Professional Documents
Culture Documents
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. For 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.
This is an orientation report that contains the real life day to day working experience of different tasks
in Credit Department of Mutual Trust Bank Limited, Panthapath Branch. Mutual Trust Bank Ltd,
(MTB) is a pioneer and leading private bank in Bangladesh. To serve the nation Mutual Trust bank
performs some activities for their clients like: general banking, loan and advance, capital market
operation etc. Bank collects deposit from public and provide its to other business or individual as
loan.
Bank pays interest to deposit holder and take interest from borrowers. Mutual Trust bank
measure all risk components before sanctioning a loan. When all the formalities completed then
respective officer disburse the loan. After disburse the loan it is duty of bank to recover the disbursed
loan. This report is based on actual information and working procedure practiced in MTB. The overall
credit management of MTB has analyzed to give a clean idea about the policy of MTB and
implementation of that policy by various mechanism and process. The objective 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 major problems regarding the credit management.
This 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, Mutual Trust Bank Limited, 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 Mutual Trust Bank. The remaining part consist the analysis, findings,
recommendations and conclusion.
Part 1
Prefatory Part
1.1 Introduction
In general sense we mean Bank as a financial institution that deals with money. There are
different types of banks like Central bank, Commercial bank, Savings bank, Investment bank,
Merchant bank, Co-operative bank etc. But when we use the term bank it generally means
commercial bank 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.
Now-a days banking sector is modernizing and expanding its hand in different financial events
every day. At the same time the banking process is becoming faster, easier and is becoming wider.
In order to survive in the competitive field of the banking sector all organizations are looking for
better service opportunities to provide their fellow clients. So it has become essential for every
person to have some idea on the bank and banking procedure.
Mutual Trust Bank is a financial institution whose main objective is the mobilization of fund from
surplus unit to deficit unit. In the process of acceptance of deposits and provision of loan, Bank
creates money. This characteristics feature sets Bank apart from other financial institution. The
bank can influence the money supply through lending and investment. The bank is an economic
institution whose main objective is to earn profit through exchange of money and credit
instruments.
Group Assignment program is essential for every BBA student because it helps him or her to
acquaint with the real life situation. As bank is one of the most important financial intermediaries;
so we have selected Mutual Trust Bank Limited (MTBL) which is one of the most leading
banks in the new banking arena.
MTBL arranges this Assignment program to gather practical knowledge about banking activities
& managerial functions. This is followed by practical experiences in the branches of MTBL. Our
topic for this Group Assignment is Managerial Functions in the Context of Bangladesh
placed in the Panthapath branch of MTBL.
Personal observation.
Secondary data
Published or unpublished or personally collected data from officers, Local officers and
Head office of the Mutual Trust Bank Limited.
Part 2
Organizational
Profile
Of
MTBL
Corporation Set-up
Certificate of Incorporation
1999
Commercial operation
Listing of Shares
Number of Branches
43
III.
IV.
V.
VI.
The Company (Bank) operates financial activities through its Head Office situated at Dhaka and 73
branches. The Bank carries out international business through a Global Network of Foreign
Correspondent Banks.
Memberships of MTBL
1.
2.
3.
4.
5.
6.
7.
8.
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.--- MTBL Group.
Vision
Mutual Trust Bank's vision is based on a philosophy known as MTB3V. The organization
envisions MTB to be:
a) One of the Best Performing Banks in Bangladesh.
b) The Bank of Choice.
c) A Truly World-class Bank.
2.5 Objectives
The main object of the Mutual Trust Bank Limited (MTBL) had been to offer an interest free
banking system in the financial market. Apart from that, the bank started its operation in the
country with a view to realizing the following objectives:
To establish a partnership relationship with customers and to eliminate the idea of the
debtor-creditor relationship of traditional banks.
To extend banking services towards the poor, helpless and low-income group of
people in the society in order to uplift of their standard of living.
2.6 Functions
The functions of Mutual Trust Bank Limited are as follows:
Part 3
Body of the
Report
3.1 Credit
The word credit comes from the Latin word Credo meaning I believe. It is a lenders trust
in a persons or firms or companys ability or potential ability and intention to repay. Credit 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(Kothari, 2013). One of the basic
functions of the bank is deposit extraction and credit extension. Managing credit operations is
the crying need for any bank.
The objective 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.
Operating Expense
Risk
Interest Rate
Legal Considerations
Finance Charge
Inflation
Business cycle can run well only by the help of lending system
It helps to create employment opportunities
Credit plays a vital role in national economy in the following waysIt provides working capital for industrialization
Credit controls almost all kinds of production activities of the country
It brings social equity
Cash generation occurs for its successful performance
Economic stabilization
Raise standard of living.
supervision and follow-up of the loan and advance. Therefore, while analyzing the credit
management of MTB, it is required to analyze its credit policy, credit procedure and quality of
credit portfolio.
All credit extensions must comply with the requirement of Bank Company Act and
the Central bank.
To maintain judicious ratio between loan and deposit. To allow credit in a manner
which in no way compromises with banks standard of excellence.
Extension of credit normally from customers deposits and not out of short term funds
or borrowing from other banks.
To extend credit in the areas, risk of which can be sufficiently understood and
managed.
To extend credit facility upon adequate pre investment analyses and repayment
capacity of the clients.
Each of the headings will now be discussed further in the following paragraph:
Principle of Safety
The first lending Principle of sound lending is safety. The very existence of a bank
depends upon the safety of its advances. So utmost care should be exercised to ensure
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.
Principle of Liquidity
Liquidity means the availability of Bank funds on short notice. The liquidity of an
advance means it repayment on demand on due date or after a short notice. Therefore,
the banks must have to maintain sufficient liquidity to repay its depositors and tradeoff between the liquidity and profitability is must.
Principle of Purpose
The bank should not lend money for any purposes for which a borrower may be free
from all risks but if the funds borrower are employed for unproductive. Purpose like
marriage ceremony, pleasure trip etc. or speculative activities, the repayment in the
normal course will become uncertain. Banks therefore discourage advances from
boarding stocks and refuse advances for speculative activities.
Character and ability of the borrower:
The primary responsibility of the leading banker is know your customer and his
business. While considering the character and ability of a borrower, the following
point must be kept in mind.
Have you made the account opening inquiries required by the bank?
How has the customer managed his financial circumstances in the past?
The branch manager should have the answer of the above queries and should be to
judge his ability to use the credit facilities to his advantage. Advance should be
granted only to those borrowers in whom the branch manager has full confidence.
Principle of Security
The security offered by a borrower for an advance is insurance to the banker. It serves
as the safety value for an unforeseen emergency. The security accepted by a banker to
cover a bank advance must be adequate, readily marketable, easy to handle and free
from any encumbrance.
Principle of Profitability
The working funds of a bank are collected mainly by means of deposit from the
public and interest has to be paid on those deposits. Banks have also to meet their
establishment charges and other expenses. Interest earned by a bank on its advance is
the main source of its income (Bucci, 2011). The difference between the interest
received on advances and the interest paid on deposits constitute a major portion of
the bankers income. The bank will not enter into a transaction unless a fair return
form it is assured.
Source of Repayment
After the branch manager has ensured that the credit will be a profitable
propositioning for the bank, he should then turn his attention to the cash flow
situation of the borrower. The banks credit can be classified into three main
categories, as follows:
1.
2.
Provision for current assets; this type facility is needed for trading and /or
manufacturing activities.
3.
The 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:
The aggregate of all cash facility will not be more than the 80% of the customers deposit and
Long term loan must not exceed 20% of the total loan portfolio. Facilities are not allowed for a
period of more than 5 (Five) years. Credit facilities to any one customer group shall not normally
exceed 15% of the capital fund or TK. 100 cores.
3.9 Type of Credit Activities:
Credit may be classified with reference to elements of time, nature of financing and provision
base.
3.9.1
Continuous loan:
These are the advances having no fixed repayment schedule but have a date at which
it is renewable on satisfactory performance of the clients. Continuous loan mainly
includes "Cash credit both hypothecation and pledge" and "Overdraft".
Demand loan:
In opening letter of credit (L/C), the clients have to provide the full L/C amount in
foreign exchange to the bank. To purchase this foreign exchange, bank extends
demand loan to the clients at stipulated margin. However, as soon as the L/C
documents arrive, the bank requests the clients to adjust their loan and to retire the
L/C documents. Demand loans mainly include Payment against Documents, "Loan
against imported merchandise (LIM)" and "Later of Trust Receipt"(Laurin and
Majnoni, 2003).
Term loan:
These are the advances made by the bank with a fixed repayment schedule. Terms
loans mainly include "Consumer credit scheme", "Lease finance"," Hire purchase",
and "Staff loan". The term loans are defined as follows:
Non-funded
Letter of Credit
Bank Guarantee
-------------
3.9.2
No hidden charges
Eligibility:
Age: minimum 21 and maximum 60 years at the end of loan maturity
Experience: Salaried executive total 2 years
Business person/self-employed 2 year
Monthly income: Minimum Tk. 30,000
of experts and a complete loan package is in place, to meet all your housing finance
needs. MTB Home Loan helps the clientto fulfiltheir dreams.
Features:
Loan for residential apartment/house purchase
Loan amounts from BDT 5,00,000 to BDT 1,00,00,000
Loan tenor from 3 to 25 years
Loan amount up to 80% of the property value
Aggregation of co-applicants income
Competitive interest rates
Quick and simple processing and approval time
Loan for apartment under construction
Partial or early settlement options available
Eligibility:
For 100% cash covered loan: Age- minimum 18 and maximum 70 years at
loan maturity
Experience:
Salaried person: 3 years
Self-employed: 3 years
Businessperson: 3 years
3.10
Number
1
Agriculture
12.50% (Highest) *
Working Capital
13.00% (Highest)**
15.50% (Mid-Rate)
Small Scale
15.50% (Mid-Rate)
7.00% (Highest)**
Commercial Lending
16.00% (Mid-Rate)
Import Finance
General
12.00%
15.50% (Mid-Rate)
(Highest)*
Housing Loan
Commercial
16.00% (Mid-Rate)
Residential
14.00% (Mid-Rate)
Consumer Credit
18.00% (Mid-Rate)
Lease Finance
16.50% (Mid-Rate)
10
15.50% (Mid-Rate)
11
12
16.50% (Mid-Rate)
13
3.00%
14
Auto Loan
16.50% (Mid-Rate)
15
16.50% (Mid-Rate)
16
Others
16.50% (Mid-Rate)
above
Deposit
Types of advances
Securities
Transport loan
Auto loan
Loan
against
merchandise
imported
Part 4
Recommendation
& Conclusion
4.1 Recommendation:
After working for this period, our recommendations for the bank are:
The Branch should move to the fully automated banking system. This will save a
lot of time of personnel working here and will increase their and the Banks
performance thereby.
In case of importing goods the Bank should aware about over invoicing so that
nobody can get chance to send money abroad illegally.
In case of exporting goods the Bank should aware about under invoicing so that
nobody can get chance to avoid Tax, Vat, and Duty.
If the bankers can scrutinize the Commercial invoice it will decrease the Money
Laundering.
The Assistant Commissioners of Tax can contribute more. They must be more
careful about invoicing and restricted products.
The bankers must be careful in financing international trade So that, the bank
does not fall in bad loss provision sated by BB.
Bank should fixed-up specific types of client strategy according to the different
character of client.
Commission income occupies the major part of the total earnings of a bank and
banks profitability mainly depends on commission earning capacity, so research
and development cell of the bank should put more effort for the purpose of
introducing an efficient Foreign Exchange department.
Human resource is another sector for the branch to be developed urgently. Human
resources in the branch need to be equipped with adequate banking knowledge.
They should have basic knowledge regarding money, banking, finance and
accounting. Without proper knowledge in these subjects, efficiency cannot be
optimized. Bank can arrange sufficient training program on these subjects.
Many times, the branchs photocopier remains out of order. Printers are of
obsolete technology. ACs gets out of order frequently. Attention should be given
on proper maintenance and replacement of phone, computer, printer fax, machine
and photocopier.
The management should impart more imphasis on the advertisement of the bank
in different electronic and printing media. The Basic goal of the advertisement
should be firstly to make people know and understand that the bank is universal
4.2 Conclusion:
Banking industry in Bangladesh is now on the right track. The banks are contributing much
than the previous years for the growth and development of the country. Credit for such
contribution by the industry goes to the Bangladesh Bank. Banking industry is much
organized because of strong vigilance and supervision of Bangladesh Bank. In the industry,
Mercantile Bank is one of the pioneers in many criteria. MTBL is committed towards the
excellence in the service with efficiency, accuracy and proficiency. Like of most of the
commercial banks, foreign exchange department is one of the most important departments of
MTBL. Perhaps, it is the most important department of the Bank. This department is driving
the bank from the front. Through the import, export and foreign remittance operations, this
department is making a great contribution to the bank and the economy as a whole. If it is said
that this department of the bank is running according to all of the ideal principles of modern
foreign exchange business mentioned in the book, it will be exaggerated. Despite problems
and weaknesses, it is driving the bank from the front. With an easy to understand operating
guidelines, transparent operating procedure and a team of highly knowledgeable and
proficient personnel, this department is expanding and excelling itself day by day.
Bibliography
Type
Examples
Books(Print & online)
Book,2 author
Debnath,
R.
M,
1stedition,Dhaka,
Busines
Lotus
of
Banking,
Publishers,
2004,
Web Documents
Web Site
http://www.mutualtrustbank.com,
http://www.bangladesh-bank.org,
http://www.epb.gov.bd