Introduction Name:

Muhammad Ismaeel Irfan Roll No: AD514231 Level: MBA (IT) Course: Financial Accounting Tutor: Mr. Naveed Pasha

Introduction to OrganizationBank was Incorporated in July 9, 1947 by Adamjee Group, Under Indian Companies Act VII of 1913. Now Mr. Mian Muhammad Mancha is the Chairman of MCB Bank Ltd. MCB Bank has 1026 Branches nationwide. MCB is Pakistans fourth largest bank by assets having an asset base of US$6.7 billion.

Where did I Visit

I did made total three visits to the Organization, One Visit to MCB Regional Office Paris Road where did I met Mr. Alvi Regional Manager Operations. I get there to obtain all possible information about MCB. And there were two Visits to MCB Bank Trunk Bazar Branch Sialkot. There I meets Mr. Asad Internal Control Head.

Organization Working

Mcb has the Business of Banking, Car Leasing, Visa Cards, Credit Cards. They Provide Loans, They Provide Customers Savings and Current Accounts. Vision Statement: To be the leading financial services provider, partnering with thier customers for a more prosperous and secure future. Mission Statement: They are a team of committed professionals, providing innovative and efficient financial solutions to create and nurture long-term relationships with their customers. In doing so, we ensure that our shareholders can invest with confidence in them.

Introduction to Issue

Our issue is to select any organization and define the Techniques which they are bieng using in order to minimize the credit risk.

What

is Credit Risk?

Credit Risk is the Risk of loss which is usually faced by the one who offers the loan or provide any thing on credit basis to any one.

Introduction to Issue

Credit Risk can be faced by the following Credit Risk can be Faced by Lenders to Customers Faced by lenders to Business Faced by Business Faced by Individuals

Techniques in order to minimize the Credit Risk in MCB Bank.

FINANCIAL ANALYSIS: In order to minimize credit risk, financial analysis is carried out to assess risk, repayment capacity, liquidity, leverage and debt to equity ratio. Financial Statements i.e; Balance Sheet, Income Statement, Cash Flow statement are the basis tools which are used to carry out financial analysis. Current Ratio which shows liquidity position of a certain business. Acid test ratio is used to ascertain the ultimate liquidity position of the business.

REPAYMENT CAPACITY: Timely payment of markup on quarterly basis and completion of other formalities of Bank shows repayment capacity. FINANCIAL BACKGROUND: Financial background of a particular borrower helps in making credit decision in sanction credit. Credit Reports of the borrower can be obtian from other banks, CIB Report, Search Report etc. MARKET REPUTATION AND GOODWILL: Repayment behavior can also be assessed by market reputation and goodwill of a particular borrower. Financial Statements, CIB Report also shows borrower's behavior towards debt servicing behavior. For this purpose MCB using tools like CIB (Credit information Bureau) Report, Search Report from ICIL.

PRIMARY SECURITY: MCB secure lending by means of primary security i.e; hypothecation, pledge, lien etc. SECONDARY SECURITY: MCB secure its financing by way of secondary security in shape of Mortgate i.e; Registered Mortgage, token mortgage and Equitable mortgage in order to secure its loans. LEGAL DOCUMENTATION: MCB is the pioneer in Basel II Implementation and Credit Risk Assessment of world class standard. MCB does not compromise on legal documentation. LEGAL OPINION AND FINAL LEGAL VETTING: In order to safe bank's interest, MCB arrange legal opinion and vetting from senior advocate registered with MCB Panel.

Data Collection

1. Mostly Data Collected By Visits. Two Visits to MCB Trunk Bazar Branch Sialkot, and One Visit to Mcb Regional Office Paris Road Sialkot. 2. Other In Internet Searching. 3. Book Study 4. My Own Information. 5. Some Information Obtained from Friends 6. Some Information Collected from Some Teachers

S.W.O.T Analysis

Strength.

As when Bank Takes Primary and Secondary Security from the Customer to Which the loan is offered then the Bank Loan Get Saved. If the Customer Fails to Return the Loan the Bank can Recover its Amount by Selling the Securities such as Mortgage etc.

Weakness.

The Weak Point is that if Customer is Fraudulent or Get disappears some where then the bank be not be able to recover its amount. Or If the documents given to Bank are not Legal then bank have to afford the Loss. Or when Customer gets insolvent and its Property which is pledged by Bank is not sufficient to recover all the debts then the Bank have loss.

Opportunities.

As we know that the Business is the name of Risk, if they want to survive in the World of Business then they have to take Risks, by taking and facing these Risks the Business can gets valuable Customers. The Business can get many opportunities to expand its business.

Threats

There are also many kind of Threat which prevails in MCB in the Sanction of Loan. 1. The Threat of Fraud by Customer. 2. The Threat of Customers Insolvency. 3. The Threat of Centralizing or Decentralizing of Banks by Government. 4. The Threat of Illegal Documentation. 5. The Threat of deficiency in the Pledged property. 5. The Threat of Credit Loss. 6. The Threat of Fraud by Employees.

Conclusion.

According to all above discussion, All techniques discussed are sufficient to minimize the credit risk but still there are some weak points such as if customer is fraud or if his purpose is to do fraud then may be the bank will not be able to recover its amount Or if any Authority of the bank involves in fraud then the bank may faces loss

Recomendations.

The Recommendation is that If MCB want to minimize the Credit Risk at extreme level then they should follow all the Steps Discussed above (Financial Analysis, Repayment Capacity, Securities Etc), they should hire Honest, talented and Competent People, They should never Trust Unknown Person who applies for the loan, first they should full fill all the requirements which has been discussed before the sanction of loan.