MCB Presentation for Submission

8/4/2019 MCB Presentation for Submission

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MCB BANK LTD.FORMERLY

(MUSLIM COMMERCIAL BANK LIMITED)

INTRODUCTION

History of bank is as old as human society. Forever since mancame to rea li ze the impor tance o f money as med ium of

exchange, the necessity of a controll ing or regulating agency

or institution was naturally felt.

The work BANK i s der ived from the word BANCUS or

BANQUE which means a bench. Other author i ties hold the

opinion the work BANK is der ived from the German word

BACK which means jo int stock fund . Later on, when the

Germans occupied major part od Italy, the work BACK was

Italianized into BANK

I t i s, therefore, not possible to dec ide as to which of he

opinions is correct, for no record is available to ascertain the

validity of any of the opinions.

DEFINITION OF BANK

A bank is a f inancial institution which accepts deposits from

the public and, in turn, advance loans by creating credit.

SERVICES OFFERED BY BANKS.

1. Liabi li t ies Based Services

2. Assets Based Services

3. Technology Based Services

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4. Misc. Services

LIABILITITES BASED SERVICES:

Current Deposits (Local/ Foreign Currency)

Saving Deposits (Local/ Foreign Currency)

Special Saving Deposits Accounts

Notice Deposits (Local/ Foreign Currency)

Term Deposits (Local/ Foreign Currency)

ASSETS BASED SERVICES:

FUND BASED FINANCING:

Running Finance.

Cash Finance.

Demand/ Project Finance.

Agricultural Finance.

Finance on Commodity Operations.

Consortium Finance.

Infrastructural Development Finance (NBP &

HBL consortium for construction of roads).

Import Finance:

FIM (Finance Against Imported

Merchandise)

FATR (Finance Against Trust Receipt)

OAP (On Acceptance Purchase)

PAD (Payment Against Documents)

Export Finance:

FAPC-I (Finance Against Packing Credit)

FAPC-II

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FAPC-Outside Re-Finance

NON FUND BASED FINANCING:

Issuance of letter of Credit

Issuance Of Guarantees

Bid Bond

Shipping Guarantees

Indemnities Bonds

CONSUMER PRODUCTS:

Issuance of Credit Card.

Car Finance.

Salary Loan.

Running Finance.

Mortgage Finance.

TECHNOLOGY BASED SERVICES:

On-Line fund Transfers

ATMs.

Credit Cards

Debit Cards

Call Centre/ Telephone Banking

Internet Banking

MISC. SERVICES:

Remittance Services

Travellers Cheques

Collection of Utility Bills

Lockers etc.

STRUCTURE OF BANKING SECTOR IN PAKISTAN.

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Pakistan banking sector consists of

A. State Bank of Pakistan.

B. Public Sector Comm. Banks

C. Local Privatized Banks.

D. Local Private Banks.

E. Foreign Banks.

F. Special ized Banks.

A. Public Sector Comm. Banks

National Bank of Pakistan.

First Women Bank Ltd.

The Bank of Khyber.

The Bank of Punjab.

B. Local Privated Banks

Habib Bank Limited

Muslim Commercial Bank Ltd.

United Bank Ltd.

Allied Bank of Pakistan.

C. Local Private Banks

Askari Commercial Bank Ltd.

Bank Al-Falah Ltd.

Bank Al Habib Ltd.

Bolan Bank Ltd.

Faysal Bank Ltd.

Metropolitan Bank Ltd. KASB Bank Ltd.

Prime Commercial Bank Ltd.

Saudi Pak Commercial Bank Ltd.

PICIC Commercial Bank Ltd.

Soneri Bank Ltd.

Union Bank Ltd.

Meezan Bank.

Cresent Standered Bank.

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SME Bank.

D. Foreign Banks

ABN Amro Bank.

Al Baraka Islamic Bank.

American Express Bank Ltd.

Bank of Ceylon.

The Bank of Tokyo Mitsubishi.

Citibank, N.A.

Deutsche Bank A.G.

Doha Bank.

Habib Bank A. G. Zurich.

NIB/ IFIC Bank Ltd.

Oman International Bank S.A.O.G.

Rupali Bank Ltd.

Standard Chartered Bank.

The Hongkong and Shanghai Banking Corporation Limited

E. Specialized Banks

Zari Taraqiati Bank Ltd.

Industrial Development Bank of Pakistan.

Punjab Provincial Co-operative Bank Ltd.

Federal Bank of Co-operatives

F. Micro Finance Banks

The First Micro Finance Bank Limited

Khushali Bank

G. Investment Banks

First Standard Investment Bank Limited

Asset Investment Bank Limited

Atlas Investment Bank Limited

Escorts Investment Bank Limited

First International Investment Bank Limited

Islamic Investment Bank Limited

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Jehangir Siddiqui Investment Bank Limited

Orix Investment Bank (Pak) Limited

Security Investment Bank Limited

Inter Bank.

THE COMMERCIAL BANK

The offic ial definition of a commercial bank is an institution

that accepts demand deposits and makes commercial loans.

Demand deposits are money people leave in an institution with

the understanding that they can get i t back at any t ime.

Commercial loans are simply loans to businesses. This action of

taking deposits and making loans is called financial

intermediation. A bank's business, however, does not end

there.

Most people and businesses pay their bil ls with bank checking

accounts, placing banks at the center of payments systems.

Banks are the major source of consumer loans -- loans for

cars, houses, education -- as wel l as main lenders to

businesses, especially small businesses.

Banks are often described as the engines of an economy, in

part because of these functions, but also because of the major

role banks play as instruments of the government's monetary

policy.

MUSLIM COMMERCIAL BANK LIMITED

Before separation of indo-Pak, the need for more Muslim banks

was fel t and Muslims having strong f inancial capacity were

thinking to invest in this sector as wel l . This was the idea

which paved the way for setting up Musl im Commercial Bank

Limited known as MCB. This was third Muslim bank in the sub-continent.

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HISTORY

Muslim Commercial Bank Ltd. Unfolds 57 years growth. MCB is

not an overnight success story. The bank started corporate life

in Calcutta on July 9, 1947. After the partition of the Indo-Pak

Subcont inen t, the bank moved to Dhaka from where it

commenced bus iness in August 1948, Mr M. Adamjee was

appointed i ts f irst cha irman. I t was incorporated with an

authorized capi ta l o f Rs. 15 mil lion. In 1956, the Bank

transferred it Registered office to Karachi, where the Principal

Office is presently located. Thus, the bank inherits a 57-years

legacy of trust in its customers and the citizens of Pakistan.

NATIONALIZATION

This institute was nationalized with other banks on 1 s t January,

1974 following the banks (nationalization) Act, 1074. (At that

time it has 506 branches and deposits amounting to Rs. 1640

million).

PRIVATIZATION

A wave of economic reforms swept Pakistan in the late 1990,

introducing the need for privatization of state owned banks

compan ies. In Apri l 1991, MCB became Pakistan s f ir st

privatized bank. The government of Pakistan transferred the

management of the Bank to National Group, a group of leading

industrialists of the country by selling 26% shares of the bank.

In term of agreement between the government of Pakistan and

the National group, the Group, making their holding 50% haspurchased additional 24% shares.

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MCB TODAY

After p riva ti zat ion, MCB i s now in a conso lida tion s tage

designed to lock in the gains made in recent years and prepare

the groundwork for future growth. The bank has restructured

its asset portfolio and rationalized the cost structure in order

to remain a low cost producer.

Today MCB has a network of over 900 branches al l over thecountry with business establishments in Sri Lanka and Bahrain.

The branch break-up province wise is Punjab (57%), Sindh

(21%), NWFP (19%) and Baluchistan (3%) respectivel y.

MCB now focuses on three core businesses namely Corporate,

Commerc ia l and Consumer Banking . Corporate c li ente le

includes public sector companies as wel l as large local and

multi national concerns. MCB is also catering to the growing

middle class by providing new asset and liability products. The

Bank provides 24 hour banking convenience with the largest

ATM network in Pakistan covering 30 cities with over 197 ATM

locations. The Banks Rupee Travel ler Cheques have been

market l eaders for the pas t s ix years and have recently

launched their Gift Cheque Scheme.

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MISSION STATEMENT

To become the preferred provider

of quality financial services in the

country with profitability andresponsibility and to be the best

place to work.

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PRINCIPLES OF PERFORMANCE.

1. Customer Focus:

Over the years MCB has developed strong relationships with its

customers by understanding their needs and treating them with

respect, dignity and importance. The driving force behind its

commitment and services is its focus on customers, ensuring

that it not only meets, but exceeds their expectations.

2. Quest For Quality:

MCB str ive to achieve excel lence by ensur ing that every

moment of our time is spent in adding value, making sure that

we do things right, f irst time, every time. With this quest for

quality, MCB has always taken initiatives in bringing banking

into a new arena; from cash to the convenience of p last ic;

from branch banking to internet banking and from face-to-face

customer interaction to online accessibility.

3. Employees Request:

MCB encourage diversity and treat each of our employees with

fairness. We give constructive feedback for their continuous

development and seek suggestions from all employees for

further improvement. We ensure that qual ity performance is

acknowledged and rewarded and exercise utmost responsibility

in decision-making with regards to our employees. Integrity of

our employees is the strength of our performance.

4. Team Based Approach:

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MCB bel ieve in achieving our Mission and Vision by working

together as a combined group. We treat our colleagues as our

interna l customers and ensure tha t the requi rements o f

internal customer focus are a lways met. Equipped with in-

depth product knowledge, and recognizing the strengths in

each individual, we strive for optimum-results from our co-

workers and bring ing out peak per formances by working

towards common goa ls and objectives in today 's dynamic

banking environment.

5. Good Corporate Citizenship:

MCB seek to cont inuously improve the quali ty of l i fe in our

communities, where we live and work. We realize that we have

a responsibility to the society in which we operate and we seek

ways of p laying a pos it ive role for the betterment of the

community at large for a progressive environment, better

living and a brighter future.

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CORPORATE INFORMATION

Board of Directors

Mian Mohammad Mansha Chairman

S.M.Muneer Vice Chairman

Tariq Rafi Director

Atif Yaseen Director

Mohammad Arshad Director

Shahzad Saleem Director

Sarmad Amin Director

Mian Umer Mansha Director

Aftab Ahmad Khan Director

Mohammad Aftab Manzoor President & CEO

Advisor:

Raza Mansha

Audit Committee

Mian Mohammad Mansha Chairman

Mian Umer Mansha Member

Aftaab Ahmad Khan Member

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Chief Financial Officer

Ali Munir

Company Secretary

Tahir Hassan Qureshi

Auditors

A.F.Ferguson & Co. Chartered Accountants

Riaz Ahmad & Co. Chartered Accountants

Legal Advisors

Mandiwalla & Zafar Advocates & Legal

Consultants

Registered Office

MCB Building, F-6 / G-6, Jinnah Avenue, Islamabad

Principal Office

Adamjee House, 2nd Floor, I.I. Chundrigar Road, Karachi

Registrar's and Share Registration Office

THK Associated (Pvt.) Ltd.

Shares Department, Ground Floor, Sheikh Sultan Trust Building

No.2

Beaumont Road, Karachi.

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MANAGEMENT HIERARCHY

Chairman

Board of directors

President

SEVP

EVP

SVP

VP

AVP

Grade I

Grade II

Grade III

Assistant

Clerical staff non clerical staff

Cashier Messenger

Technical staff

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STRUCTURE OF BRANCH MANAGEMENT

Chief Manager

Managercredit

Manageroperation

Managerforeign

exchange

Incharge/officer

credit operation

Incharge /

officer credit

marketing

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Manager foreign

exchange

Incharge/

officer export

Incharge/

officer import

Incharge/

officer F.C &

remittances

Manager operation

Incharge/

officer

clearing

Dept.

Incharge/officer

A/C Dept.

Incharge/

officer

remittance

Dept.

Officer CD

Dept.

Cash officer1

Cash officer2

Cash officer3

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BUSINESS FOCUS:

MCB now focuses on three core businesses namely

Corporate

Commercial

Consumer Banking.

Corporate clientele includes public sector companies as well as

large local and multi national concerns. MCB is also catering to

the growing middle class by providing new asset and liabil ity

products. The Bank provides 24 hour banking convenience with

the largest ATM network in Pakistan covering 41 cities with

over 225 ATM locations. The Banks Rupee Traveller Cheques

have been market leaders for the past s ix years and have

recently launched their Gift Cheque Scheme.

MANAGERIAL POLICIES OF MCB

Managerial pol ic ies are the basis of the success or fai lure of

the organizat ion. These are steps management takes for

efficient operation of the organization. Managerial policies also

depend upon the setup of both the organization and

environment.

Pol icy may be estab li shed by the board of di rector , the

committees or by the officers and employees in any

department of the bank. Units bank can formulate policy easily

then the branch banks because of the proximity of personal

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and a smaller trade territory. Branch banking organization may

have different operational areas.

Policies of MCB are formulated at three levels.

AT HEAD OFFICE LEVEL

1) At the head office policies are formulated.

2) A meeting is called upon the regional head office.

3) They formulate policies in the light of the main objective

of the social economic considerations.

AT THE REGIONAL HEAD OFFICE LEVEL

1) At the regional head off ice in Karachi, a ll the SVPs are

called upon.

2) All the polic ies agreed upon by rel igious board and they

together formulate the policies to be implemented within

Pakistan.

AT THE BRANCH LEVEL

1) At the branch level, GM/ RM call upon the meetings of all

their managers in the branch and communicate to them

the policies agreed upon regional office.

2) Along with the implementation of the policies, the GM/RM

and the managers formulate policies at branch level.

IMPLEMENTATION OF POLICIES

1) Managers, officers and workers at each level, try to fully

follow the policies set up at various level s.

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2) Any failure in the following up the policies is immediately

brought to the notice of the corresponding management

along with the reason, if any.

3) In the l ight of this, the management e ither proposes

solut ion for the implementat ion of pol ic ies or make

amendments in the policies.

MANAGEMENT STYLE (PARTICIPATIVE)

The style of the management is quite good in the sense that

management provides its employees quite reasonable working

conditions, take care of the well grooming and satisfaction of

emp loyees by assign ing them the predef ined and c lear

object ives and targets and by resolving their work related

problems and difficulties.

When management wants to specify any special objectives, call

meetings. In these meetings sty le is participative and a ll

employees are provided chance to g ive the ir opinion for

improvement of any area of the banking activities.

DELEGATION OF AUTHORITY

There is delegation of authority. All managers are independent

in their areas of act ivi ties and can handle sorts of dealing.

However, all departments work in co-ordination with one and

other.

MARKETING POLICIES

The bank fo ll ows ind iv idual marketing i .e . the persona l

marketing technique. Even at corporate level specif ic targets

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are set and with in a l imited time period these targets are to

be achieved.

HUMAN RESOURCE POLICIES:-

These policies include:

1) Recruitment

2) Selection of employees

3) Benefits to employees

4) Integrat ion

BENEFITS TO THE EMPLOYEES: Management provides various

benefits to employees so that they can perform their duties

with more concentration.

STAFF LOAN FACILITY

The employees are given loan facility for following purposes;

1) House bui lding Finance

2) Transport Finance

3) Staff Personal Finance

4) Computer Finance

GROUP INSURANCE

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Group insurance is also provided to the employees for safety of

employees.

GRATUITY FUND

Bank maintains gratuity fund for the benefit of employees. The

amount in this fund accumulates f rom year to year and is

normally paid to employees at the time of retirement. In case

of death of an employee during service amount is paid to his

family.

INCREMENT IN PAY

The management also pay increments to its employees. It is

decided on the basis of annual performance of the employees,

usually its limit is from 5% to 25% of gross salary.

PROMOTION

The decision for promotion of any person is based on his/ her

overall performance. Head office decides about promotion of an

employee after taking into consideration its assessment sent.

MEDICAL ALLOWANCE

Medical al lowance is a part of gross salary. However, actual

expense of hospitalization made is paid to the employee.

FIELD OF ACTIVITIES

MCB has a solid foundation of over 50 years in Pakistan, wi th a

network of 947 branches, over 750 of which are Automated

Branches, over 225 MCB ATMs in 41 cit ies nationwide and a

network of over 12 banks on the MNET ATM Switch

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MCB has become the only bank to receive the Euromoney

award for the fourth time in the last f ive years. MCB won the

"Best Bank in Pakistan" in 2005, 2004, 2003, 2001, and in

2000 the "Best Domestic Bank in Pakistan" awards. In addition,

MCB also has the distinction of winning the Asia Money 2004

award for being "The Best Domestic Commerc ia l Bank in

Pakistan".

MCB offers a wide range of f inancial products and advice for

Personal and Corporate Customers. You can also apply on-line

for many of Onl ine Services. Customers can access the ir

accounts using simple and convenient MCB Virtual InternetBanking services.

PRODUCT CATALOGUE:-

The Largest network of

over 269 on-line

branches in the country

and growing. Providing

customers with 24x7

real time on-line

transaction facil ities.

Cal l now for answer to

your queries, banking

services, ATM

services, mobile

banking services,RTC

services,tele banking

services and MCB

product information.

The nation's largest

network of over 225

ATMs and growing. Get

24hour conve nience of

cash withdrawal, mini

statement, bil l

payment and funds

transfer services.

Cash management

services for corporate

customers. Helps

customerssubstantially reduce

A deposit account for

customers with

substantial balance

offering profit on adaily product basis

Cash withdrawal

faci l ity at over 630,000

ATMs worldwide.

Convenience of

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their receivable

collection time frame,

improve cash flow and

business

management.

with the facility of

unlimited

withdrawals.

shopping at over 5

mill ion POS locations

globally.

A secure instrument

of pyment, offering

CASH FREE

convienence. It is themost powerful Debit

and ATM Card

providing 24 hour

direct access to your

bank account.

Islamic banking

services through

exclusive units /

branches offering arange of liability and

asset based Sharia

compliant products

like Musharika,

Murabaha, Ijara and

Istasana.

Banking at your

fingertips. Dial in

anytime to get

information regarding

balance and mini

statements.

MCB Network for

Electronic

Transactions is an

electronis hub for

ATM sharing plus

other touch

points.The nation's

largest operating

switch with the

highest transaction

volume.

Flexible and

competitive home

financing facility

with options of home

purchase,

construction and

renovation.

One of the most

popular deposit

accounts offered by

MCB.

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Get a loan in an

instant at any MCB

branch. Offering same

day financing facility

against liquid

collateral at

competitive pricing.

Fastest to Pakistan,

anywhere in

Pakistan.

International

remitances with a

two-way messaging

facility delivered at

your doorstep within

24 to 72 hours.

A local Point of Sale

acquiring network

facil itating acceptance

of all major card

brands.

Car financing and

leasing at competitive

rates with flexible

options. Car4u

finances both semi-

commercial and non-

commercial vehicles

for personal and

business use.

The most widely

accepted way to pay

cash for travel

related purposes. A

safe and secure way

to make payments

nationwide.

Personal loans for

salaried individuals of

reputed local and

foreign companies at

rates tailored to

customer's repayment

capacity.

Providing access to

diversified financing

options including

working capital loans,

term loans, trade

finance services and

MCB, the leader in

banking technology,

now provides the

convenience of

banking on the

internet. You can

The best protection for

your valuables. Lockers

of different capacities

are available

nationwide.

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investment banking. now access your

account anytime and

anywhere.

PERSONAL BANKING

LOCAL CURRENCY ACCOUNTS

o PAK RUPEE SAVING ACCOUNT

o KHUSHALI BACHAT ACCOUNTo PAK RUPEE CURRENT ACCOUNT

o PAK RUPEE TERM DEPOSIT ACCOUNT

MAHNAMA KHUSHALI SCHEME

o CAPITAL GROWTH CERTIFICATE

o SAVING 365

Saving Account with Current Account Facilities.

FOREIGN CURRENCY ACCOUNTS

o FOREIGN CURRENCY SAVING ACCOUNT

o FOREIGN CURRENCY CURRENT ACCOUNT

o FOREIGN CURRENCY TERM DEPOSIT

CORPORATE BANKING

WORKING CAPITAL LOANS

Based on the customers specif ic needs, the Corporate Bank

offers a number of different working capital f inancing facil ities

including:

Running Finance

Cash Finance

Export Refinance

Pre-shipment and Post- shipment etc.

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Tai lor-made solutions are developed keeping in v iew the

unique requirements of business

TRADE FINANCE SERVICES

Under Corporate Banking MCB offers trade f inance services

that include an entire range of import and export activit ies

including

Issuing Letters of Credit(L/Cs)

Purchasing export documents

Providing guarantees

Other support services.

INVESTMENT BANKING

Investment Banking Team 0f MCB has emerged as a leading

player in Pakistan's Investment Banking arena. The Team

handles advisory, corporate finance and capital markets related

transactions. Within these areas, the team has developed

expertise in:

Private Placements

Debt/Equity Underwriting

Term Finance Certificates

Loan Syndication

Arrangement of Non-Fund Facilities

Corporate Advisory

TERM LOAN

I t o ffers Short to Med ium Term Finance to meet capi ta l

expenditure and short term working capital requirements of

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customers. The loans are structured on the basis of underlying

project characteristics and cash flows of the business.

CASH MANAGEMENT SERVICES

Network of over 900 branches in Pakistan enables MCB to

col lect and d isburse payments e ff ic ient ly w ith i ts cash

management services. This also enables it to offer a choice of

paper based or electronic fund transfer solut ions including

collection amounts, cross branch on-line transactions etc.

MISC. PRODUCTS

MCB PYARA GHAR

EASY PERSONAL LOAN

MCB RUPEE TRAVELLERS CHEQUE

REMIT EXPRESS

o FEATURES

Easiest and safest way to remit funds

Remittance within 24 to 72 hours

Personal delivery to the beneficiary

Delivery confirmation to the remitter

Message facilities for both parties

Beneficiary wil l receive the amount even i f

he/she does not have an MCB account

TECHNOLOGY BASED SERVICES

MCB ATM SERVICES

MCB ATM BILL PAY

MCB ATM FUNDS TRANSFER

MCB CASH CARD

MCB CASH CARD is useful means of cash for MCB customers

and non customers alike:

1) Travelers

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2) Businessmen

3) General Public

MCB MOBILE BANKING

MCB CALL CENTRE

MCB SMART CARD

MCB DEBIT CARD

o FEATURES

No need to carry cash, when MCB Card is your

companion.

Acceptabi lity o f debit card at Merchant

Locat ions, including Petrol Pumps, Grocery

Stores, Bakeries, Departmental Sto res,

Jewelers, Travel Agents, Restaurants,

Chemists, Hospitals and many more locations

displaying this sign.

When MCB Card is used, payment is made by

directly debiting Bank account.

No need for signatu re , as PIN (Pe rsonal

Ident if icat ion Number) i s be ing used for

security.

Balance Enquiry of Card Account can be done

at selected Merchant outlets

MCB MASTER CARD

MCB VIRTUAL/INTERNET BANKING

MCB ISLAMIC BANKING

Vision:

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1) To excel in the field we are into, and continue to strive

to make Islamic Banking a better alternative choice

and make MCB a preferred provider of quality Islamic

Banking Products and Services, besides Conventional

Banking.

2) To assist investors in earning profit comfortably with a

sound and solid Islamic Financial portfolio in MCB.

MCB now provides i ts customers with the rel iable Islamic

F inancia l Services and support they require to successful ly

achieve their business object ives. Keeping in v iew the said

purpose bank has recently formed Islamic Banking Division andIslamic Banking Management Committee.

ISLAMIC BANKING DIVISION

Islamic Banking Division has been formed with effect from 1st

January 2003, which in a short span of t ime, has developed

Islamic Banking Products, prepared Operational Manua l,

arranged local & international training for its own executivesas well as at all management levels.

ISLAMIC BANKING MANAGEMENT COMMITTEE:

Recentl y the bank has establi shed an Islamic Banking

Management Committee comprising of the senior executives

representing various important functions of the bank, such as,

Credit & Risk Management, F inance, Treasury, Operations,Islamic Banking Division and Sharia Advisor.

The objective of this committee was to review the products

offered by Islamic Banking Branches, and to improve them not

only to make them competitive and practicable but also make

them truly Sharia Compliant

SHARIA ADVISOR:

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Dr. Muhammad Zubair Usmani, working as Sharia Advisor in

MCB s ince July 2000 is a prominent scholar hav ing Ph.D.

degree in Islamic F inance as wel l as Fazi l Takhassus from

Jamia Darul Uloom Karachi, (i.e. specialist of Islamic Fiqah and

Fatawa)

LEGAL ADVISOR:

M/s Mohsin Tayebaly & Co., Advocates & Legal Consultants, has

vetted all documentation. M/s Mohsin Tayebaly & Co. not only

has expertise in legal affairs but also has competent lawyers

possessing knowledge of Sharia.

ISLAMIC DEPOSIT SCHEMES:

For customer who are looking for a deposit opportunity where

they can purse their funds and reap halal returns on it, bank

offer the following products:

Al Makhraj Saving Account

The min imum depos it requi rement for A l-Makhraj

Saving Account is only Rs. 10,000 and profits can be

earned 6-monthly

IANAT Account

For customers who are looking for a chequing account

that gives them the ease of doing unrestricted number

of transactions, we offer Al-Makhraj Ianat Account.

With a minimum of only Rs. 10,000, Ianat Account may

be opened. With all the features and facilities that this

product offers, it is highly recommended for

management of business funds

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Al Makhraj TDR

A minimum of only Rs. 25,000 is needed to invest

money in Al-Makhraj Term Deposit. Choice of tenors

can be made from a l ist of opt ions namely 1, 3 & 6

months, 1, 2, 3 or 5 years. Profi t payment opt ions

available to customers are monthly, quarterly and/ or

at matur i ty. However, monthly profi t payment and

deposit product of 1 month are not available currently

FUND BASED FACILITIES:

IJARAH

MCBs Islamic Ijarah, analogous to the English term

'leasing, is based on the Ijarah wa Iqtina concept

which means the sale of the asset to the lessee after

the Ijarah has matured. Under this scheme, MCB wil l

be the owner of the asset, and the customer (lessee)

wil l be given the asset to use for a certain period of

t ime in return for monthly rental payments. MCB wil l

give a separate unilateral undertaking that it wil l offer

to se ll the asset to the cus tomer ( lessee) a t the

maturity of the Ijarah agreement at a price that may

be equal to the securi ty deposit amount, hence the

term Wa Iqtina

o PARTIES IN IJARAH

Lessee - Banks Customer

Lessor Bank

o TYPES OF IJARAH

Car Ijarah

Equipment Ijarah

MURABAHAH

31
http://mcb.com.pk/IslamicBanking/fund_car.htmhttp://mcb.com.pk/IslamicBanking/fund_car.htm


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Deposit Side

One Month TDR

Mahana Munafa Savings Accounts

Financing Side

Musharaka Term Finance

Diminishing Musharaka for Housing Finance

Murabahah cum Istisna for Export of Goods

Issuance of LC

ADVANCES

Advances are the most important source of earning for the

banks. MCB is also giving full attention towards this aspect and

it is also obvious from growing portfolio of advances.

PRINCIPLES OF ADVANCES:

The basic principles of advances are described as follows:

Profitability

Source of Repayment

Character & Ability of Borrower

Purpose & Amount of Facility

Period

Security

MODES OF CREDIT FACILITIES

There are two types of facilities

FUND BASED FACILITIES

1) Running f inance

2) Cash f inance

3) Demand f inance

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4) Payment against documents

5) Finance against imported merchandise

6) Finance against trust receipt

7) Export f inance

8) Foreign bi l l purchased

9) Others

NON FUNDED FACILITY

1) Letter of credit

2) Letter of guarantee

3) Bid bonds

4) Performance bonds

5) Other facil i t ies

REMITTANCES

DEMAND DRAFT

1) Demand draft is a written order drawn by a branch of a

bank upon the branch of same or any other bank to pay

certa in sum of money to or to the order of speci fied

person.

2) 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.

5) Thumb expression is not accepted on DD.

6) The following are the partiesi. Purchaser

ii. Issuing branch

iii. Drawee branch

iv. Payee

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TELEGRAPH TRANSFER

1) Transfer of funds from one branch to another branch of

the same bank or upon other bank under special

arrangements.

2) Telegraphic transfer is not negotiable.

3) The funds are not payable to bearer.

4) Minor can not avail this facil ity.

PARTIES

1) Applicant

2) Drawing branch

3) Drawee branch

4) beneficiary

MAIL TRANSFER

Transfer of funds from one branch to another branch ofthe same bank with in or outside the city is cal led mail

transfer.

Mail transfer is not negotiable.

The procedure is same as for DD.

All precautions must be observed.

PAY ORDERS

Pay order is meant for bank own payment but in practice

they are also issued to customers.

A pay order is written authorization for payment made in

a receipt form issued and payable by the bank To the

person named and addressed.

The following are the parties

o Purchaser

o Issuing branch

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o 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.

LOCKER FACILITY

CONDITIONS

The annual rent of the locker is payable in advance. In

the event of the rental charges following in arrears, the

bank reserved the right

To refuse the excess to the locker.

To exercise a general l ien over the property deposited or

about to be deposited in the locker until such time as the

dues are paid by license.

To sell the property described in deal.

To break upon the locker and forward, by post or any

other means consider fit.

The relation between license and banker will be licenser

and licensee not the banker and customer.

The ownership in the locker wil l be in the bank and

license wil l have only the r ight of use subject to terms

and conditions.

COMPARATIVE RATIO ANALYSIS OF FINANCIAL HIGHLIGHTS

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DESCRIPATION

2000(Rs000)

2001(Rs000)

2002(Rs000)

2003(Rs000)

2004(Rs000)

1.Return on equity 734729 1108176 1738594 2230145 2539994N.P.A.T x100 4483670 4986060 6313957 7726164 9392693Share holders equity 16.38% 22.22% 27.53% 28.86% 27.04%

2.Return on assets 734729 1108176 1738594 2230145 2539994N.P.A.T x 100 1636805

86

1870535

15

2351385

67

27232361

9

25928483

5 Total assets 0.45% 0.59% 0.74% 0.82% 0.98%

3.Earning per share 734729 1108176 1738594 2230145 2539994N.P.A.T 220300 242300 266545 306527 337180No of outstandingshares

3.33 4.57 6.52 7.28

7.53

4.Return on deposit 734729 1108176 1738594 2230145 2539994N.P.A.T x 100 1359901

47154544451

182705716

211511393

219966057

Total deposit 0.54% 0.72% 0.95% 1.05% 1.15%

5.Cash / deposit ratio 17328837

24285589

20055460

25356261 29541576

Cash x 100 135990147

154544451

182705716

211511393

219966057

Deposit 12.74% 15.71% 10.97% 11.98% 13.43%6.Total deposit / net

worth ratio

1359901

47

1545444

51

1827057

76

21151139

3

21996605

7Total deposit 4483670 4986060 6313957 7726164 9392693Net worth 30.33 30.99 28.93 27.37 23.

42times times times times Times

7.Interestexpense/total expense ratio

7223950 7544897 6074682 2932693 2,057,640

Interest expense x100 15565853

17132674

14875007

11288881 9,655,275

Total expense 46.40% 44.00% 40.83% 25.97% 21.31%

8.Interestincome/total incomeratio

14126332

17033225

15385869

10369994 9,347,247

Interest income x 100 16887648

19233850

17976027

14901805 20,354,783

Total income 83.64% 88.55% 85.59% 69.58% 45.92%

9.Net profit margin 734729 1108176 1738594 2230145 2,539,9

94N.P.A.T x 100 16887648

19233850

17976027

14901805 20,354,783

Total income 4.35% 5.76% 9.67% 14.96% 12.48%

10-Cost of lendingratio

14126332

17033225

15385869

10369994 9,347,247

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1-RETURN ON EQUITY

This rat io i s more mean ingfu l f or shareholders who a re

interested to know the prof it earned by a bank because the

dividend is paid f rom availab le profi t . Higher rat io means

factor of production is fully util ized and shows good position.

However in 2004 the ratio is nominal decrease as compare to

last year.

2-RETURN ON ASSETS

This ratio shows that the return is greater in 2004 as compared

to return on assets in the year 2003, 2002, 2001 and 2000

(gradual increase). It means the assets of business are ful ly

utilized in more and efficient way and also shows the favorable

trend of business.

39

16.38%

22.22%

27.53%28.86%

27.04%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

2000 2001 2002 2003 2004

N.P.A.T x100Share holders equity

0.45%

0.59%

0.74%0.82%

0.98%

0.00%

0.10%

0.20%

0.30%

0.40%0.50%

0.60%

0.70%

0.80%

0.90%

1.00%

2000 2001 2002 2003 2004

N.P.A.T x100TOTAL ASSESTS


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3-EARNING PER SHARE

This ratio real ly improves as it has gone with the increase in

profi t . Earning per share is a good measure of profi tabil ity

when compared with similar other business. Here increasing

EPS, which will surely increase share price. This ratio has same

trend as the return on the assets. It is improving in every

succeeding year.

4-RETURN ON DEPOSIT

Return on deposit has increasing trend which is favorable. This

ratio shows that with increase of deposit , profit margin also

increases. Increase in return on deposit is positive sign.

5-CASH TO DEPOSIT RATIO

This ratio shows that how much cash is available to meet the

demand l iabi l it ies of the depositors. The bank should have

40

3.33

4.575.62

7.28 7.53

0

1

2

3

4

56

7

8

2000 2001 2002 2003 2004

0.54%

0.72%

0.95%

1.05% 1.15%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

2000 2001 2002 2003 2004

N.P.A.TNo of outstanding shares

N.P.A.Tx100Total Deposits


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reasonable cash balance to meet the customer requirements

against their deposits in the bank. In this case bank ratio has

increased in 2004 as compared to 2003 & 2002 which is a good

sign from the bank point of view.

6-TOTAL DEPOSIT / NET WORTH

This ratio has decreasing trend but this decrease is due to

increase in net worth. It will provide benefit to the bank in

long run and in coming years.

7-INTEREST EXPENSE TO TOTAL EXPENSE RATIO

This ratio shows a decreasing trend. This decrease in the

interest expense is due to the decrease in borrowings of the

bank, or it might be due to decrease in the payable interest

rate to the lenders.

41

30.33 30.99 28.93

27.3723.42

0

5

10

15

20

25

30

35

2000 2001 2002 2003 2004

46.40%44%

40.83%

25.97%23.31%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

45.00%

50.00%

2000 2001 2002 2003 2004

12.74%

15.71%

10.97%11.98%

13.43%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

2000 2001 2002 2003 2004

Cash x100Deposits

Interest exp.Total exp.


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8-INTEREST INCOME TO TOTAL INCOME RATIO

A decreasing figure shows that rate of mark up has come down

and i t i s bad for earnings of bank. I t shows that interest

i ncome as compared to the total in come of the bank is

decreasing and it might be due to increase in other income of

the bank.

9-NET PROFIT MARGIN

This ratio has increasing trend up to 2003 and in 2004 NPM fall

. The major reason is that the rate of mark up fall and due to

this the interest income decrease resulting 2.48% NPM come

down as compare to last year

10-COST OF LENDING RATIO

Here we can analyze very interesting s ituat ion, as there is

decrease in interest income in 2004 and the rat io has a lso

42

83.64%88.55%

85.59%

69.58%

45.92%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

2000 2001 2002 2003 2004

4.35%

5.76%

9.67%

14.96%

12.48%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

2000 2001 2002 2003 2004

16.36%

22.24%

19.49%

10.66%

6.81%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

2000 2001 2002 2003 2004

Int. Income x 100Total Income


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decreased, reason is that interest income has decreased but

amount of advances has increased resulting in decrease in

cost of lending that shows the cost bear by the bank whi le

lending the money. Higher the ratio is not good for institution.

So, situation is good in 2004 as compared to 2003, 2002, 2001

and 2000.

11-LOAN TO ADVANCE RATIO

Analysis shows an increase in loan and also an increase in the

advances. As rate of increase of loans is greater than that of

advances, therefore, it has resulted in an overal l increase in

the ratio. Before giving loans to bank institutions have an eye

on such ratio. But in 2004 the ratio decrease to 7.50% . It

shows that bank loans are decrease as compared to the ir

advance which is beneficial both from lender and banker point

of view.

12-TOTAL DEBT RATIO

Total assets to the bank increased in 2003 as compared to last

three years wh ich has resu lted in an increase in l oan.

43

6.78%

11.68%

29.88%

35.21%

7.50%

0.00%

10.00%

20.00%

30.00%

40.00%

2000 2001 2002 2003 2004

Int. Income x 100Total Advances

Total Loan x 100Total Advances

16.36%

22.24%19.49%

10.66%

6.81%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

2000 2001 2002 2003 2004


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Therefore, the net result is increase in the loan to assets ratio.

However, in 2004 as lower this ratio is beneficial to the bank

so performance is of the bank is good in 2004 because bank

has purchased most of its assets not on loan.

13-DEBT EQUITY RATIO

This rat io depicts the relat ion between equ ity and debt

financing. Lower the ratio creditors feel more comfortable. In

the year 2004, ratio shows an decrease as compare to

2001,2002,2003 which is good sing for banks creditabil ity in

financial market.

14 - PROPRIATORY RATIO

Higher the ratio is more beneficial for the business so good

per formance is in v iew current ly . This rat io exp la ins that

participation in the assets by the shareholders fund is l imited

by outsiders fund but when we take year under review (2004)

we see that the ratio has increased in 2004 as compared to the

year 2003. Reason behind this is that the increase in assets is

f inanced by outsiders fund rather than the fund provided by

the shareholders.

44

1.3

1.79

3.73

4.43

1.10

0

1

2

3

4

5

2000 2001 2002 2003 2004

Total External DebtsTotal Internal Debts

Total Debt x100Total Assests

3.57%4.78%

10.03%

12.56%

3.97%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

2000 2001 2002 2003 2004


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15-Current ratio

Should not be less than 2. This ind icates that the current

assets are twice than current l iabil ities. Care should be taken

that current assets are not unduly inflated by over valuation.

Here in this case the current rat io of MCB is greater than

standard of 2:1 which is a good sign and shows good liquidity

position of the bank.

16-AVERAGE PROFIT PER BRANCH

The average profit per branch is increasing rapidly every year.

It is healthy, good and encouraging for bank.

45

607.21

1044.46

1663.7

2261.08

2679.3

0

500

1000

1500

2000

2500

3000

2000 2001 2002 2003 2004

Share holder Funds

Total Assests

Net ProfitNo. Of Branches

2.73%2.66% 2.68%

2.83%

3.62%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

2000 2001 2002 2003 2004

6.89

9.84

17.5 18.29

12.78

0

5

10

15

20

2000 2001 2002 2003 2004

Current Assets

Current Liabilities


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17-COST OF BORROWING

Calculation made on the base of data available shows that cost

of borrowing has decreased in 2004, which is a healthy sign for

the bank. Overall ratio is also decreased over 5 years. This is

mainly due to decrease in advances.

18-LONG TERM DEBT TO FIXED ASSETS RATIO

This ratio explains that participation in the fixed assets by the

debts of long term nature. It was established that f ixed assets

should be purchased out long term debts. The standard ratio is

1:1.But when we take year under review (2004) we see that

the ratio has decrease comparing in 2003, 2002, 2001, and

2000 which means that bank is acquiring its fixed assets by

not utilizing long term debts efficiently.

46

5.31%

4.88%

3.32%

1.38%0.94%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

2000 2001 2002 2003 2004

1.68%

2.44%

6.17%

7.47%

1.29%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

2000 2001 20002 2003 2004

Mark up x100

Deposits

Long term debt x 100

Fixed Assets


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DOCUMENTAT ION FOR VARIOUS TYPES OFACCOUNTS

1- CURRENT ACCOUNTS

Individual

1- application for opening account

2- specimen signature card

Partnership Firm

1. application for opening account

2. specimen signature card

3. deed of partnership i f availab le a long with registrat ion

certificate in case of registered firm.

Joint Stock Companies

1- Application for opening account

2- Specimen signature card

3- Board of directors resolution authorizing directors to open

and operate account.4- Certif ied true copy of the certif icate of incorporation or

registration.

5- Certif ied true copy of the certif icate of commencement of

business

6- Certified true copy as amended up to date of

memorandum and article of association.

7- List of present d irectors duly cert if ied by the registrar

joint stock companies.

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8- Certif ied true copy of the board of directors regarding

conduct of the account together with the specimens of

signatures of the authorized signatories.

9- Balance sheet if the company is already functioning.

GOVERNMENT DEPARTMENTS



3- A special resolution / authority of the concerned

administrative department duly endorsed by the finance

division / department of the government.

2- SAVING ACCOUNT



VERIFICATION OF DOCUMENTS OF PUBLIC/PRIVATE

LIMITED COMPANY

In case of account of a legal entity i.e. public/ private limited

company, no introduction is needed. However, the following

documents are needed:

1- resolution to open an account

2- photocopy of certif icate of incorporation

3- memorandum and articles of association

4- l ist of latest directors

5- cer ti fi cate o f commencement o f business fo r publ ic

limited company

6- photo copies of the directors.

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CROSS EXAMINATION OF DOCUMENTS

All the documents obtained in respect of opening an account

are primari ly checked from appraisal of original documents/

papers with special scrutiny that no sign of alterations appear

thereupon.

ALLOTMENT OF ACCOUNT NUMBER TO NEW ACCOUNT

The account number allocated to new account shall be given on

application for opening account, specimen signature card and

cheque book requirement slip.

The account number wil l be al located in f i f teen (15) digits in

the following manner

0 1 8 6 - 0 2 - 0 1 - 1 0 0 8 0 - 0

The f i fteen digit account number when decoded wil l read as

under:-

1- The first four digits from the left hand side denote branch

code.

2- The next two digits after branch code will denote nature

of account.

3- The next two d ig its after nature of account code wil l

denote currency.

4- The next seven d ig its after currency code wil l denote

account number inclusive of check digit i.e. first one digitfrom right hand side.

NATURE OFACCOUNT- CHEQUING CODE

Current 01

PLS-Saving 02

PLS Savings 365 03

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Khushali - Bachat (KBA) 04

MCB Rupee Maximizer 06

MCB Savings 365 07

New foreign currency current account 11

New foreign currency PLS account 12

CURRENCY CODE

Pakistan Rupee PKR 01

US Dollar USD 02

Pound Sterling GBP 03

Deutsche Mark DEM 04

Japanese Yen JPY 05

ISSUANCE OF CHEQUE BOOK

Cheque book shal l be issued only after the account opening

form has been comple ted i n all r espects i.e . proper ly

introduced, satisfactory reference obtained and the required

minimum deposit has been received.

LETTER OF THANKS

Letter of thanks should be sent under certif icate of posting to

the i ntroducer and the opener. Thi s precau ti on wou ld

accompl ish the purpose of noti fy ing the introducer and the

customer that an account has been opened on the basis of his

introduction thereby inviting a disclaimer, if untrue.

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OPERATION IN NEW ACCOUNT

After an account is opened, any unusual credits / debits not

compatib le with the status of the customer, the balance or

operations in the account, must be inquired into and

satisfactory response obtained before authenticating the same.

Such enquir ies must be conducted with utmost good care to

ensure that customers of good standing are not offended.

ISSUE OF CHEQUE BOOKS

1- FOR NEW ACCOUNTS

1- When a new account is opened, the manager must ensure

that a ll formali t ies with regard to opening of account,

proper introduction / reference etc., have been obtained

inc luding the depos it ing of the min imum ini tial cash

deposit before a cheque book is issued to the account

holder personally or to his known attorney against proper

acknowledgement.

2- The signature of the customer should not be obtained on

the acknowledgement of account opening form if cheque

book is not issued to the account holder at the time of

opening of account. However if signature on the

acknowledgement is obtained, must be dele ted /

crossed / cancelled so as to avoid misuse of cheque book.

3- Fresh application in the above case should be obtainedfor issuance of cheque book to avoid all possible risks.

2- FOR EXISTING ACCOUNTS

Apart from new accounts, all subsequent cheque books shall be

issued against the cheque book requisition slip extracted from

previous cheque book issued to the account holder. The

procedure is as follows:

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1- The requisit ion sl ip shal l be sent to the ledger keeper to

ascertain.

a) The account number

b) The average balance maintained by the customer

c) The manner in which the account is operated on.

d) Whether cheque books i ssued prev iously have been

properly consumed.

e) Cheques are not frequently returned for want of funds.

f) Payment of cheque is not frequently stopped.

g) It is not a dormant account.

2- If any discrepancy as stated above is found by the ledger

keeper, will be brought to the notice of concerned office r.

3- In other cases where the account is in order and the

bearer of the requisition slip is also familiar to the bank,

the concerned officer shall verify the signature of account

holder with the specimen signature card.

4- In case o f s li ghtest di ffe rence in the s ignature any

suspicion aroused about the bonaf ides of the person

representing the requisition slip, proper inquiries will be

made by contacting the drawer, i f necessary, manager

alone wil l author ize the issue of cheque book, in such

cases after due satisfaction.

SCRUTINY OF CHEQUES BEFORE PAYMENTS

Before pass ing, counter s ign ing cheques the manager /

accountant / authorized checking officer must satisfy himself

with regard to the following points:

1- the signature card must be referred to in every case.

2- The date must be checked.

3- The cheque series must be checked.

4- The agreement of amount in words and figures must be

checked.

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5- If the cheque has been altered from order to bearer

the alteration must bear the drawers full signature.

6- Endorsement must examined.

7- Crossing must be examined and cleari ng house

cheques must be special ly examined for special

crossing.

8- Stopped cheques notes must be carefully referred to.

9- The accountant must be referred to make sure that

funds are ava ilab le and that the balance does not

include uncleared effects.

10- When an account is t ransferred to a new fol io , a ll

car ry overs must be checked into the new fo li o,

including summations and prof it products and when

they are complete, the checking officer will sign in full

above the instructions column.

11- Any f inance l imit that is a llowed in an account must

be carr ied forward in words and f igures to the next

folio / sheet which should be fully authenticated by the

manager.

Foreign Exchange Documents and Procedures

INTRODUCTION

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Pakistan is a developing country and like other contemporary

countries, its import bi ll exceeds exports. Therefore it faces

scarcity of foreign exchange to meet its import requirements.

In import letter of credit operations p lay an act ive role for

settlement of payments in International Trade Services offered

by the bank to its customers.

The gap between import and export bills is partially covered by

regulations, controls and measures exercised by SBP.

CATEGORIES OF IMPORTS

Commercial sector import

Industrial sector import

Public sector import

1- Commercial sector import

a f irm, institution, organization, person or group of persons

registered as an importer under the registration order, 1993, is

called commercial importer.

2- Industrial sector import

an industrial unit is registered as an importer in order to meet

i ts own import requirements under the Registrat ion Order,

1993.

3- Public Sector Import

54


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organization owned by the government also require importing

certain capital / consumer commodities as per their

requirement.

REGISTRATION OF IMPORTERS, PROCEDURE &

DOCUMENTATION

A buyer of foreign goods has to registered himself with the EPB

under Registration Order 1993 as per procedure outlined by

them.

EXEMPTION FROM REGISTRATION

Cer ta in i tems a re impor tab le w ithout regi st ra tion as an

importer according to policy order of Ministry of Commerce.

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when an issuing bank author izes other bank (usually in the

country of exporter) to confirm its irrevocable credit and the

later adds its confirmation, such confirmation constitutes a

definite undertaking of such bank .

4- Revolving credit

in revolving credit, under the terms and conditions thereof, the

amount and or t ime is automatical ly renewed or reinstated

without specif ic amendment to the credit. It can be revocable

or irrevocable.

5- Transferable credit

a credit can be transferable only if the issuing bank expressly

designates it as transferable. Transferable credit is a credit

under which the beneficiary may request the bank authorized

1) to pay

2) incur a deferred payment undertaking

3) accept or negotiate

4) to make cred it ava ilab le in whole or in part to one or

more other beneficiary.

6- Back to back credit or counter credit

the sel ler as beneficiary of the f irst credit manages to open

another credit for the supplier or manufacturer of the goods on

the strength of the first credit.

7- Red clause credit or packing credit

this credit contains a red clause which is usual ly printed in

red to make it prominent, authorizing the intermediary banker

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to make advance to the se ll er before shipment , making

provision for subsequent negotiation of draft under the credit

to be applied for the repayment of such advance.

8- Stand by credit

i t i s o ften used in l ieu of per formance guarantee, e.g . in

respect of major construction contracts. The stand by credit

ensures payment if and when the subsidiary fails to repay the

loan on due date.

PARTIES TO LETTER OF CREDIT

1) The applicant (opener of L/C)

2) Issuing bank (opening bank)

3) Advising bank advise through bank if different from the

receiver through which the L/c is to be advised/

confirmed to the beneficiary.

4) Beneficiary (exporter)

5) Confirming bank at the request of the issuing bank addsits confirmation to a credit

6) Negotiating bank receives the documents against letter

of credi t as authorized bank. Which g ives value for

drafts/or documents

7) Reimbursing bankon the behal f o f the opening bank

honours the reimbursement claim lodged by the

negotiating bank

MODES OF PAYMENTS

1) Available by negotiation

2) Available by acceptance

3) Available by sight payment

4) Available by deferred payment

L/C AVAILABLE BY NEGOTIATION

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If the credit privides for negotiation to pay without recourse to

drawers and/or bonafide holders in terms of credit.

L/C AVAILABLE BY ACCEPTANCE

The credi t calls for a usance draft and is available by

acceptance on the issuing/ advising/ paying bank, and the

sel ler submits a ll the documents inc luding usance b il l o f

exchange to a nominated or another bank complying al l the

terms and conditions of the credit.

L/C AVAILABLE BY SIGHT PAYMENT

If the beneficiary of the credit is to obtain payment

immediately on presentation of stipulated documents, i t is

sight credit,

L/C AVAILABLE BY DEFERRED PAYMENT

In this case the L/C open ing bank has to effect payment after a

period specified in the L/C calculated as to the number of daysafter the date of presentation of documents or after the date of

shipment.

Procedure for establishment of letter of credit

The importer requests the opening bank for establ ishment of

letter of credit on L/C application form along with the following

documents.

1) Letter of credit application form

2) Indent / proforma invoice / purchase order duly

confirmed by the counter party.

3) Insurance cover note/marine insurance policy

4) Appendix B & in case of importer of machinery a lso

appendix C.

5) Form I

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L/C application form & agreement Form

It contains the following information

Name and address of importer

Name and address of exporter

Amount in foreign currency

Terms of credit sight / usance

Description of goods

Origin of goods

Port of loading and discharging

Last date of shipment and negotiation

Foreign banks charges

Terms of shipment (part shipment & transshipment)

Insurance cover note / policy number and name of

insurance company

Forward booking request

Mode of transmission

Import registration number

Any other conditions agreed

Details/ documents required by importer

INDENT PROFORMA INVOICE / PURCHASE ORDER

An indent or proforma invoice is a quotation of the sel ler

containing the description and specification of goods, price and

terms of sale.

INSURANCE COVER NOTE / marine insurance policy

All the goods imported under the documentary credit must

always be insured,

Insurance cover is based on the following points.

It is issued in the name of issuing bank

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It should cover against war, str ikes, r iots and

civil commotion

The port of shipment and port of destination

Amount of premium prepaid or premium under

bank guarantee or against agent deposit.

Shipment period should be within the validity of

insurance

Amount of insurance policy

The description of goods

Sometimes an open insurance policy is obtained

from the importer wherein various types of goods

are specified.

Revolving insurance cover is received from the

importer dealing in frequent import transactions

of goods.

APPENDIX B

This proforma replace import l icense and is submitted along

with L/C application form duly f i l led in tr ipl icate. It contains

the following information

1) Serial number

2) H.S.Code

3) Class of importer

4) Type of industry

5) Source of import

6) Country of import

7) Indent / proforma invoice No., name and address

8) Registration number of importer and indenter

FORM I

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This i s an appl icat ion for permiss ion under the fore ign

exchange regulation Act 1947 to purchase foreign exchange for

payment of imports.

SCRUTINY OF L/C APPLICATION

It should cover the following points

Is the customer a cl ient of bank and maintains

current account

Is the address of importer complete and

confirmed

Does authorized signatory sign the L/C

application

Is the L/C app lication complete and properly

filled

Is the tenure of L/C clearly mentioned

Does the customer has a valid Import

Registration Certificate.

Is H.S. code correct

Has the amount of L/C been converted into the

required currency and sel l ing rate as per rate

sheet

Is the L/C amount, unit price and description of

goods as pr Performa invoice

In Pakistan he country of destination of goods

Origin of goods is not a country PROHIBITED by

the government of Pakistan

Is proper date of shipment & negotiation

mentioned in L/C application

Has the competent authority granted approval for

establishment of L/C.

APPROVAL FOR ESTABLISHMENT OF LETTER OF CREDIT

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1) Through MCB branch operating in that country

2) Through any branch of a nationalized bank

3) Through the foreign correspondent

Processing of letters of credit

The processing officer shall allot running serial number to each

L/C opened and recorded in L/C opening register. The the

amount of L/C if stated in Foreign currency is then converted

into equivalent Pak Rupee by applying currency conversion rate

from the dai ly Rate Sheet issued by treasury and FX Group.

Then, the L/C l iabi li ty and amount of margin. I f any, are

calculated. In addition to L/C opening register, a party- wise

L/c liability register is also maintained, where in amount of L/c

liability and margin are posted.

The amount of margin and other charges are recovered to the

debit of customers A/c. the fol lowing accounting entries are

passed.

Debit customer/ importer a/c

Credit margin account L/C

Credit PLS Income Account Commission on L/C

Credit Telex/ Postage Charges Recovered Account

There after , contingent liability vouchers are passed as under.

Debit customers l iabil ity credit (with the amount of

L/C)

Credit Banks liability Credit

The balancing is done on weekly basis for margin on L/C as

well as L/C liability.

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Transmission Of letter of credit

Branches prepare L/C on Swift Format depending on the details

and after f ina l checking and s igning L/C by two author ized

signatories and forward the same to Swift Operating Centre at

Principal Office for transmission of the message.

Daily L/C OPENING STATEMENT

Daily statement of L/C opened is submitted to Principal Office,

Karachi.

FORWARD EXCHANGE BOOKING AGAINST L/Cs

At the request of importer, forward booking is made from

Principal Off ice, Treasury and the same is recorded on the

contract register. The contract slip is obtained from Principal

Off ice Treasury. The acceptance of party is obtained on the

customers copy of the contract slip for the amount, rate and

period of forward sale contract.

INLAND LETTER OF CREDIT

Inland letter of credit is a sa le transact ion of goods by the

bank to the party at a pr ice mutual ly agreed upon between

buyer and sel ler. The sale price consist of cost of goods plus

margin of profi t. The fol lowing documents duly s igned by

authorized officers are obtained while receiving L/C application

from the customer.

1) L/C application form

2) Proforma invoice / indent / other form

3) Insurance cover note

4) Demand promissory note

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Procedure for opening and t ransmiss ion of inland L/C i s

consistent with that of Internat ional l /c with the exception

that,

The L/c is established in Pak Rupees

Advised through MCB branch or some other bank in

Pakistan.

The documents received f rom the negot ia ting bank are

scrutinized strictly in accordance with the terms and conditions

of L/C to ensure that they are free from discrepancies.

At the time of establ ishment of L/C the fol lowing entries are

passed.

Debit party account

Credit margin A/c L/C

Credit income A/c. Comm. On L/C

Credit Postage, courier, Telex Charges Recovered

A/c.

Debit Customers liability on inland L/c

Credit Banks Liability on Inland L/C

IMPORT BILLS PAYMENT AGAINST DOCUMENTS (PAD)

When the documents are received from foreign bank, the L/C

opening branch aff ixes the dak received stamp and enters

the same in dak received reg is ter . The dup licate set of

documents is kept with original set of documents and duplicate

should be separa te f rom original whi le scrut in iz ing the

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3) Commercial invoices

4) Full set of bil l of lading

5) Certif icate of origin

6) Packing list

7) Shipment advice to Insurance company and importer

8) Other documents required as per terms of L/C.

SCRUTINY OF DOCUMENTS

Scrutiny of following documents is done

Scrutiny of negotiated bank schedule

Scrutiny of draft / bill of exchange

Scrutiny of commercial invoice

Scrutiny of bill of lading

Scrutiny of airway bill

Scrutiny of certificate of origin

SIGHT BILL

At the t ime of lodgment , the following general entr ies are

passed

Debit PLS PAD A/c

Debit Margin Account L/C

Credit F.C Transactions in Transit Account

Debit Banks liability on L/C for Sight L/C

Credit Customers liability on L/C for Sight L/C

After lodgment of documents, the branch calculates sale price

and intimates the importer to purchase the documents at sale

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price of the Bank. At the t ime of retirement, the fol lowing

general entries are passed.

Debit partys account

Credit PLS PAD A/c (purchase price)

Credit PLS income A/c over duecommission

Credit income A/c over due commission

RETIREMENT OF DOCUMENTS

The retirement of documents can be made by the fol lowing

means.

Through debit to the customers A/C

Through Trust Receipt facility (FTR) offered by Bank

Through Finance against Imported Merchandise (FIM)

COST MEMO

Cost memo is a prescribed printed form prepared in

quadruplicate and the amount in foreign currency is converted

into Pak Rupee at Sel ling TT & OD rate of exchange. Any

foreign correspondent charges and service charges are added

to it.

Customer issues cheque/ authority letter to debit his account for bill

amount plus mark up and charges calculated as per cost memo.

After receiving the amount, two authorized signatories endorse the

title documents and the same are delivered to the customer against

proper acknowledgemen

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SWOT ANALYSIS

Strength

Knowledge

Relationship

Customer Focus

Quest for Quality

Team based approach

Employees respect & Dignity

Good Corporate Citizenship

Weakness

Foreign Branches

Cost Structure

Lack of Training of Latest Banking Techniques

Opportunities

Foreign Bank

Energy & Power Sector

Investment Govt. Project

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THREATS for MCB

FOLLWING ARE THE MAIN THREATS:

Increasing number of foreign banks in country

Privatization of domestic banks.

Specialized services provided by the other banks.

Inconsistency in Government pol icies in business and

economic sector.

Growing technology.

Strict regulations of government over credit facility.

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RECOMMENDATIONS

From the previous analys is i t can be observed that MCB is

performing well. Its deposits are growing day by day and so its

profitability.

1) STAFF STRENGTH

First thing I observed is the staff strength, which is very low

as, compared to load of work. More employees should be hired

to decrease the load of work and to g ive some rel ief to old

workers.

2) WORKING EXTRA HOURS

Working hours per day during office timing are from 9 Oclock

to 5 Oclock, but I observed that bank staff has to work ti l l 7

Oclock or 8 Oclock. According to my point of view there are

two solutions for this problem. Either new staff should be hired

to reduce the work load or employees should be given benefits

for the extra hours they work.

3) TRAINING OF STAFF

Training of staff should be according to modern technique on

regu lar basis t o equ ip them with the new and advance

technology.

4) REVIVISIOB OF PAY STRUCTURE

Pay structure of lower & and middle management should be

revised in order to give them more benefits to increase their

work efficiency.

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5) REVISION OF PAY STRUCTURE

Pension a t MCB has been abol ished and emp loyees fee l

unsecure and uncertainity, pension system shou ld be revived.

6) GRIP ON ALL BANKING TRANSACTIONS

Most of the bank employees, are sticking to one seat only with

the result that they become master of one particular job and

loose their grip on other banking operation. In my opinion all

the employees should have regular job experience all out-look

towards banking. The promotion policy should be adjusted.

7) EASY COMMUNICATION TO HIGHER MANAGEMENT

As such system should be designed that every employee who

has some problems with his officers can communicate it to the

higher management and some steps must be taken to improve

that.

8) RECRUITMENT ON MERIT

Recruitments should be str ict ly on merit basis and induction

should be after proper and extensive training.

9) RECRUITMENT OF YOUNG & ENERGETIC STAFF

Old and lazy staff should be replaced with young, qualified and

energetic staff.

10) INCREASE IN FOREIGN BRANCHES

More foreign branches should be opened in order to capture

the international market.

11) UPGRADING CUSTOMER SERVICES

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Proper attention should be given to upgrade customer services.

12) ADOPTION OF GLOBAL BANKING STRUCTURE

Bank should adopt the global organizational banking structure

to meet the international standards of banking sector.

13) ATTENTION TO SOCIAL ISSUES

Bank need to organize seminars on social issues and informal

social act ivi ties to create an image of socia lly responsib le

institution.

14) PROMOTION POLICY

Promotion should be on the bas is of pas t per formance,

experience and qualif ication of employees. No undue priorities

should be given to some specific employees in this regard.

15) FOREIGN TRAINING OF EMPLOYEES

employees should be sent abroad for t ra in ing in advance

technology and acquiring more knowledge to meet international

standards of Banking.

16) REFRESHER COURSES

Refresher courses for the staff are most important in any

international organization. All the employees should have these

courses according to their requirement on regularly basis in

order to know the future trend & development. Foreign experts

can also be called for this purpose.

17) PROPER GUIDENCE

Bank shou ld adopt such an Induct ion p lan tha t when a

customer opens h is account with the bank, he should be

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supp lied wi th a booklet , which enables h im to know the

procedure of f i l l ing the cheque, pay-in-slip etc. It will save a

lot of t ime of the bank staff afterward during the conduct of

the account of that customer. A further step can also be taken

to educate the people & customers by arranging seminars on

specif ic areas, which are helpful in promoting healthy banking

habits

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CONCLUSION

It is evident from this reportand the financial statementsof MCB that it is makingprogress by leaps andbounds. The profits of MCBhave grown considerablyduring the last few years andthis trend is expected tocontinue into the future.

Therefore, it can be said thatMCB has a very prosperouspresent and future, whichassures the shareholders ofwealth maximization. I thinkif bank would be able tocover and control the abovementionedrecommendations then itwould be in such a situationthat will really lead ittowards the road ofprosperity, development andintegrity.

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REFERENCESEFERENCES

MCB, Shadman Branch Lahore

Rao Zahid Khalil (Manager Operations)

M. Waqas Qureshi (Manager Credit & Forex)

Ms. Iffat (Customer Service officer)

Annual report 2004

Annual report 2003

Annual report 2002

Annual report 2001

Advance accounting by M.A.Ghani

Money banking & Finance by Riaz Ahmad Mian

Banking currency & finance by M. Saeed Nasir

www.mcb.com.pk

MCB Brochures
http://www.mcb.com.pk/http://www.mcb.com.pk/


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MCB BANK LTD.FORMERLY

MUSLIM COMMERCIAL BANK LIMITED

PRESENTED TO

GROUP EFFORT BY

NOOR HASSAN E04MBA097

M. RAMZAN HAFEEZ E04MBA031

SALEEM UD DIN EO4MBA017

MATEE-UR-REHMAN E04MBA011

SHAHID ASLAM E04MBA123

SECTION B

3RD -SEMESTER

HAILEY COLLEGE OF BANKING & FINANCE


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