Waseem Abbasi Internship Report

INTERNSHIP REPORT ON NATIONAL BANK OF PAKISTAN

WASEEM ABBASI Submitted in partial fulfillment of the requirements For the degree of Master of Business Administration

At

BAHRIAIslamabad, Pakistan February, 2009

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ACKNOWLEDGEMENT

First of all I am thankful to “ALMIGHTY ALLAH”. Who gave me the strength, patience, courage and enthusiasm needed to write and complete this report, then to my friends who assisted me in this effort and we worked daylong to accomplish this assignment and to my parents who supported me financially and encouraged me morally. I have a debt of gratitude to all my teachers who taught me throughout my academic career. It was pleasure for me to be sent to The National Bank of Pakistan Passport office branch Rawalpindi. I am very thankful to the honorable internship incharge. I learnt a lot from this training program and this would guide me a lot while selecting my career. I also know how to face the problems and how to find out the ways for their solutions. The preparation of this report was a massive undertaking but the highly competent and experienced bankers of NBP Passport Office Branch, Rawalpindi, provided me with all assistance, information, advice and suggestions that I needed which contributed importantly to this report.

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Dedication Dedicated to my Parents and Teachers whose guidance Enabled me Achieving objectives in life, their Prays Enlightened and paved the way to Success

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EXECUTIVE SUMMARY National Bank of Pakistan is one of the leading banks in Pakistan. According to international standards of banking system it is one of the best banks in South Asian region as well. And the bank in the top ten in the world. This report explains the different functions of NBP and their services. The first part of the report is about my Internship Experience at National Bank of Pakistan the second part is about History of NBP, where as the third part is about functions and services and forth part is about SWOT Analysis. During the critical analysis, it was observed that NBP is one of the leading commercial banks of Pakistan with a network of around 1189 branches all over Pakistan. NBP provides a wide variety of products and accounts that suit the lifestyle and needs of the masses .In fact commercial banking is regarded as a “Conservative” business because the rewards are modest and the penalties of bad banking are many. As a trustee of the public funds, NBP has a greater responsibility for safety and prudence. Many business can enjoy some slack in their affairs, commercial banks cannot afford this, since commercial banks must make a living by putting the money at their disposal to work, they are faced with the problem of making a living without jeopardizing the safety of their institution and NBP is doing all this very efficiently. The NBP is known for its customer services as well as for its products, which are in demand.

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Table of Contents CHAPTER NO.1 1.1 INTRODUCTION…………………………………………………………………2 

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

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

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Vision……………...……………….…………………………………..………5

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Mission……………...…………………………………………………..……...5

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

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Objectives ……………………………...………………………………..……..7

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

CHAPTER NO.2

Internal and External Analysis

2.1 SWOT Analysis …………………………….……………………………....…..24 2.2 PEST Analysis …………………………………………………………....….. . 27 CHAPTER NO.3 3.1 Financial analysis 

Ratio Analysis …………………………………………………...….…………29

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Common Size Analysis ……………………………………………....…….….35

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Horizontal Analysis ………………………………………….……...……….. 38

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Trend Analysis ………………………………………………………....…..….40

CHAPTER NO.4 4.1 Internship Experience…………………………….................................................. 44 

First Week………..………………………………………….…………...…….44

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Second Week……………..…………………………………..……………...…46

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Third Week……………………...…………………………..……………….…47

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Fourth Week…………………………………………………..…...…………...48

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Fifth Week………………………………………………...………..…………. 51

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Sixth Week………...………………………...………………………………….51

4.2 Learning ……………………………………………………………………….…...52 4.3 Skills Used………………………………………….………………………………53 v

4.4 Skills Gained………………………………………………….………………....… 54 CHAPTER NO.5 Challenges ……………………………………………………………………….…......57 Identification of Problems ……………………………………………………….……..58 Recommendations & Suggestions…………………………………………...…….……59 CHAPTER NO .6 Conclusion……………………………………………………………………..………..63 References………………………………………………………….…………...……….64 Annexture

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CHAPTER # 1 INTRODUCTION TO THE ORGANIZATION

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INTRODUCTION “Bank” which means a heap of anything or joint stock fund. "A financial institution, which deals with money and credit. It accepts Deposits from individuals, firms and companies at a lower rate of Interest and gives at higher rate of interest to those who need them.” “A financial establishment which uses money deposited by customers for investment, pays it out when required, makes loan at interest, exchanges currency, etc.” HISTORY OF BANKING IN PAKISTAN Pakistan came into being on 14th August, 1947; sufficient banking services were available in the areas forming Pakistan. Out of the total branches of the nearly 3,500 in the undivided India, as many as about 1,500 branches were existing in these areas. It was agreed between the two countries that reserve bank of India shall continue to function in the Pakistan territory until 30th September 1948 and that Indian notes would continue to be legal tender at Pakistan until 30th September 1948. Unfortunately, relationship between the two countries became most strained immediately after independence; banking was mostly in the lands of Hindus who immediately started transferring their offices and assets into India. As a result most of the banks in Pakistan were closed down and even those which were open were not doing any effective business. The number of banking office in Pakistan came down to about 200 on 30th June 1948. Branches of some European banks were also functioning in a limited manner, financing in export of crops, and their number was limited to about 20. It was only the Habib bank, which transferred its office from Bombay to Karachi Austral Asia bank was another bank, which was in existence in the Pakistan territory at the time of independence. Despite of best efforts on the part of government of Pakistan, no heady way could be made on this behalf and reserve bank of India was in no mood to help the viii

new country. Imperial bank of India, agent of the reserve bank of India also started closing down its branches in Pakistan. Reserve bank also refused to advance money to Pakistan to make essential payments such as salaries etc, also Pakistan’s share of Rs.75 billion in cash balance was with held by bank, causing hardships to the newly born state. In view of these hopeless state affairs it was agreed between the two countries that reserve bank would serve as monetary authority in Pakistan only up to 30th June 1948. The Pakistan banking council prepared a scheme for the recognition of banks. The bank (amalgamation) scheme 1974 was notified in April, providing for the amalgamation of the smaller banks with bigger ones and following the five units in there phases: National bank limited Habib bank limited United bank limited Muslim commercial bank limited Allied bank of Pakistan limited The number of branches, which stood at 3397 on Dec31, 1973, reached on 7661 by end June 1992. The bank deposits which stood at Rs. 1925 corers at the end 1973 reached the highest mark about 323 corers. History of NBP The NBP was established vide NBP Ordinance No. XIX of November 9. 1949. British Govt. devalued its currency in September 1949, India devalued its rupees but Pakistan did not. It led to a crisis in trading between the two countries and India refused to lift the Pakistan Jute. To solve this problem i.e. to export jute NBP was established through an Ordinance of GOP. National Bank of Pakistan maintains its position as Pakistan's premier bank determined to set higher standards of achievements.

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The Bank in 1950 had one subsidiary ‘The Bank of Bahawalpur’ on December4, 1947 by the former Bahawalpur State. NBP was undertaking Treasury Operations and Managing Currency Chests or Sub Chests at 57 of its offices where the turnover of the business under the head amounted to Rs.2460 million. Deposits held by NBP constituted about 3.1% of total deposits of all Pakistani Banks in 1949, which rose to 38% in 1952. Growth in Deposits was accompanied by increase in Bank portfolio in advances. NBP lent out to Textile, Yarn, Iron and Steel and played a pioneer role in support of agriculture and commerce. NBP advances reached Rs.554.4 million by December 1959, which was one third of the total schedule bank credit. National Bank of Pakistan maintains its position as Pakistan's premier bank determined to set higher standards of achievements. It is the major business partner for the Government of Pakistan with special emphasis on fostering Pakistan's economic growth through aggressive and balanced lending policies, technologically oriented products and services offered through its large network of branches locally, internationally and representative offices. Division of Branches

REGIONAL OFFICES TOTAL BRANCHES SUBSIDIARIES

29 1189 4

Overseas Branches

OVERSEAS BRANCHES REPRESATIVE OFFICES SUBSIDIARY JOINT VENTURE

16 4 1 1

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VISION The vision of NBP is: “To be recognized as a leader and a brand synonymous With trust, highest standards of services quality, international best Practices and social responsibility”

MISSION STATEMENT



Institutionalizing a merit and performance culture.

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Creating and distinctive brand identity by providing the highest standards of services.

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Adopting the best international management practices.

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Maximizing stockholders values.

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Discharging our responsibility as good corporate citizen of Pakistan and in countries where we operate

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CORE VALUES

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Highest standards of integrity.

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Institutionalizing team work and performance culture.

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Excellence in service.

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Advancement of skills for tomorrow challenges.

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Awareness of social and community responsibility.

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Value creation for all stakeholders.

Values to deliver to you. NBP aim to be an organization that is founded on: 

Growth through creation of sustainable relationships with our customers.

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Prudence to guide our business conduct.

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A national presence with a history of contribution to our communities.

NBP shall work to: 

Meet expectations through market-based solutions and products

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Reward entrepreneurial efforts

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Create value for all our stakeholders

NBP aim to be people who: 

Care about relationships



Lead through the strength of our commitment and willingness to excel

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

NBP have confidence that tomorrow we will be: 

Leaders in our industry.

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An organization maintaining the trust of our stakeholders.



An innovative, creative and dynamic institution responding to the changing needs of the internal and external environment.

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After all, we are The Nation’s Bank OBJECTIVES: To enhance profitability and maximization of NBP share through increasing leverage of exiting customer’s base and diversified range of product. National bank of Pakistan is also a commercial organization and its main objective is profit maximization. This is achieved in two ways: 1. By increasing deposits. 2. By charging interest on loans provided to the private sector and business community. SERVICES of NBP NBP offers the following services to the people.  DEMAND DRAFTS You can now purchase 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 to transfer money.  SWIFT SYSTEM The SWIFT system (Society for Worldwide Interbank Financial Telecommunication) has been introduced for speedy services in the area of home remittances. The system has built-in features of computerized test keys, which eliminates the manual application of tests that often cause delay in the payment of home remittances. The SWIFT Center is operational at National Bank of Pakistan with a universal access number NBP-APKKA. All NBP overseas branches and overseas correspondents (over 450) are drawing remittances through SWIFT. Using the NBP network of branches, you can safely and speedily transfer money for our business and personal needs.

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 LETTERS OF CREDIT NBP is offering its business customers the widest range of options in the area of money transfer. If you are a commercial enterprise then our Letter of Credit service is just what you are looking for. With competitive rates, security, and ease of transaction.  TRAVELER'S CHEQUES Traveler’s cheques are negotiable instruments, and there is no restriction on the period of validity of the cheques. Rupee traveler’s cheque is available at all 700 branches of NBP. This can be encased in all 400 branches of NBP. There is no limit on purchase of this cheque. It is one of the safest ways for carrying money.  PAY ORDER NBP provides another reason to transfer your money using our facilities. NBP pay orders are a secure and easy way to move your money from one place to another. And, as usual, NBP charges for this service are extremely competitive. The charges of NBP are very low all over the Pakistan. It charges Rs 50/- for NBP account holders on issuing one payment order. And charges Rs 100/- for NBP non-account holders on issuing one payment order. It charges Rs 25/- for students on payment of fees of educational institutions. If someone want a duplicate of payment order they charges Rs 100/- for NBP account holders and Rs 150/- for non account holders.  MAIL TRANSFERS Move your money safely and quickly using NBP Mail Transfer service. And NBP also offer the most competitive rates in the market. They charges Rs 50/- exchange rate and RS 75/- postage charges on issuing mail transfer.

 FOREIGN REMITTANCES: To facilitate its customers in the area of Home Remittances, National Bank of Pakistan has taken a number of measures to: xiv

 Increase home remittances through the banking system  Meet the SBP directives/instructions for timely and prompt delivery of remittances to the beneficiaries

 SHORT TERM INVESTMENTS NBP now offers excellent rates of profit on all its short term investment accounts. Whether you are looking to invest for 3 months or 1 year, NBP’s rates of profit are extremely attractive, along with the security and service only NBP can provide.

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NATIONAL INCOME DAILY ACCOUNT (NIDA)

The scheme was launched in December 1995 to attract corporate customers. It is a current account scheme and is part of the profit and loss system of accounts in operation throughout the country. Salient Features: • Rs 2-million is required to open an account and there is no maximum limit. • Profit is paid on half yearly basis on monthly balances. • The rates of profit vary according to the slabs of deposit. On Deposits of Rs.2 million

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

• It is a checking account and there is no limit of withdrawals.  EQUITY INVESTMENTS NBP has accelerated its activities in the stock market to improve its economic base and restore investor confidence. The bank is now regarded as the most active and dominant player in the development of the stock market. NBP is involved in the following:  Investment into the capital market  Introduction of capital market accounts (under process) NBP’s involvement in capital markets is expected to increase its earnings, which would

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result in better returns offered to account holders  COMMERCIAL FINANCE NBP dedicated team of professionals truly understands the needs of professionals, agriculturists, large and small business and other segments of the economy. They are the customer’s best resource in making NBP’s products and services work for them.  TRADE FINANCE OTHER BUSINESS LOANS There are two types of trade finance. 1. AGRICULTURAL FINANCE NBP provides Agricultural Finance to solidify faith, commitment and pride of farmers who produce some of the best agricultural products in the World. Agricultural Finance Services: “I Feed the World” program, a new product, is introduced by NBP with the aim to help farmers maximize the per acre production with minimum of required input. Select farms will be made role models for other farms and farmers to follow, thus helping farmers across Pakistan to increase production. Agricultural Credit: The agricultural financing strategy of NBP is aimed at three main objectives:•

Providing reliable infrastructure for agricultural customers

•

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

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Provide farmers an integrated package of credit with supplies of essential inputs, technical knowledge, and supervision of farming.

Agricultural Credit (Medium Term): •

Production and development xvi

•

Watercourse improvement

•

Wells

•

Farm power

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Development loans for tea plantation

•

Fencing

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Solar energy

Farm Credit: NBP also provides the following subsidized with ranges of 3 months to 1 year on a renewal basis. •

Operating loans

•

Land improvement loans

•

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

•

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

Production Loans: Production loans are meant for basic inputs of the farm and are short term in nature. Seeds, fertilizers, sprayers, etc are all covered under this scheme. 2. CORPORATE FINANCE Working Capital and Short Term Loans: NBP specializes in providing Project Finance - Export Refinance to exporters - Preshipment 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:

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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 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 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 xviii

•

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

Cash and Gold Finance Cash and Gold finance means that loan is given against the gold. The gold is mortgaged with the bank and loan is taken. It is the area of consumer finance. And borrower can take loan for common use. Advance salary loan: This loan is given to those people who are Govt. servants. They can get a loan up to the salary of fifteen months.  NBP House Financing Scheme and its Promotion Campaign. Housing Finance like Sieban Scheme A housing scheme is introduced by national bank of Pakistan named Sieban. The purpose of this scheme is to provide home to people with low income. Some important features of this scheme are as under:•

Finance available for home purchase, home construction and home improvement.

•

Period of repayment ranges between 3-20 years.

•

Loans available up to a Maximum of Rs. 10 Million

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•

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

change. •

Minimum approval and disbursement timing.

Limited to areas where there are on documentation, Fee resale and foreclosure related issues, so to protect the bank’s interest.

DEPARTMENTS GENERAL BANKING DEPARTMENT  Account opening department  Remittances department  Cash department  Clearing department PRIVILEGE BANKING DEPARTMENT  Online banking  Lockers  Utility services CREDIT DEPARTMENT ACCOUNT OPENING DEPARTMENT Functions of Account Opening Department: •

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

•

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

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Check the forms whether they are correctly completed or not,

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Preparing checklist,

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Stamping on the form,

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Maintaining account opening register,

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

•

Issuance of cheque books,

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Issuance of accounts maintenance certificate,

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Closure of account

•

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

ACCOUNT OPENING PROCEDURE & PRECAUTIONS:

Customer name:

 Address: 

Contact Numbers:

 Other/ secondary/ mailing address: 

Special instructions:

REMITTANCE DEPARTMENT The remittance department deals with the transfer of money from one place to another. This department deals with the local currency transfer only. Functions of remittance department: •

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

•

Clearing SNTD, TDR and checking of respective supplementary sheets

•

Checking of Extract and H.O reconciliation

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

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Safe custody of specimen signature book

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Preparation of periodical statements

•

Any other work/ Duty assigned by the manager

CASH DEPARTMENT Cash department performs following functions: xxi

 Receipt  Payments  Act according to any standing instructions  Transfer of funds from one account to another  Handling of ATM  Verification of signatures  Posting Categories A. Payment department B. Receipt department PAYMENT DEPARTMENT

Process of payment Cheque is presented at token counter

Cashier counts the amount & payment is made

Two signatures on back of the cheque by customer

Cheque is recorded & token # is allotted

Cancellation officer cancels cheque

Posting is made

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Functions of payment department: Daily 1. Transactions related to payments and maintenance of liquidity. 2. To maintain cash related books. •

Balance book

•

Paying cashier

•

Vault register

•

Token book

•

Pass book

•

Cash remittance register and file

•

Cash indent book

•

National prize bond and fortnightly statements

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

Work done by the cash department.

•

To assign duties to other officers working in cash department.

•

Any other matter related to cash department.

4. Daily statement 5. Periodical balancing 6. Any other work/ duty assigned by the manager Weekly 1. Recheck and update the following books •

Cash remittance register & file

•

Cash indent book

2. weakly statements 3. weakly balancing of books Monthly xxiii

1. Monthly statements 2. Monthly balancing of books Quarterly 1. Quarterly statements 2. Quarterly balancing of books 3. Quarterly balancing of •

Stationery

•

Furniture/ Fixture and bank’s other fixed assets

Half yearly 1. Half yearly statements 2. Half yearly balancing of books 3. Quarterly balancing of •

Stationery

•

Furniture/ Fixture and bank’s other fixed assets

Functions of Cash Receipt Department Daily 1. Transactions related to receipts (including evening banking if any). 2. To maintain receiving cashier book. 3. To collect fee challan of different departments and prepare/maintain relevant scrolls/files. 4. To collect utility bills and prepare/maintain relevant scrolls/files. 5. Periodical balancing. 6. To maintain following books. •

Voucher register

•

Voucher movement register

7. Any other work/duty assigned by the manager. DEPOSIT DEPARTMENT xxiv

Process of deposits

Fill- up deposit slip

Deposited on Receipt Customer

Cashier counts the amount and fulfills other requirements

Functions of deposit department 1. Maintenance of transactions related to deposit department (including clearing). 2. Maintenance of record of account opening and closing- safe custody of S.S cards, insurance of account statements. 3. To maintain following books. •

Maintenance of scroll books

•

Transfer books

•

Supplementary books

•

Progressive books

4. Supervision of all vouchers. 5. Transfer of funds of SAPS, and SNGPL to their concern branches. 6. Preparation of voucher cover. 7. Periodical balancing of deposit books. 8. Preparation and timely submission of periodical statements i.e. Daily, Weekly, Fortnightly, Monthly, Quarterly, Half yearly, yearly and any other statement.

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9. Any other information required by Head Office or Regional Office from time to time. 10. To rectify the audit irregularities of deposit department. CLEARING DEPARTMENT OUTWARD CLEARING AT THE BRANCH: The following points are to be taken into consideration while an instrument is accepted at the counter to be presented in outward clearing:  The name of the branch appears on its face where it is drawn.  It should be stale or post dated or without date.  Amount in words and figures does not differ.  Signature of the drawer appears on the face of the instrument.  The amount of the instrument is same as mentioned on the paying-in-slip and counterfoil.  The title of the account on the paying-in-slip is that of payee or endorsee (with the exception of bearer cheque). INWARD CLEARING OF THE BRANCH: 1. The particulars of the instruments are compared with the list. 2. The instruments are detached and sort out department wise. 3. The entry is made in the inward clearing register (serial no. Instrument no. Account no. is written). 4. The instruments are sent to the respective departments 5. The instruments are scrutinized in each respect before honoring the same. ONLINE BANKING: Online banking (or Internet banking) allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank, credit union or building society. The common features fall broadly into following categories xxvi

•

Transactional (e.g., performing a financial transaction such as an account to account transfer, paying a bill, wire transfer... and applications... apply for a loan, new account, etc.) o

Electronic bill presentment and payment - EBPP

o

Funds transfer between a customer's own checking and savings accounts, or to another customer's account

•

o

Investment purchase or sale

o

Loan applications and transactions, such as repayments

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

•

Bank statements

Financial Institution Administration - features allowing the financial institution to manage the online experience of their end users

UTILITY SERVICES Keeping in view the difficulties faced by the general public NBP has taken the initiative to provide service for collection /receipt of utility bills on behalf of WAPDA, Sui Gas and PTCL from 9.00am 4.30 p.m. all the branches throughout the countries are observing this practice to ease the long queues lined –up at the counters of banks. CREDIT DEPARTMENT Although the study of money is important for the understanding of the way in which our Economic system operates, we must recall this point that most exchange transactions in This system are carried on today without the use of actual money, i.e. those are carried on By means of credit and credit instruments rather than money. While money still forms The basis of credit and deferred payments, it is necessary to examine the nature of credit Operations, and the instruments and institutions trough, which these operations are carried on, in considerable detail.

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THE NATURE OF CREDIT On the surface, credit operation appears to be of many kinds, but they all have a fundamental similarity. In credit transactions, one party to the transaction, the creditor, turns over to the debtor a certain amount of money, commodities or services at the present time and relies on the debtor to repay an equivalent amount, usually the money in the future plus interest at some future time. TYPES OF CREDIT INSTRUMENTS There are various types of credit instruments. The more important credit instruments are as follows: ♣ Bills of exchange: A bill of exchange is define by negotiable instruments act as "an instrument in writing, containing an unconditional order, signed by the maker, directing a certain person, to pay certain sum of money, only to or to the order of a certain person, or to the bearer the instrument". ♣ Cheque: A Cheque is defined “a bill of exchange drawn on specific banker and not expresses to be payable otherwise than on demand." ♣ Drafts: These are bills of exchange issued by a banker on his branch office. Banks draft like bills of exchange, are of great importance in the financing of trade, especially foreign trade ♣

Promissory note:

It is an instrument in writing containing an unconditional undertaking, signed by the maker, to pay the certain sum of money only to or to the order of a certain person to the bearer of the instrument. A promissory note in order to be the so, must fulfill all conditions.

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♣ Letter of credit: A letter of credit as name signifies does one person or bank to another requesting the letter to pay any amount of money up to a certain limit to the person write a letter named in the letter or in whose favor the letter is written. In this letter generally a date is fixed up to only the addressee should make which advances. Thus a letter of credit remains in force up to a certain date only. Generally banks grant this letter of credit.

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CHAPTER #

2

INTERNAL AND EXTERNAL ANALYSIS

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SWOT ANALYSIS An analysis indicating towards the organizations strengths, weaknesses, opportunities and threat is termed as SWOT Analysis. Such an analysis is very important for the management in retaining the strength, overcoming the weaknesses, capitalizing over the emerging market opportunities, and carving ways to successfully tackle with the threats and ultimately converting them in the strengths for the organization. During six weeks of my stay at NBP Passport office Branch, I have come across the following SWOT analysis of the bank. STRENGTHS  Full Day Banking One can avail the benefit of the services provided at the bank from 9:00a.m- 5:00p.m. This is highly useful for those customers who find it difficult to leave their officers in the morning.  Customized Solutions The management of the bank believes in customer focused banking rather than the product oriented banking. The products and services designed by the bank are specifically tailored to the individual needs of its customers. Customer Oriented Banking The different branches of the bank offer unmatched services where the customer receives highly privileged services in a highly elegant environment. It gives the chance of experiencing new standards in banking. Designed specially for those who appreciate only the finest things in life, customer priority banking offers the very highest levels of personalized banking to match customer’s unique status. Electronic Banking The revolution in the banking in the form of electronic banking operations have opened avenues of excellent, efficient and quick services saving the time and costs of the

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customers and fortunately NBP is among those few banks that are already reaping the benefits of electronic transactions. Electronic Funds Transfer NBP management is quite prepared to adopt the latest advancements in technology resulting in revolution in the banking operations such as check clearing process, automatic teller machines, and electronic funds transfers among the others. Telephonic Services Telephonic service is very attractive for those classes of customers who don’t have time to personally come to the bank i.e. collecting information on the phone line instead of personally visiting the bank thus saving the precious time of the customers. Ethical Concerns and Public Image The organizations showing concern for the people, ethics, and environment enjoy good public reputation and are able to reap the benefits in the long run NBP management is quite sensitive to this issue.  Training Facilities NBP provides training facilities to its employees over small intervals WEAKNESSES  Lack of Advertisement NBP has formulized a lot of products and services for its customers, even more than other commercial banks, but any advertisement on electronic media has not been seen.  Burden of Work I observed during my internship that some of the employees were burdened with over work. So I think that the work should be distributed according to their post and capabilities.  Biasness Biased selection of employees.  ATM Network xxxii

The bank has a large ATM Network across the country. The customers of NBP withdraw or access their funds any time at all the ATM Sites of NBP. OPPORTUNITIES The bank is facing the following threats and opportunities currently. These are positive external environmental factors effecting the organization.  It deals in bulk business: Due to more portfolio of the business it has an opportunity from other banks to attract the potential business  A large amount of foreign investment is attracted: It branches are in maximum major country of the world that attract more foreign customers for investment. 

Strong potential for growth:

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

Steady increase in Customer Deposits:

It is a public bank in the Pakistan everybody is making business through this bank for the secure and steady. Every day many customers come for the deposits in every branch. 

Branches In Remote Areas:

It has a branches in all the main as well as the local areas which is in the access of everybody relating to any business THREATS  Reduce the Charges The schedules of charges indicate that the fees charged by the bank on the various services it provides are extremely high. It may result in decrease in the number of its existing customers. Furthermore, this could be very alarming situation for the bank in case some of the competitors grasped the opportunity and lowered its rates. The result would be either the loss of market share or decrease in the charges resulting in lowering the bank’s income. 

Less Attractive Rate Of Return

xxxiii

Commercial banks face considerable competition in attracting deposits from individuals or small investors. In contrast, the Govt. of Pakistan national saving scheme offers attractive rates of return (approx. 16 to 18 percent annually) on 10-15 year fixed accounts. 

Stiff Competition

NBP is currently facing strict competition from the other banks that enjoy a good market position that include Askari Commercial Bank Limited, Habib Bank Limited, Standard Chartered, United Bank Limited, Citi Bank, Soneri Bank etc. PEST ANALYSIS Political Analysis NBP despite their capital positions being viewed as somewhat weak on a fragile operating environment, susceptible to political risk. The banks' performance over the near to medium term could be adversely affected by recent political developments in Pakistan though the ratings agency views such risks to be adequately reflected in the low individual ratings Economic Factor Pakistan’s economy continued to suffer from the after effects of the economic sanctions of 1998 and the impact of the international economic recession. Even some of the macro-economic indicators improved during 2000, the operating environment of the banking sector continued to remain difficult. The overall demand for bank credit remained lower because of no investment in any of the sector .this low demand led to an intense competition among banks for relatively few good borrowers in the market, resulting in substantial reduction in the lending rates. At the same time managed exchange rate

Social Factors •

Threat of new entrants

•

New market positioning assumed by new banks especially HBL xxxiv

•

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

relatively few good borrowers in the market

Technological Factors National bank of

Pakistan is the largest banking group signified its renewed

commitment to building its IT infrastructure to deliver growth and improved services to its customers across Pakistan and across the globe and provides services like •

ATMs System

•

Electronic Banking

•

SWIFT

•

Telephone Banking

xxxv

Financial Analysis of NBP IMPORTANCE Analysis is vital to figure out, weigh up and evaluate the operating performance of the firm. Another reason that depicts the importance of ratio is that investors make their investment decision in certain firm based on these ratios. Analysis of Financial Statements Financial analysis involves the use of various financial statements, e.g. balance sheet, income statement etc. There are various stakeholders such as owners, managers, creditors, government agencies, employees, prospective investors etc. interested in the financial condition and results of operations of a business enterprise. In general, the varying interests of all groups fall in four broad categories: •

Solvency

•

Profitability; and

•

Stability

•

Efficiency

Solvency refers to the company’s ability to meet its debt on due dates. Profitability means the success that the firm has had in earning a return on the assets. Stability is composed of several factors, continues demand for a company’s product or services, a reasonable and stable relation between revenues and expenses and sufficient shows net income to pay a regular dividend. Efficiency ratio shows the performance the company that how effective it is working.

xxxvi

Ratio Analysis Financial ratios are calculated from one or more pieces of information from a company's financial statements. For example, the "gross margin" is the gross profit from operations divided by the total sales or revenues of a company, expressed in percentage terms. In isolation, a financial ratio is a useless piece of information. In context, however, a financial ratio can give a financial analyst an excellent picture of a company's situation and the trends that are developing. In this project the following ratios are calculated; •

Liquidity Ratios

•

Debt Management Ratios

•

Profitability Ratios

LIQUIDITY RATIO Liquidity is a pre-requisite for the very survival of a firm. It is the ability to meet current / short term obligations. Since a bank is also a business firm so to maintain adequate liquidity is also crucial to carry out business activity. Current Ratio= Current Assets / Current Liabilities (Rupees in `000) 2007

2006

2005

Current Ratio

7.35

5.35

9.74

Current Assets

132,346,081

119,266,906

102,216,286

Current Liabilities

17,947,965

22,309,742

10,498,003

This shows the degree of high liquidity, maintained by the bank. The policy of high liquidity however is not maintained at the cost of profitability. The bank is maintaining optimal balance between liquidity and profitability in order to keep competitive edge on its competitors. The current ratio is decreasing from 9.74 to 7.35, which is covering the minimum limit of current ratio for Bank i.e. 3. So the company position is best in the industry.

xxxvii

DEBT RATIOS / SOLVENCY RATIOS The long-term solvency of a firm is examined by leverage or capital structure ratio. It is the ability of the bank to assure following payments: Debt to Asset =

Total Debt /Total Asset

(Rupees in `000)

2007

2006

2005

Debt Ratio

0.8474

0.8709

0.8713

Total Debt

645,855,939

553,178,593

503,378,402

Total Asset

762,193,593

635,132,711

577,719,114

Debt to Asset Ratio shows that how much asset the company has to honor their obligations. This ratio is decreasing from .8713 to .8474. This is very good for the company because the company has 1 asset to Pay .8474 debts. Debt to Equity =

Total Debt /Total S.H.Equity

(Rupees in

`000) Debt to Equity

2007

2006

2005

Ratio Total Debt

9.323

10.428

13.921

645,855,939

553,178,593

503,378,402

Total Equity

69,270,631

53,044,649

36,158,474

High total debt ratio of shows that the creditors have faith in the bank and they feel comfortable to invest in this bank. Debt to equity ratio is the relationship between borrowed funds and owners capital and Equity multiplier is the relationship between total assets and total equity. But it is good that the this ratio is decreasing from 13.921 to 9.323

xxxviii

The overall leverage position is showing better trend as compare to previous year. The contribution of equity in total assets is decreasing, while the debt contribution is decreasing which is better for business. Equity ratio is decreased which don’t show the better condition of the bank. Solvency Ratio is in good condition. So we can say that overall Solvency condition of the NBP is better with the comparison to the previous year. Profitability Ratio

Net Profit Margin= Net Profit / revenue *100 (Rupees in `000) 2007

2006

2005

Net Profit Margin

37.64 %

38.60 %

37.79 %

Net Profit

19,033,773

17,022,346

12,709,444

Revenue

50,569,481

44,100,934

33,633,735

Results of the ratios indicates net profit margin ratio more than average. In 2007 and 2005 the ratios are less their general and operating expenses are increasing with the same rate of increasing in their revenues. So that’s why their net income is not so much high. In 2007 the company position is good because the 37.64 is a percentage between net profit and Revenues

Return on Equity= Net Income / Average total Equity (Rupees in `000) 2007

2006

2005

Return On Equity

27.48 %

32.09 %

35.15 %

Net Income

19,033,773

17,022,346

12,709,444

Equity

69,270,631

53,044,649

36,158,474

This ratio shows that how much equity is generating income for the company .it is decreasing every year with different rate. Return on Total Assets= Net Income / Average Total Assets *100 (Rupees in `000)

xxxix

(Rupees in `000) ROA

2007 2.50 %

2006 2.68 %

2005 2.20 %

Net Income

19,033,773

17,022,346

12,709,444

Total Assets

762,193,593

635,132,711

577,719,114

Results of the ratios are more than its average which shows the ability to utilize its assets to create profits. Higher the percentage is good, the value decreases by 0.18 as compare to the 2006, but still performing well. Profitability analysis shows the entire performance of a business and if we study the profitability trend of bank then it will clear to us that it showing a positive trend. Net profit after tax is increased as compare to previous year, due to it return on assets and investment is increasing. Bank Special Ratio: Investment to Total Assets = Investment / Assets (Rupees in `000) 2007

2006

2005

Investment to total assets

0.28

0.22

0.27

Investment

210,787,868

139,946,995

156,985,686

Total Assets

762,193,593

635,132,711

577,719,114

This ratio indicates that out of total asset how much bank utilize its asset for further investing. This ratio is increasing through out of the period which is very useful for the bank to enhance its revenues Advances to Deposit Ratio= Total advances/ Total deposits (Rupees in `000)

Advances to Deposit Ratio Total Advances

2007

2006

2005

57.55%

27.88 %

58.01%

340,677,100

139,946,995

268,838,779 xl

Total Deposits

591,907,435

501,872,243

463,426,602

Loans or advances are the major assets of a bank while deposits are major liabilities of a bank. Higher ratio shows the better solvency of bank. This ratio is increased instead of previous years because advances of the bank are increased as previous years although deposits are also increased this years but its ratio is less. Cash to Deposit Ratio= Cash / Deposit (Rupees in `000) 2007

2006

2005

Cash to Deposit Ratio

16.03%

15.67%

15.36%

Cash

94,873,249

78,625,227

71,196,956

Total Deposits

591,907,435

501,872,243

463,426,602

This ratio shows that how much cash you have to pay the liabilities (deposits). As this ratio show that company has fewer amounts of cash than deposits. It also indicates that bank is investing so the bank is enhancing its business. But at the same time it could be risk for bank for liquidation. Equity to Assets= Equity / Assets (Rupees in `000) Equity to Assets Equity Assets

2007 9.09 %

2006 8.35 %

2005 6.26 %

69,270,631

53,044,649

36,158,474

762,193,593

635,132,711

577,719,114

This ratio shows the position of equity in total assets of business. In both years this ratio is in increasing trend. But the bank should increase its equity by increasing the wealth of shareholders. Equity to Deposits= Equity / Deposits (Rupees in `000)

Equity to Deposits

2007

2006

2005

11.70 %

10.57 %

7.80 %

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Equity Deposits

69,270,631

53,044,649

36,158,474

591,907,435

501,872,243

463,426,602

This ratio shows that how much equity part is there in total structure. The capital advocacy requirement is 8%. The bank was not fulfilling the requirement in 2005 but now bank has 11.70% which is good. Earning Per Share= Net Income / No of Ordinary Shares (Rupees in `000)

Earning Per Share Net Income No of Ordinary Shares

2007

2006

2005

Rs. 23.34

24

21.51

19,033,773

17,022,346

12,709,444

815,431,989

709,071,295

590,892,746

As their basic earnings per common share are increasing year-by-year it means that results of the ratio indicate that firm has paid a handsome return on investment showing the profit generations. Because the company’s net income is increasing gradually. As shown in table the company’s Basic Earning per share is increasing due to increase in net income. This shows how much profit each share has earned in any particular year. It is most important ratio for peoples who decide about investing their money. Vertical Analysis Vertical/Cross-sectional/Common size statements came from the problems in comparing the financial statements of firms that differ in size. In the balance sheet, for example, the assets as well as the liabilities and equity are each expressed as a 100% and each item in these categories is expressed as a percentage of the respective totals. In the common size income statement, turnover is expressed as 100% and every item in the income statement is expressed as a percentage of turnover (sales).

xlii

BALANCE SHEET For the year ended Dec 31, 20…. ASSETS Cash and balances with treasury banks Balances with other banks Investments - net Lendings to financial institutions Advances - net Operating fixed assets Other assets - net Total Assets LIABILITIES Bills payable Borrowings Deposits and other accounts Liabilities against assets Deferred tax liabilities - net Other liabilities Total Liabilities Net assets Represented by: Share capital Reserves Unappropriated profit Surplus on revaluation of assets - net of tax Total Liabilities & Equity

2007 % 12.45 4.92 27.66 2.82 44.70 3.40 4.07 100.00

2006 % 12.38 6.40 22.03 3.62 22.03 1.52 4.27 100.00

2005 % 12.32 5.37 27.17 2.82 46.53 1.64 4.14 100.00

0.99 1.52 82.77 0.00 0.71 4.32 90.31 16.27

1.75 1.93 82.79 0.00 0.39 4.39 91.25 13.52

0.32 1.62 85.89 0.00 0.83 4.63 93.30 13.78

1.14 2.21 6.34 9.69 6.58 16.27 100

1.17 2.29 5.29 8.75 4.77 13.52 100.00

1.10 2.51 3.10 6.70 7.08 13.78 100.00

In balance sheet we take asset as a key figure and the total liability and S.H.E as a key figure. In asset side maximum asset value is due to the advances and the investment which the bank has done. On thee other side that main liability is from deposits which shows a greater position of the bank in the current era

xliii

PROFIT & LOSS A/C For the year ended Dec 31, 20….

Mark-up / return / interest earned Mark-up / return / interest expensed Net mark-up / interest income Provision for diminution in the value of investments Provision against loans and advances Bad debts written off directly Net mark-up / interest income after provisions Non-mark-up / interest income Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale of securities - net classified as held for trading Other income - net Total non-mark-up / interest income Non-mark-up / interest expenses Administrative expenses (Reversal) / Write off / other provision - net Other charges Total non-mark-up / interest expenses Profit before taxation Taxation - Current year *Prior years *Deferred Profit after taxation Unappropriated profit brought forward Transfer from surplus on revaluation of fixed assets Profit available for appropriation

2007 % 100 33.50 66.50 -0.08 9.34 0.08 9.34 57.16

2006 % 100 31.63 68.37 -1.61 6.97 0.01 5.38 63.00

2005 % 100 30.69 69.31 -0.73 7.27 0.07 6.61 62.70

13.41 6.45 2.06 4.63 -0.06 0.29 26.78 83.95

13.93 6.56 3.02 2.65 -0.01 1.42 27.58 90.58

14.65 5.11 3.58 2.58

28.09 0.33 0.03 28.46 55.49 16.44 0.77 0.64 17.85 37.64 63.43 0.08 63.50 101.14

30.48 -0.04 0.47 30.92 59.66 19.72 1.20 0.14 21.06 38.60 43.93 0.09 44.02 82.62

33.29 0.59 0.19 34.06 56.66 21.27 -3.27 0.87 18.87 37.79 27.24 0.13 27.37 65.16

4.68 28.02 90.72

Vertical analysis of profit and loss shows increase or decrease in each item as a percentage of sales means that sales are chosen as key figure. As we have seen in the above table the interest expense is increasing with the turnover so the company is more xliv

utilizing on expenses. Administrative expenses shows decreasing trend from year 2005 to 2007 also the profit after tax is in both increasing and decreasing positions. Horizontal Analysis This technique is also known as comparative analysis. It is conducted by setting consecutive balance sheet, income statement side-by-side and reviewing changes in individual categories on a year-to-year or multiyear basis. A comparison of statements over several years reveals direction, speed and extent of a trend. The horizontal financial statements analysis is done by restating amount of each item or group of items as a percentage.

BALANCE SHEET For the year ended Dec 31, 20….

ASSETS Cash and balances with treasury banks Balances with other banks Investments - net Lendings to financial institutions Advances - net Operating fixed assets Other assets - net Total Assets LIABILITIES Bills payable Borrowings Deposits and other accounts Liabilities against assets Deferred tax liabilities - net Other liabilities Total Liabilities Net assets Represented by: Share capital

2007-2006 base year 2006 % 20.67 -7.80 50.62 -6.73 143.43 167.74 14.31 20.01

2006-2005 base year 2005 % 10.43 31.02 -10.85 41.33 -47.94 2.41 13.25 9.94

-33.41 -6.99 17.94 153.52 113.56 16.07 16.75 41.95

509.12 33.66 8.30 -20.41 -46.51 6.49 9.89 10.24

15.00

20.00 xlv

Reserves Unappropriated profit

13.64 41.37 30.59 62.81 41.95 17.96

Surplus on revaluation of assets - net of tax Total Liabilities & Equity

2.54 91.91 46.70 -24.29 10.24 12.36

In balance sheet horizontal analysis shows that current assets increases over the period of time, the increase in cash and decrease in loan shows that company wants to have more cash in hand rather lending it to others and losing the return on that investment. As far as the fixed assets of company are concern they are showing increasing trend and same is case with the current and long term liabilities PROFIT & LOSS A/C For the year ended Dec 31, 20….

Mark-up / return / interest earned Mark-up / return / interest expensed Net mark-up / interest income Provision for diminution in the value of investments Provision against loans and advances Bad debts written off directly Net mark-up / interest income after provisions Non-mark-up / interest income Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale of securities - net Unrealized loss on revaluation of investments classified as held for trading Other income - net Total non-mark-up / interest income Administrative expenses (Reversal) / Write off / other provision - net Other charges Total non-mark-up / interest expenses Profit before taxation

2007-2006 2006-2005 base year 2006 base year 2005 % % 14.67 31.12 21.46 35.12 11.53 29.35 -94.33 188.54 53.56 25.71 655.09 -77.09 99.14 6.64 4.05 31.74 10.37 12.85 -21.82 100.23

24.72 68.27 10.63 35.03

616.04 -76.52 11.36 6.27 5.67 -1072.21 -91.77 5.55 6.65

-60.12 29.05 30.91 20.08 -108.72 229.60 19.01 38.07 xlvi

Taxation - Current year *Prior years *Deferred Profit after taxation Unappropriated profit brought forward Transfer from surplus on revaluation of fixed assets Profit available for appropriation

-4.42 -26.22 422.31 -2.82 11.82 65.57 -5.00 65.42 40.38

21.55 -148.30 -78.72 46.35 33.93 111.45 -5.00 110.90 66.26

In Horizontal analysis of profit and loss we have seen that revenues increases from 2005 to year 2007 continuously but every year revenues were increased with increasing trend. The company profit after tax decreases as compare to the 2006 because the banks administrative and other expenses are increasing.

TREND ANALYSIS It is also used to check the financial performance of the company through out its starts. In this analysis we keep the first year as a base year and it remains the same for all other periods. We compare all others periods with the base year.

BALANCE SHEET For the year ended Dec 31, 20….

ASSETS

Base Year 2005 2007 2006 % % xlvii

Cash and balances with treasury banks Balances with other banks Investments - net Lendings to financial institutions Advances - net Operating fixed assets Other assets - net Total Assets LIABILITIES Bills payable Borrowings Deposits and other accounts Liabilities against assets Deferred tax liabilities - net Other liabilities Total Liabilities Net assets Represented by: Share capital Reserves Unappropriated profit

133.25 120.80 134.27 131.82 126.72 274.19 129.46 131.93

110.43 131.02 89.15 141.33 52.06 102.41 113.25 109.94

405.59 124.31 127.72 201.78 114.23 123.60 128.30 156.49

609.12 133.66 108.30 79.59 53.49 106.49 109.89 110.24

138.00 120.00 116.52 102.54 271.30 191.91 191.58 146.70 Surplus on revaluation of assets - net of tax 123.27 75.71 156.49 110.24 Total Liabilities & Equity 132.54 112.36 Trend analysis shows that the cash balance is increases due to which the lending to financial institution decreases in 2007 as compares to the year 2006.but the advances and operating fixed assets shows the significance increase. As for as the liabilities are concern Bills payable and borrowings decreases, but deposits and other accounts increases. PROFIT & LOSS A/C For the year ended Dec 31, 20….

Mark-up / return / interest earned Mark-up / return / interest expensed Net mark-up / interest income Provision for diminution in the value of investments Provision against loans and advances Bad debts written off directly

Base Year 2005 2007 2006 150.35% 131.12% 164.12 135.12 144.26 129.35 16.37 288.54 193.04 125.71 172.96 22.91 212.36 106.64 xlviii

Net mark-up / interest income after provisions Non-mark-up / interest income Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on sale of securities - net Unrealized loss on revaluation of investments classified as held for trading Other income - net Total non-mark-up / interest income Non-mark-up / interest expenses Administrative expenses (Reversal) / Write off / other provision - net Other charges Total non-mark-up / interest expenses Extra ordinary / unusual item Profit before taxation Taxation - Current year *Prior years *Deferred

137.08

131.74

137.65 189.89 86.50 270.37

124.72 168.27 110.63 135.03

9.36 143.72 139.13

39.88 129.05 130.91

126.89 84.73 27.12 125.61

120.08 -8.72 329.60 119.01

147.25 138.07 116.18 121.55 -35.63 -48.30 111.14 21.28 142.23 146.35 Profit after taxation 149.76 133.93 Unappropriated profit brought forward 350.09 211.45 Transfer from surplus on revaluation of fixed assets 90.25 95.00 Profit available for appropriation 233.40 166.26 Basic and diluted earnings per share - after tax 108.51 97.07 The trend analysis of the Profit and loss shows that mark-up interest earned increases which results in increase in interest expense ,provisions for loans and bad debts also increases, Administrative expenses show a slight increase, profits of the year 2007 were almost double as compare to year 2005.

xlix

CHAPTER # 4 INTERNSHIP EXPERIENCE

l

INTERNSHIP EXPERIENCE One of the most important aims of the student life is to express him / her correctly and adequately.. Determined, Confident and Persistent in the pursuit of knowledge and learning, I was on my way to National Bank of Pakistan F-8 Markaz Branch Islamabad in the early morning of June 9, 2008. Normally I wanted rest and recreation after the tiring class in June but this time I was anxiously waiting for the start of my internship. ♣ FIRST WEEK I started my internship from "General Banking" in the first week. The General banking is basically divided into the following sub departments, which are as follows: •

Account opening

•

Bills and remittances

•

Clearing

•

Term deposit

•

Cash department

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

Account opening:

Although the procedure of opening an account in a bank is a quite complicated job but I am going to tell you only the basic necessities for opening the account, which are as follows:

li

•

Introduction

•

National I.D. card

•

Personal data

•

Details of dealing with other banks.

These are some of the basic requirements for opening the account. Then the banker inquires about the option of opening a joint account or individual. If the customer wants to open joint account then either it is "either or survivor" (i.e. only one persons signature is sufficient) or jointly (i.e. both should sign the cheque)  Issuance of cheque book Once the account is opened, BOP issues the cheque books to the customer so that they could withdraw their money whenever they like. The producer of issuance of the cheque book is as follows: For the customer who already has an account with the bank, the lastly consumed cheque book requisition slip with the help of which a new cheque book is issued. And the person who is going to open a new account for the first time gets the cheque book free without any requisition slip. For the new depositors the cheque book is not issued at the time of opening of account, rather it is issued after three days. I remained there in the account-opening department for one week and daily I learnt a new thing. I came to know about the details of the account opened by the banks, which I have explained in previous portion of "Departments". In the start I have stated the account opening procedure and issuance of cheque book in a very comprehensive way, now let me tell u the further related detail of account opening

lii

•

First of all a customer come and gets the information regarding the opening of account. After getting the proper information he gets an introducer and goes for opening an account of any kind whatever he wants

•

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

•

S.S card is filled which contains the signature that will be used in future in order to identify that you are the same particular person who perfectly eligible for receiving the benefits.

•

The S.S card and the application form are verified and the verification stamp is imposed on it.

•

After verification the application forms are pasted in the file with the serial, no which is actually the account no. Allocated to the respective customers.

•

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

•

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

♣ SECOND WEEK In the second week I was shifted to the TDR (Term Depots Receipts) department. It was again a good experience to work with the officer here. First of all he told me about the basics of the TDR. Deposit is lifeblood of a commercial bank. The main function of a commercial bank is to canalize the saving from the savers to the ultimate users of the funds. This process of collecting saving is called "deposit mobilization". Deposits are of two types one is the demand deposit and the other one is time deposit. As the name signifies the demand deposit is payable on demand so no interest or benefit is given on such deposits but the time deposit is a kind of deposit, which gives you a benefit in terms of cash. Most of the people who have surplus money with them especially the landlords deposit their money in such accounts.

liii

Term deposits are payable on demand with certain maturity. Different percentages of profit are given in the time deposit. These are called fixed deposit because they are fixed and no transaction is allowed till maturity. In fix deposit you can open an A/c of the same title only than A/c number will be changed. While in other accounts the A/c can't be opened under the same title even in other branch of the same Bank.  Record keeping The record of the TDR is although fed in the computer but there is also a hard copy of the record. The verified TDR forms are pasted with serial number of receipt given to the customer (the receipt of the form regarding the deposit of the amount). The certificates are attached or pasted in the file according to the date. The date may be of any month and any year i.e. if there is a card of the 8th then on this card you will find the only 8th date of any month and any year in which the card was issued. ♣ THIRD WEEK In the third week of my internship I was shifted to the Clearing section and Bills for collection section as well. Three days I worked with the "Clearing" and then with the "Bills for collection" section.  Clearing This is an "Inter-city clearing" i.e. the cheques of Lahore city from different banks like National Bank of Pakistan, Standard Chartered Bank, Muslim Commercial Bank are deposited here. The deposited cheque is received carefully by checking the title of cheque, date, amount, and signature on the cheque. All the cheques go to the State Bank of Pakistan. Everyday NIFT receives all cheques and arranges them. By establishment of NIFT a lot of time, cost and labor is saved. The cheques are stamped carefully. Two stamps are required on the cheques liv

•

Clearing stamp

•

Payee's account will be credited

If any stamp is missed or unclear, SBP returns the cheque with a reason. When the cheques are deposited they enter all the cheques on the computer with account number and these figures go to SBP.  Bills for Collection Two types of cheques are deposited here •

Outstation cheques

•

BOP other branch cheques (local)

Outstation cheques mean different cities cheques are deposited and local means BOP other Branches are deposited. All cheques account numbers on the computer and these figures go to SBP. The cheques are cleared in 5-6 days. Because "NIFT" receives and delivers to SBP where these cheques are cleared in 3 days and deliver to the banks. If the cheques are returned due to some reasons, a returned memo is filled and entries are recorded on the register. FOURTH WEEK In the fourth week of internship I was transferred to the "Remittances department". I met there with a quite sophisticated personality, she tells me about the issuance, procedure and the entries of the demand drafts and pay orders.  Demand Draft It is an instrument payable on demand for which value has been received, issued by the branch of the bank drawn. Demand draft is payable at some other branches of the same

lv

bank. Demand draft is very useful because there is no chance of fraud. The person deposit cash and get demand draft. It is used for outstation payment.  Issuance of demand draft On the application form following particulars are given: •

Name of beneficiary

•

Amount

•

Mode of payment

•

The place where DD is drawn

•

Signature

•

Name and address of the beneficiary

Request shall be made on standard application form. The customer writes his name, address, I.D number, and phone number on the backside of the application form. Commission is charged as per schedule of charges. The issuance of DD is computerized and the amount is automatically protectively graphed drawing printing for the avoidance of forgery. The withholding tax and excise duty is deducted as per schedule. When the customer deposits cash in the cash department, he got voucher from the cash department and gave it to the person who makes the DD.  Payment of DD When a person brings DD (which have been drawn on you), you will check it from your DD payable record and ask the customer to sign twice at the back of the DD so that it could be confirmed that he is the eligible person for receiving the benefit, along with this you obtain the ID of that person verify it and then make the payment. After making the payment entry is made in the register that this DD has been paid.  Cancellation of DD

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Following procedure is followed for the cancellation of the DD. •

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

•

Verify the signature of the applicant, which should tally, with the signature on the application form (for opening the DD).

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Mark caution on DD issued register or on computerized entry.

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Make the payment from suspense account.

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Inform the Drawee bank regarding the cancellation.

Inter Branch Credit

Advice is the advice regarding the payment (refund) of the amount which Drawer bank have sent to them (which was deposited by the customer against the demand draft).  PAY ORDER Pay order issued from one branch can only be payable from the same branch. Pay order is used for same city payment. E.g. If BOP (Main Branch) issued pay order it is only payable for Main Branch of BOP. Procedure •

Applicant fill the application

•

After paying charges he gets voucher and pay order is issued

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

Cancellation •

The applicant give application for cancellation

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Charges are recovered from the applicant.

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♣ FIFTH WEEK In the second last week of my internship I worked in the Accounts section and the mail dispatch section.  Account Section I worked in accounts department but as it is a confidential department so they did not give me enough information regarding their working. First day I sorted out the cheques of BOP with the help of the serial number and the nature of the account and arranged them in sequence. After that I checked the activity which contains the title of the cheque, amount, date etc. Accounts department maintains the record of expenses of all the departments, it also maintain the record of all the employees regarding their basic salary, increment, benefits etc. It is the backbone of BOP  Mail Dispatch Section After a few days I worked in the mail dispatch section, the person appointed here asked me to arrange the letters and to write the mailing address on the envelopes and then to put the letters into the envelops. It was an interesting job but, the single thing which I learned from here was that, I learnt by heart the addresses of many branches of the BOP, which helped me to complete the. I also had to maintain the records of the letters sent and received in a register. ♣ SIXTH WEEK Till the last week of my internship I had worked in all the major departments of the bank and was now assigned the tasks concerning lockers and the utility bills collection. lviii

 Utility Billing Section In the billing section I received the consumer utility bills of IESCO (PWR), SNGPL (SUI), and PTCL. The consumer number and the amount had to be entered in the system. The printed sheets of these are counter checked to tally the amount entered and the cash in hand, the date and time are noted. The rent must be paid on due date; otherwise the charges are deducted from the clients accounts.  OGDCL Salaries and Pension: The main account at NBP F-8 branch is of OGDCL. So it is duty of responsibility of our bank to help them out in distributing the pay in their employees. Also NBP handles its pension every month

WHAT I LEARNT IN NBP

Here I will point out things which I learn during my internship. I learnt that how to apply the knowledge in practical form. I got the knowledge of promotional activities. I learnt that how the customers pay orders. I learnt that whenever customer comes to submit the cheque, the cheque should be written clear and also signs and amount is mentioned correctly, the date should not be of future and must not be 6 month before, signatures must be verified, account number should be on the cheque, amount in both numbers and words should be the same. I learnt that the customers are very important, they must be delivered first, their complaint must be resolved as soon as possible and dealing should be very beneficial for both.. I learnt that employees work better in friendly and co-operative atmosphere.

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SKILLS USED DURING INTERNSHIP The following are the skills that I got a chance to practice in the practical environment

♣ Interpersonal Skills This is most common and one of the most important skills during my internship period. This skill helps a person to interact with others in much better and pleasant manner. It is an art to present one’s views, thoughts, and ideas before its listeners. During my internship period it helped me to build good rapport with the other employees who guided me in the best possible manner. My interaction and dealings with the customers helped me to broaden my social network.

♣ Communication Skills Communication means exchange of messages between people for the purpose of achieving common meanings. It is an art to make information flow smoother. Today it is very necessary to communicate well especially in business sector and especially for those who are seeking information. My communication skills gave me self confidence while interacting with everyone else.

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

♣ Stress Management Skills As this internship was my first experience in a practical environment so I faced a lot of mental strain in terms of adapting to the new work environment, practical learning, cope lx

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

SKILLS GAINED DURING THE INTERNSHIP PERIOD The following skills I gained during my internship session.

♣ Time Management Skills During my internship period I have learnt punctuality and the significance of time in an organization. I have realized that time management is an important element of work. My practical learning has taught me to prioritize and organize my work according to schedule that enabled me to complete my tasks in the allotted time.

♣ Office Working Skills I had to maintain vouchers, registers, perform some other documentation, as well as work on the system. Thus I learned manual as well as the system office working skills.

♣ Human Skills I learnt the human skills in BOP in true manner. Human skills associated with an employee’s ability to work well with others both as a member of a group as well as individual leader who gets things done through others. ♣ Self Control Our ability to exercise control over our own behavior by setting standards and providing consequences for our own actions refers to self control. As an internee this skill is really important because an internee does not have much of authority. ♣ Co-Ordination

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Co-ordination means the smooth flow of work that must be carried on consistently and systematically without any breakage. In a corporate environment like banking there is need for integration making co-ordination an essential environment. As an internee it is necessary to co-ordinate well with supervisors and co-workers.

♣ Better Communication Skills During my MBA I have attended courses on communication in different semesters and was taught how to communicate effectively with others. This was my first hand experience of communicating with the manager, junior officers and others and to socialize myself among those professionals. This experience augmented my communication skills and gave me the confidence of communicating with professional people.

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CHAPTER # 5 CRITICAL ANALYSIS

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CHALLENGES Following are the challenges that I faced during my internship. Practical vs. Bookish knowledge Studies teach students theoretical aspects of practical field that is why students face difficulties in the real situation in adjusting in the practical environment of the organization. So being a fresh student I encountered different sorts of problems that was challenging for me. I did not find much application of my knowledge in the bank. Lack of Banking Knowledge Although we have had a course of money and banking in an immediate prior semester to my internship, still I found it of very minor help in the bank. If we were given a comprehensive and practical know how in the course, it would have been an implementation of that knowledge in the real organization instead of learning everything from the scratch. Adjusting With the Employees In an organization I came across many people who were opposite to my personality and often found them offensive and uncomfortable because of their attitude but I had to work and co-ordinate with them which were very challenging for me. Responding To Work Load lxiv

As it was my first experience in the work environment, it took me some time to settle in the bank setting. Learning new work especially in the beginning while at the same time responding to the seniors who assigned me the tasks to be completed in short time; was a great challenge for me. Even under such stress and strain marinating a positive attitude towards everyone was a line of challenge for me.

IDENTIFICATION OF MAIN PROBLEM

National Bank is well organized bank and operates efficiently in this competitive environment so; it is difficult for me to identify only one main problem. But nothing is perfect in this world there is always a room for improvement. According to my limited knowledge improvement can be made in following areas:  Behavioral problems among Senior and Junior employees.  Lack of participation from the employees.  Senior employees ask juniors for their personal work during the office hours.  Break down of system also disturb the banking operation.  As there is performance base incentive system employees are under pressure (stress) to perform best. In case of failure their earning will be affected.  Inefficient Online Banking System



Bonds of informal relationships among the employees are very strong and so it also affects their work to some extent. lxv

“Lack of motivation leads to dissatisfaction among employees”

RECOMMENDATIONS & SUGGETIONS The recommendations are as follows: Professional Training National BANK staff lacks professionalism. They lack the necessary training to do the job efficiently and properly. Although staff colleges are in all major cities but they are not performing well. For this purpose these staff colleges should be reorganized and their syllabus should be made in such a way which can help the employee understand the everchanging global economic scenario. Banking council of Pakistan should also initiate some programs to train the staff with much needed professional training.. Transfer Transfer is not properly carried out. Some of the employees are continually serving at the same post. They are simply rotated at the same branch. Therefore it is recommended that evenly rotation of every employee should take place after every three years in different branches of the bank. Need of Qualified Staff Required, qualified staff should be provided to branch in order to improve the functioning of the branch. Especially a telephone operator should be appointed.

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Utility Bill Charges Bank gets Rs. 2 to 3 to processes a utility bill, and it is very tire, tough and hard job despite this working resulting in a loss to then Rs 3 to5 per transaction. These charges should be increased to RS 10 per bill to enable the branch to cover their handling costs and make some profit. Technological Advancement I would like to suggest that at least all the main branches of NATIONAL BANK should be fully computerized in order to expedite the dealing process among bankers and their customers. Every department should be provided a computer with adequate training (especially Advances, Deposits and Foreign Exchange departments).Daily records should be entered directly into these computers,. It will also help in reducing the use of excessive paper work. Bank should improve online banking system very quickly because this is the requirement of the present age. Proper Distribution of Work Proper distribution of work leads to success in every organization. Proper distribution of work prevents the employee from over and under work situation. So for a smooth running of an organization proper distribution of work is the hint to be followed. During my internship I observed that there was no proper distribution of work in the bank. I saw that some of the employee worked like ants other sat idle staring here and there. So this created a lot of over work situation for while relaxation for other. Inter Departmental Transfer I watched during my internship that, there employees who have worked on one seat for many a year. It can have negative effects motivation of employee who is hard working and intelligent. Take the example of advances section. In advance section if the employee is transfer after sixth month or seven month, how can he be able to show his performances and how can he be able to know the bank customer in a short period of time. lxvii

Complaints of Customer There should be an information desk to provide the information and to receive the complaints of the customer in the bank. There is no complaint box available in the branch and not any person appointed to hear the complaints. Every person cannot go to the manager for the complaint because most of the people are hesitant. So I suggest management to install a compliant box in the branch, and recruit a special person for that guidance of the customer when they are unable to manage some difficulties in banking matters. Avoiding Bad Debts Great care should be taking while extending the loan. Loans should be awarded against reasonable securities, where market value should be equal to the loan granted. Policies should be crafted in a way to ensure that no loan is extended on political pressure. SBP regulation for loan approval should be strictly followed. According to which the current ration of borrower’s business must be 1:1 and the debt to equity ratio should be 60:40, means the liquidity position of business should be healthy. Decentralization The higher authorities should form team-based management rather than centralized management. It would result in improvement in uplifting the morale of the employees. They will be more motivated and involved in all their operations resulting in overall effectiveness of the organization. Working conditions Working conditions for employees should also be made better so that they will be motivated and enhance the performance of the bank.

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CHAPTER # 6 CONCLUSION

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Conclusion The public sector banks focused on superior services, niche marketing and the intensive use of technology to capture dissatisfied customers, In this industry segment, NBP widely regarded as top level bank because of their financial strength in the term of their capital position, prudent management and deposit security. The second tier included bank such as Prime commercial Bank, Bank Al-Habib, Soneri Bank and Metropolitan Bank. While Bolan Bank, Union Bank, Schon Bank, Prudential bank and the Bank of Punjab are in the third and last tier. These tiers, especially the second and third, are very competitive and are increasingly characterized by a widening performance gap. National Bank is in the unique position of finding a balance between the strengths and weaknesses of a corporate image that strongly identified main accounts of Pakistan government.. All the new private commercial banks suffered from a problem of credibility, as well as the collapse of the Punjab Co-operatives, Pakistan’s equivalent of the American savings and loan crisis . The bank has successfully penetrated key market through branch expansion and business diversification. A system of regional management is in the place to ensure greater trust and improved productivity. As far as internship is concerned it is a good career opportunity in general is scarce in Pakistan. Internship opportunities in particular are quite limited. Internship programs take some effort to set up and not/ all companies support the internship programs.

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In my opinion good interns bring fresh ideas, perspective and energy and create goodwill and are well worth the effort. I strongly recommend the internship program to all students contemplating the idea work experience significantly increases the chances of employment after internship. After all, when an employer compares two résumés, one student with work experience against another student with none, it is quite evident which student they would most likely choose. Internship enhances chances for a positive experience that will benefit everyone. The key elements of any internship are the training modules offered. It is crucial to identify learning goals in each module and outline the tasks to be accomplished.

REFERENCES

 http://www.nbp.com.pk 

www.nbp.com.pk/An_Report.htm

 http://www.wekipedia.com  Irshad, M. (2007). Money Banking and Finance, Nayyar Asad Printers. 

Siddiqui, A. H. (1998). Practice and Law of Banking in Pakistan (2nd Ed.), Karachi: Decent Print Enterprises P

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Emery, D.R, J.D Finnerty and J.D. Stowen, (1988). Principles of Financial Management (1st Ed.). New Jersey: Prentice Hall.



Van Horne, J.C. and J.M. Wachowicz, JR.11th Edition, “Fundamental of Financial Management” New Jersey: Prentice-Hall, Inc. 1998.



M.Y. Khan and P. K. Jain, “Financial Management” 3rd Edition, Tata McGraw Hill

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