INTERNSHIP REPORT ON MUSLIM COMMERCIAL BANK

SADAF TALIB HUSSAIN

A report submitted in partial fulfillment of the requirements of the degree of B.COM(HONS)

AT

HAILEY COLLEGER OF COMMERCE, Lahore. Pakistan Sep,2010

Acknowledgement
Person is not a perfect in all the contexts of his life, He has a limited mind and mind thinking approaches. It is the guidance from Almighty Allah that shows the man light in the darkness and the person find his way in the light. Without this helping light, person is nothing but a helpless creation.

The teaching of the Holy Prophet Muhammad (PBUH) were also the continuous source of guidance for me especially his order of getting knowledge and fulfilling once duty honestly was key motivation force for me.

With prayers of my parents and support of my teachers it became possible to formulate this report. I pay high regards to them.

I am also thankful to all my friends and class fellows who helped me and provided me support to complete this hard task.

I like to thank Mr. Zain Ali, Mr. Yasir and Mr. Akram especially as they helped me remarkably for this project.

Letter of Transmittal
Head of Hailey College of Commerce, Punjab University of Lahore, New campus.

Dear Sir, It is to present you the internship report which is executed at MCB Bank Limited as required by the university as a degree requirement for B.COM(HONS)program.

This report has been prepared in accordance with the guidelines issued by the department. It is the result of my first professional experience. The report is a practical application of whatever I studied as a business graduate of Hailey College Of Commerce Lahore. In this report, I have covered the introduction of MCB, detail of my working and learning in general banking of MCB. I had assisted the manager operation for assignments, but for learning assist incharge of each department.

I have put all the efforts to summarize my knowledge and experience in this report, to make it comprehensive and to meet readers expectations.

Sincerely, SADAF TALIB HUSSAIN

II

Executive Summary
MCB was incorporated in 1997 and was later privatized by the Government of Pakistan. The Nishat Group bought the majority shares of the bank and so got the rights to control the banks operations. Since the privatization of the bank, MCB has implement different policies to make it one of the best banks of Pakistan, which included introducing new products and services and increase its operations by opening new branches in Pakistan. I did my six weeks internship at MCB New Garden Town Lahore, and worked in account opening department, operations department, accounts department, Remmittance, Customer Service department. Some of the work that I did in these departments included collecting cheques, filling account opening forms, activity checking and stop payments and closing of accounts. Although there were no such big problems found in the working of MCB, there were some problems in training of the employees, incentive schemes and product innovation. Some of the recommendations include workshops for employees, job rotation, teams work to find innovative products and scholarship programs for employees. Lastly MCB has seen a rapid growth in its activities by introducing a range of products and services and showing its presence in the country by opening new branches and in future should keep this momentum and always strive to become the best.

III

Table of Contents

TOPICS Acknowledgement Letter of Transmittal Executive Summary Introduction

1.1 Introduction 1.2 Background of the study 1.3 Purpose 1.4 Scope 1.5 Methodology 1.6 Summary

PAGE NO. I II III

01 01 01 02 03 04

History and About MCB

2.1 HISTORICAL BACKGROUN 2.2 About MCB 2.4 VISION & MISSION 2.4.1 VALUES OF MCB 2.4.2 Awards and Achievement 2.5 Branches network 2.5.1 Organization Structure (MCB 0187) 05 06 11 12 14 16 18

PRODUCT &SEVICES
3.1 Accounts 3.1.1 CURRENT ACCOUNT 3.1.2 BASIC BANKING ACCOUNT 3.1.3 Smart Dollar Account 3.1.4 Foreign currency Account 3.1.5 SMART SAVINGS ACCOUNT 3.1.6 KHUSHALI BACHAT ACCOUNT 3.1.7 PLS SAVINGS 365 TERM DEPOSIT 3.2.1 SPECIAL RUPEE TERM DEPOSIT (STD) 3.2.2 SPECIAL NOTICE DEPOSIT (SND) Account Opening Documentation Requirement 3.3.1 Individuals Accounts 3.3.2 Partnership Account 3.3.3 Joint Stock Companies 3.3.4 Clubs, Societies and Associations 3.3.5 Minor Accounts: (Age below: 18) 3.3.8 Illiterate / Photo/ Disable Persons Accounts Client/Account Opening Process Steps Classification of Accounts 3.5.1 Dormant Accounts 3.5.2 Inoperative Accounts 51 51 39 40 41 41 43 43 44 35 37 19 19 21 23 24 26 28 30

3.5.3 Unclaimed Deposit Account 3.6 Account Closure Overview of cheque 3.7.1 Procedure for Issuance of Cheque books 3.7.2 Collection of Cheque book by the Customer REMITTANCES 3.8.1 Demand Draft 3.8.1.1 Parties involved in the Demand Draft 3.8.1.2 Accounting entry for DD issuance 3.8.1.3 Accounting entry for DD Payable Branch 3.8.2 Payment Order 3.8.2.1 Characteristics of the Payment Order 3.8.2.2 Accounting entries for P.O issuance 3.8.2.3 ACCOUNTING ENTRY WHEN PAY 3.8.3 Term Deposit Receipt 3.8.4 Call Deposit Receipt DIFFERENCE BETWEEN CDR AND TDR Clearing 3.9.1 NIFT 3.9.1.1 FLOW CHART OF WORKING OF NIFT 3.9.2 In Ward Clearing 3.9.3 OUTWARD CLEARING 3.9.4 Intercity Clearing

51 55

59 63

66 67 67 68 69 70 71 71 71 74 77

78 79 79 82 83

Lockers 3.10.1 Issuance of License 3.10.2 Types of Lockers 3.10.3 Insurance of Lockers 3.10.4 Renewal / Expiry of Lockers 86 86 87 87 88 89 89 91 93

Self Experience Financial Analysis of MCB

4.1 Horizontal Analysis 4.2 Vertical Analysis 4.3 RATIO ANALYSIS

Annual Financial statement of MCB

5.1Balance sheet 5.2 Income Statement 5.3 Cash Flow Statement 5.4 Statement Of Change In Equity 98 99 100 101

SWOT ANALYSIS CONCLUSIONS RECOMMENDATION SKILLS ACQUIRED GLOSSARY References

102 105 106 108 113 114

Chapter # 1

Introduction

1.2 Introduction

Chapter one is about introduction of report. As a part of requirement of MBA degree six week internship is necessary for student. This chapter includes background, purpose, scope, objectives and methodology of the study. It also include introduction of organization.

1.2 Background of the study

Internship training program during Master in Business administration Program is necessary for the partial fulfillment of the completion of Degree of Master in Business Administration as per HEC ( Hire education commission ) requirement. It is necessary for me to complete an internship session of about 6 weeks in some manufacturing or service industry relevant to my area of interest and specialization. So, I choose the Banking field because I have the interest in this sector because my study background is related with this sector.

1.3 Purpose
Internship is the capstone experience that provides me with hands-on, real-world

experience in a work setting. Ideally, internship will enable internees to:

Use my knowledge and skills get from the classroom, Discover where further competence is needed, Convert the bookish knowledge into practical life, and become better acquainted with the types of work settings in which such Competence can be applied.

1.4 Scope

This study will facilitate to me regarding the working of Banking sector of Pakistan because most of the teachers during their lectures use the examples of Banks like MCB, National Bank, UBL, Bank Alfalfa and many others, Students should study about the functioning of such Banks. It will help full for me in future.

1.5 Limitation of the Study:

T he study is done with the sole purpose of doing the best work but there were certain limitation faced during the internship period. The most important limitation from which the study suffers is the non-availability of information in a manner required for analysis

3 and the secrecy of the bank. Another important limitation of the study is time and space constraint.

In the MCB Timber Market Branch fraud was held by chief cashier and operation manager so an Audit Team was there and management was busy in providing information to auditor and sat s claims of customers.

1.6 Objectives:

I worked as an internee in MCB Timber Market branch, Lahore. The main objectives to study in MCB were:

To get some experience in working with well reputed organization.

To gain knowledge about the professional environment of the bank.

To know about the technology utilized in the banks. To deal and manage with the situation of stress.

1.7 Methodology:

There are mainly two methods that are used for the collection of data.

4 Primary Data Secondary Data

(A)

Primary Data:

Observation of functions of Branch operations on the spot. Observation of different processes of Branch on the spot.

(B) Secondary Data:

Internet is very helpful for me to study more about banking sector of Pakistan. Different type of booklets of the Bank. Annual reports Journals Newspapers

1.8 Summary
This is the first chapter of the report containing the detail introduction of the report. Internship training program during Master in Business administration Program is necessary for the partial fulfillment of the completion of Degree of Master in Business

5 Administration. Internship will enable internees to integrate and use knowledge and skills

from the classroom. This study will facilitate me regarding the working of banking sector of Pakistan. For achieving my purposes, objectives and for the preparation of the internship report I required some kind of data, I used both methods of data collection that are primary sources and secondary sources for that purpose.

Chapter # 2 History and About MCB

2.1 HISTORICAL BACKGROUN

MCB Bank Limited formerly known as Muslim Commercial Bank Limited MCB Bank is not an overnight success story. It was incorporated by the Adamjee Group on July 9, 1947, under the Indian Companies Act, VII of 1913 as a limited company. The bank was established with a view to provide banking facilities to the business community of the South Asia

After the partition of the Indo-Pak subcontinent, the bank moved to Dhaka (then the capital of former East Pakistan) from where it commenced business in August 1948. In 1956, the bank transferred its registered office to Karachi, Where the head office is presently located. Thus, the bank inherits a 59 years legacy of trust of its customers and the citizens of Pakistan.

6 2.1.1 NATIONALIZATION:

In January 1974, the Government of Pakistan nationalized MCB following the Banks (Nationalization) Act 1974. MCB was the only bank which was nationalized solely as neither it nor any other bank being merged with it due to its consistent and firm policies and its sound position.

2.1.2 PRIVATIZATION: A wave of economic reforms swept Pakistan in the lattes introducing the Need for privatization of state owned banks and companies. This was the first bank to be privatized in 1991 and the bank was purchased by a consortium of Pakistani corporate groups led by Nishat Group. Nishat Group is one of the leading and most diversified business groups in Pakistan. The group has strong presence in the most important business sectors of the country such as banking, textile, cement and insurance. Mian Mohammad Mansha is the Chairman of the group (and also MCB) and has played instrumental role in its success. In recognition of Mr. Manshas contribution, the Government of Pakistan has conferred him with "Sitara-e-Imtiaz", one of the most prestigious civil awards of the country.

2.2 About MCB:

Over the years MCB has developed strong relationships with its customers by understanding their needs and treating them with respect, dignity and importance. The driving force behind its commitment and services is its focus on customers ensuring that it not only meets, but also exceeds their expectation.

They strive to achieve excellence by ensuring that every moment of their time is spent in adding value, making sure that they do things right, first time, and every time. With the quest of quality MCB has always taken initiatives bringing banking into a new arena; from cash to the convenience of plastic; from branch banking to internet banking and from face to face customer interaction to online accessibility.

MCB now focuses on three core businesses namely Corporate, Commercial and Consumer Banking. Corporate clientele includes public sector companies as well as large local and multi national concerns. MCB is also catering to the growing middle class by providing new asset and liability products. MCB Bank Limited (Formerly Muslim Commercial Bank Limited) has a solid foundation of over 63 years in Pakistan, the Bank provides 24 hour banking convenience with a network of over 1000 branches, the largest ATM network in Pakistan over 450 ATM locations in the market.

2.3 Organization Profile

Name of Organization: Chairman: Location: Branch code: Phone: UAN: Website:

MCB Limited. Main Mohammad Mansha New Garden Town Lahore. 1080 +92-042-7727456 / 7720054 111-000-622 (MCB) www.mcb.com.pk

2.3.1 Pattern of Share Holdings

Description

Shareholding

Percentage

Directors, CEO and children Associated Companies NIT & ICP Banks, DFI & NBFI Insurance Companies Modarabas & Mutual Funds

52,190,877 57,009,034 5,835 2,239,307 46,052,057 7,208,703

7.5518 8.2490 0.0008 0.3240 6.6635 1.0431

9 Public Sector Cos. & Corp. General Public (Local) General Public (Foreign) Others Foreign Companies 131,749,731 101,843,819 2,400,126 44,237,663 246,167,375 19.0636 14.7364 0.3473 6.4010 35.6194

Company Total

691,104,527

100.00

ORGANIZATION STRUCTURE

As MCB is a banking company listed in stock exchange therefore it follows all the legalities, which are imposed by concerned statutes. MR. Mian Mohammed Mansha is chairman & chief executive of the company with a team of 10 directors and 1 vice chairman to help in the business control and strategy making for the company.

A team of 10 professionals is handling operational management of the bank. MR. Mian Mohammed Mansha also heads this team.

The different operational departments are:

Consumer Banking & IT Division

10 Financial & Inter Branch Division Banking Operations Divisions HRD & Legal Division Financial Control & Audit Division Credit Management Division Commercial Banking Division Corporate Banking Division

2.3.2 Board of Directors

Mian Mohammad Mansha

Chairman

Mr. S. M. Muneer Mr. Tariq Rafi Mr. Shahzad Saleem Mr. Sarmad Amin Dr. Muhammad Yaqub Mian Raza Mansha Dato' Mohammed Hussein Mr. Aftab Ahmad Khan

Vice Chairman Member Member Member Member Member Member Member

11 Mr. Abdul Farid Bin Alias Mian Umer Mansha Mr. Muhammad Ali Zeb Member Member Member

Mr. Atif Bajwa

President / CEO

2.4 VISION & MISSION Vision Statement

To be the leading financial services provider, partnering with our customers for a more prosperous and secure future.

Mission Statement

We are a team of committed professionals, providing innovative and efficient financial solutions to create and nurture long-term relationships with our customers. In doing so, we ensure that our shareholders can invest with confidence in us.

Providing innovative Efficient financial solutions Long-term relationships with our customers Shareholders invest with confidence

12

2.4.1 VALUES OF MCB

INTEGRITY We are the trustees of public funds and serve our community with integrity. We believe in being the best at always doing the right thing. We deliver on our responsibilities and commitments to our customers as well as our colleagues. RESPECT We respect our customers values, beliefs, culture and history. We value the equality of gender and diversity of experience and education that our employees bring with them. We create an environment where each individual is enabled to succeed. EXCELLENCE We take personal responsibility for our role as leaders in the pursuit of excellence. We are a performance driven, result oriented organization where merit is the only criterion for reward. CUSTOMER CENTRICITY Our customers are at the heart of everything we do. We thrive on the challenge of understanding their needs and aspirations, both realized and unrealized. We make every effort to exceed customer expectations through superior services and solutions.

13

INNOVATION We encourage and reward people who challenge the status quo and think beyond the boundaries of the conventional. Our teams work together for the smooth and efficient implementation of ideas and initiatives.

MCB TODAY
MCB is one of the leading banks of Pakistan with a deposit base of Rs. 368 Billion and total assets over Rs.500 Billion. Incorporated in 1947, MCB soon earned the reputation of a solid and conservative financial institution managed by expatriate executives. In 1974, MCB was nationalized along with all other private sector banks. The Bank has a customer base of approximately 4 million, a nationwide distribution network of over 1,000 branches and over 450 ATMs in the market. During the last fifteen years, the Bank has concentrated on growth through improving service quality, investment in technology and people, utilizing its extensive branch network, developing a large and stable deposit base.

14

2.4.2 Awards and Achievement:

Euromoney Awards

Best Bank in Asia Award 2008

MCB has been awarded as a Euromoney Award 2008 for the Best Bank in Asia".

Best Bank in Pakistan Award 2006

MCB has yet again received the esteemed Euromoney Award for the Best Bank in Pakistan. It is the only bank to receive the Euromoney Award for Excellence for the sixth time in the past seven years.

Best Bank in Pakistan Award 2005

15 Best Bank in Pakistan Award 2004 Best Bank in Pakistan Award 2003 Best Bank in Pakistan Award 2001 Best Domestic Bank Award 2000

MCB was awarded as a Euromoney Award 2000 for the Best Domestic Bank in Pakistan".

Asia Money Awards

The Best Domestic Commercial Bank Award 2005

MCB Continues to shine as once again Asia Money declares MCB as "The Best Domestic Commercial Bank in Pakistan" for the year 2005.

The Best Domestic Commercial Bank Award 2004

MCB has a distinction of winning the Asia Money 2004 award for being "The Best Domestic Commercial Bank in Pakistan".

2.5 Branches network

(Domestic operation)

(Overseas operation)

16 8

(Branches) 1057

Commercial = 986 Consumers = 44 WBG Islamic = 11 = 11

Sri Lanka = 5 Bahrain = 1 EPZ UAE =1 =1

Sub branches 05

MCB New Garden Town Branch (1080) Detail of staff as on 30.8.2010

Serial No.

Employee No.

Employee Name

Department

Permanent/Outsource

17
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 28394 4645 3982 481 150 1226 17640 28005 26265 27364 29640 29177 32619 15558 20418 21230 32576 32538 25335 SALEEM AMJAD BUTT YASIR JAVAID AKRAM RAZA ATIF MISS AMNA UMMER ALI SAJID &SHAHID SANA UMMER NAZIR AHMAD AMIR ALI M.ADNAN MIAN AKAAM M IQBAL NIMRA ZIA SADAF ALI IFTIKHAR HUSSAIN SAQIB ALI ABDUL LATIF MUHAMMAD ARSHAD MUHAMMAD JAMSHAID BM BOM GBO FOREX GBO ADVANCES PBA ASSISTANT ASSISTANT CHIEF CASHIER ICO INSURANCE GUARD CSO CSO CASH OFFICER CASH OFFICER GUARD GUARD TEA BOY PERMANENT PERMANENT PERMANENT PERMANENT PERMANENT PERMANENT PERMANENT PERMANENT PERMANENT PERMANENT PERMANENT PERMANENT PERMANENT OUTSOURCE OUTSOURCE OUTSOURCE OUTSOURCE OUTSOURCE OUTSOURCE OUTSOURCE

2.5.1 Organization Structure (MCB 0187)

Manager (AVP)

Operation Manger (OG | )

Advances (OG |||)

Forex (OG |||) PBA (OG |||)

CSO (Contract)

Remittance (Assistant)

Current saving dep. (OG |||)

18

Cash (Contract)

Regional Operational Manager

Regional Manager

Internal control officer (OG |)

Chapter # 3 PRODUCT &SERVICES

Mr. Yasir (Operation manager)

This section is based on my observation and experience and rotation during my internship at the Timber Market Branch of MCB Limited. Some of the jobs that I performed or assisted in performing or overlooked in the various departments were

19

3.1 Accounts
Malik Majid (Personal Banking Advisor)

Following are the types of account in MCB

3.1.1 CURRENT ACCOUNT

No restriction on Withdrawals and frequency of transactions

No profit is paid on Current Accounts

Service Charges are recovered as specified in the Schedule of Charges

No Zakat is to be deducted on Current Accounts.

Free of cost account statements are dispatched on half yearly basis within one

week

after the mid-year closing. If any customer wishes to receive the account statement other than the half yearly cycle, charges will be recovered as per the Schedule of Bank Charges RS.50

Account opening with Rs.1000

20 Minimum maintain balance Rs.10000 if less then minimum limit Rs.50 will deduct

Eligibility
Individuals (Single/Joint)

Firms (Sole Proprietor Partnership)

Companies (Public and Private Limited), Trust/ Clubs/ Societies and Associations are eligible to open Current Accounts.

3.1.2 BASIC BANKING ACCOUNT

To provide banking facilities to low income people without the restriction to maintain minimum balance requirement

Features
The account is opened with a minimum initial deposit of Rs.1000.

BBA is a Rupee Current Account (non-remunerative account).

21 There is no minimum balance requirement, and hence no monthly account maintenance charges apply.

In case where balance in BBA remains ZERO for a continuous 06 month period, the account will be closed automatically.

Each month the account holder is allowed 02 deposits transactions (either cash or clearing) and 02 withdrawals (cash or clearing). All customer initiated transactions over and above this limit will be charged Rs. 25 per transaction All ATM transactions conducted through electronic channels (i.e. ATM, Debit Card POS machine, Virtual Banking) are exempted of transaction fee. Hence the customer is allowed unlimited transactions through these channels.

ATM cards are issued to all BBA account holders in on-line branches. Card issuance and annual fee will be recovered as per Schedule of Bank Charges.

ATM transaction charges on balance enquiry / mini statement and on usage of non-MCB ATMs will apply as per Schedule of Bank Charges.

Statement of account to be mailed as per existing policy of the Bank. Charges for duplicate statement will apply as per Schedule of Bank Charges.

Eligibility

22

Low income individuals are eligible for opening BBA with single or joint account type.

Existing individual account holders can also convert their regular Savings or current account into Basic Banking Account.

This facility is not offered to non-individuals

3.1.3 Smart Dollar Account

The minimum amount to be placed under this product is USD 100, 00.

Complimentary Pak Rupee account without minimum balance requirement.

Free Lockers Facility

Free of Charge Bank Statement & Smart Cards

23

Discount (Up to 50%) on processing charges of Personal Loans & Car Financing.

Preferential rates on consumer loans.

Waiver on collection charges for crediting the amount in Foreign Currency.

No Charges on Standing Instructions. In case of any change in the above features, prescribed procedure by RBG will be applicable.

Eligibility

Individuals (Single & Joint), Firms, Companies.

3.1.4 Foreign currency Account

Enjoy the confidence of operating an international account, locally.

MCB Foreign Currency Account offers you the option of earning attractive returns on your Foreign Currency Investment.

KEY POINTS

24 Open your account in US Dollar, UK Pound Sterling, or Euro.

Open for as little as US$ 500 or equivalent.

Unlimited transactions at your branch.

Free Foreign Currency cash deposit and withdrawal facility.

Rate of Return directly linked with international market

Profit paid into your account every six months.

Foreign Remittances facility available.

Countrywide network of Foreign Currency Branches.

Cash withdrawal in PKR equivalent

Network of over a thousand branches, and hundreds of online branches, at convenient locations.

General Inquiry e.g. ATM Locations, Product Information etc.

25 Financial Services e.g. Account Balance Inquiry, Debit Card, Transaction detail, bill payments etc Non-financial Services e.g. Internet Banking activation etc.

Bank Account Statement and Cheque Book Request. Eligibility

Only Individuals (Single and Joint) are eligible to open PLS Savings Accounts.

3.1.5 SMART SAVINGS ACCOUNT

Offers the opportunity to small and medium sized depositors (individuals only) to earn attractive returns on their deposits. Cash withdrawals takes place only through ATM/POS.

Individuals can open an account with a minimum initial deposit of Rs. 1,000.

Profit is calculated on a monthly basis and credited to the account after each calendar quarter

All ATM transactions conducted through electronic channels (i.e. ATM, Debit Card POS machine, Virtual Banking) are exempted of transaction fees. The customer is allowed unlimited transactions up to available balance in the account through these channels.

26

The profit is calculated only on minimum deposit balance between Rs. 10,000/- and Rs. 300,000/- during a month, irrespective of the balance available in the account (as per prescribed slabs). This range can be changed by the Bank any time without giving prior notice to the customer (as and when required).

Profit is calculated monthly, based on the minimum balance of the account during the month. In case minimum balance exceeds the ceiling of Rs. 300,000/- in a month, profit would only be paid on Rs. 300,000/-

MCB Smart Savings account can be merged with the regular PLS Savings account any time by giving 3 months notice to the customers at the discretion of the Bank.

The profit rates are estimated/provisional and subject to change any time at the discretion of the Bank.

Service charges would be applicable as per Bank policy if the balance goes down below the prescribed minimum balance.

Cheque book would not be issued to the account holder. ATM Card would be issued to the customer for cash withdrawals.

27 A customer can open only one MCB Smart Savings Account in the Bank, in case a customer is found to have more than one Smart Savings Account, the Bank reserves the right not to give the profit or recover profit if already paid to the customer on their account/s.

Zakat is deducted as per the policy. Withholding Tax is also deducted from profit (where applicable) as per Income Tax Laws

Rates Up to RS.199, 999 Rs.200, 000 299,999 More than Rs.300, 000 5% 7% 5%

Profit Calculation: Profit will be calculated on a monthly basis, based on the minimum balance maintained by the customer during that month.

Eligibility
Only Individuals (Single or Joint) are eligible to open PLS Smart Savings Account.

28 Non-Individuals like Proprietors Company, Partnership, Trading, Collection accounts etc are not eligible.

3.1.6 KHUSHALI BACHAT ACCOUNT

Provides additional facilities for payment of Utility Bills and Loan Installment of HBFC through debit of Account (free of charge) with added feature of profit calculation at average daily balance. (At designated branches only Minimum balance requirement as specified in the Schedule of Bank Charges.Rs.20,000

Profit provisioning/ accruals are made on Daily Closing Balance of the day.

Profit is disbursed /paid on half yearly basis as per the rates notified by the bank.

Free of cost Account Statement is dispatched on half yearly basis.

Zakat is deducted as per the Governments and Zakat Ushr Directives. Zakat is not deducted on the accounts of Non- Muslims and where Affidavit is provided.

Withholding Tax is deducted on Profit as per the Governments policy.

Standing Instructions:

29 For all Standing Instructions regarding payment of Utility Bills /HBFC Installments, customer fills out the Standing Instructions Form (SF- 256A) at the time of opening the account or subsequently whenever desired to avail such facilities.

Conversion of Existing Account to Khushali Bachat Account:

Existing PLS Savings Accounts can be converted into Khushali Bachat Account on the request of the customer. Branch obtains written request duly signed by the customer. Branch verifies the customers signature from the record/system and attaches the application with the original Account Opening Form.

Eligibility
Only Individuals (Single or Joint) are eligible

3.1.7 PLS SAVINGS 365

PLS Savings 365 also falls under the category of Savings Deposit Scheme.

It is a checking account and there is no restriction on number of withdrawals and deposits transactions.

Account is opened with minimum deposit of Rs.300,000/-

Profit is calculated on daily product basis on the balance of Rs.300,000/- and above. However, if balances in the account fall below Rs.300,000/- on any day, the product will

30 be considered as well and the profit will be paid as per the rates notified by the Bank on half yearly basis.

All other terms and conditions including rates of profit, Zakat and Withholding tax applicable to PLS Savings Bank Accounts are applicable.

Eligibility

All types of customers are allowed to open PLS- 365 accounts except Development Financial Institution.

3.1.8 PLS SAVINGS 365-Gold

Offered to Corporate Groups, Multinational Companies, Government and Autonomous bodies.

Calculation of Profit is made on daily product basis at variable rates according to Deposit Slab Range at declared rates on Half Yearly basis.

There is no limitation on number of withdrawals and amount of withdrawals.

31 The account requires a minimum deposit of Rs. 500,000 or more in order to get attractive profits. In case, account holder is not maintaining a minimum deposit of Rs. 500,000 in the account, the profit is paid at the prevailing Savings Rate.

Service charges would be applicable as per Bank Policy if the balance goes below the prescribed minimum monthly average balance.

All other terms and conditions including rates of profit, Zakat and Withholding Tax applicable to PLS Savings Bank Accounts are applicable.

Rates Less than 10 Million 5%

Rs.10 Million to less than 25 Million

6%

Rs.25 Million to less than 50 Million

6.5%

Rs.50 Million to less than 100 Million

7%

Rs.100 Million to less than 250 Million

7.5%

Rs.250 Million to less than Rs.500 Million

8%

32 Rs.500 Million and above 8.25%

Eligibility

Individuals and institutions can open the account.

3.1.9 SAVINGS XTRA

Grow with MCB Xtra by saving more and earning greater profit. MCB Savings Xtra Account offers you a wide range of attractive profit rates.

KEY POINTS Initial balance for account opening required Rs.1000

Minimum balance maintain limit Rs.100000

The higher your balance, the higher your profit.

33 Now avail attractive rates up to 8.5%.*

Profit calculated on monthly basis.

Profit paid into your account semi-annually.

No joining fee on Debit/ ATM Card.

50% discount on lockers.

Cash deposit and withdrawal facility at hundreds of branches nationwide.

Unlimited number of ATM withdrawal transactions.

3 free withdrawal transactions through the branch every month.

3.1.10 BUSINESS ACCOUNT

MCB Business Account lets you build your business through the accrued savings from discounted transaction fees, and more.

KEY POINTS

34 Higher the balance the higher the number of free transactions.

Open a Business Account with Rs.50, 000 only.

Unlimited free cash deposit and withdrawal facility at hundreds of branches nationwide.

FREE SERVICES When you maintain average monthly balance of Rs.100, 000 or above

Demand Drafts/Pay Orders.

Cancellation for Demand Drafts/Pay Orders.

Cheque Book.

International ATM Gold Card.

TERM DEPOSIT

35

3.2.1 SPECIAL RUPEE TERM DEPOSIT (STD):

The Special Rupee Term Deposit is governed under the PLS rules, but offers the depositor a stable rate of return for a fixed maturity. It is a mandatory requirement for booking a Term Deposit to have a checking account (Current/Savings) in the Bank.

Product is available in the following tenors:

3 months, 6 months, 1 year, 3 years & 5 years The minimum amount to be placed under this scheme is Rs.1000, 000/- (amounts can be booked in multiples of Rs.1000).

Each tenor is divided into 3 categories based on the deposit amount. Zakat Zakat is deducted as per the rules of Zakat & Ushr Committee (as advised and amended from time to time) Rs.1,000,000 to less than Rs.10,000,000 Rs.10,000,000 to less than Rs.25,000,000 Rs.25,000,000 and above

36 Withholding Tax

Withholding Tax, where applicable shall be deducted from the profit amount, as per Income Tax Laws in force at the time of profit payment. This deposit can be used as a security / collateral and the depositor can avail up to 75% of the principal amount upfront. The depositor also has the option of increasing the financing limit up to 90% of the principal amount, upon obtaining the necessary approvals from the relevant authority. The tenor of the financing facility should be within the maturity date of the deposit.

In case of premature encashment, the depositor will bear the tax expense

Profit payment frequency: Profit on the special TD is paid on the date of maturity of deposit for 3 and 6 months tenor. Deposits booked for 1, 3 and 5 years tenor is paid profit on a quarterly basis. Hence the depositor gets the opportunity of investing for a long term without compromising on cash flows. Payment of profit: Profit amount will be credited into the depositors linked/ specified current or Savings account.

Cash payment of profit amount will not be allowed.

Branch is required to maintain maturity date and profit payment dates for each account so that there is no delay in payment of profit to the depositor.

37

Eligibility
(Existing Account Holders) Individuals, Firms and Companies

3.2.2 SPECIAL NOTICE DEPOSIT (SND)

SND is issued for 07 and 30 days. 07 days Notice Deposit: Issued for 07 days only and if encashed before 07 days is not eligible for profit/interest. 30 days Notice Deposit: Issued for 30 days and encashed after seven days is eligible for Profit/Interest payable for 07 Days Notice Deposits. Zakat Zakat will be deducted as per Zakat rules as advised and amended from time to time. (Applicable only on PAK Rupees) Withholding Tax Withholding Tax, where applicable will be deducted from the Profit/interest amount, as per Income Tax Laws in force at the time of profit/interest payment. These deposits are also received in multiple of Rs. 1000/If a depositor withdraws deposit on a date prior to the date of declaration of profit rates, the profit due can be paid at the rate of profit declared for the last half year.

This, however, shall be a provisional payment with the prior approval of Regional Manager. If the rate declared for said half year is more than what was paid to such deposit holders then the difference shall be paid through Payment Order. In case rate of profit announced on Special

38 Notice Deposit is less, then customer should pay the difference. It will be appropriate if an undertaking from the customer is taken in this respect. The return on Foreign Currency SND is paid on maturity or as prescribed by the Bank or SBP from time to time.

Eligibility
Existing Account Holders (Individuals, Firms and Companies)

3.2.3 SMART FOREIGN CURRENCY FIXED DEPOSITS

The minimum amount to be placed under this product is USD $ 10,000. Interest rates are offered based on the amount of deposit. Free Lockers Facility Free of Charge Bank Statement & Smart Cards Discount (Up to 50%) on processing charges of Personal Loans & Car Financing. Preferential rates on consumer loans. Interest on the smart foreign currency fixed deposits is paid on the date of maturity of deposit for 3 and 6 months tenor. Deposits booked for 1 year is paid interest on a half yearly basis. Cash payment of Interest amount is not allowed. Minimum retention period is 01 month, irrespective of the tenor for which the deposit is booked. In case depositor wishes to encash the deposit before completion of one month,

39 only principal amount will be paid to the customer. If customer wishes to encash the deposit after one month but before maturity, the branch will pay interest at the Savings Rate for the number of days completed. In case of any change in the above features, prescribed procedure by RBG will be applicable.

3.3 Account Opening Documentation Requirement

The details of Account Opening Application, Specimen Signature Cards and other Documents to be obtained for different types of accounts are as follows:

3.3.1 Individuals Accounts

1. Application for Opening Account (SF-1AA). 2. Specimen Signature Card (SF-6). 3. Attested photocopy of Computerized National Identity Card (CNIC) or Passport. It is a mandatory requirement to verify the CNIC of the customer before opening the accounts, from NADRA Online system- VERISYS 4. In case of a salaried person, attested copy of his/her service card or any other acceptable evidence of service, including but not limited to a certificate from the employer. 5. In case of illiterate person, a passport size photograph of the new account holder besides taking left & right thumb impressions on the Account Opening Form & Specimen Signature Card 6. In case CNIC does not contain a photograph, Banks may allow the said customer to open the account, subject to provision of the following documents:

40

A copy of the photograph duly attested by gazette officer/Nazim. A copy of CNIC without photograph duly attested by the same person who has attested the photograph as per above. A confirmation in writing to the effect that they have no other document bearing their photograph. Moreover, the particulars/CNIC of such persons must be confirmed from NADRA in writing or through its VERYSES system.

3.3.2 Partnership Account

1. Application for Opening Account (SF-1AA). 2. Specimen Signature Card (SF-6). 3. Attested photocopies of Computerized National Identity Card (CNIC) of all partners. 4. Attested copy of Partnership Deed or Letter of Partnership (CF-13), in lieu of the partnership deed, if not available) duly signed by all partners of the firm. 5. Attested copy of Registration Certificate with Registrar of Firms. In case the partnership is unregistered, this fact should be clearly mentioned on the Account Opening Form. 6. Authority letter in original, in favor of the person authorized to operate on the account of the firm.

41

3.3.3 Joint Stock Companies

Copies of the following documents duly certified by the authorized officer of the:

1. Resolution of Board of Directors for opening of account specifying the person(s) authorized to operate the company account. 2. Memorandum and Articles of Association. 3. Certificate of Incorporation. 4. Certificate of Commencement of Business. 5. Attested photocopies of Computerized National Identity Card (CNIC) of all the directors.

3.3.4 Clubs, Societies and Associations

Certified copies of: 1. Certificate of Registration issued by the Registrar of Cooperative Societies/ Registration Authority. 2. Bye-Laws/ Memorandum and Articles of Association of the Society containing official seal of the Registration Authority. 3. Permission of the registration authority for opening of Account in the name of Association as required under section 37 (d) of Co-operative Societies Act, 1925. 4. List of members of the Managing Committee duly certified by the Registrar of Societies. 5. Resolution duly passed by the members of Managing Committee in their meeting regarding opening and operation of account in the name of said Society. It must be

42 ensured that the mandate for operation of Account given in the Resolution is not in violation of the provision of Bye-Laws/ Memorandum and Articles of Association. 6. Attested copies of CNIC of the authorized officials/ persons.

3.3.5 Agents Accounts

1. Certified copy of Power of Attorney 2. Attested photocopy of Computerized National Identity Card (CNIC) of the agent.

3.3.6 Trust Accounts

1. Attested copy of Certificate of Registration 2. Resolution duly passed by the Trustees regarding opening and operation of Account in the Bank in the name of said Trust Deed. 3. Attested copies of CNIC of all the trustees. 4. Certified copies of Letter of Administration/ Instrument of Trust.

3.3.7 Minor Accounts: (Age below: 18)

A Minor is a person who has not attained the age of 18 years, if the Court appoints guardian of his/her person or property, then the period of his minority extends to the age of 21.

43 1. An account in the name of minor is allowed to open by his guardian, preferably jointly in the name of guardian / Minor or Minors, payable to either or survivor opener of the Account. 2. Title of Account is on the Minors Name (As per Form B) &word Minor be added to the Title of Account. 3. In the Account Opening Application, the particulars of the Guardian will be filled out in the column of Personal Information. 4. Attested copy of Computerized National Identity Card (CNIC) of the Guardian. 5. Attested photocopy of Form-B of Minor.

3.3.8 Illiterate / Photo/ Disable Persons Accounts

1. Attested photocopy of Computerized National Identity Cards (CNIC). 2. Two Attested Photographs. (One photograph shall be pasted on the Account Opening Form and other will be pasted on Specimen Signature Card. 3. Left thumb impression (Right thumb impression in case of female) on the account opening application & Specimen Signature Card (SSC)

44

3.4

Account opening

Client/Account Opening Process Steps

1. Customer comes into the branch and requests for opening an account.

2. Customer Services Officer (CSO): delivers the Account Opening Application along with the terms and Conditions (AT&C) and relevant documents to the customer.

3. Customer: receives the Account Opening Form (AOF) from CSO and submits duly completed AOF and relevant documents to the CSO.

4. CSO: checks that all the fields in the Account Opening Form have been duly filled, and the relevant account documentation required from the customer depending on the type of account are completed and attached.

Account Opening Form (AOF)

Specimen Signature Card (SSC)

Account Terms & Conditions acknowledgement

Attested copy of CNIC

45

Copy of employment or student Card & other verification documents as required on caseto-case basis.

Obtain customers signatures on the AOF and SS Card (in person). Moreover one signature card will be used to capture per signature of the client (In case of Joint Account Holders use additional signature card). Subsequently takes the form to the Relationship and Operations Manager for Verification and authorization.

5. Operations Manager/ Account Maintenance Officer (AMO): Verifies introducers signature from Branch Teller Module > Transactions > Non- Financial Transactions > Customer Signatory (Screen # BT44).

Sign-off and affix stamp on the Account Application.

Forwards AOF & Client Profile Form to Relationship Manager.

6. Relationship/ Branch Manager

Interviews the customer. Completes and sign off Know Your Customer (KYC)/ Client Profile Form. Returns the same to the CSO for further processing.

46 7. Customer Services Officer (CSO): Selects SYMBOLS Branch Teller Module > Transaction > Non-Financial Transaction > Client Definition (Screen # BT41) to create a client.

Insert Client Short Name. This is used as the default Title of Account whenever an account is opened. Input Client full Name. Pop-up box will appear on the screen: Input or select appropriate ID Type & insert CNIC number & press OK. (Box will close automatically) Insert Country Code, State, Country of Citizen, Country of Risk. In the next section of the same screen, insert Client Indicator as N Normal, S Staff and/or V VIP Account. Input address as written in Account Opening Application- SF-1AA. Select Account Executive & Client Type then press F-10 or click save icon available on Tool Bar.

System generates the client number and Pop-up box appear on the screen with the following message: SUCCESSFULLY OPENED 09 DIGIT CLIENT NO xxxxxxxxx

CSO notes down the client number on the account opening form. In case of joint account holders, separate client numbers will be given to each client.

47

Account Opening:

Uses SYMBOLS BT Module > Transaction > Non-Financial Transaction > Account Opening > select type of account Current or PLS (Screen # BT42) and for Term Deposit (Screen # BT422).

Input Account Type, insert Client Number and press enter. Client information will be retrieved on the screen:

Service Charges: Service Charges TAB shows following two charges attached with the account.

SVC- Service Charges Current SVP- Service Charges PLS ZAK- Zakat Service Charge

Service Charges (SVC & SVP) are not link with the exempted accounts. (The above exemption would be applicable only on those accounts where account holders have provided relevant documentary evidence to the branch) Zakat Deduction service charge type (ZAK) is only attached with the accounts where Zakat Declaration Form is not submitted by the customer (Only for Muslims). Zakat deduction is not applicable on Non-Muslims. Select ZAK as Type, ZK as frequency & press enter Next Charge Date by default appears as for the next year.

48 For example: If account opening date is 07th November, 2006 than Next Charge date should be 07th November, 2007.

Note: ZK is the auto frequency type for Zakat Deduction. System generates the account number:

CSO note down Client &/or Account Number on the Account Opening Application and Deposit slip. Provides the initial Cash Deposit slip to the customer. Forwards the Account Opening Form, relevant documents, cheque book requisition & ATM Request to the Branch Operations for further processing.

8. Customer: Deposit cash in the account & obtains the receipt from the teller and leaves the branch.

9. Operations Manager: Admits customers signature, affix stamp & sign-off the Application/ SS Card. Account Maintenance Officer: Verifies customer data (inserted in BT by CSO) with the Account Opening Application & other relevant documents.

Step 1.

AMO scans customers signature in the Branch Teller Module (BT) > Transactions > NonFinancial Transactions > Customer Signatory > (Screen # BT45)

49 Input or Select Client Number, press enter customer Name will appear on the screen , Input Name of Signatory & Description

System shows message at the bottom Scanning to SYMBOLS Pop-up box appears on the screen and shows message Loading image. Press Ok and then Click Save icon or press F10. Popup appear as Transaction completed: Records applied and saved.

Step 02 Select Branch Teller Module >> Transactions >> Non-Financial Transactions >> Account Signatory (Screen # BT 44). Enter Account number, press enter and save.

Keep Specimen Signature Cards (SSC) in fire proof cabinets. Forwards Account Opening Application along with the relevant documents to the Centralized Operations (in a sealed envelop via courier) for insertion of Client information in Kernel Module (Financial Management), issuance & dispatch of Thank You Letter to the New Customer and introducers. Also enclose covering note which contains the total number of forms in the envelope.

10. Central Processing Division (CPD): performs the following functions:

50 Selects Kernel Module > Static > Client Information > Client (Screen # FM144) and completes client opening screen # 144 in Kernel Module (Financial Management). Dispatches Thank You Letter to the customer and introducer. After three working days, returns account opening application, relevant documents, copy of Thank You Letter, Account Details Report & Covering Letter to the branch for their record. Also enclose undelivered Thank You Letters, if there are any.

11. Operations Manager/ Account Maintenance Officer:

Receives account opening applications from CPD counts the total number of forms and tallies the number mentioned on the covering letter. After verification branch forwards acknowledgement to CPD. Keep Account Opening Forms along with the relevant documents in the Fire Proof Cabinets or Vault for record. Keep Signature Cards in the Fire Proof Cabinets in a sequential order.

3.5

Classification of Accounts

3.5.1 Dormant Accounts

Checking accounts are classified as dormant accounts on the following conditions:

51 Current accounts not operated for 6 months and Savings accounts not operated for one year shall be classified as dormant accounts.

Half yearly profit shall continue to be applied as usual on Savings account only.

3.5.2 Inoperative Accounts

Current Accounts not operated for 2 years and Savings accounts not operated for 3 years shall be classified as Inoperative accounts

Half yearly profit shall continue to be applied as usual.

3.5.3 Unclaimed Deposit Account

If a Current & Savings Accounts remains Inoperative for 08 & 07 years respectively will be classified as Unclaimed Deposit Account. In addition to this, Bank Drafts, Government Drafts, Payment Orders, Mail Transfers, Fixed/Term Deposits etc. remains outstanding for 10 years from the date of issuance will be classified as Unclaimed Accounts.

Banking Companies Ordinance 1962 under section 31 clearly defines that Banks are required to transfer the Unclaimed Deposits to State Bank of Pakistan (SBP) on the completion of a period of Ten (10) years without any delay.

52 All unclaimed deposits including time deposit or any other kind of deposits or financial instrument (Pay in slips, Payment Orders, Demand Draft, TT, MTs or any other financial instruments) However, Deposits/Instruments recorded in the name of Minor or Government Department/Agency or Courts of Law are not transferred to SBP. No profit/interest is paid on deposits transferred to Unclaimed Accounts. Similarly, no service charges are deducted.

3.5.3.1 Notice to the Holder of Unclaimed Deposits/ Instruments

03 months prior to the completion of Unclaimed Deposits, branches are required to intimate the account holder in writing via mail on the customers address regarding the settlement of their deposits/instruments. If on the expiry of the three months period no acknowledgement or reply is received from the holder of unclaimed Deposit/Instrument, the entire funds should be transferred to SBP. Branches are required to maintain complete record of letters sent tithe holders of Unclaimed Deposits Branches are also required to send written intimation to the Government Institutions, Agencies, Court of Law and Minors (After acquiring the age of maturity) for the settlement of their deposits/instruments.

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3.5.3.2 Reporting Of Unclaimed Deposits

Branch submits list of unclaimed deposits/ instruments separately for Pak Rupee and in Foreign Currency (FCY) on the Form XI (Annexure- I-05-B) within thirty days after the close of each calendar year.

3.5.3.3 Transfer of Unclaimed Accounts to State Bank of Pakistan

The amount of unclaimed PKR and FCY deposits/ instruments is transferred to SBP at the end of each calendar year along with a list of unclaimed deposits/instruments. In case of Frozen FCY deposits / Instruments of 1998, as and when become unclaimed, the Bank/DFIs will surrender the equivalent PAK RUPEES to State Bank

3.5.3.4 Retention of Documents

Preserve all signature cards and documents indicating the Signing Authority and other documents in the dual custody of Operations Manager and Designated Authorized Officer.

3.5.3.5 Refund Procedure

All claims lodged with the Branch about Unclaimed Balances transferred to State Bank of Pakistan (SBP), should be forwarded to State Bank of Pakistan through Principal Office and after getting Proceeds from State Bank of Pakistan same shall be paid to the Claimant.

54

While forwarding any claim for refund, branches are required to obtain the following documents:

Original application for refund long with verification of attested signature/thumb impression of the claimant by the Branch Operations Manager or Designated Authorized Officer with the name and stamp.

Claimants address and contact number must be clearly mentioned in the application.

Copy of Intimation Letter sent to the holder of unclaimed deposit/instrument.

Attested copy of CNIC of the claimant.

Certificate as per Annexure- I-05-C.

3.6 Account Closure

For the purpose of account closing a form has been constructed to aide this process. Whenever the client wants to close the account, the only responsibility of the bank is to collect the issued cheque book from the customer and to get the constructed application form of account closing completely filled. After that the payment of the entire amount in the account is paid to the client.

55 1. Customer: Presents duly completed account closure application to the CSO.

2. Customer Services Officer- CSO:

Receives account closure application Confirms Account balance from the Branch Teller Module Informs account balance and returns the same to the customer, in order to fill out the cheque of the complete amount (Account Balance)

Designated Authorized Officer Verifies customers signature on Account Closure Application.

3. Customer: Fills out the cheque of the total amount and presents the same to the Teller for encashment.

4. Teller: Verifies the customers signature & amount from the system

Selects transaction type "CQWR" (Cheque withdrawal) from List of Values Debits the entire amount from the customers account. Enters the transaction details i.e. customer's account number, currency, amount of withdrawal and cheque number etc.(If transaction amount exceeds the Tellers limit, screen pop-ups Authorization Required message. Chief Teller authorizes/approves the transaction).

56

Note: In case of any Restraint on the account: Teller informs the customer to submit a written application to the CSO, in order to remove the restraint from the account.

5. CSO: Receives restraint removal application from the customer & forwards the same to the Relationship Manager for signature verification and deletion of restraint from the account in order to close customers account.

6. Account Maintenance Officer (AMO) Verifies the details and remove restraint from the customers account.

Forwards the application to the Teller in order to close the account.

7. Teller: After receiving the application from the AMO, inserts the transaction details in the system, it will generate the following entries:

Branch Teller Module:

DR: Customer Account CR: Cash In Vault

57 Accounting Entry For Account Closure Charges:

Dr: Cash In Vault/ Customers Account Cr: Miscellaneous Earning (A/c Closure)

Counts the cash and deliver the same to the customer.

8. Customer: Counts the cash and leaves the branch.

Overview of cheque
(Mr. Mahmood. Remittance) Cheque book is a safe custody instrument. Cheque is used for cash withdrawal and making payments. Cheque books are relatively sensitive items hence due care must be exercised while handling them.

Issuance of Cheque book for New Account Holders

MF-80R is used for cheque book issuance to the New Account Holders as well as the exiting customers (In absence of existing cheque book or cheque book requisition slip).

Issuance of Cheque book for Existing Customer

Prior to issuance of a new cheque-book, please ensure that the affair of the account is satisfactory in all respect (customer maintaining minimum balance requirement, account is not dormant /blocked/ inoperative, the relationship activity is within the prescribed norms of banking regulations & the customers signatures are verified as per the required practice).

58

Cheque books should be issued to the account holder or his/her authorized representative at the Banks counter if DAO is fully satisfied. However, in exceptional cases the Operations Manager may allow issuance/ dispatch of cheque book to the customers through courier after completing all the relevant formalities.

Handling of Undelivered Cheque books

All processed cheque books that remain uncollected by the customers for six months from the date of issuance must be destroyed by the branches after the recovery of Cheque book issuance charges and Excise Duty (If any).

The cheque-book custodian (Designated Authorized Officer) records the details of all such cheque books in the Annexure 1- 09-A. Branch Manager would approve the list for destruction and sign-off. Custodian (Designated Authorized Officer) destroys the books/leaves in the presence of the Branch Manager and obtains his/her signature. Ensure proper notation on cheque-book issuance Report for the books destroyed.

3.7.1 Procedure for Issuance of Cheque books

1. Customer: Visits the branch and presents cheque book requisition slip. (Available in the existing cheque book) In case of new customers or lost requisition slip/Cheque book, customer fills out a cheque book Requisition slip

59

2. CSO: receives requisition slip from the customer. Confirms Account balance from the Branch Teller Module >. Also confirm the status of account (Active, Dormant, and Inoperative). In case of dormant or inoperative account, CSO request the customer to perform a financial transaction on the cash counter in order to activate the account & process cheque book issuance request.

System does not permit the processor to submit the cheque book request by disabling the SUBMIT icon on the screen, if account has dormant or inoperative status. CSO Forwards cheque book requisition slip to Designated Authorized Officer to verify customers signature from the Branch Teller module- BT.

3. Designated Authorized Officer/ Account Maintenance Officer (AMO)

Verifies customers signature through Branch Teller Module > Input account number, press enter, account information & signature appears on the screen. Sign-off and affix stamp Signature Verified stamp on the requisition slip. Returns requisition slip to CSO for further processing.

4. Customer Services Officer (CSO- Input USER)

Receives Requisition Slip.

60 Log in to Cheque book Registration System (CBR). Input Account Number & click on submit icon. Next screen shows the customers account details. (At the bottom of the screen all the Cheque Book Request that are linked to the customers account are shown along with their status).

Click to the option Proceed available on the above screen. Input Number of Leaves as requested by the customer. Click on submit icon, system saves the cheque book request with the New status.

5. Designated Authorized Officer/ Account Maintenance Officer (Approver)

Approver inserts Login ID and password in the Cheque book Request System in order to approve the cheque book requests. Click on submit icon. Click on customers Name link, Cheque book Request Details will appear on the screen. Check details with the Requisition Slips and select Application Status as Accepted Click on SUBMIT ICON. Keep Cheque book Requisition Slips in the Fire Proof Cabinets under Dual Control. Approver ensures that all the above fields are properly filled by the Input user and approve the Cheque Book Request accordingly.

6. Central Processing Division (CPD)

Inserts USERID & Password and submit.

61 Main Menu Bar screen appears, clicks on Print Cheque book Tab on the top Menu Bar. Screen will show the details and total number of request received from all the SYMBOLS Branches. Click on Print Icon & system gives following message The Cheque book Request has been set to Printed. Details of the Cheque book Request automatically upload in the text file. Forwards Text File to NIFT via e-mail.

7. NIFT: Forwards Text file to Printer for marking Magnetic Ink Character Recognition (MICR) & Account Details (Number & Title of Account)

8. Printer:

Receives cheque book requisition slips from the NIFT for marking MICR codes. After one working day, delivers the same to the respective branches along with the covering schedule. Forwards the details (Via e-mail- Text file) of the printed cheque books to the CPD for verification and for uploading the cheque series in the CBR system 9. Central Processing Division (CPD)

Receives Text File from Printer and updates the cheque series in the system. After uploading the series in the system, Printed status automatically changed into Received.

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10. Designated Authorized Officer

Receives processed cheque books from Printer along with the covering schedule. Mark received on the cheque book covering Schedule (report) and sign off the same. Notes down cheque series on the Cheque book requisition slip on which customers signature is already verified. Note down the receipt date on the right corner of the cheque book.

Attach requisition slips with the respective cheque books. Keeps the cheque books in the safe custody under dual control. (Strong Room or Fire Proof Cabinets). Designated Authorized Officer daily delivers the cheque book Box to CSO for onward delivery to the customers.

11. CSO (Customer Service Officer) Daily generates Cheque book Issuance Report and maintain in a box file. Match the total number of cheque books received in day with system generated report.

3.7.2 Collection of Cheque book by the Customer

1. Customer: Visits the branch to collect his/her cheque book.

2. Customer Services Officer - CSO:

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Retrieves the cheque book from the box. Detach requisition slip from the cheque book. Obtains Customers signature on the cheque book requisition slip & Issuance Report. Ensures that the signatures are duly verified. Delivers the cheque book to the customer.

3. Customer: Collects cheque book and leaves the branch.

4. Customer Services Officer (CSO)

After obtaining the acknowledgement (Signature),

Attach Cheque book series with the account by using Branch Teller- BT >> Transactions >> Non-Financial Transactions >> Cheque book Issuance (BT- 47) Input or Select Account Number, press enters. Input appropriate Size Type e.g. S Small System will show Number of Leaves. Input Start Cheque Number, system shows the End Cheque Number. Press F10 or Click on save icon available on the tool bar.

System automatically debit customers account and credit Income Head (Miscellaneous Earning).

64 Auto Account Entry: Dr: Customers Account (CBIC) Cr: Miscellaneous Earning- (Account No.) Cr: Stamp Duty (If any)

CSO enters Login ID & Password in CBR system in order to change the Received Status to Delivered.

Click on View Request option available on Tool Bar, cheque book details report displays on screen, CSO click on Customers Name & verifies the cheque series and changes the status into Delivered After performing the above task, system shows the message The Application Status has been set to Delivered. Forwards all the requisition slips to the Designated Authorized Officer for the validation of Daily Cheque Issuance Listing Report for the day.

At end of Day, returns all the undelivered cheque books to Designated Authorized Officer for stock balancing.

5. Designated Authorized Officer:

Generates Daily Cheque Issuance Listing Report from MCB Reports and verify the details from the entire requisition slip issued in a day.

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There is a report available in SYMBOLS that provides details of the entire cheque books issued to all the account holders in the branch since the account opening date.

3.8 REMITTANCES

This covers the services and products that Bank offers to its customers for Funds Transfer. Currently Bank is offering following Products & Services for Fund Transfer: (Locally & Internationally). Payment Order Demand Draft (Local & Foreign Currency) Telegraphic Transfer (Local & Foreign Currency) Mail Transfer (Local Currency)

Note: But here now a day the time of online transfer so TT (Telegraphic Transfer ) and MT( Mail Transfer) not in practically use because people like online quick and safe transfer of amount even DD ( Demand Draft ) and PO ( Pay Order ) use for documentary prove

3.8.1 Demand Draft

Features Demand Draft is a written order. Drawn by one branch of a Bank upon another branch of the same Bank, or upon other Bank to pay a certain sum of money to or to the order of a specified person. It is issued by one branch of a bank and payable by another branch of the same bank or another bank

66 Demand Draft is a negotiable instrument.

Demand Draft is neither issued payable to bearer nor drawn on branches situated within the same city. Legal provisions as to crossing, endorsement, collection and payment in due course are similar to those as for cheques and other negotiable instruments. It is to be ensured that the purchaser of Demand Draft is able to at least sign his name. Thumb impression is not to be accepted on Funds Transfer Application except in cases where purchaser is maintaining an account with the issuing branch. A person unable to sign and not having an account may be advised to apply for the DD person to sign on his behalf.

through a literate

3.8.1.1 Parties involved in the Demand Draft

1. Purchaser: Is the person, firm, company or local authority. 2. Issuing or Drawing Branch: The Branch which issues a Draft on another Branch. 3. Drawee Branch: Is the Branch on which a draft is drawn. 4. Payee / Beneficiary

67

Remitter

Draft

Beneficiary Fund received

Draft

Issuing Branch

Advice

Drawee Branch

3.8.1.2 Accounting entry for DD issuance

DEBIT PARTY ACCOUNT CREDIT HO (specific branch of MCB on which DD issued)

3.8.1.3 Accounting entry for DD Payable Branch.

DEBIT HO (Specific branch by which DD issued) CREDIT DD PAYABLE

68 Once the DD present to the branch then the following entry will pass

DEBIT

DD PAYABLE CREDIT PARTY ACCOUT CREDIT

Payment of Demand Draft via Cash

When Demand Draft is presented at the counter of a Drawee branch for cash payment, identification of a payee is required. If a payee is the customer of a branch, his signature can be verified from the specimen signatures on the record.

A Crossed DD cannot be paid in cash, except to a banker who collects the same for credit to his customers account. As such, a crossed DD cannot be presented by the Payee for Cash payment at the counter.

Payment of Demand Draft in Transfer/ Clearing

Payment of Demand Drafts can also be made in Transfer/ Clearing. A complete procedure for collection / payment has been explained in the section of Cash and Counter Services (Inward Clearing

Revalidation of Demand Draft

Since DD is payable within six months from the date of its issue, therefore, an instrument being older than six months requires revalidation before payment.

69

Following procedure will be used:

The signature on such letter should be duly verified. DD should be presented to the Issuing branch. Particulars of the DD should be compared with those given in the RSBS or Branch Teller Module. A rubber stamp reading Revalidated on -------- should be affixed on the DD under signature two authorized officers of the branch with IBS or AS Numbers. of

3.8.2 Payment Order

Payment Order is used for making payments within a city. Literal definition of Payment Order is as follows:

A Pay Order is a written authorization for payment, made in a cheque form issued and payable by the bank, to the person named and addressed therein on his giving a proper discharge thereon.

FEATURES

It is issued by and drawn upon and payable by the same branch of the bank It is neither transferable nor negotiable and as such it is payable to the payee named therein

70 It is in a receipt from and therefore is payable only after obtaining a discharge of the payee on adequate revenue stamp Pay Order cannot be issued to a minor Pay Order meant for banks own payment but in practice these are also issued to customers for making payment. Pay Order is issued for payments within the same city

3.8.2.1 Characteristics of the Payment Order

It is issued by and drawn upon and payable by the same branch of the Bank. It is neither transferable nor negotiable and as such it is payable to the payee named therein.

Parties involved in the Pay Order

Purchaser: Purchaser is a person, firm, company, Government/Semi Government Organization or local authority.

Issuing/Paying Branch: These issues/pays on presentation of the instrument. Payee: Payee is the person named on a bill to whom, or to whose order, payment is to be made. Where a bill is not payable to bearer, the payee must be named or otherwise indicated therein with reasonable certainly.

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3.8.2.2 Accounting entries for P.O issuance

DEBIT: PARTY OR CASH CREDIT: PAY ORDER ISSUANCE

3.8.2.3 ACCOUNTING ENTRY WHEN PAY

DEBIT: PAY ORDER CREDIT: PARTY

3.8.3 Term Deposit Receipt

Term Deposit Receipt is basically used for the saving purpose, and it is also use for transfer purpose, which means amount moves from one account to another account, in term deposit receipt specific time period is mentioned and during this particular period no one can withdraw this amount from his account, so when we talk about some specific time period it may be three months, six months three years etc basically it depends open on customer according to his desire I made this Term deposit receipt. Term Deposit Receipt is basically a profit oriented instrument, because customer deposits his money for specific period of time and on behalf of this bank will pay some percentage of profit which depends upon the amount of deposit higher the deposit higher will be the percentage of profit. Basically TDR is profit oriented instrument so thats why zakat is also applicable on it, no commission is charged on this term deposit receipt.

72

3.8.3.1 Procedure of Issuance of Term Deposit Receipt

First of all receive the request letter from customer on (S.F 265) Also receive the cheque which is transfer from cheque to TDR. The client can also made his TDR by depositing cash but his account must be opened in our branch which is necessary because TDR payment is made only through account no counter payment is made on behalf of this TDR. Fills the TDR block and write down the complete information on it.

Date of issued TDR Received from On Account of Amount in wards and Amount in Figures Than send this TDR for signature one from the Accountant and one from the Manager. Taking all this information in to the TDR register that is TDR Serial number 58/15 Customer name Account number Issued date Expiry of this TDR Deposit Receipt which is TDR block Number

73

Renewal of Term Deposit Receipt

When the customer fills the S.F 265 which is TDR application form, in this form one option is given and the option is

Rollover the Same Tenure

If the customer tick this option while filling this form than automatically the renewal of TDR is happened no need for any customer request, which means that customer is agree with rules and regulation, and if the customer is not tick this option than he again gives us the request letter on which he wants to extend this time period of TDR, for this purpose he will also come to the branch with original TDR and change the date which is mentioned on this TDR.

3.8.3.2 Payment Procedure of Term Deposit Receipt

The payment procedure of TDR is only made through account no counter payment is made for this Term Deposit Receipt. Customer transfer this TDR at the expiry of this TDR in to his own account and than present a cheque and mention the required amount which he wants to withdraw.

3.8.3.3 Deduction of Zakat Thereon

74 Because TDR is profit oriented instrument so thats why zakat is applicable on it, now the percentage of zakat which is deducted form the whole amount which is available in his account is 2.5%. So this is the simple rule of Zakat deduction 3.8.3.4 Voucher in Sheet of TDR Dr Cheque TO CR Term Deposit Receipt(General)

3.8.4 Call Deposit Receipt

CDR is just like a hard cash, basically CDR is used for transfer purpose means amount transfer from one account to another account, CDR is used for Bidding purpose or some time government introduces different housing scheme and here he mentioned that you must submit the CDR instead if net cash, but in now a days when the government of Pakistan impose .2% withholding tax of the amount which is withdrawal over RS.25000/- in a day

3.8.4.1 Issuance of Call Deposit Receipt

Receive the request letter from customer and also receive the cheque and verify this cheque weather this post dated, stale cheque or not and also check the sign verification of this customer which is mentioned on this cheque and compare with signature card which is scanned in computer.

75 Than send this cheque for posting here and see that is it enough amount in his account which he written down on this cheque, if yes than further processing.

Fills the CDR block and write down the following information on it

Issue date of this CDR In favor of On account of Amount in wards Amount in figures CDR serial number i.e. 58/07 Than take the signature, account number his contact number at the back side of the copy which we kept as record Paste stamps on this cheque that is Branch crossing stamp Transfer stamp on this cheque Charges of CDR Bank charge Rupees 50/- per CDR 3.8.4.2 Enter these vouchers into Transfer sheet Debit Cheque TO Credit CDR

76 Also made commission voucher, and this commission is deducted from his account the customer may this commission charger through cash or I can charge from his account Debit Account TO Credit MISE Earning (General)

3.8.4.3 Maintenance of Records of CDR

For the purpose of maintenance of CDR record I used the CDR register. This register uses to write down the following things

Date of Deposit Deposit number i.e. 58/10 Deposit Receipt i.e. 770012 Depositor name Account number Due Date (At Call)

At Call means that the bank will provide the same amount to the customer who made this CDR at any time.

Payment procedure of Call Deposit Receipt

77 The customer whose name, account number is mentioned on this CDR he is only person who can take this amount through his account not in counter payment. Basically CDR is mostly used for transfer purpose thats why his payment is made only through account.

3.8.4.4 DIFFERENCE BETWEEN CDR AND TDR:

CDR

VS

TDR

Non interest bearing instrument instrument Demand at Call period No Zakat is deducted Use for Transfer Purpose Charges on CDR

Interest

bearing

Demand after the specific

Zakat is deducted Use for saving Purpose No Charges on TDR

3.9 Clearing
Fund transfer between two banks and branches is called clearing There are two types of clearing Outward clearing Inward clearing

78

Outward clearing
Outward clearing is to send the cheques to other branch There are three types of outward clearing 1. Same day clearing 2. Normal clearing 3. Inter city clearing

1. Same day clearing In same day clearing send the cheque in the morning and receive the payment in the evening, There are two conditions in the same day clearing Cheque will be 500000 or above Member of the same day

2. Normal clearing In normal clearing send the cheque today and receive the payment next day. No condition will impose in normal clearing like same day clearing. 3. Inter city clearing Clearing between two cities is called intercity clearing. In inter city clearing cheque will clear in two or three days. To understand the process of clearing we first need to understand and comprehend the workings and the purpose of the state banks institution called NIFT.

79 3.9.1 NIFT (NATIONAL INSTITUTIONAL OF FACILITATION TECHNOLOGY)

In the process of clearing NIFT plays a very important role. NIFT (national institutional facilitation technology) has a very vital role as it is the middle man in the purpose of clearing and issuances of cheque books to the customer on demand of the bank or branch. This institution has been formed by the State Bank of Pakistan and it performs the duties of receiving all the clearing cheques from all the branches of all the banks and taking them to the state bank. At the SBP first the NIFT forms a list of all the cheques from all the banks and then forwards it to the SBP representative. That person categorizes all these cheques according to their respective banks and branches and forms another list of his own. Then these sorted cheques are again given to the NIFT agent and he then takes them to the head offices of their respective banks and from there they are distributed to the respective branches also through NIFT. This way NIFT delivers all the cheques to their parent branch from which they have been issued.

3.9.1.1 FLOW CHART OF WORKING OF NIFT

80

3.9.2 In Ward Clearing

In the morning time I am received the in ward clearing from the NIFT employee and then I count the instruments which I received and match with the summery which is also attached with these instruments. Than give these instruments to the computer operator who posts these instruments, after posting all these instruments then he again give me the instruments and I enter all these instruments into the clearing sheet in his Debit side. Memo on Cheques Return Also prepare the Memo on (S.F 16) in which the details of objections are given that for purpose we return this instrument, and charge RS 200/- per instrument

Calculate the Difference Vouchers of Clearing

81

Difference voucher means the difference between the Out ward Clearing and In Ward Clearing. If the liabilities are outstanding on our side which means that our branch will pay this difference amount than I will prepare the H-O Credit Voucher, and if the Liabilities are outstanding on there side which means that now we are receiving the difference amount so I will prepare the HO Debit Voucher. If liabilities are outstanding on our side than made Credit voucher If liabilities are outstanding are on there side than made Debit Voucher

Calculate the Difference Vouchers of Clearing Return I have also made the difference voucher of those cheques which are R.U.P means Return Un Paid. Means those cheques which our branch is returned and those cheques which other banks returned our cheques which we send for clearing and it had been rejected If liabilities are outstanding on our side than made Credit voucher If liabilities are outstanding are on there side than made Debit Voucher Than finally enter all these difference vouchers in to the clearing sheet and balancing with the computer. So this the complete process of Clearing. 3.9.2.1 FLOWCHART OF INWARD CLEARING

82

Customer Gives cheque Of MCB to Other party

CHQ holder Goes where he has his own A/C

At evening Bank send That CHQ to

Bank keeps CHQ and Makes Transaction

NIFT send MCB CHQ next Morning to that Branch whose Name is mention On CHQ

MCB receives CHQ and checks The following Things

NIFT transfer Amount to the Drawer bank

Their own branch instrument Date of instrument Date of clearing Over writing Amount in figures Amounts in words

MCB Dr. the A/C Of customer and Cr. A/C of NIFT

83

3.9.3 OUTWARD CLEARING

When the account holder of our bank receives payment from any other party in the form of cheque, and that cheque is not of our bank or branch, and our account holder deposits it in his MCB account then that cheque has to pass from the process of outward clearing.

All the cheques deposited in one day of other banks are then again sent through the NIFT to the SBP which sends them to the head offices of their respective banks which through NIFT sends the instruments to the respective branches from which they were issued. This process of outward clearing is exactly opposite to the process of inward clearing which I explained in detail before. This process of outward clearing is also of three days.

3.9.3.1 Procedure of Out Ward Clearing

First of all receive the instrument from different customers which they present on our branch.

Separate these instruments with in city clearing wise and inter city wise. Giving the receiving slip to the customers. Write Down the detail of these entire instruments which I received from customer in to the Clearing Register. Paste the Cross Stamp and clearing stamp at the front of these instruments Face. Paste the Payees Account Credited stamp at the back of these instruments.

84 Calculate the amount of all these instruments Prepare the delivery summery report Prepare the Clearing Bundle Cover Also prepare the Add List

After each and every thing is completed now put all these instruments into the NIFT bag and closed this bag with seal. Than the third copy of delivery summery along with deposit slips keeps in our custody, and then enter all these vouchers in to the clearing sheet in his Credit side so this is the complete procedure of out ward clearing.

3.9.4 Intercity Clearing

There is the new concept of clearing which is named as inter city clearing. State Bank of Pakistan now revises his policies and introduces this concept, because before this action if any instrument which is belong to out of city, so in order to clear this instrument we sent this cheque through CC Cheque Collection. Under cheque collection procedure it took five to six days which time taking even though the CC procedure is not yet finished but minimum up to the certain extent. Now in most of the big cities inter city Clearing performing his job instead of CC, with the help of inter city clearing time duration is definitely minimum.

85 Facility of Inter City Clearing is now offer in these cities Karachi Lahore Mulatn Gujranwala Rawalpindi D.G Khan Hyderabad Islamabad Sialkot Bahawalpur Quetta Peshawar

3.9.4.1 Procedure of Intercity Clearing

First of all receive the instrument from different customers which they present on our branch. Separate these instruments inter city clearing wise. Giving the receiving slip to the customers. Write Down the detail of these entire instruments which I received from customer in to the inter city Clearing Register.

86 Paste the Cross Stamp, clearing stamp and inter city stamp at the front of these instruments face.

Paste the Payees Account Credited stamp at the back of these instruments. Calculate the amount of all these instruments Prepare the delivery summery report for each city Prepare the Clearing Bundle Cover for each city

After each and every thing is completed now put all these instruments city wise into the separate envelope of every city and all these envelopes put in to the NIFT bag and closed this bag with seal. Than the third copy of delivery summery along with deposit slips keeps in our custody city wise. But inter city payment procedure is different I can not credit the particular account until or unless I am receive the NILL value voucher through NIFT, and also receive the summery from NIFT about all these instruments which I am sent separately into different cities. When I receive the NILL value voucher then enter these vouchers into the clearing sheet

Dr H-O To Cr A /C

Also charge the commission on inter city Clearing which is RS 200/- per instrument. And also made the commission voucher that is account Debit and Mise Earning is Credit

87 Dr A /C TO Cr Mise Earning (General)

3.10 Lockers
Basically it is a facility which is provided by the bank to its customers in order to secure there money gold important property documents etc. before this locker concept people are very much worried about the lose of there money, gold and important documents so now the people are very much relax because now they use this facility quite frequently.

3.10.1 Issuance of License

It is not an easy task to get the licence of opening the locker facility in the branch for every bank, for this purpose the bank should get permission from State Bank of Pakistan who is the bankers bank; with out his permission no body can provide this facility to the customers. The branch who wants to get licence he must sent a written request letter to State Bank than the state bank officer visit this branch and see that is there enough place to provide the licence of lockers to this branch or not? If they are satisfy they charge the licence fee from this branch.

3.10.2 Types of Lockers

Small Size

(Rent RS 1400 per Annum) 16% FED Rs.224 (Key Security Rs.2000)

Medium Size

(Rent RS 2200 per Annum) 16% FED Rs.352 (Key Security Rs.2000)

88 Large Size (Rent RS 3500 per Annum) 16% FED Rs.560 (Key Security Rs.2500)

3.10.3 Insurance of Lockers

Bank will also pay the insurance on behalf of this lockers so in case of any bank misshape then the insurance company will accept the certain claim but it depends open the size of the lockers Small Size Locker Claim up to RS 500,000/Medium Size Locker Claim up to RS 10, 00,000/Large Size Locker Claim up to RS 15, 00,000/-

3.10.4 Renewal / Expiry of Lockers

Usually the time period of this facility is one year, at the end of the time period the bank will ask to the client that weather he will continue this facility or not if the customer says yes then he will pay the charges again in order to use this facility which is provided by the bank.

Procedure of Use of Lockers One key is given to the customer and the other key is handed over to any bank person who is the authorized person, and the locker is opened with both keys. The authorized person who keeps keys He/She note following things Customer name Signatures of customers Time of lockers operating Account number

89 Leaving time

Customers can use this locker during the banking hour that is 9: Am to 5: PM.

Chapter # 3 Self Experience

Dressing (Suiting) Regularity Punctuality Account Opening Account Closing Account activation Stop Payment

Interaction with peoples & professional

Issuance of Cheque Book Remittance Clearing Counter services Symbols software Facing stress environment

90

Chapter # 4 Financial Analysis of MCB

4.1 Horizontal Analysis
Muslim Commercial Bank Limited Balance Sheet As on 31st December 2008 2009 Assets Cash and balances with treasury banks Balances with other banks Lending to financial intuitions Investments Advances Operating fixed assets Deferred tax assets Other assets 32,465,976 6,577,017 21,081,800 63,486,316 198,239,155 9,054,156 172,373 11,031,450 342,108,243 Liabilities Bills payable Borrowings Deposits and Other accounts Sub-ordinated loans Deffered tax liabilities Other liabilities Net assets Represented by: Share capital Reserves Unappropriateed profit 7,089,679 23,943,476 257,461,838 1,597,440 11,171,496 301,263,929 40,844,314 5,463,276 24,662,426 5,530,973 35,656,675 10,479,058 39,406,831 292,098,066 479,232 1,180,162 11,722,493 355,365,842 55,119,675 6,282,768 34,000,638 5,130,750 45,414,156 48% 65% 13% -70% 5% 18% 35% 15% 38% -7% 27% 39,683,883 3,807,519 1,051,372 113,089,261 218,960,598 16,024,123 17,868,761 410,485,517 22% -42% -95% 78% 10% 77% -100% 62% 20%

(2009-2008)/2008

91 Surplus on revaluation of assets 5,187,639 40,844,314 9,705,519 55,119,675 87% 35%

Muslim Commercial Bank Limited Profit and Loss Account As on 31st December 2008 Markup/ return/ interest earned Mark up/ return/ interest expense Net mark up/ interest income Provision for dimininution H52in the value of investment Provision against loans and advances Bad debts written off directly Net mark up/interest income after provisions Non mark up/interest income Fee, commission and brokerage income Dividend income Income from dealing in foreign currencies Gain on investment Unrealized gain/ loss on revaluation of investment Other income Total non mark up interest income Income after interest income Non mark up/interest expense Administrative expenses Other proposition/write off Other charges Total non mark up/ interest expense Profit before taxation 6,482,592 11,411 66,708 6,560,711 18,500,670 5,022,416 -3,743 540,594 5,559,267 21,308,035 -23% -133% 710% -15% 15% 2,311,235 811,801 692,010 605,865 570,505 4,991,416 25,061,381 2,634,610 632,300 693,408 1,500,865 -13,105 563,213 6,011,291 26,867,302 14% -22% 0% 148% -1% 20% 7% 25,778,061 4,525,359 21,252,702 2009 31,786,595 7,865,533 23,921,062 (20092008)/2008 23% 74% 13%

121,197 1,014,540 47,000 20,069,965

105,269 2,959,583 199 20,856,011

-13% 192% -100% 4%

92 Taxation-Current year Prior years Defferd Profit after taxation Unappropriate profit brought forward Transfer from surplus on revaluation of fixed assets Profit available for appropriation Basic/diluted earning per share 5,701,443 593,497 63,332 12,142,398 4,990,260 32,166 5,022,426 17,164,824 23.4 6,442,356 -1,294,473 894,590 15,265,562 5,530,973 11,855 5,542,828 20,808,390 24.3 13% -318% 1313% 26% 11% -63% 10% 21% 4%

4.2 Vertical Analysis

Muslim Commercial Bank Limited Balance Sheet As on 31st December

2008 Assets Cash and balances with treasury banks Balances with other banks Lending to financial intuitions Investments Advances Operating fixed assets Deferred tax assets Other assets

vertical

2009

vertical

32,465,976 6,577,017 21,081,800 63,486,316 198,239,155 9,054,156 172,373 11,031,450 342,108,243

79.5% 16.1% 51.6% 155.4% 485.4% 22.2% 0.4% 27.0% 837.6%

39,683,883 3,807,519 1,051,372 113,089,261 218,960,598 16,024,123 17,868,761 410,485,517

72.0% 6.9% 1.9% 205.2% 397.2% 29.1% 32.4% 744.7%

Liabilities Bills payable Borrowings Deposits and Other accounts Sub-ordinated loans Deffered tax liabilities Other liabilities 7,089,679 23,943,476 257,461,838 1,597,440 11,171,496 17.4% 58.6% 630.3% 3.9% 27.4% 10,479,058 39,406,831 292,098,066 479,232 1,180,162 11,722,493 19.0% 71.5% 529.9% 0.9% 2.1% 21.3%

93
301,263,929 Net assets Represented by: Share capital Reserves Unappropriateed profit 40,844,314 737.6% 100.0% 355,365,842 55,119,675 644.7% 100.0%

5,463,276 24,662,426 5,530,973 35,656,675 5,187,639 40,844,314

13.4% 60.4% 13.5% 87.3% 12.7% 100.0%

6,282,768 34,000,638 5,130,750 45,414,156 9,705,519 55,119,675

11.4% 61.7% 9.3% 82.4% 17.6% 100.0%

Surplus on revaluation of assets

Muslim Commercial Bank Limited Profit and Loss Account As on 31st December 2008 Markup/ return/ interest earned Mark up/ return/ interest expense Net mark up/ interest income Provision for dimininution H52in the value of investment Provision against loans and advances Bad debts written off directly Net mark up/interest income after provisions Non mark up/interest income Fee, commission and brokerage income 2,311,235 Dividend income 811,801 Income from dealing in foreign currencies 692,010 Gain on investment 605,865 Unrealized gain/ loss on revaluation of investment Other income 570,505 Total non mark up interest income 4,991,416 Income after interest income Non mark up/interest expense 19.0% 6.7% 5.7% 5.0% 4.7% 41.1% 2,634,610 632,300 693,408 1,500,865 -13,105 563,213 6,011,291 17.3% 4.1% 4.5% 9.8% -0.1% 3.7% 39.4% 176.0% vertical 2009 vertical 208.2% 51.5% 156.7%

25,778,061 212.3% 31,786,595 4,525,359 37.3% 7,865,533 21,252,702 175.0% 23,921,062

121,197 1,014,540 47,000

1.0% 8.4% 0.4%

105,269 2,959,583 199

0.7% 19.4% 0.0013% 136.6%

20,069,965 165.3% 20,856,011

25,061,381 206.4% 26,867,302

94

Administrative expenses Other proposition/write off Other charges Total non mark up/ interest expense Profit before taxation Taxation-Current year Prior years Defferd Profit after taxation Unappropriate profit brought forward Transfer from surplus on revaluation of fixed assets Profit available for appropriation Basic/diluted earning per share

6,482,592 11,411 66,708 6,560,711

53.4% 0.1% 0.5% 54.0%

5,022,416 -3,743 540,594 5,559,267 21,308,035 6,442,356 -1,294,473 894,590

32.9% 3.5% 36.4% 139.6% 42.2% -8.5% 5.9% 100.0% 36.2% 0.1% 36.3% 136.3%

18,500,670 152.4% 5,701,443 593,497 63,332 47.0% 4.9% 0.5%

12,142,398 100.0% 15,265,562 4,990,260 41.1% 5,530,973 11,855 5,542,828 20,808,390 24.3

32,166 0.3% 5,022,426 41.4% 17,164,824 141.4% 23.4

4.3 RATIO ANALYSIS

4.3.1 PROFIT TO DEPOSIT RATIO

PROFIT / INTEREST TO DEPOSIT RATIO = PROFIT / INTEREST DEPOSIT

Profit Deposit Ratio (%)

2009 15,265,562 292,098,066 5.2%

2008 12,142,398 257,461,838 4.7%

This ratios is expressing the positive trend in 2009. Deposited increased and profit on deposits also increase.

4.3.2 RETURN ON AVERAGE EQUITY (ROE)

95

RETURN ON EQUITY CAPITAL RATIO =

NET PROFIT AFTER TAX EQUITY CAPITAL

Profit After Tax Equity Capital Ratio (%)

2009 15,265,562 45,414,156 33.61%

2008 12,142,398 35,656,675 34.05%

It is negative trend as compare to 2008. Equity Capital increased in 2009 but return is very low.

4.3.3 RETURN ON AVERAGE ASSETS (ROA)

RETURN ON ASSETS RATIO = NET PROFIT AFTER TAX AVERAGE ASSETS

96

Profit Average Assets Ratio (%)

2009 15,265,562 410,485,517 3.7%

2008 12,142,398 342,108,243 3.5%

Increasing trend in 2009 of return on assets. Profit margin increase in 2009 as compare to 2008

4.3.4 FIXED DEPOSIT TO TOTAL DEPOSIT RATIO

FIXED DEPOSIT TO TOTAL DEPOSITS RATIO = FIXED DEPOSIT TOTAL DEPOSITS

Fixed Deposits Total Deposits Ratio (%)

2009 43,578,126 292,098,066 14.9%

2008 42,589,457 257,461,838 16.5%

Fixed Deposits are more than 2008. Total Deposits are also more than 2008. But with decreasing ratio It is not good trend

4.3.5 PROFIT TO ADVANCES RATIO

INTEREST / PROFIT TO ADVANCES RATIO =

INTEREST / PROFIT ADVANCES

97

Profit Advances Ratio (%)

2009 15,265,562 218,960,598 6.97%

2008 12,142,398 198,239,155 6.12%

Profits are more in 2009 as compare to 2008. Advances Increases in 2009 It good trend.

98

4.3.6 ADMIN EXPENSES TO DEPOSIT RATIO

ADMIN EXPENSE TO DEPOSITS RATIO =

ADMIN EXPENSE TOTAL DEPOSITS

Admin Expenses Deposit Ratio (%)

2009 5,022,416 292,098,066 1.71%

2008 6,482,592 257,461,838 2.51%

Admin expenses are less as compare to 2008 Deposits increases in 2009 Its over all good trend

102

Chapter # 5 SWOT ANALYSIS

STRENGTHS

MCB is Successive and Market oriented. MCB investing huge sums on HR development and training. Customer default rate is lower as compared to other banks. MCB has the largest ATM network in the country. Meeting the challenges of latest Technology by introducing Smart card remit express, mobile banking etc. One of the major strengths of MCB is that it has very stable deposit base.

103 MCB is largest private bank in Pakistan with around 1000 branches, which cover almost every part of Pakistan. The bank enjoys competitive advantage over other banks in Pakistan. The bank enjoys competitive profitability in the industry. MCB has captured majority of potential customers in Pakistan. MCB has the accounts of big organizations like OGDCL, PTCL, EFU, PTC etc.

WEAKNESSES

Low motivational level Employees, dissatisfaction due to ill treatment and improper reward system. Favoritism and Nepotism in recruitment. High Employees Turnover. Decision making process is very slow. It is not having greater no. of branches abroad. Though ATM network is the largest in Pakistan, still some potential areas dont have the ATM. MCB RTC is useable only in Pakistan. Some management positrons needed are not professional. Although most of the branches are computerized now, still some important branches dont have computers. Less efficiency of SYMBOL System due to disconnectivity

104

Opportunities

Leasing sector is growing in Pakistan for the last two to three years which provides opportunity to MCB to go ahead in this area as well. MCB is providing Consumer Finances at comparatively lower rates which paves a way to grab more customers Financing to small/medium cottage industries will definitely increase its advances and profitability as well. Islamic Trading Based Banking can enhance the business of the bank. Overseas Operations. Launch the more effective and modern banking online system.

THREATS

Other private commercial bank with sound profitability is also a threat to MCB e.g. UBL, Alfalah, HBL etc. For the last of many years, Pakistan is facing economic and political instability which is a big threat. Afghan war and Iraq war has a deep effect on the economy of Pakistan, which may affect MCB. Foreign banks are flourishing in field of consumer financing. People dont prefer banking culture. They mostly prefer cash transactions

105

Chapter # 6 CONCLUSIONS

With Cooperation of all branch members, I have been able to learn and experience many new things related to the banking sector and the banks workings. I am able to handle the public with respect to many different workings on many different instances and also in account opening for customers and can handle many other tasks as well. Finally I concluded that MCB is a good organization for a person for his long term career workings. Overall working and environment of the bank is very comfortable and the staff is very helpful and respectful of each other and it still maintains a professional environment. Management of the bank is very strong.

Employees of MCB Timber Market branch work more than their working hours and all the workings take place in a very friendly atmosphere that does not induce pressure on the person working there. It also shows their loyalty and commitment to the organization. This branch of MCB relatively small and has climbed its way up very quickly and all that only because of the employees efforts and consideration for each other

Understanding and the effective management of the human resources is the most difficult challenge faced not only by the bank but by all the organizations. Even though the people have been sacrificed in the new organizational developments, it is becoming clear that the true lasting competitive advantage comes through human resources and how they are managed. MCB seems

106 to not focusing on this highly critical issue as the job satisfaction level of the employees working at MCB, was quite low.

Chapter # 7 RECOMMENDATIONS
After doing a deep study and witnessing everything that goes on in a branch, I would then like to make the recommendations that; First of all, the management needs to overlook the major problems that the organization is currently facing and then develop strategies to eradicate them. Some of the suggestions that I would like to give at the end are:

Promotion and Mass Media Publicity MCB Bank can improve its Marketing strategies to acquire more promotion and mass media publicity by the use of effective channels of promotions like TV, Newspaper Advertisements. It can also improve its magazine publication that it releases each month.

Need introduce friendly Products In order to compete in the ever-expanding market both nationally and internationally, introducing new and efficient products is one of its major requirements.

Centralized Structure Centralized Structure that enables employee involvement needs to be formed.

107 Better Reward System Better reward system is one of the most important requirements in order to reduce the problem of Employee retention and improve Employee motivation.

Continuous Training of Employees Creation of enhanced performance appraisal system Implementation of enhanced Marketing system Continuous lecture on better communication of staff with customers

ATM Machines Maintained ATM machine must be maintained properly to make it more convenient for the customers and to decrease the load of work to the employees of the bank especially in the salary days.

Staff Member I have observe during working that there need of more staff due to pressure of work MCB should hire more employees for better performance even any employee when take leaves Manager has no choice to his work to other employee so this situation built high pressure.

SYMBOL SYSTEM To make the SYMBOL system more efficient and make sure its connectivity all the time in order to provides more convenience to customers.

108 Job Rotation for Employees MCB should to make the strategy where make the job rotation of employees

WORK PERFORMED DURING INTERNSHIP

My internship provided me a great opportunity to learn & experience different banking practices. During the six weeks of my internship I got a good chance to see what the actual banking is regarding the operations performed at my branch i.e. account opening, remittance, clearing and deposit department.

1st week:
During the first week of my internship, I learnt these things at the account opening/maintenance department: TO OPEN THE ACCOUNT TO SET THE ACCOUNT NO. STAMP. TO FILL IN THE DEPOSIT SLIP TO ISSUE A CHEQUE BOOK

TO OPEN THE ACCOUNT:

During my internship, I opened two types of account; single account Joint account

109

1) SINGLE ACCOUNT:
I monitored three types of accounts under this head along with documentation required for these accounts. Account of a literate person Account of a salaried person Account of an illiterate person

2) JOINT ACCOUNT:
Besides opening this account I was provided with the following information regarding JOINT ACCOUNT by manager ops. how a joint account is affected by the death of one joint

account holder: 3) PARTNERSHIP ACCOUNT:

I did not open this account personally, but I know the following regarding PARTNERSHIP ACCOUNT. documents needed to open this account Moreover the operation manager told me these things regarding the partnership account: Death of a partner: Admission of new partner Documents required in case of a new partner

110

ACCOUNT MAINTENANCE ACTIVITIES:

Related to the account maintenance activities, i have learnt these things:

1) Cheque book issuance to the existing /new account holder: 2) Issuance of smart card (ATM) to the existing/ new account holder:

Other things which I have learnt about ATM involve: ATM Card Categories ATM Card Features Fund Transfer via ATM ATM Card Charges Delivery & Custody of ATM Card

2nd week:
My 2nd & 3rd weeks of internship were at remittance department, where I learnt the following things: Study of different types of vouchers related to the TRANSFER To fill a voucher for online transfer Online transfer via cheque To issue a demand draft via cheque To post the voucher for online transfer & DD Got some information about pay order from the relevant officer To make a TT to transfer access money to the head office

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3rd week:
My 4 th week was in the cash cabin and I performed following work there: To make the online transfer voucher via cash To post these vouchers To issue a DD via cash To post the vouchers for this DD Study of cash book Study of cash position book Visit to strong room How the cash is maintained in strong room

4th week:
During the 5th week, I worked with the operation manager and learnt about his working. How he checks the daily vouchers related to transfer, cash and clearance departments I have some idea about the opening & closing of bank but not have a through grip on it. How the manager ops authorize various transactions I also have some idea about the DAILY GENERAL LEDGER REPORT

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5th week:
Issuance of RTC (Against Cash) Issuance of RTC (Against Account): Encashment of RTC Cheque deposit & withdrawal through clearing

6TH week:
I did miscellaneous work in the last week of internship: What is the function of a feeding/pooling branch? What is the inter branch Dr/Cr advice Study that how CDRs are issued How an account is made exempted from ZAKAT. Study of key book

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Chapter # 8 Glossary

MCB ATM FED WHT TDR CDR PBA BBA PLS TD AOF AMO KYC SSC GBO ICO CSO DD PO

Muslim Commercial Bank Automatic Teller Machine Federal Excise Duty with Holding Tax Term Deposit Receipts Call Deposit Receipts Personal Banking Advisor Basic Banking Account Profit and Loss A/C Term Deposit Account opening Foam Account maintenance officer Know your customers Specimen Signature card General banking officer Internal control officer Customer service officer Demand Draft Pay Order

114 FTA CPD NIFT TDR RTC IBC OBC MO HO Fund Transfer Application Central Processing Division National Institute of Facilitation Technology Term Deposit Receipt Rupee Travel Cheque Inward Bills for Collection Outward Bills for Collections Main Office Head Office

9.1 References
Introduction: http://mcb.com.pk/mcb/about_mcb.asp Vision / Mission: http://mcb.com.pk/mcb/mission_vision.asp Corporate information: http://mcb.com.pk/mcb/corporate_information.as Internship Activities: PBO (Mr., Sajid) BOM (Mr. Yasir) CSO (Miss sane) Remittance (Miss Amana) Financial Statement: Google.com.pk Ratios: Analysis of Financial Statement by Charles. P. Jones