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Credit Management of MTBL


1.1 Background of the Report
Economic history shows that development has started everywhere with the banking system and its
contribution towards financial development of a country is highest in the initial stage. BBA degree is
different from other degrees in the extent that it requires to achieve practical experience with relation to
the theory. For this reason BBA students require to undergo internship program where they match
practical knowledge with that of theoretical knowledge which the acquired throughout the degree.
Internship program is a perfect blend of the theoretical and practical knowledge. As the classroom
discussion alone cannot make a student perfect in handling the real business situation, therefore it is an
opportunity for the students to know about real life situation through this program. BBA degree does not
complete unless a written report submitted to the faculty, basing on what have the students learned
through the internship program. This report is originated to fulfill the requirement of the assigned project
internship report on Credit Management of Mutual Trust Bank Limited. In this regard I had the
opportunity to work in Mutual Trust Bank Limited at Pallabi Branch for an internship period of 90
days starts from J uly 11, 2012 and ends to September 11, 2012. During this internship period I have
worked with MTBL as an employee and gathered practical work experience and knowledge about the
overall banking operation as well as about the activities of credit management.

1.2 Significance of the Report
This internship report is partial requirement of four years BBA graduation program. This is because
knowledge and learning become perfect when it is associated with theory and practice. Theoretical
knowledge gets its perfection with practical application. And the internship is designed to bridge the gap
between the theoretical knowledge and real application. By this internship program students can establish
contacts and networking. Contacts may help to get a job in practical life. That is, student can train and
prepare themselves for the job market. Therefore, it is obvious that the significance of internship is clearly
justified as the crucial requirement of four years BBA graduation.

1.3 Scope of the Report
As I was designed to the Mutual Trust Bank Ltd, Pallabi Branch, there is enough scope of the study. The
report covers the topic Credit Management Of Mutual Trust Bank Ltd. To conduct a study on credit
management of Mutual Trust Bank, I have gathered valuable information from MTB, Pallabi Branch and
I have also got some information from website of Mutual Trust Bank.

Credit Management of MTBL


The study would focus on the following areas of Mutual Trust Bank Limited.
Credit management scenario of Mutual Trust Bank Ltd.
An overviews of Mutual Trust Bank Limited
Comparison with other Banks.
Financial performance of MTB.
Each of the above areas would be critically analyzed in order to determine the efficiency of Mutual Trust
Bank Limited Credit Management system.
1.4 Objectives of the Report
1.4.1 Broad Objective
The broad objective of this report is to analyze the Credit Management of Mutual Trust Bank Limited.

1.4.2 Specific objective
To have better orientation on credit management activities specially credit policy and
practices, credit-processing steps of Mutual Trust Bank Limited,
To analyze the Lending Procedure of Mutual Trust Bank Limited,
To know the terms and conditions of credit management of Mutual Trust Bank Limited,
To evaluate the actual position in classified Loan and provisions maintained by MTBL,
To appraise the actual recovery position of MTB,
To identify scope of improvement concerning credit management.
1.5 Methodology of the report
Methods followed to perform a job or conducting activities to complete a task is called methodology. In
conducting this study the following methodology was adopted in collecting data and information,
preparation of reports etc. The methodology of report is given below:

1.5.1 Research Design
This report is a descriptive type of research which briefly reveals the Credit Management of Mutual
Trust Bank Limited. It has been administered by collecting secondary data. Annual reports of Mutual
Trust Bank Limited were the major secondary data sources in this regard. This study has been conducted
by collecting data for the period of 5 years from 2007 to 2011.

Credit Management of MTBL


1.5.2 Sources of data
The data collection method of study consists of secondary sources. The details of these sources are
highlighted in below:
Sources of Secondary data
Annual Report.
Various reports related to study.
Web base support from the internet.
1.5.3 Data Collection Procedure and Instruments
For The Credit Management of Mutual Bank Limited Secondary data are mainly used. Besides this,
information is also collected by taking expert opinion from the officers and direct observation while I was
doing the internship program at the bank.
1.5.4 Data Analysis and Reporting
In order to analyze the data I have used trend analysis and softwares for graphical presentation.

1. Data Analysis-
- Trend Analysis

2. Software Used-
- MS word
- MS Excel
- Microsoft PowerPoint

Credit Management of MTBL


1.6 Limitations
Observing and analyzing the broad performance of a bank and one of its branches are not that easy.
Moreover due to obvious reasons of scrutiny and confidentiality, the bank personnel usually dont want to
disclose all the statistical information about their organization. Time is another major limitation. The
duration of the program was twelve weeks only and being a temporary member of the organization, it was
not possible on my part to notice or express some of the sensitive issues and other aspects.
However the some of the limitations I have faced while preparing this report are listed as follows:
Time Limitation: To complete the study, time was limited by three months. It was really very
short time to know details about an organization like Mutual Trust Bank Limited.
Inadequate Data: Lack of available information about the business operations of MTBL.
Because of the unwillingness of the busy key persons, necessary data collection became hard. The
employees are extremely busy to perform their duty.
Lack of Record: Large-scale research was not possible due to constrains and restrictions posed
by the organization. Unavailability of sufficient written documents as required making a
comprehensive study. In many cases up-to-date information was not available.
Lack of experiences: Lack of experiences has acted as constraints in the way of meticulous
exploration on the topic. Being a member of the organization; it was not possible on my part to
express some of the sensitive issues.
Website Facility: Mutual Trust Bank Limited website is not much rich to collect data thats why
it makes sometime difficulty to collect information.

Credit Management of MTBL


2.1 Company profil e:
Name of the Company: Mutual Trust Bank Limited.
Legal form: A publ i c l i mi t ed Company i ncorporat ed i n
Bangl adesh on 29
t h
Sept ember 1999 under t he
compani es Act 1994 by shares for carr yi ng out al l
ki nds of banki ng act i vi t i es wi t h aut hori zed capi t al of
BDT 200 mi l l i on di vi ded i nt o 2000000 ordi nary
shares of BDT 100 each.
Date of Commencement: Oct ober 05, 1999.
Registered Office: MTB Cent re, 26GulshanAvenue, Plot -5, Block-
SE (D), Gulshan-1, Dhaka-1212.
Tel ephone: 880(2)8826966, 8822429.
Fax: 880(2)8824303.
Swift Code: MTBL BD DH.
E-mail : info@mut ualtrustbank. com. bd.
Web Page: www. mutualt rust bank. com
Auditors: Hoda Vasi Chowdhury & co, Chart ered
Account ant s BTMC Bhaban.
Tax Consul tant: M/s. ACNAIN, BSRS Bhaban C/a, Dhaka-1215,
Managing Di rector: Mr. Anis A. Khan.
Company Secretary: Mr. Qumrul Islam Chowdhury.
Number of Branches: 77.
SME centre: 14.
MTB Securi ti es Li mited: 14.
ATM Booths: 118.

Credit Management of MTBL


2.2 Background of the Bank
The importance of commercial banks after the ravage of the liberation war to develop a better economy
was severally needed and it is needed now and will be required in future also. In time to time Government
of Bangladesh agreed to permit the private commercial banking in the country. Mut ual Trust Bank
Li mi t ed as s publ i c l i mi t ed Company 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. The address of Regi st ered Offi ce i s
MTB Cent re, 26Gul shanAvenue, Pl ot -5, Bl ock-SE (D), Gul shan-1, Dhaka-1212.
Number of branches i s 77. The number of SME cent re i s 14. The number of securi t i es
house i s 14. The organi zat i on achi eved cust omers confi dence i mmedi at el y
est abl i shment i n domest i c and i nt ernat i onal mar ket s. Mut ual Trust Bank i s one of t he
few banks per mi t t ed by t he Bangl adesh bank i n t he earl y 90s; t he ot her banks
per mi t t ed earl i er were Dut ch-Bangl e Bank, Al -Arafah Isl ami c Bank, Pri me Bank,
Dhaka Bank, East ern Bank, ONE Bank. These banks are known as t he second
generat i on bank and fort unat e t o remai n i mmune from t he bad l oan cul t ure. However ,
t he perfor mances of t hese banks are not t he same; t he Mut ual Trust Bank Li mi t ed
remai ned as one of t he t op perfor mance among t hem. The emer gence of Mut ual Trust
Bank Li mi t ed at t he j unct i on of l i berat i on of Gl obal economi c act i vi t i es, aft er t he
URUGUAY ROUND has been an i mport ant event i n fi nanci a l sect or of Bangl adesh.
The experi ence of prosperous economi es of Asi an count ri es and part i cul ar of Sout h
Asi a has been t he dri vi ng force and t he st rat egi es behi nd operat i on al pol i cy opt i on of
t he Bank, The bank wi l l cont i nue t o aim for sust ai nabl e i ncreas e of busi ness
funct i onal i t i es, l i nki ng profi t abi l i t y, capi t al base, ri sk adj ust ed asset s and i nvest ment
for growt h. Mut ual Trust Bank Li mi t ed has been l i censed by t he Government of
Bangl ad4esh as a Schedul e Bank i n t he pri vat e sect or i n pursuance of t he po l i cy of
l i beral i zat i on of Banki ng and fi nanci al ser vi ces and faci l i t i es i n Bangl adesh. In vi ew
of t he above, t he Bank wi t hi n a peri od of 13 years of operat i on achi eved a remar kabl e
success and met up capi t al adequacy requi rement of Bangl adesh Bank

Credit Management of MTBL


2.3 Vision
Mut ual Trust Banks vi si on i s based on a phi l osophy known as MTB3V. We envi si on
MTB t o be:
One of t he best perfor mance banks i n Bangl adesh
The bank of Choi ce
A t rul y Worl d cl ass bank
2.4 Mission
We aspi re t o be t he most admi red fi nanci al i nst i t ut i on i n t he count ry, recogni zed as a
dynami c, i nnovat i ve and cl i ent focused company t hat offers an array of product s and
servi ces i n t he search for excel l ent and t o cr eat e an i mpressi ve economi c val ue.
2.5 Values
Commi t ment
Customer focus
Communi t y
Account abi l i t y
Agi l i t y
2.6 Goal
MTB peopl e, product s and processes are al i gned t o meet t he demand of di scerni ng
cust omers. It s goal i s t o achi eve a di st i nct i on l i ke t he l umi nari es i n t he sky. It s pri me
obj ect i ve i s t o del i ver a qual i t y t hat demonst rat es a t rue r efl ect i on of i t s vi si on-
2.7 Strategi c Objectives
To ensure i nfl ow of funds at combi nat i on of l east possi bl e cost .
To mai nt ai n a di screet credi t pol i cy.
To enhance versat i l i t y and di versi fi cat i on t hrough t he penet rat i on of new
mar ket segment s, t her eby, ful fi l l i ng unmet needs.
To ext end fi nanci al assi st ance t o t he ci t i zenry, l i vi ng at di spersed l ocat i ons by
expendi ng t he net wor k of branches.
To pract i ce st ronger IT-dri ven i ni t i at i ves t hat wi l l meet t he chal l enges and
requi rement s of t he bank and i t s cl i ent el e.
To i mprove admi ni st rat i ve and or gani zat i onal st ruct ures i n order to prepare t he
pl at form for best pract i ces of corporat e governance.
To enri ch t he banki ng sect or wi t h i mproved awareness on Cor porat e Soci al
Responsi bi l i t y.
Credit Management of MTBL


2.8 Management structure of Mutual Trust Bank

Source-Annual Report 2011(Mutual Trust Bank)
Fi gure: 2(a) - Management Structure of Mutual Trust Bank
Dr. Arif Dowla
Mr. Rashed Ahmed Chowdhury
Vice Chairman
Mr.Md.Abdul Malek
Mr.Sayed Manzur Elahi
Mr. Anjan Chowdhary

Mr. Wakiluddin
Mrs. Khwaja Nargis Hossain
Mr. Q.A.F.M Serajul Islam
Mr. Mohammed Abdul Rouf
Credit Management of MTBL


2.9 Organization Structure of Mutual Trust Bank
Designations are in ascending order-
Board of Directors
Executive Committee
Managing Director
Additional Managing Director
Deputy Managing Director
Senior Executive Vice President
Executive Vice President
Senior Vice President
Vice President
Senior Assistant Vice President
First Assistant Vice President
Assistant Vice President
Senior Principal Officer
Principle Officer
Senior Officer
Probationary Officer
Junior Officer
Assistant Officer

Source: Mutual Trust Bank Website (
Figure: 2 (b)-Organization Structure of Mutual Trust Bank
Top Management
Executive Level Management
Mid Level Management
Junior Level Management
Credit Management of MTBL


2.10 Capital Structure
The capital structure of Mutual Trust Bank Ltd is quite strong. At present, Authorized capital of the
company is BDT 10.000 Billion (BDT 1000.00 core) divided into 100,000,000 ordinary shares of BDT
100 each.
Year Authorized Capital (Amount in
Paid up Capital (Amount in
2007 3800 997.92
2008 3800 1496.88
2009 3800 1766.32
2010 10000 2119.58
2011 10000 2543.50

Source: Annual Report of Mutual Trust Bank Ltd. Year-(2007-2011)

Fig: 2(c) - Authorized & Paid up Capital
From the graph it is seen that in 2007 the authorized capital was 3800 million and paid up capital was
997.92 million. The authorized capital and paid up capital both are increased year by year. In 2011 its
authorized capital increased by 10000 million and paid up capital also increased by 2543.50 million.

Source: Annual Report Mutual Trust Bank Year-(2007-2011)
2007 2008 2009 2010 2011
Authorized Capital
Paid up Capital
Credit Management of MTBL


2.11 Products and Services of Mutual Trust Bank Limited

Fig: 2(d) - Products and Services of Mutual Trust Bank Limited
MTB Product & Service
Retail Corporate
NRB Treasury Service
Corporate & deposit
Working capital finance
MTB off-shore banking
Syndication & structured
Trade finance
Export finance
Import finance
Non-funded trade finance

NRB savings account
Credit Management of MTBL


2.12 Credit Rating Report
Mutual Trust Bank Ltd was rated Credit Rating Agency of Bangladesh (CRAB) on the basis of financial
audited Statement, as on December 31, 2011. The Summary of rating is presented below:
Status 2011 2010
Long Term A1 A2
Short Term ST-2 ST-3

Commercial banks rated A1 in the long term are adjudged to be strong banks, characterized be good
financials, healthy and sustainable franchises and a first rate operating environment. This level of rating
indicates strong capacity for timely payment of financial commitments with low likeliness of being
adversely affected by foreseeable events.

Commercial banks rated ST-2 in the short term are considered to have strong capacity for timely
repayment. Banks rated in this category are characterized with commendable position in terms of
liquidity, internal fund generation, and access alternative sources of funds is outstanding.

Credit Management of MTBL


Theoretical Background
Credit: The word credit comes from the Latin word Credo meaning I believe. It is a
lenders trust in a persons/ firms/ or companys ability or potential ability and intention to
repay. In other words, credit is a contractual agreement, in which a borrower receives
something of value now, with the agreement to repay the lender at some date in the future.

Credit Management: The credit management is to maximize the performing asset and the
minimization of the non-performing asset as well as ensuring the optimal point of loan and
advance and their efficient management. Credit management is a dynamic field where a certain
standard of long-range planning is needed to allocate the fund in diverse field and to minimize
the risk and maximizing the return on the investment.
Cash Credit CC (Hypothecation): The mortgage of movable property for securing loan
is called hypothecation. Hypothecation is a legal transaction whereby goods are made available
to the lending banker as security for a debt without transferring either the property in the goods
or either possessing.
Cash Credit CC (Pledge): Transfer of possession in the judicial sense of essential in the
valid pledge. In case of pledge, the bank acquire the possession of the good or a right to holds
goods until the repayment for credit with a special right to sell after due notice to the borrower
in the event of non-repayment.
Secured Over draft-SOD: Advance is granted to a client against financial obligations that
is deposited in the bank. A client can get up to 90% loan of the total deposited value.
Over Draft-OD: OD is some kind of advance. In this case, the customer can over draw from
his/her current account. There is a limit of overdraw, which is set by the bank. A customer can
with draw that much amount of money from their account. For this there is an interest charge
on the over draw amount. This facility does not provide for everyone, the bank will provide
only those who will fulfill the requirement. It means that only real customer can get this kind of
Pay Order-PO: A pay order is a draft issued by one another or on its branch. The
purchase of a draft makes to the seller in local currency at the domestic center while the
paying after presentation of the draft by the beneficiary pays the beneficiary. There is
also risk of loss of the draft in transit.
Credit Management of MTBL


Demand Draft-DD: The person intending to remit the money through a pay order has
to deposit the money to be remitted with the commission which the banker charges for
its services. The amount of commission depended on the amount to be remitted. On
issue of the pay-order the remitter does not remit a party to the instrument 1) drawer
branch 2) drawer branch 3) payee. This treated as the current liability of the bank as
banker on the presentation of the instrument should pay the money.

Telegraphic Transfer-TT: Telex transfer is another widely used mode for remittance of
funds. In case of telex transfer the message for transfer of funds is communicated through
tested telex. MTB generally recovers from the telex charges in addition to the usual service
Letter of Credit: Business Enterprises can avail Non-funded facility for import /
procurement of raw materials, machinery, equipment, merchandise item.
Loan against Imported Merchandize-LIM: It stands for loan against imported
merchandise. Its one kind of post import finances allowed for very shorter period,
usually 30 to 60 days or 30 to 90 days.
Loan against Trust Receipt-LTR: This is an arrangement under which credit is allowed
against trust receipts. Imported or exported goods remain in the custody of the importer of
exporter. But he is to execute a stamped trust in favor of the bank wherein a declaration is made
that the goods imported or bought with the banks financial assistance are held by him in trust
for the bank.
Local Documentary Bill Purchase-LDBP: Payment made against documents
representing sell of goods to local export oriented industries, which are deemed as
exports, and which are dominated in local currency/foreign currency falls under this
Working Capital Loan: Loan allowed to the manufacturing unit to meet their working
capital requirement, irrespective of their size.
Non-performing Loan: A non-performing loan is a loan that is in default or close to being
in default. Many loans become non performing after being in default 3 months, but this can
depend on the contract terms.
Unclassified: Repayment is regular
Credit Management of MTBL


Substandard: Repayment is irregular or stopped but has reasonable prospect of
Doubtful Debt: Unlikely to be repaid but special collection efforts may result in partial
Bad/loss: Very little chance of recovery.
Primary Security-PS: There are the securities taken by the ownership of the items for
which banks provides the facility.
Collateral Security-CS: Collateral securities refer to the securities deposited by the third party
to secure the advance for the borrower in narrow sense. In wider sense, it denotes any type of
security on which the bank has a personal right on the debtor in respect of the advances.

Credit Management of MTBL


4.1 Credit
The word credit comes from the Latin word Credo meaning I believe. It is a lenders trust in persons
or firms or companys ability or potential ability and intention to repay. Credit is a contractual
agreement, in which a borrower receives something of value now, with the agreement to repay the
lender at some date in the future. One of the basic functions of the bank is deposit extraction and credit
extension. Managing credit operations is the crying need for any bank.
The objective of the credit management is to maximize the performing asset and the maximization of
the non-performing asset as well as ensuring the optimal point of loans and advances and their efficient
4.2 Factors related with credit
Interest rate
Security or collateral
Operating expense
Legal consideration
Finance charge
4.3 Importance of credit
Credit plays a vital role in the national economy in the following ways:
1. It provides working capital for industrialization
2. It helps to create employment opportunities
3. Credit controls almost all kind of production activities of the country
4. It brings social equity
5. Cash generation occurs for its successful performance
6. Business can run well only by the help of lending system
7. Economic stabilization
8. Raise standard of living.
4.4 Credit management
Credit management is a dynamic field where a certain standard of long-range planning is needed to
allocate the fund in diverse field and to minimize the risk and maximizing the return on the invested
fund. Continuous supervision, monitoring and follow-up are highly required for ensuring the timely
repayment and minimizing the default. Actually the credit portfolio is not only constituted the banks
structure but also a vital factor of the banks success. The overall success in credit management depends
on the banks credit policy, portfolio of credit, monitoring, supervision and follow-up of the loan and
Credit Management of MTBL


advance. Therefore while the credit management of MTB; it is required to analyze its credit policy, credit
procedure and quality of credit portfolio.
4.5 Credit policy of MTB
One of the most important ways, a bank can make sure that its loans meet organizational and regulatory
standards and they are profitable. It is important to establish a loan policy. Such a policy gives loan
management a specific guideline in making individual loans decisions and in shaping the banks overall
loan portfolio. In Mutual Trust bank Ltd. there is a credit policy. The policy shall be officially distributed
among the concerned officials, all divisional heads, branches and top management of the bank. The policy
to be strictly followed by all concerned. Any deviation from the guidelines to be clearly identified and
proper justification for approval with such deviation to be provided.
This revised policy named as Credit Policy and Credit Risk Management Guidelines - 2011and will
replace the existing Credit Policy with Credit Risk Management Guidelines -2010.
4.6 Credit principles
In the feature, credit principle includes the general guidelines providing credit by branch manager or
credit officer. In Mutual Trust bank Ltd. they follow the following guideline while giving loan and
advance to the client. To achieve their goal for maximizing the stakeholders' value and protect the
interest of the depositors as well as to improve asset quality, MTB will abide by but will not be confined
to the following credit principles, which should guide their behavior in their lending decisions:
1. All credit extensions must comply with the requirement of Bank Company Act- 1991 and
amendments thereof made from time to time and all the requirements of other regulatory
2. Not to extend credit to the persons/entities not supported by CIB report.
3. To maintain judicious ratio between loan and deposits.
4. To allow credit in a manner this in no way compromises with banks standard of excellence.
5. Extension of credit normally from customers deposits and not out of short term funds or
borrowing from other banks.
6. To optimize risk and reward.
7. To ensure ethical standard in all credit activities.
8. To extend credit in the areas, risk of which can be sufficiently understood and managed.
9. To extend credit facility upon adequate pre-investment analysis and repayment capacity of the
10. To avoid excessive credit concentration through rational diversification of credit.
11. To avoid name lending.
12. To allow credit on business consideration after ascertaining viability, credit requirement, quality
of advance, security offered cash flows and level of risks.
13. The bank shall offer suitable credit services and products for the market in which it operates.
14. Encourage proactiveness in identifying, managing and communicating credit risks.
15. Independent credit participation in the credit process shall be ensured.
Credit Management of MTBL


4.7 Principles of sound lending
It should be clearly understood that the criteria/principles are not flexible laws & are given as guidelines
for protecting credit. In practical competitive world, risk is defined, accepted and credit is often granted
even though a proposal does not strictly with some of the criteria described below:
The basic lending criteria can be considered as eight main headings, as follows:
Principle of safety
Principle of liquidity
Principle of purpose
Character and ability of the borrower
Principle of security
Principle of profitability
Source of repayment
Principle of national interest
Each of the headings will now be discussed further in the following paragraph:
Principle of safety
The first lending principle of sound lending is safety. The very existence of the bank depends upon the
safety of its advances. Safety should not be sacrificed for profitability. So utmost care should be
exercised to ensure that the funds go to the right type of borrower, are utilized in such a way that they
remain safe and the repayment comes in the normal course.
Principle of liquidity
Liquidity means the availability of bank funds on short notice. The liquidity of an advance means it
repayment on demand on due date or after a short notice. Therefore the banks must have to maintain
sufficient liquidity to repay its depositors and trade off between the liquidity and profitability is must.
Principle of purpose
The bank should not lend money for any purposes for which a borrower may be free from all risk but if
the funds borrower may employed for unproductive. Purpose like marriage ceremony, pleasure trip etc.
or speculative activities, the repayment in the normal course will become uncertain. Banks therefore
discourage advances from boarding stocks and refuse advances for speculative activities.
Character and ability of the borrower
The primary responsibility of the lending bankers is know your and his business. While considering the
character and ability of a borrower, the following point must be kept in mind.
Do you know your customer already?
Was he respectively introduced?
Credit Management of MTBL


If he was previously customer of another bank, why has he come to Islamic Bank Ltd. try to
see previous bank statement?
Have you made the account opening inquiries required by the bank?
Whats the business of its ownership?
What is the customer background and financial track record?
Customers honesty and integrity and personal stability?
How has the customer managed his financial circumstances in the past?
The branch manager should have the answer of the above queries and should be to judge his ability to
use the credit facility to his advantage. Advance should be granted only two though borrowers in whom
the branch manager has full confidence. Integrity of the borrower and his ability to conduct business are
of paramount importance and take precedence over the value of securities offered.
Principle of security
The security offered by a borrower for an advance is insurance to the banker. It serves as the safety
value for an unforeseen emergency. So another principle of sound lending is the security of lending. The
security accepted by a banker to cover a bank advance must be adequate, readily marketable, easy to
handle and free from any encumbrance.
Principle of profitability
Banking is essentially a business, which aims at earning of a good profit. The working funds of a bank are
collected mainly by means by deposit from the public and interest has to be paid on those deposits.
Banks have also to meet their establishment charges and other expenses. Interest earn by a bank on its
advance is the main source of its income. The different between the interests receive on advances and
the inter5est paid on deposits constitute a major portion of the bankers income. Besides foreign
exchange business is also highly remunerative. The bank will not enter into a transaction unless a fair
return form it is assured.
Source of repayment
After the branch manager has ensured that the credit will be a propositioning for the bank, he should
then turn his attention to the cash flows situation of the borrower. The banks credit can be classified
into three main categories, as follows:
A very short term advance will be liquidated by funds received in the very near future, such
as advances against foreign or local bills or bridge functioning where evide3nce of credit
sanction from another financial institution is available.
Provision for current asset, this type facility is needed for trading and or manufacturing
Long term loans generally over 5 years; example of such facilities as investment in plant and
machinery, a farm or a shop, generally, a long term is repaid out profits generated by the
Credit Management of MTBL


Principle of national interest
The development of banking has reached a stage where a banker is required to identify his business
with national policies. Banking industry has significant role to play in the economic development of a
country. So the savings of the people which are mobilized by banks must be distributed to those sectors
which require development in the countries planning program.
4.8 Global Limit Portfolio Credit of MTB
The features with deals how much total deposit would be used as lending the proportion of long term
lending, customer exposure, country exposure, proportion of unsecured facility etc. the most notable ones
The aggregate of all cash facility will not be more than the 80% of the customers deposit Long term loan
must not exceed 20% of the total loan portfolio. Facilities are not allowed for a period of more than 5
years. Credit facilities to any one customer group shall not normally exceed 15% of the capital fund TK
100 crores.
4.9 type of Credit Activities
Credit may be classified with reference to elements of time, nature of financing and provision base:
Classification on the basis of time:
On the basis of elements of time, bank credit classified as:
Continuous Loan:
These are the advances having no fixed repayment schedule but have a date at which it is renewable on
satisfactory performance of the clients. Continuous loan mainly includes Cash credit both hypothecation
and pledge and overdraft.
Demand loan:
In opening letter of L/C the clients have to provide the full L/C amount in foreign exchange to the bank.
Demand loans mainly include Payment against Documents, Loan against imported merchandise (LIM)
and Letter of Trust Receipt.
Term Loan:
These are the advances made by the bank with a fixed repayment schedule. Terms loans mainly include:
Customer credit scheme, Lease finance, Hire purchase, and Stuff Loan. The term loans are
defined as follows:
Short term loan up to 12 months
Medium term loan: More than 12months & up to 36 months
Long term loan: More than 36 months.

Credit Management of MTBL


Short term Agriculture Loan and Micro Credit:
These loans are short term credits enlisted by Agriculture Credit division of Bangladesh Bank in its
annual loan program. Loans disbursed in agricultural sector for a period not more than 12 months are
also included in this category. Short term micro credits are the credits not exceeding BDT25000 taka only
and repayable wit in 12 months.
Application Based Category of Loans:
Based on the purpose of these loans, loans are classified as follows:
Corporate loan
Any loan exceeding 1, 00, 00,000 BDT and issued for business and trade purposes is defined as corporate
loan. Such loans mainly serve the purpose of initials for the establishment of industry or large scale
SME (Small & Medium Enterprise) Loan:
This type of loan is described for business purposes but the amount loaned does not exceed 1, 00,
00,000BDT. The amount loaned here serves the purpose of potential working capital for small and
medium enterprise.
Retail Loan:
Retail loans are given for personal usage rather than for business purposes. It includes personal loan,
Vacation loan and home loan.
MTB Personal Loan:
MTB Personal Loans are simple and quick.
Loan amounts from 50000 taka -1000000 taka
Flexible repayment option of 12-60 months
No hidden charges
Competitive interest rate.
Easy documents and quick processing
Option for early settlement
Age minimum 21 and maximum 60 years at loan maturity.
o Salaried person: 1 year with 6 months permanent status
o Self employed: 1 year of practice in the profession
Credit Management of MTBL


o Business person: 2 years of involvement in the same nature of business
Minimum monthly income:
o Salaried executive tk 15000
o Self employed tk 30000
o Business person tk 40000
MTB Auto Loan:
Own that car you have always desired, with our little help from us. We offer lucrative interest that would
pleasantly surprise you. MTB auto loans are built for utmost speed and competence. MTB auto loan is
available for financing both new and reconditioned cars. Your dream car is closer than you think.
Loan amounts from Tk 3,00,000 to Tk 20,00,000
Flexible repayment of 12-60 months
No hidden charges
Competitive interest rate
Easy documentation and quick processing
Option for early settlement.
Age minimum 21 and maximum 60 years at loan maturity.
o Salaried person: 2 years permanent status
o Self employed: 2 year of practice in the profession
o Business person: 2 years of involvement in the same nature of business
Minimum monthly income:
o Salaried executive tk 30000
o Self employed tk 30000
o Business person tk 30000
MTB Home Loan:
Planning to own a home is one of lifes most rewarding challenges. Whether it is purchasing a new house
or a new apartment, MTB has wide range of home loan options that can be customized to your satisfied
need. MTB Home loan helps you to fulfill your dream.

Credit Management of MTBL


Loan for residential apartment/ house purchase
Loan amounts from BDT 5,00,000 to BDT 1,00,00,000
Loan tenor from 3 to 25 years.
Partial or early settlement options available.
Loan amount up to 80% of the property value
Loan for apartment under construction
Aggregation of co-applicant's income
Competitive interest rates
Quick and simple processing and approval time
Any financially able person can take this loan whose age minimum 21 and maximum 65 years at loan
o Salaried person: 3 years permanent status
o Self employed: 3 year of practice in the profession
o Business person: 3 years of involvement in the same nature of business
Minimum monthly income:
o Salaried executive tk 25000
o Self employed tk 30000
o Business person tk 40000
Required documents:
Loan application
o Applicants national id card/driving license/passport copy
o Photographs of applicants
o Salary certificate for salaried person
o Trade license for business person
o Personal and business account statement for last one year
o Applicants TIN certificate
o Copies of all existing loans sanction letter and repayment history last one year
o Rental deed for rental income and ownership deed of rented property
o Apartment allotment letter/ deed of agreement/property ownership deed
o Other all property related documents copy.

Credit Management of MTBL


4.10 Rate of interest and lending:

Categories Rates
1 Agriculture 12.50% (Highest)
2 Term loan to large, medium, small & cottage industries 13.00% (Highest)
3 Working capital
Large and medium scale
Small scale

15.50% (Mid rate)
15.50% (Mid rate)
4 Export finance 7.00% (Highest)
5 Commercial lending 16.00% (Mid rate)
6 Import finance
Essential goods

15.50% (Mid rate)
12.00% (Highest)
7 Housing loan

16.00% (Mid rate)
14.00% (Mid rate)
8 Consumer credit 18.00% (Mid rate)
9 Lease finance 16.50% (Mid rate)
10 Loan to non-banking financial institutions 15.50% (Mid rate)
11 Loan/SOD against FDR of MTB 3.00% above FDR interest rate
12 SOD against FDR of other Banks 3.00% above FDR interest rate
13 Loan/SOD against other special deposit products of MTB 3.00% above Deposit product
interest rate
14 Auto Loan 16.50% (Mid rate)
15 Small business loan under SME 16.50% (Mid rate)
16 Others 16.50% (Mid rate)

4.11 The Cs of Good and Bad Loans in Credit Management
The branch manager of MTB try to judge the possible client based o some criteria. These criteria are
called the Cs of good and bad loans. These are
Credit Management of MTBL


Cash Flow
Credit Query
4.12 Different Types of Risks Associated With CM
LRA divides the credit risk into two categories, namely-
Business Risk
Industry Risk
Supply Risk
Sales Risk
Company Risk
Company Position Risk
Performance Risk
Resilience Risk
Management Risk
Management Competence Risk
Management Integrity Risk
Security Risk
Security Control Risk
Security Cover Risk
4.13 General procedure of sanctioning loan
The following procedure is applicable for giving advanced to the customer. These are-
Partys application
Filling form-A
Collecting CIB report from Bangladesh Bank
Processing loan proposal
Head office approval
Sanction letter
Project appraisal
4.14 Status of loans:
These are the loans which the bank satisfied about repayment. No doubt exists up till now about
their recovery.
Credit Management of MTBL


These are the loans which the bank finds overdue after the due date. The bank applies its
predefined policy and procedures, after a loan become classified.
Special mention account
When a loan installment is first missed by the borrower, the loan account is classified as a special
mention account (SMA). The tenure of special mention account varies with the category of
If a loan is not repaid or reschedule SMA period, it becomes sub-standard loan. From this stage
the loan is treated as defaulted. Interest is treated the same way as in SMA.
If a loan is not repaid or reschedule within the sub-standard period, it become a doubtful loan
interest will be treated as before in this stage.
Bad & Loss
If a loan is not repaid or reschedule within the doubtful stage, it is termed as Bad & Loss. A
serious doubt exists as to the recovery of such loans.

Credit Management of MTBL


4.14.1 Criteria for loan classification:

Demand loan Fixed term loan

Short term
agricultural and
micro credit

Irregular for 3
to 6 months
Irregular for
3 to 6 months
Irregular for 3
to 12 months

Sub-standard Irregular for 6
to 9 months

Irregular for
6 to 9 months

Irregular for 12
to 36 months


Irregular for 9
to 12 months

Irregular for
9 to 12

Irregular for 36
to 60 months

Bad & Loss Irregular for
more than 12

Irregular for
more than 12

Irregular for
more than 60

4.14.2 Interest and payment on classified loan:
a) Interest on loans classified as sub-standard and doubtful are charged on the account, but
instead of being credited to income account; it is called to income suspense account.
b) No Interest on loans classified as bad and loss will be charged on the account. However,
when suit will be filed to recover the loan, interest upon filing of such suit will be
charged on the account and suit will be filed on the outstanding amount including
interest. Such charged interest will also be credited to interest suspense account.
4.14.3 Maintenance of interest suspense account:
Though interest on loans classified as bad and loss may not be charged on the account, branches
should calculate interest on monthly to charge it to interest receivables on classified loans
account and credited to interest suspense account, but it is not entered into the Accounting books.
Amount wise record of such interest will be maintained and monthly proof will be prepared to
confirm it with the ledger balance.
4.14.4 Treatment of payment received in classified loan account:
Term loan for
within 5 years
Term loan for
more than 5

Irregular for
3 to 6 months
Irregular for 3
to 12 months
Irregular for
6 to 12
Irregular for
12 to 18
Irregular for
12 to 18
Irregular for
18 to 24
Irregular for
more than 24

Irregular for
more than 18

Credit Management of MTBL


Whenever, any payment is received in respect of any classified loan, the order of application
will be as follows:
a) To uncharged interest, if any
b) To interest charged but credited to interest suspense account and
c) To principal
However, if any partial payment is received on account of a classified loan account for
rescheduling, branches will keep the amount not yet paid in the accounts receivable classified
loan instead of applying the fund out right to adjustment as state above. For such adjustment,
branches should seek permissions from the head office and verify and report the necessary data
for the final decision of the head office.
4.15 Provisioning:
Provisioning is maintained at branch levels. This is followed in order to apply the matching
principle and expense & loss recognition principle that suggest the recording of a probable loss
account to be adjusted in the period it operates and is assumed to occur. For every provisioning,
each branch debits income account and credit provision against loans to better match expense
with revenue and show the effects by reducing income for any given period.
4.15.1 Rate of provision:
Provision will be provided against all types of loans including short term agricultural and micro
credit at the following rates:
Classification criteria Rates of
General provision on unclassified loans & advances 1%
General provision on unclassified small enterprise financing 2%
General provision on unclassified loans for housing finance & on loans for
General provision on unclassified consumer financing other than housing
finance & loans for professionals
General provision on special mention account 5%
Specific provision on sub-standard loans & advances 20%
Specific provision on doubtful loans & advances 50%
Specific provision on bad/loss loans & advances 100%

4.16 Credit Administration
Credit Management of MTBL


In MTB, proper credit disbursement functions are strictly handled by Credit Administration Department
(CAD). This department is critical in ensuring that proper documentation and approvals are in place in
respect of disbursement of credit facilities. CAD, in discharging its functions ensures that:
Credit approval has been obtained and it is documented
Security documents have been prepared in accordance with approved terms and those are legally
Limit creation has been done and loan documentation check list ( LDCL) has been completed
Legal counsel has certified perfection of documents( Where necessary)
Deferral in execution of certain documents has been allowed.
Disbursement approval has been given after ensuring that all standard charge of documents and
security documentation has been executed.
4.17 Credit Monitoring
The credit risk management process encompasses all the steps right from entertaining a client to getting
approval, documentation, disbursement, and follow up, supervision, monitoring and recovery. For
effective credit monitoring a fully dedicated credit monitoring cell is in place. Thorough credit monitoring
covering review of account performance, status, recovery of loans, and identification of early signals of
delinquencies are done. As an effective monitoring tool, carious statement on early alert accounts,
delinquent and special mention accounts are generated necessary corrective measures are taken.

Credit Management of MTBL



5.1 Analysis of Mutual Trust Bank Limited
Analysis is an important part of a report. Quantitative analysis has been done in this report. This analysis
will give an idea about the credit performance of Mutual Trust Bank Limited.
Quantitative Analysis
o Time Series Analysis
o Ratio Analysis
5.1 Performance of Loan & Cash Credits Overdraft of 2010 comparison with 2009
Particulars Year 2010 (TK) Year 2009 (TK)
Loans 21474615109 27049053467
Cash credit 9237081940 7260710590
Overdraft 6266431597 878897330
Loan against merchandise 23376991 31428435
Packing credit 192150005 295348211
Loan against trust receipts 8316923710 3217959571
Agriculture credit 3269130 5458859
Payment against document 921045616 857841094
Consumers loan scheme 360897222 2565715355
Lease finance 2478568846 2327900765
Margin finance 94176739 72,728571
Others 879890792 512936176
Total 53493427697 52984978424

Source: Annual Report 2011

Analysis: Here cash credit loan against trust receipt, payment against document, consumer loan scheme,
lease, finance, margin finance, was increasing by comparing with previous year, others are decreased.
Total amount of Loan increased by TK 508,449273 from the year of 2009.

Credit Management of MTBL


5.2 Performance of Industrial Advances of 2011 comparison with 2010
Industrial Advance Year2011(TK) Year2010 (TK)
Food 3 ,422,012,000 2 ,491,010,000
RMG & Textile 7 ,493,380,000 7 ,230,360,000
Jute, Cotton and Wearing Appearels 123,660,000 130,800,000
Leather and Leather Products 205,210,000 212,450,000
Paper, Paper Products & Printing 87,621,000 205,760,000
Pharmaceuticals 24,292,000 6 1,170,000
Plastic & Rubber 145,878,000 288,760,000
Petroleum & Edible Oil 1 ,243,350,000 694,480,000
Chemical & Chemical Products 1 ,440,390,000 839,520,000
Glass & Glass Products 208,320,000 5 0,180,000
Assembling Industries 82,860,000 765,060,000
Engineering, Metal & Metal Products 4 ,796,446,000 3 ,667,110,000
Non-metelic Mineral Products
Electricity & Gas Industry 1 ,177,375,000 468,940,000
Service Industries 2 ,047,120,000 126,650,000
Small Scale & Cottage Industries 614,750,000 264,120,000
Agriculture 624,070,000
17,813,807,763 6,387,690,000
41,550,541,763 24,152,390,000
Source: Annual Report-2011
Analysis: According to this chart, some of the sectors of industrial advances were increasing compare to
previous year. In industrial sector specially textile, jute, Agriculture, readymade garments are playing a
major role in our national economy. So, by increasing advance in this sector, Mutual Trust Bank Limited
performs well productive unit in our country which can help to increase the total GDP.
Total industrial advances increased by TK 17398151763 in the year of 2011 from the year of 2010.

Credit Management of MTBL


5.3 Sector wise Loan & Advance
A wide range of business industries and sectors constitutes the Banks advance portfolio. Major sectors
where the bank extended credit include steel & engineering, readymade garments, textile, ship braking,
edible oil, sugar, housing & construction, pharmaceutical, chemicals, electronic & automobiles, energy
& power, service industries, trade, finance, personal and consumer credit ,leasing etc The bank continued
to support small and medium enterprises (SME) and expended credit facilities to them through its SME
cell. Sectored allocation of advances reveals a well-diversified portfolio of the bank with balance
exposure in different sectors.
No Items 2011 2010 2009 2008 2007
Local Currency Advances
1 Term Loan 10,695.76 10,267.97 9369.57 6072.42 3660.65
2 SME Financing 2,941.89 2646.76 549.99 301.47 59.24
3 Consumer Financing 1,044.80 1378.09 1197.71 668.40 142.59
4 House Building Loan 1,148.90 1103.81 861.53 805.40 604.08
5 Trust Receipts 7,729.70 6127.68 6156.53 7610.92 6465.69
6 Cash Credit 6,876.36 5758.85 5427.70 4656.65 3749.20
7 Secured Overdraft 7,184.95 4774.98 5906.17 3624.78 2946.37
8 Lease Finance 364.54 196 254.55 257.25 251.07
9 Bill purchased & discounted
2,117.61 1777.65 2390.31 3027.34 2840.50
10 Loan to MTB securities Ltd 2656.83 - - -
11 Others Loans & Advances 1742.82 1735.82 1496.81 1962.69
Sub-total 38404.45 33849.88 28521.44 22682.06
Foreign Currency Advances 1271.67 34.04 7.90 1.17
Total 39676.12 33883.92 28529.34 22683.23
Source: Annual Report-2007-2011
From the chart Mutual Trust bank high concentration is in term loan which was increasing year by year.
In the year 2007 it was only 3660.65 million which was increased by 10,695.76 million in 2011. In trust
receipt it has been seen that the amount was increasing. Although trust receipt was in 2007 at 6465.69
million but it increasing at 7,729.70 million in year 2011. In the sector of cash credit the total amount was
increasing year by year. In 2007 cash credit was 3749.20 million which increased at 5758.85 million in
year 2010 and it stood at 6,876.36 million in year2011.The amount of secured overdraft was fluctuating
from year 2009 to 2011. Secured overdraft was high in 2009 at 5906.17 million and low in year 2007 at
2946.37 million. In SME financing, Mutual Trust Bank utilized huge amount in year 2011 at 2,941.89
million where it was 2646.76 million in year 2010, 549.99 million in years 2009, and 301.47 million in
years 2008. House building loan was increasing year by year. Bill purchased and discounted amount were
fluctuating. It was high in year 2011 at 2,117.61 million and low in year 2010 at 1777.65 million and high in
year 2009 at 2390.31 million. Loan to MTB securities Ltd. was 2656.83 million in year 2010 and it was
not perform in previous years.

Credit Management of MTBL


5.4 Time Series Analysis
5.4.1 Investment:
The total investment of the bank was growing year. In the year 2007, the total investment was 3956.53
million. It became 20148.71 million in the year of 2011.
Year Investment
2007 3956.53
2008 5606.49
2009 9537.97
2010 9216.33
2011 20148.71
Source: Annual Report 2007-2011

Figure 5 (a)-Year wise Investment of Mutual Trust Bank
Source: Annual Report 2007-2011
From the graphical representation it has been seen that, the total investment portfolio of the bank stood at
20148.71 million in December 31, 2011 as compared to previous years. Investment was 9216.33 million
in year 2010 where it was 3956.53 million 2007. The investment portfolio includes treasury bills, treasury
bonds, zero coupon bonds, shares of different companies, bonds, prize bonds etc.

2007 2008 2009 2010 2011
Credit Management of MTBL


5.4.2 Classification of Loan & Advances:
Loan status Amount
Standard 44,745.75 36,420.83 32324.15 26935.36 21669.40
Special Mention Account 1,064.63 405.66 607.01 191.14 472.19
Sub Standard 107.99 63.46 62.22 249.45 251.25
Doubtful 204.41 22.30 47.26 141.70 75.27
Bad or Loss 882.70 818.20 843.82 1011.70 215.12
Source: Annual; Report 2007 -2010

Figure: 5(b)-Classification of Loan and Advances of Mutual Trust Bank

From the graph it has been seen that the amount of standard loan as unclassified loan was increasing year
by year. In 2007 classification loan amount in standard level was 21669.40 million and in 2011 it stood at
44,745.75 million. Special mention accounts were fluctuating from year 2007 to year 2011. The amounts
of special mention account were high in year 2011 at 1,064.63 million. The amount of bad and loss is also
fluctuating, but the amount was very high in year 2008 at 1011.70 million and where it decreased at TK
882.70 million in the year 2011. The doubtful loan amount was increasing from previous years and this
amount was also very high in year 2011 at 204.41 million where it decreased in the year 2010 at 22.30 million.
The total amount of classified loan and advance was also increasing year by year which represent a better
performance for Mutual Trust Bank.
Standard Loan
2007 2008 2009 2010 2011
bad or loss
Credit Management of MTBL


5.4.3 Interest income on loan and advance
Year Interest Income (in millions)
2007 2611.64
2008 3437.32
2009 4117.68
2010 4141.44
2011 5788.74
Source: Annual Report 2007-2010

Figure: 5(c) - Interest Income on Loan and advance of Mutual Trust Bank
From the graph it has been seen that the interest income from loan and advances of Mutual Trust Bank
Limited was increasing year by year. A banks large portion of profit comes from its interest income so
Mutual Trust Bank became more profitable from its interest income. In the year 2007 the interest income
was 2611.64 million where it increased at 3437.32 million in year 2008 and it stood at 5788.74 million in
year 2011.

4117.68 4141.44
2007 2008 2009 2010 2011
Interest Income
Credit Management of MTBL


5.4.4 Geographical Location wise Loans and Advances:
In year 2010-2011
Region Loan and Advances (2011) Loan and Advances(2010)
Dhaka 31838.86 27518.20
Chittagong 10345.26 8271.16
Rajshahi 570.24 1241.86
Sylhet 457.53 416.60
Khulna 742.70 495.66
Rangpur 182.51 134.90
Barisal - -

Region Loan and Advances (2011) Loan and Advances(2010)
Dhaka 1622.88 1290.64
Chittagong 790.12 762.49
Rajshahi 409.65 352.63
Sylhet .18 -
Khulna - -
Rangpur - -
Barisal 45.54 39.68
Source-Annual Report -2011

Credit Management of MTBL


Figure 5(d) - Geographical location wise loan and Advances of Mutual Trust bank Limited

From the graph it has been seen that the Mutual Trust bank provides most of the portion of loan and
advances in urban area, where as they provide a little portion in rural area. As we seen before that this
bank provide more loan and advances in other industries than agricultural industries. Because of this their
contribution to urban area is more than rural area. But it also increased its loan & advances in rural area
from previous year.

Credit Management of MTBL


5.4.5 Deposit Analysis
Year Deposit (In millions)
2007 24777
2008 33820
2009 42354
2010 45846
2011 59705
Source: Annual Report 2007-2011

Figure: 5(e)-Year wise deposit of Mutual Trust Bank
The deposit base of Mutual Trust Bank continued to register a steady growth and stood at BDT 59705
million excluding call as of 31 December 2011 compared to BDT 45846 million of the previous year. It
was BDT 24,777 million in year 2007 and BDT 33820 million in year 2008. If deposit increase than the
bank can use more proportion of deposit for loans and advances.

2007 2008 2009 2010 2011
Credit Management of MTBL


5.4.6 Total classified Loan and Recovery Rate of Year 2007 to 2011 TK in Million
Year Total Loan Total Classified
Rate of Classified
Recovery Rate of
Classified Loan
2007 22683.23 541.64 2.39% 71.24%
2008 28529.35 1403.64 4.92% 66.25%
2009 33883.92 952.14 2.81% 76.54%
2010 39676.12 904.61 2.28% 82.15%
2011 47,005.48 1,195.10 2.54%
Source: Annual Report 2007-2011

Figure: 5(f)-Year wise Recovery rate of Mutual Trust Bank
From the graph it has been seen that in 2007 the recovery rate of Mutual Trust Bank from classified loan
was 71.24%, 66.25% in 2008, 76.54% in 2009 and 82.15% in 2010. In 2011 the recovery rate of Mutual
Trust Bank from classified loan was .In year 2008 the bank couldnt achieve a satisfactory level
because a large portion of loan became default. Overall performance was good because it could increase
its recovery rate from classified loan.

2007 2008 2009 2010 2011
Recovery Rate of
Classified Loan
Credit Management of MTBL


5.4.7 Non Performing Loan Analysis
Year Non Performing Loan
2007 3.28%
2008 3.54%
2009 2.81%
2010 2.28%
2011 2.54%
Source: Annual Report 2007-2011

Figure: 5(g) - Year wise non performing loan of Mutual Trust Bank
From the graph, non performing loan of MTB was fluctuating every year. In 2009 non performing loan
was 2.81% and in 2010 it decreased 2.28%. In 2011 MTBs non-performing loan was increased in 2.54%.
But in 2008 MTB couldnt perform well as its non performing loan percentage was high at 3.54%
compared to year 2007 at 3.28% because a huge amount of classified loan was became bad and loss.

2007 2008 2009 2010 2011
Non Performing Loan
Credit Management of MTBL


5.5 Ratio Analysis
Ratio analysis involves methods of calculating & interpreting financial ratios to analyze & monitor the
firms performance. The basic inputs to ratio analysis are the firms income statement & balance sheet.
Debt Ratio
Debt ratio=Total Liabilities/ Total Assets. (In millions)
Year Total Liability Total Asset Debt Ratio
2007 30137599048 32181896220 94%
2008 36481879425 38964974123 93.6%
2009 49090256956 52774766068 93%
2010 42312051318 56457442436 92.65%
2011 71516395979 76331366189 93.69%

Source: Annual Report 2007-2011

Figure: 5(h) - Debt Ratio

Interpretation: Debt Ratio indicates the proportion of debt or leverage in total capital structure. The
higher this ratio the greater the amount of other peoples money being used to generate profits. In the
above graph in year 2007 the ratio was 94%, in year 2008 it decreased at 93.60% and year 2009 it was
93% and in year 2010 it was also decreased at 92.65%. In 2011 the debt ratio was 93.69%.
2007 2008 2009 2010 2011
Debt Ratio
Credit Management of MTBL


Capital Adequacy Ratio
Capital Adequacy ratio= Total Capital/ Risk
Year C.A Ratio
2007 10.19%
2008 10.39%
2009 9.20%
2010 11.49%
Source: Annual Report 2007-2011

Figure: 5(I) - Capital Adequacy Ratio
Capital adequacy ratio determines the capacity of the bank in terms of meeting the liabilities and other
risk such as credit risk, operational risk etc. Generally 8% is acceptable line for this ratio, in that sense
bank is good enough, because in every year this ratio is more than standard line and this is good sign for
the bank. The year 2007, capital adequacy ratio was 10.19%. The percentage decreased at 9.20% in year
2009 but bank could increase this ratio at 11.96% in year 2011.

2007 2008 2009 2010 2011
C.A Ratio
Credit Management of MTBL


Credit/ deposit ratio
Credit/deposit ratio= Credit/ Deposit
Year Credit/Deposit Ratio
2007 91.55%
2008 84.36%
2009 80.00%
2010 86.54%
2011 79.60%
Source: Annual Report 2007 2011

Figure: 5(g) - Credit/Deposit Ratio
Credit deposit ratio measures the portion of deposit used for credit. The more the ratio the more the bank
is using deposit as its credit. In the year 2007, MTB credit deposit ratio was 91.55%, but in year 2009 it
was decreased at 80%. The credit ratio increased in 2010. But in 2011 it was also decreased at 79.60%. It
has been seen that MTB increased to use its deposits as its credit.

2007 2008 2009 2010 2011
Credit/Deposit Ratio
Credit Management of MTBL


Investment/Deposit Ratio
Investment/ Deposit Ratio= Total Investment/Total Deposit
Year Investment/Deposit Ratio
2007 15.97%
2008 16.58%
2009 22.52%
2010 20.10%
2011 33.80%
Source: Annual Report 2007-2011

Figure: 5(k) - Investment/ Deposit Ratio
Investment deposit ratio measures the portion of deposit used for investment. The more the ratio the more
the bank is using its deposit as its investment. From the above graph it is seen that the investment deposit
ratio of MTB was increasing year by year, this is a good sign for the bank. Here this ratio was quite
decreasing in year 2010 because here investment was quite decreases from previous year. In 2011 the
Investment deposit ratio was increasing faster than previous year at 33.80%. This is also good sign for

2007 2008 2009 2010 2011
Investment/Deposit Ratio
Credit Management of MTBL


6.1 Major Findings:
The total investment of the bank was growing year by year.
The standard loan & advances of MTB was increasing year by year and it carries positive sign for
The interest income from loan and advances of MTB was increasing year by year.
From the last 2 years analysis it has been seen that MTB was providing more credit facilities in
urban areas more than rural areas.
Total deposit was increasing which represent the positive sign for MTB as deposits are increasing
than bank can use more proportion of deposit for loan & advances.
The recovery rate of MTB has increased year by year.
Debt ratio of MTB was decreasing year by year.
Day by day non performing loan of MTB was decreasing.
Capital adequacy ratio was above the standard line.
Higher rate if interest pays a great role in credit management. Some times the rate is so high that
the return from the investment is not so adequate enough to repay the loan and hence default
MTB is providing loan to those who are experienced enough in their respective field.
MTB has written lending guideline which includes Industry & Business Segments Focus, Types
of loans facilities, Single Borrower & group limit, Lending caps, Loan Facility Parameters.

Credit Management of MTBL


6.3 Conclusion:
Proper financial system of country can contribute toward the development of the countrys economy. In
our country banks are leading in the financial system. Again private commercial banks, which are much
better than state owned bank, are playing significant as well as imperative role and the development of
our country. Certainly MTB is mobilizing its all resources on this same track to achieve maximum
possible contribution to the nation.
Despite stiff competition among banks operating in Bangladesh both foreign and local, MTB has
achieved satisfactory progress in areas of its operations and earned an impressive operating income over
the previous years. The bank hopes to achieve a satisfactory level of progress in all areas of its operations
including target of profitability.
In achieving the aforesaid objectives of the bank, credit operation its of paramount importance as the
greatest share of total revenue of the bank is generated from it, maximum risk is created in it and even the
very existence of bank depends on product management of its credit portfolio.
From my part, I would like to suggest, a bank requires some special personal traits that not every bank
possesses. Among the most important of these are honestly, reliability, thoroughness and willingness to
always be open to new ideas and new ways of meeting customer needs.
Today is not like yesterday or tomorrow will be different from today. Given the fast changing dynamic
global economy and the increasing pressure of globalization, liberalization, consolidation and
disintermediation, it is essential that MTB has a robust credit risk management policies and procedures
that are sensitive of these changes.

Credit Management of MTBL


6.2 Recommendation
MTB was focusing urban areas to provide facilities. Still they are ignoring rural areas. But they
can earn from agro sector so MTB should provide more credit facilities in rural areas.
Proper and effective monitoring system should be developed in order to minimize the amount of
nonperforming loan.
Capital adequacy is important for a financial institution. MTB capital adequacy ratio was in better
position and they should maintain it.
The bank should strictly follow the principle of Sound Lending. The bank should not sanction
loan to the customer without all necessary documents.
As we have seen that the bank was providing a large portion of concentration in unproductive
sector, which is not a good sign for our economy. So the bank should pay more concentration on
productive sectors like industrial loan instead of unproductive sector as car loan.
As recovery rate from classified loan was in satisfactory level but still 18% of loan goes default.
So MTB should have to increase more of its recovery rate of classified loan.
MTB should strictly follow Bangladesh Bank guideline for credit deposit ratio as its credit
deposit ratio was quite higher than Bangladesh Bank.
The bank should increase more of its investment to deposit ratio as it decreased in year 2011. It
should increase in order to generate more profit.
MTB should maintain a satisfactory level of investment rate for managing the credit to minimize
the rate of default.

Credit Management of MTBL


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