The fund deposited in the MCB bank can be classified 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.
♦ Bank does not pay any profit on current deposits.
♦ There are of different scheme of saving deposits, which are classified under
different duration purpose and rate of interest.

Rules for Current Account

Current a/c holder opens Current Accounts on proper introduction only.

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

A) Minimum Balance

A sum not less then RS. 1,000/- in cash as initial deposit is required for opening a
current account and the same may be maintained as minimum average running
credit 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.
♦ Current a/c cannot be overdrawn, except by prior 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 distinctive number will be allotted to each current account and shall be
quoted on all correspondence relating to the respective account and at the time of
making deposits and withdraws

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 bank. The account holder can draw sums
from his account by means of cheque supplied to him by the bank for that
particular account. In drawing cheques the amount in words and figures should
be written distinctively and the cheque should be drawn in such a way as to
prevent the insertion of any other word or figure. Account holder should take
well care of the cheque books issued to them. The account holder will pay excise
duty 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 (single, joint) institutions, companies,
educational 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

1. Profit and Loss Sharing Account

PLS saving account having a running minimum credit balance of RS. 1,000/-
would be eligible for sharing profit/loss of the bank. The bank would be within
its rights to make investment of credit balances in the PLS saving accounts in any
manner at its sole discretion and to make use of the fund to the best of its
judgement in the banking business under the PLS system.

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. For 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 end 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 6th day and the last day of the month. If the balance is
less than Rs.100/- the product will be nil.

Rules for PLS

♦ Account holder can only withdraw sums from his account by means of
cheques supplied to him by the bank for that particular account.
♦ Post dated and stale cheques shall not be paid.
♦ The bank reserve to itself the rights to close any account without previous
notice any account which has not satisfactory account credit balance.
♦ If the account holder withdrawals the money under 7 days notice, the profit
loss earning products will be computed on the monthly minimum balance. Zakat
is deducted every year on non-exempted accounts.

2. Khanam Bachat Scheme

Target Market

♦ Individuals planning to save funds for education & marriages of their young
sons /daughters.
♦ Individuals interested in long term deposits.
♦ Individuals in low class middle group.
♦ Individuals showing confidence in Bank’s long term schemes than schemes
of similar maturities offered by others.
♦ The loving parents that want best for their children.

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.

♦ Account in the name of miner can be operated by mother, father or jointly as
guardian.
♦ No advance can be extended against a minor account.
♦ If anybody withdraws prematurely then profit will be calculated on prevailing
PLS account.
♦ 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
♦ Individual interested investing for five years saving 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 is deducted on payments and profit according to government rules.
♦ Services
♦ We 7 our nominee can collect cross pay order.
♦ Profit amount can be send to you by postal money order & demand draft.
♦ Profit will be paid from that branch where you 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.
 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.

♦ Individuals living abroad but their families are in Pakistan.
♦ Busy individuals who don’t have time to pay their dues monthly.

Special Incentives

♦ Return is calculated on daily average balance.

♦ Profit is paid half yearly.
♦ It can be operated at mostly all the branches of MCB.

5. 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. All that is required is a minimum
amount of deposit. At the end of the stipulated period, the bank returns close to
twice as much.

Target Market

♦ Individuals interested in medium term saving schemes.

♦ Individuals of middle income class group.
♦ Individuals keeping excessive balance in current accounts.
♦ Individuals interested to save fund for lump sum, education & marriages.
♦ Individuals seeking protection against increasing inflation rate.

Conditions

♦ Minimum deposit will be Rs 10,000 with no limit for maximum.

♦ Time span is minimum five years can be expanded to 5 years.

Interest

Initial Deposit Payment upto maturity (approx.)

(Rupees) (Rupees)
10,000/- 20,000/-
50,000/- 100,000/-
100,000/- 200,000/-
1,000,000/- 2,000,000/-

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

“PLS Saving Accounts “ profit rates declared by the bank for that particular
period.
♦ Depositors will be required to fill in Account Opening Forms.

6. Fixed deposits

Fixed deposits are those deposits which are by the bank under the conditions that
they will not be payable on demand but will be payable under fixed or
determinable future time date.

Foreign Exchange Department

IMPORT

This department provides the facility to their customers to import machinery or

products from other countries. It is necessary for the importers to have the
licenses, which is issued by the chief controller of imports and exports. Before
obtaining an import license the license 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
♦ National Tax Certificate issued by the Income 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 Performa
Invoice. The seller sends this invoice to the buyer and it contains seller name,
product quality. Rate, mode of shipment, and other terms and conditions.

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 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 goods are actually
shipped and the documents received by the bank.
3) In case of non-payment the seller should be assured to legal rights in foreign
country.
4) There should be an agency, which should meet the seller’s need of finance
when the goods are shipped.
5) The commercial banks come to the help of exporters and importers.
6) The importers can undertake the obligation to pay to the exporter for the
purchase made by the importer and this is usually done through a letter of credit.

Explanation

A letter of credit is a:
1) Written undertaking by importers bank to a third party i.e. the exporter.
2) That it will be pay or accept draft (letter of credit) drawn upon it up to a
started sum of money within a specified time.
3) That the payment will only be made to the exporter if he complies with the
specified terms of credit.

Parties Involved in a Letter of Credit

There are four parties involved in a letter of credit

♦ Account party
♦ Issuing party
♦ Exporter
♦ Paying or negotiating bank

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 party

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

Exporter

The seller or the party in whose favour the letter of credit is draw is the third
party and it is also known as beneficiary.

Paying or negotiating bank

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

Operation of a letter of credit

1) The importer of buyer contacts the seller in foreign 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 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 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,
ß To issue letter of credit on agreed terms and condition with the buyer.
ß To have a proper examination of the documents.
ß To honour draft when presented with proper documents..

Types of Letter of Credit

1) Irrevocable letter of credit

2) Revocable letter of credit
3) Confirmed letter of credit
4) Unconfirmed letter of credit
5) Documentary letter of credit

1. Irrevocable letter of credit

It is the one in which the issuing bank gives a lasting undertaking to accept and in
due course to pay bills drawn upon it provided the exporter fulfils the terms and
conditions. It gives a complete protection to the exporter.

2. Revocable letter of credit

It is the one in which can be modified or cancelled by the issuing bank at any time
without any obligation on its part. They are not acceptable to the 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 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 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 by the importer to the bank
6) Liability of the issuing bank

1. Application for a letter of credit

An importer prepares an application on the prescribed form available from the

bank. The information which are supplied in the application are based on the
contract of sale and include only the importer feature of contract such as the
value of the merchandise, port of shipment, port of unloading, expiry date of the
papers and brief description of the goods. If the bank is satisfied with the
applications, it will signed and acceptance agreement with the importer.

2. Line of credit

Before issuing a letter of credit, bank takes all necessary precautions for securing
its credit. The bank first examines the customers credit standing, the type of
goods to be imported, the market demand for the goods, the collateral offered to
cover the credit. Then it establishes the amount i.e. the line of credit.

3. Opening of letter of credit

The letter of credit can be opened by mail or by cable. When it is opened by mail,
the issuing bank sends letter of credit and to carbon copies to the importer. The
importer then dispatches the letter of credit to the exporter in foreign country by
mail. One carbon copy is kept for the record. The second carbon copy after
signing is sent to the bank by the importer. If an importer directs the bank to
open letter of credit by cable, the importer’s bank sends a cable to the
corresponding bank in the foreign country with a request to notify the exporter.

4. Handling of the documents

When the exporter receives a letter of credit, he presents the required documents
and the draft to the bank in his own country after shipping of documents. If the
bank is satisfied with the documents in the importing country and pays the
exporter at official rate in the currency of his own country.

5. Payment by importer to the bank

When a bank approves the application of a customer for opening letter of credit,
it does not lend money to the importer. The bank only lends the importer to use
the credit standing of the bank to the exporter in the foreign country. The bank
makes a contract with the importer that when the draft if send by the negotiating
bank for payment the importer will make the payment to the bank not later then
the day only the bank is to honour the obligation. In case of a sight letter of credit
the payment to the corresponding bank is to be made on the day the draft and
documents are received. When the time of letter of credit is used the importer is
to arrange the payment not later than the day on which the draft is to mature.

6. Liability of the issuing bank

The liability of the issuing bank is to examine the documents in order to confirm
their validity. If the documents on the face appear to be in order the payment
should be released. If any defect is found in the documents and the issuing bank
honours the draft, the importer can claim damages. The banker is not
responsible to see whether the merchandise conform the sale of contract or they
physically exist. The issuing bank is only responsible for the completeness and
regularity of the documents relating to the letter of credit.

Importance of Letter of Credit

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

Benefits to the Banks

♦ Increased balances
♦ Commission
♦ New business opportunities

Increased balances

♦ The balances are the lifeblood of every commercial bank.

♦ The banks get mark up on the credit and this mark up increases the money of
the bank

Commission

The commission charged by the banks varies with the kinds of letters issued by
them. Though the commissions are small, yet when counted on the whole, they
form an important part of earning of the banks.

New Business Opportunity

The letter of credit provides new business opportunity to the bank. The firms,
which are engaged in the export and import of merchandise, are introduced to
the banks, which by serving them develop profitable relationship.

Opening of Letter Of Credit In MCB

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

♦ The applicant must has import registration #
♦ He must has account in that bank
♦ He must pledges his security against the L/C amount
♦ He must have IB-8 form, indent or agent form, and performance invoice.

Bank Charges

♦ The bank takes commission @ 0.40 % of amount of L/C for one quarter and
0.25% for two or more 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
♦ Bridges credit gulf
♦ Payment in domestic currency

Shipping Terms

The following shipping terms are used in international trade.

♦ EX-works
♦ FCA ( free carrier)
♦ FAS(free along side)
♦ FOB( free on board)
♦ CFR(cost & freight)
♦ CIF(cost insurance freight)
♦ DAF(delivered at frontier)
♦ DES(delivered EX-ship)
♦ DEQ(delivered EX-quay)
♦ DDU(delivered duty unpaid)
♦ DDP(delivered duty paid)

Documents

Documents are the most important part of international trade. Without them
trade cannot be completed. Documents are of five types.
1) Commercial documents
2) Transport documents
3) Insurance documents
4) Financial documents
5) Official documents

1. Commercial Documents

Commercial documents consist of following forms.

♦ Invoice form
♦ Certificate of origin
♦ Weight note
♦ Packing list
♦ Quality or insurance certificate

2. Transport Documents

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

♦ Letter of insurance
♦ Insurance policy

4. Financial Documents
These documents are concerned with the payments of goods. These documents
consist of following forms.
♦ Bill of exchange
♦ Clean bill
♦ Short bill
♦ Documentary bill
♦ Bank bill
♦ Delivery against acceptance
♦ Delivery against payment
♦ Promissory note

5. Official Documents

These documents consist of following 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. Thus this department of a bank helps the exporters to settle down
their financial affairs. For exporting it is necessary for exporter to get export
license from the chief controller of import and export after registration.
Documents are required for the registration such as N. I. C. Card, income tax
certificate, bank certificate which shows that the exporter is his account holder
and have a good dealing with them. In response to the letter of credit exporter
submit the following documents to the negotiating bank.
♦ Bill of exchange
♦ Invoice
♦ Bill of lading or Airway bill/railway receipt/truck receipt
♦ Insurance documents
♦ Packing list
♦ Any other documents, if so required.
The negotiating bank will send the same documents to the issuing bank. In
accordance with the terms and condition laid down in letter of credit.

Security of Documents

Whether documents received are meant for the opening bank and specifically for
the branch which established the letter of credit. The documents would be
negotiated within the validity of L/C. The goods have been shipped within the
time allowed under L/C. The goods are mentioned in invoice and other
documents (e.g. bill of lading, packing list etc) are in accordance with
merchandise clause L/C.
Whether the documents received pertains to L/C , established by the opening
bank and the documents negotiated are within or equal to L/C amount. In case
where the value of documents exceeds the L/C amount, the foreign bank may
negotiate the documents for amount being marginally excess or sends them on
collection, remittance may be allowed in excess subject to the following
conditions
♦ The amount does not exceed 5% of the amount of L/C subject to the
maximum of US$ 500/-
♦ The importers holds a valid import license against 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 that on the
import license. The tenor of the bill should be valid. See that the goods are not
shipped prior to the date of opening of L/C or the documents are not stated.
The goods are consigned or endorsed in the favor of the bank only opening the
letter of credit, and in no case it should be consigned to the importer directly.

Retirement of Documents

When the opening bank against a letter of credit receives documents. The
customer retires the documents under different arrangements e.g.
♦ Retirement against payment by the importer
♦ Retirement of documents in case of None-payment by the importer
♦ Retirement of documents under trust receipt

Retirement Against Payment by the Importer

The importer approaches the bank for retirement of the shipping documents.
Mark is calculated and recovered on 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 the Bank

♦ Debit importer a/c

♦ Credit PLS-payment against documents A/C
♦ Credit: PLS-income a/c mark-up recovered on PAD
♦ Credit: telegram/telex/postage charges a/c.

Retirement of Documents under Trust Receipt

Shipping documents are released to the importer on trust, that he may get the
goods cleared from the custom authority by himself, sell the good, and later pay
back the bank. Trust receipt financing is limited to first class customers only as
the bank reposed fullest confidence on the importer. Documents are obtained
from the 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 the funds to
the negotiating bank. The exporter will receive the payment from the negotiating
bank.

EXPORT RE–FINANCING

It is most important features of export. Export refinancing is used to enhance the

export of the country. It was firstly started in 1977 and re-established in 1994.
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 of the bank. This export-refinancing advance can only be used for
export and not for other purposes, state bank gets information about export
through E – 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

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 shipping the products.

P-1 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.

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. The companies have to export
double than the advance gets through P-II shipment. In P-II pre-shipment the
lumpsum amount can be calculated on the basis of performance of the last year.
If a company is unable to make double export than the advance, then bank makes
some penalty in the forms of amount against the company.

SPECIAL PRODUCTS

Export refinancing cannot be applied for exporting all types of products. Some
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. Different limits are,
♦ Cash finance
♦ Running finance
♦ Demand finance
♦ Export refinancing I
♦ Export refinancing II
♦ FAFB
♦ FBP

FORMS OF EXPORT RE FINANCING

Different forms are 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.

Clearing Department
CHEQUES

When we talk of cheques then there are two types of cheques

1) Open Cheque

Open cheque has following 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 payment. The name of holder, no of cheque and amount is
written on the register by the bank employee & token is given to cheque holder.
Then Cheque reaches the computer department. There it is again feeded in
computer & it is stamped after checking the holder has enough amount in his
account or not. After feeding 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.

2) Crossed cheque

When the cheque does not fulfil the requirement of open cheque then it is known
as crossed cheque.

A) Transfer 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 situation cheques are collected separately as transfer Delivery.

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 cheque issuing branch in the same city.
In T.D Ledger Name of account holder, Number & amount of Cheque are written
and two copies , one 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 cheque with voucher goes to Main branch then to issuing branch and then
reverse from issuing branch to main branch and then to our branch.

B) 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 prepared (See Annexe ) . Original voucher with
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.

Advance 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 faraway branch . For example HBL of Baha-ud-Din Zakariya
University Multan.

Procedure of Payment of Cheque of Foreign Currency

When cheques are denominated in foreign currency then procedure is not like
that of ordinary cheques of Rs. First of all cheques are issued and the person give
cheque to another person. When any party receives cheque 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. Then cheque goes to New York.
From there it is send to that issuing bank (domestic) from where party has
received 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 account is in Foreign Currency other than the currency in cheque.

C) Cheque Collection

When cheque is from another city then it is grouped as C.C.

Procedure

SF-37 form is used in Cheque collection (See Annexe ) Original voucher with
cheque is send to main branch. 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-In-Slip

Purpose

It is used for two purposes

♦ Whenever we want to deposit cash in our account then pay-in-slip is used by
writing amount on it and depositing it to cashier along with money.
♦ Whenever we have cheque 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.

♦ Green Pay-In-Slip is used for Saving Account (See Annexe )
♦ Blue Pay-In-Slip is used for Current Account (See Annexe )

Stamps Used In Bank (MCB)

Following stamps are used in for different purposes.

(1)Cross Stamp

This stamp is used to cross the cheque. Crossing can be done by 3 ways.
a) General Crossing
Sometimes the cheque is crossed by the drawing two lines on the upper left
corner of the cheque without writing any sentence on the cheque.

b) Written Crossing

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 Account Will be Credited on Realisation”

This is used to stamp on the back of following instruments.

Cheque (simple). 2) Travellers Cheque. 3) Pay Order. 4) Speed Cash.
This means that the account of the payee will be credited provided that cheque is
accepted by Drawer’s bank otherwise not.

(3) Disbursement Guaranteed; Payees Account will be credited on

Realisation

It is used to stamp on the back of following instruments

1) Demand Draft . 2) Foreign Remittance

(4) 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 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.

(6) Round Stamp MCB

It is used in two places.

♦ When we are dealing 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 of one part of Pay-In-Slip and marks
his signature on it and give it to the customer as a evidence.

(7) Pay Cash

This stamp is used when cheque is not crossed, it is open cheque. The officer
places this stamp on the front 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.

Reasons for Cheque returned unpaid in Cross Cheques

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 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 of reporter.
♦ NIC no of reporter.
♦ Signature of reporter.
♦ How cheque was lost.
♦ FIR Lodged or not.

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 Heads:

1) Current A/C(2) Saving or PLS A/C (3) Other A/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

There are two sides of green sheet: Debit Side & Credit side.
Both sides should tally in figure amount. If Debit total = Credit total then sheet
is balanced and there 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.

RTC Department
This department deals in RTC. It stands for Rupees Travellers Cheques. MCB
RTC has the largest share of the total RTC Market. Over 1.5 Million satisfied
customers have made MCB RTCs. These are printed in the UK and 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).

Denominations

Cheques are available in the denomination of Rs 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 Features

MCB RTCs can’t be duplicated. Various security features both in design and
materials make counterfeiting or fraudulent alteration extremely difficult.

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

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 debited by that
amount by using form RTC-30. Summary of al RTC purchased by branch is made
on form RTC-40.

Remittance Department
REMITTANCE

Transfer of money or equivalent to money from one branch to another branch of

the same bank is called remittance.

IMPORTANT TERMS

Originating branch

It is the branch from which money is send to another branch or the point of
origin of remittance.
Responding branch

The branch which receives the instrument or 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 REMITTANCE

a) Inward Remittance

The branch which receives the instrument(T.T, D.D etc) directly from the
customer or from the originating branch and is responsible to pay to party is
called inward 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

The branch which issues or sold the instrument to the responding branch is
called outward remittance. In this case we are sending remittance to another
branch of the same bank in any location.

c) Inland Remittance

Transfer of money from one branch to another branch of the same bank within
the same country is called inland remittance. In this case both originating branch
and responding branch will be situated in the same country.

d) Foreign 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 ORDER (PO0.
3) MAIL TRANSFER (MT).
4) TELEGRAPHIC TRANSFER (TT).
1. Demand Draft

♦ Demand Draft is used for the transfer of money outside station.

♦ 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 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 facility of demand
draft. After depositing the amount of draft, remittance officer prepares the
cheque of demand draft.
♦ When banker issue draft to the customer, he also records customer
particulars in a demand draft register where record is maintained branch wise.
♦ Responding branch and originating branch debit/credit the head office
account and send the daily statement of transaction to head office.

2. Pay Order

♦ Pay Order is used as instrument for transfer of money within station or city.
♦ Pay order is written order, which is issued and received by the same bank or
drawn and payable on same branch.
♦ For pay order it is not necessary that applicant should be account holder.
♦ It is used for local transference of money from one person to another.
♦ The bank charges excise duty and flat rate from the applicant.

1. Mail Transfer

♦ The transfer of money from one branch to another branch of the same bank
through mail or courier service is called mail transfer.
♦ The applicant should be the regular customer or the account holder of the
responding as well as originating branch.

2. Telegraphic Transfer

♦ Originating branch send funds to responding branch instantly and

immediately through telegram and fax.
♦ Bank charges commission, telegram/fax charges on telegraphic transfer.

DOCUMENTS PREPARED

a. Application Form (SF-100)

Firstly, the application(see annexure ) is 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. Then in 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:

1: Advise & Pay

Here the bank informs the beneficiary (to whom the money is sent ) through
telephone or personal contact about the incoming cash.

2: Credit Account No

In this case, if the beneficiary has Account with the Responding Bank then his
account is credited 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, the applicant deposits the cash (cash to
be sent + Charges) at the cash counter and receives the application back by
having stamped and signed by the cashier. This application is then submitted to
officer.

b. Memorandum (SF-237)

The officer gives Memorandum to the applicant as a evidence of Remittance (see

annexe ). Bank charges along with some information about Remittance is
written on it. Officer signs at the end of the form.

c. Fax/ Telegraphic Message

In case if the Remittance is being sent through FAX/Telegraph then a special

form known as “ Fax/Telegraphic Message” (see annexe )
I t contains following information:
T.T No, R.No, Control, Total Rs Amount, Favour, A/C No Of Beneficiary, 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 number written on the form “Confirmation 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 Originating
branch, Responding branch, Date Total amount & Branch code of both branches.
For Example Branch code of MCB GBS Multan is (1412). These vouchers are used
to credit & debit purposes (see annexe ).

e. T.T Register

T.T.No R.No Favour Amount Date

Control

HEAD OFFICE ACCOUNT

All transaction relating to remittance will be routed through head officer account.
All the branches of MCB have an account of “Head Office”. Through this Head
Office account it become easier for branches to do the transaction with other
branches and update their books.

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, Name of Beneficiary, Branch, Code
Of 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.
4) Two Vouchers are prepared (SF-89-A & SF-89-B) which are in Green &
Pink colour. Amount of T.T is written on them. They also contain the heads of
Originating 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.

Financial Analysis Of MCB

For Year 1997-98

Ratios 1998 1997

Interest earned / Advances 27.33 % 26.32 %
Interest paid / Deposits 8.94 % 8.17 %
Admin Expenses / Deposits 4.85 % 4.85 %
Investment / Deposits 46.75 % 46.70 %
Advances / Deposits 50.81 % 51.74 %
EBT / Deposits 0.76 % 0.99 %
ROA 0.27 % 0.21 %
ROE 11 % 9%
EPS Rs 2.19 Rs 1.31
Cash Dividend / Share Rs 1.75 Rs 1.50
EXPLANATION

♦ Interest earned to advances increased in 1998, which is a positive sign and

shows increased income of 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 its position and
expenses. There is an increase in the income of the bank, but there is no major
increase in expenses. This shows a satisfactory position of the bank.
♦ The ratios of advances to deposits and EBT to deposits are not showing a
healthy sign due to:
ß The bank has paid a big amount as a cost/return on deposits
ß The bank has given less advances in 1998 as compared to 1997
♦ The return on assets and return on equity are showing a good position, which
refers to an improved financial position.
♦ The EPS and cost dividend ratios are showing an increasing trend, which
means the firm is enjoying a good financial position.
♦ Overall MCB has a good and healthy position. The profitability and income
is increasing, which is attracting new depositors and investors.