"Credit Management System " - A Study On Mutual Trust Bank Limited, Khatungonj Branch, Chittagong

(This Internship Report Is Submitted For The Partial Fulfillment Of The Degree of Master of Business of Administration With A Ma or In Finan!e " Ban#ing$

Ackno!ledgement
Praise to be Allah (SWT$% the !reator and sustainer &ho ha'e gi'en us strength and opportunit( to !omplete the report on )*redit Management S(stem) of Mutual Trust Ban# +td, A stud( on its -hatungon Bran!h% *hittagong, First of all I &ould li#e to than# to our honorable super'isor &ho has arranged this opportunit( for pra!ti!al orientation in Ban#, , Finall( I am indebted to the !ontribution of all &hose !ordial !ooperation helped me dire!tl( or indire!tl( for the !ompletion of this report,

"#$%AC$
Ris# is inherent in all *ommer!ial Operations, In lending operations ris#s are properl( and intensi'el( re.uired to be managed in order to ensure asset .ualit(, Bangladesh Ban#% unders!oring the essen!e of proper ris# management in different areas of Ban#ing Operations, In order to !ompl( &ith the *redit Ris# Management guidelines% the ban# /Poli!( 0uide +ines of *redit Management S(stem1 in use &hi!h &as appro'ed b( the Board of Dire!tors in its 23st meeting held on 34,35,56667, It is a re.uirement of the Bangladesh Ban# that the guide lines are re'ie&ed periodi!all(% at least on!e annuall(, In order to ma#e the guide lines more refined and !ompliant &ith the re.uirement of the Bangladesh Ban#% the same has been re'ie&ed as /*redit Poli!( &ith *redit Management S(stem 0uide +ines% Mar!h85669, One of the main ob e!ti'es of these guidelines is to ma#e the e:e!uti'es and offi!ers of the Ban# !on'ersant &ith the Ban#1s poli!ies% pro!edures% strategies and modalities follo&ed in MTB in respe!t of !redit operations,

TABL$ O% CO&T$&TS
Cha'ter One- Background o( the Study
SL &o 3,3 3,5 3,4 3,; 3,7 3,2 "articulars Introdu!tion Ob e!ti'e of the Stud( Ba!#ground of the stud( Methodolog( of the stud( S!ope of the stud( +imitations of the stud( 3 5 4 ; 7 7 "age &o

Cha'ter T!o - An O)er)ie! o( Mutual Trust Bank Ltd

SL &o 5,3 5,5 5,4 5,; 5,7 5,2 5,@ "articulars Board of Dire!tors =istor( of the Ban# +td Mission " >ision of Mutual Trust Ban# +imited Organi?ational Stru!ture of the Mutual Trust Ban# +imited Produ!t of Ser'i!es of Mutual Trust Ban# +imited Mutual Trust Ban# 8 At a glan!e SWOT Anal(sis of -hatungon Bran!h "age &o 28< 9 36 33 35834 3; 37832

Cha'ter Three - Theoretical #e)ie!

SL &o 4,3 4,5 4,4 4,; 4,7 4,2 4,@ 4,< 4,9 4,36 4,33 4,35 4,34 "articulars Introdu!tion Ob e!ti'e of +ending Program Mission " >ision *redit Prin!ipal Prin!ipal Parameters for !redit e'olution Produ!t RangeAT(pes of +oan Fa!ilities +oan Fa!ilit( Parameters T(pes of Se!urit( Features of Se!urit( >aluation of Se!urit( *redit Assessment *all Report *redit Memorandum "age &o 3@ 3< 3<839 39856 56 53855 5485; 57 57852 5285@ 5@85< 5< 5<845

4,3; 4,37 4,32

Ris# Assessment areas *redit Ris# 0rading Basis for +oan *lassifi!ation

4584; 4;84< 4<8;@

Cha'ter %our - Credit A''ro)al Authority * #eco)ery System

SL &o ;,3 ;,5 ;,4 ;,; ;,7 ;,2 ;,@ ;,< ;,9 ;,36 ;,33 ;,35 ;,34 ;,3; ;,37 ;,32 SL &o 7,3 7,5 7,4 "articulars Introdu!tion Appro'al of delegation Authorit( *redit Appro'al Authorit( 0uide +ines for Appro'al Authorit( 0ro&th of +oan and ad'an!es of MTB (Figure83$ Total Deposit (Figure85$ Total +oan and Ad'an!e (Figure84$ Anal(sis of +oan and Ad'an!e fi'e (ears (Figure8;$ Portfolio Mi: (Figure8 7 and 2$ Pro!ess of =andling +oan (Figure8@$ Reporting of Appro'al *redit Re!o'er( *ell (*R*$ *redit Management Do!umentation and Disbursement *ustodial Dut( *redit Monitoring *redit Re!o'er( " BP+ Monitoring "articulars Problem Findings Re!ommendations and Suggestions *on!lusion 29 "age &o ;< ;< ;<876 76 73 73 75 75 74 7; 77879 79 79823 23825 2582; 2;827 "age &o

Cha'ter %i)e - %indings, #ecommendation * Conclusion

Referen!es

Cha'ter OneBackground o( the Study

+ntroduction
Bo&8a8da(s% edu!ation is not ust limited to boo#s and !lassrooms, In toda(Cs &orld edu!ation is a tool to understand the real &orld and appl( #no&ledge for the betterment of the so!iet( as &ell as business, From edu!ation the theoreti!al #no&ledge is obtained from the !ourses of stud(% &hi!h is onl( the half &a( of the sub e!t matter, Pra!ti!al #no&ledge has no alternati'e, The perfe!t !oordination bet&een theor( and pra!ti!e is of paramount importan!e in the !onte:t of the modern business &orld in order to resol'e the di!hotom( bet&een these t&o areas, Therefore% an opportunit( is offered b( Dni'ersit( for graduates to get three months pra!ti!al e:perien!e in a business organi?ation% &hi!h is #no&n as )Internship Program), Internship program brings a student !loser to the real life situation and thereb( helps to laun!h a !areer &ith some prior e:perien!e, So sele!ting and reporting on a member of this se!tor )Mutual Trust Ban# +imited), Through this stud( I &ant to put up the performan!e of Mutual Trust Ban# +imited in the ban#ing se!tor of Bangladesh, I &ant to des!ribe the *redit Management of Mutual Trust Ban# +imited,

O,jecti)e o( the Study

The main ob e!ti'e of the stud( is to ha'e #no&ledge about the loan and ad'an!e management in the Mutual Trust Ban# +imited in order to stud( the !redit management s(stem I ha'e de!ided to stud( about the follo&ing fa!tsE

A!.uiring the least #no&ledge about different loan produ!t offered b( Mutual Trust Ban# +imited, (MTB$ at present, To #no& about the !redit appro'al authorit( s(stem, To #no& the !redit poli!( and !redit operation model To #no& the !redit anal(sis pro!ess To #no& the pro!ess of sele!ting borro&ers -no&ing about the loan !lassifi!ation -no&ing about the !redit appro'al authorit( and re!o'er( s(stem,

Background o( the Study

Internship program is an integral part of a !ourse in MBA, The purpose of the internship program is to pro'ide students &ith pra!ti!al #no&ledge and e:perien!e that a!tuall( a ban# fa!e, It presents an a!!ount of &hat happened to a ban# o'er a number of (ears, It !hroni!les the e'ents that a ban# had to deal &ith% su!h as !hanges in the !ompetiti'e en'ironment &hi!h &ill in'ol'e the business and the !orporate le'el, I ha'e done m( Internship Program in Mutual Trust Ban# +imited% -hatungon Bran!h% *hittagong, This program is about findings !redit management s(stem anal(sis and the re!o'er( s(stem in Mutual Trust Ban# +imited% -hatungon Bran!h% *hittagong, B( anal(?ing this program I ha'e had the e:perien!e of organi?ational s(stems that I ha'e not had the opportunit( to e:perien!e firsthand, In a short% I ha'e anal(?ed the &hole !redit management s(stem of the Mutual Trust Ban# +imited% -hatungon Bran!h% *hittagong and to understand ho& e:e!uti'es tried to deal &ith them,

Methodology
The present stud( is based on empiri!al as &ell as theoreti!al anal(sis *olle!ted data and information &ere tabulated% pro!essed and anal(?ed !riti!all( in order to ma#e the program more informati'e% fruitful and purposeful, In preparing this report I ha'e !olle!ted data and informationCs from the follo&ing sour!esE "rimary dataPrimar( Data ha'e been !olle!ted from Inter'ie&ing 'arious offi!er of the ban# and pra!ti!al des#&or#,

Secondary dataThe se!ondar( data ha'e been !olle!ted from the training manual of Mutual Trust Ban# +imited &hi!h is &ritten b( some of the department head of Mutual Trust Ban# +imited and fa!ulties of BIBM% 'arious !redit manual of Mutual Trust Ban# +imited% 'arious !ir!ular of Bangladesh Ban# regarding +oans and Ad'an!es% files of loans issued et!, Some data !olle!ted from Annual reports% i8mail% &ebsite et!,

The ma or portion of data sour!es has been !olle!ted from se!ondar( data sour!es, Information re.uired formulating suggestions and re!ommendations ha'e been a'ailed from related te:t and resear!h paper,

Sco'e o( the Study

S!ope means the area on &hi!h the stud( has to be done, The stud( is onl( related in Mutual Trust Ban# +imited% -hatungon Bran!h% *hittagong, This report fo!uses on the O'er'ie&s of the Mutual Trust Ban# +imited and mainl( related &ith *redit management s(stem and re!o'er( s(stem,

Limitations o( Study
I ha'e fa!ed se'eral problems during the preparation of this report, Some of the limitations of this report are mentioned belo&E Time *onstraintE I had to prepare this report &ithin a period less than three month &hi!h &as not enough to prepare su!h a report, Be!ause !olle!tion and arrangement of information is a time !onsuming ob, Then again I had to summari?e those, So I had to &or# in haste, *onfidential matterE It is not possible to get all sorts of information due to offi!ial !onfidentialit(, Fngaged in &or#E F'er( man of the bran!h &as so bus( in their &or#% so the( &ere not able to pro'ide suffi!ient !are to ma#e the interneeCs !lear about different topi!s, +a!# of pra!ti!al #no&ledgeE For the la!# of pra!ti!al #no&ledge% some short !oming ma( be a'ailable in the report, Be!ause in some !ases I !ould not pra!ti!all( in'ol'ed be!ause of ban#Cs limitation and ris#iness, *redit management is too big to !o'erE *redit management is a too big to !o'er &holl( in this limited s!ope, It re.uired huge time and huge spa!e to !o'er, So% I ha'e !o'ered onl( some important topi!s of !redit management,

The problems mentioned abo'e are some of the ma or problems I ha'e fa!ed during the preparation of this report, In spite of that% I ha'e tried m( le'el best to ma#e the report as good as I !an,

Cha'ter T!o - An O)er)ie! o( Mutual Trust Bank Ltd

Com'any O)er)ie! Board o( .irector

Mr, Samson =, *ho&dhur(% *hairman Mr, Samson =, *ho&dhur(% a re!ogni?ed and leading entrepreneur of the !ountr(% is the !hairman of MTB, =e has been i!on of the pharma!euti!al industries in Bangladesh for de!ades, =e is also the *hairman of the reno&ned !onglomerate% S.uare 0roup% &hi!h !omprises =ospital +td,% S.uare Toiletries +td,% S.uare *onsumer Produ!t +td, to name a fe&, Mr, *ho&dhur( holds #e( position in 'arious reputable organi?ation, =e is the *hairman of *entral Depositor( Bangladesh +td, Founder Trustee " Former *hairman% Transparen!( International Bangladesh *hapter% >i!e8President of the International *hamber of *ommer!e% Bangladesh % and Member of the F:e!uti'e *ommittee of Fran!e8Bangladesh *hamber of *ommer!e and industr( and Dire!tor of Midas Finan!ing +td, =e is the founder and immediate past President of Bangladesh Asso!iation of Publi!l( +isted *ompanies, Mr, *ho&dhur( is the former President of the metropolitan *hamber of *ommer!e and industr(% Dha#aG as &ell as a former dire!tor of the Federation of Bangladesh *hamber of *ommer!e and Industr(, Throughout his illustrious !areer% he has &on se'eral a!!olades in!luding )Business F:e!uti'e of the (ear) b( the Ameri!an *hamber of *ommer!e in Bangladesh in 399< and the )Business Person of the Hear 5666) b( the Dail( Star and D=+ World&ide F:press, =e has been re!ogni?ed *ommer!iall( Important Person (*IP$ b( the Bational Board of Re'enue (BBR$ and a&arded for being one of the =ighest Ta:8Pa(ers the (ear &hen it &as first introdu!ed and also in 566@86<, 5669 This prolifi! business magnate is a Senior *ambridge and has parti!ipated in numerous e:e!uti'e training !ourses around the &orld% in!luded a Management Training *ourse% oining !ondu!ted b( the Dni'ersit( of Dha#a and =ar'ard Dni'ersit(,

.r Ari( .o!la, /ice Chairman

Dr, Arif Do&la is the >i!e *hairman of MTB, =e is the Managing Dire!tor of the reno&ned !onglomerate% Ad'an!ed *hemi!al Industries (A*I$ +td, as &ell as its 'arious subsidiaries,

=e is also the Managing Dire!tor of Sto!hasti! +ogi! +td, and Ape: +eather *rafts +td, =e is !urrentl( a Dire!tor of Pioneer Insuran!e *o, +td,% A*I Agro!hemi!als +td,% *onsolidated *hemi!als +td,% Tetle( A*I (Bangladesh$ +td% A*I 0odre Agro'et (P't,$ +td, Premia8Fle: Plasti!s +td,% Intesa *ommuni!ation +td,% A*I +ogisti!s +td,% A*I Motors +td, and *reati'e *ommuni!ation +td, =e has obtained a PhD degree in Mathemati!s from the Dni'ersit( of *alifornia% San Diego, =is do!toral dissertation &as on non8stationar( sto!hasti! pro!esses% a field of stud( related to probabilit( theor( and statisti!s, =e is also a member of the Ameri!an Mathemati!al So!iet(, Mr Syed Man0ur $lahi Mr, S(ed Man?ur Flahi is the founding *hairman of MTB, =e started his !areer as a professional &ith a leading multinational !orporation and then be!ame an entrepreneur in the earl( post independen!e da(s, Mr, Flahi is a prominent businessman of the !ountr( and is the !hairman of Ape: 0roup% a leading business organi?ation of the !ountr(, Throughout his illustrious !areer% he has made signifi!ant !ontributions to the founding and de'elopment of 'arious industrial and business enterprises in!luding ban#ing, =e is the founding *hairman of Ape: Tanner( +td,% Ape: Adel!hi Foot&ear +td,% Ape: Pharma +td,% Pioneer Insuran!e *o, +td, and 0re( Ad'ertising (Bangladesh$ +td, Mr, Flahi is the former *hairman of Bangladesh Asso!iation of Ban#s% and has ser'ed as a Dire!tor on the boards of Bangladesh Ban#% Sonali Ban#% and Bangladesh -rishi Ban#, =e has ser'ed as President of the Metropolitan *hamber of *ommer!e and Industr( (M**I$ and as >i!e *hairman of the Bangladesh Asso!iation of Publi! +isted *ompanies, Mr, Flahi &as *hairman of the Fast West Dni'ersit( Foundation, =e is a Dire!tor of International Publi!ations +td,% the *redit Rating Agen!( of Bangladesh +td, and of A*I +td, =e has also ser'ed as a Dire!tor of the F:port Promotion Bureau% Bangladesh, Besides being an eminent industrialist% Mr, Flahi &as also appointed Ad'iser to the *areta#er 0o'ernment of Bangladesh% t&i!e% for his leadership .ualities and professionalism, =e is the President of the Dha#a Dni'ersit( Alumni Asso!iation and a Trustee Board member of the *entre for Poli!( Dialogue, =e &as also the =onorar( *onsul of the Republi! of Belgium in Bangladesh, =e has &on 'arious a&ards for his !ontributions to the business se!tor of the !ountr(% in!luding )Business F:e!uti'e of the (ear 5666) b( the Ameri!an *hamber of *ommer!e% Bangladesh and later the )Business Person of the Hear 5665) a&ard% sponsored the Dail( Star and D=+ World&ide F:press, Mr, Flahi holds an M,A, from the

Dni'ersit( of Dha#a,

Mr Anis A Khan, Managing .irector * C$O Anis A, -han (AA-$ is Managing Dire!tor " *FO of Mutual Trust Ban# +imited (MTB$% one of Bangladesh1s leading pri'ate se!tor ban#s% sin!e Aprill 37% 5669, Prior to oining MTB% AA- headed the !ountr(1s largest multiprodu!t finan!ial institution (non8ban#ing$% and one of its premier mer!hantAin'estment ban#s% ID+* Finan!e +imited (ID+*$% for si: (ears% as its *FO " Managing Dire!tor, A !areer ban#er% Anis earlier ser'ed for 53 (ears% in a multitude of roles% &ith the then 0rindla(s Ban# p,l,o,% ABI 0rindla(s Ban# and Standard *hartered Ban# (S*B$% both in Bangladesh and abroad, Anis has re!ei'ed on ob e:posure and training on ban#ing and management pra!ti!es in!luding !orporate ban#ing% international trade% personal ban#ing% leasing% fa!toring% operations% legal and !omplian!e% mergers and a!.uisitions% business pro!ess reengineering and transformation and up gradation of information te!hnolog( platforms in Dha#a% *hittagong% Mumbai% Dubai% +ondon and Melbourne, =is last posting for Standard *hartered Ban# &as as a fun!tional head for The 0ulf based in Dubai% Dnited Arab Fmirates, AA- has ser'ed Fastern Ban# +imited% as Dire!tor and member of its Board1s F:e!uti'e and Audit *ommittees, =e ser'ed as a member of the Tas# For!e on *orporate 0o'ernan!e% !on'ened and supported b( the Bangladesh Fnterprise Institute% and &hi!h drafted The *ode Of *orporate 0o'ernan!e for Bangladesh, Anis also ser'ed as Dire!tor of the *redit Rating Agen!( of Bangladesh +imited, Anis is on the Board of *hittagong Sto!# F:!hange +imited% nominated b( the 0o'ernment of Bangladesh, =e is a member of the F:e!uti'e *ommittee of the Bangladesh Asso!iation of Publi!l( +isted *ompanies and a member of the Board of 0o'ernors of the Asso!iation of Ban#ers% Bangladesh, =e is the Immediate Past *hairman of the Bangladesh +easing " Finan!e *ompanies

Asso!iation (B+F*A$ and ser'ed till Mar!h 5669% as a member of the *hamber *ommittee of the Foreign In'estors *hamber of *ommer!e " Industr( (FI**I$% Bangladesh, =e is a member of the *hamber *ommittee of the Metropolitan *hamber of *ommer!e " Industr( (M**I$ and !hairs its Ta:ation Sub8*ommittee,

1istory o( the Bank

The *ompan( &as in!orporated on September 59% 3999 under the *ompanies A!t 399; as a publi! !ompan( limited b( shares for !arr(ing out all #inds of ban#ing a!ti'ities &ith Authori?ed *apital of T#, 4<%66%666%666 di'ided into 4<%666%666 ordinar( shares of T#,366 ea!h, The *ompan( &as also issued *ertifi!ate for *ommen!ement of Business on the same da( and &as granted li!ense on O!tober 67% 3999 b( Bangladesh Ban# under the Ban#ing *ompanies A!t 3993 and started its ban#ing operation on O!tober 5;% 3999, As en'isaged in the Memorandum of Asso!iation and as li!ensed b( Bangladesh Ban# under the pro'isions of the Ban#ing *ompanies A!t 3993% the *ompan( started its ban#ing operation and entitled to !arr( out the follo&ing t(pes of ban#ing businessE (i$ All t(pes of !ommer!ial ban#ing a!ti'ities in!luding Mone( Mar#et operations, (ii$ In'estment in Mer!hant Ban#ing a!ti'ities, (iii$ In'estment in *ompan( a!ti'ities, (i'$ Finan!iers% Promoters% *apitalists et!, ('$ Finan!ial Intermediar( Ser'i!es, ('i$ An( related Finan!ial Ser'i!es, The *ompan( (Ban#$ operates through its =ead Offi!e at Dha#a and 2@ bran!hes, The *ompan(ABan# !arries out international business through a 0lobal Bet&or# of Foreign *orrespondent Ban#s,

Mission and /ision o( Mutual Trust Bank

We aspire to be the most admired finan!ial institution in the !ountr(% re!ogni?ed as a d(nami!% inno'ati'e and !lient fo!used !ompan( that offers an arra( of produ!ts and ser'i!es in the sear!h for e:!ellen!e and to !reate an impressi'e e!onomi! 'alue,

Mutual Trust Ban#Cs 'ision is based on the philosoph( &ell #no&n as MTB2/, We en'ision MTB to beE 3$ One of the best performing ban#s in the !ountr( 5$ The ban# of !hoi!e and 4$ A trul( &orld !lass ban#

Organi0ational Structure o( the Mutual Trust Bank Ltd

Sr $3ecuti)e /ice "resident $3ecuti)e /ice "resident Senior /ice "resident /ice "resident Senior Asst /ice "resident Assistant /ice "resident %irst Asst /ice "resident 4unior Asst /ice "resident Senior O((icer O((icer5 Trainee O((icer 4unior O((icer Asst O((icer .ri)er5 $lectrician O((ice Asst 5Asst $lectrician

MTB "roducts and Ser)ices

6 7eneral "roducts 3, Sa'ing A!!ount MTB 0raduate MTB Inspire MTB Junior MTB Senior MTB Rubi MTB Pri'ilege Sa'ing A!!ount BRB Sa'ing A!!ount

5, *urrent A!!ount 4, Short Boti!e Deposit 6 .e'osit Scheme 3, Bri!# b( Bri!# 5,MTB Fdu!ation Plan 4,MTB Double Sa'er plan ;, MTB Millionaire plan 7, MTB Monthl( Benefit plan 2, Fi:ed Deposit s!heme

6 Loan scheme3, +oan 0eneral 5, Term +oan 4, Pro e!t +oan ;, *ash *redit (**$ (=(po$ 7, Se!ured O'erdraft (SOD$ 2, =ouse Building +oad @, Ban# 0uarantee <, +etter of *redit (+*$ 9, +oad Against Trust Re!eipt (+TR$ 36, Ba!# to Ba!# +A* under ImportAF:port Finan!e 33, +ease Finan!e 35, *onsumer *redit

34, Mi!ro Finan!e S!heme

3;, Small Business +oan S!heme 37, MTB Personal +oan 32, MTB Auto +oan 3@, MTB =ome +oan 3<, MTB =ome F.uit( +oan,

6 SM$3,MTB 0unabati 5, MTB Bhag(abati 4, MTB -rishi ;, MTB Mousimi 7, MTB Re'ol'ing +oan 2, MTB Digoon @, MTB 0reen Fnerg( +oan

6 Ser)ices3, Western Dnion mone( transfer 5, First Solution " others mone( transfer 4, +o!#er Ser'i!es ;, Remittan!e8 T,T,% DD 7, Online Ban#ing 2, *redit *ard @, Debit *ard <, ATM Booth

Mutual Trust Bank at a 7lance

Mutual Trust Bank Limited %inancial 1ighlight on the o)erall acti)ities o( the Bank
As at .ecem,er, 89:9
BDT in Million 89:9 899; 5339,7< 2557,29 34;@,93 7<5;2,64 ;7<;2,435 492@2,35 37@9<,<@ <2,7;K 5,5< 9<<,42 964,9@ 2@@,9@ 9,@@ 3625 733<;,@@ @623,52 33,34 3,@< 36;4,72 ;2,24 ;2,24 37,3< 3@22,45 4929,44 <7,26 75@@;,@@ ;547;,6@ 44<<4,95 36623,6; <6,66 5,<3 <56,23 975,@2 224,69 5,52 3653 ;26@7,6; 2299,@5 <,99 3,@9 <7@,;@ 4<@5 4<,@5 36,2;

SL &o 3 5 4 ; 7 2 @ < 9 36 33 35 34 3; 37 32 3@ 3< 39 56 53 55

+tems Paid up *apital Total *apital Surplus in *apital Found Total Asset Total Deposit Total +oans and Ad'an!es Total *ontingent +iabilit( +ending8Deposit Ratio *lassified +oans as K of Total +oans and Ad'an!es Profit After Pro'ision and Ta: Total *lassified +oans and Ad'an!es Total Pro'ision Maintained against *lassified +oans Surplus A(Defi!it$ in pro'ision against *lassified +oans *ost of Found Farning Asset Bon8Interest Farning Asset Return on in'estments (ROI$ Return on Asset (ROA$ In!ome from in'estment Farning per share (BDT$ Profit per share (BDT$ Pri!e8Farning Ratio (Times$

S<OT Analysis
SWOT Anal(sis is the detailed stud( of organi?ationCs e:posure and potential in prospe!ti'e of its strength% &ea#ness% opportunit( and treat% This fa!ilitates the organi?ation to ma#e their e:isting line of performan!e and also foresee the future to impro'e their performan!e in !omparison to their !ompetitors, B( anal(?ing the performan!e of the ban#% &e get the follo&ing strengths% &ea#ness% opportunit( and threats (SWOT$,

Strengths= MTB has an e:!ellent reputation in !ompare &ith their peer group in mar#et, L All t(pes of unfair " illegal business pra!ti!e are strongl( dis!ouraged, L From the 'ie& of edu!ation " e:perien!e MTB F:e!uti'es are appre!iable, L MTB offers a bun!h of deposit produ!ts &ith attra!ti'e interest rate, L Well8groomed (oung energeti! &or#ing for!e, L World8!lass ban#ing de!oration, L It is obser'ed that MTB is tr(ing to follo& the s!ientifi! management theor(, L O!!up(ing is a 'er( important lo!ation, L Well #no&n !orporate house and business !on!erns are doing business through MTB,

<eakness
L *ongested spa!e L Ma or portion of deposit is high !ost fund, L Small mar#et shares in ban#ing business,

O''ortunity
L =a'e a s!ope to in!rease !redit and business, L More effi!ient F8ban#ing8 SMF ban#ing% Internet ban#ing% Online ban#ing% L To de'elop better net&or# L In!reasing the !orporate !lients

L Te!hnolog( support impro'e ser'i!e standard, L Pri'ate ban# be!omes more reliable to lo!al publi!, L =a'e opportunit( to in!rease mar#et share L B( doing so!ial a!ti'ities% it !an !reate a good impa!t on publi! mind, L Pri'ate !an !ontribute more in the e!onomi! de'elopment our !ount(, L pro'ide assistan!e to the small business organi?ations L In!reased !ompetition in the mar#et for publi! deposits, L Regularit( en'ironment fa'oring pri'ate se!tor de'elopment L S!ope of mar#et presentation though di'ersified produ!ts and &ide ban#ing net&or#,

Threats L Ban#ing Te!hnologies are !hanging L F:isten!e of huge bran!h of deferent ban#s, L Offering higher deposit rate b( other pri'ate ban#s, L Multi8pra!ti!e Ban#ing b( other Ban# L 0o't, imposes ta: and 'at on profits L In!reased !ompetition in online ban#ing se!tor, L 0o't, restri!tion on !ertain t(pes of ban#ing a!ti'ates, L Deteriorate F:port% Import and guarantee business due to !ompetition as &ell as e!onomi! slump,

Cha'ter Three Theoretical #e)ie!

+ntroductionRis# is inherent in all !ommer!ial operations, For Ban#s and finan!ial institutions% *redit ris# is an essential fa!tor that re.uires to be managed properl(, *redit ris# 'irtuall( is the possibilit( of failure of a borro&er to repa( debt in a!!ordan!e &ith the terms of san!tion, *redit ris#% therefore% arises from ban#Cs lending operations, In the present da(Cs state of deregulation and globali?ation% ban#1s range of a!ti'ities has in!reased% so also are the ris#s, F:pansion of ban#Cs lending operations !o'ering &ide range of produ!ts ha'e for!ed the ban#s to !onfront ne&er ris# areas and therefore to &or# out proper ris# addressing de'i!es, *redit ris#s are so e:hausti'e that a single de'i!e !annot en!ompass all the ris#s, Moreo'er% lending ris#s toda( ha'e assumed su!h di'erged nature% that ne&er tools and te!hni.ues are re.uired to be applied to manage them effe!ti'el( and effi!ientl(, In order to effe!ti'el( !ontain ris#s% !redit ris# management has to be done to enable the ban# to proa!ti'el( manage loan portfolios for minimi?ing losses and ensure an a!!eptable le'el of return for the shareholders and others, In the present s!enario of fast !hanging% d(nami! global e!onom( and the in!reasing pressure of globali?ation% liberali?ation% !onsolidation and dis8intermediation% it is essential to underta#e robust !redit ris# management poli!ies and pro!edures% sensiti'e and responsi'e to these !hanges, Mutual Trust Ban# +imited upholds the prin!iple of maintaining asset .ualit( and therefore% fo!uses on stri!t super'ision of its asset portfolio &ith utmost !are, It is !ommitted to e:tend high .ualit( ser'i!es to its !lients through different finan!ial produ!ts and profitable utili?ation of fund b( underta#ing 'arious lending operations in!luding finan!ing trade% !ommer!e " industr( et!, In !ondu!ting lending operations MTB al&a(s bears in mind the essen!e of proper ris# identifi!ation and their effe!ti'e management, It is also re!ogni?ed that failure in proper identifi!ation and management of ris#s ma( result in a large .uantum of ban# ad'an!es turning into non8performing,

O,jecti)es o( lending "rogramThe main ob e!ti'es of the guidelines are as underE a, b, !, d, e, f, g, h, i, To !ontribute to the balan!ed de'elopment of e!onom( b( pursuing a sound !redit poli!( that &ill put emphasis on lending in desired se!tor, To adopt an appropriate &or#ing method, To stri!tl( !ompl( &ith la&s and norms related to lending operation, To identif( proper lending area To maintain balan!ed lending portfolio #eeping stri!t &at!h on global e!onomi! situation that might ad'ersel( affe!t the ban#, To maintain ade.uate li.uidit(% ma#e udi!ious in'estment planning and attain sustainable gro&th and profitabilit(, To ma#e !redit do!umentation e:hausti'e, To ensure proper super'ision% monitoring " follo& up of asset portfolio, To strengthen asset .ualit( ensure safe return of mone( lent% minimi?ing of !redit loss and prote!t ban#Cs interest,

Mission and /ision

Our mission is /to ma#e MTB as the most preferred ban# of the !ustomers b( ensuring prompt and .ualit( ser'i!es &ith highl( moti'ated and s#illed manpo&er% using updated te!hnolog(% !o'ering &ide range of finan!ial a!ti'ities% maintaining transparen!(% a!!ountabilit( and integrit( and thereb( ensuring a stable and sound finan!ial operational s(stem, Mutual Trust Bank !ill- a, b, !, F:tend all t(pes of !redit fa!ilities at !ompetiti'e pri!e &ith pruden!e " effi!ien!( Offer &ide range of finan!ial produ!ts Fn!ourage loans " ad'an!es to produ!ti'e in!ome generating a!ti'ities and there b( !reate emplo(ment opportunities and impro'e standard of li'ing of the !ommon people, +oans and ad'an!es for produ!ti'e purpose% &hi!h &ill alle'iate po'ert(% &ill be gi'en priorit(, d, Di'ersif( lending a!ti'ities b( a'oiding undesirable se!toral !on!entration and ensuring balan!ed geographi!al dispersal,

e, f, g, h, i,

Design loan operations #eeping so!ial and e!onomi! and en'ironmental fa!tors in to !onsideration, Atta!h due importan!e to !onsumer !redit% personal loan% SMF loan and agri!ultural !redit, In'est at reasonable lending rates, Monitor and ensure end use of loansAad'an!es for the san!tioned purpose, Prefer short term lending through small and medium enterprises,

Credit "rinci'lesTo a!hie'e our goal for ma:imi?ing the sta#eholdersC 'alue and prote!t the interest of the depositors as &ell as to impro'e asset .ualit(% MTB &ill abide b( but &ill not be !onfined to the follo&ing !redit prin!iples% &hi!h should guide our beha'ior in our lending de!isionsE a, Assessment of the !ustomerCs !hara!ter% integrit( and &illingness to repa( &ill form basis of lending, b, *ustomers ha'ing !apa!it( and abilit( to repa( shall onl( be lent, !, Possibilit( of default &ill be &or#ed out before lending, d, *redit &ill be e:tended in the areas% ris#s of &hi!h !an be suffi!ientl( understood and managed, e, Independent !redit parti!ipation in the !redit pro!ess shall be ensured, f, Fthi!al beha'ior in all !redit a!ti'ities shall be ensured, g, Fn!ourage proa!ti'e ness in identif(ing% managing and !ommuni!ating !redit ris#s, h, Maintain due diligen!e in ensuring that !redit e:posures and a!ti'ities in!luding pro!essing fun!tion !ompl( &ith MTB re.uirements as &ell as re.uirement of regulator( authorit(, i, Ris# and re&ard to be optimi?ed, , Di'ersified !redit portfolio to be built and maintained, #, *redit &ill normall( be finan!ed from !ustomersC deposits and not out of short8term temporar( funds or borro&ing from other ban#s, l, The ban# shall offer suitable !redit ser'i!es and produ!ts for the mar#et in

&hi!h it operates, m, *redit &ill be allo&ed in a manner &hi!h &ill in no &a( !ompromise &ith the Ban#Cs standard of e:!ellen!e and to !ustomers &ho &ill not !ompromise &ith su!h standards, n, All !redit e:tension must !ompl( &ith the re.uirement of Ban# *ompan( A!t8 3993 and amendments thereof made from time to time and all the re.uirements of other regulator( authorities, m, Pre'ention of e:tending !redit fa!ilities to the *IB bla!# listed personsAentities,

"rinci'al "arameters (or Credit $)aluation

While e'aluating a !redit proposal% Mutual Trust Ban# &ill ta#e in to !onsideration% among others% the follo&ing, a, Pre'ailing !redit pra!ti!es in the mar#et, b, *redit &orthiness% ba!#ground and tra!# re!ords of the borro&er, !, Finan!ial standing of the borro&er supported b( finan!ial statement and other do!umentar( e'iden!es, d, Mar#eting aspe!ts, e, Te!hni!al aspe!ts, f, So!io8e!onomi! aspe!ts, g, Fn'ironmental Aspe!ts, h, Purpose% Tenure and other !redit parameters, i, Operational 'iabilit( of the business !on!ern, , *ash flo& anal(sis and also pro e!tions thereof, #, Reliabilit( of the sour!es of repa(ment, l, Mualit(% 'alue and ade.ua!( of se!urit(, m, Ris# absorbing !apa!it( of the borro&er, n, Fntrepreneurship and managerial !apabilities of the borro&er, o, >olume of ris# in relation to the ris# ta#ing !apa!it( of the ban# A !ompan( !on!erned, p, Profitabilit( of proposal to the ban# or !ompan( !on!erned, ., Hield from the fa!ilit(,

r, Total global e:posure of the borro&erAgroup, s, *redit Ris# 0rading Status t, *IB Status u, +egal urisdi!tion and impli!ations of appli!able la&s,
',

Fffe!t of an( appli!able la&s and regulations,

"roduct #ange5 Ty'es o( Loan %acilities MTB !redit produ!ts in!lude !on'entional produ!ts li#e *ash *redit% Se!ured O'erdraft (SOD$% Industrial Term +oan% loan 0eneral% =ouse Building loan% Ban# 0uarantee% +etter of *redit% +TRABill Pur!haseA Ba!# to Ba!# +A* under importA e:port finan!e% +ease Finan!e% *onsumer *redit et!, +arge s!ale Industrial Finan!e ma( also be !onsidered under !onsortium arrangement, A list of MTB1s !redit produ!ts is tabled belo&E

"resent 'roducts o( MTB

Sl, Bo, a b, !, d, e, f, Bame *ar +oan(Fmp$ +oan (0en$ D+APAD (BTB$ +TR SOD(Other s$ F=B+ Des!ription *ar +oan(Fmplo(ee$ +oan 0eneral Demand +oan +oan against Trust Re!eipt Se!ured O'erdraft (Others$ Fmplo(ees =ouse Building +oan Staff +oan against Pro'ident Fund 8 Small " Medium Fnterprise finan!ing 8 Purpose

Finan!ing pur!hasing !ar for o&n use b( MTB1s staff as per their entitlement, Finan!ing pa(ment of dut(% >AT " others *reated under for!ed !ir!umstan!es to&ards ad ustment of import pa(ment obligations To finan!e release of import do!uments, Finan!ing pre8shipment !redit re.uirement against e:port +*, Finan!ing pur!hase of land% !onstru!tion of building% pur!hase of apartment for residential purpose to MTB staffs, +oan allo&ed to MTB1s staffs against their respe!ti'e Pro'ident Fund, Finan!ing pur!hasing of household% !onsumer durables% !ar et! 0eneral purpose To finan!e in'entor(A re!ei'ables 0eneral purpose Finan!ing agro based industries,

g, h, i, ,

Staff +oan against PF *onsumerA Personal loan SMF finan!ing

Rural !redit

#, l,

Best In'est +oan =ome +oan SOD (FO$ SOD (0eneral$ *redit *ard Term +oan(Indus trial$ Term +oan (Others$ **(=$ IBP PAD(!ash$ FDBP +ease Finan!e S+* +*(DP$A

Best In'estment +oan =ome +oan Refinan!e Se!ured O'erdraft against Finan!ial Obligation Se!ured O'erdraft other than finan!ial obligation 8 Term +oan against !apital ma!hiner( Term +oan against other than ma!hiner( *ash *redit (=(pothe!ation$ Inland Bill Pur!hase Pa(ment Against Do!ument Foreign Do!umentar( Bill Pur!hased 8 Sight +etter of *redit +etter of *redit " subse.uent !ustomer liabilit( for a!!epted bill Ba!# to Ba!# +etter of *redit against Master F:port +* " Subse.uent IFDB* Ban# 0uarantee (ForeignA +o!al$ Bid Bond% Performan!e 0uarantee% Ad'an!e Pa(ment 0uaranteeA Retention BondA Pa(ment 0uarantee

m, n, o, p, ., r, s, t, u, ', &, :

In'estment against finan!ial obligation built from !lient1s mone( and ban#1s mone( Finan!ing for !onstru!tionApur!hasing of apartment Aflat against refinan!e of Bangladesh Ban#, 0eneral, 0eneral, F:e!ution of &or#Asuppl( orders Real Fstate Finan!e Finan!ing retail borro&ers through *redit *ard, Finan!e against !apital ma!hiner( Real Fstate Finan!e% s(ndi!ated finan!e et!, To finan!e against in'entor(A sto!# Are!ei'ablesA&or#ing !apital, Finan!ing against 0o't, !he.ue% PO% DD et!, Ad'an!e against sight +* Pur!haseABegotiation of F:port Do!uments against SightADsan!e F:port +* Finan!ing for pro!urement of !apital ma!hiner( and e.uipment For importA +o!al pro!urement of goodsAser'i!es, For importA pro!urement of !apital ma!hiner( " ra& materials Aser'i!es , Finan!ing importApro!urement of ra& materials and a!!essories against F:port +*, For submission of tenderAto obtain and offer as se!urit( against &or# order% suppl( orderAfor 0as% Fle!tri!it( !onne!tionArelease of goods from !ustomsAre!eipt of ad'an!e pa(mentAagainst deli'er( of goods% &ithout or against partial pa(ments b( !lient et!, For submission to different organi?ation against their re.uirement,

BTB+*

?,

B0

Loan %acility "arameters

MTB e:tends !redit fa!ilities for genuine purposes, Different t(pes of ad'an!es re.uire to be treated differentl(, Depending on the t(pe of ad'an!e% o&nership pattern% business mode% !ash flo&% se!urit( and other related matters fa!ilit( parameters are set, =o&e'er% the general parameters for !onsidering !redit fa!ilities are as underE >a? &ature o( Ad)ancesFa!h ad'an!e made is !ategori?ed under one of the arranged t(pes and is go'erned under the terms " !onditions related thereto, >,? "ur'ose+ending is guided b( legitimate purpose, Finan!ing hoarding% spe!ulati'e and so!iall( undesirable businesses are a'oided, *redit &hi!h !ontributes to trade and !ommer!e% import% e:port% infrastru!tural de'elopment% de'elopment of industries% emplo(ment generation% po'ert( alle'iation% e!onomi! gro&th and other produ!ti'e a!ti'ities are stressed upon, >c? Limit 5Amount o( (acilityA fa!ilit( is !onsidered on the basis of assessment of re.uirement " ustifi!ation sub e!t to the o'erall lending !ap as per Bangladesh Ban# single part( e:posure limit, Spe!ifi! fa!ilities are also !onsidered depending on rational assessment of the !redit re.uirement >d? Margin5$@uityJudi!ious sta#e of the borro&er in an( finan!ing plan to be ensured, Margin &illG ho&e'er% be sub e!t to institutional poli!( in this regard and poli!( of the Bangladesh Ban# and other regulator( authorities &here appli!able, >e? "ricing-#ate o( +nterest5Commission and other charges On the basis of loan pri!ing poli!( of MTB pri!ing8interest and other !harges &ill be determined. *hanges in pri!ing of fa!ilities are to be highlighted in the !redit

proposal, >(? .is,ursement o( Credit %acilitiesDisbursement is sub e!t to stri!t !omplian!e &ith the san!tioned terms and !onditions, Disbursement &ill be sub e!t to obtaining /Disbursement Order1 from *redit Administration Department of =ead Offi!e, Where disbursement &ill be made in phases% proper utili?ation of fund disbursed in earlier phases to be ensured through ph(si!al 'erifi!ation b( the =ead of Bran!hAresponsible Offi!ers of *redit Department, MTB &ill generall( follo& the poli!( of /Bo Do!umentation Bo Disbursement1, >g? Adjustment5 #e'ayment o( Credit %acilitiesDepending on the !ash flo& of the borro&ersAother sour!es of inflo& of the sponsors mode of repa(ment &ill be fi:ed, For the borro&er to e:hibit !apabilit( to periodi!all( ad ust the dra&ings ta#en and as su!h% to ha'e idea regarding the rationale for !ontinuation of the fa!ilit(% ad ustment mode is gi'en, In term lending% &here re'ol'ing transa!tion is not allo&ed% adheren!e to ad ustment stipulation (monthl(% .uarterl(% half (earl(% (earl( or other &ise$ is suggested to ensure re!o'er( of the loan disbursed, Tenors to be ustified based on the pro e!ted repa(ment abilit( and loan purpose, >h? /alidity5$3'iry5Ma3imum tenor Short term Medium term +ong term >i? SecurityMTB prefers se!urit( based lending, Se!urit( ma( !onsist ofE (i$ (ii$ (iii$ Primar( *ollateral OthersAadditional, E E E Dp to 35 months, More than 35 months and up to 26 months, More than 26 months,

Ban# generall( a!!epts the follo&ing se!uritiesE

a Ty'es o( Security >Taken 7enerally? Sto!# in tradeAin'entor( and ra& materials% &or# in pro!ess and finished goods (under h(pothe!ation$ dul( insured under ban#1s mortgage !lause !o'ering all possible ris#s ( +etter of authori?ation of the !lient to obtain Insuran!e Poli!( " rene&al thereof to the debit of the !lient1s a!!ounts to be obtained$,In'entor( is held in ShopsASho&roomsAFa!toriesA&arehouseAgodo&ns, >alue of in'entor( is !he!#ed, Ma!hineries and e.uipments (as h(pothe!ation$, +and and building (as Registered Mortgage$, Finan!ial obligationsAinstrumentsAshares(as pledgeAlien$ Bills re!ei'ables against &or# Asuppl( order (as assignment$ Do!uments of title to goods, (as lien$ Boo# Debts (as assignmentA=(po, of assets and boo# debts$ Sin#ing fund (as lien$ O&nership of *arsAbusesA&ater !raftsA'essels under h(pothe!ation and oint registration &ith !ompetent authorit(, A!!eptan!e of +* Issuing Ban# (For IDBP$, +etter of Indemnit( for Pur!hasing Foreign e:port bills (FDBP$ F:port +* (as lien against BTB+A*$ +etter of Trust Re!eipt NFor TRO Personal guaranteeA!orporate guaranteeA !ross8!orporate guarantee, Post dated !he.ues, 3st A5nd !hargeA3st ran#ing pari8passu !harge on fi:ed and floating assets of the limited !ompanies, *ollateral se!urit((for ta#ing !ollateral se!urit( it &ill be ensured that the

!ollateral has been properl( 'alued% 'erified and managed$,

, %eatures o( security Se!urit( to be easil( tra!eable% mar#etable and non8perishable Preferabl( land and building lo!ated &ith in !it( !orporationsAmuni!ipal areas ha'ing defe!tless title in the name of first part(, =o&e'er% propert( outside muni!ipal area andAor ha'ing defe!tless title in the name of 4 rd part( ma( be a!!epted on the basis of Ban#er8*ustomer relationship, In !ase of third part( propert( relation bet&een the borro&er and the o&ner of the !ollateral se!urit( shall be !learl( mentioned after proper 'erifi!ation b( the Bran!h &here in'ol'ement of !redit administration department (bran!hA=ead Offi!e$ is mandator(, +ease hold properties from RAJD-A*DAA-DAABS*I*APubli! Wor#s Department (PWD$ or an( other 0o'ernmentASemi 0o'ernmentAAutonomous bodies ma( be a!!epted after obtaining ne!essar( BO* from the lessor for mortgaging the lease hold propert(, Primar( se!urit( to ha'e ade.uate mar#et 'alue, Finan!ial instruments to be preferabl( of first part( title, Re!ei'able bills against &or# orderAsuppl( order to be ba!#ed b( ade.uate funding arrangements of the &or# orderAsuppl( order entrusting agen!(, Do!uments to be a!!epted for negotiation &hi!h are dra&n in !onformit( &ith the e:port +A* terms (i,e, do!uments &hi!h do not ha'e dis!repan!ies$, Personal guarantee shall be obtained from those persons &ho ha'e highAsatisfa!tor( net &orth% satisfa!tor( !ommitment fulfillment tra!# re!ord and no re!ord of an( irregularA !lassified ad'an!es, For s(ndi!ated loansA oint finan!ing% MTB prefers mortgageAh(pothe!ation of propert( on pro rata Pari8passu 3st !harge basis, Rural home stead is not ta#en as !ollateral se!urit(, Perishable A seasonal goods are dis!ouraged as primar( se!urit(, Subordinated ran# ( in respe!t of finan!ing$ on fi:ed and floating assets of the

!ompanies proposed for finan!ing are generall( dis!ouraged%

c /aluation o( Security *redit Administration department &ill independentl( !ontrol and mat!h the 'alue of !ash !ollateral &hi!h are en!umbered to the ban# against &hi!h borro&ings are allo&ed as per appro'al,

Sto!# 'alue to be assessed on the basis of landed !ost for imported goodsA pro!urement !ostAe:8fa!tor( pri!eA&holesale mar#et pri!e for lo!al goods &hi!h e'er is lo&er,

>alue is sour!ed from independent appraisals addressed to the ban#. >alue of fi:ed asset Apropert( (land% building and ma!hiner($ to be assessed separatel( b( ban# enlisted independent professional sur'e(or and simultaneousl( b( Bran!h Manager and *redit In8!hargeA*redit offi!erARelationship Manager,

>alue of in'entor( and ma!hineries supplied b( !lient to be !ross !he!#ed, *redit Administration Department shall ensure re!ei'ables that a!tuall( e:ist &ith ageing and that past due% disputed and other items &ith impaired !ollateral 'alue% to be identified and #no!#ed do&n from !ollateral pool,

Rele'ant !ir!ulars in respe!t of 'aluation of se!urities to be stri!tl( follo&ed,

Credit AssessmentThe primar( fa!tor determining the .ualit( of the Ban#1s !redit portfolio is the abilit( and &illingness of a borro&er to honor% on timel( basis% all !redit !ommitments made to the Ban#, This is to be a!!uratel( determined b( the authori?ed !redit offi!ersAF:e!uti'es prior to appro'al, Therefore% a thorough !redit and ris# assessment is !ondu!ted prior to the granting of loans% and on!e appro'ed all fa!ilities are re'ie&ed at least on!e annuall( for all fa!ilities, The results of !redit assessment are presented in a *redit Appli!ationAProposal !alled Credit Memorandum >CM? Initiall( it is originated b( the *redit

Offi!erARelationship ManagerAManager of the Bran!h and reassessed in *orporate Ban#ing Di'ision and finall( in *redit Ris# Management Di'ision, The #elationshi' Manager >#M? is the o&ner of the !ustomer relationship &ho is held responsible to ensure the a!!ura!( of the entire !redit appli!ation submitted for appro'al, RMs must be !on'ersant &ith the MTB1s +ending 0uidelines and shall e:er!ise due diligen!e on borro&ers% prin!ipals and guarantors,

Call #e'ortFor initiating a relationship% Relationship Managers (RM$ &ill !all on the !lient% 'isit business !entersAfa!tories to obser'e sto!# Aprodu!tion !apa!it(Abusiness operations and to assess possibilities of establishing a remunerati'e relationship, RM &ill !ondu!t due diligen!e to get mar#et information on the borro&er from industr( sour!es% !ompetitors% lo!al area and other sour!es, Where RM is other than the Bran!h Manager% Bran!h Manager &ill be part of this pro!ess, If re.uired% the RM &ill also ta#e the help of =ead Offi!e FngineerA=ead Offi!e Personnel for initial assessment of !redit needs of large borro&ers, Based on findings of su!h !allsA'isits% RMA*redit Offi!ers along &ith Bran!h Manager &ill prepare a *all Report and &ill send the same (if the loan amount is for T#3,66 *rore and more but ma:imum of T#,7,66 *rore$ to =ead of *orporate Ban#ing Di'ision (=O*BD$ along &ith *redit Memorandum (*M$ !ontaining initial information on !lient1s ba!#ground% business% mar#et share and reputation% integrit(% !redit e:posureAe:isting ban#ing relationships, If the loan is for more than T#7,66 *rore% !all report ma( be sent to *orporate Ban#ing Di'ision !ontaining the abo'e information and indi!ati'e !redit needs along &ith pri!ing% loan stru!ture (tenor% !o'enants% repa(ment s!hedule$% nature of !redit% purpose of !redit ad se!urit( arrangement et!, The *all Report is to be routed through =ead of *reditA*RM and Managing Dire!tor for initial re'ie& and guidan!e to the RMs for subse.uent a!tions,

Credit MemorandumRM% based on the guidelines of =ead Offi!e% &ill prepare a full blo&n Credit A''lication5Credit Memorandum >CM? after underta#ing through !redit !he!# and !riti!al !redit and ris# assessment of the !lient in the light of the poli!( of the MTB, The *M is to be sent to the =ead of *orporate Ban#ing Di'ision along &ith re!ommendation of the Bran!h Manager,

Contents o( Credit Memorandum >CM?The *redit Memorandum (*M$A *redit Proposal &ill !ontain% as a minimum% the follo&ingE8 3, Bame of the !lient, 5, A uni.ue !ontrol number for ea!h borro&er !alled the *RM Bumber, 4, Bature of business, ;, 0roup a!ti'ities if an(, 7, Mar#etAPla!e of businessAarea of operation, 2, Borro&er1s business% offi!e% sho&room% Shop% fa!tor( " other address &ith phone number, @, +egal status of the !lient, <, Date of In!orporation NFor Pri'ate +imited *ompan(O 9, Date of !ommen!ement of business NFor Publi! +imited *ompan(O 36, Date of Fstablishment NFor other than +imited *ompan(O 33, *apital Stru!ture (For +imited *ompan($8 Authori?ed *apital " Paid up !apital 35, In'estment in Business NOther than for +imited *ompan(O 34, Business Bet &orth 3;, Parti!ulars of Indi'idual borro&erAProprietorAPartnersADire!tors 37, Details of Se!ond +ine of Su!!ession

32, Details of other business of indi'idual borro&erA proprietorA partnersA dire!tors 3@, -e( Management of the *ompan(AFirm 3<, Ba!#ground of the !lient and other related information 39, A!!ount Relationship 56, +iabilit( position of the !lientAallied !on!ern(s$ &ith MTB+, 53, Brea# up of liabilities 55, Total F:posure of the !lientAallied !on!ern Nin!luding proposed fa!ilit(O 54, +iabilit( position of the !lientAallied !on!ern(s$ &ith other ban#s 5;, *lient1s appli!ation 57, Bran!h re!ommendation 52, *ost of the pro e!t and Means of Finan!e (&here appli!able$ 5@, Details of +and% building and ma!hineries (&here appli!able$ 5<, Produ!tion details (&here appli!able$ 59, Business performan!e of the !lientE Three Hears past and one (ear1s pro e!ted, 46, Import performan!e of the !lientAallied !on!erns (last three (ears$ &ith our ban# 43, Import performan!e of the !lientAallied !on!erns (last three (ears$ &ith other ban#s, 45, F:port performan!e of the !lientAallied !on!erns (last three (ears$ &ith our ban#, 44, F:port performan!e of the !lientAallied !on!erns (last three (ears$ &ith other ban#s, 4;, Sto!# report 47, Assessment of Wor#ing !apital re.uirement 42, *IB report 4@, *R0 status 4<, Fa!tor(ASite 'isit report 49, *ompetiti'e position of the !lient ;6, A!!ount strateg( ;3, Anal(sis of Ris#(as per *R0 Manual$ ;5, SWOT anal(sis ;4, Stru!tural Ris#

;;, A!!ount Performan!e Ris# ;7, *redit Poli!( *omplian!e ;2, Is the proposal in line &ith budget " business strateg( ;@, Trigger Points ;<, *riti!al Su!!ess Fa!tors ;9, Other information ( if an($ 76, Parti!ulars of proposed limitAfa!ilit(8&ith nature% amount and purpose, 73, Bran!h *ommentsAJustifi!ation of the fa!ilit(Alimit 75, De!laration 74, Issues and F:!eptions

#e@uired "a'ers and .ocuments and Satis(actions-Before sending Credit Memorandum >CM? to appro'ing authorit( Bran!h MangerARM shall ensure that the follo&ing steps Aformalities ha'e been ta#enA!ompleted properl( A in!orporated in the !redit proposalE : 8 2 A B C *urrent *IB report obtained, Purpose and amount of loan proposed b( the borro&er stated in the proposal, Pre san!tion inspe!tion reportA!all reportA'isit report is in pla!e, Management profile% !apital stru!ture% *onstitution% Date of establishment and nature of business et!, stated in the proposal, F:perien!e of borro&ers% business s#ills% management " su!!essions properl( mentioned in the proposal, Borro&er ratings in the industr( is assessed along &ith o'erall industr( !on!erned and borro&er1s strength and &ea#nesses relati'e to its !ompetitors identified, D E ; Industr(1s position along &ith supplier and bu(er ris# anal(?ed, Farnings from the relationship properl( assessed in the !redit proposal, Repa(ment sour!es of the borro&er ha'e been ustifiabl( established A'alidated

b( finan!ial anal(sis, :9 *ash flo& anal(sis ustif(ing !lient1s abilit( to repa( is refle!ted in the !redit proposal, :: Borro&er1s !redit &orthiness is established b( re'ie& of 4 (ears histori!al finan!ial statements and past tra!# re!ord, :8 Industr( and business anal(sis is done in the proposal, :2 *redit fa!ilities a'ailed from other ban#s is !learl( stated in the proposal and opinions are obtained regarding the !redit standing of the borro&er, :A *redit fa!ilities are based on an e'aluation of the borro&er1s business needs, :B Possible ris#s are identified in the !redit assessment and Ris# mitigating fa!tors are !learl( mentioned in the !redit proposals, :C *redit proposals !learl( mention !urrent outstanding against all limits, :D Audited finan!ials% *R0% +arge +oan Position et!, are refle!ted in the !redit proposal, :E *ollateral se!urit( has been properl( 'alued% 'erified and managed, :; Se!urit(A*ollateral se!urit( has been !he!#ed b( *redit Administration Department and properl( do!umented, 89 A!!ount !ondu!t of the borro&er and its allied !on!erns has been done,

#isk Assessment Areasa Borro!er Analysis Full parti!ulars of the proprietor% partners% dire!tors% et!, to be e:amined and their management !apabilit( to be as!ertained, O'erall performan!e and !redit status of the !lient and of its allied !on!erns i,e, group &ill be assessed, +a!# of management !apabilit( of the !on!ern% !on!entration of the &hole affairs of business in one hand and la!# of initiati'e to !reate subse.uent management line% !ompli!ated o&nership stru!ture of inter group transa!tions shall be , +ndustry Analysis Before e:tending !redit in an area% o'er all business !onditions of that areaAse!tor &ill be !riti!all( e:amined% prospe!ts and problems to be as!ertained, Demand and suppl( of the !on!erned goods A ser'i!es% demand and suppl( gap% !ontribution of

the borro&er in meeting the gap% strength and &ea#ness of the borro&er and of their !ompetitors to be assessed a!!uratel(, Sales !on!entration of the borro&er% borro&er1s rating &ith !ompetitors in terms of strengths% &ea#nesses% mar#et share% pre'alen!e of substitutes of the produ!ed items in the mar#et and barriers to entr( into the produ!t line of the borro&er to be properl( identified, c Su''lier5 Buyer Analysis+ending de!ision &ill be pre!eded b( an intensi'e anal(sis on &hether the borro&er depends on a single or a 'er( fe& !ustomer or gets the suppl( of the ra& materialsA dealing items from a single supplier, Su!h sales and suppl( !on!entration &ill be gi'en a 'er( !areful !onsideration% be!ause it &ill ha'e signifi!ant impa!t on the future 'iabilit( of the borro&er,

d 1istorical %inancial AnalysisAn anal(sis of minimum of 4 (ears histori!al finan!ial statements of the borro&er shall be presented, Where relian!e is pla!ed on a !orporate guarantor% guarantorCs finan!ial statements shall also be anal(?ed, The anal(sis shall address the .ualit( and sustainabilit( of earnings% !ash flo& and the strength of the borro&erCs balan!e sheet, Spe!ifi!all( !ash flo&% le'erage and profitabilit( must be anal(?ed, e "rojected %inancial "er(ormanceWhere term fa!ilities (tenor more than 3 (ear$ are proposed% borro&erCs future A pro e!ted finan!ial performan!eA!ash flo& anal(sis shall be pro'ided (at least for the entire Term +oan Period$% indi!ating an anal(sis of the suffi!ien!( of !ash flo& to ser'i!e debt repa(ments, +oans shall not be granted if pro e!ted !ash flo& is ( Account Conduct For e:isting borro&ers% histori! performan!e in meeting repa(ment obligations (trade pa(ments% !he.ue% interest and prin!ipal pa(ments et!$ shall be addressed,

*redit8 debit summation% ma:imum8minimum balan!e% re!(!ling and ad ustment of the liabilit( &ill be loo#ed into &hi!h generall( &ill ba!# rene&al de!ision, g Mitigating %actorsIn !redit assessment% possible ris#s% su!h as margin sustainabilit( and A or 'olatilit( % high debt load ( le'erageA gearing $% o'er sto!#ing or debtor issues% rapid gro&th% a!.uisition or e:pansion% ne& business line% produ!t e:pansion% management !hanges or su!!ession issues% !ustomer or supplier !on!entrations and la!# of transparen!( or industr( issues and their mitigating fa!tors to be identified, h Loan StructureAmount and tenor of loan &ill be fi:ed ustifiabl( depending on in!ome generation prospe!t% pro e!ted repa(ment !apa!it( and the purpose of the loan, Failure in properl( perusing these fa!tors espe!iall( allo&ing loan for e:!essi'e tenor andAor amount !ompared to business needs lead to in!rease in ris# of fund di'ersion and ma( ad'ersel( impa!t the borro&er1s repa(ment !apa!it(,

i SecurityMTB1s lending &ill generall( be ade.uatel( se!uriti?ed, Se!urities to be obtained &ill be of a!!eptable .ualit( and 'alue% easil( mar#etable and defe!t less in title, >aluation of se!urit( &ill be properl( assessed b( the Ban# offi!ial as &ell as MTB enlisted professional 'alue, Se!urit( &ill !omprise of primar( and !ollateral, Ade.uate insuran!e !o'erage to be obtained &here appli!able, j &ame LendingBame +endingA+ending depending onl( on the fame and reputation of a borro&er &ill be a'oided, All asso!iated ris#s% lending fundamentals and a thorough finan!ial anal(sis &ill be made, k Adherence to lending guidelines*redit Proposals to be prepared in line &ith Ban#Cs lending 0uidelines, A !redit appli!ationAproposal &ill !learl( mention &hether or not the proposal !omplies &ith the ban#s lending guidelines, A proposal that &ill not adhere to the ban#Cs

lending guidelines &ill not be appro'ed unless it is spe!ifi!all( mentioned and proper ustifi!ation is pro'ided,

Syndication5Clu, %inancingAll dire!tl( sour!ed and s(ndi!ate loans are assessed similarl( i,e these loans are also anal(?ed and the ris# and return are assessed in the same manner as dire!tl( sour!ed loans,

.e(inition o( Credit #isk 7rading >C#7?

The *redit Ris# 0rading (*R0$ is a !olle!ti'e definition based on the pre8 spe!ified s!ale and refle!ts the underl(ing !redit8ris# for a gi'en e:posure, A *redit Ris# 0rading deplo(s a numberA alphabetA s(mbol as a primar( summar( indi!ator of ris#s asso!iated &ith a !redit e:posure, *redit Ris# 0rading is the basi! module for de'eloping a *redit Ris# Management s(stem,

%unctions o( Credit #isk 7rading Well8managed !redit ris# grading s(stems promote ban# safet( and soundness b( fa!ilitating informed de!ision8ma#ing, 0rading s(stems measure !redit ris# and differentiate indi'idual !redits and groups of !redits b( the ris# the( pose, This allo&s ban# management and e:aminers to monitor !hanges and trends in ris# le'els, The pro!ess also allo&s ban# management to manage ris# to optimi?e returns,

Fse o( Credit #isk 7rading

The *redit Ris# 0rading matri: allo&s appli!ation of uniform standards to !redits to ensure a !ommon standardi?ed approa!h to assess the .ualit( of indi'idual obligor% !redit portfolio of a unit% line of business% the bran!h or the Ban# as a &hole,

As e'ident% the *R0 outputs &ould be rele'ant for indi'idual !redit sele!tion% &herein either a borro&er or a parti!ular e:posureAfa!ilit( is rated, The other de!isions &ould be related to pri!ing (!redit8spread$ and spe!ifi! features of the !redit fa!ilit(, These &ould largel( !onstitute obligor le'el anal(sis,

Ris# grading &ould also be rele'ant for sur'eillan!e and monitoring% internal MIS and assessing the aggregate ris# profile of a Ban#, It is also rele'ant for portfolio le'el anal(sis,

&um,er and Short &ame o( 7rades used in the C#7 The proposed *R0 s!ale !onsists of < !ategories &ith Short names and Bumbers are pro'ided as follo&sE
7#A.+&7 Superior 0ood A!!eptable MarginalAWat!h list Spe!ial Mention Sub standard Doubtful Bad " +oss S1O#T &AM$ SDP 0D A**PT M0AW+ SM SS DF B+ &FMB$# 3 5 4 ; 7 2 @ <

Credit #isk 7rading .e(initionsA !lear definition of the different !ategories of *redit Ris# 0rading is gi'en as follo&sE Su'erior - >SF"? - : *redit fa!ilities% &hi!h are full( se!ured i,e, full( !ash !o'ered, *redit fa!ilities full( !o'ered b( go'ernment guarantee, *redit fa!ilities full( !o'ered b( the guarantee of a top tier international Ban#, 7ood - >7.? - 8 Strong repa(ment !apa!it( of the borro&er The borro&er has e:!ellent li.uidit( and lo& le'erage,

 The !ompan( demonstrates !onsistentl( strong earnings and !ash flo&, Borro&er has &ell established% strong mar#et share, >er( good management s#ill " e:pertise, All se!urit( do!umentation should be in pla!e, *redit fa!ilities full( !o'ered b( the guarantee of a top tier lo!al Ban#, Aggregate S!ore of <7 or greater based on the Ris# 0rade S!ore Sheet Acce'ta,le - >ACC"T? - 2 These borro&ers are not as strong as 0OOD 0rade borro&ers% but still demonstrate !onsistent earnings% !ash flo& and ha'e a good tra!# re!ord, Borro&ers ha'e ade.uate li.uidit(% !ash flo& and earnings, *redit in this grade &ould normall( be se!ured b( a!!eptable !ollateral (3st !harge o'er in'entor( A re!ei'ables A e.uipment A propert($, A!!eptable management A!!eptable parentAsister !ompan( guarantee Aggregate S!ore of @78<; based on the Ris# 0rade S!ore Sheet Marginal5<atch list - >M75<L? - A This grade &arrants greater attention due to !onditions affe!ting the borro&er% the industr( or the e!onomi! en'ironment, These borro&ers ha'e an abo'e a'erage ris# due to strained li.uidit(% higher than normal le'erage% thin !ash flo& andAor in!onsistent earnings, Wea#er business !redit " earl( &arning signals of emerging business !redit dete!ted, The borro&er in!urs a loss +oan repa(ments routinel( fall past due A!!ount !ondu!t is poor% or other unto&ard fa!tors are present, *redit re.uires attention Aggregate S!ore of 278@; based on the Ris# 0rade S!ore Sheet S'ecial Mention - >SM? - B

 This grade has potential &ea#nesses that deser'e management1s !lose attention, If left un!orre!ted% these &ea#nesses ma( result in a deterioration of the repa(ment prospe!ts of the borro&er, Se'ere management problems e:ist, Fa!ilities should be do&ngraded to this grade if sustained deterioration in finan!ial !ondition is noted (!onse!uti'e losses% negati'e net &orth% e:!essi'e le'erage$% An Aggregate S!ore of 7782; based on the Ris# 0rade S!ore Sheet, Su,standard - >SS? - C Finan!ial !ondition is &ea# and !apa!it( or in!lination to repa( is in doubt, These &ea#nesses eopardi?e the full settlement of loans, Bangladesh Ban# !riteria for sub8standard !redit shall appl(, An Aggregate S!ore of ;787; based on the Ris# 0rade S!ore Sheet, .ou,t(ul - >.%? - D Full repa(ment of prin!ipal and interest is unli#el( and the possibilit( of loss is e:tremel( high, =o&e'er% due to spe!ifi!all( identifiable pending fa!tors% su!h as litigation% li.uidation pro!edures or !apital in e!tion% the asset is not (et !lassified as Bad " +oss, Bangladesh Ban# !riteria for doubtful !redit shall appl(, An Aggregate S!ore of 478;; based on the Ris# 0rade S!ore Sheet,

Bad * Loss - >BL? - E *redit of this grade has long outstanding &ith no progress in obtaining repa(ment or on the 'erge of &ind upAli.uidation, Prospe!t of re!o'er( is poor and legal options ha'e been pursued, Pro!eeds e:pe!ted from the li.uidation or reali?ation of se!urit( ma( be a&aited, The !ontinuan!e of the loan as a ban#able asset is not &arranted% and the anti!ipated loss should ha'e been pro'ided for,

 This !lassifi!ation refle!ts that it is not pra!ti!al or desirable to defer &riting off this basi!all( 'alueless asset e'en though partial re!o'er( ma( be affe!ted in the future, Bangladesh Ban# guidelines for timel( &rite off of bad loans must be adhered to, +egal pro!eduresAsuit initiated, Bangladesh Ban# !riteria for bad " loss !redit shall appl(, An Aggregate S!ore of less than 47 based on the Ris# 0rade S!ore Sheet,

Basis (or Loan Classi(ication>A? O,jecti)e Criteria An( *ontinuous +oan if not repaidArene&ed &ithin the fi:ed e:pir( date for repa(ment &ill be treated as irregular ust from the follo&ing da( of the e:pir( date, This loan &ill be !lassified as Sub8standard if it is #ept irregular for 2 months or be(ond but less than 9 months% as PDoubtfulC if for 9 months or be(ond but less than 35 months and as PBad " +ossC if for 35 months or be(ond, An( Demand +oan &ill be !onsidered as Sub8standard if it remains unpaid for 2 months or be(ond but not less then 9 months from the date of !laim b( the ban# or from the date of for!ed !reation of the loanG li#e&ise the loan &ill be !onsidered as /DoubtfulC and /Bad " +oss1 if remains unpaid for 9 months or be(ond but less than 35 months and for 35 months and be(ond respe!ti'el(, In !ase an( installment(s$ or part of installment(s$ of a Fi:ed Term +oan is not repaid &ithin the due date% the amount of unpaid installment(s$ &ill be termed as Pdefaulted installmentC,

+n case o( %i3ed Term Loans, !hich are re'aya,le !ithin ma3imum B >(i)e? years o( time- -

 If the amount of Pdefaulted installmentC is e.ual to or more than the amount of installment(s$ due &ithin 2 months% the entire loan &ill be !lassified as /Sub8 standard1, If the amount of Cdefaulted installmentC is e.ual to or more than the amount of installment(s$ due &ithin 35 months% the entire loan &ill be !lassified as /Doubtful1, If the amount of Cdefaulted installmentC is e.ual to or more than the amount of installment(s$ due &ithin 3< months% the entire loan &ill be !lassified as /Bad " +oss1,

+n case o( %i3ed Term Loans, !hich are re'aya,le in more than B >(i)e? years o( time- If the amount of /defaulted installmentC is e.ual to or more than the amount of installment(s$ due &ithin 35 months% the entire loan &ill be !lassified as CSub8 standard,C If the amount of /defaulted installmentC is e.ual to or more than the amount of installment(s$ due &ithin 3< months% the entire loan &ill be !lassified as CDoubtfulC, If the amount of Cdefaulted installment Cis e.ual to or more than the amount of installment(s$ due &ithin 5; months% the entire loan &ill be !lassified as CBad " +ossC, $3'lanationIf an( Fi:ed Term +oan is repa(able at monthl( installment% the amount of installment(s$ due &ithin 2 months &ill be e.ual to the amount of summation of 2 monthl( installments, Similarl(% if repa(able at .uarterl( installment% the amount of installment(s$ due &ithin 2 months &ill be e.ual to the amount of summation of 5 .uarterl( installments,

>B?

Gualitati)e 4udgmentIf an( un!ertaint( or doubt arises in respe!t of re!o'er( of an( *ontinuous +oan%

Demand +oan or Fi:ed Term +oan% the same &ill ha'e to be !lassified on the basis of .ualitati'e udgment be it !lassifiable or not on the basis of ob e!ti'e !riteria, If an( situational !hanges o!!ur in the stipulations in terms of &hi!h the loan &as e:tended or if the !apital of the borro&er is impaired due to ad'erse !onditions or if the 'alue of the se!urities de!reases or if the re!o'er( of the loan be!omes un!ertain due to an( other unfa'orable situation% the loan &ill ha'e to be !lassified on the basis of .ualitati'e udgment, Besides% if an( loan is illogi!all( or repeatedl( re8s!heduled or the norms of re8 s!heduling are 'iolated or instan!es of (propensit( to$ fre.uentl( e:!eeding the loan8 limit are noti!ed or legal a!tion is lodged for re!o'er( of the loan or the loan is e:tended &ithout the appro'al of the proper authorit(% it &ill ha'e to be !lassified on the basis of .ualitati'e udgment , Despite the probabilit( of an( loanCs being affe!ted due to the reasons stated abo'e or for an( other reasons% if there e:ists an( hope for !hange of the e:isting !ondition b( resorting to proper steps% the loan% on the basis of .ualitati'e udgment% &ill be !lassified as CSub8standardC, But e'en if after resorting to proper steps% there e:ists no !ertaint( of total re!o'er( of the loan% it &ill be !lassified as /DoubtfulC and e'en after e:erting the all8out effort% there e:ists no !han!e of re!o'er(% it &ill be !lassified as C Bad " +ossC on the basis of .ualitati'e udgment, The !on!erned ban# &ill !lassif( on the basis of .ualitati'e udgment and !an de!lassif( the loans if .ualitati'e impro'ement does o!!ur, But if an( loan is !lassified b( the Inspe!tion Team of Bangladesh Ban#% the same !an be de!lassified &ith the appro'al of the Board of Dire!tors of the ban#, =o&e'er% before pla!ing su!h !ase to the Board% the *FO and !on!erned bran!h manager shall ha'e to !ertif( that the !onditions for de!lassifi!ation ha'e been fulfilled,

&ote-

a$ An( !hange in !lassifi!ation !riteria pro'ided b( the Bangladesh Ban# shall supersede this grading s(stem for !lassified a!!ounts, b$ An a!!ount ma( also be !lassified based on .ualitati'e udgment in line &ith Bangladesh Ban# guidelines, !$ A parti!ular ban# ma( ha'e !lassifi!ation !riteria stri!ter than Bangladesh Ban# guidelines,

1o! to Com'ute Credit #isk 7radingThe follo&ing step8&ise a!ti'ities outline the detail pro!ess for arri'ing at !redit ris# grading, Ste' + - +denti(y all the "rinci'al #isk Com'onents *redit ris# for !ounter part( arises from an aggregation of the follo&ingE Finan!ial Ris# BusinessAIndustr( Ris# Management Ris# Se!urit( Ris# Relationship Ris#

Fa!h of the abo'e mentioned #e( ris# areas re.uire to be e'aluated and aggregated to arri'e at an o'erall ris# grading measure, a$ $)aluation o( %inancial #iskE Ris# that !ounterparties &ill fail to meet obligation due to finan!ial distress, This t(pi!all( entails anal(sis of finan!ials i,e, anal(sis of le'erage% li.uidit(% profitabilit( " interest !o'erage ratios, To !on!lude% this !apitali?es on the ris# of high le'erage% poor li.uidit(% lo& profitabilit( " insuffi!ient !ash flo&, b$ $)aluation o( Business5+ndustry #iskE Ris# that ad'erse industr( situation or unfa'orable business !ondition &ill impa!t borro&ers1 !apa!it( to meet obligation, The e'aluation of this !ategor( of ris# loo#s at parameters su!h as business outloo#% si?e of business% industr( gro&th% mar#et !ompetition " barriers to entr(Ae:it, To !on!lude% this !apitali?es on the

ris# of failure due to lo& mar#et share " poor industr( gro&th, !$ $)aluation o( Management #iskRis# that !ounterparties ma( default as a result of poor managerial abilit( in!luding e:perien!e of the management% its su!!ession plan and team &or#, d$ $)aluation o( Security #iskRis# that the ban# might be e:posed due to poor .ualit( or strength of the se!urit( in !ase of default, This ma( entail strength of se!urit( " !ollateral% lo!ation of !ollateral and support, e$ $)aluation o( #elationshi' #iskThese ris# areas !o'er e'aluation of limits utili?ation% a!!ount performan!e% !onditionsA!o'enants !omplian!e b( the borro&er and deposit relationship,

CREDIT RISK

Financial Risk

Business/Industry Risk

Management Risk

Security Risk

Relationship Risk

Leverage

Si(e o Business

#$perience

Security "overage

+ccount "onduct

+ge o Business Liquidity Business 'utlook Pro ita!ility Industry )ro*th "overage Market "ompetition %eam &ork Succession

"ollateral "overage

,tili(ation o Limit

Support

"ompliance o "ovenants/"onditi on

Personal -eposits

Barriers to Business

Ste' ++- Allocate !eightages to "rinci'al #isk Com'onents A!!ording to the importan!e of ris# profile% the follo&ing &eightages are proposed for !orresponding prin!ipal ris#s, "rinci'al #isk Com'onents Finan!ial Ris# BusinessAIndustr( Ris# Management Ris# Se!urit( Ris# Relationship Ris# <eight76K 3<K 35K 36K 36K

Ste' +++- $sta,lish the Key "arameters "rinci'al #isk Key "arameters Com'onents Finan!ial Ris# +e'erage% +i.uidit(% Profitabilit( " *o'erage ratio, BusinessAIndustr( Ris# Si?e of Business% Age of Business% Business Outloo#% Industr( Management Ris# Se!urit( Ris# Relationship Ris# 0ro&th% *ompetition " Barriers to Business F:perien!e% Su!!ession " Team Wor#, Se!urit( *o'erage% *ollateral *o'erage and Support, A!!ount *ondu!t %Dtili?ation of +imit% *omplian!e of !o'enantsA!onditions " Personal Deposit, Ste' +/- Assign !eightages to each o( the key 'arameters

"rinci'al #isk Com'onents 9: %inancial #isk

Key "arameters +e'erage +i.uidit( Profitabilit( *o'erage

<eight B9H 37K 37K 37K 7K :EH 7K 4K 4K 4K 5K 5K :8H 7K ;K 4K :9H ;K ;K 5K :9H 7K 5K 5K

98 Business5+ndustry Si?e of Business Age of Business Business Outloo# Industr( 0ro&th Mar#et *ompetition Fntr(AF:it Barriers 92 Management #isk F:perien!e Su!!ession Team Wor# 9A Security #isk Se!urit( *o'erage *ollateral *o'erage Support 9B #elationshi' #isk A!!ount *ondu!t Dtili?ation of +imit *omplian!e of *o'enants A *ondition Personal Deposit

3K

Ste'-/- +n'ut data to arri)e at the score on the key 'arameters After the ris# identifi!ation " &eight age assignment pro!ess (as mentioned abo'e$% the ne:t steps &ill be to input a!tual parameter in the s!ore sheet to arri'e at the s!ores !orresponding to the a!tual parameters,

Ste' /+- Arri)e at the Credit #isk 7rading ,ased on total score o,tained The follo&ing is the proposed *redit Ris# 0rade matri: based on the total s!ore obtained b( an obligor, &um,er 3 #isk 7rading Superior Short &ame SDP Score 5 4 ; 7 2 @ < 0ood A!!eptable MarginalAWat!h list Spe!ial Mention Sub8standard Doubtful Bad " +oss 0D A**PT M0AW+ SM SS DF B+ 366K !ash !o'ered 0o'ernment guarantee International Ban# guarantees <7Q @78<; 278@; 7782; ;787; 478;; R47

Credit #isk 7rading "rocess *redit Ris# 0rading should be !ompleted b( a Ban# for all e:posures (irrespe!ti'e of amount$ other than those !o'ered under *onsumer and Small Fnterprises Finan!ing Prudential 0uidelines and also under The Short8Term Agri!ultural and Mi!ro 8 *redit, For Superior Ris# 0rading (SDP83$ the s!ore sheet is not appli!able, This &ill be guided b( the !riterion mentioned for superior grade a!!ount i,e, 366K !ash !o'ered% !o'ered b( go'ernment " ban# guarantee, *redit ris# grading matri: &ould be useful in anal(?ing !redit proposal% ne& or rene&al for regular limits or spe!ifi! transa!tions% if basi! information on a borro&ing !lient to determine the degree of ea!h fa!tor is a$ readil( a'ailable% b$ !urrent% !$ dependable% and d$ parametersAris# fa!tors are assessed udi!iousl( and ob e!ti'el(, The Relationship Manager as per should !olle!t re.uired information, Relationship manager should ensure to !orre!tl( fill up the in order to arri'e at a realisti! earning status for the borro&er,

 Ris# fa!tors are to be e'aluated and &eighted 'er( !arefull(% on the basis of most up8to8date and reliable data and !omplete ob e!ti'it( must be ensured to assign the !orre!t grading, A!tual parameter should be inputted in the Credit #isk 7rading Score *redit ris# grading e:er!ise should be originated b( Relationship Manager and should be an on8going and !ontinuous pro!ess, Relationship Manager shall !omplete the *redit Ris# 0rading S!ore Sheet and shall arri'e at a ris# grading in !onsultation &ith a Senior Relationship Manager and do!ument it as per Credit #isk 7rading &hi!h shall then be !on!urred b( the *redit Offi!er in !onsultation &ith a Senior *redit Offi!er, All !redit proposals &hether ne&% rene&al or spe!ifi! fa!ilit( should !onsist of a$ Data *olle!tion *he!#list% b$ +imit Dtili?ation Form !$ *redit Ris# 0rading S!ore Sheet% and d$ *redit Ris# 0rading Form, The !redit offi!ers then &ould pass the appro'ed *redit Ris# 0rading Form to *redit Administration Department and *orporate Ban#ingA+ine of BusinessARe!o'er( Dnit for updating their MISAre!ord, e an( subse.uent !hangeAre'ision i,e, upgrade or do&ngrade in !redit ris# grade,

Cha'ter %our - Credit A''ro)al Authority * #eco)ery System

+ntroductionDelegation of !redit appro'al authorit( is instrumental to ensure smooth !redit operation of the Ban#, In MTB !redit appro'al authorit( has been delegated to different tiers of the Management, In order to ensure .ui!# and timel( deli'er( of !redit% MTB has resorted to the poli!( of udi!ious delegation of authorit( to san!tionA appro'e loans and ad'an!es, To ensure a!!ountabilit( in the appro'al pro!esses% MTB follo&s delegation of appro'al authorit( to indi'idual e:e!uti'es, *redit appro'al authorit( in MTB is separated from the mar#eting and relationship fun!tion,

A''ro)al o( delegation AuthorityThe delegation of !redit appro'al authorit( is appro'ed b( the Board of Dire!tors% &hi!h is re'ie&ed b( the Managing Dire!tor as and &hen re.uired and at least annuall( and the same is appro'ed b( the Board of Dire!tors, In MTB appro'al authorit( is delegated in &riting from the MDABoard (As the !ase ma( be$,The Managing Dire!tor !an e:er!ise delegation authorit( of an( F:e!uti'eAOffi!ial, =e ma( also suspendAre'i'e delegated business po&er of an( F:e!uti'eAOffi!ial of an( !ategor( through spe!ifi! or general order at an( time &ithout assigning an( reason either &ith the prior appro'al of the Board of Dire!tors or sub e!t to report to the Board at subse.uent times,

Credit A''ro)al Authoritya, Board of Dire!tors AF:e!uti'e *ommittee of the Board b, Different Tiers of Management

Board o( .irectors5$3ecuti)e CommitteeAn( proposal be(ond the delegated authorit( of the Managing Dire!tor is pla!ed before the Board of Dire!torsAF:e!uti'e *ommittee of the Board for appro'al, Board of Dire!torsAF:e!uti'e *ommittee of the Board of Dire!tors has the authorit( to san!tion an( loan for the amount not e:!eeding the regulator( limit the Ban# !an pro'ide to a single !ustomer, Besides% all proposals for &ai'er of interest% !ommission% !harges et!, and prin!ipal must be appro'ed b( the Board of Dire!torsAF:e!uti'e *ommittee of board,

The Management*redit appro'al authorit( is 'ested in different tiers of the Management &ith due appro'al of the Board of Dire!tors &ith the ob e!ti'e of ensuring speed( disposal of the !redit proposals, The respe!ti'e e:e!uti'es e:er!ise delegated po&er after !ompl(ing &ith all pre!onditions set in different !hapters of this poli!( do!ument and in the rele'ant !ir!ulars of MTB% Bangladesh Ban# and other regulator( authorities in for!e, Pooling or !ombining of authorit( limits are not permitted,

A'titude o( A''ro)al Authority >A''lica,le (or Management o( .i((erent Tiers?The Offi!ialsAF:e!uti'es entrusted &ith the !redit appro'al authorit( should ha'e aptitude% training and e:perien!e to !arr( out their responsibilities effe!ti'el(, *redit appro'ing e:e!uti'es shall preferabl( ha'e reasonable &or#ing e:perien!e in !redit line (minimum 7 (ears$% relati'e training and e:perien!e% understanding 8Training " F:perien!e in finan!ial statement% !ash flo& and ris# anal(sis% &or#ing #no&ledge of a!!ounting% good understanding of lo!al Industr(A Mar#et d(nami!s i,e, !onditions and trend% rationale of borro&ing% &or#ing !apital assessment te!hni.ue% business pro e!tions% *R0% loan stru!turing " do!umentation and o'erall loan management, Appro'ing e:e!uti'es should ha'e the #no&ledge of the follo&ing areasE

Introdu!tion to a!!rual a!!ounting% Industr( A Business Ris# Anal(sis Identif(ing borro&ing !auses Finan!ial reporting and full dis!losure Finan!ial Statement Anal(sis " Interpret trend b( e:amining !hanges in ratios, The Asset *on'ersionATrade *(!le *ash Flo& Anal(sis Pro e!tions +oan Stru!ture and Do!umentation +oan Management,

Sanction5#ene!al5$nhancementDifferent Tiers of Management entrusted &ith !redit appro'al authorit( e:er!ise their delegated appro'al authorit( for san!tionArene&al of the !redit proposal and also for enhan!ement of !redit fa!ilities up to their san!tioning po&er, Bo e:e!uti'e shall e:er!ise delegated appro'al authorit( to san!tion a ne& fa!ilit( or rene&alAenhan!ement of the e:isting one of an( e:isting !ustomer if it &as earlier appro'ed b( a higher authorit( unless the delegation of business po&er is alread( !hanged,

Credit Committee*redit appro'al at an( le'el is made based on the re!ommendation of the !redit !ommittee, *redit *ommitteeCs role in MTB is restri!ted to onl( re!ommendationAre'ie& of ban#Cs loan proposals, With re!ommendation of the *redit *ommittee the !redit proposal is pla!ed for appro'alAnegation b( the authorit( authori?ed to do so,

7uidelines (or A''ro)al Authority(i$ *redit appro'al authorities are delegated in &riting b( the Managing Dire!tor and Board of Dire!tors (as appropriate$% a!#no&ledged b( in!umbent e:e!uti'e, (ii$ (iii$ (i'$ Re!ords of all delegation are retained b( *redit Ris# Management Di'ision, Appro'al must be e'iden!ed in &riting or b( ele!troni! signature, Appro'al re!ords must be #ept in the file &ith *redit Appli!ations. *redit appro'als are !entrali?ed &ithin *RM fun!tion, All large loans are appro'ed b( Board of Dire!torsAF:e!uti'e *ommittee of the Board of Dire!tors, ('$ ('i$ The aggregate e:posure of a borro&er to be used to determine the appro'al authorit(, *redit proposal that does not !ompl( &ith +ending 0uidelines% regardless of amount% to be referred to the Managing Dire!torAF:e!uti'e *ommitteeABoard of Dire!tors for appro'al% &ith proper ustifi!ation, ('ii$ ('iii$ =ead of *redit Ris# Management AManaging Dire!tor must appro'e and monitor an( !ross border ris#, An( brea!h of lending authorit( shall be reported to the Managing Dire!tor%

=ead of Internal *ontrol and *omplian!e Di'ision and =ead of *RM,

7ro!th o( Loan and ad)ances o( MTB

Bills Payble 1% Deposit Product 12%

Current Deposit 19%

Saving Deposit 12%

Current Deposit Saving Deposit Fixed Deposit Deposit Product Bills Payble

Fixed Deposit 56%

%igure -: - >Bank "ort(olio- 89:9?

Total Deposit
5 "5 " %5 % BDT Millions 25 2 15 1 5 "2!%5" %%!$2 2"!### 22!26" "5!$"6

2 1

6 2

# % year

$ "

9 5

2 1

&ear

'otal Deposit

%igure -8 >Amount o( .e'osit?

Total Loans and Advance "5 " %5 % BDT Millions 25 2 15 1 5 2 6 2 # 2 $ 2 9 2 1 1$59% Series2 Series1 226$% 2$592 %96#6 %%$$"

Figure 8 4 (+oan " Ad'an!es in last 7 (ear$

Analysis o( Loans and ad)anceSL 1 2 % " 5 6 # $ 9 1 11 12

+tems +o!al *urren!( Ad'an!es Term +oan SMF Finan!ing *onsumer Finan!ing =ouse Building +oan Trust Re!eipt *ash *redit Se!ured O'erall +ease Finan!e Bill Pur!hased and Dis!ounted +oans to MTB Se!urities +td% Others +oans and ad'an!es Sub8Total

89:9 3652@,9@ 7;9,99 339@,@3 <23,74 2372,74 7;5@,@6 7962,3@ 57;,77 57;,77 5496,43 44<;9,<<

899; 9429,7@ 7;9,99 339@,@3 <23,74 2372,74 7;5@,@6 7962,3@ 57;,77 5496,43

899E 26@54;5 463,;@ 22<,;6 <67,;6 @236,95 ;272,27 425;,@< 57@,57 465@,4;

BDT Millions 899D 899C 4226,27 79,54 3;5,79 26;,6< 2;27,2< 4@;9,56 59;2,4@ 573,6@ 5<;6,76 54;5,;@ 8 37,;7 ;39,56 2569,6; 59@2,63 4653,26 3@<,45 5547,36

3@47,<5 44<;9,<

3;92,<3 5<753,;

3925,29 552<5,6

33<5,<@ 3<7<6,969

< Foreign *urren!( Ad'an!es Total 4;,6; 4;,6;

; @,96 5<759,4 ;

2 3,3@ 552<4,5 4 33,;4 3<793,75

44<<4,95 44<<4,95 Figure8;

"ort(olio Mi3Year -2009

'er( )oan S*+ Financing Consu(er Financing ,ouse Building )oan 'rust -ecipts Sec'red verdra-t , +.% Cas. Credit SM# $inancin% , 2% Secured /verdra0t &ons'm er $inancin%, (% )o'se B'ildin% Loan , (% &as! &redit, +,% Tr'st *ecipts, +8% )ease Finance Bills Purc.ased and Discounted )oans to *'B Securities )td /t.er )oans and 1dvance

Loans to MTB Sec'rities Ltd, 0% Bills /'rc!ased and Disco'nted, .% Lease $inance, +%

t!er Loans and Advance, "%

Term Loan , 28%

Figure 87 ( Ban# +oan Portfolio 5669$

Year -20+0
Loans to MTB Sec'rities Ltd, .% Bills /'rc!ased and Disco'nted, "%

Term Loan t!er Loans and Advance, 0% SM# $inancin% &ons'm er $inancin% )o'se B'ildin% Loan Tr'st *ecipts

Term Loan , 2.% Lease $inance, 0%

Sec'red verdra-t , +2% SM# $inancin% , .% &as! &redit, +"% &ons'm er $inancin%, 0% )o'se B'ildin% Loan , (%

&as! &redit Sec'red verdra-t Lease $inance Bills /'rc!ased and Disco'nted Loans to MTB Sec'rities Ltd t!er Loans and Advance

Tr'st *ecipts, +,%

Figure 8 2 (Ban# +oan Portfolio 5636$

"rocess o( 1andling Loan

Figure8@

#e'orting o( A''ro)alA monthl( summar( of all ne& fa!ilities appro'ed% rene&ed% enhan!ed and a list of proposals de!lined stating reasons thereof to be pla!ed b( the *redit Administration Department to the =O*BD% =O*RMD and Managing Dire!tor,

Credit #eco)ery Cell51ead o( Credit #eco)ery Cella, Planning% organi?ing% dire!ting% !ontrolling and re'ie&ing the operational and administrati'e fun!tions of *redit Re!o'er( *ell to ensure effi!ient and effe!ti'e support to the related ban#ing departments in line &ith regulator( and ban#1s re.uirement &hile e:er!ising appropriate !ontrol and independent udgment, b, Dire!tl( managing a!!ounts &ith sustained deterioration (a ris# rating of substandard or &orse$, !, Pursuing all a'enues to ma:imi?e re!o'er(% in!luding pla!ing !ustomers into re!ei'ership or li.uidation as appropriate, d, Fnsuring that ade.uate and timel( loan loss pro'isions are made based on a!tual and e:pe!ted losses, e, -eeping top management apprised of a ris# rating of substandard (grade 2$ or &orse a!!ounts, f, Wor#ing8out plan A re!o'er( strateg( to ma:imi?e re!o'er( and redu!ing non8 performing loans, g, O'erseeing ban#1s total .uantum of !lassified ad'an!es% suits filed and their up to date position and re!o'er( position of non8performing loans, h, Monitoring !lassifi!ation of loans and ad'an!es as per norms, i, Re'ie&ing !lassified a!!ounts regularl(,

, Fnsuring submission of different related returns and statement to Bangladesh Ban# and different related di'isionAdepartment of =ead Offi!e, Meeting up .ueries and ob e!tions raised b( Bangladesh Ban#, #, Writing off a!!ounts &hen re.uired as per norms and maintaining proper follo& up for re!o'er(,

l, Assisting the bran!hes to &or# out a!tion plan on different issues on merit basis of ea!h a!!ount and ta#e ne!essar( a!tion a!!ordingl( m, Res!heduling of !lassified a!!ounts as per guidelines of Bangladesh Ban# and its subse.uent follo& up, n, Preparing offi!e notes and memos for res!hedulingArestru!turing of !redit fa!ilities and pla!ing to the ManagementAF:e!uti'e *ommitteeABoard of Dire!tors as the !ase ma( be, o, =andling of all &ritten8off !ases, p, Arranging appointmentA!an!ellation of appointment of re!o'er( agents, ., *olle!ting statements relating to re!o'er( performan!e% suit position% Re!o'er( AgentCs performan!e et!,% from bran!hes to re'ie& on monthl( basis, r, Submitting monthl( reports on status " re!o'er( of &ritten8off a!!ounts to the ManagementA Board to #eep them abreast about the progress of re!o'er(, s, Fnsuring follo&8up of top 56 (t&ent($ defaulter borro&ers and submission of reports to ManagementAAudit *ommittee A F:e!uti'e *ommitteeA Board of Dire!torsA Bangladesh Ban# as and &hen re.uired, t, Initiating offi!e notes see#ing permission for filingA!ontesting suits on behalf of the ban# " also to !ontest suits filed against the ban#, u, To a!!ord permission to the bran!hes for filing suit ', Monitoring% super'ision and follo& up of all !ourt !ases of the Ban# stri!tl( till full disposal, &, Ta#ing ne!essar( measures for obtaining legal opinion on 'arious legal matters and 'etting of do!uments, :, Arranging publi!ation of summonAsho& !auseAau!tion noti!e, (, Initiating offi!e notesAmemos for appro'al of professional bills of the

!ondu!ting la&(ers " +a& related publi!ation bills, ?, Fnsuring timel( suppl( of 'arious la&% !ourt !ase and other related dataAstatement as " &hen re.uired b( Bangladesh Ban#% Ministr( of Finan!e% Ministr( of +a& Justi!e " Parliamentar( Affairs% Anti *orruption *ommission% Tas# For!e and other regulator( authorities in!luding different Di'isions of the Ban#, aa, *ontesting Writ Petition% *i'il " *riminal Appeals in the Supreme *ourt filed against the Ban# &ith the appro'al of the Management, bb, Attending all other legal matters of the ban# as and &hen re.uired, =ead of *redit Re!o'er( *ell &ill report to the Managing Dire!tor through Deput( Managing Dire!tor,

Credit A''ro)al "rocess

Mutual Trust Ban# !ondu!ts its ban#ing operations under bran!h ban#ing s(stem, *redit proposals are generall( originated b( the Relationship Manager of bran!h . =o&e'er% proposals ma( be re!ei'ed at =ead Offi!e for s(ndi!ationA!lub finan!ing and institutional finan!ing, Other proposals !onsidered remunerati'e ma( also be re!ei'ed at =ead Offi!e, The Relationship Manager shall prepare Credit "ro'osal5 Credit Memorandum >CM? The *redit Memorandum (*M$ is prepared after underta#ing a thorough !redit !he!# and !ondu!ting !riti!al anal(sis of !redit and assessment of ris# asso!iated thereto in the light of *redit Poli!( 0uidelines of the Ban#, *redit Memorandum (*M$ so prepared &ill be pla!ed to the Branch Credit Committee >BCC? for ne!essar( re!ommendation, Fa!h borro&er to be assigned a uni.ue !ontrol number !alled *RM Bumber, Where the relationship fun!tionaries &ill reali?e the ne!essit( of getting prior !learan!e of =ead Offi!e in respe!t of ta#ing up of a proposal% the RM after 'isiting the !lients% their sho&roomAgodo&nAbusiness establishmentsAfa!tor( et!, &ill prepare a !all report and send the same to =ead of *orporate Ban#ing Di'ision &hi!h &ill be

routed through =ead of *reditA*RM and Managing Dire!tor for initial re'ie& and guidan!e to the RMs for subse.uent a!tions, After getting the positi'e nod on the Call #e'ort from =ead Offi!e% the RM &ill prepare the full blo&n *redit Memorandum, The *orporate Ban#ing Di'ision after thorough anal(sis &ill prepare Offi!e BoteAMemo and along &ith re!ommendation of =ead of *orporate Ban#ing &ill pla!eAfor&ard the same to *redit Ris# Management Di'ision, Appro'alARe!ommendation of the =ead of *orporate Ban#ing Di'ision is essential for on&ard mo'ement of the *redit Memorandum AAppli!ation, In *redit Ris# Management Di'ision the proposals &ill be e:amined thoroughl(, Thereafter% the proposal i,e, Offi!e noteAmemo along &ith re!ommendation of =ead of *redit Ris# Management Di'ision &ill be pla!ed to =ead Offi!e *redit *ommittee &hi!h &ill pro'ide its ne!essar( re!ommendation, Thereafter% the noteAmemo &ill be pla!ed to appropriate authorit( as per appro'ed delegation for appro'alAnegation, The *redit Proposal Amemos be(ond delegated po&er of the Management and e:!eptions to *redit Poli!( 0uidelines to be pla!ed to the Board AF:e!uti'e *ommittee, Managing Dire!tor &ill present the proposals to the F:e!uti'e *ommitteeABoard of Dire!tors, Signature of =ead of *redit Ris# Management Di'ision (=O*RMD$ is a must for all proposals for !redit appro'als e:!epting stru!tured retail loans 'i?, *onsumer +oans% *redit *ard +imits et!, The F*ABoard ma( a!!ord post fa!t appro'als of urgent appro'ed b( the management be(ond their delegated authorit(, =o&e'er% res!heduling A &rite off A de!lassifi!ation et!, proposals are to be appro'ed b( the Board o( .irectors as per Bangladesh Ban#Cs 0uidelines, At the time of originatingApreparing a Credit Memorandum a!!ura!( of all information to be ensured, Originating Relationship Managers shall adhere to !redit prin!iples% !redit poli!( guidelines and !ondu!t due diligen!e on borro&ers% prin!ipals and guarantors, The( &ill also adhere to the MTBCs established -no& Hour *ustomer (-H*$% Anti Mone( +aundering guidelines% and Bangladesh Ban#Cs regulations,

#e)ie! 5 #ene!al "rocess

All !redit fa!ilities 8 spe!ifi! or re'ol'ing 8 are to be re'ie&ed at least on!e annuall(, The Relationship Managers are responsible to prepare and send full( do!umented and !omplete *M to =ead Offi!e t&o months before e:pir( of 'alidit( of limits,

The annual re'ie&% among others% &ill fo!us on the follo&ingE a, *redit *he!# (*IB Reports% Other Ban# *redit Reports et!,$ b, O'erall e:posure of the !lient in the ban#ing se!tor, !, A!!ount *ondu!t% Turno'er% Repa(ment beha'ior and earning from the Relationship d, Re'ie& of Ris# 0rade e, Fa!tor( A Sto!# A Se!urit( Inspe!tion f, Do!umentation Status g, *o'enants *omplian!e h, Insuran!e !omplian!e i, Audit *omplian!e , Business performan!es, #, Justifi!ation of limits proposed for rene&al A enhan!ement A redu!tion, l, Justifi!ation for !hange in pri!ing (if !hange is proposed$
m,

Dses of borro&ed funds to be !onfirmed through Finan!ial Statement Anal(sisAph(si!al 'erifi!ation,

Credit Management "rocessTo ensure strong .ualit( of asset portfolio% MTB emphasi?es that a proper !redit management pro!ess is in pla!e, For this purpose mar#eting% appro'al and disbursement fun!tionsAauthorities in MTB ha'e been segregated, While Relationship Managers and =ead pf *orporate Ban#ing Di'ision are responsible for mar#eting% =ead of *redit Ris# management Di'ision is responsible for appro'al and =ead of *redit Administration Department is assigned &ith the fun!tion of disbursement,
#ole o( Credit Administration .e'artment-

*redit administration fun!tion &ill be !riti!al in ensuring that proper do!umentation and appro'als are in pla!e in respe!t of disbursement of !redit fa!ilities, *redit Administration fun!tions &ill !omprise of the follo&ingE8
.ocumentation * .is,ursement-

Before disbursement of the appro'ed !redit fa!ilities% *redit Administration

Department shall ensure that the follo&ing stepsAformalities ha'e been follo&edAdul( !ompliedE Appro'al has been obtained and that all appro'als and do!uments are in pla!e, Se!urit( do!uments are prepared in a!!ordan!e &ith appro'ed terms and are legall( enfor!eable, +imit !reation and do!umentation !he!# list (D*+$ has been !ompleted, Relationship Manager and *redit Administration Department (*AD$ has ointl( signed do!umentation !he!#list before disbursement, *redit Administration Department has issued satisfa!tor( se!urit( !ertifi!ateAse!urit( !learan!e !ertifi!ate before disbursement, *redit Administration Department has !he!#ed !ollaterals, +egal !ounsel has ensured that ban#1s se!urit( interests are perfe!ted, In!omplete do!umentation re!ei'ed a temporar( &ai'er from appro'ing authorit(, All disbursements are !o'ered b( appro'ed !redit lines, Authori?ed offi!ers as per our ban#1s poli!( disbursed fa!ilities, F'iden!e of disbursements is properl( do!umented, Dnauthori?ed appro'als ha'e been surfa!ed and proper a!tions ta#en, F:!ess o'er +imits (FO+$ are allo&ed under pre8fa!t appro'als, Standard loan fa!ilit( do!umentation that has been re'ie&ed b( legal !ounsel is used in all !ases, F:!eptions are referred to legal !ounsel for ad'i!e after re!ei'ing authori?ation from *RM Di'ision, Disbursements under loan fa!ilities are made after ensuring that all standard !harge do!uments and se!urit( do!umentations are in pla!e and all other san!tioned termsApre!onditions for disbursement are !omplied &ith, *IB report refle!tsAin!ludes name of all the lenders &ith fa!ilit(% limit and outstanding, All formalities regarding large loans and loans to Dire!tors are guided b(

Bangladesh Ban# *ir!ulars and related se!tions of Ban# *ompan( A!t,

In order to administer !redit in a proper manner under the MTB1s institutional " operational set up% tas#s of !redit administration &ill be performed in the follo&ing mannerE 8 A !op( of san!tion letter &ill be sent b( *RM Di'ision to the Bran!h &ith !op( to =O *redit Administration DepartmentAother related departmentsAdi'isions of =ead Offi!e, Bran!h *redit Administration on re!eipt of !op( of the san!tion letter &ill !omplete full do!umentation and other formalities as per terms of san!tion and send !omplian!e to =O !redit administration along &ith a list of do!uments (D*+$ obtained, For e:!eptions% bran!h &ill mention in the !omplian!e !ertifi!ate about the do!umentation &hi!h !ould not be !ompleted for genuine reasons and re.uest =O !redit administration for allo&ing them to disburse% pending !ompletion of these do!umentsAformalities% mentioning spe!ifi!all( about time period &ithin &hi!h in!omplete do!umentation &ill be !ompleted, =ead offi!e !redit administration &ill e:amine a!!ura!( of se!urit( and do!umentation formalities and if finds all do!umentation are in order as per terms of san!tion% &ill issue /Disbursement appro'alA authori?e disbursements, In the !ases &here bran!h see#s permission for disbursement #eeping do!umentation Ase!urit( formalities partiall( in!omplete A#eeping some do!uments in!omplete% *redit Administration Department of =ead Offi!e &ill go through the do!umentation &hi!h ha'e been !ompleted and for &hi!h deferral ha'e been re.uested b( the bran!h and if finds that allo&ing su!h deferral &ill not eopardi?e Ban#1s interest% &ill pla!e a note to the rele'ant !ommittee for ne!essar( re!ommendation% &hi!h then &ill be pla!ed to the =ead of *RMAMD for appro'al of su!h deferral, Onl( upon getting deferral appro'al% =ead Offi!e *redit Admin &ill issue Disbursement Appro'al Aauthori?e disbursement &ith the !ondition to !omplete in!omplete do!umentation &ithin spe!ifi! time limit,

Bran!h !redit administration &ill #eep the do!uments under their stri!t !ontrolAsafe !ustod( after properl( registering the same in Safe in8Safe out register

Custodial .uty
Obtaining se!urit( and other do!uments as per terms of appro'al, Safel( storing loanA se!urit( do!umentsA*ash *ollateral su!h as Fi:ed Deposit Re!eipt% S!ript% Bonds% and Mar#etable Se!urities% Insuran!e Poli!( and other do!uments et!, in fire proof !abinets in strong room at Bran!h under oint !ustod( of t&o authori?ed offi!ials, Fnsuring #eeping appropriate8!urrent insuran!e poli!( on all insurable ob e!ts in 'ault and rene&al of the poli!( on timel( basis, Fnsuring that t&o !ustodians and their alternates are identified b( Bran!h Manager in &riting, Fnsuring that authori?ation to debit !lientCs a!!ount is ta#en to #eep the poli!( in order, Safe8in " Safe8out Register is properl( maintained to tra!# mo'ement of the se!urit(Aother do!uments, Releasing of !ollateral or debt obligation instruments under appropriate appro'al, Fnsuring that in'entor( in &arehouse is held for finan!ing against pledge (if !redit allo&ed against pledge$ under ban#1s !ontrol. Periodi! Re'ie& of do!umentation as per follo&ing guidelinesE

Credit Monitoring
To minimi?e !redit losses a robust !redit monitoring pro!edure and s(stem to be made effe!ti'e that pro'ides an earl( indi!ation about the deterioration of the finan!ial health of a borro&er, At a minimum% *redit Monitoring *ell shall ensure thatE8

Statement of o'erdue prin!ipal " interest are generated and submitted to the management on monthl( basis, Statement of o'erdue trade bills are generated and submitted to the management on monthl( basis, Statement of F:!ess o'er limitA fa!ilit( appro'ed are generated and submitted to the management on monthl( basis, Statement of status reports on F:!ess o'er +imit (FO+$ and e:pired !redit limit are generated and submitted to the management on monthl( basis, Statement of status reports on dra&ing po&er8e:!esses and *ollateral shortfall are generated and submitted to the management on monthl( basis, Statement of !o'enants 'iolations and do!umentations defi!ien!ies are generated and !ir!ulated b( *redit Administration Department on monthl( basis to ensure that dis!repan!ies are being a!ted upon appropriatel(,

Statement of non8pa(ment and late pa(ment are generated and submitted to the management on monthl( basis and re!orded, Statement of Bon8Re!eipt of Finan!ial Statements in time are generated and submitted to the management annuall(, Statement of Farl( Alert A!!ounts% delin.uent a!!ount and Spe!ial Mention A!!ount (SMA$ are generated and submitted to the management monthl( basis, Statement of a!!ounts% &hi!h ha'e assumed SMA status due to non8rene&al on time% are generated and submitted to the management on monthl( basis, Statement of a!!ounts% &hi!h shall assume SMA status if not rene&ed &ith in t&o months are generated and submitted to the management on monthl( basis and ta#ing ne!essar( measures for rene&al of the same,

Annual re'ie& summari?es !o'enants !omplian!e, Bran!h monitors ODA**Aother regular limitsA fa!ilities on a regular basis to ensure a!!ounts turn o'er, Bran!h monitorsA re'ie& thoroughl( !ollateral shortfalls% !o'enants brea!h and other irregularities, Shorter !redit re'ie& date is gi'en in !ase finan!ials are not update and &here'er re.uired appro'als are obtained for e:tension of !redit limits e:pir( dates, Re!urring transa!tions are not allo&ed for spe!ifi! fa!ilities, *orporate Ban#ing and *RM Di'ision separatel( maintains file on !redit limit

e:pir( dates, Dses of borro&ed funds to be !onfirmed through Finan!ial Statement Anal(sis, Bran!h !ondu!ts finan!ial anal(sis on a regular basis and monitor !hanges in the !lient1s finan!ial !ondition, Bran!h *ommuni!ate the borro&er ahead of time as and &hen the installments be!ome due, RMABran!h Obtain *IB report of the borro&ers from Bangladesh Ban# and re'ie& on periodi!al basis as per norms, RMABran!h re'ie& progress against Wor# OrderA*ontra!ts finan!ed b( the bran!h periodi!all(, Timel( rene&al of limits is ensured b( *redit Administration Department informing Mar#eting Departments t&o months ahead of e:pir( of 'alidit( of the limits, Regulari?ationA!omplian!e of ob e!tions of internalAe:ternal audit timel( b( ad'ising !orre!ti'e measures% Farl( Alert Reports are prepared b( the RMs &ithin se'en da(s after identifi!ation of &ea#ness and signs of deterioration.

Credit #eco)ery*redit Re!o'er( *ell (*R*$ &ill dire!tl( manage a!!ounts &ith the status of Sub8 standard ADFAB+, A!!ounts pla!ed under F:it Strateg( i,e, graded ;87 ma( also be transferred to *R* for effi!ient e:it% based on re!ommendation of =O*RMD and =O*BD,

Credit #eco)ery Cell >C#C? shall Determine o'erall A!tion planA Re!o'er( strateg( of the Ban#, Prepare and file periodi! a!tion plan, Ma#e all out efforts to ma:imi?e re!o'er( in!luding pla!ing !ustomers into re!ei'ership or li.uidation as appropriate, Pro'ide for ade.uate and timel( loan loss pro'ision% based on a!tual and e:pe!ted losses, Res!hedule a!!ounts as per norms, Re'ie& !lassified a!!ounts,

Initiate legal a!tion as per normsA&here'er re.uired, Follo& up *ourt !ases regularl( and ensure that ne!essar( steps are ta#en for earl( resolution, Re'ie& the do!umentation% meet the !ustomer and prepare a *lassified +oan Re'ie& Report &ithin 37 (Fifteen$ da(s of the transfer and got appro'ed b( =O*RMD,

Prepare *lassified +oan Re'ie& Report on .uarterl( basis to up date the status of the a!tionAre!o'er( plan and modif( the ban# strateg( as appropriate, Fnsure that *IB reporting is updated and borro&er1s !lassifi!ationA ris# grade is !hanged in line &ith Bangladesh Ban# 0uidelines, Fnsure that +oan +oss pro'isions are held in lines &ith Bangladesh Ban# 0uidelines, Fnsure that Fligible Se!urit( 'alue of mortgaged propert( is determined in line &ith Bangladesh Ban# 0uidelines, Fnsure that appropriate authorities appro'e e:!eptions% &ai'er of interest and res!heduleA!ompromise% settlement% &here appli!able Bangladesh Ban# appro'als are obtained,

Fnsure that appropriate authorities appro'e &rite8offs in line &ith Bangladesh Ban# 0uidelines, Fnsure that appropriate authorities appro'e legal a!tion against defaulted borro&ers and fore!losure and sale of !ollateral Determine the For!ed Sale >alue (FS>$ for a!!ounts &ith grade 2 (si:$ or &orse,

&"L Monitoringa, BP+ A!!ount Manager &ill be responsible for !oordinating and administering the

a!tion plan A re!o'er( of the a!!ount% and should ser'e as primar( !ustomer !onta!t after the a!!ounts are do&n graded to substandard, b, Assistan!e ma( be sought from the RMs, =o&e'er% it is essential that the autonom( of *redit Re!o'er( *ell is maintained to ensure that appropriate re!o'er( strategies are implemented, !, The management of Bon Performing +oans must be a d(nami! pro!ess% and the asso!iated strateg( together &ith the ade.ua!( of pro'ision must be regularl( re'ie&ed,

d, A pro!ess should be established to share the lessons learnt from the e:perien!e of *redit losses in order to update the lending guidelines, e, On .uarterl( basis% a Classi(ied Loan #e)ie! #e'ort >CL#$ should be prepared b( *redit Re!o'er( *ell to update the status of the a!tion A re!o'er( plan% re'ie& and asses the ade.ua!( of pro'ision% and modif( the ban#Cs strateg( as appropriate, f, MD and =O*RMD of the Ban# &ill appro'e the *+R for BP+s under intimation to the F:e!uti'e *ommitteeABoard of Dire!tors,

Charging 5Accounting o( interest on classi(ied loans*harging of interest and a!!ounting thereof on !lassified loans shall be a!!ording to the latest !ir!ular of Bangladesh Ban#,

Cha'ter %i)e - %indings, #ecommendation * Conclusion

%indingsThe e:isting !redit poli!( is good enough to run the ban#, But some !ustomers ha'e e:pressed their dissatisfa!tion about loan s!heme in 'arious aspe!ts, It has profound effe!t on the *RM operation of Mutual Trust +td, Pri!ing is not !ommensurate &ith Ris# 0rading Regular Inspe!tions are not !ondu!ted to !onfirm that the Ban#Cs se!urit(A*ollateral is se!ured Bran!h does not ha'e organi?ational stru!ture that follo&s *RM guidelines, Mar#eting and *redit In8!harge does not perform a!!ording to *RM guidelines, Pre8san!tion Inspe!tion Report is not in pla!e, Industr(Cs position along &ith supplier and bu(er ris# is not anal(?ed, Relationship Manager and *redit Administration Department do not sign ointl( Do!umentation *he!#list (D*+$ before disbursement, *learan!e of *redit Administration Department (*AD$ regarding do!umentation and !omplian!e of !o'enants has not been ta#en for rene&al proposal, Annual re'ie& does not summari?e !o'enant !omplian!e, *ontrol Me!hanism does not e:ist to ensure !allsAinspe!tions are made regularl( on !lientCs business and do!umented,

#ecommendation and Suggestion

The e:isting !redit poli!( is good enough to run the ban#, But as the !ompetition is in!reasing da( b( da( the ban# should ta#e some measures so that the( !an distinguish it from the others, The !redit management of Mutual Trust Ban# +td, !an follo& the follo&ing suggestion to impro'e their performan!e and distinguish from othersE In !ase of an( e:!eption% proposals to be pla!ed &ith proper ustifi!ation, Bran!h ManagerA=ead of Bran!h before signing an( rene&Are'ie& proposal for sending to *=O shall ensure that su!h report is atta!hed &ith the proposal, *omplian!e report should be send to =ead Offi!e *RM Di'ision timel(, *omplian!e report should be send to =ead Offi!e *RM Di'ision timel(, Bran!h ManagerA =ead of Bran!h before sending an( fresh proposal for sending to *=O shall ensure that Pre8san!tion Inspe!tion Report is in pla!e, Bran!h% if ne!essar( !an see# assistan!e from *orporate =ead Offi!e, Without Joint signature no +D*+ &ill be a!!epted, Bran!h ManagerA=ead of Bran!h before sending an( rene&alAre'ie& proposal to *=O shall ensure that !learan!e from *redit Admin, Dept, has been ta#en, A list of !lients &hose business establishments are 'isited to be sent to *RM Di'ision on monthl( basis, In8!harge of *redit Admin, Dept, of respe!ti'e bran!h must ensure this, The *redit management of Mutual Trust Ban# +td, !an follo& the abo'e mentioned suggestion to impro'e their performan!e so that the( !an be !ompetition in the mar#et and !an gain some !ompetiti'e ad'antage,

Conclusion
The !ore part Ban# management is *redit management, The e:isten!e of a ban# depend on the !redit management, Be!ause if !redit management fails to ha'e a &ell di'ersified loan portfolio than the ban# ma( lose all its in'estments &hi!h are the sa'ings of the depositors and o&nersC e.uit(, The *redit Management does all sorts of the a!ti'ities regarding the loans and ad'an!es, To ha'e a &ell di'ersified loan portfolio% the ban# must s!reen out the good

borro&ers from the loan appli!ants, Be!ause if the borro&er is good there is 'er( fe& !han!e of default other than be!ause of s(stemati! or un!ontrollable ris#, The Mutual Trust Ban# +td, is doing its business su!!essfull( fro more than 33 (ear &hi!hSh indi!ate ban# their &ell performan!e in !redit management, Be!ause of their &ell performing !redit management the &ere able to redu!e its bad debt e'er( (ear, From the !redit management of Mutual Trust Ban# +td, I ha'e gained pra!ti!al #no&ledge about the real &orld !redit management &hi!h &ould help me to relate m( theoreti!al #no&ledge &ith the real &orld, For that I am reall( grateful to IID* the Mutual Trust Ban# +td,

#e(erencesE
Mutual Trust Ban# *RM 0uideline manual report Mar!h85669 Annual Report of Mutual Trust Ban#8 5636 Mutual Trust Ban#% =ome pageG &&&,mutualtrustban#,bd,!om