A Critical Evaluation of Credit Management and Credit Performance of Mutual Trust Bank Limited-Nayeem111011129

Internship Report
A Critical Evaluation of Credit Management and Credit Performance of Mutual Trust

Bank Limited
Supervised By:
Mehdi Rajeb
Lecturer
ULAB School of Business
University of Liberal Arts Bangladesh
Prepared By:
Md. Nayeem
ID No: 111011129
An internship report Submitted to the ULAB School of Business in partial fulfillment of the
requirements for the award of degree
Of
Bachelor of Business Administration
Date of Submission: 22 December, 2014;
Letter of Transmittal
22 December, 2014
Mehdi Rajeb
Lecturer
Subject: Submission of internship Report.
Dear Sir,
I would like to submit this report titled A Critical Evaluation of Credit Management and
Credit Performance of Mutual Trust Bank Limitedprepared as a part of the requirement for
my Internship at Mutual Trust Bank, Aganagar Branch under the BBA Program at University of
Liberal Arts Bangladesh.
I started my internship period at the organization on September 3, 2014 and have completed my
internship on November 7, 2014. During this period I have across different banking functions
and responsibilities undertaken at MTB Aganagar Branch. It has been an enlightening experience
as I learnt about various branch level functions in different departments such as General
Banking, Credit Department, and Clearing.
After learning about the profile of Mutual Trust Bank and considering the banks principal
business operations, I decided it would be appropriate to choose an area relating credit
performance of the bank because of its being the major business operation of Mutual Trust Bank.
As such, I have chosen to prepare my report on A Critical Evaluation of Credit Management
and Credit Performance of Mutual Trust Bank Limited. In this report, I have ventured to
apply the knowledge and guidelines from my education span and to focus on evaluating the
credit performance and the overall credit management activities of Mutual Trust Bank.
Despite several limitations faced while preparing the report, I have endeavored to make the
study thorough as possible. I sincerely expect that this report accomplishes the objectives and
requirements of my internship and that it finds your acceptance. Please accept my sincere thanks
and gratitude for the guidance, support and time and should you require any elaboration on any
issue, I shall be glad to pursue.
Yours Faithfully
Md. Nayeem
ID No. 11101129
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Acknowledgement
At the very beginning I would like to extend my sincere gratitude to all those who have bestowed
their assistance and cooperation upon the preparation of this report titled A Critical Evaluation
of Credit Management and Credit Performance of Mutual Trust Bank Limited
I take this opportunity to thank everyone who took concern in the successful completion of this
internship. To put more specifically, I express my sincere gratitude to my Supervisor Mr. Mehdi
Rajeb for his direction, prudent supervision and moral support on the ground of which I have put
effort to obtain knowledge on a new area.
I would like to thank the Human Resource Management (HRM) Department of Mutual Trust
Bank Limited for appointing me as intern in the bank, without the support of which I this report
couldnt have come into existence. In particular, I would like to thank Mr. Reaz Ahmed, the
Branch Head of MTB Aganagar Branch who cordially granted my access to branch specific
information and guided me through every step of difficulties I encountered during my internship
period.
I specially acknowledge the contribution of Mr. Shahidul Islam and Muhammad
NazimUddin(Officers, Credit Department, MTB Aganagar Branch) for providing precious
information and in depth idea of the credit management practices performed at different levels of
Mutual Trust Bank Limited. I also express my sincere gratitude to Mohammad
KhabirMiah(Officer, GB Department) who acquainted me with the different practical functions
undertaken at the General Banking Department of the bank.
Finally, I would show my gratitude to all the individuals who helped me to prepare this report
during this time.
-----------------------Md. Nayeem
ID No. 111011129
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Table of Contents
Letter of Transmittal .............................................................................................................i
Acknowledgement ................................................................................................................. ii
Table of Contents ............................................................................................................ iii-vi
List of Figures and Tables ....................................................................................................vi
Executive Summary .............................................................................................................vii
1.0 Introduction .................................................................................................................... 1-3
1.1 Background of the Study ................................................................................................... 1
1.2Statement of the Issue ..................................................................................................... 1-2
1.3Specific Objectives of the study ..................................................................................... 2-3
1.4Significance of the Study ................................................................................................... 3
2.0 Overview of the Organization ......................................................................................... 4-9
2.1 Mutual Trust Bank: Background .................................................................................... 4-5
2.2 Management Hierarchy of Mutual Trust Bank Limited .................................................. 5-6
2.3 Present Board of Directors ................................................................................................ 6
2.4 A Brief Overview of the Products of MTBL .................................................................. 6-8
2.5 Credit Rating of the Bank................................................................................................... 8
2.6 Summary of Financial Performance ............................................................................... 8-9
3.0 Internship Activities ..................................................................................................... 10-17
Internship Activities at Mutual Trust Bank, Aganagar Branch:
3.1 Observations of the Overall Branch Activities ............................................................. 10-12
3.1.1 General Banking Department ................................................................................... 10
3.1.2 Cash Department ...................................................................................................... 11
3.1.3 Foreign Exchange Department ................................................................................. 11
3.1.4 Clearing Department ................................................................................................ 11
3.1.5 Credit Department ............................................................................................... 11-12
3.2My Engagements with MTB Aganagar Branch ................................................................. 12
3.2.1Tasks in General Banking Department .................................................................. 12-16
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3.2.2 Tasks Performed in Credit Department ..................................................................... 16

3.2.3 Observed Loan Proceedings of Mutual Trust Bank in a Nutshell .......................... 16-17
4.0 Methodology ................................................................................................................. 18-19
4.1 Data Collection ........................................................................................................... 18-19
4.1.1 Primary Data ............................................................................................................. 18
4.1.2 Secondary Data .................................................................................................... 18-19
4.2 Data Analysis................................................................................................................... 19
5.0 (A) Analysis and Findings (Qualitative) ......................................................................20-25
5(A).1 Credit Management Practice in Mutual Trust Bank Limited ................................... 20-22
5(A).2Credit Management Activities Performed at Branch and Head Office Level of MTBL.22
5(A).2.1 Branch Level Performance .............................................................................. 22-23
5(A).2.2 Head Office Level Performance ........................................................................... 23
5(A).3 Measures against prospective Defaults ................................................................... 23-24
5(A).4 Credit Risk Management at MTBL ............................................................................. 24
5(A).4.1Credit Risk Grading ......................................................................................... 24-25
5(A).4.2Provisioning .......................................................................................................... 25
5(A).5 Summary Findings(A) ................................................................................................ 25
5.0 (B) Analysis and Findings (Quantitative) ................................................................... 26-31
5(B).1 Credit Performance Analysis ................................................................................. 26-31
5(B).1.1Horizontal/Trend Analysis of Credit Product-wise Performance ....................... 26-27
5(B).1.2Overall Performance of Credit Products from 2009-2013 ................................. 27-28
5(B).1.3Year-wise Status of Classifications of Loans &Advances ................................. 28-29
5(B).1.4Risk-Weighted Assets Analysis ........................................................................ 29-30
5(B).1.5Industry-wise Formal Access to MTBs Credit ................................................. 30-31
5(B).2 Analysis of Financial Ratios .................................................................................. 31-37
5(B).2.1Loans to Deposit Raito ..................................................................................... 31-32
5(B).2.2Return on Loans Ratio ..................................................................................... 32-33
5(B).2.3Analysis of Interest Spread ................................................................................... 33
5(B).2.4 Earning Assets to Total Assets Ratio .............................................................. 33-34
5(B).2.5 Loan Loss Provisions to Total Loans Ratio ..................................................... 34-35
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5(B).2.6 Capital Adequacy Ratio ....................................................................................... 35

5(B).2.7 Return on Investment Ratio ............................................................................ 35-36
5(B).3Summary of Findings (B) ....................................................................................... 36-37
6.0 Conclusion and Recommendation ............................................................................... 38-39
6.1 Conclusion ....................................................................................................................... 38
6.2 Limitations of the Study ................................................................................................... 38
6.3 Recommendations ....................................................................................................... 38-39
References .......................................................................................................................... 40-41

Annexure ........................................................................................................................... 42-46
List of Figures and Tables

Figure-1: Management Hierarchy of Mutual Trust bank (Source-MTB Corporate
Intra-net) .............................................................................................................. 5
Figure-2: Credit procedure of MTB Aganagar Branch ....................................... 17
Figure-3: Overall Performance Evaluation of Credit for the Last 5 Years .......... 28
Figure-4: Amounts of Unclassified Loans & Advances ..................................... 28
Figure-5: Amounts of Classified Loans & Advances ......................................... 29
Figure-6: Risk Weighted Assets for the Last 3 Year .......................................... 30
Figure-7:Industry-wise Access to Formal Credit ............................................... 31
Figure-8: Loans to Deposits Ratio ..................................................................... 32
Figure-9: Return on Loans Ratio ....................................................................... 32
Figure-10: Interest Spread ................................................................................. 33
Figure-11: Earning Assets to Total Asset Ratio ................................................. 34
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Figure-12: Loan Loss Provisions to Total Loan Ratio ........................................ 34

Figure-13: Capital Adequacy Ratio ................................................................... 35
Figure-14: Return on Investment ....................................................................... 36
Table-1: Present Board of Directors .................................................................... 6
Table-2: Summary of Financial Performance................................................... 8-9
Table-3: Credit Product-Wise Horizontal Analysis of Five Years ................. 26-27
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Executive Summary
Within its 15th year of operations, Mutual Trust Bank Limited has opened 101 branches across
the country and has been dealing with a wide variety of Credit and Deposit Products since its
emergence. This study deals with the performance of credits and the credit management practice
of Mutual Trust Bank. The study is entitled as A critical evaluation of Credit Management
and credit performance of Mutual Trust Bank Limited.
The study has focused on the banks credit performance over time and has sought to analytically
examine and critically evaluate different indicators of the financial performance of the credit
business of MTBL. The trend of the banks total disbursement of credits in the past five years
has been considered in addition to the product and industrial sector-wise focus to credit
disbursement. The Loans to Deposit Ratio, Earning Assets to Total Assets Ratio, Risk Weighted
Assets, Capital Adequacy Ratio and status of its Loan portfolio in terms of Classified and
Unclassified credits have been taken into consideration to shade lights on the credit performance
of the bank. The industry-wise formal access to loan from this very bank has been taken into
considerations to have an idea of the degree of the banks productive contribution to the
economy. The study also seeks to reveal a critical overview of the credit management practices
as prevalent at Mutual Trust Bank as its secondary focus.
Chapter Five (B)is the core and foremost chapter of this study where The Horizontal Analysis of
the Credit Product-wise disbursement for Years 2009-2013, overall Trend of the Total Loan of
during the same timeline, Status of Classified and Unclassified credits, Risk Weighted Assets,
Industry-wise Formal Access to Loan, Loans to Deposits Ratio, Capital Adequacy Ratio, Return
on Loans, Return on Investments and other important components have been calculated and
given graphical and rhetorical interpretations.
Chapter Five (A) also bears significance as the chapter briefly analyzes the overall credit
management tasks of Mutual Trust Bank performed at its different managerial levels i.e. Branch
and the Head Office.
Substantial emphasis has also been given on Chapter Three that entails the amplified directory of
the internship activities performed by this author at the Aganagar Branch of Mutual Trust Bank.
Critical observations regarding various activities as experienced have been brought into light
with a detail of the tasks as acquired during the performance.
Finally, the summary of the findings from analysis of the performance and the overall credit
management has been listed and a set of recommendations and a conclusion has been drawn on
the basis of the entire study.
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Chapter One
Introduction
1.1 Background of the Study
Internship program, being a core academic requirement of the 4 year BBA program, involves
receiving a realistic training through attending practical work at an organization. The program
facilitates an intern to have a close look into the real-life practice of what are theoretically learnt
in the whole period of his/her study. As a student of BBA majoring in Finance, I was appointed
to Mutual Trust Bank Limited, Aganagar Branch under the supervision of Mr Mehdi Rajeb,
Lecturer, School of Business, University of Liberal Arts Bangladesh. As per the academic rule,
my supervisor required me to prepare a report on the basis of the experience gathered during my
tenure as an intern and additional studies on Evaluation of Credit Management and Credit
Performanceof Mutual Trust Bank Limited. Credit management involves disbursing credits
and controlling them at various stages to optimize a banks profit. Like all other banks, the
majority of earnings of Mutual Trust Bank are derived from its credit performance. In this study,
overall performance of the banks credits have been analyzed and evaluated in various aspects
through computations of varied number of financial components. Components like Loan to Asset
Deposit Ratio, Earning Assets to Total Assets Ratio, yearly growing trends of the credits
disbursed, yearly growing trend of specific credit products, Risk Weighted-Assets, Capital
Adequacy Ratio, Interest Spread, Return on Loans and other significant indicators of credit
performance have been considered and critically analyzed in this study. Further efforts have been
made to determine the level of formal access of different industries to MTBs credit to obtain a
hint about the banks contribution to our economy. Prior to the quantitative analysis of the credit
performance, light has also been shaded on the overall credit management system as practiced in
Mutual Trust Bank Limited. However, this study is chiefly focused on the critical evaluation of
the credit performance of Mutual Trust Bank.
1.2 Statement of the issue: The prime focus of this study adheres to the evaluation of credit
performance of Mutual Trust Bank. Credit management entails the management of loans and
advances of a bank. The process is adopted by banks so that the risks related with the credits are
limited to the degree a bank can handle. As a requirement of the regulatory compliance, banks
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operating in Bangladesh emphasize to a greater extent on the risk rating systems of its credits.
But proper analysis of credit performance can also reflect and thus can suggest potential wayouts of the credit risks by helping decide where to invest. Again, for successful operations in the
industry, the credit management system must be regulation-compliant, meticulously designed,
functionally delegated and well organized. Thus, the underlying issue in this particular case is the
evaluation of credit performance evaluation of the credit management with reference to Mutual
Trust Bank Limited as a benchmark. A wider number of mechanisms have been used to evaluate
the credit performance of Mutual Trust Bank and attention has been drawn on its overall credit
management activities, in light of the observed prevalent practices.
1.3 Specific Objectives of the Study:
I.
To analyze and evaluate the overall credit performance of MTBL.
II.
To analyze and evaluate the product-specific performance of the credits of MTBL.
III.
To gain an insight of the extent of the productive use of MTBLs deposits received
from its clients.
IV.
To obtain an insight of the increase or decrease of the firms capability to tackle the
liability by the banks assets.
V.
To get a clear idea of the banks Earning Assets and their proportion to the Total
Assets of the bank.
VI.
To determine the highest income-bearing credit products for MTBL.
VII.
To have a meticulous understanding the status of MTBLs Classified and

Unclassified credits.
VIII.
To inspect the maintenance of deviation between the interest earnings and interest
expense (Interest Spread) of MTBL.
IX.
To focus on the credit management procedure as practiced at various levels of its

organizational structure.
X.
To have a close look into the credit risk management practices of MTBL.
XI.
To scrutinize if the disbursed credits of MTBL are invested in the de facto productive
sectors of the economy.
XII.
To have a brief understanding of the CRM Policies and procedures adopted by

MTBL.
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XIII.
To have an overall glance of the performance of MTBL.
1.4 Significance of the Study:

According to Bangladesh Economic Update (Vol 4 & 5 Sep 2014 & July 2014) by
UnnayanOnneshan, the credit disbursements by private banks of the country have been gradually
showing a declining trend in recent years. The study claims that the profitability of banks in
credit sectors has been declining and consequently the taxable income of banks have been
falling. Thus, more talks by experts on credit disbursement issue are taking place. In an economy
like Bangladesh, which is rapidly experiencing financial growth, the performance of banks
means a lot. In practical sense, the growth of the entire business sectors of the country are
directly related to the credits disbursed by bank i.e. credit performance and credit management
system of banks. That being stimuli, increasing regulations by the Bangladesh Bank are leaving
effects on banks performances and inducing the private banks to revise their respective credit
policies. International standards as regards credit performance and credit policies are being
observed by the central bank and efforts are being made to implement those practices into the
domestic banks. While this is the scenario, no other issues but analyzing credit performance and
evaluating credit management of a bank appeared more significant than anything else. This is
because the progress of the economy is largely dependent upon the unflawed performance of
banks. Thus, taking MTBL as a case and inspecting whether the bank is making a breakthrough
in such an adverse industry situation by making effective and efficient use of its assets has a
significant utility. As this his study will examine how MTBL has been performing in credit from
the year 2011, 2012 and 2013 with a sharp focus, it is expected that the study reflect considerable
understandings regarding the maintenance of financial components like Risk-weighted Assets,
Earnings to Total Assets, Loan to Deposit Ratio, Capital Adequacy Ratio etc. for other interested
financial institutions, even for the non-bank ones.
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Chapter Two
Overview of the Organization
2.1 Mutual Trust Bank Limited: Background
Mutual Trust Bank is one of the five oldest private commercial banks operating in Bangladesh
that were issued permission during the early 90s. The other contemporary banks were DutchBangla Bank, Al ArafaIslami Bank, Prime Bank, Dhaka Bank and Eastern Bank. These banks
are known as the second generation banks in the country as they have come out of bad loan
culture for the first time in the history of banking in Bangladesh. Mutual Trust bank limited is
licensed as a Scheduled Bank in the private banking sector. The bank has recently opened its
101th branch and in a period of 15 years, it has conspicuously shown a growth through meeting
its capital adequacy requirement of the central bank of Bangladesh. Following information
regarding the commencement of the bank have been adopted from the banks website
(www.mutualtrustbanklimited.com):
Mutual Trust Bank was incorporated as a Public Limited Company in 1999, under the
Companies Act 1994. The company had an Authorized Share Capital of BDT 1,000,000,000
divided into 10,000,000 ordinary shares of BDT 100 each during its incorporation. Currently, the
Authorized Share Capital of the company is BDT 10,000,000,000 divided into 1,000,000,000
ordinary shares of BDT 10 each. The Company was also issued Certificate for Commencement
of Business on the same day and was granted license on October 05, 1999 by Bangladesh Bank
under the Banking Companies Act 1991 and started its banking operation on October 24, 1999.
According to the Memorandum of Association and as licensed by Bangladesh Bank under the
provisions of the Banking Companies Act 1991, the Company started its banking operation.
Currently Mutual Trust Bank Limited conducts the following banking operations:
1. Wholesale Banking
2. Retail Banking
3. International Trade Financing
4. Small and Medium Enterprises (SME) Banking
5. NRB Banking
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6. Privilege Banking
7. Card Services and
8. Treasury Operations
MTB operates through its Head Office at Dhaka and the bank carries out international business
through a Global Network of Foreign Correspondent Banks.
2.2 Management Hierarchy of Mutual Trust Bank Limited:
Figure 1: Management Hierarchy of Mutual Trust bank (Source-MTB Corporate Intra-net)

As the figure depicts, MTBL has a standard organization structure which has compliance and
consistence with the guideline as prescribed by the Bangladesh Bank.
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As per their detailed organizational structure relevant with the credit management process, Board
of directors is the source of all power which is delegated by the Managing Director and CEO of
the Bank. Every Divisions and Departments has a divisional and departmental heads, sufficient
manpower is employed under these departmental heads. Officers has to report to their line
managers, Line Mangers has to report to their divisional heads, Divisional heads are accountable
to Deputy Managing Directors, Deputy Managing Director has to report to Managing Director
and CEO. CEO is accountable for his actions to the Board of Directors.
It is relevant to articulate thatthe MTBL restructured its banking system from Branch Banking to
Centralized Banking in the year 2007. A corporate intra-net is used to centrally control the
branch banking operations from the Head Office.
2.3 Present Board of Directors:
Sl.
1
2
3
4
5
6
7
8
9
10
11
12
13
Name
Mr. Rashed Ahmed Chowdhury
Mr. M.A Rouf,
Mr Syed ManzurElahi
Dr. ArifDowla
Mr. Md. Hedaytellah
Mr. Md. Abdul Malek
Mr. Md. Wakiluddin
Mrs. KhwajaNargisHossain
Mr. AnjanChowdhury
Mr. Q.A.F.M Serajul Islam
Mr. Anwarul Amin
Dr. Sultan HaffezRahman
Mr. Anis A. Khan
Designation
Chairman
JP, Vice Chairman
Managing Director &

CEO
Source: www.mutualtrustbank.com
Table 1: Present Board of Directors

2.4 A Brief Overview of the Products of MTBL
MTBs products are broadly classified into four categories, namely:
1. Retail banking products
a. Deposit products
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b. Loan Products
Retail products are enjoyed by individuals and institutions. MTB has a wide variety of deposit
products, mainly dividing into 4 categories: Current Deposit (no interest paid), Savings Deposit
(interest paid on a monthly basis), Fixed Deposits and other specific deposit plans that offer
different interest earnings depending on the maturity. Retail Loan Products include Personal
Loan, Auto Loan, Home Loan, Home Equity Loan and Professional Loan. MTB levies different
interest rates (floating) on these credits issued.
2. Wholesale banking products-MTBs wholesale banking includes:
a. Term Finance
b. Working Capital Finance
c. Trade Finance
d. Offshore Banking
e. Syndication and Structured Finance.
MTB often term these financing activities as Corporate Finance and the interest rate earned on
these credits amount a greater amount of earnings for MTB.
3. SME Banking: Followings are MTBs SME banking products:
a. MTB Bhagyobati
b. MTB Krishi
c. MTB Moushumi
d. MTB Revolving Loan
e. MTB Small Business Loan
f. MTB Digoon
g. MTB Green Energy Loan
The Revolving Loan, in the suburb areas is a popular credit scheme.
4. NRB
a. NRB Savings A/C
b. NRB DPS A/C
c. NRB FDR
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5. Treasury
a. Dibor
b. Money Market
c. Foreign Exchange
d. Primary Dealers Business
Apart from these MTB provides other services such as taking Electricity Bills, Telephone Bills,
Gas Bills etc, though these services are subject to branch specifications.
2.5 Credit Rating of the Bank: Mutual Trust Bank was last rated by CRAB, one of the leading
credit rating agencies of the country, in May, 2010 which expired on June 30 2011. The agency
didnt rate it further, as per their website suggests. (http://crabrating.com/index.php)
2.6 Summary of Financial Performance
The following summary has been prepared by taking inputs from the annual report of Mutual
Trust Bank Limited 2010-2013. Since the audited financial statement for the year 2014 is yet to
be published, this study had to depend on the audited reports that were published up to 2013. For
this, some facts, such as total branches have reached 101 in number, total number of employees
has increased to a considerable amount etc couldnt be included in this table.
Particulars
Authorized Capital
Paid up Capital
Shareholders Equity
2013
10000
2543
4719
2012
10,000.00
2,119.58
4,378.81
2011
3,800.00
1,766.32
3,684.51
2010
3,800.00
1496.88
2,483.09
Total capital
Total Assets
Total Deposits
Total Loan & Advances
6695
6,225.56 3,969.33 2,888.33
65,683 58,246.03 52,774.77 38,964.97
53778 45,846.31 42,354.07 33,820.41
44,506 39,676.12 33,883.92 28,529.35
Total Investment
Export
Import
Total contingent Liabilities
20,149 9,216.33 9,537.97 5,606.49

26,596 16,842.85 19,676.38 19,463.24
36,945 27,652.80 29,720.99 30,381.62
15857 15,498.87 10,061.04 11,467.71
Operating Income
1488
3,398.65
2,544.02
1,839.57
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Operating Expenditure
848
1,396.93
917.1
644.49
Profit before provision & tax
303
2,001.72
1,626.92
1,195.09
Profit after provision & tax
404
988.36
820.61
305.03
Total provision maintained
1483
1,283.15
1,139.82
1,236.07
Earning asset
Price earnings ratio
66,665 51,184.77 46,075.04 33,944.60

20.84
15.18
10.64
22.23
Number of Branches
76
68
44
36
Number of Employees
1291
1,050
841
739
[Source: Annual reports of MTB, 2010-2013]

Table 2: Summary of Financial Performance
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Chapter Three
Internship Activities
3.1 Internship Activities at Mutual Trust Bank, Aganagar Branch
As part of my four year BBA program, I was appointed to Mutual Trust Bank at its Aganagar
Branch (Keranigonj, Dhaka) from September 3, 2014 to November 7, 2014 by the Vice President
of the HR department of the bank. It was a three months opportunity to closely observe the
practical applications of my theoretical learning. I came to know, observe and innately evaluate
certain facts that have enriched my understanding about the banking practice in Bangladesh.
Observation of the Overall Activities of Branch: At the very first day of my internship, I met
the branch head (manager) of Aganagar Branch with the appointment letter issued from the
corporate Head Office. The manager, cordially receiving me with his affectionate tone, asked the
officer performing General Banking activities to introduce to me to the employees of the bank. In
the first week of my internship, I theoretically learned from the General Banking officer (as
MTB has no theoretical sessions for interns) about the departments of the MTB Aganagar
Branch and their respective functions, an overview of which is presented below:
3.1.1 General Banking Department: An officer is in charge of handling the General Banking
Activities of MTB Aganagar Branch. He sits at the front desk and performs the following tasks:
a. New Account Opening
b. Account Closing and Transfer of Accounts
c. Checking Account Balance for customers
d. Maintaining the Banks Locker
e. Issuing Cheque Books
f. Issuing Pay orders, Demand Draft etc money transaction means.
g. Transferring Funds
h. Opening Fixed Deposit Accounts and other Scheme Deposits
i.
Maintaining On-line Voucher
j.
Rendering ATM cards, receiving complaints about cards, issuing card

replacement orders and activating SMS and internet banking options.
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3.1.2 Cash Department: A cash in-charge and two other Assistant Officers take care
of the Cash Department at MTB Aganagar Branch. They are responsible for cash
payment and receipt on behalf of the bank. They pass Cheque, do the postings on
the computer and receive utility bills from the clients.
3.1.3 Foreign Exchange Department: The Foreign Exchange task of Aganagar
Branch is limited to dealing with Remittance received only. Since the Branch is
not in the metropolitan area, no L/C or export proceedings are performed in this
Branch. Customers and clients who are supposed to receive money from a foreign
country come with the pin code of the transfer agents like Western Union,
Monegram etc. The officer collects information from the recipient and verifies by
accessing information from the pin code. After he is satisfied, the money is paid
to the respective recipient.
3.1.4 Clearing Department: The clearing tasks at this very branch are performed by
the very person who is responsible for the Foreign Exchange Department.
According to my observation, the reason for these combining tasks may have lied
in the fact that the Forex Department tasks are limited, or MTB is unlikely to
appoint an employee considering this a relatively smaller branch.
3.1.5 Credit Department: One of the most major roles played by the branch is taking
care of the credit financing disbursed towards the clients. Since, Aganagar,
located in the Kaliganj area, is the industrial center of Keranigonj, almost every
commercial bank has their branch on that locality. AB Bank, Jamuna Bank, Brac
Bank and MTB has the branch in on the same lane. So the credit department has
hard times keeping with the competition of the neigbouring competitors on that
locality. This Department at this very branch is taken care of by two credit
officers, who directly work under direct supervision and in cooperation with the
Deputy Manager and Manager of the Bank. Theres a credit committee headed by
the Manager of the branch and the other members are the deputy manager and the
two credit officers.
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The credit department has to play a wide variety of roles. As per my observation, they
have the supreme role in the profit of the branch. Some tasks performed by the
department are as follows:
k. Preparing Loan Application Form for the purpose of providing loans

l.
Preparing the CIB (Credit Information Bureau) Statement for Bangladesh Bank
m. Administering, supervising and controlling Retail Loans

n. Counseling the counter party on which loan to avail
o. Preparing Credit Proposal and Statement
3.2 My Engagements with MTB Aganagar Branch: Since the appointment letter of MTB bore
no formal directions as to my appointment into any specific department, I enjoyed kind of an
informal freedom regarding my work. But my organization supervisor, Mr. Reaz Ahmed, the
branch head wanted me to work in General Banking department as an assisting hand to the
respective officer. Later, I was asked to work in the Credit Department of the Branch. So my
experiences are gathered around mainly these two departments.
Followings are the activities I performed at the AganagarBranch.Efforts have been made to
highlight the discrepancy of practice from the theory in the observation of each task.
3.2.1 Tasks in General Banking Department:Almost two-thirds of my internship
time was spent in the GB department. I had come across the opportunity to solely handle the
front desk, while the responsible officer was out in mandatory leaves for 15 days. In this
department, I performed the following tasks:
A. Opening Accounts: Although the Account Opening form is a deed between a bank and a
client and should be filled up by the clients own hand, in our branch, the front desk
officers have to do this task. I had to fill in the account forms as per the customers
documents i.e National ID card, Birth Certificate, Passport, Drivers License etc.
Followings are some special features and documents that are necessary to be attached to
the Account forms:
Transaction Profile: Usually savings, current and MTB Inspire accounts are
termed as the Transaction account whereby customer regularly makes
to and
12 | P a g e
receives money from the bank. Transaction profile is the speculation of the
amount of the money he is likely to transact on a monthly basis. This profile is a
special requirement for the corporate Head Office audit committee to analyze how
risky a customer is. This profile is also audited by the Bangladesh Bank authority
to check and verify the money laundering activities in Bangladesh. The profile
seeks three information which are:
i. The ceiling of the amount ofcash a client can deposit or withdraw at a time
and in a month
ii. The ceiling of the amount of cheque transaction of the customer at a time
and in a month
iii. The ceiling of amount of money that a customer expects to receive from a
foreign country and the amount of money he wants to send overseas (this
is strictly regulated)
Observation regarding Transaction Profile: According to my observation, although this has to

be filled by the customer him/herself, most of the customers can hardly perceive the gist of it.
Therefore, we, people who are in charge, have to speculate and fill the profile and get it signed
by the customer. The point I want to make is that, by such practice, the main purpose of
maintaining Transaction Profile is getting hampered. Although signed by the customer, the
profile always doesnt say what it needs to say.
KYC Form: In the course of dealing with account forms, I came to know and
understand about a new form that is required to be attached to the main A/O form
known as KYC (Know Your Customer). The KYC forms vary in terms of
Transactional and Non-Transactional (FDR and other Saving Schemes) Accounts.
In case of Transactional Accounts, along with the basic information of the
customer, (Name, Date of Birth, NID No. etc), the customers transaction risk is
assessed on the basis of the Transaction Profile. This is to be filled by the office.
13 | P a g e
The Head Office and audit committee of the MTBL uses this data to get a light on
how much credit is to be disbursed on how much deposit.
SBS-2 Report Form: Scheduled Bank Services (SBS) forms are the requirements
of the Statistics Department of Bangladesh Bank to collect the overview of the
financial operations across the economy. Bank and non-bank organizations have to
fill up SBS return forms to reflect the clear picture so that the Statistics Department
can come into necessary findings. These forms are of three types- SBS-1, SBS-2
and SBS-3. For Banks, SBS-2 forms are used whereby the following information is
given against each of the Accounts opened and operated by MTB. SBS-2 is
basically a coding system of the accounts variety, customers occupation, deposit
categories maintained by banks etc. Codes are definitely of numeric value. Usually
first 3 columns of the form are filled in the bank offices. Rest of the columns, in my
observations, have always been marked N/A. The columns that are filled in are:
i.
Column 1-Serial Number: This is the account no. of the customer, be it a

savings, current or deposit scheme.
ii.
Column-2 Number of Accounts: Each category of the deposit/loan scheme

bears a specific code no. This code is filled in this column.
iii.
Column-3-Sector Codes: The most important part of this form. Here

customers are divided into specific sectors according to their profession. For
example, Retail shop owners are given code 903050, Service Holders code is
911000, and Housewives are given 915001.
Observation on the SBS-2 Forms: As per my observation, the task of filling up this form is
inflicted by over-generalization. While filling up this form, proper precautions in categorizing
the profession of the customer are not taken. Although most of the clients fall into the category,
Local Businessmen are categorized in 903050 irrespective of the nature of their business, for
instance. This trait is kind of a malpractice that will leave bad impact on the statistical analysis of
Bangladesh Bank in the long-run.
B. Issuing Cheque books: Cheque Books are maintained with much sensitivity in Aganagar
Branch. The GB officer himself unlocks the Cheque Books to be issued every day. When
14 | P a g e
a client comes and claims, the Cheque Book lot entry is posted in the computer using
Flora Banking Software. Since special cautions have been made by the Central Bank
authority as per Cheque forgery issues, Cheque issuing task is handled with considerable
attention. Interns are not usually allowed to handle the Flora Banking Software in case of
Cheque Book lot entry. But I performed this task of issuing Cheque Book under the
careful guidance of the GB officer I assisted. After the lot entry is posted, the registry
book is signed by the customer and the Cheque Book is handed over to him.
o Observations: Once a Cheque Book is lost, the formality to retrieve a new one is
much lengthy process. The client claiming to lose a Cheque needs to file a General
Diary in the police station. The copy is then verified and kept by the branch
manager and the proceedings are done only after then. I have seen two clients who
were businessmen and their transactions were seriously hampered due to losing of
Cheque Books.
C. Customer Dealing: I had to demonstrate the features of different deposit products before
a prospective account holder of the company. Followings are the most sold products of
MTB Aganagar Branch, according to my observation:
Savings Accounts: Savings accounts pay interest on the deposits on a monthly

basis. But there is another savings account product named MTB Inspire that
counts interest on a daily basis and pays in an accrual manner monthly. It is
usually opened on the name of an individual. This product is not available for
business institutions. The current interest rate on savings accounts paid by MTB is
5%.
Current Accounts: Typically current accounts are opened by people conducting

businesses in the neighboring area. Institutions generally use this product. No
interest is paid by MTB on this deposit product. For institutions to open this
account, some additional documents along with the Identity documents (NID,
Passport, Birth Certificate etc) are needed such as Trade License issued by the
local government authority, TIN certificate, seal of the institution etc.
Fixed Deposit Scheme: Like all other bank MTB is providing Fixed Deposit
Scheme. The rate has fluctuated between 8.50% to 8.75% during my working
15 | P a g e
period at the bank for the three months deposits. The deposits can be, however, of
6 months, 1 year and other maturity periods, but typically 3 months is the mostsold and standard Fixed Deposit benchmark rate according to observation.
Looking at the previous records of the performance of the bank in the case of
FDR, it makes me believe that the sale of this deposit product has considerably
decreased due to interest rate plunge.
Other Deposit Schemes: Among deposit schemes like Brick by Brick, MTB
Kotipoti, MTB Millionaire etc. Brick by Brick the most popular scheme sold by
the branch. It pays approximately 11% return on the savings made by the party.
The installment can be of 500 taka to any amount of its multiple.
Observations about the deposit products: One remarkable observation that the special savings
and other deposit schemes centrally designed by the MTBL are hardly popular in the suburban
branches like Aganagar. Only a few deposit schemes like Savings, Brick by Brick, FDR are sold
and the rest rigorously designed are hardly familiar to clients. I think proper marketing initiatives
are should be taken to adapt products like MTB inspire, MTB Probaho, MTB Education Plan,
MTB Millionaire etc to customers. In my tenure, I have hardly sold any of these deposit products
to any client.
3.2.2 Tasks performed in Credit Department: The credit department is one of the
most confidential and sensitive departments of this branch. In this department, I was given
chances to observe more than rather physically work. Amongst the work I performed, the
preparation of CIB statement is mentionable. I accompanied Mr. Nazimuddin, one of the credit
officers, in the bodily investigation of the partys collateral locations. But for most of the time, I
was allowed to observe the proceedings and arranged informal questionings with the credit
officers regarding the performance of the credit. I have achieved a detailed understanding on
their Loan products and the Loan proceedings.
3.2.3 Observed Loan proceedings of Mutual Trust Bank in a Nutshell: The task
starts from the request for credit made by the client. Scrutinizing and collection of information
from Primary and Secondary sources are done afterwards. Credit appraisal and evaluation is the
critical part of the credit management. On the basis of the evaluation, higher authority approves
the application with certain conditions. Sanctioning officer sanctions the credit. Credit is
16 | P a g e
sanctioned only when the credit monitoring terms and conditions are fulfilled. Loan
disbursement procedure is presented in short in the following figure:
1. Borrowers Request &
2. Filling in Form A
Bangladesh Bank
Application for Loan
4. Preparation of Credit
3. Collection of CIB Report from
5. Appraisal of Credit Proposal
6. Approval of Head office
8. Documentation
9. Disbursement of Credit
Proposal
7. Issuance of Sanctioning Letter
Figure 2: Credit procedure of MTB Aganagar Branch
Chapter Four
17 | P a g e
Methodology
4.1 Data Collection:
This study is based on a blended mix of primary and secondary sources of data. However, since
one of the core objectives of the study involves a number of analyses of the credit performance
of MTBL, the dependence on secondary data has been naturally to a greater extent. Again, for
the qualitative analysis of the overall credit management practices at different level of MTBL,
the authors observation as an intern in the bank has been used as the primary data. For the
quantitative analyses, different secondary data in internal and external forms have been used.
4.1.1 Primary Data: Primary data used in this study have chiefly been gathered through
observations of the activities as performed at the credit department of MTB Aganagar
Branch. The author of this study has been facilitated to undergo a close interaction
with the credit officers that resulted in the disclosure of the credit managing tasks
through the authors informal interviews and inquisitions. The data collected at this
stage served the qualitative analysis of this study.
4.1.2 Secondary Data: In order to quantitatively evaluateMTBLs performance of credit
through analyzing ratios and showing their trend, this study had to take inputs from a
wide number of secondary sources. These secondary data can be subsumed into two
following categories:
a. Secondary Data from Internal Source: Internal secondary data have been
gathered from the banks own publications. Such data include the Audited Annual
Reports of the Mutual Trust Bank Limited (Up to 2013), the banks website
(www.mutualtrustbank.com) ,forms, brochures and other documents used in the
credit department and overall branch operations of the Aganagar branch.
b. Secondary Data from External Source:These documents include different
regulatory guidelines issued from Bangladesh Bank such as BRPD circulars,
BASEL accords, Investopedia definitions, books, articles, blogs and journals and
other publications available on the internet on credit related issues. Bangladesh
Bank website has been used as an important source of the industry performance
the banking industry.Helps have also been inferred from economic updates of
18 | P a g e
Bangladesh from Websites like www.unnayan.org. A detail of the secondary data

would be available at the end of this study under the section titled References.
4.2 Data Analysis: The Analyses of this study is divided into two parts i.e qualitative and
quantitative. Qualitative analysis on the credit management procedure practiced as at MTBL is
done on the basis of personal observation. The quantitative analyses, the main part of the
analysis, however, have been done by using a number of formulae to calculate the banks
financial performances in terms of credit operations. These calculations include the banks Loans
to Deposit Ratio, Return on Loans Ratio, Earnings to Total Asset Ratio, Loan Loss Provision to
Total Loan Ratio, and Capital Adequacy Ratio for the last 3 years in addition to the calculations
of the banks overall performance and its trend in the last 5 years. The study has also analyzed
the maintenance of MTBLs Risk Weighted Assets and the performance of its Classified and
Unclassified Loans for the previous 3 years. All these calculations have been done by using
Microsoft Excel. As a tool of analysis,the graphical illustrations of the analyzed components
have been used, while the all the calculations and the formulae used have been made available in
tables the Annexureof this study.
19 | P a g e
Chapter-Five (A)
Analysis and Findings (Qualitative)
5(A).1 Credit Management Practice in Mutual Trust Bank Limited
The entire credit disbursing procedure, assessing credit proposals and managing credit related
risks and analyzing the credit performance constitute the whole packet of credit management of
Mutual Trust Bank. From the micro perspective, the process sets off its journey when an
applicant applies for a specific loan product at a particular branch of MTBL. This very part of
analysis is aimed at focusing on the overall picture of credit management practices prevalent at
Mutual Trust Bank Limited. This qualitative analysis has been resulted from the authors
observation during the performance of his internship at a branch of the bank and thus it
emphasizes more on the practical scenario rather than the theoretical one.
The initial application through which the borrower applies for loan needs to specifically mention
primary personal information regarding him as well as the grounds he needs the credit for. On
the basis of information collected from the application, a verification stage emerges where the
credit officers of the branch seek to verify the info thoroughly once again before they go through
further proceedings. In case of new clients, credit officers go for a method called Direct
Inquiry meaning interviewing the customer and inquiring about his financial solvency from
secondary sources. In case of an existing client, a method called In-file ledger1 (the common
name in branches) is followed. This entails checking the accounts maintained by the client with
additional care. The purpose of both the method is to gain an initial insight of how financially
credible, credit-worthy and capable the client is. After the preliminary scrutiny is done,
credit officers require the client to fill in a form popularly known as Form-A. This is the
formally-set form used for information-collecting purpose by Mutual Trust Bank. All basic and
supplementary personal information about the prospective client is gathered through is form.
Although, theoretically, the form ought to be filled in by the client himself, in most of the cases
this task is performed by the respective officers. Afterwards, the Credit Officers fill in the CIB
form, as prescribed by the Bangladesh and collect the CIB Report. The time consumed in
Terms in Italic are kept the way they are used at MTB Aganagar Branch and the terminology is adopted from MTB
Corporate Intranet.
20 | P a g e
collecting CIB Report for MTBL has tremendously reduced with the introduction of Bangladesh
Banks online CIB Report Collection System in 2011. This task previously took 15-25 days
(www.bankinfobd.com). The significant part starts after the CIB report is collected. Credit
Officers at a particular branch of MTBL prepare the Credit Proposal so as to send to the Head
Office for approval. This proposal contains the complete T&C of the investment. At this level of
management, a number of documents are prepared properly signed (both by the borrower and
undertaking officers) and attached to the Credit Proposal. The document requirements in this
case vary depending on types of borrowers and loans. Common document requirements are Loan
Application Form, Acceptance of the terms and conditions of Sanction Advice, Photographs (2
copies), NID/Passport/Birth certificates etc. TIN, LOI (for Service Holders), Trade License (For
Business Persons), Utility Bills, Six-Months Bank Statement, Quotation (for auto loan and home
loan), Guarantor Information, , Demand Promissory Notes, Personal Letter of Guarantee, and
Letters of Hypothecation for Stocks, Goods, Book Debts and Receivableetc are borrower-specific
documents. The Project Proposal form is prepared by the branch. The most crucial part follows
afterwards. In a form tilted MTB Credit Appraisal Form, branch Credit Officers appraise the
project proposal themselves. The appraisal process gives indication to the feasibility of the
project. It is also a process to measure the financial capacity and management capacity of the
client with regard to his credit-worthiness. Quantitative analyses are conducted regarding the
repaying capacity of the borrower. If the disbursing amount is larger, Ratio Analysis is given
concern. Otherwise, merely repaying capacity test is conducted to show credit-worthiness of the
applicant. The loan, however, if amounts to five million taka, further credit risk analyses are
followed. The approval committee of Mutual Trust Bank emphasizes on project appraisal as they
approve no credit unless it is appraised at branch level. The HO committee appraises once again
the branch-appraisal form and if satisfied, The HO forwards the proceedings to the Board of
Directors of the bank for approval. It is noteworthy to mention that the BOD reserves the
absolute discretionary authority in terms of approval set by their own criteria, which is not
clearly defined and maintained with much confidentially. Approval letters are sent to respective
branches once the BOD approves a project for sanctioning process. In MTB branches, usually
the Branch Head, who is also the head of the branch credit committee, issues the sanction letter.
The Deputy Manager or a Credit Officer may also issue a sanction letter in his absence. The
sanction letter specifically mentions Credit Limit, Initial Securities, Collaterals Securities,
21 | P a g e
Interest Rates, Repayment Mode, Expiry Date, Documentations and other conditions concerned
with the loan. Upon acceptance of the sanction letter by the client, the branch of MTBL starts its
documentation process. The loan is finally disbursed to the borrower by a Cheque written by the
credit officer after all the documentations are accomplished.
5(A).2 Credit Management Activities Performed at Branch and Head Office Level of
MTBL: Prior to the approval of credit, all the formalities are performed by the concerned
branch. But the credit management tasks split between branch and the Head Office from the
Approval stage. According to MTBL website, MTBLs approval mainly depends on its Product
Program Guidelines in which all necessary documents, borrowers eligibility etc are specified
clearly. The approval of the credit requires rigorous appraisal of the credit proposal from the
branch level. The Head Office needs to appraise the proposal again in its own way. Followings
are the roles played by branch and HO in terms of credit managing tasks:
5(A).2.1Branch Level Performance: A Branch Committee is constituted at branch level to look
after the credit performance. The committee is presided over by the branch-head and credit
officers are appointed according to directions from HO. Collection and verification of the
information of loan-seeking party, creation of proposal and appraising the proposal are pursued
by credit officer. When and if the approval letter of the BOD comes regarding the loan, further
tasks of branch starts only then. These tasks mainly involve sanctioning and overall
administration of the credit. While sanctioning a credit, the branch has to go by the rules as
prescribed in the Circulars forwarded from the Head Office credit division. These rules require
the branch to ensure that the borrower operates within the control area of the branch, the credit is
not inflicted by the sanctioning officers relation or interest with party taking the loan, credit
disbursement is rigidly consistent with MTBLs Credit Operation Manual and other Credit
Circulars. A registry book for each sanctioning officer is kept to track the operations of the
credits sanctioned by a particular sanctioning officer. At MTBL, a sanctioning officer is held
liable for the loans he sanctions and in case of non-repayment or any default, he bears the utmost
responsibility. Further significant role played by a branch after a loan is sanctioned is the
monitoring which is directly pursued by the branch-head. S/he pays visits to the clients and
contacts them over phone time to time. Proofs of his/her communication are preserved in the
client-specific Credit-File for audit committee. Moreover, it is the branch that makes sure that no
22 | P a g e
borrower is receiving more than allotted credit and begins actions if a non-repayment against a
credit is detected. In short, a branch is the place for MTBLs main credit operation where
Administration, Monitoring and Controlling parts of the credit management takes places. The
branch head of operations is in charge of inspecting branch-specific credit related risk portfolio
as derived from the appraisal of proposals.
5(A).2.2 HO Level Performance: Within the Head Office arena, Mutual Trust Bank
maintains three bodies to accomplish the management tasks. These bodies, in MTBLs
terminology, are known as the Head Office Committee for Credit, the Executive Committee and
finally the Board of Directors. The Head Office credit committee remains updated about the
ongoing policies adopted by Bangladesh Bank and cross-matches them with the banks credit
policies. It receives the credit applications forwarded from branches and arranges the papers that
are added to proposals in definite order accordingly. Extension applications of any loan are also
received, reviewed and analyzed by this body. However, it can approve extensions only if the
BOD gives authority to. The Executive Committee receives recommended proposals from the
head office credit committee and revises them to check if any pits are detected. Upon the
delegated authority from the Board of Directors, it can approve loans and their extensions. This
committee is, in fact, the implementing and overseeing authority to evaluate if BODs credit
policies are applied correctly. The paramount authority, however, is reserved by Board of
Directors, which designs the banks overall policies and set criteria on the basis of which credits
will be granted. The management of MTBL leaves no credit out of the direct knowledge of its
Board of Directors. Usually, the Board of Directors renders authority to the Executive and Credit
Committee to approve the proposals; exceptions of this case are to a substantial amount though.
5(A).3 Measures against Prospective Defaults: In a specific branch where a non-repayment
occurs, a three step-process is undergone. It is mentionable in this case that, MTBL marks the
first non-repayment as the Special Mention Account, disregard to the CRG model guideline for
extra-precautions. The first step involves arranging frank and broad discussion with the client.
This session, at its second phase, involves a third person- either the guarantor or a person of
influence to the borrower. If the whole process comes into nothing, the branch issues letters to
the client in two segments. They call these First Reminder Letter and Second Reminder Letter. If
the approach of persuading the client fails, the branch tries negotiating the terms of loan.
23 | P a g e
Negotiations are made by the bank in light of mutual benediction of the client and the bank.
Based on the clients current financial status, the terms of credit are rescheduled or revised. In
some cases, the client is facilitated with extra installment stipulation for repayment of unpaid
amount. In other cases, reduction of interest rates on loan is allowed. The branch is left with no
option but filing a suit against a defaulting party when it fails to repay the loan even after all the
arrangements of the credit plan are redesigned in his favor. At this stage, branch is apt to hire a
lawyer to go through the litigation process against the defaulter to recover the loan by taking
possession of the collateral securities. As per the MTBLs website suggests, the number of suits
filed by the bank stood 125 in 2013 while the number had been only 88 during 2012. MTB
Aganagar Branch had 2 litigations running on the lower court during 2013.
5(A).4 Credit Risk Management at MTBL: Investopedia defines credit risk as the loss of
principal due to a borrowers failure to repay the credit (Investopedia.com). As part of its risk
management activities, the bank considers projects on the basis of risk grading results. In
addition to the banks own appraisal of the investment proposals, at the macro level, the Head
Office inspects proposals sent from branches and weighs these risks to banks total earning assets
(credit and other investments) and compares these assets to the capital. Significant aspects
related to credit management are amplified as follows:
5(A).4.1 Credit Risk Grading: To comply with BB standard risk management policy,
MTBL uses Credit Risk Grading model, to measure its credits. This grading tool provides for an
understanding of the precautions to take against possible defaults. According to this method,
MTBL classifies its clients among 8 broad categories depending on some criteria. The criteria
are grounded from the answers to how much of the loans provided are guarded by deposits and
collaterals, whether the bank has the grab of the financial statements of the client, if the borrower
is making profit or loss in his business, if the borrower has missed any of the repaying
installments etc. As in banks, borrowers or credits are considered as assets, this grading tool
stands as a reflector of the active assets and the inactive or non-performing assets of the bank.
Borrowers are given numbers out of 100% on different criteria as mentioned here. On the basis
of the numbers they achieve, Mutual Trust Bank classifies them to 8 categories and subdivide
them into two main groups namely classified and unclassified credits. Unlike as speculated in
BB guideline, Mutual Trust Bank, in its statements, categorizes Superior, Good, Acceptable and
24 | P a g e
Marginal Accounts as Standard Accounts. So the category, according to the bank statement, is
basically of 5 types namely Standard, Special Mention, Substandard, Doubtful and Bad/Loss
Accounts.
5(A).4.2Provisioning: As per the BRPD Circular No. 05 revised by Banking Regulation&
Policy Department (As on May 29, 2013), MTB keeps provisions on its Classified and
Unclassified credit accounts as means of minimizing credit related risks. This study has shown
the trend of the provision expenses incurred by the bank in the quantitative part of analysis.
5(A).5 Summary Findings (A): At MTBL, credit management policies are designed at the HO
level and the branches sanction, administer, monitor and control credit operations. As per the
observed credit management system, the supreme authority in terms of credit is much confined
to the Board of Directors and the Executive committee. The entire procedure, although
apparently coupled with compliance with BB regulations, technologically upgraded systems
adopted by regulatory committee and Basel II accord compliance, is conservative, still timeconsuming in nature and thus somewhat discouraging for new loan-seekers going by the banks
product-specific eligibility criteria. The bank, while analyzing and assessing credit risks, solely
uses and relies on CRG model although there are other techniques to measure risks associated
with credits. For instance, LGD (Loss Given Default) can be a strong indicator of the banks
credit risks. Calculation of Loss Given Default would express the amount the bank is susceptible
to losing loss if a borrower defaults. Besides, the bank doesnt exhibit any clearly defined criteria
for approval and depends much more on the BOD for approval of credits. The study also finds
that delegating more authority towards branch level, where the actual bank-borrower interaction
takes place, might increase the banks credit management efficiency.
25 | P a g e
Chapter Five (B)

Analysis and Findings (Quantitative)
5(B).1Credit Performance Analyses
5(B).1.1Horizontal/Trend Analysis of Credit Product-wise Performance: Horizontal or
Trend Analysis is the analyzing technique to show changes in the amount of corresponding
financial statement over a period of time (www.accountingformanagement.org). In this study,
this technique has been applied to show the changes occurring in the performance of the credit
products allowed by MTBL. Yearly change in the loan amount disbursed among different
divisions of the total loan portfolio scheme has been shown from 2009-2013, one-fifth of the
banks total lifetime. The table below shows the Horizontal Analysis of the Loan and Advances
of MTBL:
Horizontal/Trend Analysis for the last 5 years of Loans and Advances, BDT in Million
Particulars
2013
2011
2010
2009
2008
14619.47 13539.49
10695.76
10267.97
9369.57
6072.42
4868.94
3322.99
2941.89
2646.76
550.00
301.47
Financing
2342.69
2268.86
1959.52
1378.09
1197.71
668.40
General Loans
338.31
178.88
201.10
178.17
406.30
565.97
Demand Loans
630.28
2130.20
380.56
62.48
75.14
144.63
Documents (PAD)
122.08
196.24
647.87
62.48
1052.30
751.98
Trust Receipts
7913.42
6911.98
7729.70
515.17
6156.53
7610.92
Lease Finance
402.14
397.43
364.54
6127.68
254.56
257.25
House Building Loan
2104.91
1446.38
1148.90
169.00
861.53
805.40
Staff/Employee Loan
541.78
525.57
448.75
9.65
202.06
0.00
Loans and Advances - Off-
235.61
80.17
812.55
1103.81
0.00
0.00
Term Loan
Small
and
Medium
Enterprise Financing
Retail
&
2012
Consumer
Payment
Against
26 | P a g e
Shore Banking Unit

Loan to MTB Securities
Ltd.
2505.57
2665.57
2665.55
303.36
0.00
0.00
0.05
0.41
2.38
1078.13
0.00
0.00
25.23
30.59
11.74
2656.83
0.00
0.00
Discounted
1593.96
2417.75
46189.74
1971.20
2390.32
3027.34
Other Loans & Advances
53625.51 51135.15
43481.28
36788.55
10.67
8.69
87247.67 119681.84
65319.33
Loan
to
MTB
Capital
Limited
Loan to MTB Exchange
(UK) Limited
Bill
Purchased
Total
&
91,870
22526.67 20214.47
Table 3: Credit Product-Wise Horizontal Analysis of Five Years

From Table 3 presented above, we can see that the Term Loan has increased to a substantial
amount comparing from the year 2009 to 2013. The overall increase rate in this product holding
2009 a base year is almost 56%. We can also see that that the growth of Term Loan has been
brilliant during the year 2012 vis--vis that of 2013. The disbursement into SME Financing has
dramatically increased in 2013 to BDT 4868.94m from BDT 3322.99m in 2012.Investments in
Trust Receipts, Demand Loans, Bill Purchased & Discounted have been fluctuating in a rather
swinging manner.
5(B).1.2 Overall Performance of Credit Products from 2009-2013: The year-wise total
disbursement of loans and advances form 2009-2013 has been presented in the following barchart. The graph shows the cumulative progress of MTBs loan disbursements.
27 | P a g e
Overall Performance Evalulation of Credit(Loans & Advances,BDT in Million) of

MTBL for the Last 5 Years
140000.00
119681.84
120000.00
100000.00
87247.67
80000.00
91870
2010
65319.33
60000.00
40000.00
2009
2011
2012
22526.67
20000.00
2013
0.00
2009
2010
2011
2012
2013
Figure 3: Overall Performance Evaluation of Credit for the Last 5 Years
The graph shows that the highest amount of loan has been disbursed during 2011 worth BDT
119681.84m. It also depicts that the loan disbursement has a trend to grow, although there is a
plunge in the year 2012 and 2013 from 2011. The recent two years are observed to have a stable
position in terms of disbursing loans.
5(B).1.3Year-wise Status of Classifications of Loans &Advances: As per the BRPD Circular
No. 05 revised by Banking Regulation & Policy Department (As on May 29, 2013) of
Bangladesh Bank, MTB classifies its credits into mainly Classified and Unclassified loans and
advances. The following two graphs depict the year-wise change in the status of such credits:
Amounts of Unclassified Loans & Advances (BDT in Million)

of MTBL(2011-2013)
60000.00
50000.00
52126.16
54,799.17
43930.00
40000.00
Standard
30000.00
Special Mention Account
(SMA)
20000.00
10000.00
1064.63
870.87
1,055.87
2011
2012
2013
0.00
Figure 4: Amounts of Unclassified Loans & Advances
28 | P a g e
From the figure 4, we can see that the Unclassified or secured credits disbursed by MTBL are
categorized into Standard and Special Mention Account. The status of Standard Loans is
increasing. The amount increased from BDT 43930m as in 2009 to BDT 52126.16m. It further
took a rise to BDT 54799.17m. On the other hand, the status of SMA is fluctuating. The amount
was BDT 1064.63m, BDT 870.87m and BDT 1055.87m in 2011, 2012 and 2013 successively.
Amounts of Classified Loans & Advances (BDT in Million) of

MTBL(2011-2013)
1600.00
1414.14
1439.07
1400.00
1200.00
1000.00
822.69
Substandard
800.00
521.48
600.00
400.00
200.00
613.44
Doubtful
Bad/Loss
204.44
107.99
149.38
103.25
2011
2012
2013
0.00
Figure 5: Amounts of Classified Loans & Advances
The graph shown above depicts the year-wise changes in the amount of classified or risky
credits. According to the graph, MTBL has been successful in minimizing its Doubtful Loans
over the years. The amount reduced from BDT 204.44m to BDT 149.38m to 103.25from the
years 2011 to 2013. But the bank is apparently losing control over its Bad/Loss and Substandard
credits. The Bad/Loss Credits, seriously doubted in terms of recovery probability, has increased
from BDT 822.69m to 1414.14 to 1439.07 over the years 2011, 2012 and 2013. The progression
goes on in the same manner (increasing) for the substandard credits, as per the graph depicts.
5(B).1.4 Risk-Weighted Assets analysis: According to Investopedia, Risk Weighted Assets
reflect the minimum amount of capital required for a bank, based on a percentage of the assets
that are weighted by its risk. Greater amount of such assets express the banks greater ability of
the bank to tackle the adverse situations.Following bar chart shows the Risk-Weighted Assets of
MTBL for the years 2011, 2012 and 2013:
29 | P a g e
Risk Weighted Assets of MTBL for the last 3

years (BDT in million)
80,000.00
70,000.00
60,000.00
50,000.00
40,000.00
30,000.00
20,000.00
10,000.00
0.00
70,346.81
65,221.01
57,925.94
2013
2012
2011
2013
2012
2011
Figure 6: Risk Weighted Assets for the Last 3 Year
The graph reveals that Risk-Weighted Assets amounted to be BDT 70,346.81m in 2013, the
highest among the last three years. This evidences that the bank is growing since with growth of
a banks total assets, the risk associated with the assets increases in the natural course. This graph
indicates that the financial viability of Mutual Trust Bank Limited is an increasing trend.
5(B).1.5Industry-wise Formal Access to MTBs Credit: This analysis shows how much credit
has been disbursed into different industrial sectors of the economy from MTBL. We have
incorporated the aggregate loans disbursed in the industrial sectors to find out the formal access
to MTBs credits.
30 | P a g e
Agreegate Industrywise Access to Credit

20.00%
17.28%
18.00%
14.43%
16.00%
13.75%
14.00%
10.27%
12.00%
10.00%
7.65%
7.18%
6.14%
6.00%
8.00%
4.48%
6.00%
2.22%
1.94%2.66%
4.00% 1.09%
1.36%0.84%
0.96%1.77%
2.00%
0.00%
Figure 7: Industry-wise Access to Formal Credit
From the illustration, during 2011, 2012, 2013 we find that the highest amount of credits has
been disbursed into the Manufacturing (almost 30% of the total credit) sectors have the highest
access to MTBs credit. MTBL has second consideration on the Trade Service Sector. The graph
also depicts that consumer credit and construction sector has the lowest concentration of MTBs
credit ((0.66% and 0.96%) respectively. Although, Loans disbursed in SME sector has a
considerable amount in 2013, the aggregate proportion of credit is negligible in this sector.
5(B).2 Analyses of Financial Ratios
In this section of the chapter, efforts have been made to analyze some financial ratios of MTBL
to have a close look into the performances triggered from the financial operations of the bank.
Followings are ratios analyzed for this purpose:
5(B).2.1Loans to Deposit Raito: Loans to Deposit ratio measures a banks liquidity. In other
words, the proportion of credits disbursed from the deposits collected. Lower rate of Loan to
Deposit Ratio indicates higher liquidity of the underlying assets in this analysis
(Selvavinayagam, 1995). This analysis also gives an idea about the idle deposits of a bank. The
following line graph presents the Loans to Deposits Ratio for 2011, 2012 and 2013:
31 | P a g e
Loan to Deposit Ratio (2011-2013)

82%
80%
80%
78%
75%
76%
74%
Loans to Deposit Ratio in %
71%
72%
70%
68%
66%
2011
2012
2013
Figure 8: Loans to Deposits Ratio
The above regression shows that MTBs Loan to Deposit ratio is decreasing almost in a constant
rate. This means, the liquidity of the bank has increased in 2013 as compared with 2012 and
2011.But increased liquidity also indicates that the investments made againstdeposits are
reducing.
5(B).2.2Return on Loans Ratio: The return on loan ratio signifies the Credit departments
ability to price the loans so as to achieve an optimum loan mix. It has a strong relationship with
the interest spread that the bank can manage to maintain. This return-to-Loans Ratio has been
calculated by devising the earnings from interest of credits disbursed by the total amount of loans
disbursed. Following diagram shows that Return on Loans Ratio for 2011, 2012 and 2013:
Return on Loans Ratio (2011-2013)

15%
14.57%
15%
14%
13%
14%
13%
Return on Loans Ratio

in %
13%
13%
12%
12%
2011
2012
2013
Figure 9: Return on Loans Ratio
32 | P a g e
As depicted in the diagram, the return to loans ratio has a steady growth rate. The interest
earning has grown in 2011 and 2012 at the same rate and the growth rate has increased in 2013.
5(B).2.3Analysis of Interest Rest Spread: MTBL maintains a gap between the rate it pays on
deposits and the rate it takes on the disbursed credits. This is termed as Spread in banking
language. Spread determines the profit of a bank to a substantial degree. The analysis of interest
earning spread provides a deeper understanding of sources of a banks earnings and depicts how
vulnerable a banks profitability is (Selvavinayagam, 1995). Following graph depicts the interest
spread for MTBL in 2011, 2012 and 2013:
Interest Spread (2011-2013)

7.00%
6.00%
5.94%
4.93%
5.29%
5.00%
4.00%
3.00%
Interest Spread in %
2.00%
1.00%
0.00%
2011
2012
2013
Figure 10: Interest Spread
According to the above line graph, the performance of MTBL in terms of maintaining a standard
spread between the rates on its credits and deposits during the year 2013 and 2012 is quite
satisfactory, since the average industry spread during that period was 5% (Source: Bangladesh
Bank)
5(B).2.4 Earning Assets to Total Assets Ratio:The ratio reveals the proportion of assets that are
in really productive use. Earning Assets for MTBL are interest-bearing investments, loans and
advances. In this analysis, the total of interest-providing assets has been divided by the banks
total assets. Following is the graphical presentation of the Earnings to Total Assets Ratio for
years 2012, 2012 and 2013:
33 | P a g e
Earning Assets to Total Asset Ratio

(2011-2013)
86%
87%
86%
85%
84%
84%
82%
83%
Earning Assets to Total

Asset Ratio in %
82%
81%
80%
2011
2012
2013
Figure 11: Earning Assets to Total Asset Ratio
As the graph shows, the ratio of the total interest bearing assets as compared to the total assets of
the bank has slightly decreased by 2% in 2011, 2012 and 2013 in a successive manner, yet the
average ratio is quite plausible.
5(B).2.5 Loan Loss Provisions to Total Loans Ratio: MTB, like all other banks, maintain s a
provision for its credit accounts. Investopedia suggests it to be held as an expense set aside as
an allowance for bad loans. The ratio of this provision to the total loans actually gives an idea
of the quality of a banks loan portfolio. Given below is the graph of Loan Loss Provisions to
Total Loans Ratio of MTBL for 2011, 2012 and 2013:
Loan Loss Provisions to Total Loan

Ratio (2011-2013)
3.30%
3.20%
3.10%
3.00%
2.90%
2.80%
2.70%
2.60%
3.25%
2.83%
2.88%
Loan Loss Provisions

to Loan Ratio in %
2011
2012
2013
Figure 12: Loan Loss Provisions to Total Loan Ratio
34 | P a g e
MTBL has been has been keeping more provisions for against its credits in 2013 (3.25% of what
is disbursed) than 2011 and 2011 (2.83% and2.88% respectively), as per the analysis shows. This
finding is also supported by the findings of Earning Assets to Total Assets Ratio of this study,
because increased rate of provisions for bad/loss credits bears the possibility of being
instrumental in reducing the amount of interest bearing assets.
5(B).2.6 Capital Adequacy Ratio: Capital Adequacy Ratio is the measurement of how much
capital is used to support the banks risk assets (www.maxi-pedia.com).MTBLs core and
supplementary capital, that are categorized into tier I and tier II, has been divided by the risk
weighted assets (Cash, Claims on Govern, Sovereign and other Private Funds) to calculate the
ratio. Following graph shows the Capital Adequacy Ratio for years 2011, 2012 and 2013:
Capital Adequecy Ratio

12.50%
11.96%
12.00%
11.57%
11.50%
Capital Adequecy
Ratio
10.70%
11.00%
10.50%
10.00%
2011
2,012
2013
Figure 13: Capital Adequacy Ratio
According to the graph, the capital Adequacy Ratio declined to 10.70% during 2012 from 11.96
in 2011, which increased in 2013 with an immediate effect to 11.57%. As per BIS, the standard
acceptable rate of CAR is 8% (maxi-pedia.com). This graph suggests that Mutual Trust Bank
Limited has maintained Capital Adequacy Ratio above the acceptable standard.
5(B).2.7 Return on Investment Ratio: Although less connected with the credit performance,
the Return on Investment ratio is a significant indicator of the earning performance of the bank.
This ratio focuses on interest earned on securities to total book value of securities held by
MTBL.
35 | P a g e
Return on Investment (2011-2013)

12.00%
10.05%
10.00%
7.70%
8.00%
7.45%
6.00%
Return on Investment
in %
4.00%
2.00%
0.00%
2011
2012
2013
Figure 14: Return on Investment
The graph shows that the interest earnings against investments have been the highest of 10.05%
amongst the past three years. The Return on Investment decreased in 2012 to 7.45% from 7.70%
in 2011.
5(B).3Summary of Findings (B):

1. Mutual Trust Banks Loan to Deposit Raito has shown a growing trend over the last three
years. It implies that the bank has been able growingly utilize its resources towards
productive use.
2. Earning Assets to Total Assets ratio suggests a downgrading trend. These contradictory
findings suggest that the Banks other interest-bearing investments, except for loans and
advances are not performing up to par.
3. The overall amount of loan disbursed in the last year (2013) has increased.
4. The Risk Weighted Assets of the bank is rapidly increasing, in accordance with the
increasing amounts of credits that are being disbursed.
5. According to the study, although Mutual Trust Bank has managed to maintain an
acceptable Capital Adequacy Ratio, the trend is unstable and the rate is fluctuating over
the last three years.
6. The bank recognizes Term Finance as its safest loan product and has invested into this to
the highest amount in the last 5 years.
36 | P a g e
7. The overall Return on Investment of Mutual Trust Bank is growing.

8. The overall status of the classified (Standard & Special Mention) credits disbursed by
Mutual Trust Bank is good. Study finds that the bank has been successful in giving a
boost to the Standard Credits while successfully minimizing the Special Mention
Accounts.
9. The overall status of the unclassified loans is slightly daunting. The banks Substandard
and Loss credit accounts are gradually increasing to a conspicuous extent; although a
decreasing trend in the Doubtful accounts have been detected over the last three years.
10. Mutual Trust Bank has successfully maintained an interest spread over the industry
average in 2013. The study found that the spread is in an increasing trend.
11. Mutual Trust Bank has disbursed the highest amount of its credits to manufacturing
industry in the last 3 years. Trade services are its second attention point. The bank has the
negligible attention towards SME, Consumer, and Agriculture and Ship Breaking sectors.
37 | P a g e
Chapter Six
Conclusion and Recommendation
6.1. Conclusion: Operations of a bank become prolific only when the productive use of its
deposits is possible by allocating them to prudently analyzed borrower groups through a
regulation-complied and efficient credit management system. The management has to rely on the
assessment of performance for an informed and in-depth indication of its future actions. As per
the study finds, Mutual Trust Bank has a semi-decentralized credit management that centrally
controls the credits and the branch operations are in tandem with the center. According to the
findings of this study, it can be surly be maintained that except for minor deviations, the overall
performance of the credit of Mutual Trust Bank is quite up to the mark and a prediction that the
bank would continue to contribute to the economy of Bangladesh in a graduating manner will
certainly not be an exaggeration.
6.2 Limitations of the study: Audited Annual reports, as available till date, up to 2013 have
been used in the analysis, while the audited financial statements of 2014 could have given a
sharper insight of the credit performance. The unaudited and incomplete financial statements
were not considered, as they lack notes to the credit related particulars necessary for the
calculations of this study. A detailed insight of the in-practice approval and appraisal system
performed at the Head Office level could not be possible because of lack of access to necessary
files due to the banks concern of its confidentiality policies. For the sake of comparing the
progress/regress of congenial credit related components like industry wise credit disbursement,
product wise focus of the bank etc, three years data have been adopted in case of ratio analyses,
since MTB has brought about considerable changes in its loan portfolio after 2009. The personal
observation of the author and some secondary data has been considered as the basis for the
qualitative analysis for lack of access to primary files, while listening from the horses mouth
could reflect better insights.
6.3 Recommendations:
1. A systematic credit recovery focused committee should be constituted with special
attention to minimize the increasing rate of bad/loss credits. As per findings, the bank is
incurring greater loan loss provision expense due to increased amount of bad/loss credits.
38 | P a g e
2. The Other Interest-bearing Investments except for loans and advances should be
designed in more well-thought manner, since the aggregate earning to total assets ratio is
declining year by year while the loans and advances are performing well. Regulatory
Guidelines as to investing into the banks own subsidiaries should be strictly abided by.
3. The banks negotiating terms and rescheduling policies after the first non-repayment of
loans should be revised to minimize the amounts of classified loans i.e Substandard and
Bad/Loss credits.
4. Mutual Trust Bank should strive to sustain the growing trend of its classified loans and
maintain the present growth rate of its return on investment.
5. Credit Risk Assessing can be made more efficient by delegating greater authority towards
branch level operations. Such can be done by training credit officers of a branch on
various credit risk analyzing techniques, other than merely CRG model.
6. The intermediary layer of Head Office Committee, which is non-instrumental in case of
monitoring the credit, can be cut, since the branch and the Board of Directors are
practically dealing with the monitoring tasks. Branches can be given authority to directly
communicate the monitoring results to the Board of Directors.
7. In addition to Bangladesh Bank prescribed CRG model, other risk forecasting and
techniques, such as LGD, should be used for a better understanding of the potential
losses.
8. The bank should encourage external ratings of its clients to increase its credibility and
ensure quality and transparency of its credit service.
9. Investments in SME sector should be substantially increased. This would ensure the
banks liquidity performance through quick recovery as well as would contribute to the
economic development of the country.
39 | P a g e
References:
1. Rana, Nasrin and Islam (2014), External Sector: Current Trends, Bangladesh Economic
Update Vol-5, September 2014 [online] Available from :
http://www.unnayan.org/reports/meu/Meu_September_2014/MEU_September_2014.pdf
[Accessed: 15th December, 2014]
2.
Mahmud (2013), Banking Sector: Current Status, Bangladesh Economic Update Vol-4,
December 2013 [online] Available from :
http://www.unnayan.org/reports/meu/December-2013/MEU%20December%202013.pdf
[Accessed: 15th December, 2014]
3. Accounting for Management (2014): Horizontal (Trend) Analysis of Financial

Statements. Available from http://www.accountingformanagement.org/horizontalanalysis-of-financial-statements/ [Accessed: 7th December, 2014]
4. Investopedia (2014): Risk Weighted Assets. Available from
http://www.investopedia.com/terms/r/riskweightedassets.asp [Accessed: 9th December,
2014]
5. Investopedia (2014): Loan Loss Provision. Available from:
http://www.investopedia.com/terms/l/loanlossprovision.asp [Accessed: 9th December,
2014]
6. Maxipedia (2014): Capital Adequacy Ratio. Available from: http://www.maxipedia.com/capital+adequacy+ratio+car [Accessed: 15th December, 2014]
7. Bankinfobd(2014): Mutual Trust Bank Limited. Available from: http://www.maxipedia.com/capital+adequacy+ratio+car [Accessed: 1st December 2014]
8. Bankinfobd(2014): CIB Report Goes Online. http://www.bankinfobd.com/blog/cibreport-goes-online [Accessed: 9th Decmber, 2014]
9. Investopedia (2014): Loss Given Default. Available from:
http://www.investopedia.com/terms/l/lossgivendefault.asp [Accessed: 10th December,
2014]
10. Investopedia (2014): Credit Risk. Available from:
http://www.investopedia.com/terms/c/creditrisk.asp [Accessed: 7th December, 2014]
40 | P a g e
11. Selvavinayagam (1995): Financial Analysis of banking Institutions, FAO Investment

Centre Occasional Paper Series No.1 [online] Available from: http://www.fao.org/3/aae362e.pdf [Accessed:2nd November, 2014]
12. BANGLADESH BANK, STATISTICS DEPARTMENT (2013): Guideline to fill in the
Banking Statistics Returns (SBS-1, SBS-2 & SBS-3)-5th Edition.
13. BANGLADESH BANK (2007): Credit Risk Grading Manual: Bank.[online]. Available
from: http://www.bangladeshbank.org/mediaroom/circulars/brpd/cregradnbbankjun07.pdf [Accessed: 13th November,
2014]
14. Audited Annual Reports of Mutual Trust Bank, 2009-2013 [online] Available from:
http://mutualtrustbank.com/information_financial_statements.php [Accessed: 13th
November, 2014]
15. Gestel et al. (1995), Credit Management: Basic Concepts: Financial Risk Components,
Rating Analysis, Models, Economic and Regulatory Capital. Oxford University Press,
Oxford.
41 | P a g e
Annexure:
Formulae &Data used in calculating ratios
SL
No.
Name of Ratio
Loans to Deposit
Return on Loans
Interest Spread
Ratio Calculating Formula

=
100
100
100
100
Earnings to Total
Assets
Loan
Loss
Provision to Total
Loan
Capital
Ratio
Adequacy
100
=
100
100
Year wise Status of Loans and Advance of MTBL

Year wise Status of Loans and Advance of MTBL
Amount in BDT Million
Classification
of Loans and
Advances
2011
2012
2013
Unclassified (UC):
Standard
43930.00 52126.16 54,799.17
Special Mentioned Account (SMA)
1064.63
870.87 1,055.87
Sub Total
44994.63 52997.03 55855.04
Classified:
Substandard
107.99
521.48
613.44
Doubtful
204.44
149.38
103.25
Bad and Loss
822.69 1414.14
1439.07
Sub Total
1135.12 2085.00
2155.76
Total
46129.75 55082.03 58010.80
42 | P a g e
Loans to Deposit Ratio:
Year
Total Loans and

Advances(BDT in
Million)
Total
Deposit(BDT
in Million)
Loans to Deposit Ratio

in %
2011
2012
2013
47,005.48
56,511.08
59,548.36
59,050.80
75,140.14
84,372.74
80%
75%
71%
Return on Loans Ratio
Year
Interest
Income(BDT in
Million)
Total Loans and

Advances(BDT in
Million)
2011
2012
2013
5,919.22
7,622.52
8,675.51
47,005.48
56,511.08
59,548.36
Return on Loans
Ratio in %
13%
13%
14.57%
Loans to Assets Ratio
Year
Total Loans and

Advances(BDT in
Million)
Total
Assets(BDT
in Million)
Loans to Assets Ratio

in %
2011
2012
2013
47,005.48
56,511.08
59,548.36
76,331.37
93,162.05
101,463.54
62%
61%
59%
43 | P a g e
Return on Loans Investment
Year
Return on
Investment in %
2011
2012
2013
7.70%
7.45%
10.05%
Earning Assets to Total Assets Ratio
Year
Earning Assets(BDT in
Million)
2011
65,757.56
Total
Assets(BDT
in Million)
76,331.37
Earnigs to Total Asset

Ratio in %
86%
2012
78,153.40
93,162.05
84%
2013
83,637.25
101,463.54
82%
Note: Investopedia says, Earning assets include investment in stocks, bonds, CDs (Certificate of
Deposits) and other interest bearing assets along with loans and advances.
Loan Loss Provisions to Loan Ratio
Year
2011
2012
2013
Loan Loss
Provisions(BDT in
Million)
1,329.89
1,626.30
1,933.97
Total Loans and

Advances(BDT in
Million)
47,005.48
56,511.08
59,548.36
Loan Loss
Provisions to Loan
Ratio in %
2.83%
2.88%
3.25%
44 | P a g e
Interest Spread
Total Loans
Interest Interest
and
Interest
Year Interest Income Fees on Loans
Bearing
Spread
Advances(BDT Expenses
Liabilities
in %
in Million)
2011
6097.52
9.63
47005.48
5279.86
65485.99
4.93%
2012
7848.90
7.65
56511.08
7005.05
81330.94
5.29%
2013
8984.99
6.08
59548.36
7997.88
87278.36
5.94%
Note: Interest Bearing liability include consolidated borrowing from other Banks, Financial
Institutions and Agents along with from customers.
Capital Adequacy Ratio
Year
Total Capital(Tieri+Tier-ii)
Risk Waighted Assets
2013
2012
8,137
70,346.81
2011
6980.82
6925.31
65,221.01 57,925.94
Capital Adequecy
Ratio
11.56635248
10.70333 11.95546
Note: Total Capital includes both the Tier-i & Tier-ii capital of a company.MTBL classifies Core
capital as Tier I and Supplementary Capital as Tier II capial.
Risk Weighted Assets (RWA)
Total Risk Weighted Assets
(RWA)
Particulars
A. Credit Risk on
Balance Sheet Exposure
Off-Balance Sheet Exposure
B. Market Risk
C. Operational Risk 570.75
10.00
Total Risk Weighted Assets
(A+B+C)
2013 RWA,BDT
in Million
Risk Waighted
Assets
2012 RWA,BDT
in Million
Risk Waighted
Assets
2011 RWA,BDT
in Million
Risk Waighted
Assets
51250.68
9771.23
3,617.45
52435
3210.01
4,526.00
45,716.87
4,069.17
3,595.00
5,707.45
5,050.00
4,544.90
70,346.81
65,221.01
57,925.94
45 | P a g e
Industry-wise Formal Access to Credit

2013
Advances to Industries
2012
2011
BDT
BDT
BDT
in
in
in
Million Million Million
719
738
317
4,047
2,492
3,208
4,052
4,049
3,561
696
641
868
1,248
116
10,339 10,723
7,024
2,970
2,428
1,887
659
502
392
884
952
1,035
918
1,163
1,519
7,810
7,507
7,037
3,850
3,752
2,379
967
1,131
1,052
1,594
1,539
1,185
Total
in 3
years
Agreegate
Industry-wise
access to
Credit
1,775
1.09%
Agriculture
9,748
6.00%
RMG
11,662
7.18%
Textile
2,205
1.36%
Ship Building
1,363
0.84%
Ship Breaking
28,086
17.28%
Other Manufacturing industry
7,285
4.48%
SME loans
1,552
0.96%
Construction
2,871
1.77%
Power, Gas
3,601
2.22%
Transport, Storage and Communication
22,354
13.75%
Trade Service
9,981
6.14%
Commercial real estate financing
3,150
1.94%
Residential real estate financing
4,318
2.66%
Consumer credit
Capital Market (Loan provided for brokerage
4,328
4,349
3,757
12,434
7.65%
or merchant banking, to stock dealer or any
kind of capital market activities)
4,987
6,502
5,200
16,689
10.27%
NBFIs
8,938
7,926
6,584
23,449
14.43%
Others
100.00%
59,007 56,511 47,005 162,523
Total
Note: Proportion of sectoral loans disbursed to total amount of loans disbursed= (Amount of
sectoral loans disbursed Total amount of loans disbursed) 100
46 | P a g e

A Critical Evaluation of Credit Management and Credit Performance of Mutual Trust Bank Limited-Nayeem111011129

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A Critical Evaluation of Credit Management and Credit Performance of Mutual Trust Bank Limited-Nayeem111011129

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Internship Report

A Critical Evaluation of Credit Management and Credit Performance of Mutual Trust

University of Liberal Arts Bangladesh

3.2.2 Tasks Performed in Credit Department ..................................................................... 16

5(B).2.6 Capital Adequacy Ratio ....................................................................................... 35

References .......................................................................................................................... 40-41

List of Figures and Tables

Figure-12: Loan Loss Provisions to Total Loan Ratio ........................................ 34

To analyze and evaluate the overall credit performance of MTBL.

To analyze and evaluate the product-specific performance of the credits of MTBL.

To determine the highest income-bearing credit products for MTBL.

To have a meticulous understanding the status of MTBLs Classified and

To focus on the credit management procedure as practiced at various levels of its

To have a brief understanding of the CRM Policies and procedures adopted by

To have an overall glance of the performance of MTBL.

1.4 Significance of the Study:

2.2 Management Hierarchy of Mutual Trust Bank Limited:

Figure 1: Management Hierarchy of Mutual Trust bank (Source-MTB Corporate Intra-net)

Managing Director &

Table 1: Present Board of Directors

20,149 9,216.33 9,537.97 5,606.49

Profit before provision & tax

Profit after provision & tax

Total provision maintained

66,665 51,184.77 46,075.04 33,944.60

[Source: Annual reports of MTB, 2010-2013]

Maintaining On-line Voucher

Rendering ATM cards, receiving complaints about cards, issuing card

k. Preparing Loan Application Form for the purpose of providing loans

m. Administering, supervising and controlling Retail Loans

Observation regarding Transaction Profile: According to my observation, although this has to

Column 1-Serial Number: This is the account no. of the customer, be it a

Column-2 Number of Accounts: Each category of the deposit/loan scheme

Column-3-Sector Codes: The most important part of this form. Here

Savings Accounts: Savings accounts pay interest on the deposits on a monthly

Current Accounts: Typically current accounts are opened by people conducting

1. Borrowers Request &

Application for Loan

3. Collection of CIB Report from

5. Appraisal of Credit Proposal

6. Approval of Head office

7. Issuance of Sanctioning Letter

Figure 2: Credit procedure of MTB Aganagar Branch

Bangladesh from Websites like www.unnayan.org. A detail of the secondary data

Chapter Five (B)

House Building Loan

Loans and Advances - Off-

Shore Banking Unit

Other Loans & Advances

Table 3: Credit Product-Wise Horizontal Analysis of Five Years

Overall Performance Evalulation of Credit(Loans & Advances,BDT in Million) of

Figure 3: Overall Performance Evaluation of Credit for the Last 5 Years

Amounts of Unclassified Loans & Advances (BDT in Million)

Figure 4: Amounts of Unclassified Loans & Advances

Amounts of Classified Loans & Advances (BDT in Million) of

Risk Weighted Assets of MTBL for the last 3

Figure 6: Risk Weighted Assets for the Last 3 Year

Agreegate Industrywise Access to Credit

Figure 7: Industry-wise Access to Formal Credit

Loan to Deposit Ratio (2011-2013)

Loans to Deposit Ratio in %

Return on Loans Ratio (2011-2013)

Return on Loans Ratio

Figure 9: Return on Loans Ratio