Internship Report on MCB Bank

INTERNSHIP REPORT

ON

MUSLIM COMMERCIAL BANK Ltd.

SITARA MUZZAMILMBA

MBS-08-13

Sahiwal CampusDepartment of Business Administration

Bahauddin Zakariya University

“PREFACE”

It is the requirement of the MBA course Bahauddin Zakariya University, Multan that

all students of MBA have to spend six or eight weeks in any organization to get practical

exposure and to get familiarized with the ways to live in the organizational environment which is

dramatically different from the educational environment. That two months period called

“Internship Period “, if spent properly and sincerely, enables the students to be more confident,

more knowledgeable, more responsible and, above all, more committed to its work in the

practical field. I have also been assigned to do internship of eight weeks period in MCB Kot

Farid Branch Sahiwal.

It has enabled me to understand the practical scenario and sharpen our decision

making power and utilizing the resources in an effective manner, so that our resources generate

maximum profit.

In preparing this report, I have put all of my best efforts and tried my level best to give

maximum knowledge. Despite of my all the coherent efforts, I do believe that there will always

be a room for improvement in the efforts of learner like me.

Sitara Muzzamil

MBS-08-13

2

“ACKNOWLEDGEMENT”

All praises to almighty Allah and our holy prophet Muhammad PBUH who gave me the

courage and patience for completion of this final report.

I wish to acknowledge my gratitude to my inspiring Teachers for their endless their

persistence, support and encouragement, and for providing me a lifetime opportunity to work

with Muslim Commercial Bank

I am also very thankful to Muslim Commercial Bank Ltd. Kot Farid Branch, Sahiwal

and the Branch Manager Mr. Yasin Tahir who gave me opportunity to work with experienced

persons in their organization.

I am also thankful to my parents, family and friends that continually offered encouraging

support … … …

Sitara Muzzamil

MBS-08-13

3

“TABLE OF CONTENTS”

“PREFACE”..............................................................................................................2

“ACKNOWLEDGEMENT”.....................................................................................3

“TABLE OF CONTENTS”.......................................................................................4

“EXECUTIVE SUMMARY”...................................................................................6

INTRODUCTION OF SECTOR..............................................................................8

THE MUSLIM COMMERCIAL BANK LIMITED..............................................11

“VISION STATEMENT”.......................................................................................12

“MISSION STATEMENT”....................................................................................12

“HEAD OFFICE”....................................................................................................13

“CIRCLE OFFICE”.................................................................................................14

“MANAGEMENT OF ORGANIZATION”...........................................................15

“ORGANIZATIONAL STRUCTURE”.................................................................16

“INFORMATION ABOUT BRANCH”.................................................................20

“GENERAL BANKING”.......................................................................................21

“DEPARTMENTS WHERE INTERNSHIP WAS CARRIED OUT”...................22

“OPERATIONS DEPARTMENT”.........................................................................22

“CLEARING DEPARTMENT”.............................................................................29

“REMITTANCE DEPARTMENT”........................................................................33

“OTHER DEPARTMENTS”..................................................................................37

“CASH DEPARTMENT”.......................................................................................37

“ACCOUNTS DEPARTMENT”............................................................................39

“TECHNOLOGY DEPARTMENT”......................................................................40

“ADVANCES DEPARTMENT”............................................................................42

“FINANCIAL ANALYSIS OF MCB”...................................................................47

“RATIO ANALYSIS”.............................................................................................47

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ADVANTAGES OF RATIO ANALYSIS:.............................................................48

LIQUIDITY RATIOS.............................................................................................48

DEBT RATIO.........................................................................................................49

MARKET RATIOS.................................................................................................50

“VERTICAL ANALYSIS”.....................................................................................57

“HORIZONTAL ANALYSIS”...............................................................................60

“SWOT ANALYSIS”.............................................................................................64

“MCB’s SWOT ANALYSIS”.................................................................................65

“STRENGTHS”......................................................................................................65

“WEAKNESSES”...................................................................................................68

“OPPORTUNITIES”...............................................................................................69

“THREATS”............................................................................................................70

“PEST ANALYSES”..............................................................................................71

“APPLICATION OF CLASS ROOM LEARNING”.............................................73

“WHAT I HAVE LEARNT IN MCB”...................................................................74

“SUGGESTIONS & RECOMMENDATIONS”....................................................75

“IF I WERE MANAGER AT MUSLIM COMMERCIAL BANK”......................77

“REFERENCES & RESOURCES”........................................................................78

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“EXECUTIVE SUMMARY”

The banking structure in Pakistan comprises of the following types, State Bank of

Pakistan, Commercial Bank of Pakistan; Exchange Banks, Saving banks, Cooperative banks,

Specialized credit institutions. The state bank of Pakistan is the Central bank of the country and

was established on July 01, 1948. The network of bank branches now covers a very large

segment of national economy. The State Bank of Pakistan issues the shares of these periodically.

Bank employees and other common peoples can also purchase these shares and earn profit. In

1956, MCB transferred its Registered office to Karachi, where the Head Office is presently

located. In April 1991, MCB became Pakistan’s first privatized bank.

The corporate branch at Shahrah-e-Faisal Karachi (SFK) branch is the corporate branch

of MCB in Karachi. The bank is using SWIFT for transfer of information about imports and

exports. MCB SFK branch has Currently Following three Departments General Banking

Department, Advances Department & Foreign Exchange Department.

To open an account the customer has to meet the general banking manager with an

introducer. The procedure begins with the punching of account opening form to the customer file

i.e. customer’s master file. Before closing any account, bank send letter to the account holder for

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

authority to close any account. Current deposits are those which are payable to bank whenever

demanded by the customer. Bank does not pay any profit on current deposits. The following are

the financial products/services of MCB Malay Mail Scheme, PLS Account, Saving 365 Account,

Capital growth certificate scheme, Fund Management Scheme, Khushali Bachat Account, Term/

Fixed Deposits and others like night banking, credit cards, traveler cheques.

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In remittance department like any other bank MCB also have instruments for transferring

of money, Telegraphic Transfer, Mail Transfer. In cash department both deposits and

withdrawals go side by side. This department works under the accounts department and deals

with cash deposits and payments. This department maintains the following sheets, books, and

ledger of account cash received voucher sheet, cash paid voucher sheet, Paying-in-slip, Cheque

book, Cash balance book. The clearing in Karachi at MCB or other banks is being done through

NIFT (National Institute of Facilitation Technology).

Bank provides this facility to the people who need advance money to meet their

requirement. Party dealing with other banks financial condition of borrower business and as a

first step credit proposal is being made. MCB provides advances, which are two types. Secured

Advances, Unsecured Advances. MCB usually classified advances in to following types

Agricultural Advances, Commercial Advances

Industrial Advances. Commercial Advances are of following types

Demand Finance, Cash Finance, Foreign bills purchased, Finance against imported

goods, Finance against foreign bills, Export Refinance Part I (Pre Shipment) & others. Banks

Agriculture division deals with the agriculture advances. Bank provides the Agriculture

Advances in order to enhance and support the agriculture sector of the country. Farm Credit &

Non Farm Credit.

In foreign exchange, MCB is dealing Foreign Currency Accounts, Foreign Remittances,

and Foreign Bills for Collection, Imports & Exports

Foreign currency accounts & the foreign currency department deals with the following

types of accounts, Dollar Khushali account, Current account, Saving bank account, Term

deposit, Prime Currency Scheme. Foreign accounts are convertible on floating rate available to

the bank. Letter Of Credit facility is being provided by MCB in foreign exchange.

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INTRODUCTION OF SECTOR

The word 'Bank' is said to have been derived from the words Bancus or Banque or Bank.

This history of banking is traced to as early as 2000 B.C. Banking in fact is primitive as human

society, for ever since man came to realize the importance of money as a medium of exchange,

the necessity of a controlling or regulating agency or institution was naturally felt. The priests in

Greece used to keep money and valuables of the people in temples. These priests thus acted as

financial agents. The origin of banking is also traced to early goldsmiths. They used to keep

strong safes for storing the money and valuables of the people. The first stage in the development

of modern banking, thus, was the accepting of deposits of cash from those persons who had

surplus money with them.

The goldsmiths used to issue receipts for the money deposited with them. These receipts

began to pass from hand to hand in settlement of transactions because people had confidence in

the integrity and solvency of goldsmiths. When it was found that these receipts were fully

accepted in payment of debts; then the receipts were drawn in such a way that it entitled any

holder to claim the specified amount of money from goldsmiths. A depositor who is to make the

payments may now get the money in cash from goldsmiths or pay over the receipt to the creditor.

These receipts were the earlier bank notes. The second stage in the development of banking thus

was the issue of bank notes.

The goldsmiths soon discovered that all the people who had deposited money with them

do not come to withdraw their funds in cash. They found that only a few persons presented the

receipts for encashment during a given period of time. They also found that most of the money

deposited with them was lying idle. At the same time; they found that they were being constantly

requested for loan on good security. They thought it profitable to lend at least some of the money

deposited with them to the needy persons. This proved a profitable business for the goldsmiths.

They instead of charging safe keeping charges from the depositors began to give them interest on

the money deposited with them. This was the third stage in the development of banking.

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At the time of independence, there were 631 offices of scheduled banks in Pakistan, of

which 487 were located in West Pakistan alone. As a new country without resources it was very

difficult for Pakistan to run its own banking system immediately. Therefore, the expert

committee recommended that the Reserve Bank of India should continue to function in Pakistan

until 30th September 1948, so that problems of time and demand liability, coinage currencies,

exchange etc. be settled between India and Pakistan.

The non-Muslims started transferring their funds and accounts to India. By the end of

June 1948 the number of officers of scheduled banks in Pakistan declined from 631 to 225.

There were 19 foreign banks with the status of small branch offices that were engaged solely in

export of crop from Pakistan, while there were only two Pakistani institutions, Habib Bank of

Pakistan and the Australian Bank. The customers of the bank are not satisfied with the uncertain

condition of banking. Similarly the Reserve Bank of India was not in the favor of Govt. of

Pakistan. The Govt. of Pakistan decided to establish a full-fledge central bank. Consequently the

Governor-general of Pakistan Quaid-I-Azam inaugurated the State Bank of Pakistan on July 1,

1948. Thus a landmark was made in the history of banking when the state bank of Pakistan

assumed full control of banking and currency in Pakistan. The banking structure in Pakistan

comprises of the following types.

State Bank of Pakistan

Commercial Bank of Pakistan

Saving banks.

Cooperative banks

Specialized credit institutions.

Commercial banks have been the most effective mobilizers of savings and have been

providing short-term requirements of working capitals to trade, commerce and industry.

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Up to December 31, 1973, there were 14 Pakistan commercial banks that functioned all

over the country and in some foreign countries through a network of branches. All these

commercial banks were nationalized in January 1, 1974, and were recognized and merged into

the following five banks:

National Bank of Pakistan

Muslim commercial bank limited

Habib Bank Limited

United Bank Limited

Allied Bank of Pakistan

The state bank of Pakistan is the Central bank of the country and was established on July

1, 1948. The separation of East Pakistan and its repercussion in the form of economic depression

has caused a lot of difficulties to the banking system in Pakistan. The network of bank branches

now covers a very large segment of national economy. The numbers of branches have increased

appreciably and there is now on branch of bank for every 3000 heads of population

approximately. There is done reasonable growth in deposits from the establishment of Pakistan.

Besides this growth, specialized credit and financial institutions have also developed over the

years.

The Government of Pakistan in the late 90’s introducing the need for the privatization of

state owned banks and companies. The private sector has accepted the challenge and most of the

banks are privatized today. The State Bank of Pakistan issues the shares of these periodically.

Bank employees and other common peoples can also purchase these shares and earn profit.

Throughout the period of banking history the banks have been expanding rapidly and achieved

the desired goal of progress.

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THE MUSLIM COMMERCIAL

BANK LIMITED

HISTORY:

MCB was founded by ISFHANI and ADAMJEE families in Calcutta on July 9, 1947.

MCB is not an overnight success story rather good track of services are responsible for the leaps

and bounds progress. After the partition of the Indo-Pak Subcontinent, the bank moved to Dhaka

from where it commenced business in August 1948. In 1956, the Bank transferred its Registered

office to Karachi, where the Head Office is presently located. Thus, the bank inherits a 52-year

legacy of trust in its customers and the citizens of Pakistan

The performance of MCB was badly affected by bureaucrat government. In January

1974, MCB was nationalized by Bhutto Government following the bank act 1974 subsequently

in June 1974 Premier Bank Limited merged with MCB.

PRIVATIZATION:

When privatization policy was announced in 1990, MCB was the first to be privatized

upon recommendations of World Bank and IMF. The reason for 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.

MCB besides being money financial organization have rendered invaluable services in

the economics and social developments of our country. 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-grown tree. Evergreen, Strong, and firmly rooted.

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“VISION STATEMENT”

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

prosperous and secure future”

“MISSION STATEMENT”

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

solutions to create and nurture long-term relationships with our customers. In doing so, we

ensure that our shareholders can invest with confidence in us.”

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DEVELOPMENTS:

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.

Extended use of information technology which is evident from the

fact that there are 768 fully automated branches, more than 250- online

branches (integrated networking), 151 ATMS in 27 cities nation wide and

a M.C.B continuously innovate new product.

“HEAD OFFICE”

Chudrigor Road of Karachi has same importance in Pakistan’s economy as of the Wall

Street in world economy. The division working under MCB Head office is as follows:

Administration

Credit Management

Investment Banking

Human Resource

Information Technology

Corporate Planning & Budgeting

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Finance & Treasury

International Division

Inspection & Audit

Law Division

Marketing & Development

Trustee Division

Under the President an Executive Committee and a Credit Committee works. All the

matter of the bank join to the board of director are presented to the executive committee which is

responsible for daily operation of the bank .The request for credit exceeding the General

Manager power is approved by the Credit Committee. Under the area Executive is the General

Manager who is the in charge of the Circle Office. Under the General Manager is the Zonal

Manager and then the Branch Manager. At present, there are 9 circles, 47 regions and 1400+

branches. Before privatization there were provincial chiefs for all the four provinces. But this

management now has abolished the provincial officers and improved the efficiency of the bank.

“CIRCLE OFFICE”

The working of circle office is to control and regulate the functions of branches which are

under in its control. The functions of circle office are to mobilize the deposits and receive reports

from branches. Circle office is like a mini head office. Agents and correspondents of MCB are in

all commercial cities of the world. Circle office is divided in the following division:

Credit Management

Audit & Inspection

Human Resource

Marketing & Development

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“MANAGEMENT OF ORGANIZATION”

MANAGEMENT OF BANK:

Mian Mohammad Mansha Chairman

S.M. Muneer Vice Chairman

Mohammad Aftab Manzoor President & Chief Executive

Tariq Rafi Director

Sheikh Mukhtar Ahmed Director

Mohammad Arshad Director

Shahzad Saleem Director

Raza Mansha Director

Sarmad Amin Director

Mian Umer Mansha Director

AUDIT COMMITTEE:

Mian Mohammad Mansha Chairman

Shaikh Mukhtar Ahmed Member

Shahzad Saleem Member

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CHIEF FINANCIAL OFFICER:

Ali Amin

COMPANY SECRETARY:

Tameez-ul-haque

“ORGANIZATIONAL STRUCTURE”

As MCB is a banking company listed in stock exchange therefore it follows all the

legalities which are imposed by concerned statutes Mian Muhammad Mansha is Chairman 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.

Operational Management of the bank is being handled by a team of 10 professionals.

This team is also headed by Mr. Muhammad Mansha. 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:

Corporate Banking

Commercial Banking

Consumer Banking

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CORPORATE BANKING:

These are branches which have an exposure of over Rs. 100 million. Usually includes

multinational & public sector companies

COMMERCIAL BANKING:

The branches 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.

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:

Punjab 650

Sindh 243

NWFP 103

Blochistan 36

Azad J.Kashmir 14

Domestic 1046

Overseas 7

Total 1053

Furthermore, the bank has some proposals under consideration to open more branches in

some European countries and as well as in Japan & china

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Chairman

Mian Muhammad Mansha

President

Muhammad Aftab Manzoor

Corporate Banking

Group

Muhammad Shoaib

Qureshi

Commercial Banking

Group - North

Imdad Ali Butt

Commercial Banking

Group - South

Shahid Sattar

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OVERSEAS BRANCHES:

19

Total no. of branches 7

Colombo 1

Mardana 1

Pettah 1

OBU Bahrain 1

Wellawatte 1

EPZ 1

Kandy 1

“INFORMATION ABOUT BRANCH”

I did my internship in Muslim Commercial Bank Limited Kot Farid Branch, Sahiwal.

And some important information about my branch which I observed are as follows:

MANAGEMENT OF THE BRANCH:

Branch manager Mr. Yasin Tahir

Accountant Ms. Shumaila Malik

Operational manager Mr. Ayaz

Cashier Mr. Nazir

Peon Khalid

Secrity guard Haidar

DEPOSITS:

The total deposits of this about to 207.10 million.

NUMBER OF ACCOUNTS:

Accounts in this branch of MCB are as follows:

CURRENT ACCOUNT:

Total numbers of current accounts are 1049

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PLS ACCOUNT:

Total numbers of profit and loss accounts are 2120.

KHUSHALI BACHAT ACCOUNT:

These are about to 600 accounts.

REMITTANCE:

Total remittance of this branch is 26.22 million.

RATE OF INTEREST:

The rate of interest provided by such bank is minimum 4.45% and maximum 9%.

“GENERAL BANKING”

It is backbone of banking It is one of the major department of MCB. It further consists of

following departments:

Operations Department

Current Department

Remittance Department

Clearing Department

Cash Department

Accounts Department

Technology Department

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“DEPARTMENTS WHERE INTERNSHIP WAS CARRIED OUT”

Operations Department

Clearing Department

Remittance Department

“OPERATIONS DEPARTMENT”

In Operations department I was under supervision of Mr. Ayaz, Operational manager.

And I learnt to open accounts of different types and nature which are as follows,

TYPES OF ACCOUNTS:

Single

Joint Partnership Private Limited

Public Limited

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SINGLE:

Only one person can operate this a/c. An individual who can fulfill the requirement of

bank can open this a/c. We can call it a personnel or individual a/c. The requirements for this

type are National Identity Card Photocopy, Minimum Deposited Balance, Account Opening

Form, Letter of Kinship etc.

JOINT:

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

Instruction are given for joint a/c such that the account shall be operated by anyone or more. The

requirements for this type are National Identity Card Photocopy, Minimum Deposited Balance,

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

Declaration regarding the operator of account.

PARTNERSHIP:

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

The requirements for this type are National Identity Card Photocopy, Minimum Deposited

Balance, Account Opening Form, Registration certificate, agreement among partners and

Commencement of business and private registration, resolution of board of directors,

commencement of business, memorandum and articles of association and balance sheet etc.

PRIVATE LIMITED:

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

concern and mostly medium business enterprises open such kind of accounts. All the board of

directors have to submit the declaration regarding the account operator on the company pad and

with the rubber stamp with the signature of the all the members of the board of directors. In case

of any change in directors bank must be informed regarding that. In case funds are borrowed by

the company all the directors approval is necessary rather not only the authorized partner who

can be the operator of the account.

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PUBLIC LIMITED:

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

Public limited concern and mostly medium business enterprises open such kind of accounts. And

terms regarding board of directors are the same as of private limited.

NATURE OF ACCOUNTS:

Current Account

PLS Saving bank A/C

Khushali Bachat Account (KBA)

Saving 365 A/C

Basic banking A/C (BBA)

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 this type of account is opened by the

businessmen. 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 SAVING BANK A/C:

This account was started in 1980s after the issuing of banking ordinance in 1980 by Zia

Government to develop Islamic banking in Pakistan. In this case customer would be responsible

for bearing profit as well as loss. The bank would be within its rights to make investment of

credit balances in the PLS saving accounts in any manner at its sole discretion and to make use

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of the fund to the best of its judgment in the banking business under the PLS system. For

withdrawal of larger amount, 7 days notice in writing is required to be given.

Minimum balance is Rs.500/=

Not more than eight withdrawals in a year allowed

More than Rs.15000/= are not allowed to draw

Seven day notice is required for big withdrawal

Zakat deducted on @ 2.5%

Profit calculated on monthly basis

Profit paid on annually basis

SAVING 365 ACCOUNT :

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

business people. Profit on deposits will be payable on daily product basis on balance of RS.

500,000/- and above. However, if balance in the account falls below RS. 500,000/- on any day,

the product will be ignored. There will be no restriction on withdrawal from the account. Zakat

and withholding Tax is also applicable on the account opened under this scheme.

Minimum balance is Rs.500,000/=

Below minimum balance, profit calculation ignored

Profit calculated on daily basis

Profit paid on annually basis

10% Withholding Tax on minimum balance

Zakat deducted on @ 2.5%

KHUSHALI BACHAT ACCOUNT:

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Saving type account

Rate of return is 8% per annum

Profit calculated on daily basis

Profit paid on half yearly basis

Utility bills can be debited through this a/c

No charges will be debited for utility payments

BASIC BANKING A/C (BBA):

Introduced specially for salaried persons.

Minimum balance is Rs.1000/=

No service charges.

Only two transactions allowed, in one month.

For more than two transactions Rs.35/- per transaction.

Single natured A/C.

ACCOUNT OPENING PROCEDURE:

Following steps are involved in A/C opening,

ACCOUNT OPENING FORM: Firstly the customer fills the account opening form and

provides all the information as provided above. I experienced to fill this form

INTRODUCTION:

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An account is needed to be introduced. The introduction of a current account holder is

accepted for the opening of an account.

The introducer should be a branch customer or may be account holder of any

branch of MCB; however signatures should be verified by the banker. In certain

cases, introduction from bank other than bank MCB may be allowed.

Personally known accounts may be introduced by the bank staff.

Introduction from an account holder not personally coming to the bank should be

verified by the bank.

STAMPING:

Then it is stamped. Stamps like. BAL sign verified, Sign Admitted Stamp, Sign Verified

stamps etc are affixed.

ACCOUNT NUMBER:

When all the procedures are completed than the final approval is taken from the branch

manager. After obtaining approval, an account number is allotted to the customer and all the

information is entered in to the computer and KYC is filled up. Then that account number is

writing on the Cheque Book, Specimen Signature cards and account opening form.

KNOWING YOUR CUSTOMER:

After entering information KYC is filled up. It should be ensured that at the time of

filling information in KYC, a customer should be physically present. After this all information is

saved in system. I filled KYC form also.

APPROVAL:

27

This account is further approved by Manager Operations.

SEND FORM TO HEAD OFFICE:

After fulfilling all the requirements and verifying the forms from operation manager the

account opening form is sent to Head Office Karachi and make request to issue the printed

cheque book.

LETTER OF THANKS:

Subsequent to the opening of an account, letter of thanks should be sent under registered

post or courier service to the customer and the introducer.

ISSUANCE OF A CHEQUE BOOK:

After opening an a/c with the bank, the a/c holder can not immediately start operating

his/ her account. The cheque book is issued, when a customer will submit a copy of letter of

acknowledgement duly signed by him, in case of new account. And for subsequent issuance of

cheque book He/she has to make a request once again in the name of bank for the issuance of

cheque book and he should mention title of A/C, A/C number, sign it properly and mention the

number of leaves requires. Normally a cheque book having at least 25 leaves is issued but it can

also be of 50 leaves.

CLOSING OF AN ACCOUNT:

There is no. of reasons of closing an account. Some are listed below:

If customer desires to close his account

In case of death of one account holder.

Bankruptcy of the account holder.

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

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

his account is going to be closed. There is need an approval form higher authority to close any

account.

“CLEARING DEPARTMENT”

In clearing department I worked under supervision of Miss Shumaila Malik. In clearing

department and learned about inward and outward clearing and I also learnt about,

MEANING OF CLEARING:

The word clearing has been derived from the word “clear” and is defined as,

“A system by which banks exchange cheques and other negotiable instruments drawn on

each other within a specific area and thereby secure payment for their clients through the

Clearing House at specified time in an efficient way.”

CLEARING HOUSE

It is a place where cheques are presented, collected from bank branch. It is one of the

services provided by NIFT to other commercial banks. NIFT acts as a clearinghouse.

NIFT:

NIFT stands for National Institutional Facilitation Technologies. Clearing House of

SBP has shifted a tiresome part of its work to a private

institution named NIFT. NIFT collects cheques, demand

drafts, Pay orders, Travelers Cheques, etc. from all the

branches of different banks within city through its carriers

and send them to the branches on which these are drawn

for clearing. After the branches approve the instruments

drawn on them, NIFT prepares a sheet for each branch

showing the number for instruments and amount

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in its favor and drawn on it and sends it to each branch. A similar sheet for each bank is also sent

to clearing house of SBP where accounts of banks are settled in the same manner.

LEARNING IN CLEARING DEPARTMENT

My learning in clearing department was of following things:

Procedure of clearing a cheque.

Checking of cheques.

Inward and outward clearing.

Different reasons of returning a cheque.

Types of clearing stamps.

CLEARING PROCEDURE:

Instruments collected are treated as Transfer, Transfer Delivery, Clearing, and

Cheque collection.

CHECKING OF CHEQUES:

When the instruments are collected from the client. Following things are checked

Cheque date, instrument should be neither stale/ nor post-dated.

Title

Amount in figures and words should be the same

There should be no cutting and overwriting on the cheque

Instrument should not bear any unauthorized alternation.

Cheque is crossed.

TRANSFER:

30

When the instruments are collected and paid by the same branch, it is called transfer.

TRANSFER DELIVERY:

When instruments are collected and paid by two different branches of the same bank

situated in the same city, it is called transfer delivery

A cheque is processed under transfer delivery when it has crossing stamp and is from

local branch of MCB

CLEARING:

Instruments 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, are processed for clearing.

In outward clearing when cheque is received two copies of voucher SF-37 are prepared,

one copy and instruments along with clearing stamp, realization stamp, add list and two vouchers

of clearing summary are sent to NIFT in a sealed bag. And clearing records are recorded in

clearing register.

In Inward clearing instruments received from NIFT are posted in Computers after

checking.

CHEQUE COLLECTION (C.C):

When cheque is from another city then it is grouped as C.C.Such instruments are

processed as cheque for collection. In this procedure SF-37 form is used in Cheque collection.

Original voucher with cheque, stamped as C.C along with C.C number is sent to main branch of

the responding city which is further sent to NIFT. Whereas Carbon copy with Pay-In-Slip is

taken by bank for record purposes.

PAY-IN-SLIP:

31

It is used for two purposes

Whenever we want to deposit cash in our account then pay-in-slip is used by

writing amount on it and depositing it to cashier along with money.

Whenever we have cheque from any party to be collected in our account we fill

pay-in-slip. One part is attached with cheque and another is given to cheque

holder as a receipt.

NOTE:

In inward clearing sometimes cheques are not passed due to some reasons then cheques

are sent back to NIFT along with cheque return memo. Some of these reasons are,

Cheque incomplete

Clearing stamp Required.

Drawer’s sign incomplete

Drawer’s sign different from specimen

Post Dated

Payment stopped by drawer.

Amount in words and figures differ.

Insufficient funds etc.

“REMITTANCE DEPARTMENT”

32

REMITTANCE:

Remittance is transfer of funds from one place to another or from one person to another.

It is an important service provided by banks to customers as well as non-customers. Since it is

not a free service it is a source of income for the bank.

PARTIES INVOLVED IN REMITTANCE

Four parties involved in remittance: -

Remitter, Remittee, Issuing Bank, Paying Bank

REMITTER:

One who initiates, or requests for a remittance. The bank charges him a commission for

this service. He may or may not be the branch’s customer.

REMITTEE:

A Remittee is also called the beneficiary, or the payee. The person in whose name the

remittance is made. A Remittee is also the one who receive the payment.

ISSUING BANK:

The bank that sends or effects the remittance, through demand drafts, telegraphic

transfers, or Mail Transfers.

33

PAYING BANK:

Paying Bank also knows as the drawee branch. The branch from where the instrument is

drawn.

TYPES OF REMITTANCE:

Remittance is classified into following four types

Inward remittance, instruments received for payment

Outward remittance, issuing instrument to the responding branch.

Inland remittance, with in same country.

Foreign remittance, from one country to another country.

INSTRUMENTS USED IN REMITTANCE:

Demand Draft (DD)

Telegraphic Transfer (TT)

Pay Order (PO)

Call Deposit Receipt (CDR)

Rupees Traveler Cheque (RTC)

DEMAND DRAFT:

DD is a written order given by the branch of the bank on behalf of the customer to other

branch of the same bank to pay the certain amount to the customer.DD are issued for the

particular place other than place of issuance. DD applicant or recipient, who might not be an A/C

holder present it to another bank at a different place requesting it to pay on demand a specified

amount of money which is already received to the person named on it.

34

DOCUMENTATION:

A printed application form is provided for filling in completely and signing by the

applicant. After depositing an amount of draft and commission of the bank, duly completed and

signed by two authorized officers, then it is handed over the applicant and credit order is

dispatched to drawee branch.

TELEGRAPHIC TRANSFER (TT):

TT is fund that is transferred electronically which is remitted on the order of a certain

person. In this case the authority is given from one bank to other on the behalf of the customer

through telecommunication to debit their inter office account

through them and credit their parties account mentioned in TT.

But it is not practiced these days frequently.

PAY ORDER:

For this kind of remittance the payer must have the

account in the issuing bank. Pay order are more liquid as compared to cheques because cheques

may be dishonored while PO can’t be. It is written order issued by the bank drawn and payable

on itself. It is used for local transfer of money from one person to another person.

35

DOCUMENTATION:

The party who requires a pay order will get a printed application from the bank. He will

fill it and deposits the amount and commission.

CALL DEPOSIT RECEIPT (CDR):

It is an instrument like Cheque issued by the bank on account of a customer & in favor of

a person, to pay the specified amount. CDR’s are issued to make payments, especially when a

company goes for some tenders or for purchase of government securities or any contracts with

others.

DOCUMENTATION:

The party who requires a CDR will get a printed application from the bank. He will fill it

and deposits the amount and commission. The bank enjoys the benefit of keeping funds

deposited until the payment is not made.

RUPEES TRAVELER CHEQUE (RTC):

RTC is the traveler cheque are acceptable at all branches

of MCB, and they carry dozens o f benefits. Security is always

being an important issue of concern. TCs provide maximum

security while carrying big amounts.

DOCUMENTATION:

First of all RTC-10 is given to customer. It is filled and then cash is deposited to cash

department. One copy is for office and one copy is given to the customer and RTC are issued at

that time.

NOTE:

At time of my stay in remittance department, there was no issue of CDR, TT, RTC, PO

so I were unable to understand its practical aspects, except clearing.

36

“OTHER DEPARTMENTS”

There have been some departments in which internship was not allowed, these

departments were

1. CASH DEPARTMENT

2. ACCOUNTS DEPARTMENT

3. ADVANCES DEPARTMENT

And in TECHNOLOGY DEPARTMENT I got information about ATM and Online

Banking and just filled their forms because computer work was not allowed to internees.

“CASH DEPARTMENT”

The cash department is the most important department of the bank. In cash department

both deposits and withdrawals go side by side. This department deals with cash deposits and

payments.

The following books are maintained in the Cash Department:

Cash Receipt Book

Cash Payment Book

Cash Balance Book

37

The officers in this department are called teller and there were 2 tellers Mr. Nazir and Mr.

Abrash at the counter. This department is involved in two activities: Cash Deposits, Cash

Payments.

CASH RECEIPT BOOK:

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

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

the related details of the transaction. The cashier check the necessary details provided in the

paying-in-slip and accounts the cash and tallies with the amount declared in the slip then cashier

fills in the “Cash voucher received Record Sheet” and assigns a voucher no. to both the

transaction being made in the sheet and the slip. The 2nd cashier posts the transaction entries in

computer ledger. After posting these entries, computer display before posting balance and after

posting. Cashier assigns the stamp “POSTED” on the voucher to show voucher transaction

entries are posted.

CASH PAYMENT BOOK:

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

Cheque book. No payments are made by another instrument. When cheque is valid in all

respects, the cashier enters the necessary inputs in the computer and posts the entry so that

account balance is updated. When cashier posts these entries, computer automatically display

the balance before posting the transaction amount, balance after posting.

The cashier at the same time maintains the “Cash Voucher Received Record Sheet”.

Then inspects the signature of the customer, cancellation mark of checking officer and stamp of

“POSTED” is placed on cheque before he hands over the cash to customer.

CASH BALANCE BOOK:

At the end of the working day cashier is responsible to maintain the cash balance book.

The cash book contains the date, opening balance, detail of cash payment and received in figures,

38

The consolidated figure of receipt and payment of cash is entered in the cash book and

the closing balance of cash is drawn from that i.e.

Opening Balance of Cash + Receipts - Payments = Closing Balance

“ACCOUNTS DEPARTMENT”

The most important aspect in record keeping of a bank is its accounting system. The basic

purpose for maintaining an accounting system is to ensure consistency in record keeping and

accounts. The basic requirement for any accounting system is that it should be in accordance

with the GAAP i.e. Generally Accepted

Accounting Principles. There are two choices

available to an organization for an accounting

system.

Main Functions of Accounts Department:

The major function of this department is

keeping the record maintenance of each and

every transaction and prepares reports about the amount of deposits and advances and sent to

Head office or State Bank of Pakistan on monthly, quarterly and yearly basis.

Following activities are carried out in Accounts Department.

Budgets and budget review form

Income & expenditures.

Reports and Reconciliation.

Activity checking.

Depreciation & Maintenance of fixed assets provision.

39

Maintenance & depreciation of fixed assets.

“TECHNOLOGY DEPARTMENT”

It includes;

Mobile Banking

Phone Banking

Online Banking

ATM

MOBILE BANKING:

It has been launched recently during my internship. It helps in getting accounts details

and making transactions using mobiles.

PHONE BANKING:

"MCB Phone Banking” is available to all customers on a countrywide basis. Customers

can dial 111-000-622(without any city code/prefix) from their respective cities

Customers enjoy 24x7 Round the Clock Phone

Banking Services. MCB is the first bank in Pakistan to

offer Centralized connectivity.

ONLINE BANKING:

MCB now offers the facility of on-line banking to

its customers through its country wide network of

40

branches. Customers can use the ATMs or the banking counters of any branch for day-to-day

banking needs, irrespective of branch where they maintain their accounts.

There are now more than 250 branches linked through this system and they can

transact with each other directly using computer systems and the software named

“SYMBOLS” at their own branches.

ATM (Automatic Teller Machine):

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 / cheque 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 covering

27 cities of Pakistan

ATMs are operated through a card issued to the valued customers and by application of

Personal Identification Number (PIN number). Now MCB has also entered into a contract with

Cirrus which is a subsidiary of MasterCard. This contract will enable an ATM card holder to

use his account even when he is out of country at all the ATMs where Cirrus logo is displayed.

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.

41

“ADVANCES DEPARTMENT”

Different banks provide loan facility to general public, companies etc. but MCB provides

two types of loans that are as under:

Fund Base Loans

Non Fund Base Loans

FUND BASE LOANS:

In this type of loans cash is directly involved. Bank provides loans in shape of cash. Bank

gives credit or limit facility to customers that needed it. In fund based loans there are two further

classifications:

Long Term Loans:

Lease facility for car

For Machinery

For Fixed Assets

Short Term Loans:

Running Finance (R/F)

Cash Finance (C/F)

RUNNING FINANCE:

The MCB provides overdraft facility to the customers for the working capital

requirement. These are the loans which are given to those customers whose business runs

through out the year or continuously. Its duration is one year and it is for running business.

42

In advances there are two securities one is known primary security and other is secondary

or collateral security.

Hypothecation of stock is the primary security and mortgage is the secondary or

collateral security.

SECURITIES FOR FUND BASE LOANS:

Hypothecation of Stock

Mortgage

Pledge

HYPOTHECATION OF STOCK:

In hypothecation of stock the possession of goods and the title remains in the favour of

customer. Without the permission of the bank the customer can't sell the stock. It is the

restriction of the bank that in god own there should be stock according to the instructions of bank

every time. The draw back of this is that there is no check and balance of stock from the bank.

The customer can easily sell his stock.

MORTGAGE:

The bank can mortgage the immovable property like land, building etc as a security. In

mortgage the possession remains to customer and title of goods remains to bank.

PLEDGE:

In this, bank requires the moveable property of the customer as a security like stock,

vehicle etc. possession of goods remains to customer and title in the favor of bank. The bank

hires a muqaddam [Guard] and the key of store where the stock is pledged is in the security of

bank. When customer wants to sell the stock then he pays the amount equivalent to stock which

he wants to sell. After receiving amount bank releases his stock for the same amount

43

NON FUND BASE LOANS:

In non fund based loans cash is not directly involved but bank gives guarantee on

the behalf of customer. Bank works as a third party and known as Guarantor. Bank provides a

security to customer when he needs and someone requires from the customer.

DOCUMENTS REQUIRED BY BANK FOR ADVANCES:

Request of customer

Credit application from bank

Basic borrower sheet

Net worth certificate

CIB report

Financials

Account statement

Property evaluation report

For sale value certificate

Property documents

Title deed [fard]

Property map

CNIC

Account opening form

Undertaking

Following steps are there:

44

Information required by the bank

Preparation of credit proposals

Sanction advice

INITIAL INFORMATION:

Following information is required to be submitted to bank.

Nature & structure of borrower business

Names of proprietors, partners or directors

Detail of all firms or companies associated with borrower.

Financial condition of borrower business

An assessment of his business abilities

Accurate and up to date financial statements of last two years for comparison

purposes

Market report on the borrower where borrower has maintained an account with

another bank, a report from his bank should also be obtained.

A report from credit standing bureau of State Bank of Pakistan

PREPARATION OF CREDIT PROPOSAL:

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

complete group position. The party’s credibility report is obtained from the bank with which the

bank is doing its business. The party’s credibility report is also taken from the Head office of

Trade Information Division.

For obtaining credit, party has to submit the last two years Balance Sheet and Profit &

Loss statement duly attested by authorised auditors. If the party is also involved in export or

import business then the bank also considers the data of three years about import & export.

45

Current debt and equity ratio is also calculated by the bank. The type of data required to prepare

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

the foreign Exchange department. Some data is available in Advance Department. The purpose

of obtaining Credit should be explained clearly. The securities offered by the party to the bank

are also evaluated. In case of pledging of property in shape of land or building the complete

evaluation of the property should also be attached.

After all the necessary documents for applying for advance is fulfilled by the party then

the case is sent to Manager for approval. If the credit limit is in his range then he can decide over

it otherwise the case is forwarded to seniors. If there is any discrepancy then the party is

informed of it.

Sanction Advice:

When the documents required are complete and there is no ambiguity then the party is

advised that their credit or loan is approved and will be available to you soon.

The form contains following information:

Nature and amount of limit.

Purpose

Security/ Collateral

Margin (%).

Mark up/ Charges

Validity

“FINANCIAL ANALYSIS OF MCB”

46

“RATIO ANALYSIS”

Ratio analysis is an important and old technique of financial analysis. Ratios are

important and helpful in the reference that:

These simplify the comprehension of financial statement and tell the whole story

of changes in the financial conditions of the business.

These provide data for inter-firm comparison. The ratios highlight the factors

associated with successful and unsuccessful firms, also reveal strong and weak

firms.

These help in planning and forecasting these can assist management in its basic

functions of forecasting, planning, coordination and control.

These help in investment decision in case of investor and lending decision in case

of Bankers etc.

However, the ratios are only indicators, they cannot be taken as final regarding good or

bad financial position of the business other things have also to be seen.

Great care is needed while calculating meaningful ratios and in interpreting them.

Although there are several ratios, which an analyst can employ yet the type of ratios he would,

use entirely depends on the purpose for which the analysis is done i.e., a creditor would keep him

abreast about the ability of a concern to cover up its current obligations and so would care about

current and liquid ratios, Turnover of receivables, coverage of interest by the level of earnings

etc.

ADVANTAGES OF RATIO ANALYSIS:

47

It helps to give comprehensive financial statements in evaluating aspects of any

undertaking in respect of financial health, operations efficiency and profitability. It gives a

chance of inter-firm-comparison to measure efficiency and helps management to resort to some

remedial measures. It provides a good help in decision making for investors and the financial

institutions.

CATEGORIES OF RATIO ANALYSIS:

Liquidity ratios

Activity ratios

Debt ratios

Profitability ratios

Market ratios

LIQUIDITY RATIOS

The liquidity of a firm is measured by its ability to satisfy its short-term obligations as

they come due. Liquidity refers to the solvency of the firm’s overall financial position i.e. the

ease with which it pays its bills. Due to low or declining liquidity firm moves towards financial

distress and bankruptcy.

Liquidity Measures are

Current ratio

Quick (acid-test) ratio

CURRENT RATIO:

48

The current ratio, one of the most commonly cited financial ratios, measure the firm’s

ability to meet its short-term obligations. It is expressed as follows:

Current assets

Current ratio = Current liability

RESULT:

From the above ratios it is clear that the firm’s investment in current assets has increased.

In 2008 it is in better position to pay its obligations as they come due. But in three years we can

see that the firm has the ability to pay its current liabilities efficiently. The standard for this ratio

is 2:1 it is calculated by the current assets by total of the current liabilities.

This ratio is below the standard. The management should take steps to improve the short-

term financial position of the firm.

DEBT RATIO

The debt position of a firm indicates the amount of other people’s money being used to

generate profits. In general, the financial analyst is most concerned with long term debts, because

these commit the firm to a stream of payment s over the long run.

The debt ratio measures the proportion of total assets financed by the firm’s creditors.

The higher this ratio the greater the amount of other people money being used to generate profit.

The ratio is calculated by following formula

Debt ratio = Total liabilities

Total assets

49

Years 2008 2007 2006

Current ratio 1.42 1.02 1.31

Years 2008 2007 2006

Debt ratios 0.864958 0.860627 0.877075

RESULT:

The ratio indicates the more than half of the assets financed by the debt. This ratio is

almost showing the same trend throughout the previous three years. Debt ratio indicates the

greater the risk and more financial leverage it has. It also shows that firm has paid some portion

of the debt during the year 2008.

MARKET RATIOS

Return on total assets

Return on equity

Earnings per share

RETURN ON TOTAL ASSETS:

It measures the overall effectiveness of management in generating profits with its

available assets. The higher the Return on total assets better will be the performance.

Earning available for common stockholders

Return on total assets =

Total assets

50

Year 2008 2007 2006

ROA 5.030% 5.505% 5.219%

RESULT:

The return on investment of the firm is 5.03 % in 2008. It is less than the previous year. It

shows that firm generates Rs.5.03 for each Rs.100 of the investment which is very poor for the

company progress.

RETURN ON EQUITY:

Earning available for common stockholders

Return on total assets =

Total Equity

Year 2008 2007 2006

ROE (%) 28.313 34.73238 34.448881

RESULT:

The return on equity of the firm is 28.313% in 2008. It is less than the previous year. It

shows that firm generates Rs.28.313 for each Rs.100 of the investment made by the partners or

shareholders of the company (which are privately owned by four brothers).

EARNING PER SHARE:

51

RESULT:

This ratio indicates the amount of income earned by the common stockholders. Above

figures clearly show the progress of the company and it maintains this ratio more than Rs.20

which is good for the investors.

VERTICAL ANALYSIS:

In vertical analysis each item of a financial statement is presented as a % age of the total

of items or some other suitable items.

HORIZONTAL ANALYSIS:

In vertical analysis each item in financial statement of the last year is considered as a base

of the same items.

52

Year 2008 2007 2006

EPS 24.38929 26.16947 22.95

BALANCE SHEET

AS AT 31 December 2008,2007,2006

2008 2007 2006

(Rs. In '000') (Rs. In '000') (Rs. In '000')

ASSETS      

Cash and balances with treasury banks 39,631,219 39,683,883 32465976.00

Balances with other banks 4,106,526 3,867,591 6649659.00

Lending to financial institutions 4,100,079 1,051,372 21081800.00

Investments 97,790,391 115,358,590 64450761.00

Advances 262,508,830 218,959,786198236682.0

0

operating fixed assets 17,320,485 16,082,781 9073276.00

deferred tax assets - - 174886.00

Other Assets 19,828,228 17,896,838 11044909.00

  445,285,758 412,900,841343177949.0

0

LIABILITIES      

Bills payable      

Borrowings from financial institutions 10,551,468 10,479,058 7089678

Deposits and other accounts 22,663,840 39,406,831 23943476

Sub-ordinate loans 330,245,080 292,088,347 257185110

Liabilities against assets subject to finance lease - 479,232 1597440

Other liabilities 440,295 1,183,586  

  21,252,942 11,716,465 11177125

53

NET ASSETS 385,153,625 355,353,519 300992830

  60,132,133 57,547,322 42185119

REPRESENTED BY:      

Share capital      

Reserves 6,282,768 6,282,768 5463276

Unappropriated profits 36,772,321 34,000,927 24662446

  11,065,723 7,054,472 6278593

Minority interest 54,120,812 47,338,167 36404315

  69 63 52

Surplus/ (deficit ) on revaluation of securities 54,120,881 47,338,230 36404367

  6,011,252 10,209,092 5780752

  60,132,133 57,547,322 42185119

Income Statement

For the Years 2008,2007,2006

2008 2007 2006

Rs. In '000'

Rs. In '000'

Rs. In '000'

Mark-up /return/ intertest earned40,049,505 31791754

25784853

Mark-up/ return/ interest expensed11,592,922 7858819 4509146

Net Mark-up /return/ intertest income28,456,583 23932935

21275707

54

Provision for diminution in the value of investment - nrt 2,683,994 105269 121197

Provision against non-performing loans and advances - net 1,335,127 2959583 1014540

Bad debts written off directly - 199 47000

  4,019,121 3065051 1182737

Net mark-up /interest income after provisions24,437,462 20867884

20092970

Non-mark-up / interest income      

Fee, commission and brokerage income 2,878,663 2,772,615 2325171

Income earned as trustee to various funds 21,867 5,859 483

Dividend income 451,312 535,813 746276

Income from dealing in foreign currencies 727,564 693,408 692010

Gain on sale of securities - net 748,139 1,507,610 605865

Unrealized loss on revaluation of investments (99,531) (3,329)  

classified as held for trading      

Other income - net 1,201,834 1,002,160 577703

Total non-mark-up / interest income 5,929,848 6,514,136 4947508

 30,367,310

27,382,020

25040478

Non-mark-up / interest expenses      

Administrative expenses 7580302 5,440,305 6505576

Other provision / (reversal) - net 10120 (3,743) 11411

Other charges 920991 642,780 66708

Total non-mark-up / interest expenses 8511413 6,079,342 6583695

Share of profit of associated undertaking 30843 1,223,633 474030

55

Extra ordinary / unusual item - -  

Profit before taxation 2188674022,526,311

18930813

Taxation      

Current year 7387345 6,463,560 5709140

Prior years -865344 -1294586 593906

Deferred 16348 899,898 61213

Share of tax of associated undertaking 25164 15,769 25675

  6563513 6,084,641 6389934

Profit after taxation 1532322716,441,670

12540879

Basic and diluted earnings per share - after tax 24.39 26.17 19.96

56

“VERTICAL ANALYSIS”

BALANCE SHEET

AS AT 31 December 2008

2008 2007 2006

ASSETS % % %

Cash and balances with treasury banks 8.90 9.61 9.46

Balances with other banks 0.92 0.94 1.94

Lending to financial institutions 0.92 0.25 6.14

Investments 21.96 27.94 18.78

Advances 58.95 53.03 57.76

operating fixed assets 3.89 3.90 2.64

deferred tax assets     0.05

Other Assets 4.45 4.33 3.22

total assets 100.00 100.00 100.00

LIABILITIES      

Bills payable 2.37 2.54 2.07

Borrowings from financial institutions 5.09 9.54 6.98

Deposits and other accounts 74.16 70.74 74.94

Sub-ordianted loans   0.12 0.47

Deferred tax liabilities 0.10 0.29 0.00

Other liabilities 4.77 2.84 3.26

total liabilities 86.50 86.06 87.71

57

REPRESENTED BY:      

Share capital 1.41 1.52 1.59

Reserves 8.26 8.23 7.19

Unappropriated profits 2.49 1.71 1.83

total common stockholder equity 12.15 11.46 10.61

Surplus/ (deficit ) on revaluation of securities 1.35 2.47 1.68

total liabilities & equity 100.00 100.00 100.00

Income Statement

For the Years 2008,2007,2006

2008 20072006.0

0

Mark-up /return/ intertest earned 100 100 100

Mark-up/ return/ interest expensed28.9

524.7

2 17.49

Net Mark-up /return/ intertest income71.0

575.2

8 82.51

Provision for diminution in the value of investment - nrt 6.70 0.33 0.47

Provision against non-performing loans and advances - net 3.33 9.31 3.93

Bad debts written off directly   0.00 0.18

Total Provisions10.0

4 9.64 4.59

Net mark-up /interest income after provisions61.0

265.6

4 77.93

  0.00 0.00 0.00

58

Non-mark-up / interest income 0.00 0.00 0.00

Fee, commission and brokerage income 7.19 8.72 9.02

Income earned as trustee to various funds 0.05 0.02 0.00

Dividend income 1.13 1.69 2.89

Income from dealing in foreign currencies 1.82 2.18 2.68

Gain on sale of securities - net 1.87 4.74 2.35

Unrealized loss on revaluation of investments 0.00 0.00 0.00

classified as held for trading -0.25 -0.01 0.00

Other income - net 3.00 3.15 2.24

Total non-mark-up / interest income14.8

120.4

9 19.19

 75.8

286.1

3 97.11

Non-mark-up / interest expenses 0.00 0.00 0.00

Administrative expenses18.9

317.1

1 25.23

Other provision / (reversal) - net 0.03 -0.01 0.04

Other charges 2.30 2.02 0.26

Total non-mark-up / interest expenses21.2

519.1

2 25.53

Share of profit of associated undertaking 0.08 3.85 1.84

Profit before taxation54.6

570.8

6 73.42

Taxation 0.00 0.00 0.00

59

Current year18.4

520.3

3 22.14

Prior years -2.16 -4.07 2.30

Deferred 0.04 2.83 0.24

Share of tax of associated undertaking 0.06 0.05 0.10

 16.3

919.1

4 24.78

Profit after taxation38.2

651.7

2 48.64

Basic and diluted earnings per share - after tax24.3

926.17 19.96

“HORIZONTAL ANALYSIS”

BALANCE SHEET

AS AT 31 December 2008

2008

2007

2006

ASSETS % % %

Cash and balances with treasury banks 122 122 100

Balances with other banks 62 58 100

Lendings to financial institutions 19 5 100

Investments 152 179 100

Advances 132 110 100

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operating fixed assets 191 177 100

deferred tax assets     100

Other Assets 180 162 100

  130 120 100

LIABILITIES      

Bills payable 149 148 100

Borrowings from financial institutions 95 165 100

Deposits and other accounts 128 114 100

Sub-ordianted loans   30 100

Liabilities against assets subjectto finance lease     100

Deferred tax liabilities     100

Other liabilities 190 105 100

  128 118 100

NET ASSETS 143 136 100

REPRESENTED BY:      

Share capital 115 115 100

Reserves 149 138 100

Unappropriated profits 176 112 100

  149 130 100

Minority interest 133 121 100

  149 130 100

Surplus/ (deficit ) on revaluation of securities 104 177 100

  143 136 100

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Income Statement

For the Years 2008,2007,2006

2008 2007 2006

% % %

Mark-up /return/ intertest earned 155.32 123.30 100

Mark-up/ return/ interest expensed 257.10 174.29 100

Net Mark-up /return/ intertest income 133.75 112.49 100

Provision for diminution in the value of investment - nrt 2214.57 86.86 100

Provision against non-performing loans and advances - net 131.60 291.72 100

Bad debts written off directly   0.42 100

Total Provisions 339.82 259.15 100

Net mark-up /interest income after provisions 121.62 103.86 100

Non-mark-up / interest income      

Fee, commission and brokerage income 123.80 119.24 100

Income earned as trustee to various funds 4527.331213.0

4 100

Dividend income 60.48 71.80 100

Income from dealing in foreign currencies 105.14 100.20 100

Gain on sale of securities - net 123.48 248.84 100

Unrealized loss on revaluation of investments      

classified as held for trading      

Other income - net 208.04 173.47 100

Total non-mark-up / interest income 119.86 131.66 100

  121.27 109.35 100

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Non-mark-up / interest expenses      

Administrative expenses 116.52 83.63 100

Other provision / (reversal) - net 88.69 -32.80 100

Other charges 1380.63 963.57 100

Total non-mark-up / interest expenses 129.28 92.34 100

Share of profit of associated undertaking 6.51 258.13 100

Extra ordinary / unusual item      

Profit before taxation 115.61 118.99 100

Taxation      

Current year 129.40 113.21 100

Prior years -145.70-

217.98 100

Deferred 26.711470.1

1 100

Share of tax of associated undertaking 98.01 61.42 100

  102.72 95.22 100

Profit after taxation 122.19 131.10 100

Basic and diluted earnings per share - after tax 122.19 131.11 100

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RESULT ON THE BASIS OF VERTICAL & HORIZONTAL ANALYSIS:

From the above mentioned analysis following are my Result about the Operations of

branches of MCB for the year 2008,

MCB’s income by operations has been increased by 122.19% than 2007.

Company’s Total Assets in Pakistan has been increased by 130% than 2007.

Deficit has been decreased by 104 % in comparison with year 2007

Due to financial crisis in the world investment activities are slowed down in year 2008

and they are decreased by 152% than year 2007.

Due to its sound financial policies MCB’s borrowing from financial institutions has been

decreased by 95 % than year 2007.

“SWOT ANALYSIS”

“The overall evaluation of a company’s strengths, weaknesses, opportunities and threats”

Strengths (S) include internal capabilities, resources and positive situational factors that

may help the company to serve its customers and achieve its objectives

Weaknesses include internal limitations and negative situational factors that may interfere

with the company’s performance.

Opportunities are favorable factors or trends in the external environment that the

company may be able to exploit to its advantage.

And Threats are unfavorable external factors or trends that may present challenges to

performance.

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A scan of the internal and external environment is an important part of the strategic

planning process. The SWOT Analysis provides information that is helpful in matching the

firm’s resources and capabilities to the competitive environment in which it operates.

“MCB’s SWOT ANALYSIS”

“STRENGTHS”

MCB is the first Pakistani privatized bank and because of its quality management,

marketing, innovation in products and services. Owing to all such factors they have established a

good reputation in the banking market. The name of MCB makes you recall the highly

cooperative and professional individuals ready to serve you with maximum zeal and zest.

The joining of experienced people, advanced management, advance setup and facilities

gave MCB an edge over its competitors.

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MUSLIM COMMERCIAL BANK’S IMAGE:

MCB is a reputable financial organization and is well known all over the Pakistan.

Perception is of producing a high quality services.

CUSTOMER CARE:

The Bank not only provides high quality services but it also look for the comfort and

convenience of the clients, MCB always preferred their customers.

MARKET SHARE:

MCB has covered much of the potential market and the net profit is increasing years after

years. Deposits and advances have sufficiently increased.

LARGE NUMBER OF DIVERSIFY PRODUCTS:

This is also its main strength as it has diversified in many products such as:

Debit Card

Visa Card

Car Financing

Agriculture Financing

BRANCH NETWORK

It is the greatest strength of the Bank. In 2004, five more branches were added to the

network and by the end of the year 2005 the total number of branches was raised from just 53 to

143. MCB has also planned to open more branches in next coming years.

SOUND MARKETING:

Skillful marketing of the products is being achieving countrywide goals of Muslim

Commercial Bank Limited.

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PHONE BANKING:

Every account holder can conform its balance on Phone and may ask for any query.

There are also 24 hours help lines for customers.

MOBILE BANKING:

It has been launched recently. It helps in getting accounts details and making transactions using

mobiles.

HIGHLY AUTOMATED BANK:

MCB in Pakistan is the also in the list of highly automated banks, about 750, like

Emirates because of its modern style of banking through fully computerized control and twenty

four hour banking.

FASTER BANKING SERVICE:

MCB have faster banking services that are making it more prominent in the banking

industry especially in operations and Foreign exchange. The customer prefers this bank not only

because of its faster speedy service rather due to reasonable service charges.

INTERNATIONALLY DESIGNED PRODUCTS:

MCB’s products are internationally designed products. These are valuable and

operational in all over the world.

CONTRACT WITH CIRRUS:

Now MCB has also entered into a contract with Cirrus which is a subsidiary of

MasterCard. This contract will enable an ATM card holder to use his account even when he is

out of country at all the ATMs where Cirrus logo is displayed.

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“WEAKNESSES”

ADVERTISEMENT:

The majority of people are not well aware about the products of MCB. Therefore it

should advertise extensively especially RTC and Master Cards.

ACCOMMODATE BEHAVIORALLY:

A behavior has been noted that bank tries to feel at ease with good looking, rich and

educated people and the poor looking customers feel some bit strange in the environment of the

bank. The bank employees should try to accommodate behaviorally all type of customers.

MISMANAGEMENT OF TIME:

Mismanagement of time is another big mistake in MCB branches, the bank official time

of closing is 5:30pm but due mismanagement of time allocation and work the staff is normally

on their seats till 7:00 or 8:00 clock.

AND ALSO,

Costly documents are required for loan sanctioning.

Some times bank also never meets stated rate of profit

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“OPPORTUNITIES”

PRIVATIZATION:

As on December 31, 1998, sixty-eight scheduled banks with 9,106 branches are operating

in Pakistan. As on this date, total population of Pakistan is 140.03 million. Total number of

personal accounts with all scheduled banks as on December 31,1997, are 28.98 million. If we

consider the population statistics of working age group as on December 31,1997, it stands to the

figure of 96.64 million. Thus we can say those 28% of working age people of Pakistan are

having accounts with banks while 72% are unbanked.

The need of privatization has made people to switch to banks to satisfy their needs of

lending and borrowing. This not only increases the deposits but also the credit business.

DIVERSIFICATION:

They may enter in New business or any other consumer-durable product in order to

promote their name, by introducing Loan for the students, small businesses, and handicraft

industry.

SOME MORE OPPERTUNITIES:

Information Technology.

Credit cards can give more earning.

Establishing more foreign Branches.

They should introduce Student Finance Facility.

They should also introduce mobile ATM

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“THREATS”

CHANGE IN GOVERNMENT POLICIES:

Change in government policies has affected the banking business. Still banks have to wait

to get permission of state bank. The freezing of foreign currency accounts is a vital example of

letting people not to trust on banks.

COMPETITION:

The Competition has become severe by the entrants of so many banks, So to exist one

will have to prove himself in its services through excellent management and will have to satisfy

its shareholders. Otherwise he will be out the market.

LOW INVESTMENT:

The decrease purchasing power of consumer in the current economic situation of the

country affecting the business activity speed too much and the result is the low investment from

the investors in new projects can create problem for the bank because it is working a lot in trade.

STATE BANK REGULATION:

As the Bank introduces unique products so they face problem if State Bank Of Pakistan

employ taxes on them which force them to increase the rate of Interest.

EXPECTATIONS OF THE PEOPLE:

Due to huge competition among those banks and MCB,, people are the basic

beneficiaries from it and thus their expectations tend to increase about the products and the

relative rate of interest thus creating a threat for MCB.

SOME BANKS ARE OFFERING KISAN CARDS.

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“PEST ANALYSES”

PEST analyses tell How Political, Economical, Social and technological factors affect

MCB. These are the external factors which affects the whole organization.

POLITICO-LEGAL FACTORS:

Stable government

Stable policies in favor of business

Improved relation with outside world

Law and order.

UNSTABLE GOVERNMENT:

Due to this reason foreigners hesitate to invest their savings in banks, as a result of

economy of our country is going downward and banks suffer.

ADVERSE LAW AND ORDER SITUATION:

The situation of law and order is adverse. The policies are not very handy and beneficial

for the country. The Govt. passes such rules which are not in the favour of bank e.g. The Govt. of

Pakistan has passed a rule that if anyone withdraws more than Rs.25000 then he will be charged

0.30% on withdrawal.

ECONOMIC FACTORS:

Pakistan's economy is going weaker and weaker. 9/11 has a great influence on the

economic crisis of all over the world. With economic factors the bank influenced very much that

are as under:

Impact of WTO force to cost reduction methodology.

Low interest rate

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Inflation

Low GDP growth

Budget deficit

Increase in Govt. duties

Fluctuation in exchange rates

SOCIAL FACTORS:

Social environment includes family, friends, a person's role and status. An individual’s

life directly by society and the person acts according to his or her society. Cultural environment

includes norms, values, religion, conception and perception.

If we see the religion point of view then interest is not allowed that's why most of

the people hesitate to invest their savings in banks and yet they are not aware of

ISLAMIC BANKING.

Traditional business men do not like the business with bank. They pay their

creditors through cash not through cheque. They do not want to get the bank

facilities.

TECHNOLOGICAL FACTORS:

Today is the era of technology. In the every aspect of life technology plays an important

role.

Due to rapid change in technology every bank has to change its technology to

compete other ones.

Increasing issue of securities due to technology resulted increase in cyber

crime. Cyber crime means manipulation. One person can easily transfer

amount from any other's account to his account.

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“APPLICATION OF CLASS ROOM LEARNING”

During my internship of eight weeks in Muslim Commercial Bank, Ltd. Kot Farid

Branch, Sahiwal the knowledge given by my respected and devoted teachers proved to be very

helpful in understanding the environment in the organization and working practically.

Following are some key points about application of my class room learning in the

organization:

The knowledge achieved from the subject “Business Communication” helped me in

understanding customer dealing i.e. how to deal with them? How to understand their problems?

etc.

It also helped me in understanding the inter Organizational Communication i.e. circulars,

notices etc.

Also the Knowledge which I got from the subject “Computer application in Business”

also proved very useful.

Financial Management and Principles of Accounting helped me in understanding the

accounting terminologies which are used in bank e.g. what is debit and credit vouchers? What

are these for? And also in understanding that how entries are made against certain heads.

I could do this only with the help of the knowledge provided to me in my two semesters

of MBA at Bahauddin Zakariya University, Sub Campus Sahiwal.

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“WHAT I HAVE LEARNT IN MCB”

In Muslim Commercial Bank Ltd. I really enjoyed working with the staff of Kot Farid

Branch, Sahiwal having a wish to be employee of MCB. It was almost impossible to work in all

the departments within that limited time. But the staff of the branch provided me the opportunity

to work in the different departments for the sake of practical knowledge. I feel highly indebted to

work in the Kot Farid Branch with the manager of that branch Mr. Yasin Tahir, because I learnt a

lot in that branch.

During my internship training in the MCB as I early mentioned that I have worked in

different departments & seats and learnt the following things,

How to deal with different types of customers.

Account opening.

Cheque book issuance.

Outward clearing.

Cheque for Collection.

Different forms and vouchers filling.

Experience of working in a well reputed organization.

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“SUGGESTIONS & RECOMMENDATIONS”

Following are some suggestions for Muslim Commercial Bank, Ltd.

ADVERTISING:

Bank must let potential customers know that all attractions for banking exist. This is done

by advertising on television and obtaining press coverage, in conjunction with direct mail,

window displays, leaflet in branches and in appropriate other locations (such as hotels, shops,

etc.) and including leaflets in statement of accounts sent to existing customers in the hope that

they will tell potential customers about the services provided by our bank.

INCREASED ATM’S LOCATIONS:

Some personal sector customers prefer not to come to branch. They increasingly want to

deal with the bank in other ways, such as home banking or use of Automated Teller Machines

(ATMs), which need to be at every branch or some important shopping plazas and airports etc.

INCREASED SERVICES:

One way to retain the customers is to offer a wide range of services such as tax advice,

free life insurance equivalent to amount deposited, shares portfolio management, fund

management facility, etc., complimentary to the core services. Banks must have a slightly

different mix of services and mean of providing these such that customers can choose the mix

that suits them best.

MANAGEMENT OF TIME:

There should be a good management of time for the sake of employees i.e. offering them

free break hours instead of making them work in this time as well.

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GROWTH SCOPE FOR EMPLOYEES:

MCB should provide greater facilities to its employees, and give them bonuses for their

hard work and Promotions as well. 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

BANKING PROFESSIONALS:

The bank should hire banking professionals having experience in their respective fields

that will boost the performance of the company as currently MBAs are produced for this field so

they should be hired for enhancing the performance of company.

ATTRACT CUSTOMERS:

The banking company should offer such policies which would attract customers which

are denied by other banking in the market.

JOB ROTATION AND PROMOTIONS:

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

COMMUNICATION SYSTEM FOR EMPLOYEES:

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.

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“IF I WERE MANAGER AT MUSLIM COMMERCIAL BANK”

If I would be a manager at MCB I’ll take following steps,

I will apply such a communication system specially designed for employees trough they

can share the problems regarding work environment.

Complete working and break hours will be offered so that employees can work

efficiently.

I will make it sure that some of the employees should be sent for training to other

countries and employees from other branches should be brought here.

I will make promotions, job rotation and bonuses, an important part of policies of MCB.

At every month’s closing when employees stay at branch even after working hours, a

dinner from bank will be offered.

To retain potential customers certain services will be provided and let them know with

advertising.

I will make it sure that Working environment, equipment, furniture and staff dressing

should be according to the modern banking style.

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“REFERENCES & RESOURCES”

To make this internship report data is taken from the following resources:

ONLINE RESOURCES:

Muslim Commercial Bank, Ltd http://www.mcb.com

Muslim Commercial Bank Pakistan http://www.mcb.com/pakistan/

State Bank of Pakistan http://www.sbp.org.pk

Statistical Bureau of Pakistan http://www.fbs.gov.pk

Interview with key persons at MCB, Kot Farid Branch Sahiwal.

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