Internship Report ZARAI TARAQIATI BANK LIMITED Head Office Islamabad
SUBMITTED BY
Mumtaz Ali MBA-IV SUPERVISED BY Asif Ali Naqvi
Department of Administrative Sciences Quaid-i-Azam University Islamabad
ACKNOWLEDGEMENT
All praises are for almighty Allah for guiding me in hardships and all respects for Holy Prophet (PBUH) for showing me the light of truth and honesty. I am thankful to Asif Ali Naqvi under his
guidelines I was able to complete this Internship Report and she always helped us during the extensive work of the project. I am also thankful to the respondents who gave me their precious time for the interviews.
Mumtaz Ali Hulio
Executive Summary Banking is one of the most sensitive businesses all over the world. Banks play very important role in the economy of every country all over the world and Pakistan is no exemption. This report report is about one of the leading Agriculture Agriculture Bank of the Pakistan Pakistan known as Zarai Taraqiati Taraqiati Bank Limited. ZTBL is playing its one of the most important role in the development of the Agricu Agricultu lture re Sector Sector of the Pakist Pakistan. an. On 14th Dece Decemb mber er 2002, 2002, unde underr the the ordi ordina nanc ncee of the the Agricultural Development of the Pakistan 1961, ZTBL was incorporated as Public Limited Compan Company. y. This This Bank severs severs its venerat venerated ed custom customers ers in the form form of differ different ent custom customize ized d products. It is providing both type of severs financial and non-financials mostly to its clients of the rural areas of the Pakistan, which comprises of 68% of the Pakistan’s total population. The Bank has country-wide network in the form of 349 branches and is severing round about half of the million clients annually and over accumulated account holder’s with the average loan size of around around Rs.89, 000 servin serving g 65%, 65%, 31% & 4% of subsis subsisten tence, ce, economic economic and large large grower growerss respectively.
Chapter no 1 1INTRODUCTION 1.1 History of the Bank Pakistan is one of the agricultural country, about 75% of its population is directly or indirectly associated with agriculture. Due to its widespread and extensive canal system, its land is very fertile. The Agricultural Development Finance Corporation was setuped in 1951, keeping in view v iew the need of finance to rapid development of agriculture sectored. It also provides financial facilities for the development and modernization of agriculture, including forestry, fisher, animal husbandry, poultry and dairy farming.
Under the Agricultural Development Bank Act, the Agriculture Development Bank of Pakistan came in being in September 1957. Under this Bank, the agriculturists, co-operation societies and others others were were provid provided ed the facili facilitie tiess of credit credit in cash, cash, warehou warehousin sing g and storag storage. e. Agricu Agricultu ltural ral Development Development Finance Corporation Corporation and the Agricultu Agricultural ral Development Development Bank were similar in function and government provides capital to both of them. later On February 18, 1961, due to their similar functions these both came under the single banner of Agricultural Development Bank of Pakistan.
Agricultural Development Bank of Pakistan (ADBP) Under the ADB Ordinance 1961, the Agricultural Development Bank of Pakistan (ADBP) was established originally. Then, ADBP was reorganized into a public limited company, with the purpose of ensuring better governance and the provision of high quality financial services to its rural clientele. Then all assets, business, contracts and liabilities of ADBP were taken by the Zarai Taraqiati Bank Limited (ZTBL and on December 14, 2002 and started its countrywide operations as a public limited banking company.
The ADBP had than become the single largest institution in the country catering to be viable credit need of the agriculturists and in disbursing over Rs. 5000 million per annum for the development and modernization of agriculture.
Conversion of ADBP into ZTBL Agriculture Development Bank of Pakistan (ADBP) was converted into Zarai Taraqiati Bank Ltd (ZTBL) by the Federal Government and it started its operations with profound effect. It was restructured accompanied with new board of directors and was titled as public limited company. Its aim under the presidential ordinance was to ensure good governance, autonomy, delivering high high quality quality,, viable viable and timely timely financial financial servic services es to a greate greaterr number number of client clientele ele in the agricultural and rural segment of the country with adequate return to the stake holder. In 1984 Zarai Taraqiati Bank (ZTBL) under the company’s ordinance was registered with SECP as a public limited and by virtue of finance order, all assets, liabilities proceeding undertaking of the ADBP stands transferred to and vested in Zarai Taraqiati Bank with effect from December 14, 2002. The conversion of ADBP into ZTBL had a conditionality of the Asian Development Bank (ADB) loan framework as per which a restructuring exercise was initiated. The restructuring process entailed ADB’s Rural Finance Sector Development Program (RFSDP) with the objective to transform ZTBL into a sustainable Rural Finance Institution. It also included the up-gradation of Information technology (IT) infrastructure for which funds from ADB’s loan were to be utilized. As part of the overall organizational revamping strategy, the bank has taken several initiatives to enhance its lending activities while adopting a prudent approach with regards to credit quality. Kisaan Support Services (Pvt.) Limited (KSSL), a subsidiary of ZTBL, has been engaged to sell fertilizer to farmers at subsidized rates, while a Memorandum of Understanding (MoU) (MoU) is signed signed between between KSSL KSSL and Pak Arab Arab Fertil Fertilize izerr to ensure ensure timely timely availabil availability ity of agricultural inputs. The main aim behind the restructuring of ADBP and its conversion into ZTBLis extend swore credit to the needy segment of highly productive and yielding agri and non-farm activities. It was done keeping in the mind that this step shall greatly add to the c redit distribution mechanism. National Operation The Zarai Taraqiati Bank Limited runs its operation in whole Pakistan and also out side Pakistan and the persons conducting such business. The bank’s total manpower is 7665 having 4515 officers and 3150 staff. It has 49 regional offices and 342 branches through out the Pakistan including the Federally Administered Tribal Area (FATA), Federally Administered Northern Area (FANA) and Azad Jammu and Kashmir. ZTBL while completing its period of 42 years
operational activities tried to serve the forming community through the country for their medium and long-term development credit needs. Organization First the head office of the ZTBL was located in Karachi and was shifted to Islamabad later during 1973. Presently there are 9 division and 33 departments in the head office. It has 49 regional offices and 343 branch offices apart from 8 audit directorates in the field, two staff colleges at Islamabad and Karachi. To cater for loan requirement of the forming community at their door steps over 1408 Mobile Credit Officers have been deployed in the field, each covering 25 villages in an average.
Board of Directors: Syed Qamar-Uz-Zaman Shah
Chairman Board Mr. Muhammad Zaka Ashraf
President/ CEO Mr. Yawar Zia
Director Mr. Qamar Zaman Chaudhry
Director Mr.Muhammad Iftikhar Khan Mohmand
Director Mr. Tauqir Ahmad Faiq
Director Dr. Khalid Ahmad Khokhar
Director Mr. Imam Bux Sheikh
Director Mr.Muazam
Ali
Company Secretary
Vision Statement Emerge as a Leader in provision of agriculture credit by promoting and sustaining productivity through a market/agribusiness focus. To bridge yield gaps of all agriculture commodities and to ensure that the welfare of farming population is radically improved and the environment is protected from harmful human interventions.
Mission Statement To beco become me a lead leader er in guid guidin ing g entr entrep epre rene neur urss & farm farmer erss impl implem ement ent an agri agribus busin ines esss and market marketing ing led approach approach that that brings brings strong strong commer commercial cial orient orientati ation on in produc productio tion n cateri catering ng domestic domestic and internatio international nal markets. markets. As a specialize specialized d agriculture agriculture development development bank, deliver pragmatic technology and optimal solutions to farm communities and rural areas across all agroecological zones with sensitivity to economic growth and equity. Develop close partnership and linkages with all its clients to dramatically transform, restructure and revamp the agriculture scene and enhance its outreach by investing wisely and judiciously in new approaches, ideas and means of mass communication.
Corporate Objectives The prime objective of ZTBL incorporated under the companies’ ordinance 1984 is to provide Srural and agriculture sector and mitigates poverty. The credit facilities in rural areas shall be provided in cash or kind at a market based a mark-up rate that ensures operational and financial sustainability of the bank. The ZTBL is to “Develop and operate as a financially and operationally sustainable R.F.I of the country. To assist rural community, particularly the small farmers, in raising their productivity and income levels through timely delivery of credit, advisory and ancillary services. Build ZTBL's ZTBL's image image as a proact proactive ive,, client client friendl friendly, y, financ financial ially ly & operat operation ionall ally y sustai sustainab nable le with with indigenous product deployment. Establish and provide backward and forward linkages to strengthen agri. value added commodity chains. chains. Engage in public - private private and wholesale wholesale - retail partnership partnership to deepen outreach outreach and reduce operating cost. It functions as a rural commercial bank to mobilize rural capital formation
and to commercialize the agri. sector by delivering the true value of credit to the client. Provide a wide range of risk insurance products to its clients. Open up it venues of operation to Domestic & International Banking Industry to avail comparative advantages.
Nature of Business Zarai Tarqiati Bank is to provide credit facilities to the farmers, including hiring and renting of any thing which it may advance way of loan and the provision for ware hosing facilities of such terms and subject to such conditions as may be prescribed by its rule to agriculturists for the purpose purpose of agricultur agriculturee and to persons persons engaged in cottage cottage industries industries in rural areas and provide provide sustainable rural financing services, particularly to small farmers.
Types of loans of loans Banks Banks provid provides es loans loans through through variou variouss product products/s s/sche chemes mes for short, short, medium medium and long long term term depending on the cash flow of the borrowers. The bank gives special focus and importance to fulfill the genuine and real needs of the small farmers in terms of production loans (seed, fertilizers, pesticides, POL, labor charges etc) as well as for working working capital purpose. These loans are provided provided to the needy farmers in cash and kind under under variou variouss scheme schemess like like Sada Sada Bahar, Bahar, Awami Awami Zarai, Zarai, Genera Generall Credit Credit and One Window Window Operations Zarakhazi Schemes. The bank also provides Development loans to farming community like tractors, allied agriequipments/implements, besides loans for poultry and livestock, fisheries, orchards, plantation, and irrigation schemes etc.
Maximum Credit limit Maximum limit of loan is Rs.1.00 million per borrower/party.
Lending Criteria The bank advances preferably to small farmers and following criteria is observed in overall distribution.
Subsistence farmers 70% Economic farmers 20% Big farmers 10% Production loans 77.5% Development loans 22.5% The management adopts lending – recovering linkage criteria to ensure smooth operations of the bank and honor its obligations.
Security The bank provides loans under Agri-Pass Book System as well as other collateral acceptable to the bank. Simplification of loan documents is in order to facilitate the farmers, the Bank has simplifie simplified d the loan documentati documentation on to be applicable applicable for three years of the loan period. The main loan documents which are presently being used in the branches of the bank are as under loan appl applic icat atio ion n
form form
IB-7 IB-7
Revi Revise sed d
loan loan
Agre Agreem emen entt-cu cumm-Gu Guar aran ante teee
Certificate/Sanction Mutation entered in bank favor sanction latter for loan
Major lending scheme Sada Bahar Scheme One Window Operation/Zarkhaiz Scheme Crop Maximization Project-II White Resolution Scheme Red Meat Financing Package Scheme Green Revolution Scheme Sairab Pakistan Scheme Crop loan Insurance Scheme Banazir Tractor Scheme Awami Zarai Scheme Establishment of Model Village
Char Charge ge
Crea Creati tion on
Performance and Progress of Projects Loan Disbursement Disbursement During the year 2009 loans amounting to Rs.77.680 billion were disbursed to 567.415 borrowers as compared to Rs.70.698 billion availed by 571,946 borrowers during the year 2008. Thus growth in amount was 10%.
Disbursement Position during the Last 5 Years Years
Disbursement Production
2005 2006 2007 2008 2009
33.42 47.77 50.22 58.52 61.72
No Development 5.941 4.72 5 .7 12.17 15.96
Total 39.36 52.52 55.91 70.7 77.7
Growth
Borrowers
33% 6% 26% 10%
Served 441,536 443,874 475,756 571,946 567,415
of
Bank disbursed total of Rs.77.680 billion in 2009 as against Rs.39.356 billion disbursed during the years 2005, with borrower network of 567,415 and 441,536 respectively. The cumulative growt growth h duri during ng the the peri period od under under rema remain ined ed 97% 97% in term termss of amoun amountt and and 29% in term termss of borrowers.
Ho Account Department Day first: 19-7-2010, Zulfkar ali Satti – In charge Payroll unit
Pay Roll Unit Payroll unit of ZTBL consists of 700 employees. Its role is to manage Advances given to the employee, allowances, benefits and tax deduction over the salaries of the employees etc. there are five types of the advances as mentioned bellow: House building allowances Computer allowances Personal loans Car loan Motor cycle There is 4% markup charged over the employees on the house building allowances while no markup is charged over the personal loans, which is in the benefit of the employees. Non clerical staff is given 18% allowance, while clerical staff is given 15% allowance on the basic b asic pay. Allowances and benefits are given on the basis of the scales of the employees. There are different scales of the employees as mentioned bellow: 1 to 3 Scale for non clerical employees 4 to 7 scale for clerical employees 7 onwards for officers The amount of allowances and advances are transferred through a transfer voucher. Different types of the vouchers are used in ZTBL such as debit voucher, credit voucher and transfer voucher. The credit and debit voucher are in the branches of the ZTBL, while transfer voucher is used in the ZTBL Head Office.
Day 2: 20-7-2010, Munir hussain – OG 2
ZTBL consists of staff training school, which facilitates the refresher courses in training program to the existing employees of the ZTBL. Training school preplan the training schedule for the upcoming year, which is approved by the higher authorities and send letter to different training zonal offices for training purpose. Employees coming form the different branches are entertained through lecture on banking sector and are given given techni techniques ques to improv improvee skills skills requir required ed in this this curren currentt world world of compet competiti itive ve environment. ZTBL hire the trainer of the program both internally as well as internally.
Lecture Fee These trainers charge the lecture fee, which is disbursed by the HO Account Department. The entry is passed in the GL Head (General Leger Head) as debit the speaker fee and credit the ZTBL. Above transaction is done, while using using the excel format as mentioned mentioned bellow:
S. No. – PP No. – Account – No Speaker – Amount
Amount of the lecture is given to the speakers with respect to the grade vice. Minimum amount is Rs400 for grade 16 to 18, and maximum amount is Rs600 for 19 grade officer. It is required for the external speaker to open account into the ZTBL for error free transaction. This transaction usually takes two days to take place.
Leave In Cashment When leave of the employee is not approved by the bank then that leave is changed into cash. The criteria for this mentioned by the SBP, which stats that it is only possible when there is 180 days balance of the employee, below this it would not work. This transaction takes place as follow Employee – Credit Bank – credit
Education Stipend/ Allowance Education stipend is special relief for all staff including non clerical, clericals and officers, where as education allowance is only opportunity available to non clerical and clerical staff. The employees apply through the application forms, while submitting that to the Staff Welfare Department Three children are allowed for the stipend allowance and 300 are added in the salary of the employee. For the education stipend minimum 65% marks criteria is set by the bank. Students of the 6th to 8th are given Rs224 per month, 9th and 10th are given Rs376 per month,
where as students of the XI and XII are given Rs388 per month and bachelors to master are given Rs400 per month. Top 10 students in their studies are awarded Rs1200 per child.
President Club Charge President club charges are Rs1300 per month.
Payment of Special Duty Allowance It is the criteria of the bank that if the employee will perform special duty after the bank timings then he will be given special duty allowance. Employees who perform special duty from 5 PM to 8 PM or 10 PM then they are given Rs200 per day.
Arrear of Salaries Arrears are the result of increment, promotion of the employees or other differences of the actual salary and paid salary. These arrears are handled by the payroll unit
Day 3 Sher allumgeer AVP IBR UNIT
IBR Unit HO Account Department consists of IBR unit, in which reconciliation of the transaction takes place. These transactions are of two types, one is transaction in between branches and other is in betwe between en and head head office office.. Central Central Account Accounting ing syste system m Head Head Office Office Islam Islamabad abad is used used for reconciliation purpose. It consists of central accounting file/ entry quarry. Again it consists of two files, one is originating file and other is respondent file. From originate file funds are transferred, while from respondent file funds are received. In these accounts transfer voucher is used as base. When errors occurred in the transaction then the balances does not tally. Errors in these accounts mostly occur due to wrong code of branch or mixing of both debit and credit accounts or through other other wron wrong g entry entry.. To solv solvee this this prob proble lem m of erro errors rs recon reconci cili liat atio ion n meth method od is used used.. Inte Inter r
reconciliation unit in HO Account Department collects whole data from country wide branches and if there is problem of reconciliation, IBR Unit inform the branches to reconciliation the transaction. If there is error in the data collected in IBR Unit then software shows the status of 99. After reconciliation when balances tally then the software show the status of 00. The head office office sends sends advice advicess to branch branches es throug through h mail mail and list list form. form. Accord According ing to the pruden prudentia tiall regulations issued by the State Bank of Pakistan reconciliation should take place with in 30 days, but for certain times it takes place after due date.
Employees Funds Unit
HO Accounts Department Department of ZTBL consists consists of Employee Employee fund unit. Major responsibi responsibiliti lities es of this this unit unit consis consists ts of activi activitie tiess relate related d to the managi managing ng funds, funds, invest investmen mentt of surplu surpluss funds, funds, payments of retirement benefits of gratuity, pension, GPF, GTI, BF grants etc. to out going employees. It is also the responsibility of this unit to prepare the accounts of the funds annually and these are later audited by external auditors. Further more it records the contribution towards employee’s funds and maintains individual accounts in visionary funds where ever applicable. It maintains the book of accounts of o f trust funds and invests the surplus funds and manages the audit with with the the help help of Char Charte tere red d Acco Accoun unta tant ntss Firm Firms. s. It faci facili lita tate tess the the paym paymen entt if bene benefi fits ts of Benvolevent Funds, Pensions, Provident, Gratuity and Group Term Insurance (GIT). It also facilitates the payments of various benefits just as death compensation/donation to deceased employee’s family and marriage grant to clerical staff etc. It manages outstanding staff advances of employees who die during bank services. It recovers funds provident funds advances. It facilitates the arrangement of actuarial valuation study as required under International accounting standarad-19 This unit consists of trustees, who manage these funds through operational staff of this unit. The regulations, standards and instructions of the banks are k ept at first priority while managing these funds. According to the regulations of the bank, Head of the Accounts and in charge of employee funds are chief trustee and trustee according to their functional position. To select the chief trustee, according to the Banks fund regulation two third rules is applied. This unit manages different types of the funds for different purposes as shown in figure in the
Sr. No.
Name of Fund
Purpose
1
ZTBL Employee Benefit Fund To
write-off/adjust
house
building
and
conveyance conveyance advances advances of all officer/staff officer/staff who die during Bank service and payment of death 2
ZTBL
3
(Officers) ZTBL Be Benevolent Fu Fund (S (Staff) Payment of of BF BF gr grant as as ad admissible un under ru rules;
4
Benevolent
compensation. FundPayment of BF grant as admissible under rules
ZTBL Pension Fund
Funeral charges & Marriage Grant Payment of pension as admissible
to
employ employees ees on supera superannua nnuatio tion n or volunt voluntari arily ly exit from service after completion of 25 year of 5
service. ZTBL Gr Gratuity Fu Fund (u (underGratuity Grat uity is paid to employees employees having less then SSR-1961)
6
gratuity is transferred to pension fund. ZTBL Gr Gratuity Fu Fund (u (underPaymen Pay mentt of gratui gratuity ty as severa severance nce benefi benefitt to SR-2005)
7
ZTBL
Employees
Fund 8
ProvidentPaymen Paymentt of account account balanc balances es during during servic servicee or/and accumulated Provident Fund to member
or/and accumulated Provident Fund to member
at exit from service. ZTBL General Provident FundPaymen Paymentt of account account balanc balances es during during servic servicee (Staff)
10
employees regulated under SR-2005
at exit from service. ZTBL General Provident FundPaymen Paymentt of account account balanc balances es during during servic servicee (Officers)
9
10 year of service. After 10 years of service the
or/and accumulated Provident Fund to member
at exit from service. ZTBL Co C ontributory Pr P rovidentPaymen Paymentt of account account balanc balances es during during servic servicee Fund
or/and accumulated Provident Fund to member at exit from service.
Central Accounts Department of ZTBL
Aims & Objectives
The centra centrall account accountss departm department ent of ZTBL ZTBL formul formulate ate and mainta maintain in account accounting ing police policess and procedures manuals accounting standards to ensure dissemination and implementation across the bank. It formulates and prepares financial statements keeping in the view of the requirement of Bank Bank.. It also also make makess sure sure the the prop proper er accou account ntin ing g of Asse Assets ts,, liab liabil ilit itie ies, s, and and Inco Income me and and Expenditure.
Functions Central accounting department issues instructions related to accounting po lices and procedures. Central Accounts Department of ZTBL consists of five units like Policy Unit, Accounts Unit, Corporate Tax Unit, Fixed Asset unit, Prepayment Unit.
Policy Unit Policy Unit plans accounting procedures of accounting in both head office and branches and coordinate with other departments with in the head office on the different policy meters. It deals coordination of external auditors and arrange payment to them. It formulates bank charges schedules and circulates among the branches and submits to SBP on half yearly basis. It deals with with manage management ment letter letter and executi executive ve summar summary y and sugges suggests ts guidel guideline iness for adjust adjustmen mentt of suspense account. It performs administrative functions for the department such as sanction of leaves and budget preparation. This unit also provides guidelines to the branches regarding rectification of accounting errors and audit observation.
Accounts unit The Account unit of the Central Accounts Department coordinates with concerned departments for the timely timely produc productio tion n of statem statement ent of affair affairs. s. It prepar prepares es financ financial ial statem statement entss whili whiling ng compiling balances under relevant group of heads from trial balances. It makes the list of abnorm abnormal al entrie entriess for recti rectific ficati ation. on. It prepar prepares es quarter quarterly, ly, half half yearly yearly and yearly yearly financ financial ial statements for the audit committee. It prepares annual capital adequacy ratio statement for certification by external auditors.
Tax unit
The Tax unit of the Central Accounts Department of the ZTBL provides guidelines of deduction of the tax under the ordinance of income tax 2001 and collects tax payment documentary evidences for tax deducted. It communicates and coordinates with tax consultant, SBP and income tax authorities and collects related to the tax refund case form consultant. It pays advance tax and prepares the statement along with tax related audit.
Fixed assets unit It sends out timely formats and procedures for the fixed assets to the Zones, Branches, and Head Office Department. It deals with collection of fixed assts schedules as well as other required documents from branches and head office department. It compiles and summarizes the fixed assets schedules on country level along with data maintenance. This unit on quarterly basis compiles the addition and deletion of fixed assets. It works to monitor and verify the disposal of fixed assets and depreciation charged by the departments and head office on quarterly basis. It calculates and accounts for the deferred tax assets and coordinates and cooperates with external and internal auditors on the different issues of the fixed assets of the bank.
Pre-payment verification unit Pre-payment unit of the ZTBL Bank is designed to verify all payment structures related to the Head Office. It checks availability and competence of sanction of the competent authority. It works to check procedural compliance and completeness of documents.
Budget and Fund Management Department
Aim and Objective
The main aim of Budget and Fund Management Department of ZTBL Bank is prepare the financ financial ial plane plane for the credit credit limit limits, s, fund fund review review and to arrang arrangee additio additional nal resour resources ces for maintenance of additional liquidity for efficient distribution, timely discharge of liabilities and operations of Bank.
Functions Budget and fund management department of ZTBL mainly develops the policies, procedures and standards for the budget planning and analysis. It coordinate and cooperate with administrative and government in order to resolve budget issues. It automates budget process and preserves the data and obtains approval from Board of Directors for annual budget. It gather the data of various departments and analysis that for their performance. Further it consists of four units as described bellow.
Budget Planning Unit Budget Analysis Unit Treasury Unit Fund Reconciliation Unit
Budget Planning Unit
The Budget planning unit of the Budget and fund management department of the ZTBL develops depart department mental al police policess proced procedure uress and standa standards rds for the financ financial ial managem management ent and budget budget planning processes and parameters. It communicates with administrative and governance groups in order to resolve the budget issues. It compiles and process necessary information for the preparation of annual reports. It generally evaluates and review expenditures and submits to the audit committee. Its further role is to provide information and analysis for the purpose of the annual planning and effective efficient decision making.
Budget Analysis Unit It general generally ly analyz analyzes es and monit monitors ors financi financial al activi activitie tiess of departm department entss which which show show their their performance. On the basis its analyzed results performs the highly effective steps. It develops assumptions and strategies for future budget cycle.
Treasury Unit Treasury Unit is engaged in the arrangement of the fund for the different purposes to the branches and maintains their records. It manages Banks accounts with SBP and commercial banks such as MCB, HBL, and UBL and so on. It checks out the appropriate balances in the branches if there are excess balances then its calls for and if there is less balances then it transfer the funds and also declare the deposit rates for the depositors. It performs the role of coordinator while performing the role of coordination with SBP, commercial, Internal and External auditors on the matters of treasury. It deals the matters of investment of surplus funds provided by the branches.
Funds Reconciliation Unit It mainly plays the role of reconciliation of Bank accounts with other commercial banks at Head Office, due maintenance of check and balance of funds received or remitted from other branches. Advices issued by branches are responded by Funds Reconciliation Department. It also monitors the reconciliation of bank accounts with other commercial banks.
Regulatory Reporting Deportment The regulator regulator gives instructions instructions What to do, when to do and hoe to do as Government Government agencies and SBP etc, while reporting means perpetrations of the reports and submission of the reports to the regulators. That’s why this department reports certain information to the regulators and ensures it that bank has compiled all instructions.
Aims and objectives It aims to fulfill the statuary reporting requirements and provides financial reporting to the management for the specific purposes. Its objective is to provide and ensure the effectiveness in meeting statutory reporting obligations. It makes prompt and accurate analysis to aid effective decision making. In last it ensures the implementation of the Basal-II.
Functions
It reform reformula ulates tes and redesi redesigns gns syste system m of data data captur capturing ing,, its consoli consolidat dation ion and subseq subsequent uent reporting keeping in mind regulatory requirements. It ensures the implementation of updated reporting requirements, which are update time by time. It analysis the financial results and repots it to concerned authority authority and arrange compliance compliance with external and internal auditors. auditors. Further Further more it performs the job suggested by the regulatory authority.
Reporting process There are mainly five steps in reporting process, which are defined bellow:
Data Capturing This is the step in which data is gathered from various sources such as field offices, deportments such as CAD and ISD and from financial reports such as Accounts, D/R Series etc.
Consolidation In this step the gathered data is consolidated in to single hole, because this data is collected from various sources.
Data verification In this step collected data is verified weather the collected data is valid and true or not, because the collected data is not all ways reliable. It needs very careful examination due to possible errors and mistakes, which are later rectified for report generation purpose.
Report generation On the basis of analyzed and verified data is injected in the form of reports which is provided by SBP.
Submission In this last step the complete formed reports are submitted to the regulatory authorities such as SBP. The main sources of submission are courier and online.
Personal Experience Personal Experience
My internship was started on 6th of July at Operation Division of the ZTBL Islamabad. Firstly we met with Sir Mahmood Karim Qureshi Sahib, he is the Senior Vice President of BD & MD depa depart rtme ment nt.. We were were the the unde underr supe superv rvis isio ion n of SVP SVP BD & MD depar departm tment ent.. He warm warmly ly welcomed in the ZTBL Head Office and gave us the Brief introduction of the ZTBL and purpose of the organization. After meeting with SVP of BD & MD department I moved to the ZTBL Islamabad Branch, to the operation branch as Schedule given in the internship letter issued by ZTBL Head Office. I spend my first two weeks of Internship at ZTBL Islamabad Branch at operational Branch. As I wanted to the get information and knowledge about work which is going on grass root level, where the basic work is performing.
During internship period (8 weeks) in ZTBL (Internal Audit Department), I learned a lot of knowledge from the experts and highly qualified persons. It was necessary to fulfill the practical requirements of the degree of master of business administration.
Chapter no 2 Learning and personal Internship experience Practical Practical world is different different from that we studied in books. When students getting their degrees from their institutions, every one have its mind set goal, either he wanted to start his personal business or wanted to get a good job. Internship is the compulsory academic requirement where you are studying in the institute. As I’m student of MBA and I selected the ZTBL Bank for my learni learning ng experi experience ence becaus becausee ZTBL ZTBL is the develo developme pmenta ntall organi organizat zation ion of the Pakist Pakistan. an. Its technology is used for the high production development, so that it was our nicer chance to get into this to enhance the learning approach and get good experience from the organization.
Head Office Accounts Department
Team Members
Mr. Haide Haiderr Ali Jan Jan Arbab Arbab (Sen (Senior ior Vice Vice Presid President) ent) Mr. Ghulam Muhammad
(Vice President)
Mr. Muhammad Ali
(Assistant Vice President)
Mr. Tariq Ejaz Mr. Muhammad Naseer Mr. Zulfiqar Ahmed Satti Mr. Shaheen Iqbal Mr. Sher Alam Khan
(Assistant Vice President) (Assistant Vice President) (Grade - 1) (Assistant Vice President) (Assistant Vice President)
\
1st & 2nd Week July 12, 2010 – July 23, 2010 I started my internship in ZTBL form Monday 19th of July2010. On the first day of Internship I was introduced by the office members and the head office accounts Department in which we are doing doing the internsh internship. ip. Next day I was briefed briefed with with detail detailss about about the employee employee fund fund unit. unit. Recording of contributions towards employee’s funds and maintenance of individuals accounts in provident funds where applicable. Next day I was told about different funds. There are of basically the following funds.
ZTBL Employee Benefit Fund ZTBL Benevolent Fund (Officers) ZTBL Benevolent Fund (Staff) ZTBL Pension Fund ZTBL Gratuity Fund (under SSR-1961) ZTBL Gratuity Fund (under SR-2005) ZTBL Employees Provident Fund ZTBL General Provident Fund (Officers) ZTBL Contributory Provident Fund ZTBL General Provident Fund (Staff)
Next day I was briefed with details about the employee fund. The funds are managed by the trustees through operational staff of the unit. Each activity of funds is managed in accordance with the funds regulations and Bank’s instructions in this regard. Fourth day I was sent in payment unit and introduced the unit & office staff. Next day I was briefed with details about the function of payment unit. The main function of payment unit is to make the payments of head office expenses. Make all payments at Head Office and application of Income Tax as applicable. Provide tax chalans to Suppliers/Contractors. In the first day of 2 nd week I was in payroll unit where introduced by the office members and payroll unit. Next day I was briefed with details about the function of payroll unit, such as preparation of Payroll of Employees posted at Head Office and disbursement thereof, calculation of income tax, deduction and deposit with State Bank of Pakistan In the third day I was in inter bra branc nch h reco reconci ncili liat atio ion n unit unit and and was was intr introd oduc uced ed by the the offi office ce memb member erss and and inte interr branc branch h reconci reconcilia liati tion on unit. unit. Next Next day I was briefe briefed d with with detail detailss about about the functi function on of inter inter branch branch recon reconci cili liat atio ion n unit unit.. Last Last day day of 2nd week week I disc discus usse sed d thes thesee main main poin points ts such such as time timely ly reconciliation of inter branch transactions and communication in this regard with Branches and Zonal Offices and generating reports of Inter Branch Transactions - Originating & Respondingwise outstanding entries.
Fund Management Department
Team Members
Mr. A.D Abid
(Senior Vice President)
Mr. Iftikhar Hussain
(Vice President)
Mr. Shahid Tuafel
(Grade - 1)
Mr. Aftab Udin
(Grade - 1)
Mr. Khalid Qamar
(Grade - 1)
Mr. Hammid (LATE)
(Junior Manager)
3rd Week July 05, 2010 – July 09, 2010 In the first day of second week I was introduced by the office members and introduced by the fund management Department in which I was doing the internship. On the second day I was introduced by the various documents like, Advices and Vouchers. Next day I was briefed with details about this important document of ZTBL. In ZTBL advices are used for the purpose of financial transaction there are two types of advices such as Debit advices and Credit advices. Next day we were briefed with details about the vouchers. There are there types of vouchers such as Debit vouchers, Credit vouchers and Transfer vouchers. Debit vouchers have white colour, credit vouchers have blue colour and transfer vouchers have yellow colour. In ZTBL Head Office there is no cash transaction that’s why used only transfer voucher. Debit and credit vouchers are used in ZTBL branches but not in head office. Next day of this were given the assignment on Microsoft excel in which we maintain the record of funds that head office issue to the branches for tractors. In the last day of this were given the another assignment .in this assignment we were were checks the total amount of the branches and those branches that have above three million we write letter of those branches that they remit the extra amount to head office.
BUDGET DEPARTMENT
Team Members
Mr. A.D Abid
(Senior Vice President)
Mr. Waqar Hussain
(Vice President)
Mr. Zafar Iqbal
(Assistant Vice President)
Mr. Ahmad Aleem
(Grade - 2)
Mr. Ashraf Siddique
(Grade - 2)
Mr. Khalid Khatak
(Grade -3)
Mr. Amjad
(Senior Assistant)
4st Week June 28, 2010-July 02, 2010
On the first day of 4th week I was introduced by the office members. Next day I was introduced by the Budget Department in which I was doing the internship. Budget Department is basically to develop a budget process which clearly identifies issues, incorporates planning, establishes accountability factors and provides follow-up reporting. In the second day of I was told by the allocation of budget. Allocation of budget is done on two bases such as Demand based budget and Expenditure trend based budget (with some % increase like 10%). Next day I was briefed with details about this allocation of budget. In demand based budget allocate on the demand for this purpose budget department check the demand of branches and head office and allocate the budget. Expenditure trend based budget is one in which department allocate the budget of branches and head office same as last year or some percentage increase in the last year budget allo allocat catio ion. n. Next Next day day I was was intr introd oduc uced ed with with othe otherr impor importa tant nt term term such such as Cont Contin inge gency ncy / unforeseen reserves. Budget department also appropriation of capital and revenue expenditure for additional funds from contingency/unforeseen reserves for new schemes introduced during the year.
Central Accounts Department
Team Members
Mr. Rana Muja jah hid Ali
(Se Sen nior Vic icee Presi sid dent nt))
Mr. Ali Abbas
(Vice President)
Mr. Farooq Aftab
(Vice President)
Mr. Ali Hassa
(Assistant Vice President)
Mr. Muhammad Saleem
(Grade - 1)
Mr. Muhammad Iqbal
(Grade - 1)
5th Week August 02, 2010 – August 06, 2010
In the first day of 5 th week I was introduced by the office members and introduced by the central accounts department. Next day I was briefed with details about the pre payment verification unit fund unit. I briefly discussed about the function of these units such as verify all payments relating to head office and check budget/ceiling. Next day I was in policy unit and discussed about the policy unit. I briefly discussed about the function of these units: Coordinate with other departments in the head office on policy matters, issue specimen signature numb number erss and and up-d up-dat atee spec specim imen en signa signatu ture ress bookl booklet et for for use use by auth author oriz ized ed signa signato tori ries es in branches/head office and Allocate new G.L. Heads for accounting purposes. In the forth day of this week I was in tax unit. Where, I briefly discussed about the function of these units such as Issue guidelines regarding deduction of tax at source under the income tax ordinance, 2001, coordinate with tax consultant, SBP & income tax authorities on tax issues and Prepare statement & payment of advance tax u/s 147 of the income tax ordinance, 2001. In the last day of this week I was in accounts unit. We are briefly discussed about the function of these units such as prepare quarterly, half yearly and yearly financial statements and its agenda for presentation to audit committee & board of directors, compile balances under relevant group
of heads from trial balances for preparation of financial statements and produce list of abnormal entries/balances for rectification.
Regulatory Reporting Department
Team Members
Mr. Khalid Mehmood
(Senior Vice President)
Mr. Mubashir Umar
(Vice President)
Mr. Muhammad Ali
(Assistant Vice President)
Mr. Jameel Ahmad
(Assistant Vice President)
Mr. Kashif ur Rehman
(Grade - 1)
6th Week July 26, 2010 – July 30, 2010 First day of 6th week I was introduced by the office members and introduced by the regulatory reporting department. Next day I was given brief details about the functions and objectives of this department such as improve effectiveness in meeting statutory reporting obligations, prompt and accurate analysis to aid decision-making and periodic financial reporting to the management. In the third and fourth day of this they gave me the trial balance and said to make a balance sheet. During balance sheet formation I faced some problems so as I discussed these with office members and I finalized the balance sheet. In the last day of this week I made financial analysis of balance sheets such as Horizontal analysis and Vertical analysis.
Chapter 3 Performance Analysis of the company
SWOT ANALYSIS Strengths
It provides the loan at cheaper cheape r interest rate as compare to the other o ther Banks.
In Pakistan, majority of the farmers is poor that’s why farmers are required to get loan from the bank so ZTBL has h as a very vast market to operate in.
ZTBL ZTBL gets gets most most of the funds funds from from differ different ent develo developme pmenta ntall insti institut tution ionss includ including ing Government, Government, ADP, and SBP etc. so in case of bad debts the bank won’t have to suffer a lot.
It is affil affiliat iated ed with with differ different ent resear research ch insti institut tution ionss and it has all sort sort of agricu agricultu ltural ral machines and technology so it can easily achieve its aim which is the development of agriculture in Pakistan.
ZTBL has a staff college for the training of its employees in Islamabad, through proper training more efficient team of employees can be made which shall be beneficial in tough banking competition.
One of the core competency of the bank is its MCOs because ZTBL is the only bank which has a team of highly experienced and properly trained MCOs who can easily disburse loan and can achieve recovery target quickly hence risk of bad debts is reduced.
Throug Through h differ different ent comput computer er softwa softwares res data data is kept kept and mainta maintaine ined. d. Some Some of these these softwares are CFOCS, DMS, MIS, and HRIS etc.
ZTBL has no competitors in the market, some banks started lending facility for agri business but due to lack of efficient team of MCOs those banks had to suffer heavy loss.
The farmers have a trust on ZTBL because of its operations and the behavior of mobile credit officers.
Audit zone performing its job in a better way to rectify the errors and fraud cases.
Weaknesses
Sometimes the lending is done on political basis. Due to the influence of political leaders the recovery system is affected which leads to bad debts.
The bank has no treasury treasury department department due to which funds are not being properly properly utilized utilized and the bank is missing a great opportunity to earn profit.
There is exuberance of old, non technical and uneducated employees in ZTBL. These employees are promoted to senior level management on the basis of seniority due to which performance is affected.
Some cases of nepotism are often seen in the bank when loans are given by the branch managers to their relatives and fake data is maintained.
Most of the employees even seniors managers are computer illiterate. They can even check their emails properly. So IT implementation seems to be failed in the bank due to rigid attitude of employees because they are not adaptable to change.
They are lacking of banking bank ing online system.
Opportunities
By utilizing the efficient team of MCOs the bank can have heavy amount amoun t of deposits.
The bank can set up its treasury department in Karachi for proper utilization of the funds and for maximum profit earning.
The bank can reduce its expenses by laying-off non performing employees.
The bank has a good reputation in the market and its employees are highly trained for agri business development planning so it can also operate in Middle East because the Arabs are now focusing on agriculture.
ZTBL can become a leading commercial bank by slightly changing its culture. It is already equipped with highly experienced bank officers.
Threats
As the economy situation is very bad and the country is facing liquidity crunch that’s why ZTBL may have to face difficulty in getting funds.
In order to overcome the liquidity problem the bank has started operating in commercial banking market but due to inefficient commercial banking practices ZTBL may have to face a severe situation.
The climate of the earth is rapidly changing due to which heavy rains and floods are often anticipated. This is an alarming situation for ZTBL to operate in the market being an agri lender.
The bank has a very small profit margin because it gets funds from SBP at 6% and provides funds to the farmers at 8% only.
Agricultural crop rate decreasing each year
Ratio Analysis
Current Ratio
Formula: Total current assets/Total current liabilities (Values are in %)
Ratio
2006
2007
2008
Current Ratio
0.86
0.99
0.96
Current ratio has improved last year as the traditional value of the current ratio is 2. In 2008 the current ratio of ZTBL was 0.99 last year in 2007 it decreased to 0.96 but the difference is very low as compare to last year. The analysis of current assets showed that almost 50% of current assets comprise cash. This is a healthy sign for the ZTBL.
1 0.95 0.9 Current Ratio
0.85 0.8 0.75 2006
2007
2008
Debt to Equity Ratio
Formula: Total Debt/Total Equity
Ratio
2006
2007
2008
2009
Debt to Equity Ratio
0.34
0.29
0.20
0.18
The debt to equity ratio of the ZTBL is decreasing since last years as in 2006 D/E ratio is was 0.34 and in 2009 it is 0.18. The reason is that the company is mainly financed by equity, which is evident from low Debt/Equity ratio. The debt is being paid over the period of time. Hence the company apparently not properly utilizes this source of finance.
0.35 0.3 0.25 0.2 Debt to Equity Ratio
0.15 0.1 0.05 0 2006
2007
2008
2009
Total Debt to Total Asset Ratio
Formula: Total Debt/Total Asset
Ratio
2006
2007
2008
2009
Total Deb Debt
to Total 0.17
0.17
0.13
0. 1 0
Asset Ratio
The trend in above given table shows that the Total Debt to Total Asset Ratio decreases continuously, as in 2006 it was 0.17 and in 2009 it is 0.10. The reason is that the company is equity based and low financial leverage, accordingly there is very low Debt/Total assets ratio. This trend is continuing over the past five years.
0.18 0.16 0.14 0.12 0.1
Total Debt to Total Asset Ratio
0.08 0.06 0.04 0.02 0 2006
2007
2008
Interest Coverage Ratio
Formula: EBIT/Interest Charges
2009
Ratio
2006
Interest
Coverage 10.16
2007
2008
2009
13.69
3 6.7
65.42
Ratio
The interest coverage ratio of ZTBL increases as we move from 2006 to 2009. The company has very high interest coverage ratio. This is mainly due to low debts and increase in the profits over the years. It is evident from the previous five years data.
70 60 50 40 Interst Coverage Ratio
30 20 10 0 2006
2007
2008
2009
Total Assets Turnover
Formula: Sale/Total Assets
Ratio
2006
2007
2008
2009
Total Assets Turnover 0.41
0.51
0 .5 1
0.52
The Total Assets Turnover Ratio of ZTBL in 2007 is 0.51 and in 2009 is 0.52. There is slit difference it suggests that the assets turns over ratio over the period remain static especially during last two years.
0.6 0.5 0.4 0.3
Total Asset Turnover Ratio
0.2 0.1 0 2006
2007
Net Profit Margin
Formula: Net Income/Sale
2008
2009
Ratio
2006
2007
2008
2009
Net Profit Margin
0 .2 9
0 .2 9
0.34
0 .3 9
The Net Profit Margin of the ZTBL increases as w e move from 2006 to 2009 200 9 which suggests that there is decrease in expenses and expansions.
0.4 0.35 0.3 0.25 0.2
Net Profit P rofit Margin Margin
0.15 0.1 0.05 0 2006
2007
2008
2009
ROA
Formula: Net Income/Total Asset
Ratio
2006
2007
2008
2009
0 .1 3
ROA
0 .1 5
0.18
0 .2 0
The ROA of ZTBL in 2006 is 0.13 and in 2009 is 0.20, which increases increases as we move from 2006 to 2009. The return on Assets ratio has increased over the period of time, which indicates that assets assets are effectively effectively managed managed and utilized. utilized. We saw a trend of 2 to 4 percent percent increase increase in each year.
0.2 0.18 0.16 0.14 0.12 0.1
ROA
0.08 0.06 0.04 0.02 0 2006
2007
2008
2009
ROE
Formula : Net Income/Equity
Ratio
2006
2007
2008
2009
0 .2 6
ROE
0 .2 6
0.28
0 .3 4
ROE of ZTBL in 2006 is 0.26 and in 2009 it is 0.34. It is due to increase in net profit. We have observed an increase of 5 to 8 percent in return on equity in previous year from 2006 to 2009. 0.35 0.3 0.25 0.2 ROE
0.15 0.1 0.05 0 2006
2007
Earning per Share
Formula: Net Income/Share O/S
2008
2009
Ratio
2006
2007
2008
2009
Earning per Share
2 .6 1
3 .5 6
4.53
5 .7 2
The Earning per Share of ZTBL increased in 2006, which is 2.61 and in 2009 it is 5.72. As a result of proper utilization of resources and decrease in costs, the net profit of the company has been increased over the years. The second reason is that the company enhances its infrastructure at a low cost. All these arrangements results in increase of earning per share.
6 5 4 3
Earning per Share
2 1 0 2006
2007
2008
2009
Payout Ratio:
Formula: Dividend per share/Earning per share
Ratio
2006
2007
2008
2009
Payout Ratio
0 .8 6
0 .6 7
0.77
0 .8 7
The Pay out Ratio of ZTBL in 2006 is 0.86 and in 2009 it is 0.87. The dividend payout ratio has increased tremendously. This shows that less percentage of funds is re-invested du ring the year.
0.9 0.8 0.7 0.6 0.5 0.4
Payout Ratio
0.3 0.2 0.1 0 2006
2007
2008
2009
The compan company y is being being operate operated d in highly highly technol technologi ogical cal area area should should make make compre comprehen hensiv sivee planning for sustainability in in post deregulation era of interest sector in Pakistan. If we observe the recent year trend, all the described items on top have a positive sign showing future growth and compact current position. If we look at profit after tax we see that it improves significantly over the years due to reduction in cost and increase in assets. This is a good sign for the organization to expand the business. The organization also expanded its Assets significantly showing the worth of the organization. Interest coverage ratio of the organization is increased due to reduction in debt to equity ratio. Debt to equity ratio depict that company is more equity financed and financial charges are reduced. However in my opinion company should utilize
optimal financial structure and enhance debt side of financing to reduce more fixed cost of the company profit.
Liquidity ratios: Liquidity reflects the ability of company to meet its short term obligations using assets that are most readily converted into the cash. Assets that may be converted into cash in a short period of time are referred as liquid assets that are listed in financial assets as current assets. Current assets are often referred as a working capital because these assets represent resources needed for the day to day operations of the company’s long term, capital investments. Current assets are used to satisfy short term obligations. The amount by which current assets exceed current liabilities is referred as the net working capital.
Chapter no 4 Conclusion and Recommendations
Recommendations ZTBL should improve the Management system. They should be employee and customer oriented. They have to introduce the dress coat into the organization. Loaning procedure should be easier and convenient to the customers and easy processing system. They should adopt the new agriculture technology for the high level production to increase the GDP level of the country. ZTBL has to play vital role for introducing new energies to overcome the problems of the fuel and bio gas. Political involvement should be eliminated so that they can take good decision and actions for the better disbursement. Marketing department should play vital rol for introducing new products. They should also play role for advertise their products and features and functions of the products. ZTBL Head Office has to update the annual reports and manuals annually. They should hire the employee on the merit basis. Their employees have to knowledge about their organization and about its department where they are working. Employees should be qualified and productive.
ZTBl has to introduce again for Project Financing scheme. Because the scheme was successful before but due to the some hurdles it was closed. But it really highly benefited the whole country. The bank’s logo and its color should be changed. Fresh and energetic graduates should be select for the recruitment on the merit base. Bank should also be male and female oriented for the better performance of the organization. ZTBL has to started Online banking system so that their customer will get benefit from their services and number customer will increase to their organization. ZTBL has to introduce ATM card service to facilitate their customers ZTBL has to focus on commercial banking also Introduction of New Branches to expand their business. Introduction of DMS to overall branches.
CONSLUSION: During my internship here in ZTBL, I found that ZTBL has high level of professionalism and challenging environment and its culture is friendly. ZTBL seems Top Agriculture Financing in the future future as indicated by the financial financial indicators. indicators. It keeps energy energy and potential to serve the deserving clients in all over the world. The bank has set itself a vision to be a world-class bank. This can only be achieved with dedication and a passion to excel in every activity. I really admire ZTBL’s policy makers for designing investor friendly and customer oriented products. The bank is really working well and contributing a valuable part in the economy of Pakistan through tax, giving loan to government, giving loans to the businesses for their survival and expansion, generating a well skilled human resource and employment etc. During this internship, I really learned Professionalism, leadership skills, communication skills, problem solving skills, situation analysis skills and how to become a good mentor etc.
H e a d O ffic e A c c o u n t D e p a rt m e (AVP) In t e r B r a n c h 1 ( V -PV) A C A N T
(AVP) ( O -I-GI ) (AVP) (AVP)
P a ym e n t U n it 1 ( V -PV) A C A N T
(AVP) ( O -I-GI )
S V P O f f ic ic e
( O -I-GI ) ( O -I-GI )
E m p l o ye e F u n d U n i t
P A /( O-I )G
(AVP) (AVP) (AVP) ( O -I-GI )
P a yr o l l U n i t 1 ( V -PV) A C A N T
( O -I-GI )
( O -I-GI ) F i xe d A s s e ts U n i t 1 ( V -PV) A C A N T
( O -I-GI ) ( O -II) -GII)
Regulatory and reporting deportment
Grades of Bank
SEVP
EVP
SVP
VP
AVP
Grade1
Grade2 Grade3 Assistants
Nonclerical staff
Clerical Staff
ZONES & BRANCHES LOCATIONS
With an integrated network of over 27 zonal offices and 342 branches in Pakistan
