Muslim Commercial Bank MCB Internship REport

An Internship Report

MCB Bank Ltd

Table for Contents

PREFACE......................................................................................................02

ACKNOWLEDGEMENT.................................................................................03

INTRODUCTION OF BANK………………………………………………….….05

MCB BANK LIMITED.....................................................................................11

MCB BANK LIMITED KHANEWAL................................................................15

GENERAL BANKING DEPARTMENT………........................................16

TYPES OF ACCOUNTS................................................................................19

ACCOUNTS DEPARTMENT……………………………………………..………30

REMITTANCE................................................................................................32

CLEARING DEPARTMENT………………………………………………………36

CASH DEPARTMENT……………………………………..………………………

37

CREDIT DEPARTMENT………………………………………..

…………...........40

TYPES OF ADVANCES…………………...……………………………..……..43

FOREIGNEXCHANGE…………………………………………………….……...65

SWAT ANALYSIS………………………………………………………….………69

RECOMMENDATION....................................................................................73

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MCB Bank Ltd

“With the name of Allah who is so merciful and

benevolent”

Internship is an integral part of MBA program. For the sake of internship

the most initial thing is to have a practical experience. This effort may

get a student to get a practical experience if right organization is

selected. During this internship, a student comes to practical

knowledge. As an MBA student I have also done my internship in MCB

Bank Limited Khanewal. I am also the employee of this organization

and working here since last 01 year. In my job in MCB Bank start from

4th September 2006 firstly they provide the theoretical knowledge in

MCB Staff College Lahore. But knowledge can not perfect without

practical. So, in Khanewal branch I get practical exposure and to get

familiarized with the ways to live in the organizational environment

which is dramatically different from the educational environment.

Now I am working as Credit Incharge here I come to know a different

and very interesting experience of learning and working with people.

First of all I will tell you about Bank then I will tell operations of different

department. In preparing this report Mr. Ejaz Ahmad Nadeem

Manager Khanewal branch and all staff members help me about

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MCB Bank Ltd

all topics, I have put all of my best efforts and tried my level best

to give maximum knowledge.

Shahzad Ahmad Shad

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MCB Bank Ltd

First and foremost all praise is to Almighty Allah to give me the courage

and patience to carry out this responsibility successful.

I also wish to tender grateful acknowledgements with profound respect

and gratitude to respected director of Institute of management Science

for affording us an excellent opportunity to explore ourselves in the

internship program.

I am highly indebted to Mr. Ejaz Ahmad Nadeem Manager MCB Bank

Khanewal, Mr. Ajmal Toroo Manager Operations, Mr. Iqbal Tasneem &

Mr. Sakeel Ahmad General Officer in MCB Bank Khanewal.

I also feel indebted to all the respected staff of MCB Bank

Khanewal who gave me very effective guidance to make this work

successful.

Author

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MCB Bank Ltd

THE BANK

1. “Bank is an institution which revives money from

one party and lends to another party”.

2. “Banks are guardian distributor of cash money”.

These are the following types of banks

1. Central Bank

2. Commercial Bank

3. Industrial Bank

4. Exchange Bank

5. Saving Bank

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MCB Bank Ltd

Evolution of Banking

Bank Origin

There are different views about origin of the world “Bank”.

According to some people the word “Bank” is derived from the

world “Bancus” which means a “Bench”. They argue their point by

this transacted their business of money exchange on the benches.

If the business of any businessman failed, his bench was

destroyed by the people. Due to this practice the word “Bankrupt”

was also used.

On the other hand some people say that the world “Bank” is

derived from German time the word “Bank” was replaced by the

word “Bank” which is called “Banco” in Italian language.

Evolution of Banking

The history of banking evolution is very interesting. In the early ages

human life and wealth was not secure. Due to fear of loot-mar and theft

people buried their wealth under land but this method was not satisfied.

People started to search the custodians of wealth. The evolution of

banking started and it has crossed the following stages.

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MCB Bank Ltd

First Stage of Evolution

After a great struggle people succeeded in finding the reliable persons

to deposit their money and valuable goods for safety. These people

were goldsmiths. These were considered the most trusted persons due

to their sounds financial position. On the other hand they had very

strong iron safes for keeping gold, money and other valuable items.

People started depositing their gold and cash in the safe of goldsmiths.

Goldsmiths charged something for this purpose and they returned the

depositors their money whenever they needed banking evolution and

goldsmith were the early bankers.

Second Stage

During this period those receipts which were issued by the goldsmiths

against the valuables goods were being used as a medium of exchange

by the merchants. People purchased the various things from the traders

against their receipts against the payments. So the receipts were used

like the bank Cheque of the modern age.

Third stage of Evolution

This period started at that time when goldsmiths came to know by the

experience that people are using their receipts as medium exchange

and very few people demand their deposits. So they reach to the

conclusion that they may lend some portion of their total deposits to

some other people and they can earn profit. Goldsmith started the

business of lending. They also started paying interest to attract the

depositors of net cash. Now this business became very profitable, so

the traders and money lenders also jumped in this field.

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MCB Bank Ltd

Fourth Stage of Evolution

It was started at that time when people were tempted to deposit more

and more cash to the traders, money lenders and goldsmiths to earn

maximum interest. On other hand number of borrowers also increased

borrowing the money. So for the borrowing and lending business

regular institutions came in to being.

In the present age bank is modernized shape of those institutions. But

to earn more profit every bank started issuing overdraft facility without

maintaining adequate cash reserves to meet the demands of the

depositors. This inability created the financial crises. Now to maintain

the good will of the banks perform their duties. All the commercial banks

perform their duties keeping in view the instructions of the Central Bank.

Keeping in view the above discussion about the evolution of bank we

can say that it is the result of the different activity of goldsmiths,

merchants and money lenders. They are the real founders of modern

banking business. All the basic functions of modern bank like accepting

are similar with the founders. Now with the changing business

requirements the secondary functions of banks have been changing

with the passage of time.

Growth of Banking in Pakistan

The entire banking business was controlled by the non-Muslims before

the partition of the sub-continent. When Hindus became sure about the

division of the sub continent, they secretly began to transfer their capital

to the safe places in India. The funds and other valuables were

transferred to India.

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MCB Bank Ltd

Time of Independence

Hindus migration from Pakistan to India also caused drain on the bank

deposits. In order to ruin the economy of Pakistan. Hindus closed down

most of the head offices and branches of the scheduled and non

scheduled banks in Pakistan.

At the time of independence there were only two Pakistani banks that is

Habib Bank and Australasia Bank. At the time, Pakistan had 631

branches of scheduled banks and 411 of no-scheduled banks. The total

deposits of Pakistan banks were Rs. 800 million and advances were

198 million, the non-scheduled banks number reduced from 411 to 106

over the same period.

The mass scale withdrawal of deposits closure of branches and

migration caused a deadlock in the banking business in Pakistan.

Keeping in view the above situation government, of Pakistan took

various steps to provide all kinds of facilities to they non-Muslim

bankers for restoring normal banking facilities but response was not

encouraging.

Establishment of State Bank

After independence it was not possible that Pakistan to take steps to set

up the Central Bank immediately. The Reserve Bank of India acted as a

Central Bank of Pakistan till 30th September. 1948 But it could not

protect the interests of Pakistan.

To remove the financial difficulties and to establish sound banking

system Govt. established the State Bank on 1st July 1948. In the

development, to banking system it played very important role as a

Central bank of the country.

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MCB Bank Ltd

Development of Commercial Bank

New branches were opened in the country with the development of

banking system. These banks also extended their branches to foreign

countries.

Specialized Financial Institutions

Government of Pakistan established the specialized financial

institutions like ADBP. IDBP, NDFC, PICIC, HBFC. These financial

institutions financed the particular sectors like agriculture, industry and

housing.

Nationalization of Commercial Banks

In 1974 Government of Pakistan nationalized all the banks. The

Weaker banks were merged with the strong banks.

It was argued that these were nationalized so, provide fair distribution

of Credit to all the classes of people and remove the monopoly of few

Capitalists over the banking industry.

Privatization of Commercial Banks

Now government has decided to privatize the Commercial Banks. The

banks are in the process of privatization like other units of the economy

since 1990. This step is taken to provide better banking facilities lo the

public. It was also argued that loans were used as a political bribe and it

destroyed our banking system. People are not willing to repay the loans

despite of all Govt. efforts. So after privatization private banks will not

accept the political pressure and loans will be issued on merit.

In January. 1991, a privatization Commission was set up and two

Commercial banks namely MCB and ABL were transferred to private

sector. Now HBL and UBL are also privatize by this Govt.

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MCB Bank Ltd

In August 1991 government has also allowed the establishment of new

private banks. Now new like Askari Bank, Platinum Bank, Indus Bank,

Mehran Bank, Soneri Bank, Bank Alfalah, Prime Bank, Union Bank and

Al-Habib Bank are established. These banks have established their

branches in all the important cities of the country.

COMMERCIAL BANKS

Commercial banks are companies which transact business of

banking in Pakistan Commercial banks have constituted the most

important source of institutional credit in the economy of Pakistan.

COMMERCIAL BANKING SCENARIO IN

PAKISTAN

At the time of independence in 1947, there were 38 scheduled

banks with 195 offices in "Pakistan. But by December 31, 1973

there were 14 scheduled Pakistani Commercial Banks with 3,233

offices all over Pakistan and 74 offices in the foreign countries.

Nationalization of Banks was not done 1st January 1974 under the

Nationalization Act 1974 due to certain objectives. But it had

negative effects on the efficiency of the banking sector.

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MCB Bank Ltd

THE MCB BANK LIMITED

History

MCB Bank formally Muslim Commercial Bank was founded by Isfhani

and Adamjee families in Calcutta on July 9, 1947. In January 1974,

MCB was nationalized by Bhutto Government following the bank act

1974 subsequently in June 1974 Premier Bank Limited merged with

MCB. But the performance of MCB was badly affected by bureaucrat

government. In the late 1990 after long period of time newly established

Democratic Government of Pakistan have decided to sell nationalized

assets of country for better utilization. In April 1991, MCB became

Pakistan’s first privatized bank.

Thus, the bank inherits a 59-year legacy of trust in its customers and

the citizens of Pakistan. Now in nationwide 1000 branches and 07

branches work internationally.

Vision Statement

Challenging and Changing the Way you Bank.

Mission Statement

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MCB Bank Ltd

MCB Bank’s team of committed professionals is dedicated to

maintaining long term customer relationships through outstanding

service and convenience.

VALUES

Trust

We are the trustees of public funds and serve with integrity &

commitment. Ethical behavior is of critical importance to us. We adopt

full compliance with internal and external policies and procedures,

operating within the legal framework

Customer Focus

We continuously seek to exceed our customer’s expectations, forging

and maintaining long term relationships

Innovation

We strive to be the market leaders in innovative products and services

offering customized financial solutions with flawless execution

Teamwork

The diversity of our people is our strength. We inspire and challenge

each other – working together to achieve synergy

Achievement

Our people are our most valuable asset. We are committed to a result

oriented culture. Our goals are clear and merit is the only criterion for

reward

Social Responsibility

As responsible citizens we contribute to the social welfare of the

community we live in

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MCB Bank Ltd

Euromoney Awards

Best Bank Award 2006





Best Domestic Ban k Award 2000

Asia Money Award

Best Domestic Commercial Bank Award 2005

Best Domestic Commercial Bank Award 2004

Best Bank In Pakistan Award 2006

MCB has yet again received the esteemed Euromoney Award for the

“Best Bank in Pakistan”. It is the only bank to receive the Euromoney

Award for Excellence for the sixth time in the past seven years.

INVESTOR RELATIONS

FINAL RESULTS FOR THE YEAR ENDED 31

DECEMBER’06

MCB Bank’s Board of Directors reviewed the bank’s performance during 2006 in during the year meeting held on 23rd February 2007 in Lahore, Pakistan and approved the Bank’s financial results for the year ended

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http://www.mcb.com.pk/mcb/awards_accolades.asp#0%230









MCB Bank Ltd

31st December 2006. The bank has declared bonus shares of 15% and cash dividend of 15%. This is in addition to 60% interim cash dividends announced

HIGHLIGHTS FOR THE FULL YEAR (Consolidated

Accounts)

Net Income was Rs. 12,541M (US$ 206M) for the year ended 31 December’06, an increase of 36.1% over 2005.

Net Interest Income was Rs. 21276M(US$ 349M)for the year ended 31 December’06, a healthy increase of 42% over the same period last year, with the pre provision operating profit at Rs.20, 113M( US$ 330M), a 39% increase over last year.

The Net Interest Margin for the year came to 8.32% compared to 6.52% for the year 2005.

Cost to Income Ratio dipped to 26.29% in 2006 compared to 33.56% for the year 2005, decreasing further from 30.8% for 9 months ended 31 September’06.

Return on Average Shareholder’s Equity was 47.65% for the year ended 31 December’06, compared to 64.34% for the year 2005.

Total Assets grew by 14% to Rs. 343Bn (US$ 5.6Bn) from Rs. 299Bn (US$ 4.91Bn) last year, Loans growing by 10% to Rs.198Bn (US$ 3.3Bn) and deposits by 12% to Rs. 257Bn (US$ 4.2Bn).

Equity grew from Rs. 18.7Bn (US$ 0.31Bn) by 95% to Rs. 36.4Bn (US$ 0.60Bn) for the year ended 31 December’06.

Total capital adequacy ratio rose to 19.13% with Tier 1 at 16.58% compared to 12.79% and 9.53% at 2005 year end.

Asset quality improved with the NPL ratio falling to 4.14% from 4.46% in 2005. The NPL coverage ratio improved from 93.10% in 2005 to 100.4% for the year ended 31 December, 2006

Basic earning per share was 24.17 Rs (US$ 0.40 per share) and dividend payout for the year was 31.24% compared to 18% in 2005.

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MCB Bank Ltd

MCB continues to be an industry leader and is also the first bank in Pakistan to tap international investor markets. We are now poised for growth both on the domestic and international fronts.

Grain Market Branch KhanewalKhanewal city has only one branch of MCB Bank Ltd. This branch

reported to circle office Multan. It is located in the center of the city in

the grain market Khanewal. Its deposit last month end Rs. 242M. It has

good working environment but its building is so small and old one.

That’s why customer feel guilty especially ladies customers are suffer

many problems when branch is crowded or outside environment in

cotton and wheat season transportation of these goods block the

entrance gates of the grain market.

Branch believes in Customer Service but no any Automation &

Modernization because token system used in this fully

computerized era. High demand of ATM machine here due to

competition with other banks.

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MCB Bank Ltd

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MCB Bank Ltd

GENERAL BANKING OPERATIONS

In General Baking these departments are working in MCB Bank

Khanewal. It is backbone of banking It is one of the major department of

MCB Bank Khanewal. It consists of following departments:

Account Opening Department

Accounts Department

Remittance Department

Clearing Department

Cash Department

Account opening DepartmentNew accounts are opened in this department. The fund deposited in the

MCB bank can be classified under the main heads:

CURRENT ACCOUNT

SAVING ACCOUNT

TERM /CALL DEPOSITS

SMART SAVING ACCOUNT

This department head by Manager Operation Mr. Ajmal Turoo.

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MCB Bank Ltd

ACCOUNT OPENING

To open an account the customer has to meet the manager operation

with an introducer (the person who is going go introduce that person in

the bank). He fill the application form (SF-1AA) (Green color for all

types of Accounts) Along with the specimen signature card (SF-6) is

also supplied to customer. He gets all information from the customer &

also get signature on application form & on the specimen signature

card.

Procedure

The Officer records the necessary details into the Account opening

register and allots an a/c number from this a/c opening register. This

register is maintained for each type of account and the a/c no’s are

allotted serially. After opening a saving and current account every

applicant’s data is entered into the computer to maintain a safe record

and application form is properly filled so that it can be available when

necessary. Checking officer (Computer operator) is responsible to

match the manual application form with the computerized a/c opening

file. The signature specimen card contains two signatures of an

applicant, applicant a/c no, a/c type, branch code, title of a/c, it will be

attached with an application form. Banker uses this card at the time

when he receives the Cheque; he compares customer’s signature with

the signature on the Cheque for avoiding fraud.

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MCB Bank Ltd

ACCOUNTS TYPES These are most used types, each have different documentation

requirements:

1. Single

2. Joint

3. Partnership

4. Private Limited

5. Public Limited

SINGLE

Mostly open the single accounts. Only one person can operate this a/c.

An individual who can fulfill the requirement of bank can open this a/c.

The requirements for this type are National Identity Card Photocopy,

Minimum Deposited Balance, and Account Opening Form etc.

JOINT

In case of joint a/c applicant mentions that how much person will

operate the a/c. Instruction are given for joint a/c such that the account

shall be operated by anyone or more. The requirements for this type are

National Identity Card Photocopy, Minimum Deposited Balance,

Account Opening Form, Additional Signature Form (For Joint Account),

Declaration regarding the operator of account.

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MCB Bank Ltd

PARTNERSHIP

For partnership a/c, along with the application form other requirements

needs satisfied.

The requirements for this type are National Identity Card Photocopy,

Minimum Deposited Balance, Account Opening Form, Registration

certificate, agreement among partners and Commencement of business

and private registration, resolution of board of directors,

commencement of business, memorandum and articles of association

and balance sheet etc.

PRIVATE LIMITED

Such type of account is opened in the name of the businesses having

private limited concern and mostly medium business enterprises open

such kind of accounts. All the board of directors have to submit the

declaration regarding the account operator on the company pad and

with the rubber stamp with the signature of the all the members of the

board of directors. In case of any change in director’s bank must be

informed regarding that. In case funds are borrowed by the company all

the directors approval is necessary rather not only the authorized

partner who can be the operator of the account.

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MCB Bank Ltd

PUBLIC LIMITED

Public Limited A/C type of account is opened in the name of the

businesses having Public limited concern and mostly medium business

enterprises open such kind of accounts. All the board of directors have

to submit the declaration regarding the account operator on the

company pad and with the rubber stamp with the signature of the all the

members of the board of directors. In case of any change in director’s

bank must be informed regarding that. In case funds are borrowed by

the company all the directors approval is necessary rather not only the

authorized partner who can be the operator of the account.

ACCOUNT CLOSING & SOME OTHER

TYPES of ACCOUNT

There are number of reasons of closing an account can be one of the

following if customer desire to close his account, in case of death of one

account holder, bankruptcy of the account holder and If an account

contain nil balance or not up to the requirement of rules.

Before closing any account, bank send letter to the account hold for

informing him that his account is going to be closed. There is need an

approval form higher authority to close any account.

(i) DORMANT ACCOUNT

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MCB Bank Ltd

If no any operation in C/A a/c last 06 months & 01 year in PLS

Saving a/c. called the Dormant accounts.

(ii) INOPERATIVE ACCOUNTS

No operation in Current a/c in last 02 years & 03 years in PLS saving

a/c transfer to inoperative ledger in December.

(iii) DECEASED CUSTOMER ACCOUNTS

On the death of an customer his her a/c is marked as deceased. No

withdrawal. Get certificate from his family of his death.

(iv) UNCLAIMED ACCOUNTS

After ten years inoperative accounts are converting into unclaimed a/c

and now these are under SBP.

(A) CURRENT ACCOUNTSFor Business this type of a/c used. Current deposits are those which are

payable to bank whenever demanded by the customer. Bank does not

pay any profit on current deposits.

FEATURES

A sum of Rs. 10,000/= in cash as initial deposit is required for opening a

current account and the same may be maintained as minimum average

running credit balance. No profit will be paid on credit balances held in

current accounts. The bank reserves the right to allow opening of

current a/c at its description. All deposits and withdrawal from a current

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MCB Bank Ltd

a/c will take place only at the branch where the account is being

maintained

The account holder can draw sums from his account by means of

Cheque supplied to him by the bank for that particular account.

Account holder should take well care of the Cheque books issued to

them.

(B) SAVING ACCOUNT

Saving accounts are opened on proper introduction with sums of credit

balance within certain limit for individual (single, joint) institutions,

companies, educational institutions etc. MCB has introduced various

schemes under saving a/c are following:

ACCOUNTS CODE

PLS Account 02

Saving 365 Account 03

Saving 365 gold 07

Khushali Bachat Account 04

BBA 33

Smart Saving 08

(a) PROFIT & LOSS SHARING (PLS) ACCOUNT

Minimum balance is Rs.10,000/- for account opening.

Below minimum balance 10,000/= Rs. 50 charges will be debited

Not more than eight withdrawals in a year allowed

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MCB Bank Ltd

Seven day notice is required for withdrawal

Profit calculated on monthly basis

Profit paid on annually basis

Profit paid on lowest balance at the end

Zakat deducted on @ 2.5%

(b) SAVING 365 ACCOUNTS

This account is newly developed of MCB and it provides flexibility of

saving account to business people. Profit on deposits will be payable

on daily product basis on balance of RS. 300,000/- and above.

However, if balance in the account falls below RS. 300,000/- on any

day, the product will be ignored. There will be no restriction on

withdrawal from the account. Zakat and withholding Tax is also

applicable on the account opened under this scheme.

Minimum balance is Rs.300,000/=

Below minimum balance, profit calculation ignored

Profit calculated on daily basis

Profit paid on annually basis

Zakat deducted on @ 2.5%

(c) SAVING 365 GOLD ACCOUNT

Introduced in 01 Dec 1998. High profit, balance not below 10M in this

case profit paid on saving rates.

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MCB Bank Ltd

(d) KHUSHALI BACHAT ACCOUNT

Min balance is 2500 at any time.

Saving type account

Profit calculated on daily basis

Profit paid on half yearly basis

Utility bills can be debited through this a/c

No charges will be debited for utility payments

(e) BASIC BANKING ACCOUNT

Opened with min Rs. 100, For 06 month’s period zero balance

maintaining a/c is not closed. Each month 02 deposit transactions

(either cash or clearing) & two withdrawals (either cash or clearing)

permitted. Every above transaction Rs. 25 charged.

(f) SMART SAVING ACCOUNT

This type of account introduces in 2007 and minimum required balance

is 10,000. Profit 3% on 100,000/- or more, 5% on 200,000 or more and

7% on 300,000 or more than 300,000 profit paid on 3 month basis.

TERM DEPOSITSTerm deposits are fixation of certain amount of money for a specific

span of time. These can be of mainly two types i.e. short term notice

deposits and long term notice deposits. Different rates are charged

for different period of times like as shown by following table. If

presented before maturity then previous period rate would be

charged.

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MCB Bank Ltd

The instrument term deposit is like a slip containing issuing bank name,

a/c # to operate on computer, deal #, customer name, reference #, date

of issue, amount, rate maturity date etc.

Duration Rate of Interest

01 month 08.1%

02 month 10.1%

03 month 11.0%

06 month 11.5%

01 year 12.5%

02 year 13.3%

03 year 14.5%

05 year 16.4%

CALL DEPOSITSThese call deposits are presented in the bidding process as guarantee

or security from the bank that this much money is deposited in the bank.

These are made in the favor the party offering contract or any other

person. The bank offer no interest rate on it because these can be

called at any time. For encashment the applicant must have to cancel

the call deposit instrument from its beneficiary.

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MCB Bank Ltd

For collection the beneficiary usually send the authority letter for paying

in the shape of Demand Draft or pay order. The call deposit instrument

containing the information regarding applicant and beneficiary name,

joint name a/c opened signature cards for encashment, reference #,

amount, date of issue, authorized signature etc.

OTHER PRODUCT / SERVICES

The privatization process for the expansion and diversification of

economic activities in the country also demanded the introduction

of new banking products. MCB took initiative in this direction and

for the first time MCB devised and marketed new products and

services with brand names to enter the varying requirements of its

diverse customers. MCB currently have following products or

services in banking sector that are making it more prominent in

the banking sector:

a) Night Banking

b) Fax Utility

c) Consultancy Services

d) Rupee Traveler Cheque

e) Self Supporting Scheme

f) Utility Bills Collection

g) ATM

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MCB Bank Ltd

NIGHT BANKING SERVICES

To facilitate business community

Only in commercial trades centers premises

Clients can make deposits up to 8:00 pm

Date moved to next for all such transaction

FAX utility

Pioneer to introduced Fax for customer service.

Facilitates speedy transfer of funds.

Within an hour any where in Pakistan.

Charges are debited to Customer account.

CONSULTANCY SERVICES

In the process of privatization of public sector units, prospective

buyers need professional assistance and MCB, with its expertise

offers to their specialized service for valuation of the market value

of the industrial unit, preparing bid documents and arranging

finance for the purchase of the unit.

MCB RUPEE TRAVELERS CHEQUE

Can be a safest way to carry cash

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MCB Bank Ltd

Cheque is accepted at trade centers & branches

No need to be a/c holder for traveler Cheque

Cheque is signed once when issued.

Upon delivering second signed are made

In case of theft no fair to encash

But informing bank is necessary if thefted

SELF SUPPORTING SCHEME

Loan for poor/needy people

No mark-up charged

Maximum amount of Rs. 25,000/=

Minimum amount of loan Rs. 5,000/=

UTILITY BILLS COLLECTION

Utility bill collection for maximum customers

Objective is to create interaction with customers

Currently 1000 branches are performing this job

ATM (Automated Teller Machine)

Minimum balance of Rs. 500/=

No charges are debited per transaction

Only two hundred per annum debited

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MCB Bank Ltd

ACCOUNTS DEPARTMENTEvery transaction which takes place recorded in the computer so all

transactions in different departments are forwarded to account

department. Since all vouchers from different departments are

forwarded to Account department so this department tallies all such

transactions with current department after maintaining the ledger of

each department

This department maintains all formalities of the accounts and account

holders like it account name, account holder’s name, code number and

full address. Different cheques debit and credit voucher come form

different departments like Token, Clearing, Remittances, Cash, Foreign

Exchange, Advances and posted against different accounts.

A working Journal called Manual is prepared daily which shown the

balance accounts of all parties. Mark-up and profit are calculated daily.

That would be debited at credited from or to account holder’s account

after specific period of time.

Markup is debit from the account after every three month profit is

credited to accounts after every six months.

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MCB Bank Ltd

. Following are different functions performed by this department:

Preparation of Financial Statements for different time span

Maintain all accounts of different departments

Calculation of profit on different schemes

Calculation of markup on different advances

Preparation Different types of reports for State Bank

Daily position of cash & every accounts

Matching daily summaries of all departments with ledger

TOTAL BALANCING

Transfer Sheet

All transfer entries like transfer of cheques, HO, General ledger

entries receiving CCs are enter in this sheet.

Other Sheet

In this sheet all DD payable, HO enteries, and DD, TT, MT, & PO

made by cheques.

Clearing Sheet

Clearing with other banks show in this sheet also show in daily

balancing.

Transfer Sheet total + Other Sheet total = Total Transfer Sheet

Total Transfer Sheet + Clearing sheet total + Cash Sheet total

= Closing Balance.

Match with the computer balancing.

This Closing Balance Is the next day opening Balance.

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MCB Bank Ltd

REMITTANCESThe need of remittance is commonly felt in commercial life particularly

and in every day life general. A major function of any banking system is

the transfer of funds from one client or one place to another. By

providing this service to the customer the bank earns a lot of income in

the form of service charges. This department deals with local currency

remittance i.e. remittance from one city to another without actually

carrying the currency. MCB Bank uses following instrument for

transferring of money:

Demand Drafts (DD)

Pay Order (PO)

Telegraphic Transfer (TT)

Mail Transfer (MT)

Demand Drafts (DD ) DD is a written order given by the branch of the bank on behalf of the

customer to other branch of the same bank to pay the certain amount to

the customer. DD are issued for the particular place other than place of

issuance. A draft is a Cheque drawn by a bank on its own branch or any

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MCB Bank Ltd

other branch of another bank at a different place requesting it to pay on

demand a specified amount of money which is already received to the

person named on it. DD is of following two types:

DD payable

DD Paid Suspense a/c

In the first type as advice reaches for payment the immediately pay to

the customer while in later as DD presented by the customer, it is paid

and the suspense account is debited.

Documentation

A printed application form is provided for filling in completely and

signing by the applicant. After depositing an amount of draft and

commission of the bank, duly completed and signed by two authorized

officers, then it is handed over the applicant and credit order is

dispatched to drawee branch. Following are the pre-requisites for the

processing of DD:

Show the Bank Serial No, No. of DD, Central No, Test Key and

Rs.75 Postage charges. Rs. 50 on Rs.50,000 or min amount then

every thousand increased Rs. 1 in commission till Rs. 100,000.

From Rs. 100,000 to Rs. 200,000 it is Rs. 100 but increased by

0.05% above Rs. 200,000.

Pay OrderFor this kind of remittance the payer must have the account in the

issuing bank. Pay order are more liquid as compared to Cheque

because Cheque may be dishonored while PO can’t be. It is written

order issued by the bank drawn and payable on itself. It is used for local

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MCB Bank Ltd

transfer of money from one person to another person. It is also used by

the public for depositing money with Government or Semi Government

department.

DOCUMENTATION

The party who requires a pay order will get a printed application from

the bank. He will fill it and deposits the amount and commission. The

bank charges are same as on demand draft.

Bank Serial Number No. of PO & Central No.

In MCB Bank Khanewal used the computer for this instrument

printed shape.

TELEGRAPHIC TRANSFER (TT)In this case the authority is given from one bank to other on the behalf

of the customer through telecommunication to debit their inter office

account through them and credit their parties account mentioned in TT.

It is an inter bank transaction. Telegraphic transfer is an instant transfer

of funds. Through this method applicant can transfer money from one

place to another place. There are two types of TT; both types of TT are

maintained in separate registers, test is applied by the manager of

every amount of TT.

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MCB Bank Ltd

Incoming TT

Outgoing TT

Applicant has to fill a form along with depositing amount to be

transferred and bank commission. MCB charges the commission at the

same rate as in the case of demand drafts but Rs. 100 charges for

telephone.

Documentation

Issuing Branch Name & Code

Beneficiary Branch Name & Code

No. of TT

Rs 75 Postage charges and Rs. 100 for telephone charges.

Amount in words & Figure

Test key

Mail Transfer (MT)As the name shows, it is transfer of money in the shape of document

through mail. Procedure is like TT. The transfer of funds from one place

to another by mail is called Mail Transfer (MT). The MT can be foreign

or domestic. The applicant who is desiring to remit the funds by way of

Mail Transfer can either deposit cash or ask the bank to debit his/her

account with the cost of MT including the bank charges. These all

measures are for safe transfer of funds.

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MCB Bank Ltd

Documentation

Issuing Branch Name & Code

Beneficiary Branch Name & Code

Number of MT

Amount in words & Figure

Test key

CLEARING DEPARTMENT

All the external functions of clearing are carried by Mr. Sakeel through

National Bank of Pakistan main branch Khanewal.

Inward Bills of collection

1. Lahore -------- Khanewal.

MCB cheque of KWL come from (0176) N.G.LAH

We debit party A/C and Credit N.G. LAH. on the SF-181-

under transaction code 0300.

2. If the cheque is MCB BANK or UBL. This cheque sends by

cleaning. They Cr. us by National Bank and we send this

advice. They cr. party & Dr. MCB KWL.

Outward Bills of collection

1. Khanewal ------- Lahore.

we collect the N.G LAH.cheque and send it to the responding branch,

we made C.C & present through outgoing bills (C.C cheque for

collection) CC on SF -37- also write on C.C. register – then send If

they clear they send us SF-181 (Manual or computerized copy)

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MCB Bank Ltd

Open C.C. register telly it branch and amount. Then we collect

service charges of MCB banks cheque. Charge 15% and others are

like UBL, HBL 20% as per Cheque charges.

CASH DEPARTMENTMCB Bank GM Br. Khanewal used old procedure of cash payment with

Tokens. This is a time consuming process but safe in using because

one cheque pass through many people hands. In cash department both

deposits and withdrawals go side by side. This department works under

the accounts department and deals with cash deposits and payments.

This department maintains the following sheets, books, ledger of

account:

Cash received voucher sheet. (SF-14)

Cash paid voucher sheet. (SF-13)

Cash balance book. (SB-57)

Cash position register.

Prize bond register. (3B)

First Cheque presentd to Mr. Zamir he check the cheque, its date,

amount in words & amount in figure telly one face and two back

signature. Then token no. on cheque & token number in token register

cash paid stamp on cheque and give to Mr. Taswar. He posted into

computer. When he posts these entries, computer automatically display

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MCB Bank Ltd

the balance before posting the transaction amount, balance after

posting. He easily and quickly see whether the amount being withdrawn

so exceed the balance or within the balance. If the amount does exceed

the balance then it is upon the discretion of the manager to allow an

overdraft and not depending upon the customer’s reputation. If he does

not allow an over draft, the procedure is repeated again as described for

the mismatch of the signature Cheque is return.

The following staff members are performing their duties with patience

and hard work. Three peoples are working in cash department named

Mr. Nabi Bukhsh, for collection Mr. Raja Khalid for payments and Mr.

Akram on bills.

Cash Paid Sheet

The only instrument that can be used to withdraw an amount from an

account is the Cheque book. No payments are made by another

instrument. Cheques can be of two types, they may be presented at the

counter and encased and the others are clearing or transfer cheques.

Cashier manually inspects the Cheque for following:

Cash Received

For depositing the cash into customer’s accounts, there is need to fill in

the paying-in-slip giving the related details of the transaction. This

paying-in-slip contains the date, a/c/no, a/c title, particulars, amount

being deposited and details of the cash. There are two portion of the

paying-in-slip. The depositor signs the one part of the paying-in-slip one

is retained by the bank to show an acceptance of the entries made in

the slip.

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MCB Bank Ltd

The different colored paying-in-slip are used for all the types of

deposits. Only the slips related to a particular type of a/c is acceptable

by the bank. For example current paying-in-slip for current a/c and

saving paying-in-slips for saving a/c etc. The paying-in-slip serves as a

voucher to update to computerized transaction ledger. The transaction

ledger is only updated by paying-in-slip and Cheque.

The cashier responsible to receive both the paying-in-slip and cash from

the depositor the cashier check the necessary details provided in the

paying-in-slip and account the cash and tallies with the amount declared

in the slip. If the amount does not tally with the cash given, the deposit

is not entertained until the customer removes the discrepancy. Then

send to Mr. Iqbal who stamp on the voucher one part give to customer

and one for Mr. Taswar for posting in the computer.

CASH BOOK BALANCE

At the end of the working day cashier is responsible to maintain the

cash balance book. The cash book contain the date, opening balance,

detail of cash payment and received in figures, closing balance,

denomination of government notes (Currency). It’s checked by

manager. The consolidated figure of receipt and payment of cash is

entered in the cash book and the closing balance of cash is drawn from

that i.e.

Opening Balance of Cash + Receipts - Payments =

Closing Balance

The closing balance of today will be the opening balance of tomorrow.

This department is one of the most important department of the bank.

All the books maintained in this department are checked by officer.

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MCB Bank Ltd

Debit voucher (SF-9)

For debit entries used SF-9. Charges of services, postage etc.

Credit voucher (SF-10)

Commission on bills & other credit entries.

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MCB Bank Ltd

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MCB Bank Ltd

ADVANCES DEPARTMENT

It is major department of the branch. Mr. Mr. Shahzad Ahmad Shad

(myself) is the incharge of Credit department. Bank provides this facility

to the people who need advance money to meet their requirements. For

getting the advances, the first step is the preparation of credit proposal.

Some principles of lending are considered whenever financing being is

made. These principles are:

Character

Capacity

Collateral

Capital

Condition

REQUIRED INFORMATION

An assessment of his business abilities

Accurate & up-to-date financial statements

Market reports about the borrower

Party dealing with other banks

Nature and structure of borrower business

Names of proprietors, partners or Directors

Detail of companies associated with borrower business

Financial condition of borrower business

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MCB Bank Ltd

PREPARATION OF CREDIT PROPOSAL

At first, a formal application for credit approval is obtained from the party

along with complete group position. The party’s credibility report is also

obtained from the banks from which the party has been doing the

business. The party creditability report is also taken from the head office

of Trade information Division.

For obtaining credit, party has to submit the last two years Balance

Sheet and Profit & Loss Statement duly attested but authorized

auditors. The Current and Debt equity ratio is also calculated by the

bank.

Then recommendations are made the type of data required to prepare

the credit proposal is to be gathered from different departments. Some

data is obtained from the foreign exchange department. Some data is

obtained from current account department and some data is available in

Advance Department. The purpose for which the financing is required

should be explained very clearly. The securities offered by the party to

the bank are also evaluated. In case of pledging of the property in

shape of land or building the complete evaluation of the property should

also be attached.

. These are two types of advances:

Secured Advances

Unsecured Advances

In secured advances, the bank takes any security against the loans

while in case of unsecured advance no security is taken by the bank.

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MCB Bank Ltd

ADVANCES TYPESMCB Bank usually classified advances in to following types:

Agricultural Advances

Commercial Advances

Industrial Advances

MCB divided the advances in to two major types:

Fund Based

Non Fund Based

In the fund base advances, the funds of MCB is involved and in

Non Fund based only guarantee is given by the bank.

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MCB Bank Ltd

Fund Base Advance

MCB Bank Khanewal have following Fund base facilities of

advance in its corporate branches. The details of these types

would be later. These are as follows:

I. Demand Finance (DF)

II. Cash Finance (CF)

III. Running Finance (RF)

IV. Finance against imported goods (FIM)

V. Export Refinance Part I (Pre Shipment)

VI. Export Refinance Part I (Post Shipment)

VII. Export Refinance Part II

VIII. . Finance against purchase collection (FACP)

IX. Finance against foreign bills (FAFB)

X. Foreign bills purchased (FBP)

XI. Local Manufacturing Machinery (LMM)

XII. Payment against document (PAD)

I. DEMAND FINANCE

This is a type of secured loan and demand loan never allowed without

security. It is a type of long term financing. GM Khanewal branch also

gives loan under the head of demand finance to individuals, industrial

units commercial business etc.

II. CASH FINANCE

In this, the borrower gives a specific reason for the need of cash. GM

Khanewal branch gives the facility of cash credit to business. The

amount is passed through voucher and credit to the party account.

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MCB Bank Ltd

III. RUNNING FINANCE

These finances as evident by the name are given to the business to

meet their daily needs. The mark up is charged on daily basis. This type

of advances is given to trade, commerce and manufacturing for general

purpose. It is drawn through Cheque.

IV. FINANCE AGAINST IMPORTED

MERCHANDISE

These types of advances are granted against the pledge of imported

merchandise. The goods imported are pledged by bank. Bank pays all

the charges to exporter and customs and keeps the goods in its control.

On payment from the client to bank, the bank releases these goods.

V. EXPORT REFINANCE PART-I PRE-

SHIPMENT

This type of loan is provided by the bank to the customer at the rate of

12% for the period of 150 days. The bank provides this type of advance

facility to those exporters who have not enough money to make

shipment. To promote the export, the governments pursue the Banks to

provides loans to the exporters.

VI. EXPORT REFINANCE PART-I POST

SHIPMENT

This type of facility is provided to the customers who have enough

amount of money to make first shipment but not more. So the bank

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MCB Bank Ltd

issues a loan to the exporter, this financing is for period of 150 days.

Finance is provided by the SBP to exporters for the purchase of raw

material and for its processing packing and shipment. The mark up rate

currently set by the SBP is 12%. In case, if the party is unable to make

the shipment within 150 days of financing. The party has to pay certain

amount of finance as asked by the SBP and after 150 days the markup

rate also charges up @ 60 paisa per thousand per day. So usually an

exporter tries to make the shipment within the fixed period set by the

SBP which is usually 150 days.

VII. EXPORT REFINANCE PART-II

In this case the bank after receiving the performance of years in export

business of the party the limit is set for a period of one year. Here the

limit cannot be set by the terms pledged of the permission of the bank.

VIII. FINANCE AGAINST PURCHASE OF

COLLECTION DOCUMENT

The bank provides this type of advance facility to those exporters who

have not enough money to make shipment. A bill (Cheque, draft, etc.)

may be purchased by the bank. Bank pays the amount to the client after

deducting its commission.

IX. FINANCE AGAINST FOREIGN BILLS

This facility is given to the exporter, If he needs an urgent money. Bank

also provides finance against the foreign bills. He gives bills of

exchange to the bank as a security and bank send these bills for

collection and bank gives money to he exporter.

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MCB Bank Ltd

X. FOREIGN BILL PURCHASE

The exporters which are under L/C are also provided with the facility of

loan. Amount is given to the exporter after the approval of L/C by the

issuing bank.

XI. LOCAL MANUFACTURING MACHINERY

The bank provides this facility to the business man who wants to buy

the local manufactured machinery. LMM funds are provided by the SBP.

Rate of markup for this type of loan facility is 12% on this type of loan.

XII. PAYMENT AGAINST DOCUMENT

Bank make the payment to party against document and upon expire

date. Bank receives back money with mark up in this type of lending.

Upon receipt of the documents negotiated by the sellers bank. The

opening bank makes sure that documents are according to terms and

conditions of the credit.

1. Collect Information required for preparation of

an application for Finance (SF-86-A).

On SF-86-A Application of Finance require all information about

Outstanding Limit, Existing Limit & Proposal Limit With MCB

Bank & If any other Bank. Directors names & ID cards and also

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MCB Bank Ltd

Legal opinion on the documents.

2. Processing of credit proposals (SF-86).

Documents like Title Deed, NEC, and Approved site Map,

Ax Shajra (Map of Location of Property). If valid then valuation

through MCB Bank approved Company panel list. Harvests

mostly used. Then get application on singed SF 86A, signed

B/S, Signed I/S & A/S Statement.

3. Procedure for approval under Manger’s

Discretionary Limits.

Get singed Borrower Basic Fact Sheet, Risk Rating & CIB

Report through SBP Rs=300 Fee per client.

CPS Credit Proposal SF-86 System

It has 6 pages

1. This Page Same the SF-86A, fill all information about

customer show in SF-86A.

2. Securities existing and new offering Securities

3. Conformation

DOC Compare

stock Report

Manger timely visit

Insured

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MCB Bank Ltd

4. Financial & Business given to MCB Bank, Deposits &

Commission and No. of days

5. Group Information

If Customer have more than one business show their shares

All availing Finance self with other show in this page.

6. Comments

Background Development, Pricing, Margin on which we

finance, Justification of Proposal

Finance, Group A/C Strategy & Recoumdation on which bases

we finance.

Send these all to the office if they approved

4. Forwarding Credit Proposals to controlling

offices.

If approved then mortgage the property

Mortgage Register to the Registarion then Send to Tehsildar

then register charge to the Bank get the copy then we again

send to legal opinion.

If Yes valid All Property Documents & New Legal opinion to the

continuous office. Now if they approved give them limit.

5. Financial Statements Analysis and

Interpretation.

All F/S as like Balance sheet, Income statement, check by

credit officer.

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MCB Bank Ltd

6. Issuance of Sanctioned Facility Letters.

When Approval comes then we give the letter of sanctions

Facility letter which show all terms and conditions.

7. Obtaining the required Charge / IB forms duly

filled in signed and attested.

All IB Forms as like IB-6, IB-12 etc fill properly.

8. Documentation for collateral securities.

All documents collect from customer as like Title Deed, NEC,

and Approved site Map, Ax Shajra (Map of Location of

Property) and send to legal retainer for legal opinion.

9. Disbursement of credit Facilities.

If Yes valid All Property Documents & New Legal opinion to the

continuous office. Now if they approved give them limit.

10. Various returns for submission to controlling

offices.

. Weakly Reports statement of stock limit expiry send to

controlling offices.

11. Returns and Reporting to SBP including CIB.

CIF In this Relate to the CIB and also FCA Reports.

12. Obtaining Clearance report from CIB to SIB.

Get Information about customer for limit fee Rs. 300/- per

client.

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MCB Bank Ltd

13. Inter bank credit Reports.

Inter bank C.R. show all information get from other Banks of

city = confidence Report.

14. Monitoring of outstanding advances.

If expire Date then work stock checking

No usance of Limit after expiry Finance.

15. Calculation of Mark up.

Running Finance update the Rates automatically

Cash Finance calculate manually

Formula.

Markup Rate (1000)

365/100(Product)

KIBOR Rate+ SMR

11%+3%6747.178 if not timely paid 25 day outstanding SMR

change Full Normal Rate 3+5 SMR 11+3+5=19 then we write 20%

If more than 20% then original rate is correct.

Outstand 20800, Rate 11.84%

Markup

=11.84(1000)

365/100(20800)

Ignoring Last three (000) for find of product.

500,000 is 500

16. Inspection of hypothecated and pledged

stocks / inventories.

a) Pledge Stock

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MCB Bank Ltd

Used in Cash Finance. For inspection the stock of cotton bales

& oil cake. Mostly visit the Manger, Credit Incharge or Regional

Manger.

b) Hypothecated Stock

For RF mostly as like limits of cement, Ghee supplier & Sugar

supplier visit the Manger or Credit Incharge.

17. Follow up for recovery of Principal Markup.

Interlinked by customer about checking of his stock expiry &

markup payments.

18. Renewal and enhancement of Credit

Facilities.

For renewal check the Revenue Record like Copy of

mautation= Register Dakel & Kharga. New financials

statements like B/S & I/S. provide data to the controlling office

and get the approval.

19. Periodical review of outstanding finances to

detect the irregularities.

Check the Revenue Record like Copy of mautation, markup

payments and balances of limit periodically.

20. Follow up for recovery of stuck up finances.

Stuck up finance which one can not pay markup and timely

adjust the limit. Send reminder to the customer, if no response

then consults Legal Retainer.

21. Arranging the insurance cover for securities.

Limit + 10% insured at the time of financing.

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MCB Bank Ltd

Insured for (i) Theft, (ii) Fire & (iii) Building. This is the

obligation of the customer

22. Obtaining periodical stock statements.

Through Mocadam Company in Cash Finance daily basis report

and RF mostly monthly basis report collected. Mr. Saeed & Mr.

Farooq are two mocdams of the Khanewal branch.

Agriculture Credit

Banks Agriculture division deals with the agriculture advances. Bank

provides the Agriculture Advances in order to enhance and support the

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MCB Bank Ltd

agriculture sector of the country. Agriculture advances are of the two

types. The types are as follows:

Farm Credit

Non Farm Credit

I. FARM CREDIT

These are the credits provided by the MCB for the purchases of inputs

for development of agriculture sector. Following are two main sub

classes of Farm Credit.

Production Finance

Development Finance

PRODUCTION FINANCE

These are short term loans. These loans are provided to farmers for

purchases of different type of input, for example, Seeds, Fertilizers,

Pesticides. These loans are provided against personal guarantees or

mortgage of land as a security. Rate of profit for these loans is 10%.

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MCB Bank Ltd

DEVELOPMENT FINANCE

These are medium or long term loans. These loans are provided for the

development of agriculture sector. Main purpose of these loans are to

purchase instrument:

Tractors

Implements (Trolley, Thresher etc.)

Installation of tube-well

Planting of garden

The loans are disbursed against security of land (mortgage) or any

other security acceptable to bank. The rate of profit for these loans is

11% to 17%.

II. NON FARM CREDIT

Second major form of agriculture advance is Non-Farm Credit. These

loans are provided against mortgage of land as a security or pledge of

equipment as a Collateral security. These are medium or long term

investment depending up the project. These loans are provided to boost

up agriculture sector to provide the sources of earning of foreign

exchange as well as to provide employment to people. Following are

the different types of small industries for which loans are provided to

improve the economy of the country:

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MCB Bank Ltd

Fish Farm

Cattle Farm

Poultry Farm

Dairy Farm

Non Fund Based

L.C

Guarantee

Letter of Credit

A letter of credit is defined as under

“Undertaking by the importer’s bank to exporter that the draw in accordance with terms and conditions of the credit, will be honored if presented with in the validity of the credit.”

It is a conditional undertaking by the Bank to make payment to

the exporter if he fulfills the terms of credit by presenting the required

documents to the bank in his country. In fact LC is a legal document on

behalf on which the payment made by the importer’s bank to the

exporter’s bank.

MCB Bank is providing this service to its customers who have an

account with the branch and other businessmen too. This facility has

been recognized as a modern banking activity of all commercial banks

that are included in the list of 6000 Banks internationally.

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MCB Bank Ltd

Information in LC document

The name of the local company, which is importing the goods

The name of foreign company, which is exporting the goods

The details of the goods to be transacted including the amount,

quality, mode of packing etc.

The total amount of the LC

The number of days for which the LC is valid

The name of the banks, who are regulating all these dealings

The name of the carrier which will be used for the shipment of the

goods to the importer

Bank receives an L.C from the importer for exporter of goods. These export LC used in Pakistan are following two types.

1) SIGHT L.CS

2) USANCE OR D/A LCS

SIGHT L.CS

The LC in which payment is made at sight basis after documents are delivered

USANCE OR DA L.CS:

In this class of LC the exporter with that listed in the l.c makes the payment after a specific period of time bank checks all the documents provided. if no error then payment is being made else vice verse. The payment in this type of export is made in full else specified, partly payment may be made when both the parties agrees. After receiving the LC and checking all the documents the officer is issuing an approval sheet. The bank provides the bill of exchange.

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MCB Bank Ltd

Exporters provide the following documents to the bank.

Bill of lading or air way bill

Invoice

Packing list

Certificate of chamber of commerce

Insurance

E form

The bank informs SBP about current export uses the E form. It is issued

in quadruplicate. The custom authorities retain first spy of E-form

returned MCB Bank, .2nd copy is for SBP 3rd for exporter and 4th for the

banks record. When full payment is being made the SBP’s copy is

returned to MCB Bank

TERMS OF SALE

CIF (cost, insurance and freight)

FOB (freight on board)

CFR (cost and freight)

There are normally six parties involved in a letter of credit:

1) Buyer (known as the importer or consignee)

2) Buyer’s Bank (known as opening, or paying bank)

3) Seller (known as the exporter, or beneficiary)

4) Seller’s bank (known as advising, confirming,

negotiating bank)

5) Carrier (known as the shipping company)

6) Insurance Company

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MCB Bank Ltd

Types of LC

There are two types of LCs

1-Irrevocable LC

An irrevocable LC is one that is a definite undertaking by the

issuing Bank that it cannot be cancelled or amended without the

consent of all the parties to the credit. The exporter feels himself safe

and assured that his payment will be met in time without delay.

2-Revocable LC

This type of credit is one that can be cancelled at any time by the

issuing bank giving any reason to the negotiating bank, meaning that

the importer’s bank shall not honor any cheques/drafts presented for

payment. The importers do not so commonly use this type of LC, as

most of the time there are instructions by the exporters to open and

irrevocable LCs in their favor.

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MCB Bank Ltd

Opening of LC

For opening of LC the following documents are required by the bank.

Application or bond

Order or invoice or indent

Insurance (mist according to Pakistan rules)

Liability endorsement of customer

Irrevocable documentary credit (LC)

Serenity form

An L.C is issued after opening of the letter of credit it is sent to the negotiating bank.

LC Opening Charges

When an LC is opened, the bank collects certain charges

from importer these are:

Commission

Postage charges

Telex charges

Bills Under LC

After receiving the L.C. the negotiation bank checks the documents, which are provided by the exporter with that are described in the L.C. if there is not discrepancy in that documents then the negotiating bank gives the payment to the exporter otherwise vice verse.

The negotiating bank sends the document provided by the exporter to the LC issuing bank with their covering letter known as bills under L.C. The negotiating bank

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MCB Bank Ltd

sends these documents by two mails so that if one mail is not received then the set from second mail can be used for further transactions.

The negotiating bank sends following documents to the advising bank.

Covering letter to advising bank 1 copy

Bill of exchange 2 copies

Invoices 8 copies

Bill of lading or air way bill 3 copies

Packing list 3 copies

Shipping advice to insurance company 1 copy

Shipping certificate from vessel 1 copy

The advising bank checks all the documents which they received from the negotiating bank finds any information which is not given in the L.C in this bill if the bank finds no thing then transaction is made and if there is any discrepancy then the advising bank may claim the return of amount from the negotiating bank.

Guarantee

A guarantee is a promise between one person to another person or party to answerable for the debt of a third party. Bank issues guarantee after 100%cash collaterals are provided by the person i.e.50% in the form of the property.

Securities

Bankers lend money in the form clean advances against promissory

note as well as secured advances against tangible and marketable.

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MCB Bank Ltd

These reports are only valid MCB normally allow the advances to the

customers against the following types of securities:

Bankers Lien

Mortgage

Pledges

Bankers Lien

This type of security is accepted in case of advances against share, life

policies, bonds, ornaments and fixed deposits etc. It is type of most

liquid security.

Mortgages

There are two types of Mortgage. These are following:

Legal Mortgage

Equitable Mortgage

Legal mortgage and equitable mortgage are accepted in case of

immovable properties like land, building and machinery etc.

Transfer of interest in movable property for securing the payment of money lend on existing or future liability. The bank provides the following two types of mortgage.

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MCB Bank Ltd

Registered mortgage

Equitable mortgage

Registered mortgage

Registered mortgage is provided on the residential property, commercial industrial property, raw plot, etc. A party can get registered mortgage if they provide the following documents to the bank.

Title deed

Non encumbrance (NEC)

pit form (in case a constructed hose)

Valuation certificate

Affidavit

Mortgage deed

Personnel guarantee of mortgagor

Power of attorney

Legal opinion.

Banks examine all these reports, and if they are correct then issue the mortgage to the party. The bank examines these reports to see that the property they want to mortgage is registered and is not already pledged. The bank also calculates the value of the property and the legal opinion of the customer in case of non-payment.

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MCB Bank Ltd

Equitable mortgage

Equitable mortgage is provided on the residential property, commercial industrial property, raw plot, etc.

Title deed

Non encumbrance certificate (nec)

Pt-1 form (in case a constructed house)

Valuation certificate

Affidavit

Memorandum of deposit of title deed

Personal guarantee of mortgagor

Power of attorney

Legal opinion

In this mortgage a charge form bound the customer for any legal action

in case of non-payment. In this type of mortgage hypothecation of

stocks involves.

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MCB Bank Ltd

Pledge

This type of security is accepted in case of stocks or raw materials. In a

pledge, the borrower has not right to sell the stocks with the permission

of bank.

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MCB Bank Ltd

FOREIGN EXCHANGEEncyclopedia Britannic defines Foreign Exchange as “a system by

which commercial nations discharges their debts to each other”.

Nature has granted its wealth unevenly

Need of Imports & Exports

Because no international Money unit exists

IN MCB

This department works like general banking department with the

difference that it deals in foreign currencies like US ($) and Pound

Sterling, Dutch Mark (DM), Euro and Japanese Yen (Y). In MCB Bank

Khanewal deal in froiegn currency.

FOREIGN CURRENCY ACCOUNTS

These accounts can be operated foreign national and Pakistani

National. The foreign currency department deals with the following

types of accounts:

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MCB Bank Ltd

Current account

Saving bank account

Dollar Khushali account

Term deposit

Foreign accounts are convertible on floating rate available to the bank.

The account holder is free to operate the account. To the extent of

available balance, for remittance any where in the world in the world

and for whatever purpose. Remittances in any convertible foreign

currency can be accepted, these remittances will however be converted

into US $, pound sterling, DM and Japanese Yen at the ruling rate

before crediting to these foreign currency accounts.

Travelers cheques, drafts, telegraphic transfers and pay orders are

accepted for deposit. The interest earned on these deposits (saving

accounts and term deposits) is credited in foreign currency and is also

remittal freely. The interest earning is exempted from income tax and no

Zakat deductions are made from the account. The balances in these

accounts are freely transferable anywhere. No permission for the

remittances from State Bank of Pakistan is required. Traveler cheques

can be issued to the extent of deposit in the account.

Term Deposit Accounts

Issued in US $ and sterling

Duration of 3 months

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MCB Bank Ltd

Interest in paid at maturity

Dollar Khushali Account

This scheme is introduced by MCB is 1994. It is service oriented

scheme is US dollar Currency. This account can be opened by all

Pakistani and Foreign national residing in Pakistan or abroad but in

1998 Govt freeze these A/Cs. Now this type called frozen A/Cs (DKA).

Features

Profit is paid on daily basis.

Conversion in Rs. From dollar through FEBC.

No restriction on number of withdraw

No Deduction of Zakat & Income tax

Minimum balance to open US $ 100.

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MCB Bank Ltd

STRENGTHS WEAKNESSES OPPORTUNITIES

THREATS (SWOT) ANALYSIS

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MCB Bank Ltd

STRENGTHS

MCB BANK one of the largest financial institutions of Pakistan with

high share of customer.

MCB BANK has an extensive domestic branch network of 1000

(according to the latest data) branches located all over Pakistan. The

Bank also has a presence in 07 international branches.

MCB BANK cash provision as percentage of non performing loans

equal to 60% .

Highest share price Rs. 351 in month of July, 2007 in Pakistan

banking history.

WEAKNESSES

MCB BANK staff especially at lower considers their work as burden.

They usually waste time in other task a part in performing their duty.

The general out look and interior layout of branches are not as

required according to modern banking

MCB BANK bearing up large burden in running those branches,

which are not producing any income but keep on adding

expenditure.

MCB BANK is relying on its traditional sources of income it has not

taken benefit from innovation in banking like introducing retail

banking or consumer banking and using any type of scheme to

generate more deposits and producing more advances.

MCB BANK is far behind in offering modern banking facility like

automated teller machines then other commercial bank in Pakistan

as only 102 branches in all over country have this facility.

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MCB Bank Ltd

MCB BANK has only 389 on line branches and only 129 branches

working on Symol (Real online system). While from remaining

branches data gathering is time consuming, and not fool proof.

Quantum of settlement within different branches is pending because

of this updating daily record is becoming very difficult.

In MCB BANK, most of the time merit not has importance in hiring of

employees. Such practices are black spot on the face of bank and

resulted big losses and fraudulent acts by MCB BANK own

employees.

OPPORTUNITIES

Reorganizing efforts going on in the MCB BANK has open many

opportunities for MCB BANK to grow. MCB BANK current management

has boarder vision. They have taken steps to improve customer

services, streamline internal procedure and creating a delectating

climate for technology initiative.

To achieve above mention objective they have created operation group

Starting of the retail banking initial working.

Setting of target for of making at least 300 Symbol branches country

wide on line last of 2008.

Closing of all those branches, which are burden on MCB BANK.

Management to offer specialized services to major corporate

including advisory and debt syndication introduces the concept of

relationship manager.

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MCB Bank Ltd

Comprehensive training programs has been develop to up grade the

core banking skills of the existing staff as well as integrate high

quality hiring.

To improve the motivation of staff a merit-based culture is being

promoted. Through overhauling the manpower recruitment

preservation and performance appraisal system.

These actions taken by current management provide a great

opportunity for MCB BANK for making it future prosper and can make

MCB BANK not less than any modern commercialize bank in Pakistan.

THREATS

Following are the major threats which MCB Bank is facing:

Major threats MCB BANK facing is from its competitor especially

from nationalized commercial bank. In which NBP is on the top of the

list, The Bank gets the all big accounts of Govt.

Retail banking and consumer banking resulting in the products such

as credit cards, housing finance and automobile finance lending to

small individual consumers, and purchases of automobiles, housing,

and consumer goods are generally made on a cash basis. These are

causing another threat, if not counter will result in significance loss of

customers.

Recently banks and other financial institutions have introduced

innovative schemes to attract deposits, like gift checque scheme by

Bank Alfalh Ltd. These schemes offer prizes on short and long term

fixed deposits, through lucky draws.

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MCB Bank Ltd

Now banks are using technology which covers the distance no

matter how far away any one, through a satellite based, on-line real-

time banking system and by offering telephone banking, electronic

funds transfer, E-Banking and other modern facilities.

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MCB Bank Ltd

SUGGESTIONS FOR MCB BANK LTD.

MCB BANK major fault is that wasn’t keeping its pace with

on going changing in banking industry unlike other bank.

Now this bank combining all it power and trying to approach

other banks.

Latest reorganizing efforts are necessary to make it cost

effective also making its facility accordingly to modern

banking. These must continue.

Bank management has to put its all effort to change the

prevailing culture of the bank and to put the foundation

stone of business oriented culture. In which employees give

important to the bank and its customer.

To attract the customer in the future MCB BANK have to

make extensive effort to give facilities of retail and

consumer banking. Plus the technology in the banking

which will be necessary for future banking is another week

area need to be stressed.

The outlook and interior lay out of the branches is another

thing which needs to be improved.

The procedure of taking services from the bank must be

made easier and straight forward not involving long difficult

procedure for simple task.

To remain in the market bank need to be vigilant in the

eyes of customer. One way is through promotion efforts,

so that people aware about he services of the banking and

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MCB Bank Ltd

any addition which the bank as made in the portfolio of its

services.

SUGGESTIONS FOR MCB BANK KHANEWAL

High demand of ATM machine here due to competition with

other banks.

Better located building having more space for customer

Change token system for payment of cheques with computer

system.

Better environment through better relations between staff

members.

Basically Khanewal is an agriculture city no any industry in

Khanewal city so, need a strong Agri Lone Department for this

more staff required for this department.

No Human Resources Department should be here in order to

motivate and trained the employees. I have noted some mistakes

of the new staff are due to not any training program for them in

the beginning.

The bank has problem of staff shortage. The new officers need in

Account department, Agri department and Credit department.

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MCB Bank Ltd

CONTACT PERSONS IN MCB BANK KHANEWAL

Mr. Ejaz Ahmad Nadeem Manager

Cell No. 0300-6887024

Mr. Ajmal Toroo Manager Operation

Cell No. 0345-7410033

Office # 1) 065-2554762

2) 065-2558762

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