NBP Internship Report

INTRODUCTION

INTERNSHIP REPORT ON NATIONAL BANK OF PAKISTAN

INTRODUCTION TO BANKING

There are many definitions of the word “Bank” even the standard encyclopedia and law books find it difficult to state exactly what a Bank is.

There have been many attempts by different writers to explain the exact significance of the term “Bank”. Here some of the definitions are quoted as follows.

According to the Banking Companies Ordinance 1962”Section 5 (b) defines

“Banker means a person transacting the business of accepting, for the purpose of lending or investment, of deposits from the public, and withdrawal by cheques, drafts, order of otherwise, and include any post office saving banks”

According to Crowther

”Bank is a dealer of debt, his own and of other people.”

According to Gilbert

“A bank is a dealer in capital or dealer in money. He is an intermediary party between the borrowers and lenders.”

According to Samulelson

“Commercial banks provide certain services for customers and in return receive payments from them.”

According to Holder

“The modern banker is primarily a dealer in credit.”

University of the Punjab, Gujranwala Campus 1


IMPORTANCE OF BANKING

We can take bank just like a heart in the economic structure and capital provided by it is like blood in it

Banks play very important role in the economic life of a nation. The growth of the economy is dependent upon the soundness of its banking system. Although banks do not create new wealth but borrow, exchange and consume. These make generation of wealth. In this way they become most effective partners in the development of that country.

To encourage the habit of saving and to mobilize these savings is its basic purpose. Banks deposit surplus from the public and then advances these surpluses in the form of loans to the industrialists, agriculturists, businessmen and unemployed people under different schemes so that they set up their own business. Thus banks help in capital formation.

If there are no banks, then there would be concentration of wealth in few hands and great portion of wealth of a country would be idle. In the fewer developing countries rate of saving is very low and due to this, rate of investment and rate of growth is also very low. We can take bank just like a heart in the economic structure and capital provided by it is like blood in it. As long as the blood is in circulation, the organs will remain sound and healthy. If the blood is not provided is not provided to any organ then the organ would become useless. So if the finance is not provided to agriculture sector or to industrial sector, it will be destroyed.

Loan facility provided by bank works as an incentive to the producer to increase production. Banks provide transfer of payment facility, which is cheaper, quicker and safe. Many difficulties in the international payment have been overcome and volume of transactions has been increased. These facilities are very much helpful for the development of trade and commerce.



COMMERCIAL BANKING IN PAKISTAN

It was very difficult for Pakistan to build up its own Banking system immediately after independence without sufficient resources. Following the announcement of the partition plan in June 1947 there was a haste movement on the parts of banks to transfer their funds and accounts across the borders. The banks having their registered offices in Pakistan were transferred to India. In an effort to bring about the collapse of the new state by the persecuting an international policy of withdrawal, the Indian bank offices closed quickly. Those banks, which stayed, were considering the winding up of their business. By 30 th June 1948 the number of schedule banks in Pakistan declined from mere scratch.

Today there are more than 7000 branches of commercial banks along with an established network of supplementary financial institutions. All this development in the banking sect is the result of untiring efforts of four decades.

PHASES OF BANKING IN PAKISTAN

Broadly speaking we can divide the development of commercial banking into four phases

PHASE-1 1947-1974 Establishment of commercial banking system

PHASE-2 1974-1979 Nationalization of banks

PHASE-3 1979-1991 Islamisation process

PHASE-4 1991-2000 Privatization process

FIRST PHASE (1947-74)



SET UP OF COMMERCIAL BANKING SYSTEM

This was the first phase of development of Pakistan’s commercial banking system, which consist of the circumstances under which the development of banking was started in the country.

INITIAL POSITION OF BANKING IN PAKISTAN

There were 19 non-Indian foreign banks in Pakistan at the time of independence with the status of small branch network, whose policies and operations were controlled by their head offices abroad. These banks were engaged solely in export of corps from Pakistan. There were only two Pakistani banks, the Habib bank, which had transferred its head office from Bombay to Karachi after the announcement of the partition plan, and Australian bank which has been working in Pakistani territories prior to June 1947. The government of Pakistan tried hard to eliminate the banking crises. Banking Companies Ordinance 1947 was promulgated to safe guard the interest of both the bankers and the company’s customers. The situation however showed no significant improvements. The imperial bank of India closed down most of its offices in Pakistan, which had been working as the agent of the reserve bank of India was not willing to purchase even token amounts of the government of Pakistan. Securities on the plea that these securities were not marketable. The reserve bank of India was hardly of any help. It refused to help government of Pakistan with advance argument adhoc securities to enable them to make essential disbursements such as salaries and other obligations to add to the difficulties.

The Indian government withheld Pakistan’s share of Rs. 75 crore in cash balances held by her at the time of independence. The foregoing developments clearly brought home the urgency of assuming control and currency in Pakistan and brought to the fore the need to setup a central banking institution to take the place of reserve bank of India. Therefore it was agreed between the government of India and Pakistan to authority of Pakistan from 30th September 1947 to 30th June 1948

In order to make necessary arrangements of the establishment of the central bank of Pakistan a committee was appointed to recommend the necessary steps. Consequently the Governor General of Pakistan and father of the nation Quaid-e-Azam Muhammad Ali Jinnah



Inaugurated the State Bank of Pakistan on 1st July 1948. After the State Bank order was promulgated on 12th May 1948.

When it assumed full control of banking and currency in Pakistan the first important task before the SBP was to issue of currency notes and withdrawal of reserve bank of India, which had been in circulating in Pakistan so far.

SECOND PHASE (1974-1979)

NATIONALIZATION OF BANKS

The banking reforms turned out to be a transitional and temporary step and hardly after 18 months had the government nationalized the banking system. Thus through the Nationalization Bank Act 1974, SBP and all commercial banks incorporated in Pakistan and carrying on business in or outside the country were brought under the government ownership with effect from January 1974. The ownership and management of all Pakistan banks stood transferred and rested in the federal government. The shareholders were provided compensation in the form of federal government bonds redeemable at par any time within a period of fifteen years. The amount of compensation was equal to the break up value of the shares in case of commercial banks. For the State Bank shares the amount of compensation was estimated on the basis of average of the clearing quotations during the six working days preceding nationalization. The chairman, director and chief executives of various banks were remove from their offices other than those appointed by the federal government and the state bank. The central board of banks, managing committees and similar other bodies were dissolved. A Pakistani banking counsel was established for nationalized commercial banks to co-ordinate their activities.

As a result of merger of banks the following five major banking companies were formed:

1. National Bank of Pakistan 2. Habib Bank Limited 3. United Bank Limited 4. Muslim commercial Bank Limited 5. Allied Bank of Pakistan



THIRD PHASE (1979-91)

INTRODUCTION OF ISLAMIC BANKING

In 1977 the Bhutto government was toppled. The martial law government planned to reform the banking sector in a novel way. The overall policy was to Islamize the economy and the banking system, being based on interest was an important target of the new policy. The most preferred form of Islamic bank financing profit and loss sharing would require banks to receive deposit without guaranteeing any return.

The Islamic bank has to acquire a high degree of confidence of the saver to make him deposit his money with them. Not even the return of the principle amount if guaranteed. The Islamic bank cannot finance the project of an investor merely on the furnishing of collateral. The bank will have to be a partner in the project. This will require to careful security of the project and the assessment of risk involved because profits are the function of the amount of risk in the project. Honesty and trust form both sides of the market are more important to the system of Islamic Banking.



FOURTH PHASE (1991-2000)

PRIVATIZATION AND DE-REGULATION

The government headed by Prime Minister Nawaz Sharif was not fully satisfied with the performance of nationalized. The areas, which were severely criticized, were the falling standard of banking services and common red-tapism. There were complaints about the services as delay in home remittances, dispatch of cheques, drafts, inefficient counter services, bad debts of the banks etc. were on the rise. The government decided to privatize these banks. In order to implement privatization policy a privatization commission was established on 22nd

January 1991. The commission has transferred two banks MCB and ABL to the private sector. Application for privatization of other banks namely UBL and HBL were also invited but the bidding response was quite poor. The privatization of these banks is under consideration. Legislation was enacted to permit the establishment of new banks and the government approved 10 application from the private sector for the grant of commercial bank licenses by SBP, out of these 9 new banks have since been incorporated. Till March 1994 there were 20 domestic scheduled banks with 9825 branches and 21 foreign banks with 66 branches in operation in the country. Overall investment of the scheduled banks in the current year rose to 76.7%. at present there are 24 domestic scheduled with 8137 branches and 19 foreign banks with 71 branches are in operation in the country. Total assets of domestic scheduled banks amounting to Rs. 1563.73 billion on 30 th

March 1996. Overall investment of the domestic scheduled banks in the current year declined by 80% over the same period last year.

1. Bank of Commerce Al Habib Ltd.2. Soneri Bank Ltd3. Union Bank Ltd.4. Indus Banks Ltd.5. Mehran Bank Ltd.6. Prime Commercial Bank Ltd.7. Askari Commercial Bank Ltd.8. Bolan Bank Ltd.

Now Mehran bank has been absorbed by National Bank Ltd, due to its poor performance and ultimate failure. Now the ABN Amro Bank has also been included in the list of foreign scheduled banks


HISTORY

OF

NBP


BRIEF HISTORY OF NATIONAL BANK OF PAKISTAN

The normal procedure of establishing a banking company under the

Companies Law was set aside and the Bank was established through

the promulgation of an Ordinance due to the crisis situation that had

developed with regard to financing of jute Trade. The Bank

commenced its operations from November 20, 1949 at six important

jute centers in the then East Pakistan and directed its resources in

financing of jute crop. The Bank’s Karachi and Lahore offices were

subsequently opened in December 1949.

State bank of Pakistan after its formation demanded from the Indian

Reserve Bank the assets against the Indian currency retired from

Pakistan territory. Government of India refused to hand over the

assets worth about five hundred million rupees. The dispute is still

unsettled and these assets are still not delivered to Pakistan. Until June

1950, the Bank was engaged exclusively on jute operation. Thereafter,

it was felt that it could expand its business to include other

commodities as well. Bank took a big stride in 1952, when it replaced

the Imperial Bank of India, as an agent of State Bank of Pakistan.

With the passage of time its functioning diversified as they take over

the function of different institution with the passage of time like in past

they took over the function of Imperial bank of India and now of NDFC

(National Development Finance Corporation)



It is working as the agent of the state bank of Pakistan and performs its

functions wherever state bank of Pakistan is not present.

The government floated its 10 % of the shares in the open market in

past and the ratio became 60: 40 and in future they trying to make it

55: 45.

In 1999 national bank celebrated its golden jubilee during the last fifty

years bank has made substantial strides in the financial services

industry in Pakistan.

In 1999 its market share was around 22% and it remains the largest

financial institution in Pakistan.

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 people who…

Care about relationships. Lead through the strength of our commitment and willingness to

excel. Practice integrity, honesty and hard work. We believe that these are

measures of true success

We have confidence that tomorrow we will be…

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

changing needs of the internal and external environment



Vision and Guide

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



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 our core values


http://www.nbp.com.pk/About_Us/CoreValues.htm


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 people who…

Care about relationships. Lead through the strength of our commitment and willingness to

excel. Practice integrity, honesty and hard work. We believe that these are measures of

true success

We have confidence that tomorrow we will be…


MANAGEMENT

OF

NBP


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

changing needs of the internal and external environment

MANAGEMENT OF NATIONAL BANK OF PAKISTAN

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.


http://nbp.com.pk/My%20Documents/My%20Webs/About_Us/Pres_Message.htm

MANAGEMENT

OF

NBP

MANAGEMENT

OF

NBP


Syed Ali Raza Dr. Waqar Masood Chairman & President Director

Iftikhar Ali Malik Syed Shafqat Ali Director Director

M. Zubair Motiwala Azam Faruque


HIERARCHY

OF

NBP


Director Director

Sikandar Hayat Jamali ikhlaq Ahmad Director Security board of directors

HIERARCHY OF NATIONAL BANK OF PAKISTAN


PRESIDENT

EXECUTIVE VICE PRESIDENT

SENIOR EXECUTIVE VICE PRESIDENT

SENIOR VICE PRESIDENT

OFFICERS GRADE

I II IIIVICE PRESIDENTASSISTANT VICE

PRESIDENTCASHIERASSISTANTSPEONS

HIERARCHY

OF

NBP


BRANCH HIERARCHY OF NATIONAL BANK GONDLAWALA ROAD, GUJRANWALA


Branch Manger

Managers

Manager Operation

Assistant Manager

Assistant officers

Officers

Deputy Officers

Clerks

Peons and Guards

MARKETING

MIX


The branch manager is the head of the branch is assisted by the manger operations in carrying out the main functions of the branch. Remaining organizational structure is divided according to the requirements of different departments. There are currently three managers, two deputy managers, seven offices, 4 deputy officers and 2 assistant officers working in the branch. The total number of employees working in the branch is 18.

MARKETING MIX OF NATIONAL BANK OF PAKISTAN

4 P’s 4 C’sProduct/ Service Customer SolutionPrice Customer CostPlace ConveniencePromotion Communication

Marketing is the task of creating, promoting and delivering goods and

services to consumers and businesses. Organizations identify and

profile distinct group of buyers who might prefer or require varying


PRODUCTS

OF

NBP


products and marketing mixes. The customer seeks for value and

satisfaction. The organizations can increase the value of the customer

offering in several ways e.g. raising benefits, reducing costs etc.

marketing mix is a set of marketing tools that the firm uses to pursue

its marketing objectives in the target market. These marketing tools

are known as 4 p’s of marketing. These four marketing tools are

viewed as 4c’s by the consumers.

To identify the customer needs and fulfilling hem is the basic objective

of an organization. Marketing is not just satisfying your customers, you

have to delight them and this can be done by acting upon this phrase.

“Under Promise and Over Deliver”

National Bank provides a winning combination of products and services

to its prime customers. It is one of the country’s leading commercial

banks, which ensures complete security, and reliability in all-financial

transactions.

PRODUCTS

A product is anything that can be offered to a market to satisfy a want

or need and a service is an act or performance that is essentially

intangible and does not result in the ownership of anything. What

products or services have to be offered to the target market depends

on the market requirement and also the organization’s profits. The

organization will offer those products and services, which result in

maximum profits and minimum costs.

A bank is an organization rather a financial institution that provides

products such as different types of deposits and services like foddering

financing facilities to its customers.


PRODUCTS

OF

NBP


National Bank offers a diversified line of products and services to its

customers. The unique products and services offered by National Bank

are as follow:

Consumer banking Corporate banking Commercial banking NBP advance salary NBP cash card NBP cash & gold NBP Karobar NBP Kisan Dost NBP online banking NBP Saibaan SWIFT

CORPORATE BANKING

These are branches which have an exposure of over Rs. 100 million.

Usually includes multinational & public sector companies.

COMMERCIAL BANKING

The branches which has a credit exposure of less than Rs. 100 million

but having a credit portfolio of more than Rs. 20 million (excluding

staff loans)

Usually branches in large markets and commercial areas come under

this category.

CONSUMER BANKING


PRODUCTS

OF

NBP


These are the branches which have exposure up to Rs. 20 million and

these include all the branches which are neither corporate nor

commercial branches.

NBP ADVANCE SALARY

Affordable installments from 1 to 60

Months, Take up to 15 advance salaries.

Currently for NBP account holders of

government or related organization employees.

NBP CASH CARD

ATM plus debit card in one -------- One Card does it all

NBP CASH & GOLD

Meet your need for ready cash against your idle gold jewelry with no minimum limits

GET EXTRA BENEBIT FROM YOUR GOLD

NBP KAROBAR

This is a Rozgar scheme introduced by President of Pakistan recently, this includes

NBP Sasti Savari


PRODUCTS

OF

NBP


NBP Chalti Pharti DukanNBP Rabata Duniya Se NBP Maal atao Pasey Kamao

NBP KISAN DOST

NBP affordable agriculture program offers you a wide range of financing

Recently National Bank of Pakistan has introduces home finance scheme with name of Saibaan.

Affordable Easy installment No surprises

Flexible

Mark-up choices Grace period option

Convenient

Structured and programmed Minimum approval and disbursement timing


PRICES

OF

NBP


PRICE

It is second important tool of marketing mix because it plays

a major role in determining the customer’s choice. Also it is

the only marketing tool that results into revenue. The banks

offer advances to their clients by charging ascertain rate of

mark up or interest. This mark up or interest charged is the

price. The customer makes a comparison between the prices

offered by other financial institutions and National Bank and

then selects the most suited offer.

The charges are stated in a schedule of charges for every

facility. Some of them are given:


PLACES

OF

NBP


NBP Products Rate of chargesCash & Gold 12% per annumNBP Karobar 7.5% per annumKisan Dost 6.5% per annumNBP Saibaan 7.5% per annum

PLACE

The location of the bank plays a vital role in making its

operations profitable. If the bank is located in some business

center then it will be very easy for it to attract business

people as its customers. Therefore NBP has most of its

branches at places where it can reach its targets customer


Punjab 732

Sindh 290

NWFP 110

Blochistan 32

Azad Kashmir 31

Regional Offices 29

Domestic 1224

Overseas 18

Total 1242

PLACES

OF

NBP


easily. The branch network of National Bank is given as

follows:

Here is a list of the banks locations in Pakistan accordance to each province or territory;

Sindh : Dadu, Sanghar, Hyderabad,

Jacobabad, Shikarpur, Karachi,

Larkana, Mirpurkhas, Badin,

Nawabshah, Sukkur, Khairpur,

Tharparkar.


http://en.wikipedia.org/wiki/Sindh

http://en.wikipedia.org/wiki/Pakistan

PLACES

OF

NBP


Punjab : Bahawalpur, D.G. Khan, RYKhan, Faisalabad,

Gujranwala, Sialkot, Narowal, Jhang, Jhelum, Gujrat,

Chakwal, Darya Khan , Bhakkar, Lahore, Multan,

Murree, Attock, Gilgit, Rawalpindi, Sahiwal, Sargodha,

Sheikhupura.

NWFP : Abbottabad, Mansehra, Bannu, D.I. Khan, Kohat,

Mingora, Mardan, Peshawar.

Baluchistan : Quetta,

Azad Kashmir : Muzaffarabad, Mirpur.


http://en.wikipedia.org/wiki/Azad_Kashmir

http://en.wikipedia.org/wiki/Quetta

http://en.wikipedia.org/wiki/Baluchistan

http://en.wikipedia.org/wiki/North_West_Frontier_Province

http://en.wikipedia.org/wiki/Punjab_(Pakistan)


29 Regional Offices

1,195 Branches

143 Online Branches

4 Subsidiaries

INTERNATIONAL NETWORK


PLACES

OF

NBP

PROMOTION

OF

NBP


NBP also has branches in USA, Canada, Germany, France,

Bahrain, Egypt, Bangladesh, Hong Kong, Japan, South Korea,

The Peoples Republic of China, Afghanistan, Turkmenistan,

Kyrgyz Republic, Kazakhstan, Uzbekistan and Azerbaijan

18 Overseas Branches

4 Representative Offices

1 Subsidiary

1 Joint Venture

PROMOTION


http://en.wikipedia.org/wiki/Azerbaijan

http://en.wikipedia.org/wiki/Uzbekistan

http://en.wikipedia.org/wiki/Kazakhstan

http://en.wikipedia.org/wiki/Kyrgyz_Republic

http://en.wikipedia.org/wiki/Turkmenistan

http://en.wikipedia.org/wiki/Afghanistan

http://en.wikipedia.org/wiki/The_Peoples_Republic_of_China

http://en.wikipedia.org/wiki/South_Korea

http://en.wikipedia.org/wiki/Japan

http://en.wikipedia.org/wiki/Hong_Kong

http://en.wikipedia.org/wiki/Bangladesh

http://en.wikipedia.org/wiki/Egypt

http://en.wikipedia.org/wiki/Bahrain

http://en.wikipedia.org/wiki/France

http://en.wikipedia.org/wiki/Germany

http://en.wikipedia.org/wiki/Canada

http://en.wikipedia.org/wiki/USA

DEPARTMENTS

OF

NBP


National Bank is actively participating in promotion of its products and services through advertisement and other promotional schemes.

Initially, the bank focused on the upper class customer’s only and offered products for a limited class of people. But now the strategy has been changed and the bank is now targeting the middle market also. The products offered are of diverse nature to cater the needs of maximum number of people.

Customer Oriented Attitude

National Bank values its customers. Customers’ complaints are encouraged because it gives an opportunity to know the needs of the customer and build more confidence in them.Most of the promotional efforts are done through

Direct marketing Public relations

National bank sometimes gets suggestions and recommendations from its good customers.

Branch layout is being designed in such a way that more and more customers are attracted. Some of the branches of National Bank have a very good entrance and outlook but many still need to be improved.

FIELD OF ACTIVITIES OF NBP

This is the practical portion of my report and here I will explain different departments of NBP and how these


DEPOSIT

DEPARTMENT


departments work. Following are the main department of National Bank of Pakistan.

DEPOSIT DEPARTMENT

ADVANCES DEPARTMENT

CLEARING DEPARTMENT

BILLS DEPARTMENT

REMMITTANCE DEPARTMENT

ACCOUNT DEPARTMENT

TECHNOLOGY DEPARTMENT

DEPOSIT DEPARTMENT

The function of deposit department is to collect deposits from customers. Following type of deposits are offered by National Bank.

1. Current deposit


DEPOSIT

DEPARTMENT


2. Saving bank deposit3. Profit and loss saving account4. Fixed deposit5. Short notice term deposit 6. Foreign currency deposit 7. Cumulative deposit certificate (other)

CURRENT DEPOSIT

In this type of account the client is allowed to deposit or withdraw money as and when he likes. He may, thus, deposit or with draw several times in the day if he likes. Usually the bank allows this and service chargers are deducted by the bank.

SAVING BANK DEPOSIT

This type of account is for those persons who want to make small savings. This type of account is opened with Rs. 500. In this case deposits can be made only up to a costing amount and with drawls are allowed twice a week. If the depositors wants to withdraw more than Rs. 15000 a seven days notices is required before the withdrawal.

PROFIT & LOSS SAVING A/C

These types of accounts are one step towards the Islamisation of Banking system in the Pakistan. Under such types of accounts the bank allows no interest to the customers. The executive board of the bank declares profit or loss every year. PLS saving account having a running minimum credit balance of Rs. 100 would be eligible for sharing profit/loss of the bank. The rate of profit or loss on PLS saving accounts shall be determined by the bank at the close of each half year, in its sole discretion and the banks


DEPOSIT

DEPARTMENT


decisions shall be final and binding on the PLS account holder

Fixed Deposit

In this type of account a certain amount is deposited for a certain, period such as six-month, two years or longer. A fix deposit receipts is issued in the same of the depositor. The officer incharge and the bank manager sign the receipt. A notice is given to the depositor requesting the depositor to withdraw his money or to renew this deposit. The interest allowed on fixed varies with the period for which the deposits are made.

SHORT NOTICE TERM DEPOSIT

This kind of deposit is for a short period. The depositor may withdraw his deposit at any time by giving seven days notice to the banker. In this type of deposit facility the trader is allowed to withdraw his amount with interest of the deposited period.

FOREIGN CURRENCY DEPOSIT

Foreign currency account is opened by depositing foreign currency. In NBP, you can open foreign currency account in:

1. Us Dollar ($)2. Pound Sterling (£)3. Japanese Yen (¥)4. Deutsche Mark (DM)


CLEARING

DEPARTMENT


CLEARING DEPARTMENT

Every bank acts in two way i.e.

1. Paying Bank2. Collection Bank

Here in theory no legal obligation on a banker to collect cheques, drawn up to other banks for a customer. It is, however, an important function of crossed cheques. A large part of this work is carried out though the bankers clearing house wherever it is established.


CLEARING

DEPARTMENT


CLEARING HOUSE

A clearing house is the place where representatives, of all the banks get together for the purpose of off setting the inter bank indebtedness arising from the transfer of deposits by a customer of a particular bank to another bank.

ADVANTAGES OF CLEARING HOUSE

The advantages are manifold. It prevents the cost and waste involved in collection each and every cheque and claim. Which a banker holds against another, across the counter with all the danger of loss in the transit incumbent upon it. Great economy is also achieved in the employment of liquid cash by setting the difference by simpler transfer of credit from one account to another, there by minimizing the necessity of holding large wash balances, clearing house works under the control of State Bank of Pakistan.

A banker has no legal obligation to collect cheque drawn upon other banks for the customers, though modern banks have assumed this important function of their own choice. Therefore, it is very important that since they have assumed this function, the banker should be very careful in their performance, otherwise they will face more difficulties. So, if they provide this facility when the cheques are crossed.

FUNCTIONS OF CLEARING DEPARTMENT

The following are the main functions of clearing department.

1. To accept transfer deliveries and clearing cheques from the customer of the branch and to arrange for their collection.


CLEARING

DEPARTMENT


2. To arrange the payment of cheque drawn on the branch and given for collection to any other branch of National Bank of Pakistan or any other members, or sub-members of the local clearing house.

3. To collect amounts of cheques drawn on members, sub-members of the local clearing house, sent for collection by those National Bank Limited branches which are not represented the local clearing house.

PROCEDURE OF DEPOSITING CHEQUES IN CLEARING HOUSE

Whenever a customer wants to deposit cheque, etc, he fills a pay in slip and hands it over the counter along with the instruments he wants to deposit with bank. As far as possible, the customer desire that on of the staff member fill in a slip for him, he should be obliged promptly.

The smaller portion of the perforated pay in slip is handed over to the depositor and the portion becomes the regular portion of a credit voucher.

1. Transfer Cheques

Transfer cheques are those cheques, which are collected and paid by the same branch of bank.


CLEARING

DEPARTMENT


2. Transfer Delivery Cheques

Transfer Delivery cheques are those cheques, which are collected and paid by two different branches of a bank, situated in the same city.

3. Clearing ChequesClearing cheques are those cheques in which the payee (Person who deposit cheques for collection) and the drawer of a cheque maintain the account with different banks.

SCRUTINY OF CHEQUE

When the cashier receives the cheques, which are to be deposited for clearing purpose the following points must be verified.

The instrument should be neither stale nor post dated. If the instruments is crossed, not negotiable, it can be for

the third party (can be endorsee of an order cheque, or a holder of bearer cheque)

The instrument should not bear any unauthorized alteration.

The amount in words and figures should be the same. The instruments should be drawn on a member, or any of

local branches. If the cheque is crossed “Account payee’s” “Account

payee only” or “Payee’s Account”, it should be accepted for collection for the payee’s account.

The cheques or drafts should not be crossed specially to any other bank.


CLEARING

DEPARTMENT


A cheque payable to one of the joint account holder should not be collected for the joint account without the payee’s endorsement, or consent.

A cheque payable to a firm should not be accepted for credit to a partner’s account.

A cheque drawn by a customer in the capacity of an agent. Attorney, or Manager of his company or firm, should not be collected for credit to his personal account.

Pay orders, although negotiable, should not be collected for third parties.

Do not collect an instrument in the account of an agent, or of the servant of the payees of endorsee of the instruments.

Mail transfer Receipts pay ships and treasury receipt should not be collected for persons other than the payee.

If an account is new, or the balance or operation of the account is not satisfactory, satisfy yourself about the titles of the customer to the instruments before the titles of the customer to the instrument before accepting the deposit.

Brach agent’s permission should be obtained before accepting a third party cheque or draft for creditor the account of the staff member.

If the payee is a government department, government official, or a trust account, the instrument cannot be collected, but of the payee’s account.

If the payee of an instrument is NBP, it can collected for credit of the drawer’s account, or the amount of the instrument may be utilized as desired be the drawer in writing.

Cheque payable to a trust, account should not be collected for credit to at trustee account.

All the endorsement should be regular, and on endorsement should be missing. After the cashier scrutinizes the cheques he must also scrutinize the pay in slip.


CLEARING

DEPARTMENT


SCRUTINY OF PAY-IN-SLIP

Following steps are involved in the scrutiny of pay in slip.

1. On both the counterfoil and the pay in slip following should be checked.

I. Date of DepositsII. Account numberIII. Title of the accountIV. The cheque/number and the drawer bank/name.V. Total amount in words and figures

2. Customer should use separate pay in slip for transfer, transfer delivery, and clearing cheques.

3. The amount noted should be the same as the amount of the instruments, and the amount in words and figures should be same

PROCEDURES AFTER SCRUTINIZING

After scrutinizing the cheques and other deposit instruments and paying slip at the counter the following procedure is under taken by cashier if he is satisfied.

1. Fixing the stamp.

2. Scrutiny, and receipt by the authorized officer

3. Returning the counter foil to the depositor.

4. Certificates and confirmation by the officer-incharge of the department.


CLEARING

DEPARTMENT


5. Separating the cheque into transfer delivery, and clearing cheque

PROCEDURE OF CLEARING AT CLEARING HOUSE

The mechanism of setting inters bank indebtedness operates as follows:

Clerks representing various banks meet at a common place, The Clearinghouse, everyday. Every clerk then delivers to the others the cheques and the other claims which their respective banks hold against his banks hold against his bank cheques and other documents dishonored will be returned to the representative of the respective bank. The various amounts of receipts and deliveries are now added up and a balance is struck there in and the final settlement is effected by the supervisor of the clearing house by transferring balance kept and the central bank by these various clearing banks.


ADVANCES

DEPARTMENT


ADVANCES DEPARTMENT

INTRODUCTION

The function of advances department is to lend in the form of clean advances, against promissory notes, as well as secured advances against tangible and marketable securities. According to the Prudential Regulations of the State Bank of Pakistan, No bank can issue a clean advance of more than Rs. 100,000/-. The bankers prefer such securities that do not run the risk of general depreciation due to market fluctuations.

Common Securities for the banker’s advances are as under:

SECURITIES

GUARANTEES

When an application for advance cannot offer any tangible security, the banker may rely on personal guarantees to protect himself against loss on advances or overdraft to the applicant.

MORTGAGE


ADVANCES

DEPARTMENT


A mortgage is the transfer of an interest in specific immovable property for the purpose of security the payment of money advanced or to be advanced by; way of loan, and existing or future debt, or the performance of an engagement which may rise to a pecuniary liability. The transfer is called a mortgagor, the transferee a mortgage.

HYPOTHECATION

When property in the shape of goods is charged as security for a loan form the bank the ownership and possession is left with the borrower, the goods are said to be hypothecated. The essence of hypothecation is that neither the property in the goods not the possession of them are possessed by the lender, but the security is granted by means of letter of hypothecation, which usually provides for a banker’s charge on the hypothecation goods.

PLEDGE

In a pledge the ownership remains with pledge, but the pledgee has the exclusive possession of property until the advance in repaid in full. While in case of the default the pledgee has the power of sale after giving due notice.

PROMISSORY NOTE

Sometimes promissory note is also accepted as a security, “A promissory note is an instruments in writing containing an unconditional undertaking signed by the maker, to pay ;on demand or at a fixed or determinable future time a certain sum of money only, to or to the order of certain persons, or to the bearer or the instrument.” A promissory note is incomplete until has been delivered to payee or the bearer. Moreover, the sum promised in a promissory note may be


ADVANCES

DEPARTMENT


made by two or more makers who may be liable there on jointly and severally.

KINDS OF ADVANCES

The advances which are given by National Bank are as under:

RUNNING FINANCE (Overdraft)

Running finance (old name overdrafts) is a short term loan allowed by the bank for a period of one year. The running finance account can be operated and daily sale proceeds can be deposited into the account. The mark-up is recovered on the products of daily outstanding balance. The running finance is suitable for meeting day to day financial needs of the business.

CLASSIFICATION OF RUNNING FINANCE

1. UnsecuredUnder such type of overdraft the bank pay upon the personal security of the customer’s mentioned on the customer’s account.

2. Secured

Under this type of overdraft the bank allows his customer to withdraw more than his deposits after giving security against the amount overdrawn.

The Securities against which they given are:

Share certificate, Saving Certificate Deposits Mortgage of property Guarantee of person


ADVANCES

DEPARTMENT


DEMAND FINANCE (DF)

Demand Finances are those advances which are allowed in lump sum for fixed period and are repayable lump sum or gradually in installments which could be monthly, quarterly, biannually or annually.

CLASSIFICATION OF (DF)

1. Demand Finance (Packing Credit)

Scheme introduced by SBP for exporter of carpet, surgical instruments, at zero percent rate of interest. While banks provides at concessional rate of interest.

2. Ordinary Loan

Qarz-e-Hasana Scheme Loans are allowed to the students, teachers without any interest or mark up with the recommendation of the MPA or MNA.

3. Loan for Staff

Loans are offered to the staff of the following categories.

House Building Loans against mortgage of property. Loan for purchasing vehicles. Loan equivalent to month’s salary.


ADVANCES

DEPARTMENT


CASH FINANCE (COMMERCIAL LOANS INWARD)

These type of loans are given against following:

Against locally manufactured goods. Against pledge Against commodities Against Trust Receipts

FINANCE AGAINST FOREIGN BILLS (FAFB)

This facility is available to both local and foreign bills

1. FAFB (local) advance against Railway receipts and truck receipt, a company with bills of exchange and invoices, are given under this head.

2. FAFB (foreign) advances against foreign bill covering bills of exchange, bills of lading airway bills of exchange etc.

AGRICULTURE LOANS

Loans to the farmers with holding up to 25 acres for meeting their short term, medium and long term agricultural production requirements, such as:

Agricultural inputs Tube Wells Live Stock Framing Land improvements


ADVANCES

DEPARTMENT

BILLS

DEPARTMENT


INDUSTRIAL LOANS

Besides the short-term loans which play an important part in working capital requirements, medium and long-term loans are also given to industrial sector for purchases of machinery and other capital nature goods.

IMPORT EXPORT BUSINESS/TRADE FINANCE

NBP Provides highly efficient trade finance services for import/export business for our clients/customers through large number of authorized branches where trained and motivated staff is available to handle the business on behalf of customer


BILLS

DEPARTMENT


BILLS DEPARTMENT

Bills department the following functions:

1. Inward Bills for Collection (IBC)2. Outward Bills for collection (OBC)

INWARD BILLS FOR COLLECTION (IBC)

These are bills or cheques etc. which is collected locally. These are received from outstation branches banks and parties.

Demand Draft

It refers to the payment of money on demand of the holder of draft. Demand draft includes DD issues and DD payable.

OUTWARD BILLS FOR COLLECTION (OBC)

Clean Bills

These are negotiable instruments, drawn on outstation branches, bills sent for collection on behalf of the customers i.e. cheques, drafts or treasury bills etc.

Documentary Bills

These are bills accompanied by documents such as R.R.T.R. Bills of lading etc. having title to goods, collected by the bankers on behalf of their customers.

PAY SLIP


ACCOUNTS

DEPARTMENT


Pay slip is an instrument in receipt, issued by the bank in the following cases:

1. On account of expenditure incurred by the bank.2. On account of refund of a payment to a persons under

certain circumstances.

PAY ORDER

Pay order is issued to other banks for collection of payments as said.

ACCOUNTS DEPARTMENT

Usually accounts are maintained in two ways:


ACCOUNTS

DEPARTMENT


1. Journal System

2. Voucher System

In journal system entries are posted in Journal Books and then posted to ledger. It is adopted by industrial institutions.

Voucher system is use for every transaction. Voucher has to be prepared either in cash or in transfer or in clearing. The sheet upon which these vouchers are summarized transactions-wise and consolidated into a figure is called supplementary.

Types of Supplementary

Supplementary are of two types:

1. Debit Supplementary2. Credit Supplementary

Debit Supplementary is used for debit voucher and credit supplementary is used for credit voucher books.

BOOKS AND REGISTERS

Books and registers used by bank are as follows:

General ledger

Ledger of A/Cs

Balance Book (for a/c ledger)


ACCOUNTS

DEPARTMENT


Token Book

Cashier Long Book

Cash Order Register (SND, DAC & Pay order is recorded)

Daily Transaction Long Book Day Book Transfer Book Open/Close Register Pak A/C Book Suspense A/C Book Weekly Telegram Book (Cost is written) T.T. Issued Register T.T. or Telegraphic Transfer Payable Register D.D. Issued Register D.D. or Demand Draft Payable Register Law Charges Recoverable A/C Book (under suit

account) Office Order Book P/L Income and Expenditure Accounts Book P/L Balance Book for Income and Expenditure A/C

(weekly balances of expenditure A/C are recorded) Cheque Book Issue Register Stock Register Cheque Books in hand PLS (TDR) Term Deposit Register Stationery in Hand Register OBC (Outward Bills for Collection) Register Dak Inward Register Dak Outward Register Stationery in Hand Register Cash in Transit Register Clearing Register Inward/Outward Running Finance Register Office Attendance Register


REMMITTANCES

DEPARTMENT


INCOMES

Income Includes

1. Brokerage (A bank sells and buys shares, stocks, debentures, other securities and receives payments for these services)

2. Discount 3. Service Charges4. Rent (On Building)5. Commission (from utility services)

EXPENDITURES

Expenditures Includes

1. Salaries, allowances and provident fund2. Rent, taxes, insurance, lighting etc.3. Profit paid on deposits and borrowings4. Postage, telegram, and stamps5. Stationary, printing and advertisement charges etc.6. Auditor’s fee and legal charges

REMMITTANCES DEPARTMENT

Remittance department performs following functions:

1. Mail Transfer (MT)2. Telegraphic Transfer (TT)3. Demand Drafts (DD)

MAIL TRANSFER (MT)


REMMITTANCES

DEPARTMENT


When a customer requests the bank to transfer his money from one branch of bank to another branch of the same bank or from one city to another city to the same bank or any other bank. Customer fills the form given by bank. If the customer has an account with that amount as mentioned in the application form then concerned officer will undertake the following procedure to make the mail transfer complete.

1. Branch Mail transfer form2. Receiving Branch Register copy3. Issuing branch register Copy 4. beneficiary advice 5. advice to customer

In case where the customer is not account holder of the bank then the customer will have to deposit the amount which he wants to transfer under Mail. Then the above said procedure will be done.

TELEGRAPHIC TRANSFER (TT)

This type of transfer is simple. After filling the application form the concerning officer shall fill the telegraphic transfer form. Then it is sent to the required bank which on receiving it immediately makes the payment to the customer and afterwards the voucher are sent to that bank by ordinary mail.

DEMAND DRAFT (DD)

Demand draft is just like cheques and issued when the customer wants to take cash with him personally. The idea behind is to avoid the risk and burden of currency notes in huge quantity. Demand draft can easily be handled whatever amount it has and the money can easily be taken from the bank when it is presented. In fact, the bank persuades the customer to transfer money by drafts and avoid the risk of frauds involves in MT and T.T. Draft is only


TECHNOLOGICAL

DEPARTMENT


issued when the bank knows customer and bank has the confidence in him

In case of transfer of money by drafts, the customer has to fill an application form. Then the concerned officer fills the following forms:

1. Customer’s advice2. Customer’s debit form3. Register copy4. Cover Advice

A foreign bank uses the cover advice if draft is issued to National Bank of Pakistan.

FOREIGN DEMAND DRAFT

Foreign Demand Draft is just like demand draft. The only difference is that a bank issues FDD to the bank of another country. It requires foreign exchange and it involves seven forms, which are to be filled.

TECHNOLOGICAL DEPARTMENT

Technological advancements are also affecting the banking industry. The foreign banks have a competitive edge over all local banks in their technologies' advancements and automated systems. Local banks have also realized the gravity oil this situation and are striving to add computerized systems to their branches

NBP is now fully concentrated on it. There are more than 1242 branches of NBP all over Pakistan and out of these more than 143 branches are fully computerized Almost all .the branches of big cities are computerized; therefore,


TECHNOLOGICAL

DEPARTMENT


the need for a technology department at each branch is growing. Now a day, a computer division is working in each city to provide service to ad the branches of that area. ATM system is also introduced in many branches in major cities. Following is the brief description of these ATM machines.

NBP ATM NETWORK

CITIES NUMBER OF ATMS

1. Burewala 01

2. Faisalabad 06

3. Gujar Khan 01

4. Gujranwala 04

5. Gujrat 01

6. Hyderabad 06

7. Islamabad 16

8. Karachi 21

9. Lahore 13

10. Mirpur 02

11. Multan 04

12. Muzaffarabad 03

13. Peshawar 04

14. Quetta 04

15. Rawalpindi 05

16. Sheikhupura 01

17. Sialkot 03

18. Taxila 01

19. Wah Cantt 01


http://nbp.com.pk/ATM_Finder.htm#Wah

http://nbp.com.pk/ATM_Finder.htm#Taxila

http://nbp.com.pk/ATM_Finder.htm#Sialkot

http://nbp.com.pk/ATM_Finder.htm#Shiekh

http://nbp.com.pk/ATM_Finder.htm#RWP

http://nbp.com.pk/ATM_Finder.htm#quetta

http://nbp.com.pk/ATM_Finder.htm#peshawar

http://nbp.com.pk/ATM_Finder.htm#Muz

http://nbp.com.pk/ATM_Finder.htm#Multan

http://nbp.com.pk/ATM_Finder.htm#mirpur

http://nbp.com.pk/ATM_Finder.htm#Lahore

http://nbp.com.pk/ATM_Finder.htm#Karachi

http://nbp.com.pk/ATM_Finder.htm#ISB

http://nbp.com.pk/ATM_Finder.htm#Hyderabad

http://nbp.com.pk/ATM_Finder.htm#Gujrat

http://nbp.com.pk/ATM_Finder.htm#Gujranwala

http://nbp.com.pk/ATM_Finder.htm#GKhan

http://nbp.com.pk/ATM_Finder.htm#faisalabad

http://nbp.com.pk/ATM_Finder.htm#Burewala

WORK

DONE

BY

ME


WORK DONE BY ME

During my internship in the National Bank of Pakistan

Limited, I really enjoyed to work with the staff of Branch,

Gondlawala Road, Gujranwala from 20thJuly to 2nd

September, 2006 and have a wish to be employee of

National Bank of Pakistan Limited. It was almost impossible

to work in all the departments within that limited time. But

on my request, the staff of the branch provided me the

opportunity to work in the different departments for the sake

of practical knowledge. I am really very thankful to branch


FIRST

WEEK


manager Sir Ashraf Meher sb that provides me a learning

environment in the branch.

During my internship training in the National Bank of

Pakistan as I early mentioned that I have worked in different

departments & seats and learnt the followings.

OPENING OF NEW ACCOUNT

Account opening and closing is the function of accounts departments. Bank’s customers may be individuals (Single or Joint), firms (partnership/proprietorship), Autonomous corporations, Limited Companies, Charitable Institutions, Associations Educational Institutions or Local Bodies. NBP normally opens following types of accounts.

Current account

Saving account

BASICS TO OPEN AN ACCOUNT

During the span of mine internship in National Bank, I learned and observed a lot of about the opening of an



account. Basically I think that the opening of an account is the establishment of a contractual relationship between the banker and the customer. By opening an account at a bank a person becomes a ‘customer’ of a bank. Further I am going to express the basic requirements and steps involved in the opening of an account.

INTRODUCTION AND PRELIMINARY INVESTIGATION

Before opening an account National Bank of Pakistan as like the other banks in Pakistan ascertain whether or not the person who is going to open the account is a desirable customer or not. Then National Bank of Pakistan determine the prospective customer’s integrity, respectability, occupation and the nature of business by the introductory references given at the time of account opening. Negligence in this informal preliminary investigation may result in serious consequences not only for the banker concerned directly but also for other bankers and the general public who may be affected indirectly.

In order to further strengthen and streamline this process, the Federal Ombudsman of Pakistan, vide his ruling on complaint No. II/31/5186, has directed the banks to retain with the account opening form a Photostat copy each of the National Identity Cards of the person desiring to open an account as well as that of the introducer. As per these directions, the concerned Branch Managers are required to obtain the original National Identity Cards along with their Photostat copies and then return the original after attesting the authenticity of the retained copy.



Preliminary investigation is necessary because of the following reasons:

Avoid Frauds: In this regard I learned that if a banker does not make the necessary inquiries mentioned above he may enable dishonest persons to possess cheque books for fraudulent purposes. If any such person happens to be an undercharged bankrupt, the banker might be placed in an awkward position for having allowed such a person to open and open a bank account.

Safeguard against unintended overdrafts: Sometimes due to a mistake an account may be given an overdraft, For instance, the ledger keeper, misreading the balance of an account honors a cheque for an amount larger than the balance. Similarly a credit entry belonging to a customer may be made by mistake in another customer’s account. In such situations the excess amount withdrawn by the customer can only be realized if the customer is a respectable person.

Inquiries about clients: Being a banker I think National Bank of Pakistan has a business obligation to respond to inquiries from other banks etc. about his customer’s financial position. Though the banker gives only a general ideal about the financial standing of his customer, it should nevertheless have the necessary information available with him.

SPECIMEN SIGNATURE

When an account is opened with National Bank of Pakistan customer provides to the bank a specimen of the form of signature which would appear on all his cheques to express his authority for the payment of cheques drawn on his banker. This specimen is taken generally on a card specially



designed for this purpose, and rule for the customers, full name, and account number are entered on it.If the bank has reasons to doubt the genuineness of a signature, he should either get it confirmed for his satisfaction or return the cheque with the remark ‘Signature differs’. If the signature of the customer is forged the banker cannot escape his liability because he has actually acted on his customer’s mandate.

SIGNATURE OTHER THAN IN ENGLISH

If a customer signs in a language other than English or Urdu, he is requested to fill a Vernacular Form. This is a type of indemnity whereby the customer relieves the bank of any responsibility in case there is any mis-verification of signatures by the bank and the cheque is paid. The vernacular Form is obtained because the bank officers are not used to verification of signatures other than in English or Urdu; hence there is likelihood of misverification.

HOW TO OPEN AN ACCOUNT (GENERAL)

Before opening an account in National Bank of Pakistan I observed that the following points must be considered in this regard.

Another account holder of the bank should properly introduce the new customer.

The account holder should sign the account opening form in the presence of bank officer and the signature is duly verified.

A copy of identity Card is required by Bank.

Against submission of the Bank’s prescribed application form, duly introduced in the manner provided and on supplying such document, as may be required and



account may be opened. The Bank reserves to itself the right to refuse to open and account without assigning any reason.

Each account shall be allotted a distinct number that is to be quoted in all correspondence with the bank relation to the account.

Minimum amount for opening and continued maintenance of various types of accounts is as follows:

Rs.

Saving 500

Current 500

Term Deposit 1000

The bank reserves the right to change the above mentioned minimum balance requirement at any time without any notice.



PROCEDURE TO OPEN AN ACCOUNT

According to my practice in National Bank of Pakistan, When a customer wants to open an account, the bank officer gives him an application form. All information, which is necessary to be known by the bank, are requirements of the application form. Form also requires the essential documents to be attached by the customer.

Basically following information is required to open an account with National Bank of Pakistan.

Title of Account

Full Name of Applicant

Occupation

Address

Telephone No.

Currency of account

Nature of Business

Introducer’s Name, Address & Signatures

Special instruction regarding the account

Initial Amount of the Deposit

Signature of the applicant



DOCUMENTS TO BE ATTACHED

Further I learned that if you wanted to open an account with National Bank of Pakistan then you should attach the following documents with your application form which are different for different categories.

SOLE PROPRIETOR’S ACCOUNT

In order to open an account with National Bank of Pakistan Limited Sole Proprietors have to submit their business registration certificate number.

PRIVATE / JOINT ACCOUTS

For individual or private or joint accounts National Identity Card is required.

JOINT STOCK COMPANY

Before an account of a Public Limited Company is opened National Bank of Pakistan Limited must ask the person authorized to do so to submit the certified copies or the following documents:

Certified true copy of the Memorandum and Articles of Association of the company.

Certified true copy of the resolution of the board of directors / managing committee / governing body regarding conduct of the account.

Certified list containing names and signatures of the directors / office bearers.

Certified true copy of the certificate of incorporation or registration.



Certified true copy of the certificate of commencement of business (in case of public limited companies).

Balance Sheet

I.D. Card copy of each director

Original is also enclosed for inspection and return

List of persons authorized to operate the account.

Power of Attorney in favor of the person opening account.

PARTNERSHIP FIRM ACCOUNT

Information which is required to be submitted to National Bank of Pakistan Limited by a partnership firm in this case is as follows:

Full Names

Address

Specimen of signatures of the partners

Certified true copy of partnership deed Registration No. if the Partnership is registered

SOCIETIES / CLUBS AND ASSOCIATIONS ACCOUNT

National Bank of Pakistan Limited is authorized to open the accounts of the societies/clubs and associations, These are non-trading organizations, formed for the promotion of culture, science, education, recreational activities and charitable purposes etc. some of these institution are registered under the Societies Registration Act, 1866, and are issued a certificate of registration after they have been found fit for registration.

ISSUANCE OF CHEQUE BOOK



When a customer opens an account with the bank, he is provided with cheque book for withdrawals from account. However, the first cheque book is given to the customer only when all the required documents are checked. A cheque book contains ten, twenty five, fifty or hundred leaves. The cheque book also carries a requisition slip for the issuance of the new cheque book. This slip is duly filled and singed by the customer. The signature of the customer is verified by the bank and new cheque book is issued to the customer and serial numbers of the cheque are duly entered in the book of the bank. Along with the signature, person should also write his full name & address.

Usually only one cheque book is issued at a time, however big concerns who need a number of cheque books at a time, may ask the bank to stock as number of cheque books in their name and to point their name on these cheque books.

Bank debits the client’s account for excise duty of Rs.2.50/- per cheque and keeps the cheque book ready for the customer, as on his advice.

The officer keeps and maintains the cheque book register Cheque book inventory and cheque books issued are recorded in this register. The account number for which the cheque book is issued and the number of leaves are also recorded in this register when the cheque book issued an entry is passed in the cheque book issue register.

In case of loss of cheque book or requisition slip on cheque book the customer has to fill the Form No. 216-B to obtain a new cheque book.

PAYMENT OF CHEQUES


SECOND

WEEK


In the National Bank of Pakistan Limited I learnt how to make payment of a cheque. In fact I done the duty of token clerk mostly but I also worked and participated the procedure followed for the payment of cheques. Actually the customer is required to withdraw its deposits through the cheques out of cheque book issued to him drawn on the branch where he is maintaining the account. The cheques are paid in one of the following ways:-

By cash payment over the counter

By transfer (from one account to an other)

By collection/clearing

TOKENS / HANDLING / ISSUANCE

Before commencement of business, the cashier incharge shall hand over the stock of tokens (supplied by C. O. K) to the token issuing official against acknowledgement in the token issue (hand over) Register R-84, indicating therein the number of tokens received. Token issuing official shall count the tokens received, arrange them in serial order in a poker ready for issuance.

At the close of the business, all un-issued tokens shall be received back by the cahier incharge, against his initials in the register from the token issuing official. He shall tally the total with the number of tokens issued in the morning by adding the number of tokens received back by him (from customers) and number of tokens pending with the customer (if any). When the quantity of tokens physically held by him agrees with the number of tokens issued in the morning, these shall be placed in the cash safe along with the closing cash of the day.

The loss of any token need not to be circulated amount the branches and be treated as local issue to be dealt by branch



at its own. The paying cashier will keep a list of numbers of the tokens which have been lost.

On presentation of cheque instrument for cash payment a token shall be issued by the token issuing official after scrutinizing its following aspects:-

1. The cheque/instrument presented relates to the branch and is not crossed.

2. The cheque/instrument is bearer or order, in case it is an order one the payee is known to the branch.

3. The date on the cheque/instrument is in order. The instrument is not undated or post-dated or stale. A cheque is stale or out of date, which is more than six months old on the date of presentation.

4. Amount in words and figures agrees and is absolutely certain.

5. It has been duly signed by drawer i. e. the account holder/issuing branch and is also signed by the payee/bearer.

6. There is no alteration/cutting/over-writing.

7. The cheque/instrument is not mutilated, torn or cancelled.

8. All cancellations and alterations on the cheque instruments have been authenticated by the drawer under his full signature.

9. Crossed cheques/instrument presented by a bank for payment at the counter is accompanied by its memo dully signed by authorized person (s) of the presenting bank.

10. In case of telegraphic transfers the payee has signed revenue stamps of adequate value affixed on the receipt, and his signatures have been verified.

11. Cash Payment voucher has been signed:

a) By manager and accountant/authorized officer of the branch.

b) By the payee on the reverse.



12. In case of demand draft/pay order payee has been identified and has signed on the back of the instrument.

After verifying the above points and satisfying that cheque/instrument is apparently in order the token issuing official will affix the rubber stamp on the reverse of the cheque/instrument as per specimen given below. He shall give token No. of the token being issued by him against the cheque, record the date and time of issuance and shall put his initials at the relevant column. At the time of payment, cashier making the payment shall note down the time of payment under his initial:-

After recording token No., date and time on the back of the cheque, token issuing official shall state in the relevant column. Token No. and Nature of Account, Name of Account through bearer or self and amount on the payment side of the cash book. In case of telegraphic transfer demand draft, pay order and cash payment vouchers relevant head of account, amount and other particulars shall be noted by him.The token made of brass, engraved with bank and branch name and serial number shall be delivered to the bearer of cheque and other instruments ensuring that it is being delivered to the presenter only and in case of any doubt fresh signature of the presenter shall be taken before delivering the taken.


National BANK OF PAKISTAN LTD.

………………………………...…..BranchToken No…………………………...……..Date ……………………………...……….Time Token Issued…………………...…...Initial …………………………………......Time of Payment …………………...…….Cashier’s Initial …………...………...……


SCRUTINY OF THE CHEQUE BY LEDGER KEEPER BEFORE ITS POSTING IN THE LEDGER OR ACCOUNT CARD

On completion of formalities referred above the cheque is handed over to the ledger keeper and other instruments to the concerned departments. Ledger keeper will again scrutinize check and verify the points as given below:-

The account on which cheque is drawn is neither closed nor dormant or inoperative.

It bears token stamp on the reverse.

The cheque is of our bank and the branch.

The cheque is out of the cheque book(s) issued.

The signature of drawer is there.

The account number, title of account is there.

Is not un-dated, post-dated, stale or out of date.

Payment of the cheque has not been stopped by the drawer.

There is no legal bar for the payment of cheque account is not attached, under lien or the account holder is deceased.

The funds are available/sufficient to honor the cheque i.e. the amount does not exceed the credit balance of the account (or the un-drawn portion of the sanctioned drawing power in case of cash finance account or current account) having approved running finance facility.

Amount in words and figures tallies.

No. previous entry in the ledger is un-authenticated.

In case it is drawn on account marked as similar account, it should be ensured that the cheque is being posted to the correct account.



Endorsement made thereon is prima facie in order.

Alternations/mutilations/cuttings/over-writings, (if any) is confirmed by the drawer under his full signatures.

In case cheque is presented in transfer delivery, “Transfer Delivery” stamp is affixed.

The collecting bank’s discharge is in order.

Crossings of other bank (if any) are properly cancelled. Where the cheque has been presented through

clearing, it bears crossing and clearing stamps of the same bank with date.

POSTING OF CHEQUES/OTHER INSTRUMENTS AND FIXATION OF STAMP AS PER NATURE OF PAYMENT

After proper scrutiny the cheque is posted in the ledger/card folio number/sheet number of the account is entered on the top left corner of the cheque and “Pay Cash” or “TRANSFER” stamp as the case may be is affixed on the face of the cheque. The ledger keeper shall sign on the cheque with the narration “Entered” to signify that it has been posted after proper checking and is in order.

In case transfer cheques another stamp as per specimen given, is affixed:



Debits to an account against unlearned cheque are not allowed without the authority of the branch manager. The credit slips on local banks shall be retained till receipt of proceeds from them. The credits to the accounts in respect of cheque in clearing shall be posted in the evening on receipt of advices from the main branch (clearing) and withdrawal against such credits will be allowed on the next morning.If payment of a cheque creates an authorized or unauthorized finance or a debit balance is within or excess of the authorized drawing power, then all such cheques be entered in the payment Authority Register (R-No. 65) with full particulars of the cheque, the balance of the account against which they are drawn and the amount of the authorized drawing power and /or unlearned cheques (if any) be presented in register to the manager, who shall write “Pay” or “Return” in the register under his initials. In case of “Return” he shall add the objection under which it is to be dishonored. The officer incharge Deposits must see by reference to this register that no such cheque is paid without the sanction of the manager.

WHEN CHEQUES ARE RETUNED FOR INSUFFICIENT FUNDS THE RELATIVE MEMOS MUST BE INITIALED BY

THE MANAGER / ACCOUNTANT

The Officer Incharge Deposits/Accountants/Manager shall again scrutinize the cheque and after satisfying himself that the cheque is in order in all respects he will pass it in the ledger or in the account card for payment under his full signatures. The cheques shall be cancelled in red ink in such a way that signatures of authorized officer cross out the


“P A S S E D”

Manager Accountant

THIRD

WEEK


signatures of the drawer. Cheques shall be passed by authorized officers singly or jointly in accordance with the signing/passing powers delegated.The Cheque cancelled/passed for cash payment shall be forwarded to the paying cashier for payment.

HOW TO CLOSE AN ACCOUNT

The account can be closed by the customer at any point in time. The customer is required to submit and application for closing the account. Then the account is closed out and his balance is paid to him. Cheque book is returned back to bank and the officer cancel and the remaining cheques in cheque book.

UTILITY BILLS COLLECTION

I worked in the utility bills collection department as the

National Bank of Pakistan collects utility bills on behalf of

WAPDA, Sui Gas Companies, and Pakistan

Telecommunication Corporation Limited by putting the

stamp on the utility bills “Paid”, Date of payment, Signature

of the officer receiving the utility bills. After receiving utility

bills a list is made on the form which is called Bills scroll

form. One copy of the scroll is with the bank for evidence


FOURTH

WEEK


whereas the original copy with the receipt of the bills is sent

to the billing department of the respective corporation. The

bank charge commission on the bills.

CASH MANAGEMENT

The most important department of National Bank of Pakistan limited which deals in money (receiving deposits at lower rates and lend them out at higher rates of interest). This department also called as Chest Department and manager of it is called Cash Manager or Chest Manager. In those branches where this department is not separately existed, the branch manager performs the duties of the Chest Manager.

The excess cash (More than its insured limit by the insurance company) of the branches of the region is collected by the main branch. The main branch is also bound to send its excess cash (more than its insured limit) to the State Bank of Pakistan. No branch can have cash its safe more than its insurance at any time at the time of closing cash, if it is so the manager will be responsible (not the insurance


FIFTH

WEEK


company) whether or not he informed to the regional office (exception to the limit which is insured for the day).New Notes and Prize Bonds are also part and parcel of the Cash Management. Keys of the Safe lockers are with the three authorized persons each one of them is responsible for cash as at the time of closing the cash the officers including Cash officer presented and lock the safe after counting and scrutinize the cash. The cash officer maintain its daily cash book with specification of notes (Bonds are also recorded in the books in relation with cash) and other vouchers, after being satisfied the manager authenticates the books and vouchers regarding cash with stamp and signature. at the end I would like to conclude that the cash management is being done in the National Bank of Pakistan Limited very effectively.

PROCEDURE FOR ADVANCING LOAN

I also worked in the credit department, where I learnt about credit applications. In this regard the bank adopts the following procedure in order to grant a loan. A customer applies for a loan to the manager, who says him to give details of his property. The details of the proposal and the photocopies of the document to the title of property are sent to the legal advisor of bank. The legal advisor gives his legal opinion upon the documents. The branch manager, in the light of the opinion received from the legal advisor, discusses the proposal with the advancing manager whether to give or not the loan to the applicant. If manager allows granting the loan all the documents along with request letter are sent to regional office for approval. In the regional office the proposal is analyzed and if the office is satisfied a consent letter prepared which is signed by the regional controller credit. This letter is sent to the branch manager. After receiving it the manager finance reviews the consent letter, and prepares a DAC (Disbursement Authorization



Certificate). DAC can be made only for people who have a bank account.

The following documentation is made for loan.

An application or request letter for loan by the customer

Legal opinion of the legal advisor of the bank (for the title deeds)

Consent letter from the regional office

Vetting Certificate (includes consent No., Facility whether fund based or no-fund based, addresses etc.)

Valuation of property any consultant or any panel of consultants approved by State Bank of Pakistan

Original title deed or sale deed

Affidavit

General power of attorney (made by advocate for the person/owner taking loan for the company)

Mortgage deed

Mutation document made

Verification of the property by the bank from the competent authority

Hypothecation of stock certificate (Running is to be given against 75% margin of stock)

IB-25R Letter of hypothecation (duly signed by the party)

IB-12 , DP Note/Promissory Note (Bank prepared itself, duly signed by the party, revenue stamps of Rs. 100 put on it)

IB-6R Agreement of finance mark up (Contract with party for taking mark up on quarterly basis)

IB-24 (used for title deed)

IB-29 (used for guarantee from party)


LAST

WEEK


IB-26 (used for pledge of stock, margin is different for different goods)

No. IB-28 (used for lien) etc.

After that Loan is sanctioned to the party fulfilling all the terms and conditions for the purpose. The procedure given above is for both short and long term loans. The thing which is most important here is that the banks first keeps in mind and analyzes according to the rules prudential regulations of the State Bank of Pakistan.

ASSIGNMENT GIVEN BY MY BRANCH MANAGER

Saibaan is the home finance scheme of National bank of Pakistan which is recently introduced by Prime Minister of Pakistan. During last week my Branch manager gave me assignment on Saibaan in order to completely study it and compare it with other banks home finance scheme. The results of my assignment are as follow:



Open the door to your dream home the NBP

What is NBP Saibaan?NBP Saibaan is the most affordable House Financing Scheme. You can avail now and repay over a 3 to 20 years period

Home purchase loans up to 10 million Home reconstruction loans up to 10 million

Home improvement loans up to 2.0 million (3 to 15 years)

IntroductionNational Bank of Pakistan (NBP) has announced the launch of a housing scheme to cover all sections of the society with monthly income starting from as low as Rs. 5000/- per month.

Branded as 'NBP Saibaan' (Housing for all), the scheme offers a maximum loan of Rs 10 million in accordance with the debt burden criterion. Loans are available for Home Construction, Home Purchase and Home Improvement. For Home Improvement Loans the maximum amount is Rs. 2.00 Million.



Home Construction and Home Purchase loans can be repaid over a period of 20 years, whereas the repayment period for Home Improvement loan is 15 years.

The scheme was launched at a function in Karachi presided over by Mr. Shaukat Aziz, Pakistan's Finance Minister

How can apply You are a Resident Pakistani national

You are aged between 21 and 62 years at the time of application/ disbursement of loan

You are a Salaried person, self-employed professional or business person

You have a Net Take Home income not less than Rs. 5,000 per month (Govt. and related organization employees) and Rs. 10,000 per month (for other salaried class) Rs. 15,000 per month (for business persons and self employed)

Your property is located in NBP approved localities

Your duration of service is: Two years for salaried and Three years for Self-Employed/ Business Persons.



Required Documentation With Application

With Applications Form

Two attested passport size photographs Two attested copies of your National Identity Card Cheque for the processing charges

Property Documents

Any title document available (other documents may be required)

AND

FOR SALARIED PERSONS, WHOSE SALARIES ARE DISBURSED THROUGH NBP BRANCH

Employer Undertaking for remittance of salary at relevant NBP branch for credit to customer’s account (to be provided at a later stage, format available at relevant branch)



Employee ID Copy attested by NBP Branch (where applicable)

Attested copies of last three (3) months salary slips

Attested copies of last three (3) months bank statements

2) FOR SALARIED PERSONS OF MNCs AND NBP APPROVED COMPANIES

Employer Undertaking duly attested by relevant NBP Branch, where applicable (to be provided at a later stage, format available at relevant branch)

Attested copies of last three (3) months Salary Slips

Letter of Verification of Employment on Company Letterhead mentioning the date of joining

Attested copies of last three (3) months bank statements

3) FOR OTHER SALARIED PERSONS

Letter of Verification of Employment on Company Letterhead mentioning the date of joining

Attested copies of last three (3) months Salary Slips

Attested copies of last twelve (12) months bank statements

Attested copies of last three (3) months paid bills for electricity and telephone OR copies of last (12) twelve months credit card bills (which ever is available)

4) FOR BUSINESS PERSONS

Bank Certificate stating applicant maintaining Business Account and the date of account opening.



Attested copy of latest Form 29 in case of Private or Public Limited Company

Attested copy of Partnership Deed (where applicable)

5) FOR SELF-EMLPLOYED PERSONS

Attested copy of current professional association membership/practicing certificate. Adequate proof of professional engagement like bank certificates

Attested copy of Partnership Deed (where applicable)

Instructions for completing the Application Form:

Fill-in the form completely

Print the "completely filled" form

Get it signed by Referees

Sign it yourself

Attach the Required Documents

and submit "In PERSON" to NBP Saibaan Team


http://www.nbp.com.pk/Saibaan/ContactSaibaan.htm

http://www.nbp.com.pk/Saibaan/RequiredSaibaan.htm


Mark Up RatesFixed Rate Option

Priced at 10 years PIB rates plus 3.5 % with re-pricing after 10 years (subject to a minimum floor)

Variable Rate Option

SBP Discount Rate with 12 months re-pricing (subject to a minimum floor)

Processing Fee

For government employees including NBP employees irrespective of

the finance amount Rs. 500/= For Others:

Financing below Rs. 1 million: Rs. 1,000Financing between Rs. 1 to 4 million: Rs. 3,000Financing above Rs. 4 million: Rs. 6,000

Other Charges

Income Estimation, Legal and valuation Fee will be charged as per actual



Prepayment (Complete/ Partial) Charges

2% of the amount being prepaid if pre-payment occurs during the first (5) years of loan period. No penalty will be charged after five (5) years

Mark Up RatesHome Finance

Mark-up Rates of other BanksAs on 29-08-2006

BANK MARK-UP RATE REMARKS

For Salaried Class For Business Class

Prime 7.00% 7.00%

NBP 7.50% 7.50% If govt. employee then 6.5%

UBL 7.80% 7.80% Free Property Insurance

ABN Amro 8.25% 9.75%

HBL 8.25% 8.25% Minimum salary req. Rs. 12000/-

Askari 8.50% 8.50% (7-8 % for Army Officials)

Citibank 8.50% 9.50%

Union 8.50% 9.50% 8% if loan is above of 4M & free Pl

Meezan 8.50% 9.50%

MCB 8.75% 9.25%

Standard Chartered

9.00% 10.0% (Less 0.6% if age is less then 40 years)

Faisal Bank 9.00% 9.00%


FINANCIAL

ANALYSIS


Soneri 9.00% 9.00% Max. Loan limit upto 5M

PICIC 9.50% 9.50%

Bank AlHabib 9.50% 9.50%

HBFC Variable rate from 7 to 16%

FINANCIAL ANALYSIS

"Financial statement analysis is the process of identifying of financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit &loss account," and it is done through ratio analysis.

RATIO ANALYSIS:

Ratio means “one number expressed in term of another a ratio is statistical yardstick by mean of which relationship between two or various figures can be compared or measured. Here we are going to explain the ratio analysis of NBP.



Financial ratios can be divided into the following six parts.

A. Liquidity ratiosB. Activity ratiosC. Leverage ratiosD. Profitability ratiosE. Investor ratiosF. Bank special ratios

A. Liquidity ratios Current ratios Quick ratios Absolute Liquid ratio

B. Activity ratios Inventory turnover ratio Average collection period Average payment period Total assets turnover ratio

C. Leverage ratios Proprietary ratio Debt ratio Debt to Equity ratio Debt to Tangible net worth ratio Debt to Funds ratio External-Internal Equity ratio



D. Profitability ratio Return on total assets Return on-equity Return on investment Return on fixed assets Average profit per branch Net profit Margin Interest income to total income Interest expense to total expense Return on advances

E. Investor Ratios Earning per share P/E ratio Dividend per share Dividend yield ratio Dividend payout ratio Break up value/Book value per share M/B ratio

F. Bank special Ratios Earning assets to total assets Return on earning assets Net margin to earning assets Loan loss coverage ratio Equity to total assets Deposit time equity Loan to deposit ratio



Because here we are discussing ratio analysis of bank, therefore we will not discuss A & B category of ratios.

2005 2004 (Rupees in thousands)

ASSETSCash 71196956 94446552Balance with other banks 31019330 49784884Lending to financial institutions 16282942 10511322Investments_ net 156985686 149350096Advances – net 268838779 220794075Operating fixed assets 21941056 19141569Other assets_net 23941056 9202969Deferred tax assets_net ------------ -----------

577719114 553231467LIABILITIESDeposits and other accounts 463426602 465571717Borrowings from financial inst. 8756847 11084790Bills payable 1741156 7214671Other liabilities 24974450 23068314Deferred tax liabilities 4462718 29185Sub ordinated loans ----------- -----------Liabilities against assets 16629 17058

503378402 506985735NET ASSETS 74340712 46245732REPRESENTED BY Share capital 5908927 4924106Reserve 13526041 10812914Unappropriated profit 16713506 9161747

36158474 24899767Surplus on revaluation of assets 38182238 21345965

74340712 46245732



2005 2004(Rupees in ‘000)

Mark-up/return/interest earned 33633735 20947333Mark-up/return/interest expensed 10321768 6559398 Net mark-up/interest income 23311967 14387925Provision against non-performing loans and advances

2446739 1515354

Provision for diminution in the value of investments

(245881) 185707

Bad debts written off directly 23069 14297Provision of balance sheet obligations --------- 32807

2223927 1748165Net mark-up/interest income after provisions

21088040 12639770

NON MARK-UP/INTEREST INCOME Fee commission and brokerage income 4926604 2099195 Dividend income 1718478 1273563Income from dealing in foreign currencies 1205638 1008988Other income 1573905 875113 Total non-mark-up/interest income 9424625 8257159

30512665 20896926NON MARK-UP/INTEREST EXPENSESAdministrative expenses 11195133 887801(Reversal) / Other provisions 198298 32243 Other charges 63206 8284 Total non-mark-up/interest expenses 11456637 8919328Compensation on delayed tax refund ---------- -----------PROFIT BEFORE TAXATION 19056028 6195372 Taxation – current year 7154002 4950000 Prior years (1098709) 847958 Deferred 291291 (15729)



PROFIT AFTER TAXATION 12709444 6195372

Unappropriated profit brought forward 9161747 5892902 Transferred from surplus on revaluation of fixed Assets

43221 45496

9204968 5938398 Profit available for appropriation 21914412 12133770APPROPRIATIONS Transfer to Statutory reserve (2541889) (1248586) General reserve ---------- ----------- Capital reserve ----------- ----------- Reserve for issue of bonus shares (1181785) (984821)Proposed cash dividend (1477232) (738616)

(5200906) (2972023)Unappropriated profit carried forward 16713506 9161747Basic and diluted earning per share after tax

21.51 10.48



2005 2004 (Rupee in 000)

CASH FLOW FROM OPERATING ACTIVITIES Profit/(Loss) before taxation 19056028 11977601Less: Dividend income 1718478 1273863

17337550 10703738Adjustments for non-cash chargesDepreciation 567458 598928Amortization – intangible assets 2446739 ----------Provision against non-performing advances (245881) 442595Provision for diminution in the value of investment

----------- (172876)

Provision for diminution in the value of other assets

23069 149593

Bad debts written off directly (28635) 8771Gain on sale of non banking assets (17922) -------Loss on sale of fixed assets 2216 (39324)Provision for potential lease losses 198298 1200

2945322 98888720283872 4667695

(Increase)/Decrease in operating assets Lendings to financial institutions (5473515) (534847) Advances 279072 (40570180) Others assets (50514512) 26142

(8176486) (41422187)(Increase)/Decrease in operating assetsBills Payable (5473515) (829636) Borrowings from financial institutions (1724818) (25037087) Deposits (2145115) 9557765 Other liabilities 1166962 26142

(7994564) (16282816)(54928862) (53037308)

Income tax paid 8019454 (683995)Income tax refund 27106 370208



Net cash flow operating activities (54928562) 30892555CASH FLOW FROM INVESTING ACTIVITIES Net investments in available-for-sale securities

6189586 105292873

Net investments in held-to-maturity securities 7193074 (45878054)Net investments in held-for trading securities 1718478 ---------------Dividend received (804423) 181258Investments in operating fixed assets (29705) (1265675)Investment in subsidiary and associated companies

23861 --------------

Net cash flow from investing activities 14290871 30040288CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issue of right shares (736529) (640)Dividend paid (20779) (818306)Net cash flow from financing activities (575308) (536208)Ex. difference in cash transactions in foreign branches

(16726) (56354)

Increase/(Decrease) in cash and cash equivalents

(41412025) 60540128

Cash and cash equivalent at beginning of the year

142995560 82455432

Cash and cash equivalents at end of the year

101583535 142995560



SOLVENCY ANALYSIS



Solvency analysis of a firm indicates the amount of the other

people’s money being used to generate profit. In general,

these analyses are more concerned with long term debts,

because these commit the firm to a stream of payments

over the long run. Solvency analysis includes:

Proprietary ratio

Debt ratio

Debt to Equity ratio

1. PROPRIETARY RATIO

=


Total equity

Total Assets


Year 2005 (000) 2004 (000)Total Equity 74340712 46245732

Total Assets 577719114 553231467

ratio 0.13 0.08

2. DEBT RATIO/ SOLVENCY RATIO

=

Year 2005 (000) 2004 (000)Total Debts 503378402 506985735

Total Assets 577719114 553231467

ratio 0.87 0.92

3. DEBT TO EQUITY RATIO

1) =

Year 2005 (000) 2004 (000)

Long term Debts 85781848 83122476

Equity 74340712 46245732

ratio 1.15 1.80

DEBT TO EQUITY RATIO

2) =


Total equity

Total Assets

Long term Debt

Equity

Total Debt

Equity


Year 2005 (000) 2004 (000)Total Debts 503378402 506985735

Equity 74340712 46245732

ratio 6.77 10.96

INTERPRETATION

The overall leverage position is showing better trend as compare to previous year. The contribution of equity in total assets is increasing, while the debt contribution is decreasing which is better for business. Equity ratio is increased which shows 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 ANALYSIS



Profitability analysis of a firm indicates the overall efficiently

of the management. Without profit a company can not

attract the outside capital. Profitability analysis includes:

Return on total assets

Return on-equity

Return on investment

Return on fixed assets

Average profit per branch

Interest income to total income

Interest expense to total expense

1. RETURN ON ASSETS

= × 100

Year 2005 (000) 2004 (000)


Net Profit after Tax

Total Assets


Net Profit after Tax 12709444 6195372

Total Assets 577719114 553231467

return 2.20% 1.12%

2. RETURN ON EQUITY

= × 100

Year 2005 (000) 2004 (000)Net Profit after Tax 12709444 6195372

Equity 74340712 6295372

return 17.09% 13.40%

3. RETURN ON INVESTMENT

= × 100


Investment 156985686 149350096

return 8.10% 4.15%

4. RETURN ON FIXED ASSETS

= × 100


Fixed Assets 9454365 9202969

return 134% 67%



Equity


Investment


Fixed Assets


5. AVERAGE PROFIT PER BRANCH

=

Year 2005 2004Net Profit after Tax 12709444000 6195372000

No. of branches 1242 1226

Average Profit 10233047 5053321

6. INTEREST INCOME TO TOTAL INCOME

= × 100

Year 2005 (000) 2004 (000)Total Income 43058360 29204492

Interest Income 33633735 20947333

return 54.89% 71.72%

7. INTEREST EXPENSE TO TOTAL EXPENSE

= × 100

Year 2005 (000) 2004 (000)Total Expense 21778405 15478726



No. of branches

Interest Income

Total Income

Interest Expense

Total Expense


Interest Expense 10321768 6559398

return 29.76% 21.67%

INTERPRETATION

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, equity and investment is increasing. Not only overall

profit is increasing but also average profit of all the branches is

increasing. Bank interest income is also increasing due to more

advances in this year. This year bank total deposits are also

increased and that’s why interest expenses are showing up ward

trend.



INVESTOR ANALYSIS

Investor analysis or market analysis are related to firm

market valve, as measure by its current share price to

certain accounting values. Investor analysis includes:

Earning per share



P/E ratio

Dividend per share

Dividend yield ratio

Dividend payout ratio

Break up value/Book value per share

M/B ratio

1. EARNING PER SHARE

=

Year 2005 2004Net Profit after Tax 12709444000 6195372000

No. of Shares 590892700 492410600

Earning 21.51 10.48

2. P/E RATIO



No. of Shares

MP Per Share

EPS


=

Market price per share is Rs.284.90 on 3rd Feb.2007

Year 2005 2004MP Per Share 284.90 284.90

EPS 21.51 10.48

ratio 13.25 27.19

3. DIVIDEND PER SHARE

=

Year 2005 2004Total Dividend 1477232000 738616000

No. of Shares 590892700 492410600

DPS 2.5 1.5

4. DIVIDEND YIELD RATIO

=

Year 2005 2004DPS 2.5 1.5

MV Per Share 284.90 284.90

ratio 0.008 0.005

5. DIVIDEND PAYOUT RATIO

= × 100


Total Dividend

No, of Shares

DPS

MV Per Share

DPS

EPS


Year 2005 2004DPS 2.5 1.5

EPS 21.51 10.48

ratio 12% 14%

6. BOOK VALUE PER SHARE

=

Year 2005 2004 Equity 74340712000 46245732000S

No. of Shares 590892700 492410600

ratio 125.8 93.9

7. M/B RATIO

=

Year 2005 2004 BV Per Share 125.8 93.9

MV Per Share 284.90 284.90

ratio 2.26 3.03

INTERPRETATION


Equity

No. of Shares

MV Per Share

BV Per Share


NBP has also has good investment opportunities for the

investors. This bank has more attraction for investors as

compare to previous year. Earning per share is increased

due to increase in profit. Book value and market valve of one

share in also increased as compare to 2004. Only dividend

payout ratio is decreased fewer dividends but it is also in

favor of investors because it will increase wealth of

shareholders and ultimate benefit to investors.



BANK SPECIAL ANALYSIS

Bank ratio analysis is little bit different from other

organizations and if we want to see the real picture of a bank

we have to focus on given special ratios.

Earning assets to total assets

Return on earning assets

Net margin to earning assets

Loan loss coverage ratio

Equity to total assets

Deposit time equity



Loan to deposit ratio

1. EARNING ASSETS TO TOTAL ASSETS

=

Year 2005 (000) 2004 (000)Earning Assets 473126737 430440377

Total Assets 577719114 553231467

ratio 0.81 0.77

INTERPRETATION

The efficiency of the banking firm is measured by its ability to

utilize its assets in a manner that they could be profitable for


Earning Assets

Total Assets


the firm. Bank earning assets are increasing as compare to last

year but it is just a little bit increase. Advances of bank are

increasing and investment as compare to 2004 is also

increased. Lending to financial institutions is also very well.

Balance with other banks is not desirable this year but overall

earning assets showing satisfactory position in 2005.

2. RETURN ON EARNING ASSETS

= × 100


Net Profit before tax 12709444 6195372

return 2.6% 0.14%

INTERPRETATION

Return on earning assets is increased as compare to

previous year because there is increased in net profit in


NP before Tax

Earning Assets


2005 as compare to 2004. The increasing trend in this ratio

is beneficial for business and investors because this ratio

shows real profitability position of business.

3. NET MARGIN TO EARNING ASSETS

= × 100


Net Margin 23311967 14387935

ratio 4.9% 3.34%

INTERPRETATION

Spread is difference between interest income and interest

expense. This ratio shows the spread position of a bank. In

this year bank net margin is increased due to increase in


Net Margin

Earning Assets


advances and interest income as compare to 2004. Interest

expenses are also increased but their increasing trend is

lesser as compare to interest income so that’s why spread

position of bank is increased in this year.

4. LOAN LOSS COVERAGE RATIO

=

Year 2005 (000) 2004 (000)Pre tax Income 19056028 11977601

Provision for loan loss 2446739 1515354

Net Charges Off 23069 32807

ratio 8.8 times 8.7 times

INTERPRETATION

This ratio shows how much money is there against Rs 1 loss.

This ratio provides a protection to customers who are going

to deposit their money in bank. Higher the ratio is beneficial

for the bank and customers. In this year loan loss coverage


Pre tax Income + Provision for loan loss

Net Charges off + Provision for loan loss


ratio is increased due to decrease in bad debts but in 2004

the ratio of bad debts is more as compare to this year. This

shows the efficiency of bank in this year instead of 2004.

5. EQUITY TO TOTAL ASSETS

=

Year 2005 (000) 2004 (000)Total Equity 74340712 46245732

Total Assets 577719114 553231467

ratio 0.13 0.08

INTERPRETATION

This ratio shows the position of equity in total assets of

business. In both years this ratio is better. The bank should

increase its equity by increasing the wealth of shareholders.


Equity

Total Assets


6. DEPOSIT TIME EQUITY

=

Year 2005 (000) 2004 (000)Total Debts 503378402 506985735

Equity 74340712 46245732

ratio 6.77 10.96

INTERPRETATION

This ratio is also known as debt to equity ratio. This shows

how much outsiders share in business total equity. Lesser

ratio is better for a business and this year bank ratio is

decreasing which showing better trend as compare to

previous years.


Debt

Equity


7. LOAN TO DEPOSIT

= × 100

Year 2005 (000) 2004 (000)Loan 268838779 220794075

Deposit 463426602 465571717

ratio 58.01% 47.42%

INTERPRETATION

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 of

previous years because advances of the bank are increased

as previous years although deposits are also increased this

years but its ratio is less.


Loan

Deposit




TREND ANALYSIS

In trend analysis we done two types of analysis, these are

1. Horizontal Analysis

It is conducted by setting consecutive balance sheet, income

statement or statement of cash flow 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(s). The horizontal

financial statements analysis is done by restating amount of

each item or group of items as a percentage.

2. Vertical Analysis

Like horizontal analysis this can also done for balance sheet

and income statement. Here we assign 100% value to any

key item of balance sheet or income statement and then see

portion of other items in this percentage.



Particulars 2001 2002 2003 2004 2005 Avg. Change

Comments

ASSETS



Cash 100% 70% 75% 119% 90% 88.5% Favorable

Balance with other banks 100% 120% 81% 169% 103% 118.2% Favorable

Lending to financial institutions

100% 116% 160% 87% 94% 114.2% Favorable

Investments_ net 100% 200% 222% 312% 358% 273% Favorable

Advances – net 100% 83% 95% 107% 112% 99.25% Favorable

Operating fixed assets 100% 74% 52% 54% 57% 59.25% Favorable

Other assets_net 100% 112% 124% 132% 141% 102.2% Favorable

Deferred tax assets_net 100% 0% 0% 0% 0% 0% Favorable100% 104% 112% 132% 138% 122% Favorable

LIABILITIES

Bills payable 100% 150% 244% 289% 310% 248.2% Unfavorable

Borrowings from financial inst.

100% 87% 126% 131% 145% 122.2% Unfavorable

Deposits and other accounts

100% 104% 118% 121% 131% 248% Favorable

Sub ordinated loans 100% --- --- --- --- ----

Liabilities against assets 100% 160% 81% 78% 82% 100.25% Unfavorable

Other liabilities 100% 87% 82% 87% 85% 85.25% Unfavorable

Deferred tax liabilities 100% 0% 0% 0% 0% 0%100% 103% 111% 171% 181% 141.2% Unfavorable

NET ASSETS 100% 136% 157% 245% 424% 240.5% Favorable

REPRESENTED BY 1

Share capital 100% 100% 104% 112% 136% 113% Favorable

Reserve 100% 96% 108% 206% 284% 173.5% Favorable

Unappropriated profit 100% 452% 787% 814% 984% 759.25% Favorable100% 119% 121% 125% 132% 124% Favorable

Surplus on revaluation of assets

100% 174% 189% 202% 360% 231% Favorable F

100% 136% 157% 245% 424% 240% Favorable


50100150200250300350400450

Total Assets TotalLiabilities

Total Equity

2001

2002

2003

2004

2005


The horizontal analysis of the balance sheet of the bank over

all give the positive trend .The result of the balance sheet

depict that there is a constant increasing trend in cash, total

assets, total liability and equity. There is extraordinary high

trend in 2005 in all factors of balance sheet as compare to

2001.

The trend of cash is increasing to upward with 88.5%. The

trend of Total asset is also increasing to upward with 22%,

and the trend of total liabilities is also increasing with 41.2%

to upward. Equity is increased by 140%.



Particulars 2001 2002 2003 2004 2005

Mark-up/return/interest earned 100% 60% 67% 59% 115%

Mark-up/return/interest expensed 100% 47% 48% 34% 46%

Net mark-up/interest income 100% 81% 80% 75% 161%

Provision against non-performing loans and advances

100% 685684% 705787% 442575% 1242153%

Provision for diminution in the value 100% -146522% -150000% -172876% -98982%



of investments Bad debts written off directly 100% 22% 31% 1.2% 0.16%

Provision for potential lease losses 100% 145% 168% 234% 0%100% 104% 108% 39% 159%

Net mark-up/interest income after provisions

100% 68% 77% 79% 161%

NON MARK-UP/INTEREST INCOME Fee commission and brokerage income

100% 112% 115% 220% 270%

Dividend income 100% 106% 125% 127% 161%

Income from dealing in foreign currencies

100% 57% 66% 193% 106%

Other income 100% 130% 149% 116% 217%

Gain on Investments 100% 435% 532% 209% 226%

Gain / Loss on trading in government securities

100% 0% 0% -11440% -851%

Total non-mark-up/interest income

100% 145% 175% 163% 209%

100% 55% 100% 92% 172%

NON MARK-UP/INTEREST EXPENSESAdministrative expenses 100% 75V 87% 96% 87%

(Reversal) / Other provisions 100% 43000% 50000% 149593% -72740%

Other charges 100% 4261% 4496% 3189% 13468%

Total non-mark-up/interest expenses 100% 93% 94% 92% 81%

Compensation on delayed tax refund 100% 0% 0% 513852% 340596%

PROFIT BEFORE TAXATION 100% 114% 117% 130% 420%

Taxation – current year 100% 75% 79% 102% 301%

Prior years 100% 0% 0% 0% -149763%

Deferred 100% 215% -101% -42% 216%

PROFIT AFTER TAXATION 100% 120% 128% 140% 513%

Unappropriated profit brought forward

100% 201% 219% 69% 58%

Transferred from surplus on revaluation of fixed Assets

100% 33% 41% 42% 137%

Profit available for appropriation 100% 122% 126% 116% 402%

APPROPRIATIONS



Transfer to Statutory reserve 100% 127% 128% 146% 256%

General reserve 100% 5000000% 1000000% 800000% 5500000%

Capital reserve 100% 0% 0% 0% 0%

Reserve for issue of bonus shares

100% 63% 77% 84% 213%

Interim cash dividend Rs 1.75 per share

100% 69% 69% 51% 97%

Interim cash dividend Rs 1.50 per share

100% 54624% 383159% 50577% 639799%

100% 145% 157% 156% 541%

Unappropriated profit carried forward

100% 24% 45% 26% 34%

According to horizontal analysis of profit and loss account

there is increasing trend. In 2005 there is increase in all

factors such as interest income interest income interest

income after provision and profit before and after tax

because the trust of people on banks is increasing day by

day. The increase in profit in 2005 is almost 5 times as

compare to 2001.



Particulars 2001 2002 2003 2004 2005ASSETS 100% 100% 100% 100% 100%Cash 19 12 13 17 12Balance with other banks 7 8 5 9 5Lending to financial institutions 5 5 6 2 3Investments_ net 17 39 35 27 27Advances – net 41 30 34 39 47Operating fixed assets 8 6 4 4 4Other assets_net 2 2 3 2 2Deferred tax assets_net 1 0 0 0 0

100% 100% 100% 100% 100%LIABILITIES



Deposits and other accounts 88 88 92 92 89Borrowings from financial inst. 3 2 2 2 4Bills payable 1 1 1 1 1Other liabilities 7.5 6 4.6 3 5Deferred tax liabilities 0 2.5 0.5 1.5 0.5Sub ordinated loans 0 0 0 0 0Liabilities against assets 0.5 0.5 0.5 0.5 0.5

100% 100% 100% 100% 100%NET ASSETS 100% 100% 100% 100% 100%REPRESENTED BY Share capital 21 16 15 11 15Reserve 43 30 29 23 29Unappropriated profit 4 14 21 20 21

68 60 65 54 65Surplus on revaluation of assets 32 40 35 46 35

100% 100% 100% 100% 100%

INTERPRETATION

In balance sheet of bank the most important item is earning

assets. There are four earning assets. Bank has strong

earning assets like advances investments and lending to

financial institutions has major percentage in of assets of

bank. In liability and equity analysis the Borrowings from



financial institutions and deposits have major portion and

reserve and share capital has major portion in equity



Particulars 2001 2002 2003 2004 2005

Mark-up/return/interest earned 100% 100% 100% 100% 100%

Mark-up/return/interest expensed 60 54 35 31 31

Net mark-up/interest income 40 46 65 69 69

Provision against non-performing loans and advances

9 6 9 7 7

Provision for diminution in the value of investments

-3 0.3 2 1 -1

Bad debts written off directly 1.5 0.7 2 0.3 1

Provision for potential lease losses 0.5 1 0 0.7 0

8 8 13 9 7

Net mark-up/interest income after provisions

32% 38% 52% 60% 62%

Particulars 2001 2002 2003 2004 2005NON MARK-UP/INTEREST INCOME

100 100% 100% 100% 100%



Fee commission and brokerage income

64 65 45 64 52

Dividend income 13 19 16 15 18

Income from dealing in foreign currencies

19 14 10 12 13

Other income 4 2 29 12 17

Total non-mark-up/interest income

100 100 100 100 100

NON MARK-UP/INTEREST EXPENSES

100 100 100 100 100

Administrative expenses 59 50 99 99 97

(Reversal) / Other provisions 9 17 0.6 0.9 2

Other charges 32 33 0.4 0.3 1

Total non-mark-up/interest expenses 100 100 100 100 100

INTERPRETATION

In vertical analysis of profit and loss account the interest

expense has decreasing trend from 2001 to 2005 but in

2005 there little bit increase in net interest income but

almost have same trend. According to this analysis fee,

commission and brokerage income has some worth in our

income statement its almost one fourth or one fifth of our

interest income and it has increasing trend.

The administrative expenses are also increasing from 2001

to 2005 but overall management is able to reduce expenses,



so due to which there is continuous increase in profit before

and after tax.



COMPARATIVE ANALYSIS

In comparative study of financial statements, we compare

the given year statements with different years or compare

with competitors in industry. For this we conduct two types

of analysis.

Liquidity ratios

Time Series Analysis

Cross Sectional Analysis





Ratios 2004 2005 Comments

Leverage RatiosProprietary Ratio 0.13 0.08 GoodDebt Ratio 0.87 0.92 GoodDebt to Equity 6.77 11.82 Good

Profitability RatiosReturn on Assets 2.20% 1.12% GoodReturn on Equity 17.09% 13.4% GoodReturn on Investment 8.10% 4.15% GoodReturn on fixed Assets 134% 67% GoodAverage profit Per Branch 10233047 5053321 Good

Investors RatiosEPS 21.51 10.48 GoodP/E Ratio 13.25 27.19 BadDividend Yield Ratio 0.008 0.005 GoodDividend Payout Ratio 12% 14% BadBook valve per Share 125.8 93.9 Good

Bank Special Ratios

Earning assets to Total assets 0.81 0.77 GoodReturn on earning assets 2.6% 0.14% GoodNet margin to Earning assets 4.9% 3.34% Good



Loan loss coverage Ratio 8.8 times 8.7 times GoodEquity to Total assets 0.13 0.08 Good

Deposit time Equity 6.77 10.96 Good

Loan to Deposit 58.01% 47.42% Good

INTERPRETATIPN

Solvency Ratios

Proprietary Ratio, Solvency Ratio, Debt to Equity are all in

good position but only debt to fund ratio showing poor

condition in this year.

Profitability Ratios

All the ratios involved in profitability showing better trend as

compare to 2004 and this shows the efficient management

of bank.

Investor Ratios

Price Earning Ratio, Market/Book Ratio are both in good

condition the difference as per previous year is very large.

Only dividend yield and payout is decreasing due to lesser

declaration of dividend in this year.

Bank Special Ratios



These ratios shows real picture of a bank. All these ratios

showing better position as compare to 2004 so overall bank

showing better position.



Ratios NBP MCB Comments

Leverage RatiosProprietary Ratio 0.13 0.08 GoodDebt Ratio 0.87 0.92 poorDebt to Equity 6.77 11.82 Good

Profitability RatiosReturn on Assets 2.20% 3.0% poorReturn on Equity 17.09% 38.28% poorReturn on Investment 8.10% 12.84% poorReturn on fixed Assets 134% 109% Good

Investors RatiosEPS 21.51 21 GoodP/E Ratio 13.25 11.80 GoodDividend Yield Ratio 0.008 0.012 PoorDividend Payout Ratio 12% 14.38% PoorBook valve per Share 125.8 54.64 Good

Bank Special Ratios

Earning assets to Total assets 0.81 0.87 PoorReturn on earning assets 2.6% 4.98% PoorNet margin to Earning assets 4.9% 5.73% PoorLoan loss coverage Ratio 8.8 times 11.47 times PoorEquity to Total assets 0.13 0.08 Good

Deposit time Equity 6.77 11.82 Good

Loan to Deposit 58.01% 78.62% Poor



INTERPRETATIPN

NBP Limited is not only showing better trend in this year but

also showing better position in industry. The major

competitor of NBP is MCB and it is necessary to depict the

real scenario of NBP financial ratios, we compare these with

MCB ratios, so for this purpose we have done cross sectional

analysis of NBP with MCB.

In this analysis, overall leverage position of NBP is good as

compare to MCB. Profitability analysis is not better as

compare to MCB. In investor analysis, Dividend payout ratio

is bad but overall market value of NBP is good as compare to

MCB. Bank special ratios of NBP are also not very good as

compare to MCB.



SUGGESTIONS & RECOMMENDATIONS

Although NBP is included in ten top most banks of the world

equity as well as assets wise, and it is only bank that got

“AAA” from Pacra. But for the further improvement in

various sectors my recommendations to the bank would be

as follows:

NBP should become very specific about its competitors,

so that it can understand who its competitor is in the

first degree and who is in the second degree. Then the

first-degree competitors should be watched closely

A research cell should continuously try to gather

information about the present action so its competitors

and expected future actions. So in this way more

effective strategies can be formulated.

The performance reward linkage should be making

strong as it is said, "A happy employee delivers more

than he receives from the organization." The NBP

should also try to make its employees happier.



There is immediate need, to reconstruct the personnel

policies. Selection should be through newspaper

advertisements. In this way more intelligent, efficient

and qualified staff can be formulated.

It is strongly recommended that NBP should go for

computerization rather than manual work, which is very

slow and time, consuming process. In this age NBP

even does not have a partially computerized system

where as other new competitor banks are now going

towards on-line banking services.

Govt. should take keen interest to recover its bad

debts, which can improve its financial position.

In case of giving the loans, it is necessary to check the

repute of customer towards loan repayment. Bank

shouldn’t advance the money to those people who are

addict of rescheduling of loans due to their political

influences. Instead providing loans to these persons,

loans must be advanced to the well-reputed businesses

and industries having good record of loan repayment.



Along with the officers, the training must also be given

to the clerical staff. Because of NBP are running on

manual system and the training of its staff directly

improving their efficiency of work.

Present training program for its officers is need to be

improved, as this program instead of improving the

efficiency of officers is merely a burden for the bank in

the form of heavy T.A. , D.A. and cost.

Working conditions must be improved for the

employees. Bank will definitely get more benefits after

some expenditure on the working conditions as it

improves efficiency and productivity of the employees.

NBP should flourish certain marketing plans to attract

the customers by giving them certain incentives and

beneficial schemes to the customers as other

competitor banks are doing so.

There is also a need of proper recruitment and selection

program. New young talent should be introduced to

inject the new ideas.



Deterioration in efficiency is mostly due to promotion

without merit. So promotions must be awarded on merit

and also when due.

Special attention should be given to the behavior of the

employees towards the customers, as customer is the

most important person for any bank.

There are many employees who are working on ad-hoc

basis creating dissatisfaction. The deserved should be

made permanent employees.

Political influences in the bank should be eliminated.

To motivate the employees of the bank, regular

bonuses and incentives should be given to them.

There must be a friendly environment among all the

employees as it enhances the trust and sincerity.

NBP should be focusing its attention towards the share

of traveler cheque.

Branch manager should be trained in the field of selling

to serve better according to the expectation of

customers.

The recruitment policy should be fair and transparent.



Management should increase the branch limit of

expenditure to fulfill the necessary expenditure of

personnel.relation.
