General Banking Section of Mercantile Bank Ltd

GENERAL BANKING

General Banking section is one of the most important part of a branch. This is the section where various services are provided to the account holders for example, cash receipt and payment, receipt of cheque for collection, remittance etc. This is also the section where the relationship between the bank and the customer starts. This section attract new customer by offering different types of deposit schemes, opening new savings or current accounts, deposit pension schemes, double deposit scheme, offering time deposit at an attractive rate etc. The customers actually provide the maximum portion of the fund out of which bank make credit and make so huge amount of profit. So General Banking section has an important role in creating an image of the bank in the mind of the customer. If customers are satisfied by the service then they might think to do banking with that branch, apply for a credit, or open an L/C etc. So every bank branch tries to be alert and careful in providing general banking services.

Mercantile Bank Ltd., Kawran Bazar Branch, Where I have had my practical training maintaining General Banking Section, and this is the section which occupies fifty percent of the office space and also this is the largest section of the branch in terms of manpower also.

 General Banking Section of MBL, Kawran Bazar Branch has the following sections:

  Cash Section

  Accounts Section

  Local Remittance and Clearing Section

  Account Opening Section

I have had the chance to work with the people of all the sections of the General Banking and I had spent most of my time in this section during interne period. The functions of the following sections are discussed though out this chapter. Especially I would like to explain those functions which I have got exposure elaborately and will also try to explain some other basic functions of those sections.

Cash Section

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. 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 MBL main branch.

The main functions of cash section are-

  1. Cash Receipt
  2. Cash Payment
  3. Selling of Prize Bond
  4. Changing Soiled and Mutilated Notes

Cash Receipt

Cash receipt procedure is given below-

  1. Depositor first fills up the Deposit-in-Slip.
  2. Depositor deposits the money.
  3. Officer receives the money, counts and then enters in the Cash Receipt Register, and finally signs with seal and dates the deposit-in-slip.
  4. 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.
  5. 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.

Receipt of Credit Card Payments: All the Credit card related transactions are centrally controlled by the credit card division of the MBL, Head Office. Branch accepts the credit card payment aid firstly credit “Q-Cash” account. Then all the accumulated deposit of the credit card payments is credited by issuing  IBCA to the H/O general account by debiting Q-Cash account again. “Q-Cash” is an intermediate account and an item of the sundry deposit.

Sometimes the officers in charge with receipt of cash find difficulties to check whether there are any fake currency notes, especially when huge amount of money is deposited in the cash counter. The UV machine provided by the bank to detect fake notes are not always effective, especially for those fake notes where Tk. 100 currency notes are converted into Tk. 500. It’s a time consuming process. Special skill is needed to identify those fake notes.

During the first and second week of a month, special counter is set up to serve the people who have opened various monthly savings scheme. Sometimes interns are engaged in duties there.

Cash Payment

Cheques, Pay-slip, FDR, Sanchay Patra encashment are made through cash payment counter. Mercantile bank has provided online banking facilities fully in all of their branches. So an account holder of a branch now has the opportunity to withdraw or deposit money in their account from any branch of MBL.

Cash payment procedure is given below-

  1. Customer first deposits the check to the cash section. Authorized individual checks whether it is materially altered, proper endorsed, crossed or not. In this branch an assistant officer do this job.
  2. Being satisfied, 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 non payment of cheque using a cheque return memo.
  3. Authorized officer (General Banking in-charge) is then verified the signature with the Specimen Signature Card (SSC). In MBL Kawran Bazar Branch the specimen signature cards are scanned and stored in the computer, but they could not complete this task.
  4. He send the instrument to the officer at the computer once again for posting;
  5. Cash officer is then pass the cheque to the cash payment counter.
  6. An Officer/Assistant officer is posted in the cash payment counter. He/She asked the bearer to sign on the back of the instrument. At the same he just enters the payment details in his register. If the signature agrees then the money is paid to the bearer;
  7. At the end of the day, these information must be tallied with computer postings to ensure the correctness of payment. In this branch no token is used for cash payment purpose.

If the check is dishonored due to insufficiency of funds, BASIC bank charges Tk.50/= as penalty.

In case of dishonor of a cheque, bank could only specify the following reasons as per N.I. Act-1881. The reasons were in a memo format, those are:

  Insufficient fund

  Amounts in word and figure differs

  Cheque out of date/post-dated

  Payment stopped by drawer

  Drawer’s signature differ

  Crossed cheque to be presented through bank

  Payee’s endorsement is required

  Other specific reasons not mentioned above:

  • Upon the receipt of the notice of death of a customer
  • Court’s order (Garnishee order, insolvency, insanity, etc.)
  • Defective title
  • Mutilated
  • Presented during non-banking hours
  • If the endorsement is irregular
  • When the breach of trust is intended.

Procedure for online payment: When an account holder submits a cheque to a different branch of MBL, that branch examine the required part of the cheque, take the help of online to access customer account and if everything is okay than the branch debit the customer account and make payment. Branch then make a statement on those transactions and send that report to the account holder’s branch along with the photocopy of the instrument.

Standing Instructions: These are the instructions given by the customer for the purpose of payment of installment of different deposit schemes. This branch has automated standing instruction, computer automatically execute the standing instruction at the date requested by the customer by debiting customers’ account held with the bank. A print out of all the transfers are generated and preserved for future reference.

Due to providing online banking service, any branch that received a cheque of another branch has the authority to debit the drawer’s account. This authority of debiting a customer account of one branch by another branch certainly increases the risk of misappropriation of account holder’s fund by any branch staff.

Selling of Prize Bond

Now there is only one type of government prize bond of denomination TK. 100. Bank sell prize bond to the customers also purchase it from the customer. Bank branch earn commission at the time when they purchase prize bond from Bangladesh Bank.

Cash section maintains a prize bond register where each purchase and sale is recorded chronologically. All the transactions are balanced at the end of the day. An authorize officer make the entries of all transaction and sign on the signature column of the register.

But the sell/purchase of prize bond in this branch seems to be very negligible.

Changing of Soiled and Mutilated Notes

This function is very important for the general public, since in our country paper notes are more prevalent and get soiled/mutilated in  very short period of time. According to Bangladesh Bank Circular the bank branch should change the soiled and mutilated notes of the public on behalf of Bangladesh Bank. Bangladesh Bank also provides guidelines of replacing soiled and mutilated notes. If a note is burnt or more then two pieces or more then one fourth portion of a note is not present, the branch should not make immediate payment, branch should issue a receipt to the customer with a future date to come and send those notes to Bangladesh Bank for replacement. If Bangladesh Bank allows payment then the bank branch could make payment in that future date. Bank should also hang a notice containing the words that this branch makes change for soiled and mutilated notes.

The registers used in the cash department are described below:

Cash Remittance Register: This register is maintained to record transaction related to transfer of cash from MBL main branch to MBL Kawran Bazar Branch normally. If The Kawran Bazar branch exceeds the vault limit (2.00 crore) then this branch may require to transfer the excess cash to main branch. When cash remitted outward, an IBDA is issued by debiting MBL General account and cash account of the branch is credited. When any inward cash remittance is received then cash account of the branch is debited and branch responds to the IBDA issued by the main branch or another branch from where remittance is effected.

Cash Payment Registesr: All modes transactions (Current A/C, Savings A/C, other A/C etc.) for payments are entered in these registers. At the end of the day the total payment is calculated.

Cash Receipt Registers: There are different modes of receipts like collection of Grameen Phone bills, Alico insurance premium, current account receipt, savings account receipt, DPS receipt. Different registers are maintained for different modes of cash receipts.

Cash Balance Book: In this register, at the end of the day all the payments, receipts and opening balance of the day are add together to get total cash balance at the closing of the day. The cash balance is reported denomination wise.

Vault Register: Here the closing cash balance at the end of the day are recorded denomination wise. If any branch have evening banking permission, the have to maintain separate register to record evening receipts. This is signed by the branch manager, second in charge and the cash in charge of that branch.

Key Register: This register is kept under control of the branch manager. This register have the record the name of the managers are possessing the vault keys.  Vault keys are kept under supervision of Branch manager, second in charge and cash officer. All of them should be present with the key when vault is opened at the morning, if any one is absent, vault could not be opened.

 No one of the cash section could leave until there is agreement in the cash balance in the cash balance book and the cash position obtained from computer entries.

MBL, Kawran Bazar branch do not offer locker service to their clients.

Accounts Section

The function of accounts section of MBL, Kawran Bazar branch are diverse in nature. This includes clearing, collection of cheques in addition with their regular functions. This department is overloaded with work and lack the manpower required to perform the jobs timely and accurately.

Accounts department examines all the vouchers/cheques (classified, head wise) before filing them for preservation for future reference. The purpose is to find out whether all the formalities have been completed, for example, stamping, signature of the authorized officers, proper cancellation of cheques etc. A cheque up to Tk. 20,000 can be cancelled by cash in charge. Tk. Up to 100,000 required double cancellation (second in charge). A cheque above 100,000 required cancellation from branch manager and second in charge. There is also a similar rule to pass any transfer vouchers. This actually helps to minimize the chance of fraud and forgery.

The Functions of accounts department are following:

   Preparing the clean cash report and statement of affairs.

  Preparing summary of the transactions corresponding general account.

  Recording of transaction in the cashbook, general and subsidiary ledger.

  Prepare monthly salary statement, provident fund statement and administrative expenditure statement.

  Monthly, quarterly and yearly closing of accounts.

  Making the payment of the expense of the branch.

  Charging of Depreciation

  Make provision for office rent, telephone expense etc.

  Recordings of inter branch fund transfer.

 Checking whether all the vouchers are correctly passed.

  To prepare all kinds of statements related to Bangladesh Bank, Head office and National Board of Revenue (NBR).

  Packing and maintains the total debit and total credit vouchers.

  Giving clearing entries (both inward and outward).

Clean Cash Report & Statement of Affairs

Clean Cash report contains the debit and credit of all cash, clearing and transfer entries and ultimately provides the closing cash balance. The closing cash balance of today is the opening cash balance for the next working day.

Statement of Affairs is generated daily by the accounts section. This is the statement where all the balances of main asset accounts and liability accounts are reported. Deposits are the major source of liability for branch and its loans and advances are the major source of asset with is financed by the deposits.  Liabilities branch incur as bills payable, DD payable, TT payable, pay order are reported under the main head Bills Payable in the statement of affairs. Under the head of other liabilities underlying subheads are adjusting account credit, FC held against back to back L/C, interest suspense account etc.  the Break up of some accounts are also given in the statement of affairs. The main asset heads are cash balance, investment, credit and advances, Free hold property, Dead stock, Other asset account. Bank branch also has some contingent assets and liabilities. Some examples of contingent liabilities are outward bills for collection, L/C general, BTB L/C. Some examples of contingent assets are: Outward bills lodged, Inward bills lodged, BTB L/C (customer liability), BTB bills. Statement of affairs also contains cumulative income and expenses of that branch.

Summary of the transactions corresponding general account.

Accounts section prepares this summary where the transactions those affect the MBL General Account is reported, those are actually the Originating and Responding entries posted by the bank branch. A copy of this statement is sent to the head office central accounts department for reconciliation.

Monthly salary statement, provident fund statement.

MBL Kawran Bazar Branch pays its salary to employee on 25th of a month. For that purpose this section has some work to do. Keeping themselves up to date about the actual basic salary of the employee, maintain the provision for income tax from salary, provision of provident fund etc. Provident fund is sent to the head office through IBCA. Head office invest this fund.

 Monthly, quarterly and yearly closing of accounts.

Closing of accounts means to make the balance of nominal account zero by recognising the income and expenditure for that period. During closing interest is charged on loan accounts and opposite effect is given to the adjusting account. Provision for expenditure for the next period is also made. When the actual expenses occurred then the provision is adjusted.

 There are two types of adjusting account these are:

  1. Adjusting account debit
  2. Adjusting account credit

Bank branch has some prepaid expense, for example vault insurance. Branch pays the insurance premium at the beginning of the year by debiting adjusting account. Bank branch charges the insurance expense monthly by debiting expense account and crediting the adjusting account. All prepaid expenses are treated similarly. Another example is payment of office rent. There is 10% tax on office rent on the owner of the premises. Bank pays this office rent after deducting the tax amount. Some other examples of prepaid expenses are Telephone bill, Electric bill, Stationary, Depreciation of Furniture/Equipment, interest receivable account, commission receivable etc. Interest normally charged on party account on quarterly basis. But income is recognized monthly by debiting Adjusting account debit (interest receivable) account and crediting income account. At the end of the quarter party account is debited and interest receivable account credited (adjusted).

Accounts payable of the branch is created in the adjusting account credit. For example interest payable on deposit, provisions for different expenses (Depreciation) etc. Interest payable on deposit is created by debiting interest expense and crediting adjusting account debit on every month. But the interest ultimately credited to customer account at the end of the quarter by again debiting adjusting account credit and crediting customers’ account.

Therefore during closing by the branch adjusting account debit is credited and adjusting account credit is debited.

                                      Making the payment of the expense of the branch.

During operation of the branch, many day to day expenses incurred. Accounts department prepare required vouchers and manages the expenses. Depreciation is also charged during closing.

Another important expenditure of MBL is the lease rent of lease bound asset and the interest, which is exceptional type of expenditure compare to other banks in Bangladesh. MBL holds furniture, equipments as lease from a company. Every month each of the branch pay the lease rent (also called depreciation) and also pay the interest on the fund invested by the head office to the company. Actually Head Office pay this bills by debiting the branch’s general account and the branch responds by charging expenditure account as crediting H/O general account. The benefit of this system is that banks now have the more liquid assets which they can invest in the money market, or can use for management of liquidity.

Payment of Government Revenue: It is the responsibility of the MBL head office to pay government tax incurred. The government taxes due are sent to the H/O account with the help of IBCA by crediting general account of Head office. The government tax are payable as source tax, VAT on commission, Excise duty, Income tax, and over interest income of the customer. Only tax on office rent is paid by the branch through issuing pay order favoring government revenue collection. This pay order is deposited along with a chalan to Sonali Bank.

Preparation all kinds of statements:

Accounts section is entrusted with the duty to prepare statement required by the Bangladesh Bank, Head Office of the bank and National Board of Revenue. The statement prepared for Bangladesh Bank are SBS forms, Statement of weekly position that are used in calculation of CRR and SLR of the Bank, Quarterly statement of exchange of torn/dirty notes. For Head Office use the statements prepared are, daily reconciliation statement, Weekly & monthly statement of affairs with income, expenditure & subsidiaries, Monthly comparative statement, Half-yearly statement of other assets, Half-yearly statement of suspense A/C etc. NBR related statements are: Monthly challan regarding VAT, Quarterly challan regarding Income Tax of staff, Half-yearly challan regarding 10% source tax on interest of deposits, Yearly challan of excise duty etc.

Reconciliation: One of the very important function of a bank to reconcile the internal transaction between branches, or between branch or head office of the same bank. For intra branch transactions IBCA and IBDA is used. IBCA is used to credit general account of a branch or head office and IBDA is used to debit the branch/head office general account. When IBDA of IBCA is originated, the information related to the transaction is recorded in the corresponding register and copy of it is sent to the head office and to the responding branch. Responding branch’s duty is to respond within two days and send a copy of it is sent to the head office for reconciliation. Head office reconciles the mutual claims of the inter-branch transactions. When Branch received any IBDA or IBCA for responding, it first records it in appropriate register then make the responding entries and notified the head office.

The transaction that required to issue an IBCA/IBDA

From Branch:

Cash remittance, DD/TT/MT issue, OBC, Clearing, Cost of FC & LC, FBP, Sundries etc to main branch. IBCA issued to head office for the following transactions, FDBP, FDD, income tax, VAT on L/C commission, Welfare fund, Q-cash, Provident fund, Revaluation of F/C.

The transactions for which branch receives an IBCA/IBDA

From Head Office/Main Branch:

IBCA: Payment of Incentive bonus to employees, Sundries etc.

IBDA: Sundries, Lease hold property, online commission, interest expense lease etc.

From other branch:

Same as IBCA/IBDA issued.

 Procedures of Clearing

Clearing is one of the most important function of a bank. This is actually provides an efficient payment mechanism by which any kind of payment using negotiable instruments can be collected with the help of a bank. To get the banking service a person should be an account holder of a bank. Only the scheduled banks clear the cheques drawn upon one another through the clearing house. 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. But not all the branches of a bank are the members of clearing house. Only some of the branches which are representative of the clearing house can participate. The non member branches can participate in clearing with the help of the representative branches of the same bank. But this may take a little bit longer time for collection. Normally collection period of cheque is two days. But if the amount of cheque is greater than five lac, the facility of same day clearing provided by Bangladesh Bank can be availed by some branches which are situated in the city area.

Outward Clearing:

Local remittance and clearing section of MBL, Kawran Bazar branch receives cheques, drafts and like instruments from its customers for the purpose of collection with a deposit slip over the counter.  Accounts section has the responsibility to credit their accounts in the following date. Branch issues an IBDA favoring general account with the main branch and send those instruments collected over the previous day along with IBDA to main branch. Main branch presents those instruments to the corresponding banks representative branch in the clearing house. Those instruments of different bank branches then sorted out and sent to the respective branch for clearing. If some cheque is not passed, then it is returned by the appropriate bank branch specifying the reasons to the clearing house again. The MBL, Kawran Bazar branch collect those instruments through MBL main branch; main branch also issues and IBDA equivalent amount to the cheques returned favoring the Kawran Bazar Branch. The Kawran Bazar branch debits the corresponding customer account again if their instruments return from the clearing house. This is the process of outward clearing. Bangladesh Bank has provided a software named “Nikash” to all the scheduled banks with a view to facilitate clearing operation with the help of the computer. When branch sends the instrument to Main branch, branch also provide a soft copy of the clearing transactions. Every bank maintains a current account with Bangladesh Bank for the purpose of clearing and maintaining CRR. The net claim of the banks over one another is ultimately reflected on that account.

Inward Clearing:

The cheque/instruments which are issued by the account holders of a particular branch for making payment to different people ultimately came to the same branch for clearing. MBL, Kawran Bazar branch receives those instruments and IBDA from the main branch. If some of the cheques are failed to pass, then those cheques are returned to main branch again and IBDA is issued equivalent to the amount of those cheques to debit main branch. Then the Kawran Bazar branch again issues an IBCA against main branch equivalent to the amount that is passed. Branch charges Tk. 50 if their cheque is returned.

In the above discussion it is assumed that the cheques are from the branches of different scheduled banks of the same clearing house. But this may not happen always. The cheque presented by the customer may be of jurisdiction of the different clearing house. This type of cheque is called OBC. Then three type of situation may arise.

  1. MBL has a branch acting as a representative of the clearing house
  2. MBL has a branch but not representative of the clearing house
  3. MBL might not have any branch in that clearing house.

In situations like (1), MBL Kawran Bazar branch would send the instrument to that branch through mail. The branch situated in different clearing house collects the check through clearing mechanism and send an IBCA favoring Kawran Bazar branch. Then ultimately customer account is credited.

In situations like (2) and (3), MBL Kawran Bazar branch would sent the instrument to the drawer’s bank branch directly by post. That branch issues a DD favoring MBL Kawran Bazar branch. MBL Kawran Bazar branch then collect the money through ordinary clearing procedure.

Local Remittance and Clearing Section

The functions of this section are:

  Providing the customer service like transfer of account from one branch to another.

  Functions related to the encashment of mature/premature Monthly savings scheme.

  Issuance of Government Savings certificate and payment of the profits.

  Issuance of DD/Pay Order/TT/payslip etc.

  Receive the instrument from customer for collection.

  Prepare vouchers of the above mentioned transactions.

  Managing the registers relevant to the above function for example, IBCA, IBDA issue and receipt register, OBC/IBC Issue receipt register, pay slip/pay order issue register etc.

Transfer of Account

After getting application from the account holder, branch after deducting charge (Tk. 200), credit the rest amount to General A/C with other branch by issuing IBCA along with account opening documents where account is supposed to be transferred. Branch also keep a photocopy of those documents for future reference.  The customers account balance becomes zero. Before following the above procedure bank first check the genuineness of the application, verify the signature on the application.

Encashment of Monthly Savings Scheme

Customers can encash his MSS deposit before or on maturity. An application signed by the customer is necessary. When branch get such application, customer’s account is debited and bills payable account (pay slip) is credit. Then a pay slip is issued favouring customer by debiting pay slip account. The amount is paid to the customer after deducting excise duty and income tax. Bank paid the agreed amount after deduction mentioned above if encashment is made after maturity. But if encashment is made before maturity the customer gets savings rate after one year.

This branch also manages the issuing and payment of government savings certificate and its interest. After issuing the certificate branch Credits general account with main branch, ultimately main branch deposit it to Bangladesh Bank. Branch normally pays the interest of the certificates on maturity and claim reimbursement from the Bangladesh bank through main branch.

 Issuance of DD, Pay order & TT

Pay order is issues when an account holder or a customer applies to issue a pay order favoring a person or institution. Customer’s need to be pay the amount by cash/cheque, the commission and the VAT of commission with the help of a deposit slip. Payment of pay order is made only on account. The actual holder of the pay order submits it along with a filled deposit slip to his bank for collection. The pay order ultimately comes to the same branch for collection. Pay order is used for payment usually when the payee’s has an account with a bank in the jurisdiction of same clearing house. Payment of pay order requires clearing. When pay order is issued, bills payable (pay order) account is credited and when this pay order returns for collection then payment is made by debiting bills payable (pay order) account and crediting the general account with the corresponding branch with an IBCA. If pay order is presented in a bank which is situated in different clearing house, the paying bank send the instrument directly to the drawer’s branch requesting to send a DD favoring the paying branch. Then the payee’s branch collects the proceed through local clearing house.

A customer favors DD (Demand Draft) when he/she wants to pay someone whose bank account is maintained with a branch, which is not situated in the jurisdiction of same clearing house. DD is usually issued favoring another branch of a same bank outside the clearing house. When a DD is issued an IBCA also is issued equivalent to the amount applied for favoring that branch. If the payee holds an account with the same branch, he/she can get it paid to his account after submitting the pay order. But if he has a bank account with another bank branch, the payment of DD requires local clearing. A test no. is to be given on the draft of Tk. 50,000/- and above and the drawee’s branch is to be intimated over telephone.

When a branch receives a DD Advice, then DD payable account is credited and when Instrument is presented DD payable account is debited and customer account is credited. If the instrument is presented before the advice comes, then party’s account is credited by debiting suspense account. When advice comes H/O general account is debited to credit suspense account.

TT is the most popular method for remitting money because it is fast and quick and very easy process. The fund transfer take place within the time of a phone call. The special feature of TT is that this message contains test keys, which is unique for every bank and only branch manager or the officer who is delegated with the duty. By decoding the test keys the authenticity of the message is tested. If the message is found okay than the payee’s account is credited instantly.

Other Functions

This section receives the instruments from the account holders for the purpose of collection. They prepare the vouchers. Make entry to the corresponding registers the relevant information about the instrument. When an OBC is received a contra liability is created. OBC is debited and OBC lodged is credited. This contra liability is again adjusted when the branch received the payment and customer account is credited. The reason behind this is actually to show the effect of the transaction in the balance sheet and another reason is this transaction can be traced out in case of necessity. So when encashment of monthly savings account is made then an intermediate account “pay-slip” account is first credited, then cash payment is made through pay slip. There are many of this type of account in the balance sheet of a bank.

Account Opening Section

To establish a Banker and customer relationship Account opening is the first step. Opening of an account binds the Banker and customer into contractual relationship. But selection of customer for opening an account is very crucial for a Bank. Indeed, fraud and forgery of all kinds start by opening account. So, the Bank takes extremely cautious measure in its selection of customers.

 Types of Account:

MBL, Kawran Bazar Branch has the following types of accounts:

  1. Current Account
  2. Savings Account
  3. Fixed Deposit Account
  4. Short Term Deposit
  5. Monthly Savings scheme.

Procedure to open an Account:

(1)   For opening an account, at first the prospective account holder will apply for opening an account by filling up account opening form. Account opening form consists of the name of the branch, type of account, name of the applicant(s), present address, permanent address, passport number (if any), date of birth, nationality, occupation, nominee(s), special instruction (if any), initial deposit, specimen signature(s) of the applicant(s), introducer’s information etc.

(2)   Filling up of KYC form: This form has been introduced by the Bangladesh Bank to prevent money laundering. KYC form helps to asses the customer. Clear instructions with regard to operations are found in KYC. If the transaction of a customer is suspicious or not matched with the KYC than Bank branch should report it to Bangladesh Bank.

(3)   The prospective customer should be properly introduced by the followings:

  1. An existing customer of the bank.
    1. Officials of the bank not below the rank of Assistant Officer.
    2. A respectable person of the locality who is well known to the Manager or authorized officer.

(4)   Two copies of passport size photograph duly attested by the introducer.

(5)   Signature of the prospective account holder in the account opening form and on the specimen signature card duly attested by the introducer.

(6)   Then the concerned authority will allocate a number for the new account.

The customer than deposit the “initial deposit” by filling up a deposit slips. Initial deposit to open a current account in MBL is Tk. 1000.00 and saving account is Tk. 500.00. After depositing the initial deposit, the account is considered to be opened. MBL, Kawran Bazar Branch maintains all of its accounts in computer. After depositing the initial deposit, Branch records it in the computer by giving new account number. Then it issues cheque book requisition slip by the customer. Then it distributes all relevant papers to respective department.

 Activities & papers necessary for opening an account

(A)      Joint Account:

If the account is a joint account, then the joint account holder should submit a declaration and operational instructions of the account along with their signature.

(B)      Partnership firm:

The following documents have to be submitted for preparing an account of a partnership firm:

i)              Partnership deed.

ii)             (a) If the partnership firm is a registered one, then one copy of registration forms.

(b) If not, then a copy of certificate from the notary public.

 (C)      Limited Company:

For the opening of an account of a limited company, following documents have to be submitted:

i)      A copy of resolution of the company that the company decided to open an account in the Prime Bank.

ii)     Certified true copy of the Memorandum & Articles of Association of the Company.

iii)    Certificate of Incorporation of the company for inspection and return along with a duly certified Photocopy for Bank’s records.

iv)    Certificate from the Registrar of Joint Stock Companies that the company is entitled to commence business (in case of Public Ltd. Co.  for inspection and return) along with a duly certified Photocopy for Bank’s records.

v)     Latest copy of balance sheet.

vi)    Extract of Resolution of the Board/General Meeting of the company for opening the account and authorization for its operation duly certified by the Chairman/Managing Director of the company.

vii)   List of Directors with address (a latest certified copy of Form-XII).

 (D)       Club/Society:

Following documents have to be obtained in case of the account of the club or society:

i)              Up to date list of office bearers.

ii)             Certified copy of Resolution for opening and operation of account.

iii)            Certified copy of Bye-Law and Regulations/Constitution.

iv)           Copy of Government Approval (if registered).

(E)       Cooperative Society:

Following documents have to be obtained in case of the account of Cooperative Society:

i)              Copy of Bye-Law duly certified by the Co-operative Officer.

ii)             Up to date list of office bearers.

iii)            Resolution of the Executive Committee as regard of the account.

iv)           Certified copy of Certificate of Registration issued by the registrar, Co-operative societies.

 (F)       Trustee Board:

Following documents have to be obtained in case of the account of trustee board:

 i)              Prior approval of the Head Office of PBL.

ii)             Certified copy of Deed of Trust, up to date list of members of the Trustee Board and certified copy of the Resolution of Trustee Board to open and operate the account.

(G)       Minor’s Account:

Following documents have to be obtained in case of the account of minor:

 i)             Putting the word “MINOR” after the title of the account.

ii)             Recording of the special instruction of operation of the account.

iii)            The AOF is to be filled in and signed by either the parents or the legal guardian appointed by the court of law and not by the minor.

 Fixed Deposit Account:

Fixed deposit accounts are opened for a fixed period varying from one months to three years or above and are payable at a fixed date of maturity. Interest on this deposit is paid at the rate fixed by H.O. from time to time depending on the period of maturity. Interest is payable only at the maturity of the deposit.

The following table shows different FDR rates:

Time period

Interest rate

One month

9.00%

Three months

10.25%

Six months

10.5%

One year

10.75%

Two years

10.75%

Three years

10.50%

 Branch could offer higher rates than the offered rate up to 1.25%, but head office approval is required.

 Short Term Deposit

The deposits held in these accounts shall be payable on short time for 7 days or 30 days. The deposits may be accepted for period and rate of interest is fixed by H.O. from time to time. The STD interest rates in MBL are 6.5%.

 Monthly Savings Scheme

It is one type of savings scheme where installment payment should be deposited to the bank within first 10 days of each month. It can be opened for five, eight and ten years maturity period for Tk. 250/-, Tk. 500/-, Tk.1000/-, Tk.1500/-, Tk.2500/-, and Tk. 5000/-. Interest is paid to the customer @ 12.5% for MSS.

Installment Sizes of MSS and Their Maturity Values:

Time Period

Size of the Installments in Taka

Tk. 250Tk. 500Tk. 1000Tk. 1500Tk. 2500Tk. 5000
Five years20,62541,25082,5001,23,7502,06,2504,12,400
Eight years40,37580,7501,61,5002,42,2504,03,7508,07,500
Ten years57,5001,15,0002,30,0003,45,0005,75,00011,50,000

Double increase deposit scheme:

In this deposit scheme the deposited amount will doubled in six years. In this scheme ten thousand or multiple amount of ten thousand are taken as deposit. In this scheme the get loan facilities up to 80% of deposited amount.

Closing of an Account

An account holder can close his account any time he wants in order to terminate banker-customer relationship. He must make an application mentioning his intention to close his accounts and he must also deposit the unused leaves of the cheque book. After verifying the genuineness of the application bank closes the account but Tk. 50/- for savings and Tk. 100 for current account is charged as closing fees.

The operation of the account might be ceased by the bank side also due to the following reasons:

  1. Notice given the customer himself.
  2. Death of customer.
  3. Customer insanity or insolvency.
  4. Order of the court / Injunction of the court.
  5. 4. Garnishee Order

Conclusion

Mercantile Bank Ltd. is one of the most potential Banks in the banking sector. It has a large portfolio with huge assets to meet up its liabilities and the management of this bank is equipped with the expert bankers and managers in all level of management. MBL is able to quickly adapt with the changes in the environment. The financial performance over the year was also very sound. Its general banking service is widening by introducing online banking, its foreign exchange business also shows increasing trend. MBL is also expanding its branch network to avail the more investment/business opportunity. It has very talented and expert human resources and always recruits high quality officers in their management positions. There every possibility that this progress of MBL will continue and could overcome its limitation to produce good result in future.

General Banking