MCB 2009 Internship Report

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    REVOLUTION OF BANKING

    The word 'Bank' is said to have been derived from the words Bancus or Banque or Bank.This history of banking is traced to as early as 2000 B.C. The priests in Greece used tokeep money and valuables of the people in temples. These priests thus acted as financial

    agents. The origin of banking is also traced to early goldsmiths. They used to keep strongsafes for storing the money and valuables of the people. The persons who had surplusmoney found it safe and convenient of deposit their valuables with them. The first stagein the development of modern banking, thus, was the accepting of deposits of cash fromthose persons who had surplus money with them.The goldsmiths used to issue receipts for the money deposited with them. These receiptsbegan to pass from hand to hand in settlement of transactions because people hadconfidence in the integrity and solvency of goldsmiths. When it was found that thesereceipts were fully accepted in payment of debts; then the receipts were drawn in such away that it entitled any holder to claim the specified amount of money from goldsmiths.A depositor who is to make the payments may now get the money in cash from

    goldsmiths or pay over the receipt to the creditor. These receipts were the earlier banknotes. The second stage in the development of banking thus was the issue of bank notes.The goldsmiths soon discovered that all the people who had deposited money with themdo not come to withdraw their funds in cash. They found that only a few personspresented the receipts for encashment during a given period of time. They also found thatmost of the money deposited with them was lying idle. At the same time; they found thatthey were being constantly requested for loan on good security. They thought it profitableto lend at least some of the money deposited with them to the needy persons. This provedquite a profitable business for the_ goldsmiths. They instead of charging safe keepingcharges from the depositors began to give them interest on the money deposited withthem. This was the third stage in the development of banking.

    DEFINITION OF A BANK:The term 'bank' is being used for a long time, yet it has no precise definition. The basicreason is that the commercial banks perform not just one but many types of functions.The term bank has been defined differently by different authors. Some are as follows:According to Crowther,"Bank is a dealer in debtshis own and of other people."

    According to G.W. Gilbert,"A banker is a dealer in capital or more properly a dealer in money. He is an intermediateparty between the borrower and the lender. He borrows from one party and lends toanother."

    According to Banking companies ordinance 1962u/s3(B) of Banking Companies Ordinance 1962 "Banker means person transacting thebusiness of accepting for the purpose of lending or investment, of deposits of moneyfrom the public, repayable on demand or otherwise and withdraw able by cheque, draft,order or otherwise and includes any Post Office Savings Bank."

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    COMMERCIAL BANKING IN PAKISTANThe interesting point which I observed during the span of mine internship was thehistorical background of Banking & Financial sector which is the one in which greatimprovement and growth is observed since the formation of Pakistan. For studying thegrowth of this sector we can divide it into three stages, which are as follows:a) Pre-Nationalization Erab) Nationalization Erac) Post Nationalization Era

    A) PRE NATIONALIZATION PERIOD:There were only two Muslim banks in Indo Pak before partition, they were;Habib Bank Ltd. (estd. in 1941 at Bombay) & Australia Bank Ltd. (estd. In 1944 atLahore). All other banks, at that time, were either owned by Hindus or Foreigners.At the time of partition there were 631 bank branches in area which came under Pakistanicontrol. But due to blood shed and violence at large scale, mostly branches were closedand the disparity can be assessed from the fact that on July 1948 there were 195 brancheswith deposits of Rs.88 crore (880 million) only. Also a factor lagging in Pakistaniindustry was a central bank of its own, by that time Reserve Bank of India was acting ascentral bank for both countries and same currency notes were used in both territories. ButReserve Bank of India was biased and Set down Pakistan on many occasions such as theissue of funds transfer etc.In this period drastic steps were taken in government sector for the improvement ofoverall position. The private sector also responded to these changes and some verypositive changes were observed. Some of the steps taken by the government in this regardwere as under:1) Inauguration of State Bank of Pakistan (SBP) on 1st July, 1948.2) Setting up of National Bank of Pakistan in November, 1949 to control the 'jute' export

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    in East Pakistan and to act as agent of SBP.3) Larger powers were given to SBP through SBP Act (1956) for controlling purposes.4) Banking Companies Ordinance 1962 for protection and guidance to banks.5) Establishment of specialized banks, such as ADBP (1952);a) HBFC (Nov, 1952);

    b) P1CIC (Oct, 1957)c) IDBP (Aug. 1961);d) NDFC (Jan, 1973).These were the steps, which built a strong banking sector in Pakistan. This is alsoobvious from the facts that by 1973 there were almost 10 foreign banks were working inPakistan and all over deposit position was around Rs.2300 crore (23,000 million). A birdeye view of 5 top banks was as given below:BANK POSITION IN 1973

    BANK NO. OF BRANCHES DEPOSITSHBL

    6676,160

    NBP5795,660

    UBL4975,670

    MCB5061,640

    ABL145570

    B) NATIONALIZATION PERIODOn January 01, 1974 all Pakistani banks were nationalized through Nationalization Act1974. Under this law all Pakistani banks became a public property. All small banks weremerged in bigger banks to create 5 major Pakistani banks Pakistani banks. These bankswere to control by Pakistan Banking Council. There are still controversies about this actof government as whether it contributed in success of failure of banks. However themajor changes after nationalization were as follows: Working of banks was extended to under developed areas. Market expansion for credit and deposits. Decrease in service level of bank officers.

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    Decrease in profitability as well.However the effect of expansion was enormous and it can also be depicted with the helpof table 2 which shows the deposit & branch positions of different nationalized banks.

    BANK POSITION IN 1992

    Bank No. of Branches Deposits (Rs. In Millions)HBL1926153,431

    NBP1448128,679

    UBL168487,482

    MCB128850,013

    ABL75033,757

    TOTAL7096453,362

    C) POST NATIONALIZATION ERAIn 1990 the government decided to denationalize all the nationalized institutes. Some wasalso suggested in banking sector. For this purpose, amendments were made toNationalization Act 1974 and two nationalized banks were privatized. Along with this apermission to open banks in private sector was also granted. The rules regardingestablishment of new banks and for incoming foreign banks were alsoRelaxed.The-three privatized banks are;a) MCB taken up by a private group in April, 1991b) ABL taken up by its own employees in September, 1991.c) UBL taken up by UAE party in 2002.After these changes a large number of private and foreign banks started their operationsin Pakistan and the present status can be seen from the following figures:

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    SCHEDULE BANKSCategory No. of BanksNationalized Commercial Banks 3Private / Privatized Commerce Banks 18

    Public Sector Specialized Banks 4Foreign Banks 19Total Schedule Banks 44In addition to above mentioned scheduled banks there are 7 Development FinancialInstitutes, 14 Investment Banks and Modarbah Companies.

    MUSLIM COMMERCIAL BANK LTD.(HISTORICAL BACKGROUND)Now let us discuss the historical background of Muslim Commercial Bank Limited.Before separation of Indo Pak, the need for more Muslim banks was felt. And Muslims

    having strong financial capacity were thinking to invest in this sector as well. This wasthe idea which paved the way for setting up Muslim Commercial Bank Ltd known asMCB. This was the third Muslim bank in the subcontinent.

    HISTORYThis bank was incorporated under companies act 1913 on 9th July, 1947 (just beforepartition) at Calcutta. But due to changing scenario of the region, the certificate ofincorporation was issued on 17th August, 1948 with a delay of almost 1 year; thecertificate was issued at Chitagong. The first Head office of the company was establishedat Dacca and Mr. G.M. Adamjee was appointed its first chairman. It was incorporatedwith an authorized capital of Rs. 15 million.After some time the registered office of the company was shifted to Karachi on August23rd, 1956 through a special resolution, now recently the Head office of MCB has beentransferred to Islamabad in July, 1999 and now Head office is termed as Principle Office.This institute was nationalized with other on January 1st, 1974. At that time it had 506branches and deposits amounting to Rs. 1,640 million. Although. MCB has a reputationof a conservative bank but nationalization also left its effects on this institute as well andby end of year 1991 in which it was privatized the total number of branches were 1.287and deposits amounting to as high as Rs. 35,029 million.When privatization policy was announced in 1990, MCB was the first to be privatizedupon recommendations of World Bank and IMF. The reason for this choice was thebetter profitability condition of the organization and less risky credit portfolio whichmade'' it a good choice for investors. On April 8th, 1991, the management control washanded over to National Group (the highest bidders). Initially only 26% of shares weresold to private sector at Rs. 56 per share.

    DEVELOPMENTSAfter privatization, the growth in every department of the bank has been observed.Following are some key developments:1) Launching of different deposit schemes to increase saving level.

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    2) Increased participation on foreign trade.3) Betterment of branches and staff service level.4) Introduction of Rupee Traveler Cheques & Photo Credit Card for the first time inPakistan.5) Extended use of information technology which is evident from the fact that there are

    768 fully automated branches, 243 online branches (integrated networking), 151 ATMSin 27 cities nation wide and a M.C.B continuously innovate new product.

    MANAGEMENT OF THE ORGANIZATION

    MANAGEMENT OF THE BANK

    Mian Mohammad Mansha ChairmanS.M. Muneer Vice Chairman

    Mohammad Aftab Manzoor President & Chief Executive

    Tariq Rafi DirectorSheikh Mukhtar Ahmed DirectorMohammad Arshad DirectorShahzad Saleem DirectorRaza Mansha DirectorSarmad Amin DirectorMian Umer Mansha Director

    AUDIT COMMITTEE

    Mian Mohammad Mansha ChairmanShaikh Mukhtar Ahmed MemberShahzad Saleem Member

    CHIEF FINANCIAL OFFICER

    Ali Amin

    COMPANY SECRETARY

    Tameez-ul-haque

    ORGANIZATIONAL STRUCTUREAs MCB is a banking company listed in stock exchange therefore it follows all thelegalities which are imposed by concerned statutes Mr. Muhammad Mansha is chairman& chief executive of the company with a team of 10 directors and 1 vice chairman to helpin the business control and strategy making for the company.Operational Management of the bank is being handled by a team of 10 professionals.

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    This team is also headed by Mr. Muhammad Mansha. The different operationaldepartments are Consumer Banking & IT div; Financial & Inter branch div; Bankingoperations div; HR & Legal div; financial control & Audit div; Credit management div;Commercial Banking div; Corporate Banking div; Treasury management & FX Groupand lastly Special Assets Management (SAM) Group.

    For effective handling of branches, it has been categorized into three segments withdifferent people handling each category. These categories are:a) Corporate Bankingb) Commercial Bankingc) Consumer Banking

    A) CORPORATE BANKING:These are branches which have an exposure of over Rs. 100 million. Usually includesmultinational & public sector companies.

    B) COMMERCIAL BANKING;

    The branches which has a credit exposure of less than Rs. 100 million but having a creditportfolio of more than Rs. 20 million (excluding staff loans)Usually branches in large markets and commercial areas come under this category.

    C) CONSUMER BANKINGThese are the branches which have exposure up to Rs. 20 million and these include all thebranches which are neither corporate nor commercial branches.Recently the organizational structure was re-designed as follows:Province wise branches

    Corporate Consumer Commercial20 branches 637 branches 383 branches

    NUMBER OF BRANCHES IN DIFFERENT LOCALITIES

    Punjab 632Sindh 232NWFP 123Blochistan 34Azad Kashmir 19Domestic 1040Overseas 4EPZ 1Total 1045

    Sri Lanka 3Bahrain 1

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    Furthermore, the bank has some proposals under consideration to open more brances insome European countries and as well as in japan & china

    HIERARCHY OF MANAGEMENT

    MEDIOCRE LEVEL MANAGEMENT

    The organization chart within a department and in different offices is as follows:

    Divisional Heads .. Head OfficeRegional Head (EVP) .. Regional OfficeZonal Head (VP) .. Zonal OfficeBranch Manager .. Branch(VP, AVP, GRADE 1, 2, 3)

    FIELDS OF ACTIVITIES OF MCBThe purpose of banks is to provide some services to the general public. And for thispurpose different banks provide different services to the people in different forms. TheMuslim Commercial Bank (MCB) is a commercial bank, in modern time commercialbanks play a very important role and their functions are manifold. The main functionsand services which Muslim Commercial Bank Limited provides to different peoples areas follows.

    1) Open Different accounts for different peoples2) Accepting various types of deposits3) Accepting various types of deposits4) Granting loans & advances5) Undertaking of agency services and also general utility functions, few of those are as

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    under:a) Collecting cheques and bill of exchange for the customers.b) Collecting interest due, dividend, pensions and other sum due to customers.c) Transfer of money from place to place.d) Acting an executor, trustee or attorney for the customers. Providing safe custody and

    facilities to keep jewellery, documents or securities.e) Issuing of travelers cheques and letters of credit to give credit facilities to travel.f) Accepting bills of exchange on behalf of customers.g) Purchasing shares for the customers.h) Undertaking foreign exchange business.i) Furnishing trade information and tendering advice to customers.

    For proper functioning of branches and the over all bank has been divided in differentdepartments. These departments handle different jobs so that division of work is there forimprovement of functions and also it is easy to control the situation. The general divisionin a branch is as follows:

    1) Cash department2) Deposit department3) Advances & credit department4) Foreign exchange departmentTechnology department (new addition in order to cop with the growing needs of day today technology requirements)

    CASH DEPARTMENT

    The following books are maintained in the Cash Department:1. Receiving Cash Book2. Paying Cash Book3. Token Book4. Scroll Book5. Cash Balance BookWhen cash is received in counter, it is entered in the Scroll Book and Receiving CashierBook. At the close of the day, these are balanced with each other.When the cheque or any negotiable instrument is presented at counter for payment, it isentered in the token book and token is issued to the customer. The token clerk and theCashier make entries in the paying book and payment is made to payee. At the close ofday, the Token Book and Paying Cashier Book are balanced.The consolidated figure of receipt and payment of cash is entered in the cash balancebook and drawn closing balance of cash.Opening Balance + Receipts - Payments = closing Balance.This is very important department because cash is the most liquid asset and mostly fraudsare made in this department, therefore, extra care is taken in this department and nobodyis allowed to enter or leave the area freely. Mostly, cash area is grilled and its door isunder supervision of the head of that department. All the books maintained in this

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    department are checked by an officer.

    DEPOSIT DEPARTMENTBank deals in money and they are merely mobilizing funds within the economy. They

    borrow from one person and lend to another, the difference between the rate of borrowinglending forms their spread or gross profit. Therefore we can rightly state that deposits arethe blood of the bank which causes the body of an institution to get to work. Thesedeposits are liability of the bank so from point of view of bank we can refer to them asliabilities.The total deposits of MCB are growing since its inauguration but after privatization thereis a sharp incline in over all deposits of the bank. The increase in deposits is also a causeof increase on total number of accounts; bank has progressed in both aspects.

    TYPES OF DEPOSITSDeposits can be segregated on two bases, one is the duration in which there funds are

    expected to be with the bank and second is the cost of getting these funds. So dividedeposits in two classes according to duration of deposits i.e.1) Time deposits / liabilities2) Demand deposits / liabilitiesAnd on the basis of the cost to acquire these funds, a deposit can be classified as any oneof following four, High Cost Medium Cost, Low Cost No Cost.Banks has different kinds of deposit schemes in order to induce deposits. These schemesare a mixture of the above mentioned two types of deposits with an addition of differentservices & requirements such as minimum balance' requirement, mode of transaction,basis for calculation of profit, deductions, additional benefits, eligibility for differentgroups.In the similar fashion, MCB has a large variety of deposit schemes and some of them areas follows:

    CURRENT A/C (CD):In this type of accounts the client is allowed to deposit or withdraw money as and whenhe likes. He may, thus, deposits or withdraws money several times in a day if he likes.There is also no restriction of amount to be deposited or withdrawn. However, there isrequirement of minimum balance maintenance of Rs. 1000/-. Usually this type of accountis opened by the businessmen. No profit is paid by the bank and no service charges arededucted by the bank on current deposits account. These types of deposits are alsoexempt from compulsory deduction of Zakat.

    PLS SAVING BANK A/C (SA):This type of account is for those persons who want to make small savings'. This type ofaccount is opened with a minimum deposit of Rs. 1000/-. Under this scheme deposits canbe made only up to a-costing amount and withdrawals are allowed twice a week or 8times a month. If a big amount is required a seven days notice is required before thewithdrawal. The profit is paid on these accounts on the minimum balance during a monthfor the whole of that month. Zakat & other withholding taxes are deducted as per rules of

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    the government.

    KUSHALI BACHAT A/C (KBA):This is an advance form of PLS saving a/c, in this type of account. The minimum balancerequirement for this type is Rs. 2500/-. There is also restriction on the number of

    withdrawals as well, i.e. up to 4 times in a calendar month. For maintaining this extrabalance the customer gets the benefits of profit calculation on daily product basis and alsofree service of standing instructions of paying utility bills and HBFC installments. Allother rules of saving account are applicable.

    PLS 365 SAVING A/C:This is a special type of saving account in which customer maintains a minimum balanceof Rs. 300,000- and in turn he gets the benefits of daily profit calculations and also thereis no restriction on the maximum number of withdrawals as was there in the case ofKBA. There is also another advantage of this scheme that if balance on a particular dayfalls below the minimum balance then only the product of that day is ignored whereas in

    KBA, if balance falls below the minimum limit then all the products for that month areignored on in other words no profit is paid for that month.

    NOTE:PLS Saving, Kushali Bachat & PLS 365 saving accounts can be opened in foreigncurrency also. Before nuclear tests of 1998 these accounts were opened in four majorcurrencies but now these are only opened in USD ($). However, now bank discouragesthe opening of foreign currency accounts because no forward cover risk is provided byState Bank of Pakistan (SBP) and all the loss in case of devaluation or depreciation inlocal currency has to be born by bank himself. This increase in cost has left foreigncurrency account of no use, therefore, now bank prefers to accept deposits in localcurrency rather in foreign exchange.

    KHANUM BACHAT SCHEME:This is a type of term deposit, in this type of deposit an account is deposited and monthlypayments of Rs. 1000/- are made by the account holder in this account for a minimum of10 years. After the expiry of term, he receives his funds along with profit for the tenor.The distinctive feature of this product is that profit is calculated on monthly basis andcharged to account on end of each half /ear. Then profit is also calculated on that amountof profit which is credited to the customer's account. So we can say that in this type ofaccount there is a concept of accumulated profits on profit. This ends in getting a heavyreturn for the depositor at the end of tenor for his small savings. This product wasactually introduced to promote saving habits in the people. Zakat and withholding taxesare deducted as per rules only at the time of maturity while making payment to thecustomer.

    HAJJ MUBARIK SCHEME:This is also very closely related with Khanum Bachat scheme. This was designed to helpthe persons who are willing to offer Hajj but are unable to save required funds. In thisdeposit schemes, 2 or 3 years agreement is entered with a customer. During this time he

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    keeps on depositing monthly deposits and his account is charged with the accumulatedprofits calculated on 6 monthly basis. The scheme is so designed that total amount to bereceived at the end of this scheme comes equal to the anticipated cost of offering Hajj atthe end of tenor. Zakat & withholding tax are deducted at the time of payment.

    MONTHLY KUSHALI SCHEME:This scheme is similar to CGC in the sense that an initial deposit is made in this case alsobut instead of lump sum payment at the end of the tenor, the person gets a monthly profiton his deposits. Under this scheme, the bank has guaranteed minimum rate of 1% permonth but usually this rate is more than 1% per month. Zakat & withholding tax arecalculated as per rules laid down by the government.

    PLS TERM DEPOSIT RECEIPTS (TDRS)This is a type of term deposit in which a receipt is issued for varying tenors ranging from1 month to 5 years or more. These are in the form of receipts and profit on these receiptsis paid biannually. These receipts are encashable after expiry of the period for which they

    were issued. Different profit rates are applied to different type of TDRs.

    SPECIAL NOTICE DEPOSITS (SND):Under this deposit scheme, a deposit is received from the depositor under the conditionthat he will intimate the bank before a certain period in case of withdrawals. There aretwo types of SNDs, they are 7 days and 30 days notice deposits. The profit is paid onthese deposits but it is nearly equivalent to saving account rate.

    FUNCTIONSThis was a brief review of different types of deposit schemes. The Deposit Departmenthandles the account opening, profit payment and accounting of all types of depositschemes.

    ACCOUNT OPENING:Account opening is an agreement in which customer offers his funds and bank acceptsthese funds, therefore the nature of relation between a banker and customer is of acontractual one and all the conditions applicable to this contract act are also applicable.

    PROCEDURE FOR OPENING:Procedure for opening of account is as follows:A person, who wants to open any kind of account, has to fill in a printed form which isprovided by the bank, free of cost. Separate account opening forms are used for differenttypes of accounts.Bank usually requires that new depositor must be introduced by some one. An introducercan be any person known to the bank but preferably it should be a customer of the bank.However, the manager can open the account by his own introduction.If the manager is satisfied, it will obtain the full signature of the customer- on the formand specimen signature card, makes the first deposit, and issues the cheque book.The following are given to the customers:Pay-in-slip is the proof of deposit. For every payment which is. to be deposited in the

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    bank, the pay-in-slip is to be filled up. The object of this book is to provide the customerwith the bank's acknowledgment for receipt of money to be credited this account.Cheque Book contains a number of cheques. It enables a customer to make withdrawalfrom this account or make payment of various parties by issue of cheque.Pass Book is a copy of the customers account as appears in the books of the bank.

    Balance is recorded in this book by the Clerk.NOTE:1) In case of partnership account partnership deed should be attached.2) In case of companies memorandum and article of association, certificate ofincorporation, certificates for commencement of business, list of directors and boardresolution for opening of account is also obtained from the customer.3) Accounts of Trusts, Executors & Administrators can also be opened but with the priorapproval of the Head Office.Profit payment & calculation is done in accordance with the rules of each type of depositscheme-by the deposit department. The products for each deposit scheme are calculatedseparately and added till the end of 6 month period. Then the sum total of these products

    is multiplied with the respective profit rates which are issued by the Head Office at theend of each half yearly closing. The profit provisions for each type of deposits are alsocalculated on monthly basis by the same department in order to calculate the net profit orloss position of the branch.Accounting entries are also made in the respective books of account by this department.However, in small and medium size branches, the accountant performs the book keepingduties for all kinds of ledgers.

    CLEARING DEPARTMENT

    Every banker acts both as a paying as well as a collecting banker, It is however animportant function of crossed cheques. A large part of this work is carried out through thebankers clearing house.A clearing house is a place where representative of all banks of the city get together andsettle the receipts and payment of cheques drawn on each other. As the collecting bankerruns certain risks in receipt of their ownership the law has provided certain protections tothe banks.The Negotiable Instrument Act, 1881, lays down hat drawer or holder of a cheque ordraft may cross the instrument generally or specially. It further lies down that a crossedcheque can only be paid to a banker, who collects it for a customer in good faith andwithout negligence.

    TYPES OF CHEQUES COLLECTEDTransfer cheques: are those cheques, which are collected and paid by the same branch ofbank.Transfer delivery cheques: are those cheques, which are collected and paid by twodifferent branches of the same bank situated in the same city.Clearing cheques: are those cheques, which are drawn on the branches of some otherbank of the same city or of the same area, which is covered by a particular clearing

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    house.Collection cheques: are those cheques, which are drawn on the branches of either thesame bank or of another bank, but those branches, are not in the same city or they are notthe members of clearing house.

    FUNCTIONS OF CLEARING SDEPARTMENT:1. To accept Transfer, Transfer delivery, clearing and collection cheques from thecustomers of the branch and to arrange for their collection.2. To arrange the payment of cheques drawn on the branch and given for collection toany other branch on MCB or any other members or sub member of the local clearinghouse.3. To collect amount of cheques drawn on members, sub-member of local clearing house,sent for collection by MCB Branches, not represented at the local clearing house.

    COMMON PROCEDURE FOR ALL CHEQUES:i) Receiving and scrutinizing the cheques and other deposit instruments, and the pay-in-

    slip at the counter.ii) Fixing the stamps.iii) Scrutiny and receipt by the authorized officer.iv) Returning the counter file to the depositor.v) Certificate and confirmation by the officer in charge of the department. ,vi) Separating the cheque into transfer, transfer delivery, and clearing cheques.

    SCRUTINY OF CHEQUESa) The instrument should be neither stale/ nor post-dated.b) If the instrument is crossed not negotiable it can be for the third party (an endorsee ofan order cheque, or a holder of bearer cheque).c) The Instrument should not bear any unauthorized alternation.d) The instrument should not be mutilated.e) The amount in words and figures should be same.f) The instrument should be drawn on any local branch.g) If cheque is "crossed Account Payee's" only or "Payee's Account", it should only beaccepted for collection for the payee's account.h) The cheques or drafts should not be crossed specially to any other bank.i) A cheque payable to a firm should not be accepted for credit to a partner's account.j) A cheque payable to one of the joint account holders should not be collected for thejoint account without the payee's endorsement, or consent.k) A cheque drawn by a customer in the capacity of agent, Attorney, or Manager of hiscompany or firm, should not be collected for credit to his personal account.l) Pay orders, although negotiable should not be collected for third parties.m) Do not collect an instrument in the account of an agent or of the servant of the payeeor endorsee of the instrument.n) Not transferable" instruments, like Telegraphic Transfer, or Mail Transfer Receipt,Pay-slips, and Treasury Receipts, should be collected for a person other payee.o) If an account is new or the balance or operation of the account is not satisfactory,satisfy your self about the title of the customers to the instruments before accepting the

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    deposits.p) Branch agent's permission should be obtained before accepting a third party cheque ordraft for the credit of the member.q) If the payee is a Government Department, Government Official, or a trust account theinstrument cannot be collected, but for the payee's account.

    r) If the payee of an instrument is UBL, it can be collected for credit of the drawersaccount, or the amount of the instrument may be utilized as desired by the drawer inwriting.s) Cheque payable to a trust, account should not be collected for credit to a trustee'saccount.t) All the endorsement should be regular, and no endorsement should be missing.Note: No charges are charged by the bank for this purpose.

    LEDGERS OF DEPOSIT DEPARTMENT:The following types of ledgers are concerned with deposit departments:1. Saving Ledgers

    2. Current Ledgers3. Profit & Loss Sharing Ledgers4. Fix Deposit Register5. S.N.T.D. Register6. Call deposit register7. Cumulative deposit certificate register8. Cash book9. Daily profit and loss summary book10. Officer spaceman signature book11. Voucher registerHowever, in computerized branches all these ledgers are no more there but only daybooks are maintained. The rest of the work is done on computers.

    ADVANCES DEPARTMENT

    Advances are the most important source of earning for the banks. MCB is also giving fullattention towards this aspect and it is also obvious from the growing portfolio ofadvances and from very low delinquency rate. The credit portfolio of this institution is ina very much better shape than other financial institutions of Pakistan and the credit goesto the management and the staff who are concerned about the quantity and quality aswell.1) Loans2) Cash Credits3) Overdraft

    1) LOANS:Loans are monetary assistance by a financial institution to a business, individual etc. Theloans are granted by the bank in lump sum, so these types called fixed or demand loans.Interest is charged on the whole amount of a fixed loan.

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    The borrower withdraws whole the amount of loan. This type of loan is normally grantedagainst security of gold documents.In case of demand loans against gold or documents, a demand promissory note for theamount of loan is taken from the borrower loans are granted under;

    A) LOAN AGAINST GOLD:Under this type of loan, which is granted to the borrower the Head Cashier estimates thevalue of Gold or Gold ornaments through an agent (Gold smith) and keeps a margin of 40to 50 percent. After the opening the gold loan account a token is given to the borrower,which is a bank receipt.On repayment of loan, the gold or ornaments held as security for it, together with thedemand promissory note duly discharged is returned to the borrower and his receipt forthe gold ornament taken in the demand loan ledger. This receipts states that he ornamentsreturned are complete and in order. Part delivery of ornaments is given against partpayment of a loan but care is taken that the ornaments still in banks possession fullycovers the balance of the loan outstanding. The interest gold loan is to be applied with

    quarterly.

    B) LOAN AGAINST PLEDGED OF STOCK:In case of advancing such types of loans, the following precautions are dept in the mind:i) Stock pledged must be readily saleableii) Products should be readily saleableiii) Advance should be within the borrows means

    REQUIREMENT FOR LOAN:For granting loan to any party or individual, the bank checks following particulars of theclient:1) Credibility2) Feasibility ReportBy Credibility, bank Judges the credibility of the client by his past bank record, CBIreport etc. it is very important in making decision about giving him loan.Feasibility report is on the running or proposed business of the client. The report enablesthe bank to judge the likely return of the business.

    2) CASH CREDITCinder such cash account is opened in the name of the customer who borrows from thebank. Customer is granted a loan up to a certain limit, sanctioned by the head office, fromwhich he can draw when he requires and interest is charged on the amount actuallyutilized by the customer. In order to avoid the danger of idle fund, the bank charges acertain rate of interest, even if the customer does not withdraw any amount. The ratecharged by the bank on cash credit in 46 paisa per thousand on daily basis.The credit is usually given against the securities of goods or merchandize as follows:

    1. ADVANCES AGAINST PLEDGE STOCK IN TRADE OR PRODUCTSWhen a cash is granted against the pledge of stock or product, cash credit form is taken,from the certain products or stock, but the actual pledge is created when the stock or

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    finished product are placed under the bank's lock or the document of title are dulyendorsed to the bank by the borrower.

    2. HYPOTHECATION OF STOCK ON FINISHED PRODUCTS:The difference between pledge and hypothecation is that under a pledge the borrower's

    goods are placed in the bank's possession under own lock, whereas, under ahypothecation, they remain in the possession of the borrower or guarantor and are merelycharged to the bank under documents signed by them. Even though the documentsempower the bank to take possession of the goods hypothecated, but it is possible that theborrower may actually resist any attempt.

    3. MORTGAGES OF PROPERTY:Title deeds of immovable property are accepted by the bank only as collateral security oralternatively as unauthorized security.

    MODES OF CREDIT FACILITIES

    There are two types of facilities

    A FUNDED FACILITY1) Running finance2) Cash finance3) Demand finance4) Payment against documents5) Finance against imported merchandise6) Finance against trust receipt7) Export finance8) Foreign bill purchased9) Others

    NON FUNDED FACILITY1) Letter of credit2) Letter of guarantees3) Bid bonds4) Performance bonds5) Other facilities

    REMITTANCES

    DEMAND DRAFT1) Demand draft is a written order drawn by a branch of a bank upon the branch of sameor any other bank to pay certain sum of money to or to the order of specified person2) Demand draft is a negotiable instrument.3) Legal provisions are same as that of cheque.4) It is to be ensured that purchaser can at least sign.

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    5) Thumb expression is not accepted on DD6) The following are the parties.a) purchaserb) issuing branchc) drawee branch

    d) payeeA demand draft may be issued against the written request of the customer before issuingit must be seen that the demand draft is in order.

    SCRUTINY OF APPLICATIONThe DD application must be scrutinized by the counter clerk in respect of followingpoints.A There should be branch where payment is to be made.B full name of payer should be mentionedC amount in words and figures must be sameD application to be signed by the purchaser

    TELEGRAPHIC TRANSFER Transfer of funds from one branch to another branch of the same bank or upon otherbank under special arrangements. Telegraphic transfer is not negotiable The funds are not payable to bearer Minor cannot avail this facility

    PARTIESFollowing are the parties involved Applicant Drawing branch Drawee branch BeneficiaryFull name of the beneficiary or account number should be mentioned in the applicationform. Instruction regarding mode of payment should be obtained. A record in the remittance outward register should be maintained. All the remittance must be controlled through number.

    MAIL TRANSFER Transfer of funds from one branch to another branch of the same bank with in or outside the city is called mail transfer. Mail transfer is not negotiable The procedure is same as for DD All precautions must be observed

    PAY ORDERS

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    Pay order is meant for bank own payment but in practice they are also issued tocustomers. A pay order is written authorization for payment made in a receipt form issued andpayable by the bank. To the person named and address.The following are the parties

    A purchaserB issuing branchC payee Charges must be recovered at prescribed rate. Pay order should be prepared like demand draft. A record of all issued and paid should be maintained. Credit voucher should be prepared

    TECHNOLOGY DEPARTMENT

    Technological advancements are also affecting the banking industry. The foreign bankshave a competitive edge over all local banks in their technologies' advancements andautomated systems. Local banks have also realized the gravity oil this situation and arestriving to add computerized systems to their branchesMCB is ahead of all other local banks in this field and now it is in a position to evencompete with foreign banks. There are more than 1045 branches of MCB all overPakistan and out of these more than 300 branches are fully computerized Almost all .thebranches of big cities are computerized; therefore, the need for a technology departmentat each branch is growing. Now a day, a computer division is working in each city toprovide service to ad the branches of that area.MCB has also introduced the now concept of online banking. There are now more than250 branches linked through this system and they can transact with each other directlyusing computer systems at their own branches. Now customers do not have to wait longfor their transactions and can operate their account through all the online branches.

    ATM NETWORK:ATM stands for Automatic Teller Machine. This machine is used to transact in one'saccount without intervention of humans. These machines are basically used for takingcash, confirming balances and requesting statements / cheque books.MCB has the largest ATM network in the country at the moment with almost one ATMat each online branch and also ATM terminals at International Airports. This networkcovers more than the 27 cities of Pakistan including the provincial capitals and largecommercial cities of the country.ATMs are operated through a card issued to the valued customers and by application ofPersonal Identification Number (PIN number). A person can withdraw from any machineacross Pakistan with having an account in only one branch of MCB. This was onlypossible with the help of online system. In this system all the machines are linked tocentral banking host at IRM division Karachi through either satellite or telephonecontroller. This system identifies the card holder and his PIN Number.Now MCB has also entered into a contract with Cirrus which is a subsidiary of

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    MasterCard. This contract will enable an ATM card holder to use his account even whenhe is out of country at all the ATMs where Cirrus logo is displayed.Green Cards are ordinary cards with a maximum withdrawal facility of Rs. 10,000/- in aday. The annual fee for this card is Rs. 300/- only.Gold Cards are special cars with maximum withdrawal limit of Rs. 25000/- in a day.

    These cards are issued to the persons having more than Rs. 500000/- as their averagebalance.International Cards are issued in collaboration with Cirrus and are useable all over theworld with maximum withdrawal facility according to the standards of Cirrus.

    MCB WEB SITEMCB has also initiated its own website on internet with the address.www.mcb.com.pk

    MISCELLANEOUS

    PRODUCTS AND SERVICES OF MCBFollowing are some products of MCB that are introduced by Musing Commercial Bankafter privatization.

    1) MCB RUPEE TRAVELLER CHEQUE:MCB Rupee Travelers Cheques are as good as cash, infact better. Better because withRupee Travelers Cheques you have the power to purchase and a feeling of security thatshould you lose them, you will get a refund.MCB Rupee Travelers Cheques are accepted at major shops, travel agents, hotels,business establishments and MCB branches all over Pakistan. You don't have to be anMCB account holder to buy the Rupee Traveler Cheques. Anybody can purchase them.It's a safe and convenient way to conduct everyday business. At a time when thefts androbberies are on the increase, you are better off carrying Travelers Cheques rather thanmoney.

    2) MAHNAMA KHUSHALI SCHEME:A 5- year fixed Deposit Scheme, targeted to persons with small savings who would desirea regular monthly return on their investment.

    SALIENT FEATURE:

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    a) Minimum amount of investment shall be Rs.0.010m and the maximum amount ofinvestment would be Rs. 1.000m.b) Khushali Certificates can be purchased by individuals (singly or jointly) or by theProprietorship/Partnership concerns or Companies, etc. in their namec) The Khushali Certificate will be of five years maturity.

    d) The interim rate of profit offered will be minimum 1% per month. If the profitdeclared by the bank is higher, additional profit will be paid.e) Zakat will be deducted wherever applicable on yearly basis whether you will bereceiving your profit or encashing your certificates.f) As per Government Directions, tax on the profit / return is to be deducted by MCBbranches at the time of payment.

    3) MCB KHUSHALI BACHAT ACCOUNT:

    FEATURES:a) 8% rate of return per annum.

    b) Returns calculated on daily.c) Average balance and paid half yearly.d) Introduced first time in Pakistan.e) The facility of helping account holders pays utility bills (electricity, telephone and gas)through their account. No queues. No delays.

    4) PRIME CURRENCY ACCOUNT SCHEME:Launched to attract deposits in foreign currencies. US Dollars, Pound Sterling, Euro andJapanese Yen.

    FEATURES:a) Owing foreign currency account under the Prime Currency Scheme allows you to earnattractive rates of interest in foreign currency.b) You have a choice between opening this account in your personal name and opening itunder joint names.c) Whether you are a resident or a non-resident Pakistan, MCB Prime Currency Schemeinvites all to operate a foreign currency account.d) Foreign nationals and foreign companies can also open a foreign currency accountunder the Prime Currency Scheme.e) Your foreign currency account can be opened in four global currencies: The UnitedStates Dollar, the Pound Sterling, the Japanese Yen and the Euro.f) Travellers Cheques and Foreign Currency Notes can also be issued to holders ofpersona! and Joint accounts.g) Remittance from abroad, Travellers Cheques, Foreign Currency Notes and ForeignExchange generated by encashing F.E.B.Cs may be deposited in these accounts.h) Rupee Loan facility will also available against this account.i) You can draw any amount of foreign exchange from your foreign currency account andtransfer or remit the amount freely to any part of the world without any restrictions.j) The restrictions imposed by the State of Pakistan for the opening of foreign currencyaccounts in case of passport; Work-permit and resident Visa have been withdrawn. Your

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    account will be restriction free.k) The Prime Currency Scheme is exempt from al! forms of taxes including Income Tax,Wealth Tax and Zakat deductions.l) MCB Prime Currency Scheme is a world in itself.MCB - committed to working for your convenience - offers the foreign currency account

    facility at more seventy of its branches all over Pakistan.

    5) HAJJ MUBARAK SCHEMEA saving scheme, of 2/3 years duration, for the convenience of persons, with a limitedincome, who desire to perform Hajj was introduced.Under the 2 years scheme, a monthly deposit of Rs.1800 is required, whereas under the 3years scheme, the required monthly deposit is only Rs.1200.

    6) CAPITAL GROWTH CERTIFICATE SCHEME:For long term depositors under which the amount deposited almost doubles at the end of5 years. For the scheme, the minimum amount of deposits is Rs. 10000 while there is no

    maximum limit. In case of premature encashment of the certificate, the depositor willprofit at the same rates as that of PL Saving Account.

    7) FUND MANAGEMENT SCHEMEThis scheme is offered to corporate and customers and is aimed at providing better rate ofreturn up to 15% per annum. One of the objectives of the scheme is to develop secondarymarket for Government Securities.

    8) CONSULTANCY SERVICES:In the process of privatization of public sector units, prospective buyers need professionalassistance and MCB, with its expertise, offers to them specialized service for valuation ofthe market value of the industrial unit, preparing bid documents and arranging finance forthe purchase of the unit.

    9) SELF SUPPORTING SCHEME:For the benefits of genuine worker/borrowers who are poor and needy and for smallentrepreneur the bank as evolved a self supporting scheme: maximum amount of loanRs.25000 and minimum Rs.5000 per individual. Loan will be totally free of mark-up.10) FAX PRESSThis product was first of its kind introduced by using modem technology of The FaxMachine. It facilitates speedy transfer of funds within Pakistan. The service guaranteestransfer of from one city to another, within an hour.

    11) NIGHT BANKING SERVICE:For the convenience of the account holder, service has, especially, been introduced atbusy commercial centers. Traders and other clients can now make deposit, with case, atsuch centers up to 8.00PM.

    12) UTILITY BILLS COLLECTION

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    With the aim of extending this service to wider range of customers, the number of MCBbranches collecting Utility Bills more than 900.1. MCB Mobile2. Islamic Banking Services13. MCB MOBILE

    Banking at your fingertips. Dial in anytime to get information regarding balance and ministatements.

    14. PYARA GHARFlexible and competitive home financing facility with options of home purchase,construction and renovation.

    15. ISLAMIC BANKING SERVICESIslamic banking services through exclusive units/branches offering a range of liabilityand asset based Sharia compliant products like Musharika, Murabaha, Ijara and Istasana.

    16. MCB CAR CASHCar financing and leasing at competitive rates with flexible options Carcash finances bothsemi-commercial and non-commercial vehicles for personal and business use.

    17. MCB LOCKERSThe best protection for your valuables. Lockers of different capacities are availablenationwide.

    Objectives of MCBThe following are the objectives of Muslim Commercial Bank Limited.

    CREATING AND MANAGING VALUES.The first objective of Muslim Commercial Bank Limited is to create and mange thevalues, which is one of the back bone of the objectives of any well organized andmanaged organization.HUMAN CAPITAL.The second objective of Muslim Commercial Bank is to take care of the Human capitalwhich is a necessary thing for the development and prosperity of any well establishedorganization.BEST PLACE TO WORK.The third objective of Muslim Commercial Bank Limited is to make it a place which ismuch feasible and comfortable for employees of the bank. The MCB is always consciousin developing such place where employees of the bank feel easiness.TECHNOLOGY.The forth objective of Muslim Commercial Bank Limited is to bring new and latesttechnology in the operations of the bank. At MCB, technology has a direct relation withyour needs; it is a means for creating value and convenience for the customer. Over thelast few years MCB has invested heavily into strengthening its technology backbone.Today it is leading the way in banking technology and setting new standards for thebanking industry; penetrating into the local market, listening to the needs of the people

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    and educating them of simple financial products and services that create both value andconvenience. MCBs strength lies in providing a technological base at the grass rootslevel of the society with a challenge to educate and assimilate such systems across vastcultural and economic backgrounds. With over 768 automated branches, 243 onlinebranches, over 151 MCB ATMs in 27 cities nationwide and a network of over 16 banks

    on the MNET ATM switch, MCB continuously innovates new products and services thatharness technology for the customers benefit.UNDERSTANDING & RELATIONSHIP.The fifth and very important objective of Muslim Commercial Bank Limited is to createsuch an environment which is suitable for creating understanding and relationshipbetween the employees, thus going towards the way of development and prosperity. Overthe years, MCB has fostered strong bonds with its customers. Understands them; theirneeds. They feel comfortable with MCB; its their bank; it responds to them; listens tothem; partners with them; grows with them. At MCB, banking is all about being there forpeople, making a home in their hearts-continuously building relationships on mutual trustand confidence. We understand that relationships are about expectations-our products and

    services are based on your customers, expectations. Be it financing for personal orbusiness related needs, funds transfer and trade related facilities or need for differenttypes of deposit accounts, MCB offers you a variety of products and services customizedto satisfy your individual needs.UNDERSTANDING CONVENIENCE.The next objective of Muslim Commercial Bank Limited is to make understanding aconvenient thing for the whole environment of the bank, for the purpose of boosting upits values and prosperity in such a competitive environment. Convenience is what thecustomer is looking for; and this is what we at MCB are continuously striving to provide.Whether it is the 24 hours cash convenience of our ATM network or the easy availabilityof financing requirements or simple opening of account, MCB has tailored its productsand services to make your life easier. MCB knows the particular needs of its diversecustomer base d continuously develop products and services that fulfill these needs.UNDERSTANDING RELIABILITY.The last but not least objective of Muslim Commercial Bank Limited is to make anenvironment which have an understanding of reliability in the whole structure of thebank. With a strong financial base, a promising team and the right resources, MCB hasproved to be a reliable partner indeed. MCB understands the special needs of thebusiness, trading and agricultural sectors. Strategically located branches in small townsand cities provide warm services and advice to the small businessmen and local traders.MCB speaks their language; it understands their needs and provides tangible results. Byresponding in a timely manner with a flexible approach, MCB provides its clients withthe reliable financial service and support they require to successfully achieve theirbusiness objectives. With a solid foundation of over 50 years in Pakistan and havingrecently completed 10 successful years of privatization, MCB is strongly positioned tolead the banking sector in the new millennium. You can feel safe in our hands.

    BRANCH NETWORKThe following is the Branch Network of Muslim Commercial Bank Limited.

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    Sector wise position of circle,As on 30-12-2002Consumer Sector 810 Branches.

    Commercial Sector 210 Branches

    Corporate Sector 20 Branches

    Overseas Branches 4EPZ Branch 1Total Branches 1045

    INFORMATION ABOUT MY BRANCH

    I did my internship in Muslim Commercial Bank Limited Grain Market Branch, RenalaKhurd.And some important informations about my branch which I observed are asfollows:

    MANAGEMENT OF THE BRANCH

    BRANCH MANAGER GHULAM MUJTABAACCOUNTANT MUHAMMAD SADIQUEGRADE ONE OFFICER MALIK TUFAILCASHIER WAHEED AHMEDHEAD CLERCK M. SHAFIQUEJUNIOR CLERCK M. ASIFPEON JAMEELSECRITY GUARD M. ASLAMSWEEPER IFTIKHAR AHMEDTRAINEE ABDUL SATTAR AMIR

    OTHER GENERAL INFORMATION

    DEPOSITS:The total deposits of this about to 207.10 million.

    NUMBER OF ACCOUNTS:Accounts in this branch of MCB are as follows:

    CURRENT ACCOUNT:Total numbers of current accounts are 1049.

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    PLS ACCOUNT:Total numbers of profit and loss accounts are 2120.

    KHUSHALI BACHAT ACCOUNT:

    These are about to 600 accounts.

    REMITTANCE:Total remittance of this branch is 26.22 million.

    NO. OF VOUCHERS:The vouchers which are transacted in this branch are as follows:TYPES DEBIT CREDITTransfer 961 901Clearing 591 810Cash 1754 1389

    Rate of interest 4.45%Maximum 9%

    That gives to this year.

    RATE OF INTEREST:The rate of interest provided by such bank is minimum 4.45% and maximum 9%.

    FINANCING:Mainly, the short term financing schemes are being dealt here.

    CAPITAL:Capital of branch is treated in its Head Office.

    REVENUES:The total revenues of this branch are near to 11.25 million.

    WORK DONE BY ME

    In the Muslim Commercial Bank Ltd. I really enjoyed working with the staff of GhallaMandi Branch Renala Khurd and having a wish to be employee of MCB. It was almostimpossible to work in all the departments within that limited time. But on my request, thestaff of the branch provided me the opportunity to work in the different departments forthe sake of practical knowledge. I feel highly indebted to work in the Renal KhurdBranch on the request of the manager of that branch Ch. Abdul Sattar, because I learnt alot in that branch.During my internship training in the MCB as I early mentioned that I have worked indifferent departments & seats and learnt the followings.

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    UTILITY BILLS COLLECTION

    Muslim Commercial Bank Ltd. collects utility bills on behalf of WAPDA, Sui GasCompanies, and Pakistan Telecommunication Corporation Limited by putting the stampon the utility bills Paid, Date of payment, Signature of the officer receiving the utility

    bills. After receiving utility bills a list is made on the form which is called Bills scrollform. One copy of the scroll is with the bank for evidence whereas the original copy withthe receipt of the bills is sent to the billing department of the respective corporation. Thebank charge commission on the bills.

    OPENING NEW ACCOUNT BASICS

    During the span of mine internship in MCB I learned and observed a lot of about theopening of an account. Basically I think that the opening of an account is theestablishment of a contractual relationship between the banker and the customer. Byopening an account at a bank a person becomes a customer of a bank. Further I am

    going to express the basic requirements and steps involved in the opening of an account.

    INVESTIGATION

    Before opening an account MCB as like the other banks in Pakistan ascertain whether ornot the person who is going to open the account is a desirable customer or not. ThenMCB determine the prospective customers integrity, respectability, occupation and thenature of business by the introductory references given at the time of account opening.Negligence in this informal preliminary investigation may result in serious consequencesnot only for the banker concerned directly but also for other bankers and the generalpublic who may be affected indirectly. In Ladbroke & Co. V Todd (1914), the banker didnot obtain introduction at the time of opening the account, and it was construed anegligence within Section 82 of the Bills of Exchange Act 1882.In order to further strengthen and streamline this process, the Federal Ombudsman ofPakistan, vide his ruling on complaint No. II/31/5186, has directed the banks to retainwith the account opening form a Photostat copy each of the National Identity Cards of theperson desiring to open an account as well as that of the introducer. As per thesedirections, the concerned Branch Managers are required to obtain the original NationalIdentity Cards along with their Photostat copies and then return the original after attestingthe authenticity of the retained copy.

    HOW TO OPEN AN ACCOUNT (IN GENERAL)Before opening an account in MCB I observed that the following points must beconsidered in this regard.1. Another account holder of the bank should properly introduce the new customer.2. The account holder should sign the account opening form in the presence of bankofficer and the signature is duly verified.3. A copy of identity Card is required by Bank.4. Against submission of the Banks prescribed application form, duly introduced in themanner provided and on supplying such document, as may be required and account may

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    be opened. The Bank reserves to itself the right to refuse to open and account withoutassigning any reason.5. Each account shall be allotted a distinct number that is to be quoted in allcorrespondence with the bank relation to the account.6. Minimum amount to open an account is required regarding the nature of account.

    PROCEDURE TO OPEN AN ACCOUNTAccording to my practice in MCB, when a customer wants to open an account, the bankofficer gives him an application form. All information, which is necessary to be knownby the bank, are requirements of the application form. Form also requires the essentialdocuments to be attached by the customer.Basically following information is required to open an account with MCB1. Title of Account2. Full Name of Applicant3. Occupation4. Address

    5. Telephone No.6. Currency of account7. Nature of Business8. Introducers Name, Address & Signatures9. Special instruction regarding the account10. Initial Amount of the Deposit11. Signature of the applicant

    PROCEDURE TO HONOUR A CHEQUE

    During my internship training in the Muslim Commercial Bank Limited, I observed andfound Cheques are received for the following purposes.

    i) For Cash paymentsii) For transfer(from one account to another account)iii) For Clearing

    I) FOR CASH PAYMENTS

    Cheques which are presented on Bank counter must be checked in the following way:1) Date.2) Signature of Drawer.3) Signature of Payee.4) Whether Bearer has cancelled.5) Whether Payee account duly is there.If condition 4&5 exist then check the signatures of Drawer.6) Match the figure and wordily amount of cheque.

    When all above matters are satisfied then come to the Token register and check:1) Token number.

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    2) Cheque number.3) Amount of cheque.4) Particulars.

    Two stamps are put on cheque.

    a) Cash Payment (on the face of cheque).b) Stamp for Token (on the back of cheque).

    On stamp which is put for token their details are as follows: Token number. Time of giving token to client. Signature of token giver.

    Note:Payment is also made when cheques of same branch account is presented for transfer toother account in same ranch along with cheque for payment.

    II) CHEQUE FOR TRANSFER:When cheques are presented to be sent for collection and drawn on bank situated withinthe city then there are three stamps to be put on face as well as on back of cheque.

    a) Crossing Stamp (face).b) Transfer Stamp (face).c) Bank Manager Stamp (back).Only in MCB branches.

    CHEQUES FOR CLEARING:

    There are two stamps put on each cheque, sent for clearing:a) Crossing Stamp.b) Manager Stamp.

    CHEQUES IN COLLECTION:When cheques received in clearing are intra city then these are controlled under CC.First of all, these cheques are recorded in day book then allotted number and then serialnumber. Then a performa is prepared in which Bank on whom was drawn, chequenumber, amount, beneficiary name are recorded. After completing that performa chequeis posted along with performa.

    CLEARING

    Following information is entered in clearing register.a) Name of favoring party.b) Name of bank on whom drawn.c) Branch.d) Cheque number.

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    e) Amount.Clearing is sent after entering in register. In clearing register future date and day isputted. Cheques and vouchers are then separated and Cheques are sent for clearing.Clearing credit vouchers are entered on clearing sheet. Such credits are balanced bygiving debits to cheques received in clearing from other branches. At the beginning of the

    day clearing return sheet is received. Vouchers are made if1. Clearing received is more than clearing delivered then Credit voucher.2. Clearing delivered is more than clearing received then Credit voucher.On the same day, credit vouchers sent for clearing are entered on the sheet's credit side.Cheques are sent to NIFT after taking them on calculator, their total amount along withtotal number of instruments. A summary is prepared and sealed after noting the numberof seal in summary.Telephonic TransferDD- Demand DraftPO- Payment OrderFor TT, the account of beneficiary must be there in branch. DD is also prepared and

    beneficiary can get payment.First of all, Performa is filled by purchasing party along with cheque or cash payment.When cheque is received it is first posted in computer section in order to check thebalance of account. After posting the bank officer calculate tax if National Tax number isnot there. i.e.Rs.100000 @0, 1%More than Rs.40000 @0.4%Commission and postage charges are also calculated. These are paid in cash or otherwiseby cheque.

    ISSUANCE OF CHEQUE BOOKDuring my period of internship in MCB i observed that when a account is opened then acheque is issued to thecustomer for drawing his money at per rules. Following procedureis adopting for the issuance of cheque.When a customer opens an account with the bank, he is provided with cheque book forwithdrawals from account. However, the first cheque book is given to the customer onlywhen all the required documents are checked. A cheque book contains ten, twenty five,fifty or hundred leaves. The cheque book also carries a requisition slip for the issuance ofthe new cheque book. This slip is duly filled and singed by the customer. The signature ofthe customer is verified by the bank and new cheque book is issued to the customer andserial numbers of the cheque are duly entered in the book of the bank. Along with thesignature, person should also write his full name & address.Usually only one cheque book is issued at a time, however big concerns who need anumber of cheque books at a time, may ask the bank to stock as number of cheque booksin their name and to point their name on these cheque books.Bank debits the clients account for excise duty of Rs.2.50/- per cheque and keeps thecheque book ready for the customer, as on his advice.The officer keeps and maintains the cheque book register Cheque book inventory andcheque books issued are recorded in this register. The account number for which thecheque book is issued and the number of leaves are also recorded in this register when the

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    cheque book issued an entry is passed in the cheque book issue register.

    RUPEE TRAVELLER CHEQUES: RTCSWhen RTCs are to be issued payment is received in cash or by cheque, tax @0.03% ischarged id National Tax number is nor available. RTCs are issued in consecutive number

    of face value ofv Rs.1000v Rs.5000v Rs.10000v Rs.50000v Rs.100000Specimen signatures of buyer are taken and clearing slip is in four pages. One is sent toHead office, one to RTC division, one for bank record and one for client.If client wants immediate payment of RTCs then he will bring RTCs with two signatures,one copy of deal

    and ID card copy. Payment is made. RTCs can be endorsed to other party. Oncereceiving party will pay the RTCs along with credit vouchers in their relevant accountwith Bank. Payment will be credited to account of paying party.

    FINANCIAL ANALYSIS

    BALANCE SHEET (ASSETS)AS ON 31ST DECEMBER 2000-01-02

    Rupees (000)Item 2000 2001 2002Cash and balance 12571424 212559900 17867991Balance with other bank 4757413 3025689 2154190More at call and short notice 6064332 15470519 33874620Investment 36480913 55432235 89609821Advance 86312721 46584120 78923737Fixed assets 3482950 3659646 3825045Other assets 13862305 11400906 8883163Total 174715063 187053515 235138567

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    MUSLIM COMMERCIAL BANK LIMITEDBALANCE SHEET (LIABILTY)AS ON 31ST DECEMBER 2000-01-02

    Rupees (000)Item 2000 2001 2002Deposit & other account 135990147 154544451 182705716Borrowing from bank 5856198 8946624 21987824Bills payable 7803443 8097178 6261957Others 8438055 8578240 9045634Share capital 2202855 2423140 2665455

    Preserve 12277630 2278980 3026517Un-appropriated profit 3185 283940 621985Surplus on revelation of fixed assets 1188122 1900962 5384934174715063 187053515 235138567

    MUSLIM COMMERCIAL BANK LIMITEDBALANCE SHEET (ASSETS)HORIZONTAL ANALYSISAS ON 31ST DECEMBER 2000-01-02

    Rupees (000)Item Increase (Decrease Increase (Decrease)Amount %age Amount %ageCash 8688476 69.11 (339109) (15.95)Balance with other bank (1731724) (36%) (871499) (28.80)Money at call and short notice 4618425 42.55 18404101 118.96Investment 12321288 28.58 341775896 61.65Advance (9773140) (113.31) 2339617 3.05Operating fixed assets 55290 1.53 165399 4.51Other assets (1803004) (13.65) (2517743) 22.8

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    MUSLIM COMMERCIAL BANK LIMITEDBALANCE SHEET (LIABILITIES)HORIZONTAL ANALYSISAS ON 31ST DECEMBER 2000-01-02

    Rupees (000)

    Item Increase (Decrease)2000-2001 Increase (Decrease)2001-2002Amount %age Amount %ageDeposits and other account 18554304 13.64 28161265 1822Borrowings (7944051) 47.03 13041200 145.76Bills payable 293735 3.76 (1835221) 22.66Other liabilities 142064 1.68 467394 5.44Share capital 220285 9.99 242315 10Reserve fund & other reserves 1350 0.5 747537 32.81Un-appropriated profit 2800775 8814.9 338045 119.05Surplus on revaluation of fixed assets 791889 71.40 3483972 183.27

    MUSLIM COMMERCIAL BANK LIMITEDBALANCE SHEET (ASSETS)VERTICAL ANALYSISAS ON 31ST DECEMBER 2000-01-02

    Rupees (000)

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    Items 2000 2001 2002Cash 7.21% 1137% 7.60%Balance with other bank 2.73 1.61 0.92Money at call and short notice 6.22 7.75 14.41Investment 24.71 29.67 38.11

    Advance 49.50 41 33.56Operating fixed assets 2.07 1.95 1.62Other assets 7.57 6.10 3.78Total 100% 100% 100%

    MUSLIM COMMERCIAL BANK LIMITEDBALANCE SHEET (LIABILITIES)VERTICAL ANALYSISAS ON 31ST DECEMBER 2000-01-02

    Rupees (000)Items 2000 2001 2002Deposits and other account 77.84% 82.62% 78.85%Borrowings 9.67 4.78 9.49Bills payable 4.47 4.32 2.70Other liabilities 4.83 4.59 3.90Share capital 1.26 1.30 1.15Reserve fund & other reserves 1.30 1.22 1.30Un-appropriated profit .0018 .15 .27Surplus on revaluation of fixed assets .63 1.02 2.32Total 100% 100% 100%

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    MUSLIM COMMERCIAL BANK LIMITEDPROFIT AND LOSS ACCOUNTS (INCOME)

    FOR THE PERIOD ENDED DECEMBER 2000-01-02

    Rupees (000)Items 2000 2001 2002Interest / return earned 1424242 17033225 15385869Fees, commission 909045 868637 907071Income from dealing foreign currency 609838 687854 503593Dividend income 158909 243994 297748Other income 1085614 400140 881746Total 16887648 19233850 17976027

    MUSLIM COMMERCIAL BANK LIMITEDPROFIT AND LOSS ACCOUNTS (EXPENSES)FOR THE PERIOD ENDED DECEMBER 2000-01-02

    Rupees (000)Items 2000 2001 2002Cost / return on deposit 7238680 7544897 6074682Administrative expense 7128658 7331623 8077395Provision for diminution the value of investment 46048 62064 -Provision against non-performing advance 601799 1704944 -Other provisions 30000 40000 -Bad debts 483943 448999 721105Other charges 36725 147 1313Profit before tax 1321795 2101176 3101020Taxation 587066 993000 1362426Total 17474714 20226850 19337941

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    MUSLIM COMMERCIAL BANK LIMITEDPROFIT AND LOSS ACCOUNTS (INCOME)HORIZONTAL ANALYSISFOR THE PERIOD ENDED DECEMBER 2000-01-02

    Rupees (000)

    Item Increase (Decrease) 2000-2001 Increase (Decrease)2001-2002Amount %age Amount %ageInterest / return earned 2908983 20.60 (1647356) (9.67)Fees, commission etc. (40408) (4.44) 38434 44.42Income from dealing foreign 78016 12.79 (184261) (26.78)Dividend income 85085 53.54 53754 22Other income (685204) (63.11) 481606 120.35

    MUSLIM COMMERCIAL BANK LIMITEDPROFIT AND LOSS ACCOUNTS (EXPENSES)HORIZONTAL ANALYSISFOR THE PERIOD ENDED DECEMBER 2000-01-02

    Rupees (000)Item Increase (Decrease) 2000-2001 Increase (Decrease)2001-2002Amount %age Amount %ageCost/return on deposit 306217 4.23 (1470215) 19.48

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    Administrative expense 202965 2.84 745772 10.17Provision for diminution 160126 34.78 (62064) (100)Provision against non-performing advances 1103145 183.30 (1704308) (100)Other provisions 1000 33 (4000) (100)Bad debts (34944) 7.22 272106 606

    Profit before tax 779381 58.96 999844 47.58Tax 405934 69.14 369426 37.20

    MUSLIM COMMERCIAL BANK LIMITEDPROFIT AND LOSS ACCOUNTS (INCOME)VERTICAL ANALYSISAS AT DECEMBER 2000-01-02

    Items 2000 2001 2002Interest earned 83.6% 88.56% 85.60%Fees, commission etc. 5.38 4.52 5.04Income for dealing foreign currency A/C 3.61 3.58 5.04Dividend income 0.94 1.27 1.66Other income 6.43 2.08 4.91Total 100% 100% 100%

    MUSLIM COMMERCIAL BANK LIMITEDPROFIT AND LOSS ACCOUNTS (EXPENSES)VERTICAL ANALYSISAS AT DECEMBER 2000-01-02

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    Items 2000 2001 2002%age %age %ageCost / return on deposit 41.42 37.30 31.41

    Administrative expense 41 36.25 41.76Provision for diminution the value of investment 0.26 0.306 00Provision against non-performing advance 3.44 8.42 00Other provisions 0.17 0.20 00Bad debts 2.76 2.25 3.72Other charges 0.21 00 .006Profit before tax 4.56 10.39 16.35Taxation 3.35 4.90 7.05Total 100% 100% 100%

    PERFORMANCE 1993-2002

    The following figures will give an idea of the progress made after privatization.(Rs. In million)1993 2002Authorized share capital 2000 3500Paid-up share capital 663 2665Reserve funds & other reserves 12010 3027Total assets (excl. contra) 75427 235139Deposits 62783 182706Advances 30753 78924Investments 27864 89610Imports 32734 48842Exports 16931 28284Home remittance 3023 32962Pre-tax profit 346 3103No. of branches 1290 1045No. of employees 13768 10926No. of accounts 3411427 4463530

    BALANCE SHEET (ASSETS)

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    HORIZONTAL ANALYSISCOMMENTS

    Cash is increased in 2001 but decrease in 2002; it shows that the liquidity position ofthe bank is going to be weak, so it is alarming sign for the bank. Therefore bank should

    take necessary steps according to the position. There is decreasing trend in balance with other banks which is a negative sign. Increase in money at call and short notice, it means that customers of bank are verypunctual in making payments. Therefore it is good sign for the bank. In the field of investment there is increasing trend with the passage of time. It iscommon term of finance more investment more return. As we know that main source of profit of a bank is the difference between thepercentages of interest, Banks pay less rate of interest than receiving the interest from thecustomers. In this case advance to customers very low in 2001 but increase in 2002. Itmeans that MCB is running very well. MCB is in a position that it is earning more and more profit with passage of time. Then

    bank can purchase more and more fixed assets, and it is bank is doing. Assets of thebanks are increasing day by day by purchasing the assets. More assets mean that bank hasmore capacity to pay off its liabilities. There is increasing trend in field of fixed assets. Itis due to purchase of new assets. Other assets have a decreasing trend which is not a positive sign. Decrease in assetsdecrease the worth of organization

    LIABILITIES

    There is increasing trend in deposits and other accounts which shows the credibility ofthe bank. Borrowing is decreasing in 2001 but there is increasing trend in the year 2002.Although it is seeing that banks borrowing is increasing with the passage of time whichis not a good sign but there is a positive thing in this behalf, usually banks borrow moneyat that time when they would have to give it for earning more profit, I think the MuslimCommercial Bank doing the same thing for increasing its profits. Bills payable increase in 2001 but decrease in 2002 positive sign. Other liability has an increasing trend not good because increase in liability decreasesthe liquidity position of the bank. Share capital increase that shows the creditability of bank. The Muslim Commercial Bank Limited is increasing its reserves and Un-appropriatedprofit in order to increase its lending power, which is good sign, because according to theprudential regulations of State Bank of Pakistan, a bank can lend money (per partyexposure) equal to the 30% of its assigned capital plus reserves.

    MUSLIM COMMERCIAL BANK LIMITEDPROFIT AND LOSS A/CHORIZONTAL ANALYSIS

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    INCOME Interest income decrease in 2002 will great proposition which is not favorable. It meansthat interest received by the bank is decreasing with the passage of time. It is not good fora banking company. As we all know that banks provide many services for their customers and also act as a

    agent of the customer. The banks receive fee and commission after their services; it is amain source of bank to receive fee and commission from their customers. In case bank istaking more fees as compared to previous years. This is good for the bank. In foreign currency dealing and dividend there is huge increasing trend which showsthe investment of bank in healthy organization. Other income decrease in 2001 but this increase mean positive situation.

    EXPENSE Return on deposit decreases which shows good sign and it is due to decrease in returnrate. Adm and diminution and provision against non performing loan decreasing turned that

    is favorable. Bad debts increased with huge amount not positive sign. Profit before taxation has increased with greater proportion. Tax increases which are not bad because it is interrelated with profit, if profitincreased, tax also increase.

    VERTICAL ANALYSISINCOME Interest earned decrease which is negative sign. As we know that banks provide many facilities other than money lending andborrowing. Banks receive fee, commission etc. for these services. Therefore fee andcommission income are increasing which is good and favorable signs. Divided income increased but it is very small. Other income increase with great proportion good sign.

    EXPENSES Return on deposit decrease good sign because it increases the profit. Administration expenses are increased but no alarming rate. Position against non performing loan us zero which show bank have good customer. All provision is zero which sows the good credit policy. Bad debt and other charges increased but the situation is not alarming. Profit increased. Tax is increased but it is interrelated with profit.

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    OVERALL REVIEW

    The Bank has now completed more than 12 years, since its privatization and it is, indeed,gratifying to note that during this period, MCB has performed well and has sustained itsgrowth in all the major sectors. The well deserved credit, for this good performance andprogress, must surely go to the Banks management, its Directors and, in no smallmeasure, to the entire MCB team for its dedication, concerted efforts and excellent teamspirit.MCB has been a pioneer among the banks in Pakistan, particularly in introducing anumber of innovative banking products and services. For the first time in the history ofPakistan, these multifarious products mostly in the shape of saving schemes have beenintroduced by MCB with brand names. This has set the trend and many other banks, bothlocal and foreign, have since followed in MCBs footsteps, by launching new productsand services, on similar lines.

    RATIOS ANALYSIS

    Ratio analysis is an important and age-old technique of financial analysis. Ratios areimportant and helpful in the reference that: These simplify the comprehension of financial statement and tell the whole story ofchanges in the financial conditions of the business. These provide data for inter-firm comparison. The ratios highlight the factors associatedwith successful and unsuccessful firms, also reveal strong and weak firms. These help in planning and forecasting these can assist management in its basicfunctions of forecasting, planning, coordination and control. These help in investment decision in case of investor and lending decision in case ofBankers etc.However, the ratios are only indicators, they cannot be taken as final regarding good orbad financial position of the business other things have also to be seen.

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    RATIO ANALYSIS

    1. RETURN ON EQUITYRs. (000)2000 2001 2002

    13.14% 16.09% 14.86%

    2. RETURN ON ASSETSRs. (000)2000 2001 2002

    0.42% 0.59% 0.73%

    3. EARNING PER SHARERs. (000)2000 2001 2002

    3.33 4.57 6.52

    4. RETURN ON DEPOSITRs. (000)2000 2001 2002

    0.54% 0.71% 0.95%

    5. CASH / DEPOSIT RATIO

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    Rs. (000)2000 2001 2002

    2.56% 2.25% 2.33%

    6. TOTAL ASSETS / NETWORKRs. (000)2000 2001 2002

    31.23 times 27.16 times 20.09times

    7. RETURN ON DEPOSITRs. (000)2000 2001 2002

    24 times 22 times 15 times

    8. INTEREST EXPENSES / TOTAL EXPENSES RATIORs. (000)2000 2001 2002

    41% 37.30% 31%

    9. INTEREST INCOME / TOTAL INCOME RATIORs. (000)2000 2001 2002

    83% 88% 85%

    10. NET PROFIT MARGINRs. (000)

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    2000 2001 2002

    4.35% 5.76% 9.67%

    11. AVERAGE PROFIT PER BRANCHRs. (000)2000 2001 2002

    Rs. 607214 Rs. 1044463 Rs. 1663726

    1. RETURN ON EQUITYThis ratio is more meaningful for share holders who are interested to know the profitearned by the company because the dividend paid from available profit higher ratiomeans factor of production fully utilized and good position. Here ratio is increased in2001 but again decrease in 2002. And I think that the Bank improved its return on equityratio in the year 2001. But it again fall down in the year 2002, which is an alarming signfor the Bank.

    2. RETURN ON ASSETSThis ratio has an increasing trend. It means the assets of the business are fully utilized inmore and efficient way and also shows the favorable trend of the business. This ratio ofthe bank was too low in the year 2000, but it improved in the year 2001, and it was muchgood in the year 2002.

    3. EARNING PER SHAREThis ratio got really improved as it has gone with the increase in profit. Earning per shareis a good measure of profitability when compared with similar other business. Hereincreasing EPS, which will surely increase share price. This ratio has the same trend asthe return on the assets. And is improving in the every succeeding year.

    4. RETURN ON DEPOSITReturn on deposit is increasing trend which is favorable. This ratio shows with theincrease of deposit the profit margin also increases. Increase in return on deposit ispositive sign. This ratio has the same trend as the above mentioned ratio of return onequity has which is a good sign for the Bank.

    5. CASH / DEPOSIT RATIOCash deposits ratio means liquidity position of the bank. This ratio is very low means thatBank has no idle fund but even low ratio bank has not liquidity problems. Bank meets all

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    its financial problems. This shows the strategic policy of the bank and efficiency of thebank.

    6. TOTAL ASSETS / NET WORTHThis ratio shows the decreasing trend. But it is not had position because net worth of the

    bank increasing day by day. Increase in net worth shows that bank is on sound footing.And I think that this will provide benefit to the bank in the long run.

    7. TOTAL DEPOSIT / NET WORTHThis ratio has also decreasing trend but decreasing is due to increase in net worth. And itwill provide benefit to the Bank in the long run and in the coming years.

    8. SOLVENCY RATIOThis ratio shows that the assets of the bank have increased more as compared to itsliability which is good effect on the solvency of the bank. Solvency means the ability to

    meet its obligation: with the passage of time it is increasing which is good sign.

    9. INTEREST EXPENSE / TOTAL EXPENSE RATIOA decrease figure shows that deposits are getting low. The reason is the decrease in thereturn on deposit. When decrease return then people prefer to invest in business for moreearning. This decrease in the interest expenses is due to the decrease in the borrowings ofthe bank. or it might be due to decrease in the payable interest rate to the lenders.

    10. INTEREST INCOME / TOTAL INCOME RATIOA little decrease figure rather than stagnant figure showing same amount of incomegeneration. Although the rate of markup come down but it has no bad effect on theearnings of the bank. This ratio shows that interest income as compared to the totalincome of the bank is decreasing. But it does not mean that it is a bad effect. Because itmight be due to increase in the other Income of the bank which is too a Good affect forthe bank.

    11. NET PROFIT MARGINThis is being improved yearly. Although bank is earning huge income but its expensesincreased quite a bit simultaneously. Ultimately result is increase in the net profit of thebank. And it means that bank has an improving trend from the point of view of theincome and will be improving in the coming years.

    12. AVERAGE PROFIT PER BRANCHThe average profit per branch is increasing rapidly every year. It is healthy good andencouraging for bank. This ratio of the bank shows that it profit of the branches isincreasing in the coming years. if it was one time in the year 2000, then it was two timein the year 2001 and three times in the year 2002.

    RECOMMENDATION

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    From the Quantum of the profit and its financial data it can be easily judged that afterprivatization, MUSLIM COMMERCIAL BANK is performing well. Its deposits aregrowing day by day and so its profitability. The controlling body is responsible for theproductive performance of the Bank.

    Following are my observation and suggestion to improve the efficiency for thedevelopment of the economy.A big portion of the home remittance is sent by Pakistan working capital through MuslimCommercial Bank Limited. As we know a big portion of this amount is wastedpurchasing of luxuries. The people motivated to save money by offering the depositthrough various investment schemes. The rate of profit should increase 1% or 2% thanother banks and it would be profitable step for bank.There is a criticism on the banking management that the salaries of the employees aredecreasing in every succeeding year. And I think this will shake the confidence andworking habit of the employees.There is another recommendation about the bank that there is no proper timing of the

    bank and there is made an unnecessary delay in the banking transactions, which mightnot be a good sign for the bank from future prosperity point of view.Staff turnover particularly of trained staff result in financial and other losses. The amountspent by the bank on employment, induction and training of outgoing officers constitutesto beat till another officer should ready prove this work. The exodus of bank officer in thepast has worsened the situation.Most of the bank employees, are sticking to one seat only with the result that theybecome master of one particular job and loose their grip on other banking operation. Inmy opinion all the employees should have regular job experience all out-look towardsbanking. The promotion policy should be adjusted.Refresher Courses for the staff are most important in any international organization. Altthe employees should have these courses according to their requirement. Foreign expertscan also be called for this purpose.Every year some of the employees should be sent for training to other countries andemployees from other branches should be brought here. Some more reading materialshould be provided. The purpose should be to educate the employees with the advancestudies in their field. The employee should be provided the opportunities to attend andparticipate in seminars and lectures on banking.Bank should give some more incentive to its employees in order to remove the conflictbetween lower and higher officers and should try to improve the working condition of thebank.As such system should be designed that every employee who has some problems with hisofficers can communicate it to the higher management and some steps must be taken toimprove that.Recruitments should be strictly on merit basis and induction should be after proper andextensive training.Old and lazy staff should be replaced by young, qualified and energetic staff.Foreign branches should be opened in order to capture the international market and toearn international repute for the bank.Working environment, equipment, furniture and staff dressing should be according to the

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