Professional Documents
Culture Documents
MUSLIM COMMERCIAL
BANK
SUBMITTED TO
Honorable
PROF CH. NAZIR AHMED
PRINCIPAL HAILEY COLLEGE OF COMMERCE
SUBMITTED BY
KHURRAM SHAHID
ROLL#124
M.COM (FINANCE)
SESSION 2000-2002
PREFACE
Being aware of the importance of practical training, the Hailey College of
Commerce, University Of The Punjab, requires every M.COM student to go
through training for practical purpose as trainee.
The internship program is to broaden the vision of practical experiences with
theoretical knowledge as it increases one’s capabilities to handle problems at
various stages and the ability of decision.
I tried my best to collect the valuable information and its relevant facts.
This report is the result of my internship with Muslim Commercial Bank (MCB)
KHURRAM SHAHID
M.COM (FINANCE)
All the praise for Almighty Allah, who enabled me, to carry a successful effort, to
prepare a report on Muslim Commercial Bank(MCB)in the best possible way.
It’s also a great honor for me to present this effort to honorable Professor Nazir
Ahmed, Principal Hailey college Of Commerce.
Specially thanks to Sir. Prof. Fida Hussain Bukhari who gave me substantial
support in compiling my work .May this effort prove to be beneficial for all, who
go though it and hope that it will meet the examiner’s approval
KHURR
AM SHAHID
M.COM (FINANCE)
History
Muslim Commercial Bank Ltd. Unfolds 52 years’ growth. MCB is not an overnight success
story. The bank started corporate life in Calcutta on July 9, 1947. After the partition of the
Indo-Pak Subcontinent, the bank moved to Dhaka from where it commenced business in August
1948. In 1956, the Bank transferred it Registered office to Karachi, where the Head Office is
presently located. Thus, the bank inherits a 52-years legacy of trust in its customers and the
citizens of Pakistan.
NATIONALIZATION
In January 1974, the government of Pakistan nationalized MCB following the banks Act 1947;
Premier bank Limited merged with MCB.
PRIVATIZATION
A wave of economic reforms swept Pakistan in the late 1990, introducing the need for
privatization of state owned banks companies. In April 1991, MCB became Pakistan’s first
privatized bank. The government of Pakistan transferred the management of the Bank to
National Group, a group of leading industrialists of the country by selling 26% shares of the
bank. In term of agreement between the government of Pakistan and the National group, the
Group, making their holding 50% has purchased additional 24% shares.
MCB today, a represents a bank that has grown with time, experience and Pakistan. A major
financial institution, in scope and size, it symbolizes a fully growing tree evergreen, strong, and
firmly rooted.
FOREIGN TRADE
The bank conducted import business during the year amounting to RS. 54.0 billion as compare
to RS. 56.4 Billion in 2000. The export business slightly improves to RS. 36.9 Billion from RS.
35.1 Billion in 2000.. Home remittances decline to RS. 16.7 Billion from 30.7 Billion the
decline in home remittances business was due to freezing of Foreign Currency Accounts, which
has effected the confidence of Pakistanis working overseas.
SOCIAL SECTOR
The bank activity participating in the Prime Minister self-employment Scheme.
The application received from various applicants is being processed on merit and disposed off
as quickly as possible.
FOREING OPERATION
Our bank’s foreign operation in Bangladesh and Sri Lanka continue to remain profitable. In
April 1999 the Bank opened its third branch in Sri Lanka at Marinade a suburb of Colombo.
BOARD OF DIRECTORS
The board of directors has the authority in guiding Bank affairs and in making general
policies. Some directors are the personnel of the MCB and others are successful
businessperson and executives of other major organization. Ten members are included in
board of directors, see in a list.l
DIRECTORS
Nine Directors are:
1 Mr. Tariq Rafi
2 Sheikh Mukhtar Ahmed
3 Mr. Mohammed Arshad
4 Mr. Shahzad Saleem
5 Mr. Raza Mansha
6 Mr. Sarmed Amin
7 Mian Umer Mansha
8 Mr. Mushtaq Ahmed Malik
9 Mr. Mohammed Aftab Manzoor
President & Chief Executive
AUDITORS
A.F FERGUSON & CO.
Chartered Accountants
LEGAL ADVISORS
MANDVIWALLA & ZAFAR
Advocate and Legal Consultants
REGISTERED OFFICE
MCB building, F6/G6,
Jinnah Avenue, Islamabad
PRINCIPAL OFFICE
Adamjee House, 2nd Floor,
I. I. Chundrigar Road, Karachi
I went the branch of Muslim commercial bank for my internship training. It is the part of
our M.Com’s training to go for training at any well-established organization. Bank is the
most suitable.
The branch is situated at G T Road Muridke. Major customers of bank are businessmen,
employees of different public and private organizations, salaried and non-salaried
persons. Recently branch accounts worth RS. 102 million of 4560 account holders.
Majority of accounts is PLS, current a joint accounts.
MANAGEMENT OF BRANCH
OG-I (MANAGER) 1
OG-II 1
OG-II 2
Cashier 2
Assistants 3
Security Guard 2
GENERAL BANKING
ACCOUNT OPENING
The general banking department performs various functions among them the first and most
important function is A/C opening. The bank reserves the right to open any account, which in
its opinion is suitable as a customer. The process of opening an account is very simple and any
body that would like to open his account can do sot easily without any difficulty.
1. CURRECT ACCOUNT
2. SAVING ACCOUNT
3. TERM DEPOSITS ACCOUNT
As I had already mentioned about “SIGNATURE SPECIMEN CARD”. This card contains
three signatures of an applicant. Banker uses this card at the time when he receives the cheque;
he compares customer’s signature with the signature on the cheque for avoiding fraud.
CURRENT & SAVING ACCOUNTS ARE OPEND FOR:
Individual
Only one person can operate this account. an individual who can fulfill the requirement
of bank can open this account. We can call it a personnel or individual a /c.
Joint
In case of joint a/c applicant mentions that how much person will operate the a/c.
Instruction are given for joint a/c such that the account shall be operated by
Bank prepares two ‘LETTER OF THANKS’ one for the new customer and the other for his
introducer. This act promotes good will between the customer and the introducer.
CHEQUE BOOK
Chequebook is issued to the customer when the bank accepts the A/C opening application
form. Whenever a chequebook is issued to the applicant it is ensured that the series is input to
system immediately.
CLOSING OF AN ACCOUNT
There are No of reasons of closing an account. Some are listed below.
DEPOSIT DEPARTMENT
The primary economic function of commercial bank is to receive surplus income of individuals,
firms, public houses, institutions, companies and to honor cheque drawn upon it. Deposits are
to bank as a backbone is to the body of man. It is the lifeblood of a bank. The deposit of a bank
is useful in many ways.
The bank borrow money from the general public by accepting deposits by offering suitable
rates interest to them or simply promise to repay on demand.
The fund deposited in the MCB bank can be classified under the main heads;
Current deposits are those which are payable to bank whenever demanded by the customer.
Bank does not pay any profit on current deposits. There are of different scheme of saving
deposits, which are classified under different duration purposes and rater of interest. Fixed
deposits are those deposits which are by the bank under the conditions that they will not be
payable on demand but will be payable under fixed determinable future time date.
RULES FOR CURRENT ACCOUNT
Current a/c holder opens current accounts on proper introduction only. However, introduction
of a PLS Saving Account holder of repute may be accepted at the discretion of the manager.
MINIMUM BALANCE
A sum not less then RS. 500/- in cash as initial deposit is required for opening a current
account and the same may be maintained as minimum average running credit balance.
MINORS
The minors will not be allowed to open current account directly.
PROFIT
No profit will be paid on credit balance held in current accounts. The bank reserves the right to
allow opening of current a/c at its description.
All deposits and withdrawal from a current a/c will take place only at the
branch where the account is being maintained.
Current a/c cannot be overdrawn, except by prior agreed agreements with the
bank.
The correspondence relating to current A/Cs should be addressed to manager of
the branch where the account is being maintained.
A distinctive number will be allotted to each current account and shall be
quoted on all correspondence relating to the respective account and at the time
of making deposits and withdraws.
PLS ACCOUNT
CAPITAL GROWTH SCHEME
monthly minimum balance. 10% withholding tax on profit is also applicable on profit/loss
sharing account. Zakat is deducted every year @ 2.5% on non-exempted accounts.
SAVING 365 ACCOUNTS
The account will be opened with a limit sum of RS. 500,000/- however there will be no
maximum limit for maintaining deposits under this scheme. Profit on deposits will be payable
on daily basis under this scheme. Profit on deposits will be payable on daily product basis on
balance of RS. 500,000/- and above. However, if balance in the account falls below RS.
500,000/- on any day, the product will be ignored. There will be no restriction on withdrawal
from the account. Zakat and withholding Tax is also applicable on the account opened under
this scheme.
FIXED DEPOSIT OR TERM DEPOSIT
MCB has an attractive term deposit scheme that is for both short term and long term
investment. MCB has introduced the following scheme in term deposit;
Special notice term deposits receipts
7 days notice
30 days notice
3 month TDR
6 month TDR
1 year TDR
2year TDR
3 year TDR
4 year TDR
5year TDR
The bank reserves the right to accept or reject the term deposit a/c opening application form of
the applicant.
DEPOSIT RECEIPT
Deposit receipt is given to customer in response of accepting his application. Deposit receipt
can be purchased either by depositing cash or by cheque. The issuance of certificate or receipt
against cheque is subject to realization of the proceed of the cheque. The bank with sum of not
less than accepts term deposits RS. 1000/- from individuals (single, joint) firms
(proprietorship/partner ship companies and etc) against the issuance of non-transferable
receipts in acknowledge of the PLS deposits received. On maturity of deposit receipt the
depositor shall have the opinion either to withdraw the deposit or the amount of
the profit or renew the deposit with or without the accumulated profit.
The bank determines the profit on deposit receipts semiannually, on the basis of its net working
result. Profit is given at the maturity of the deposit receipt. Profit for seven days and 30 days,
short-term deposit are given on daily basis such as
No of days X Rate X total amount
If a person comes after three month for one month fixed then bank gives the profit for two
months, and same in the case for three month fixed deposit. If customer withdraws his money
before fixed period then profit is given to him on the basis of profit slab of Term Deposit
Scheme.
10% withholding tax will be deducted from the profit at the time of disbursement.
Zakat will be deducted at the rate of the end of the year. The bank reserves the right to use
these investments in any business to the best of its judgment.
CAPITAL GROWTH CERTIFICATE
MCB has a risk-free return scheme by which your capital can grow to nearly double the
amount in just a few year times. All that is required is a minimum amount of deposit. So you
simply give the bank an initial amount and at the end of the stipulated period, the bank returns
close to twice as much.
SALIENT FEATURES
Minimum amount of investment is RS. 10,000/- with no limit on the maximum amount
Time period of the certificate scheme is 5 years and this scheme is renewable for a
further period of 5 years.
Upon the maturity of certificate, the following returns are expected to be made after
deduction of Zakat whenever applicable and withholding as:
10,000/- 20,000/-
50,000/- 100,000/-
100,000/- 200,000/-
1,000,000/- 2,000,000/-
In case of premature encashment of certificates, the depositor will be given “PLS
Saving Account” profit rates declared by the bank for that particular period.
Depositors will be required to fill in Account Opening Forms.
MAHANA KHUSHALI SCHEME
Salient Features
Minimum amount of investment shall be RS. 25,000/- and the maximum amount of
investment would be RS. 1.0 million.
Khushali certificate can be purchased by individuals (singly or jointly) or by the
proprietorship/partnership or companies etc. in their name.
The guaranteed rate of return will be minimum 1% per month. If the profit declared
by the bank is higher, additional profit will be paid to depositors which the branch
managers from time to time will inform them about.
MAAL-A-MALL SCHEME
Maal-a-mall is newly issuing scheme. It is the most profitable scheme of the bank and MCB has
got RS. 20 Billions. This certificate is for Rs.25000/-.
PROCEDURE
The procedure of Mall-a-Mall certificate is very simple. The applicant has to fill the slip of
certificate where he writes.
Branch code
Date
Tenure
Name of applicant, his ID No. his address and phone No.
The tenure can be of 2 months, 4 months 8 months or 1 year and the profit percentages are
different for different for different tenure i.e.2 % for 2 months, 3% for 4 months, 5% for 8
months 6.5% for 1 year tenure. These certificates are automatically renewable after maturity.
Copy of ID card is attached with certificate. Profit is calculated at the time of drawing.
At register, the officer writes reference or serial No. name of applicant, certificate No. date of
issue and date of maturity. At Maal-a-Mall certificate, the officer write dates of issue, maturity
date, and reference No. and name of applicant.
CALL DEPOSIT
It is one of the features of commercial institutions. Here the companies and institutions have
the opportunity to withdraw the entire amount at any time. People deposit the amount for one
project and can use this account during that project. They got the money from this amount
whatever they needed for the project. The bank has been issuing deposit receipts or pay order
at the request of their customer in favor of Government Departments.
CLEARING DEPARTMENT
This department receives the cheques and other negotiable instruments drawn on local
branches of other banks. Nift has a clearing house, in which cheques and other negotiable
instruments are brought by each local bank representative and the nutal claims of each bank on
other is offset and a settlement is made by the payment of difference. Clearing system is helpful
for both the customers and bank in saving currency, time and labor.
PROCEDURE
The cheques and drafts come to then from different banks. They write them at one (daily
voucher record sheet) and then separate different banks and write one bank’s slips at one
schedule and then summary of banks and then balance with total drafts and total amount and
giving them to representative. MCB is a member of State Bank of Pakistan (SBP) and has an
account with SBP. The clearinghouse of SBP(NIFT), through whom branches forward/receive-
clearing cheques along with a schedule conducts clearing. The clerk of forwarding branch
prepares the schedule and vouchers of all the clearing cheque, which he received by the clerk
HAILEY COLLEGE OF COMMERCE, UNIVERSITY OF THE PUNJAB 22
INTERNSHIP REPORT
on that day and sends these cheques to the checking officer. Checking officer pass these
cheques and vouchers by his initials, endorsement stamp and branch special crossing stamp.
Clerk posts the contra entries of these vouchers in the clearing register.. Representatives’ banks
collect these cheques. Next day at 8:30 A.M. representatives of all local banks and foreign
banks exchange their cheques, which are drawn on their banks.
This department receives the cheques and other negotiable instruments drawn on local
branches of other banks. Nift has a clearing house, in which cheques and other negotiable
instruments are brought by each local bank representative and the nutal claims of each bank on
other is offset and a settlement is made by the payment of difference. Clearing system is helpful
for both the customers and bank in saving currency, time and labor.
The clearinghouse debits/credits the payee/receipt branch with the total amount of the cheques
paid on their behalf. The settlement of book entries e.g. , if MCB is to gives RS 2 Million to
UBL and UBL has to give RS.1 million to MCB then MCB will draw a cheque of 1 Million in
favor of UBL. SBP will debit this amount from MCB account and credit of UBL account. In this
way mutual cross obligation of banks settled by debiting and crediting in the books of SBP.
PROCEDURE FOR ADVISING HEAD OFFICE ACCOUNT
All that inter-bank adjustments will be effected through head office account it will be essential
for the branch to advice head office account of each transaction so that they may also pass the
necessary entries in their books. The Nift will send a consolidated debit/credit advice to the
branches in respect of clearing cheques delivered to or received from the branches. The
Amount of the advice will agree with the total amount appear5ing in the schedule of cheque
deliver/received. The same office will similarly send advice to the branches of the returns, if
any. Copies of all advice will be sent to the head office.
TRANSFER AND TRANSFER DELIVERY
Transfer is used for inter branch and transfer delivery is inter-branch. Branch receives the
cheques and other negotiable instrument drawn on other branch of the same bank. Main
branch of the MCB handles the transfer delivery of cheques. Three same clearing cheques
procedure will be adopted in the transfer deliveries except not availing the facility of SBP. In
case of cheques drawn on one branch and collected by an other branch for the credit of its
constituents the branch delivering the cheques will send a consolidated debit advice will
Invariably agree with the total appearing in the transfer delivery schedule. If any cheque is
returned unpaid, a credit advice will be sent to the branch returning the cheque.
Clerk will also maintain the ledger for transfer delivery copies of all the advises will be
endorsed to the head office as usual.
MODES OF PAYMENT
In banking system different modes of payment are used, some of them are;
CHEQUES
TRAVELLER CHEQUES
MAIL TRANSFER
TELEGRAPHIC TRANSFER
LOCAL DEMAND DRAFT
FOREIGN DEMAND DRAFT
DIFFERENCE BETWEEN CHEQUE & DRAFT
Both are modes of payment. The difference is that the service charge excise duty and other
charges are paid by the cheque holder (to whom cheque is issued) and in draft all charges are
paid by cheque issuing deposit holder.
ADVICE FOR CHEQUE
It is used for enter branch communication. When a person has an a/c in MCB at G T Road
branch and he got a cheque from Muridke branch of the same bank then he deposits that
cheque in his account at G T Road branch that sends that cheque with advice to main branch
and main branch sends that
Advice with cheque to Muridke branch and that branch approve that cheque and sends back to
main branch and main branch sends back to G T Road branch and dig. Branch deposits/credits
that cheque to depositor’s account.
If Muridke branch has no such amount then they refuse to approve it and send to main branch
and main branch sends back (new advice) to G T Road branch and reserve process starts .If
transfer delivery is used between different cities then the issuing cheque holder pays service
charges and mail or transfer charges. If a depositor in a branch (Karachi) gives cheque to
another depositor (Lahore) then branch of second depositor makes an advice and transfer
amount to first depositor and service charges and the second depositor pays postal or other
transfer charges. Three vouchers are used. Main voucher and copy of draft or cheque are sent
to first depositor’s branch. Main draft and one voucher are sent to head office and one voucher
remains to II depositor’s branch.
SPEED CASH
It is a new mode of payment usually used for immediate payment. It can only be issued by
Sheikh Sultan Trust branch and can send to any branch all over the country. Amounts from
foreign countries come to Sheikh Sultan Trust branch from where it is sent to other branches.
Payee’s bank manager can give amount after checking draft without any advice.
REMITTANCE DEPARTMENT
Transfer of money or equivalent to money from one branch to another branch of the same bank
is called remittance. Now it is become easier and safer method both for the client and banker
to transfer their money from one branch to another within the city and outside the city.
ORIGINATING BRANCH
It is the branch, which receive the instrument for remittance.
RESPONDING BRANCH
The branch, which receives the instrument for remittance.
TYPES OF REMITTANCE
INWARD REMITANCE
The branch receives the instrument directly from the customer or from the originating branch,
and is responsible to pay to part is called inward remittance.
OUTWARD REMITTANCE
The branch, which issues or sold the instrument to the responding branch is, called outward
remittance.
INLAND REMITTANCER
Transfer of money from one branch to another branch of the same bank within the same
country is called inland remittance. In this case both originating branch and responding
branch will be situated in the same country.
FOREGIN REMITTANCE
Transfer of money from one country to another country is called foreign remittance. In such
case may be originating or responding branch will be out of the country, and mostly
conversion of foreign currency is involved.
MCB USES FOLLOWING FOUR TYPES OF MODES OF PAYMENT
1. Demand Draft (DD)
2. Pay order (PO)
3. Mail Transfer (MT)
4. Telegraphic Transfer (TT)
HAILEY COLLEGE OF COMMERCE, UNIVERSITY OF THE PUNJAB 26
INTERNSHIP REPORT
When customer requires a facility of remittance, he should be asked to complete the prescribed
application for. Same prescribed application form will used for MT, TT, DD, and PO. This
application form is stated the amount of the remittance, the name and address of the payee, the
name of originating and responding branch. The applicant and the bank officer who have been
duly authorized to act on his behalf should sign this application form.
for the confirmation of draft. When banker issue draft to the customer, he also records
customer particulars in a demand draft register where record is maintained branch wise
.Responding branch and originating branch debit/credit the head office account and send the
daily statement of transaction to head office.
INTER-BRANCH TRANSACTION
Suppose Main branch Muridke issues a “DD” on Lahore branch for RS. 1000/-. The following
entries will pass in:
MAIL TRANSFER
The transfer of money from one branch to another branch of the same bank through mail or
courier service is called mail transfer. Bank is responsible for the transference of the applicant
should be the regular customer or the account holder of the responding as well as originating
branches.
TELEGRAPHIC TRANSFER
Through telegram and fax originating branch seen funds to responding branch instantly and
immediately. Bank charges commission, telegram/fax charges of RS.20 on telegraphic transfer.
ACCOUNT DEPARTMENT
Account department is the backbone of a bank. It plays a vital role in performing different
functions of a bank. The account department of MCB is computerized as well as manual.
Accounting books of different departments are maintained under this department and with the
help of these, accountant prepare the monthly, quarterly, semiannually and yearly financial
statement and other statements of the whole bank. The entire transaction-taking places are
recorded daily in the books of accounts and in computerized ledgers.
For every transaction there is voucher prepared and through these vouchers contra entries are
passed under different head. Good working of accounts department mainly depend on the
voucher system. Accounts department is responsible for proper handling and maintenance of
vouchers of different department.
Manual Functions Performed By Accounts Department
To Prepare and Maintain The Voucher
Accountant prepares vouchers for all daily activities of different departments. Checking officer
checks and tallies these vouchers with their daily transactions and posts their entries under
proper heads.
CASH BOOK
Cashbook is prepared daily to keep the record of DAILY RECEIPT and DAILY PAID vouchers.
Cashbook contains the opening balance of working day. Before writing and balance the cash
book firstly there is need to properly arrange all the vouchers of that day.
TO MAINTAIN AND UPDATE THE LEDGER FOR TERM DEPOSITS
One of the functions of accounts department is to maintain and update the term deposit ledgers
and books manually. Term deposit receipt or TDR ledger is updated after every month for
estimating profit on customer’s accounts. Accountant prepares different ledger for all schemes
of term deposit. With the help of TDR ledger accountant prepare “PROVISIONAL LEDGER”.
From this ledger accountant calculate the monthly product of each account and estimate the
profit for a half-year. The semiannual profit on each account will be the expenses of branch.
monthly, semiannually and yearly statements. Some of these statements are prepared for the
purpose of record keeping of branch and some are prepared to send to the circle office, head
office, and State Bank of Pakistan.
SOME OF THESE STATEMENTS ARE
Statement of provisional income
Statement of provisional expense
Statement of head office account
Summary of income and expenses
Statement of profit and loss a/c
Statement of profit and loss on PLS 365 a/c
BILLS DEPARTMENT
The department deals in bills for collection for a kind such as cheques, draft, pay orders, call
deposits etc with outstation branches of MCB or with other banks.
It provides service to their customer to get payment from the nearer bank at nominal charges.
The four main heads of bill departments are.
Bill department receives cheques or other kinds of bills from it client whose account must be
opened in that branch. This branch forwards the check with schedule or covering letter to that
branch on which bill is drawn. The checking officer of bills department will cross the cheque
with special bank stamp before forwarding the cheque. OBC Register is also maintained for
proper record keeping of outward bills. This register is updated two times once at the
confirmation advice of this check is received form the payable branch. Bank gets a commission
0.25% on per hundred and courier charges Rs.30 this service.
2. INWARD BILLS FOR COLLECTION (IBC)
The branches, which receive bills, have to verify these bills for payment. The party
account must be opened in that branch. The responsibility of this branch is to verify the
bills for collection within three days and send the advice to the originating branch. In
case of verification of bills is approved bank debits the account of the respective account
holder and send a debit advice to originating branch and at the same time credit the
head office account.
For inward bills IBC Register is maintaining for keeping the proper record of the bills.
3. OUTWARD DOCUMENTARY BILLS FOR COLLECTION (ODBC)
Originating branch receives the documentary bills from their clients and sent them to
outstation branches of the same bank or other bank. Customer account must be opened
in that branch. The documentary bills are i.e. trust, receipt, railway receipt, sale
invoice, receipt of courier service etc. bank gets a commission 0.35% + postage
charges+courier service
charges of this service. Seller and purchaser both can avail the facility of bank in case
of selling and purchasing their product or goods.
4. INWARD DOCUMENTARY BILLS FOR COLLECTION (IDBC)
Bank receives the documentary bills from the other outstation branches of the same bank or
other bank for collection the amount from purchaser.
In this case back acts as buyer acts as a buyer’s bank. When bank receives the documentary
bills they send intimation to buyer about his arrival of goods. If the buyer is the account holder
then bank will debit his account otherwise purchaser deposits the amount of the bill. Bank
hand over these documents to purchaser, on behalf of which buyer receives the goods. Bank
also charges commission.
ADVANCES DEPARTMENT
ADVANCE OF LOAN
When a customer borrows from a banker a fixed amount, which is repayable either in periodic
installments or in lumps at a fixed future times. Customer has to pay mark-up on the entire
amount.
The advance department has to prepare credit line proposal to ensure that the security for the
advance is perfect and to provide all information required on the credit worthiness of the
client.
ADVANCES ARE GIVEN TO CUSTOMER ON THE FOLLOWING BASIS
Experience, capacity and credit worthiness of the borrower
Financial condition of his business
Details about the customer dealings with other associated companies
Account turnover position
Average balance maintain
DEMAND FINANCE
The duration of repayment of this advance is longer than cash and running finance. These
advances are made in lump sum and there is permission to repay the amount in periodic
installments or in a lump sum. Big loans are sanctioned under this finance against reasonable.
Mark-up is charged on daily basis 0.50 RS. Per day thousand.
RUNNING FINANCE & CASH FINANCE
The maximum time period of repayment the advance is one year. It’s according to the will of
the customer to repay it whenever, within this period. Customer can operate the running
finance facility as a current account to meet these urgent and unexpired requirements.
Running finance is the new name of overdraft.
In pledge case, goods and documents are delivered by a customer to this banker to be held as
security for the repayment schedule of these advances are allowed to adjust in periodic or in
lumps sum.
FACILITIES
MCB has provided two types of facilities in case of advances.
1. FUND FACULITY
2. NON FUND FACILITY
FUND FACULITY
Funds are given to customer according to their requirement against securities.
There are following types of advances, which are given to customer on fund basis.
Industrial loans
Commercial loan
Agricultural loan
These loan are given specially to traders, business, small industrial units, including cottage
industries, agriculturists, thus ensuring unquotable distribution of bank credit among various
sectors of the country’s economy.
INDUSTRIAL LOAN
Loans are given to industrial units including cottage up to or less than RS. 20 Million. Loans
and advances shall not exceed amount specified by marginal restriction on the type of
securities offered. Industrial loans are granted to the manufacturing section of the economy
including finance for fixed investments and working capital requirements of small industries.
Loan Period
Loans are allowed of a maximum period of 5 years including a maximum grace period of 1
year. In special case up to 10 years also, depending upon the merit of the case.
Commercial Loan
Total principal amount of loans to a single enterprise/borrower shall not exceed RS. 0.5
million. Maximum maturity is 3 years, depending upon the nature and type of and of advances,
decided upon case to case basis.
Mark-Up
Both for commercial and industrial loan, mark-up will be charges as per existing rate, subject
to changes from time to time. Presently it is 051 RS. Per day per RS. 1000/-.
Mode of Repayment
Equal monthly, quarterly or half-yearly, repayment of principal and interest or as per term of
approval.
Securities and Margin
Loans can be made against any or more of the following securities mortgages of immovable
property (land and building), pledge of stocks, raw materials, and finished goods,
hypothecation of stocks, raw material, and finished goods, SBP guarantee.
AGRICULTURE LOAN
The loan is advanced to those farmers who are cultivated agricultural land. It is classified into
following two types.
1. Production Finance
2. Development Finance
Production Finance
This finance is advanced to the agriculturist for input requirement of land E.I. fertilizer,
Pesticides, seeds etc. It is also called short-term loan.
Development Finance
These loans are advanced to the farmers for the purpose of development of the land or other
development purposes belong to the agriculture sector tractor, thresher, and tubewells. It is
HAILEY COLLEGE OF COMMERCE, UNIVERSITY OF THE PUNJAB 36
INTERNSHIP REPORT
called short, long, medium term loan. The repayment of loan is scheduled in periodic
installments, which may be quarterly, half yearly or yearly. Mortgager of land is used as
security for development finance .Mark up is charged on daily basis and changes time to time
normally it is 0.50 RS. Per thousand per day.
the type of guarantee, unusual conditions are contained in the guarantee. After the guarantee
has been issued, a copy of the same is attached to the counter guarantee issued to the customer.
Bank charges a commission 0.40% per quarter on the amount of the guarantee issued.
Normally the validity period of guarantees does not, at a time, exceed on year.
For opening a foreign currency account there is needed a photocopies of 4 pages of passport
card. The State Bank of Pakistan national resident outside Pakistan against the security of
balances in foreign currency account.
The MCB Has Introduced Three Schemes In Foreign Currency Account
• Primary Currency Account
• Dollar Khushali Account
• Term Deposit Account
Cheque ledger
Vouchers of debit and credit
Pay in slip
Daily statement account to head office
After the freezing of accounts, now the banks have only one foreign currency account i.e. dollar
accounts, and their tenure is not more that one year. The bank giving profit LIBOR rate+4%.
Import
This department provides the facility to their customer to import machinery or products from
other countries. It is necessary for the import to have the licenses, which is issued by the chief
controller of imports and exports. For having the license, an individual or firm submits the
application through his bank.
The documents which are necessary for the registration and having the import license
are following
Filled Application Form For Register
The National Identity Card of the Applicant
The National Tax Certificate issued by the Income Tax Department
In case of firm or company, the Memorandum and the Article of the Association
Banker is issues the letter of credit normally in the response of the Performa Invoice. The
seller sends this invoice to the buyer and it contains seller name, product quality, and rate,
mode of shipment, and other terms and conditions.
LETTER OF CREDIT
Definition of Letter Of Credit
HAILEY COLLEGE OF COMMERCE, UNIVERSITY OF THE PUNJAB 40
INTERNSHIP REPORT
Exporter
The seller or the party in whose favor the letter of credit is draw is the third party and it is also
known as beneficiary.
Paying or Negotiating Bank
The paying bank in the exporter’s country on which the draft is drawn is called the paying
bank.
6. This form contains all the necessary details discussed between the importer an exporter
for the shipment of goods which of unloading, the documents against which the bank is
the honor the draft, total value of the goods etc.
7. If the documents supplied by the seller conform to the terms of contract the exporter will
be paid.
8. The issuing bank will not be responsible if there is any fraud or the merchandise does not
conform to the sales contract.
9. The obligation of the buyers bank is,
a) To issue letter of credits on agreed terms and condition with buyer.
b) To have a proper examination of the documents.
c) To honor draft when presented with proper documents.
It is one under which the exporter’s bank does not give any guarantee to the exporter
that the bills drawn will be honored by the issuing bank to honor the draft. From the exporter’s
point of view, the confirm irrevocable letter of credit is the best from of receiving payment.
2. Line Of Credit
Before issuing a letter of credit, bank takes all necessary precautions for securing its credit.
The bank first examines the customers credit standing, the type of goods to be imported, the
market demand for the goods, the collateral offered to cover the credit. Then it establishes the
amount i.e. the line of credit.
When the exporter receives a letter of credit, he presents the required documents and the draft
to the bank in his own country after shipping of documents. If the bank is satisfied with the
documents in the importing country and pays the exporter at official rate in the currency of his
own country.
5. Payment by Importer to the Bank
When a bank approves the application of a customer for opening letter of credit, it does not
lend money to the importer. The bank only lends the importer to use the credit standing of the
bank to the exporter in the foreign country. The bank makes a contract with the importer that
when the draft if send by the negotiating bank for payment the importer will make the payment
to the bank not later then the day only the bank is to honor the obligation. In case of a sight
letter of credit the payment to the corresponding bank is to be made on the day the draft and
documents are received. When the time of letter of credit is used the importer is to arrange the
payment not later than the day on which the draft is to mature.
The liability of the issuing bank is to examine the documents in order to confirm their validity.
If the documents on the face appear to be in order the payment should be released. If any
defect is found in the documents and the issuing bank honors the draft, the importer can claim
damages. The banker is not responsible to see whether the merchandise conforms the sale of
contract or they physically exist. The issuing bank is only responsible for the completeness and
regularity of the documents relating to the letter of credit.
IMPORTANCE OF LETTER OF CREDIT
The bank charges nominal commission on financing the import and export shipment.
Benefits To the Bank
Increasing balances
Commission
New business opportunities
Increase Balances
The balances are the lifeblood of every commercial bank. The banks get marks up on the credit
and this mark up increase the money of the bank.
Commission The commission charged by the banks varies with the kinds of letters issued by
them. Though the commissions are small, yet when counted on the whole, they form an
important part of earning of the banks.
New Business Opportunity
The letter of credit provides new business opportunity to the bank. The firms, which are
engaged in the export and import of merchandise, are introduced to the banks, which by
serving them develop profitable relationship.
Document
Documents are the most important part of international trade. Without them trade cannot be
completed. Documents are of five types.
1. Commercial documents
2. Transport documents
3. Insurance documents
4. Financial documents
5. Official documents
Commercial Documents
Commercial documents consists of following
Invoiced form
Certificate of origin
Weight note
Packing list
Quality or insurance certificate
Transport Documents
These documents are related with transfer of goods. These documents consist of following
forms.
Airway bill
Bill of landing
Rail consignment note
Roadway bill
Combined transport bill o landing
Insurance Documents
Official Documents
Black listed certificate
Consular invoice
Health, vetenary, sanitation certificate
Export
Usually the exporter does not rely on the credit of a banker in the country of importer, and
insist on a confirmation from a banker carrying on business in his own country. Thus this
department of a bank helps the exporters to settle down their financial affairs. For exporting it
is necessary for exporter to get export license from the chief controller of import and export
after registration. Documents are required for the registration such as N.I.C, income tax
Certificate, bank certificate that shows that the exporter is his account holder and has a good
dealing with them. In response to the letter of credit exporter submit the following documents
to the negotiating bank.
Bill of exchange
Invoice
Bill of lading or Airway bill/railway receipt /truck receipt
Insurance documents
Packing list
Any other documents, if so required.
The negotiating bank will send the same documents to the issuing bank. In accordance with the
terms and condition la id down in let of credit.
Security of Document
Whether documents received are meant for the opening bank and specifically for the branch
which established the letter of credit. The documents would be negotiated within the validity of
L/C. the goods have been shipped within the time allowed under L/C. the goods are mentioned
in invoice and other documents (e.g. bill of lading, packing list etc) are in accordance with
merchandise clause L/C. Whether the documents received pertains to L/C, established by the
opening bank and the documents negotiated are within or equal to L/C amount. In case where
the value of documents exceeds the L/C amount. The foreign bank may negotiate the documents
for amount being marginally excess or sends them on collection, remittance may be allowed in
excess subject to the following conditions.
The amount does not exceed 5% of the amount of L/C subject to the maximum of US
500/- $.
The importers hold a valid import license against which the excess amount is adjusted-
provided remittance is affected within 1.5 year from the date of issue of import license.
The name of the importer on the bill of exchange does not differ from that on the import
license. The tenor of the bill should be valid. See that the goods are not shipped prior to the
date of opening of L/C or the documents are not stated.
The goods are consigned or endorsed in the favor of the bank only opening the letter of credit,
and in no case it should be consigned to the importer directly.
Retirement of Documents
When the opening bank against a letter of credit receives documents. The customer
retires the documents under different arrangements e.g.
Retirement against payment by the importer
Retirement of documents in case of None-payment by the importer
Retirement of document under trust receipt
Retirement of Documents under Trust Receipt
Shipping documents are released to the importer on trust, that he may get the goods cleared
from the custom authority by himself, sell the good, and later pay back the bank. Trust receipt
financing is limited to first class customers only as the bank reposed fullest confidence in the
importer. Documents are obtained from the customer. The finance is provided for the period of
45 days only.
The Amount of Finance Is Calculated As Under
Rupee value of bill plus foreign bank charges plus taxes, less SBP marging restriction =
amount of finance.
Mark up is calculated @ 0.43 RS. Per 1000 per day on the amount of finance utilized.
After the retirement of documents the opening bank then transmits the funds to the negotiating
bank. The exporter will receive the payment from the negotiating bank.
Renewal of Card
The expired card would be renewed, if the account holder wants.
Loss/Misplaced Card
If a card is lost or misplaced, immediately inform the MCB card Department. A replacement
card having the same validity as of the lost card would be sent to the individual concerned as
soon as written intimation is received from him.
The account holder would have to pay RS. 50/- as the lost card fee.
RUPEE TRAVELERS CHEQUE
MCB rupee Travelers Cheques have the largest share of the total RTC market. Over 1.5 million
satisfied customers have made MCB RTCs their first choice and find them ideal for all
transactions whether business or personal. We aim at ledership, attain it and today, we are the
market leaders.
MCB is the only bank to have the Tele-verification System that allows the customer to confirm
the validity of each cheque. This facility should assure you that the cheques are not lost/stole.
What set MCB RTCs apart are the security features. MCB RTCs are printed in the UK and
carry a thread watermark- a feature that prevents counterfeiting.
MCB Rupee Travelers Cheques
Ideal For Every Deal
Different facilities are provided through RTCs, some of them are as follows
As Good As Cash: RTCs are the most convenient substitute for cash for all kinds as
transactions-business, property, trade or personal.
Denominations: cheques are available in denominations of RS. 1000 RS. 10,000 and
RS. 50,000.
Easily Encashed: RTCs can be easily encashed at any designated MCB branch.
Easy refundable: in case of loss or theft, you can get the full amount back.
HAILEY COLLEGE OF COMMERCE, UNIVERSITY OF THE PUNJAB 53
INTERNSHIP REPORT
Exclusive security features: due to special printing and safety precautions, MCB RTCs
cannot be duplicated. Various securities features both in design and materials make
counterfeiting or fraudulent alteration extremely difficult.
Valid unit used: validity of cheques is indefinite. You can use for a week, a year or
more after the date of purchase.
Tele-verification system: RTCs enable you to check the validity of a cheque 24 hours a
day. Tele-verification UAN: (021) 111-000-456.
FINANCIAL ANALYSIS
MUSLIM COMMERCIAL BANK LTD.
BALANCE SHEET
VERTICAL ANALYSIS
AS ON DECEMBER 31,2002
LIABILITIES
Bill Payable 6261957 2.802527 8097178 4.49427519
Borrowing from financial institutions 21987824 9.840609 8946624 4.96575354
Deposits &other accounts 182705716 81.76959 154544437 85.7786864
Sub-ordinate loans 1600000 0.716077 __ __
Liabilities against assets subjected finance lease __ __ __ __
Other liabilities 9045634 4.048356 8580465 4.76128489
Deferred tax liabilities 1838545 0.822837 __ __
TOTAL 223439676 100 180168704 100
NET ASSETS 11698891 6905572
REPRESENTED BY
Share capital 2665455 22.78383 2423140 35.1841478
Reserves 3026517 25.87012 2278980 33.0909354
Inappropriate profit 621985 5.3166151 302465 4.12282696
6313957 53.970560 5004585 72.471694
Surplus on revaluation of assets 5384934 46.02944 1900962 27.6020898
LIABILITIES
OPERATING EXPENDITURE
Interest expense 7544897 41.59745 6074682 36.79828
Provision for diminution in the value of inv. 62064 0.12356 512 0.284979
Profit against non-performing loan and adv. 1704944 8.98754 ____ 0
Bad debts written off directly 448999 2.475476 721105 4.012546
Administrative expenses 7336815 40.45023 8077395 50.13016
Other provisions 40000 0.220533 ___ 0
Other charges 147 0.00081 1313 0.227281
Taxes 993000 5.513422 1362426 7.654269
TOTAL 18089674 100 16237433 100
OPERATING EXPENDITURE
Interest expense 7544897 6074682 -1470215 19.230288
Provision for diminution in the value of inv. 62064 -62064 -100.000
Profit against non-performing loan and adv. 1704308 -1704308 -100.00
Bad debts written off directly 449635 721617 271982 60.722069
Administrative expenses 7331623 8077395 745772 9.890183
Other provisions 40000 -4000 -100.00
Other charges 147 1313 1166 793.0231
Taxes 993000 1362426 369426 37.0321
TOTAL 18089674 16237433 -1852241 -10.23156
Return on Assets
(RS. 000)
Return on Assets
2002 2001
Profit after Tax 1738594 1108176
Total assets 235138567 180166493
Ratios 0.739% 0.6%
This ratio shows that the return is greater in 2002 as compared to return on assets in the year
2001. Although interest and discount on loans which is the major source of revenue for bank
has increased in 2002 as compared to last year, but cost on deposits and borrowing which is the
major expenditure of bank has increased more in the current year than the last year.
Another reason of increase in return is the increase in lending rate and decrease in financial
cost, total assets in 2002 have also increased substantially than last year so return on assets
increased in 2002.
RETURN ON SHAREHOLDER INVESTMENT
(RS. 000)
Return on Shareholder
Fund 2002 2001
This ratio is a further explanation of the above ratio that is the rate of return has
decreased in 2002, in 2002 profit after tax has increased and on the other hand its
denominator shareholders fund has also increased due to increase in reserve fund and
other reserves. Therefore both the factors are responsible for this ratio.
RETURN ON EQUITY CAPITAL
(RS. 000)
Return On Equity
Capital 2002 2001
Profit After Tax 1738594 1108176
Equity Share Capital 2665455 2423149
Ratios 65.23% 45.73%
Calculation made on the base of data available shows that profit earning after taxes in
2002 has increased. Here in this ratio we see that ratio has increased not by the single
factor but also due to increase in share capital. So both these factors has resulted an
increase of the return.
EARNING PER SHARE
(RS)
Earning Per share
2002 2001
Profit After Tax 1738594000 1108176000
This ratio is telling that is in the current year 2002 profit has increased and that is why
earning per share has also increased.
RATE OF RETURN ON LOANS
(RS. 000)
Rate of Return on loans
2002 2001
Interest Income 15385869 17033225
Total Loan 78923737 76584120
Ratios 19.49% 22.24%
Here we are watching very interesting situation, as there is decrease in interest income
in 2002 and ratio has also decreased, reason is that interest income has decreased but
amount of loan has increased resulting in decrease in return on loan.
LIQUIDITY RATIOS
LOAN TO DEPOSIT RATIO
(RS. 000)
Loan to Deposit Ratio
2002 2001
Total Loans 78923737 76584120
Total Deposits 182705716 154544451
Analysis shows an increase in loan and also increase in the deposits. As rate of increase
of deposits is greater than that of loans, therefore it has resulted in an overall decrease in
the ratio.
LOAN TO ASSETS RATIO
(RS. 000)
Loan to Assets Ratios 2002 2001
Total Loans 78923737 76584120
Total Assets 235138567 187053515
Ratios 33.56% 40.93%
Total assets of the bank increased from RS. 187 (billion) in 2001 to Rs. 235 (billion) in
2002 and have 25% increase in assets, which has resulted in an increase in loan but to
shorter extent. Therefore the net result is decrease in the loan to assets ratio from
40.93% in 2001 to 33.56% in 2002.
CAPITIAL RATIOS
EQUITY CAPITAL TO ASSETS
In current year bank’s assets have been increased from RS. 187 (billion) to Rs.
235(billion) there by increase @ 25.67% over the last year. On the other hand bank’s
equity has increased and changed during the year
2002 so this is the reason that ratio equity to assets has decreased from 1.29% in 2001 to
1.13% in 2002. Denominator total assets have increased substantially during the year
2002 and increase in equity capital resulted a decrease in this ratio.
EQUITY RATIO
(RS. 000)
Equity Ratio
2002 2001
Shareholder Fund 11698891 6887022
Total Assets 235138567 187053515
Ratios 4.97% 3.69%
This ratio explains that participation in the assets by the shareholders funds is limited by
outsiders fund but when we take year under review (2002) we see ratio has increased in
2002 as compared to the year 2001. Reason behind this is that increase in assets in
financed by outsider’s fund rather than the fund provided by the shareholders.
(RS. 000)
Debt Equity Ratio
2002 2001
Total External Debit 223439676 180166493
Total Internal Debts 11698891 6887022
Ratios 19.10 times 26.09 times
This ratio depicts the relation between equity and debt financing. This current year ratio
shows an decrease in ratio from 26.09 times to 19.10 times. Because lesser is the equity
financing lesser will be the soundness of the bank
The reason behind this decrease is an increase in external borrowings and increase in
internal debt also but rate of increase in internal borrowing is greater. It is necessary to
keep the bank fund up to 40% as reserve.
CONCLUSION
During my internship training at MCB G T Road Branch Muridke I have learned a lot. It was a
geed experience for me. In April 1991, the, MCB became the first Pakistan’s Privatized bank.
After privatization, the profitability and performance of the bank has increased. Toda MCB
represents a bank that has grown with time.
GOOD FEATURES
The staff of foreign exchange department is highly professional. All the members of this
department are highly educated and trained they work in a proper way and follow all the ruled
and regulations, that is why this department of this branch is most professional and highly
profitable department of the whole MCB.
1- Duty Hours Are not Properly followed the working hours are from 9:00 A.M to 5:00
P.M. this is because of extra burden of work on them and desire to fulfill the goal of the
branch
2- It has been observed that most of the staff member knowledge is limited. They only
know their routine duties. If any thing other than normal routine occurs, they are
confused.
SUGGESTIONS
1- Before adopting or changing any rules or policies of the bank, efforts should be made
to first of all provide sufficient training to the staff. Providing proper training to the staff
member periodically
.2- For avoiding duty timing problem, all the departments should have appropriate staff
members.
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