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Normally many techniques are used for credit risk management in Pakistan by various
organizations ,my core subject for discussion is the banking sector, and I select the MCB
bank for the said purpose.

Introduction to Organization
Bank was Incorporated in July 1947 by Adamjee Group, UnderIndian Companies Act
VII of1913. Now Mr. Mian Muhammad Mancha is the Chairman of MCBBank Ltd.MCB
Bank has 1026Branches nationwide. MCB isPakistan’s fourth largest bank byassets
having an asset base ofUS$6.7 billion.
Organization Working
Mcb has the Business of Banking, Car Leasing, Visa
Cards, Credit Cards.
They Provide Loans, They Provide Customers Savings
and Current Accounts.
Vision Statement: To be the leading financial services
provider, partnering with thier customers for a more
prosperous and secure future.
Mission Statement: They are a team of committed
professionals, providing innovative and efficient financial
solutions to create and nurture long-term relationships
with their customers. In doing so, we ensure that our
shareholders can invest with confidence in them
Introduction to Issue
Our issue is to select any organization and
define the Techniques which they are
bieng using in order to minimize the credit
What is Credit Risk?
Credit Risk is the Risk of loss which is usually
faced by the one who offers the loan or
provide any thing on credit basis to any one.
Credit Risk can be faced by the following
Credit Risk can be Faced by Lenders to
Faced by lenders to Business
Faced by Business
Faced by Individuals
Techniques in order to minimize the Credit Risk in MCB Bank

FINANCIAL ANALYSIS:In order to minimize credit risk,

financial analysis is carried out to assess risk, repayment
capacity, liquidity, leverage and debt to equity ratio
Financial Statements i.e; Balance Sheet, Income Statement,
Cash Flow statement are the basis tools which are used to
carry out financial analysis.
Current Ratio which shows liquidity position of a certain
Acid test ratio is used to ascertain the ultimate liquidity
position of the business
Timely payment of markup on
quarterly basis and completion of other formalities of Bank
shows repayment capacity.
: Financial background of a particular borrower helps in making credit decision in
sanction credit. Credit Reports of the borrower can be obtian from
other banks, CIB Report, Search Report etc.
Repayment behavior can also be assessed by market reputation and
goodwill of a particular borrower. Financial Statements, CIB
Report also shows borrower's behavior towards debt
servicing behavior. For this purpose MCB using tools like CIB
(Credit information Bureau) Report, Search Report from ICIL.
MCB secure lending by means
of primary security i.e; hypothecation, pledge, lien etc.
SECONDARY SECURITY: MCB secure its financing by
way of secondary security in shape of Mortgate i.e;
Registered Mortgage, token mortgage and Equitable
mortgage in order to secure its loans.
MCB is the pioneer in
Basel II Implementation and Credit Risk Assessment of
world class standard. MCB does not compromise on
legal documentation.
:Inorder to safe bank's interest, MCB arrange legal opinion
and vetting from senior advocate registered with MCB Panel.
Data Collection
 1. Mostly Data Collected By Visits. Two Visits to MCB
Trunk Bazar Branch Sialkot, and One Visit to Mcb
Regional Office Paris Road Sialkot.
 2. Other In Internet Searching.
 3. Book Study
 4. My Own Information.
 5. Some Information Obtained from Friends

S.W.O.T Analysis
 As when Bank Takes Primary and Secondary Security from the Customer to
Which the loan is offered then the Bank Loan Get Saved. If the Customer Fails to
Return the Loan the Bank can Recover its Amount by Selling the Securities such as
Mortgage etc.
 The Weak Point is that if Customer is Fraudulentor Get disappears some where
then the bank be not be able to recover its amount.
 Or If the documents given to Bank are not Legal then bank have to afford the
 Or when Customer gets insolvent and its Property which is pledged by Bank is
not sufficient to recover all the debts then the Bank have loss.
 As we know that the Business is the name
of Risk, if they want to survive in the World
of Business then they have to take Risks,
by taking and facing these Risks the
Business can gets valuable Customers.
The Business can get many opportunities
to expand its business.

 There are also many kind of Threat which prevails in
MCB in the Sanction of Loan.
 1. The Threat of Fraud by Customer.
 2. The Threat of Customers Insolvency.
 3. The Threat of Centralizing or Decentralizing of Banks
by Government.
 4. The Threat of Illegal Documentation.
 5. The Threat of deficiency in the Pledged property.
 5. The Threat of Credit Loss.
 6. The Threat of Fraud by Employees
 According to all above discussion, All techniques
discussed are sufficient to minimize the credit risk but still there are some weak
points such as if customer is fraud or if his purpose is to do fraud then may be the
bank will not be able to recover its amount
 Or if any Authority of the bank involves in fraud then the
bank may faces loss.
 The Recommendation is that If MCB want to

minimize the Credit Risk at extreme level then they should follow all the Steps
Discussed above(Financial Analysis, Repayment Capacity Securities Etc), they
should hire Honest, talented and Competent People, They should never Trust
Unknown Person who applies for the loan, firstthey should full fill all the
requirements which has been discussed before the sanction of loan.