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“Overall Banking System of Mutual Trust Bank Ltd.”

CHAPTER 1 INTRODUCTION 1.1 Introduction: Managing the function of each department efficiently and flexible payment procedure is enough for a bank to achieve success. A prudent bank management should always try to make an appropriate balance between the payments and receive .The payment and receive flexibility with in short time gives the customer ultimate satisfaction, which attracts the more clients in the bank. The transaction will be automatically high and increase the commission and profit of the bank. As a pioneer Mutual Trust Bank Limited (MTBL) is able to do so to earn the trust of general people. MTBL has the glory of being oldest bank owned by the general people of Bangladesh and it servers the nation for last 11 years with largest line of diversified banking services in different sectors. So far, MTBL is performing well and listed in the “A” category for long time. 1.3 Background Of The Study Banking sector is a very curtail part of a country. It plays a very much important role in the countries economy and always tries to make a sign on the economy. This institution is responsible for the financial stability of a country. Due to globalization of the market, all the industries have to face the competition. The foreign banks come in to the local market and the local banks have to fight most to gain the market share. And the present developing economy of Bangladesh demands immediate development of financial institutions which can make a good step to build up a strong economic infrastructure. In this view the banks have to drive their operation in such way which can make a contribution on the economy. And make a contribution into the economy; banks need efficient personnel with modern banking knowledge. This report has been prepared in the light of this view to gather practical knowledge and prepared under the guidance and supervision of the core teacher. 1.4 Objectives of The Study 1.4.1 Broad Objectives: •

To make familiar with the terms what have studied during MBA course.


To know about the banking sector in Bangladesh.

To get an overall idea about the management terms and operation strategy and the limitation of a bank by going though the Mutual Trust Bank Ltd.

1.4.2 Specific Objectives: •

To know the management policy of a bank.

To know the objectives and planning of a bank.

To be familiar with the banking sector.

To gather comprehensive practical knowledge on the total banking function.

Critically analyze the functions and the operation of each level of the Mutual Trust Bank Ltd.

To fulfill the partial requirement of MBA degree.

1.5 Scope of the Study This report is the outcome of my practical knowledge during in working at Mutual Trust Bank Ltd. Babu Bazar Branch. The study covered in banking areas are: •

General Banking Department (Account Opening, Accounts, Remittance)

Investment Department (Loans and Advance)

Foreign Exchange Department (Import, Export, Remittance)

1.6 Methodology This report is based on the primary and secondary data. This report also bears the practical knowledge of individual worked at the particular branch. So the methodology is the mixing of primary and secondary data with practical knowledge. 1.7 Sources of Information In order to make the report more meaningful, two sources of data have been collected. 1.7.1 Primary Data Source:

1.7.2

Face to face conversation with the respective officers and staffs of the branch.

Informal conversation with the clients

Practical work experience from different department of the bank.

Relevant files and documents as provided by the concerned officers.

Secondary Data Source: •

Annual Report of the bank.

Bank Training & Research Academy


Various books, articles and manuals etc

Different web sites.

Time Constraints:

1.8 Limitations Because of limited time to submit the thesis report it was not possible to learn a more and prepare this report to submit. Inadequate of Information: The relative information is not so sufficient to get ready for an extra ordinary report. •

Insufficient time of Bank Personnel:

As the bank officials are so much busy in their desk work so it is hard to keep peace with them and get overall support from them. •

Fear of Disclosure:

Because of some confidential reason, it was not possible to make a good report. CHAPTER 02 PROFILE OF MUTUAL TRUST BANK LTD. 2.1 A HISTORICAL VIEW OF BANKING SYSTEM IN BANGLADESH Bangladesh inherited its banking structure from the British regime and had 44 banks and other financial institutions before the partition of India in 1947. The Dhaka bank established in 1806 as the first commercial bank in the Bangladesh region of British India. Bengal bank the first British- patronized modern bank established in India in 1784 had opened its two branches in 1873 in Sirajgonj and Chittagong of Bangladesh region. Later in 1862, the Bengal bank purchased the Dhaka bank and opened its first branch in Dhaka in the same year by reconstituting and merging the Dhaka bank. Thereafter, another branch of Bengal bank was opened in Chandpur in 1900 there were six other branches of Bangladesh Bank in operation in the territory of Bangladesh until the partition of British India in 1947. Following the emergence of Pakistan in 1947 state bank of Pakistan the central bank of the country came into being in July 1948. Later the national Bank of Pakistan a strong commercial bank was set up in 1949. In all 36 schedule commercial banks were in operation in the whole Pakistan until 1971. Pakistanis owned most of these banks and only three of them namely; National Bank of Pakistan, Habib Bank Ltd. and the Australia Bank Ltd. had one branch of each in East Pakistan in 1949. During 1950-58 three other Pakistani owned banks Premier Bank Ltd., Bank of Bhowalpur Ltd. and Muslim commercial bank had opened their branch in East Pakistan. East Pakistan had only to banks owned by local business groups with headquarters in Dhaka. These were the Eastern Mercantile bank Ltd. (presently Pubali Bank Ltd) and Eastern Banking corporation Ltd (presently Uttara Bank Ltd) established in 1959 and 1965 respectively. In the beginning of 1971, there were 1130 branches of 12 banks in operation in East Pakistan. The


foundation of independent banking system in Bangladesh was laid through the establishment of Bangladesh Bank in 1972 by presidential order no – 127 of 1972 (which took effect on 16th December, 1971). Though the order, the eastern branch of the former state bank of Pakistan at Dhaka was renames the Bangladesh Banks a full fledged office of the central bank of Bangladesh and the entire undertaking of the state bank of Pakistan in, and in relation to Bangladesh has been delivered to the bank. The Bangladesh Banks (Nationalization) order enacted in 1972 nationalized all banks except foreign ones. Six nationalized Banks were formed through margin the exiting banks of that period. The rate of growth and development of banking sector in the country was extremely slow until 1983 when the govt. allowed to establish private banks and started denationalization process. Initially, the Uttara Bank in the same year and thereafter, the Pubali Bank, and the Rupali Bank in 1986.There were no domestic private commercial banks in Bangladesh Until 1982 when the Arab- Bangladesh Banks (AB Bank) commenced private commercial banking in the country. Five more commercial banks came up in 1983 and initiated a moderate growth in banking financial institutions. Banking structure in Bangladesh has under gone a rigid regulatory during the period 1972-83 which was repression in nature. Through out this period, the socioeconomic objective led NCBs suffered an infirmity due to absence of competition, and also from both allocative and operational in inefficiency. In order to established and promote systematic stability and efficiency optimal competition and enable the banks to safe guard themselves from fragility, the country banking structure has been reorganized and is now governed under a gradually liberalized regulatory environment. At present the Bank Company Act 1991 is the main law relating to regulation of banking in Bangladesh. All legal requirements for establishment of banks and banking operation are incorporated in this Act. One of the main objectives of recently initiated banking sector reform is to open up the market for private sector banks and encourage competition. The ultimate objective is to improve the quality of banking services through promoting operational managerial and fund mgt. HISTORICAL BACKGROUND OF MUTUAL TRUST BANK LTD. The financial institutions that support people at the time of necessary are bank. Bankers deal with two sensitive things of the society, Men and Money. So Mutual Trust banks should be top quality in all aspects of professional life to ensure highest service to its customers. This report represents Babu Bazer Branch of the Mutual Trust Bank Ltd. This report will give a clear idea about the whole operational activities of the bank. The Company was incorporated on September 29, 1999 under the Companies Act 1994 as a public company limited by shares for carrying out all kinds of banking activities with Authorized Capital of Tk. 38,00,000,000.00 divided into 38,000,000 ordinary shares of Tk.100 each. The Company was also issued Certificate for Commencement of Business on the same day and was


granted license on October 05, 1999 by Bangladesh Bank under the Banking Companies Act 1991 and started its banking operation on October 24, 1999. As envisaged in the Memorandum of Association and as licensed by Bangladesh Bank under the provisions of the Banking Companies Act 1991, the Company started its banking operation and entitled to carry out the following types of banking business: (i) All types of commercial banking activities including Money Market operations. (ii) Investment in Merchant Banking activities. (iii) Investment in Company activities. (iv) Financiers, Promoters, Capitalists etc. (v) Financial Intermediary Services. (vii) Any related Financial Services. A group of established, Famous and recognized entrepreneur dedicated and pious personalities of Bangladesh are the Chairman and directors of the bank. Among them, a recognized entrepreneur of the country & business magnate with variegated experience Mr. Samson H. Chowdhury is the founder chairman of the bank. His progressive leadership and continuous inspiration provided a boost for the bank is getting a foothold in the financial market of Bangladesh. The Company (Bank) operates through its Head Office at Dhaka and 37 branches and 5 SME Service Centers. The Company/Bank carries out international business through a Global Network of Foreign Correspondent Banks. This report has been prepared by a careful review of existing literature and personal interview to various executives of this bank. I have tried my best to make this report in a standard form. The Registered Office of the Bank: 68, Dilkusha C/A, Dhaka Phone: 717 0138, 717 0139, 717 0140 Fax: 880-2-956 9762, SWIFT-MTBL BD DH E-mail: mtbl@bangla.net 2.2 VISION OF MUTUAL TRUST BANK LTD. To be the bank of 1st choice by creating exceptional value for our clients, investors and employees. 2. 3 MISSION OF MUTUAL TRUST BANK LTD. To be the most admired financial institution in the country, recognized as a dynamic, innovative and client focused company, which offers an array of products and services in the search for excellence and to create an impressive economic value.


2.4 OBJECTIVES OF MUTUAL TRUST BANK LTD. •

Offering quick and improved clientele service through application of modern information technology. Bringing modern Banking facilities to the doorstep of general public through diversification of Banking services, thereby arousing saving propensity among the people.

Playing an important role in the national progress by inculcating improved banking-customer relationship, thereby bringing us closer and closer to them.

Ensuring highest possible dividend to the respect shareholders by making best use of their equity.

Pursuing the policy of nurturing balance growth of bank in all sectors.

Consolidating our position in the competitive market by introducing innovative banking products.

Ensuring highest professional excellent for our work force through enhancement of their work efficiency and technological knowledge.

Expanding the bank’s area of investment by taking part in syndicate large loan financing.

Upholding the image of the bank at home and abroad by pursing dynamic and time-befitting banking activities.

Ensuring capital adequacy, asset quality, efficient management, highest profit and satisfactory liquidity through successful implementation of the programmed for Marketing Core Risk banking.

2.5 BUSINESS IDEOLOGY Alongside providing best service to the clients, patronizing and taking part in social development activities as well as making due contribution to growth of the national economy. 2.6 Division of Mutual Trust Bank Ltd. Name of the divisions of MTBL are as follows: A. Human resources division (HRD): It is one of the important divisions of the bank. It formulates the draft policies for the bank that is usually placed in the board meeting to accept. The division controls all the administrative activities of the banks. Decision about requirement, and postings of the bank employees in different divisions or branches as well as other important decisions are taken by the division. B. General Service Division (GSD): Administrative activities regarding general banking done here. To control these activities divisions issues necessary circulars. MTBL other activities regarding general banking are:


Opening new branches

Issuance of power of attorney to the officer of the bank.

Customer’s services.

Legal affairs.

General correspondence with Bangladesh

Cash affairs of the bank.

C. Audit and Inspection Division: The role of the division is to conduct extensive visit to all branches allover the country and head office also. At the time of inspection the officers audit the books accounts and of the respective ranch, observe their performances and takes notes on their issues, which they think, are not fit to the originality. In this way each and every branch of allover the country comes under H/O’s supervision. D. Finance and Administration Division (FAD): This division can be called the

central account division because all the accounts related

activities are done here. All the branches send their monthly statement to the head office. In this divisions, using annual closing statements, which prepares monthly position of the bank in cumulative basis. The in charges of the branches are requested to ensure completion of annual closing of accounts and preparation of all the statements and returns accurately as per following detailed programmed. It may be mentioned here that from the annual closing statements, to prepare balance sheet, profit and loss account, close flow statement, statement of change in equity and liquidity statements according to bank companies Act. That bank, profit target of the bank for the year 2004 has been fixed at taka 125crores, deposit target at taka 3100 crores and advance target at taka 2700 crores. In this connection all concerned are ardently requested to exert all out combined efforts to raise the profit of the bank by taking all possible steps for enhancing quality, business of the bank and controlling avoidable expenditures which will help to earn higher earnings and make us able to achieve profit target. Some important points and entries that are given below (From annual closing): 1) Balancing of Books. 2) Balance certificate. 3) Incidental charges/ service charges. Service charges irrespective of all A/C’s on half-yearly basis as per following details: Current A/c TK.575/-Per Year

Savings A/c TK.230/-Per Year

STD A/c TK.575/-Per Year

C/C A/c TK.920/-Per Year


4) Interest on monthly savings scheme deposit and special deposit scheme a/c. 5) Interest on CIBTA A/C. It should be charged at the prevailing interest @8.75% p.a on the credit balance of respective branch. 6) Income Tax on Deposit Interest. •

It should be realized @10% from the Interest Payable to the depositors

Excise duty on deposit & Advance Account.

7) Income tax on Commission earned on L/C deducted at source, vat on common Banking services (L/C, L/G Remittance inland DD, TT, PO, SDR, MT, ETC) and vat on fuel bill. 8) Income Tax at the rate of 5% on commission earned on L/C from Bank’s portion of commission, VAT at source at the rate of 15% on the commission on Banking services and VAT at the rate of 2.25% on fuel bill. 9) Stationary Consumed: All stationary consumed up to debited to Expenditure A/C Printing Stationary and Expenditure A/C Security Stationary and Credited to Stock of Printing Stationary and Stock of Security Stationary in hand. 10) Expenses: Accrued / Pre-Paid. 11) Interest on Advances. Interest on Loans, Overdrafts and Cash Credits that is charged on quarterly basis must be actually and correctly calculated and charged for the quarter of the year. 12) Reversal of Adjusting Entries. It must be reversed on the next working day after closing of the year. 13) Cash Remittance. Outstanding in the Sundry Assets A/C if any, on account of cash Remittance made by the Branches must be adjusted. 14) Discounting of TT. 15) Unclear Cheques / Cheques under Collection. Branches are advised that they should credit in the Deposit Accounts the amounts, which have actually been received/collected by them. Under no circumstances the Branch should include the amount of unclear CHEQUES in Deposits by Debiting Suspense A/C /CIBT A/C/BP A/C and Clearing Adjustment A/C. All advices pertaining to Inter-Branch Transaction must be responded on or before closing to avoid inflated deposits. 16) Statements of Reconciliation of Bankers Account. All concerned are advised to prepare separate statements of Reconciliation of Banker’s Account for the accounts maintained with different Bank’s. The monthly statement should be prepared correctly


and the certificate of balances from each of the Banks should be enclosed with the relative statements E. International division: MTBL has separate division to deal with foreign exchange business, which is known as international division. It plays a middleman role between a branch of MTBL and foreign correspondents in the case of Export-import and other foreign exchange activities. F. Marketing division: It is directly related to the marketing of the bank’s services. It takes all the arrangement in deposit mobilization, customer service related activities and all other marketing related activities. The main task of this division is to formulate strategies of achieving the bank’s corporate objectives. G. Credit Card Division: The bank sets this division only for implementation purpose of its credit card service. This division controls all activities dealing with operation of credit card. The bank has implemented its credit card on May 27, 2008. H. Computer division: As all the branches of MTBL except sandpit become computerized this division has a lot of activities to maintain all branches. I f any problem faced by any officer of any branches he/she can get help by telephone and can get guidance from this department. For significant problem this division sent their related specialist to this branch to correct this problem. On the other this division always helps by providing latest software of banking sector. I. Tax department: This new and special department is formed for the purpose of monitoring all activities related to tax of government. They always take steps as a way that will be easy to follow for their branches according to the rules regulation of taxation. For this reason this department always keeps proper communication and relation with Bangladesh Bank and National Board of Revenue (NBR) J. Law and Recovery Division: MTBL has a separate division for recovery of classified stuck up advances and to take lawful actions against these types of defaulters. The main task of this division is to make proposal to take lawful action against the classified and stuck-up loan holders. Mutual Trust Bank Foundation MTBL is a vibrant and promising bank. Its activities are not limited only to business and financial matters. Out of social responsibility, MTBL has extended its support for expansion of educated in the country. Sports and Cultural Activities Since its inception, MTBL has been playing a pioneering role in sponsoring sports and games in the


country. MTBL was the sponsor of Metropolis Football League and Senior Division Football League last year. Besides, MTBL extended substantial patronization to Bangladesh Olympic Association and Bangladesh volleyball Federation in 2003 also in the Inter Bank Football Compotation. The Bank never hesitates to extend its helping hands to the people as in the days of crisis so also in the exuberant happy moments of cultural events. ORGANIZATION HIERARCHY OF MUTUAL TRUST BANK LIMITED


2.8

Mr. Samson H. Chowdhury Dr. Arif Dowla

Chairman Vice Chairman

Mr. Syed Manzur Elahi

Director

Mr. Md. Hedayetullah

Director

Mr. Kh. Rashiduzzaman

Director

Al-haj Syed Abul Hossain

Director

Mr. Mohammed Abdur Rouf

Director

Mr. Md. Abdul Malek

Director

Mr. Rashed Ahmed Chowdhury

Director

Mrs. Yasmeen Haque

Director

Mr. A.F.M. Mahfuzul Hassan

Director

Mr. Md. Wakiluddin

Director

Mr. Saidur Rahman Ratan

Director

Mr. Anis A. Khan

Managing Director & CEO


2.9 Organogram of MTBL, Branch has been shown here:

In Charge/ manager (SVP)

2nd Officer (AVP)

Deposit in Charge (PO)

Cash In Charge Asst. Officer

Payment

(Asst

O)

Receive

Receive

(Asst O)

(JO)

Acc Opening (JO)

Payment (JO)

Acct Section (SO)

Clearing (PO)

Foreign Exchange

Deposit (JO)

Deposit (SO)

Loan & Advance

Loan & Advance (PO)

Loan & Advance (PO)

Remittance

Foreign Exchange

Foreign Exchange

Asst Officer

Officer

Remittance (PO)

Remittance (PO)

2.10 PRESENT TRENDS OF THE BANK BRANCHES OF MTBL MTBL, which started its operation at Principal Branch on October 24, 1999, was the first branch of this bank, located at the hub of the business center of Motijheel area also Principal branch contributes largely to the profit of the Bank. This bank is operating throughout the country as well as the age of the Bank is 11 years. During this period it has established total 37 branches & 5 SME center over the country and made a smooth network inside the country as well as throughout the world. The number of Branches as territory-wise is mentioned in the table.

1.

Principal Branch


WW Tower (1st-3rd Floor) 68, Motijheel C/A Dhaka-1000 Tel : 711 3237-8, 7110930-1 Fax : 880-2-956 6181 Tlx : 642543 EMTEB BJ E-mail: mtbpb@bangla.net 2.

Dilkusha Branch MNSN Tower 60 Dilkusha C/A Dhaka-1000 Tel : 7171 301- 2 , 7170137 E-mail: mtbldil@bangla.net

3.

Panthapath Branch Chandrashila Suvastu Tower 69/1 Panthapath, Dhaka. Tel : 861 3807, 8629887 Fax : 862 4687 Tlx: 632129 MTB PP BJ E-mail: mtbpp@progetelbd.net

4.

Babu Bazar Branch Aman Court, 15, Armenian Street Babu Bazar, Dhaka. Tel :731 4821-2 Fax : 731 6393 Tlx : 632128 MTBBB BJ E-mail: mtblbb@bangla.net

5.

Progati Sarani Branch 15/5, Progati Sarani, Dhaka Tel : 881 8804, 885 5863 Tlx: 642543 EMTEB BJ E-mail: mtbpsb@bangla.net

6.

Dhanmondi Branch Green Taj Center


Plot # 81 New, Road # 8/A New 1st Floor, Dhanmondi,Dhaka Tel : 815 5607, 8158334 E-mail: mtbldhan@bonline.org 7.

Uttara Model Town Branch House No.4, 1Road No.07 Sector 04, Uttara, Dhaka. Phone:8924379, 8951474 Fax:8951474 E-Mail: mtblut@yahoo.com

8.

Pallabi Branch 14/11, Pallabi, Mirpur-12, Dhaka Tel : 901 6273 , 805 5630 E-mail: mtbplb@bangla.net

9.

Agrabad Branch Akhtaruzzaman Centre,21-22, Agrabad C/A Chaittagong Tel : 031-716 487, 813 287,Fax : 031-721 091

10.

CDA Avenue Branch 565/A, CDA Avenue (GEC Point) East Nasirabad, Chittagong. Tel : 031- 623 559, 625336 Fax : 880-31-623559 E-mail:mutualcdagec@spctnet.com

11.

Khatunganj Branch 325 Asadganj Road, Chittagong Tel : 031-61 22 54 , 840718 E-mail: mtblktg@gononet.com

12.

Sonargaon Branch Khandker Plaza, Thana Road Mograpara, Sonargaon Tel : 06723-88105

13.

Sreenagar Branch Sreenagar Bazar Sreenagar , Munshigonj


Tel : 06925 88222 14.

Aman Bazar Branch Kamal Khan Plaza , Chikondandy Hathazari, Chittagong Tel : 031-681022

15.

Bashundhara City Branch Bashundhara City Shopping Mall Level-3, Block-A Panthapath, Dhaka. Tel : 9124021, 9136113, 8122044

16.

Chandra Branch Dewan Plaza Chandra Polly Biddut Kaliakoir, Gazipur, Tel : 06822-51968

17.

Jubilee Road Branch 214 Jubilee Road Chittagong Tel : 031-627533

18.

Nazirhat Branch M.M. Plaza, Fatikchari Chittagong. Tel : 0821-4483498

19.

Chakoria Branch Shah Amanat Shopping Complex (1st Floor) Chiringa, Chakoria Cox's Bazar Tel: 0173-108693

20.

Pabna Branch Abdul Hamid Road Dilalpur, Pabna Tel: 0174-567109

21.

Gulshan Branch House # 50, Road # 03 Plot- SWH-7, South Avenue Gulshan, Dhaka


22.

Sylhet Branch Sylhet City Center Zindabazar, Sylhet

23.

Moulvi Bazar Branch 103, M. Saifur Rahman Road, Moulvi Bazar, Sylhet

24.

Savar Branch United Super Market Savar Bazar, Bus Stand Savar. Tel: 7741452, 7741453

25.

Fulbaria Branch Annexco Tower 8, Phonix Road Fulbaria, Dhaka. Tel: 9559842 Fax: 880-2-9559867

26.

Madaripur Branch Howlader Harun Plaza Main Road, Puran Bazar Kotwali, Madaripur Tel: 066162483

27.

Dholaikhal Branch 25 Jorpool Lane Dholaikhal New Road Dhaka. Tel: 7172602, 7172363

28.

Raipur Branch Gazi Complex Thana : Raipur Dist : Laxmipur

29.

Aganagar Branch Babul Tower-2 Shahid Delowar Hossain Rd East Aganagar, Dhaka Phone: 7762226, 7762227


30.

Joypurhat Branch 553 Main Road Joypurhat Sadar Joypurhat.

31.

Narayangonj Branch 31, 31/1, Loyal Tank Road, Tanbazar, Noor Mansion

32.

Rangpur Branch Mostafa Super Market Holding#1 Mouja: Radhabollov Pourasava: Rangpur Thana: Rangpur Sadar

33.

Banani Branch Rupsha Center (Ground& 1st Floor) House# 72, Road# 11 Block-D, Banani Dhaka-1213

34.

Kushtia Branch Eden Complex 169 (94/6 old) NS road 1st Floor, Thanapara, Kustia

35.

Gournadi Branch Holding No- 3594 Mouja- Chor Ghatali Gournadi, Barisal

36.

Tongi Branch United shoping complex Hossain Market Tongi, Gajipur

37.

Elephant Road Branch 235/5, Elephant Road, Dhaka-1205

SME SERVICE CENTERS


1.

Haidergonj SME Service Center Gazi Super Market (1st floor), Haidergonj, Raipur, Laxmipur.

2.

Dagon Bhuiyan SME Service Center R B Plaza (1st Floor) 74-Dagoan Bhuiyan, Feni.

3.

Laksham SME Service Center Laksham Private Hospital Bhaban, Holding no. 1739, Paschim Gaon, Laksham, Comilla.

4.

Noria SME Service Center Mazi Plaza, Holding No: B-148 Thana- Noria, Dist: Shariyatpur

5.

Kaliganj SME Service Center Kaliganj Bazar Gazipur

Table 02: Number of Branches Years

2004

2005

2006

2007

2008

Number of Branches

20

25

28

30

36


Number of Branches 40 35 30 25 20 15 10 5 0

Number of Branches

2004 2005 2006 2007 2008 years Graph 01: Graph of Number of Branches. Numbers of branches remain same of MTBL from 2004 to 2008; which are 36 in numeric number increased in 2008 confirms the better performance over the years. In 2008 the number has been increased to 36, which is a good achievement for any private bank. It indicates that the bank is performing well over the last five years. Numbers of Employees: Mutual Trust Bank is the pioneer in private banking sector. The numbers of employees increased throughout its life because of growing nature. In 2007 the number of employees were 1270, which were 2183 in 2005 and 2133 in 2004. Number will be increased when the number of branches will be increased. Table 03: Numbers of Employees. Years Number of Employees

2005 1185

2005 1133

2006 1183

2007 1270

2008 1432

2500 2000 1500 1000 500 0

Years Number of Employees


Graph 02: Graph of Numbers of Employees. It seems that as the branches increases, the numbers of the employees also increases to provide better customer service to retain the passion in the banking sectors. It indicates that the bank is performing well over the last five years. Number of Foreign Correspondents: Mutual Trust Bank is the pioneer in private banking sector. In 2007 the Number of foreign correspondents are 400, which are 391 in 2006 and 358 in 2005. Number of Number of foreign correspondents will be increased when MTBL is able to make contract with other oversees financial institution. Table 04: Number of Foreign Correspondents. Years

2004

2005

2006

2007

2008

Number of foreign correspondents

358

410

391

400

405

Number of Foreign Correspondent 410 400 390 380 370

Year

360 350 340 330

2004 2005 2006 2007 2008

Graph 03: Graph of Foreign Correspondents. It seems that MTBL maintains good relationship with its foreign banks and exchange houses. For this reason the numbers of the foreign correspondences are increasing day by day.

It indicates that the

bank is performing better over the last five years. Capital Structure of Mutual Trust Bank Ltd. : Mutual Trust Bank is one of the oldest banks in Bangladesh. It owns one of the strongest capital structures in the banking history of Bangladesh. Authorized capital is increased in 2006 which is 2450 millions. Apart from that paid up capital is also increased since it started its journey. On the report the paid up capital is reported Taka 805.47 million. Last year it was 619.59 million, which was lower than the amount reported in the year 2006.


Table 05: Capital Structure of MTBL. Years Authorized

2003

2004

2005

2006

2007

2008

capital

1000.00

1,000.00

1000.00

1000

2450.00

2450.00

Paid up capital

430.27

430.27

516.33

619.59

805.47

1208.20

Reserve Fund

1198.7

1270.63

1345.99

2115.03

2468.79

3360.18

Capital of MTBL 4000 3000 2000 1000 0

2003 2004 2005 2006 2007 2008 Years

Authorized Capital

Paid up Capital

Reserve Fund

Graph 04: Graph of Capital Structure of MTBL. Deposits of Mutual Trust Bank Ltd. : On 2008 total deposits of the bank stood at TK. 47961.2 million which is higher than last years 40350.9 millions and the growth rate is 18.86%. The increasing trend of collecting deposit is followed in last five year.

Table 06: Deposits of MTBL. Year Deposits Growth Rate

2004

2005

2006

22257.12

28973.39

32984.05

NIL

30.18%

13.84%

2007 40350.9 22.33%

2008 47961.2 18.86%


Deposits of MTBL 50000 40000 30000 20000 10000 0

2004

2005

2006 Years

2007

2008

Graph 05: Graph of Deposits of MTBL. From the Chart and the Table shown above, it is visible that from the year 2004 to 2005 the deposit had been increased by 30.18%. It is also seen that from the year 2006 to 2008 the amount has been increased steadily. In the year 2008, the total deposit of Mutual Trust Bank Limited has reached 47961.2million Taka, which is 18.86% more from the year 2007. It indicates that the bank is performing well over the last five years in collecting deposits. Loans and Advances of Mutual Trust Bank Ltd.: With a view to improve the quality and soundness of Loan portfolio, the bank arranges more strict procedure for risk assessment, lending decisions and monitoring functions at the time of granting Loans and Advances. The emphasis on maintaining the quality of assets has rendered a diversified and well-structured advances portfolio. I have furnished below the loan and advance position of Mutual Trust Bank Limited to comparison its progress for last five years.

Table 07: Amount of different types of Advances of MTBL

Year

2004

2005

2006

2007

2008

Overdrafts etc.

21119.53

21613.77

24913.19

29619.6

33137.02

Others

1137.62

1226.67

2107.01

3090.08

3338.73

Total

23122.53

23617.77

26918.19

31625.6

35144.02

Growth rate

NIL

13.12%

33.22%

22.41%

13.28%

Loans, Cash credit,


Loans and Advances 40000 30000 20000 10000 0

2004

2005

2006 2007

2008

Years Loans, Cash credit, Overdrafts etc.

Others

Graph 06: Graph of Loans and Advances of MTBL. Here it can be observed from the chart that the growth rate of loans and advances has been increased day by day and it recorded 13.28% growth rate in the year 2008. Mutual Trust Bank Limited extended its credit in different sectors like Agriculture, pharmaceuticals, textiles and garments, chemical industries, Food and allied, transport and communications industries, electronics and automobiles industries, housing and constructions industries, engineering and metals industries, energy and power industries, services industries and many other industries. International Trade of Mutual Trust Bank Ltd. : In the year 2008 Mutual Trust Bank Limited remains highly active in the arena of international trade financed by offering a board spectrum of services namely, Issuance of Documentary Credit, Advising of Export L/Cs, Purchase and negotiation of export bills, Documentary collections, pre-shipment and post-shipment financed, Remittance Disbursement Activities etc. Import: In the year 2008, Mutual Trust Bank saw the highest ever growth rate in import business, which stood at Tk 62759.00 million, compared to 2007s volume of Tk 42458.50 million marking the increase of 47.81% from last year. The major import items of the year were: Coals, Steel items, HDPE, Raw cotton, Fabrics and Accessories, Industrial commodities and Seeds, poultry feeds, capital machineries etc Table 08(a): Import of MTBL.

Year

2004

2005

2006

2007

2008


Import

19264.5

22028.3

31648.2

42458.5

62759

Growth rate

NIL

14.35%

43.67%

34.16%

47.81%

Import 70000 60000 50000 40000 30000 20000 10000 0

2004

2005

2006 Years

2007

2008

Graph 07(a): Graph of Import Performance of MTBL. Throughout the years MTBL is getting better and better in import business service provider, because they provide the best customized self-tailored service to its different valued customers. It indicates that the bank is performing well over the last five years in import service business. Export: Mutual Trust Bank experienced sound growth of export business in 2007 from 2008. The volume of export business rose 28019.2 million from Tk 31824 million in 2008 showing and increase of around 13.58%. As before, Ready Made Garments still remained in the major export item of 2008 constituting more than 19.3%. The other export items were frozen fishes, which was 4.2% of total export.

Table 08(b): Export of MTBL. Year Export Growth Rate

2004 16341.8 NIL

2005 17105.3 4.67%

2006 21344.1 24.78%

2007 28019.2 31.27%

2008 31824 13.58%


Export 35000 30000 25000 20000 15000 10000 5000 0

2004

2005

2006

2007

2008

Years Graph 07(b): Graph of Export Performance of MTBL. The increasing trend of performing export business for client has been experienced for last few years. In the year 2007, MTBL experienced the highest ever growth rate which was 31.27%, but the highest amount of export revenue is earned by MTBL in the year 2008, which is around 31824 millions. It seems that MTBL is getting better and better day-by-day in this sector. Foreign Exchange Business: Mutual Trust Bank Limited has passed a successful year in foreign exchange business. MTBL expended the foreign exchange business in different countries with different agencies in last year. Mutual Trust Bank made money transfer arrangements with Bolaka exchange house last year. MTBL has the highest number of foreign correspondents in abroad. So it receives the major portion of remittance from the non-returning Bangladeshis and from the international importers. Mutual Trust Bank Ltd remittance volume increased at a huge amount by 56.80% about Tk 21353.9 million from last year's Tk. 13618.2million. It also increased by 29.07% in the year 2007. Table 09: Foreign Remittance Business of MTBL. Year

2004

2005

2006

2007

2008

Foreign remittance

7637.5

9035.5

13618.2

21353.9

27560.8

Growth rate

NIL

18.30%

50.72%

56.80%

29.07%


Gr Foreign remittance 30000 25000 20000 15000 10000 5000 0

2004

2005

2006 Years

2007

2008

aph 08 : Graph of Foreign Remittance of MTBL. It indicates that the bank is performing well over the last five years in foreign remittance business.

Profit of MTBL: Profit performance of Mutual Trust Bank Limited proves that it is performing well in the last five years. In 2004, profit before tax was 336.09 millions. Profit became 88.12 millions, when tax for that year was deducting. Since then, the profit before tax and profit after tax are increasing at a faster growth rate. The highest amount of profit is earned in 2008. The profit of last five years suggests that MTBL is managed well during that time. Table 10: Profit of MTBL. Year Profit Before Tax Profit After Tax

2004 336.09 88.12

2005 484.21 170.02

2006 581.13 271.67

2007 1058.73 507.49

2008 2035.10 1238.11


Profit of NBL 2500 2000 1500 1000 500 0

2003

2004

2005

2006

2007

Years Profit before tax

Profit after tax

Graph 09: Graph of Profit Level of MTBL. It indicates that the bank is performing well over the last five years. Source & Utilization of Capital:

Main part of the source of capital of MTBL bank is Equity of Share Holder & Savings of mass people. That money the bank used for short term & long term debt/loan to the different enterprise & financial institutions and earn huge profit against that.

1.45

1.72 5.32

Source of Fund 5.28

Paid up capital Reserve Fund Deposit and others

86.23

Borrowings Other liabilities

Uses of fund

Lons and Advances Investment

9.71

2.59

3.48

2.07

Cash and Banks Call money

12.25

Fixed Assets 69.9

Fig: Source & Use of Fund

Other Assets


2.11 Table-1: This table shows the Overall Performance of Mutual Trust Bank Limited of last five years. Year

2004

2005

2006

2007

2008

Authorized capital

1,000.00

1,000.00

1,000.00

2450

2450

Paid up capital

430.27

516.33

619.59

805.47

1208.20

Reserve Fund Deposits Loans

1270.63 27762.12 22257.15

1345.99 28973.39 23129.65

2115.03 32984.05 27020.21

2468.79 403520.87 32709.68

3360.18 47961.22 36475.74

Investment

4044.2

4374.17

3564.82

6239.38

7760.38

Import business

19264.5

22028.3

31648.2

42458.5

62753.00

Export Business

1634108

17105.3

21344.1

28019.2

31824.00

Gross Income

3622.31

3715.21

4202.52

5728.82

6644.40

Gross Expenditure

2473.23

2677.22

2980.06

3351.19

4582.04

Profit-Before Tax

336.09

484.21

581.13

1058.73

2035.10

Profit-After Tax

88.12

170.02

271.67

507.49

1238.11

Fixed Assets

889.61

895.35

1431.23

1627.29

1842.28

Total Assets

356709.33

35127.30

38400.37

46796.04

56526.96

Table: 1(a): This table shows the Overall Performance of Mutual Trust Bank Limited of last five years:

Particulars

2004

2005

2006

2007

2008

Loan/Deposit

80.17%

79.83%

81.92%

81.06%

76.05%

ROA

2.61%

2.09%

2.22%

2.50%

4.29%


Book value per Share

395.31

360.68

441.36

406.50

378.12

Market value per Share

226.61

475.25

746.50

760.50

1494.00

Earning per Share

17.07

27044

43.85

63.01

102.00

Dividend (In number)

20%

20% (Bonus 30% (Bonus 50% (Bonus 55% (Bonus

(Bonus

share)

share)

share)

share)

share) 358

410

391

400

405

Number of Employees

1102

1133

1183

1270

1432

Number of Shareholders

9276

9491

9564

10240

10760

Number of Branches

20

25

28

30

36

Number of foreign correspondents

CHAPTER 3: OVER ALL BANKING OPERATION OF MUTUAL TRUST BANK LTD. 3.1.1 INTRODUCTION Bank is nothing but an intermediary between lender (surplus unit) and borrowers (deficit unit). Savings and deposits are the main strength of the banks to provide loan and the interest earned from the difference borrowing and lending is the major portion of banks income. Banks also earns from variety of operation. Branch banking includes four operational divisions in First Security Bank Limited. They are: 1. General Banking 2. Accounts Division 3. Loan And Advance 4. Foreign Exchange

3.1.2 GENERAL BANKING General banking department is the heart of all banking activities. This is the important department of a


branch, because funds are mobilized, cash transactions are made; clearing, remittance and accounting activities are done here. Since bank is confined to provide the services everyday, general banking is also known as retail banking. In MTBL Babu Bazar Branch, the following departments are under general banking section: 1. 2. 3. 4. 5. 6. 7. 8. 9.

Account opening section Deposit section Cash section Remittance section Clearing section Credit card section Loans & Advances Section Accounts section Western Union Money Transfer Section

3.1.3 ACCOUNT OPENING SECTION: Account opening is the gateway for clients to enter into business with bank. It is the foundation of banker customer relationship. This is one of the most important sections of a branch, because by opening accounts bank mobilizes funds for investment. Various rules and regulations are maintained and various documents are taken while opening an account. A customer can open different types of accounts through this department. Such as:  Individual /Joint Account: 1. 2. 3. 4. 5.

Introduction of the account. Tow photographs of the signatories duly attested by the introducer. Identity (copy of passport). Joint Declaration Form (For joint a/c only). Employee's Certificate (in case of service holder).

 Partnership Account: 1. 2. 3. 4. 5. 6. 7.

Introduction of the account. Two photographs of the signatories duly attested by the introducer. Valid copy of Trade License. Rubber stamp. TIN number certificate. Identity (Copy of passport). Permission letter from DC/Magistrate (in case of newspaper)

 Limited company: 1. 2. 3. 4. 5. 6.

Introduction of the account. Two photographs of the signatories duly attested by the Introducer. Valid copy of Trade License. Board resolution of opening A/C duly certified by the Chairman/Managing Director. Certificate of Incorporation. Certificate of Commencement (In case of Public limited company).


7. Certified (joint stock) true copy of the Memorandum and Article of Association of the Company duly attested by Chairman or Managing Director. 8. List of directors along with designation & specimen signature. 9. Latest certified copy of Form - xii (to be certified by register of joint stock companies) (In case of Directorship change). 10. Rubber Stamp (Seal with designation of each person) 11. Certificate of registration (In case of Insurance Company - Obtained from department of Insurance form the Peoples Republic of BD.)  Club / societies account 1. 2. 3. 4. 5. 6. 7.

Introduction of the account. Two photographs for Opening A/C duly certified by President/Secretary. Board Resolution for Opening A/C duly certified by President/Secretary. List of Existing Managing Committee. Registration (if any). Rubber Stamp. Permission letter from Bureau of N.G.O. (In case of N.G.O. A/C).

ACCOUNT OPENING PROCEDURE Step 1

The account should be properly introduced by Any one of the following:  An existing Current Account holder of the Bank.  Officials of the Bank not below the rank of an Assistant officer.  A respectable person of the locality well known to the manager/Sub-Manager of the Branch concerned.

Step 2

Receiving filled up application in bank's prescribed form mentioning what type of

Step 3

account is desired to be opened.  The form is filled up by the applicant himself / herself.  Two copies of passport size photographs from individual are taken, in case of firms photographs of all partners are taken.  Applicants must submit required documents  Application must sign specimen signature sheet and give mandate.  Introducer's signature and accounts number - verified by legal officer.

Step 4

Authorized Officer accepts the application.

Step 5

Minimum balance is deposited - only cash is accepted.

Step 6

Account is opened and a Cheque book and pay-in-slip book is given.

3.1.4 DEPOSIT SECTION: Deposit is the lifeblood of a bank. From the history and origin of the banking system, we know that deposit collection is the main function of a bank. 3.2.1 Accepting deposits: The deposits that are accepted by MTBL like other banks may be classified in toa) Demand Deposits b) Time Deposits


3.1.4.1 (a) Demand deposits: These deposits are withdrawn able without notice, e.g. current deposits. Mutual Trust Bank Limited accepts demand deposits through the opening of:•

Current Account

Savings Account

Short Time Deposit

Call deposits from the fellow bankers

3.1.4.1 (b) Time deposits: A deposit which is payable at a fixed date or after a period of notice is a time deposit. Mutual Trust Bank Limited accepts time deposits through Fixed Deposit Receipt (FDR), Short Term Deposit (STD) and Beared Certificate Deposit (BCD) etc. While accepting these deposits, a contract is done between the bank and the customer. When the banker opens an account in the name of a customer, there arises a contract between the two. This contract will be valid one only when both the parties are competent to enter into contracts. As account opening initiates the fundamental relationship & since the banker has to deal with different kinds of persons with different legal status, Mutual Trust Bank Limited officials remain very much careful about the competency of the customers. 3.1.4.2 •

Short Term Deposit (STD) Account :

Normally various big companies, organizations, Government Departments keep money is STD account. Frequent withdrawal is discouraged and requires prior notice. The deposit should be kept for at least seven days to get interest. The interest offered for STD is less than that of savings deposit. Interest is calculated based on daily minimum product and paid two times in a year. 3.1.4.3 •

Fixed term deposit account (FDR):

Fixed term deposit (FDR) application form has been used both for application form and as a credit voucher for the bank. In the case of FDR specimen signature card used and client give three signatures on the specimen signature card. In the case of FDR it is clearly mention that when this

amount will be withdrawn account holder receive principle amount plus interest. FDR account holder gets a FDR slip that is provided by the MTBL officer. FDR slip contains name of account holder, deposited amount, and interest rate, and time of maturity. If depositor withdraws his money before maturity date he does not get any interest. If account holder lost FDR slip then indemnity bond


is required to issue a duplicate FDR slip. FDR account can be open by individually or joint name. In the case of FDR holder, Death is no mince will get the amount. Following are given the interest rate according to the maturity date.\ 3.1.5 •

MTBL Monthly Savings (MMS):

Monthly saving scheme (MMS) is specially offer for limited income group. This MMS account help to accumulate in hand sum amount at the end of maturity date of MMS. After maturate depositor receive different types of amount for different years such as. Sl

Monthly

Receive after 3

Receive after

Receive after

No.

Installment

years @ 9.00%

5years

10years

20,627/41,255/82,510/1,23,765/1,65,020/2,06,274/4,12,549/-

@9.25% 37,896/75,791/1,51,583/2,27,374/3,03,166/3,78,957/7,57,914/-

@9.50% 70,849/1,41,697/2,83,394/4,25,091/5,66,788/7,18,485/14,16,970/-

01. 02. 03. 04. 05. 06. 07.

500/1,000/2,000/3,000/4,000/5,000/10,000/-

Requirement for opening MMS: •

One copy passport size photo.

Nominee name and photo.

3.1.6 MTBL deposit scheme (NDS): Under NDS client can deposit for five years and his deposited money is fully refundable. Under this NDS depositor enjoy a monthly profit corresponding to their deposited amount.

Following are given the structure of NDS and their monthly benefit: BENEFIT UNDER THIS SCHEME


Amount of Deposit

Monthly Benefit

Tk. 50,000/-

Tk. 450/-

Tk. 1,00,000/-

Tk. 900/-

Tk. 2,00,000/-

Tk. 1,800/-

Tk. 3,00,000/-

Tk.2,700/-

Tk. 50,00,000/-

Tk. 45,000/-

Document requirements for NDS:•

Two copies of pass port size photo

Mentioning nominee with address and relation

An introducer who maintaining an account in NDS, Babu bazar branch.

Identity (passport, driving license, voter ID).

Every day, authorized officer check out which (SDS, FDR, STD) accounts interest has to pay. He create voucher for interest excise duty. On every (SDS, FDR, STD) accounts holder has to paid 10% government tax, another interest. Here authorized officer issued one debit voucher and one credit voucher: Debit head:-

Party account

Credit head:-

Sundry Deposit VAT

End of the year account holder also paid excise duty to the government on the basis of their outstanding. Followings way duty should be paid: Out standing

Duty

More then 10000

Nil

Tk 10000 to 100000

Tk 120

Tk 100001 to 1000000

Tk 250

Tk 1000001 to 10000000

Tk 500

Tk10000001 to 50000000

Tk 2500

Tk 500000001 to More

Tk 5000

3.1.7 •

Savings Insurance Scheme:

This is an uncertain World and the threatening silhouettes of future catastrophes are always looming


around. This MTBL scheme gives your family protection against the insecurities of the world. This MTBL scheme gives your family protection against the insecurities of the world. This scheme is the first of its kind in Bangladesh. It combines the benefits of regular savings and insurance scheme, so you get the usual rate of interest on the deposited amount while you enjoy the protection of a comprehensive insurance coverage. Under this scheme, the beneficiary (ies) get equal the deposit in case of natural death of the account holder whereas in the event of accidental death of the account holder the beneficiary (ies) will receive twice the deposit. As for example, if a customer picks up Easy Class (Tk.50, 000/-) he/she will get Tk. 50, 000/- for natural death and Tk 1,00,000/- for accidental death apart for his/her deposited amount and interest. 3.1.8 Issuing Cheque Book: There are three types of cheque book in the Mutual Trust Bank Ltd. those are:• Ten leaves cheque book: - Ten leaves cheque book use only for savings account. •

Twenty leaves cheque book: - Twenty leaves cheque book is use for current account.

Fifty leaves cheque book: - Fifty leaves cheque book use for current account but this is provided those depositors who are loyal customer or those whose transaction has done randomly.

Cheque book issue to a new account holder : New account holder has to fill up an application form which is provided by MTBL. After verifying depositor signature the authorized officer put branch seal and put his signature then date, name of the account holder, account number, cheque number are recorded in the register book. When all this function is successfully completed the client gets his cheque book and put his signature on the register book. Cheque book issure to existing account holder: When a existing deposit holder wants to withdraw a new cheque book then he should be given a requiting slip to the bank which he get form previous cheque book then authorized officer verifying holder signature. After verifying signature authorized officer put branch seal, and his signature on new cheque book then date, name of account, account number, cheque no, are recorded in the register book then client get his cheque book and put his signature on the register book. In the case of lost Cheque book: It has been observed that when a cheque book has been lost by the account holder, then account holder must have filled an indemnity bond which has been authorized the introducer with stamp paper Tk. 180.


Service charge for: • Saving account= 200 +200 + 120 (access duty) • Current Account= 575/= • STD= 575/= Closing Charge for: • Saving account= 200 • Current Account= 400. Some important points for account opening: • • •

Below 18 years is considered minor account for this case legal Guardian is essentially needed. Fully mad person can’t open account. Seasonal mad person can open the account but doctor certificate is essential.

3.1.9 CASH SECTION: Banks, as a financial institution, accept surplus money from the people as deposit and give them opportunity to withdraw the same by check, etc. But among the banking activities, cash department play an important role. It does the main function of a commercial bank i.e, receiving the deposit and paying the cash on demand. As this department deals directly with the customers, the reputation of the bank depends much on it. The functions of a cash department are described bellow: Functions of Cash Department: Cash Payment

Cash payment is made only against Cheque this is the unique function of the banking system which is known as "payment on demand". It makes payment only against its printed valid Cheque

Cash Receipt

It receives deposits from the depositors in form of cash So it is the "mobilization unit" of the banking system It collects money only its receipts forms

3.1.10 REMITTANCE SECTION: Local carrying cash money is troublesome and risky, that's why money can be transferred from one place to another through banking channel. This is called remittance. Remittances of funds are one of the most important aspects of the Commercial Banks in rendering services to its customers. Types of remittance: • Between banks and non banks customer • Between banks in the same country • Between banks in the different centers. • Between banks and central bank in the same country • Between central bank of different customers. The main instruments used by the MTBL of remittance of funds are • Payment order (PO)


• •

Demand Draft (DD) Telegraphic Transfer (TT)

So the basic three types of local remittances are discussed below: Points Explanation

Pay Order

Demand Draft

TT

Pay order gives the Demand Draft is an order of issuing

Issuing branch requests

payee the right to bank on another branch of the same

another branch to pay

claim payment from bank to pay specified sum of money

specified money to the

the issuing bank

specific

to payee on demand.

payee

demand by

on

Telegraph/

Telephone Payment from Generally used to Remit fund

Payment from issuing Payment from ordered branch

Payment from ordered

branch only

branch

Within

the Outside the clearinghouse area of

clearinghouse area of issuing branch. Payee can also be the issuing branch.

Payment Process of the paying

through clearing

purchaser. 1. Confirm that the DD is not forged one. 2. Confirm with sent advice 3. Check the 'Test Code' 4. Make payment

Only Commission

Commission + SWIFT Charge

payment

is

made

bank

Charge

Anywhere in the country

1. Confirm issuing branch 2. Confirm Payee A/C 3. Confirm amount 4. Make payment 5. Receive advice Commission + telephone

3.1.11 CLEARING SECTION: Cheques, Pay Order (P.O), Demand Draft (D.D.) Collection of amount of other banks on behalf of its customer are a basic function of a Clearing Department. Clearing: Clearing is a system by which a bank can collect customers fund from one bank to another through clearing house. Clearing House: Clearing House is a place where the representatives of different banks get together to receive and deliver cheque with another banks.

Member of clearing House Mutual Trust Bank Ltd. is a scheduled Bank. According to the Article 37(2) of Bangladesh Bank Order, 1972, the banks, which are the member of the clearinghouse, are called as Scheduled Banks. The scheduled banks clear the cheque drawn upon one another through the clearinghouse.


Types of Clearing: (A) Outward Clearing: When the Branches of a Bank receive cheque form its customers drawn on the other Banks within the local clearing zone for collection through Clearing House, it is Outward Clearing. (B) Inward Clearing: When the Banks receive cheque drawn on them from other Banks in the Clearing House it is Inward Clearing. Types of clearing house: There are two type of clearing house: Those are 1) Normal clearing house 2) Same day clearing house (1) Normal clearing house: 1) 1st house: 1st house normally stands at 10 am to 11 am 2) 2nd house: 2nd house normally stands after 3 p.m. and it is known as return house. (2) Same day clearing house: 1) 1st house: 1st house normally stands at 11 a.m. to 12 p.m 2) 2nd house: 2nd house normally after 2 p.m. and it is known as return house. •

Who will deposit cheque for Clearing: Only the regular customers i.e. who have Savings, Current, STD & Loa Account in the Bank can deposit cheque for collection of fund through clearing house.

•

Precaution at the time of cheque receiving for Clearing, Collection of LBC, OBC & Transfer: 1. Name of the account holder same in the cheque & deposit slip., 2. Amount in The cheque & deposit slip must be same in words & in figure 3. Date in cheque may be on or before (but not more than six months back) clearing house date. 4. Bank & Branch name of the cheque, it's number & date in the Deposit slip. 5. Cheque must be signed. 6. Signature for confirmation of date, amount in words / in figure Cutting & Mutilation of cheque. 7. Cheque should be crossed (not for bearer cheque). 8. Account number in the deposit slip must be clear. 9. Depositor's signature in the deposit slip.

Return house: Return House means 2nd house where the representatives of the Bank meet after 3 p.m. to receive and deliver dishonored cheque, which place in the 1st Clearing House. Cheque may be dishonored for any one of the following reasons:


1) Insufficient fund. 2) Amount in figure and word differs. 3) Cheque out of date/ post- dated. 4) Payment stopped by the drawer. 5) Payee's endorsement irregular/ illegible / required. 6) Drawer's signature differs / required. 7) Crossed cheque to be presented through a bank. 8) Other specific reasons not mentioned above. The dishonor cheque entry in the Return Register & the party is informed about it. Party's signature required in the return register to deliver the dishonor cheque. After duration, the return cheque is sent to the party's mailing address with Return Memo. •

Responsibility of the concerned officer for the Clearing Cheque: 1) Crossing of the cheque. 2) (Computer) posting of the cheque. 3) Clearing seal & proper endorsement of the cheque. 4) Separation of cheque from deposit slip. 5) Sorting of cheque 1st bank wise and then on branch wise. 6) Computer print 1st Clearing House computer validation sheet. 7) Examine computer validation sheet with the deposit slip to justify the computer posting. 8) Copy of computer posting in the floppy disk.

Bills Collection: In modern banking the mechanism has become complex as far as smooth transaction and safety is concerned. Customer does pay and receive bill from their counterpart as a result of transaction. Commercial bank's duty is to collect bills on behalf of their customer. Types of Bills for Collection a) Outward Bills for Collection (OBC) b) Inward Bills for Collection (IBC)

(a) Outward Bills for Collection (OBC): What is OBC? OBC means Outward Bills for Collection. OBC exists with different branches of different banks outside the local clearinghouse. Normally two types of OBC: 1) OBC with different branches of other banks


2) OBC with different branches of the same bank Procedure of OBC: 1) Entry in the OBC register. 2) Put OBC number in the cheque. 3) "Crossing seal" on the left corner of the cheque & "payees account will be credited on realization" seal on the back of the cheque with signature of the concerned officer. 4) Dispatch the OBC cheque with forwarding. 5) Reserve the photocopy of the cheque, carbon copy of the forwarding and deposit slip of the cheque in the OBC file. Commission calculation for OBC:

•

Limit Charge Up to tk 25000 @.15% Min.tk. 10 Up to tk 100000 @.15% Mint tk.50 Up to tk 500000 @. 10% Min tk.150 Over tk 500000 @. 05% Min tk.600 Maximum Tk 1200 VAT calculation: VAT always 15% on commission.

•

Postage: postage always fixed 40 taka.

(b) Inward bills for collection (IBC) When the banks collect bills as an agent of the collecting branch, the sys tem is known as IBC. In this case the bank will work as an agent of the collection bank. The branch receives a forwarding letter and the bill. Procedure of IBC: 1. IBC against OBC: To receive the OBC cheque first we have to give entry in the IBC Register. The IBC number should put on the forwarding of the OBC with date. 2. Deposit of OBC amount: OBC cheque amount is put into the "sundry deposit sundry Creditors account", prepare debit & credit vouch of it. If the OBC cheque is honored, send credit advice (IBCA) with signature & advice number of the concern branch for the OBC amount. 3. If the OBC cheque is dishonored, the concerned branch is informed about it. 4. Again place in the clearing house or send the OBC cheque with Return Memo to the issuing branch according to their information. 3.1.12: ACCOUNTS SECTION: Accounts Department is called as the nerve Center of the bank. In banking business, transactions are done every day and these transactions are to be recorded properly and systematically as the banks deal


with the depositors' money. Improper recording of transactions will lead to the mismatch in the debit side and in the credit side. To avoid these mishaps, the bank provides a separate department; whose function is to check the mistakes in passing vouchers or wrong entries or fraud of forgery. This department is called as Accounts Department. If any discrepancy arises regarding any transaction this department repot to the concerned department. Besides these, the branch has to prepare some internal statements as well as some statutory statements, which are to be submitted to the Central Bank and the Head Office. This department prepares all these statements. WORKINGS OF THIS DEPARTMENT •

Recording the transactions in the cash book.

Recording the transactions in general and subsidiary ledger.

Preparing the daily position of the branch comprising of deposit and cash.

Preparing the daily Statement of Affairs showing all the assets and liability of the branch as per General Ledger and Subsidiary Ledger separately.

Making payment of all the expenses of the branch.

Recording inters branch fund transfer and providing accounting treatment in this regard.

Preparing the monthly salary statements for the employees.

Preparing the weekly position for the branch which is sent to the Head Office to maintain Cash Reserve Requirement (C.R.R)

Preparing the monthly position for the branch which is sent to the Head Office to maintain Statutory Liquidity Requirement (S.L.R)

Make charges for different types of duties.

Preparing the budget for the branch by fixing the target regarding profit and deposit so as to take necessary steps to generate and mobilize deposit.

Checking of Transaction List.

Reconciliation The reconciliation division collects all the CIBTA (computerized inter bank transaction

advice) related voucher. Foreign exchange division take some voucher which is related to their division and rest of the vouchers according to IBCA (inter branch credit advice) IBDA (inter branch debit advice) responding and originating wise. When all are complete then those are posting in computer and take a print of originating wise. When all are complete then those are posting in computer and take a print of originating and responding sheet and make extract.


 Extract: - Extract needs to reconciliation all transaction between Babu Bazar Branch

and all other branch of MTBL through IBCA and IBDA. Extract are two types such as, Extract for originating and responding credit entries and extract for origination and debit entries. 3.1.13 CARD DIVISION: Through its Credit Card. Mutual Trust Bank Limited has not only initiated a new scheme but

also brought a new life style concept in Bangladesh. Now the dangers and the worries of carrying cash money are memories of the past. Credit Card comes in both local and international forms, giving the client power to buy all over the World. Now enjoy the conveniences and advantages of Credit Card as you steps into the new millennium. Mutual Trust Bank Ltd. issued two types of credit card, which is as follows. MTB Visa Electron Card will be offered to each and every Savings, Current & STD Account holders of the Bank. This electron Card can be used at any

Dutch-Bangla Bank’s ATM all over the country. MTB will introduce its

own ATM soon. Local credit card: Local credit cars is two types, such as “gold card” and “silver card” Gold card limit is 45000 taka to 200000 taka. Silver card limit is 10000 to 30000 taka. Requirement for local credit card:• FDR, STD account loan. •

Tax identification number

Two copies passport size photo

Facilities of Local Credit Card » No card fee for first year » No transaction fees on POS & DBBL TMs » No time bindings for cash withdrawal » No need to come to Branch for cash withdrawals » 5000 outlets for shopping in Bangladesh International Credit Card It has also two types, such as gold card and silver card. •

For international purpose gold card limit is 2000 dollar to 4000 dollar

For international purpose silver card limit is 1000 to 2000 dollar

Requirement for international Credit Card:


2 Passport Size Picture.

Application Form Duly Signed and Filled.

Valid Trade License.

TIN Certificate.

VAT Certificate.

Passport Photocopy (First 05 Pages).

National ID.

Shop Deed Photocopy.

Electricity / Telephone/Gas Bill Photocopy (House/Shop).

Blank Undated Cheque with duly signed.

Rent Receipt of the Shop (If No Deed of The Shop).

Lien Confirmation of FDR.

Facilities of International Credit Card » Useable in Any Currency at Home and Abroad » Best for upper class income group » Easy to use & Carry. » Secured & Convenient » Handy & Prestigious » 80% Cash Advance facility » Easy repayment options » Up to 45 Days Interest free period for purchasing any products. MTB VISA Remittance Card Remittance card is a revolutionary product of Mutual Trust Bank and it is also the first time in Bangladesh, it acts like a debit card but it is different than debit cards. Usually debit cards are issued against a bank account number and the withdrawal amount are debited from the customer’s account when a card is used on an ATM or POS. On the contrary in case of Remittance Card there will be no need to open or maintain a bank account with MTB. The remitted amount of money will be directly credited to the card account. It will fulfill the purpose of quick money transfer from non-resident Bangladeshi (who are working abroad) to their relatives in Bangladesh. International Travel Cards An internationally accepted VISA prepaid card for the travelers. » Will reduce dollar endorsement hassle and will provide best support while in abroad. » Easy to use & Carry. » Secured & Convenient


» Handy & Prestigious » Usability on 550,000 Visa ATM’s worldwide. » About 18 million outlets worldwide » Easy repayment options MTB Hajj Card Hajj card is a pre-paid card which is valid only in Saudi Arabia (KSA) to perform Hajj or Omrah. According to the Central Bank Foreign Currency regulations, this card will allow the pilgrims to withdraw cash from any of the VISA acquired ATM and purchase or pay against service by using VISA POS throughout Saudi Arabia. The cardholder will be able to withdraw SR 100 in cash per transaction or up to the face value of the card. Who needs the Hajj Card? MTB Hajj cards are especially designed to ease the payment for food and lodging of the Bangladeshi pilgrims at Saudi Arabia to perform Umrah or Hajj. However these cards can also be used by any travelers at Saudi Arabia considering the security aspect in handling cash required for their travel while in the Kingdom. Benefits of the Hajj Card: »Peace of Mind: No need to worry about carrying large amount of cash. » Safety The traveler will receive a personal identification number (PIN code) for each card. ATM Cash can only be accessed by the cardholder by entering the confidential PIN code. »Easy Withdrawing cash from VISA acquired ATM is done by following a few easy steps. » Hotel Booking Any Bangladeshi pilgrim can easily book hotel in Mecca or Medina from Bangladesh before going to perform Hajj or Omrah by using his/her hajj card. Card holder also can buy/book advance air ticket in advance by the card at the inconvenient schedule. » Convenient: Hajj cards can be used to withdraw cash & purchase or getting service 24 hours a day, 7 days a week from any of the VISA ATMs and VISA accepted outlet across Saudi Arabia. » No Confusion: The cards value will be converted in Saudi Riyals. The traveler does not need to worry about foreign currency exchange once the purchase is done by using card in KSA. » Cost Saving: There are no fees on ATM withdrawals made with Saudi Umrah and Haj Cards, and 100% cash value can be withdrawn in cash. »Shari‘a:


The cards adhere 100% to Islamic Shari’ a regulations. »Souvenir: Once used these attractive cards can be kept as a souvenir of the trip to the Holy Lands. » Other Feature: Balance enquiry, Mini Statements are available in any VISA ATM in KSA. 3.1.14 MTBL VISA Cards Service: Actually VISA Cards card is debit card, Mutual Trust Bank Limited has introduced VISA Card service to its Customers. The cars will enable to save our valued customer form any kind of predicament in emergency situation and time consuming formalities. MTBL VISA Card will give our distinguished clients the opportunity to withdraw cash at any time, even in holidays, 24 hours a day, and 7 days a week. MTBL VISA Card - your access to prompt cash. By using VISA Card subscriber can give various utility bill such as telephone, gas, electricity bills etc. Actually ATM card is a debit card. Charges for VISA Card: VISA Card holders have to pay 1000 taka annually and in the case of card lost subscriber also pay additional 300 taka 3.2. LOANS & ADVANCES SECTION This is the survival unit of the bank. The reason is, until and unless the success of this section, the survival is a big question. This is the main earning unit of the bank. Banks accepts deposits from the depositors in condition of providing interest to the depositors in condition of providing interest to them. Now the question is how bank provides interest to their clients. The simple answer is – interest from advances. The bank provides interest to the borrowers because: 

To earn interest from borrowers and give depositors the interests get back. The rest are the profit of the bank.

To accelerate economic development.

To meet the interest groups.

Credit is a continuous process. Recovery of one credit gives rise to another credit. In this process of revolving funds, bank earns income in the form of interest. A bank can invest its fund in many ways. Bank provides loans and advances to traders, businessmen and industrialists. Moreover, nature of credit may differ in terms of security requirement, disbursement provision, terms and conditions etc. Bank often uses loans and advances as an alternative to one another. But, academically this concept is incorrect. Academically, Advances is the combination such items where loans is a part only. For this credit section of the banks is known as advance section.


TYPES OF ADVANCES It is not possible to discuss all these types of advances in details in this report but an attempt has been made to analyze the basic difference and characteristics of these advances all in the following manner: (A) Overdraft: Overdrafts are those drawings, which are allowed by the banker in excess of the balance in account up to a specified amount for definite period. It is given to the businessmen to increase their business activities. There are two forms of overdrafts: 

SOD (Secured Overdraft).

Loan General. (LG)

Any deposit in the SOD account is treated as repayment of overdraft. The features of SOD are:  The interest rate is 14%.  The interest starts from the date of first withdrawal.  Only businessmen can open this and he has to be a current account holder of the respective branch of MTBL. The security that is kept against the SOD loan are generally FDR, SDS, MSS etc. (B) Cash Credit (CC): It is one type of current account. The difference between them is that current account is intended to be an account with credit balance and the CC is an account for drawing in advance. Operation of cash credit is same as that of overdraft. The purpose of cash credit is to meet working capital needs of traders and industrialists. It is given through the Cash Credit (CC) account. (C) Inland Bills Purchased (IBP): Bank purchases two types of Inland Bill – Clean Bill and Documentary Bill. •

Clean Bill:

Clean bill are those that requires no payment for documents check, Demand Draft, Telegraphic Transfer, and Mail transfer. •

Documentary Bills:

Documentary bills are those which require related documents for payments like Bills of Exchange, Railway/ Shipment receipt and invoice etc. This bill is often created in businesses and bank purchases these before their maturity. Thus, purchases of these bills are one kind of credit to these before their maturity. As bank purchases these bills on behalf of the business so it is one kind of credit to those businesses. After maturity, bank presents it to the drawee for encashment. (D) Employee Loan: For the betterment of its own employees MTBL provides loans. The branch managers and executives


get this facility. Repayment is adjusted from their monthly salary on an equal monthly installment. 10% of basic is contributed by employee in every month. The staffs can also take loan, which is known as Staff Loan against Provident Fund (SPF). The repayment is adjusted from their monthly salary. 10% of basic is also contributed to the PF by the bank. (E) Consumer Credit Scheme: MTBL Consumer Credit Scheme gives a great opportunity to buy household and office items on easy installments. This scheme gives the advantage of part payment to cope with the high price tags of many necessary home and office appliances. To lead a better life MTBL provides this credit to consumers to purchase household items as Television, Refrigerator, Personal Computer, Furniture, Car etc. The people with fixed income get this credit. It is a 24 to 48 installment system of 14% interest. The amount allowed to the borrower is 10000/- to 300000/-. CREATION OF CHARGES FOR SECURING LOANS: For the safety of the loan, bank requires security from the borrower so that it can recover the loan by selling security if borrower fails to repay. Creation of charge means making it available as a cover for an advance. The method of charging should be legal, perfect and complete. Securities are charges in order to: •

Protection of interest.

Ensuring the recovery of the money lent.

Provision against unexpected change.

• Commitment of the borrower. A brief description about the securities that is kept against the loans is described below: (A) Primary Security: Security deposited the borrower himself to the loan such as – FDR, Cash, MSS. (B) Collateral Security: •

Narrow Sense – security deposited by a third party to secure the advances for the borrower.

Wider sense – any types of security on which the creditor has a personal right of action on the debtor in respect of advance common method of charging security and their nature of security. (C) Lien: It is the right of the banker to hold the debtor’s property until the debt is discharged – generally retained by the bank in its own custody or to the hands of the third party with lien marked. The third party cannot discharge it without the permission of the bank. In case of need bank needs permission of the court to sell the property. (D) Assignment: Borrower transfers the right of property or debt to the bank. Life Insurance Policy, supply bills, book debt of the borrower can be assigned. (E) Pledge: It is one kind of lien but the bank enjoys more rights on it. In this case, physical transfer of the goods is must to the bank. Bank can sell the property without the intervention of the court in case of default


on loan.

(F) Mortgage: Mortgage is the transfer of special immovable property – like land, building, plant etc. Most common type of mortgage is legal mortgage in which ownership is transferred to the bank by registration of the mortgage deed. Another method called equitable mortgage is also used in bank for creation of charges. Registration is not required. In both the cases, the mortgaged property is retained in hand of the property. PRINCIPLES OF SOUND LENDING In order to secure a balance between liquidity Profitability, and security, MTBL following principles of sound lending: (a) Liquidity: While lending adequate care is taken to ensure the liquidity of the lien item. In this case, MTBL choose such securities, which possess such liquidity. (b) Safety: Mutual Trust Bank exercises the lending function only it is safe and the risk factor is adequately mitigated and covered. Safety depends upon the security offered by the borrower. (c) Diversity: In order to minimize the risk, Mutual Trust Bank invests its fund in different industries situated in different regions of the country. (d) Yield: From the commercial point of view, Mutual Trust Bank considers sufficient yield of return while financing a project. (e) Productive Purpose: Mutual Trust Bank exercises its lending function only on productive purpose. (f) National or Social Interest: Mutual Trust Bank also considers national aspect of any project while financing. They take utmost care so that the project cannot be determined to the society as well as to the nation. SELECTION OF BORROWER: In lending, the most important step is the selection of the borrower. Due, to the asymmetric information and moral hazard, banks have to suffer a lot due to the classified loans and advances, which weakens the financial soundness of the bank. If the selection of the borrower is correct, that is the borrower is a good character, capital and capacity or of Reliability, resourceful and responsible the bank can easily get the return from them. This point of view, MTBL follows the following procedures: (a) Analyzing Last Business Record:


After getting an application for a loan the past record of the applicant is carefully studied. Generally such studies includes – i.

Account balances and past transactions

ii.

Credit report from other banks

iii.

Information of the industry by studying market feasibility

iv.

Financial statements (balance sheet, cash flow statement, and income statement). If the borrower is a sole proprietor then the single entry accounting treatment is converted into double entry system.

v.

If the amount is more then TK. 10 lac then report from credit information bureau of Bangladesh Bank is collected.

(b) Borrower Analysis: Borrower analysis is based on 5-c’s (character, capital, capacity, collateral, creditworthiness) and 3-r (responsibility, reliability and resourcefulness). It follows that the bank forms a rational judgment about the integrity of the borrower which should be undoubted. (c) Credit Approval Procedure: After receiving the application from the client, Mutual Trust Bank Limited prepares a Credit Line Proposal (CLP) and forwards the same to the Head Office to place before Head Office Credit Committee (HOCC) for approval. It includeso

Request for credit limit of customer.

o

Project profile/ profile of business.

o

Copy of trade license duty attested.

o

Copy of T I N certificate.

o

Certificate copy of Memorandum & Articles of Association, certificate of incorporation, certificate of commencement of business, Resolution of the Board, Partnership Deed (where applicable).

o

3 years balance sheet and profit & loss account.

o

Personal net worth statement of the owner/ directors/partners etc

o

Valuation certificate of the collateral security in bank’s form with photograph of the security.

o

CIB enquiry form duly filled in (for proposal of above 10 lac).

o

Credit report from other banks.

o

Stock report duly verified.

o

Indent/ Performa invoice/Quotation.

o

Statement of accounts.

DOCUMENTATION:


Documentation can be described as the process of technique of obtaining the relevant documents. In spite of the fact, that banker leads credit to a borrower after inquiring the character, capital, capacity, collateral, creditworthiness of the borrower MTBL obtains proper documents executed from the borrower, and he must obtain proper documents executed from the borrower to protect him against willful defaults. Documentation contains the precise terms of granting loans and thereby serve as important evidence in the law courts if the circumstances so desire. Charge documents as required by the different types of advances are mentioned below: (a) Loan: o

Letter of arrangement.

o

Letter of disbursement.

o

Letter of partnership (firm) or Board of resolution (Limited companies).

o

Letter of pledge.

o

Letter of hypothecation.

o

Letter of lien and ownership.

o

Letter of credit for packing credit.

o

Letter of lien (in case advance against FDR).

o

Letter of lien and transfer authority.

o

Legal documents for mortgage of property.

o

Copy of sanction letter mentioning detail of terms and condition duly acknowledge by the borrower.

o

Trust receipt.

o

D P Note.

(b) Overdraft: o Letter of partnership. o Letter of arrangement. o Letter of continuity. o Letter of lien. o Letter of lien and ownership/share transfer form (in case of advance against share). o Letter of lien and transfer authority. o Legal documents for mortgage of property. o D P Note. (c) Cash Credit: o Letter of partnership (partnership firm) or Board of resolution (in case of limited company). o Letter of arrangement. o Letter of continuity. o Letter of hypothecation. (In case of CC). o Legal documents for mortgage of property. o Letter of pledge or arrangement of pledge. o D P note.


(d) Bills Purchased: o Letter of partnership (partnership firm) or Board of resolution (in case of limited company). o Letter of arrangement. o Letter of acceptance, where it calls for acceptance by the drawee. o Letter of hypothecation of bill.

Loans and Advances of Mutual Trust Bank Ltd. : With a view to improve the quality and soundness of Loan portfolio, the bank arranges more strict procedure for risk assessment, lending decisions and monitoring functions at the time of granting Loans and Advances. The emphasis on maintaining the quality of assets has rendered a diversified and well-structured advances portfolio. I have furnished below the loan and advances position of Mutual Trust Bank Limited to comparison its progress for last five years. Table shows Amount of different types of Advances of MTBL. Year

2004

2005

2006

2007

2008

Loans, Cash credit, Overdrafts

21119.53

21613.77

24913.19

29619.6

33137.02

Others

1137.62

1226.67

2107.01

3090.08

3338.73

Total

23122.53

23617.77

26918.19

31625.6

35144.02

Growth rate

NIL

13.12%

33.22%

22.41%

13.28%

Loans and Advances 40000 30000 20000 10000 0

2004

2005

2006 2007

2008

Years Loans, Cash credit, Overdrafts etc.

Others

Graph of Loans and Advances of MTBL. Here it can be observed from the chart that the growth rate of loans and advances has been increased day by day and it recorded 13.28% growth rate in the year 2008. Mutual Trust Bank Limited extended


its credit in different sectors like Agriculture, pharmaceuticals, textiles and garments, chemical industries, Food and allied, transport and communications industries, electronics and automobiles industries, housing and constructions industries, engineering and metals industries, energy and power industries, services industries and many other industries.

3.3.1FOREIGN EXCHANGE (EXPORT AND IMPORT) Export means sale of goods across the boarder to overseas. Buyer through some mechanism Export from Bangladesh is governed as per Export policy order issued by the government from time to time. Presently the policy order issued from two years term and Export policy order 1995-1997 is now in force. Accepting some commodities listed in the policy all item are allowed for Export Bangladesh Bank is the administering authority to monitor the Export transaction and authorized Branches dealing in Foreign Exchange are handling the Export transaction strictly adhering to the directives of Bangladesh Bank and always accountable to Bangladesh Bank for realization and reporting of transaction as per manner prescribed. Import means buy of goods across the boarder to overseas. Buyer wants some mechanism Import from Abroad is governed as per Import policy order issued by the government from time to time. Foreign Exchange means dealings with Foreign Currency. Any individual, firm company in possession of valid Export Registration Certificate (ERC) issued by chief controller of Imports and Exports (CCI&E) can export permissible goods to overseas Buyer. The exporter before must be satisfied as to the arrangement made for repatriation of Export value to the country. Buyer and Seller after negotiation with each other as to price and others terms and conditions such as payment terms, shipping terms concludes a signed contract for sale and purchase of goods. After concluding purchase contract the following method are usually followed: International Trade of Mutual Trust Bank Ltd. : In the year 2008 Mutual Trust Bank Limited remains highly active in the arena of international trade financed by offering a board spectrum of services namely, Issuance of Documentary Credit, Advising of Export L/Cs, Purchase and negotiation of export bills, Documentary collections, pre-shipment and post-shipment financed, Remittance Disbursement Activities. Import: In the year 2008, Mutual Trust Bank saw the highest ever growth rate in import business, which stood at Tk 62759.00 million, compared to 2007s volume of Tk 42458.50 million marking the increase of 47.81% from last year. The major import items of the year were: Coals, Steel items, HDPE, Raw cotton, Fabrics and Accessories, Industrial commodities and Seeds, poultry feeds, capital machineries etc


Table 08(a): Import of MTBL. Year

2004

2005

2006

2007

2008

Import

19264.5

22028.3

31648.2

42458.5

62759

Growth Rate

NIL

14.35%

43.67%

34.16%

47.81%

Import 70000 60000 50000 40000 30000 20000 10000 0

2004

2005

2006 Years

2007

2008

Graph 08(a): Graph of Import Performance of MTBL. Throughout the years MTBL is getting better and better in import business service provider, because they provide the best customized self-tailored service to its different valued customers. It indicates that the bank is performing well over the last five years in import service business. Export: Mutual Trust Bank experienced sound growth of export business in 2008 from 2007. The volume of export business rose 28019.2 million from Tk 31824 million in 2008 showing and increase of around 13.58%. As before, Ready Made Garments still remained in the major export item of 2008 constituting more than 19.3%. The other export items were frozen fishes, which was 4.2% of total export. Table 08(b): Export of MTBL.

Year

2004

2005

2006

2007

2008

Export

16341.8

17105.3

21344.1

28019.2

31824

Growth rate

NIL

4.67%

24.78%

31.27%

13.58%


Export 35000 30000 25000 20000 15000 10000 5000 0

2004

2005

2006

2007

2008

Years Graph 08(b): Graph of Export Performance of MTBL. The increasing trend of performing export business for client has been experienced for last few years. In the year 2007, MTBL experienced the highest ever growth rate which was 31.27%, but the highest amount of export revenue is earned by MTBL in the year 2008, which is around 31824 millions. It seems that MTBL is getting better and better day-by-day in this sector. Foreign Exchange Business: Mutual Trust Bank Limited has passed a successful year in foreign exchange business. MTBL expended the foreign exchange business in different countries with different agencies in last year. Mutual Trust Bank made money transfer arrangements with Bolaka exchange house last year. MTBL has the highest number of foreign correspondents in abroad. So it receives the major portion of remittance from the non-returning Bangladeshis and from the international importers. Mutual Trust Bank remittance volume increased at a huge amount by 56.80% about Tk 21353.9 million from last year's Tk.13618.2million. It also increased by 29.07% in the year 2007. Table 09: Foreign Remittance Business of MTBL. Year

2004

2005

2006

2007

2008

Foreign remittance

7637.5

9035.5

13618.2

21353.9

27560.8

Growth Rate

NIL

18.30%

50.72%

56.80%

29.07%


Gr Foreign remittance 30000 25000 20000 15000 10000 5000 0

2004

2005

2006 Years

2007

2008

aph 09 : Graph of Foreign Remittance of MTBL. It indicates that the bank is performing well over the last five years in foreign remittance business. LETTER OF CREDIT L/C may be defined as conditional under taking/commitment of issuing Bank/Buyer’s Bank for making payment of an agreed amount of money to the seller/Beneficiary on behalf of the applicant/buyer or its own behalf against presentation of stipulated documents. It is guided by ICC (International Chamber of Commerce). UCPDC (Uniform Customs and Practice for Documentary Credits) publication 600 defined L/C as any arrangement, however named or described, wherever a Bank (The Issuing Bank) acting at the request and on the instruction of a customer (The applicant) or its own behalf. 

To make a payment to or to the order of a third party (The Beneficiary) or is to accept and pay bills of exchange (Drafts) drawn by the beneficiary.

Authorizes another Bank to effect such payment, or to accept and pay such bill of exchange (Drafts).

Authorizes another Bank to negotiate against stipulated documents provided that the terms and conditions of the credit are complied with.

Two Types of L/C there are: A) Revocable. B) Irrevocable. But Irrevocable L/C is use normally. Various types of Irrevocable L/C are under below:         

Cash L/C. ACU L/C. Back-to-Back L/C. EDF L/C. Handling of Export Documents. Settlement of TT (Inward and Outward). Settlement of FBP. Settlement of FBC. Settlement of T.C


   

F.C. A/C. NFCD A/C. Issuance of FDD. Handling of Cash Currency.

PROCEDURE FOR OPENING OF IMPORT L/C (CASH): The client, who desires to open L/C, has to submit following papers/documents to the Bank for consideration: a) Application for opening of L/C duly singed by the importer. b) Membership certificate from chamber of commerce or any other recognized Business association. c) Valid IRC. d) TIN Certificate. e) Three copies of declaration stating that income tax for previous year has been paid or income tax return has been submitted. f) Trade License. g) Vat registration certificate. h) Valid indent / preformed invoice. I) Insurance cover note with money receipt. j) Any other permit/ documents if required as per instruction/ order issued by CCI&E time to time under present IPO. EXPORT L/C: The L/C Issued by buyer’s Bank abroad and advised to the exporter by a local advising Bank is known as Export L/C. After getting export L/C by the exporter the L/C must be checked carefully and be confirmed, especially on the following points: -a) The L/C is duly advised by a local advising Bank and properly authenticated by the issuing Bank. b) A foreign Bank having good reputation issues the L/C. c) The exported items are as per proforma invoice issued earlier. d) Price & Terms of delivery are acceptable (CFR or FOB or other). e) Last date of shipment or shipment period is sufficient. f) Last date of negotiation is acceptable. g) Payment terms or Reimbursement clause is comfortable. h) Condition for payment of bank and other charges are acceptable. i) The L/C is subject to UCPDC (ICC Publication No.600).

Against Export Letter of Credit:

Buyers arrange opening of L/C in favor of exporter through the buyers Bank to ship out goods. This is the safest method of securing payment as buyers Bank undertakes to make payment if documents prescribed in the credit are strictly in conformity within credit terms.


Advance payment:

This is not very often in practice. Some times one exporter can insist buyer to value of

Export

goods in advance before Export to facilitate them to ship out goods at the cost of the buyer without involving any risk of the exporter. •

Documents against Payment:

Buyer some times tend to execute contract for buying goods through D/P, D/A or CAD basis to avoid the expenses of opening of L/C for Import. •

Export Documents:

After Export the shipper submit Export documents to the Bank as per terms of L/C or contract for collection of Export proceeds. Bank make scrutiny of the Documents submitted in the light of Export L/C. The Bank advice the exporter to get the discrepancies removed wherever possible. The Bank always help exporter understand L/C’s and in preparation of Export documents to conform L/C terms. •

Export Finance:

Export finance is provided to exporter prior to Export and at post shipment stage. Reshipment finance or packing credits are allowed to exporters to facilitate them to procure, process and for manufacturing of exportable of goods for Export. As per Bangladesh Bank directive Bank can finance up to 90% of irrevocable L/C. Confessional rate of interest are charged on packing credit. It is adjusted upon realization of relative Export proceeds.

Incentives to exporters:

Export trade has been playing vital role in the national economy by fetching increase Foreign Exchange from the word outside every year enabling finance of Import Bill incurred to accelerate the pace of development. The importance of Export incentive in increasing Export earning of the country needs no emphasis. Export incentives have now became one of the recognized policy instruments both in attracting investment in Export oriented industry and in motivating Export performance. •

25% cash assistance:

To boost up Export against fabrics locally manufactured govt provide 25% cash assistance to manufacturer and exporters of readymade garments. •

Lower Interest rate:

Reshipment credit is the from of packing credit are extended to exporters at confessional rate of interest i.e. @10.50% instead of usual lending rate which is 16%.


Credit up to 90% of the Export L/C:

Exporter is enjoying the facility of obtaining credit up to 90% of value of goods without any collateral in case where they obtained irrevocable letter of credit. •

Exporter’ retentions quota:

Exporters can retain 5% of their export earning in L/C to facilitate them to travel abroad to procure export orders as well to enable them to import machineries for the export oriented industry.

A COMPANY’S EXPORT COMMODITY: •

Readymade Garments

Garm

Jute

Handicrafts.

ents. •

Joe goods .

Shrimps.

Frozen Fish

Vegetables.

Hides and

S

Finished leather.

ki n s. •

Tea.

Others.

SWIFT SWIFT is the Society for Worldwide Inter Bank Financial Telecommunication, a member-owned cooperative through which the financial world conducts its business operations with speed, certainty and confidence. Over 8,300 banking organizations, securities institutions and corporate customers in more than 208 countries trust us every day to exchange millions of standardized financial messages.


Our role is two-fold. We provide the proprietary communications platform, products and services that allow our customers to connect and exchange financial information securely and reliably. We also act as the catalyst that brings the financial community together to work collaboratively to shape market practice, define standards and consider solutions to issues of mutual interest. SWIFT enables its customers to automate and standardize financial transactions, thereby lowering costs, reducing operational risk and eliminating inefficiencies from their operations. By using SWIFT customers can also create new business opportunities and revenue streams. SWIFT has its headquarters in Belgium and has offices in the world's major financial centers and developing markets. SWIFT is solely a carrier of messages. It does not hold funds nor does it manage accounts on behalf of customers, nor does it store financial information on an on-going basis. As a data carrier, SWIFT transports messages between two financial institutions. This activity involves the secure exchange of proprietary data while ensuring its confidentiality and integrity. 3.3.2: Foreign Exchange Market In Bangladesh It is the organizational framework within which individuals firms and Banks buy and sell Foreign Currencies or Exchange one Currency for another. ** Functions of Foreign Exchange Market: (a) Transfer of funds or purchasing power from one nation and currency to another. (b) Trade financing. (c) Facilities for avoiding Foreign Exchange risks or hedging. 3.3.3 DIFFERENT TYPES OF FOREIGN EXCHANGE MARKETS: a) Spot market: For spot transaction. b) Forward market: For forward transaction. c) Future market: There is an important distinction between “ Forward” transactions and “Future” contracts. The former are individual agreements between two parties, say a Bank and customer. The letter is a contract traded on an organized market of a standard size and settlement date, which is resalable at the market price up to the close of trading in the contract. d) Option market: An option is a contract specifies the right to buy or sell (by then buyer of the contract) a standard amount of Foreign Exchange within a specific period (American Option) or at a specific date (European Option) at a certain price (Strike price). A call option confers the right to buy and a put option confers the right to sell.


3.3.4 DIFFERENT FOREIGN EXCHANGE MARKET OPERATIONS: •

Arbitrage: It refers to the purchasing of Foreign Currency where it’s price is low and selling it where the price is high. This is also called currency arbitrage. Arbitrage may be due to interest rate differences in two financial centers, which is known as interest arbitrage.

SWAP: Purchasing a foreign currency on the spot for selling forward or selling a foreign currency on the spot for purchasing forward.

Hedging: Foreign Exchange risks can be avoided or covered by Hedging. This usually involves an agreement today to buy or sell a certain amount of foreign currency at some future date at a rate agreed upon today.

Speculation: It is opposite of hedging. While a hedger seeks to avoid or cover a foreign exchange risk for fear of loss, the speculator accepts or even seeks a foreign exchange risk in the hope of making a profit. Speculation occurs in the forward exchange market.

Covered Interest Arbitrage: It refers to the transfer of liquid funds from one monetary center and currency to another to take advantage of higher rates of return (or Interest) and at the same time the resulting foreign exchange risk is covered or hedged by a forward sale of the foreign currency to coincide with the maturity of the foreign investment.

3.3.5 FOREIGN CURRENCY ACCOUNTS: Foreign Currency Accounts are those, which are allowed to be maintained in foreign currency with the dealers (i.e. the banks who are holding F.E. License) either in pound sterling or U.S. Dollar at the option of the prospective Account holder. There are several types of Foreign Currency Accounts, which are detailed below: (1) Foreign Currency Accounts of overseas Bangladesh. (2) Foreign National’s F.C A/C. (3) NFCD Account. (4) RFCD Account. (5) Retention Quota Account. (1) FOREIGN CURRENCY ACCOUNTS OF OVERSEAS BANGLADESH

(Formerly called

as F.C. under wage Earners A/C.) (a) Eligibility: Accounts can be opened by Bangladesh Nationals or persons of Bangladesh Origin working or selfemployed abroad. These accounts can be maintained as long as the Account holder desires. (b) Funds for opening the Accounts:


i.

Remittance received from abroad in convertible currency through Banking channel.

ii.

Convertible Foreign Currency in the shape of Currency Notes Travelers Cheques. Drafts etc. brought into Bangladesh by the Account holder while on temporary visit to Bangladesh provided such Foreign Currency has been declared to the Customs Authorities on from, ”FKJ” at the time of their arrival in Bangladesh.

iii.

Foreign Currency other than pound sterling or US Dollar can also converted at the Dealers usual buying rate for credit to F.C. A/C.

STEPS IN THE PROCESS OF A/C OPENING: (1) All papers mentioned above are to be submitted to the Banks counter signed by both the accounts holder and his/her Nominee (if any) except the signature on specimen signature cards. (2) The dealing assistant will scrutinize the papers and ask the Account holder and Nominee to sign in the specimen signature card in front of the Officer-in-Charge. The signature of the Account holder should tally with the signature given in the passport. If he/she wants to give a different from of signature that signature is to be attested by the Account holder himself with his signature furnished in the passport and he/she is also to furnished his/her signature as in the passport in the specified place of the Account opening Form. The Officer-in-Charge should verify the signature furnished accordingly. (3) The Dealing Officer will then enter the particulars in the “Account Opening Register” inserting Account Number as “FCSTG” (for pound sterling) and FCDLR (for US Dollar). (4) Accounting Opening Register along with all the papers are to be sent to the Officer-inCharge who after verification and securitization, put his signature in the Account Opening Registers as well as the” Advice” showing Accounts number and hand it over to the Account holder. (5) All the particulars are entered in the Foreign Currency Transaction Ledger and after authentication by the Checking Offer, the Account Opening Form and all other papers are kept in the respective file. (6) At the end of the transaction period all Account Opening Forms are checked up and signed by the Officer-in-Charge. (7) Two types of Foreign Currency Ledgers are maintained at the Branch, one for pound sterling and another for US Dollar. (2) FOREIGN NATIONAL’S F.C.A/C: The Bank in the name of Foreign Nationals residing in Bangladesh for employment can open this Account. All the requirements in 1 (b), (c) & (d) are required to be fulfilled. The Account holder who is not permitted can make no Nominee to purchases or sale of Foreign Currency from this Account. The Account holder signature is required to be verified by other Account holder as done in case of Taka, Account. Balance however, is freely remittable abroad.


(3) NFCD ACCOUNTS: The Bangladesh Nations/Persons of Bangladesh Origin can open non-Resident Foreign Currency Deposit Account in Convertible Foreign Currency for one month, three months, six months or one year. Interest is payable may open such Accounts even after their return to Bangladesh within six months of their arrival. (4) RFCD ACCOUNTS: Persons ordinarily resident in Bangladesh may maintain Foreign Currency Accounts with Foreign Exchange brought in at the time of their return to Bangladesh from visits abroad. These Accounts are termed as Resident Foreign Currency Deposit (RFCD) Accounts. The amount brought in with declaration to Customs Authorities in form FMJ and up to US$5000 brought in without declaration can be credited to this Account. However, process of Export of goods or services from Business deals in Bangladesh cannot be credited to such Accounts. Balances of such Accounts are freely remittable abroad. Balance of RFCD Accounts may also be opened in US Dollar or Pound sterling and may be maintained as long as the account holders desire. Interest may be paid on these Deposits if these are for a term of not less than one month and the Balance is not less than US$1000 or Pound Sterling 500. (5) RETENTION QUOTA ACCOUNT: Merchandise Exports may retain up to 25% of realized FOB value of their Exports in Foreign Currency Accounts. For Exports items with high Import content (such as naphtha, furnace oil, bitumen, readymade garments etc.), the retention quota is 7.50%. Funds from these Accounts can be used to meet bonfire Business expenditure, such as Business visits abroad, participation in Export fairs and seminars, Import of raw materials, machinery and spares etc. funds from these Accounts may also be used to set up offices abroad without prior permission of Bangladesh Bank. Exporters may, at their option, retain the Foreign Currency in interest bearing renewable term Deposit Accounts in Bangladesh in US Dollar or Pound sterling with a minimum amount of US Dollar 2000 or Pound sterling 1500. Exporters may also keep their quota in an interest bearing renewable term Deposit A/C in Bangladesh in Pound Sterling or US Dollar with a minimum Amount of USD 2000.00. Service exporters may retain 55 of their repatriated income in Foreign Currency Accounts. Funds can be drawn from these Accounts to meet expenses for bonafide Business expenses abroad. This quota may also be kept in interest bearing renewable term Deposit Accounts. However, Foreign Exchange earning on Accounts of indenting commission or agency commission for Export from Bangladesh can be credited to such Accounts since these incomes originate from Bangladesh sources. 3.3.5 OTHERS ACCOUNTS: •

Convertibility on Trade account :


Bangladesh Taka is fully convertible for settlements of trade related transactions. Accordingly, an importer has automatic access in his account to settle payment of Foreign Exchange for Import of all items outside the control list and also for Import of control list items as per general or specific authorization of the offices of the Chief Controller of Importers.

STD Account:

Dealers may open STD (7-30 days special notice) Account in the name of local Foreign Diplomatic Missions and their expatriate personnel, Foreign Airlines operating in Bangladesh, International NonProfit Organizations including Charitable Organizations, U.N Organization and its bodies operating in Bangladesh and their respective expatriate personnel and pay interest thereon as prescribed by the respective Bank from time to time subject to the conditions that the amount of interest accrued on the balance of this Account will be disbursed locally in Nonconvertible Taka and that no part of the amount of interest will be eligible for remittance outside Bangladesh at any stage. 3.3.6 Exchange Rate: The Foreign Exchange dealing of a Bank with its customers is known as merchant Business and the Exchange rate at which the transaction takes place is the merchant rate. It is the rate at which two national currencies are exchanged. The exchange rate is determined by the intersection of the market DD. curve and supply curves of foreign currency. The DD. for foreign exchange arises primarily in the course of importing goods and services from abroad and making foreign investments and loans. The supply of foreign exchange arises in the course of exporting goods and services and receiving foreign investments and loans. •

BASIS OF MERCHANT RATE:

The inter Bank buying rate forms the basis for quotation of buying rate to the customer by the Bank. The inter Bank selling rate forms the basis for quotation of selling rate to the customer by the Bank. The inter Bank rate on the basis of which the Bank quotes its merchant rate is known as the base rate. •

QUOTED CURRENCY:

The term base Currency means the Currency that is variable in an Exchange rate quotation. • BASE CURRENCY: The term base Currency means the Currency that is fixed. Thus if Pound 1= US$ 1.6725 Sterling is the base Currency & Dollar is the quoted Currency.


3.3.7 EXCHANGE RATE QUOTATION: a) Direct: If the ER is expressed in variable units of domestic currency for a fixed unit’s of Foreign Currency. It is also called pence rate. Indirect: If the ER is expressed in variable units of Foreign Currency per fixed unit of the domestic currency. It is also called currency rate. b) American Terms: An exchange rate expressed as number of currency units per Dollar. c) European Terms: An exchange rate expressed as number of Dollars per currency unit.

VALEUR COMPENSEE OR COMPENSATED VALUE: The principle that the two-way sides of the deal should be completed on the same day is referred to the principle of velour compensate. CROSS RATE: A Cross-rate may be defined as an Exchange rate that is calculated from two other rates. It is an Exchange rate between two Currencies neither of which is the home Currency will be referred to as a cross rates. 3.3.8 •

CALCULATING CROSS RATES:

A) If both currencies (American and European) involved in the cross transaction are quoted in the same form (direct or indirect) divide the spot rate of one currency by the spot rate of the other currency. Example: If $/

: 102.30

$/D.M.

: 1.7140

Then, D.M./ : 102.30/1.7140 = 59.68. b) If one currency is quoted in one /term and the other currency is quoted in another form/term, multiply the spot rates. Example: L/$ : 1.4620


$/

: 102.30

Then, L/

: 149.56.

TWO WAY QUOTATIONS: In all Foreign exchange quotations, there will be two rates : 1) The buying rates/ Bid Rate. 2) The selling rates/ Offer Rate. Maximum:--Buy low the lower of the two rates is the buying rates &

the selling rate is high.

For Example: --$1 = 60.00 Buying rate and selling rate is TK. 60.00. •

SPOT RATE: It is an ER for “on the spot” transaction.

FORWARD RATE:

It is an ER for the transaction to be happened at some future date, but agreement for the transaction is to be done today. Forward rate is quoted either at premium (+) or at discount (-) over spot rate. In case of direct quotation, premium will be added to and discount will be subtracted from spot rate. The reverse is for indirect quotation. FORWARD RATE AT PREMIUM: When the forward rate is costlier than the spot rate, the margin is at premium. i. FORWARD RATE AT DISCOUNT: When the forward rate is cheaper than the spot rate, the forward margin is at discount. ii. QUOTING FORWARD RATES: Forward exchange rates are quoted in terms of premiums and discounts on the spot rates. Where the forward rate is at a premium, the abbreviation “pm” is used. A discount is shown as “dis” and the word “par” means that the forward rate is at parity with the spot rate. In the absence of any indication like “pm” or “dis”, how do one know about premium or discount quotation? A larger figure on the buying side than on the selling side indicates, “Discounts” and vice versa in case of “premium”. •

The Basis Of Calculation For All Forward Rates Of Exchange Or Swap Rates Is The Interest Differential Between The Two Currencies:

When a spot rate of exchange depreciates, its SWAP rate or forward premium will normally increase and vice versa.


If the interest rates in one currency increase at a faster rate than another, the interest differential between the two will widen and so the SWAP rate will also increase. If the interest differential narrows, the SWAP rate will be reduced. Spot and Forward rates of Exchange are linked. They move for similar reasons with the exception that the dominant influence on forward rates of exchange is the interest differential. Example of Forward Transaction: Suppose, spot rate is $ 1 = TK. 60 Cost to Bank of borrowing Taka for 90 days is 9% per annum. Bank can invest in U.S. $ for 90 days at 8.55% p.a. So, interest rate differential is 0.45% p.a. = 60 x 3/100 x 90/360 = 0.45. If the spot rate of exchange can be adjusted to reflect this loss of 4.5% p.a., a forward rate of exchange could be obtained. Therefore, TK. 60+ 0.45 = $1 =TK. 60.45= outright rate of exchange. If the doubt, whether to subtract or add to forward differential, then first of all see whether the interest differential constitutes a profit or loss to the Bank. If a cost, then forward rate should be more expensive relative to spot rate, if a profit, then the forward rate should be cheaper relative to the spot rate.

CALCULATION OF INTEREST: The following formula is used:I=

PxRxN 100x365

Where I= Interest. P= Principal. R= Rate of Annum and N= No. of Annum. Example: Find the interest on $ 30500 for 9 days at 4% per Annum. I= 30500x4x9 100x365. = $ 30.08. SPOT AND FORWARD TRANSACTIONS: The actual delivery of Foreign Exchange may take place.


-

On the same way. Two days later. Some days later say after a month.

CASH TRANSACTION: Where the agreement to buy and sell is agreed upon and executed on the same day, the transaction is known as Cash Transaction or value today. SPOT TRANSACTION: The transaction where the delivery of Foreign Currency takes place two days after the date of contract is known as the ‘spot” transaction. FORWARD TRANSACTION: The transaction in which the delivery of Foreign Currency takes places at a specified future date is known as a Forward transaction. The forward transaction may be for delivery one month, two months or 2/3 months etc. CALCULATION OF FORWARD RATES: The forward rate is calculated by adding premium or by deducting discount from the spot rate. The rule that premium should be added and Discount should be deducted applies to both purchases & sale transactions. The above calculation is based on direct quotation. CALCULATION HAVE 1 MONTH, 2 MONTHS: In Direct rates, as above, first rate is for buying and second for sell in FORWARD RATES FOR DOLLARS: Buying

1Month

2Months

Spot Rate

60.00

60. 00

Add-Premium

+0.40

+0.80

Forward Rates

______

______

60.40 Selling

1Month

Spot Rate

63.60

60.80 2Months 63.60

Add-Premium

+0.50

+0.90

Forward Rates

_______

_______

64.10

64.50

The first statement TK.60.00/90 is the spot rate for Dollars. The Banks buying rate is TK.60.00 and the selling rate is TK.63.60. The second or third months are forward margins in paisa for one or two months respectively.


3.3.9

BALANCE OF TRADE & BALANCE OF PAYMENTS

Balance of Trade: In the modern world, there is hardly any country, which is self-sufficient in the sense that it produces all the goods and services that it needs. Every country imports from other countries the goods that cannot be produced at all in the country or can be produced only at higher cost than foreign suppliers. Similarly, a country exports to other countries the commodities, which those countries prefer to buy from abroad rather than produce at home. Export of commodities to foreign countries adds to our foreign record while imports add to the payments that have to make to the foreigners, difference between the value of commodity exports and import is known as “Balance of Trade�. If exports exceed imports, the balance of trade is said to be favorable and if imports exceed exports the balance of trade will be unfavorable. The commodity exports & imports entering the balance of trade are called visible items because they are recorded at the customs barriers of the country. Balance of Payment: In addition to the import and export of goods are various kinds for payments have to be made or received. Transport charges, shipping freight, passenger fares, and services connected with the tourist traffic, payment of interest on external debt etc. as against commodity or merchandise transactions, which are visible these services are called invisible items of the balance of payments as they are not recorded at the customs barriers. If render more invisible service to the foreigners than they render to customers. Then it has a surplus on invisible account. Balance of Payment thus refers to the sum of both the balance on visible as well as invisible items. More specifically the Balance of Payments is a comprehensive record of economic transactions of the residents of a country with the rest of the world during a given period of time 3.19 FOREIGN EXCHANGE MECHANISM (EXPORT) 1) EXPORT POLICY. 2) REGISTRATION OF EXPORTER. 3) COMMUNICATION WITH BUYER ABROAD. 4) PROFORMA INVOICE. 5) EXPORT L/C or FIRM CONTRACT. 6) EXPORT FORM 7) EXPORT DOCUMENTS. A) FINANCIAL DOCUMENTS.


B) COMMERCIAL DOCUMENTS: •

INVOICE/ COMMERCIAL INVOICE.

BILL OF LADING/ AIRWAY BILL/ TRUCK RECEIPT.

PACKING/ WEIGHMENT/ MEASUREMENT LIST.

CERTIFICATE OF ORIGIN.

PRE-SHIPMENT CERTIFICATE.

GSP CERTIFICATE ISSUED BY EPB.

8) NEGOTIATION OF EXPORT DOCUMENT. 9) REIMBURSEMENT. 10) PRE-SHIPMENT FINANCE. •

BACK TO BACK L/C.

PACKING CREDIT/ PRE-SHIPMENT INVESTMENT.

3.3.11

EXPORTER-Consult Export Policy order get ERC. | Contract Buyer-Settle sales terms. | Issue Performance Invoice-to exporter abroad. | Export L/C-Check carefully by exporter and exporter’s Bank. | Exp Passing- Issued by AD signed by exporter and AD. | Shipment- Submit document of goods or the item exported. | Documents-Submit document by the exporter to their Bank. | Negotiation/- Payment made by the exporter Bank to the exporter. Or Collection- if documents are discrepant/ unaccepted.


| Reimbursement- Getting payment by the negotiating Bank.

3.3.12: EXPORT FINANCE IN BANGLADESH Exports, for obvious reasons, are listed in the priority sector in all developing economics. There is no dispute in the fact that export trade constitutes the most substantial base for sustaining the long-term development prospects of a countries economy. This is all the more true for a country like Bangladesh whose import alarmingly out weights its export and quite naturally Bangladesh is very much keen to boost up its export. But the most stumbles bloc in the process is the non-availability of finance. There is neither adequate capital in the hands of the exporter in Bangladesh to meet up their trade requirement nor there exists an organized capital market in the country to bridge the gap. In view of this, commercial Banks in the country are the only real base that can play challenging and pivotal role in the sector. There are two stages in export financing-pre-shipment stage and post-shipment stage. PRE-SHIPMENT FINANCE: Export policy of the Government contains provisions for extending liberal credit facilities to the exporters in the pre-shipment stage. These are extended in the form of allowing opening of Back-toBack Inland L/C & Back-to-Back import L/C and extending credit facilities under two different types of cash credit pre-shipment cash-credit (export cash credit) and packing cash-credit. •

EXPORT CASH CREDIT:

Export cash credits are granted for financing procurement of raw materials, storing, manufacturing till shipment of goods. This type of cash credit may be allowed up to 90% of the value of Irrevocable Export L/C of 1st class Foreign Banks or our correspondents/ Firms contract of 1 st class foreign buyer against the security of that Export L/C/ Firm contract. In case where borrower offers pledge of goods in addition to Irrevocable Export L/C contract, credit may be sanctioned up to 90% value of the L/C contract of pledge of the exportable goods. •

PACKING CASH CREDIT:

It is allowed for making necessary preparation for shipment of goods. This finance generally covers cost of packing, transportation from god own to the port of shipment, warehousing, insurance etc. POST SHIPMENT FINANCE: Post shipment finance is given by way of strictly in order export bill. The prescribed period of realization of purchased bill is 21 days from the date of purchase. If proceeds of purchased export bills are not realized within 21 days overdue interest are charged at usual lending rate. Finance in the post-shipment stage is affected through purchase/ negotiation of Foreign Bills drawn under


Irrevocable L/C. in addition to this Banks may also purchase/negotiate export documents drawn under firm contract of foreign buyers whose satisfactory financial status reports are in record with them. Where export documents are presented for negotiation drawn under export L/C or firm contract, the following formalities should be complied with: a) Exporter will obtain comprehensive guarantee from Sadharan Bima Corporation, which will be endorsed in favor of Bank, and Branch will retain it with them. b) Documents will be negotiated provided these are drawn strictly in accordance with the terms of L/C on firm contract. c) An indemnity will be obtained from exporter in case of discrepant documents of Banks standard from stating that in case of non-payment of the Bill by drawn for any reason whatever, the amount will be refunded immediately on demand. d) In cases where export documents are negotiated with discrepancies against Indemnity of exporter, after negotiated of such documents, the negotiating Branch of the Bank as well as the concerned buyer respectively for prompt payment if the Bill to avoid/minimize overdue interest. 3.3.13: THE IMPORTANTANCE OF EXPORT DOCUMENTATION PROPERLY Preparation of Export documents strictly in terms L/C is very important for repatriation of Export Bill proceeds. Discrepancies in Export documents may put the exporter in an embarrassing position and even chance of realization of value became uncertain even may lead to total denial of the buyer to pay bill. Therefore, due emphasis must be given while preparing Export documents so as to ensure that all relevant Export documents are prepared strictly as per terms of letter of credit or contract. If any condition as stipulated in the credit/contract cannot be complied with the exporter muster EXPORTERS DOCUMENTS: Different types of documents are called for in the credit and full set must be furnished in conformity with credit terms. Export documents can be divided into two groups: 1) Compulsory documents. 2) Auxiliary documents. Compulsory documents are usually the following: 1) Bill of Exchange/ Draft. 2) Export license. 3) Commercial Invoice. 4) Bill of lading/Airway Bill. 5) Marine insurance. Auxiliary documents are mainly the following documents: -

1) Packing list. 2) Commercial Invoice. 3) Inspection Certificate.


4) Certificate of origin/Certificate of origin (Textile). 5) Quality control certificate. 6) Stationary Certificate. 7) G.S.P. Certificate.

3.3.14 DOCUMENTS USED IN FOREIGN EXCHANGE: As Foreign Trade involves Transactions in between the countries, the formalities attached therewith are complicated and multifarious. Quite naturally a large number of documents are used in it. Which are on the increase due to the growing complications introduced into the trade because of the imposition of different types of checks and controls in different countries. The documents used in foreign trade may be classified into following types: •

Bill of Exchange:

The bill of exchange is that particular instrument through which payment is effected in trade deals both internal and international. • Bill of Lading: It’s a document issued by the shipping company or its agent acknowledging the goods mentioned there in on board the carrying vessel in apparent goods order and condition unless otherwise indicated there in, for shipment to the consignee on terms and conditions as agreed upon as to their carriage. • Receipt: When goods to the transported are small in bulk or requiring speedy delivery or those are perishable in nature or the deal is in between the neighboring countries. •

Invoice:

It is made out by the seller under his signature in the name of the buyer and must be submitted in a set of attested 3 copies. Its main purpose is to check whether the appropriate goods have been shipped. •

Marine Insurance Policy:

In the international Trade it is must be cover the risk of loss on consignments while they are on seas. •

Bill of Entry:

It is a document, which contain the particulars of the imported goods as well as the amount customs duty payable. •

Indent:

It is an order placed by importer to his overseas exporter. It should convey in full details and every particulars the exporter should know, so that he can satisfy buyer’s requirement. •

Performa Invoice:

At the negotiating stage of a deal the buyer may require the seller to quote the prices of the goods showing their detailed particulars in order to enable him examine the competitive position.


Trust Receipt:

At times, the documents of title to goods (not the title) are delivered by the banker to the importer against trust receipt.

CHAPTER 4: SWOT ANALYSIS 4.1. A SWOT ANALYSIS SWOT is an acronym for an organization’s strengths, weaknesses, opportunities and threats. Followings are the major findings from SWOT Analysis about the Mutual Trust Bank Ltd.: STRENGTH

• • • • • • • •

Adequate financial resources. More than 22(Twenty Two) Hundred of people are employed in MTBL. 101 branches are surrounded all over in Bangladesh. They are the member of more than 32 foreign remittance agencies. Some agricultural sector of Bangladesh is getting support. Some portion of the Bangladeshi people getting support very well by getting MTBL services. MTBL always ready to help the government and people of Bangladesh. By the past experience they give good percentages of dividend to the shareholders every year.

OPPORTUNITY

WEAKNESS

• • • • •

Absence of using modern technological support. The branches are not under online banking. Too narrow service line. Weak sharing network. Every branch does not have authority to open the LC.

THREAT


• • • • •

Supply of money. They are very helpful to the business for Export. They are very helpful to the business for Import by opening LC. They are going to open more branches all over Bangladesh. They are going to make all the branches under online banking support.

• • •

New and Other banks growth. Regulatory requirements. Changing customers needs.

4.1. B BCG Matrix The Portfolio Matrix is a tools for allocating resources. The portfolio Matrix was developed by Boston Consulting Group (BCG), so that it is also called BCG Matrix. It shows the linkages between business growth rate and the market share. Placing products in the BCG matrix results in 4 categories in a portfolio of a company Business in the question mark with a high growth rate & weak market share. It usually require cash investment . In stars business in the high growth rate & strong market share. It use large amounts of cash and are leaders in the business so they should also generate large amounts of cash. In the cash cow ,business have low growth rate and strong market share. They are usually establish in the market, such as : multinational company. In the dogs, the business have low growth rate and weak market share. This type of business are usually non profitable & generally should be close that business. In the BCG Matrix Mutual Trust Bank Ltd. stand in the Stars. Because they have high business growth rate and strong market share. If we see the last 5 years performance, we can see their business growth rate is gradually increasing compare to other leading bank in Bangladesh . The Loan and advance department, deposit, foreign trade is growing up. In 2004 loan and advance department portfolio of MTBL Was 22,257315 and in 2008 that was 36,475.74 million taka. And Prime Bank was 16492 in 2003 & 57683 million taka in 2008. And MTBL s Deposit in 2003 was 27,762.12 and in 2007 that was 47,961.22 million taka. And Prime Bank was 20483 in 2004 & 57683 million taka in 2008. In foreign trade MTBL opened 18,039 import LC s worth USD 907.08 million and handling export document worth USD 14,369 million in 2008. And Prime Banks import was 25441 in 2004 & 70617 million taka in 2008, and export was 16490 in 2003 & 51316 million taka in 2008.


Fig: BCG Matrix

4.1. C Loan & Advance Life Cycle Introduction stage In the Introduction stage, the product is introduced to the market through a focused and intense marketing effort designed to establish a clear identity and promote maximum awareness. Many trial or impulse purchases will occur at this stage. Growth stage This is the second stage of Product Life Cycle. At this stage people know about the product & the demand of the product grows up rapidly & profit also goes up at this stage. The loan & Advance department of MTBL’ s are now in the growth stage, because MTBL introduce different types of loan such as: Syndicate loan, Project loan, Housing loan, Lease finance, SME, Agri loan etc. If we follow the last 5 years performance of Loan & Advance department we can see the MTBL has been able to increase its Loan & Advances despite adverse condition in the domestic as well as in the global economy. The bank recorded growth of 11.51% with a total loan and advances portfolio of Tk 3647.57 crore at the end of December 2007compare to Tk 3270.97 crore at the end of December 2006. Maturity stage This is the third stage of Product Life Cycle. Arrival of the product's Maturity stage is evident when competitors begin to leave the market, sales velocity is dramatically reduced, and sales volume reaches a steady state. At this point in time, mostly loyal customers purchase the product. But in this stage no one can stay longer.


Decline stage It is the last stage of Product Life Cycle. Continuous decline in sales signals entry into the Decline stage. The lingering effects of competition, unfavorable economic conditions, new fashion trends, etc, often explain the decline in sales.

Fig: Loan & Advance Life Cycle 4.1. D DEPOSIT LIFE CYCLE Introduction stage In the Introduction stage, the product is introduced to the market through a focused and intense marketing effort designed to establish a clear identity and promote maximum awareness. Many trial or impulse purchases will occur at this stage. Growth stage This is the second stage of Product Life Cycle. At this stage people know about the product & the demand of the product grows up rapidly & profit also goes up at this stage. The Deposit of MTBL’s are now in the growth stage, because MTBL’s innovative products including NMS and NDS attached a huge number of customers, which contribute the growth of deposit. If we follow the last 5 years performance of Deposit of MTBL’s we can see the MTBL has been able to increase their Deposit. From 27,762.12 in 2003 to 47,961.22 in 2008 (Tk in million). Maturity stage This is the third stage of Product Life Cycle. Arrival of the product's Maturity stage is evident when competitors begin to leave the market, sales velocity is dramatically reduced, and sales volume reaches a steady state. At this point in time, mostly loyal customers purchase the product. But in this stage no one can stay longer. Decline stage It is the last stage of Product Life Cycle. Continuous decline in sales signals entry into the Decline stage. The lingering effects of competition, unfavorable economic conditions, new fashion trends, etc, often explain the decline in sales.


Fig: Deposit Life Cycle

CHAPTER 5: Recommendation & Conclusion 5.1

RECOMMENDATION:

GENERAL BANKING DEPARTMENT •

If the entire general Banking system is fully computerized then they satisfy the customer by providing fast service.

If they establish networking system with their branches then it can easily transfer data within short time.

If they cancel the introducer system then they can collect more deposit through new account and it also satisfied the customer.

To provide their performance and remove the problem. Mutual Trust Bank has to do something and these are as follows: •

Implement online banking

Enhances some power to the manager

Focus on relationship strategies.

Individual attention and care.

To follow strictly the office time

Management should take proper steps for motivation.


Promotion hierarchy should be cut down to small size.

LOAN AND ADVANCE DEPARTMENT •

Try to avoid giving loan the political person who had bad reputation of loan repaying.

Evaluate the securities value properly to avid the risk of loan recovery. The punishment system should be established to discourage the unlawful activities of employee.

Bangladesh Bank should more active to provide CIB report.

FOREIGN EXCHANGE DEPARTMENT •

In Foreign Exchange Department it requires communicating with foreign bank frequently and quickly. To make the process easy and quick the whole system should be computerized and modern communication media for example e-mail, fax, Internet should be used.

MTBL should give more attention to advertisement to create more attraction among their customer, which is collect, more deposit and increase investment scope.

All the staff members and officers are very friendly and well mannered.

MTBL (Babu Bazar Branch) has an excellent working environment.

MTBL should have enough research and development for their bright future.

MTBL prioritize sectors very carefully so that it can enjoy more profit with less risk.

Improve the skill of Human Resources by introducing training program on modern banking with latest methods or techniques.

5.2 CONCLUSION Mutual Trust Bank Ltd. has established goodwill through innovative products and services. It has many problems but is followed very sincerely the rules, regulations and advice of Bangladesh bank during the last ten years. Technological development has opened up a new dimension in the development creative products, efficient services and customer satisfaction. Mutual Trust Bank Ltd. must cope with this technological advancement to retain its present status. Many new generation private commercial banks have already introduced On-line banking. But Mutual Trust Bank Ltd. Could not established it till now. The bank must take initiative to established on-line banking. The bank has an experienced and educated managing Director. The other directors of the bank are also young and educated. Their innovative idea will help to create new opportunities for the bank. But their creative ideas could not be implemented if the attitude of the employees is not changed. The executives, officers and staffs must be trained to change their negative attitude towards new concept of banking. Although I am an employee of this bank I worked at almost all the desk more or less. Gaining knowledge of practical banking and compare this practical knowledge with theoretical knowledge. Though all departments and sections are covered in this thesis report but it is not possible to go to the


depth or each activities of division. So, objectives of this thesis report have not been fulfilled with complete satisfaction. However, highest effort has been given to achieve the objectives of this thesis report. REFERENCE& BIBLIOGRAPHY •

Annual Report 2003 -2008 of Mutual Trust Bank Ltd.

Mutual Trust Bank Ltd. Guidelines Manual of 2008

Mutual Trust Bank Ltd. Daily Affairs of Babu Bazar Branch.

Guideline for Foreign Exchange Transaction Published by Bangladesh Bank.

Rose P, and Sylvia C. H., (2008) Bank Management & Financial Service.

Lawrence J. Gitman. “Principles of Managerial Finance (Tenth edition.)

http://www.google/ bank/Bangladesh.com

http://www.mutualtrustbank.com/others/financial_statement.htm

LIST OF ABBREVIATION A/C AD B/L BB BOE CCI & E CFR CIB CIF DD DP Note EPB EXP FC FDD FOB HS Code IBC IBCA IBDA IMP

Account Authorized Dealer Bill of Lading Bangladesh Bank Bill of Exchange Chief Controller of Import & Export Cost & Freight Credit Information Bureau Cost Insurance & Freight Demand Draft Demand Promissory Note Export promotion Bureau Export Form Foreign Currency Foreign Demand Draft Free On board Harmonized system of coding Inward Bills for Collection Inter Branch Credit Advice Inter Branch Debit Advice Import Form


IRC L/C LCAF OBC PO PSI SWIFT

Import Registration Certificate Letter of Credit Letter of Credit Authorization Form Outward bills for Collection Payment Order Pre Shipment Inspection Society for Worldwide Inter

TC TIN TR TT STD

Telecommunication. Travelers Cheque Tax Identification Number Truck Receipt Telegraphic Transfer Short Term Deposit

bank

Financial


Overall banking system of mutual trust bank ltd