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CHAPTER: 1

1. Introduction

1.1 Origin of the Study

1.2 Scope of the Study

1.3 Objective of the Study

1.4 Methodology of the Report1.5 Limitation

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1. Introduction

Modern banks play an important part in promoting economic development of a country.

Bank provides necessary funds for executing various programmers underway in the

process of economic development. They collect savings of large masses of people

scattered throughout the country, which in the absence of the banks would have remained

ideal and unproductive. These scattered amounts are collected, pooled together and made

available to commerce in industry for meeting the requirements.

Economy of Bangladesh is in the group of worlds most underdeveloped economies. One

of the reasons may be its underdeveloped banking system. Government as well as different

international organizations have also identified that underdeveloped banking systemcauses some obstacles to the process of economic development. So they have highly

recommended for reforming financial sector.

Banks are becoming more important to the economy as a whole and to local communities

day by day. Certainly banks can be identified by the functions (service or role) they

perform in the economy. Bank is a financial intermediary accepting deposits and granting

loans; offers the widest menu of services of any financial institution. Banks are the most

important financial institution in the economy. They are the principle sources of credit

(loanable funds) for millions of individuals and families for many units of the government.

Banks are also closely watched because of their power to create money in the form of

easily spend able deposits by making loans and investment. Changing in the volume of

money created by banks appears to be closely correlated with economic conditions,

especially the growth of jobs and the presence of absence of inflation. The fact that banks

creates money, which impacts the vitality of the economy. Bank provides individuals and

business with loans that support consumption and investment spending.

Financial Institution perform the essential economic function of channeling funds from

people who have saved surplus funds by spending less than their income to people who

have a shortage of funds because they wish to spend more than their income. The

channeling of fund from savers to spenders is so important to the economy because people

who save are frequently not the same people who have profitable investment opportunities

available to them. The absence of financial market individual lender and investor/

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borrower can not get together. Without a financial market it is hard transfer funds from

savers to investors/borrower. Financial intermediaries i.e. Depository Institutions like

Commercial Banks, Savings and Loan Associations, and Credit Institutions. It mainly

consists of export, import and other foreign remittance. Direct Investment, export, import

and foreign remittance etc. play an important role in a developing economy. There is a

great opportunity to invest the foreign remittance, which also comes from "wage earners"

working abroad, in several prospective investing fields like energy sector,

telecommunication, information technology etc in our economy.

Measured by total assets, commercial banks are the most important financial intermediary.

Like other financial intermediaries, they perform a critical function of facilitating the flowof funds from surplus units to deficit units. Commercial banks basically focused on

commercial lending. From the end of 19th century they are providing diversified services.

Commercial banks have different sections such as section focusing on lending; a section

helps in foreign trade, a section that collects deposits. This study more or less relates with

all the sections of the activities of Mercantile Bank Limited.

With the globalization and technological innovation in the, banking business has become

competitive. To cope up with this, bankers should have vast theoretical knowledge and

professional knowledge as well as technical basic. MBA is one of the professional degree,

is to provide students with the practical aspect of learning to the organizational setting. For

the attainment of that purpose curriculum and syllabus is designed in a manner so that

students are facilitated to have practical or empirical experience to some extent. As an

MBA student of Stamford University Bangladesh, with major in Finance, I felt financial

institution was my destiny to gather the real practical knowledge. With a view to develop

skilled professional in that area, the internship-training program for MBA students is

mandatory. For that consequence I prefer my internship program in the banking sector and

the organization is the Mercantile Bank Limited.

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1.1 Origin of the Study

To supply well-versed graduates Stamford University Bangladesh is conducting MBA

program with good reputation. Each of the professional degree needs practical knowledge

of respective field of discipline to be fruitful. To complete MBA program also has an

internship, relating to the exchange of theoretical knowledge into the real life practical

situation. The main purpose of the preparation of the report is due to the partial fulfillment

of the internship program conducted by the Department of Business Administration,

Stamford University Bangladesh.

During the Internship Program, I am under the supervision and guidance of Umme Hanna

Airin Ara, Lecturer, Department of Business Administration, Stamford UniversityBangladesh assigned to prepare a report about particular topic among some option which

should be relevant to my practical knowledge within these 3(three) months trimester MBA

program. To fulfillment of the internship program the report is originated entitled The

Overall Banking Activities of Mercantile Bank Limited.

1.2 Scope of the study

The study encompasses the overall banking activities, management, organizational

structure, credit facilities & Foreign Exchange Division of MBL .That is the report mainly

focuses on the overall operation of the Mercantile Bank Limited.

The report highlighted the overall banking activities and performance in the sector of

finance and its impact on the overall economy of the country that means the report is

mainly concern with the financial achievement of Mercantile Bank Limited

1.3 Objective of the Study

General Objective

The General Objective is to prepare & submit a report on the topic The Overall Banking

Activities of Mercantile Bank Limited.

Specific Objective

The main objective of the study is to get a clear idea about the Banks and how it runs

and what functions it does.

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To know about the Overall Banking System.

To examine the profitability and productivity of the Bank.

To familiarize rules and regulation approval of loans and advance procedures.

To analyze the banks sources of the funds and how it is collected.

To identify the sector where MBL provide the credit facility like: Trade and business,

import, export, garments, fisheries, real estate and micro credit programs thats the

primary parameter of a countrys economic cycle.

To analyze the financing systems of the Bank and find out whether the bank needs any

improvement to be done and make greater contribution towards the country's

economy.

1.4 Methodology of the Report

Methodology includes direct observation, face-to-face discussion with employees of

different departments, study of files, circulars, etc. and practical work. In preparing this

report both primary and secondary sources of information have been used.

The primary sources are-

For collecting primary data, I had to ask with the respective officer(s), others like:

Face to face conversation with the officer

Exposure on different desk of the bank

File study

Personal observation

The secondary sources are-

Annual Report of Mercantile Bank Ltd. Periodicals published by the Bangladesh Bank.

Different publications regarding banking functions, Operation Manual etc.

1.5 Limitation

Although I have received co-operation from concerning body but most of the time they

were busy with their work thats why, I did not get so many time as I would like to have.

The administration authority, management policy and decision making policy is in the

hand of Head Office. As an MBA student it is needed to gather the experience that how to

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take the decision when the bank fall into a plan and what its management policy, how to

set up their portfolio, what is their business strategy but a branch does not do so.

The following limitations are apparent in the report:

Time is the first limitation as the duration of the program is very few only.

Another limitation of the report of Bank policy is not disclosing some data and

information for obvious reason which could be very much useful.

It requires lot of assistance from all level officers and staff but as a bank the officer

was busy in doing their jobs.

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INDUSTRIAL & ORGANIZATIONAL

OVERVIEW

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CHAPTER: 2

2.1 Introduction

2.2 Banking industry in Bangladesh and its operation

2.3 Organizational Overview of MBL

2.4 Operating and Financial Performance

2.5 Products & Services2.6 Others

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2.1 Introduction

This chapter discusses the overview of the banking sector which gives us a better

understanding regarding the ancient banking and modern banking. After all that deals with

the organizational overview which includes the history, vision, and mission.

A bank is a financial institution whose main objective is the mobilization of fund from the

surplus unit to deficit unit. In the process of acceptance of deposits and provision of loan,

Bank creates money. This characteristics feature sets bank apart from other financial

institutions. A bank is an economic institution whose main objective is to earn profit

through exchange of money and credit instrument.

2.2 Banking industry in Bangladesh and its operation

Bank is very old institution that is contributing toward the development of any economy

and is treated as an important service industry in modern world. Now a day the function of

bank is not limited to with in the same geographical limit of any country. Due to

globalization and free market economy, this industry is facing severe competition in any

country and implementation of WTO will further increase competition. The overall

performance of Bank does not only depend upon the banking industry itself but also on the

performance of economy where it is operating.

After the birth of Pakistan in 1947, the State Bank of Pakistan, the central bank of the

country, came into being in 1948. Later, the National Bank of Pakistan, a commercial

bank was set up in 1949. In all, 36 scheduled commercial banks were in operation

throughout Pakistan. Pakistanis owned most of these banks. Only three of them, namely,

National Bank of Pakistan, Habib Bank, and the Australasia Bank had a branch in East

Pakistan in 1949. During 1950-58, three other Pakistani-owned banks, the Premier Bank,

Bank of Bawalpur and Muslim Commercial Bank had opened branch offices in East

Pakistan. Four Pakistani-owned banks, the United Bank, Union Bank, Standard Bank and

Commerce Bank conducted business in the province during 1959 - 1965. The province

had only two banks owned by local business groups and with headquarters at Dhaka, the

Eastern Mercantile Bank (now PUBALIBANK) and Eastern Banking Corporation (now UTTARA

BANK), established in 1959 and 1965 respectively.

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The banking system in the territory of Bangladesh grew slowly during the British and

Pakistan periods. There were only 25 bank branches in 1901 and the number grew to 668

in 1946. Creation of Pakistan was a deterrent in the sector as was evidenced by the closure

of bank branches, which came down to 148 in 1950. In 1965, the number rose again to

545. Subsequent years, however, showed dramatic changes in the situation and the number

of bank branches increased to 1,025 in 1970. The banking system in Bangladesh started

functioning with 1,130 branches of 12 banks inherited from Pakistan. Subsequently, these

banks were nationalised and renamed after being merged into six banks. The new names

of the banks were the SONALIBANK (The National Bank of Pakistan, The Bank of Bawalpur,

The Premier Bank), AGRANI BANK (Habib Bank, Commerce Bank), JANATA BANK (United

Bank, Union Bank), RUPALIBANK (Muslim Commercial Bank, Standard Bank),PUBALIBANK(Australasia Bank, Eastern Mercantile Bank) and UTTARA BANK (Eastern Banking

Corporation).

Banking Operation in Bangladesh

The development process of a country largely depends upon its economic activities.

Banking is a powerful medium among other spheres of modern socio-economic activities

for bringing about socio-economic changes in a developing country like Bangladesh.

Three different sectors like Agricultural, Commerce and Industry provide the bulk of a

countrys wealth. The nourishment of these three is only possible through an adequate

banking facility. The banking service facilitates these three to be integrated in a concerted

way. For a rapid economic growth a fully developed economic system can provide the

necessary boost. The whole economy of a country linked up with its banking system.

With the passage of time the functions of a bank, lending is far by the most important.

They provide both longterm and short-term credit. The customers come from all walks of

life, from a small business of a multi-national corporation having its business activities all

around of the world. The banks have to satisfy the requirements of different customers

belonging to different social groups.

Banks particularly have a very important role in raising of the financial resources because

of their capacity to tap resources from a wider spectrum of people and diversified nature of

their operations. The banking business has therefore, become complex and requires

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banks in Bangladesh are classified as government/nationalized, private, foreign, and joint

ownership banks. The country had 6 (Six) nationalized commercial banks (NCB) until

1983, when one of them, the Rupali Bank was denationalized. Another government bank,

the Pubali Bank, was denationalized in 1986.

Domestic private banks are the International Finance and Investment Bank (IFICBANK, estd.

1976), ISLAMI BANK BANGLADESH (1983), UNITED COMMERCIAL BANK (1983), CITY BANK (1983),

NATIONALBANK (1983), ARABBANGLADESHBANK (1985), ALBARAKABANK (1987), EASTERNBANK

(1992), NATIONAL CREDIT AND COMMERCE BANK (1993), PRIME BANK (1995), SOUTH-EAST BANK

(1995), DHAKA BANK (1995), AL-ARAFAH ISLAMI BANK (1995), SOCIAL INVESTMENT BANK 1995),

PREMIER BANK (1996), DUTCH-BANGLA BANK (1996), MERCANTILE BANK (1999), STANDARD BANK(1999), ONE BANK (1999), EXPORT IMPORT BANK (1999), BANGLADESH COMMERCE BANK (1999),

MUTUAL TRUST BANK (1999), TRUST BANK (1999), BANK ASIA (1999) and FIRST SECURITY BANK

(1999). The three NCBs now operating in the country are the Sonali Bank, Janata Bank

and Agrani Bank. There is a special group of nationalized banks known as specialized or

development financial institutions to support specific economic purposes of the country.

These include two for agricultural development, the BANGLADESH KRISHI BANK (estd. 1973)

andRAJSHAHIKRISHIUNNAYANBANK(estd. in 1987 with branches of Bangladesh Krishi Bank

in Rajshahi division), one for industrial development, the BANGLADESH SHILPA BANK (estd.

1972) and one for supporting unemployed youths in their self-employment activities, the

EMPLOYMENTBANK (estd.1997). The country has a Co-operative Bank established in 1948, as

the apex institution of all co-operative societies in Bangladesh. The main function of this

bank is to mobilize small savings and assist members of co-operative societies to build up

capital and provide them with loan/financial assistance for the development of

AGRICULTURE, commerce, fisheries, urban and rural cottage industries, etc. It also provides

loan to promote other income generating activities in the society.

Foreign private banks which have branches in Bangladesh are the STANDARD CHARTERED

GRINDLAYSBANK, AMERICANEXPRESSBANK,STANDARDCHARTEREDBANK,STATEBANKOFINDIA,CREDIT

AGRICOLE INDOSUEZ, Hongkong and Shanghai Banking Corporation (HSBC), NATIONALBANKOF

PAKISTAN,CITIBANKNA, HABIBBANK, and HANVITBANK.

Some branches of both nationalized and private commercial banks have been permitted to

conduct FOREIGN EXCHANGE business under the Foreign Exchange Regulation Act 1947.

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Such banks are called authorized dealers and their club or association bears the name

BAFEDA - Bangladesh Foreign Exchange Dealers Association. Apart from the authorized

dealers, more than 400 Money Changers throughout the country are engaged in buying

and selling of foreign exchange.

Depending upon the relationship with and the degree of control of the Bangladesh Bank

banks in Bangladesh are divided into scheduled and non-scheduled banks. Scheduled

banks are enlisted by the Bangladesh Bank under the provisions of section 37 of the

Bangladesh Bank Order 1972. They are promise bound to obey central bank instructions,

rules and regulations especially, those relating to required capital and provisions, statutory

liquidity reserves, audited returns etc. Through scheduling, banks gain special status and

enjoy some special facilities from the central bank such as re-discounting, participation inthe money market, membership of the clearing house and deposit insurance scheme. Non-

scheduled banks do not enjoy such privilege. The list of non-scheduled banks in

Bangladesh includes the Eden Bank, Saidpur Commercial Bank, Comilla Co-operative

Bank, Dinajpur Industrial Bank, Rajshahi Bank, Shankar Bank, Faridpur Banking

Corporation and Madaripur Commercial Bank.

Banks in Bangladesh have correspondent relationship with other banks in foreign

countries in order to sell their services or to purchase services from them.

Although only three in number, nationalized commercial banks dominate banking

activities in the country, especially the mobilization of deposits and making advances.

Their share in total bank deposits on 31 March 2000 was 57.28%, while that of domestic

private banks, foreign private banks, and the specialized banks was 29.01%, 8.42% and

5.29% respectively. The share of NCBs, domestic private banks, foreign private banks and

specialized banks in advances on the same date was 51.66%, 29.25%, 6.03% and 13.06%

respectively.

Laws that directly regulate the banking system of Bangladesh are: Bangladesh Bank Order

1972; Bank Company Act, 1991; Bangladesh Bank (Nationalization) Order 1972;

Companies Act 1913 and 1994; Deposit Insurance Order 1984; Bankruptcy Act 1997;

Insolvency Act 1920; Financial Court Act 1990; Foreign Exchange (Regulation) Act

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1986; Financial Institutions Act 1993; Financial Institutions Rules 1994; and Co-operative

Societies Ordinance 1984.

Laws that indirectly influence the banking system and for which references are made in

the Banking Company Act 1991 are: Code of Civil Procedure 1898; Code of Criminal

Procedure 1898; Evidence Act 1872; General Clauses Act 1897; Limitations Act 1908;

Negotiable Instruments Act 1881; Penal Code 1860; Trust Act 1882; Transfer of Property

Act; and Bangladesh Chartered Accountant Order 1973.

Figure 1: Banking Operation under BB

Sources: Chowdhry, L.R. (2002, 2ndedition), A Text Book On Banker Advances

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Bangladesh Bank

Commercial Bank Specialized Bank and CreditAgents

Co-operative Banks

Nationalizedbank

PrivateBank

ForeignBank

Traditional Islamic Bank

BKB RAKUB BSB BSRS

BSBL

CCBL

PSCBASIC Grameen Karmasanghtan

BankAnsar-VDPUnnayan Bank

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Some words used as a abbreviate form in the diagram are:

BKB - Bangladesh Krishi Bank

RAKUB- Rajshahi Krishi Unnayan Bank

BSB- Bangladesh Shilpa Bank

BSRS- Bangladesh Shilpa Rin Shangshta

BASIC- Bangladesh Small Industries & Commerce.

BSBL- Bangladesh Samabaya Bank Ltd.

CCBL- Central Co-operative Bank Ltd.

PCS- Primary Cooperative Socites.

2.3 Organizational Overview of MBL

2.3.1 History

Mercantile Bank Limited emerged as a new commercial bank to provide efficient banking

services and to contribute socio-economic development of the country. The Bank

commenced its operation on June 2, 1999. The Authorized Capital of the Bank is Tk. 3000

million and the Paid-up Capital is Tk. 1199.12 million.

The Bank provides a broad range of financial services to its customers and corporateclients. The Board of Directors consists of eminent personalities from the realm of

commerce and industries of the country.

Mercantile Bank Limited is a scheduled private commercial Bank established on May 20,

1999 under the Bank Company Act, 1991 and incorporated as a Public Limited Company

under Companies Act, 1994. The Bank started commercial Banking operations from June

02, 1999. From then with in a short time MBL established itself in a strong position in the

economy of the country. It has earned significant reputation in the countrys Banking

sector as Bank and created a wide image in the eye of the people.

The dream of creating MBL, which is A Bank of 21st Century, has become successful

because of the initiative of some persons who are the sponsors of MBL. There are 30

sponsors in Mercantile Bank Limited and all of them are highly regarded for their

entrepreneurial competence.

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2.3.2 Approach of MBL

The aim of Mercantile Bank Limited is to become a leading Bank of the 3rd generation by

providing better service to the clients along with other quality operations in Private

Banking Sector. The bank has some mission to achieve the organizational goals. This are-

MBL intend to provide the better service for the customer.

MBL intend to provide the good return for their respectable shareholders.

MBL work as medium of exchange on behalf of their potential clients.

MBL is much responsive in case of provide the optimum benefit of the customers.

MBL is always concentrated to enhance the competitive advantages by upgrading

banking technologies and information system.

MBL believes in discipline growth strategy.

MBL always encourages investors to boost up the share market.

MBL maintain high standard of corporate and business ethics.

MBL intends to play more important role in the economic development of

Bangladesh and its financial relations with the rest of the world through

international trade.

There are also other missions of MBL, which are also plays significant role to reach the

ultimate target.

2.3.3 Objectives & Goal of Mercantile Bank Limited

MBL is always ready to maintain the highest quality to services by upgrading

banking technology prudence in management and by applying high standard of

business ethics through its established commitment and heritage.

MBL is committed to ensure its contribution to national economy by increasing its

profitability through professional and disciplined growth strategy for its customer

and by creating corporate culture in international banking arena.

The objective of MBL is not only to earn profit but also to keep the social

commitment and to ensure its co-operation to the person of all level, to the

businessman, industrialist-specially who are engaged in establishing large-scale

industry by consortium and the agro-based export oriented medium & small-scale

industries by self-inspiration.

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MBL, one of the renowned private banks is committed to continue its endeavor by

rapidly increasing the investment of honorable shareholders into assets.

MBL believes in building up strong-based capitalization of the country.

MBL is committed to continue its activities in the new horizon of business with a

view to developing service oriented industry and culture of morality and its

maintenance in banking.

MBL is always pre-occupied to encourage the inventors for purchasing its share by

creating the opportunity of long-term investment and increasing the value of share

through prosperity as developed day by day.

MBL is playing a vital role in Socio-economic development of Bangladesh by way

of linkage with rest of the world by developing worldwide network in domestic

and international operations.

2.3.4 Features of Mercantile Bank Limited

There are so many reasons behind the better performance of Mercantile Bank Limited than

any other newly established banks:

Highly qualified and efficient professionals manage the bank.

Mercantile Bank Limited has established a core Research & Planning Division

with efficient persons.

The bank has established correspondent relationship with 102 of foreign banks.

The computerized operation system in all branches of MBL has provided the

frequent and prompt customer service.

The strict leadership along with the supervision of efficient management directs all

the branches.

The inner environment and team work, of all branches in MBL motivated all

experienced employees to achieve the ultimate objective of MBL.

Mercantile Bank Limited has become a member of the SWIFT system to expedite

foreign trade transaction.

Mercantile Bank Limited has become introduced some scheme for the purpose of

saving of low income people which are not available in other banks like Ajebon

Pension Scheme.

The Bank offer attractive saving rate than other financial institutes.

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Mercantile Bank Limited provides loan to the customers at lower interest with easy

& flexible condition than the others do.

Along with the profit generation Mercantile Bank Limited also maintain social

responsibilities.

Mercantile Bank Limited changes lower commission from their customer in

comparison with other banks.

The Bank always guided their potential customers by giving valuable advise.

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2.3.5 The Corporate Structure

Board of Directors

Board of Directors, the apex body of the Bank, formulates policy guidelines,provides strategic planning and supervises business and performance ofmanagement while the Board remains accountable to the company and itsshareholders. The Board is assisted by the Executive Committee and AuditCommittee

Board of Directors

Md. Abdul Jalil, Chairman

Tazneen Aman

Israt Jahan

Farida Begum

A. K. M. Shaheed Reza

Md. Mizanur Rahman Chowdhury

M S Ahsan

Bilkis Begum

Al-Haj S. M. Shakil Akhter

Md. Tabibul Huq

Saber Hossain Chowdhury

Dewan Mujibur Rahman

Audit Committee

A. K. M. Shaheed Reza

Md. Mizanur Rahman Chowdhury

Bilkis Begum

Managing Director & CEO

Dewan Mujibur Rahman

Executive Committee

Al-Haj S. M. Shakil Akhter

Taznin Aman

Israt Jahan

Farida Begum

M S Ahsan

Al-Haj Mosharref Hossain

Md. Tabibul Huq

A. S. M. Feroz Alam

Saber Hossain Chowdhury

Dewan Mujibur Rahman

Company Secretary

S.Q. Bazlur Rashid

Auditors

Khan Wahab Shafique Rahman & Co.Chartered Accountants

Syful Shamsul Alam & Co.Chartered Accountants

Tax Advisor

K M Hasan & Co.Chartered Accountants

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2.3.6 Management Structure

Figure 2: Management Structure of MBL

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Managing Director and CEO

Additional Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

First Vice President

Assistant Vice President

First Assistant Vice President

Principle Officer

Senior Executive Officer

Executive Officer

Assistant Officer

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2.3.7 Function of Mercantile Bank Limited

The functions of commercial Banks are now wide and varied. However, the functions of

Mercantile Bank Ltd. may broadly be classified under the following two categories-

A. Primary Functions; and

B. Secondary Functions

A. Primary Functions

The primary functions of Mercantile Bank Limited are same as other Commercial Banks.

These functions includes-

i. Accepts deposits;

ii. Lends money;iii. Creates credit;

iv. Creates medium of exchange.

i. Accepts Deposits

The first primary functions of bank are to accept deposits of money from the public

or savers group. The total deposits held by the banker are broadly classified as-

a) Demand deposits

Demand deposits are withdraw able on demand and thus no

Prior notice is needed. Deposits in Current Account and Savings Accounts fall

in this category.

b) Time deposits

Time deposits are repayable on the expiry of a fixed period of time only. Fixed

Deposit Accounts, Recurring Deposit Accounts and deposits payable at

specified notice fall in this category.

The banks usually pay interest on all types of deposit accounts except the

current accounts.

ii. Lends Money

Banking business essentially involves lending. In fact the deposits are accepted for

lending or investment. Depending on the requirements of the borrower, banks lend

money in the forms following-

a) Loans

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b) Overdraft

c) Cash credit and

d) Bills purchased & discounted

iii. Creates Credit/Money

The creation of credit is one of the important functions of Commercial Banks. In

the ordinary course of business, banks accept deposits from the public and lend

money to its customers. When a bank extends loan, it does not pay the amount in

cash. Rather, the bank credits the amount in the bank account of the borrower and

allows withdrawing the required amount by cheques. In this way, a bank creates

credit or deposits, which are regarded as money and can be used for the purchase

goods and services and also for the payment of debt just like currency notes.iv. Creation of Medium of Exchange

Commercial Banks usually issues cheque, which circulates like money in the

society and thus creates the medium of exchange.

B. Secondary Functions

Modern commercial Banks like MBL, besides performing the functions, cover a wide

range of financial and on-financial services to meet the growing needs of the time. Some

of these services are available only to the customers while others are available to the

public in general.

The subsidiary services provided by a modern banker may be classified into following

three groups-

i. Agency Services; and

ii. Generally Utility Services

iii. Foreign Exchange Business

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2.4 Operating and Financial Performance

2.4.1 Branch Information

Figure 3: Site Map

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Head Office

61, Dilkusha Commercial AreaDhaka-1000, BangladeshTel: +880-2-9559333, 01711-535960Fax: +880-2-9561213SWIFT: MBLBBDDHWebsite: www.mblbd.com

Main Branch61, Dilkusha Commercial AreaDhaka-1000, BangladeshTel: +880-2-9559333, 9571618, 01711-535961,01711-643281, 01713-044847Fax: +880-2-9554410SWIFT: MBLBBDDH

Dhaka Division

Dhanmondi Branch

Karwan Bazar Branch

Joypara Branch

Banani Branch

Board Bazar Branch

Nayabazar Branch

Mohakhali Branch

Mirpur Branch

Ashulia Branch Uttara Branch

Elephant Road Branch

Motijheel Branch

Satmasjit Road Branch

Konabari Branch

Gulshan Branch

Hemayetpur Branch

Bijoynagar Branch

Mogbazar Branch

Chittagong Division

Agrabad Branch

Khatunganj Branch

Jubilee Road Branch

Madam Bibir Hat Branch

Jhilogja Branch

O R Nizam Road Branch

Chowmohani Branch

Feni Branch

Rajshahi Division

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Rajshahi Branch

Naogaon Branch

Rangpur Branch

Bogra Branch

Sapahar Branch

Khulna Division

Khulna Branch

Sylhet Division

Sylhet Branch

Moulvibazar Branch

Barishal Division

Recently a branch opened in Barishal Division

2.4.2 Resources

1. Deposit Scheme

Monthly Savings Scheme

Family Maintenance Deposit

Double Benefit Deposit Scheme

Special Savings Scheme

Pension and Family Support Deposit

2. Consumers' Credit Scheme

Small Loan Scheme

Lease Finance

Doctors' Credit Scheme

Rural Development Scheme

Women Entrepreneurs Development Scheme

SME Financing Scheme

Personal Loan Scheme

Car Loan Scheme

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2.4.3 Performance of MBL-At a Glance

Table 1: MBL at a glance

(BDT in million)

Particulars 2002 2003 2004 2005

Authorized Capital 1200.00 1200.00 1200.00 1200.00

Paid-up Capital 319.77 639.53 799.41 999.27

Assets 16383.17 18324.73 24098.09 28890.48

Deposits 15150.42 16285.19 22385.19 25727.43

Advances 8896.19 10775.95 17669.29 21857.05Import 15112.50 20380.80 28325.20 33271.90

Export 11377.30 15250.60 17411.00 24108.57

Profit after tax 256.74 215.91 312.58 386.83

No. of Branches 15 20 25 28

No. of Employees 363 492 544 663

Source: Annual Report 2005 of MBL

2.4.4 Financial Position

ASSET PORTFOLIO

Table 2: Asset Portfolio of MBL

Year-2005 (BDT in Million)

Components Amount % of Total

Loans and Advances 21,857.05 75.65

Investments 3,517.68 12.18

Cash 1,878.41 6.50

Money at Call and Short Notice 625.00 2.16

Balances with other Banks 118.19 0.41

Other Assets 894.15 3.10

Total 28,890.48 100.00

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Asset Portfolio

76%

12%

7%

2%

0%

3%

Loans and Advances

Investments

Cash

Money at Call and Short

Notice

Balances with other

Banks

Other Assets

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Figure 4: Asset Portfolio of MBL

2.4.5 Comparative Statement of Income & Expenditure

Comparative Income position of the Company for the year ended on 31 December 2004

and 2005 are as follows:

Table 3: Income Description of MBL

Description 2004 2005

Interest Discount and similar Income 2,191,648,398 2,595,262,904Fees, Commission and Brokerage 217,146,130 300, 611, 339

Gain less losses arising from Dealing

Securities

268,210,909 259,202,408

Other Operating Income 94,289,760 192,323,014

Profit less losses on interest rate changes (30,997,398) 82,610,516

Total 2,740,297,799 3,430,010,181

A comparative expenditure position of the Company for the year ended on 31 December

2004 and 2005 are as follows:

Table 4: Expenditure Description of MBL

Description 2004 2005

Interest Fees and Commission 1,531,630,250 1,944,655,065

Administrative Expenses 214,607, 313 280, 405, 091

Other Operating Expenses 156,932,684 214,312,000

Depreciation on Banking Assets 15,366,126 23,404,125

Total 1,918,536,373 2,462,776,281

2.4.6 Net Profit

As of December 31, 2005 the MBL earns at amount to Tk. 386.83 million. During the

period of 2004 the profit was Tk. 312.58 million. So the profit of 2005 is increased than

2004.

2.4.7 Financial Highlights

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Highlights on the overall financial activities of Mercantile Bank Limited for the year 2006and 2005.

Table 5: Financial Highlights

(BDT in million)SL

NO.PARTICULARS 2006 2005

1 Paid-up Capital 1,199.12 999.27

2 Total Capital Fund 2,554.29 2,045.85

3 Capital Surplus/Deficit 401.50 273.47

4 Total Assets 37,159.65 28,890.48

5 Total Deposits 33,317.65 25,087.43

6 Total Loans and Advances 26,842.14 21,857.05

7 Total Contingent Liabilities and Commitments 20,627.47 14,674.258 Credit Deposit Ratio (in %) 85.16 91.68

9Percentage of Classified Loans against TotalLoans and Advances (in %)

3.79 4.14

10 Profit after Tax and Provision 494.22 386.83

11 Amount of Classified Loans during the year 112.25 179.58

12 Provision kept against Classified Loans 594.00 523.00

13 Provision Surplus 0.0081 0.18

14 Cost of Fund (in %) 9.00 8.42

15 Interest Earning Assets 32,882.99 26,117.9316 Non-interest Earning Assets 4,276.66 2,772.55

17 Return on Investments (ROI) (in %) 8.76 9.51

18 Return on Assets (ROA) (in %) 1.50 1.46

19 Income from Investments 369.12 314.94

20 Earning Per Share (BDT) 41.22 32.26

21 Net Income Per Share (BDT) 41.22 32.26

22 Price Earning Ratio (approximate) 9 Times 10 Times

2.4.8 Financial Summary

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Figure5: Financial Summery of MBL

2.5 Products & Services

2.5.1 Card

MBL cardholder can enjoy the following benefits and much more

No Cash Withdrawal Fee:For withdrawals of cash from

MBL ATM by MBL cardholders no cash advance fee is

necessary and from any other Q-cash ATM the fee is Tk.10only. MBL is the only bank offering such unique facility.

Moreover, our VISA Cardholders can also withdraw cash

from any Visa logo ATM locally and internationally.

Acceptability: International/Dual card is accepted all over

the world at millions of outlets and ATMs. A Dual card is

also accepted in most of the big cities like Dhaka,

Chittagong, Khulna, Rajshahi, Sylhet at more than 10,000

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outlets including 4500 POS. It covers various kinds of merchants like hospital, hotel,

restaurant, department store and the card has accessibility to any outlet having VISA logo.

Credit Facility: Mercantile Bank Ltd. Visa Credit card offers maximum 45 days credit

facilities free of interest and minimum payment is 5% of outstanding billing payment for

easy repayment and convenience of the customers.

Supplementary Card: A Principal cardholder (local) may apply for more than one

supplementary card where one supplementary card is free. Expenses made by

supplementary card will be charged to the principal card.

Advance against Credit card: MBL cardholder can take advance as term loan up to 50% of

the card limit to be repaid on the monthly installment basis.

Any POS transaction over TK. 20000 but not exceeding 50% of the credit limit isconvertible to Personal loan/CCS and to be repaid on monthly installment basis.

Repayment period of such loan may be from 6 months to 36 months.

Overdraft Facilities: Overdraft facilities up to 80% of the credit card limit may also be

allowed for payment of the installment of scheme deposit with our Bank.

Payment of Utility Bill: Payment of utility bills like telephone bills, gas bills, electric bills,

water bills, may be settled by card.

2.5.2 Online Banking

Online Banking have so far been activated with 32 (Thirty Two) Branches of the Bank

from January 01, 2006. Online service is now available for all customersBoth Cash

deposit and withdrawals, Cheque Deposits and Transfer in CD, SB, STD, Loan accounts

(Cheque Bearing within limit). Monthly Saving account will not fall under Online

transaction service.

Online Banking Times:

Sunday to Thursday, Hours - 9:00 am to 3:00 pm

Saturday ,Hours - 9:00 am to 12:00 noon (only in open branches on Saturday)

Account wise Online Banking Limit (cash withdrawal, deposit and transfer):

Maximum Deposit Limit : Tk. 500,000.00 per transaction

Cumulative deposit shall not be more than TK.10,00,000.00 per day

Maximum Withdrawal Limit : Tk. 300,000.00 per transaction

Cumulative withdrawal shall not be more than TK.600,000.00 per day

Charges for Online Banking:

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Table 6: Charges for Online Banking of MBL

Intra City* Inter City**Mode of

realization

Free

Upto BDT 1,00000 - TK. 50.00

Upto BDT 2,00000 - TK. 100.00

Upto BDT 3,00000 - TK. 150.00

Upto BDT 4,00000 - TK. 200.00

Upto BDT 5,00000 - TK. 250.00

Up front Cash

*Intra City Transaction: Branches under Same City Corporation Areas

**Inter City Transaction: Branches outside City Corporation Areas

Service Charge Applicable

2.6 Others

2.6.1 Mercantile Bank Foundation

The Bank has set up Mercantile Bank Foundation for extending benevolent services to the

society. The Bank contributes 1% of operating profit or Tk.4.00 million, whichever is

higher, to Mercantile Bank Foundation every year. The Foundation has been established

with following objectives:

1. Mercantile Bank Prize to 8(eight) eminent personalities of the country for the

outstanding contribution in the fields of Economics and Economic Research, Bengali

Language and Literature, Science and Technology, Education and Culture, Journalism,

Sports, Research on Liberation War and Industry and Commerce.

2. Interest free education loan for the meritorious but poor students

3. To conduct research on Bengali language and literature.

4. Book purchase and Distribution Policy to encourage writers and publishers

of the country.

5. Interest free Loan to the unemployed educated people.

6. Donation for handicapped artists, literature and distressed people.

7. Project for the development of shelter-less children.

2.6.2 R&D: Investing into the Future

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Excellence in banking operation depends largely on a well-equipped and efficient

Research and Development Division. Such activities require the investment of substantial

resources and a set of qualified personnel with multidisciplinary background. Although it

is not possible at this stage to undertake R&D activities similar to those of the banks in the

developed countries, Mercantile Bank has established a core Research and Planning

Division comprising skilled persons from the very inception of the Bank.

2.6.3 Human Resources Development

In today's competitive business environment, the quality of human resources makes the

difference. The Bank's commitment to attract high quality persons to work for it is

reflected in the efforts of the Bank. In the face of today's globalization, the Bank envisagesto develop highly motivated workforce and equip them with latest skills and technologies.

The Bank evolves human resources development strategy with a view to ensuring good

working environment, a high level of loyalty and commitment, devotion and dedication on

the part of the employees.

2.6.4 Training Division

The Bank has set up Training Institute for providing training facilities to its

executives/officers. The Training Institute has already conducted a number of foundations

and specialized training courses. A number of officers were sent to Bangladesh Institute of

Bank Management (BIBM) and other training institutes at home and abroad for

specialized training on various aspects of banking. The Bank believes in professional

excellence and considers its working force as its most valuable asset and the basis of its

efficiency and strength.

2.6.5 MBL Time Line

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Figure 6: MBL Time Line

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GENERAL BANKING

3.1 Introduction

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CHAPTER: 3

Introduction

3.2 Accounts Opening

3.3 Local Remittances

3.4 Fixed Deposit Receipt (FDR)

3.5 Deposits

3.6 Deposit Schemes

3.7 Collection and Clearing House

3.8 Accounts

3.9 Cash

3.10 Locker Service

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Bangladesh is one of the less developed countries. So the economic development of the country

depends largely on the activities of commercial banks. So we need to emphasis whether these

commercial banks are effectively and honestly performing their functions, assigned duties and

responsibilities. In thus respect we need to know about the general banking function of those

banks as well as MBL is to provide the general banking service.

General banking is the starting point of all the banking operations. This is the department,

which provides day-to-day or instant services to the customers. Since bank is confined to

provide the services everyday, general banking is also known as retail banking. Main

Functions of general banking department are the followings:

1. Accounts Opening.2. Local Remittances.

3. FDR.

4. Different Schemes.

5. Collection and Clearing House.

6. Accounts Section.

7. Cash Section.

8. Locker Service

3.2 Accounts Opening

For building up the relation between Bank and Customer the first step, that is must be

done is to open an account of the customer. Opening of an account binds the same into a

contractual relationship. But the selection of customer is very crucial. In fact, fraud and

forgery of all kinds start by opening of an account by the customer or customers.

Banks success and failure is largely depending on their customers. If customer is fraud,

they may create fraud and forgery by their account with bank and thus destroy good will

of the banks. So, this section takes extreme caution in selecting its customer base.

One of the basic functions of commercial banks is to accept deposits. For accepting

deposits both demand and time, MBL-Kawran Bazar Branch offers the following types of

accounts-

3.2.1 Types of accounts with terms and conditions

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This part covers only following types of accounts-

A. Current Account

B. Savings Bank Account

C. Short Term Deposit (STD) Account

A. Current Account: No restriction exists on the number of deposits into and

withdrawal from this account. Opening balance must be Tk. 1000 and after than

customer must maintain a minimum balance of Tk. 500. Tk. 50 is charged if

balance falls short of minimum balance.

Interest Rate = No interest.

Generally businessmen open this kind of account.B. Savings Account: This account can be opened by depositing Tk. 100. Mercantile

Bank requires a minimum balance of Tk. 500 to continue the account. At one time,

depositor can draw maximum 25% or Tk 1000 whichever lower.

Interest Rate = 6%

Individual, Businessmen or personally any one can open this kind of

account.

C. Fixed Deposit Receipt: This deposit is taken for some maturity period. Depositor

isnt allowed to withdraw or deposit money 1 this account.

D. Bearer Certificate of Deposit: Special Characteristics of these accounts are-

Transferable by mere delivery only.

Duration 3-months to 12 months.

This certificate doesnt contain any information about the depositor

It is sold at discount so that the difference between purchase price and face

value becomes the interest earning for the depositors.

Denomination for this account is Tk. 1,00,000. Tk. 50, 000 and Tk. 25,000

Only.

Opening of such account does not require any sort of document or any kind

of information about the depositor.

Interest rate for BCD ranges from 8% to 9/5% depending of amount and

maturity period.

The Bank then issues the following instruments to the customer to operate the

account

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Cheque Book: It is used to withdraw money from the account.

Deposit Book: It is used to deposit money in the account.

In case of issuing cheque book the above mentioned documents and the account opening

form must be checked properly.

3.2.2 Issuing cheque book

For New and Old Account

Fresh checkbook is issued to the account holder only against requisition on the prescribed

application form. In case of old account, requisition made on the prescribed requisition

slip attached with the checkbook issued earlier. Generate a security no randomly for everycheck leaf by Manager or authorized person. Prepare the instrument with respective

security no on the back of each leaf and signed by the authorized person. Make necessary

entries in Check Issue Register. Finally issue the checkbook for client (s).

Issue of Duplicate check book

Duplicate checkbook in lieu of lost one should be issued only when an A/C holder

personally approaches the Bank with an application Letter of Indemnity in the prescribedproforma agreeing to indemnify the Bank for the lost checkbook. Fresh check Book in lieu

of lost, one should be issued after verification of the signature of the Account holder from

the Specimen signature card and on realization of required Excise duty only with prior

approval of manager of the branch. Check series number of the new checkbook should be

recorded in ledger card signature card as usual. Series number of lost checkbook should be

recorded in the stop payment register and caution should be exercised to guard against

fraudulent payment.

3.2.3 Account enquiry

A customer can obtain the statement of his A/C by submission of an application in

prescribed balance enquiry receipt. Normally it is supplied two times in a year. In

addition, customer can know his current deposit position informally.

3.2.4 Transfer of an account

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Account holder may transfer his account from one branch to another. For this, he/she must

apply with proper reason to the manager of the branch where he is maintaining account.

Manager then requests to the manager of that branch where the A/C holder wants to

transfer his account. Besides, he also sends original copy of account opening form and

signature card and photocopy of application for transferring the account with the balance

remained in the account.

3.2.5 Closing of an account

An account may close-

1. When the customer desirous to close the account.

2. When the account is inoperative for a long time.3. In case of customers death, insanity or insolvency.

To close an account, the checkbook is to be returned to the bank. The bank makes charges

for the same by debiting the amount from his account and rest amount is then paid to the

customer. Necessary entries are given to the account closing register and computer.

Finally make sure that A/C holder is completely free from all dues.

3.2.6 Accounts opening process

Individual, firms or company anyone can open an account in the bank according to the

banks prescribed form. Applicant must submit required documents with his application

form. Different kinds of documents are required for different kinds of accounts or

applications. For individual only introduction by another account holder of the same bank

may be enough but for firm and others relevant papers/documents must be submitted to

the bank for verifications. There is a manual (Check list for account opening) of the MBL

for general banking division mentioning the required documents for different types of

accounts. The authorized officer scrutinizes the introduction and examines the documents

submitted. If every thing appears as satisfactory, three signatures should be made Verified

by-Officer, Admitted by-Officer and approved by-Manager. For opening accounts one

thing is must that is initial deposit. This should be made in cash no Cheque; no draft is

acceptable for opening account purpose.

Procedure & rules to open a new account

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Savings account

Before opening of a savings Bank Account, the following formalities must be completed by the

customer:

Requirement

Introducer

2 copies passport size photograph dully attested by introducer

Valid passport/ ward commissioners identification certificate

Prescribed account opening form filled in properly by intending account holder

Putting specimen signatures in the specimen card.

Fill the KYC form

Initial deposit Tk. 5000/- only

After fulfilling above formalities, opens an account for the client and provide the customer with

a deposit book and a checkbook in case of savings account and currents account.

Current account (Individual)

Requirement

Introducer (current account holder)

2 copies passport size photograph dully attested by introducer

Valid passport/ ward commissioners identification certificate

Prescribed account opening form filled in properly by intending account holder

Putting specimen signatures in the specimen card.

Fill the KYC form

Initial deposit Tk. 5000/- only

Joint Account

When an account is opened in the names of two or more persons it is called a joint account.

However, it is desirable that the number should not exceed three. At the time of opening an

account, clear and specific instructions shall be obtained regarding operation of the account and

payment of the balance, if any, to the survivors or surviving members in the event of death of

one or more joint account holders. Account shall be operated by either of us or either of

survivor, or us or both of us jointly or both of us or survivor.

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Current account (Proprietorship)

No saving account shall be opened in the proprietary concern. Application to open current

accounts will be made on which the name of the proprietor and his authorized signature must be

obtained. All formalities regarding the benefice of the account openers and the introducers rules

of the opening of the accounts etc. must be completed to the absolute satisfaction of the

manager.

Requirements

Introducer (Current account holder)

2 copies passport size photograph dully attested by introducer

Valid passport/ ward commissioners identification certificate.

Trade license

Seal of the firm

TIN Certificate

Prescribed account opening form filled in properly by intending account holder

Putting specimen signatures in the specimen card.

Fill the KYC form.

Initial deposit Tk. 5000/- only

Partnership

In case of partnership account,

Requirements

Introducer (current account holder)

2 copies passport size photograph dully attested by introducer

Valid passport/ ward commissioners identification certificate of all partners.

Trade license

Seal of the firm

Partnership deed

Prescribed account opening form filled in properly by intending account holder

Putting specimen signatures in the specimen card.

Fill the KYC form.

Initial deposit Tk. 5000/- only

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Current Account (Limited Company)

On having the desire to open an account from a limited company, a MBL Officer asks for the

following documents:

Requirements

Introducer (current account holder)

2 copies passport size photograph dully attested by introducer

Valid passport/ ward commissioners identification certificate of all directors.

Trade license of the company

Memorandum and articles of association of company (certified copy/ photocopy

dully attested by authorized signatory

Board Resolution

Certificate of incorporation

Certificate of commencement of business (for public limited company)

TIN certificate

List of directors

Seal of the company

Prescribed account opening form filled in properly by intending account holder

Putting specimen signatures in the specimen card.

Fill the KYC form.

Initial deposit Tk. 5000/- only

a. The name of the persons who have been authorized to operate the bank account on

behalf of the company.

b. The name of the persons who are authorized to execute documents with the bank

on companys behalf.

Societies, Clubs and Associations

In case of these sorts of accounts MBL requires the following documents:

Registration Certificate Under the Societies Registration Act, 1962

Copies of Memorandum, Articles of Association

Resolution of the Managing Committee.

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Power of Attorney to Borrow.

Non-government Organization (NGO)

The account opening procedure is same but in exception is that the Registration Certificate from

the Social Welfare Department of Government must be enclosed with the application.

Joint Account in The Name of Minor

A minor cannot open an account in his own name due to the incapacity to enter into a contract.

He can open an account in MBL in Joint name of another person who will be guardian of him.

3.3 Local RemittancesCash remitting from one place to another is risky. So, Banks remit funds on behalf of the

customer (s) to save them from any awkward happening through network of their

branches. There are three modes of remitting funds. These are -

A) Pay Order (PO)

B) Pay Slip (PS)

C) Demand draft (DD)

D) Telegraphic Transfer (TT)

A) Pay Order (PO)

Pay order is an instrument, used to remit fund within a clearing zone. Unlike cheque, there

is no possibility of dishonoring PO. The PO can only be encashed through the branch that

has issued the instrument.

Pay Order (PO) Issuing Process

For issuing a PO, following formalities are to be maintained. These are -

Duly filled up the application form by the customer.

Deposit money either in cash or by cheque with necessary charges.

Prepare the instrument and make necessary entries in the Bills Payable Register

where payees name, date, PO no. etc are noted.

Deliver the instrument to the customer after scrutinized and approved by authority

by taking signature of the customer on the counterpart.

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Cancellation of PO

The following procedure is followed to refund the pay order by cancellation:

1. Submit written request to refund the pay order attaching therewith the original PO.

2. Verify purchasers signature with the original application form on record.

3. Manager/authorized persons prior permission is required before refunding the

amount of pay order.

4. Pay order should be affixed with a stamp cancelled under proper authentication

and the authorized officers signature on the pay order.

5. No charge is created for cancellation. Refund only the pay order amount.6. The original entries are to be reversed with proper narration.

7. Record the cancelled pay order in the Pay Order Issue Register.

Loss of Pay Order

If the instrument is lost, the holder is asked to fulfill the following requirements-

1. Holder should inform the bank immediately.

2. Record a GD (General Diary) in the nearest Police Station.

3. Furnish an Indemnity Bond.

Collection of Pay Order

If the payee is a customer of Kawran Bazar Branch, he will deposit it for collection. Then

the branch gives necessary endorsement as a collecting bank. Then the instrument places

the issuing bank through clearing house.

PO Charge

Table 7: PO Charge

Amount Commission VAT on

Commission

150/= to 1,00,000/= 15/= 15%

1,00,000/= to 10,00,000/= 25/= 15%

10,00,000/= and above 50/= 15%

Issuing of duplicate instrument 50/= -

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Use of pay order

A pay order is issued and paid by the same branch of a bank and as such, the drawer

and the drawer are the same. The person or the organization in whose favor it is issued

is known as payee or the beneficiary. It is some times sold to individual on payment of

value who may or may not be a customer and is called the purchaser.

The purchaser should sign the standard application form giving detailed particulars

and request for issue of pay order. The payee or beneficiary must not appear to be

fictitious. His full name and address should be written on the application. Bank should

recover commission of pay order from the purchaser.

A pay order is divided into three parts viz. The actual pay order, the second counterfoil

to be returned by the payee and the first counterfoil to be retained by the issuingbranch as record.

Characteristics & payment

It should be paid to the payee or beneficiary after proper identification or it may be

credited to his account.

A pay order is transferable. As it is a bankers cheque payable to order the payee/

beneficiary may transfer it, by giving proper discharge on its back, to some oneelse who receives payment as the transferee.

It is not generally collected for a persons other that the original payee except in

cases where the depositor is a valued client known to the bank.

Before making payment the signature of issuing officers should be verified and the

date of payment should be marked in the register.

B) Pay slipIf anybody get any amount from MBL then MBL issue pay slip. He can deposit the pay

slip in any banks any branch.

Meaning & purpose

A pay slip is a written authorization for making payment-specified person or firm

payable by issuing branch, for a discharged liability of the bank. As pay slip is

originated made payable by the bank in a receipt form there is no need for any

application for its issue.

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A pay slip is issued to effect payments on account of bills payable by the bank for

goods and services purchased or availed by it. For example, bank is required to

make payment of bills for the purchase of furniture & fixture, for printing &

stationery and for any other works done on its behalf by the other party on

agreement with the bank.

Characteristics & payment

A pay slip is receipt of payment received by the payee due from the bank. It should be paid to

the payee on proper identification or credited to his account on its being presented duly

discharged by him or revenue stamp of required value. Cash payment should not be made if it is

crossed except to a collecting bank.

C) Demand draft (DD)

DD is called Bankers Draft. It is an instrument, issued by a particular branch, drawn on

another branch of the same bank, instructing to pay a certain sum of money. It is very

popular instrument for remitting fund from one corner of a country to another. DD is

issued in favour of a customer who maintains an A/C with MBL Kawran Bazar Branch. It

can be issued against Cash or Cheque. If DD amount is more than Tk. 50,000/= a test code

is given on IBCA. The A/C treatments will be-

The banker even on receiving instructions from the remitter cannot stop the payment of

the instrument. Stop payment can be done in the following cases-

i) Loss of draft before endorsement: In this case, Draft

reported to be lost, payees endorsement requires verification is marked.

ii) Loss of draft after endorsement: In this case, the branch

first satisfies itself about the claimant and the endorsement in his favor.

Cancellation of DD

To cancel an issued DD, the client has to submit an application. Issuing branch then sends

an Inter Branch Debit Advice (IBDA) to the drawn branch against previously issued Inter

Branch Credit Advice (IBCA). After that the following entries are given-

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Issue of Demand Drafts

The customer is asked to complete filling in a form that is treated as an application

as well as voucher. The application form should be checked carefully.

Commission charges are calculated and inserted in the case provided in the form.

The voucher given to the customer to deposit the cash with the cashier.

The cashier receives the cash and delivers the voucher to Remittance Department

against initial in his book.

Draft is prepared and entered in draft issue Register.

Branch-wise serial number is given on the draft besides the printed number putting

on oblique (/) in between. The amount protect graphed.

The draft number is written on the voucher.

Draft block and the voucher along withthe register are sent to the officer in charge

for checking and signatures. He signs the draft and voucher and initials the

counterfoil of the draft and the Register.

Then the draft and the voucher are sent to the Manager/ Second Officer for second

signature.

The draft is crossed if customers desires and delivered to him against his

acknowledgement on the voucher.

If the amount is tendered by a cheque, the drawer to and the purchaser of the draft

should be the same person, i.e. the signature on the cheque and on the application

form must tally.

A memorandum is issued to the customer if he or she desires.

The cheque is sent for passing and cancellation.

After the cheque is passed, similar procedure as explained above is adopted for

issuing draft.

Issuing of Duplicate DD

If the customer wants a duplicate DD, he then is asked to do the following formalities-

1. Throwing an application immediately by the original DD holder.

2. Making a General Diary (GD) in the nearest Police Station.

3. Furnishing an Indemnity Bond.

4. Put a CAUTION mark in the register.

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5. Inform to the Head Office by the issuing branch

6. Inform all the branches by the HO for stop payment.

7. Issue a new DD (Put the same DD no. and mark DUPLICATE).

DD Charge

Commission @ 0.10% but minimum Tk. 10/=

Postage charge Tk. 30/= (Fixed).

DD cancellation charge Tk. 50/= (Fixed).

Issuing of duplicate instrument Tk. 50/=

D) Telegraphic transfer (TT)

Telegraphic Transfer may be affected at the written request of any person and against value

received from him. A written application on the banks prescribed form duly signed by the

purchaser should be obtained. If the application for issue of telegraphic transfer contains

instruction to debit the account of the purchaser, his signature should be verified. It is however,

preferable to obtain a confirmation cheque from the customer.

The application form is in variably checked on the following points:

There should be a branch of MBL in the place on which Telegraphic Transfer will be

issued and the said branch has test arrangement with the issuing branch.

Full name of the payee and his A/C no., in case instructions are to credit his test

arrangement with the issuing branch.

The amount of T.T Commission and Telegram charges should be received from the

purchaser. The total amount may be paid in cash or tendered by a cheque if he is

customer of the branch. Some times, the customer may also desire to pay the amount of

T.T by cheque and commission and telegraph charges by cash.

In case of amount tendered by cheque, the drawer on the cheque and the purchaser of

the TT should be the same person, viz., the signature on the cheque and on the

application should tally. Such cheque should be in favor of Mercantile Bank Ltd.

Now, a cost memo for the TT is to be prepared by the officer under his signature which

contains the amount of TT Commission & Telegram charges & is delivered to the

purchaser.

Now the officer concerned as to the amount, name of the beneficiary has correctly

prepared the message, instructions regarding mode of payment and place of payment.

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The concern officers should correctly prepare the test.

T.T over telephone may be transmitted on account of valued clients of the bank.

Payment of Telegraphic Transfer

The payment of T.T should be made to the payee or beneficiary after being satisfied in all

respect. The serial number of T.T should be entered in T.T payable register on the relative folio

next to that of previous message on agreement of test. The issuing branch should be

immediately informed if any number is omitted.

The voucher should be passed. The beneficiary should be intimated the earliest, if

possible may be informed on telephone.

If the instructions are to be Advise and pay, the T.T receipt should be prepared. The

manager and the officer of the branch should sign after checking the name of the

beneficiary, the amount and the name of the issuing branch. The number of T.T receipt

should be noted in the T.T payable Register and on the decoded manages. The

beneficiary should be advised on the printed prescribed form instead of sending the T.T

receipt.

When the amounts are credited/ paid the same and should be noted in the T.T payable

register. While making the payment on a T.T receipt, the signatures of the attorney who

have signed be verified cancelled.

The T.T receipts are not transferable. They should not bear any endorsement. The

beneficiary is too signed on proper revenue stamp in front of the officer. Party

acceptable should attest the signatures of the beneficiary to the bank.

3.4 Fixed Deposit Receipt (FDR)

Fixed deposits are time deposits or time liabilities. These are the deposits in which an

amount of cash is deposited in Bank for a fixed period specified in advance. Beforeopening a Fixed Deposit Account a customer has to fill up an application from which

contains the followings-

Amount in figures

Beneficiarys name and address

Time period

Rate of Interest

Date of Issue

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Date of maturity

How the account will be operated (singly or jointly)

Signature (s)

F.D.R. no.

Special instructi