Chapter 1

PROFILE OF INDUSTRY THE BANKING SECTOR

1
1.1 PROFILE OF THE INDUSTRY

Commercial banks operating in Pakistan are going through a transitory period. Avoiding
the transition is not possible. The factors responsible for gradual but profound change are
growing liquidity, declining interest rates and shrinking spreads. The yield on
government securities has also come down drastically. Till couple of years back
government securities were the biggest source of earnings for most of the commercial
banks. In the absence of corresponding growth in private sector demand for credit, banks
have no option but to explore new business potentials to resist decline in their
profitability.

The banking sector is experiencing drastic changes forcing the players to redefine their
strategies. State Bank of Pakistan continues to update and amend its regulations and
instructions to enable the commercial banks to improve their solvency and to enhance
their capital strength and competitive capabilities. The central bank has opened new
business opportunities by eliminating certain restrictions. Now banks are allowed to
implement their own credit policies. They enjoy more freedom to tap many segments of
the market, which were previously unexplored.

The consumer banking activities has enhanced as many players are coming up with
branded products. The competition in this area has intensified as larger banks continue to
play a significant role by improving the quality of products and services they offer. New
players have joined them with innovative solutions and new services benchmarks.
Competition in this area is expected to get fiercer. The winners will be those who could
excel in customer services, improve quality of products and continue innovations.

Local banks are posing a bigger challenge to foreign banks. Larger banks, having the
advantage of greater reach, are threatening the existence of smaller banks. Larger banks
have adopted a more aggressive but accommodating approach by focusing on client
needs, improving response time and increasing use of technology. Many banks have
started exploring rural areas with special focus on advances to agriculture sector and
related activities.

2
1.2 State of Economy
Before looking into the performance of commercial banks operating in Pakistan, it is
necessary to keep in mind the geopolitical conditions in the region, the adverse impact of
9/11 and subsequent events to which Pakistan could not remain immune. After the 9/11
the world plunged into 'synchronized global recession' affecting even the most developed
economies. As against them Pakistan's economy was very fragile and was suffering from
a number of structural problems, external debt crisis being the most contentious one.
However, in the post 9/11 era, the external debt issue has been resolved to a large extent,
easing the debt servicing pressure. Entry of fresh aid and grants and reduced debt
servicing requirements enabled the country to accumulate foreign exchange reserves. The
SBP's buying of foreign exchange from the market, in an attempt to avoid massive
appreciation of rupee against dollar, also helped in building foreign exchange reserves.
1.3 Banking Sector

Commercial banks operating in the country can be divided into four distinct categories,
private banks, foreign banks, privatized banks and nationalized commercial banks
(NCBs). The number of private banks has remained almost constant ever since they
commenced operations in early nineties. However, ownership of a number of private
banks has changed over the years. Lately, with the take over of Prudential Bank and
Platinum Bank by the new sponsors their names were changed to Saudi Pak Commercial
Bank and KASB Bank respectively. Earlier, ownership of Union Bank was acquired by
Standard Chartered, PICIC Commercial Bank was acquired by the NIB Bank and Prime
Bank was acquired by ABN Amro. National Bank of Pakistan has been listed at local
stock exchanges and parts of its shares were off loaded.

Meezan Bank was created as a result of merger of Al-Meezan Investment Bank and
Societe Generale. The first ever license to operate as a Scheduled Islamic Commercial
Bank was granted to Meezan Bank on January 31, 2002. Pakistan operations of Societe
Generale were amalgamated into Meezan Bank on May 01, 2002. At the end of year
2002 it had six branches, three in Karachi and one each in Islamabad, Lahore and
Faisalabad.

3
1.4 Outlook

After the good performance of the commercial banks, the operating environment for
banking sector poses great challenges particularly in the environment of declining interest
rates and shrinking spreads. Banks are forced to take new initiative to combat fierce
competition and eroding profits margins. Though the economy is set to grow, the growth
of banking sector will largely depend on the growth of private sector credit demand.

One of the key success factors for a commercial bank in future will be its ability to reach
out to its clients through multiple delivery channels, ranging from a traditional brick and
mortar branch network to a state-of-the-art customer contact centers, comprehensive
ATM network and Internet-based banking facilities.

Banks are expected to redefine their marketing strategy. Most of them will focus more
intently on retail banking products such as personal loans, small business finance,
mortgages and investment products, the consumers will be reached through technology
dependent channels of distribution such as ATMS, Debit and Credit cards. While there
has been persistent and substantial increase in deposits, the credit off take has remained
comparatively low. The commercial banks that are operating in Pakistan these days are
listed below.

1.5 BANKS OPERATING IN PAKISTAN

The banks that are members of the State Bank of Pakistan are listed below:
1.5.1 Government Owned Banks
1 Industrial Development Bank of Pakistan

2 Khushhali Bank

3 National Bank of Pakistan

4 SME Bank Limited

5 The Bank of Khyber

6 The Bank of Punjab

4
7 The Punjab Provincial Co-operative Bank Limited

8 Zarai Taraqiati Bank Limited

1.5.2 PRIVATIZED BANKS

• Allied Bank Limited

• Habib Bank Limited

• MCB Bank Limited

• United Bank Limited

1.5.3 PRIVATE BANKS

• Arif Habib Bank Limited

• Askari Bank Limited

• Atlas Bank Limited

• Bank Al-Falah Ltd.

• Bank Al-Habib Ltd.

• BankIslami Pakistan Ltd.

• Crescent Commercial Bank Ltd.

• Dawood Islamic Bank Limited

• Dubai Islamic Bank

• Emirates Global Islamic Bank Limited

• Faysal Bank Ltd.

• Habib Metropolitan Bank Ltd. (Merged with Habib Bank AG Zurich in October

2006)

5
 • JS Bank Limited

• KASB Commercial Bank Ltd.

• Meezan Bank Ltd.

• MY Bank Ltd.

• NDLC-IFIC Bank Ltd. (NIB)

• Saudi-Pak Commercial Bank Ltd.

• Soneri Bank Ltd.

• Standard Chartered Bank (Pak) limited (Re-constituted in December 2006)

1.5.4 DFIS (DEVELOPMENT FINANCIAL INSTITUTIONS)

• Pakistan Industrial Credit and Investment Corp. Ltd.

• Pak Kuwait Investment Company (Pvt) Ltd.

• Pak Libya Holding Company (Pvt) Ltd.

• Pak-Oman Investment Company (Pvt) Ltd.

• Saudi Pak Industrial and Agricultural Investment Company (Pvt) Ltd.

• House Building Finance Corporation

• National Investment Trust Limited

1.5.5 NON MEMBER BANKS

• Bank of Tokyo Mitsubishi UFJ Limited, Pakistan

• Network Micro Finance Bank Limited

• Rozgar Micro Finance Bank

• Tameer Micro Finance Bank Limited

6
 CHAPTER 2
PROFILE OF INSTITUTION MCB BANK

7
2.1 ABOUT MCB

MCB is one of the leading banks of Pakistan with a deposit base of about Rs. 280 billion
and total assets of around Rs.300 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.
This led to deterioration in the quality of the Bank’s loan portfolio and service quality.
Eventually, MCB was privatized in 1991.

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 and managing its non-performing
loans via improved risk management processes.

2.2 VISION STATEMENT

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

2.3 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 in us with confidence.

2.4 History & Background of MCB (Ltd)

MCB has an edge over other local banks, as it was the first privatized bank. The State
Bank of Pakistan has restricted the number of branches that can be opened by foreign
banks, an advantage that MCB capitalizes because of its extensive branch network.

8
Ten years after privatization, MCB is now in a consolidation stage designed to lock in the
gains made in recent years and prepare the groundwork for future growth. The bank has
restructured its asset portfolio and rationalized the cost structure in order to remain a low
cost producer.

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. The Bank provides 24 hour banking
convenience with the largest ATM network in Pakistan covering 30 cities with over 197
ATM locations. The Bank’s Rupee Traveler Cheques have been market leaders for the
past six years and have recently launched their Gift Cheque Scheme.

MCB looks with confidence at year 2007 and beyond, making strides towards fulfillment
of its mission, "to become the preferred provider of quality financial services in the
country with profitability and responsibility and to be the best place to work

9
2.5 ORGANIZATION CHART

ORGANIZATION CHART OF
M.C.B. Limited
Nishatabad FAISALABAD

Branch Manager

Finance Remittance Account IT Cash Clerical

Advances Department Department Department Department
Staff

Branch Manager

Advance Finances (G 2)

Remittance Accounts
Department Department
(G 3) (G 3)

Computer Operator

Cash Officers

Clerical Staff

10
2.6 Services of the MCB BANK

The bank provides all types of banking services such as:

• Deposits in local currency

• Deposits in Foreign Currency

• Advances to Businesses

• Advances to Trade

• Consumer Financing

• Agriculture Financing

• Corporate Financing

• ATM Facility

• Lockers Facility

• On-Line Banking

• E-Banking

• Commission free Remittance

• Collection of Utility Bills

11
CHAPTER 3
BUSINESS PROCESS OF MCB BANK

12
 3.1 BUSINESS PROCESS
The business processes here means all the activities that take place in a bank and I am
going to tell you about some processes which I experienced and worked on in the MCB
BANK during my period of internship here. These include the everyday processes which
take place in the bank and they are explained and discussed in detail further in the report.

3.2 ACCOUNT OPENING

To open a big account is one of the major objectives of the banks because when a
customer opens an account in the bank then the deposits belongs to that branch and the
business is carried out from these deposits.

To open an account an account opening form has been specifically designed for everyone
who wishes to open an account in that bank. I am just going to run you through some of
the important point to which the account opening form caters to and also I have attached
an account opening form at the end of the report for your viewing so that it might be
clearer to you and easily understandable.

• BRANCH NAME & CODE

The account opening form is designed for all the branches of the MCB BANK so it
has a single fixed format so first of all to make the form property of that branch, the
branch name and the branch code is to be mentioned very clearly.
3.2.1 TYPES OF ACCOUNTS
Here the type of account the customer chooses to open has to be selected by the client
as the bank offers many types of accounts. Some of the available accounts are
(i) Current deposit account
(ii) Profit & loss account
(iii) Basic Banking Account
(iv) Savings Extra

13
 (v) Business Account
(vi) Savings 365 Gold
(vii) Savings 365
(viii) Khushhali Bachat Account (KBA)
(ix) Smart Savings Account
(x) Enhance Savings Account
3.2.1.1 CURRENCY OF ACCOUNT
Here the client has the right the choose which currency he or she wants to operate
his or her account in as the rules are very different for an account in local currency
as compared to the account in foreign currency
3.2.1.2 TITLE OF ACCOUNT
Here the name which the client wishes to give to the account shall be written and the
account will be operated under that name.
3.2.1.3 CONTACT INFORMATION
In this category the information of the customer is mentioned by which he or she can
be contacted with. This includes, address, alternate address, phone number, cell phone
number, fax number and email address. This is very important because in specific
circumstances the bank may have the need to contact the account holder.
3.2.1.4 CATEGORY OF ACCOUNT
In this category it is selected by the client whether he wishes the account to be
individual, joint, proprietorship, public limited or private limited company account.
All these accounts have different requirements for opening.
3.2.1.5 OCCUPATION
The occupation of the client has to be mentioned here.
3.2.1.6 OPERATIONAL INSTRUCTIONS
In this category the account holder nominates anyone other than himself who may
also operate the account.
3.2.1.7 INTRODUCER / REFERENCE
This is one of the requirements to open an account. Reference of any other account
holder is needed to open an account because in case a person commits fraud then
the bank must have someone to question.

14
3.2.1.8 KNOW INFORMATION NEXT (KIN)
This is very important information to write the name of a close relative. This is taken
so that in case the account holder does not contact the bank for three years then the
bank would get in contact with the name mentioned as in the next to kin.
3.2.1.9 ADDITIONAL INFORMATION

In this the account holder mentions if he has any account in any other branches of
banks. This rationale shows the strength of the customer.
3.2.1.10 SPECIMEN SIGNATURE CARD
Along with the account opening form we also get the client to fill in and sign four
times on a purposely designed specimen signature card. We use this Specimen
Signature card to confirm the signatures on instruments issued by the client. This is
very important to prevent fraudulent cases. It is vital that we have this card filled
because from this we verify the signatures on the cheques before any value of money
can be transferred or paid in cash.

When the account opening form is completed the officer in charge must view the
original CNIC and also attach a photocopy of it. Also it is necessary to have an
introducer when to open an account. And it is also vital to obtain the CNIC of the
next to kin.

15
3.2.1.11 FLOWCHART OF ACCOUNT OPENING

Customer

Fill up a/c
opening
form NIC copy

Service
Letter if
Attach all required employee
Documents of the
client by officer
Reference
letter

Verification by Request
another officer application
on letter
pad if
business
A/C
Final
Verification
by Manager A/c No. is
entered in the
A/c opening form

Computer
Account of the
Generates the customer is opened
A/c No.

16
3.3 ACCOUNT CLOSING
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.

3.3.1 FLOWCHART OF ACCOUNT CLOSING

Cheque book returned

by the customer

Submit account closing

application form

Officer closes the

Account

Payment of all balance

in the account is made
by the bank

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3.3.2 Dormant / Inoperative Accounts:
Dormant or inoperative accounts are those accounts in which no transaction is happened
for the last six months or more than six months are called dormant accounts, and no body
comes into the bank and inform about this account or in other words we can say that
these are dead accounts.
3.3.3 Deceased Customer Accounts:
Deceased Customer Accounts are those accounts in which the actual account holder is
dead, but amount is still is available in his account is called deceased accounts, in order to
clear this problem if the relatives of this account holder came to the bank and inform that
this person is now no more, so the bank verify this statement that either it is true or not, if
it is true than bank asked to the relatives of this account holder that please provide us the
copy of death certificate of this account holder, than bank legally distribute the equal
amount of the remaining income which is left in his account.
3.3.4 Unclaimed Accounts:
Unclaimed Accounts are those accounts in which no transaction is occurred for the last
fifteen years, and no body come in to the bank and ask about this amount which is still
remaining in this account, than we send this amount to our Head Office and head office
will give this amount to the Government of Pakistan. Because no body claim this amount
for last fifteen years.
3.4 CLEARING
There are two types of clearing activities which take place in a bank
(i) Inward Clearing
(ii) Outward Clearing

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.
3.4.1 NIFT

NATIONAL INSTITUTIONAL OF FACILITATION TECHNOLOGY

18
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.

3.4.2 FLOW CHART OF WORKING OF NIFT

NIFT
Branches
of MCB

SBP State Bank of

Head Pakistan
office of (Sorting of cheques)
MCB

NIFT
3.4.3 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

19
give me the instruments and I enter all these instruments into the clearing sheet in his
Debit side.
3.4.3.1 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.
3.4.3.2 Calculate the Difference Vouchers of Clearing:
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 H-O Debit Voucher.

If liabilities are outstanding on our side than made Credit voucher i.e.
Cr
H-O
If liabilities are outstanding are on there side than made Debit Voucher i.e.
Dr
H-O
3.4.3.3 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 i.e.
Cr
H-O
If liabilities are outstanding are on there side than made Debit Voucher i.e.
Dr
H-O
Than finally enter all these difference vouchers in to the clearing sheet and balancing
with the computer. So this the complete process of Clearing.

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3.4.3.4 FLOWCHART OF INWARD CLEARING

Customer
gives cheque
of MCB to
other party

CHQ holder
goes where he
has his own
A/C

Bank keeps
CHQ and
makes
transaction
At evening
bank send
that CHQ to
NIFT send MCB
CHQ next
morning to that
branch whose
name is mention
on CHQ
Their own branch
instrument
Date of instrument
MCB receives
Date of clearing
CHQ and checks
Over writing
the following
Amount in figures
things
and words
NIFT transfer
amount to the
drawer bank
MCB Dr. the A/C
of customer and
Cr. A/C of NIFT

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3.4.4 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.
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.
• 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.

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3.4.4.1 FLOWCHART OF OUT WARD CLEARING

A/C holder of At evening Their own branch

other bank instrument
gives cheque to bank send Date of instrument
the A/C holder that CHQ to Date of clearing
of MCB Over writing
NIFT send MCB Amount in figures
CHQ next and words
The A/C holder
of MCB present morning to that
cheque in MCB branch whose
Cheque is. Other Bank Dr. the
A/C of his customer
and Cr. A/C of
NIFT

Bank keeps Other Bank

receives CHQ NIFT transfer
CHQ and and checks the amount to the
makes following things drawee bank
transaction

3.4.5 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.
Facility of Inter City Clearing is now offer in these cities

23
 • Karachi
• Lahore
• Mulatn
• Gujranwala
• Rawalpindi
• D.G Khan
• Hyderabad
• Islamabad
• Sialkot
• Bahawalpur
• Quetta
• Peshawar

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.
• 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

24
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
Dr
A /C
TO
Cr
Mise Earning
(General)

3.5 REMITTANCE FORM

Remittance form is used for the issuance of the following matters; these are equal to pure
cash and are issued only on the full payment of their amount plus their charges. They are,

• Term Deposit Receipt (TDR)

• Call Deposit Receipt (CDR)
• Demand Draft (DD)

25
 • Telegraph Transfer
• Pay Order

3.5.1 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 that’s why zakat is also applicable on it,
no commission is charged on this term deposit receipt

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. i.e.

• Date of issued TDR

• Received from
• On Account of
• Amount in wards
• Amount in Figures
• Also mentioned the TDR number on that is 58/15

26
 • 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

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.

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.

27
Deduction of Zakat Thereon:
Because TDR is profit oriented instrument so that’s 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.

Voucher in Sheet of TDR:

Dr
Cheque
TO
CR
Term Deposit Receipt
(General)
3.5.2 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, then the

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.
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 favour of
• On account of
• Amount in wards

28
 • 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

Enter these vouchers into Transfer sheet:

Debit
Cheque
TO
Credit
CDR
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)

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.

29
Payment procedure of Call Deposit Receipt:
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 that’s why his payment is made only through account.

DIFFERENCE BETWEEN CDR AND TDR:

CDR VS TDR
Non interest bearing instrument Interest bearing instrument
Demand at Call Demand after the specific period
No Zakat is deducted Zakat is deducted
Use for Transfer Purpose Use for saving Purpose
Charges on CDR No Charges on TDR
Payment through account Payment through account
3.5.3 Demand Draft:
This transfer remit is made when the customers need to send money to another city or
country. The original instrument is handed over to the customers and the name of the
receiver is printed on the DD. The bank keeps only the form of DD in which all the
information is given like Account number of sender and receiver, address of sender and
receiver and phone number of receiver on (SF100).

Procedure of Issuance of Demand Draft:

• First of all receive the request form from customers on SF 100, In this SF 100
customers writhe down the Favoring person’s name his account number, and also
mentioned the city name form where the demand draft is sent, also write down his
name account number is well on this SF 100, the customer should mention the
amount of this SF 100 which he is give to the other party. Than I calculate the
commission charges of the whole amount and mention on this form along with
postage charges and excise duty.
• Enter all the information into the Demand Draft out Ward Register and get the
DD serial number i.e. 58/ 70 etc. along with the DD block number on it.

30
 • Than prepare the Demand Draft
• After preparing the Demand Draft than the next process is to make the advice of
this Demand Draft send to the relevant branch.
• Than putting all this information into the Dak dispatch Register in order to get
reference number.

Commission Charges on DD
Up to 100000 010% Minimum RS 50
Over 100000 0.05% Minimum RS 100

Postages Charges is Rs. 75

Excise Duty charge 5 % of the Commission Amount
Also take the vouchers of DD into the Sheets i.e.
Debit
Cheque
TO
Credit
H –O
Also take the commission vouchers that is
Debit
Account
TO
Credit
Commission charges on DD
Postage charges on DD
Excise Duty on DD

3.5.3.1 Procedure of In Ward Demand Draft:

Some time receive the advice of demand draft which is drawn on us.
First of all enter this advice in to the Dak Received Register and paste the Dak
received stamp on it.
Enter this DD advice in to the DD payable Register.

31
 Also made the voucher in to the sheet when I receive only the advice of this DD

Debit
H–O
TO
Credit
DD Payable
And when I receive the original Demand Draft then the made the two more voucher DD
payable Debit to Account Credit
Debit TO Credit
DD Payable Account

And also mark the date in to the DD Payable register the date in which I received this
original DD and amount credit to the account.
3.5.3.2 Cancellation Procedure of Demand Draft:
• Receive the Request letter form customer in his letter pad or plane paper.
• Purchaser along with Demand Draft physically comes to the branch
• Under DD cancellation no need to sign or stamp of the favoring Person but some
time
• Purchaser is the authorized person to cancel this Demand Draft.
• If i have already sent the DD advice to the relevant branch than I will send the
Debit voucher by the same amount in which the DD is made because if I did not
send the Debit voucher to the branch the entry will outstand in there side so in
order to clear this entry I will send this Debit voucher to the relevant branch.
• Commission charges for DD cancellation are
RS 100/- charge form Account Holder
RS 150/- Charge from Non Account Holder.
• Cancellation code of Demand Draft is 0543

3.5.3.3 Issuance of Duplicate Demand Draft:

32
 Reason for duplicate demand Draft:
It may be lost.
It may be theft by some body.
It may be tore in to pieces.

Procedure of Duplicate DD:

• First receive the request letter form customer

• Also fills the (CF 15) indemnity Form in this form the customers gives the under
taking that in this particular time period if the payment is made on this DD than
the bank is not responsible for this action, and he also said that during this period
if he founds the original DD than he will not present again this Demand Draft for
payment purpose.
• Charges for Duplicate Demand Draft 5
RS 200/- for Account Holder
RS 250/- for Non Account Holder
• Then I sent the copy of the customer request letter along with the CF 15 to the
relevant who will respond this Demand Draft and ask the current status of this
Demand Draft is the payment is paid or not, and if payment is made on behalf of
this demand Draft than we will provide the complete information the customer
and now the deal is happened between the party and the particular customer who
will take this payment.
• If payment is not made yet then I ask to the branch manager that please stop
payment of this Demand Draft.
• I than I will issue the duplicate Demand Draft to the party, for example if the
pervious Demand Draft serial number is 58/ 100 and Block number is 951380,
and after some now the serial number is 58/ 150 and Block Number is 951430
now write down the following thing on this duplicate DD,
• 58 / 100 951431 (In lieu of DD NO 58 / 100 951380) mentioned with red ink on
this Demand Draft, no more commission is charged.
3.5.4 Telegraph Transfer (TT):

33
Telegraphic Transfer is also used by the bank to send money to outstation banks to pay
the money to the specific person on whom the instrument is drawn. The bank sends
information to that bank where the TT is transferring. The sending branch gives a receipt
only to the customer.
This sort of instrument is used out of city and the main purpose is to get payments in a
very short time. And it is not locally used, through Fax for example if there is a deal
between two parties one is sitting in Faisalabad and the parity is in Karachi and the
Faisalabad party purchase some thing and the other party said we want payments through
TT. Then the Faisalabad party come in the bank, first open his account in bank, then he
fills the application for remittance and our procedure is start. After receiving the
application our next procedure is made TT advice in this advice we enroll the TT No, R
No Amount, Fevering of the particular parson is mentioned his account No, Write Test
And Date is mentioned in this advice .After completing the advice we write the TT No R
No in TT Dispatch register and enroll in the TT Remittance register then we enroll all
these things in Fax paper and last thing is the reference no is mentioned on TT.

Procedure of Telegraph Transfer

• Application For Remittance on (SF 100)

• T.T Out Ward Register
• T.T Remittance Register
• In Roll in Fax paper
• Code Test
• T.T dispatch outward
• Right down all the information onT.T Message Book

Commission Charges by the bank on TT (0400)

34
UP TO RS 100,000 .10 %Rs.50 Minimum
OVER RS 100,000 .05 % Minimum Rs 100

Postage Charges:
Postage charges is fixes up to Rs.75

Telegram / Fax Charges on TT:

Minimum RS 100/-

3.5.4.1 Procedure of Out Ward Telegraph Transfer TT:

First of all receive the request form from customer on SF100 in which the favoring name,
his account number, purchaser name his account number, TT amount in words as well as
in figures, branch name and code of the particular city where TT is sent, and finally
mentioned the commission postage charges on this SF 100.
Than enter all the information in to the TT Out Ward Register also take the TT Number
along with Remittance Number, R Number starts from 01 TO 100 and if the year is not
finished and R number goes to 100 than R Number again starts from 01, and TT number
shows that how many times I sent this TT to this branch in a year.
Also made the commission charges on this TT, that commission on TT, Postage on TT,
and Excise Duty on TT.
To make the TT Advice on (SF 89-A) and write down all the information which is
important regarding this TT, also prepare the Fax Pad,
Than taken all these information in to the TT Message Book.
Enter all this information in to Dak dispatch Register in order to get Reference Number.
Finally code the Test on this TT
Vouchers of this TT in to the Sheet

Debit Credit
Cheque TO H–O

Commission Vouchers in to the Sheet

Debit Credit
TO
Account Commission on TT
Postage charges on TT

35
 Excise duty on TT

3.5.4.2 Procedure of In Ward Telegraph Transfer TT :

First of all receive the advice of Telegraph Transfer which is drawn on us.
Enter this advice in to the Dak Received Register and paste the Dak
received stamp on it.
Enter this TT advice in to the TT payable Register and mark the TT number R number,
date issued of this TT date Paid of this TT favoring name his A/C etc.
Also made the vouchers when I received the advice of this TT
Debit Credit
H–O TO TT Payable
TT Payable Account
Also enter these vouchers in to the Sheet that is H-o debit in to the General head, and TT
payable Credit in to the Other head, than TT Payable Debit in to the Other Head and
Account Credit either it is Current or PLS.

3.5.4.3 Cancellation Procedure of Telegraph Transfer:

• Receive the Request letter form customer in his letter pad or plane paper.
• Purchaser along with Telegraph physically comes to the branch
• Under TT cancellation no need to sign or stamp of the favoring Person
• Purchaser is the authorized person to cancel this Telegraph Transfer.
• If i have already sent the TT advice to the relevant branch than I will send the
Debit voucher by the same amount in which the TT is made because if I did not
send the Debit voucher to the branch the entry will outstand in there side so in
order to clear this entry I will send this Debit voucher to the relevant branch.
• Also take the reversal vouchers in to the sheet after cancellation that is
Debit Credit
H –O Account
• Commission charges for TT cancellation are
RS 100/- charge form Account Holder
RS 150/- Charge from Non Account Holder.

36
 • Cancellation code of Telegraph Transfer is 0443
3.5.5 Pay Order:
Pay Order is used to send money within the city. The instrument is given to the
customer. He sends or gives it to that person who is receiving the payment from the
payer. The holder of the PO claims for money.
This sort of instrument is locally used and pay in the same branch that made this pay
order. Pay Order has no advice because it is locally used and payment is received from
the bank that made this pay order.
Pay Order is locally used and dealing between two parties, for example Mr. Asif is
dealing with Adil industries Pvt Ltd and purchase sugar and give them money inform of
pay order, the Mr. Asif give his cheque or give the net cash in bank, and bank made pay
order on favoring of Adil Industries Pvt Ltd. If deal is happened then Adil Industries Pvt
Ltd sent this pay order to the branch where his account is open and post the stamp on pay
order that he receive the amount and then account is credited of Adil Industries Pvt
Ltd .And if the deal is not happened then Adil Industries Pvt Ltd sign on pay order it
means that there deal is not confirmed with Mr. Asif and give the pay order and he
deposit this amount into his account.
If a person has no account than what happened how the person withdrawal the amount
from the bank, he receive token and an account holder give the verification of that
particular person and bank check the verification of the account holder with the help of
that token the favoring person is liable to get amount from bank.
If the pay order is up to Rs. 10,000 then revenue ticket is posted an amount Rs.5 on that
pay order
If the amount on pay order is less then 10,000 then posted revenue ticket of Rs. 2 on pay
order.

Procedure of Issuance of Pay Order:

Receive the request letter from customer on SF 100.
Write down the commission charges and excise duty on this SF 100
Enter all the information in to the Pay order Book
Putting the vouchers in to the Transfer Sheet

37
 Prepare the Pay Order.
Purchaser made this Pay Order with net cash or presenting a cheque in case of
cheque first of all I send this cheque to the computer operator for posting purpose
in order to know the balance in his account.
Mark this Pay Order to the Pay Order Day Book
3.5.5.1 PAY Order Charges:
In pay order no limit of amount is required and it’s up to you how much amount written
on pay order and bank charge Rs. 100 per pay order
And if any person who made pay order from M.C.B and his account is also over there
then bank give facility in form of relaxation for that particular person and receive pay
order face is Rs. 50 and excise duty on this Pay order is 5 % of the commission amount.
3.5.5.2 Maintenance of Pay Order Record:
For this purpose Day Book is used for the purposing of balancing of Pay Order, and write
down each and every Pay Order in this Day Book which I a5m prepared and credit side
fills when physically Pay Order received for payment purpose it may be presented
through Clearing or may be Party Physically come in to the Branch in order to get
payment on behalf of this Pay Order.
3.5.5.3 Cancellation Procedure of Pay Order:
• Receive the Request letter form customer in his letter pad or plane paper.
• Purchaser along with Pay Order physically comes in to the branch
• Under Pay Order cancellation the Favoring Party Should sign at the back of this
Pay order in order to cancel this Pay Order, because with out Signature or stamp
of the favoring pay order is not canceled.
• Pay Order is cancelled with mutual understanding of both parties.
• Also take the reversal vouchers in to the sheet after cancellation that is
Debit Credit
Pay Order Account
• Commission charges for Pay Order cancellation are
RS 100/- charge form Account Holder
RS 150/- Charge from Non Account Holder.

38
 • Also verify the signature of the client who gives the request of Pay Order
Cancellation and match his signature on (SF 100) which he was filled.
3.5.5.4 Issuance of Duplicate Pay Order:

Reason for duplicate demand Draft:

It may be lost.
It may be theft by some body.
It may be tore in to pieces.

Procedure of Duplicate Pay Order:

• First receive the request letter form customer
• Also fills the (CF 15) indemnity Form in this form the customer gives the under
taking that in this particular time period if the payment is made on this Pay Order
than the bank is not responsible for this action, and he also said that during this
period if he founds the original Pay Order than he will not present again this Pay
Order for payment purpose.
• Charges for Duplicate Pay Order
RS 100/- for Account Holder
• RS 200/- for Non Account Holder.
• I than I will issue the duplicate Pay Order to the party, for example if the
pervious Pay Order serial number is 58/ 200 and Block number is 311520, and
after some now the serial number is 58/ 250 and Block Number is 311570 now
write don the following thing on this duplicate Pay Order,
3.6 ON Line Transaction:
Here I am working under the kind supervision of Mr. Imran who gives me every possible
information which is beneficial for me. M.C.B also providing the facility of on line
transaction and has wide range of this online network, for example if one party purchase
the material from other party which is in Karachi then the party said that give me
payment through online. For this purpose the person whose account is open in M.C.B can
use this facility, to provide this facility bank charge the commission and the amount
transfer to Karachi through online .if online transaction is not possible then we send the
amount through post and the instrument which is used for this purpose is Inter Branch

39
Credit Advice S.F 179. this voucher consists of three copies one copy is send to the
responding branch and the other two copies and the slip is under the control of bank, in
this instrument following things are mentioned like originating branch, responding
branch, reference no, amount in figure and in word is well and also coated the Test on
this advice which is send to the relevant branch. Similarly when we receive the following
sort of advice from other bank through, then we made the credit voucher S.F 10. By
amount of C.B.T means cross branch transaction from the branch Karachi Main (0001),
control no 134050, dated 17- 09- 09, and made the following entry from our side

Debit Credit
H -O TO Account

ON LINE TRANSACTION CHARGES

RS 1 to 1 Million Rs. 200 + 10 = 210

Here RS 200 is the Commission Charges and RS 10 is the Excise Duty.

3.7 VOUCHERS
Vouchers are used to keep the record of all the work performed in the branch of the bank
through out the whole day and is organized by an officer of the bank each day for each
and every transaction that took place on the previous day. It is a very vital part of the
work as it is the record keeping of everything that happens in the banks and evidence is
attached with it and it is viewed and confirmed and checked in very much detail by the
auditors of that bank.
PROCEDURE
The process by which the vouchers are attached with the supplementary sheets is
explained in detail below;

40
There are two parts of vouchers that the MCB Bank used to keep the record of each day.

(i) First bundle of vouchers includes Cash on Hand, Current Deposit voucher,
PLS vouchers and the all the general vouchers inclusive of all the debit and
credit entries done throughout the day and respective is attached along with it.
(ii) Second bundle of voucher includes HO (head office) vouchers and all the
income and expenditure vouchers also inclusive of all the debit and credit
entries throughout the day along with the evidence attached.

The evidences mentioned here are all the instruments which the bank received throughout
the day including deposit slips, cheques, pay orders, remittance forms, demand drafts,
Online’s, advices, HO advice etc.

For binding and checking these vouchers the officer has to,

(i) Sort all of the instruments according to the supplementary sheets

(ii) Ticking of all of the amounts that are mentioned on the supplementary sheets
against the amounts mentioned on the original instruments to avoid mistakes
and errors and also for the checking of any missing instruments.
(iii) After all the binding of the vouchers has been done than all the debit and
credit entries of the vouchers have to summed up and the total has to be
shown on the title page attached to the vouchers.
3.7.1 FIRST BUNDLE OF VOUCHERS DISTRIBUTION
The first bundle includes

3.7.1.1 CASH ON HAND

• This shows the detail of the amount paid to the customers or withdrawals done by
the customer throughout the day
• Utility bills received ( SNGPL,WASA, FESCO,PTCL )
• Attachments: CPM ( cash position memo )

41
3.7.1.2 CD VOUCHERS
• All the debit vouchers which are the CD cheques are attached with the
supplementary sheets.
• All the credit vouchers which are the deposit slips for the CD accounts are
attached with the supplementary sheets.
• Form of internal transfer is a form which is used to transfer funds from one
account into another and if this transfer transaction takes place then this form has
also to be attached as evidence with the account to which the money is
transferred.
3.7.1.3 PLS VOUCHERS
• All the debit vouchers which are the PLS cheques are attached with the
supplementary sheets.
• All the credit vouchers which are the deposit slips for the PLS accounts are
attached with the supplementary sheets.
• Form of internal transfer is a form which is used to transfer funds from one
account into another and if this transfer transaction takes place then this form has
also to be attached as evidence with the account to which the money is
transferred.
3.7.1.4 GENERAL
Some of the important instruments have to be attached with general supplementary sheets
• Pay Orders issued (PO)
• Call Deposits issued (CDR)
• Basic Business Account instruments (BBA)
• Smart Saving Account instruments (SSA)
• Online payments
• Demand Drafts (DD)
• ATM Credit and debit vouchers
• Vouchers of commission and federal excise duty
• Voucher of commission on FESCO

42
And the rest of supplementary sheets which are included in general may or may not
require any instruments to be attached to them at the time of voucher binding.

3.7.2 SECOND BUNDLE OF VOUCHERS DISTRIBUTION

This bundle includes vouchers and supplementary sheets of the head office and all the
sheets of income and expenditure for the bank. The second bundle includes,

HEAD OFFICE
• The advice of head office issued against the clearing of the cheques
• Bank transfer scroll that are issued by the NIFT
• All advices issued against the head office of the bank
• All the “online” credit slips processed throughout the day.
INCOME AND EXPENDITURE
• All sort of bank commissions
• All sort of bank charges
• All the vouchers for expenses of stationary.
• All the vouchers for expenses of maintenance bills.
• All the vouchers for expenses of entertainment of staff bills.

3.7.3 SECOND BUNDLE OF VOUCHERS DISTRIBUTION

This bundle includes vouchers and supplementary sheets of the head office and all the
sheets of income and expenditure for the bank. The second bundle includes,

HEAD OFFICE
• The advice of head office issued against the clearing of the cheques
• Bank transfer scroll that are issued by the NIFT
• All advices issued against the head office of the bank
• All the “online” credit slips processed throughout the day.
INCOME AND EXPENDITURE

43
 • All sort of bank commissions
• All sort of bank charges
• All the vouchers for expenses of stationary.
• All the vouchers for expenses of maintenance bills.
• All the vouchers for expenses of entertainment of staff bills.

IMPORTANCE OF VOUCHERS

(i) The main reason for making these vouchers is to keep the record of the bank up to date
of all the work that has been performed in the bank throughout the day.

(ii) In case there is any misunderstanding of any instrument, it can be confirmed from
these sheets and traced out as every detail of each transaction is mentioned here.

(iii) This can be easily reviewed by officers for inspection and it has to be signed and
checked by a senior officer on a daily basis to keep a check on the workings of the
branch.

44
 FLOWCHART OF MAINTAINING SUPPLEMENTARY SHEETS

Customer Receiving form Customer

head Office (account holder/non
account holder)

Debit Cheque of PLS

and CD received form Advices form head
cash counter Office (debit) Required DD, pay order,
online and CDR
(Credit)

Deposit form of CD and NIFT Scroll

PLS received form cash
counter (credit)

System

Run Day Data Transfer Printing Of

end to IT Supplementary
department Sheets

45
Collection of all the
instruments debit and
credit vouchers from Attachments of sheets
officers and cash with all
department vouchers/Instruments

3.8 ATM DEBIT CARD

ATM stands for automatic teller machines. This is one of the product of MCB Bank in
order to provide convenience to their customers after bank timing have ended and he or
she can still withdraw an amount of cash by using the ATM debit card. MCB offers 4
types of ATM/ Debit cards.
1. local classic
2. local gold
3. international classic
4. International gold.

PROCEDURE FOR ATM CARD

• To hold an ATM card the person must be an account holder of the bank
• They would be required to fill the application form of the ATM debit card
• The MCB Bank would deduct ATM card charges
• The card would be processed by IT and then sent to the MCB Bank branch from
which it was initiated
• The card would then be issued to the customer
In the end to activate the card the client would have to call the given number and confirm
his information for it to start working. Or customer request to the relevant branch to
active the card. Branch sends a request through email to the IT department Karachi to
activate the card and within few minutes the card is activated. Normally, when the card is
given to the customer branch officers make it sure that the card is activated.
3.8.1 CHARGES FOR ATM DEBIT CARD:

46
CHARGES FOR ATM DEBIT CARD Local Local International International
Classic Gold Classic Gold

1 Issuance of new card 250 350 400 500

2 Renewal Charges 250 350 400 500
3 Issuance of supplementary card 100 100 200 200
4 Re- Issuance 250 350 400 500
5 Balance Inquiry at MCB ATM Rs.2.00 Rs.2.00 US 1$ US 1$
6 Balance Inquiry MCB customer at MNET Rs. 4.00 Rs.
member Bank 4.00
7 Balance Inquiry MCB Customer at 1 link As per 1 As per As per 1 link As per 1 link
ATM link charges 1 link charges charges
charges
8 MCB Customers using other bank’s ATM Rs. 10 Rs. 10 Rs. 10 Rs. 10
for cash withdrawal

BENEFITS OF THE ATM DEBIT CARD

Less time is required for withdrawals as compared to withdrawals by cheque
Cash withdrawals can be made in all 24 hours everyday throughout the year
Cash withdrawals can be made from any ATM machine from any bank so this offers
maximum convenience to the client
The PIN code takes care of the clients’ security and the personalization of their card.
3.8.2 FLOWCHART FOR ATM CARD

Fill the application

form ATM card With in 10 Days card
send by IT department
For to MCB Branch
activation
must fill
date of birth
ATM charges and mother
deducted Rs 250 name
Issue card to customer

Activate the card by

47
Process by IT calling on universal
number
3.9 MCB VISA CARD:
MCB Visa is not just another card in your wallet. It not only provides the conventional
credit card services in a manner that is superior in comparison, but goes an extra mile.
MCB VISA offers you a wide range of products that will cater to your diversified taste
perfectly.
Buy now and pay off latter in easy and affordable monthly installments.
You need cash and want to pay back in installments.
Now Experience peace of mind of having a credit card free from fraud or misuse.
3.9.1 CHARGES FOR MCB VISA CARD:

MCB Visa Card Gold Classic

Joining fee Rs. 0 Rs. 0
Annual Fee Rs. 0 Rs. 0
Annual chip maintenance Rs. 500 p.a Rs. 350 p.a
fee
Service fee/ mark up on 2.83% per month 2.83% per month
cash transactions
Card replacement fee Up to Rs. 500 Up to Rs. 500
Card re issuance fee Rs. 500 Rs. 500

3.10 Lockers:

48
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 banker’s 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 1000 per Annum)
Medium Size ( Rent RS 1500 per Annum)
Large Size ( Rent RS 3000 per Annum)
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.

49
Customers can use this locker during the banking hour that is 9: Am to 5: PM.

CHAPTER 4

SWOT Analysis of MCB BANK

50
4.1 SWOT ANALYSIS
The SWOT Analysis of the MCB Bank in my view is as follows;

4.2 STRENGTHS
• One of the largest banks in Pakistan
• Automatic Operations
• Full Day Banking
• ATM Network
• Customized Solutions
• Customer Oriented Banking
• Electronic Banking
• Electronic Funds Transfer
• Phone Banking
• Wide Countrywide branches network
• Strong potential for growth
• Steady increase in Customer Deposits

4.3 WEAKNESSES
• High Employees Turnover.
• High charges.
• Less attractive rate of return.
• Dissatisfied Employees
• Lack of proper trainings.
• Less efficiency of SYMBOL System due to disconnectivity .
• Gap between Management and Employees
• Old Branch Structure
• Old Employee Appraisal System

51
4.4 OPPORTUNITIES
• Overseas Operations.
• Branches in Rural Areas.
• Additional benefits to employees as well as customers.
• Launch the more effective and modern banking online system.
• Growing Market
• New Products and Schemes
• Increase in Branch Network
• E-Banking

4.5 THREATS
• Economic conditions of country
• Social, Cultural, demographic and environmental forces
• Political, Governmental and Legal forces
• Technological forces
• Competitive forces
• Increase in Banking Institutions
• Instability

52
 CHAPTER 5
FINANCIAL STATEMENTS AND ANALYSIS

53
5.1 Balance Sheet
Muslim Commercial Bank Limited
Balance Sheet
As on 31st December

2006 2007 2008

Assets
Cash and balances with treasury 23,665,549 32,465,976 39,683,883
banks
Balances with other banks 1,469,333 6,577,017 3,807,519
Lending to financial intuitions 9,998,828 21,081,800 1,051,372
Investments 69,481,487 63,486,316 113,089,261
Advances 180,322,753 198,239,155 218,960,598
Operating fixed assets 8,182,454 9,054,156 16,024,123
Deferred tax assets 191,967 172,373 -
Other assets 5,464,426 11,031,450 17,868,761

298,776,797 342,108,243 410,485,517

Liabilities
Bills payable 8,536,674 7,089,679 10,479,058
Borrowings 27,377,502 23,943,476 39,406,831
Deposits and Other accounts 229,345,178 257,461,838 292,098,066
Sub-ordinated loans 1,598,080 1,597,440 479,232
Liabilities against assets subject - - -

54
to finance lease
Deffered tax liabilities - - 1,180,162
Other liabilities 8,611,600 11,171,496 11,722,493
275,469,034 301,263,929 355,365,842

Net assets 23,307,763 40,844,314 55,119,675

Represented by:
Share capital 4,265,327 5,463,276 6,282,768
Reserves 13,408,005 24,662,426 34,000,638
Unappropriateed profit 210,662 5,530,973 5,130,750

17,883,994 35,656,675 45,414,156

Surplus on revaluation of assets 5,423,769 5,187,639 9,705,519

23,307,763 40,844,314 55,119,675

5.2` Profit & Loss Account

Muslim Commercial Bank Limited
Profit and Loss Account
As on 31st December
2006 2007 2008

Markup/ return/ interest earned 17,756,23 25,778,06 31,786,595

2 1
Mark up/ return/ interest expense 2,781,468 4,525,359 7,865,533
Net mark up/ interest income 14,974,76 21,252,70 23,921,062
4 2

- Provision for dimininution in the value of (98,982) 121,197 105,269

investment
- Provision against loans and advances 1,242,153 1,014,540 2,959,583
- Bad debts written off directly 1,184 47,000 199
1,144,355 1,182,737 3,065,051

Net mark up/interest income after 13,830,40 20,069,96 20,856,011

provisions 9 5

Non mark up/interest income

Fee, commission and brokerage income 2,448,950 2,311,235 2,634,610

Dividend income 480,344 811,801 632,300
Income from dealing in foreign currencies 531,455 692,010 693,408
Gain on investment 866,895 605,865 1,500,865

55
Unrealized gain/ loss on revaluation of 851 - (13,105)
investment
Other income 1,084,576 570,505 563,213

Total non mark up interest income 5,413,071 4,991,416 6,011,291

Income after interest income 19,243,48 25,061,38 26,867,302

0 1

Non mark up/interest expense

- Administrative expenses 6,459,490 6,482,592 5,022,416
- Restructuring expenses - - -
- Other proposition/write off (72,740) 11,411 (3,743)
-Other charges 178,841 66,708 540,594

Total non mark up/ interest expense 6,565,591 6,560,711 5,559,267

Extra ordinary/unusual items 340,598 - -

Profit before taxation 13,018,48 18,500,67 21,308,035
7 0
Taxation-Current year 4,611,359 5,701,443 6,442,356
-Prior years (149,763) 593,497 (1,294,473)
-Defferd (365,524) 63,332 894,590
4,096,072 6,358,272 6,042,473
Profit after taxation 8,922,415 12,142,39 15,265,562
8

Unappropriate profit brought forward 165,208 4,990,260 5,530,973

Transfer from surplus on revaluation of 83,749 32,166 11,855

fixed assets

248,957 5,022,426 5,542,828

Profit available for appropriation 9,171,372 17,164,82 20,808,390

4
Basic/diluted earning per share 21.36 23.40 24.30

56
5.3 RATIOS ANALYSIS:

Liquidity Ratios

Liquidity ratios measure the short-term solvency of a firm. Liquidity ratios present the picture
of the ability of the firm to pay its short-term obligations. The ratio holds different meaning for
creditors and owners of the firm. For owner, high liquidity means inefficiency of the
management and vice versa, while high liquidity of the firm is considered favorable by the
creditors as they see it as that the firm can pay their obligations and vice versa. Following are
most common type of liquidity ratios used by analysts to determine the liquidity of the firm.

5.3.1 Current Ratio:

The current ratio measures the number of items of the firm s current assets cover its current
liabilities. The current ratio should be part of your business' basic financial planning, meaning it
should be tracked monthly or quarterly. By keeping a close eye on this figure, you will
recognize if it begins to get out of line. This will allow you to take early action to prevent your
business from ending up in a difficult position.
Current ratio=current asset/ current liabilities

2006
Current asset 284,937,950
Current liabilities 266,857,434
Current ratio 106.80%

2007
Current asset 321,850,264
Current liabilities 290,092,433
Current ratio 111.00%

2008
Current asset 376,592,633
Current liabilities 342,463,187
Current ratio 110.00%

57
Current Ratio
Years 2006 2007 2008
Percentage 106.80% 111.00% 110.00%

CurrentRatio
112.00%
111.00%
110.00%
109.00%
108.00%
Current Ratio
107.00%
106.00%
105.00%
104.00%
2006 2007 2008

Analysis of current ratios of MCB:

Current ratio shows a firm’s ability to cover its current liabilities with its current
assets. It is obtained by dividing current assets of the firm by its current liabilities.
Current ratio of 1 or higher means that the firm can pay all its current liabilities from
its current assets, while a value less than 1 means that the firm will be unable to pay
its current liabilities completely by its current assets. A lower value means
aggressive approach of the management toward business, but has opposite meaning
for creditors, who don’t like aggressive approaches of the management.

In MCB bank limited 2007s current ratio is strong than other two years. It shows
that this year’s liabilities could be recovered with its assets. After 2007, a bank has
maintained good current ratio in 2007

Current ratio does not show the true picture of the organization. Sometimes it shows that
organization has ability to pay its obligations but its profitability ratio tells that it has not

58
ability to pay its obligation. But still it is very useful for the analysts especially for
the creditors.

5.3.2 Quick ratios:

Quick ratio shows a firm’s ability to meets it current liabilities with its current assets
excluding inventories and prepaid expenses, which are least liquid portion of the current
assets. Since banks don’t have any sorts of inventories, therefore only prepaid
expenses are subtracted from the current assets of the bank.

This is an important planning tool, especially for businesses that can tie up a lot of
assets in inventory. By tracking it monthly, management can keep an eye out for
negative trends that could hamper their business' ability to meet its obligations.
Quick ration can also use to evaluate the financial health of potential customers,
since it also indicates whether a business can pay off its debts quickly. A firm with a
low quick ratio may be more likely to delay payments because its assets are tied up
elsewhere.

Current assets - inventories divided by current liabilities

2006
Current assets 284,937,950
Inventories 69,481,487
Current liabilities 266,857,434
Quick ratios 80.74
2007
Current assets 321,850,264
Inventories 63,486,316
Current liabilities 290,092,433
Quick ratios 89.06
2008
Current assets 376,592,633

59
 Inventories 113,089,261
Current liabilities 342,463,187
Quick ratios 76.94
Quick ratio
Years 2006 2007 2008

Percentage 80.74% 89.06% 76.94%

Analysis of the quick ratio:

Inventories are considered as current assets so they are included in current ratio
calculation. Inventories are less liquid. Normally it is not easily converted into cash on
short notice. In 2007 quick ratio is better than other years it show that bank can easily
recover its liabilities on short notice.

5.3.3 Working capital:

Working capital is the difference between current assets and current liabilities. Working
capital is often considered a measure of liquidity by it self. This ratio shows the amount
of liquidity. Working capital is used to check liquidity of the organization.

Working capital=current asset-current liability

60
 2006
Current asset 284,937,950
Current liabilities 266,857,434
Working capital 18,080,516
2007
Current asset 321,850,264
Current liabilities 290,092,433
Working capital 31,757,831
2008
Current asset 376,592,633
Current liabilities 342,463,187
Working capital 34,129,446

Working capital

Years 2006 2007 2008

Working Capital 18,080,516 31,757,831 34,129,446

Working Capital

40,000,000
35,000,000
30,000,000
25,000,000
20,000,000 Working Capital
15,000,000
10,000,000
5,000,000
0
2006 2007 2008

Analysis of the working capital:

61
Working capital is better in 2008, which is 34,129,446. It means that are
assets utilized more economically in 2008 as compared to 2006, 2007

5.3.4. Cash ratio:

Cash and cash equilent /total assets

Cash and equilent are the most liquid assets. The cash ratio shows the proportion of the
assets held in the most liquid possible form. It is used to check the liquidity of the
organization

2006

Cash equivalent 25,134,882

Total assets 298,776,797
Cash Ratio 8.41

Cash equivalent 39,042,993

Total assets 342,108,243

Cash Ratio 11.41
2007

2008

62
 Cash equivalent 43,491,402

Total assets 410,485,517

Cash Ratio 10.60

Cash ratio
Years 2006 2007 2008

Percentage 8.41% 11.41% 10.60%

Cash Ratio
12.00%

10.00%

8.00%

6.00%
Cash Ratio
4.00%

2.00%

0.00%
2006 2007 2008

Analysis of cash ratios of MCB:

Higher cash ratio also shows the higher rate of satisfaction like other liquidity
ratios. Cash ratio is more important liquidity ratio. In 2006 cash ratio was, 8.41% it
increased very quickly in 2007 by 11.41%, but in 2008 it declined. 2007 was
the best year as it shows 11.41% ratio,
In short working capital and cash ratio are more realistic and more important ratios,

63
which describe the true picture of any organization. In MCB 2007 is the year in which the
liquidity ratios are shown better than other years. So 2007 is mentioned a good year of
the Muslim Commercial Bank.

5.3.5 Leverage Ratios:

Leverage ratios of a firm show the extent to which a firm finances its operation from
the outside sources and money. The leverage can be determined from analysis of
owner equity in business, total liabilities, current and long-term liabilities, long-term
assets and total assets of the business. Following are the common leverage ratios to
show the degree of leverage the bank is using to finance its activities and assets by
liabilities.

5.3.6 Debt-To-Total-Assets Ratio

It shows that how much assets have been financed by liabilities and it also shows the
margin of protection available for the creditors.

Debt ratio
Debt ratio=Total debt/ Total assets

2006
Total debt 275,469,034
Total assets 298,776,797
Debt Ratio 92.20
2007
Total debt 301,263,929
Total assets 342,108,243
Debt Ratio 88.06
2008
Total debt 355,365,842
Total assets 410,485,517
Debt Ratio 86.57
Debt ratio

64
 Years 2006 2007 2008
Percentage 92.20% 88.06% 86.57%

Debt Ratio
93.00%
92.00%
91.00%
90.00%
89.00%
88.00%
Debt Ratio
87.00%
86.00%
85.00%
84.00%
83.00%
2006 2007 2008

Analysis of leverage ratio:

Financial leverage is the extent to which a firm is financed with debt. The amount
of the debt a firm uses has both positive and negative effects. The more debt the
more it is that the firm will have trouble meeting its obligations. Thus the more debts
higher profitability of the financial distress and even bankruptcy. Further more the
chance of the financial distress and debt obligation generally may create conflicts of
interest among the stakeholders. In Muslim Commercial bank, year 2006 was
heavily financed because debt was the major source of financing in 2006. Debt also
had lower transaction cost. But better year was 2007 because Muslim Commercial
Bank in this year was not heavily financed and had not trouble to pay its obligations.

5.3.7 Debt-To-Equity Ratio:

Debt-to-Equity ratio shows the extent to which debt financing is used relative to equity
financing. Debt equity is calculated by dividing total liabilities of the bank by the total
owner equity.

Total debt divided by shareholders equity

65
Debt to equity ratio=Total debt / shareholders equity or Debt ratio/1-Debt ratio

2006
Total debt 275,469,034
Shares holder equity 4,265,327
Debt to equity Ratio 64.58

2007
Total debt 301,263,929
Shares holder equity 5,463,276
Debt to equity Ratio 55.14

2008
Total debt 355,365,842
Shares holder equity 6,282,768
Debt to equityRatio 56.56

Debt to equity ratio

Years 2006 2007 2008
Percentage 64.58 55.14 56.56%
% %

Debt to equityratio
66.00%
64.00%
62.00%
60.00%
58.00%
Debt to equity ratio
56.00%
54.00%
52.00%
50.00%
2006 2007 2008

66
Analysis of the Debt to equity ratio

The debt equity ratio is a simple rearranged of the debt ratio. Debt equity ratio shows
how the firm’s stockholder bears the risk of the firm. Greater the debt greater risk for the
firm s shareholders .In 2007 risk for the share holders was very low as compared to the
other years decrease debt to equity ratio was very small on the contrast risk was very high
in 2006 because of heavy financing.

5.3.8 Equity multiplier:

Owner equity to fixed assets ratio:

“Owner equity to fixed assets ratio” shows that how much money downer in
relation to fixed assets invest. If the owner equity exceeds the fixed asseoes ts, it means
that owner finances a part of current assets. When owner equity is less than fixed
assets it means that creditor’s obligations have been used to finance a part of fixed
assets.

Total owner equity divided by fixed assets

Equity multiplier=Total assets /shareholders equity

2006
Total Assets 298,776,797
Shares Holder equity 4,265,327
Equity Multiplier 70.05

2007
Total Assets 342,108,243
Shares Holder equity 5,463,276
Equity Multiplier 62.62
2008
Total Assets 410,485,517
Shares Holder equity 6,282,768
Equity Multiplier 65.34

67
Equity multiplier
Years 2006 2007 2008
Percentage 70.05 62.62 65.34%
% %

Equitymultiplier
72.00%
70.00%
68.00%
66.00%
64.00% Equity multiplier
62.00%
60.00%
58.00%
2006 2007 2008

Analysis of the equity multiplier:

Equity multiplier is yet another representation of the same information. It shows how
much total assets the firm has for each dollar of equity. In MCB it is better in 2006 it
means that bank has about 70.05 in total assets of 100 of equity.

Coverage Analysis:

Coverage ratios analyze the ability of a firm to cover or service its financial
obligations. Most common coverage ratios are explained below.

5.3.9 Interest Coverage Ratio

Interest coverage ratio shows the ability of a firm to cover up its interest charges on the
income before interest and taxes. The ratio is obtained through dividing earning before
interest and taxes (EBIT) of the bank by its interest expenses.

EBIT divided by interest expense

Interest coverage ratio=EBIT/Interest expense

68
 2006
EBIT 13,018,487
Interest expense 2,781,468
Interest coverage ratio 468.04

2007
EBIT 18,500,670
Intrest expense 4,525,359
Intrest coverage ratio 408.82

2008
EBIT 21,308,035
Interest expense 7,865,533
Interest coverage ratio 270.90

Interest coverage ratio

Years 2006 2007 2008
Percentage 468.04 408.82 270.90%
% %

69
 Intrest coverageratio
500.00%
450.00%
400.00%
350.00%
300.00%
250.00%
Intrest coverage ratio
200.00%
150.00%
100.00%
50.00%
0.00%
2006 2007 2008

Analysis of the interest coverage ratio:

Coverage ratio shows the number of the times a firm can recover or meet particular
financial obligations. The interest coverage ratio, which is also called the time
interest earned ratio, measure the coverage of the firm s interest expense.2006 is the best
comparative better coverage of its interest and fixed charged obligations. After 2006,
2007 is better than 2008

Profitability Analysis:

Profitability ratios are of two types those showing profitability in relation to sales and
those showing profitability in relation to investment. Together, these ratios indicate the
bank’s overall effectiveness of operation. It creates a relationship between income
statement and balance sheet of the firm. Following are the some typical profitability
ratios used to analyze the profits of firms.

5.3.10 Cost To Sales Ratio:

Cost to sales ratio determines the cost incurred in generating the sales of the bank.
The net sales of banks are its interest/mark up earned while costs of sales are its
interest/mark up expense incurred. The ratio is obtained by dividing cost of sales by
net sales. The following table shows the cost of sales of MCB over five years of
operations.

70
Interest or mark up expensed divided by interest or mark up earned

2006
Interest expense 2,781,468
Interest earned 17,756,232
Cost to sales ratio 15.66

2007
Interest expense 4,525,359
Interest earned 25,778,061
Cost to sales ratio 17.56

2008
Interest expense 7,865,533
Interest earned 31,786,595
Cost to sales ratio 24.74

Cost to sales ratio

Years 2006 2007 2008
Percentage 15.66% 17.56% 24.74%

Cost to sales ratio

30.00%

25.00%
Percentage

20.00%

15.00% Cost to sales ratio

10.00%

5.00%

0.00%
2006 2007 2008
Years

71
Analysis of the cost to sales ratio:
Cost to sales ratio shows the cost incurred in generating the sales of the bank. In 2008 the
cost to generate the sales is higher with respect to other financial years. After 2008, 2007
had also higher cost. Year 2006 is best one for MCB.

5.3.11 Return on Investment:

Return on investment measure the ratio of profit generated in relation to the total assets
employed. Net profit after tax divided by total assets gives the return on investment.

Return on investment is an indicator of how profitable a company is. By using this ratio
annually, we compare business' performance to industry's norms.
Net profit after tax divided by Total assets

Return on investment= Net profit after tax/Total assets

2006
Profit after tax 8,922,415
Total assets 298,776,797
Return on Investment 2.99

2007
Profit after tax 12,142,398
Total assets 342,108,243
Return on Investment 3.55

2008
Profit after tax 15,265,562
Total assets 410,485,517
Return on Investment 3.72

72
Return on investment
Years 2006 2007 2008
Percentage 2.99% 3.55% 3.72%

Return on investment
4.00%
3.50%
3.00%
2.50%
2.00%
Return on investment
1.50%
1.00%
0.50%
0.00%
2006 2007 2008

Analysis of the return on investment ratio

Profitability ratios focus on the profit generating performance of the firm. These ratios
measure how effectively the firm is generating its profit. They reflect its performance, its
risk ness and the effect of leverage. Muslim commercial bank was heavily financed in
2008 that financing was used in investment that’s why return on investment is high in
2006 as compare to the other years.
5.3.12 Return On Equity:

Return on equity is another summary measure of overall bank’s performance. It can

be calculated by dividing the net profit by the owner equity. This ratio tells us the
earning power on shareholder’s book value investment and is frequently used in
comparing two or more firms in any industry. A high return one quite often reflects
the firm’s acceptance of strong investment opportunities and effective expense
management.

73
 2006
Profit after tax 8,922,415
Sharesholders equity 4,265,327
Return on Equity 209.18

2007
Profit after tax 12,142,398
Sharesholders equity 5,463,276
Return on Equity 222.25
2008
Profit after tax 15,265,562
Sharesholders equity 6,282,768
Return on Equity 242.98

Return on Equity
Years 2006 2007 2008
Percentage 209.18 222.25 242.98%
% %

Return on equity
250.00%

240.00%

230.00%

220.00%
Return on equity
210.00%

200.00%

190.00%
2006 2007 2008

74
Analysis of the Return on equity

Return on equity is an indicator of how profitable a company is. Use this ratio
annually to compare your business' performance to your industry's norms. In year
2008, MCB has a strong investment opportunities’ which reflects a high return, after
this 2007 also depicts a high return, whereas, 2006 are not
satisfied.

Market value ratios:

5.3.13 P/E ratio

Price earning ratio=Market price per share/ earning per share

2006
Market price per share 167.80
Earning per share 21.36
P/E ratio 785.58
2007
Market price per share 246.10
Earning per share 23.40
P/E ratio 1,051.71

2008
Market price per share 399.95
Earning per share 24.30
P/E ratio 1,645.88

Price earning ratio

Years 2006 2007 2008
Percentage 785.58 1051.71 1645.88%
% %

75
 Priceearningratio
1800.00%
1600.00%
1400.00%
1200.00%
1000.00%
800.00% Price earning ratio
600.00%
400.00%
200.00%
0.00%
2006 2007 2008

Analysis of the Price earning ratio:

Price earning ratio of MCB bank is high in 2008 as compared to the other years. Because
the market price per share is high in 2008. Because in this year MCB generate an
excellent profit. 2007 is also good but 2006 is worst all of them.

5.3.14 Earning yield:

Earning yield=Earning per share/Market price per share

2006
Earning per share 21.36
Market price per share 167.80
Earning Yeild 12.73

2007
Earning per share 23.40
Market price per share 246.10
Earning Yeild 9.51

2008
Earning per share 24.30
Market price per share 399.95

76
 Earning Yield 6.08

Earning yield
Years 2006 2007 2008
Percentage 12.73% 9.51% 6.08%

Earningyield
14.00%
12.00%
10.00%
8.00%
6.00% Earning yield

4.00%
2.00%
0.00%
2006 2007 2008

Analysis of the earning yield:

Earning yield of MCB bank is high in 2006 as compared to the other years. Because the
market price per share and earning per share is low in 2006. Earning yield is unsatisfied
in 2008.

5.3.15 Earning Per Share:

This ratio determines the amount of income that has been earned on each share
outstanding. Net profit after tax divided by total numbers of shares outstanding gives the
amount earned on each share.

77
Net profit after tax divided by total number of shares outstanding Earning per share=Net
profit after tax/ Total no of shares

2006
Profit after tax 8,922,415
Total number of shares 426,532
Earning per share 21.00

2007
Profit after tax 12,142,398
Total number of shares 546,327
Earning per share 22.23

2008
Profit after tax 15,265,562
Total number of shares 628,227
Earning per share 24.30

Earning per share

Years 2006 2007 2008
Percentage 21.00 22.23 24.30%
% %

78
 Earnigper share
25.00%

24.00%

23.00%

22.00%
Earnig per share
21.00%

20.00%

19.00%
2006 2007 2008

16 Income/ expense ratio:

2006
Total Income 23,169,303
Total expenses 10,491,414
Income/ expense ratio 2.21

2007
Total Income 30,769,477
Total expenses 12,268,807
Income/ expense ratio 2.51

2008
Total Income 37,797,886
Total expenses 16,489,851
Income/ expense ratio 2.29

Income /expense ratio:

Years 2006 2007 2008
Percentage 2.21% 2.51% 2.29%

79
Analysis of Income/ expense ratio:
Income/ expense ratio of MCB bank is high in 2007 as compared to the other years. Because in
this year the expenses as compared to earnings are very low. After this 2006 and 2008 also
depicts an excellent income/ expense ratio.

5.4 Horizontal Analysis of Balance Sheet

2006 2007 2008

Assets 100% 137% 168%

100% 448% 259%
Cash and balances with treasury banks 100% 211% 11%
Balances with other banks 100% 91% 163%
Lending to financial intuitions 100% 110% 121%
Investments 100% 111% 196%
Advances 100% 90%
Operating fixed assets 100% 202% 327%
Deferred tax assets 100% 115% 137%
Other assets
100% 83% 123%
Liabilities 100% 87% 144%
Bills payable 100% 112% 127%
Borrowings 100% 100% 30%
Deposits and Other accounts
Sub-ordinated loans
Liabilities against assets subject to finance

80
 lease
Deffered tax
100% 130% 136%
liabilities 100% 109% 129%
Other liabilities 100% 175% 236%

Net assets 100% 128% 147%

Represented by: 100% 184% 254%
Share capital 100% 2626% 2436%
Reserves 100% 199% 254%
Un-appropriated profit 100% 96% 179%

Surplus on revaluation of assets 100% 175% 236%

5.5 Vertical Analysis

2006 2007 2008

(Rupees '000)
Assets

Cash and balances with treasury\ banks 7.92 9.49 9.67

Balances with other banks 0.49 1.92 0.93

Lending to financial instutions 3.35 6.16 0.26
Investments 23.26 18.56 27.55
Advances 60.35 57.95 53.34
Operating fixed assets 2.74 2.65 3.90
Deffered tax assets 0.06 0.05 -
Other assets 1.83 3.22 4.35
100 100 100
Liabilities
Bills payable 2.86 2.07 2.55
Borrowings 9.16 7.00 9.60

81
Deposits and Other accounts 76.76 75.26 71.16
Sub-ordinated loans 0.53 0.47 0.12
Liabilities against assets subject to finance
lease
Deffered tax liabilities - - 0.29
Other liabilities 2.88 3.27 2.86
92.20 88.06 86.57

Net assets 7.80 11.94 13.43

Represented by:
Share capital 1.43 1.60 1.53
Reserves 4.49 7.21 8.28
Unappropriated profit 0.07 1.62 1.25
5.99 10.42 11.06
Surplus on revaluation of assets 1.82 1.52 2.36
7.80 11.94 13.43

CONCLUSION

82
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 Nishatabad 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
employee’s 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 to not focusing on this highly critical issue as the job satisfaction
level of the employees working at MCB, was quite low.

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

83
 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.
• 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
There is lack of proper and continuous training of employees that needs to be solved.
 Creation of enhanced performance appraisal system.
 Proper use of stationary.
 Implementation of enhanced Marketing system.

• 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.
• Salary Packages
Improvement should be made in the salary package of the employees as it is
comparatively less when compared to the other operating banks in Pakistan.

• Staff Member
In branch only two employees in cash counter and it must be increased to four person for
proper handling of cash because there is heavy load work.

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 • 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.

• Job Rotation for Employees

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