CHAPTER NO.

1 INTRODUCTION OF THE REPORT

1.1 Introduction
As part of the academic requirement for completing MBA (Finance). The Students are required to under go for two (2) Months of internship with an organization. The internship is to serve the purpose of acquainting the students with the practice of knowledge of the discipline of banking administration. This report is about National Bank of Pakistan Sarai Salah Branch Haripur, which was established in 1992. It gives the facility and services to the people of Sarai Salah.

1.2

Scope of Study
As an internee in National Bank of Pakistan Sarai Salah Branch Haripur the

main focus of my study research was on general banking procedures. These operations include remittances, deposits, advances, Gold Finances and Agriculture Finances. Similarly different aspects of overall of NBP are also covered in this report.

1.3

Limitation of the Study

Some thing is better than nothing. No matter how efficiently a study is

conducted, it cannot be perfect in all respects. This study was conducted in accordance with the objectives of the study. The study may not include broad explanations of acts and figures due to the nature of the study. Secondly, the limitation, which affects the study, is the restriction on mentioning every fact of the bank due to the problem of secrecy of the bank. In addition, the availability of required data was a problem as all the documents and files

are kept strictly under lock and key due to their strictly confidential nature. The third problem of short time period also makes the analysis restricted as one cannot properly understand and thus analyze all the operations of a bank just a very short time of eight weeks.

1.4

Purpose of the Study

The main purpose of study in hand is together relevant information to compile

internship report on Nation Bank of Pakistan. To observe, analyze and interpret the relevant data competently and in a useful manner. To work practically in an organization. To develop interpersonal communication.

1.5

Research Methodology
The report is based on my three months internship program in Nation Bank of

Pakistan. The methodology reported for collection of data is primary as well as secondary data. The biggest source of information is my personal observation while working with staff and having discussion with them. Formally arranged interviews and discussions also helped me in this regards. Primary data include Personal observation and Interviews of The Staff members. Secondary data consist of Manuals, Journals, magazines, Annual Reports and Internet.

1.6

Scheme of Study

PART I
Chapter 1 An introductory chapter that discuss the introduction of study of report, its Background, Purpose, Scope, Methodology, limitations and Scheme of the report. 2

This First chapter totally defines what is in my report. It tell the reason for what it is develop and what is methodology behind the report and limitation of report. In Scheme of study I write about the chapter in the report and define what is in it.

PART II
Chapter2 This chapter concludes brief history of banking in general from starting tell now. Then I discuss evolution of banking and Nationalization of banking in Pakistan in which I discus the importance of banking for Pakistan. In History of NBP I try to highlight those event which have import effect on NBP business and it administration. Mission statement & Vision statement tell what is their business and what they want to become. At the last topic I try to describe the objectives & functions of National Bank of Pakistan and it also give the detail of it regional branches which is define with chart. Chapter3 In this chapter the services of NBP were discussed and the department like cash department, Payment department, Govt: Receipt and payment department, Remittance department and other main department are discuss in detail.

PART III
Chapter 4 It consists of comprehensive performance of NBP through past several years. Though Ratio analysis and Horizontal and vertical analysis of Balance Sheet and Profit and Loss Statement I try to discuss the financial position of NBP. I also put the graph by which one can easily understand the result of Ratio. Chapter 5: In Fight chapter I do SWOT analysis and try to tell about Strengths the bank have and what are the weakness on which bank should focus to take advantage of Opportunities and avoid the Threats that NBP Faces in current market. 3

Chapter 6
It covers the critical analysis of the bank. This chapter has been divided into three parts i.e. Finding in which different finding like problem at Branch, functional analysis, distractive analysis, personal management analysis are done, in recommendations & suggestion I try to give the solution of certain thing that I observe.

PART IV Chapter 7
In Seventh Chapter Conclusion of my report and also give the reference from which I take tax and data which help me to complete my report.

CHAPTER NO.2 REVIEW OF BANKING

2.1 Banking
The economic growth and success behind every developed all developing country revolve around an efficient banking system. No one would argue the fact that banking sector plays the vital role in maintaining sustained growth and development.

2.2

Evolution of Banking
It has not so far been decided as to how the word Bank originated. Some

authors opine that their word is derived from the words Banque which mean a bench. The explanation of their origin is attributed to the fact that the Jews in Lombardy transacted the business of money exchange on benches in the market place, and when the business failed, the people destroyed the Banco. Incidentally the word Bankrupt is said to have been evolved from this practice. Others authorities hold the opinion that the word Bank is derived from the German word Back which mean joint stock fund. Later on, when the Germans occupied major part of Italy, the word back was Italianized in to Back.

2.3

Early Growth
Banking in fact is as primitive as human society, for ever since man came to

realize the importance of money as a medium of exchange, the necessity of, a controlling or regulating agency or institution was naturally felt perhaps it was the Babylonians who developed banking System as it early as 2000 Bait is evident that the temples of Babylon were used as banks because of the prevalent respect and confidence in the clergy. King

Hammurabi (1728 1686 B.C.), the founder of the Babylonian empire, drew up a code wherein he laid down standard rules of procedure for banking operations by temples and great landowners. He got his, code inscribed on a block of diorite about 8 feet tall, containing about 150 paragraphs which deal with nearly all aspects of loans, interest, pledges, guarantees, natural accidents, loss, theft etc. Later on, the Sumerians Babylonians, Hittites and Assyrians standardized the values of the goods in silver, copper, bronze or electrum. In 1401 a German Public Bank was formed comprising the operations of discounting, deposit and transferring of money. By the 16th century, some more public banks were formed in Venice, Milan, Amsterdam, Hamburg, and Nuremberg. In the old times Gold Smith in England started banking system. People use to deposit their valuables and commodity money with Gold Smiths. So Gold Smiths can be said the people who firstly started formal banking people use to deposits their valuables with the gold smiths for the purpose of safekeeping. Then when after some time these valuables were drawn from Gold smiths, Gold Smith used to charge some service charges. So in their system the deposits were backed up with hundred present reserves with Gold Smith. By and by Gold Smith started thinking that al the deposits are not with drawn at the same day. In a particular day some people withdraw their deposits and some also comes to make new deposits. So over all effect is offset. So Gold Smith realized that a handsome amount always remained with them. Then they decided to keep fractional reserves for daily transactions. There was of course a revolutionary idea realized by Gold smith that gave birth to modern banking system by keeping fractional reserves with them Gold Smith started lending money to the needy people and thus increasing their profits. From these profits, Gold Smith started giving other services to the common public. In 1672, however, English banking faced great crises when Charles-11 borrowed huge sums of money from the Gold Smiths and later refused to pay them back. Therefore, a number of Gold Smith bankers formed themselves into a 6

corporation in 1695, known as the Bank of England. Their bank lent pound sterling 12, 00,000 at 8 % interest to William-111, who in return, allowed a number of privileges to the bank, specially the right to issue Notes payable to bearer on demand up to the amount of their loan. That was known as fiduciary issue, not covered by the gold.

2.4

Banking in Pakistan
At the time of independence the areas which now constitute Pakistan were

producing food grains and agriculture raw material for sub-continent so there were no industrial zones in these areas however, there were 487 offices of banks in these areas which were providing banking facilities. When Pakistan came into existence it was decided that reserve bank of India will continue solving problems of time and demand liabilities, coinage, currencies, exchange etc.

There were only two Pakistani institutions Habib bank and Australasia bank in Pakistani. In July 1st, 1948 Govt. of Pakistan decided to establish a full-fledge central bank. Governor General of Pakistan Quaid-e-Azam Muhammad Ali Jinnah inaugurated state bank of Pakistan. The first important task, which the state bank of Pakistan had to do, was the issue of currency noted and withdrawal reserve bank of India notes with over Printing their of Govt. of Pakistan, which had been in circulation in Pakistan. The central bank of Pakistan was assigned an urgent task creating a National banking system. In order to attain their task it provided every help of Habib bank to expand its network of branches and also recommended to Govt. the establishment of a new bank, which could server as an agent of the state bank. As a result, the National bank of Pakistan came into being in 1949. The outbreak of Korean War in 1950 provided a great boom for Pakistans export, and thus the demand for bank advances increased shapely. However, when the 7

Korean War ended in 1952, there was a shortfall in the countrys export earnings with no appreciable change in imports earnings with any appreciable change in inputs. Their naturally caused a drain or the foreign exchange reserves, and in turn, affected the balance of payments position the government had, therefore, to reduce inputs and provide adequate incentives to the business and industry in the form of protective tariffs. Their induced banks to provide working capital for industries. The state bank of Pakistan sponsored the setting up of and industrial finance corporation. Agriculture development bank was setup to attend agriculture finance. All these measures and the devaluation of Pakistani rupee on August 1st, 1955 had a very favorable effect on market and balance of payments position in 1955-56. Thus Pakistan now entered in to a phase of planned economic development in 1956, and naturally further expansion in banking and credit facilities was mad. However, despite the intensive needs, private enterprise was not coming in Pakistan consequently the state establish a regional bank by the name of EASTERN MERCANTILE BANK in east Pakistan. In 1960 RURAL CREDIT FUND was setup with one Crore to provide medium and long-term credit in the rural areas.

2.5

Kind of Banking in Pakistan

In Pakistan following types of banks are operating in the business circle like

economics.

2.5.1 Central Banks

Each country in the world has its own central banks. Their bank does not deal with public directly. This means that it neither receive cash deposit from the people. State bank is the central bank of Pakistan. It was set up on July 1st, 1948. 2.5.2

Commercial Banks
The first commercial bank in the world is Bank of Venus. It was set up in

1171 in Italy. These banks are set up on commercial bases therefore; their primary 8

objective is to earn profit and maximize it is far as possible. For this they received cash deposits from the people in different accounts. They give loans to different business enterprises and thereby create credit money. The state bank of Pakistan is the central bank of Pakistan, commercial banks, financial institutions and cooperative banks are the other components of the banking system.

2.5.3 Agricultural Banks

The bank is responsible for development of agricultural sector in the country. The public linked with agriculture and agro-based industries can get financial help from agricultural bank. These banks are providing long term and short term credit facilities to the farmers for the purpose of seeds, fertilizers and agriculture tools, fencing and tube wells. The agriculture development of Pakistan is working as a agriculture bank in Pakistan. 2.5.4

Industrial Banks
The banks meets financial needs of industrial sector loans are granted to set up

new companies to purchase of new machinery and construction of buildings requires long term loans at responsible rate of interest. Industrial development bank of Pakistan is working as industrial bank. 2.5.5

Mortgage Banks
The banks provide loans against land and building for short and long term.

The bank can lend money to buy or construction of new house. Moreover purchase and development of land require funds. In Pakistan their is need of mortgage banks. At present House Building Finance Corporation is doing work of Mortgage banks in housing sector.

2.5.6

Exchange Banks
The exchange has their head offices in foreign countries. They deal in foreign

exchange due to foreign trade. The importer makes payments in foreign currency. The exporter receives foreign currency. American express bank limited bank of Tokyo limited Rupali bank limited, Bank of Oman and Doha Bank Ltd. are some example of exchange bank in Pakistan.

2.5.7 Cooperative Banks

These banks can provide banking facilities to member for meeting their financial requirement. The members may be farmers or small producers. The Punjab provincial cooperative is the example of cooperative bank. 2.5.8

Saving Banks
The banks receive idle money from people having low income. The people

save money for future needs. The saving offers responsible rate of profit on saving account. The student Govt. employees and house hold women can open such account. Post offices and national saving centers are example of such banks in Pakistan.

2.6

History of National Bank of Pakistan

When we won political independence, Non- Pakistanis, mostly Hindus,

controlled our economy. After partition over 7 million people came to West Pakistan & about 5 million went out. East Pakistan was spared from massive migration but its economy was also, being dependent on Calcutta, badly hurt. Most bankers & business experts left Pakistan and the economic life was brought to a standstill: mostly branches of Imperial bank of India were only in partial operation with little staff. The number of bank offices fell from 631 to 195 after partition. After this commercial phase, in 1950 started the industrial phase Jute and cotton industries were started during 1950-55.

10

It was decided that Reserve 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 ask 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 band 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 50crore India disputed and virtually refused to settle this dispute until 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 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 withdraws the Marwari merchants who were employed annually for movement of jute crop by financing it. There was 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. These are as under; 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 Govt. stood behind SBP. Speedy it was such that 6 branches came into being at once and the doubts on our ability to handle this situation were dispelled forever. Now, as the jute Board and 11

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, there after other commodities were also taken-up. After that Mr. Zahid Hussain, Governor SBP assumed additional charge also as a chairman NBPs Board of Directors, & Mr. M.A. Mohair became its first M.D. In 1950, NBP established a branch in Jeddah, Saudi Arabia. In 1952, NBP replaced Imperial Bank of India. Mr. Mumtaz Hassan negotiated this arrangement as acting Governor of SBP. By 1955, NBP had branches in London and Calcutta. A branch in of NBP Baghdad, Iraq was established in 1957. 1962 NBP established a branch in Dar-es-Salaam, Tanganyika. In 1962 when Mr. Mumtaz Hassan became M.D, the number of branches increased from 6 to 239 & deposits from Rs. 5 crore to 106 crore, profit from Rs. 3 lack to 21 million & the staff increased from 380 to 7091.In Des.1966 its 600th branch was opened raising the deposits to 2.31bn, and staff to 14,963. In 1964, peoples credit scheme was started to finance small business. While in 1964, Iraqi government nationalized Baghdad Branch of NBP.

In 1965, The Indian government seized the Calcutta branch on the outbreak of hostilities between India and Pakistan. In 1967 The Tanzanian government nationalized the Dar-Es-Salaam branch. In 1971, NBP acquired Bank of China's two branches, one in Karachi and one at Chittagong. At separation of East Pakistan NBP lost its branches there.

NBP merged with Eastern Mercantile Bank and with Eastern Bank Corporation. During 1974, the government of Pakistan nationalized NBP. As part of the concomitant consolidation of the banking sector, NBP acquired Bank of Bahawalpur (est. 1947). In 1977, NBP opened an offshore brain Cairo.

During 1994, NBP amalgamated Mehran Bank (est. 1991). In 1997, NBP's branch in Ashgabat, Turkmenistan commenced operations. In 2000, NBP opened a representative office in Almaty, Kazakhstan. In 2001, State Bank of Pakistan and

12

Bank of England agree to allow only 2 Pakistani banks to operate in the UK. NBP and United Bank agreed to merge their operations to form Pakistan International Bank, of which NBP would own 45% and United Bank 55%. Also that year, NBP closed its branch in New York. During 2002, Pakistan International Bank renamed itself United National Bank Limited (UNB). The ownership structure of the UNB remained as before. The only change to the shareholding structure is that UBL had recently been privatized in Pakistan and was now owned 49% by the Government of Pakistan and 51% by a joint foreign consortium of Abu Dhabi. In 2003, NBP also received permission to open a branch in Afghanistan. In 2005, NBP closed its offshore branch in Cairo.

2.7

Current Position of NBP

National Bank of Pakistan maintains its position as Pakistan's premier bank

determined to set higher standards of achievements. It is the major business partner for the Government of Pakistan with special emphasis on fostering Pakistan's economic growth through aggressive and balanced lending policies, technologically oriented products and services offered through its large network locally, internationally and representative offices. NBP maintains its position as Pakistans Premier Bank with a network of over 1100 branches locally, 15 overseas branches, one Subsidiary at Almaty (Kazakhstan) and four Representative Offices at Tashkent (Uzbekistan), Baku (Azerbaijan), Beijing (China) and Chicago (USA). NBP also have a Joint Venture with UBL at U.K., with the name of Pakistan International Bank (UK) Ltd., with seven branches at Main Branch, London, Manchester Branch, Glasgow Branch, Bradford Branch, Sheffield Branch, Birmingham Branch and Knightsbridge Branch (London). The Bank currently has an employee has of over 15,000 employees world wide. The various departments include:

13

Consumer Banking Corporate Finance Investment Banking Agricultural Banking Transactional Banking Operations Software Development and Automation Financial Control Treasury Internal Audit Risk Management & Credit Economic & Business research Training & Development Strategic Planning Human Resources.

2.8

Services of NBP
International banking Demand drafts Mail transfers Pay order Traveler's cheques Letter of credit Commercial finance Foreign remittances Swift system Short term investments Equity investments N.i.d.a Agricultural finance Corporate finance

2.9

NBP Retail Products

Premium aamdani premium saver karobar saibaan Advance salary cash card 14

Investor Advantage Cash N Gold Kisan Taqat Kisan Dost Aasan Banking NBP Helpline Internet based home remittance service Personal accident insurance

2.10 Competitors of NBP

The Competitors of NBP are the other commercial Banks providing same services such as HBL UBL ABL MCB Bank Al-Falah Citi Bank RBS etc

15

2.11 Mission Statement & Vision Statement

Mission Statement

NBP will aspire to the values that make NBP truly the Nations Bank, by: Institutionalizing a merit

and performance culture the Creating highest a distinctive of

brand identity by providing standards services. Adopting the best international management practices. Maximizing stakeholders value. Figure:

2.11(a) Discharging our responsibility as a good corporate citizen of Pakistan

and in countries where we operate.

Vision Statement
To be recognized as a leader and a brand synonymous with trust, highest standards of service quality, international best practices and social responsibility.

Figure: 2.11(a)

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2.12 Objective of National Bank of Pakistan

National

Bank

of

Pakistan

maintains its position as Pakistan's premier bank determined to set higher standards of achievements. It is the major business partner for the Government of Pakistan with special emphasis Pakistan's on fostering growth economic

through aggressive and balanced lending policies, technologically oriented products and services offered through its large network of branches locally internationally

Figure: 2.12 (a)

Source: http://www.scribd.com and representative offices. We aim to be an organization that is founded on Growth through creation of sustainable relationships with our customers. Prudence to guide our business conduct. A national presence with a history of contribution to our communities. We shall work to Meet expectations through Marketbased solutions and products.

Figure: 2.12(b)
17

Source: http://www.scribd.com Reward entrepreneurial efforts. Create value for all stakeholders.

We aim to be people who

Care about relationships. Lead through the strength of our commitment and willingness to excel. Practice integrity, honesty and hard work. We believe that these are

measures of true success.

We have confidence that tomorrow we will be

d

Leaders in our industry. An organization maintaining the trust of stakeholders. An innovative, creative and dynamic institution responding to the

changing needs of the internal and external environment.

After all, we are The Nations Bank.

18

2.13 Detail of Regional Offices Across The Country

Figure: 2.13

19

2.14 Organizational Chart

PRESIDENT Board of Directors

SECRETARY Board of Directors

EXECUTIVE COMMITTEE

SECRETARY

EXECUTIVE
Committee

SEVP CONST & MAINTAIN

SEVP ECONOMIC RESEARCH

SEVP CORPORATE AFFAIR

SEVP CREDIT

SEVP LOAN COLLECTION

SEVP EDP

SEVP INTERN DIVISION

SEVP TREASURY

SEVP CAPITAL MARKET

SEVP CAPITAL MARKET

SEVP AUDIT

Figure: 2.14
20

2.15 Corporate Information

Board of Directors Chairman & President Syed Ali Raza Muhammad Ayub Khan Tarin Mian Kausar Hameed Ibrar A. Mumtaz Tariq Kirmani Haniya Shahid Naseem Nazrat Bashir Audit Committee Chairman Ibrar A. Mumtaz Mian kausar Hameed Tariq kirmani Auditors Anjum Asin Shahid Rahman & Co. Chartered Accountants M. Yousu Adil Saleem & Co. Chartered Accountants Legal Advisors Mandviwala & Zafar Advocates & Legal Consultants Registered & Head Office NBP building I.I Chaundrigar Road, Karachi, Pakistan Registrar & Share Registration Office Central Depository Co. of Pakistan, CDC House, 99-B, Block-B, S.M.C.H.S., Main Shara-e-Faisal Karachi, Pakistan Website www.nbp.com.pk 21

CHAPTER NO.3 BRIEF INTRODUCTION OF BRANCH

I have done my internship in the National Bank of Pakistan Sarai Salah branch Haripur. The branch is situated near about in the middle of the city. Most of the operations are performed in this branch. It contains almost all the departments which are mentioned below.

I have started my internship on 23.08.2010 at this branch. I have worked in the different departments of the branch especially the account opening account and advances sections.

Department of National Bank of Pakistan

The main departments of NBP are describing below: 3.1 3.2 3.3 3.4 3.5 3.6 3.7 Cash Department Deposit Department Advances Department Bills and Remittance Department Establishment Department Management Department Govt. receipt & payment Department Now we see the functions of each department working at National Bank of Pakistan. 3.1

Cash Department

22

The cash department is that through which all the receipts and payments of bank are made. Also the banks cash record remains with this department. There are two types of books used in this department.

3.1.1 Cash Receipt Book

In which the cashier records the entry when some one comes to deposit some amount. The clients com with pay in slips and the cashier the amount according to the pay in slip, sort outs the notes, puts a signature, stamps it and record in his book. After stamping the slip the cashier returns the pay in slip to the customer. Then customer goes to the another bank officer, he again record this voucher into his cash scroll and returns one part of the pay in slip to the customer and keeps the other part for the record.

3.1.2

Cash Payment Book

When some client comes to the branch to withdraw some amount from the

account, after getting the token from deposit section he goes to the cashier, cashier checks his token and cheque which is referred to him from deposit section. The cashier makes to him required payment and receives the token from the customer. After recording all the cheques in his book he returned the cheques in to the deposit section.

Book Maintain
The following are the common books, which are maintained in any branch of NBP.

2.1.3 Cash Book

The sole purpose of the cashbook is to record the total transactions done in each type of account daily. The closing balance of cash is also included in the cashbook. It is maintained with the help of various types of vouchers and daybooks.

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These vouchers and day books of different heads are as follows: Charges vouchers. Suspense vouchers. Payment order vouchers. Term deposit vouchers. Call deposit vouchers. PLS daybooks. Current daybooks. Cash finance day books. Running finance day books. Demand finance day books. Foreign exchange day books.

With the help of these vouchers various types of registers are maintained to record daily transactions done in various accounts. These registers are:Daily transaction report of PLS/ Current account. Suspense register Charges register

3.2.2 General Ledger

In this ledger the posting is done from the cashbook. With the help of this ledger any discrepancy in balance of accounts can be easily found out.

2.2.3 General Abstract Ledger

It is like trial balance. In this ledger debit or credit balance of each balance of each type of account is posted from the cash book.

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3.2.4

Letter of Credit
A letter of credit is a means of making payments for the imports of goods. It is

issued by the Bayers Bank in favor of the seller. The terms and conditions of sales are also stated on it.
The following steps are involved for opening a letter of credit.

The importer contracts the exporter for purchase of goods. he settle with the seller about the prices quantity and quality of goods and mode of making the payments. Then the importer informs his banker to open a letter of credit. The banker will ask the applicant to provide import licensee and Performa invoice. After checking these documents, the banker will ask the importer to file an application on the printed form. A printed application form usually called Letter of Credit is filled up by the banker and signed by the importer. All terms and conditions of sale contract are recorded on it. The issuing bank informs the advising bank that credit has been issued. Three copies are prepared, the issuing bank keeps one copy and other two copies are sent to the advising bank. The advising bank will give one copy to the exporter. The State Bank of Pakistan decides the percentage of amount to be paid to the issuing by the importer. This amount is called Margin. This amount is deducted from the total payment made by the importer. The advising bank informs the seller that credit has been issued. The seller sends the goods to the Bayer and provides the shipping documents to the advising banker. The bank checks the documents and then sends to the issuing. The issuing bank on the receipt of shipping documents, effect payments to the seller. The shipping documents are released to the Bayer upon payments of the amount due. The Bayer sends the transport documents to the carrier who will then proceed to deliver the goods. 25

There are two main kinds of letter credit: Revocable Irrevocable

It can be amended or cancelled at any time without prior notice to the seller, up to the moment of payment. In this case the seller is at risk. It can be amended or cancelled only with the agreement of the parties. In this case the seller is not at risk. National Bank of Pakistan provides the facility of letter of credit to its customers. Party comes to bank and bank following from for completion. Application Form Appendix Undertaking Performa invoice Import registration/import license

After filling these documents and submitting to bank all the documents are checked and signatures by the bank. An approval form is attached to these documents. Bank evaluates the credibility and transaction of applicant. Bank fixes some margin, which depends upon the credibility of client as well as nature of product. The margin is to be debited from import account. The amount which is mentioned in L/C not found in applicants account, bank will not open L/C. If the balance of importers accounts fulfills the requirements then managers will open L/C. The client authorized the bank to debit all the expense occurred for this deal from his account at any time. Because bank is required to meet the liabilities.

Deposit Department

26

All types of cash transactions are deled under this section. Now we see the types of accounts, which are opened in this section.

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3.4

Types of Account
Depositors can open the following types of accounts with the National Bank of

Pakistan:Current account P.L.S. saving account. P.L.S. Term Deposit Account. M.I.S.(Monthly Income Scheme)

A brief introduction of these accounts is given below.

3.4.1 Current Account

As the name signifies the depositor can draw or demand amount at any time by presenting the cheque in the bank. Unlike time deposits there is no restriction of withdrawals. The bank neither pays any kind of interest nor deducts the Zakat from the deposits of this account. The bank also does not tale any service charges up to the minimum balance of account from the depositors. The minimum balance required to an account to be opened is Rs. 5000/-. If balances in account reduce from the minimum balance of 5000 then the bank charges Rs. 50/- as incident charges applied. In developed and developing countries a very significant amount of money is kept under current account. Businessman normally opens this kind of account.

3.4.2 Profit & Loss Sharing Saving Account

In these P.L.S. accounts the bank gives no fixed rate of profit. These types of deposits are designed to encourage the saving habits of the people. The minimum deposit to open this account is Rs. 500/-. After every six months a rate of profit is announced by the bank and after calculating the amount, it is credit to the depositor account. Now a day, if an account holder maintains 3000/- minimum balance throughout the year then his account is eligible for profit. Also on 1 st day of

28

RAMADANs Zakat is deducted at the rate of 2.5 %. Restriction on withdrawal of heavy balances is now abolished. Customer con withdraw their amount at no limit.

3.4.3 P.L.S. Term Deposit

In this type of account the amount is deposited for a specified period of time. This period varies from 7 days minimum to maximum 5 years. The profit rate is also changes with the short period to long period. There is higher rate of profit on long term P.L.S. T.D.R. The minimum balance required to open this type of account is Rs. 10000/-. Profit is announced after six months and then credit to the respective accounts. 3.4.4

Monthly Income Scheme

For this scheme the required minimum balance is Rs.10000/-. Profit is

announced after every six months but it is credit to the customers accounts on every month. Mostly retired persons are like to open this type of account.

3.5

Account Opening Procedure

The customer can open an account with the National Bank of Pakistan in the

following categories:Individually Account Jointly Account Sole proprietorship Account Partnership Firm Corporation Account

3.5.1 Individual Account

A person can open an account in National Bank of Pakistan in Pak-rupee. First of all he/she has to fill the account opening form provided by the bank. Then his 29

introduction is done before the branch manager. An existing account holder of the bank or an officer of the bank who know him very well can do this introduction. A copy of his identity card is must attached with his account opening form. If the account holder is illiterate then he/she provides his/her three recent photographs to the branch. In order to stop the payment from his account it is necessary to give the instructions in black and white. The account holder can get the statements of accounts from the bank at his will at any time without any charges.

3.5.2 Joint Account

A person can open an account in N.B.P. in Pak-rupee. An account opening form is given form that branch where he wants to open his account. In that opening form he provides complete information about the account holders. If any one or both of them are illiterate then he or they give the photographs to the bank. Then the introduction of the person is done. A copy of their identity card is must attached with his account opening form. He or she also states the made of operation which is clearly written in their account opening form. In joint account there is two modes of operation first are Jointly and second is E or S. In jointly mode both the persons must sign the cheque. And for any kind of transaction they must dually signed the documents while the either or Survivor mode any one of them can sign the cheque and withdraw his money.

3.5.3 Sole Proprietorship

The person who is the sole owner of a business can open an account with National Bank of Pakistan after providing the following documents to the bank officer. Current municipal license Commercial registration certificate Copy of identity card

30

In some special cases when the officer of branch is doubtful about the authenticity f the documents he can get additional documents for proper verification. The branch manager studies all documents of the business. If he is satisfied then the account of the party is opened with the bank. Normally these types of accounts maintained under Current account system.

3.5.4 Partnership Firm

The partnership firms can also open an account with the bank. But for this purpose they have to provide the certain type of information to the bank. For this purpose a form is provided to the account holder in which they provide the following information to the concerned branch and the person who can draw the amount from the bank is also nominated. 3.5.5 Name of firm Name of parties Identity card of partners Registration certificate of the firm

Limited Company/Corporation
In order to open the account of a company the following documents are

required by the bank so that the bank could take action in case of any fraud or discrepancy. Memorandum of Association Memorandum of Article Most recent balance sheet and profit and loss statement Resolution of board of directors about the person who is Any other documents

authorized to sign the cheques.

3.6

Issuance of Cheque Book

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Now-a-day the price of cheque book issue by the NBP are 30, 75

Size of

cheque book is varies. It contains 10 leaves to 100 leaves. The assistant writes the following information on the title page of the cheque book and cheque book issuance register. Issuance date Name of account holder Account number Type of account

After authentication by the authorized officer on the cheque book register, the cheque book is handed over to the account holder.

3.7

Depositing of the Amount

Account holder can deposit the amount in cash or draft etc. in his account

through credit voucher. In N.B.P. two types of vouchers are used for this purpose. Green voucher which is used for Cash Receipts Pink voucher, which is used for all Non Cash Receipts

like drafts, cheques, payment orders etc.

3.8

Encashment of Cheques

3.8.1 Issuance of Token

After scrutinizing the apparent tenure of cheque a token is issued to the account holder.

3.8.2 Verification of Signature

After affixing the two stamps i.e. Pay Cash and Signature Verified. A cheque is sent to the accountant for the verification of signature from signature specimen 32

card. After authentication of signature and posting in his account the cheque is sent to the cash department for the payment.

3.8.3 Payment of Cash

Cashier pays the amount to the token holder after getting back the token from customer.

3.8.4 Deduction of Zakat

From the PLS Saving account Zakat is deducted at the rate of 2.5% annually on the outstanding balance of account on the first day of every valuation date i.e. first day of Ramazan. Minimum balance of the deduction of Zakat is fixed by the Central Zakat authority (CZA) before the valuation date.

3.8.5 Exemption From Zakat

The accounts of foreigners (including Muslims of other nations) and Pakistani non-Muslims are exempted from the compulsory deduction of Zakat. The accounts of followers of Fiqah-I-Jafria are also exempted from the deduction of Zakat after the submission of affidavit on a legal stamp paper.

3.8.6 With Holding Tax

Whenever a profit is paid on any deposit, it is subjected to the withholding tax at the fix rate of 10% annually.

3.9 Closing of Account

There are many reasons for closing of an account. It is not a good indication for the business of the bank. Some of the more common reasons are as follows: Account holders own request Death of the account holder

33

Bankruptcy of the account holder Closing of account due to bad conduct of account holder etc.

An account is closed at the request of account holder or as a result of improper conduct of the accept holder or because of nil balance of the account. In first case account holder requests in black and white to the branch manager to close his account. While in seconds case the branch manager is authorized to close the account. But bank before closing the account first sends a letter to the account holder that his account will be closed. So after fulfilling the legal requirements, it is marked of the accounts holders number that the account has been closed.

Remittance Department
Remittance is a major function of the bank. It is the transfer of money from one place to another place. The need for remittance is commonly felt in commercial life particularly and in everyday life generally. By proving this service to the customers the National Bank earns a lot of income in the form of service charges. National Bank of Pakistan deals with the following type of remittances: Demand Draft (DD) Mail Transfer (MT) Telegraphic Transfer (TT) Pay Order Now we discuss all these in detail:-

3.10.1 Demand Draft (DD)

Demand draft is a written order given by the one branch of a bank on behalf of customer to another branch of the same bank to a certain amount to the certain person. Procedure for prepare demand draft.

34

A draft voucher is filled which contains the following information Name of the parties involved Date Amount to be sent Account number (if DD is crossed) A credit voucher is filled in order to get the excise duty, withholding The sender deposits the total amount of the two vouchers i.e. the debit Then the cashier sends the cash receipt voucher to the accounts Accountant gives the DD leaf along with the DD voucher to his

tax and exchange commission, and credit vouchers. department and the account records the amount paid in his cash scroll. assistant who records the senders name, amount and receivers name. After writing all the information in the DD register he gives it to the officer along with the DD for authentication. After authentication the DD is handed over to the sender and bank sends the advice to the concerned branch. So when the party presents the DD in the concerned branch its payment could be made. Parties Involved In the Demand Draft The following parties are involved in demand draft;

Purchaser or Sender
The purchaser is the person who sends the money to a particular person payable at a certain branch.

Issuing or Drawing Branch

The branch from where the demand draft is issued to another branch of the same bank.

Drawee Branch
Branch in which the draft has drawn and called upon to pay the amount.

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 Payee
The person who is entitled to receive the amount after presenting the demand draft in the drawee branch.

3.10.2 Mail Transfer (MT)

It is the transfer of money from one branch to another branch of the same bank through mail service. In mail transfer there is no need of advice as the amount is directly credited to the receivers account.

Procedure
First a voucher is filled in which the sender writes the amount to be

sent, name, account number of the receiving person with the branch name and date. A credit voucher is filled in order to deduct exchange, postage charges The sender deposits the total amount of the two vouchers in the cash The cashier gives the vouchers to the accountant after affixing received Then the accountant writes the amount paid in the cash scroll and gives MT leaf is filled according to the information provided in credit and withholding tax according to the amount of the mail transfer. department. stamp and writing the amount in red ink. the MT to his assistant. voucher. He also writes the same information in the MT register. Then he gives the MT leaf and MT register to the officer for authentication. He takes two signature of the sender on the counterfoil of the MT and counter foil is handed over to the sender, at the end the MT along with the fan fold is sent to the concerned branch through mail.

3.10.3 Graphic Transfer (TT)

36

This is the most urgent method of remitting the money from one place to another place. This method is used when the sender desires to send urgently, in this case the sender request the manager of the branch to issue TT.

37

Procedure For sending the TT the manager applies a test. In the test the manager uses a coding technique. He writes his own code number, which is allotted, to him as the bank branch code. After making all the conformation the concerned branch makes the payment to the receiver. If the sender wants to convey the same message through telephone then he has to pay the charges of telephone along with the TT charges. First the person deposit the TT amount along with the charges through the credit voucher then his TT sent to the relevant branch.

3.13.4 Payment Order (PO)

A pay order is a written order issued by the bank no its own branch, drawn upon and payable by itself to pay a specified sum of money to the person. The purpose of a pay order is to transfer the fund from one place to another. It is usually not issued in favor of the parties of other cities. Usually the pay order is issued for the local transfer of money from one person to another or from the person to any other Department. It is used for different purposes. The purpose may be the repairs of the branch or renovation of the branch.

Procedure
The procedure of a pay order varies with the nature of the purpose. If the work is of huge amount then first the manager writes a letter to the Zonal Chief in order to get sanction of the work. Then the advertisement of the work is given in the newspaper in order to invite the contractors. But if the work is small then the branch manager has discretionary power to select the party whose rate is lowest. After finishing the work the contractor submits the bill of work on his stamp pad. Then the bank issues a pay order, against the pay order the contactor gets the amount from the issuing branch.

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3.11

Govt. Receipt & Payment Department

Govt. Receipt & payment includes different types of work. Now we see one

by one:

3.11.1 Utility Bills

National Bank accepts the following types of utility bills. Electricity Bills BLT Bills Telephone Bills Sui Gas Bills

Procedure
The cashier in cash section receives utility bills. The cashier posts the amount of bill in respective scroll and at the end all the amount of collected bills is transferred to the respective account. Then representative of the concerned department collects the amount in the shape of M.T. (Mail Transfer). The bank takes the collection commission of Rs. 8 per bill from each type of bill.

3.11.2 Disbursement of Pension

National bank is fully authorized to disburse the pension to the Govt. and Army retired personnel.

Procedure
For the distribution of pension the branch maintains the pension register. In order to get the pension, first the pensioner submits his pension voucher with his

39

pension book that voucher sent to the cash department for the payment to the pensioner after posting into his account.

3.11.3 Dispatches Section

This section deals with posting of every mail into the dispatches register. For this purpose bank hire the services of different courier services to sent the documents from one place to another. Before the handing over the mail to the courier service clerk, the dispatch section assistant notes the document in a register and issues a number, which is used to maintain the proper records. After handing over to the courier service, now it is the responsibility of the courier service company. In case of misplacement they have to pay for the damages. Assistant of this department sort out the receiving mail and then sent to the different sections.

3.12 Advance Section

Advances are investments of bank to earn profit. After restructuring of National Bank of Pakistan, Head Office gives loan targets to each branch that must be achieved for its survival. The Manager is responsible to achieve these targets in the given period.

3.13 Types of Loans/Finances

There are three major types of loans that are offered by NBP mostly at the rate of 11%, they are as follows. Short Term Finances Medium Term Finances Long Term Finances

3.13.1 Short Term Finances

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Short-term finances are sanctioned for increasing Working Capital & Production. These are given for the period of one year to 3 years maximum. Short Term finance includes the following types: Cash Finance The bank gives their loan to the customer & businessman against certain specified immovable property. It is issued for establishment & extension of industry. Demand Finance Their loan is given against movable property (called Secure Finance) or may be given against personal guarantee (called Clean Finance). Demand finance is further divided into three types: Staff Finance Their finance is given to the employees of National Bank for improving their living standard e.g. for purchasing a motorcycle, car, house building, computer etc. There is no markup on their loan except on car & computer buying @ 4%. Gold Finance It is sanctioned for the period of 11 months by pledging gold ornaments. Agricultural (Seasonal Finance) It is given for supporting seasonal crops like Rabi & Kharif. It is sanctioned for six month only at high markup rate. Running Finance Their finance is only a secured finance which is sanctioned against movable security that is easily convertible into cash e.g. security bonds, Govt. certificates &

41

bonds etc. Example for their loan is Three Advance Salary. It is newly

commenced

credit scheme by NBP. Three Advance Salaries is given to Govt. or semi govt. registered companys employees. The only condition for their type of credit is that the salary must be directly credited into the bank. The borrower must give a blank cheque for security.

3.13.2

Medium & Long Term Finance

These finances are issued for production & development of industry &

agriculture e.g. for buying input or building for industry. These are issued for the period of 5 years or more. The main types of their finance are: Project Finance Agriculture (Development) House building Finance.

All the loans may be fund base or non-fund base. Fund Base loans are those which given in cash form to the borrower. Non-Fund Base loans are those which given other than cash e.g. Guarantee, L.C, Promissory Note etc. Banks run their business with the money of depositor, which is repayable to them on demand. Banker is very conscious while using these funds. They think thousands times before lending to the borrower. They must keep in mind the following factors before advancing the loan:Character The first and most important factor considered in the credit analysis is character. The credit character is base on the borrowers willingness to pay her obligation. The willingness can be judged by the banker to see her family background, stability of employment, personal habits, nature of business, previous record moral reputation, importance of values to her etc.

42

Capacity to Pay The bank should judge the financial condition of the borrower. Whether he is able to repay that amount of loan which he wants to get. Before advancing the loan bank must be satisfied with the repayment of fund by checking following resources of borrower; Capital The asset of the consumer may be in form of horse motorcar, furniture etc. The businessman may own assets in the form of new material, plant, machinery, building etc. The bank should extend the loan in the proportion to the asset head by them. If the assets of borrower are liquid, he may be giver large amount of credit. If assets are not liquid, then less amount of credit may be given against the value of assets. Before landing the loan the banker should examine the value of her business and its prospectus in future. The banker should keep in her maid the owners participation in her business. The banker should not provide loan more than capital. Collateral Collateral means an additional security given against the loan. Before Sale of Assets Income Location of Plant etc.

advancing the loan the banker should preferred get the security of liquid assets because they can be converted into cash easily. The collateral security may be consisting of stock, bill of exchange, bill of lading warehouse receipt, bonds etc. Bank must be carefully examining their Collateral security before advancing the loan for security purpose. Banker should not extend loan on up to the full Value of collateral

43

security. The securities, which are issued by the govt., may be given 100% loan against them. The other collateral may set 40%, 50% etc. loan against the value. Main Requirements for Sanctioning Loan
ID card copy. Legal contract between bank & borrower on a security bond. A written application. Promissory Note. Valuable security. Lien mark in favor of bank. References (at least two) Latest Financial statements. Financing Agreement on a prescribed form. Authority letter. Trust Receipt. Insurance of securities.

Securities
Before giving a loan to borrower a bank required a valuable security in three ways:

Hypothecation Pledge Mortgage

Hypothecation
In Their type of security, immovable property is pledged by the bank & bank is required a real value of that property for sanctioning a loan. Margin for their security is 50%. In hypothecation bank does not interfere in the business of borrower.

Pledge

44

In Pledge the bank has 90% shares in business of the borrower. The bank has a right to sell the production & interfere in business transactions. In their type of security bank pledge the stock & raw material. The stock must be insured. Stock is controlled & managed by the bank; borrower cannot use raw material & cannot sell its production without the presence & permission of the agent of bank.

Mortgage
All documents of ownership & registration of movable property is submitted to the bank with an authority letter which has an agreement to give authority of selling property in case when borrower will not repay the loan after a fixed period. Following is the procedure of taking loan from NBP. First of all application form is filled in which the person who wants to take loan mentions the purpose of taking loan, security against which he is applying for loan. If loan amount is below Rs. 500,000, then no need of balance sheet.

45

CHAPTER NO.4 FINANCIAL ANALYSIS

4.1 Five Years at a Glance

Total Assets

1000000 800000 600000 400000 200000 0 2005 2006 2007 2008 2009

Graph: 4.1.1

Deposit

800000 700000 600000 500000 400000 300000 200000 100000 0 2005 2006 2007 2008 2009

Graph: 4.1.2

46

Advances

500000 400000 300000 200000 100000 0 2005 2006 2007 2008 2009

Graph: 4.1.3

Investments

250000 200000 150000 100000 50000 0 2005 2006 2007 2008 2009

Graph: 4.1.4

47

Shareholders Equity

100000 80000 60000 40000 20000 0 2005 2006 2007 2008 2009

Graph: 4.1.5

Pre-Tax Profit

30000 25000 20000 15000 10000 5000 0 2005 2006 2007 2008 2009

Graph: 4.1.6

48

After Tax Profit

20000 15000 10000 5000 0 2005 2006 2007 2008 2009

Graph: 4.1.7

Earning Per Share

20 15 10 5 0

2005

2006

2007

2008

2009

Graph: 4.1.8

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Ratio analyses
Financial ratio is an index that relates two accounting numbers and is obtained by dividing one number by the other.

4.2Types of ratios & Calculation

Following are the types of ratios

4.2.1 Liquidity ratios

Ratios that measure a firms ability to meet short term obligations. 4.4.1 4.4.2 Current ratio Quick Ratio

4.4.3 Net working capital 4.5 Leverage Ratios:

Leverage ratios measure the extent to which a firm has been financed by debt.

4.5.1 Advance to total deposit ratio 4.5.2 Total turn over ratio

4.6

Profitability ratio:
Profitability ratios measure managements overall effectiveness as shown by

the returns generated on sales and investment. 4.6.1 4.6.2 4.6.3 4.6.4 4.6.5 4.6.6 Return on total assets Earning per share Return of deposit Margin on profit Debt Ratio Interest covered ratio

These Ratios are defined and calculated below.

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4.4

Liquidity ratios
Ratios that measure a firms ability to meet short term obligations.

4.4.1 Current ratio

Formula

Current ratio= current asset/current liabilities Table: 4.4.1

YEAR Currant Assets Currant Liabilities Current Ratio 2007 Rs.30994965 Rs.30940041 1.00 2008 Rs.44550347 Rs.39656831 1.12 2009 Rs.59316438 Rs.42269623 1.40

1.4 1.2 1 0.8 0.6 0.4 0.2 0 2007 2008 2009

Graph: 4.4.1

Comments
The current ratio compares the liquid assets with short term liabilities. The ratio express that in 2008 the current ratio of NBP was 1.12 times and in 2009 the ratio increased to 1.40 times. The ratio shows that both in 2008 and 2009, the current ratios were fair enough to cover its short term liabilities with current assets.

51

4.4.2 Quick Ratio

This ratio is calculated by dividing the current assets like cash and receivables to current liabilities.
Formula

Quick Ratio= Cash/ Current liabilities Table: 4.4.2

YEAR Cash Current liabilities Quick ratio

2007 Rs.94873249 Rs.30940041 3.06

2008 Rs.106503756 Rs.39656831 2.68

2009 Rs.115827868 Rs.42269623 2.74

3.5 3 2.5 2 1.5 1 0.5 0 2007 2008 2009

Graph: 4.4.2

Comments
The quick ratios were 3.06, 2.68 and 2.74 in 2007, 2008 and 2009 respectively. The ratio express that there is enough cash great in 2007 to fulfill the current liability, but this case is low in 2008 and in 2009 it is rather high. This means there is increase in the asset in the year 2009 as compare to the liability.

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4.4.3 Net working capital

Formula Net Working capital = current assets current liabilities

Table: 4.4.3
Year Current assets Current liabilities Net Working capital

2007 Rs.30994965 Rs.30940041 Rs.54924 m

2008 Rs.44550347 Rs.39656831 Rs.4893516 m

2009 Rs.59316438 Rs.42269623 Rs.17046815 m

20000000 15000000 10000000 5000000 0

2007

2008

2009

Graph: 4.4.3

Comments
Working capital is increasing which shows that there is an increase in current assets. As we observe that the current asset are increasing year after year which is good indication for the bank, because now in 2009 bank have more to investment which mean more earning.

53

4.5

Leverage Ratios
Leverage ratios measure the extent to which a firm has been financed by debt.

4.5.1 Advance to total deposit ratio

It is calculated by dividing advances by total deposits Formula
Advance to total deposit ratio = advances Total deposits

Table: 4.5.1
YEAR advances total deposits advance to total deposits

2007 Rs.340667100 Rs.591907435 0.58

2008 Rs.412986865 Rs.6249390160 0.66

2009 Rs.475243431 Rs.726464825 0.65

0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2007 2008 2009

Graph: 4.5.1

Comment
As we can see the deposits increase which mean the customer are depositing more in bank but the advances decreased means that bank has provided less advances to customers than the previous year.

4.5.2 Total turn over ratio

54

It can be calculate by dividing total income by total assets Formula Total asset turnover = total income Total assets

Table: 4.5.2
Year Total income Total assets Total asset turnover

2007 Rs.64114326 Rs.762193593 0.084

2008 Rs.77358660 Rs.817758326 0.094

2009 Rs.78556322 Rs.944232762 0.083

0.1 0.08 0.06 0.04 0.02 0 2007 2008 2009

Graph: 4.5.2

Comment
The ratio shows inefficiency of the company uses its assets to generate profit. This means that the bank has turnover of assets 0.083 time this year less thin as compare to previous year. The company did not manage its assets more efficiently according to the ratio.

4.6

Profitability ratio

55

Profitability ratios measure managements overall effectiveness as shown by the returns generated on sales and investment.

4.6.1 Return on total Asset

Formula

Return on total assets Table: 4.6.1 Year net profit Total assets Return on total assets

net profit Total assets

x 100

2007 Rs.19033773 Rs.762193593 2.2%

2008 Rs.15458590 Rs.817758326 1.89%

2009 Rs.18211846 Rs.944232762 1.93%

2.5 2 1.5 1 0.5 0 2007 2008 2009

Graph: 4.6.1

Comment
The result shows that the bank has generated less profit in 2008 as compare to 2007 but it try better in 2009 to increase the profit. The result shows that bank did not use it resources to generate profit.

56

4.6.2 Earning per share

It is calculated by dividing net profit to no. of share
Formula

EPS

Net profit No. of share

Table: 4.6.2 Year Net Profit No. of share EPS 2007 Rs.19033773 Rs24305938 17.68 2008 Rs.15458590 Rs.3584307 14.38 2009 Rs.18211846 Rs.3584307 16.92

20 15 10 5 0

2007

2008

2009

Graph: 4.6.2

Comment
As we can observe that in 2007 Earning per share is greater which is 17.68 as compare to 2008 and 2009. This result shows the performance of NBP which is good in 2007 as compare to 2008 and 2009. 4.5.3

Return on deposits

57

It is calculated by dividing net profit with total deposit.

Formula

Return on deposit:

Net profit Total deposit

x100

Table: 4.6.3 Year Net profit Total deposits Return on deposit: 2007 Rs.19033773 Rs.591907435 3.2% 2008 Rs.15458590 Rs.624939016 2.47% 2009 Rs.18211846 Rs.726464825 2.51%

3.5 3 2.5 2 1.5 1 0.5 0 2007 2008 2009

Graph: 4.6.3

Comments
The graph shows that the Return of deposit in decreasing with time to time, as it is 2.51% in 2009 which is 2.47% and 3.2% in 2007 and 2008. The result reflect that the NBP in going down in term of return to it customer on deposit which is good in 2007.

58

4.6.4

Margin on profit
It is calculated by dividing the net profit by total income

Formula

Margin on profit =

net profit Total income

x 100

Table: 4.6.4 Year Net profit: Total income Margin on profit: 2007 Rs.19033773 Rs.64114326 29.69% 2008 Rs.15458590 Rs.77358660 19.9% 2009 Rs.18211846 Rs.82256425 22.1%

30 25 20 15 10 5 0 2007 2008 2009

Graph: 4.6.4

Comment
Profit margin is decrease because of the less deposit and profit earning of NBP during 2009. To observe the graph we see that 2007 is the best and in 2008 there is down fall which is recovered in 2009.

59

4.6.5 Debt ratio

The debt ratio measure the proportion of total assets financed by the firms creditors the highest the ratio, the greater the amount of other people money being used to generate profit. It is calculated as
Formula

Debt ratio

Total Liability Total assets

Table: 4.6.5 Year Total Liability Total assets debt ratio: 2007 Rs.645855939 Rs.762193593 0.85 2008 Rs.715299108 Rs.817758326 0.8747 2009 Rs.824676384 Rs.944232762 0.8733

1 0.8 0.6 0.4 0.2 0 2007 2008 2009

Graph: 4.6.5

Comment
The decrease debt ratio shows increased share of debt in total assets as compare to owner equity. Which mean that bank have more liability than owner equity and it is increasing year to year.

4.6.6 The interest covered ratio

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It is also called interest covering ratio. It shows the firm ability to make the interest payment. It is calculated as
Formula

Interest covered ratio Table: 4.6.6 Year PBIT Interest expense Interest covered ratio

PBIT Interest expense

2007 Rs.42451580 Rs.14391079 2.94

2008 Rs.42503078 Rs.19502080 2.17

2009 Rs.45814070 Rs.23513897 1.95

3 2.5 2 1.5 1 0.5 0 2007 2008 2009

Graph: 4.6.6

Comment
The graph shows the decrease in payment of interest to it customer and equity holder. As we observe that bank pay more interest in 2007 as in this year performance of bank is good as compare to other years. Which mean bank pay more interest in 2007.

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4.7

Horizontal analysis of Balance Sheet

Rupees (000)

Balance sheet (assets) Horizontal analysis

As on 31st December 2007-08-09 Table: 4.7 Item 2007 Increase (decrease) %age Cash Lending to F.I. Balance with other banks Investment Advances Fixed assets Other assets 100 100 100 100 100 100 100 2008 Increase (decrease) %age 112 80 102 81 121 93 144
2009 Increase (Decrease)

%age 122 91 76 103 140 97 191

Balance sheet (liabilities) Horizontal analysis As on December 31st 2007-08-09 Table: 4.7 Item 2007 Increase (decrease) %age Bills payable Borrowing Deposit & other accounts Other liabilities 100 100 100 100 2008 Increase (decrease) %age 145 37 106 128 2009 Increase (decrease) %age 150 419 123 136

62

Balance sheet (owner equity) Horizontal analysis As on december 31st 2007-08-09 Table: 4.7 Item
Share capital

2007
100

2008
110

2009
132

Reserve Un-appropriate profits Surplus on revelation of F.A

100 100 100

126 116 45

143 135 53

Balance Sheet Horizontal Analysis Comments

Assets
Cash is increased in 2009 and decreased in 2007 but it remain constant increase in 2008 .It shows that the liquidity position\of the bank is going to Strong, so it is alarming sign for the bank. Therefore, bank should take the necessary steps according to the position. There is decreasing trend in balance with other banks which is not a good sign. Increase in money at call and short notice, it means that customers of the banks are very punctual in making payments. Therefore it is a good sign for bank. In the field of investment there is increasing in 2009 but decreasing trend in 2008. It is common term of finance "more investment more return".

63

As we know that main source of profit of the bank is the difference between the percentages of interest, Bank pay less rate of interest than receiving the interest from the customers. In this case advances to increase in coming year with time to time. It means NBP running very well.

NBP is in a position that it is earning more and more profit with the passage of time. Then bank can purchase more and more fixed assets, and it is bank is doing. Assets of the banks are increasing day by day by purchasing the assets. More assets mean bank has more capacity to pay of its liabilities. There is median trend in field of fixed assets. Bank purchase asset in 2007 but in 2008 it asset decrease but in 2009 they are increase. It is due to purchase of new assets.

Other assets have increasing trend which is not appositive sign. Decrease on assets decrease the worth of the organization.

Liabilities
There is an increasing trend in deposits and other accounts which

shows the credibility of the bank. Borrowing is increasing in 2009 that is the positive sign. Although it is

seeing that bank's borrowing is fluctuate with the passage of time which is not positive sign. Usually banks borrow money when they would have to give it for earning more profit, in same way NBP increasing its profit. Bills payable increase in which is a positive sign. Other liabilities have an increasing trend not good because increase in

liabilities decreases the liquidity position of the organizations.

Owner Equity
Share capital increases that show the creditability of the bank. 64

The NBP increasing its reserves and un-appropriate profit in order to

increase its lending power, which is good sign, because according to the prudential regulations of State Bank of Pakistan, a bank ca lend money equal to the 30% of its assigned capital plus reserves.

4.8

Vertical Analysis of Balance Sheet

Rupees (000) Balance sheet (assets) Vertical analysis As on 31st December 2007-08-09

Table: 4.8 Items Cash and balances with treasury banks Balances with other banks lending to financial institutions Investments Advances Operating fixed assets Deferred tax assets Other Assets total Assets 2007 12.45 4.92 2.82 27.70 44.65 3.40 0.00 4.07 100 2008 13.020 4.690 20.890 50.500 2.960 5.450 0.390 2.100 100 2009 12.27 3.01 2.07 23.05 50.33 2.66 0.32 6.28 100

65

Rupees (000) Balance sheet (liabilities) Vertical analysis As on December 31st 2007-08-09
Table: 4.8 Items Bill payable Borrowing deposits and other accounts sub-ordinated loans liabilities against asset subject to finance lease deferred tax liabilities other liabilities total liabilities 2007 1.1 1.67 91.65 0.01 0.79 4.8 100 5.54 100 5.13 100 2008 1.43 5.66 87.37 0.004 2009 1.29 5.49 88.09 0.005

Rupees (000) Balance sheet (owner equity) Vertical analysis As on December 31st 2007-08-09
Table: 4.8 Items share capital Reserves Inappropriate profit Total owner Equity 2007 11.77 22.77 65.46 100 2008 11.02 24.51 64.47 100 2009 11.36 23.93 64.72 100

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Balance Sheet Vertical Analysis Comments Assets

To see the analysis I come to know that in 2007 advances are more

than other asset which is good for bank, also investment are also high which show the earning in future. More the investment more the earning. In 2008 investment are going higher and NBP applied his 50%

resources in investment. In 2009 70% of bank resources are applied in investment and

advances.

Liability

In 2007,2008 and 2009 the deposit and other account are very high

which shows that bank have to pay interest.

Owner Equity Equity shows that bank have lot of reserve to pay the interest and also can investment the money to earn more.

4.9

Horizontal Analysis of Income Statement

Table: 4.9 Income Statement For the Years 2009,2008,2007
2009 % 2008 % 2007 %

Mark-up /return/ interest earned

155.32

123.30

100

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Mark-up/ return/ interest expensed Net Mark-up /return/ interest income Provision for diminution in the value of investment - nrt Provision against non-performing loans and advances - net Bad debts written off directly Total Provisions Net mark-up /interest income after provisions Non-mark-up / interest income Fee, commission and brokerage income Income earned as trustee to various funds Dividend income Income from dealing in foreign currencies Gain on sale of securities - net Other income - net Total non-mark-up / interest income Non-mark-up / interest expenses Administrative expenses Other provision / (reversal) - net Other charges Total non-mark-up / interest expenses Share of profit of associated undertaking Profit before taxation Current year Prior years Deferred Share of tax of associated undertaking Profit after taxation Basic and diluted earnings per share - after tax

257.10 133.75 2214.57 131.60 339.82 121.62 123.80 4527.33 60.48 105.14 123.48 208.04 119.86 121.27 116.52 88.69 1380.63 129.28 6.51 115.61 129.40 -145.70 26.71 98.01 102.72 122.19 122.19

174.29 112.49 86.86 291.72 0.42 259.15 103.86 119.24 1213.04 71.80 100.20 248.84 173.47 131.66 109.35 83.63 -32.80 963.57 92.34 258.13 118.99 113.21 -217.98 1470.11 61.42 95.22 131.10 131.11

100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100

Comment
As we see that there is constant increase in income which mean that

NBP is working well. See the analysis we observe that bank fee, commission and brokerage

income are increasing with time to time.

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Dividend income decrease which shows that bank payment decrease,

which mean bank pay less dividend. Bank earn more through foreign currencies which mean bank deal

good in foreign country. As we see that expenses of bank are also increase in term of

administrative expenses and other charges.

4.10 Vertical Analysis of Income Statement

Table: 4.10

Income Statement
For the Years 2009,2008,2007 2009 Mark-up /return/ interest earned 100 Mark-up/ return/ interest expensed 28.95 Net Mark-up /return/ interest income 71.05 Provision for diminution in the value of 6.70 investment - net Provision against non-performing loans and 3.33 advances - net Bad debts written off directly Total Provisions 10.04 Net mark-up /interest income after 61.02 provisions Non-mark-up / interest income 0.00 Fee, commission and brokerage income 7.19 Income earned as trustee to various funds 0.05 Dividend income 1.13 Income from dealing in foreign currencies 1.82 Gain on sale of securities - net 1.87 Unrealized loss on revaluation of investments 0.00 classified as held for trading -0.25 Other income - net 3.00 Total non-mark-up / interest income 14.81 75.82 2008 100 24.72 75.28 0.33 9.31 0.00 9.64 65.64 0.00 8.72 0.02 1.69 2.18 4.74 0.00 -0.01 3.15 20.49 86.13 2007 100 17.49 82.51 0.47 3.93 0.18 4.59 77.93 0.00 9.02 0.00 2.89 2.68 2.35 0.00 0.00 2.24 19.19 97.11

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Non-mark-up / interest expenses Administrative expenses Other provision / (reversal) - net Other charges Total non-mark-up / interest expenses Share of profit of associated undertaking Profit before taxation Taxation Current year Prior years Deferred Share of tax of associated undertaking Profit after taxation Basic and diluted earnings per share - after tax

0.00 18.93 0.03 2.30 21.25 0.08 54.65 0.00 18.45 -2.16 0.04 0.06 16.39 38.26 24.39

0.00 17.11 -0.01 2.02 19.12 3.85 70.86 0.00 20.33 -4.07 2.83 0.05 19.14 51.72 26.17

0.00 25.23 0.04 0.26 25.53 1.84 73.42 0.00 22.14 2.30 0.24 0.10 24.78 48.64 19.96

Comment
To see the analysis we observe that the bank have earn more in 2007 which is decrease in 2008 and in 2009 it income also decrease as compare to 2007. Also earning per share increase which is pay a greater roll in 2008 and 2009.

CHAPTER NO.5 SWOT ANALYSIS

5.1 SWOT Analysis
SWOT ANALYSIS (strengths, weaknesses, opportunity and threats) provide a complete knowledge of the organization to compete in the industry. So, by the help of environmental analysis and organization structure we can find out the opportunities and threats and then match with the capabilities if the organization.

5.1.1 STRENGTHS

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National bank of Pakistan is a government owned bank. This is

the reason that the Pakistani nation has complete trust over the bank that its deposits are fully secured. The most important point of National bank is that it is agent of State

bank of Pakistan, where the State bank branches are not working National bank control its function. Government has providing facilities through National Bank of Pakistan

to get the knowledge of computer, for this purpose IT Centers have been set up at different places where short courses of computer are taught. Only the NBP is authorized to advance loan against Gold. This

function makes the NBP able to earn profit on the Gold. This function becomes the major source of income of NBP. There are more than six million clients of National bank. Their

customers are served all over the Pakistan and abroad. Its branch network is one of the largest in Pakistan (29 Regional Offices and 1189 branches) and (15 Overseas Branches). The number of employees of the bank is12195. National bank of Pakistan is enjoying the deposit of different

government organization like P.I.A., Pakistan Railway, WAPDA and Sui gas. When Govt. starts some scheme of loan to assist the public normally

NBP is authorized to implement it. For this it is provided with the funds from the Govt. But the advances this loan to public he earns profit on its which increase his over all income. National Bank of Pakistan is providing different types of loans on

Mark-up and no Mark-up bases to its employees. I.e. Car Loan, Motorcycle Loan, Computer Loan, House Building Loan etc.

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WEAKNESSES
The staff is working partially on the bases

manual record system and computer record system. It should be computerized, after all we have to adopt electronic media for IT revolution in future. The political involvement in bank affairs

resulted in lake of strategic decisions. The human resource department of NBP is

not performing its duties as well, recruiting, training and development. No bonuses and other cash prizes are given

to employees for motivational purposes against extra time on job. And rate of the loans converted in to bad debts is high. Whole the management and staff of the

bank have not the relevant knowledge of banking business, education and professional skills. Banking is experienced just book keeping only. Personal use of the bank assets by the

branch managers. Generally, the attitudes of the employees are not serious with each other and have professional jealousy, which is not healthy for the bank.

5.1.3 OPPORTUNITIES
A gradual reduction in the corporate tax rate for commercial banks will have a positive impact on their earnings. Golden hand shake may decrease the establishment expenses of the NBP. Pakistans business educational institutes and universities are producing MBAs, BBAs, and commerce professionals, bank can recruit skilled and advanced knowledge persons for strong management.

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Foreign currency account holders can adjust their loans with their foreign currency. Government of Pakistan is responsible for all deposits which are made by the National bank of Pakistan.

Most of government accounts are with NBP. Which may create the trust and goodwill among the customers.

5.1.4 THREATS
Being a government bank president of The Bank is appointed by

government, so political influence is there. Other commercial banks i.e. MCB, Askari commercial Bank, UBL, Bank AlFalah etc are providing loans and advances at lesser rate of interest. Because NBP is a financial institution so if there is any mistake it may

create a lot of problems for the bankers so it is a stress for the employees to non correctness of the accounts. There may have some frauds, robbery or other mishaps with the banks so all the time employees have to remain careful. The number of banks in Pakistan is increasing day by day and they are

providing good customer services as compared with the NBP, so it may lose its market share in the future. The competent employees of NBP may move to other banks, as the

pay in NBP is less than the remuneration offered by other banks.

CHAPTER NO. 6 FINDING, RECOMMENDATION & SUGGESTION

6.2 Findings

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During the short span of two months internship in NBP Sarai Salah branch Haripur and roughly spent one week on each counter, this short span is not sufficient for having all the information about the organization. But although though some observations it is pointed out that there are some shortcomings in the bank, which are absorbed and experienced, and also narrated by the concerned personnel of the bank. So the findings are divided into four major parts which are as under. 1. Problem at the branch 2. Function analysis 3. administrative analysis 4. Personal managements analysis

6.2.1

Problems at the Branch

6.2.1.1 Communication problems between the employees:

There is a single hall in the branch and the staff of the bank use peon or clerical staff to communicate with each other. It automatically creates a lit of noise and disturbance in the bank. The follow of communication information is very slow as there is a gap between various counters. So if the officer wants to verify or sign any balance or document it has to be moved thorough peon.

6.2.1.2 Limited staff

It is noticed during the internship period that, In this branch the staff is limited and the customer wait for along time. NBP also deals with almost all the government affairs. The old age pensioners accounts are also there. To handle the old age people are not an easy task. The officer dealing with them has to be very perfect, competent and patient. Mainly it is in the beginning of the month when pensioners come to collect their payment. They wait for a long time to receive the pension. And when the reached the counter the attitude of the officer really dishearten them.

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6.2.1.3 Lack of computer expert

There is lack of computer experts in the branch. Branch has the computers but no one can operate them efficiently. Modern age is computer era and usefulness of computer can not be denied. With the help of computer efficiency increases. In this branch there is a computer but no one among the staff can not operate it properly. They still face this problem. Maintain registers for the record. This slow down the progress of work.

6.2.2

Functional Analysis

6.2.2.1 Formal Organization

Formal organization includes the activities of two or more person, which are cautiously determined grouped, and coordinated towards a given objective. It provides a base when people to communicate with each other, when they have common purpose and they are willing work. In NBP, we find a formal organization Bernard referred to an organization as a formal when the activities of two or more person are coordinated towards a given objective. The formal organization comes into being when people are able to communicate with one another are willing to act and sharing a purpose in this formal organization of NBP the activities are carried out more formal fashion. In theory it provides basis for communication with one another but in practice it is not exercised because the employee at the level cannot got straight away SVP and ask him about any office in problem faced by him, because first he has to talk to his immediate superior. He has to follow a proper channel for communication with his superior.

6.2.2 .2 Difference between Theory and Practice

A vast difference exists between theory and practice and NBP the written procedure is some what different from the practice which is done by employee.

6.2.2.3 Bank duty is to maintain secrecy

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In this branch they do not care about maintaining secrecy during the rush of routine business. They speak loudly about the account position of while getting clearance of cheque the person can easily get the whole information from the ledger. The deposit clerk must be care full while passing any cheque, he should be careful about his record. In this record another short fall is in giving the information about the balance on telephone they least bother to ask any other for verification.

6.2.3

Administrative Analysis

6.2.3.1 Job analysis is not effective

Only on the basis of job analysis it can decide how a right person can be hired, trained, compensated or promoted. It is very important for an organization in which nature of the job described and job specification ara mentioned. Most of the employees are simple graduate and do not have proper know how about their job. This creates problems both for organization and for the employee. In NBP wages and salaries according to the seniority and grades. People performing simple or complex responsibility are getting the same salary and facilities. This creates dissatisfaction among the employee.

6.2.3.2 Carelessness in opening of Account

When customer comes to open an account, the staff does not bother to check his / here phone number and permanent address. Address is very necessary because any thing can happen. They should be careful in this respect. This is the basic rule, which should be followed for the opening of account; the importance of the interrogation is that he may take any kind of financing from the bank. So in case of default if you dont have bio-data of that person, it may create big trouble for the bank.

6.2.3.3 Mobilization of Remittances:

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Remittances are a basic function and main source of income for the bank, unfortunately, there is an increasing shift to the use of informal means. Most of the customer of the bank NBP, main branch Islamabad is people living abroad. They send their money through hundi. If these remittances sent through banks, it will be very beneficial for the bank and national economy. The band officials do not motivate the customer to send their remittances through banks. People that there r more changes in commission charge by the bank. The charges should be reduced.

6.2.3.4 Lack of Specialized Training:

National bank of Pakistan does not adequate facilities of specialized training to their staff. Training is provided on the basis of generalization rather than specialization. As the worker finishes his training he is inducted in to a specific field. Since he does not have knowledge about the specific job assigned to him thus he feels difficulty to perform his job. In bank, main branch the newly recruited employee training was not imparted but they all learn things on the job.

6.2.3.5 Separation of Activities

There is a lack of delineation of responsibility as such. A function deposit and remittances is partially done in deposit department, and partially in account department. This create confusion and conflict in the decision making process. There should be complete separation of activities to avoid all this ambiguity. And this may also reduce overlapping of work.

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6.2.3.6 Poor Job Rotation

There is a absence of job rotation in NBP Sarai Salah Branch Haripur. A person placed in one department remains there forever. It reduces the career opportunities to the worker as well as results in boredom and will not take interest in work. Job rotation is very important for employees especially for those who are newly recruited. The newly recruited should be rated in all the department of the banking order. To get familiar with waking of different department so that when he gets a responsible position he have know how of the whole system.

6.2.4

Personnel Management Analysis

6.2.4.1 Need for Better Training Programmed

The need of training is felt the entire world. Training of the personnel is part of human resource management. It has been noticed that the training programmed of NBP is not adequate. Once a candidate has been selected and placed on the respective job. It becomes essential to been selected and placed on the respective job. It becomes essential to train him adequately for the task. They should learn new methods for motivating customer. The training programmed of the bank, should include scientific technique to improve the decision making and interpersonal as well as individuals needs of the employee both specialized to fresh as well as on job worker to maintain the high standards of service. 6.2.4.2 Developing Managerial Leadership Leadership is a practical term of visible, clear on objective and communicating better control on financial and administrative matter. So the manager is not only responsible for their own units in business but also in people i.e training, recruiting, grievance handling taking immediate initiative in crises situation have to take major decision affecting the future of there bank and banking community.

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6.2.4.3Recruitment Policy
Human resources are the lifeblood of the organization. If the personal are recruited carefully they can because an asset to the organization and in the case of carelessness the personnel can become a liability. The bank is not following ots recruitment policy properly. Due to favoritism nepotism and political influence unsuitable candidates are selected. Both the staff unions and the top authority tries their best to recruits their favorites. This creates a lot of problem. The person selected through these channel are influential and do not work for the betterment of the bank.

6.2.4.4 Promotion
Promotion in the national bank of Pakistan is purely on the seniority so the new young person having high qualification is into having any chance of promotion of their favorites which gave a sense of deprivation to the deserving employee and their efficiency is affected. As the concept of promotion is attached better jobs better in terms of greater responsibility, more prestige, greater skills and increased rate of salary, thus a better and impartial policy of promotion needs to be followed.

6.3

Recommendation
National bank of Pakistan is an effectively operating and profit making

organization and carrying out its activities under a specified system of procedures. The man regulatory body is state bank of Pakistan, which provide the policy guide lines and ensure that the money market operate on sound professional bases. While the head offices specifies the whole procedure of functions and operations. This procedure has been modernized with the passage of time with a view to stream line the approach and the underline procedures of time with a view to streamline the approach and the underlying procedure for effective overhauling of its own capabilities so as to bring them at par with international practices. Here some suggestions are recommended, which can add some input for efficiency and better performance of NBP as an organization in general and main branch Islamabad in particular. 79

This is a computer era. With the use of computer we can increase our

efficiency. National Bank of Pakistan should computerize all its branches. By the use of computer properly these branches can increase there working efficiency. Central Asian Republics (CARs) have great opportunities of new

business so N.B.P should open new branches in these Republic. Model Banks like City Bank, M.C.B. is using media very effectively to

increase the business of banks. So National Bank of Pakistan should use electronic media for its business developments. The interference of union in banking business should be minimized as

it decreases the working efficiency of the employee as well as the bank. There is needed to make the outlook situations of branches in those

manners that can complete the other modern banks in the banking market. CREDIT CARDS are issued by the different banks like MCB, ABP

and Citi Bank etc. but NBP dont issued this type of finance scheme, there is a place for this type of scheme in this bank. 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, their

families, companies or firms.

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There are some clients having sound and successful plan but without

financially sound and providing securities bank should firms such policies that may solve this problem. There is too much dependence on handwork and they are not getting at with computer programmed. All the branches of NBP should be computerized.

There are some employees untrained which decreases the efficiency of

the bank branch. All the employees should well train. 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 other banking operation. In my opinion each employee should have regular job change. Every year some of the employees should be sent for training to other

countries and employees from other countries should be brought here. In commercial institutions like banks, reward and punishment system

should be introduced. Means achieve, smart, educated, skilled, self-spoken and well-dressed staff should be rewarded and appreciated and lazy, lethargic staff should be warned and punished. Promotion should be given to competent persons on merit basis. The National Bank of Pakistan needs to improve the service orientation

at its branches, as these constitute the "front line" of the Bank in terms of contact with its customers. A new monitoring system should be created to efficiently collect and utilize the feedback from the branches to support product development and enhance the quality of service. Bank management has to put its all effort to change the prevailing

culture of the bank and to put the foundation stone of business oriented culture. In which employees give important to the bank and its customer. 81

To attract the customer in the future NBP have to make extensive

effort to give facilities of retail and consumer banking. Plus the technology in the banking which will be necessary for future banking is another week area need to be stressed. The outlook and interior lay out of the branches is another thing which

needs to be improved. The procedure of taking services from the bank must be made easier

and straight forward not involving long difficult procedure for simple task.

6.4

Suggestion
To remain in the market bank need to be vigilant in the eyes of customer. One

way is through promotion efforts, so that people aware about he services of the banking and any addition which the bank as made in the portfolio of its services. It is requirement of time that N.B.P. should go for computerization

rather than manual work, which is very slow and time, consuming process. In this time N.B.P. even does not have a partially computerized system where as other new competitor banks are now going towards on-line banking services. At the time of giving loans, it is necessary to see the repute of

customer towards loan repayment. National Bank of Pakistan should not advance the money to those people as well as organizations who are addict of rescheduling of loans due to their political influences. Instead providing loans to these persons, loan must be advanced to the well reputed business people and industries having good record of loan repayment. Govt. should take keen interest to recover its bad debts, which can

improve its financial position.

82

For increasing the efficiency of N.B.P. officers as well as clerical staff

they must be trained by qualified person. Because in many branches of National Bank of Pakistan manually system is prevail. With the trained employees they will improve their efficiency of work. Present training program for its officers is need to be improved, as this program instead of improving the efficiency of officers is merely a burden for the bank in the form of heavy T.A. , D.A. cost. Incentives and beneficial schemes to the customers as other competitor

banks are doing so. It is need of time for proper recruitment and selection program. New

young talent should be introduced to inject the new ideas. Political influences in the bank should be eliminated. Deterioration in efficiency is mostly due to promotion without merit.

So promotions must be awarded on merit and also when due. In most branches of NBP many employees who re working on ad-hoc

basis creating dissatisfaction. The deserved should be made permanent employees. Special attention should be given to the behavior of the employees

towards the customers, as customer is the most important person for the bank. NBP should focus its attention towards the share of traveler cheque. To motivate the employees of the bank, regular bonuses and incentives

should be given to them. There must be a friendly environment among all the employees as is

enhance the trust and sincerity. 83

Management should increase the branch limit of expenditure to fulfill

the necessary expenditure of personnel relation. Branch manager should be trained in the field of selling to serve better

according to the expectation of customers. The recruitment policy should be fair and transparent. Due to these payments environment of bank influenced. Bank should hire expert staff for such type of activities and start them

here. The branch should improve his environment to attract more customers. Facility sends them other branch. In other words the employees should

not discourage the clients.

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Chapter No.7 CONCLUSION & REFERENCES

7.1 Conclusion
Being the government bank nation of Pakistan has much trust over the bank have its an opportunity for the organization to increase the market share of the organization. National Bank of Pakistan works as an agent of the State Bank of Pakistan which helps to increase the profit of the organization. Training Programs may increase the efficiency of the management as well as staff. NBP is also providing the facility of training programs to its employees which may create the ability of modern baking in future prospects. Other private banks are paying more as compared to NBP. The fact creates dissatisfaction of job of employees. NBP should increase and revise the pay scale of its employees. Today the world has entered in to the computerization in every field of life. It provides time saving, accuracy of the work and efficient services in the banking business. NBP has its regional it centers network, which provides the base to Online Banking and other computer services to customer as well as employees. Due to downsizing in the National Bank of Pakistan. The work load has exceeded over the employees. They have to work over 10-12 hours, which create tension and unpleasant environment among the employees.

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7.2

Reference and Sources

Avashti, Shariran, (1983), Public Administration; sixth Ed, New York: MC Graw Hill Book company. Asrar, H. siddique, (1983), Practice and law of banking in Pakistan; 3rd Ed, Royal Book Co. Karachi. Chhabra, T.N (1985), Principles and practice of management; Delhi, D.R printing services. Chruder Sherman,(1983) managing human resources; 7th Ed, South Western pub.Co. Dallas, n.d. Dewitt, K.K (1984), modern economic theory ; 3rd Ed, Bombary: move publishing company. Daryl R. Conner, (1986), managing organizational change dangers and opportunities report, O.D resources, inc, Atlanta, GA. Edwin, b. Flippo, (1976), principles of personnel management; McGraw Hill Co.Tokyo. Fred Luthens, (1985) , organizational behavior; ed, N. r McGraw Hill Co. Grant smith, personnel administration and industrial relations, 3rd edition, Lung King tong co.ltd Hong Kong, 1984, p 349 Greenly, Gorden, E. (1989), strategic management; UK McGraw Hill book company. Kennedy, Ralph dale, (1973) and financial statement analysis and Interpretation; 6th edition, Homewood; Richard D. Irwin. King, David, (1987), Banking and Money; London; Edward Arnold press. Lusk, Edward J. (1979), financial and management control, A Health care perspective; USA, Aspen System Corporation. Annual report NBP; 2009, Retrieved on November 15, 2010 from http://www.nbp.com.pk
NBP Internship report; 2008, Retrieved on April 20, 2008 form http://wwwscribd.com.pk

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Annexure

(a)

87

(b)

88

(c)

89

(d)

90

(e)

91