CHAPTER NO 1

1. EVOLUTION OF BANKING
1.1 INTRODUCTION
The word bank is derived from Latin word Bancus or Banque, which means a bench.
The explanation of his origin is attributed to the fact that the Jews in Lombardy
transacted the business of money exchange on benches in the market place. When the
business of a person fails the people destroy his bench, which is now days termed as
‘Bankrupt’. Incidentally the word bankrupt is said to evolve from this practice. The
opponents of this opinion argue that if it was so, then how is it that the Italian
moneychangers were never called Bachierie in the middle ages.
Other authorities hold the opinion that bank is derived from German word ‘Back’,
which means joint stock fund. Later on, when the German occupied major part of the
Italy, the Back was Italicized into bank.

1.1.1 DEVLOPMENTS OF MODERN BANKING

Despite the classical origin, banking in its modern form and structure stated in Britain
when many of the Lambordary merchants came to England in the Fourteen century
and settled in the part of the London now called Lombard Street. They were so
resourceful that even the kings had to depend on them for loans despite the fact that
the church was firmly against usury. They dealt with not only keeping the money in
safe custody but also changes money for the travelers or merchants engaged in foreign
trade. The business of changing money was so lucrative that King Edward III
established the office of royal Exchanger for changing foreign money at a profit for
the benefit of the crown.
The venture of Christopher Columbus, which America brought riches to England and
gave a tremendous boost to foreign trade. The merchants now began to hold part of
their riches in cash. These transactions, however, received a big setback in 1640,
when King Charles I seized 130,000 Pounds and bullion left for safe custody with the
city merchants at the Royal Mint. This shook the confidence of the merchants in the
Royal Exchanger and Royal Mint. Consequently this business was taken over by gold
smiths, who, up to that time, ere dealing only in gold and sliver. Since these gold
smiths required strong

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safes for the purpose of their own business, they introduce necessary facilities of safe
keeping of the valuables and he cash of their customers. These goldsmiths issued
receipts or note to their depositors in respect of the cash or articles left with them.
These were called gold smith notes, and carried an undertaking to return the money
and articles to depositor bearers on demand. There were a considerable number of
such notes on circulation among various classes of merchants and thus they can by
aptly called Bank Notes in their earliest form. Over a period of time, these goldsmiths
discovered that large sums of money were left in their custody for long periods.
Therefore, hey stated the use of his cash to advance loans to other persons for a fixed
period of time and at considerably at a higher rate of interest. Moreover they further
encourage cash deposits by their customers by offering banking of modern times.
Some of the enterprise goldsmith\s issued checkbooks for the attraction of their
customers, and thus another important step in the evolution of banking was taken. In
1672, however, English banking face a great crisis when Charles II borrowed huge
sum of money form the goldsmith bankers formed themselves into a Corporation in
1695, known as the Bank of England.
This was known as fiduciary issue, not covered by gold. This new bank became a
very serious competitor to the comparatively smaller private banks run by the London
goldsmiths.
By the year 1700, the Bank of England was not only issuing Notes but also
conduction account for customer. Being a joint stock bank by charter, its directors
were conduction the business like that of limited companies. The Bank of England
was e only joint stock Company, which was given the monopoly of issuing the Bank
Notes.
In 1708 the privilege to issue Notes in England was withdrawn from joint stock banks
and confined to the private banks with not more then 6 partners. Up to 1813 or there
about in England, the main profit of banks was derived from the circulation of notes
and for many years after that, deposits were treated as minor matter.

1.2 INTRODUCTION OF MCB BANK

MCB is one of the leading banks of Pakistan with a deposit base of about Rs. 280
billion and total assets of around Rs.300 billion incorporated in 1947. MCB soon
earned the reputation of a solid and conservative financial institution managed by
expatriate executives. In 1974, MCB was nationalized along with all other private
2
sector banks. This led to deterioration in the quality of the bank's loan portfolio and
service quality. Eventually MCB was privatized in 1991.

During the last sixteen years the bank has concentrated on growth through improving
service quality, investment in technology and people, utilizing its extensive branch
network, developing a large and stable deposit base and managing its non-performing
loans via improved risk management process.

In 2005, the management of the bank changed its name from Muslim Commercial
Bank Limited to MCB Bank Limited (MCB). The reason was to explore international
markets as they were facing resistance specially from Western Countries to avail
license. In 2008 the head office of MCB was shifted to Lahore in a newly constructed
building, namely MCB House, located at Sharea Ghous-ul-Azam (formerly known as
Jail Road) from Karachi.

1.3 HISTORY OF MCB BANK

Before separation of Indo Pak, the need for more Muslim banks was felt. And
Muslims having strong financial capacity were thinking to invest in this sector as
well. This was the idea, which paved the way for setting up MCB Bank Ltd known as
MCB. This was the third Muslim bank in the subcontinent.

MCB Bank Ltd. formerly known as Muslim Commercial Bank Limited was
incorporated by the Adamjee Group on July 9, 1947, under the Indian Companies
Act, VII of 1913 as a limited company. The certificate of incorporation was issued on
17th August 1948 with a delay of almost 1 year; the certificate was issued at
Chitagong. The first Head office of the company was established at Dacca and Mr.
G.M. Adamjee was appointed its first chairman. It was incorporated with an
authorized capital of Rs. 15 million.

The bank was established with a view to provide banking facilities to the business
community of the sub-continent. The bank was Nationalized in 1974 during the
government of Zulfikar Ali Bhutto. This led to deterioration in the quality of the
bank's loan portfolio and service quality. This was the first bank to privatize in 1991
privatized upon recommendations of World Bank and IMF.

3
Initially only 26% of shares were sold to private sector at Rs. 56 per share. , Nishat
Group is one of the leading and most diversified business groups in Pakistan.

Mian Mohammad Mansha is the Chairman of the group (and also MCB) and has
played instrumental role in its success. In recognition of Mr. Mansha’s contribution,
the Government of Pakistan has conferred him with "Sitara-e-Imtiaz", one of the most
prestigious civil awards of the country.

MCB is Pakistan’s fourth largest bank by assets having an asset base of US$6.7
billion, and the largest by market capitalization having a market capitalization of
US$4.1 billion. The Bank has a customer base of approximately 4 million and a
nationwide distribution network of 1,026 branches, including 8 Islamic banking
branches, and over 300 ATMs, in a market with a population of 160 million.
1.3.1 PRIVATIZATION

When privatization policy was announced in 1990, MCB was the first to be this
choice was the better profitability condition of the organization and less risky credit
portfolio which made'' it a good choice for investors. On April 8th, 1991, the
management control was handed over to National Group (the highest bidders).
Initially only 26% of shares were sold to private sector at Rs. 56 per share. Privatized
upon recommendations of World Bank and IMF.

1.3.2 AFTER PRIVATIZATION

Ten years after privatization, MCB is now in a consolidation stage designed to lock in
the gains made in recent years and prepare the groundwork for future growth. The
bank has restructured its asset portfolio and rationalized the cost structure in order to
remain a low cost producer.

After privatization, the growth in every department of the bank has been observed.
Following are some key developments:

 Launching of different deposit schemes to increase saving level.

 Increased participation on foreign trade.

 Betterment of branches and staff service level.

 Introduction of Rupee Traveler Cheques & Photo Credit Card for the first time
in Pakistan.

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1.3.3 MCB BANK TODAY
MCB today, represents a bank that has grown with time, experience and Pakistan. A
major financial institution, in scope and size, it symbolizes a fully growing tree
evergreen, strong, and firmly rooted.

1.3.4 FOREIGN TRADE

The bank conducted import business during the year amounting to RS. 54.0 billion as
compare to RS. 56.4 Billion In 2005. The export business slightly improves to RS.
36.9 Billion From RS. 35.1 Billion. In 2006. Home remittances decline to RS. 16.7
home remittances business was due to freezing of Foreign Currency Accounts, which
has affected the confidence of Pakistanis working overseas.

1.3.5 YEAR 2006 COMPLIANCE

MCB’s strength lies in providing a technological base at the gross root level of the
society with a challenge to educate and assimilate such systems across vast cultural
and economic backgrounds. With over 768 automated branches, 263 online branches,
over 151 MCB ATMs in 27 cities nationwide and a network of over 16 banks on the
MNET ATM switch, MCB continuously innovates new products and services that
harness technology for the customer’s benefits.

1.3.6 SOCIAL SECTOR

The bank activity participating in the Prime Minister self-employment Scheme. The
application received from various applicants is being processed on merit and disposed
off as quickly as possible.

1.3.7 THE BUSINESS

MCB is in it’s over 50 years of operation. It has a network of over 1,000 branches all
over the country with business establishments in Sri Lanka and Bahrain. The branch
break-up province wise is Punjab (57%), Sindh (21%), NWFP (19%) and Balochistan
(3%) respectively.
MCB has an edge over other local banks, as it was the first privatized bank. The State
Bank of Pakistan has restricted the number of branches that can be opened by foreign
banks, an advantage that MCB capitalizes because of its extensive branch network.

5
Fourteen years after privatization, MCB is now in a consolidation stage designed to
lock in the gains made in recent years and prepare the groundwork for future growth.
The bank has restructured its asset portfolio and rationalized the cost structure in
order to remain a low cost producer.
MCB now focuses on three core businesses namely Corporate, Commercial and
Consumer Banking. Corporate clientele includes public sector companies as well as
large local and multi national concerns. MCB is also catering to the growing middle
class by Providing new asset and liability products. The Bank provides 24 hour
banking convenience with the largest ATM network in Pakistan covering 27 cities
with over 151 ATM locations. The Bank’s Rupee Traveler Cheques have been market
leaders for the past six years and have recently launched their Gift Cheques Scheme.
MCB looks with confidence at year 2007 and beyond, making strides towards
fulfillment of its mission, "to become the preferred provider of quality financial
services in the country with profitability and responsibility and to be the best place to
work".
A major achievement of MCB is that the state bank of Pakistan has issued a license to
MCB to start Islamic banking. Now MCB is setting up a 1st Islamic banking branch at
1st floor Shaheen complex, Karachi. This complex starts working from September 1,
2003.

1.4 VISION AND MISSION STATEMENT

1.4.1 VISION STATEMENT

Challenging and changing the way you bank.

1.4.2 MISSION STATEMENT

MCB Bank has five mission statements which are as follows:

• To provide value-added services to our customers

• To provide high-tech innovative solutions to meet customers requirements
• To create sustainable value through growth, efficiency and diversity for all
stakeholders

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 • To provide a challenging work environment and reward dedicated team
members according to their abilities and performance
• To play a proactive role in contributing towards the society

1.5 OUR CORE VALUES

1.5.1 CUSTOMER FOCUS

MCB treat each of its customer equality & as the most important person while it
interact with him/her. It must ensure that employees do everything to meet and exceed
the customers expectations with perfect to times, accuracy & quality services.

1.5.2 EMPLOYEE RESPECT & DIGNITY

MCB treat each of its employees with fairness, which includes giving constructive
feedback for their development. It celebrate diversity and seek suggestions from all
employees for improvement. It ensure that responsibility & fairness in all decision-
making.

1.5.3 TEAM BASED APPROACH

MCB work towards achievement of its vision & mission as a combines group. It
encourage inter & intra-departmental communications. It treat our colleagues as its
internal customers & ensure that the requirements of internal customer focus are
always met.

1.5.4 GOOD CORPORATE CITIZENSHIP

MCB ensure that it contribute due share to the Govt. It realize that it has a
responsibility to the society in which it operate & seek ways of playing a positive role
for the betterment of the community at large.

1.6 OBJECTIVES OF MCB

The main objectives of MCB are:

i. Improved Customer Services

ii. Effective Use of Electronic Media
iii. Enlightened Personnel Policies
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iv. Compatible Package
v. Excellent Work Environment
vi. Modernization of Branches
vii. Launching of New Products
viii. Decentralization of Authority
ix. Effective staff Motivation Policies

1.7 ORGANIZATIONAL HIERARCHY OF MCB

GRADES OF BANK

SEVP

ESEVP

SVP

VP

AVP

GRADE-1

GRADE-2

GRADE-3

ASSISTANT

Clerical staff Non-clerical staff

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1.7.1 ORGANIZATIONAL STRUCTURE OF MCB
As MCB is a banking company listed in stock exchange therefore it follows all the
legalities which are imposed by concerned statutes Mr. Mian Muhammad Mansha
is chairman & chief executive of the company with a team of 10 directors and 1 vice
chairman to help in the business control and strategy making for the company. A team
of 10 professionals is handling operational Management of the bank. Mr. Muhammad
Mansha also heads this team. The different operational departments are Consumer
Banking & IT div; Financial & Inter branch div; Banking operations div; HR & Legal
div; financial control & Audit div; Credit management div; Commercial Banking div;
Corporate Banking div; Treasury management & FX Group and lastly Special Assets
Management (SAM) Group.

For effective handling of branches, it has been categorized into three segments with
different people handling each category. These categories are:

a) Corporate Banking

b) Commercial Banking
c) Consumer Banking

1.7.2 CORPORATE BANKING

These are branches, which have an exposure of over Rs. 100 million. Usually includes
multinational & public sector companies.

1.7.3 COMMERCIAL BANKING

The branch which has a credit exposure of less than Rs. 100 million but having a
credit portfolio of more than Rs. 20 million (excluding staff loans) .Usually branches
in large markets and commercial areas come under this category.

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1.7.4 CONSUMER BANKING

These are the branches, which have exposure up to Rs. 20 million, and these include
all the branches, which are neither corporate nor commercial branches.

Recently the organizational structure was re-designed as follows:

Province wise branches

Corporate Consumer Commercial

20 branches 637 branches 383 branches

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1.8 CORPORATE INFORMATION

BOARD OF DIRECTORS

Chairman Mian Muhammad Mansha

Vice Chairman S.M. Muneer
Presidents & Chief Executives Tariq Rafi
Shahzad Saleem
Sarmad Ameen
Mian Umar Mansha
Aftab Ahmed Khan
Atif Yaseen
Dr. Muhammad Yaqub
Muhammad Aftab Manzoor
Advisor Raza Mansha

AUDIT COMMITTEE
Chairman Dr. Muhammad Yaqub
Members Tariq Rafi
Mian Umar Mansha
Aftab Ahmed Khan
Chief Financial Officer Ali Muneer
Company Secretary Tahir Hussain Qureshi
AUDITORS
Chartered Accountants KPMG Taseer Hadi & Co.
Chartered Accountants Riaz Ahmed & Co.

Legal Advisors Mandviwalla & Zafar

Advocaes & legal consultants

Registered Office MCB Building, F-6/G-6

Jinnah Avenue, Islamabad

Principal Office MCB Tower

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 I.I. Chandrigar Road, Karachi
Registrar's and Share THK Associates (PVT) Ltd.
Registration Office Shares department, ground floor, state
life building No. 03, Dr. Zia ud Din
Ahmed road Karachi.
1.9 PLACING STRATEGIES OF MCB BANK
The location of the bank plays a vital role in making its operations profitable. If the
bank is located in some business center then it will be very easy for it to attract
business people as its customers. Therefore MCB has most of its branches at places
where it can reach its targets customer easily. The branch network of MCB is given as
follows:

Punjab 632

Sindh 232

NWFP 123

Blochistan 34

Azad Kashmir 19

Domestic 1040

Overseas 5

Total 1045

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 CHAPTER NO 2

2.1 PRODUCTS /SERVICES

2.1.1 MCB RUPEE TRAVELERS CHEQUE

MCB Rupee Travelers Cheques are as good as cash, infect better. Better because with
Rupee Travelers Cheques you have the power to purchase and a feeling of security
that should you lose them, you will get a refund.

MCB Rupee Travelers Cheques are accepted at major shops, travel agents, hotels,
business establishments and MCB branches all over Pakistan. You don't have to be an
MCB account holder to buy the Rupee Traveler Cheques. Anybody can purchase
them. It's a safe and convenient way to conduct everyday business. At a time when
thefts and robberies are on the increase, you are better off carrying Travelers Cheques
rather than money.

2.1.2 MAHANA KHUSHALI SCHEME

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A 5- year fixed Deposit Scheme, targeted to persons with small savings who would
desire a regular monthly return on their investment.

SALIENT FEATURES

 Minimum amount of investment shall be Rs.0.010m and the maximum

amount of investment would be Rs. 1.000m.

 Khushali Certificates can be purchased by individuals (singly or jointly) or by

the Proprietorship/Partnership concerns or Companies, etc. in their name

 The Khushali Certificate will be of five years maturity.

 The interim rate of profit offered will be minimum 1% per month. If the profit
declared by the bank is higher, additional profit will be paid.

 Zakat will be deducted wherever applicable on yearly basis whether you will

 be receiving your profit or enchasing your certificates.

 As per Government Directions, tax on the profit / return is to be deducted by

MCB branches at the time of payment.

2.1.3 MCB KHUSHALI BACHAT ACCOUNT

SALIENT FEATURES

 8% rate of return per annum.

 Returns calculated on daily.

 Average balance and paid half yearly.

 Introduced first time in Pakistan.

 The facility of helping account holders pays utility bills (electricity, telephone
and gas) through their account. No queues. No delays.

2.1.4 PRIME CURRENCY ACCOUNT SCHEME

Launched to attract deposits in foreign currencies. US Dollars, Pound Sterling, Euro

and Japanese Yen.

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SALIENT FEATURES

 Owing foreign currency account under the Prime Currency Scheme allows you
to earn attractive rates of interest in foreign currency.

 You have a choice between opening this account in your personal name and
opening it under joint names.

 Whether you are a resident or a non-resident Pakistan, MCB Prime Currency

Scheme invites all to operate a foreign currency account.

 Foreign nationals and foreign companies can also open a foreign currency
account under the Prime Currency Scheme.

 Your foreign currency account can be opened in four global currencies:

The United States Dollar, the Pound Sterling, the Japanese Yen and the Euro.

 Travelers Cheques and Foreign Currency Notes can also be issued to holders
of persona! and Joint accounts.

 Rupee Loan facility will also available against this account.

 You can draw any amount of foreign exchange from your foreign currency
account and transfer or remit the amount freely to any part of the world
without any restrictions.

 The restrictions imposed by the State of Pakistan for the opening of foreign
currency accounts in case of passport; Work-permit and resident Visa have
been withdrawn. Your account will be restriction free.

 The Prime Currency Scheme is exempt from al! Forms of taxes including
Income Tax, Wealth Tax and Zakat deductions.

2.1.5 HAJJ MUBARAK SCHEME

A saving scheme, of 2/3 years duration, for the convenience of persons, with a limited
income, who desire to perform Hajj, was introduced.
Under the 2 years scheme, a monthly deposit of Rs.1800 is required, whereas under
the 3 years scheme, the required monthly deposit is only Rs.1200.
2.1.6 CAPITAL GROWTH CERTIFICATE SCHEME

For long term depositors under which the amount deposited almost doubles at the end
of 5 years. For the scheme, the minimum amount of deposits is Rs. 10000 while there
15
is no maximum limit. In case of premature encashment of the certificate, the depositor
will profit at the same rates as that of PL Saving Account.

2.1.7 FUND MANAGEMENT SCHEME

This scheme is offered to corporate and customers and is aimed at providing better
rate of return up to 15% per annum. One of the objectives of the scheme is to develop
secondary market for Government Securities.
2.1.8 SELF-SUPPORTING SCHEME
For the benefits of genuine worker/borrowers who are poor and needy and for small
entrepreneur the bank as evolved a self-supporting scheme: maximum amount of loan
Rs.25000 and minimum Rs.5000 per individual. Loan will be totally free of mark-up.
2.1.9 FAX PRESS
This product was first of its kind introduced by using modem technology of The Fax
Machine. It facilitates speedy transfer of funds within Pakistan. The service
guarantees transfer of from one city to another, within an hour.

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2.1.10 NIGHT BANKING SERVICE
For the convenience of the account holder, service has, especially, been introduced at
busy commercial centers. Traders and other clients can now make deposit, with case,
at such centers up to 8.00PM.
2.1.11 UTILITY BILLS COLLECTION
With the aim of extending this service to wider range of customers, the number of
MCB branches collecting Utility Bills more than 900.
2.1.12 MCB ISLAMIC BANKING SERVICES
Islamic banking services through exclusive units/branches offering a range of liability
and asset based Sharia compliant products like Musharika, Murabaha, Ijara and
Istasana.
2.1.13 MCB CAR CASH
Car financing and leasing at competitive rates with flexible options Car cash finances
both semi-commercial and non-commercial vehicles for personal and business use.
2.1.14 MCB LOCKERS
The best protection for your valuables. Lockers of different capacities are available
nationwide.

2.1.15 MCB PYARA GHAR

MCB gives dream home at the lowest and best possible mark-up rates. You can
choose either one of our two mark-up rate options- fixed or variable. Early repayment
option

tailor-made to allow making partial prepayments at dates that suit.

Who Can Apply
Anyone who fulfills the following criteria is eligible to apply:
 Pakistani national residing in the city and area where the product is launched.
 25 years old or above when you apply and under 60 at the time of maturity of
the applied financing period.
 Salaried person, self-employed professional or a businessman with a verifiable
monthly income stream.
 Net take -Home income not less than Rs. 25,000 per month.
 Have 5 years or more of business or professional experience.
 Home Purchase Home Renovation Home Construction
 Tenure 3 years to 15 years 2 years to 5 years 3 years to 15 years.
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2.1.16 MCB BUSINESS SARMAYA
MCB Business Sarmaya is a running finance against your residential property. It
offers running finance up to 20 millions with low markup.

2.1.17 MCB CAR FOR YOU

MCB car 4 u auto finance is a power move that gets you not only a car of your own
choice but leads you best in life. It is affordable with competitive markup, flexible
conditioning and easy processing and above all no hidden cost.
2.2 DEPARTMENTS OF MCB
For proper functioning of branches and the over all bank has been divided in different
departments. These departments handle different jobs so that division of work is there
for improvement of functions and also it is easy to control the situation. The general
division in a branch is as follows:
1) Accounts/Deposits
2) Accounts Opening
3) Remittances
4) Advances Department
2.2.1 DEPOSIT DEPARTMENT
Bank deals in money and they are merely mobilizing funds within the economy. They
borrow from one person and lend to another, the difference between the rate of
borrowing lending forms their spread or gross profit. Therefore we can rightly state
that deposits are the blood of the bank, which causes the body of an institution to get
to work. These deposits are liability of the bank so from point of view of bank we can
refer to them as liabilities.

The total deposits of MCB are growing since its inauguration but after privatization
there is a sharp incline in over all deposits of the bank. The increase in deposits is also
a cause of increase on total number of accounts; bank has progressed in both aspects.
2.2.1 TYPES OF DEPOSITS
Deposits can be segregated on two bases, one is the duration in which there funds are
expected to be with the bank and second is the cost of getting these funds. So divide
deposits in two classes according to duration of deposits i.e.

• Time deposits / liabilities

• Demand deposits / liabilities

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And on the basis of the cost to acquire these funds, a deposit can be classified as
anyone of following four, High Cost Medium Cost, Low Cost No Cost.

Banks has different kinds of deposit schemes in order to induce deposits. These
schemes are a mixture of the above mentioned two types of deposits with an addition
of different services & requirements such as minimum balance' requirement, mode of
transaction, basis for calculation of profit, deductions, additional benefits, eligibility
for different groups.

In the similar fashion, MCB has a large variety of deposit schemes and some of them
are as follows:
• CURRENT ACCOUNT

In this type of accounts the client is allowed to deposit or withdraw money as and
when he likes. He may, thus, deposits or withdraws money several times in a day if he
likes. There is also no restriction of amount to be deposited or withdrawn. However,
there is requirement of minimum balance maintenance of Rs. 1000/-. Usually the
businessmen open this type of account. No profit is paid by the bank and no service
charges are deducted by the bank on current deposits account. These types of deposits
are also exempt from compulsory deduction of Zakat.
PLS ACCOUNT

This type of account is for those persons who want to make small savings'. This type
of account is opened with a minimum deposit of Rs. 1000/-. Under this scheme
deposits can be made only up to a-costing amount and withdrawals are allowed twice
a week or 8 times a month.

The profit is paid on these accounts on the minimum balance during a month for the
whole of that month. Zakat & other withholding taxes are deducted as per rules of the
government.
KHUSHALI BACHAT ACCOUNT

This is an advance form of PLS saving a/c, in this type of account. The minimum
balance requirement for this type is Rs. 2500/-. There is also restriction on the
number of withdrawals as well, i.e. up to 4 times in a calendar month. For
maintaining this extra balance the customer gets the benefits of profit calculation on
daily product basis and also free service of standing instructions of paying utility bills
and HBFC installments. 28

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All other rules of saving account are applicable.
PLS 365 GOLD

This is a special type of saving account in which customer maintains a minimum

balance of Rs. 300,000- and in turn he gets the benefits of daily profit calculations and
also there is no restriction on the maximum number of withdrawals as was there in the
case of KBA. There is also another advantage of this scheme that if balance on a
particular day falls below the minimum balance then only the product of that day is
ignored whereas in KBA, if balance falls below the minimum limit then all the
products for that month are ignored on in other words no profit is paid for that month.
KHANUM BACHAT SCHEME

This is a type of term deposit, in this type of deposit an account is deposited and
monthly payments of Rs. 1000/- are made by the account holder in this account for a
minimum of 10 years. After the expiry of term, he receives his funds along with profit
for the tenor. The distinctive feature of this product is that profit is calculated on
monthly basis and charged to account on end of each half /ear.

Then profit is also calculated on that amount of profit, which is credited to the
customer's account. So we can say that in this type of account there is a concept of
accumulated profits on profit. This ends in getting a heavy return for the depositor at
the end of tenor for his small savings. This product was actually introduced to
promote saving habits in the people. Zakat and withholding taxes are deducted as per
rules only at the time of maturity while making payment to the customer.
TERM DEPOSITS RECIEPT

This is a type of term deposit in which a receipt is issued for varying tenors ranging
from 1 month to 5 years or more. These are in the form of receipts and profit on these
receipts is paid biannually. These receipts are excisable after expiry of the period for
which they were issued. Different profit rates are applied to different type of TDRs.

Under this deposit scheme, a deposit is received from the depositor under the
condition that he will intimate the bank before a certain period in case of withdrawals.

• FUNCTIONS OF DEPOSIT DEPARTMENT

This was a brief review of different types of deposit schemes. The Deposit
Department handles the account opening, profit payment and accounting of all types
of deposit schemes.
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ACCOUNT OPENING

Account opening is an agreement in which customer offers his funds and bank accepts
these funds, therefore the nature of relation between a banker and customer is of a
contractual one and all the conditions applicable to this contract act are also
applicable.

PROFIT PAYMENT AND CALCULATION

Profit payment & calculation is done in accordance with the rules of each type of
deposit scheme-by the deposit department. The products for each deposit scheme are
calculated separately and added till the end of 6-month period. Then the sum total of
these products is multiplied with the respective profit rates, which are issued by the
Head Office at the end of each half yearly closing. The profit provisions for each type
of deposits are also calculated on monthly basis by the same department in order to
calculate the net profit or loss position of the branch.

ACCOUNTING ENTRIES

Accounting entries are also made in the respective books of account by this
department. However, in small and medium size branches, the accountant performs
the book keeping duties for all kinds of ledgers.

2.2.2 REMITTANCE DEPARTMENT

Remittance department performs following functions:

 Mail Transfer (MT)

 Telegraphic Transfer (TT)

 Demand Drafts (DD)

• MAIL TRANSFER (MT)

When a customer requests the bank to transfer his money from one branch of bank to
another branch of the same bank or from one city to another city to the same bank or
any other bank. Customer fills the form given by bank. If the customer has an account
with that amount as mentioned in the application form then concerned officer will
undertake the following procedure to make the mail transfer complete.

• Branch Mail transfer form

• Receiving Branch Register copy

21
 • Issuing branch register Copy

• Beneficiary advice

• Advice to customer
In case where the customer is not account holder of the bank then the customer will
have to deposit the amount which he wants to transfer under Mail. Then the above
said procedure will be done.
• TELEGRAPHIC TRANSFER (TT)
This type of transfer is simple. After filling the application form the concerning
officer shall fill the telegraphic transfer form. Then it is sent to the required bank
which on receiving it immediately makes the payment to the customer and afterwards
the voucher are sent to that bank by ordinary mail.
• DEMAND DRAFT (DD)

Demand draft is just like cheques and issued when the customer wants to take cash
with him personally. The idea behind is to avoid the risk and burden of currency notes
in huge quantity. Demand draft can easily be handled whatever amount it has and the
money can easily be taken from the bank when it is presented. In fact, the bank
persuades the customer to transfer money by drafts and avoid the risk of frauds
involves in MT and T.T. Draft is only issued when the bank knows customer and
bank has the confidence in him

In case of transfer of money by drafts, the customer has to fill an application form.
Then the concerned officer fills the following forms:

• Customer’s advice

• Customer’s debit form

• Register copy

• Cover Advice

• FOREIGN DEMAND DRAFT

Foreign Demand Draft is just like demand draft. The only difference is that a bank
issues FDD to the bank of another country. It requires foreign exchange and it
involves seven forms, which are to be filled.

22
CLASSIFICATION OF (DF)

• DEMAND FINANCE (Packing Credit)

Scheme introduced by SBP for exporter of carpet, surgical instruments, at zero

percent rate of interest. While banks provides at concessional rate of interest.

• ORDINSRY LOANS:

Qarz-e-Hasana Scheme Loans are allowed to the students, teachers without any
interest or mark up with the recommendation of the MPA or MNA.

• LOAN FOR STAFF

Loans are offered to the staff of the following categories.

 House Building Loans against mortgage of property.

 Loan for purchasing vehicles.

 Loan equivalent to month’s salary.

2.3 ACCOUNT OPENING DEPARTMENT

Account opening and closing is the function of accounts departments. Bank’s

customers may be individuals (Single or Joint), firms
(partnership/proprietorship), Autonomous corporations, Limited
Companies, Charitable Institutions, Associations Educational
Institutions or Local Bodies.
2.3.1 BASICS TO OPEN AN ACCOUNT
During the span of mine internship in MCB, I learned and observed a lot of about the
opening of an account. Basically I think that the opening of an account is the
establishment of a contractual relationship between the banker and the customer. By
opening an account at a bank a person becomes a ‘customer’ of a bank. Further I am
going to express the basic requirements and steps involved in the opening of an
account.
2.3.2 INTRODUCTION AND PRELIMINARY INVESTIGATION
Before opening an account MCB as like the other banks in Pakistan ascertain whether
or not the person who is going to open the account is a desirable customer or not.
Then MCB determine the prospective customer’s integrity, respectability, occupation
and the nature of business by the introductory references given at the time of account

23
opening. Negligence in this informal preliminary investigation may result in serious
consequences not only for the banker concerned directly but also for other bankers
and the general public who may be affected indirectly.

In order to further strengthen and streamline this process, the Federal Ombudsman of
Pakistan, vide his ruling on complaint No. II/31/5186 has directed the banks to retain
with the account opening form a Photostat copy each of the National Identity Cards of
the person desiring to open an account as well as that of the introducer. As per these
directions, the concerned Branch Managers are required to obtain the original
National Identity Cards along with their Photostat copies and then return the original
after attesting the authenticity of the retained copy.

2.3.3 Preliminary investigation is necessary because of the following reasons

• Avoid Frauds

In this regard I learned that if a banker does not make the necessary inquiries
mentioned above he might enable dishonest persons to possess cheques books for
fraudulent purposes. If any such person happens to be an undercharged bankrupt, the
banker might be placed in an awkward position for having allowed such a person to
open and open a bank account.

• Safeguard against unintended overdrafts

Sometimes due to a mistake an account may be given an overdraft, For instance, the
ledger keeper, misreading the balance of an account honors a cheque for an amount
larger than the balance. Similarly a credit entry belonging to a customer may be made
by mistake in another customer’s account. In such situations the excess amount
withdrawn by the customer can only be realized if the customer is a respectable
person.
• Inquiries about clients
Being a banker I think MCB has a business obligation to respond to inquiries from
other banks etc. about his customer’s financial position. Though the banker gives only
a general ideal about the financial standing of his customer, it should nevertheless
have the necessary information available with him.
• Specimen Signature
When an account is opened with MCB customer provides to the bank a specimen of
the form of signature, which would appear on all his cheques to express his authority
24
for the payment of cheques drawn on his banker. This specimen is taken generally on
a card specially designed for this purpose, and rule for the customers, full name, and
account number are entered on it.
If the bank has reasons to doubt the genuineness of a signature, he should either get it
confirmed for his satisfaction or return the cheques with the remark ‘Signature
differs’. If the signature of the customer is forged the banker cannot escape his
liability because he has actually acted on his customer’s mandate.
2.3.4 HOW TO OPEN AN ACCOUNT (GENERAL)

Before opening an account in MCB I observed that the following points must be
considered in this regard.

 Another account holder of the bank should properly introduce the new
customer.

 The account holder should sign the account opening form in the presence of
bank officer and the signature is duly verified.

 A copy of identity Card is required by Bank.

 Against submission of the Bank’s prescribed application form, duly introduced

in the manner provided and on supplying such document, as may be required
and account may be opened. The Bank reserves to itself the right to refuse to
open and account without assigning any reason.

 Each account shall be allotted a distinct number that is to be quoted in all

correspondence with the bank relation to the account.

 Minimum amount for opening and continued maintenance of various types of

accounts is as follows:

Rs.

Saving 500

Current 500

Term Deposit 1000

The bank reserves the right to change the above mentioned minimum balance
requirement at any time without any notice.

25
• PROCEDURE TO OPEN AN ACCOUNT

According to my practice in MCB, when a customer wants to open an account, the

bank officer gives him an application form. All information, which is necessary to be
known by the bank, are requirements of the application form. Form also requires the
essential documents to be attached by the customer.

Basically following information is required to open an account with MCB.

 Title of Account

 Full Name of Applicant

 Occupation

 Address

 Telephone No.

 Currency of account

 Nature of Business

 Introducer’s Name, Address & Signatures

 Special instruction regarding the account

 Initial Amount of the Deposit

 Signature of the applicant

• DOCUMENTS TO BE ATTACHED
Further I learned that if you wanted to open an account with MCB then you should
attach the following documents with your application form, which are different for
different categories.
SOLE PROPRIETOR’S ACCOUNT
In order to open an account with MCB Sole Proprietors have to submit their business
registration certificate number.
• PRIVATE / JOINT ACCOUTS
For individual or private or joint accounts National Identity Card is required.
• JOINT STOCK COMPANY

26
Before an account of a Public Limited Company is opened MCB must ask the person
authorized to do so to submit the certified copies or the following documents

 Certified true copy of the Memorandum and Articles of Association of the

company.

 Certified true copy of the resolution of the board of directors / managing

committee / governing body regarding conduct of the account.

 Certified list containing names and signatures of the directors / office bearers.

 Certified true copy of the certificate of incorporation or registration.

 Certified true copy of the certificate of commencement of business (in case of

public limited companies).

 Balance Sheet

 I.D. Card copy of each director

 Original is also enclosed for inspection and return

 List of persons authorized to operate the account.

 Power of Attorney in favor of the person opening account.

 PARTNERSHIP FIRM ACCOUNT

Information, which is required to be submitted to MCB by a partnership firm, in this

case is as follows:

 Full Names

 Address

 Specimen of signatures of the partners

 Certified true copy of partnership deed

 Registration No. If the Partnership is registered

• SOCIETIES / CLUBS AND ASSOCIATIONS ACCOUNT

MCB is authorized to open the accounts of the societies/clubs and associations, These
are non-trading organizations, formed for the promotion of culture, science,
education, recreational activities and charitable purposes etc. some of these institution
27
are registered under the Societies Registration Act, 1866, and are issued a certificate
of registration after they have been found fit for registration.

2.3.5 ISSUANCE OF CHEQUE BOOK

When a customer opens an account with the bank, he is provided with cheque book
for withdrawals from account. However, the first cheque book is given
to the customer only when all the required documents are checked. A
cheque book contains ten, twenty-five, fifty or hundred leaves. The
cheque book also carries a requisition slip for the issuance of the new
cheque book.

This slip is duly filled and singed by the customer. The bank verifies the signature of
the customer and new cheque book is issued to the customer and serial
numbers of the cheque are duly entered in the book of the bank. Along
with the signature, person should also write his full name &
address.Usually only one cheque book is issued at a time, however big
concerns who need a number of cheque books at a time, may ask the
bank to stock as number of cheque books in their name and to point their
name on these cheque books.Bank debits the client’s account for excise
duty of Rs.2.50/- per cheque and keeps the cheque book ready for the
customer, as on his advice.

The officer keeps and maintains the cheque book register Cheque book inventory and
cheque books issued are recorded in this register. The account number for which the
cheque book is issued and the number of leaves are also recorded in this register when
the cheque book issued an entry is passed in the cheque book issue register.

In case of loss of cheque book or requisition slip on cheque book the customer has to
fill the Form No. 216-B to obtain a new cheques book.

2.4 ADVANCES DEPARTMENT

INTRODUCTION

The function of advances department is to lend in the form of clean advances, against
promissory notes, as well as secured advances against tangible and marketable
securities. According to the Prudential Regulations of the State Bank of Pakistan, No
28
bank can issue a clean advance of more than Rs. 100,000/-. The bankers prefer such
securities that do not run the risk of general depreciation due to market fluctuations.
Common Securities for the banker’s advances are as under:

2.4.1 GUARANTEES

When an application for advance cannot offer any tangible security, the banker may
rely on personal guarantees to protect himself against loss on advances or overdraft to
the applicant.
2.4.2 MORTGAGE

A mortgage is the transfer of an interest in specific immovable property for the

purpose of security the payment of money advanced or to be advanced by; way of
loan, and existing or future debt, or the performance of an engagement, which may
rise to a pecuniary liability. The transfer is called a mortgagor, the transferee a
mortgage.
2.4.3 HYPOTHECATION
When property in the shape of goods is charged as security for a loan form the bank
the ownership and possession is left with the borrower, the goods are said to be
hypothecated. The essence of hypothecation is that neither the property in the goods
not the possession of them are possessed by the lender, but the security is granted by
means of letter of hypothecation, which usually provides for a banker’s charge on the
hypothecation goods.
2.4.4 PLEDGE
In a pledge the ownership remains with pledge, but the pledge has the exclusive
possession of property until the advance in repaid in full. While in case of the default
the pledge has the power of sale after giving due notice.
2.4.5 PROMISSORY NOTE
Sometimes promissory note is also accepted as a security, “A promissory note is an
instruments in writing containing an unconditional undertaking signed by the maker,
to pay ;on demand or at a fixed or determinable future time a certain sum of money
only, to or to the order of certain persons, or to the bearer or the instrument.” A
promissory note is incomplete until has been delivered to payee or the bearer.

29
Moreover, the sum promised in a promissory note may be made by two or more
makers who may be liable there on jointly and severally.
2.4.6 CASH FINANCE (COMMERCIAL LOANS INWARD)
These types of loans are given against following:

 Against locally manufactured goods.

 Against pledge

 Against commodities
 Against Trust Receipts

2.4.7 FINANCE AGAINST FOREIGN BILLS (FAFB)

This facility is available to both local and foreign bills.

• FAFB (local) advance against Railway receipts and truck receipt, a company
with bills of exchange and invoices, are given under this head.
• FAFB (foreign) advances against foreign bill covering bills of exchange, bills
of lading, airway, bills of exchange etc.

2.4.8 AGRICULTURE LOANS

Loans to the farmers with holding up to 25 acres for meeting their short term, medium
and long term agricultural production requirements, such as:

 Agricultural inputs

 Tube Wells

 Live Stock Framing

 Land improvements

2.4.9 INDUSTRIAL LOANS

Besides the short-term loans, which play an important part in working capital
requirements, medium and long-term loans are also given to industrial sector for
purchases of machinery and other capital nature goods.
2.4.10 IMPORT EXPORT BUSINESS/TRADE FINANCE

MCB Provides highly efficient trade finance services for import/export business for
our clients/customers through large number of authorized branches where trained and
motivated staff is available to handle the business on behalf of customer.
2.5 CASH DEPARTMENT
30
The following books are maintained in the Cash Department:

 Receiving Cash Book

 Paying Cash Book

 Token Book

 Scroll Book

 Cash Balance Book

When cash is received in counter, it is entered in the Scroll Book and Receiving
Cashier Book. At the close of the day, these are balanced with each other.
When the cheques or any negotiable instrument is presented at counter for payment, it
is entered in the token book and token is issued to the customer. At the close of day,
the Token Book and Paying Cashier Book are balanced.
The consolidated figure of receipt and payment of cash is entered in the cash balance
book and drawn closing balance of cash.

Opening Balance + Receipts - Payments = closing Balance.

This is very important department because cash is the most liquid asset and mostly
frauds are made in this department, therefore, extra care is taken in this department
and nobody is allowed to enter or leave the area freely. Mostly, cash area is grilled
and its door is under supervision of the head of that department. An officer check all
the books maintained in this department.
2.6 CLEARING DEPARTMENT

Every banker acts both as a paying as well as a collecting banker, It is however an

important function of crossed cheques. A large part of this work is carried out through
the bankers clearing house. A clearinghouse is a place where representative of all
banks of the city get together and settle the receipts and payment of cheques drawn on
each other. As the collecting banker runs certain risks in receipt of their ownership the
law has provided certain protections to the banks.

The Negotiable Instrument Act, 1881, lays down hat drawer or holder of a cheques or

draft may cross the instrument generally or specially. It further lies down that crossed
cheques can only be paid to a banker, who collects it for a customer in good faith and
without negligence.

31
2.6.1 TYPES OF CHEQUES

 Transfer cheques: are those cheques, which are collected and paid by the
same branch of bank.

 Transfer delivery cheques: are those cheques, which are collected and paid
by two different branches of the same bank situated in the same city.

 Clearing cheques: are those cheques, which are drawn on the branches of
some other bank of the same city or of the same area, which is covered by a
particular clearing house.

 Collection cheques: are those cheques, which are drawn on the branches of
either the same bank or of another bank, but those branches, are not in the
same city or they are not the members of clearing house.
2.6.2 FUNCTIONS OF CLEARING DEPARTMENT

 To accept Transfer, Transfer delivery, clearing and collection cheques from

the customers of the branch and to arrange for their collection.

 To arrange the payment of cheques drawn on the branch and given for
collection to any other branch on MCB or any other members or sub member
of the local clearing house.

 To collect amount of cheques drawn on members, sub-member of local

clearing house, sent for collection by MCB Branches, not represented at the
local clearing house

 Receiving and scrutinizing the cheques and other deposit instruments, and the
pay-in-slip at the counter.

 Fixing the stamps.

 Scrutiny and receipt by the authorized officer.

 Returning the counter file to the depositor.

 Certificate and confirmation by the officer in charge of the department.

 Separating the cheques into transfer, transfer delivery, and clearing cheques.
2.7 TECHNOLOGY DEPARTMENT

32
Technological advancements are also affecting the banking industry. The foreign
banks have a competitive edge over all local banks in their technologies'
advancements and automated systems. Local banks have also realized the gravity oil
this situation and are striving to add computerized systems to their branches
MCB is ahead of all other local banks in this field and now it is in a position to even
compete with foreign banks. There are more than 1045 branches of MCB all over
Pakistan and out of these more than 300 branches are fully computerized Almost all
.the branches of big cities are computerized; therefore, the need for a technology
department at each branch is growing. Now a day, a computer division is working in
each city to provide service to ad the branches of that area.

MCB has also introduced the now concept of online banking. There are now more
than 250 branches linked through this system and they can transact with each other
directly using computer systems at their own branches. Now customers do not have to
wait long for their transactions and can operate their account through all the online
branches.
2.7.1 ATM Network

ATM stands for Automatic Teller Machine. This machine is used to transact in one's
account without intervention of humans. These machines are basically used for taking
cash, confirming balances and requesting statements / cheques books.

MCB has the largest ATM network in the country at the moment with almost one
ATM at each online branch and also ATM terminals at International Airports. This
network covers more than the 27 cities of Pakistan including the provincial capitals
and large commercial cities of the country.

ATMs are operated through a card issued to the valued customers and by application
of Personal Identification Number (PIN number). A person can withdraw from any
machine across Pakistan with having an account in only one branch of MCB. This
was only possible with the help of online system. In this system all the machines are
linked to central banking host at IRM division Karachi through either satellite or
telephone controller. This system identifies the cardholder and his PIN Number.

Now MCB has also entered into a contract with Cirrus, which is a subsidiary of
MasterCard. This contract will enable an ATM cardholder to use his account even
when he is out of country at all the ATMs where Cirrus logo is displayed.

33
Green Cards: are ordinary cards with a maximum withdrawal facility of Rs. 10,000/-
in a day. The annual fee for this card is Rs. 300/- only.

Gold Cards: are special cars with maximum withdrawal limit of Rs. 25000/- in a day.
These cards are issued to the persons having more than Rs. 500000/- as their average
balance.

International Cards: are issued in collaboration with Cirrus and are useable all over
the world with maximum withdrawal facility according to the standards of Cirrus.

CHAPTER NO 3
3 ANALYSIS
3.1 FINANCIAL ANALYSIS
3.1.1 HORIZONTAL ANALYSIS
It is conducted by setting consecutive balance sheet side by side and reviewing
changes in individual categories on a year to year or multiyear basis. The most
important item revealed by comparative financial statement analysis is trend. The
horizontal financial statements analysis is done by restating amount of each item or
group of items as a percentage. Such percentages are calculated by selecting a base
year and assign a weight of 100 to the amount of each item in the base year statement.
Thereafter, the amounts of similar items or groups of items in prior or subsequent
financial statements are expressed as a percentage of the base year amount.
In this horizontal analysis we determine that when cash decrease in 2005 that shows
the liquidity position of firm is not good but their cash increase in 2006 their liquidity
position is good, but their balance with the other banks decrease in 2005 but balance
increase in 2006 this shows the positive impact on the organization but their lending
increase in 2006 which was less in 2005, but their investment in 2006 is decreased as
compare to the previous year so it is a common term finance, more investment more
return. So the increase advances in 2005 means the Muslim Commercial Bank is
running very well. MCB Bank is in a position that its earning more and more profit
with the passage of time.
In the horizontal analysis we determine how much increase in bill payables in 2005
decrease that a good sign for the corporation. But borrowing is less as compare to the
previous year, and the other liabilities increased in 2005 to 2006. This sign is not good
because when the liabilities increase that reduced the liquidity of organization and
when the share capital increases that shows the credibility of bank. So when MCB

34
increases its reserves and inappropriate profit to increase its lending power, so a bank
can lend money equal to 30% of its capital plus reserves.
The overall objective of financial statement analysis is the examination of a firm's
financial opposition and return in relation to risk. In horizontal analysis of profit and
loss when interest increases in 2005 but decreases in 2006 which is unfavorable but in
foreign is increased which shows the investment of much has a positive impact and
decreased income in 2006 which is alarming and increases in the dividend which is
positive impact. In horizontal analysis we determine that when the provision against
the loan has decreased trend which shows the positive impact and when the
administrative expenses decrease in 2005 and increase in2006 but the bad debts
increase in 2005 and decrease in 2006 has a positive sign but the tax increases that is
not bad because it is with profit increases tax also increases.

FINANCIAL ANALYSIS OF MCB

IMPORTANCE
Analysis is vital to fathom, weigh and evaluate the operating performance of the firm.
Another reason that depicts the importance of ratio is that investors make their
investment decision in certain firm based on these ratios. But few points to remember
before starting the computation process:
Bank is service sector hence it doesn’t deal in with any kind of physical good,
therefore certain ratio such as inventory turnover will not be discussed at all.
The key points to note with the bank are:
There are substantial non-cash charges in the profit and loss statement – mainly
provision for loans losses.
It is generally difficult to get a definitive fix on actual cash loan losses due to lack of
disclosure.
Banks are in the business of borrowing money and on lending it at higher interest
rates. Debt is therefore not only a form of financing bit more importantly a key input
into its “production process”.
Now keeping in view these differences it is crucial to make following adjustment to
get a better look of data:
Accounting loss provisions are added back in the calculation of cash profits but an
estimate of the economic or cash loan losses is deducted (proxied by estimated write-
offs). In the case of MCB, actual write-offs have historically been disclosed since.
35
Interest is deducted in the calculation of cash profits.

WHY FINANCIAL ANALYSIS

Financial analysis of the organization involves the evaluation of the financial
performance as depicted in the financial statements of the organization. The MCB
provides this information in the shape of its annual report for every financial year
containing financial as well as non-financial information.
To improve the quality of decision making, proper analysis of these statements helps a
lot. Financial statements analysis helps in determining the financial conditions at any
particular point in time and effectiveness of operations of a firm during a specific
period.
The various stakeholders of business are all interested in the analysis of financial
statements. But the focus of interest of all is not the same. Financial statements are
prepared primarily for decision-making. They play a dominant role in setting the
framework of managerial decisions.
But the information in the financial statements is not an end in itself as no meaningful
conclusions can be drawn from these statements alone. However the information
provided in the financial statements is of immense use in making decisions through
analysis and interpretation of financial statements.
Financial statement analysis is the process of identifying of financial strengths and
weaknesses of the firm by properly establishing relationship between the items of the
balance sheet and the profit and loss account.

36
 Balance Sheets
MCB bank ltd.
As on year end on December 31, _______
2005 2006 2007 2008 2009
ASSETS Rs. Rs. Rs. Rs. Rs.
Cash and Balances with 23,833,253 23,665,549 32,465,976 39,683,883 39,631,172
treasurey banks
Balances with other banks 5,708,323 1,469,333 6,577,017 3,807,519 4,043,100
Lendings to Financial Instituions 10,965,297 9,998,828 21,081,800 1,051,372 4,100,079
Investements 67,194,971 25,708,194 63,481,316 113,089,261 96,256,874
Advances 137,317,773 180,322,753 198,239,155 218,960,598 262,510,470
Operating Fixed Assets 7,999,821 8,182,454 9,054,156 16,024,123 17,263,733
Deferred Tax Assets - 191,967 172,373 - -
other assets 6,154,370 5,464,426 11,031,450 17,868,761 19,810,476
Total Assets 259,173,808 255,003,504 342,108,243 410,485,517 443,615,904
LIABILITIES
Bills Payable 7,566,684 8,536,674 7,089,679 10,479,058 10,551,468
Borrowings 7,590,864 27,377,502 23,943,476 39,406,831 22,663,840
Deposits and other accounts 221,069,158 229,345,178 257,461,838 292,098,066 330,274,155
Sub-ordinated loans 1,598,720 1.598,080 1,597,440 479,232 _
Liabilities against assets subject _ - - -
to finance lease
Deferred Tax Liabilities 269,499 2,271,393 _ 1,180,162 4,371,137
Other Liaibities 6,525,999 8,611,600 11,171,496 11,722,493 21,253,250
Total Liabilities 244,620,924 276,142,347 301,263,929 355,365,842 389,113,850
Capital
Share Capital 3,371,800 4,265,327 5,463,276 6,282,768 6,282,768
Reserves 5,661,553 13,408,008 24,662,426 34,000,638 36,768,765
Unappropraited Profit 165,208 210,662 5,530,973 437,137 9,193,332
surplus on revaluation of assets 5,354,323 5,423,769 5,187,639 9,705,519 6,191,189
- net of tax
Total Capital 14,552,884 23,307,766 40,844,314 50,426,062 58,436,054
Total Liabilities & Capital 259,173,808 299,450,113 342,108,243 405,791,904 447,549,904

37
 Income Statement
MCB Bank Ltd.
For the year end on December 31, _______
2005 2006 2007 2008 2009
Rs. Rs. Rs. Rs. Rs.
Mark-up/return/interest 9,083,863 17,756,232 25,778,061 31,786,595 40,043,82
earned 4
Mark-up/return/interest 2,057,640 2,781,468 4,525,359 7,865,533 11,560,74
exepensed 0
Net Mark-up/Interest 7,026,223 14,974,764 21,252,702 23,921,062 28,483,08
Income 4
Provision against non- 442,595 1,242,153 1,014,540 2,959,583 2,683,99
performing loans and 4
advances
Provision for (172,876 (98,982 121,197 105,269 1,335,12
impairement in the value ) ) 7
of investment
Bad debts written of 8,771 1,184 47,000 199 _
directly
278,490 1,144,355 1,182,737 3,065,051 4,019,12
1
privision for potential 1,200 _ _ _
lease losses

Non Mark-up/Interest 6,746,533 13,830,409 20,069,965 20,856,011 24,463,96

Income 3

Fee Commission and 1,992,356 2,448,950 2,311,235 2,634,610 2,866,72

brokerage income 9
Divident Income 378,908 480,344 811,801 632,300 617,554
Income from dealing in 492,738 531,455 692,010 693,408 727,564
foreigh currencies
Gain on sale of 804,419 866,895 605,865 1,500,865 740,429
investments -net
unrealised gain(loss) on (11,440 851 _ 1,728 (103,198
revaluation of ) )
investments classified as
held for traing - net
Other Income 576,007 1,084,576 570,505 1,000,149 942,362
Total Non- 4,232,988 5,413,071 4,991,416 27,304,238 5,791,44
Markup/Interest 0
expenses
4,234,188 4,991,416 27,304,238 30,255,40
3
Non Mark-up/Interest
Expense
38
 Adminstrative Expenses 7,244,200 6,459,490 6,482,592 5,426,116 7,546,87
8
Other provisions/write 149,593 (72,740 11,411 (3,743 10,120
offs ) )
Other Charges 41,864 178,748 66,708 573,830 830,839
Total non- 7,435,657 6,565,591 6,560,711 5,996,203 8,387,83
markup/interest 7
expenses
(3,201,469 (6,565,591 (1,569,295 21,308,035 21,867,56
) ) ) 6
Extra Ordinary/unusual - - - - -
items
Profit Before Taxation 513,852 340,598 18,500,670 21,308,035 21,867,56
6
Taxation-Current Year 1,555,764 4,611,359 5,701,443 6,442,356 7,341,25
7
Prior Years - (149,763 593,497 (1,294,473 (864,824
) ) )
Deferred 70,420 (356,524 63,332 894,590 16,533
)
1,626,184 4,105,072 6,358,272 6,042,473 6,492,96
6
Profit After Taxation 2,431,532 8,922,415 12,142,398 15,265,562 15,374,60
0
Unappropriated Profit 195,966 165,208 4,990,260 5,530,973 5,130,75
brought forward 0
Profit available for 265,337 9,171,372 17,164,824 20,808,390 20,526,66
appropriation 9
Basic diluted earnings 5.99 21.36 23.40 24.30 24.47
per share - Rupees

RATIO ANALYSIS
A ratio is a quantitative relation between two magnitudes of the same kind. In ratio
analysis, the financial ratios of the firm are compared to that of its competitors. This
comparison allows the firm to detect major operating differences which if corrected
will increase its efficiency. Another very popular method of ratio analysis is to
compare the firm's financial ratios to industry averages.
Before discussing the financial ratios three cautions are in order:

39
 a) A single ratio does not generally provide sufficient in formations to judge
the overall performance of the firm. Only if a group of ratios is used, a
reasonable judgment concerning the firm’s overall financial state can be
made.
b) An analyst, when comparing financial statement, should ensure that
predetermined uniform standards are used for this purpose.
c) It must be insured that the data used in calculating financial ratios have
been developed in the same manner and are sound and reliable.
There is no doubt that financial ratios are a useful guide for managerial decision-
making but these are not exact and definite. Ratios only suggest the questions that
need to be answered and provide no answers.
Let us now calculate some of the key financial ratios of MCB for the years 2006-
2007, and try to answer the questions that these ratios suggest.
These ratios are calculated from the "Balance Sheet" and "Profit & Loss Account" of
MCB Bank Limited 2003-2007.

40
 RATIO ANALYSIS OVER LAST FIVE YEARS
Table 5.3
Ratios
2004 2005 2006 2007 2008
Liquidity ratio

Current Ratio 1.68 1.82 2.50 2.75 2.95

Quick Ratio 0.92 0.89 1.41 1.50 1.38

Leverage Ratio

Debt Equity Ratio 0.14 0.12 0.34 0.61 0.60

Debt to Total 0.08 0.06 0.17 0.27 0.31

Assets
Profitability

Net Profit Margin 121% 200% 83% 98% 57%

Return on Assets 1.9% 1.66% 1.26% 0.63% 0.4%

Return on Equity 37.53 35.07 26.06 13.54 8.39

Other Ratios

Advances to Total
Assets 0.55% 0.58% 0.52 0.53 0.56
Advances to 0.71% 0.76% 0.64 0.63 0.71
Deposits
Deposits to 0.084% 0.085% 0.82 0.82 0.80
Liabilities
Interest Income to 4.64% 3.96% 2.29 4.78 9.04
Total Income

BRIEF ANAYLTICAL REVIEW

41
It is observed that Current Ratio has decreasing trend this is because of sharp
increase in short-term loans, which is not positive sign. Quick ratio has mixed
trend it increases in years 2003,2004 then slightly declining in 2005 & 06 then
increase in 2007, it is observed that this fluctuations are occurring due to increase
in investment and increase in stock which is a positive sign.
It is observed that in Debt equity ratio bank has more equity to pay its debts in
recent years, which is positive sign. It is observed that debt of the bank is
decreased against total assets in recent years.
Interest coverage ratio shows increasing trend this is because of increase in
EBIT. Now bank can pay its interest expenses more easily which is positive sign.
Net profit of the bank has also increasing trend over the previous last five years
which is very positive sign. Return on assets depicts increasing trend it is due to
increase in net profit of the bank, which is positive sign. Due to high net profits
Return on equity is increasing which is also a positive sign.
In Advances to total assets ratio it is observed that it has increasing trend which
is positive sign this is just because of increase in advances to general public and
government sector. Advances to deposits also have positive increasing trend
because advances are assets of the bank, which are showing increasing, trend
against deposits. Deposits to liabilities also have increasing trend people
deposited their money more than in previous years which shows public trust in the
bank which is also a positive sign. Net profit to total advances has also
increasing trend over the last five years which is also a positive sing. It is observed
that net profit of the bank has sharp increase than advances, which is positive sign.

42
 HORIZONTALAnalysis
Balance Sheets
MCB Bank Ltd.
As on year end on December 31, _______
2005 2006 2007 2008
ASSETS
Cash and Balances with -0.70% 36.22% 66.51% 66.29%
treasurey banks
Balances with other banks -74.26% 15.22% -33.30% -29.17%
Lendings to Financial Instituions -8.81% 92.26% -90.41% -62.61%
Investements -61.74% -5.53% 68.30% 43.25%
Advances 31.32% 44.37% 59.46% 91.17%
Operating Fixed Assets 2.28% 13.18% 100.31% 115.80%
Deferred Tax Assets
other assets -11.21% 79.25% 190.34% 221.89%
Total Assets -1.61% 32.00% 58.38% 71.17%
LIABILITIES
Bills Payable 12.82% -6.30% 38.49% 39.45%
Borrowings 260.66% 215.42% 419.13% 198.57%
Deposits and other accounts 3.74% 16.46% 32.13% 49.40%
Sub-ordinated loans #VALUE! -0.08% -70.02% #VALUE!
Liabilities against assets subject
to finance lease
Deferred Tax Liabilities 742.82% #VALUE! 337.91% 1521.95%
Other Liaibities 31.96% 71.18% 79.63% 225.67%
Total Liabilities 12.89% 23.16% 45.27% 59.07%
Capital
Share Capital 26.50% 62.03% 86.33% 86.33%
Reserves 136.83% 335.61% 500.55% 549.45%
Unappropraited Profit
Surplus on revaluation of assets - 1.30% -3.11% 81.27% 15.63%
net of tax
Total Capital 60.16% 180.66% 246.50% 301.54%
Total Liabilities & Capital 15.54% 32.00% 56.57% 72.68%

We take year 2003 as base year. It is observed that cash balance, lending to
financial institutions & investment of the bank has increasing trend this is due to
increase in deposits of the bank, which is positive sign. Bank’s advances also
having increasing trend, which is again a positive sign. Bank is paying its bills
payable more easily than before because of more equity and deposits which is a
good sign. Borrowing has sharply decreased in year 2006-07 due to more deposits

HorizontalAnalysis
43
 Income Statement
MCB Bank Ltd.
For the year end on December 31, _______
2005 2006 2007 2008

Mark-up/return/interest earned 95.47% 183.78% 249.92% 340.82%

Mark-up/return/interest expensed 35.18% 119.93% 282.26% 461.84%

Net Mark-up/Interest Income 113.13% 202.48% 240.45% 305.38%

Provision against non-performing 180.65% 129.23% 568.69% 506.42%

loans and advances

Provision for impairment in the -42.74% -170.11% -160.89% -872.30%

value of investment
Bad debts written of directly #VALUE!
310.91% 324.70% 1000.60% 1343.18%
Net Mark-up/Interest Income #VALUE! -100.00% #VALUE! #VALUE!
after provison
Non Mark-up/Interest Income

Fee Commission and brokerage 22.92% 16.01% 32.24% 43.89%

income
Dividend Income 26.77% 114.25% 66.87% 62.98%
Income from dealing in foreign 7.86% 40.44% 40.73% 47.66%
currencies
Gain on sale of investments -net

Unrealized gain(loss) on
revaluation of investments
classified as held for trading - net
Other Income 88.29% -0.96% 73.63% 63.60%
Total Non-Markup/Interest 27.88% 17.92% 545.03% 36.82%
expenses

-100.00% 17.88% 544.85% 614.55%

Non Mark-up/Interest Expense

Administrative Expenses -10.83% -10.51% -25.10% 4.18%

Other provisions/write offs

Other Charges 326.97% 59.34% 1270.70% 1884.61%

Total non-markup/interest -11.70% -11.77% -19.36% 12.81%
expenses

105.08% -50.98% -765.57% -783.05%

Extra Ordinary/unusual items

Profit Before Taxation -33.72% 3500.39% 4046.73% 4155.62%

44
Taxation-Current Year 196.40% 266.47% 314.10% 371.87%
Prior Years
Deferred -606.28% -10.07% 1170.36% -76.52%
152.44% 290.99% 271.57% 299.28%
Profit After Taxation 266.95% 399.37% 527.82% 532.30%
Un-appropriated Profit brought
forward
Profit available for 3356.50% 6369.07% 7742.25% 7636.07%
appropriation
Basic diluted earnings per share - 256.59% 290.65% 305.68% 308.51%
Rupees

We take year 2003 as base year. It is observed that cash balance, lending to
financial institutions & investment of the bank has increasing trend this is due to
increase in deposits of the bank, which is positive sign. Bank’s advances also
having increasing trend, which is again a positive sign. Bank is paying its bills
payable more easily than before because of more equity and deposits which is a
good sign. Borrowing has sharply decreased in year 2006-07 due to more deposits
which is good sign. Share capital and profits has sharp increase over years because
of increase in equity, which is a positive sign
It is observed that interest income of the bank has increasing trend due to more
advances, which is a positive sign. Fee income and brokerage of the bank has
increasing trend, which shows sound business of the bank it is positives sign.
Share profit has sharp increase over the years which is due to sale of bank share to
general public it shows public confidence on the bank which is also a positive
sign.
45
 Income of bank from dealing in foreign currencies is also having a sharp increase.
Administration expenses have increased in recent years, which are to control bank,
more efficiently than before. Taxation expense of the bank has also increasing trend
which is due to increase in profits which is a positive sign.. Net profit of the bank has
sharp-increasing trend, which is due to increase in different kind of income of the
bank. Overall income statement of the bank depicts very sound position of the bank’s
profitability.
It is observed that cash balance, lending to financial institutions & investment of the
bank has increasing trend this is due to increase in deposits of the bank, which is
positive sign. Bank’s advances also having increasing trend, which is a positive sign.
Deposits of the bank have increased more than previous years, which shows public
trusts on the bank. Profit of the bank also showing a stable increase due to increase in
revenue and other income of the bank.

Vertical Analysis
Balance Sheets
MCB Bank Ltd.
As on year end on December 31, _______
2004 2005 2006 2007 2008
ASSETS
Cash and Balances with treasurey 9.20% 9.28% 9.49% 9.67% 8.93%
banks
Balances with other banks 2.20% 0.58% 1.92% 0.93% 0.91%
Lendings to Financial Instituions 4.23% 3.92% 6.16% 0.26% 0.92%
Investements 25.93% 10.08% 18.56% 27.55% 21.70%
Advances 52.98% 70.71% 57.95% 53.34% 59.18%
Operating Fixed Assets 3.09% 3.21% 2.65% 3.90% 3.89%
Deferred Tax Assets
other assets 2.37% 2.14% 3.22% 4.35% 4.47%
Total Assets 100.00% 100.00% 100.00% 100.00% 100.00%
LIABILITIES 0.00% 0.00% 0.00% 0.00% 0.00%
Bills Payable 2.92% 3.35% 2.07% 2.55% 2.38%
Borrowings 2.93% 10.74% 7.00% 9.60% 5.11%
Deposits and other accounts 85.30% 89.94% 75.26% 71.16% 74.45%
46
Sub-ordinated loans 0.62% #VALUE! 0.47% 0.12% #VALUE!
Liabilities against assets subject to 0.00% #VALUE!
finance lease
Deferred Tax Liabilities 0.10% 0.89% #VALUE! 0.29% 0.99%
Other Liaibities 2.52% 3.38% 3.27% 2.86% 4.79%
Total Liabilities 94.38% 108.29% 88.06% 86.57% 87.71%
Capital 0.00% 0.00% 0.00% 0.00% 0.00%
Share Capital 1.30% 1.67% 1.60% 1.53% 1.42%
Reserves 2.18% 5.26% 7.21% 8.28% 8.29%
Unappropraited Profit 1.62% 0.11% 2.07%
surplus on revaluation of assets - net 2.07% 2.13% 1.52% 2.36% 1.40%
of tax
Total Capital 5.62% 9.14% 11.94% 12.28% 13.17%
Total Liabilities & Capital 100.00% 117.43% 100.00% 98.86% 100.89%

Vertical Analysis
Income Statement
Mcb Bank Ltd.
For the year end on December 31, _______
2004 2005 2006 2007 2008

Mark-up/return/interest earned 100% 100% 100% 100% 100%

Mark-up/return/interest expensed 23% 16% 18% 25% 29%

Net Mark-up/Interest Income 77% 84% 82% 75% 71%

Provision against non-performing loans and 5% 7% 4% 9% 7%

advances
Provision for impairment in the value of -2% -1% 0% 0% 3%
investment
Bad debts written of directly 0% #VALUE!
3% 6% 5% 10%
Net Mark-up/Interest Income after provison 0% #VALUE! 0% #VALUE! #VALUE!

Non Mark-up/Interest Income 74% 78% 78% 66%

Fee Commission and brokerage income 22% 14% 9% 8% 7%

Dividend Income 4% 3% 3% 2% 2%
Income from dealing in foreign currencies 5% 3% 3% 2% 2%

Gain on sale of investments -net 5% 2% 5% 2%

Unrealized gain(loss) on revaluation of #VALUE! 0% 0%

investments classified as held for trading - net

47
Other Income 6% 6% 2% 3% 2%
Total Non-Markup/Interest expenses 47% 30% 19% 86% 14%

47% 0% 19% 86% 76%

Non Mark-up/Interest Expense 0% 0% 0% 0% 0%

Administrative Expenses 80% 36% 25% 17% 19%

Other provisions/write offs 0%

Other Charges 0% 1% 0% 2% 2%
Total non-markup/interest expenses 82% 37% 25% 19% 21%

-35% -37% -6% 67% 55%

Extra Ordinary/unusual items

Profit Before Taxation 6% 2% 72% 67% 55%

Taxation-Current Year 17% 26% 22% 20%
Prior Years -1% -4% -2%
Deferred 1% -2% 0% 3%
18% 23% 25% 19% 16%
Profit After Taxation 27% 50% 47% 48% 38%
Un-appropriated Profit brought forward 19% 17% 13%

Profit available for appropriation 3% 52% 67% 65% 51%

0%

Vertical analysis shows much the same picture as in horizontal analysis. Interest
income and non-interest income of the bank has increasing trend, which shows sound
business of the bank. Income of bank from dealing in foreign currencies is also having
a sharp increase. Administration expenses have increased in recent years, which are to
control bank, more efficiently than before. Taxation expense of the bank has also
increasing trend which is due to increase in profits which is a positive sign. Net profit
is consistently increasing, which is a positive sign for the sound working of the bank.

3.2 SWOT ANALYSIS

3.2.1 STRENGTHS
Following are the strengths of the MCB Bank.
48
 • One of the major strengths of MCB is that it has very stable deposit base.
• MCB is the largest private bank in Pakistan with around 1000 branches, which
cover almost every part of 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 etc.
• MCB is a successive and market oriented bank.
• MCB is investing huge sums on HR development and training.
• Customer default rate is lower as compare 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.
3.2.2 WEAKNESSES
• Decision making process is very slow.
• It is not having greater number of branches abroad.
• Though ATM network is largest in the country, still some potential areas do
not have the ATM.
• MCB RTCs are usable only in Pakistan.
• Some management positions do not work properly.
• Low motivational level, non aggressive marketing.
• Employees' dissatisfaction due to ill treatments and improper reward system.
• Favoritism and nepotism in recruitment.

3.2.3 OPPORTUNITIES
• Opportunities exist in house mortgage products since the people are
investingmost of their funds in the agriculture and construction sector.
• The bank should form differentiated products for its overseas customers
already operating in all cities of Pakistan.
• Customer relation officers with marketing knowledge should be hired at least
in the main branches for providing better services to customers.
3.2.4 THREATS

49
 • Increase in number of private banks in the country resulting into increased
competition in the consumer and commercial financing both.
• The overall low investment, low interest rates and high liquidity are also a
threat for this large commercial bank.
• Other private commercial banks with sound profitability are also a threat to
MCB Bank e.g. UBL, HBL, Bank Alfalah etc.

3.3 PEST/ EXTERNAL ANALYSIS

3.3.1 Political
The political situations are very important for economy of the country. Due to
political instability the valuation of currency drop down the bank investment shrinks
and the rate of production decreases and that situation leads to increase in poverty and
low standards of living.

3.3.2 Economical
Economical situation are also very important for banking sector. Because when
interest rates are high then credit demands are low, so the rates of investments
decrease economy. When investments shrinks then business activity have comes to an
end. And from that the unemployment prevails in economy. On other hand when
interest rate are low then circulation of money, inflation rate, investments, and supply
increases, then price level also increase but purchasing power decrease.

3.3.3 Social
Socially when the productivity of bank increase then rate of production also increases
and per capita income and standard of living also increase, so it boosts up the
economy.

3.3.4 Technology
Technological advancements are very important to compete globally. From
technological advancement the work can easily be done, quality of service and
products improved. Customers are more satisfied and customer’s loyalty also
increased.

50
 CHAPTER NO 4

4 INTERNSHIP EXPERIENCE
4.1 WORKING EXPERIENCE
MANAGEMENT OF BRANCH
Branch Name
Muslim Commercial Bank Ltd. Pir vadhai branch rawalpindi
Branch Manager
M. Pervez Akhtar
Manager Operation
M. Asif
Head Cashier
Ms. Aakfeen
Cashier
Mr. Usman
4.2 Training at branch
Major activities performed during my internship programmes are as follows.
4.2.1 Account Opening Section
In this section, I gain the practical knowledge about opening the accounts. This
section deals with opening current and saving accounts for these customers and all
matters regarding therefore. The customers opening current or saving accounts can be
categorized as following.
Individual
Firm
Company
• Opening an account

51
In order to open an accounts, first of all the customer has to fill a form prescribed by
the bank the person is required to bring some reference or introduction for opening the
accounts. Introducer may be the person who has any accounts with NBP.
Some important information regarding introducer e.g. the name, accounts number and
I.D card copy of the introducer is written on the space provided on the specimen
signature card. There are different requirements for different types of accounts and
accounts holders. I spent one week for filing forms and credit vouchers of customer
for opening of account.
• Deposits
The procedure undertaken upon receiving deposits from the customers is as follows.
Examining the deposit slip to ensure that the name and the accounts numbers are
clearly indicated. Counting the cash or cheques and agree the total with the amount on
the deposits slip. After that the pay-in-slip is validated for cash transaction
/transfer/clearing transfer as appropriate before the counter file is handed over to the
customer. Cheque signed by directors, partners, or employees of a company, drawn in
favour of them and credited in their accounts in the bank are to be scrutinized.
• Withdrawals
I spent one week in this section as a person who collect cheque and provide token to
the customer. The withdrawals can be made only at the branch where the accounts are
maintained. In current accounts the bank does not offer any interest. We can deposit
or withdraw any amount during banking hours.
• Issuance of Cheque book
In this section I have work for one week. My duty was to write account number of
customer on every page of cheque book and stamp the cheque book properly.
4.2.2 Remittances Section
I take some information about this section from my senior. This section deals in
transfer of money from one place to another or country by:
a) Demand drafts
b) Mail transfer
c) Telegraphic transfer

In this section internees are advised only to observe the working of transfer of money
from one place to another or country by the above modes of transferring money.
4.2.3 Bill Collection Section
52
I spent one week of my training in bill collection section. Here in collected utility bills
likes gas electricity, water and telephone etc

4.3 Concerned Departments

During the internship of six weeks at MCB, I was rotated in almost every department
of the bank. Few of the departmental activities in this regard are as follow.

4.3.1 Cash Department

First of all, in the initial few days, I was given an opportunity to work in the cash
department. I had two prime tasks in this department.
a) Observation of departmental professional activity.
b) Observation and proper understanding of departmental Sop’s (Standard
Operating Procedures).

4.3.2 Accounts Department

Departmental rotation is MCB policy for its internees. I got an opportunity to work in
this department for almost a week.
I had to observe and somehow assist in the following activities.
Maintaining journal system.
Maintaining voucher system.
Observation and understanding of supplementary.

4.3.3 Remittance Department

I had to observe and assist in this department for almost two weeks. Here local
remittance was in operation. I regularly observed and assisted management and staff
in these activities and understood thoroughly.
Activities for local remittance observed by me in MCB are as follow.
a) Transfer through pay order.
b) Transfer through demand draft.
c) Telegraphic transfer.

53
CHAPTER NO 5
5 CRITICAL ANALYSIS
The six weeks short internship at MCB Bank Ltd. Has not been a sufficient duration
to personally observe and experience the working and analyze certain factors related
to the environment of all the Departments in the Branch.

I found out some pros and cons in the branch which are as follows:
5.1 PROS AND CONS OF THE ORGANIZATION
5.1.1 PROS
• Professional Style of Management
Although the concept of professional management is still in its transition stage in
Pakistan MCB from the very first day employed skilled and professional
management, which had the capacity to take quick, decisions, and respond to the
changing business conditions.
• Dynamic and Advanced Approach
The Bank employed skilled and professional approach to management, which took a
series of successive measures to make the people of Pakistan banking, and saving-
minded. This dynamic approach and personalized service met the expectations of the
customers.
• Customer Orientations and Personalized Service
The banker customer relationship attained a new dimension courtesy the politeness
and efficiency of professionally trained staff and fair induction policies. The
introduction of different schemes, good atmosphere, proper guidance and team effort
have proven to be the catalyst in not only improving the financial standing of the bank
but has also been the source of the prestige it holds today.
54
 • Healthy, Competitive Working Environment
The obligation to give all its employees an equal chance to succeed has been one of
the most fundamental and challenging responsibilities of the bank. It has always
provided its employees the scope within which to make the most of their abilities. In
MCB Bank survival, growth and expansion demand full use of one’s own talent and
ability. Such a competitive environment was instrumental in introducing
professionalism, which in the ultimate analysis transformed the entire outlook of the
industry.

5.1.2 CONS
• Cash Department
 Rare instances of fake currency notes result in loss to the branch and the
cashier who accepted them, that affects their work negatively.
 Manual counting system by the cashiers is a very time consuming exercise,
especially if there is a rush of customers.

• Advances Department
 The filing and record maintenance of the credit related documents is not done
efficiently due to lack of computer skills of the related officers.
 Lack of infrastructure for carrying out computerized/ automatic financial
analysis of the borrowers’ businesses is another shortfall of this Department.
 Visiting clients for business purposes in the work hour’s results in the
customers who walk in the branch to go back without being entertained. They
feel uncared for and hence never turn back.
 Partial knowledge of the bank’s credit policy and the State Banks Prudential
information of the prospective borrower

• Departmental Problems at the Branch

The following are some of the problems and shortcomings that were inevitably
prominent.

55
Deposits Department
 In order to save time the addresses filled in the required section of the account
opening forms are filled without confirming that they are appropriate for using
for correspondence purposes in case of any notifications to be sent to the
customers.
 The present format of the account opening forms seems more complicated to
the lesser-educated customer and hence he takes it away to be filled with
somebody’s help, but unfortunately, rarely comes back.

• Bills and Clearing Departments

 The carelessness of the officers at times result in delay of collection, as the
original advice is lost in post and proper filing of the copy is not done.
 The same officer of the branch does the posting of the bills and cheques,
clearing and collection that result in unnecessary delay.

 The procedure of applying tests is not know to all the officers as it is practiced
by only one of them and hence it causes delay when it is applied by the others
in case the said officer is absent.
 The test application officer works manually and there is no other person to
assist him that results in spending most of the time in applying these.

56
CHAPTER NO 6

SUGGESTIONS, CONCLUSION AND RECOMMENDATIONS

SUGGESTIONS FOR INTERNEES

Following are some personal observations and views which should be kept in mind by
my fellow students before they inter into an internship program.

First of all this internship program allowed me to work in a practical environment, so

I got some practical exposure and this pragmatic experience added to my routine life.
Working with professionals personnels I feel confident and this experience will help
me in getting a job in the future. Almost all internees face this problem that when they
join an organization for internship purpose, the behavior of existing employees is not
that much good with internees. So I suggest my fellows that they should be mentally
prepare for such situations.

Another thing which must be kept in mind while starting an internship program that if
you are an average or below average student then you must not start your internship
during studies, because an average student might not be able to keep balance between
studies and the internship.

Another important thing that I would like to share with my fellows is that it is not
necessary that supervisor who is assigned to you in the organization will tell you each
57
and every thing. Internee himself/herself will have to observe that how people
perform tasks and in what way and in what sequence.

6.2 CONCLUSION
MCB is an effectively operating and profit making organization and carrying out its
activities under a specified system of procedure. The main regulatory body is State
Bank of Pakistan, which provides policy guidelines and ensures that the money
market operates on sound professional basis. While the head office specifies the
whole procedure of functions and operations. This procedure has been modernized
with the passage of time with a view to streamline the approach and underlying
procedure for effective overhauling of its own capabilities so as to bring them at par
with international practices.

The use of information technology in Pakistan is quite limited. An example of this is

the fact that Credit cards have been used very commonly abroad as a medium of
transaction, still it is not considered as a reliable mod of transaction. Acceptability of
credit card transaction in Pakistan is limited from the users' end because:

Cash is still the most comfortable mode on transaction, because of cultural dislike for
borrowing from the formal sector (issues of riba [interest] and easier access to
informal channels,) and also because of the presence high denomination currency
which could be carried easily. The fear of transaction information being made
available to the authorities giving rise to questions on sources on the income.

Over the last four years mainly as there result of aggressive marketing by the foreign
banks credit cards have been able to penetrate the middle and upper income salary
class to high degree which the business community is still uncomfortable with idea
given the second reason stated above. Foreign banks continue to dominate this
business segment with CITI bank and Standard Chartered leading with more than
hundred thousand card members each.

6.3 RECOMMENDATIONS
Following are my observation and suggestion to improve the efficiency for the
development of the bank:

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 Human Resource Department should be there in order to motivate and trained
the employees. I have noted some dissatisfaction among the employees due to
in efficient promoting system.
 There is a criticism on the banking management that the salaries of the
employees are decreasing in every succeeding year. And I think this will shake
the confidence and working habit of the employees.

 There should be proper advertising and marketing of those products, which are
quiet, new for customers.

 Most of the bank employees, are sticking to one seat only with the result that
they become master of one particular job and loose their grip on other banking
operation. In my opinion all the employees should have regular job experience
all out-look towards banking. The promotion policy should be adjusted.

 Refresher Courses for the staff are most important in any international
organization. Alt the employees should have these courses according to their
requirement. Foreign experts can also be called for this purpose.

 Bank should give some more incentive to its employees in order to remove the
conflict between lower and higher officers and should try to improve the
working condition of the bank.

 As such system should be designed that every employee who has some
problems with his officers can communicate it to the higher management and
some steps must be taken to improve that.

REFERENCES

1. Graddy, B., Austin H. S., and William H. B. (1985). Commercial Banking and
he Financial Services Industry. Journal of banking, 3, 272-295.

1. Hara, M., and Wayne S. (1990). Deposit Insurance and Wealth Effects: The
Value of Being ‘Too Big to Fail’. Journal of Finance, 45(3), 114-157.

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2. Hanif M Nadeem (2004), "Restructuring of financial section in Pakistan"
journal of the institute of bankers. Volume no 2.

3. Huertas, T. (1988). Can Banking and Commerce Mix? Cato Journal, 7, 743-
769.

4. Moulton, H.G. (1918). Commercial Banking and Capital Formation. Journal

of Political Economy, 5, 72-85.

5. Prudential regulations for corporate/commercial banking. State bank of

Pakistan, Banking policy department (2006), second edition: SBP

6. Annual reports of MCB Bank Ltd. (2004-2006

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 Internet sources
1. url:http//www.mcb.com.pk
2. url:http//www.scribd.com
3. url:http//www.google.com
4. url:http//www.sbp.Org.com.pk

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