Credit risk management practices in Mutual Trust Bank Limited

Abstract

The topic of my internship report is “Credit Risk Management Practices in Mutual Trust Bank Limited”. The justification of my report writing on this topic is that credit risk management has attained the latest highlighted feature in the banking field. The arena of credit risk has gained extensive attention in recent years due to the increased competition and the challenges of the present financial crisis. The main objective of my report is to have a complete knowledge on the activities performed in Credit Risk Management of Mutual Trust Bank Limited. In this report, I have put some specific objectives and methodology to reach the main objective. Specific objectives are to learn the most recent risk regulation for banks which is linked with credit risk management, to understand various dimensions of risk involved in different credit transactions, to suggest scopes of improvement in credit risk management of Mutual Trust Bank Limited. To get the answers of my objectives, I have considered credit risk grading, risk area analysis under qualitative and quantitative approach for credit risk assessment, credit approval process, administration and recovery process and also gone through several newspapers and MTB Annual Report 2014 for required information. This report contains some limitation because of information security concern and my interest to have coverage in General Banking, Clearing, Foreign Exchange and Credit Department within the 12-week internship period. Bangladesh Bank has formulated Credit Risk Guideline to supervise the process of Credit Risk Management. As a scheduled local bank in Bangladesh, Mutual Trust Bank Limited (MTB) complies with that policy and it has the entire infrastructure in place and activities are performed accordingly. It has adopted a well-structured Credit Risk Management Policy approved by the Board. MTB is currently following BASEL II as bank regulation to measure and mitigate credit risk. Credit Risk Grading is used to assess the borrower’s risk on the basis of scorecard and score sheet. After completing of this grading, credit proposal is processed and submitted for approval. Then credit is administered and monitored to check whether the purpose of credit is being met or it is misused. So to check the risk regularly and to improve credit risk management practices in Mutual Trust Bank Limited, the role of audit, importance of training system and partnership with financial institution for this training have been suggested. Total emphasis on this particular area is given as it is believed that the credit risk management process of a bank is a good indicator of the quality of the bank's loan portfolio.