Chapter – 1
INTRODUCTION
1.1 Background of Study:
For the first time banking system was started in 2000 B.C. In these Greek banking institutions were popular, and with the passage of time the need was felt to establish banks and so in the middle of 12th century banks were established at Venice and Geneva. The origin of modem banking started in Europe in the 14th century.
Internship at banks has almost become a cliché. Over the past decade the business and public administration students regarding internships at banks have established a trend. Thus it can be very convenient for anybody to view this report as any other report on any other bank. This misconception has been the biggest challenge and motivating force to take up this study. My efforts have been directed at maintaining a qualitative difference from a routine study.
The picture of the banking sector in Pakistan is not a rosy one like the overall economy. There have several intermittent socio-political crises over the past few years. Banks in general have had to bear the brunt of the polices of politicians and economic managers of our country. Banks have been largely used as an instrument of manipulation rather than as a tool for financial stabilization. The liquidity crunch of our banks has been a direct consequence of loan defaults by the high and might of our society.
These rough conditions provide me with an excellent opportunity to explore the path to survival for a financial institution while all the others around it are falling like ninepins. The study is particularly aimed at the contributions of MCB to an unstable economy and at the urgent need of whole scale rationalized reforms.
1.2 Purpose of Report:
Commercial banks are profit-seeking institutions. They have been the most effective mobilizes of saving and have been providing short-term requirements of profit earnings concerns. The purpose of his report is to explain the various operations of MCB Melody Branch and how day-to-day activities are performed.
1.3 Scope of Report:
This report explains the operations of only one of the branches of MCB, which is MCB Melody Branch, located in Melody Islamabad
1.4 Limitations Of Report:
It is to admit that the study attempts only those aspects, which are closely relevant to the purpose of the study. Facts and figures, which otherwise might be equally important, but not having a direct bearing on the conclusions arrived at is this study, have been ignored.
The most important limitation from which the study suffers is the non-availability of information in a manner required for analysis and the secrecy of the Bank. Another important limitation of the study is time constraint. Six months period, with intervals, is too less to study the operations of the Bank thoroughly.
1.5 Methodology of Report:
The report is aimed at tow level, the first at the branch level and the second for the organization as whole. No secondary data is available at the branch level hence all the observation of the report are the result of primary data gathered from the bank from the following sources.
The secondary data is collected from the following source.
I. Interviews.
2. Personal Observations.
3. Brochures.
4. Review of annual report 2007 - 2008
5. Bank Manuals.
6. Journals & Newspapers
7. Internet
1.6 Scheme of Report:
This report is partitioned in four sections containing following chapters.
Section I:
Chapter I: Introduction.
In this chapter background of banking, history of MCB, purpose, scope, methodology and scheme of the report is described.
Section II:
Chapter 2: MCB Historical Background
Chapter 3: Organizational Structure.
Chapter 4: Products and Services.
Chapter 5: Departmentation.
Chapter 6: Human Resource Management.
Section III:
Chapter 7: Operation Analysis
Chapter 8: Financial Analysis
Section IV:
Chapter 9: Findings and Recommendations.
Chapter 10: Implementation! Action Plan
Chapter- 2
MCB-HISTORICAL BACKGROUND
Before independence, the financial sector of Indo-Pak was in the hand of foreign banks some of them were British by origin. The oldest bank operating from 1883 in the part of the world was chartered bank while another bank namely Grindlays bank was also working simultaneously from 1883. Among the contemporaries, Imperial Bank of India was the largest India bank, which has started its operations in 1919. It was discharging the role of commercial bank as well as the central bank of India until an independent Central Bank i.e. Reserve Bank of India was established in 1935.
2.1 Banking:
Bank is an institution, which deals in money and monitory material. It is an integral part of modern economic system. The principle of banking is first concentration and then, channelization of resources for the purpose of fulfilling the economic needs of nation and its members.
People deposit their surplus money in banks and while they are paid fixed amount of interest on it, the deposited money can be utilized to various ends. In other worlds, the funds at the disposal of the nation will increase. As such, our resources go on increasing our reliance on foreign aid will naturally be lessened. The construction of numerous huge building and projects and the execution of many developmental plans would be simply impossible without banking.
Definition of Bank:
A bank may be defined as an institution, which purchases and sells money and transacts other financial business of like nature. A bank is an institution, which receive the deposits and advances loan.
If we define this term in a very simple way, we may call it, "An institution where principal operations are concerned with the accumulation of the temporary idle money of the general public for the purpose of advancing it to others for expenditure".
2.2 History of Banking in Pakistan:
History of banking in Pakistan stands with partition. At the time of independence there were 487 offices of schedule banks in the territories now constituting Pakistan, after the announcement of the independence plan. The banning services in Pakistan were seriously suffered. There was a serious usually rush on banks for transferring funds and accounts. The banks transferred their registered offices from Pakistan to India. So by 30th June 1948, the number of the offices of the scheduled banks in Pakistan declined from 487 to only 195.
In 1946, the year before independence, 14 scheduled banks had their head offices in Pakistan areas. Ten of the banks were incorporated in West Pakistan and had a total of 472 branches. The remaining four banks were incorporated in East Pakistan and had a total of 137 branches.
There was two Muslim banks in Pakistan, two days before independence, that were to stay there, while 13 Hindu banks all the 14 locally incorporated banks except the Australasian Bank were destined to move out or where already except the Australasian Bank were destined to move out or where already moving.
In order to create a national banking system in Pakistan State Bank of Pakistan recommended establishing Nation Bank of Pakistan in 1949. It also helped Habib Bank of Pakistan to expend its network of branches. More Pakistan scheduled banks continued to establish and by Dec. 1973 total scheduled commercial banks operating in the country were stood fourteen. Due to the continuous to flourish and now it coves a very large segment of national economy.
The network of banking branches now covers a very large segment of national economy. In June 1948 West Pakistan had only 81 offices of scheduled banks. But by June 1993 their number has increased to 7100 in every nook and corner of Pakistan.
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2.3 Establishment Of MCB:
A little earlier before the creation of Pakistan, the role of the Muslims of the areas, which were later included in Pakistan was of no significance due to their restricted participation in the banking sector. There was only a small bank namely Australasia Bank having a few branches in Lahore and its suburbs. In 1942, the Australasia Bank was housed in a garage of a trader of Lahore who used to trade at a small scale with Australia during that period. However the only bank, run by the Muslims of the sub-continent, was Habib Bank, which was established in 1941. At that time Quaid-e-Azam Muhammad Ali Jinnah expressed his desire that another Muslim bank also be established in Calcutta which came into reality when Adamjee with the assistance of Isphanis established Muslim Commercial Bank on July 9, 1947 in Calcutta. When Pakistan came into being Muslim Commercial Bank shifted its headquarters from Calcutta to Dhaka on August 17, 1948 and later on to Karachi on August 23,1956.
2.4 Nationalization Of MCB:
The 1960s decade is stated as the golden era in Pakistan's economic and financial developments. The banking sector also registered noticeable growth during that period and lent a strong helping hand to the government to achieve rapid economic growth of the country. But in early 1970s this scenario had changed altogether. The separation of East Pakistan (now BangIa Desh) and the induction of Pakistan Peoples Party government led by Zulfiqar Ali Bhutto were the most significant events of early 70s having far reaching effects on the banking system.
In the wake of rapidly changing conditions of the country, the government decided it necessary to nationalize all the commercial banks so that the nation as a whole can benefit from a better channeling of resources. Consequently, Muslim Commercial Bank was nationalized under the Banks (Nationalization) Act, 1974 promulgated on January 1, 1974.
In the banking sector, the then government decided to retain only five major banks by merging all the weaker banks with the stronger ones. As a result of this policy, the Premier Bank was merged into Muslim Commercial Bank in 1974.
2.5 Privatization Of MCB:
The banks after nationalization came under political and bureaucratic control and pressure to deviate from normal business practices. Some of their senior executives were tempted to nurture a culture of obliging big businessmen, feudal and political influentials. They sacrificed their personal integrity and interest of banking sector for gaining promotions and accumulating personal wealth. That is how banking sector started losing its upright and professional institutional image from mid-80s and its downward slide started which touched new low during 1990s.
The then PML government also became conscious of the falling standard of the banking sector and decided to privatize all the commercial banks. Banks (Nationalization) (Second Amendment) Ordinance 1991 was also promulgated to pave the way for privatization of banks in Pakistan.
In the wake of above amendments, 26% shares valuing Rs. 149.8 millions of the Muslim Commercial Bank, held by the State Bank of Pakistan were sold and the Bank's management was transferred to the purchasers of these 26% shares.
2.6 Objectives Of MCB:
The main objectives of MCB are:
i. Improved Customer Services
ii. Effective Use of Electronic Media
iii. Enlightened Personnel Policies
iv. Compatible Package
v. Excellent Work Environment
vi. Modernization of Branches
vii. Launching of New Products
viii. Decentralization of Authority
ix. Effective Reward and Punishment Policies.
2.7 Vision of MCB: To be the leading financial services provider, partnering with our customers for a more prosperous and secure future.
2.8 Mission Of MCB:
MCB states its mission as follows:
MCB banks are a team of committed professionals, providing innovative and efficient financial solutions to create and nurture long-term relationships with our customers. In doing so, we ensure that our shareholders can invest in us with confidence.
Besides, MCB team core values are:
| i. | Trust |
| ii. | Customer focus |
| iii. | Innovation |
| Iv | Team work |
| v. | Achievement |
| vi | Social Responsibility |
2.9 Functions Of MCB:
MCB performs the following three types of banking:
| i. | Commercial Banking. |
| ii. | Consumer Banking. |
| iii. | Corporate Banking. |
2.9.1 Commercial Banking:
Commercial Banking is performing the routine duties of banking business. They collect surplus money from people; make loans and advances in the form of overdrafts, cash credits and discounting bills of exchange. They also provide agency services and general utility services.
2.9.2 Consumer Banking:
MCB Consumer Banking provide different saving accounts with attractive returns and investment products that give the monthly profits as well as the convenient payment instruments to serve the purpose of safety in highly valuable transaction, having acceptance around the world.
2.9.3 Corporate Banking:
MCB Corporate Banking is providing its customers with professional financial advisor that give personal attention to customers' banking needs. They are specialists in connection with the services like under-taking, corporate advisory, project finance, equity placements etc.
2.10 MCB's Performance Today:
MCB remain committed with its 994 Branches to the use of technology and automation to improve customer service and productivity. Over 50% of MCB's branches that is around 523 are computerized with 51 branches on line during the year another 35 branches were computerized. In addition to this 34 branches have been connected with SWIFT - the worldwide inter bank financial telecommunication network. The use of this fast and secure communication technology has enabled them to provide quick and efficient service to their customers.
MCB continues to maintain leadership in the provision of ATM services to its account holders. A network of over fifty ATM's is operative in four cities, which also include offsite ATM' s at Karachi and Lahore Airport. Service levels have been enhanced through investment in International Standard System support and process reengineering. Customer response is evidenced by the increase in ATM cardholders and the spectacular increase in usage of the MCB ATM.
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