Chapter One

Introduction of Banking Industry

What is Bank?
By G.W. Gilbert, "A banker is a dealer in capital or more properly a dealer in money. He is an intermediate party between the borrower and the lender. He borrows from one party and lends to another." Under Banking Companies Ordinance 1962, {S: 3(B)} "Banker means person transacting the business of accepting for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise and withdraw able by cheque, draft, order or otherwise and includes any Post Office Savings Bank." Banking is one of the most sensitive businesses all over the world. Banks play very important role in the economy of a country. Banks are guardian to the assets of the general stacks. The banking sector plays a noteworthy role in a modern world of money and economy.

Evolution of Commercial Banks in Pakistan

The country started without any worthwhile banking network in 1947 but witnessed exceptional growth in the first two decades. At the time of independence, there were only two banks, which were incorporated in undivided India and whose owners were Muslims; they opt to shift their Head Offices in Pakistan and with the founding of SBP, the other banks also came into existence and by 1973 number of banks increased to fourteen in Pakistan.

Commercial Banking in Pakistan:

o o o o o Commercial banking in Pakistan can be divided in three phases and Nationalized Commercial Banks (NCBs), Privatized Banks, Private Banks Foreign Banks. Commercial banks operating in Pakistan can be divided into four categories:

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 Pre-Nationalization Phase
There were only two Muslim banks in Indo Pak before partition one of them was Habib Bank Ltd. (establish in1941 at Bombay) and second was Australia Bank Ltd. (establish in 1944 at Lahore). Firstly at time of independent Reserve Bank of India was acting as central bank for both countries and same currency notes were used in both countries. But Reserve Bank of India was unfair. After that some steps taken which built a strong banking industry in Pakistan these are here under: o o o o Establishment of State Bank of Pakistan (SBP) on 1st July, 1948. Establishment of National Bank of Pakistan in November, 1949 SBP Act (1956) Banking Companies Ordinance 1962

Nationalization Phase In 1974 all Pakistani banks were nationalized through Nationalization Act 1974. Under this law all Pakistani banks became a public property. All small banks were merged in bigger banks to create 5 major Pakistani banks Pakistani banks. These banks were to control by Pakistan Banking Council. There are still controversies about this act of government as whether it contributed in success of failure of banks.

Post Nationalization Phase

In 1990 the government decided to denationalize all the nationalized institutes. For this purpose, amendments were made to Nationalization Act 1974 and two nationalized banks were privatized. Along with this a permission to open banks in private sector was also granted. The rules regarding establishment of new banks and for incoming foreign banks were also relaxed.

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Chapter Two

About the Organization

MCB in Brief
MCB is one of the top banks of Pakistan with a deposit base of Rs. 368 Billion and total assets over Rs.500 Billion. Incorporated in 1947, MCB soon earned the reputation of a solid and unadventurous financial institution managed by emigrant executives. In 1974, MCB was nationalized along with all other private sector banks. The Bank has a customer base of approximately 4 million, a nationwide distribution network of over 1,000 branches and over 450 ATMs in the market.

Vision Statement
To be the leading financial services provider, partnering with our customers for a more prosperous and secure future.

Mission Statement
We are a team of committed professionals, providing innovative and efficient financial solutions to create and nurture long-term relationships with our customers. In doing so, we ensure that our shareholders can invest with confidence in us.

Values of MCB
Integrity We are the trustees of public funds and serve our community with integrity. We believe in being the best at always doing the right thing. We deliver on our responsibilities and commitments to our customers as well as our colleagues. Respect We respect our customers values, beliefs, culture and history. We value the equality of gender and diversity of experience and education that our employees bring with them. We create an environment where each individual is enabled to succeed.

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 Excellence We take personal responsibility for our role as leaders in the pursuit of excellence. We are a performance driven, result oriented organization where merit is the only criterion for reward. Customer Centricity Our customers are at the heart of everything we do. We thrive on the challenge of understanding their needs and aspirations, both realized and unrealized. We make every effort to exceed customer expectations through superior services and solutions. Innovation We encourage and reward people who challenge the status quo and think beyond the boundaries of the conventional. Our teams work together for the smooth and efficient implementation of ideas and initiatives.

Business Volume Corporate Information

MCB Bank Limited is Public Limited Company listed on Karachi, Lahore & Islamabad Stock Exchanges in Pakistan, under license number BCD (1) 17-66 dated 8th December 1966 and its external Auditors KPMG Taseer Hadi & Co. (Chartered Accountants) total number of shareholders - as of December31-12-2009 is 691,104,527.

Historical Overview Formation:

MCB (formally Muslim commercial bank limited) Bank Limited completed his 64 years in the field of banking quite successfully. MCB was formed in 1946 in Calcutta. The registered office of the bank transferred to Karachi in 1948.

Achievements:
MCB Bank Limited won Best Bank in Pakistan Euro money awards seven times in 2000, 2001, 2003, 2004, 2005, 2006 and 2008, Best Domestic Bank in Pakistan five times 2004, 2005, 2006, 2008 and 2009, Asset award Best Domestic Bank in Pakistan 2009 and Euro money awards Best Bank in Asia 2008.

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Change of Name: The name of bank has been changed from Muslim Commercial Bank Ltd to MCB Bank Ltd. Shifting of Head Office: In 2008 the head office of MCB was shifted to Lahore in a newly constructed building, namely MCB House, located at Jail Road, from Karachi.

Principles of Performance
Customer Focus Over the years MCB has developed strong relationships with its customers by understanding their needs and treating them with respect, dignity and importance. The driving force behind its commitment and services is its focus on customers, ensuring that it not only meets, but exceeds their expectations. Quest for Quality MCB strives to achieve excellence by ensuring that every moment of our time is spent in adding value, making sure that we do things right, first time, and every time. With this quest for quality, MCB has always taken initiatives in bringing banking into a new arena; from cash to the convenience of plastic; from branch banking to internet banking and from face-to-face customer interaction to online accessibility. Employees Respect MCB encourages diversity and treat each of our employees with fairness. MCB gives constructive feedback for their continuous development and seek suggestions from all employees for further improvement. The bank ensures that quality performance is acknowledged and rewarded and exercise utmost responsibility in decision-making with regards to our employees. Team Based Approach MCB believes in achieving its Mission and Vision by working together as a combined group. MCB treats its employees as its internal customers and ensure that the requirements of internal customer focus are always met. Equipped with in-depth product knowledge, and recognizing the strengths in each individual, the bank strives for optimum-

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results from our co-workers and bringing out peak performances by working towards common goals and objectives in today's dynamic banking environment. Good Corporate Citizenship MCB seeks to continuously improve the quality of life in our communities. The bank realizes that it has a responsibility to the society in which it operates and it seeks ways of playing a positive role for the betterment of the community at large for a progressive environment, better living and a brighter future.

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Chapter Three
Functions of MCB Limited Finance system of the bank:
The financial system of MCB Bank primarily consist of two pillars which are also may be components of other commercial banks financial system. A Simple Chart of finance system is as under:

Finance System

Depositors: Households Business Firms Foreigner Government

Borrower: Households Business Firms Foreigner Government

Accepting Deposits: The main primary function is to accepting the deposits from customer it is also main source of funds for bank. There are different types of accounts on which deposits are accepted by bank. These are the component of financial system which termed as severs or lender in finance system of MCB Bank: o Households o Partnership firms o Public/Private Companies o Financial Institutions/ Banks o Foreigner o Government/ SBP

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 Granting Loans: The another function is to granting loans to borrower or spender for use it is also main source of income for the MCB Bank like other commercial bank. There are different types of loans which granted by the bank. These are also components of financial system of MCB Bank and termed as borrower or spender: o Households o Partnership firms o Public/Private Companies o Financial Institutions/ Banks o Foreigner o Government/public project financing A broader approach of MCB Bank Limited financial system can also include source of funds and allocation of funds. This approach is more prominent then above one. Here

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under is a chart is given:

Financial System

Sources of Funds: Depositors Shareholders Financial institutions SBP

Allocation of Funds: Loans Advances Securities Others

Sources of Funds Depositors: Like all commercial bank deposits are main source of MCB Bank and recently in 2009 total amount of deposits are 363,258,355, 000 rupees. There are different types of deposits which as under: Types of Deposits Fixed deposits 18 In Rupees 62,651,531, 000

Saving deposits Current accounts Margin accounts Others Total amount Shareholders:

173,797,078, 000 123,898,324, 000 2,910,655, 000 767, 000 363,258,355, 000

Equity is also main source of funds for MCB Bank and recently in 2009 equity is rupees 6,911,045, 000. Financial Institutions: MCB Bank another sources of fund is financial institutions and in recently 2009 total amount of financial institutions deposits are rupees 4,346,356, 000. Interbank transactions are also a valuable source under the head of financial institutions. State Bank of Pakistan: SBP remains the source of funds for all commercial bank and MCB Bank can also can utilizes the funds from SBP which is lender of last resorts for all commercial bank. Allocation of Funds Loans: MCB bank allocate the funds for profit generation it is also proved to be the best items in funds allocation and recently in 2009 total markup earns through it is rupees 36,212,097, 000.

Advances: Short-term loans are also a valuable source of incomes so MCB Bank also allocating the funds in it. These may include: o Cash Credit o Overdraft o Discounting of bills Securities:

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MCB Bank also makes investment in securities and in recently 2009 total earning from investing in securities are rupees 13,894,162, 000. Others: MCB Bank also allocates his funds many other activities for generating revenue these may include: o o o Repurchase agreement Interbank transactions Project Financing Electronic Data for Decision Making MCB Bank has good IT based information system which is used for decision making so it enhance the overall capabilities by providing information timely and accurate. MCB use different MIS and KMS software for communication purpose all over the Pakistan within its branches and with SBP Bank.

Chapter Four

Products and Services of MCB

Banking Sector Overview
Financial sector in Pakistan is going through a fast-paced transition as new groups were buying out foreign banks operations in Pakistan. The number of listed banks is also

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increasing. While the income from core banking activity has increasing due to higher business volume, earnings are also expected to improve due to ventures into consumer finance, housing finance and enhanced lending to the agriculture sector. In just four years the banking industry has expanded tremendously and now there are more than two dozen commercial and investment banks operating in the country. Commercial banks in the private sector had performed well since their inception, registering overall growth in the deposit base and profits. The banks also managed to maintain a healthy credit portfolio. Foreign banks have a strong presence in all major cities and are targeting high net worth individuals and blue chip companies. Their strategy is quite successful as they account for about 34 percent of total sector profits, despite having only 15 percent of deposits and 16 percent of advances.

Products and Services Personal Banking Deposit Accounts

Khushali Bachat Account Khushali Bachat Account, a Rupee savings account is one of MCB Banks most popular products. Due to the low initial deposit, the account can be opened by people from all walks of life and still avail the facility of daily product profit calculation.

Mahana Khushali Bachat MCB Monthly Khushali Scheme provides you with a steady income every month. Just purchase a Monthly Khushali Certificate and you will enjoy a steady income of your total deposit every month.

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Pak Rupee Savings Account MCBs Pak Rupee Savings Account offers you attractive returns on your Pak Rupee investment. In addition, you have access to a countrywide ATM network convenient cash accessibility 24 hours a day. The facility also provides you with unlimited daily transactions with a limit on maximum withdrawal amount through the ATM machines. Pak Rupee Current Account MCBs Pak Rupee Current Account offers you the convenience of unlimited withdrawals i.e. access to your funds whenever you want without any notice. There is no limit on the number of transactions you make in a day plus you can avail finance facility up to 75% of the total deposit. In addition, you have access to a countrywide ATM network convenient cash accessibility 24 hours a day. The facility also provides you with unlimited daily transactions with a limit on maximum withdrawal amount through the ATM machines. Pak Rupee Term Deposit MCB Pak Rupee Term Deposit gives a higher rate of return. It gives you choice of 1 month, 3 months, 6 months, 1 year, 2 years, 3 years, 4 years and 5 year term deposits. Saving 365 The MCB Saving 365 calculates profits on a daily product basis and gives you the facility of unlimited withdrawals. Foreign Currency Savings Account MCBs Foreign Currency Savings Account offers you attractive returns on Foreign Currency investment. An investor can invest in any of the four currencies i.e. US Dollar, UK Pound Sterling, Japanese Yen or Euro. Foreign currency account is exempted from Zakat and withholding tax Foreign Currency Current Account MCBs Foreign Currency Current Account offers you the convenience of unlimited withdrawals i.e. access to your funds whenever you want without any notice. There is no limit on the number of transactions you make in a day.

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MCB Foreign Currency Term Deposit MCB Foreign Currency Term Deposit gives a higher rate of return. It gives the choice of 1 month, 3 months, 6 months, 1 year, 2 years, 3 years, 4 years and 5 year term deposits. Dollar Khushali Account The Dollar Khushali Account, a Dollar based account was introduced in 1993 at selected MCB Bank branches. Today, you can open a Dollar Khushali Account at over 200 branches in Pakistan.

Loan Products
MCB Business Sarmaya MCB Business Sarmaya is the best Running Finance facility against your residential property which empowers you to manage your business dealings better. So act today and get MCB Business Sarmaya and thus improve your business, avail lucrative opportunities and expand your business, with absolute satisfaction of cash flows. MCB Car4u Life is like a chess board. You plan your career options. You analyze your business moves. But when you really want to improve your life, you make a power move. MCB CAR4U Auto Finance is the power move that assists you in more ways than you ever imagined. It is affordable, with lowest mark up, flexible conditions, easy processing and above all, no hidden costs.

MCB Pyara Ghar Some destinations require a long wait. Like waiting for a home of your own. But with MCB Pyara Ghar it is now easy to step into your home and start living a real life. MCB Pyara Ghar is an ideal Home Finance from your own bank that lets you Purchase, Renovate or Construct your home the way you have always wanted. Having your own home was never so easy Easy Personal Loan MCB Easy Personal Loan provides you with the financial advantage to do things you've always wanted to but never had the sufficient funds for. Take that much-needed

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holiday. Buy a car. Refurnish your house. Purchase a new TV. Finance a better education for your children. MCB Master Card Since the beginning of time, people have tried to find more convenient ways to pay, from gold to paper money and cheques. Today, money is moving away from distinct hard currencies and towards universal payment products that transcend national borders, time zones, and, with the Internet, even physical space. Plastic or "virtual" money, credit, debit, and electronic cash products, inevitably will replace cash and cheques as the money of the future. MCB Rupee Traveler's Cheques MCB Rupee Traveler's Cheques were first introduced in 1993 as safe cash for traveling and travel related purposes. The product has been extremely popular and is preferred over cash by customers while traveling and in all walks of life. MCB Rupee Traveler's Cheques- The safest way to carry Cash

Corporate Banking
Cash Management Services MCBs network of over 1000 branches in Pakistan enables it to collect and disburse payments efficiently with its cash management services. This also enables it to offer you a choice of paper based or electronic fund transfer solutions including collection amounts, cross branch on- line transactions etc.

Working Capital Loans Based on the customers specific needs, the Corporate Bank offers a number of different working capital financing facilities including Running Finance, Cash Finance, Export Refinance, Pre-shipment and Post- shipment etc. Tailor- made solutions are developed keeping in view the unique requirements of your business. Term Loans MCB offers Short to Medium Term Finance to meet capital expenditure and short term working capital requirements of our customers. The loans are structured on the basis of underlying project characteristics and cash flows of the business.

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Trade Finance Services Under Corporate Banking MCB offers trade finance services that include an entire range of import and export activities including issuing Letters of Credit (L/Cs), purchasing export documents, providing guarantees and other support services. Others Products and Services MCB Visa Credit Card MCB offers a complete suite of Classic, Gold and Platinum Visa Credit Cards focusing on providing, superior service, travel privileges & shopping pleasure. MCB Smart Card MCB Smart Card is the key that enables access to convenient banking services. MCB Rupee Travelers Cheque Rupee Travelers Cheque, being the market leader, is the most widely accepted way to pay cash for travel-related purposes. MCB ATMs MCB has one of the nation's largest ATM networks with over 450 ATMs and still growing. MCB Mobile ATM MCB Mobile ATM not only provides world class banking service but also provide convenience. MCB SMS Banking SMS anytime to get information regarding balance, mini statements and credit card related information once your card is linked. MCB Mobile MCB Mobile is a quick easy and secure way to recharge mobile phones, transfer money, pay bills and do much more. MCB Call Center Theres no easier way to bank than the new enhanced 24/7 MCB Call Center, which blends innovation and convenience to provide Banking Services that go beyond expectations. MCB Investment Services

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MCB Investment Services offer distribution of mutual funds managed by the leading fund managers of Pakistan MCB Advisory Services MCB also provide financial advisory services, commercial structuring support and access to capital resources to help companies successfully finance their business/project. MCB Lockers Lockers of different capacities are available nationwide. MCB Banc assurance MCB Banc assurance has created a one-stop shop for all your financial and insurance needs. MCB Local Rupee Drawing Arrangement Transaction Banking Department at MCB provides Local Rupee Drawing Arrangement, a product for small banks and financial institutions. MCB Home Remittance MCB Home Remittance provides a faultless inflow of foreign remittances credited in the beneficiarys account within minutes. MCB Quasi Equity/Hybrid Instruments MCB places a group of debt that has some uniqueness of equity such as being unsecured, subordinated or with a budding equity upside.

MCB Equity Capital Raising MCB offer capital for their clients by offering common or preferred equity to public or private investors, through initial public offers, offers for sale, rights issues and private equity placements MCB Islamic Banking MCB Islamic Banking provides Reba Free and Sarah Compliance services to a variety of customer segments

Virtual Internet Banking

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MCB Virtual Internet Banking offers you the convenience to manage and control your banking and finances when you want to, where you want to. MCBs Virtual Internet Banking facility is simple and secure. And its free of cost. With MCB Virtual Internet Banking you can access any of the banking services, 24 hours a day, 7 days a week and throughout the year. MCB Virtual Internet Banking offers a wide range of online services which makes your banking accessible anytime and from anywhere. Detailed Account Summary of all listed accounts. Mini-statements of each of the listed accounts showing recent transaction history for that account(s). Statement-by-Period of each of the listed accounts, based on the period specified. Immediate or Scheduled Transfer of Funds between your own accounts, as well as to third-party accounts MCB. Scheduling of One-Time as well as Recurring Funds Transfers. Payment of utility bills for registered Utility Companies. Immediate or Scheduled Bills Payment. Scheduling of One-Time as well as Recurring bill payments. Option for Full or Partial payment based on the payment conditions specified by a particular Utility Company. Bulk Salary Transfer for Corporate Customers, to facilitate them in paying salary to the corporate employees, who maintain accounts with MCB. Bulk Funds Transfer for Corporate Customers. Cheque Book Request for any of your listed accounts. Payment/Transfer Alerts for reminding, in advance, prior to the processing of specified payments and transfers. Personal Alerts for reminding of pre-specified events and occasions. setup as beneficiaries, maintaining accounts with

Islamic Banking
Deposit Schemes For customers who are looking for a deposit opportunity where they can purse their funds and reap Halal returns on it, we offer the following products: Al-Makhraj Saving Account

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Al-Makhraj Ianat Account Al-Makhraj Term Deposit Fund Based Facilities Ijarah Products MCBs Islamic Ijarah, analogous to the English term 'leasing, is based on the Ijarah wa Iqtina concept which means the sale of the asset to the lessee after the Ijarah has matured. Under this scheme, MCB will be the owner of the asset, and the customer (lessee) will be given the asset to use for a certain period of time in return for monthly rental payments. MCB will give a separate unilateral undertaking that it will offer to sell the asset to the customer (lessee) at the maturity of the Ijarah agreement at a price that may be equal to the security deposit amount, hence the term Wa Iqtina. Types of Ijarah Car Ijarah Equipment Ijarah

MCBs Competitive Strategies

To be competitive the Bank has further reinforced its position in the Consumer Banking arena by streamlining and re-launching the consumer financing products and introducing more convenience based solutions. With the re-launch of auto finance and house finance products, the Bank pushed the products with full thrust. The Bank has also launched a running finance facility against mortgage of property. Technology continued to play an important role in improving and expanding product offerings. The Bank introduced more IT based products to cater to the changing lifestyles and needs of the customers. MCB Virtual-Internet Banking was launched with wide ranging banking solutions for the customers ranging from individual to corporate customers and it has become the most preferred Internet banking solution in the country. MCB also had the privilege of being the first Bank in Pakistan to launch the comprehensive bill payment facility through its alternate delivery channels which include Internet Banking, ATMs and MCB Call Centre, currently with six payment partners. Similarly, the Bank also took initiatives to increase the usage of debit facility. To provide timely and updated information, MCB has also provided a new look to its website which is user friendly and considerably easy to browse. 28

The Islamic Banking initiative has been very successful in attracting new customer, both individuals and companies. Similarly, those relationships, which were confined only to current account facility, have grown into stronger business relationships. The branch network was expanded to Lahore and Multan during the last year and recently been extended to Hyderabad and Faisalabad. The Bank plans to further expand its Islamic Banking branch network to other metropolitan areas and also to introduce new sharia compliant banking solutions to a wider range of customers for satisfying their individual and business needs. Some wide-ranging new strategic initiatives were also taken up which will be important for the Bank in years to come. A private company has been formed in Hong Kong (fully owned subsidiary of MCB) in partnership with Standard Chartered Bank, handling trade transactions of select countries in the Asia-Pacific region. It is projected to earn US$ 1 million in its first year of operations. To increase its international presence, the Bank will be opening its representative office in Dubai and entering into major strategic alliances with banks in the UAE/ especially for marketing our consumer banking products to non-resident Pakistanis. Furthermore, feasibility is also being carried out for entering other international markets. MCB's operations continued to be streamlined with focus on rationalization of expenses, re-alignment of back-end processing to increase productivity, enhancement of customer service standards, process efficiency and controls. The Bank has taken the lead in introducing the innovative concept of centralizing Trade Services in the country by providing centralized foreign trade services to branches with a view to improve efficiency, expertise and reduce delivery cost. Management of Human Resources has been one of our core focus areas. MCB is committed towards attracting, retaining and motivating outstanding people. Challenge for MCB is to provide an environment in which employees can better realize their potential. The Bank introduced 'reward for performance' where high potential officers were identified and rewarded accordingly. In view of the competitive environment, the Bank is focusing on performance and introducing a more robust performance management system. MCB is also strongly committed to training its staff at all levels.

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The Bank will also be implementing the full suite of the latest version of SYMBOLS Version 8. MCB Bank will run SYMBOLS e Finance modules to deliver personalized services to its customers over multiple delivery channels, while SYMBOLS Enterprise Operations Center will serve as its core banking transaction-processing engine. By implementing SYMBOLS, MCB Bank aims to raise the level of its customer service and its time to market in new product offerings for its three core banking businesses in Corporate, Commercial and Consumer Banking - retaining its market leadership as Pakistan's progressive Bank.

Chapter Five

Critical Analysis
Risk framework:
o MCB Bank has good risk framework a Risk Management & Portfolio Review Committee is in place which has five members including chairman of the committee. This committee is responsible for developing risk frame work according to the guidelines of SBP.

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Currently a centralized framework is apply by the MCB which is comply with the guidelines of SBP I will discuss in detail where it applied for risk mitigation of all types of risk faced by the bank in this dynamic environment. Here under all types of risk which faced by the bank.

Risks faced by the bank

Systematic Risk: In finance terms systematic risk are market risk, aggregate risk, or un-diversifiable risk, is the risk associated with aggregate market returns. This risk should not be confused with systemic risk because risk of loss from some shattering event that collapses the entire financial system. Unsystematic Risk: In Finance terms unsystematic risk are specific risk, idiosyncratic risk, residual risk, and diversifiable risk these are the company specific risk in a portfolio which is uncorrelated with aggregate market returns. Here under some of these risk are as under:
Credit Risk:

MCB face credit risk it arises from dealings with individuals, corporate, financial institutions, sovereigns etc. Market Risk: MCB face market risk which arises from changes in market rates such as Interest Rates, Foreign Exchange Rates and Equity Prices etc.

Liquidity Risk: MCB face also liquidity risk it terms as the ability to fund assets and meet obligations as they become due. Operational Risk: MCB also face operational Risk such as loss resulting from an inadequacy or a failure ascribable to people, processes, technology or external events. Compliance Risk:

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MCB also face the compliance risk that is similarity between the company policies, rules, and charges etc with SBP guidelines. Reputational Risk: In my opinion MCB may not facing reputational risk that is past bad conducts by the bank and has good reorganization among the all commercial banks which are operating in Pakistan. Security risk: MCB and its employees also face security risk it is a risk being occur illegal activities of individuals or group from and outside the organization.

Security system
Above mentioned security risk is mitigate by establishing a security system. In head office where I work has two components of the security system which are as under: Security Guard: In place of MCB where I spend my six weeks in training has a security department, security guards are hired for mitigating the security risk. MCB Computerized Card: Every one in head office has a computerized card on which his detail are printed but also it serve as security code that without it every door is closed for you because a chip is in place in this card.

Management Information System

MCB has good information system in place which provides information needed to manage organizations effectively. These are regarded to be a subset of the overall internal controls procedures in a business, which cover the application of people, documents, technologies, and procedures used by management accountants to solve business problems such as costing a product and service.

Employees Integrity
Integrity of employees is significant and the most important element because without it the business owner cannot count on receiving the results expected and promised. MCB has proper code of Ethics and conduct signed by all the employees

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acts as a guide for them in discharging their duties and sets out the standards of good banking practice. In MCB Bank high degree of good governance, transparency, culture of excellence and accountability as well as ensuring the highest level of professionalism. Controls and Compliance is an integral internal function and care is taken to ensure that all activities are carried out in accordance with prevailing regulations so that the interests of all our stakeholders are protected.

Loaning system
Here under the procedures used by the MCB Banks for advancing loans to the

customers here under:

Customer:

A customer is a person which want to obtain loan from bank he contact with the loaning and advances officer in branch where his account is open. A customer can be a consumer, commercial or corporate.
Branches:

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MCB has large number of branches all over the Pakistan these initially response to customer and also has direct contact with the customer. They fill the all necessary file work with the customer normally these documents are obtained: o LAF (Loan Application Form) o BBFS (Borrower Basic Fact Sheet) o CBI (Credit Information Bureau) o CNIC (Computerized National Identity Card) o In Case of Consumer, Incomes Statement of the Consumer and collateral documents are also obtained. o In Case of Commercial and Corporate Partnership Deed, Memorandums of the Company, Financial Statement from approved auditor and collateral documents are also obtained
Approving Authority:

After completing the necessary requirements branches forward these documents to the approving authority. These documents are checked by the authority and forward to the legal department.
Legal Department:

In this department legal aspect of loan is covered and activities like checking or reviewing the legal owner of the collaterals are performed. Credit Risk Control Division After the legal department all the activities are performed by the CRCD and loan issuing order is made after reviewing, maintaining documents and control after the loan. o All the original documents are again reviewed by the DU.(Document Unit) o IB Forms (Islamic Banking Forms) are prepared by the DU.(Document Unit) o On the bases of AOF(Approval of Finance) which is issued by the approving authority a FAL(Facility Advising Letter) is prepared by the MU (Monitoring Unit) o Then three set of FAL and IB Forms are sent by CRCD with the help of CSU (Customer Services Unit) to branches and original documents are sent to the CU (Custodial Unit).

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These three sets are one for customer, second for branch and third for the CRCD which is also placed in CU.

o After the signature of customer set of these document are retained by the each party.
Loan Granted:

Finally loan granted by the bank after completing these process DAC (Disbursement Authoring Certificate) is issued by the approving authority and sent by the CSU to branches then branches release approved amount.

Risk Mitigation Approaches

MCB Bank has good credit risk management framework and also mitigate his risk by his RMG Risk Management Group. Risk mitigation is start when a customer contacts any branch but MCB develop centralized risk mitigation approach. Here under the introductions of RMG. Risk Management Group (RMG) The main purpose of RMG is to actually manage the companys risk. Risk management is a structured approach to managing uncertainty through, risk assessment, developing strategies to manage it, and mitigation of risk using managerial resources. The RMG GROUP consists of four divisions that work under it. These are as follows: o Credit Review Division o Credit Risk Management Division o Credit Management Division o Credit Risk Control Division

Credit Review Division (CRD) The purpose of this department is to review the credit proposals accompanied with audited financials of both corporate and commercial clients evaluated by the business units. The major tasks of the CRD include:

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o Financial statement analysis including profit and loss analysis, financial statement analysis and Balance sheet analysis o Credit risk rating of the client
o

Drafting of various connivance ( conditions of loans) within approval of finance considering the macroeconomic situations and risk level of client

o Finally issuing the approval finance Credit Risk Management Division (CRMD) The basic purpose of CRMD is to ensure policy making regarding credit risk within the risk management, issuance of circulars on time to time as well on need basis. They are responsible to draft policies, manuals, salvage lists and various risks frameworks required for the implementation of Basel II parameters Credit Management Division (CMD) It is basically responsible to report data to SBP. They are responsible to run various data modules for checking and implementing functions of unique obligor. They are responsible for the integration of various MIS management function systems working simultaneously within the various divisions and groups of the bank. They had also developed credit risk management information system in order to enhance the regulatory requirements of central banks as well as developing the reports required for the analysis by the senior management and BODs. Credit Risk Control Division (CRCD) A Sub-division of Credit Risk Management Group with a function of mitigating risks associated with credit facilities granted to customers

Chapter Six 36

Financial Analysis of MCB

Consolidated Statement of Financial Position As at December 31, 2010 Assets Cash and balances with treasury banks Balances with other banks Lendings to financial institutions Investments net Advances net Operating fixed assets Deferred tax assets net Other assets net Liabilities Bills payable Borrowings Deposits and other accounts Subordinated loan Liabilities against assets subject to finance lease Deferred tax liabilities net Other liabilities Net assets Represented by: Share capital Reserves Unappropriated profit Minority interest Surplus on revaluation of assets net of tax

2010 (Rupees in 000) 6 45,407,264 7 1,551,518 4,401,781 215,747,844 254,565,471 21,061,787 ---27,746,198 570,481,863 10,265,537 25,684,593 431,295,499 5,146,733 16,090,374 488,482,736 81,999,127 7,602,150 40,164,526 23,458,429 71,225,105 2,698 71,227,803 10,771,324 81,999,127

2009 38,774,871 6,077,354 3,000,000 169,484,647 253,248,265 18,099,010 --23,057,731 511,741,878 8,201,090 44,662,088 367,581,075 3,201,756 15,782,589 439,428,598 72,313,280 6,911,045 38,387,656 17,821,670 63,120,371 71 63,120,442 9,192,838 72,313,280

Consolidated Profit and Loss Account

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For the year ended December 31, 2010

Markup / return / interest earned Markup / return / interest expensed Net markup / interest income Provision for diminution in the value of investments net Provision against loans and advances net Bad debts written off directly Net markup / interest income after provisions Nonmarkup / interest income Fee, commission and brokerage income Income earned as trustee to various funds Dividend income Income from dealing in foreign currencies Gain on sale of securities net Unrealized gain on revaluation of investments classified as held for trading Other income Total nonmarkup / interest income Nonmarkup / interest expenses Administrative expenses Other provision net Other charges Total nonmarkup / interest expenses Share of profit of associated undertaking Extra ordinary / unusual item Profit before taxation Taxation Current year Prior years Deferred Share of tax of associated undertaking Profit after taxation Loss / (profit) attributable to minority interest Profit attributable to ordinary share holders Unappropriated profit brought forward Transfer from surplus on revaluation of fixed assets net of tax Profit available for appropriation 2009 (Rupees in 000) 54,829,365 51,621,911 18,027,372 15,835,581 36,801,993 35,786,330 444,476 1,484,218 3,100,594 5,796,527 52,047 41,576 3,597,117 7,322,321 33,204,876 28,464,009 4,133,109 22,714 -450,492 632,819 410,618 -40,832 751,058 6,441,642 39,646,518 12,327,496 88,261 990,638 13,406,395 269,513 26,509,636 8,053,368 1,554,809 29,333 30 9,637,510 16,872,126 1,893 16,874,019 17,821,670 21,879 17,843,549 34,717,568 3,461,374 18,029 -342,132 341,403 806,388 -11,510 774,017 5,754,853 34,218,862 10,235,366 142,824 691,722 11,069,912 200,196 23,349,146 7,725,787 (2,232,933) 2,190,425 464 7,683,743 15,665,403 (4) 15,665,399 11,065,723 22,374 11,088,097 26,753,496 2010

Basic and diluted earnings per share after tax

22.20

(Rupees) 20.61

38

Consolidated Statement of Comprehensive Income For the year ended December 31, 2010
2010 2009 (Rupees in 000)
Profit after tax for the year Other comprehensive income Effect of translation of net investment in foreign branches and subsidiaries Equity shareholders of the Bank Minority interest Comprehensive income transferred to equity Components of comprehensive income not reflected in equity Net change in fair value of available for sale securities Deferred tax Total comprehensive income for the year 16,872,126 15,665,403

89,552 70 89,622 16,961,748 216,561 (74,473) 142,088 17,103,836

65,805 65,805 15,731,208 3,068,752 (571,913) 2,496,839 18,228,047

Six Years Financial Summary 2005 - 2010

(Rupees in Millions)
2010 2009 51,616 15,837 35,779 4,409 2008 40,044 11,561 28,483 4,537 2007 31,787 7,866 23,921 4,328 2006 25,778 4,525 21,253 3,573 2005 17,756 2,781 14,975 4,406

Profits
Mark-up / return earned Mark-up / return expensed Fund based income Fee, Commission, brokerage & FX income 54,821 17,988 36,834 5,310

39

Dividend and capital gains Total income Operating expenses Operating profit before tax and provision Provisions / write-off Profit before tax Profit after tax Cash dividends Bonus shares

956 43,099 13,160 29,938 3,685 26,253 16,873 8,743 760 10,000 7,602 40,163 21,416 69,181 10,024 79,204 567,553 494,605 274,144 254,552 24,544 213,061 488,349 431,372 351,298 25,685 305,902 136,246 60.91% 67.19% 14.54% 3.27 25.91% 3.13% 25.91% 34.53 22.20 63.55% 59.01% 91.00 91.71 104.19 87.15% 3.96% 81.44% 8.95% 77.13% 8.20 7.47 6.24

1,234 41,422 10,801 30,620 7,465 23,155 15,495 7,602 691 10,000 6,911 38,386 15,779 61,076 8,664 69,740 509,224 444,188 269,722 253,249 23,239 167,134 439,484 367,605 304,953 44,662 283,369 119,922 55.90% 69.32% 13.62% 3.83 27.35% 3.25% 27.35% 30.46 20.38 73.37% 68.89% 80.34 80.86 91.74 87.23% 3.97% 82.96% 8.62% 67.47% 8.34 7.37 6.02

1,255 34,275 8,365 25,910 4,042 21,868 15,375 7,225 628 10,000 6,283 36,769 9,193 52,245 6,191 58,436 443,616 380,187 272,847 262,135 18,269 96,632 385,180 330,182 268,501 22,664 240,470 266,251 63.80% 71.13% 16.90% 4.10 31.49% 3.60% 31.49% 28.76 20.22 82.64% 79.39% 68.72 65.96 76.87 85.70% 3.03% 81.32% 6.70% 54.17% 8.49 7.06 6.32

2,120 30,369 6,000 24,369 3,061 21,308 15,266 7,854 10,000 6,283 34,001 5,131 45,414 9,706 55,120 410,486 343,173 229,733 218,961 10,725 113,089 355,366 292,098 259,896 39,407 232,398 213,317 70.16% 75.26% 21.23% 5.06 37.66% 4.06% 37.22% 28.03 20.08 78.65% 74.96% 59.74 61.84 72.51 83.60% 2.15% 88.98% 4.67% 68.31% 9.04 6.53 6.43

1,418 26,244 6,549 19,695 1,194 18,501 12,142 3,960 819 6,500 5,463 24,662 5,531 35,657 5,188 40,844 342,108 292,639 206,848 198,239 8,571 63,486 301,264 257,462 224,165 23,943 194,363 160,843 70.49% 82.44% 19.02% 4.01 45.00% 3.79% 42.48% 24.34 15.97 80.34% 77.00% 46.90 49.12 53.73 85.54% 1.19% 87.07% 4.14% 69.46% 9.59 6.26 7.22

1,348 20,728 6,638 14,090 1,072 13,018 8,922 1,715 853 6,500 4,265 9,055 4,990 18,311 5,424 23,734 298,781 260,948 188,140 180,323 8,396 69,481 275,046 229,342 216,046 27,378 177,924 80,427 62.80% 84.34% 27.76% 3.12 64.87% 3.20% 58.12% 17.12 11.74 82.03% 78.63% 24.09 26.41 31.22 87.34% 0.70% 94.20% 4.46% 65.92% 16.32 7.00 12.53

Statement of Financial Position

Authorised capital Paid up capital Reserves Unappropriated Profit Shareholders equity Surplus on revaluation of assets - net of tax Net Assets Total Assets Earning Assets Gross Advances Advances - net of provisions Non-Performing Loans (NPLs) Investments Total Liabilities Deposits & other accounts Current & Saving Deposits (CASA) Borrowings Interest bearing Liabilities Contingencies and Commitments

Financial Ratios
Profit before tax ratio (PBT/ total income) Gross Spread (NIM/Interest Income) Non interest income to total income Income/ expense ratio (excl. provisions)Times Return on average equity (ROE) Return on average assets (ROA) Return on Capital Employed (ROCE) Earnings per share (EPS before tax) *** Earnings per share (EPS after tax) *** Gross Advances/ deposits ratio Net Advances/ deposits ratio Breakup value per share (excl. surplus on rev. of assets) *** Breakup value per share (excl. surplus on rev. of fixed assets) *** Breakup value per share (incl. surplus on rev. of assets) *** Earning assets to total assets ratio Weighted Average Cost of Deposits CASA to Total Deposits NPLs to Gross advances ratio Coverage Ratio (Specific provision / NPLs) Assets to Equity Times Total Assets per share Times Deposits to shareholder equity Times

Chapter Seven

My MCB Branch (1509)

40

Muslim Commercial Bank Ltd branch Bagh (Code 1509) is situated in Zaman Chowk Bagh, which is well-known commercial area in Bagh city. MCB Bagh branch is facilitating great number of population in Bagh. As a consequence of location MCB Bagh branch has a great number of customers.

Summary of Departments in Branch Account Department

Banks have their opening and closing departments. This is the special function of Account department. Usually main kinds of accounts opened in MCB Bagh are: Current Account Profit and Loss Sharing Account

Current Account
This type of account is basically used to meet the daily transactions. Current account provides safety to the customers money, gives the advantage of paying debts by the convenient and safe means of sending cheques through the post thus avoiding the trouble and that units in PKR, USS, GBP and DM.

Saving Account.
This is the Profit oriented type of the accounts. There is a limited time for drawing cash, customer cannot draw money before it certain time. There is no difference between current and saving account except profit. This account is opened by Limited company, Partnership, club societies & associations, joint & sole proprietorship.

Cash Department
Cash department is given the complete responsibility of handling all receipts & disbursement of cash as a result of transactions in both local & foreign currencies & near cash items such as traveler cheque etc. As a consequence it is also responsible for the bookkeeping of those transactions & the safe custody of cash & near cash securities.

Clearing Department
Clearing can be defined as the transfer of funds from one branch of bank to the other branch of the same bank or the other bank on which the instrument is drawn, with out 41

involving cash through state banks Clearing house or we can say in other way that cheques which can not be cashed at the counter of the bank.

Clearing Types
Clearing department deals with the two type of the clearance. Inward (IBC). Out ward (OBC).

Inward Clearance.
Inward Bill for Collection means Cheque drawn on MCB and presented to the other banks on handed over to MCB agent in clearing house. That is inward clearance for MCB. So inward clearing results in outflow of funds to collecting banks reducing the balance in the clearing account.

Outward Clearance
A cheque, which is drawn on other, bank and presented to MCB is known as out ward Clearance (OBC) for MCB. So outward clearing results in inflow of funds from paying bank into the clearing account maintained with the clearing house, increasing the balance in the clearing account.

Remittance Department
Remittance is the monitory transfer from one place to another place or from one country to another country to fulfill the requirements of the customer by the order of the customer. Remittance department divided into two categories. 1. Local : Local Remittance may includes the following functions transfer through Pay Order, transfer through Demand draft (DD), Telegraphic transfer(TT), mail transfer. (MT)Local transfer, preparation of balance certificates. 2. Foreign: Foreign remittance section deals with remittance out side the country, but in foreign currency. This section of foreign remittance is divided into out going Remittance and incoming Remittance. These terms out going & incoming remittance means sale & purchase of foreign exchange in the above four currencies

Learning as an internee

42

Standing on the forth floor of MCB Bagh Branch, I heard the good news of me having a six week opportunity to interact with a world class bank. All these six weeks were full of events, full of learning and most importantly full of professional working. Here 'professional' regards in all from clerical to managerial work. In these six weeks period, the best thing to me was the authority and dependency of customers upon me, when they come with a hope that I'm there to guide them through. Knowing all is not learning, the real learning is to convey right. I tried to learn real, see real MCB, and tried to comprehend the difference between what we look from outside and what is going on inside. MCB is full of experienced and professional traditional bankers. As it perfectly suit the environment we are operating in, You attitude has helped MCB in capturing masses. In the private sector, no doubt its a fast growing bank, but here's something that's still unrealistic to the policy makers. The line of unsatisfied customers is increasing, not because we are not serving well, it's because customers are not understanding the YOU attitude right. Every customer wants to make sure his work is done at the first convenience, but they are not concerned about the responsibility with which every employee is working. We need to put in some guidelines for our customers, as they walk in. This will not only save their time but will also motivate staff members to work more promptly, because if customer and employee engage into some unhealthy quarrel, the whole environment will be disturbed. Back to my real learning. In my six week internship, I worked in customer service department, as well as in clearing department. Because of some work load, I was unable to learn much about other cash and accounting department. Here is my count down learning of six weeks. Learned basic operations of remittance department Learned how to make entries and vouchers Observed other operations e.g. PO (Pay Order), DD (Demand Draft)

Account Opening:
Penning down information and keying it into the system does seem a simple and tedious job but it is not. My initial five days at customer service department was the

43

liveliest experience of my internship. Though physically I was there just to assist the account opening officer, but it turned out to be much more for me. That is when I first actually imitated as a presenter of MCB to customers, when to many people, I'm their hope. MCB offers a variety of options for anyone; to everyone. You are an investor, regular businessman, middle man, salaried person or a house wife; MCB serves you in every way it can through its commendable and reliable services. Working at Customer Service Department, I did counter with different types of customer and opened their accounts under the supervision of the officer. When you have the sole responsibility to open the accounts, it's always very important to understand the needs of your customer. Understanding the psyche of customer is very important. Until and unless you're completely satisfied that the customer has genuine reason and need to open the account, don't do so.

Account Opening Form:

In all the documentation within the bank, clearness and tidiness are the major features. Over writing and cutting should always be avoided as it may lead to any misinterpretation. Account Opening Form is the most important documentation when a customer walks in for commercial banking and wants to develop a relationship with us. In AOF, all the necessary information should be completely scrutinized before the customer walks back. Now lets look at some of the salient requirements of AOF and their importance.

Currency and Type of Account

It offers you all the eight different types of accounts mentioned before. First understand why the customer is here and what type of account suits him a lot. Scale down all the options suiting his investment or requirement and help him choose what is best for him. Outline all the salient features of that particular account to him and make him tick the best box. Mark the currency box if the customer wishes to deposit in currency, in case, other than PKR.

Nature of Account
Understand and choose the desired nature of account.

Individual Account (Single/Joint)

44

Determine if the account is personal or joint. Once again understand your customer here. Illiterate and gullible customers should better opt for joint account for their own security.

Particulars of Account
First of all the title of account is entered by which it will be called off. Following is the Key/Secret Word of six characters which is mostly preferred to be mothers name because its simple unforgettable. Key word is used to verify the customer on phone or while other subsequent inquiries. Next comes the mailing address; where the bank should mail anything it has to. Next is the permanent address of the customer which should be copied from the CNIC of the customer. E-mail address is mandatory for Net banking and estatement facility whereas Mobile number for mobile banking. Lastly its your choice to hold your statements for collection or mail it to you. Here make sure mandatory fields are entered and any valid contact number provided. must be

Personal Information
Following portion summarizes social with standing of a person. Applicants name, Fathers or husbands name, gender, marital status, Date of birth, nationality, country of residence and identification source and its number should be enter. Make sure the source of identification is not expired. Enter NTN if available. Know the occupation of the applicant and check the respected box. In case there is more than one account applicant, fill in all the abovementioned information for other applicant as well. Its a good practice to ask for the original identification source of the customer and pen down the number and expiry date directly from it.

Next of Kin
In case if the account holder is somehow not contacted, this portion provides information of the person who should be contacted instead. Persons name, relationship, address and Telephone number should be provided.

Business Account

45

Determines that the party has its own entity under which the account will be supervised. Match the respected category and check the box.

Particulars of Account
Here the information about the business is filled in. Title of account, company/business name, and nature of business, office/mailing address, head office /registered address, office email and NTN are mandatory information required for business account. CNIC is required in case of sole proprietor ship and information of few persons are required who can be contacted in case of companies. Here we need to know that who will be operating the company accounts.

Additional Information Existing relationship with MCB

In case if the customer already has some relationship with MCB , it should be mentioned here. This is just in case to formally know and cross check the customers provided information.

Existing relationship with other banks

This is to know what relationship the customer has with other banks, if any.

MCB ATM/Debit Card

Here first define your customer what ATM card is, what are its features and what is the difference between its different options. Enter the name of the customer in Name on card field. Then is the option of supplementary ATM card.

Zakat Deduction (only on PLS A/C)

PLS account holders can directly pay Zakat from their accounts, if they are willing to.

Operating Instructions
This identifies the signing authority of the account. It can be operated singly, either or survivor, jointly, mandate or by any other in special cases.

Statement of Accounts

46

This specifies how early the account statement is required. It can be daily, weekly, monthly, quarterly or semi annually. Customers can choose Mail or e Statement or both.

Special Instructions
Special instructions, if any, are registered here. It usually certifies further operating instructions of the account. the

Account referred by
Detail of person referring the customer is entered here.

Terms and Conditions

These terms and conditions outline the policy of bank about its accounts regulations. Abidance by state bank laws and banks policy is compulsory and customers signature at the end of the statement is his abidance by the law

Indemnity and Undertaking

Here the customer agree by the bank policies and agree to its terms. Applicant signs the undertaking and officially agrees to be a part of MCB. As an account opening officer, you must enclose all the signatures and should verify them. Every cutting on the AOF should be verified by customer's signature, and officer should verify the customer's signature.

For Bank Use Only Special Category of Account

If the account is of minor, MCB staff, Illiterate, Blind or Registered Alien, it should be checked respectively. Passport size Photographs are required in this case and customer can only make the transaction personally. Make sure signatures are not too simple or shaky. If so, again passport size photographs may be required and transactions can only be made personally for customer's own security.

Service Charges
This is the minimum balance penalty which is applicable to all except students, deserving of zakat and government employees' salary or pension purpose accounts

Know You Customer (KYC)

47

Here's an assessment that the account opening officer do in order to understand some aspects of the new customer relationship.

Individual Account
The customer is marked as walk in, marketed or a referral. Moreover what will be the customer's sources of funds? What would be the usual mode of transaction and what would be the intentions of account with MCB. Who will be the ultimate beneficiary and what the approximate value of transaction per month is.

Business Account
The customer is marked as a walk in, marketed or referred customer. Name of parent and other companies are entered. Geographical area of activity is mentioned. How the businesses earn is mentioned to know the business type. Then similarly mode of transaction, ultimate beneficiary, initial deposit and approximate officer here by recommends to open the account of the customer. maximum value of transaction per month is recorded. Finally after fulfilling all the necessary requirements, the

Documentation to be obtained Individuals

Photocopy of CNIC/Alien Registration No./ passport Photocopy of service card/employment card/student card

Sole Proprietorship
As above and NTN/Sales Tax Registration Certificate Application to open account on sole proprietorship letter head Rubber stamp of sole proprietorship to be affixed on AOF and SSC.

Partnership
Photocopy of CNIC of all partners Application to open account on partnership letter head signed by all partners Attested copy of Partnership deed Copy of Registration certificate with Registrar of Firms Authority letter in favor of person responsible to operate the account. Rubber stamp of partnership to be affixed on AOF and SSC.

Joint Stock Companies

48

Certified copies of: Resolution of Boards for opening of account and certifying the person responsible to operate it Memorandum and Article of Association Certificate of Incorporation and Commencement of business CNIC of all the directors NTN/Sales Tax Registration Certificate Rubber stamp of Company to be affixed on all documentation

Clubs, Societies and Associations

Certified copies of: Certificate of registration By-Laws/Rules and Regulations Resolution of governing body to open an account, certifying the person responsible to operate it. NTN/Sales Tax Registration Certificate Rubber stamp of Company to be affixed on all documentation

Agent Accounts
Certified copy of 'Power of Attorney' Photocopy of CNIC

Trust Accounts
Photocopy of Certificate of Registration Photocopy of CNIC of all trusties Certified copy of instrument of trust

Executors and Administrators

Photocopy of CNIC of Executor/Administrator Certified copy of Letter of Administration or Probate

Specimen Signature Card (SSC)

Whenever a customer visits to make a transaction, we cannot all the time verify his signature by AOF. For this purpose SSC is signed and then scanned into the system. So whenever the signature requires verification, it can be done through systems next to

49

employees. SSC comprises of Branch code, A/C No., date, customer's name, special instructions and two signatures.

Cheque Book Requisition Form

At the opening of account, this form is filled, identifying the account number, number of leaves and whether to hold cheque book for collection or to mail it.

Letter of thanks
A letter of thanks is dispatched to the mailing address of the new account holder and its copy is attached to the AOF. Actually this letter of thanks is for the confirmation of this fact that customer actually lives at the mentioned address.

Clearing of cheques: Outward Clearing

My experience at Bagh branch started from the clearing department. Right in the morning cheques collected from the drop box simply flood over my table. According to all I learnt through listening, viewing and questioning is summarized below.

Documentation of Consumer Cheques:

All the cheques collected are first categorized into o o o o Credit Cards Auto Loans Personal Loans Cash Line Verified cheques are then validated before being documented into the drop box collection sheet for our daily drop box collections record. To anticipate the approval of cheques, we need to validate some important specifications of all the cheques. They are: Date: Cheque should not be post dated or out of date. Figures: Amount in words and figures should match. Signature: Drawers signature must be clear. Intercity: Cheques must not be of other cities. Intercity clearing cheques consumer departments are not entertained for

50

Payees Name: Payees name should be written, and endorsement should be as per the beneficiary of the cheque. There should be no over writing in every thing penned. All the filtered cheques are then entered into the collection sheet in which following information is entered.

Cheque No. Name of bank Name of Customer Loan No. Amount Document No. All the documented consumer cheques are then posted into the system.

Posting of the Consumer Cheques

For clearing, we opt for second option in banking category, and after entering the posting date, clearing date and transfer delivery date, we opt for single entry option. Now all the cheques are credited in the clearing schedule in their prescribed ledgers.

Customer Accounts:
During the posting, following fields are keyed in Debit/Credit Account Number Bank Branch Cheque Number Amount After entering the details into the system, we can accept, modify and reject it. As soon as entry is accepted, computer generated document number is assigned. In case further modification is required, it can be done at clearing modification option under clearing schedule.

51

Following the completion of posting of cheques, an add list is prepared to calculate the total amount of cheques which is further cross-checked with the clearing display on the system.In other case, if cheque is of city then it's either sent in intercity clearing or as OBC (Outward Bill Collection). Intercity is case is as follows
Types of cheques
Local - Consumer

presented through NIFT whereas OBC is

either sent through Courier or Dispatched to the desired branch of the bank. Stamps in each

Stamps over cheques

Endorsement
Received Payment

Crossing Clearing Crossing Clearing Crossing Clearing Intercity Clearing Crossing OBC Number

Local Commercial

Payee's Account Credited

Payee's Account will be Credited upon realization. Payee's Account will be Credited upon realization.

Intercity

OBC

Cleared Cheques
Now the next day when clearing is confirmed by NIFT, respected accounts are debited. We go into the banking option and in transfer; we debit all the respected accounts. Same is the case with intercity and OBC cheques. In documentation, debit and credit vouchers are made, which show total amount of clearing as per day.

Returned Cheques
All the cheques which are returned, due to any reason, are then reversed. They are debited back in the clearing schedule. All the returned cheques are documented in the cheque return registers and all the account holders of returned cheques are charged with service penalty. All the vouchers are signed by the designated officer and all the entries over 50,000 are supervised

Remittances:
Demand Draft

52

DDs are always a secure way of paying remittances in other cities. Both account holders and walk in customers can avail the facility of DDs. Charges tend beneficiary and remitter either pays in cash or through cheque. When DDs are issued, head office account is debited and remitters account is credited, on presentation, head office account is credited and beneficiary's account is debited. to differ for both customers but the advantage tend to be same. DDs are made in the favour of

Pay Order
POs are another safe way of paying your remittances within the city. They are payable at any branch and then are forwarded for clearing. In case of PO, remitter account is credited and PO A/C of branch is debited. At presentation, Beneficiary is debited and PO A/C of branch is credited.

Chapter Eight

53

Imperative Analysis of MCB

SWOT analysis
SWOT analysis is a short form that stands for Strengths, Weaknesses, Opportunity and Threats. This is a careful assessment of strengths of an organization to avail an opportunity by overcoming its weaknesses and phasing out all he threats to its survival in order to grow and survive. For a better strategic management, organizations need to go for scanning the internal as well as the external sources on which the overall business lies. The first and the foremost concern of the organization are to see its internal capabilities and the things which can be the problem in achieving their targets, goals and aims. I conduct the SWOT analysis of the MCB Bank and my findings are here under explained.

General Analysis of MCB

Strengths o Safe and secure investments venture o Innovative and new technology adapter o Employee Satisfaction o Well Equipped and fully secure environment o Modernized banking (online + Internet) o Complete supervision at every level o Business continuity management and implementation of advance model under Basel II Weaknesses o Weak organizational culture (need a paradigm shift to improve organizational structure) o HR Policies (appraisal, compensation, career planning) o Networking problems regarding ATM o Weak MIS interconnectivity among the Division o No mobile ATM services in rural areas Opportunities 54

o Information Technology (MIS) o Establishing more Foreign Branches o Local Setup should be expanded. o Internet Banking o Some more innovative products and services should be introduced. o Centralization Threats o Downsizing is potential threat for MCB employees and they are losing their confidence towards bank performance o Fierce competition o Changing environment of banking o Instable Govt., economical and political conditions are a great threat. o Entrance of international banks o Latest MIS is available in market whereas MCB is capitalizing in symbols

General Conclusion
The work within each unit is not divided properly when an employee is absent another employee (who is already over burdened by own job) is given absentees whole work instead of dividing it among employees. Accommodate management is required. Internees are not considered part of the organization so are not allotted as such assignments. Theres no proper arrangement for guidance of internees. Working hours are quite long; mostly employees have to sit even after the office hours to complete their work. (E.g. branches suddenly overburden them for there clearances and they have to manage it) Inefficiency of IT department (At times system software is not in working order which causes delay in work, and IT is not efficient to help) Rotation on duties without proper training No refresher courses

55

No merit of selection of employees as well as no specific job description and job specification

Particular Analysis of MCB Bagh Branch Strengths

Latest Technologies MCB Bagh branch is provided with latest computers, more than 4 telephone connections and fax machine which makes communication easier with different branches, and enhancement of job. Location The branch is situated in Zaman Chowk Bagh which is a commercial area of Bagh were business activities perform greater as compare to residential area. Thus it increases the number of customers. Interlinked MCB Bagh branch is linked through an online network of 450 branches, thus enabling them to serve customer in better way. One can easily transfer his money from one branch to another branch in any city of country. Experienced Staff Although the Branch has not sufficient staff as per required but the branch has most experienced and the least experienced staff. Good will MCB Bagh branch is main branch of Muslim Commercial bank in the areas, which is another plus point for the Branch. Most of population

Weaknesses
Insufficient Staff MCB Bagh branch has a shortage of staff and their training capabilities are not up to the requirements of the fast changing banking environment. Absence of Expertness The technical training of the staff is negligible e.g. in case of the absence of computer There is no any other trained personnel who can record the daily transactions. Insufficient Building The MCB Branch Bagh has not sufficient building as per required by a Bank

56

Insufficient furniture The branch has old and insufficient furniture in it. Auto Teller Machine Required Currently MCB Bagh branch is providing the facility of online banking in Bagh but branch has not the facility of Auto Teller Machine (ATM) up till now. Extremely mechanistic The organization is very much mechanistic and provides no flexibility to encourage creativity. Control over staff The control of manager is not effective. The discretionary powers of manger are very low to offer more incentives and value added services to its customers. Fewer professional Environments There is a lack of commitment and professionalism on part of the employees. The staff is always in a hurry to leave the bank as soon as possible. They were also observed to starting their operations comparatively late. The organizational culture is not cooperative and Favoritism was observed on part of the manger as well as the top management towards some staff members. Low level of Technology management The branch has very low level of technology management. The technology available is not maintained well mainly because of the lack of technically trained staff. For instance the scanner, in spite of its availability has not been used for scanning the specimen signature cares. In spite of the presence of technology many jobs are done manually such as the letters and other calculations, which could be easily, done in MS Word and Ms Excel. Other Limitations Some shortcomings on part of MCB Bank, which affects the operations of the MCB Bagh branch. There is a lack of functional and proper research and development, which could scan the micro and macro environmental data for future planning and strategy. There is no procedure, which could encourage the middle and lower level management to initiate creativity. Financial audits are conducted but operational audits have not received proper attention as much as it should get.

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Opportunities
As per my analysis I found that there some opportunities available in the area for MCB Encouragement of projects based on information technology The coming century is the century of information technology as now days all the business community is diverting its attention towards this field. The Bank has the basic infrastructure, which can facilitate the online process. This is the best opportunity available to all banks and MCB as well, to sponsor the IT and computer based projects because Attract new customers The biggest opportunity for the MCB, Branch Bagh has the greater number of customers who get their payments through MCB, Bagh branch. These customers can be easily convinced to open their accounts with MCB. MCB has advantage of generating more deposits and attracting valuable customers due to its better image in the business community. MCB has also benefit of increasing credit lines. This is only due to good dealing and better image that MCB has directly acquired those lines of credit from abroad that are only acquired by it, this better image can help further NBP in explanation of its activities. Development in Latest Technologies The Internet facility in the area provides an opportunity to MCB to get Online. This will be very beneficial for the bank, as there is no other bank in Bagh except HBL which provides On-Line banking and Auto teller machines facility. As MCB will provide this facility to the citizens, this will increase the number of customers which will eventually increase the financial benefit. World wide Remittance facility MCB Bagh branch should provide world wide remittance because a considerable portion of the labor force of the area is serving overseas. Their families can be encouraged to use MCB as channel for remittances.

Threats
Superior services by competitors

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The biggest threat to the operational success of the branch is the better competitors services. Many private sector banks are offering higher rates of return to customers than MCB Bank of Pakistan. Disappointment of customers The bank is the increasing interest rates which dissatisfies customers. Most of these customers were observed to be dissatisfied with the delays in their servicing. Invasion of Profit Capturing of profits is yet another threat to the success of MCB Bagh branch. The branch of MCB Bank is located close to the ABL, NBP and HBL. All these branches are taking away each others customers.

Judgment and Suggestions

The critical analysis MCB in the previous section is the representation of its past, mirror of its present, and an insight into its future. The past data of MCB Bagh branch enabled me to study the organization in a historical perspective and understand the nuisances in the banking operations. Study of he present of MCB helped me evaluate the organization in comparison to its future and competitors. The data obtained from the analysis of its present and future in combination with my professional studies resulted in some suggestions and implementation plans, which can help to increase the profitability and operational success of the MCB, Branch Bagh. Some of the major findings suggestions are discussed. Physical facilities. The physical facilities or the layout are the most fundamental features in an organization, which the customers observe in forming an opinion, perception or idea about the organization. Therefore, every organization tries to make a good first impression on customers through the presentation of its physical facilities or layout. The physical facilities in the branch are not up to the mark, which requires timely changes to provide good environment to customers. The suggested changes and corrective actions are gives below: The lighting system must be improved and all the out of use lights must be replaced. 59

Generators should be made available to the branch to minimize the disruptions due to power failure. A cash counting machine can help reduce the time spent in counting cash.

Availability of staff The existing staff in the Bank has shortage of staff. Staff in the branch must be in proportion to the customer has so as to expedite the workflow, avoid shortage of staff and remove the customers grievances arising mainly due to delay in workflow. The additional staff required is in the fallowing categories. More technically trained staff should be added to the existing staff strength One staff assistant or grade 2 officers properly trained in computer and sufficiently trained in foreign currency accounts. One employee of grade 4 should be hire on daily wages or contract, to maintain filing. Commitment of employees The decreasing commitment of employees can be increased by introducing an effective performance appraisal system, which can reward and recognize the achievements and services of employees for the Bank. The appraisal system must have the following features. Objectivity: The appraisal system must be based on facts and figures and objective evaluation of the facts on grounds. Feed Back: Periodically provided to employees and recognizing their efforts through reward (bonuses) and publicly appreciation. Simplification of advances The biggest source of the bank revenue is advances. The advances of MCB, Bagh branch are on him decreasing trend, causing a decrease in the revenue for the bank. The bank should make the advance procedure simple and quick to meet the customers requirements. Marketing perception

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The concept of marketing should be followed in every aspect of the organization. Generally, the banks staff considers that marketing is to go to customers, beg them for opening an account with the Bank and to abide by his every just and unjust action They should be taught that marketing is not only to go to customers only. A customer can also be attracted by provided customer oriented services, showing empathy to your customers and attending him personally. Customer orientation Deposits are the main source of funds for commercial banks. Therefore, the priority of every bank is to increase the number and amount of deposits. The key to successful business does not lie in simply attracting new customers. The real success is to maintain in the old customers and attract new customers at the same time because retaining a customer is more difficult than attracting new customers. Every depositor should be given equal importance and there should be no differentiation between customers so that every customer feels himself as much important as the other customer. The attitude of the staff should be friendly to all the customers. The customers should be taken to the concerned person or guided friendly if the concerned person is not available. The attitude of thats not my job should not exist anymore. Mobilization of less cost deposits The analysis of expenses shows that more then 40% of expenses of the bank are the payments on fixed deposits, which is a very high proportion. The bank should launch a campaign to get less cost deposits much as high amount current account as well as low cost PLS saving accounts. Information Access The Bank should provide information to all the present and potential customers relating to the new products, services, some services fee structure and other matters, which are likely to affect the customers. It should be made sure that all the customers have access to this information. Conveying information is of no use, unless, there is some feedback from the customers. The following measures are suggested to implement this suggestion.

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Brochures, hand outs, pamphlets and other printed reports must be provided to customers, which should provide all the information necessary to attract and retain customers and to satisfy the customers need for more information.

Personal contacts with the customers can help in providing information to customers. All the customers must be provided a chance to get the desired information by personal contact with the Bank staff.

Complaint and suggestion box should be maintained at the door of the Bank where the customers can point out drawbacks in the customers services and put forward their suggestions on his improvement of the services quality of the Bank.

Campaign for increasing the deposits. The numbers of account holders in a bank make a significant contribution to the deposits of the Bank and determine its business volume, profits and size of a bank. Therefore, MCB, Bagh branch must a clear plan for increasing the number of accounts. The details of plan for increasing the number of accounts are given in the implementation plan. Manual vouchers system. As all the ledger system and vouchers are made manually which is a much time consuming job and it also requires much more efforts most importantly human error chances are there thats why if the organization implement SAP FINANCE MODULE in their current saving department that will help them creating automatic vouchers and ledger if any transaction is made by customer because SAP has the capability to keep all the records of a an individual at just one place and it has the capacity to store much data.

Bibliography

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1. 2. 3. 2. 4. 5.

Annual Report , 2010 , Muslim Commercial Bank Limited. Khan, Saeed. Banking Currency and Finance. Ghani, M.A, Principles of Accounting H.Gibson, Charles. Financial Statement Analysis Rehman, Ata SH. Business Communication and Report Writing. . Surfing Web, Official Website of MCB. http:// www. Mcb.com

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