Saima jabeen Akhanda

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Organization Overview


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1.0 Profile of the Organization

The importance of financial intermediaries in the development of the overall economy of

country cannot be described in short. From the inception of the civilization the banking sector

dominate the economic development of a country by mobilizing the saving from the general

people and channeling those saving for investment and thus economic development and

growth. The importance of commercial banks after the ravage of the liberation war to develop a

better economy was severally needed and it is needed now and will be required in future also.

In time-to-time Government of Bangladesh agreed to permit the private commercial banking in

the country.

To fulfill the demand as well as to improve the commercial banking service in our country, The

Mercantile Bank Limited is scheduled bank that was incorporated in May 20, 1999 under the

Companies Act 1994, commenced its operation on June 2, 1999. It emerged as a new

commercial bank to provide efficient banking services and to contribute socio-economic

development of the country. It availed its registration as a banking company under the Banking

Company Act 1993 from the Bangladesh Bank.

The Bank provides a broad range of financial services to its customers and corporate clients.

The Board of Directors consists of eminent personalities from the realm of commerce and

industries of the country.

- Recognition and award: Different professional and regulatory bodies have

honored MBL frequently. In 2009, The Institute of Chartered Accountants of

Bangladesh (ICAB), the highest Accounting Body in Bangladesh awarded theBank for publishing its Annual Report-2008. In the Financial Sector-Banking

Category, ICAB was kind to recognize our Bank with 'Certificate of Merit' for its

best Published Accounts & Reports. This ICAB award has proved our financial

transparency, efficiency in banking operation and full disclosure of all material

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financial and corporate information. In 2009, Refugee and Migratory Movements

Research Unit (RMMRU) have also honored MBL with Sonar Manush Sheba

Award for its contribution to foreign remittance management.

Within a short time the bank has been successful in positioning itself as progressive and

dynamic financial institution in the country. The is now widely acclaimed by the business

community, from small entrepreneur to big merchant and conglomerates, including top rated

corporate and foreign investors, for modern and innovative ideas and financial solution. Thus

within this short time it has been able to create an unique image for itself and earned significant

solution in the banking sector of the country as a bank with a difference.

Mercantile banks time line overview:

Date Function

May 20, 1999 Incorporation of the bank

June 02, 1999 Commencement of business

October 29, 2000 Opening of 10 th branch

July 03, 2002 Opening of 15 th branch

June 30, 2003 Publication of prospectus for IPO

October 21- 22, 2003 Subscription for shares

December 24, 2003 Opening of 20 th branch

February 16, 2004 Listed in Dhaka Stock Exchange

February 26, 2004 Listed in Chittagong Stock Exchange



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November 24, 2008 Opening of 42 nd branch

June 06, 2009 Inauguration of brokerage house operation

October 22, 2009 Opening of 45 th branch


The Year 2009 was the challenging one for the financial sector. As the Year 2009 was much

crucial for the world economy, it had to pass through such an incessant economic catastrophe,originated in USA with the debacle of sub-prime mortgages, which no one witnessed since

1930's. The economic slowdown was so wide-reaching that almost every economy of the world

had been affected mainly from September 2008. The world economy's deepest post-war

downturn has resulted in higher rate of unemployment in many countries including robust

economies like Russia, USA, UK, Japan, China, and India. The economic disaster had impelled

huge increase in corporate defaults worldwide. International business volume had been

dwindled significantly. In spite of this world economic fall down since 1930's Great

Depression, Bangladesh Economy remained resilient in 2009, attaining 5.88 % Real GDP

growth in the fiscal year 2008-09. Though it was the lowest growth over the last 5 years,

performance of the economy was satisfactory compared to that of other developing nations.

Almost all the macro-economic indicators showed positive trend during the period under

review. The Year 2009 was the challenging one for the financial sector. The incessant fall-out

of international credit market due to world economic meltdown resulting sluggish growth has

put significant pressure on financial performance of banks and financial institutions worldwide.

Mercantile Bank Ltd. Achieved continuous growth in almost all arenas of its business despite

this economic crisis, facing intensified competition of the industry. The Bank remained in

financial strong position with its continued focus on the vision of becoming country's finest

corporate citizen, providing excellent and need-based customer service.

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The Bank mobilized deposits of BDT 58.30 billion as at December 31, 2009 compared to BDT

49.54 billion, till 2008. Total loans and advances stood at BDT 48.30 billion at the end of 2009

that was BDT 41.99 billion at the end of 2008. Import business stood at BDT 60.59 billion in

2009 compared to BDT 56.53 billion in 2008. Export business stood at BDT 46.30 billion in

2009 as against BDT 43.11 billion in 2008. The Bank collected foreign remittance of BDT

5.06 billion in 2009 compared to BDT 4.72 billion in 2008.

In 2009, the Bank was able to make profit before Tax of BDT 1.66 billion as compared to 1.28

billion indicating 29.73% growth. Net profit attributable to shareholders stood at BDT 807.52

million. The return on equity remained 18.80% during 2009 and Earning per Share (EPS) stood

at BDT 37.41. Non Performing Loan (NPL) ratio reduced to 2.54% in 2009 as compared to

2.86% in 2008.

MBL made adequate provision against Classified Loans which is significantly higher than last

year. Adequate provision made the Bank stronger than before. Tier-1 Capital stood at BDT

4.24 billion at the end of 2009 compared to that of BDT 3.47 billion at the end of 2008. Tier-2

Capital reached to BDT 758.91 million at the end of December 2009 as compared to that of

BDT 660.29 million at the end of 2008. Return on Assets (ROA) increased to 1.22% in 2009

from 1.10% in 2008 and Return on Equity (ROE) also increased significantly to 18.80% from

17.75% in 2008. The Capital Adequacy Ratio (CAR) increased to 10.48% in 2009 as against

that of 10.17% in 2008. Net Interest Margin (NIM) stood at 3.58% at the end of 2009,

suggesting a healthy growth in Net Interest Income.

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Efficiency is our strength is the motto of Mercantile Bank Limited. So the motto itself is self-

explanatory to deliver the vision of the bank. Mercantile Bank limited is prepared to meet the

challenge of the 21st century well ahead of time. To cope with the challenge of the new

millennium and to build its strength it hired experienced and well-reputed banker of the

country from the inception. The bank has efficient and dedicated professionals and equipped

with modern technology to provide the best service in the need of the people and thus to realize

its vision. So the Bank defined:

Vision:

To make the finest corporate citizen.

Mission:

Will become most caring, focused for equitable growth based on diversified

deployment of resources, and nevertheless would remain healthy and gainfully profitable

Bank.

Core values:

- For the customers: Providing with caring services by being innovative in the

development of new banking products and services.

- For the shareholders: maximizing wealth of the Bank.

- For the employees: respecting worth and dignity of individual employees

devoting their energies for the progress of the Bank.

- For the community: strengthening the corporate values and taking environment

and social risks and reward into account.

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1.1 Mercantile Bank Limited at a Glance:

Name of The Bank Mercantile Bank Limited.

Registered Office Dhaka

Web Address www.mercantilebank.com

Date of Incorporation June 2, 1999

Total Number of Branches 60 (October 2010)

Chairman Md. Abdul Jalil, M.P

Managing Director AKM Shahidul Haque

Auditors Morshed Alam

Chairman

A. S. M. Feroz Alam

Director

Mohd. Selim

Director

Total Capital Fund BDT. 4,995.43Million (December, 2009)

Paid-up Capital BDT. 2,158.42Million (December, 2009)

1.2 Company Image and logo:

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http://www.prime-bank.com/http://www.prime-bank.com/


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Mercantile Bank limited Bank is a solid, forward looking, modem foreign bank with a long

record of sound performance. The effort that Mercantile Bank Limited makes in order to

portray the Bank as a brand image is very strong and successful. The general image of

Mercantile Bank Limited is that its efficiency is its strength.

1.3 Management of the Bank:Boards of directors are the sole authority to take decision about the affairs of the business. Now

there are 22 directors in the management of the bank. All the directors have good academic

background and have huge experience in business. Md. Abdul Jalil is the chairman of the bank.

The board of directors holds meetings on a regular basis.

Executive Committee: The Executive Committee consists of the seven members from the

Board of Directors. This committee exercises the power as delegated by the Board from time to

time and approves all matters beyond the delegation of Management.

Management Committee: The Management Committee consists of the Acting Managing

Director, Deputy managing directors and Senior Executive Vice Presidents. They discuss about

the progress on portfolio functions. Different ideas and decisions, guidelines regarding

deposits, lending and management of Human and Material resources are the main concern of

this committee. All these committees meet on a regular basis for discussing various issues and

proposals submitted for decisions.

Organizational structure of Mercantile Bank Limited

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1.4 Ownership structure:

From the top to the bottom management body of Mercantile Bank Limited can be divided into

four levels:

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Executive Vice President &

Head of Branch

Vice President

First Vice President

Asst. Vice President

First Asst. Vice President

Principal Officer

Senior Executive officer

Executive Officer

Probationary Officer

Officer

Assistant Officer


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Top Level Management

Executive Level Management

Mid Level Management

Junior Level

1.5 Objective of the Bank:

The objective of the Mercantile Bank Limited is specific and targeted to its vision and to

position itself in the mindset of the people as Efficiency is our strength. The objectives of the

Mercantile Bank Limited are as follows:

Strategic objectives:To achieve positive Economic Value Added (EVA) each year.

To be market leader in product innovation.

To be one of the top three Financial Institutions in Bangladesh in terms

of cost efficiency.

To be one of the top five Financial Institutions in Bangladesh in terms

of market share in all significant market segments they serve.

To develop the standard of living of the limited income group by providing Consumer Credit.

To finance the international trade both in import and export.

To carry on the foreign exchange business, including buying and selling

of foreign currency, travelers cheque issuing, international credit card

issuance etc.

To encourage the new entrepreneurs for investment and thus to develop

the countrys industry sector and contribute to the economic

development.

Financial objectives:

To achieve 20% return on shareholders' equity or more, on average.

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New technology:

Adopting the state-of-the art technology in banking operations.

1.6 Principal Activities:

The principal activities of the Bank are banking and related businesses. The banking

businesses include deposits taking, cash withdrawal, extending credit to corporate

organization, organizing syndication deals, retail and small and medium enterprises, trade

financing, project financing, lease and hire purchase financing, issuance of local and

international credit cards etc. The mode of banking includes conventional and Islamic

Banking. The services are provided through both traditional and modern products. It also

performs investment banking and advisory services through Merchant Banking and

Investment Division Through its Off-shore Banking Units it provides banking business

involving Non Resident foreign currency denominated assets and liabilities.

1.7 Strategy:

Banking sector in Bangladesh made satisfactory performance during 2009. Growth of

export and record inward remittances had eased pressure on dollar. However, import

performance was downsized by decline in prices of commodities and other non-food items

(including oil) along with decline in capital machinery import. The situation improved to

some extent in the last quarter of 2009. Monetary policy aimed at ensuring highest possible

output checking inflation up to tolerable level helped the Banking sector to cope up with

the situation. Bangladesh Bank apart from their indirect measures took direct measures to

reduce lending rate for corporate and medium size customers with a view to reduce interest

spreads of commercial banks.

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Besides, the banking and financial industry experienced further intensification of

competitive pressure as the national and international banks operating in Bangladesh

strongly pursued the banking and financing needs of the Corporate, Retail, SME and Credit

Card sector customers through diversification of products and services and extending

automated banking services with ATM, Debit card facilities and Internet Banking. Rates of

interest became very competitive for deposit and lending. As a consequence of reduction of

interest rates on lending, banks cut their rates on deposit to maintain spread.

As the Government maintained the interest rate on savings instruments, a portion of small

savers who have long been the stable depositors of the banks were attracted to those

Government savings instruments. Besides, the bullish capital market also attracted small

savers significantly as the gain from capital market was tax exempted. Mercantile Bank

Limited will focus on growing earnings over long term at a rate that will keep it above the peer group benchmark. In doing so, Mercantile Bank Limited will focus on its delivery

channels, technology, people and its brand for growth of the shareholders value.

The growth plan of Mercantile Bank Limited centered on its five customer group;

Corporate, Retail, SME, Merchant and Investment Banking, Treasury. Specific strategies

are being implemented for each of them. The plan contains following strategies:

Branch Cluster Management:

An effective Cluster Management (Branch Mentorship) was introduced

whereby the Senior Management is becoming directly involved with Head of Branches

in their marketing drives for assets, liabilities, and other issues. Now the Head of

Branches are exposed to more matured thoughts and ideas through Mentors resulting in

qualitative improvement of their business and operational activities.

Brand Image:

Employees are well trained to provide efficient service thereby enhancing the

Brand Image further. Image of the bank would be harnessed through advertisement in

TV, Newspapers, different print Medias, outdoor ads, transit advertising and trade

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shows. It will make Mercantile Bank Limited with its symbol as a bank with different

care for its customers.

Capital Adequacy:

To maintain adequate capital base to support the asset growth as well as ensure

compliance

Capacity Building:

In order to successfully implement the strategy, the in house capacity

development is important. This is to be done through continuous training of the

employees.

Stress on new products:

PBL shall continue to provide new services to its customers with support of its

superior information technology platform;

Expansion of network for Retail and SME:

Extend business to existing clients through a wider product range and penetrate

new markets through expansion of network in rural areas;

Structured finance:

Accelerate the growth of large and medium lending through syndication;

More savings products:

More savings products with attractive features will be developed for the small

savers, which will be rewarding for both the customers and Mercantile Bank Limited.

Employee motivation:

To cultivate, develop and motivate the people of Mercantile Bank, rewarding

excellence, motivating and enhancing mediocrity.

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1.8 Financial Product and Services:

The Bank has launched a number of financial products and services since its inception. Among

these, Monthly Savings Scheme, Family Maintenance Scheme, Double Benefit Deposit

Scheme, Quarterly Benefit Deposit Scheme, 1.5 Times Benefit Deposit Scheme, Advance

Benefit Deposit Scheme, Consumer Credit Scheme, Small Loan Scheme, Lease Finance

Scheme, Overseas Employment Loan Scheme, Car Loan Scheme, Home Loan Scheme and

SME Loan have received wide acceptance among the people. These products and services are

described below:

Deposit Products:

Monthly Saving Scheme:

It is our significant product; introduced to attract small savers for building up

their habit of savings and thereby build up a healthy capital base for the

economy. The monthly installments are in various sizes and one can adopt the

schemes for a period of 05 years, 08 years or 10 years. Investor gets a lump sum

(principal plus interest) at the maturity of the scheme. Installment amount

should be deposited within the first 10 days of each month. In case of failure,5% of monthly installment will be charged as late payment fee which will be

added with the installment amount. In case of premature encashment, interest

will be paid at Savings rate. The incumbent depositor can get a loan facility of

maximum 80% of his deposited amount. At the end of 2009, BDT 13.58 billion

was deposited against that of BDT 9.79 billion in 2008 recording 38.71%

growth in this scheme.

Monthly Benefit Deposit Scheme:

Under this scheme, depositor will get a certain sum of money in each month

proportion to his/her deposit during the entire tenure. Benefit starts right from

the first month of opening an account under this scheme and continues up to

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five years. On maturity, the principal amount is paid back. Objectives of this

scheme are: help the retired persons for investing their retirement benefits,

create investment opportunities for Non-Resident Bangladeshi, etc. Minimum

deposited amount is BDT 50,000 or its multiples and the tenure is Five (05)

years. This scheme is also known as "Family Maintenance Deposit Scheme

(FMD)". Under this scheme total amount of BDT 1.86 billion was deposited up

to the end of 2009.

Double Benefit Deposit Scheme:

Under this scheme, deposited amount will be double in a tenure of Seven and

Half (7.5) years. Minimum deposited amount should be BDT 10,000 or its

multiples. 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. At the end of 2009 total

amount of BDT 6.93 billion was deposited under this scheme.

Quarterly Benefit Deposit Scheme:

The 'Quarterly Benefit Deposit Scheme' will be maintained for a period of 3(three) years and the minimum amount of deposit is BDT 50,000.00 (fifty

thousand) or its multiples. Interest will be paid on quarterly basis. Benefit starts

right from the first quarter of opening the account. On maturity, principal

amount will be paid back. Savings account is needed to maintain this scheme.

Loan may be granted up to maximum 80% of the forced encashment value on

the date of loan processing. During the period of continuation of loan, quarterly

benefits will be credited only to the loan account. Deposit under this scheme

increased to BDT 229.40 million in 2009 from BDT 145.35 million in 2008.

1.5 Times Benefit Deposit Scheme:

Under the '1.5 Times Benefit Deposit Scheme' a deposit of minimum BDT

50,000.00 (fifty thousand) or its multiples will be received for a period of 4.25

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years. On maturity 1.5 times of the deposited amount will be paid back to the

account holder. In case of premature encashment interest will be paid on Saving

A/c Rate. However, no interest shall be paid if premature encashment takes

place before expiry of 1 (one) year. Loan may be granted up to maximum 80%

of the deposited amount. Total amount of Deposit under this scheme increased

significantly to BDT 233.67 million from just 139.37 million at the end of

2008.

Advance Benefit Deposit Scheme:

Under this Scheme, one can deposit a certain amount of money for two years.

The depositor will receive the benefit on yearly basis. The benefit amount of

first year will be received in advance at the time of deposit. On maturity, the

depositor will get back the principal amount with the benefit amount of second

year. That is Interest is paid in two phases, first phase paid initially BDT 9,500

and second phase paid BDT109, 520 after maturity against BDT 1, 00,000.

Loan may be granted up to maximum 70% of the deposit. This is also known as

"Agrim Munafa Amanat Prokolpo (AMAP)". BDT 76.92 million was deposited

under this scheme at the end of 2009.

Loan Products:

Consumer Credit Scheme:

Consumer Credit Scheme is one of the popular areas of collateral-free finance

of the Bank. People with limited income can avail of credit facility to buy

household goods including computer and other consumer durables. Total

exposure under this scheme was BDT 49.83 million at the end of 2009.

Small Loan Scheme:

This scheme has been designed especially for the businessmen longing for

credit facility for their business and can't provide tangible securities. Total

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amount of BDT 15.40 million was deployed under this scheme at the end of

2009.

Lease Finance:

This scheme has been designed to assist and encourage the genuine and capable

entrepreneurs and professionals for acquiring capital machinery, medical

equipments, computers, vehicle and other items. Flexibility and term and

conditions of this scheme have attracted the potential entrepreneurs to acquire

equipments of production and services and repay gradually from earnings on

the basis of "Pay as you earn." Total exposure under this scheme was BDT

356.50 million at the end of 2009.

Doctors' Credit Scheme:

Doctors' Credit Scheme is designed to facilitate financing to fresh medical

graduates and established physicians to acquire medical equipments and set up

clinics and hospitals and thereby make the medical facilities upgraded and

available to the mass people. BDT 7.06 million was disbursed under thisscheme till the end of 2009.

SME Loan Scheme:

Small and Medium Enterprise (SME) Loan Scheme has been introduced to

provide financial assistance to new or experienced entrepreneurs to invest in

small and medium scale industries with a comparatively low rate of interest as

the same is assisted by the Bangladesh Bank with refinancing facilities.

Exposure under this scheme experienced significant growth of 44.39% and

amounting to BDT 983.39 million at 2009 end from that of BDT 681.08 million

at the end of 2008.

Personal Loan Scheme:

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Personal Loan Scheme has been introduced to extend credit facilities to cater

the needs of low and middle-income group for any purpose. Government and

semi-government officials, employees of autonomous bodies, banks and other

financial organizations, multinational companies, reputed private organizations

and teachers of recognized public and private schools, colleges and universities

are eligible for this loan. Total Loans and Advances under this scheme

increased to BDT 364.38 million up to 2009 from that of 279.78 million at the

end of 2008.

Car Loan Scheme:

Car Loan Scheme has been introduced to enable middle-income people to

purchase Cars/SUVs/Jeeps. Government and semi-government officials,

employees of autonomous bodies, banks and other financial organizations,

multinational companies, reputed private organizations, teachers of recognized

public and private universities and businessmen are eligible for this loan. Total

amount of BDT 201.98 million was disbursed under this scheme up to

December 2009.

Home Loan Scheme:To meet the growing need of housing for middle and lower-middle income

people, MBL has introduced Home Loan Scheme. We also support the

Bangladesh Bank's Home Loan Refinance Scheme. The Scheme will also boost

up the growth of housing sector. Such loan shall be available for purchase or

construction of new apartments for self-residing purpose.

Overseas Employment Loan Scheme:

Overseas Employment Loan Scheme is designed to facilitate the Bangladeshi

youths seeking employment abroad but unable to meet the expenses to reach the

workplace from their own sources. The ultimate objective of the scheme is to

promote skilled -skilled manpower to different countries across the world as

well as to provide support to Government Policy considering priority of this

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sector. By availing loan under this scheme, the active youths of middle and

lower middle class can get overseas employment by avoiding borrowing from

the illustrious class or village 'mohajon' at a very high cost or selling their

paternal properties. The scheme will also help fetching foreign currency for the

country as well as fulfill the Bank's commitment to encourage Micro-lending

for poverty alleviation, improve the quality of life and thereby contribute to

socio economic development of the country.

Financial highlights for the year 2009 & 2008:

(BDT in million)SL

NO. PARTICULARS 2009 2008

1 Paid-up Capital 2,158.42 1,798.68

2 Total Capital Fund 4,995.43 3,387.17

3 Capital Surplus/Deficit 226.86 120.41

4 Total Assets 66,166.52 55,928.72

5 Total Deposits 58,033.47 49,538.35

6 Total Loans and Advances 48,295.55 43,419.36

7 Total Contingent Liabilities andCommitments 21,757.17 1 9,917.86

8 Credit Deposit Ratio (in %) 83.22 87.65

9 Percentage of Classified Loans against TotalLoans and Advances (in %) 2.59 2.96

10 Profit after Tax and Provision 807.52 615.88

11 Amount of Classified Loans during the year 261.24 348.47

12 Provision kept against Classified Loans 629.70 5 78.20

13 Provision Surplus 1.09 -

14 Cost of Fund (in %) 8.81 9.19

15 Interest Earning Assets 57,471.28 4 9,941.85

16 Non-interest Earning Assets 8,695.24 5,986.87

17 Return on Investments (ROI) (in %) 8.75 10.46

18 Return on Assets (ROA) (in %) 1.22 1.10

19 Income from Investments 696.66 520.33

20 Earning Per Share (BDT) 37.41 28.53

21 Net Income Per Share (BDT) 37.41 28.53

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22 Price Earning Ratio (approximate) 11 Times 12 Times

1.9 SWIFT:SWIFT is the Society for Worldwide Inter-bank Financial Telecommunication, a member-

owned cooperative through which the financial world conducts its business operations with

speed, certainty and confidence.

Mercantile Bank enables its clients to transfer funds to their beneficiaries through the most

efficient channels, which are available from the bank. They facilitate quick and easy transfer of

their funds by assuring complete security.

SWIFT Branches List:

Sl. No. Branch name SWIFT code

1 Main MBLBBDDH001

2 Karwan Bazar MBLBBDDH002

3 Agrabad MBLBBDDH003

4 Rajshahi MBLBBDDH004

5 Dhanmondi MBLBBDDH005

6 Banani MBLBBDDH006

7 Khatun gonj MBLBBDDH007

8 Nayabazar MBLBBDDH0119 Mohakhali MBLBBDDH012

10 Motijheel MBLBBDDH013

11 Elephant Road MBLBBDDH014

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12 Mirpur MBLBBDDH015

13 Jubilee Road MBLBBDDH016

14 Uttara MBLBBDDH017

15 Gulshan MBLBBDDH019

1.1.0 Mercantile Bank Limited Brokerage House:Mercantile Bank Limited Brokerage House has been developed to ensure development of

sound capital market and to provide higher, better and diversified services to a wide range

of customers. MBL is offering high quality products and services at a competitive rate.

Mercantile Bank Limited Brokerage House offers full-fledged international standard

brokerage service with margin loan facility. We are also a full service Depository

Participant (DP) of Central Depository Bangladesh Ltd. (CDBL). The brokerage service is

designed to provide customers with necessary support profitably in the stock market.

MBL is dedicated to provide high level of professional and personalized services to itsdomestic and international clients at a reasonable cost. MBLs services are comprehensive

in nature, including brokerage, margin loan, CDBL facilities, and research and custodian

needs of customers.

Reason for MBL Brokerage House:

- Professionally trained staffs are engaged.

- Chosen as the preferred broker by most foreign/international and high-net

worth investors

- Corporate member of Dhaka Stock Exchange

- Depository Participant (DP) of Central Depository Bangladesh Ltd

- Margin Loan facilities

- Maintains International

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- MBL has a strong commitment to its corporate, institutional and individual

clients.

1.1.1 Card facilities:MBL card holder can enjoy the following benefits and much more:

No Cash Withdrawal Fee:

For withdrawals of cash from MBL ATM by MBL cardholders no cash advance fee is

necessary and from any other Q-cash ATM the fee is Tk.10 only. MBL is the only bank

offering such unique facility. Moreover, our VISA Cardholders can also withdraw cash

from any Visa logo ATM locally and internationally.

Acceptability:

International/Dual card is accepted all over the world at millions of outlets and ATMs.

A Dual card is also accepted in most of the big cities like Dhaka, Chittagong, Khulna,

Rajshahi, Sylhet at more than 10,000 outlets including 4500 POS. It covers various

kinds of merchants like hospital, hotel, restaurant, department store and the card has

accessibility to any outlet having VISA logo.

Credit Facility:

Mercantile Bank Ltd. Visa Credit card offers maximum 45 days credit facilities free of

interest and minimum payment is 5% of outstanding billing payment for easy

repayment and convenience of the customers.

Supplementary Card: A Principal cardholder (local) may apply for more than one supplementary card where

one supplementary card is free. Expenses made by supplementary card will be charged

to the principal card.

Advance against Credit card:

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MBL cardholder can take advance as term loan up to 50% of the card limit to be repaid

on the monthly installment basis. Any POS transaction over TK. 20000 but not

exceeding 50% of the credit limit is convertible to Personal loan/CCS and to be repaid

on monthly installment basis. Repayment period of such loan may be from 6 months to

36 months.

Overdraft Facilities:

Overdraft facilities up to 80% of the credit card limit may also be allowed for payment

of the installment of scheme deposit with our Bank.

Payment of Utility Bill:

Payment of utility bills like telephone bills, gas bills, electric bills, water bills, may be

settled by card.

1.1.2 Online Banking:Online Banking has so far been activated with 42 Branches of the Bank from January 01, 2006.

Online service is now available for all customers Both Cash deposit and withdrawals, Cheque

Deposits and Transfer in CD, SB, STD, Loan accounts (Cheque Bearing within limit) and

Monthly Savings Scheme (MSS) .

Online Banking Times:

Sunday to Thursday, Hours - 9:00 am to 3:00 pm

Saturday, Hours - 9:00 am to 12:00 noon (only in open branches on Saturday)

Service charge: For Monthly Savings Scheme (MSS) TK. 10 (Ten only)

including 15% VAT per transaction. Yearly service charge is not applicable.

Account wise Online Banking Limit (cash withdrawal, deposit and

transfer):

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- Maximum Deposit Limit: No Limit for Online Cash Deposit

Transaction per day per Client.

- Maximum Withdrawal Limit: Tk. 300,000.00 per transaction.

Cumulative withdrawal shall not be more than TK.600,000.00 per day

Charges for Online Banking:

Intra City* Inter City** Mode of realization

Free

Up to BDT 1,00000 - TK. 50.00Up to BDT 2,00000 - TK. 100.00

Up to BDT 3,00000 - TK. 150.00

Up to BDT 4,00000 - TK. 200.00

Up to BDT 5,00000 - TK. 250.00

Up front Cash

*Intra City Transaction: Branches under Same City Corporation Areas.

**Inter City Transaction: Branches outside City Corporation Areas.

1.1.3 Remittance Services:

Mercantile Bank Limited maintains a strong network with the Overseas Exchange Companies

& Banks in different parts of the world ensuring better remittance services for its customers.

The following are the list of Overseas Exchange companies/Banks having arrangement with

mercantile Bank Limited:

Name of the Exchange Company PresenceRumana Money Services UK Wall Street Exchange Centre UAEAl-Ahalia Money Exchange Bureau UAE

Naaz Exchange Limited CanadaXpress Money Services Global

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Euro-Bangla Money Transfer Ltd UK National Exchange Company S.R.L ItalyAl Moosa Exchange Company KuwaitAN Express Ltd UK SN Money Exchange Limited UK

Trust Exchange UK limited UK Economic Exchange Company UAEManiflo Money Exchange Inc USABangladeshi Money Exchange Ltd CanadaGlobal Exchange Italia Srl, Italy ItalyRupali Exchange (Europe) Ltd UK Al-Zaman Exchange W.L.L Qatar ICICI Bank Canada

1.1.4 Mercantile SMS Banking Service:

Your Bank at your Fingertip expresses the modern compatibility of Mercantile Bank

Limited. As the time goes by, life style changes. To keep up, MBL welcomes you to SMS

Banking Service, one of the most modern banking services. MBL SMS banking Service isconvenient, safe, low-cost, fast and available round the clock.

MBL SMS Banking Service offers:

Access to account balance

Last 3 transaction inquiry

Cheque status inquiry and many more.

1.1.5 Import Export Business:

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Import and export is a core business area of the Bank. Bank's performance in this area during

2009 was satisfactory. During the period under review, total import and export business

transacted were BDT 60.59 billion and BDT 46.30 billion respectively. The growth of import

and export business was 7.19% and 7.40% in 2009 and 2008 respectively. The growth of

export gave the Bank an edge in managing required foreign currency to meet L/C commitments

1.1.6 Inward Foreign Remittance:

Hard-earned remittance of the Bangladeshi expatriate working abroad plays significant role in

the overall development of the economy. Amid the world economic turmoil, countless

Bangladeshi expatriates had to return to the country, losing their job in the foreign lands. In

spite of this adverse economic situation, growth of inward foreign remittance of the Bank was

consistent. In 2009, the Bank handled BDT 5.06 billion of remittance business compared to

that of BDT 4.72 billion in 2008. MBL continues to assist the overseas Bangladeshis to remit

their hard-earned money to their beneficiaries swiftly and safely. The Bank has opened several

Branches in the rural areas with urban areas as well, aiming to aid the remitters to remit their

money to their beneficiaries living in those rural areas.

MBL maintains a strong network with the Overseas Exchange Companies & Banks to ensure

quicker and safer remittance services. The Bank has signed agreements with different overseas

exchange companies including USA, Canada, UK, Italy, Japan etc. so that the remitters caneasily send their money to their beneficiaries. As well, negotiation with more Overseas

Exchange Companies is in progress. MBL has signed International Representation Agreement

with globally reputed Money Transfer Company "Western Union Services". This arrangement

helps us to provide better service to the expatriates sending their money to their dependents,

relative, friends & family members residing in Bangladesh. An agreement with Bangladesh

Post Office (BPO) has been signed for the distribution of inward foreign remittance. BPO

provides services through its 450 designated outlets under this arrangement across the country.

As a result, a new horizon has been opened for the Bank to extend its remittance services to the

doorstep of beneficiaries easily, quickly and safely. Very soon, MBL intends to launch an

Exchange House in U.K, namely-"Mercantile Bank Exchange House" to make the remittance

service convenient for the expatriates living in U.K.

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1.1.7 Corporate Social Responsibility of MBL:Corporate Social Responsibility (CSR) has been described as corporate citizenship, moral and

transparent business values, ecological sustainability or corporate charity. It is a business

practice to deliver sustainable and ethical values to the equity holders, employees, customers,

environment, society, government and other stakeholders at large.

Mercantile Bank Limited (MBL) is fully committed to conduct its business activities in an

economically, environmentally and socially sustainable manner. The Bank always fosters the

motive in mind to build an ever-lasting warm relationship with the customers, employees,

capital providers, community people, regulatory bodies and other stakeholders. Keeping thismotive in mind, MBL always cares all of its stakeholders and the community people since its

inception.

For Community:

As we all know that banks act as a 'Trustee' for the society. Therefore, MBL behaves in

a responsible and ethical manner with the community people. The Bank always

contributes towards changing the quality of life of the people as the Bank wishes to see

them leading their life in a standard way. The Bank serves by adhering closely the

national policies and thereby contributing towards the progress of the nation. In

maintaining its responsibilities to the society where it operates its business activities,

MBL focuses in the areas of employment, education, professional development and

contribution to the underprivileged people.

Employment:

MBL plays an important role in creating job opportunities for the people. Each

year, the Bank creates employment opportunities for fresh graduates as well as

experienced officials. In 2008, a total of 169 fresh graduates have joined with

MBL family. The new recruits have joined as Probationary Officers (82) and

Assistant Officer (87). Besides, experienced bankers are also being appointed in

the Bank as and when required. At the end of 2008, the Bank has 1,115 officials

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in its payroll. Moreover, Bank's financing to the SME sector will indeed

promote employment generation.

CSR Activities of the Bank in 2008 and one year back:

(Amount in BDT) AASector Wise Spending 2008 2007Donation to Mercantile Bank Foundation 100,00,000 40,00,000Education 390,000 100,000Health 200,000 25,000Disaster/Relief 1,530,000 10,400,000Others 50,000 90,000Total 12170000 14615000

Education:

MBL desires for an educated nation. The Bank through its Foundation,

patronizes the education sector of the country. The Bank provides scholarship

to the needy and brilliant students of different educational institutions. Best two

MBM graduates of BIBM get financial awards from the Bank. In the year under

review, the Bank has provided scholarship worth BDT 1 lakh in this regard. The

children of the employees of the Bank also get scholarship for brilliant results.

MBL has also donated BDT 1.00 million to Bangla Academy for research in

Bengali Literature with a view to aid academic research, which would

eventually uphold Bangladeshi culture across the Globe.

Professional Development :

Professional education has been encouraged in MBL. The Bank believes that to

be more professional one should gather professional knowledge. The Bank is

continuing its supports to the professional bodies as it continued earlier. The

Bank encourages it employees to complete Banking Diploma by rewarding

BDT 5,000 for completion of part-I and BDT 7,000 for completion of part-II.

Support to Destitute:

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MBL always shares the well and woe of the distressed people. Mercantile Bank

Foundation has been set up to give financial support to the underprivileged

communities. Through this Foundation, the Bank concentrates on addressing

the needs of physically disable people such as blind, acid victims etc. The

people of our country are used to be the victims of natural calamities every now

and then. The Bank strives to assist the victims of natural disaster by providing

financial help in rehabilitation and rescue purpose. In the year 2008, the Bank

donated BDT15.30 lakh for helping the disaster victims.

For Customers:

MBL provides the most efficient and need-based services in every aspect of its business

by being more innovative and professional. The needs and expectations of the

customers drive us to the development of new banking products and services. MBL

uses trained personnel and state-of-art technology for delivering prompt services to the

customers.

The Bank has high reputation for delivering better customer service and is also

committed to uphold its image in coming days. Customer Service Excellence is an

integral part of its strategy to stay ahead in an extremely competitive banking industry.

To attain a continuous improvement in customer service, all branches of our Bank have

established 'Customer Complain and Suggestion Box'. At branch level, officials are

deployed to assist and interact with customers on banking queries and provide prompt

solutions of the queries.

A number of banking products has been launched for the people who have traditionally

been excluded from the banking services. 'Women Entrepreneurs DevelopmentScheme' has been introduced in the Bank for the women who are experienced but

dearth of capital is hindering their initiatives to start business. An agreement with

Women Entrepreneurs' Association, Bangladesh (WEA) has been signed to encourage

women entrepreneurs to come forward in the business. They have also introduced SME

services for the marginal people of our country.

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For Employees:

MBL, which has 1,115 employees provides due importance for promoting the well being

of its employees by offering attractive remuneration and other fringe benefits.Employees' remuneration and benefits packages are monitored and regularly reviewed to

ensure a competitive package in the industry. Incentive bonus from yearly profit is also

rewarded to the employees on performance basis. Employees are awarded all sorts of

supports to pursue professional educations. The Bank provides its employees personal

loan facilities such as car loan, furniture loan and other loan to make their life easier and

comfortable. Growth and progression opportunities for employees are available in the

Bank. With competitive remuneration packages and employees' well being is looked after

through attractive benefits such as medical coverage, loans at lower rate of interest for

housing and car as well as other forms of financial assistance. MBL seeks to provide a

standard quality of life to its employees.

The Bank ensures a hygienic and convenient work environment for its employees.

Performance and merit are the basis of promotion for the employees. The Bank respects

the worth and dignity of individual employees. Importance has been given for building

skill and efficiency of the employees to do their assigned day-to-day jobs with due

confidence by bringing them in the 'Training Net'. For this purpose, Training Institute of the Bank has been refurbished in a large and well-equipped premise located in Swadesh

Tower, 41/6 Purana Paltan, Dhaka, which has a well-resourced library. The trainees are

being provided residential amenities in the Training Institution.

For Equity Holders:

Maximization of wealth of the equity holders gets top listed priority in the Bank. MBL is

committed to its capital providers to deliver fair returns on their investment. Equityholders are always concerned to see their institution progressive. The Bank runs its

business activities keeping in mind as its shareholders wish to see it. MBL is consistently

delivering a superior return to its shareholders and investors. In 2008, Dividend Payout

Ratio was 58.41%.The Bank has achieved BDT 34.24 as EPS and declared Stock

Dividend at 20% in the year 2008.

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For Environment:

MBL is concerned with conservation and preservation of the environment. There is a

rising level of awareness and demand to address the issue of sustainability of theenvironment because the whole world is increasingly experiencing the devastating effects

of environmental changes for Green House affects due to Global Warming. The Bank is

mindful of its responsibilities to the future generations by playing its part in promoting

environmental awareness and in the conservation of the environment.

The Bank takes environmental issue very cautiously while financing new projects. It

finances only in those projects, which are environment-friendly. Early detection of

environmental risks is an integral part of credit appraisal system of the Bank. Ecological

damage will sooner or later harm not only the society but also the Bank in the form of

loan losses or image problems. In this regard, the Bank sent two officials to the Hague,

Netherlands for training on 'Environment and Social Management Course for Financial

Institutions' conducted by FMO, Netherlands. The Bank creates awareness among people

of the community about the effects of environmental pollution and its consequences.

For Cultural Activities:

MBL fosters the culture of various communities. The Bank is relentlessly supporting

traditional games and sports by taking some non-profit initiatives. As a recognized

benefactor of culture, the Bank provides funding for the publication of art books that

familiarize the Bank. A variety of cultural institutions have been benefited by the

initiatives of the Bank. The Bank also supports the writers, musicians and other

performers in their inventive activities.

The Bank patronizes different cultural activities. The Bank has sponsored a number of

cultural programs encouraging different communities. The Bank has sponsored NationalChess Championship, Tennis competition and Swimming competition in different times.

In 2008, the Bank was the Official Sponsor of '23rd National Swimming Championship

Competition' arranged by Bangladesh Swimming Federation. BDT 1 (one) million has

been donated to celebrate this ceremony.

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Mercantile Bank Foundation:

Mercantile Bank Foundation has been established to act as a helping hand to the

community people and Bank's commitment towards CSR. The Foundation always playsits role by extending charitable and beneficial social services. The Foundation has been

promoting a dialogue between the Bank and its community for over nine years. Through

its programs, the Foundation strives to preserve and promote cultural heritage and

support artistic expression. It also provides funding for state-of-art research, as well as for

innovative projects in the areas of education, social insertion and disability.

Objectives of Mercantile Bank Foundation: Mercantile Bank Foundation has

been formed with the aim of achieving some objectives, which has been stated

below:

1. To take possible initiatives in increasing social well being and alleviating

poverty from the country.

2. To support the education by establishing new educational institutions,

providing stipends/ scholarship to the poor and brilliant students.

3. To provide awards to the Scholars in eight significant arenas for their

outstanding contribution. These arenas are:- Bengali Language and Literature

- Education and Culture

- Research on Liberation War

- Economy and Economic Research.

- Commerce and Industry

- Medicine, Science and Technology

- Journalism and

- Sports

4. To assist research activities on Bengali Literature through Bangla Academy.

5. To support the writers and publishers through purchasing their books and

distributing these to different educational institutions on the occasion of

national and historical days.

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6. To assist the unemployed young to make them self-sufficient.

7. To assist the rootless and distressed orphans through taking appropriate steps

for their mental perfection and self-support.

8. To support in establishing hospitals, clinics, etc. for the improvement of the

health sector, to donate one time financial endowment to the poor artiste,

literature-patron and fatal disease-affected poor patients, to support the poor

father for arranging his daughter's marriage, to help poor but bright students.

Financing of the Foundation:

The Bank contributes 1% of Operating Profit or BDT 4.00 million, which is the

maximum. The Sponsors of the Bank donates to the Foundation a lump sum

amount at a time or amount on yearly- basis from their own funds or their own

business source. Also different grants and donations from persons or,

organizations of home and overseas are being used to financing the foundation.

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1.1.8 Human Resource Development:

MBL invests extensively in its human resource development to build up its employees'

capabilities. The goal is to empower staff and create a culture that encourages and

rewards staff for their commitment, creativity and teamwork in order to respond rapidlyto the ever changing customer needs and the market place. Their employees have shown

remarkable agility in dealing with the challenges of new ideas. The successful

implementation of various strategic initiatives, have demonstrated their resilience,

determination and commitment to embrace change. They are always aligned with the

strategic direction of the Bank.

A smart officer wins the heart of a customer by delivering services to the customers'

expectation. Taking that into consideration, MBL has formulated its Human Resource

Policy incorporating ample benefits to be provided and returns to be expected from the

employees. Employees are the valuable assets and the Bank intends to make its

employees more valuable, nurturing their knowledge and skills.

They put utmost care for the welfare of their employees. They always ensure congenial

working atmosphere for their employees. They provide attractive compensation package

to all level of executives, officers and staffs and considering the continuous change in the

price level and living cost, they revise the compensation package at a regular time

interval. Alongside the festival bonus, the deserving employees are rewarded as per their

performance with accelerated promotion and other incentives. Their objective is to create

a genuine partnership with their employees by providing appropriate incentives and

rewards for performance.

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leading telecommunication company to deliver banking services through using its mobile

network. This initiative will provide access to affordable financial services to the

customers including local money transfer, business payments like Utility Bill, Insurance

Premium, and Loan Installments etc.

1.2.0 SWOT Analysis of Mercantile Bank Limited:

STRENGTH WEAKNESS

1. Quantities approaches to reduce the

risk classification.

2. Assign adequate power to the top

management to monitor credit

operation.

3. Clearly specifies the documentation

process to reduce the risk of

classification.

4. Provide guideline to furnish loans

only to small-scale industries for

short time, which minimizes huge

loss.

5. Clearly define measure in dealing

with foreign exchange transaction.

6. Strong procedure in selection of new

borrowers.

1. The techniques specified for credit

appraisal is not sufficient.

2. More dependency rests on

Government sources for deposit

mobilization.

3. Service offered is not adequate.

4. High price of loan applicant form.

5. Harder rules and regulations for loans and advances.

OPPRTUNITIES THREATS

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1. Suitable for small-scale business,

which growing day by day.

2. Government and other International

agencies positive attitude toward

low classification rate.

1. Upcoming Banks and their unique

features. .

2. Reduced Government support in

future.

Introduction of the Study

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2.0 Literature review:

In my report I have tried to focus on the Performance Management System of Mercantile Bank

Limited. There have been so many reports and articles done before by other people over this

issue. In literature review I will try to draw attention over some of those articles.

According to sumtotal.com, a renowned website of performance management solutions;

Performance management is essential to building a productive and engaged workforce.

Performance management solutions enable one to automate appraisals, close skill gaps, and

manage career and succession plans. With these critical capabilities in play, one can quickly

align ones talent pool with their overall business goals.On the other hand, another renowned HR website About.com reveals that, Managers cite

performance appraisals or annual reviews as one of their most disliked tasks. Performance

management eliminates the performance appraisal or annual review and evaluation as the focus

and concentrates instead on the entire spectrum of performance management and improvement

strategies. These include employee performance improvement, performance development and

training, cross training, challenging assignments, 360-degree feedback and regular performance

feedback.

But setting up of an effective performance management system is not that easy. That is why D

& B creditability corp. encloses the way of building an effective performance management

system. They are saying that: setting up a good performance management system doesn't

happen overnight or by accident. One need to consider its design and carefully plan how it will

work before managers begins using it to evaluate employees.

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A performance management system should provide employees with these four basic benefits:

A clear understanding of job expectations

Regular feedback about performance

Advice and steps for improving performance

Rewards for good performance

The goal of a performance management system is to help boost employee performance and,

ultimately, the productivity of the business. For it to be effective, a performance management

system should incorporate the following critical elements:

Updated Job Descriptions:

Job descriptions should clearly describe the employee's current duties and

performance expectations. Position descriptions should be specific, clearly

defining the job function, required skills, deadlines and goals, and should

delineate expectations for the employee's relations with peers and customers.

Keep job descriptions current, especially during times of organizational change.

Rapid growth and downsizing inevitably add new responsibilities and shift

employees' workloads.

Performance Measures and Standards:

Once you have job descriptions in place, you need to establish performance

standards that describe what constitutes below average, average, and above-

average performance. Start by thinking about the best- and worst-case scenarios

until you reach realistic standards for measuring performance.

Next, determine how you're going to measure the expectations outlined in the

job description. This requires both objective and subjective methods of

assessment. In some situations it's easy to gauge performance by looking at thenumbers: for example, how many new accounts an employee brought in or how

many products an employee assembled.

Quantifying an employee's coping skills, customer service skills or attitude is

much more difficult. Some managers also have biases or poor evaluation skills.

Establish clear guidelines and measures that eliminate potential bias and

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prevent evaluators from subjectively determining what constitutes excellent and

unacceptable behavior.

Evaluator Training:

Research shows that managers with poor communication or interpersonal skills

are often the downfall of a company's otherwise sound performance

management program. All managers need training on how to communicate and

how to conduct fair, nonjudgmental and consistent appraisals. An effective

performance management system will administer training to managers before

they conduct their first reviews.

Guidelines for Improvement:

Institute basic policies to cope with employee weaknesses and poor

performance. Decide if you'll provide training or mentoring for employees

exhibiting sub par performance. Set guidelines that outline how long it should it

take an employee to improve and what steps will be taken if the employee fails

to show improvement.

Employee Input:

Solicit and evaluate staff suggestions for your performance management

program. Incorporate employee input into your program or system as needed.

Compensation and Rewards:When employees perform well they should be compensated. Rewards keep

morale high, generate loyalty and foster additional improvement. But closely

linking pay hikes and promotions to performance appraisals is a contested issue.

Critics say that too close a tie between performance evaluation and

compensation may be punishing or unfair to employees who don't overachieve.

Regardless of how and when one chooses to compensate his/her employees, an above-average

appraisal deserves acknowledgment. It has to be making sure that employees are being

consistently rewarded for their hard work.

One of the research papers, from University of California Berkeley states that:

An effective performance management process sets the foundation for rewarding excellence. It

becomes more useful:

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- By linking individual employee work efforts with the organizations mission and

objectives, the employee and the organization understand how that job contributes

to the organization.

- By focusing attention on setting clear performance expectations (results + actions

& behaviors), it helps the employee know what needs to be done to be successful

on the job.

- Through the use of objectives, standards, performance dimensions, and other

measures it focuses effort. This helps the department get done what needs to be

done and provides a solid rationale for eliminating work that is no longer useful.

- By defining job-mastery and career development goals as part of the process, it

makes it very clear how the current position supports employee growth and the

additional opportunities the employee needs to explore.- Through regular check-in discussions, which include status updates, coaching, and

feedback, it promotes flexibility, allowing you and the employee to identify

problems early and change the course of a project or work assignment.

- By emphasizing that an annual appraisal should simply be a summary of the

conversations held between you and the employee during the entire cycle, it shifts

the focus away from performance as an annual event to performance as an on-

going process.

An effective performance management process, while requiring time to plan and implement,

can save you and the employee time and energy. Most importantly, it can be a very effective

motivator; since it can help you and the employee achieve the best possible performance.

Martin Fisher described the several forms of performance management system in his book

Performance Appraisals. According to him the purpose of performance appraisal is to

improve the organizations performance through the enhanced performance of individuals. In

his book he showed the assumption of people regarding performance appraisal. Many people

refer to a number of more specific positive purposes of performance appraisal. Such as-

To review past performance.

To assess training needs.

To help develop individuals.

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To audit the skills within an organization

To set targets for future performance.

To identify potential for promotion.

But there are some negative perceptions about performance management as well. Morenegatively people may believe that performance appraisal is simply used by the organization to

apportion blame and to provide a basis for disciplinary action. Some people see it as a stick

that management has introduced with which to beat people. And if this is there attitude- with or

without cause- performance appraisal is doomed to failure. Even if the more positive objectives

are built into the scheme, problems may arise because:

They may not all be achievable.

They can cause conflict.

For example, an appraisee is less likely to be open about any shortcomings in past performance

during a process that affects pay or promotion prospects, or which might be perceived as

leading to disciplinary action.

It is therefore important that performance appraisal should have specific objectives. Not only

should the objective be clear but also they should form part of the organizations whole

strategy. In this way the key objectives can be incorporated into the appraisals, highlighting

areas for improvement, new directions and opportunities.

Alan Fowler gave a good definition of the objective of performance appraisal in PM plus, June

1991. He suggested that: Staff work best when they know what they have to do, how well,

they have to do it and how well they are thought to have done, so they need to talk to their

managers at least once a year about this, and their managers need to take their staffs views

into account when setting work goals and deciding who needs what training.

The following are some examples of the definitions used by various organizations:

Cambridge shire County Council, for example, is quite clear that the objectives

of performance review meetings are to: Look back on what has been accomplished.

Look forward to what needs to be accomplished.

Identify how individuals can be helped to improve their contribution in their

present jobs

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Clarify the jobholders career prospects, aspirations and intentions.

These objectives are all positive. There is no reference to identifying weaknesses; no

implication that the process is about attaching blame.

The national Australia Group Ltd states that their scheme is: Based on the

simple idea that when people know and understand what is expected of them, and have

been able to take part in forming these expectations, they can and will perform to meet

them. The group gave the following reasons for introducing the scheme:

We need to be offered encouragement and support to perform well.

When our performance is assessed it needs to be as objective as possible.

We should all be part of the same process of performance assessment.

We need to believe and have confidence that the system is fair to everyone.

We need everybody to be trained so that the approach is fully understood and can be applied

consistently.

We all need to be involved in the process with advance information, time for preparation and

an opportunity to assess ourselves.

At MENCAP the aims and principles of their performance management

and development system were defined as follows:

Aims:

- To increase mutual understanding of performance requirements.

- To note and recognize achievements.

- To note and analyze any problems in meeting requirements.

- To provide the opportunity to discuss aspirations and concerns about career

prospects and the present job.

- To define or, redefine future objectives

- To agree action plan.

- To agree self- development and training needs. Principles:

- Concentrates on developing strengths as well as addressing performance problems.

- Based on open and constructive discussion.

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- An everyday and natural management process, not just a once- a year event and

not just a form filling exercise.

BP exploration defined the objectives of their performance management system

as follows:

Our stated objective is to achieve a best in class world position. We are dependent on the

contribution of each and every one of our people to get there. We need to focus on

performance- how to do everything we do better- and this means how we manage our people,

just as much as it means discovering new oil-fields, improving our profitability, managing

our costs or, upgrading our public image.

We need to focus on how, on a day-by-day basis, we deliver performance improvements-

even if what we are already doing is of a very high standard. To achieve this we need to

change the way we work together and the way performance is discussed. Managers and

others responsible for reviewing performance will be assessed on how well they do this.

HP information plc have defined the objectives of their performance appraisal

systems which are being stated as follows:

To improve performance management in HP Information plc.

To review past and present work performance.

To improve future performance.

To set performance objectives. To identify training and development needs.

To provide a rational basis for salary recommendations.

To develop communication and working relationship.

One of the objectives of this scheme is to provide data for pay proposals. Although, as noted

above, this can cause problems, many organizations do include a rating system in their

schemes which influences performance related pay awards. Their reason for doing this is quite

clear: if you are going to reward people according to their performance, your decision must be based on a proper review and assessment of their performance.

As per McGregor, Performance appraisal is necessary because it:

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Provides systematic judgment needed to back up salary increases, transfers, demotions,

and terminations.

It is the means of telling how the subordinate is doing, suggestions needed to change

the behavior, attitude, job knowledge, skills of the employee.

The superior uses it for the coaching and counseling of the individual.

And as per Levinson, performance appraisal is important because it:

Gives Feedback for performance

Basis for changing and improving of behavior

Provides data for future assignments and compensation.

Michael Armstrong in his book Armstrongs Handbook of Performance Management has

clearly defined Performance Management. In his words: Performance management is a

systematic process for improving organizational performance by developing the performance

of individuals and teams. It is a means of getting better results by understanding and managing

performance within an agreed framework of planned goals, standards and competency

requirements. Processes exist for establishing shared understanding about what is to be

achieved, and for managing and developing people in a way that increases the probability that

it will be achieved in the short and longer term. It is owned and driven by line management.

He also stated the problem of performance management in his book: Performance management

is often referred to as the Achilles heel of HRM. All modern organizations face the challenge

of how best to manage performance. That is, they must determine the best ways to set goals,

evaluate work and distribute rewards in such a way that performance can be improved over

time. While all firms face similar challenges, the way a firm responds to these challenges will

depend on where the firm is located and the context within which it is operating. Differences inculture, technology or simply tradition make it difficult to directly apply techniques that have

worked in one setting to a different setting.

2.1 Rationale of the study:

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4.1 I am proposing this study to know about the performance management system of

Mercantile Bank Limited.

4.2 Gathering knowledge which will help me in future to establish a better performance

management system.

4.3 From the study the University gets information of performance management activities and

strategies of the Mercantile Bank limited which may help them to modify their system

2.2 Statement of the problem:

I chose the topic to learn how Performance Management System works in an organization and

to relate the theoretical learning with the practical experience. This topic will help me to know

the reason for Evaluation, person who should benefit from the evaluation, what type of

evaluation should be used and what problems might be encountered. How PMS is helping in

managing the overall performance of the employees, to identify that.

2.3 Scope of the Study:

The scope of the report was to get a real life exposure. I have got the opportunity to observe

what is actually happening in a company, how they are planning their performance

management system and how they are using the methods of the PMS and also influence them

can have over the development of the employee performance in the organization.

As I worked in the Human Resource division, head office of the Mercantile Bank Limited, I

got the opportunity to learn different part of Human Resource activities. To conduct a study on

PMS concept I have gathered valuable information from our university library & Mercantile

Bank Limited. I have also got some information from web site.

2.4 Objectives of the study:

The main objective of the practical orientation of the bank is to have an overall picture of how

the bank runs their Performance Management System and HR functions.

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(a) Broad objective: To analyzing the performance management system of Mercantile Bank

Limited.

(b) Specific objectives:

To know the type of evaluation process they are using.

To know the problems they are facing.

To know whether their performance management system has any

relationship with the downsizing.

To know their process of performance appraisal documentation.

To identify how their performance management system does help them with employee

development

2.5 Methodology:

This report has been prepared on the basis of experience gathered during the period of

internship. For preparing this report, I also got information from annual report and website of

the Mercantile Bank Ltd. Actually, this study is descriptive in nature. Maximum data were

collected from the primary sources. The details of the work plan are furnished below:

Data collection method: Relevant data for this report has been collected primarily by

direct investigation of different records, papers, Documents, operational process and

different personnel. Structured questionnaire has been used & Information regarding

office activities of the bank has been collected through consulting and discussion with

bank personnel.

Data sources: Both primary and secondary source of data are used to complete this

study. These two sources are explained below:

1. Primary sources:

o Face to face interview with the bank officers and staffs.

o Through consulting with officials of the branch.

o Notes taken from day to day working

2. Secondary sources:

o Different manuals, circulars, files and documents of the MBL.

o Different websites including the website of MBL.

o Different text books of Human Resource Management.

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o Journals and newspapers.

2.6 Limitation of the study:There were some constraints in preparing this report. But at the same time I tried to make an

adjustment with those problems.

The officer of the Human Resource Department was reluctant to provide information

about the company policies and the HRM strategy they were following.

It was very difficult to collect the information from various personnel for the job

constrain.

Bank policy was not disclosing some data and information for various reasons. The department people always remain busy due to lack of supporting employees so

they could not dedicate their full efforts.

Because of the limitation of information some assumption was made. So there may be

some personal mistake in this report.

The time 3 months are not sufficient to know all activities of the HRD to prepare the

report.

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Interpretation & Conclusion

3.0 Performance Management System of Mercantile Bank Limited (MBL):

One of the agenda of the Human Resource Department is continuous development of the

employees so that they can cope with the rapidly changing business environment. Innovation is

a major priority that we want to promote. Accordingly, through performance management

system employees are being developed and enhanced performances and related competencies.

In MBL, performance evaluation programs are being undertaken annually for the employees toseek opportunities for skill improvement and to help them to guide for career management

system.

The evaluators of MBL are basically persons who are holding any managerial post, such as-

senior executive vice president, Vice president, assistant vice president. They are experts and

highly qualitative officers from inside the organization. These performance evaluation

programs were found highly effective in developing MBLs peoples knowledge, skill &

abilities to perform their assigned jobs in a better way. MBLs performance management

systems involve numerous activities, far more than simply reviewing what an employee has

done. These systems fulfill several purposes. One of the purposes of MBLs performance

management system is to improve the organizations performance through the enhanced

performance of individuals. Though they are often constrained by difficulties in how they

operate. Performance management is closely related to rewards. Organizations basically

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allocate rewards based on either performance or membership criteria, but this is not always the

case, few organizations actually reward employees based on their performance. In MBL, they

reward their employees both based on performance and membership criteria. As performance

based rewards they have: merit pay and incentive pays (such as- bonuses, increment and profit

sharing option). In MBL promotions are being made over three years performance.

The performance management process of MBL:

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1. Establish performance standards.

2. Set measurable goals.

3. Measure actual performance.

4. Compare actual performance withstandards

5. Review the appraisal

6. If necessary initiate corrective action.


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Each employee of MBL receives a yearly increment based on his or her performance.

According to performance appraisal the amount of increment varies. That means if an

employee performs well she/he will get an improved increment. On the other hand if an

employees performance is unsatisfactory then she/he will get decreased amount of increment

or, no increment at all. In MBL they follow a set of questions to evaluate the performances of their employees. This set of questions is known as Annual Confidential Report (ACR), which

consists of 15 questions. The rating scale is 0 to 3 for each question. That means the evaluator

can rate an individual question from 0 to 3 based on the employees performance, where 0

refers Below Average and thus 1 = Average; 2 = Good and 3 = Excellent.

The managers of each division and branches perform this evaluation. For example, in main

branch and branches inside Dhaka the evaluation process is done from SEVP (Senior

Executive Vice President) up to AVP (Assistant Vice President). And in branches outside

Dhaka generally AVPs (Assistant Vice President) are responsible for evaluation. In MBL

scope for self- evaluation is low. They compare their employees to some given standards. Their

measurable performance ratings are given below:

1. Reliability, commitment, sense of belonging and responsibility: In MBL an

individuals reliability, commitment, sense of belonging and responsibility is being

evaluated to understand how reliable and committed employees are toward the

organization. And whether they have any sense of belonging and responsibility. As

these criteria is very crucial for an organization to understand their employees better

and to hold them in the organization for a longer period of time.

2. Knowledge of banking, skill and awareness to rules and policies and its

implementation: In banking sector it is necessary that an employee should have

knowledge about banking system and she/he should also have sufficient skills and

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awareness to organizational rules and policies and implement these properly.

Employees should be well aware of the banks rules and policies and should know how

to implement those.

3. Competence, ability to do and get things done (leadership to train, guide,

supervise and utilize manpower): Competence refers to the behavioral requirements

of a role to carry out the work satisfactorily. It is what people bring to work in the form

of different types and levels of behavior. In MBL competencies are being measured by

following criteria:

Achieves high level of performance from team.

Defines objectives, plans and exceptions clearly.

Continually monitor performance and provide good feedback.

Maintains effective relationships with individuals and the team as a whole.

Develops a sense of common purpose in the team.

Builds team morale and effectively motivates individual members of the team

by recognizing their contribution while taking appropriate action to deal with

poor performers.

4. Initiative, drive and enthusiasm: The employees of MBL are being also evaluated on

the basis of their initiative ness and enthusiasm. They are being observed whether they

have the sustained energy and determination in the face of obstacles to set and meet

challenging targets, in compliance with quality, time and diversity standards and

delivering the required business results. Following points are being marked while

evaluating this section:

Agrees on achievable goals at the start of each project.

Strives toward targets.

Refuses to settle for second best.

Monitors tasks for accomplishment, quality and timeliness. Asks for feedback.

5. Quality and quantity of work: Quality and Quantity of work is also being observed

and given high priority. Employees have been leaded, encouraged, inspired and

supported to develop confidence and capability to help them realize their full potential

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to develop quality of work. Quantity of work can also be developed through similar

activities. And then they are being measured on some criteria.

6. Marketing ability: Marketing ability refers to an employees willingness and ability to

give priority to customers, delivering high quality services that meet their needs.

Through this standard an employee is being evaluated whether she/ he cares for

customers, concerned for people, has competitiveness, enterprise, excellence, sees

growth as major objective, market and customer oriented and productive. An employee

should possess following qualities in order to get excellent rating on this section:

Respond to customer requests promptly.

Treat all customers with respect.

Do not make assumption about customer needs, but asks lots of questions to

clarify them.

Take the initiative in developing policies to meet customer needs.

Try to see things from customers points of view- finds out about the pressure

of their world so as to relate to their concerns.

Request feedback from customers to ensure satisfaction and shares the results.

Know when and how politely to decline an inappropriate customer request.

7. Learning ability and analytical thinking: Analytical thinking is about bringing

disciplined analysis to data and situations, to see cause and effect and to use this to

make effective decisions. This is important in enabling to prioritize and take important

decisions based on an assessment of the impact and implication of the likely outcomes.

The ability of learning and analytical thinking can be developed by an individual

her/himself. MBL remarks analytical ability on following criteria:

When faced with a problem, gather as much information as necessary about it

before identifying root causes and possible solutions.

Bounce ideas off others to understand how they might tackle a problem. Break down large pi

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