Professional Documents
Culture Documents
Learning and gaining knowledge through studies from an institute and applying that knowledge into an organization are two very different things. During my studies, my main objective was to learn everything that I could so that I could use that knowledge for a better cause in future, like for advancement in career. But when I came to MCB for internship, I observed that it really didnt matter at first what my skills were, what mattered was my behavior and how cooperative I was with all the staff members. Small tasks which didnt really required much skill like making entries in registers and binding the printings of the posting in the files were given to me to check how much was I interested in finishing the tasks that were assigned to me. Once they found me hardworking and determined towards learning, they started assigning me complicated tasks which explained to me the different process going on in the bank. I have divided this report into three chapters. The first chapter explains the introduction of the organization, its products and services, SWOT analysis and the different departments of the branch and their working. The second chapter explains the tasks done by me on weekly basis and finally I have concluded the report with some recommendations for MCB Islamic Banking and IBIT and some of the new things that I learned from my internship.
EXECUTIVE SUMMARY
MCB Bank Limited (Formerly Muslim Commercial Bank Limited) has a solid foundation of over 60 years in Pakistan, with a network of over 1000 branches, over 400 MCB ATMs in 41 cities nationwide and a network of over 12 banks on the MNET ATM Switch. MCB's operations continued to be streamlined with focus on rationalization of expenses, re-alignment of back-end processing to increase productivity, enhancement of customer service standards, process efficiency and controls. The Bank has taken the lead in introducing the innovative concept of centralizing Trade Services in the country by providing centralized foreign trade services to branches with a view to improve efficiency, expertise and reduce delivery cost. During my internship in MCB I worked in Remittances, Advances and Operations department and I successfully completed all the task/duties that were assigned to me. During the course of internship I learned about different functions performed by Remittances, Advances and Operations department and bank as a whole. I also learned banks correspondence with their customers and within branches. I learned about documentation requirements and record keeping for different activities and processes.
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 and managing its loan book through improved risk management processes.
MCB is Pakistans fourth largest bank by assets having an asset base of PKR 445 billion at December 31, 2008 on a consolidated basis and the largest bank by market capitalization. The Bank has a nationwide distribution network of over 1,050 branches. * In 2008, MCB reported an after tax profit of PKR 15.3 billion on a consolidated basis.
*Source: mcb.com.pk
Vision statement:
To be the leading financial services provider, partnering with our customers for a more prosperous and secure future.
Mission statement:
We 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 with confidence in us.
MCB TOWER:
A Vision of the Future:
The modern, urbane architecture and intelligent design of MCB Tower reflects MCBs pioneering role in the banking arena, providing cutting edge, innovative banking solution, leading with an edge of technology.
Advisor
Raza Mansha
Audit Committee
Mian Mohammad Mansha Mian Umer Mansha Aftab Ahmed Khan Chairman Member Member
Company Secretary
Tahir Hassan Qureshi
Best Bank In Asia Award 2008 Best Bank In Pakistan Award 2006 Best Bank In Pakistan Award 2005 Best Bank In Pakistan Award 2004 Best Bank In Pakistan Award 2003 Best Bank In Pakistan Award 2001 Best Domestic Bank Award 2000
The Best Domestic Commercial Bank Award 2005 The Best Domestic Commercial Bank Award 2004
1. ATMs :
MCB has the nation's largest network of over 197 ATMs and is still growing. The customers can get 24 hour convenience of cash withdrawal, mini statements, and bill payment and funds transfer services. The bank provides 24 hours banking services through the largest ATM network in Pakistan covering 24 cities with over 262 locations.
2. Mobile Banking :
Banking at fingertips, the customers can dial in anytime to get information regarding balance and mini statements.
3. Call Centre:
For answers to queries, banking services, ATM services, mobile banking services, RTC services, tele- banking services and MCB product information, the customers can avail this facility. 111-000-622.
4. Smart Card:
MCB Smart cards work on ATMs and Point of Sale terminals at merchant locations & offer the following features: Purchasing Bill payments Funds transfer Cash withdrawals Balance inquiry Mobile banking Mini statement
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6. Bill payment
MCB also provides the facility of utility bills payment to its customers. The customers can deposit their utility bills in any MCB branch that is near their homes.
7. Virtual Banking:
MCB Virtual Internet Banking offers the customers the convenience to manage and control their banking and finances; when they want and where they want. MCBs Virtual Internet Banking facility is: Simple Secure Free of cost. MCB Virtual Internet Banking allows the customers to access banking services, 24 hours a day, 7 days a week and throughout the year.
Bulk Salary Transfer for Corporate Customers, to facilitate them in paying salary to the corporate employees, who maintain accounts with MCB. Cheque Book Request for any of your listed accounts. Payment/Transfer Alerts for reminding, in advance, prior to the processing of specified payments and transfers. Personal Alerts for reminding of pre-specified events and occasions.
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CHEIF MANAGER
MANAGER OPERATIONS
MANAGER CREDITS
FOREX
CASH OFFICER
GENERAL BANKING OFFICER
CASH OFFICER
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O believers fear Allah and give up that interest which is still due to you if you are true believers; but if you do not do so then you are warned of the declaration of war against you by Allah and His Messenger. If, however, you repent even now (and forgo interest), you are entitled to your principal; do not wrong, and no wrong will be done to you.
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It has been reported by Hazrat Abu Hurairah on the authority of the Prophet, that the Prophet said, Refrain from seven things which are deadly. The companions asked him what these are. He said (i) to associate partners with Allah, (ii) to case spell, (iii) to kill someone without a reason valid in the eye of Allah, (iv) to devour interest, (v) to devour the property wealth of an orphan, (vi) to runaway from the battle field, and (vii) to falsely implicate innocent and chaste women of vulgarity. This saying has been reported by Bukhari, Muslim, Abu Dawood and Nisai.
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VISION STATEMENT:
To become a leader among Islamic Banks of the country in the coming years capturing major share of the domestic Islamic financial market.
SHARIAH ADVISOR:
Dr. Muhammad Zubair Usmani, working as Shariah Advisor in MCB Islamic bank since July 2000 is a prominent scholar having Ph.D. degree in Islamic Finance as well as Fazil Takhassus from Jamia Darul Uloom Karachi, (i.e. specialist of Islamic Fiqh and Fatawa). He has attended and addressed several international and local seminars / conferences as guest speaker in Pakistan as well as abroad. He has also worked as Research Scholar and member of various forums and committees formed for promoting the cause of Islamic Banking in Pakistan and abroad. All products are approved by our Shariah Advisor Dr. Muhammad Zubair Usmani and these are further approved and vetted by Dar ul Ifta, Jamia Dar ul Uloom Korangi Karachi. Majority of the products are signed by Maulana Muhammad Taqi Usmani as well.
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LEGAL ADVISOR:
M/s Mohsin Tayebaly & Co., Advocates & Legal Consultants, has vetted all documentation. The Co. for this purpose not only has expertise in legal and corporate affairs but also have competent lawyers possessing knowledge of Shariah.
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ISLAMIC BANKING
The functions and operating modes of Islamic banks are based on the principles of Islamic Shariah.
In contrast, it promotes risk sharing between provider of capital (investor) and the user of funds (entrepreneur).
In the modern Islamic banking system, it has become one of the service-oriented functions of the Islamic banks to be a Zakat Collection Centre and they also pay out their Zakat.
Lending money and getting it back with compounding interest is the fundamental function of the conventional banks
Participation in partnership business is the fundamental function of the Islamic banks. So the Islamic banks have to understand customer's business very well.
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It can charge additional money (penalty and compounded interest) in case of defaulters
The Islamic banks have no provision to charge any extra money from the defaulters. Only small amount of compensation and these proceeds is given to charity. Rebates are given for early settlement at the Bank's judgment.
Very often it results in the bank's own interest becoming prominent. It makes no effort to ensure growth with equity.
It gives due importance to the public interest. Its ultimate aim is to ensure growth with equity.
For interest-based commercial banks, borrowing from the money market is relatively easier
For the Islamic banks, it must be based on a Shariah approved underlying transaction.
Since income from the advances is fixed, it gives little importance to developing expertise in project appraisal and evaluations
Since it shares profit and loss, the Islamic banks pay greater attention to developing project appraisal and evaluations.
The conventional banks give greater emphasis on credit-worthiness of the clients. The status of a conventional bank, in relation to its clients, is that of creditor and debtors
The Islamic banks, on the other hand, give greater emphasis on the feasibility of the projects. The status of Islamic bank in relation to its clients is that of partners, investors and trader, buyer and seller.
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Being an Islamic bank in Pakistan with a reputation of MCB commercial banking gives MCB Islamic Banking an edge over the other Islamic banks, use of over 55 year experience and bundle of resources of conventional banking give MCB Islamic a unique position in the Islamic banking sector.
WEAKNESSES:
The majority of people are not well aware of the products of MCB Islamic banking. Therefore it should advertise extensively because the majority of people do not feel any difference in Islamic banking and conventional banking so it must communicate effectively that how it differs from conventional banking because the target market is those people who do not want to use conventional banking.
Lack of job satisfaction among the employees is another weakness. Currently most employees in the branches are not happy with their jobs especially in Islamic Banking branches. Because these branches are not online and thus the workload has increased.
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OPPORTUNITIES:
There are too many people in Pakistan who want to deposit their money in Islamic mode of financing due to their religious points of view. MCB as a bank that offers both conventional and Islamic banking can cater a huge customer market. But for that MCB has to advertise its Islamic banking products effectively so that customer would come to know that that it differs from conventional banking and how it is Halal.
Other than that it has a unique position in Islamic banking. Due to a very good reputation and huge capital of conventional banking, it can also use the good will and experience of conventional banking.
THREATS:
Change in government policies has affected the banking business. Still banks have to wait to get permission of state bank. The freezing of foreign currency accounts is a vital example of letting people not to trust on banks.
The Competition has become severe by the new entrants in the banking sector, so to survive; one will have to prove itself in its services through excellent management and will have to satisfy its shareholders. Otherwise it will be out the market.
In a country like Pakistan where people have very rigid view on banking that it is totally based on interest, it is very difficult to change the views of people regarding Islamic banking. It requires lot of effort and creation of awareness through advertisement.
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PURPOSE:
Its purpose is to cater to investment requirements of people who want to invest their funds in Shariah Complied Islamic mode of transactions / financing. MCB has developed the Islamic modes of financing which shall be administered in conformity with the Shariah requirements.
MEANING OF AL-MAKHRAJ
MCBs Deposit Scheme has been named as Al-Makhraj since it has been derived from the Arabic word Khrooj which means EXIT. Thus, it bears relevance as we EXIT from Riba Based Banking to Riba Free Banking.
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INVESTMENT DECISIONS:
Funds will be managed by MCB, acting as Mudarib on a discretionary basis i-e the investment decisions will be completely of MCB management.
TARGET MARKET:
General Public Corporate Mid Market Business Group Institutions working on Islamic Development Project/Cause Trusts / Foundations
DEPOSIT SCHEMES:
Al-Makhraj Saving Account Ianat Account Al Makhraj Term Deposit Basic Banking Account
Minimum Initial Deposit: Rs. 5000 Islamic Tools used in designing the product: Mudaraba/ Musharaka. Product to be availed by: Individuals & Joint Account Holders (Local) Companies, Corporate, Trusts, etc Special Advantages For Customer = Bi-Annual Profit Payment; Withdrawal Facility Shariah = Meets requirements for Shariah Compliance
Additional Features: Personalized Cheque books Withdrawal Facility from ATM/ Debit Card Online deposit as per bank's policy Virtual Banking Call Centers Facilities 6-monthly profit payment on the basis of monthly declared rates Issuance of duplicate statement of account Free bank balance certificates (once in 6 months) Taking stop payment/ hold mail/ standing instructions No penalty if balance falls below minimum level. Personal financial consultancy services (regarding Shariah Compliant products) Utility bill payment via ATM card Choice of statement frequency (as per Schedule of Charges) Weight ages are made according to tiers (Volume-wise and Time wise). Banking Network: IBD's Branch only. Profit payment options, 6 monthly.
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IANAT ACCOUNT
For customers who are looking for an account that gives them the ease of doing unrestricted number of transactions, MCB Islamic offers Al-Makhraj Ianat Account. With a minimum of only Rs. 10,000, Ianat Account may be opened. With all the features and facilities that this product offers, it is highly recommended for management of business funds.
Features of the product are as follows: Minimum Initial Deposit: Rs. 10,000 Product to be availed by: Individuals & Joint Account Holders (Local), Companies, Corporate, Trusts, etc
ADDITIONAL FEATURES:
Personalized Cheque books Withdrawal Facility from ATM/ Debit Card Online deposit as per bank's policy Debit card; Utilities payment via ATM card Virtual Banking Call center facilities Free bank balance certificates (once in 6 months) Taking stop payment/ hold mail/ standing instructions Choice of statement frequency (as per Schedule of Charges) No penalty if balance falls below minimum level. Issuance of duplicate statement of account (as per Schedule of Charges) Banking Network: IBD's Branch only
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Special Advantages:
For Customers = Profit Payment Options customized to suit needs of customers; Minimum Deposit requirements lower than most banks so it is more accessible/ affordable for people Shariah = Meets requirements for Shariah Compliance Additional Features: Call center facilities Personal financial consultancy services (regarding Shariah Compliant products) Taking hold mail/ standing instructions for profit payments etc Different weight ages based on tenors and profit payment options Communication Process: Announcement every month on notice boards, and website Institute of Business & Information Technology 26
Banking Network: IBD's Branch only Profit Payment Options: Monthly/ Quarterly/ At Maturity (Monthly payment option to be made available later in a few months time).
FUTURE PRODUCTS
In the near future, the customers would be able to avail the following products Musharaka Financing Export re-finance Diminishing Musharaka (housing finance)
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DESCRIPTION OF DEPARTMENTS
During my six weeks internship at MCB Islamic Banking, Ajmal House branch, I worked in all departments and sections of the branch and observed their functioning. The description of those departments is explained below.
REMITTEMCES:
Remittance is one of the important functions of any commercial bank. Mr. Noman, who is Remittance in charge of the branch, gave me information about this section of bank. Remittance in favor of the beneficiaries may be made in the following ways: Issuance of drafts Issuance of mail transfer Issuance of telegraphic transfer Electronic Funds Transfer All remittances are affected at the request of the customer on submission of the banks required requisition form. The remittances may be affected by debit to the customers account, if authorized by him or by deposit of the required amount of cash together with charges as per banks tariff. The remittances may be accepted only for those places where the banks own branch has functional office. All requests of remittance must clearly state the place of drawing, name of the payee and his account number.
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COMMON ELEMENTS:
SF-100 Fund Transfer Application is the general form for any type of funds transfer as is evident from its name i.e. Demand Draft, Pay Order, Telegraphic transfer or Internal Transfer. All instruments including CDR are marked on the top with NOT MORE THAN PKR *****/**. All advices and funds relating to funds transfer including CC, DD, PO, TT, MT are subject to test and are signed by IBS holders as per banks and SBPs regulations. The numbers of CC, DD, PO, TT, MT are marked as per banks registers and sequence with branches.
DEMAND DRAFT
A demand draft is a written order, drawn by one branch of a bank upon another branch of the same bank, or upon another bank under special arrangements to pay a certain sum of money to or to the order of a specified person.
Features of DD
Demand draft is a negotiable instrument. It is neither payable to the bearer nor drawn on branches situated within the same city. Legal provisions are same as that of cheque. It is to be ensured that purchaser can at least sign. Thumb expression is not accepted on DD. There should be a branch at the place where that payment is to be made. The following are the parties. a. Purchaser b. Issuing branch c. Drawee branch d. Payee/beneficiary
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Procedure of issuance:
Filling the application (S.F 100). Payment through cash or cheque Entry in the DD issued register. Making the demand draft. Signing the demand draft Application of test
DD payment precautions:
Scrutinize the advice whether it pertains to the issuing branch Check the DD serial number and test if above
Rs 25,000 If there is any cutting on the advice or the draft, it has to be dually authenticated under full signature of authorized officer. Entry in the DD payable register in case of manual branch. Checking the test and signatures of the authorized signatory.
PAY ORDER
A pay order is a written authorization for payment, made in receipt form issued and payable by the bank, to the person named and addressed therein on his giving a proper discharge thereon.
Features:
PO cannot be issued to a minor It is meant for banks own payment but in practice these are also issued to the customers for making payments It is used for making payments within the same city. It is issued by and drawn upon and payable by the same branch of the bank It is neither transferable nor negotiable and as such it is payable to the payee named therein. It is in a receipt form and therefore it is payable only after obtaining a discharge of the payee on adequate revenue stamps.
TELEGRAPHIC TRANSFER
Transfer of funds from one branch to another branch of the same bank or upon another bank under special arrangements for the payment to the beneficiary through telegram// fax is called Telegraphic Transfer TT instructions regarding payment are sent to the drawee branch in a coded language and under confidential number known as test number.
Features:
TT is not negotiable Funds remitted are not payable to bearer Not allowed within the same city If the beneficiary is not maintaining account with drawee branch, funds can be affected by "ADVISE AND PAY
Parties in TT
Applicant Remitting or drawing branch Drawee branch Beneficiary/ payee
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Issuance procedure
Application on SF-100 Payment through cash or cheque Preparation of TT message Application of test on the message Confirmation of the cable sent message Dispatch of confirmation
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CREDITS DEPARTMENT
MCB offers three broad Islamic fund based facilities: 4. Ijarah Car Ijarah Equipment Ijarah 5. Murabahah Domestic(local Purchase) International 6. Letter of Credit
FUTURE PRODUCTS
In the near future, the customers would be able to avail the following products Musharaka Financing Export re-finance Diminishing Musharaka (housing finance)
IJARAH
MCBs Islamic Ijarah, analogous to the English term 'leasing, is based on the Ijarah wa Iqtina concept which means the sale of the asset to the lessee (customer) after the Ijarah has matured. Under this scheme, MCB will be the owner of the asset, and customer (lessee) will be given the asset to use for a certain period of time in return for monthly rental payments. MCB will give a separate unilateral undertaking that it will offer to sell the asset to customer Institute of Business & Information Technology 34
(lessee) at the maturity of the Ijarah agreement at a price that may be equal to the security deposit amount, hence the term Wa Iqtina. MCB Islamic currently offers 2 types Ijarah Products: Car Ijarah Equipment Ijarah
Special Attractions:
Free from Riba Fully Shariah Compliant No rental payments from the date of booking till the time of delivery No up-front registration / tax related expenses and fees No up-front Insurance payment Nominal processing fee of Rs. 4400 (Non-refundable) A unique opportunity for customer to get any locally assembled noncommercial or semi-commercial new vehicle of your choice in 1 to 5 years by paying as little as 20% security deposit and NOTHING more!!
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Eligible Persons:
Customer is a Pakistani national residing in the city where Al-Makhraj Car Ijarah product is available. Customer age is not less than 22 years & shall not be 60 (for salaried persons) & 65 (for businessmen), before maturity of the Ijarah facility. Customers monthly salary / income is at least Rs. 15000 and your monthly rental payment does not exceed 45% of your net monthly take home salary / income. Customer is a Businessman / self-employed with a minimum experience of 3 years in the same business / profession. Customer is an employee for 2 years with the current employer or with overall 3 years of employment history
Shariah Compliance:
Al-Makhraj Car Ijarah Scheme has been developed under strict supervision and approval of Dr. Maulana Mohammad Zubair Usmani, a reputed Shariah Scholar who belongs to internationally renowned Jamia-Darul-Uloom Karachi.
EQUIPMENT IJARAH
This is the Ijarah for Machinery and other equipments to corporate clients.
Security Deposits:
10% Minimum plus any other security required by the Bank from time to time.
Legal Documentation:
Ijarah Agreement Institute of Business & Information Technology 36
Unilateral undertaking by the lessee to purchase the asset at the PreAgreed Purchase Price on termination of Ijarah before Maturity Unilateral undertaking by the Bank to offer to sell the asset at maturity.
MURABAHAH
It is an Islamic mode of financing that is used by the bankers to accommodate their customers in the procurement of business inventories and other goods of capital nature. Murabahah can be defined as follows: A contract between a buyer and a seller under which the later first purchases the goods at the request of the former I.e., customer and then sells it to same customer after adding profit. In accomplishing a Murabahah transaction, various relationships between the bank and the customer emerge at different stages of the process which are backed by documentations between the branch and the customer.
First stage:
In the first stage, the customer places the order for purchase of goods/ commodities with the bank and the bank agrees to purchase and sell the same. The relationship thus established is that of promisor and promissee.
Second stage:
During the second stage, the customer is appointed as an agent of the goods/commodities purchased and the relationship of principal and agent is established.
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Third stage:
During the third stage of Murabahah process, the bank places order with the supplier and the relationship of buyer and seller is created.
Fourth stage:
During the fourth stage of Murabahah process, goods are delivered to the customer against the recovery of Murabahah price. In this way, the relationship of seller and purchaser is created between the bank and the customer.
Fifth stage:
The fifth stage of Murabahah is related to the creation of Murabahah finance based upon the payment schedule furnished by the customer. The relationship of creditor and debtor is created between the bank and the customer. The tenure of payment is also fixed at this stage. If the bank is not involved in this entire process and if the stages are skipped, it would just be a loan and hence the profit earned would be interest (Riba).
Bai Murabahah:
Bai means the sale of commodity in exchange of money and Murabahah means agreed profit. Bai Murabahah is generally called Murabahah. In this process, the cost of the goods and the profit added thereon is made known to the customer. The payment of Murabahah can be made by the customer either in installments or instantly.
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In the process of Murabahah, the bank first acquires the ownership, possession and risk of the commodities and then transfers it to the customer.
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MURABAHAH FINANCING:
It can be defined as The sale and purchase transaction in which the customer is given the facility to pay the sale price either in installments or as per agreed schedule or as lumpsum
TYPES OF MURABAHAH
Following are the two types of Murabahah:
1. Local Murabahah:
Local Murabahah is the financing of the goods that are manufactured, processed or available in Pakistan.
2. Foreign import:
It is the investment of the bank in transactions related to import/ export.
Buyer - Banks Customer Seller - Provider of the goods Purchaser/ Bank - purchases the goods on behalf of the customer
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MODE OF REPAYMENT
There are two modes of repayment in Murabahah.
1. Spot Murabahah:
If the payment is made immediately in cash then it is called spot Murabahah.
PROCESS OF MURABAHAH:
The process of Murabahah includes the following steps 1. Receiving the purchase order form: First of all the bank receives a purchase order form the customer. The purchase order contains the information like: a. YPO number It is the reference number of the commodity being purchased. b. Quantity of the required goods c. Quality of the required goods d. WHT The customer specifies in the purchase order form that whether it pays its WHT directly to the government or wants the bank to pay it on its behalf. e. Value date It is the date at which the customer will make the payment of the expenses. The profit of Murabahah is to be paid to the bank on the maturity of the tenure.
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f. Mode of payment to the supplier. The customer also specifies the mode through which he wants the suppliers to be paid e.g. through issuance of PO/DD or direct credit to the account of the supplier. 2. Banks instructions: After receiving an order form from the client, the bank gives an instruction to the client to act as agent on behalf of the Bank for the goods. 3. Confirmation from the customer: A confirmation letter is sent by the client to the Bank that it has received the goods and has found them in accordance with the order. 4. Banks offer to sell: The bank now offers to sell the acknowledged goods at Murabahah sale price to the client. 5. Customers acceptance: The customer accepts the offer of the bank and purchases the goods offered by the bank. The customer agrees to pay the Murabahah price. 6. Murabahah financing: In this step, the calculation of Murabahah profit, Murabahah sale price and schedule of payment is made.
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Buy-back or Repurchase of Goods not permissible. Appropriate collateral / securities can be obtained as per mutual consent.
LETTER OF CREDIT
A written undertaking by Bank at the request of the Buyer/Applicant to pay the Seller/Beneficiary a certain sum of money as stipulated in the Letter of Credit, provided that the Seller/Beneficiary complies with the terms and conditions of the Letter of Credit. The Letter of Credit can be issued under Wakalah contract (agency relationship) and thereafter the goods purchased maybe financed under the Murabahah contract (cost plus).
Irrevocable L/C:
An irrevocable letter of credit can not be amended or revoked without the agreement of ALL the parties to the letter of credit, so it provides the assurance that providing the beneficiary complies with the terms, he/she will be paid for the goods or services. Under UCP 600, a letter of credit is deemed irrevocable unless otherwise stated.
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Unconfirmed L/C:
An unconfirmed irrevocable letter of credit provides a commitment by the issuing bank to pay, accept, or negotiate a letter of credit. An advising bank forwards the letter of credit to the beneficiary without responsibility or undertaking on its part except that it must use reasonable care to check the authenticity of the credit which it advised. It does not provide a commitment from the advising bank to pay, so the beneficiary is reliant upon the undertaking of the overseas bank. The beneficiary is not protected from the credit risk of the issuing bank nor the country risk.
Confirmed L/C:
A confirmed irrevocable letter of credit is one to which the advising bank adds its confirmation, makes its own independent undertaking to effect payment, negotiation or acceptance, providing documents are presented which comply with the terms of the letter of credit. The advising bank, which may also be the confirming bank, assumes the country (political and economic) risk of the applicants country as well as the credit risk, failure and default of the issuing bank and effects payment to the beneficiary without recourse. In order for a letter of credit to be confirmed, a bank accepting this risk would have a correspondent relationship with the issuing bank. If the advising bank does not have such a relationship, the letter of credit can be confirmed by an independent bank. The negative aspect here is the cost of adding another bank to the scenario. A seller should consider requesting a confirmed credit when
The credit standing of the issuing bank is unknown to the seller or viewed by the seller as questionable. Exchange controls in the buyers country may prevent local banks from honoring certain external payments.
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The importing country is suffering economic difficulties: large external debt and/or high debt service ratios, a persistent negative balance of payments, or a record of being late or having defaulted on its international payments.
Transferable L/C:
Under a transferable letter of credit a beneficiary (the first beneficiary) can ask the issuing/advising/confirming bank to transfer the letter of credit in whole or in part to another party/ies such as supplier/s (second beneficiary/ies). A transferable letter of credit is usually used when the beneficiary is not the manufacturer/original supplier of some/all of the goods/services. This process enables the beneficiary to pay the manufacturer/original supplier by letter of credit. If the bank agrees, this bank, referred to as the transferring bank, advises the letter of credit to the second beneficiary/ies in the terms and conditions of the original letter of credit with certain constraints defined in Article 48 of UCP 600. In general, unless the letter of credit states that it is transferable, it is considered non-transferable.
Revolving L/C:
Although infrequently used today, revolving letters of credit were a tool created to allow companies conducting regular business to issue a letter of credit that could roll-over without the company having to reapply, thus enabling business flow to continue without interruption as long as the terms and conditions, quantities, and other transaction details did not change. In addition, if a letter of credit were a revolving one, there were few ways to stop it from rolling over; so, should a conflict arise between the parties while the letter of credit was in place or should the products change, there was little recourse for either party. In the business world today, the fact is that, unless required by law or because of high risk, ongoing business is usually conducted without of letters of credit
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Standby L/C:
As is the case with the revolving letter of credit, standby letters of credit are infrequently used today. A standby letter of credit is one which is issued as a back-up or form of insurance for the seller should the buyer default on the agreed-upon payment terms. A standby letter of credit is issued in the same way a documentary credit is in that the collateral needed for issuance is required by the issuing bank and the beneficiary must comply with every detail as outlined in the letter of credit. The problem with this instrument is that the applicant has no guarantee, other than the sellers word, that the standby will not be drawn against even if payment is made as agreed. This situation is challenging, especially if the letter of credit is confirmed and the advising bank sees only documents pertaining to the shipment as outlined in the letter of credit and has no knowledge of other payments being made.
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OPERATIONS DEPARTMENT
There are different jobs which are performed in operations department. I will discuss them one by one.
Clearing of cheques
There are different types of clearing. First we have inward and out ward clearing. Inward clearing means cheques sent by us for collection on the behalf of customer and out ward clearing means cheques issued by our customers and presented for payment through clearing. Within these types we have some more types of clearing.
1. Normal clearing:
It takes 3 days for normal clearing and if we have a cheque of other branch it is known as credit cheque because we have to credit this amount into the customer account and if our cheque is deposited into other bank it would be debited to customer account.
Steps in Clearing
First of all we have to match the contents of NIFTs list with cheques they provide. All the cheques written in list must be present in the bag. We have to enter all the cheques in our excel sheet to have a summarized record. And in case of any mistake in entering those cheques in MIBS (system used for posting) we can compare this sheet with systems result. Then we have to check the cheques issued by our customers to check for any errors present. It has the fallowing main steps. 1. Amount in words and figures should be same. 2. Cheque should not be more then 6 months old. 3. Stamp of clearing should be placed on every cheque. 4. Signature should match the specimen provided at the time of opening of account 5. Account balance should be more then the value of cheque Difference between clearing inward and outward is transferred to head office account through debit or credit voucher.
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Date
Drawer
Payee
Signature
(A/c holder)
(Receiver of cheque)
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On copy B & C in debit section we write the A/c # of person we are transferring his money to other branch and in contra we credit the responding branch.
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WORK DONE BY ME
On the first day of my internship, the chief manager gave me a brief introduction of Islamic banking and introduced me to the staff members. I was given a brochure that had the information about Islamic banking, the deposit schemes and the different types of accounts.
During the rest of the week, the process of account opening was introduced to me. I was given an account opening form which I studied thoroughly and learned about the information that is required from the customer. Primary requirements of account opening are: Computerized CNIC Source of income
Verysis:
The bank has authorized itself for the facility of Verysis for the verification of the CNICs of the customers for the purpose of account opening. When a customer wants to open account with MCB, he has to fill the account opening form and attach some documents with it as well. Following information is required from the customer: Title of Account Full Name of Applicant Occupation Address Telephone No. Currency of account Nature of Business (where applicable) Introducers Name, Address & Signatures Special instructions (if any) regarding the account Institute of Business & Information Technology 54
I also studied the KYC (know your customer) form. This form is used to find out the risk associated with the customer that is found through: The citizenship status Geographical address Occupation Political exposure of the person Length of banking history Transaction profile
This form is filled in by the account opening officer. The purpose of this form is the accountability of the customer. The customer is rated as a high risk or a low risk customer in this form.
I studied the account opening files of the different clients to see the documents requirements for different types of customers like individuals, private and public limited companies. As the branch is Corporate and wholesale banking branch, the accounts of different companies are also maintained there.
During
the
first
week
of
my
internship,
assisted
Mr.
Mustafa in the account opening of a new customer. I got the Account opening form and the specimen signature card filled from the customer and then filled out the KYC form. Then I saw the process of entering the information of the customer in the system for opening of account. I scanned the documents of the new customer.
I also studied the SMART CARD and GOLD CARD application forms.
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In the Operations department, Ms Sundus was my supervisor who is the incharge of current/ saving. I performed the following tasks in that department.
1. Preparation of vouchers and advices: The working in the Operations department includes the preparation of several vouchers. Whenever any account or GL head is debited or credited, a voucher is prepared for its documentation. Afterwards these vouchers are kept as record and used in future if any transaction needs to be confirmed. I prepared the following vouchers in the Operations department.
i.
Clearing vouchers:
The cheques that the branch sends to NIFT for clearing are received the next morning. A voucher is prepared (debit or credit) for the amount of clearing and the instruments are credited to the accounts of the customers.
ii.
Service charges:
Whenever service charges are charged from a customer (individual or corporate) of the branch, these charges are debited from his/ her account through the preparation of voucher. There are different vouchers for corporate and individual clients.
iii.
Transfer of salary:
I also prepared the vouchers for crediting the salaries of the employees of the branch to their accounts.
iv.
Preparation of advices:
I prepared SF- 179 (inter branch credit advice) in the Operations department for the utility bills, transfer of funds of corporate clients from Premier Branch to our branch and Onlines.
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2. Preparation of Excel sheets: I assisted my supervisor in the preparation of Operations daily sheet, Clearing sheet, ATM sheet, Trial Balance. These sheets are prepared on Excel for keeping a check that the transactions are balanced. There prints are taken at the day end and are attaches with the printing of the system.
3. Arranging the files: I was assigned the task of arranging the account opening files according to their catalogue.
4. Filling the funds transfer application: During my stay in the Operations department, I learned how to fill up the Funds Transfer Applications and also filled some of these applications. 5. Filing of the printings: I did the filing of the printings; these printings of the system are taken at each day end and are filed in the respective files.
6. Making entries in registers: A register is maintained for the FED charges taken from the customers. I was assigned the task of making entries in that register form the printing of the system.
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When I was sent to Credits department, Mr. Kashif Maqsood was my supervisor there who is the Credits manager of the Branch. He assigned me the following tasks: 1. Preparation of Advices for funds transfer: I prepared the inter branch credit advices for the transfer of funds on standing instruction of the corporate clients who were taking financing facilities from the Branch.
2. Scanning of documents: I was also assigned the task of scanning different documents which were to be mailed to the EFU house branch. Because Ajmal house Branch also coordinates with the EFU House Branch which is the main corporate branch of the city.
3. Faxing the advices: In the credits section, the funds are transferred to different branches for making payments like payments of Murabahah. This is done through the preparation of advices (SF-179). One copy of this advice is faxed to the responding branch and then mailed through TCS.
4. Confirming the faxes: Whenever an advice is faxed, it is confirmed from the responding branch that whether they have received the fax or not and whether it is in the readable form or not. I confirmed the advices that I faxed.
5. Preparing Excel sheet: I was also assigned the task of taking all the vouchers of the credits section in the Excel sheet to see if it is balanced. Its print is attached with the printing of the system at the day end.
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6. Preparation of Offer and Acceptance documents: In the case of Murabahah, Offer and Acceptance agreement is made between the client and the bank as described earlier in the report; Mr. Kashif also assigned me the task of making Offer and Acceptance agreements of Murabahah to make the concept of Murabahah clear to me. I also did the calculations for the Murabahah sale price.
7. Making entries in the ledgers: I made entries for the rentals taken from the customers of car Ijarah in the Ledgers.
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SUGGESTIONS
I have the following recommendations for MCB Bank limited and MCB Islamic Banking Division. MCB is growing at a fine rate. While doing so it needs to maintain the status of all its branches. The main focus should be to update all old branches to new online branches so that a stronger inter-branch communication is maintained. Awards, appraisals and bonuses should be arranged for the staff as they work beyond the working hours. In Ajmal House branch, this was a normal practice. If the staff is appraised for its services only then they can keep the customers delighted. For the conventional banking sector, MCB is doing very fine marketing of all the available products and services. The Islamic Banking Division has been there since the last six years but no proper marketing is being done for its products and services. The Islamic banking products should be marketed extensively so that their customer base is increased.
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Customer Vouchers:
It is used to pass any entry regarding the customer account means whenever we are going to make a change in customer account we have to use these vouchers. It has 2 copies first for office use and 2 nd carbon copy for the customer. Debit voucher is used to deduct money from the account and credit voucher is use to add money into the account. If we receive CBT favoring any customer of our branch then we have to fill a credit voucher to add money into his account. If we charge any commission or transfer money to other bank on the instruction of bank we have to fill a debit voucher to deduct money from customers account.
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