CHAPTER 1

INTRODUCTION OF STUDY

1.1 Background of the Study

Banks play a vital role in strengthening economy of any country. They

help in mobilizing savings and provide capital for trade, commerce and
industry. In Pakistan banking sector has always shown remarkable
results in the past and is carrying on with it. MCB is one of the leading
bank in Pakistan, and has played a key role in the development of the
country.

The opportunity has been provided to understand the bank operations

during two months internship in MCB branch HANGU as the
requirement for fulfillment of BBA (HR) Degree. In this report
different aspects of the banking sector in general and MCB has
covered.

1.2 Purpose of the Study

The purpose of the study is to give a comprehensive review of the
MCB and to analyze its financial aspects. Besides that, the purpose of
the study is:

1) To compare the theoretical knowledge with the actual practical

work.
2) To study operations of the banks, and to analyze the strength and
weaknesses of the organization.

1
1.3 Scope of the study

This will help the relevant MCB to find out their weakness and can get
their relevant data from this report. This study is also helping the
student in future to understand the functions and procedure of the
banks. This study will facilitate the students regarding the working of
Banking sector of Pakistan because most of the

Methodology of Study

For writing this report the information has been collected in following
manner. There are two types of data used for report writing.

1.4-1 Primary data

The data, which is collected for the first time and exist in raw form, is
called primary data. It includes:
i. Personal observation
ii. Discussion with staff
iii. Informal interviews with branch manager

1.4-2 Secondary data

The data gathered from existing sources are called secondary data. The
main sources of secondary data of MCB are:
i. Annual reports of MCB
ii. MCB’s website/ internet
iii. Manuals
iv. Brochures
v. Relevant books

2
1.5 Limitations of the Study

A time period of two months is not enough to study the operations of

such a large organization like MCB. So the study had to be restricted to
certain specific areas only. Hence, we can term the time factor a big
limitation of the study.
The lack of information was another limitation of the study. The only
source of information about the financial performance of the overall
organization was its Annual Reports, which was also not available at
the Branch. Also Annual Reports of other banks were not available for
the same year, so cross sectional analysis was not possible.
Due to large volume of work handled by MCB Branch Hangu, the
workload on the employees was too much due to which they could not
properly share their views about the organization.

1.6 Objectives of the study

The main objective is to:
1. Present the introduction to the report which includes the
methodology, scope, purpose, objective and limitations of the
study.
2. Survey various functions of Muslim commercial Bank of
Pakistan.
3. Study the various functions like hiring, recruitment, training
and development of Muslim commercial bank of Hangu
Branch.
4. Make Analysis by using the SWOT analysis and Critical
analysis.
5. Present the findings
6. Provide recommendations followed by conclusion and relevant
references.

3
 Scheme of the Report

The report has been divided into four sections, each section having
sub-sections in it. The scheme of the report is as follows.

1.7-1 Section One

Chapter 1
This chapter includes the introduction of the report, the background of
study, purpose of study, scope of work, methodology of research and
overall layout of the report.

Section two

Chapter 2
This chapter presents a comprehensive review of the bank. It includes
history of MCB, its organizational structure.

Chapter 3

This chapter includes different Divisions of MCB.

Chapter 4

This chapter includes products offer by MCB.

Chapter 5

This chapter contains a detail review of Hangu City Branch.

4
 Section three

Chapter 6
This chapter contains personnel management analysis, administrative
analysis, political analysis and SWOT analysis.

Section four

Chapter 7

It summarizes the findings and recommendations based on the analysis

in this section.

5
CHAPTER 2
INTRODUCTION OF MCB

Before independence, the financial sector of Indo-Pakistan was in the

hands of foreign banks some of them were British by origin. The oldest
bank operating from 1883 in this part of the world was the Chartered
Bank while another bank namely Grindlays Bank was also working
simultaneously from 1883. Among the contemporaries, Imperial Bank
of India was the largest Indian Bank, which had started its operations
in 1919. It was discharging the role of a commercial bank as well as
the Central Bank for India until an independent Central Bank i.e.
Reserve Bank of India was established in 1935.

2.1 ESTABLISHMENT OF MCB

A little earlier before the creation of Pakistan, the role of the Muslims
of the areas, which were later included in Pakistan was of no
significance due to their restricted participation in the banking sector.
There was only a small bank namely Australasia Bank having a few
branches in Lahore and its suburbs. In 1942, the Australasia Bank was
housed in a garage of a trader of Lahore who used to trade at a small
scale with Australia during that period. However, the only full fledged
bank, run by the Muslims of the sub-continent, was the Habib Bank
which was established in 1941. At that time Quaid-e-Azam
Muhammad Ali Jinnah expressed his desire that another Muslim bank
also be established in Calcutta which came into reality when Adamjee
with the assistance of Isphanis established Muslim Commercial Bank
on July 9, 1947 in Calcutta. When Pakistan came into being the

6
Muslim Commercial Bank shifted its headquarters from Calcutta to
Dhaka on August 17, 1948 and later on to Karachi on August 23, 1956.

2.2 NATIONALIZATION OF MCB

The 1960s decade is stated as the golden era in Pakistan’s economic

and financial development. The banking sector also registered
noticeable growth during that period and lent a strong helping hand to
the government to achieve rapid economic growth of the country. But
in early 1970s this scenario changed altogether. The separation of East
Pakistan (now Bangladesh) and induction of the government led by
Zulfiqar Ali Bhutto were the most significant events of early 70s
having far reaching effects on the banking system.

In the wake of rapidly changing conditions of the country, the

government decided to nationalize all the commercial banks so that the
nation as a whole can benefit from a better use of resources.
Consequently, the Muslim Commercial Bank was nationalized under
the Banks (Nationalization) Act, 1974 promulgated on January 1,
1974.

In the banking sector, the then government decided to retain only five
major banks by merging all the smaller banks with the large ones. As a
result of this policy, the Premier Bank was merged into Muslim
Commercial Bank in 1974.

7
2.3 PRIVATIZATION OF MCB

The banks after nationalization came under political and bureaucratic

control and deviated from normal banking practices. Some of their
senior executives were tempted to nurture a culture of obliging big
businessmen, feudal and political influential. They sacrificed their
personal integrity and interest of banking sector for gaining promotion
and accumulating personal wealth. That is how banking sector started
losing its upright and professional institutional image from mid-80s
and its downward slide started which touched new low during 1990s.

The then PML government also became conscious of the falling

standard of the banking sector and decided to privatize all the
commercial banks. Banks (Nationalization) (Second Amendment)
Ordinance 1991 was also promulgated to pave the way for
privatization of banks in Pakistan.

In the wake of above amendments, 26% shares valuing Rs. 149.8

millions of the Muslim Commercial Bank, held by the State Bank of
Pakistan were sold and the Bank’s management was transferred to the
purchasers of these 26% shares.

2.4 OBJECTIVES OF MCB

The main objectives of MCB are:

i. Improved Customer Services
ii. Effective Use of Electronic Media
iii. Enlightened Personnel Policies
iv. Compatible Package
v. Excellent Work Environment

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 vi. Modernization of Branches
vii. Launching of New Products
viii. Decentralization of Authority
ix. Effective staff Motivation Policies
2.5 MISSION OF MCB

MCB states its mission as follows:

“Our mission is to become the preferred provider of quality financial

services in the country with profitability and responsibility and to be
the Best Place to Work”.

Besides, MCB team core values are:

i. Customer Focus
ii. Quest for Quality
iii. Team-based Approach
iv. Employee Respect & Dignity
v. Good Corporate Citizenship

2.6 FUNCTIONS OF MCB

MCB performs the following three types of banking:

2.6-1 COMMERCIAL BANKING

Commercial Banking is performing the routine duties of banking

business. It collects surplus money from people; offers loans and
advances in the form of overdrafts, cash credits and discounting bills of
exchange. It also provides agency services and general utility services.

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2.6-2 CONSUMER BANKING
MCB Consumer Banking provides different saving accounts with
attractive returns and investment products that give the monthly profits
as well as the convenient payment instruments to serve the purpose of
safety in highly valuable transaction, having acceptance around the
world.

2.6-3 CORPORATE BANKING

MCB Corporate Banking is providing its customers with professional

financial advisor that give personal attention to customers’ banking
needs. They are specialists in connection with the services like under-
taking, corporate advisory, project finance, equity placements etc.

2.7 ORGANIZATIONAL STRUCTURE

It is the graphical representation of authorities and responsibilities. It

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

MCB is a very large and complicated organization having many

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

10
MCB is a very large organization with many branches in different
areas of the country and different divisions under the Head Office. So
it is managed through broad span of control with decentralization of
authority. (The tendency to disperse decision-making authority in an
organization structure) All the Executives, including Senior Executive
Vice Presidents (SEVP`s), General Managers (GM`s), Regional
Managers (RM`s), Vice Presidents (VP`s), and Branch Managers are
delegated with powers and authorities, which are fairly, commensurate
with their responsibilities and duties they perform.

Still many decisions of small importance, are made by Top

Management for control purposes. So there is a mix of centralized and
decentralized authority in this respect. (The tendency to restrict
delegation of decision making in an organization structure, usually by
holding authority at or near the top of the organization structure.)

2.7-1 BRANCH NETWORK

MCB is a huge organization, having branch network throughout the

country. From management point of view the branches are grouped
under regions, and regions under circles.
22 circles are working under which there were 50 regions and 1,326
Branches through out the country and five Branches are working
abroad. Province wise position of circle, regions and Branches is as
under:

Province Circles Regions Branches

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 Baluchistan 1 2 40
NWFP and AJK 3 9 251
Punjab. 11 27 752
Sindh 7 12 283
TOTAL 22 50 1,326.

2.7- 2 DIVISION OF MCB

• Agriculture Division.
• General Services Division.
• Special Assets Management Group.
• Business Development and Marketing Division.
• HRD Division.
• RTC and Master Card Division.
• Central Accounts Division.
• Industrial Credit Division.
• O&M Division.
• Corporate Affairs Division.
• Information Management.
• Legal Affairs Division.
• Credit Management Division.
• Inspection and Audit Division.
• Islamization Division.
• Finance and Treasury Division.
• Investment Banking Group.
• International Division.

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 • Training Division.
• Foreign Trade and exchange Operation Division.

2.7-3 MANAGEMENT HIERARCHY

The management hierarchy represents the different positions and

designations in the hierarchy of the ABL. However this is not the
reporting hierarchy but merely represents the positions and grades on
the basis of seniority grades.
CHART .1 MANAGEMENT HIERARCHY

PRESIDENT

Senior Executive Vice

President

Executive Vice
President

Senior Vice President

Vice President

Assistant Vice
President

Regional General
Manager

Branch Managers
13
CHART .2 HIERARCHY OF MCB

14
CHAPTER 3

DIFFERENT DIVISIONS IN MCB

3.1 THE HUMAN RESOURCE DIVISION

The Human Resource Division is strategically the most important

contributor to organizational effectiveness. It is responsible for human
resource management, including areas like recruitment, training,
performance appraisals and career development. HRD acts on the
conviction that people at MCB are the most important assets for the
Bank.
The division tries to create an environment of mutual trust and dignity.
It plans to hire, develop and retain the human resource base with the
rights level of skills and talent to meet current and future business
needs. The HRD aims to transform the Bank into a modern and
dynamic bank, highly professional and efficient, fully equipped to play
a meaningful role, on sustainable basis in the economic and social
development of KPK as well as the country.
In addition to the above, the Bank acknowledges professional acumen,
experience and expertise of its staff through regular financial benefits
in the shape of competitive salaries, cash awards, promotions,
academic sponsorships and other incentives so as to boost their morale
for greater input towards betterment of the Bank.

15
3.2 FUNCTIONS OF PERSONNEL DEPARTEMENT

1. They are engage in Personnel policy and Recruitment

planning.
2. They are concern with promotion and transfers of the Employees.

3. Give loans, Medical leaves and Disciplinary actions to the

Employees.

4. They give training to the employees.

5. They are engage in Human resource Development, Job Rotation,

Training, Career Development, Employee Relation, Health, Fitness
Program

6. They arrange board meeting in the organization.

7. They also deal internees.

8. They forecast future needs and human resource planning.

9. They give salaries to the employees.

10. They are engage in screening and selection of employees.

11. It also give Post Retirement Benefits to the employees of the

Bank.

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3.3 THE MARKETING DIVISION

The Marketing Division of the Bank is responsible for the formulation

and implementation of marketing strategy of the Bank’s products both
on assets and liabilities side keeping in view the business environment
of the province. It works to popularize the Bank’s deposit schemes and
loan products among the people with a view to improve business and
over all image of the Bank. The division works in close coordination
with the branches and other divisions or departments of the bank
towards the implementation of the marketing strategy and achievement
of the assigned targets.
The division is comprised of three departments viz research and
development department, customer relations department and product
promotions department the responsibility of the research and
development department is to search and develop new products
according to the requirement of the market. The customer relations
department is responsible for the implementation of the marketing
strategy. The product promotion department has been assigned with the
promotion of the products through electronic and print media and
through other means of promotion.
The division has developed consumer finance products as well as
conventional products. These are in addition to Agri-Products which
have been developed for the agriculture sector of the economy.
Searching for good corporate clients is the core activity of the division,
which is receiving full attention of the relevant department with a
result oriented approach.

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3.4 THE ISLAMIC BANKING DIVISION

The MCB has started Islamic Banking by converting all assets and
liabilities of Hangu branch on 27th Ramadan (22nd November 2003).
It further converts the Quetta and Bannu Branches into Islamic
Banking. These branches are now working according to the guidelines
of Shariah Supervisory Board. The Aims and target of the IBD is to
implement the decision of the Board of Director to gradually convert
the whole bank in to an Islamic Bank within three years under the
supervision of the Shariah Supervisory Board as per rules and
regulation of the SBP. To achieve the target, Islamic banking division
has devised an action plan for expansion and conversion of the whole
bank into an Islamic Bank within a laid down framework and to
develop the business in various areas. According to the plan new
branches will be opened and twelve branches of the Bank will be
converted in to IBBs. Disbursement of funds under Islamic Financing
modes through other branches will start soon. Presently Islamic
Banking Branch is offering Ijara, Murabah. Diminishing Musharakha
and Guarantees as Islamic finance services and investing the idle funds
through Treasury in the Capital. While consumer financing schemes
under Islamic modes of financing Housing Finance Scheme and House
Contraction Scheme are launching. Export scheme, Foreign exchange
Accounts etc.

18
3.5 THE CREDIT DIVISION

There has been a remarkable growth in core business of the Bank and
the Credit Division has played very effective role in this regard. The
credit division of the bank continuously review its policy frameworks
in accordance with the tough competition faced in the wake of
reducing mark up rates and increased liquidity in market. Credit
monitoring is being strengthened with a view to develop early warning
signals through constant monitoring of loans from different angles, risk
management plan is being developed giving a rating to the clients
based on industry status, financial strength of the clients security
offered, repayment behavior among other factors. The conventional
loans, micro and consumer finance, Islamic mode of financing are the
salient characteristics of our credit schemes whereas the agricultural
lending policy is being formulated with new features. Introduction of
new schemes like house finance, car finance and other financing
schemes will definitely improve and enhance the credit portfolio. The
MCB has strengthened its grip on the target market for these schemes.
The Micro lending operations in the Bank are structured in a separate
department called the Micro Finance Department under the credit
division of the Bank. It aims to be the largest Micro Finance provider
in the KPK on sustainable basis. Its main objective is providing access
to financial services by the low income and disadvantaged segment of
the society.

19
3.6 THE INTERNAL AUDIT DIVISION

The Auditing is a systematic examination of all books and records in

order to ascertain or verify and to report upon the facts regarding its
operations. The Internal Audit Division works independent of the
management and reports to the Audit Committee of the Board. The
audit committee comprises of two wings i.e. the Head Office & Field
Audit Department and The Inspection & implementation Department.
The former ensures audit according to the plan and the later
responsible for inspections and implementation and follow up action.
The main function of internal audit division of a bank is to conduct
independent appraisal of all activities aiming to add value. Every
activity of the Bank falls with in the scope of the internal audit. The
prime objective of internal auditor is to examine, evaluate, and manage
to control and eventually to mitigate the risk. In addition the internal
audit division advises and recommends senior management for
improvements in internal control and risk management system.

3.7 THE TREASURY AND INVESTMENT DIVISION

The Treasury and Investment Division have developed a reputation as

a proven market player. Treasury remained the main source of revenue
generation for the Bank. Investment department is responsible for
managing the Bank’s equity portfolio. The division is also responsible
day-to-day management of liquidity for the Bank.
Owing to rising trends in interest rates, treasury prioritized investment
in corporate bonds offering float rate at KIBOR. Besides return on
government securities that also saw rising trend, COT contributed
handsome return in profit of the treasury. The swap market did not
offer any significant opportunities for interest arbitrage. The overall

20
currency exposure is being managed prudently and effectively while
generating sustainable exchange earnings. The financial markets of the
country continue to develop; we expect significant opportunities to
arise for division by trading, funding and gapping areas.

3.8 THE FINANCE DIVISION

The Finance Division is responsible for bookkeeping and accounts,

overall fiscal management, financial control, financial reporting and
accounting functions of the Bank. The Finance Division ensures that
the accounting records and system are maintained in accordance with
internal policies, regulatory requirements and international accounting
standards. It establishes policies and procedures relating to the finance
function, monitors returns on earning assets and reports on various
performance indicators including asset/liability mismatch. The division
directs control of the budgeting process in accordance with the annual
plans, policies, management directives and strategy, ensuring that
quality budgeting and forecasts are drawn up and consolidated for
approval.
The Finance Division exercise budgetary control on all expense and
income items at both the Head Office and branch level, ensuring the
effective monitoring arrangements are in place in respect of adherence
to budget or forecasts. It monitors capital adequacy in accordance with
regulatory directives. The Division maintains the financial databank
and carries out industry financial analysis vis-à-vis Banks strengths
and opportunities.

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3.9 THE INFORMATION TECHNOLOGY DIVISION

The Information Technology Division of the bank was established in

1994 and all the branches were successfully automated by the year
1998. The Information Technology division has progressed in the last
ten years and trying its best to abreast in the field of fast developing
technology. In order to achieve its goals, the management has started
On-Line Banking to facilitate the customers of the MCB, so that they
will transfer money between any two branches through out the country.
The Bank beside this works in the field of information technology and
gets advantages from the technology in a more advanced way to build
a strong means of communication between the different branches.

3.9-1 USE OF IT IN THE MCB ONLINE BANKING SYSTEM

The MCB has its own banking system called as “U-BANK” which is
used for the transactions. Through this all the branches of the MCB are
interconnected with each other. The U-BANK provides an Online
Inter-Branch Transaction Facility through which customer maintaining
accounts in online branches would be able to operate their accounts
from any of the online branches across the country.
An online branch will offer the following transactions to account
holder of other online branches:
i Balance Inquiry
ii Cash Withdrawal
iii Cash Deposit
iv Transfer of Funds
v Issuance of ATM Cards
A special option has been made available in the computer system in
online branches to accept transaction meant for another online branch.

22
The online transaction will only be accepted during fixed hours. A
complete audit trail of all the transactions posted remotely would be
available both at the destination branch and the originated branch. The
originating branch must tick all the online transactions with the
voucher/documents, as is being done for local transactions.

3.9.2 ONLINE CUSTOMER SERVICE

Why On-line
• Fast changing financial environment.
• Market Competition
• Customer Demand due to increasing public interest in Banking.
• Objectives
• To Acquire Market Share with the introduction of On-line (e-
Banking) to meet competition.
• Improve corporate + Brand Image.
• Establish Customer Loyalty.
• Increase and Sustain Customer Base.
• Provide ease and speed in transaction Processing.

3.10 SYSTEM ARCHITECTURE

The Online System is being integrated with U-BANK Plus System

Architecture and comprises three main components.
Online IT Server
Local Branch
Remote Branch

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3.10-1 ON-Line Server (IT)

Server machine will work as an online switch and is housed at IT

Department and will establish and maintain the connection between
Local and Remote Branch and route the transaction to the Destination
Branch.

3.10-2 Local Branch

Any Branch initiating an online transaction will be called local branch.

A branch using the system for making a transaction on some other
branch will always be a local branch. The posting date on the remote
branch system must be the same as on the local branch system, so that
the transaction is posted on the same date and balances are up to date.
The system ensures that transaction posting date in Local and Remote
branch is aligned.

3.10-3. Remote Branch

A Branch on which transaction is targeted is called Remote branch.

Customer of any branch will be entertained at Online Local Branch.

3.10-4 NETWORKING SETUP IN BANK

The MCB has some online branches equipped with state of the art and
latest hardware and software components. Before giving an overview
of the Bank’s network, I would like to first give an introduction to
computer networks;
Computer Networks

24
In the world of computers, networking is the practice of linking two or
more computing devices together for the purpose of sharing data.
Networks are built with a mix of computer hardware and computer
software.

3.10-5The MCB Networking

The logical networking environment of the Bank is of both types:

Server-Client Environment.
Workgroup Environment.
Server-Client Environment is used within the branch i.e. between the
server and the clients of the specific branch. Windows 2003 Server is
being installed on the server side of the branch network and windows
XP is installed on the Client side of the branch network.
The workgroup Environment is used between the Servers of the
different branches i.e. the connection between the different branches of
the Bank through out the country is like workgroup.
The following lists types of servers and their purpose in the Bank;
3.10-6 File server

Stores various types of files and distributes them to other clients on the
network when required (Including broadcasting, uni-casting and
multicasting).

3.10-7 Print server

Controls and manages one or more printers and accepts print jobs from
other network clients, spooling the print jobs, and performing most or
all of the other functions that a workstation would perform to

25
accomplish a printing task if the printer were connected directly to the
workstation’s printer port.

3.10-8 Mail server

Stores, sends, receive, routes, and perform other email related

operations for other clients on the network.

3.10-9 Fax server

Stores, sends, receives, routes, and performs other functions necessary

for the proper transmission, reception, and distribution of faxes.

3.10-10 Proxy server

Performs some type of function on behalf of other clients on the

network to increase the performance of certain operations (e.g.,
prefetching and caching documents or other data that are requested
very frequently) or as a security precaution to isolate network clients
from external threats.

3.10-11 Remote Access Server (RAS)

Monitors modem lines or other network communications channels for

requests to connect to the network from a remote location, answers the
incoming telephone call or acknowledges the network request, and
performs the necessary security checks and other procedures necessary
to log a user onto the network. This remote login is mostly used by the
Network administrator to fix any problem when is experienced. This

26
facilitates the Administrator to troubleshoot any error/problem even if
he is far away from the branch and that error is needed to fix urgently.

3.10-12 Backup Server

Has network backup software installed and have large amounts of hard
drive storage or other forms of storage (tape, HDD etc.) available to it
to be used for the purpose of ensuring that data loss does not occur in
the network..

3.11 FOREIGN EXCHANGE DIVISION

3.11-1 Foreign Exchange

Foreign exchange is of great significance to the Pakistan development

to meet the claims of foreign countries on us in respect of foreign trade
transactions.

Similarly foreign exchange department in commercial bank is also of

very much importance so as to deal in foreign currency transactions.
MCB foreign exchange department is involved in business of export,
import and foreign currency accounts. So we can say that banks are
pioneer sector to help out the nation by motivating manufacturers of
exportable items to explore foreign markets for mutual benefits of
individuals as well as national Ex -chequers.

27
3.11-2 Export

Export are commercial engagements finalized between the local setters

and foreign buyers for the sale of locally manufactured goods, the
prices and made of delivery finalized between the consignee and
cosigner but the forwarding of expert documents and remittance of sale
proceeds are handled by the Banks. So Banks play vital role in
maturing the export contacts. All export in our country is controlled
under the strict rule of SBP no export of good are allowed which are
prohibited by GOP. The GOP has under the export trade central
regulation banned exports to South Africa and Israel.

Pakistan is exporting the following goods but still its balance of

payment is unfavorable due to excessive import against export.
1. Leather goods.

2. Carpets.

3. Sports goods.

4. Petroleum products.

5. Rice etc.

3.11-3 Registration of Exporters:

No person is allowed to export goods unless he is registered as an

exporter wills the Chief Controller of import and exports. Form “E” is
used for export purpose and is issued by Banks.

28
3.11-4 Export from Customer Point of View

The export is a commercial deal involving a buyer outside the country.

The registered exporter after making an agreement wills the importer,
manufacture goods. He arranged other necessary documents and hand
over all such documents to Bank along with duly signed bill of
exchange customer also fill the export form (E) and authenticated by
the issuing banker. After this he is partially discharged off from his
duties regarding the one specific case under discussion and the duties
of the Banker starts.

3.11-5 Export from Banks Point off View

After receiving documents from customer, bank forward such

document to its own foreign correspondents in the country of importer.
Bank charge a nominal fee on the export of goods and series provided.
The main object of the Bank by offering such services is to emphasize
on the export business and in the way make Pakistan able to earn
enough foreign exchange to pay off outstanding debt burden.

MCB is keenly interested in booking the export business on large scale

by providing various export facilities to different parties.

3.11-6 Letter Of Credit

A written statement by a Bank that money will be loaned provided

conditions specified in the letter are met. It is used in import and export
business it is a commitment on the part of the buyers Bank to pay or
accept drafts drawn upon it provided such drafts do not exceed a
specified amount.

29
 3.11-7 Export Letter Of Credit

In such letter of credit we reverse our thinking what has been said in
the import L.C, the explain doesn’t know the credit worthiness of the
importer in the other country. So upon the request of the exporter, the
importer Bank sends a letter of credit to exporter to ensure the payment
and minimize risk. This help in promoting oversees trade exporter
should examine the following particulars of LC.

1. Advice No.
2. Name of issuing Bank.
3. Amount of LC.
4. Name of the importer.
5. Tenor of LC.
6. Shipping documents.
7. Expiration date.
8. Type of LC and liability of bank issued.

Exporter having LC have the following advantages

1. He can easily get necessary finance just by producing shipping

documents to any Bank.
2. It established legal right of getting payment of the goods exported in
the foreign country.
3. Exporter receiver money in his own currency.

4. Both importer and exporter rely on each other.

30
 3.11-8 Methods and period of payment

There are various methods used for settlement of foreign trade

transaction between buyer and seller.

3.11-8.1 Open Account and Advance Payment

On open account payment to the exporter is made after receiving good

and similarly advanced payment is sent by the importer ahead of the
actual transportation of merchandise.

3.11-8.2 Documentary Collections

It may be further segregated as following:

Cash Collection:-
Importer makes settlement upon the receipt of shipping documents in
cash.
Credit Collection:
In such case the exporter Bank hand over shipping documents to the
consignee against the acceptance of usance draft. The period of the bill
is usually 30 days, 60 days, or 90 days from the date of shipment a date
of acceptance.

Documentary Credit
It has good two categories.
a. Sight credits:-
Payment is made to exporter at the spot of receiving the documents.

31
b. Usance credits.
Payment is made in future at specified period.

3.11.9 Bank Guarantee:-

Trade between exporter and importer takes place on account of Bank

guarantee in respect of one party payment surety.

However in Pakistan value of exported good “under SBP order” should

be paid will in four months or as specified by SBP either in foreign
currency in which authorized dealers maintains accounts or in
Pakistani rupees.

Exporter letter of credit is beneficial for exporter on the basis of which

his payment against importer is secured and the same letter may be
used for other financial problems of the exporter. In this was MCB is
fully contributing toward export enhancement.

3.12 IMPORTS:

No country in the world is self sufficient up to some extent every

country is importing certain necessary products of daily use of national
importance. Pakistan is importing excessive goods including
petroleum, cars, electronic equipment's, cement, wheat, potatoes, tea,
rubber, pulses etc. Import eats up large portion of foreign exchange.
Certain import products are being used as a raw material to be
concerted into finished exported products, this is the best use of
imported good and the foreign exchange is doubled.

32
3.12-1 OPENING OF THE IMPORT LETTER OF CREDIT

Only the registered importer exporter is allowed to open Lc in the

Bank every Bank has its own form which is filled by the importer
provided all the necessary documents and information therein.

For opening LC following requirements shall be met by the importer,

Banks and customs authorities.

3.12.2 BY IMPORTERS:

a. To submit form “B” to the bank.

b. Import must be made competitive prices.

c. Description of the goods.

d. To provide registration copy.

e. To obtain necessary authorization from concerned authorities

where received.

3.12.3 By Bank (MCB)

To ensure that he holds a valid import registration certificate.

The importer has valid membership of trade body, Necessary
endorsement in respect of LC, operate A/C in Bank

33
3.12.4 By custom authorities.

To ensure the import of goods has been made as per description and IT
classification mentioned in LC, and the item is imported in accordance
with the procedure prescribed in this order.

3.13 IMPORT ON CONSIGNMENT BASIS

Bank under SBP order must ensure that registered contact for import
on consignment basis is submitted by the importer and the Banks will
ensure that importer submits contact for import on consignment basis.

When L.C. is opened and received by exporter he sends documents and

the Bank, upon satisfaction on the documents makes payment to the
exporter in his own currency. Bank also examine the documents
submitted by exporter, invoice price, description of goods bill of
loading whether stale or not, and the bill of loading as a “clean” and
“freight” paid.

Similarly the importer after receiving the good make payment of the
importing Bank either on spot or at some fixed future date depending
upon the type of the draft.

If the importing Bank makes payment to the exporter without

examining the goods, in case defect is found in the goods, then the
importer can claim damages if any on the issuing Bank.

From letter of credit both importer and exporter are benefited and the
foreign trade transaction is made easily without any difficulty.

34
3.14 WHY MCB HANDLE L.C.

The main reason behind this fact is that MCB and other banks while
expending LC charge commission very with the kind of LC’s. The
commissions are small yet when counted on the whole they form a
significant portion of the earning of MCB and other Banks.

New parties engage in import and export businesses are in this way
introduced to the bank which by serving them effectively develops
profitable relationship.

Importer Bank send LC from importer side to the exporter Bank which
in turn will send bulk of business to the bank and so reciprocal service
is developed.

3.15 FOREIGN CURRENCY ACCOUNTS.

The foreign currency accounts section performs different functions.

For example, cash deposit cash withdraw from the account, and inward
remittances. The functions of the foreign currency accounts section is
discussed as under:
1. One can directly deposit/cash cheeses from the Bank.

2. If a cheque comes from a foreign correspondent Bank, they will

deposit it in the said account.
3. Family maintenance (meaning receiving dollars from a person
and if he do not have a foreign currency account, then the Bank
will pay him in Pakistan rupees)

35
 The Bank has different foreign currency rates, for different purposes.

1. If the letter of credit (LC) is about the export, then the Bank has
different rate for foreign exchange, (It will be higher compared
to rupees, in order to encourage exports).
2. If the LC is about the imports of the goods, then the rate will
vary from export.
3. The person who opened the letter of credit can book the rates,
up to six months. The Bank has different rates. This is provided
so that to cover the devaluation risks. This method is also called
swapping.
4. The rate of foreign currency, for the person who converts
directly is foreign currency notes in to Pak rupee will be
different.

The SBP rule every Bank can offer foreign a/c s in four major
currencies, US dollars $. Pound, German Mark and Japanese Yen. First
the other currencies should be converted to any one of currency and
then deposited in the respective FC a/c.

3.16 CURRENT ACCOUNT

This account is for the business purpose or for those people who
withdraw of deposit the amount very frequently. This account is
considered as no profit any loss account. The current account is opened
from at least five hundred dollars. There is no restriction on the
number of cheeses being cashed, if the balance is below five hundred
dollars, then it is discretion of the account officer to close it or leave it
as it is. If the amount is less then five hundred dollars, and the account

36
is not closed, then the Bank will charge five dollars in six months.
Other Banks charge more than five dollars especially the foreign
Banks.

3.17 SAVING ACCOUNT

It is a profit and loss sharing account (PLS). It is interest oriented

account; the MCB gives 6.12% interest per annum.

The saving account can be opened in three types of currency.

a. US Dollars.

b. Deutsche Marks.

c. British Pounds.
Khushali Dollar Account (KDA).

The profits given on daily basis. There is restriction on drawing

cheeses, not more than four cheeses could be drawn in a month interest
is paid @ of 6%.

3.18 FIXED DEPOSIT RECEIPTS

As the name shows, it is fixed deposit account. One can deposit his
amount from seven days up to five years.

3.19 INWARD REMITTANCES

The account section also deals with inwards remittances, meaning the
purchase of telegraphic transfers (TT) mail transfer
(MT), currency notes etc.

37
3.20 TRAVELERS CHEESES (TC)
The account officer has a specified amount of stock of traveler’s
cheeses. The account officer acts as a trustee on behalf of the traveler’s
cheeses company. When giving the TC, hey have one percent
commission. When cashing they pay them off in rupees. If the TC is
purchase din a foreign country, then only the person who has a foreign
currency account can deposit it in his account and get dollars.

38
CHAPTER 4

PRODUCTS OFFER BY MCB

There are two basic principles of Banking, first deposits and secondly
advances. Deposits play a pivotal role in commercial Banking. In
deposits it could be initiated by the cash pay in slip which a customer
enter into the bank he will fill up the pay in slip for which he must have
an account to enter into a valid contract, which is called customer
banker relationship. This contract could be launched of on opening of
account.

4.1 OPENING OF AN ACCOUNT

The Banking history is reputed with various instances of fraud due to

incorrect opening of account. Therefore, he branch manager and other
officer had to taken care and exercised required precautions at the time
of opening of account. At the time of opening of account, officers and
manager should tactfully obtain as much information as possible about
the character and integrity of the person. His /her correct name, address
and occupation. This infect will be the only opportunity when they will
be able to talk to prospective customer in the friendly and frank
atmosphere. The customer can be classified as follows.

1. Individuals.

2. Partnership firms.

3. Joint Stock companies.

4. Agent.

39
 5. Clubs.

6. Societies and associations.

7. Executives and administrators.

8. Trusts local bodies etc.

9. Agriculture Accounts

For opening of account, the person should meet the following

requirements
• He/She should be a major one.
• He/She should have attained the age of 18 and having allotted
NIC No.
• He/She should be a same person i.e. He/She should understand
the terms and conditions of the contract.
• He/She must not be a bankrupt and his/her liabilities should not
exceed than that of the assets declared by him/her.

4.2 CLASSIFICATION OF DEPOSITS

Deposits can be classified in the following way:

4.2-1 Current deposits

These are those kinds of deposits which are not remunerative in nature
i.e.; no profit is given on these deposits.

There is no limit on withdrawal within the banking hours customer can

present number of cheques. Every type of customer meeting the
conditions of account opening can open these accounts.

40
KEY POINT
• Low minimum balance requirements.
• Unlimited cash deposit and withdrawal facility at hundreds of
branch nationwide.
• Use your MCB Smart Card to shop at thousand of merchants across
Pakistan.
• Affordable lockers and other transactional facilities.

Branch, On Your Way

• Hundreds of 9-5 full day banking branches (including Saturdays).
• Network of over a thousand branches, and hundreds of online
branches, at convenient locations.

ATM (ACCESS 24/7)

• Over 350 MCB ATMs.
• Over 3000 MNET/1-LINK ATMs.

SMS BANKING, ON THE GO (ACCESS 24/7)

• Balance inquiry details.
• Last 4 transaction details.

4.2.2 PLS DEPOSITS; (Profit and loss sharing)

There are called remunerative deposits I, e, profit paying, to these

account holder profits is paid. We can classify these types of accounts
in the following categories.

i. Saving bank account

ii. Short notice term deposits 7 days.

41
 iii. Short notice term deposits 30 days.
iv. Term deposits receipts 3 months.
v. Term deposits receipts 6 months.
vi. Term deposits receipt 1-5 years.

On saving Bank deposits the Bank pays, periodical profits paid on the
minimum closing balance.

KEY POINT
• Open a basic Account with as little as Rs. 1000/- only.
• No minimum balance maintenance requirement.
• No monthly account maintenance charges.
• Two free withdrawals per month.
• Two free deposits per month.
• Unlimited free withdrawal transactions through MCB’s ATMs.
• Use your MCB Smart Card to shop at thousands of merchants
across Pakistan.

BRANCH, ON YOUR WAY

• Hundreds of 9-5 full day banking branches.
• Network of over a thousand branches, and hundreds of online
branches, at convenient locations.
ATMS (ACCESS 24/7)
• Over 350 MCB ATMs.
• Over 3000 MNET/ 1-LINK ATMs.

42
 4.3 SCHEMES OFFERED BY MCB

To inculcate the habit of saving among the people and public, MCB has
introduced remunerative schemes, which include.

4.3-1 Khushali Bachat Account

As the name indicates, this scheme has been started to encourage

savings.
The main features of this account are”
• Introduced for the first time in Pakistan.
• 8% rate of return is given per annum.
• Return are calculated on daily product basis and paid half yearly.
• It provides the facility of helping the account
holders to pay utility bills (electricity, telephone and gas) through
their account, without making any queues and delay.

4.3.2 Mahana Khushali Scheme.

MCB has introduced this scheme to encourage investment by paying

profit month after month.

The salient features of this scheme are:

• Khushali certificates can be purchased by individuals (singly or
jointly), by the proprietorship partnership concerns or companies
etc, in their name.
• Minimum amount of investment shall be Rs.10, 000 and
maximum amount can be 1, 0000,000.
• The Khushali certificate will be of five years maturity.

43
 • 14.70% per annum profit is paid monthly; it is reviewed in six
months.
On profit by MCB branches at the time of paying the profit on monthly
basis. Payment of profit is done by either crossed pay order or any
other way of transfer of money. In case the account holder does not
receive the profit, it will be credited to his account and for the next
month the profit will be paid on new balance.

In case the premature encasement is desired PLS, profit saving rate will
be applied as the Bank announces for a particular period. If the
certificate is held for less than 90 days no profit will be given.

4.4 CAPITAL GROWTH SCHEME.

This scheme is based on half yearly profit, but is not paid to the
customer or credited to his/her account.

The amount of profit so provided on six monthly intervals is treated as

being reinvested, to attract profit at the applicable rate like the principal
amount of deposit. In other words, under this scheme, the half yearly
profit is provided on a cumulative basis, and retains with the bank, until
final payment on maternity or open completion of the period set out for
Hajj Mubarak Account.

4.5 CAPITAL GROWTH CERTIFICATE

At the time of issuing a capital growth certificate, the branch will make
an entry in the standard book SB 133, in the manner as required for an
entry of tern deposit in SB-9, in chronological order, Each page of this

44
book has a provision of bearing one years record of the deposit receipts,
including the provision of declared profit, twice a year, on a six
monthly basis. His first six columns of this book relate to the particulars
of deposit, while column no-7 refers to the amount; in addition, up to
date profit provided to each deposit receipt. Column Nos-9 and 12 are
meant for calculation of six monthly profit and these columns will only
be used when the rate of profit is declared The profit so calculated
would be added to the previous cumulative amount of each deposit
receipt and total thereof will be noted in the next column of cumulative
amount. The profit will not be disbursed or paid to the
customer/depositor as it will be treated as being re invested, for
attracting profit on the entire accumulated amount of each deposit
certificate.

4.6 PREMATURE WITHDRAWAL

The CGC’s are originally issued for a total period of five years and,
maturity, the face value amount becomes approximately double one
premature withdrawal, profit is allowed at the simple rate, applicable
for the period the deposit has remained with the Bank. For this
purpose, the branch is advised to keep a schedule containing the
monthly declared rates of all the previous periods, duly updated, so
that the calculation of profit in such cases can easily be made. The
actual amount calculated along with the depositor, by debiting the
profit payable account (CGC) and capital growth certificate account,
respectively. The payment entry, recovery of Zakat and withholding
tax, wherever applicable, will also be noted in SB-133 simultaneously,
for updating the deposit record. Amount of Zakat and tax will as usual,
be credited other respective account.

45
The profit on each deposit certificate is regularly provided, on a six
monthly basis and up to date record of provision is available in SB-133
against every individual deposit certificate. As such, upon premature
withdrawals the branch shall pay the actual calculated profit for the
period of deposit, as per the rules indicated above, and will reverse the
excess amount of provision, if any, by passing and entry as follows.

4.7 ZAKAT & TAX CALCULATION

In capital growth certificates the profits are only paid at the time of
encashment, on either maturely or before maturity. As such, the zakat,
wherever applicable, is recovered on the total encashment value of the
deposit certificate (i.e., the face value plus accumulated profit there
upon) at 2.5%. The withholding tax is however, recovered only on the
amount of accumulated profit at the applicable rate.

4.8 OVERDUE CAPITAL GROWTH CERTIFICATES

The CGC already overdue for payment but which remain outstanding
will not attract profit after maturity. In order to keep these deposits
separate from other regular deposits, branch will carry for the details of
such deposits on separate folio to be reserved for overdue deposits in
SB-133, and the original entry of the deposit, in the folio of regular
deposits, will be closed. In order to segregate the figure of overdue
deposit in SB-9-A, A separate folio will also be reserved, and the
cumulative value as appearing in SB-133 against the each overdue CGC
will be transferred from regular record to this overdue section of SB-9-
A. After transferring to overdue, no further profit on these deposits,
except for the intervening period (the period between the last half, year

46
end, and the maturely date of the deposit) will be applied on declaration
of profit rate for the period, in which the intervening period is covered.

In case the depositor withdraw before the declaration of profit the area
of profit intervening period will be added at the prescribed rate of
provision or must deposit and paid to the depositor. If, however, the
deposit is withdrawn after the declaration of profit, the actual amount
on the declared rate will be calculated for this remaining period and
paid to the depositor, in the prescribed manner. The entries for such
amount of profit will only be passed at the time of deposit or declaration
of profit rate, whichever is earlier.

4.9 REINVESTMENT ON MATURITY

On maturity of a capital growth certificate, the customer may desire to

reinvest the total amount including profit, for a like period of 5 years. In
such cases the branch will treat the reinvestment of deposit in CGC, as a
fresh deposit and payment of existing certificate will be made in the
manner set out above. However if the customer visits the branch after
three months or more from the date of maturity, with a intention to
redeposit the amount, the branch will calculate the profit for the
overdue period, at the applicable rate, on it last accumulated value
before transfer to overdue Deposit certificates. This amount of profit
will first, be provided, along with the profit of the intervening period at
six monthly and annual closing, and thereafter, the process of
encashment, in the presented manner, will be followed. A new capital
growth certificate, for a rounded amount as desired by the customer,
will be issued for the encashment proceeds of the existing CGC, and the
balance amount, if any, will be paid to the customer.

47
 4.10 OPENING OF A HMS ACCOUNT

After completion of the application form and related formalities of Hajj

Mubark savings accounts, the particulars of account will be noted on
the left side folio of the ledger and the credit entry of initial deposit will
be passed in the account. On the top of the page, a note should be given
to signify the duration period of account and amount of monthly
installment to be deposited by the customer. The right hand folio of the
ledger should be reserved for recording the profit on the HMS account;
in no case should this folio be used for opening a new account. On top
of this page in the space provided for the heading, the words “profit
provision on HMS” should be written to identify the folio for
computing profit on the balances of accounts appearing in the specified
time.

4.10.1 Default In Installments

In Hajj Mubarak savings account, the depositor/intending Hajji is

required to deposit certain specified amount in the specified duration
period. In case of default, this period is automatically extended up to the
number of months that payment was defaulted. For having a watch on
regular payments by the customers, the branch will check the ledger on
the last day of each month to note the names and account numbers of
the defaulters, If the customer does not pay the installments, for three
continuous months, a reminder in writing on the given access should be
sent to get the account regularized. `

4.10.2 Withdrawal from the Scheme

48
A customer may request to withdraw the funds from his/her HMS
accounts before completing the period of deposit or to discontinue
participating in the scheme. In such cases, the branch will apply profit
on the deposit in declared for PLS SB accounts, during the period of
deposit for each term of six months. The calculation of profit will be
made on monthly product basis as per SB rules, and paid along with the
original deposit, through cash detail voucher after completing the
relevant formalities for closure of account as per procedure.

4.10.3 Payment on Completion Of Period

By the time of completion of the stipulated duration period of an

account the total amount in a HMS Account would have accumulated to
a sum nearly equivalent to the passage cost for performing Hajj by the
account holder or his/her nominee in case of his/her death. At the time
of calling applications from the intending Hajj pilgrims, the branch will
review the ledger of HMS accounts and note the names of account
holders who have already completed the total number of installments as
specified for such account of who are about to complete the period for
depositing the installments in the account. The branch, requesting them
to call on the bank to complete the application and other formalities of
Hajj passage will intimate all such customers. A blank Hajj application
form should also be sent to the customer at his/her address to enable
him/her to apply for the Hajj, before the closing date for submitting Hag
application. When the customer visits the branch, the calculation of the
available amount in HMS account should be made, and by closing the
account in the prescribed manner, the entire amount would be used
towards recovery of Hag Dues against his/her Hag application. The
customer would pay any short fall in the amount

49
4.11 KHANUM BACHAT ACCOUNT SCHEME

Under Khanum Bachat account scheme a monthly sum of Rs. 1000/-

will have to be deposited by a customer regularly for ten years, on or
before the 6th day of each month and at maturity, a lump sum payment
including profit will be made to the account holder. According to the
average prevailing rate of profit, it is expected that the total amount
would be amount Rs.257, 000 subject to deduction of zakat and
withholding tax etc, wherever applicable at the time of maturity
payment.

Expected rate of profit is, 14, 77% per annum, exactly the same rate
normally declared for 5 years term deposits, subject to change
according to the market situation.

4.11.1 Opening of the Account;

Khanum Bachat Account scheme is slightly different from CGC and

other term deposits as in all these schemes the amount of deposit
remains constant, whereas in KBS, the balance fluctuates regularly,
because of monthly deposit in each account.

After completion of the application form and related formalities of a

Khanum Bachat Account, the particulars of account will be noted on the
ledger and the credit entry of initial deposit will be passed in the
account. On top of this page, in the space provided for the heading the
words profit provision on KHB should be written.

50
4.11.2 Withdrawal from the Scheme;

A customer may request to withdraw the funds from his/her KHB

account before completing the period of deposit or to discontinue
participating in the scheme. In such cases, the branch will apply profit
on the deposit in KHB account at a simple rate of profit declared for
PLS SB accounts, during the period of deposit for each term of six
month. The calculation of profit will be made on monthly product basis
as per SB rules, and paid along with the original deposit through cash
debit voucher after completing the relevant formalities for closure of
account as per procedure.

4.11.3 Deduction of Tax and Zakat from Profits;

At the time of payment of deposit amount including profit, either on

maturity or before maturity, the amount of withholding tax and zakat
wherever applicable, will be deducted in the prescribed manner.

4.11.4 Rules Governing Pls Khanum Bachat Account Schemes

1. PLS KHAB Account is a non chequing account, which can be

opened, in the personal name of an individual, including that of
a minor, proper introduction, in the manner prescribed for
opening other deposit account.
2. The customer participating in PLS Khanum bachat account
must be regular in making monthly deposits of the stipulated
amount of Rs.1000/- without any lapse. Relaxation of two
monthly payment sin a year would be available but only in
exceptional genuine cases, subject to depositing the same in

51
 subsequent months, and default for more than two months,
either continuously or with a gap, in any one year would result
in customers withdrawal from the scheme.
3. For the delay in payment, the profitability of the account would
be adversely affected as profit and such amounts (s) would be
calculated from the date of deposit. If the payment for the
defaulted amount is not subsequently made, the total period of
the scheme for such account, would automatically be extended
accordingly, to cover the number of monthly payment.
4. The Bank reserves its right to refuse any deposit in this scheme,
from any person or class of persons, without assigning any
reason, and for such refusal, no right or claim would be
entertained by the Bank or its officer.
5. The bank would be within its rights to invest the funds raised
form the deposits in PLS Khanam Bachat Account in any
manner at its discretion and to make use on the funds to the be
judgment in the banking business under the PLS system.
6. PLS KHB account in the name of guardian (s) of the minor
either singly or jointly and, on maturity, the payment of the
accumulated amount along with profit will be made to the
guardian(s) or in a joint account to either or survivor, unless on
attaining majority age, the minor exercises his right to such
deposit with the consent of the guardian(s).

52
4.12 MAAL- A-MAAL SCHEME"

Recently MCB has announced "Maal a Mall” scheme for its customer
this is prizes oriented scheme of the bank, in such scheme the
individual is received to deposit Rs.25000/- cash in any branch of the
Bank so as to count his name in the draw. The bank will arrange drain
after every month and the successful winners will be given prizes like,
Toyota cars, big prize of Rs.20, 000,000 lack and attractive prizes.

53
CHAPTER 5
MCB BRANCH HANGU CITY

5.1 INTRODUCTION

Hangu city branch is one of the important branches of MCB. Because it is one
of the richest districts in KPK. It performs all the function of the commercial
bank, from deposits to advances, remittances etc. The Hangu branch of the
MCB is widely acclaimed as the busiest branch in the region. The site of the
branch is very suitable; it is in the middle of the Hangu city or can say in the
heart of the city. Building of the branch is not too big to accommodate the
staff and clients comfortably. However, the branch manager Mr. Gul Theef
and the other staff are so active that they deal the clients efficiently, politely,
and in a congenial atmosphere. During the internship period in the branch,
they give the writer too much respect and guidance to learn more in the field
of banking, general correspondence, and customer dealing.

5.2 DEPARTMENTATION

Departmentation is “grouping activities and people into departments make it

possible to expand organization.”

54
 CHART .3 MCB BRANCH HANGU CITY

ORGANIZATIONAL CHART

Manager Operation

General Banking
Credit Department
(Operation) Department

Account Cash Remittances Bills

Clearing
Opening Department
Department Department Department
Department

55
5.2-1 ACCOUNT OPENING DEPARTMENT

The opening of an Account is the establishment of banker-customer

relationship. This department performs the duty of opening accounts
for customer. It also issues cheque books to customers. A person who
wishes to open an account with the bank has to fill an account opening
from obtained from any branch of MCB at the time of opening an
account. The bank officer tactfully obtains information about character,
integrity, responsibility, occupation, and the nature of the business of
the respective customer.

5.2-2 CASH DEPARTMENT

Cash department owes its’ importance to the fact that it is a major

point of contract between the bank and the customer, the bank’s most
valued relationships. This department is the showcase of the bank and
conveys the first impressions about the bank’s commitment to
professionalism in its system and procedures and to courteous and
efficient customer service. This department performs the function of
receipts and payments.

5.2-3 REMITTENCES DEPARTMENT

Funds transfer facility or remittances of funds are one of the functions

of the banks all over the world. Remittances through banking channels
save time, costs less and eliminate the risks involved in physical;

56
transportation of money from one place to another. MCB transfers
money in the following ways:
1. Pay order (P/O)
2. Demand draft (DD)
3. Mail transfer (MT)
4. Telegraphic transfer (TT)

5.2-4 BILLS DEPARTMENT

The bills department deals with the collection, purchase and

discounting of bills on behalf of the customers. The collection of
cheque and other instruments has become a very important service that
commercial banks render to their clients. While collecting cheque and
other instruments, a bank acts as an agent of its customers and
therefore, the banker-customer relationship to the agent principal
relationship.

The collection of bills usually involves two banks; the collecting bank
and the paying bank. Both, collecting as will as paying, banks have
certain obligations to each other and to their customers. They have
certain legal rights also and legal protection is available against
fraudulent transactions under section of the Negotiable Instruments
Act, 1881.

5.2-5 CLEARING HOUSE

MCB along with their daily business activity also provides the facility
of collecting credit claims for customers i.e. when a customer deposits
a cheque or draft for collection, which is of the some other bank. Then

57
bank collects this instrument for its customer through clearing and
similarly in case of payments, the bank makes the payment through
clearing for the instruments (cheque or draft), which are given by its
customers for his obligation fulfillment customer of some other bank.
The State bank of Pakistan (SBP) operates the function of clearing
house system. If SBP has no office at a place then National Bank of
Pakistan (NBP) as a representative of SBP acts as a Clearinghouse.

5.2-6 CREDIT DEPARTMENT

The bank is profit- seeking organization. It attracts surplus balance

from the customer at low rate of interest and makes advances at a
higher rate of interest to the individual and business firms. Credit and
extensions are the most important activity of all the financial
institutions, because it is the main source of the earning. Credit
department is one of the most sensitive and important department of
the bank. The major portion of the profit is usually earned through this
department. The job of this department is to make proposals about the
loans; the credit management division of H.O directly controls all the
advances.

58
CHAPTER 6

ANALYSIS

6.1 HUMAN RESOURCE MANAGEMENT

Human resource management is responsible for the people dimension

of the organization. It is responsible for getting competent people,
training them to perform at high effort levels, and providing
mechanism to ensure that these employees maintain their productive
affiliation with the organization.

The MCB believes in investing in its people. On this account they have
very comprehensive and effective Human Resource Development
system. Since privatization the Human Resource Department has
adopted the strategy of streamlining, paving the way for unyielding
competitiveness.

Some of the major components of Human Resource Policy are listed

below in this chapter.

6.1-1 selection and recruitment

“Recruitment is the discovering of potential applicants for actual and

anticipated organizational vacancies”. The caliber of the work force of
an organization largely determines its strengths and its success as an
enterprise. The employment policies of many organizations are not
formalized. They have just evolved as practices over the course of
many years. The MCB has very orderly and impartial procedure for

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selecting people. In fact it is the only bank in private sector with such
an extensive and irrefutable selection process.

Human Resource Department has combined many selection techniques

i.e. job application form, employment, test, interview, and physical
examination.

6.1-1.1 MCB recruits candidates in three cadres

1. Probationary Officers
2. Management Trainees
3. Contractual Appointments

Most of the recruitments are made through Probationary Officers.

Management Trainees are selected amongst the graduates from foreign
universities, or prestigious national universities i.e. Institute of
Business Administration Karachi (IBA), Lahore University of
Management Sciences Lahore (LUMS), and Quaid-e-Azam University
Islamabad. Contractual Arrangements are made with persons
possessing technical knowledge and expertise related to specific
departments like Treasury Department, Foreign Exchange, and
Information Technology etc. The persons hired through these
contractual arrangements are usually appointed at higher posts. Now
the Bank also awards contracts to the people for clerical jobs like
cashiers, date entry operators etc.

6.1-1.2 Prerequisites for probationary officers

o The candidate should be Pakistani citizen

o The candidate should be under 25 years of age, and preferably
unmarried.

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 o The candidate should be a graduate.

The candidate fills out specific application form. After screening the
applications only selected candidates are called for test, which is
designed to test the analytical, comprehension, and general knowledge
abilities of the candidates. After passing the test, the candidate
undergoes an interview. Those who pass the interview are referred to a
medical board for physical examination. The candidates, who are
finally selected, are offered appointments as probationary officers,
after signing the following bonds

o Bank’s Secrecy Bond

o Bank’s Security Bond
o Service Agreement Bond

6.1-2 Training

“Training is the organized procedure by which people learn knowledge

and/or skills for a definite purpose”. Our education system is primarily
generalized, designed to provide guidelines to students for
their overall career advancement. It is not designed to teach specific
job skills for positions in particular companies or organizations. To
overcome this deficiency of our educational system, many
organizations have to setup their own training centers and programs.

MCB has a mix of training methodologies for its employees. We can

broadly categorize these methods into two groups Off the Job Training,
and On the Job Training.

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6.1-2.1 Off the Job Training

The new probationary officers and management trainees selected this

year will be given 3 months off the job training along with 3 months
on the job training. Previously the duration of total training was 1 year.
Off the job training is given at one of the three training institutes of
MCB at Karachi, Lahore, and Islamabad. Professionalism is the core
objective at these training institutes. The common methods used for
training includes:

o Lectures and classroom discussions

o Conceptual exercise and problem solving
o Tutorial and syndicate discussion
o Analytical report and group presentation
o Penal discussion

6.1-2.2 On the Job Training

The total of 6 months of training include 3 months on the job training

at different branches in order to be conversant with all operations of
retail banking, credit and marketing, foreign exchange etc. the trainee
is rotated at different branches, so that he learns to adapt
himself/herself quickly to different working conditions and branch
cultures. Usually on the Job and Off the Training are provided to
trainees simultaneously. After the training the trainee is kept at
probation for another six months. The successful completion of
probationary period entitles the trainees to permanent appointments.

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6.1-3 COMPENSATION

Any remuneration to an employee for services performed, including

wages, salaries, fringe benefits etc. MCB awards their employees a
lucrative compensation in return of their tough mental labor. Apart
from basic salaries they are offered many other benefits like utility
allowance, medical allowance, overtime allowance, education
allowance, house rent allowance, bonuses etc. They are also offered
non-interest loans from the bank.

There are also some cash prizes for employees who show better
performance. Those employees, who pass IBP part 1 exam in first
attempt, are offered Rs.60, 000 cash prize or two increments. Similarly
those who pass part 2 exams are offered Rs.100, 000 or three
increments. Those who pass both examinations within one year of
training are promoted to OG 2, and those who get the gold medal in the
exam, are promoted to OG 1.

6.1-4 PERFORMANCE APPRAISAL

It is the description of job-relevant strengths and weaknesses of an

individual or a group. Performance appraisal in MCB involves making
ACRs of the subordinates. That is, a branch manager writes the ACRs
of employees in his branch, a Regional Manager writes the ACRs for
the various Branch Managers working under him and so on.
An ACR contains such information as the employee background,
nature of his work, performance of employee, performance rating and

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recommendations. These ACRs are sent to the GM Office from where
they are forwarded to the Human Resource Division.

6.1-5 RETIREMENTS

Employees at all levels in MCB get retirement after either the

completion of 30 years in service or reaching an age of 60 years. The
bank operates the following staff retirement benefit schemes for its
employees:

a) For employees who did not opt for the new scheme, the bank
Operates the following:

o Approved contributory provident fund;

o An approved gratuity scheme

b) For new employees and for those who opted for the new scheme
introduced in 1975 for clerical staff and in 1977 for officers, the bank
operates the following:

o An approved funded pension scheme for which monthly

contributions are made on the basis of actuarial
recommendations.
o An approved non-contributory provident fund introduced in
lieu of the contributory provident fund.
C) For AVPs and above cadre and employees in officers’ cadre joining
after January 1,2000, the bank operates an approved contributory
provident fund.

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The above benefits are payable to staff on completion of prescribed
Qualifying period of service.

6.2 PERSONNEL MANAGEMENT ANALYSIS

6.2 -1 NEED FOR BETTER TRAINING PROGRAM

It has been noticed that the training program of MCB is not adequate.
Special marketing training should give to employees who are
concerned with marketing. They should learn new methods for
motivating customers. The training program of the bank should include
scientific techniques to improve the decision-making, and Inter
personal as well as individual needs of the employees. It has been
noticed that the training program of MCB is not adequate. Special
marketing training should give to employees who are concerned with
marketing. They should learn new methods for motivating customers.
The training program of the bank should include scientific techniques
to improve the decision-making, and Inter personal as well as
individual needs of the employees.

6.2-2 Marketing visits

A very useful mode of contact is through personal marketing visits.

Such visits are an important by product such as gaining information
about the customer’s financial and business position, about his
marketing reputation and creating a feeling of importance in the minds
of client.

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 6.2-3 Lack of public communication

Communication plays a vital role in any business circle, however, it

has been noticed that MCB employees are lacking the skills of
effective communication. Proper attention must be given to enhance
the communication skills of the employees from top to bottom.

6.2-4 Marketing at desk

Bank employee come in daily contact with many people who happen to
deal with the bank as casual remitter or beneficiaries, drawer of bills,
safe custody service holder, travelers and variety of other people with
whom that bank has no account or regulars relationship. The bank
officers are doing very little on their own to explore the possibilities of
selling banking services to them as a marketing contributor

6.3 ADMINISTRATIVE ANALYSIS

6.3-1 Spaces shortage

It is observed that Head Office suffers from space shortage. The

seating arrangement is not sufficient as compared to the number of
employees and customer.

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6.3-2 Slow career growth

Promotion is one of the motivational tools; promotion policy of MCB

is very slow. The opportunities for upward advancement are very few.

6.3-3 Centralization

MCB has a centralized structure. There is no delegation of authority to

the lower management / staff. In order to improve the performance of
the staff and to build their confidence, some authority must be
delegated to the lower management.

6.3-4 Negligence of rules and regulations

It has been noted that the Bank’s officers usually neglect the rules and
regulations either intentionally or unintentionally; because these have
not properly communicated to them. Their prompt communication
must be ensured and the employees must be informed about the
penalties in case of negligence.

6.3-5 Improper distribution of duties

In MCB there is improper distribution of duties and responsibilities. It

is being observed that sometimes an officer of the same grades may
less or more responsibility than another officer of his grade.

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6.3.6 Product rates

When MCB’s product rates are compared with the competitors, one
can notice that they either have the same or lower rates. So in order to
attract the customers, MCB must offer rates above the market to have a
better market share.

6.3.7 Poor job rotation

Branch officers are not properly rotated. It is noted that an experience

banker from Accounts section doesn’t know about the work of
remittances department. So they must be rotated in all the departments
of the banking order to get familiar with the working of different
departments in order to have a know how of the whole system.

6.3.8 Working setup

It is observed that there are some deficiencies in the branch setup,

which creates extra disturbance, and excessive movement, which in
turn affect the efficiency of employees and thus that of the whole
organization also.

6.3.9 Lack of specialized training

In MCB training is provided on the basis of generalization rather than

specialization. After completion of training he is inducted into a

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specific field. Due to lack of knowledge he faces difficulty to perform
the assigned job.

6.3.10 Separation of activities

There is no separation of activities e.g. clearing of cheques. This is

partially done in cash department and partially in accounts. This
creates confusion and conflicts. In order to avoid mishaps, there should
be complete separation of activities.

. 6.4 POLITICAL ANALYSIS

6.4-1 Internal political environment

1. In personnel and establishment is no systematic reward that result is

lower employee motivation. Due to which the experience project
officers frequently leave personnel and establishment. This result in
constant shortage of project officer.

2. There is a very weak coordination among employee of personnel

and establishment. It serve as factor toward is efficiency of which on it.

3. There is no political pressure for strong coordination between

Different institutions so as to lower the cost of employees.

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 4. There is lot of political interference in the recruitment system of the
bank that results in inefficient management which in the long run result
eventually in bad portfolio.

6.4 SWOT ANALYSIS

6.4-1 STRENGTHS

1) The largest private sector bank in Pakistan with a network of

941 domestic and 5 foreign branches.
2) MCB has long-term vision, which plays a very important role
in organization’s success.
3) First bank to privatize, which has, now become the leader in
market with largest on line ATM network in the country.
4) Bank’s emphasis on consumer banking by providing them with
innovative saving schemes, products and services suiting best to their
life style.
5) Extension and improvement in services to domestic as well as
foreign customer.
6) Best and optional policies and attractive compensation
packages, for employees, which has really improved their
commitment, dedication and hard work, towards the accomplishment
of banks objectives.
7) MCB instant financing products for customer wanting instant
loan facility at MCB branches.
8) 24 hours cash access through ATM.

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9) Pioneer in introduction of MCB Master Card and RTC, which
minimize the degree of risk.
10) Attention and sensitivity to competition prevailing in the
country.
11) Easy access to the customers at their residential localities
through a large number of branches.
12) Recognition of critical condition and need for Drastic
immediate change.
13) MCB has a brand name and recognition.
14) MCB has now started Mobile banking, which is definitely a
truly innovative product and according to the needs of the customers.
15) The current customers list of MCB is very large and having a
large number of deposit.

6.4-2 WEAKNESSES

1) Customers having account, with small amounts are not given

some services and dealing to those with high accounts.
2) Number of branches is decreasing because of low profitability.
3) A sense Insecurity of jobs, with the down sizing, among the
employees is found.
4) Experienced but old staff, who are not aware of using modern
technologies/ equipments?
5) Political pressure from vested interest group selection.
6) A very small foreign network
7) Financial weaknesses i.e. excess operating cost
8) Human Resources i.e. low morale due to following factors:
• No development
• Political interference
• No database

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• Untapped markets
9) No marketing of advances
10) No training for advances in-charge.
11) Not many advances to agriculture sector and small and medium
enterprises.

OPPORTUNITIES

1) Due to largest ATM network, MCB can expand its 24 hours

cash facilities to the far off cities of the growing market demand.
2) They can capture a large portion of the market, if they expand
its ATM and branch network to other countries of the as well.
3) Increasing focus/target on different types of customers, MCB
can open women branches, especially in those areas where women
class want to get involved but couldn’t due to environmental
restriction.
4) Growing policies of government on business and commerce
sector provides MCB and opportunity to efficiently meet with the
business people’s requirement of instant cash and financing facilities.
5) MCB has also an opportunity to expand its new technological
advancement like; tele-bank and Internet banking efficiently.
6) Stronger position to recover bad debts
7) Benefits from incoming expertise and competition.
8) Focus on small business, export/ import sector.
9) Launching of new products like Mala Maal and Cash Card etc
type of product in future
10) To open overseas branches throughout the world like National
Bank of Pakistan and Habib Bank Limited or merger with other
foreign banks outside Pakistan.

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 11) New schemes should be introduced to finance commodity
operations.
12) The formation of new and energetic marketing teams can
increase the disbursement of loans and new customers can be searched
out.
THREATS

1) Increasing foreign banks in the country.

2) Privatization of other domestic banks has also increased their
services.
3) Highly specialized and attractive services provided by foreign
banks to their customers.
4) Inconsistency in government policies regarding to business
and economic sector.
5) Growing global technological advancement.
6) Strict regulations by the government over credit facilities to
the customers as to meet the prudential regulations.
7) Loss of confidence of the customers due to freezing of
accounts
8) Concentration risk is involved with the credit department.
9) Inflation rate is high.
10) GNP and GDP rates are low and so the saving is low.

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CHAPTER 7

FINDINGS AND RECOMMENDATIONS

7.1 FINDINGS

7.1-1 Lack of customer relationship

In the bank the officers come across many customers daily. There is a
need to improve the customer relationship in all the departments. The
relationship manager has a very close contact with the customers and
this is his duty to give proper guidance to the customers. Where as in
MCB I have found that the customer relationship is not up-to the
satisfactory level.

7.1-2 Inadequate Training Program

As the employee finishes his training he is induced in a specified field

since he does not have knowledge about the specific job assigned to
him thus he feel difficulty to perform his job.
There is no special training given to the employees for motivating
customers.

7.1-3 Shortage of Latest Computers

There is a shortage of latest computers. They have been using the same
old computers; those are out dated now a day. It results in the
inefficiency of work. There is also lack of latest software, which
results in slow processing.

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7.1-4 Poor Job Rotation

There is no specific job rotation in MCB, HANGU Branch, Officers

spend most of the time in the same department. A person can spend
years sitting in one department, performing the same duties.

The employees of the foreign exchange and other departments have the
same routine for years after giving a seat to the probationary officer,
the management forgets about him for at least six months.

7.1-5 Lack of Security

The most important aspect consider in the bank is security. But in

MCB I have seen that there was easy accessibility to account
information.
There was not enough security as far as the accounts were concerned.
Anyone can call and can get the information from the bank, which has
been creating trouble in the bank.

7.1-6 Shortage of Staff

There is a shortage of staff in the deposit, credit and foreign exchange

department of the bank. MCB,HANGU Branch. Few people are
working and the workload is very much high on them.

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7.1-7 Lack of Motivation

Motivation is the most important aspect in any organization. There is a

lack of motivation in the employees of all departments, which has to be
improved. By motivating people they can create a change in the bank.

7.1-8 High Work Load

The workload on the employees of MCB is immense. It is usual

practice for the employees to stay beyond the official working hours.
The manager specially faces problems in this regard.

8.1-9 Improper Work Distribution

I have noticed it through out my whole internship, which was also

irritating for me that the work distribution is totally improper here.
Few people have to perform less responsibility with same grade and
few have to perform more responsibility.

7.1-10 Lack of Appreciation

Another very important thing that is ignored in different department is

appreciation of the employees who work with dedication and
efficiency. If hard work and performance of the staff members is not
recognized and appreciated, it dis-hearts them resulting in poor
efficiency.

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7.2 RECOMMENDATIONS

Following are my observation and suggestion to improve the efficiency

for the development of the bank.

7.2-1 Customer Relationship

In the bank the officers come across many customers daily. There is a
need to improve the customer relationship in all the departments. There
should be proper training programme for employees to enhance their
relationship with their customers.

7.2-2 Better training programs

Special training should be given to employees for motivating

customers. The training program of bank should include scientific
techniques to improve decision making and interpersonal as well as
individual needs of an employee. And also give Proper time and
training to the Internees because they are future of the Bank. .

7.2-3 Latest computer equipments

Latest software should be introduced in the bank so that the data

processing speed of the computer can be enhanced.

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7.2.4 Enrich job Rotation

Employees should be properly rotated after serving in a specific

department so that their level of interest remains constant. Job rotation
will enhance the efficiency and effectiveness .This will keep their
morale high.

7.2-5 Proper security measures

There be should be proper check and balance on the accounts and

employees .security of accounts must be maintained .so that irrelevant
personnel can not access to the accounts of the customers.

7.2-6 Recruitment of staff

Recruitment should be done in order to fill up these new vacancies. In

this way the workload on employees will be reduced, operations will
be stream lined and employees will feel comfortable in performing
their duties more effectively.

7.2-7 Employee’s motivation

The Willingness to put extra efforts .Bank must emphasis on

employee’s motivation by introducing new attractive packages,
incentives, friendly work environment and recreational activities for
employees and their families.

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7.2-8 Introduction of new technology

To decrease the workload on employee’s new technology i.e.

computers, latest software’s, automatic deposits machines, cash
counting machines in every branch of MCB.

7.2-9 Proper Job distribution

Person fit for the job must be recruited with the list of duties,
responsibilities, authority and accountability .work should be
distributed among the employees according to their skill, attitude,
education and experience.

7.2-10 Sense of recognition

The employees worked with dedication and efficiency be appreciated

and recognized by management. This will increase their satisfaction,
loyality, performance and interest.

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 BIBLIOGRAPHY

• Siddiqui, Asrar H. (1998). Practice and Law of Banking in

Pakistan, Sixth Revised & Enlarged Edition. Karachi:
Royal Book Company.

• The official website of MCB i.e. http://.www.mcb.com.pk

• (on-line)Available http://www.ibp.com.pk
• (on-line)Available http://WWW.scribed.com
• (on-line)Available http://www.wikipedia.com
• (on-line)Available http://www.sbp.com.
• (on-line)Available http://www.lse.com.pk

• MCB manual /annual report

• Koontz Harold, (1993) Management in Global Perspective;

New York; McGraw Hills, Inc, 10th Edition, p-266

• MCB (2006).MCB Mahana Khushali Scheme Brochure

Karachi; Yakeen Art press

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