
2006 % 71.387 0.491 3.171 10.849 28.201 48.630 2473.332
2005 % 138.212 -0.154 -1.008 10.592 36.180 50.457 2448.135
2004 % 142.862 0.791 5.129 10.726 -
By calculating the admin expenses in this way the result of spread is still in n
egative but not as much as it was before. However, all this shows that there is
still problem the bank
Internship Report on Zarai Taraqiati Bank Ltd. 2010 is not utilizing its human c
apital as it needs to. The main reason behind this is the working style of the b
ank, because it a government institute so the wastage of resources is not a surp
rise thing. However, the bank is continually improving its working style and als
o moving towards making high profit.
Ratio of net markup to total income shows that bank has improved its secondary f
unction as wel. But this improvement is not stable one when I look the ratios of
previous years, it shows ups and downs in it.
Return on assets
Return on assets is a ratio uses to gain information that how much assets of the
company producing profit, the more the result of this ratio the more efficently
the bank is utilizing its assets. More than 2 is considerd a good ratio and the
result of ZTBL is also showing good result, the ratio of 2009 is also more than
2 which is found in the report published by Japan Credit Rating Agency.
Infection ratio
It is an important ratio which shows that how much advances of the bank is place
d under classified advances. In other words, it shows that how much loans given
by the bank is considered to become bad debts. The more this ratio is, the more
the bank needs to maintain the provisions against these loans and which will res
ult in lesser profitability. Usually, ideal situation is conisdered where this r
atio is less than 5%, in this situation the bank has a biger portion of customer
s which are trust worthey and have credit worthiness. The infection ratio of ZTB
L is very high which can be considered a negative sign. However, keeping in view
the previous records it is clear that bank has improved it a lot and all this i
mprovement is giving sense that if bank continue working with the same pace than
in the next two to three years this ratio will decrease significantly and can c
ome under satisfactory level. The record of NPL s is given in the Quick View of
ZTBL s Performance.
Provision to Classified Advances
53
2010
This ratio tells that how much provision the bank is maintaing against its class
ified advances. The more this provision is, the more it can be assumed that the
classified advances of bank is in the category of loss. Maintaing provision is t
he requirement of Prudential Regulations of State Bank of Pakistan, the more ris
ky the loan is the more provision the bank is required to maintain. The bank has
to keep its classified advances in the four categories, (1) Other Assets Especi
ally Mentioned (2) Substandard (3) Doubtful (4) Loss. Each category has its own
requirement of provision, the higher the category, the higher the provision requ
ired to maintain. The ratio calculated from the financial statement of ZTBL show
s a continuous increase, it is a negative sign because the bank is maintaining l
arger provision which shows that a large part of classified advances are in the
category of loss. And it shows that bank is not doing enough to recover these lo
ans.
Advances to Depoists
Advances to deposit shows that how much part of deposit is used by bank to advan
ce. Usually this ratio remains with in range of 70 to 75 % because 25% of all ba
nk deposits is required to be kept in statutory reserve to maintain minimum liqu
dity requirement. The ratio of ZTBL is presenting a different scenerio, it is mo
re than 1400% for the year 2008 which an abnormal result. I have mentioned the r
eason of it many times before in this report, the reason is that ZTBL is advanci
ng a large part out of the loan it has obtained from the SBP. The borrowing of t
he bank is much larger than the deposits it has this is the reson that this rati
o is showing such result.
Key Financial Trends of 2009
According to Japan Credit Rating Agency on August 2010
Note: The following is the extract from the report of Japan Credit Rating Agency
issued on August 2010 showing the new credit rating of ZTBL. Balance sheet footi
ng of the bank was higher at year-end 2009 at Rs. 113.6b. Net advances increased
to Rs. 83.6b (2008: Rs.69.b) representing a higher proportion of total assets a
t 74% at year-end 2009. While various new loan products have been launched been
launched by the bank in 2009, Sada Bahar Scheme has remained the flagship produc
t of the bank. For all new borrowers of crop production loans, Awami Zarai Schem
e (AZS) has been launched by the bank; outstanding balance against this scheme m
ay also show increase over time. To ensure proper utilization of loan, the bank
has incorporated a wholly owned subsidiary to make arrangement for in-kind lendi
ng to farmers. The IT infrastructure of the bank has improved considerably over
time. With the implementation of various applications at branch-level to consoli
date loan 55
2010
disbursement & recovery data, monitoring of lending activities has improved, tho
ugh there may still be a need to further strengthen the loan recovery mechanism.
Gross infection has declined from16.7% in 2008 to 15.8% in 2009; however there
is still need for further strengthening the recovery mechanism. Net infection ho
vered at prior year s level at 11.5%. Net NPLs in relation to Tier-1 capital sto
od at almost 57% at year-end 2009. ZTBL has arranged crop loan insurance for whe
at, cotton, sugarcane, rice and maize. As the insurance coverage is enhanced, th
e risk of loss in case of calamities will be reduced.
Growth in loan portfolio during 2009 absorbed some of the liquidity held by the
bank. Liquid assets to total borrowings and deposits declined to 27%. The bank h
as made efforts to enhance its deposit base, though these continue to represent
a small proportion of the total resource base. The bank had outstanding borrowin
gs of Rs. 54.5b from SBP at year-end 2009. The terms of restructuring of SBP deb
t have yet to be finalized, which would have significant implications for the ri
sk profile of the institution. The bank has so far not made any interest or prin
cipal payments against these credit lines. While there is some cushion available
to the bank in terms of markup differential receivable from the GoP vis-Ã-vis inte
rest payable to SBP, liquidity profile may be significantly compromised if payme
nt is required against the principal portion. One of the proposals under conside
ration entailed debt to equity swap, which if finalized, would support capitaliz
ation levels and facilitate in furthering the government s economic objective pu
rsued through the bank.
Credit Risk
Gross advances of the bank considerably grow over 2009, with year-end outstandin
g balance of Rs. 89.4b (2008: Rs. 77.8b). Loan disbursements of around Rs. 78b w
ere made by the bank in the outgoing year. Loan disbursement target for fiscal y
ear 2010 was Rs. 80b. ZTBL is used as an arm by the Government, with disbursemen
t target stipulated as part of the annual budget process. For FY10, 22.7% of the
loan disbursement target pertained to development loans, while remaining was fo
r production loans. All targets are allocated by SBP. While various new loan pro
ducts have been launched by the bank, Sada Bahar Scheme has remained the flagshi
p product of the bank. Loan products launched in 2009 include, Green Tractor Sch
eme, Crop Productivity Scheme and Rural Development Scheme. Green tractor scheme
is specifically for the province of Punjab and entails subsidy of RS. 200,000 p
er unit for 10,000 tractors. Banazir tractor scheme is applicable to all areas o
f Pakistan. On receiving complaints from borrowers regarding non-cooperative att
itude of tractor dealers, a tractor delivery system has been developed through K
SSL in the outgoing year. Awami Zarai Scheme (AZS) has been launched by the bank
for all new borrows of production loans, pertaining to inputs required at the t
ime of crop cultivation. As per the scheme, agriculture inputs will be supplied
by KSSL to farmers in lieu of cash. Quantity of input needed for each crop on a
per acre basis has been predetermined by the bank. The farmers will be provided
a specific quantity of inputs according to cultivable land. The purpose of AZS i
s to ensure proper utilization of loan proceeds. Crop productivity scheme is spe
cifically for financing of fertilizer. Rural development scheme has been launche
d to provide assistance for dairy, poultry, sheep and goat farming in the rural
areas of AJ&K; especially earthquake affected areas. The bank has also setup a p
ilot project for a model village in collaboration with ministry of food & agri./
provincial agri. Departments. Crop loan insurance has been made compulsory by S
BP for wheat, cotton, sugarcane, rice and maize financing. To facilitate loan in
surance, the bank has to pay the premium for subsistence farmers, which is subse
quently reimbursed by GOP on a half yearly basis. ZTBL has arranged crop loan in
surance with Adamjee insurance company limited (AICL). Premium is charged @ 1.3%
of loan sanctioned. 57
2010
The implementation of software applications has facilitated monitoring of lendin
g activities at branch level. The need for strengthening the collection mechanis
m however remains, as may be ascertained form the portfolio quality indicators.
NPLs increased to Rs. 14.2b (2008: Rs. 13b) during 2009. During the out-going ye
ar, an amount of Rs. 2.6b was charged off against provisions as per the prudenti
al regulations, with cumulative balance of charged off loans standing at Rs.34.9
8b at the end of December 2009. This amount was lower than the balance of Rs. 36
.30b at the end of December 2008, on amount of recoveries of 4.29b made against
charge off amount. At year-end 2009, gross infection in the loan portfolio of th
e bank remained high at 15.8% (2008: 16.7%). The overall agriculture loan portfo
lio of the banking sector had gross infection of 16.1% (2008:15.3%) at end-Decem
ber 2009. Around 52 %( 2008: 47%) of NPLs were classified as OAEM at year-end. O
n account of this,, provisioning coverage against total NPLs Is low. Net infecti
ons (NPLs adjusted for specific provisioning only was 11.5% (2008:11.2%). Minimu
m recovery target set by the bank entails 90.8% of current dues and 75% of past
dues. In 2009, recovery of 91% was achieved against current dues, while 72.4% re
covery was made against past dues. Recovery targets are monitored on a branch-wi
se basis; in branches where overall recovery is less than 75% loan approval auth
ority is retracted. The bank held fixed income securities of Rs. 6.7b at Decembe
r 2009, increasing form Rs. 4.5b at the end of the preceding year. Of these, onl
y Rs. 283.65m was placed in COIs whiles remaining comprised government paper, cr
edit risk associated with which is considered minimal. COIs are also placed with
counterparties of sound risk profile. In addition to the above, the bank has Rs
. 100m invested in a wholly owned subsidiary.
Market Risk
Net investments of the bank increased to Rs. 7.2b (2008: Rs. 5.1b) at end- Decem
ber 2009. Around 73% of net investments comprised short-term treasury bills. Pri
ce risk on the same is considered low. Fixed-rate long term PIBs represented 14%
of net investments. These carry markup rates in the range of 12-13% and have ma
turities between Aug-Dec 11. Recent increase in benchmark rate is expected to ha
ve reduced the market value of fixed income instruments held in the portfolio. H
owever, the bank has both the intent & ability to hold these to maturity.
Internship Report on Zarai Taraqiati Bank Ltd. 2010 Investment in equities at co
st was maintained at Rs. 100.6m, comprising exposure in unlisted securities amou
nting to Rs. 10.5m. Investment in unlisted securities has been fully provided fo
r various reasons. Investment in listed equities of Rs 89.3m had a market value
of Rs 537m.
Liquidity
Total borrowings and deposits of the bank where higher at Rs. 63.2b (2008:Rs. 59
.9b) at year end 2009 with increase in deposit to Rs. 8.75b (2008: Rs 5.43b). Bo
rrowings were maintained at Rs. 54.5b at year-end 2009. Liquidity profile of the
bank declined in relation to 2008, with liquid assets to total borrowing and de
posits reducing to 27 %( 2008:36%). Depositors of the bank are primarily individ
uals. Proportion of current and saving accounts in the deposit mix was maintaine
d at 94%. Since deposits still comprise a small proportion of funding mix; impro
vement in the deposits does not have a material impact on the cost of funding fo
r the bank. The bank had outstanding borrowings to the tune of Rs. 54.5b from SB
P at year-end 2009. These borrowings were obtained to provide finance to clients
for agriculture. At the time of reorganization of ADBP into ZTBL, these credit
lines were restructured and a moratorium was given to ZTBL according to which it
had been allowed to repay SPB debt in 15 years (in 30bi-annual installments) wi
th a grace period of 3 years starting from July 2003 and the last payment was su
pposed to be of Rs. 3.20b, representing the subordinated loan. At the time of re
structuring, the bank had proposed to cap the markup on these borrowings at 2.35
58 %( 12 month t-bill rate as at July 01, 2003) for five years but the matter ha
d not been acceded to by the SBP. Since then, various restructuring proposals ha
ve been discussed by the bank with the ministry of Finance and SBP, though an ag
reement on this issue has still to be achieved. The bank has not made any princi
pal repayment on the premise that the restructuring terms have not been finalize
d. These loans are secured by way of federal government guarantee. Presently, th
e bank is accruing interest expense on these at varying rates. Three credit line
s amounting to Rs. 1.577b carry interest rate of 4% p.a. while remaining thirty
two lines amounting to Rs. 48.597b are based on PLS subject to maximum share of
profit to SBP ranging from 4-10% p.a. markup on subordinated loan is being charg
ed at weighed average yield of t-bills of 12 months maturity. No return however
has been actually paid by the bank, with a total payable of Rs. 19.54b having be
en accrued by December 32, 2009. Any plan requiring immediate payment of the eit
her the interest expense or 59
2010
principal may place significant stress on the bank, as it does not have the requ
ired liquidity. However, the bank also has markup differential of Rs. 17.74b rec
eivable from the government. This amount is not recognized on books. There are a
lso other amounts recoverable from the government in lieu of relief packages, wi
th outstanding balance of Rs. 956.27m at year-end 2009.
Profitability
Return on markup bearing assets declined to 9.8% on account of decline in high-y
ielding lending to financial institutions. Nevertheless, interest income of the
bank increased to Rs. 8.7b (2008: Rs 8.5b) attributable to overall higher averag
e markup bearing assets during 2009. Net interest income of the bank also depict
ed an increase to Rs. 5.1b (2008: Rs.4.98b). Cost of funding hovered at 6%, thus
spreads declined to 4%. Cash outlay has not been made by bank for payment of in
terest on borrowings, and interest in only being accrued on books. Non interest
income of the bank was higher at Rs. 38.2 m attributable to increase in dividend
income on investments. Other revenues primarily comprising recoveries on charge
d off loan amounts was Rs. 4.3b (2008: Rs 4.8), taking total revenues, net of fi
nancial charges, to Rs. 11.2b (2008: Rs. 10.4b). Administrative expenses of the
bank inclined to Rs. 5.2b (2008:Rs. 4.5b), in line with inflationary trends in t
he economy. While salary expense experienced growth of 12% staff strength of the
bank was rationalized to 5,352(2008: 5,370). In December 2005, the bank had int
roduced SR-2005, a retirement benefit scheme for its employees. A significant pr
oportion of employees switched to SR 2005 from their existing pension scheme in
2005. The scheme was re-opened in 2009 and 1,097 Executives/officers of the bank
opted for SR-2005, resulting in an expense of Rs. 677.8 to bank in 2009. Increm
ental provisioning against non-performing loans declined to Rs. 563 (2008: Rs. 1
.9b). The bank posted profit before tax of Rs. 4.6b (2008: Rs. 3.99b) for 2009.
Profit for 2009 was reduced to Rs. 1.8b (2008: Rs. 2.6) after adjustment of tax
expense of Rs. 2.8b (2009: Rs. 1.4b) which pertained to current and prior year.
Capitalization
As of December 31, 2009 equity of the bank was higher at Rs. 18.7b (2008: Rs. 16
.9b), exceeding the minimum capital requirement of Rs. 6b mandated by SBP. Capit
al
Internship Report on Zarai Taraqiati Bank Ltd. 2010 Adequacy Ratio of the bank w
as slightly lower at 21.7% (2008: 22.9%). Net NPLs to Tier 1 capital stood at 57
% at end-December 2009. If the proposal of loan conversion into equity materiali
zes, it will provide considerable momentum to capitalization of the institutions
.
61
2010
Quick View of ZTBL s Performance till 2009
90 80 70 60 50 40 30.2 30 20 10 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2
006 2007 2008 2009 11.7 22.4 24.4 27.6 29.1 29.7 39.4 33.7 52.5 55.9 77.7 70.7
Disbursement (Billion)
80 70.8 70 60 50 40 30.1 30 20 10 0 1997 1998 1999 2000 2001 2002 2003 2004 2005
2006 2007 2008 15.1 18.7 25.8 32.1 33.5 36.9 38.9 42.1
73.8
Recovery (Billion)
52
63.2
2009
10 9 8 7 6 5 4 3.1 3 2.1 2 1 0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
2007 2008 2009 1.5 1.8 1.6 1.4 1.6 2.3 2.6 2.9 4.3 5.5 8.8
Deposit (Billion)
10 8.4 8 6 4 4 2 0.2 0 1997 -2 -4 -6 1998 1999 2000 2001 2002 2003 2004 2005 200
6 2007 2008 2009 1.8 0.3 0.8 0.2 1.2 0.1 0.6 1.8
Gross Profit (Billion)
5
-3.8
63
2010
80.0% 69.6% 61.6% 60.8% 60.0% 52.9% 53.0% 52.5% 50.0% 48.8% 49.7% 49.1%
70.0%
40.0% 33.3% 30.0% 27.7% 19.1% 15.6%
20.0%
10.0%
0.0% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
NPL's As a Percentage of Total Outstanding
Chapter 4
SWOT Analysis
Strengths
y ZTBL has brand name in agricultural loaning. y It is first and large financial
institution established in Pakistan to promote agricultural financing. y The ba
nk has more than 350 branches throughout Pakistan and has presence in all the pr
ovinces of the country which enables it to capture and facilitate a large number
of customers. y The bank enjoys sovereign guaranty of Federal Government that c
overs its debt obligation to State Bank of Pakistan. y The Bank has the most exp
erienced and the least experienced staff, which is a good combination of experie
nced heads and exuberance of youth. y The bank has ability to launch successful
products for agricultural industry due to know how of the agricultural system of
the country. y Mobile Credit Officer is the unique concept which is helping in
remaining more near to its customers and also helps in recovery. Concept like th
ese helps bank in safeguarding itself in the risky adventure of financing to sma
ll farmers.
65
2010
Weaknesses
y ZTBL have not introduced any Islamic product in financing. Islamic banking is
becoming popular in these days and to sustain and increase the number of custome
rs every bank is felling need to start offering Islamic Products. This ZTBL requ
ires noticing this changing trend. y In spite of the presence of technology many
jobs are done manually. Almost all other bank s operations have been computeriz
ed but ZTBL is still working on manually written ledgers etc. y Like other Gover
nment institutes the red tap dilemma also exists in ZTBL. y The staff is not mot
ivated because the promotion mechanism is based on experience rather than on the
performance of the employees. This is the reason that usually employees stop gi
ving their full efforts after knowing the reality that their performance pays a
less role in their success. y The average loan disbursement amount is 85,000 to
single person which is not a big amount. Usually the loan obtained by the loanee
can be used to meet working capital requirement only it cannot be used to fulfi
ll the dream of modernizing of agriculture sector. y There is a lack between the
planning of head office and the reality of environment because the staff at hig
h level have little know how of the real situation on the ground. y The infrastr
ucture of the bank is also based on old style; the bank is not refurnishing its
branches like the other banks have done in this decade. y The situation at branc
h level is not good, there is lack of even furniture, fans etc.
Opportunities
y
The bank started computerizing its operation which if completed will result in i
ncrease of the bank performance. The impact of computerization can be seen from
the result of recovery of 2009 which is 89%. The computerized system helps bank
in reducing fraud. Due to increase in the government attention toward the agricu
lture sector it is expected to see the role of the bank increasing in the near f
uture. As a result of different steps taken by the government regarding the bett
erment of the agriculture, small borrowers are attracted to get the financing an
d to start business. So, the ZTBL has an opportunity to attract the customers by
giving them more attracted schemes. They have wide area network in all over the
Pakistan, so ZTBL can make it possible the fast delivery of funds to rural area
s. The flood of 2010 is challenge for the whole country. Because the most effect
ed people are farmers so the bank has a chance to increase its reputation by uti
lizing its full resources to help them. It is also expected that the relief whic
h the government may provide to them will also be delivered through the bank in
the form of relaxation to the loanees.
y
y
y
67
2010
Threats
y
The biggest threat in the banking sector is the continuous downfall of the count
ry economy since the last few years. Sudden rise and fall in the trade and indus
try conditions and stock exchange business of the country also adversely affect
the growth of banking sector. The default ratio of customers who are availing th
e credit facilities from the ZTBL can rise due to the economic recession in the
country. Government type of working style is also a threat to the bank which req
uires to be changed to keep the banking growing. Many commercial banks also star
ted agriculture loaning scheme so it is expected that in the future the farmers
will have more choices to have finance from which will definitely affect the cus
tomer base of the bank. Political unrest is also a threat for the bank because i
t is a government owned bank and the change in government can result a change in
the strategy of the government which can affect the plan made by the bank. Natu
ral Calamities is also a problem, the bigger part of the bank customers relies o
n the environmental condition. Almost whole of the agriculture industry have thr
eat from the changing environment conditions. The example of 2010 flood is still
in front of us those who are affected are unable to pay their loans back.
y
y
y
y
y
y
Part Two
Ch. 5: Assignments I handled during my Internship.
69
2010
Chapter 5
Organogram of Mian Channu Branch
Manager
AMD (Assistant Manager Desk)
AMO (Assistant Manager Operations)
Assistant Officer
MCO (Mobile Credit Officer) MCO (Mobile Credit Officer)
Accountant
Cashier
Redemption of loan
On the payment of all the dues by the loanee (principal + interest), he can free
his land (or any other security provided) from any charge created by bank for t
he purpose of loan. For this purpose he will have to present the following docum
ents: 1. 2. 3. 4. Application for redemption Stamp Paper of rupee 20 Last receip
t of amount paid Cheque book (if issued)
When the loanee provides these documents to assistant officer (Or any officer ap
pointed for these sort of work), the assistant officer asks the peon to bring th
e Loan Case File of the borrower. After the file is received by the assistant of
ficer, he checks the documents that whether all the documents are there in the f
ile. Then he makes required entries in the Passbook. These entries usually made
on the page 28 and 30. The example of entries is given below. The following entr
ies are made on page 28. See page number 16 and block number 3 for detail. The e
ntire loan including interest has been paid by (Here page number 16 the loanee.
shows the number and date of last charge created against the land of loanee in t
he favor of bank) The following entries are made on page 30. See page number 18
and block number 8 for detail. ZTBL Mian Channu (Page number 18 is usually the p
age where the detail of land mortgaged has been given, it include the area of la
nd, khatoni number etc)
71
2010
After these entries the officer then sends the file to Manager for signature. On
approval from the Manager for the Redemption Application the assistant officer
attaches all afore said documents with in the file and record in the File Moveme
nt Register that file has been moved from the record room for the redemption pur
pose. Than the file is send to AMO (Assistant Manager Operation) for further pro
cess. The loanee is given the date of next week to collect his Passbook . During
this period AMO checks the record of the loanee to confirm that the entire due
amount with respect to that particular loan has been paid and then he signs to g
ive approval to assistant officer to issue Passbook to the loanee. The AMD (Assi
stant Manager) and Manger both also sign the notice issued in the name of Patwar
i and Tehsildar that the land can be transferred to the loanee as the loan has b
een fully paid by him. Then file again comes to the assistant officer, he checks
the signature both in the notice and Passbook and then stamped both. Now the Pa
ssbook is ready to issue. Before issuing Passbook the officer record that passbo
ok is issued to the loanee in the Dispatched Register . On the issuance of Passb
ook to the loanee, the officer verifies that the person receiving the documents
is the original owner of the land which is mortgaged with the bank. After gettin
g the Passbook, the loanee goes to Patwari and Tehsildar for the change of recor
d back to his name. The one thing which is interesting here is obtaining Stamp P
aper from the borrower. This is not a requirement but bank has made it practice
so that if in the near future, it finds that some amount is still due by the bor
rower than it can write on the stamp paper whatever it wants and then can claim
the due amount from the borrower. This is precautionary measure adopted by bank
because once the Passbook issued to the borrower and the land again transferred
to his name, the bank will be in no position to recover any amount which is unex
pectedly left due.
The redemption process in short can be described as the following:
y y y y y y Submission of Application Acceptance of application by manager Recor
d of file in the File Movement Register Entries made in the passbook File send t
o AMO for checking of loan status On approval from AMO, the Manger and Assistant
manger signed the notice to issue Passbook
Internship Report on Zarai Taraqiati Bank Ltd. 2010 y The passbook dispatched to
loanee with notice to Tehsildar to transfer land back to his name y After the l
and is transferred to the loanee name, if he wishes he can withdraw the amount f
rom his current account and can close his account. Usually the loanees do not re
deem their land because they want to avoid the cost and wastage of time when in
the future they again have to gain loan from the bank. So, they usually remain t
he land in the name of the bank even after they have paid the whole loan amount.
During my internship I have seen people who has paid loan more than 10 years ag
o but they came to bank after such long time to redeem their land and the reason
behind their redeem was that they want to transfer it to someone others name ot
herwise they may not come for redeem. I have also seen one of the clients who ha
s paid loan in 1985 but his land is still in the name of the bank and they have
not redeemed it. After the death of the client his sons came to know that the la
nd could not be transfer to their name because it is still mortgaged against the
loan which their father had paid in 1985. So, at that time they reach bank for
redemption because the bank always maintained record so their file found from th
e record room after little efforts. All this shows the confidence the people has
on the bank and also shows that in practical life anything can happen.
73
2010
Opening of Current Account
In the ZTBL, the current account usually opened only when the person comes there
for a loan. On the approval of loan, his sanctioned amount is usually credited
to his current account. The procedure of opening of Current Account is not very
complicated. The following are the main point in the opening of a new account: 1
. 2. 3. 4. 5. 6. 7. 8. 9. Acquiring original CNIC Filling the Current Account Fo
rm Filling of Know Your Customer Filling of Current Account Card Registering nam
e in the Current Account Register , (Issuance of A/C No.) Filling of deposit sli
p of starting amount Signing by AMO and Manager Issuance of Cheque book Opening
account in the ledger of bank
1: Acquiring Original CNIC
It is mandatory to check the original CNIC of the person before opening of curre
nt account. In the ZTBL it is routine to open account when manager sanctioned an
d signed the amount of loan. Because at that stage it becomes essential to have
an account in the bank otherwise the amount of loan will not be paid. The other
documents required to attach with the forms are: y 2 recent pictures y Copy of C
NIC.
2: Filling Current Account Form
After obtaining original CNIC the form for current account is filled with the in
formation written on the CNIC. The form includes the following information: y y
y y Type of account Branch Name Branch Code Name
Internship Report on Zarai Taraqiati Bank Ltd. 2010 Father Name CNIC Number Addr
ess Occupation Nationality Contact number Date of birth Marital status Mother na
me Name, CNIC, Contact of MCO who knows the person personally Next of Kin (The p
erson who will have right to operate the account in the event of the account hol
der s death or any other mishap) y Starting amount y y y y y y y y y y y
3: Filling of Know Your Customer Form
The Know Your Customer form is also attached with the current account opening fo
rm and contains the following information: y y y y y y y y y y y Name Account nu
mber CNIC number Address Purpose of opening of account Monthly income Source of
income Type of customer (i.e. Walk in) Public figure Usual mode of transaction (
i.e. in cash, cheque) Etc.
75
2010
4: Current Account Specimen Card
Name: Adress: Name of Account Holder Account No. Type of Account: Name of Accoun
t Holder
This side is used to write the name of This side is used to obtain the signature
s of account holder both in Urdu and English. the account holder for verificatio
n of cheques in the future if required.
Signing Authority: One side is used to obtain the signature of account holder; I
usually take 3 signature of him in the right side of card. While the left side
of card is used to write the account holder name in both Urdu and English.
5: Registering name in the Current Account Register (Issuance of A/C No.)
After filling the required forms the name of the new account holder is registere
d in the Current Account Register. This register requires writing down the name
of account holder, his father name, Address and the starting amount. These are t
he following blocks made in the register requires to fill. Account Number: It Da
te of Opening of Opening Balance of Name: is account number Account Account Fath
er name: issued to holder. It Address: is a serial number, so I used to write th
e next number when I have to open Adnan Ijaz an account. S/O Ijaz Naseem 15-09-2
010 1000 Mian Channu Example: 1567
Internship Report on Zarai Taraqiati Bank Ltd. 2010 When the account number is i
ssued, it is also written in the Account Opening Form and Know Your Customer For
m.
6: Filling of Deposit Slip of starting amount
To open an account in the ledgers of bank the account holder requires to deposit
an initial amount. This amount in ZTBL is usually 1000; however it depends on t
he amount of loan sanctioned like some loans required to deposit a larger amount
with the bank before issuance of loan from the bank. The example of such loan i
s of Tractor because I have not be given chance to stay with an MCO, so I don t
know what exact amount is required to deposit with the bank for any particular l
oan. The Deposit Slip which I used to fill during my internship consist the foll
owing information:
Zarai Taraqiati Bank Ltd.
Depositor s Copy Branch Name: Branch Code: Date: Name: Account Number: Particula
rs Amount Branch Name: Branch Code: Name:
Zarai Taraqiati Bank Ltd.
Bank Copy Date:
Account Number:
Particulars
Amount
Total Amount Rupees in words: Depositors Signatures: Signing Authority:
Total Amount Rupees in words: Depositors Signatures: Signing Authority:
7: Signing by AMO and Manager
Then the forms and deposit slip is signed by AMO (Assistant Manager Operation) a
nd Manger to verify that all the requirements of opening an account is met by th
e account holder.
77
2010
8: Issuance of Cheque book
Than on depositing of a nominal fee of rupee 30 the account holder has been issu
ed a cheque book. In the bank where I have completed my internship, the cheque b
ook is issued by the cashier when the person deposits his starting amount of acc
ount and the amount of issuing of cheque book.
9: Opening account in the ledger of bank
Unlike other banks, ZTBL is still working on manually written ledger books. Howe
ver, the bank is also gradually computerizing its records. These ledger books ar
e large books with a number on front of it which helps in finding the record of
any particular person. The ZTBL Mian Channu branch where I have completed my int
ernship has 52 ledgers at that time with the current account holder of 11595 at
the date of 15 September 2010. There will absolutely many accounts which will no
t be alive. When the depositor deposited the amount his name and other particula
rs is written down in the ledger so that he can transact with the bank in the fu
ture. The ledger of current account contains the following information.
Zarai Tarqiati Bank Ltd.
Branch name: Mian Channu
Page no. 177 Branch Code: 20226
Name: Father: Address: Account no: Cheque book: Date 15-09-2010 15-09-2010 16-09
-2010
Signature:
Particulars By cash Loan Paid To Cheque. (no.)
Debit
Credit 1000 50000
Balance 1000 51000 1000
Signing authority
50000
The above given table is the example of information usually written in the curre
nt account of a customer. There are also many other column available in the ledg
er books but they all are not used in the bank. There are some options which are
not printed there but it is a practice to write that information, like there is
no column of signature
Internship Report on Zarai Taraqiati Bank Ltd. 2010 but without a signature no o
ne can check the validity of a cheque. So, I have observed that the signature an
d thumb impression is used to take in the right side of ledger book where a lot
of space is available. The other option which I have mentioned here but not incl
uded in the ledger book is the cheque book number. It is also practice to write
down serial of cheque book in the space available. It makes it possible to confi
rm that the cheque book which the customer is using to transact with the bank is
associated with that particular bank account or not. Here I have also made few
entries which show how a transaction is recorded in the ledger book. Absolutely,
the date is the first option than the particulars which shows what exactly happ
en on that day. Like in the first entry the bank account has been opened with an
amount of 1000. So, I have written by cash in the particulars which represents
that the person has transacted in cash. Then I credited the amount which shows t
hat this money is given by the customer and in the balance column it has increas
ed the balance with the same amount of 1000. The next column is used by the sign
ing authority (AMO in my case) to confirm the transaction. As I have written bef
ore that in ZTBL current account is usually opened only when the bank has to dis
burse any loan to the customer. When I have joined the bank that was the slack t
ime for the bank because all the customers of bank are farmers that is why they
come to bank to get or give loan when they have to plant or harvest any crop. Th
at is why a number of bank customers are seasonal. They are usually a great rush
from April to June and then from November to December. Awami Zari Scheme was th
e only scheme available to new borrower at the time I was there. In this scheme
a part of sanctioned amount is given to borrower to meet the wage and water expe
nses and the rest amount is paid by supply order of fertilizer and pesticides. T
he amount which has to pay in the form of cash is credited to the current accoun
t of customer from where he can withdraw it. The 2nd entry in the sketch of ledg
er above shows the disbursement of any of such loan, which has increased the bal
ance to 51000. When the customer draws a cheque on the bank the entry in the led
ger will be like I have shown above with the date of 16-09-2010. The account of
the customer will be debited and the balance will be reduced with the same amoun
t. A large number of ZTBL customers are illiterate so they can not fill their ch
eque by themselves and due to this reason almost all the cheques are filled in t
he accounts by a clerk. Before filling the cheque of anyone he assures the balan
ce in the account and in the same time he records entries so he will not have to
reopen the ledger to make entry after the deposit or withdrawal of amount by th
e customer. So there are some things
79
2010
which I have learned from the seniors which they have developed to facilitate th
emselves when the customer will come again in the future, these guidelines are f
ollowing: y y y y y y Write the ledger name and its page number on the front of
new cheque book Write the account number on every cheque of new cheque book Take
the Thumb Impression of every customer on the cheque For the man take left thum
b impression and for women take right or both No cheque will be paid to anyone e
lse than account holder if it is a loan account Fill the cheque in Urdu if the c
ustomer signs in Urdu or gives Thumb Impression only y Also fill the memorandum
attached with in cheque book with each cheque to record all the transaction for
future reference of client and to the bank also.
All the cheques are required to be signed by respected authority before payment
of cash, like AMO (Assistant Manager Operation). Before his sign no cheques can
be passed, he also cheques the entries made by clerk in the ledgers before passi
ng cheques. In this way the entries originated by any person is double checked w
hich reduce the chances of any mistake. Whenever a cheque of more than 25000 is
come to cash it is required to write a voucher of With Holding Tax with it so th
at the amount of tax can be deducted from the payment. The vouching will be disc
ussed later on.
ZTBL Flood Relief Fund 2010
Heavy monsoon rains started to hit Pakistan from 22 July 2010, causing flash flo
ods in several parts of Khyber Pakhtunkhwa, Baluchistan, Punjab and Pakistan Adm
inistered Kashmir. This flood have caused huge destruction, hundreds of villages
have been swept away. Death toll has risen to more than 1500 people, at least 1
.2 million homes have been damaged and an estimated 17.2 million people have bee
n affected by the floods. Floods have caused widespread damage to public infrast
ructure, with roads submerged and tens of bridges swept away, many hospitals and
an estimated 7,173 schools are being severely damaged. Power and communication
lines are down in many areas. The economic cost is also huge. Thousands acres of
agricultural land has been flooded, at least 3.2 million hectares of standing c
rops have been damaged and at least 200,000 livestock animals have been lost. Th
is is a snap shot of the situation after the flood and the damage final estimate
s are yet to make. To help the victims of this flood ZTBL made Flood Relief Fund
2010 and the head office asked all the branches to collect the fund for this fl
ood relief fund. According to circular issued by Head Office every branch make i
t sure to convince the borrower, depositors and general public to contribute in
this fund for this purpose the following procedure is required to follow: y From
any loan of below 200,000 or any payment from the account of customer below thi
s limit should be deducted with amount of at least 100 rupee to contribute in th
e flood relief fund. However, it is required to make sure that avoid double dedu
ction from any particular person s payment. But if anyone wants to contribute mo
re than 100 or more than one time he can give at any time. y From any payment of
more than 200,000 but less than 500,000 the rupee of 500 should be deducted to
charge to flood relief fund keeping in view the double deduction. y From any pay
ment of more than 500,000 the amount of 1000 should be deducted. The amount is d
educted by filling a deposit slip with the name of the contributor to deposit in
the account of flood relief fund (A/C No.3043). For this purpose every MCO (Mob
ile Credit Officer) is given a deposit slip book so that he can collect fund fro
m the 81
2010
people during his visit to the villages. And inside the bank, the accounts depar
tment makes it sure to fill this deposit slip with every payment. The weekly rep
ort of these funds collection is required to send to Regional Office. According
to the weekly report of last week of Ramdan, the Mian Channu branch where I did
internship was in the first position in the collection of fund in the whole zone
of Vehari.
Writing of Vouchers
Vouchers are the important evidence of all the transactions takes place in the b
ank. In the accounts department of ZTBL it is the back bone, every transaction o
f bank with reference to cash required a voucher to be drawn against it.
The vouchers are of three types:
1. Debit Voucher (Receipt of Amount) 2. Credit Voucher (Payment) 3. Transfer Vou
cher
1. Debit Voucher
Debit Voucher is used when bank received any amount from anyone. The example is
of deposited amount by the depositors, the payment of loan by the loanee etc.
2. Credit Voucher
It is used for the payment of any amount by the bank to anyone. Like the cheque
drawn on bank, the expenses of bank itself etc.
3. Transfer Voucher
As the name shows it is used when the amount is required to transfer from one he
ad to another. The example is the transfer of utilities bills accepted by the ba
nk to the respected utilities provided company (Mepco, PTCL etc.). The transfer
of return to the income account of bank, it is also used when the loan is sancti
oned so it is required to transfer amount of loan to the loanee account. Another
use of transfer account is to correct mistakes in the ledger, for example if an
account is mistakenly debited in place of another account. So the transfer vouc
her can be written to credit the first account and debit the second one to corre
ct the mistake. In the end of day all the vouchers written during the day is req
uired to be write down in the daily Scroll (which will be discussed later on) an
d then all the vouchers of day is sewed and then sealed so that no new voucher c
an be placed or removed from the record. These vouchers used to store in record
room and they keep piling up there. Every voucher has at least two copies, one f
or the customer and one for the bank record. For easy recognition the vouchers a
re made of different colors. y Debit Voucher (Have three copies and in white col
or) y Credit Voucher (Have two copies and in blue color) y Transfer Voucher (Hav
e two copies and in yellow color) 83
2010
Sample of Debit/Credit Voucher
Branch----------------Name-----------------Parentage-----------Village----------
-----Tehsil----------------Debit Cash Voucher (Cash Receipt) Branch Code Date Se
rial No. 154700
No. Particulars Loan Case no./ A/c no./ Advice no. G.L Head TR Code RO Code Effe
ctive Date Amount Contra Voucher/Contra Branch no. Record no./CA Code
Total
Amounts in words:--------------------------------------------Enclose:-----------
-----------------------------------------------Prepared by:---------------------
-------------------------------Checked by:--------------------------------------
---------------Authorized Signature:---------------------------------------
Internship Report on Zarai Taraqiati Bank Ltd. 2010 The debit voucher for the de
duction of With Holding Tax from the cash withdrawal of more than 25,000 will be
filled in the following way. First the name or branch, its code and the date is
required to write. Than the information from whom this tax is collected, his na
me, father name, his village and city name will be written. After that in the pa
rticulars it will be written A/O of With Holding Tax and in the GL Head (General
Ledger Head) the head number of With Holding Tax (which is 3056 in the ZTBL) wi
ll be written. The amount will be written after calculating .3% of withdrawal am
ount. In the total the same amount will be written again and then this amount wi
ll be written down in words. In the last the signing authority will sign in. In
this voucher of W.H Tax only a few columns of the voucher is used, the other col
umns can be used for other types of transactions. The explanation of each column
is given below:
1: Particular:
In particulars the reason of the transaction is written down. For example, Amoun
t of Recovery etc.
2: Loan Case no./ Account no./ Advice no.
If the voucher is of recovery than in this column the loan case number of the lo
anee who has come to pay loan will be written. This column has 6 blocks to write
, due to shortage of space these block can t be shown in the above sample of vou
cher. Loan Case no./ Account no./ Advice no. 3 9 6 7 0 0
3: G.L Head (General Ledger Head)
It is the General Ledger Head which is required to debit. These are standard hea
ds used in the entire branches of ZTBL. Like 3056 is the G.L Head for W.H Tax, i
t will be same when any branch of ZTBL will collect this tax from his customer.
4: T.R Code
This code is rarely used for debit and that is why I don t have complete informa
tion about it. In the recovery voucher this column is used, when MCO collects th
e cash than I used to write 14 and when loanee himself comes to pay loan I used
to write 15 in that place. So, it helps when the voucher is recorded in the comp
uter room to understand the type of transaction. 85
2010
Like, in the credit voucher I was asked to write 01 code for all the expenses of
the branch and 02 for the expenses of the Zonal Branch. So, it helps computer t
o understand the type of transaction. These codes can be different in different
banks.
5: R.O Code
Originated/Respond code is used to show that whether a transaction is originated
or responded. For example in the W.H Tax example the word O will be written in
this column which will show that this debit voucher is originating this transact
ion. And when this amount will be transferred to the respected head in that vouc
her the word R will be written which will show that this voucher is responding t
o any transaction.
6: Effective Date
It is the date on which the amount is received. It can be different from the dat
e on which the voucher has been written down. For example, on 13 September an MC
O is on a tour to the villages which are under his circle; during his visit he c
ollects recovery of 100,000 from someone. He will issue receipt to the loanee as
evidence that MCO has collected cash from him and on the next day (14 September
) when he will come to the bank that MCO will deposit cash as a recovery in the
name of that loanee. Because the cash has been collected by him a day before the
voucher of recovery is written down so the effective date on voucher will be 13
September while the date of Voucher in right upper side column will be the date
of 14 when the voucher is written. Why the effective date required? The answer
of this question can be understood from the above example. The loanee has paid t
he MCO on 13 September, while the amount is deposited by the MCO on 14 September
. So, no interest is required to be charged for the day of 14 September because
the amount has been already collected a day before. If the effective date will n
ot be written than there will be discrepancy between the amount collected by MCO
and the amount calculated in the accounts in the time of writing voucher becaus
e the amount calculated in the accounts department will include the interest of
one more day than collected by MCO.
7. Amount
This column used to write the amount, it is also divided into many blocks so tha
t when write any amount it will be easily readable later on. Like the first bloc
k in Rs. Column from right side is for figure of hundred and the next block is o
f thousands.
Internship Report on Zarai Taraqiati Bank Ltd. 2010 Amount Rs. 11 000 2 09 000
Ps. -
Total
2
20
000
-
8. Contra Voucher/Contra Branch No.
This column is used when we are responding to some other voucher or branch. Duri
ng my internship I have used it once time. One of the customer of a bank has rec
eived tractor in the Benzir Tractor Scheme but the company failed to deliver the
tractor on the agreed upon date. And it is a contract between the bank and the
company that when company will not deliver the tractor on the agreed date, it wi
ll be charged with the penalty of 150 rupee per day. So, the bank had a claim on
the company of rupee 25,000 due to late delivery to the customer. The company h
as transferred this amount to the bank account, so definitely the bank has a vou
cher written against it. Now this penalty is in the bank account which it has to
transfer to the customer who has faced difficulty due to late delivery. So, whe
n I transferred the amount from bank account to the customer s account I was act
ually responding to the first voucher created with which the amount was transfer
red from company to the bank account. So, I was asked to write the voucher numbe
r of that first voucher in the column of contra voucher of new voucher with whic
h I am transferring amount to customer s account so that in future when any one
need to find out that from which reason the account of the customer is credited,
he can easily find the contra voucher number from the voucher written to transf
er amount to the customer account. And when he will open the contra voucher numb
er, he will find that the amount was transferred by the company as penalty to th
e bank account. So, in short it is used when we are responding to any other vouc
her or branch. The Exact view of contra voucher/contra Branch No. and Record no.
/CA Code are the following. These two head come under the main head of Sundry/Su
spense & Central A/C only which is not displayed in the voucher sample due to sh
ortage of space. Sundry/Suspense & Central A/c only
Contra Voucher/Contra Branch No. Record no./CA Code
3
9
6
7
0
0
0
1
87
2010
9. Record No./CA Code.
Record number is the number of the entry in any contra voucher to which we are r
esponding. A voucher can have many transactions written on it as you can see tha
t there are number of rows available in the voucher to write on. So, giving cont
ra voucher number is not the only thing we need to write to give exact reference
, we also need to give reference of Record no. of that particular transaction in
that voucher. And CA code is used when we are responding to any Contra Branch N
o.
10. Rupees in Words
Rupees in words are compulsory to fill so that to avoid any mistake in writing a
mount in numbers and also to avoid any misconception in future.
11. Encl (Enclose)
Enclose is number of receipt if any attached with the voucher. Like if I want to
write a credit voucher to pay some employee who has bought stationary for the o
ffice use so I will attach the receipt of the stationary he has bought from the
shop with the voucher and I will write (1) in the enclose so whenever anyone wil
l see the voucher he will know that there is a receipt attached with the voucher
.
12. Signatures
There are three spaces available to sign in the voucher. These spaces are for th
e person: y One who has prepared it y One who has checked it y And signing autho
rity who passes this transaction But I have not seen anyone signing the first tw
o places, the only signature place is used is of signing authority because it is
compulsory. Both Debit and Credit vouchers have same columns and lines to write
on. But the transfer voucher is different from these two, it has the same colum
ns and lines but it is divided into two parts. Upper side is for the debiting an
account and in the down side is for crediting an account. Because when we use t
o transfer amount from one account to another account than there should be one a
ccount which is required to debit and the other account should be credited to co
mplete the whole entry. The sample of Transfer Voucher has been given in the nex
t page.
Sample of Transfer Voucher
Branch----------------Name-----------------Parentage-----------Village----------
-----Tehsil----------------Transfer Voucher Branch Code Date Serial No. 154700
No.
Particulars
Loan Case no./ A/c no./ Advice no.
G.L Head
TR Code
RO Code
Effective Date
Amount
Contra Voucher/Contra Branch no.
Record no./CA Code
Total
No. Particulars Loan Case no./ A/c no./ Advice no. G.L Head TR Code RO Code Effe
ctive Date Amount Contra Voucher/Contra Branch no. Record no./CA Code
Total
Amounts in words:--------------------------------------------Enclose:-----------
-----------------------------------------------Prepared by:---------------------
-------------------------------Checked by:--------------------------------------
---------------Authorized Signature:---------------------------------------
89
2010
Daily Transaction Scroll
Daily transaction scroll is written by operations officer every day in a bank. I
t is the record of all the cash inflows, outflows and transferred on a particula
r day. Both cashier and operation officer writes his own scroll at the end of da
y when they have to close the cash. The closing balance in both these scrolls mu
st be same otherwise there are some transactions which have not been recorded co
rrectly either by the cashier or the operation officer. If I will divide the pag
e of scroll than the following are the important columns and part of it:
Daily Transaction Scroll Name of Branch--------------------------Date
Branch Code Sheet Number
The above are the sketch of columns used in the upper side of scroll page. Sheet
number is used when there are more vouchers to write and they cannot be written
on a single sheet so the next sheet is required to use in such situation the nu
mber of sheet should be written so that they can be arranged in a proper way. Sr
Voucher G.L . No. Head 1 154700 2 701 3 568900 4 768200 Total Debit 11 000 500
5 000 4 000 11 500 5 000 4 000 4 000 4 000 Credit Debit Credit
The above view is of the rest of the page where all the vouchers are recorded. T
he sheet is divided into two sections the left side part is used to write the de
bit and credit vouchers and their amounts, while the right side is used to write
the debit and credit of transfer vouchers. The above is the example of writing
of different vouchers. The first two vouchers are debit vouchers that are why I
have written the amount (11,000 and 500) in the debit column. The 2nd voucher na
me is not written completely which is an ease which can be
Internship Report on Zarai Taraqiati Bank Ltd. 2010 used if the same serial is g
oing on and only the last number is changing. The third voucher is a credit vouc
her and its amount (5,000) is written in the credit side in front of it. The fou
rth voucher is representing a transfer voucher so its effect will be shown in th
e right side of the sheet. In both Debit and Credit column of the right side of
sheet is filled with the same amount because in transfer voucher one account wil
l be going to be debit and the other will be credit so the net effect will be ze
ro. In the end all the amounts of all the vouchers are totaled in their respecti
ve columns. Like in this example the debit vouchers total amount is 11,500 and t
he total of credit vouchers is 5,000. The debit and credit side of transfer vouc
hers side will always be the same, which are 4,000 in the example. After getting
this total the next step is to calculate and write the closing balance. 1. Open
ing Balance 2. Debit Balance 3. Total Balance (1 + 2) 4. Credit Balance 5. Closi
ng Balance (3 4) 400,000 11,500 411,500 5,000 406,500
To calculate the closing balance first step is to write the Opening Balance whic
h is absolutely the Closing Balance of last day. Here in the example I have assu
med it 400,000. After it the debit balance will be written in the 2nd row and in
the 4th row both 1st and 2nd row will be added to get the total balance. Now th
e credit balance will be written and to get the closing balance the credit balan
ce is required to deduct from the total balance of 3rd row. To close the cash, t
his closing balance should match the closing balance in the books of cashier. Wh
en comparing with the cash scroll of cashier the Total Balance, Credit Balance a
nd then Closing Balance all should be similar otherwise there will be something
which is skipped during writing even by the Officer or by the cashier. When clos
ing cash, in the end of this scroll sheet the number of total debit, credit and
transfer vouchers is required to be written so that nothing can be added or eras
ed from the above scroll by any one. Number Vouchers of Debit 2 Credit 1 Transfe
r 1 Total 4
As you can find that in the above given example of scroll, there are two debits,
one credit and one transfer vouchers have been written so the same number is wr
itten in the ending column of scroll sheet.
91
2010
Making Entries in the Ledgers
In ZTBL the record of current accounts and loans are manually maintained. There
are many records which have been computerized but still the hand written ledgers
are used. Making entries in the Ledgers requires simple concept of debit and cr
edit. However the understanding of banking practices are required so that to fol
low the exact way of recording any transaction because usually the column writte
n on the ledger books are not used for the purposes for which they are made. The
employee usually has established their own way of writing transactions in the l
edgers the way in which they feel easy. I have found many columns unused in the
ledgers of Sada Bahar Loan Scheme or they have been used to write other informat
ion which is different from the heading of columns.
Disbursement and Recovery Entries
When a loan is sanctioned and ready to disburse it is recorded in the respected
ledgers. I am here taking example of SBS (Sada Bahar Scheme) which is a revolvin
g finance scheme. Every loanee has a unique Loan Case Number which is the base o
f all the record of his loan. When a loan of SBS is sanctioned its amount is not
transferred to the current account of the loanee like it is used to transfer in
the AZS (Awami Zari Scheme). In SBS the Loan Case Number is used for all types
of transactions, when a loan is sanctioned it is recorded in the SBS ledger with
the name of loanee and Loan Case Number is used as an account number from which
he can operate. The information which is required to write in the ledger sheet
when a new loan has been passed and ready to disburse are following: y y y y y y
y y Loan Case Number Name Parentage Address CNIC Maximum limit Date of maturity
Cheque book number
After entering the above information the loan can be disbursed to the loanee whe
n he desires. Because almost all the customers of ZTBL are low earning farmers a
nd they
Internship Report on Zarai Taraqiati Bank Ltd. 2010 require immediate cash to me
et their expenses so they draw a cheque on the bank on the same time when their
loan is entered in the ledger book. In SBS farmer can withdraw the amount till h
e has reached maximum limit and the return will only be paid on the amount which
he has taken out as a loan. The entries of disbursement can be easily explained
by taking an example that the loan has be sanctioned and it is recorded in the
ledger now loanee want to withdraw the total sanctioned amount of 50,000. The en
try of this transaction will be in the following way at 01-01-2010: Principal Cr
edit Balance Debit 50,000 1,480 18,520 31,480 1,480 Return Total Credit Balance
Outstan ding 50,000 1,480 Nil 51,480 31,480
Date 01-1-10 31-4-10 01-5-10
Particulars To Cheque No. To Return Recovery
Debit 50,000
After four month a computerized outstanding balance report of all the loans is g
iven to each branch, it is called OBL (Outstanding Balance Ledger) . The bank al
so adds return to the principal amount of each loan case, like it is shown in th
e date of 31-04-10. (The interest rate on SBS is 9%) Now suppose that loanee has
reached bank on 01-05-10 and he wants to pay 20,000. The entry is shown in the
date of 01-05-10. It is rule in the bank that when the bank recovers any amount
from the loanee than first return amount will be reduced and then the principal
will reduced. Here in this example, the loanee wants to pay 20,000, so first int
erest will be deducted which is 1480. To pay return we will credit it with 1480
and then the principal will be credited with the remaining amount (20,000-1480=1
8,520) as shown in the above diagram. Due to this payment the principal is also
reduced to 31,480 and because the total return has been deducted that is why the
total outstanding amount is also 31,480. (It is routine in the bank to check th
e total outstanding amount in the ledger with OBL before receiving any recovery.
This is a precaution because the handwritten and manually calculated ledgers ca
n have mistakes so checking it with OBL make it sure that they are not receiving
less amount from the customer.)
93
2010
Revolving SBS Loan
Now suppose a situation where loanee wants to pay his entire outstanding loan an
d then wants to withdraw it again. This usually happens when the MCO want to ach
ieve his recovery target or the time period of one year is completed from the da
te on which the loanee has withdrawn the amount. It is compulsion for every loan
ee to return his entire loan at least once in a year, if he will not pay his loa
n within one year, he will be treated as defaulter and he can withdraw only 90%
of sanctioned amount from his running SBS finance. But in SBS the default situat
ion is rarely occurs because when the limit of one year is near to end, the loan
ee can revolve his loan by paying only interest of the loan. This can be explain
ed by continuing the last example, on 01-05-10 the loanee has paid 20,000 and hi
s remaining outstanding balance is now 31.480. Now suppose he comes again on 01-
06-10 and wants to revolve his loan, on that day the following entries will be m
ade in his loan account: Principal Credit Balance Debit 50,000 1,480 18,520 31,8
40 31,480 31840 Nil 50,000 1,480 241 241 Return Total Credit Balance Outstan din
g 50,000 1,480 Nil 241 Nil 51,480 31,480 31,720 Nil (A/C Closed) 50,000
Date 01-1-10 31-4-10 01-5-10 01-6-10 01-6-10 01-6-10
Particulars
Debit
To Cheque 50,000 No. To Return Recovery To Return Recovery To Cheque 50,000 No.
Because the loanee wants to pay the total outstanding amount, the first thing to
do is to calculate return on the last outstanding principal balance. Because th
e loanee has already paid some part of principal on 01-05-10 due to which the pr
incipal has been reduced from 50,000 to 31,480. Now the return will be calculate
d from 01-05-10 to 0106-10 (31 days) at last outstanding principal balance of 31
,840. (31,480 * 9/100 * 31/365) = 241
Internship Report on Zarai Taraqiati Bank Ltd. 2010 I have debited this return c
alculated and it has increased the total outstanding to 31,720. Now the next ste
p is to obtain all the outstanding amount of principal and interest so that the
account can be closed and again revolved on that day. In the 2nd entry on the da
te 01-06-10 I have credited all the principal amount and the balance of principa
l became Nil and the same I did with the return, I have credited the total balan
ce of return and its balance also became Nil. Because both principal and return
balance is now Nil that is why the total outstanding amount of loan is also Nil
now and the Account is closed on that situation. Now the loanee wants to revolve
his account so he will again draw a cheque on the bank of any amount with in hi
s sanctioned limit, in this example I have assumed he again wants to get the tot
al amount out of it. So, I have again debited the amount which has increased the
principal balance and then total outstanding balance to 50,000. These are just
entries in the ledgers absolutely the loanee will have to follow some procedures
to revolve his account. Usually MCO of the loanee asks to revolve the account a
nd then vouchers are written and entries are made in the ledgers and then these
vouchers and entries is passed by the AMO otherwise no payment or recovery is ma
de. The vouchers need to written when revolving an SBS loan accounts are followi
ng: y A debit recovery voucher of full outstanding amount including Principal an
d Return. Whenever an account is fully paid it is practice in the bank that writ
e the return collected on this account on the upper right corner of the voucher,
it helps the other employees in the end to transfer it to the Income Account of
bank and also to prepare weekly report on recovery. y Another debit voucher of
With Holding Tax will also be filled if the amount loanee wants to again withdra
w is more than 25,000 y A debit voucher of revolving fee (100 rupee for SBS) y A
credit voucher will be written in the end of the day against the cheque drawn b
y the loanee y A transfer voucher which is used to transfer the Return recovered
on the loan to the Income Account of the bank.
95
2010
Actually in revolving an account the loanee pays only the interest amount, revol
ving fee and W.H Tax if any. The principal is adjusted against the new disbursem
ent of loan. For example: If 51,000 is total outstanding balance (50,000 princip
al + 1,000 returns) and loanee wants to revolve the account, he will have to pay
the total outstanding amount first and then he can withdraw again the principal
of 50,000. Amount the loanee will pay Revolving fee Again disbursement of loan
W.H Tax on 50,000 Balance -51,000 -100 50,000 -150 -1,250
1250 is the amount which loanee will pay only and his loan will again be revolve
d to a new maturity of one year. In this way revolve benefits the two parties, o
ne is loanee who has to pay a nominal amount and he obtains a new maturity date.
The second one is MCO who can show that he has recovered the loan which helps h
im in achieving his recovery target.
Opening and Closing Cash
In the beginning of every day the cashier opens the cash in time. The cash remai
ns locked in the safe and it requires two keys two open. One key is always remai
ns with the cashier and the other key remains with the manager; however manager
can further gives it to someone else. In the branch where I have completed my in
ternship, the AMO has the second key.
Key Register:
It is a register which have information about the keys of the safe. Whenever a p
erson gives the key to someone else, he writes in the key register the name of p
erson who has received the key and that other person signs it. Usually the keys
remain with the cashier and another officer of the bank but when one of them is
on leave it is required to give responsibility of keys to someone else because d
uring their absence the cash of bank can t remain closed. If there is any mishap
the person who has keys according to key register will be held responsible. Thu
s the key register has significance matter; no one gives the key to someone else
without entering it in this register. When a key is given to someone else the t
ime of giving keys is also written in the register, it is precaution to make it
clear that on which time of day the key was with which person.
Safe Register:
Whenever the cash is placed inside or remove from the safe it is recorded in the
safe register. In the morning when cashier brings out cash from the safe he wri
tes the date, amount and denomination in which cash he has obtained. And same in
formation is required to enter when the cash is again placed in the safe in the
evening. The person who gets cash from the safe or puts it also signs it. The ca
sh is also written in denomination in which it is exist. Like if bank has 1 mill
ion than this information is not enough the denomination in which this one milli
on exist in bank is also written. Like the bank may have this amount of 1 millio
n in the following denominations. 100 notes of 5,000 500,000 300 notes of 1,000
300,000 300 notes of 500 150,000 400 notes of 100 40,000 200 notes of 50 10,000
Total 1,000,000
97
2010
Dispatch and Diary
Dispatching and receiving letter is the routine work in any bank. The letter whi
ch the bank sends to others is dispatched while the letter which the bank receiv
ed is called diary. The bank maintains the proper record of every document which
is dispatched or received.
Recommendations
Implementation of Information Technology
The following are the problems which I have felt during my internship which is r
equired to be noticed to increase the pace of growth of the bank. Although the b
ank is computerizing its operations but it is far behind other commercial banks,
it needs to speed up implementation of Information Technology so that to perfor
m its operations efficiently and effectively. Information technology will help b
ank in finding and stopping malpractices and other irregularities and this will
result in much better performance. Providing computers and software is not the o
nly solution, the bank needs to train its employees so they can use this new tec
hnology for the betterment of the organization. The bank has many experienced em
ployees but they have no or very little know how of IT and many of them is not i
nterested in learning it. So, training the new and young employees is a better o
ption because they have will to learn and also they are people who will have to
work for a long time with the bank. Investing in young employee is better than t
raining those who are near to their retirement.
Motivation of Human Capital
Human capital no doubt is a precious asset for any organization, without skilled
and motivated employees no organization can survive in this competitive environ
ment. ZTBL has mix of experience and young staffs which provide excellence blend
of required skills and enthusiasm for progress. But I have found during my inte
rnship that the employee of ZTBL is not as much motivated as other bank s employ
ees are. The reason behind this is the mechanism of promotion, many of the perma
nent employees of the bank has not been promoted
Internship Report on Zarai Taraqiati Bank Ltd. 2010 since last 10 years and the
same case is with the contracted workforce they have no idea that when they will
be permanent. The promotion criteria like all other government institutions is
based on the experience, the more older the employee is the more he has a chance
to be promoted irrespective of this that how his previous performances was. But
what I have heard from the employee is that they have no idea that when and how
they will be promoted, there are no hard and fast rules made as it is available
in other government institutions. The bank s Human Resource Department needs to
focus on developing more trained and motivated employee, the efforts they are p
utting in this regard is not satisfactory. However, the bank starts training eac
h and every employee which is a good thing but with training the motivation in t
erms of promotion, bonuses etc. are also required.
Branch Infrastructure
Almost all the banks in Pakistan has refurnished their branches to provide bette
r services to its customers, the branches bank of today is completely different
from the branches of 10 years ago. That all is started when City Bank come in Pa
kistan with a new idea of modernized decorated branches. After it all the banks
has adopted this concept and they build and refurnished their entire network of
branches. But ZTBL is still working on the old style; the branches have not the
furniture, fans, rooms etc. according to their requirements. The concept of air
conditioning which has become an essential part in all other banks is a thing ab
out which the bank has not even think, there are even less fans than required. I
t is true that bank does not have a need to make their branches like all other b
anks but it is required to provide at least the basic necessities to make the wo
rking of the employee comfortable and also to facilitate its customers.
99
2010
Conclusion
ZTBL is a specialized institute which provides financing facilities to the peopl
e of rural areas and in this way it is contributing its part for the development
of the country. Due to a government owned organization the politicians and othe
r higher authorities sometime use it to give benefits to their families and frie
nds and this also effects the growth of the bank. However the bank has improved
itself a lot, the profit of the year of 2008-9 and decline in Non Performing Loa
ns are clear signs of improvements. The few things on which the bank has to focu
s is implementation of information technology with faster pace, improving branch
infrastructure and working of its human capital to make them motivated.

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INTERNSHIP REPORT

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