Ful Report

Credit Management of MTBL

1.1 Background of the ReportEconomic history shows that development has started everywhere with the banking system and its contribution towards financial development of a country is highest in the initial stage. BBA degree is different from other degrees in the extent that it requires to achieve practical experience with relation to the theory. For this reason BBA students require to undergo internship program where they match practical knowledge with that of theoretical knowledge which the acquired throughout the degree. Internship program is a perfect blend of the theoretical and practical knowledge. As the classroom discussion alone cannot make a student perfect in handling the real business situation, therefore it is an opportunity for the students to know about real life situation through this program. BBA degree does not complete unless a written report submitted to the faculty, basing on what have the students learned through the internship program. This report is originated to fulfill the requirement of the assigned project internship report on Credit Management of Mutual Trust Bank Limited. In this regard I had the opportunity to work in Mutual Trust Bank Limited at Pallabi Branch for an internship period of 90 days starts from July 11, 2012 and ends to September 11, 2012. During this internship period I have worked with MTBL as an employee and gathered practical work experience and knowledge about the overall banking operation as well as about the activities of credit management.

1.2 Significance of the Report This internship report is partial requirement of four years BBA graduation program. This is because knowledge and learning become perfect when it is associated with theory and practice. Theoretical knowledge gets its perfection with practical application. And the internship is designed to bridge the gap between the theoretical knowledge and real application. By this internship program students can establish contacts and networking. Contacts may help to get a job in practical life. That is, student can train and prepare themselves for the job market. Therefore, it is obvious that the significance of internship is clearly justified as the crucial requirement of four years BBA graduation.

1.3 Scope of the ReportAs I was designed to the Mutual Trust Bank Ltd, Pallabi Branch, there is enough scope of the study. The report covers the topic Credit Management Of Mutual Trust Bank Ltd. To conduct a study on credit management of Mutual Trust Bank, I have gathered valuable information from MTB, Pallabi Branch and I have also got some information from website of Mutual Trust Bank.

The study would focus on the following areas of Mutual Trust Bank Limited. Credit management scenario of Mutual Trust Bank Ltd. An overviews of Mutual Trust Bank Limited Comparison with other Banks. Financial performance of MTB.Each of the above areas would be critically analyzed in order to determine the efficiency of Mutual Trust Bank Limited Credit Management system.1.4 Objectives of the Report 1.4.1 Broad ObjectiveThe broad objective of this report is to analyze the Credit Management of Mutual Trust Bank Limited. 1.4.2 Specific objective To have better orientation on credit management activities specially credit policy and practices, credit-processing steps of Mutual Trust Bank Limited, To analyze the Lending Procedure of Mutual Trust Bank Limited, To know the terms and conditions of credit management of Mutual Trust Bank Limited, To evaluate the actual position in classified Loan and provisions maintained by MTBL, To appraise the actual recovery position of MTB, To identify scope of improvement concerning credit management.1.5 Methodology of the report Methods followed to perform a job or conducting activities to complete a task is called methodology. In conducting this study the following methodology was adopted in collecting data and information, preparation of reports etc. The methodology of report is given below:

1.5.1 Research Design This report is a descriptive type of research which briefly reveals the Credit Management of Mutual Trust Bank Limited. It has been administered by collecting secondary data. Annual reports of Mutual Trust Bank Limited were the major secondary data sources in this regard. This study has been conducted by collecting data for the period of 5 years from 2007 to 2011.

1.5.2 Sources of dataThe data collection method of study consists of secondary sources. The details of these sources arehighlighted in below:Sources of Secondary data Annual Report. Various reports related to study. Web base support from the internet.1.5.3 Data Collection Procedure and InstrumentsFor The Credit Management of Mutual Bank Limited Secondary data are mainly used. Besides this, information is also collected by taking expert opinion from the officers and direct observation while I was doing the internship program at the bank.1.5.4 Data Analysis and ReportingIn order to analyze the data I have used trend analysis and softwares for graphical presentation.

1. Data Analysis- Trend Analysis

2. Software Used- MS word MS Excel Microsoft PowerPoint

1.6 LimitationsObserving and analyzing the broad performance of a bank and one of its branches are not that easy. Moreover due to obvious reasons of scrutiny and confidentiality, the bank personnel usually dont want to disclose all the statistical information about their organization. Time is another major limitation. The duration of the program was twelve weeks only and being a temporary member of the organization, it was not possible on my part to notice or express some of the sensitive issues and other aspects.However the some of the limitations I have faced while preparing this report are listed as follows: Time Limitation: To complete the study, time was limited by three months. It was really very short time to know details about an organization like Mutual Trust Bank Limited. Inadequate Data: Lack of available information about the business operations of MTBL. Because of the unwillingness of the busy key persons, necessary data collection became hard. The employees are extremely busy to perform their duty. Lack of Record: Large-scale research was not possible due to constrains and restrictions posed by the organization. Unavailability of sufficient written documents as required making a comprehensive study. In many cases up-to-date information was not available. Lack of experiences: Lack of experiences has acted as constraints in the way of meticulous exploration on the topic. Being a member of the organization; it was not possible on my part to express some of the sensitive issues. Website Facility: Mutual Trust Bank Limited website is not much rich to collect data thats why it makes sometime difficulty to collect information.

2.1 Company profile:Name of the Company:Mutual Trust Bank Limited.Legal form:A public limited Company incorporated in Bangladesh on 29th September 1999 under the companies Act 1994 by shares for carrying out all kinds of banking activities with authorized capital of BDT 200 million divided into 2000000 ordinary shares of BDT 100 each.Date of Commencement: October 05, 1999.Registered Office:MTB Centre, 26GulshanAvenue, Plot-5, Block-SE (D), Gulshan-1, Dhaka-1212. Telephone: 880(2)8826966, 8822429.Fax: 880(2)8824303.Swift Code: MTBL BD DH.E-mail: [email protected] Page: www.mutualtrustbank.comAuditors: Hoda Vasi Chowdhury & co, Chartered Accountants BTMC Bhaban.Tax Consultant: M/s. ACNAIN, BSRS Bhaban C/a, Dhaka-1215, Bangladesh.Managing Director:Mr. Anis A. Khan.Company Secretary: Mr.Qumrul Islam Chowdhury.Number of Branches: 77.SME centre: 14.MTB Securities Limited: 14.ATM Booths:118.

2.2 Background of the BankThe importance of commercial banks after the ravage of the liberation war to develop a better economy was severally needed and it is needed now and will be required in future also. In time to time Government of Bangladesh agreed to permit the private commercial banking in the country. Mutual Trust Bank Limited as s public limited 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 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. The address of Registered Office is MTB Centre, 26GulshanAvenue, Plot-5, Block-SE (D), Gulshan-1, Dhaka-1212. Number of branches is 77.The number of SME centre is 14. The number of securities house is 14.The organization achieved customers confidence immediately establishment in domestic and international markets. Mutual Trust Bank is one of the few banks permitted by the Bangladesh bank in the early 90s; the other banks permitted earlier were Dutch-Bangle Bank, Al-Arafah Islamic Bank, Prime Bank, Dhaka Bank, Eastern Bank, ONE Bank. These banks are known as the second generation bank and fortunate to remain immune from the bad loan culture. However, the performances of these banks are not the same; the Mutual Trust Bank Limited remained as one of the top performance among them. The emergence of Mutual Trust Bank Limited at the junction of liberation of Global economic activities, after the URUGUAY ROUND has been an important event in financial sector of Bangladesh. The experience of prosperous economies of Asian countries and particular of South Asia has been the driving force and the strategies behind operational policy option of the Bank, The bank will continue to aim for sustainable increase of business functionalities, linking profitability, capital base, risk adjusted assets and investment for growth. Mutual Trust Bank Limited has been licensed by the Government of Banglad4esh as a Schedule Bank in the private sector in pursuance of the policy of liberalization of Banking and financial services and facilities in Bangladesh. In view of the above, the Bank within a period of 13 years of operation achieved a remarkable success and met up capital adequacy requirement of Bangladesh Bank

2.3 VisionMutual Trust Banks vision is based on a philosophy known as MTB3V. We envision MTB to be: One of the best performance banks in Bangladesh The bank of Choice A truly World class bank2.4 MissionWe aspire to be the most admired financial institution in the country, recognized as a dynamic, innovative and client focused company that offers an array of products and services in the search for excellent and to create an impressive economic value.2.5 Values Commitment Customer focus Community Accountability Agility Trust2.6 GoalMTB people, products and processes are aligned to meet the demand of discerning customers. Its goal is to achieve a distinction like the luminaries in the sky. Its prime objective is to deliver a quality that demonstrates a true reflection of its vision-MTB3V.2.7 Strategic Objectives To ensure inflow of funds at combination of least possible cost. To maintain a discreet credit policy. To enhance versatility and diversification through the penetration of new market segments, thereby, fulfilling unmet needs. To extend financial assistance to the citizenry, living at dispersed locations by expending the network of branches. To practice stronger IT-driven initiatives that will meet the challenges and requirements of the bank and its clientele. To improve administrative and organizational structures in order to prepare the platform for best practices of corporate governance. To enrich the banking sector with improved awareness on Corporate Social Responsibility.2.8 Management structure of Mutual Trust Bank

Dr. Arif DowlaChairman

Mr. Rashed Ahmed Chowdhury Vice Chairman

Directors

Mr.Md.Abdul MalekMr.Md.HedaytullahMr.Sayed Manzur ElahiMr. Anjan ChowdharyMr. WakiluddinMrs. Khwaja Nargis HossainMr. Q.A.F.M Serajul IslamMr. Mohammed Abdul Rouf

Source-Annual Report 2011(Mutual Trust Bank)Figure: 2(a) - Management Structure of Mutual Trust Bank2.9 Organization Structure of Mutual Trust BankDesignations are in ascending order-

Top Management ChairmanBoard of DirectorsExecutive CommitteeManaging DirectorAdditional Managing DirectorDeputy Managing Director

Executive Level ManagementSenior Executive Vice PresidentExecutive Vice PresidentSenior Vice PresidentVice PresidentSenior Assistant Vice PresidentFirst Assistant Vice President

Mid Level ManagementAssistant Vice PresidentSenior Principal OfficerPrinciple OfficerSenior Officer

Junior Level ManagementProbationary OfficerJunior OfficerAssistant Officer

Source: Mutual Trust Bank Website (www.mutualtrustbank.com)Figure: 2 (b)-Organization Structure of Mutual Trust Bank2.10 Capital StructureThe capital structure of Mutual Trust Bank Ltd is quite strong. At present, Authorized capital of the company is BDT 10.000 Billion (BDT 1000.00 core) divided into 100,000,000 ordinary shares of BDT 100 each.YearAuthorized Capital (Amount in millions)Paid up Capital (Amount in millions)

20073800997.92

200838001496.88

200938001766.32

2010100002119.58

2011100002543.50

Source: Annual Report of Mutual Trust Bank Ltd. Year-(2007-2011)

Fig: 2(c) - Authorized & Paid up CapitalFrom the graph it is seen that in 2007 the authorized capital was 3800 million and paid up capital was 997.92 million. The authorized capital and paid up capital both are increased year by year. In 2011 its authorized capital increased by 10000 million and paid up capital also increased by 2543.50 million.

Source: Annual Report Mutual Trust Bank Year-(2007-2011) 2.11 Products and Services of Mutual Trust Bank Limited

MTB Product & ServiceCorporate Banking ProductTrade financeMTB off-shore bankingSyndication & structuredExport financeImport financeNon-funded trade financeNRB savings accountLoan ProductDeposit productNRBSMERetail

Treasury Service

Corporate & deposit product

Working capital finance

Fig: 2(d) - Products and Services of Mutual Trust Bank Limited2.12 Credit Rating ReportMutual Trust Bank Ltd was rated Credit Rating Agency of Bangladesh (CRAB) on the basis of financial audited Statement, as on December 31, 2011. The Summary of rating is presented below:Status20112010

Long TermA1A2

Short TermST-2ST-3

Commercial banks rated A1 in the long term are adjudged to be strong banks, characterized be good financials, healthy and sustainable franchises and a first rate operating environment. This level of rating indicates strong capacity for timely payment of financial commitments with low likeliness of being adversely affected by foreseeable events.

Commercial banks rated ST-2 in the short term are considered to have strong capacity for timely repayment. Banks rated in this category are characterized with commendable position in terms of liquidity, internal fund generation, and access alternative sources of funds is outstanding.

Theoretical Background Credit: The word credit comes from the Latin word Credo meaning I believe. It is a lenders trust in a persons/ firms/ or companys ability or potential ability and intention to repay. In other words, credit is a contractual agreement, in which a borrower receives something of value now, with the agreement to repay the lender at some date in the future. Credit Management: The credit management is to maximize the performing asset and the minimization of the non-performing asset as well as ensuring the optimal point of loan and advance and their efficient management. Credit management is a dynamic field where a certain standard of long-range planning is needed to allocate the fund in diverse field and to minimize the risk and maximizing the return on the investment. Cash Credit CC (Hypothecation): The mortgage of movable property for securing loan is called hypothecation. Hypothecation is a legal transaction whereby goods are made available to the lending banker as security for a debt without transferring either the property in the goods or either possessing. Cash Credit CC (Pledge): Transfer of possession in the judicial sense of essential in the valid pledge. In case of pledge, the bank acquire the possession of the good or a right to holds goods until the repayment for credit with a special right to sell after due notice to the borrower in the event of non-repayment. Secured Over draft-SOD: Advance is granted to a client against financial obligations that is deposited in the bank. A client can get up to 90% loan of the total deposited value. Over Draft-OD: OD is some kind of advance. In this case, the customer can over draw from his/her current account. There is a limit of overdraw, which is set by the bank. A customer can with draw that much amount of money from their account. For this there is an interest charge on the over draw amount. This facility does not provide for everyone, the bank will provide only those who will fulfill the requirement. It means that only real customer can get this kind of facility. Pay Order-PO: A pay order is a draft issued by one another or on its branch. The purchase of a draft makes to the seller in local currency at the domestic center while the paying after presentation of the draft by the beneficiary pays the beneficiary. There is also risk of loss of the draft in transit. Demand Draft-DD: The person intending to remit the money through a pay order has to deposit the money to be remitted with the commission which the banker charges for its services. The amount of commission depended on the amount to be remitted. On issue of the pay-order the remitter does not remit a party to the instrument 1) drawer branch 2) drawer branch 3) payee. This treated as the current liability of the bank as banker on the presentation of the instrument should pay the money.

Telegraphic Transfer-TT: Telex transfer is another widely used mode for remittance of funds. In case of telex transfer the message for transfer of funds is communicated through tested telex. MTB generally recovers from the telex charges in addition to the usual service charge. Letter of Credit: Business Enterprises can avail Non-funded facility for import / procurement of raw materials, machinery, equipment, merchandise item. Loan against Imported Merchandize-LIM: It stands for loan against imported merchandise. Its one kind of post import finances allowed for very shorter period, usually 30 to 60 days or 30 to 90 days. Loan against Trust Receipt-LTR: This is an arrangement under which credit is allowed against trust receipts. Imported or exported goods remain in the custody of the importer of exporter. But he is to execute a stamped trust in favor of the bank wherein a declaration is made that the goods imported or bought with the banks financial assistance are held by him in trust for the bank. Local Documentary Bill Purchase-LDBP: Payment made against documents representing sell of goods to local export oriented industries, which are deemed as exports, and which are dominated in local currency/foreign currency falls under this head. Working Capital Loan: Loan allowed to the manufacturing unit to meet their working capital requirement, irrespective of their size. Non-performing Loan: A non-performing loan is a loan that is in default or close to being in default. Many loans become non performing after being in default 3 months, but this can depend on the contract terms. Unclassified: Repayment is regular Substandard: Repayment is irregular or stopped but has reasonable prospect of improvement. Doubtful Debt: Unlikely to be repaid but special collection efforts may result in partial recovery. Bad/loss: Very little chance of recovery. Primary Security-PS: There are the securities taken by the ownership of the items for which banks provides the facility. Collateral Security-CS: Collateral securities refer to the securities deposited by the third party to secure the advance for the borrower in narrow sense. In wider sense, it denotes any type of security on which the bank has a personal right on the debtor in respect of the advances.

4.1 CreditThe word credit comes from the Latin word Credo meaning I believe. It is a lenders trust in persons or firms or companys ability or potential ability and intention to repay. Credit is a contractual agreement, in which a borrower receives something of value now, with the agreement to repay the lender at some date in the future. One of the basic functions of the bank is deposit extraction and credit extension. Managing credit operations is the crying need for any bank.The objective of the credit management is to maximize the performing asset and the maximization of the non-performing asset as well as ensuring the optimal point of loans and advances and their efficient management.4.2 Factors related with credit Risk Time Interest rate Security or collateral Operating expense Legal consideration Inflation Finance charge4.3 Importance of creditCredit plays a vital role in the national economy in the following ways:1. It provides working capital for industrialization2. It helps to create employment opportunities3. Credit controls almost all kind of production activities of the country4. It brings social equity5. Cash generation occurs for its successful performance6. Business can run well only by the help of lending system7. Economic stabilization8. Raise standard of living.4.4 Credit managementCredit management is a dynamic field where a certain standard of long-range planning is needed to allocate the fund in diverse field and to minimize the risk and maximizing the return on the invested fund. Continuous supervision, monitoring and follow-up are highly required for ensuring the timely repayment and minimizing the default. Actually the credit portfolio is not only constituted the banks structure but also a vital factor of the banks success. The overall success in credit management depends on the banks credit policy, portfolio of credit, monitoring, supervision and follow-up of the loan and advance. Therefore while the credit management of MTB; it is required to analyze its credit policy, credit procedure and quality of credit portfolio.4.5 Credit policy of MTBOne of the most important ways, a bank can make sure that its loans meet organizational and regulatory standards and they are profitable. It is important to establish a loan policy. Such a policy gives loan management a specific guideline in making individual loans decisions and in shaping the banks overall loan portfolio. In Mutual Trust bank Ltd. there is a credit policy. The policy shall be officially distributed among the concerned officials, all divisional heads, branches and top management of the bank. The policy to be strictly followed by all concerned. Any deviation from the guidelines to be clearly identified and proper justification for approval with such deviation to be provided.This revised policy named as Credit Policy and Credit Risk Management Guidelines - 2011and will replace the existing Credit Policy with Credit Risk Management Guidelines -2010. 4.6 Credit principlesIn the feature, credit principle includes the general guidelines providing credit by branch manager or credit officer. In Mutual Trust bank Ltd. they follow the following guideline while giving loan and advance to the client. To achieve their goal for maximizing the stakeholders' value and protect the interest of the depositors as well as to improve asset quality, MTB will abide by but will not be confined to the following credit principles, which should guide their behavior in their lending decisions:1. All credit extensions must comply with the requirement of Bank Company Act- 1991 and amendments thereof made from time to time and all the requirements of other regulatory authorities.2. Not to extend credit to the persons/entities not supported by CIB report.3. To maintain judicious ratio between loan and deposits.4. To allow credit in a manner this in no way compromises with banks standard of excellence.5. Extension of credit normally from customers deposits and not out of short term funds or borrowing from other banks.6. To optimize risk and reward.7. To ensure ethical standard in all credit activities.8. To extend credit in the areas, risk of which can be sufficiently understood and managed.9. To extend credit facility upon adequate pre-investment analysis and repayment capacity of the clients.10. To avoid excessive credit concentration through rational diversification of credit.11. To avoid name lending.12. To allow credit on business consideration after ascertaining viability, credit requirement, quality of advance, security offered cash flows and level of risks. 13. The bank shall offer suitable credit services and products for the market in which it operates.14. Encourage proactiveness in identifying, managing and communicating credit risks.15. Independent credit participation in the credit process shall be ensured.4.7 Principles of sound lendingIt should be clearly understood that the criteria/principles are not flexible laws & are given as guidelines for protecting credit. In practical competitive world, risk is defined, accepted and credit is often granted even though a proposal does not strictly with some of the criteria described below: The basic lending criteria can be considered as eight main headings, as follows: Principle of safety Principle of liquidity Principle of purpose Character and ability of the borrower Principle of security Principle of profitability Source of repayment Principle of national interestEach of the headings will now be discussed further in the following paragraph:Principle of safetyThe first lending principle of sound lending is safety. The very existence of the bank depends upon the safety of its advances. Safety should not be sacrificed for profitability. So utmost care should be exercised to ensure that the funds go to the right type of borrower, are utilized in such a way that they remain safe and the repayment comes in the normal course.Principle of liquidityLiquidity means the availability of bank funds on short notice. The liquidity of an advance means it repayment on demand on due date or after a short notice. Therefore the banks must have to maintain sufficient liquidity to repay its depositors and trade off between the liquidity and profitability is must.Principle of purposeThe bank should not lend money for any purposes for which a borrower may be free from all risk but if the funds borrower may employed for unproductive. Purpose like marriage ceremony, pleasure trip etc. or speculative activities, the repayment in the normal course will become uncertain. Banks therefore discourage advances from boarding stocks and refuse advances for speculative activities.Character and ability of the borrowerThe primary responsibility of the lending bankers is know your and his business. While considering the character and ability of a borrower, the following point must be kept in mind. Do you know your customer already? Was he respectively introduced? If he was previously customer of another bank, why has he come to Islamic Bank Ltd. try to see previous bank statement? Have you made the account opening inquiries required by the bank? Whats the business of its ownership? What is the customer background and financial track record? Customers honesty and integrity and personal stability? How has the customer managed his financial circumstances in the past?The branch manager should have the answer of the above queries and should be to judge his ability to use the credit facility to his advantage. Advance should be granted only two though borrowers in whom the branch manager has full confidence. Integrity of the borrower and his ability to conduct business are of paramount importance and take precedence over the value of securities offered.Principle of securityThe security offered by a borrower for an advance is insurance to the banker. It serves as the safety value for an unforeseen emergency. So another principle of sound lending is the security of lending. The security accepted by a banker to cover a bank advance must be adequate, readily marketable, easy to handle and free from any encumbrance.Principle of profitabilityBanking is essentially a business, which aims at earning of a good profit. The working funds of a bank are collected mainly by means by deposit from the public and interest has to be paid on those deposits. Banks have also to meet their establishment charges and other expenses. Interest earn by a bank on its advance is the main source of its income. The different between the interests receive on advances and the inter5est paid on deposits constitute a major portion of the bankers income. Besides foreign exchange business is also highly remunerative. The bank will not enter into a transaction unless a fair return form it is assured.Source of repaymentAfter the branch manager has ensured that the credit will be a propositioning for the bank, he should then turn his attention to the cash flows situation of the borrower. The banks credit can be classified into three main categories, as follows: A very short term advance will be liquidated by funds received in the very near future, such as advances against foreign or local bills or bridge functioning where evide3nce of credit sanction from another financial institution is available. Provision for current asset, this type facility is needed for trading and or manufacturing activities. Long term loans generally over 5 years; example of such facilities as investment in plant and machinery, a farm or a shop, generally, a long term is repaid out profits generated by the business.Principle of national interestThe development of banking has reached a stage where a banker is required to identify his business with national policies. Banking industry has significant role to play in the economic development of a country. So the savings of the people which are mobilized by banks must be distributed to those sectors which require development in the countries planning program.4.8 Global Limit Portfolio Credit of MTBThe features with deals how much total deposit would be used as lending the proportion of long term lending, customer exposure, country exposure, proportion of unsecured facility etc. the most notable ones are:The aggregate of all cash facility will not be more than the 80% of the customers deposit Long term loan must not exceed 20% of the total loan portfolio. Facilities are not allowed for a period of more than 5 years. Credit facilities to any one customer group shall not normally exceed 15% of the capital fund TK 100 crores.4.9 type of Credit ActivitiesCredit may be classified with reference to elements of time, nature of financing and provision base:Classification on the basis of time:On the basis of elements of time, bank credit classified as:Continuous Loan:These are the advances having no fixed repayment schedule but have a date at which it is renewable on satisfactory performance of the clients. Continuous loan mainly includes Cash credit both hypothecation and pledge and overdraft.Demand loan:In opening letter of L/C the clients have to provide the full L/C amount in foreign exchange to the bank. Demand loans mainly include Payment against Documents, Loan against imported merchandise (LIM) and Letter of Trust Receipt.Term Loan:These are the advances made by the bank with a fixed repayment schedule. Terms loans mainly include: Customer credit scheme, Lease finance, Hire purchase, and Stuff Loan. The term loans are defined as follows: Short term loan up to 12 months Medium term loan: More than 12months & up to 36 months Long term loan: More than 36 months.

Short term Agriculture Loan and Micro Credit:These loans are short term credits enlisted by Agriculture Credit division of Bangladesh Bank in its annual loan program. Loans disbursed in agricultural sector for a period not more than 12 months are also included in this category. Short term micro credits are the credits not exceeding BDT25000 taka only and repayable wit in 12 months.Application Based Category of Loans:Based on the purpose of these loans, loans are classified as follows:Corporate loanAny loan exceeding 1, 00, 00,000 BDT and issued for business and trade purposes is defined as corporate loan. Such loans mainly serve the purpose of initials for the establishment of industry or large scale factory.SME (Small & Medium Enterprise) Loan:This type of loan is described for business purposes but the amount loaned does not exceed 1, 00, 00,000BDT. The amount loaned here serves the purpose of potential working capital for small and medium enterprise.Retail Loan:Retail loans are given for personal usage rather than for business purposes. It includes personal loan, Vacation loan and home loan. MTB Personal Loan:MTB Personal Loans are simple and quick.Features: Loan amounts from 50000 taka -1000000 taka Flexible repayment option of 12-60 months No hidden charges Competitive interest rate. Easy documents and quick processing Option for early settlementEligibility:Age minimum 21 and maximum 60 years at loan maturity.Experience: Salaried person: 1 year with 6 months permanent status Self employed: 1 year of practice in the profession Business person: 2 years of involvement in the same nature of businessMinimum monthly income: Salaried executive tk 15000 Self employed tk 30000 Business person tk 40000MTB Auto Loan:Own that car you have always desired, with our little help from us. We offer lucrative interest that would pleasantly surprise you. MTB auto loans are built for utmost speed and competence. MTB auto loan is available for financing both new and reconditioned cars. Your dream car is closer than you think.Features: Loan amounts from Tk 3,00,000 to Tk 20,00,000 Flexible repayment of 12-60 months No hidden charges Competitive interest rate Easy documentation and quick processing Option for early settlement.Eligibility:Age minimum 21 and maximum 60 years at loan maturity.Experience: Salaried person: 2 years permanent status Self employed: 2 year of practice in the profession Business person: 2 years of involvement in the same nature of businessMinimum monthly income: Salaried executive tk 30000 Self employed tk 30000 Business person tk 30000MTB Home Loan:Planning to own a home is one of lifes most rewarding challenges. Whether it is purchasing a new house or a new apartment, MTB has wide range of home loan options that can be customized to your satisfied need. MTB Home loan helps you to fulfill your dream.

Features: Loan for residential apartment/ house purchase Loan amounts from BDT 5,00,000 to BDT 1,00,00,000 Loan tenor from 3 to 25 years. Partial or early settlement options available. Loan amount up to 80% of the property value Loan for apartment under construction Aggregation of co-applicant's income Competitive interest rates Quick and simple processing and approval timeEligibility:Any financially able person can take this loan whose age minimum 21 and maximum 65 years at loan maturity.Experience: Salaried person: 3 years permanent status Self employed: 3 year of practice in the profession Business person: 3 years of involvement in the same nature of businessMinimum monthly income: Salaried executive tk 25000 Self employed tk 30000 Business person tk 40000Required documents:Loan application Applicants national id card/driving license/passport copy Photographs of applicants Salary certificate for salaried person Trade license for business person Personal and business account statement for last one year Applicants TIN certificate Copies of all existing loans sanction letter and repayment history last one year Rental deed for rental income and ownership deed of rented property Apartment allotment letter/ deed of agreement/property ownership deed Other all property related documents copy.

4.10 Rate of interest and lending:

SL NumberCategoriesRates

1Agriculture 12.50% (Highest)

2Term loan to large, medium, small & cottage industries13.00% (Highest)

3Working capital Large and medium scale Small scale 15.50% (Mid rate) 15.50% (Mid rate)

4Export finance7.00% (Highest)

5Commercial lending16.00% (Mid rate)

6Import finance General Essential goods 15.50% (Mid rate) 12.00% (Highest)

7Housing loan Commercial Residential 16.00% (Mid rate) 14.00% (Mid rate)

8Consumer credit18.00% (Mid rate)

9Lease finance16.50% (Mid rate)

10Loan to non-banking financial institutions15.50% (Mid rate)

11Loan/SOD against FDR of MTB3.00% above FDR interest rate

12SOD against FDR of other Banks3.00% above FDR interest rate

13Loan/SOD against other special deposit products of MTB3.00% above Deposit product interest rate

14Auto Loan16.50% (Mid rate)

15Small business loan under SME16.50% (Mid rate)

16Others 16.50% (Mid rate)

4.11 The Cs of Good and Bad Loans in Credit ManagementThe branch manager of MTB try to judge the possible client based o some criteria. These criteria are called the Cs of good and bad loans. These are Character Capital Capacity Collateral Cash Flow Conditions Complacency Communication Credit Query4.12 Different Types of Risks Associated With CMLRA divides the credit risk into two categories, namely- Business Risk Industry Risk Supply Risk Sales Risk Company Risk Company Position Risk Performance Risk Resilience Risk Management Risk Management Competence Risk Management Integrity Risk Security Risk Security Control Risk Security Cover Risk4.13 General procedure of sanctioning loanThe following procedure is applicable for giving advanced to the customer. These are- Partys application Filling form-A Collecting CIB report from Bangladesh Bank Processing loan proposal Head office approval Sanction letter Documentation Project appraisal Disbursement4.14 Status of loans:Unclassified: These are the loans which the bank satisfied about repayment. No doubt exists up till now about their recovery.Classified:These are the loans which the bank finds overdue after the due date. The bank applies its predefined policy and procedures, after a loan become classified. Special mention accountWhen a loan installment is first missed by the borrower, the loan account is classified as a special mention account (SMA). The tenure of special mention account varies with the category of loans. Sub-standardIf a loan is not repaid or reschedule SMA period, it becomes sub-standard loan. From this stage the loan is treated as defaulted. Interest is treated the same way as in SMA. DoubtfulIf a loan is not repaid or reschedule within the sub-standard period, it become a doubtful loan interest will be treated as before in this stage. Bad & LossIf a loan is not repaid or reschedule within the doubtful stage, it is termed as Bad & Loss. A serious doubt exists as to the recovery of such loans.

4.14.1 Criteria for loan classification:Loan Classification

StageContinuous loanDemand loanFixed term loan

Irregular for 3 to 6 monthsTerm loan for within 5 yearsTerm loan for more than 5 yearsShort term agricultural and micro credit loan

SpecialMentionAccount

Irregular for 3 to 6 monthsIrregular for 3 to 6 monthsIrregular for 3 to 12 monthsIrregular for 3 to 12 months

Sub-standardIrregular for 6 to 9 months

Irregular for 6 to 12 monthsIrregular for 12 to 18 monthsIrregular for 6 to 9 months

Irregular for 12 to 18 monthsIrregular for 12 to 36 months

Doubtful

Irregular for 9 to 12 months

Irregular for 9 to 12 months

Irregular for 18 to 24 monthsIrregular for 36 to 60 months

Bad & LossIrregular for more than 12 months

Irregular for more than 18 monthsIrregular for more than 12 months

Irregular for more than 24 monthsIrregular for more than 60 months

4.14.2 Interest and payment on classified loan:a) Interest on loans classified as sub-standard and doubtful are charged on the account, but instead of being credited to income account; it is called to income suspense account.b) No Interest on loans classified as bad and loss will be charged on the account. However, when suit will be filed to recover the loan, interest upon filing of such suit will be charged on the account and suit will be filed on the outstanding amount including interest. Such charged interest will also be credited to interest suspense account.4.14.3 Maintenance of interest suspense account:Though interest on loans classified as bad and loss may not be charged on the account, branches should calculate interest on monthly to charge it to interest receivables on classified loans account and credited to interest suspense account, but it is not entered into the Accounting books. Amount wise record of such interest will be maintained and monthly proof will be prepared to confirm it with the ledger balance.4.14.4 Treatment of payment received in classified loan account: Whenever, any payment is received in respect of any classified loan, the order of application will be as follows:a) To uncharged interest, if anyb) To interest charged but credited to interest suspense account and c) To principalHowever, if any partial payment is received on account of a classified loan account for rescheduling, branches will keep the amount not yet paid in the accounts receivable classified loan instead of applying the fund out right to adjustment as state above. For such adjustment, branches should seek permissions from the head office and verify and report the necessary data for the final decision of the head office.4.15 Provisioning: Provisioning is maintained at branch levels. This is followed in order to apply the matching principle and expense & loss recognition principle that suggest the recording of a probable loss account to be adjusted in the period it operates and is assumed to occur. For every provisioning, each branch debits income account and credit provision against loans to better match expense with revenue and show the effects by reducing income for any given period.4.15.1 Rate of provision:Provision will be provided against all types of loans including short term agricultural and micro credit at the following rates:Classification criteriaRates of provision

General provision on unclassified loans & advances1%

General provision on unclassified small enterprise financing2%

General provision on unclassified loans for housing finance & on loans for professional 2%

General provision on unclassified consumer financing other than housing finance & loans for professionals5%

General provision on special mention account5%

Specific provision on sub-standard loans & advances20%

Specific provision on doubtful loans & advances50%

Specific provision on bad/loss loans & advances100%

4.16 Credit AdministrationIn MTB, proper credit disbursement functions are strictly handled by Credit Administration Department (CAD). This department is critical in ensuring that proper documentation and approvals are in place in respect of disbursement of credit facilities. CAD, in discharging its functions ensures that: Credit approval has been obtained and it is documented Security documents have been prepared in accordance with approved terms and those are legally enforceable. Limit creation has been done and loan documentation check list ( LDCL) has been completed Legal counsel has certified perfection of documents( Where necessary) Deferral in execution of certain documents has been allowed. Disbursement approval has been given after ensuring that all standard charge of documents and security documentation has been executed.4.17 Credit MonitoringThe credit risk management process encompasses all the steps right from entertaining a client to getting approval, documentation, disbursement, and follow up, supervision, monitoring and recovery. For effective credit monitoring a fully dedicated credit monitoring cell is in place. Thorough credit monitoring covering review of account performance, status, recovery of loans, and identification of early signals of delinquencies are done. As an effective monitoring tool, carious statement on early alert accounts, delinquent and special mention accounts are generated necessary corrective measures are taken.

Analysis

5.1 Analysis of Mutual Trust Bank LimitedAnalysis is an important part of a report. Quantitative analysis has been done in this report. This analysis will give an idea about the credit performance of Mutual Trust Bank Limited. Quantitative Analysis Time Series Analysis Ratio Analysis5.1 Performance of Loan & Cash Credits Overdraft of 2010 comparison with 2009ParticularsYear 2010 (TK)Year 2009 (TK)

Loans2147461510927049053467

Cash credit92370819407260710590

Overdraft6266431597878897330

Loan against merchandise2337699131428435

Packing credit192150005295348211

Loan against trust receipts83169237103217959571

Agriculture credit32691305458859

Payment against document921045616857841094

Consumers loan scheme3608972222565715355

Lease finance24785688462327900765

Margin finance9417673972,728571

Others879890792512936176

Total5349342769752984978424

Source: Annual Report 2011

Analysis: Here cash credit loan against trust receipt, payment against document, consumer loan scheme, lease, finance, margin finance, was increasing by comparing with previous year, others are decreased.Total amount of Loan increased by TK 508,449273 from the year of 2009.

5.2 Performance of Industrial Advances of 2011 comparison with 2010Industrial AdvanceYear2011(TK)Year2010 (TK)

Food3 ,422,012,0002 ,491,010,000

RMG & Textile7 ,493,380,0007 ,230,360,000

Jute, Cotton and Wearing Appearels123,660,000130,800,000

Leather and Leather Products205,210,000212,450,000

Paper, Paper Products & Printing87,621,000205,760,000

Pharmaceuticals24,292,0006 1,170,000

Plastic & Rubber145,878,000288,760,000

Petroleum & Edible Oil1 ,243,350,000694,480,000

Chemical & Chemical Products1 ,440,390,000839,520,000

Glass & Glass Products208,320,0005 0,180,000

Assembling Industries82,860,000765,060,000

Engineering, Metal & Metal Products4 ,796,446,0003 ,667,110,000

Non-metelic Mineral Products-268,330,000

Electricity & Gas Industry1 ,177,375,000468,940,000

Service Industries2 ,047,120,000126,650,000

Small Scale & Cottage Industries614,750,000264,120,000

Agriculture624,070,000-

Others17,813,807,7636,387,690,000

Total41,550,541,76324,152,390,000

Source: Annual Report-2011Analysis: According to this chart, some of the sectors of industrial advances were increasing compare to previous year. In industrial sector specially textile, jute, Agriculture, readymade garments are playing a major role in our national economy. So, by increasing advance in this sector, Mutual Trust Bank Limited performs well productive unit in our country which can help to increase the total GDP.Total industrial advances increased by TK 17398151763 in the year of 2011 from the year of 2010.

5.3 Sector wise Loan & AdvanceA wide range of business industries and sectors constitutes the Banks advance portfolio. Major sectors where the bank extended credit include steel & engineering, readymade garments, textile, ship braking, edible oil, sugar, housing & construction, pharmaceutical, chemicals, electronic & automobiles, energy & power, service industries, trade, finance, personal and consumer credit ,leasing etc The bank continued to support small and medium enterprises (SME) and expended credit facilities to them through its SME cell. Sectored allocation of advances reveals a well-diversified portfolio of the bank with balance exposure in different sectors.NoItems20112010200920082007

Local Currency Advances

1Term Loan10,695.7610,267.979369.576072.423660.65

2SME Financing2,941.892646.76549.99301.4759.24

3Consumer Financing1,044.801378.091197.71668.40142.59

4House Building Loan1,148.901103.81861.53805.40604.08

5Trust Receipts7,729.706127.686156.537610.926465.69

6Cash Credit6,876.365758.855427.704656.653749.20

7Secured Overdraft7,184.954774.985906.173624.782946.37

8Lease Finance364.54196254.55257.25251.07

9Bill purchased & discounted2,117.611777.652390.313027.342840.50

10Loan to MTB securities Ltd2656.83---

11Others Loans & Advances1742.821735.821496.811962.69

Sub-total38404.4533849.8828521.4422682.06

Foreign Currency Advances1271.6734.047.901.17

Total39676.1233883.9228529.3422683.23

Source: Annual Report-2007-2011From the chart Mutual Trust bank high concentration is in term loan which was increasing year by year. In the year 2007 it was only 3660.65 million which was increased by 10,695.76 million in 2011. In trust receipt it has been seen that the amount was increasing. Although trust receipt was in 2007 at 6465.69 million but it increasing at 7,729.70 million in year 2011. In the sector of cash credit the total amount was increasing year by year. In 2007 cash credit was 3749.20 million which increased at 5758.85 million in year 2010 and it stood at 6,876.36 million in year2011.The amount of secured overdraft was fluctuating from year 2009 to 2011. Secured overdraft was high in 2009 at 5906.17 million and low in year 2007 at 2946.37 million. In SME financing, Mutual Trust Bank utilized huge amount in year 2011 at 2,941.89 million where it was 2646.76 million in year 2010, 549.99 million in years 2009, and 301.47 million in years 2008. House building loan was increasing year by year. Bill purchased and discounted amount were fluctuating. It was high in year 2011 at 2,117.61 million and low in year 2010 at 1777.65 million and high in year 2009 at 2390.31 million. Loan to MTB securities Ltd. was 2656.83 million in year 2010 and it was not perform in previous years.

5.4 Time Series Analysis5.4.1 Investment:The total investment of the bank was growing year. In the year 2007, the total investment was 3956.53 million. It became 20148.71 million in the year of 2011.YearInvestment

20073956.53

20085606.49

20099537.97

20109216.33

201120148.71

Source: Annual Report 2007-2011

Figure 5 (a)-Year wise Investment of Mutual Trust BankSource: Annual Report 2007-2011From the graphical representation it has been seen that, the total investment portfolio of the bank stood at 20148.71 million in December 31, 2011 as compared to previous years. Investment was 9216.33 million in year 2010 where it was 3956.53 million 2007. The investment portfolio includes treasury bills, treasury bonds, zero coupon bonds, shares of different companies, bonds, prize bonds etc.

5.4.2 Classification of Loan & Advances:Loan statusAmount (2011)Amount (2010)Amount (2009)Amount (2008)Amount (2007)

Standard44,745.7536,420.8332324.1526935.3621669.40

Special Mention Account1,064.63405.66607.01191.14472.19

Sub Standard107.9963.4662.22249.45251.25

Doubtful204.4122.3047.26141.7075.27

Bad or Loss882.70818.20843.821011.70215.12

Source: Annual; Report 2007 -2010 Figure: 5(b)-Classification of Loan and Advances of Mutual Trust Bank

From the graph it has been seen that the amount of standard loan as unclassified loan was increasing year by year. In 2007 classification loan amount in standard level was 21669.40 million and in 2011 it stood at 44,745.75 million. Special mention accounts were fluctuating from year 2007 to year 2011. The amounts of special mention account were high in year 2011 at 1,064.63 million. The amount of bad and loss is also fluctuating, but the amount was very high in year 2008 at 1011.70 million and where it decreased at TK 882.70 million in the year 2011. The doubtful loan amount was increasing from previous years and this amount was also very high in year 2011 at 204.41 million where it decreased in the year 2010 at 22.30 million. The total amount of classified loan and advance was also increasing year by year which represent a better performance for Mutual Trust Bank.5.4.3 Interest income on loan and advanceYearInterest Income (in millions)

20072611.64

20083437.32

20094117.68

20104141.44

20115788.74


Figure: 5(c) - Interest Income on Loan and advance of Mutual Trust BankFrom the graph it has been seen that the interest income from loan and advances of Mutual Trust Bank Limited was increasing year by year. A banks large portion of profit comes from its interest income so Mutual Trust Bank became more profitable from its interest income. In the year 2007 the interest income was 2611.64 million where it increased at 3437.32 million in year 2008 and it stood at 5788.74 million in year 2011.

5.4.4 Geographical Location wise Loans and Advances:In year 2010-2011 UrbanRegionLoan and Advances (2011)Loan and Advances(2010)

Dhaka31838.8627518.20

Chittagong10345.268271.16

Rajshahi570.241241.86

Sylhet457.53416.60

Khulna742.70495.66

Rangpur182.51134.90

Barisal--

RuralRegionLoan and Advances (2011)Loan and Advances(2010)

Dhaka1622.881290.64

Chittagong790.12762.49

Rajshahi409.65352.63

Sylhet.18-

Khulna--

Rangpur--

Barisal45.5439.68

Source-Annual Report -2011

Urban

Rural

Figure 5(d) - Geographical location wise loan and Advances of Mutual Trust bank Limited

From the graph it has been seen that the Mutual Trust bank provides most of the portion of loan and advances in urban area, where as they provide a little portion in rural area. As we seen before that this bank provide more loan and advances in other industries than agricultural industries. Because of this their contribution to urban area is more than rural area. But it also increased its loan & advances in rural area from previous year.

5.4.5 Deposit AnalysisYearDeposit (In millions)

200724777

200833820

200942354

201045846

201159705


Figure: 5(e)-Year wise deposit of Mutual Trust BankThe deposit base of Mutual Trust Bank continued to register a steady growth and stood at BDT 59705 million excluding call as of 31 December 2011 compared to BDT 45846 million of the previous year. It was BDT 24,777 million in year 2007 and BDT 33820 million in year 2008. If deposit increase than the bank can use more proportion of deposit for loans and advances.

5.4.6 Total classified Loan and Recovery Rate of Year 2007 to 2011 TK in MillionYearTotal LoanTotal Classified LoanRate of Classified LoanRecovery Rate of Classified Loan

200722683.23541.642.39%71.24%

200828529.351403.644.92%66.25%

200933883.92952.142.81%76.54%

201039676.12904.612.28%82.15%

201147,005.481,195.102.54%


Figure: 5(f)-Year wise Recovery rate of Mutual Trust BankFrom the graph it has been seen that in 2007 the recovery rate of Mutual Trust Bank from classified loan was 71.24%, 66.25% in 2008, 76.54% in 2009 and 82.15% in 2010. In 2011 the recovery rate of Mutual Trust Bank from classified loan was .In year 2008 the bank couldnt achieve a satisfactory level because a large portion of loan became default. Overall performance was good because it could increase its recovery rate from classified loan.

5.4.7 Non Performing Loan AnalysisYearNon Performing Loan

20073.28%

20083.54%

20092.81%

20102.28%

20112.54%


Figure: 5(g) - Year wise non performing loan of Mutual Trust BankFrom the graph, non performing loan of MTB was fluctuating every year. In 2009 non performing loan was 2.81% and in 2010 it decreased 2.28%. In 2011 MTBs non-performing loan was increased in 2.54%. But in 2008 MTB couldnt perform well as its non performing loan percentage was high at 3.54% compared to year 2007 at 3.28% because a huge amount of classified loan was became bad and loss.

5.5 Ratio AnalysisRatio analysis involves methods of calculating & interpreting financial ratios to analyze & monitor the firms performance. The basic inputs to ratio analysis are the firms income statement & balance sheet.Debt RatioDebt ratio=Total Liabilities/ Total Assets. (In millions)YearTotal LiabilityTotal AssetDebt Ratio

2007301375990483218189622094%

2008364818794253896497412393.6%

2009490902569565277476606893%

2010423120513185645744243692.65%

2011715163959797633136618993.69%


Figure: 5(h) - Debt Ratio

Interpretation: Debt Ratio indicates the proportion of debt or leverage in total capital structure. The higher this ratio the greater the amount of other peoples money being used to generate profits. In the above graph in year 2007 the ratio was 94%, in year 2008 it decreased at 93.60% and year 2009 it was 93% and in year 2010 it was also decreased at 92.65%. In 2011 the debt ratio was 93.69%.Capital Adequacy RatioCapital Adequacy ratio= Total Capital/ RiskYearC.A Ratio

200710.19%

200810.39%

20099.20%

201011.49%

201111.96%


Figure: 5(I) - Capital Adequacy RatioInterpretation:Capital adequacy ratio determines the capacity of the bank in terms of meeting the liabilities and other risk such as credit risk, operational risk etc. Generally 8% is acceptable line for this ratio, in that sense bank is good enough, because in every year this ratio is more than standard line and this is good sign for the bank. The year 2007, capital adequacy ratio was 10.19%. The percentage decreased at 9.20% in year 2009 but bank could increase this ratio at 11.96% in year 2011.

Credit/ deposit ratioCredit/deposit ratio= Credit/ DepositYearCredit/Deposit Ratio

200791.55%

200884.36%

200980.00%

201086.54%

201179.60%

Source: Annual Report 2007 2011

Figure: 5(g) - Credit/Deposit RatioInterpretation:Credit deposit ratio measures the portion of deposit used for credit. The more the ratio the more the bank is using deposit as its credit. In the year 2007, MTB credit deposit ratio was 91.55%, but in year 2009 it was decreased at 80%. The credit ratio increased in 2010. But in 2011 it was also decreased at 79.60%. It has been seen that MTB increased to use its deposits as its credit.

Investment/Deposit RatioInvestment/ Deposit Ratio= Total Investment/Total DepositYearInvestment/Deposit Ratio

200715.97%

200816.58%

200922.52%

201020.10%

201133.80%


Figure: 5(k) - Investment/ Deposit RatioInterpretation:Investment deposit ratio measures the portion of deposit used for investment. The more the ratio the more the bank is using its deposit as its investment. From the above graph it is seen that the investment deposit ratio of MTB was increasing year by year, this is a good sign for the bank. Here this ratio was quite decreasing in year 2010 because here investment was quite decreases from previous year. In 2011 the Investment deposit ratio was increasing faster than previous year at 33.80%. This is also good sign for MTBL.

6.1 Major Findings: The total investment of the bank was growing year by year. The standard loan & advances of MTB was increasing year by year and it carries positive sign for MTB. The interest income from loan and advances of MTB was increasing year by year. From the last 2 years analysis it has been seen that MTB was providing more credit facilities in urban areas more than rural areas. Total deposit was increasing which represent the positive sign for MTB as deposits are increasing than bank can use more proportion of deposit for loan & advances. The recovery rate of MTB has increased year by year. Debt ratio of MTB was decreasing year by year. Day by day non performing loan of MTB was decreasing. Capital adequacy ratio was above the standard line. Higher rate if interest pays a great role in credit management. Some times the rate is so high that the return from the investment is not so adequate enough to repay the loan and hence default occurs. MTB is providing loan to those who are experienced enough in their respective field. MTB has written lending guideline which includes Industry & Business Segments Focus, Types of loans facilities, Single Borrower & group limit, Lending caps, Loan Facility Parameters.

6.3 Conclusion:Proper financial system of country can contribute toward the development of the countrys economy. In our country banks are leading in the financial system. Again private commercial banks, which are much better than state owned bank, are playing significant as well as imperative role and the development of our country. Certainly MTB is mobilizing its all resources on this same track to achieve maximum possible contribution to the nation.Despite stiff competition among banks operating in Bangladesh both foreign and local, MTB has achieved satisfactory progress in areas of its operations and earned an impressive operating income over the previous years. The bank hopes to achieve a satisfactory level of progress in all areas of its operations including target of profitability.In achieving the aforesaid objectives of the bank, credit operation its of paramount importance as the greatest share of total revenue of the bank is generated from it, maximum risk is created in it and even the very existence of bank depends on product management of its credit portfolio.From my part, I would like to suggest, a bank requires some special personal traits that not every bank possesses. Among the most important of these are honestly, reliability, thoroughness and willingness to always be open to new ideas and new ways of meeting customer needs.Today is not like yesterday or tomorrow will be different from today. Given the fast changing dynamic global economy and the increasing pressure of globalization, liberalization, consolidation and disintermediation, it is essential that MTB has a robust credit risk management policies and procedures that are sensitive of these changes.

6.2 Recommendation MTB was focusing urban areas to provide facilities. Still they are ignoring rural areas. But they can earn from agro sector so MTB should provide more credit facilities in rural areas. Proper and effective monitoring system should be developed in order to minimize the amount of nonperforming loan. Capital adequacy is important for a financial institution. MTB capital adequacy ratio was in better position and they should maintain it. The bank should strictly follow the principle of Sound Lending. The bank should not sanction loan to the customer without all necessary documents. As we have seen that the bank was providing a large portion of concentration in unproductive sector, which is not a good sign for our economy. So the bank should pay more concentration on productive sectors like industrial loan instead of unproductive sector as car loan. As recovery rate from classified loan was in satisfactory level but still 18% of loan goes default. So MTB should have to increase more of its recovery rate of classified loan. MTB should strictly follow Bangladesh Bank guideline for credit deposit ratio as its credit deposit ratio was quite higher than Bangladesh Bank. The bank should increase more of its investment to deposit ratio as it decreased in year 2011. It should increase in order to generate more profit. MTB should maintain a satisfactory level of investment rate for managing the credit to minimize the rate of default.

Bibliography:Books Lawrence, J Gitman (2008), Principles of Managerial Finance, 11th edition, Pearson Education Pte.LTD, Singapore. Bedi, H.L. Practical Banking Advances UBS publishers Distribution LTD, New Delhi. C.R. Kotheri, Research Methodology 3rd Edition, 2007-2008, Wishwa Prakashan, Calcutta, India. Frederick S. Miskhin, The Economics of Money Banking & Financing Market 7th Edition, 2008, Boston. Frank K.Reilly & Keith C.Brown, Investment Analysis Portfolio Management, 2nd Edition.

Prospectors: Mutual Trust Bank Ltd, Annual Report 2007 2010.

Websites: www.mutualtrustbank.com www.bangladesh-bank.org.bd www.mtblbd.com

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