mcb intership report

INTERNSHIP REPORT

MUSLIM COMMERCIALBANK

SUBMITTED TO

HonorablePROF CH. NAZIR AHMED

PRINCIPAL HAILEY COLLEGE OF COMMERCE

SUBMITTED BY

KHURRAM SHAHIDROLL#124

M.COM (FINANCE)SESSION 2000-2002

HAILEY COLLEGE OF COMMERCEUNIVERSITY OF THE PUNJAB

HAILEY COLLEGE OF COMMERCE, UNIVERSITY OF THE PUNJAB 1

INTERNSHIP REPORT

PREFACE

Being aware of the importance of practical training, the Hailey College of Commerce, University Of The Punjab, requires every M.COM student to go through training for practical purpose as trainee.The internship program is to broaden the vision of practical experiences with theoretical knowledge as it increases one’s capabilities to handle problems at various stages and the ability of decision.I tried my best to collect the valuable information and its relevant facts.This report is the result of my internship with Muslim Commercial Bank (MCB)

KHURRAM SHAHID M.COM (FINANCE)


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All the praise for Almighty Allah, who enabled me, to carry a successful effort, to prepare a report on Muslim Commercial Bank(MCB)in the best possible way.

It’s also a great honor for me to present this effort to honorable Professor Nazir Ahmed, Principal Hailey college Of Commerce.Specially thanks to Sir. Prof. Fida Hussain Bukhari who gave me substantial support in compiling my work .May this effort prove to be beneficial for all, who go though it and hope that it will meet the examiner’s approval

KHURRAM SHAHID

M.COM (FINANCE)


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MCB-ITS SUCCESS STORY

History

Muslim Commercial Bank Ltd. Unfolds 52 years’ growth. MCB is not an overnight success

story. The bank started corporate life in Calcutta on July 9, 1947. After the partition of the

Indo-Pak Subcontinent, the bank moved to Dhaka from where it commenced business in August

1948. In 1956, the Bank transferred it Registered office to Karachi, where the Head Office is

presently located. Thus, the bank inherits a 52-years legacy of trust in its customers and the

citizens of Pakistan.

NATIONALIZATION

In January 1974, the government of Pakistan nationalized MCB following the banks Act 1947;

Premier bank Limited merged with MCB.

PRIVATIZATION

A wave of economic reforms swept Pakistan in the late 1990, introducing the need for

privatization of state owned banks companies. In April 1991, MCB became Pakistan’s first

privatized bank. The government of Pakistan transferred the management of the Bank to

National Group, a group of leading industrialists of the country by selling 26% shares of the

bank. In term of agreement between the government of Pakistan and the National group, the

Group, making their holding 50% has purchased additional 24% shares.

MUSLIM COMMERCIAL BANK TODAY


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MCB today, a represents a bank that has grown with time, experience and Pakistan. A major

financial institution, in scope and size, it symbolizes a fully growing tree evergreen, strong, and

firmly rooted.

FOREIGN TRADE

The bank conducted import business during the year amounting to RS. 54.0 billion as compare

to RS. 56.4 Billion in 2000. The export business slightly improves to RS. 36.9 Billion from RS.

35.1 Billion in 2000.. Home remittances decline to RS. 16.7 Billion from 30.7 Billion the

decline in home remittances business was due to freezing of Foreign Currency Accounts, which

has effected the confidence of Pakistanis working overseas.

YEAR 2002 COMPLIANCE

MCB’s strength lies in providing a technological base at the gross root level of the society with

a challenge to educate and assimilate such systems across vast cultural and economic

backgrounds. With over 768 automated branches, 243 online branches, over 151 MCB ATMs

in 27 cities nationwide and a network of over 16 banks on the MNET ATM switch, MCB

continuously innovates new products and services that harness technology for the customer’s

benefits..

SOCIAL SECTOR

The bank activity participating in the Prime Minister self-employment Scheme.

The application received from various applicants is being processed on merit and disposed off

as quickly as possible.

FOREING OPERATION

Our bank’s foreign operation in Bangladesh and Sri Lanka continue to remain profitable. In

April 1999 the Bank opened its third branch in Sri Lanka at Marinade a suburb of Colombo.


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BOARD OF DIRECTORS

The board of directors has the authority in guiding Bank affairs and in making general

policies. Some directors are the personnel of the MCB and others are successful

businessperson and executives of other major organization. Ten members are included in

board of directors, see in a list.l

1. Mian Muhammad Mansha Chairman and chief executive

2. Mr. S. M. Muneer Vice Chairman

DIRECTORS

Nine Directors are:

1 Mr. Tariq Rafi

2 Sheikh Mukhtar Ahmed

3 Mr. Mohammed Arshad

4 Mr. Shahzad Saleem

5 Mr. Raza Mansha

6 Mr. Sarmed Amin

7 Mian Umer Mansha

8 Mr. Mushtaq Ahmed Malik

9 Mr. Mohammed Aftab Manzoor

President & Chief Executive


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AUDITORS

A.F FERGUSON & CO.

Chartered Accountants

M.YOUSAF ADIL SALEEM & CO.

Chartered Accountant

LEGAL ADVISORS

MANDVIWALLA & ZAFAR

Advocate and Legal Consultants

REGISTERED OFFICE

MCB building, F6/G6,

Jinnah Avenue, Islamabad

PRINCIPAL OFFICE

Adamjee House, 2nd Floor,

I. I. Chundrigar Road, Karachi


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MAIN BRANCH MURIDKE

I went the branch of Muslim commercial bank for my internship training. It is the part of

our M.Com’s training to go for training at any well-established organization. Bank is the

most suitable.

The branch is situated at G T Road Muridke. Major customers of bank are businessmen, employees of different public and private organizations, salaried and non-salaried persons. Recently branch accounts worth RS. 102 million of 4560 account holders. Majority of accounts is PLS, current a joint accounts.

MANAGEMENT OF BRANCH

OG-I (MANAGER) 1

OG-II 1

OG-II 2

Cashier 2

Assistants 3

Security Guard 2


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GENERAL BANKING

ACCOUNT OPENING

The general banking department performs various functions among them the first and most

important function is A/C opening. The bank reserves the right to open any account, which in

its opinion is suitable as a customer. The process of opening an account is very simple and any

body that would like to open his account can do sot easily without any difficulty.

There are three types of accounts

1. CURRECT ACCOUNT

2. SAVING ACCOUNT

3. TERM DEPOSITS ACCOUNT


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Procedure required to open an account

The customer that likes to open an account is required to meet with the manager or second

officer, who will give him an “APPLICATION FORM” specifically used for account opening.

Separate color-coded Application Form is available for each type of account. So that a

particular colored form is given to the customer to fill in for opening a related account. Along

with the form, a Card for specimen signature is also supplied to customer. Manager has every

right to reject this contract if he is not satisfied by the details provided by the customer. But in

case the contract is acceptable to both, the next step is official a/c opening. This begins with the

“ACCOUNT OPENING REGISTER” which can be thought of as a customer’s master file. The

manager records the necessary details into this register and allot an A/C number form this A/C

opening register. This register is maintained for each type if account and the a/c no’s are

allotted serially. After opening a saving and current account every applicant’s data is entered

into the computer to maintain a safe record and application form is properly filled so that it

can be available when necessary. Checking officer is responsible to Tele the manual

application form with the computerized A/C opening file. For fixed deposit only that

application form is needed this is prepared manually, because most of the procedure of fixed

deposit is done manually.

As I had already mentioned about “SIGNATURE SPECIMEN CARD”. This card contains

three signatures of an applicant. Banker uses this card at the time when he receives the cheque;

he compares customer’s signature with the signature on the cheque for avoiding fraud.

CURRENT & SAVING ACCOUNTS ARE OPEND FOR:

Individual

Only one person can operate this account. an individual who can fulfill the requirement

of bank can open this account. We can call it a personnel or individual a /c.

Joint


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In case of joint a/c applicant mentions that how much person will operate the a/c.

Instruction are given for joint a/c such that the account shall be operated by

1. Any one of us or survivor

2. Any two/all of us jointly

In first case if one of the a/c holders died then the other partner can’t operate this a/c

individually without having permission from the court.

Partnership Account

For partnership account, along with the application form signature card. Other

documents are also needed such as

Registration certificate

Agreement among partners

Commencement of business

In case of addition or withdrawal of any partner a new agreement will be required.

COMPANY ACCOUNT

For company accounts following documents are required: -

1. Private registration

2. Resolution of board of directors

3. Commencement of business

4. Memorandum and Articles of Association

5. Balance sheet

Bank prepares two ‘LETTER OF THANKS’ one for the new customer and the other for his

introducer. This act promotes good will between the customer and the introducer.


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CHEQUE BOOK

Chequebook is issued to the customer when the bank accepts the A/C opening application form.

Whenever a chequebook is issued to the applicant it is ensured that the series is input to system

immediately.

CLOSING OF AN ACCOUNT

There are No of reasons of closing an account. Some are listed below.

1. If customer desires to close his account

2. In case of death of one account holder

3. Bankruptcy of the account holder

4. If an account contain nil balance or not up to the requirement of rules Before

closing any account, bank send letter to the account hold for informing him that

his account is going to be closed. There is need an approval form higher authority

to close any account.

DEPOSIT DEPARTMENT

The primary economic function of commercial bank is to receive surplus income of individuals,

firms, public houses, institutions, companies and to honor cheque drawn upon it. Deposits are

to bank as a backbone is to the body of man. It is the lifeblood of a bank. The deposit of a bank

is useful in many ways.

The bank borrow money from the general public by accepting deposits by offering suitable

rates interest to them or simply promise to repay on demand.

The fund deposited in the MCB bank can be classified under the main heads;


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1. Current or Demand Deposits

2. Saving Deposits

3. Fixed or Term Deposits

4. Call Deposits

Current deposits are those which are payable to bank whenever demanded by the customer.

Bank does not pay any profit on current deposits. There are of different scheme of saving

deposits, which are classified under different duration purposes and rater of interest. Fixed

deposits are those deposits which are by the bank under the conditions that they will not be

payable on demand but will be payable under fixed determinable future time date.

RULES FOR CURRENT ACCOUNT

Current a/c holder opens current accounts on proper introduction only. However, introduction

of a PLS Saving Account holder of repute may be accepted at the discretion of the manager.

MINIMUM BALANCE

A sum not less then RS. 500/- in cash as initial deposit is required for opening a current

account and the same may be maintained as minimum average running credit balance.

MINORS

The minors will not be allowed to open current account directly.

PROFIT

No profit will be paid on credit balance held in current accounts. The bank reserves the right to

allow opening of current a/c at its description.

All deposits and withdrawal from a current a/c will take place only at the

branch where the account is being maintained.

Current a/c cannot be overdrawn, except by prior agreed agreements with the

bank.


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The correspondence relating to current A/Cs should be addressed to manager of

the branch where the account is being maintained.

A distinctive number will be allotted to each current account and shall be

quoted on all correspondence relating to the respective account and at the time

of making deposits and withdraws.

ISSUANCE OF CHEQUE BOOK

The Chequebook is issued against the valid requisition slip signed by the account holder as per

signature provided by the bank. The account holder can draw sums from his account by means

of cheque supplied to him by the bank for that particular account. In drawing cheques the

amount in words and figures should be written distinctively and the cheque should be drawn in

such a way as to prevent the insertion of any other word or figure. Account holder should take

well care of the chequebook issued to them. The account holder will pay excise duty of RS. 4

per leaf to the government.

PAY-IN SLIP

Pay-in slip is used for deposing the additional amount. The entries of cash receipt will be

verified under the signature of two authorized officials of the bank. The depositor should

collect the stamped and signed the counterfoil. The bank will accept the Pakistanis notes. All

cheques and other instruments should be crossed before they are deposited for credit into the

account there shall be no restriction on numbered of withdrawals in current account. The

current account is computerized, thus it generate the statement of account for all account

holders periodically. The account holder is expected to maintain a minimum running. Credit

balance of RS. 500/. An account holder wishing to close his account must surrender the unused

Cheques to the bank. Incidental charges are beard by the account holder if its credit balance is

less than RS. 500/.

SAVING ACCOUNT


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Saving accounts are opened on proper introduction with sums of credit balance within certain

limit for individual (single, joint) institutions,, educational institutions etc.

MCB has introduced various schemes under saving account.

PLS ACCOUNT

CAPITAL GROWTH SCHEME

MAHANA KHUSHALI SCHEME

KHANM BACHAT SCHEME

KHUSHALI BACHAT ACCOUNT

MALA MAAL ACHEME

SAVING 365 ACCOUNT

TERM DEPOSITS OR FIXED DEPOSITS

PROFIT AND LOSS SHARING ACCOUNT

PLS saving account having a running minimum credit balance of RS. 500/- would be eligible

for sharing profit/loss of the bank. The bank would be within its rights to make investment of

credit balances in the PLS saving accounts in any manner at its sole discretion and to make use

of the fund to the best of its judgment in the banking business under the PLS system.

Withdrawals from PLS saving account are allowed not more than 8 times in a calendar month

and for a total amount not exceeding RS. 15000/- without the approval of bank manager. For

withdrawal of larger amount, 7 days notice in writing is required to be given.

PROFIT/LOSS

The profit/loss will be credited on the basis of its net working results at the end of each half-

year. Calculation of products on PLS saving a/c will be made for each calendar month on


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the lowest credit balance if an account between the close of business on the 6 th day and the last

day of the month. If the balance is less than RS. 100/- the product will be nil.

RULES FOR PLS

Account holder can only withdraw sums from his account by means of cheques supplied to him

by the bank for that particular account. Post dated and stale cheques shall not be paid. The

bank reserve to itself the rights to close any account without previous notice any account,

which has not satisfactory account credit, balance. If the account holder withdrawals the

money under 7 days notice, the profit or loss earning products will be computed on the

monthly minimum balance. 10% withholding tax on profit is also applicable on profit/loss

sharing account. Zakat is deducted every year @ 2.5% on non-exempted accounts.

SAVING 365 ACCOUNTS

The account will be opened with a limit sum of RS. 500,000/- however there will be no

maximum limit for maintaining deposits under this scheme. Profit on deposits will be payable

on daily basis under this scheme. Profit on deposits will be payable on daily product basis on

balance of RS. 500,000/- and above. However, if balance in the account falls below RS.

500,000/- on any day, the product will be ignored. There will be no restriction on withdrawal

from the account. Zakat and withholding Tax is also applicable on the account opened under

this scheme.

FIXED DEPOSIT OR TERM DEPOSIT

MCB has an attractive term deposit scheme that is for both short term and long term

investment. MCB has introduced the following scheme in term deposit;

Special notice term deposits receipts

7 days notice

30 days notice

3 month TDR

6 month TDR


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1 year TDR

2year TDR

3 year TDR

4 year TDR

5year TDR

The bank reserves the right to accept or reject the term deposit a/c opening application form of

the applicant.

DEPOSIT RECEIPT

Deposit receipt is given to customer in response of accepting his application. Deposit receipt

can be purchased either by depositing cash or by cheque. The issuance of certificate or receipt

against cheque is subject to realization of the proceed of the cheque. The bank with sum of not

less than accepts term deposits RS. 1000/- from individuals (single, joint) firms

(proprietorship/partner ship companies and etc) against the issuance of non-transferable

receipts in acknowledge of the PLS deposits received. On maturity of deposit receipt the

depositor shall have the opinion either to withdraw the deposit or the amount of

the profit or renew the deposit with or without the accumulated profit.

The bank determines the profit on deposit receipts semiannually, on the basis of its net working

result. Profit is given at the maturity of the deposit receipt. Profit for seven days and 30 days,

short-term deposit are given on daily basis such as

No of days X Rate X total amount

If a person comes after three month for one month fixed then bank gives the profit for two

months, and same in the case for three month fixed deposit. If customer withdraws his money

before fixed period then profit is given to him on the basis of profit slab of Term Deposit

Scheme.

10% withholding tax will be deducted from the profit at the time of disbursement.


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Zakat will be deducted at the rate of the end of the year. The bank reserves the right to use

these investments in any business to the best of its judgment.

CAPITAL GROWTH CERTIFICATE

MCB has a risk-free return scheme by which your capital can grow to nearly double the

amount in just a few year times. All that is required is a minimum amount of deposit. So you

simply give the bank an initial amount and at the end of the stipulated period, the bank returns

close to twice as much.

SALIENT FEATURES

Minimum amount of investment is RS. 10,000/- with no limit on the maximum amount

Time period of the certificate scheme is 5 years and this scheme is renewable for a

further period of 5 years.

Upon the maturity of certificate, the following returns are expected to be made after

deduction of Zakat whenever applicable and withholding as:

Initial Deposit Payment upon Maturity

RS. RS.

10,000/- 20,000/-

50,000/- 100,000/-

100,000/- 200,000/-

1,000,000/- 2,000,000/-

In case of premature encashment of certificates, the depositor will be given “PLS

Saving Account” profit rates declared by the bank for that particular period.

Depositors will be required to fill in Account Opening Forms.


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MAHANA KHUSHALI SCHEME

Salient Features

Minimum amount of investment shall be RS. 25,000/- and the maximum amount of

investment would be RS. 1.0 million.

Khushali certificate can be purchased by individuals (singly or jointly) or by the

proprietorship/partnership or companies etc. in their name.

The khushali certificates will be of five years maturity.

The guaranteed rate of return will be minimum 1% per month. If the profit declared

by the bank is higher, additional profit will be paid to depositors which the branch

managers from time to time will inform them about.

The following table gives the monthly returns on various amounts.

AMOUNT MONTHLY PROFIT

RS. RS.

1,000,000 10,830

500,000 5,416

100,000 1,083

50,000 541

25000 270

Zakat will be deducted once a year on the principal amount of the investment but will

be collected monthly over the year.

As per Government directives, tax on the profit/return is to be deducted by MCB

branches at the time of payment.


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PAYMENT PROCEDURE

The monthly payment (profit) will be made through the following convenient and efficient

modes:

Cross Pay Order, which may be collected by yourself or your authorized person?

A cross Postal Money Order or Demand Draft which will be at the doorstep promptly

each month.

Personal collection of cash profit at the issuing bank branch.

INCASE OF PREMATURE ENCASHMENT

The following rates of profit will apply:

If certificate is held for less then 90 days No Profit

If the Certificate is held for3 months but less than 6 months PLS rate

If the Certificate is held for 6 months but less than1 year PLS rate

If the Certificate is held for 1 year but less than 2 year PLS rate




MAAL-A-MALL SCHEME

Maal-a-mall is newly issuing scheme. It is the most profitable scheme of the bank and MCB has

got RS. 20 Billions. This certificate is for Rs.25000/-.

PROCEDURE

The procedure of Mall-a-Mall certificate is very simple. The applicant has to fill the slip of

certificate where he writes.

Branch code


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Date

Tenure

Name of applicant, his ID No. his address and phone No.

The tenure can be of 2 months, 4 months 8 months or 1 year and the profit percentages are

different for different for different tenure i.e.2 % for 2 months, 3% for 4 months, 5% for 8

months 6.5% for 1 year tenure. These certificates are automatically renewable after maturity.

Copy of ID card is attached with certificate. Profit is calculated at the time of drawing.

At register, the officer writes reference or serial No. name of applicant, certificate No. date of

issue and date of maturity. At Maal-a-Mall certificate, the officer write dates of issue, maturity

date, and reference No. and name of applicant.

CALL DEPOSIT

It is one of the features of commercial institutions. Here the companies and institutions have

the opportunity to withdraw the entire amount at any time. People deposit the amount for one

project and can use this account during that project. They got the money from this amount

whatever they needed for the project. The bank has been issuing deposit receipts or pay order

at the request of their customer in favor of Government Departments.

CLEARING DEPARTMENT

This department receives the cheques and other negotiable instruments drawn on local

branches of other banks. Nift has a clearing house, in which cheques and other negotiable

instruments are brought by each local bank representative and the nutal claims of each bank

on other is offset and a settlement is made by the payment of difference. Clearing system is

helpful for both the customers and bank in saving currency, time and labor.

PROCEDURE

The cheques and drafts come to then from different banks. They write them at one (daily

voucher record sheet) and then separate different banks and write one bank’s slips at one


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schedule and then summary of banks and then balance with total drafts and total amount and

giving them to representative. MCB is a member of State Bank of Pakistan (SBP) and has an

account with SBP. The clearinghouse of SBP(NIFT), through whom branches forward/receive-

clearing cheques along with a schedule conducts clearing. The clerk of forwarding branch

prepares the schedule and vouchers of all the clearing cheque, which he received by the clerk

on that day and sends these cheques to the checking officer. Checking officer pass these

cheques and vouchers by his initials, endorsement stamp and branch special crossing stamp.

Clerk posts the contra entries of these vouchers in the clearing register.. Representatives’

banks collect these cheques. Next day at 8:30 A.M. representatives of all local banks and

foreign banks exchange their cheques, which are drawn on their banks.

This department receives the cheques and other negotiable instruments drawn on local

branches of other banks. Nift has a clearing house, in which cheques and other negotiable

instruments are brought by each local bank representative and the nutal claims of each bank

on other is offset and a settlement is made by the payment of difference. Clearing system is

helpful for both the customers and bank in saving currency, time and labor.

The clearinghouse debits/credits the payee/receipt branch with the total amount of the cheques

paid on their behalf. The settlement of book entries e.g. , if MCB is to gives RS 2 Million to

UBL and UBL has to give RS.1 million to MCB then MCB will draw a cheque of 1 Million in

favor of UBL. SBP will debit this amount from MCB account and credit of UBL account. In this

way mutual cross obligation of banks settled by debiting and crediting in the books of SBP.

PROCEDURE FOR ADVISING HEAD OFFICE ACCOUNT

All that inter-bank adjustments will be effected through head office account it will be essential

for the branch to advice head office account of each transaction so that they may also pass the

necessary entries in their books. The Nift will send a consolidated debit/credit advice to the

branches in respect of clearing cheques delivered to or received from the branches. The


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Amount of the advice will agree with the total amount appear5ing in the schedule of cheque

deliver/received. The same office will similarly send advice to the branches of the returns, if

any. Copies of all advice will be sent to the head office.

TRANSFER AND TRANSFER DELIVERY

Transfer is used for inter branch and transfer delivery is inter-branch. Branch receives the

cheques and other negotiable instrument drawn on other branch of the same bank. Main

branch of the MCB handles the transfer delivery of cheques. Three same clearing cheques

procedure will be adopted in the transfer deliveries except not availing the facility of SBP. In

case of cheques drawn on one branch and collected by an other branch for the credit of its

constituents the branch delivering the cheques will send a consolidated debit advice will

Invariably agree with the total appearing in the transfer delivery schedule. If any cheque is

returned unpaid, a credit advice will be sent to the branch returning the cheque.

Clerk will also maintain the ledger for transfer delivery copies of all the advises will be

endorsed to the head office as usual.

MODES OF PAYMENT

In banking system different modes of payment are used, some of them are;

CHEQUES

TRAVELLER CHEQUES

MAIL TRANSFER

TELEGRAPHIC TRANSFER

LOCAL DEMAND DRAFT

FOREIGN DEMAND DRAFT

DIFFERENCE BETWEEN CHEQUE & DRAFT

Both are modes of payment. The difference is that the service charge excise duty and other

charges are paid by the cheque holder (to whom cheque is issued) and in draft all charges are

paid by cheque issuing deposit holder.


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ADVICE FOR CHEQUE

It is used for enter branch communication. When a person has an a/c in MCB at G T Road

branch and he got a cheque from Muridke branch of the same bank then he deposits that

cheque in his account at G T Road branch that sends that cheque with advice to main branch

and main branch sends that

Advice with cheque to Muridke branch and that branch approve that cheque and sends back to

main branch and main branch sends back to G T Road branch and dig. Branch deposits/credits

that cheque to depositor’s account.

If Muridke branch has no such amount then they refuse to approve it and send to main branch

and main branch sends back (new advice) to G T Road branch and reserve process starts .If

transfer delivery is used between different cities then the issuing cheque holder pays service

charges and mail or transfer charges. If a depositor in a branch (Karachi) gives cheque to

another depositor (Lahore) then branch of second depositor makes an advice and transfer

amount to first depositor and service charges and the second depositor pays postal or other

transfer charges. Three vouchers are used. Main voucher and copy of draft or cheque are sent

to first depositor’s branch. Main draft and one voucher are sent to head office and one voucher

remains to II depositor’s branch.

SPEED CASH

It is a new mode of payment usually used for immediate payment. It can only be issued by

Sheikh Sultan Trust branch and can send to any branch all over the country. Amounts from

foreign countries come to Sheikh Sultan Trust branch from where it is sent to other branches.

Payee’s bank manager can give amount after checking draft without any advice.

REMITTANCE DEPARTMENTTransfer of money or equivalent to money from one branch to another branch of the same bank

is called remittance. Now it is become easier and safer method both for the client and banker to

transfer their money from one branch to another within the city and outside the city.


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ORIGINATING BRANCH

It is the branch, which receive the instrument for remittance.

RESPONDING BRANCH

The branch, which receives the instrument for remittance.

TYPES OF REMITTANCE

Remittance is classified into following four types.

INWARD REMITTANCE

OUTWARD REMITTANCE

INLAND REMITTANCER

FOREGIN REMITTANCE

INWARD REMITANCE

The branch receives the instrument directly from the customer or from the originating branch,

and is responsible to pay to part is called inward remittance.

OUTWARD REMITTANCE

The branch, which issues or sold the instrument to the responding branch is, called outward

remittance.

INLAND REMITTANCER

Transfer of money from one branch to another branch of the same bank within the same

country is called inland remittance. In this case both originating branch and responding

branch will be situated in the same country.

FOREGIN REMITTANCE

Transfer of money from one country to another country is called foreign remittance. In such

case may be originating or responding branch will be out of the country, and mostly

conversion of foreign currency is involved.


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MCB USES FOLLOWING FOUR TYPES OF MODES OF PAYMENT

1. Demand Draft (DD)

2. Pay order (PO)

3. Mail Transfer (MT)

4. Telegraphic Transfer (TT)

When customer requires a facility of remittance, he should be asked to complete the prescribed

application for. Same prescribed application form will used for MT, TT, DD, and PO. This

application form is stated the amount of the remittance, the name and address of the payee, the

name of originating and responding branch. The applicant and the bank officer who have been

duly authorized to act on his behalf should sign this application form.

HEAD OFFICE ACCOUNT

All transaction relating to remittance will be routed through head officer account. All the

branches of MCB have an account of “Head Office”. Through

this Head Office account it become easier for branches to do the transaction with other

branches and update their books.

DEMAND DRAFT

A draft is an instrument drawn by a bank in favor of any person on a branch of its own bank or

any other bank to pay a certain amount of money which is demanded to the person named on it.

It is not necessary for the demand draft that applicant or recipient account should be open in

originating and responding branches. For demand draft bank charges excise duty and

commission. It will be the bank income. It is one if the cheapest methods of transference of

money within the country or outside the country.

PROCEDURE FOR DEMAND DRAFT


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Applicant has to fill in the application form for availing the facility of demand draft. After

depositing the amount of draft, remittance officer prepares the cheque of demand draft. Contra

entry will be done on the two sides of cheque leaf, on the cheque there will be authorized

signature and posted stamp of the bank. One copy of confirmation advice will be dispatch with

the cheque and the other copy will be sent to the responding branch by the originating branch

for the confirmation of draft. When banker issue draft to the customer, he also records

customer particulars in a demand draft register where record is maintained branch

wise .Responding branch and originating branch debit/credit the head office account and send

the daily statement of transaction to head office.

INTER-BRANCH TRANSACTION

Suppose Main branch Muridke issues a “DD” on Lahore branch for RS. 1000/-. The following

entries will pass in:

Main Branch Muridke

Debit customer A/C RS. 1000/-

Credit Head office RS. 1000/-

Head office will pass the following entries in his book

Debit Main Branch Muridke 1000/-

Credit Lahore RS 1000/-

On receipt of advice of draft Lahore branch will pass the following entries in their book.

Debit Head Office RS. 1000/-

Credit Balance

In case the draft is presented to Lahore branch the receipt of advice from G T Road branch the

amount will be debited to Head office direct and a special advice sent to that effect to the

drawer branch as well as Head Office.

PAY ORDER


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Pay order is written order, which is issued and received by the same bank or drawn and

payable on same branch. In this case originating and responding branches will be same for

Pay Order it is not necessary that applicant should be account holder. It is used for local

transference of money form one person to another. The bank charges excise duty and flat rate

of Rs.10/- from the applicant.

MAIL TRANSFER

The transfer of money from one branch to another branch of the same bank through mail or

courier service is called mail transfer. Bank is responsible for the transference of the applicant

should be the regular customer or the account holder of the responding as well as originating

branches.

TELEGRAPHIC TRANSFER

Through telegram and fax originating branch seen funds to responding branch instantly and

immediately. Bank charges commission, telegram/fax charges of RS.20 on telegraphic transfer.

ACCOUNT DEPARTMENT

Account department is the backbone of a bank. It plays a vital role in performing different

functions of a bank. The account department of MCB is computerized as well as manual.

Accounting books of different departments are maintained under this department and with the

help of these, accountant prepare the monthly, quarterly, semiannually and yearly financial

statement and other statements of the whole bank. The entire transaction-taking places are

recorded daily in the books of accounts and in computerized ledgers.

For every transaction there is voucher prepared and through these vouchers contra entries are

passed under different head. Good working of accounts department mainly depend on the

voucher system. Accounts department is responsible for proper handling and maintenance of

vouchers of different department.

Manual Functions Performed By Accounts Department


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To Prepare and Maintain The Voucher

Accountant prepares vouchers for all daily activities of different departments. Checking officer

checks and tallies these vouchers with their daily transactions and posts their entries under

proper heads.

CASH BOOK

Cashbook is prepared daily to keep the record of DAILY RECEIPT and DAILY PAID vouchers.

Cashbook contains the opening balance of working day. Before writing and balance the cash

book firstly there is need to properly arrange all the vouchers of that day.

TO MAINTAIN AND UPDATE THE LEDGER FOR TERM DEPOSITS

One of the functions of accounts department is to maintain and update the term deposit ledgers

and books manually. Term deposit receipt or TDR ledger is updated after every month for

estimating profit on customer’s accounts. Accountant prepares different ledger for all schemes

of term deposit. With the help of TDR ledger accountant prepare “PROVISIONAL LEDGER”.

From this ledger accountant calculate the monthly product of each account and estimate the

profit for a half-year. The semiannual profit on each account will be the expenses of branch.

COMPUTERZIED FUNCTION PERFORMED BY A/C DEPTT.

To Update the General Ledger

Account Department Receives the Following Output of General Ledger

Daily general ledger expense

Daily general ledger income

Daily general ledger assets

Daily general ledger liability

Daily general ledger circle expense

Daily general ledger audit expense

The formats of all these ledgers are same. They contain the following heads A/C No.

Description, previous balance, amount credit, amount debit and current balance. Codes are


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assigned to all these items. Income will be credited in the branch account and expenses will be

debited in the branch account at the month end. All the expenses of circle, regional, audit;

inspection office is debited in the head office account, because it is the responsibility of the

head office to bear the expenses of its offices. For all the heads of general ledger there is

closing balance and opening balance. These ledgers there are helpful in preparing the daily,

monthly, semiannually and yearly statements. Some of these statements are prepared for the

purpose of record keeping of branch and some are prepared to send to the circle office, head

office, and State Bank of Pakistan.

SOME OF THESE STATEMENTS ARE

Statement of provisional income

Statement of provisional expense

Statement of head office account

Summary of income and expenses

Statement of profit and loss a/c

Statement of profit and loss on PLS 365 a/c

Balance conformation report

Statement of affairs

BILLS DEPARTMENTThe department deals in bills for collection for a kind such as cheques, draft, pay orders, call

deposits etc with outstation branches of MCB or with other banks.

It provides service to their customer to get payment from the nearer bank at nominal charges.

The four main heads of bill departments are.

1. OUTWARD BILLS FOR COLLECTION (OBC)

2. INWARD BILLS FOR COLLECTION (IBC)

3. OUTWARD DOCUMENTARY BILLS FOR COLLECTION (ODBC)


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4. INWARD DOCUMENTARY BILLS FOR COLLECTION (IDBC)

1. OUTWARD BILLS FOR COLLECTION (OBC)

Bill department receives cheques or other kinds of bills from it client whose account must be

opened in that branch. This branch forwards the check with schedule or covering letter to that

branch on which bill is drawn. The checking officer of bills department will cross the cheque

with special bank stamp before forwarding the cheque. OBC Register is also maintained for

proper record keeping of outward bills. This register is updated two times once at the

confirmation advice of this check is received form the payable branch. Bank gets a commission

0.25% on per hundred and courier charges Rs.30 this service.

2. INWARD BILLS FOR COLLECTION (IBC)

The branches, which receive bills, have to verify these bills for payment. The party

account must be opened in that branch. The responsibility of this branch is to verify the

bills for collection within three days and send the advice to the originating branch. In

case of verification of bills is approved bank debits the account of the respective account

holder and send a debit advice to originating branch and at the same time credit the

head office account.

For inward bills IBC Register is maintaining for keeping the proper record of the bills.

3. OUTWARD DOCUMENTARY BILLS FOR COLLECTION (ODBC)

Originating branch receives the documentary bills from their clients and sent them to

outstation branches of the same bank or other bank. Customer account must be opened

in that branch. The documentary bills are i.e. trust, receipt, railway receipt, sale

invoice, receipt of courier service etc. bank gets a commission 0.35% + postage

charges+courier service

charges of this service. Seller and purchaser both can avail the facility of bank in case

of selling and purchasing their product or goods.


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4. INWARD DOCUMENTARY BILLS FOR COLLECTION (IDBC)

Bank receives the documentary bills from the other outstation branches of the same bank or

other bank for collection the amount from purchaser.

In this case back acts as buyer acts as a buyer’s bank. When bank receives the documentary

bills they send intimation to buyer about his arrival of goods. If the buyer is the account holder

then bank will debit his account otherwise purchaser deposits the amount of the bill. Bank hand

over these documents to purchaser, on behalf of which buyer receives the goods. Bank also

charges commission.

ADVANCES DEPARTMENT

ADVANCE OF LOAN

When a customer borrows from a banker a fixed amount, which is repayable either in periodic

installments or in lumps at a fixed future times. Customer has to pay mark-up on the entire

amount.

The advance department has to prepare credit line proposal to ensure that the security for the

advance is perfect and to provide all information required on the credit worthiness of the

client.

ADVANCES ARE GIVEN TO CUSTOMER ON THE FOLLOWING BASIS

Experience, capacity and credit worthiness of the borrower

Financial condition of his business

Details about the customer dealings with other associated companies

Account turnover position

Average balance maintain

IN MCB ADVANCES ARE CALSSIFIED INTO FOLLOWING THREE TYPES


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1. Demand Finance

2. Running Finance

3. Cash Finance

DEMAND FINANCE

The duration of repayment of this advance is longer than cash and running finance. These

advances are made in lump sum and there is permission to repay the amount in periodic

installments or in a lump sum. Big loans are sanctioned under this finance against reasonable.

Mark-up is charged on daily basis 0.50 RS. Per day thousand.

RUNNING FINANCE & CASH FINANCE

The maximum time period of repayment the advance is one year. It’s according to the will of

the customer to repay it whenever, within this period. Customer can operate the running

finance facility as a current account to meet these urgent and unexpired requirements.

Running finance is the new name of overdraft.

Clean Overdraft Is One Of The Type Of Running Finance

Against clean overdraft bank does not keep any tangible security. This facility is permitted only

against a promissory note or hypothecation of a stock or pledge of stocks.

Mark-up is calculated on daily basis under the running or cash finance. Running finance is

adjusted twice in three months. Bank gives the advance against bonds, shares, fixed deposit

certificate, mortgages, hypothecation pledge etc and other tangible assets. MCB normally

charges 14% per annum but this rate may be changed by bank. Mark-up is marked on daily

basis which is 0.25% per thousand per day. Mostly in running and cash stock are

hypothecated and pledge to the bank. In case of hypothecation, property in goods is charged as

security for a loan to the bank but the ownership and possession is left with the borrower. The


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form of agreement obtained in case of a hypothecation provides that the bank can take

ownership of goods if the borrower defaults in repaying the amount.

In pledge case, goods and documents are delivered by a customer to this banker to be held as

security for the repayment schedule of these advances are allowed to adjust in periodic or in

lumps sum.

FACILITIES

MCB has provided two types of facilities in case of advances.

1. FUND FACULITY

2. NON FUND FACILITY

FUND FACULITY

Funds are given to customer according to their requirement against securities.

There are following types of advances, which are given to customer on fund basis.

Industrial loans

Commercial loan

Agricultural loan

These loan are given specially to traders, business, small industrial units, including cottage

industries, agriculturists, thus ensuring unquotable distribution of bank credit among various

sectors of the country’s economy.

INDUSTRIAL LOAN

Loans are given to industrial units including cottage up to or less than RS. 20 Million. Loans

and advances shall not exceed amount specified by marginal restriction on the type of

securities offered. Industrial loans are granted to the manufacturing section of the economy

including finance for fixed investments and working capital requirements of small industries.

Loan Period

Loans are allowed of a maximum period of 5 years including a maximum grace period of 1

year. In special case up to 10 years also, depending upon the merit of the case.

Commercial Loan


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Total principal amount of loans to a single enterprise/borrower shall not exceed RS. 0.5

million. Maximum maturity is 3 years, depending upon the nature and type of and of advances,

decided upon case to case basis.

Mark-Up

Both for commercial and industrial loan, mark-up will be charges as per existing rate, subject

to changes from time to time. Presently it is 051 RS. Per day per RS. 1000/-.

Mode of Repayment

Equal monthly, quarterly or half-yearly, repayment of principal and interest or as per term of

approval.

Securities and Margin

Loans can be made against any or more of the following securities mortgages of immovable

property (land and building), pledge of stocks, raw materials, and finished goods,

hypothecation of stocks, raw material, and finished goods, SBP guarantee.

AGRICULTURE LOAN

The loan is advanced to those farmers who are cultivated agricultural land. It is classified into

following two types.

1. Production Finance

2. Development Finance

Production Finance

This finance is advanced to the agriculturist for input requirement of land E.I. fertilizer,

Pesticides, seeds etc. It is also called short-term loan.

Development Finance

These loans are advanced to the farmers for the purpose of development of the land or other

development purposes belong to the agriculture sector tractor, thresher, and tubewells. It is


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called short, long, medium term loan. The repayment of loan is scheduled in periodic

installments, which may be quarterly, half yearly or yearly. Mortgager of land is used as

security for development finance .Mark up is charged on daily basis and changes time to time

normally it is 0.50 RS. Per thousand per day.

Procedure for Advance

The applicant fills in the application form for loan. Bank provides the application form to his

applicant. If the officer is satisfied with the application than he prepare the proposal in

response to this application. The branch manager call for the following documents i.e. property

deeds, mortgage of property etc. is patch these documents with proposal and forward the

proposal to circle office. As soon as a proposal is received, the circle office advances

department ensures that the requisite documents/reports are in order/favorable. Further they

also make suitable inquiries about client business reliability and competitiveness. If the general

manager has the power to sanction the loan then after processing, circle office will prepare the

sanction advice and send it back to relevant branch, on the other hand proposal will be

submitted to the head office.

NON FUND FACILITY

When and applicant for an advance cannot offer any tangible security the banker may rely on

personal guarantees, letters of credit to protect himself against loss on advance or loan.

Guarantees

Banks issue guarantees on behalf of customer. Limit proposals, covering such transactions

should be submitted, with full details, for the approval of the appropriate sanctioning authority.

Generally, customers, on whose behalf the guarantees are issued, issue guarantees. While

executing a guarantee the terms and conditions of the guarantee is closely examined in order to

determine the extent of banks obligation and/or financial liability under the guarantee and the


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type of guarantee, unusual conditions are contained in the guarantee. After the guarantee has

been issued, a copy of the same is attached to the counter guarantee issued to the customer.

Bank charges a commission 0.40% per quarter on the amount of the guarantee issued.

Normally the validity period of guarantees does not, at a time, exceed on year.

FOREIGN EXC HANGE DEPARTMENT

This department deals with the foreign exchange transaction. The function of this department is

just like general banking with the difference that it deals in foreign currency. Only the

authorized dealer of SBP can deal in foreign exchange. MCB is also the authorized dealer and

has a licensee of STATE BANK OF PAKISTAN. This department is further divided into

following four main heads.

Foreign Currency Account

Import

Export

Foreign Currency Account

Foreign currency account can be open in US dollar, Pound Sterling, Dutesh Mark, Japanese

Yen. Any individual firm or a company may open private foreign currency account irrespective

of nationality or place or residence. Opening of account in the joint names of a resident and a

non-resident is permitted. Foreign currency account holder opens foreign currency accounts

on proper introduction. There is no limit on amount of deposits or withdrawals from these

accounts. No question is asked on the source of funds received in such accounts. No Zakat,

income tax or withholding tax is deducted.


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For opening a foreign currency account there is needed a photocopies of 4 pages of passport

card. The State Bank of Pakistan national resident outside Pakistan against the security of

balances in foreign currency account.

The MCB Has Introduced Three Schemes In Foreign Currency Account

Primary Currency Account

Dollar Khushali Account

Term Deposit Account

Primary Currency Account

A sum no less than dollar 100/- in cash as initial deposit is required for opening prime

currency account and the same may be maintained as minimum average running credit

balance. Profit will be calculated on monthly basis on minimum balance. Profit rates are

different for different currencies. For standing instruction bank charges 2US $ on per

transaction.

Dollar Khushali Account

This account is opened only with dollar currency. A sum not less than dollar 2000 for opening

dollar khushali account and the same may be maintained as minimum average running credit

balance other wise this account will be treated as prime currency account.

Term Deposit Account

The term deposit account is negotiated in a manner so that the delivery dates fall on working

days both in Pakistan and in the foreign country where delivery is to be given. These deposits

are three months, six-month, nine months, one year,

two-year, three years, and five years. There are different profit rates for different tenure.

Following Ledger Documents Are Maintained For Currency Accounts

General ledger

Day book


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Cheque ledger

Vouchers of debit and credit

Pay in slip

Daily statement account to head office

After the freezing of accounts, now the banks have only one foreign currency account i.e. dollar

accounts, and their tenure is not more that one year. The bank giving profit LIBOR rate+4%.

Import

This department provides the facility to their customer to import machinery or products from

other countries. It is necessary for the import to have the licenses, which is issued by the chief

controller of imports and exports. For having the license, an individual or firm submits the

application through his bank.

The documents which are necessary for the registration and having the import license

are following

Filled Application Form For Register

The National Identity Card of the Applicant

The National Tax Certificate issued by the Income Tax Department

In case of firm or company, the Memorandum and the Article of the Association

Banker is issues the letter of credit normally in the response of the Performa Invoice. The

seller sends this invoice to the buyer and it contains seller name, product quality, and rate,

mode of shipment, and other terms and conditions.

LETTER OF CREDIT

Definition of Letter Of Credit


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A letter of credit consist of an undertaking by a bank authorized the seller to draw in

accordance with certain terms and stipulating legal forms, that all such bill will be honored.

Explanation

A letter of credit is a,

1. Written undertaking by importer bank to a third party i.e. the exporter.

2. That it will be pay or accept draft (letter of credit) drawn upon it up to a started sum of

money within a specified time.

3. That the payment will only be made to the exporter if the complies with the specified

terms of credit.

Parties Involve In A Letter Of Credit

Account party

Issuing party

Exporter

Paying or negotiating bank

Account Party

The buyer or the importer on whose account and request the letter of credit is opened is known a s account party.Issuing Party

The bank, which issues or opens a letter of credit at the request of importer, it is called

the issuing bank.

Exporter

The seller or the party in whose favor the letter of credit is draw is the third party and it is also

known as beneficiary.

Paying or Negotiating Bank

The paying bank in the exporter’s country on which the draft is drawn is called the paying

bank.


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REASON; WHY A LETTER OF CREDIT IS MADE?

1. The exporters are uncertain of the importer capacity to pay.

2. The importers are unwilling to pay the amount unless the goods are actually shipped and

the documents received by the bnank.

3. In case of non-payment the seller should be assured to legal rights in foreign country.

4. There should be an agency, which should meet the seller’s need of finance when the

goods are shipped.

5. The commercial banks come to the help of exporters and importers.

6. The importers can undertake the obligation to pay to the exporter for the purchase made

by the importer and this is usually done through a letter of credit.

OPERATION OF LETTER OF CREDIT

1. The importer of buyer contacts the seller in foreign country for the purchase of a

particular good or good.

2. He settles with the seller the quantity and quality of the goods to be importer.

3. The sale contract also includes the method of payment

4. The importer then submits an application to his bank for the issuing of an individual

letter of credit.

5. The form on which the importer employees for letter of credit is supplied by the bank.

6. This form contains all the necessary details discussed between the importer an exporter

for the shipment of goods which of unloading, the documents against which the bank is

the honor the draft, total value of the goods etc.

7. If the documents supplied by the seller conform to the terms of contract the exporter will

be paid.


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8. The issuing bank will not be responsible if there is any fraud or the merchandise does not

conform to the sales contract.

9. The obligation of the buyers bank is,

a) To issue letter of credits on agreed terms and condition with buyer.

b) To have a proper examination of the documents.

c) To honor draft when presented with proper documents.

Types of Letter Of Credit

1. Irrevocable letter of credit

2. Revocable letter of credit

3. Confirmed letter of credit

4. Unconfirmed letter of credit

5. Documentary letter of credit

1) Irrevocable letter of credit

It is the one in which the issuing bank gives a lasting undertaking to accept and in due

course to pay bills drawn upon it provided the exporter fulfills the terms and conditions. It

gives a complete protection to the exporter.

2) Revocable letter of credit

It is the one in which can be modified or cancelled by the issuing bank at any time

without any obligation on its part. They are not acceptable to the business.

3) Confirmed letter of credit

It is that which has the protection of the credit standing of the importers as well as the

exporter’s bank, which confirms the letter of credit, takes the liability of paying in case the

issuing bank fails to make payment to the exporter

4) Unconfirmed letter of credit


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It is one under which the exporter’s bank does not give any guarantee to the exporter

that the bills drawn will be honored by the issuing bank to honor the draft. From the exporter’s

point of view, the confirm irrevocable letter of credit is the best from of receiving payment.

5) Documentary letter of credit

It is the one of which provides for bills to be accompanied by documents of little to goods such

as the bills of landing, invoice, the policy of insurance etc.

HOW A LETTER OF CREDIT IS OPENED

1. Application for a letter of credit

2. Line of credit

3. Opening of the letter of credit

4. Handling of the documents

5. Payment by the importer to the bank

6. Liability

1. Application for A Letter Of Credit

An importer prepares an application on the prescribed form available from the bank. The

information which are supplied in the application are based on the contract of sale and include

only the importer feature of contract such as the value of the merchandise, port of shipment,

port of unloading, expiry date of the papers and brief description of the goods. If the bank is

satisfied with the application, it will sign and acceptance agreement with the importer.

2. Line Of Credit

Before issuing a letter of credit, bank takes all necessary precautions for securing its credit.

The bank first examines the customers credit standing, the type of goods to be imported, the

market demand for the goods, the collateral offered to cover the credit. Then it establishes the

amount i.e. the line of credit.


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3. Opening Of Letter Of Credit

The letter of credit can be opened by mail or by cable. When it is opened by mail, the issuing

bank sends letter of credit and to carbon copies to the importer. The importer then dispatches

the letter of credit to the exporter in foreign country by mail. One carbon copy is kept for the

record. The second carbon copy after signing is sent to the bank by the importer. If an

importer. If an importer directs the bank to open letter of credit by cable, the importer’s bank

sends a cable to the corresponding bank in the foreign country with a request to notify the

exporter.

4. Handling of the Documents

When the exporter receives a letter of credit, he presents the required documents and the draft

to the bank in his own country after shipping of documents. If the bank is satisfied with the

documents in the importing country and pays the exporter at official rate in the currency of his

own country.

5. Payment by Importer to the Bank

When a bank approves the application of a customer for opening letter of credit, it does not

lend money to the importer. The bank only lends the importer to use the credit standing of the

bank to the exporter in the foreign country. The bank makes a contract with the importer that

when the draft if send by the negotiating bank for payment the importer will make the payment

to the bank not later then the day only the bank is to honor the obligation. In case of a sight

letter of credit the payment to the corresponding bank is to be made on the day the draft and

documents are received. When the time of letter of credit is used the importer is to arrange the

payment not later than the day on which the draft is to mature.

6. Liability of the issuing Bank


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The liability of the issuing bank is to examine the documents in order to confirm their validity.

If the documents on the face appear to be in order the payment should be released. If any defect

is found in the documents and the issuing bank honors the draft, the importer can claim

damages. The banker is not responsible to see whether the merchandise conforms the sale of

contract or they physically exist. The issuing bank is only responsible for the completeness and

regularity of the documents relating to the letter of credit.

IMPORTANCE OF LETTER OF CREDIT

The bank charges nominal commission on financing the import and export shipment.

Benefits To the Bank

Increasing balances

Commission

New business opportunities

Increase Balances

The balances are the lifeblood of every commercial bank. The banks get marks up on the credit

and this mark up increase the money of the bank.

Commission The commission charged by the banks varies with the kinds of letters issued by

them. Though the commissions are small, yet when counted on the whole, they form an

important part of earning of the banks.

New Business Opportunity

The letter of credit provides new business opportunity to the bank. The firms, which are

engaged in the export and import of merchandise, are introduced to the banks, which by

serving them develop profitable relationship.

OPENING OF LETTER OF CREDIT

Before opening of L/C certain requirements are necessary that are

The applicant must have import registration No.

He must has account in the bank


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He must pledges his security against the L/C amount

He must have IB-8 form, and perform, and performance invoice.

Bank Charges

The bank takes commission @ 0.40% of amount of L/C for one quarter and 0.25% for two or

more quarter.

If L/C amount is low then minimum bank commission if RS 500/-

Postal charges are RS. 1200/

-Stamp duty is calculated @ 0.50% of L/C amount

Mark up is calculated at RS. 0.50 per day per 1000

For Collection

In case of sight payment service charges are calculated @ 0.10% of bill amount and

minimum charge are RS. 500/- and minimum charge is RS. 500/- and handling

commission is RS. 500

In case of D/A L/C, commission is calculated @ 0.10% per month

ADVANTAGES OF LETTER OF CREDIT

Advantages letter of credit to the importer and exporter

1. Provision of finance

2. Credit standing

3. Legal right

4. Risk covered

5. Business expansion

6. Bridges Credit gulf

7. Payment in domestic currency

Document


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Documents are the most important part of international trade. Without them trade cannot be

completed. Documents are of five types.

1. Commercial documents

2. Transport documents

3. Insurance documents

4. Financial documents

5. Official documents

Commercial Documents

Commercial documents consists of following

Invoiced form

Certificate of origin

Weight note

Packing list

Quality or insurance certificate

Transport Documents

These documents are related with transfer of goods. These documents consist of following

forms.

Airway bill

Bill of landing

Rail consignment note

Roadway bill

Combined transport bill o landing

Insurance Documents


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Insurance documents consist of following forms

Letter of insurance

Insurance policy

Financial Documents

These documents are concerned with the payments of goods. These documents consist of

following forms

Bill of exchange

Clean bill

Short bill

Documentary bill

Long bill

Bank bill

Delivery against acceptance

Delivery against payment

Promissory note

Official Documents

Black listed certificate

Consular invoice

Health, vetenary, sanitation certificate

Export

Usually the exporter does not rely on the credit of a banker in the country of importer, and

insist on a confirmation from a banker carrying on business in his own country. Thus this

department of a bank helps the exporters to settle down their financial affairs. For exporting it


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is necessary for exporter to get export license from the chief controller of import and export

after registration. Documents are required for the registration such as N.I.C, income tax

Certificate, bank certificate that shows that the exporter is his account holder and has a good

dealing with them. In response to the letter of credit exporter submit the following documents

to the negotiating bank.

Bill of exchange

Invoice

Bill of lading or Airway bill/railway receipt /truck receipt

Insurance documents

Packing list

Any other documents, if so required.

The negotiating bank will send the same documents to the issuing bank. In accordance with the

terms and condition la id down in let of credit.

Security of Document

Whether documents received are meant for the opening bank and specifically for the branch

which established the letter of credit. The documents would be negotiated within the validity of

L/C. the goods have been shipped within the time allowed under L/C. the goods are mentioned

in invoice and other documents (e.g. bill of lading, packing list etc) are in accordance with

merchandise clause L/C. Whether the documents received pertains to L/C, established by the

opening bank and the documents negotiated are within or equal to L/C amount. In case where

the value of documents exceeds the L/C amount. The foreign bank may negotiate the documents

for amount being marginally excess or sends them on collection, remittance may be allowed in

excess subject to the following conditions.

The amount does not exceed 5% of the amount of L/C subject to the maximum of US

500/- $.


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The importers hold a valid import license against which the excess amount is adjusted-

provided remittance is affected within 1.5 year from the date of issue of import license.

The name of the importer on the bill of exchange does not differ from that on the import

license. The tenor of the bill should be valid. See that the goods are not shipped prior to the

date of opening of L/C or the documents are not stated.

The goods are consigned or endorsed in the favor of the bank only opening the letter of credit,

and in no case it should be consigned to the importer directly.

Retirement of Documents

When the opening bank against a letter of credit receives documents. The customer

retires the documents under different arrangements e.g.

Retirement against payment by the importer

Retirement of documents in case of None-payment by the importer

Retirement of document under trust receipt

Retirement of Documents under Trust Receipt

Shipping documents are released to the importer on trust, that he may get the goods cleared

from the custom authority by himself, sell the good, and later pay back the bank. Trust receipt

financing is limited to first class customers only as the bank reposed fullest confidence in the

importer. Documents are obtained from the customer. The finance is provided for the period of

45 days only.

The Amount of Finance Is Calculated As Under

Rupee value of bill plus foreign bank charges plus taxes, less SBP marging restriction =

amount of finance.


INTERNSHIP REPORT

Mark up is calculated @ 0.43 RS. Per 1000 per day on the amount of finance utilized.

After the retirement of documents the opening bank then transmits the funds to the negotiating

bank. The exporter will receive the payment from the negotiating bank.

Credit Card Facility

The facility is given to the customer on their

Credit worthiness

Sufficient balance

Sufficient mean of sources

Customer uses the facility of these credit cards only from the affiliated establishments of the

MCB.Establishment are those to whom the MCB give the authority to sell their goods or

services to the credit card holder.

All the charges received by the MCB card department from its establishments. Credit card

department debits the cardholder a/c and credits the establishment a/c.

Working of MCB Credit Card

Branch manager would recommend their clients of good standing for a credit card. Manager

collects application from their clients and sends them to the circle office with their remarks and

a note about their financial statement .The circle office would inspect, investigate and make

inquiries on all such applications and pall them their General Manager with their remarks. In

case there the circle office does not consider an applicant fit to have credit card they reject it at

their end. Copy of rejection letter is forwarded to credit card department for their information.

General Manager forwards the application with his remarks to credit card department. When

approved a credit card valid for twelve calendar months would be issued and dispatched to

member directly through branch manager.

Member fee for the MCB Credit Card Is RS. 100/- only


INTERNSHIP REPORT

Renewal of Card

The expired card would be renewed, if the account holder wants.

Loss/Misplaced Card

If a card is lost or misplaced, immediately inform the MCB card Department. A replacement

card having the same validity as of the lost card would be sent to the individual concerned as

soon as written intimation is received from him.

The account holder would have to pay RS. 50/- as the lost card fee.

RUPEE TRAVELERS CHEQUE

MCB rupee Travelers Cheques have the largest share of the total RTC market. Over 1.5 million

satisfied customers have made MCB RTCs their first choice and find them ideal for all

transactions whether business or personal. We aim at ledership, attain it and today, we are the

market leaders.

MCB is the only bank to have the Tele-verification System that allows the customer to confirm

the validity of each cheque. This facility should assure you that the cheques are not lost/stole.

What set MCB RTCs apart are the security features. MCB RTCs are printed in the UK and

carry a thread watermark- a feature that prevents counterfeiting.

MCB Rupee Travelers Cheques

Ideal For Every Deal

Different facilities are provided through RTCs, some of them are as follows

As Good As Cash: RTCs are the most convenient substitute for cash for all kinds as

transactions-business, property, trade or personal.

Denominations: cheques are available in denominations of RS. 1000 RS. 10,000 and

RS. 50,000.

Easily Encashed: RTCs can be easily encashed at any designated MCB branch.

Easy refundable: in case of loss or theft, you can get the full amount back.


INTERNSHIP REPORT

Exclusive security features: due to special printing and safety precautions, MCB RTCs

cannot be duplicated. Various securities features both in design and materials make

counterfeiting or fraudulent alteration extremely difficult.

Valid unit used: validity of cheques is indefinite. You can use for a week, a year or

more after the date of purchase.

Tele-verification system: RTCs enable you to check the validity of a cheque 24 hours a

day. Tele-verification UAN: (021) 111-000-456.

Bank charges for RTCs

The bank gets commission or RS. 10 per leaf. Excise duty is calculated at the rate of 0.20% to

the total amount and this duty id exempted for tax payees.

Procedure

The officer firstly writes it in the register (different registers for different types of RTC) when

he writes serial #, date, amount and name of the specimen in the cheque, they write name of

person at two sides, serial No. Of cheques. They send the serial No. To head office for on line

and person gets the RTC.In case of withdrawal, the person can get amount from any branch

having facility of RTC all over the country. In person gives it to any body then other person

credits it in his a/c and gets money from his next day. If other body wants to get money the

same day then he must has to verify it with other a/c holder and can get his amount.

In case of stolen of RTC, the specimen firstly goes to police station and inform them and get

copy of FIR and then copy of that FIR sends to nearest MCB branch (having facility of RTC)

the clerk immediately sends that information head office and head office informs all RTC

branches with message having serial of stolen RTC so that thief may not able to get amount.

On the other hand the person gets new RTC of the same amount.


INTERNSHIP REPORT

FINANCIAL ANALYSIS MUSLIM COMMERCIAL BANK LTD.

BALANCE SHEET VERTICAL ANALYSIS

AS ON DECEMBER 31,2002

PARTICULARS

ASSETS

Cash on hand

2002

(RS.000)

17867991

% AGE

7.59892

2001

(RS.000)

21287400

% AGE

11.3656779

Balance with other banks 2154190 0.916136 3075463 1.6175526

Lending to financial institutions 33874620 14.40624 15470519 8.27063795

Investments-net 89609821 38.10937 55376260 29.6344257

Advances-net 78923737 33.56478 76585999 40.9423581

Other assets 8883163 3.777842 11398468 6.09499693

Operating fixed assets 3825045 1.62672 3659667 1.95647005

Deferred tax assets __ ____ 220500 0.1178807

TOTAL 235138567 100 187074276 100


INTERNSHIP REPORT

LIABILITIES

Bill Payable 6261957 2.802527 8097178 4.49427519

Borrowing from financial institutions 21987824 9.840609 8946624 4.96575354

Deposits &other accounts 182705716 81.76959 154544437 85.7786864

Sub-ordinate loans 1600000 0.716077 __ __

Liabilities against assets subjected finance lease __ __ __ __

Other liabilities 9045634 4.048356 8580465 4.76128489

Deferred tax liabilities 1838545 0.822837 __ __

TOTAL 223439676 100 180168704 100

NET ASSETS 11698891 6905572

REPRESENTED BY

Share capital 2665455 22.78383 2423140 35.1841478

Reserves 3026517 25.87012 2278980 33.0909354

Inappropriate profit 621985 5.3166151 302465 4.12282696

6313957 53.970560 5004585 72.471694

Surplus on revaluation of assets 5384934 46.02944 1900962 27.6020898

TOTAL 11698891 100 6887022 100

MUSLIM COMMERCIAL BANK LTD.BALANCE SHEET

HORIZONATAL ANALYSISAS ON DECEMBER 31, 2002

PARTICULARS

ASSETS

Cash on hand

2002

(RS.000)

17867991

2001

(RS.000)

21259900

CHANGE

(Rs.000)

-3419409

% AGE

-16.063066

Balance with other banks 2154190 3025689 -921273 -29.955587

Lending to financial institutions 33874620 15470519 18404101 118.962402

Investments-net 89609821 55432235 34233561 61.8199225

Advances-net 78923737 76584120 2337738 3.05243521

Other assets 8883163 11400906 -2515305 -22.067045

Operating fixed assets 3825045 3659646 165378 4.5189357

Deferred tax assets __ 220500 -220500 -100.00000

TOTAL 235138567 187053515 48085052 25.692624


INTERNSHIP REPORT

LIABILITIES

Bill Payable 6261957 8097178 -1835221 -22.664946

Borrowing from financial institutions 21987824 8946624 13041200 145.766716

Deposits &other accounts 182705716 154544451 28161279 18.222124

Sub-ordinated loans 1600000 __ 1600000 100.00000

Liabilities against assets subjected finance lease __ __ __ __

Other liabilities 9045634 8578240 465169 5.42125631

Deferred tax liabilities 1838545 __ 1838545 100.00000

TOTAL 223439676 180166493 43273183 24.016919

NET ASSETS 11698891 6887022 4811869 69.412338

REPRESENTED BY

Share capital 2665455 2423140 242315 10.000004

Reserves 3026517 2278980 747537 32.8013848

Unappropriated profit 621985 283940 319519 105.638338

6313957 4986060 1327897 26.163448

Surplus on revaluation of assets 5384934 1900962 3483972 183.274153

Minority interest __ ___ ___ ___

TOTAL 11698891 6887022 4811869 69.412338

MUSLIM COMMERCIAL BANK LTD.PROFIT & LOSS ACCOUNT

VERTICAL ANALYSISAS ON DECEMBER 31,2002

Particular

Interest earned

2001

(RS.000)

17034263

%AGE

88.46044

2002

(RS.000)

15385869

%AGE

90.012654

Fee commission and brokerage income 868637 907071 .987564

profit from federal exchange business 1648 ___ 0.986542

income from UTP 3099 0.016093 ___ 0.017944

Dividend income 243994 1.267083 297748 2.126548.9

Income from dealing 687854 3.657082 503593 3.411546

Other income 400140 2.079832 881746 5.439037

TOTAl 19256362 100 17976027 100

OPERATING EXPENDITURE


INTERNSHIP REPORT

Interest expense 7544897 41.59745 6074682 36.79828

Provision for diminution in the value of inv. 62064 0.12356 512 0.284979

Profit against non-performing loan and adv. 1704944 8.98754 ____ 0

Bad debts written off directly 448999 2.475476 721105 4.012546

Administrative expenses 7336815 40.45023 8077395 50.13016

Other provisions 40000 0.220533 ___ 0

Other charges 147 0.00081 1313 0.227281

Taxes 993000 5.513422 1362426 7.654269

TOTAL 18089674 100 16237433 100

MUSLIM COMMERCIAL BANK LTD.PROFIT & LOSS ACCOUNTHORIZONTAL ANALYSIS

AS ON DECEMBER 31, 2001

PARTICULARS 2001

(RS.000)

2002

(RS.000)

CHANGE

(RS.000)

%AGE

Interest earned 17033225 15385869 -1647356 9.60283

Fee commission and brokerage income 868637 907071 38434 -40408 -90.01265

Dividend income 243994 297748 53754 22.54322

Income from dealing 687854 503593 -184261 -27.39726

Other income 400140 881746 481606 120.1904


INTERNSHIP REPORT

TOTAL 19233850 17976027 -1257823 34.96037

OPERATING EXPENDITURE

Interest expense 7544897 6074682 -1470215 19.230288

Provision for diminution in the value of inv. 62064 -62064 -100.000

Profit against non-performing loan and adv. 1704308 -1704308 -100.00

Bad debts written off directly 449635 721617 271982 60.722069

Administrative expenses 7331623 8077395 745772 9.890183

Other provisions 40000 -4000 -100.00

Other charges 147 1313 1166 793.0231

Taxes 993000 1362426 369426 37.0321

TOTAL 18089674 16237433 -1852241 -10.23156

PROFITABLITY RATIOS

Return on Assets

Profit after tax X 100Total Assets

This ratio shows that the return is greater in 2002 as compared to return on assets in the year

2001. Although interest and discount on loans which is the major source of revenue for bank

has increased in 2002 as compared to last year, but cost on deposits and borrowing which is the

major expenditure of bank has increased more in the current year than the last year.

HAILEY COLLEGE OF COMMERCE, UNIVERSITY OF THE PUNJAB

Return on Assets(RS. 000)

2002 2001Profit after Tax 1738594 1108176Total assets 235138567 180166493Ratios 0.739% 0.6%

58

INTERNSHIP REPORT

Another reason of increase in return is the increase in lending rate and decrease in financial

cost, total assets in 2002 have also increased substantially than last year so return on assets

increased in 2002.

RETURN ON SHAREHOLDER INVESTMENT

Profit after tax X 100Shareholder fund

Return on Shareholder Fund

(RS. 000)2002 2001

Profit After Tax 1738594 1108176Shareholder Fund 11698891 6887022Ratios 14.86% 16.09%

This ratio is a further explanation of the above ratio that is the rate of return has

decreased in 2002, in 2002 profit after tax has increased and on the other hand its

denominator shareholders fund has also increased due to increase in reserve fund and

other reserves. Therefore both the factors are responsible for this ratio.

RETURN ON EQUITY CAPITAL

Profit after tax X 100Paid up Capital

Return On Equity Capital

(RS. 000)

2002 2001

Profit After Tax 1738594 1108176Equity Share Capital 2665455 2423149Ratios 65.23% 45.73%


INTERNSHIP REPORT

Calculation made on the base of data available shows that profit earning after taxes in

2002 has increased. Here in this ratio we see that ratio has increased not by the single

factor but also due to increase in share capital. So both these factors has resulted an

increase of the return.

EARNING PER SHARE

Profit after taxTotal No. Of Equity share

Earning Per share(RS)

2002 2001Profit After Tax 1738594000 1108176000Total No of Outstanding equity share

266545483 242314075

Ratios 6.52 4.57

This ratio is telling that is in the current year 2002 profit has increased and that is why

earning per share has also increased.

RATE OF RETURN ON LOANS

Interest income X 100Total Loan

Rate of Return on loans(RS. 000)

2002 2001Interest Income 15385869 17033225Total Loan 78923737 76584120Ratios 19.49% 22.24%


INTERNSHIP REPORT

Here we are watching very interesting situation, as there is decrease in interest income

in 2002 and ratio has also decreased, reason is that interest income has decreased but

amount of loan has increased resulting in decrease in return on loan.

LIQUIDITY RATIOS

LOAN TO DEPOSIT RATIO

Total Loans X 100Total Deposits

Loan to Deposit Ratio(RS. 000)

2002 2001Total Loans 78923737 76584120Total Deposits 182705716 154544451Ratios 43.20% 49.55%

Analysis shows an increase in loan and also increase in the deposits. As rate of increase

of deposits is greater than that of loans, therefore it has resulted in an overall decrease in

the ratio.

LOAN TO ASSETS RATIO

Total Loans X 100Total Assets

Total

assets of

the bank


Loan to Assets Ratios(RS. 000)

2002 2001

Total Loans 78923737 76584120Total Assets 235138567 187053515Ratios 33.56% 40.93%

61

INTERNSHIP REPORT

increased from RS. 187 (billion) in 2001 to Rs. 235 (billion) in 2002 and have 25%

increase in assets, which has resulted in an increase in loan but to shorter extent.

Therefore the net result is decrease in the loan to assets ratio from 40.93% in 2001 to

33.56% in 2002.

CAPITIAL RATIOS

EQUITY CAPITAL TO ASSETS

Equity Capital X 100Total Assets

Equity Capital to Assets

(RS. 000)2002 2001

Equity Capital 2665455 2423140Total Assets 235138567 187053515Ratios 1.13% 1.29%

In current year bank’s assets have been increased from RS. 187 (billion) to Rs.

235(billion) there by increase @ 25.67% over the last year. On the other hand bank’s

equity has increased and changed during the year

2002 so this is the reason that ratio equity to assets has decreased from 1.29% in 2001 to

1.13% in 2002. Denominator total assets have increased substantially during the year

2002 and increase in equity capital resulted a decrease in this ratio.

EQUITY RATIO

Shareholder Fund X 100Total assets


INTERNSHIP REPORT

Equity Ratio(RS. 000)

2002 2001Shareholder Fund 11698891 6887022Total Assets 235138567 187053515Ratios 4.97% 3.69%

This ratio explains that participation in the assets by the shareholders funds is limited by

outsiders fund but when we take year under review (2002) we see ratio has increased in

2002 as compared to the year 2001. Reason behind this is that increase in assets in

financed by outsider’s fund rather than the fund provided by the shareholders.

DEBIT EQUITY RATIO

Total External DebtsTotal Internal Debts

This ratio depicts the relation between equity and debt financing. This current year ratio

shows an decrease in ratio from 26.09 times to 19.10 times. Because lesser is the equity

financing lesser will be the soundness of the bank


Debt Equity Ratio(RS. 000)

2002 2001Total External Debit 223439676 180166493Total Internal Debts 11698891 6887022Ratios 19.10 times 26.09 times

63

INTERNSHIP REPORT

The reason behind this decrease is an increase in external borrowings and increase in

internal debt also but rate of increase in internal borrowing is greater. It is necessary to

keep the bank fund up to 40% as reserve.

CONCLUSIONDuring my internship training at MCB G T Road Branch Muridke I have learned a lot. It was a

geed experience for me. In April 1991, the, MCB became the first Pakistan’s Privatized bank.

After privatization, the profitability and performance of the bank has increased. Toda MCB

represents a bank that has grown with time.

GOOD FEATURES

The staff of foreign exchange department is highly professional. All the members of this

department are highly educated and trained they work in a proper way and follow all the ruled

and regulations, that is why this department of this branch is most professional and highly

profitable department of the whole MCB.


INTERNSHIP REPORT

DRAW BACKS AND SUGGESTIONS

It has been observed that every system has some defects. Although the management is always

alert for modification where the defect are notified.

DRAW BACKS

1- Duty Hours Are not Properly followed the working hours are from 9:00 A.M to 5:00

P.M. this is because of extra burden of work on them and desire to fulfill the goal of the

branch

2- It has been observed that most of the staff member knowledge is limited. They only

know their routine duties. If any thing other than normal routine occurs, they are

confused.

SUGGESTIONS

1- Before adopting or changing any rules or policies of the bank, efforts should be made

to first of all provide sufficient training to the staff. Providing proper training to the staff

member periodically

.2- For avoiding duty timing problem, all the departments should have appropriate staff

members.

Facility of Computer Cell in All Big Cities

Mostly all the big branches of MCB are computerized. Programs are installed by the head

office and programmers work like operators. They are strictly prohibited to see the programs.

In case of default, the analyst comes from head office and removes the fault. It takes more time.

In order to over come this, it is necessary that computer cells should be established in all big

cities in Pakistan for providing the immediate service. These will also helpful in decreasing the

expenses of air tickets and TADA of analyst.

No Advance Facility for Students


INTERNSHIP REPORT

There is not facility for students to get mark free loan in this bank So, this bank should provide

free of mark up or easy terms and conditions loan to students and deserving persons on merit. I

hope this scheme will be successful in producing intelligent, intellectual and brilliant students.

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