Waseem Abbasi Internship Report

8/14/2019 Waseem Abbasi Internship Report

1/71

INTERNSHIP REPORT ON

NATIONAL BANK OF PAKISTAN

WASEEM ABBASI

Submitted in partial fulfillment of the requirements

For the degree of Master of Business

Administration

At

BAHRIAIslamabad, Pakistan

February, 2009

i


2/71

ACKNOWLEDGEMENT

First of all I am thankful to ALMIGHTY ALLAH. Who gave me the strength,

patience, courage and enthusiasm needed to write and complete this report, then to my

friends who assisted me in this effort and we worked daylong to accomplish this

assignment and to my parents who supported me financially and encouraged me morally.

I have a debt of gratitude to all my teachers who taught me throughout my academic

career.

It was pleasure for me to be sent to The National Bank of Pakistan Passport office branch

Rawalpindi. I am very thankful to the honorable internship incharge. I learnt a lot from

this training program and this would guide me a lot while selecting my career. I also

know how to face the problems and how to find out the ways for their solutions.

The preparation of this report was a massive undertaking but the highly competent and

experienced bankers of NBP Passport Office Branch, Rawalpindi, provided me with all

assistance, information, advice and suggestions that I needed which contributed

importantly to this report.

ii


3/71

Dedication

Dedicated to my Parents and

Teachers whose guidance

Enabled me

Achieving objectives in life, their

Prays

Enlightened and paved the way to

Success

iii


4/71

EXECUTIVE SUMMARY

National Bank of Pakistan is one of the leading banks in Pakistan. According to

international standards of banking system it is one of the best banks in South Asian

region as well. And the bank in the top ten in the world. This report explains the different

functions of NBP and their services.

The first part of the report is about my Internship Experience at National Bank of

Pakistan the second part is about History of NBP, where as the third part is about

functions and services and forth part is about SWOT Analysis.

During the critical analysis, it was observed that NBP is one of the leading commercial

banks of Pakistan with a network of around 1189 branches all over Pakistan. NBP

provides a wide variety of products and accounts that suit the lifestyle and needs of the

masses .In fact commercial banking is regarded as a Conservative business because the

rewards are modest and the penalties of bad banking are many. As a trustee of the public

funds, NBP has a greater responsibility for safety and prudence. Many business can enjoy

some slack in their affairs, commercial banks cannot afford this, since commercial banks

must make a living by putting the money at their disposal to work, they are faced with the

problem of making a living without jeopardizing the safety of their institution and NBP is

doing all this very efficiently.

The NBP is known for its customer services as well as for its products, which are in

demand.

iv


5/71

Table of Contents

CHAPTER NO.1

1.1 INTRODUCTION2

History of Banking in Pakistan.......2

History of National Bank.......3

Vision......5

Mission........5

Core Values.........6

Objectives .......7

Product and Services ..........7

CHAPTER NO.2 Internal and External Analysis

2.1 SWOT Analysis .......24

2.2 PEST Analysis ...... . 27

CHAPTER NO.3

3.1 Financial analysis

Ratio Analysis ....29

Common Size Analysis ......35

Horizontal Analysis ...... 38

Trend Analysis .......40

CHAPTER NO.4

4.1 Internship Experience.................................................. 44

First Week.......44

Second Week.......46

Third Week......47

Fourth Week........48

Fifth Week...... 51

Sixth Week.......51

4.2 Learning ....52

4.3 Skills Used.53

v


6/71

4.4 Skills Gained..... 54

CHAPTER NO.5

Challenges .......57

Identification of Problems ...58

Recommendations & Suggestions....59

CHAPTER NO .6

Conclusion....63

References.....64

Annexture

vi


7/71

CHAPTER # 1

INTRODUCTION TO THE ORGANIZATION

vii


8/71

INTRODUCTION

Bank which means a heap of anything or joint stock fund.

"A financial institution, which deals with money and credit. It accepts Deposits from

individuals, firms and companies at a lower rate of Interest and gives at higher rate of

interest to those who need them.

A financial establishment which uses money deposited by customers for investment,

pays it out when required, makes loan at interest, exchanges currency, etc.

HISTORY OF BANKING IN PAKISTAN

Pakistan came into being on 14th August, 1947; sufficient banking services were

available in the areas forming Pakistan. Out of the total branches of the nearly 3,500 in

the undivided India, as many as about 1,500 branches were existing in these areas.

It was agreed between the two countries that reserve bank of India shall continue to

function in the Pakistan territory until 30th September 1948 and that Indian notes would

continue to be legal tender at Pakistan until 30th September 1948. Unfortunately,

relationship between the two countries became most strained immediately after

independence; banking was mostly in the lands of Hindus who immediately started

transferring their offices and assets into India. As a result most of the banks in Pakistan

were closed down and even those which were open were not doing any effective

business.

The number of banking office in Pakistan came down to about 200 on 30th June 1948.

Branches of some European banks were also functioning in a limited manner, financing

in export of crops, and their number was limited to about 20.

It was only the Habib bank, which transferred its office from Bombay to Karachi Austral

Asia bank was another bank, which was in existence in the Pakistan territory at the time

of independence. Despite of best efforts on the part of government of Pakistan, no heady

way could be made on this behalf and reserve bank of India was in no mood to help the

viii


9/71

new country. Imperial bank of India, agent of the reserve bank of India also started

closing down its branches in Pakistan.

Reserve bank also refused to advance money to Pakistan to make essential payments such

as salaries etc, also Pakistans share of Rs.75 billion in cash balance was with held bybank, causing hardships to the newly born state. In view of these hopeless state affairs it

was agreed between the two countries that reserve bank would serve as monetary

authority in Pakistan only up to 30th June 1948.

The Pakistan banking council prepared a scheme for the recognition of banks. The bank

(amalgamation) scheme 1974 was notified in April, providing for the amalgamation of

the smaller banks with bigger ones and following the five units in there phases:

National bank limited

Habib bank limited

United bank limited

Muslim commercial bank limited

Allied bank of Pakistan limited

The number of branches, which stood at 3397 on Dec31, 1973, reached on 7661 by end

June 1992. The bank deposits which stood at Rs. 1925 corers at the end 1973 reached the

highest mark about 323 corers.

History of NBP

The NBP was established vide NBP Ordinance No. XIX of November 9. 1949.

British Govt. devalued its currency in September 1949, India devalued its rupees but

Pakistan did not. It led to a crisis in trading between the two countries and India refused

to lift the Pakistan Jute. To solve this problem i.e. to export jute NBP was established

through an Ordinance of GOP. National Bank of Pakistan maintains its position as

Pakistan's premier bank determined to set higher standards of achievements.

ix


10/71

The Bank in 1950 had one subsidiary The Bank of Bahawalpur on December4, 1947 by

the former Bahawalpur State.

NBP was undertaking Treasury Operations and Managing Currency Chests or Sub Chests

at 57 of its offices where the turnover of the business under the head amounted to

Rs.2460 million. Deposits held by NBP constituted about 3.1% of total deposits of all

Pakistani Banks in 1949, which rose to 38% in 1952.

Growth in Deposits was accompanied by increase in Bank portfolio in advances. NBP

lent out to Textile, Yarn, Iron and Steel and played a pioneer role in support of

agriculture and commerce.

NBP advances reached Rs.554.4 million by December 1959, which was one third of thetotal schedule bank credit.

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

set higher standards of achievements. It is the major business partner for the Government

of Pakistan with special emphasis on fostering Pakistan's economic growth through

aggressive and balanced lending policies, technologically oriented products and services

offered through its large network of branches locally, internationally and representative

offices.

Division of Branches

Overseas Branches

x

REGIONAL OFFICES 29

TOTAL BRANCHES 1189

SUBSIDIARIES 4

OVERSEAS BRANCHES 16

REPRESATIVE OFFICES 4

SUBSIDIARY 1

JOINT VENTURE 1


11/71

VISION

The vision of NBP is:

To be recognized as a leader and a brand synonymous

With trust, highest standards of services quality, international best

Practices and social responsibility

MISSION STATEMENT

Institutionalizing a merit and performance culture.

Creating and distinctive brand identity by providing the highest standards of

services.

Adopting the best international management practices.

Maximizing stockholders values.

Discharging our responsibility as good corporate citizen of Pakistan and in

countries where we operate

xi


12/71

CORE VALUES

Highest standards of integrity.

Institutionalizing team work and performance culture.

Excellence in service.

Advancement of skills for tomorrow challenges.

Awareness of social and community responsibility.

Value creation for all stakeholders.

Values to deliver to you.

NBP 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.

NBP shall work to:

Meet expectations through market-based solutions and products

Reward entrepreneurial efforts

Create value for all our stakeholders

NBP 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

NBP have confidence that tomorrow we will be:

Leaders in our industry.

An organization maintaining the trust of our stakeholders.

An innovative, creative and dynamic institution responding to the changing needs

of the internal and external environment.

xii


13/71

After all, we are The Nations Bank

OBJECTIVES:

To enhance profitability and maximization of NBP share through increasing leverage of

exiting customers base and diversified range of product.

National bank of Pakistan is also a commercial organization and its main objective is

profit maximization. This is achieved in two ways:

1. By increasing deposits.

2. By charging interest on loans provided to the private sector and business

community.

SERVICES of NBP

NBP offers the following services to the people.

DEMAND DRAFTS

You can now purchase NBPs Demand Drafts at very reasonable rates. Any person

whether an account holder of the bank or not, can purchase a Demand Draft from a bank

branch to transfer money.

SWIFT SYSTEM

The SWIFT system (Society for Worldwide Interbank Financial Telecommunication) has

been introduced for speedy services in the area of home remittances. The system has

built-in features of computerized test keys, which eliminates the manual application of

tests that often cause delay in the payment of home remittances. The SWIFT Center is

operational at National Bank of Pakistan with a universal access number NBP-APKKA.

All NBP overseas branches and overseas correspondents (over 450) are drawing

remittances through SWIFT.

Using the NBP network of branches, you can safely and speedily transfer money for our

business and personal needs.

xiii


14/71

LETTERS OF CREDIT

NBP is offering its business customers the widest range of options in the area of money

transfer. If you are a commercial enterprise then our Letter of Credit service is just what

you are looking for. With competitive rates, security, and ease of transaction.

TRAVELER'S CHEQUES

Travelers cheques are negotiable instruments, and there is no restriction on the period of

validity of the cheques. Rupee travelers cheque is available at all 700 branches of NBP.

This can be encased in all 400 branches of NBP. There is no limit on purchase of this

cheque. It is one of the safest ways for carrying money.

PAY ORDER

NBP provides another reason to transfer your money using our facilities. NBP pay orders

are a secure and easy way to move your money from one place to another. And, as usual,

NBP charges for this service are extremely competitive. The charges of NBP are very

low all over the Pakistan. It charges Rs 50/- for NBP account holders on issuing one

payment order. And charges Rs 100/- for NBP non-account holders on issuing one

payment order. It charges Rs 25/- for students on payment of fees of educational

institutions. If someone want a duplicate of payment order they charges Rs 100/- for NBP

account holders and Rs 150/- for non account holders.

MAIL TRANSFERS

Move your money safely and quickly using NBP Mail Transfer service. And NBP also

offer the most competitive rates in the market. They charges Rs 50/- exchange rate and

RS 75/- postage charges on issuing mail transfer.

FOREIGN REMITTANCES:

To facilitate its customers in the area of Home Remittances, National Bank of Pakistan

has taken a number of measures to:

xiv


15/71

Increase home remittances through the banking system

Meet the SBP directives/instructions for timely and prompt delivery of

remittances to the beneficiaries

SHORT TERM INVESTMENTS

NBP now offers excellent rates of profit on all its short term investment accounts.

Whether you are looking to invest for 3 months or 1 year, NBPs rates of profit are

extremely attractive, along with the security and service only NBP can provide.

NATIONAL INCOME DAILY ACCOUNT (NIDA)

The scheme was launched in December 1995 to attract corporate customers. It is a

current account scheme and is part of the profit and loss system of accounts in operation

throughout the country.

Salient Features:

Rs 2-million is required to open an account and there is no maximum limit.

Profit is paid on half yearly basis on monthly balances.

The rates of profit vary according to the slabs of deposit. On Deposits of Rs.2

million to 2,000 million, the rate fluctuates from 1.4 to 1.75

It is a checking account and there is no limit of withdrawals.

EQUITY INVESTMENTS

NBP has accelerated its activities in the stock market to improve its economic base and

restore investor confidence. The bank is now regarded as the most active and dominant

player in the development of the stock market.

NBP is involved in the following:

Investment into the capital market

Introduction of capital market accounts (under process)

NBPs involvement in capital markets is expected to increase its earnings, which would

xv


16/71

result in better returns offered to account holders

COMMERCIAL FINANCE

NBP dedicated team of professionals truly understands the needs of professionals,

agriculturists, large and small business and other segments of the economy. They are the

customers best resource in making NBPs products and services work for them.

TRADE FINANCE OTHER BUSINESS LOANS

There are two types of trade finance.

1. AGRICULTURAL FINANCE

NBP provides Agricultural Finance to solidify faith, commitment and pride of farmers

who produce some of the best agricultural products in the World.

Agricultural Finance Services:

I Feed the World program, a new product, is introduced by NBP with the aim to help

farmers maximize the per acre production with minimum of required input. Select farms

will be made role models for other farms and farmers to follow, thus helping farmers

across Pakistan to increase production.

Agricultural Credit:

The agricultural financing strategy of NBP is aimed at three main objectives:-

Providing reliable infrastructure for agricultural customers

Help farmers utilize funds efficiently to further develop and achieve better

production

Provide farmers an integrated package of credit with supplies of essential

inputs, technical knowledge, and supervision of farming.

Agricultural Credit (Medium Term):

Production and development

xvi


17/71

Watercourse improvement

Wells

Farm power

Development loans for tea plantation Fencing

Solar energy

Farm Credit:

NBP also provides the following subsidized with ranges of 3 months to 1 year on a

renewal basis.

Operating loans

Land improvement loans

Equipment loans for purchase of tractors, farm implements or any other

equipment

Livestock loans for the purchase, care, and feeding of livestock.

Production Loans:

Production loans are meant for basic inputs of the farm and are short term in nature.

Seeds, fertilizers, sprayers, etc are all covered under this scheme.

2. CORPORATE FINANCE

Working Capital and Short Term Loans:

NBP specializes in providing Project Finance - Export Refinance to exporters - Pre-

shipment and Post-shipment financing to exporters - Running finance - Cash Finance -

Small Finance - Discounting & Bills Purchased - Export Bills Purchased / Pre-shipment /

Post Shipment Agricultural Production Loans.

Medium term loans and Capital Expenditure Financing:

xvii


18/71

NBP provides financing for its clients capital expenditure and other long-term

investment needs. By sharing the risk associated with such long-term investments, NBP

expedites clients attempt to upgrade and expand their operation thereby making possible

the fulfillment of our clients vision. This type of long term financing proves the banks

belief in its client's capabilities, and its commitment to the country.

Loan Structuring and Syndication:

National Banks leadership in loan syndicating stems from ability to forge strong

relationships not only with borrowers but also with bank investors. Because we

understand our syndicate partners asset criteria, we help borrowers meet substantial

financing needs by enabling them to reach the banks most interested in lending to their

particular industry, geographic location and structure through syndicated debt offerings.

Our syndication capabilities are complemented by our own capital strength and by

industry teams, who bring specialized knowledge to the structure of a transaction

Cash Management Services:

With National Banks Cash Management Services (in process of being set up), the

customers sales collection will be channeled through vast network of NBP branched

spread across the country. This will enable the customer to manage their companys total

financial position right from your desktop computer. They will also be able to take

advantage of our outstanding range of payment, ejection, liquidity and investment

services. In fact, with NBP, youll be provided everything, which takes to manage your

cash flow more accurately

International Banking

National Bank of Pakistan is at the forefront of international banking in Pakistan which is

proven by the fact that NBP has its branches in all of the major financial capitals of the

world. Additionally, we have recently set up the Financial Institution Wing, which is

placed under the Risk Management Group. The role of the Financial Institution Wing is:-

To effectively manage NBPs exposure to foreign and domestic

correspondence

xviii


19/71

Manage the monetary aspect of NBPs relationship with the correspondents to

support trade, treasury and other key business areas, thereby contributing to

the banks profitability

Generation of incremental trade-finance business and revenues

NBP offers:

The lowest rates on exports and other international banking products

Access to different local commercial banks in international banking

Cash and Gold Finance

Cash and Gold finance means that loan is given against the gold. The gold is mortgaged

with the bank and loan is taken. It is the area of consumer finance. And borrower can

take loan for common use.

Advance salary loan:

This loan is given to those people who are Govt. servants. They can get a loan up to the

salary of fifteen months.

NBP House Financing Scheme and its Promotion Campaign.

Housing Finance like Sieban Scheme

A housing scheme is introduced by national bank of Pakistan named Sieban. The purpose

of this scheme is to provide home to people with low income. Some important features of

this scheme are as under:- Finance available for home purchase, home construction and home

improvement.

Period of repayment ranges between 3-20 years.

Loans available up to a Maximum of Rs. 10 Million

xix


20/71

Mark-up choices available. Rate ranges between 9.0 2.85%, rates subject to

change.

Minimum approval and disbursement timing.

Limited to areas where there are on documentation, Fee resale and foreclosure related

issues, so to protect the banks interest.

DEPARTMENTS

GENERAL BANKING DEPARTMENT

Account opening department

Remittances department

Cash department

Clearing department

PRIVILEGE BANKING DEPARTMENT

Online banking

Lockers

Utility services

CREDIT DEPARTMENT

ACCOUNT OPENING DEPARTMENT

Functions of Account Opening Department:

Providing account opening form according to the customer's requirements,

Guide the customer about the requirements of the account opening and form

filling,

Check the forms whether they are correctly completed or not,

Preparing checklist,

Stamping on the form,

Maintaining account opening register,

Pasting of forms in register after release from general banking in charge,

xx


21/71

Issuance of cheque books,

Issuance of accounts maintenance certificate,

Closure of account

Verification of signature in case of cheque presented before releasing of accountopening from SS card is not yet scanned

ACCOUNT OPENING PROCEDURE & PRECAUTIONS:-

Customer name:

Address:

Contact Numbers:

Other/ secondary/ mailing address:

Special instructions:

REMITTANCE DEPARTMENT

The remittance department deals with the transfer of money from one place to another.

This department deals with the local currency transfer only.

Functions of remittance department:

Handling of transaction of D.D., M.T. Pay Order, CDR, LBC, OBC

Clearing SNTD, TDR and checking of respective supplementary sheets

Checking of Extract and H.O reconciliation

Handling of tax matters and responsible for timely deposit of tax in government

account

Safe custody of specimen signature book

Preparation of periodical statements

Any other work/ Duty assigned by the manager

CASH DEPARTMENT

Cash department performs following functions:

xxi


22/71

Receipt

Payments

Act according to any standing instructions

Transfer of funds from one account to another

Handling of ATM

Verification of signatures

Posting

Categories

A. Payment department

B. Receipt department

PAYMENT DEPARTMENT

xxii

Process of payment

Cheque is recorded & token

# is allotted

Cancellation officer cancelscheque

Posting is made

Cheque is presented at token

counter

Two signatures on back of

the cheque by customer

Cashier counts the amount

& payment is made


23/71

Functions of payment department:

Daily

1. Transactions related to payments and maintenance of liquidity.

2. To maintain cash related books.

Balance book

Paying cashier

Vault register

Token book

Pass book

Cash remittance register and file

Cash indent book

National prize bond and fortnightly statements

3. In addition he will act as in-charge cash department and is responsible for the

Work done by the cash department.

To assign duties to other officers working in cash department.

Any other matter related to cash department.

4. Daily statement

5. Periodical balancing

6. Any other work/ duty assigned by the manager

Weekly

1. Recheck and update the following books

Cash remittance register & file

Cash indent book

2. weakly statements

3. weakly balancing of books

Monthly

xxiii


24/71

1. Monthly statements

2. Monthly balancing of books

Quarterly

1. Quarterly statements

2. Quarterly balancing of books

3. Quarterly balancing of

Stationery

Furniture/ Fixture and banks other fixed assets

Half yearly

1. Half yearly statements

2. Half yearly balancing of books

3. Quarterly balancing of

Stationery

Furniture/ Fixture and banks other fixed assets

Functions of Cash Receipt Department

Daily

1. Transactions related to receipts (including evening banking if any).

2. To maintain receiving cashier book.

3. To collect fee challan of different departments and prepare/maintain relevant

scrolls/files.

4. To collect utility bills and prepare/maintain relevant scrolls/files.

5. Periodical balancing.

6. To maintain following books.

Voucher register

Voucher movement register

7. Any other work/duty assigned by the manager.

DEPOSIT DEPARTMENT

xxiv


25/71

Functions of deposit department

1. Maintenance of transactions related to deposit department (including clearing).

2. Maintenance of record of account opening and closing- safe custody of S.S cards,

insurance of account statements.

3. To maintain following books.

Maintenance of scroll books

Transfer books

Supplementary books

Progressive books

4. Supervision of all vouchers.

5. Transfer of funds of SAPS, and SNGPL to their concern branches.

6. Preparation of voucher cover.

7. Periodical balancing of deposit books.

8. Preparation and timely submission of periodical statements i.e. Daily, Weekly,

Fortnightly, Monthly, Quarterly, Half yearly, yearly and any other statement.

xxv

Process of

deposits

Deposited on Receipt

Customer

Cashier counts the

amount and fulfills other

requirementsFill- up deposit slip


26/71

9. Any other information required by Head Office or Regional Office from time to

time.

10. To rectify the audit irregularities of deposit department.

CLEARING DEPARTMENT

OUTWARD CLEARING AT THE BRANCH:

The following points are to be taken into consideration while an instrument is accepted at

the counter to be presented in outward clearing:

The name of the branch appears on its face where it is drawn.

It should be stale or post dated or without date.

Amount in words and figures does not differ.

Signature of the drawer appears on the face of the instrument.

The amount of the instrument is same as mentioned on the paying-in-slip and

counterfoil.

The title of the account on the paying-in-slip is that of payee or endorsee (with

the exception of bearer cheque).

INWARD CLEARING OF THE BRANCH:

1. The particulars of the instruments are compared with the list.

2. The instruments are detached and sort out department wise.

3. The entry is made in the inward clearing register (serial no. Instrument no.

Account no. is written).

4. The instruments are sent to the respective departments

5. The instruments are scrutinized in each respect before honoring the same.

ONLINE BANKING:

Online banking (or Internet banking) allows customers to conduct financial

transactions on a secure website operated by their retail or virtualbank, credit union or

building society.

The common features fall broadly into following categories

xxvi
http://en.wikipedia.org/wiki/Virtual_bankhttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Credit_unionhttp://en.wikipedia.org/wiki/Building_societyhttp://en.wikipedia.org/wiki/Virtual_bankhttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Credit_unionhttp://en.wikipedia.org/wiki/Building_society


27/71

Transactional (e.g., performing a financial transaction such as an account to

account transfer, paying a bill, wire transfer... and applications... apply for a loan,

new account, etc.)

o Electronic bill presentment and payment - EBPP

o Funds transferbetween a customer's own checking and savings accounts,

or to another customer's account

o Investment purchase or sale

o Loan applications and transactions, such as repayments

Non-transactional (e.g., online statements, check links etc.)

o Bank statements

Financial Institution Administration - features allowing the financial institution to

manage the online experience of their end users

UTILITY SERVICES

Keeping in view the difficulties faced by the general public NBP has taken the initiative

to provide service for collection /receipt of utility bills on behalf of WAPDA, Sui Gas

and PTCL from 9.00am 4.30 p.m. all the branches throughout the countries are observing

this practice to ease the long queues lined up at the counters of banks.

CREDIT DEPARTMENT

Although the study of money is important for the understanding of the way in which our

Economic system operates, we must recall this point that most exchange transactions in

This system are carried on today without the use of actual money, i.e. those are carried on

By means of credit and credit instruments rather than money. While money still forms

The basis of credit and deferred payments, it is necessary to examine the nature of credit

Operations, and the instruments and institutions trough, which these operations are

carried on, in considerable detail.

xxvii
http://en.wikipedia.org/wiki/EBPPhttp://en.wikipedia.org/wiki/Girohttp://en.wikipedia.org/wiki/Checking_accounthttp://en.wikipedia.org/wiki/Savings_accounthttp://en.wikipedia.org/wiki/Investmenthttp://en.wikipedia.org/wiki/Investmenthttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Bank_statementhttp://en.wikipedia.org/wiki/EBPPhttp://en.wikipedia.org/wiki/Girohttp://en.wikipedia.org/wiki/Checking_accounthttp://en.wikipedia.org/wiki/Savings_accounthttp://en.wikipedia.org/wiki/Investmenthttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Bank_statement


28/71

THE NATURE OF CREDIT

On the surface, credit operation appears to be of many kinds, but they all have a

fundamental similarity. In credit transactions, one party to the transaction, the creditor,

turns over to the debtor a certain amount of money, commodities or services at the

present time and relies on the debtor to repay an equivalent amount, usually the money in

the future plus interest at some future time.

TYPES OF CREDIT INSTRUMENTS

There are various types of credit instruments. The more important credit instruments are

as follows:

Bills of exchange:

A bill of exchange is define by negotiable instruments act as "an instrument in writing,

containing an unconditional order, signed by the maker, directing a certain person, to pay

certain sum of money, only to or to the order of a certain person, or to the bearer the

instrument".

Cheque:

A Cheque is defined a bill of exchange drawn on specific banker and not expresses tobe payable otherwise than on demand."

Drafts:

These are bills of exchange issued by a banker on his branch office. Banks draft like bills

of exchange, are of great importance in the financing of trade, especially foreign trade

Promissory note:

It is an instrument in writing containing an unconditional undertaking, signed by the

maker, to pay the certain sum of money only to or to the order of a certain person to the

bearer of the instrument. A promissory note in order to be the so, must fulfill all

conditions.

xxviii


29/71

Letter of credit:

A letter of credit as name signifies does one person or bank to another requesting the

letter to pay any amount of money up to a certain limit to the person write a letter named

in the letter or in whose favor the letter is written. In this letter generally a date is fixed up

to only the addressee should make which advances. Thus a letter of credit remains in

force up to a certain date only. Generally banks grant this letter of credit.

xxix


30/71

CHAPTER # 2

INTERNAL AND EXTERNAL ANALYSIS

xxx


31/71

SWOT ANALYSIS

An analysis indicating towards the organizations strengths, weaknesses, opportunities and

threat is termed as SWOT Analysis. Such an analysis is very important for the

management in retaining the strength, overcoming the weaknesses, capitalizing over the

emerging market opportunities, and carving ways to successfully tackle with the threats

and ultimately converting them in the strengths for the organization.

During six weeks of my stay at NBP Passport office Branch, I have come across the

following SWOT analysis of the bank.

STRENGTHS

Full Day Banking

One can avail the benefit of the services provided at the bank from 9:00a.m- 5:00p.m.

This is highly useful for those customers who find it difficult to leave their officers in the

morning.

Customized Solutions

The management of the bank believes in customer focused banking rather than the

product oriented banking. The products and services designed by the bank are

specifically tailored to the individual needs of its customers.

Customer Oriented Banking

The different branches of the bank offer unmatched services where the customer receives

highly privileged services in a highly elegant environment. It gives the chance of

experiencing new standards in banking. Designed specially for those who appreciate only

the finest things in life, customer priority banking offers the very highest levels of

personalized banking to match customers unique status.

Electronic Banking

The revolution in the banking in the form of electronic banking operations have opened

avenues of excellent, efficient and quick services saving the time and costs of the

xxxi


32/71

customers and fortunately NBP is among those few banks that are already reaping the

benefits of electronic transactions.

Electronic Funds Transfer

NBP management is quite prepared to adopt the latest advancements in technology

resulting in revolution in the banking operations such as check clearing process,

automatic teller machines, and electronic funds transfers among the others.

Telephonic Services

Telephonic service is very attractive for those classes of customers who dont have time

to personally come to the bank i.e. collecting information on the phone line instead of

personally visiting the bank thus saving the precious time of the customers.

Ethical Concerns and Public Image

The organizations showing concern for the people, ethics, and environment enjoy good

public reputation and are able to reap the benefits in the long run NBP management is

quite sensitive to this issue.

Training Facilities

NBP provides training facilities to its employees over small intervals

WEAKNESSES

Lack of Advertisement

NBP has formulized a lot of products and services for its customers, even more than

other commercial banks, but any advertisement on electronic media has not been seen.

Burden of Work

I observed during my internship that some of the employees were burdened with over

work. So I think that the work should be distributed according to their post and

capabilities.

Biasness

Biased selection of employees.

ATM Network

xxxii


33/71

The bank has a large ATM Network across the country. The customers of NBP withdraw

or access their funds any time at all the ATM Sites of NBP.

OPPORTUNITIES

The bank is facing the following threats and opportunities currently. These are positive

external environmental factors effecting the organization.

It deals in bulk business:

Due to more portfolio of the business it has an opportunity from other banks to attract the

potential business

A large amount of foreign investment is attracted:

It branches are in maximum major country of the world that attract more foreign

customers for investment.

Strong potential for growth:

In every coming day it invest in the new area of business for the increasing of the profits.

Steady increase in Customer Deposits:

It is a public bank in the Pakistan everybody is making business through this bank for the

secure and steady. Every day many customers come for the deposits in every branch.

Branches In Remote Areas:

It has a branches in all the main as well as the local areas which is in the access of

everybody relating to any business

THREATS

Reduce the Charges

The schedules of charges indicate that the fees charged by the bank on the various

services it provides are extremely high. It may result in decrease in the number of its

existing customers. Furthermore, this could be very alarming situation for the bank in

case some of the competitors grasped the opportunity and lowered its rates. The result

would be either the loss of market share or decrease in the charges resulting in lowering

the banks income.

Less Attractive Rate Of Return

xxxiii


34/71

Commercial banks face considerable competition in attracting deposits from individuals

or small investors. In contrast, the Govt. of Pakistan national saving scheme offers

attractive rates of return (approx. 16 to 18 percent annually) on 10-15 year fixed

accounts.

Stiff Competition

NBP is currently facing strict competition from the other banks that enjoy a good market

position that include Askari Commercial Bank Limited, Habib Bank Limited, Standard

Chartered, United Bank Limited, Citi Bank, Soneri Bank etc.

PEST ANALYSIS

Political Analysis

NBP despite their capital positions being viewed as somewhat weak on a fragile

operating environment, susceptible to political risk. The banks' performance over the near

to medium term could be adversely affected by recent political developments in Pakistan

though the ratings agency views such risks to be adequately reflected in the low

individual ratings

Economic Factor

Pakistans economy continued to suffer from the after effects of the economic

sanctions of 1998 and the impact of the international economic recession. Even some

of the macro-economic indicators improved during 2000, the operating environment

of the banking sector continued to remain difficult. The overall demand for bank

credit remained lower because of no investment in any of the sector .this low demand

led to an intense competition among banks for relatively few good borrowers in the

market, resulting in substantial reduction in the lending rates. At the same time

managed exchange rate

Social Factors

Threat of new entrants

New market positioning assumed by new banks especially HBL

xxxiv


35/71

The low demand of bank credit led to increase competition among banks for

relatively few good borrowers in the market

Technological Factors

National bank of Pakistan is the largest banking group signified its renewed

commitment to building its IT infrastructure to deliver growth and improved services

to its customers across Pakistan and across the globe and provides services like

ATMs System

Electronic Banking

SWIFT

Telephone Banking

xxxv


36/71

Financial Analysis of NBP

IMPORTANCE

Analysis is vital to figure out, weigh up and evaluate the operating performance of

the firm. Another reason that depicts the importance of ratio is that investors make their

investment decision in certain firm based on these ratios.

Analysis of Financial Statements

Financial analysis involves the use of various financial statements, e.g. balance

sheet, income statement etc. There are various stakeholders such as owners, managers,

creditors, government agencies, employees, prospective investors etc. interested in the

financial condition and results of operations of a business enterprise. In general, the

varying interests of all groups fall in four broad categories:

Solvency

Profitability; and

Stability

Efficiency

Solvency refers to the companys ability to meet its debt on due dates. Profitability means

the success that the firm has had in earning a return on the assets. Stability is composed

of several factors, continues demand for a companys product or services, a reasonable

and stable relation between revenues and expenses and sufficient shows net income to

pay a regular dividend. Efficiency ratio shows the performance the company that how

effective it is working.

xxxvi


37/71

Ratio Analysis

Financial ratios are calculated from one or more pieces of information from a company's

financial statements. For example, the "gross margin" is the gross profit from operations

divided by the total sales or revenues of a company, expressed in percentage terms. In

isolation, a financial ratio is a useless piece of information. In context, however, a

financial ratio can give a financial analyst an excellent picture of a company's situation

and the trends that are developing. In this project the following ratios are calculated;

Liquidity Ratios

Debt Management Ratios

Profitability Ratios

LIQUIDITY RATIO

Liquidity is a pre-requisite for the very survival of a firm. It is the ability to meet current /

short term obligations. Since a bank is also a business firm so to maintain adequate

liquidity is also crucial to carry out business activity.

Current Ratio= Current Assets / Current Liabilities (Rupees in `000)

2007 2006 2005

Current Ratio 7.35 5.35 9.74

Current Assets 132,346,081 119,266,906 102,216,286

Current Liabilities 17,947,965 22,309,742 10,498,003

This shows the degree of high liquidity, maintained by the bank. The policy of high

liquidity however is not maintained at the cost of profitability. The bank is maintaining

optimal balance between liquidity and profitability in order to keep competitive edge on

its competitors. The current ratio is decreasing from 9.74 to 7.35, which is covering the

minimum limit of current ratio for Bank i.e. 3. So the company position is best in the

industry.

xxxvii


38/71

DEBT RATIOS / SOLVENCY RATIOS

The long-term solvency of a firm is examined by leverage or capital structure ratio. It is

the ability of the bank to assure following payments:

Debt to Asset = Total Debt /Total Asset (Rupees in `000)

2007 2006 2005

Debt Ratio 0.8474 0.8709 0.8713

Total Debt 645,855,939 553,178,593 503,378,402

Total Asset 762,193,593 635,132,711 577,719,114

Debt to Asset Ratio shows that how much asset the company has to honor their

obligations. This ratio is decreasing from .8713 to .8474. This is very good for the

company because the company has 1 asset to Pay .8474 debts.

Debt to Equity = Total Debt /Total S.H.Equity (Rupees in`000)

2007 2006 2005

Debt to Equity

Ratio9.323 10.428 13.921

Total Debt 645,855,939 553,178,593 503,378,402

Total Equity 69,270,631 53,044,649 36,158,474

High total debt ratio of shows that the creditors have faith in the bank and they feelcomfortable to invest in this bank. Debt to equity ratio is the relationship between

borrowed funds and owners capital and Equity multiplier is the relationship between total

assets and total equity. But it is good that the this ratio is decreasing from 13.921 to 9.323

xxxviii


39/71

The overall leverage position is showing better trend as compare to previous year. The

contribution of equity in total assets is decreasing, while the debt contribution is

decreasing which is better for business. Equity ratio is decreased which dont show the

better condition of the bank. Solvency Ratio is in good condition. So we can say that

overall Solvency condition of the NBP is better with the comparison to the previous year.

Profitability Ratio

Net Profit Margin= Net Profit / revenue *100 (Rupees in `000)

2007 2006 2005

Net Profit Margin 37.64 % 38.60 % 37.79 %

Net Profit 19,033,773 17,022,346 12,709,444Revenue 50,569,481 44,100,934 33,633,735

Results of the ratios indicates net profit margin ratio more than average. In 2007 and

2005 the ratios are less their general and operating expenses are increasing with the same

rate of increasing in their revenues. So thats why their net income is not so much high.

In 2007 the company position is good because the 37.64 is a percentage between net

profit and Revenues

Return on Equity= Net Income / Average total Equity (Rupees in `000)

2007 2006 2005

Return On Equity 27.48 % 32.09 % 35.15 %

Net Income19,033,773 17,022,346 12,709,444

Equity69,270,631 53,044,649 36,158,474

This ratio shows that how much equity is generating income for the company .it is

decreasing every year with different rate.

Return on Total Assets= Net Income / Average Total Assets *100 (Rupees in `000)

xxxix


40/71

(Rupees in `000) 2007 2006 2005

ROA 2.50 % 2.68 % 2.20 %

Net Income 19,033,773 17,022,346 12,709,444

Total Assets 762,193,593 635,132,711 577,719,114

Results of the ratios are more than its average which shows the ability to utilize its assets

to create profits. Higher the percentage is good, the value decreases by 0.18 as compare

to the 2006, but still performing well.

Profitability analysis shows the entire performance of a business and if we study the

profitability trend of bank then it will clear to us that it showing a positive trend. Net

profit after tax is increased as compare to previous year, due to it return on assets and

investment is increasing.

Bank Special Ratio:

Investment to Total Assets = Investment / Assets (Rupees in `000)

2007 2006 2005

Investment to total assets 0.28 0.22 0.27

Investment 210,787,868 139,946,995 156,985,686

Total Assets 762,193,593 635,132,711 577,719,114

This ratio indicates that out of total asset how much bank utilize its asset for further

investing. This ratio is increasing through out of the period which is very useful for the

bank to enhance its revenues

Advances to Deposit Ratio= Total advances/ Total deposits (Rupees in `000)

2007 2006 2005

Advances to Deposit Ratio57.55% 27.88 % 58.01%

Total Advances 340,677,100 139,946,995 268,838,779

xl


41/71

Total Deposits591,907,435 501,872,243 463,426,602

Loans or advances are the major assets of a bank while deposits are major liabilities of a

bank. Higher ratio shows the better solvency of bank. This ratio is increased instead ofprevious years because advances of the bank are increased as previous years although

deposits are also increased this years but its ratio is less.

Cash to Deposit Ratio= Cash / Deposit (Rupees in `000)

2007 2006 2005

Cash to Deposit Ratio 16.03% 15.67% 15.36%

Cash 94,873,249 78,625,227 71,196,956

Total Deposits

591,907,435 501,872,243 463,426,602

This ratio shows that how much cash you have to pay the liabilities (deposits). As this

ratio show that company has fewer amounts of cash than deposits. It also indicates that

bank is investing so the bank is enhancing its business. But at the same time it could be

risk for bank for liquidation.

Equity to Assets= Equity / Assets (Rupees in `000)

2007 2006 2005Equity to Assets 9.09 % 8.35 % 6.26 %

Equity69,270,631 53,044,649 36,158,474

Assets 762,193,593 635,132,711 577,719,114

This ratio shows the position of equity in total assets of business. In both years this ratio

is in increasing trend. But the bank should increase its equity by increasing the wealth of

shareholders.

Equity to Deposits= Equity / Deposits (Rupees in `000)

2007 2006 2005

Equity to Deposits 11.70 % 10.57 % 7.80 %

xli


42/71

Equity69,270,631 53,044,649 36,158,474

Deposits591,907,435 501,872,243 463,426,602

This ratio shows that how much equity part is there in total structure. The capital

advocacy requirement is 8%. The bank was not fulfilling the requirement in 2005 but

now bank has 11.70% which is good.

Earning Per Share= Net Income / No of Ordinary Shares (Rupees in `000)

2007 2006 2005

Earning Per Share Rs. 23.34 24 21.51

Net Income 19,033,773 17,022,346 12,709,444

No of Ordinary

Shares815,431,989 709,071,295 590,892,746

As their basic earnings per common share are increasing year-by-year it means that

results of the ratio indicate that firm has paid a handsome return on investment showing

the profit generations. Because the companys net income is increasing gradually. As

shown in table the companys Basic Earning per share is increasing due to increase in net

income. This shows how much profit each share has earned in any particular year. It is

most important ratio for peoples who decide about investing their money.

Vertical Analysis

Vertical/Cross-sectional/Common size statements came from the problems in comparing

the financial statements of firms that differ in size. In the balance sheet, for example, the

assets as well as the liabilities and equity are each expressed as a 100% and each item in

these categories is expressed as a percentage of the respective totals. In the common size

income statement, turnover is expressed as 100% and every item in the income statement

is expressed as a percentage of turnover (sales).

xlii


43/71

BALANCE SHEET

For the year ended Dec 31, 20.

2007 2006 2005

ASSETS % % %

Cash and balances with treasury banks 12.45 12.38 12.32

Balances with other banks 4.92 6.40 5.37

Investments - net 27.66 22.03 27.17

Lendings to financial institutions 2.82 3.62 2.82

Advances - net 44.70 22.03 46.53

Operating fixed assets 3.40 1.52 1.64

Other assets - net 4.07 4.27 4.14

Total Assets 100.00 100.00 100.00

LIABILITIES Bills payable 0.99 1.75 0.32

Borrowings 1.52 1.93 1.62

Deposits and other accounts 82.77 82.79 85.89

Liabilities against assets 0.00 0.00 0.00

Deferred tax liabilities - net 0.71 0.39 0.83

Other liabilities 4.32 4.39 4.63

Total Liabilities 90.31 91.25 93.30

Net assets 16.27 13.52 13.78

Represented by: Share capital 1.14 1.17 1.10

Reserves 2.21 2.29 2.51

Unappropriated profit 6.34 5.29 3.10

9.69 8.75 6.70

Surplus on revaluation of assets - net of tax 6.58 4.77 7.08

16.27 13.52 13.78

Total Liabilities & Equity 100 100.00 100.00

In balance sheet we take asset as a key figure and the total liability and S.H.E as a keyfigure. In asset side maximum asset value is due to the advances and the investment

which the bank has done. On thee other side that main liability is from deposits which

shows a greater position of the bank in the current era

xliii


44/71

PROFIT & LOSS A/C


2007 2006 2005

% % %

Mark-up / return / interest earned 100 100 100

Mark-up / return / interest expensed 33.50 31.63 30.69

Net mark-up / interest income 66.50 68.37 69.31

Provision for diminution in the value of investments -0.08 -1.61 -0.73Provision against loans and advances 9.34 6.97 7.27

Bad debts written off directly 0.08 0.01 0.07

9.34 5.38 6.61

Net mark-up / interest income after provisions 57.16 63.00 62.70

Non-mark-up / interest incomeFee, commission and brokerage income 13.41 13.93 14.65Dividend income 6.45 6.56 5.11

Income from dealing in foreign currencies 2.06 3.02 3.58

Gain on sale of securities - net 4.63 2.65 2.58

classified as held for trading -0.06 -0.01Other income - net 0.29 1.42 4.68

Total non-mark-up / interest income 26.78 27.58 28.02

83.95 90.58 90.72Non-mark-up / interest expenses

Administrative expenses 28.09 30.48 33.29

(Reversal) / Write off / other provision - net 0.33 -0.04 0.59Other charges 0.03 0.47 0.19

Total non-mark-up / interest expenses 28.46 30.92 34.06

Profit before taxation 55.49 59.66 56.66Taxation - Current year 16.44 19.72 21.27

*Prior years 0.77 1.20 -3.27

*Deferred 0.64 0.14 0.87

17.85 21.06 18.87

Profit after taxation 37.64 38.60 37.79

Unappropriated profit brought forward 63.43 43.93 27.24

Transfer from surplus on revaluation of fixed assets 0.08 0.09 0.1363.50 44.02 27.37

Profit available for appropriation 101.14 82.62 65.16

Vertical analysis of profit and loss shows increase or decrease in each item as a

percentage of sales means that sales are chosen as key figure. As we have seen in the

above table the interest expense is increasing with the turnover so the company is more

xliv


45/71

utilizing on expenses. Administrative expenses shows decreasing trend from year 2005 to

2007 also the profit after tax is in both increasing and decreasing positions.

Horizontal Analysis

This technique is also known as comparative analysis. It is conducted by setting

consecutive balance sheet, income statement side-by-side and reviewing changes in

individual categories on a year-to-year or multiyear basis. A comparison of statements

over several years reveals direction, speed and extent of a trend. The horizontal financial

statements analysis is done by restating amount of each item or group of items as a

percentage.

BALANCE SHEET


2007-2006 2006-2005

base year 2006 base year 2005

ASSETS % %

Cash and balances with treasury banks 20.67 10.43

Balances with other banks -7.80 31.02Investments - net 50.62 -10.85

Lendings to financial institutions -6.73 41.33

Advances - net 143.43 -47.94

Operating fixed assets 167.74 2.41

Other assets - net 14.31 13.25

Total Assets 20.01 9.94

LIABILITIES

Bills payable -33.41 509.12

Borrowings -6.99 33.66

Deposits and other accounts 17.94 8.30

Liabilities against assets 153.52 -20.41Deferred tax liabilities - net 113.56 -46.51

Other liabilities 16.07 6.49

Total Liabilities 16.75 9.89

Net assets 41.95 10.24

Represented by:

Share capital 15.00 20.00

xlv


46/71

Reserves 13.64 2.54

Unappropriated profit 41.37 91.91

30.59 46.70

Surplus on revaluation of assets - net of tax 62.81 -24.29

41.95 10.24

Total Liabilities & Equity 17.96 12.36

In balance sheet horizontal analysis shows that current assets increases over the period of

time, the increase in cash and decrease in loan shows that company wants to have more

cash in hand rather lending it to others and losing the return on that investment.

As far as the fixed assets of company are concern they are showing increasing trend and

same is case with the current and long term liabilities

PROFIT & LOSS A/C


2007-2006 2006-2005

base year 2006 base year 2005

% %

Mark-up / return / interest earned 14.67 31.12Mark-up / return / interest expensed 21.46 35.12

Net mark-up / interest income 11.53 29.35

Provision for diminution in the value of investments -94.33 188.54

Provision against loans and advances 53.56 25.71Bad debts written off directly 655.09 -77.09

99.14 6.64

Net mark-up / interest income after provisions 4.05 31.74

Non-mark-up / interest income

Fee, commission and brokerage income 10.37 24.72

Dividend income 12.85 68.27Income from dealing in foreign currencies -21.82 10.63

Gain on sale of securities - net 100.23 35.03

Unrealized loss on revaluation of investmentsclassified as held for trading 616.04

Other income - net -76.52 -60.12Total non-mark-up / interest income 11.36 29.05

6.27 30.91

Administrative expenses 5.67 20.08

(Reversal) / Write off / other provision - net -1072.21 -108.72

Other charges -91.77 229.60

Total non-mark-up / interest expenses 5.55 19.01

Profit before taxation 6.65 38.07

xlvi


47/71

Taxation - Current year -4.42 21.55

*Prior years -26.22 -148.30

*Deferred 422.31 -78.72-2.82 46.35

Profit after taxation 11.82 33.93

Unappropriated profit brought forward 65.57 111.45Transfer from surplus on revaluation of fixed assets -5.00 -5.00

65.42 110.90

Profit available for appropriation 40.38 66.26

In Horizontal analysis of profit and loss we have seen that revenues increases from 2005

to year 2007 continuously but every year revenues were increased with increasing trend.

The company profit after tax decreases as compare to the 2006 because the banks

administrative and other expenses are increasing.

TREND ANALYSIS

It is also used to check the financial performance of the company through out its starts. In

this analysis we keep the first year as a base year and it remains the same for all other

periods. We compare all others periods with the base year.

BALANCE SHEET


Base Year 2005

2007 2006

ASSETS % %

xlvii


48/71

Cash and balances with treasury banks 133.25 110.43

Balances with other banks 120.80 131.02

Investments - net 134.27 89.15Lendings to financial institutions 131.82 141.33

Advances - net 126.72 52.06

Operating fixed assets 274.19 102.41Other assets - net 129.46 113.25

Total Assets 131.93 109.94

LIABILITIES

Bills payable 405.59 609.12

Borrowings 124.31 133.66

Deposits and other accounts 127.72 108.30

Liabilities against assets 201.78 79.59Deferred tax liabilities - net 114.23 53.49

Other liabilities 123.60 106.49

Total Liabilities 128.30 109.89

Net assets 156.49 110.24Represented by:

Share capital 138.00 120.00Reserves 116.52 102.54

Unappropriated profit 271.30 191.91

191.58 146.70

Surplus on revaluation of assets - net of tax 123.27 75.71156.49 110.24

Total Liabilities & Equity 132.54 112.36

Trend analysis shows that the cash balance is increases due to which the lending to

financial institution decreases in 2007 as compares to the year 2006.but the advances and

operating fixed assets shows the significance increase. As for as the liabilities are concern

Bills payable and borrowings decreases, but deposits and other accounts increases.

PROFIT & LOSS A/C


Base Year 2005

2007 2006Mark-up / return / interest earned 150.35% 131.12%

Mark-up / return / interest expensed 164.12 135.12

Net mark-up / interest income 144.26 129.35

Provision for diminution in the value of investments 16.37 288.54Provision against loans and advances 193.04 125.71

Bad debts written off directly 172.96 22.91

212.36 106.64

xlviii


49/71

Net mark-up / interest income after provisions 137.08 131.74

Non-mark-up / interest income

Fee, commission and brokerage income 137.65 124.72Dividend income 189.89 168.27

Income from dealing in foreign currencies 86.50 110.63

Gain on sale of securities - net 270.37 135.03Unrealized loss on revaluation of investments

classified as held for trading

Other income - net 9.36 39.88

Total non-mark-up / interest income 143.72 129.05

139.13 130.91

Non-mark-up / interest expenses

Administrative expenses 126.89 120.08(Reversal) / Write off / other provision - net 84.73 -8.72

Other charges 27.12 329.60

Total non-mark-up / interest expenses 125.61 119.01

Extra ordinary / unusual itemProfit before taxation 147.25 138.07

Taxation - Current year 116.18 121.55*Prior years -35.63 -48.30

*Deferred 111.14 21.28

142.23 146.35

Profit after taxation 149.76 133.93Unappropriated profit brought forward 350.09 211.45

Transfer from surplus on revaluation of fixed assets 90.25 95.00

Profit available for appropriation 233.40 166.26Basic and diluted earnings per share - after tax 108.51 97.07

The trend analysis of the Profit and loss shows that mark-up interest earned increaseswhich results in increase in interest expense ,provisions for loans and bad debts also

increases,

Administrative expenses show a slight increase, profits of the year 2007 were almost

double as compare to year 2005.

xlix


50/71

CHAPTER # 4

INTERNSHIP EXPERIENCE

l


51/71

INTERNSHIP EXPERIENCE

One of the most important aims of the student life is to express him / her correctly and

adequately..

Determined, Confident and Persistent in the pursuit of knowledge and learning, I was on

my way to National Bank of Pakistan F-8 Markaz Branch Islamabad in the early morning

of June 9, 2008. Normally I wanted rest and recreation after the tiring class in June but

this time I was anxiously waiting for the start of my internship.

FIRST WEEK

I started my internship from "General Banking" in the first week. The General banking is

basically divided into the following sub departments, which are as follows:

Account opening

Bills and remittances

Clearing

Term deposit

Cash department

The first day of exposure to the practical field was at the (sub department) Account

opening. Account opening:

Although the procedure of opening an account in a bank is a quite complicated job but I

am going to tell you only the basic necessities for opening the account, which are as

follows:

li


52/71

Introduction

National I.D. card

Personal data

Details of dealing with other banks.

These are some of the basic requirements for opening the account. Then the banker

inquires about the option of opening a joint account or individual. If the customer wants

to open joint account then either it is "either or survivor" (i.e. only one persons signature

is sufficient) or jointly (i.e. both should sign the cheque)

Issuance of cheque book

Once the account is opened, BOP issues the cheque books to the customer so that they

could withdraw their money whenever they like. The producer of issuance of the cheque

book is as follows:

For the customer who already has an account with the bank, the lastly consumed cheque

book requisition slip with the help of which a new cheque book is issued. And the person

who is going to open a new account for the first time gets the cheque book free without

any requisition slip.

For the new depositors the cheque book is not issued at the time of opening of account,

rather it is issued after three days.

I remained there in the account-opening department for one week and daily I learnt a new

thing. I came to know about the details of the account opened by the banks, which I have

explained in previous portion of "Departments".

In the start I have stated the account opening procedure and issuance of cheque book in a

very comprehensive way, now let me tell u the further related detail of account opening

lii


53/71

First of all a customer come and gets the information regarding the opening of

account. After getting the proper information he gets an introducer and goes

for opening an account of any kind whatever he wants

He fills the form regarding the opening of account which is in fact a request.

S.S card is filled which contains the signature that will be used in future in

order to identify that you are the same particular person who perfectly eligible

for receiving the benefits.

The S.S card and the application form are verified and the verification stamp

is imposed on it.

After verification the application forms are pasted in the file with the serial, no

which is actually the account no. Allocated to the respective customers.

The cheque book is issued to the customer after three days.

The procedure for opening the account comes to an end after sending the letter

of thanks.

SECOND WEEK

In the second week I was shifted to the TDR (Term Depots Receipts) department. It was

again a good experience to work with the officer here. First of all he told me about the

basics of the TDR.

Deposit is lifeblood of a commercial bank. The main function of a commercial bank is to

canalize the saving from the savers to the ultimate users of the funds. This process of

collecting saving is called "deposit mobilization".

Deposits are of two types one is the demand deposit and the other one is time deposit. Asthe name signifies the demand deposit is payable on demand so no interest or benefit is

given on such deposits but the time deposit is a kind of deposit, which gives you a benefit

in terms of cash. Most of the people who have surplus money with them especially the

landlords deposit their money in such accounts.

liii


54/71

Term deposits are payable on demand with certain maturity. Different percentages of

profit are given in the time deposit.

These are called fixed deposit because they are fixed and no transaction is allowed till

maturity. In fix deposit you can open an A/c of the same title only than A/c number will

be changed. While in other accounts the A/c can't be opened under the same title even in

other branch of the same Bank.

Record keeping

The record of the TDR is although fed in the computer but there is also a hard copy of the

record. The verified TDR forms are pasted with serial number of receipt given to the

customer (the receipt of the form regarding the deposit of the amount).

The certificates are attached or pasted in the file according to the date. The date may be

of any month and any year i.e. if there is a card of the 8th then on this card you will find

the only 8th date of any month and any year in which the card was issued.

THIRD WEEK

In the third week of my internship I was shifted to the Clearing section and Bills for

collection section as well. Three days I worked with the "Clearing" and then with the

"Bills for collection" section.

Clearing

This is an "Inter-city clearing" i.e. the cheques of Lahore city from different banks like

National Bank of Pakistan, Standard Chartered Bank, Muslim Commercial Bank are

deposited here. The deposited cheque is received carefully by checking the title of

cheque, date, amount, and signature on the cheque. All the cheques go to the State Bank

of Pakistan. Everyday NIFT receives all cheques and arranges them. By establishment of

NIFT a lot of time, cost and labor is saved. The cheques are stamped carefully. Two

stamps are required on the cheques

liv


55/71

Clearing stamp

Payee's account will be credited

If any stamp is missed or unclear, SBP returns the cheque with a reason.

When the cheques are deposited they enter all the cheques on the computer with account

number and these figures go to SBP.

Bills for Collection

Two types of cheques are deposited here

Outstation cheques

BOP other branch cheques (local)

Outstation cheques mean different cities cheques are deposited and local means BOP

other Branches are deposited. All cheques account numbers on the computer and these

figures go to SBP.

The cheques are cleared in 5-6 days. Because "NIFT" receives and delivers to SBP where

these cheques are cleared in 3 days and deliver to the banks.

If the cheques are returned due to some reasons, a returned memo is filled and entries are

recorded on the register.

FOURTH WEEK

In the fourth week of internship I was transferred to the "Remittances department". I met

there with a quite sophisticated personality, she tells me about the issuance, procedure

and the entries of the demand drafts and pay orders.

Demand Draft

It is an instrument payable on demand for which value has been received, issued by the

branch of the bank drawn. Demand draft is payable at some other branches of the same

lv


56/71

bank. Demand draft is very useful because there is no chance of fraud. The person

deposit cash and get demand draft. It is used for outstation payment.

Issuance of demand draft

On the application form following particulars are given:

Name of beneficiary

Amount

Mode of payment

The place where DD is drawn

Signature

Name and address of the beneficiary

Request shall be made on standard application form. The customer writes his name,

address, I.D number, and phone number on the backside of the application form.

Commission is charged as per schedule of charges. The issuance of DD is computerized

and the amount is automatically protectively graphed drawing printing for the avoidance

of forgery.

The withholding tax and excise duty is deducted as per schedule. When the customer

deposits cash in the cash department, he got voucher from the cash department and gave

it to the person who makes the DD.

Payment of DD

When a person brings DD (which have been drawn on you), you will check it from your

DD payable record and ask the customer to sign twice at the back of the DD so that it

could be confirmed that he is the eligible person for receiving the benefit, along with this

you obtain the ID of that person verify it and then make the payment. After making the

payment entry is made in the register that this DD has been paid.

Cancellation of DD

lvi


57/71

Following procedure is followed for the cancellation of the DD.

Obtain the application in writing for the cancellation of DD along with the

original DD.

Verify the signature of the applicant, which should tally, with the signature on

the application form (for opening the DD).

Mark caution on DD issued register or on computerized entry.

Make the payment from suspense account.

Inform the Drawee bank regarding the cancellation. Inter Branch Credit

Advice is the advice regarding the payment (refund) of the amount which

Drawer bank have sent to them (which was deposited by the customer against

the demand draft).

PAY ORDER

Pay order issued from one branch can only be payable from the same branch. Pay order is

used for same city payment. E.g. If BOP (Main Branch) issued pay order it is only

payable for Main Branch of BOP.

Procedure

Applicant fill the application

After paying charges he gets voucher and pay order is issued

All pay orders shall be crossed "payee's A/c only".

Cancellation

The applicant give application for cancellation

Charges are recovered from the applicant.

lvii


58/71

FIFTH WEEK

In the second last week of my internship I worked in the Accounts section and the mail

dispatch section.

Account Section

I worked in accounts department but as it is a confidential department so they did not

give me enough information regarding their working. First day I sorted out the cheques of

BOP with the help of the serial number and the nature of the account and arranged them

in sequence. After that I checked the activity which contains the title of the cheque,

amount, date etc. Accounts department maintains the record of expenses of all the

departments, it also maintain the record of all the employees regarding their basic salary,

increment, benefits etc. It is the backbone of BOP

Mail Dispatch Section

After a few days I worked in the mail dispatch section, the person appointed here asked

me to arrange the letters and to write the mailing address on the envelopes and then to put

the letters into the envelops. It was an interesting job but, the single thing which I learned

from here was that, I learnt by heart the addresses of many branches of the BOP, which

helped me to complete the. I also had to maintain the records of the letters sent and

received in a register.

SIXTH WEEK

Till the last week of my internship I had worked in all the major departments of the bank

and was now assigned the tasks concerning lockers and the utility bills collection.

lviii


59/71

Utility Billing Section

In the billing section I received the consumer utility bills of IESCO (PWR), SNGPL

(SUI), and PTCL. The consumer number and the amount had to be entered in the system.

The printed sheets of these are counter checked to tally the amount entered and the cash

in hand, the date and time are noted. The rent must be paid on due date; otherwise the

charges are deducted from the clients accounts.

OGDCL Salaries and Pension:

The main account at NBP F-8 branch is of OGDCL. So it is duty of responsibility of our

bank to help them out in distributing the pay in their employees. Also NBP handles its

pension every month

WHAT I LEARNT IN NBP

Here I will point out things which I learn during my internship.

I learnt that how to apply the knowledge in practical form.

I got the knowledge of promotional activities.

I learnt that how the customers pay orders.

I learnt that whenever customer comes to submit the cheque, the cheque should be

written clear and also signs and amount is mentioned correctly, the date should not

be of future and must not be 6 month before, signatures must be verified, account

number should be on the cheque, amount in both numbers and words should be the

same.

I learnt that the customers are very important, they must be delivered first, their

complaint must be resolved as soon as possible and dealing should be very

beneficial for both..

I learnt that employees work better in friendly and co-operative atmosphere.

lix


60/71

SKILLS USED DURING INTERNSHIP

The following are the skills that I got a chance to practice in the practical environment

Interpersonal Skills

This is most common and one of the most important skills during my internship period.

This skill helps a person to interact with others in much better and pleasant manner. It is

an art to present ones views, thoughts, and ideas before its listeners. During my

internship period it helped me to build good rapport with the other employees who guided

me in the best possible manner. My interaction and dealings with the customers helped

me to broaden my social network.

Communication Skills

Communication means exchange of messages between people for the purpose of

achieving common meanings. It is an art to make information flow smoother. Today it is

very necessary to communicate well especially in business sector and especially for those

who are seeking information. My communication skills gave me self confidence while

interacting with everyone else.

Conceptual Skills

I used my conceptual skills to gain an insight into the working of the bank: how the workis done? What are the problems? their relative contribution to the economy as a whole.

Stress Management Skills

As this internship was my first experience in a practical environment so I faced a lot of

mental strain in terms of adapting to the new work environment, practical learning, cope

lx


61/71

with the challenges faced etc. using my stress management skills I was able to list

priorities and work accordingly.

SKILLS GAINED DURING THE INTERNSHIP PERIOD

The following skills I gained during my internship session.

Time Management Skills

During my internship period I have learnt punctuality and the significance of time in an

organization. I have realized that time management is an important element of work. My

practical learning has taught me to prioritize and organize my work according to schedule

that enabled me to complete my tasks in the allotted time.

Office Working Skills

I had to maintain vouchers, registers, perform some other documentation, as well as work

on the system. Thus I learned manual as well as the system office working skills.

Human Skills

I learnt the human skills in BOP in true manner. Human skills associated with an

employees ability to work well with others both as a member of a group as well as

individual leader who gets things done through others.

Self Control

Our ability to exercise control over our own behavior by setting standards and providing

consequences for our own actions refers to self control. As an internee this skill is reallyimportant because an internee does not have much of authority.

Co-Ordination

lxi


62/71

Co-ordination means the smooth flow of work that must be carried on consistently and

systematically without any breakage. In a corporate environment like banking there is

need for integration making co-ordination an essential environment. As an internee it is

necessary to co-ordinate well with supervisors and co-workers.

Better Communication Skills

During my MBA I have attended courses on communication in different semesters

and was taught how to communicate effectively with others. This was my first hand

experience of communicating with the manager, junior officers and others and to

socialize myself among those professionals. This experience augmented my

communication skills and gave me the confidence of communicating with

professional people.

lxii


63/71

CHAPTER # 5

CRITICAL ANALYSIS

lxiii


64/71

CHALLENGES

Following are the challenges that I faced during my internship.

Practical vs. Bookish knowledge

Studies teach students theoretical aspects of practical field that is why students face

difficulties in the real situation in adjusting in the practical environment of the

organization. So being a fresh student I encountered different sorts of problems that was

challenging for me. I did not find much application of my knowledge in the bank.

Lack of Banking Knowledge

Although we have had a course of money and banking in an immediate prior semester to

my internship, still I found it of very minor help in the bank. If we were given a

comprehensive and practical know how in the course, it would have been an

implementation of that knowledge in the real organization instead of learning everything

from the scratch.

Adjusting With the Employees

In an organization I came across many people who were opposite to my personality and

often found them offensive and uncomfortable because of their attitude but I had to work

and co-ordinate with them which were very challenging for me.

Responding To Work Load

lxiv


65/71

As it was my first experience in the work environment, it took me some time to settle in

the bank setting. Learning new work especially in the beginning while at the same time

responding to the seniors who assigned me the tasks to be completed in short time; was a

great challenge for me. Even under such stress and strain marinating a positive attitude

towards everyone was a line of challenge for me.

IDENTIFICATION OF MAIN PROBLEM

National Bank is well organized bank and operates efficiently in this competitive

environment so; it is difficult for me to identify only one main problem. But nothing is

perfect in this world there is always a room for improvement. According to my limited

knowledge improvement can be made in following areas:

Behavioral problems among Senior and Junior employees.

Lack of participation from the employees.

Senior employees ask juniors for their personal work during the office hours.

Break down of system also disturb the banking operation.

As there is performance base incentive system employees are under pressure

(stress) to perform best. In case of failure their earning will be affected.

Inefficient Online Banking System

Bonds of informal relationships among the employees are very strong and so it

also affects their work to some extent.

lxv


66/71

Lack of motivation leads to dissatisfaction among employees

RECOMMENDATIONS & SUGGETIONS

The recommendations are as follows:

Professional Training

National BANK staff lacks professionalism. They lack the necessary training to do the

job efficiently and properly. Although staff colleges are in all major cities but they are n

Waseem Abbasi Internship Report

Documents

Transcript of Waseem Abbasi Internship Report