Shoaib Report on MCB

7/31/2019 Shoaib Report on MCB

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Chapter One

Introduction of Banking Industry

What is Bank?

By G.W. Gilbert,

"A banker is a dealer in capital or more properly a dealer in money. He is an

intermediate party between the borrower and the lender. He borrows from one party and

lends to another."

Under Banking Companies Ordinance 1962, {S: 3(B)}

"Banker means person transacting the business of accepting for the purpose of

lending or investment, of deposits of money from the public, repayable on demand or

otherwise and withdraw able by cheque, draft, order or otherwise and includes any PostOffice Savings Bank."

Banking is one of the most sensitive businesses all over the world. Banks play very

important role in the economy of a country. Banks are guardian to the assets of the general

stacks. The banking sector plays a noteworthy role in a modern world of money and

economy.

Evolution of Commercial Banks in Pakistan

The country started without any worthwhile banking network in 1947 but witnessed

exceptional growth in the first two decades. At the time of independence, there were only

two banks, which were incorporated in undivided India and whose owners were Muslims;

they opt to shift their Head Offices in Pakistan and with the founding of SBP, the other

banks also came into existence and by 1973 number of banks increased to fourteen in

Pakistan.

Commercial Banking in Pakistan:

o Commercial banking in Pakistan can be divided in three phases and

Commercial banks operating in Pakistan can be divided into four categories:

o Nationalized Commercial Banks (NCBs),

o Privatized Banks,

o Private Banks

o Foreign Banks.

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Pre-Nationalization Phase

There were only two Muslim banks in Indo Pak before partition one of them was

Habib Bank Ltd. (establish in1941 at Bombay) and second was Australia Bank Ltd.(establish in 1944 at Lahore). Firstly at time of independent Reserve Bank of India was

acting as central bank for both countries and same currency notes were used in both

countries. But Reserve Bank of India was unfair. After that some steps taken which built a

strong banking industry in Pakistan these are here under:

o Establishment of State Bank of Pakistan (SBP) on 1st July, 1948.

o Establishment of National Bank of Pakistan in November, 1949

o SBP Act (1956)

o Banking Companies Ordinance 1962

Nationalization Phase

In 1974 all Pakistani banks were nationalized through Nationalization Act 1974.

Under this law all Pakistani banks became a public property. All small banks were merged

in bigger banks to create 5 major Pakistani banks Pakistani banks. These banks were to

control by Pakistan Banking Council. There are still controversies about this act of

government as whether it contributed in success of failure of banks.

Post Nationalization Phase

In 1990 the government decided to denationalize all the nationalized institutes. For

this purpose, amendments were made to Nationalization Act 1974 and two nationalized

banks were privatized. Along with this a permission to open banks in private sector was

also granted. The rules regarding establishment of new banks and for

incoming foreign banks were also relaxed.

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Chapter Two

About the Organization

MCB in Brief

MCB is one of the top banks of Pakistan with a deposit base of Rs. 368 Billion and

total assets over Rs.500 Billion. Incorporated in 1947, MCB soon earned the reputation of a

solid and unadventurous financial institution managed by emigrant executives. In 1974,

MCB was nationalized along with all other private sector banks. The Bank has a customer

base of approximately 4 million, a nationwide distribution network of over 1,000 branches

and over 450 ATMs in the market.

Vision Statement

To be the leading financial services provider, partnering with our customers for a

more prosperous and secure future.

Mission Statement

We are a team of committed professionals, providing innovative and efficient

financial solutions to create and nurture long-term relationships with our customers. In

doing so, we ensure that our shareholders can invest with confidence in us.

Values of MCB

Integrity

We are the trustees of public funds and serve our community with integrity. We

believe in being the best at always doing the right thing. We deliver on our

responsibilities and commitments to our customers as well as our colleagues.

Respect

We respect our customers values, beliefs, culture and history. We value the

equality of gender and diversity of experience and education that our employees

bring with them. We create an environment where each individual is enabled to

succeed.

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Excellence

We take personal responsibility for our role as leaders in the pursuit of

excellence. We are a performance driven, result oriented organization where

merit is the only criterion for reward.

Customer Centricity

Our customers are at the heart of everything we do. We thrive on the challenge

of understanding their needs and aspirations, both realized and unrealized. We

make every effort to exceed customer expectations through superior services

and solutions.

Innovation

We encourage and reward people who challenge the status quo and think

beyond the boundaries of the conventional. Our teams work together for the

smooth and efficient implementation of ideas and initiatives.

Business Volume Corporate Information

MCB Bank Limited is Public Limited Company listed on Karachi, Lahore &

Islamabad Stock Exchanges in Pakistan, under license number BCD (1) 17-66 dated 8th

December 1966 and its external Auditors KPMG Taseer Hadi & Co. (Chartered

Accountants) total number of shareholders - as of December31-12-2009 is 691,104,527.

Historical Overview

Formation:

MCB (formally Muslim commercial bank limited) Bank Limited completed his 64

years in the field of banking quite successfully. MCB was formed in 1946 in Calcutta. The

registered office of the bank transferred to Karachi in 1948.

Achievements:

MCB Bank Limited won Best Bank in Pakistan Euro money awards seven times in

2000, 2001, 2003, 2004, 2005, 2006 and 2008, Best Domestic Bank in Pakistan five times

2004, 2005, 2006, 2008 and 2009, Asset award Best Domestic Bank in Pakistan

2009 and Euro money awards Best Bank in Asia 2008.

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Change of Name:

The name of bank has been changed from Muslim Commercial Bank Ltd to MCB

Bank Ltd.

Shifting of Head Office:

In 2008 the head office of MCB was shifted to Lahore in a newly constructed

building, namely MCB House, located at Jail Road, from Karachi.

Principles of Performance

Customer Focus

Over the years MCB has developed strong relationships with its customers by

understanding their needs and treating them with respect, dignity and importance. Thedriving force behind its commitment and services is its focus on customers, ensuring that it

not only meets, but exceeds their expectations.

Quest for Quality

MCB strives to achieve excellence by ensuring that every moment of our time is

spent in adding value, making sure that we do things right, first time, and every time. With

this quest for quality, MCB has always taken initiatives in bringing banking into a new

arena; from cash to the convenience of plastic; from branch banking to internet banking

and from face-to-face customer interaction to online accessibility.

Employees Respect

MCB encourages diversity and treat each of our employees with fairness. MCB

gives constructive feedback for their continuous development and seek suggestions from

all employees for further improvement. The bank ensures that quality performance is

acknowledged and rewarded and exercise utmost responsibility in decision-making with

regards to our employees.

Team Based Approach

MCB believes in achieving its Mission and Vision by working together as a

combined group. MCB treats its employees as its internal customers and ensure that the

requirements of internal customer focus are always met. Equipped with in-depth product

knowledge, and recognizing the strengths in each individual, the bank strives for optimum-

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results from our co-workers and bringing out peak performances by working towards

common goals and objectives in today's dynamic banking environment.

Good Corporate Citizenship

MCB seeks to continuously improve the quality of life in our communities. The

bank realizes that it has a responsibility to the society in which it operates and it seeks ways

of playing a positive role for the betterment of the community at large for a progressive

environment, better living and a brighter future.

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Chapter Three

Functions of MCB Limited

Finance system of the bank:

The financial system of MCB Bank primarily consist of two pillars which are also

may be components of other commercial banks financial system. A Simple Chart of

finance system is as under:

Accepting Deposits:

The main primary function is to accepting the deposits from customer it is also

main source of funds for bank. There are different types of accounts on which deposits are

accepted by bank. These are the component of financial system which termed as severs or

lender in finance system of MCB Bank:

o Households

o Partnership firms

o Public/Private Companies

o

Financial Institutions/ Bankso Foreigner

o Government/ SBP

Finance System

Depositors:

HouseholdsBusiness FirmsForeigner

Government

Borrower:

HouseholdsBusiness FirmsForeignerGovernment

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Granting Loans:

The another function is to granting loans to borrower or spender for use it is also

main source of income for the MCB Bank like other commercial bank. There are different

types of loans which granted by the bank.

These are also components of financial system of MCB Bank and termed as

borrower or spender:

o Households

o Partnership firms

o Public/Private Companies

o Financial Institutions/ Banks

o Foreigner

o Government/public project financing

A broader approach of MCB Bank Limited financial system can also include source

of funds and allocation of funds. This approach is more prominent then above one. Here

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under is a chart is given:

Sources of Funds

Depositors:

Like all commercial bank deposits are main source of MCB Bank and recently in

2009 total amount of deposits are 363,258,355, 000 rupees. There are different types of

deposits which as under:

Types of Deposits In Rupees

Fixed deposits 62,651,531, 000

Financial System

Sources of Funds:

DepositorsShareholdersFinancial institutionsSBP

Allocation of Funds:

LoansAdvancesSecuritiesOthers

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Saving deposits 173,797,078, 000

Current accounts 123,898,324, 000

Margin accounts 2,910,655, 000

Others 767, 000

Total amount 363,258,355, 000

Shareholders:

Equity is also main source of funds for MCB Bank and recently in 2009 equity is

rupees 6,911,045, 000.

Financial Institutions:

MCB Bank another sources of fund is financial institutions and in recently 2009

total amount of financial institutions deposits are rupees 4,346,356, 000. Interbank

transactions are also a valuable source under the head of financial institutions.

State Bank of Pakistan:

SBP remains the source of funds for all commercial bank and MCB Bank can also

can utilizes the funds from SBP which is lender of last resorts for all commercial bank.

Allocation of Funds

Loans:

MCB bank allocate the funds for profit generation it is also proved to be the best

items in funds allocation and recently in 2009 total markup earns through it is rupees

36,212,097, 000.

Advances:

Short-term loans are also a valuable source of incomes so MCB Bank also allocating the

funds in it. These may include:o Cash Credit

o Overdraft

o Discounting of bills

Securities:

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MCB Bank also makes investment in securities and in recently 2009 total earning

from investing in securities are rupees 13,894,162, 000.

Others:

MCB Bank also allocates his funds many other activities for generating revenue

these may include:

o Repurchase agreement

o Interbank transactions

o Project Financing

Electronic Data for Decision Making

MCB Bank has good IT based information system which is used for decision

making so it enhance the overall capabilities by providing information timely and accurate.

MCB use different MIS and KMS software for communication purpose all over the

Pakistan within its branches and with SBP Bank.

Chapter Four

Products and Services of MCB

Banking Sector Overview

Financial sector in Pakistan is going through a fast-paced transition as new groups

were buying out foreign banks operations in Pakistan. The number of listed banks is also

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increasing. While the income from core banking activity has increasing due to higher

business volume, earnings are also expected to improve due to ventures into consumer

finance, housing finance and enhanced lending to the agriculture sector.

In just four years the banking industry has expanded tremendously and now there

are more than two dozen commercial and investment banks operating in the country.

Commercial banks in the private sector had performed well since their inception,

registering overall growth in the deposit base and profits. The banks also managed to

maintain a healthy credit portfolio.

Foreign banks have a strong presence in all major cities and are targeting high net

worth individuals and blue chip companies. Their strategy is quite successful as they

account for about 34 percent of total sector profits, despite having only 15 percent of

deposits and 16 percent of advances.

Products and Services

Personal Banking

Deposit Accounts

Khushali Bachat Account

Khushali Bachat Account, a Rupee savings account is one of MCB Banks most

popular products. Due to the low initial deposit, the account can be opened by people from

all walks of life and still avail the facility of daily product profit calculation.

Mahana Khushali Bachat

MCB Monthly Khushali Scheme provides you with a steady income every month.

Just purchase a Monthly Khushali Certificate and you will enjoy a steady income of your

total deposit every month.

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Pak Rupee Savings Account

MCBs Pak Rupee Savings Account offers you attractive returns on your Pak

Rupee investment. In addition, you have access to a countrywide ATM network convenient

cash accessibility 24 hours a day. The facility also provides you with unlimited daily

transactions with a limit on maximum withdrawal amount through the ATM machines.

Pak Rupee Current Account

MCBs Pak Rupee Current Account offers you the convenience of unlimited

withdrawals i.e. access to your funds whenever you want without any notice. There is no

limit on the number of transactions you make in a day plus you can avail finance facility up

to 75% of the total deposit. In addition, you have access to a countrywide ATM network

convenient cash accessibility 24 hours a day. The facility also provides you with unlimited

daily transactions with a limit on maximum withdrawal amount through the ATM

machines.

Pak Rupee Term Deposit

MCB Pak Rupee Term Deposit gives a higher rate of return. It gives you choice of

1 month, 3 months, 6 months, 1 year, 2 years, 3 years, 4 years and 5 year term deposits.

Saving 365

The MCB Saving 365 calculates profits on a daily product basis and gives you the

facility of unlimited withdrawals.

Foreign Currency Savings Account

MCBs Foreign Currency Savings Account offers you attractive returns on Foreign

Currency investment. An investor can invest in any of the four currencies i.e. US Dollar,

UK Pound Sterling, Japanese Yen or Euro. Foreign currency account is exempted from

Zakat and withholding tax

Foreign Currency Current Account

MCBs Foreign Currency Current Account offers you the convenience of unlimited

withdrawals i.e. access to your funds whenever you want without any notice. There is no

limit on the number of transactions you make in a day.

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MCB Foreign Currency Term Deposit

MCB Foreign Currency Term Deposit gives a higher rate of return. It gives the

choice of 1 month, 3 months, 6 months, 1 year, 2 years, 3 years, 4 years and 5 year term

deposits.

Dollar Khushali Account

The Dollar Khushali Account, a Dollar based account was introduced in 1993 at

selected MCB Bank branches. Today, you can open a Dollar Khushali Account at over 200

branches in Pakistan.

Loan Products

MCB Business Sarmaya

MCB Business Sarmaya is the best Running Finance facility against your

residential property which empowers you to manage your business dealings better. So act

today and get MCB Business Sarmaya and thus improve your business, avail lucrative

opportunities and expand your business, with absolute satisfaction of cash flows.

MCB Car4u

Life is like a chess board. You plan your career options. You analyze your business

moves. But when you really want to improve your life, you make a power move. MCB

CAR4U Auto Finance is the power move that assists you in more ways than you ever

imagined. It is affordable, with lowest mark up, flexible conditions, easy processing andabove all, no hidden costs.

MCB Pyara Ghar

Some destinations require a long wait. Like waiting for a home of your own. But

with MCB Pyara Ghar it is now easy to step into your home and start living a real life.

MCB Pyara Ghar is an ideal Home Finance from your own bank that lets you Purchase,

Renovate or Construct your home the way you have always wanted. Having your own

home was never so easy

Easy Personal Loan

MCB Easy Personal Loan provides you with the financial advantage to do things

you've always wanted to but never had the sufficient funds for. Take that much-needed

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holiday. Buy a car. Refurnish your house. Purchase a new TV. Finance a better education

for your children.

MCB Master Card

Since the beginning of time, people have tried to find more convenient ways to pay,

from gold to paper money and cheques. Today, money is moving away from distinct hard

currencies and towards universal payment products that transcend national borders, time

zones, and, with the Internet, even physical space. Plastic or "virtual" money, credit, debit,

and electronic cash products, inevitably will replace cash and cheques as the money of the

future.

MCB Rupee Traveler's Cheques

MCB Rupee Traveler's Cheques were first introduced in 1993 as safe cash for

traveling and travel related purposes. The product has been extremely popular and is

preferred over cash by customers while traveling and in all walks of life.

MCB Rupee Traveler's Cheques- The safest way to carry Cash

Corporate Banking

Cash Management Services

MCBs network of over 1000 branches in Pakistan enables it to collect and disburse

payments efficiently with its cash management services. This also enables it to offer you a

choice of paper based or electronic fund transfer solutions including collection amounts,cross branch online transactions etc.

Working Capital Loans

Based on the customers specific needs, the Corporate Bank offers a number of

different working capital financing facilities including Running Finance, Cash Finance,

Export Refinance, Pre-shipment and Post- shipment etc. Tailor- made solutions are

developed keeping in view the unique requirements of your business.

Term Loans

MCB offers Short to Medium Term Finance to meet capital expenditure and short

term working capital requirements of our customers. The loans are structured on the basis

of underlying project characteristics and cash flows of the business.

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Trade Finance Services

Under Corporate Banking MCB offers trade finance services that include an entire

range of import and export activities including issuing Letters of Credit (L/Cs), purchasing

export documents, providing guarantees and other support services.

Others Products and Services

MCB Visa Credit Card

MCB offers a complete suite of Classic, Gold and Platinum Visa Credit Cards

focusing on providing, superior service, travel privileges & shopping pleasure.

MCB Smart Card

MCB Smart Card is the key that enables access to convenient banking services.

MCB Rupee Travelers Cheque

Rupee Travelers Cheque, being the market leader, is the most widely accepted way

to pay cash for travel-related purposes.

MCB ATMs

MCB has one of the nation's largest ATM networks with over 450 ATMs and still

growing.

MCB Mobile ATM

MCB Mobile ATM not only provides world class banking service but also provide

convenience.

MCB SMS Banking

SMS anytime to get information regarding balance, mini statements and credit card

related information once your card is linked.

MCB Mobile

MCB Mobile is a quick easy and secure way to recharge mobile phones, transfer

money, pay bills and do much more.

MCB Call Center

Theres no easier way to bank than the new enhanced 24/7 MCB Call Center,

which blends innovation and convenience to provide Banking Services that go beyond

expectations.

MCB Investment Services

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MCB Investment Services offer distribution of mutual funds managed by the

leading fund managers of Pakistan

MCB Advisory Services

MCB also provide financial advisory services, commercial structuring support and

access to capital resources to help companies successfully finance their business/project.

MCB Lockers

Lockers of different capacities are available nationwide.

MCB Banc assurance

MCB Banc assurance has created a one-stop shop for all your financial and

insurance needs.

MCB Local Rupee Drawing Arrangement

Transaction Banking Department at MCB provides Local Rupee Drawing

Arrangement, a product for small banks and financial institutions.

MCB Home Remittance

MCB Home Remittance provides a faultless inflow of foreign remittances credited

in the beneficiarys account within minutes.

MCB Quasi Equity/Hybrid Instruments

MCB places a group of debt that has some uniqueness of equity such as being

unsecured, subordinated or with a budding equity upside.

MCB Equity Capital Raising

MCB offer capital for their clients by offering common or preferred equity to

public or private investors, through initial public offers, offers for sale, rights issues and

private equity placements

MCB Islamic Banking

MCB Islamic Banking provides Reba Free and Sarah Compliance services to a

variety of customer segments

Virtual Internet Banking

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MCB Virtual Internet Banking offers you the convenience to manage and control

your banking and finances when you want to, where you want to. MCBs Virtual Internet

Bankingfacility is simple and secure. And its free of cost. With MCB Virtual Internet

Banking you can access any of the banking services, 24 hours a day, 7 days a week and

throughout the year. MCB Virtual Internet Banking offers a wide range of online services

which makes your banking accessible anytime and from anywhere.

Detailed Account Summary of all listed accounts.

Mini-statements of each of the listed accounts showing recent transaction history

for that account(s).

Statement-by-Period of each of the listed accounts, based on the period specified.

Immediate or Scheduled Transfer of Funds between your own accounts, as well

as to third-party accounts setup as beneficiaries, maintaining accounts with

MCB.

Scheduling of One-Time as well as Recurring Funds Transfers.

Payment of utility bills for registered Utility Companies.

Immediate or Scheduled Bills Payment. Scheduling of One-Time as well as

Recurring bill payments. Option for Full or Partial payment based on the

payment conditions specified by a particular Utility Company.

Bulk Salary Transfer for Corporate Customers, to facilitate them in paying salary

to the corporate employees, who maintain accounts with MCB.

Bulk Funds Transfer for Corporate Customers.

Cheque Book Request for any of your listed accounts.

Payment/Transfer Alerts for reminding, in advance, prior to the processing of

specified payments and transfers.

Personal Alerts for reminding of pre-specified events and occasions.

Islamic Banking

Deposit Schemes

For customers who are looking for a deposit opportunity where they can purse their

funds and reap Halal returns on it, we offer the following products:

Al-Makhraj Saving Account

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Al-Makhraj Ianat Account

Al-Makhraj Term Deposit

Fund Based Facilities

Ijarah Products

MCBs Islamic Ijarah, analogous to the English term 'leasing, is based on the

Ijarah wa Iqtina concept which means the sale of the asset to the lessee after the Ijarah

has matured. Under this scheme, MCB will be the owner of the asset, and the customer

(lessee) will be given the asset to use for a certain period of time in return for monthly

rental payments. MCB will give a separate unilateral undertaking that it will offer to sell

the asset to the customer (lessee) at the maturity of the Ijarah agreement at a price that may

be equal to the security deposit amount, hence the term Wa Iqtina.

Types of Ijarah

Car Ijarah

Equipment Ijarah

MCBs Competitive Strategies

To be competitive the Bank has further reinforced its position in the Consumer

Banking arena by streamlining and re-launching the consumer financing products and

introducing more convenience based solutions. With the re-launch of auto finance and

house finance products, the Bank pushed the products with full thrust. The Bank has also

launched a running finance facility against mortgage of property.

Technology continued to play an important role in improving and expanding

product offerings. The Bank introduced more IT based products to cater to the changing

lifestyles and needs of the customers. MCB Virtual-Internet Banking was launched with

wide ranging banking solutions for the customers ranging from individual to corporate

customers and it has become the most preferred Internet banking solution in the country.

MCB also had the privilege of being the first Bank in Pakistan to launch the comprehensivebill payment facility through its alternate delivery channels which include Internet

Banking, ATMs and MCB Call Centre, currently with six payment partners. Similarly, the

Bank also took initiatives to increase the usage of debit facility. To provide timely and

updated information, MCB has also provided a new look to its website which is user

friendly and considerably easy to browse.

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The Islamic Banking initiative has been very successful in attracting new customer,

both individuals and companies. Similarly, those relationships, which were confined only

to current account facility, have grown into stronger business relationships. The branch

network was expanded to Lahore and Multan during the last year and recently been

extended to Hyderabad and Faisalabad. The Bank plans to further expand its Islamic

Banking branch network to other metropolitan areas and also to introduce new sharia

compliant banking solutions to a wider range of customers for satisfying their individual

and business needs.

Some wide-ranging new strategic initiatives were also taken up which will be

important for the Bank in years to come. A private company has been formed in Hong

Kong (fully owned subsidiary of MCB) in partnership with Standard Chartered Bank,

handling trade transactions of select countries in the Asia-Pacific region. It is projected to

earn US$ 1 million in its first year of operations. To increase its international presence, the

Bank will be opening its representative office in Dubai and entering into major strategic

alliances with banks in the UAE/ especially for marketing our consumer banking products

to non-resident Pakistanis. Furthermore, feasibility is also being carried out for entering

other international markets.

MCB's operations continued to be streamlined with focus on rationalization of

expenses, re-alignment of back-end processing to increase productivity, enhancement of

customer service standards, process efficiency and controls. The Bank has taken the lead in

introducing the innovative concept of centralizing Trade Services in the country by

providing centralized foreign trade services to branches with a view to improve efficiency,

expertise and reduce delivery cost.

Management of Human Resources has been one of our core focus areas. MCB is

committed towards attracting, retaining and motivating outstanding people. Challenge for

MCB is to provide an environment in which employees can better realize their potential.

The Bank introduced 'reward for performance' where high potential officers were identified

and rewarded accordingly. In view of the competitive environment, the Bank is focusing on

performance and introducing a more robust performance management system. MCB is also

strongly committed to training its staff at all levels.

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The Bank will also be implementing the full suite of the latest version of

SYMBOLS Version 8. MCB Bank will run SYMBOLS e Finance modules to deliver

personalized services to its customers over multiple delivery channels, while SYMBOLS

Enterprise Operations Center will serve as its core banking transaction-processing engine.

By implementing SYMBOLS, MCB Bank aims to raise the level of its customer service

and its time to market in new product offerings for its three core banking businesses in

Corporate, Commercial and Consumer Banking - retaining its market leadership as

Pakistan's progressive Bank.

Chapter Five

Critical Analysis

Risk framework:

o MCB Bank has good risk framework a Risk Management & Portfolio Review

Committee is in place which has five members including chairman of the

committee. This committee is responsible for developing risk frame work

according to the guidelines of SBP.

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o Currently a centralized framework is apply by the MCB which is comply with

the guidelines of SBP I will discuss in detail where it applied for risk mitigation

of all types of risk faced by the bank in this dynamic environment. Here under

all types of risk which faced by the bank.

Risks faced by the bank

Systematic Risk:

In finance terms systematic risk are market risk, aggregate risk, or un-diversifiable

risk, is the risk associated with aggregate market returns. This risk should not be confused

with systemic risk because risk of loss from some shattering event that collapses the entire

financial system.

Unsystematic Risk:

In Finance terms unsystematic risk are specific risk, idiosyncratic risk, residual risk,

and diversifiable risk these are the company specific risk in a portfolio which is

uncorrelated with aggregate market returns. Here under some of these risk are as under:

Credit Risk:

MCB face credit risk it arises from dealings with individuals, corporate, financial

institutions, sovereigns etc.

Market Risk:

MCB face market risk which arises from changes in market rates such as Interest

Rates, Foreign Exchange Rates and Equity Prices etc.

Liquidity Risk:

MCB face also liquidity risk it terms as the ability to fund assets and meet

obligations as they become due.

Operational Risk:

MCB also face operational Risk such as loss resulting from an inadequacy or a

failure ascribable to people, processes, technology or external events.

Compliance Risk:

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MCB also face the compliance risk that is similarity between the company policies,

rules, and charges etc with SBP guidelines.

Reputational Risk:

In my opinion MCB may not facing reputational risk that is past bad conducts by

the bank and has good reorganization among the all commercial banks which are operating

in Pakistan.

Security risk:

MCB and its employees also face security risk it is a risk being occur illegal

activities of individuals or group from and outside the organization.

Security system

Above mentioned security risk is mitigate by establishing a security system. In head

office where I work has two components of the security system which are as under:

Security Guard:

In place of MCB where I spend my six weeks in training has a security department,

security guards are hired for mitigating the security risk.

MCB Computerized Card:

Every one in head office has a computerized card on which his detail are printed

but also it serve as security code that without it every door is closed for you because a chip

is in place in this card.

Management Information System

MCB has good information system in place which provides information needed to

manage organizations effectively. These are regarded to be a subset of the overall internal

controls procedures in a business, which cover the application of people, documents,

technologies, and procedures used by management accountants to solve business problems

such as costing a product and service.

Employees Integrity

Integrity of employees is significant and the most important element because

without it the business owner cannot count on receiving the results expected and

promised. MCB has proper code of Ethics and conduct signed by all the employees

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acts as a guide for them in discharging their duties and sets out the standards of

good banking practice.

In MCB Bank high degree of good governance, transparency, culture of excellence

and accountability as well as ensuring the highest level of professionalism. Controls

and Compliance is an integral internal function and care is taken to ensure that all

activities are carried out in accordance with prevailing regulations so that the

interests of all our stakeholders are protected.

Loaning system

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

customers here under:

Customer:

A customer is a person which want to obtain loan from bank he contact with the

loaning and advances officer in branch where his account is open. A customer can be a

consumer, commercial or corporate.

Branches:

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o These three sets are one for customer, second for branch and third for the CRCD

which is also placed in CU.

o After the signature of customer set of these document are retained by the each

party.

Loan Granted:

Finally loan granted by the bank after completing these process DAC

(Disbursement Authoring Certificate) is issued by the approving authority and sent by the

CSU to branches then branches release approved amount.

Risk Mitigation Approaches

MCB Bank has good credit risk management framework and also mitigate his risk

by his RMG Risk Management Group. Risk mitigation is start when a customer contacts

any branch but MCB develop centralized risk mitigation approach. Here under the

introductions of RMG.

Risk Management Group (RMG)

The main purpose of RMG is to actually manage the companys risk. Risk

management is a structured approach to managing uncertainty through, risk assessment,

developing strategies to manage it, and mitigation of risk using managerial resources.

The RMG GROUP consists of four divisions that work under it. These are as

follows:

o Credit Review Division

o Credit Risk Management Division

o Credit Management Division

o Credit Risk Control Division

Credit Review Division (CRD)

The purpose of this department is to review the credit proposals accompanied with

audited financials of both corporate and commercial clients evaluated by the business units.

The major tasks of the CRD include:

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o Financial statement analysis including profit and loss analysis, financial

statement analysis and Balance sheet analysis

o Credit risk rating of the client

o Drafting of various connivance ( conditions of loans) within approval of

finance considering the macroeconomic situations and risk level of client

o Finally issuing the approval finance

Credit Risk Management Division (CRMD)

The basic purpose of CRMD is to ensure policy making regarding credit risk within

the risk management, issuance of circulars on time to time as well on need basis. They areresponsible to draft policies, manuals, salvage lists and various risks frameworks required

for the implementation of Basel II parameters

Credit Management Division (CMD)

It is basically responsible to report data to SBP. They are responsible to run various

data modules for checking and implementing functions of unique obligor. They are

responsible for the integration of various MIS management function systems working

simultaneously within the various divisions and groups of the bank. They had also

developed credit risk management information system in order to enhance the regulatory

requirements of central banks as well as developing the reports required for the analysis by

the senior management and BODs.

Credit Risk Control Division (CRCD)

A Sub-division of Credit Risk Management Group with a function of mitigating

risks associated with credit facilities granted to customers

Chapter Six

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Financial Analysis of MCB

Consolidated Statement of Financial Position

As at December 31, 2010 2010 2009(Rupees in 000)Assets

Cash and balances with treasury banks 6 45,407,264 38,774,871Balances with other banks 7 1,551,518 6,077,354Lendings to financial institutions 4,401,781 3,000,000Investments net 215,747,844 169,484,647Advances net 254,565,471 253,248,265Operating fixed assets 21,061,787 18,099,010Deferred tax assets net ---- ---Other assets net 27,746,198 23,057,731

570,481,863 511,741,878

Liabilities

Bills payable 10,265,537 8,201,090Borrowings 25,684,593 44,662,088Deposits and other accounts 431,295,499 367,581,075Subordinated loan Liabilities against assets subject to finance lease Deferred tax liabilities net 5,146,733 3,201,756Other liabilities 16,090,374 15,782,589

488,482,736 439,428,598

Net assets 81,999,127 72,313,280Represented by:Share capital 7,602,150 6,911,045Reserves 40,164,526 38,387,656Unappropriated profit 23,458,429 17,821,670

71,225,105 63,120,371Minority interest 2,698 71

71,227,803 63,120,442Surplus on revaluation of assets net of tax 10,771,324 9,192,838

81,999,127 72,313,280

Consolidated Profit and Loss Account

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For the year ended December 31, 20102010 2009

(Rupees in 000)Markup / return / interest earned 54,829,365 51,621,911Markup / return / interest expensed 18,027,372 15,835,581

Net markup / interest income 36,801,993 35,786,330

Provision for diminution in the value of investments net 444,476 1,484,218Provision against loans and advances net 3,100,594 5,796,527Bad debts written off directly 52,047 41,576

3,597,117 7,322,321

Net markup / interest income after provisions 33,204,876 28,464,009Nonmarkup / interest income

Fee, commission and brokerage income 4,133,109 3,461,374Income earned as trustee to various funds 22,714 18,029Dividend income -- --

450,492 342,132Income from dealing in foreign currencies 632,819 341,403Gain on sale of securities net 410,618 806,388Unrealized gain on revaluation of investments -- --classified as held for trading 40,832 11,510Other income 751,058 774,017

Total nonmarkup / interest income 6,441,642 5,754,853

39,646,518 34,218,862Nonmarkup / interest expenses

Administrative expenses 12,327,496 10,235,366Other provision net 88,261 142,824Other charges 990,638 691,722

Total nonmarkup / interest expenses 13,406,395 11,069,912Share of profit of associated undertaking 269,513 200,196Extra ordinary / unusual item

Profit before taxation

26,509,636 23,349,146Taxation Current year 8,053,368 7,725,787 Prior years (2,232,933) Deferred 1,554,809 2,190,425Share of tax of associated undertaking 29,333 464

30 9,637,510 7,683,743

Profit after taxation 16,872,126 15,665,403Loss / (profit) attributable to minority interest 1,893 (4)

Profit attributable to ordinary share holders 16,874,019 15,665,399

Unappropriated profit brought forward 17,821,670 11,065,723

Transfer from surplus on revaluation of fixed assets net of tax 21,879 22,374

17,843,549 11,088,097

Profit available for appropriation 34,717,568 26,753,496

(Rupees)

Basic and diluted earnings per share after tax 22.20 20.61

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Consolidated Statement of Comprehensive Income

For the year ended December 31, 2010

2010 2009

(Rupees in 000)Profit after tax for the year 16,872,126 15,665,403Other comprehensive incomeEffect of translation of net investment in foreign branches

and subsidiaries

Equity shareholders of the Bank 89,552 65,805 Minority interest 70

89,622 65,805

Comprehensive income transferred to equity 16,961,748 15,731,208Components of comprehensive income not reflected in equity

Net change in fair value of available for sale securities 216,561 3,068,752Deferred tax (74,473) (571,913)

142,088 2,496,839

Total comprehensive income for the year 17,103,836 18,228,047

Six Years Financial Summary 2005 - 2010(Rupees in Millions)

2010 2009 2008 2007 2006 2005

ProfitsMark-up / return earned 54,821 51,616 40,044 31,787 25,778 17,756

Mark-up / return expensed 17,988 15,837 11,561 7,866 4,525 2,781

Fund based income 36,834 35,779 28,483 23,921 21,253 14,975

Fee, Commission, brokerage & FX income 5,310 4,409 4,537 4,328 3,573 4,406

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Dividend and capital gains 956 1,234 1,255 2,120 1,418 1,348

Total income 43,099 41,422 34,275 30,369 26,244 20,728

Operating expenses 13,160 10,801 8,365 6,000 6,549 6,638

Operating profit before tax and provision 29,938 30,620 25,910 24,369 19,695 14,090

Provisions / write-off 3,685 7,465 4,042 3,061 1,194 1,072

Profit before tax 26,253 23,155 21,868 21,308 18,501 13,018

Profit after tax 16,873 15,495 15,375 15,266 12,142 8,922

Cash dividends 8,743 7,602 7,225 7,854 3,960 1,715

Bonus shares 760 691 628 - 819 853

Statement of Financial PositionAuthorised capital 10,000 10,000 10,000 10,000 6,500 6,500

Paid up capital 7,602 6,911 6,283 6,283 5,463 4,265

Reserves 40,163 38,386 36,769 34,001 24,662 9,055

Unappropriated Profit 21,416 15,779 9,193 5,131 5,531 4,990

Shareholders equity 69,181 61,076 52,245 45,414 35,657 18,311

Surplus on revaluation of assets - net of tax 10,024 8,664 6,191 9,706 5,188 5,424

Net Assets 79,204 69,740 58,436 55,120 40,844 23,734

Total Assets 567,553 509,224 443,616 410,486 342,108 298,781

Earning Assets 494,605 444,188 380,187 343,173 292,639 260,948

Gross Advances 274,144 269,722 272,847 229,733 206,848 188,140

Advances - net of provisions 254,552 253,249 262,135 218,961 198,239 180,323

Non-Performing Loans (NPLs) 24,544 23,239 18,269 10,725 8,571 8,396

Investments 213,061 167,134 96,632 113,089 63,486 69,481

Total Liabilities 488,349 439,484 385,180 355,366 301,264 275,046Deposits & other accounts 431,372 367,605 330,182 292,098 257,462 229,342

Current & Saving Deposits (CASA) 351,298 304,953 268,501 259,896 224,165 216,046

Borrowings 25,685 44,662 22,664 39,407 23,943 27,378

Interest bearing Liabilities 305,902 283,369 240,470 232,398 194,363 177,924

Contingencies and Commitments 136,246 119,922 266,251 213,317 160,843 80,427

Financial RatiosProfit before tax ratio (PBT/ total income) 60.91% 55.90% 63.80% 70.16% 70.49% 62.80%

Gross Spread (NIM/Interest Income) 67.19% 69.32% 71.13% 75.26% 82.44% 84.34%

Non interest income to total income 14.54% 13.62% 16.90% 21.23% 19.02% 27.76%

Income/ expense ratio (excl. provisions)Times 3.27 3.83 4.10 5.06 4.01 3.12

Return on average equity (ROE) 25.91% 27.35% 31.49% 37.66% 45.00% 64.87%

Return on average assets (ROA) 3.13% 3.25% 3.60% 4.06% 3.79% 3.20%

Return on Capital Employed (ROCE) 25.91% 27.35% 31.49% 37.22% 42.48% 58.12%

Earnings per share (EPS before tax) *** 34.53 30.46 28.76 28.03 24.34 17.12

Earnings per share (EPS after tax) *** 22.20 20.38 20.22 20.08 15.97 11.74

Gross Advances/ deposits ratio 63.55% 73.37% 82.64% 78.65% 80.34% 82.03%Net Advances/ deposits ratio 59.01% 68.89% 79.39% 74.96% 77.00% 78.63%

Breakup value per share

(excl. surplus on rev. of assets) *** 91.00 80.34 68.72 59.74 46.90 24.09


(excl. surplus on rev. of fixed assets) *** 91.71 80.86 65.96 61.84 49.12 26.41


(incl. surplus on rev. of assets) *** 104.19 91.74 76.87 72.51 53.73 31.22

Earning assets to total assets ratio 87.15% 87.23% 85.70% 83.60% 85.54% 87.34%

Weighted Average Cost of Deposits 3.96% 3.97% 3.03% 2.15% 1.19% 0.70%

CASA to Total Deposits 81.44% 82.96% 81.32% 88.98% 87.07% 94.20%

NPLs to Gross advances ratio 8.95% 8.62% 6.70% 4.67% 4.14% 4.46%

Coverage Ratio (Specific provision / NPLs) 77.13% 67.47% 54.17% 68.31% 69.46% 65.92%

Assets to Equity Times 8.20 8.34 8.49 9.04 9.59 16.32

Total Assets per share Times 7.47 7.37 7.06 6.53 6.26 7.00

Deposits to shareholder equity Times 6.24 6.02 6.32 6.43 7.22 12.53

Chapter Seven

My MCB Branch (1509)

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Muslim Commercial Bank Ltd branch Bagh (Code 1509) is situated in Zaman

Chowk Bagh, which is well-known commercial area in Bagh city. MCB Bagh branch is

facilitating great number of population in Bagh. As a consequence of location MCB Bagh

branch has a great number of customers.

Summary of Departments in Branch

Account Department

Banks have their opening and closing departments. This is the special function of

Account department. Usually main kinds of accounts opened in MCB Bagh are:

Current Account

Profit and Loss Sharing Account

Current Account

This type of account is basically used to meet the daily transactions. Current

account provides safety to the customers money, gives the advantage of paying debts by

the convenient and safe means of sending cheques through the post thus avoiding the

trouble and that units in PKR, USS, GBP and DM.

Saving Account.

This is the Profit oriented type of the accounts. There is a limited time for drawing

cash, customer cannot draw money before it certain time. There is no difference between

current and saving account except profit. This account is opened by Limited company,

Partnership, club societies & associations, joint & sole proprietorship.

Cash Department

Cash department is given the complete responsibility of handling all receipts &

disbursement of cash as a result of transactions in both local & foreign currencies & near

cash items such as traveler cheque etc. As a consequence it is also responsible for the book-

keeping of those transactions & the safe custody of cash & near cash securities.

Clearing Department

Clearing can be defined as the transfer of funds from one branch of bank to the

other branch of the same bank or the other bank on which the instrument is drawn, with out

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involving cash through state banks Clearing house or we can say in other way that

cheques which can not be cashed at the counter of the bank.

Clearing Types

Clearing department deals with the two type of the clearance.

Inward (IBC).

Out ward (OBC).

Inward Clearance.

Inward Bill for Collection means Cheque drawn on MCB and presented to the

other banks on handed over to MCB agent in clearing house. That is inward clearance for

MCB. So inward clearing results in outflow of funds to collecting banks reducing the

balance in the clearing account.

Outward Clearance

A cheque, which is drawn on other, bank and presented to MCB is known as out

ward Clearance (OBC) for MCB. So outward clearing results in inflow of funds from

paying bank into the clearing account maintained with the clearing house, increasing the

balance in the clearing account.

Remittance Department

Remittance is the monitory transfer from one place to another place or from one

country to another country to fulfill the requirements of the customer by the order of the

customer. Remittance department divided into two categories.

1. Local : Local Remittance may includes the following functions transfer through

Pay Order, transfer through Demand draft (DD), Telegraphic transfer(TT), mail transfer.

(MT)Local transfer, preparation of balance certificates.

2. Foreign: Foreign remittance section deals with remittance out side the country, but in

foreign currency. This section of foreign remittance is divided into out going Remittance

and incoming Remittance. These terms out going & incoming remittance means sale &

purchase of foreign exchange in the above four currencies

Learning as an internee

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Standing on the forth floor of MCB Bagh Branch, I heard the good news of me

having a six week opportunity to interact with a world class bank. All these six weeks were

full of events, full of learning and most importantly full of professional working. Here

'professional' regards in all from clerical to managerial work. In these six weeks period, the

best thing to me was the authority and dependency of customers upon me, when they come

with a hope that I'm there to guide them through. Knowing all is not learning, the real

learning is to convey right. I tried to learn real, see real MCB, and tried to comprehend the

difference between what we look from outside and what is going on inside.

MCB is full of experienced and professional traditional bankers. As it perfectly suit

the environment we are operating in, You attitude has helped MCB in capturing masses. In

the private sector, no doubt its a fast growing bank, but here's something that's still

unrealistic to the policy makers. The line of unsatisfied customers is increasing, not

because we are not serving well, it's because customers are not understanding the YOU

attitude right. Every customer wants to make sure his work is done at the first convenience,

but they are not concerned about the responsibility with which every employee is working.

We need to put in some guidelines for our customers, as they walk in. This will not only

save their time but will also motivate staff members to work more promptly, because if

customer and employee engage into some unhealthy quarrel, the whole environment will

be disturbed.

Back to my real learning. In my six week internship, I worked in customer service

department, as well as in clearing department. Because of some work load, I was unable to

learn much about other cash and accounting department. Here is my count down learning

of six weeks.

Learned basic operations of remittance department

Learned how to make entries and vouchers

Observed other operations e.g. PO (Pay Order), DD (Demand Draft)

Account Opening:

Penning down information and keying it into the system does seem a simple and

tedious job but it is not. My initial five days at customer service department was the

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liveliest experience of my internship. Though physically I was there just to assist the

account opening officer, but it turned out to be much more for me. That is when I first

actually imitated as a presenter of MCB to customers, when to many people, I'm their hope.

MCB offers a variety of options for anyone; to everyone. You are an investor,

regular businessman, middle man, salaried person or a house wife; MCB serves you in

every way it can through its commendable and reliable services.

Working at Customer Service Department, I did counter with different types of

customer and opened their accounts under the supervision of the officer. When you have

the sole responsibility to open the accounts, it's always very important to understand the

needs of your customer. Understanding the psyche of customer is very important. Until and

unless you're completely satisfied that the customer has genuine reason and need to open

the account, don't do so.

Account Opening Form:

In all the documentation within the bank, clearness and tidiness are the major

features. Over writing and cutting should always be avoided as it may lead to any

misinterpretation. Account Opening Form is the most important documentation when a

customer walks in for commercial banking and wants to develop a relationship with us. In

AOF, all the necessary information should be completely scrutinized before the customer

walks back. Now lets look at some of the salient requirements of AOF and theirimportance.

Currency and Type of Account

It offers you all the eight different types of accounts mentioned before. First

understand why the customer is here and what type of account suits him a lot. Scale down

all the options suiting his investment or requirement and help him choose what is best for

him. Outline all the salient features of that particular account to him and make him tick the

best box.

Mark the currency box if the customer wishes to deposit in currency, in case, other

than PKR.

Nature of Account

Understand and choose the desired nature of account.

Individual Account (Single/Joint)

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Determine if the account is personal or joint. Once again understand your customer

here. Illiterate and gullible customers should better opt for joint account for their own

security.

Particulars of Account

First of all the title of account is entered by which it will be called off. Following is

the Key/Secret Word of six characters which is mostly preferred to be mothers name

because its simple unforgettable. Key word is used to verify the customer on phone or

while other subsequent inquiries. Next comes the mailing address; where the bank should

mail anything it has to. Next is the permanent address of the customer which should be

copied from the CNIC of the customer. E-mail address is mandatory for Net banking and e-

statement facility whereas Mobile number for mobile banking. Lastly its your choice to

hold your statements for collection or mail it to you.

Here make sure mandatory fields are entered and any valid contact number must be

provided.

Personal Information

Following portion summarizes social with standing of a person. Applicants name,

Fathers or husbands name, gender, marital status, Date of birth, nationality, country of

residence and identification source and its number should be enter. Make sure the source of

identification is not expired. Enter NTN if available. Know the occupation of the applicant

and check the respected box. In case there is more than one account applicant, fill in all the

abovementioned information for other applicant as well. Its a good practice to ask for the

original identification source of the customer and pen down the number and expiry date

directly from it.

Next of KinIn case if the account holder is somehow not contacted, this portion provides

information of the person who should be contacted instead. Persons name, relationship,

address and Telephone number should be provided.

Business Account

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Determines that the party has its own entity under which the account will be

supervised. Match the respected category and check the box.

Particulars of Account

Here the information about the business is filled in. Title of account,

company/business name, and nature of business, office/mailing address, head office

/registered address, office email and NTN are mandatory information required for business

account. CNIC is required in case of sole proprietor ship and information of few persons

are required who can be contacted in case of companies. Here we need to know that who

will be operating the company accounts.

Additional Information

Existing relationship with MCB

In case if the customer already has some relationship with MCB , it should be

mentioned here. This is just in case to formally know and cross check the customers

provided information.

Existing relationship with other banks

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

MCB ATM/Debit Card

Here first define your customer what ATM card is, what are its features and what is

the difference between its different options. Enter the name of the customer in Name on

card field. Then is the option of supplementary ATM card.

Zakat Deduction (only on PLS A/C)

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

to.

Operating Instructions

This identifies the signing authority of the account. It can be operated singly, either

or survivor, jointly, mandate or by any other in special cases.

Statement of Accounts

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This specifies how early the account statement is required. It can be daily, weekly,

monthly, quarterly or semi annually. Customers can choose Mail or e Statement or both.

Special Instructions

Special instructions, if any, are registered here. It usually certifies further the

operating instructions of the account.

Account referred by

Detail of person referring the customer is entered here.

Terms and Conditions

These terms and conditions outline the policy of bank about its accounts

regulations. Abidance by state bank laws and banks policy is compulsory and customers

signature at the end of the statement is his abidance by the law

Indemnity and Undertaking

Here the customer agree by the bank policies and agree to its terms. Applicant signs

the undertaking and officially agrees to be a part of MCB.

As an account opening officer, you must enclose all the signatures and should verify them.

Every cutting on the AOF should be verified by customer's signature, and officer should

verify the customer's signature.

For Bank Use Only

Special Category of Account

If the account is of minor, MCB staff, Illiterate, Blind or Registered Alien, it should

be checked respectively. Passport size Photographs are required in this case and customer

can only make the transaction personally. Make sure signatures are not too simple or shaky.

If so, again passport size photographs may be required and transactions can only be made

personally for customer's own security.

Service Charges

This is the minimum balance penalty which is applicable to all except students,

deserving of zakat and government employees' salary or pension purpose accounts

Know You Customer (KYC)

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Here's an assessment that the account opening officer do in order to understand

some aspects of the new customer relationship.

Individual Account

The customer is marked as walk in, marketed or a referral. Moreover what will be

the customer's sources of funds? What would be the usual mode of transaction and what

would be the intentions of account with MCB. Who will be the ultimate beneficiary and

what the approximate value of transaction per month is.

Business Account

The customer is marked as a walk in, marketed or referred customer. Name of

parent and other companies are entered. Geographical area of activity is mentioned. How

the businesses earn is mentioned to know the business type. Then similarly mode of

transaction, ultimate beneficiary, initial deposit and approximate maximum value of

transaction per month is recorded.Finally after fulfilling all the necessary requirements, the

officer here by recommends to open the account of the customer.

Documentation to be obtained

Individuals

Photocopy of CNIC/Alien Registration No./ passport

Photocopy of service card/employment card/student card

Sole Proprietorship

As above and NTN/Sales Tax Registration Certificate

Application to open account on sole proprietorship letter head

Rubber stamp of sole proprietorship to be affixed on AOF and SSC.

Partnership

Photocopy of CNIC of all partners

Application to open account on partnership letter head signed by all partners

Attested copy of Partnership deed

Copy of Registration certificate with Registrar of Firms

Authority letter in favor of person responsible to operate the account.

Rubber stamp of partnership to be affixed on AOF and SSC.

Joint Stock Companies

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Certified copies of:

Resolution of Boards for opening of account and certifying the person

responsible to operate it

Memorandum and Article of Association

Certificate of Incorporation and Commencement of business

CNIC of all the directors

NTN/Sales Tax Registration Certificate

Rubber stamp of Company to be affixed on all documentation

Clubs, Societies and Associations

Certified copies of:

Certificate of registration

By-Laws/Rules and Regulations

Resolution of governing body to open an account, certifying the person

responsible to operate it.

NTN/Sales Tax Registration Certificate

Rubber stamp of Company to be affixed on all documentation

Agent Accounts

Certified copy of 'Power of Attorney'

Photocopy of CNIC

Trust Accounts

Photocopy of Certificate of Registration

Photocopy of CNIC of all trusties

Certified copy of instrument of trust

Executors and Administrators

Photocopy of CNIC of Executor/Administrator

Certified copy of Letter of Administration or Probate

Specimen Signature Card (SSC)

Whenever a customer visits to make a transaction, we cannot all the time verify his

signature by AOF. For this purpose SSC is signed and then scanned into the system. So

whenever the signature requires verification, it can be done through systems next to

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

instructions and two signatures.

Cheque Book Requisition Form

At the opening of account, this form is filled, identifying the account number,

number of leaves and whether to hold cheque book for collection or to mail it.

Letter of thanks

A letter of thanks is dispatched to the mailing address of the new account holder

and its copy is attached to the AOF. Actually this letter of thanks is for the confirmation of

this fact that customer actually lives at the mentioned address.

Clearing of cheques:

Outward ClearingMy experience at Bagh branch started from the clearing department. Right in the

morning cheques collected from the drop box simply flood over my table. According to all

I learnt through listening, viewing and questioning is summarized below.

Documentation of Consumer Cheques:

All the cheques collected are first categorized into

Credit Cards

Auto LoansPersonal Loans

Cash Line

Verified cheques are then validated before being documented into the drop box

collection sheet for our daily drop box collections record. To anticipate the approval of

cheques, we need to validate some important specifications of all the cheques. They are:

Date: Cheque should not be post dated or out of date.

Figures: Amount in words and figures should match. Signature: Drawers signature must be clear.

Intercity: Cheques must not be of other cities. Intercity clearing cheques for

consumer departments are not entertained

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Payees Name: Payees name should be written, and endorsement should

be as per the beneficiary of the cheque.

There should be no over writing in every thing penned.

All the filtered cheques are then entered into the collection sheet in which following

information is entered.

Cheque No.

Name of bank

Name of Customer

Loan No.

Amount

Document No.

All the documented consumer cheques are then posted into the system.

Posting of the Consumer Cheques

For clearing, we opt for second option in banking category, and after entering the

posting date, clearing date and transfer delivery date, we opt for single entry option. Now

all the cheques are credited in the clearing schedule in their prescribed ledgers.

Customer Accounts:

During the posting, following fields are keyed in

Debit/Credit

Account Number

Bank

Branch

Cheque Number

AmountAfter entering the details into the system, we can accept, modify and reject it. As

soon as entry is accepted, computer generated document number is assigned. In case

further modification is required, it can be done at clearing modification option under

clearing schedule.

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Following the completion of posting of cheques, an add list is prepared to calculate

the total amount of cheques which is further cross-checked with the clearing display on the

system.In other case, if cheque is of city then it's either sent in intercity clearing or as OBC

(Outward Bill Collection). Intercity is presented through NIFT whereas OBC is

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

case is as follows

Types of cheques Stamps over cheques Endorsement

Local - Consumer Crossing

Clearing

Received Payment

Local Commercial Crossing

Clearing

Payee's Account Credited

Intercity

Crossing

Clearing

Intercity Clearing

Payee's Account will be Credited

upon realization.

OBC Crossing

OBC Number

Payee's Account will be Credited

upon realization.

Cleared Cheques

Now the next day when clearing is confirmed by NIFT, respected accounts are

debited. We go into the banking option and in transfer; we debit all the respected accounts.

Same is the case with intercity and OBC cheques. In documentation, debit and credit

vouchers are made, which show total amount of clearing as per day.

Returned Cheques

All the cheques which are returned, due to any reason, are then reversed. They are

debited back in the clearing schedule. All the returned cheques are documented in the

cheque return registers and all the account holders of returned cheques are charged with

service penalty. All the vouchers are signed by the designated officer and all the entries

over 50,000 are supervised

Remittances:

Demand Draft

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DDs are always a secure way of paying remittances in other cities. Both account

holders and walk in customers can avail the facility of DDs. Charges tend to differ for

both customers but the advantage tend to be same. DDs are made in the favour of

beneficiary and remitter either pays in cash or through cheque.

When DDs are issued, head office account is debited and remitters account is

credited, on presentation, head office account is credited and beneficiary's account is

debited.

Pay Order

POs are another safe way of paying your remittances within the city. They are

payable at any branch and then are forwarded for clearing. In case of PO, remitter account

is credited and PO A/C of branch is debited. At presentation, Beneficiary is debited and PO

A/C of branch is credited.

Chapter Eight

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Imperative Analysis of MCB

SWOT analysis

SWOT analysis is a short form that stands for Strengths, Weaknesses, Opportunityand Threats. This is a careful assessment of strengths of an organization to avail an

opportunity by overcoming its weaknesses and phasing out all he threats to its survival in

order to grow and survive.

For a better strategic management, organizations need to go for scanning the

internal as well as the external sources on which the overall business lies. The first and the

foremost concern of the organization are to see its internal capabilities and the things which

can be the problem in achieving their targets, goals and aims. I conduct the SWOT analysis

of the MCB Bank and my findings are here under explained.

General Analysis of MCB

Strengths

o Safe and secure investments venture

o Innovative and new technology adapter

o Employee Satisfaction

o Well Equipped and fully secure environment

o Modernized banking (online + Internet)

o Complete supervision at every level

o Business continuity management and implementation of advance model under

Basel II

Weaknesses

o Weak organizational culture (need a paradigm shift to improve organizational

structure)

o HR Policies (appraisal, compensation, career planning)

o Networking problems regarding ATM

o Weak MIS interconnectivity among the Division

o No mobile ATM services in rural areas

Opportunities

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o Information Technology (MIS)

o Establishing more Foreign Branches

o Local Setup should be expanded.

o Internet Banking

o Some more innovative products and services should be introduced.

o Centralization

Threats

o Downsizing is potential threat for MCB employees and they are losing their

confidence towards bank performance

o Fierce competition

o

Changing environment of bankingo Instable Govt., economical and political conditions are a great threat.

o Entrance of international banks

o Latest MIS is available in market whereas MCB is capitalizing in symbols

General Conclusion

The work within each unit is not divided properly when an employee is absent

another employee (who is already over burdened by own job) is given absentees

whole work instead of dividing it among employees.

Accommodate management is required.

Internees are not considered part of the organization so are not allotted as such

assignments.

Theres no proper arrangement for guidance of internees.

Working hours are quite long; mostly employees have to sit even after the office

hours to complete their work. (E.g. branches suddenly overburden them for there

clearances and they have to manage it)

Inefficiency of IT department (At times system software is not in working order

which causes delay in work, and IT is not efficient to help)

Rotation on duties without proper training

No refresher courses

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

specification

Particular Analysis of MCB Bagh Branch

StrengthsLatest Technologies

MCB Bagh branch is provided with latest computers, more than 4 telephone

connections and fax machine which makes communication easier with different branches,

and enhancement of job.

Location

The branch is situated in Zaman Chowk Bagh which is a commercial area of Bagh

were business activities perform greater as compare to residential area. Thus it increases

the number of customers.

Interlinked

MCB Bagh branch is linked through an online network of 450 branches, thus

enabling them to serve customer in better way. One can easily transfer his money from one

branch to another branch in any city of country.

Experienced Staff

Although the Branch has not sufficient staff as per required but the branch has most

experienced and the least experienced staff.Good will

MCB Bagh branch is main branch of Muslim Commercial bank in the areas, which

is another plus point for the Branch. Most of population

Weaknesses

Insufficient Staff

MCB Bagh branch has a shortage of staff and their training capabilities are not up to

the requirements of the fast changing banking environment.

Absence of Expertness

The technical training of the staff is negligible e.g. in case of the absence of computer

There is no any other trained personnel who can record the daily transactions.

Insufficient Building

The MCB Branch Bagh has not sufficient building as per required by a Bank

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Insufficient furniture

The branch has old and insufficient furniture in it.

Auto Teller Machine Required

Currently MCB Bagh branch is providing the facility of online banking in Bagh but

branch has not the facility of Auto Teller Machine (ATM) up till now.

Extremely mechanistic

The organization is very much mechanistic and provides no flexibility to encourage

creativity.

Control over staff

The control of manager is not effective. The discretionary powers of manger are very

low to offer more incentives and value added services to its customers.

Fewer professional Environments

There is a lack of commitment and professionalism on part of the employees. The

staff is always in a hurry to leave the bank as soon as possible. They were also observed to

starting their operations comparatively late. The organizational culture is not cooperative

and Favoritism was observed on part of the manger as well as the top management towards

some staff members.

Low level of Technology management

The branch has very low level of technology management. The technology available

is not maintained well mainly because of the lack of technically trained staff. For instance

the scanner, in spite of its availability has not been used for scanning the specimen

signature cares. In spite of the presence of technology many jobs are done manually such

as the letters and other calculations, which could be easily, done in MS Word and Ms

Excel.

Other Limitations

Some shortcomings on part of MCB Bank, which affects the operations of the MCB

Bagh branch. There is a lack of functional and proper research and development, which

could scan the micro and macro environmental data for future planning and strategy. There

is no procedure, which could encourage the middle and lower level management to initiate

creativity. Financial audits are conducted but operational audits have not received proper

attention as much as it should get.

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Opportunities

As per my analysis I found that there some opportunities available in the area for MCB

Encouragement of projects based on information technology

The coming century is the century of information technology as now days all the

business community is diverting its attention towards this field. The Bank has the basic

infrastructure, which can facilitate the online process. This is the best opportunity available

to all banks and MCB as well, to sponsor the IT and computer based projects because

Attract new customers

The biggest opportunity for the MCB, Branch Bagh has the greater number of

customers who get their payments through MCB, Bagh branch. These customers can be

easily convinced to open their accounts with MCB. MCB has advantage of generating more

deposits and attracting valuable customers due to its better image in the business

community. MCB has also benefit of increasing credit lines. This is only due to good

dealing and better image that MCB has directly acquired those lines of credit from abroad

that are only acquired by it, this better image can help further NBP in explanation of its

activities.

Development in Latest Technologies

The Internet facility in the area provides an opportunity to MCB to get Online. This

will be very beneficial for the bank, as there is no other bank in Bagh except HBL whichprovides On-Line banking and Auto teller machines facility. As MCB will provide this

facility to the citizens, this will increase the number of customers which will eventually

increase the financial benefit.

World wideRemittance facility

MCB Bagh branch should provide world wide remittance because a considerable

portion of the labor force of the area is serving overseas. Their families can be encouraged

to use MCB as channel for remittances.

Threats

Superior services by competitors

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The biggest threat to the operational success of the branch is the better

competitors services. Many private sector banks are offering higher rates of return to

customers than MCB Bank of Pakistan.

Disappointment of customers

The bank is the increasing interest rates which dissatisfies customers. Most of these

customers were observed to be dissatisfied with the delays in their servicing.

Invasion of Profit

Capturing of profits is yet another threat to the success of MCB Bagh branch. The

branch of MCB Bank is located close to the ABL, NBP and HBL. All these branches are

taking away each others customers.

Judgment and Suggestions

The critical analysis MCB in the previous section is the representation of its past,

mirror of its present, and an insight into its future. The past data of MCB Bagh branch

enabled me to study the organization in a historical perspective and understand the

nuisances in the banking operations. Study of he present of MCB helped me evaluate the

organization in comparison to its future and competitors. The data obtained from the

analysis of its present and future in combination with my professional studies resulted in

some suggestions and implementation plans, which can help to increase the profitability

and operational success of the MCB, Branch Bagh.

Some of the major findings suggestions are discussed.

Physical facilities.

The physical facilities or the layout are the most fundamental features in an

organization, which the customers observe in forming an opinion, perception or idea about

the organization. Therefore, every organization tries to make a good first impression on

customers through the presentation of its physical facilities or layout. The physicalfacilities in the branch are not up to the mark, which requires timely changes to provide

good environment to customers. The suggested changes and corrective actions are gives

below:

The lighting system must be improved and all the out of use lights must be

replaced.

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Generators should be made available to the branch to minimize the disruptions due

to power failure.

A cash counting machine can help reduce the time spent in counting cash.

Availability of staff

The existing staff in the Bank has shortage of staff. Staff in the branch must be in

proportion to the customer has so as to expedite the workflow, avoid shortage of staff and

remove the customers grievances arising mainly due to delay in workflow.

The additional staff required is in the fallowing categories.

More technically trained staff should be added to the existing staff strength

One staff assistant or grade 2 officers properly trained in computer and sufficiently

trained in foreign currency accounts.

One employee of grade 4 should be hire on daily wages or contract, to maintain

filing.

Commitment of employees

The decreasing commitment of employees can be increased by introducing an

effective performance appraisal system, which can reward and recognize the achievements

and services of employees for the Bank.

The appraisal system must have the following features.

Objectivity:The appraisal system must be based on facts and figures and objective evaluation

of the facts on grounds.

Feed Back:

Periodically provided to employees and recognizing their efforts through reward

(bonuses) and publicly appreciation.

Simplification of advances

The biggest source of the bank revenue is advances. The advances of MCB, Bagh

branch are on him decreasing trend, causing a decrease in the revenue for the bank. The

bank should make the advance procedure simple and quick to meet the customers

requirements.

Marketing perception

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The concept of marketing should be followed in every aspect of the organization.

Generally, the banks staff considers that marketing is to go to customers, beg them for

opening an account with the Bank and to abide by his every just and unjust action

They should be taught that marketing is not only to go to customers only. A

customer can also be attracted by provided customer oriented services, showing empathy to

your customers and attending him personally.

Customer orientation

Deposits are the main source of funds for commercial banks. Therefore, the priority

of every bank is to increase the number and amount of deposits. The key to successful

business does not lie in simply attracting new customers. The real success is to maintain in

the old customers and attract new customers at the same time because retaining a customer

is more difficult than attracting new customers.

Every depositor should be given equal importance and there should be no

differentiation between customers so that every customer feels himself as much

important as the other customer.

The attitude of the staff should be friendly to all the customers. The customers

should be taken to the concerned person or guided friendly if the concerned person

is not available. The attitude of thats not my job should not exist anymore.

Mobilization of less cost depositsThe analysis of expenses shows that more then 40% of expenses of the bank are the

payments on fixed deposits, which is a very high proportion. The bank should launch a

campaign to get less cost deposits much as high amount current account as well as low cost

PLS saving accounts.

Information Access

The Bank should provide information to all the present and potential customers

relating to the new products, services, some services fee structure and other matters, which

are likely to affect the customers. It should be made sure that all the customers have access

to this information. Conveying information is of no use, unless, there is some feedback

from the customers. The following measures are suggested to implement this suggestion.

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Brochures, hand outs, pamphlets and other prin

Documents

Shoaib Report on MCB