An operating report of Mutual Trust Bank. And a comparative analysis of consumer banking.
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1. Introduction Mutual Trust Bank Limited was incorporated on September 29, 1999 under the Companies Act 1994 as a public company limited by shares for carrying out all kinds of banking activities with Authorized Capital of Tk. 38,00,000,000 divided into 38,000,000 ordinary shares of Tk.100 each. The Company was also issued Certificate for Commencement of Business on the same day and was granted license on October 05, 1999 by Bangladesh Bank under the Banking Companies Act 1991 and started its banking operation on October 24, 1999. As envisaged in the Memorandum of Association and as licensed by Bangladesh Bank under the provisions of the Banking Companies Act 1991, the Company started its banking operation and entitled to carry out the following types of banking business: (i) All types of commercial banking activities including Money Market operations. (ii) Investment in Merchant Banking activities. (iii) Investment in Company activities. (iv) Financiers, Promoters, Capitalists etc. (v) Financial Intermediary Services. (vii) Any related Financial Services. The Company (Bank) operates through its Head Office at Dhaka and 30 branches. The Company/Bank carries out international business through a Global Network of Foreign Correspondent Banks.
An operating report of Mutual Trust Bank. And a comparative analysis of consumer banking.
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2. Statement of problem: Mutual trust bank is one of the leading 3rd generation bank. Recently their customers are little bit disappointed for their charges. Though there many charge of operation are little bit lower then multinational banks but higher then most of the local banks but in some case their charges very low then other banks. They have scope to increase the charge in those cases, but that charge must be lower then other banks and can earn more profit from the recent customers. Now competition has been increased between banks, in order to compete with those banks MTB need to increase their profitability which has largely depended on their customer. Now days it become a large problem for MTB. If they can hold their recent customers and attract new customers by offering better products and services at reasonable and intelligent charge, it will be profitable for them. Managers are concern to grow the branches profitability at a sound rate. So, managers are now concern to grow the branches revenue by keeping their customer satisfied and attracting new customers. Now they are thinking that in which charges need to be reduced and which charges need to be increase slightly and what new service should introduce or they should follow their current rate. Basically this research will try to show how the products and services of MTB can generate more profit and attract new customers and hold current customers.
3. Purpose of the study: Purpose of the study is to analyze various features and charges of products/services and make comparison with other banks and to show how reduction of various charges in consumer banking section can increase customer and generate more revenue. And again to show some operational activities which I participate there.
An operating report of Mutual Trust Bank. And a comparative analysis of consumer banking.
4. Research timeline 2008 February
Writing research proposal
2008 March
Developing Literature Review
2008 March
Collecting Data
2008 April
Data analysis and interpretation of findings
2008 May
Preparing draft and finalizing the research paper.
2008 May
Submission of research paper
5. Limitations of the study The whole study was not out of limitations. But as an intern it was a great opportunity for me to know the banking activities of Bangladesh specially MTB. Some constraints are appended bellow: •
The main constraint of the study is inadequate access to information, which has hampered the scope of analysis required for the study.
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Due to time limitations many of the aspects could not be discussed in the present report.
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Every organization has their own secrecy that is not revealed to others. While collecting data i.e. interviewing the employees, they did not disclose much information for the sake of the confidentiality of the organization.
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Since the bank personals were very busy, they could provide me very little time.
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Another problem is that creates a lot of confusions regarding verification of data. In some cases more than one person were interviewed to clarify each concept as many of the bankers failed to provide clear-cut idea about the job they perform.
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The clients were too busy to provide me much time for interview.
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An operating report of Mutual Trust Bank. And a comparative analysis of consumer banking.
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I carried out such a study for the first time, so inexperience is one of the main constrains of the study.
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Another problem is marketing policy.
6. Review of Literature 6.1. Bank Profitability: According to Gerlach et al, 2003, Two most important and major determinants of bank profitability are nonperforming loan ratio and net interest margin. The profitability variable is represented by two alternative measures: the ratio of profits to assets, i.e. the return on assets (ROA) and the profits to equity ratio, i.e. the return on equity (ROE). In principle, ROA reflects the ability of a bank’s management to generate profits from the bank’s assets, although it may be biased due to off-balance-sheet activities. ROE indicates the return to shareholders on their equity and equals ROA times the total assets-to-equity ratio. 6.2. Interest rate: Interest rate is one of the oldest and the most curious human inventions. It is assumed that people assumed that people started charging interest (interest rate) on invested capital in the ancient times, together with money appearance. It is a fee paid on borrowed capital. Assets lent include money, shares, consumer goods through hire purchase, major assets such as aircraft, and even entire factories in finance lease arrangements. The interest is calculated upon the value of the assets in the same manner as upon money. Interest can be thought of as "rent on money". A rate which is charged or paid for the use of money. An interest rate is often expressed as an annual percentage of the principal. It is calculated by dividing the amount
An operating report of Mutual Trust Bank. And a comparative analysis of consumer banking.
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of interest by the amount of principal. Interest rates often change as a result of inflation and Federal Reserve policies. For example, if a lender (such as a bank) charges a customer $90 in a year on a loan of $1000, then the interest rate would be 90/1000 *100% = 9%.The fee is compensation to the lender for foregoing other useful investments that could have been made with the loaned money. Instead of the lender using the assets directly, they are advanced to the borrower. The borrower then enjoys the benefit of using the assets ahead of the effort required to obtain them, while the lender enjoys the benefit of the fee paid by the borrower for the privilege. The amount lent, or the value of the assets lent, is called the principal. This principal value is held by the borrower on credit. Interest is therefore the price of credit, not the price of money as it is commonly and mistakenly believed to be. The percentage of the principal that is paid as a fee (the interest), over a certain period of time, is called the interest rate. According to “The Economist’s dictionary of Economics� In part they defined the interest rate as: The proportion of a sum of money that is paid over a specific period of time in payment for its loan. It is the price a borrower has to pay to enjoy the use of cash which he does not own, and the return a lender enjoys for differing his consumption or parting with liquidity. According to Stephan A. Ross, Randolph W.Westerfield and Jeffrey Jaff (2005), interest rate is extra payment for borrowing money. 6.3. Bank account: A bank account is a financial account with a banking institution recording the financial transactions between the customer and the bank and the resulting financial position of the customer with the bank.
An operating report of Mutual Trust Bank. And a comparative analysis of consumer banking.
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6.4. Bank statement: A bank statement is a summary of all financial transactions occurring over a given period of time on a deposit account, a credit card, or any other type of account offered by financial institutions. It is customary for banks to issue statement of accounts to their checking account customers at periodic intervals, monthly or quarterly, or on special request (Norman Penny). A document issued by a bank to its customers, listing details of debit and credit transactions over a given period with a resultant balance of the account. These statements are issued to cover a range of accounts including current accounts, loan accounts and deposit accounts. A record of transaction and their effect on account balances over a specific period of time, for a given account. A bank account statement lists the debits and credits that took place over the relevant time period. 6.5. Government bond: A government bond is a bond issued by a national government denominated in the country’s own currency. Bonds issued by national governments in foreign currencies are normally referred to as sovereign bonds. Government bonds are usually referred to as risk free bonds, because the government can raise taxes or simply print more money to redeem the bond at maturity. 6.6. Loan: A loan is a type of debt. Legally, a loan is a contractual promise of a debtor to repay a sum of money in exchange for the promise of a creditor to give another sum of money.
An operating report of Mutual Trust Bank. And a comparative analysis of consumer banking.
According to Peter S. Rose, loans are regarded by bankers as profitable credits with “sticky” interest rate.
7. Research Methodology: It is a operational/working report which I participated in MTB and a comparative study to analyze the different features and products which generate profit. And identify some technique from which managers of MTB can generate more profit and attract new customers. Both primary and secondary data were used to do this study. Both primary and secondary data was collected from annual reports, depth interviews, data journals, articles, internet websites, company brochures and other internal sources. Maximum data was collected through interview and questions and from different banks web site and brochures. And few self-developed questions are used which are given below: •
What are the products and services which generating revenue for the bank?
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How they generating profit?
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Is this profit satisfactory?
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Is there any scope to generate more profit?
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Are you satisfying customers perfectly?
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What is the interest rate in different deposits or FDR?
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What is the interest rate in different loans?
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Is there any possibility to increase or reduce charges and interest rates? Etc.
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An operating report of Mutual Trust Bank. And a comparative analysis of consumer banking.
7.1. Data collection: Primary sources of data •
Face to face conversation with the bank officers and staffs.
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Informal conversation with the clients.
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Different manuals of MTBL.
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Different circulars of MTBL.
Secondary data: •
Annual report of MTBL.
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Prospectus of MTBL and different banks manual.
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Website of different bank and MTBL.
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Different textbooks.
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Few pervious reports made by other students.
7.2. Data analysis: Several products are found through my working and interview which is generating profits/revenue to MTBL. Products: 1. Liability products: •
Current account
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Savings account
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Short term deposits
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Fixed deposits
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An operating report of Mutual Trust Bank. And a comparative analysis of consumer banking.
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2. Asset products: •
Secured loans ( Mortgage loans, cash loans)
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Semi secured loans ( Business installment loans, Installment loans, flexi loans, auto loans)
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Unsecured loans (Personal loans) 3. Others:
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Government bonds.
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Bank statement/ certificate
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Pay order.
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Cheque book issue, account closing, yearly charge.
7.3. General banking: Financial institution/intermediary that medicates or stands between ultimate borrowers and ultimate lenders is knows as banking financial institution. Banks perform this function in two ways- taking deposits from various areas in different forms and lending that accumulated amount of money to the potential investors in other different forms. General banking is the starting point of all the banking operating. General Banking department aids in taking deposits and simultaneously provides some ancillaries services. It provides those customers who come frequently and those customers who come one time in banking for enjoying ancillary services. In some general banking activities, there is no relation between banker and customers who will take only one
An operating report of Mutual Trust Bank. And a comparative analysis of consumer banking.
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service from bank. On other hand there are some customers with who bank are doing its business frequently. It is the department, which provides day-to-day services to the customers. Everyday it receives deposits from the customers and meets their demand for cash by honoring cheques. It opens new accounts, demit funds, issue bank drafts and pay orders etc. Since bank in confined to provide the service everyday general banking is also known as retail banking. Through my internee I have worked several sections of MTB in the Pragati Sharani branch. They are: •
Customer service.
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Account opening and closing.
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Remittance: 1. Payment order issue. 2. Demand draft issue/collection. 3. T.T Issue/Collection 4. Endorsements. 5. IBC/OBC Collection.
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Deposit department.
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Accounts department. 1. Clearing. 2. Transfer. 3. Cash.
7.3.1. Customer services of Mutual Trust Bank Limited:
An operating report of Mutual Trust Bank. And a comparative analysis of consumer banking.
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Professional merit and competency, flexibility, Determination and dedication are the core resources that MTBL consider to be of paramount importance for building a client oriented modern banking. Customer satisfaction is MTBL foremost professional undertaking. Therefore, a satisfied client is MTBL precious product and they consider them MTBL ambassador in the market. During my internee I have seen all this things, every employee have good relation with every customer. What ever he is small customer or big customer. Every one is treated in same way. 7.3.2 Account opening of MTBL: Under this department, MTBL officer opens different types of accounts on the request of clients. The procedure of opening account is given bellow: Types of account: (a).General products are: Current account: Current account is for those who made very frequent transaction daily. Everyday cash is coming and going out from their account. Features of current account, Minimum opening charge 2000tk. Yearly maintenance charge 300tk. And 2tk per leaf of cheque. Closing fee 100tk. It can be open by individuals, jointly, proprietor ship or limited company account. Here interest rate is 00.0%. Savings account: Savings account is account which is appropriate for organization person or persons who expect very low transaction with funds going out but coming in any day. Basically savings accounts are opened and operated by individuals to meet their future contingencies and also enjoy accessibility of money kept in savings accounts. Its interest
An operating report of Mutual Trust Bank. And a comparative analysis of consumer banking.
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rate (6.25%) is higher then current account (00.0%). Minimum opening balance 1000tk. Yearly charge on account 500tk. 4tk per leave of cheque. Closing fee 100tk. It also can be open by individuals, jointly, proprietor ship or limited company account. Short term deposits: According to characteristics, short term deposits are similar to current deposit except interest. Though it is C/D account but bearing some interest. Currently this interest rate is 6.00%. Collection account of DESCO, TNT above 10lac tk interest rate is 6%. And other type of customer’s tk 1.00lac, interest rate is 6%. Fixed deposits: Fixed deposit is very much important for its contribution to the bank’s deposit creation process, because the highest amount of bank’s fund from its direct customers comes in the for of Fixed Deposit. The period varies from 1month to 3yrs. These deposits are not repayable on demand but they are withdraw able subject to a period of notice. Hence, it is a popularity known as time liabilities. Normally the money on a fixed deposit is not repayable before the expiry of period. Before opening a fixed deposit account a customer has to fill up an application form which contains, amount in figure, Beneficiaries name and address, period, rate of interest, date issue, date of maturity, instructions that weather the FDR will renewed with interest for the next period or not to be renewed for next period, or will the interest will pay to any account or not, signatures and FDR no. When FDR account is opened, it is recorded in the FDR register which contains information like, FDR A/C no. FDR receipt no, name of the FDR holder with address, Maturity period, Maturity date and interest rare. Minimum FDR balance is BDT
An operating report of Mutual Trust Bank. And a comparative analysis of consumer banking.
50000. For increasing the deposit base every commercial bank offers its customers various rates according to the amount of deposit.
MTBL also offers its valuable customers some significant rates for different amounts as under: Duration For 1 month
Interest Rate 8.00%
For 3 months
11.25%
For 6 months
11.25%
For 12 months
12.00%
For 3 years
12.00%
Rates of different deposit accounts of MTBL: SL 01 02 03
Particulars Savings Deposit Short Term Deposit Fixed Deposit:
Interest Rate 6.25% 6.00%
For 1 month
8.00%
For 3 months
11.25%
For 6 months
11.25%
For 12 months
12.00%
For 3 years or more
12.00%
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An operating report of Mutual Trust Bank. And a comparative analysis of consumer banking.
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The FDR becomes renewed automatically in MTBL if the customer does not encash his/her FDR with in seven days if maturity. In case of encashment of FDR in maturity, few accounts treatments have made: Excise duty on FDR……………………dr. Income tax on interest………………… dr. FDR A/C……………………………….dr. Cash A/C ……………………………….
cr.
Interest on FDR A/C…………………….
cr.
If the customer wants to draw the interest only, then entries are…. Interest on FDR A/C……………………dr. Cash A/C……………………………………cr. In case of before maturity enactment interest is calculated for the days from the date of opening the FDR account. (b). Some of MTBL Consumer Products which are generating profit for MTB: 1. Brick By Brick Savings Scheme: Monthly Installment 5 Years* 8 Years* 10 Years* * The maturity value is an indicative figure. Tax/Excise Duty will be deducted as per govt. rules. 90% Loan Advantage on deposited amount. Thereafter in multiples of Tk. 5000 up to a limit of Tk. 100,000.
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2. MTB Monthly Benefit Plan: Deposit Amount Income Amount for 3-year plan* Income Amount for 5-year plan* * The maturity value is an indicative figure. Tax/Excise Duty will be deducted as per govt. rules. 90% Loan Advantage on deposited amount. 3. Save Everyday Plan: Saving money for the future is a common practice in any society. Savings help you to build a better tomorrow. Regular saving makes a man become disciplined, self confident and successful. MTBL offers you "Save Everyday" Plan. The primary advantage of this plan is that you are absolutely free to choose your own time for depositing money into this account. You can deposit daily, weekly or monthly. The choice is yours, but the transactions will have to be within the Bank's transaction hour.This is a 5 year plan and you will be required to open the account with an initial deposit of Tk. 2500/= only. We offer you very attractive interest rate which is accrued in this account on a daily basis. 4. MTB Education Plan: Monthly Installment 4 Years* 7 Years* 9 Years* * The maturity value is an indicative figure. Tax/Excise Duty will be deducted as per govt. rules. 90% Loan Advantage on deposited amount. 5. Consumer Credit Scheme: In order to make a significant contribution in the living standards of the people of medium and low income category, MTBL has introduced a scheme called "Consumer Credit Scheme". With a view to materialize the dreams of those who are unable to make
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one time investment from their own savings, one can now afford to buy necessary household equipments and thus improve the standard of living. All sorts of household durables e.g. Television, Refrigerators, Computers, Air Conditioners, Video Cameras, Washing/ Drying Machines and Furniture’s are allowed under this scheme. One can buy Motorcycle too under this program. The collateral security is minimum and the interest rates are one of the lowest in the market. Please contact the nearest branch for details. 6. Best Invest: Best Invest offers you efficient high return investment plan. This plan helps you to build up a sizeable income in easy and affordable installments. This plan allows you to own 5 times the initial invested amount. Best Invest offers two separate and convenient term deposit periods for 4 years and 6 years respectively. Best Invest is available in units worth Tk.50, 000/- each. You will invest Tk.10, 000/- as down payment for purchasing 1 (one) unit and the Bank will provide loan for Tk.40, 000/-The customer also has the option to buy units in multiples of Tk. 50,000/- but maximum up to Tk. 1, 00, 00,000/(one crore). This is a unique high return plan catering to all income groups. So do not miss the opportunity. (c). Customized Products are: 1. MTB Double Saver Plan: Deposit Amount Maturity Value after 6 Years* * The maturity value is an indicative figure. Tax/Excise Duty will be deducted as per govt. rules. 90% Loan Advantage on deposited amount.
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2. MTB Triple Saver Plan: Deposit Amount Maturity Value after 11 Years* * The maturity value is an indicative figure. Tax/Excise Duty will be deducted as per govt. rules. 90% Loan Advantage on deposited amount. 3. MTB Millionaire Plan: Monthly Installment Year Maturity Value* * The maturity value is an indicative figure. Tax/Excise Duty will be deducted as per govt. rules. 90% Loan Advantage on deposited amount. 4. MTB Unique Savings Plan: Unique Savings Plan is an any day, any amount savings plan. The beauty of this plan is that a customer can deposit any day, any time and any amount. Unique Savings Plan offers you to deposit any amount of your choice but not less than Tk. 500/- for 3/4/5 years. This is a high income plan with withdrawal facilities. The withdrawal facility will help you at the time of any emergency. You can withdraw 50% of the deposited balance for once a month. At maturity you will get a handsome amount.
7.3.3. Procedures of account opening, interest posting, cheque book issue and account closing: During my internee I have done this thing lot of times. Basically all account opening procedure are nearly same. A customer 1st need to collect the account opening form from the bank. Then he/she have to fill up all the requirements which are given in the form like nominee, photograph (most important thing), introducers sign on form and
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also on photographs behind, customer have to give signature in front of two bank officials, then one ant photo identities photocopy. In case of sole proprietorship, customer have to sign on signature card, copy of valid trade license, TIN certificate, 18-permission of Bangladesh Bank ( for GSA & Agents only). In case of partnership all things are same only extra needed partner ship deed. Interest posting to Clint’s account: Bangladesh Government has circulated that, 10% deduction from the banks internal accounts. This 10% tax deduction from the clients interest. Other wise another circitation is that, from the OBC collection every bank cut off there OBC commission as income account, here Bangladesh Bank said that 15% money cut off from the OBC collections as vat on others. Cheque book issues: MTBL has several cheque books. Their savings accounts cheque books contain 10 leafs. And current deposit account contains three types of cheque books one is 10 leafs, one is 25 leafs and another one is 50 leafs. When customers come to collect cheque book, customer have to fill up direct requisition slip or cheque book requisition slip. Then customer service officer receives these types of slip from the clients and verifies the signature of clients, when verification is completed then gives the cheque books under processing. Then books brings from the VOLT and put account no in the cheque book, write down the serial no of the book in the requisition slip and in cheque book register. After all this formalities are done then principle officer sign in the cheque leafs and sent
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to another principle officer to give initial. After this client signs in cheque book register and receive the book. After that principle officer postings that books leafs no in the computer data processing system. A cover file containing the requisition slip is effectively preserved as vouchers. If any defect is noticed by the ledger keeper, he makes a remark to that effect on the requisition slip and forward it to the cancellation officer to decide whether a new check book to be issued to the customer or not. Account closing: There are two ways of account closing. One is by banker and another is by the customer. By banker, if any customer doesn’t maintain any transaction with in six years and the A/C balance becomes lower then the minimum balance, banker has the right to close an A/C. And by customer, if the customer wants to close his/her A/C, he writes an application direct to branch manager request him to close his A/C. Basically closing procedure is same for all kinds of accounts. Only FDR account automatically closes after termination of the period. And in brick by brick A/C closing system is very easy. Of one of the client of this account didn’t pay monthly installment at the bank for three months consecutively one after another, the clients account closes automatically. And for current and savings A/C, after receiving the application from the customer the officer verifies the balance of the account. He then calculates the interest and other charges accumulated on the A/C. Then he gives necessary accounting entries post to accounts section. The balance is returned to the customer. And lastly the A/C is closed. But in practice during my internee I haven’t seen any customer closing his account willingly. Maximum account is closed by bank.
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7.3.4. Remittance, Main instruments, Payment order and demand draft issue, cancellation, charges: Remittance of funds is ancillary services of MTBL. It aids to remit fund from one place to another place on behalf of its customers as well as non-customers of bank. MTBL has its branches in the major cities of the country and therefore, it serves as one of the best mediums for remittance of funds from one place to another. The main Instruments used by MTBL, Pragati Sharani Branch for remittance of funds, payment order issue/collection, demand draft issue/collection, T.T Issue/collection, Endorsements, Travelers cheque Issuance, IBC/OBC collection. Payment order is an instrument issued by bank, instructing itself a certain amount of money mentioned in the instrument taking amount of money and commission when it is presented in bank. Only the branch of the bank that has issued it will make up the payment of pay order. When a customer comes to issue a pay order, 1st all he have to fill up the payment slip. Then deposits the pay orders amount. And then bank officials prepared the instrument and after this payment order is given to customer by taking signature on the counterpart. There are different modes of P.O a customer can purchase. By cash, by account or by transfer. When PO is purchased by cash ledgers are, Cash A/C ………….Dr Bills payable (PO) A/C…….Cr Income on commission A/C…Cr
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By account, Customer’s A/C……………Dr Bills payable (PO)………………Cr Income on commission A/C……Cr. By Transfer, MTBL general/other dept clients A/C…..Dr Bills payable (PO) A/C………………….Cr Income on commission A/C…………….Cr PO A/C is the current liabilities of bank, which is acquired to be discharged by beneficiaries against cash or through an account. After all this things when PO is submitted by collecting bank through clearing house, the issuing bank gives payment, Bills payable (PO) A/C….Dr MTBL general A/C…………..Cr But before giving payment its duty for issuer to observe whether endorsement was given by collecting bank or not. If a buyer wants to cancel the PO, he should submit a letter of instrument in this regard and also return the instrument. For this adjustment entry will be, Bills payable (PO) …………Dr Customer A/C…………………..Cr
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When Instrument is lost, the holder will inform to the issuing bank immediately. Bank will mark STOP PAYMENT on bills payable (PO) register. Buyer will then ask for a new instrument by submitting a GD copy, and indemnity bond. A new instrument will be delivered.
7.3.5. T.T issue collection, Accounting entries, Procedures, Endorsement: Telex transfer (TT) is another widely used mode for remittances of funds. In case of telex transfer the message for transfer of funds is communicated through tested telex. MTBL generally recovers from the telex charges in addition to the usual service charges. 1st customer deposits money with MTBL to be sent. Then the customer obtains a cash memo containing TT serial no. TT serial no, notifying part name is mentioned in the telex message. Finally the telex department confirms transmission of the telex. Account entries for TT: Cash A/C Clients A/C………Dr MTBL general A/C (pragati sharani branch)…..Cr After receiving the telex, it is authenticated by test. TT serial number is verified by the “TT in-Concern branch” register. The following entries are given in the vouchers: MTBL General A/C (Pragati Sharani Branch)…..Dr Client’s A/C…………………………………………….Cr
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BDT 50/- is taken as postal charge. The minimum commission it BDT 50/- or 0.15% of the amount whichever is higher. Endorsement: MTBL endorses US$ in passports. To endorse US dollar, the client has to apply in the prescribed from (TM form). Entries are: Cash or customers A/C……………Dr Foreign currency on hand………………..Cr
7.3.6. Accounts department of MTBL: Accounts department is play most vital role in banking. Accounts department is a department with which every department is related. It records the profit & loss A/C and statement of assets and liabilities by applying “Golden Rules” of book-keeping. The functions of it are theoretical & computerized based. During my internee I have given my effort in accounts department for few days. Their entire executives helped me lot during my internship. They didn’t guide me as an internee. They guide me as a training officer of MTBL to gather practical knowledge about banking. They tried their best to inform me every thing about accounts department. Basically accounts department is mix of three departments, Cash, Transfer and Clearing. Cash department of any branch plays very vital role in accounts department. Because, it deals with most liquid assets of MTBL. Pragati Sharani Branch has an equipped cash section. This receives cash from depositors and pay cash against cheque, draft, PO, and pay in slip over the counter. When a valued client deposit or withdraw their money they must full fill the deposits slip his/her own, then they sign as the
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depositor options then they deposit their money through cash officer at the cash counter. There are several types of deposit slip, Ex. Current deposit, Savings Deposit, pay order slip etc. Receiving Cash: Any people who want to deposit money will fill up the deposit slip and give the form along with the money to the cash officer over the counter. The cash officer counts the cash and compares with the figure written in the deposit slip. Then he put his signature on the slip along with the cash received seal and records in the cash receive register book against account no. At the end of the procedure, the cash officer passes the deposit slip to the counter section for posting purpose and delivers slip to the clients. Account treatment: Cash A/C…………….Dr Customer’s A/C……………..Cr Disbursing Cash:
When any one wants to receive money against cheque comes to the payment counter and presents his cheque to the officer. He verifies, date of the cheque, signature of the A/C holder, whether the cheque is crossed or not, whether the cheque is endorsed or not, whether the amount in figure and in word correspondent or not. Then he checks the cheque from computer for further verification like whether there is sufficient balance or not, whether there is stop payment instruction or not, whether there is any legal
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obstruction or not. After checking everything, if all are in order the cash officer gives amount to the holder and records in the paid register.
7.3.7. Transfer, clearing, clearing hose process, types, clearing cheque: Transfer is not a critical sector in banking but it is very important. Transfer plays a vital role in banking sector. Basically transfer is a type of register maintaining matter. In this register officer write down everyday transaction in debit and credit side then the officer calculate both the side of the register if both side shown same amount, it means that the total days transaction is completely ok. Clearing is one of the marginal parts of banking. I really enjoyed this part of the accounts department and banking sector. In Mutual Trust Bank Limited clearing in charges Mr. Md Enayet Hossain ( officer), I did work with him. I want Bangladesh Bank lots of time with him. In Bangladesh bank, there is a very large room which contains more then fifty tables for each bank that is called the clearing room. Every bank has an officer of clearing house who is work with Bangladesh bank clearing house. Actually most of major client deposit their account in different kinds of bank cheques. Clearing officer check all the cheques and deposit slip very carefully and then he receives the cheque. After that the clearing officer give posting all the cheques in computer software which is recognized through Bangladesh bank computer depertment. Then clearing officer seat all the cheques in adance date after that the officer endorsement all the cheques and sign all the cheques. All the cheques are posted in the computer by branch wise, then officer print the entire document and staple all the cheues by branch wise. This is called schedule of clearing house. Then clearing officer copy’s all the documents in
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two floppy disc as per Bangladesh Bank requirement. When the clearing officers enter the clearing house 1st job is to deliver the floppy to the Bangladesh Bank computer department.
7.3.8. Loan: Loan is another broad source of in come of MTBL’s consumer banking. The managers and employees of MTB are very concern about the loan disbursement. Each branches performance depends on loan. That’s why managers of every branch trying to increase the loan. Secured loan: This is a kind of loan where a customer has to give a kind of asset or cash to the bank to get the loan. It is 100% secured loan. With out any asset bank do not approve this kind of loan. Mortgage loan is one kind of secured loan. Basically they take an asset or cash from the customer and give this loan. This loans time limit is 24 to 360 months. And minimum loan amount is 5 lac and maximum is 80 lac. They give loans against FDR also. But here customer can take 85% loan of his FDR. Interest rate is 14%-17%. MTB take land or FDR as security to give this loan. Basically they give this loan to those who can make the installment regularly. So they consider minimum income of the customer like: •
BDT 25000 for salaried persons
•
BDT 35000 for businessman
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Semi Secured loan: This is a kind of loan where some part of loan is secured and some part of loan is unsecured the secured amount may be 25%to 100%. Flexi loan is one kind of semi secured loan. It is a facility that is being offered increasingly by banks and other financial lenders. It is a cross between an overdraft facility and a personal loan. Flexi loans work by allowing you to borrow money and repay it at variable amounts at your choice depending entirely on how much you wish to repay at any particular time. If you cannot afford to pay back a large amount one month you can just pay back what you can afford. In another month if you have more money available you can pay back more. If necessary you cannot pay back anything in a particular month you can just withdraw money from the facility. Interest rate is 15% to 20%. MTBL gives this kind of loan to the <10000tk income level customers. Time limit of this loan is 1yr to 5yr. And the loan amount is BDT 100000 to BDT 1000000. They take FDR or government security bond as security. Unsecured loan: This is a kind of loan where customer does not need to submit any asset to bank. MTB do not encourage this kind of loan. But in little special case they give Personal loan to customer. In this kind of loan MTB primarily consider customers monthly income. Monthly income should be <10000tk. And loan limit is BDT 50000 to BDT 100000. And the time limit is 1yr to 5yr. Interest rate is 16% to 20.5%. Depends on category.
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Loan section is the big earning sector of Mutual Trust Bank. But MTB also earn little revenue from government bond, bank statement/certificate, pay order, account closing and yearly maintenance charge.
8. Discussion and findings A comparison among MTB, DBL, NCC bank: To understand the competitive position of MTB in consumer banking a comparison with other bank has been made. One is DBL and another one is NCC bank both are local bank. Their operating activities are same as MTB. Their charges are relatively same but MTB can re-consider their charges by making this comparison to generate more profit.
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8.1. Bank Account (Account related charges):
Name of the
MTB
NCC
DBL
charges and fees Minimum amount to
BDT
2000
BDT
1000
BDT
5000
Savings A/C
BDT
1000
BDT
5000
BDT
1000
Closing charge
BDT
100
BDT
250
BDT
300
Yearly operating
BDT
300
BDT
500
BDT
500
ATM Charge yearly
BDT
500
BDT
500
Cheque book
2tk per leaf
open current A/C
charge
Minimum balance
ATM card
Free
Free
Free
Current 1000tk
Current 1000tk
Current
500tk
savings 500tk
savings
savings
500tk
BDT 300
1000tk
BDT 200
BDT 150
replacement fee Interest rates
Current A/C 00%
Current A/C 00%
savings A/C 6.25%
savings A/C 7.00% Savings A/C 6.50%
STD
STD
A/C 6.00%
A/C 6.00%
Table 1: Account related charges
Current A/C 00%
STD
A/C 6.00%
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From the above table we can clearly see that, minimum account opening amount is 2000tk which is much higher then NCC bank. Thought it is lower then DBL. But I have seen during my internee so many people came to open account but when they heard about minimum amount of A/C opening they just went out. But MTB can reduce this minimum amount. For current account they can make it 1000tk and for savings account they can make it 500tk. Coz maximum people come to open savings account they don’t come intentionally. 500tk is not a big deal to any people. I think if they reduce their customer will increase. Now we can see that account closing and operating charge is lower then NCC and DBL but in this section they can increase closing charge and decrease slightly yearly operating charge. They can make closing charge more 200tk, still it is lower then other 2 banks. If closing charge is bit higher people will think twice to close an account. They can decrease operating charge from 300 to 250 tk. Yap it will reduce some amount of revenue but near future they will get more profit. Coz account opening will increase when people will see that yearly processing fee of this bank is lower then any other bank. It is noticeable that MTB’s cheque book cost and ATM charge are relatively higher then other two bank. They taking 2tk per leaf for cheque book while other two bank giving it cost of free. They also can make it free. And yearly ATM charge is 500 but DBL providing it for free of cost. MTB also can make it free. Relatively other charges of MTB are lower then NCC and DBL, so if they re-consider the ATM and cheque book charges, it will definitely increase customer. Again ATM replacement fee is higher then other two banks. They also should thing about this. Above table we can see that in case of savings account MTB’s interest rate is lower then DBL and NCC. Now why people keep tk in savings account, to earn some interest. Now obviously people will
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switch to those banks who are giving higher rate. So here is the big scope for MTB increase the rate slightly, their current customer will stay loyal to them and new customers will attract to open new account. 8.2.Fixed deposits:
Tenor
MTB
NCC
DBL
1 Month
8.00%
9%
8.50%
3 Month
11.25%
12.25%
11.50%
6 Month
11.25%
12.50%
12.00%
1 year
12.00%
12.50%
12.50%
3 year
12.00%
12.50%
12.50%
Table 2: Interest rates of fixed deposits From the above table we can see that MTBâ&#x20AC;&#x2122;s deposit rates are relatively lower then other two banks. Now if they can increase this rates little bit they can get more deposits, which they can use them for lending purpose. Though point some thing is nothing but customers when see that one bank is giving interest rate on deposit bit higher then other banks, naturally they run to that bank with their money. Coz people deposits money to earn some interest. Now who will give them more earning, they will depose their money to that bank.
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8.3. Loans:
Products
MTB
NCC
DBL
Secured loan
14%-17%
15%
14%
Semi secured loan
15%-20%
16%
16%
Unsecured loan
16%-20.5%
16%
17%
Auto loan
14%
16%
14.50%
Credit card
N/A
30%
30%
Table3: loan interest rates. Here we can see that MTBâ&#x20AC;&#x2122;s every interest rate on loans is too much higher then other two banks. They have to reduce these rates to earn more profit. If people see that MTB is giving relatively lower interest rate comparing other banks. People will lend money from them. As we know every bank biggest earnings sector is their loan section. If any bank increase the ration of giving loan, their revenue will be more. On the other hand we can see that NCC and DBL earning a lot of revenue through their credit card. But MTB even did not introduce it. So they should introduce credit card as soon as possible.
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8.4. Loan related charges:
Features
MTB
NCC
DBL
Early settlement fee Processing fee:
Minimum 1000tk 1% of approved
Minimum 1000tk 1% of approved
Minimum 1000tk 1% of approved
amount or minimum
amount or minimum
amount or minimum
1000tk
1000tk
1000tk
1% of approved
1% of approved
1% of approved
amount or minimum
amount or minimum
amount or minimum
1000tk
1000tk
1000tk
1% of approved
1% of approved
1% of approved
amount or minimum
amount or minimum
amount or minimum
1000tk
1000tk
1000tk
Mortgage Loan
Personal loan
Auto loan
Table 4: Loan related charges Now here we can see that loan related charges are basically same in this three bank. But here if MTB slightly reduce these charges they can earn more revenue. Here if they reduce their operating charge it may reduce their revenue little bit but their loan
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disbursement will increase. And in near future they will earn more revenue from this section.
8.5. Government Bonds: MTB is getting .5% commission for 1lac bond, which is very little profit. Government fixes this rate for all the banks. So, it is not possible for any bank to change this rate. Now MTB only can encourage people to buy these bonds. Now if people buy this bond people have to have an account in MTB and their principle and interest amount of the bond goes to their accounts which will increase MTBs funds. 8.6. Statements and certificates: Statements and certificates are almost same in comparison of this three bank. Like duplicate statement for current year MTB charging 50tk similarly other two banks also charging same. Duplicate statement for previous year MTB charging 200tk but on the other hand NCC charging 100tk and Dhaka Bank charging 150tk, which is relatively lower then MTB. So here MTB should take a look. Charge for bank solvency certificate is same in this three bank, charge is 100tk. And balance confirmation certificate also same 100tk. This section is very little earning sector. But as we know in Bangladesh, bank environment is very competitive, so every side should be up to dated. 8.7. Other some factors by which MTB can earn profit:
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There are some other factors by which MTB can earn profit like locker, introducing credit card etc. In my branch there is no locker service. MTB can introduce this feature and can earn some revenue. NCC and DBL earning yearly huge amount through locker service. They provide 3 kinds of lockers large, medium, and small. And charging 2000-2500tk for large, 1800-2000tk for medium, and 1000-1500tk for small size lockers. On the other hand MTB (pragatisharani branch) don’t have any locker service. They should introduce it. MTB also don’t have any credit card facility. Now a day’s banks are earning lots of revenue through credit card. MTBL also should introduce credit cards. 8.8. Mathematical view: From the financial statement of 2006 I have found that net profit of MTB after tax is BDT 689,584,847 which is much higher then 2005 ( BDT 493,478,835). It shows that day by day MTB’s profit margin is increasing. But it can be increase more. A bank’s 30% of total profit comes from consumer banking division. That means MTB’s (689584847*30%) =BDT 206875454.1 profit came from consumer banking division in 2006. Now if they reduce 5% of consumer banking charge profit will decrease 206875454.1-(206875454.1*5%) =BDT 196531682.1. Now for this reduction if 10% customer increases in MTB then profit will: BDT 196531682.1+ (196531682.1*10%) = BDT 216184850.31. Now we can see that their profit will increase (216184850.31206875454.1) = BDT 9309396.21 from pervious profit. So reduction of consumer banking charges can generate more revenue for the MTB.
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9. Significance of the study: In this report I tried to describe the sections in which I gone through and worked there. Basically in 1st half of report I tried to show how every sections work and how they providing service and in what type of activities I was involved. In the 2nd half I tried to show some comparison. In this study I tied to prove that if charges of consumer banking can reduce it can generate more profit. This research will draw MTBâ&#x20AC;&#x2122;s managementâ&#x20AC;&#x2122;s attention to decrease their charges, fees, and interest rates in order to hold their current customers and as well as attract new customers which will increase their revenue. And this study will encourage researchers to investigate further research about the technique to increase the revenue of Mutual Trust Bank Limited.
10. Recommendation: A bank can earn lots of revenue comparatively to other banks, just if they consider their charges slightly lower then other banks. So depending on the above research MTB should reduce some charges and increase interests on deposits to hold current customers as well as attract new customers. Now so many banks providing
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cheque book free of cost. They should also provide it free. And they should introduce credit card. And they should come with newer ideas, newer products which can attract new customers. They can increase interest rate in savings accounts. Coz a banks maximum profit comes form loan section. So if they increase interest rate for the accounts people will be more interested to keep money to bank and from those accounts they can use that money for lending purpose. So final suggestion to MTB is they should increase account opening, and encourage peoples to open A/C to their bank, by offering newer products, services and relatively lower service charges from other banks.
11. Conclusion In conclusion I want to say that, Mutual Trust Bank is one of the leading 3rd generation bank. Its increasing customers day by day. It has huge number of products and creating a large number of customer base. In Pragatisharani Branch maximum people of Bashundhara, Badda, Baridhara, Badda, Bishwa road are their customer. Coz It is the 1st bank in that area. And I have seen they satisfying every customer through their honest service, but still something missing there and thatâ&#x20AC;&#x2122;s why they loosing customer and failing to keep account opening flow. Now some other bank branches are opening there. And maximum people are switching to other banks. But if they can meet all the needs of customers they can hold current customers and attract new customers. Above research tried to find out those missing things by comparing MTBâ&#x20AC;&#x2122;s consumer banking with other banks, and suggesting. Now a days competition is increased in our country in banking sector. Continuous improvement and update is required to hold and survive in this
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competitive market. A little bit concentration on problem areas through the recommendations can bring back old reputation and increase profit.
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•
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An operating report of Mutual Trust Bank. And a comparative analysis of consumer banking.
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