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    01 INTRODUCTION OF BANKING

    1.1 What is Bank?

    While the question may seem elementary, the answer can be quite complex. Understanding

    what banking is all about will help you make better financial decisions.

    A bank is a financial institution where you can deposit your money. Banks provide a system

    for easily transferring money from one person or business to another. Using banks and the many

    services they offer saves us an incredible amount of time, and ensures that our funds "pass

    hands" in a legal and structured manner. There are also other types of financial institutions that

    operate just like banks.

    A bank is a financial institution licensed by a government. Its primary activities include

    providing financial services to customers while enriching its investors. Many financial activities

    were allowed over time. For example banks are important players in financial markets and offer

    financial services such as investment funds. In some countries such as Germany, banks have

    historically owned major stakes in industrial corporations while in other countries such as the

    United States banks are prohibited from owning non-financial companies. In Japan, banks are

    usually the nexus of a cross-share holding entity known as the zaibatsu. In France,

    bancassurance is prevalent, as most banks offer insurance services (and now real estate

    services) to their clients.The level ofgovernmentregulation of the banking industry varies widely, with countries such

    asIceland, the United Kingdom and the United States having relatively light regulation of the

    banking sector, and countries such as China having relatively heavier regulation (including

    stricter regulations regarding the level ofreserves).

    1.2 Why Do You Need a Bank Account?

    With all the changes taking place in the banking marketplace today, you might ask yourself

    Do I really need a bank? Why can't I just find a way to avoid all these fees? What types ofaccounts are available to me? It can be mind-boggling. There are many reasons why a banking

    relationship is vital:

    When you deposit money in a bank, you have the comfort of knowing your money is in a

    safe, insured place. Deposits in most banks are insured by the Federal Deposit Insurance

    Department of Business Administration

    Faculty of Administrative Sciences Kotli Azad Kashmir

    http://en.wikipedia.org/wiki/Governmenthttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Zaibatsuhttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/Bancassurancehttp://en.wikipedia.org/wiki/Governmenthttp://en.wikipedia.org/wiki/Regulationhttp://en.wikipedia.org/wiki/Icelandhttp://en.wikipedia.org/wiki/Icelandhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Reserve_requirementshttp://en.wikipedia.org/wiki/Reserve_requirementshttp://www.fdic.gov/http://en.wikipedia.org/wiki/Governmenthttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Zaibatsuhttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/Bancassurancehttp://en.wikipedia.org/wiki/Governmenthttp://en.wikipedia.org/wiki/Regulationhttp://en.wikipedia.org/wiki/Icelandhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Reserve_requirementshttp://www.fdic.gov/
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    Corporation (FDIC). This means your money is protected up to $100,000 per depositor. You can

    also think of it as "out of sight, out of mind." If you don't have a daily visualization of your cash

    at hand, you'll probably be less tempted to spend it frivolously.

    Most people and businesses, including your employer, need to have a paper trail to

    document transactions. Checks are a perfect way to keep a permanent record of business

    activities, even when they are personal. Even if you bank online, there is a well-documented trail

    of all your transactions.

    Department of Business Administration

    Faculty of Administrative Sciences Kotli Azad Kashmir

    http://www.fdic.gov/http://www.fdic.gov/
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    1.3 How Banks Operate?

    In addition to providing a safe place for your money, banks also loan money to businesses and

    consumers. A large portion of a bank's business is lending. How do banks get the money they

    loan? The money comes from depositors like you. Banks use these deposits to make loans. Everyfee you pay to your bank enables them to reinvest in themselves, giving them more money to

    loan to you, for another fee, of course.

    Banks are in business to make a profit. Their profit generally comes from the difference in

    interest paid to depositors and the interest earned on loans. Making loans helps banks make

    money, and offering checking accounts is a way to attract deposits, which banks turn into

    profitable loans. Banks cannot legally loan all of their deposited money all at once. The Federal

    Reserve Board, which is part of the Federal Reserve System, requires that banks must keep a

    certain percentage of their deposits in reserve at all times, assuring you, the customer, can

    withdraw your money when you need to. The remaining funds, which are not subject to reserve,

    are used to make consumer loans.

    1.4 Types of banks

    Banks' activities can be divided into retail banking, dealing directly with individuals and small

    businesses; business banking, providing services to mid-market business; corporate banking,

    directed at large business entities; private banking, providing wealth management services to

    high net worth individualsand families; and investment banking, relating to activities on the

    financial markets. Most banks are profit-making, private enterprises. However, some are owned

    by government, or are non-profit organizations.

    Central banks are normally government-owned and charged with quasi-regulatory

    responsibilities, such as supervising commercial banks, or controlling the cash interest rate.

    They generally provide liquidity to the banking system and act as the lender of last resort in

    event of a crisis.

    1.4.1 Types of retail banks

    Department of Business Administration

    Faculty of Administrative Sciences Kotli Azad Kashmir

    http://en.wikipedia.org/wiki/Retail_bankinghttp://en.wikipedia.org/wiki/Business_bankinghttp://en.wikipedia.org/wiki/Private_bankinghttp://en.wikipedia.org/wiki/High_net_worth_individualhttp://en.wikipedia.org/wiki/High_net_worth_individualhttp://en.wikipedia.org/wiki/Investment_bankinghttp://en.wikipedia.org/wiki/Financial_marketshttp://en.wikipedia.org/wiki/Non-profit_organizationhttp://en.wikipedia.org/wiki/Central_bankhttp://en.wikipedia.org/wiki/Interest_ratehttp://en.wikipedia.org/wiki/Lender_of_last_resorthttp://en.wikipedia.org/wiki/Retail_bankinghttp://en.wikipedia.org/wiki/Business_bankinghttp://en.wikipedia.org/wiki/Private_bankinghttp://en.wikipedia.org/wiki/High_net_worth_individualhttp://en.wikipedia.org/wiki/Investment_bankinghttp://en.wikipedia.org/wiki/Financial_marketshttp://en.wikipedia.org/wiki/Non-profit_organizationhttp://en.wikipedia.org/wiki/Central_bankhttp://en.wikipedia.org/wiki/Interest_ratehttp://en.wikipedia.org/wiki/Lender_of_last_resort
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    Commercial bank: the term used for a normal bank to distinguish it from an investment bank.

    After the Great Depression, the U.S. Congress required that banks only engage in banking

    activities, whereas investment banks were limited tocapital market activities. Since the two no

    longer have to be under separate ownership, some use the term "commercial bank" to refer to a

    bank or a division of a bank that mostly deals with deposits and loans from corporations or large

    businesses.

    Community Banks: locally operated financial institutions that empower employees to

    make local decisions to serve their customers and the partners.

    Community development banks: regulated banks that provide financial services and

    credit to under-served markets or populations.

    Postal savings banks: savings banks associated with national postal systems. Private banks: banks that manage the assets of high net worth individuals.

    Offshore banks: banks located in jurisdictions with low taxation and regulation. Many

    offshore banks are essentially private banks.

    Savings bank: in Europe, savings banks take their roots in the 19th or sometimes even

    18th century. Their original objective was to provide easily accessible savings products to all

    strata of the population. In some countries, savings banks were created on public initiative; in

    others, socially committed individuals created foundations to put in place the necessary

    infrastructure. Nowadays, European savings banks have kept their focus on retail banking:

    payments, savings products, credits and insurances for individuals or small and medium-sized

    enterprises. Apart from this retail focus, they also differ from commercial banks by their broadly

    decentralised distribution network, providing local and regional outreachand by their socially

    responsible approach to business and society.

    Building societies and Landesbanks: institutions that conduct retail banking.

    Ethical banks: banks that prioritize the transparency of all operations and make only what

    they consider to be socially-responsible investments.

    Islamic banks: Banks that transact according to Islamic principles.

    Department of Business Administration

    Faculty of Administrative Sciences Kotli Azad Kashmir

    http://en.wikipedia.org/wiki/Commercial_bankhttp://en.wikipedia.org/wiki/Commercial_bankhttp://en.wikipedia.org/wiki/Great_Depressionhttp://en.wikipedia.org/wiki/Great_Depressionhttp://en.wikipedia.org/wiki/Capital_markethttp://en.wikipedia.org/wiki/Capital_markethttp://en.wikipedia.org/w/index.php?title=Community_Bank&action=edit&redlink=1http://en.wikipedia.org/wiki/Community_development_bankhttp://en.wikipedia.org/wiki/Postal_savings_systemhttp://en.wikipedia.org/wiki/Private_bankinghttp://en.wikipedia.org/wiki/Offshore_bankhttp://en.wikipedia.org/wiki/Savings_bankhttp://en.wikipedia.org/wiki/Building_societieshttp://en.wikipedia.org/wiki/Landesbankhttp://en.wikipedia.org/wiki/Ethical_bankhttp://en.wikipedia.org/wiki/Islamic_bankhttp://en.wikipedia.org/wiki/Commercial_bankhttp://en.wikipedia.org/wiki/Great_Depressionhttp://en.wikipedia.org/wiki/Capital_markethttp://en.wikipedia.org/w/index.php?title=Community_Bank&action=edit&redlink=1http://en.wikipedia.org/wiki/Community_development_bankhttp://en.wikipedia.org/wiki/Postal_savings_systemhttp://en.wikipedia.org/wiki/Private_bankinghttp://en.wikipedia.org/wiki/Offshore_bankhttp://en.wikipedia.org/wiki/Savings_bankhttp://en.wikipedia.org/wiki/Building_societieshttp://en.wikipedia.org/wiki/Landesbankhttp://en.wikipedia.org/wiki/Ethical_bankhttp://en.wikipedia.org/wiki/Islamic_bank
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    1.4.2 Types of investment banks

    Investment banks "underwrite" (guarantee the sale of) stock and bond issues, trade for their

    own accounts, make markets, and advise corporations on capital market activities such as

    mergers and acquisitions.Merchant banks were traditionally banks which engaged in trade finance. The modern

    definition, however, refers to banks which provide capital to firms in the form of shares rather

    than loans. Unlike venture capital firms, they tend not to invest in new companies.

    Both combined

    Universal banks, more commonly known as financial services companies, engage in several of

    these activities. These big banks are very diversified groups that, among other services, also

    distribute insurance hence the term bancassurance, a portmanteau word combining "banque

    or bank" and "assurance", signifying that both banking and insurance are provided by the same

    corporate entity.

    1.4.3 Other types of banks

    Islamic banks adhere to the concepts of Islamic law. This form of banking revolves around

    several well-established principles based on Islamic canons. All banking activities must avoid

    interest, a concept that is forbidden in Islam. Instead, the bank earns profit (markup) and fees on

    the financing facilities that it extends to customers.

    1.5 Banks in the economy

    Size of global banking industry

    Department of Business Administration

    Faculty of Administrative Sciences Kotli Azad Kashmir

    http://en.wikipedia.org/wiki/Investment_bankhttp://en.wikipedia.org/wiki/Underwritehttp://en.wikipedia.org/wiki/Capital_markethttp://en.wikipedia.org/wiki/Merchant_bankhttp://en.wikipedia.org/wiki/Trade_financehttp://en.wikipedia.org/wiki/Trade_financehttp://en.wikipedia.org/wiki/Venture_capital_firmhttp://en.wikipedia.org/wiki/Universal_bankhttp://en.wikipedia.org/wiki/Universal_bankhttp://en.wikipedia.org/wiki/Financial_serviceshttp://en.wikipedia.org/wiki/Bancassurancehttp://en.wikipedia.org/wiki/Portmanteauhttp://en.wikipedia.org/wiki/Islamic_bankhttp://en.wikipedia.org/wiki/Shariahttp://en.wikipedia.org/wiki/Markup_(business)http://en.wikipedia.org/wiki/Investment_bankhttp://en.wikipedia.org/wiki/Underwritehttp://en.wikipedia.org/wiki/Capital_markethttp://en.wikipedia.org/wiki/Merchant_bankhttp://en.wikipedia.org/wiki/Trade_financehttp://en.wikipedia.org/wiki/Venture_capital_firmhttp://en.wikipedia.org/wiki/Universal_bankhttp://en.wikipedia.org/wiki/Financial_serviceshttp://en.wikipedia.org/wiki/Bancassurancehttp://en.wikipedia.org/wiki/Portmanteauhttp://en.wikipedia.org/wiki/Islamic_bankhttp://en.wikipedia.org/wiki/Shariahttp://en.wikipedia.org/wiki/Markup_(business)
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    Worldwide assets of the largest 1,000 banks grew 16.3% in 2006/2007 to reach a record $74.2

    trillion. This follows a 5.4% increase in the previous year. EU banks held the largest share, 53%,

    up from 43% a decade earlier. The growth in Europes share was mostly at the expense of

    Japanese banks, whose share more than halved during this period from 21% to 10%. The share of

    US banks remained relatively stable at around 14%. Most of the remainder was from other Asian

    and European countries.[8]The United States has the most banks in the world in terms of

    institutions (7,540 at the end of 2005) and possibly branches (75,000).[citation needed] This is an

    indicator of the geography and regulatory structure of the USA, resulting in a large number of

    small to medium-sized institutions in its banking system. As of Nov 2009, China's top 4 banks

    have in excess of 67,000 branches (ICBC:18000+, BOC:12000+,CCB:13000+,ABC:24000+)

    with an additional 140 smaller banks with an undetermined number of branches. Japan had 129

    banks and 12,000 branches. In 2004, Germany, France, and Italy each had more than 30,000

    branchesmore than double the 15,000 branches in the UK.[8]

    1.6 Bank crisis

    Banks are susceptible to many forms of risk which have triggered occasional systemic crises.

    These include liquidity risk(where many depositors may request withdrawals beyond available

    funds), credit risk (the chance that those who owe money to the bank will not repay it), and

    interest rate risk(the possibility that the bank will become unprofitable, if rising interest rates

    force it to pay relatively more on its deposits than it receives on its loans).Banking crises have

    developed many times throughout history, when one or more risks have materialized for a

    banking sector as a whole. Prominent examples include the bank run that occurred during the

    Great Depression, the U.S. Savings and Loan crisis in the 1980s and early 1990s, the

    Japanese banking crisis during the 1990s, and the subprime mortgage crisis in the 2000s.

    Usually, the governments bail out the bank through rescue plan or individual public intervention.

    [9]

    1.7 Challenges within the banking industry

    Department of Business Administration

    Faculty of Administrative Sciences Kotli Azad Kashmir

    http://en.wikipedia.org/wiki/Bank#cite_note-ifsl-7%23cite_note-ifsl-7http://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/ICBChttp://en.wikipedia.org/wiki/BOChttp://en.wikipedia.org/wiki/CCBhttp://en.wikipedia.org/wiki/Agricultural_Bank_of_Chinahttp://en.wikipedia.org/wiki/Agricultural_Bank_of_Chinahttp://en.wikipedia.org/wiki/Bank#cite_note-ifsl-7%23cite_note-ifsl-7http://en.wikipedia.org/wiki/Liquidity_riskhttp://en.wikipedia.org/wiki/Credit_riskhttp://en.wikipedia.org/wiki/Interest_rate_riskhttp://en.wikipedia.org/wiki/Bank_runhttp://en.wikipedia.org/wiki/Great_Depressionhttp://en.wikipedia.org/wiki/Savings_and_Loan_crisishttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Subprime_mortgage_crisishttp://en.wikipedia.org/wiki/Bank#cite_note-8%23cite_note-8http://en.wikipedia.org/wiki/Bank#cite_note-ifsl-7%23cite_note-ifsl-7http://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/ICBChttp://en.wikipedia.org/wiki/BOChttp://en.wikipedia.org/wiki/CCBhttp://en.wikipedia.org/wiki/Agricultural_Bank_of_Chinahttp://en.wikipedia.org/wiki/Bank#cite_note-ifsl-7%23cite_note-ifsl-7http://en.wikipedia.org/wiki/Liquidity_riskhttp://en.wikipedia.org/wiki/Credit_riskhttp://en.wikipedia.org/wiki/Interest_rate_riskhttp://en.wikipedia.org/wiki/Bank_runhttp://en.wikipedia.org/wiki/Great_Depressionhttp://en.wikipedia.org/wiki/Savings_and_Loan_crisishttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Subprime_mortgage_crisishttp://en.wikipedia.org/wiki/Bank#cite_note-8%23cite_note-8
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    The banking industry is a highly regulated industry with detailed and focused regulators. All

    banks with FDIC-insured deposits have the FDIC as a regulator; however, for examinations,

    [clarification needed] theFederal Reserveis the primary federal regulator for Fed-member state banks;

    the Office of the Comptroller of the Currency (OCC) is the primary federal regulator for

    national banks; and the Office of Thrift Supervision, or OTS, is the primary federal regulator

    forthrifts. State non-member banks are examined by the state agencies as well as the FDIC.

    National banks have one primary regulatorthe OCC.Each regulatory agency has their own set

    of rules and regulations to which banks and thrifts must adhere.The Federal Financial

    Institutions Examination Council (FFIEC) was established in 1979 as a formal interagency

    body empowered to prescribe uniform principles, standards, and report forms for the federal

    examination of financial institutions. Although the FFIEC has resulted in a greater degree of

    regulatory consistency between the agencies, the rules and regulations are constantly changing.In

    addition to changing regulations, changes in the industry have led to consolidations within the

    Federal Reserve, FDIC, OTS and OCC. Offices have been closed, supervisory regions have been

    merged, staff levels have been reduced and budgets have been cut. The remaining regulators face

    an increased burden with increased workload and more banks per regulator. While banks

    struggle to keep up with the changes in the regulatory environment, regulators struggle to

    manage their workload and effectively regulate their banks. The impact of these changes is that

    banks are receiving less hands-on assessment by the regulators, less time spent with each

    institution, and the potential for more problems slipping through the cracks, potentially resulting

    in an overall increase in bank failures across the United States.The changing economic

    environment has a significant impact on banks and thrifts as they struggle to effectively manage

    their interest rate spread in the face of low rates on loans, rate competition for deposits and the

    general market changes, industry trends and economic fluctuations. It has been a challenge for

    banks to effectively set their growth strategies with the recent economic market. A rising interest

    rate environment may seem to help financial institutions, but the effect of the changes on

    consumers and businesses is not predictable and the challenge remains for banks to grow and

    effectively manage the spread to generate a return to their shareholders.

    The management of the banks asset portfolios also remains a challenge in todays economic

    environment. Loans are a banks primary asset category and when loan quality becomes suspect,

    Department of Business Administration

    Faculty of Administrative Sciences Kotli Azad Kashmir

    http://en.wikipedia.org/wiki/FDIChttp://en.wikipedia.org/wiki/Wikipedia:Please_clarifyhttp://en.wikipedia.org/wiki/Wikipedia:Please_clarifyhttp://en.wikipedia.org/wiki/Federal_Reservehttp://en.wikipedia.org/wiki/Federal_Reservehttp://en.wikipedia.org/wiki/Federal_Reservehttp://en.wikipedia.org/wiki/Office_of_the_Comptroller_of_the_Currencyhttp://en.wikipedia.org/wiki/Office_of_the_Comptroller_of_the_Currencyhttp://en.wikipedia.org/wiki/Office_of_Thrift_Supervisionhttp://en.wikipedia.org/wiki/Thrifthttp://en.wikipedia.org/wiki/Thrifthttp://en.wikipedia.org/wiki/Federal_Financial_Institutions_Examination_Councilhttp://en.wikipedia.org/wiki/Federal_Financial_Institutions_Examination_Councilhttp://en.wikipedia.org/wiki/FDIChttp://en.wikipedia.org/wiki/Wikipedia:Please_clarifyhttp://en.wikipedia.org/wiki/Federal_Reservehttp://en.wikipedia.org/wiki/Office_of_the_Comptroller_of_the_Currencyhttp://en.wikipedia.org/wiki/Office_of_Thrift_Supervisionhttp://en.wikipedia.org/wiki/Thrifthttp://en.wikipedia.org/wiki/Federal_Financial_Institutions_Examination_Councilhttp://en.wikipedia.org/wiki/Federal_Financial_Institutions_Examination_Council
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    the foundation of a bank is shaken to the core. While always an issue for banks, declining asset

    quality has become a big problem for financial institutions. There are several reasons for this,

    one of which is the lax attitude some banks have adopted because of the years of good times.

    The potential for this is exacerbated by the reduction in the regulatory oversight of banks and in

    some cases depth of management. Problems are more likely to go undetected, resulting in a

    significant impact on the bank when they are recognized. In addition, banks, like any business,

    struggle to cut costs and have consequently eliminated certain expenses, such as adequate

    employee training programs.

    02 INTRODUCTION AND OVERVIEW OF NATIONAL BANK OF

    PAKISTAN

    2.1 INTRODUCTION

    National Bank of Pakistan (the bank) was incorporated in Pakistan under the National Bank of

    Pakistan Ordinance, 1949 and is listed on all the stock exchanges in Pakistan. Its registered and

    head office is situated at II Chundrigarh Road Karachi. The Bank is engaged in providing

    commercial banking and related services in Pakistan and overseas. The bank also handles

    treasury transactions for the Government of Pakistan as and agent to the State Bank Of

    Pakistan ( SBP). The bank operates 1,243 (2007: 1232) branches in Pakistan and 22 (2007:

    18) overseas branches (including the Export Processing Zone branch Karachi.). under a Trust

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    Deed, the bank also provides services as trustee to National Investment Trust (NIT) including

    safe custody of securities on behalf of NIT.

    National Bank of Pakistan maintains its position as Pakistans premier bank determined to set

    higher standards of achievements. It is business partner for the Government of Pakistan with

    special emphasis on fostering Pakistans economics growth through aggressive and balanced

    lending policies, technologically oriented products and services offered through its large

    network of branches locally, internationally and representative offices.

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

    in the country, which includes:

    Handling of treasury transactions for the Government of Pakistan as an 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.

    Financing of projects, including technical assistance, project appraisal through long

    term short term loans, term finance and musharika certificates, etc.

    Buying, selling, dealing, including entering into forward contracts of foreign exchange.

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

    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.

    Joint venturing with foregn dealers, agents and companies for its representation abroad.

    Participating in World Bank and Asian Development Banks lines of credit

    Providing personalized Hajj services to intending Hajjis.

    2.2 OVERVIEW OF THE ORGANIZATION

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    Vision Statement

    To be the pre-eminent financial institution in Pakistan and achieve market recognition both in

    the quality and delivery of service as well as the range of product offering

    Mission StatementTo be recognized in the market place by Institutionalizing a merit & performance culture,

    Creating a powerful & distinctive brand identity, Achieving top-tier financial performance,

    and Adopting & living out our core values.

    Core Values

    We aim to be an organization that is founded on

    Growth through creation of sustainable relationships with our customers.

    Prudence to guide our business conduct.

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

    We shall work to

    Meet expectations through Market-based solutions and products.

    Reward entrepreneurial efforts.

    Create value for all stakeholders.

    We aim to be people who

    Care about relationships.

    Lead through the strength of our commitment and willingness to excel.

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

    success.

    We have confidence that tomorrow we will be

    Leaders in our industry.

    An organization maintaining the trust of stakeholders.

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

    internal and external environment.

    2.3 History

    NBP is the largest commercial bank in the Pakistan and was established under the National

    Bank of Pakistan Ordinance on November 8, 1949 in Pakistan. It was established in crisis

    conditions following the deadlock with India. The original intention was to setup it sometime

    in 1950. The plans for its establishment had to be advanced in view of the critical situation,

    which developed especially in the jute trade as a result of Indias refusal to accept the exchange

    rate of Pakistans rupee. It played a notable role in financing the jute trade in collaboration with

    the Jute Board so that crisis was eventually overcome. The timely opening of the bank

    branches enabled the jute growers in East Pakistan to obtain a fair price of their products and

    helped the country in maintaining its foreign exchange earnings from raw jute. Later on, it

    established its office in West Pakistan to help and finance the cotton crop.

    The national bank of Pakistan took over the agency work of the State Bank of Pakistan in 1952

    for transacting Government business and managing currency chests at places where the State

    Bank of Pakistan does not has an office of its own. The National Bank of Pakistan in view of

    its relationships with the Government and as agent of the State Bank of Pakistan holds unique

    position among commercial banks in Pakistan. For example, for years it had a monopoly inGovernment and Semi-Government deposits. This is both a privilege and a responsibility. On

    the one hand, the bank is given special support and assistance and on the other, it is also

    expected to serve as an instrument for the promotion of national objectives and policies. It also

    undertakes Government Treasury operations. National Bank of Pakistan maintains its position

    as Pakistans premier Bank determined to set higher standards of achievements. It is the major

    business partner for the Government of Pakistan with the special emphasis on fostering

    Pakistans economic growth through aggressive and balanced lending policies, technologically

    oriented products and services offered through its large network of 1406 branches locally, 24

    branches internationally and representative offices.

    2.4 Nature of the Organization

    National Bank of Pakistan is a Governmental Organization. It is functioning as an agent

    of State Bank of Pakistan. It implements the policies of SBP. Its basic objective was to extend

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    credit to the agriculture sector. It is the major business partner for the Government of Pakistan

    with special emphasis on fostering Pakistans economic growth through aggressive and

    balanced lending policies, technologically oriented products and services offered through its

    large network of branches. It deals all Government Revenue, collection and payments of

    salaries, pensions and Government Treasury. It is a complete commercial, retail and corporate

    bank as well.

    The National Bank of Pakistan a commercial bank generally makes advances for a

    period not exceeding one year, except in case of small and medium industries for which

    advance may be made for a maximum period of five years. The bank makes not only against

    the security of stocks and goods hypothecated or pledged to the bank, but also against

    documents of goods and property, shares re various joint stock companies, Government

    securities, Insurance policies deposits receipts, etc. the margin and rate of interest are

    determined by several factors including the type of security the size of loan and the integrity of

    the party.

    National Bank of Pakistan maintain its position as Pakistans 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 Pakistans oriented products and services offered

    through its large network of branches locally and internationally and representative offices.

    2.5 Operations AND Functions

    The main operations and Functions that are performed by the NBP Are as follows:

    Accepting the Deposits of money from the customer

    Borrowing money and arranging finance from other banks

    Advancing and lending money to its clients and customers

    Financing of projects including technical assistance, project appraisal through long term

    short term loans

    Buying selling dealing and discounting of bills of exchange, promissory notes drafts

    bill of lading, and other instruments of securities.

    Foreign exchanger business

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    Financing of seasonal crops

    Receiving of bonds scrips valuable for safe custody

    Generating, Undertaking promoting etc of issue of shares. Bonds

    Undertaking and executing trusts

    Making investment in Other Companies

    Joint Venture with foreign dealers, agent and companies for its representation abroad

    Utility Services

    Providing Hajj Services to intending persons

    Agent of SBP for collecting

    Payment of pension on behalf of provincial and central government

    Treasury business

    Gold Finances

    Through mail transfer, demand drafts, telegraphic transfers, payment orders

    Locker services

    Establishing Letter of Credit for importers

    Negotiating the Letter of Credits (Exports)

    Collection based Export Document Selling

    Foreign Remittances through SWIFT (Society for Worldwide Inter-bank Financial

    Telecommunications)

    Foreign Currency Accounts handling (US $, Pound Sterling, Japanese Yen & Dutch

    Mark)

    SBP Export Refinance Scheme

    Remittances both inward and outward.

    .2.6 Objectives of NBP

    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.

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

    These are explained as:

    2.6.1 Increase in deposits:

    Competition in banking is intense and every bank whether it is Pakistani, foreign, private or

    nationalized tries to increase its deposits by providing better facilities to its customers. By

    increasing its deposits a bank can extend greater amount of loan and hence achieves higher

    profit. NBP is also improving its facilities and services to attract customers with higher volume

    of deposits. There are two main factors involved in increasing the deposits. These factors are

    improving the services and courtesy. NBP is continuously working on these two factors to

    increase its deposits.

    2.6.2 Extension of loans:

    The profitability of a bank largely depends on the amount given to people as loan and the type of

    people to whom credit is given i.e. the credit worthiness of the borrowers. This strategy has

    worked quite well for NBP. Deposits are collected from the people and invested in different

    projects. NBP prefers to give loans to financially sound and reliable parties, after securing the

    collators. NBP has an extremely well organized section. The staff is adequately trained, and

    educated and competent. They carry out extensive financial analysis before deciding on the loan.

    Interest charged on the loans potentially contributes to higher profits.

    Some of the other objectives of NBP are:

    i. Improve customer services.

    ii. Quick disposal of credit cases.

    iii. Efficient operation of the branches.

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    iv. Better Public Relations.

    v. Operational and advisory services for foreign exchange accounts activities

    03 STRUCTURE OF NAITONAL BANK OF PAKISTAN

    3.1 Management of National Bank of Pakistan

    Management is a distinct process consisting of activities of planning, organizing, actuating an

    controlling performed to determine and accomplish stated objectives with the use of human being a

    other resources.8

    The management has two types.

    1. Centralized.

    2. Decentralized.

    Centralized Management tends to concentrate decision making at the top of the

    Organization.

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    Decentralized disperses decision making and authority throughout and further down the

    organizational hierarchy.9

    NBP have a centralized type of management because all the decisions are taken by the top

    management.

    3.1.1 SENIOR MANAGEMENT OF NBP.

    Table 2

    Masood Karim Sheikh

    SEVP & Group Chief, Corporate &

    Investment Banking Group and Chief

    Financial Officer

    Qamar HussainChief Operating Officer & Head of

    Credit & risk Management

    Tajammal Hussain BokhareeSEVP & Group Chief, Special Assets &

    Remedial Management Group

    Imam Bakhsh BalochSEVP & Group Chief, Compliance

    Group

    Shahid Anwar KhanSEVP & Group Chief, Overseas

    Banking Group

    Nabi Bakhsh SoomroSEVP & Group Chief, Islamic Banking

    Group

    Muhammad Sardar KhawajaEVP & Group Chief, Audit &

    Inspection Group

    Dr. Asif A. Brohi SEVP & Group Chief, OperationsGroup

    Ekhlaqa Ahmed EVP & Secretary Board of Directors

    Muhammad Nusrat Vohra SEVP & Group Chief, Treasury

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    Management Group

    Aamir Sattar SVP & Financial Controller/Divisional

    Head, Financial Control Division

    Dr. Mirza Abrar Baig

    SEVP & Group Chief, Human

    Resource Management &

    Administration Group

    Atif Hassan KhanSVP & Group Chief (A) Information

    Technology Group

    (Source www.nbp.com.pk)

    3.2 BOARD OF DIRECTORS

    Table 1

    NAME DISIGNATION

    Ali Raza Chairman & President

    Mohammad Ayub Khan Tarin Director

    Mian Kausar Hameed Director

    Abrat A Mumtaz Director

    Tariq Karmani Director

    Sikandar Hayat Jamali Director

    M. Khalid Malik Director

    S.M. Rafique SEVP & Sectorary to BD

    (Source Annual report 2008)

    3.3Net Work of Branches:

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    NBP have wide range of branches inside the country and outside the country.

    3.3.1 Domestic operation

    NBP has a vast network of 1254 branches within Pakistan.

    Its subsidiaries are:

    NBP Leasing Limited (formerly NBP) Capital Limited)

    NBP Modaraba Management Company Limited

    NBP Exchange Company Limited

    Taurus Securities Limited

    3.3.2 NBP Regional Offices

    1. Karachi (South) 16.Multan

    2. Karachi (West) 17.Bahawalpur

    3. Hyderabad 18.Dera Ghazi Khan

    4. Larkana 19.Sahiwal

    5. Sukkur 20.Abbottabad

    6. Quetta 21.Gujrat

    7. Gawadar 22.Rawalpindi

    8. Lahore (Cenral) 23.Jhelum

    9. Lahore (East) 24.Peshawar

    10. Gujranwala 25.Mardan

    11. Sialkot 26.Dera Ismail Khan

    12. Faisalabad 27.Muzaffarabad (A.K.)

    13. Jhang 28.Mirpur (A.K.)14. Sargodha

    15. Federal Capital Islamabad

    3.3.3 Overseas Branch Operations

    22 overseas Branches

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    United States of America 2 Republic of Korea 1

    France 1 Japan 2

    Germany 1 Afghanistan 4

    Bahrain 1 Turkmenistan 1

    Pakistan EPZ 1 Kyrgyzstan 1

    Bangladesh 4 Azerbaijan 1

    Hong Kong 2

    04 DEPARTMENTS OF NBP

    4.1 Operation Department

    The department that is most commonly used for general banking is called the operation

    department. In the District Courts Mirpur branch it is being run effectively under the

    supervision of CHIEF OPERATION MANAGER

    The following are the some categories according to the type of work done by the operation

    officers.

    4.1.1 Remittances

    The main functions of the remittances are as follows

    4.1.2 Demand Draft

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

    NBPs Demand Drafts at very reasonable rates. Any person whether an account holder of the

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

    It is a bill either on demand or otherwise by one bank on another in favour of third party or by

    one branch of the same bank or by the head office on the branch or otherwise.

    4.1.3 The issuance of the DD

    The amount both in words and figures is written and the applicant has to sign on two places

    which will be helpful in case DD is to be cancelled. The client has to deposit the cheque

    (Account holder) or cash at the counter and will receive the receipt that will be paid to the

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    officer who will issue the DD in favour of the holder and the entry will be recorded in the DD

    issued register.

    4.1.4 Mail Transfer

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

    most competitive rates in the market.

    The money will be transferred to the other branch either locally or not through mail.

    If the customer is the account holder then his account will be debited, if not then he will have

    to make the cash payment at the Cash counter and the receipt will be presented to the MT

    issuer officer. The following forms will be used for this purpose

    1. Branch mil transfer form

    2. Receiving Branch registered Copy

    3. Issuing Branch Registered Copy

    4. Debt Voucher

    5. Beneficiarys Advice

    6. Advice to customer

    4.1.5 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.

    It is mostly used locally and its procedure is same as the DD issued procedure.

    4.1.6 Telegraphic Transfer

    It is the most efficient way t transfer the money from one place to another on one phone call

    only. It is an application form provided to the customer in which he has to specify the name of

    the payee, the place of the transfer and the amount.

    After filling of the voucher the client will make the payment and get the stamp of Cash paid by

    the Cash Officer And then Authorized person will make tests on the receipt. The tests are thesecret codes that are not understandable to any unauthorized person.

    After making the call the tested messages will be delivered to the other branch officer who

    will complete the transaction.

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    4.2 Cash Department

    The deptartment that Deals with the payment and receipt of the Cash or we can simply say that

    it is the deptt. that is involved in the cash management . Being the main branch there are two

    types of cash involved.4.2.1 Local Cash

    The cash that is involved in the same branch for payment of the dues or for any requirement

    of the branch

    4.2.2 Chest Cash

    The payment and receipt of the cash from all other branches of the same city.

    4.2.3 Cash Books

    The following books are maintained in the cash department of branch

    Receiving Cashier Books

    Paying

    Token Books

    Scroll Book

    Cash balance Book

    When cash is received on the counter, it is entered in the scroll book in the cashier book.

    At the close of the day these books are balanced with each other. When the cheque of

    negotiable instrument is presented at the counter for payment, Token is used to the customer.

    After consolation the token and the instrument is presented to the cashier for payment. The

    cashier makes entry in the paying cashier book and payment is made to the Payee. The

    Consolidated of the receipt and payment of cash in entered in the cash balance book and drawn

    closing balance

    Closing Balance = Cash + Receipt _Payments

    4.2.4 Govt. Receipt And Payment

    This department also comes under the operations of the branch. It deals with the payment and

    collection of dues on behalf of the local, provincial and federal govt.

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    The payment side involves the payment of all type of pensions and other funds that are

    announced by the govt. or any tax returns by the CBR.

    The collection of dues includes the collection of Sales Taxes, Income Taxes, Property taxes

    and any other fee that is to be submitted in the account of the Central Treasury. The collection

    of the Challan forms, fees and the payment made to the Punjab Public Service Commission is

    also included in this counter.

    4.2.5 Collection Of Utility Bills

    The counter for the collection of utilitity bills also play a great role in the general banking

    setup. The NBP collects all type of bills on behalf of the concerned organizations for a pre

    agreed fee.

    4.3 Clearing Department

    The department that is responsible for the clearing of the cheques that are drawn on the other

    banks or the cheques that have been drawn on the NBP.In the past it was a more complicated

    process, because SBP was the custodian so it had to make the arrangements for the clearance of

    cheques that have been drawn on the others. So a person representing his or her bank had to go

    to SBP for the Clearance of these cheques which was a time consuming method and it was

    taking at least 4 to 5 days for the clearance.

    Now the SBP has made the thing so easy for all the banks by making a contract to a privatized

    insitutionNIFT. Now all the clearing is being done through the NIFT against a Fee that is

    Rs.2.5 for every cheque that has get cleared.

    4.3.1 Types of Cheques Collected by the Clearing

    a)Transfer Cheques

    The cheques that are collected and paid by the same branch of the bank

    b)Transfer Delivery Cheques

    The cheques that are collected and paid by two different branches of a bank situated in the

    same city.

    c)Clearing Cheques

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    When the endorsee (the person who deposit the cheque for collection) and the the person on

    whom the cheque has been drawn are the account holders of two different banks then these

    type of cheques can be get cleared through the NIFT.

    4.4 HUMAN RESOURCE DEPARTMENT

    Being the District Courts Branch of Mirpur Hr department has to play a big role in the success

    ph the branch. The HR is considering great importance now a day and should get also because

    the personnel are the main asset of the NBP. Being the main branch the staff is also a key

    factor. The primary objective of the Hr department is to get the jobs done effectively,

    economically and with as little friction as possible. The department is focusing mainly on the

    policies that are focused on the personnel.

    Most talented people are hired through proper recruitment process. Discrimination of any kind

    is counter productive to performance.

    The objectives/functions that has to be performed by the personnel are clearly mentioned in the

    JOB DESCRIPTION.

    The code of conduct provides s framework of NBPs values and ethical standards. The

    following principles must be applied for the governing the code of conduct of the bank

    employees while on the job.

    All decisions and actions must be confirmed with all applicable laws, regulations and

    corporate policies.

    Business must only be succored for NBP on the basis of the belief in competitive

    market system and the appropriateness of earning a profit by providing our customer with

    efficient services.

    Individual must be honest and trust worthy in all actions and relationships for, and in

    behalf of the NBP.

    Each decision or act must be proper, in terms of both our own sense of integrity and the

    scrutiny of others.

    Ethical conduct should be recognized and valued by all employees and agents of the

    bank.

    Formal appraisal is a year round activity and a formal appraisal report is prepared at least once

    a year. The appraisal comments are based on achievements against key job objectives. In NBP

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    the good performance of the employees is always acknowledged by giving them monetary

    rewards. Excellence awards, merit increments, gifts, visiting tickets to abrade and promotions.

    Transfers are usually made on the promotions from one country to another or from one branch

    to another or maybe from one department to another.

    4.5 COMPLIANCE DEPARTMENT

    The department that deals with the Audit/Checking and inspection is known as the Compliance

    department. The department is being run under the supervision of the COMPLIANE OFFICER.

    It is involved in the checking of all types of work that is being conducted in the branch.

    The inspection is carried out on daily, weekly and monthly basis depending upon the nature of the

    work.

    Generally it includes the following type of functions;

    Checking of all type of registers that are maintained by the officers of remittances, and that

    are

    o Demand Draft issued Register

    o Telegraphic Transfer issued Register

    o Main Transfer issued Register

    o Pay Order issued Register

    o Register of all type of Advices received against DD, MT, and TT

    o Demand Draft received Register

    o Telegraphic Transfer received Register

    o Main Transfer received Register

    o Pay Order received Register

    Inspection of the Dak/Mail register issued and received

    Inspection of all books that are maintained at the clearing

    Inspection of the Cash Book

    Inspection of the Scroll Book

    Inspection of the Cheque Book Issued Register

    Inspection of the all the payments made to pensioners

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    Inspection of the all type of Receipts

    Inspection of the Cash issued to the branches

    Inspection of the utility bills collected

    Inspection of the receipts and the payments of the Govt. Counter Inspection of the all type of Deposits

    Inspection of the of the all type of loans

    Inspection of the Corporate Cell

    4.6 CREDIT ADMINISTRATION DEPARTMENT

    The most important department of the NBP main branch. The credit department of a bank is

    the most profit generating department of any bank. The department is being run effective under

    the supervision of CAD Officer. The department is involved in all the process of Booking the

    loan, documentation, Risk Analysis, Sanctioning /Approval Documentation, Sanction Advice,

    Securitization, Disbursement, Monitoring, Collection, Recovery.

    The financing process starts with

    4.6.1 Loan Booking

    Introduction

    Funds requirement

    Nature of Utilization

    Nature of Business

    Financial position

    Character

    Security

    4.6.2 Documentation (Pre-Sanction)

    Information about business

    Personal data

    Security Valuation

    Security Documents

    Encumbrance

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    BLA Report (Bench Legal Advisor)

    Loan History (CIB Report)

    Loan Application Form

    4.6.3 Analysis Financial Analysis

    Sector Analysis

    Product Analysis

    Political Factors

    Industry Analysis

    SBP Prudential Regulations

    4.6.4 Securitization

    The complete process is made for the security that is being used for the approval of

    loan. The securities may be of the following types:

    Personal Guarantee

    Personal Guarantee + Hypothecation

    Pledge

    Mortgage

    Charge/Lien on the Current Asset

    4.6.5 Approval Document

    Then an approval document is received from the appropriate/competent authority.

    4.6.6 Sanction Advice

    Then the terms and conditions are advised with the approval document.

    4.6.7 Disbursement of Loan

    Then the loan is disbursed to the party after the completion of all the above stated

    requirements.

    4.6.8 Monitoring

    The monitoring involves all the steps that will be taken for the maintenance of the advances of

    the customers. The officers will determine that either the person is paying the installments or

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    not. In case of short tern loans the time period will short and the customer should be in a

    position to payback the loan.

    4.6.9 Collection

    This sub head is involved in the collection of all the payments and advance if the time period is

    finished.

    4.6.10 Recovery

    In case of default by the customer, the recovery process will be on. During recovery all legal

    actions will be taken against the customers regarding payment of the loans.

    4.7 Foreign Exchange

    Foreign Exchange means expression of value of local currency when exchanged in terms of

    currencies of other nations. The Foreign Exchange Department of NBP is the most competentdepartment and is contributing a lot in the overall performance of the Branch.

    The main operations of the Foreign Exchange department are

    Imports

    Exports

    Remittances

    Foreign Exchange Account handling

    4.7.1 IMPORTS

    The import deals primarily with the letter of Credit, Contract and the Advance payment .

    AnLc is a familiar instrument in setting trade between buyer and seller located in different

    countries for the purchase and sale of goods. It is usually a guarantee by the bank for the

    payment of the goods delivered by the exporter to the importer.

    Important documents for the Import are

    Bill of Exchange

    Commercial Invoice

    Transportation Documents e.g Air way bill or bill of lading

    Insurance documents for the goods

    Packing List

    Pre-shipment inspection certificate

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    Form I

    In contract the most popular is CAD (Cash against Documents). That is the payment will be

    made at the collection of the documents that were involved in the negotiation process.

    The third way is the advance payment that will be made to the exporter either full or partial

    depending upon the nature of the transaction.

    4.7.2 Exports

    Export is mainly involed with the collection of the documents or the discounting of the LC. In

    the negotiation process Export Bill negotiation A/c will be debited.

    Documents Required for the negotiation:

    Form-E

    Bill of Exchange

    Commercial Invoice

    Transportation Documents e.g Air way bill or bill of lading

    Packing List

    Letter of Credit

    4.7.3 Documents to be forwarded

    Bill of Exchange

    Commercial Invoice Transportation Documents e.g. Air way bill or bill of lading

    Packing List

    Other specific Documents

    4.7.4 Documents Remained in hand

    Form-E

    Copy of Commercial Invoice

    Copy of Packing List

    Letter of Credit

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    05 PRODUCTS OF NBP

    5.1 NBP Premium Aamdani

    NBP Premium Aamdani (Monthly Income Scheme)

    Eligibility Criteria:

    Minimum deposit of Rs. 50,000 and a maximum deposit of Rs. 5,000,000 for 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%

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    2 year 8.50%

    3 year 9.50%

    4 year 10.50%

    5 year 11.00%

    5.2 NBP Premium Saver (PLS Saving Account)

    Eligibility Criteria:

    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

    Earn up to 7.25% p.a.

    Profit rates are expected

    Certain conditions apply

    Premature encashment will result in lower rates of return

    Expected rates are for the given year

    5.3 NBP Karobar (Another step towards your prosperity)

    5.3.1 NBP Rozgar Scheme:

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    If you are aged between 18 and 40 years, you could be eligible for easy financing for self

    employment inthe categories below

    Karobar Details:

    Government of Pakistan (GOP) support:

    1) Life and disability insurance paid by GOP with no medical examination required.

    2) 6% mark-up paid by customer, rest paid by GOP.

    Subject to availability of subsidy/confirmation from GOP.

    Note: The mark-up rate will be revised on annual basis.

    Financing Terms & Conditions:

    Minimum Down Payment:

    10% of asset price (5 % for PCO and Tele center)

    Mark-up Rate Variable:

    1 year KIBOR + 2% (For the first year mark-up will be 12%) The customer will pay markup

    @ 6%p.a as long as GOP provides the balance markup to NBP on a monthly basis)

    1 to 5 Years (for PCO 2 years)

    Initial 3 months

    Rs. 200,000/-

    5.4 NBP Saibaan

    Under the scheme of NBP Saibaan following types of products to the customers. His scheme is

    launched especially for the people those who want to have loan for the construction, renovation

    or purchase of land.

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    Product Items:

    Home Finance

    Home Construction

    Balance Transfer Facility (BTF)

    Home Renovation

    Purchase of Land + Construction

    Home Purchase (House or Apartment)

    Financing Amount Up to 35 Million

    Financing Period 3 to 20 Years

    Debt to Equity 85:15 (Maximum)

    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 15 Million

    Financing Period 3 to 15 Years

    Debt to Equity 70:30 (Maximum)

    Re-Financing (Balance Transfer Facility (BTF))

    If you have a Home Finance Facility outstanding with another bank you can have

    it transferred to NBP through a hassle-free process.

    5.5 NBP Advance Salary

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    Take upto 20 advance salaries(currently for NBP account holders of govt. or relatedorganization employees).

    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.

    Terms and Conditions:

    Eligibility Permanent Employees of Govt., Semi-Govt.,

    Autonomous, Semi Autonomous, Local &

    other bodies who are maintaining their Salary

    A/Cs at NBP.

    Repayment Direct deduction from Salary A/C

    Maximum Loan

    Amount

    Rs. 490,000/-

    Security Employer will provide undertaking that

    borrowers Salary and end of service benefits

    will route through his/her Salary A/C

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    maintained at NBP during the tenure of the

    loan and his/her end of service benefits are at

    least equal to the amount of Advance Salary

    required.

    Hypothecation of Consumer durables owned

    by the borrower.

    Three (3) Undated Cheques

    Max. Repayment

    Period

    5 years (60 months)

    Advance in terms of #

    of net take home

    salaries

    Up to 20 net take home salaries

    Markup Rate 15 % *

    (Based on diminishing balance method)

    Processing Fee 1% of Loan Amount

    Verification Charges Rs 500/-

    Life Insurance No Insurance of any kind.

    Documentation

    Charges

    at actual

    Contact Your Salary disbursing NBP Branch.

    Remaining Service Age At the time of approval and disbursement the

    applicants remaining service age should be 6

    months after maturity of the loan

    Debt Burden 50%

    Minimum net take

    home salary

    no minimum take home requirement

    5.6 NBP Cash Card

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    To identify a merchant outlet that welcomes your card, just look for the NBP or Orix Logo. To

    make a payment give your NBP Cash Card to the merchant. The merchant will swipe your card

    on the POS (Point Of Sale) machine and the purchase amount will be entered. Enter your

    digital ATM Pin for verification (this is the same as your cash withdrawal pin). After Approval

    a transaction slip will be provided. Collect your card and slip and confirm you transaction

    amount. Your purchase transaction is now complete and the transaction amount has been

    debited to your NBP account. Please retain your transaction for further reference.

    5.6.1 NBP Cash Card Safety Tips

    Welcome to our relationship enriched with a wide range of remarkable e-banking service. For

    your safety and convenience we would recommend some precautions while using NBP CASH

    CARD at ATMs and merchant outlets.

    Immediately after receiving the NBP Cash Card, change your PIN Code at the nearest

    NBP ATM.

    Never share your Personal Identification Number (PIN) or given it out over telephone.

    Never write your PIN Code on your card.

    Never keep your card and PIN at the same place.

    As you approach an ATM, beware of your surroundings, if you notice anything

    unusual, visit the ATM later.

    Immediately report a lost of stolen card to your NBP branch.

    Stand close to the ATM machine while entering your PIN and do not allow anyone to

    watch.

    Ensure that the merchant has entered the correct amount of transaction before you enter

    your PIN code.

    Maintain your POS receipt as a record and ensure that he card returned to you by the

    cashier/attendant is yours.

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    Protect your card from direct sunlight and magnetic fields.

    Do not bend your card.

    Carefully dispose off your old card when your are issued a new one.

    5.7 NBP Cash n Gold Card

    With NBP's Cash n Gold, you can meet your need for ready cash against your idle gold

    jewelry.

    Rate of mark-up 12% p.a.

    Facility of Rs. 7,000 against each 10 gms of net contents of gold

    No maximum limits of cash

    Repayment after one year

    Roll over facility

    Only gold ornaments acceptable

    Weight and quality of gold to be determined by NBP's appointed scruffs

    No penalty for early repayment

    5.7.1 NBP Kisan Taqat- General Information

    If you are a progressive milk supplier of Nestle Milk Pack

    By financial aid of National Bank of Pakistan, you can increase the production of milk

    efficiently.

    Benefits of National Bank of Pakistans Loan:

    Branches, closest to you

    Easy and shortened documented procedure

    Relaxation from paying installments

    Guidance and help of experienced people

    Government bank with more than 50 years of age

    5.8 NBP Kisan Dost

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    National bank of Pakistan has started for Farmers an Agriculture loan system names Kisan

    Dost whose basic objective is this that a farmer can acquire a loan with full trust and without

    any bribery and reference according to his requirements. He should have access to approved

    loan when he needs it and whenever he wants it he may withdraw money in future from his

    account as per his requirement, approved on revolving basis during three years without any

    paper documents. So, now every farmer can very easily increase his production with easy

    access to loan.

    Features:

    Lowest mark up on loans, i.e. 12% per annum

    Fast and easy procedure for loan approvals

    Availability of loans on time and when needed, on the door of farmer

    On every step, guidance of farmers through agriculture experts

    For the acquirement of loans, a wide range of agriculture loans (schemes)

    Facility of agriculture loan at agricultural pass book, jewelry and paper securities

    Providence of loan up to 0.1 million on personal guarantee to non-owner farmers

    Facility of revolving basis of loans for three years for which new documents

    requirement is not required

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    06 DEPOSIT AND LENDING POLICIES OF NBP

    6.1 Deposit Policies of NBP

    As well as deposit is concerned the deposits are the life blood of the bank because the

    borrowed capital is much greater than their own capital. The difference between the borrowed

    money interest and the lending rate of interest will be the profit margin of the bank because the

    lending rate is higher than the borrowing rate. Following are the major deposits of the bank:

    6.1.1 Current Account

    Current accounts are opened for meeting the current needs of the customer. On such account

    there is no markup paid to the accountholders. These are also called non-interest bearing

    accounts. Minimum balance requirement is Rs. 5,000 if balance of the account will be less than

    5,000 than Rs. 50 to be deducted each month. Pension, Government employees, students,

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    widow are exempted from this restriction. No Zakat will be deducted from the current Account

    holder.

    2% tax will be deducted if the customer withdraw more than 25000 in a day

    .Requirements for the Current account

    CNIC of the customer

    CNIC of the next of Kin

    CNIC of the Introducer

    Two photographs for the illiterate person.

    Specimen of the signatures of the educated person

    The introducer must be an existing current account holder.

    6.1.2 PLS Saving AccountThe customers in this account deposit a lot of amount. On such amount there is markup paid to

    account holders. Minimum balance requirement is Rs. 5,000 if balance of the account will be

    less than 5,000 than Rs. 50 to be deducted each month. Pension, Government employees,

    students, widow are exempted from this restriction. Zakat will be deducted from the Account

    holder.

    2% tax will be deducted if the customer withdraw more than 25000 in a day.

    Requirements for the Saving account

    CNIC of the customer

    CNIC of the next of Kin

    CNIC of the Introducer

    Two photographs for the illiterate person.

    Specimen of the signatures of the educated person

    The introducer must be an existing account holder.

    Mark Up Rate is 1.2% per annum for 100 Rupees.

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    6.1.3 PLS Term Deposit

    These type of deposits are offered for a term or a specific time period. The minimum deposit

    should be for the 7 days at least. If the customer will want to withdraw from the term deposit

    then the saving rate will be applied on the amount.

    Requirements

    CNIC of the customer

    CNIC of the next of Kin

    CNIC of the Introducer

    Two photographs for the illiterate person.

    Specimen of the signatures of the educated person

    The introducer must be an existing account holder.Following Rates will be applicable depending upon the time period involved.

    For 7 days 1.2% per annum

    For 30 days 1.5% per annum

    For 3 Months 1.27% per annum

    For 6 Months 1.8% per annum

    For 1 Years 2% per annum

    For 2 Years 2.3% per annum

    For 3 Years 2.7% per annum

    For 4 Years 3% per annum

    For 5 Years and above 3.25% per annum

    6.1.4 PLS Saver

    The newly introduced scheme by the NBP is PLS Saver which is effective from the 1.1.2007.

    The customers in this account deposit a lot of amount. On such amount there is markup paid to

    account holders. Minimum balance requirement is Rs. 20,000 and the maximum limit is

    300,000. if balance of the account will be less than 5,000 than Rs. 50 to be deducted each

    month. Pension, Government employees, students, widow are exempted from this restriction.

    Zakat will be deducted from the Account holder.2% tax will be deducted if the customer

    withdraw more than 25000 in a day.

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    Requirements for the Saver account

    CNIC of the customer

    CNIC of the next of Kin

    CNIC of the Introducer

    Two photographs for the illiterate person.

    Specimen of the signatures of the educated person

    The introducer must be an existing account holder.

    The mark up rate is 7.25% annually.

    6.2 Lending Policies of NBP

    Basically lending policies are governed by SBP lending policies, however, NBP has some

    discountary powers in respect of lending policies. The advances made by the NBP hasincreased so much and are involved in creating a great amount of return for the bank. Deposits

    and the Advances are the two important functions of any bank. NBP takes deposits from the

    customers and lend them to the others for earning a profit. The difference between the deposit

    rate and the lending rate will be the benefit of the bank. Civil line branch of NBP is playing the

    most important role in this category because it has a separate department to deal with the

    peoples those who want to have money. Civil line branch is dealing with the Corporate sector

    as well.

    6.2.1 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

    6.2.2 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

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    clients vision. This type of long term financing proves the banks belief in its client's

    capabilities, and its commitment to the country.

    6.2.3 Loan Structuring and Syndication:

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

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

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

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

    and structure through syndicated debt offerings. Our syndication capabilities are

    complemented by our own capital strength and by industry teams, who bring specialized

    knowledge to the structure of a transaction.

    6.2.4 Cash Management Services:

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

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

    country. This will enable the customer to manage their companys total financial position right

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

    range of payment, ejection, liquidity and investment services. In fact, with NBP, youll beprovided everything, which takes to manage your cash flow more accurately.

    6.2.5 Generally Leading Policies Include:

    Clean Credit Report

    Compliance with maximum exposure by the bank

    Compliance with maximum exposure that can be allowed to a single party

    Funded = 4 times of equity of the firm

    Non-Funded = 10 times of equity of the firm

    Lending Policies made by the NBP have categorized the loans in the following types according

    to the requirements of the customers.

    6.2.6 TYPES OF ADVANCES

    1. Security Vice

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    Clean Advances

    In these types of advances only the personal guarantee of the

    borrower is involved. The best example is the Credit Card.

    Secured LoansThe loans the sectioned of those are associated with the security. The

    securities may be of the following types:

    Personal Guarantee

    Personal Guarantee + Hypothecation

    Pledge

    Mortgage

    Charge/Lien on the Current Asset

    2. Period Vice

    The loans that are designed according to the time periods needs.

    Short Term Loans (For 1 year only)

    Long Term Loans (For 5 years)

    3. Utilization Vice

    The advances that are typically designed according to the utilization

    requirements of the loans.

    Working Capital Requirement

    Project Finance

    4. Customer Vice

    According to the customer

    Consumer finance

    SME lending

    Corporate Financing

    5. Sector Vice

    The advances that are according to the sectors, such as

    Agriculture

    Textile

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    Chemical sector

    6.3 Types of Finance

    All the types of advances comes under the following Credit Heads

    1. Small Finance2. Cash Finance

    3. Running Finance

    4. Demand finance

    5. Agriculture Finance

    6. Corporate Loans

    6.3.1 Small Finance

    As the name indicates, this head involves small amount that will be financed

    by the bank. The loan is for the business people only. The loan will be issued against any

    tangible security of the businessman. These small loans are sanctioned for short period of times

    i.e for 1 year only. After one year the customer will have to pay back the amount or will renew

    his loan.

    The loan amount will be 60% of the amount of the property that is being pledged.

    The mark-up Rate Is fixed 12% annually.

    Under Small Finance following types are included.

    Gold Finance

    Commercial finance

    Industrial Finance

    6.3.2 Gold Finance

    If the customer has the gold then he can use it for the generation of the money.

    60% of the gold amount will be financed by the NBP after evaluation from the jewelers those

    are under that contract of NBP. It is a short tern loan and must be paid or renewed after 1 year.

    Following documents will be required

    CNIC

    Complete information of Business

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    CIB Report

    Application Form

    Security Evaluation from authorized Jewelers

    BLA Report IB 6A (Gold Agreement)

    IB12 (Promissory Note)

    IB 26 (Pledge of security)

    Any other document as per the requirement of the NBP.

    6.2.3 Commercial & Industrial Finance

    For the small businessmen those are doing business at commercial level mainly for sole

    proprietorship. The upper limit that will be sanctioned under this finance is Rs. 250,000. Forsmall industrialists this facility is also available. In this case the upper limit will be 500,000.

    Mark-up will be 12% and the loan is for 1 year.

    Following documents will be required

    CNIC

    Complete information of Business

    CIB Report

    Application Form Security Evaluation from authorized Jewelers

    BLA Report

    IB 6R (Finance Agreement duly signed by the Bank and customer)

    IB12 (Promissory Note)

    IB 26 (Pledge of security)

    IB 25 (Hypothecation of stock)

    HOX7 (Mark-up Rate Agreement)

    Any other document as per the requirement of the NBP.

    6.3.4 Running Finance

    This financing facility is also for short period of times, i.e for 1 year only. After 1 year it must

    be renewed or cleared. It is mostly issued against some type of liquid assets, such as Defense

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    Saving Certificates (DSC) or term deposits. These loans are typically taken for the working

    capital requirements. While sanctioning the loan the bank will create lien on the DSC or term

    deposit from the Issuing bank. There is no limit for the loan.

    75% of the DSC or Term Deposit will be given to the customer.

    Mark-up Rate will be fixed 12% per annum.

    Following documents will be required

    CNIC

    Complete information of Business

    CIB Report

    Application Form

    Security Evaluation from authorized Jewelers

    BLA Report

    IB 6R (Finance Agreement duly signed by the Bank and customer)

    IB12 (Promissory Note)

    IB 26 (Pledge of security)

    IB 28 & 31 (For liquid assets)

    HOX7 (Mark-up Rate Agreement)

    Any other document as per the requirement of the NBP.

    6.3.5 Demand Finance

    Demand finance is provided to the customer on demand by him. In NBP it is mostly issued to

    the Staff. The others can also take this facility. There is no upper limit for the loan amount. The

    loan is issued against some type of property that will be pledged by the bank. In this type of

    loan the borowwer will take the whole amount at once.

    The loan can be sanctioned for 1 year or for 5 years.

    Markup for the Staff is 4%.

    Markup for the others is Kiber +2.3%

    Following documents will be required for Staff

    CNIC

    Application Form

    IB 6C (Finance Agreement with staff)

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    IB12 (Promissory Note)

    IB 25 (Hypothecation)

    HOX7 (Mark-up Rate Agreement)

    Any other document as per the requirement of the NBP.Following documents will be required for others

    CNIC

    Complete information of Business

    CIB Report

    Application Form

    Security Evaluation from authorized Jewelers

    BLA Report IB 6R (Finance Agreement duly signed by the Bank and customer)

    IB12 (Promissory Note)

    IB 25(Hypothecation)

    HOX7 (Mark-up Rate Agreement)

    Any other document as per the requirement of the NBP.

    6.3.6 Cash Finance

    The limit of this type of cash is above 500,000. It is both for long run and short run.

    This type of loan is mostly sectioned to big industrials and businessmen.

    The main advantage of this type of advance is that the customer can have loan up to his

    requirement within the limit that has been sectioned to him. The mark up will be charged on

    the amount that has been used by the customer not on the whole, which is the case in Demand

    Finance.

    Mark Up Rate is KIBER+2.3% Per annum.

    Documents Requirement

    CIB Report

    Application Form

    Security Evaluation from authorized Jewelers

    BLA Report

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    IB 6R (Finance Agreement duly signed by the Bank and customer)

    IB12 (Promissory Note)

    IB 26 (Pledge of security)

    HOX7 (Mark-up Rate Agreement) IB 25 (Hypothecation of Stock)

    Any other document as per the requirement of the NBP.

    6.3.7 Agriculture Finance

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

    produce some of the best agricultural products in the World.

    6.4 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.

    6.4.1 Agricultural Credit:

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

    Providing reliable infrastructure for agricultural customers

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

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

    technical knowledge, and supervision of farming.

    Agricultural Credit (Medium Term):

    Production and development

    Watercourse improvement

    Wells

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    Farm power

    Development loans for tea plantation

    Fencing

    Solar energy

    Equipment for sprinklers

    6.4.2 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

    6.5 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.

    The mark up Rate is Fixed 12% annually.

    Chanpter No. 7

    Financial Position of NBP

    7.1 Consolidated Balance Sheet

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    7.3 Consolidated Cash Flow Statement

    7.4 STATEMENT OF CHANGES IN EQUITY

    Six years performance at a Glance

    (Rs. in Million)

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    Financial Position of NBP

    National Bank of PakistanConsolidated Balance SheetAs at December 31st, 2008

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    National Bank of PakistanConsolidated Profit & Loss Account

    For the year ended December 31st, 2008

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    National Bank of PakistanConsolidated Cash Flow Statement

    For the period ended December 31st, 2008

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    NATIONAL BANK OF PAKISTANSTATEMENT OF CHANGES IN EQUITY

    For the year ended December 31, 2008

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    08 Area of Study

    Work Done By Me at the Branch

    On the very first day of my internship at NBP District Courts Mirpur A.K the Manager warmly

    welcomed me. He visited me at the different departments


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