An Internship Report On National Bank of Pakista1

1 An Internship Report on National Bank of Pakistan
DEFINITION OF A BANK
The World Bank is used in the sense of a commercial bank. It is of Germanic origin though some persons trace its origin to the French word, Banqui and the Italian word Banca Chambers Twentieth Century Dictionary defines a bank as an institution for the keeping ending and exchanging etc. of money. According to Crowther. The Bankers business is to take the debts of other people to offer his own in exchange, and thereby create money. According to Kent, the bank is an organization whose principal operations are concerned with the accumulation of the temporarily idle money of the general public for the purpose of advancing to others for expenditure. According to Sayers, Ordinary banking business consists of changing cash for bank deposits and bank deposits for cash; transfering bank deposits from oen person or corporation to another; giving the secured or unsecured promises of businessmen to repay, etc. Thus bank is a financial institution, which uses funds deposited with it to extend loans to companies or individuals, and also provides financial services to its customers. 1 In other words it is an intermediate party between the borrower and the lender. The difference between the terms on which it borrows and those on which it lends forms the source of its profit.
BANKING
Banking is the acceptance, transfer, and, most important, creation of deposits. 2 Banking consists of safeguarding and transfer of funds, lending or facilitating loans, guaranteeing creditworthiness, and exchange of money. These services are provided by such institutions as
Department of Business Administration Kotli Azad Kashmir.
commercial
banks,
saving
banks,
trust
companies,
finance
companies, and merchant banks or other institutions engaged in investment banking. All countries subject banking to government regulation and supervision normally implemented by central banking authorities.
EARLY BANKING
Many banking functions such as safeguarding funds, lending, guaranteeing loans, and exchanging money can be traced to the early days of recorded history. In medieval times the Knights Templar, an international military and religious order, not only stored valuables and granted loans but also arranged for the transfer of funds from one country to another. The great banking families of the Renaissance, such as the Medici in Florence, were involved in lending money and financing international trade. The first modern banks were established in the 17th century, notably the Riksbank in Sweden (1656) and the Bank of England (1694). 3 In the 17 th century, English goldsmiths provided the model for contemporary banking. Gold was stored with these artisans for safekeeping, and was expected to be returned to the owners on demand. The goldsmiths soon discovered that the amount of gold actually removed by owners was only a fraction of the total stored. Thus, they could temporarily lend out some of this gold to others, obtaining a promissory note for principal and interest. In time, paper certificates redeemable in gold coin were circulated instead of gold. Consequently, the total value of these banknotes in circulation exceeded the value of the gold that was exchangeable for the notes.
Two characteristics of this fractional-reserve banking remain the basis for present-day operations. First, the banking systems monetary liabilities exceed its reserves. This feature was responsible in part for Western industrialization, and it still remains important for economic expansion, though a risk of creating too much money is a rise in inflation. Second, liabilities of the banks (deposits and borrowed money) are more liquidthat is, more readily convertible to cashthan are the assets (loans and investments) included on the banks balance sheets. This characteristic enables consumers, businesses, and governments to finance activities that otherwise would be deferred or cancelled; at the same time, it opens banks to the risk of a liquidity crisis. When depositors en masse request payment, the inability of a bank to respond because it lacks sufficient liquidity means that it must either renege on its promises to pay or pay until it fails. A key role of the central bank in most countries is to regulate the commercial banking sector to minimize the likelihood of a run on a bank, which could undermine the entire banking system. The central bank will often stand prepared to act as lender of last resort to the banking system to provide the necessary liquidity in the event of a widespread withdrawal of funds. This does not equal a permanent safety net to save any bank from collapse, as was demonstrated by the Bank of Englands refusal to rescue the failed investment bank Baring in 1995.
FUNCTIONS OF COMMERCIAL BANKS.

Commercial banks perform a variety of functions, which can be divided as; (1) (2) (3) (4) (5) (6) Accepting deposits; Advancing loans; Credit creations; Financing foreign trade; Agency services; and Miscellaneous services to customers.
1.
ACCEPTING DEPOSITS
This is the oldest function of a bank and the banker used to
charge a commission for keeping the money in its custody when banking was developing as an institution. Now a days bank accepts three kinds of deposits. The first is saving deposits, on which the bank pays small interest. The depositors are allowed to draw their money by cheques up to a limited amount during a week or year. Businessmen keep their deposits in current accounts. They can withdraw any amount standing to their credit in account deposits by cheques without notice. The bank does not pay interest on such accounts. Current accounts are also known as demand deposits. Deposits are also accepted by a bank in fixed or time deposits. The rate of interest increases with the length of the time period of the fixed deposit. But there is always the maximum limit of the interest rate, which can be paid. For instance, the interest rate on fixed deposits over five years is 8 percent in Pakistan.
2.
ADVANCING LOANS
One of the primary functions of a commercial bank is to
advance loans to its customers. A bank lends a certain percentage of the cash lying in deposits on a higher interest rate than it pays on such deposits. This is how it earns profits and carries on its business. The bank advances loans in the following ways. a) Cash Credit: The bank advances loans to businessmen
against certain specified securities. The amount of the loan is credited to the current account of the borrower. In case of a new customer a loan account for the sum is opened. The borrower can withdraw money through cheques according to his requirements but pays interest on the full amount. b) Call Loans: These are very short-term loans advanced to the
bill brokers for not more than fifteen days. They are advances against first class bills or securities. Such loans can be recalled at a very short notice. In normal times they can also be renewed. c) Overdraft: A bank often permits a businessman to draw
cheques for a sum greater than the balance lying in his current account. Providing the overdraft facility up to a specific amount to the businessman. But he is charged interest only on the amount by which his current account is actually overdrawn and not by the full amount of the overdraft sanctioned to him by the bank. d) Discounting Bills of Exchange: If a creditor
holding a Bill of Exchange wants money immediately, the bank provides him the money by discounting the bill of exchange. It deposits the amount of the bill in the current account of the billholder after deducting its rate of interest for the period of the loan, which is not more than 90 days. When the Bill of Exchange Department of Business Administration Kotli Azad Kashmir.
matures, the bank gets its payment from the banker of the debtor who accepted the bill. 3.
CREDIT CREATION.
Credit creation is one of the most important functions of the commercial banks. Like other financial institutions, they aim at earning profits. For this purpose, they accept deposits and advance loans by keeping a small cash in reserve for day transactions. When a bank advances a loan, it opens an account in the name of the customer and does not pay him in cash but allows him to draw the money by cheque according to his needs. By granting a loan, the bank creates credit or deposit.
4.
FINANCIAL FOREIGN TRADE:

A commercial bank finances foreign trade of its customers by
accepting foreign bills of exchange and collecting them from foreign banks. It also transacts other foreign exchange business and busy and sells foreign currency.
5.
AGENCY SERVICES:
A bank acts as an agent of its customers in collecting and paying
cheques, bills of exchange, drafts, dividends, etc. it also busy and sells shares, securities, debentures, etc. for its customers. Further, it pays subscriptions, insurance Premia, rent, electric and water bills and other similar charges on behalf of its clients. It also acts as a trustee and executor of the property and will its customers. Moreover, the bank acts as an income tax consultant to its clients, for some of these services, the bank charges a nominal fee while it renders others free of charge.
6.
MISCELLANCEOUS SERVICES :
Besides the above services. The commercial bank performs a number of other services. It acts the custodian of the valuables of its customers by providing them lockers where they can keep their jewelry and valuable documents. It issues various from of credit instruments, such as cheques, drafts, travelers cheques, etc., which facilitate transactions. The bank also issues letters of credit and acts as a referee to its clients. It underwrites shares and debentures of companies and helps in the collection of funds from the public. Some commercial banks also publish journals, which provide statistical information about the money market and business trends of the economy.
ROLE OF BANKS IN ECONOMIC DEVELOPMENT OF A COUNTRY

In modern age, monetary by banking system plays a vital role in economic development of a country. To provide financing for the accomplishment of certain economic plans depends upon an organized by sound banking system by a country financial institutions plays an important role in credit provision. So, if the monetary market by banking system of a country are well organized by sound, it will help in accelerating the process of economic development. To encourage people to save more by then investment of these savings into suitable aeras depends upon the policy by strength of banking system. Besides be strong banking system, monetary policy of a county also plays a vital role in development. Although monetary policy of a country is made by the central bank, yet it depends upon the co-operation of commercial banks. As for as a developing country like Pakistan is concerned, it always suffer capital deficiency. Only banks can solve problem by providing credit in required amount. The reasons is, to motivate the people towards savings, collection of the saved amount by then investment of this amount, all this is the duty of banks. By doing so, banks become an example of model investment for people. Hence, the banking system of a country can help i. i) ii) Development of a country. To make the monetary policy successful. Main features of monetary policy are as following. i) To achieve high level of employment. Department of Business Administration Kotli Azad Kashmir.
ii) iii) iv) v)
To stable in prices. To save economy from recession by inflation. To avoid fluctuation of interest rates To improve in standard of living of people.
So the banking system of 3rd world countries is not so stable, so it very difficult to implement monetary policy properly. As far as Pakistan is concerned, when all the scheduled banks were nationalized in 1974, State Bank of Pakistan got a complete grip upon banking network. Owing to this, the role of banks in economic development became more prominent. It can be understand through following facts. i) PICIC by Industrial development bank has played an
important role for the development of industrial sector and have issued long by short-term debts for necessary machinery, raw material equipment. ii) For the development of agriculture red sector, NBP was the
first one to be established in this regard. Then ADBP by now other commercial banks are also providing credit for agricultural sector. iii) These banks provide financing for domestic as well as
international trade. iv) Have provided credit facility to small business people to
promote cottage industry. v) Have provided financing for house building to overcome the
scarcity of houses. HBFC has played a vital role in this regard. vi) Have played an important role in providing finance to Govt.
especially in agricultural sector.
BANKING IN PAKISTAN
At the time of independence in 1947, it was very difficult for Pakistan to immediately run its banking system therefore it was decided that the Reserve Bank of India will continue to function in Pakistan until Pakistan establishes its own banking system. Before the partition of the subcontinent the entire banking system was almost controlled and managed by non-Muslims. The Hindus in order to ruin the economy of newly established state closed down most of the head offices and branches of scheduled and nonscheduled banks in Pakistan. At the time of partition there were 487 offices of scheduled banks in West Pakistan and 144 in East Pakistan but many of the offices were later transferred to India by non-Muslims and therefore the number of offices were reduced from 631 to 195. i The Reserve Bank of India caused further difficulties to Pakistan by refusing to give Pakistan its share of 55 crore which Pakistan was entitled to from the cash balance of undivided India. Therefore the Government of Pakistan decided to establish the State Bank of Pakistan on 1 st July 1948 and the reserve bank of India was relived of its duties. The State Bank of Pakistan was entrusted with the duty regulating the issuance of bank notes and generally to cooperate the currency and credit system of the country to its advantage. State Bank of Pakistan was given a monopoly of note issue, is to act as a fiscal agent for the government, supervise the operations of the commercial banks, is the lender of last resort to commercial banks, is to perform the function of clearing house for the banks and to maintain the external value of the rupee. The banking companies act
in 1949 was created empowering the State Bank to control the operations of baking companies in Pakistan. ii After the establishment of the State Bank of Pakistan the government of Pakistan established Industrial Finance Corporation in 1949, which later changed into the Industrial Development Bank of Pakistan. The bank was entrusted with a task of providing financial facilities for the development and modernization of agriculture, animal husbandry, fishery, poultry, dairy farming. In 1952 House Building Finance Corporation was established to provide financial aid to individuals and corporate housing societies for construction of residential houses. In 1966 Investment Corporation of Pakistan was established with a view of broadening the base of investment and developing the capital market. In 1973 National Development Finance Corporation was established to provide long and medium range loans, assistance and advice to government sponsored or managed enterprises. On 1 st January 1974 the Government of Pakistan decided to nationalize the Pakistani scheduled banks with an objective that the nation as a whole will benefit from this act. The nationalization was smooth and yielded positive results. As a result of nationalization all the commercial banks were merged into the following five banks. iii 1. 2. 3. 4. 5. ABL UBL HBL NBP MCB
The nationalization of banks lead to the development of such conditions and circumstances that could not be changed without disinvestment and privatization of nationalized and public sector banks therefore an ordinance was promulgated in 1991 to pave way for the privatization of banking in Pakistan. As a result of privatization The Allied Bank of Pakistan was sold to the employees of the bank and the Muslim Commercial Bank of Pakistan was dissinvested in two steps. Further the United Bank of Pakistan and Habib Bank of Pakistan will also be privatized soon. Some other financial institutions are also expected to be privatized soon. This privatization is expected to bring the era of economic development in Pakistan.
HISTORICAL BACKGROUND OF NBP

The story of NBP is part of our struggle for economic independence. When we won political independence, our economy was controlled by Non-Pakistanis, mostly Hindus. East Pakistan was spared from massive migration but its economy was also, being dependent on Calcutta, badly hurt. Most bankers and business experts left Pakistan and the economic life was brought to a standstill, these mostly branches of Imperial Bank of India were only in partial operation with skeleton staff. Banking & Finance - History It was decided that Reserve Bank of India would act as the common monetary authority of both countries up to September 1948. But this arrangement did not prove well. In August 1947, we were given a first installment of Rs.200 million (20 crore) as our share, leaving a balance of Rs.550 million (55 crore) but it was not paid when asked for. In October 1947 there was fighting in Kashmir, when India refused to give us the amount of Rs. 55 crore if we did not give up all interest in Kashmir, which we refused. In response, Reserve Bank of India refused to make even an advance for ways and means. Despite that India had to pay our 50 crore, (the remaining 5 crore still remains unpaid). There was a controversy on establishment of our central bank because we had no experience or expertise but it was resolved and SBP was created, 3 months ahead of schedule, on July 1, 1948, which was the last public appearance of the Quaid-e-Azam. SBP claimed its
share of Assets of Reserve bank of India against the Indian currency retired from Pakistan, but this 50 crore India disputed and virtually refused to settle this dispute uptil now. In 1949 (September) U.K. devalued its currency, India followed suit but we did not. India said we had contravened the agreement of keeping both currencies at par. We said we had not done that, India had done it arbitrarily without consulting us. On October 3, 1949, the two central banks were to announce the new par value of both currencies but India denied a day earlier. India also froze our trade balance surplus which is still an unsettled dispute. India also withdraw the Marwari merchants who were employed annually for movement of jute crop by financing it. There being no jute industry, prices fell sharply, foreign banks and foreign merchants stood aside and an agrarian unrest was threatening. Two Ordinances were, therefore, issued. 1. 2. Jute Board Establishment Ordinance & NBP Ordinance dated 08.11.1949
NBP was established on 20.11.1949 to provide finance to suitable parties. NBP stood behind jute trade, SBP stood behind NBP and the government stood behind SPB. Speedy it was such that 6 branches came into being at once and the doubts on our ability to handle this situation were dispelled for ever. Now, as the Jute Board and NBP were in the field, the foreign merchants and bankers also rushed in to get their share in the business and consequently NBP had to lay out much less finance than it could. Mr.Ghulam Farooq was chairman Jute Board & Mr. Mumtaz Hassan was chairman NBP. Until June, 1950, NBP remained exclusively in jute operations, thereafter other commodities were also taken-up. After that Mr. Zahid Hussain,
Governor SBP assumed additional charge also as chairman NBP's Board of Directors, & Mr.M.A. Muhajir became its first M.D. In 1952 NBP replaced Imperial Bank of India. Mr. Mumtaz Hassan as Acting Governor of SBP negotiated this arrangement. In 1962 when Mr. Mumtaz Hassan became MD (He had already served NBP for 10 years as its Chairman of government Director), the number of branches had increased from 6 to 239 and deposits from Rs.5 crore (50 million) to 106 crore (one bn & 60 mln) , profit, from 3 million (3 lac) to 21 million (2.1. crore) and the staff increased from 380 to 7091, as compared to 1949-50. In Dec. 1966 its 600th branch was opened raising the deposits to 2.31 bn. and staff to 14, 963. Upto 1965, the shareholders had received 225% of their original investment. Now its has more than 21549 employees 1537 branches and Rs.208283 million deposit.
MANAGEMENT
Before nationalizing, affairs of Bank were governed by a Central Board of Directors which was led by a managing director nominated by Federal Govt. when the Banks was Nationalized at January 1,1974, its previous administration i.e. Central Board of Director was dissolved, an Executive Board was established which is governed by a chief Executive who is the President of the Board of Directors.
GENERAL PERFORMANCE
Circumstances in which NBP was established were really miserable for economy. But it successfully over came these circumstances to rescue the country, from the severe economic Crises. It is the largest Commercial Bank in Pakistan.
The Bank has taken many steps to reduce the element of interest in Banking sector, like other Banks it has done a lot of work to motivate people towards profit and loss sharing accounts. The Bank has also offering Qarz-e-Hasna for education by rural credit program. Bank is also providing credits to small Businessmen.
HEAD OFFICE
The head office of NBP is located at 1.1. chandigar road Karachi.
REGIONAL OFFICES
The bank has following nine regional headquarters. 1. 2. 3. 4. 5. 6. 7. 8. 9. Karachi Hyderabad Quetta Multan Faisalabad Peshawar Lahore Islamabad Muzaffarabad (A.K)
ZONAL OFFICES
There are forty (40) Zonal Offices, each being headed by Zonal Chief and directly controlled by the respective regional offices. .
EMPLOYEES
There are 15,541 total number of employees as for December 1999, working in National Bank of Pakistan.
BRANCHES
Total number of domestic branches are 1408, as for December 1999.
OVERSEASE BRANCHES
There are 24 overseas branches and 4 representative offices serving in different parts of the world.
ORGANIZATION STRUCTURE OF NBP

The structure of National Bank of Pakistan is shown in the organizational chart.
PRESIDENT
S.E.V.P E. V. P S. V. P V. P A. V. P O. GI O. GII O. GIII
Clerical Staff
Cashier Technical Staff
Non-clerical Staff
Messenger DR (Dispatch Rider)
MANAGEMENT OF NBP
Mr. Syed Ali Raza
(President)
BOARD OF DIRECTORS
The board of directors is the supreme governing body of National Bank of Pakistan. it comprises of a government representative, Pakistan Banking Council Nominee, Nominee of corporate sector and three directors from National Bank of Pakistan. These are, i. ii. iii. iv. v. vi. Mr. Syed Ali Raza Mr. Aftab A. Khan Mr. Muhammad Younas Khan Mr. Aizaz Sarfraz Mr. Bilal A Qurashi Mr. Khalid Sultan Khawaja (Chairman) (Director) (Director) (Director) (Director) (Director)
vii. viii.
Mr. Irshad Ali Gola Mr. S. M. Raifque
(Director) (Secretary)
EXECUTIVE COMMITTEE OF NBP
1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Syed Ali Raza R.A Kaleemi S.M Rafique Seikh Muhammad Ibrahim Masood Karim Seikh Muhammad Khalique S. Mustanir Haider Asif Hasan Abdul Hameed Shahzaman M. Nusrat Vohra
(Chairman & President) (Member) (Member/Secretary) (Member) (Member) (Member) (Member) (Member) (Member) (Member)
BRIEF LIST OF SERVICES PERFORMED BY NBP
1. 2. 3.
NBP was born to finance jute industry which was vital for the country, specially East Pakistan-1949. NBP started financing cotton and other commodities afterwards. NBP served the nation through schemes like factory workers scheme (1962), Peoples' credit scheme (1964), School Banking scheme (1962), Export Finance Schemes of SBP.
4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.
NBP has a bright record of staff Welfare-latest being the NBP foundation (1996). NBP worked as Trustee and/or Custodians (e.g. of NIT). NBP established ladies counters and inducted ladies to NBP. NBP served the agricultural sector. NBP replaced Imperial Bank of India. NBP took over bank of Bahawalpur. NBP took over Mehran Bank & some other banks' branches. NBP has a track-record of investments in Government Securities. NBP works on behalf of SBP as authorized. NBP has a progressive chain of deposit banking and financing services. NBP performs modern services like foreign currency accounts credit/charge cards, US commercial paper, corporate Clients' Department of Business Administration Kotli Azad Kashmir.
service through corporate branches, local travellers' cheques, local currency bonds, etc. 15. 16. 17. 18. 19. 20. NBP has a large network of branches through out the country. NBP is the pioneer in Management education in Banking Sector. NBP is pioneer of creating its own films for training of its staff at 4 staff colleges. NBP finances priority sectors of the economy as required by the govt. e.g. Yellow Cab Scheme, self employment scheme etc. NBP has a track-record of contribution to defence funds, environment development, education, health care & sports. NBP is broadening its vision and marching towards a clientFocussed corporate culture in the bank.
DIVISIONS OF NBP
CORPORATE CREDIT DIVISION
The major function of this division is to handle the big loans and industrial financing, I.B.R.D. It also does the evaluation of credit ceiling policy devised by the credit division.
INTERNATIONAL DIVISION
This division has to look after the administration of National Bank of Pakistan outside Pakistan. It takes care of all the affairs about the advances given outside, the management of the branches of the bank outside Pakistan, the posting of employees outside Pakistan etc.
RECOVERY AND LITIGATION DIVISION

This division comes into operation when recovery of advances given becomes difficult or impossible. It is the job of this division to decide whether to go court against the client or not.
AUDIT AND INSPECTION DIVISION

The major function of this division is to carry out the inspection of rules and policies. It also inspects the books of accounts, whether they are kept rightly or not.
ADMINISTRATION DIVISION
This division consists of two wings the personnel wing and establishment wing. The personnel wing concerns with employee welfare and administration. It looks after things like rules relating to the administration of employees, the medical bills etc. There is also a disciplinary cell which is for punishments if an employee does something wrong. The establishment wing has a main function of controlling the debt stock i-e furniture, transport facility, stationary, sports portfolio, security arrangements, and staff welfare.
RESEARCH CORPORATE PLANNING AND HUMAN RESOURCE DEVELOPMENT DIVISION

There main job is to do human resource management. For this purpose there are staff collages in Pakistan. There are four of them. They give training to employees outside organization and also outside the country. In 1998 National Bank of Pakistan staff collages have trained about 7992 employees out of which 321 were executives 5553 officers and 1878 other staff. Out side National Bank of Pakistan they trained 128 executives, 113 officers and 2 other staff. They have their own staff and also engage faculty from Punjab University and LUMS.
ENGINEERING AND MAINTENANCE DIVISION

The job of this division is maintenance of buildings, construction of projects, project designing. The head of this division is an engineer who has designation of executive vice president.
FINANCE AND INVESTMENT DIVISION

It looks after the accounts, investment in resources and decides where to allocate the surplus funds.
CUSTOMER SERVICES DIVISION

The main job of this division is to manage the opening and closing of branches, Islamization policy, then there is a complaint cell Department of Business Administration Kotli Azad Kashmir.
where the customer make the complaints if they are not treated well. This division also accepts Hujj application. This division is very important as it directly concern the customers who are the ones to make the deposits which the bank invests.
BUSINESS PROMOTION AND MARKETING DIVISION

It concerns the marketing and selling of the policies and interest rates of National Bank of Pakistan through advertisements on television or in the papers etc.
LAW DIVISION
This division consists of an executives committee and an Evaluation committee. Their job is documents evaluation and they give legal opinion to recovery and litigation division also.
COMPUTER DIVISION
This division does data processing through computers and develop control systems. All these divisions perform their functions through the branches and they are located at the head office in Karachi.
DEPARTMENTS OF NBP
1DEPOSIT DEPARTMENT
Procedure of Opening an Account The opening of account and their maintenance is very essential for the banking companies from the point of view of security and efficient services to be rendered by these companies to their clients. This is why the banks always insist upon their new account holders to provide them a reasonable reference of a person already maintaining his account with them or with some other bank, who is referred to as introduce of the account. Thereafter the necessary documents filled by the account holders. The account numbers are serially allotted to the account holder. Their special instructions with regards to the operation of accounts are obtained from them under the old system of banking separate ledgers are maintained for recording the transactions of account holders but now under the computerized banking every account holders transactions are recorded on his separate lose leaf card and the transactions of these loose leaf cards are recorded by posting machine under this system the entire position of account holder is readily seen at a glance. This system is more convenient and the error of human element is eliminated. For every account holder a
double record of transaction is automatically recorded on this loose leaf card. When this sheet is completely filled up the bank despatches one portion.
KINDS OF ACCOUNTS
PLS SAVINGS ACCOUNTS These accounts are opened with not less than Rs.500/. If at any time the sum falls below Rs.500/ the account will not qualify for sharing in profit nor shall it be liable for loss, if any. There is no restriction on the maximum amount. The account will be credited/debited with the amount of profit/loss worked out at the rate determined by the bank on the basis of its networking results at the end of each half year. These will be only checking accounts, withdrawal will be allowed not often than 8 times in a calendar month and more than one PLS account opened in the same name. TYPES OF PLS SAVINGS ACCOUNTS i) ii) iii) iv) v) Individual account Joint account Checking account interest @ 7.50% Non checking account PLS term deposit
Such accounts are opened for indefinite period with nominal rate of mark up for the withdrawal of these accounts advance notice is required. In the first category 7 days notice is required and for withdrawal of investment.
In second category advance notice of 30 days is required for withdrawal and the percentage of profit for both the above mentioned types of accounts if any may be announced by the government annually.
CURRENT ACCOUNT
These accounts are opened with the minimum amount of Rs.1000/ no interest is allowed by the bank. The funds held in the account are payable on demand without any restrictions on withdrawals. The bank normally open current account for the business need of the firms. In this category following types of accounts are opened. a) This type of account is opened for private or public limited company. The following documents are invariably obtained for opening the accounts: i) account. ii) iii) iv) v) b) Memorandum and articles of association. Certificate of incorporation. List of board of directors. Certificates of commencement of business. Resolutions from the board of directors for opening the
Societies/Club/Association This type of account is opened for clubs societies and for
opening of such account it is necessary to obtain the copy of bye lows. c) Proprietorship These type of accounts are opened for business concern having an individual as their sole proprietor. d) Partnership
This type of account is opened for business concerns having a number of partner. While opening this account care is taken to obtain the partnership deeds along with their specific instructions with to the operation of accounts.
FIXED DEPOSITS
In this type of account a certain amount is deposited for a certain period such as six month, two years or longer. A fix deposit receipts is issued in the name of the depositor. The receipt is signed by the officer incharge and the bank manager. A notice is given to the depositor on a prescribed form two weeks before the FDR falls due, requesting the depositor to withdrawn his money or to renew his deposits. The interest allowed on fixed deposit varies with the period for which the deposits is made.
SHORT TERM DEPOSIT

Application for short term deposit is taken on form F-486 and the amount on form F-88. The amount of such deposits will be credited to short term deposit account. Rate of interest allowed by bank on short term deposit is advised by the head office from time to time and are laid down in section XII of supplement No.1.
CALL DEPOSITS
Branch may accept call deposit from local bank or from other on such rates on interest as may be prescribed by the head office from time to time through controlling office. These deposits will be credited to call deposit account in the favor of government and semi government department should also be credited to call deposit account. Department of Business Administration Kotli Azad Kashmir.
SAVING ACCOUNTS
Saving account is opened by the client through an application on the printed form available from the bank as per instructions mentioned thereon. The signatures of the new applicant must be verified by an existing account holder in the same branch. Application must be accompanied an amount of Rs.500/- in cash of PLS account, and Rs.1000/ in case of current account. A copy of national identity card must be attached with the application how along with the specimen signature card signed by the applicant.
ARTICLES IN SAFE CUSTODY

Application for articles in safe deposits taken from the depositor on form of 175 signature of the depositor should be verified by the supervising official the number of the relative safe deposits noted thereon on the application form filed in serial order in a separate file which should be kept in the strong room overnight. Particulars of articles taken into safe deposit will be recorded on the safe deposit register.
CLEARING DEPARTMENT
Every banker acts both as a paying as well as a collecting banker, it may be said that there in theory no legal obligation on a banker to collect cheques, drawn, upon other banks for customer. It is however an important function of crossed cheques. A large part of this work in carried out through the bankers clearing house were ever it is established. A clearing house is a place where representative of all banks of the city get together and settle the receipts and payment of cheques drawn on each other. As the collecting banker runs certain risks in receipt of their ownership the law has provided certain protections to the banks. The Negotiable Instrument Act, 1881, lays down the drawer or holder of a cheque or draft may cross the instrument generally or especially. It further lays down that a crossed cheque can only be paid to a banker, who collect it for a customer who maintains an account.
2.
a)
TYPES OF CHEQUES COLLECTED BY THE CLEARING DEPARTMENT

Transfer Cheques Transfer cheques are those cheques which are collected and
paid by the same branch of bank.
b)
Transfer delivery cheques Transfer delivery cheques are those cheques which are
collected and paid by two different branches of a bank situated in the same city. c) Clearing cheques When the payee or endorsee (which deposits the cheque for collection), and the drawer of cheque maintain accounts with different banks, the collecting bank can receive the amount of cheques from the paying banker in any of the following manners: i. It can send its representative with the cheque to each of the payment banks, and collect each. This procedure is wasteful of time and labour, cumbersome and risky. ii. The bank can maintain an account with the paying various banks.
3.
i. ii.
FUNCTIONS OF CLEARING DEPARTMENT IN A BRANCH

To accept Transfer, Transfer delivery and clearing cheques from To arrange the payment of cheques drawn on the branch and
the customers of the branch and to arrange for their collection. given for collection to any other branch on United Bank Limited or any other members, or sub member of the local clearing house. iii. To collect amount of cheques drawn on members, submember of the local clearing house, sent for collection by United bank limited, branches not represented at the local clearing house.
4.
PROCEDURE CHEQUES ETC.
COMMON
FOR
ALL
KINDS
OF
i. ii. iii. iv. v. vi.
Receiving and scrutinizing the cheques and other deposit Fixing the stamps. Scrutiny and receipt by the authorized officer. Returning the counter foil to the depositor. Certificate and confirmation by the officer incharge of the Separating the cheques into transfer, transfer delivery, and
instruments, and the payinslips at the counter.
department. clearing cheques.
5.
i. ii.
SCRUTINY OF INSTRUMENTS
The Instrument should be neither stale nor postdated. If the instrument is crossed `not negotiable' it can be for the
third party (an endorsee of an order cheque, or a holder of bearer cheque). iii. iv. v. vi. vii. The Instrument should not bear any unauthorized alternation. The instrument should odd be multilated. The amount in words and figures should be same. The instrument should be drawn on a customer, or any local If the cheque is crossed `Account Payees' only or "payee's
branches. Account", it should only be accepted for collection for the payee's account. viii. ix. The cheques or drafts should not be crossed specially to any A cheque payable to one of the joint account holders should not other bank. be collected for the joint account without the payee's endorsement, or consent. x. A cheque payable to a firm, should not be accepted for credit to a partner's account.
xi.
A cheque drawn by a customer in the capacity of an agent,
Attorney, or Manager of his company or firm, should not be collected for credit to his personal account. xii. xiii. Pay orders, although negotiable, should not be collected for Do not collect an instrument in the account of an agent, or of the third parties. servant, of the payee or of the servant, of the payee or endorsee of the instrument. xiv. "Not transferable" instruments, like Telegraphic Transfer, or Mail Transfer Receipt, Payslips, and Treasury Receipts, should be collected for a person other payee. xv. If an account is new, or the balance or operation of the account is not satisfactory, satisfy your self about the titles of the customers to the instruments before accepting the deposits. xvi. Branch agent's permission should be obtained before accepting a third party cheque are draft for the credit of the account of the staff member. xvii. If the payee in a Government Department, Government Official, or a trust account, the instrument can not be collected, but for the payee's account. xviii. If the payee of an instrument is UBL, it can be collected for credit of the drawers account, or the amount of the instrument may be utilized as desired by the drawer in writing. xix. xx. Cheque payable to a trust, account should not be collected for All the endorsement should be regular, and no endorsement should be missing. credit to a trustee's account.
ADVANCES DEPARTMENT
Advances department performs such functions 1. 2. 3. Loans Cash Credit Overdraft
1.
LOANS
Monetary assistance by a financial institution to a business
some financial problems such as to finance fiscal assets, working capital, bridge finance, etc. The loans are granted by the bank in lump sum, so these type called fixed or demand loans. Interest is charged on the whole amount of a fixed loan. The borrower withdraws whole the amount of loan. This type of loan is normally granted against security of gold and documents. In case of demand loans against gold or documents, a demand promissory note for the amount of loan is taken from the borrower. Loans are granted under: i. Loan against Gold : Under this type of loan which is granted to the borrower. The Head Cashier estimates the value of Gold or Gold ornaments through an agent (Gold smith) and keeps a margin of 40 to 50 per cent. After the opening the gold loan account a token is given to the borrower which is a bank receipt.
On repayment of loan, he gold or ornaments held as security for it, together with the demand promissory note duly discharged is returned to the borrower and his receipt for the gold ornament taken in the demand loan ledger. This receipts states that the ornaments returned are complete and in order. Part delivery of ornaments is given against part payment of a loan but care is taken that the ornaments still in the banks possession fully covers the balance of the loan outstanding. The interest on gold loan is to be applied with quarterly rests. ii. Loan against pledged of stock : In case of advancing such types of loans, the following precaution are kept in the mind: a) b) c) Stock pledged must be readily saleable. Products should be readily saleable. Advance should be within the borrows means.
2.
CASH CREDITOR
Under such cash credit account is opened in the name of the
customer who borrows from the bank. Customer is granted a loan upto a certain limit which is sanctioned by the head office, which he draw when he requires interest is charged on the amount actually utilized by the customer. In order to avoid the danger of idle fund, the bank charges are certain rate of interest, even if the customer does not withdraw any amount. The credit is usually given against the securities of goods or merchandise as follows: i. Advances Against Pledge Stock in Trade or Products: When a cash is granted against the pledge of stock or product, cash credit form is taken, from the certain products or stock, but the
actual pledge is created when the stock or finished product are placed under the bank's lock and key or the document of title are duly endorsed to the bank by the borrower. ii. Hypothecation of stock on Finished Products: The difference between pledge and hypothecation is that under a pledge the borrower's goods are placed in the bank's possession under own lock, whereas, under a hypothecation, they remain in the possession of the borrower or guarantor and are merely charged to the bank under documents signed by them. Even though the documents empower the bank to take possession of the goods hypothecated, but it is possible that the borrower may actually resist any attempt. iii. Mortgages of property: Title deeds of immovable property is accepted by the bank only as collateral security or alternatively as unauthorized security.
3.
OVER DRAFTS:
When the bankers permits his customer to overdraw upon his
current account upto a certain limit, it is called overdraft facility provided buy the bank. The customer is charged with the interest for the amount he has actually overdrawn from the bank. The customer is free to take the overdraft facility upto the limit whenever he needs and he can at any time return back the advance to the bank by deposited the amount with the bank. There are two types of overdrafts: i. Unsecured Overdraft: Under such type of overdraft the bank rely upon the personal security of the customer or customer's mentioned on the customer's account.
ii.
Secured Overdraft Under this type of overdraft the bank allows his customer
to withdraw more than his deposits after giving security against the amount overdrawn. The securities against which the amount is withdrawn may or Government or other first class.
REMITTANCE DEPARTMENT
The following are the main functions of this department. Remittance can take place in three different ways. i. ii. iii. Demand Draft Telegraphic Transfer Mail Transfer
DEMAND DRAFT
It is a bill down either on demand or otherwise by one bank on another in favour of third party or by one branch of the same bank or buy the Head Office on a branch or vice versa. ISSUANCE OF DEMAND DRAFT The amount both in words and figures is written and the applicant has to sign on two places which are helpful in case DD is to be cancelled. The applicant then has to deposit the cash at the counter. The officer incharge at the counter will affix the stamp cash received at the DD issued from. After the cash has been deposited the DD will be issued to him. Each DD has its own register along with the name of the party in whose favour the DD was issued. CANCELLATION OF DEMAND DRAFT
For cancellation the client has to give an application to the bank that the DD is no longer required and has to sign the proper verification of the signatures will cancel the DD, and will pass the entry be debiting to main office and crediting party account. The bank will then issue a debit advice to the main office.
TELEGRAPHIC TRANSFER
An application form for TT is provided to the client in which as to specify the name of the payee, the place of the transfer and the amount. If the amount is deposited through cash or through self cheque a simple cash voucher is passed giving a credit to main office. A telegraphic massage is sent to the bank on the bank on which the TT is drawn specifying the TT number, date, the name of the party in whose favour it is drawn and the test number.
MAIL TRANSFER
When a customer request the bank to transfer his money from this bank to any other bank of the branch of same bank in the city, outside the city of outside the country the first thing he has to do is to fill an application form. In which he states that I want to transfer the money from this bank to that bank by mail. If the customer is the account holder of this bank, the bank will debit his account and the concerned officer will fill the six different forms to make the mail transfer complete. The six forms used for this purpose are listed below: i. ii. iii. iv. v. Branch Mail Transfer Mail Receiving branch registered copy Issuing Branch Register Copy Debt Voucher Beneficiary's Advice
vi.
Advice to Customer
If the customer is not he account holder of this bank, then firstly he has to deposit the money and then rest of the procedure will be adopted to transfer his money.
CASH DEPARTMENT
The following books are maintained in the Cash Department: 1. 2. 3. 4. 5. Receiving Cashier Bank Paying Cashier Book Token Book Scroll Book Cash Balance Book
When cash is received in counter, it is entered in the Scroll Book and Receiving Cashier Book.At the close of the day, these are balanced with each other. When the cheque or any negotiable instrument is presented at counter for payment, it is entered in the token book and token is issued to the customer. The token and the Cashier makes entry in the paying book and payment is made to payee. At the close of day, the Token Book and Paying Cashier Book is balanced. The consolidated figure of receipt and payment of cash is entered in the cash balance book and drawn closing balance of cash. Opening balance of Cash + Receipts Payments = Closing Balance. This is very important department. All the books maintained in this department are checked by an officer. Department of Business Administration Kotli Azad Kashmir.
ACCOUNTS DEPARTMENT
General there are two types of maintaining of an Account: A: B: Journal System Voucher System
Generally journal system is adopted by some commercial industrial institutions. In journal system entries are reported on Journal Book and then posted to main ledger. In banking voucher system is used for every transaction voucher has to be prepared either in cash or in transfer or in clearing. On the sheet upon which these vouchers are summarized, transaction wise and consolidated into on figure is called supplementary. There two types of supplementary: a. b. Debit Supplementary Credit Supplementary
Debit supplementary is used for debit voucher expenses and credit supplementary is used for credit voucher. They are of red and green colour respectively.
FUNCTIONS OF NBP
The National Bank of Pakistan performs two types of function. It acts as an ordinary commercial bank, and at places where there are no branches of State Bank of Pakistan it represents Pakistan, that is why it cannot be privatized. As a commercial bank it performs the following functions. 1. 2. 3. 4. 5. etc. 6. 7. 8. Foreign exchange business. Financing of seasonal crops like cotton, wheat, rice, Receiving of bonds, scrips, valuable etc. for safe custody. Accepting of deposits of money on current account, saving, term Borrowing money and arranging finance from other banks. Advancing and lending money to it's clients. Financing of projects including technical assistance, project Buying, selling, dealing and discounting of bills of exchange, deposit and other profit and loss sharing accounts.
appraisal through long term/short term loans. promissory notes, drafts, bill of lading, other instruments of securities
9.
Carrying on agency business of any description other than
managing agent on behalf of clients, including government and local authorities. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. Generating, undertaking, promoting etc. of issue of shares, Transacting guarantees and indemnity business. Undertaking and executing trusts. Making investments in other banking companies. Joint venturing with foreign dealers, agents and companies for Participating World Bank's and Asian Development bank's lines Utility services. Providing Hajj services to intending Hajis. Agent to State Bank of Pakistan for collecting Payment of pension on behalf of provincial and central Treasury business. Gold finances. bonds.
its representation abroad. of credit.
governments.
FUNCTIONS OF NBP AS A REPRESENTATIVE OF STATE BANK OF PAKISTAN

1. 2. 3. 4. Collection of cheques and bill of exchange for its customers. Paying insurance premium, rent or other obligations of the Collecting interests due, dividend pensions and other sums due Transferring of money from place to place. Department of Business Administration Kotli Azad Kashmir.
customers. to customers.
5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18.
Acting an executors, trustees for the customers. Providing safe custody and jewelry documents or securities. Issuing of travelers cheques and letter of credit to give credit Purchasing shares for the customers. Accepting bills of exchange on behalf of customers. Undertaking foreign exchange business. Furnishing trade information and tendering advice to customers. Formulating operation policy guidelines for the banks. Laying down performance criteria for banks and taking steps for Evaluating the performance of the banks in the context of Determining the areas of coordination of the banks. Formulating schemes under section of the act. Making recommendations to the federal government for the Analyzing and appraising financial statement including balance
facilities for travel.
ensuring their observance. operational guidelines issued to the banks.
appointment of the president and members of the executive board. sheets and profit and loss accounts of banks and appointment of auditors of the bank. 19. 20. Conducting such surveys, inquiries and appraisals as may be Exercising and performing such powers and functions of the necessary for the purpose of this act. federal government under the act and such other functions as the federal government may assign to it. 21. Establishing a research department or conduct banking research and in particular study overseas banking operation and problems of the agricultural financing.
22. 23.
Establishing a central training institution for improving bank Coordinating the planning of the operations of nationalized
services. commercial banks, and exercising general overall checks on the cost of their operations. 24. Appointing lead banks and to apportion share of advance among the banks in respect of consortium loans financed by the nationalized commercial banks only, in accordance with resource availability of each bank. 25. Watching the progress of the implementation of the rulings made in State Bank Annual Inspection Reports and the remedial and corrective measures taken by the banks with a view of removing imbalances both in respect of commodities and regions. 26. Overseeing foreign operations of banks to ensure that these are being conducted in the best interest of the bank.
WORK DONE BY ME AT NBP MAIN BRANCH KOTLI (A.K)

I performed the following work in my 2 months training at NBP Main Branch Kotli (A.K).
GENERAL BANKING
First of all, I was asked to work in different sections of general banking. The incharge of general banking having good command on banks operations. Here I dealt with new customers who wanted to get information about the branch and willing to deal with the branch. This is a very interesting department because here I met people of different types and deals with them accordingly.
BILLS & REMITTANCE DEPARTMENT

It is a most important and interesting department. This section deals with the transfer of money from one branch to another branch. Nearly 6 drafts issued daily from this department. Here I knew how the amount transfer and what is the procedure. This department also deal with T.T. transfer of money. I worked nearly two and a half week in this department.
DEPOSIT DEPARTMENT
Deposit department deals with current, saving, fixed accounts for a long period. In current accounts the banks does not offer any interest. You can deposit or withdraw any amount during banking hours. In PLS account we can only withdraw upto Rs.25000/- per month. If you want to withdraw more than Rs.25000/- a notification must be given to the bank. In fixed accounts normally people of old age are more interested because they get a lumsum amount every month as a markup or interest. These accounts are normally for 2 to 5 years.
CLEARING DEPARTMENT
In clearing department I deals with cheques of Bank's clients drawn on different banks.
CREDIT DEPARTMENT
I spent last week of my training in credit department. It deals with the advancing of loans. This department is further divided into some sections like cash finance, demand finance, finance against
property, finance against shares, modaraba financing, mosharika financing etc.
NATIONAL BANK OF PAKISTAN

Balance Sheet December 31, 1999
(Rupees in 000) ASSETS:Cash Balance with other banks Money at call and short notice Investments- net of diminution Advances- net of provision Operating fixed assets Capital work in progress (building cons.) Other assets net of provision. LIABILITIES:Deposits and other accounts
Borrowings from other banks, agents, ect.
64,793,405 20,021,108 4,066,521 91,277,587 122,293,933 6,723,042 185,708 40,571,282 349,969,775 294,754,493 11,362,600 2,082,447 25,770,235
52,646,553 12,777,002 1,058,164 102,968,932 109,524,000 6,073,659 219,326 39,789,773 325,057,409 273,390,739 10,287,943 3,271,018 22,958,650
Bills payable Other liabilities
NET ASSETS REPRESENTED BY:Share capital Reserve fund and other reserves Accumulated loss Shareholders equity Surplus on revaluation of fixed assets
333,969,775 309,908,350 15,962,811 1,463,880 9,124,223 (834,634) 10,149,469 5,813,342 15,962,811 15,149,059 15,149,059 273,390,739 10,287,943 3,271,018 22,958,650
MEMODRANDUM ITEMS:Bills for collection

Acceptances, endorsements and other obligations.
2,509,239 2,766,198
98,978,343 88,982,959
Contingent liabilities and commitments Qarz-e-Hasna Fund 281,768 214,165
NATIONAL BANK OF PAKISTAN (20,905,676)

10,371,371 PROFIT AND LOSS ACCOUNT 2,244,203 For The Year Ended December 31, 1999 23,351 255,829 1,462,851 3,986,234 7,941,136 1,124,085 1,516787 823,236 2,340,023 73,565 11,478,809 27,899 2,906,695 2,595,211 311,484 488,546 (177,062) (261,572) (438,634)
31,277,047
1999 Mark-up/ Interest discount and / Or return earned Less: Return on deposits. Fees. Commissions and brokerage Profit/ (Loss) from dealing securities Divided income Other operating income Operating Expenses: Administrative expenses Diminution in value of investments
Provision against non-performing advances
1998
(Rupees in 000)
31,699,317 (22,915,325) 8,784,046 1,367,663 12,500 (478) 528,052 32,261 290,923 6,875,603 1,072,408 74,931 4,713,890 2,730,516 2,578,508 2,135,382 1,605,729 6,160,139 529,653 155,151 (738,2660) 515,552 (208,607) (52,965)
.

(438,634) (261,572)
Other provisions. Bad debts written off directly Other income Amortization of deferred cost Profit before taxation Taxation (Loss)/profit after taxation Loss brought forward Appropriations Transfer to statutory reserve Loss carried forward 311,484 23,351 3,048 29,256 255,829 2,135,382 (478) 290,923 16,914 1,828,023
NATIONAL BANK OF PAKISTAN

CASH FLOW STATEMENT December 31, 1999 1999
CASH FLOW FROM OPERATING ACTIVITES: Profit before taxation Less: Profit/(Loss) from dealing securities Dividend Income Profit on sale of fixed assets
1998
(Rupees in 000) 398,051 410,957 1,124,085 1,516,787 2,595,211 823,236 6,457,370 6,486,626
.
155,151 515,552 2,578,508 12,500 3,672,,668 5,500,691
Adjustment for non-cash charges Depreciation Provision for diminution in the value. Provision against non-performing advances Amortization of deferred costs Others
11,273,122 (14,286,720) (1,242,180) (4,255,778) 21,363,754
15,229,550 (4,273,978) (2,062,183) 8,893,389 18,527,839
(1,188,571) 745,919 Department of Business Administration Kotli Azad Kashmir. 2,872,421 2,659,311 23,047,604 22,033,069
(Increase/(decrease) in operating liabilities Government Securities Advances Other Assets Increase/(Decrease) in Operating Lib. Deposits and other accounts Bills payable Other liabilities Cash flow before tax and other payments Special separation package costs paid Income tax paid Net cash inflow from operating activities 36,427,149 (11,982,586) 25,278,452 (369,551) (3,137,606) 21,771,295 682,512) CASH FLOW FROM INVESTING ACTIVITIES Purchases of investment securities. Dividend income Fixed capital expenditure Sale proceeds of fixed assets Net cash used in investing activities CASH FLOW FROM FINANCING ACTIVITIES Borrowings from other banks, agents etc. Net cash from financing activities Effect of exchange translation adjustment 1,074,657 1,074,657 348,367 22,399,315 66,481,719 530,917 530,917 245,431 11,559,050 54,922,669 66,481,719 52,646,553 255,829 (377,122) 8,801 (795,004) (8,869,082) 290,923 (84,449) 22,761 (8,639,847) (5,022,014) 19,422,549
88,881,034 Increase in cash and cash equivalents for the year Cash and cash equivalents at the beginning of the year 64,793,405
20,021,108 12,777,002 Department of Business Administration Kotli Azad Kashmir. 4,066,521 1,058,164 88,881,034 66,481,719
Cash and cash equivalents at the end. Cash and cash equivalents Cash Balances with other banks Money at call and short notice Cash and cash equivalents at end of year.
RATIO ANALYSIS
1. a) LIQUIDITY RATIOS :
Net WORKING Capital =Current Assets Current liabilities 1998 1999 Comments: Working Capital comes out by deducting current liabilities from current assets, working capital in 1998 was higher as compare to 1999. b) Current Ratio= current Assets - Current liabities 278806587 184275299 = 1.51 :1 278806587 184275299 =94531288 302452554 296836940 =5615614
1998
1999
302452554 296836940
=1.02 :1
Comments: Current ratio means how current assets meet current liabilities. In practice it must be 2 : 1. In 1998 Current ratio is 1.5 : & in 1999 it is 1.02 : 1 , which is not according to standard. c) Acid Test Ratio = Cash+Marketable Securities+A/C recieveables Current Liabilities 169450651 =0.92:1 184275299 180158621 = 296836940 Comments: The quick (acid test) ratio is similar to the current ratio except that it excludes inventory from current assets. Generally 1.01 :1 or greater is recommended. In 1998 it was 0.92 & in 1999 it was 0.61 which is not according to standard.
2
1998
1999
0.61: 1
Activity Ratios :
a) 1998 Proprietary Ratio = 15149059 325931072 1999 15962811 349932586 = 0.045 Stock Holder Equity Total Assets = 0.031
Comments:
Proprietary ratio can be calculated by dividing stock holder equity on total assets. In 1998 it was 0.031 but in 1999 it slightly improves to 0.045. b) Total Assets Turnover Ratio. = Sales .
Total Assets 34504818 325931072 1999 Comments: Total Assets Turnover indicate the efficiency with which the firm is able to use all its assets to generate revenue. It indicates weather the firms operation have been financially efficient or not. In 1998 it was 0.11 but in 1999 it decreases to 0.10. 35291180 349932586 = 0.10 : 1 = 0.11 : 1
1998
3
a)
Leverage Ratios :
Debt Ratio = Total Liabilities Total Assets
1998
310782013 = 325931072 333969775 = 349932586
0.953 : 1 0.954 : 1
1999
Comments: This ratio shows how many times total assets covers 0.954 which shows slight improvement. total liabilities other than equity. In 1998 it was 0.953 but in 1999 it was
b)
Debt To Equity Ratio:
= = =
Long Term Debts Share Holder Equity 2.25 : 1 2.33 : 1
1998
34120256 15149059 37132835 15962811
1999
Comments: Debt equity ratio indicates the relationship between the long term funds provided by creditors. It is used to calculate the degree of financial leverage of the firm. It was 2.25 in 1998 but in 1999 it improves to 2.33.
c)
Cash To Deposit Ratio: 52646553 27339142 64793405 29475437
= =
Total Cash Total Deposit 0.219 : 1
1998
1999
0.219 : 1
Comments: Cash to deposit ratio can be calculated by dividing total cash to total deposits. In 1998 it was 0.193 but in 1999 it improves little bit to 0.219.
4.
Profitability Ratios :
a) Operating or Grass Profit Ratio = Profit Before Taxes Sales or Income
1998
2135382 34504818 311484 35291180
= =
0.061 : 1 0.009 : 1
1999
Comments: The operating profit ratio represents pure profit earned on each rupees. It ignore any financial or governmental charges and measure only the profit earned on operations. It was 0.061 in 1998 but in 1999 it was decrease to 0.009.
b)
Return On Equity Ratio: 529653 15149059 1999
= =
Net Profit After Taxes Share Holder Equity 0.031 : 1
1998
Not Calculated because of net loss.
NOTE:
Other profitability ratios cannot be calculated because of NET LOSS IN THE FINANCIAL YEAR OF 1999.
PERFORMANCE ANALYSIS OF NBPANNUAL REPORT 1999

N. B. P celebrated its Golden Jubilee in 1999. During the last fifty years the bank has made substantial strides in the financial services industry in Pakistan. Currently its market share is around 22% and it remains the largest financial institution in Pakistan.
Profit befor provisions& taxation:

In increase of 27%. 1999,profit before provisions & taxation an increased to Rs. 6.9 Billion from Rs.5.5 Billion in 1998,showing
Growth in deposits:
The growth in deposits has been maintained at over 7%. In 1998 total number of deposits were 273391 million while in 1999,they increased to 294754 million.
Advances:
Total gross advances of the bank at the end of 1999 stood at Rs. 139.6 Billion net of recoveries as compared to total advances of Rs. 126.1 Billion at year ended 1998.
Capital adequacy ratio:

Despite the provisions, the capital adequacy ratio of 11.4% exceeds the minimum internationally accepted ratio of 8%.
Non performing loans:

The increase in non-performing loans to Rs.30 Billion from Rs. 20 Billion in1998 was on account of a change in the prudential Regulations for restructured loans.
Satellite Network:
NBP has established router based high speed satellite network between six cities and intends to expand this network from six to nine cities. It will link all NBP Regions, Zones & Branches.
Future strategy:
NBPs strategy will focus on leveraging its network and franchise for creating revenue generating opportunities using technology to both improve customer service and achieve eternal efficiencies and finally to improve the quality of human resources base through structured training.
SUGGESTIONS FOR IMPROVEMENT

I want to give some suggestions to improve the efficiency of the bank. 1. 2. 3. 4. Separate desk or counter should be established in every branch to provide the information as required by the clients. The environment of the offices should be comfortable so that the client and staff must feel comfort during business in bank. Unsecured loan are not to be provided in case of banks directions, there families, companies or firms. There are some clients having sound and successful plan but without financially sound and providing securities bank should firms such policies which may solve this problem. 5. I observed that many branches of NBP are over crowded. Less people can work which is performed by extra people. No. of employes should decrease or new branches should opens for the adjustment of these extra employees. Department of Business Administration Kotli Azad Kashmir.
6.
There is too much dependence or handwork and they are not getting at with computer programme. All the branches of NBP should be computerized.
7.
There are some employes untrained which decreases the efficiency of the bank branch. All the employee should well trained.
8.
Most of the bank employees are sticking to one seat only, with the result that they become master of one particular job and loose their grip on
9.
People have to wait for re-cashing their cheques and for paying their utility bills, which is not good for reputation of bank, it should be improved.
10.
Promotion should be given to competent persons on merit basis.
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1 An Internship Report on National Bank of Pakistan

Department of Business Administration Kotli Azad Kashmir.

2 An Internship Report on National Bank of Pakistan

Department of Business Administration Kotli Azad Kashmir.

3 An Internship Report on National Bank of Pakistan

Department of Business Administration Kotli Azad Kashmir.

4 An Internship Report on National Bank of Pakistan

FUNCTIONS OF COMMERCIAL BANKS.

Department of Business Administration Kotli Azad Kashmir.

5 An Internship Report on National Bank of Pakistan

6 An Internship Report on National Bank of Pakistan

FINANCIAL FOREIGN TRADE:

Department of Business Administration Kotli Azad Kashmir.

7 An Internship Report on National Bank of Pakistan

Department of Business Administration Kotli Azad Kashmir.

8 An Internship Report on National Bank of Pakistan

ROLE OF BANKS IN ECONOMIC DEVELOPMENT OF A COUNTRY

9 An Internship Report on National Bank of Pakistan

ii) iii) iv) v)

especially in agricultural sector.

Department of Business Administration Kotli Azad Kashmir.

10 An Internship Report on National Bank of Pakistan

Department of Business Administration Kotli Azad Kashmir.

11 An Internship Report on National Bank of Pakistan

Department of Business Administration Kotli Azad Kashmir.

12 An Internship Report on National Bank of Pakistan

Department of Business Administration Kotli Azad Kashmir.

13 An Internship Report on National Bank of Pakistan

HISTORICAL BACKGROUND OF NBP

Department of Business Administration Kotli Azad Kashmir.

14 An Internship Report on National Bank of Pakistan

Department of Business Administration Kotli Azad Kashmir.

15 An Internship Report on National Bank of Pakistan

Department of Business Administration Kotli Azad Kashmir.

16 An Internship Report on National Bank of Pakistan

Department of Business Administration Kotli Azad Kashmir.

17 An Internship Report on National Bank of Pakistan

Total number of domestic branches are 1408, as for December 1999.

ORGANIZATION STRUCTURE OF NBP

Department of Business Administration Kotli Azad Kashmir.

18 An Internship Report on National Bank of Pakistan

Mr. Syed Ali Raza

Department of Business Administration Kotli Azad Kashmir.

19 An Internship Report on National Bank of Pakistan

Mr. Irshad Ali Gola Mr. S. M. Raifque

EXECUTIVE COMMITTEE OF NBP

Department of Business Administration Kotli Azad Kashmir.

20 An Internship Report on National Bank of Pakistan

BRIEF LIST OF SERVICES PERFORMED BY NBP

4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

21 An Internship Report on National Bank of Pakistan

Department of Business Administration Kotli Azad Kashmir.

22 An Internship Report on National Bank of Pakistan

RECOVERY AND LITIGATION DIVISION

AUDIT AND INSPECTION DIVISION

Department of Business Administration Kotli Azad Kashmir.

23 An Internship Report on National Bank of Pakistan

RESEARCH CORPORATE PLANNING AND HUMAN RESOURCE DEVELOPMENT DIVISION

ENGINEERING AND MAINTENANCE DIVISION

FINANCE AND INVESTMENT DIVISION

CUSTOMER SERVICES DIVISION

24 An Internship Report on National Bank of Pakistan