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Internship Report on NBP

ACKNOWLEDGEMENT

I would like to thank all the great teachers who guided me brilliantly and wonderfully throughout

my tenure of two years. They have also been a source of light for me and they taught me

everything that I needed. They did their best to take me to the point where bright and shining

future will be waiting for me. They helped me regarding my studies and provide me the best that

they could. They let me to participate in various brainstorming sessions and tried to enhance my

participation skills by arranging various group discussions.

They also enhanced and improved my communication skills by arranging various presentations.

By this I not only improved my communication but my personality also improved a lot. My

teachers also assigned me various projects and assignments, which were completed and

submitted by me. These projects and assignments were also very useful for me and guided me a

lot in watching the real phases of business and to overview the original working of business

going on in our daily life. This institution gave me a lot and I will always be very thankful to this

great institute of learning and its outstanding faculty.

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Internship Report on NBP

DEDICATION

To my parents whose unconditional love and support helped

me in making the report.

And

To my teachers for their corporation and assistance and

who changes the lifes of the students through their experience,

knowledge, character and personality.

And

To my siblings for their

gentle encouragement and valuable support.

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Executive Summary

In this report I have tried to explain each and everything related to the National Bank of Pakistan.

In the report introduction I have highlighted some of the main features of the report and tried to

give the outlook of the bank. I also went to the point from where the word Bank was evolved and

various definitions regarding this have also been explained. The scope of banking in Pakistan

and its various stages have also been clearly explained with all the social, political and monitory

changes also taking place through this period. Then there is full information regarding NBP its

formation and its current position has also been highlighted. Various departments working in the

NBP along with their Management a Board of Directors is clearly mentioned in the report. There

are many business groups also working in NBP and the departments also work side by side with

them. There is a very good understanding among the departments of NBP, which is making its

working smoother cool and calm.

There are various products offered by the NBP like ATM, Travelers cheques etc which constitute

a very important part of our daily life. Then the Financial Analysis is also given in the report

with complete explanation of the Balance Sheet and Profit and Loss Account for the past two

years really showing the great strength of NBP. Ratio Analysis clearly indicates some very good

signs for the shareholders and the investors. There has been a continuous improvement in the

performance of the bank, which is clearly shown by its ratios. There are also given the results of

the year 2006 showing the improvements and discrepancies in the various areas of the bank.

Some problems have also been detected while analyzing the financial results and while working

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Internship Report on NBP

at the bank practically. These problems must be the focus area and if properly handled can play a

very big role in the success of the NBP in the coming years. Required references of the people

working at the branch where I completed my Internship have also been mentioned at the end and

can be contacted whenever required.

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Vision

To become a dynamic and efficient bank providing


integrated solutions in order to be the first choice bank
for the customers.

Mission

NBP will aspire to the values that make NBP truly the Nation’s Bank: by,

 Institutionalizing a merit and performance culture

 Creating a distinctive brand identity by providing the highest standards of services

 Adopting the best international management practices

 Maximizing the stakeholder values

 Discharging our responsibility as a good corporate citizen of Pakistan and in countries

where we operate

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Core Values

 Highest standards of integrity

 Institutionalizing team work and performance culture

 Excellence in service

 Advancement of skills for tomorrow’s challenges

 Awareness of social and community responsibility

 Value creation for all stakeholders

Goals

To enhance profitability and maximization of NBP share through

increasing leverage of existing customer base and diversified range

of products offered.

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CHAPTER 1

INTRODUCTION TO BANKING

What is “Bank”

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.”

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According to Samuelson:

“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.”

Thus the comprehensive definition of the bank is:

“A bank is a financial institution, which deals with money and credit. It accepts deposits from individuals,

firms and companies at a lower rate of interest and gives at a higher rate of interest to those who need

them. The difference between the terms at which it borrows and those at which it lends forms the source

of it profit. A bank, thus, is a profit earning institution”

Banker

Banker includes a body of persons whether incorporated or not who carry on business of

banking.

Customer

Customer is defined as one who has account with the bank. The word customer signifies a

relationship in which duration is not of the essence. A person whose money has been accepted by

the Bank on the footing that they undertake to honour cheques up to the amount standing to this

credit is a customer of the Bank in the sense of the statute, irrespective of whether his connection

is of short or long standing. All the city branches accounts are computerized.

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Importance of Banking

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.

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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 30th June 1948 the number of schedule banks in Pakistan

declined from mere scratch.

Today there are more than thousands branches of commercial banks along with an established

network of supplementary financial institutions. All this development in the banking sector is the

result of untiring efforts of past five decades

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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 Islamization 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

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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.

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

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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 breakup 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 removing 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

CAUSES OF NATIONALIZATION

The nationalization of banks may be justified on the following grounds:

1. Large business and industrial houses dominate the lending policies of the commercial

banks; this brought forward the problem of concentration of wealth.

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2. Commercial banking operations were guided by profit motives and as a result the

backward regions and the small entrepreneurs were never been their favorite customers.

3. The operation of banks, unlike after business, have direct implication on the entire

national economy. For instance if the banks raise the cost of their credit, the cost of

everything may go up.

4. Unhealthy complications among banks can lead to financial and economic problems.

5. The flow of bank advances towards national priority sector in general is not forthcoming

because private banks are profit oriented.

RESULTS OF NATIONALIZATION

Although there are doubts about the positive results of the nationalization but we can say that the

nationalization of banks provided efficient professional management to expand banking services

in every nook and corner of the country. Banks laid full emphasis on their lending policies on

priority sector and national building projects, which discouraged non-productive and unhealthy

activities like speculation and hoarding, there was also a recorded increase in the number of

foreign branches of Pakistani banks.

The growth of Pakistani banking system was significant. The banking facilities expanded in the

rural areas. The bank credit increased sharply especially in the public sector. A part from this

expansion the banking system’s activity seeking to gain credit targets laid down by national

Credit Consultative Council (N.C.C.C) and to confirm to the priorities over the year to enlarge

the flow of credit for the small banker and agriculturist as well as for exports. Bank deposits rose

very substantially during a period when total monetary assets also registered a sharp rise.

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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.

After the nationalization of the banks the banks now had not very satisfactory conditions. As the

works and tasks of government the banking sector too had also come under great trouble. Due to

lack of proper management and accountability system the banking sector again was losing the

confidence of the general public.

The people were again feeling the need of the proper system under which the banks as well as

their interests in the banks will be properly secure. The contribution of the banks in the economy

and GDP was also not very much effective which not a good sign for the country is.

Also the issue of Islamic banking was gaining popularity. People did not know much about it but

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it was near to their belief and that’s why they were supporting that idea. There was a strong need

of such step by the government which will be beneficial to both people and the bank. Banks were

needed to be setup again properly and strong feedback from general public was also very much

demanding.

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. Now there are more than 20 banks working in Pakistan. New Banks, which have

emerged successfully in the fourth phase, are given below:

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 Soneri Bank Ltd

 Standard Chartered Bank Ltd.

 ABN Amro Bank Ltd Ltd.

 Askari Commercial Bank Ltd.

 Meezan Bank Ltd.

 Bank AL Habib Ltd

 NIB Bank Ltd.

 Atlas Bank Ltd

 SaudiPak Bank Ltd

 Alfalah Bank Ltd

 Habib Metropolitan Bank Ltd

 Al Barka Islamic Bank Ltd

 Faysal Bank Ltd

 Crescent Standard Bank Ltd

 Picic Commercial Bank Ltd

 Citi Bank Ltd

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CHAPTER 2

INTRODUCTION OF NATIONAL BANK OF PAKISTAN

History of National Bank of Pakistan

National Bank of Pakistan (the Bank) was established on November 9, 1949 under the National

Bank of Pakistan Ordinance, 1949 in order to cope with the crisis conditions which were

developed after trade deadlock with India and devaluation of Indian Rupee in 1949. Initially the

Bank was established with the objective to extend credit to the agriculture sector. 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.

The nature of responsibilities of the Bank is different and unique from other banks/financial

institutions. The Bank acts as the agent to the State Bank of Pakistan for handling

Provincial/Federal Government Receipts and Payments on their behalf. The Bank has also

played an important role in financing the country’s growing trade, which has expanded through

the years as diversification took place. Today the Bank finances import/export business to the

tune of Rs. 52.7 billion, whereas in 1960 financing under this head was only Rs. 1.54 billion.

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Objects and Activities

The Bank is providing all banking services of mercantile and commercial banking permissible in

the country, which include:

 Handling of treasury transactions for the Government of Pakistan as agent to the

State Bank of Pakistan.

 Providing services under a Trust Deed as Trustee to the National Investment Trust

(NIT) including safe custody of securities on behalf of NIT.

 Accepting of deposits of money on current, fixed, saving, term deposit and profit

and loss sharing accounts.

 Borrowing money and arranging finance from other banks.

 Advancing and lending money to its clients.

 Buying, selling, dealing, including entering into forward contracts of foreign

exchange.

 Financing of seasonal crops like cotton, wheat, rice, sugar cane, tobacco, etc.

 Receiving of bonds, scrips, valuables, etc. for safe custody.

 Carrying on agency business of any description other than managing agent, on

behalf of clients including Government and local authorities.

 Generating, undertaking, promoting, etc. of issue of shares and, bonds, etc.

 Transacting guarantee and indemnity business.

 Undertaking and executing trusts.

 Joint venturing with foreign dealers, agents and companies for its representation

abroad.

 Participating in "World Bank" and "Asian Development Bank's" lines of credit.


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 Providing personalized Hajj services to intending Hajjis.

PRESENT STATUS OF THE BANK

The new management team having extensive experience of management of large financial

institutions both within and outside the country is expected to further enhance the profitability

and operational efficiency of the Bank.

Merger / Amalgamation of National Development Finance Corporation with

National Bank of Pakistan

The Federal Government sanctioned the Scheme of Amalgamation of National Development

Finance Corporation (NDFC) with National Bank of Pakistan (NBP) under Section 47(8) of the

Banking Companies Ordinance, 1962, effective from 1 November 2001. In terms of the Scheme

of Amalgamation, the specific assets and liabilities of NDFC as of 31 October 2001 have been

transferred to NBP and any difference between the assets and liabilities transferred shall be

compensated and reimbursed by the Federal Government to NBP, on behalf of NDFC.

Prospects

The Bank's principal strategic going forward objective is to make the transition from a public

service institution to a modern commercial bank. Being the country's largest financial institution,

the Bank is uniquely positioned to leverage its large branch network and its 8.5 million customer

base to consolidate its core businesses as well as develop new revenue generating opportunities.

The new management team is in place combining the Bank's existing personnel with

professionals recruited from outside. Operating procedures are being re-defined and internal

controls strengthened utilizing a revamped IT architecture.

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New Products and take Initiatives

NBP now has 1232 domestic branches and 28 foreign branches. The 2006 results are a further

confirmation that the hard work of the past three years has crystallized into a solid turnaround.

In 2006, NBP launched several new products and initiatives that have been made possible by

investments in technology, the branch network, human resource and financial discipline. The

benefits of the increased infrastructure expenditure are now becoming apparent in all areas of the

bank and much more will become visible over the next year.

In Consumer Banking we introduced the President Scheme of Rozgar in which different products

had been offered to the customers. NBP also had substantial increase in its agriculture and SME

(Small Entrepreneurial Businesses) lending.

NBP also launched Online Banking in 2004, offering a full service, round-the-clock access to

banking. This service covers more than 150 branches in 20 cities. Profit is credited to our

customers on 31st December. Usually this is done by the 20th of January after the year-end. We

are proud of the way technology is benefiting our customers and look forward to introducing

further benefits.

Operating Environment

The record profitability was achieved in a rapidly changing environment. The external sector has

improved considerably with the increase in reserves. The overall Country Rating has improved

with AA+ (long term) and A-1 (short term) in a prominent manner. NBP is the first Pakistani

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bank to raise Tier II capital from external resources. The impact of these positive developments

on the overall economy is now becoming evident.

The year 2007 started sluggishly but there has been an upturn since July 2007. Economic growth

is expected to rise. Exports rebounded in the second half with a 16% growth and inward

remittances have averaged US$ 300 million per month. Credit off-take picked up near the end of

the year and at near to Rs. 56 billion in Dec 06 is considerably higher than the Rs 28 billion in

previous years. The increase in foreign exchange reserves has led to strong growth in banking

sector deposits.

A large deposit base and a reduction in non earning assets were significant contributors to

growth in revenues in 2007. However, with the growth in deposits far outpacing the growth in

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loans, margins are under severe pressure. For the overall banking sector, average lending rates

have declined by 2.75% with steeper falls in the second half. Higher proportion of deposits is

now in low yielding government securities. A further reduction in lending rates is likely and

banks are endeavoring to absorb it by expanding their loan portfolio.

Operations Group

The Bank needs to improve the service orientation at its branches, as these constitute the "front

line" of the Bank in terms of contact with its customers. A new monitoring system is being

created to efficiently collect and utilize the feedback from the branches to support product

development and enhance the quality of service. The advent of Internet and other technological

improvements have re-defined how branches should operate. Bank cannot afford to be left

behind and is in the process of introducing E-Commerce initiatives based on customer friendly

technologies. Bank will also create products to utilize the benefits of E-Commerce for its

customers.

Human Resource Function

Little tangible progress can be achieved if the above-discussed initiatives are not accompanied by

a marked improvement in Bank's training and performance appraisal policies and procedures.

Here a comprehensive training program is being developed to upgrade and develop core banking

skills of the Bank's existing staff. Furthermore, to boost the staff motivation level and to ensure

that those displaying a marked improvement in performance are adequately rewarded for their

efforts, a merit based culture is being promoted through revamping manpower recruitment,

retention and performance appraisal systems.


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Corporate & Investment Banking

A new approach to corporate banking is underway. The Bank has initiated a structured approach to

corporate banking by introducing a single point of contact through Relationship Managers (RMs). For this

purpose, new RMs as well as team leaders has been inducted to expedite this process. Area Managers will

be appointed to manage relationships and to better service the needs of multinationals and large local

corporate. An investment banking team has also been formed to offer specialized services to major

relationships including advisory and debt syndications (TFCs). Furthermore, to stem the growth in non-

performing loans, the existing risk / credit management practices at the Bank are being revamped.

Business Lines

With focus towards building new assets, Consumer, SME and Agriculture financing will be the

key areas. They are all part of our Retail Banking Group. We have taken a number of initiatives

in 2007 and will aggressively launch new products. Work is being done on Housing Finance and

Credit and Debit Cards and we plan to launch them in the first half of 2008. Corporate and

Investment Banking Group continues to face tough price competition, as the market growth has

been limited. We have taken a number of initiatives to increase our product range and with the

Additional expertise of the Investment Banking Unit, established during the year, we will be able

to maintain our leadership.

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Treasury will play an important role in current low interest rate environment. Lower yields on

National Saving Schemes will encourage Capital Market products and we are reinforcing our

Treasury Marketing Unit which will work closely with Corporate and Investment Banking Group

to develop products for our corporate customers.

Economic Outlook

Economic growth is expected to pick up, with low interest rates leading to higher investment.

The geopolitical situation, particularly Iraq situation is a major risk and can disrupt the economic

environment leading to volatility in interest rates.

The efforts of the Government over past three years in changing the economic landscape of

Pakistan are clearly bearing fruit now. State Bank of Pakistan has performed its role of regulator

with excellent skill and at the same time has been effective as an enabler of the development of

banking industry in Pakistan.

The investment by the Bank in human resource, technology and physical assets will continue for

the next few years. This will keep us at the forefront of delivery channels and assist in providing

excellent customer service.

The pressure on banking sector margins will no doubt make it difficult but NBP’s Management

is confident that through pro-active management and dedication of their employees, NBP will

remain ahead of the competition.

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Why Bank is important?

Banks play very important role in the economic life of the nation. The growth of the economy is

closely related to the soundness of its banking system. Although banks create no new wealth but

they borrow, exchange and consume wealth. In this way, they become very effective partners in

the process of economic development. Modern banks are very useful for the utilization of the

resources of the country.

The basic role of the banks is to encourage the habit of savings among the people and to mobilize

these savings for the investment purpose. Banks deposit surplus form the public and then

advance 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 the great

portion of capital of the country would remain idle. In the fewer developing countries rate of

saving is very low and due to this, rate of investment and rate of economic growth remains very

much low. We can take bank just like a heart in the economic structure and the 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 were not provided to any organ then that 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 the 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.

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Company Management

Corporate Information

Registered Office

National Bank of Pakistan

Head Office

NBP Building, I.I. Chundrigar Road

Karachi, Pakistan.

Head Office

National Bank of Pakistan

Head Office

NBP Building, I.I. Chundrigar Road

Karachi, Pakistan.

Phone #: + 92 (21) 921 2100 ( 50 Lines )

Auditors

Ford Rhodes Sidat Hyder & Co.Chartered Accountants

M. Yousuf Adil Saleem & Co. Chartered Accountants

Audit Committee

Azam Faruque

Sikandar Hayat Jamali

Ibrar A. Mumtaz

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Legal Advisor

Mandviwala & Zafar Advocates & Legal Consultants

Registrar’s and Share Registration Office

THK Associates (Pvt.) Ltd.

Shares Department, Ground Floor,

State Life Building # 3,

Dr. Ziauddin Ahmed Road,

Karachi, Pakistan.

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Board of Directors

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Business Groups

Corporate and Investment Banking Group Operation

CIBG serves large institutional and corporate customers in Pakistan through 12 dedicated

corporate banking centers in all major cities. The CIBG portfolio consists of most of the largest

names in the market and represents all major industry groups, including textiles, large scale

manufacturing, telecommunications, petrochemicals, fertilizer, airlines, transportation and

services. It offers its clients a comprehensive range of banking services via a one window

interface through designated relationship managers.

CIBG is recognized as a market leader due to its unique ability to meet the entire spectrum of a

customer’s banking requirements. Our large equity base allows us to meet the financing needs of

the largest corporate and our large network and specialized teams are able to deliver and provide

customized solutions. The Group has increasingly focused on providing value addition services

to our customers, e.g. payroll and cash management services.

They strongly believe in relationship banking, which is essential for us to remain responsive to

our customers. They also remain focused on improving productivity and ensuring the quality of

our risk management.

The Group’s immediate priority is to increase fee-based income. An investment Banking Unit

has been established which will focus on loan syndications, development of local currency

corporate bonds (TFCs) and advisory services. With this Investment Banking Unit, CIBG now

has a fully integrated corporate and investment banking capability.

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International and Overseas Banking Group Operation

NBP’s international network is amongst the most extensive of emerging market banks with a

presence in 28 main foreign branches. The network spans the principal financial centers of USA

and Europe, and the developed and emerging markets in Asia, the Middle East and Africa. The

Bank’s 50 year history in the international market provides it a well established network of both

commercial customers and correspondent banking relationships.

IOBG’s principal line of business is trade finance. NBP’s strong presence in all areas of the

domestic market combined with the extensive international network has provided the Bank a

unique ability to capture a large volume of trade flows relating to Pakistan. In our international

units we are also active in financing local third country trade in niche segments, particularly by

leveraging our network. IOBG units have a well established customer franchise in the South

Asian origin communities. Activity with other customer segments has also been growing

particularly in emerging markets and now forms an important part of our business.

An additional strength of IOBG is that all international units are entirely self funded through

stable well diversified local customer deposits or capital which enables us to develop local

commercial and, in specific markets, consumer businesses while minimizing the inherent cross

border exposures.

Identifying opportunities, while keeping a balance in acknowledging and acceptance of diverse

foreign cultures is a task that will continue to guide and control IOBG in the future.

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Retail Banking Group Operation

The Retail Banking network, with 1458 branches, is the core strength of National Bank. Its

extensive reach in all geographic locations – urban and rural – throughout the country, provides

access to over 5 Million customers across all sectors of the economy. The network provides

NBP with the largest diversified low cost deposit base of any bank in Pakistan, and forms the

basis for many of our other business lines, corporate and investment banking and treasury

activities.

RGB has three principal areas of activity:

1. The retail network for deposit mobilization.

2. Commercial banking group to serve small and medium enterprises (SME).

3. Consumer banking group.

Deposits mobilization, the traditional strength, continued to perform strongly in 2007 with

deposits growing by 12%.

There is a growing propensity for consumer spending to uplift living standards. Recognizing

that consumer demand can be a major driver of investment and economic growth, the

Government has also moved towards an enabling regulatory framework and has also taken

initiatives to create an appropriate legal regulatory framework to enable the development of a

housing finance market.

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Agriculture is the most important contributor to Pakistan’s economy. NBP, which has been a

leader in agriculture financing, plans to increase further its credit to this sector with a particular

focus on providing a wider range of products to small and medium size farmers. Their

specialized agricultural finance department helps farmers in modernizing their farming

techniques. The Government has also provided a regulatory framework to encourage corporate

farming and as this develops; their participation in this sector will grow even further.

While they continue to develop our products, we recognize that quality of customer service will

become an even greater differentiating factor in the market. They have taken a number of

initiatives in this area; investing in technology, training and upgrading of our branches.

Extended banking hours and better facilities for utility bill payments have been made available.

In their Retail network, they have an unmatched distribution network, which provides us many

opportunities for growth, and we plan to use this to soon provide additional services, including

wealth management services.

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CHAPTER 3

DEPARTMENTS

DEPARTMENTS OF NATIONAL BANK OF PAKISTAN

NBP is performing its activities through the following functions:


1. ACCOUNTS DEPARTMENT
The function of accounts department is to collect deposits from customers. Following types of
accounts are offered by NBP.
i. Current Account

ii. Profit & Loss Sharing Account

iii. Fixed Account

iv. Foreign Currency Account

1. Current Account

In the 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 and current deposit account.

2. Profit and Loss Sharing Account

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. 500 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 decisions shall be final and binding on the PLS account holder.

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3. Fixed Account

In the 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 in charge

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.

4. Foreign Currency Accounts

Depositing foreign currency opens foreign currency account. In NBP you can open foreign

currency account in various currencies offered by the bank. There is no zakat deduction on such

accounts and also no withholding tax is deducted from account. This account can be opened with

the at least 1000 of those currencies.

BOOKS RELATING TO CUSTOMERS

a) Pay-in-Slip

When money is to be deposited in the bank the pay in slip is to be filled. The object of this book

is to provide the customer with the bank’s acknowledgement for receipt of money to be credited

his account.

b) Cheque Book

A cheque book contains a number of cheques, which is given to a customer upon written request

and after marking the payment for the cheque book. It enables a customer to make withdrawal

from his account or make payment to various parties by issue of cheques.

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GROUNDS FOR CLOSING THE CUSTOMER’S ACCOUNT


The banker may close the account of the customer due to following reasons:
i. Notice by a Customer

ii. Death of a Customer

iii. Customer’s Insolvency

iv. Customer’s Insanity

v. By order of court

vi. Unsatisfactory operation

I) NOTICE BY CUSTOMER

The banker closes the account of the customer on the application of the customer for closing his

account.

II) DEATH OF CUSTOMER

On death of his customer, the bank must stop payment on cheques drawn on him by the deceased

customer because the death revokes his authority to pay such cheque. The heirs or the executors

of the deceased customer are not authorized to operate on the account; it can act only in

accordance with provisions mentioned in the letter of probate issued by a competent courts.

III) CUSTOMER’S INSANITY

If the customer becomes insane or mental it terminates the banker’s authority to act as his

customer’s agent. Since the banker customer relationship comes to end, in such as situation, it is

usually considered that the banker’s authority to pay his customer’s cheques is revoked by notice

of insanity. However, the bankers treat their customers as it unless a fairly inclusive evidence of

the customer’s insanity is available to them.

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IV) ORDER OF COURT

A court of law may serve a banker with an order in garnish proceeding in execution of a decree

prohibiting him from honoring a customer’s cheques.

V) CUSTOMER INSOLVENCY

Insolvency is civil death therefore, the insolvent adjusting loses his rights receiver or liquidator

as the banker receives the notice of insolvency of the adjusting, or petition filed for adjusting

filled customer insolvency.

2. CLEARING DEPARTMENT

Clearing House

1. Advantage of Clearing House

2. Function of Clearing Department

3. Procedure of depositing cheque

4. Types of cheques collected by clearing department

5. Scrutiny of pay in slip

6. Procedure after scrutinizing

7. Procedure of clearing at clearing house

INTRODUCTION

Every bank acts in two way i.e.

i. Paying Bank

ii. Collecting Bank

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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 through the bankers clearing house wherever it is established.

CLEARING HOUSE

A clearing house is the place where representatives, of all the banks get together for the purpose

of offsetting the inter bank indebtedness arising from the transfer of deposits by a customer of a

particular bank to another bank.

ADVANTAGE 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, thereby minimizing the necessity of holding large cash balances, clearing

house works under the control of State Bank of Pakistan.

A banker has no legal obligation to collect cheques 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.

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FUNCTION 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.

2. To arrange the payment of cheque drawn on the branch and given for collection to any

other branch of NBP 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 NBP, branches which are not represented at the local

clearing house.

PROCEDURE OF DEPOSITING CHEQUES IN CLEARING DEPARTMENT

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 one 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.

TYPES OF CHEQUES COLLECTED BY CLEARING DEPARTMENT

a. Transfer Cheques

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

b. Transfer Delivery Cheques

Transfer Deliver cheques are those cheques, which are collected and paid by two different

branches of a bank, situated in the same city.

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c. Clearing Cheques

Clearing 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. When the

cashier receives the cheques, which are to be deposited for clearing purpose, the following points

must be verified.

1) The instruments should be neither state nor post dated.

2) 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).

3) The instrument should not bear any unauthorized alteration.

4) The amount in words and figures should be the same.

5) The instruments should be drawn on a member, or any of local branches.

6) If the cheque is crossed "Account payee’s" "Account payee only" or "Payee’s Account", it

should only be accepted for collection for the payee’s account.

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

8) 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.

9) 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.

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

11) Do not collect an instrument in the accounts of an agent, or of the servant of the payees

of endorsee of the instruments.

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12) Mail transfer Receipts pay ships and treasury receipt should not be collected for persons

other than the payee.

13) 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.

14) Branch agent’s permission should be obtained before accepting a third party cheque or draft

for credit of the account of the staff member.

15) If the payee is a government department, government official, or a trust account, the

instrument cannot be collected, but for the payee’s account.

16) If the payee of an instrument is National Bank, it can be collected for credit of the drawer’s

account, or the amount of the instrument may be utilized as desired by the drawer in writing.

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

18) 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.

SCRUTINY OF PAY-IN-SLIP

The 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 Deposits

ii. Account number

iii. Title of the account

iv. The cheque/number and the drawer bank/name.

v. Total amount in words and figures

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1 Customer should use separate pay in slip for transfer, transfer delivery, and clearing

cheques.

2 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-in charge of the department.

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

PROCEDURE OF CLEARING AT CLEARING HOUSE

The mechanism of setting inter bank indebtedness operates as follows.

Clerks representing various banks meet at a common place, the clearinghouse, and 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.

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3. CREDIT DEPARTMENT
Introduction
1. Securities.

2. Types of advances

INTRODUCTION

The function of advances or credit department is to lend money in the form of clean advances,

against promissory notes, as well as secured advances against tangible and marketable securities.

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

1. 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.

2. Mortgage

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.

3. Hypothecation

When property in the shape of goods is charged as security for a loan from 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

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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.

4. Pledge

In a pledge the ownership remains with pledge, but the pledge has the exclusive possession of

property until the advance is repaid in full. While in case of the default the pledge has the power

of sale after giving due notice.

5. 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 made

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

TYPES OF ADVANCES

The advances which are given by National Bank of Pakistan are as under:-

1. DEMAND FINANCE (Ordinary Loan)

Demand Finances are those advances which are allowed in lump sum for a fixed period and are

repayable lump sum or gradually in installments.

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TYPES OF ADVANCES

Demand Finance (Packing Credit)

Scheme introduced by State Bank of Pakistan for exporter of carpet, surgical instruments, at zero

Demand Finance (Staff)

Loans are offered to the staff of the following four categories.

i. House Building Loans against mortgage of property.

ii. Loan for purchasing vehicles.

iii. Loan equivalent to month’s salary.

RUNNING FINANCE (Overdraft)

Running finance (old name overdrafts) are advances, which are generally, given to meet

temporary requirements of the customers. A good customer use the banks running finance limit

as a mean of protecting his credit in the market and as a line of security defense to meet his

commitments.

TYPES OF RUNNING FINANCE

I. Unsecured

Under such type of overdraft the bank pay upon the personal security of the customer’s

mentioned on the customer’s account.

II. 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:

i. Share certificate, Saving certificate

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ii. Deposits

iii. Mortgage of property

iv. Guarantee of person

3. CASH FINANCES (Commercial Loans Inward)

These types of loans are given against following:

i. Against locally manufactured goods.

ii. Cash finance against Rice and Paddy

iii. Against pledge

iv. Against commodities

Besides advances against the above commodities parties for advances against other commodities

like tobacco, oil, may approach bank.

V. Against Trust Receipts

To obtain adjustment of an overdue account or to facilitate the borrower to self the pledged good

it is sometimes necessary to deliver a portion of the goods, against the trust receipt and promise

from the borrower to deposit the sale proceeds with the bank.

4. FINANCE AGAINST THE FOREIGN BILLS (FAFB)

The advance facility is allowed both to local foreign bills and is classified as under:-

i. FAFB (Local) advance against Railway receipts and truck receipt, a company with bills

of exchange and invoices, are given under this head.

ii. FAFB (Foreign) advances against foreign bill, covering bills of exchange bills of lading

airway bills of exchange bills of lading airways bills etc.

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5. AGRICULTURE LOANS

Loans to the farmers with holding up to 25 acres for meeting their short terms, medium and long

terms Agricultural production requirements, such as:

i. Agricultural inputs

ii. Tube wells

iii. Live Stock Framing

iv. Land improvement

6. INDUSTRIAL LOANS

Besides the short-term loans which play a part in working capital medium and long-term loans

are also given to industrial sector for purchase of machinery and other capital nature goods

4. FOREIGN EXCHANGE DEPARTMENT

• International trade is growing and with the development of international trade it has become

more imperative.

• For countries to devote more and more attention to the complicated mechanism of

Foreign Exchange. It is more important in case of developing countries. It is need of time,

that a country should conserve its foreign exchange resources.

MEANING OF FOREIGN EXCHANGE

The foreign exchange term refers to the principles that determine the rate of exchange. It covers

following three senses:

i. The mechanism or system by which international obligations or indebtedness are

fulfilled.

ii. The currency of one country is exchanged for that of another.

iii. The principles on which the people of the world settle their debts to one another.

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I. FOREIGN EXCHANGE TRANSACTIONS

The foreign exchange transactions are usually of two types.

i. Merchandise Transaction

These consist of visible imports and exports, i.e. the purchase of goods for abroad and sale of

goods to abroad.

ii. Service Transaction

These represent inward and outward payments in respect of shipping, insurance, banking and

travel services. It includes payments in respect of interest, dividends, rents and profits etc.

iii. Unrequited Transfers

In indicates the payments and receipts from of reign countries in shape of such items as home

remittances by workers abroad, gifts, aids etc.

II. Capital Account Transactions

These are further divided into two classes:

i. Long Term Capital Transfers

Those transfers whereby residents of one country acquire securities (stocks and bonds) and

tangible assets (land etc.) in foreign countries with the purpose of earning profits in future.

ii. Short Term Capital Transfers

Those transfer which move relatively quickly from country to country;

a. Fore speculative purposes

b. To take advantages of differences in interest rates

c. As balancing items where a country has a debit or credit balance on current accounts.

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The important examples are:

1. Money Gold, and

2. Holdings of commercial credit, bills, cheques etc.

3. Transactions with I.M.F

5. BILLS DEPARTMENT

Bills department performs the following functions.

a. Inward Bills for Collection (IBC)

b. Outwards Bill for Collection (OBC)

INWARD BILLS FOR COLLECTION (IBC)

These are bills or cheques etc. which are collected locally. They are received from outstation

branches banks and parties.

DEMAND DRAFT

If refers to the payments of money on demand of the holder of draft. Demand draft includes DD

issues and DD payable.

OUTWARDS BILL FOR COLLECTION (OBC)

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 landing etc. having title to

goods, collected by the bankers on behalf of their customers.

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PAY SLIP

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

a. On account of expenditure incurred by the bank.

b. 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 make the payment as said.

6. REMITTANCE DEPARTMENT

Remittance department performs following functions:

i. Mail Transfer (MT)

ii. Telegraphic transfer (TT)

iii. Demand Drafts (DD)

iv. Online Transfer

MAIL TRANSFER (M.T)

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.

i. Branch Mail Transfer form

ii. Receiving Branch Register copy

iii. Issuing Branch register copy

iv. Beneficiary advice

v. Advice to Customer

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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 (T.T.)

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 banks which on receiving it

immediately makes the payment to the customer and after wards the voucher are sent to that

bank by ordinary mail.

DEMAND DRAFT (D.D.)

Demand draft is just like cheque and issued when the customer wants to take cash with him

personally. The idea behind it 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 M.T and T.T Draft is only issued when the bank

knows customer and bank has the confidence in him.

ONLINE TRANSFER

In this type of transfer there is no physical transfer of the money but the money is transferred

electronically. By computerized system the stated sum of money is transferred by writing the

branch code of beneficiary branch followed by the name and the account number of the

beneficiary and amount is transferred in his account in just fraction of seconds.

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CHAPTER 4
PRODUCTS & SERVICES
SERVICES PROVIDED BY NBP

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

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

Additionally, we have recently set up the Financial Institution Wing, which is placed under the

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

To effectively manage NBP’s exposure to foreign and domestic correspondence

Manage the monetary aspect of NBP’s relationship with the correspondents to support trade,

treasury and other key business areas, thereby contributing to the bank’s profitability

Generation of incremental trade-finance business and revenues

NBP OFFERS

The lowest rates on exports and other international banking products

Access to different local commercial banks in international banking

DEMAND DRAFTS

If you are looking for a safe, speedy and reliable way to transfer money, you can now purchase

NBP’s Demand Drafts at very reasonable rates. Any person whether an account holder of the

bank or not, can purchase a Demand Draft from a bank branch.

MAIL TRANSFERS

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

most competitive rates in the market.

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PAY ORDER

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

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

for this service are extremely competitive.

TRAVELER'S CHEQUES

Negotiability: Pak Rupees Traveler’s Cheques are a negotiable instrument

Validity: There is no restriction on the period of validity

Availability: At 700 branches of NBP all over the country

Encashment: At all 400 branches of NBP

Limitation: No limit on purchase

Safety: NBP Traveler’s Cheques are the safest way to carry our money

LETTER OF CREDIT

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

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

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

Credit are the best way to do your business transactions.

COMMERCIAL FINANCE

Our dedicated team of professionals truly understands the needs of professionals, agriculturists,

large and small business and other segments of the economy. They are the customer’s best

resource in making NBP’s products and services work for them.

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FOREIGN REMITTANCES

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

a number of measures to:

 Increase home remittances through the banking system

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

beneficiaries

Pak Remit

New Features

The existing system of home remittances has been revised/significantly improved and well-

trained field functionaries are posted to provide efficient and reliable home remittance services to

nonresident Pakistanis at 15 overseas branches of the Bank besides United National Bank (the

joint venture between NBP and UBL in UK)., and Bank Al-Jazira, Saudi Arabia.

Zero Tariffs

 NBP is providing home remittance services without any charges.

 Strict monitoring of the system is done to ensure the highest possible security.

 Special courier services are hired for expeditious delivery of home remittances to the

beneficiaries.

SWIFT SYSTEM

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

introduced for speedy services in the area of home remittances. The system has built-in features

of computerized test keys, which eliminates the manual application of tests that often cause delay

in the payment of home remittances.

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The SWIFT Center is operational at National Bank of Pakistan with a universal access number

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

remittances through SWIFT.

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

and personal needs.

SHORT TERM INVESTMENTS

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

are looking to invest for 3 months or 1 year, NBP’s rates of profit are extremely attractive, along

with the security and service only NBP can provide.

N.I.D.A

National Income Daily Account The scheme was launched in December 1995 to attract corporate

customers. It is a current account scheme and is part of the profit and loss system of accounts in

operation throughout the country.

EQUITY INVESTMENTS

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

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

development of the stock market. NBP is involved in the following:

 Investment into the capital market

 Introduction of capital market accounts (under process)

 NBP’s involvement in capital markets is expected to increase its earnings, which would

result in better returns offered to account holders.

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AGRICULTURAL FINANCE

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

produce some of the best agricultural products in the

World.

Agricultural Finance Services

“I Feed the World” program, a new product, is

introduced by NBP with the aim to help farmers

maximize the per acre production with minimum of

required input. Select farms will be made role models

for other farms and farmers to follow, thus helping

farmers across Pakistan to increase production.

Agricultural Credit

The agricultural financing strategy of NBP is aimed at

three main objectives:-

 Providing reliable infrastructure for agricultural customers

 Help farmers utilize funds efficiently to further develop and achieve better production

 Provide farmers an integrated package of credit with supplies of essential inputs,

technical knowledge, and supervision of farming.

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Agricultural Credit (Medium Term)

 Production and development

 Watercourse improvement

 Wells

 Farm power

 Development loans for tea plantation

 Fencing

 Solar energy

 Equipment for sprinklers

Farm Credit

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

basis.

OPERATING LOANS

Land improvement loans

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

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

Production Loans

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

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

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CORPORATE FINANCE

Working Capital and Short Term Loans

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

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

Discounting & Bills Purchased – Export Bills Purchased / Pre-shipment / Post Shipment

Agricultural Production Loans

Medium term loans and Capital Expenditure Financing

NBP provides financing for its clients’ capital expenditure and other long-term investment needs.

By sharing the risk associated with such long-term investments, NBP expedites clients’ attempt

to upgrade and expand their operation thereby making possible the fulfillment of our clients’

vision. This type of long term financing proves the bank’s belief in its client's capabilities, and

its commitment to the country.

Loan Structuring and Syndication

National Bank’s leadership in loan syndicating stems from ability to forge strong relationships

not only with borrowers but also with bank investors. Because we understand our syndicate

partners’ asset criteria, we help borrowers meet substantial financing needs by enabling them to

reach the banks most interested in lending to their particular industry, geographic location and

structure through syndicated debt offerings. Our syndication capabilities are complemented by

our own capital strength and by industry teams, who bring specialized knowledge to the structure

of a transaction.

Cash Management Services

With National Bank’s Cash Management Services (in process of being set up), the customer’s

sales collection will be channeled through vast network of NBP branched spread across the

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country. This will enable the customer to manage their company’s total financial position right

from your desktop computer. They will also be able to take advantage of our outstanding range

of payment, ejection, liquidity and investment services. In fact, with NBP, you’ll be provided

everything, which takes to manage your cash flow more accurately.

NBP Cash Card

Shop to your heart's desire!

NBP Cash Card is a 24-hour direct access ATM/Debit card to your bank account, which lets you

pay directly from your account as an alternative payment method to cash. The transaction is

Authorized and processed by entering PIN. The NBP CashCard holders are able to transact at

any of the 4000 + Merchants where Orix logo is displayed and can withdraw cash from NBP, 1-

Link & M-NET ATM’s across the country.

Advantages

 You won't need to carry a lot of cash with you every time you go out.

 Secure and Safe transaction.

 Account Information on tips (like: Mini Statement, Balance Inquiry, Utility Bill Payment

etc.)

 Enable To Withdraw Cash From 1-Link ATMs / MNET ATMs.

 Enable to Make Purchases from Around 4000 POS (Merchants) Countrywide including

2500+ POS in Karachi.

 No Card Issuance Fee for first 12 Months

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HOME LOANS

NBP SAIBAAN

Product Items

 Home Finance Home Renovation

 Home Construction Purchase of Land + Construction

 Balance Transfer Facility (BTF)

 Home Renovation

Home Purchase (House or Apartment) - Product Detail

 Financing Amount Up to 35 Million

 Financing Period 3 to 20 Years

 Debt to Equity 85:15 (Maximum)

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Home Construction

 Financing Amount Up to 35 Million

 Financing Period 3 to 20 Years

 Debt to Equity 85:15 (Maximum

Home Renovation

 Financing Amount Up to 15 Million

 Financing Period 3 to 15 Years

 Debt to Equity 70:30 (Maximum)

Purchase of Land and for Construction thereon

 Financing Amount Up to 35 Million

 Financing Period 3 to 20 Years

 Debt to Equity 70:30 (Maximum)

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)

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AND

1) 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) month’s Salary Slips

 Attested copies of last twelve (12) months bank statements

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 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)

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NBP ADVANCE SALARY

National Bank of Pakistan (NBP)

In January-2003, National Bank of Pakistan has

launched a unique product, ‘NBP-Advance

Salary’. Currently this product is for fixed-income

permanent employees of Federal & Provincial

Government, Semi-Government, Autonomous,

Semi-autonomous, local bodies and other

Government organizations. The product is purely

cash flow based and offers its holder to avail 20

(twenty) net salaries in one go to be repaid in up to

60 (sixty) months. With no collateral, insurance or

requirements, Advance Salary provides rapid

disbursement in a short turnaround time.

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NBP RETAIL PRODUCTS

 Amount of investement required from Rs. 50,000/- to Rs. 5,000,000

 Investment period is 5 years

 Free Demand Draft, Pay Order and NBP Online Aasan Banking*

 Free Cheque Book / NBP Cash Card (ATM + Debit)

 Profit paid every month as follows:

Period Profit Rates

 1 year 7.50%

 2 years 8.50%

 3 years 9.50%

 4 years 10.50%

 5 years 11%

 Financing facility available up to 90% of the deposit value

 Premature encashment will attract penalties

 Zakat and withholding tax will be deducted as per rules

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NBP Premium Saver

 Minimum saving balance of Rs. 20,001 and a maximum balance of Rs. 300,000*

 Free NBP Cash Card (ATM + Debit)

 Two debit withdrawals allowed in a month and no limit on number of deposit

transactions

 Profit calculated monthly and paid on half yearly basis.

NBP Karobar Scheme

President's Rozgar Scheme, if you are aged between 18 and 45 years, you could be

eligible for easy financing for self employment in the categories below:
 NBP Karobar Utility Store

 NBP Karobar Mobile Utility Store

 NBP Karobar Mobile General Store

 NBP Karobar Transport

 NBP Karobar PCO

 NBP Karobar Tele-Centre

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CHAPTER 5

PRACTICAL EXPERIENCE

WORK DONE AT THE BRANCH

As everybody knows that "Knowledge without practice is sterile "In order to give vent to this idea an

Internship program of six weeks has been arranged in different esteemed organizations during

MBA. In this regard on 31st October, 2007, I was asked by my Dean to go to National Bank to

have an internship of six weeks there. So as per standing order of my Branch Manager I was

assigned to work under the supervision of AVP/Operations Manager of Civil Lines Branch, on

1st of November. On my first day of Internship, Manager handed me over the charge of

Operation Manager.

As five departments namely Accounts, Cash and Billing, Foreign Exchange and Credit were

being managed by the Manager in this particular branch. I started my practical training by

working with the Operation Manager in the Account Opening Department. I was guided fully by

my senior as per the requirements of the opening of the account. I worked in this department for

three weeks and got all information that I could. The Manager and the Accountants duly signed

this evaluation.

OPERATIONS DEPARTMENT

Then I was handed over to the head of Miscellaneous Department who guided me wonderfully throughout

the tenure. This was the main department of the branch where all work was to be done. First of

all I was trained to fill up the deposit slips of the customers. I was also guided to fill up the

deposit slips of the cheque which customers had brought to the bank.

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Cheque

Secondly I was advised by my Manager to be remained vigilant about the fake cheque giving

some instructions for the scrupulous examination of cheque like signature verification from

specimen card. Fortunately the branch where I got my Internship was computerized; all the

things were to be done electronically. So it was very easy for me to cheque and matches the

signatures of any person who was account holder of the bank. Signature verification was done by

me by checking the signatures of the customers from the specimen signature cards.

Filling up of deposit slips

I also used to fill the deposit slips for the customers, and also guide them how to fill the deposit

slips.

Issuance of cheque books

I issued the cheque books to the customers, first I received the request from customer and then

sent it to the head office, after few days a printed cheque book come from head office and which

was delivered to customer and also take the receiving on the register.

Issuance of drafts

Many people used to come NBP for making of drafts, I also used to do the work in that

department, first an application form is being filled by the customer, and a amount is deposited in

the bank than a printed draft is being given to him.

Issuance of Pay orders

I also used to do the work in this department first an application form is being filled by the

customer, and an amount is deposited in the bank than a pay order is being issued to him.

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Online transfer of money

It is very famous service of bank, an online service is being filled by the customer and the

amount is being deposited in the bank which have to be on lined plus the service.

Posting of cheque in the computer

The cheques which were presented at bank and come for clearing are also entered in the

computer, data entry for dishonored cheques was also done by me.

Balance query to customers

I also used to tell the people there balance of the account, which was checked by entering the

account no in the MISIS software of NBP.

Posting of letters

I was also given the assignment of the posting of letters to the various Locker Holders of the

bank. This included some new instructions relating to the use of lockers. I had to search for the

address for the various locker holders and to write their address on the posting letter. This

assignment was successfully completed by me.

CREDIT DEPARTMENT

Then for two week I worked in the credit department where I clearly came to know how the credit

limits are prepared and what are the various documents involved in the loaning procedure.

In the credit department I performed the task of providing loan under the president’s rozgar

scheme.

Granting the loan for Rickshaw

I was assigned the task of the loan to be granted to different customers by the head of the credit

department. For this purpose I performed the following activities:

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 Entering the detailed description of the person

 Entering the amount of loan

 Analyzing the equity provided by the customer

 Analyzing and entering the details of the persons who have provided the guarantee for

that customer

 Entering the details of the amount of loan and the time period for which the loan has been

taken

 Entering the other details provided by the customers

Granting the loan Under NBP’s Saibaan Scheme

 Entering the detailed description of the person

 Entering the amount of loan

 Analyzing the equity provided by the customer

 Analyzing and entering the details of the persons who have provided the guarantee for

that customer

 Entering the details of the amount of loan and the time period for which the loan has been

taken

 Entering the other details provided by the customers

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CASH DEPARTMENT

I wanted to work in the cash department also but the branch manager because of regulatory

conditions did not allow me. I was also not allowed to work in the sensitive areas of the bank.

Overall I really enjoyed my work and got the wonderful experience of my life.

FOREIGN EXCHANGE DEPARTMENT

I also worked in the foreign exchange department of National Bank of Pakistan at Civil Lines

branch Gujranwala for one week. The main responsibility of this department includes handling

the customers who are interested in International Trade. That’s why this department deals with

the opening of Letter of credit for importers and exporters. This department is also responsible

for the sending and receiving money to different countries. During my stay in this department, I

had learned how to pen LC for an importer. I was assigned the task by the operation manager of

the branch to fill out the LC form. For this purpose, I performed the following tasks:

 Entering the details of the importer

 Entering the details of the exporters in the form

 Entering the detailed description of the imported goods

 Analyzing the Performa invoice of the imported goods

 Detailed analysis of the stamp paper as required by the bank

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CHAPTER 6

FINANCIAL ANALYSIS OF THE BANK

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RATIO ANALYSIS

Ratio 2006 2005 Result


Earning Assets to 81.78% 81.77% Same

Total Assets*
Return on 3.30% 2.70% Favorable

Earning Assets
Net Margin to 5.80% 2.19% Favorable

Earning Assets**
Loan-Loss 97 Times 92 Times Favorable

Coverage Ratio
Deposit Time 9.27 Times 12.11 Times Unfavorable

Capital
Loans To .75 Times .68 Times Favorable

Deposit***
EPS 24.32 18.09 Favorable
P/E Ratio 9.25 15.75 Unfavorable
Dividend Payout 10.27% 11.05% Same

Ratio
Dividend yield 1.11% .70% Favorable

Ratio

* Earning Assets= Advances +Lending to Financial Institutions+ Balances with other banks +

Investments

** Net Margin= Net Mark up income – Net Mark up expenses

*** Loans= Advances +Lending to Financial Institutions+ Balances with other banks

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EARNING ASSETS TO TOTAL ASSETS

This ratio explains the amount of earning assets of the bank in the total assets. The results of the

years concerned have shown that this ratio has not changed significantly.

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RETURN ON EARNING ASSETS

This ratio explains the amount of profit on the earning assets out of the total profit of the bank.

The results of the corresponding years have shown that the return on earning assets has

increased.

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LOAN-LOSS COVERAGE RATIO

This is very important ratio and it tells the level of protection available to the depositors about their

deposits.

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DEPOSIT TIME CAPITAL

The credit rating of bank depends upon total deposits. This ratio has dual effects. The higher

answer is favorable for the banks and lower answer is favorable for shareholders. If deposits are

high then there will be more chances for investments.

This ratio is not in the favor of the bank for the current year.

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LOANS TO DEPOSIT

It is a kind of asset to liability ratio. Higher ratio shows the growth of a bank in terms of number

of customers available. The bank having more schemes/opportunities for lending often have high

loan to deposit ratio.

This ratio is in the favor the bank as the assets of the bank (loans) are increasing.

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EARNINGS PER SHARE

The earnings per share are very important ratio in terms of return to investors. It shows the

amount available to be distributed to the shareholders.

The EPS of the bans has also shown significant increase in the corresponding years.

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P/E RATIO

It shows the market potential of the bank. P/E ratio shows the growth potential of any company in

the market. Higher answer is favorable for the bank and it shows the high potential.

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DIVIDEND PAYOUT RATIO

This ratio shows the amount of dividend to be paid to the shareholders by the bank out of total

earnings.

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 The past two years data shows an improvement in the return on earning assets, which is a

positive sign. The Bank should have to continue its policies. By observing the audited

account we find that this improvement is due to increase in the Net profit which is good

sign.

 Loan-loss coverage Ratio is continuously increasing in the previous years. The figures

reveal that this trend was due to increase in the pre tax earning of the bank and also due

to increase in the net margin of the bank.

 Net profit Ratio is giving upward trend. This trend is observed due to increase in Net

profit but on the other hand the expenses decreases which shows an efficient

management.

 Loans to deposit ratio shows an increasing trend in the previous years. This trend is

observed as the advances of the bank increased and due to this reason the loan to deposit

ratio is showing an upward trend.

 The group’s pre-tax profit has increased by almost 38% over the last year. The EPS has

an increased by almost 34.43%.

 The overall performance of National Bank of Pakistan was very much satisfactory in the

year 2006 but as we all know that there is always a space for improvement.

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CHAPTER 7

SWOT / PEST ANALYSIS

Following are some main problems which I faced in working in the bank (branch):

 The whole data of the bank is not computerized, and the computerizing

process is very slow, it takes a long time to find some data from the

manual work done.

 The old employees of the branch are not well trained about the

computerized program which is used in the bank, and the staff is also not

well trained about the modern banking.

 The staff of the bank didn’t work by heart because they didn’t get any

reward and incentive on good performance.

 The resources of the bank are mismanaged which discourage hard

workers.

 There is no proper delegation of authorities to the staff.

 The no of staff member is very low; more people are required due to more

work load.

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RECOMMENDATIONS

As we seen from the previous analysis of the financial statements we have realized that that National

Bank is performing very well since its inception. It is quite difficult to give suggestion to

improve the banking conditions. As we know that nothing is perfect, there is always a room for

improvement, so I have found during my internship can be made up taking into account the

following suggestions.

 NBP is in the process of providing the services of Automated Teller Machine. In

order to complete with the other banks ATM services must be provided throughout

the country as this service is becoming very popular in bank customers.

 The bank is also in process of computerizing its records, which is good sign, but it is

going on with small progress Computerization must be done on early basis. This will

help in increasing efficiency of work don, customer’s satisfaction decreases the

stationary cost and resultantly it will increase profits.

 In Past, National Bank of Pakistan has always being suffered from bad Government

policies. Government intervention should avoid completely.

 Employees Training program must be introduced on continuous basis so that

Employees have understanding with the latest developments especially with the

customers.

 Bank should introduced incentive plans for employees on regular basis so that if

employees may work whole-heartedly for the welfare of their organization. While

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giving incentives qualification, work, experience, hard work and such other factors

must be considered.

 Mismanagement of resources must be avoided as much as possible as it decreases

profit but also discourage hard worker and honest employees.

 Fresh graduates must be recruited. As the combination of Experienced and fresh can

produce better results and it will improve the efficiency of management.

 Banks different schemes must be conveyed to the targeted customers so that to have a

reasonable share in market.

 Bank should help the society by providing interest free loans to the Talented Students.

 The Bank is also facing a severe problem of Centralization in which the people are

not comfortable with their work. There must be proper delegation of authorities in

order to give the best results.

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References

www.wikipedia.org

www.nbp.com.pk

www.sbp.org.pk

www.economist.com

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