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www.vustudents.ning.com. Internship Report Muslim Commercial Bank (MCB Bank Limited). Brief Introduction of MCB BANK.

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  1. www.vustudents.ning.com

  2. Internship ReportMuslim Commercial Bank(MCB Bank Limited)

  3. Brief Introduction of MCB BANK • MCB is one of the leading banks of Pakistan with a deposit base of Rs. 368 billion and total asset turnover Rs. 500 billion. Incorporated in 1947, MCB soon earned the reputation of a solid and conservative financial institution managed by expatriate executives. In 1974, MCB was nationalized along with all other private sector banks. • The Bank has a customer base of approximately 4 million, a nationwide distribution network of over 1,000 branches and over 450 ATMs in the market. • During the last fifteen years, the Bank has concentrated on growth through improving service quality, investment in technology and people, utilizing its extensive branch network, developing a large and stable deposit base. .

  4. Business volume of MCB Bank Limited

  5. Competitors • Local Private Banks

  6. Competitors Foreign Banks

  7. Training Program During my internship I learned about different segments which are as follow • Opening of different Accounts of different customers. • Recording the Inward Dak of the bank. • Record the Outward Dak of the bank. • Clearance of cheques in different. • Worked as Customer Service Officer (CSO) • Learnt about the procedure of opening of the Letter of Credit. • Drawing of Demand Drafts, Pay Order and Call Deposit Receipt. • Making of Outward Bills for Collection. (OBC)

  8. Inward Dak of the Bank Inward Dak is the Dak that is received in the bank There is a register that is called inward dak register. In this register every inward dak is registered and recorded. Recording: Serial Number Reference Number Separation and Disbursement Department wise Disburse Dak as quickly as it is received

  9. Outward Dak of the Bank Outward dak of the bank is the opposite to inward dak of the bank. In outward dak we send to the outsiders. There is a register that is called outward dak register. In this register all those daks that will be sent out from the bank are recorded. Recording: Recording of Address Serial Number Then these daks are handed over to the courier services with which the bank has the agreement like MCB Muree Road branch has the agreement with OCS couriers.

  10. Acknowledgement Receipt by Courier Service Correspondent When the dak is handed over to the person he gives the receipt against each dak this receipt contains the acknowledgement of receipt of dak and the serial number this serial number is recorded in the outward register for proof. If any dak is misplaced, we can confirm them from the couriers by this number for our dak.

  11. Customer Service Officer (CSO) Customer Service Officer is the person whose primary function is to facilitate and entertain the customers’ needs. As CSO I performed the following functions: Issuing of cheque book request form Issuing of the deposit slips Issuing of ATM Cards form Issuing of form for online funds transfer, DD form, and PO form. Issuing of Bank Statements Entertain the Balancing inquiry of the customers.

  12. Inward Clearing Inward clearing means those cheques that are drawn on us but they are presented for payment at any other branch of any bank and are sent by that bank to us through NIFT for clearance. NIFT (NATIONAL INSTITUTIONAL FACILITATION TECHNOLOGY) The institution that has the network all over the Pakistan of collecting the cheques from different banks branches and then allocates the cheques to the relevant banks for clearance. This institution acts as clearing house which was previously performed by the State Bank of Pakistan and if there is no branch of SBP then this function was performed by the National Bank of Pakistan. Now this institution performs this function.

  13. Procedure of Inward Clearing Scrutiny of Cheques Signature Verification Balance Verification Debiting the account Return/Dishonor of cheque Advice preparation Notification to NIFT

  14. Scrutiny of Cheques Scrutiny of cheque means verifying the cheques’ validity in different angles. Signature Verification Once the scrutiny of cheque is done next stage comes to verify the signature of person on the cheque with the signature that is stored in the bank computer system. Balance Verification Here each customer’s balance inquiry is made for honoring the cheques. This balance verification is mandatory.

  15. Debiting the Account If there is sufficient balance in the account then the customer’s account is debited. It means the amount is deducted from the account of the customer. Dishonor/Return of Cheque: we divide this point in two sub categories, i.e. Dishonor and Return. Dishonor of cheque If there are insufficient funds in the account of customer then cheque is dishonored and a cheque return memo is also attached with it and bank charges the fee named as bank charges. Return of Cheque Here other than insufficient balance bank can return the cheque for several different reasons

  16. Advices Preparation Advice is a document that is directed to the regional head quarter of bank notifying about the clearing of the cheques. Notification to NIFT As we send the advice to our regional head quarter similarly we send a notification to the NIFT not the advice. NIFT then hands over this notice to the banks. On receiving this information the banks that had sent the cheques to us will credit the accounts of the customers if the cheques are honored by us otherwise the bank will hand over the cheque to the customer along with the cheque return memo.

  17. Outward Clearing Outward clearing is the opposite of the inward clearing These cheques are collected throughout the banking hours In this section bank only hands over the cheques to the NIFT and NIFT separates the cheques with respect to branch names Here only number of instruments are counted and handed over to the NIFT

  18. Features of Outward Clearing In outward clearing the person must be the account holder of the bank The cheque must relate to different branch of different bank person giving the cheque for collection must first fill in the slip and then present the cheque to the clearing officer Clearing officer signs and stamps the deposit slip and handover the counter slip to the person and keeps the cheque The cheques that were received after 3:00 PM are also collected but they are sent for clearing next day for clearing and remaining part of the deposit slip

  19. Steps involved in Outward Clearing • First we differentiate the cheques with respect to the bank on whom they are drawn • Different stamps are pasted on the face and back of the cheque • Stamps Used in Outward Clearing • Clearing Stamp: This stamp is pasted on front of the cheque for clearing • Payees Account will be credited on Realization: This is used to stamp on the back of cheques. This stamp is normally used when the cheque is in the name of the customer • Received Payment for MCB: This stamp is used where the cheque is in the name of the MCB Bank. This stamp is also pasted on the back of the cheque.

  20. Outward Bills for Collection (OBC) Outward bill for collection is a procedure by which cheques are collected (realized) by the bank. The need for the OBC occurs when there is no facility of NIFT Procedure for Issuing the OBC OBC Form This OBC form is in duplicate containing the name of the bank on whom the cheque is drawn

  21. OBC Register • In OBC register first we write the OBC number which is written on the OBC form • On OBC form OBC number is taken from this registers • Next column we write the name of the account holder who has the account in our bank • In next column the amount that is written on cheque is recorded • Realization of OBC • If there are sufficient funds in the account of the customer they make a demand draft in the favor of our bank and deliver to us. This demand draft is ultimately transferred to the account of the customer.

  22. Demand Draft, Pay Orders and Call Deposit Receipt Demand Draft A method used by individuals to make transfer payments from one bank account to another. Demand drafts are marketed as a relatively secure method for cashing checks. Demand drafts are made for the beneficiary for payments, funds transfers etc... These are made for outstation branches of the concerned banks Pay Orders Pay orders are issued by the bank that are paid or realized within the city of issuing bank. It means MCB of Muree road branch Rawalpindi will issue the pay order in the favor of any branch of MCB that is located in only in Rawalpindi

  23. Procedure for the issue of DD • Customer request for fund transfer form is filled. • Credit and Debit vouchers are made • we divide it in two shapes • Debit and Credit vouchers against cash payment • Cash account Dr. • DD Payable Cr. • Debit and Credit vouchers against amount drawn from the account • Customer Account Dr. • DD Payable Cr.

  24. Advice Preparation • Advice is prepared if the value of the DD is less than the Rs. 100,000 • If the value exceeds the Rs.100,000 then the amount is transferred by online funds transfer method. • After doing all the documentation the DD is issued

  25. Account Opening The process of opening an account is very simple and anybody who would like to open his account can do it easily without any difficulty Types of Accounts CURRENT ACCOUNT SAVING ACCOUNT TERM DEPOSITS ACCOUNT

  26. Procedure for Account Opening Application Form • Green color-coded Application Form is available for each type of account • Form is given to the customer to fill in for opening a related account. • Signature Specimen Card (SS) • “SIGNATURE SPECIMEN CARD” is the card is compulsory for opening the account. • Without getting the signature of the customers you cannot open the account • These are the signatures that verify the cheque because these cheques are kept by the bank • This card contains: • four signatures of an applicant • applicant account number • account type

  27. Branch code • title of account • Banker uses this card at the time when he receives the cheque; he compares customer’s signature with the signature on the cheque for avoiding fraud • Account Opening Register • The person who is opening the account of the persons records the necessary details into this register and allots an account number from this account opening register • This register is maintained for each type of account and the account numbers are allotted serially • Cheque Book • Cheque book is issued to the customer when the bank accepts the account opening application form

  28. Letter of Thanks • Bank prepares two ‘LETTER OF THANKS’ one for the new customer and the other for his introducer. This act promotes good will among the customer and the introducer.

  29. Letter of Credit “A letter of credit is a written instrument issued by a bank authorizing the seller to draw in accordance with certain terms and stipulations legal forms, that all such bill will be honored”. Parties involved in Letter of Credit Account party Issuing party Exporter Paying or negotiating bank

  30. Operation of a letter of credit The importer or buyer contacts the seller in foreign country for the purchase of a particular good or goods. He settles with the seller the quantity and quality of the goods to be imported. The sale contract also includes the method of payment. The importer then submits an application to his bank for the issuing of an individual letter of credit. The form on which the importer employees for a letter of credit is supplied by the bank.

  31. This form contains all the necessary details discussed between the importer and exporter for the shipment of goods which include the description of merchandise, port of shipment, port of unloading, the documents against which the bank is to honor the draft, the total value of the goods etc. • If the documents supplied by the seller conform to the terms of contract the exporter will be paid. • The issuing bank will not be responsible if there is any fraud or the merchandise does not conform to the sales contract. • 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.

  32. Structure of Finance Department

  33. Functions of Finance Department • Finance Department performs following functions • Borrowing from State Bank of Pakistan. • Lending to Commercial Banks • Lending to Investors. • Lending to General Public for multi-business.

  34. USE OF ELECTRONIC DATA IN DECISION MAKING Making crucial, timely, strategic decisions is a must to stay a head in today’s competitive environment Up to date information enabling the banks to make timely and prudent decisions Banks strength in the area of information technology based services has always been an edge in the competition

  35. Technology support provides an alternate service delivery channels higher customer satisfaction levels • MCB customer care center – e dedicated customer call center, was formally inaugurated during 2004 • During 2005 MCB achieved a successful launch of mobile ATM solutions for banks valued customers

  36. SOURCES OF FUNDS

  37. ALLOCATION OF RESOURCES Deposits and Other Accounts

  38. Critical Analysis of MCB BANK Limited Ratio Analysis • Liquidity Ratios • Leverage Ratio • Profitability Ratios • Activity Ratios • Market Ratios • Statements of Cash Flow

  39. Liquidity Ratios Current Ratio = Current Assets / Current Liabilities 2009 = 226,656,076 / 420467889 = 0.54:1 2008 = 204,801,921 / 363396932 = 0.56:1 2007 = 198,525,463 / 342463187 = 0.58:1 Quick Ratio = Current Assets – Investment / Current Liabilities 2009 = 468,160,736 – 167,134,465 / 420,467,889 = 0.72: 1 2008 = 406,541,695 – 96,631,874 / 363,396,932 = 0.85: 1 2007 = 376,592,633 – 113,089,261 / 342,463,187 = 0.77: 1

  40. Sales to Working Capital = Revenue earned / Working Capital 2009 = 51,616,007 / 47,700,847 = 1.08 2008 = 40,043,824 / 43,144,763 = 0.93 2007 = 31,786,595 / 34,129,446 = 0.93 Working Capital = Current Assets – Current Liabilities 2009 = 47,700,847 2008 = 43,144,763 2007 = 34,129,446

  41. Leverage Ratio Time Interest Earned Ratio = EBIT / FIXED INTERST CHARGES 2009 = 38,519,581 / 15,364,636 = 2.51 2008 = 32,764,741 / 10,843,175 = 3.01 2007 = 28,769,732 / 7,461,697 = 3.86 Debt Ratio = Total liabilities / total assets 2009 = 439,483,714 / 509,223,727 = 0.86 2008 = 385,179,850 / 443,615,904 = 0.87 2007 = 355,365,842 / 410,485,517 = 0.87

  42. Debt to Equity Ratio = total liabilities/ shareholders equity 2009 = 439,483,714 / 61,075,932 = 7.20 2008 = 385,179,850 / 52,244,865 = 7.37 2007 = 355,365,842 / 45,414,156 = 7.83 Debt to tangible net worth = total liabilities / net worth – net intangible assets 2009 = 439,483,714 / 69,740,013 = 6.30 2008 = 385,179,850 / 58,436,054 = 6.59 2007 = 355,365,842 / 55,119,675 = 6.45

  43. Total Capitalization Ratio = Long term debts / capital employed 2009 = 19,015,825 / 80,091,757 = 0.24 2008 = 21,782,918 / 74,027,783 = 0.29 2007 = 12,902,655 / 46,704,422 = 0.28 Shows the proportion of company’s debt in capital structure supported by company’s operation. Fixed Asset Ratio / Equity Ratio = (Fixed asset/ total assets) / (shareholder’s equity / total assts) 2009 = (282,567,651 / 509,223,727) / (61,075,932 / 509,223,727) = 0.55/ .12 = 4.6 2008 = (238,813,983 / 443,615,904) / (52,244,865 / 443,615,904) = 0.54 / 0.12 = 4.5 2007 = (211,960,054 / 410,485,517) /(454,141,456 / 410,485,517) = 0.52 /0.11 = 4.7

  44. Long term assets versus long term debts = Long term assets / long term debts 2009 = 41,054,991 / 19,015,825 = 2.16 2008 = 37,074,209 / 21,782,918 = 1.70 2007 = 33,892,884 / 12,902,655 = 2.63

  45. Profitability Ratios Net Profit Margin = Net Profit / Mark up Interest Earned * 100 2009 = 15,495,297 /51,616,007 * 100 = 30.02 % 008 = 15,374,600 / 40,043,824 * 100 = 38.39 % 2007 = 15,265,562 /31,786,595 * 100 = 48.03 % RETURN ON ASSETS = NET INCOME/ TOTAL ASSETS 2009 = 15,495,297 / 509,223,727 = 0.03 2008 = 15,374,600 / 443,615,904 = 0.03 2007 = 15,265,562 / 410,485,517 = 0.04

  46. DuPont Return on Assets = Net income / Total Assets 2009 = 15,495,297 / 509,223,727 = 0.03 2008 = 15,374,600 / 44,361,5904 = 0.03 2007 = 15,265,562 / 4,104,855 = 0.04 Operating Assets Turnover = net mark up / operating assets 2009 = 51,616,007 / 1,926,183,632 = 0.03 2008 = 40,043,824 / 423,805,428 = 0.09 2007 = 31,786,595 / 392,616,756 = 0.08

  47. Return on Operating Assets = Net income / operating assets 2009 = 15,495,297 / 196,183,632 = 0.01 2008 = 15,374,600 / 423,805,428 = 0.04 2007 = 15,265,562 / 392,616,756 = 0.04 Return on Total Equity = Net income after Tax / Shareholder Equity 2009 = 15,495,297 / 61,075,932 = 0.34 2008 = 15,374,600 / 52,244,865 = 0.29 2007 = 15,265,562 / 45,414,156 = 0.25 Indicates how much return in %age is earned by investing amount equal to equity

  48. Operating Income Margin = Operating Income / Mark up interest earned * 100 2009 = 3,154,945 / 51,616,007 * 100 = 44.86 % 2008 = 21,867,566 / 40,043,824 * 100 = 54.61 % 2007 = 21,308,035 / 31,786,595 * 100 = 67.03 % Gross Profit Margin = Net mark up / mark up interest earned * 100 2009 = 35,774,544 / 51,616,007 * 100 = 69.31 % 2008 = 28,483,084 / 40,043,824 * 100 = 71.13 % 2007 = 23,921,062 / 31,786,595 * 100 = 75.25 %

  49. Return on Investment = Net profit after tax/Total assets 2009 = 15,495,297 / 50,9223,727= 0.03 2008 = 15,374,600 / 443,615,904 = 0.03 2007 = 15,265,562 / 410,485,517 = 0.04 Asset turnover Ratio = mark up interest earned / Total Assets 2009 = 51,616,007 / 509,223,727 = 0.10 2008 = 40,043,824 / 443,615,904 = 0.09 2007 = 31,786,595 / 410,485,517 = 0.08

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