the company was incorporated on september 29

An operating report of Mutual Trust Bank. And a comparative analysis of consumer banking.

1. Introduction

Mutual Trust Bank Limited 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. As

envisaged in the Memorandum of Association and as licensed by Bangladesh Bank under

the provisions of the Banking Companies Act 1991, the Company started its banking

operation and entitled to carry out the following types of banking business:

(i) All types of commercial banking activities including Money Market operations.

(ii) Investment in Merchant Banking activities.

(iii) Investment in Company activities.

(iv) Financiers, Promoters, Capitalists etc.

(v) Financial Intermediary Services.

(vii) Any related Financial Services.

The Company (Bank) operates through its Head Office at Dhaka and 30 branches. The

Company/Bank carries out international business through a Global Network of Foreign

Correspondent Banks.

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2. Statement of problem:

Mutual trust bank is one of the leading 3rd generation bank. Recently their

customers are little bit disappointed for their charges. Though there many charge of

operation are little bit lower then multinational banks but higher then most of the local

banks but in some case their charges very low then other banks. They have scope to

increase the charge in those cases, but that charge must be lower then other banks and can

earn more profit from the recent customers. Now competition has been increased between

banks, in order to compete with those banks MTB need to increase their profitability

which has largely depended on their customer. Now days it become a large problem for

MTB. If they can hold their recent customers and attract new customers by offering better

products and services at reasonable and intelligent charge, it will be profitable for them.

Managers are concern to grow the branches profitability at a sound rate. So, managers are

now concern to grow the branches revenue by keeping their customer satisfied and

attracting new customers. Now they are thinking that in which charges need to be

reduced and which charges need to be increase slightly and what new service should

introduce or they should follow their current rate. Basically this research will try to show

how the products and services of MTB can generate more profit and attract new

customers and hold current customers.

3. Purpose of the study:

Purpose of the study is to analyze various features and charges of

products/services and make comparison with other banks and to show how reduction of

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various charges in consumer banking section can increase customer and generate more

revenue. And again to show some operational activities which I participate there.

4. Research timeline

2008 February Writing research proposal

2008 March Developing Literature Review

2008 March Collecting Data

2008 April Data analysis and interpretation of findings

2008 May Preparing draft and finalizing the research paper.

2008 May Submission of research paper

5. Limitations of the study

The whole study was not out of limitations. But as an intern it was a great

opportunity for me to know the banking activities of Bangladesh specially MTB. Some

constraints are appended bellow:

The main constraint of the study is inadequate access to information, which has

hampered the scope of analysis required for the study.

Due to time limitations many of the aspects could not be discussed in the present

report.

Every organization has their own secrecy that is not revealed to others. While

collecting data i.e. interviewing the employees, they did not disclose much

information for the sake of the confidentiality of the organization.

Since the bank personals were very busy, they could provide me very little time.

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Another problem is that creates a lot of confusions regarding verification of data.

In some cases more than one person were interviewed to clarify each concept as

many of the bankers failed to provide clear-cut idea about the job they perform.

The clients were too busy to provide me much time for interview.

I carried out such a study for the first time, so inexperience is one of the main

constrains of the study.

Another problem is marketing policy.

6. Review of Literature

6.1. Bank Profitability:

According to Gerlach et al, 2003, Two most important and major determinants of

bank profitability are nonperforming loan ratio and net interest margin.

The profitability variable is represented by two alternative measures: the ratio of profits

to assets, i.e. the return on assets (ROA) and the profits to equity ratio, i.e. the return on

equity (ROE). In principle, ROA reflects the ability of a bank’s management to generate

profits from the bank’s assets, although it may be biased due to off-balance-sheet

activities. ROE indicates the return to shareholders on their equity and equals ROA times

the total assets-to-equity ratio.

6.2. Interest rate:

Interest rate is one of the oldest and the most curious human inventions. It is

assumed that people assumed that people started charging interest (interest rate) on

invested capital in the ancient times, together with money appearance. It is a fee paid on

borrowed capital. Assets lent include money, shares, consumer goods through hire

purchase, major assets such as aircraft, and even entire factories in finance lease

4

http://en.wikipedia.org/wiki/Finance_lease

http://en.wikipedia.org/wiki/Aircraft_finance

http://en.wikipedia.org/wiki/Hire_purchase

http://en.wikipedia.org/wiki/Hire_purchase

http://en.wikipedia.org/wiki/Consumer_goods

http://en.wikipedia.org/wiki/Shares

http://en.wikipedia.org/wiki/Money

http://en.wikipedia.org/wiki/Asset

http://en.wikipedia.org/wiki/Capital_(economics)


arrangements. The interest is calculated upon the value of the assets in the same manner

as upon money. Interest can be thought of as "rent on money".

A rate which is charged or paid for the use of money. An interest rate is often

expressed as an annual percentage of the principal. It is calculated by dividing the amount

of interest by the amount of principal. Interest rates often change as a result of inflation

and Federal Reserve policies. For example, if a lender (such as a bank) charges a

customer $90 in a year on a loan of $1000, then the interest rate would be 90/1000

*100% = 9%.The fee is compensation to the lender for foregoing other useful

investments that could have been made with the loaned money. Instead of the lender

using the assets directly, they are advanced to the borrower. The borrower then enjoys the

benefit of using the assets ahead of the effort required to obtain them, while the lender

enjoys the benefit of the fee paid by the borrower for the privilege. The amount lent, or

the value of the assets lent, is called the principal. This principal value is held by the

borrower on credit. Interest is therefore the price of credit, not the price of money as it is

commonly and mistakenly believed to be. The percentage of the principal that is paid as a

fee (the interest), over a certain period of time, is called the interest rate.

According to “The Economist’s dictionary of Economics” In part they defined the

interest rate as: The proportion of a sum of money that is paid over a specific period of

time in payment for its loan. It is the price a borrower has to pay to enjoy the use of cash

which he does not own, and the return a lender enjoys for differing his consumption or

parting with liquidity.

According to Stephan A. Ross, Randolph W.Westerfield and Jeffrey Jaff (2005),

interest rate is extra payment for borrowing money.

5

http://en.wikipedia.org/wiki/Credit_(finance)

http://en.wikipedia.org/wiki/Investments

http://www.investorwords.com/2858/loan.html

http://www.investorwords.com/5877/customer.html

http://www.investorwords.com/5454/charge.html

http://www.investorwords.com/401/bank.html

http://www.investorwords.com/2767/lender.html

http://www.investorwords.com/3728/policy.html

http://www.investorwords.com/4205/reserve.html

http://www.investorwords.com/1895/Federal.html

http://www.investorwords.com/2452/inflation.html

http://www.investorwords.com/5752/rate.html

http://www.investorwords.com/205/amount.html

http://www.investorwords.com/3839/principal.html

http://www.businessdictionary.com/definition/percentage.html

http://www.investorwords.com/214/annual.html

http://www.investorwords.com/2531/interest.html

http://www.investorwords.com/3100/money.html

http://www.investorwords.com/3569/paid.html

http://en.wikipedia.org/wiki/Rent


6.3. Bank account:

A bank account is a financial account with a banking institution recording the

financial transactions between the customer and the bank and the resulting financial

position of the customer with the bank.

6.4. Bank statement:

A bank statement is a summary of all financial transactions occurring over a given

period of time on a deposit account, a credit card, or any other type of account offered by

financial institutions. It is customary for banks to issue statement of accounts to their

checking account customers at periodic intervals, monthly or quarterly, or on special

request (Norman Penny).

A document issued by a bank to its customers, listing details of debit and credit

transactions over a given period with a resultant balance of the account. These statements

are issued to cover a range of accounts including current accounts, loan accounts and

deposit accounts.

A record of transaction and their effect on account balances over a specific period

of time, for a given account. A bank account statement lists the debits and credits that

took place over the relevant time period.

6.5. Government bond:

A government bond is a bond issued by a national government denominated in the

country’s own currency. Bonds issued by national governments in foreign currencies are

normally referred to as sovereign bonds. Government bonds are usually referred to as risk

free bonds, because the government can raise taxes or simply print more money to

redeem the bond at maturity.

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6.6. Loan:

A loan is a type of debt. Legally, a loan is a contractual promise of a debtor to

repay a sum of money in exchange for the promise of a creditor to give another sum of

money.

According to Peter S. Rose, loans are regarded by bankers as profitable credits

with “sticky” interest rate.

7. Research Methodology:

It is a operational/working report which I participated in MTB and a comparative

study to analyze the different features and products which generate profit. And identify

some technique from which managers of MTB can generate more profit and attract new

customers. Both primary and secondary data were used to do this study.

Both primary and secondary data was collected from annual reports, depth

interviews, data journals, articles, internet websites, company brochures and other

internal sources.

Maximum data was collected through interview and questions and from different

banks web site and brochures. And few self-developed questions are used which are

given below:

What are the products and services which generating revenue for the bank?

How they generating profit?

Is this profit satisfactory?

Is there any scope to generate more profit?

Are you satisfying customers perfectly?

What is the interest rate in different deposits or FDR?

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What is the interest rate in different loans?

Is there any possibility to increase or reduce charges and interest rates? Etc.

7.1. Data collection:

Primary sources of data

Face to face conversation with the bank officers and staffs.

Informal conversation with the clients.

Different manuals of MTBL.

Different circulars of MTBL.

Secondary data:

Annual report of MTBL.

Prospectus of MTBL and different banks manual.

Website of different bank and MTBL.

Different textbooks.

Few pervious reports made by other students.

7.2. Data analysis:

Several products are found through my working and interview which is

generating profits/revenue to MTBL.

Products:

1. Liability products:

Current account

Savings account

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Short term deposits

Fixed deposits

2. Asset products:

Secured loans ( Mortgage loans, cash loans)

Semi secured loans ( Business installment loans, Installment loans, flexi loans,

auto loans)

Unsecured loans (Personal loans)

3. Others:

Government bonds.

Bank statement/ certificate

Pay order.

Cheque book issue, account closing, yearly charge.

7.3. General banking:

Financial institution/intermediary that medicates or stands between ultimate

borrowers and ultimate lenders is knows as banking financial institution. Banks perform

this function in two ways- taking deposits from various areas in different forms and

lending that accumulated amount of money to the potential investors in other different

forms.

General banking is the starting point of all the banking operating. General

Banking department aids in taking deposits and simultaneously provides some ancillaries

services. It provides those customers who come frequently and those customers who

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come one time in banking for enjoying ancillary services. In some general banking

activities, there is no relation between banker and customers who will take only one

service from bank. On other hand there are some customers with who bank are doing its

business frequently. It is the department, which provides day-to-day services to the

customers. Everyday it receives deposits from the customers and meets their demand for

cash by honoring cheques. It opens new accounts, demit funds, issue bank drafts and pay

orders etc. Since bank in confined to provide the service everyday general banking is also

known as retail banking.

Through my internee I have worked several sections of MTB in the Pragati Sharani

branch. They are:

Customer service.

Account opening and closing.

Remittance:

1. Payment order issue.

2. Demand draft issue/collection.

3. T.T Issue/Collection

4. Endorsements.

5. IBC/OBC Collection.

Deposit department.

Accounts department.

1. Clearing.

2. Transfer.

3. Cash.

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7.3.1. Customer services of Mutual Trust Bank Limited:

Professional merit and competency, flexibility, Determination and dedication are

the core resources that MTBL consider to be of paramount importance for building a

client oriented modern banking. Customer satisfaction is MTBL foremost professional

undertaking. Therefore, a satisfied client is MTBL precious product and they consider

them MTBL ambassador in the market. During my internee I have seen all this things,

every employee have good relation with every customer. What ever he is small customer

or big customer. Every one is treated in same way.

7.3.2 Account opening of MTBL:

Under this department, MTBL officer opens different types of accounts on the

request of clients. The procedure of opening account is given bellow:

Types of account:

(a).General products are:

Current account:

Current account is for those who made very frequent transaction daily. Everyday

cash is coming and going out from their account. Features of current account, Minimum

opening charge 2000tk. Yearly maintenance charge 300tk. And 2tk per leaf of cheque.

Closing fee 100tk. It can be open by individuals, jointly, proprietor ship or limited

company account. Here interest rate is 00.0%.

Savings account:

Savings account is account which is appropriate for organization person or

persons who expect very low transaction with funds going out but coming in any day.

Basically savings accounts are opened and operated by individuals to meet their future

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contingencies and also enjoy accessibility of money kept in savings accounts. Its interest

rate (6.25%) is higher then current account (00.0%). Minimum opening balance 1000tk.

Yearly charge on account 500tk. 4tk per leave of cheque. Closing fee 100tk. It also can

be open by individuals, jointly, proprietor ship or limited company account.

Short term deposits:

According to characteristics, short term deposits are similar to current deposit

except interest. Though it is C/D account but bearing some interest. Currently this interest

rate is 6.00%. Collection account of DESCO, TNT above 10lac tk interest rate is 6%.

And other type of customer’s tk 1.00lac, interest rate is 6%.

Fixed deposits:

Fixed deposit is very much important for its contribution to the bank’s deposit

creation process, because the highest amount of bank’s fund from its direct customers

comes in the for of Fixed Deposit. The period varies from 1month to 3yrs. These deposits

are not repayable on demand but they are withdraw able subject to a period of notice.

Hence, it is a popularity known as time liabilities. Normally the money on a fixed deposit

is not repayable before the expiry of period. Before opening a fixed deposit account a

customer has to fill up an application form which contains, amount in figure,

Beneficiaries name and address, period, rate of interest, date issue, date of maturity,

instructions that weather the FDR will renewed with interest for the next period or not to

be renewed for next period, or will the interest will pay to any account or not, signatures

and FDR no. When FDR account is opened, it is recorded in the FDR register which

contains information like, FDR A/C no. FDR receipt no, name of the FDR holder with

address, Maturity period, Maturity date and interest rare. Minimum FDR balance is BDT

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50000. For increasing the deposit base every commercial bank offers its customers

various rates according to the amount of deposit.

MTBL also offers its valuable customers some significant rates for different

amounts as under:

Duration Interest Rate

For 1 month

For 3 months

For 6 months

For 12 months

For 3 years

8.00%

11.25%

11.25%

12.00%

12.00%

Rates of different deposit accounts of MTBL:

SL Particulars Interest Rate

01 Savings Deposit 6.25%

02 Short Term Deposit 6.00%

03 Fixed Deposit:

For 1 month

For 3 months

For 6 months

For 12 months

For 3 years or more

8.00%

11.25%

11.25%

12.00%

12.00%

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The FDR becomes renewed automatically in MTBL if the customer does not

encash his/her FDR with in seven days if maturity. In case of encashment of FDR in

maturity, few accounts treatments have made:

Excise duty on FDR……………………dr.

Income tax on interest………………… dr.

FDR A/C……………………………….dr.

Cash A/C ………………………………. cr.

Interest on FDR A/C……………………. cr.

If the customer wants to draw the interest only, then entries are….

Interest on FDR A/C……………………dr.

Cash A/C……………………………………cr.

In case of before maturity enactment interest is calculated for the days from the date of

opening the FDR account.

(b). Some of MTBL Consumer Products which are generating profit for MTB:

1. Brick By Brick Savings Scheme:

Monthly Installment 5 Years* 8 Years* 10 Years* * The maturity value is an indicative

figure. Tax/Excise Duty will be deducted as per govt. rules. 90% Loan Advantage on

deposited amount. Thereafter in multiples of Tk. 5000 up to a limit of Tk. 100,000.

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2. MTB Monthly Benefit Plan:

Deposit Amount Income Amount for 3-year plan* Income Amount for 5-year plan*

* The maturity value is an indicative figure. Tax/Excise Duty will be deducted as per

govt. rules. 90% Loan Advantage on deposited amount.

3. Save Everyday Plan:

Saving money for the future is a common practice in any society. Savings help you to

build a better tomorrow. Regular saving makes a man become disciplined, self confident

and successful. MTBL offers you "Save Everyday" Plan. The primary advantage of this

plan is that you are absolutely free to choose your own time for depositing money into

this account. You can deposit daily, weekly or monthly. The choice is yours, but the

transactions will have to be within the Bank's transaction hour.This is a 5 year plan and

you will be required to open the account with an initial deposit of Tk. 2500/= only. We

offer you very attractive interest rate which is accrued in this account on a daily basis.

4. MTB Education Plan:

Monthly Installment 4 Years* 7 Years* 9 Years*



5. Consumer Credit Scheme:

In order to make a significant contribution in the living standards of the people of

medium and low income category, MTBL has introduced a scheme called "Consumer

Credit Scheme". With a view to materialize the dreams of those who are unable to make

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one time investment from their own savings, one can now afford to buy necessary

household equipments and thus improve the standard of living. All sorts of household

durables e.g. Television, Refrigerators, Computers, Air Conditioners, Video Cameras,

Washing/ Drying Machines and Furniture’s are allowed under this scheme. One can buy

Motorcycle too under this program. The collateral security is minimum and the interest

rates are one of the lowest in the market. Please contact the nearest branch for details.

6. Best Invest:

Best Invest offers you efficient high return investment plan. This plan helps you to build

up a sizeable income in easy and affordable installments. This plan allows you to own 5

times the initial invested amount. Best Invest offers two separate and convenient term

deposit periods for 4 years and 6 years respectively. Best Invest is available in units

worth Tk.50, 000/- each. You will invest Tk.10, 000/- as down payment for purchasing 1

(one) unit and the Bank will provide loan for Tk.40, 000/-The customer also has the

option to buy units in multiples of Tk. 50,000/- but maximum up to Tk. 1, 00, 00,000/-

(one crore). This is a unique high return plan catering to all income groups. So do not

miss the opportunity.

(c). Customized Products are:

1. MTB Double Saver Plan:

Deposit Amount Maturity Value after 6 Years*



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2. MTB Triple Saver Plan:

Deposit Amount Maturity Value after 11 Years*



3. MTB Millionaire Plan:

Monthly Installment Year Maturity Value*



4. MTB Unique Savings Plan:

Unique Savings Plan is an any day, any amount savings plan. The beauty of this plan is

that a customer can deposit any day, any time and any amount.

Unique Savings Plan offers you to deposit any amount of your choice but not less than

Tk. 500/- for 3/4/5 years. This is a high income plan with withdrawal facilities. The

withdrawal facility will help you at the time of any emergency. You can withdraw 50%

of the deposited balance for once a month. At maturity you will get a handsome amount.

7.3.3. Procedures of account opening, interest posting, cheque book

issue and account closing:

During my internee I have done this thing lot of times. Basically all account

opening procedure are nearly same. A customer 1st need to collect the account opening

form from the bank. Then he/she have to fill up all the requirements which are given in

the form like nominee, photograph (most important thing), introducers sign on form and

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also on photographs behind, customer have to give signature in front of two bank

officials, then one ant photo identities photocopy. In case of sole proprietorship, customer

have to sign on signature card, copy of valid trade license, TIN certificate, 18-permission

of Bangladesh Bank ( for GSA & Agents only). In case of partnership all things are same

only extra needed partner ship deed.

Interest posting to Clint’s account:

Bangladesh Government has circulated that, 10% deduction from the banks

internal accounts. This 10% tax deduction from the clients interest. Other wise another

circitation is that, from the OBC collection every bank cut off there OBC commission as

income account, here Bangladesh Bank said that 15% money cut off from the OBC

collections as vat on others.

Cheque book issues:

MTBL has several cheque books. Their savings accounts cheque books contain 10

leafs. And current deposit account contains three types of cheque books one is 10 leafs,

one is 25 leafs and another one is 50 leafs. When customers come to collect cheque book,

customer have to fill up direct requisition slip or cheque book requisition slip. Then

customer service officer receives these types of slip from the clients and verifies the

signature of clients, when verification is completed then gives the cheque books under

processing. Then books brings from the VOLT and put account no in the cheque book,

write down the serial no of the book in the requisition slip and in cheque book register.

After all this formalities are done then principle officer sign in the cheque leafs and sent

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to another principle officer to give initial. After this client signs in cheque book register

and receive the book. After that principle officer postings that books leafs no in the

computer data processing system. A cover file containing the requisition slip is

effectively preserved as vouchers. If any defect is noticed by the ledger keeper, he makes

a remark to that effect on the requisition slip and forward it to the cancellation officer to

decide whether a new check book to be issued to the customer or not.

Account closing:

There are two ways of account closing. One is by banker and another is by the

customer. By banker, if any customer doesn’t maintain any transaction with in six years

and the A/C balance becomes lower then the minimum balance, banker has the right to

close an A/C. And by customer, if the customer wants to close his/her A/C, he writes an

application direct to branch manager request him to close his A/C. Basically closing

procedure is same for all kinds of accounts. Only FDR account automatically closes after

termination of the period. And in brick by brick A/C closing system is very easy. Of one

of the client of this account didn’t pay monthly installment at the bank for three months

consecutively one after another, the clients account closes automatically. And for current

and savings A/C, after receiving the application from the customer the officer verifies the

balance of the account. He then calculates the interest and other charges accumulated on

the A/C. Then he gives necessary accounting entries post to accounts section. The

balance is returned to the customer. And lastly the A/C is closed. But in practice during

my internee I haven’t seen any customer closing his account willingly. Maximum

account is closed by bank.

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7.3.4. Remittance, Main instruments, Payment order and demand draft

issue, cancellation, charges:

Remittance of funds is ancillary services of MTBL. It aids to remit fund from one

place to another place on behalf of its customers as well as non-customers of bank.

MTBL has its branches in the major cities of the country and therefore, it serves as one of

the best mediums for remittance of funds from one place to another. The main

Instruments used by MTBL, Pragati Sharani Branch for remittance of funds, payment

order issue/collection, demand draft issue/collection, T.T Issue/collection, Endorsements,

Travelers cheque Issuance, IBC/OBC collection.

Payment order is an instrument issued by bank, instructing itself a certain amount

of money mentioned in the instrument taking amount of money and commission when it

is presented in bank. Only the branch of the bank that has issued it will make up the

payment of pay order. When a customer comes to issue a pay order, 1st all he have to fill

up the payment slip. Then deposits the pay orders amount. And then bank officials

prepared the instrument and after this payment order is given to customer by taking

signature on the counterpart. There are different modes of P.O a customer can purchase.

By cash, by account or by transfer.

When PO is purchased by cash ledgers are,

Cash A/C ………….Dr

Bills payable (PO) A/C…….Cr

Income on commission A/C…Cr

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By account,

Customer’s A/C……………Dr

Bills payable (PO)………………Cr

Income on commission A/C……Cr.

By Transfer,

MTBL general/other dept clients A/C…..Dr

Bills payable (PO) A/C………………….Cr

Income on commission A/C…………….Cr

PO A/C is the current liabilities of bank, which is acquired to be discharged by

beneficiaries against cash or through an account. After all this things when PO is

submitted by collecting bank through clearing house, the issuing bank gives payment,

Bills payable (PO) A/C….Dr

MTBL general A/C…………..Cr

But before giving payment its duty for issuer to observe whether endorsement was given

by collecting bank or not.

If a buyer wants to cancel the PO, he should submit a letter of instrument in this

regard and also return the instrument. For this adjustment entry will be,

Bills payable (PO) …………Dr

Customer A/C…………………..Cr

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When Instrument is lost, the holder will inform to the issuing bank immediately.

Bank will mark STOP PAYMENT on bills payable (PO) register. Buyer will then ask for

a new instrument by submitting a GD copy, and indemnity bond. A new instrument will

be delivered.

7.3.5. T.T issue collection, Accounting entries, Procedures,

Endorsement:

Telex transfer (TT) is another widely used mode for remittances of funds. In case

of telex transfer the message for transfer of funds is communicated through tested telex.

MTBL generally recovers from the telex charges in addition to the usual service charges.

1st customer deposits money with MTBL to be sent. Then the customer obtains a cash

memo containing TT serial no. TT serial no, notifying part name is mentioned in the telex

message. Finally the telex department confirms transmission of the telex.

Account entries for TT:

Cash A/C Clients A/C………Dr

MTBL general A/C (pragati sharani branch)…..Cr

After receiving the telex, it is authenticated by test. TT serial number is verified by the

“TT in-Concern branch” register. The following entries are given in the vouchers:

MTBL General A/C (Pragati Sharani Branch)…..Dr

Client’s A/C…………………………………………….Cr

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BDT 50/- is taken as postal charge. The minimum commission it BDT 50/- or 0.15% of

the amount whichever is higher.

Endorsement: MTBL endorses US$ in passports. To endorse US dollar, the client has to

apply in the prescribed from (TM form). Entries are:

Cash or customers A/C……………Dr

Foreign currency on hand………………..Cr

7.3.6. Accounts department of MTBL:

Accounts department is play most vital role in banking. Accounts department is a

department with which every department is related. It records the profit & loss A/C and

statement of assets and liabilities by applying “Golden Rules” of book-keeping. The

functions of it are theoretical & computerized based. During my internee I have given my

effort in accounts department for few days. Their entire executives helped me lot during

my internship. They didn’t guide me as an internee. They guide me as a training officer

of MTBL to gather practical knowledge about banking. They tried their best to inform me

every thing about accounts department. Basically accounts department is mix of three

departments, Cash, Transfer and Clearing.

Cash department of any branch plays very vital role in accounts department.

Because, it deals with most liquid assets of MTBL. Pragati Sharani Branch has an

equipped cash section. This receives cash from depositors and pay cash against cheque,

draft, PO, and pay in slip over the counter. When a valued client deposit or withdraw

their money they must full fill the deposits slip his/her own, then they sign as the

23


depositor options then they deposit their money through cash officer at the cash counter.

There are several types of deposit slip, Ex. Current deposit, Savings Deposit, pay order

slip etc.

Receiving Cash:

Any people who want to deposit money will fill up the deposit slip and give the

form along with the money to the cash officer over the counter. The cash officer counts

the cash and compares with the figure written in the deposit slip. Then he put his

signature on the slip along with the cash received seal and records in the cash receive

register book against account no. At the end of the procedure, the cash officer passes the

deposit slip to the counter section for posting purpose and delivers slip to the clients.

Account treatment:

Cash A/C…………….Dr

Customer’s A/C……………..Cr

Disbursing Cash:

When any one wants to receive money against cheque comes to the payment

counter and presents his cheque to the officer. He verifies, date of the cheque, signature

of the A/C holder, whether the cheque is crossed or not, whether the cheque is endorsed

or not, whether the amount in figure and in word correspondent or not. Then he checks

the cheque from computer for further verification like whether there is sufficient balance

or not, whether there is stop payment instruction or not, whether there is any legal

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obstruction or not. After checking everything, if all are in order the cash officer gives

amount to the holder and records in the paid register.

7.3.7. Transfer, clearing, clearing hose process, types, clearing cheque:

Transfer is not a critical sector in banking but it is very important. Transfer plays

a vital role in banking sector. Basically transfer is a type of register maintaining matter.

In this register officer write down everyday transaction in debit and credit side then the

officer calculate both the side of the register if both side shown same amount, it means

that the total days transaction is completely ok.

Clearing is one of the marginal parts of banking. I really enjoyed this part of the

accounts department and banking sector. In Mutual Trust Bank Limited clearing in

charges Mr. Md Enayet Hossain ( officer), I did work with him. I want Bangladesh Bank

lots of time with him. In Bangladesh bank, there is a very large room which contains

more then fifty tables for each bank that is called the clearing room. Every bank has an

officer of clearing house who is work with Bangladesh bank clearing house. Actually

most of major client deposit their account in different kinds of bank cheques. Clearing

officer check all the cheques and deposit slip very carefully and then he receives the

cheque. After that the clearing officer give posting all the cheques in computer software

which is recognized through Bangladesh bank computer depertment. Then clearing

officer seat all the cheques in adance date after that the officer endorsement all the

cheques and sign all the cheques. All the cheques are posted in the computer by branch

wise, then officer print the entire document and staple all the cheues by branch wise. This

is called schedule of clearing house. Then clearing officer copy’s all the documents in

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two floppy disc as per Bangladesh Bank requirement. When the clearing officers enter

the clearing house 1st job is to deliver the floppy to the Bangladesh Bank computer

department.

7.3.8. Loan:

Loan is another broad source of in come of MTBL’s consumer banking. The

managers and employees of MTB are very concern about the loan disbursement. Each

branches performance depends on loan. That’s why managers of every branch trying to

increase the loan.

Secured loan:

This is a kind of loan where a customer has to give a kind of asset or cash to the

bank to get the loan. It is 100% secured loan. With out any asset bank do not approve this

kind of loan. Mortgage loan is one kind of secured loan. Basically they take an asset or

cash from the customer and give this loan. This loans time limit is 24 to 360 months. And

minimum loan amount is 5 lac and maximum is 80 lac. They give loans against FDR

also. But here customer can take 85% loan of his FDR. Interest rate is 14%-17%. MTB

take land or FDR as security to give this loan. Basically they give this loan to those who

can make the installment regularly. So they consider minimum income of the customer

like:

BDT 25000 for salaried persons

BDT 35000 for businessman

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Semi Secured loan:

This is a kind of loan where some part of loan is secured and some part of loan is

unsecured the secured amount may be 25%to 100%. Flexi loan is one kind of semi

secured loan. It is a facility that is being offered increasingly by banks and other financial

lenders. It is a cross between an overdraft facility and a personal loan. Flexi loans work

by allowing you to borrow money and repay it at variable amounts at your choice

depending entirely on how much you wish to repay at any particular time. If you cannot

afford to pay back a large amount one month you can just pay back what you can afford.

In another month if you have more money available you can pay back more. If necessary

you cannot pay back anything in a particular month you can just withdraw money from

the facility. Interest rate is 15% to 20%. MTBL gives this kind of loan to the <10000tk

income level customers. Time limit of this loan is 1yr to 5yr. And the loan amount is

BDT 100000 to BDT 1000000. They take FDR or government security bond as security.

Unsecured loan:

This is a kind of loan where customer does not need to submit any asset to bank.

MTB do not encourage this kind of loan. But in little special case they give Personal

loan to customer. In this kind of loan MTB primarily consider customers monthly

income. Monthly income should be <10000tk. And loan limit is BDT 50000 to BDT

100000. And the time limit is 1yr to 5yr. Interest rate is 16% to 20.5%. Depends on

category.

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Loan section is the big earning sector of Mutual Trust Bank. But MTB also earn

little revenue from government bond, bank statement/certificate, pay order, account

closing and yearly maintenance charge.

8. Discussion and findings

A comparison among MTB, DBL, NCC bank:

To understand the competitive position of MTB in consumer banking a

comparison with other bank has been made. One is DBL and another one is NCC bank

both are local bank. Their operating activities are same as MTB. Their charges are

relatively same but MTB can re-consider their charges by making this comparison to

generate more profit.

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8.1. Bank Account (Account related charges):

Name of the

charges and fees

MTB NCC DBL

Minimum amount to

open current A/C

BDT 2000 BDT 1000 BDT 5000

Savings A/C BDT 1000 BDT 5000 BDT 1000

Closing charge BDT 100 BDT 250 BDT 300

Yearly operating

charge

BDT 300 BDT 500 BDT 500

ATM Charge yearly BDT 500 BDT 500 Free

Cheque book 2tk per leaf Free Free

Minimum balance Current 1000tk

savings 500tk

Current 1000tk

savings 1000tk

Current 500tk

savings 500tk

ATM card

replacement fee

BDT 300 BDT 200 BDT 150

Interest rates Current A/C 00% Current A/C 00% Current A/C 00%

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savings A/C 6.25%

STD A/C 6.00%

savings A/C 7.00%

STD A/C 6.00%

Savings A/C 6.50%

STD A/C 6.00%

Table 1: Account related charges

From the above table we can clearly see that, minimum account opening amount

is 2000tk which is much higher then NCC bank. Thought it is lower then DBL. But I

have seen during my internee so many people came to open account but when they heard

about minimum amount of A/C opening they just went out. But MTB can reduce this

minimum amount. For current account they can make it 1000tk and for savings account

they can make it 500tk. Coz maximum people come to open savings account they don’t

come intentionally. 500tk is not a big deal to any people. I think if they reduce their

customer will increase. Now we can see that account closing and operating charge is

lower then NCC and DBL but in this section they can increase closing charge and

decrease slightly yearly operating charge. They can make closing charge more 200tk, still

it is lower then other 2 banks. If closing charge is bit higher people will think twice to

close an account. They can decrease operating charge from 300 to 250 tk. Yap it will

reduce some amount of revenue but near future they will get more profit. Coz account

opening will increase when people will see that yearly processing fee of this bank is

lower then any other bank. It is noticeable that MTB’s cheque book cost and ATM charge

are relatively higher then other two bank. They taking 2tk per leaf for cheque book while

other two bank giving it cost of free. They also can make it free. And yearly ATM charge

is 500 but DBL providing it for free of cost. MTB also can make it free. Relatively other

charges of MTB are lower then NCC and DBL, so if they re-consider the ATM and

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cheque book charges, it will definitely increase customer. Again ATM replacement fee is

higher then other two banks. They also should thing about this. Above table we can see

that in case of savings account MTB’s interest rate is lower then DBL and NCC. Now

why people keep tk in savings account, to earn some interest. Now obviously people will

switch to those banks who are giving higher rate. So here is the big scope for MTB

increase the rate slightly, their current customer will stay loyal to them and new

customers will attract to open new account.

8.2.Fixed deposits:

Tenor MTB NCC DBL

1 Month 8.00% 9% 8.50%

3 Month 11.25% 12.25% 11.50%

6 Month 11.25% 12.50% 12.00%

1 year 12.00% 12.50% 12.50%

3 year 12.00% 12.50% 12.50%

Table 2: Interest rates of fixed deposits

From the above table we can see that MTB’s deposit rates are relatively lower

then other two banks. Now if they can increase this rates little bit they can get more

deposits, which they can use them for lending purpose. Though point some thing is

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nothing but customers when see that one bank is giving interest rate on deposit bit higher

then other banks, naturally they run to that bank with their money. Coz people deposits

money to earn some interest. Now who will give them more earning, they will depose

their money to that bank.

8.3. Loans:

Products MTB NCC DBL

Secured loan 14%-17% 15% 14%

Semi secured loan 15%-20% 16% 16%

Unsecured loan 16%-20.5% 16% 17%

Auto loan 14% 16% 14.50%

Credit card N/A 30% 30%

Table3: loan interest rates.

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Here we can see that MTB’s every interest rate on loans is too much higher then

other two banks. They have to reduce these rates to earn more profit. If people see that

MTB is giving relatively lower interest rate comparing other banks. People will lend

money from them. As we know every bank biggest earnings sector is their loan section. If

any bank increase the ration of giving loan, their revenue will be more. On the other hand

we can see that NCC and DBL earning a lot of revenue through their credit card. But

MTB even did not introduce it. So they should introduce credit card as soon as possible.

8.4. Loan related charges:

Features MTB NCC DBL

Early settlement fee Minimum 1000tk Minimum 1000tk Minimum 1000tk

Processing fee:

Mortgage Loan

1% of approved

amount or minimum

1000tk

1% of approved

amount or minimum

1% of approved

amount or minimum

1000tk

1% of approved

amount or minimum

1% of approved

amount or minimum

1000tk

1% of approved

amount or minimum

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Personal loan

Auto loan

1000tk

1% of approved

amount or minimum

1000tk

1000tk

1% of approved

amount or minimum

1000tk

1000tk

1% of approved

amount or minimum

1000tk

Table 4: Loan related charges

Now here we can see that loan related charges are basically same in this three

bank. But here if MTB slightly reduce these charges they can earn more revenue. Here if

they reduce their operating charge it may reduce their revenue little bit but their loan

disbursement will increase. And in near future they will earn more revenue from this

section.

8.5. Government Bonds:

MTB is getting .5% commission for 1lac bond, which is very little profit.

Government fixes this rate for all the banks. So, it is not possible for any bank to change

this rate. Now MTB only can encourage people to buy these bonds. Now if people buy

this bond people have to have an account in MTB and their principle and interest amount

of the bond goes to their accounts which will increase MTBs funds.

8.6. Statements and certificates:

34


Statements and certificates are almost same in comparison of this three bank. Like

duplicate statement for current year MTB charging 50tk similarly other two banks also

charging same. Duplicate statement for previous year MTB charging 200tk but on the

other hand NCC charging 100tk and Dhaka Bank charging 150tk, which is relatively

lower then MTB. So here MTB should take a look. Charge for bank solvency certificate

is same in this three bank, charge is 100tk. And balance confirmation certificate also

same 100tk. This section is very little earning sector. But as we know in Bangladesh,

bank environment is very competitive, so every side should be up to dated.

8.7. Other some factors by which MTB can earn profit:

There are some other factors by which MTB can earn profit like locker,

introducing credit card etc. In my branch there is no locker service. MTB can introduce

this feature and can earn some revenue. NCC and DBL earning yearly huge amount

through locker service. They provide 3 kinds of lockers large, medium, and small. And

charging 2000-2500tk for large, 1800-2000tk for medium, and 1000-1500tk for small

size lockers. On the other hand MTB (pragatisharani branch) don’t have any locker

service. They should introduce it.

MTB also don’t have any credit card facility. Now a day’s banks are earning lots

of revenue through credit card. MTBL also should introduce credit cards.

8.8. Mathematical view:

From the financial statement of 2006 I have found that net profit of MTB after tax

is BDT 689,584,847 which is much higher then 2005 ( BDT 493,478,835). It shows that

35


day by day MTB’s profit margin is increasing. But it can be increase more. A bank’s 30%

of total profit comes from consumer banking division. That means MTB’s

(689584847*30%) =BDT 206875454.1 profit came from consumer banking division in

2006. Now if they reduce 5% of consumer banking charge profit will decrease

206875454.1-(206875454.1*5%) =BDT 196531682.1. Now for this reduction if 10%

customer increases in MTB then profit will: BDT 196531682.1+ (196531682.1*10%) =

BDT 216184850.31. Now we can see that their profit will increase (216184850.31-

206875454.1) = BDT 9309396.21 from pervious profit. So reduction of consumer

banking charges can generate more revenue for the MTB.

9. Significance of the study:

In this report I tried to describe the sections in which I gone through and worked

there. Basically in 1st half of report I tried to show how every sections work and how they

providing service and in what type of activities I was involved. In the 2nd half I tried to

show some comparison. In this study I tied to prove that if charges of consumer banking

can reduce it can generate more profit. This research will draw MTB’s management’s

attention to decrease their charges, fees, and interest rates in order to hold their current

36


customers and as well as attract new customers which will increase their revenue. And

this study will encourage researchers to investigate further research about the technique

to increase the revenue of Mutual Trust Bank Limited.

10. Recommendation:

A bank can earn lots of revenue comparatively to other banks, just if they

consider their charges slightly lower then other banks. So depending on the above

research MTB should reduce some charges and increase interests on deposits to hold

current customers as well as attract new customers. Now so many banks providing

cheque book free of cost. They should also provide it free. And they should introduce

credit card. And they should come with newer ideas, newer products which can attract

new customers. They can increase interest rate in savings accounts. Coz a banks

maximum profit comes form loan section. So if they increase interest rate for the

accounts people will be more interested to keep money to bank and from those accounts

they can use that money for lending purpose. So final suggestion to MTB is they should

increase account opening, and encourage peoples to open A/C to their bank, by offering

newer products, services and relatively lower service charges from other banks.

11. Conclusion

In conclusion I want to say that, Mutual Trust Bank is one of the leading 3rd

generation bank. Its increasing customers day by day. It has huge number of products and

creating a large number of customer base. In Pragatisharani Branch maximum people of

37


Bashundhara, Badda, Baridhara, Badda, Bishwa road are their customer. Coz It is the 1st

bank in that area. And I have seen they satisfying every customer through their honest

service, but still something missing there and that’s why they loosing customer and

failing to keep account opening flow. Now some other bank branches are opening there.

And maximum people are switching to other banks. But if they can meet all the needs of

customers they can hold current customers and attract new customers. Above research

tried to find out those missing things by comparing MTB’s consumer banking with other

banks, and suggesting. Now a days competition is increased in our country in banking

sector. Continuous improvement and update is required to hold and survive in this

competitive market. A little bit concentration on problem areas through the

recommendations can bring back old reputation and increase profit.

Bibliography

Annual reports of MTBL.

Different vouchers of NCC, DBH, and MTBL.

Norman Penney. (May, 1967), Bank Statements, Cancelled Checks, and Article Four

in the Electronic Age, Journal of Banking and Finance, Michigan Law Review, Vol.

65, No. 7pp. 1341-1360.

Peter s. Rose. (2004 – 2005), Commercial Bank Management (International Ed),

McGraw-Hill, Irwin.

38


Rose, P. S., & Hudgins, S. C. (2005), Bank Management & Financial Services (6th

Ed.)”,McGraw-Hill Education (Asia)

http://www.bankofgreece.gr/publications/pdf/Paper200525.pdf

http://www.lh-broker.com/index.php?pg=Opportunities&inset=1&lang=eng

http://en.wikipedia.org/wiki/Interest%5Frate

http://en.wikipedia.org/wiki/Bank_statement

http://en.wikipedia.org/wiki/Bank_account

http://en.wikipedia.org/wiki/Government_bonds

http://www.ukfinancialoptions.co.uk/flexi-loan.htm

http://www.investorwords.com/2539/interest_rate.html

http://economics.about.com/cs/studentresources/f/interest_rate.htm

http://www.investorwords.com/56/account_statement.html

http://glossary.global-investor.com/terms/bank-statement.htm?

id=116&ginPtrCode=00000&PopupMode=

www.mutualtrustbank.com www.bangladesh-bank.org

39

http://www.bangladesh-bank.org/

http://www.mutualtrustbank.com/

http://glossary.global-investor.com/terms/bank-statement.htm?id=116&ginPtrCode=00000&PopupMode

http://glossary.global-investor.com/terms/bank-statement.htm?id=116&ginPtrCode=00000&PopupMode

http://www.investorwords.com/56/account_statement.html

http://economics.about.com/cs/studentresources/f/interest_rate.htm

http://www.investorwords.com/2539/interest_rate.html

http://www.ukfinancialoptions.co.uk/flexi-loan.htm

http://en.wikipedia.org/wiki/Government_bonds

http://en.wikipedia.org/wiki/Bank_account

http://en.wikipedia.org/wiki/Bank_statement

http://en.wikipedia.org/wiki/Interest_rate

http://www.lh-broker.com/index.php?pg=Opportunities&inset=1&lang=eng

http://www.bankofgreece.gr/publications/pdf/Paper200525.pdf

the company was incorporated on september 29

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