INTRODUCTION

The Muslim Commercial Bank Ltd is one of the leading commercial bank of
Pakistan with network of 1054 domestic and six foreign branches. The bank was
registered as commercial bank in July 1947 in Calcutta (India) After the partition in
August 1948, the bank shifted its head office to the Dacca (Bangladesh) and in 1956 the
bank shifted its head office to Karachi, where it is still working.

In 1948 Mr. Ispahani and Mr. Hameed Adamjee purchased the bank. At that time
the bank showed a historical performance and profit.

In 1974 the Government felt a harsh need of nationalization of banks and

financial institutions and nationalization act was introduced. Under this act MCB was the
first bank which was nationalized. In the same year Premier Bank was merged with MCB
and it started work as a government bank. This nationalization affected the bank badly.

All the financial institutions and banks did not show good performance after
nationalization, and again the government felt a big need to privatize these banks. In 1991
the bank was privatize during Nawaz Sharif government. The government of Pakistan
transferred the management of the bank to National group, one of the leading group in the
field of business. They were sold 25% shares. Now this group is having 50% of the total
shares. Government is having 25% shares and general public is also having the same
shares.

Now a days MCB’s main focus remains on consumer banking and its growing
reputation as full service provider, gives the bank an edge in front of increased
competition in the banking sector in Pakistan with a network of over 1216 branches and
team of dedicated professionals. MCB with an international out look and regional focus
ensures prompt customer service and innovative solutions to business and personal needs.

The consumer banking provides consumers with innovative saving schemes,

products and services. The bank ATM (Automated Teller Machine) network is the
largest in Pakistan and Pak rupee traveler cheques are the market leaders. Besides, MCB
was the first to introduce photo card with the introduction of MCB Master Card adding
extra feature to an already existing product in the market. Its corporate banking ensures
assistance from a dedicated team of professional financial advisors for under writing
project finance or corporate advisory services.

Hence till mid 1999 bank has shown remarkable achievements in fulfilling up of
all its objectives along with the targeted profit limits. At present the bank is considered
with an efficient and largest network bank with high potential and committed team
towards their respective tasks and responsibilities.

All MCB’s products have also presented an admirable response by its clients and
contributed a lot in developing the bank’s repute as well as the economy, which is really
appreciable. The profit earning position of bank is being improved every year and market
price of MCB share has been reached to Rs.25/- in the mid of 1999.

1.1 MCB VISION

MCB vision by the 21st century is to have highly motivated professional Team who will
provide quality customers services expand and penetrate the customer base, in order to
improve profitability so that we can pay regular and increase our share value. The
chairman in his recent review has desired to extend the bank’s highly professional
services in foreign operation and be come in the list of Asia’s best financial institution.

1.2 OBJECTIVES OF MCB

Every Organization is established to accomplish certain objectives. In this
connection, the main objectives of the MCB include:

a. Improved Customer Service.

b. Quick Disposal of Credit Claims.

c. Efficient operation of the officers in co-operative environment.

 d. Effective Communication with other banks.

e. To ensure growth and development of the bank.

f. To procure greater business i.e. to acquire more deposits, which are

considered to be the raw material of the bank.

g. To channalize the resources of the bank productively and increase the wealth
of stock holders.

h. To reduce the general trend of cash transaction and make the people more
bank oriented.

i. To participate in economic development of the country.

j. Introducing new products in order to attract more customers.

k. To increase foreign exchange reserves.

HISTORICAL BACKGROUND OF BANKING IN PAKISTAN

The history of banking system in Pakistan dates back to independence of

Pakistan in August 1947 when various banks transferred their Head Quarters and funds to
areas likely to fall in Indian banking system.

According to various book there were 3106 branches of Indian scheduled banks in
the undivided sub continent as on 1st March 1947 out of which only 487 branches were
located in areas presently constituting Pakistan. However the number of scheduled banks
drastically declined too 195 from 487 by 30th June 1948.

At the time of partition there were only two banks having the honour to be first
commercial bank of Pakistan, namely Habib Bank Ltd, which was set up in 1941 with its
Head Office in India and the Australasia Bank Ltd, which was established in 1944 with
its Head Office in Pakistan.

After the partition, an expert committee was set up and this committee
recommended that the Reserve Bank of India being the central Bank of the undivided
India should continue to function as Central Bank of Pakistan and the Indian currency
notes would continue to be legal tender in Pakistan till 30th September 1948. subsequently
it was set up started functioning from 1st July 1948.

Thus the history of Banking system in Pakistan started with the establishment of
the State Bank of Pakistan which was inaugurated by Quaid-e-Azam Mohammad Ali
Jinnah on 1st July,. 1948. consequently three banks were established which include
Muslim commercial Bank Ltd. Bank of Bhawalpur in October 1948 and National Bank of
Pakistan in 1949. Habib Bank also transferred its Head Office from Bombay to Karachi
due to partition in August 1947. and it was assisted by the State Bank to finance domestic
trade of the country.

1.3 AN OVERVIEW OF MCB

Muslim Commercial Bank is not an over night story of success:

They started business in Calcutta on July 9th 1947. After the partition of Indo-Pak sub-
continent the bank moved to Dhaka from where they commenced business in August
1948. In 1956, the bank transferred it registered office to Karachi, where the Head Office
is presently located.

According to the MCB Annual Report 2001, the bank inherits a 55 years of
legacy of trust in its customers and citizens of Pakistan. Where as till now MCB’s role in
development in economy as well as its services have showed a remarkable performance
which mind it to be as the ideal bank in future.

At present the bank is operating with its total 1061 branches out of them six are
located out side the country.

The total bank deposit in Jun 1948 were only Rs 88 corers (880 millions) and
credit amounted to Rs.20 corers (200 million) but in December 2001 the deposits of bank
have risen up to Rs. (154,544 million) as compared to Rs.(135990 million) in 2000 and
total advances have reached to Rs.76586 million as compared to 86359 million last year.
1.4 NATIONALIZATION OF MCB
After spending 27 years of its operation since establishment in January 1974, the
government of Pakistan nationalized MCB by following.

• Concentration of wealth in few hands.

• Inappropriate use of credit.

• Unbalanced distribution of credit.

• Protection of Black Money.

• Unhealthy competition among banks.

• Exploitation of Bank’s Employees.

• Favoritism.

• Low efficiency of foreign bank branches.

1.5 PRIVATIZATION OF MCB

A wave of economic reforms swept Pakistan in late 1990, introducing the need for
privatization of state owned banks and companies. In April 1991, MCB becomes
Pakistan’s first bank, which was decided to be privatized. The government of Pakistan
transferred the management of the bank to a national group of leading industrialists of the
country by selling 25% shares of the bank also with a view to broaden equity holding the
government sold 25% and the paid up capital to the General Public as well. In term of
agreement b/w government of Pakistan and national group, additional 25% share were
again offered to the group of purchasing and making their holding to 50%. Now 25% of
remaining shares are retained by government which shall be sold in near future.
CHAPTER-2

BRANCH NETWORK

MCB is a huge organization, having branch network throughout the country. From
9management point of view the branches are grouped under regions, and regions under
circles.

20 circles are working under which there are 39 regions and 1045 branches through out
the country and five branches are working abroad. Group wise position of circles, regions
and branches is as under3.

Group Circles Regions Branches

Commercial-North 9 25 637
Commercial-South 7 14 383
Corporate 4 - 20

Total 20 39 1040

Overseas 4
EPZ 1

G. Total 1045
2.1 Divisions of MCB

2.1.1 Agriculture Division

Agriculture division deals with the loans and development of agriculture sector. It has the
responsibility to manage all the affairs related to agriculture sector. This division works
for the development of agriculture in the country.

2.1.2 Audit Division

Audit Division is responsible for the inspection of financial affairs. It also keeps a
check over the irregularities in different branches. They are delegated enough
authority from the Board of Directors so that it works without pressure. It appoints
the audit teams and all the irregularities pointed out are reported to this division.

2.2.3 Business Developments and Marketing Division

This division works under the Head Office (H.O). Its main concern is to develop the
business of the bank related to the introduction of new products. Changes in the existing
schemes in favour of the bank and customer is also the responsibility of this division.
2.2.4 Central Accounts Division

Central Accounts Division takes care of the accounts of branches and records all inter
branch transactions and transaction of branches with HO. Calculation of profit on the
account of branches maintained with HO is also the responsibility of this division.

2.2-5 Corporate Affairs Division

Corporate affairs division deals with the affairs related to public limited companies. It
includes financing of large and specialized corporations projects. In short it manages
the corporate financing. It also directly controls all those branches, which are
designed as corporate branches.

2.2-6 Credit Management Division

This division has the duty to make and alter the credit rules and regulations in accordance
with the prudential rules and regulations formed by SBP. It deals with all credit proposals
submitted by advances department of different branches and designs their limit of loans.
This division also carries out marketing activities about the loan.

2.2-7 Finance and Treasury Division

It manages all the assets of MCB. Management of income tax and central excise duty
is the function of this division. The most important function is to announce the profit
rates on different schemes from time to time.

2.2-8 Foreign Trades and Exchange Operation Division

This division is responsible for managing foreign currency reserves for day-to-day
requirements of the bank. It frames all the rules and regulations regarding foreign
exchange and opening of L/C in the light of prudential regulations of SBP.

2.2-9 General Service Division

General service section is concerned with construction of building for branches of the
bank at various localities. It is also concerned with the purchase of vehicles and other
accessories for the banks. The supply of stationary and equipment is the responsibility of
this division.
2.2-10 Human Resource Development Division

This division manages all the methods concerns with the human resources management
like selection, promotion, transfer and retirement etc. It settles all the matters relating to
salaries, increments, bonuses, and fringe benefits. It maintains records of employees and
conducts performance appraisal and disciplinary actions.

2.2-11 Information Management Division

Information Management provides all the information to the top management. This
division monitors the information system of all branches and is playing a very important
role in computerization of MCB.

2.2-12 Industrial Credit Division

Previously it was a part of credit management division. It is concerned with advances to

various industrial units.

2.2-13 International Division

This division deals all the matters relating to branches located in foreign countries. It
looks after all the matters, which MCB carries out with banks and financial institution of
foreign countries. It also manages the religious matters of hajj and Umrah.

2.2-14 Investment Banking Division

This division looks after the investment of bank in various schemes introduced by the
bank. It deals with capital market at national and international level and also manages
syndicate in case of issuing of shares etc.

2.2-15 Islamization Division

During the era of Late President. Gen. Zia, steps were taken to abolish interest from the
bank transaction, MCB developed this division. This department deals with Zakat
deduction, Iqra surcharge, Qarz-e-hasana etc. This division also gives suggestions on the
adoption of interest free banking in Pakistan.
2.2-16 Legal Affairs Division

This division deals with the legal affairs of the bank. It handles all the cases filed against
the bank. It also gives suggestions in framing of new rules and regulations to other
division.

2.2-17 Organizational and Method Division

This division deals with the review of organizational structure of MCB. This division
forms methods and procedures to be adopted by different branches. This division collects
data and suggestions for the improvement of the organizational structure and procedures.

2.2-18 Rupee Travelers Cheque and Credit Division

This division is concerned with the issuance and management of RTC’s and credit cards.

2.2-19 Special Assets Management Division

This division deals with giving suggestions and new ways to recover the stuck up loans.

2.2-20 Training Division

This division administers staff colleges and new banking techniques. This division is
responsible for arranging training programs for all level of employees. This division
keeps itself aware of the introduction of new banking techniques and provides a full
opportunity to its employees to learn about it.

2.2 Organizational Structure

It is the graphical representation of authorities and responsibilities.4 It defines the various

level of management and its span of control. (It refers to the number of personnel a
manager manages by virtue of his post.) 5

MCB is a very large and complicated organization having many divisions, branches, and
administrative offices all over the country and outside the country. MCB is running its
operations successfully since 1947 and reached to the top of the banking industry.
Normally it is said that MCB has no specific organizational structure, but it is not true
because no bank without its proper organizational structure stand No. 1 for so many
years. However, MCB policies are very flexible and changes frequently according to the
situation.

MCB is a very large organization with many branches in different areas of the country
and different divisions under the Head Office. So it is managed through broad span of
control with decentralization of authority. (The tendency to disperse decision-making
authority in an organization structure.)6 All the Executives, including Senior Executive
Vice Presidents (SEVP`s), General Managers (GM`s), Regional Managers (RM`s), Vice
Presidents (VP`s), and Branch Managers are delegated with powers and authorities,
which are fairly, match able with their responsibilities and duties they perform.
Chairman are made by Top Management for control
Still many decisions of small importance,
purposes. So there is a mix of centralized and decentralized authority in this respect. (The
tendency to restrict delegation of decision
BOD making in an organization structure, usually by
holding authority at or near the top of the organization structure.) 7

Chart # 2.3 President

Organizational Chart of MCB
(CEO)

5 SEVPs

10 EVPs

5 SVPs

5 VPs

AVPs

OG-I,II,III

Clerical Class
Staff Four

Teller Typist Cashier Guards Drivers Messengers

Source: www.mcb.com.pk