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 on- line 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
Breakup value per share
(excl. surplus on rev. of fixed assets) *** 91.71 80.86 65.96 61.84 49.12 26.41
Breakup value per share
(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