Internship Report

on
Credit Policy & Practice of Private Commercial Banks of
Bangladesh
(A Case Study on Mercantile Bank imited!
INTERNSHIP REPORT
A"stract
In Banks and Financial Institutions, Credit Risk is considered as an essential factor that needs
to be manaed! Credit Risk is the "ossibilit# that a borro$er or counter "art# $ill fail to meet
its obliations in accordance $ith the areed terms! Credit Risk, therefore, arises from the
Bank%s dealins $ith or lendin to cor"orate, indi&iduals and other Banks or Financial
Institutions! Credit Risk 'anaement needs to be a robust "rocess that enables Banks to
"roacti&el# manae loan "ortfolios in order to minimi(e losses and earn an acce"table le&el
of return for shareholders!
'ercantile Bank "re"ared Credit Policy in 'a# )*** and circulated the same to the
Branches + concerned E,ecuti&es for Com"liance $hich $as re&ised in -uust )**.!In order
to co"e $ith the fast chanin scenario of d#namic lobal econom#, liberali(ation and
lobali(ation and in the liht of the directi&es + suestions of the Focus rou" of Banladesh
Bank, the Credit Policy has been re&ised in October, )**/! -ll E,ecuti&es + Officers of the
Branch as $ell as Head Office es"eciall# those are entrusted $ith the res"onsibilit# of Credit
marketin, a""ro&al "rocessin, credit monitorin, reco&er# and com"liance, must kee"
themsel&es thorouhl# con&ersant $ith the contents of the Credit Policy for meticulous
com"liance!
'B0 is to does e&er#thin $ithin the conte,t of its "olic# and Banladesh Bank uidelines!
E&er# "ri&ate commercial bank formulates its "olic# for their o"erations to kee" banks &iable
and "rofitable and also for the safeuard of de"ositors% interest!
Practices of Credit are ho$e&er, sub1ect to additions, alternations and modifications as ma#
be $arranted b# the chane of circumstances due to "assae of time, to suit the re2uirement
of the Bank! 3hate&er the "olic# of Banladesh Bank is most of the "ri&ate commercial
banks are inclined to in&est in the hihl# "rofitable sector simultaneousl# $here risks are
lo$er!
Onl# the credit de"artment has been co&ered in the internshi" "roram, it is not "ossible to o
to the de"th of each acti&ities of branch because of time limitation! In this re"ort those credit
schemes are hih lihted onl# $hich are most familiar to common "eo"le as $ell as
fre2uentl# "racticed b# a bank es"eciall# 'B0 4ulshan Branch! -nd onl# the "arts rele&ant
to m# focusin fields ha&e been taken, thus the actual credit Polic# has been shortened to
facilitate the stud#!
'B0 discouraes the "ersons $ho are inclined to et loan for their urent "ur"ose! 'ode of
disbursement, chare documents etc! creates bottleneck in loan a""ro&al "rocess! Head office
takes so loner time in "rocessin and a""ro&al of cor"orate loan! The total sanctionin
"rocess e&ent takes month after month to i&e the final decision! 'B0 does not sanction loan
to all sectors e2uall# as the# re2uire, rather it concentrates its loan and ad&ances $ithin some
limited fields and cateor#! It has Credit Card facilities, but -T' booths are located onl#
in some commercial hubs in the cit#! -ain the terms and conditions of the credit card are
not chanes $ith the chanin en&ironment! That%s $h# -T' card holders most often
don%t take credit card facilities e&en in some cases em"lo#ee of 'B0 use other banks%
credit card! Consumer credit schemes 5CCS6 are more "o"ular and re2uired thins amon the
"eo"le of &arious classes, but the effecti&e rate of interest is &er# hih! -nd the terms and
conditions of CCS loan are also &er# incon&enient and discourae "eo"le! 0oan sanctionin
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and disbursement "rocedure are not so eas# and fle,ible bein considered the re2uirements of
different classes of "eo"le! Sector $ise loans in aro based industries and firms, leather
technolo# can be con&enient and fle,ible for the recei&er! 0oan facilit# "arameter should be
e,"anded so that all the "eo"le can et loan accordin to their needs! -&erae cost of fund is
&er# hih! On the contrar# Business Po$er for sanctionin loans and ad&ances at branch le&el
is neliible!
0ots of ne$ commercial bank has been established in last fe$ #ears and these banks ha&e
made this bankin sector &er# com"etiti&e! So, no$ banks ha&e to orani(e their
o"eration and do their o"erations accordin to the need of the market! Bankin sectors no
more de"ends on a traditional method of bankin! In this com"etiti&e $orld this sector
has trenched its $ins $ide enouh to co&er an# kind of financial ser&ices an#$here in
this $orld! The ma1or task for banks, to sur&i&e in this com"etiti&e en&ironment is b#
manain its assets and liabilities in an efficient $a#!
E&er# orani(ation has its "ositi&e as $ell as neati&es and in case of 'ercantile Bank
0imited e,istence of the later one is less then the earlier one and as the manaement is
determined to reach the "ick of success it seems that in near future the neati&es $ill be
eliminated! Eiht #ears is a &er# short s"an of time and the orani(ation, $hich can establish
itself as one of the most re"uted "ri&ate commercial Bank in the countr# $ithin this short
"eriod deser&es s"ecial credit and $ith their able leaders 'ercantile Bank $ill reach the
hihest le&el of success &er# shortl#! I $ish the bank all success "ros"erit# in their field!
INTERNSHIP REPORT
Table of Content
1. INTRODUCTION 1
1.1 Forward 1
1.2 Problem Statement 1
1.3 Objectives of the Report 1
1.4 Methodolo! of the St"d! 2
1.4.1 So"rces of #ata 2
1.4.2 Methods of #ata $ollection 2
1.% &imitations of the St"d! 2
1.' Rationale of the St"d! 3
1.( Scope of the St"d! 3
1.) *ac+ro"nd of Mercantile *an+ &imited 4
1.).1 Objectives of M*& 4
1.).2 Str"ct"re of M*& 4
1., #ivisions of M*& (
1.,.1 $redit #ivision (
7!8!) Human Resource 9i&ision (
7!8!. -udit and Com"liance 9i&ision (
7!8!: Central -ccounts 9i&ision )
7!8!/ Information Technolo# 9i&ision )
7!8!; International 9i&ision )
7!8!< 'arketin 9i&ision )
7!8!= Trainin and 9e&elo"ment 9i&ision ,
7!8!8 Research and 9e&elo"ment 9i&ision ,
2. CREDIT POLICY OF MBL 11
2.1 Polic! -"idelines 12
)!7!7 0endin Princi"les 12
)!7!) Industr# > Business Sement Focus 12
)!7!. 9iscourae Business T#"es 14
)!7!: 0oan Facilit# Parameters 1%
)!7!/ Credit -ssessment and Risk 4radin 1'
)!7!; -""ro&al -uthorit# 2.
)!) Orani(ational Structure > Res"onsibilities 21
)!)!7 Orani(ational Structure 21
)!)!) ?e# Res"onsibilities 22
)!. Procedural 4uidelines 22
)!.!7 -""ro&al Process 22
)!.!) 9eleation of Po$er 24
)!.!. Sanctionin -uthorit# 24
)!.!: 9isbursement 2%
)!.!/ 0eal -ction 2%
)!.!; 3rite off 0oans and -d&ances 2%
3. CREDIT PRACTICE OF MBL 2(
3.1 /0tent and restriction 2(
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3.2 $redit #epartment and 1ts F"nction 2(
3.3 *"siness Power 2)
3.3.1 Responsibilities 2)
3.4 Processin of $redit Proposals 24
3.% $redit $ateories 33
3.%.1 2ric"lt"re 33
3.%.2 3erm &oan for &are and Medi"m scale 1nd"str! 34
3.%.3 3erm &oan for Small and $ottae 1nd"str! 34
3.%.4 4or+in $apital 34
3.%.% /0port $redit 3%
3.%.' $ommercial &endin 3%
3.%.( Other &endin 3%
3.' &oan S!ndication and Str"ct"red Finance 3%
3.'.1 3!pes of s!ndicated facilities 3'
3.'.2 Parties of a S!ndication 3'
3.'.3 2dvantaes of &ender 5 *an+s 3'
3.'.4 2dvantaes of $"stomers 3'
3.'.% 1mportant factors for S!ndication 3'
3.( Project Finance 3)
3.) SM/ &endin 3)
3.).1 P"rpose 3)
3.).2 3aret $"stomer Sement 3)
3.).3 /0tent of Facilities 3)
3.).4 Prod"ct Forms 3,
3.).% 3enor of &oans 3,
3.).' *an+ $hares 3,
3.).( /6"it! of the *orrowers 3,
3.).) Repa!ment Methods 3,
3.)., 3rainin 3,
3., /0port Finance 4.
3.1. Finance in -arments Sector 4.
3.11 Speciali7ed &oans 4.
3.12 Small &oan Sched"le 4.
3.13 /arnest Mone! Financin Scheme 41
3.14 #octors $redit Scheme 41
3.1% Personal &oan Scheme 41
3.1' $ons"mer $redit Scheme 41
3.1( 4omen /ntreprene"rship #evelopment Project 42
3.1) &ease Finance Scheme 42
3.1, 3!pes of $redit 2ctivities 42
3.1,.1 &oans 8-eneral9 42
3.1,.2 :o"se &oans 8-eneral9 42
3.1,.3 :o"se &oans 8Sta;9 43
3.1,.4 $ar &oan Scheme 43
3.1,.% $ash credits and overdrafts 44
3.2. Sector wise allocation of loans and advances 4(
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4. FINDING ! ANALYI 4,
4.1 Observations 4,
4.2 Recommendations 4,
4.3 $oncl"sion %.
L"#t of F"$%&e#
F"$%&e 1.1' Mana$e(ent )"e&a&*+, '
F"$%&e 2.1' O&$an"-at"onal t&%*t%&e of MBL 21
F"$%&e 2.2' Flo. C+a&t of A//&o0al P&o*e## 23
F"$%&e 3.1' Flo. C+a&t of ,n1"*ate1 F"nan*e 3(
L"#t of Table#
Table 2.1' In1%#t&, an1 B%#"ne## e$(ent Fo*%# 13
Table 2.2' R"#2 G&a1"n$ 1)<1,
Table 3.1' Loan Ce"l"n$ 43
Table 3.2' Ca& Loan *+e(e 44
Table 3.3' e*to& ."#e allo*at"on of loan# an1 a10an*e# 4(
B"bl"o$&a/+,
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#$ I%&R'()C&I'%
#$# *or+ard,
This re"ort has been done as "er the re2uirement for successful com"letion of the Internshi"
"roram! E,"osure to the business $orld and ac2uirin "ractical $ork e,"erience $as the
"rimar# ob1ecti&e of this re"ort! I $as attached $ith 'ercantile Bank 0td at its 4ulshan
Branch for m# internshi"! The re"ort focuses on credit di&ision as I $as attached $ith that
di&ision durin the "eriod of m# internshi" "roram! The to"ic for this re"ort $as decided
u"on after a""ro&al b# m# Honorable Proram Su"er&isor -ssistant Prof! @ua(i -khla2ur
Rahman, School of Business of Ani&ersit# of 0iberal -rts
Banladesh!
#$- Pro"lem Statement,
Banks Credit Polic# > Practice, and ho$ it runs and $hat function it does in "ro&idin loans
to clients are technical 1ob and ha&e a reat "ros"ect in our countr#! Credit Polic# of all the
"ri&ate commercial banks is almost same, as the# follo$ and are to follo$ the common
instructions and uidelines of Banladesh Bank! But the# differ in actual "ractice of loans
and ad&ances! -ain each bank has some s"ecial schemes of loans and ad&ances that are full#
or "artl# e,clusi&e!
#$. '"/ectives of the report,
The "resent stud# has been desined to achie&e the follo$in ob1ecti&esB
The first ob1ecti&e is to kno$ about the 'B0 Credit Polic# as a "ri&ate commercial
bank!
Secondl# ho$ 'B0 o"erates its credit di&ision bein controlled $ith rules >
reulations of Banladesh Bank!
The another basic ob1ecti&e of the re"ort are to see $hether the "rocess of Credit
Practice O"eration in 'ercantile Bank 0td! is com"l#in $ith the uideline issued b#
Banladesh Bank and ho$ 'ercantile Bank 0td! is handlin the loans > ad&ances!
To find out barriers or bottlenecks in sanctionin the o&erall loans and ad&ances
"rocess!
To recommend on those "roblems!
#$0 Methodology of the Study,
The stud# $as based on secondar# data! In order to "re"are "ractical trainin re"ort &arious
source > method of data collection $as used!
#$0$# Sources of data,
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In this re"ort onl# Secondar# data ha&e been used! For both the Orani(ation "art and Pro1ect
"art, 2uantitati&e information from the -nnual re"orts of 'B0 and 2ualitati&e information
from other literature reardin the &arious di&isions and their functions, o"erations $ere
used! So, onl# secondar# data $ere utili(ed! For the "ro1ect "art, "rimar# data $ere collected
b# holdin informal inter&ie$s $ith the em"lo#ees to learn about their res"onse+reaction to
the chane that is occurrin in the orani(ation!
3hile I $as conducted the stud# I collected &arious t#"es secondar# data! 9ata has been
collected throuh different sources, b# inter&ie$in the res"onsible officers, bank%s annual
re"ort, and from different circular "ublished b# the Bank!
#$0$- Methods of (ata Collection,
There are so man# methods of data collection $hich $as rele&ant > im"ortant for the stud#!
The methods used in this re"ort $ere as follo$sBC
Intervie+ Method, To collect information direct inter&ie$ $as taken of the manaer
of o"eration, loan in chare, e,ecuti&es, officials etc!
'"servation Method, To collect some information relatin to the "ractice of loans
and ad&ances in terms of a""ro&al, sanctionin and mode of disbursement an
obser&ation $as conducted!
#$1 imitations of the Study,
The follo$in limitations are a""arent in this re"ortBC
There $as little or no sco"e of $ork at credit di&ision of the branch for the
internee students! So I could not reali(e $ell all the "rocedures of credit!
Onl# those loans > Schemes $hich are hihest "racticed b# the branch ha&e been
focused in this re"ort!
No amount of sector $ise allocation of loans and -d&ances of entire 'B0 $as
i&en! Rather than the fiures relatin to 4ulshan Branch onl# has been used!
Collectin all data of allocated loans of entire 'B0 $as im"ossible bein attached
$ith a branch!
For the Orani(ational "art, almost no financial information for the #ear )**<
$ere a&ailable, in some cases onl# unCaudited information could be collected!
Credit Polic# is the Internal > Confidential matter to e&er# bank! So onl# the
most im"ortant Parts and Pro&isions of "olic# related to selected schemes, loans
and ad&ances $ere focused!
#$2 Rationale of the Study,
In this )7
st
centur# Banks are the lifeCblood of modern econom# irres"ecti&e of its si(e >
"attern! Banks are established to earn "rofit and hel" economic and financial acti&ities so as
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to hel" economic de&elo"ment of a count#! In such a conte,t, the main business of Bankin is
to take de"osits from customers and sanction credit to the borro$ers! In "erformin
multidimensional acti&ities like borro$in and lendin of mone#, the $orld of bankin is
under oin a transformation! Beside banks are direct aents to create o""ortunities for the
de&elo"ment of a countr# and also "ro&ide lare scale of em"lo#ment o""ortunities! Banks
are the most im"ortant functionar# of financial s#stem of a countr# and 'ercantile Bank
0imited is one of them! It "la#s a d#namic role in the economic de&elo"ment of a nation
throuh of sa&in and allocation of credit to "ri&ates and industrial sectors! It di&erts and
em"lo#s the funds in such a&enues $hich are aimed to de&elo" a countr#%s econom#!
#$3 Scope of the Study,
Bankin Sector is a robust and sensiti&e area! - Bank has different "roducts, different
ser&ices and different customers! 9ifferent de"artments of a Bank "erform different acti&ities!
Ho$e&er, sco"e of the stud# is limited $ithin a s"ecific area of an orani(ation that is
'ercantile Bank 0imited!
-ain it $as "re"ared on the basis of data and information athered from 4ulshan Branch!
So this stud# sa#s onl# about the acti&ities of the 'ercantile Bank 0imited 4ulshan Branch
in the liht of 'B0 as a $hole! This stud# co&ers onl# &arious "arts and "ro&isions of 'B0
Credit Polic# and Practice as a sam"le of "ri&ate commercial bans in Banladesh!
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#$4 Background of Mercantile Bank imited,
'ercantile Bank 0imited $as established in Dune ), 7888 as a "ri&ate commercial bank and
started its o"eration! The then Prime minister Sheikh Hasina inauurated the bank! The
reno$ned .* industrialists establish this bank $ith e&er#bod#%s consent 'r! -bdul Dalil
elected as the chairman! 'ercantile Bank 0imited is a "ri&ate commercial bank $ith Head
Office at ;7, 9ilkusha C+-, 9haka, Banladesh started o"eration on )
nd
Dune 7888! The Bank
has :7 branches s"read all o&er the countr# and introducin some braches! 3ith assets of T?!
7.*<=!8. million, the bank has di&ersified acti&ities in retail bankin, cor"orate bankin and
international trade!
CreditC'ercantile Bank is "la#in an im"ortant role $hile i&in loan for the small and
medium enter"rises! In the terms of credit mercantile bank has introduced ne$ schemes
mostl# for the business "eo"le in Banladesh! 9ifferent cateories of loan been "ro&ided to
the businessman! The total amount of loan been "ro&ided $as );=:)!7: million B9T till
)**; its main in&estin "ro1ects are business, arments, micro credit, construction and others!
Consumer Credit SchemeB 'ercantile Bank has been "ro&idin loan to medium and lo$C
income "eo"les! This "olic# has ained a reat "o"ularit# amon consumers!
#$4$# '"/ectives of MB
'ercantile Bank 0imited 5'B06 aims at e,cellence and is committed to e,"lore a ne$
hori(on of bankin and "ri&ate a $ide rane of 2ualit# "roducts and ser&ices com"arable $ith
those a&ailable $ith an# modern bank in the $orld!
It is a bank for the common "eo"le includin businessman and "rofessionals! It intends to
ser&e $ith 2ualit# at a "rice com"etiti&e to achie&e in the financial market! It $ould
constantl# kee" on e,"lorin the needs of the clients!The manaement of the bank bears in
mind the fact the# are on the threshold of a ne$ millennium, $hich $ill "ose e,tra ordinar#
challenes to be faced and at the same time o"en u" ne$ o""ortunities and "ossibilities!
#$4$- &he Structure of MB
The orani(ation structure and cor"orate of 'ercantile Bank 0imited 5'B06 stronl# reflect
its determination to establish, u"hold and ain a stroner footin as an orani(ation $hich is
customerCoriented and trans"arent in its manaement!
Board of (irectors
The Board of 9irectors consists of 7. member elected from the s"onsors of the Bank!
The Board of 9irectors is the a"e, bod# of the bank!
Board Committee,
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The Board of 9irectors $ho also decides on the com"osition of each committee
determines the res"onsibilities of each committee!
56ecutive Committee,
-ll routine matter be#ond deleated "o$ers of manaement are decided u"on b# or
routed throuh the E,ecuti&e Committee, sub1ect to ratification b# the Board of
9irectors!
Policy Committee,
-ll mater relatin to the "rinci"les, "olicies, rules, and reulation, ethics etc! for
o"eration and manaement of the bank are recommended b# the Committee to the
Board of 9irectors!
ManagementB
The manaement of the bank is &astl# on a Board of 9irectors, for o&erall su"er&ision
and directions on "olic# matters b# the board! The "o$er of eneral su"er&ision and
control of the affairs of the bank is e,ercise b# the "resident and manain director of
the bank $ho is the chief e,ecuti&e officer! -bo&e all, the bank $ill be manned and
manaed b# a ala,# of talented "rofessionals "roficient in their indi&idual fields and
dedicated to the cause of the bank!
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*igure #$#, Management 7ierarchy
S')RC5, Adapted from MB8s Annual Report -993
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#$: (ivisions of MB,
-ll "olic# formulations and subse2uent e,ecutions are done in the Head Office! It
com"rises of nine ma1or di&isions namel# Credit 9i&ision, International 9i&ision, Central
-ccounts 9i&ision, Human Resources 9i&ision, Information Technolo# 9i&ision,
'arketin 9i&ision, Trainin 9i&ision, Research and 9e&elo"ment 9i&ision, -udit and
Com"liance 9i&ision! Besides these main di&isions, there are fort# one branches all o&er the
countr# to look after the BankEs da#CtoCda# o"erations! The structures and Sanctions of each
of the di&isions of 'B0 are described belo$B
#$:$#$ Credit (ivision,
The "rimar# ob1ecti&e of this di&ision is to e&aluate the credit $orthiness and debt "a#ment
ca"abilit# of "resent loan customers and loan a""licants! It is also res"onsible for kee"in
track of the credit "ortfolio b# obtainin reular information from the branches! It sets "rices
for credits and ensures affectin it at the branches! This de"artment also monitors the &arious
loan accounts of the branches and "re"ares &arious statements for Banladesh Bank!
#$:$- 7uman Resources (ivision,
The em"lo#ees are 'ercantile BankEs most &aluable resource! Ha&in com"etent and
"rofessional em"lo#ees is becomin increasinl# im"ortant in toda#Es com"etiti&e $orld,
and 'B0 has a sinificant com"etiti&e ad&antae in this res"ect man# of its em"lo#ees ha&e
$orked here since the BCCI area and therefore ha&e &ast e,"erience in their res"ecti&e
fields! -lso the ne$ em"lo#ees are recruited $ith sound academic backround and i&en
"ro"er trainin after recruitment to room u" for their res"onsibilities! The# "lan to inculcate
a hih "erformance culture $here the em"lo#ees $ill $ork $ith fun and "ride!
#$:$. Audit and Compliance (ivision,
The main function of this di&ision is to "ro&ide leal assistance to the branches and to ensure
strict adherence of rules and "olicies b# all concerned officials of the bank throuh routine
and sur"rise ins"ection and audit!
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#$:$0 Central Accounts (ivision,
Finance and -ccounts di&ision task is to maintain dail# li2uidit# "ositions, treasur# bills, call
mone#, debentures, "lacement of funds etc! 'onthl#Caccrued interest calculation of all interests
bearin accounts, interCbranch calculation for Head Office, amorti(ation of all fi,ed and other
assets! It "re"ares statement of accounts and "rofit and loss account for the bank! 3eekl#
de"osit and ad&ance anal#sis and Cost of fund anal#sis are the t$o ma1or functions done b#
this de"artment!
#$:$1 Information &echnology (ivision,
Pre&iousl#, 'ercantile Bank had a &er# lo$ le&el of automation! There $as hardl# an# PC in
the $hole Bank before )**7! But $hen the ne$ manaement took o&er in )**7, the# a&e
hue em"hasis on com"uteri(in the bankEs o"erations! -fter ) #ears, almost all the
o"erations in the bank are no$ automated! The Bank is also shiftin to a ne$ IT "latform,
$hich aims at maintainin, o"eratin and strenthenin the technolo# base of the bank to
enable error free "roduction of information that ensures onoin efficienc# and "rofitabilit#
of o"eration, - $orld class bankin soft$are called Fle, Cube has been installed $hich $ill
centrali(e o"erations and "ro&ide Online Bankin, Internet Bankin, -utomated Teller
'achine, Tele"hone Bankin, Point of sale dis"enser, Credit Card facilit# etc! 0ast No&ember,
*/ Introduced Ne$ soft$are called PC Bank )***!
#$:$2 International (ivision,
International 9i&ision is res"onsible for assistin the authori(ed branches to deal in forein
trades, that is, im"ort and e,"ort businesses on account of the customers of the bank b#
i&in a""ro&al for transactions and controllin them at &arious staes! It deals $ith all
corres"ondents of forein banks ha&in arranement $ith the bank! E&er# #ear ne$ aents
are added! The larer the number of corres"ondents and the $ider the co&erae area, the
richer $ill be the international connections of the bank!
#$:$3 Marketing (ivision,
The main function of this di&ision is to build relationshi" $ith the "otential customers and
strenthen the relationshi" $ith the e,istin customer! To inform and e,"lain the "otential
customer about the facilities "ro&ided b# the bank and searchin for ne$ area of business and
collect information about the "otential sector as $ell as to "re"are strate# for ettin
com"etiti&e ad&antae!
#$:$4 &raining and (evelopment (ivision,
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The main function of this di&ision is to "re"are the em"lo#ee of the bank as com"etent and
2ualit# $orkforce! The function of this di&ision is s follo$sB
-rrane trainin and orientation "roram for the fresh bankers!
Pro&ide s"ecific trainin "roram for the em"lo#ee to make them more "rofessional!
#$:$: Research and (evelopment (ivision,
E,cellence in bankin o"eration de"ends larel# on a $ellCe2ui""ed and efficient Research
and 9e&elo"ment 9i&ision! Such acti&ities re2uire the in&estment of substantial mone# and a
set of hihl# 2ualified "ersonnel $ith multidisci"linar# backround! -lthouh it is not
"ossible at this stae to undertake R>9 acti&ities similar to those of the banks in the
de&elo"ed countries, 'ercantile Bank has established a core Research and Plannin 9i&ision
com"risin skilled "ersons from the &er# ince"tion of the Bank!
INTERNSHIP REPORT
INTERNSHIP REPORT
-$ CR5(I& P'IC; '* MB
'ercantile Bank 0td! is committed to "ro&ide hih 2ualit# ser&ices to its constituents throuh
different financial "roducts and "rofitable utili(ation of fund and contribute to the ro$th of
49P of the countr# b# financin trade and commerce, hel"in industriali(ation, boostin
e,"ort, creatin em"lo#ment o""ortunities for the educated #outh and encourain microC
credit leadin to "o&ert# alle&iation and im"ro&in the 2ualit# of life of the "eo"le and
thereb# contributin to the o&erall socioCeconomic de&elo"ment of the countr#!
3ith a &ie$ to achie&in the aforesaid ob1ecti&es of the bank, Credit o"eration is of
"aramount im"ortance as the reatest share of the total re&enue of the bank is enerated from
it! The success of a bank, therefore, de"ends on ho$ efficientl# and 1udiciousl# it makes use
of its a&ailable resources! In other $ords, "rudent and efficient manaement of its credit
"ortfolio is &er# essential for the success of a bank! The Credit Polic# of an# bankin
institution is a combination of certain acce"ted, time tested standards and other d#namic
factors dictated b# the realities of chanin situations in different market "laces!
In formulatin a credit 1udment and makin @A-0ITF Credit 9ecision, the lendin officer
must be e2ui""ed $ith all information needed to e&aluate a borro$er%s character,
manaement com"etence, ca"acit#, abilit# to "ro&ide collaterals and e,ternal conditions
$hich ma# affect his abilit# in meetin financial obliations!
The Credit Polic# has been di&ided into the follo$in cateoriesB
a! Policy <uidelines$
"! 'rgani=ational Structure and Responsi"ilities$
c! Procedural <uidelines$

&a"le -$#, Industry and Business Segment *ocus
INTERNSHIP REPORT
-$# Policy <uidelines,
The Credit Polic# uidelines of the Bank describes details fundamental credit risk
manaement "olicies, outlines eneral "rinci"les that are desined to o&ern the
im"lementation of more detailed lendin "rocedures and credit risk anal#sis+risk radin
s#stem!
-$#$# ending Principles,
For sound lendin interCalia the follo$in "oints should be ke"t in &ie$B
Dudicious selection of Customers
i! Pur"ose
ii! Safet#
iii! Source of re"a#ment
i&! Securit# > 0i2uidit#
&! Profitabilit#
&i! Su"er&ision > 9i&ersit#
&ii! National+Social interest
Giii Banladesh Bank uidelines
It should be remembered that selection of the a""ro"riate borro$ers, "ro"er follo$Cu" and
endCuse su"er&ision throuh constant follo$Cu" and monitorin are the cornerstone for timel#
reco&er#! These uidelines $ill be u"dated annuall#! Before selectin a customer + client and
subse2uent recommendation for financin, the Credit Officer + Relationshi" 'anaer must
obser&e the follo$in basics of lendinB
-$#$- Industry and Business Segment *ocus,
-s a eneral "ractice 'ercantile Bank 0imited definitel# concentrates its business in Trade
Finance + E,"ort H Im"ort business and all t#"es of Commercial 0oan, Industrial + Pro1ect
Finance + S#ndication and structured Finance + S'E Financin and other s"eciali(ed
"rorams e,ce"t other$ise restricted b# the 4o&ernment or indicated as unethical and banned
items!
The Bank i&es em"hasis to di&ersif# its business "ortfolio commensurate $ith economic and
business trend, life c#cle of the "roducts, demand su""l# a", social and national obliation
etc! The Bank%s "olicies for financin in different ma1or sectors are summari(ed as follo$sB
S Sectors Policies
7 Te,tile + S"innin+ S$eater+ ?nittin+ 9enims > 4arments To e,"and
S')RC5, Adapted from Mr$ *akru==aman Cho+dhury
INTERNSHIP REPORT
) Cement To maintain
. Construction + Real estate + House buildin To e,"and
: Telecommunication To e,"and
/ Communication Selecti&e basis
; Information Technolo# 5IT6 Pro1ect To e,"and
< -roCbased Industr# To e,"and
= Hos"ital + Clinic + School + Collee + Ani&ersit# Selecti&e basis
8 Healthcare + Pharmaceuticals + 'edicine Selecti&e basis
7* Electrical + Electronic a""liance To e,"and
77 Finance to NBFI Selecti&e basis
7) S"ecial ProramB Consumer Credit Scheme, S'E Financin
Scheme, 9octor%s Credit Scheme, 3oman Entre"reneurs
9e&elo"ment Pro1ect, Personal 0oan Scheme, Small 0oan
Scheme, 0ease Finance Scheme, Earnest 'one# Financin
Scheme, Car 0oan, HB0 54eneral6 + 'ortae 0oan,
Em"lo#ees House Buildin Scheme, -T', GIS- Credit Card,
EEF, etc!
To e,"and
7. Plastic + Packain Selecti&e basis
7: 0eather Selecti&e basis
7/ Steel and Enineerin To e,"and
7; Edible oil To e,"and
7< Scra" Gessel Restricted $a#
7= Pa"er + Pul" + Parte, To e,"and
78 Chemicals Restricted $a#
)* Others Based on merit
The Bank%s "olic# is to handle the s"eciali(ed business sectors + sements b# settin u"
se"arate units in Head Office Credit 9i&ision! In &ie$ of this, Bank has alread# set u" the
follo$in units in Head office Credit 9i&isionB
S#ndication and Structured Finance
Pro1ect Finance
4arments Sector
S'E
S"eciali(ed Schemes such as Consumer Credit Scheme, 9octor%s Credit Scheme,
3oman Entre"reneurs 9e&elo"ment Pro1ect, Personal 0oan Scheme, Small 0oan
Scheme, 0ease Finance Scheme, Earnest 'one# Financin Scheme, Em"lo#ees
INTERNSHIP REPORT
House Buildin Scheme, Car 0oan, HB0 54eneral6 + 'ortae 0oan, -T', GIS-
Credit Card, EEF, etc!
The Policies for the abo&e s"eciali(ed sements + sectors ha&e been + to be circulated to all
concerns from time to time!
-$#$. (iscouraged "usiness types,
The Bank $ill discourae lendin to follo$in areas of businessB
'ilitar# E2ui"ment+3ea"ons Finance > Tobacco sector
Com"anies listed on CIB black list or kno$n defaulters
Hihl# 0e&eraed Transactions > Finance of S"eculati&e In&estments
0oin, 'ineral E,traction+'inin or other acti&it# that is Ethicall# or
En&ironmentall# Sensiti&e
Counter"arties in countries sub1ect to AN sanctions!
Share 0endin 5Not more than ;*I of share &alue of last ; 5si,6 months market
a&erae or ma,imum ./ lac $hiche&er is lo$er or as "er uidelines of Banladesh
Bank6
Takin an E2uit# Stake in Borro$ers 5e,ce"t under Islamic Bankin O"eration6
Bride 0oans rel#in on e2uit#+debt issuance as a source of re"a#ment!
0endin to Holdin Com"anies!
INTERNSHIP REPORT
-$#$0 oan *acility Parameters,
The 0oan facilit# "arameters for the Bank ha&e been set as underB
The Bank in eneral $ill a""ro&e + rene$ trade finance facilit# for the "eriod of *7
5one6 #ear from the date of a""ro&al + last e,"ir# date!
The Bank $ill e,tend medium term loan for .5three6 #ears "eriod!
The Bank $ill e,tend lon term loan for ma,imum "eriod of < 5se&en6 #ear includin
race "eriod of ;5si,6 months to 7=5eihteen6 months!
House Buildin 0oan to Bank%s em"lo#ee shall be o&erned as "er "olic# uidelines
of JEm"lo#ees House Buildin 0oanK scheme!
The rate of Interest + Commission + Chares + Fees etc! $ould be as "er the a""ro&ed
schedule of chares $ith &ariation "ermissible as "er Banladesh Bank uidelines and
$ith the a""ro&al of com"etent authorit#!
The interest rate to be chared and to be "aid out on 2uarterl# basis e,ce"t the
es"ecial schemes and unless other$ise s"ecified in the a""ro&ed terms!
Re"a#ment of term loan $ould be fi,ed "referabl# on monthl#+2uarterl# basis!
In eneral, the cash marin for 0+C $ould be 7*I of the 0+C amount or on the basis
of Banker H Customer relationshi" sub1ect to the minimum re2uirement of
Banladesh Bank $hiche&er is hiher!
For the im"ort of Ca"ital machiner#, the cash marin for 0+C $ould be )/I C .*I or
on the basis of Banker H Customer relationshi" sub1ect to the minimum re2uirement
of Banladesh Bank $hiche&er is hiher!
-n# e,ce"tion, as mentioned abo&e, $ould be s"ecificall# a""ro&ed b# the com"etent
authorit# of the Bank!
Galuation of the landed "ro"ert# + Buildin + 'achiner# + Stock of Ra$ materials +
finished "roducts shall be done b# the Bank%s enlisted "rofessional sur&e#ors dul#
checked b# the Bank officials!
The &alue of the mortae "ro"ert# shall be "referabl# double of the facilit# to be
e,tended de"endin u"on other securit# co&erae!
The securit# condition ma# be rela,ed de"endin u"on the Credit $orthiness of the
customer + BankerCCustomer relationshi" + "otentialit# of the business of the client!
-n# e,em"tions of the "arameters mentioned abo&e are sub1ect to be a""ro&ed b# the
com"etent authorit# as "er deleated "o$er a""ro&ed b# the Board of 9irectors
INTERNSHIP REPORT
-$#$1 Credit Assessment And Risk <rading,
-ll financial acti&ities in&ol&e a certain deree of risk and "articularl#, the financial
institutions of the modern era are enaed in &arious com"le, financial acti&ities re2uirin
them to "ut "ro"er attention to e&er# detail!
Credit Assessment,
- thorouh Credit and Risk assessment shall be conducted for all t#"es of credit
"ro"osals! The results of this assessment to be "resented in the a""ro&ed Credit
-""raisal Form that oriinates from the Credit Officer + Relationshi" 'anaer 5R'6
and is to be a""ro&ed b# the Credit Committee + E,ecuti&e Committee of the Board of
9irectors + Board of 9irectors! The Credit Officers + R' are the o$ner of the
customer relationshi" and must be held res"onsible to ensure the accurac# of the
entire credit a""lication + "ro"osal submitted for a""ro&al! The Credit Officer + R's
must be familiar $ith Bank%s 0endin 4uidelines and should conduct due dilience
on ne$ borro$ers, "rinci"als and uarantors in line $ith "olic# uidelines!
Credit -""raisal should summari(e the results of Credit Officers + R's risks
assessment and includes, as a minimum, the follo$in detailsB
-mount and t#"e of loan5s6 "ro"osed
Pur"ose of 0oan5s6
Results of Financial anal#sis
0oan structure 5Tenor, Co&enants, Re"a#ment schedule, Interest6
Securit# -rranements
?FC conce"t
Risk Management > Credit Risk 5valuation > Assessment ? ending (ecision,
- com"rehensi&e and accurate a""raisal of the risk in e&er# credit "ro"osal of the
Bank is mandator#! No "ro"osal can be "ut on "lace before a""ro&in authorit# unless
there has been a com"lete anal#sis! In order to safeuard Bank%s interest o&er the
entire "eriod of the ad&ance, a com"rehensi&e &ie$ of the ca"ital, ca"acit#, interit#
of the borro$er, ade2uac#, nature of securit#, com"liance $ith all reulator# +leal
formalities, condition of all documentation and finall# a continuos and constant
su"er&ision on the account are called for! 3hile makin lendin decisions, "articular
attention shall be i&en to the anal#sis of credit "ro"osals recei&ed from hea&il#
le&eraed com"anies and those dealin in nonCessential consumer oods, takin
s"ecial care about their debt ser&icin abilities!
Em"hasis shall be i&en on the follo$in se&eral credit "rinci"lesB
INTERNSHIP REPORT
Present and future business "otentialit# for o"timum de"lo#ment of Bank%s
fund to increase return on assets
Preference for self li2uidatin @A-0ITF business
-&oidin marinal "erformers!
Risk de"ression is basic to sound credit "rinci"les and "olicies! Bank shall be
careful about lare and undue concentration of credit to industr#, one oblior
and common "roduct line etc!
Basics of Credit Risk,
The follo$in risk areas shall be considered for anal#(in a credit "ro"osal!
Borro$er -nal#sis 5'anaement+O$nershi"+Cor"orate Structure Risk6
Industr# -nal#sis 5Business and Industr# Risk6
Su""lier+Bu#er -nal#sis+'arket Risk
-dherence to 0endin 4uidelines
Interest Rate Risk
Forein E,chane Risk
Cost o&errun Risk > 'itiatin Factors
0oan Structure > Securit#
Risk <rading,
Risk radin is a ke# measurement of a Bank%s asset 2ualit# and as such, it is essential
that radin is a robust "rocess! -ll facilities should be assined a risk rade!
Presentl# the Bank is follo$in+conductin the 0endin Risk -nal#sis to assess the
risk rade! The concerned Credit Officer + R' must clearl# indicate the risk rade 5as
"er the findin6 in the s"ecific column of credit a""raisal form so that the authorit#
can take decision on the matter! - standard Risk 4radin 'atri, is de"icted as under
based on the Risk 4rade Scorecard attached as an -""endi,C7!)!
&a"le -$-, Risk <rading
INTERNSHIP REPORT
Risk Rating <rade (efinition
Su"erior H
0o$ Risk
7
Facilities are full# secured b# cash de"osits, o&ernment bonds or a counter
uarantee from a to" tier International Banks + 0ocal Banks! -ll securit#
documentation%s are in "lace and in order!
4ood H
Satisfactor# Risk
)
The re"a#ment ca"acit# of the borro$er is stron! The borro$er should ha&e
e,cellent li2uidit# and lo$ le&erae! The com"an# must demonstrate consistentl#
stron earnin and cash flo$ and ha&e an unblemished track record! -ll securit#
documents are in "lace! -reate Score of 8/ or reater based on the Risk 4rade
Scorecard!
-cce"table H
Fair Risk
.
-de2uate financial condition thouh ma# not be able to sustain an# ma1or or
continued setbacks! These borro$ers are not as stron as 4rade ) borro$ers, but
should still demonstrate consistent earnin, cash flo$ and ha&e a ood track record!
- borro$er should not be raded better than . if realistic audited financial
statements are not recei&ed! These assets $ould normall# be secured b# acce"table
collateral 57st chare o&er stocks+debtors+e2ui"ment+"ro"ert#6! Borro$ers should
ha&e ade2uate li2uidit#, cash flo$ and earnins! -n -reate Score of </C8: based
on the Risk 4rade Scorecard!
'arinal H
3atch 0ist
:
4rade : assets $arrant reater attention due to conditions affectin the borro$er, the
industr# or the economic en&ironment! These borro$ers ha&e an abo&e a&erae risk
due to strained li2uidit#, hiher than normal le&erae, thin cash flo$ and+or
inconsistent earnins! Facilities should be do$nraded to : if the borro$er incurs a
loss, loan "a#ments routinel# fall "ast due, account conduct is "oor, or other
unto$ard factors are "resent! -n -reate Score of ;/C<: based on the Risk 4rade
Scorecard!
S"ecial 'ention
/
4rade / assets "otential $eaknesses that deser&es manaement%s close attention! If
left uncorrected, these $eaknesses ma# result in a deterioration of the re"a#ment
"ros"ects of the borro$er! Facilities should be do$nraded to / if sustained
deterioration in financial condition is noted 5Consecuti&e losses, neati&e net $orth,
e,cessi&e le&erae6, if loan "a#ments remain "ast due for 8* da#s or more, or if a
sinificant "etition or claim is loded aainst the borro$er! Full re"a#ment of
facilities is still e,"ected and interest can still be taken into "rofits! -n -reate
Score of //C;: based on the Risk 4rade Scorecard!
Substandard
;
Financial condition is $eak and ca"acit# or inclination to re"a# is in doubt! These
$eaknesses 1eo"ardi(e the full settlement of loans! 0oans should be do$nraded to
; if loan "a#ments remain "ast due for 7=* da#s or more but less than )<* da#s, if
the customer intends to create a lender rou" for debt restructurin "ur"oses, the
S')RC5, Adapted from the (ata"ase of MB
INTERNSHIP REPORT
o"eration has ceased tradin or an# indication suestin the $indin u" or closure
of the borro$er is disco&ered! Not #et considered nonC"erformin as the correction
of the deficiencies ma# result in an im"ro&ed condition and interest can still be taken
into "rofits! -n -reate Score of :/C/: based on the Risk 4rade Scorecard!
9oubtful
5nonC"erformin6
<
Full re"a#ment of "rinci"al and interest is unlikel# and the "ossibilit# of loss is
e,tremel# hih! Ho$e&er, due to s"ecificall# identifiable "endin factors, such as
litiation, li2uidation "rocedures or ca"ital in1ection, the assets are not #et classified
as 0oss! -ssets should be do$nraded to < if loan "a#ments remain "ast due for )<*
da#s or more but less than .;* da#s and interest income should be taken into
sus"ense 5nonCaccrual6! 0oan loss "ro&isions must be raised aainst the estimated
unreali(able amount of all facilities! The ade2uac# of "ro&isions must be re&ie$ed at
least 2uarterl# on all nonC"erformin loans and the bank should "ursue leal o"tions
to enforce securit# to obtain re"a#ment or neotiate an a""ro"riate loan
reschedulin! In all cases, the re2uirements of Banladesh Bank in CIB re"ortin,
loan reschedulin and "ro&isionin must be follo$ed! -n -reate Score of ./ H
:: based on the Risk 4rade Scorecard!
Bad and 0oss
5nonC"erformin6
=
-ssets raded = are lon outstandin $ith no "roress in obtainin re"a#ment 5in
e,cess of .;* da#s "ast due6 or in the late staes of $ind u"+li2uidation! The
"ros"ect of reco&er# is "oor and leal o"tions ha&e been "ursued! The "roceeds
e,"ected from the li2uidation or reali(ation of securit# ma# be a$aited! The
continuance of the loan as a bankable asset is not $arranted and the antici"ated loss
should ha&e been "ro&ided for! This classification reflects that it is not "ractical or
desirable to defer $ritin off this basicall# $orthless asset e&en thouh "artial
reco&er# ma# be affected in the future! Banladesh Bank uidelines for timel# $rite
off of bad loans must be adhered to! -n -reate Score of ./ or less based on the
Risk 4rade Scorecard!
INTERNSHIP REPORT
-$#$2 Approval Authority,
'ercantile Bank 0td! belie&es in decentrali(ation of "o$ers! 3ith a &ie$ to ensurin
"rom"t and efficient ser&ices to its multitude of clients s"read far and $ide, the Bank
en&isaes deleation of o"timum "o$ers to its E,ecuti&es and Officials at different
le&els of o"erations! !
The Bank intends to make it cr#stal clear to all concerned that the "o$ers are
deleated to ser&e the reater interest of the institution!
The credit a""ro&al function has been se"arated from the marketin+relationshi"
manaement function!
-ll credit risks must be authori(ed b# e,ecuti&es $ithin the authorit# limit deleated
to them!
-n# credit "ro"osal that does not com"l# $ith 0endin 4uidelines, reardless of
amount, has to be referred to Head Office for -""ro&al!
-n# breaches of lendin authorit# to be re"orted to 'anain 9irector > CEO, Head
of Internal Control and Head of CR'!
&ime Re@uirement for Approval of Credit Proposals,
At Branch level B Branch -uthorit# as "er their business deleation must take
decision $ithin ma,imum of . C < da#s
At 7ead 'ffice level B The Head Office Credit Committee5HOCC6+ E,ecuti&e
Committee of the Board of 9irectors+Board of 9irectors shall take decision $ithin
ma,imum of B
/ H < da#s for sim"le t#"e of facilit#
7/ H .* da#s for Pro1ect 0oan
.* H ;* da#s for 0oans under S#ndication + Club Finance etc!
Sanction letter to be issued $ithin 7 H ) da#s time from the date of a""ro&al!
In case of 0are 0oan, it must be re"orted to Banladesh Bank!
In case of the s"ecific loans like 9irector%s loan, "rior a""ro&al from Banladesh
Bank to be obtained as "er re2uirements + uidelines of Banladesh Bank!
INTERNSHIP REPORT
-$- 'rgani=ational Structure and Responsi"ilities,
The a""ro"riate orani(ational structure must be in "lace to su""ort the ado"tion of "olicies
described in Cha"terCI of these uidelines! The ke# feature is the sereation of the
'arketin + Relationshi" 'anaement function from -""ro&al + Risk 'anaement +
-dministrati&e Functions!
-$-$# 'rgani=ational Structure,
The follo$in chart re"resents the manaement structureB
*igure -$#, 'rgani=ational Structure of MB
S')RC5, Adapted from MB data"ase
INTERNSHIP REPORT
-$-$- Aey Responsi"ilities,
There are &arious res"onsibilities that done b# &arious concerned! The ke# res"onsibilities
that ha&e been &ested u"on them as follo$sB
A! 7ead of Credit Risk Management ,
O&ersiht of the Bank%s credit "olicies, "rocedures and controls relatin to all
credit risks arisin from cor"orate+commercial+institutional bankin and treasur#
o"erations!
O&ersiht of the Bank%s asset 2ualit# > Ensure that the lendin e,ecuti&es ha&e
ade2uate e,"erience and + or trainin in order to carr# out 1ob duties effecti&el#
B! 7ead of Credit ,
Promote stron asset 2ualit#!
A"datin the Bank%s lendin uidelines+credit "olicies as and $hen re2uired but at
least annuall#!
Ensure credit recommendations+a""ro&als are taken in a timel# manner > Ensure
com"liance $ith internal "olicies and e,ternal reulator# re2uirements!
Pro&ide in"ut+ad&ice to the '9 > CEO+Board of 9irectors reardin the
formulation of strateic o"eratin "lans!
C! 7ead of Credit Administration (ivision (CA(! ,
Ensure loan documentation and securities are dul# com"leted and in "lace "rior to
disbursement of loans!
Ensure com"liance $ith all formalities reardin lare loans and loans to
9irectors as "er 9irecti&es of Banladesh Bank Circulars > rules and reulations
of Bankin Com"anies -ct!
Ensure that ade2uate insurance is in "lace on all "leded assets, all a""ro&al
conditions ha&e been met and e,ce"tions, if an#, are a""ro&ed "rior to
disbursement of loans!
-$. Procedural <uidelines,
This cha"ter outlines the main "rocedures that are needed to ensure com"liance $ith the
"olicies contained in cha"ter 7 of these uidelines!
-$.$# Approval Process,
The concerned E,ecuti&e at Lonal Office on recei"t of the "ro"osal $ill "re"are a credit
a""raisal memo as "er the "rescribed format and $ithin the "ur&ie$ of the set "olic# and then
"lace it to Lonal Head $ho $ill make Dudment 52ualitati&e and 2uantitati&e6 and if found
&iable then he $ill a""ro&e the facilit#, if it is $ithin his business deleated "o$er other$ise
he ma# re1ect it or for$ard it to the Head of Cor"orate + Commercial Bankin at Head Office
alon $ith his recommendations!
INTERNSHIP REPORT
BRA%C7 MARA5&I%<
&5AM
(5B5C)&IC5S & '**IC5RS!
75A( '* BRA%C7
(APPR'CA > (5CI%5!
AS P5R (55<A&I'%
75A( '* C'RP'RA&5
C'MM5RCIA BA%AI%<
(MARA5&I%<!
75A( '* CR5(I&
(APPR'CA > (5CI%5!
AS P5R (55<A&I'%
(M(
(APPR'CA > (5CI%5!
AS P5R (55<A&I'%
B'AR( '* (IR5C&'RS
(APPR'CA > (5CI%5!
5B5C)&IC5 C'MMI&&55
'* (IR5C&'RS
(APPR'CA > (5CI%5!
AS P5R (55<A&I'%
B5;'%( CAPACI&;
R5C'MM5%(5( &'
M( & C5'
(APPR'CA > (5CI%5!
B5;'%( CAPACI&;
R5C'MM5%(5( &'
AM(
(APPR'CA > (5CI%5!
D'%A 75A(
(APPR'CA (5CI%5!
AS P5R (55<A&I'%
B5;'%( CAPACI&;
R5C'MM5%(5( &'
B5;'%(
CAPACI&;
R5C'MM5%(5(
&'
B5;'%( CAPACI&;
R5C'MM5%(5( &'
*igure -$-, *lo+ Chart of Approval Process
S')RC5, Adapted from MB data"ase
INTERNSHIP REPORT
-$.$- (elegation of Po+er,
9eleation of a""ro&al of Credit facilities shall be as "er "olic# uidelines that all "ro"osals
$here credit facilit#+facilities are u"to 7/I of the Bank%s Ca"ital shall be a""ro&ed b# CR'
le&el, facilities u"to )/I of the Ca"ital shall be a""ro&ed b# the 'anain 9irector and CEO
sub1ect to the limit a""ro&ed b# the Board of 9irectors! Credit facilities in e,cess of )/I of
the Bank%s Ca"ital shall be a""ro&ed b# the E,ecuti&e Committee of the Board of 9irector or
Board of 9irectors on recommendation of CR', Cor"orate Bankin and 'anain 9irector
> CEO! 3hile e,ercisin the business deleation "o$ers, the follo$in eneral uidelines
shall be follo$ed meticulousl#B
The 'anain 9irector can e,ercise all the "o$ers &ested in other
E,ecuti&es+Officers of the Bank!
Other than the 'anain 9irector, the 9eleation of Po$ers shall be e,ercised b# the
-dditional 'anain 9irector + 9e"ut# 'anain 9irector + E,ecuti&es+Officers onl#
to $hom such schedule of "o$ers is issued b# a se"arate letter b# or under the order
of the 'anain 9irector as a""ro&ed b# the Board+Committee!
The 'anain 9irector ma# sus"end e,ercise of deleated Po$ers of an#
E,ecuti&e+Officer or an# cateor# of E,ecuti&e+Officer throuh s"ecific or eneral
order $ith the "rior a""ro&al of the Board+Committee!
9eleated Po$ers ma# be reduced, sus"ended or $ithdra$n at the discretion of the
Board of 9irectors +Committee!
-$.$ . Sanctioning Authority,
The business "o$ers can be e,ercised b# the follo$in $hen "osted as underB
-dditional 'anain 9irector+9e"ut# 'anain 9irector shall e,ercise business "o$er
deleated to them! Senior E,ecuti&e Gice President + E,ecuti&e Gice President + Senior Gice
President $hene&er "osted as InCchare of Credit 9i&ision shall e,ercise business "o$er
deleated to them! The 'anain 9irector is ho$e&er, authori(ed to allo$ com"osite credit
facilities $ithin the deleation as "er deleation allo$ed for indi&idual nature of loan! But
Com"osite limit 5funded and nonCfunded6 so allo$ed shall not e,ceed Tk 7* crore, out of
$hich under no circumstances funded facilit# shall e,ceed Tk! / crore!
-$.$0 (is"ursement,
9isbursements under loan facilities are made $hen all securit# documentation is in "lace!
CIB re"ort should reflect+include the name of all the lenders $ith facilit#, limit and
INTERNSHIP REPORT
outstandin! -ll formalities reardin lare loans and loans to 9irectors are uided b#
Banladesh Bank circulars and related section of Bankin Com"anies -ct! -ll Credit
-""ro&al terms must be met! The check list certificate is to be sined b# Credit InCchare and
Head of Branch! In order to co"e $ith the re&ised "olic#, the disbursement authorit# $ill be
&ested to the Head of Credit -dministration 9i&ision u" to Tk! /!** Crore abo&e $hich $ill
be &ested to the 9e"ut# 'anain 9irector! In the absence of the 9e"ut# 'anain 9irector,
the "o$er ma# be e,ercised b# the Senior E,ecuti&e Gice President!
-$.$1 egal Action,
0eal "roceedin are lenth# and time consumin as $ell as ha&in an element of neati&e
"ublicit# and as such effort must made to settle a defaulter%s outstandin out of court!
Ho$e&er, if situation com"els the Bank to take leal action for reco&er# of stuck u" loans and
ad&ancesM the same shall be done $ith "rior a""ro&al of Head Office!
-$.$2 Erite 'ff 'f oans > Advances,
0oans + ad&ances $hich are recommended for $riteCoff must be accom"anied b# a memo
summari(in the circumstances necessitatin the current $riteCoff as $ell as reco&er# efforts
to date! Ander no circumstances should the fact that all or an# "ortion of a loan + ad&ances
that has been $rittenCoff be re&ealed to the borro$er, nor should the borro$er be informed
that the loan + ad&ances is on a nonCaccrual basis! 9es"ite, the loans and ad&ances bein
$rittenCoff, the reco&er# "rocess $ill be continued for those loan and ad&ances!
INTERNSHIP REPORT
.$ CR5(I& PRAC&IC5S '* MB

.$# 56tent & Restrictions
It is a""lied to all the Branches of 'ercantile Bank 0imited in Banladesh! E,tension of
Credit facilities are sub1ect to Credit Polic# of the Bank and credit restrictions, marin
restrictions, sti"ulations reardin securit#, "eriod of re"a#ment and other instructions and
restrictions im"osed from time to time in this res"ect b# Head Office, Banladesh Bank rules
and reulations and o&erall 4o&ernment "olic# of Banladesh!
.$- Credit (epartment & its *unction
The Credit Risk 'anaement 9e"artment is assisted b# the Credit -dministration
9e"artment, $hich is mainl# concerned $ith the "ostCa""ro&al functions of the Credit
9i&ision! The as"ects that are criticall# tracked and monitored b# Credit -dmin are
Credit e,"ir#
Past dues
E,cess o&er limit
9ocument deficienc#
Re"ortin
Credit 9i&ision is in&ol&ed in basicall# ) broad functionsB
INTERNSHIP REPORT
oan Monitoring,
The im"ortant as"ects of this "art areB
Follo$ a""ro&al terms
Pro"er loan disbursement
'onitor interest "a#ments and "rinci"al re"a#ment
Balance $ith eneral leder
(ocumentation,
The im"ortant functions of this "art areB
0ook at sanction terms and Fill u" loan documentation
checklist,
Ensure Pro"er loan documentation and Obtain client sin off
Filin $ith the Reistered Doint Stock Cor"oration 5 RDSC6
Reistered mortae deed e,ecution
.$. Business Po+ers,
-ll "o$ers of the Bank are &ested in the Board! The# are the source of all "o$ers, and an#
"erson or bod# can e,ercise onl# the "o$ers deleated b# the Board in $a#s and manners
s"ecified b# them! 'ercantile Bank 0td! belie&es in decentrali(ation of "o$ers! 3ith a &ie$
to ensurin "rom"t and efficient ser&ices to its manitude of clients s"read far and $ide, the
Bank en&isaed deleation of o"timum "o$ers to its E,ecuti&es and officials at different
le&el of o"erations!
The Board can deleate the authorit#, not its res"onsibilit#!
The e&il of dual Subordination ma# cree" in the chain of command if authorit#
is not $ell defined and "ro"erl# im"lemented!
E,ercise of the deleated authorit# must commensurate $ith the shoulderin
of the res"onsibilit#!
.$.$#Responsi"ilities,
Head Office is res"onsible for formulatin Credit Polic# for the Bank, for the
"ro"er conduct of the ad&ances in the Branches and for the s#stem of control
o&er them! Head office deleate business "o$ers of BranchCinCchares, de&ise
method of for$ardin credit "ro"osals to Head Office for sanction and
instructions reardin submission of "eriodical returns!
BranchCinCChares are "rimaril# res"onsible for all ad&ances at their
Branches! The# must e,ercise common sense, $isdom, "rudence and
1udiciousness in the use of "o$ers deleated to them and in recommendin
"ro"osals to Head Office for sanction! In all cases, the# must ensure that
BankEs interests are full# safeuarded!!
INTERNSHIP REPORT
.$0 Processing of Credit Proposals,
- secured credit facilit# ma# be allo$ed to a customer onl# after ettin a
limit sanctioned b# the authori(ed officials!
The customer seekin a credit facilit# aainst acce"table securit# must make
an a""lication in bankEs "rinted form NRe2uest for Credit 0imitN PFC7:;
5-nne,ureCl6 enclosin necessar# "a"ers+documents to his nearest Branch of
the Bank $here he maintains his o"erati&e account!
-rranin an inter&ie$ $ith the intendin borro$er to kno$ on the follo$in
"ointsB Present and future "ros"ect of the customerEs business
7! Before finall# selectin the borro$er, bank is satisfied that M
The customer "ossesses character, ca"acit# and ca"ital > The account is
remunerati&e one > Re"a#ment arranement is satisfactor#!
9ealin items and "rimar# securit# of the customer "ossess the 2ualit# of eas#
marketabilit#, durabilit# and storabilit#
Collateral securit# offered "ossesses the 2ualit# of eas# marketabilit# and is
not encumbered and its &aluation is 1udiciousl# assessed so as to lea&e
sufficient marin after co&erin the ad&ance and belons "referabl# to the
borro$er!
'eans, standin and res"ectabilit# of the a""licant and the uarantor 5if an#6
are satisfactor#!
Credit $orthiness of the a""licant is reasonable
0ocation of the business is ood!
&he follo+ing Papers>documents are to "e su"mitted "y the Branch Managers along
+ith the proposals,
a6 Re2uest for Credit limit of customers CPFC7:; 5-nne,ureCl6
b6 Pro1ect Profile + Profile of Business
c6 Co"# of Trade 0icense dul# attested
d6 Co"# of TIN Certificate
e6 Certified co"# of 'emorandum and -rticles of -ssociation, Certificate of
Incor"oration, Certificate of commencement of business, Resolution of Board of
9irector, Partnershi" 9eed, 5$here a""licable6
f6 Personal Net $orth Statement of the O$ner+9irector+Partner+Pro"rietor in BankEs
Format!
INTERNSHIP REPORT
6 Galuation Certificate in BankEs Format alon $ith "hotora"h of collateral
securit# $ith detail "articulars on the back dul# authenticated b# the Branch
'anaer!
h6 . #ears Balance sheet and "rofit and loss -+C
i6 CIB En2uir# Form dul# filled in 5For "ro"osal of Tk!7*!** lac and abo&e6
16 0endin Risk -nal#sis for Credit facilities of Tk!/*!** lac and abo&e
k6 Ins"ection+Gisit Re"ort of Factor#+Establishment+Business "remises of the
customerC-nne,ureC/
l6 Statement of NC 5C9+SB+CC6 for the last 7) months! In case the customer
maintainin account $ith other Bank, Statement of -ccount for the last 7) months
of the concerned Bank should be furnished!
m6 In case of rene$al+enhancement of credit facilit#, 9ebit Turno&er, Credit
Turno&er, hihest dra$in, lo$est dra$in, and Total income earned detailed
"osition of e,istin liabilities of the customer i!e! 9ate of sanction, 9ate of e,"ir#,
Present outstandin, Remarks, if an#!
n6 9eclaration of the customer of the name of sister+allied concerns and liabilities
$ith other Banks, if an#, and an undertakin to the effect that the# ha&e no
liabilit# be#ond those declaredC-nne,ureC;
o6 In case of AC "ro"osal, detailed "erformance of 0+C durin the last #ear i!e! No!
and date of 0+C o"ened, commodit#, 0+C &alue, 9ate of creation of P-9, date of
retirement, mode of retirement etc!
"6 In case of BTB AC "ro"osalC
26 9etailed list of machiner#, "roduction ca"acit#, $orkin ca"ital 5BTB AC6
assessment, e,istin e,"ort AC in hand mentionin date of shi"ment, detailed
"osition of outstandin BTB 0+C+-cce"ted Bills, "roress of "roduction and
e,"ected date of shi"ment, statement of outstandin F9BP+I9BP, if an#, @uota
Position, Ins"ection Re"ort, Co"# of &alid Bonded 3are House 0icence, Customs
Clearance or dis"ute, if an#!
r6 3hether the a""licant is Shareholder+9irector of 'ercantile Bank 0td! as "er
definition of Bankin Com"anies -ct!
s6 Financial -nal#sis to be "re"ared b# the Branch 'anaer based on the financial
"erformance of the com"an# > should sho$s trends in sales+"rofitabilit#,
li2uidit#, le&erae etc! It should also contain an assessment of the com"etence and
2ualit# of the business manaement, the eneral economic > com"etiti&e
en&ironment of the borro$ers industr# and an# other "ertinent factors $hich is
rele&ant for our credit decision!
t6 Dustification+consideration for the facilit#!
INTERNSHIP REPORT
)! The sanctionin authorit# on recei"t of the "ro"osal shall scrutini(e the same and
ensure thatB
-ll necessar# "a"ers and documents ha&e been enclosed!
The "ro"osal has been dul# sined b# the members of the Branch Credit
Committee includin the 'anaer!
The "ro"osal has been dul# recommended!
The "ro"osal does not fall $ithin the e,istin credit restriction
'inimum marin re2uirement aainst the credit facilit# has been "ro"osed!
The "rimar# securit# has ot eas# marketabilit#, durabilit# and storabilit#
The "ro"ert# offered as collateral securit# is 1udiciousl# assessed
The "ro"osal is &iable and stands all credit tests
The "ro"osed borro$er is not defaulter 5classified6 of an# Bank+Financial
Institution
There is no re2uest from other Bank+Financial institution for not
allo$in+sto""ae of facilit# to the "ro"osed borro$er!
3here the "ro"osed accommodation in the form of $orkin ca"ital ma# be
considered on the "ro1ect financed b# an# other Bank includin 9FI,
fa&ourable status re"ort and No Ob1ection Certificate 5NOC6 from the
financin Institution is obtained!
3here )nd chare on the fi,ed and floatin assets 5in case of a limited
com"an#6 or )nd mortae on real estate is offered, clearance in res"ect of
creation of )nd chare on the "ro"ert# toether $ith confirmation that
documents $ill be held b# them on behalf of the Bank and that the# shall not
"art $ith the same $ithout consent of the Bank, is obtained from the 7 is
mortaee!
.! Check list of action to be taken b# the Branch 'anaer+Second Officer+Credit Officer
before disbursement of Credit facilities
-cce"tance of customers to be obtained of the terms > conditions on the
du"licate co"# of sanction ad&ice!
The# $ill thorouhl# e,amine and ensure that the sub1ect credit facilit# does
not contradict to an# la$, rules and reulation of the countr#, Banladesh
Bank and our Bank!
The# $ill obtain NOC from Bank $here the customer has e,istin liabilit#!
CIB Re"ort on the borro$er throuh Head Office!
0endin Risk -nal#sis as "er FSRP Formula in case of credit of Tk!/* lac and
abo&e!
No ob1ection certificate of Banladesh Bank in case the credit facilit# e,ceeds
7/I of Ca"ital Funds of the Bank!
INTERNSHIP REPORT
Reulari(ation+-d1ustment of classified+o&erdue credit of the customer+their
sister+allied concerns $ith our Bank+other Banks, if an#!
:! Rules of sanctionin loansB
Sanction ad&ice $ill be communicated b# Head Office to the Branches and b#
the Branches to the customers under 9ouble sinatures authori(ed b# the
Bank!
No E,ecuti&es+Officers shall e,ceed "rescribed limit of deleated business
"o$ers under an# circumstances!
Galuation of oods+"roduces+h#"othecated to the Bank to secure an# ad&ance
shall in no case e,ceed! The landed cost at the "ort of entr# is assessed b# the
custom authorit# in case of im"orted oods!
4oods and "roduces aainst $hich ad&ances are made should be readil#
marketable!
0oans > -d&ances allo$ed aainst F9Rs, PSPs, 'B9Rs, and 9B9Rs etc!
shall be ad1usted immediatel# before the face &alue of the instruments and
outstandin ad&ance amount becomes e2ual or u"on maturit#, $hiche&er is
earlier!
In case of ad&ance aainst mortae of "ro"ert#, oriinal Title 9eed and chain
of documents i! e! C! S Parcha, R! S! ?hatian, 'utation Certificate, NonC
encumbrance Certificate, 'unici"al Ta, Recei"t, -""ro&ed "lan, Rent Recei"t
5A"to date6 etc! should be checked b# a "aneled la$#er or b# the Bank%s 0a$
Officer!!
'one# suit+court cases aainst an# defaultin borro$er are to be filed b# the
branches after obtainin "rior a""ro&al from Head Office!
.$1 Credit Categories,
-s initiated b# Banladesh Bank different kinds of lendin $ere subdi&ided into 77
cateories, and aain to < "rime sectors for fi,ation of rates of interest b# the indi&idual
banks on com"etiti&e basis de"endin on the cost of funds, "re&ailin market condition and
monetar# "olic# of the countr#!
oans and advances have primarily "een divided into t+o ma/or groupsB
a! *i6ed term loanB These are the ad&ances made b# the Bank $ith fi,ed re"a#ment
schedules! The terms of loan are defined as follo$sB
Short term B A" to 7) months
'edium term B 'ore than 7) and u" to .; months
INTERNSHIP REPORT
0on term B 'ore than .; months
"! Continuous creditsB These are the ad&ances ha&in no fi,ed re"a#ment schedule, but
ha&e an e,"ir# date at $hich it is rene$able on satisfactor# "erformance!
Further all cateories of loans ha&e been accommodated under the < "rime sectors as under
asB
.$1$# Agriculture,
Credit facilities to the aricultural sector falls under this cateor# !It is subdi&ided into t$o
ma1or headsB
a! oans to primary producersB This sector of aricultural financin refers to the
credit facilities allo$ed to "roduction units enaed in farmin, fishin, forestr# or
li&estock! 0oans to "rocessors or traders of aricultural "roducts are not to be
cateori(ed as aricultural loans!
0oans to tea ardens for "roduction are treated as aricultural loan, but loans to tea
ardens for e,"ort should be treated under the cateor# NE,"ort CreditN! Similarl#
medium and lon term loans to tea ardens are cateori(ed as industrial term lendin!
"! oans to input dealers>distri"utorsB It refers to the financin allo$ed to in"ut
dealers and 5or6 distributors in the aricultural sector! -ricultural loans ma# include
short, medium and lon term loans as $ell as continuin credits! -s such, it ma# fall
under the head! 5a6 0oans 54eneral6, 5b6 Hire Purchase or 5c6 0ease Financin!
c! Rural & Micro creditB The bank $ill "ro&ide rural credit throuh rural branches
and other rural institutions enaed in rural u"liftment throuh credit deli&er#! Small
loan "articularl# micro credits $ill be e,tended $ithout collateral securit# throuh
"ro"er su"er&ision and monitorin! Indi&idual su"er&isin aenc# ma# be a""ointed
for su"er&isin such micro credits!
.$1$- &erm oan for arge & Medium Scale Industry,
This cateor# of ad&ances accommodate the medium and lon term financin for ca"ital
structure formation of ne$ Industries or for B'RE of the e,istin units $ho are enaed in
manufacturin oods and ser&ices! Term financin to tea ardens ma# also be included in this
cateor# de"endin on the nature and si(e!
-s the financin under this cateor# has fi,ed re"a#ment schedule it falls under the head
0oan 54eneral6, Hire "urchase or 0ease Finance!
INTERNSHIP REPORT
.$1$. &erm oans to Small & Cottage Industries,
These are the medium! and lon term loans allo$ed to small > cottae industries Small
Industries are "resentl# defined as those establishments $hose total in&estment in fi,ed
ca"ital such as land, buildin, machiner# and e2ui"ment 5e,cludin ta,es and duties6 does
not e,ceed .* million taka and in&estment in machiner# and e2ui"ment 5e,cludin ta,es and
duties6 does not e,ceed 7* million taka! Cottae industries also fall $ithin this definition!
Banladesh Bank i&es interest subsid# O.I to the Banks on loans e,tended under this
cateor#! No short term or continuin credits are to be included in this cateor#! 'edium >
0on term $ea&er credits are also included under this cateor# !0ike the 0are > 'edium
Scale Industr# it is also allo$ed in the form of N0oan 54en6, HireCPurchase or 0ease
FinancinN!
.$1$0 Eorking Capital,
0oans allo$ed to the manufacturin units to meet their $orkin ca"ital re2uirements,
irres"ecti&e of their si(e Cbi, medium or small, fall under the cateor#! These are usuall#
continuin credits and as such fall under the head NCash Credit 5H#"othecation6
.$1$1 56port CreditB
Credit facilities allo$ed to facilitate e,"ort of all items aainst 0etter of Credit +and+or
confirmed e,"ort orders fall under this cateor#! It is accommodated under the heads NE,"ort
Cash Credit 5ECC6N, Packin Credit 5PC6, Forein 9ocumentar# Bills Purchased 5F9BP6,
0ocal E,"ort Bills Purchased etc!
.$1$2 Commercial ending,
Short term loans and continuin credits allo$ed for commercial "ur"oses other than e,"orts
fall under this cateor# !It includes im"ort financin, financin for internal trade, ser&ice
establishment, etc! No medium and lon term loans are accommodated here! This cateor# of
ad&ances are allo$ed in the form of 5i6 0oan aainst Trust Recei"t 50TR6, 5ii6 Pa#ment
aainst Im"ort 9ocuments 5P-96, 5iii6 Secured O&erdrafts 5SO96, 5i&6 Cash Credit 5H#"6, 5&6
0oan 54en6, etc! for commercial "ur"oses!
.$1$3 'ther endingB
-n# loan that does not fall in an# of the abo&e cateories is considered under the cateor# of
other lendin! It includes loan to 576 Trans"ort E2ui"ment, 5ii6 Construction 3orks includin
Housin 5commercial+residential6, 5iii6 3orkOrder Finance, 5IG6 Personal 0oans, etc!
.$2 oan Syndication & Structured *inance,
S#ndication means 1oint financin b# more than one bank to the same clients aainst a
common securit#! This is done basicall# to s"read the risk! It also "ro&ides a sco"e for an
inde"endent e&aluation of risk and focused monitorin b# the aent + lead bank! In
S#ndication financin banks also enter into an areement that one of the lenders ma# act as
0ead Bank! In such case, lead bank has to coCordinate the acti&ities at &arious staes of
handlin the "ro"osal i!e! a""raisal, sanction, documentation, sharin of securit#,
disbursement, ins"ection, follo$Cu", reco&er#, distribution of installments! + interest etc! It
ma# also call meetin on s#ndication members, $hene&er necessar# to finali(e an# decision!
The s#ndicate ma# enerall# be $orked in t$o $a#sB
7! Best effort 'ethod! )! Ander$ritin 'ethod! -t "resent the Best effort method is in
"ractice in our countr#
.$2$# &ypes of Syndicated facilities,
Credit enhanced s#ndicated loan!
3orkin Ca"ital S#ndication!
0oan for B'RE + Ne$ Pro1ects!
Pro1ect Finance 0oan
0ocal Currenc# 0oan under Structured Finance etc!
.$2$- Parties to the Syndication,
-rraner 5Sinle -rraner + CoC-rraner + -rraner 4rou"6! -rraner must obtain
mandate from the customer + Borro$er!
Partici"ants 5Banks + Financial Institutions etc!6!
The Facilit# 'anaer + -ent 5Banks + Financial Institutions6!
.$2$. Advantages of enders > BanksB
0are 0oan re2uirement $ithin leal lendin limit can be manaed!
For di&ersification of risk + sharin of risk!
Sco"e of di&ersification across customers and industries!
.$2$0 Advantages of Customers,
'a# et a lare loan b# contactin $ith one Bank + -rraner!
0ess time consumin and cost effecti&e!
-ns$erable to onl# one Bank!
.$2$1 Important factors for syndication,
'andate to be obtained from the Borro$er!
The debt + E2uit# ratio H $hether the debt I is 1ustifiable!
'arket a""etite H $hether it is saleable to the market + "artici"ants!
3hether the "artici"ants are confident enouh of the ca"abilit# of the -rraner!
3hether the due dilience are "ro"erl# conducted!
Time 0imit for the arranement + Facilit#!
*igure .$#, *lo+ Chart of Syndicated *inance
S')RC5, Adapted from Annual Report -992
.$3 Pro/ect *inance,
- se"arate unit for Pro1ect Finance has been established in the Head Office Credit 9i&ision!
The functions of the unit are to a""raise + anal#(e the Feasibilit# of the "ro1ect, conduct due
dilience, address the risk factors and to be "laced before the Head Office Credit Committee +
E,ecuti&e Committee + Board of 9irectors based on the lendin authorit#!
.$4 SM5 ending,
The Bank intends to encourae the small and medium entre"reneurs and hence structured its
S'E financin acti&ities! The Bank has set the definition of small enter"rise in line $ith
Banladesh Bank uidelines! - s"ecial credit scheme under the name and st#le JSmall and
'edium Enter"rise 5S'E6 SchemeK has been introduced to e,tend credit facilities to the
small and medium entre"reneurs of the countr#!
.$4$# Purpose,
Contribute to the socioCeconomic de&elo"ment of the countr#!
Encourae small and medium industr# es"eciall# aroCbased industr# of the countr#!
Partici"ate in reduction of "o&ert# throuh em"lo#ment eneration and income
eneratin "ro1ects!
Pro&ide financial assistance to small and medium enter"rise, $hich ha&e limited
access to the formal financial markets!
.$4$- &arget Customer SegmentB
'icro Enter"rise
Small Enter"rise+Business
'edium
.$4$. 56tent of *acilitiesB
3ill be determined de"endin u"on the e,"erience of the entre"reneur and the si(e of
the "ro1ect!
Small Enter"riseB Pro1ect &alue u" to Tk7*!** lac!
'edium Enter"riseB Pro1ect &alue abo&e Tk7*!** lac but or+$ithin Tk/*!** lac
Nationalit#B 'ust be Banladeshi citi(en or com"an#+firm must be reistered in
Banladesh and shares o$ned b# Banladeshis!
.$4$0 Product *orms,
3orkin Ca"ital 0oanCO&erdraft+Cash Credit 5H#"othecation6
Pro1ect 0oan+Term 0oanC Hire Purchase
.$4$1 &enor of oan,
A" to 7 5one6 for 3orkin Ca"ital 0oan
'ore than 7 5one6 for Pro1ect 0oan+Term 0oan
.$4$2 Bank Charges>PricingB
Rate of InterestB 7.I"!a!
Ser&ice ChareB 7I on the outstandin balance on monthl# basis!
Risk FundB 7I one time to be reali(ed at the time of sanction the loan!
No chares $ill be reali(ed for "rocessin the loan "ro"osal!
.$4$3 5@uity of the Borro+erB
Ne$ entre"reneurB 7*I
E,"erienced entre"reneurB 7/I!
E2uit# must be de"osited to the bank before a&ailin the facilit#!
.$4$4 Repayment MethodB
It is done b# makin "a#ment of s"ecific number of installments!
Securit#+ CollateralB
H#"othecation on the in&entor#, recei&ables, ad&ance "a#ments, "lant > machineries!
E2uitable mortae o&er immo&able "ro"erties $ith reistered Po$er of -ttorne#!
Personal 4uarantees of S"ouse+Parents+other famil# members!
One third "art# "ersonal uarantee,
Post dated che2ues for each installment!
Collateral Securities &i(! Financial Instruments, 0and and Buildin!
.$4$: &raining,
Borro$ers can also et trainin from their selected institutions, $hich must be reconi(ed b#
the Bank! BI', BSCIC, 'I9-S are "referred trainin institutions!
.$: 56port *inance,
The Bank e,tended different t#"es of credit facilities to the E,"ort oriented Industries +
E,"orter from the &er# ince"tion of the Bank! Recentl# the Bank has re&ie$ed the "osition
and re&ised its "olic# to increase the &olume of e,"ort business b# e,tendin finance to $ell
re"uted e,"ort oriented industries ha&in a track record! This $ill brin the Bank a
substantial "rofit as $ell as forein currenc# to meet the obliation aainst im"ort! The Bank
e,tends facilities in both "reCshi"ment stae and "ortCshi"ment stae for $orkin ca"ital like
"rocurement and "rocurin of Ra$ materials, Packin and Trans"ortin of oods, insurance
"remiums, freiht chares, ins"ection fees etc! PreCshi"ment finance $ill be allo$ed either
aainst Irre&ocable 0etter of Credit of a re"uted forein Bank or aainst finance contract
from re"uted forein bu#ers acce"table to the Bank!
The Bank does not rant an# Packin Credit facilit# aainst 5i6 Restricted 0+C and 5ii6
Re&ocable 0+C! Before neotiation, the dealin officer must check and scrutini(e the
documents thorouhl# to ensure that the# ha&e been dra$n in e,act conformit# $ith the
terms and conditions mentioned in the 0etter of Credit!
.$#9 *inance in <arments Sector,
The Bank%s "olic# is to increase the &olume of E,"ort business substantiall#! In &ie$ of this
the Bank has established a se"arate unit under Head Office Credit 9i&ision for handlin the
4arments Business! In order to take necessar# "recautions durin o"enin of Back to Back
0+C for the im"ort of fabrics and accessories, the Bank has strenthen its monitorin +
su"er&isor# functions for "rotectin the Bank%s interest!
.$## Speciali=ed oanB
In order to co"e $ith the chanes in the econom# and societ#, the Bank%s "olic# is to de&elo"
and introduce ne$ "roducts for different customers rou"!
.$#- Small oan SchemeB
3ith a &ie$ to "ro&ide financial assistance to the sho"kee"ers of different sho""in center +
market situated at &arious cities of the countr#, the Bank has launched an es"ecial "roram
under Small 0oan Scheme! The salient feature and terms and conditions has been circulated
to all concerns &ide Instruction Circular P *8+88 dated Se"tember .*, 7888!
.$#. 5arnest Money *inancing SchemeB
3ith a &ie$ to encourae the Contractor financin aainst 3orks, an Earnest 'one#
Financin Scheme has been introduced! The modus o"erandi and terms and conditions under
the Scheme has been circulated to all concerns &ide Instruction circular P /* dated -uust );,
)***!
.$#0 (octors Credit Scheme,
In order to "ro&ide modern 'edicare facilit# to the mass "eo"le of the countr#, a Scheme
namel# J9octors Credit SchemeK has been introduced for ne$l# "assed 'BBS 9octors,
S"ecialist 9octors and O$ner5s6 of Clinic + Hos"ital + 9ianostic Centre! The detailed
uidelines under the scheme has been circulated to all concerns &ide Instruction circular P /7
of -uust )***!
.$#1 Personal oan Scheme,
3ith a &ie$ to cater the Credit needs of 4o&ernment + Semi 4o&ernment Officials +
Em"lo#ees of -utonomous Bodies + Banks and financial Institutions + 'ultinational
Com"anies + re"uted "ri&ate orani(ation and Teachers of Public + "ri&ate School + Collees +
Ani&ersities, a "ersonal loan Scheme has been introduced! The detailed uidelines and terms
and conditions has been circulated &ide Instruction circular P ):* dated Dul# <, )**:!
.$#2 Consumer Credit Scheme,
In order to "ro&ide financial assistance for "urchasin household consumable items, the Bank
has launched an es"ecial credit "roram under Consumer Credit Scheme to u"rade the
li&in standard of the "eo"le $ho ha""ens to be the main dri&in force of the econom#! -
brief outline on the terms and conditions of the CCS has been circulated to all concerns &ide
Instruction circular P */+88 dated Se"tember *8, 7888!


.$#3 Eomen 5ntrepreneurship (evelopment Pro/ect,
3ith a &ie$ to encourae $omen to take acti&e role in SocioCeconomic acti&ities, an es"ecial
"ro1ect in the name of J3omen Entre"reneurshi" 9e&elo"ment Pro1ectK has been introduced
for e,tendin credit facilit# for establishment + E,"ansion of Small Cottae Industr# and also
as $orkin ca"ital to the "ro1ect! The detail uidelines, terms and conditions and modus
o"erandi of the Pro1ect has been circulated &ide Head Office, Credit 9i&ision Instruction
Circular P 7.8+)**) dated Se"tember )., )**)!
.$#4 ease *inance SchemeB
0ease Financin is one of the most con&enient sources of ac2uirin ca"ital machiner# and
e2ui"ment $hereb# a client is i&en the o""ortunit# to ha&e an e,clusi&e riht to use an asset
usuall# for an areed "eriod of time aainst "a#ment of rent! It is a term financin re"a#able
b# installment! 3ith a &ie$ to encourae the enuine and ca"able entre"reneurs for ac2uirin
Ca"ital machiner#, medical e2ui"ment, Com"uters and &arious items, the bank has
introduced 0ease Finance Scheme! Interest rate fluctuates bet$een 7/C7/!/I! Other terms
and condition are a""licable like term loan!
.$#: &ypes of Credit Activities,
9e"endin on the &arious nature of financin, all the lendin acti&ities ha&e been brouht
under the follo$in ma1or headsB
.$#:$# oan (<eneral!,
Short term, 'edium term > 0on term loans allo$ed to indi&idual+firm+industries for a
s"ecific "ur"ose but for a definite "eriod and enerall# re"a#able b# installments fall under
this head! These t#"es of lendin are mainl# allo$ed to accommodate financin under the
cateories 5I6 0are > 'edium Scale Industr# and 5ii6 Small > Cottae Industr#! Ger# often
term financin for 5I6 -riculture > 5ii6 Other lendin%s are also included here!
.$#:$- 7ouse Building oan (<eneral!,
0oans allo$ed to indi&idual+enter"rises for construction of house 5residential or commercial6
fall under this t#"e of ad&ance! The amount is re"a#able b# monthl# installment $ithin a
s"ecified "eriod! Such ad&ances are kno$n as House Buildin 0oan 54eneral6!
.$#:$. 7ouse Building oan (Staff!,
&a"le .$#, oan Ceiling
S')RC5, Adapted from the MB data"ase
&a"le .$-, Car oan Scheme
The Board of 9irectors of the Bank introduced a $ellC timed and "ramatic re&ised House
Buildin 0oan Scheme for the em"lo#ees of the Bank in &ie$ of increase of "rice of land,
cost of construction materials, "urchasin "rice of read#Cmade flat+house in the ma1or cities
of the countr# as also to im"ro&e $elfare of E,ecuti&es+ Officers of the Bank! The scheme is
called the JEm"lo#ees House Buildin 0oan Scheme of 'ercantile BankK The loan under the
scheme is not claimed as a matter of riht but is e,tended on first come first ser&ed basis
sub1ect to a&ailabilit# of -nnual Budetar# allocation of fund for the Scheme a""ro&ed b# the
Board!
oan Ceiling,
The amount of the loan can not e,ceed the actual cost and other e,"enses relatin to
the land and+or construction of a house or "urchase "rice of a read#made
flat+a"artment! The loan ceilin has been determined $hich are as follo$sB
Sl$ %o$ Category of 5mployees Amount of oan
*7! Senior Gice President and -bo&e Tk!.)!** lac
*)! -sstt! Gice President to Gice President Tk!)<!** lac
*.! Senior Officer to Senior Princi"al Officer Tk!7<!** lac
*:! -sstt! Officer to Officer Tk!7)!** lac
*/! Em"lo#ees other than Officer Tk!/!** lac
.$#:$0 Car oan Schemes
The Trans"ort Polic# of 'B0 for "ro&idin Cars to the E,ecuti&es aainst loan $as a""ro&ed
b# the Board of 9irectors! In the liht of increase of &alue of car, fuel, motor "arts,
maintenance cost and the cost of li&in inde, 59ri&er "ur"ose6, it has been obser&ed that
e,istin monthl# Car allo$ance allo$ed to the E,ecuti&es do not commensurate $ith the real
o"eratin cost of the &ehicle! -s such, the e,istin Car 0oan Scheme ma# be reCdesined in a
$a# that the loan facilit# does not become a burden for the concerned e,ecuti&es!
It is also obser&ed from the Car 0oan Schemes of some Banks that the# are "ro&idin Car
loan to their E,ecuti&es $ithout an# interest! 'oreo&er, their Car allo$ances are hiher than
'B0!
The ceilin of loan, monthl# loan installment and monthl# car allo$ance, ha&e been fi,ed b#
makin a com"arison the same $ith ne$ eneration Banks 5co"# enclosed6 are as follo$s
Sl$ %o$ (esignation of the oan imit oan imit Monthly
S')RC5, Adapted from the MB data"ase
56ecutives ( %e+ Car! (Recondition Car! Allo+ance
*7! -GP+FGP 7/*****+7=***** Tk!=,)8*!** Tk!.*,***!**
*)! SGP+GP 7=*****+)****** Tk! 8,)**!** Tk!.),/**!**
*:! EGP )****** Tk!77,<**!** Tk!./,***!**
*/! SEGP+9'9+-'9 -t -ctual
.$#:$1 Cash Credits & 'verdrafts (Against 7ypothecation of <oods>Stocks!
-d&ance ma# are sanctioned to a client aainst "rimar# securit# of h#"othecation of ra$
materials and+or finished "roducts! Ander this arranement, the borro$er b# sinin a letter
of h#"othecation dul# stam"ed, creates a chare aainst the oods for an amount of debt but
neither the o$nershi" nor the "ossession of the same is "assed on to the Bank! Onl# a riht or
interest on the oods is created in fa&our of the Bank, but the borro$er binds himself to i&e
"ossession of the oods to the Bank $hen called u"on to do so!
Hence, in order to secure the ad&ance, Bank normall# insists on the borro$ers to "ro&ide
suitable collateral securit#!
3hile allo$in credit facilit# aainst h#"othecation of oods+stocks the follo$in "oints are
considered sub1ect to restrictions im"osed from time to timeB
The facilit# is to be allo$ed onl# to the trust$orth# ha&in undoubted standin and
credit $orthiness!
The oods are sellable and borro$er has an absolute title in oods!
H#"othecation ad&ance is allo$ed b# banks onl# for $orkin ca"ital and not for
ca"ital in&estment!
The oods are not sub1ect to ra"id deterioration due to storae for short or lon
duration! The "rices of the oods are stead#
The oods are not encumbered and+or h#"othecated to an# other Bank!
In case aricultural cro"s, the cro"s should be of current season and the ad&ance is
ad1ustable before the cro"s of ne,t season comes in the market!
Sale of Stocks,
In default of re"a#ment of an ad&ance called u"on b# the Bank, the Bank has the riht to
sell the stock "leded to it as securit# after i&in reasonable notice to the borro$er 5&ide
section 7<; of the contract -ct6! Such notice must be sent b# reistered letter, $ith
ackno$ledement due, $hene&er it becomes necessar# to reali(e the securit#! In the e&ent
of the reistered letter bein refused, it must be ke"t uno"ened so that it can be "roduced
in the court, if necessar#, as e&idence of notice ha&in i&en
7ireFPurchaseB
HireCPurchase is a t#"e of installment credit under $hich the borro$er arees to take the
oods on hire at a stated rental, $hich is inclusi&e of the re"a#ment of Princi"al as $ell as
interest for ad1ustment of the loan $ithin a s"ecified "eriod!
S'( (<eneral!,
These are ad&ances allo$ed to indi&idual+firms aainst financial obliation 5i!e! lien on
F9R+PSP+ BSP+ insurance Polic#+Share etc6! This ma# or ma# not be a continuous Credit!
S'( (56port!,
-d&ance allo$ed for "urchasin forein currenc# for "a#ment aainst 0Cs 5Back to
Back6 $here the e,"orts do not materiali(e before the date of im"ort "a#ment! This is
also an ad&ance for tem"orar# "eriod $hich is kno$n as e,"ort finance and falls under
the cateor# NCommercial 0endinN!
S'( ('thers!,
-d&ances allo$ed aainst assinment of $ork order for e,ecution of contractual $orks
falls under this head! This ad&ance is enerall# allo$ed for a definite "eriod and s"ecific
"ur"ose! I!e! it is not a continuous credit! It falls under the cateor# SO9 NOthersN!
PA( (Payment against (ocument!,
Pa#ment made b# the Bank aainst lodment of shi""in documents of oods im"orted
throuh 0Cs falls under this head! It is an interim ad&ance connected $ith im"ort and is
enerall# li2uidated aainst "a#ments usuall# made b# the "art# for retirement of the
documents for release of im"orted oods from the customs authorit#! It falls under the
cateor# NCommercial 0endinN!
&R (oan against &rustee Received!,
-d&ance allo$ed for retirement of shi""in documents and release of oods im"orted
throuh 0+C falls under this head! The oods are handed o&er to the im"orter under Trust
Recei"t $ith the arranement that sale "roceeds should be de"osited $ith the Bank to
li2uidate the ad&ances $ithin a i&en "eriod! This is also a tem"orar# ad&ance connected
$ith im"ort and kno$n as "ostCim"ort finance and falls under the cateor# ECommercial
0endinN!
&a"le .$., Sector +ise allocations of oans and Advances
S')RC5, Annual Report -993
.$-9 Sector +ise allocations of oans and Advances,
'B0 al$a#s "refers in $ell di&ersified "ortfolio in&estment! The "ortfolio continues to be
free from undue concentrations in terms of e,"osure of an# s"ecific industr#!
S Sectors Sector +ise
Allocation of loans
for the ;ear -993$
7 4arments :8;)=:=.;<
) Tradin 8//.7:)8/;
. EnineerinB 7./:7.=/8<
: Contractor Finance 7./=;8*)88
/ 0easin Com"an# 7:=:87*;)/
; Housin ))8;8<*);:
< Food "roducts and be&erae 7<:/:8<..*
= Pharmaceuticals ;<7./;.8=
8 Telecommunication 7//*******
7* Trans"ort :=/::*<;7
77 Te,tile 7)/;);8)</
7) Information technolo# ))7*.8888
7. Hos"ital and medical Ser&ices ;//*:888*
7: Pa"er, Pa"er "roduction and "ublications )8<)::<))
7/ Plastic and "lastic 'aterials 7;<8<7;;/
7; Storae ;)/*8*:
7< 4lass and lass "roducts );/)/))))
7= -riculture 77)/<:**<<
78 OTHERS ):)**:/;/.
Total .7=<<=;*7*:
0$*I%(I%<S & A%A;SIS
0$# '"servation,
9urin internshi" "eriod in 'ercantile Bank 0imited, 4ulahan Branch the
follo$in "roblems or shortae are obser&ed!
0ack of sufficient e,ecuti&es or officers es"eciall# in the credit di&ision ham"ers the
loan sanctionin "rocess in time!
'B0 takes relati&el# more times in rantin loans ad&ances to different "arties! It
seriousl# discouraes the "ersons $ho are inclined to et loan for their urent
"ur"ose! 'ode of disbursement, chare documents etc! Head office takes so loner
time in "rocessin and a""ro&al of cor"orate loan! The total sanctionin "rocess e&ent
takes month after month to i&e the final decision!
'B0 does not sanction loan to all sectors e2uall# as the# re2uire, rather it
concentrates its loan and ad&ances $ithin some limited fields and cateor#!
'B0 has Credit Card facilities but -T' booths are located in some commercial
hub in the cit#! -ain the terms and conditions of the credit card are not chanes
$ith the chanin en&ironment! That%s $h# -T' card holders most often don%t
take credit card facilities e&en in some cases em"lo#ee of 'B0 use other banks
credit card!
There are &arious "roducts and schemes of loans and ad&ances but in e&er# "hase
'B0 doesn%t com"l# $ith the re2uirements of its "olic# and Banladesh bank uide
lines e,actl#!
There is discrimination in sanctionin sector $ise breaku" of loans and ad&ances!
Consumer credit schemes 5CCS6 are more "o"ular and re2uire thins amon the
"eo"le of &arious classes but 'B0 don%t ha&e an# customi(ed schemes taretin
&arious classes of "eo"le! E&en the effecti&e rate of interest is &er# hih! -nd the
terms and conditions of CCS loan are also &er# incon&enient and discourae "eo"le!
0$- Recommendations,
'B0 should disburse their loans in &arious sector rather than s"ecific scheme!
0oan sanctionin and disbursement "rocedure should be eas# and fle,ible bein
consider the re2uirements of different classes of "eo"le!
-mount of loan can be raised in "ro"ortion $ith the e,istin demand of "eo"le in
S'E loan, CCS and Personal loan! S'E loan can be "o"ular amon the small trader
and lo$er income rou" "eo"le like 'B0 9PS!
'B0 credit Policies can be re&ised bein considered $ith the increase demand of
telecom, trans"ortation, ?nit and "ackain and "lastic industr#!
Sector $ised loan in aro based industries and firms, lather technolo# can be
con&enient and fle,ible for the recei&er!
0$. Conclusion,
0ots of ne$ commercial bank has been established in last fe$ #ears and these banks ha&e
made this bankin sector &er# com"etiti&e! So, no$ banks ha&e to orani(e their
o"eration and do their o"erations accordin to the need of the market! Bankin sectors no
more de"ends on a traditional method of bankin! In this com"etiti&e $orld this sector
has trenched its $ins $ide enouh to co&er an# kind of financial ser&ices an#$here in
this $orld! The ma1or task for banks, to sur&i&e in this com"etiti&e en&ironment is b#
manain its assets and liabilities in an efficient $a#!
-s an internee student in 'ercantile Bank 0imited at 4ulshan Branch, 9haka I ha&e trul#
en1o#ed m# internshi" from the learnin and e,"erience &ie$"oint! I am confident that ;*
da#s internshi" "roram at 'ercantile Bank 0imited $ill definitel# hel" me to reali(e career
in the 1ob market s"eciall# in bankin sector!
9urin the course of m# "ractical orientation I ha&e tried to learn the "ractical bankin to
reali(e m# theoretical kno$lede, $hat I ha&e athered and oin to ac2uire from &arious
courses! It is reat "leasure for me to ha&e "ractical e,"osure of 'ercantile Bank 0imited,
because $ithout "ractical e,"osure it couldnEt be "ossible for me to com"are the theor# $ith
"ractice!
Onl# the credit de"artment has been co&ered in the internshi" "roram, it is not "ossible to o
to the de"th of each acti&ities of branch because of time limitation! So ob1ecti&es of the
internshi" "roram ha&e not been fulfilled $ith com"lete satisfaction! Ho$e&er, hihest
effort has been i&en to achie&e the ob1ecti&es of the internshi" "roram!
So in conclusion I $ould like to sa# that e&er# orani(ation has its "ositi&e as $ell as
neati&es and in case of 'ercantile Bank 0imited e,istence of the later one is less then the
earlier one and as the manaement is determined to reach the "ick of success it seems that in
near future the neati&es $ill be eliminated! Eiht #ears is a &er# short s"an of time and the
orani(ation, $hich can establish itself as one of the most re"uted "ri&ate commercial Bank
in the countr# $ithin this short "eriod deser&es s"ecial credit and $ith their able leaders
'ercantile Bank $ill reach the hihest le&el of success &er# shortl#! I $ish the bank all
success "ros"erit# in their field!
Bi"liography
[1] Annual Report 2006 and 2007
[2] Website of Mercantile Bank Ltd.
[] MBL database
[!] Mr. Lutful "aider #$o%d$ur&' ()*' MBL' +uls$an Branc$
[,] Md. (akru--a.an #$o%d$ur&' A)* / #redit 0nc$ar1e' MBL' +uls$an Branc$