Professional Documents
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Internship Report
MCB ( Muslim Commercial Bank)
MCB Banks team of committed professionals is
dedicated to maintaining long term customer
relationships through outstanding service and
convenience
Internship Report
LIST
OF
ACRONYMS
MCB
Muslim
Commercial
Bank
SBP
State Bank of
Pakistan
EBIT
Before
Taxes
Earning
Interest and
DD
Draft
Demand
TT
Telephonic
Transfer
MT
Mail Transfer
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AVP
SVP
VP
Vice President
GM
General Manager
HO
Head Office
TABLE OF CONTENTS
CHAPTER-1
1.1 BRIEF HISTORY
BRIEF HISTORY
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CHAPTER-2
SWOT ANALYSES
3.1 STRENGTHS
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3.2 WEAKNESS
3.3 OPPORTUNITIES
3.4 THREATS
CHAPTER-4
CHAPTER-1
HISTORY OF BANKING
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Banking started in Pakistan after the bold and emergent decision of formulation of SBP on July
30, 1948. Thereafter this sector has witnessed enormous growth. In 1974 banks were
nationalized, in the hope that new era of growth could be achieved through it.
However the process is reverse since 1991, up till now MCB, ABL, and UBL have been
privatized and HBL is in the process of its privatization.
On 14th August 1947, 487 branches of different banks were operating in Pakistan. By 30th June,
1948, 292 branches winded up their business in Pakistan and the remaining 195 branches
restricted their banking operations to a minimum level.
The only bank, which shifted its head office from Bombay to Karachi, was the Habib Bank
Limited. MCB with the assistance of Quaid-e-Azam Mohammad Ali Jinnah, started operation in
July 9, 1947 with an Authorized capital of Rs.3 crores. Indo-Pak subcontinent, the Bank moved
to Dhaka from where it commenced its business in August 1948. And in 1956 the bank shifted its
head office to Karachi, where it is still working.
In 1948 Ms. Ispahanani and Mr. Abdul Hameed Adamjee purchased the bank. At that time the
bank showed a historical performance and profit.
1.3 NATIONALIZATION
In 1974 the government felt a harsh need of nationalization of banks and financial institution and
the nationalization act was introduced. Under this act, MCB was the first bank, which was
nationalized. In the same year Premier Bank was merged with MCB and it started work as a
government bank this nationalization affected the bank badly.
1.4 PRIVATIZATION
All the financial institutions and banks did not show good performance after
nationalization, and again the government felt a big need to privatize these banks. In 1991 the
bank was privatized again. The government of Pakistan transferred the management of the bank
to National group, one of the leading groups in the field of business. They were sold 25% shares.
Now this group has 50% of the total shares. Government has 25% shares and general public also
has the same shares.
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Now out of 10% shares only 14.90% shares are being held by State Bank of Pakistan and all
other being held by individuals, directors and joint Stock Companies etc (Annual Report of
M.C.B).
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MCB Limited is a business entity and all its activities are directed towards the prime objectives,
which is profit. But the only difference is that it sells intangible products i.e. the services.
Now in order to achieve this important goal, the management has evolved
multidimensional policies. Especially after privatization of the bank on April 1991, a very
enlightened management took the charge of MCB Limited. Mr. Hussain Lawai the renowned and
experienced banker assumed the office of the Chief Executive i.e. the President of the MCB.
Major aspects concentrating are the following:
1.
2.
A)
Special preference was given to MBA's and then to the experienced staff of BCCI.
Ultimately the 1st batch of MBA's was hired in July 1992. The management was
aware of the fact that if you offer peanuts, you will find only monkeys, therefore they
offered attractive packages and thus was able to succeed in skimming cream of the
market.
B) A comprehensive six months theoretical program was devised at MCB Staff Colleges, located
at Karachi and Lahore for providing some reasonable knowledge to the newly hired qualified
staff. The stated theoretical training program was supplemented by the practical branch training.
3.
Compatible Package
After privatization the staff salaries have been revised three times. The first time was 35%, the
second was 32%, and the last one was 20%.
4.
5.
Modernization of Branches
6.
7.
Decentralization of Authority
8.
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Mission Statement
MCB Banks team of committed professionals is dedicated to maintaining long term customer
relationships through outstanding service and convenience.
CHAPTER-2
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Publicity department.
Branches opening/closing shifting.
Shares floatation/government deposits.
Consideration on complaints.
Utility bills collections.
Hajj arrangements.
New and innovative policies.
Inward and outward remittances are recorded. Surplus funds are utilized (to purchase the shares
of other companies). Balance sheet of the bank is prepared. Public sector advances are released.
The safe custody of the securities is maintained. Declaration of the rates of return on PLS
Account.
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Handling on property documents sent to them by various circles and head office i.e.
loan documents etc.
Follow up, recovery cases and cases of fraud against employee. The cases against
bank are dealt too.
Give opinion on various accounts i.e. partnership, deceased and pension accounts. It
gives opinions on all-important legal matters.
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Cash department
Clearing and collection department
Remittance department
The functions of each department and their operations are explained as follows:
Payment
Clearing
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Receipts
2.15.1 Payment
The cash department issues payments on request. The checks are received by the department and
after their clearance cash is issued to the check-holder.
The payment deals with that customer who withdraws money through cheques or any other
negotiable instruments. The cashier keeps the record of all payments in the register book. At the
end the payment and receipt cashier checks the balance and count the cash. They verify that both
register cash and the cash in hand are balance.
2.15.2 Clearing
Another main aspect is the clearance of checks. It includes verification of proper date, amount,
endorsements, such as issue stamp, clearing stamp and back-side stamp, and signature. After
proper verification of checks the payments are issued. At the issuance of cash the cash is debited
in the clients account.
2.15.3 Receipts
It is responsible for taking cash deposits from its clients who want to store or invest their surplus
reserves. In the receipt section, the cashier receives money from the customers on behalf of any
individual or the company. Most of the receipt goes through the accounts of the MCB.The cash
receipts are done in two forms:
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Transfer checks
Gives check
MCB Bank
X account Dr
Y account -- Cr
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Clearing checks
MCB
Account-holder
X
Cross check
NBP
Account-holder
Y
NBP Bank
MCB Deposited
The clearing department makes different envelops for different checks of each bank. It then
sends these envelops to the clearinghouse. In the clearinghouse, representatives of different
banks take the balances of all the checks and the balances are cleared. Now National Institution
of Facilitation Technology (NIFT) takes the job of clearinghouse. It not only separates balances
for each bank but also for each branch. The clearing department of MCB separates checks of
each bank in different envelops and sends it to NIFT. After NIFT sends the checks to other
banks, they send an OK report to NIFT which sends that report back to MCB. This ensures that
all checks are safely deposited in the respective banks.
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customer. Vouchers are sent by ordinary mail to keep the record. On TT, no excise duty is
charged only commission and telegram charges are charged.
CHAPTER#3
SWOT ANALYSIS
3.1 STRENGTHS
One of the major strengths of MCB is that it has very stable deposit base.
MCB is largest private bank in Pakistan with around 1000 branches, which cover
almost every part of Pakistan.
The bank enjoys competitive advantage over other banks in Pakistan.
The bank enjoys competitive profitability in the industry.
MCB has captured majority of potential customers in Pakistan.
MCB has the accounts of big organizations like OGDCL, PTCL, EFU, PTC etc.
MCB is Successive and Market oriented.
MCB investing huge sums on HR development and training.
Customer default rate is lower as compared to other banks.
MCB has the largest ATM network in the country.
Meeting the challenges of latest Technology by introducing Smart card remit
express, mobile banking etc.
Laying foundation on sound basis; recently for this they met with the ORACLE
representative of South Asia, to purchase ORACLE software for their banking
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system and transform its environment in such a way so as to come in line with
those of other international banks.
Establishment of TFC: Centralized import and export center of MCB in one
special circle taking this extensive burden from branches, whereas no other bank
has done this so far.
Maintaining an Excessive Earning Acceleration, this is expected to result in
substantial value enhancement for investors.
EUROMONEY Awards of Best Bank in Pakistan for best bank in Pakistan, plus
the accolade of best domestic band in Pakistan.
Extensive Management Restructuring to translate into bottom line improvement
for going forward. This includes induction of professionals in strategic business
areas, shedding surplus staff and shutting down loss making low potential
branches. From 1996 onwards some 350 Branches were closed down & releasing
staff of approx 4600 with golden handshake.
Larger Market Share: MCB accounts for 10.4% of total assets, 10.0% of deposits
and 11% of loans in the banking system. So it has a clear edge over smaller banks.
Striving for income: New Team after massive restructuring, is looking to strive for
greater operating income, as is evident from the figure (15) that since 1996 bank
has been able to gain some net positive Profit After Tax amount consistently and
will be aiming to do so in near future.
Perhaps the only large bank in Pakistan to have a formal electronic banking
research cell that is exploring the technical requirements and market size Potential
of Internet Banking.
3.2 WEAKNESS
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3.3 OPPORTUNITIES
Leasing sector is growing in Pakistan for the last two to three years which provides
opportunity to MCB to go ahead in this area as well.
MCB is providing Consumer Finances at comparatively lower rates which paves a way to
grab more customers
Financing to small/medium cottage industries will definitely increase its advances and
profitability as well.
Islamic Trading Based Banking can enhance the business of the bank.
Targeting of Hundi/Hawalla through networking and IT potential of MCB.
Profitability is expected to strengthen despite decline in interest rate. The drop in interest
rates is expected to spur the private sector credit growth in an effort to kick-start the
dormant economy serving as impetus for productivity activity in economy; which is
likely to compensate for lower interest margins that result from less than proportionate
drop in deposit rates.
Banking sector fundamentals improving; on the back of economic stabilization, improved
monetary and foreign exchange reserves management by the central bank and drive
against loan defaulters.
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MCB with its large branch network and hence huge, diversified clientele is placed to
benefit from lower NPLs, a new dynamic and cost conscious management, and greater
credit demand on the back of governments conscious initiative towards a deflationary
monetary policy.
Only Operationally efficient banks will benefit from Low Interest Rates: The declining
interest rate environment would lower MCBs cost of equity (COE), thus having a
positive impact on its ROIE COE spread, which in turn allows
MCB to show growth in value creation.
More Focus on consumer banking activities.
Strong earnings momentum expected in future, through focus on loan book growth,
efficient utilization of idle cash and declining NPL.
Deposit expected to grow in future: The Governments decision to lower interest rates has
challenged the banking sector, including MCB, on the deposit mobilization front. At the
same, however, MCBs large branch network coupled with its excellent market standing
compared with other banks offering similar returns on deposits is expected to retain
even bolster its deposit base in future at the expense of less efficient public Sector
competitors.
3.4 THREATS
Other private commercial bank with sound profitability is also a threat to MCB e.g. UBL,
Alfalah, HBL etc.
For the last of many years, Pakistan is facing economic and political instability which is a
big threat.
Afghan war and Iraq war has a deep effect on the economy of Pakistan, which may affect
MCB.
Foreign banks are flourishing in field of consumer financing.
People dont prefer banking culture. They mostly prefer cash transactions.
MCB since 1996 is performing well in all most every department at national level
particularly. However if there is some competition that MCB may expect to face come
from the four nationalized commercial banks, which compete with the MCB in terms of
deposit mobilization at retail level.
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Other banks working on the same phenomena seeking for proficient and efficient staff is
expected to enamor qualified and experienced employees of organization by offering
some brilliant incentives in the form of high salary and other benevolent funds and this
thing may also attract existing efficient staff of MCB. To some extent they seem to be
effective in their efforts.
CHAPTER-4
Recommendations are based on the previous sections of a report and are suggestions that the
analyst feels are required to be implemented in order to improve further the standing and position
of the firm in the financial world. These are thus based on the findings and shortcomings noted in
an organization while working with it and then writing on it. Opinions of various capable
individuals are sought who through their real life experiences and deep insight are better able to
judge whether the course of action adopted by the organization is going to prove fruitful or does
it require further improvement in the form of changes in its strategies.
Following are the findings and recommendations for various Departments that were felt are
required while consulting the staff members of Zafarwal Branch.
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The procedure of opening an account should be simplified. The account opening form should be
self-explanatory and include translations in Urdu for those customers who are not well read,
since the fact cannot be ignored that many people do not have a good understanding of English.
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The Remittances Department at the Branch is divided into Inland Remittances and Foreign
Remittances.
Both these are dealt by separate officers and involve using specific stationary and procedures.
The following recommendations are made for this very important Department of the bank
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There were certain drawbacks in the application and processing for the loan requests that were
observed at the branch. The findings and the recommendations are as under
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complete or correct the case is sent back to the Zafarwal Branch and it takes yet longer to process
it.
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Special trainings on credit management should be imparted to the staff dealing in financing
activities of the bank. This is very important in light of current loan default scenario in the
economy.
BIBLIOGRAPHY
1.
Siddiqui A.H. (1983 P.nos. 16-22) Practice & Law of banking in Pakistan.
2.
Meenai S.A (1984) Money & Banking.
3.
Prof. Dr. Khawaja Amjad Saeed (Financial Institution in Pakistan)
4.
Koontz. (Management. 8" edition page: 8)
5.
Brochures/Leaflets (n.d)
6.
Accounts opening forms of MCB.
7.
Donnelley, Gibson, Ivanceivich (Fundamentals of Management)
Briefings by head of each division department & other officer of MCB