Sie sind auf Seite 1von 88

Muslim Commercial Bank

OVERVIEW OF BANKING IN PAKISTAN


History of Banking
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. 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 persons who had surplus money found it safe and convenient of deposit their valuables with them. 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

Muslim Commercial Bank

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 quite 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.

Muslim Commercial Bank

Commercial Banking In Pakistan


The interesting point which I observed during the span of mine internship was the historical background of Banking & Financial sector which is the one in which great improvement and growth is observed since the formation of Pakistan. For studying the growth of this sector we can divide it into three stages, which are as follows: a) Pre-Nationalization Era b) Nationalization Era c) Post Nationalization Era

A) PRE NATIONALIZATION PERIOD:


There were only two Muslim banks in Indo Pak before partition, they were; Habib Bank Ltd. (estd. in 1941 at Bombay) & Australia Bank Ltd. (estd. In 1944 at Lahore). All other banks, at that time, were either owned by Hindus or Foreigners.

At the time of partition there were 631 bank branches in area which came under Pakistani control. But due to blood shed and violence at large scale, mostly branches were closed and the disparity can be assessed from the fact that on July 1948 there were 195 branches with deposits of Rs.88 crore (880 million) only. Also a factor lagging in Pakistani industry was a central bank of its own, by that time Reserve Bank of India was acting as central bank for both countries and same currency notes were used in both territories. But Reserve Bank of India was biased and Set down Pakistan on many occasions such as the issue of funds transfer etc.

Muslim Commercial Bank

In this period drastic steps were taken in government sector for the improvement of overall position. The private sector also responded to these changes and some very positive changes were observed. Some of the steps taken by the government in this regard were as under: 1) 2) Inauguration of State Bank of Pakistan (SBP) on 1st July, 1948. Setting up of National Bank of Pakistan in November, 1949 to control the 'jute'

export in East Pakistan and to act as agent of SBP. 3) 4) 5) a) b) c) d) Larger powers were given to SBP through SBP Act (1956) for controlling purposes. Banking Companies Ordinance 1962 for protection and guidance to banks. Establishment of specialized banks, such as ADBP (1952); HBFC (Nov, 1952); P1CIC (Oct, 1957) IDBP (Aug. 1961); NDFC (Jan, 1973).

These were the steps, which built a strong banking sector in Pakistan. This is also obvious from the facts that by 1973 there were almost 10 foreign banks were working in Pakistan and all over deposit position was around Rs.2300 crore (23,000 million). A bird eye view of 5 top banks was as given below:

Muslim Commercial Bank

BANK POSITION IN 1973

BANK HBL NBP UBL MCB ABL

NO. OF BRANCHES 667 579 497 506 145

DEPOSITS 6,160 5,660 5,670 1,640 570

B) NATIONALIZATION PERIOD
On January 01, 1974 all Pakistani banks were nationalized through Nationalization Act 1974. Under this law all Pakistani banks became a public property. All small banks were merged in bigger banks to create 5 major Pakistani banks Pakistani banks. These banks were to control by Pakistan Banking Council. There are still controversies about this act of government as whether it contributed in success of failure of banks. However the major changes after nationalization were as follows: Working of banks was extended to under developed areas. Market expansion for credit and deposits. Decrease in service level of bank officers. Decrease in profitability as well.

However the effect of expansion was enormous and it can also be depicted with the help of table 2 which shows the deposit & branch positions of different nationalized banks. 5

Muslim Commercial Bank

BANK POSITION IN 2006

Bank HBL NBP UBL MCB ABL TOTAL

No. of Branches 1926 1448 1684 1288 750 7096

Deposits (Rs. In Millions) 153,431 128,679 87,482 50,013 33,757 453,362

C)

POST NATIONALIZATION ERA

In 1990 the government decided to denationalize all the nationalized institutes. Some was also suggested in banking sector. For this purpose, amendments were made to Nationalization Act 1974 and two nationalized banks were privatized. Along with this a permission to open banks in private sector was also granted. The rules regarding establishment of new banks and for incoming foreign banks were also Relaxed. The-three privatized banks are; a) b) c) MCB taken up by a private group in April, 1991 ABL taken up by its own employees in September, 1991.1 UBL taken up by UAE party in 2002.

After these changes a large number of private and foreign banks started their operations in Pakistan and the present status can be seen from the following figures:
1

Muslim Commercial Bank

SCHEDULE BANKS
Category Nationalized Commercial Banks Private / Privatized Commerce Banks Public Sector Specialized Banks Foreign Banks Total Schedule Banks No. of Banks 3 18 4 19 44

OVERVIEW OF MUSLIM COMMERCIAL BANK Ltd.

THE MISSION STATEMENT

Muslim Commercial Bank

To be the best bank in the vicinity for providing excellent services to target consumer

SLOGAN OF THE BANK


GOOD BANKING GETTING BETTER BANKING

HISTORICAL BACKGROUND:
Now let us discuss the historical background of Muslim Commercial Bank Limited. Before separation of Indo Pak, the need for more Muslim banks was felt. And Muslims having

Muslim Commercial Bank

strong financial capacity were thinking to invest in this sector as well. This was the idea which paved the way for setting up Muslim Commercial Bank Ltd known as MCB. This was the third Muslim bank in the subcontinent.

HISTORY
This bank was incorporated under companies act 1913 on 9th July 1947 (just before partition) at Calcutta. But due to changing scenario of the region, the certificate of incorporation was issued on 17th August, 1948 with a delay of almost 1 year; the certificate was issued at Chitagong. The first Head office of the company was established at Dacca and Mr. G.M. Adamjee was appointed its first chairman. It was incorporated with an authorized capital of Rs. 15 million.

After some time the registered office of the company was shifted to Karachi on August 23rd, 1956 through a special resolution, now recently the Head office of MCB has been transferred to Islamabad in July, 1999 and now Head office is termed as Principle Office.

This institute was nationalized with other on January 1st, 1974. At that time it had 506 branches and deposits amounting to Rs. 1,640 million. Although. MCB has a reputation of a conservative bank but nationalization also left its effects on this institute as well and by end of year 1991 in which it was privatized the total number of branches were 1.287 and deposits amounting to as high as Rs. 35,029 million.

When privatization policy was announced in 1990, MCB was the first to be privatized upon 9

Muslim Commercial Bank

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.

DEVELOPMENTS
After privatization, the growth in every department of the bank has been observed. Following are some key developments: 1) 2) 3) 4) Pakistan. 5) Extended use of information technology which is evident from the fact that there 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

are 768 fully automated branches, 243 online branches (integrated networking), 151 ATMS in 27 cities nation wide and a M.C.B continuously innovate new product.

MANAGEMENT OF THE BANK


Mian Mohammad Mansha S.M. Muneer Chairman Vice Chairman

10

Muslim Commercial Bank

Mohammad Aftab Manzoor Tariq Rafi Sheikh Mukhtar Ahmed Mohammad Arshad Shahzad Saleem Aftab ahmad khan Sarmad Amin Mian Umer Mansha

President & Chief Executive Director Director Director Director Director Director Director

AUDIT COMMITTEE
Mian Mohammad Mansha Shaikh Mukhtar Ahmed Shahzad Saleem Chairman Member Member

CHIEF FINANCIAL OFFICER


Ali Amin

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

11

Muslim Commercial Bank

which are imposed by concerned statutes Mr. Muhammad Mansha is chairman & chief executive of the company with a team of 10 directors and 1 vice chairman to help in the business control and strategy making for the company.

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: a) b) c) Corporate Banking Commercial Banking Consumer Banking

A)

CORPORATE BANKING:

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

B)

COMMERCIAL BANKING;

The branches which has a credit exposure of less than Rs. 100 million but having a credit

12

Muslim Commercial Bank

portfolio of more than Rs. 20 million (excluding staff loans) Usually branches in large markets and commercial areas come under this category. C)

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: Corporate 16 branches Commercial 965 branches

NUMBER OF BRANCHES IN DIFFERENT LOCALITIES

Punjab Sindh NWFP Blochistan Azad Kashmir Total

601 217 112 35 16 981

13

Muslim Commercial Bank

Hierarchy of Management
GRADES OF BANK

SEVP ESEVP SVP VP AVP GRADE-1 GRADE-2

GRADE-3 ASSISTANT Clerical staff Non-clerical staff

Cashier

Messenger

Technical Staff

Dispatch Rider

14

Muslim Commercial Bank

MEDIOCRE LEVEL MANAGEMENT


The organization chart within a department and in different offices is as follows: Divisional Heads Regional Head (EVP) Zonal Head (VP) Branch Manager (VP, AVP, GRADE 1, 2, 3) .. Head Office .. Regional Office .. Zonal Office .. Branch

15

Muslim Commercial Bank

DEPARTMENTS & SERVICES AT MCB


The purpose of banks is to provide some services to the general public. And for this purpose different banks provide different services to the people in different forms. The Muslim Commercial Bank (MCB) is a commercial bank, in modern time commercial banks play a very important role and their functions are manifold. The main functions and services which Muslim Commercial Bank Limited provides to different peoples are as follows.

1) 2) 3) 4) under: a) b) c) d)

Open Different accounts for different peoples Accepting various types of deposits Granting loans & advances Undertaking of agency services and also general utility functions, few of those are as

Collecting cheques and bill of exchange for the customers. Collecting interest due, dividend, pensions and other sum due to customers. Transfer of money from place to place. Acting an executor, trustee or attorney for the customers. Providing safe custody

and facilities to keep jewellery, documents or securities.. e) f) Accepting bills of exchange on behalf of customers. For proper functioning of branches and the over all bank has been divided in

different departments. These departments handle different jobs so that division of work is there for improvement of functions and also it is easy to control the situation.

16

Muslim Commercial Bank

The general division in a branch is as follows: 1) 2) 3) Cash department Deposit department Advances & credit department

Technology department (new addition in order to cop with the growing needs of day to day technology requirements)

Cash Department
The following books are maintained in the Cash Department: 1. 2. 3. 4. 5. Receiving Cash Book Paying Cash Book Token Book Scroll Book Cash Balance Book

When cash is received in counter, it is entered in the Scroll Book and Receiving Cashier Book. At the close of the day, these are balanced with each other.

When the cheque or any negotiable instrument is presented at counter for payment, it is entered in the token book and token is issued to the customer. The token clerk and the Cashier make entries in the paying book and payment is made to payee. At the close of day, 17

Muslim Commercial Bank

the Token Book and Paying Cashier Book are balanced. The consolidated figure of receipt and payment of cash is entered in the cash balance book and drawn closing balance of cash. Opening Balance + Receipts - Payments = closing Balance.

Deposit Department
Bank deals in money and they are merely mobilizing funds within the economy. They borrow from one person and lend to another, the difference between the rate of borrowing lending forms their spread or gross profit. Therefore we can rightly state that deposits are the blood of the bank which causes the body of an institution to get to work. These deposits are liability of the bank so from point of view of bank we can refer to them as liabilities.

The total deposits of MCB are growing since its inauguration but after privatization there is a sharp incline in over all deposits of the bank. The increase in deposits is also a cause of increase on total number of accounts; bank has progressed in both aspects.

TYPES OF DEPOSITS
Deposits can be segregated on two bases, one is the duration in which there funds are expected to be with the bank and second is the cost of getting these funds. So divide deposits in two classes according to duration of deposits i.e. 1) 2) Time deposits / liabilities Demand deposits / liabilities

18

Muslim Commercial Bank

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

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

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

CURRENT A/C:
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 type of account is for those persons who want to make small savings'. This type of account is opened with a minimum deposit of Rs. 1000/-. Under this scheme deposits can be

19

Muslim Commercial Bank

made only up to a-costing amount and withdrawals are allowed twice a week or 8 times a month. If a big amount is required a seven days notice is required before the withdrawal. The profit is paid on these accounts on the minimum balance during a month for the whole of that month. Zakat & other withholding taxes are deducted as per rules of the government.

HAJJ MUBARIK SCHEME:


This is also very closely related with Khanum Bachat scheme. This was designed to help the persons who are willing to offer Hajj but are unable to save required funds. In this deposit schemes, 2 or 3 years agreement is entered with a customer. During this time he keeps on depositing monthly deposits and his account is charged with the accumulated profits calculated on 6 monthly basis. The scheme is so designed that total amount to be received at the end of this scheme comes equal to the anticipated cost of offering Hajj at the end of tenor. Zakat & withholding tax are deducted at the time of payment.

SPECIAL NOTICE DEPOSITS:


Under this deposit scheme, a deposit is received from the depositor under the condition that he will intimate the bank before a certain period in case of withdrawals. There are two types of SNDs, they are 7 days and 30 days notice deposits. The profit is paid on these deposits but it is nearly equivalent to saving account rate.

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

20

Muslim Commercial Bank

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

PROCEDURE FOR OPENING:


Procedure for opening of account is as follows: A person, who wants to open any kind of account, has to fill in a printed form which is provided by the bank, free of cost. Separate account opening forms are used for different types of accounts.

Bank usually requires that new depositor must be introduced by some one. An introducer can be any person known to the bank but preferably it should be a customer of the bank. However, the manager can open the account by his own introduction.

If the manager is satisfied, it will obtain the full signature of the customer- on the form and specimen signature card, makes the first deposit, and issues the cheque book.

Books relating to customers Pay-in-slip


Is the proof of deposit? For every payment which is. To be deposited in the bank, the pay-inslip is to be filled up. The object of this book is to provide the customer with the bank's acknowledgment for receipt of money to be credited this account.

21

Muslim Commercial Bank

Cheque Book Contains a number of cheques. It enables a customer to make withdrawal from this account or make payment of various parties by issue of cheque. Pass Book Is a copy of the customers account as appears in the books of the bank. Balance is recorded in this book by the Clerk.

Grounds for Closing the Customers Account


The banker may close the account of the customer due to following reasons: I. Notice by a customer II. IV. VI. Death of customer Customers Insanity Unsatisfactory operation

III. Customers Insolvency V. By order of court

I.

Notice by Customer:

The banker closed the account of the customer in the application the customer for closing his account. II.

Death of Customer

On death of his customer, the bank must stop payment of cheques drawn on him by the deceased customer because the death revokes his authority to pay such cheques. The heirs of the executors of the decreased customer are not authorized to operate on the account; it can act only in accordance with the provisions mentioned in the letter of probate issued by a competent court.

22

Muslim Commercial Bank

III.

Customers Insanity

If the customer becomes mentally ill, this terminates the bankers customer relationship comes to its end, in such as situation, it is usually considered that the bankers authority to pay his customers cheques is revoked by notice of insanity. However, the bankers treat their customers as it unless a fairly conclusive evidence of the customers insanity is available to them.

IV.

Order of Court

A court of law may serve a banker with an order in garnishee proceeding in execution of a decree prohibiting him from honoring a customers cheques.

V.

Customer Insolvency

Insolvency is civil death, therefore, the insolvent adjusting loss his rights receiver of liquidates. As soon as the receives the notice of insolvency of his adjusting, or petition filed for adjusting a filed customer insolvency, his authority to pay cheques or to accept of honor bills to take any other action on behalf of his insolvent customer comes to end.

Clearing Department
Every banker acts both as a paying as well as a collecting banker, It is however an important function of crossed Cheques. A large part of this work is carried out through the bankers clearing house. A clearing house is a place where representative of all banks of the city get together and settle the receipts and payment of cheques drawn on each other. As the collecting banker runs

23

Muslim Commercial Bank

certain risks in receipt of their ownership the law has provided certain protections to the banks. The Negotiable Instrument Act, 1881, lays down hat drawer or holder of a cheque or draft may cross the instrument generally or specially. It further lies down that a crossed cheque can only be paid to a banker, who collects it for a customer in good faith and without negligence.

TYPES OF CHEQUES COLLECTED

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

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

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

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

FUNCTIONS OF CLEARING DEPARTMENT


1. To accept Transfer, Transfer delivery, clearing and collection cheques from the customers of the branch and to arrange for their collection. 2. To arrange the payment of cheques drawn on the branch and given for collection to any

24

Muslim Commercial Bank

other branch on MCB or any other members or sub member of the local clearing house. 3. To collect amount of cheques drawn on members, sub-member of local clearing house, sent for collection by MCB Branches, not represented at the local clearing house.

COMMON PROCEDURE FOR ALL CHEQUES:


i) Receiving and scrutinizing the cheques and other deposit instruments, and the pay-

in-slip at the counter. ii) iii) iv) v) vi) Fixing the stamps. Scrutiny and receipt by the authorized officer. Returning the counter file to the depositor. Certificate and confirmation by the officer in charge of the department. , Separating the cheque into transfer, transfer delivery, and clearing cheques.

SCRUTINY OF CHEQUES
a) b) The instrument should be neither stale/ nor post-dated. If the instrument is crossed not negotiable it can be for the third party (an endorsee of

an order cheque, or a holder of bearer cheque). c) d) e) f) g) The Instrument should not bear any unauthorized alternation. The instrument should not be mutilated. The amount in words and figures should be same. The instrument should be drawn on any local branch. If cheque is "crossed Account Payee's" only or "Payee's Account", it should only be

25

Muslim Commercial Bank

accepted for collection for the payee's account. h) i) j) The cheques or drafts should not be crossed specially to any other bank. A cheque payable to a firm should not be accepted for credit to a partner's account. A cheque payable to one of the joint account holders should not be collected for the

joint account without the payee's endorsement, or consent. k) A cheque drawn by a customer in the capacity of agent, Attorney, or Manager of his

company or firm, should not be collected for credit to his personal account. l) m) Pay orders, although negotiable should not be collected for third parties. Do not collect an instrument in the account of an agent or of the servant of the payee

or endorsee of the instrument. n) Not transferable" instruments, like Telegraphic Transfer, or Mail Transfer Receipt,

Pay-slips, and Treasury Receipts, should be collected for a person other payee. o) Branch agent's permission should be obtained before accepting a third party cheque

or draft for the credit of the member. p) All the endorsement should be regular, and no endorsement should be missing.

Note: No charges are charged by the bank for this purpose.

LEDGERS OF DEPOSIT DEPARTMENT The following types of ledgers are concerned with deposit departments: 1. 2. 3. 4. Saving Ledgers Current Ledgers Profit & Loss Sharing Ledgers Fix Deposit Register

26

Muslim Commercial Bank

5. 6. 7. 8. 9. 10. 11.

S.N.T.D. Register Call deposit register Cumulative deposit certificate register Cash book Daily profit and loss summary book Officer spaceman signature book Voucher register

However, in computerized branches all these ledgers are no more there but only day books are maintained. The rest of the work is done on computers.

Advance Department
Advances are the most important source of earning for the banks. MCB is also giving full attention towards this aspect and it is also obvious from the growing portfolio of advances and from very low delinquency rate. The credit portfolio of this institution is in a very much better shape than other financial institutions of Pakistan and the credit goes to the management and the staff who are concerned about the quantity and quality as well. 1) 2) 3) Loans Cash Credits Overdraft

LOANS:

27

Muslim Commercial Bank

Loans are monetary assistance by a financial institution to a business, individual etc. The loans are granted by the bank in lump sum, so these types called fixed or demand loans. Interest is charged on the whole amount of a fixed loan.

The borrower withdraws whole the amount of loan. This type of loan is normally granted against security of gold documents.

In case of demand loans against gold or documents, a demand promissory note for the amount of loan is taken from the borrower loans are granted under;

LOAN AGAINST GOLD


Under this type of loan, which is granted to the borrower the Head Cashier estimates the value of Gold or Gold ornaments through an agent (Gold smith) and keeps a margin of 40 to 50 percent. After the opening the gold loan account a token is given to the borrower, which is a bank receipt.

On repayment of loan, the gold or ornaments held as security for it, together with the demand promissory note duly discharged is returned to the borrower and his receipt for the gold ornament taken in the demand loan ledger. This receipts states that he ornaments returned are complete and in order. Part delivery of ornaments is given against part payment of a loan but care is taken that the ornaments still in banks possession fully covers the balance of the loan outstanding. The interest gold loan is to be applied with quarterly.

28

Muslim Commercial Bank

LOAN AGAINST PLEDGED OF STOCK:


In case of advancing such types of loans, the following precautions are dept in the mind: i) ii) iii) Stock pledged must be readily saleable Products should be readily saleable Advance should be within the borrows means

REQUIREMENT FOR LOAN:


For granting loan to any party or individual, the bank checks following particulars of the client: 1) 2) Credibility Feasibility Report

By Credibility, bank Judges the credibility of the client by his past bank record, CBI report etc. it is very important in making decision about giving him loan. Feasibility report is on the running or proposed business of the client. The report enables the bank to judge the likely return of the business.

CASH CREDIT
Cinder such cash account is opened in the name of the customer who borrows from the bank. Customer is granted a loan up to a certain limit, sanctioned by the head office, from which he can draw when he requires and interest is charged on the amount actually utilized by the customer. In order to avoid the danger of idle fund, the bank charges a certain rate of interest, even if the customer does not withdraw any amount. The credit is usually given against the

29

Muslim Commercial Bank

securities of goods or merchandize as follows:

ADVANCES AGAINST PLEDGE STOCK IN TRADE OR PRODUCTS


When a cash is granted against the pledge of stock or product, cash credit form is taken, from the certain products or stock, but the actual pledge is created when the stock or finished product are placed under the bank's lock or the document of title are duly endorsed to the bank by the borrower.

HYPOTHECATION OF STOCK ON FINISHED PRODUCTS:


The difference between pledge and hypothecation is that under a pledge the borrower's goods are placed in the bank's possession under own lock, whereas, under a hypothecation, they remain in the possession of the borrower or guarantor and are merely charged to the bank under documents signed by them. Even though the documents empower the bank to take possession of the goods hypothecated, but it is possible that the borrower may actually resist any attempt.

MORTGAGES OF PROPERTY:
Title deeds of immovable property are accepted by the bank only as collateral security or alternatively as unauthorized security.

MODES OF CREDIT FACILITIES


There are two types of facilities

30

Muslim Commercial Bank

FUNDED FACILITY
1) 2) 3) 4) 5) 6) 7) 8) cash finance Demand finance Payment against documents Finance against imported merchandise Finance against trust receipt Export finance Foreign bill purchased Others

Remittances DEMAND DRAFT


1) Demand draft is a written order drawn by a branch of a bank upon the branch of same or

any other bank to pay certain sum of money to or to the order of specified person 2) 3) 4) 5) 6) 7) 8) Demand draft is a negotiable instrument. Legal provisions are same as that of cheque. It is to be ensured that purchaser can at least sign. Thumb expression is not accepted on DD The following are the parties. purchaser issuing branch Drawee branch

9)

31

Muslim Commercial Bank

10) payee A demand draft may be issued against the written request of the customer before issuing it must be seen that the demand draft is in order.

SCRUTINY OF APPLICATION
The DD application must be scrutinized by the counter clerk in respect of following points. A B C D There should be branch where payment is to be made. full name of payer should be mentioned amount in words and figures must be same application to be signed by the purchaser

TELEGRAPHIC TRANSFER

Transfer of funds from one branch to another branch of the same bank or upon other bank under special arrangements.

Telegraphic transfer is not negotiable The funds are not payable to bearer Minor cannot avail this facility

PARTIES
Following are the parties involved

Applicant Drawing branch

32

Muslim Commercial Bank

Drawee branch Beneficiary Full name of the beneficiary or account number should be mentioned in the application form.

Instruction regarding mode of payment should be obtained. A record in the remittance outward register should be maintained. All the remittance must be controlled through number.

MAIL TRANSFER

Transfer of funds from one branch to another branch of the same bank with in or out side the city is called mail transfer.

Mail transfer is not negotiable The procedure is same as for DD All precautions must be observed Credit voucher should be prepared

Technology Department
Technological advancements are also affecting the banking industry. The foreign banks have a competitive edge over all local banks in their technologies' advancements and automated systems. Local banks have also realized the gravity oil this situation and are striving to add computerized systems to their branches

33

Muslim Commercial Bank

MCB is ahead of all other local banks in this field and now it is in a position to even compete with foreign banks. There are more than 981 branches of MCB all over Pakistan and out of these more than 445 branches are fully computerized Almost all .the branches of big cities are computerized; therefore, the need for a technology department at each branch is growing. Now a day, a computer division is working in each city to provide service to ad the branches of that area.

MCB has also introduced the now concept of online banking. There are now more than 267 branches linked through this system and they can transact with each other directly using computer systems at their own branches. Now customers do not have to wait long for their transactions and can operate their account through all the online branches.

ATM NETWORK:
ATM stands for Automatic Teller Machine. This machine is used to transact in one's account 34

Muslim Commercial Bank

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. This network covers more than the 32 cities of Pakistan including the provincial capitals and large commercial cities of the country more than 179 ATM branches.

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

Now MCB has also entered into a contract with Cirrus which is a subsidiary of MasterCard. This contract will enable an ATM 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.

35

Muslim Commercial Bank

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.

FINANCIAL PRODUCTS

36

Muslim Commercial Bank

SAVING ACCOUNT Saving accounts are opened on proper introduction with sums of credit balance within certain limit for individual (single, joint) institutions, companies, educational institutions etc. MCB has introduced various schemes under saving a/c are following:

Mala Maal Scheme PLS Account Saving 365 Account

Capital growth certificate scheme


Fund Management Scheme Khanm Bachat Scheme Khushali Bachat Account Term/ Fixed Deposits

MAAL-A-MAAL SCHEME

This scheme is recently launched by the MCB after severe financial crisis of year 1998 created as result of atomic bomb explosion, to mobilize the deposits. It is the most profitable scheme of the bank and MCB has got Rs. 20 billion deposits through this scheme and the certificate is for Rs. 25000/-

37

Muslim Commercial Bank

Procedure
The procedure of Maal-a-Maal certificate is very simple. The applicant has to fill the slip of certificate where he have to write Branch code, Applicants name, ID Card Number, Address, Phone #, Date and tenure etc. For different tenure different profit percentages are declared as show below:

Tenure (Months) Two Four Eight Twelve

Rate of Return (%) 06 07 08 10

These certificates are automatically renewable after maturity. Copy of ID card is attached with certificate. Profit is calculated at the time of drawing. At register, the officer writes reference or serial #, name of applicant, certificate #, date of issue and date of maturity. At Maal-a-Maal certificate, the officer write date of issue, maturity date, reference #, and name of the applicant.

PROFIT & LOSS SHARING (PLS) ACCOUNT


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 38

Muslim Commercial Bank

any manner at its sole discretion and to make use 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/= Below minimum balance charges will be debited Not more than eight withdrawals in a year allowed More than Rs.15000/= are not allowed to draw Seven day notice is required for withdrawal Profit calculated on monthly basis Profit paid on annually basis Profit paid on lowest balance at the end 10% Withholding Tax on minimum balance Zakat deducted on @ 2.5%

SAVING 365 ACCOUNTS 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.

39

Muslim Commercial Bank

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%

CAPITAL GROWTH CERTIFICATE SCHEME Long term deposit Profit rate as that of PLS Saving Account Minimum amount of deposit is Rs. 10,000/= Amount deposited double in of 5 years No maximum limit of Deposits 10% Withholding Tax on minimum balance Zakat deducted on @ 2.5%

FUND MANAGEMENT SCHEME Rate of return upto 15% per annum Offered to corporate and business community

40

Muslim Commercial Bank

Development of secondary market for Government Securities 10% Withholding Tax on minimum balance No maximum limit of deposits Zakat deducted on @ 2.5% KHUSHALI BACHAT ACCOUNT 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

KHANUM BACHAT SCHEME Designed to support small savings of people Depositing money for 10 years No return until 10 year Payments are made on monthly basis No limit for monthly payments After 10 year return will be on fixed rates

41

Muslim Commercial Bank

TERM DEPOSITS
Term deposits are fixation of certain amount of money for a specific span of time. These can be of majorly two types i.e. short term notice deposits and long term notice deposits. Different rates are charged for different period of times like as shown by following table. If presented before maturity then previous period rate would be charged.

Duration 01 month 02 month 03 month 06 month 01 year 02 year 03 year 05 year

Rate Of Interest 08.1 % 10.1% 11.0% 11.5% 12.5% 13.3% 14.5% 16.4%

The instrument term deposit is like a slip containing issuing bank name, a/c # to

42

Muslim Commercial Bank

operate on computer, deal #, customer name, reference #, date of issue, amount, rate maturity date etc.

43

Muslim Commercial Bank

CALL DEPOSITS
These call deposits are presented in the bidding process as guarantee or security from the bank that this much money is deposited in the bank. These are made in the favor the party offering contract or any other person. The bank offer no interest rate on it because these can be called at any time. For encashment the applicant must have to cancelled the call deposit instrument from its beneficiary. For collection the beneficiary usually send the authority letter for paying in the shape of Demand Draft or pay order. The call deposit instrument containing the information regarding applicant and beneficiary name, joint name a/c opened, signature cards for encashment, reference #, amount, date of issue, authorized signature etc.

OTHER PRODUCT / SERVICES


The privatization process for the expansion and diversification of economic activities in the country also demanded the introduction of new banking products. MCB took initiative in this direction and for the first time MCB devised and marketed new products and services with brand names to enter the varying requirements of its diverse customers. MCB currently have following products or services in banking sector that are making it more prominent in the banking sector: Night Banking

44

Muslim Commercial Bank

Fax Utility Consultancy Services Traveler Cheques Self Supporting Scheme Utility Bills Collection Credit Cards ATM

45

Muslim Commercial Bank

Financial Analysis of MCB


IMPORTANCE Analysis is vital to fathom, weigh and evaluate the operating performance of the firm. Another reason that depicts the importance of ratio is that investors make their investment decision in certain firm based on these ratios. But few points to remember before starting the computation process: Bank is service sector hence it doesnt deal in with any kind of physical good, therefore certain ratio such as inventory turnover will not be discussed at all.

The key points to note with the bank are: There are substantial non-cash charges in the profit and loss statement mainly provision for loans losses. It is generally difficult to get a definitive fix on actual cash loan losses due to lack of disclosure. Banks are in the business of borrowing money and on lending it at higher interest rates. Debt is therefore not only a form of financing bit more importantly a key input into its production process. Now keeping in view these differences it is crucial to make following adjustment to get a better look of data: Accounting loss provisions are added back in the calculation of cash profits but an estimate of the economic or cash loan losses is deducted (proxied by estimated write-offs). In the case of MCB, actual write-offs have historically been disclosed since.

46

Muslim Commercial Bank

Interest is deducted in the calculation of cash profits.

WHY FINANCIAL ANALYSIS Financial analysis of the organization involves the evaluation of the financial performance as depicted in the financial statements of the organization. The MCB provides this information in the shape of its annual report for every financial year containing financial as well as nonfinancial information.

To improve the quality of decision making, proper analysis of these statements helps a lot. Financial statements analysis helps in determining the financial conditions at any particular point in time and effectiveness of operations of a firm during a specific period.

The various stakeholders of business are all interested in the analysis of financial statements. But the focus of interest of all is not the same. Financial statements are prepared primarily for decision-making. They play a dominant role in setting the framework of managerial decisions. But the information in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. However the information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements.

Financial statement analysis is the process of identifying of financial strengths and weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit and loss account. 47

Muslim Commercial Bank

BALANCE SHEET ANALYSIS In this part changes in the various components of Balance sheet are described. The analysis of the balance sheet of MCB is done keeping in view the figures available from the annual reports of MCB for the year 2006, 2007 and 2007. Muslim Commercial Bank Balance Sheet As on 31st Dec 2007

2007 (Rupees '000) 21,259,900 3,025,689 15,470,519 55,432,235 76,585,999 11,400,906 3,659,646 220,500 ----------------########

2006

12,571,424 4,757,413 10,852,094 43,110,947 86,359,139 13,203,910 3,604,356 255,780 -----------------########

8,097,178 8,946.62 ######## --8,580,119

7,803,443 16,890,675 ######## --8,438,055

48

Muslim Commercial Bank

-----------------######## ----------------6,887,022 ==========

------------------######## -----------------5,592,743 ==========

2,423,140 2,278,980 283,940 ----------------4,986,060 1,900,962 ----------------6,887,022 ========== 6,970,924

2,202,855 2,277,630 3,185 -----------------4,483,670 1,109,073 -----------------5,592,743 ========== 7,913,666

Figure# 5.1 balance sheet analyses Asset Side During the span of 2005, 2006 and 2007 years, we see that the overall assets of the bank increased to 132% in 2007 that is higher than last year. As we can see in Graph 5.1 shows that lending to financial institution increased to 192%, through that bank gets a higher rate of return and due to that cash account increase to 136.22% as that was 92% in 2006. That trend of cash shows that the bank has more cash to invest in a major project to get a high profit in the future.

The increase in total asset is due to the major change in the lending to financial institution. 49

Muslim Commercial Bank

35000000 30000000 25000000 20000000 15000000 10000000 5000000 0 2004 2005 2006

250.00
Lending to f inancial ins titutions Cas h

200.00 150.00 100.00 50.00 0.00 2003 2004 2005 2006 2007

Lending to f inanc ial institutions Cas h

Graphs 5.1 Cash and lending

According to the figure from balance sheet, the advances are 131% and 144% in 2006 and 2007 respectively, which shows the favorable trend that bank has enough cash for advances. And in 2007 investment decreased 94% as it was in 2006 is 103% that could be the cause of government bond policy or high inflation.

250000000 200000000 150000000 100000000 50000000 0 2004 2005 2006

Investments Advances

50

Muslim Commercial Bank

200.00 150.00 100.00 50.00 0.00 2003 2004 2005 2006 2007 Investments A dvances

Graphs 5.2 Advances & Investments And one reason in decrease in investment is that bank invests money in different segment like Federal government securities, it includes T bills, Pakistan investment bond, Govt compensation bond, Euro bond and Sukuk bond, in 2007 bank highly decrease their investment and invest in the ordinary shares of listed and non-listed companies. So due to that overall investment changed to downward.

Liability Side As graph 5.3 is showing that the liability side of the bank increasing in every aspect but they have enough resources like assets to maintain the liabilities. The increasing in deposit and other account shows that customers of MCB are increasing and they are depositing their money in MCB, so due to that bank is liable to pay a money back to as per customers willingness, and MCB is taking an advantage of that deposits, bank invest it to some earnable activity. Bank earns high profit from investment and gives some margin from profit to their customers.

51

Muslim Commercial Bank

300000000 250000000 200000000 150000000 100000000 50000000 0 2004 2005 2006 Depos it & other ac c ounts Bills payable Other liabilities

200.00 150.00 100.00 50.00 0.00 2004 2005 2006

Deposit & other accounts Bills payable

Other liabilities

Graphs 5.3 Liabilities Banks payable is decreasing to 93% in 2007 as 112% in 2006, that span shows that bank is paying their current liability in a very effective way. But on the other hand their other liabilities are increasing; it can be the due to purchase of fixed asset because banks fixed assets also increased to 113% in 2007 as in 2006 were 102%. So their other liabilities also increased to 171% in 2007 as 125% in 2006.

52

Muslim Commercial Bank

All the facts and figures show that their financial performance is better because their current asset ratio and asset turnover ratio also increased. Shareholders equity The shareholder equity is 199% and 387% in 2006 and 2007 respectively. The increase in equity is just because of the issue of share capital to general public. MCB issued shares rather than debt. In case of issue of debt the bank is liable to pay interest on monthly or annually basis, so bank will have decided that issue of share capital could be the beneficial for us, due to that their overall performance is attractive and highly appreciative.
40000000 35000000 30000000 25000000 20000000 1 5000000 1 0000000 5000000 0 2004 2005 2006 SHA R EHOLRES EQUITY

500.00 400.00 300.00 200.00 100.00 199.06 100.00 387.63 SHAREHO LRES EQUITY

0.00 2003 2004 2005 2006 2007

53

Muslim Commercial Bank

Graphs 5.4 Shareholders Equity During the span of three years 2005, 2006 and 2007 Muslim Commercial Bank performed well as the figure 5.1 shows. The trend is going positively or to the prosperity. The bank is paying their liabilities at a favorable time in a very effective manner. Their current asset ratio is also satisfactory which shows that bank is able to pay their current liabilities without any problem. The bank has very high liquidity to meet the daily expenses.

INCOME STATEMENT ANALYSIS Various components of income statement are described. The analysis of the income statement of MCB is done keeping in view the figures available from the annual reports of MCB for the year 2005, 2006 and 2007. Muslim Commercial Bank Income Statement For the year ended 31 Dec 2007

Not e

2007 (Rupees '000) 17,033,225 7,544,897 ----------------9,488,328 62064.00 1,704,944 448,999 ----------------2,216,007

2006

Mark-up/Return/interest Earned Mark-up/Return/Interest Expensed

21 22

14,124,242 7,238,680 -----------------6,885,562 46,048 601,799 483,943 -----------------1,131,790

Net Mark-up/Interest Income Provision for diminution in the value of investments Provision against non-performing loans and advances Bad debts written off directly

54

Muslim Commercial Bank

Net Mark-up/Interest Income after provisions Non Mark-up/Interest Income Fees, commissions & brokerage income Dividend Income Income from dealing in foreign currencies Other Income

----------------7,272,321

-----------------5,753,772

23

Total Non-Markup/Interest Income

868,637 243,994 687,854 400,140 ----------------######## ----------------9,472,946

909,045 158,909 609,838 1,085,614 -----------------2,763,406 -----------------8,517,178

Non Mark-up/Interest Expenses Administrative expenses Other provisions Other charges

24 11.2 25

Total Non-Markup/Interest Expenses Extraordinary and exceptional items Profit Before Taxation

7,331,623 40000.00 147 ----------------7,371,770 -2,101,176 ----------------957,720 -35,280 ----------------993000.00 ----------------1108176 3185.00 ----------------1111361

7,128,658 30,000 36,725 -----------------7,195,383 -1,321,795 -----------------650,992 -213126 149,200 -----------------587,066 -----------------734,729 1,161 -----------------735,890

Taxation - Current - Prior years - Deferred

26 26 26

Profit After Taxation Unappropriated profit brought forward

Profit available for appropriation APPROPRIATIONS: Transfer to: Statutory Reserve

221,635

146,946

55

Muslim Commercial Bank

Capital Reserve Revenue Reserve Issue of bonus shares -Interim nil (2000: 10%) Reserve for issue of bonus shares - Final nil (2000: 10%) Interim dividend Rs. 1.25 (2000: Nil) per share Proposed Cash dividend Rs. 1.25 per share (2000: Rs. 0.75 per share)

----302,893 302893.00 ----------------827,421 ----------------283940.00 ========== 4.57 ========== 4.57 ==========

--200,260 220,285 -165,214 -----------------732,705 -----------------3,185 ========== 3.03 ========== 3.03 ==========

Unappropriated profit carried forward Earnings per share Diluted earnings per share 27

As graph 5.5 showing that the trend of the income is going up with highly efficiency, the mark up interest income is 283% in 2007 and 195% in 2006 which means that the income of mark up interest increasing due to the increase in the deposits the customers are attracting to deposit their savings in Muslim Commercial Bank, as on the other side, if we see the balance sheet that will prove that the deposits increased during the 2007, that deposit invested to the profitable activity.

The bank or any service organization do not depend on the mark up interest income because that is not only the source of income other things are also their like non mark up interest income etc.

If we see the figure 5.2 income statement that is showing the positive trend during the span of three years because their management working well. Profit before taxation is favorable because they controlled the other charges of bank that is decreased to 159% in 2007 as that 56

Muslim Commercial Bank

was 427% in 2006, and profit available for appropriation is 646% and 345% in 2007 and 2006 respectively.

But one aspect of income statement that shows the negative thing that is increased in bad debts of the bank that is 535% in 2007 as it was 13% in 2006. That is the huge increment in the bad debts that is due to the increase in the advances.

25000000 20000000 15000000 10000000 5000000 0 2004 2005 2006 M.Up/ interest income

57

Muslim Commercial Bank

350.00 300.00 250.00 200.00 150.00 100.00 50.00 0.00 2003 2004 2005 2006 2007

M.Up/ interest inc ome

Graphs 5.5 income statement

Graph 5.6 shows that Non-M.up income is decreased to 117% in 2007 as it was 127% in 2006 that is not a big trouble for the bank because income fluctuate over the time their can be some reason like gain on investment and that same happened with the bank that their gain on investment decreased to 75% and other income also decreased to 99% in 2007 as it was 188% in 2006. This all situation is some what favorable because the Non-M.up expenses are still below but it is same during the two years that is 88% but it should control because NonM.up income is decreasing but expenses are not, if this trend is going as it is then it will create a trouble for the management in the future.
8000000 7000000 6000000 5000000 4000000 3000000 2000000 1000000 0 2004 2005 2006 Non-M.Up/Interes t Inc ome Non-M.Up/Interes t Ex pens e

58

Muslim Commercial Bank

140.00 120.00 100.00 80.00 60.00 40.00 20.00 0.00 2003 2004 2005 2006 2007 NonM.Up/Interes t Inc ome NonM.Up/Interes t Ex pens e

Graphs 5.6 Non-M.up income & expenses

As graph 5.7 earning per share showing that the earning of the bank as per share increased with high votality, that is 23%, 21% and 7% in 2007, 2006 and 2005 respectively. That increase in the EPS is better for the new investor.

Earning per share 25 20 15 Earning per share 10 7.21 5 0 2003.5 2004 2004.5 2005 2005.5 2006 2006.5 21.36

23.4

Graph 4.7 Earning per share Statement of Changes in Equity for the year ended December 31, 2007
CAPITAL RESERVES

59

Muslim Commercial Bank

Share Capital

Share Premium

Reserve for issue of Bonus Shares (Rupees '000)

Statutory Reserve

Unappropriat ed Profit

Total Profit

Balance as at December 31, 1999

1,820,541

473,673

182,054

1,161

3,914,155

Profit after taxation for the year ended 36891

--

--

--

--

734,729

734,729

Issue of bonus shares

182,054

--

-182054

--

--

--

Transferred to Statutory reserve

--

--

--

146,946

-146946

--

Interim bonus shares issued Final cash dividends paid Transferred to reserve for issue of bonus shares

200,260

--

--

--

-200260

--

--

--

--

--

-165214

-165214

------------------

------------------

220,285 ------------------

------------------

-220285 ------------------

------------------

Balance as at December 31, 2000

2,202,855

473,673

220,285

1,583,672

3,185

4,483,670

60

Muslim Commercial Bank

Profit after taxation for the year ended December 31, 2001

--

--

--

--

######

1,108,176

Issue of bonus shares

220,285

--

-220285

--

--

--

Transferred to Statutory reserve

--

--

--

221,635

-221635

--

Interim cash dividend paid Proposed cash dividend

--

--

--

--

-302893

-302893

--

--

--

--

-302893

-302893

Transferred to reserve for issue of bonus shares ---------------------------------------------------------------------------------------------------------

Balance as at December 31, 2001

2,423,140 ======== ==

473,673 ======= ===

-==========

1,805,307 ========= =

283,940 ==========

4,986,060 ========= =

Cash Flow Statement for the year ended December 31, 2007
Not e Cash Flow from Operating Activities Profit before taxation Less: Dividend income 2007 (Rupees '000) 2,101,176 -243994 ----------------2006

1,321,795 -158909 ------------------

61

Muslim Commercial Bank

1,857,182 Adjustments for non-cash charges Depreciation Provision against non-performing advances Provision for diminution in the value of investments Provision for diminution in the value of other assets Gain on sale of fixed assets 332,685 1,704,914 62,064 40,000 -33277 ----------------2,106,416 ----------------3,963,598

1,162,886 301,280 601,799 46,048 30,000 -9734 -----------------969,393 -----------------2,132,279

(Increase)/Decrease in operating assets Lendings to financial institutions Advances - net Other assets

-4618425 8,068,196 2,608,979 ----------------6,058,750

-1271315 -19528364 -1948803 ------------------22748482

Increase/(Decrease) in operating liabilities Bills payable Borrowings from financial institutions Deposits Other liabilities

Income tax paid

Net cashflow from operating activities Cash Flow from Investing Activities Net investments in available-for-sale securities Net investments in held-to-maturity securities Dividend received Investments in operating fixed assets

293,735 -7944051 18,554,304 15,840 ----------------10,919,828 ----------------20,942,176 -1723084 ----------------19,219,092

2,510,532 3,516,154 5,665,111 -542809 -----------------11,148,988 ------------------9467215 -1087908 ------------------10555123

-12825529 1,537,639 163,383 -629621

7,270,157 -101850 76,302 -385849

62

Muslim Commercial Bank

Investments in subsidiary companies and associated undertakings Sale proceeds of property and equipment disposed of

Net cash flow from investing activities Cash Flow from Financing Activities Dividend paid

-195508 166,858 -----------------11782778

-19,397 -----------------6,878,157

Net cash flow from financing activities Effects of exchange rate changes on cash and cash equivalents

Increase/(Decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year

Cash and cash equivalents at end of the year

28

-479562 -----------------479562 -193479 ----------------6,763,273 17,522,316 ----------------24,285,589 ==========

-267568 ------------------267568 -557891 ------------------4502425 21,831,262 -----------------17,328,837 ==========

Banking transactions with related parties are carried out on commercial terms and conditions.
Not e 2007 (Rupees '000) 2006

6. Cash and Balances with Treasury Banks In hand - local currency - foreign currencies In transit - local currency - foreign currencies With State Bank of Pakistan in Local currency current account Local currency deposit account Foreign currency deposit account

3,484,511 448,639 544717.00 82050.00

3,331,265 319,703 493,291 73,886

10,866,293 460 2,115,569

4,765,990 501,337 --

63

Muslim Commercial Bank

With other central banks Foreign currency current account Foreign currency deposit account With National Bank of Pakistan in local currency

174,247 147212.00

301,748 132,215

3,396,202 ----------------21,259,900 ==========

2,651,989 -----------------12,571,424 ==========

6.

Balances with other Banks 3,090 ######## 1033823 ----------------3,025,689 ========== -2,719,036 2,038,377 -----------------4,757,413 ==========

In Pakistan - current account Outside Pakistan - current account - deposit account

8. Lendings to Financial Institutions Call money lending Repurchase agreement lending

8.1

9,044,643 6,425,876 -----------------15,470,519 ==========

6,064,332 4,787,762 -----------------10,852,094 ==========

64

Muslim Commercial Bank

9.2 Investments by Segments: 8.1 Securities Federal Government Securities: held as - Market collateral Treasury Bills Held by - Federal Investment Bonds against lending to Pakistan Investment Bonds bank - financial institutions - Others - Federal Government Securities - Government Compensation Bonds

2007 Further given as collateral (Rupees '000) 9.4 Total 22,103,221 Held by 13,293.50 bank 8,689,467 1,363,056 870,771 75,965 3,935,762 1,064,375 -2,944,509 435,035 852,000 ----------------4,787,762 ========== 392,485 315.92 3,541,650

2006 17,261,855 Further 14,707,306 given as -collateral 1,402,079 870,771 79,208 -868,867 -2,544,551 437,069------------------========== 69,795 342,268 4,010,676 Total

Market Provincial Government Securities Treasury Bills 5,525,876 -Subsidiaries and Associated Undertakings Pakistan Investment Bonds Paid-up Ordinary Shares: 600,000 -Fully Federal - Listed Companies Investment - Unlisted Companies Bonds 300,000 ----------------------------------Term Finance Certificates, Debentures, 6,425,876 -Bonds and Participation Term Certificates: ========== - Listed Term Finance Certificates ========== - Unlisted Term Finance Certificates - Debentures, Bonds and Participation Term Certificates Other Investments - N1T Units - Prize Bonds - Certificates of Investment

5,525,876 600,000 9.5 300,000 ----------------6,425,876 ==========

3,935,762 -852,000 -----------------4,787,762 ==========

5917.00 34,315 500000.00 ----------------55,630,182 9.3 19.2 -1018852 820,905 ----------------55,432,235 ==========

3,747 48,592 1,500,000 -----------------44,146,784 -956788 -79049 -----------------43,110,947 ==========

Less: Provision for diminution in value of investments Surplus/(Deficit) on revaluation of securities (net)

Investments (Net of provisions)

9.3 Particulars of Provision for Diminution in value of Investments

65

Muslim Commercial Bank

Opening balance Charge for the year Write offs

9.7

Closing balance

956,788 62,064 -----------------1,018.85 ==========

993,960 46,048 -83220 -----------------956,788 ==========

9.10 Particulars of investments held in listed companies and modarabas


Investee Number of Shares Held Paid up Value per Share Total nominal value

Listed Shares Adamjee Insurance Company Ltd. A1-Meezan Mutual Fund Ayaz Textile Mills Ltd. Azam Textile Mills Ltd. Baig Spinning Mills Ltd. BSJS Balanced Fund Ltd. Business & Industrial Insurance Co. Ltd. Commercial Union Life Assurance Dominion Stock Fund Ltd. E.F.U. Insurance Co. Ltd. Engro Chemicals Pak. Ltd. Fauji Fertilizer Company Limited Fidelity Investment Bank Haydary Construction Ltd. Hubco Power Company Limited I.C.I. Pakistan Ltd. Interasia Leasing Ltd. Kaytex Mills Limited Leglar Nafees Denim Mills Ltd. Lever Brothers Pakistan Limited Lucky Cement Ltd. Mehr Dastagir Textile Mills Ltd. Millat Tractors Ltd. Mirza Sugar Mills Ltd. 15,822,85 0 2,019,500 225,250 44,411 397,230 4,879,730 247,500 3,000,000 922,000 307,261 662,445 3,227,400 825,400 1,008,800 5,582,000 5,000 164,500 226,700 1,851,989 150,000 4,000,000 1,617,400 338,976 748,830 10 10 10 10 10 10 10 10 10 10 10 10 10 1 10 10 10 10 10 50 10 10 10 10 158,228,500 20,195,000 2,252,500 444,110 3,972,300 48,797,300 2,475,000 30,000,000 9,220,000 3,072,610 6,624,450 32,274,000 8,254,000 1,008,800 55,820,000 50,000 1,645,000 2,267,000 18,519,890 7,500,000 40,000,000 16,174,000 3,389,760 7,488,300

66

Muslim Commercial Bank

Musarrat Textile Mills Ltd. Nafees Cotton Mills Ltd. Network Leasing Corporation Limited REDCO Textile Mills Ltd. Resham Textile Mills Ltd. Rupali Polyester Limited Sadiqabad Textile Mills Limited Sakrand Sugar Mills Ltd. Saritow Spinning Mills Ltd. Shell Pakistan Ltd. Shifa International Hospital Towellers Ltd. Trust Leasing Corporation Limited Trust Security & Brokerage Limited Unit Trust of Pakistan P.I.C.I.C. Ltd. Pakistan PTA Limited Pakistan State Oil Corporation Pakistan Telecommunication Limited Sui Northern Gas Pipelines Limited Modaraba Certificates Financial Link Modaraba First A1-Noor Modaraba First Custodian Modaraba First Dadabhoy Modaraba First Elite Capital Modaraba First Mehran Modaraba Guardian Leasing Modaraba

3,604,500 232,800 943,500 982,500 28,037 657,545 2,638,261 275,220 295,265 15,000 526,000 2,687,330 94,600 300,000 15,000 2,320,120 15,000 7,211,400 17,008,15 6 23,819,03 9

10 10 10 10 10 10 10 10 10 10 10 10 10 10 5,000 10 10 10 10 10

36,045,000 2,328,000 9,435,000 9,825,000 280,370 6,575,450 26,382,610 2,752,200 2,952,650 150,000 5,260,000 26,873,300 946,000 3,000,000 75,000,000 23,201,200 150,000 72,114,000 170,081,560 238,190,390

285500 5583270 200500 436500 257500 53152 332000

10 10 10 10 10 10 10

2,855,000 55,832,700 2,005,000 4,365,000 2,575,000 531,520 3,320,000

9.11 Particulars of investments in Term Finance Certificates Paid up Value per Certificate 1,479,500 6,206,400 792,367

Investee Aruj Textile Mills Limited Bankers Equity Limited Cherat Cement Company Limited

Number of Certificates Held 1 10 1

Paid-up value 1,479,500 62,064,000 792,367

67

Muslim Commercial Bank

Fatima Sugar Mills Limited

First International Investment Bank Matiari Sugar Mills Ltd. Orix Leasing Pakistan Limited Pak Arab Refinery Limited

Rai Textile Mills Limited Sui Southern Gas Company Limited Tourism Promotion Services (Pak) Ltd.

1 1 11 13 50 1 500 925 1 2 928 1 200 5

2,025,000 6,075,000 1,159,344 1,000,000 253,987 99,980 100,000 25,000 5,000 1,912,500 999,800 561,753

2,025,000 6,075,000 12,752,784 20,852,784 50,000,000 253,987 49,990,000 92,500,000 25,000 10,000 92,535,000 1,912,500 199,960,000 2,808,765

FINANCIAL RATIOS ANALYSIS Ratio analysis is employed to gain insight into the financial character of a firm. The calculation of ratios can often lead to a better understanding of a firms financial position and performance. A specific ratio or a number of selected ratios can be calculated and used to measure or evaluate a specific financial and operating characteristic of a firm.

Muslim Commercial Bank Financial Ratios

FINANCIAL MCB RATIOS 2 005


Current Ratio (x) Current Assets .90 3 .94

2 006
2 .50

2 007
5

68

Muslim Commercial Bank

Current Liabilities

Total Debt 2 Debt to Equity (%) x100 ,600 Shareholders Equity Total Debt 9 Debt to Total Assets (%) x100 4 Total Assets Net Sales 2 Total Asset Turnover (%) x100 .71 Total Assets (100 x Net 3 Net Profit Margin (%) Profit After Tax) 4 Net Sales (100 x Net Return on Investment (ROI) Profit After Tax) (%) Total Assets (100 x Net 2 Return on Equity (ROE) (%) Profit After Tax) 6 Sharholder's Equity Earnings Market 8 Price earning ratio price Earning per .14 share Net Profit Earning Per Share After Tax After Tax (Rs.) Outstanding Shares .21 1.36 3.40 7 2 2 .86 0.52 7 1 4.87 5 6 4 .93 .98 .54 0 2 3 9.58 7.13 5 5 .01 .21 5 6 2 8 9 8 ,500 44 1 8

Figure 5.3 Ratio analysis

As figure 5.3 showing that the liquidity performance of the bank is satisfactory, bank has high position to meet the short term obligation. Current ratio of bank is 3.9%, 2.94% and 5.5% in 2005, 2006 and 2007 respectively. It decreased in 2006 because bank paid its 69

Muslim Commercial Bank

obligation, but it increased in 2007 to 5.5% that shows the bank liquidity position.
Current Ratio (x) 6.00 5.00 4.00 3.00 2.00 1.00 0.00 2004 2005 2006 Current Ratio (x)

Graph 5.8 Current Ratio

Graph 5.9 showing that banks long term position is getting better during the span of last three tears, debt to equity ratio is decreasing with highly percentage that is favorable for the future because its position is not well in 2007 that is 844% higher than equity and last years were higher. Because bank depends on the loans from other institutes and did not raise capital from the equity. And now when bank has enough financing to meet the requirement then bank starts to pay the borrowing from other institutes, due to that its debt to equity ratio increased.

There is a slightly improvement in the debt to total asset that is 88% in 2007 as it was in 2006 is 92%. That is due to high borrowing and bank purchased their asset from the borrowing rather than its equity.

70

Muslim Commercial Bank

D b toE u (% et q ity ) 3 0 ,0 0 2 0 ,5 0 2 0 ,0 0 1 0 ,5 0 1 0 ,0 0 50 0 0 2 0 ,6 0 1 0 ,5 0 84 4 D b toE u (% et q ity )

20 04

20 05

20 06

D b toT ta A s ts (% et o l se ) 9 6 9 4 9 2 9 0 8 8 8 6 8 4 20 04 20 05 20 06 8 8

9 4 9 2 D b toT ta et o l A s ts(% se )

Graphs 5.9 Leverage ratios

Graph 5.10 showing that the profitability of the MCB has a slightly deteriorated, the net profit margin decreased to 57% in 2007 as it was 60% and 34% in 2006 and 2005 respectively. That is because of the high increased in sales volume, the volume of net profit after tax is not as much increased as sales. So the deterioration in net profit margin will not serve.
70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 20 04 2005 2006 N P et rofit M argin (% ) R eturn on E quity (R E (% O) )

Graph5.10 profitability ratios

71

And on the other side of profitability ratio is return on equity that is deteriorated, to 45% in 2007 and it was 64% in 2006, that is due to the quick increase in the equity but on the other side their is no relative increase in Net profit.

As graph 5.11 showing that the Earning per share (EPS) increased to 23% in 2007 as it was 21% and 7% in 2006 and 2005 respectively. That is due to the highly increase in the net profit which is aprox 30% increased from previous year.

And price earning ratio increased to 10.52% in 2007 and 7.86%, 8% in 2006 and 2005 respectively. That trend is showing that there is a relative increase in the market price of the shares as increase in the EPS.

Earning Ratios
25.00 20.00 15.00 10.00 5.00 0.00 2004 2004 2005 2005 2006 2006 2007 Price earning ratio Earning Per Share After Tax (Rs.)

Graph 5.11 Earnings Ratios

72

SWOT ANALYSIS
STRENGTH
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.

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.

MCB in Pakistan is the also in the list of highly automated banks like Emirates because of its modern style of banking through fully computerized control and twenty four hour banking.

The joining of experienced people, advanced management, advance setup and facilities gave MCB an edge over its competitors.

73

WEAKNESSES
The majority of people are not well aware about the products of MCB. Therefore it should advertise extensively especially RTC and Master Cards. 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. In MCB there is lack of specialized skill because of job rotation policy of human resource department. The bank should concentrate upon increasing its abilities on individual service basis.

Mismanagement of time is another big mistake in MCB branches, the bank official time of closing is 5:30pm but due mismanagent of time allocation and work the staff is normally on their seats till 7:00 or 8:00 clock.

OPPORTUNITIES
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.

74

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.

THREATS
Change in government policies have 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.

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.

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.

75

LEARNING AT MCB My Job Description in MCB


In the Muslim Commercial Bank Ltd. I really enjoyed working with the staff of Ghala Mandi branch, Jhang and having a wish to be employee of MCB. It was almost impossible to work in the entire Ghala Mandi branch, Jhang departments within that limited time. But on my request, 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 Ghala Mandi branch, Jhang on the request of the manager of that branch Bashir Ahmad shahbaz, 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 followings.

UTILITY BILLS COLLECTION Muslim Commercial Bank Ltd. collects utility bills on behalf of WAPDA, Sui Gas Companies, and Pakistan Telecommunication Corporation Limited by putting the stamp on the utility bills Paid, Date of payment, Signature of the officer receiving the utility bills. After receiving utility bills a list is made on the form which is called Bills scroll form. One copy of the scroll is with the bank for evidence whereas the original copy with the receipt of the bills is sent to the billing department of the respective corporation. The bank charge commission on the bills.

76

OPENING NEW ACCOUNT BASICS


During the span of mine internship in MCB I learned and observed a lot of about the opening of an account. Basically I think that the opening of an account is the establishment of a contractual relationship between the banker and the customer. By opening an account at a bank a person becomes a customer of a bank. Further I am going to express the basic requirements and steps involved in the opening of an account.

INVESTIGATION
Before opening an account MCB as like the other banks in Pakistan ascertain whether or not the person who is going to open the account is a desirable customer or not. Then MCB determine the prospective customers integrity, respectability, occupation and the nature of business by the introductory references given at the time of account opening. Negligence in this informal preliminary investigation may result in serious consequences not only for the banker concerned directly but also for other bankers and the general public who may be affected indirectly. In Ladbroke & Co. V Todd (1914), the banker did not obtain introduction at the time of opening the account, and it was construed a negligence within Section 82 of the Bills of Exchange Act 1882.

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

77

with their Photostat copies and then return the original after attesting the authenticity of the retained copy.

HOW TO OPEN AN ACCOUNT (IN GENERAL)


Before opening an account in MCB I observed that the following points must be considered in this regard. 1. 2. Another account holder of the bank should properly introduce the new customer. The account holder should sign the account opening form in the presence of bank

officer and the signature is duly verified. 3. 4. A copy of identity Card is required by Bank. Against submission of the Banks prescribed application form, duly introduced in

the manner provided and on supplying such document, as may be required and account may be opened. The Bank reserves to itself the right to refuse to open and account without assigning any reason. 5. Each account shall be allotted a distinct number that is to be quoted in all

correspondence with the bank relation to the account. 6. Minimum amount to open an account is required regarding the nature of account.

PROCEDURE TO OPEN AN ACCOUNT


According to my practice in MCB, when a customer wants to open an account, the bank officer gives him an application form. All information, which is necessary to be known by the bank, are requirements of the application form. Form also requires the essential documents to be attached by the customer.

78

Basically following information is required to open an account with MCB 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Title of Account Full Name of Applicant Occupation Address Telephone No. Currency of account Nature of Business Introducers Name, Address & Signatures Special instruction regarding the account Initial Amount of the Deposit Signature of the applicant

PROCEDURE TO HONOUR A CHEQUE


During my internship training in the Muslim Commercial Bank Limited, I observed and found Cheques are received for the following purposes. i) ii) iii) For Cash payments For transfer(from one account to another account) For Clearing

I)

FOR CASH PAYMENTS

Cheques which are presented on Bank counter must be checked in the following way: 1) Date.

79

2) 3) 4) 5)

Signature of Drawer. Signature of Payee. Whether Bearer has cancelled. Whether Payee account duly is there.

If condition 4&5 exist then check the signatures of Drawer. 6) Match the figure and wordily amount of cheque.

When all above matters are satisfied then come to the Token register and check: 1) 2) 3) 4) Token number. Cheque number. Amount of cheque. Particulars.

Two stamps are put on cheque. a) b) Cash Payment (on the face of cheque). Stamp for Token (on the back of cheque).

On stamp which is put for token their details are as follows:


Token number. Time of giving token to client. Signature of token giver.

80

Note: Payment is also made when cheques of same branch account is presented for transfer to other account in same ranch along with cheque for payment.

CHEQUE FOR TRANSFER


When cheques are presented to be sent for collection and drawn on bank situated within the city then there are three stamps to be put on face as well as on back of cheque. a) b) c) Crossing Stamp (face). Transfer Stamp (face). Bank Manager Stamp (back). Only in MCB branches.

CHEQUES FOR CLEARING:


There are two stamps put on each cheque, sent for clearing: a) b) Crossing Stamp. Manager Stamp.

CHEQUES IN COLLECTION:
When cheques received in clearing are intra city then these are controlled under CC. First of all, these cheques are recorded in day book then allotted number and then serial number. Then a Performa is prepared in which Bank on whom was drawn, cheque number, amount, beneficiary name are recorded. After completing that Performa cheque is posted along with Performa. 81

CLEARING
Following information is entered in clearing register. a) b) c) d) e) Name of favoring party. Name of bank on whom drawn. Branch. Cheque number. Amount.

Clearing is sent after entering in register. In clearing register future date and day is putted. Cheques and vouchers are then separated and Cheques are sent for clearing.

ISSUANCE OF CHEQUE BOOK


During my period of internship in MCB i observed that when a account is opened then a cheque is issued to the customer for drawing his money at per rules. Following procedure is adopting for the issuance of cheque.

When a customer opens an account with the bank, he is provided with cheque book for withdrawals from account. However, the first cheque book is given to the customer only when all the required documents are checked. A cheque book contains ten, twenty five, fifty or hundred leaves. The cheque book also carries a requisition slip for the issuance of the new cheque book. This slip is duly filled and singed by the customer. The signature of the customer is verified by the bank and new cheque book is issued to the customer and serial numbers of the cheque are duly entered in the book of the bank. Along with the signature, person should also write his full name & address.

82

Usually only one cheque book is issued at a time, however big concerns who need a number of cheque books at a time, may ask the bank to stock as number of cheque books in their name and to point their name on these cheque books.

Bank debits the clients account for excise duty of Rs.2.50/- per cheque and keeps the cheque book ready for the customer, as on his advice.

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

RUPEE TRAVELLER CHEQUES: RTCS


When RTCs are to be issued payment is received in cash or by cheque, tax @0.03% is charged id National Tax number is nor available. RTCs are issued in consecutive number of face value of

Rs.1000 Rs.5000 Rs.10000 Rs.50000 Rs.100000

Specimen signatures of buyer are taken and clearing slip is in four pages. One is sent to Head office, one to RTC division, one for bank record and one for client.

83

If client wants immediate payment of RTCs then he will bring RTCs with two signatures, one copy of deal and ID card copy. Payment is made. RTCs can be endorsed to other party. Once receiving party will pay the RTCs along with credit vouchers in their relevant account with Bank. Payment will be credited to account of paying party.

IMPACT OF INTERNSHIP ON MY CAREER


I took my internship as simulation of my future jobs. From my internship I focused on those points which can create problems for in future. I can now easily understand which situation requires what solution. Now I have the work knowledge of AM and Managers that is how they deal with their customers and employees. Therefore I can say that I can reach at top management level easily.

RECOMMENDATIONS

84

Bank must let potential c

ustomers 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. Financially unsophisticated people might feel bank accounts, cheque books, credit cards, etc. are difficult to understand and to keep control thereof. 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 the branch or some important shopping plazas. It is widely known that there is a substantial Black Economy in Pakistan, Where people earn income that is undisclosed to the revenues authorities. Payments for goods and services in the black economy are necessarily in cash, because transactions by cheques are more likely to be exposed to the revenue authorities. Some people will therefore avoid bank accounts to preserve secrecy of earnings. One way to retain the personal sector 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. 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. Arguably, there has been a little encouragement from banks to persuade people to open a bank account. Opening hours are restricted, and there is a commonly held belief that banks operate for their convenience and not for the convenience of the customers. A logic leads to promotional campaign through employers who are customers of the

85

banks and their employees are paid in cash. Such business accounts should be encouraged to open the accounts of their employees with the banks. It might be worth offering free banking for a specific period to new accounts or simply publicizing the services available by means of posters at the employers premises. It might be possible to attract another type of personal customers through business accounts, namely directors and denier employees, etc. Again an incentive package could be put together. The banks may choose to make its existing products distinctive or to introduce new products. It is often easier to benefit from adverse changes made by other banks than to attract customers by innovations. A short term promotional technique is to offer price incentives, for example, low interest rates on advances or limited issue high profit bearing term deposits. Longer term, a Loss Leader may be offered. For example, profit bearing current accounts are not very lucrative but any bank can not afford not to offer these. The reduced profits can be augmented by profits made on other products. It is also possible to attract/retain personal customers by investment in new technology like ATMs and Telephone Banking facilities, which made the services quicker, easier, cheaper and more flexible.

Following are some suggestions for my fellow students;

If they want to achieve something in MCB, they must make their heart solid like a rock.

They should consult with their fellows who are in job that how an organization works.

They should ask their friends and fellows who are in job about the differences they feel in practical with books knowledge.

86

They should know how to take good care of their seniors. Last but not least, they should know how to remain clam in problems.

87

References Online References:


http://www.sciencenews.org/articles http://scienceforkids.org/articles http://www.ibp.org.pk

88