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HISTORY OF BANKING Evolution of Banking It has not so far been decided as to how the word ‘Bank’ originated. The explanation of this origin is attributed to the fact that the jews in Lombardy transacted the business of money exchange on banches in the market place and when the business failed, the people destroyed the Bank. Inci Inciden denta tall lly, y, the the word word ‘b ‘ban ankr krupt upt’’ is said said to have have been been evolved from this practice. The opponents of this opinion argue that it was so, then how is that the Italian mone moneyc ycha hang nger ers s were were neve neverr call called ed ‘B ‘Ban anchi chier erei ei’’ in the the Middle Ages? Other authorities hold the opinion that the word ‘Bank’ is derived from the German word back which means joined stock fund. Then ‘Back’ was Italianize into ‘Bank’.
Early Growth Bank Bankiing in fact fact is as prim primiitiv tive as huma human n societ ciety y for for eversince man came to realise the importance of money as a medium of exchange. Perhaps it was the Babylonians who developed banking system as early as 2000 B.C. It is evident that the Temples of Babylon were used as ‘Banks’ because of the prevalent respect and confidence in the clergy.
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King Hamurabi ( 1728 – 1686 B.C ), the founder of the Babylonian empire, drew up accede where in he laid down stan st anda dard rd rule rules s of proc proced edur ure e for for bank bankin ing g oper operat atio ions ns by temples and great landlords. He got his code inscribed on the block of diorite diorite about 8 feet tall, containing containing about 150 paragraphs which deals with nearly all aspects of loans, interest, pledges, guarantees, natural accidents, loss, theft etc.
Later
on
Sume umerians,
Babylonians,
Hitties
and
Assyrians standardised the values of the goods in silver, copper and bronze. It is not certain as to whom invented money but history rece ecess that hat king king of Lydi ydia cast castlled elec electr trum um ingot ngots s of iden id enti tica call sh shap apes es and and of unif unifor orm m weig weight hts s with with a trip triple le emblem engraved on it as an official guarantee of value in 687 B.C. .C. In 1401 a Germ German an publ publiic bank bank was was fram framed ed comprising the operations of discounting and transferring of money. By the 16th century, some more public banks were formed in Venice, Milan, Amsterdam, Hamburg and Nuremburg. In order to streamline Banking organisations and techniques, conferences were held in Nuremburg from 1548 15 48 to 15 1551 51 and and it was was agre agreed ed that that the the comm commer erci cial al interest of the time needed a bank with facilities of growth and transfer but it should not be a bank run by private indivi individua duals. ls. Ultimat Ultimately ely in 15 1587, 87, a State State Bank Bank under under the name of banco DI rialto was formed in Genoa. Later the bank of Amsterdam was also formed in 1609. This Bank had had a guar guaran ante tee e by the the Stat State e and and rende enderred valu valuab able le services to the Netherlands traders upto the year 1795.
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Similarly in 1690, the Bank of Ham Hamburg came into exist xisten ence ce in Hamb Hambur urg g with with the the busi busine ness ss of acce accept ptin ing g depo deposi sits ts of fine fine sil silver ver or of forei oreign gn money oney and and to run run acco accoun unts ts on these these depos deposit its. s. This This Bank Bank rend render ered ed great great service to the merchants as well as countries it dealt with until 1873, when it was merged with the Reich bank. By the year 1700, the bank of England was not only issuing note notes s but but also also cond conduc ucti ting ng acco accoun unts ts for for cust custom omer ers. s. Its Its directors were conducting the business like that of limited companies. The bank had the monopoly of issuing banking notes. Upto 1813 or there about in England, the main profit of bank was derived from the circulation of notes.
Development of Modern Banking In 1918 came into being eleven clearing banks of today. The The effe effect ct of this this hi hist stor oric ical al deve develo lopm pmen entt of bank bankin ing g in England has been fairly wide. First, emergence of a small numb number er of larg large e bank banks s with with wide wide netw networ ork k of bran branche ches. s. Second, Second, increase in the popularity popularity of bank accounts and a large-scale use of cheques. In 1946, the labour government nationalised the bank of England and transferred the existing stock to the nominee of Brit Britis ish h treas treasur ury y. In 19 1955 55,, the the Brit Britis ish h Bank Banks s made made a departu departure re from from tradit traditio ional nal banking banking by undert undertaki aking ng hirehirepurchas purchase e finance finance for compan companies ies buying buying indust industria riall plants plants and machinery and took interest on hire-purchase finance.
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Banking In Pakistan At the time of independence, there were 631 offices of scheduled banks in Pakistan, of which 487 were located in West Pakistan Pakistan alone. As a new country country without without resources resources it was very difficult for Pakistan to run its own banking system system immedi immediate ately ly.. There Therefor fore, e, the exper expertt commi committe ttee e recom ecomme mend nded ed that that the the Reser eserve ve Bank Bank of Indi India a sh shou ould ld continue to function in Pakistan Pakistan until 30 th September 1948, so that that prob proble lems ms of time time and and deman demand d liab liabil ilit ity, y, coin coinag age e currencies, exchange etc. be settled between India and Pakistan. Pakistan. The non-Muslims non-Muslims started transferring transferring their funds and and acco accoun unts ts to India ndia..
By the end of June June 1948 1948 the the
number of officers of scheduled banks in Pakistan declined from from 631 to 225. 225.
There There were were 19 foreig foreign n banks with with the
status of small branch offices that were engaged solely in export of crop from Pakistan, while there were only two Pakis akista tani ni in inst stit itut utio ions ns,, Habi Habib b Bank Bank of Pakis akista tan n and and the the Aust Au stra rala lasi sia a Bank Bank.. The The cust custom omer ers s of the the bank bank are are not not satisfied with the uncertain condition of banking. Similarly the Reserve Bank of India was not in the favour of Govt. of Pakistan. The Govt. of Pakistan decided to establish a fullfledge central bank. Consequently the Governor-general of Pakis akista tan n Quai Quaidd-II-Az Azam am in inau augu gura rate ted d the the Stat State e Bank Bank of Pakistan on July 1, 1948. Thus a landmark was made in the hist hi stor ory y of bank bankin ing g when hen the st stat ate e bank bank of Paki akist stan an assumed full control of banking and an d currency in Pakistan. The The bank bankiing st strruct ucture ure in Paki akist stan an comp omprise rises s of the the following types. 63
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1)
State Bank of Pakistan. Pakistan.
2)
Commercial Bank of Pakistan.
3)
Saving banks.
4)
Co-operative banks
5)
Specialised credit institutions. institutions.
Up to Dece ecember 31, 1973, there ere were 14 Pakistan commercial banks that functioned all over the country and in some foreign countries through a network of branches. All these commercial banks were nationalised in January 1, 1974, and were recognised and merged into the following five banks: 1)
National Bank of Pakistan
2)
Muslim commercial bank limited
3)
Habib Bank Limited
4)
United Bank Limited
5)
Allied Bank of Pakistan
The The st stat ate e bank bank of Pakis akista tan n is the the Cent Centra rall bank bank of the the country
an d
was
established
on
July
1,
1948.The
sepa separat ratio ion n of East East Pakis akista tan n and and its its reper repercu cuss ssio ion n in the the form of economic depression has caused a lot of difficulties to the banking banking system system in Pakist Pakistan. an. The network network of bank bank bran branche ches s now now cove covers rs a very very larg large e segm segmen entt of nati nation onal al econ econom omy y.
The The numb number ers s of bran branch ches es have have incr ncrease eased d
appreciably and there is now on branch of bank for every 3000 heads heads of population population approxima approximately tely..
There There is done
reasonable growth in deposits from the establishment of
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Besi Beside des s this this grow growth th,, sp spec ecia iali lise sed d credi creditt and and
financial institutions have also developed over the years. The Government of Pakistan in the late 90’s introducing the need for the privatisation of state owned banks and companies. The private private sector has accepted the challenge and most of the banks are privatised today. The State Bank of Pakist Pakistan an issues the shares of these periodical periodically ly.. Bank employees and other common peoples can also purchase these shares and earn e arn profit.
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MUSLIM COMMERCIAL BANK LIMITED History of Muslim Commercial Bank Mus usllim Comm Commer erci cial al Bank Bank (MCB (MCB)) unf unfolds olds 52 year years s of growth. MCB is not an overnight success story. story. The bank started corporate life life in Calcutta on on July 9, 9, 1947. After After the partition of the Indo-Pak Subcontinent, the bank moved to Dhaka from where it commenced business in August 1948. In 19 1956 56,, the the Bank Bank tran transf sfer errred its its Regis egiste terred offic ffice e to Karachi, where the Head Office Office is presently located. Thus, the bank inherits a 52-year legacy of trust in its customers and the citizens of Pakistan. Pakistan.
Nationalization In January 1974, the Government of Pakistan nationalized MCB MCB foll follo owing wing the the bank banks s (Nat (Natiional onaliz izat atio ion) n) Act 19 1947 47,, Premier Bank Limited merged with MCB.
Privatization A wave wave of econom economic ic refo reform rms s swept swept Pakista akistan n in the late late 1990, introducing introducing the need for privatization of state owned banks companies companies.. In April 1991 1991,, MCB became Pakis Pakistan’s tan’s first irst priv rivati atized bank bank..
The gov governm ernmen entt
of Paki akist stan an
tran transf sfer errred the the mana managem gemen entt of the the Bank Bank to Nati Nation onal al Group, a group of leading industrialists of the country by selling 26% shares of the bank.
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In ter terms of agr agreeme eement nt bet between ween the the Gover overnm nmen entt of Pakistan and the National Group, the group, making their holding 50% has purchased additional 24% shares. Now, 25% is purchased by the Government, which shall be sold in the near future.
Board of Directors The board of directors has the authority in guiding Bank affairs and in making general policies. policies. Some directors directors are are the personnel of the MCB Bank and others are successful businessperson orga organi niza zati tion on..
an d
executives
of
other
major
Ten memb member ers s are are in incl clude uded d in board board of
directors, see in a list. ♦
♦
Mian Muhammad Mansha Executive. Mr. Tariq Rafi
Vice Chairman
Directors Ten Ten directors are: 1)
Mr. S. M. Muneer.
2)
Sh. Mukhtar Ahmed
3)
Mr. Muhammad Arshad
4)
Mr. Shahzad Saleem
5)
Mr. Mr. Raza Mansha Man sha
6)
Mr. Mr. Sarmad Amin
7)
Mr. Mr. Umar Mansha
8)
Dr. Aleem Mehmood
Chairman
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an d
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9)
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Mr. Tanveer Ali Agha
10)
Dr. Najeeb Samie
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Structure of MCB PRESIDENT AND CEO
INT DIV
EXECUTIVE
EXECUTIVE
DIRECTOR
DIRECTOR
SAMG
INSPECTION
OPERATION
GSD
& FRAUD FORGERY
CONSUMER
CORPORATE
BANKING
HRD
BANKING
GROUP
GROUP
(continued)
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CONSUMER
CORPORATE
BANKING
BANKING
GROUP
GROUP
GENERAL MANAGER
REGIONAL MANAGER
CHIEF MANAGER
MANAGER
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Structure of MCB – General Bus Stand Branch (1412)
B r a n c h M a n a g e r
A s s is t a n t M a n a g e r
A c c o u n ta n t
O ff ic e r s
C a s h ie r
M e s s e n g e r
G u a rd
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Overall performance Of MCB in 1998 Net Profit Prof Profit it afte afterr taxa taxati tion on in 19 1998 98 was was Rs. Rs. 39 399. 9.2 2 mill millio ion, n, an increase of 67% from Rs. 238.8 million in 1997. Since a comple complete te provi provisio sion n for for non-pe non-perfo rform rming ing assets assets has been made made,, the the bala balanc nce e of the the bank bank now now reflec flectts its true true stre st reng ngth th.. For the the firs firstt time time afte afterr MCB’ MCB’s s priv privat atiz izat atio ion n in 1991, a dividend of 15% was declared last year. It gives me great pleasure to state that for the year 1998 it has been decided to announce an increased dividend of 17.5%. 17.5%.
Reserve Fund/Equity A sum of Rs. 79.8 million has been b een transferred to Statutory Reserve this year, raising the total Reserves to Rs. 1,796.6 million at the end of 1998, from Rs. 1,716.8 million as last year.
Deposits Deposits with the Bank at the end of year 1998 stood at Rs. 123.8 billion as compared to Rs. 124.4 billion in 1997. The The reaso eason n for thi his s slig slight ht decr decrea ease se of 0.4% was was the withd withdraw rawal al of Foreig oreign n Curre Currency ncy Ac Accou counts nts as a resul resultt of Deposits 130000
124391
125000
123822
120000
115000
113005
110000 1996
1997
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1998
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Gover vernmen nmentt’s
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deci decis sion
to
free freez ze
Foreig ign n
Cur Currency ency
Accounts in May 1998. Let me assure you with confidence that the depositors have complete faith in MCB, which is evid eviden entt from from the the fact fact that hat in the the very ery first month onth of launching the MCB Maal-a-Maal Rupee Deposit Certificates Scheme attracted Rs. 7.6 billion.
Advances Total Advances at the end of 1998 were Rs. 62.9 billion as compared to Rs. 64.4 billion in 1997 showing a fall of 2.3%. Thi This s is mainl ainly y due due to the the slo slowing wing down down of eco econom nomy foll ollowing wing the event vents s desc descri ribe bed d abov above, e, as well ell as, as, in keeping with our policy of prudent lending.
Advances 70000
64365
65000
62920 60407
60000
55000
50000 1996
1997
1998
Investments Investments slightly declined by 0.2%. The current policy of the management is to dispose off Investment in shares of list listed ed and and unli unlist sted ed comp compan anie ies s at the the best best poss possib ible le prices.
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Investments 60000 58095
57981
1997
1998
55000
50000 47553
45000 1996
Recoveries The
recovery position in
the year 1998 was most
encouraging. Bank recovered Rs. 1.04 billion in cash. The bank also disposed off properties which were acquired in settlement of accounts. The recovery of loans shall remain a priority in 1999.
Foreign Trade The The bank bank cond conduc ucte ted d Impo Import rt busi busine ness ss duri during ng the the year year amou amount ntin ing g to Rs. Rs. 54 54.0 .0 bi bill llio ion n as comp compar ared ed to Rs. Rs. 56 56.4 .4 billion in 1997. The export business slightly improved to Rs. 36.9 bi bill lliion from Rs. 35.1 bi billlion in 19 199 97. Home ome remittances declined to Rs. 16.7 billion from 30.6 billion. T The he decli decline ne in home home remi remitt ttan ance ces s busi busines ness s was was due to Exports
Imports
40000
65000
63523
36918 35123
35000
60000
56418
55000
30000
54037
27321
50000
25000 1996
1997
1996
1998
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freezing of Foreign Currency Accounts, which has effected the confidence of the Pakistanis working working overseas.
Rupee Travellers Cheques Musl Muslim im Comm Commer erci cial al Bank Bank who who are are pi pion onee eers rs of Rupee upee Travellers Cheque in Pakistan maintained their leadership position and sales recovered during the year 1998 were Rs. 67 billion an increase of 57% over the previous year.
Human Resources To in indu duct ct fres fresh h bl bloo ood d in the the bank bank and and cater cater for for futu future re needs, a new batch of management trainees trainees was selected selected strictly on merit. After thorough training these offices have been inducted in various divisions and branches. Attention was paid to upgrade operational and managerial skills of staff and a number of professional courses were conducted at MCB Staff and Training Institutes during the year. We have continued our programme of hiring of some senior leve levell Bank Bankin ing g Exec Execut utiv ives es from from the the mark market et,, wher wherev ever er necessary.
Year 2000 Compliance The management and the staff of relevant divisions are ful fully awar ware abou aboutt the the Millen lleniu ium m issu sues es.. All the core ore computer systems operating in MCB are in full compliance. All the necessary steps steps had been taken and MCB was very much aware about the Y2K bug.
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Automation The progress is as per per plan. At the end end of 1998, 75 bran branch ches es were ere onl nliine and and 24 241 1 branc ranche hes s have have been been computerized with multi terminal systems. 66 ATMs were in operation and over 50,000 ATM Cards had been issued. The The comm commer erci cial al citi cities es of Faisa aisala laba bad d and and Mult Multan an wer were added on the MCB ATM Network. Plans are in hand for expanding the online network to major cities and covering all the four provinces thereby providing the ATM network true national coverage and maintaining our in this service.
Social Sector The The bank bank had had been been acti active velly part partic icip ipat atin ing g in exx-P Prime rime Minister’s
Self
Employment
Scheme
(SES).
The
applications received from various applicants were being processed on merit and disposed off as quickly as possible. Nowa Nowada days ys,, no new new loan loans s are are bein being g gran grante ted d as per per the the order of Chief Executive of Pakistan.
Foreign Operations Our bank’s foreign operations in Bangladesh and Sri Lanka cont contin inue ue to rema remain in prof profit itab able le.. In Ap Apri rill 19 1999 99,, the the bank bank opened its third third branch in Sri Lanka at Maradana a suburb of Colombo. Our Our coun countr try y is pass passin ing g thr through ough a crit critic ical al phas phase e of its its histor history y. Pakista akistan’s n’s econom economy y contin continues ues to remai remain n under under pres pressu sure re as it adju adjust sts s to new new econ econom omic ic chal challe lenge nges s and and reali ealitties ies.
The The
per performa ormanc nce e
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of
the
econ econo omy
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influences the performance of the financial sector. MCB is cognizance of its role in the national economy, and will continue to play its role as a lead bank.
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Chairman’s Review 1998 was an eventful year for our country. Pakistan joined the the poli polity ty of nucl nuclea earr powe powers rs and and st stra rate tegi gic c imba imbala lanc nce e created in the region due to a nuclear test by a neighboring country was restored. The The May May 199 998 8 Nuc Nuclear lear Test est led led to the the imposi posittion of sanctions and suspension of multilateral assistance by the leadi eadin ng
Western
Aid
giving
count untries, es,
putting
the
Pakis akista tan’ n’s s econ econom omy y and and bala balanc nce e of paym payment ent posi positi tion on under severe pressure. The Government of Pakistan took a number of far reaching decisions in the wake of the Nuclear Test which included free freezi zing ng of Forei oreign gn Curr Currenc ency y Ac Acco count unts, s, in intr trod oduc ucti tion on of three Foreign Exchange rates and increase in Petrol prices and Sales Tax. Over Overal alll 19 1998 98 was was di diff ffic icul ultt and and chall challen engi ging ng year year for for the the nation especially for trade and commerce and industrial sectors. However, as a result of various corrective measures taken by the Government, the economy is now slowly coming back to normal. According to a recent statement of the Feder ederal al Fin inan ance ce Mini Minist ster er,, the the in infl flat atio ion n rate rate has has been been brou brought ght down down to arou around nd 6% and and the the Forei oreign gn Exch Exchan ange ge Reserves which had touched US$ 440 Million in 1998, were at US$ 1.8 Billion by the end of April 1999.
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In keeping with the W.T.O. requirement, the Government also had to reduce reduce the custom duty on Imports. Imports. There has been been a smal smalll drop drop in elect electri rici city ty tari tariff ff for for in indu dust stri rial al and and comme ommerrcial cial cons consum umer ers s.
The The
Stat State e
Bank ank
of
Pakis akista tan n
reduced the Repo rates from 16.5% to 15.5% and then to 14%. This resulted in reduction in mark up rates by the large commercial banks in April 1999, which is bound to encourage higher credit growth. The economy still faces major challenges. The growth rate of economy has gone down to around 4% from 6%. The Export target of US$10 billion for the current financial year ending June 30, 1999, has been reduced to US$8 billion (this figure is static for the last few years now). However, ther there e is lik likely ely to be sign signif ific icant ant reduct eductio ion n in the the Trade rade Deficit during 1998-99. A very very sign signif ific icant ant achie achievem vemen entt of 19 1998 98 was was hold holdin ing g of population census after 17 years, which was necessary to formulate
various
socio-ec o-eco onomic
policies
by
the
Government. Keeping eeping with with the above above econom economic ic scenar scenario io in view view,, the over-all performance of Muslim Commercial Bank, during 1998 can be termed as very satisfactory
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ADVANC ADV ANCES ES DEPAR DEPARTME TMENT NT ADVAN CES MCB provides the facility to the people who need advance money ney to meet meet thei theirr requi equirremen ementts. For gett gettin ing g the advance the following steps are there: 1)
Information Information required by the bank
2)
Preparation of credit proposals
3)
Sanction advice
1. Initial Information Following Following information information is required to be submitted to bank. ♦
Nature & structure of borrower borrower business.
♦
Names of proprietors, partners or directors.
♦
Deta etail of all firms or companies associated with borrower.
♦
Financial condition of borrower business.
♦
An assessment of his business abilities.
♦
♦
♦
Accurate and upto date financial statements of last two years for comparison purposes. Mark Market et repor eportt on the the borr borrow ower er wher where e borr borrow ower er has has main mainta tain ined ed an acco accoun untt with with anot anothe herr bank bank,, a repo report rt from his bank should also be obtained. A report from credit standing bureau of State Bank of Pakistan.
2. Preparation Preparation of Credit Proposal At first a formal application for credit approval is obtained from the party along with complete group position. The
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party’s credibility report is obtained from the bank with which the bank is doing its business. The party’s credibility report is also taken from the Head ead office of Trade Information Division. For obtaining credit, party has to submit the last two years Balance Sheet and Profit & Loss statement duly attested by autho authori rise sed d audi audito tors rs.. If the the part party y is also also in invo volv lved ed in export or import business then the bank also considers the data of three years about import & export. Current debt and equity ratio is also calculated by the bank. The type of data data requi equirred to prep prepar are e the the cred credit it prop propos osal al is to be gather gathered ed from from the differ different ent departm department ents. s. Some Some data data is obtain obtained ed from from the fore foreign ign Excha Exchange nge departm department ent.. Some Some data is available in Advance Department. The purpose of obtaining Credit should be explained clearly. clearly. The securities offered by the party to the bank are also evaluated. In case of pledging of property in shape of land or building the comple complete te evaluat evaluation ion of the prope property rty should should also also be attached. After Af ter all the necessary documents for applying for advance is fulfilled by the party then the case is sent to Manager for approval. If the credit limit is in his range then he can decide over it otherwise the case is forwarded to seniors. If there is any discrepancy then the party is informed of it.
3. Sanction Advice When the documents required are complete and there is no ambiguity then the party is advised that their credit or 63
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loan is approved and will be available to you soon. There is a separate form for every annual approval or in case of a new facility (See Annex -
).
The form contains following information: ♦
Nature and amount of limit.
♦
Purpose
♦
Security/ Collateral
♦
Margin (%).
♦
Mark up/ Charges
♦
Validity
Other Terms and Conditions 1) The
bank reserves the rights to revise / amend / modify the rates of mark-up commission or any other conditions of the liabilities within the period so decided by the Bank.
2) The
bank shall have full authority to cancel the facilities allowed without assigning any reason and to call for adjustment of the liabilities within the period decided by the bank.
The 3) The
facil faciliti ities es grante granted d are are subjec subjectt to SBP SBP’s ’s Pruden Prudentia tiall regulations.
The 4) The
hypoth hypothecat ecatio ioned ned goods, goods, buildi building ng and machin machinery ery must be insured at all times against the risk of fire, riots, strike, burglary, malicious damage risks withthe bank as the mortgage and yourself as a mortgager, and the relevent policy held by us.
5)
Assets hypothecated to the bank will have to be insured at all times for full market value. The insurance policy will be made in the joint name of the company and the
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bank. The relevent insurance policy will be held by the bank along with the premium p remium payment receipt. 6)
Stock statements statements together together with a list of book debts are to be submitted at the end of each month to reach us by the first week of the following following month.
7) The
bank would undertake the inspection of stocks from time to time and in any case atleas east once in the calendar year.
8)
SBP has SBP has impo impose sed d Prude rudent ntia iall regul egulat atio ions ns on all all the the bank banks. s. Thes These e faci facillitie ities s are are bein being g offered ered witht ththe understanding that your company’s financial condition will comply with these regulations.
9)
Audite Audi ted d acco accoun unts ts sh shou ould ld be su subm bmit itte ted d to the the bank bank within six months of date from the date of your financial year end.
10)All
levies and taxes now or at any time hereafter levied and payable payable in respect respect of the financial financial accommodatio accommodation n and and bank bankin ing g faci facili liti ties es set set out in this this lett letter er will will be exclusively borne by you.
11)All
requisites charge forms to be submitted duly filled in and signed by the authorised persons.
12)For
any change in any ownership, prior permission of bank shall be obtained otherwise existing owners shall also continue to be liable.
13)In
normal banking practice the facility is repayable on demand and we reserve to ourselves the right to vary the terms and condi dittion or ask for repay payment if circum circumsta stances nces arriv arrive e which which in our opini opinion on justi justify fy our doing so.
Types of Advances MCB provides advances, which are of two types. These are as following: ♦
Fund Based Advances 63
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Non Fund Based Advances
1. Fund Based Advances Funds
are
given
to
customer
according
to
their
requirement against securities. These loan are given specially to traders, business, small industrial units, including cottage industries, agriculturists, thus thus ensu ensuri ring ng an equit equitabl able e di dist stri ribu buti tion on of bank bank cred credit it among various sectors of the country’s economy. There are following types of advances, which are given to customer on fund basis. 1)
Industrial loan
2)
Commercial loan
3)
Agricultural loan
Industrial Loan Loans oans are are gi give ven n to in indu dust stri rial al unit units s in incl clud udin ing g cott cottag age e indust industrie ries s up to or less than than RS. 20 mill millio ion. n.
Loans Loans and
advances shall not exceed amount specified by marginal restr restrict ictio ion n on the type of securiti securities es offere offered. d.
Indust Industria riall
loan loans s are are gran grante ted d to the the manuf manufac actu turi ring ng sect sectio ion n of the the econ econom omy y inclu ncludi ding ng fina financ nce e for for fix fixed in inve vest stme ment nts s and and working capital requirements of small industries. Loan Period
Loan oans are are all allowed owed for for a maxi aximum peri perio od of 5 year ears includ including ing a maximum maximum grace grace period period of 1 year year.
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case up to 10 years also, also, depending upon the merit of the case.
Commercial Loan Total
principal
amount
of
loans
to
a
single
ente enterp rpri rise se/b /bor orrrower ower sh shal alll not not exceed ceed RS. RS. 0. 0.5 5 mill millio ion. n. Maximum maturity is 3 years, depending upon the nature and type 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 0.51 RS per day per RS. 1000/-. Mode of Repayment
Equal Equal mont monthl hly, y, quar quarte terl rly y or half half-y -yea earl rly, y, repay repayme ment nt of principal and interest or as per term of approval. Securities and Margin
Loans can be made against any or more of the following secu securi riti ties es mort mortga gages ges of immo immova vabl ble e prop proper erty ty (lan (land d and and buildi building), ng), pledge pledge of st stock ocks, s, raw materi materials als,, and finis finished hed goods, hypothecation of stocks, raw material, and finished goods, State bank of Pakistan guarantee.
Types Of Advances by MCB 1. Fund Fund based Advances Following are the Fund based Advances: ♦
Running Finance(RF) 63
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♦
Cash Finance(CF)
♦
Finance against ag ainst imported goods(FIM)
♦
Export Refinance Refinance part-I (Pre-shipment)
♦
Export Refinance Part-II
♦
Finance against purchase collection(FAPC)
♦
Finance against foreign bills(FAFB)
♦
Foreign Foreign bill purchases(FBP)
♦
Local Manufacturing Machinery(LMM)
♦
Payment Against Document(PAD)
♦
Demand Finance(DF)
♦
Khud Rozgar Scheme
The detail of above-mentioned items are given below:
a. Running Finance (RF) The max time of repayment is one year. It is according to will of customer. This type of advances are given to Trade, Commer Commerce ce and manufa manufactu cturin ring g general general purpos purposes. es. These These finances as evident by the name are given to meet their daily needs. The mark up is charged on daily balances. Norm Normal ally ly 0. 0.54 54 pais paisa a per per thou thousa sand nd is charg charged ed on dail daily y basis. It is drawn through cheque.
b. Demand Finance (DF) The duration of DF is more than running or Cash Finance. These are made in Lump sum and are there is a permi permissi ssion on to repay repay the amount amount in perio periodic dic instal instalmen ment. t. Upon receipt of documents negotiated by the seller bank,
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the opening
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bank makes
sure
that hat
docume uments
are
acco accord rdin ing g to ter terms and and cond condit itio ions ns of the the cred credit it.. Bank Bank makes the payment to the party against document and upon expire date, bank receives back money with mark up rate.
c. Payment Against Agai nst Document Aga inst Documentt (PAD) Documen LMM funds are provided by the SBP SBP.. The bank provides provides the facility to the businessman who wants to buy the local manufactured machinery.
d. Local Manufacturing Machinery (LMM) It is a long term financing. MCB also gives loan under the head of demand finance to individuals, industrial units and commercial business etc. This is a type of secured loan and demand loan is never allowed without security.
e. Foreign Bills Purchases (FBP) The exporters, which are under L/C are also provided with the facility of loan. Amount is given to the exporter after the approval of L/C by the issuing bank. b ank.
f. Cash Finance (CF) MCB gives the facility of cash credit to the business. The borrower gives a specific reason for the need of cash. The amount is passed through voucher and credited to party’s account. Normally 0.52 paisa per thousand is charged on daily basis to customers.
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g. Finance against Imported Goods (FIM) These types of advances are granted against the pledge of imported goods. These goods are pledged by the bank. Bank pays all the charges to customs and keeps the goods in its control. The bank releases the good on payment from the client to bank.
h. Export Refinance Refinance Part-1 Part-1 (Pre-Shipment) ( Pre-Shipment) The government pursues the banks to provide the loanto the exporters to promote the export. The bank provides this type of advance facility to only those exporters who have not enough money to make shipment. Bank provides the loans to the customer at the rate of specific % for period of 150 days.
i. Export Refinance Part-1 (Post Shipment) Thi This s mean means s that that the the cust custom omer er has has enou enough gh amou amount nt to make first shipment but not more. So the bank issues a loan to the exporter. This financing is for period of 150 days. Finance is provided by the SBP to the exporters for purc purcha hase se of raw raw mate materi rial al,, its its proc proces essi sing ng,, Packi acking ng and and ship sh ipme ment nt.. In case case,, if the the part party y is unab unable le to mak make the the shipment within 150 days of financing. The party has to pay certain amount of finance as asked by the SBP and after 150 days the rate of mark up also goes up @ 51 paisa per thousand per day. So usually exporters try to make the shipment within the fixed period set by the SBP which is usually 150 days.
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j. Export Refinance Refinance Part-11 Part-11 In this case the bank after receiving the performance of year years s in expor xportt busi busine ness ss of part party y sets sets the the limi limitt for for the the period of one year. Here the limit cannot be set by the terms pledged of the permission of the bank.
k. Finance Against Purchase Collection (FAPC) A bill may be purchased by the bank. If a client is in urgent need of money and he has a bill b ill whose clearance may take a few days then he sells it to bank. Bank pays the amount amount to the client after deducting its commission.
l. Finance Against Agai nst Foreign Bills (FAFB) (FAFB) Bank also provides finance against the foreign bills. This faci facili lity ty is gi give ven n to the the expo export rter er,, if he needs needs an urge urgent nt money. He gives bill of exchange to the bank as security and bank sends these bills for collection and gives money to exporter.
m.Khud Rozgar Scheme Limit for loan
The limit of this loan is from Rs 10,000 to Rs 500,000 Security/Pledge ♦
♦
A personal security is required to obtain loan otherwise anyother security will be required. Total business assets will have to be hypothecated.
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Mark up & return of loan ♦
♦
Mark up will be at the rate of 15 % for timely return of loan otherwise rate of mark up will be 16 % per annum. The payment of mark up on loan will start after 12 months of payment of principal amount.
Eligibility of Applicant 1) The
age of applicant should not be less than 19 years and he has not applied for any type of loan from any bank.
2)
Applic Appl ican antt has has been been livi living ng in the the resid esidenc ence e sh show own n as address for atleast one year.
3)
Applicant is not the student nor the employee of any govt organisation.
Eligibility of Guarantor 1)
He has been living at the given address atleast for one year.
2)
He is not the employee nor the family member of MCB.
3)
He is not the officer of any Govt organisation. organisation.
Fees for Loan
A fee of Rs 100 will have to be submitted which will be non-refundable. Important documents required ♦
♦
♦
♦
Two copi copies es of appl applic icat atio ion n form form (one (one orig origin inal al & one one photocopy). Original Identity card will have to be shown. Similarly two photo copies of ID card will also be required. Two passport size snaps of both applicant & guarantor. Original & attested documents of asset of guarantor. guarantor.
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Conditions
The application of loan can be rejected in case of incomp incomplet lete e or wrong wrong in infor format mation ion.. Appro Approved ved loan loan can be cance cancell lled ed.. It sh shou ould ld be in info form rmed ed that that the the reje reject ctio ion n and and acceptance of loan are sole right of bank. If the rent of loan is not paid for more than 3 months then the remaining amount will be required to refund immediately with 16 % mark up.
Agricultural Loan Bank Bank pro provid ides es the agr agricul icultu turre adva advanc nces es in order der to enhance and support the agriculture sector of the country. Bank Bank’s ’s Ag Agri ricu cult ltur ure e di divi visi sion on deals deals with with the the agri agricul cultu ture re advances. These advances are of following types: 1)
Farm Credit
2)
Non Farm Credit
Farm Credit C redit These are the credits provided by the MCB or purchases of inputs for development of agriculture sector. Following are two main Sub classes of Farm credit: Production Finance
These are short term loans. These laons are provided to farm farmer ers s for for pur purchas chases es of di diff ffer eren entt type types s of in inpu put, t, for for example seeds, fertiliser, and pesticides.
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Development Finance
These are medium or long term loans. These loans are provided for the development of agricultural sector. Main Purposes of these loans are as under: ♦
To To purchase purch ase tractors
♦
To To purchase purcha se implemen im plements ts (Trolley, (Trolley, Threshers, Thresher s, Drill etc).
♦
For installation of tube wells
♦
For planting of gardens
Non Farm Credit The second major form of agriculture advance is Non Farm Farm credit. These loans are provided to boost up agriculture sect sector or to pro provide the sour ources ces of ear earni ning ng of foreign eign exchange exchange as well as to provide employment employment opportunit opportunities ies to people. These loans are provide against mortgage of land land as secu securi rity ty or pl pled edge ge of equi equipm pmen entt as coll collat ater eral al security. These are long term or medium term investment depending upon the project. Follo ollowi wing ng are are the di diffe ffere rent nt types types of small small indust industrie ries s for for which loans are provided to improve the economy of the country. ♦
Fish Farm
♦
Cattle Farm
♦
Poultry Farm
♦
Dairy Farm
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2. Non Fund F und Fu nd Based Advances When hen an appl pplicant cant for an adva advanc nce e cann cannot ot offer fer any any tangi ngibl ble e
security
the banker nker may
rely ely
on
personal
guarantees, letters of credit to protect himself against loss on advance or loan. There are two type of advances which come under Non Fund Advances. ♦
Guarantees.
♦
Letter Of Credit.
Letter
Of
Credit
is
explained ned
in
Foreign
Exchange nge
Department while Guarantees Guarante es are elaborated below. below.
Guarantees Introduction
Bank examines customer’s relation with the bank 7 the nature of the business. Bank also sees his past business with the bank. Sometimes bank issues Guarantee on the behalf of the customer by getting some margin from him. This margin may vary from customer to customer. Requirements for Guarantee
Banks issue issue guarantee guarantee on the behalf behalf of custome customers. rs. Limit Limit proposal proposals s covering covering
transactio transactions ns should should be submitted submitted
with full detailsfor the approval of appropriate sanctioning authority. Generally Guarantees are issued in favouring of Shipping comp compan anie ies, s,
Govt Govt
Depa Depart rtme ment nts s
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payments at future dates by customer on whose behalf the guarantees are issued. While executing a guarantee, the term erms
an d
condi nditions
of
the
guarantee are
closely
exam xamined ned in order der to det determ ermin ine e the exten xtentt of bank bank obligations and financial liability under the guarantee and the type of guarantee, all condition are contained in the guarantee. Procedure
Bank Bank char charge ges s a comm commiiss ssiion on the the amou amount nt for for whic which h guar guaran ante tee e is iss ssue ued. d. Norma ormallly the the valid alidit ity y peri perio od of guarantee does not exceed one year. After the guarantee has been issued, a copy of same is issued to the counter guarantee issued to the customer. customer.
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DEPOSIT DEPARTMENT Account Opening Opening The The general general bankin banking g perfo perform rms s vario various us functi functions ons among among them the first and most important function is A/C opening. The process process of opening an account account is very simple simple and any body who would like to open his account could do it easily without any difficulty diff iculty..
Types of Accounts There are three types of accounts ♦
CURRENT ACCOUNT
♦
SAVING ACCOUNT
♦
TERM DEPOSITS ACCOUNT
Procedure for Account Opening 1) Application Appl ication Form The customer would like to open his account is required to meet with the manager or second officer, who will give him an “AP APPL PLIC ICA ATION TION FORM FORM” ” sp spec ecif ific ical ally ly us used ed for for acco accoun untt open openin ing. g.
Sepa Separa rate te colo colour ur-c -cod oded ed Ap Appl plic icat atio ion n Form orm is
availa available ble for for each type type of account account..
So that that a partic particula ularr
coloured form is given to the customer to fill in for opening a related account.
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2) Specimen Card As I have already mentioned about “SIGNATURE SPECIMEN CAR CARD”.
Thi This car card conta ontaiins thr three sign signat atur ures es of an
applicant, applicant A/c no, A/c type, branch code, title of A/c, it will will be attached attached with with an applicatio application n form. form. Banker Banker uses this card at the time when he receives the cheque; cheque ; he compares customer’s signature with the signature on the cheque for avoiding fraud. Manager has every right not to accept this contract if he is not satisfied by the details provided by the customer. customer.
3) Account Opening Register Register The The mana manage gerr recor ecords ds the the nece necess ssar ary y deta detail ils s in into to this this register and allots an a/c number from this a/c opening regi regist ster er..
This This regis registe terr is maint maintai ained ned for each type type of
account account and the a/c numbers are allotted allotted seriall serially y.
After Af ter
openin opening g a savin saving g and curre current nt accoun accountt every every appli applicant cant’s ’s data data is ente entere red d in into to the the comp comput uter er to main mainta tain in a safe safe record and application form is properly filled so that it can be available when necessary. For fixed deposit only that applic applicati ation on form form is needed needed which which is prepar prepared ed manual manually ly,, because most of the procedure of fixed deposit is done manually.
4) Cheque Book Cheque book is issued to the customer when the bank accepts the A/C A /C opening application form.
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Types Of Customers 1) Individual Only one person can operate this a/c. We can call it a personnel or individual a/c.
2) Joint In case case of join jointt A/c, A/c, appl applic ican antt ment mentio ions ns that that how how much much person person will operate operate the A/c. Instructio Instruction n are given for for joint A/c such that the account shall be operated by
a) Any Any one sur vivor.. one of us or survivor survivor survivor. In first case if one of the a/c holders died then the other can operate the a/c individually.
b) Any Any two/All of of us us jointly. jointly jointl y. In second case if one of the a/c holders died then the other partner can’t operate this a/c individually without having permission from from the court.
3) Partnership A/C For par partner tnersh shiip a/c a/c, alo along with the the appl appliicat cation ion form signature card. card. Other documents are also also needed such as ♦
Registration Certificate
♦
Agreement among partners
♦
Commencement of business
Note In case of addition or withdrawal of any partner a new agreement will be required. 63
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4) Company Account For For company accounts following following documents are required: ♦
Private registration
♦
Resolution of board of directors
♦
Commencement of business
♦
Memorandum and Articles of Association
♦
Balance sheet
Letter of Thanks Bank prepares two ‘LETTER OF THANKS’ one for the new cust custom omer er and and the the other her for hi his s intr ntroduce ducerr. Thi his s act act promotes
good
will
among
the
customer
an d
the
introducer.
Closing of an Account There There are no. of reason reasons s of closing closing an account. Some are are listed below: 1)
If customer desires to close his account
2)
In case of death of one account holder holder..
3)
Bankruptcy of the account holder. holder.
4)
If an acco accou unt cont ontain ain ni nill bala balanc nce e or not up to the the requirement of rules.
Bef Before ore clo closing sing any any acco accoun untt, bank bank send send lette etterr to the account hold for informing him that his account is going to be closed. There is need an approval form form higher higher authority to close any account.
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Importance of Deposits for Bank The primary economic function of the commercial bank is to recei receive ve su surp rplu lus s in inco come me of in indi divi vidua duals ls,, firm firms, s, publ public ic hous houses es,, in inst stit itut utio ions ns,, comp compan anie ies s and and to hono honour ur cheq cheque ue drawn drawn upon upon it. Deposi Deposits ts are are to bank as a backbone backbone is to the the body body of of a man. man.
It is is the the life lifebl bloo ood d of a ban bank. k.
The The
deposits of a bank are useful in many ways. The The bank bank bor borrows ows money oney from from the the gene genera rall publ public ic by accepting accepting deposits deposits by offering offering suitable rates of interest interest to them or simply promise to repay on demand. d emand.
Types Of Accounts in MCB The The fund fund depo deposi site ted d in the the MCB MCB bank bank can can be clas classi sifi fied ed under the main heads: ♦
CURRENT OR DEMAND DEPOSITS
♦
SAVIGN DEPIOSITS
♦
FIXED OR TERM DEPOSITS
♦
CALL DEPOSITS
1) Current Deposits (Or) Demand Deposits ♦
♦
♦
Current deposits are those which are payable to bank whenever demanded by the customer. customer. Bank does not pay any profit on current current deposits. There are of different scheme of saving deposits, which are classified under different duration purpose and rate of interest.
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Rules for Current Current Account Account Curr Curren entt a/c a/c hold holder er open opens s Curr Curren entt Ac Acco coun unts ts on prop proper er introduct introduction ion only. only.
However, However, introd introductio uction n of a PLS Saving
Account holder of repute may be accepted at the discretion of the manager. A) Minimum Balance
A sum not less then RS. 1,000/- in cash as initial deposit is required required for opening a current current account and the same may be main mainttaine ained d
as min iniimum avera verage ge runn runniing cred crediit
balance. B) Profit ♦
♦
♦
♦
♦
♦
No profit will be paid on credit balances 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. Curr Curren entt a/c a/c cann cannot ot be over overdr draw awn, n, except cept by prio priorr agreed agreements with the bank. The correspondence relating to current A/Cs should be addressed to manager of the branch where the account is being maintained.A A dis distin tincti ctive ve number number will will be allott allotted ed to each each curre current nt acco accoun untt and and sh shal alll be quote quoted d on all all cor corresp respon onden dence ce relating to the respective account and at the time of making deposits and withdraws
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C) Issuance of Cheque Book
The Cheque book is issued against the valid requisition slip signed by the account holder as per signature provided by the the bank bank..
The The acco accoun untt holder holder can draw draw sums sums from from his his
account by means of cheque supplied to him by the bank for for that that part partic icul ular ar acco accoun unt. t.
In draw drawin ing g che chequ ques es the 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 insertion of any other word word or figure. figure. Account holder should take well care of the cheque books issued to them. The account holder holder will pay excise excise duty of of Rs.4 per leaf to the government.
2) Saving Account Saving accounts are opened on proper introduction with sums of credit balance within certain limit for individual (sin (s ingl gle, e,
joint) nt)
ins nsttitut itutiions ons,
com compani panies es,,
educ educat atiional onal
institutions etc. MCB has introduced various schemes under saving a/c, ♦
PLS ACCOUNT
♦
CAPITAL GROWTH SCHEME
♦
MAHANA KHUSHALI SCHEME
♦
KHANM BACHAT SCHEME
♦
KHUSHALI BACHAT ACCOUNT
♦
MALA MAAL SCHEME
♦
SAVING 365 ACCOUNT
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1. Profit and Loss Sharing Sharin g Account PLS PL S savi saving ng acco accoun untt havi having ng a runn runnin ing g mini minimu mum m cred credit it bal balance ance of RS. 1,0 ,000 00//- woul uld d be eli eligi gibl ble e for sh shar arin ing g profit/loss profit/loss of the the bank. The bank would would be within its its rights to make investment of credit balances in the PLS saving accounts accounts in any manner at its sole discretion discretion and to make make use of the fund to the best of its judgement in the banking business under the PLS system. Withdrawals
Withdrawals 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. manager. For For withdrawal withdrawal of larger amount, 7 days notice in writing is required to be given. Profit/Loss
The profit/loss will be credited/debited on the basis of its net
working
results
at
the
e nd
of
each
half-year.
Calculation of products on PLS saving A/c will be made for each calendar month on the lowest credit balance of an account between the close of business on the 6 th day and the the last last day day of the the mont month. h.
If the the bala balanc nce e is less less than than
Rs.100/- the product will be nil. Rules for PLS ♦
♦
Accoun countt hol holder der can can onl nly y withdr thdraw aw su sum ms from from hi his s account by means of cheques supplied to him by the bank for that particular account. Post Post dated and stale cheques cheq ues shall not be paid.
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The The bank bank reser serve to itsel self the rights ghts to clo close any any account without previous notice any account which has not satisfactory account credit balance. If the account holder withdrawals the money under 7 days days noti notice ce,, the the prof profit it loss loss earn earnin ing g prod product ucts s will will be computed on the monthly minimum balance. Zakat is deducted every year on non-exempted non-exempted accounts.
2. Khanam Bachat Scheme Target Market ♦
Indi Indivi vidu dual als s pl plan anni ning ng to save save fund funds s for for educ educat atio ion n & marriages of their young sons /daughters.
♦
Individuals interested in long term deposits.
♦
Individuals in low class middle group.
♦
♦
Indi Indivi vidua duals ls sh show owin ing g conf confid iden ence ce in Bank Bank’s ’s long long term term schemes schemes than schemes of similar maturities maturities offered offered by others. The loving parents that want best for their children. c hildren.
Deposit Amount
We will have to deposit Rs 1000 on monthly basis t the time birth of your baby or at later stage. It will continue for upto 10 years without making any withdrawal. Conditions ♦
♦
♦
♦
The account can be opened singly or jointly. Accou ccount nt in the the name name of mine minerr can can be oper operat ated ed by mother, father or jointly as guardian. No advance can be extended against a minor account. If anybod anybody y withd withdraw raws s premat prematur urely ely then then profi profitt will will be calculated on prevailing PLS account.
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The bank reserves the right to refuse any depositor in the scheme without giving any reason. This account can be opened in any MCB branch.
Interest ♦
♦
The interest is given on yearly basis. Tax & Zakat will be deducted according to rule at the time of maturity and payment.
3. Mahana Khush-hali Scheme Target Market ♦
Indi Indivi vidua duall in inte tere rest sted ed in inve vest stin ing g for for five five year years s savi saving ng schemes.
♦
Individuals who want monthly return on investment.
♦
Middle class income group.
♦
For the persons residing abroad and family in Pakistan.
♦
For retired persons who want regular monthly return on investment.
Conditions ♦
♦
♦
Minimum amount required is Rs 25000 and Maximum is Rs 1 million. This scheme can be adopted by individuals ( Single or Joint) in their names. This certificate will mature after 5 years.
Interest ♦
♦
♦
The bank will give profit on monthly basis. Zakat Zakat is deducted on payments and profit profit according according to government rules. Services
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♦
♦
♦
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We 7 our nominee can collect cross pay order. Profit Profit amount can be send to you by postal money order & demand draft. Prof Profit it will will be paid paid from from that that branc branch h wher where e you you have have opened Khush-hali Account. If a customer has a saving or current account in this bank then profit can be deposited in that account.
The following table gives the monthly returns on various amounts, based method of calculation.
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AMOUNT (Rupees)
MONTHLY PROFIT (Rupees)
1,000,000
10,830
500,000
5,416
100,000
1,083
50,000
541
25,000
270
In Case of Premature Encashment
The following rates of profit will apply: ♦
If the certificate is held for less then 90 days No profit
♦
If the Certificate is held for 3 months but less than 6 months PLS rate
♦
If the Certificate is held for 6 months but less than 1 year PLS rate
♦
If the Certificate is held for 1 year but less than 2 year PLS rate
♦
If the Certificate is held for 2 year but less than 3 year PLS rate
♦
If the Certificate is held for 3 year but less than 4 year PLS rate
♦
If the Certificate is held for 4 year but less than 5 year PLS rate
4. Khush-hali Bachat Account Target Market ♦
♦
Individuals who want to pay dues of insurance, HBFC& instalment. Indi Indiv vidual duals s living ving abr abroad oad but but thei theirr fami famillies ies are are in Pakistan.
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Busy individuals who don’t have time to pay their dues monthly.
Special Incentives ♦
Return is calculated on daily average balance. balance .
♦
Profit is paid half yearly ye arly..
♦
It can be operated at mostly all the branches of MCB.
5. Capital 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 time. time. All that is required required is a minimum minimum amount of deposit. deposit. At the end of the stipulated stipulated period, period, the bank returns returns close to twice as much. Target Market ♦
Individuals interested in medium term saving schemes.
♦
Individuals of middle income class group.
♦
♦
♦
Indi Indiv vidual duals s accounts.
keepi eeping ng
excess cessiive
bal balance ance
in
cur current ent
Indi Indivi vidu dual als s in inte terreste ested d to save save fund fund for for lu lump mp su sum m, education & marriages. Indi Indivi vidu dual als s seek seekin ing g inflation rate.
prot protec ecti tion on
agai agains nstt
incr in crea easi sing ng
Conditions ♦
♦
Mini Minimum mum depo deposi sitt will will be Rs 10 10,0 ,000 00 with with no limi limitt for for maximum. Time span is minimum five years can be expanded to 5 years.
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Interest
♦
♦
Initial Deposit (Rupees)
Payment Payment upto maturity (approx.) (Rupees)
10,000/-
20,000/-
50,000/-
100,000/-
100,000/-
200,000/-
1,000,000/-
2,000,000/-
In case case of prema prematur ture e encashm encashment ent of certif certifica icates tes,, the depositor will be given “PLS Saving Accounts “ profit rates declared by the bank for that particular period. Depositors will be required to fill in Account Opening Forms.
6. Fixed deposits de posits deposits Fixed deposits are those deposits which are by the bank unde underr the the cond condiition tions s that that they they wil will not not be paya payabl ble e on demand but will be payable under fixed or determinable future time date.
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FOREIGN EXCHANGE EXCHANGE DEPARTMENT Import This department provides the facility to their customers to import import machinery machinery or products products from from other other countri countries. es. It is necessary for the importers to have the licenses, which is issue issued d by the the chie chieff cont contrrolle ollerr of impo import rts s and and expo export rts. s. Befo Beforre obta obtain inin ing g an impo import rt lice license nse the the lice license nse must must be registered with the chief controller of import and export. For having the license, an individual or firm submits the application through his bank.
Documents Required ♦
♦
♦
♦
Filled application form for Register The National Identity Card of the applicant Nati Nation onal al Tax Cert Certif ific icat ate e issu issued ed by the the Inco Income me Tax department In case of firm or company, the Memorandum and the Article of Association.
Banker issues the letter of credit normally in the response of the Perfo Performa rma Invoice. Invoice. The seller seller sends sends this invoic invoice e to the buyer buyer and it contai contains ns seller seller name, name, produ product ct qualit quality y. Rate, mode of shipment, and other terms and conditions.
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Letter of Credit Definition of letter of credit A letter of credit is a written instrument issued by a bank authorising the seller to draw in accordance with certain terms and stipulating legal forms, that all such bills will be honoured.
Explanatory Definition A letter of credit consist of an undertaking by an issuing bank that bills drawn by the exporter will be duly owner provided the comply with the terms of credit.
Reasons Reasons For L/C 1) The
exporters are uncertain of the importer capacity to
pay. 2) The
importers are unwilling to pay the amount unless the the good goods s are are actu actual ally ly sh ship ippe ped d and and the the docu docume ment nts s received by the bank.
3)
In case of non-payment the seller should be assured to legal rights in foreign country.
4) The There re
should shou ld be an agenc agency, y, whic which h sh shou ould ld meet meet the 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.
Explanation A letter of credit is a:
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1)
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Written undertaking by importers bank to a third party i.e. the exporter.
Thatt 2) Tha
it will will be pay pay or acce accept pt draf draftt (let (lette terr of cred credit it)) 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 he complies with the specified terms of credit.
Parties Parties Involved in a Letter of Credit There are four parties involved in a letter of credit ♦
Account party
♦
Issuing party
♦
Exporter
♦
Paying Paying or negotiating bank ban k
Account Account party or Importer The buyer or the importer on whose account and request the letter of credit is opened is known as account party.
Issuing Issuing party The bank, which issues or opens a letter of credit at the request of importer, it is called the issuing bank.
E xporter Exporter The seller or the party in whose favour the letter of credit is draw is the third party and it is also known as beneficiary.
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Paying Pa ying or negotiating bank Paying The paying bank in the exporter’s country on which the draft is drawn is called the paying bank.
Operation of a letter of credit The 1) The
impo import rter er of buye buyerr cont contact acts s the the sell seller er in for foreign eign country for the purchase of a particular good or goods.
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 a letter of credit is supplied by the bank.
6) This
form contains all the necessary details discussed between between the importer and exporter exporter for the shipment shipment of goods goods which which includ include e the descri descripti ption on of merchan merchandis dise, e, port port of sh ship ipme ment nt,, port port of unlo unload adin ing, g, the the docum document ents s against which the bank is the honour the draft, the 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.
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, To issue letter of credit on agreed terms and condition with the buyer. To have a proper examination of the documents. To honour draft documents..
when
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Types of Letter of Credit 1)
Irrevocable Irrevocable letter of credit
2)
Revocable letter of credit
3)
Confirmed letter of credit
4)
Unconfirmed Unconfirmed letter of credit
5)
Documentary letter of credit
1. Irrevocable letter of credit It is the the one one in whic which h the the issu issuin ing g bank bank gi give ves s a last lastin ing g undertaking to accept and in due course to pay bills drawn upo upon it pro provid ided ed the exporte orterr ful fulfil fils the the ter terms and and conditions. conditions . It gives a complete protection to the exporter. 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 businessman.
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. The exporter 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 It is one under which the exporter’s bank does not give any guarantee to the exporter that the bills drawn will be honoured by the issuing bank. It is the commitment of the
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issuing bank to honour the draft. From the exporter’s point of view, the confirm irrevocable letter of credit is the best form of receiving payment.
5. Documentary Documentary letter of credit It is the one of which provides for bills to be accompanied by documents of title 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 Payment by the importer to the bank
6)
Liability of the issuing bank
1. Application Application for a letter of credit An impo import rter er prep prepar ares es an appl applic icat atio ion n on the the pres prescr crib ibed ed form form available available from from the bank. The inform informatio ation n which are 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 merchandi merchandise, se, port of shipment, shipment, port of unloading, expiry date of the papers and brief description of the goods. If the bank is satisfied satisfied with the applications, it will signed and acceptance agreement with the importer. importer.
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2. Line of credit Before issuing a letter of credit, bank takes all necessary prec preca autio utions ns for for secu securring its cred credit it..
The The bank bank first irst
examines the customers credit standing, the type of goods to be imported, the market demand for the goods, the collatera collaterall offered offered to cover cover the credit. credit. Then it establish establishes es the amount i.e. the line of credit.
3. Opening 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 to carbon copies to the importer importer.. The importer then then di disp spat atch ches es the the lett letter er of cred credit it to the the expor xporte terr in foreign foreign country country by mail. mail. One carbon carbon copy is is kept for for the record. The second carbon copy copy after signing signing is sent to to the bank by the importer importer.. If an importer importer directs 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 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.
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5. Payment Pa yment Payme nt by importer to the bank b ank When a bank approves the application of a customer for open openin ing g lett letter er of cred credit it,, it does does not not lend lend mone money y to the the import importer er..
The bank bank only lends lends the impor importer ter to use use the
credit standing of the bank to the exporter in the foreign country. country. The bank makes makes a contract with the importer that when the draft if send by the nego egotiating bank for payment the importer will make the payment to the bank not not late laterr then then the the day day only only the the bank bank is to hono honour ur the the obligatio obligation. n. In case of a sight sight letter letter of credit credit the payment payment to the corresponding bank is to be made on the day the draft and documents documents are received. 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 Liability of the issuing bank The liability of the issuing ban bank is to examine the docu docume ment nts s in orde orderr to conf confiirm their their vali validi dity ty..
If the the
documents documents on the face appear to be in order order the payment payment should be released.
If any defect is found in the
docume documents nts and the iss issuin uing g bank bank honou honours rs the draft draft,, the importer
can
claim
damages.
The
banker
is
not
responsible to see whether the merchandise conform the sale of contract or they physically physically exist. exist. The issuing bank is only responsible for the completeness and regularity of the documents relating to the letter of credit.
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Importance of Letter of Credit The The bank bank charge charges s nomina nominall commi commissi ssion on on financi financing ng the import and export shipment.
Benefits to the Banks ♦
Increased balances
♦
Commission
♦
New business opportunities
Increased balances ♦
♦
The The bala balanc nces es are are the the life lifebl bloo ood d of ever every y comm commer erci cial al bank. The banks get mark up on the credit and this mark up increases the money of the bank
Commission The The comm commis issi sion on char charged ged by the the bank banks s vari varies es with with the the kinds of letter letters s issued by them. them. Though Though the commissio commissions ns are small, yet when counted on the whole, they form an important part of earning of the banks.
New Business Opportunity Opportunity The letter of credit provides new business opportunity to the bank. The firms, firms, which which are engaged in the export export and import of merchandise, are introduced to the banks, which by serving them develop profitable relationship. relationship.
Opening of Letter Of Credit In MCB Before opening of L/C certain requirements are necessary that are
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The applicant must has import registration registration #
♦
He must has account in that bank
♦
He must pledges his security against the L/C amount
♦
He must must have have IB-8 IB-8 for form, in inde dent nt or agen agentt form orm, and and performance invoice.
Bank Charges Charges ♦
♦
The bank takes commission @ 0.40 % of amount of L/C for one quarter and 0.25% for two or more more quarters. If L/C amount is low then minimum bank commission is 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 charges are 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 Of letter of credit to the importer and exporter ♦
Provision of finance
♦
Credit standing
♦
Legal right
♦
Risk covered
♦
Business expansion
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♦
Bridges credit gulf
♦
Payment in domestic currency
Shipping Ship ping Terms The The foll follow owin ing g sh ship ippi ping ng term terms s are are us used ed in in inte tern rnat atio iona nall trade. ♦
EX-works
♦
FCA ( free carrier)
♦
FAS(free along side)
♦
FOB( free on board)
♦
CFR(cost & freight)
♦
CIF(cost insurance freight)
♦
DAF(delivered DAF(delivered at frontier) frontier)
♦
DES(delivered EX EX-ship) -ship)
♦
DEQ(delivered EX-quay)
♦
DDU(delivered duty unpaid)
♦
DDP(delivered duty paid)
Documents Docume Documents nts are the most most import important ant part part of intern internati ationa onall trade.
Without
them
trade
Documents are of five types. 1)
Commercial documents
2) Transport Transport
documents documen ts
3)
Insurance documents
4)
Financial documents
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5)
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Official documents
1. Commercial Documents Commercial documents consist of following forms. ♦
Invoice form
♦
Certificate of origin
♦
Weight note
♦
Packing list
♦
Quality or insurance certificate
2. Transport Trans port Documents Transport Documents The These se docu docume ment nts s are are relat elated ed with with tran transf sfer er of good goods. s. These documents consist of following forms, forms, ♦
Airway bill
♦
Bill of lading
♦
Rail consignment note
♦
Roadway bill
♦
Combined transport bill of lading
3. Insurance Documents Insurance documents consist of following forms. forms. ♦
Letter of insurance
♦
Insurance policy
4. Financial Documents The These se docu documen ments ts are are conce concern rned ed with with the the paym payment ents s of goods. These documents consist of following forms.
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♦
Bill of exchange
♦
Clean bill
♦
Short bill
♦
Documentary bill
♦
Bank bill
♦
Delivery against acceptance
♦
Delivery against payment
♦
Promissory note
5. Official Documents These documents consist of following forms. forms. ♦
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. Thu Thus s this this depa depart rtmen mentt of a bank bank help helps s the the expo export rter ers s to sett settle le down down their their fina financ ncia iall affa affair irs. s.
For expor exporti ting ng it is
necessary for exporter to get export license from the chief controller controller of import and export after registration. Documents are required for the registration such as N. I. C. Card, Card, income income tax certificate, certificate, bank certificate certificate which shows shows that the exporter is his account holder and have a good deal dealin ing g with with them. them.
In resp respon onse se to the letter letter of credi creditt
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exporter
submit
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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 issuing bank. In accordance accordance with with the terms terms and condition condition laid down in letter of credit.
Security of Documents Whether documents received are meant for the opening bank and specifical specifically ly for the branch which which established established the letter of credit. The documents would be negotiated within within the validit validity y of L/C. L/C. The goods goods have have been shipped shipped within within the time allo allowed wed under L/C. L/C. The goods goods are are mentioned mentioned in invoice and other documents (e.g. bill of lading, packing list etc) are in accordance with merchandise clause L/C. Whether
the
docum cuments nts
rece eceived
pert ertains to
L/C
,
esta establ blis ishe hed d by the the open openin ing g bank bank and and the the docu docume ment nts s nego negoti tiat ated ed are withi within n or equal equal to L/C amount amount..
In case case
where the value of documents exceeds the L/C amount, the foreign bank may negotiate the documents for amount bein being g marg margin inal allly exces xcess s or send sends s them them on coll collec ecti tion on,,
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remi emittan ttance ce may may be allo allowe wed d in excess cess su subj bjec ectt to the following conditions ♦
♦
The amount does not exceed 5% of the amount of L/C subject to the maximum of US$ 500/ The The impo import rter ers s holds olds a vali valid d impo import rt lice licens nse e agai agains nstt which the excess amount is adjusted-provided remittance is effected 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 from that on the import import license. The tenor of the bill should should be valid. valid. See that the goods goods are are not shipped 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 Retirement of of Documents When the opening bank against a letter of credit receives docume documents nts..
The custome customerr retire retires s the document documents s under
different arrangements e.g. ♦
♦
♦
Retirement against payment by the importer Retirement of documents in case of None-payment by the importer Retirement of documents under trust receipt
Retirement Retir ement Against Payment Payment by the Importer Retirement The importer approaches the bank for retirement of the shipping documents. documents. Mark is is calculated and recovered recovered on on 63
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the bill amount for 230 days @ 12.55% for each RS. 100/or part thereof on payment against documents (PAD) for intimation purpose only.
Entries Passed by by the Bank ♦
Debit
importer a/c
♦
Credit
PLS-payment against documents A/C
Credit: PAD
PLS-income a/c mark-up recovered on
Credit:
telegram/telex/postage charges a/c.
♦
♦
Retirement of Documents under Trust Receipt Shipping documents are released to the importer on trust, that hat he may may get get the goods oods clea clearred from from the the cus usttom authority by himself, sell the good, and later pay back the bank bank..
Trust rust rece receip iptt finan financi cing ng is limit limited ed to first first class class
customers only as the bank reposed fullest confidence on the importer. importer. Documents are obtained obtained from the customer customer.. The finance is provided for the period of 45 days only. Calculation of Amount of Finance
Rupee value of bill plus foreign bank charges plus taxes, less SBP margin restriction = Amount of finance 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 transmit transmit the funds funds to the negotiati negotiating ng bank. The export exporter er will receive the payment from the negotiating bank.
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Export Re–Financing It is most important important features of export. export. Export refinancing refinancing is used to enhance the export export of the country. country. It was firstly firstly star st arted ted in 1977 1977 and re-est e-estab abli lish shed ed in 19 1994 94..
Here Here the
exporting companies can get advances at a very low mark up i.e. lower then inflation rate. Banks get advances from State bank at 6% and provide advances to the exporting companies at 8% and 2% is spread of the bank i.e. is the income income of the bank. This This export-r export-refina efinancing ncing advance advance can only be used for export and not for other purposes, state bank bank gets gets in info form rmat atio ion n abou aboutt expo export rt thr through ough E – form form.. There are two parts of export refinancing. ♦
P-1
♦
P-II
P-1 Two forms of P-1 are pre-shipment and port shipment
P-1 Pre-shipment Pre-shipment In P-1 pre-shipment companies make an agreement with foreign companies and get loan from the bank to make products and shipping them to foreign countries i.e. they get advance before be fore shipping the products.
P-1 Post-shipment Post-shipment In P-1 the post-shipment companies make an agreement with foreign countries and produce some of the products and ship them and get advance from the bank to complete the shipment. 63
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P-II In P-II pre-shipment companies get lumpsum for the whole next year and the entire amount can be used to export the products products.. The companies companies have have to export export double double than the advance advance gets through through P-II P-II shipment. shipment. In P-II P-II pre-shipmen pre-shipmentt the lumpsum amount can be calculated on the basis of perfor performan mance ce of the last year year. If a company company is unabl unable e to make double export than the advance, then bank makes some penalty in the forms of amount against the company.
Special Products Expo Export rt refin efinanc ancin ing g canno cannott be appl applie ied d for for expo export rtin ing g all all types of products. Some products products are ♦
Cotton cloth
♦
Cotton products
♦
Finished leather
♦
Refined sugar
♦
High quality yarn i.e. more than thirty count
Each company has different limit at a time and bank has to make a report at the end of each month and one copy of that report is sent to state bank and one copy to head office at Karachi. Karachi. Different limits are, ♦
Cash finance
♦
Running finance
♦
Demand finance
♦
Export refinancing I
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Export refinancing II
♦
FAFB
♦
FBP
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Forms of Export Re Financing Different forms are required required for export refinancing. These forms are ♦
Undertaking as per Annexe UT-DE-1
♦
Form DE-1
♦
Form DE-2
♦
Original contract
♦
Undertaking as per Annexe A
♦
Certificate of non-availment of loan.
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CLEARING DEPARTMENT Cheques When When we talk talk of cheq cheque ues s then then ther there e are are two two type types s of cheques
1) Open Cheque Open cheque has following properties: properties: ♦
The word Bearer is not crossed.
♦
Cross stamp is not there
♦
Cheque is not of limited companies.
♦
Self or name should be written on the cheque.
Token A token is given on open cheques when presented to bank for payment. In this case payment is made at the spot to the cheque holder. First of all cheque is presented to bank for pay payment ment.. The The nam name of hol holder, der, no of cheq cheque ue and and amount amount is written written on the register register by the bank employee & token is given to cheque holder. Then Cheque reaches the computer uter depa epartme tment. nt.
There
it
is
again
feeded ded
in
computer & it is stamped after checking the holder has enou enough gh amou amount nt in hi his s acco account unt or not. not. After fter feedi feeding ng in computer ( debiting holder’s A/C ) , the cheque reaches the cash department where the holder can receives his cash by giving token to the cashier provided that he has enough amount in his A/C.
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2) Crossed cheque When the cheque does not fulfil the requirement of open cheque then it is known as crossed cheque.
A) Transfer Delivery Delivery When cheque has following properties then it is proceeded as Transfer Delivery. ♦
Cheque is crossed.
♦
Cheque is of MCB.
♦
Cheque is from local branch.
In this this situ situat atio ion n cheq cheque ues s are are coll collec ecte ted d sepa separa rate tely ly as transfer transf er Delivery De livery.. Procedure
In Transfer Delivery following process is done. First of all cheques are noted in Transfer Delivery Ledger with the date in advance because it takes one day to reach chequ cheque e issu issuin ing g branc branch h in the the same same city city.. In T.D Ledg Ledger er Name of account holder, Number & amount of Cheque are written written and two copies copies , one original original and one carbon copy of voucher SF-73 B are prepared. Original copy of voucher along with cheque is send to issuing branch while carbon copy and Pay-In-Slip is with the bank. The The chequ cheque e with with vouc vouche herr goes goes to Main Main branc branch h then then to issuing branch and then reverse from issuing branch to main branch and then to our branch.
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B) Clearing Clearing In clearing the cheques which are ♦
crossed
♦
limited company
♦
different bank in the same city
Procedure
Such cheques are collected as clearing cheques and are noted in Clearing Ledger. Two copies of voucher SF-37 are prepa preparred (See (See An Anne nex xe
) . Orig Origin inal al vouc vouche herr with with the the
cheques are send to Main branch which then send to S.B.P in advance date. The payment is not given at hand but it is transferred to account of account holder. In case if cheque is returned due to number of reasons then the objection is finished and again send to main branch but this time a credit voucher along with original cheque is send to main branch instead of any Pay-In-Slip. Pay-In-Slip.
Advance Clearing Clearing When cheque is sorted for clearing because of different branch in the same city then we note these cheques in two days advance date because it takes more time to reach that that faraway faraway
branch branch . For exam example ple HBL of Baha-u Baha-ud-Di d-Din n
Zakariya University Multan.
Procedure Payment of Cheque of Foreign Currency Procedure of of Payment When cheques are denominated in foreign currency then procedure is not like that of ordinary cheques of Rs. First First of
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all all cheq cheque ues s are are issu issued ed and and the the pers person on gi give ve cheq cheque ue to anot anothe herr pers person on.. When hen any any part party y recei eceive ves s cheq cheque ue in foreign currency to deposit in his account then it gives it to the ban where he has his bank account. The Bank sends this cheque to its Head Office. Head Office send it to the country where transaction is done over that currency. currency. Then cheque goes to New York. From there it is send to that issui issuing ng bank (domes (domesti tic) c) from from where where party party has recei received ved cheque whose bank whose cheque it is. N.Y is credited and that bank is debited by that amount. N.Y send it to head office of our Bank. Then H.O is credited and N.Y is debited. Amount of Foreign currency is then send to main or local branch where the party has its account. Now the account of that person is credited and the H.O is debited Now there may be two cases: 1)
Either account is in Pak Rs.
2)
Or account is in that country
3)
Or acco accoun untt is in Forei oreign gn Cur Currency ency other ther than than the the currency in cheque.
C) Cheque Collection When cheque is from another city then it is grouped as C.C. Procedure
SF-37 form form is used in Cheque collectio collection n (See Annexe Annexe
)
Orig Origin inal al vouc vouche herr with with cheque cheque is send send to main main bran branch ch..
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Carbon copy with Pay-In-Slip is taken by bank for record purposes.
Pay-In-Slip Here it is very necessary to have knowledge about Pay-InSlip Purpose
It is used for two purposes ♦
♦
Whenever Whenever we want to deposit deposit cash in our account then pay-in-slip is used by writing amount on it and depositing it to cashier along with money. When henever we hav have che cheque fro from any party to be collected in our account we fill pay-in-slip . One part is attached with cheque and another is given to cheque holder as a receipt.
Types
It is of two types depending upon the type of account. ♦
♦
Gree Green n Pay-I ay-Inn-Sl Slip ip is us used ed for for Savi Saving ng Accou ccount nt (See (See Annexe ) Blue Pay-In-In-Sl Sliip is us used ed for for Cur Current ent Accoun countt (See (See Annexe )
Stamps Used In Bank (MCB) Following stamps are used in for different purposes.
(1)Cross Stamp Stamp This stamp is used to cross the cheque. Crossing can be done by 3 ways.
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a) General Crossing
Sometimes the cheque is is crossed crossed by the drawing drawing two lines on the upper left corner corner of the cheque without without writing any sentence on the cheque. b) Written Written Crossing Cr ossing
Cheque can also be crossed by stamping it with sentence “Pays Account Only” c) Special Crossing
Crossing can also be done by stamping a cheque with the words “MCB GBS Branch”. This means that now cheque is in use of bank only. If it is lost or dropped then it is of no use to anybody because now it is a cheque of bank. This cheque will not be cashed any where else.
(2) “Payees “Payees Account Will be Credited on Realisation” Realisation ” Realisation” This is used to stamp on the back of following instruments. Cheque Cheque (simpl (simple). e). 2) Travell ravellers ers Cheque. Cheque. 3) Pay Order Order.. 4) Speed Cash. This means that the account of the payee will be credited prov proviided ded that hat cheq cheque ue is acce accept pted ed by Draw Drawer er’’s bank bank otherwise not.
(3) Disbursement Disbur sement Pa yees Account will Disburs ement Guaranteed; Payees Payees be credited on Realisation It is used to stamp on the back of following following instruments 1) Demand Draft . 2) Foreign Foreign Remittan Remittance ce
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(4) Payees Payees Account Credited This stamp is used on back of those cheques which are of the same branch. It is of guarantee that if there is no problem with the cheque or A/C then Payees account will be credited.
(5) Clearing Clearing Stamp This stamp is placed in front of clearing voucher on the same day in which clearing was made (one day advance date). Or the date in which it is presented by Main branch in State Bank Of Pakistan. Pakistan. (6) Round Stamp MCB It is used in two places. ♦
♦
When hen we are deal ealing with C.C then we write the number of C.C which is written inside the stamp. One stamp is on cheque and other on Pays-In-Slip. When we fill Pay-In-Slip and give it to the bank officer along with cheque then he places this round stamp on the face face of one part part of Pay-I ay-Inn-Sl Sliip and and mar marks hi his s signature on it and give it to the customer as a evidence.
(7) Pay Pay Cash This stamp is used when cheque is not crossed, it is open cheq cheque ue.. The offi office cerr pl plac aces es this this st stam amp p on the the fron frontt of cheque and writes token number on it. This means that payment in cash will be made of this cheque on presentation of token to cashier. This is like indication for cashier to pay cash.
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Reasons Reaso ns for Cheque returned unpaid iin Reasons n Cross Cheques Following Following are the reasons for the cheque return. ♦
Cheque incomplete
♦
Clearing stamp Required.
♦
Drawer’s sign incomplete
♦
Drawer’s sign different from specimen
♦
Post Dated
♦
Payment stopped by drawer.
♦
Amount in words and figures differ.
Report Report of Lost or Stolen cheque In case of lost or stolen incidents following procedure is performed. ♦
Cheque no of lost cheque
♦
Whether it was single or double signed.
♦
Whether it was crossed or related to someone
♦
Phone / Fax Fax of reporter repo rter..
♦
NIC no of reporter.
♦
Signature of reporter.
♦
How cheque was lost.
♦
FIR Lodged or not.
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Green Sheet At the end of banking time ( 1:30 o’ clock), three Green sheets are prepared for clearing , cash and account side. One Green Sheet is also prepared by clearing department.
Heads in Green Sheet Green Sheet has following following Heads:
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1) Cur Current ent A/C( A/C(2 2) Sav Savin ing g or PL PLS S A/C A/C (3) (3) Othe Otherr A/C(4 /C(4)) General A/C
M.T Payable
H.O A/C
T.T Payable
Other than 3,2 &1
Pay order D.D Payable
Sides of Green sheet Ther There e are are two two sides sides of gree green n sh sheet eet::
Debi Debitt Si Side de
&
Credit side. Both sides should should tally tally in figur figure e amount. amount. If Cred Credit it total tal
Debit total total =
then hen sh shee eett is bal balance anced d and and ther there e is no
mistake. It should be taken care that cheques are always debit and pay-in-slip is always credit. If voucher is of Pink colour then it will be on credit side and if it is of blue colour then it is debit side.
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RTC DEPARTMENT Thi This s depa deparrtmen tmentt deal deals s in RTC. It st sta ands nds for Rupee upees s Travellers Cheques. MCB RTC has the largest share of the total RT RTC Market. Over 1.5 Million satisfied customers c ustomers have made MCB RTCs. These are are printed printed in the UK UK and carry carry a thread watermark- a feature that prevent counterfeiting.
Important Features As good as cash The most convenient substitute for cash for all kinds of transactions(property,, trade, personal etc). transactions(property
Denominations Cheques are available available in the denomination of Rs Rs 1,000 1,000 Rs 10,000 Rs 50,000.
Easily Encashed They can be encashed at any MCB branch.
Easily refundable In case of Loss Or Theft we can get the full amount back.
Exclusive Security S ecurity Secur ity Features MCB RTCs can’t be duplicated. Various security features both both in desi design gn and and mate materi rial als s mak make coun counte terf rfei eiti ting ng or fraudulent alteration extremely extremely difficult.
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V alid Until Valid Until Used Validity of Cheque is indefinite. We can use them for a week, a year or more after the date of purchase.
Televerification System It enables us to check the validity of cheque 24 hours a day . Televerification eleverific ation UAN (021) 111-000-456.
Procedure First of all RTC-10 is given to customer. It is filled and then cash is deposited to cash department . One copy is for office and one copy is given to the customer and RTC are issued at that time. When RTCs are sold then H.O A/C is credited by using form no RTC-20. It has five copies: A,B,C,D,E. A= H.O copy, B= RTC Dept, C& D= Branch. When RTCs are returned or purchased by the MCB then H.O is debi debite ted d by that that amou amount nt by us usin ing g form form RTC-30 C-30.. Summary of al RTC purchased by branch is made on form RTC-40.
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REMITTANCE DEPARTMENT Remittance Transfer Transfer of money or equivalent to money from one branch to another branch of the same bank is called remittance.
Important Terms Originating Originating branch It is the the bran branch ch from from whic which h money oney is send send to anot anothe herr branch or the point of origin of remittance.
Responding Res ponding branch Responding b ranch The branch branch which which receives receives the instrument instrument or or money money for remittance is known as Responding Branch.
Types of Remittance Remittance is classified into following four types: ♦
INWARD REMITTANCE
♦
OUTWARD REMITTANCE
♦
INLAND REMITTANCE
♦
FOREIGN REMITT R EMITTANCE ANCE
a) Inward R emittance Remittance Remi ttance The The branch branch which which recei receives ves the instru instrument ment(T (T.T .T,, D.D etc) etc) directly from the customer or from the originating branch and is responsible to pay to party is cal called inward
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remittance. For example if some D.D is drawn on our bank and we have to pay the party( to whom it was send).
b) Outward Remittance Remittance The The branc branch h whic which h issu issues es or sold sold the the in inst strum rumen entt to the the respo respondi nding ng branch branch is called called outwar outward d remit remittan tance. ce. In this this case we are sending remittance to another branch of the same bank in any location.
c) Inland Remittance Remi Remitttance tance Transfer of money from one branch to another branch of the same bank within the same country is called inland remi remitt ttanc ance. e.
In this this case case both both orig origin inat atin ing g bran branch ch and
responding branch will be situated in the same country.
d) Foreign Remittance Remittance Transfer of money from one country to another country is called foreign remittance.
Modes of payment MCB uses following four types of modes of payment 1)
DEMAND DRAFT (DD).
2)
PAY PA Y ORDER ORDE R (PO0. (PO 0.
3)
MAIL TRANSFER (MT).
4) TELEGRAPHIC
TRANSFER (TT).
1. Demand Draft ♦
Demand Draft is used for the transfer of money outside station.
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♦
♦
♦
♦
♦
Internship Report
A draft is an instrument drawn by a bank in favour of any person on a branch of its own bank or any other bank to pay a certain amo 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. It is one of the cheapest methods of transference of money within the country or outside the country. Applicant has to fill in the application form for availing the the faci facili lity ty of deman demand d draf draft. t. After fter depo deposi siti ting ng the the amount of draft, remittance officer prepares the cheque of demand draft. When hen bank banker er issu sue e draf draftt to the the cust custom omer er,, he als 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.
2. Pay Order ♦
♦
♦
♦
♦
Pay Order is used as instrument for transfer of money within station st ation or o r city. city. Pay order is written order, which is issued and received by the the same same bank bank or draw drawn n and and pay payabl able on same same branch. For pay order it is not necessary that applicant should be account holder. It is us used ed for for loca locall tran transf sfer eren ence ce of mone money y from from one one person to another. The bank charges excise duty and flat rate from the applicant.
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3. Mail Transfer ransf er ♦
♦
The The tran transf sfer er of mone money y from from one bran branch ch to anot anothe herr bran branch ch of the sam same bank bank thr through ough mail ail or couri ourier er service is called mail transfer. The The applic applicant ant should should be the regul regular ar custom customer er or the account holder of the responding as well as originating branch.
4. Telegraphic Transfer ♦
♦
Origin Originati ating ng branch branch send send funds funds to respo respondi nding ng branch branch instantly and immediately through telegram and fax. Bank charge charges s commi commissi ssion, on, telegr telegram/f am/fax ax charge charges s on telegraphic transfer.
Documents Documents Prepared a. Application Form (SF-100) Firstly, irstly, the applicatio application(see n(see annexure annexure
) is filled filled by the
applicant in which he writes the name of payee, his a/c # & the name of branch to which TT is sent as well as the depositor’s name, his a/c # & address. address. Then in the the office, they collect the charges, commission & excise duty. Same prescribed application form will be used for MT, TT, DD, and PO. It is understood that in case of T.T or M.T the remittance is being sent at our entire risk .In case of T.T Or M.T, there are two options:
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1: Advise & Pay Pay Her Here the the bank bank in info forrms the the bene benefi fici ciar ary y (to (to whom whom the the mone money y is sent sent ) thr through ough tele teleph phon one e or perso persona nall cont contac actt about the incoming cash.
2: Credit Account No In thi this case case,, if the the bene beneffici iciary ary has has Acco ccount unt with the the Respo espond ndin ing g Bank Bank
then then his account account is credi credite ted d by the
incoming amount without informing him. When the applicant completely fills the application form then he is asked to sign at the bottom of the page. After signing, signing, the applica applicant nt deposits deposits the the cash (cash to be sent + Charges)
at the
cash counter and
receives the
appl applic icat atio ion n back back by havi having ng st stam amped ped and and sign signed ed by the the cashier. This application is then submitted to officer.
b. Memorandum (SF-237) The The offi office cerr gi give ves s Mem Memoran orandu dum m to the the appl applic ican antt as a evidence of Remittance (see annexe
). Bank charges
along with some information about Remittance is written on it. Officer signs at the end en d of the form.
c. Fax/ Telegraphic Message In
case
if
FAX/Telegraph
the
Remittance
then
a
is
special
being
sent
form
known
Fax/Telegrap ax/Telegraphic hic Message” Message ” (see annexe I t contains following following information:
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)
through as
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T.T T.T No, R.No, R.No, Control, Total Total Rs Amount, Favour, Favour, A/C No Of Beneficiary, Benefic iary, Test Test & Date.
T.T No & R.No: These numbers are noted from T.T register which contains every information of every T.T sent to different cities( T.T register will be explained more in coming pages).
Control It is the the number number writ writte ten n on the the form form “Conf Confir irma mati tion on Of Cable Sent” ( SF-89A).(See annexe
)
Favour & A/C No It shows the name of person & his account to whom the cash is being sent.
d. Confirmation Of Cable Sent (SF-89-A) These are two vouchers A & B. Special features of this form are Origin Originati ating ng branch, branch, Respond esponding ing branch, branch, Date Total otal amou amount nt & Bran Branch ch code code of both both bran branche ches. s. For Examp Example le Branch code of MCB GBS Multan is (1412). These vouchers are used to credit & debit purposes (see annexe
).
e. T.T Re gister T.T Register Register T.T.No
R.No Control
Favour
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Amount
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Head Office Account All trans ransac acttion relat elatiing to remi emittan ttance ce wil will be rout outed throug through h head office officerr account account.. have have an an acco account unt of
Alll the branches Al branches of MCB MCB
“Head “Head Office Office”. ”.
Throug Through h tthis his Head Head
Office account it become easier for branches to do the transaction with other branches and update their books.
Whole Procedure 1)
First of all application is filled by the applicant. Cash is deposited in the cash department. Applicant is provided with Memorandum as an evidence.
2)
Now starts the work of Bank officer. The officer enters the information on the Register. In case of T.T, the T.T No, R.No, R.No, Name of Beneficiary, Branch, Code Of branch, branch , Date, Account of beneficiary is written on the register.
3) Then
“Fax / Telegraphic message” is filled which also contains the same information as that of register. register.
Two 4) Two
Vouchers Vouchers are prepared (SF-89-A & SF-89-B) which which are in Green & Pink colour. Amount of T.T is written on them hem. They hey also also cont ontain ain the the head heads s of Orig igiinati nating ng Branch and Responding branch.
5) Then
Test Is written on the extreme left column( T.T, M.T, P.O No). The procedure of it’s calculation is written above.
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FINANCIA FINA NCIAL L ANAL A NALYSIS YSIS OF FINANCIAL FINAN CIAL ANALYSIS MCB For Year 1997-98 R atios
1998
Interest earned / Advances Interest paid / Deposits Admin Expenses / Deposits Investment / Deposits Advances / Deposits EBT / Deposits ROA ROE EPS Cash Dividend / Share
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27.33 % 8.94 % 4.85 % 46.75 % 50.81 % 0.76 % 0.27 % 11 % Rs 2.19 Rs 1.75
1997
26.32 % 8.17 % 4.85 % 46.70 % 51.74 % 0.99 % 0.21 % 9% Rs 1.31 Rs 1.50
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Explanation ♦
♦
♦
Interest earned to advances increased in 1998, which is a posi positi tive ve sign sign and and sh show ows s in incr crea ease sed d in inco come me of the the bank, and its improving financial position. Interest paid to deposits, investment to deposits and administration expenses to deposits, the firm has been able to sustained sustained its position position and expenses. expenses. There is an increase in the income of the bank, but there is no major major increase increase in expenses. expenses. This shows shows a satisfact satisfactory ory position of the bank. The ratios of advances to deposits and EBT to deposits are not showing a healthy sign due to: The bank has paid a big amount as a cost/return on deposits The bank has given less advances in 1998 as compared to 1997
♦
♦
♦
The return on assets and return on equity are showing a good good positi position, on, which which refer refers s to an impro improved ved financi financial al position. The The EP EPS S and cost ost divide vidend nd rati ratios os are are showi owing an increasing trend, which means the firm is enjoying a good financial position. position. Over Overal alll MCB has a good good and and heal health thy y posit positio ion. n. The The profitability and income is increasing, which is attracting new depositors and investors.
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PREFACE Prerequisite of MBA study is to undergo internship. I got the opportunity to join the MCB General Bus Stand Branch, Multan for the said purpose for a period of 6 weeks. Practical
involvement
was
a
great
experience
as
inte in tera ract ctio ions ns both both with with the the expe experi rien enced ced execut ecutiv ives es and and clie client nts s ceme cement nted ed the the base base of know knowle ledg dge e I have have been been acquiring in the classroom. classroom. This internship report includes the material about MCB and different departments along with their working procedure. For For the completion of this project I met the various persons of these organizations. As far as my knowledge and hard work is concerned this report will provide a good in sight of MCB. I have have sp spec ecia iall than thanks ks for for foll follo owing wing pers person ons s who who have have encouraged & guide me lot. I learned very much under their guidance. Mr. Muhammad Saleem Khan Manager.
Branch
♦
Mr. Liaqat Raza Jaffery
Accountant.
♦
Mr. Masroor Mehmood
Officer.
♦
Riaz Hussain
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ACKNOWLEDGEMENT Alll prai Al praise se to Al Alla lah, h, the the Benef Benefic icen ent, t, the the mer mercifu ciful, l, and and respect for His Prophet “Peace Be Upon Him” who made us recognize our creator. First of all I am highly obliged to my honorable teachers Mr. Muha Muhamm mmad ad
Shou Shouka kat t
Mali Malik k and
Mr. Mr.
Muha Muhamm mmad ad
Rizwan because of them I could be able to do an
internship in the MCB. I am also thankful to the Employees of MCB who provided me a friend friendly ly
and knowle knowledgea dgeable ble enviro environme nment nt through through
which I learned a lot.
Riaz Hussain
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CONTENTS HISTO HI STORY RY OF BANKI BA NKING NG
1
EVOLUTION OF BANKING.................................................................................................................1 EARLY GROWTH............................................................................................................................1 DEVELOPMENT OF MODERN BANKING...............................................................................................3 BANKING IN PAKISTAN...................................................................................................................4 MUSLIM MUSL IM COMMERCIAL COMMER CIAL BANK LIMITED LIMI TED
7
HISTORY OF MUSLIM COMMERCIAL BANK ........................................................................................7 ........................................................................................7 BOARD OF DIRECTORS....................................................................................................................8 STRUCTURE OF MCB...................................................................................................................10 STRUCTURE OF MCB – GENERAL BUS STAND BRANCH (1412).........................................................12 OVERALL PERFORMANCE OF MCB IN 1998...................................................................................13 EVIEW...................................................................................................................19 CHAIRMAN’S R EVIEW ADVANCES DEPARTMENT DEPARTME NT
21
1.INITIAL INFORMATION ...............................................................................................................21 2.PREPARATION OF CREDIT PROPOSAL............................................................................................21 3.SANCTION ADVICE.....................................................................................................................22 OTHER TERMS AND CONDITIONS....................................................................................................23 TYPES OF ADVANCES....................................................................................................................24 TYPES OF ADVANCES BY MCB.....................................................................................................26 DEPOSIT DEPOS IT DEPARTMENT
36
ACCOUNT OPENING......................................................................................................................36 TYPES OF ACCOUNTS....................................................................................................................36 PROCEDURE FOR ACCOUNT OPENING..............................................................................................36 TYPES OF CUSTOMERS.................................................................................................................38 CLOSING OF AN ACCOUNT.............................................................................................................39 IMPORTANCE OF DEPOSITS FOR BANK .............................................................................................40 .............................................................................................40 TYPES OF ACCOUNTS IN MCB.....................................................................................................40 FOREIGN FOREI GN EXCHANGE EXC HANGE DEPARTMENT
50
IMPORT......................................................................................................................................50 EQUIRED.................................................................................................................50 DOCUMENTS R EQUIRED LETTER OF CREDIT......................................................................................................................51 EXPORT......................................................................................................................................62 EXPORT R E –FINANCING...............................................................................................................66 SPECIAL PRODUCTS......................................................................................................................67 FORMS OF EXPORT R E FINANCING ................................................................................................68 CLEARIN CLE ARING G DEPARTMENT
69
CHEQUES....................................................................................................................................69 RTC DEPARTMENT DEPARTM ENT
79
IMPORTANT FEATURES...................................................................................................................79 PROCEDURE ................................................................................................................................80 REMITTANCE REMI TTANCE DEPARTMENT
81
EMITTANCE...............................................................................................................................81 R EMITTANCE IMPORTANT TERMS.......................................................................................................................81 EMITTANCE.................................................................................................................81 TYPES OF R EMITTANCE
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MODES OF PAYMENT.....................................................................................................................82 DOCUMENTS PREPARED.................................................................................................................84 HEAD OFFICE ACCOUNT...............................................................................................................87 FINANCIAL FINAN CIAL ANALYSIS OF MCB
88
EXPLANATION..............................................................................................................................89 PREFACE PREFACE
90
ACKNOWLE ACKNO WLEDGEME DGEMENT NT
91
CONTE CON TENT NTS S
92
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