1

Internship report
On

General Banking of

Mercantile Bank Limited

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Internship report
On

General Banking of
Mercantile Bank Limited

SUBMITTED TO

MD. Farhan Faruqui

Assistant Professor
East West University

SUBMITTED BY
Towsif Noor Jamee

ID: 2011-2-10-171

Submission Date: 24th April, 2016

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Declaration

I hereby declare that the Internship work entitled General Banking of Mercantile Bank Limited
submitted to the East West University is a record of an original work done by me under the
guidance of MD. Farhan Faruqui, Assistant Professor, East West University. I further declare that
this Internship work is submitted in the partial fulfillment of the requirements for the award of the
degree of Bachelor of Business Administration. The results embodied in this Report have not been
submitted to any other University or Institute for the award of any degree or diploma or such other
titles.

-----------------------------------

Towsif Noor Jamee

ID: 2011-2-10-171
East West University
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Letter of Transmittal

Date: 22.04.2016
MD. Farhan Faruqui
Assistant Professor
East West University
Subject: Submit the Internship report on General Banking of Mercantile Bank Limited
Dear Sir,

It is a great pleasure and privilege to present the internship report titled General Banking of
Mercantile Bank Limited. which was assigned to me as a partial requirement for the competition
of BBA Program.

Throughout the study I tried with the best of my capacity to accommodate as much information
and relevant issues as possible and tried to follow the instructions as you have suggested. I tried
my best to make this report as much informative as possible. I sincerely believe that it will satisfy
your requirements. I however sincerely believe that this report will serve the purpose of my
internship program.

I, therefore, pray and hope that you would kindly accept my report and oblige thereby. With thanks
and best regards.

Sincerely yours,

..
Towsif Noor Jamee
ID: 2011-2-10-171
East West University
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Acknowledgement

For the very first of all I would like to express my gratefulness and harmony to the Allah, the
supreme authority of the Universe, without whom we would be nothing.

Then of all I would like to thank my supervisor MD Farhan Faruqui without whose help,
suggestion and co-operation the total report will be valueless.
I would also like to express my heartiest gratitude to the Head of Branch & Vice-President Md.
Ata Rabbani Khan of MBL, Narayanganj BB road Branch, for giving me the opportunity to
complete my internship program in his bank. I am also grateful to the Manager of Operation &
First Asst. Vice President Md. Sayeduzzaman of this branch for his constant help and support
during my working period at Mercantile Bank Ltd.

I would like to express my gratitude to the Principal Officer Naznin Sultana and MTO Tahsina
Meher and Sales executive MR. Dipanker Sarkar for their full support to know about
General Banking of Mercantile Bank Limited.

I have got tremendous help from them. They always provided me the required materials and helped
me to clarify the banking activities. This report will give me practical knowledge about the banking
activities.

Finally, I would like to thank all officials of MBL, Narayanganj BB road Branch for their co-
operation, support and love. This is really a nice superior working environment. I do not ever forget
this organization.

I would like to thank from the deep of my heart to those people who are related with making of
this report and make it a success.

At last but not the least, the East West University for giving me an opportunity to complete my
BBA degree and give me a scope to gather practical experience and enrich my knowledge.
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Executive Summary

The Internship report has been prepared on General Banking of Mercantile Bank Ltd based
on practical and secondary data and information. The information used in the report has collected
from various sources such as published materials like annual report.

I have prepared this report to represent the available product & service facilities, service quality,
their strength & weakness, their efficiency to serve customer, terms and conditions etc.
Mercantile Bank always tries to launch new products and services according to customers test and
preference. MBL also has the trend to change the old scheme and try to serve with modern
technology. MBL works with the aim to achieve service excellence and maximize shareholders
value.
Foreign Exchange Department (FED) is the international department of Bangladesh Bank issues
license to scheduled banks to deal with foreign exchange. These banks are known as Authorized
Dealers. If the branch is authorized in foreign exchange market, it can remit foreign exchange from
local country to foreign countries. So Mercantile Bank, Narayanganj Branch is an authorized
dealer.

The overall performance of MBL is good. The environment, staff behavior & attention towards
the customer are also good. MBL always works with latest technology & it has the reputation of
being the provider of good quality services. Their special banking services like SMS Banking,
Online Banking etc are very effective to create customer satisfaction .
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1.1. Origin of the report

This report has been prepared as a practical requirement of BBA Program after completing the
academic courses a student has to complete a 3-month organizational attachment. So, after
completion of 3-month organizational attachment at Mercantile Bank Limited (Narayanganj BB
road Branch), this report has been prepared.

This report on General Banking of Mercantile Bank Ltd was initiated as a part of Internship
Program, which is a BBA degree requirement of the East West University. This report is being
submitted To MD. Farhan Faruqui, Assistant Professor, Department of Business Administration,
East West University Bangladesh.

1.2. Background of the Report:

Banking in Bangladesh has passed through an era of unprecedented all round growth since the
nationalization of commercial banks aftermath our independence. The branch network has
widened and functional dimensions broadened. Loan activities in the banks now-a-days have
assumed new dimensions and this requires up to date knowledge and skill on the part of the bank
managers and those in the field of banking profession about the state of art of lending wisely.
Extending credit always bears the risk of being defaulted. So policy of credit expansion and credit
management style has inherent importance to the bankers. And the recent wary about the classified
loan hints the importance of studying the credit management of the private commercial banks.
Since the MBL is enjoying the lowest rate of classified loan among the commercial banks
operating in the country.

1.3. Objective of the Report:

This paper is prepared with a view to highlight my two months period banking experience through
the analysis of products and services available at Mercantile Bank . The objectives of this report
are:
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To get an overall idea about Mercantile Bank.

To show available product and services.
To analysis the unique features of MBL.
To identify the strength, weakness, opportunity and threats for MBL.
To determine the various service dimensions and facilities that customers demand
To know Banks current level of online quality and standards.
To suggest ways of improving the service quality that accommodates a rapidly growing
customer volume.

1.4. Methodology:

1.4.1. Methodology of the study

Approach:

My study will be based on both primary as well as secondary information.

Primary source:

The method of collecting primary data will be mostly limited to formal and informal interviewing.
I hava worked to general banking division for two months it is the primary source.

Secondary source:

As for collecting secondary information. I will review any and all related publication available to
me such as Banks annual report, brochures etc. Moreover. I will also use the internet to visit banks
global website and other related web pages for any information related to my study.

1.4.2. Scope of the report

I have worked as an internee in Mercantile Bank (Narayanganj BB road Branch), which is one of
the most successful banks in our country. When I was there I worked in different sections of this
Bank. These were Account opening section, Collection & Clearing section, Cash section and
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accounts section. The main scope of this study is the findings regarding MBLs products & services
availability & techniques. Many aspects of the operation & product diversification along with the
production technology of MBL could be adopted by our planners to design our banking sector into
a real effective one. This report may act like a guide in revealing some of the important aspects of
MBL. This report tend to determine the customer satisfaction.

1.5. Limitation of the report

Limitation of time was one of the most important factors that shortened the present study.
Due to time limitation many aspects could not by discussed in the present study.

Availability of critical information is crucial to my analysis. Some of the information can

be deemed too confidential by the management, especially the ones regarding corporate
strategies, information on matrix system or credit scoring method and strategies they follow
to hold its competitiveness in the market. Hence, access to that information will be
restricted, which may limit the scope of my analysis.

As I had more dependencies on the primary sources, so there might be some level of inaccuracy
with those collected information.
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1.6. INTRODUCTION

Mercantile Bank is a well known Bank in our country. It has gained firm confidence in the minds
of its clients within a short period of its operation. The success is primarily attributed to prompt
and bold decision-making, efficient and cordial services, economic use of resources and
introduction of new financial products and technologies .The continued endeavors of the
Management and Staff of the Bank under prudent guidance and timely support of the Board of
Directors have substantially contributed to success of the Bank.

Mercantile Bank Limited was incorporated in Bangladesh as a Public Limited Company with
limited liability under the Bank Companies Act 1991on 20 May 1999 and commercial operation
on June 1999. The Bank went for public issue of shares on in 2003 and its shares are listed with
Dhaka Stock Exchange and Chittagong Stock Exchange.

During this short span of time the MBL has been successful to position itself as a progressive and
dynamic financial institution in the country. The MBL has been widely acclaimed by the business
community, from small entrepreneurs to large traders and industrial conglomerates, including the
top rated corporate borrowers for forwarding-looking business outlook and innovative financing
solutions. Thus within this very short period of time it has been able to create an image for itself
and has earned significant reputation in the countrys Banking Sector as a bank with vision.
Presently it has 109(One hundred and nine) branches in operation. Recently Small and Medium
Enterprise (SME) Financing Scheme has been introduced to assist new and experienced
entrepreneurs to invest in small and medium scale industries. In 2016 MBL is planning to open 16
new branches.
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MBL Timeline
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General Banking Department

Account Opening Section.

Types of Accounts with terms and condition.
Common Formalities Required for every account
Documents Required for each account separately
Issuing cheque Book
Account enquiry
Transfer of an account
Closing of an account
Deposit Scheme
Pay order
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General Banking Department performs the core functions of the bank. It deals day to day
transactions. It takes the deposit from the customer and meets the customer demands for cash by
honoring their checks. Broadly, it has the following core heads-

1. Accounts Opening Section

2. Local Remittance Section
3. Cash Section
4. Collection And Clearing

2.1. Account opening section

Banker-customer relationship begins with the opening of an account by the customer. Opening
of an account binds the same into a contractual relationship. But the selection of customer is
very crucial. In fact, fraud and forgery of all kinds start by opening of an account by the
customer (s). So, the bank takes extra care in its selection. One of the basic functions of
commercial banks is to accept deposits. For accepting deposits both demand and time,
Mercantile Bank Narayanganj branch offers the following types of accounts-

A. Demand deposits (Withdrawal on demand)

1. Saving Bank Account

2. Current Account

B. Time Deposits (Payable at a fixed date or after a period of notice)

FDR
Double Benefit Deposit Scheme
Super Benefit Deposit Scheme
Monthly Savings Scheme
Special Notice Deposit
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2.1.1. Types of Accounts with terms and conditions

Savings Bank Account

This deposit is primarily for small-scale savers. Hence, there is a restriction on withdrawals in a
week. Heavy withdrawals are permitted only against prior notice. Some Important Points are as
follows-

1. Minimum opening deposit of Tk.500/= is required;

2. Check book issuing balance is also the same (Tk. 500/=);
3. Interest rate is 3.5%. Interest paid twice in a year depending on monthly minimum balance.
4. Can open the A/c individually or jointly. In case of joint a/c, Joint signature is required if
not authorized otherwise.
5. Minor (For withdrawal purpose), lunatic, insolvent, pardanshin women (Not mandatory)
can not open such type of account.
6. Recent 3-copy passport size photographs of the A/C. holder duly attested by the Introducer.
7. Recent 1-copy passport size photographs of the Nominee duly attested by the A/C.
holder(s).
8. Passport / Driving License / Voter ID / Chairman Certificate.

Current Account

Current account is purely a demand deposit account. There is no restriction on withdrawing money
from the account. It is basically justified when funds are to be collected and money is to be paid at
frequent interval. It is most suitable for private individuals, traders, merchants, importers and
exporters, mill and factory owners, limited companys etc. Some Important Points are as follows-

1. Minimum opening deposit of TK.1000/- is required;

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2. There is no withdrawal limit. But in case of large amount say 10 lac or more, bank requires
one day before notice;
3. No interest is given upon the deposited money;
4. The primary objective of such account is to save big customers like businessmen, join stock
companies, public authorities, etc. from the risk of handling a lot of cash.
5. The cost of providing current account facilities is considerable to the Bank as they make
payments and collect the bills, drafts, and checks for any number of times daily. The Bank
is, therefore, do not pay interest on current deposits. At the same time, Prime bank charges
Tk. 200 as Incidental fee;
6. Minimum Tk. 1000 balance must always maintain all the time;
7. Minor can not open such type of account;
8. Account holder can enjoy SOD or even TOD facility.

2.1.2. Common formalities required for every account

Duly filled up Account Opening Form.

Introducers signature on Account Opening Form to be verified by Manager under full
signature.
Three copies of passport size photograph of account opener(s) duly attested by the
introducer.
Note: Mandate or authority form filled up by an individual (s) or account openers are to be
obtained if the customer wants to authorize another person to operate an account on behalf of him/
them.
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2.1.3. Documents required for each account separately (CD)

In case of Proprietorship Firm-

Declaration of proprietorship.
Trade licence.
Tax Identification No (TIN) directed by Bangladesh Bank.

In case of Partnership Firm-

Account must be opened in the name of the firm.

The firm should describe the names and addresses of all partners.
Board Resolution signed by all partners to open the A/C.
Photocopy of partnership deed duly attested by notary public.
Letter of partnership duly signed by all partners.
Trade licence from municipality.
Tax Identification No (TIN) directed by Bangladesh Bank.

In case of Private Limited Join Stock Company-

Memorandum of Association and Articles of Association duly certified by Chairman or

Secretary.
Board Resolution duly certified by Chairman/ Secretary authorizing to open the A/C
with the bank and mentioning the name of the person (s) who will operate the A/C as
per provisions of Articles of Association.
Certificate of incorporation duly certified by Chairman or Secretary.
List of all Directors with Designation, Address & Specimen Signature duly certified by
Chairman or Secretary (Form XII).
Latest copy of Balance Sheet
Power of attorney.
Tax Identification No (TIN) directed by Bangladesh Bank.
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In case of Minors account-

Putting the word MINOR after the title of the account.

Recording special instruction of operation of the account.
The account opening form is to be filled in and signed by either of the parents or the
legal guardian appointed by the Court of Law & not by the Minor.

2.1.4. Issuing cheque book

For New and Old Account

Fresh checkbook is issued to the account holder only against requisition on the prescribed
application form. In case of old account, requisition made on the prescribed requisition slip
attached with the checkbook issued earlier. Generate a security no randomly for every check leaf
by Manager or authorized person. Prepare the instrument with respective security no on the back
of each leaf and signed by the authorized person. Make necessary entries in Check Issue Register.
Finally issue the checkbook for client (s).

2.1.5. Account Enquiry

A customer can obtain the statement of his A/C by submission of an application in prescribed
balance enquiry receipt. Normally it is supplied one time in a year. In addition, customer can know
his current deposit position informally with thirty taka fee.

2. 1. 6. Transfer of an Account
Account holder may transfer his account from one branch to another. For this, he/she must
apply with proper reason to the manager of the branch where he is maintaining account.
Manager then requests to the manager of that branch where the A/C holder wants to transfer
his account. Besides, he also sends original copy of account opening form and SSC (Specimen
 19

Signature Card) and photocopy of application for transferring the account with the balance
remained in the account.

2.1.7. Closing of an account

An account may close-

When the customer desirous to close the account.

When the account is inoperative for a long time.
In case of customers death, insanity or insolvency.
When the court on that particular A/C issues Garnishee Order.
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Deposit Scheme

Bank is the largest mobilizer of surplus domestic savings. For poverty alleviation, we need
self-employment, for self-employment we need investment and for investment we need savings.
In the other words, savings help capital formations and the capital formations help investments in
the country. The investment in its turn helps industrialization leading towards creation of wealth
of the country. And the wealth finally takes the country on road to progress and prosperity. As
such, savings is considered the very basis of prosperity of the country. The more the growth of
savings, the more will be the prosperity of the nation.

The savings rate in Bangladesh is one of the lowest in the world. In order to improve the
savings rate, Financial Institutions responsible for mobilization of savings should offer attractive
Savings Schemes so that the marginal propensity to save increases. The savings do not, of course,
depend only on the quantum of income but largely depend on the habit of savings of the people.

The salient features of the Scheme are given below:

1. Minimum size of monthly installment shall be Tk. 500/- minimum.

2. At present Income Tax on interest will not be applicable but in future for any change in
Govt. rule of taxation, the Bank reserve the right to deduct Income Tax.
3. The depositor will have the option to choose any installment size at the time of opening
of an Account and will not be allowed to change the size of installment afterwards.

4. Account in the name of minors can be opened too under the Scheme.

5. A person can open more than one account for different size of installments at any branch
of the Bank.

6. The Deposit shall be for a period of 10years maximum.

7. Normally no withdrawal shall be allowed before maturity. But, if any depositor intends
to withdraw his/her savings due to certain unavoidable reasons before 5 years, he/she will
be allowed to do so, in the following manner:
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a. No benefit or interest shall be allowed for pre-mature encashment within one year.

b. If the account is closed after one year of its opening, interest shall be allowed on the deposit
at prevailing Savings Deposit rate.

8. The monthly installment shall be payable by the10th day (in case of holiday the next
working day) of every month. Advance payment of any number of installments is
acceptable.
9. Loan may be allowed up to 80% of the deposited amount against lien.
10. When a depositor fails to deposit any installment, he/she will have to pay a fine @5% of
the overdue amount payable at the time of depositing the next installment.
11. In case of death of a depositor, the account will cease to be operative and the amount
deposited so far shall be paid to the nominee, and in absence of nominee, to the legal heirs
of the deceased as per rules in force.

12. The Bank at its discretion may allow inter branch transfer of the A/C under the Scheme.

Double Benefit Deposit Scheme

Objectives

Give maximum benefit.

Help in meeting specific needs like education, marriage etc.

Deposit becomes double in 10 Years.

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Mode

Tenure of the deposit is 10 Years.

Rates

Tenure Effective Interest Rate

10 8.50%

Other Features

The Minimum amount of deposit is BDT 10,000.00(Ten Thousand) or its multiples.

All taxes/duty/levy and /or any other surcharges presently in force or that may be imposed by the
Government of Bangladesh (GOB) from time to time will be deducted/ recovered from the deposit
account under this scheme.

In case of premature encashment interest will be paid on Saving A/C Rate.

Loan may be granted up to maximum 80% of the deposited amount but minimum principle amount
must be BDT 20,000.00.

Loan processing fee be realized BDT 50.00 only and usual stamp costs also be realized.
 23

Monthly Saving Scheme

Objectives

Build up habit of savings.

Attract small savers.

Saving for rainy days.

Mode

Monthly installement sizes are 250, 500, 1000, 1500, 2500, 5000 and in multiples of 5000 up to BDT
25000.
Interest rate is 3.5%.

Other Features
All taxes/duty/levy and /or any other surcharges presently in force or that may be imposed by the
Government of Bangladesh (GOB) from time to time will be deducted/ recovered from the deposit
account under this scheme.

In case of pre-mature encashment before 05 years, interest will be paid on Savings Account Rate. But
in case of early encashment before 08 or 10 years the depositor will get full benefit up to previous slab
and Savings Account Rate for each subsequent year; no interest will be paid for fraction year.

Upon deposit of installment for at least 01 year (minimum deposit amount must be BDT 12,000.00)
under this scheme, loan may be granted up to maximum 82% of the deposited amount.

FDR Account:
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Loan processing fee be realized BDT 50.00 only and stamp costs also be realized.

Fixed deposits are time deposits or time liabilities. These are the deposits in which an amount of
cash is deposited in Bank for a fixed period specified in advance. Before opening a Fixed Deposit
Account a customer has to fill up an application form, which contains the followings-

Amount in figures
Beneficiarys name and address
Time period
Rate of Interest
Date of Issue
Date of maturity
How the account will be operated ( singly or jointly)
Signature (s)
F.D.R. no.
Special instructions (if any)

After fulfilling the above information and depositing the amount, FDR account is opened and a
FDR receipt is issued and it is recorded in the FDR Register, which contains the following
information-

FDR account no.

FDR (Fixed Deposit Receipt) no.
Name of the FDR holder with address
Maturity period
Maturity date
Interest Rate
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In case of FDR Account, the bank does not have to maintain a cash reserve. So, Mercantile
bank offers a high interest rate in these accounts.

a) For 3 months & above @ 5.00 %

b) For 6 months & above @ 5.00%
c) For 12 months & above @ 5.25 %

In case of encashment of FDR [say for Tk X] on maturity, following accounting treatments are
given-

Interest on FDR A/C -------------------------------Cr. [say Tk. P]

Excise Duty on FDR -------------------------------Dr [say Tk. Q]

10 % Income Tax on interest --------------------- Dr. [say Tk. R]

FDR A/C ---------------------------------------------Dr. [Tk. (X+P-Q-R)]

Cash A/C ---------------------------------------------Cr. [Tk. (X+P-Q-R)]

If the customer wants to draw the interest only, then the following entries are given

Interest on FDR A/C --------------------------------Dr.

Cash A/C ---------------------------------------------Cr.

Renewal of FDR:

Customer supposes to inform the bank in writing 15 days before the maturity date for
encashment. If not, bank normally renews the amount just after the maturity date. Renewal will
be for previously agreed maturity period.

Loss of FDR:

If the instrument is lost from the possession of the holder, the holder is asked to fulfill the
following requirements-
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a) Holder should inform the bank immediately

b) Record a GD (General Diary) in the nearest Police Station.
c) Furnish an Indemnity Bond
On fulfilling the above requirements, Mercantile bank is then issued a duplicate FDR.

Period Pre-mature Interest Rate

Encashment
Before 30 days No Interest

01 3 months Every completed SB (Savings Bank) Rate

calendar months
Before 3 months
02 6 months Before maturity but
completes 3 months
Before 3 months
Before expiry of 6
12 months
03
months After expiry of 6
months but before
maturity
SB Rate
Interest payable at 3 months
Rate for a period of 3 months
SB Rate
Interest payable at 3 months
rate for a period of 3 months
Interest payable at 6 months
rate for a period of 6 months

Pre-mature Encashment of FDR

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Super Benefit Deposit Scheme (SBDS)

This scheme has been formulated with a view to gain an upper hand in the market in terms of
Deposit collection. Features of this scheme are enumerated below:

Features and Terms of the scheme:

Minimum Deposit amount would be BDT 170,000.00 (One Lac Seventy Thousand) or
multiples thereof.

The tenor of the scheme would be one (1) year and renewable at mutually agreed rate.

Customer will not be entitled to any interest in case of pre-mature encashment i.e. all benefits
given will be deducted from principal.

Benefits can be drawn monthly / quarterly / half yearly or at maturity.

Benefits will be transferred to the SB/CD or any other account where the benefit(s) will be
transferred.

Schemeholder is entitled to benefit from the next month of account opening.

A separate prefix number (provider by our IT division) should be used for this scheme.

A sheet containing form and duly signed by the customer.

Standard procedure of account opening must be followed.

Schemeholder will be given a Deposit Receipt after account opening and is non-transferrable.
 28

Pay order (PO)

Pay order is an instrument, used to remit fund within a clearing zone. Unlike cheque, there is no
possibility of dishonoring PO. The PO can only be encased through the branch that has issued the
instrument.

Pay Order Issuing Process

For issuing a PO, following formalities are to be maintained. These are-
Duly filled up the application form by the customer.
Deposit money either in cash or by cheque with necessary charges.
Prepare the instrument and make necessary entries in the Bills Payable Register where
payees name, date, PO no. etc are noted.
Deliver the instrument to the customer after scrutinized and approved by authority by
taking signature of the customer on the counterpart.

Purchaser has an account with

Mercantile and fills up the relevant Purchase the PO in favor of a person
form with a credit voucher or company

If any A/C with Prime Deposit the PO in his account with

Collecting Bank Mercantile or another Bank by the
sends an IBDA beneficiary

If deposited to another bank

Payees account credited with
collecting Banker
The collecting Banker presents the PO to paying
Banker through clearing house

Payees account credited with collecting Banker

Chart : PO Working Procedure.

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COLLECTION AND CLEARING SECTION

Collection and Clearing section

Collection
Receiving cheques for collection.
Clearing
Types of cheques for clearing
 30

3.1Collections and clearing section

3. 1. 1. Collection
In modern banking the mechanism has become complex as far as smooth transaction and safety
is concerned. Customer does pay and receive bill from their counterpart as a result of
transaction. Commercial banks duty is to collect bills on behalf of their customer.

Received seal is stamped on the counterfoil of the pay-in-slip.

Special Crossing in favor of cheque-receiving branch is affixed on the cheque

NIKASH Posting is made and gives code no.

Segregate cheque from Pay-in-slip.

Give respective endorsement.

Gets total from NIKASH2 and also get total from Pay-in-slip.

If both are same, sort the cheques according to banks.

Get all the schedules from NIKASH2

Affix schedules to the corresponding Banks cheques.

Chart: Show s Collection Procedure

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After that, the following entries are given and a debit voucher is prepared -

Balance with Bangladesh Bank ----------------------- Debit

Customers A/C --------------------------------------- Credit.

3.1.2. A) Receiving Cheques For Collection

In Mercantile Bank Limited, cheques of its customers is received for collection from other
banks. In case of receiving cheques, following points should be checked very carefully-
The check should not carry a date older than the receiving date for more than 6 months. In
that case it will be a Stale Check. Again the check should not be a Post dated one.
The amount both in words and figures of the pay-in-slip should be the same and also it
should be in conformity with the checks amount both in figures and words.
The name mentioned both in the check and the pay-in-slip should be the same.
The check must be crossed.
Collecting banker must check whether endorsement is done properly or not.

ENDORSEMENT IN CASE OF

Payees A/C will be credited on Bills for collection

realization

3.1. 2. B) Types of Bills for Collection

Outward Bills for Collection

Inward Bills for Collection.

 32

Outward Bills for Collection (OBC)

If the bill is beyond the clearing range then it is collected by OBC mechanism. Customer deposits
cheques, drafts etc. for collection, attaching with their deposit slip. Instruments outside the
clearing range are collected through OBC mechanism. A customer of Mercantile bank
Narayanganj branch is depositing a check say of NCC Bank, Dhanmondi branch, Dhaka. Now
as a collecting bank, Narayanganj branch will perform the following tasks-

Procedure of OBC

Depositing the cheque along with deposit-slip

Crossing of cheques are done indicating Sylhet Branch. as a collecting bank

Endorsement Payees A/C will be Credited on realization is given

Entries are given in the Outward Clearing Register.

Collecting bank can collect it either by its branch or by the drawers bank. They will forward the
bill to that particular branch. OBC number will give on the forwarding letter. Now following
procedures will take place in case of the following two cases.

Bills Collected through Branch

Collecting branch will receive an I.B.C.A. from that particular branch. Accounting treatment from
collecting branchs point of view will be-

HO A/C concerned branch .........................Debit

Customer A/C ............................................Credit

Income A/C on commission/ Postage.Credit.

 33

The process of collection is described below:

If the bill is drawn on Mercantile Bank Mirpur Branch

Bills are sent to that branch through mail or courier;

Branch collects the bills and sends an IBCA to that Branch;

Depositors account is credited.

If the bill is drawn on another Bank and there is a branch of Mercantile.

Branch sends the bill direct to the branch of Prime e by OBC schedule.

Request them to send the proceeds by IBCA and collect the bill.

That branch of Prime can collect the through clearing house arrangement exists there.

If the bill is drawn on another bank but there is no branch of Mercantile-

Bill is directly sent to that Bank

Request them to send a draft in favor of this bank by an OBC schedule.

That bank sends a DD mentioning the Paying Bank

Then the bill is collected through clearing house process.

Balance Sheet Effect

OBC creates asset and liabilities simultaneously for bank. When send for collection, it is banks
liability and as well as customers liability i.e. banks asset.
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Liability head Bills for collection being bills receivable as per contra

Asset head Bills receivable being bills for collection as per contra.

Customers liability A/CDebit.

Bankers liability A/CCredit.

After realization (Even if dishonored)

Bankers liability A/C..Debit.

Customer liabilities A/C...Credit.

After realization the contra is settled. This item is a stock variable of balance sheet at a particular
date.

Balancing

Balancing is done on the bankers liability account. The year end balance is shown on balance
sheet.

b. Inward bills for collection (IBC)

When the banks collect bills as an agent of the collecting branch, the system is known as IBC. In
this case the bank will work as an agent of the collection bank. The branch receives a forwarding
letter and the bill. Next steps are as follows-
Entry in the IBC register

An IBC number is given on the bill.

Endorsement given- Our branch endorsement confirmed

The instrument is sent for clearing.

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Accounting Entries-

Clearing..........................................Debit

Miscellaneous Creditor A/C OBC ...Credit.

If honored, the accounting treatment will be-

Miscellaneous Creditor A/C OBC.Debit

H.O. Collecting branch A/C......Credit.

An IBCA is dispatched in this regard

HO A/C agent branch.....Debit

HO A/C collection branch..Credit.

If dishonored, The instrument is returned to the collecting branch along with a return memo.

3.2.1. Clearing

According to the Article 37 (2) of Bangladesh Bank Order, 1972, the banks which are a member
of the clearing house are called as Scheduled Banks. The scheduled banks clear the cheques drawn
upon one another through the clearing house. This is an arrangement by the central bank where
everyday the representative of the member banks sits to clear the cheques. For clearing there is a
department in every Bank. This department receives cheques, drafts and like instruments from its
customers for the purpose of collection with a deposit slip over the counter crediting their accounts.
Clearing of cheque is done through the clearing house in Bangladesh Bank. Everyday the first hour
starts at 10.00 a.m. and returns house at 5.00 p.m

3.2.2. Types of cheques for clearing

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Inward clearing cheques.

Outward clearing cheques.

i. Inward Clearing Bills

It refers the instument drawn on Prime bank Sylhet Branch Limited, received from other
banks in the clearing house by their representative (s). Settlement process-

Bills collected from other banks

through clearing house by Main BB debits the A/C of Main Branch sends
Branch Drawn on Mercantile Bank Main Br. Maintained with the bills to Mercantile
N.ganj Branch. BB. Bank N.ganj Branch
with an IBDA

Mercantile Bank N.ganj Branch debits customers respective A/C.

Accounting entry passed by this branch:

Respective A/C Debit.

Head Office A/C (Main Br.) ....Credit.

If cheques are returned, Prime Bank Sylhet Branch passes an IBDA to Main Branch. Then the
necessary accounting entries will be-

HO A/C (Main Br.) .......Debit.

Respective A/C .Credit.

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ii. Outward Clearing Bills

It refers the instruments drawn on the other banks received by Prime bank Sylhet Branch. They
are of three kinds as follows-

Cheques drawn on another branch of Prime The settlement process

Cheques are directly sent to OBC received along the Entry passed in
the respective branch instrument by the OBC register of
respective branch that branch

When IBCA comes, customers account is credited. IBCA is sent from that
branch to this branch.

Cheques drawn on another Bank, which is situated within clearing house area.

Narayanganj IBDA along with bills These bills are sent to

Branch collects are sent to N.ganj clearing house from N.ganj
cheques. Branch. Br. through Main Branch

Depositors account is credited with N.ganj Branch.

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CASH SECTION

Cash Section
Cash Receipt
Cash payment
Flow Chart of Cash Management
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4.1Cash section

Cash is the lifeblood of all financial institutions. Cash section is a very sensitive point of the
branch. This section deals with all types of negotiable instruments and it includes vault, used as
the store of cash instruments. The vault limit is 2 crore taka. Operation of this section begins
when the banking hour starts. Cash officer begins his/her transaction with taking money from the
vault, known as the opening cash balance. Vault is kept in a more secured place. The amount of
opening cash balance is entered into a register. After whole days transaction, the surplus money
remains in the cash counter is put back in the vault and known as the closing balance. If the cash
stock goes beyond this limit, the excess cash is then transferred to Prime bank
main branch. The main functions of this section are-
Cash Receipt
Cash Payment

4.1.1. Cash Receipt

Cash receipt procedure is given below-

The depositor first fills up the Deposit-in-Slip.

Depositor deposits the money.

Officer receives the money, counts and then enters in the Cash Receipt Register, and finally
signs with seal and dates the deposit-in-slip.

Slip is then passed to another officer, who enters the receipt details like serial no, amount,
etc. in his register, signs the slip and keeps the banks part of the slip. Other part is given
to the depositor.

At the end of the day, entries are cross checked with the register kept at the cash counter to
see whether the transactions are correct or not.
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Accounting treatment -
When cash received, the following entries are made -
Cash A/C.Debit
Part ys A/C.C redit

4.1.2. Cash Payment

Some important check points for making the payment are as follows-

Endorsement
Endorsement is done by putting signature of the drawer on the back of the negotiable
instrument for the purpose of negotiation. By blank endorsement, an order instrument
is made as bearer. Mercantile bank limited endorses the instrument in the following
ways-

ENDORSEMENT IN CASE OF
Payees A/C credited Pay to Mr. X
Received payment Pay to Prime bank, Mr. X
Payees A/C credited
Payees A/C credited Pay to Mr. X, Mercantile bank

Crossing
Generally two types of crossing are practiced, namely- General Crossing and Special
Crossing. Basically it gives a direction to the paying bank not to pay the check amount
over the counter. General crossing includes A/C payee crossing only. Drawing two
parallel and transverse lines do it. On the other hand, special crossing is like general
crossing but in addition bank name is also mentioned. This gives the direction to the
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same to pay the check only to the banker, whose name appears in the crossing or to his
agent.

Cash payment procedure is given below-

Customer first deposits the check (s) to the cash section. Authorized individual checks
whether it is materially altered, proper endorsed, crossed or not. Being satisfied the total
requirements; he passes it to the computer for checking the balance. Operator verifies the
check leaf security no. If matched, then operator signs. Otherwise noticed to the individual
for stop payment;

Authorized officer is then verified the signature with the Specimen Signature Card (SSC);

Send the instrument to the computer section once again for posting;

Cash officer is then asked the bearer to sign on the back of the instrument. At the same he
just enters the payment details in his register and pays the money to the bearer;

At the end of the day, this information must be tallied with computer postings to ensure the
correctness of payment.

Accounting treatment -
When cash paid, the following entries are made -
Part y A/C.De bit
Cash A/C..Credit

Dishonor of Cheque
If the cheque is dishonored, Mercantile bank sends a memorandum (cheque return memo) to the
customer stating the reason in the following way-

Refer to drawer

Not arranged for.

Effects not cleared. May be presented again.

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Exceed arrangements.

Full cover not received.

Payment stopped by drawer.

-----------------Payees endorsement irregular/ illegible/ required.

-----------------Payees endorsement irregular/ require Banks confirmation.

Drawers signature differs/ required.

Alteration in date/ figures/ words requires drawers full signature.

Cheque is post dated/ out of date/ mutilated.

Amount in words and figures differs.

Crossed cheque must be presented through a bank.

Clearing stamp required/ requires cancellation.

Addition to Banks discharge should be authenticated.

Cheque crossed Account Payee Only

Collecting Banks discharge irregular/ required

4.2. Flow Chart of Cash Management:

Cash Receipt Cash Payment

Entry Pass Receiving Register Entry Pass Paying Register

Receipt Summary Payment Summary

Payment Summary

Cash Balance Book

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Positive findings

Negative Findings
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5.1. Findings

Positive Findings
It is newly generated bank and short history of operation but it has created a brand value
among the customers.
A lot of savings and credit schemes have been introduced for different market
segmentation. EX- SBDS
It has a lot of customers and they are loyal very to the Narayanganj branch.
This bank comparatively charge very low service charge due to providing various
services even than the government banks.
The Foreign Exchange department now performs comparatively better than previous as
they have valuable knowledge about this.
Foreign Exchange department is also fluent in processing the necessary foreign exchange
documents and in servicing to the customers.
This branch has much space for performing banking activities and for relaxation of the
customers.
Employees behavior to the customers is very good.
Our cash section is very fast compare to other banks.
Banks atmosphere is very friendly, superiors are cooperative to the subordinates.
Serving time of each customer is very low.
It also has advanced their technology with modernized Temenus Software.
Remittance giving is nearly 90 lac taka in three months.

Negative Findings
The relationship among employees is not up to the mark.
Online banking facilities are not available in every branch. It costs 125 tk yearly, but we
told it is free to the customers.
Employees are not satisfied their salary.
Job rotation is not performed timely as the officers demand it.
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Lack of proper advertisements of products.

Some employees are not well motivated in doing their routine jobs.
Computer efficiency of the officers is not observed suitable enough in all cases.
All computers are not well equipped.
Banking law and banking practice are found sometimes inverse.
In Narayanganj Branch marketing system is very poor to sell their products like Loan.
There are very few schemes are offered by MBL.
Employee shortage in GB section.
In GB section there is only one computer for opening accounts and inquires it is not
sufficient.
Messangers are not available at the time of work, so officers have to go to take a signature
from their superiors. It kills valuable time and serving customers take long.
Most of the time ATM machine is out of service.
Air conditioner service is poor many customers have complained about it.
Everyday expenditure is large for this branch,
Employees need training in file management.
Switching between Temenos and PC bank is hazardous, it kills time.
Our clearing section is efficient but it would be more if there is another employee.
Giving compulsory ATM card with every account is another problem, sometime
customers are not informed about it and when they know they misbehave with officers.
Some customers just gossip with officers after their work has done.
In foreign exchange department we have only one heavy weight customer Papillon Knit
Ware LTD. If the customer is switch will lose our profit. So finding more customers is
essential.
ATM card delivery is poor, cards wont come properly from head office.
Transaction profile of every customer should be filled by customers not by officers.
There are various products and schemes of loans and advances but customer are not
known to all of them.
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RECOMMENDATION AND CONCLUSION

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6.1. Recommendation
Mercantile Bank Limited has been successful in all of its operation since its inception. It has out-
performed all its peer and competitor and peer banks in virtually all area of its activities. Still there
is scope for improvement for the bank and the any or all of the following could be which Mercantile
Bank Limited can implement to better its performance:

In evaluating the performance of the clients, there must be some set standards to be used
as a scale for better comparison. There should be a range of standard to cover a wide range.
Loans should not be provided only on the basis of inter-personal relationship with the
clients.
Manpower should be increase in GB section
Necessary training should be provided to upgrade the efficiency of the officers in
measuring risk and in selecting the profitable projects.
In Narayanganj Branch there is very low chance to get personal loans, it should be
improved.
The bank should be more cautious on operating expenses.
The Bank should promote their product by advertisement.
The Bank should introduce new and attractive product to their customer.
Internal control system should be improved so as to increase the brunch productivity.
Physical and technological facilities should increase in evaluating credit proposals and also
in monitoring the recovery of advances.
The Mercantile Bank Limited has provision for internship program, but it is not well
organized. Although the officials are very careful and co-operative with the interns, the
authority should be more structured. The bank really uses the Internship program to their
advantage by rearranging the whole procedure.
The bank should employ an outside company for recovery of its dues because it takes a
great amount of time for the banks employees to recover stuck up loans.
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As the clients are not in favor of introducer system that currently present, if possible the
rule of introducing to open an account should be changed. Because many people face in
problem to arrange an introducer in the time of opening accounts.
For selling their products this branch need strong marketing to sell their products.
To attract new customers and to retain itself in the banking market, the banking market,
the bank should be innovative and diversified its product services.
Consumer loan should be continuing.
All of work should be computerized instead of manual posting because of better services.
(Example- cheque book register or ATM card register).
The loan sanction process should be easier that the clients can feel convenient to take loan
from the bank.
Foreign exchange department need more heavy weight customers.
Permanent customers and big customers should be given motivational prizes like diaries or
calendars at year start.
Regular Performance Appraisal and assuring promotion/reward depending upon that will
resist the employees switching tendency.
Credit departments efficiency should be increased, sometime credit departments officer
have to come GB departments head to get work authorized.
Clearing section need extra manpower.
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6.2. Conclusion
Although Mercantile Bank Limited is a second generation bank in the private sector, within a very
few time it has already acquired a leading position. This bank is much more effective than others
to identify the weakness it carries as well as to solve them very effectively. Mercantile Bank
Limited has started its operation in June 1999. But pretty soon afterwards, within few months, the
Bank has taken up the challenge to start sound banking operations. From its inception the bank has
proven itself to be worthy of its slogan of Bank with a Difference, through successful operation
of Banking. From the previous records and discussion, we can conclude that the Modern Business
Management is essentially applied in this organization.

It has a wide range of area. General Banking Of Mercantile Bank Limited is my assign
project. For a bank, proper remittance flows are most profitable assets. The largest portion of
operating income is derived from lending. A commercial bank, usually wins over its competitors
only on the quality and quantity of remittance flow. MBL gives importance on their customers,
employees and shareholders. They want to achieve strong corporate growth through financial
inclusion. They try provide solutions at a minimum cost based on a high level of satisfaction of all
segments of our customers, thus also contributing to the prosperity of our employees and
shareholders. MBL is trying to develop innovative and technologically advanced products and
services that satisfy their customer needs.

At the end of the report, I have identified several findings & recommendations of this banking
system. In spite of some weakness & lacking, MBL remains strong position in banking sector. If
MBL follows effective corporate, uses its strengths, overcomes its weakness, develops some
promotion works & changes its services little bit user friendly, then it is sure that MBL will get
competitive advantages over its major competitors.

THE END
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