Chapter-05 Critical 4.1 General Analysis

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down of economy following the events described above, as well as, in keeping

with MCBs policy of prudent lending.

4.1.5 INVESTMENTS

Investments of MCB have also been slightly declined by 0.2% because the

current policy of the management is to dispose off Investment in shares of

listed and unlisted companies at the best possible prices.

4.1.6 RECOVERIES

The recovery position in the year 2001 was most encouraging. Bank recovered

Rs. 104 billion in cash. The bank also disposed off properties, which were

acquired in settlement of accounts. Where the recovery of loans outstanding

has become the priority in 2000.

4.1.7 FOREIGN TRADE

The bank conducted import business during the year 2001 amounting to

Rs.54.00 billion as compared to Rs.66.9 billion in 2000. The export business

slightly improved to Rs. 36.9 billion from Rs.35.1 billion in 2000.4 Home

remittances declined to Rs. 16.7 billion from 30.6 billion. The decline in home

remittances business was due to freezing of Foreign Currency Accounts,

which has affected the confidence of the Pakistanis working overseas.

4.1.8 RUPEE TRAVELERS CHEQUE

Muslim Commercial Bank who are pioneers of Rupee Travelers Cheque in

Pakistan maintained their leadership position and sales recovered during the

year 2001 were Rs. 67 billion an increased of 57% over the previous year.

4.1.9 HUMAN RESOURCES

To induct fresh blood in the bank and cater for future needs, a new batch of

management trainees has been selected strictly on merit. After through

training these officers have been inducted in various divisions and branches.

4 Muslim Commercial Bank. (2001). Annual Report, Karachi: Yaqeen Art Press.p.23.


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Attention is paid to upgrade operational and managerial skills of staff and a

number of professional courses are conducted at MCB staff and Training

Institutes during the year 2001. The management has also continued the

program of hiring of some senior level Banking Executives from the market,

whenever necessary.

4.1.10 AUTOMATION

A Y2K program was put into place ensuring that by third quarter 99 all

systems are Y2K compliant. The progress is as per plan. At the end of 2001,

75 branches were online and 241 branches had been computerized with multi

terminal systems. Where as 91 ATMs are in operation and over 60,000 ATM

Cards had been issued up till mid 99. 5 The commercial cities of Faisalabad,

Multan and Hyderabad have also been added of MCB ATM Network. Where

plans are in hand for expanding online network to major cities and covering all

the four provinces thereby providing the ATM network true national coverage

and maintaining the leadership in this service.

4.1.11 SOCIAL SECTOR

The bank is actively participating in Prime Minister Self Employment Scheme

(SES). The applications revived from various applicants are being processed

on merit and disposed off as quickly as possible.

4.1.12 FOREIGN OPERATIONS

The banks foreign operations in Bangladesh and Sri Lanka continue to remain

profitable. In 1999, the bank opened its third branch in Sri Lanka at Maradana

a suburb of Colombo.

4.1.13 ACCOUNTS POSITION OF MCB

The total numbers of accounts till 2001 were decreased from 5062364 to

4392164.

5 Muslim Commercial Bank. (1999). MCB ATM Brochures. Karachi: Yaqeen Art Press.p.4.


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4.1.14 BRANCHES OF THE MCB

The total number of MCB branches in Pakistan and abroad has reached to

1061 now from 1210 in 2000. The difference exists due to the closing of fewextra branches, which were considered non profitable.

4.1.15 EMPLOYMENT POSITION

The number of employees in 2001 has also been declined to 11614 in against

of 12133 last year.

4.1.16 GRAPHICAL REPRESENTATION OFGROWTH/LOSS

Source: MCB Annual Report, 2001.

Balances with other banks have decreased by 57.2% and has caused

considerably in decreasing the current assets of the bank.


Figure 4.1 Balances with Other Banks (Rs.000)

Figure 4.2 Other Assets (Rs. 000)

2000 2001

0

2000000

4000000

6000000

2000

2001

0 50 0000 0 1 000 00 00 1 500 000 0


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Other assets have decreased and a net change of 15.8% is observed.

Eventually, this has affected the overall fixed assets of the bank. Thus, the

fixed assets of the bank have lessened in the FY 2001.

2001

20

00

0 5000000 1000000

0

1500000

0

2000000

0


Borrowings from other banks have decreased. The net decrease in the

borrowings from other banks observed is 88.8%, which has in turn

caused the current liabilities to decrease.


Net assets have increased in the FY 2001 and a net change of 18.79% is

observed. This is due to the greater increase in the total assets.

Figure 4.3 Borrowings from Other Banks (Rs. 000)

Figure 4.4 Net Assets (Rs. 000)

20012000

0

2000000

4000000

6000000

8000000


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.


A net change of 33.7% is observed that shows a healthy sign. This is due

to the significant increase in the net mark up interest income after

provisions.


Total asset has increased by 6.6 % which is due to the significant increase in

net investment and in current assets.

Figure 4.5 Profit after Taxation (Rs. 000)

Figure 4.6 Total Assets (Rs. In millions)

2000

2001

0 500000 1000000 1500000

2000

2001

0 50000 100000 150000 200000


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Deposits of the bank have increased by 12%. This is mainly due to the

increase in the saving deposits of the bank.

2000 2001

0

20000000

40000000

60000000

80000000

100000000


The net advances of the bank have been decreased by 12.7%. This has, to

some extent, caused the total assets to decrease.

Figure 4.7 Deposit Growth Ratio (Rs. 000)

Figure 4.8 Advances Growth Ratio (Rs. 000)

2000 2001

0

50000000

100000000

150000000

200000000


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4.2 ANALYSIS OF ORGANIZATION STRUCTURE

OF MUSLIM COMMERCIAL BANK

4.2.1 MANAGEMENT SPAN

In the opinion of Harold Koontz "a manager can manage eight to fifteen at the

lower level and four to eight at higher level". In MCB, the branch Manager is

supervising 37 persons, in which one is Executive, 23 are officers and 13 are

clerical and non-clerical staff.

This structure leads to delegation of authority, clear-cut policies, and Efficient

subordinates. But the disadvantage or problems in this structure are the

following.

4.2.1.1 Group Cohesiveness & Group dynamics

Group dynamics are concerned with the integration and forces among Group

members in a social situation. In such a large organization Problems of

groups are created and sub groups' emerge the whole Organization

atmosphere is disturbed and it create problems in the Smooth functioning of

organization.

4.2.1.2 Status and Authority Problem

In flat structure the problem of status and authority is created. Especially the

authority relationship among officers and clerical staff. None of the above

clerical staff do not work properly.

4.2.1.3 Decision-Making

In this structure decision-making is very difficult. It often results in

Conflicts and Oppositions.

4.2.1.4 Control

In wide span, control is not effective. It is very difficult to control so Many

people at a time by one person, e.g. when the chief manager is not the chair,


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the .employees usually do not work properly. They start Chatting and doing

their private works.'

4.2.2 INDUSTRIAL CREDIT DIVISION

Departmentation by territory is at the lowest level. For this purpose, MCB has

established General Manager officers. Regional Manager Offices. But the

expenditure on these offices is extra burden on the Revenue of MCB, A huge

amount is annually spent on the maintenance of these office salaries of staff,

furniture and equipment etc.

4.2.3 COMMUNICATION

Communication problem in flat structure is very complicated and results in

serious problems. In MCB communication and information flows is not

according to standard. Usually vouchers are not communicated properly. T.T

and D,D to the accounts holder account are not recorded properly.

4.2.4 DELEGATION OF AUTHORITY

In. MCB delegation of authority is very limited; MCB to a great extent is a

centralized bank. Manager has very limited authority especially in cases of

advances. He has to take the approval of GM and R.M. In branch the officers

has limited authority. They have to take approval of chief manager even in

case of minor issue. These crate problems when the manager is not present in

his office, the customers have to wait for hours. This discourages both

customers and officers because they have to suffer a lot. In newly established

an there is comparatively more delegation of authority as compared to MCB,

that is why their deposits and business is improving day by day.

4.2.5 AUTHORITY AND RESPONSIBILITY RELATIONSHIP

One of the purpose of organization is to show the hierarchy of position.

For this authority and responsibility must be structured in a' systematic

manner. In MCB authority and. responsibility is set on scalar principle.In other words there is top to bottom flow of authority. In functional


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dedication and hard work towards the accomplishment of banks

objectives.

Human resource development and employment of technology

towards modern development.

24 hours cash access and safe payment products of high value

transaction.

MCB instant financing products for customers warning instant loan

facilities at MCB branches.

Pioneer in introduction of MCB master card with photograph and

rupee travelers cheque (RTC) which minimize the degree of

friskiness.

Attention and sensitivity to competition prevailing in the country.

An efficient and experienced private management group also

involved in other interests like; textile and cement industries.

Easy access to the customers at their residential localities through a

high number of branches.

WEAKNESS

Slow down in advances growth in the short term as MCB focuses

on quality customers in the market.

Customers having accounts with small amounts are not given same

services and dealing given to those with high accounts.

No of branches is decreasing every year, due to that employees at

the low profitable branches feel unsecured to their jobs.

Management group is also having huge investments in other interest

like: Textile and cement industries, which may divided their

attention and resources also.

Political pressures from vested interest group.

No transparent system of recruitment and selection.

OPPORTUNITIES

Due To largest ATM network, MCB can expand its 24 hours cash

facilities to other cities of the country in order to meet the growing

market demand.


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Increasing focus/target on different types of customers, MCB can

open women branches specially in those areas where women class

want to get involved but couldnt due to environmental restrictions.

Growing policies of government on business and commerce sector

provides MCB and opportunity to efficiently meet with the business

peoples requirements of instant cash and financing facilities.

Customers feed back on different products and accounts has really

improved the bank performance and encouraged the atmosphere for

other future policies.

MCB also has an opportunity to expand its new technological

advancement like: Tele bank and Internet banking facilities in order

to serve the customers more efficiently.

Due to efficient and experienced management group, MCB can also

improve well and expand its foreign operation successfully.

THREATS

Increasing number of foreign banks in the country.

Privatization of other domestic banks.

Highly specialized and attractive services provided by foreign

banks to their customers.

Un consistency in governments policies regarding to business and

economic sector.

Growing global technological advancement.

Strict regulations by the government over credit facilities to the

customers as well as to meet the prudential regulations.

Loss of confidence of overseas prospects/customers due to freezing

of accounts.

From SWOT analysis we can conclude that the management of the Bank

should adopt systematic planning for the Bank growth, introduce new schemes

like Mall-a-Mall certificate from this scheme MCB received Rs. 13 billion

deposit from the customers, this is a great achievement for the bank. MCB

have more customers as compare to other banks, if they given proper attention

to every customer then in few year it will be the leading bank of the country.


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4.4 CRITICAL ANALYSIS SUMMARIZED

Critical analysis is the most important part of the report, because it depends onthe author, only a good, keen and comprehensive analysis leads to good

recommendations for the improvement of the existing conditions, therefore, in

MCB I have observed mush of thing and have analysis them to the extreme of

my effort MCB faces the following problems.

1. The main objective of MCB is to provide improved services to

customers, but now the bank seem to fail to achieve its

objective, its lengthy procedures as compared to newly

established private banks causes problems for customers.

2. MCB being an established bank now does not fell so much

competition in the market, which in long run will not be

favorable.

3. MCB is not keeping pace with the changing market

environment, the main reason for which is lack of new policies,

and also the existing policies remain unchanged for a long

period of time.

4. MCB being a so established bank upto now used the traditional

procedure and have not adopted a lot the modern banking

techniques.

5. Top level management is having a lot of influence in all

decision making, and they always do not consult the lower

level management will not have adequate data about the

problems organize at lower level.

6. Sometimes in MCB there arise the overlapping of functions e.g.

HRD and training division of HO overlap some of each other

functions.

7. In advances department the process of loan sanctioning is very

lengthy, which affect the customer, some time a valuable

customer in big need of money does not get loan in time only

due to this lengthy process.

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Chapter-05 Critical 4.1 General Analysis