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Steps of Consumer Banking Along with Performance Evaluation of Foreign Exchange Division of Mercantile Bank Ltd.

INTRODUCTION

1.1 BACKGROUND OF THE STUDY:

Without practical experience, no one can acquire complete knowledge. Value of theoretical knowledge is insignificant, if practical experience is not added. It is more realized in the study of Business where practical experience plays an important role.

1.2 OBJECTIVE OF THE STUDY:

The most important objective of the report is to have a practical experience in an organizational environment as well as to understand the system and methodology adopted in conducting day to day banking operation by Mercantile Bank Ltd. Besides this report has been organized to obtain the following objectives:

• To have an overall idea of banking system.
• To know the techniques used by the bank.
• To apply theoretical knowledge into practical arena.
• To compare Relevant rules, regulations theories and practices for banking.
• To be familiarized about working hour, values and environment of the bank
• To have a clear concept on departmentalization and the authority entrusted on different officials.
• An exposure of practices of different banking activities in Mercantile Bank Ltd.
• Evaluation of the present performance of the Bank.
• To analyze the financing system of the bank.
• To find out if the bank has any field to improve upon and greater contribution towards the country’s economy.

1.3 SCOPE OF THE STUDY:

Mercantile bank limited has 45 branches all over the country. The scope or span of this report is to highlight the overall performance with related subject matter of the bank. It also presents a brief scenario of Mercantile Bank Ltd.

a) Lack of Information or Data:

The main constraint of the study was insufficiency of the information that was highly required for the study. Most of the time data could not be collected due to confidential purpose Adequate and in-depth well-organized literature was not available. Though the officials tried to assist, sometimes their working pressure couldn’t give me proper assistance what needed.

b) Time Constraint:

Duration of the internship program is also a problem because within this short period it is not possible to collect all the information as details. Students are given a three months time period while an employee or an officer is awarded with one year probationary period to do his or her particular job.

c) Comparison Status:

Had no opportunity to compare the banking system of the Mercantile Bank Ltd. with that of other contemporary and common size banks. The main reasons are the shortage of time and Internship nature.

Despite all the shortcomings faced, the whole thing has been supervised well at the end. I believe that the report is a brilliant one on Overall Banking of Mercantile Bank Ltd.

1.5.1. Source of Information:

Data have been collected from the two unique sources; one is primary sources and another is secondary sources.

Primary Sources:

o Face to face conversation with the respective officers and stuffs of the branch and head office.

o Discussing with my supervising teacher and manager.

o Practical work experience in the different desk of the department of the branch.

o In-depth study of selected cases.

Secondary sources:

o Annual Report of Mercantile Bank Ltd.

o Website of the Mercantile Bank Ltd.

o Several books and periodicals related to the banking sector.

o Bangladesh Bank Report

o Different circular sent by the head office of Mercantile Bank Ltd.

o Various documentary file of Mercantile Bank Ltd.

o Prior research report.

1.5.3. Reliability of Collecting Data:

The data collected are highly reliable in the sense that all data generated in the report are used exclusively by the Mercantile Bank Ltd. The auditors’ report on the financial statements and the correspondence with different desks generate the reliable information to compose the report successfully.

1.5.4. Model Used:

The performance evaluation of the Mercantile Bank Ltd. has been conducted based on the SWOT Analysis.

BANKING OVERVIEW

2.1 BEGINNING OF BANKING:

Before the birth of Christ, the Jews in Jerusalem introduced activities like banking in the form of money lending. The word ‘bank’ was most likely derived from the word ‘bench’ as during ancient time Jews used to do money-lending business sitting on long benches.

First modern banking was introduced in 1668 in Stockholm as ‘Savings Pis Bank’ which opened up a new era of banking activities throughout the European Mainland.

In the South Asian region, early banking system was introduced by the Afghan traders popularly known as Kabuliwallas. Muslim businessmen from Kabul, Afghanistan came to India and started money lending business in exchange of interest sometime in 1312 A.D. They were known as ‘Kabuliwallas’.

2.2 BANKING HISTORY OF BANGLADESH:

The Banking System

At the time of independence the banking system consisted of two branch offices of the former State bank Pakistan and 17 large commercial banks. Among them 2 banks were under the control of Bangladeshi interests and 3 banks were under the control of foreigners other than West Pakistanis. There were 14 smaller commercial banks. All banking services were virtually concentrated in urban areas. Newly independent Bangladesh designated the Dhaka branch of the State Bank of Pakistan as the central bank and renamed it as the Bangladesh Bank. The bank was responsible for regulating currency, controlling credit and monetary policy, and administering exchange control and the official foreign exchange reserves. The Bangladesh government initially nationalized the entire domestic banking system and proceeded to reorganize and rename the various banks. Foreign-owned banks were permitted to continue doing business in Bangladesh.

Cooperative credit systems and postal savings offices handled service to small individual and rural accounts. The new banking system succeeded in establishing reasonably efficient procedures for managing credit and foreign exchange.

Secoral Focus

The most important function of the credit system throughout the 1970s was to funding trade and the public sector, which mutually absorbed 75 percent of total advances. During the late 1970s and early 1980s the government’s encouragement of agricultural development and private industry brought changes in lending strategies. Lending to farmers and fishermen dramatically expanded as the Bangladesh Krishi Bank, a specialized agricultural banking institution. The number of rural bank branches doubled between 1977 and 1985, to more than 3,330.

Improvement

Denationalization and private industrial growth led the Bangladesh Bank and the World Bank to focus their lending on the emerging private manufacturing sector. Scheduled bank advances to private agriculture, as a percentage of sectoral GDP, rose from 2 percent in FY 1979 to 11 percent in FY 1987, while advances to private manufacturing rose from 13 percent to 53 percent.

Problems

The transformation of finance priorities has brought with it problems in administration. To identify viable borrowers and projects no sound project-appraisal system was in place. Lending institutions did not have adequate independence to choose borrowers and projects and were often instructed by the political authorities. In addition, the incentive system for the banks stressed disbursements rather than recoveries, and the accounting and debt collection systems were inadequate to deal with the problems of loan recovery. It became more common for borrowers to default on loans than to repay them; the lending system was simply disbursing grant assistance to private individuals who qualified for loans more for political than for economic reasons. The rate of recovery on agricultural loans was only 27 percent in FY 1986, and the rate on industrial loans was even worse.

The problem of credit recovery remained a threat to monetary stability, responsible for serious resource misallocation and harsh inequities. Although the government had begun effective measures to improve financial discipline, the draconian contraction of credit availability contained the risk of inadvertently discouraging new economic activity.

Overcome

As a result of these poor showing, major donors applied pressure to induce the government and banks to take firmer action to strengthen internal bank management and credit discipline. As a consequence, recovery rates began to improve in 1987. The National Commission on Money, Credit, and Banking recommended broad structural changes in Bangladesh’s system of financial intermediation early in 1987, many of which were built into a three-year compensatory financing facility signed by Bangladesh with the IMF in February 1987.

Foreign exchange reserves at the end of FY 1986 were US$476 million, equivalent to slightly more than 2 months worth of imports. This represented a 20-percent increase of reserves over the previous year, largely the result of higher remittances by Bangladeshi workers abroad. The country also reduced imports by about 10 percent to US$2.4 billion. Because of Bangladesh’s status as a least developed country receiving concession loans, private creditors accounted for only about 6 percent of outstanding public debt. The external public debt was US$6.4 billion, and annual debt service payments were US$467 million at the end of FY 1986.

2.3 NUMBERS & TYPES OF BANKS OPERATING IN BANGLADESH:

Bangladesh’s financial sector was dominated by the commercial banking system. The financial system of Bangladesh consists of Bangladesh Bank (BB) as the central bank, 4 State Owned Commercial Banks (SCB), 5 government owned specialized banks, 30 domestic private banks, 9 foreign banks and 29 non-bank financial institutions. Moreover, MRA has given license to 298 Micro-credit Organizations. The financial system also embraces insurance companies, stock exchanges and co-operative banks.

Sonali Bank is the largest among the NCBs while Pubali is leading in the private ones. Among the 9 foreign banks, Standard Chartered has become the largest in the country. Banhladesh Bank (BB) regulates and supervises the activities of all banks. The BB is now carrying out a reform program to ensure quality services by the banks.

2.4 BANKING LAWS AND PRACTICES OF BANGLADESH:

In Bangladesh, especially in the Banking sector the following Acts have been practiced for years. The Acts are –

• The Bangladesh Bank Order, 1972;
• The Bank Companies Act, 1991;
• The Financial Loan Court Act, 1990;
• The Financial Institutions Act, 1993;
• Foreign Exchange Regulation Act, 1947;
• The Money Loan Court Act, 1990;
• The Contract Act, 1872;
• The Negotiable Instrument Act, 1881,
• The Partnership Act, 1932;
• Other Acts related to charging of Securities, documentation of loans and advances, law of insurance relating to goods etc.

TERMINOLOGY

IMPORTANT TERMINOLOGY:

Bank: A bank is a financial intermediary dealer in loans and debts. A bank is a dealer in debt or its own and its customer.

Banker: The person who carries out the banking activities is known as banker who also takes the important decision.

Banking: All activities of a bank are known as banking.

Loan: It is a kind of advance made with or without security. It is given for a fixed period at an agreed rate of interest.

Overdraft: It is an arrangement whereby a customer has been allowed temporarily to overdraw his current account. It is without any security.

Central bank: A state own and main bank of a country, which controls the other banks of the country and its main duty is to maintain stability of monetary standard.

Commercial bank: This bank is mainly operated for earning profit. It collects money from customers by the help of deposits and then invests money among the people.

Customer: A customer is a person who has some short of an account either deposit or current or some similar relation with a bank.

Cheque: A cheque is a bill of exchange drawn on a banker payable on demand. A cheque is an order on bank by a depositor to pay certain amount of money to a particular person or bearer.

Bill of exchange: A bill of exchange is a negotiable instrument in writing containing an unconditional order signed by the maker directing a certain person to pay a certain some of money only to or to the order of the certain person to the bearer of the instrument.

Bank credit: When a bank makes an advance to a customer whether by overdraft or by loan account is called the bank credit.

Pledge: When the debtor leaves his goods right according to contract of loan, is called pledge.

Hypothecation: When the bank or lender or financial institution provides loan to the customer against movable on immovable property and if bank obtain only the legal entities of this secured properties but not possession, then it is called hypothecation.

Payee: Who accept the final amount of money after the period is called payee. Payee may be bearer or endorser.

Bank rate: Bank rate is the rate of interest which is imposed by Bangladesh bank to schedule bank upon the amount deposited by scheduled bank to Bangladesh bank.

Clearing house: By clearing house, central bank clears all the debts and receipts of the scheduled bank and it develops the relationship among the commercial banks.

Glossary

A BRIEF OVERVIEW OF MBL

4.1 HISTORICAL BACKGROUND OF MBL:

Mercantile Bank emerged as a new commercial bank to provide efficient bank service and to contribute socio-economic development of the country. Mercantile Bank limited has been licensed by the government of the Bangladesh as a schedule bank in the private sector in pursuance of the policy of liberalization of banking and financial services in Bangladesh. This bank was established on May 20, 1999 under the Bank Company Act, 1991 and incorporated as a public limited company under Companies Act, 1994. From then with in a short period of time MBL established itself in a strong position in the economy of the country. It has earned significant reputation in the country’s Banking sector as bank and created a wide image in the eye of the people. The Bank went for public issue of shares in 2003 and its shares are listed with Dhaka Stock Exchange and Chittagong Stock Exchange. The Authorized Capital of the Bank as of 2008 is Tk. 3,000 million and the Paid-up Capital is Tk. 1,798.68 million.

The Bank provides a broad range of financial services to its customers and corporate clients. The Board of Directors consists of eminent personalities from the realm of commerce and industries of the country. The bank has set up a new standard in financing in the industrial trade and foreign exchange business. Its various deposits and credit products have also attracted the clients both corporate and individuals who feel comfort in doing business with the bank.

4.2 VISION, MISSION & OBJECTIBE OF mbl:

Vision Statement

Would make finest corporate citizen.

Mission Statement

Will become most caring, focused for equitable growth based on diversified development of resources, and nevertheless would remain healthy and gainfully profitable Bank.

Objectives

Strategic objectives

• To achieve positive Economic Value Added (EVA) each year.
• To be market leader in product innovation.
• To be one of the top three Financial Institutions in Bangladesh in terms of cost efficiency.
• To be one of the top five Financial Institutions in Bangladesh in terms of market share in all significant market segments they serve.

Financial objectives

• to achieve 20% return on shareholders’ equity or more, on average.

Core Values

For the customers

Providing with caring services by being innovative in the development of new banking products and services.

For the shareholders

Maximizing wealth of the Bank.

For the employees

Respecting worth and dignity of individual employees devoting their energies for the progress of the Bank.

For the community

Strengthening the corporate values and taking environment and social risks and reward into account.

4.3 CORPORATE INFORMATION OF MBL AT A GLANCE:

Registered Name : Mercantile Bank Limited

Corporate Slogan : efficiency is our strength

Date of Incorporation : 20^th May, 1999

Inauguration of the first branch : 2^nd June, 1999

Head Office : 61, Dilkusha Commercial Area,

Dhaka-1000, Bangladesh \

Tel: 880-2-9559333, 01711-535960

Fax: 880-2-9561213

Telex: 642509 MBLID BJ

Official Logo :

Chairman : Md. Abdul Jalil

Managing Director : Dewan Mujibur Rahman

Number of Branches : 45

Number of Employees : 1,115

No. of Foreign Correspondents : 586

Authorized Capital : TK. 3,000 million

Paid up Capital : TK. 1,798.68 million

Services provided : Deposit Scheme, Credit Facility and Foreign

Exchange Services

Banking operating system : Both conventional and Foreign Exchange

system

Technology used : Member of SWIFT, online Banking, UNIX

based computer system

E-mail : mbl@bol-online.com

Website : www.mblbd.com

SWIFT : MBLBBDDH

4.4 ORGANIZATION STRUCTURE OF MBL:

Mercantile Bank Limited

Fig 1: Organization Structure of MBL

4.5CORPORATE STRUCTURE OF MBL:

4.6 MANAGEMENT HYERARCHY OF MBL:

Fig 2: Management Hierarchy of MBL

4.7 PERFORMANCE OF MBL:

To meet wide-ranging needs of modern customer, MBL has a blend of expertise. And technological excellence is in place also. The Bank aims at mobilizing untapped money of the country and prudent deployment for productive activities in the form of lending at a competitive rates/loan pricing. The Bank pursues diversified credit policies and strategic planning in credit management to attain its goals and objectives.

4.7.1 CAPITAL

The Authorized Capital of the Bank was BDT 3,000.00 million of 30,000,000 Ordinary Shares of BDT 100 each as of December 31, 2008. Paid-up Capital of the Bank was BDT 1,798.68 million of 17,986,800 Ordinary Shares, face value of BDT 100 each and listed both in Dhaka and Chittagong Stock Exchanges. The shares of the Bank are trading at prices higher than the book value.

4.7.2 STATUTORY RESERVE:

The Bank transferred BDT 256.34 million to Statutory Reserve as 20% of the profit after provisions before tax and dividend at the end of 2008 as per section 24 of the Bank Companies Act, 1991. The total amount of Statutory Reserve stood at BDT 1,222.83 million at the end of 2008.

4.7.3 DEPOSITS:

The Bank mobilized total deposits of BDT 49,538.36 million as of December 31, 2008 as compared to that of BDT 39,348.00 million upto December 2007. Competitive interest rates, attractive deposit products, deposit mobilization efforts of the Bank and confidence reposed by the customers on the Bank contributed to the notable growth in deposits. The Bank introduced a number of attractive deposit schemes to cater the requirement of small and medium savers. This improved not only the quantum of deposits, but also brought about qualitative changes in the deposits structure.

Table 3: Deposit Mix (BDT in million)

Graph 2: Deposit Mix

4.7.4 LOANS AND ADVANCES:

The Bank has formulated a policy to give more priority to Small and Medium Enterprises (SME) while financing large-scale enterprises through consortium of banks. Total loans and advances of the Bank stood at BDT 41,993.95 million as of December 31, 2008 as compared to BDT 31,877.86 million at the end of December 2007.

Table 4: Sector-wise Loans & Advances Mix (BDT in million)

Graph 3: Sector-wise Loans & Advances Mix

4.7.7 IMPORT TRADE:

Mercantile Bank Limited has opted quality financing while facilitating import trade in 2008. During the year, the Bank executed a total of 20,321 Letters of Credit amounting to BDT 56,528.80 million. The principal items were capital machineries, garments & accessories, rice, wheat, sugar, CDSO, vegetable oil, cement clinkers, hot roll steel, raw cotton, ships-breaking etc.

4.7.8 EXPORT TRZDE:

From the beginning this bank is very much supportive in Export financing. In export this bank is holding top position among leading bank’s of new generation as an outcome of its positive attitude. A total of 17,581 export bills were handled worth BDT 43,108.50 million in 2008. The main export items of the Bank were Readymade Garments, jute & Jute goods, leather, handicrafts, tea, frozen food, fish products etc.

4.7.9 FOREIGN REMITTANCE:

Total foreign remittance in the single year, i.e. in 2008 made a record high to the tune of BDT 4,722.90 million. The Bank has deepened its step on the foreign soils further by establishing more and more remittance arrangements with overseas exchange companies where Bangladeshi expatriates are working. These include United Kingdom, U.A.E, Kuwait, Bahrain, Canada, Italy, France etc.

4.7.10 TREASURY OPERATION & FUND MANAGEMENT:

Treasury operation of MBL is involved in fund management and foreign exchange dealings. The duty of treasurer also includes maintaining Cash Reserve Requirement (CRR) and Statutory Liquidity Requirement (SLR) with the Bangladesh Bank. Treasury Division of MBL actively participates in money market operation and investment activities. Their Treasury Division reflected healthy performance during the last few years. In 2008, the Bank generated revenue of BDT 729.12 million from money market operations and BDT 21.98 million from secondary capital market.

4.7.11 EARNING BASE IN ASSETS:

Earning base in assets of the Bank was 91.84% in 2008 as compared to 88.75% in 2007. The ratio indicates efficient utilization of resources to earn revenues.

Table 5: Earning Base in Assets (BDT in million)

4.7.12 ASSETSPORTFOLIO:

The Bank’s total assets outstanding as of December 31, 2008 amounted to BDT 55,928.72 million as compared to BDT 44,940.54 million at the end of December 2007. Of the total assets outstanding in 2008, loans and advances constituted 75.09%, investments 13.75%, cash 7.82%, balances with other banks 0.59%, and other assets 2076% as against 70.93%, 15.80%, 8.27%, 0.47% and 4.53% respectively in 2007.

Table 6: Asset Portfolio (BDT in million)

Graph 4: Asset Portfolio

4.7.13 INFORMATION TECHNOLOGY:

Banking operations of the branches have been computerized to minimize costs and risks and to optimize benefits and overall efficiency for improved services. The Bank generates the relevant Financial Statements at the end of the day. The Bank has installed Reuters Screen for smooth operation of foreign currency dealings. The Bank has also hosted a web page of its own. On-line Banking has been introduced by the Bank to provide better services to the customer. The Bank has introduced ATM ‘Q-cash’. The Bank has installed SWIFT to facilitate quick international trade and payments arrangements. The Bank has already introduced VISA Debit and Credit Cards.

4.8 FINANCIAL REVIEW:

4.8.1 OPERATING PROFIT:

The operating revenue of the Bank stood at BDT 1,581.51 million in 2008 as against BDT 1,385.14 million in 2007. Net Interest Income of the Bank stood at BDT 1,558.39 million in 2008 as against BDT 1,291.60 million in 2007.

Table 7: Operating Profit (BDT in million)

4.8.2 TOTAL INCOME:

Total income increased from BDT 5,560.95 million in 2007 to BDT 6,877.50 million in 2008. Interest income accounted for 81.49%, commission 6.67%, exchange gains 6.66%, and other income 5.18% to total income in 2008 as against 80.04%, 6.59%, 7.63% and 5.75% respectively in 2007.

Table 8: Total Income (BDT in million)

Graph 5: Total Income

4.8.3 INTEREST INCOME:

Interest income increased from BDT 4,450.90 million in 2007 to BDT 5,604.36 million in 2008. Interest on loans and advances accounted for 85.75%, interest on Treasury and T&T Bond 8.33%, interest on Treasury Line 2.31%, interest on deposits with other Banks 1.24%, interest on Treasury Bills 0.49% and other interest income 1.88% of total interest income in 2008 as against 80.11%, 7.71%, 2.69%, 2.72%, 1.97% and 4.82% respectively in 2007.

Table 9: Interest Income (BDT in million)

Graph 6: Interest Income

4.8.4 INTEREST EXPENSE:

Interest expenses moved up from BDT 3,159.30 million in 2007 to BDT 4,045.97 million in 2008. Interest on deposits under schemes was the largest component of interest expenses and accounted for 46.88% of total interest expenses in 2008 as compared to that in 2007. Interest on FDR acounted for 45.21%, interest on savings deposits 4.19%, interest on short-term deposits 1.47%, interest on call deposits 1.01% and other interest expenses 1.24% of total interest expenses in 2008 as against 46.85%, 3.84%, 1.62%, 0.68%, 0.14% respectively in 2007.

Table 10: Interest Expenses (BDT in million)

Graph 7: Interest Expenses

4.8.5 NET INTEREST INCOME:

Net interest income increased from BDT 1,291.60 million in 2007 to BDT 1,558.39 million in 2008. Gross interest income of the Bank amounted to BDT 5,604.36 million and interest expenses amounted to BDT 4,045.97 million in 2008.

4.8.6 NET INTERSET MARGIN (NIM):

Bank’s net interest margin, which is derived from net interest income divided by average earning assets, was 3.72% in 2008 as compared to 3.52% in 2007. Net Interest Margin (NIM) increased as the higher spread is being resulted from the lower deposit rate and higher yields on risk assets. This indicates a reasonable spread between interest income and interest expenses.

4.8.7 NON –INTEREST INCOME:

Non-interest income increased from BDT 1,110.05 million in 2007 to BDT 1,273.14 million in 2008. Non-interest income was 18.51% of the total income in 2008 as compared to 19.96% in 2007. Commission accounted for 36.05%, Exchange gains 35.99%, income on investment in shares 1.73% and other non-interest income 26.23% of total non-interest income in 2008 as against 38.20%, 33.00%, 5.90% and 22.90% respectively in 2007.

Table 11: Non-Interest Income (BDT in million)

Graph 8: Non-Interest Income

4.8.8 TOTAL EXPENSES:

The total expenses of the Bank stood at BDT 5,295.99 million during 2008 as compared to BDT 4,175.81 million during 2007. Interest expenses accounted for 76.40%, salaries and allownaces 11.54%, rent, rates, taxes etc. 2.94%, depreciation and repairs 1.41%, stationary, printing and advertisements 1.20%, postage, stamp and telecommunication 0.51%, and other expenses 6.00% of total expenses in 2008 as against 75.66%, 11.78%, 2.98%, 1.44%, 1.36%, 0.68% and 6.11% respectively in 2007.

Table 12: Total Expenses (BDT in million)

Graph 9: Total Expenses

4.8.9 NON-INTEREST EXPENSES:

Non-interest expenses moved up from BDT 1,016.51 million in 2007 to BDT 1,250.02 million in 2008. Non-interest expenses were 23.60% of the total expenses in 2008 as compared to 24.34% in 2007. Salaries and allownaces 48.93%, rent, rates, taxes etc. 12.46%, depreciation and repairs 5.97%, stationary, printing and advertisements 5.08%, postage, stamp and telecommunication 2.16%, and other expenses 25.40% of total expenses in 2008 as against 48.40%, 12.23%, 5.92%, 5.58%, 2.78%, and 25.08% respectively in 2007.

Table 13: Non-Interest Expenses (BDT in million)

Graph 10: Non-Interest Expenses

4.8.10 NET PROFIT BEFORE TAX:

After transferring all provisions, net profit before tax increased to BDT 1,281.68 million in 2008 as against BDT 1,198.84 million of the previous year, showing an increase of 6.91%.

4.8.11 PROVISION FOR INCOME TAX:

Provision against current year tax was BDT 665.80 million in 2008 as against BDT 658.34 million in 2007 showing 1.13% increment.

4.8.12 PROFIT AFTER TAX:

The Bank earned profit after tax of BDT 615.88 million in 2008 as against BDT 540.50 million in 2007.

4.9 MBL TIME LINE:

4.10 RESOURCES & FACILITIES OF MBL:

Deposit Schemes

1. Monthly Savings Scheme: The primary objective of this scheme is to encourage people to develop their habit of saving. Under this scheme, one can save a fixed amount of return every month and get a lucrative amount of return after five, eight or ten years.

2. Family Maintenance Deposit Scheme: Under this scheme, one can deposit certain amount of money for five years and in return he/she will receive benefits on monthly basis. Benefit start right from the first month of opening an account under the scheme and continue up to five years. On maturity the principal amount will be paid back.

3. Double Benefit Deposit Scheme: Under this scheme, one can deposit a certain amount of money for seven and a half year period. After seven and a half years, the deposit amount will be doubled.

4. Quarterly Benefit Deposit Scheme: Under the Quarterly Benefit Deposit Scheme, one can deposit for a period of three years and in return depositor will receive benefits on quarterly basis. Benefits starts right from the first quarter of opening an account under the scheme and continues up to three years. On maturity the principal amount will be paid back.

5. 1.5 Times Benefit Deposit Scheme: Under the 1.5 Times Benefit Deposit Scheme, one can deposit a certain amount of money for 42 months or three and half years. On maturity, the depositor will receive 1.5 times of the deposited amount.

6. Advance Benefit Deposit Scheme: Under this Scheme, one can deposit a certain amount of money for two years. The depositor will receive the benefit on yearly basis. The benefit amount of first year will be received in advance at the time of deposit. On maturity, the depositor will get back the principal amount with the benefit amount of second year.

Loan Products

1. Consumer Credit Scheme: Consumers’ Credit Scheme is one of the popular areas of collateral-free finance of the Bank. People with limited income can avail of credit facility to buy household goods including computer and other consumer durables.

2. Small Loan Scheme: This scheme has been designed especially for the businessman who need credit facility for their business and can’t provide tangible securities.

3. Lease Finance: This scheme has been designed to assist and encourage the genuine and capable entrepreneurs and professionals for acquiring capital machineries, medical equipments, computers, vehicle and other items. Flexibility and easier terms and conditions of this scheme have attracted the potential entrepreneurs to acquire equipments of production and services and repay gradually from earnings on the basis of ‘Pay as you earn’.

4. Doctors’ Credit Scheme: Doctors’ Credit Scheme is designed to facilitate financing to fresh medical graduates and established physicians to acquire medical equipments and set up clinics and hospitals.

5. Rural Development Scheme: Rural Development Scheme targeted for the rural people of the country to make them self-employed through financing various income-generating projects. This scheme is operated on group basis.

6. Women Entrepreneurs Development Scheme: Women Entrepreneurs Development Scheme has been introduced to encourage women in doing business. Under this scheme, the bank finances the small and cottage industry projects sponsored by women.

7. SME Loan Scheme: Small and Medium Enterprise (SME) Loan Scheme has been introduced to provide financial assistance to new or experienced entrepreneurs to invest in small and medium scale industries with a comparatively low rate of interest as the same is assisted by the Bangladesh Bank with refinancing facilities.

8. Personal Loan Scheme: Personal Loan Scheme has been introduced to extend credit facilities to cater the needs of low and middle income group for any purpose. Government and semi-government officials, employees of autonomous bodies, banks and other financial organizations, multinational companies, reputed private organizations and teachers of recognized public and private schools, colleges and universities are eligible for this loan.

9. Car Loan Scheme: Car Loan Scheme has been introduced to enable middle-income people to purchase Cars/SUVs/Jeeps. Government and semi-government officials, employees of autonomous bodies, banks and other financial organizations, multinational companies, reputed private organizations, teachers of recognized public and private universities and businessmen are eligible for this loan.

10. Home Loan Scheme: To meet the growing need of housing for middle and lower-middle income people, MBL has introduced Home Loan Scheme. They also support the Bangladesh Bank’s Home Loan Refinance Scheme. The Scheme boosts up the growth housing sector. Such loan shall be available for purchase or construction of new apartments for self-residing purpose.

11. Overseas Employment Loan Scheme: Overseas Employment Loan Scheme is designed to facilitate the Bangladeshi youths seeking employment abroad but who are unable to meet the expenses to reach the workplace from their own sources. The ultimate objective of the scheme is to promote skilled/semi-skilled manpower to different countries across the world as well as to provide support to Government Policy considering priority of this sector. By availing loan under this scheme, the active youths of middle and lower-middle class can get overseas employment by avoiding borrowing from the illustrious class or village ‘mohajon’ at a very high cost or selling their paternal properties. The scheme helps fetching foreign currency for the country as well as fulfills the Bank’s commitment to encourage micro-lending for poverty alleviation, improve the quality of life and thereby contribute to socio-economic development of the country.

4.11 FINANCIAL HIGHLIGHTS OF MBL:

Highlights on the overall financial activities

For the year 2008 and 2007

Table 14: Financial Highlights (BDT in million)

4.12 HEAD OFFICE & BRANCH NETWORK OF MBL:

NETWORK: BRANCH 45 & 3 SME CENTER:

SME SERVICE CENTER:

From the above graph, we can see that there is chronological increase in every sector. Here, it is mentionable that in Year 2006, Import increases dramatically at a higher rate, but after that faced slow decrease

GENERAL BANKING DEPARTMENT

5 General Banking DEPARTMENTS:

The General Banking Department does the most important and basic works of the Bank. All other departments are linked with this department. It also plays a vital role in deposit mobilization of the branch. MBL provides different types of accounts, locker facilities and special types of saving scheme under General Banking Department.

General Banking of this branch consists of different sections, namely Account Opening Section, Checkbook Issue, Transfer of Account, Closing of Account, Remittance Section, Online Banking, Clearing and Bills Section, Dispatch Section, Cash Section, Data Entry Section, Accounts Section etc.

5.1. Account Opening Section:

According to the Law and Practice, the Banker-Customer relation arises only from contract between the two. And opening of Account is the contract that establishes the relationship between a banker and a customer. So this section pays a very important role in attracting customer and therefore should be handled with extra care.

According to the International Code of Conduct, banks should maintain following steps regarding their customers –

• Banks will act fairly and reasonably in all their dealings with their customers,
• Banks will help customers understand how their accounts operate and seek to give them a good understanding of banking service,
• Banks should maintain confidence in the security and integrity of banking and payment system.

Mercantile Bank Ltd. (MBL) opens the following Accounts for its customers –

Fig 3: Accounts of Mercantile Bank Ltd.

5.1.1. Types of Account of MBL at a Glance: