INTERNSHIP REPORT

ON
LENDING PROCEDURES OF COMMERCIAL BANK
(A Case study of Mercantile Bank Limited)

Main Branch
Please indicate the address
Dhaka

NORTHERN UNIVERSITY
B A N G L A D E S H
 INTERNSHIP REPORT
ON
LENDING PROCEDURES OF COMMERCIAL BANK
(A Case study of Mercantile Bank Limited)

Main Branch
Dhaka

Under the Supervisor of :

Prepared By:

Submission Date :

NORTHERN UNIVERSITY
B A N G L A D E S H
 STUDENT DECLARATION

I, ………………., here by declare that the presented report of internship titled “Lending
procedures of Commercial Bank- A case Study of Mercantile Bank Limited” is uniquely
prepared by me after the completion of three months work in Main Branch of Mercantile
Bank Ltd.

I also confirm that, the report is only prepared for my academic requirement not for any other
purpose. It might not be used with the interest of opposite party of the corporation.

I further undertake to indemnify the development against any loss or damage arising
from breach of the foregoing obligations.

……………………
Signature

SUPERVISOR’S CERTIFICATE
This is to certify that the internship report on “Lending Procedures of
Commercial Bank -A case of Mercantile Bank Limited ” in the bona fide
record at the report is done by Emran Hossain (ID: BBA070102019 ) as a part
fulfillment of the requirement of BBA (Regular) Program from Northern
University Bangladesh.

The report has been prepared under my guidance and is a record of the bona fide
work carried out successfully.

……………………… ……………………...
Supervisor Chairman
.
 L E T T E R O F T R A N S M IT T A L
Date:

Md.Abdullahel Kafi
Assistant Professor,
Department of Business Administration,
Northern University Bangladesh

Subject: Submission of the Internship Report on Lending procedures of commercial Bank

(a case study of Mercantile Bank Limited)

Dear Sir,

Here I present my Internship report titled ‘Lending Procedures of Commercial

Bank –a case of Mercantile Bank Limited with due gratitude and appreciation.
As per partial fulfillment of the requirements for the B.B.A. Program, I have completed the
Internship from Mercantile Bank Limited.

The internship program has given the opportunity to learn about different aspects of a reputed
organization. Before facing the real Business world, I have gathered a pre idea about the
organization culture.

To prepare this report both the Primary and secondary data have been used. A survey was
conducted for getting real information from the customers who have already taken the Consumer
Credit Scheme.

However, I have gathered all the facts that I could within this short period & have tried my level
best to exert all the thinks as much presentable as possible. Despite of limitations, I sincerely
hope that my report will meet the requirements that you set for me.

Yours faithfully,

…………………..

ACKNOW LEDGEM ENT

At the very beginning I would like to express my deepest gratitude to almighty ALLAH
for giving me the strength and the composure to finish the assigned task within the
scheduled time.

I am deeply indebt to my supervisor Md.Abdullahel Kafi, Assistant Professor,

Department of Business Administration, Northern University Bangladesh for
giving me the opportunity to discover the kind of kinship that ensues when we work in
close proximity to compile this report. I am also grateful to him for his whole-hearted
guidance and supervision, during the preparation of the report.
Gratitude is due to Mr. Azad Shamsi (SVP-HR Division), Mr. Md. Rafiquzzaman (SVP-
It Division) and Mr. Md. Shamim (Officer-Credit Division) and to all the personnel of
Mercantile Bank Ltd. Main Branch, who have co-operated and helped me in collecting
information for the improvement of my report.

I gratefully acknowledge the time and effort that the above-mentioned persons have
voluntarily shared. Their suggestions and comments to make the report a good one, was
really a great source of spirit for me

My love and thanks to all my friends who have helped and supported me all the way,
while doing the report.

…………..……………

EXECUTIVE SUMMARY
The Buying house Company is the most important part of the export-oriented business. It
increases the opportunity for entrepreneurship development in garment sector. Thus it
helps the unemployed people as well as the government to remove unemployment
problem and also play an important role in the economic development of the country.

I have worked there three months as requirement of the internship phase of BBA program
under the Department of Business Administration of NUB. I have selected my topic:
“Merchandising Activity of Multiline Buying Bangladesh Ltd”. This report is originated
as a partial requirement of BBA program. The overall approach of the report is to focus
on the merchandising activity of MBBL and the way by which it attracts the foreign
customers to sale products abroad.

Multiline Buying Bangladesh Ltd is a 100% export oriented buying house. It depends on
independent merchandising department. Multiline Buying Bangladesh Ltd. ensures the
buyer about product quality and price. It gives emphasize in merchandising division to
increase the reputation of the company. If Multiline Buying Bangladesh Ltd can initiate
long term and short-term plan for execute business the business would be benefited.

The Multiline Buying Bangladesh Ltd believes that performance evaluation is a

systematic appraisal of an employee by him supervising officer who is conversant with
the employee’s job performance. POD evaluates the employees performance based on
work factors such as job knowledge, performance of work disciplinary action, attendance
records etc.

Multiline Buying Bangladesh Ltd is managed by qualified and skilled management. The
management term members are well organized and highly professional. Management
term of Multiline Buying Bangladesh Ltd determined long-term decision

Table of Contents
 CHAPTER-1
INTRODUCTION (1-5)
1. INTRODUCTION 1
1.1 ORIGIN OF THE TOPIC 1
1.2 BACKGROUND OF THE REPORT 2
1.3 OBJECTIVES OF THE STUDY 3
1.4 METHODOLOGY OF THE STUDY 4
1.5 SCOPE OF THE STUDY 4
1.6 LIMITATION TO THE STUDY 5

CHAPTER-2
AN OVERVIEW OF MERCANTILE BANK LIMITED (6-09)
2. MERCANTILE BANK LIMITYED- AS A NEW PRIVATE BANK 06

2.1 Vision 07
2..2 Mission 07
2..3 Objectives 07
2..4 Core Values 08
2..5 Sponsors 08
2..6 Corporate structure 08
2..7 Management Hierarchy of Mercantile Bank Limited 08
2..8 Management and Manpower 08
2.9 PRODUCTS AND SERVICES OF MERCANTILE BANK LIMITED 08
2.11 Different Credits Offered by the MBL 09

CHAPTER-3
CREDIT ANALYSIS (10-29)
3.1 ABOUT THE CREDIT
3.1.1 Definition of credit
3.2 TYPE OF CREDIT
3.2.1 Types of credit facilities extended by MBL 16
Source 17
End-use 17
Team 17
Cost 17
3.3 IMPORTANCE OF THE BANK LENDING 18
3.4 IMPORTANCE OF BANK CREDIT 19
3.5 METHODOLOGY OF PREPARTING BUDGET AT BANK LIMITED 20
3.5.1 At branch Level 20
3.5.2 At the Regional Leve 20
3.5.3 At Head Office Level 20
3.6 CREDIT MANAGEMENT AND BANK 20
3.6.1 Bank Rate 22
3.6.2 Open Market Operation 22
3.6.3 Variable Reserve Requirements 22
3.6.4 Maintenance of Value of Taka 23
3.7 TOOLS FOR CREDIT MANAGEMENT 23
3.7.1 .Security 23
3.7.2 Margin 24
3.7.3 Creation of Charge 27
3.8 REPORTING TO CIB OF BB 27
3.9 DOCUMENTATION 28
3.10 CREDIT DISBURSEMENT 33
3.11 LOAN CLASSIFICATION 33
3.11.1 Recent Development 34
3.11.2 Procedure of Loan Classification: 35
3.12 CREDIT MONITORING, FOLLOW-UP & SUPERVISION 39

Chapter-4
Overall Credit Policy of MBL (41-50)
4.1 4.1MODERN CONCEPT OF LENDING PURPOSE OF MBL 41
4.1.1 Judicious Selection of Customer: 41
4.1.2 Purpose: 42
4.1.3 Safety 43
4.1.4 Liquidity 43
4.1.5 Security 44
4.1.6 Profitability 44
4.1.7 Spread/Dispersal/Diversification 44
4.1.8 National interest/social benefit 44
4.1.9 Customer Segmentation 44
4.1.10 Discouraged Business 44
4.2 CREDIT GUIDELINES OF BB 46
4.3 TECHNIQUES OF PROJECT APPRAISAL 46
4.3.1 Management appraisal 46
4.3.2 Market appraisal 46
4.3.3 Technical appraisal 47
4.3.4 Financial appraisal 47
4.3.5 Economic appraisal 48
4.4 THE INITIAL LOAN INTERVIEW 48
4.5 CREDIT INVESTIGATION 49
4.6 PURPOSE OF CREDIT INVESTIGATION 49
4.7 LENDING STRATEGY OF MERCANTILE BANK LIMITED 49
4.8 FEATURE OF LENDING 49
4.8.1 Types of Facilities 49
4.8.2 Amount 50
4.8.3 Repayment 50
4.8.4 Pricing 50
4.8.5 Security 50
4.8.6 Insurance 50
4.8.7 Covenant and Conditions 50

CHAPTER-5
CREDIT RISK AND MANGEMENT (67-80)
6 CREDIT RISK AND MANAGEMENT 51
6.1.1 Credit Approval Process of MBL 51
6.1.2 How to Calculate Credit Risk 51
6.2 Risk Management of MBL 52
Credit Risk Management 52
Liquidity Risk Management 54
Market Risk Management 54
Foreign Exchange Risk Management 54
Interest Rate Risk Management 55
Reputation Risk Arising from Money Laundering Incident and its 55
Management
Operation Risk Management 55
Information Systems audit Management 56
6.2.2 Risk Management Realities 56
6.2.3 Risk Management Approach 57
6.2.4 Risk Management Oversight 57
6.2.5 Risk Management Process of MBL 60
6.3 Credit Risk Management 61
6.3.1 Creating Credit Risk Awareness Culture 61
6.3.2 Approved Credit Policy by the Board of Directors 61
6.3.3 Separation of Credit Risk Management I (CRMD) from Credit 61
Administration Division
6.3.4 Formation of Law and Recovery Team 62
6.3.5 Independent Internal Audit and Direct Access to Board (Audit 62
Committee)
6.3.6 Large Loan limit and Credit Facility on business Consideration 62
6.3.7 Credit Quality and Portfolio Diversification 62
6.3.8 Early Warning system 63
6.3.9 Provision & Suspension of Interest 63
6.3.10 Lending Process in MBL 63
6.3.11 Credit Management Initiatives 64

FINDINGS OF MBL, CONCLUSION AND RECOMMENDATION

(81-86)
Findings 81
Recommendation 82
Conclusion 84
Bibliography 85
Appendix 86
Acronyms 97