Bank Management on Mutual Trust Bank Limited (MTBL)

7/23/2019 Bank Management on Mutual Trust Bank Limited (MTBL)

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Execut ive Summary

In this study outsourcing is defined as the organizational practice of contracting for services from an

external entity while retaining control over assets and oversight of the services being outsourced. In

the 1980s, a number of factors led to a renewed interest in outsourcing. or private sector

organizations, outsourcing was identified as a strategic component of business process reengineering

!an effort to streamline an organization and increase its profitability. In the public sector, growing

concern about the federal budget deficit, the continuing long"term fiscal crisis of some large cities,

and other factors accelerated the use of privatization1 measures #including outsourcing for services$ as

a means of increasing the efficiency of government.

%his is an orientation report that contains the real life day to day wor&ing experience of different tas&s

in 'redit (epartment of )utual %rust *an& +imited, anthapath *ranch. )utual %rust *an& +td,

#)%*$ is a pioneer and leading private ban& in *angladesh. %o serve the nation )utual %rust ban&

performs some activities for their clients li&e- general ban&ing, loan and advance, capital mar&et

operation etc. *an& collects deposit from public and provide its to other business or individual as

loan. *an& pays interest to deposit holder and ta&e interest from borrowers. )utual %rust ban&

measure all ris& components before sanctioning a loan. /hen all the formalities completed then

respective officer disburse the loan. fter disburse the loan it is duty of ban& to recover the disbursed

loan. %his report is based on actual information and wor&ing procedure practiced in )%*. %he overall

credit management of )%* has analyzed to give a clean idea about the policy of )%* and

implementation of that policy by various mechanism and process. %he obective of this study is to

analyze the credit policy, rules and regulation of credit management and evaluation of the product

performance in order to identify the maor problems regarding the credit management.

%his report consists of an introductory part of this report, which has been developed for the proper

execution of the entire report. In the second part, a brief description about the host organization of my

internship, )utual %rust *an& +imited, has been given. In the third part of this report consist of

the theoretical aspects. In part four consists of some information about credit, its usefulness and

credit management policy of )utual %rust *an&. %he remaining part consist the analysis, findings,

recommendations and conclusion.


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Part 1Prefatory Part


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1.1 Introduction

In general sense we mean 2*an&3 as a financial institution that deals with money. %here are

different types of ban&s li&e 'entral ban&, 'ommercial ban&, 4avings ban&, Investment ban&,

)erchant ban&, 'o"operative ban& etc. *ut when we use the term ban& it generally means

5commercial ban& that is one which is concerned with accepting deposit of money from the

public, repaying on demand or otherwise and withdraw able on demand or otherwise and

employing the deposits in the form of loan and investment to meet the financial needs of business

and other classes of society.

6ow"a days ban&ing sector is modernizing and expanding its hand in different financial events

every day. t the same time the ban&ing process is becoming faster, easier and is becoming wider.

In order to survive in the competitive field of the ban&ing sector all organizations are loo&ing for

better service opportunities to provide their fellow clients. 4o it has become essential for every

person to have some idea on the ban& and ban&ing procedure.

)utual %rust *an& is a financial institution whose main obective is the mobilization of fund from

surplus unit to deficit unit. In the process of acceptance of deposits and provision of loan, *an&

creates money. %his characteristics feature sets *an& apart from other financial institution. %he

ban& can influence the money supply through lending and investment. %he ban& is an economic

institution whose main obective is to earn profit through exchange of money and credit

instruments.


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1.2 Origin of the Report

7roup ssignment program is essential for every ** student because it helps him or her to

acuaint with the real life situation. s ban& is one of the most important financial intermediariesso we have selected Mutual Trut !an" #imited $MT!#%& which is one of the most leading

ban&s in the new ban&ing arena.

)%*+ arranges this ssignment program to gather practical &nowledge about ban&ing activities

: managerial functions. %his is followed by practical experiences in the branches of )%*+. ;ur

topic for this 7roup ssignment is 'Managerial (unction in the )ontext of !angladeh*

placed in the anthapath branch of )%*+.

1.+ O,-ective of the tudy

!road O,-ective

%he first obective of writing the report is fulfilling the partial reuirements of the

)anagement in inancial institutions course.

Specific O,-ective

%he general obective of this report is to fulfill the reuirement of course.

%o acuire practical experience in different ban&ing services of )utual %rust

*an& +imited.

%o gather &nowledge about the transaction of different department of the branch.

%o &now about the 'redit products and the way of disbursement.

%o problem"prospect for investment.

)a&e the best effort to penetrate into the entire society with particular emphasis

on low income groups.

%o inform the ban&ing credit facilities to the mass people.

%o ma&e inspiration for micro credit as well as industrial loan by which more

employment can be created.


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1./ Scope of the tudy

In )utual %rust *an&, anthapath branch we get much facilities because of existing employee of

the branch.

)any helpful colleagues who give us lot of information.

ssistance of local management at any time.

Internet and ban& website is very much upgrade.

4upply of financial data.

1.0 #imitation of the tudy

%he 7roup ssignment was not free from limitations. /e faced some problems during the study,

which I am mentioning them as below-

Lack of time:/e had to complete this report within a very short span of time that was not

sufficient for investigation.

Lack of Supervision:s the officers were busy with their daily wor&, they could provide

us very little time. 4ometimes, they didnt want to supervise due to pressure of wor& load.

Restricted Information:%here are various information the ban& officer didnt provide

due to security and other corporate obligations.


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1. Methodology of the tudy

Sources of Data

%he report is descriptive in nature. %he information was collected from both primary and

secondary sources of data.


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Part 2

Organizational

ProleOf

MTBL


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2.1 Introduction of MT!#

)utual %rust *an& +imited #)%*+$ is one of the leading third generation private sector

commercial ban&s that started its ban&ing operation in (ha&a on ;ctober ?@, 1999. It has focused

on the established and emerging mar&ets of *angladesh. 'oncentrating hard on the activities of its

area of specialization, )%*+ has been able to achieve excellent mar&et standard with competent

customer service. *y means of such measures the ban& intends to grow and increase shareholdersA

value. )utual %rust *an& pledges to maximize customer satisfaction through services and build a

trusting relationship with customers, which has stood in the test of time for the last nine years.

%he emergence of )utual %rust *an& +imited was at the uncture of liberalization of global

economic activities. 6ot only this, it comes forward at a crucial state of affairs when *angladesh

was undergoing through economic reforms and trade liberalization according to the Bruguay


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2.2 itorical !ac"ground of MT!#

%he 'ompany was incorporated on 4eptember ?9, 1999 under the 'ompanies ct 199@ as a

public company limited by shares for carrying out all &inds of ban&ing activities with uthorized

'apital of %&. F8,00,000,000 divided into F8,000,000 ordinary shares of %&.100 each.

%he 'ompany was also issued 'ertificate for 'ommencement of *usiness on the same day and

was granted license on ;ctober 0G, 1999 by *angladesh *an& under the *an&ing 'ompanies ct

1991 and started its ban&ing operation on ;ctober ?@, 1999. %he ban& conducts all types of

commercial ban&ing activities including foreign exchange business and other financial services.

(uring the first two years of operations, the ban&As main focus was on the delivery of personalized

customer services and expansion of its clientele base. s envisaged in the )emorandum of

ssociation and as licensed by *angladesh *an& under the provisions of the *an&ing 'ompanies

ct 1991, the 'ompany started its ban&ing operation and entitled to carry out the following types

of ban&ing business-

I. ll types of commercial ban&ing activities including )oney )ar&et operations.

II. Investment in )erchant *an&ing activities.

III. Investment in 'ompany activities.

I3. inanciers, romoters, 'apitalists etc.

3. inancial Intermediary 4ervices.3I. ny related inancial 4ervices.

%he 'ompany #*an&$ operates financial activities through its >ead ;ffice situated at (ha&a and HF

branches. %he *an& carries out international business through a 7lobal 6etwor& of oreign

'orrespondent *an&s.

Mem,erhip of MT!#

1. )etropolitan 'hamber of 'ommerce and Industry, (ha&a #)''I, ($

?. %he Institute of *an&ers *angladesh #I**$3. *angladesh oreign Exchange (ealers ssociation #*E($

@. *angladesh Institute of *an& )anagement #*I*)$

G. International 'hamber of 'ommerce *angladesh +imited #I''*$

C. ssociation of *an&ers *angladesh +imited #**$

H. *angladesh ssociation of ublicly +isted 'ompanies #*+'$

8. merican 'hamber of 'ommerce in *angladesh #)'>)$

2.+ Miion 4 3iion of MT!#

Mission


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We aspire to be one of the most admired banks in the nation and be recognized as an innovative

and client-focused company, enabled by cutting-edge technology, a dynamic workforce and a

wide array of financial products and services.--- )%*+ 7roup.

Vision

)utual %rust *an&As vision is based on a philosophy &nown as MT!+3. %he organization

envisions )%* to be-

a% ;ne of the *est erforming *an&s in *angladesh.

,% %he *an& of 'hoice.

c% %ruly /orld"class *an&.

2./ !an"& 5hiloophy

/ith the mission to become a dependable client focused financial institution in the country by

proving service with trust and integrity.

2.0 O,-ective

%he main obect of the )utual %rust *an& +imited #)%*+$ had been to offer an interest free

ban&ing system in the financial mar&et. part from that, the ban& started its operation in the

country with a view to realizing the following obectives-

%o establish a partnership relationship with customers and to eliminate the idea of the

debtor"creditor relationship of traditional ban&s.

%o establish welfare oriented ban&ing system.


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%o mobilize savings towards productive sectors.

%o invest on profit and ris& sharing basis.

%o accept deposits on profit and loss sharing basis.

%o create employment opportunities by investing savings towards prospective

economic sectors.

%o extend ban&ing services towards the poor, helpless and low"income group of

people in the society in order to uplift of their standard of living.

%o contribute to establishment of a society by euitable distribution of wealth.

%o establish ustice in trade and commerce in the country.

%o render services for the economic development of the nation.

2. (unction

%he functions of )utual %rust *an& +imited are as follows-

%o maintain all types of deposit accounts with online facilities.

%o conduct foreign exchange business.

%o extend other ban&ing services.

%o conduct social welfare activities.


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Part 3

Body of the

Report

+.1 )redit


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%he word credit comes from the +atin word 2'redo3 meaning 2I believe3. It is a lenders trust

in a persons or firms or companys ability or potential ability and intention to repay. 'redit is

a contractual agreement, in which a borrower receives something of value now, with

the agreement to repay the lender at some date in the future#othari, ?01F$. ;ne of the basic

functions of the ban& is deposit extraction and credit extension. )anaging credit operations is

the crying need for any ban&.

%he obective of the credit management is to maximize the performing asset and the

minimization of the non"performing asset as well as ensuring the optimal point of loans and

advances and their efficient management.

+.2 (actor )onidered for )redit

J %ime

J ;perating Expense

J


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supervision and follow"up of the loan and advance. %herefore, while analyzing the credit

management of )%*, it is reuired to analyze its credit policy, credit procedure and uality of

credit portfolio.

+.0 )redit 5olicy of MT!

;ne of the most important ways, a ban& can ma&e sure that its loans meet organizational and

regulatory standards and they are profitable. It is important to establish a loan policy. 4uch a

policy gives loan management a specific guideline in ma&ing individual loans decisions and

in shaping the ban&s overall loan portfolio. In )utual %rust *an& +imited there is perhaps a

credit policy but there is no credit written policy.

+. 5rinciple of )redit

In the feature, credit principles include the general guidelines of providing credit by branch

manager or credit officer. In )utual %rust *an& +imited they follow the following guideline

while giving loan and advance to the client #Edwards, ?00@$.

ll credit extensions must comply with the reuirement of *an& 'ompany ct and

the'entral ban&.

6ot to extend credit to the personsDentities not supported by 'I* report.

%o maintain udicious ratio between loan and deposit. %o allow credit in a manner

which in no way compromises with ban&s standard of excellence.

Extension of credit normally from customers deposits and not out of short term funds

or borrowing from other ban&s.

%o optimize ris& and reward.

%o ensure ethical standard in all credit activities.

%o extend credit in the areas, ris& of which can be sufficiently understood and

managed.

%o extend credit facility upon adeuate pre investment analyses and repayment

capacity of the clients.


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%o avoid excessive credit concentration through rational diversification of credit.

%o avoid name lending.

%o allow credit on business consideration after ascertaining viability, credit

reuirement, uality of advance, security offered, cash flows and level of ris&s.

+.6 5rinciple of Sound #ending

It should be clearly understood that the criteriaDprinciples are not inflexible laws : are given

as guidelines for protecting credit. In a practical competitive world, ris&s are defined,

accepted and credit is often granted even though a proposal does not strictly with

some of the criteria described below.%he basic lending criteria can be considered as eight

main headings, as follows-

a% rinciple of 4afety

,% rinciple of +iuidity

c% rinciple of urpose

d% 'haracter and ability of the borrower

e% rinciple of 4ecurity

f% rinciple of profitability

g% 4ource of repayment

h% rinciple of 6ational Interest

Each of the headings will now be discussed further in the following paragraph-

5rinciple of Safety

%he first lending rinciple of sound lending is safety. %he very existence of a ban&

depends upon the safety of its advances. 4o utmost care should be exercised to ensure


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that the funds go to the right type of borrower, are utilized in such a way that they

remain safe and the repayment comes in the normal course.

5rinciple of #i7uidity

+iuidity means the availability of *an& funds on short notice. %he liuidity of an

advance means it repayment on demand on due date or after a short notice. %herefore,

the ban&s must have to maintain sufficient liuidity to repay its depositors and trade"

off between the liuidity and profitability is must.

5rinciple of 5urpoe

%he ban& should not lend money for any purposes for which a borrower may be free

from all ris&s but if the funds borrower are employed for unproductive. urpose li&e

marriage ceremony, pleasure trip etc. or speculative activities, the repayment in the

normal course will become uncertain. *an&s therefore discourage advances from

boarding stoc&s and refuse advances for speculative activities.

)haracter and a,ility of the ,orro8er

%he primary responsibility of the leading ban&er is 2&now your customer and his

business3. /hile considering the character and ability of a borrower, the following

point must be &ept in mind.

(o &now your customer alreadyK

/as he respectively introducedK

If he was previously customer of another ban&, why has he come to Bnited

'ommercial*an& +td. %ry to see previous ban& statementK

>ave you made the account opening inuiries reuired by the ban&K

/hat are the business its ownershipK

/hat is the customers bac&ground and financial trac& recordK

'ustomers honesty : integrity and personal stabilityK

>ow has the customer managed his financial circumstances in the pastK

%he branch manager should have the answer of the above ueries and should be to

udge his ability to use the credit facilities to his advantage. dvance should be

granted only to those borrowers in whom the branch manager has full confidence.

5rinciple of Security


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%he security offered by a borrower for an advance is insurance to the ban&er. It serves

as the safety value for an unforeseen emergency. %he security accepted by a ban&er to

cover a ban& advance must be adeuate, readily mar&etable, easy to handle and free

from any encumbrance.

5rinciple of 5rofita,ility

%he wor&ing funds of a ban& are collected mainly by means of deposit from the

public and interest has to be paid on those deposits. *an&s have also to meet their

establishment charges and other expenses. Interest earned by a ban& on its advance is

the main source of its income #*ucci, ?011$. %he difference between the interest

received on advances and the interest paid on deposits constitute a maor portion of

the ban&ers income. %he ban& will not enter into a transaction unless a fair return

form it is assured.

Source of Repayment

fter the branch manager has ensured that the credit will be a profitable

propositioning for the ban&, he should then turn his attention to the cash flow

situation of the borrower. %he ban&s credit can be classified into three main

categories, as follows-

1. very short"term advance will be liuidated by funds received in the verynear future, such as advances against foreign or local bills or bridge

functioning where evidence of credit sanction from another financial

institution is available.

2. rovision for current assets this type facility is needed for trading and Dor

manufacturing activities.

+. +ong term loans, generally over G years example of such facilities as

investment in plant and machinery, a farm or a shop, generally, a long term is

repaid out profits generated by the business.

+.9 :lo,al )redit 5ortfolio #imit of MT!


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%he features which deals with how much total deposits would be used as lending the proportion of

long term lending, customer exposure, country exposure, proportion of unsecured facility etc. the

most notable ones are-

%he aggregate of all cash facility will not be more than the 80L of the customers deposit and

+ong term loan must not exceed ?0L of the total loan portfolio. acilities are not allowed for a

period of more than G #ive$ years. 'redit facilities to any one customer group shall not normally

exceed 1GL of the capital fund or %. 100 cores.

+.; Type of )redit


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%hese are the advances made by the ban& with a fixed repayment schedule. %erms

loans mainly include M'onsumer credit schemeM, M+ease financeM,M >ire purchaseM,

and M4taff loanM. %he term loans are defined as follows-

J 4hort term loan- Bp to 1? months.

J )edium term loan- )ore than 1? months : up to FC months

J +ong term loan- )ore than FC months.

Ta,le / )laification on characteritic of financing of Mutual Trut !an" #imited

(unded >on?funded

Overdraft #etter of )redit

#oan !an" :uarantee

)onumer )redit ???#TR ???

5


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*ased on the purpose of the loan, loans are classified as follows-

)orporate #oan

ny loan exceeding 1, 00, 00,000 *(% and issued for business and trade purposes is

defined as corporate loan. 4uch loans mainly serve the purpose of initials for the

establishment of industry or large scale factory.

SME $Small 4 Medium Enterprie% #oan

%his type of loan is disbursed for business purposes but the amount loaned does not

exceed 1, 00, 00,000 *(%. %he amount loaned here serves the purpose of potential

#partial$ wor&ing capital for small and medium business ventures.

Retail #oan


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#oan !alance tranfer or Ta"e over

'ustomers enoying E)I based personal loan with other ban&s may enoy the facility

of +oan*alance %ransfer.

Eligi,ility

)inimum C loan E)I repayment with existing ban&

)inimum ta&eover loan amount is %&. ?00,000 and maximum %&. 9,G0,000

!enefit of Ta"eover 5lan

6o processing fee for loan ta&eover or balance transfer

Interest rate will be 1L less than ongoing rate

pproved loan amount may be higher than the ta&eover loan amount

MT!


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of experts and a complete loan pac&age is in place, to meet all your housing finance

needs. )%* >ome +oan helps the clientto fulfiltheir dreams.

(eature

+oan for residential apartmentDhouse purchase

+oan amounts from *(% G,00,000 to *(% 1,00,00,000

+oan tenor from F to ?G years

+oan amount up to 80L of the property value

ggregation of co"applicant s income

'ompetitive interest rates

=uic& and simple processing and approval time

+oan for apartment under construction

artial or early settlement options available

Eligi,ility

ny financially able person

ge- minimum ?1 and maximum CG years at loan maturity

or 100L cash covered loan- ge" minimum 18 and maximum H0 years at

loan maturity

)inimum Income ighest$ P


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? %erm loan to large, medium, small : cottage 1F.00L #>ighest$PP

F /or&ing 'apital

Q +arge and )edium 4cale

Q 4mall 4cale

Q 1G.G0L #)id"


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+.11 =ifferent Securitie for =ifferent Type of


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Part 4Recommendation

& Conclusion


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4.1Recommendation

fter wor&ing for this period, our recommendations for the ban& are-

%he *ranch should move to the fully automated ban&ing system. %his will save a

lot of time of personnel wor&ing here and will increase their and the *an&s

performance thereby.

In case of importing goods the *an& should aware about over invoicing so that

nobody can get chance to send money abroad illegally.

In case of exporting goods the *an& should aware about under invoicing so that

nobody can get chance to avoid %ax, Rat, and (uty.

If the ban&ers can scrutinize the 'ommercial invoice it will decrease the )oney

+aundering.

%he ssistant 'ommissioners of %ax can contribute more. %hey must be more

careful about invoicing and restricted products.

%he ban&ers must be careful in financing international trade 4o that, the ban&

does not fall in bad loss provision sated by **.

*an& should fixed"up specific types of client strategy according to the different

character of client.

'ommission income occupies the maor part of the total earnings of a ban& and

ban&s profitability mainly depends on commission earning capacity, so research

and development cell of the ban& should put more effort for the purpose of

introducing an efficient oreign Exchange department.

>uman resource is another sector for the branch to be developed urgently. >uman

resources in the branch need to be euipped with adeuate ban&ing &nowledge.

%hey should have basic &nowledge regarding money, ban&ing, finance and

accounting. /ithout proper &nowledge in these subects, efficiency cannot be

optimized. *an& can arrange sufficient training program on these subects.

)any times, the branchs photocopier remains out of order. rinters are of

obsolete technology. 's gets out of order freuently. ttention should be given

on proper maintenance and replacement of phone, computer, printer fax, machine

and photocopier.

%he management should impart more imphasis on the advertisement of the ban&

in different electronic and printing media. %he *asic goal of the advertisement

should be firstly to ma&e people &now and understand that the ban& is universal


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one and permits anyones access.

%he spread out mechanism of the ban& should be faster and progressive as well.

*eing established in 1999, the ban& has established only @1 branches and 8 4)E

'enters in ten #10$ years. %he mode of extension is much slower than other

contemporary and euivalent ban&s. *ranches should be opened in every

industrial and commercial corner of the country.

)ore products of varied interests should be introduced for the diversified client

group. ;pportunity in retail ban&ing lies in the fact that the countrys increased

population is gradually learning to adopt consumer finance. %he greater bul& of

our population is of middle classed. (ifferent types of retail lending products

would create great appeal to this mammoth class. 4o a wide variety of retail

lending products has a very large and easily pregnable mar&et.

/.2 )oncluion

*an&ing industry in *angladesh is now on the right trac&. %he ban&s are contributing much

than the previous years for the growth and development of the country. 'redit for such

contribution by the industry goes to the *angladesh *an&. *an&ing industry is much

organized because of strong vigilance and supervision of *angladesh *an&. In the industry,

)ercantile *an& is one of the pioneers in many criteria. )%*+ is committed towards theexcellence in the service with efficiency, accuracy and proficiency. +i&e of most of the

commercial ban&s, foreign exchange department is one of the most important departments of

)%*+. erhaps, it is the most important department of the *an&. %his department is driving

the ban& from the front. %hrough the import, export and foreign remittance operations, this

department is ma&ing a great contribution to the ban& and the economy as a whole. If it is said

that this department of the ban& is running according to all of the ideal principles of modern

foreign exchange business mentioned in the boo&, it will be exaggerated. (espite problems

and wea&nesses, it is driving the ban& from the front. /ith an easy to understand operating

guidelines, transparent operating procedure and a team of highly &nowledgeable and

proficient personnel, this department is expanding and excelling itself day by day.


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!i,liography

Type Example

!oo"$5rint 4 online%

*oo&,? author (ebnath,

Bank Management on Mutual Trust Bank Limited (MTBL)

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Transcript of Bank Management on Mutual Trust Bank Limited (MTBL)