This report is the result of the Internship Program I conducted at Mercantile Bank Limited at Ring Road Branch. This is my true report statement on “Loan and Advance Operations of Mercantile Bank Limited” Ring Branch. The result of my work experience with Mercantile Bank Limited (Ring Road Branch) is descriptive paper.
The banking philosophy of Mercantile Bank Limited is not to 'carry coal to the new castle'. Thus, the report titled 'Loan Management Procedure of MERCANTILE bank Ltd' has been prepared as a partial fulfillment of the BBA program authorized by the Department of Business Administration, Sonargaon University.
Objectives of the Study
Therefore, it is the duty of the top management of commercial banks to face the situation.
Methodology of the Study
Significant of the Study
Limitations of the study
Though I have given utmost effort to prepare this paper but there are some limitations of the study. They are as follows-
This report only considers Loan Management System of MBL
Only 3 months time is not enough to complete such a study in a lucid manner
Bank was not that much willing to provide the required data
Bank authority also prohibits some facts to be included in this report
In many cases, up to date information is not published
Due to lack of practical experience, some errors might be occurred during the study
Chapter Two
Theoretical Review
- The History of Loan
- Meaning of Loan
- The Importance of Loan
- Loan Management
- Process of Loan Management
- Loan Management Structure and Responsibilities Program Guidelines
- Program Guidelines
- Tools of Loan Management
Financial institutions evolved to put funds from savers into the hands of loans that used this value to create economic value. Lending has contributed to the economic growth of countries around the world as it makes goods and services available to consumer business professionals and the government, although the basic tasks of assessing risk. Loan risk rating is important for Loan Risk Management as it helps the banks and financial institutions to understand such rating across the borrowers, activities and the business lines can provide a better assessment of the quality of Loan Portfolio of a bank or branch. Meanwhile, at the end of 2003, Bangladesh Bank provided guidelines for managing loan risks of banks, in which it recommended the introduction of Risk Grade Scorecard for risk assessment of loan proposals.
Bangladesh Bank expects all commercial banks to have a well-defined credit risk management system that delivers accurate and timely grading. In practice, a bank's loan risk assessment system should reflect the complexity of its lending activities and the overall level of risk.
Chapter Three
Bank Profile
Organization Overview
Mercantile Bank Limited was formed as a new commercial bank to provide efficient banking services with the aim of improving the socio-economic development of the country. The philosophy of Mercantile Bank Ltd is not to "drive coal to the new castle". The main objective is to provide loans to poor people, and their activities are aimed at comprehensive growth, where people from all economic strata will enjoy the benefits of a better standard of living, dignity of work and self-worth.
Mercantile Bank Ltd is always ready to maintain the highest quality by upgrading banking technology, well management system and applying high standard of business ethics through its established commitment and heritage and represents itself with a true concept as 'Banglar Bank'.
History
December 2001, its paid up capital was Tk 596.5 million
- Mission
- Vision
- Core Values
- Technology
- Special Feature Green Banking
The bank has decided to build a long-term relationship with its legal and general customers. 29 sponsors participate in the establishment of Mercantile Bank Limited; the sponsors of the bank have a long tradition of trade, commerce and industry. The Board of Directors consists of prominent personalities from the field of trade and industry of the country.
Lutfar Rahman Sarker, the former governor of the central bank of Bangladesh, was the chief advisor to the bank. Respect the value and dignity of individual employees who devote their energies to the progress of the bank.
Locker Service
- Mercantile Bank’s Functional Departments
- Operational network organ gram
- Structure of Banking Services
- Products Scheme
- Five Years Comparative Financial and Operational Performance
MBL has adopted modern hardware and software technologies to make services easier and faster, it has introduced on-line banking and SMS banking services to its customers. They are providing 24 hour banking services to their customers through SMS banking and ATM booths across the country. Green Banking is to provide innovative green products to support activities that are not hazardous to the environment and help preserve the environment.
The aim is to use a bank's resources responsibly, avoiding spoilage and prioritizing the environment and society. We have set up a separate Green Banking unit and many measures have been taken, including green financing, creating awareness among the employees for efficient use of water, electricity and paper, giving priority to preserving the ecosystem and at the same time commercial projects are financed and reuse of equipment with the aim of making our bank a Green Bank. The Mercantile Bank Limited has the following divisions, which encompass the entire business of the bank.
Strong management and the interest of the directors made the growth of the business smooth. Thus, the bank has positioned itself in a relatively good position among other local banks of the country. The main function of the bank is to mobilize funds from the surplus unit to the deposit unit and therefore the two main activities of the bank are the collection of deposits and the disbursement of loans and advances.
When we talk about the bank's performance, we must observe the progress in these two activities, and the growth and balance of these two activities confirm how much better the bank is doing. Among them, Monthly Savings Scheme, Family Maintenance Scheme, Double Benefit Deposit Scheme, Quarterly Benefit Deposit Scheme, 1.5x Benefit Deposit Scheme, Advance Benefit Deposit Scheme, Consumer Loan Scheme, Small Employment Finance Scheme, Small Loans Loan Scheme, Home Loan Scheme and SME Loan have got wide acceptance among people.
Chapter Four
Loan Management System of Mercantile Bank Ltd.: An Analytical Review and Findings
Loan Management System of MBL
A sound credit policy includes, among other things, the safety of the invested funds in relation to the bank's profitability. Keep in mind that a good loan to a correctly selected borrower will be collected in half.
Objectives of Loan Management System of MBL
Loan Programs of Mercantile Bank Ltd
A family can have a maximum of 4 (four) MSS accounts in the name of persons in his/her family. The depositor will receive a certain amount of money each month in relation to his/her deposit throughout the term. Deposit a fixed sum of money for 10 years or 15 years in monthly installments of various sizes.
A family can have a maximum of 02 (two) PFSD accounts in the names of persons in his/her family. The minimum amount of deposit required is Tk.5000 or its multiple or Tk.2500 or its multiple.
The loan amount is directly credited to the customer's account Loan limit BDT 3.00 Lac or 8 times of monthly recorded income, whichever is lower. Under this scheme, the Bank finances women-sponsored small scale industry and home projects. The Small and Medium Enterprises (SME) loan scheme has been introduced to provide financial assistance to young or experienced entrepreneurs to invest in small and medium industries at a relatively low rate of interest as the same is assisted by the Bank of Bangladesh with refinancing facility.
In order to meet the growing need for housing for medium and low-income earners, MBL has introduced a housing loan scheme.
- Deposits
- Deposits Mix
- Loans and Advances
- Loans and advances Mix
But in 2020, we can see operating profit a little bit low because of the Covid-19 pandemic around the world. The bank is introducing a number of attractive deposit systems to meet the needs of small and medium-sized savers. The main focus of Mercantile Bank Loan Line/Program is to finance business, trade and industrial activities through an effective delivery system.
The bank's credit portfolio includes a wide range of credit programs covering approximately 200 items. Loan is also offered to 15 (fifteen) incentive sectors as determined by the government at a reduced rate of interest for the development of frontier industries. Loans are available to individuals, businessmen, small and large companies, traders, manufacturers, legal entities, etc. The bank's loans and advances recorded impressive growth in 2019.
In terms of the loan, the Bank has given due importance to the needs and oral demands of both the public and private sectors. The bank has formulated a policy to give more priority to Small and Medium Enterprises (SMEs) by financing large enterprises through consortium of banks.
Sector-wise Loans & Advances
- Loan Products
- Overdraft
- Cash Loan
- Loan (General)
- Staff Loan
- Bills Portfolio
- Term Loan
- Bills Purchased and Discount
- Loan against Imported Merchandise (LIM)
- Payments against Documents (PAD)
- Loan against Trust Receipt (LTR)
- Inland Bill Purchased (IBP)
- Heir Purchase
- Home Loan
- Letter of Loan
- Packing Loan
- Personal Loan
- Other loans
- Rate of Interest on Loan
- Loan Policy of Mercantile Bank Ltd. (MBL)
- Securities against Advances
- General procedure for loans and advances
- Selection of Right Borrower 6. Project appraisal
- First Information Sheet
- Application for Loan
- Collecting CIB Report from Bangladesh Bank
- Making Loan Proposal
- Selection of Right Borrower
- Project Appraisal
- Head Office Approval
- Sanction Letter
- Loan Documentation
- Disbursement
- LOAN MONITORING
- Loan Recovery
The party will approach the person responsible for the department's loan department for SOD arrangement. The concerned officer of the branch will give him a loan application form and the party has to fill this form. The responsible department in the Loan Department will evaluate the proposal and if it appears to be viable, the loan will be sanctioned.
This loan is transferred upon receipt of the shipping documents from the negotiating bank and submitted to PAD. The party must himself draw genuine trade transaction and the bill and he is not the buyer of the bill. First information sheet is the prescribed form provided by the respective branch which contains MBL information of the borrower.
Character: The most valuable asset of a person, which is based on the integrity and reliability of the borrower. Then bank branch prepares a loan proposal containing terms and conditions of loan for approval of Head Office or Head of the concerned branch. Client must have net worth more than 2.5 times of the equity required for investment in the project.
It is the pre-investment analysis done by the officer before project approval. After receiving the loan line proposal from the branch, the head office reviews the project. He then sends it to the HQ Loan Committee for loan approval.
The balance on the account during the limit should not be less than four times the loan limit. In the absence of the Deputy Managing Director, the authority may be exercised by the Senior Executive Vice President.
Recovery Programs to be Taken By Mercantile Bank Limited
Collection Objective
The loan recovery process begins when the borrower fails to pay one or more contractual payments (installments). Therefore, it is the duty of the collection department to reduce outstanding past due receivables and loan losses.
SWOT Analysis
The recovery rate (less than 10%) of the classified amount is also unsatisfactory, although it is no worse than the overall position of the country's other banks.
Chapter Five
Limitations, Recommendations and Conclusion
Findings
Recommendations
Conclusion
Bibliography
