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Internship Report

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TABLE OF CONTENTSTable of Contents.....................................................................................................................1 Objectives of Studying the Organization...................................................................................5 Brief History of National Bank of Pakistan.................................................................................6 Nature of National Bank of Pakistan.........................................................................................9 Business volume of National Bank of Pakistan........................................................................11 Branch Network of National Bank of Pakistan.........................................................................15 Number of Employees of National Bank of Pakistan................................................................17 Product Lines.........................................................................................................................18 Deposits.............................................................................................................................19 Current Deposits..............................................................................................................19 PLS Saving Deposits........................................................................................................19 Fixed Deposit Account (Time Deposits)............................................................................20 Foreign Currency Account................................................................................................21 NBP Premium Aamdani....................................................................................................22 National Income Daily Account (NIDA).............................................................................22 Advances............................................................................................................................24 NBP Saibaan....................................................................................................................24 NBP Advance Salary.........................................................................................................25 NBP Cash & Gold.............................................................................................................27 Students Loan Scheme....................................................................................................27 NBP Karobar- Presidents Rozgar Scheme........................................................................27 Corporate Advances............................................................................................................30 Cash Finance...................................................................................................................30 Running Finance/ Overdraft.............................................................................................30 Demand Finance..............................................................................................................30 Remittances.......................................................................................................................31 Demand Drafts................................................................................................................31 Travelers Cheques...........................................................................................................32 Letter Of Credit ...............................................................................................................32 Foreign Remittances .......................................................................................................33 Swift System....................................................................................................................33 Mail Transfer....................................................................................................................34 Telegraphic Transfer........................................................................................................34

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Page |2 Pay Order........................................................................................................................34 Miscellaneous.....................................................................................................................35 Lockers............................................................................................................................35 NBP Cash Card.................................................................................................................35 International Banking.......................................................................................................36 Organizational Structure of National Bank of Pakistan............................................................37 Board of Directors...............................................................................................................37 Senior Management............................................................................................................40 Corporate & Investment Banking Group...........................................................................42 Compliance Group...........................................................................................................44 Islamic Banking Group.....................................................................................................45 Treasury Management Group...........................................................................................46 Credit Management Group...............................................................................................48 Audit & Inspection Group.................................................................................................49 Human Resource Management & Administration Group...................................................51 Information technology group..........................................................................................52 Financial control Division.................................................................................................53 Overseas Coordination & Management Group..................................................................54 Commercial & Retail Banking Group ..............................................................................55 Special Assets Management Group..................................................................................56 Employee Benefits, Disbursements & Trustee Division.....................................................57 Core Banking Application.................................................................................................59 Operations Group............................................................................................................60 Provincial & Regional Management.....................................................................................61 Branch Management...........................................................................................................62 Organizational (Management) levels at NBP...........................................................................62 Top Managers.....................................................................................................................63 Middle Managers.................................................................................................................63 First Line Managers or Lower Level Management................................................................63 Non Managerial Employees.................................................................................................64 Hierarchy of National Bank of Pakistan...................................................................................64 Organization Structure of the Branch.....................................................................................65 Centralized Decision Making...............................................................................................66 Downward Communication.................................................................................................66 Chain of Command.............................................................................................................67

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Page |3 Authority and Responsibility................................................................................................67 Delegation..........................................................................................................................67 ...........................................................................................................................................68 Departments of the Branch....................................................................................................68 Clearing House Department................................................................................................69 Remittance Department......................................................................................................73 Account Opening Department.............................................................................................75 Cash Department................................................................................................................76 Deposits Department..........................................................................................................78 Advances Department........................................................................................................79 Computer Department........................................................................................................80 Online branches...............................................................................................................81 Batch Branches................................................................................................................81 Manual Branches.............................................................................................................81 Pension Disbursement Department.....................................................................................82 Accounts Department.........................................................................................................83 Structure of Branchs Accounts Department...........................................................................85 Bank Accounting Operations..................................................................................................89 Role Of CFO (Chief Financial Officer)......................................................................................91 Use of Electronic Data in Decision Making..............................................................................95 Information System Resources of NBP.................................................................................96 People Resources.............................................................................................................96 Hardware Resources........................................................................................................96 Software Resources.........................................................................................................97 Data Resources...............................................................................................................97 Network Resources..........................................................................................................97 Sources of Funds....................................................................................................................98 Generation of funds.............................................................................................................101 Allocation of Funds...............................................................................................................105 Critical Analysis (Theory vs Practical) ..................................................................................109 Balance Sheet......................................................................................................................111 Income Statement................................................................................................................112 Financial Statements Analysis..............................................................................................113 Ratio Analysis...................................................................................................................114 Profitability Ratios..........................................................................................................115

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Page |4 Liquidity Ratios..............................................................................................................120 Debt Ratios....................................................................................................................125 Capital Adequacy Ratios................................................................................................128 Operating Performance Ratios.......................................................................................129 Horizontal Analysis............................................................................................................132 Horizontal Analysis of Balance Sheet.................................................................................133 Horizontal Analysis of Income Statement..........................................................................142 .........................................................................................................................................144 .........................................................................................................................................144 Vertical Analysis...............................................................................................................151 Vertical Analysis of Balance Sheet.....................................................................................152 Vertical Analysis of Income Statement..............................................................................161 ............................................................................................................................................163 Bank Analysis with refernce to commercial Banks listed on stock exchange.........................170 Future prospects of National Bank of Pakistan......................................................................173 Short falls/ Weaknesses of National Bank of Pakistan...........................................................175 Conclusions..........................................................................................................................178 Recommendations...............................................................................................................179 References...........................................................................................................................181

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OBJECTIVES OF STUDYING THE ORGANIZATIONThe primary purpose of this study is to fulfillment of the requirements for the degree of MBA (Banking & Finance).For this connection each student of this particular course is required to undertake training in a relevant organization selected by them, for a period of 6-8 weeks. The secondary purpose of this internship is to understand how the theoretical knowledge can be applied to the practical situations and examine an organizations financial issues and identify its opportunities/ problems and also suggest corrective measures. This internship is also very necessary to gain confidence and become aware of the mechanism of an organization. As an internee I want to achieve following objectives during my internship and organization study: 1. To familiarize with a business organization. 2. To familiarize with the different departments in the organization and their functioning. 3. To enable myself to understand how the key business process are carried out in organization. 4. To understand how information is used in an organization for decision making at various levels. 5. To relate theory with practice.6. 7. 8.

I was also keen to gain professional experience in an actual testing environment. I want to develop my skills in the application of theory to practical work situations. To develop my attitude conducive to effective interpersonal relationships.

9. To acquire good work habits and sense of responsibility. 10. To enhance my learning experience by application of fundamental concepts previously learned. 11. To observe, analyze and interpret the relevant data competently and in a useful manner.

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my interpersonal communication.

13. I want to enhance my knowledge of the discipline of banking administration.

BRIEF HISTORY OF NATIONAL BANK OF PAKISTANThe history of National Bank of Pakistan is part of Pakistans struggle for economic independence. National Bank of Pakistan was established on November 9, 1949 under the National Bank of Pakistan Ordinance, 1949 in order to cope with the crisis conditions which were developed after trade deadlock with India and devaluation of Indian Rupee in 1949. Initially the Bank was established with the objective to extend credit to the agriculture sector. The normal procedure of establishing a banking company under the Companies Law was set aside and the Bank was established through the promulgation of an Ordinance, due to the crisis situation that had developed with regard to financing of jute trade. The Bank commenced its operations from November 20, 1949 at six important jute centers in the then, East Pakistan and directed its resources in financing of jute crop. The Banks Karachi and Lahore offices were subsequently opened in December 1949. The National Bank of Pakistan came forward to establish its offices in the Cotton growing areas and extended credit facilities liberally in order to restore stability to the market. In 1951, the country was once again faced with a crisis in the cotton trade when prices was crashed and touched the lowest level since independence following the cessation of hostilities in Korea. The bank in collaboration with the cotton board provided the necessary Credit facilities to the trade and the crisis was tided over. The nature of responsibilities of the Bank is different and unique from other banks/financial institutions. The Bank acts as the agent to the State Bank of Pakistan for handling Provincial/Federal Government Receipts and Payments on their behalf. The Bank has also played an important role in financing the countrys growing trade, which has expanded through the years as diversification took place.1 The National Bank of Pakistan has its headquarters in Karachi, Pakistan. The bank operates 1249(2008) branches in Pakistan and 22(2008) overseas branches. Under a trust Deed, the bank also provides services as trustee to National Investment Trust (NIT) including safe custody of

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securities on behalf of NIT. The National Bank of Pakistan has assets worth Rupees 737976.44 million on September 30, 2008.2 National Bank of Pakistan is today a progressive, efficient, and customer focused institution. It has developed a wide range of consumer products, to enhance business and cater to the different segments of society. Some schemes have been specifically designed for the low to middle income segments of the population. These include NBP Karobar, NBP Advance Salary, NBP Saibaan, NBP Kisan Dost, and NBP Cash n Gold. The National Bank of Pakistan has implemented special credit schemes like small finance for agriculture, business and industries, administrator to Qarz-e-Hasna loans to students, self employment scheme for unemployed persons, public transport scheme. The Bank has expanded its range of products and services to include Shariah Compliant Islamic Banking products. For the promotion of literature, NBP recently initiated the Annual Awards for Excellence in Literature. NBP will confer annual awards to the best books in Urdu and in all prominent regional languages published during the defined period. Patronage from NBP would help creative work in the field of literature. The Bank is also the largest sponsor of sports in Pakistan. It has provided generously to philanthropic causes whenever the need arose. It has taken various measures to facilitate overseas Pakistanis to send their remittances in a convenient and efficient manner. In 2002 the Bank signed an agreement with Western Union for expanding the base for documented remittances. More recently it has started Electronic Home Remittances Project. This project introduces technology based system to handle inward remittances efficiently, by ensuring that the Bank's branches keep a track of the remittance received from abroad till its final receipt. A number of initiatives have been taken, in terms of institutional restructuring, changes in the field structure, in policies and procedures, in internal control systems with special emphasis on corporate governance, adoption of Capital Adequacy Standards under Basel II framework, in the up gradation of the IT infrastructure and developing the human resources. National Bank has earned recognition and numerous awards internationally. It has been the recipient of The Bank of the Year 2001, 2002, 2004 and 2005 Award by The Banker Magazine, the Best Foreign Exchange Bank Pakistan for 2004, 2005, 2006 and 2007, Global Finance, Best

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Emerging Market Bank from Pakistan for the year 2005, Global Finance, Kisan Time Awards 2005 for NBP's services in the agriculture field. It is listed amongst the Region's largest banks and also amongst the largest banks in South Asia 2005, The Asian Banker. It has also been presented a Recognition Award 2004 for having a Gender Sensitive Management by WEBCOP AASHA besides other awards.3 The precise summary of National Bank of Pakistan regarding its countrywide and overseas operations is as fallows: 1949 National Bank of Pakistan (NBP) was established under the National Bank of Pakistan Ordinance 1949 and was 100% govt.-owned. NBP acted as an agent of the Central Bank wherever the State Bank did not have its own Branch. It also undertook Government Treasury operations. Its first branches were in jute growing areas in East Pakistan. Offices in Karachi and Lahore followed. 1950 NBP established a branch in Jeddah, Saudi Arabia. The Bank in 1950 had one subsidiary The Bank of Bahawalpur on December4, 1947 by the former Bahawalpur State 1955 By this time NBP had branches in London and Calcutta. 1957 NBP established a branch in Baghdad, Iraq. 1962 NBP established a branch in Dar-es-Salaam, Tanganyika. 1964 The Iraqi government nationalized NBP's Baghdad branch. 1965 The Indian government seized the Calcutta branch on the outbreak of hostilities between India and Pakistan. 1967 The Tanzanian government nationalized the Dar-Es-Salaam branch. 1971 NBP acquired Bank of China's two branches, one in Karachi and one at Chittagong. At separation of East Pakistan NBP lost its branches there. NBP merged with Eastern Mercantile Bank and with Eastern Bank Corporation.

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1974 The government of Pakistan nationalized NBP. As part of the concomitant consolidation of the banking sector, NBP acquired Bank of Bahawalpur (est. 1947).

1977 NBP opened an offshore brain Cairo. 1994 NBP amalgamated Mehran Bank (est. 1991). 1997 NBP's branch in Ashgabat, Turkmenistan commenced operations. 2000 NBP opened a representative office in Almaty, Kazakhstan. 2001 State Bank of Pakistan and Bank of England agree to allow only 2 Pakistani banks to operate in the UK. NBP and United Bank agreed to merge their operations to form Pakistan International Bank, of which NBP would own 45% and United Bank 55%.

2003 NBP received permission to open a branch in Afghanistan. 2005 NBP closed its offshore branch in Cairo.

NATURE OF NATIONAL BANK OF PAKISTANNational Bank of Pakistan was incorporated in Pakistan under the National Bank of Pakistan Ordinance, 1949 and is listed on all the stock exchanges in Pakistan. The bank is engaged in providing commercial banking and related services in Pakistan and overseas. The bank operates 1,249 (2007:1,232) branches in Pakistan and 22 (2007:18) overseas branches (including the Export Processing Zone branch, Karachi). Under a Trust Deed, the bank also provides services as trustee to National investment Trust (NIT) including safe custody of securities on behalf of NIT.4 The nature of responsibilities of the Bank is different and unique from other banks/financial institutions. The bank also handles treasury transactions for the Government of Pakistan as an agent to the State Bank of Pakistan for handling provincial/Federal Government receipts and payments on their behalf. The National Bank of Pakistan has also played an important role in financing the countrys growing trade, which has expanded through the years as diversification took place. The bank is providing all banking services of mercantile and commercial banking permissible in the country, which include:

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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. Receiving of bonds, valuables, etc. for safe custody. Carrying on agency business for any description other than managing agent, on behalf of clients including Government and local authorities.

Generating, undertaking, promoting, etc. of issue of shares and, bonds etc. Transacting guarantee and indemnity business. Undertaking and executing trusts. Joint venturing with foreign dealers, agents and companies for its representation abroad. Participating in World Bank and Asian Development Banks lines of credit. Providing personalized Hajj services to intending Hajjis.

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BUSINESS VOLUME OF NATIONAL BANK OF PAKISTANRupees in Millions Year Total Assets Deposits Advances Reserves Investments

2004 553,231,46 7 465,571,71 7 220,794,07 5 10,813,914 149,350,09 6

2005 577,719,114 463,426,602 268,838,779 13,536,041 156,985,686

2006 645,132,7 11 501,872,2 43 316,110,4 06 13,879,26 0 139,946,9 95

2007 762,193,5 93 591,907,4 35 340,677,1 00 15,772,12 4 210,787,8 68

2008 817,758,32 6 624,939,01 6 412,986,86 5 19,941,047 170,822,4 91

Horizontal Analysis (%)Total Assets Deposits Advances Reserves Investments100 100 100 100 100 104 100 122 125 105 117 108 143 128 94 138 127 154 146 141 148 134 187 184 114

The business volume of National Bank of Pakistan is stated in terms of total assets, deposits, advances, reserves and investments. To analyze the trend in these items the Horizontal analysis of each item is calculated.

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A NALYSISThe Total Assets of National Bank of Pakistan fluctuates during all years as they show an increasing trend. The total assets are increased 4 % in 2005 and 17 % in 2006. The year 2007 represents second highest percentage on account of total assets as it was increased to 38%. There was an increase of 48 % in 2008 as compare to base year and 10% as compare to 2007.

ANALYSIS The deposits and other accounts of National Bank of Pakistan show a mixed trend during all years. In the year 2005, the deposits were increased very marginally, with the year 2006 represents an increase of 8%. The deposits are increased 27% & 34% in the years 2007 and 2008 respectively.

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ANALYSIS The advances made by National Bank of Pakistan shows an increasing trend in all years as compare to base year. This implies that National Bank of Pakistan is keener to advance money to lenders. The advances were increased 22 % in the year 2005 and 43 % in 2006 as compare to base year. The year 2007 represents an increase of 54 % and 2008 represents highest percentage among all years that is 87 % as compare to base year.

ANALYSIS The Banks reserves are banks' holdings of deposits in accounts with their central bank plus currency that is physically held in bank vaults (vault cash). The reserves of National Bank of Pakistan fluctuate during all years as they show an increasing trend. The reserves are increased 25 %, 28 % & 46 % in the years 2005, 2006 & 2007 respectively. The year 2008 represents highest increasing percentage of 84% as compare to base and previous years.

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ANALYSIS The investments made by National Bank of Pakistan fluctuate during all years. There was an increase of 5 % in 2005. The year 2006 indicates a decrease of 6% in investments. The year 2007 represents an increase of 41 %, highest among all years. The investments are increased 14 % in 2008 as compare to base year; however investments are decreased 27 % as compare to the year 2007.

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BRANCH NETWORK OF NATIONAL BANK OF PAKISTANWith the geographical development of its branches, the National Bank of Pakistan has been able to extend its services to a much larger number of Pakistanis all over the country. Today the Bank has more than 8.8 million accounts & Bank maintains its presence in all the major financial centers of the world through its 22 (2008) overseas branches and 5 representative offices. Of these, three representative offices have recently been set up at Tashkent (Uzbekistan), Baku (Azerbaijan) and Almaty (Kazakhstan) to take advantage of the emerging opportunities in CIS countries. Banks role Apart from having a vast branch network, Bank is at the forefront in the acquisition and application of new technologies in every aspect of its banking facilities. It has acquired leased telephone lines for on-line banking. The Bank has 12 Regional Computer Centers to cover various on-line and batch system requirements of branches and controlling offices. Presently the National Bank of Pakistan is divided into various Groups headed by SEVPs/EVPs. Its field operations are controlled by 29 regions ( Annexed II) reporting to as many Regional chiefs, who control 40 zones and 15 single Branch zones headed by Zonal Chiefs; 12 corporate branches and 1249 domestic branches headed by Branch Managers. The bank has 12 SWIFT local centers. Apart from having a vast branch network, Bank is at the forefront in the acquisition and application of new technologies in every aspect of its banking facilities. It has acquired leased telephone lines for on-line banking. Bank has also a presence on the internet. The National Bank of Pakistan has 156 online branches throughout the country. It has modernized its services by installing Automated Teller Machines (ATMs) called CASH LINK at selected branches.

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The Bank's organizational structure reflects the three levels at which it operates: international, national and local. The Head Office formulates and implements the strategic, management and operational policies. The Bank's geographical organization consists of branches located in the regional capitals and in some provincial capitals. The branches' activities relate to the State treasury service, payment system services, currency circulation, banking and financial supervision, and the analysis of economic and financial developments at the local level. The Bank has representative offices abroad, in London, New York and Tokyo; a number of officers are seconded as financial experts to Italian embassies and consulates. The Bank has representative offices in Beijing, Tashkent, Chicago and Toronto. It has agency arrangements with more than 3000 correspondent banks worldwide. Its subsidiaries are Taurus Securities Ltd, NBP Exchange Company Ltd, NBP Capital Ltd, NBP Modaraba Management Company Ltd, and CJSC Bank, Almaty, Kazakhstan. The Bank's joint ventures are, United National Bank (UK), First Investment Bank and NAFA, an Asset Management Company (a joint venture with NIB Bank & Fullerton Fund Management of Singapore).5 The Branch network of National Bank of Pakistan is divided into following categories

ATM network ( Total ATMs 101 & Total ATMs machines 104) Domestic network ( 1249 Branches) Islamic network ( 5 Branches) Online network ( 156 Branches) Overseas network ( 29 Branches) Swift network ( 12 Branches) Customer Facilitation Centers (6 Customer Facilitation Centers) Agriculture branches ( 825 Branches)

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NUMBER OF EMPLOYEES OF NATIONAL BANK OF PAKISTANPermanent Temporary/ On Contractual basis Bank's own staff strength at the end of the year Outsourced Total Staff Strength 13237 842 14079 2350 16429

An employee may be defined as: "A person in the service of another under any contract of hire, express or implied, oral or written, where the employer has the power or right to control and direct the employee in the material details of how the work is to be performed." 6An employee contributes labor and expertise to an endeavor. Employees perform the discrete activity of economic production. Of the three factors of production, employees usually provide the labour. Specifically, an employee is any person hired by an employer to do a specific "job". In most modern economies, the term employee refers to a specific defined relationship between an individual and a corporation, which differs from those of customer, or client. The relationship between National Bank of Pakistan and its employees is usually handled through the Human Resource Management & Administration Group & Employees benefit disbursement & trustee

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division. These groups handle the incorporation of new hires, and the disbursement of any benefits which the employee may be entitled, or any grievances that employee may have. There are differing classifications of workers within National Bank of Pakistan, these are: Permanent Temporary / On Contractual Outsourced

The Employees of National Bank of Pakistan are organizing into trade unions, which represent most of the available work force in National Bank of Pakistan. These trade Unions utilize their representative power to collectively bargain with the management of bank in order to advance concerns and demands of their membership.

PRODUCT LINESThe most precise definition of product is anything capable of satisfying needs, including tangible items, services and ideas. In marketing, a product is anything that can be offered to a market that might satisfy a want or need.7 Since 1575, the word "product" has referred to anything produced. Since 1695, the word has referred to "thing or things produced. The economic or commercial meaning of product was first used by political economist Adam Smith. In general usage, product may refer to a single item or unit, a group of equivalent products, a grouping of goods or services, or an industrial classification for the goods or services. The consumer banking products include personal accounts, credit cards, loans, investment products, treasury products and many more. The National Bank of Pakistan offering for sale several related products individually, which is commonly known as product lining. A product line is defined as A group of products that are closely related because they function in a similar manner, are sold to the same customer groups, are marketed through same types of outlets, or fall within the given price ranges. 8 The followings are the main consumer banking products of NBP.

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DEPOSITSThe National Bank of Pakistan offers to their clients a variety of Deposit Schemes with personalized services at competitive rates of interest. Any Pakistani citizen can open his/her account for any deposit scheme at any of its Branches strategically located throughout Pakistan. The Bank with its huge network of 1243 branches garners savings from both the rich and the poor in urban as well as rural areas. Even a poor farmer in a remote village, with his meager annual income, feels secure to safe keep his minuscule savings in National Bank of Pakistan, Because National Bank of Pakistan has a long heritage of trust and professional commitment.

CURRENT DEPOSITSThese are payable to the customer when ever they are demanded. When a banker accepts a demand deposit, he incurs the obligation of paying all cheques etc, drawn against him to the extent of the balance in the account. Because of their nature, these deposits are treated as current liabilities by the banks. Bankers in Pakistan do not allow nay profit on these deposits, and customers are required to maintain a minimum balance, failing which incidental charges are deducted from such accounts. This is because Current Deposits may be withdrawn by the depositors at any time, and as such the bank is not entirely free to employ such deposits.9 Current Accounts/ Basic Banking accounts are opened, on proper introduction and submission of required documents along with initial deposit prescribed from time to time. Basic banking accounts are opened for an individuals (single or joint) only whereas current accounts are opened for individuals (single or joint) Charitable institution, provident and other funds of benevolent nature of local bodies, autonomous corporations, companies, associations, educational institutions, firms etc. and in all other cases where the accounts are to opened under the order of a competent court of law. No profit is paid on the balances of current/basic banking accounts. The bank is authorized to deduct service charges (incidental charges) on current accounts levied through its half yearly schedule of charges, in case the average balance falls below the minimum balance as prescribed by the bank. No balance maintenance condition is applied on basic banking account.

PLS SAVING DEPOSITSIn Pakistan a Savings Deposits Account can be opened with a very small amount of money, and the depositor is issued a cheque book for withdrawals. Profit is paid at a flexible rate calculated on

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six monthly basis under the Interest Free Banking System. There is no restriction on the withdrawals from the deposit accounts but the amount of money withdraw is deleted from the amount to be taken for calculation of products for assessment of profit to be paid to the account holder. It discourages unnecessary withdrawals from the deposits. In order to popularize the scheme the SBP has allowed the Savings Scheme for school and college students and industrial labour also. The purpose of these accounts is to inculcate the habit of savings in the constituents. As such, the initial deposits required for opening these accounts are very nominal. 10NBP charge Rs.500 for opening of PLS Savings deposits. The silent features of profit and loss sharing and saving accounts of NBP are as fallows 1. These accounts can be opened by individuals in their own single or joint name. The PLS savings account can also be opened for provident fund or other benevolent funds of companies, firms, organizations, NGOs and educational institutions. 2. PLS saving account can be opened with a minimum amount of Rs.500/- only 3. To share in the profit a minimum balance of Rs.500/- must be maintained in the account. The minimum balance on sixth and last of month will qualify for the profits. The profits will be calculated on the basis of monthly minimum balance for the periods of six months i.e. from January to June and July to December 4. The head office of NBP determines the profit or loss on PLS saving deposits and advice its branches the rate and time of distribution of these profits. 5. There shall be no restrictions on maintaining the maximum balance in PLS saving account. 6. On the first day of Ramzan each year the Zakat at the rate of 2.5% will be deducted from these deposits on the balance of that day. But if depositors affix an affidavit of Zakat deduction along with account opening form or he is a non-Muslim, no Zakat will be deducted from his account.

FIXED DEPOSIT ACCOUNT (TIME DEPOSITS)The deposits that can be withdrawn after a specified period of time are referred to as Fixed or Term Deposits. The period for which these deposits are kept by the bank ordinarily varies from three

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months to five years in accordance with the agreement made between the customer and the banker. Profit/Return is paid to the depositors on all fixed or Time deposits, and the rate of profit/Return varies with the duration for which the amount is kept with the banker. By lending out or investing these funds, the bank earns more than the Profit/Return that it has to pay on them to the depositors.11 By giving an advance notice to the bank the deposit can be withdraw from the bank before the expiry of the period. Fixed deposit accounts have higher rate of interest as compare to other accounts. The rate of interest rises with the length of period and the amount of deposit. The bank grants to the depositor a fix deposit (FDR) which is not transferable to any other person. The silent features of fixed deposit account of NBP are as fallows 1. The PLS term deposit are opened for individuals in their own single or joint names, companies firms and other organizations. 2. The PLS term deposit receipt are issued for any amount. There is minimum or maximum limit or deposits in a single term deposit account. 3. PLS term depositors may be allowed some facilities against the security of these receipt credits, after making Lien on the relevant receipt and subject to recovery of service charges. 4. Under term deposit scheme the depositors not cease to earn the profit immediately, after the respective maturity date.

FOREIGN CURRENCY ACCOUNTGovernment of Pakistan has introduced many important reforms in Foreign Exchange Control in the country since February, 1990, for the purpose of strengthening the Foreign Exchange Reserves. One of these reforms relates to foreign currency accounts, which can be opened in United States Dollars, Pound Sterling, Euro and Japanese Yen in any of the authorized branches of commercial banks throughout the country.12 Foreign currency accounts are opened, on proper introduction and submission of required documents along with an initial deposit prescribed from time to time. Rates of return on foreign currency deposits are subject to fluctuation as determined in accordance with State Bank of Pakistan directives and will be paid on six monthly basis whereas the return on term deposit/SNTD will be paid on maturity or as prescribed by SBP. The bank shall have no

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responsibility for or liability to the account holders for any diminution due to taxes imposed or depreciation in the value of funds credited to the account whether due to devaluation or fluctuation in the exchange rate or other wise.

NBP PREMIUM AAMDANINBP Premium aamdani is a retail product of the bank. The amount of investment required for this account is Rs. 20,000/-to Rs. 5,000,000.The investment period is 5 years. Zakat and withholding tax will be deducted as per rules. In NBP premium aamdani, the account holders have benefit of free demand draft, pay order; free cheque book and NBP cash card (ATM+Debit). The Financing facility is available up to 90% of the deposit value.13 Profit paid every period as follows: Period 1st year 2nd years 3rd years 4th years 5th years Profit Rates 7.50% 8.50% 9.50% 10.50% 11%

a) NBP Premium SaverNBP Premium saver is a retail product of the bank. The minimum saving balance of Rs. 20,001 and a maximum balance of Rs. 300,000 are required for opening a premium saver account. Two debit withdrawals allowed in a month and no limit on number of deposit transactions. The profit is calculated monthly and Paid on half yearly basis. Free NBP Cash Card (ATM + Debit) facility is available to account holder.14

NATIONAL INCOME DAILY ACCOUNT (NIDA)The scheme of National income daily account 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. Deposits in the NIDA accepted on the condition that the depositor shall always maintain a minimum balance as prescribed by the bank in his account. In the event however, that any depositor wishes to withdraw the amount and the balance in his account is less than the required amount, the account will be converted to the ordinary PLS SB account for the purpose of calculating profit. An example of how the NIDA accounts are maintained is shown on the next page.

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R ATES

ON

N ATIONAL

INCOME DAILY ACCOUNT

From Rs 2/- million to Rs 50/- the rate is 1.4%. From Rs50/- million but less than Rs 500/-million, the rate is 1.5%. From Rs 500/- million but below Rs 1000/- the rate is 1.6%. From Rs 1000/- and above the rate is 1.75%.

S ALIENT F EATURES 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.

NIDA 1Date Description of Transaction C Debit (-) Credit (+) Balance Days Products

01/05/2008 05/05/2008 08/05/2008 11/05/2008 15/05/2008 18/05/2008 20/05/2008 22/05/2008 23/05/2008

Balance Cash Cash Transfer Cash Cash Cash Cash Cash700,000 1,000,000 3,000,000 500,000

10,000,000 10,000,000 9,500,000 100,000 9,600,000 81,600,000 78,600,000 160,200,000 159,200,000 5,000,000 164,200,000 163,500,000 75,000,000 84,600,000 4 3 3 4 3 2 2 1 38000000 28800000 253800000 326400000 480600000 318400000 328400000 163500000

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25/05/2008 27/05/2008 31/05/2008 01/06/2008 06/06/2008 10/06/2008

Cash Cash Transfer Cash Transfer Cash9,870,000 2,100,000 300

10,000 500,000

163,510,000 163,509,700 164,009,700 161,909,700

2 2 4 1 5 4

327020000 327019400 656038800 161909700 989548500 752158800

36,000,000 197,909,700 188,039,700

ADVANCESNational Bank of Pakistan plays a pivotal role in translating the government's development plans in terms of growth in industrial, commercial and agricultural sectors in Pakistan. Accordingly the Bank has formulated its Credit Policy under the guidelines of SBP-the Central Bank of Pakistan.

NBP SAIBAANThe NBP Saibaan is retail product of the bank. It has different product items which are home purchase, home construction, home renovation and purchase of land plus construction. If anyone has a Home Finance Facility outstanding with another bank he can have it transferred to NBP through a hassle-free process. 15 A brief description of these products is as fallowsTYPE OF ADVANCE Home Purchase (House or Apartment) Home Construction Home Renovation Purchase of land Plus Construction Financing Amount Rs. 35 Million Rs. 35 Million Rs. 15 Million Rs.35 Million Financing Period 3 to 20 years 3 to 20 years 3 to 15 years 3 to 20 years Debt to equity Ratio 85:15 (maximum) 85:15 (maximum) 80:20 (maximum) 80:20 (maximum)

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NBP ADVANCE SALARYThe NBP Advance salary has been the flag-ship product for NBP. NBP Advance Salary, the leading personal loan product of the country, is maintaining its inimitability ever since it was launched. This was only possible due to its swift growth and remarkable loan disbursement of over 118 billion.16 You can avail up to 20 net take home salaries with easy repayment installments. Its hassle free acquisition with no prior formalities and easy availability in a short turn around time is attributed as the most distinguishing features of the product. The product is offered countrywide. The terms and conditions of NBP Advance salary is shown on next page:

T ERMS & C ONDITIONSEligibility Repayment Maximum Loan Amount Security Permanent Employees of Govt., Semi-Govt., Autonomous, Semi Autonomous, Local & other bodies who are maintaining their Salary A/Cs at NBP. Direct deduction from Salary A/C Rs. 490,000/Employer will provide undertaking that borrowers Salary and end of service benefits will route through his/her Salary A/C 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. Max. Repayment Period Advance in terms of # of net take home salaries Markup Rate Three (3) Undated Cheques 5 years (60 months) Up to 20 net take home salaries 15 % (Based on diminishing balance method)

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Processing Fee Verification Charges Life Insurance Documentation Charges Contact Remaining Service Age Debt Burden Minimum net take home salary

1% of Loan Amount Rs 500/No Insurance of any kind. at actual Your Salary disbursing NBP Branch. At the time of approval and disbursement the applicants remaining service age should be 6 months after maturity of the loan 50% no minimum take home requirement

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NBP CASH & GOLDWith NBPs Cash & Gold, the customers meet their need for ready cash against their idle gold jewelry. The rate of mark up is 13% p.a. This product has following features17 Facility of Rs. 7,000 against each 10 grams of net contents of gold No maximum limits of cash Repayment after one year Only gold ornaments acceptable Weight and quality of gold to be determined by NBP's appointed schroffs No penalty for early repayment

STUDENTS LOAN SCHEMEPursuant to the announcement made by the Federal Finance Minister in his 2001-2002 budget speech, a Student Loan Scheme (SLS) for Education was launched by the Government of Pakistan in collaboration with major commercial banks of Pakistan (NBP, HBL, UBL, MCB and ABL). Under the Scheme, financial assistance is provided by way of Interest Free Loans to the meritorious students who have financial constraints for pursuing their studies in Scientific, Technical and Professional education within Pakistan. The Scheme is being administered by a high powered committee comprising Deputy Governor, State Bank of Pakistan, Presidents of the commercial banks and representative of Ministry of Finance, Government of Pakistan. 18

NBP KAROBAR- PRESIDENTS ROZGAR SCHEMEThe solution of Pakistans major socio-economic problems primarily lies in the development and growth of small & micro businesses. These will not only provide employment opportunities to ever-growing population demand but will also become the catalyst for breaking the vicious circle of poverty. In this regard, NBP has developed a full range of Products under the Presidents Rozgar Scheme with a brand name of NBP KAROBAR. The scheme will be offered to eligible

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young and literate citizens of Pakistan, falling within an age group of 18-40 years having a minimum qualification of Matriculation (except for females in the PCO/Tele-center product). The eligible borrowers will be required to make a down payment of 15%. Asset and Life & Disability insurances will be mandatory under this scheme. The 15% down payment will include 1st years asset insurance premium. However, the cost of life and disability insurance will be borne by GOP. The mark-up rate for the 1st year will be 12% and for the subsequent years it will be 1 year KIBOR + 2%. Fifty percent (50%) of this rate will be paid by the customer i.e. 6% and the balance of 6% will be borne by GOP. Additionally, first 10% of the losses under the scheme will be takenup by GOP. Initially, under the Presidents Rozgar scheme, NBP will offer following products: a) NBP Karobar Utility Store (under a Franchise with Utility Stores Corporation) b) NBP Karobar Mobile General Store (without USC Franchise) c) NBP Karobar Transport d) NBP Karobar PCO e) NBP Karobar Tele-center

NBP K AROBAR U TILITY S TOREThe product has been designed in collaboration with UTILITY STORES CORPORATION OF PAKISTAN (USC) to provide financing facility of an average amount of Rs.100, 000/- for a maximum period of five years with grace period of three months. This is available to all eligible citizens of Pakistan for setting-up small-scale Retail Outlet or Mobile Utility Store. The USC will give its franchise to qualifying Pakistani citizens. Following two financing options are available under this product:

1. NBP KAROBAR Utility Store (Shop)The Financing facility is available to set-up a small scale Retail Outlet (Utility Store in a shop) for purchase of furniture & fixtures. This is also applicable on payment of security deposit / advance rent under franchise from the USC. However, stocks will be purchased by the customer.

2. NBP KAROBAR Mobile Utility Store

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Financing facility available to purchase a 2/3 wheeler, 4 stroke Petrol/CNG/LPG Vehicle (Auto Scooter / Motorcycle Rickshaw) with attached Loader body (Thehla type) under franchise from the USC to carry utility goods for retail sale ideally in areas where accessibility to conventional utility stores is difficult.

NBP K AROBAR M OBILE G ENERAL S TORE ( WITHOUT USC F RANCHISE)This financing program has been designed on the similar pattern of Mobile Utility Store. The only difference is that the borrower will have the liberty of procuring stock/supplies/grocery items from open market. Under this product the average loan size of Rs.100, 000/- will be given for a maximum period of five years with a grace period of three months.

NBP K AROBAR T RANSPORTThe NBP Karobar Transport is designed to finance 2/3 wheeler, 4 stroke Petrol/CNG/LPG Vehicle (Auto Scooter / Motorcycle Rickshaw) to the eligible citizens of Pakistan for providing less expensive environment friendly transport facility. Under this product average loan size of Rs.100, 000/- will be provided for a maximum period of five years with a grace period of three months.

NBP K AROBAR PCOThis product is designed to finance setting-up a PCO. NBP will be providing financing for the purchase of Mobile/Wireless Telephone Set with connection, Credit Balance. The average amount of financing under this product will be Rs.5, 000/- for a maximum period of two years with a grace period of three months.

NBP K AROBAR T ELE - CENTERThis product is specially designed to finance setting-up a Tele-center. NBP will be providing financing for the purchase of Mobile/Wireless Telephone Set with connection, Computer, Printer and Fax machine cum Photocopier etc. to establish tele-center on a rented shop or owned premises. The average amount of financing under this product will be Rs.50, 000/- for a maximum period of two years with a grace period of three months.

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CORPORATE ADVANCESCASH FINANCEThis is a very common form of borrowing by commercial and industrial concerns and is made available either against pledge or hypothecation of goods, produce or merchandise. In cash finance, a borrower is allowed to borrow money from the banker up to a certain limit, either at once or as and when required. The borrower prefers this form of lending due to the facility of paying markup/services charges only on the amount he actually utilizes. If the borrower does not utilize the full limit, the banker has to lose return on the un-utilized amount. In order to offset this loss, the banker may provide for a suitable clause in the cash finance agreement, according to which the borrower has to pay markup/service charges on at least on self or one quarter of the amount of cash finance limit allowed to him even when he does not utilize that amount.

RUNNING FINANCE/ OVERDRAFTThis is the most common form of bank lending. When a borrower requires temporary accommodation his banker allows withdrawals on his account in excess of the balance which the borrowing customer has in credit, and an overdraft thus occurs. This accommodation is generally allowed against collateral securities. When it is against collateral securities it is called Secured Overdraft and when the borrowing customer cannot offer any collateral security except his personal security, the accommodation is called a Clean Overdraft. The borrowing customer is in an advantageous position in an overdraft, because he has to pay service charges only on the balance outstanding against him. The main difference between a cash finance and overdraft lies in the fact that cash finance is a bank finance used for long term by commercial and industrial concern on regular basis, while an overdraft is a temporary accommodation occasionally resorted to.

DEMAND FINANCEWhen a customer borrows from a banker a fixed amount repayable either in periodic installments or in lump sum at a fixed future time, it is called a loan. When bankers allow loans to their

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customers against collateral securities they are called secured loans and when no collateral security is taken they are called clean loans. The amount of loan is placed at the borrowers disposal in lump sum for the period agreed upon, and the borrowing customer has to pay interest on the entire amount. Thus the borrower gets a fixed amount of money for his use, while the banker feels satisfied in lending money in fixed amounts for definite short periods against a satisfactory security.

REMITTANCESDEMAND DRAFTSDrafts drawn by one branch on another branch or on the Head Office of same bank or vice versa, are not cheques or bills, as these have no distinct drawer and drawee. Section 85-A reads: Where any draft, that is, an order to pay money, drawn by one office of bank upon another office of the same bank for a sum of money payable to order on demand, purports to be issued by or on behalf of the payee, the bank is discharged by payment in due course. Bankers drafts payable to order on demand are within the protection of Sections 10 and 131-A of the Negotiable Instruments Act. However, if a demand draft drawn on a bank by its own branch bears a forged endorsement, the person in possession of it cannot compel that bank to pay it. As far as possible the bankers draft should be crossed and it should never be drawn payable to bearer. When a person requires a draft he should be asked to complete the prescribed application form in which he should state the amount of the draft, the name of the payee, and the place of payment. This application form should be signed by the purchaser or by those persons who have been duly authorized to act on his behalf. When a customer requests his banker to provide him with a bankers draft, the amount of which is to be debited to his account, he should enclose with his written request a cheque covering the amount of the required draft and other charges etc. payable to banker.19 The National Bank of Pakistan provides demand drafts at very reasonable rates with safety, speedy and reliable way to transfer money. Any person whether an account holder of the bank or not, can purchase a Demand Draft form a bank.

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TRAVELERS CHEQUESThey are generally issued for the convenience of person travelling abroad, but some Pakistani banks issue them in Pakistan currency also for use within the country as well. Before issuing, the bankers receive an amount equal to the face value of the cheques, and also charge a small commission. The travelers cheques are for fixed amount and are treated as Order cheques payable only to the purchaser whose specimen signature appears on each travelers cheque itself. Foreign currency travelers cheques are issued and encashed in accordance with the provisions of the Exchange Control Regulation Act, 1947. While making payment, the paying banker must insist that the holder signs in his presence.20 The National Bank of Pakistan provides their services for travelers cheque at very reasonable and competitive rates. It has following features Negotiability Validity Availability Encashment Limitation Safety Pak Rupees Travelers Cheques are a negotiable instrument There is no restriction on the period of validity At 700 branches of NBP all over the country At all 400 branches of NBP No limit on purchase NBP Travelers Cheques are the safest way to carry our money

LETTER OF CREDITLetters of credit are very useful instruments in facilitating commercial relations between businessmen at various places. Letter of credit state the limit of the credit and the time during which it is held at the disposal of the grantee, but they are neither negotiable nor transferable. Letter of credit may be revocable. There are many kinds of letter of credit such as Revolving credit, Back to Back credit, Claused credit etc.21 NBP is committed to offering its business customers the widest range of options in the area of money transfer. If you are a commercial enterprise then our Letter of Credit service is just what you are looking for. With competitive rates, security, and ease of transaction, NBP Letters of Credit are the best way to do your business transactions.

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FOREIGN REMITTANCESTo facilitate its customers in the area of Home Remittances, National Bank of Pakistan has taken a number of measures to: Increase home remittances through the banking system. Meet the SBP directives/instructions for timely and prompt delivery of remittances to the beneficiaries. The new features of NBP foreign remittances include: The existing system of home remittances has been revised/significantly improved and welltrained field functionaries are posted to provide efficient and reliable home remittance services to nonresident Pakistanis at 15 overseas branches of the Bank besides United National Bank (the joint venture between NBP and UBL in UK)., and Bank Al-Jazira, Saudi Arabia. Zero Tariffs: NBP is providing home remittance services without any charges. Strict monitoring of the system is done to ensure the highest possible security. Special courier services are hired for expeditious delivery of home remittances to the beneficiaries.

SWIFT SYSTEMThe SWIFT system (Society for Worldwide Inter bank Financial Telecommunication) has been introduced for speedy services in the area of home remittances. The system has built-in features of computerized test keys, which eliminates the manual application of tests that often cause delay in the payment of home remittances. The SWIFT Center is operational at National Bank of Pakistan with a universal access number NBP-PKKA. All NBP overseas branches and overseas correspondents (over 450) are drawing remittances through SWIFT. Using the NBP network of branches, we can safely and speedily transfer money for our business and personal needs.

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MAIL TRANSFERA Mail Transfer is a form of remittance in which the amount remitted by a customer or a noncustomer is directly credited to the account of the beneficiary with another branch. 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. When the money is not required immediately, the remittances can also be made by mail transfer (MT). Here the selling office of the bank sends instructions in writing by mail to the paying bank for the payment of a specified amount of money. Debiting to the buyers account at the selling office and crediting to the recipients account at the paying bank make the payment under this transfer. NBP taxes mail charges from the applicant where no excise duty is charged. Postage charges on mail transfer are actual minimum Rs. 40/- if sent by registered post locally Rs.40/- if sent by registered post inland on partys request.

TELEGRAPHIC TRANSFERTelegraphic Transfer is a form of remittance, which is advised by telegram, telex or fax machines. The fundamental principles of such transfer are otherwise identical with the Mail Transfer. It is the message, which is sent from one branch to another on the order of payer to payee through wire. It is one of the quickest means to transfer fund through the use of telex/fax/internet or cable. Payment to the beneficiary is affected directly by the drawee office upon identification or through credit into beneficiarys bank account. As such remitting office is not required to issue any instrument payment to the remitter for delivery to the beneficiary.

PAY ORDERNBP 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 some one want a duplicate of payment order they charges Rs 100/- for NBP account holders and Rs 150/- for non account holders.

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MISCELLANEOUSLOCKERSNational of Pakistan also provides lockers facility in the country. The lockers issued only to the depositors. No lockers are issued to any unknown person. The dual control system is used for lockers. The officer has master key to apply on the locker but he cannot open the locker of any person. The locker holder provides the bank has specimen signature. Whenever the locker holders come to open the locker, his signatures are verified by the officer and then will be able to open his locker. If the key of the locker is lost company providing these lockers breaks the locker and new lock is fitted in its locker and lock is destroyed in the presence of the locker holder and bank charges RS 1200 for that. In case the locker holder dies, the court opens his locker in the presence of his heir as mentioned in his will or and his belongings are given to them and the locker is closed.

NBP CASH CARDNBP Cash Card is a 24-hour direct access ATM/Debit card to your bank account, which lets you pay directly from your account as an alternative payment method to cash. The transaction is authorized and processed by entering PIN. The NBP Cash Card holders are able to transact at any of the 4000 + Merchants where Orix logo is displayed and can withdraw cash from NBP, 1-Link & M-NET ATMs across the country. The followings are the main features of this product: You won't need to carry a lot of cash with you every time you go out. Secure and Safe transaction. Account Information on tips (like: Mini Statement, Balance Inquiry, Utility Bill Payment etc.)

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Enable To Withdraw Cash From 1-Link ATMs / MNET ATMs. Enable to Make Purchases from Around 4000 POS (Merchants) Countrywide including 2500+ POS in Karachi.

No Card Issuance Fee for first 12 Months

INTERNATIONAL BANKINGNational 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, the Bank has recently set up the Financial Institution Wing, which is placed under the Risk Management Group. The role of the Financial Institution Wing is: To effectively manage NBP's exposure to foreign and domestic correspondence Manage the monetary aspect of NBP's relationship with the correspondents to support trade, treasury and other key business areas, thereby contributing to the bank's profitability Generation of incremental trade-finance business and revenues

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ORGANIZATIONAL STRUCTURE OF NATIONAL BANK OF PAKISTANA well-developed and properly coordinate structure is an important requirement for the success of any organization. It provides the basic framework within which functions and procedures are performed. Any organization needs a structure, which provides a framework for successful operations. The operation of an organization involves a number of activities, which are related to decision making, and communication of these decisions. These activities must be well coordinated so that the goals of the organization are achieved successfully. The Organization Structure (Annexed I) shows the internal operations and reporting lines of the National Bank of Pakistan. The bank has clearly defined organizational structure, which supports clear lines of communications and reporting relationships. There exists a properly defined financial and administrative power of various committees and key management personnel, which supports delegations of authority and accountability. The internal operations of the Bank are organized into 15 main departments and divisions headed by senior management of the bank and are report directly to the Board of Directors. The organizational structure of National Bank of Pakistan is centralized because all the decisions of the bank are taken by the top Management. The National Bank of Pakistans Departmental key roles and functions are as follows:

BOARD OF DIRECTORSPursuant to Section 11 of The Banks (Nationalization) Act, 1974, the number of Directors of the Bank shall not be less than 5 and not more than 7, excluding the President. The Federal Government may, if deems necessary, appoint a Chairman of the Board in respect of the Bank. At

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present National Bank of Pakistans Board of Directors consist of 6 Directors and a President who is the Chief Executive of the Bank and presides over the meetings of the Board. The responsibilities of Directors include the followings:221.

The Board of Directors shall assume its role independent of the influence of the Management and should know its responsibilities and powers in clear terms. it should be ensured that the Board of Directors focus on policy making and general direction, oversight and supervision of the affairs and business of the Bank and does not play any role in the day-to-day operations, as that is the role of the Management.

2.

The Board shall approve and monitor the objectives, strategies and overall business plans of the institution and shall oversee that the affairs of the institution are carried out prudently within the framework of existing laws & regulations and high business ethics.

3.

All the members of the Board should undertake and fulfill their duties & responsibilities keeping in view their legal obligations under all the applicable laws and regulations. The Board shall clearly define the authorities and key responsibilities of both the Directors and the Senior Management without delegating its policy-making powers to the Management and shall ensure that the Management is in the hands of qualified personnel.

4.

5.

The Board shall approve and ensure implementation of policies, including but not limited to, in areas of Risk Management, Credit, Treasury & Investment, Internal Control System and Audit, IT Security, Human Resource, Expenditure, Accounting & Disclosure, and any other operational area which the Board may deem appropriate from time to time. The Board shall also be responsible to review and update policies periodically and whenever circumstances justify.

6. As regards Internal Audit or Internal Control, a separate department shall be created which shall be manned preferably by professionals responsible to conduct audit of the Bank, Various Divisions, Offices, and Units Branches etc. The Head of this department will report directly to the BOD or Board Committee on Internal Audit.7.

The business conditions and markets are ever changing and so are their requirements. The Board, therefore, is required to ensure existence of an effective Management Information system to remain fully informed of the activities, operating performance and financial condition of the institution, the environment in which it operates, the various risks it is exposed to and to evaluate performance of the Management at regular intervals.

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8.

The Board should meet frequently (preferably on monthly basis, but in any event, not less than once every quarter) and the individual directors of an institution should attend at least half of the meetings held in a financial year. The Board should ensure that it receives sufficient information from Management on the agenda items well in advance of each meeting to enable it to effectively participate in and contribute to each meeting.

9.

The Board should carry out its responsibilities in such a way that the external auditors and supervisors can see and form judgment on the quality of Boards work and its contributions through proper and detailed minutes of the deliberations held and decisions taken during the Board meetings.

10.To

share the load of activities, the Board may form specialized committees with well-

defined objectives, authorities and tenure. These committees, preferably comprising of Non- Executive Board members, shall oversee areas like audit, risk management, credit, recruitment, compensation etc. these committees of the Board should neither indulge in day-to-day affairs/operations of the bank and enjoy any credit approval authority for transaction/limits. These committees should apprise the Board of their activities and achievements on regular basis.11.The

Board should ensure that it receives management letter from the external auditors

without delay. It should also be ensured that appropriate action is taken in consultation with the Audit Committee of the Board to deal with control or other weaknesses identified in the management letter. A copy of that letter should be submitted to the State Bank of Pakistan so that it can monitor follow-up actions. The Following table mentioned the names & designation of Board of Directors of National Bank of Pakistan:

Name Syed Ali Raza Mr. Sikandar Hayat Jamali Mian Kausar Hameed Mr. Ibrar A. Mumtaz Mr. Tariq Kirmani Mr. Muhammad Arshad Chaudhry

Designation Chairman & President Director Director Director Director Director

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Mr. Mohammad Ayub Khan Tarin Mr. Ekhlaq Ahmed

Director Secretary Board of Directors

SENIOR MANAGEMENTThe senior management of National Bank of Pakistan is consists of Group chiefs, who report directly to the Directors of Bank. The whole functions of National Bank of Pakistan are performed under these Groups. The National Bank of Pakistan has following groups and divisions: Corporate and investment Banking Group Operations Group Credit Management Group Audit & Inspection Group Compliance Group HRM & Administration Group Commercial & Retail Banking Group Treasury Management Group Special Assets Management Group Employees benefit & Disbursements Group Overseas & Coordination Group Islamic Banking Core Banking Application, PMO

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Financial Control Division Information Technology Group

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NameMasood Karim Shaikh Shahid Anwar Khan Dr. Asif A. Brohi Imam Bakhsh Baloch Ziaullah Khan Dr. Mirza Abrar Baig Amer Siddiqui Muhammad Nusrat Vohra Amim Akhtar Ekhlaq Ahmed Tajammal Hussain Bokharee Mrs. Khurshid Maqsood Ali Tahir Yaqoob Anwar Ahmed Meenai Naeem Syed Aamir Sattar Atif Hassan Khan

Group Name & DesignationSEVP & Group Chief, Corporate & Investment Banking Group SEVP & Group Chief, Credit Management Group SEVP & Group Chief, Operations Group SEVP & Group Chief, Audit & Inspection Group SEVP & Group Chief, Compliance Group SEVP & Group Chief, Human Resources Management & Administration Group SEVP & Group Chief, Commercial & Retail Banking Group SEVP & Group Chief, Treasury Management Group EVP & PSO to the President EVP & Secretary Board of Directors EVP/Divisional Head, Special Assets Management Group EVP & Divisional Head Employee Benefits, Disbursements & Trustee Division EVP & Group Chief, Overseas Coordination & Management Group EVP & Divisional Head, Islamic Banking EVP & Head, Core Banking Application, PMO Financial Controller & Divisional Head, Financial Control Division Group Chief (A), Information Technology Group

CORPORATE & INVESTMENT BANKING GROUPThe corporate & investment banking group is headed by Mr. Masood Karim Shaikh. This group performs its function through its following two units: Corporate Banking Investment Banking

The corporate and investment banking will continue to play a major role in loan syndications, structured financing and debt / capital raising transactions with the objective of providing entire range of corporate and investment banking solutions to its valued clients under one umbrella. The Corporate Banking Group achieved excellent results in 2007 with a number of landmark transactions in cement, energy, communication and fertilizer sectors. In addition to the funded income, our corporate and investment banking has substantially increased its fee base income this year by being the lead advisor in a number of transactions in the corporate world of Pakistan The challenges to corporate business in year 2007 were manifold including reduction in Private Credit Investment as a result of slowing down of economy as well as rising interest rates. The

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increasing pressure on the textile industry reduced the lending to this sector. In addition the bank's corporate loans yields also faced pressure as substitute form of funding sources are available in the market in form of Islamic financing, mutual funds, issuance of debt instruments like TFCs and Bonds and the Capital markets. Despite these threats and challenges at NBP, our corporate team not only increased the volume as well as the yield of the loans they also maintained a strong franchise with the leading Pakistani corporate so as to ensure that NBP not only maintains its market share but is in a position to meet any challenges in future. NBP during the year also participated in a number of TFC issues and mutual funds subscriptions thereby increasing the overall yield on investment portfolio. NBP has the largest equity portfolio in the banking sector primarily due to 27% holding in NIT units, the largest mutual fund in Pakistan. During the year 2008 the bank redeemed 10% of its NIT holding covered under LoC, which resulted in capital gain of Rs. 1.8 billion in 2008. The National Bank of Pakistan has initiated a structured approach to corporate banking by introducing a single point of contact through Relationship Managers. For this purpose, new Relationship Managers as well as team leaders has been inducted to expedite this process. The Area Managers of National Bank of Pakistan are appointed to manage relationships and to better service the needs of multinationals and large local corporate. An investment banking team has also been formed by National Bank of Pakistan to offer specialized services to major relationships including advisory and debt syndications. The National Bank o Pakistan have special focus on Corporate Banking with a presence in all major locations through out the country, offering full range of Banking products / services and one window interface through designated Relationship Managers. Corporate Banking offers tailor made products / solutions as required by corporate customers which includes: The key features of corporate Banking includes: Funded facilities, ranging from short to medium and long term lending Trade related financing. Foreign currency financing.

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All sorts of non-funded facilities / services which include Cash receipts / payments, Remittances, Collections, guarantees, letter of credit etc. Customized products / solutions

COMPLIANCE GROUPThe Compliance Group of National Bank of Pakistan is headed by Mr. Ziaullah Khan and is report directly to the President/ Chief executive of NBP. In order to keep the working of Audit Department aligned with the best international practices 'Compliance Group has been created. This group is responsible for monitoring compliance of various administrative / operative instructions, rules, and regulations by constantly reviewing and reporting status of compliance and non-compliance. The Compliance Group of NBP is set to ensure that all relevant laws are complied with, in letter and spirit, and, thus, minimize legal and regulatory risks. The Compliance officers will primarily be responsible for Banks effective compliance relating to:

Relevant provisions of existing laws and regulations. Guidelines for KYC. Anti money laundering laws and regulations. Timely submission of accurate data / returns to regulator and other agencies. Monitor and report suspicious transactions to President / Chief Executive Officer of the bank and other related agencies. The Compliance Officers will serve as a contact point between President /Chief executive officers and senior management, with regard to functioning of compliance program provide assistance in this area to branches and other departments of the bank, and act as liaison with State Bank of Pakistan concerning the issues related to compliance.

The functions of compliance group of National Bank of Pakistan are as fallows:

Study and emphasize compliance of best international practices in audit of various functions of NBP. Monitor compliance of Administrative/Operational Instructions, Rules, Regulations issued from time to time by the Management. Review over the compliance carried out by the audit departments.

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Prepare and put up a consolidated Report to the Directors of National Bank of Pakistan regarding the status of compliance and non-compliance of the recommendations agreed by the Departmental Management.

ISLAMIC BANKING GROUPThe divisional head of Islamic Banking group is Mr. Anwar Ahmed Meenai. Islamic Banking is one of the emerging field in global financial market, having tremendous potential and growing at a very fast pace all around the world. Al-Hamdulillah, the progress of Islamic Banking in Pakistan has also been commendable during the last Five years. The year 2007 marked the first year of Islamic Banking operations. During the year under review, in addition to active participation in various Sukuk transactions, two more Islamic Banking branches at Lahore and Peshawar started operations. NBP's plans for the year 2008 include opening of Faisalabad and Rawalpindi branches with the focus on growing organically by opening more standalone Islamic Banking branches, utilizing NBP's existing branch network of 1,200 plus conventional branches and looking into strategic acquisitions for expansion in this field. The products & services being offered by National Bank of Pakistans Islamic Banking are fully Shariah Compliant and have been certified by NBPs Shariah Advisor. Deposit Schemes being offered by NBPs Islamic Banking Branches include the following:a) Current Deposit Scheme b) Profit & Loss Sharing (PLS) Deposit Scheme

Commercial and Corporate customers requiring financing will have the following financing facilities available to them to meet their requirements: a) Murabaha b) Murabaha Facility c) Ijarah (Leasing) In addition to Shariah acceptable standard general banking services, following services are also being offered at the Islamic Banking Branches: Letter of Credit Facility Handling of Remittances Issuance of Bank Drafts and Pay Orders. Collection of Export Bills. Collection of Local Bills.

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Government Collections Utility Bills Collection

TREASURY MANAGEMENT GROUPThe group chief of Treasury management group of National Bank of Pakistan is Mr. Muhammad Nusrat Vohra. The NBP treasury and capital market group has developed a reputation of being the market leader in coming up with customized solutions for a large and varied client base that is spread virtually all across the country. The client base does not consist of only blue chips ones but encompasses public sector clients, retail sector, multinationals, local conglomerates as well as individuals. National bank treasury is currently regarded as a market leader in both foreign exchange and rupee denominated products because of its emphasis on service quality. The Treasury management group of National Bank of Pakistans offer:23 Narrowest bid / offer spread and quickest on line quotes Customized solutions to minimize risk and optimize returns as per the needs and circumstances of the clients Focus on building sustained and long term relationship with institutional, corporate and retail clients. Local presence across the nation as well as internationally. Currently the National Bank of Pakistan offer following Treasury Products:24

P LAIN V ANILLA FX P RODUCTSNBP Treasury Management Group is a market price maker and trend setter in the plain vanilla Foreign Exchange products. Its ability to offer tight prices, coupled with timely and accurate research making it a bank of choice for clients seeking to favorably position their currency risk As a result, National bank has one of the largest FX book in the country.

P AKISTAN I NVESTMENT B ONDSPakistan Investment Bonds issued by Government of Pakistan are a preferred means for a majority of institutional investors to invest their surplus funds for a longer time horizon. This way they are able to lock a higher yield for a relatively long term rather than take the risk of re-pricing after

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relatively shorter time periods. Furthermore, PIBs are highly secured and risk free as they are guaranteed by the government of Pakistan. NBP is the leading Primary Dealer for PIBs primarily because of its inventory size and the appetite for such a long-term instrument given its deposit base. While most foreign / private banks would have to go to the secondary market in order to satisfy a large order from an institutional investor, NBP can execute such large orders through its own book. This means that it can offer tight prices for large amounts even under volatile market conditions.

D ERIVATIVES P RODUCTSNBP treasury Management group has been at the forefront in developing the derivatives market in Pakistan and has contributed both individually and from the FMA (Financial Market Association) front as well. The first ever Derivative transaction of the Pakistani banking sector was done by NBP. Some of the more common derivative structures being offered include: C URRENCY OPTIONS An option gives the buyer the right but not the obligation to buy or sell an asset at a pre-specified date and price. So the upside profit potential is unlimited whereas the downside loss is protected at a pre determined level. Various structures of currency options are available including Knock-ins / Knock outs Participating ForwardsAND

I NTEREST R ATE SWAPS

FRAS

A client can convert a fix rate loan into floating rate one or vice versa by using these derivative instruments. This allows the clients to develop and implement their views about the evolving interest rate scenario. For example, if the borrower feels that the interest rate might go up in the future, than


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