A WORKING REPORT ON THE OPERATIONAL PROCEDURE OF MUTUAL TRUST BANK LIMITED EMPHASIZING ON GENERAL BANKING

Introduction : 1) Origin of the report:  This internship report was assigned in the BBA program of “THE  OPERATIONAL PROCEDURE OF MUTUAL TRUST BANK LIMITED EMPHASIZING ON GENERAL BANKING”. I prepared this report for internship to fullfil the requirement of my graduation at ULAB. Beyond my assigned project, I also learnt the general banking operations that may come in hand by my professional life. This report had to be submitted to the School of Business, ULAB .

2) Background of the study:

      MUTUAL TRUST BANK LIMITED(MTBL)  is one of  the leading private commercial  banking service  in Bangladesh, as they had  various products and services for the customers. MTBL  was always in the lookout for various financial opportunities. As a part of this MTBL is intending to introduce new products and services of Payment and Cash Management for the corporate clients to serve them more efficiently & also they were intending to find what they were lacking in Payment & Cash Management services.

3) Objective of the study:

 The study has been undertaken with the following objectives:

The main objective of education is to acquire knowledge. To acquired knowledge ultimately I must do some practical application in addition to theoretical knowledge. Through this report, I tried my level best to present my practical knowledge as well as to find out-

• To get an overall idea about the General Banking Operation of Mutual Trust Bank Limited.
•  To fulfil the requirement of the internship program under BBA program.

General objective

• To gain Practical job experiences and view the application of theoretical knowledge in  the real life.

Project objective

• To know Mutual Trust Bank Limited  General banking activities.
• To know Mutual Trust Bank Limited Foreign Exchange activities.

    To suggest ways of improving the general banking operation standard that accommodates a rapidly growing customer volume.

4)    Scope

       This report does not cover the entire banking operation of Mutual Trust Bank Limited. As I worked at the branch of Mutual Trust Bank, so my main concern was the General Banking operation of Mutual Trust Bank Limited. This study attempts to Banking Operation of Mutual Trust Bank Limited. This study briefly highlights General Banking Operation of MTBL.

5)    Methodology

Mainly I have collected data from two sources.

These two sources are as following.

            Primary source

            Secondary source

The primary sources of my information are as below-

            Direct observation

            Expert opinion

            Questioning the concerned persons.

The secondary sources of my information are as below-

                 1.    Annual report of MTBL.

                 2.    Desk report of the related department

                 3.    Other manual information

                 4.    Different reference books of the library

                 5.    Some of my course elements as related to this report.

The following methodology will be followed for the study. Both primary and secondary data sources will be used to generate this report. Primary data sources are scheduled survey, informal discussion with professionals. The secondary data sources are annual reports, manuals, and brochures of Mutual Trust Bank Limited and different publications of Bangladesh Bank.

6)    Limitations of the Study

      Lack of comprehension of the respondents was the major problem that created much confusion regarding verification of conceptual question.

      Limitations of time were one of the most important factors that shortened the present study. Due to time limitation many aspects could not discussed in the present study.

      Confidentiality of data was another important barrier that was faced during the conduct of the study. Every organization has their own secrecy that in not revealed to others. While collection data on Mutual Trust Bank Limited, personnel did not disclose enough information for the sake of confidentiality of the organization.

 Rush hours and business was another reason that acts as an obstacle while gathering data.

Chapter-2

(Company Overview)

7) Overview of Mutual Trust bank Ltd.

Mutual trust bank Ltd. was established in the year 1999 with a paid up capital of TK 997.92 million, and shareholders’ fund of TK1925.53 million. The bank has currently 36 branches all over Bangladesh. The Bank offers the full range of banking and investment services for personal and corporate customers, backed by the latest technology and a team of highly motivated officers and staff. In its effort to provide you can bank on us, the Bank has launched fully automated Phone Banking service, joined a countrywide-shared ATM network and has introduced a co-branded credit card. A process is also underway to provide e-business facility to the bank’s clientele through Online Banking solutions. Mutual Trust Bank has 36 branches and 5 SME Service Centres including several ATM booths and an offshore Banking Outlet across the country and a wide network of correspondents all over the world. The Bank has plans to open more branches in the current fiscal year to expand the network. The Bank offers the full range of banking and investment services for personal and corporate customers,backed by the latest technology and a team of highly motivated officers and staff.

The Bank has launched fully automated Phone Banking service, joined a countrywide-shared ATM network and has introduced a co-branded credit card. A process is also underway to provide e-business facility to the bank’s clientele through Online and Home Banking solutions.

Service is the product of the Bank building. The guard at the door is the first person represents the Bank; receive a customer with wishes hi smiling face.

Now, Mutual Trust Bank Ltd. is competing for the leading position among the local private commercial banks. An operational procedure of Mutual Trust Bank can increase the level of customer service and the efficiency of operation. As a result, Mutual Trust Bank will be able to improve their competitive advantages over its rival.

To prepare this report  I used my practical work experience. Face to face conversation with the officers.

8)  At a Glance  of Mutual Trust Bank Limited. 

9) Objectives of the bank:

 Vision

To be the bank of first choice by creating exceptional value for our clients, investors and employees alike. Mutual Trust Bank Limited goal is to dedicate their services to the nation through active financial participation in all segments of economy, small industries, commerce and trade and service sector.

 Mission

We aspire to be most admired financial institution in the country recognized as a dynamic, innovative and client focused company, that offers overall array of products and services geared for excellence and create an impressive economic value.

To build Mutual Trust Bank Limited in to an efficient, market driven, customer focused institution with good corporate governance structure.

 SLOGAN:

       “YOU CAN BANK ON US”

10) The Commitments

 MUTUAL TRUST BANK values its customers. Each customer’s expectations of superior services and products are bank’s prime moves. Mutual Trust Bank has reached its approximately 10 years in banking. On this joyous occasion, Mutual Trust Bank highlighted its core values. These are –

11) Structure of MTBL Uttara branch:

  Mutual Trust bank Uttara branch has relatively few layers between the top of the corporation and normal employee, so they have flat organizational structure. An organizational structure is a mostly hierarchical concept of subordination of entities that collaborate and contribute to serve one common aim. This branch’s organizational structure allows the expressed allocation of responsibilities for different functions and processes to different departments.

Employee’s Hierarchy of Uttara Branch of Mutual trust bankEmployees structure any organizational design so that they can best accomplish the firm’s goals.  The existing organization hierarchy of Uttara Brach is designed by above diagram which not a narrow or nor a wide span hierarchy. Normally hierarchy is consisted by functions, departments and designations. But in the Uttara branch I have seen the hierarchy is consisted by only their designations. Any organization’s goal achievement is very easy when their hierarchy is designed properly. In this branch has 19 employee excluding office peon, guard and tea boy. Manager is at the top position and he is responsible for all decision-making situations. Under the manager a Deputy Manager/senior executive officer is applying his diagnostic and conceptual skills.

12) Hierarchy of Mutual Trust bank Ltd.

13) Divisions of MTBL:

 Account Departments:

Though Uttara branch is a small-medium branch of Mutual Trust bank but they are dealing with huge number of customers. During my internship period, I have seen the ratio of account opening and closing is not so much difference. Lot of customer is coming to the Uttara branch of Mutual Trust bank to open different type of accounts and on the other hand some customers are closing their account also.

For account opening, a customer comes to the bank and asks someone where he can open an account? After finding the desired desk, he/she tells their purpose to that officer. If the customer doesn’t bring certain papers and certain money then he/she can’t open an account and if he/she brings the papers and money then the officer fill up account’s form and after finishing this process the officer sends it to computer operator officer for posting. Most of the time customer does not recognize his desired book. He has to make sure from peon or employee. This is really example of time consuming and unorganised management’s service. Here customer should get deposit book from 1^st desk. After that customer need to go by himself to the cash department for deposit money and that is another process, which is done by cash department. Similarly, when customer comes to close his account, he must bring an application to close his account. The officer cut down the bank and government’s fixed fees from the customer account. Then is goes to the computer operator officer for closing his account from the computer. After that customer goes to the cash department to collect his ending balance.

 Cash Department:

Cash department of Uttara branch of Mutual Trust bank is totally separated from other department so that customer can easily recognize the cash department. But to withdraw cash all customer need to go to an officer’s desk, which is on the other side from cash department. Once the customer submits cheque leaf to that officer then he registered it and sends it to computer operator officer to check whether the customer has sufficient money to withdraw. If the account doesn’t have sufficient money to withdrawal then customer can’t withdrawal money. If the account has money to withdraw then it goes for the manually sign verification. It’s really a time consuming process because the signature could be verify by computer operator when he checks customer’s cash balance. Now a day computer allows verifying signature very easily. All they need to do is to scan the signature and input it to the customer database at the time they open the account. If the sign doesn’t match then customer can’t withdraw money. Whenever sign is matched then the cash officer deducts his withdrawal money from customer account and finally customer receives his desired amount.

 Transfer Department:

First of all customer goes to an officer who is assigned for cash transfer. The officer fill a form based on customer need – Pay order, D.D etc. Then the officer goes to another desk for posting cash transfer to a computer. Here the customer has to wait for a while. If there is no sufficient money on the customer account, the officer informs customer that he can’t transfer money (which is after fill the form). Here dissatisfaction can grow in both parties. After filling the form, if the customer realizes that he can’t transfer money- dissatisfaction grows in both parties because of waste of time and effort. On the other hand, when customer has sufficient money to transfer then office peon carry the form and send it to the manager for authorization. Here sometimes customer has to wait for long period of time because peon gets busy with other task. The manager’s room should be in a better position so that the authorization could be complete quickly. After that it goes to the cash department to deduct the transferred amount from the customer account.

 Cheque Book Issue Department:

For new chequebook issue, customer has to bring previous chequebook’s white colour leaf. First a customer goes to an officer who issues chequebook and submit it to another officer for processing. Then customer needs to go to 2nd officer for verification. Then it goes to the computer operator for posting. If computer operator finds that the customer didn’t use his previous chequebook’s every leaves then the customer does not get chequebook. It is a dissatisfactory service indeed. Here one thing is very irritating and inefficient in case when customer does qualify for new chequebook. The chequebook’s leaves checking act should have done by the first officer before verification process. Customer as well as employee could save their valuable time. If the customer used previous chequebook properly then the white leaf return to the assigned officer and after finish of sealing and registering he gives the new chequebook to the customer. But whenever customer lost his chequebook then he has to write an application to the manager, if manager give the permission then again following the previous process will finish process.

Credit Risk Management and Administration:

           The primary objective of this division is to evaluate the credit worthiness and debt payment capability of present loan customers and loan applicants. It is also responsible for keeping track of the credit portfolio by obtaining regular information from the branches. It sets prices for credits and ensures affecting it at the branches. This department also monitors the various loan accounts of the branches and prepares various statements for Bangladesh Bank.

The Credit Risk Management Department is assisted by the Credit Administration Department, which is mainly concerned with the post-approval functions of the division. The aspects that are critically tracked and monitored by Credit Administration are:

v    Credit expiry

v    Past dues

v    Excess over limit

v    Document deficiency

v    Reporting

Credit Administration is involved in basically 2 broad functions:

Loan Monitoring:

            The important aspects of this part are:

• Follow approval terms
• Proper loan disbursement
• Monitor interest payments and principal repayment
• Balance with general ledger

 Documentation:  

            The important functions of this part are:

• Look at sanction terms and Fill up loan documentation checklist
• Ensure Proper loan documentation and Obtain client sign off
• Filing with the Registered Joint Stock Corporation ( RJSC)

Human Resources Division:

                          The employees are MTBL valuable resource. Having competent and professional employees is becoming increasingly important in today’s competitive world, and MTBL has a significant competitive advantage in this respect. Many of its employees have worked here since the BCCI area and therefore have vast experience in their respective fields.  Also the new employees are recruited with sound academic background and given proper training after recruitment to groom up for their responsibilities. They plan to include a high performance culture where the employees will work with fun and pride.

14) FUNCTIONS OF GENERAL BANKING OF MTBL

It is most important side of the bank. Bank is nothing but a middleman between lenders and borrowers. To provide investment facilities, a bank needs a huge amount of money from the depositors. General banking is the side where banks offer different alternatives to the clients to deposit and remit their money. To encourage the clients, bank offers different options in front of their clients. Most of these options are very much similar between the banks, but the customer services and facilities may not be the same.

 Payment order (P.O.)

Payment order is a very popular cash transfer system of any bank. In the Uttara branch of Mutual Trust bank massive customer is transferring money by payment order everyday. But only the customer who is the account holder of Uttara branch only he/she can get the service of payment order. Sometimes some customer who doesn’t have the account in this bank he can get this service by special permission from manager. Those are not getting permission they become frustrated.

 Demand draft (D.D.)

Demand Draft is done when customer want to transfer their money from one district to another district. The customer intending to remit the money through a Demand Draft (DD) has to deposit the money to be remitted with the commission, which the banker charges for its services. The amount of commission depends on the amount to be remitted Because of outside of Dhaka D.D.

The pictorial representation of the above procedure is shown below:

Cash Transfer:

Remittance of funds is ancillary services of Mutual Trust bank. It aids to remit fund from one place to another place on behalf of its customers as well as non- customers of Bank. Mutual Trust bank has its branches in the major cities of the country and therefore, it serves as one of the best mediums for remittance of funds from one place to another.

 Online Cash Transfer:

Online cash transfer is a technological advanced feature of Mutual Trust bank. This feature really increased customer’s quality services. Customers are getting this service at the cheapest cost only monthly 100tk. So they are delighting by getting this service. Online customer is increasing rapidly in this branch because most of the current A/C holder customer has their business link with Dhaka city. As a result they can transfer money instantly through online

 Foreign Remittance:                                                           

 Foreign remittance collection is very poor in the Uttara branch of Mutual Trust Bank. They have contract with only Three-exchange Company, which are Wall-street Exchange, Express Money and Money Gram. Most of them are from Middle East country Saudi Arab, Kuwait, Oman, and UAE etc. Couple of days ago Mutual Trust bank made a contract with Western Union Exchange. It’s a great achievement for them, because it’s a criterion and popular money exchanger in the world. They have link with above two hundred countries so now people can easily transfer money almost all over from the world to Mutual Trust bank’s any branch. As well as Utttara branch’s customers will be benefited by these tremendous services.

 Clearing:                                          

Clearing is one of the magical parts of banking. Generally this clearing procedure handle by Bangladesh bank, that’s way Bangladesh bank’s other name is ‘Clearing house’. Most of major client deposit their account in different kinds of bank cheques. Clearing officer check all the cheques and deposit slip very carefully and then he received the cheque. All the cheques are posted in the computer by branch wise, then officer print the entire document and staple all the cheques by branch wise this is called schedule of clearing house. It is a very difficult job to staple all the cheques, because some time’s the cheques is huge in quantity, it may be 100 to 150, and this is very vital job indeed. If the cheques staple in wrong direction, the cheque may be return from another bank. All of the procedure the clearing in charge goes to the Bangladesh Bank clearing house before 10 am in the morning. The clearing officer checks all the bank’s cheque and he put all the cheques in bank wise, like as this another bank’s delivered their cheques in Mutual Trust bank desk.

 Product and Services

The bank introduced a number of financial products and services since its banking operation. There are several types of bank accounts like current a/c, savings a/c, short-term deposit (STD) a/c, etc. in Mutual Trust Bank. Moreover, there are also term deposit accounts in the bank like short-term deposit (STD) and fixed deposit (FDR) a/c. Different accounts have different interest rates. Current account holder does not get any interest as the account is opened for business purpose.

Type of Deposit Accounts:

 The relationship between the banker and the customer begins with the opening of an account by the customer. Initially all the accounts are opened with a deposit money by the customer and hence these accounts are called deposit account. Usually a person needs to open an account to take services from bank. Without opening an account, one can get only a few services from the bank. So the banking begins actually by opening an account with a bank.

  (a) Current Deposits (CD):

 In this kind of account a customer can deposit his money and can write one or more check to withdraw their money whenever customer wants. Current account is to serve big customers such as businessmen, joint stock companies, private limited companies, public limited companies etc. from the risk of handling cash by themselves. Most of the CD A/C holders are the small business owner like – dealers, different kinds of shop owner, etc. Though interest rate is 0% of this CD A/C but businessmen are holding this account to facilitate their business. Minimum deposit is 1500tk to open this account.

(b) Savings Bank Deposits (SB):     

Savings Bank Account holder customer no. is greater than any account’s customer no. in this Uttara branch of Mutual trust bank. Currently they are dealing with more than two thousand six hundred SB account holder. And most of the customers are the lower and middle classes. SB account holder no. is increasing everyday. Customers of SB account wish to save a part of their incomes to meet their future need and intend to earn an income from their savings. Interest rate is 6.25% and minimum deposit amount is 1000tk to open this account.

(c)  Short-Term Deposit (STD):

In Short-term Deposit, 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. In Mutual Trust Bank various big companies, Organizations, Government Departments keep money in STD accounts. Frequent withdrawal is discouraged and requires prior notice.

(d) Fixed Deposit Receipt (FDR):

               These are the deposits, which are made with the bank for fixed period specified in advance. It is purely a time deposit account. The bank does not maintain cash reserve against these deposits and therefore the bank offers higher provisional rates of profit on such deposits. At present the provisional rate of profit for FDR in Mutual Trust Bank Ltd. are as follows: 1, 3, 6, 12, 24, 36 Months which interest rate is 10% to 12.50%.

 Type of Savings Scheme :

(a)  MTBL Double Saver Scheme:

MTBL Double Saver Scheme is the most attractive product of Mutual Trust Bank, because by this scheme they can make their deposit amount just double after 6 years. This bank offers various deposit amounts to catch up different level of customer. These are as follows – 50000tk, 100000tk, 200000tk and 500000tk.

(b)  Brick by Brick Savings Scheme:

BRICK BY BRICK savings scheme is a scheme by which customer can easily save their money. This branch has all level of customer against this scheme – lower, middle or higher class customer. There are four instalments amount is available Tk. 500/-, 1000/-, 2000/- or 5000/- for the savings period of 5, 8 or 10years. So which amount is affordable they are choosing it. This scheme is very helpful for customer’s future life.

(c) Monthly Income Scheme:

It’s a very useful and effective scheme for those customers who have money but they are not getting any scope to invest for monthly fixed income. The Bank will provide the customer a deposit receipt after opening the account. This receipt is non-transferable. Minimum deposit amount is TK 1, 00,000.  Monthly income will be credited after one month. However, no profit will be paid if the deposit is withdrawn within 1 (one) year of opening the account and monthly income paid to the customer will be adjusted from the principal amount.

Table-1: Different type of Product & Account information of Uttara branch of MTBL (Annual Report 2008)

15) OTHER  FUNCTION OF GENERAL BANKING

01. Receipt of Cash

02. Payment of Cash

03. Balancing, Checking and safe custody of cash

04. Ledger keeping

05. Cancellation and payment of cheques

06. Endorsement

07. Balance enquiries

08. Balance Certificate

09. Closing of Account

10. Supplementary preparation

11. Issuing of Cheque book

12. Documentations of Account opening

13. Outward and inward clearing

14. Cash Transfer

15. Transfer Delivery

16. Issue and payment of demand draft, TT, MT, PO, PS

17. Outward and inward bill Collection

18. Reconciliation of Accounts

19. Heads of Accounts

20. Transfer Book

21. Supplementary

22. Cash Book

23. Others administrative work

24. Inter Branch Transaction advice

16)Foreign Exchange

      Globalization is a process by which trade among the countries has grown up, leading to a larger market. This foreign trade gives rise to foreign exchange of a bank. Foreign exchange refers to the process by which the currency of one country is converted into the currency of another country at a certain rate. Foreign Exchange market exists wherever one currency is traded for another .In banks when we talk of foreign exchange, we refer to the general device by which a bank converts currency of one country to another.      There are three kinds of transaction in foreign exchange department. They are:

a)      Import section,

b)      Export section, and

c)      Foreign Remittance section: Foreign remittance is the process of transferring the fund from Bangladesh to a foreign country’s bank. This can be done by sending D.D. or pay order to other countries. The bank charges some remittance on the service.

(d) Letter Of Credit (L/C):         

      A letter of credit is a letter issued by a bank (known as the opening or the issuing bank) at the request of its client/applicant (known as the opener of L/C) addressed to a person (exporter/beneficiary) undertaking that the bills drawn by the beneficiary will be duly honored by it (the opening bank), providing certain terms and conditions in the letter. In return, the bank charges L/C commission to its clients.

 Classification of Letter of Credit:

 Mutual Trust Bank  provides several kinds of L/C services to its customers. Some of them are discussed bellow:

• Irrevocable L/C:

      Irrevocable L/C cannot be amended or cancelled without the consent of the beneficiary (exporter) or any other interested parties. Banks usually open this type of L/Cs.

• Revocable L/C:    This kind of L/C can be amended or cancelled by the Issuing Bank, without the consent of the beneficiary or any other concerned parties. If it is not indicated in the L/C, whether it is Revocable or Irrevocable, then the L/C is treated as irrevocable one.

Documentary Letter of Credit:

All the commercial letter of credits, where export related documents such as Commercial Invoice, Bill of Lading (B/L) etc. are required to present with the bill of exchange, is called Documentary Credit. Under this L/C, bill of exchange will not be honored without other required documents.

Different parties involved in L/C transaction:

L/C starts when an applicant (importer) applies to a bank, where he is an account holder, for making a L/C. The following diagram briefly shows the parties and banks involved in making a L/C in Mutual Trust Bank and the procedures of making and receiving the payment of the parties. The name of the banks in the diagram is given as example

Before applying for a L/C, the importer and the exporter get together through an agent or they might know each other . Together, they come up with a deal that contains the type of products to be transferred, quantity of the product, an exchange rate fixed by mutual agreement of the two parties and the amount to be paid. The name of the deal is known as Proforma Invoice.

Other business of foreign exchange:

1)      Buying & selling of foreign currency

2)      Delivering inward & outward remittance

3)      Letter of credit for import

4)      Back to Back LC

5)      Loan against Imported Marcendise

6)      LTR

7)      Export Financing:

a)      Export cash credit

b)      Packing credit

c)      Pre shipment finance & post shipment

d)     Guarantee

e)      FDBP(Foreign Draft Bill Purchase)

f)       FDBC(Foreign Draft Bill Collection)

Chapter-3 (Analysis & Findings)

17) SWOT Analyses of MTBL:

Return of  average equity :  Return of  average equity of MTBL is higher / streangth from 2007 to 2008 because of profit & earning is high.

Cost of income ratio : Cost incured 33.12 from the 2007 and 35.24 for 2008 to earn Tk. on  33.12 ps expenditure.

Capital Adequacy raio : Risk weighted asset capital had been reserved for higher amount in the year of 2008 from the year of 2007.

Earning per share :  Earning of 2008 is higher then 2007 so equity portion maximum earning from maximum profit.

Return of  average asets : Return of  average asets  in the year of  2008  it is higher 2007 it means  it is indicates the opportunity .

NPL reatio (none performing) ratio :  The performance of of the year of 2007 is higher then 2008. It indicates the weakness of non performing ratio.

Credit to deposit ratio :  The  performance of   credit to deposit ratio  of 2007 is higher then 2008 so it indicates the threat.

Price to book value ratio: The performance of price of book value ratio of  2007 is greater than that of 2008. It is also indicates the threat.

SWOT analysis:

     SWOT is an acronym for the internal strength and weakness of a firm & environment

opportunity and threat facing the problem. MTBL has some strength,

weakness; opportunity and threats. The scenarios are shown in the bellows:

Strengths: