Download - Internship Report on ZTBL[3]
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INTERNSHIP REPORT
ZARAI TARAQIATI BANK LTD.
Submitted to:
Chairman
Department Of business Administration
Submitted By:
Name: SHABNAM NAZ
Roll # : Q575753
Registration #: 05-FID-0097
Mailing Address:Block No 10,Flat No 14, Cat-5,I-9/4 Islamabad
Contact #:0336-5013509
Date of Submission:
DEPARTMENT OF BUSINESS ADMINISTRATION
ALLAMA IQBAL OPEN UNIVERSITY
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ACKNOWLEDGEMENT
I have great sense of gratitude for the most Beneficent and Merciful Allah who has always
helped me in all matters of life .I tried but He rewarded me more than the tried.
I have deep feelings for whole of my family, in general, and for my Father, my Mother and my
elder brother, in particular .They have always soothed me, elevated me and their words and dua
has floated me in the deep seas of troubles. All of my successes are due to the prayers of my
family.
I am thankful to all of my teachers and my class fellows and friends whom cheerfulness and
guidance is an asset for me .I am especially thankful to the bank staff who has given me
opportunity to get precious practical knowledge and also for their guidance during my internship.
Without the help of all these I was not able to complete this report.
Shabnam naz
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Format of the Internship Report for MBA Finance
1. Title Page2. Acknowledgements
3. List of Contents
4. List of tables & illustrations, if any
5. Introduction
6. Objectives of studying the organization
7. Overview of the organization7.1 Brief history7.2 Nature of the organization
7.3 Business volume7.4 Number of employees7.5 Product lines
8. Organizational structure8.1 Main offices8.2 Comments on the organizational structure
9. Structure of the Finance Department9.1 Number of employees working in the Finance Department9.2 Finance & Accounting operations
10. Functions of the Finance Department10.1 Accounting system of the organization
10.2 Finance system of the organization10.3 Use of electronic data in decision-making10.4 Mobilization of funds10.5 Generation of funds10.6 Sources of funds10.7 Allocation of funds
11. Critical analysis of the theoretical concepts relating to practical experiences
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i.e. relate the theoretical concepts with your practical experience during your
Internship with the Finance Department11.1 Financial analysis (ratio analysis, horizontal & vertical analysis of theorganization for the last five years)11.2 Organization analysis with reference to the industries listed on the stock
exchange11.3 Behavior of the studied organization in allocation of various funds todifferent assets11.4 Future prospects of the organization
12. Short-falls/weaknesses of the Finance Department12.1 Critical analysis of the management patterns of the organization withreference to financial operations, weak areas that need to be improved.
13. Conclusions & recommendations for improvement
14. References & Sources used
15. Annexes
InstructionsThe report should be:
1.Double space typed on A4 size,
2.75 gram paper,
3.With bold headings & sub-headings,
4.With margins set as top,
5.Bottom & right 1 inch whereas left 1.5 inch.
6.These typed pages should be hard board binding in black color consisting of 25 to
30 pages.Latest Mailing Address, Roll Number, Registration Number & Telephone Number
should be clearly mentioned in the report.
HISTORY OF ZTBL
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The Zarai Taraqiati Bank Limited
(ZTBL)(formerly known as Agricultural
Development Bank of Pakistan) is thelargest public sector financial development
institution with a wide network of 27 Zonal
Offices, 9 Audit Zones and 352 branches inPakistan. The bank serves around half amillion clients annually and has over one
million accumulated account holders.
Pakistan is an agricultural country and more than 60% of its population is working related to
agriculture. A development in the agricultural sector will no doubt result in the development of
the whole country. To keep With a view to meet this basic need the Agricultural Development
Finance Corporation was set-up in 1951, and was entrusted with the task of providing financial
facilities for the development and modernization of agriculture, including: Forestry, Fishery,
Animal Husbandry, Poultry, Dairy Farming.
Later on the Agricultural Development Bank of Pakistan was also established in September
1957, under the Agricultural Development Bank Act. The Bank is to provide credit in cash or in
kind, warehousing and storage facilities to agriculturists, cooperative societies and other bodies,
of which the majority of members are agriculturists.
As the functions of the Agricultural Development Finance Corporation and Agricultural
Development Bank were similar and since both were working with capital provided by the
Government, they were merged into one organization known as Agricultural Development Bank
of Pakistan on February 18. 1961. The Agricultural Development Bank of Pakistan was a
banking company for the purpose of the Banking Companies Ordinance and the State Bank of
Pakistan Act.
On 14 December 2002 the Federal Government has converted the Agricultural Development
Bank of Pakistan (ADBP) into Zarai Taraqiati Bank Ltd (ZTBL) and the new venture has started
its operation with immediate effect. The new corporate structure redefines the banks statue as a
public limited company with an independent Board of Directors promulgated under the
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presidential ordinance which, aims at ensuring good governance, autonomy, delivering high
quality, viable and timely financial services to a greater number of clientele in the agricultural
and rural segment of the country with adequate returns to the stakeholder.
After this incorporation all the assets and liabilities of ADBP became the assets and liabilities of
ZTBL. This restructure was carried out with the aim to improve the working and role of bank in
the agricultural development.
The bank is completely owned by the government and it has head office in Islamabad.
Ownership Government
Type of Institution Specialized Bank
Established 1961
President & CEO Muhammad Zaka Ashraf
Equity 18.7 Billion (2009)Headquarters Islamabad, Pakistan
Total Deposits PKR 8.8 billion (as Dec.31st, 2009)
Total Disbursement PKR 77.7 billion (as Dec.31st, 2009)
Homepage www.ztbl.com.pk
ZTBL is providing affordable, rural and agriculture financial services to the rural Pakistan,
comprising 68 % of the total population. The Bank through a country-wide network of 352
branches is serving around half a million clients annually and over one million accumulated
account holders with the average loan size of around Rs.89,000.
Credit Rating
In August 2010, ZTBL continued to achieve AAA credit rating by JCR-VIS.
Year Entity Stand Alone Outlook2010 AAA/ A-1+ B+/ B Stable
2009 AAA/ A-1+ B+/ B Stable
The credit rating of the bank is due to the reason that bank enjoys sovereign guarantee of the
federal government that covers its debt obligations to State Bank of Pakistan (SBP) and ensures
safety of deposits under the Banks (Nationalization) Act 1974. The banks lending book is
largely funded through SBPs credit lines while contribution from deposits remains nominal.
ZTBL is actively exploring different options for resource mobilization including
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bilateral/multilateral arrangements with financial institutions. In case these efforts materialize; it
would diversify the existing funding source of the bank, thereby reducing reliance on the SBP.
Nature of organization
Dedicated to serve the needs of the farming community, by delivering financial products and
technical services on a competitive and sustainable basis, in a convenient, efficient and
professional manner, leading to success of the Bank and the farmers.
Business Volume
To play effective role in the promotion of economic growth, by enhancing the availability of
credit to the agriculture sector, through reliable access to sustainable financing, special lendingprograms, technical assistance, and other products & services, and to promote career
development opportunities for increasing professionalism and technical proficiencies of
employees.
Develop and operate as a financially and operationally sustainable R.F.I of the country.
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 image as a proactive, client friendly, financially & operationally
sustainable with indigenous product deployment.
Establish and provide backward and forward linkages to strengthen agri. value added
commodity chains.
Engage in public - private and wholesale - retail partnership to deepen outreach and
reduce operating cost.
To function as a rural commercial bank to mobilize rural capital formation and tocommercialize the agriculture sector by delivering the true value of credit to the client.
Provide a wide range of risk insurance products to its clients.
Open up its venues of operation to Domestic & International Banking Industry to avail
comparative advantages
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NO. Of Employees:
The general direction and superintendence of the affairs of the bank are entrusted to a 12
members Board of Directors consisting of a chairman appointed by the Federal Government, the
Federal Government officers from the Ministries of Finance and Food and Agriculture, four
officers of the four Provincial Governments and one non official nominated by each province.
One member on this board represents the State Bank of Pakistan also. However, at present the
bank has 7 directors including chairman. The bank also has a president appointed by the federal
government and a company secretary.
In ZTBL, the president supervises and directs the Chief Executive Officer who supervises and
directs the Head of Department, who then supervise and direct the officers under them. The
management hierarchy of bank is as follows;
Earlier the bank was functioning like a pure government institution and permission has to be
sought on every step for moving forward. Now the bank management board will be fully
empowered to run the affairs of the ZTBL.
More than 2,000 employees of the bank have opted for Voluntary Golden Hand Shake Scheme,
offered by the bank to its employees. Bank has established a task force for improving the
operational performance of the staff and it was monitoring the disbursement, recovery operations
and performance of field functionaries. The task force comprised 10-15 officers and each officer
will head a desk exclusively to monitor 3-4 regions. This task force will be responsible to
evaluate performance of each MCO, Manager and Regional Manager on the achievement of
banks policies regarding credit and recovery periodically.
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Board ofDirectors
Sultan Ali chaudhry
Chairman Board
Mr.Ihsan-Ul-Haq KhanPresident/ CEO
Mr.Muhammad Zaka
AshrafDirector
Mr.Abdul Wajid ArainDirector
Mr.Zafar IqbalDirector
Mr M Iftikhar Khan
mohmand
Director
Mr.M Yaqoob VardagDirector
Dr.Khalid Ahmed khokarDirector
Dr Amir Muhammad
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Brief Resume On Mr Ihsan ul Haq Khan President/CEO
All Pakistan ZTBL Officers Association (patriots) has welcomed the
appointment of a prominent banker Ehsan-ul-Haq Khan as President
of the Bank. Ehsan-ul-haq Khan is a seasoned banker having morethan 30 years experience in banking sector. He served Allied Bank
of Pakistan, NDFC and National Bank of Pakistan.
He was currently holding the post of Acting President/CEO of Small
& Medium Enterprises Bank (SME). The Association held an
emergency meeting on Saturday to discuss the appointment of new
President after the intervention of apex court. Addressing theofficers, Ghazanfar Ali, Secretary General of Patriots group lauded
the timely intervention of the Prime Minister Raja Pervez Ashraf
who in compliance with the Islamabad High Court Orders has
appointed Ehsan-ul-Haq Khan as permanent President/CEO ofZTBL
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A Brief Resume of director
Mr. Muhammad Zaka Ashraf
Present Portfolios
President/Chief Executive Officer, Zarai Taraqiati Bank Ltd.
Chairman & Chief Executive, Ashraf Group of Industries
Chairman, Pakistan Sugar Mills Association (Punjab Zone) from October, 2006 (Second
Tenure)
Chairman, Sugarcane Research & Development Company, Agriculture Department,
Government of Punjab
President, Petarian Association, Lahore
Patron-in-Chief Sindh Abadgar Welfare Association (Sindh)
Posts Held
Advisor to Chief Minister Sindh from 1989 to 1990
Member Executive Committee, Lahore Chamber of Commerce & Industry from October
2002 to September 2004
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Central Chairman All Pakistan Sugar Mills Association from October 2004 to October
2006
Vice Chairman of The Federation of Pakistan Chambers of Commerce & Industrys
Standing Committee on Food & Agriculture from January 2007 to December 2007
Academic Institutions
Member Board of Governors of Sadiq Public School, Bahawalpur, from 1st January 1989
Transformation of ZTBL to R.F.I of the country and road to excellence.
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 ADBsRural 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 ADBs loan were to be
utilized.
Healthy and well-functioning rural finance markets are directly related to achieving the two key
national policy objectives of accelerating rural/agriculture growth and reducing poverty. The
realization of these objectives depends on the simultaneity of developments in rural finance and
non-financial markets to foster the creation of diverse sources of rural finance to build
sustainable financial institutions, and stimulate products and capital flows in the rural sector. For
this, rural finance must be seen as an integral part of equitable development within a framework
of macroeconomic stability.
For the majority, access to affordable rural finance services is also important to enable them to
compete in the post-World Trade Organization scenario. Inability to compete because of high
financial costs could reduce income of the majority of farmers and rural clients, particularly the
small and subsistence clients. Lack of access to affordable rural finance services will also
prevent the clients from switching to non-farm activities.
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The ZTBL restructuring plan covering the following;
Governance: establish an environment that facilitates good governance and
accountability;
Systems: modernize operations through use of technology, networking, and
communication tools;
Business processes:streamline products and delivery systems so as to reduce transaction
costs, simplify operations, and increase outreach;
Products and services:introduce products and services that are financially economically
viable;
Human resource development: improve standards and skills of management and staff
and strengthen training capacity; and
Information Technology:establish new hardware and software platform to support
MIS, accounting system including forensic accounting, and risk management functions.
The reforms shall establish ZTBL as a key R.F.I of the country. By expanding its private sectorrole, the bank aims to establish network of high tech rural and agri. financial services through
intermediations under public private participation and whole-sale -retail lending mechanism.
Branch Structure:
Head Office
Islamabad, Pakistan
Punjab Sindh Balochistan Khaber
Pakhtunkhaw
Gilgit
Balitistan
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Islamabad
13 BranchesKarachi
15 BranchesD.I. Khan
14 BranchesAbbottabad
7 Branches
Gilgit
7 Branches
Multan8 Branches
Hyderabad14 Branches
Turbat6 Branches
Mingora
15 Branches
D.G.Khan
6 BranchesMirpur Khas
14 BranchesQuetta
18 BranchesPeshawar
20 Branches
Sahiwal
15 BranchesSukkur
15 BranchesD.M. Jamali
7 Branches
Lahore20 Branches Larkana18 Branches
Gujranwala18 Branches
S.B. Nazirabad14 Branches
Bahawalpur
13 Branches
Faisalabad20 Branches
Sargodha16 Branches
Vehari
11 BranchesMuzafargarh
11 BranchesR.Y. Khan
7 BranchesMuzafar.Abad
10 Branches
27
Total Audit Zones 9
Total Branches 352
Total Zones
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Kissan Support Services Ltd.
Subsidiary of ZTBL
Kissan Support Services Ltd. Is a subsidiary of ZTBL which is established with a capital
investment of 100 Million to help ZTBL in the achievement of its objective and also to make
availability of trained human capital to the bank.
KSS Aim
To provide support staff to ZTBL & under take its non core activities.
KSS Operation
Kissan support services operates under its Memorandum & Articles of Association.
Objectives
The main objective of KSS are following:
To provide to the Bank all kinds of support staff and ancillary services
To plan, organize and establish training facilities to impart training to the banks staff
Drip Irrigation System to assist the bank clients in marketing of their product and provide
storage facilities
To assist the bank clients in marketing of their product and provide storage facilities
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To provide welfare services to the employees of the Bank including education, vocational
training, sports and recreation facilities
To invest any surplus money of the company not immediately required
To carry on any business, which may seem to the company capable of being conveniently
carried on
To liaison & establish contracts with agricultural research organizations for development
of efficient, effective and appropriate technologies
To carry on business of providing consultancy, advisory and other agency services and
support services to Zarai Taraqiati Bank Limited
To provide to the Banks clients quality products and services for efficient and improved
farming
Etc.
Services/Activities so far undertaken by KSS
Security Services to ZTBL
Recruitment/provision of staff
janitorial Services provided to:
ZTBL Head office buildings
Ztbl Farms
Staff college
Printing stationery office
AV Unit
Old record office
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Sports club
Warehouse
Management of Sports Activities
Management of Sports Activities
Photocopy Services
Day to day minor repair and maintenance of ZTBL HQ Buildings
ZTBL Locker Facility
Zarai Taraqiati Bank Ltd. apart from its core functional activity marked with country based agri-business, has started to serve its valued customers by offering lockers facility. Initially, thisfacility is being offered at following 11 branches:-
S.No Name of Branch
1 Islamabad Branch
2 Main Branch Lahore
3 Peshawar Branch
4 Gujranwala Branch
5 Faisalabad Branch
6 Multan Branch
7 Sahiwal Branch
8 Sargodha Branch
9 Khan Pur Branch
10 Shafi Court Branch
11 Main Branch Gulshan-e-Johar
Following are the approved rates for rent of lockers and key deposits against which lockers will
be allocated:
Type Specification Rent Per AnnumRent after grace
periodKey Deposit
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Small 6-1/2"x4-1/2"x23" Rs.1,200/- Rs.1,500/- Rs. 5,000/-
Medium 13-1/2"x4-1/2"x23" Rs.1,800/- Rs.2,250/- Rs. 10,000/-
Large 13-1/2"x8-1/2"x23" Rs.2,500/- Rs.3,125/- Rs. 15,000/-
Life Time Locker Facility
On lump-sum payment of locker rent for ten years entitle the lessee to avail the locker facility forlife time, without key deposit.
Products offered to Meet Finance Need of Farmers:
Zarai Taraqiati Bank Limited (ZTBL) is a specialized bank providing agricultural credit in rural
areas of the country. Pakistan is an agricultural country and near about 60% of its population is
working directly or indirectly related to agriculture industry. But instead of being an agricultural
country Pakistan is still not gaining benefits from this sector which it can gain. Some time we
even does not able to fulfill our food requirement and sometime we have bumper crop but does
not have facilities to store them properly, in this way we are wasting our resources. To gain
benefit from agriculture sector it is required to be modernized to increase the per acre production
and also to build warehouses to store. The main hindrance in the modernization of agriculture is
the unavailability of finance. The other financial institutions feel reluctant in giving finance to
farmers due to high level of risk in the production of this field. To facilitate farmers and to help
in modernization of agriculture sector the government has established this bank which is
contributing its part in achieving government objective from many decades. ZTBL is offering a
blend of products to fulfill the need of different types of customers.
Types of Loans Advanced
Short Term Loans
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Short term loans are loans for shorter period of less than a year. It includes, crop
production working capital loans recoverable in lump sum commencing after the
harvest/marketing of respective crops and within maximum period of 12 months.
Medium Term Loans
Medium term loans are for a period of more than a year but less than 5 years. In includes,
dairy farming and livestock etc. The installments of these loans are usually paid able in
quarterly or half yearly basis.
Long Term Loans
Long term loans are for a period of more than 5 years. These are development loans
which require large amount and also need some time to show its result in the shape of
better production. It includes loans for tractor, agricultural machinery, poultry farming,
godowns and orchard in yearly/half yearly installments within maximum period of 8
years.
Loan Schemes:
ZTBL is offering the following loan schemes to the farmers.
Supervised agriculture scheme:
Under this scheme agriculture loans are given for short, medium and long term loans up to Rs.
1.00 million per borrower/per case. The loans are sanctioned for In Fats, livestock, orchard,
tractor, agricultural machinery, tube well and irrigation facilities etc. under the scheme besides
provision of credit, information are provided to the farmers for planning the farm, production,
guidance for implementation of the scheme, marketing and repayment of loans.
Zarkhaiz (one window operation)
For timely and conveniently provision of credit to purchase inputs, loans are provided to the
borrowers under One Window Operation being conducted twice a week during Rabi and Kharif
seasons. Applications processed on the same day whereas sanction payments are made within
three days at Branch. For Rabi Crops one window operation from October to January and for
Kharif Crops from April to September each year which is extendable as per requirement of
particular area.
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Sada Bahar Scheme
For providing timely input loans for crops and working capital for poultry and fishery etc, the
Bank has launched a Sada Bahar Scheme. Assessment for inputs requirements for the whole year
is made at the time of first application. The amount so assessed is treated as Revolving Limitprovided it is within the security limit. The Managers are authorized to sanction such loan limits
up to Rs.O.500 million. Schemes main features are as under:
Revolving Credit Limit is fixed to cater production credit and ancillary requirements of
the farmers during one year period.
The documentation once completed remains applicable for three years with yearly
cleanup/renewal without any further documents.
The borrowers can draw the credit in lump sum or in installments according to his
requirement.
Like-wise he can repay in lump sum or in installments during the year when his cash
position allows him.
Pass Book containing transactions in his SBS Account is supplied to every borrower free
of cost.
Tea financing scheme
In order to increase the tea cultivation in District Mansehra, Swat, Mutta, Shangla par and Dir in
Malakand Division, tea financing scheme has been introduced which would not only save the
hard earned foreign exchange but would also help improve the socio-economic condition of the
inhabitants of the area. The salient futures of the scheme are given as under:
Maximum Credit Ceiling of Rs.60, 000/- per acre has been fixed.
Farmers owing land up to five acres are eligible to avail loans.
Credit will be given in 3 installments: first year Rs.30, 000/-, 2nd year Rs.15,000/-
3rd year Rs.15,000/- provided the disbursed loan is used properly.
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The credit would be repayable within 1 year with 6 years grace period with
prescribed markup of 9% per annum. Rebate of 1 % will be allowed in mark-up
on timely repayment and proper utilization of the loan.
Crop maximization project:
Ministry of Food, Agriculture and Livestock (MINF AL), Government of Pakistan has launched
Crop Maximization Project in 109 villages in various districts throughout the country to increase
the productivity/yield of crops. Under the project MINFAL has to provide funds of Rs, 299.893
million to ZTBL for disbursing loans to the project farmers for purchase of inputs. Till the time
funds of Rs.468 Million have since been received by the Bank for the purpose. These funds are
to be revolved for meeting input credit needs in the project villages till 30th June, 2014 after
which Bank will return the principal amount to MINFAL. Accordingly Credit needs of the
project farmers are being met by respective ZTBL branches through Village Organizations
formed for the purpose. Duly the currency of the project Bank is authorized to charge 4% per
annum mark-up on loans to project growers to meet its operational cost, however in case of
default Banks normal rate of return i.e. 9% p will be applicable.
PER ACRE CREDIT LIMITS
Major Crops
Wheat 16,000
Paddy (Rice) 19,000
Sugarcane 30,000
Cotton 21,000
Maize 20,000
Minor Crops
Overall Credit Limit Per Borrower Rs.1.000 Million
Sada Bahar Scheme under one window operation or otherwise Rs.0.500 Million
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Potato 36000 Bajra 11000
Tobacco 29000 Jawar 11000
Mustard Mung 11000 Gram 12000
Tomato 19000 Guara 3000
Mash 3000 Caster Oil 6000
Lentil 11000 Barlay 9000
Groundnut 14000 Berceme 4900
Sunflower 15000 Janter 4000
Soyabean 12000 Garloc 26000
Canola 13000Turmeric
25000
Rape Seed 11000 Ginger 30000
Til(Sesame) 12500 Lacern & Shaftal 4500
Suger beet 12000
Growing Agro Forest Tree
SNo. Trees 1st Year 2nd Year 3rd Year
1 Bamboo 34,000 8,000 3,000
Growing Orchards
S. No. Trees 1st Year 2nd Year 3rd Year 4th Year 5th Year
1 Mango 24,000 13,000 13,000 13,000 14,000
2 Citrus 21,000 12,000 11,000 13,000 13,000
3 Apple 23,000 12,000 12,000 12,,000 14,000
4 Banana 29,000 20,000 23,000 30,000 26,000
5 Jujuba 19,000 9,000 10,000 10,000 10,000
6 Guava 21,000 12,000 11,000 13,000 13,0007 Coconut 29,000 6,000 6,000 7,000 8,000
8 Palm Oil 18,000 6,000 7,000 7,000 7,000
9 Dated 33,000 12,000 11,000 12,000 13,000
Mature Orchard/Fruits crops
Pear 24000 Dates 31000
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Loquat 24000 Strawberry 25000
Plum 33000 Tea 60000
Apple 37000 Guava 24000
Papaya 22600 Pomegrante 33000
Almond 32000 Palm 22000
Coconut 21000 Olive Oil 13000Lichi 32000 Walnut 23000
Cherry 33000 Persimen 15000
Mango 37000 Zizi Phus(Bher) 25000
Apricot 31000 Melon 16000
Banana 37000 Water Melon 16000
Peach 32000 Musk Melon 16000
Citrus 34000
Types of Security:
Immovable Property:
Agricultural Land
Under Pass Book System 80%
Outside Pass Book System 70%
Under Alienability Certificate 66%
Commercial/Industrial Land under Pass Book 80%
Outside Passbook System
Urban Residential/Commercial Plots in all localities outside Pass Book 75%
Alienability Certificate 66%
Residential/Commercial Buildings 70%
Lease hold rights of a leased land of CDA/KDA with 99 years lease 70%
Moveable Property and Guarantees:
Unconditional Bank guarantee from scheduled Banks
Up to maximum amount of an un-conditional Bank guarantee after keeping sufficient
margin for un-paid mark-up, cost, charges and expenses.
Guarantee issued by Central or Provincial Government
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Full amount of loan plus return and other charges.
Government securities
85% of face value or market value whichever is less.
Defense Savings & FEB Certificates
75% of value of certificates presented as security.
Fix Term Deposits Receipts
85% of face value of deposits receipts.
NIT Units
80% of the face value or market value whichever is less.
Life Insurance policies
85% of surrender value
Pledge of Potatoes/Seed Potatoes price or market value which ever is less Up to
75% of Govt. support.
Personal Surety:
Against a bond with two sureties under General Credit and one surety in Special Schemes up to
Rs.25,000/- or Up to 50% of appraised value of properties of sureties.
Debt Equity Ratio
For Tubewell/Tractors/Implements/Attachments/Equipments
All kinds of
Tubewells/
Turbines
25%
Within 5 years in annual/bi-annual
installments commencing one year after firstdisbursement
New Tractor
No equity but10% of the loan is
to be needed in
PLS Account
Within 8 years in monthly/quarterly or half
yearly installments to be decided by Managerin consultation with borrower.
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Used Tractor,
Equipments/
attachments/
implements
and used tractor
-do-Within 5 years in monthly/quarterly or halfyearly installments to be decided by the
Manager in consultation with borrower.
Except Tubewell/Tractors/Implements/ Attachments/Equipments
Production Loan upto Rs.0.100 Million NIL
Land holding upto 25 acres/loan amount upto Rs.0.2 Million 15%
Land holding beyond 25 acres to 50 acres/loan amount beyond Rs.0.2 Million uptoRs.0.5 Million
25%
Land holding beyond 50 acres/loan amount beyond Rs.0.5 Million upto Rs.1
Million.
30%
Repayment Periods
S. No. Types of Loans Recovery Period
1 Short Term Loans Crop production working capital loans recoverable in lump sum
commencing after the harvest/marketing of respective crops and
within maximum period of 12 months.
2 Medium Term
Loans
Dairy farming and livestock etc. In yearly/half yearly/monthly
installments and within maximum period of 5 years.
3 Long Term Loans Tractor, agricultural machinery, poultry farming, godowns andorchard iIn yearly/half yearly installments within maximum
period of 8 years and. above.
Recovery Procedure
A) Recovery Schedule
Recovery schedule in each loan case as per terms of sanction of loan is fixed and
communicated to the borrowers after disbursement of loan.
In case of default or failure in repayment of any installment on due date the mark-up shallcontinue to be charged and last installment due to this may differ from the amount of
installments fixed at the time of disbursement.
b) Issuance of Notices
Demand noticeis issued before the due date of every installment.
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A Legal Noticeis issued one month after the due date informing the borrower that if the
amount is not repaid within next one month, further legal action will be taken to recover
the dues.
c) Legal Action
Legal action can be initiated against the defaulter if loan is not repaid even after expiry of
legal Notice period.
Where the court in bank's favour has decreed a case, account is to be settled by recovery
of amount from the auction of the mortgaged property.
The bank may purchase the mortgaged property if considered feasible to dispose it off
later on through auction or in any manner deemed fit for getting the best price.
The bank may dispose off the mortgaged properties of defaulters for satisfaction of its
dues with out intervention of courts under Financial Institutions (Recovery of Finances)
Ordinance 2001.Rescheduling of Loan Repayment Facility
d) Rescheduling of Loan Repayment Facility
ZTBL allows rescheduling of repayment of installments to its borrowers in order to
maintain credit discipline and to mitigate their genuine problems in real hardship cases
and in areas declared as calamity hit by the respective Provincial Governments
The Rescheduling facility is to be considered by bank on case to-case basis and is to be
allowed on borrower's request only.
The relaxation in recovery period shall not be allowed beyond one year in any case.
The borrowers shall have to execute a supplementary loan agreement on Non Judicial
Stamp Paper of appropriate value to give legal cover to extended period.
The borrowers shall have to pay the return for the extended period.
d) Down Payment for Rescheduling of Loans
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Rescheduling Number Rate of down payment as against due
installments to be rescheduled
1st 10%
2n
20%
3r
30%
Horizontal Analysis of Balance Sheet
Particulars 2011 2010 2009 2008 2007
ASSETS % % % % %
Cash & balances with
treasury banks 8.695 31.983 -18.724 -0.532
100
Balances with other banks 973.720 707.497 426.058 428.274 100
Lendings to financialinstitutions - - - -
-
Investments - net 77.413 166.845 97.724 349.899 100Advances - net 28.689 12.842 13.212 -2.595 100
Operating fixed assets 16.981 -11.432 -16.375 -29.360 100
Other assets - net -8.284 1.860 -10.364 -14.614 100
21.936 11.267 1.813 -0.098 100
LIABILITIES
Bills payable 210.675 98.915 39.962 19.402 100
Borrowings 0.000 0.000 0.000 0.000 100
Deposits and other
accounts 73.764 38.465 -7.681 -15.296
100
Sub-ordinated loans 0.000 0.000 0.000 0.000 100
Liabilities against assets
subject to finance lease - - - - -
Deferred tax liability - - - - -
Other liabilities 86.149 46.641 9.006 3.013 100
19.942 10.705 1.418 -0.086 100
NET ASSETS 32.729 14.307 3.948 -0.162 100
REPRESENTED BY
Share capital 5.500 0.000 0.000 0.000 100Reserves 404.287 162.741 66.838 13.928 100
Unappropriated profit 278.696 112.925 17.022 -18.478 100
30.315 10.222 2.245 -0.998 100
Surplus on revaluation ofassets - net of tax 260.729 400.125 164.838 78.773 100
32.729 14.307 3.948 -0.162 100
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Note:In this Horizontal Analysis the year 2004 is taken as a base year to calculate the change in
other financial years. All the columns are representing change with respect to 2007.
Vertical Analysis of Balance Sheet
Particulars 2011 2010 2009 2008 2007
ASSETS % % % % %
Cash & balances with
treasury banks 1.693 2.253 1.516 1.891 1.899
Balances with other banks 15.518 12.790 9.106 9.319 1.762
Lendings to financial
institutions 0.000 0.000 0.000 0.000 0.000
Investments - net 4.940 8.143 6.594 15.290 3.395
Advances - net 68.324 65.655 71.987 63.121 64.739
Operating fixed assets 1.117 0.927 0.956 0.823 1.164
Other assets - net 8.408 10.233 9.841 9.554 11.178
100.000 100.000 100.000 100.000 100.000
LIABILITIES
Bills payable 0.722 0.501 0.385 0.333 0.279
Borrowings 60.320 65.353 71.338 72.412 72.350
Deposits and other
accounts 6.385 5.512 4.012 3.736 4.407
Sub-ordinated loans 3.771 4.086 4.460 4.527 4.523
Liabilities against assets
subject to finance lease 0.000 0.000 0.000 0.000 0.000Deferred tax liability 0.218 0.152 0.011 0.000 0.000
Other liabilities 28.584 24.396 19.796 18.989 18.418
100.000 100.000 100.000 100.000 100.000
NET ASSETS 100.000 100.000 100.000 100.000 100.000
REPRESENTED BY
Share capital 74.223 83.179 89.669 92.606 91.682
Reserves 6.438 3.966 2.715 1.914 1.664
Unappropriated profit 19.339 12.855 7.616 5.480 6.655
100.000 100.000 100.000 100.000 100.000Surplus on revaluation of
assets - net of tax 2.847 4.584 2.669 1.876 1.048
100.000 100.000 100.000 100.000 100.000
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Horizontal Analysis of Profit & Loss
Particulars 2011 % 2010 % 2009 % 2008% 2007%
Mark-up/return/interest
earned 4.501 -13.362 -26.024 -15.825 0.000Mark-
up/return/interest
expensed 11.279 9.002 -10.618 -87.507 0.000
Net mark-
up/interest income 0.224 -27.473 -35.745 29.405 0.000
Provision against non-
performing loans andadvances -43.546 -9.279 -48.118 38.920 0.000
Provision/(reversal)for diminution in the
value of investment 27.355 -168.737 913.026 -158.617 0.000Write offs under
Government relief
packages 0.000 4286.557 15739.293 0.000 0.000
Bad debts written off
directly
-16.749 58.214 65.541 105.258 0.000
Net mark-up/interest
income afterprovisions 14.982 -101.980 -123.815 -36.551 0.000
NON MARK-
UP/INTERESTINCOME
Fee, commission and
brokerage income 82.822 -2.988 5.560 30.996 0.000
Dividend income 89.283 -64.283 7.133 7.133 0.000
Other income 514.594 509.536 486.610 -11.859 0.000
Total non mark-
up/interest income 506.732 500.567 478.468 -12.217 0.000
144.932 57.249 35.344 -30.120 0.000
NON MARK-UP/INTEREST
EXPENSES
Administrative
expenses 85.474 55.459 13.261 7.184 0.000
Provision against
other assets 12392.995 2574.166 54846.182 379.466 0.000
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Provision for stolen
fixed assets
Other charges
Total non mark-
up/interest expenses 98.750 58.105 73.490 6.965 0.000
241.700 55.455 -100.000 -107.828 0.000PROFIT BEFORE
TAXATION 241.700 52.854 -44.586 -107.828 0.000
Taxation -
Current 175.783 25.485 -56.772 -92.363 0.000
- Prior
years
-
Deferred -266600.000 2231120.000 189060.000 -12240.000 0.000
175.638 49.299 -54.893 -92.483 0.000
PROFIT AFTER
TAXATION 291.769 55.548 -36.775 -119.457 0.000
Unappropriated profitbrought forward 455.289 205.182 112.603 160.791 0.000
Profit available for
appropriation 346.096 105.262 12.854 -26.348 0.000
Transfer tostatutory reserve - - - - -
Transfer tocontingency reserve - - - - -
Profit caried
forward 346.096 105.262 12.854 -26.348 0.000
Basic earnings per
share (Rupees) 235.049 33.028 -43.548 -117.742 0.000
Note:In this Horizontal Analysis the year 2004 is taken as a base year to calculate the change in
other financial years. All the columns are representing change with respect to 2004.
Vertical Analysis of Profit & Loss
Particulars 2011 % 2010% 2009 % 2008% 2007 %
Mark-up/return/interest
earned 170.058 194.831 187.772 106.091 163.098
Mark-up/return/interest 70.058 94.831 87.772 6.091 63.098
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expensed
Net mark-up/interest
income 100.000 100.000 100.000 100.000 100.000
Provision against non-
performing loans and
advances 99.934 84.502 46.186 99.740 147.368Provision/(reversal) for
diminution in the value of
investment 0.066 -0.019 0.264 -0.012 0.043
Write offs under
Government reliefpackages 0.000 15.517 53.549 0.273 0.000
Bad debts written off
directly 0.000 0.000 0.000 0.000 0.000
100.000 100.000 100.000 100.000 100.000
Net mark-up/interest
income after provisions 34.539 -0.926 -12.946 66.804 73.574NON MARK-
UP/INTEREST INCOME
Fee, commission andbrokerage income 0.076 0.041 0.046 0.377 0.252
Dividend income 0.197 0.038 0.117 0.771 0.631
Other income 99.727 99.922 99.837 98.853 98.451
Total non mark-up/interest
income 100.000 100.000 100.000 100.000 100.000
NON MARK-
UP/INTEREST
EXPENSES 100.000 100.000 100.000 100.000 100.000
Administrative expenses 92.994 97.983 65.056 99.855 99.651
Provision against otherassets 6.934 1.866 34.937 0.494 0.110
Provision for stolen fixedassets 0.053 0.000 0.000 0.000 0.000
Other charges 0.019 0.151 0.007 0.145 0.000
Total non mark-up/interestexpenses 100.000 100.000 100.000 100.000 100.000
45.070 31.938 0.000 -3.619 32.306
PROFIT BEFORE
TAXATION 100.000 100.000 100.000 100.000 100.000
Taxation - Current 100.052 84.049 95.833 101.605 99.999
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- Prior years 0.909 1.103 0.000 0.000 0.000
- Deferred -0.961 14.848 4.167 -1.605 0.001
100.052 84.049 95.833 101.605 99.999
PROFIT AFTER
TAXATION 58.644 50.603 37.410 -17.641 66.776
Unappropriated profitbrought forward 41.356 49.397 62.590 117.641 33.224
Profit available for
appropriation 100.000 100.000 100.000 100.000 100.000
Transfer to statutory
reserve 0.000 0.000 0.000 0.000 13.355
Transfer to contingency
reserve 0.000 0.000 0.000 4.096 0.000
Profit caried forward 100.000 100.000 100.000 100.000 100.000
Interpetation of Horizontal and Vertical Analysis
Markup/ Return/ Interest Earned
Markup/return/interest earned is the amount which the bank earns from its primary function oflending money to its customers. Increase in this income shows that bank is growing, the reason
of this growth can be either the increase in customer base or in the increase of rate of lending.
When I compare the markup/return/interest earned by the bank in the past 5 years it shows thatthe bank has improved its primary function in recent years. The year from 2008 to 2010 shows a
decline in this income which is a clear sign that in that specific years the bank performance was
not satisfactory, the reason of this performance can be the political unrest in the country due to
which sufficient attention couldnt be given to banks working or it can be result of large NPLs.
In the notes related to markup/return/interest earned it shows that the bank is earning a major part
of its income from the loans given to customers, the bank has less focus of investment. However,it is earning a handsome amount from the placement which it has made with other banks.
Markup/Return/ Interest Expensed
Markup/Return/ Interest Expensed is the expense of bank on taking deposits and borrowings
from the SBP. This expense shows an increase as compared to previous years which shows that
banks cost of deposits and borrowings has been increased. This increase can be due to tworeasons, it can be due to increase in the amount of deposits and borrowing or it can be due to
increase in the rate the bank offered on deposits and on borrowing from SBP.
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In the notes it shows that bank is paying a large amount on borrowing from the SBP rather than
on the deposits. It can be due to two reasons that either bank has deposits in the current account
on which it has to pay no or less cost or it is due to less deposits. From the amount of deposits inthe balance sheet it is clear that the deposits of bank are not of significant amount as compared to
borrowing. I also know that bank is working manly on the amount borrowed from SBP rather
than on deposits collected from the general public and institutes. An increase inmarkup/return/interest expensed is not a bad sign if the markup/return/interest income is alsoincreasing, however if the increase in expense is more than the increase in the income than it will
be a negative sign. From the vertical analysis of Profit and Loss account it is clear that the
income is much more than the expense which shows that the bank has cushion to confront withother expenses incurred due to secondary functions of the bank which is a positive sign.
Net Markup/Interest Income
It is the income which the bank is earning after paying the markup/return/interest expensed.From the horizontal analysis of the profit and loss it is clear that there are many ups and downs
in this income which is result of decline in the markup/return/interest income of the bank. But in
the year 2008 it shows recovery and it is increased as compared to previous two years of 2006and 2007.
When I look net income in terms of amount in the profit and loss accounts of last five years I
find it positive and a handsome amount to bear the other expenses of the bank. Because thehorizontal analysis is showing result by taking 2007 as a base year that is why in the year 2009
and 2010 it shows negative sign which means that in these two years the net income of the bank
has been decreases as compared to year 2007. But in the year 2011 it again shows recovery.
Provision again Non-Performing Loans
This shows the cost bank is charging to it P&L account against those loans which may become
bad debts; almost all banks try to reduce this cost. This shows the customer base of the bank towhich bank is lending, the lesser the cost the better and trustworthy client base the bank has.
Horizontal analysis of P&L A/C shows the decline in the recent years in this provision which is apositive sign for the bank. Which shows that banks credit and recovery departments has
improved their workings.
Provision/ (reversal) against diminution in the value of investmentThis shows any provision required to charge or reverse for the investment made by the bank. An
increase in the provision shows that the investments of the banks are declining in value which
will definitely result in loss and if the provision made before is reversed it shows that the valueof the investment is increasing.
The horizontal analysis of the P&L account shows that the provision created by the bank is
reduced in 2008 as compare to 2007 which is a positive sign. The reason of large provision in
2007 can be due to uncertainty in the stock market etc.
Write offs under Government Relief Packages
ZTBL is a government bank due to which the government can ask it to give relief to loanees ofparticular regions of category which also increase the cost for the bank. The flood of 2012 is
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expected to increase this cost in this financial year too because a large number of farmers have
been effected with this flood and they are not in the situation to return their borrowed amount to
the bank. For the year 2011 there is not any amount which is asked by the government to writeoff but in the year of 2010 and 2009 there is some amount which banks directly written off on
the instructions of the government.
Net markup/ Interest income after provisionsThis is net income after charging provisions. An increase in this income is a positive sign which
can be due to two reasons that either the net markup/return/interest income has increased or the
provision required to be charged by the bank is reduced due to less number of NPLs loans. So, ifthe net markup/interest income after provision is increasing it is a positive sign because the bank
will have more amounts to pay its other expenses like admin expenses etc. and it will result in
more Gross Profit.
Non Markup/Interest IncomeIt is the income which the bank in earning from its secondary functions. An increase in this
income is also a positive sign it shows that the bank is also making its secondary functionsprofitable. The secondary functions shows the amount earned from the commission charged in
the services offered by the bank, the dividend income etc.
But this income may also have a portion of income gained by the bank by the sale of scrap or oldmachinery etc. It is not a positive sign if this income is larger part of total non markup/interest
income. Because, the bank will not have the scrap to sale in all years and having larger part of
this income of sale of scrap will definitely depicts that the banks profitability can be affected inthe coming years. However, if the bank has sold old machinery and in the meanwhile new
machinery is added in the assets of the bank than it will be a positive sign because it will show
that the bank is working on BMR (Balancing, Modernizing and Restructuring) which will result
in better performance.
The profit and loss account of the bank is showing an increase in the non markup/interest income
which is a positive sign. The vertical analysis of the profit and loss shows that other income isthe larger part in non markup/interest income and from the notes it is clear that in the other
income, the amount recovered which has been written off previously is making a bigger portion.
Recovering a previously written off loan is a positive sign because it is causing an increase in theincome of the bank.
Non Markup/Interest Expenses
It consist on the expenses bank payed for admin expenses and some other expenses. But theadmin expenses is usually a large part of this non markup/interest expenses and also it is most
important expenditure to have a look upen because it shows that whether the bank is utilizing its
human capital efficiently or not. A larger admin expenses is not a negative sign if it is also
increasing the income of the bank. However, if the percentage change in the increase in theadmin expenses is more than the percentage in the increase in the income than it is a negative
sign beacause is paying more to increase its income. Almost all banks try to control this income
so that to increase their income.
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The ratio of Admin Expenses to Deposits is used to check the cost bank is facing on collecting of
deposits which is the main source of money bank required to lend to others to make income.
However, in ZTBL the bank relies on borrowing from SBP more than on deposits so theefficiency of admin expenses can not be judge from the ratio of admin expenses to deposits. So,
it is difficult to say anything about the cost of admin expenses.
From the horizontal analysis it is clear that the admin expenses has been increased in 2011 butthe profit of the bank is also increased so it is not a negative sign. By looking in the notices of
financial statement it is found that admin expenses consists on a number of expenses, salaries of
the staff no doubt a major a part of it but other expenses like traveling expenses, motor vehicalcost of repairing etc are also effecting this cost a lot. Because I know that the MCO scheme has
become a major part of the banks working so increase in the cost of traveling, rapairing is not a
surprise.
Profit before TaxationThe profit before taxation has been significantly increased in the recent years, the financial
statement for the 2012 is still not available on internet nor in print format but some key factswhich has been published by the bank for the 2012 shows that bank continues making profit in
year 2012 also. When I look in the previous year it found that the profit before taxation is 2.5
times more than it was in 2007. However, the increase in the profitiability is not constant there
are ups and downs in it. Like in 2008 and 2009 the profit of the bank has been decresed ascomapred to 2007 and in 2010 it again started increasing and this continues till 2012 which have
result of more than 2 Billion.
TaxationDue to increase in the profit the tax has been also increased, it is almost doubled in the last 5
years like the profit of the bank which has been also doubled. So, it not a negative sign. By
compare the increse in the profit before tax and the increase in tax, I come to know that theincrease in the tax is less than increase in profit which can be due to two reason that whether the
rate of tax is not increased as the income of the bank or the bank is managing its tax efficiently.
Profit after TaxThe after tax profit of the bank continued to increase in the recent years which is a good sign and
also shows that bank has improved its working a lot than few years before. The profit for theyear 2010 is almost 300% more than the 2007 which show that the profit of the bank is tripled in
last five years. The same trend continued in 2012 in which the bank also made a record profit.
Interpetation of Horizontal and Vertical Analysis of Balance
Sheet
Cash and Balance with Treasury Banks
It shows the amount placed with SBP in order to fulfill the requirement of banking companies
ordinance, 1962. There is a decline in the amount with respect to previous year, the reason of itcan be the decrease in the volume of deposits due to which the bank is not required to maintain
higher placement with SBP. However, the deposits also show an increase in it, so the reason of
this decrease in the cash and balances with treasure bank is uncertain. One other can be this that
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the bank has placed higher amount with SBP than required in the previous year and that is why
in this year the bank has withdrawal the money from its account with SBP.
Balances with other BanksHorizontal analysis of Balance sheet shows significant increase in the placement with other
banks. It is not a good sign if the placement is in ideal state and is not generating any revenue forthe bank. However, from the notes of ZTBL it is clear that the bank has placed amount withother banks in the accounts which are giving markup to the bank.
Placing money with other institutions is not a good thing for any bank when does on a large scalebecause it cannot generate enough money to compensate the opportunity cost the bank is bearing
on not investing or advancing this money to its customers. However, the case of ZTBL is
different. It borrows money from SBP at fewer rates and lends it to farmers. The rate it charges
to farmers is less than the prevailing rate in the market (currently 9%) so by depositing moneywith other financial institution it can earn more than the rate it is offering to its clients. Because it
is an institute developed just for the improvement of agricultural sector so the banks main focus
is on lending rather than investing.Investments-netThere are ups and downs in the amount of investment made by the bank in the previous five
years. From the notes to the account it is clear that bank usually invest in less risky investment
like Market Treasury Bills and Pakistan Investment Bonds. The less risky investment will resultin less gain on investment but here the return on investment is not the main focus of the bank.
The money the bank owns is largely consist on the borrowed money from SBP, so the bank
cannot use the borrowed money in a more risky adventure.
Advances-net
The bank continues to increase the amount of advances to facilitate more and more farmers every
year. The data of 2009 shows a record increase in lending to farmers; the bank has disbursed77.7 Billion rupees in 2012 as compared to 70.7 Billion in 2011. The percentage increase in the
horizontal analysis also shows this continuous increase in the trend of advancing.
Operating Fixed AssetsThe assets of the bank are also increased in 2011 and in 2012 the president of the bank also
announced to increase it further by constructing new buildings. Increase in the fix assets showsthat the bank is optimistic about its future.
Borrowings
It is the amount which bank has borrowed from SBP. There is no change in this loan from 2007the reason is that neither SBP has given new loan to ZTBL nor ZTBL has returned any principal
amount of loan back to SBP due to which the amount of loan borrowed remain unchanged.
ZTBL and SBP is now negotiating on terms and conditions of returning principal amount in 15
equal installments.
Deposits
Deposits are the backbone in any bank operations because the primary function of any bank is totake deposit from depositors and then lend it again to other who needs it. But as I have written
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before ZTBL does not rely on deposits more like any other bank. However, in recent years the
bank is trying to shift its dependence from SBP to other resources and due to this it starts
increasing its deposits by marketing. But the efforts in this respect is still need improvements asthe products offered by ZTBL is not as attractive as offered by other commercial banks.
Share CapitalIn 2011 the bank has issued bonus shares to increase its paid up capital. The reason of thisincrease can be the requirement of SBP to maintain a minimum equity level. Currently the paid
up capital of the bank is 12.5 Billion.
ReservesReserves are made for the development of the organization or for the contingencies which can
affect in the future. There is continuous increase in the reserves of the bank from last five years
which is a good sign. These reserves also include the statutory reserve requirement according tobanking companies ordinance, 1962.
Surplus on Revaluation of Assets-Net of TaxIt is surplus amount which is the bank expect to get if it will sell these assets. The market
conditions never remain certain; the price of anything can rise or fall in matter of second. This is
the reason that organizations use to revalue their assets to record their value according toprevailing market rates. The revaluation of fixed assets also helps banks in raising their equity
which result in more lending power of the bank.
ConclusionAlthough the bank needs improvements in many fields, the overall performance of the bank is
satisfactory. The bank has made many efforts in the recent years and it is clearly visible in the
result of its financial statements. The reduction in NPLs is also a positive sign and willdefinitely result in good performance. Besides a government institution the bank has made before
tax profit of 4.9 Billion which is great achievement. If the process of improvement continues
than it can make more profit in the upcoming years and its success will also result improvementin financing facilities to people of rural area.
Key Financial Trends of 2009
According to Japan Credit Rating Agency on August 2010
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Note:The following is the extract from the report of Japan Credit Rating Agency issued onAugust 2010 showing the new credit rating of ZTBL.
Balance sheet footing of the bank was higher at year-end 2009 at Rs. 113.6b. Net advancesincreased to Rs. 83.6b (2008: Rs.69.b) representing a higher proportion of total assets at 74% at
year-end 2009. While various new loan products have been launched been launched by the bankin 2009, Sada Bahar Scheme has remained the flagship product of the bank. For all newborrowers of crop production loans, Awami Zarai Scheme (AZS) has been launched by the bank;
outstanding balance against this scheme may also show increase over time. To ensure proper
utilization of loan, the bank has incorporated a wholly owned subsidiary to make arrangementfor in-kind lending to farmers.
The IT infrastructure of the bank has improved considerably over time. With the implementation
of various applications at branch-level to consolidate loan disbursement & recovery data,
monitoring of lending activities has improved, though there may still be a need to furtherstrengthen the loan recovery mechanism. Gross infection has declined from16.7% in 2008 to
15.8% in 2009; however there is still need for further strengthening the recovery mechanism. Netinfection hovered at prior years level at 11.5%. Net NPLs in relation to Tier-1 capital stood atalmost 57% at year-end 2009. ZTBL has arranged crop loan insurance for wheat, cotton,
sugarcane, rice and maize. As the insurance coverage is enhanced, the risk of loss in case of
calamities will be reduced.
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Growth in loan portfolio during 2009 absorbed some of the liquidity held by the bank. Liquid
assets to total borrowings and deposits declined to 27%. The bank has made efforts to enhanceits deposit base, though these continue to represent a small proportion of the total resource
78base. The bank had outstanding borrowings of Rs. 54.5b from SBP at year-end 2009. The
terms of restructuring of SBP debt have yet to be finalized, which would have significantimplications for the risk profile of the institution. The bank has so far not made any interest or
principal payments against these credit lines. While there is some cushion available to the bank
in terms of markup differential receivable from the GoP vis--vis interest payable to SBP,liquidity profile may be significantly compromised if payment is required against the principal
portion. One of the proposals under consideration entailed debt to equity swap, which if
finalized, would support capitalization levels and facilitate in furthering the governmentseconomic objective pursued through the bank.
Credit Risk
Gross advances of the bank considerably grow over 2011, with year-end outstanding balance of
Rs. 89.4b (2008: Rs. 77.8b). Loan disbursements of around Rs. 78b were made by the bank inthe outgoing year.
Loan disbursement target for fiscal year 2012 was Rs. 80b. ZTBL is used as an arm by theGovernment, with disbursement target stipulated as part of the annual budget process. For FY10,
22.7% of the loan disbursement target pertained to development loans, while remaining was for
production loans. All targets are allocated by SBP.
While various new loan products have been launched by the bank, Sada Bahar Scheme has
remained the flagship product of the bank. Loan products launched in 2011 include, Green
Tractor Scheme, Crop Productivity Scheme and Rural Development Scheme.
Green tractor scheme is specifically for the province of Punjab and entails subsidy of RS.200,000 per unit for 10,000 tractors. Banazir tractor scheme is applicable to all areas of Pakistan.
On receiving complaints from borrowers regarding non-cooperative attitude of tractor dealers, a
tractor delivery system has been developed through KSSL in the outgoing year.
Awami Zarai Scheme (AZS) has been launched by the bank for all new borrows of production
loans, pertaining to inputs required at the time of crop cultivation. As per the scheme, agriculture
inputs will be supplied by KSSL to farmers in lieu of cash. Quantity of input needed for each
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crop on a per acre basis has been predetermined by the bank. The farmers will be provided a
specific quantity of inputs according to cultivable land.
The purpose of AZS is to ensure proper utilization of loan proceeds. Crop productivity scheme is
specifically for financing of fertilizer. Rural development scheme has been launched to provide
assistance for dairy, poultry, sheep and goat farming in the rural areas of AJ&K; especiallyearthquake affected areas.
The bank has also setup a pilot project for a model village in collaboration with ministry of food
& agri./ provincial agri. Departments. Crop loan insurance has been made compulsory by SBPfor wheat, cotton, sugarcane, rice and maize financing. To facilitate loan insurance, the bank has
to pay the premium for subsistence farmers, which is subsequently reimbursed by GOP on a half
yearly basis. ZTBL has arranged crop loan insurance with Adamjee insurance company limited
(AICL). Premium is charged @ 1.3% of loan sanctioned.
The implementation of software applications has facilitated monitoring of lending activities at
branch level. The need for strengthening the collection mechanism however remains, as may beascertained form the portfolio quality indicators.
NPLs increased to Rs. 14.2b (2011: Rs. 13b) during 2012. During the out-going year, an amount
of Rs. 2.6b was charged off against provisions as per the prudential regulations, with cumulativebalance of charged off loans standing at Rs.34.98b at the end of December 2011. This amount
was lower than the balance of Rs. 36.30b at the end of December 2008, on amount of recoveries
of 4.29b made against charge off amount.
At year-end 2012, gross infection in the loan portfolio of the bank remained high at 15.8%
(2011: 16.7%). The overall agriculture loan portfolio of the banking sector had gross infection of
16.1% (2011:15.3%) at end-December 2011. Around 52 %( 2008: 47%) of NPLs were classifiedas OAEM at year-end. On account of this,, provisioning coverage against total NPLs Is low. Net
infections (NPLs adjusted for specific provisioning only was 11.5% (2011:11.2%).
Minimum recovery target set by the bank entails 90.8% of current dues and 75% of past dues. In
2012, recovery of 91% was achieved against current dues, while 72.4% recovery was made
against past dues. Recovery targets are monitored on a branch-wise basis; in branches whereoverall recovery is less than 75% loan approval authority is retracted.
The bank held fixed income securities of Rs. 6.7b at December 2011, increasing form Rs. 4.5b at
the end of the preceding year. Of these, only Rs. 283.65m was placed in COIs whiles remainingcomprised government paper, credit risk associated with which is considered minimal. COIs are
also placed with counterparties of sound risk profile. In addition to the above, the bank has Rs.
100m invested in a wholly owned subsidiary.
Market RiskNet investments of the bank increased to Rs. 7.2b (2010: Rs. 5.1b) at end- December 2011.Around 73% of net investments comprised short-term treasury bills. Price risk on the same is
considered low. Fixed-rate long term PIBs represented 14% of net investments. These carry
markup rates in the range of 12-13% and have maturities between Aug-Dec11. Recent increase
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in benchmark rate is expected to have reduced the market value of fixed income instruments held
in the portfolio. However, the bank has both the intent & ability to hold these to maturity.
Investment in equities at cost was maintained at Rs. 100.6m, comprising exposure in unlisted
securities amounting to Rs. 10.5m. Investment in unlisted securities has been fully provided for
various reasons. Investment in listed equities of Rs 89.3m had a market value of Rs 537m.
LiquidityTotal borrowings and deposits of the bank where higher at Rs. 63.2b (2010:Rs. 59.9b) at year end 2011 with increase in deposit to Rs. 8.75b (2010: Rs 5.43b). Borrowings were maintained at
Rs. 54.5b at year-end 2009.
Liquidity profile of the bank declined in relation to 2010, with liquid assets to total borrowing
and deposits reducing to 27 %( 2010:36%).
Depositors of the bank are primarily individuals. Proportion of current and saving accounts in thedeposit mix was maintained at 94%. Since deposits still comprise a small proportion of funding
mix; improvement in the deposits does not have a material impact on the cost of funding for thebank.
The bank had outstanding borrowings to the tune of Rs. 54.5b from SBP at year-end 2011. These
borrowings were obtained to provide finance to clients for agriculture. At the time of
reorganization of ADBP into ZTBL, these credit lines were restructured and a moratorium wasgiven to ZTBL according to which it had been allowed to repay SPB debt in 15 years (in 30bi-
annual installments) with a grace period of 3 years starting from July 2003 and the last payment
was supposed to be of Rs. 3.20b, representing the subordinated loan. At the time of restructuring,
the bank had proposed to cap the markup on these borrowings at 2.3558 %( 12 month t-bill rateas at July 01, 2003) for five years but the matter had not been acceded to by the SBP. Since then,
various restructuring proposals have been discussed by the bank with the ministry of Finance andSBP, though an agreement on this issue has still to be achieved. The bank has not made anyprincipal repayment on the premise that the restructuring terms have not been finalized. These
loans are secured by way of federal government guarantee.
Presently, the bank is accruing interest expense on these at varying rates. Three credit lines
amounting to Rs. 1.577b carry interest rate of 4% p.a. while remaining thirty two lines
amounting to Rs. 48.597b are based on PLS subject to maximum share of profit to SBP ranging
from 4-10% p.a. markup on subordinated loan is being charged at weighed average yield of t-bills of 12 months maturity. No return however has been actually paid by the bank, with a total
payable of Rs. 19.54b having been accrued by December 32, 2011. Any plan requiring
immediate payment of the either the interest expense or principal may place significant stress onthe bank, as it does not have the required liquidity. However, the bank also has markupdifferential of Rs. 17.74b receivable from the government. This amount is not recognized on
books. There are also other amounts recoverable from the government in lieu of relief packages,
with outstanding balance of Rs. 956.27m at year-end 2011.
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ProfitabilityReturn on markup bearing assets declined to 9.8% on account of decline in high-yielding lending
to financial institutions. Nevertheless, interest income of the bank increased to Rs. 8.7b (2010:Rs 8.5b) attributable to overall higher average markup bearing assets during 2009. Net interest
income of the bank also depicted an increase to Rs. 5.1b (2010: Rs.4.98b). Cost of funding
hovered at 6%, thus spreads declined to 4%. Cash outlay has not been made by bank for paymentof interest on borrowings, and interest in only being accrued on books.
Non interest income of the bank was higher at Rs. 38.2 m attributable to increase in dividend
income on investments. Other revenues primarily comprising recoveries on charged off loanamounts was Rs. 4.3b (2010: Rs 4.8),|" taking total revenues, net of financial charges, to Rs.
11.2b (2010: Rs. 10.4b).
Administrative expenses of the bank inclined to Rs. 5.2b (2010:Rs. 4.5b), in line withinflationary trends in the economy. While salary expense experienced growth of 12% staff
strength of the bank was rationalized to 5,352(2010: 5,370).
In December 2010, the bank had introduced SR-2010, a retirement benefit scheme for its
employees. A significant proportion of employees switched to SR 2011 from their existing
pension scheme in 2010 The scheme was re-opened in 2011 and 1,097 Executives/officers of the
bank opted for SR-2010, resulting in an expense of Rs. 677.8 to bank in 2011.
Incremental provisioning against non-performing loans declined to Rs. 563 (2010: Rs. 1.9b). The
bank posted profit before tax of Rs. 4.6b (2010: Rs. 3.99b) for 2012.Profit for 2011 was reduced to Rs. 1.8b (2010: Rs. 2.6) after adjustment of tax expense of Rs.
2.8b (2011: Rs. 1.4b) which pertained to current and prior year.
Capitalization
As of December 31, 2011 equity of the bank was higher at Rs. 18.7b (2010: Rs. 16.9b),exceeding the minimum capital requirement of Rs. 6b mandated by SBP. Capital Adequacy
Ratio of the bank was slightly lower at 21.7% (2010: 22.9%). Net NPLs to Tier 1 capital stood at
57% at end-December 2009. If the proposal of loan conversion into equity materializes, it willprovide considerable momentum to capitalization of the institutions.
Quick View of ZTBLs Performance till 2009
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SWOT Analysis
Strengths
ZTBL has brand name in agricultural loaning.
It is first and large financial institution established in Pakistan to promote agricultural
financing.
The bank has more than 350 branches throughout Pakistan and has presence in all the
provinces of the country which enables it to capture and facilitate a large number of
customers.
The bank8 enjoys sovereign guaranty of Federal Government that covers its debt
obligation to State Bank of Pakistan.
The Bank has the most experienced and the least experienced staff, which is a good
combination of experienced heads and exuberance of youth.
The bank has ability to launch successful products for agricultural industry due to know
how of the agricultural system of the country.
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Mobile Credit Officer is the unique concept which is helping in remaining more near to
its customers and also helps in recovery. Concept like these helps bank in safeguarding
itself in the risky adventure of financing to small farmers.
Weaknesses
ZTBL have not introduced any Islamic product in financing. Islamic banking is becoming
popular in these days and to sustain and increase the number of customers every bank is
felling need to start offering Islamic Products. This ZTBL requires noticing this changing
trend.
In spite of the presence of technology many jobs are done manually. Almost all other
banks operations have been computerized but ZTBL is still working on manually written
ledgers etc.
Like other Government institutes the red tap dilemma also exists in ZTBL.
The staff is not motivated because the promotion mechanism is based on experience
rather than on the performance of the employees. This is the reason that usually
employees stop giving their full efforts after knowing the reality that their performance
pays a less role in their success.
The average loan disbursement amount is 85,000 to single person which is not a big
amount. Usually the loan obtained by the loanee can be used to meet working capital
requirement only it cannot be used to fulfill the dream of modernizing of agriculture
sector.
There is a lack between the planning of head office and the reality of environment
because the staff at high level have little know how of the real situation on the ground.
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The infrastructure of the bank is also based on old style; the bank is not refurnishing its
branches like the other banks have done in this decade.
The situation at branch level is not good, there is lack of even furniture, fans etc.
Opportunities
The bank started computerizing its operation which if completed will result in increase ofthe bank performance. The impact of computerization can be seen from the result of
recovery of 2009 which is 89%. The computerized system helps bank in reducing fraud.
Due to increase in the government attention toward the agriculture sector it is expected tosee the role of the bank increasing in the near future. As a result of different steps takenby the government regarding the betterment of the agriculture, small borrowers are
attracted to get the financing and to start business. So, the ZTBL has an opportunity to
attract the customers by giving them more attracted schemes.
They have wide area network in all over the Pakistan, so ZTBL can make it possible thefast delivery of funds to rural areas.
The flood of 2010 is challenge for the whole country. Because the most effected peopleare farmers so the bank has a chance to increase its reputation by utilizing its full
resources to help them. It is also expected that the relief which the government may
provide to them will also be delivered through the bank in the form of relaxation to theloanees.
Threats
The biggest threat in the banking sector is the continuous downfall of the countryeconomy since the last few years.
Sudden rise and fall in the trade and industry conditions and stock exchange business ofthe country also adversely affect the growth of banking sector.
The default ratio of customers who are availing the credit facilities from the ZTBL canrise due to the economic recession in the country.
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Government type of working style is also a threat to the bank which requires to bechanged to keep the banking growing.
Many commercial banks also started agriculture loaning scheme so it is expected that in
the future the farmers will have more choices to have finance from which will definitelyaffect the customer base of the bank.
Political unrest is also a threat for the bank because it is a government owned bank andthe change in government can result a change in the strategy of the government which
can affect the plan made by the bank.
Natural Calamities is also a problem, the bigger part of the bank customers relies on theenvironmental condition. Almost whole of the agriculture industry have threat from the
changing environment conditions. The example of 2010 flood is still in front of us those
who are affected are unable to pay their loans back.
Ch. 5: Assignments I handled during my Internship.
Organogram of Islamabad Branch
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Redemption of loan
On the payment of all the dues by the loanee (principal + interest), he can free his land (or anyother security provided) from any charge created by bank for the purpose of loan. For this
purpose he will have to present the following documents:
Application for redemption
Stamp Paper of rupee 20
Last receipt of amount paid
Cheque book (if issued)
When the loanee provides these documents to assistant officer (Or any officer appointed for
these sort of work), the assistant officer asks the peon to bring the Loan Case File of theborrower. After the file is received by the assistant officer, he checks the documents that whether
all the documents are there in the file. Then he makes required entries in the Passbook. These
entries usually made on the page 28 and 30. The example of entries is given below.
The following entries are made on page 28.
The entire loan including
interest has been paid by theloanee.
See page number 16 and
block number 3 for detail.
(Here page number 16 showsthe number and date of last
charge created against theland of loanee in the favor ofbank)
The following entries are made on page 30.
ZTBL Islamabad Branch
See page number 18 andblock number 8 for detail.
(Page number 18 is usuallythe page where the detail of
land mortgaged has been
given, it include the area ofland, khatoni number etc)
After these entries the officer then sends the file to Manager for signature. On approval from theManager for the Redemption Application the assistant officer attaches all afore said documents
with in the file and record in the File Movement Register that file has been moved from the
record room for the redemption purpose.
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Than the file is send to AMO (Assistant Manager Operation) for further process. The loanee is
given the date of next week to collect his Passbook. During this period AMO checks the record
of the loanee to confirm that the entire due amount with respect to that particular loan has beenpaid and then he signs to give approval to assistant officer to issue Passbook to the loanee. The
AMD (Assistant Manager) and Manger both also sign the notice issued in the name of Patwari
and Tehsildar that the land can be transferred to the loanee as the loan has been fully paid byhim.
Then file again comes to the assistant officer, he checks the signature both in the notice and
Passbook and then stamped both. Now the Passbook is ready to issue. Before issuing Passbookthe officer record that passbook is issued to the loanee in the Dispatched Register. On the
issuance of Passbook to the loanee, the officer verifies that the person receiving the documents is
the original owner of the land which is mortgaged with the bank. After getting the Passbook, the
loanee goes to Patwari and Tehsildar for the change of record back to his name.
The one thing which is interesting here is obtaining Stamp Paper from the borrower. This is not a
requirement but bank has made it practice so that if in the near future, it finds that some amountis still due by the borrower than it can write on the stamp paper whatever it wants and then can
claim the due amount from the borrower. This is precautionary measure adopted by bank
because once the Passbook issued to the borrower and the land again transferred to his name, the
bank will be in no position to recover any amount which is unexpectedly left due.
The redemption process in short can be described as the following:
Submission of Application
Acceptance of application by manager
Record of file in the File Movement Register
Entries made in the passbook
File send to AMO for checking of loan status
On approval from AMO, the Manger and Assistant manger signed the notice to issue
Passbook
The passbook dispatched to loanee with notice to Tehsildar to transfer land back to his
name
After the land is transferred to the loanee name, if he wishes he can withdraw the amountfrom his current account and can close his account.
Usually the loanees do not redeem their land because they want to avoid the cost and wastageof time when in the future they again have to gain loan from the bank. So, they usually
remain the land in the name of the bank even after they have paid the whole loan amount.
During my internship I have seen people who has paid loan more than 10 years ago but theycame to bank after such long time to redeem their land and the reason behind their redeem
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was that they want to transfer it to someone others name otherwise they may not come for
redeem.
I have also seen one of the clients who has paid loan in 1985 but his land is still in the name
of the bank and they have not redeemed it. After the death of the client his sons came to
know that the land could not be transfer to their name because it is still mortgaged against theloan which their father had paid in 1985. So, at that time they reach bank for redemptionbecause the bank always maintained record so their file found from the record room after
little efforts. All this shows the confidence the people has on the bank and also shows that in
practical life anything can happen.
Opening of Current Account
In the ZTBL, the current account usually opened only when the person comes there for a loan.On the approval of loan, his sanctioned amount is usually credited to his current account. The
procedure of opening of Current Account is not very complicated. The following are the mainpoint in the opening of a new account:
Acquiring original CNIC
Filling the Current Account Form
Filling of Know Your Customer
Filling of Current Account Card
Registering name in the Current Account Register, (Issuance of A/C No.)
Filling of deposit slip of starting amount
Signing by AMO and Manager
Issuance of Cheque book
Opening account in the ledger of bank
1: Acquiring Original CNIC
It is mandatory to check the original CNIC of the person before opening of current account. In
the ZTBL it is routine to open account when manager sanctioned and signed the amount of loan.Because at that stage it becomes essential to have an ac