Non Fund Based Products & Services of MCB 1.

Finance against Trust Receipt (FATR) What is Finance against Trust Receipt (FATR)?

The MCB Bank may at the request of the customers, at the time of opening of LC or at a later stage, release the import documents of related goods received under the LC or against bills under collection both inland or foreign, to enable the customer to obtain delivery of the goods And arrange to retire the documents out of the sale proceeds of goods, or from other sources, within the stipulated period, which is set in line with the customers inventory turnover cycle. The documents of title are delivered against the customers signature on the prescribed Trust Receipt form/related security documents covering hypothecation of goods. Purpose: To adjust / retire shipping documents under LC (S) and to cover the transit period Repayment: Principal is repayable on or before maturity while Markup is to be serviced upon adjustment of the loan or at the end of each calendar quarter whichever is earlier. Security: Trust Receipt

2. Finance Against Imported Merchandise Purpose: To adjust FATR on due date. Repayment: Principal is repayable on or before maturity while Markup is to serviced upon adjustment of the loan or at the end of each calendar quarter whichever is earlier. Security: Pledge of stock of imported merchandize lying at Mill Premises. 3. Export Refinance 1, Export Refinance 2

Any exporter can avail the Export Finance Facility through MCB bank, after fulfilling collateral requirements of the bank. The decision to lend shall be taken by the bank under its own internally approved credit policy. Export refinance 1 In MCB Bank financing under Part I of the Scheme is a transaction-based facility. The finance is granted by the MCB bank to the exporter on the basis

of a Firm Export Order / Export Letter of Credit, for a maximum period of 180 days. The financing facility can be availed at preshipment stage for procuring inputs and manufacturing the goods to be exported. Financing at Post Shipment stage is also granted against goods already shipped to the importer abroad, for the period up-to realization of export proceeds or 180 days, whichever is earlier. This facility is provided only those exporters whose manufacturing material is ready to trade in the foreign market and bank only provide this facility because the client has manufactured goods but not the finance to facilitate trade. Export refinance 2 In MCB bank financing Under Part-II of the Scheme, a revolving finance limit is sanctioned to the exporter equivalent to 50% of his export performance during the previous year on July-June basis. Exporters can avail this financing facility for a period of 180 days. Facility Once availed needs to be repaid in totality. Exporters having availed Part-II facilities have to export / ship eligible goods and realize export proceeds and submit the evidence of Performance on the prescribed statement within two months from close of each financial year. MCB bank provide the facility because the client has already purchased the machinery but the production didnt start due to lack of finance so in this regard government facilitates the client with funding to make the trade happen. 4. Foreign Bill Purchased (FBP) An instant financial solution for exporters with payment on L/C, D/A, D/P basis" To obtain a production continuity and to maximize every sources, Exporters should make the best of our Foreign Bill Purchase. Transactions in Foreign Bills Owing to the fluctuations of the foreign exchanges, foreign bills have been drawn of late for the most part in dollars. If an advance is made on a bill which is drawn in foreign currency, the customer is either given a percentage of the converted value or the exact amount of the converted value, depending upon his credit standing and that of the drawee abroad. The ledger for foreign bills purchased is much the same in principle as the one illustrated under foreign exchange purchased and sold. Briefly, there are on both debit and credit sides foreign amount (or dollar face) and dollar cost columns; the profit is computed by deducting the dollar cost of a bill from the amount of the proceeds in dollars, the proceeds being increased by the interest charge made against the American customer for the time which has elapsed between the extension of

the dollar credit to him for the bill and the receipt by the bank of the proceeds. Thus if a bill cost $25,000 and the bank collected, including interest, $25,200, its gross profit on it would be $200. This illustration covers bills drawn in dollars only. The classification of accounts in the foreign bills ledgers is ordinarily by country to which sent. Whether the bills are drawn in dollars or foreign currency does not matter so far as bookkeeping is concerned. The bank general ledger debits and credits covering advances on foreign bills are as follows: Debit: Advances on Foreign Bills Credit: Cashier's Checks The term "advances on foreign bills" is better than the phrase "foreign bills purchased" because no bank buys outright a customer's bill, but always takes it subject to charge back if the bill is not paid by the drawee abroad. Fund Based Facilities Ijarah Products 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 after the Ijarah has matured. Under this scheme, MCB will be the owner of the asset, and the 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 the customer (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. Types of Ijarah Car Ijarah Equipment Ijarah

Murabahah It is 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. Murabah Sale Price = Cost + Expenses incurred + Agreed Profit

Parties in Murabahah Buy Banks Customer er Sell Bank er Appointment of customer as agent of the bank Age (Foreign Transactions) / common broker (for Local nt Transactions). Types of Murabahah DOMESTIC (Local Purchases) Murabahah General, for purchase of cotton or any other commodity on deferred payment basis INTERNATIONAL (emerging from SLC) Spot Murabahah (Cash Retirement) Deferred Payment Murabahah a) Pledge of Imported Goods b) Trust Receipt c) Ship Breaking

Diminishing Musharika Equipment It is a contract through which the bank and its client participate in the joint ownership of a property. The share of the Bank is further divided into a number of units and it is agreed that the client will purchase the banks share periodically, thus increasing his own share until all the units of the bank are purchased by him so as to make the client the sole owner of the property. Parties in Diminishing Musharakah (In joint partnership with its customer) (Banks customer)

Ba nk Partn er

Diminishing Musharakah Pricing The buying (per unit price) for the buyer is determined at the beginning of the partnership. The monthly payments paid by the buyer includes this price plus rental charges since the buyer is already in possession of the commodity and is using it.

Process Flow

1- Diminishing Musharakah Agreement (Entails that the Bank and the client are joint owners of Equipment, enjoying ownership rights in undivided Equipment and that both are jointly responsible for all the expenses related to ownership. Under this agreement the client shall purchase units of Banks ownership in the Equipment at the Buy Out price that shall correspond to the cost value of the Equipment). 2- Lease Agreement (The client gets exclusive right to use the Equipment in consideration of a rental). 3- Undertaking to Purchase (The client will purchase the Musharakah units from the bank).

Imports (Financing against Import Bills) a) The facility for imports can be allowed only from the date of actual execution of import payments in foreign currency by creating a foreign currency loan against the importer. The maximum period of such loans should not exceed six(6) months from the date of disbursement. b) For repayment of the loan, the Authorised Dealers are allowed to purchase foreign currency to the extent of loan from inter-bank market at the prevailing exchange rate on the date of repayment in order to adjust foreign currency loan outstanding against such importer(s). c) Authorised Dealers are allowed to purchase foreign currency from interbank market to cover the interest amount on such loans against submitting M forms alongwith monthly foreign exchange returns. d) The reporting of forms I would be on the date of actual payment against the documents. e) No forward cover will be provided to importer(s) who avail foreign currency finance against FE 25. The forward cover facility is allowed only against outstanding import commitments. 2. The reporting procedure would be as under: Lending to Exporters.

At the time of extending the loan, the transactions will be reported on Schedule J as receipt of loan under the Code No.9711 (as MCB bank will purchase the foreign exchange component of the loan and disbursement will be made in equivalent Pak Rs.). At the time of adjustment of loan at realization of foreign exchange proceeds of exports, the realization of export bill will be reported under relevant code vide code list No.4 on Schedule A-1 and the amount of loan and interest repaid as sale on Schedule E-4 under code No.1712 and 1224 respectively vide code list No.7. Lending to Importers. At the time of extending the loan, there will be two sides to the transaction, payment abroad against import will be reported on Schedule E-2 under relevant Code vide Code list No.6, while the loan will be reported on Schedule J as receipt under Code N o.9711. At the time of adjustment of the loan, the amount of loan will be reported as sale on Schedule E-4 under Code No.1712 vide Code list No.7 of Circular No.52 of 1984. The amount of interest paid would be reported as sale on Schedule E4 under code No. 1224 vide code list No. 7.