This report is prepares on the basis of my three-month practical experience at Mercantile Bank Limited, Mirpur Branch. This Internship program helps me to learn more about the practical situation of a financial institution. Banking system of Bangladesh has gone through three phases of development- Nationalization, Privatization, and Lastly Financial Sector Reform. Mercantile Bank Limited has started its journey as a private commercial bank on 2nd June 1999.The whole working process of Mercantile Bank Limited, Mirpur Branch is divided into six section 1) Accounts Department, 2) Clearing Department, 3) General Banking Department, 4) Credit Department, 5) SME Financing Department, and 6) Foreign Exchange Department. My report has been presented on foreign exchange activities of the Foreign Exchange Department of Mercantile Bank Limited.
The whole report is divided into four Chapters- Orientation of Study Chapter, Learning Chapter, Problems Identification Chapter and Recommendations & Concluding Chapter. The first chapter is the introductory chapter contains introduction- origin, chronological progress and current activities of the organization, background, scope of the study, objective of the study, methodology of the study, limitation of the study. The learning chapter shows discussion, analysis, evaluation, and finding about foreign exchange activities. The third chapter shows different problems identification of MBL. The fourth and last chapter contains Recommendations & Conclusion.
Mercantile Bank Limited is a third generation bank in Bangladesh. Mercantile Bank has been incorporated on May 20th, 1999 in Head office at 61 Dilkhusha C/A, Dhaka, Bangladesh as a public limited company under the rules & regulations of Bangladesh Bank & the Bank companies’ Act 1991. Mercantile Bank Limited commenced formal commercial banking operation from the June 02, 1999 with the leadership of M.P Md. Abdul Jalil. The founder chairman who had long dream of floating a commercial bank which would performs most of the standard banking services and investment activities on the basis not only profit sharing but also contribute socio-economic development of the country. The opening of the Principal Office was the big leaf forward and successively the opening of the Mothijil Branch expanded the horizon of Mercantile Bank Limited to bring its services to the valued clients more effectively. The Mirpur Branch opened at Rokeya Sarani, RaziaPlaza (1st Floor) 184, Senpara Parbata, Mirpur-10, Dhaka on 3 July 2002. The bank stood 65 branches all over the country up to 30 December 2010. With a firm commitment to achieve an excellence in service, Mercantile Bank Limited has always tried for creating wide array of banking solution and offer supervision value proposition.
Evaluation of Foreign Exchange Activities:
Foreign Exchange is one of the most attractive departments for both clients and bank. Because of the continuous improvement of the country, foreign transaction is also increasing day by day. For this reason all of the banks are trying to improve their performance in foreign exchange activities. Foreign exchange division of MBL has some strong and weak points that affect their performance to the customers. MBL has high reputation as a bank that practices customer oriented banking among the local banks of Bangladesh. MBL has already launched every service available under foreign exchange activities. This characteristic of foreign exchange division of MBL is positively considered by customers while taking decision of using MBL foreign exchange division.
MBL has a large number of branches all over the country. It already has 65 branches all over the country and the number is increasing day by day. As a result of these it has a large customer base. This huge customer base is very helpful for foreign exchange division because every customer can be a possible customer of foreign exchange.
To evaluate the foreign exchange activities of MBL trend analysis is used in the report. Because of trend analysis is the most common techniques of data analysis for the performance evaluation of a financial institution. So trend analysis can explain the flow of activities in foreign exchange of MBL The trend can represent the growth or turn down of a bank over a period of time. Here it has been analyzed the trend of total import, export, remittance, L/C issued performance etc as given below:
Trend Analysis of Total Import:
Table-1: Import Performance of MBL
|Year||Amount in BDT in Million|
From the graph found that the highest import was in the year of 2010 and it increased slightly in the start of year 2007.However MBL always tried to raise their import performances.
Trend Analysis of Total Export:
Table-2: Export Performance of MBL
|Year||Amount in BDT in Million|
From the graph found that the Export level increased over year 2007, 2008, 2009 and highest Export was in the year of 2010 which was BDT 59,404.20 million and it decreased slightly in the end of year 2007. However MBL always try to raise their present condition better than past.
Trend Analysis of Total Foreign Remittance:
Table-3: Foreign Remittance of MBL
|Year||Amount in BDT in Million|
From the above graph can easily clarify that amount of remittance increased over year to year. It is a positive sign for the Bank.
Trend Analysis of Month Wise Import Cost:
Import payment during 2010 amounted to USD 27.79 billion compared to USD 21.85 billion in 2009 showing 27.18% growth in import cost in 2010 over 2009. In case of monthly comparison, Import cost was always higher in 2010 over 2009 except January.
Trend Analysis of Month Wise Export Earning:
Total export earning during 2010 amounted to USD 19.18 billion compared to USD 15.08 billion in 2009, indicating an increase of 27.22% export growth in 2010 over 2009. This double digit export growth is mainly attributes to the RMG sector which, contributes almost 75% of our total export earning.
Trend Analysis of Month Wise Remittance Inflow:
Remittance inflow crossed USD 10.00 billion land mark for the first time in Bangladesh history in the year 2009. Since then pace of remittance inflow slowed down and it became evident during the last quarter of 2010 when month wise remittance inflow fall below than that of 2009. Month wise remittance inflow over 2008 to 2010 from source of Annual Report 2010, MBL are showing by graph as:
At the end of 2010, remittance inflow 2.63% growth over 2009 and reached to almost USD 11.00 billion compared to USD 10.72 billion over 2009 and at the end of 2009, remittance inflow 19.36% growth over 2008.
Trend Analysis of Total L/C Issued:
Table-4: Import L/C Issued of MBL
Comment: The performance on L/C issued was better in year 2010 and it increased slightly in the start of year 2007. However MBL always tried to raise their L/C issued performances.
Exchange Gain in Foreign Trade Operations (Including Dealings):
Table-5: Exchange Gain in Foreign Trade Operations
|Year||Amount in BDT in Million|
Comment: The performance on exchange gain in foreign trade operations was better in year 2010 compare to year 2007, 2008 and 2009. It was relatively in good condition in 2010.
The study mainly focuses on the “Foreign Exchange Activities” of MBL. All the findings that are originated from Foreign Exchange Activities Analysis of MBL:
1) General Foreign Exchange Service Portfolio:
Foreign Exchange operations mainly include L/C, Import and export procedures. As an Authorized Dealer, MBL, Mirpur Branch is always committed to facilitate import of different goods into Bangladesh from the foreign countries. Import Section, which is under Foreign Exchange Department of the branch.
2) Different Means of Payment:
The bank provided different means of payment for the importers and exporters whereas they prefer. The clients make their payment by Cash in advance, Open Account, Collection Method, Letter of credit.
3) Concentrate on Export Incentives:
The bank is currently concentrated on different types of export incentives to attract the actual and potential customers. They are Financial Incentives, General Incentives, and Other Incentives. Most of them are already implemented.
4) Growing Fastest Correspondent Relationship:
The number of foreign correspondents is 589 as of December 31, 2010. Efforts are being continued to further expand the Correspondent Relationship to facilitate Bank’s growing foreign trade transactions. The Bank is using SWIFT communication system for fast and accurate handling for foreign trade. The Bank is connected to REUTERS also for up-to-date information.
5) Different Accounts Related to Foreign Exchange Transaction:
The bank provides different accounts facilities to maintain Foreign Exchange Transaction. The clients can choose their suitable accounts facility to make foreign transaction which is more preferable. There as follows:
a) Nostro Account
b) Vostro account
c) Loro Account :
6) Performance of Foreign Exchange Department :
Export and import performance (Figure: 1 and 2) of foreign exchange department of MBL is higher in year 2010. In 2009, it was slightly decreased. Amount of Foreign remittance is upward but L/C Commission was relatively lower in 2009 rather than in 2010.
Different Problems Identification of MBL:
In the basis of internee and study, MBL have different problems such as:
The bank should give close attention on its interest expense. This cost is rising over year to year. It has an affect on interest income. Amount of import and export was turn down last year but it is a concerning issue to have direct monitoring system. Foreign Exchange department’s main function is to handle export and import procedures and there is a direct relationship between amount of Export & Import and Exchange gain which is charged to customers onletter of credit and letter of guarantee are credited to income at the time of effectingthe transactions.
The bank remained selective in export trade financing in 2010. Total export business was handled worth BDT 59.404.20 million in 2010. The main focal point of the bank in export financing was garments industry. The lone driving force of the economy of Bangladesh in single biggest source of foreign exchange.Total foreign remittance in a single year, in 2010 made a record high to the tune of BDT 5,108.10 million. So that, its affects on remittance arrangements.Moreover for prompt & safe delivery of this hard earned money to Shortage of skilled human resource in foreign exchange department is a major problem in MBL. The procedure related with Export and Import and other formalities of Foreign Exchange is so lengthy that it would take more time to finalize one transaction.Currently MBL have PC Bank 2000 bank for documentation and keeping the record which is not enough for documentation and keeping the record.
At present the ATM, debit card, credit card etc services are so much popular. But their ATM booth and other services facilities are not available.
Mercantile Bank Limited has been able to operate its all issues proficiently and more competently in the operations of foreign Exchange and other related perspective around the Bank. To improve the management culture and foreign exchange department’s performance in future, MBL should adopt some of the industry best practices currently. This are:
MBL should try to handle it on strictly and close monitoring system have been maintained.
The direct monitoring and supervision process should develop where branch manager and head in charge of the related department are hold responsible.
MBL should provide different incentive facilities more attractively to attract actual and potential clients.
MBL has deepened its step on the foreign soils further by establishing more and more remittance arrangements with overseas exchange companies where Bangladeshi expatriates are working.
MBL can establish agency arrangements with some big banks.
Vacancies should fill up with qualified and experienced personnel by offering attractive incentives. The bank should provide training facility for its existing employer for their betterment.
MBL and Foreign Exchange department should take initiative to trim down the official formalities as possible.
For proper documentation and keeping the record, it is essential to update Management Information System (MIS).
MBL try to make this service available for each and every client although MBL is broadening its card service facilities, increasing the number of ATM network and widening the card benefits to the customer.
Banking is becoming more and more vital for economic development of Bangladesh in mobilizing capital and other resources. Mercantile Bank, being a third generation bank, is also extending such contributions as to the advancement of the socioeconomic condition of the country. It is not possible to get 100% from anywhere especially for those organizations which with mass people. MBL has some problems but it is encouraging that they are trying to overcome these obstacles. The overall performance of MBL despite some criticism is above the average of present banking industry. Solid revenue growth together with strict discipline on expenses and a culture of sound risk management have upgraded the Bank to a level of excellence. In its pursuit of excellence, the Bank constantly reviews its systems, policies, process and prices of its products and services in line with the changing market reality.