Upload
arslan-rajput
View
228
Download
0
Embed Size (px)
Citation preview
7/30/2019 Full Report1
1/80
Chapter No: 01
Introduction to Banking
1.1 What is Bank
1.2 Banking
1.2.1 Origin of Banking
1.2.2 Banking in Ancient World
1.2.3 Early Banking1.3 Functions of Commercial Banks
1.4 Role of Banks in the Economic Development of a Country
1.5 Banking in Pakistan
Chapter No: 01
Introduction to Banking
1
7/30/2019 Full Report1
2/80
1.1 What is aBank?
There are various views about the origin of the word, bank. The word is derived
from an Italian word, banque which means a, bench. The other point of view
is that it has originated from the German word bank, which means a joint stock
firm. The World Bank is used in the sense of a commercial bank. It is of
Germanic origin though some persons trace its origin to the French word,
Banqui. Chambers Twentieth Century Dictionary defines a bank as an
institution for the keeping lending and exchanging of money.
According to Crowther,
A bank is a firm which collects the money from those who have spare. It lends
money to those who require it.
Or
The Bankers business is to take the debts of other people to offer his own in
exchange, and thereby create money.
According to Kent,
The bank is an organization whose principal operations are concerned with the
accumulation of the temporarily idle money of the general public for the purpose
of advancing to others for expenditure.
According to Mr. Parking,
A bank is a firm that takes deposits from households and firms and makes loans to
other households and firms.
2
7/30/2019 Full Report1
3/80
According to Sayers,
Ordinary banking business consists of changing cash for bank deposits and bank
deposits for cash; transferring bank deposits from one person or corporation to
another; giving the secured or unsecured promises of businessmen to repay, etc.
Thus bank is a financial institution, which uses funds deposited with it to
extend loans to companies or individuals, and also provides financial services to
its customers. In other words it is an intermediate party between the borrower and
the lender. The difference between the terms on which it borrows and those on
which it lends forms the source of its profit.
1.2 BANKING
Banking is the acceptance, transfer, and, most important, creation of deposits.
Banking consists of safeguarding and transfer of funds, lending or facilitating
loans, guaranteeing creditworthiness, and exchange of money. Such institutions as
commercial banks, saving banks, trust companies, finance companies, provide
these services and merchant banks or other institutions engaged in investment
banking. All countries subject banking to government regulation and supervision
normally implemented by central banking authorities.
1.2.1 Origin of Banking
Banking was invented before coins and reached a high level of sophistication in
the Egypt. Military conquests, such as those of Alexander the Great, spread the
use of coins, which became the most convenient means of payment.
Banking is the business providing financial services to consumers and businesses.
The basic services a bank provides are checking accounts, which can b used like
money to make payments and goods and services; saving accounts and time
3
7/30/2019 Full Report1
4/80
deposits that can b used to save money for future use; loans that consumers and
businesses can use to purchase goods and services; and basic cash management
services such as check cashing and foreign currency exchange. Four types of
banks specialize in offering these basic banking services: commercial banks,
savings and loan associations, savings banks, and credit unions.
1.2.2 Banking in the Ancient World
Many functions of modern banking were participated by ancient civilizations.
Usually temples served as banks and priest as bankers. The temples were logical
places for enterprise. In a polytheistic era where superstition was rife, few couldconsider angering the goods by stealing the money from temple. Babylonian
cruciform records revel the wide spread use of credit, mortgage, written promises
to repay loans and interest charges up to legal maximum rates. History of
banking is traced back as 2000 BC Babylonians.
Up a code wherein he laid down standard rules, procedure for banking
operations by temples and great landowners. He got his code inscribed on a
block of 8 feet tall, containing about 150 paragraphs, which deal with nearly allaspects of loans, interest pledges, guarantees, natural accidents, loss theft etc.
later on, the Sumerians, Babylonians, hit ties and Assyrians standardized the
values of the goods in silver, copper, bronze or electrum. It is not certain as to
who invented money; but history records that Gyges, king of Lydia, caste
electrum (natural alloy of gold and silver) ingots of identical shape and of
uniform weight with a album engraved on it as an official guarantee of value in
687 BC.
1.2.3 Early Banking
4
7/30/2019 Full Report1
5/80
Many banking functions such as safeguarding funds, lending, guaranteeing
loans, and exchanging money can be traced to the early days of recorded
history. In medieval times the Knights Templar, an international military and
religious order, not only stored valuables and granted loans but also arranged for
the transfer of funds from one country to another. The great banking families of
the Renaissance, such as the Medici in Florence, were involved in lending
money and financing international trade. The first modern banks were
established in the 17th century, notably the Riks bank in Sweden (1656) and the
Bank of England (1694).
In the 17th century, English goldsmiths provided the model for
contemporary banking. Gold was stored with these artisans for safekeeping, and
was expected to be returned to the owners on demand. The goldsmiths soon
discovered that the amount of gold actually removed by owners was only a
fraction of the total stored. Thus, they could temporarily lend out some of this
gold to others, obtaining a promissory note for principal and interest. In time,
paper certificates redeemable in gold coin were circulated instead of gold.
Consequently, the total value of these banknotes in circulation exceeded the
value of the gold that was exchangeable for the notes.
Two characteristics of this fractional-reserve banking remain the basis for present-
day operations. First, the banking systems monetary liabilities exceed its
reserves. This feature was responsible in part for Western industrialization, and it
still remains important for economic expansion, though a risk of creating too
much money is a rise in inflation. Second, liabilities of the banks (deposits and
borrowed money) are more liquidthat is, more readily convertible to cash
than are the assets (loans and investments) included on the banks balance sheets.
This characteristic enables consumers, businesses, and governments to finance
5
7/30/2019 Full Report1
6/80
activities that otherwise would be deferred or cancelled; at the same time, it opens
banks to the risk of a liquidity crisis. When depositors en masse request payment,
the inability of a bank to respond because it lacks sufficient liquidity means that it
must either renege on its promises to pay or pay until it fails. A key role of the
central bank in most countries is to regulate the commercial banking sector to
minimize the likelihood of a run on a bank, which could undermine the entire
banking system. The central bank will often stand prepared to act as lender of last
resort to the banking system to provide the necessary liquidity in the event of a
widespread withdrawal of funds. This does not equal a permanent safety net to
save any bank from collapse, as was demonstrated by the Bank of Englands
refusal to rescue the failed investment bank Baring in 1995.
1.3 Functions of Commercial Banks
Commercial banks perform a variety of functions, which can be divided as;
(1) Accepting deposits;
(2) Advancing loans;
(3) Credit creations;
(4) Financing foreign trade;
(5) Agency services; and
(6) Miscellaneous services to customers.
1. ACCEPTING DEPOSITS
This is the oldest function of a bank and the banker used to charge a
commission for keeping the money in its custody when banking was
developing as an institution. Now a days bank accepts three kinds of
6
7/30/2019 Full Report1
7/80
deposits. The first is saving deposits, on which the bank pays small
interest. The depositors are allowed to draw their money by cheques up to a
limited amount during a week or year. Businessmen keep their deposits in
current accounts. They can withdraw any amount standing to their credit in
account deposits by cheques without notice. The bank does not pay interest
on such accounts. Current accounts are also known as demand deposits.
Deposits are also accepted by a bank in fixed or time deposits. The rate of
interest increases with the length of the time period of the fixed deposit. But
there is always the maximum limit of the interest rate, which can be paid.
For instance, the interest rate on fixed deposits over five years is 8 percent
in Pakistan.
2. ADVANCING LOANS
One of the primary functions of a commercial bank is to advance loans to
its customers. A bank lends a certain percentage of the cash lying in
deposits on a higher interest rate than it pays on such deposits. This is how
it earns profits and carries on its business. The bank advances loans in the
following ways.
a) Cash Credit:
The bank advances loans to businessmen against certain specified
securities. The amount of the loan is credited to the current account of the
borrower. In case of a new customer a loan account for the sum is opened.
The borrower can withdraw money through cheques according to his
requirements but pays interest on the full amount.
b) Call Loans:These are very short-term loans advanced to the bill brokers for not more
than fifteen days. They are advances against first class bills or securities.
7
7/30/2019 Full Report1
8/80
Such loans can be recalled at a very short notice. In normal times they can
also be renewed.
c) Overdraft:
A bank often permits a businessman to draw cheques for a sum greater than
the balance lying in his current account. Providing the overdraft facility up
to a specific amount to the businessman. But he is charged interest only on
the amount by which his current account is actually overdrawn and not by
the full amount of the overdraft sanctioned to him by the bank.
d) Discounting Bills of Exchange:
If a creditor holding a Bill of Exchange wants money immediately, the bank
provides him the money by discounting the bill of exchange. It deposits the
amount of the bill in the current account of the bill-holder after deducting
its rate of interest for the period of the loan, which is not more than 90
days. When the Bill of Exchange matures, the bank gets its payment from
the banker of the debtor who accepted the bill.
3. CREDIT CREATION
Credit creation is one of the most important functions of the commercial
banks. Like other financial institut ions, they aim at earning profits. For this
purpose, they accept deposits and advance loans by keeping small cash in
reserve for day transactions. When a bank advances a loan, it opens an
account in the name of the customer and does not pay him in cash but
allows him to draw the money by cheque according to his needs. By
granting a loan, the bank creates credit or deposit.
4. FINANCIAL FOREIGN TRADE
8
7/30/2019 Full Report1
9/80
A commercial bank finances foreign trade of its customers by accepting
foreign bills of exchange and collecting them from foreign banks. It also
transacts other foreign exchange business and busy and sells foreign
currency.
5. AGENCY SERVICES
A bank acts as an agent of its customers in collecting and paying
cheques, bills of exchange, drafts, dividends, etc. it also busy and sells shares,
securities, debentures, etc. for its customers. Further, it pays subscriptions,
insurance Premia, rent, electric and water bills and other similar charges on behalf
of its clients. It also acts as a trustee and executor of the property and will its
customers. Moreover, the bank acts as an income tax consultant to its clients, for
some of these services, the bank charges a nominal fee while it renders others free
of charge.
6. MISCELLANCEOUS SERVICES
Besides the above services. The commercial bank performs a number of other
services. It acts the custodian of the valuables of its customers by providing them
lockers where they can keep their jewelry and valuable documents. It issues various
from of credit instruments, such as cheques, drafts, travelers cheques, etc., which
facilitate transactions. The bank also issues letters of credit and acts as a referee to
its clients. It underwrites shares and debentures of companies and helps in the
collection of funds from the public. Some commercial banks also publish journals,
which provide statistical information about the money market and business trends
of the economy.
1.4 ROLE OF BANKS IN ECONOMIC DEVELOPMENT OF A
COUNTRY
9
7/30/2019 Full Report1
10/80
In modern age, monetary by banking system plays a vital role in economic
development of a country. To provide financing for the accomplishment of certain
economic plans depends upon an organized by sound banking system by a country
financial institutions plays an important role in credit provision. So, if the
monetary markets by banking system of a country are well organized by sound, it
will help in accelerating the process of economic development. To encourage
people to save more by then investment of these savings into suitable areas depends
upon the policy by strength of banking system.
Besides be strong banking system, monetary policy of a county also plays a vital
role in development. Although monetary policy of a country is made by the central
bank, yet it depends upon the co-operation of commercial banks.
As for as a developing country like Pakistan is concerned, it always suffer capital
deficiency. Only banks can solve problem by providing credit in required amount.
The reasons is, to motivate the people towards savings, collection of the saved
amount by then investment of this amount, all this is the duty of banks. By doing
so, banks become an example of model investment for people.
Hence, the banking system of a country can help i.
i) Development of a country.
ii) To make the monetary policy successful.
Main features of monetary policy are as following.
i) To achieve high level of employment.
ii) To stable in prices.
iii) To save economy from recession by inflation.
iv) To avoid fluctuation of interest rates
10
7/30/2019 Full Report1
11/80
v) To improve in standard of living of people.
So the banking system of 3rd world countries is not so stable, so it very difficult to
implement monetary policy properly. As far as Pakistan is concerned, when all the
scheduled banks were nationalized in 1974, State Bank of Pakistan got a complete
grip upon banking network. Owing to this, the role of banks in economic
development became more prominent. It can be understand through following facts.
i) PICIC by Industrial development bank has played an important role for
the development of industrial sector and have issued long by short-term debts
for necessary machinery, raw material equipment.
ii) For the development of agriculture red sector, NBP was the first one to
be established in this regard. Then ADBP by now other commercial banks are
also providing credit for agricultural sector.
iii) These banks provide financing for domestic as well as international
trade.
iv) Have provided credit facility to small business people to promote
cottage industry.
v) Have provided financing for house building to overcome the scarcity of
houses. HBFC has played a vital role in this regard.
vi) Have played an important role in providing finance to Govt. especially
in agricultural sector.
1.5 Banking in Pakistan
Banking is one of the most sensitive businesses all over the world. Efficient
banking is the basis of a viable economic structure and growth. Pakistan is no
exception.
11
7/30/2019 Full Report1
12/80
The country started without any worthwhile banking network in 1947 but
witnessed phenomenal growth in first two decades. By 1970, it had acquired a
flourishing banking sector.
The characteristics that distinguished it were that it was indigenous, growth
oriented, and well integrated with the local business. Its intermediation cost was
reasonable. Its assets were well secured and liabilities well protected. It enjoyed
an image of reliability integrity and support to the business community.
The first exception to the otherwise good reputation of the banking business was
noticed when one of the small banks. Namely the standard bank ltd started
securing patronage of army generals for procuring business by using inappropriate
methods. This was the beginning of institutional corruption at the highest
bureaucratic levels.
The state bank of Pakistan was established with a banking control and inspection
department but it had a limited role to play in regulating the banking business.
The banking business, however, suffered no loss of image or substance because of
its limited role. The reason being that the bank management was more proactive
to observe as self-imposed business ethics.
Nationalization of banks in the seventies changed the whole complexion of the
banking industry in the country. With one stroke of pen, the commercial banks
were made subservient to the political leadership and the bureaucracy. Specialized
banking institutions were already working in the public sector. The new
accountability paradigm changed the business ethics in the banking industry, and
with this change started the disaster.
Nationalization of banking industry was accompanied by violent changes in the
external value of rupee. The commercial banks thus lost their equilibrium,
initiative and growth momentum. They ceased to be a business concern and
12
7/30/2019 Full Report1
13/80
became big bureaucracies. This was accompanied by indiscreet loaning under
political pressure. They suffered from three terminal diseases none performing
loans, higher intermediation cost and loss of initiative and entrepreneurship.
In the meanwhile, western banks started entering into the business. They with the
support of ruling elite, concentrated on the big business, leaving the routine
business to the local banks. This reduced the profitability of the local banks.
The government permitted small private sector banks to operate, which indulged
in questionable policies to promote business. The public sector banking which
constituted the backbone. Thus continued to suffer because of their approach, size
and carried over liabilities.
The biggest problem for the economic managers of the country was that they had
no vision to resolve the structural incompetence of the public sector banking
industry. Privatization was considered to be a solution but neither the objectives
nor the mechanism of privatization process were clearly spelled out. As a result
privatization process could not gain momentums even after unloading of two of
the commercial banks. I.e. the Muslim commercial bank and the Allied Bank.
The problems accentuated gradually as the issue of non performing loans was
politicized by one of the interim governments and soon thereafter some of the
newly established private banks and privatized started crumbling and the state
bank had to directly intervene to protect the depositors.
At this stage the World Bank entered into the game by providing a credit for
improving the financial sector the prescription of the World Bank for improving
the health of the financial sector was quite simple the bank believed that
privatization and globalization of the economic activity was the only solution tothe problems of developing countries. It thus prescribed induction of imported
leadership, transfer of non-performing loans to a specialized agency, effective
13
7/30/2019 Full Report1
14/80
regulation, and introduction of banking rationalization of branches and the staff
and finally the privatization by allowing international bidders.
The World Bank prescription is thus working to the desired ends. The public
sector banks have a new leadership that has a background of working with
multinationals. They have transferred a part of the non performing loans to the
news entity created for the purpose. The SBP is now regulating the commercial
banks through what it calls the prudent regulations.
The bank branches in major urban business areas are switching over a banking
thus minimizing the cultural difference between the domestic and foreign banks.
A large number of unprofitable branches have been closed and the staff at the tail
has been reduced. All of this has apparently given a new, attractive state of the art
look to the public sector banks. World banks funding through the state bank has
helped improve their balance sheets and as a result united bank has already been
privatized and Habib bank is not for behind the ultimate.
Chapter No: 02
14
7/30/2019 Full Report1
15/80
INTRODUCTION TO NATIONAL BANK OF PAKISTAN
2.1 Introduction
2.2 History of National Bank of Pakistan
2.3 Functions of National Bank of Pakistan
2.4 Functions of NBP as a Representative of State Bank of Pakistan
2.5 Development of National Bank of Pakistan
2.6 Phases of Banking in Pakistan
2.7 Management System
2.7.1 Structure of the organization
2.7.2 Management of NBP
2.7.3 Board of Directors
2.8 Branch Network of NBP
2.9 Objectives of Internship
Chapter No: 02
15
7/30/2019 Full Report1
16/80
INTRODUCTION TO NATIONAL BANK OF PAKISTAN
2.1 INTRODUCTION
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 nation wide
branches.
National Bank of Pakistan, established in 1949 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.
National Bank of Pakistan is distinct from other banks in that it has a non-profit
and service oriented motive, which has manifested itself in the area of salary
deposits of Government employees and payment of utilities bills. These services
do not contribute towards the earnings of the bank; rather they put pressure on our
resources. Nevertheless, National Bank of Pakistan committed to serving small
savers and the general public of the country. National Bank of Pakistan is
everyones and does not only serve corporate customers.
It would be very complex task to discuss entire functioning of the bank. However,
in order to have an in depth analysis, a sound grasps and to produce an effective
report on how the bank has been performing in the previous year vis--vis the
present day developments.
16
7/30/2019 Full Report1
17/80
The purpose of writing this report is to express my understanding, knowledge &
learning that I got during my internship period in National Bank of Pakistan.
Mission Statement
To be recognized in the market place by Institutionalizing a merit & performance
culture, Creating a powerful & distinctive brand identity, Achieving top-tier
financial performance, and Adopting & living out ourcore values.
Core Values
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 Market-based solutions and products.
Reward entrepreneurial efforts.
Create value for all stakeholders.
We aim to be peopling 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
Leaders in our industry
An organization maintaining the trust of stakeholders.
17
http://www.nbp.com.pk/About_Us/CoreValues.htmhttp://www.nbp.com.pk/About_Us/CoreValues.htm7/30/2019 Full Report1
18/80
An innovative, creative and dynamic institution responding to the
changing needs of the internal and external environment.
Mission
To provide reliable banking services to Government, financial institutions, public
and to act as an operation alarm of State Bank of Pakistan.
Vision
To be the pre-eminent financial institution in Pakistan and achieve market
recognition both in the quality and delivery of service as well as the range of
product offering.
2.2 History of National Bank of Pakistan
The story of National Bank of Pakistan is part of our struggle for economic
independence. When we won political independence, mostly Hindus controlled
our economy. East Pakistan was spared from massive migration but its economy
was also, being dependent on Calcutta badly hurt. Most bankers and business
experts left Pakistan and the economic life was brought to a standstill. The mostly
branches of Imperial Bank of India were only in partial operation with skeleton
staff.
It was very difficult for Pakistan to build up its own Banking system immediately
after independence without sufficient resources as at that time most of the
commercial banks in Pakistan were the branches of foreign banks, Indian and
others was staffed mainly by non-Muslims. Those banks, which stayed, were
considering the winding up of their business. By 30th June 1948, the number ofscheduled banks in Pakistan declined from 487 to only 195.
18
7/30/2019 Full Report1
19/80
There was a controversy on establishment of our Central Bank because we had no
experience but it was resolved and SBP was established, 3 month a head of
schedule, on July 01, 1948. On October 03, 1949, 2 central banks were to
announce the new par value of both currencies but India denied a day earlier.
India also froze out trade balance surplus that is still an unsettled dispute. India
had also withdrawn the merchants who were employed annually for movement of
jute crop by financing it. There being no jute industry, prices fell sharply, foreign
banks and foreign merchants stood aside and an agrarian unrest was threatening.
Two Ordinances were therefore issued.
Jute Board Establishment Ordinance
NBP Ordinance dated 08.11.1949
2.3 Functions of National Bank of Pakistan
The NBP performs two types of functions. It acts as an ordinary commercial bank
and places where there is no branch of State Bank of Pakistan it represents it. As a
commercial bank it performs the following:
Accepting of deposits of money on current a/c, saving a/c, term deposit
and other profit and loss sharing accounts.
Borrowing money and arranging finance from other banks.
Advancing and lending money to its clients.
Financing of projects including technical assistance, project appraisal
through long term & short term loans
Buying, selling, dealing & discounting of bills of exchange, promissory
notes, drafts, bill of lading, and other instruments of securities.
Foreign exchange business.
Financing of seasonal crops like cotton, wheat & rice.
19
7/30/2019 Full Report1
20/80
Receiving of bonds, valuables etc for save custody.
Carrying on agency business of any description other then managing agent
on behalf of client, including govt. and local authorities.
Generating, undertaking and promoting etc of issue of shares, bonds.
Transacting guarantees and indemnity business.
Undertaking and executing trusts.
Making investments in other banking companies.
Joint ventures with foreign dealers, agents and companies for its
representation abroad.
Participating World Bank and Asian development banks lines of credit.
Utility services
Providing Hajj services to intending Hajjis
Agent to State Bank of Pakistan for collecting.
Gold finances.
2.4 Functions of NBP as a Representative of State Bank of Pakistan:
Collection of cheques and bill of exchange for its customers.
Paying insurance premium, rent or other obligations of the customers.
Transferring of money from one place to another.
Collecting interest dues, dividend, pensions and other sums due to
customers.
Acting an executor, trustees for the customers.
Providing safe custody and jewelry documents and securities.
Issuing of travelers cheques and letter of credit to give credit facilities.
Purchasing shares for the customers.
20
7/30/2019 Full Report1
21/80
Accepting bills of exchange on behalf of customers.
Undertaking foreign exchange business.
Furnishing trade information and tendering advice to the customers.
Formulating operation policy guidelines for the banks.
Laying down performance criteria for banks and taking steps for ensuring
their observance.
Evaluating the performance of the banks in the context of operational
guidelines issued to the banks.
Determining the areas of coordination of the banks.
Making recommendations to the federal govt. for the appointment of
auditors of the bank.
Conducting such surveys, inquiries and appraisals may be necessary for
the purpose of this act.
Exercising and performing such powers and functions of the federal govt.
under the act and such other functions as the federal govt. may assign to it.
2.5 Development of National Bank of Pakistan
NBP was established on 20.11.1949 to provide finance to suitable parties under
the National Bank of Pakistan Ordinance No. 21of 1949. It is a semipublic bank
and functions like other commercial banks. NBP stood behind jute trade, SBP
stood behind
NBP and the Government stood behind SBP. Speedy it was such that 6 branches
came in to being at once and the doubts on our ability to handle the situation was
dispelled forever. Now the Jute Board and NBP were in this field, the foreign
merchants and bankers also rushed into get their share in the business and
consequently NBP had to lay out much les finance that it could. Until June 1950,
21
7/30/2019 Full Report1
22/80
NBP remained exclusively in Jute operation; therefore other commodities were
also taken up.
In 1952, NBP replaced Imperial Bank of India. In 1962, the number of branches
increased from 6 to 239 and deposits from Rs. 5 crore to Rs. 106 crore, profit
from 3 million to 21 million, and the staff increased from 380 to 7091, as
compared to 1949-50. in December 1966, its 600th branch was opened raising the
deposit to 2.31 billion and staff to 14963. Up to 1965, the shareholders had
received 225% of their original investment. Now it has 13272 employees, 1199
branches and Rs. 395.6 billion deposits.
2.6 PHASESOFBANKINGINPAKISTAN
The development of commercial banking is divided into 4 phases.
Establishment of Commercial Banking System (1947-74)
Nationalization of Banks (1974-79)
Deregulation Process (1991-98)
NATIONALIZATION ERA
On 1st January, 1974 all Pakistani banks were nationalized through
nationalization Act 1974. Under this law all Pakistani banks became a public
property. All small banks were merged in bigger banks to create 5 major
Pakistani banks. These banks were to control by Pakistani banking council. The
major changes after nationalization were as follows:
Working of banks were extended to underdeveloped areas
Market expansion for credit and deposits
POST NATIONALIZATIONERA
22
7/30/2019 Full Report1
23/80
In 1990 the government of Pakistan decided to denationalize all the
nationalization institutes. For this purpose amendments were made to
nationalization act 1974 and 2 nationalized banks were privatized along with this
a permission to open banks in private sector was also granted. After these changes
a large no. of private and foreign banks started their operations in Pakistan and the
present status can be seen by the following figures.
2.7 Management
An Executive Board composed of six Senior Executives of the Bank and the
President who is also the Chief Executive supervises the affairs and business of
the Bank.
2.7.1 Structure of the organization
Head office Karachi
PRESIDENT
DIRECTORS
GROUP CHIEFS
23
Business
chief group
Operational
group chief
Risk
managementgroup chief
Compliance
group chief
7/30/2019 Full Report1
24/80
Branch Level
2.7.2 Management of NBP
Head Office of the Bank
The head office of the National Bank of Pakistan is in Karachi.
Central Board
The general superintendent and direction of the affairs and business of the bank
shall be encrusted to the Central board which may exercise all powers and things as
may be exercised or done by the bank and or not by this ordinance expressly
directed or required to be done by the bank in general meeting.
The central Board shall consist of the following directors namely.
The Managing Directors appointed by the central Government under section
16.Nine Directors are elected in local or special meetings by the shareholders
in the following manners. The share holders registered in a branch, register
maintained for an area mentioned in sub-section (5) of section 8, shall elect
24
MANAGER
OPERATION
MANAGER
COMPLIANC
E MANAGER
7/30/2019 Full Report1
25/80
from amongst themselves, such number of directors for that area as may be
decided before election by the Central Government having regard to the
proportion which that share capital subscribed by the shareholders of that
area bears to the whole. Provided that the shareholders registered in branch
register maintained at Dacca shall elect from amongst themselves at least two
Directors. Three directors appointed by the Central Government, provided
that the total number of the elected and appointed Directors representing the
area for which the Decca register is maintained shall be not be less than
three.
The President of the Central Board shall be appointed by the Government
from amongst the Directors.
2.7.3 Board of Directors
Syed Ali Raza
Chairman Board, National Bank of Pakistan
Mr. S. Ali Raza is the Chairman, NBP Board of Directors. Mr. Raza is a graduate
of the London School of Economics and M.Sc. in Admn. Science from the London
Graduate Business Centre, City University, London. Before joining the National
Bank of Pakistan in July 2000 as the Banks President, he held a key management
position as Managing Director and Regional Head, Pakistan, Middle East and
North Africa at the Bank of America (BOA).
Qamar Hussain
President , NBP
Mr. Qamar Hussain is the President of National Bank of Pakistan (NBP), thelargest Commercial Bank of the country. He holds an MBA degree in International
Business & Finance from Mcgill University, Montreal, Canada and has undergone
25
7/30/2019 Full Report1
26/80
extensive training in business leadership abroad.
Mr. Hussain started his banking career from Bank of America N.T. & S.A.,
Pakistan in the year 1981. Prior to joining NBP in 2009, he has worked with
American Express Bank Limited as Senior Director Global Credit, New York and
earlier as Senior Director Country Manager, Bangladesh. He had also been
associated with the CHASE MANHATTAN BANK in Pakistan and USA.
Mr. Tariq Kirmani
Director
Soon after completing his Masters in Business Administration (MBA) Mr.
Kirmani embarked upon a rewarding career, starting with a multi-national OilCompany (Caltex later Chevron Pakistan) in 1969 and worked for seven years in
the United States of America, United Arab Emirates and Australia in different
senior management positions in Marketing Operations and Finance.
Mrs. Haniya Shahid Naseem
Director
Mrs. Haniya Shahid Naseem is an MBA with more than fifteen years experience
of working in the education, social, industrial textile and agriculture sectors of
Pakistan. She has served for 5 years on the Board of a textile company, having a
turnover of more than one Billion Rupees. Presently she is actively involved in
the administration of Pakistan Public School Multan.
Ms. Nazrat Bashir
Director
Ms. Nazrat Bashir belongs to District Management Group of Civil Services of
Pakistan. She is Masters in Economics from New York University, New York,
USA and Master in Psychology from Peshawar University; Peshawar.She has
extensively traveled abroad and has attended various international Seminars and
Conferences such as on Micro Finance.
26
7/30/2019 Full Report1
27/80
Mr. Ekhlaq Ahmed
Secretary Board of Directors
Mr. Ekhlaq Ahmed, EVP is the Company Secretary of the Bank and also the
Secretary of Credit & Operations Committees. He is M.A. (Economics) from
Rajshahi University, Bangladesh (former East Pakistan). He is a Diplomaed
Associate Institute of Bankers, Pakistan (DAIBP) and secured overall 1st
position in order of merit and won Muslim Commercial Bank Prize in the
subject of Foreign Trade & Foreign Exchange.
Senior management
Qamar Hussain
President
Dr. Asif A. Brohi
SEVP & Group Chief, Commercial & Retail Banking Group
Shahid Anwar Khan
SEVP & Group Chief, Credit Management Group
Ziaullah Khan
SEVP & Group Chief Assets Recovery Group and Divisional Head, IslamicBanking Division
Dr. Mirza Abrar Baig
SEVP & Group Chief, Human Resources Management & Administration Group
Nausherwan Adil
SEVP & Group Chief, Operations Group
Tariq Jamali
SEVP & Group Chief, Compliance Group
Nadeem A. Ilyas
SEVP & Group Chief, Corporate & Investment Banking Group & PSO to President
27
7/30/2019 Full Report1
28/80
Syed Iqbal Ashraf
SEVP Group Chief, Overseas Banking Group
Muhammad Nusrat Vohra
SEVP & Group Chief, Treasury Management Group
Khalid Bin Shaheen
SEVP & Group Chief, Global Home Remittance Management Group
Imam Bakhsh Baloch
SEVP & Group Chief, Audit & Inspection Group
Asif Hassan
SEVP & Group Chief, Small and Medium Assets Recovery Group
Tahira Raza
EVP & Head Risk Management Division, Credit Management Group
Sheharyar Qaisrani
EVP/Divisional Head Agriculture Business Division, C&RB Group
Muhammad Hassan Khaskheli
EVP & Divisional Head, Personnel & Industrial Relations Division, HRM&AGroup
Qamar Hussain
EVP & Divisional Head, Human Resources Division, HRM&A Group
Moizuddin Khan
EVP & Divisional Head, Training & Organizational Development Division,HRM&A Group
Ekhlaq Ahmed
EVP & Secretary Board of Directors
Aamir SattarEVP & Financial Controller, Financial Control Division
Raza Mohsin Qizilbash
28
7/30/2019 Full Report1
29/80
EVP & Head, Legal Division
Mahmood Siddique
EVP & CIO, IT Division
Javaid Haider
SVP & Divisional Head, Logistic Support & Engineering Division, CM Group
Aamir Abbasi
SVP & Divisional Head, Corporate Communication Division
Muhammad Rafique
SVP, Head PMO
S.M. Ali Zamin
SVP & Secretary Operations Committee
Local Board
The local board shall be established for the areas mentioned in sub section (5) of
section B, one each at Karachi and the Lahore, and shall without prejudice to the
powers conferred by the section 12, have power, within the prescribe limits
generally totransact all usual business of the bank. A local Board shall consist of
the following members namely.
The Managing Director
One member appointed by the central board from amongst the Directors
elected by the shareholders registers in the branch register of the area.
Two members appointed by the Central Government from the area in which
the Local Board is established.
Three members elected in a local or special local meeting from the amongst
themselves by the shareholders register in the branch register of the area.
Managing Director
The Managing director shall be appointed by the Central Government for o period
29
7/30/2019 Full Report1
30/80
not exceeding five years and on such salary and terms and conditions of the service
as the central Government may determine.
New Management Structure
The previous management was removed by the bank nationalized ordinance 1974.
The general direction and the superintendent of the affairs and the business of the
banks vests in the Executive Board consisting of the President (Chief Executive)
and five senior executive of the bank. The Federal Government in 1980 constituted
a Board of the bank and two additional members one representing the ministry of
Finance and the other, Pakistan Banking Council.
3.6 Branch Network
Domestic Branch Networks
National Bank of Pakistan is the only Pakistani bank to have representative
offices in all over the Pakistan as well as in Azad Jammu & Kashmir.
3.2 Cash Department
Cash department of NBP is given the complete responsibility of handling all
receipts disbursement of cash, as a result of transaction in both local & foreign
currencies & near cash items such as traveler cheques etc (when they are issued
against cash).As a consequence it is also responsible for the bookkeeping of these
transactions & the safe custody of cash & near cash securities. Following are the
major functions dealing department of NBP
Cash receipts (or receive deposits)
Encashment of cheque
Cash receipts
The depositor uses cheque deposit slip (or cash deposit slip) fordepositing the
amount. There are two types of cash deposit slip:
One for current account-holders
Other for saving account holders. Both are in different colors
for clear identification.
Encashment of cheque
Encashment of cheque cash department of NBP is a separate close part
covered with glasses. No one other than cash departments employee
is allowed to enter into that area.
3.3 Clearing Department
This department deals with the transactions related to the other bank. The State
Bank of Pakistan acts as a clearing agent for the commercial banks. It deals with
the cheques of any other branch of other bank. If more than one Cheque is
attached with slip then the entry is to be done one by one. The Cheque number,
30
7/30/2019 Full Report1
31/80
date on the Cheque and the name of the branch of the bank on which the Cheque
is drawn is entered. When the clearing has been prepared then the next step is to
stamp the cheques and slips with clearing stamp on front of the Cheque and
slip and NBP General Account on the back. After this clearing is to be passed
to the in charge officer who signs on it. Amount is transferred to the customer
account after 3-4 days. Cheques and slips are to be stamped carefully because
sometimes clearing has been returned due to the reason of not properly stamped
or any other.
3.4Remittance Department
Remittance is the monitory transfer from one place to another place or from one
country to another country to fulfill the requirements of the customers by the
order of the customer. Remittance Department at NBP Main Branch, Kotli can be
divided into two sections due to its activities.
Domestic Remittance
Foreign Remittance
3.4.1Domestic Remittance
Domestic remittance section deals with remittance incoming and outgoing but
only in domestic i.e. Pakistan rupee and within Pakistan. Domestic remittance
includes the following eight functions in NBP:
a) Transfer through Pay Order
Pay order is also called as cashier order, managers cheque, bankers cheque,
and cheque on services. Pay order is an instrument through which payment can
be made from one bank to another bank within city. In case of NBP, pay orders
are also used, instead of demand drafts; outside the city where NBP does not
31
7/30/2019 Full Report1
32/80
have its branch. So, we can say except Karachi for all other cities pay orders are
issued by NBP.
b) Transfer through Demand Draft
It has been defined as an unconditional order in writing addressed by one person
to another, signed by the person giving it (the drawer), and requiring the person to
whom it is addressed (the drawee) to pay on demand or at a fixed or determinable
future time a certain sum of money to or to the order of, a specified person (the
payee) or to the bearer. Demand draft is an instrument which is payable on
demand, and through which funds are transferred outside the city or country,
where NBP has its branch. The main and important purpose of issuing the
demand draft from the bank is that environment of our country is not too good to
carry cash from one place to another. So, demand draft helps us to overcome this
situation to some extent because it avoids carrying cash amount with us.
c) Telegraphic Transfer (TT)
Generally a mail transfer takes 3-4 days to reach its destination. T.T. is the fastest
mode of transferring funds from one bank to another bank not in days but in hour
or minutes. In such cases transfer of funds message is passed on through a
telegram, to the drawee branch of the same bank. When the urgency of situation
demands that the payment is to be made immediately then the message is
conveyed to the drawee branch by telephone. Payment to the beneficiary is
effected directly by the drawee office upon identification or through credit into
beneficiarys bank account.
d) Mail Transfer (MT)
This is an order to pay money, drawn by one branch of a bank upon anotherbranch of the same bank or Mail Transfer is the transfer of funds from one branch
32
7/30/2019 Full Report1
33/80
to another branch of the same bank within Pakistan. If such balance is transferred
by means of mail, it is described as mail transfer remittance.
e) Local / Internal Transfer (LT)
Local / Internal transfer is the transfer of funds from one account to another
account within the same branch i.e. Main Branch, Lahore.
3.4.2 Foreign Remittance
Foreign Remittance section deals with remittance (incoming and outgoing) but in
foreign currency and outside Pakistan. Funds are transferred into four types of
currencies by Remittance department.
USD
GBP
JPY
DEM
To facilitate its customers in the area of Home Remittances, National Bank of
Pakistan has taken a number of measures to:
Increase home remittances through the banking system
Meet the SBP directives/instructions for timely and prompt delivery of
remittances to the beneficiaries
New Features
The existing system of home remittances has been revised/significantly improved
and well-trained field functionaries are posted to provide efficient and reliable
home remittance services to nonresident Pakistanis at 15 overseas branches of the
Bank besides Pakistan International Bank (UK) Ltd., and Bank Al-Jazira, Saudi
Arabia.
33
7/30/2019 Full Report1
34/80
Zero Tariffs: NBP is providing home remittance services without any
charges.
Strict monitoring of the system is done to ensure the highest possible
security.
Special courier services are hired for expeditious delivery of home
remittances to the beneficiaries.
3.5 Credit Department
In NBP the credit activities are played under a separate department. So the main
activities of this department are:
To give credit to customers.
Closely monitor the development in different accounts.
Reporting to SBP and head office.
3.6 Advances Department
Advances are the major source of earning income for commercial banks, it is
interest charged on the money lend to the customer. Bank advances to customers
are made either by way of loan or by overdraft on current account. At present
NBP provides both long term as well as short-term loans.
Loans
Cash credit
Overdraft
3.6.1 LoansLoan against Gold
facility of Rs.5000 against 10 grams of gold
34
7/30/2019 Full Report1
35/80
Mark-up 9% per annum
Repayable after 1 year
Under this type of loan, which is granted to the borrower, the head cashier
estimates the value of gold or gold ornaments through an agent {gold smith} and
keeps a margin of 40 to 50%. After the opening of the gold loan a/c a token is
given to the borrower, which is a bank receipt.
On repayment of loan, the gold or ornaments held as security for it, together with
the demand promissory note duly discharged is return to the borrower and his
receipt for the gold ornament taken in the demand loan ledger. This receipts
states that the ornaments returned are complete and are in order. Part delivery of
ornaments is given against part payment of a loan but care is taken that the
ornaments still in the banks possession fully covers the balance for the loan
outstanding. The interest on gold loan is to be applied with quarterly rest.
3.6.2 Cash credit
Here, cash credit a/c is opened in the name of customer to borrow from the bank.
Customer is granted a loan up to a certain limit which is sanctioned by the head
office, which he draw when he requires interest is charged on the amount actually
utilized by the customer. In order to avoid the danger of idle funds, the bank
charges a certain rate if interest, even if the customer does not withdraw any
amount.
The credit is usually given against the securities of goods or merchandise as
follows:
Advances against pledge stock in trade or products
When a cash is granted against the pledge of stick or product, cash credit form is
taken, from the certain products or stock, but the actual pledge is created when the
35
7/30/2019 Full Report1
36/80
stock or finish product are placed under the banks lock and key or the document
of title are duly endorsed to the bank by the borrower.
Hypothecation of stock on finish products
The difference between pledge and hypothecation is that under the pledge the
borrowers goods are placed in the banks possession under own lock whereas,
under hypothecation, they remain in the possession of the borrower or guarantor
and are merely charged to the bank under documents signed by them. Even
though the documents empower the bank to take the possession of the goods
hypothecated, but it is possible that the borrower may actually resist any attempt.
Mortgage of property
Title deeds immovable property is accepted by the bank only as collateral security
or alternatively as unauthorized security.
3.6.3Overdrafts
When the bankers permit his customer to overdraft upon his current a/c up to a
certain limit, it is called overdraft facility provided by the bank. The customer is
charged with the interest for the amount he has actually overdrawn from the bank.
The customer is free to take the overdraft facility up to the limit whenever he
needs and he can at any time return back the advance to the bank by deposited the
amount with the bank.
There are two types of drafts:
Unsecured overdraft
Under such type of overdraft the bank rely upon the personal security of the
customer or customers mentioned on the customers a/c.
Secured overdraftUnder this type of overdraft the bank allows his customer to withdraw more than
his deposits after giving security against the amount overdrawn.
36
7/30/2019 Full Report1
37/80
3.7 Accounts Department
The main function of the accounts department of National Bank of Pakistan is to
maintain general ledger accounts and after the business hours the function of the
accounts officer is to close books.
General ledger
It is the prime record of the branch reflecting its assets and liabilities and serves as
the master control of accounting system of the branch. It consists of only those
accounts, which are authorized by the head office.
Voucher System
Voucher is a written authorization used in approving a transaction for recording
and payment. It is a system, which is generally designed to provide strong internal
control over the transaction, which takes place in any department of the bank. One
debit and one credit voucher is prepared. At the end of the day, these vouchers are
collected and recorded.
Debit voucher is used in two cases
Whenever any expense is incurred
When a depositor withdraws some amount form his/her account
Debit voucher contains
Name of Branch
Date
Branch Code
Account No
Transaction Code
Amount and other details (Narration)
Credit voucher is used in two cases
37
7/30/2019 Full Report1
38/80
When a depositor deposit any amount in his account
Any income received by the bank e.g. bank draft
Expense voucher
It includes:
Salaries given to all employees of the bank
Wages
Rent
Lease Installments
Insurance -Vehicle
Insurance - Cash
Utility Bills
Medical Allowances
Salary Structure
Bonuses are credited after every 6 months i.e. June and December.
These are 1st and 2nd profit bonuses and are equal to one months
basic salary.
Allowances includes house allowance, transport allowance and utility
allowance
Provident Fund is provided to each employee on his/her retirement.
Contribution by employer and employee is 8.3%.
Preparation of Statements
Weekly Statements are sent at first to National Bank of Pakistan headoffice Karachi
38
7/30/2019 Full Report1
39/80
Monthly Statements are sent at first to National Bank of Pakistan head
office Karachi and then these are sent to head office affairs in
consolidation form. All vouchers and statements are signed and
approved by manager accounts or who has authority to sign on behalf
of the bank and whose signatures appears in one of the banks book of
specimen signature or a person who has authority to sign internal
vouchers and records extent of its authority will be made by the
country manager.
Daily Activity Report includes the details of the following:
Loan Transactions
General Ledger Transactions
Fixed Deposits Transactions
39
7/30/2019 Full Report1
40/80
Chapter No: 04
Services and Products of NBP
4.1 International Banking
4.2 NBP Offers
4.2.1 Demand drafts
4.2.2 Mail transfers
4.2.3 Pay order
4.2.4 Traveler's cheques
4.2.5 Letter of credit
4.3 International Banking
4.3.1 New features
4.3.2 Swift system
4.4 Short Term Investments
4.4.1 NIDA
4.4.2 Equity investments
4.5 Trade Finance Other Business Loans
4.5.1 Corporate finance
4.5.2 Agricultural finance services
4.6 NBP Retail Products
40
7/30/2019 Full Report1
41/80
Chapter No: 04
Services and Products of NBP
4.1 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 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
4.2 NBP Offers:
41
7/30/2019 Full Report1
42/80
The lowest rates on exports and other international banking products
Access to different local commercial banks in international banking.
4.2.1 Demand drafts
If you are looking for a safe, speedy and reliable way to transfer money, 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
4.2.2 Mail transfers
Move your money safely and quickly using NBP Mail Transfer service. And we
also offer the most competitive rates in the market.
4.2.3 Pay order *
NBP provides another reason to transfer your money using our facilities. Our pay
orders are a secure and easy way to move your money from one place to another.
And, as usual, our charges for this service are extremely competitive.
4.2.4 Traveler's cheques
Negotiability: Pak Rupees Travelers Cheques are a negotiable instrument
Validity: There is no restriction on the period of validity
Availability: At 700 branches of NBP all over the country
Encashment: At all 400 branches of NBP
Limitation: No limit on purchase
Safety:NBP Travelers Cheques are the safest way to carry our
money
4.2.5 Letter of creditNBP is committed to offering its business customers the widest range of options
in the area of money transfer. If you are a commercial enterprise then our Letter
42
7/30/2019 Full Report1
43/80
of Credit service is just what you are looking for. With competitive rates, security,
and ease of transaction, NBP Letters of Credit are the best way to do your
business transactions.
4.3 International Banking
To facilitate its customers in the area of Home Remittances, National Bank of
Pakistan has taken a number of measures to:
Increase home remittances through the banking system
Meet the SBP directives/instructions for timely and prompt delivery ofremittances to the beneficiaries
4.3.1 New features:
The existing system of home remittances has been revised/significantly improved
and well-trained field functionaries are posted to provide efficient and reliable
home remittance services to nonresident Pakistanis at 15 overseas branches of the
Bank besides United National Bank (the joint venture between NBP and UBL in
UK)., and Bank Al-Jazira, Saudi Arabia.
Zero Tariff: NBP is providing home remittance services without any
charges.
Strict monitoring of the system is done to ensure the highest possible
security.
Special courier services are hired for expeditious delivery of home remittances to
the beneficiaries.
4.3.2 Swift system
The SWIFT system (Society for Worldwide Inter bank 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
43
7/30/2019 Full Report1
44/80
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-PKKA. 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.
4.4 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.
4.4.1 NIDA
National Income Daily Account 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.
4.4.2 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 result in better returns offered to account holders
44
7/30/2019 Full Report1
45/80
4.5 Trade Finance Other Business Loans
4.5.1 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:
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
45
7/30/2019 Full Report1
46/80
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.
4.5.2 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
Watercourse improvement
Wells
Farm power
Development loans for tea plantation
Fencing
Solar energy
46
7/30/2019 Full Report1
47/80
Equipment for sprinklers
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
4.6 NBP Retail Products
Unprecedented Safety - Unprecedented
Return
Premium Aamdani Home Page
Unprecedented Safety - Unprecedented
Return
Premium Saver Home Page
President's Rozgar Scheme - Easy financing
for self employment
Karobar Home Page
47
http://www.nbp.com.pk/Aamdani/index.htmhttp://www.nbp.com.pk/Premium/index.htmhttp://www.nbp.com.pk/Karobar/index.htmhttp://www.nbp.com.pk/Karobar/index.htmhttp://www.nbp.com.pk/Aamdani/index.htmhttp://www.nbp.com.pk/Premium/index.htmhttp://www.nbp.com.pk/Karobar/index.htm7/30/2019 Full Report1
48/80
Affordable, Flexible & Convenient home
financing for allSaibaan Home Page
Take upto 20 Advance Salaries - Affordable
Installations from 1 - 60 months
Advance Salary Home Page
One Card does it all - ATM plus Debit Card
in one
Cash Card Home Page
Invest with Confidence - Marginal Finance
Facility
Investor Advantage Home Page
Meet your need for ready cash against your
idle gold jewelry with no minimum limits
Cash n Gold Home Page
NBP KISAN Taqat
Kisan Taqat Home Page
NBP's affordable agricultural program
offers you a wide range of financingKisan Dost Home Page
48
http://www.nbp.com.pk/Saibaan/index.htmhttp://www.nbp.com.pk/Saibaan/index.htmhttp://www.nbp.com.pk/advancesalary/index.htmhttp://www.nbp.com.pk/cashcard/index.htmhttp://www.nbp.com.pk/Margin/Index.htmhttp://www.nbp.com.pk/CashnGold/index.htmhttp://www.nbp.com.pk/KissanTaqat/Index.htmhttp://www.nbp.com.pk/KisanDost/Index.htmhttp://www.nbp.com.pk/KisanDost/Index.htmhttp://www.nbp.com.pk/KissanTaqat/Index.htmhttp://www.nbp.com.pk/CashnGold/index.htmhttp://www.nbp.com.pk/Margin/Index.htmhttp://www.nbp.com.pk/cashcard/index.htmhttp://www.nbp.com.pk/advancesalary/index.htmhttp://www.nbp.com.pk/Saibaan/index.htmhttp://www.nbp.com.pk/advancesalary/index.htmhttp://www.nbp.com.pk/cashcard/index.htmhttp://www.nbp.com.pk/Margin/Index.htmhttp://www.nbp.com.pk/CashnGold/index.htmhttp://www.nbp.com.pk/KissanTaqat/Index.htmhttp://www.nbp.com.pk/KisanDost/Index.htm7/30/2019 Full Report1
49/80
Knitting Links - AASAN Banking
Online Home Page
NBP Helpline
0800-80080
from 8:30 am to 10:00 pm
NBP's Internet Based Home Remittence
Service
Pak Remit Home Page
Personal Accident Insurance
Protection Shield Home Page
CHAPTER NO: 05
FINANCIAL STATEMENTS OF NATIONAL BANK OF PAKISTAN
5.1 Balance Sheet
49
http://www.nbp.com.pk/HelpLine/index.htmhttp://www.nbp.com.pk/Pakremit/index.htmhttp://www.nbp.com.pk/ProtectionShield/index.htmhttp://www.nbp.com.pk/Pakremit/index.htmhttp://www.nbp.com.pk/Online/index.htmhttp://www.nbp.com.pk/HelpLine/index.htmhttp://www.nbp.com.pk/Pakremit/index.htmhttp://www.nbp.com.pk/ProtectionShield/index.htm7/30/2019 Full Report1
50/80
5.2 Profit and Loss Statement
5.3 Cash Flow Statement5.4 Statement of comprehensive Income
5.5 Statement of Changes in Equity
5.6Ratio Analysis
5.6.1 Return on Total Assets
5.6.2 Return on Equity Ratio
5.6.3 Earnings Per share
5.6.4 Current Ratio
5.6.5 Networking Capital
5.6.6 Equity Ratio
5.6.7 Net Profit Ratio
5.6.8 Gross Profit Ratio
5.6.9 Cost Ratio
5.6.10 Operating Profit Ratio
5.6.11 Operating Ratio
CHAPTER NO: 05
FINANCIAL STATEMENTS OF NATIONAL BANK OF PAKISTAN
5.1 Balance Sheet
As at December 31, 2010
2008 2009 2010 2010 2009 2008
.US Dollars in '000. ...Rupees in '000...ASSETS
1,240,081
1,348,647
1,344,158
Cash and balances withtreasury banks
115,442,360
115,827,868
106,503,5
50
7/30/2019 Full Report1
51/80
446,467 330,741 353,843
Balances with otherbanks
330,389,664
28,405,564
38,344,0
199,431 228,064 268,094 Lending for financialinstitutions-net 23,025,156 19,587,176 17,128,31,988,9
792,534,13
43,508,47
7 Investments-net301,323,80
4217,642,8
22170,822,4
94,808,6
315,533,51
85,559,86
9 Advances-net477,506,56
4475,243,4
31412,986,
6281,97
9 292,802 313,074 Operating fixed assets 26,888,22625,147,19
224,217,
5
37,313 35,656 80,954 Deferred tax assets-net 6,952,666 3,062,2713,204,5
5,187,724 694,729 622,887 Other assets-net 53,496,240
59,666,438
44,550,4
9,521,605
10,998,291
12,051,356
1,035,024,680
944,582,762
817,758,2
LIABILITIES
118,986 123,668 93,226 Bills Payable 8,006,631
10,621,169
10,219,6
471,085 527,198 234,077 Borrowings 20,103,591
45,278,138
40,458,2
7,276,505
8,470,269
9,689,198
Deposits and otheraccounts
832,151,888
727,464,825
624,939,1
Sub-ordinated loansLiabilities against assetssubject
294 496 1,242 to finance lease 106,704 42,629 25,27
Deferred tax liabilities461,74
7 492,168 537,466 Other liabilities 4,616,03842,269,62
339,656,
38,328,6
179,613,79
910,555,20
9906,528,85
2825,676,3
84715,299,
01,192,9
881,384,49
21,496,14
7 NET ASSETS128,495,82
8118,906,3
78102,459,
1
REPRESENTED BY
104,440 125,328 156,660 Share Capital 13,454,628
10,763,702
8,969,7
232,184 264,095 284,688 Reserves 24,450,244
22,681,707
19,941,4
610,776 706,723 766,813 Unappropriated profit 65,857,438
60,696,510
52,456,0
947,400
1,096,146
1,208,161
103,762,310
94,141,919
81,367,0
245,588 288,346 287,986
Surplus on revaluation ofassets-net 24,733,518
24,764,459
21,092,1
1,192,9 1,384,49 1,496,14 128,495,82 118,906,3 102,459,
51
7/30/2019 Full Report1
52/80
88 2 7 8 78 1
5.2 PROFIT AND LOSS ACCOUNT
For the year ended December 31, 2010
2009 2010 2010 2009
US Dollars in '000 Rupees in '000
907,587
1,030,129 Mark-up/ return/interest earned
88472134
77947697
471,443 526,876 Mark-up/ return/interest expensed
45250476
40489649
436,114 503,253 Net mark-up/ interest income
43221658
37458048
128,585 81,633
Provision against non-performingadvances-net
7011046
11043469
Provision for diminution
7,052 34,403 in the value of investment295467
8 605629
236 46Provision against off balance sheetobligation 3965 20237
Bad debts written off directly135,87
3 116,082996968
91166933
5300,27
1 387,171Net markup/ interest income afterprovisions
33251969
25788713
NON MARK-UP/ INTEREST INCOME103,981 112,146
Fee, Commission and Brokerageincome
9631579 8930391
22,360 12,802 Dividend income109949
3 1820336
35,259 25,745Income from dealing in foreigncurrencies
2211139 3028165
53,446 29,253Gain on sale and redemption ofsecurities-net
2512363 4591894
Unrealized gain on revaluation ofinvestments
27 79 classified as held-for-trading 6730 2355
6,430 25,282 Other income217133
6 552216221,52
3 205,307 Total non-markup/ interest expenses176326
401902535
7521,79
4 592,478508846
094481407
0NON MARK-UP INTERESTEXPENSES
52
7/30/2019 Full Report1
53/80
262,81
2 305,091 Administrative expenses
262025
77
2257147
07,228 1,724 Other provisions/ write offs 148026 620780
3,745 1,384 Other charges 118887 321647273,78
5 308,199 Total non markup /interest expenses264694
902351389
7248,00
9 284,279 PROFIT BEFORE TAXATION244151
192130017
3
103,296 114,515 Taxation - current
9835048 8871513
-48,126 -10,936 Taxation - Prior year -939256
-4133282
-
11,643 -23,798 Taxation - Deferred
-204388
7 -999904
43,527 79,781685190
5 3738327204,48
2 204,498 PROFIT AFTER TAXATION175632
141756184
6610,77
6 706,723 Inappropriate profit brought forward606965
105245620
4
Transfer from surplus on revaluation of
fixed assets on account of incremental
1,443 1,371 Depreciation 117738 123934816,70
1 912,592 Profit available for appropriation783774
627014198
4
In Dollars In Rupees
0.15 0.15 Basic earnings per share 13.05 13.050.15 0.15 Diluted earnings per share 13.05 13.05
5.3 CASH FLOW STATEMENT
For the year ended December 31, 2010
2009 2010 2010 2009
US Dollars in '000 ..Rupees..CASH FLOWS FROMOPERATING ACTIVITIES
248,010 284,279 Profit before taxation
24,415,1
19
21,300,17
3
-22,360 -12,802 less: dividend income
-1,099,49
3-
1,920,336
225,650 271,47723,315,6
2619,379,83
7
53
7/30/2019 Full Report1
54/80
Adjustments:
10,097 12,500 Depreciation 1,073,545 86,214
54 108 Amortization 9,300 4,600
128,585 81,633Provision against non-performingadvances-net
7,011,046
11,043,469
7,052 34,403Provision for diminution in the value ofinvestments-net
2,954,678 605,629
236 46Provision against off balance sheetobligation 3,965 20,237
Unrealized gain on revaluation ofinvestment
-27 -78 classified as held-for-trading -6,730 -2,355
-45,122 -3,428Capital gain on redemption of NI(U)T LoCUnits -294,424
-3,875,309
-88 -385 Gain on sale of fixed assets -33,081 -7,587
117 230Financial charges on leasedassets 19,829 10,072
Bad debts written off directly
7,227 1,724 Other provisions /write offs 148,026 620,780
108,131 126,75310,886,1
54 9,286,750
333,781 398,23034,201,7
8028,666,58
7(increase)/Decrease of operatingassets
-29,192 -40,467Lending to financialinstitutions-gross
-3,475,48
0-
2,507,144
-15,941 -48,476 Held-for-trading securities
-4,163,33
8-
1,369,079
-853,472
-107,984 Advances-net
-9,274,17
9
-73,300,03
5-
121,613 56,068Other assets (excludingadvance tax)
4,815,377
10,444,603
-1,020,2
18-
140,859
-12,097,6
20
-87,620,86
1
Increase in operating liabilities
4,682 -30,442 bills payable
-2,614,53
8 402,108
57,367-
298,626Borrowings
-25,647,3
84 4,926,9511,193,7
641,218,9
28 Deposits and other accounts104,687,
063102,525,8
09
54
7/30/2019 Full Report1
55/80
30,306 45,109Other liabilities (excluding currenttaxation)
3,874,183 2,602,792
1,286,119 934,969 80,299,324 110,457,660
-115,469
-107,352
Income taxpaid
-9,219,87
1-
9,916,950
-117 -231 Financial charges paid -19,829 -10,072
-115,586 107,583
-9,239,70
0-
9,927,022
484,0961,084,7
57 Net cash generated from operating activities93,163,7
8441,576,36
4CASH FLOWS FROMINVESTING ACTIVITIES
-555,916
-1,061,6
14Net investments in available-for-salesecurities
91,176,168
-47,744,53
3
128,522 106,345 Net proceeds from Held-to-maturity securities9,133,42
911,038,01
4
22,360 12,802Dividend incomereceived
1,099,493 1,920,336
-20,628 -31,782Investment in operating fixedassets
-2,729,58
6-
1,771,649
-7,190 -3,806Investment in subsidiary andassociates -326,853 -617,495
158 685Sale proceeds of property and equipmentdisposed off 58,852 13,657
-
432,694
-
977,370
Net cash (used) in investing
activities
-83,940,8
33
-37,161,67
0CASH FLOWS FROMFINANCING ACTIVITIES
-245 -569 Payments of lease obligations -48,902 -21,024
-67,769 -93,853Dividendpaid
8,060,510
-5,820,338
-68,014 -94,422Net cash (used) in financingactivities
-8,109,41
2-
5,841,362Effects of exchange differences on translationof
10,706 142the net assets of foreignbranches 12,216 919,475
-5,906 13,107
Increase /Decrease in cash and cash
equivalents
1,125,75
5 -507,1931,684,546
1,678,640
Cash and cash equivalents at beginning ofthe year
144,169,195
144,676,388
1,678,640
1,691,747 Cash and cash equivalents at end of the year
145,294,950
144,169,195
55
7/30/2019 Full Report1
56/80
5.4 STATEMENT OF COMPREHENSIVE INCOME
For the year ended December 31, 2010
2009 2010 2010 2009
US Dollars in '000 ..Rupees in '000..
204,482 204,498Profit after taxation forthe year
17,563,214
17,561,846
Other comprehensiveincome:
Exchange adjustments ontranslation
10,706 142of net assets of foreignbranches 12,216 919,475
215,188 204,640Total comprehensiveincome for the year
17,575,430
18,481,321
56
7/30/2019 Full Report1
57/80
Surplus arising on revaluation of assets has been reported in accordance with the
requirement of the companies ordinance, 1984 and the directives of the Stat Bank
of Pakistan in a separate account below equity.
5.5 STATEMENT OF CHANGES IN EQUITY
For the year ended December 31, 2010
Share
Capital
Reserves
Unappropri
ated profitTotal
CapitalRevenu
eGenera
l
Exchang
eTranslati
on
Statutory
...Rupees...
Balance as at January 1, 20098,969,75
1 5,987,37613,432,3
33 521,338 52,456,20481,367,00
2
Comprehensive IncomeProfit after tax for the yearended
December 31, 2009 17,561,84617,561,84
6
Other comprehensive income-net of tax 919,475 919,475
919,475 17,561,84618,481,32
1
Transferred from surplus on
57
7/30/2019 Full Report1
58/80
revaluation of fixed assets tounappropriate profit-net of
tax 123,934 123,934
Transfer to statutory reserve1,821,18
5 -1,821,185
Transactions with owners
Issue of bonus shares (20%)1,793,95
1 -1,793,951Cash dividend (Rs.6.5 pershare) -5,830,338 -5,830,338
Balance as at December 31,2009
10,763,702 6,906,851
15,253,518 521,338 60,696,510
94,141,919
Balance as at January 1, 2010
10,763,7
02 6,906,851
15,253,5
18 521,338 60,696,510
94,141,91
9
Comprehensive IncomeProfit after tax for the yearended
December 31, 2010 17,563,21417,563,21
4Other comprehensive income-net of tax 12,216 12,216
12,216 17,563,21417,575,43
0
Transferred from surplus on
revaluation of fixed assets tounappropriate profit-net of
tax 117,738 117,738
Transfer to statutory reserve1,756,32
1 -1,756,321
Transactions with owners
Issue of bonus shares (20%)2,690,92
6 -2,690,926
Cash dividend (Rs.6.5 pershare) -8,072,777 -8,072,777
Balance as at December 31,2010
13,454,628 6,919,067
17,009,839 521,338 65,857,438
103,762,310
5.6Ratio Analysis
5.6.1 Return on Total Assets
58
7/30/2019 Full Report1
59/80
This ratio shows the yield earned by the use of assets in financial year. Return on
asset measures the overall effectiveness of management in generating profits with
its available assets.
Formula
Return on Total Assets = Net Profit after tax /total assets * 100
For 2009
=17561846 / 944232762 * 100
=1.86%
For 2010
=17563214 / 1035024680 * 100
=1.70%
Comments
This ratio shows the high profitability in 2009 where it was 1.86% but in 2010 it
is 1.70%, the rate of profitability decreases to 0.16% in 2010.
5.6.2 Return on Equity Ratio
Dividing the earning after tax by shareholders funds carries out this ratio thepurpose of calculating the ratio to find out the yield after utilizing the shareholder
fund for one year. The way of calculating this ratio is given below:
59
7/30/2019 Full Report1
60/80
Formula
Return on Equity=Net profit after tax / shareholders equity * 100
For 2009
= 17561846 / 118906378 * 100
=14.77%
For 2010
= 17563214 / 128495828 * 100
=13.67%
Comments
In 2010 it decrease to 13.67% as compared to 2009 in which it was 14.77% it
means the return on each share decrease with the rate of 1.1% in 2010
5.6.3 Earnings Per share
This is very important ratio for the shareholders and investors. The shareholders
and investors give the main emphasis to the earning per share while making the
decision to invest or to become a member of the company. This ratio is calculated
as follows:
Formula
60
7/30/2019 Full Report1
61/80
Earning Per Share=Earning available to common stock / No. of shares
outstanding
For 2009
=17561846 / 1345463
=13.05
For 2010
=17563214 / 1345463
=13.05
Comments
The bank earning per share remain unchanged it means that the rupee amount
earned on behalf of each outstanding share of common stock has not changed in
2010.5.6.4 Current Ratio
The current ratio measures the firms ability to meet its short term obligations
Formula
Current Ratio = Current assets / Current liabilities
For 2009
=856706861 / 588632541
61
7/30/2019 Full Report1
62/80
=1.45
For 2010
=1247687548 / 641703009
=1.94
Comments
Here the current ratio increased from 1.45 to 1.94 which is a good sign for firm as
its ability to repay its debt is increased.
5.6.5 Networking Capital
Formula
Networking capital = Current assets Current liabilities
For 2009
=856706861-588632541
=268074320
For 2010
=1247687548-641703009
=605984539
62
7/30/2019 Full Report1
63/80
5.6.6 Equity Ratio
Formula
Equity ratio = Shareholders funds / Total assets * 100
For 2009
=118906378 / 944582762 * 100
=12.59%
For 2010
=128495828 / 1035024680 * 100
=12.41%
5.6.7 Net Profit Ratio
This ratio measures the firms success with respect to earning on sales. The net
profit ratio measures the percentage of each sale remaining after all costs &
expenses, including interest, taxes, & preferred stock dividends, have been
decided.
Formula
Net Profit Ratio = Net profit / Sales * 100
For 2009
63
7/30/2019 Full Report1
64/80
=17561846 / 77947697 * 100
=22.53%
For 2010
=17563214 / 88472134 * 100
=19.85%
Comments
The net profit ratio decreased from 22.53% to 19.85% it means net profit ratio
decreased in 2010 with the rate of 2.68%
5.6.8 Gross Profit Ratio
The gross profit ratio measures the percentage of each sales rupees remaining
after the firm has paid for its goods.
Formula
Gross Profit Ratio = Gross profit / Sales * 100
For 2009
=37458048 / 77947697 * 100
=4