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Introduction
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1.1 Background of the Study
Banks are the backbone of the global economy, providing capital for innovation,
infrastructure, job creation and overall prosperity. Banks also play an integral role in society,
affecting not only spending by individual consumers, but also the growth of entire industries.
The operations of banks are known as one of the most important economic activity in the
world. Any activity which requires investments and financial resources undoubtedly requires
the involvement of banks and financial institutions (Haghighat and Nasiri, 2003). Thus, banks
have the central role in the economy (Fethi & Pasioura, 2010). The financial environment of
any economy consists of typically five components, namely: money, financial instruments,
financial institutions, rules and regulations and financial markets. Among the various
financial institutions, banks are a fundamental component and the most active players in the
financial system (Dhanabhakyam & Kavitha, 2012). Bank is a financial intermediary that
channels funds from surplus units, the depositors, to the deficit units, the borrowers, in the
process gaining from the spread of the different interest charged. By the scope of its
functions, banks are the key to economic growth of any economy (Rashid, 2010). Further,
banks are a fundamental component of the financial system, and are also active players in
financial markets (Guisse, 2012). The essential role of a bank is to connect those who have
capital (such as investors or depositors), with those who seek capital (such as individuals
wanting a loan, or businesses wanting to grow). Banks have control over a large part of the
supply of money in circulation. Through their influence over the volume of bank money, they
can influence in the nature and character of production in any country (Brigham & Houston,
2011).
Bangladesh has a mixed banking system comprising nationalized, private and foreign
commercial banks. Now-a-days Commercial banks play a key role in the economic
development of a nation through mobilization of savings and allocation of credit to
productive sectors. Achieving to the components of a strong and efficient banking system,
achieving goals, efficient use of resources and operating efficiently have been considered for
many years, so it requires an assessment of a bank's performance (Teker et al, 2011).
Evaluation of bank performance is very important for Bankers due to the need to protect the
banking operations against continuous risks are due to gambling-incentives related to capital
market (Hays et al, 2009). Thus, financial performance helps us to measure the results of a
firm's policies and operations in monetary terms. These results are reflected in the firm's
return on investment, return on assets, value added. It also helps us to evaluate how well a
bank is using its resources to make a profit. Common examples of financial performance
include operating income, earnings before interest and taxes, and net asset value. It is
important to note that no one measure of financial performance should be taken on its own.
Rather, a thorough assessment of a company's performance should take into account many
different measures. Financial performance is a subjective measure of how well a bank can use
assets from its primary mode of business and generate revenues. This term is also used as a
general measure of a firm's overall financial health over a given period of time, and can be
used to compare similar firms across the same industry or to compare industries or sectors in
aggregation. The examination of financial performance in banking has important public
policy implications in the Bangladeshi context due to the following facts: Firstly, the
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principle aim is to achieve a more competitive and efficient financial system. The banking
industry is a vital part of the financial system in any country. Thus, its successes or failure
strongly affects the health of the economy. Secondarily, it is interesting to study the
determinants of financial performance, as it is extremely useful for managers in improving
organizational performance and it also helps the policy-making bodies create, if needed, an
appropriate regulatory environment. Lastly, sound financial health of a bank is the guarantee not
only to its depositors, but is equally significant for the shareholders, employees and the whole
economy as well. As a sequel to this maxim, efforts have been made from time to time, to measure the
financial position of each bank and manage it efficiently and effectively. In this paper, an effort has
been made to evaluate the banking practices and financial performance of Janata Bank Ltd.
Financial evaluation has been done by using CAMEL Parameters and Z score analysis.
In addition, it is clear from the review of earlier literatures that there has been no study on the
banking practices and performance appraisal of Janata Bank Ltd. Hence, I felt the need to
undertake the present study.
The prime objective of this study is to analyze the banking practices and performance of
Janata Bank Ltd.
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1.3 Methodology of the Study
The method implies the way of doing thing and the procedure adopted to accomplish the job.
It also implies the techniques that are used to conduct a research. In such a context, research
method refers to the methods that a researcher uses in performing research question (Kothari,
2006).
The term methodology is defined as a particular procedure or a set of procedures or the systematic
study of methods that can be applied within a discipline. Methodology does not refer to research or to
the specific analysis techniques rather it refers to anything or everything that can be encapsulated for a
discipline or a series of processes, activities or tasks. Methodology includes the following concepts
as they relate to a particular discipline or field of inquiry:
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Bank Limited. For financial performance analysis, CAMEL model and Multivariate
Discriminate Analysis (MDA) is used, which was developed by Prof. Altman is known as Z
score model. For the analysis and interpretation of data some tools like MS-Word, MS- Excel
and MS- PowerPoint software were used.
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1.5 Scope and limitations of the Study
The scope of the study is limited to a nationalized bank named as Janata Bank Ltd. and the
report focuses mainly on major banking practices arena of JBL such as general banking,
credit management, foreign exchange operations; and financial performance of JBL.
I have faced some limitations, when I was preparing this report which is mentioned below:
The time period for this study was only 3 month which was very short.
Much confidential information was not disclosed by respective personnel of the department.
As the officers were busy with their daily work, they could provide me very little time.
Sometimes, they didnt want to supervise due to pressure of work load.
Such a study was carried out by me for the first time. So, in-experience is one of the main
factors that constituted the limitation of the study.
There is a lack of sufficient secondary data.
During my internship program, I was placed in several sections as per the wish of the
concerned officials. As a result, I could not concentrate on a particular section/department for
my study.
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Chapter: 02
Theoretical Framework
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2.1 Definition of Bank and Banking
Bank is an institution that deals in money and its substitutes and provides crucial financial
services. The principal type of baking in the modern industrial world is commercial banking
and central banking.
Banking Means "Accepting Deposits for the purpose of lending or Investment of deposits of
money from the public, repayable on demand or otherwise and withdraw by cheque, draft or
otherwise."
The concise oxford dictionary has defined a bank as "Establishment for custody of money
which it pays out on customers order." Infact, this is the function which the bank performed
when banking originated.
"Banking in the most general sense, is meant the business of receiving, conserving &
utilizing the funds of community or of any special section of it."
Despite in recent years, many non-bank financial institution has been established, still the
financial system of Bangladesh is mainly banking sector based. Banking sector consists of
Bangladesh Bank as the central bank, four state-owned commercial banks, four specialized
bank/development financial institutions, thirty private commercial banks and nine foreign
commercial banks.
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Figure: Banking sector in Bangladesh
Bangladesh Bank basically responsible for all the core functions that are done by all the
monetary and financial sector regulators. Besides the core functions, Bangladesh Bank is also
responsible for some other supporting functions. The functions of Bangladesh Bank are cited
in below:
To regulate and supervise and monitor financial intermediaries like banks and non-bank
financial institutions.
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Besides this function, Bangladesh Bank also responsible for asset classification, loan
concentration, setting up single borrower exposure limit, Licensing to the new bank and
branch, impose penalty for non-compliances, intervention in the management for assistance if
any bank face difficulties, prepare guidelines and issuance directives regarding banking
operation, guidelines for core risk management, publication of different economic review etc.
Bangladesh bank monitors the performance of all schedule banks operating in the country
through CAMEL rating system. The ratio used in CAMEL rating system reflects the
performance. Based on this CAMEL rating performance analysis, Bangladesh Bank
undertakes necessary initiatives. For this purpose, Bangladesh Bank depends mostly on
historic data. Bangladesh Bank also introduced the risk based inspection system for the
supervision of schedule banks. In a report of IMF 2010, it is stated that the supervision of
commercial banks is still compliance based to see whether policy and procedures are
followed for which it has to primarily rely on checklist and it lacks proper forward-looking
qualitative judgment.
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2.2.5.2 Specialized Bank/Development Financial Institutions (DFIs)
After liberation, two specialized bank operating in Bangladesh were also nationalized and
renamed as Bangladesh Krishi Bank and Bangladesh Shilpa Bank. But Bangladesh Krishi
bank was divided in 1987 and renamed as Rajshahi Krishi Unnayan Bank (RAKUB) for
Rajshahi Division to promote agricultural development in that region and Bangladesh Krishi
bank for the rest of part of the country. In 1988, another specialized bank name Bank of
Small Industries and Commerce Bangladesh Ltd. (BASIC) was established as private bank to
promote small and medium entrepreneurship. In 1993, the then Government of Bangladesh
took the control of BASIC and was declared it as a specialized bank. Bangladesh Shilpa Bank
was merged with Bangladesh Shilpa Rin Sangsta (BSRS) in 2010 and renamed as
Bangladesh Development Bank Limited (BDBL). So, currently there are four specialized
banks which are termed as Development Financial Institutions (DFIs) operating in
Bangladesh.
At present, there are thirty local private commercial banks operating in Bangladesh. PCBs
dominate the banking sector of Bangladesh. More than fifty percent of total deposits and
assets are covered by the PCBs. The performance of PCBs is much better than SCBs and
DFIs in all respects. Client service innovation and banking service automation is one of the
major reasons for their domination over the SCBs and PCBs. among the three generation of
PCBs, third generation banks are more innovative and provide better client services through
automation whereas first generation banks are little bit in backward position though they
continuously improving their condition to compete in the market. Bangladeshs PCBs have
quickly occupy market share at the expense of the state-owned commercial banks (SCB) and
presently grasp more than 59 percent of total deposits whereas it is only 28 percent for the
SCBs and PCBs assets coverage is 58% whereas it is only 29% in SCBs.
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branch network. Their operation is basically limited to capital city and some other municipal
city corporation area.
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Documentation procedures must be fulfilled by the applicants.
Applicant must sign specimen signature sheet that provided by bank.
Introducer is mediatory to open any account.
Introducers signature and accounts number will verify by authorized officer
Authorized Officer will accept the application.
Minimum balance has to deposit to the bank by applicant (only cash is accepted).
Authorized officer will give entry to the register and open the account.
After that the officer will give cheque book to the account holder.
KYC (knowledge about your customer) should maintain.
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bank itself may become bankrupt. This is important because this is the earning unit of the
bank. Banks are accepting deposits from the depositors in condition of providing interest to
them as well as safe keeping their interest. Now the question may gradually arise how the
bank will provide interest to the clients and the simple answer is Loans & Advance.
Loan:
Loan means lending a fixed amount of money to borrower for a certain period time. The
borrower must repay the loan within the given time period. In Loan, the disbursement will
take place only for one time. The borrower can repay the loan all at a time or by installment.
Advance:
Advance is a little bit different than Loan. In Advance, the borrower is allowed and credit
limit for a given period of time. In that given period, the borrower can withdraw money as
many times as he want but he cannot exceed the credit limit. Again he can repay several
times whenever he wants. In Advance, disbursement and repayment occurs several times. But
at the end of the period, whole credit amount must be repaid to the banks. This type of credit
is allowed to business for their working capital requirement.
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Condition
Collateral
Character:
Character denotes integrity of the borrower i.e. he should have willingness to repay the
money borrowed. The banker should investigate every aspect of the character factor and
should convince himself that despite adverse conditions, the applicant will make every effort
to discharge his debt as per terms.
Capacity:
Capacity means the ability to employ the funds profitably accordind to the terms and
conditions. The capacity of the borrower has to be determined to find out his experiences in
the line in which he is working.
Capital:
Capital denotes financial soundness. The borrower must have his own stake in the business
which creates a sense of involvement in the mind of the borrower. Capital is the financial
strength of a risk as measured by the equity or net worth of the business.
Condition:
Condition refers to the general business condition and the conditions in the particular industry
in which the borrower is engaged. The banker should exercise prudence whether the business
establishments are existent and continuing their business.
Collateral:
Collateral implies the additional securities taken to offset weaknesses that are apparent. All of
the collateral that may be made available to the bank will not make a bad loan good but it will
make good loan better. While assessing valuation of collateral securities bankers need to take
extra care by sampling survey and by examining information from land revenue office and
also enquiring people nearby. The documents of the collateral securities are to be verified
from the concerned Sub-Registered Office and other related office.
Overdraft:
This is when our bank allows us to take more money out than we currently have in our
account. This is usually an extremely temporary measure and there are high interest rates and
stiff fees/penalization for using an overdraft facility. Most banks also only allow a small
amount to be over drawn (less than $100) this type of credit is most often used when a person
hasnt budgeted correctly and believe they have more money in their account than they
actually do.
Credit Card/Store Card:
A credit or store card is the most common form of a revolving loan. We can use these cards
to pay for almost anything these days and at the end of each month we are required to pay off
a monthly minimum or the full balance or anywhere in between. If the monthly minimum is
not bad then were usually charged a late fee.
Unsecured Loan:
An unsecured loan is almost always an installment loan, its useful when needing to raise a
large sum of money. Its important to make sure that we can afford the monthly repayments
before applying for an unsecured loan as these are generally approved or denied based on our
salary.
Secured Loan:
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The most common type of secured loan is a mortgage. When we have a secured loan we put
an asset (in this case your house) as security for the loan, if we fail to pay the monthly
repayments then the security (in this case your house) will be repossessed and sold to recoup
the loaned amount. These are almost always installment loans.
Store Finance / Hire Purchase:
When we buy an item with store finance we are usually required to pay a monthly repayment,
this is another form of an installment loan. Because we are able to use the item while we pay
it off this is also known as a hire purchase. These are almost always extremely bad value with
high interest rate; lots of businesses try to make these types of loans more appealing to
customers by offering an interest free period.
Pawn broking:
Pawn broking is a form of a secured loan except that while the money is borrowed the
pawnbroker keeps physical possession of the asset youre using for security. In most cases
the pawnbrokers are hoping that you dont pay the money back as they undervalue your asset
and then sell it on to other customers.
2.3.2.6 Loan Classification as per Bangladesh Banks Banking Regulation & Policy
(BRPD Circular No.05; June 05, 2006):
All loans and advances will be grouped into four categories for the purpose of classification,
namely:
Continuous Loan
Demand Loan
Fixed Term Loan &
Short-term Agricultural & Micro Credit.
Continuous Loan:
The loan Accounts in which transactions may be made within certain limit and have an
expiry date for full adjustment will be treated as Continuous Loans. Examples are: CC, OD
etc.
Demand Loan:
The loans that become repayable on demand by the bank will be treated as Demand Loans. If
any contingent or any other liabilities are turned to forced loans (i.e. without any prior
approval as regular loan) those too will be treated as Demand Loans. Such as: Forced LIM,
PAD, FBP, and IBP etc.
Fixed Term Loan:
The loans which are repayable within a specific time period under a specific repayment
schedule will be treated as Fixed Term Loans.
Short-term Agricultural & Micro Credit:
Short-term Agricultural Credit will include the short-term credits as listed under the Annual
Credit Program issued by the Agricultural Credit and Special Programs Department
(ACSPD) of Bangladesh Bank. Credits in the agricultural sector repayable within 12(twelve)
months will also be included herein. Short-term Micro-Credit will include any micro-credits
not exceeding Tk. 25,000/= (twenty five thousand) and repayable within 12(twelve) months,
be those termed in any names such as Non-agricultural credit, Self-reliant Credit, Weaver's
Credit or Bank's individual project credit.
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2.3.2.7 Loan Classification Guidelines from Bangladesh Bank:
Central bank is the controller of money market in any country. As central bank, Bangladesh
Bank controls money market in our country. Bangladesh bank, time to time, issues some
guidelines and regulations for operation of a banking concern. These guidelines are general in
nature. Besides these, every commercial bank sets credit guidelines for these operations.
Whatever be the guidelines, the aim of it is to reduce the total amount of unsound credit as
well as improve the overall performance of the banks. Classification of overdue loans and
advances opened a new era in the credit management of commercial banks in Bangladesh.
Before 1989 no specific guidelines were followed by the commercial banks for this purpose.
In 1989, Bangladesh Bank issued BCD circular No. 34/1989 stating specific rules and
conditions of loan classification. After that each schedule banks except BKB, RAKUB, and
BSB would be responsible for its own loan classification according to the guidelines provided
by Bangladesh Bank.
Status, type and definition of classification:
Status loan type Definition of status
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Bad/ loss (BL) Continuous and demand overdue is more than 12
No security held, borrower months.
not traceable, time barred
loans, no hope of recovery Term loan If default amount of
(up to 5 years) installment is equal to
installment payable in18
months.
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2.3.3 Foreign Exchange
It is well known fact that the money is a medium of exchange for all transactions that take
place inside the country as well as outside the country. In Bangladesh, we have the Taka for
financing the internal trade and other obligation. So, the home currency has to be converted
into the currencies of other countries, to meet the obligation that arises out import of goods
and services from other countries. That part of the economic science that deals with the
conversion of home currency into foreign currency for the purpose of setting international
obligations is called foreign exchange.
Foreign Exchange Act. 1947 defines foreign exchange as "foreign currency and includes
deposits, credits, and balances payable in foreign currency as well as drafts, travelers checks,
letter of credit, bills of exchange drawn in local currency but, payable in foreign currency"
The foreign exchange market consists, of two tiers, the Interbank market in which major
banks & financial institutions, trade with each other and the Retail market in which banks
deal with their commercial customers (Redhead and Hughes Is, 1998 cited by Al Amin,
2013)
Today foreign exchange has been the talk of the town, and this is because foreign exchange
plays a very crucial role in the overall performance of the national economy. The practice of
managing foreign exchange resources has therefore evolved broadly in line with the
globalization and liberalization of economies and financial market. This has played over such
areas as risk management and active portfolio management. Broadly speaking foreign
exchange is held and managed to facilitate international transactions (Anifowoshe, 1997 cited
by Al Amin, 2013).
Foreign exchange major tasks is to ensure that the reserves are maintained at an adequate
level to serve as a cushion or buffer at times of temporary foreign short falls in foreign
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exchange receipt. In fact, such a respite enables country to put its house in order and adopt
necessary measures to deal with the external shock destabilizing the Economy (Nwakwo,
2001).
The use of trade and exchange controls as tools of reserve management involved
comprehensive restrictions on trade and other international transactions. The main objectives
here are to ensure that foreign exchange reserve, are conserved and adequate to guarantee
external stability and that the available resources are optimally used to promote domestic
production (Anifowoshe, 1997).
Export:
Pre-shipment Advances
Post-shipment Advances
Export Guarantees
Advising/Confirming Letter of Credit
Facilitating project exports
Bills for collection
Import:
Opening letters of credit
Advance bills
Import loans and guarantees.
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Exchange Dealings:
Rate computation
Nostro/Vostro Accounts
Forward contracts
Derivatives
Exchange position and cover operations
Remittances:
Issue of DD, MT, TT etc.
Encashment of checks, DD, MT, TT etc.
Issue and encashment of travelers' checks
Sale and encashment of foreign currency notes
Non-resident deposits
Statistics:
Submission of returns
Collection of credit information
The accomplishment of a given task measured against preset known standards of accuracy,
completeness, cost, and speed. In a contract, performance is deemed to be the fulfillment of
an obligation, in a manner that releases the performer from all liabilities under the contract
(Business dictionary.com)
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Financial Performance Analysis is the process of scientifically making a proper, critical and
comparative evaluation of profitability and the financial health of Banks through the
applications of the techniques of financial statement analysis (Gupta and Verma, 2008).
Financial Performance refers to the achievement of the bank in terms of profitability.
Profitability of a bank denotes the efficiency with which a bank deploys its total resources to
optimize its net profits and thus serves as an index to the degree of asset utilization and
managerial effectiveness (Dhevika et al., 2013).
Financial analysis is the process of identifying the financial strength and weaknesses of the
firm by properly establishing relationship between the items of the balance sheet and the
profit and loss account (Pandey, 1979).
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company by analyzing firms present and future profitability, revenue stream and risk
position.
4. Management
Management for a firm is always keen on financial analysis. It is ultimately the responsibility
of the management to look at the most effective utilization of the resources. Management
always tries to match effective balance between the asset liability management, effective risk
management and short-term and long-term solvency condition.
a) Liquidity Ratios
Liquidity Ratios are calculated to measure the firms ability to meet its current obligations.
The solvency position is indicated by the liquidity ratios. The solvency position is very
critical for any firm. It is often indicated by the Bangladeshi industry that it has ample
sources available for the long term finance, but very limited sources are available for the
short term finance or to meet working capital requirement. So, a firms performance in this
area is an important indication towards the performance. The ratios that indicate liquidity
position are: current ratio, quick ratio, cash ratio, interval measure, net working capital ratio
etc.
b) Leverage Ratios
Leverage Ratios are popularly known as the capital structure ratios as well. Any firm has got
two sources of finance one is owned funds and the other is borrowed funds. As a general rule,
there should be an appropriate mix of debt and owners equity in financing the firms assets.
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The ratios that indicate leverage are: debt ratio, debt-equity ratio, capital employed to net
worth ratio, interest coverage ratio etc.
c) Activity Ratios
Activity Ratios are calculated evaluate the efficiency with which the firm manages and
utilized its assets. These ratios are known as turnover ratios as well. The activity ratios
involve a relationship between sales and assets. A proper balance between sales and assets
generally reflects that assets are managed properly. The ratios that indicate level of activities
are: inventory turnover ratio, debtors turnover ratio, assets turnover ratio and working capital
turnover etc.
d) Profitability Ratios
A firms performance is often judged by the profitability. However, two types of profitability
ratios are calculated.
a) Profitability in relation to sales.
b) Profitability in relation to investments.
The ratios that indicate the profitability position of a firm are: gross profit margin ratio, net
profit margin ratio, operating expense ratio, return on investment, return on equity, earning
per share, dividend per share, dividend payout ratio, dividend and earnings yield, price
earnings ratio, market value to book value ratio etc.
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Companies in the industry. Companies with high profit margins indicate that they have a
highly proprietary product or service that carries with it a price premium.
Net margins vary from company to company, and, historically, certain ranges can be
expected across industries. Therefore, it is important to compare the ROEs and other financial
ratios of companies in similar lines of business, as similar business constraints exist in each
distinct industry.
Asset Turnover:
Asset turnover measures how much sales a company generates from each rupee of asset. It
helps us to measure managements effectiveness in using assets to force sales.
The majority of high-margin companies also tend to have low asset turnover. This is because
an organization can only do a certain amount of business without incurring additional costs
that would adversely impact profit margins. On the other hands, low-margin organizations
tend to have high asset turnover, as they rely on high sales volume to generate profits.
By improving its asset management policies, a company can increase shareholders returns
without necessarily increasing profit margins.
Equity Multiplier:
The final component of the three-step DuPont Model is the equity multiplier, which helps us
to examine how an organization uses debt to finance its assets. A higher equity multiplier
indicates higher financial leverage, which means the company is relying more on debt to
finance its assets.
An organization can boost its return on equity by raising its equity multiplier (increasing the
amount of debt it carries). If a company is already sufficiently levered, taking on additional
debt increases the risks of not being able to fulfill its obligations to creditors and going
bankrupt (Cited by Nanavati, 2013).
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analyzed can be compared to the database. It utilizes seven pieces of data taken from the
corporations balance sheet and income statement. Five ratios are then extrapolated from
these data points. To calculate the Z-Score, the results of each of the above five ratios are
multiplied by a set factor (i.e. a coefficient developed by Professor Altman). The results of
this multiplication are then added together to determine the companys Z-Score (Cited by
Islam and Mili, 2012).
Capital Adequacy:
Capital Adequacy indicates whether the bank has enough capital to absorb unexpected losses.
It is required to maintain depositors confidence and preventing the bank from going
bankrupt. Some of the ratios considered to assess the capital adequacy of the banks by
researchers were total capital as a percentage of total assets, total loans as a percentage of
total capital, total assets to total shareholders funds, ratio of total shareholders funds to total
net loans, ratio of total shareholders funds to total deposits, ratio of shareholders funds to
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contingency liabilities, ratio of total shareholders funds to total risk weighted assets (CAR),
Debt- Equity ratio, Coverage ratio etc.
Asset Quality:
This indicates what types of advances the bank has made to generate interest income. When
loans are given to highly rated companies, the rates attracted are lower than that of lower
rated doubtful companies. Thus asset quality indicates the type of debtors of the bank. Some
of the ratios considered to assess the asset quality of the banks by researchers are total loan as
a percentage of total assets; loan closes provision to total net loans, ratio of loan loss
provision cot gross loans. On performing assets to net advances, investments in government
securities to total investments and Standard advances to total advances etc.
Management Quality:
This parameter is used to evaluate management quality so as to assign premium to better
quality banks and discount poorly managed ones. It involves analysis of efficiency of
management in generating business (top-line) and in maximizing profits (bottom-line).Some
of the ratios considered to assess the management quality of the banks are operating expense
as a percentage of total assets, deposit interest expense as a percentage of total deposits, total
of risk weighted assets to total assets, total advances to total deposits (CD ratio), profit per
employee, business per employee and return on net worth etc.
Earnings Quality:
This parameter lays importance on how a bank earns its profits. This also explains the
sustainability and growth in earnings in the future. Some of the ratios considered to assess the
earnings ability of the banks were net income as a percentage of total assets, net-interest
income as a percentage of total assets, ROA, ROE, Pre-tax profit/total assets, income spread
to total assets, cost to income ratio, operating profit to total assets, interest income to total
income and non - interest income to total income etc.
Liquidity
Banks are in a business where liquidity is of prime importance. Among assets cash and
investments are the most liquid of a banks assets. In this category of ratios, the ability of
banks to meet its obligations is assessed. Some of the ratios considered to assess the earnings
ability of the banks were Liquid assets as a percentage of total assets, liquid assets as a
percentage of total deposits, total deposits as a percentage of total loans, deposits/total assets,
liquid assets to demand deposits, cash to total assets and investments in government securities
to total assets etc.
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2.7.6 Trend Analysis
Trend analysis indicates changes in an item or a group of items over a period of time and
helps to drown the conclusion regarding the changes in data. In this technique, a base year is
chosen and the amount of item for that year is taken as one hundred for that year. On the
basis of that the index numbers for other years are calculated. It shows the direction in which
concern is going.
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performance of a company, this study used the Z-Score model, and finally, it was concluded
that the financial health of the company was good and financial viability is also healthy.
Velavan (2010) in his study measures Financial Health of E.I.D. Parry Sugar Limited using
Z scores Model- A Case Study. In this study, the financial health of E.I.D Parry Sugars
Limited as per Altman guide lines, the financial health of the sample units were tested
through Z-Score and finally, it was concluded that the financial health of the company was
good and financial viability is also healthy.
Prasuna (2003) analyzed the performance of Indian banks by adopting the CAMEL Model.
The performance of 65 banks was studied for the period 2003-04. The author concluded that
the competition was tough and consumers benefited from better services quality, innovative
products and better bargains.
Bhayani (2006) analyzed the performance of new private sector banks through the help of the
CAMEL model. Four leading private sector banks Industrial Credit & Investment
Corporation of India, Housing Development Finance Corporation, Unit Trust of India and
Industrial Development Bank of India - had been taken as a sample.
Gupta and Kaur (2008) conducted the study with the main objective to assess the
performance of Indian Private Sector Banks on the basis of Camel Model and gave rating to
top five and bottom five banks. They ranked 20 old and 10 new private sector banks on the
basis of CAMEL model. They considered the financial data for the period of five years i.e.,
from 2003-07.
Barr et al. (2002 p.19) states that CAMEL rating has become a concise and indispensable
tool for examiners and regulators. This rating ensures a banks healthy conditions by
reviewing different aspects of a bank based on variety of information sources such as
financial statement, funding sources, macroeconomic data, budget and cash flow.
Majumder and Rahman (2011) used financial ratios and Prof. Altmans MDA Model (The Z-
Score Model) for financial analysis of selected pharmaceutical companies in Bangladesh.
They observed from the study that the profitability, liquidity and solvency position of the
selected pharmaceuticals are not in sound position and it was also observed that most of the
selected pharmaceuticals have a lower level position of bankruptcy. These reviews provide
that for the overall financial diagnosis of the selected listed pharmaceutical companies in
Bangladesh, ratio analysis and Professor Altmans The Z-Score Model are the most fruitful
techniques.
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Chapter: 03
An Overview of Janata
Bank Limited.
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3.1 Background of Janata Bank Limited
Janata Bank Limited is the 2nd largest state owned commercial bank in Bangladesh.
Immediately after the liberation of Bangladesh in 1971, the erstwhile United Bank Limited
and Union Bank Limited were renamed as Janata Bank. The established of Janata Bank was
happened under the Bangladesh Bank order 1972. It was incorporated as a public Limited
Company on 21, May 2007 vide certificate of incorporation No-C66933(4425)07 in the early
era of privatization. The Bank has taken over the business of Janata Bank at a purchase
consideration of Tk. 2593.90 million as a going concern through a vendor agreement signed
between the Ministry of Finance of the Peoples Republic of Bangladesh and the Board of
Directors on behalf of Janata Bank Limited on 15th November 2007. Janata Bank Limited,
one of the state owned commercial banks in Bangladesh, has an authorized capital of Tk.
20000 million (approx. US$ 250 million), paid up capital of Tk. 19140.00 million, reserve of
Tk.17976.20 million. The Bank has a total asset of Tk. 586082.98 million as on 31st
December 2013. Janata Bank Limited operates through 897 branches including 4 overseas
branches at United Arab Emirates. It is linked with 1239 foreign correspondents all over the
world. The Bank employees more than 15(fifteen) thousand persons. The Board of Directors
is composed of 13 (Thirteen) members headed by a Chairman. The Directors are
representatives from both public and private sectors. The Bank is headed by the Chief
Executive Officer & Managing Director, who is a reputed banker. The corporate head office
is located at Dhaka with 10 (ten) Divisions comprising of 44 Departments.
Amid adverse geopolitical economic situation, the management of Janata Bank with its
pragmatic business policies has tackled the situation efficiently and fruitfully. In view of
creation of employment opportunities Janata Bank Limited has been proved to be the best
employment provider in the banking sector. In continuity of this trend, 665 Executive
Officers were appointed in the year 2013. A total of 3,371 officers and staffs were appointed
in 2011 and 2012. At present, the number of total employees of the bank stands at 15,485.
The bank had to spend a considerable amount of money on account of salaries, allowances
and other incidental expenses for such a large number of employees. Yet, in this year Janata
Bank has strengthened its position further in the banking sector. At the end of 2013, the total
assets of the bank stood at BDT 586,083 million which was BDT 511,129 million in the
previous year. Net profit of the bank stood at BDT 9,551.39 million in the year 2013 as
against BDT 15,280.34 million net losses in the previous year. The deficit of capital of bank
was BDT 20,117 million in the year 2012 which has transformed into a surplus of BDT 908
million in the year 2013. As a result capital adequacy ratio rose from 3.70% to 10.27%.
As a player of money market JBL is also playing its due role. So, earning profit is not its sole
consideration, rather contributing significantly to the national economy ultimately increasing
shareholders wealth are its prime objectives. Apart from this, JBLs efforts were relentless
and uncompromising in establishing JBL as a high profile bank. JBLs endeavor to establish
good governance and best practices for credible and sustainable development was incessant
in conducting banking business. Among the state owned commercial banks, Janata Bank
Limited has been able to earn the highest chunk of operating profit during the year 2013.
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3.2 Profile of the JBL at a glance
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3.3 Organizations Mission, Vision and Values
3.3.1 Mission
Janata Bank Limited will be an effective commercial bank by maintaining a stable growth
strategy, delivering high quality financial products, providing excellent customer service
through an experienced management team and ensuring good corporate governance in every
step of banking network.
3.3.2 Vision
To become the effective largest commercial bank in Bangladesh to support socio-economic
development of the country and to be a leading bank in south Asia.
3.3.3 Values
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3.4 Strategic Objectives of JBL
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3.5 Products and Services of JBL
JBL render both corporate and retail banking services with a strong focus on socio-economic
development of the country. The bank typically provides short term working capital loan and
limited long term credit exposure. Moreover, JBL offers micro enterprise and special credit
as well as rural banking. Under corporate banking services JBL provides trade finance,
project finance, syndicate finance. On the other hand, consumer loan, deposit scheme,
remittance facilities are provided through retail banking. In 2013, JBL launched its own
innovation to remittance payment system at all branches which facilitate Deposit/withdrawal
from any branch in this system.
2.0 Loans & Advances
1.0 Deposits 2.1 Agriculture Loan Programs
1.1 Current & Call Deposits a. All kinds of Crops Loan, Loan for
a. Current Deposit Cultivation
b. Call Deposit of Sugarcane (mill area), Fisheries &
c. Deposit in Foreign Currency Shrimp,
d. Resident Foreign Currency Deposit Purchase of Cow/ Buffalo, Livestock, Duck/
e. Deposits in F.C (WES) Chicken, Cultivation of Banana, Betel Leaf.
f. Convertible taka A/C (D) b. Loan for Shrimp Culture Development
1.2 Savings Bank Deposits c. Loan for Irrigation and Agricultural
a. Savings Bank Deposit Equipment
b. Savings Deposit from Foreign Remittance d. Loan for Salt Production Plant
c. SB General e. Dal, Spices, Oil Seeds & mase
d. Q-Cash Deposit 2.2 Poverty Alleviation Program
e. Non-Res F.C Deposit a. Diversified Credit Program
f. School Banking Deposit b. Small Farmers & Landless Labourers
1.3 Monthly Scheme Deposits c. Development Project(SFDP)
a. Deposit Pension Scheme d. Swanirvar Credit Scheme
b. JB Savings Pension Scheme e. Self Employment Project for
c. Janata Bank Deposit Scheme Trained Unemployed Youth
d. Medical Deposit Scheme f. Self employment Scheme
e. Education Deposit Scheme g. NGO Linkage Lending Through NGOs
f. Ghore Ghore Sanchay h. Ghoroa Prokalpa/ Family Based Micro
g. JB Monthly Savings Scheme Credit
h. JB Special Deposit Scheme i. Micro Credit Scheme
i. JB Monthly Amanat Prokalpa j. MSFSCIP
1.4 Term Deposits 2.3 Specialized Loan Program
a. Fixed Deposit a. Grain Storage Credit
b. JB Double Benefit Scheme b. Credit for Flower Plantation & Garden
c. JB Monthly Benefit Scheme c. BGSDP
d. Retirement Savings Scheme d. Credit Program for Goat Rearing
e. JBL Retirement Savings Scheme e. Credit for Forestry/Horticulture Nursery
f. Continuous Benefit Account f. Hybrid Milking Cow Rearing (HYV-Milk
1.5 Special Notice Deposit Cow)
a. Special Notice Deposit g. Credit Program for Fish Cultivation
b. Convertible Taka A/C(SND) h. Fish Cultivator/Entrepreneur
i. Loan for Handicapped/Disabled People
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j. ATDP 2.10 Working Capital
k. Credit Program for floating Fish Cage a. Credit Program for Agro-based
Culture Industry/Project
l. Poverty Alleviation Program b. Working Capital for Husking Mill
2.4 Rural Credit c. Credit program for Preservation of
a. Rural Transportation Potatoes in Cold Storage
b. Loan for Land Mortgage d. Other Working Capital
2.5 Term Loan for Large and Medium e. Credit Program for Jute Industries
Credit Programs 2.11 Export Financing
a. Dairy, Poultry, Fisheries, Hatchery a. ECC (HYPO & PLEDGE)
b. Agro based, Industry/Project Loan b. PACKING CREDIT
c. Syndication Loan c. Other Export Finance
2.6 Other Loans & Advances d. LTR(FC)
a. Loan for Cold Storage e. ECC for Export Oriented Project
b. Large & Medium Term Loan f. BMRE for Export Oriented Project
c. Leasing Company g. Loan General
2.7 Loans for Thrust Sectors h. Cash Credit (Hypo & Pledge)
a. Computer Software & Information i. Demand Loan (BBLC)
Technology j. Advance Against Cash Subsidy
b. Electronics k. PAD (EDF)
c. Artificial Flower Production l. PAD (GMT)
d. Export Oriented Frozen Foods 2.12 Import Financing
e. Flower Cultivation a. PAD (Cash)
f. Gift Items b. LIM
g. Export Oriented Leather Products c. LTR
h. Export Oriented Jute Goods d. Demand Loan (L.C)
i. Jewellery & Diamond Cutting & Polishing 2.13 Trade Financing
j. Oil & Gas Industries a. Transport
k. Cultivation of Sericulture b. Brick Field
l. Stuffed Toys c. Work Order
m. Textile Industries (Except Readymade d. BADC/BRTC
Garments) e. Loan on FDR/Third Party FDR
n. Infrastructural Industries (except housing f. Loan on FDR of OTHER BANK
sector) g. National Investment Bond, ICB Unit,
2.8 Export Oriented Industry Insurance Policy, Share, Debenture
Term/Project Financing h. Loan Against Wage Earners Bond
a. Agro-products & Agro processing Product i. Food Ministry
b. Light Engineering Products j. Service Oriented Ind.
c. Shoes & Leather Product k. Loan Against DPS
d. Pharmaceuticals Product l. Loan Against SPS
e. Software & ICT Product m. Loan Against JBDS
f. Home Textile n. Loan Against EDS
g. Shipyard loan o. Loan Against MDS
h. Toiletries product p. Loan Against CBA -FDR
2.9 Micro & Cottage industries loan q. Credit Program for Urban Commercial
a. Dairy/Goru Mota Taza Koron/ Poutry/ Housing
Semi-intensive Shrimp Culture/Fish Culture r. Credit Program for Urban Residential
b. Other micro & Cottage Industries Loan House Building
c. Credit for loom (Tat) s. Credit Program for Jute Business
t. Commercial Loan for USA aided project
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u. Loan to Diagnostic Centers e. Payment of Old-age/ Disabled Allowances
v. Loan to Travel Agencies f. Food procurement Bills
w. Credit Program for House Repair g. Issuance of Television License
2.14 Other Credit Program 4.3 Q-Cash (ATM) Services
a. Consumer Credit Scheme a. Cash withdrawal
b. Cyber Cafe b. Balance inquiry
c. Service Holders Loan c. Mini statement of accounts
d. Doctor's Loan Scheme d. point of sale (POS)
e. Women Entrepreneur Development Credit 4.4 Others
Program a. Locker Service
f. Special Credit Program for Women b. JB remittance payment system(Deposit/
Entrepreneurs withdrawal from any branch)
g. Small Business Development Loan c. SMS banking
Scheme d. Sale of Lottary Ticket
e. Sale of Prize Bond
3.0 Financial Services f. Sale of Wage Earner Bond (W.E.B)
3.1 Inland Remittance g. Sale of Sanchay Patra (S.P)
a. Demand Draft (DD) 5.0 Customer Care
b. Telephonic Transfer (TT ) a. Help Desk
c. Mail Transfer (MT ) b. Inquiry Desk
3.2 Foreign Remittance c. Counseling
a. Online Speedy Remittance d. Information Desk
b. Maintaining NRT Account 6.0 Web based Spot cash
c. Foreign M.T. a. Speedy Remittance Cell
d. Foreign Remittance b. Western Union
e. Foreign Demand Draft c. IME
3.3 Other Financial Services d. Placid N.K. Corporation
a. Pay Order e. X-Press Money
b. Pay Slip f. NBL Quick-Pay
c. Security Deposit Receipt (SDR) g. Prabhu Group Inc
4.0 Other Services h. Trans Fast Remtt
4.1 Utility Services i. Ria Financial Service
a. Gas Bills Collection j. Marchentrade
b. Electricity Bills Collection k. EZ Remittance
c. Telephone Bills Collection l. Samba Financial Group
d. Water/Sewerage Bills Collection m. MoneyGram
e. Municipal Holding Tax Collection 6.1 Internet Banking
f. Port Bill Collection a. Accounts Details Information
g. Land Rent Collection b. Customer Statement
h. Embarkation Fee Collection c. Cheque Status
4.2 Walefare Services
a. Payment of Non- Govt. Teachers Salaries
b. Payment of Girl Students Scholarship/
Stipend /Upbitti & Primary Student Stipend
c. Payment of Army pension/Civil Pension
d. Payment of Widows, Divorcees and
Destitute Women Allowances
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3.6 Organizational Structure of JBL
Board of Directors
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3.7 Human Resources of JBL
As Human Resource Development is one of the key competencies to enable individuals in
any organizations to perform current and future jobs through planned learning activities, JBL
has integrated the use of training and development efforts to improve quality and capability
of executives. This is materialized through a well-designed Human Resource Management
and development programme. The Board of Directors of the bank underlines the need for
improving the skill and capability of human resource to ensure maximum quality output from
minimum resources.
As an employer, JBL ensures equal opportunities for both male and female employees. JBL is
strictly following female quota in recruiting manpower. As a result the number of female
employees is increasing significantly.
The following table exhibits the comparative number of male and female employees by
category in the year 2013:
Category 2013
Male Female Total
CEO& Managing Director 1 0 1
Deputy Managing Director 5 0 5
General Manager 21 2 23
Deputy General Manager 110 4 114
Assistant General Manager 256 31 287
First Assistant General Manager 575 88 663
Senior Executive Officer 927 198 1125
Executive Officer 3046 534 3580
Assistant Executive Officer 3166 362 3528
Assistant Executive Officer (Teller) 2198 212 2410
Assistant Officer Grade-1 479 13 492
Assistant Officer Grade-2 439 17 456
Support Staff Category-1 108 0 108
Support Staff Category-2 263 5 269
Total 13968 1517 15485
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3.8 Report on Sustainable Banking of JBL
Bank sustainability means building a successful business today and delivering value over the
long term. Sustainability is is a long term journey. Along the way, organizations need to set
goals, measure performance, and integrate a sustainable strategy into their core planning. A
sustainable economy should combine long term profitability with ethical behavior, social
justice, and environmental care. This means that when companies or organizations consider
sustainability and integrate it into how to operate, they must consider four key areas of their
performance and impacts: Economic, Environmental, Social and Human Rights.
According to GRIs(Global Reporting Initiative) Sustainability Reporting Framework, JBL is
reporting on sustainable banking system that enables it to measure, understand and
communicate this information. JBLs mission is to make:
Sustainable long term financial performance
Sustainable and responsible financial services
Strongly contribute in socioeconomic development
To create good governance, regulation and stakeholder engagement
To help in building green environment
A positive and consistent employee experience
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Total deposits in 2013 is BDT 478,535.57 million where in 2012 it was BDT 409,767.01
million.
No. of Loans and Advances A/Cs was 742,655 in 2012 where in 2013 it is 759,835
Total Advance in 2013 is BDT 285,747.65 million where in 2012 it was BDT 305,339.57
million.
No. of Branches was 888 in 2012 where in 2013 it is 897.
The amount of agricultural loans disbursed in 2013 is BDT 12,694.30 million and No. of
beneficiaries is 433,838.
1,873,630 A/Cs has been opened with 10 taka in 2013 to help farmers to avail
opportunities of doing their works smoothly.
In retail customer department-3 (RCD-3)/retail customer department-4 (RCD-4), under
agriculture and rural credit program no. of Borrowers covered 5,46,369 and BDT 17,652.67
million disbursed, No. of borrowers receiving crop loan is 325,908; No. of borrowers in
Micro-Credit Programs is 2410 and loan disbursed BDT 53.5 million.
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adding values to the society and the economy. Ultimate goal of CSR activities of JBL is
Building a Sustainable Society. The budget for performing CSR activities is provided from
the profit earned by the bank each year. Since its inception, the break-down of the budgets
devoted to the philanthropic initiatives up to 2013 are as follows:
In 2013 JBL rendered BDT 79.53 million to financially deprived meritorious and those who
have great inclination to be benefited with education and research. JBL also contributed in
Health care (BDT 38.06 million); Poverty Reduction and Rehabilitation (BDT 94.38 million);
Natural calamity (BDT 2.39 million); Preservation of History; Culture, Tradition and Sports
(BDT 39.76 million); Environment Protection, Expansion of Information Technology (BDT
20.31 million); Invention (BDT 7.85 million). Besides JBL also disbursed interest free loans
to the marginal agriculturists and the poor from the clutch of loan (BDT 10.00 million).
Development of human resources is one of the prerequisite of JBL for attaining the targets.
To do so, JBL recruited 665 officers in 2013 which is 3.12 times higher than in 2012 (213
persons). JBTI conducted 30 training courses directly and another 84 courses conducted
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through other training institutes. JBL has 2 female GM, 4 DGM, 31 AGM, 88 FAGM, 198
SEO, 534 SO, and 362 AEO. Total 2,790 officers have been trained for development in IT
and On-line.
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2013: Enhancement of paid up capital to BDT 19,140 million
2013: Issuance of highest right share in JBL history.
2013: JBL achieved highest net profit among the SCBs & PCBs.
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3.11 Gandamati Bazar Branch: Internship Place
This branch is situated at Gandamati Bazar, Koatbari, Comilla. The activities of this
branch were started in 20th December, 1977. It covers all the area both urban and rural area.
The customers are very happy to get this branch and customers are also very loyal to this
branch. The employee of this branch is also well indeed. It holds so many well reputed
companies account. The outlook of this branch is also wonderful. Consequently, this branch
is increasing profit day by day.
Departments of this Branch:
The departments available in this branch are Account opening department, Cash zone,
Clearing and collection, Remittance department and Advance department.
Caretaker(Guard)
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Chapter: 04
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Introduction:
This chapter is the heart of this report. This chapter is divided into three main parts are given
below:
Part: One 4.1 Major Banking Practices Arena of Janata Bank Ltd.
Part: Two 4.2 Financial Performance Analysis of Janata Bank Ltd.
Part: Three 4.3 SWOT Analysis.
Part: One
General banking is the starting point of all the banking operations. It is the department, which
provides day-to-day services to the customers. Every day it receives deposits from the
customers and meets their demand for cash by honoring cheques. It opens new accounts,
remit funds, issue bank drafts and pay orders etc. Because bank is a financial organization, so
as a part of service organization this department should satisfy to their client with the best
services. Since bank is confined to provide the service every day, general banking is also
known as retail banking.
The following sections are performing under this department of JBL:
4.1.1.1 Account Opening Section
4.1.1.2 Deposit Section
4.1.1.3 Cash Section
4.1.1.4 Remittance Section
4.1.1.5 Bills and Clearing Section
4.1.1.6 Accounts Section
4.1.1.7 Dispatch Section.
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4.1.1.1 Account Opening Section
The relationship between banker and customers begins with the opening of an account by the
customer. Opening accounts binds the banker and customers into contractual relationship.
But selection of customer for opening an account is very crucial for a bank. In fact, fraud and
forgery for all kinds start by opening an account. So, bank should take extreme caution in this
section.
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But for company/ business/ corporate account, proper business documents such as valid/
renewed trade license, TIN, VAT registration thus like documents are cross checked for
naming of the account.
Nature of business/ profession: - if the customer is of salaried class, employer name have to
be entered. If the customer is a businessman/ trader/ sole proprietor, the business name should
be entered. For example Rock Star restaurant etc. customers title/ position and full address
of the business/ employer should also be entered. Address with P. O. BOX in not acceptable.
Similarly remarks like private service, business are not acceptable. Rather have to
specify what type of company/ business the customer is associated with. For example,
Manager lighting palace
Address :
Enter the complete business/ residential address. Within the brackets you may also provide
prominent addresses/ identifiable landmarks for ease of physically locating the address. Once
an address has been entered the authority should send an account confirmation letter to
confirm the accuracy of the address. This letter is in fact a formal approach to verify the
address only, yet it mentions the account number and a formal recognition as a valued client.
Contact numbers:
Have to enter landline (if any) numbers of residence / office; personal cell number, fax
number and e-mail address (if available). The band authority may verify these numbers by
giving the customers a courtesy call or by sending him an associate e-mail.
Other/secondary/mailing address:
Some customer may volunteer their parents or siblings addresses as second home address or
a mailing address other than a permanent address.
Nominee:
It is mandatory field to fill up. Behind the nominee picture nominee sign is a must and should
be attested by the account holder as well. After the death of the account holder only the
nominee can claim the account possession. But yet if the account holder has no one to allow
as nominee or if not willing to mention any one, then an application regarding this matter
must be addressed to the manager. In such circumstances if successors claim the possession
of the account after the death of the account holder, sum bellow 15000 can be allocated
against commissioner certificate and sum above 15,000 will be honored only against
succession certificate from the court.
Specimen signature card:
This card contains a photograph of the account holder on the top left. Specimen signature of
the account holder will be on the right side of a box and on the left, the banker will sign along
with a seal the two signatures are accepted. The banker should cross block the two
specimen signature as well.
If the account holder cannot provide a signature his/her thumb mark will do. But it should
mention whether the thumb mark is of right hand (RHT) or left (LHT). In this regard any
bearer check will never be allowed and only the account holder will be allowed to make
check transaction by providing thumb nark in front of the band officer.
Special instructions :
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Clear-cut special instruction is a must part to fill up. The bank could be instructed to honor a check
signed by a single signatory even against a joint account; in that case the special instruction would
be like either or survivor. However, if any special instruction has not been obtained from
customer, the customer has to be asked for it and the specified column must be cancelled by
drawing a line. It is to note that this column must not be left blank in any circumstances.
Safety measure in account opening:
If someone is willing to do any fraud, he /she will start with account opening. So the banker
will have to be in peak of caution in verifying all the data and document during opening of
account. This is to keep in mind that against any future forgery at least this account opening
procedure must gain a clean chart as well as the banker himself.
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4.1.1.1.4 Closing of Bank Account
The relationship between a Banker and his customer is a contractual one and may be
terminated by either of them by giving notice of his intention to the other person. The rights
and obligation of a Banker in this regard is as follows:
If a customer directs the Banker to close his account.
On receipt of the notice of the death of a customer
If a Banker receives a notice regarding the insanity of his customer.
On receipt of a Garnishee order from the court.
If the central bank wants to close any one's account.
If the account did not transected for a long time.
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Current a/c may be individual, joint / partnership or can be formed any name. It
provides the following facilities:
Overdraft facility.
Other facilities like collection of checks transfer of money, rendering agency and
general utility services.
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Security A/C
Nominee facility
Renewal facility
Not transferable
Payment may be cash or collection
Not negotiable
Duration Rate
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f) Janata Bank Monthly Savings Scheme (JBMSS):
This is now very much popular to all classes of clients. Any person having Bangladesh and
age limit above 18 can open this scheme.
Period Interest rate
For 2 years 10%
For 4 years 9%
For 6 years 8.5%
Monthly installment may be TK500, 1000,2000,5000,10000,20000,25000. Installment must
be deposited within first 10 days of month.
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9000 671089
10000 745898
The money will be paid out on maturity according to the table above, but Tax / Levy/ Excise
and other charges as applicable will be adjusted from the amount.
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Whether the account had desired amount of money or not.
Prefectures of serial number of the cheques.
After careful examination, the drawing amount of cheque was entered in the ledger .
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Accounting Entries for PO
By cash:
Cash A/C ..Debit.
Bills payable (PO) A/C ...Credit.
Income on commission A/C Credit.
By account:
Customer's A/C ..Debit.
Bills payable (PO) A/C Credit.
Income on commission A/C Credit.
By transfer:
JBL General/ other Dept Clients A/C.Debit.
Bills payable (PO) A/C ..Credit.
Income on commission A/C... Credit.
Settlement of a PO:
When PO submitted by collecting bank through clearing house, the issuing bank gives
payment.
Bills payable (PO) A/CDebit.
JBLGeneral A/C.Credit.
Cancellation of a Pay Order:
If a buyer wants to cancel it, he should submit a letter of instrument in this regard and also
return the instrument.
Bills payable (PO) .Debit.
Customer A/C..Credit.
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Cash/Customer's A/C--------------------- Debit.
JBL General A/C (Drawn on Branch) ---------- Credit.
Income on commission A/C ---------------------- Credit.
After giving these entries an Inter-Bank Credit Advice (IBCA) is prepared which contains the
controlling number, depicting that the branch is credited to whom it is issued. An IBCA
implies the following entries,
JBL General A/C Issuing Branch ------- Debit.
Drawn on Branch ------------------------------------Credit.
DD Cancellation:
To cancel an issued DD, the client has to submit an application. Issuing branch then sends an
Inter Branch Debit Advice (IBDA) to the drawn branch against previously issued IBCA.
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4.1.1.5 Bills and Clearing Section
"The process by which cheques exchanged between the collecting and paying bank and the
ensuring financial settlement is called clearing"
Clearing department deals with the cheques, drafts and other instrument and its collection and
payment process. Clearing are two types. They are:-
1. Inward Bills for Collection (IBC)
2. Outward Bills for Collection (OBC)
Accounts department is very important department of general banking. There are many
transactions are made in very day in back. Here the transactions are recording properly. If
there is any fault made then the account section may check it and do action against it. To
avoid these mishaps the bank provides accounts department; whose function is to check the
mistakes in passing vouchers or wrong entries or fraud or forgery. If any discrepancy
regarding transaction arises the department report to concerned department.
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Preparing the daily Statement of Affairs showing all the assets and liability of the
branch as per General Ledger and Subsidiary Ledger separately.
Making payment of all the expenses of the branch.
Preparing the monthly salary statements for the employees.
Recording inters branch fund transfer and providing accounting treatment in this regard.
Make charges for different types of duties.
Checking of Transaction List.
Recording of the vouchers in the Voucher Register.
Dispatch division mainly operates the limitation of dispatching the intimidation letter to the
client; Inter Bank credit advice (IBCA), Inter Bank Debit Advice (IBDA), Outward Bill for
Collection (OBC) to other banks for internal transaction with the bank.
The officer engaged in the dispatch division maintains two types of register books to keep
entries of those documents particulars.
These two types of books are:
1. Inward mail
2. outward mail
Outward mails are of two types:
1. local courier
2. overseas courier
When the officer receives papers from outside the branch, it is required to give a dispatch no.
on the paper. The officer put number on that paper and on the basis of nature of document he
takes decision how it has to be dispatched. Sometimes he gives to documents by hand to
other party. At the beginning of the month, he withdraws money from bank by issuing a debit
voucher to make the payment of dispatching bills. He writes all the expansion of dispatching
in the register and payment. At the end of the month, he calculates his total expenses; he
refunds it to the banks by creating a credit voucher.
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4.1.2 Credit Management of JBL
1. Selection of borrower
For selecting the borrower security should not the only thing to be relied upon. So
responsibilities of the bankers to investigate the client from different view point i.e. the
strength and weakness of the client so that the client will be able to repay the bank loan as
repayment schedule with profit.
2. Credit appraisal
Borrowers Credit Worthiness Analysis by JBL following 6 Cs:
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The question that must be dealt with before any other whether or not the customer can service
the loan that is pay out the loan when due with a comfortable margin of error. This usually
involves a detailed study of six aspects of the loan application: character, capacity, cash,
collateral, conditions and control. All must be satisfied for the loan to be a good one from the
lenders (JBL) point of view.
Cash: The borrower should have the ability to generate enough cash flow to repay the loan.
This cash flow can be generating from sales or income from the sales of liquidation of assets
or funds raised through debt or equity securities.
Character: The loan officer must be convinced that the customer has a well defined purpose
for requesting credit and a serious intention to pay. Responsibility, truthfulness, clean past
record, true purpose and honest intention to repay the loan make up what a loan officer calls
character.
Capacity: The customer requesting credit must have the authority to request such and the
legal standing to sign a binding loan agreement.
Collateral: The borrower must possess adequate net worth or enough quality assets to
provide adequate support for the loan. The value of the collateral security must cover the loan
exposure.
Conditions: The recent trend of borrowers line of work or industry must be taken into
considerations by the lender.
Control: The lender should be careful about whether changes in law and regulations could
adversely affect the borrower and whether loan request meets the Banks and regulatory
authorities standards for loan quality.
3. Credit assessment
A thorough credit and risk assessment should be conducted prior to the granting of loans, and
at least annually thereafter for all facilities. The results of this assessment should be presented
in a credit application that originates from the Relationship Manager, and is recommended by
Branch Credit Committee (BCC). The RM should be the owner of the customer relationship,
and must be held responsible to ensure the accuracy of the entire credit application submitted
for approval. RMs must be familiar with the banks Lending Guidelines and should conduct
due diligence on new borrowers, principals and guarantors.
Credit Applications should summarize the results of the RMs risk assessment and include as a
minimum, the following details:
Amount and type of loan(s) proposed
Purpose of loans
Loan structure (Tenor, Covenants, Repayment Schedule, Interest)
Security arrangements
In addition, the following risk areas are analyzed:
Borrower analysis
Industry analysis
Supplier/ Buyer analysis
Historical financial analysis
Projected financial performance
Account conduct
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Adherence to lending guidelines
Mitigating factors
Loan structure
Security
A Credit Risk Grading (CRG) deploys a number/ Alphabet/ Symbol as a primary summary
indicator of risk associated with a credit exposure. Credit Risk Grading (CRG) is the basic
module for developing a credit Risk Management System.
All Banks should adopt a credit risk grading system.
Well managed credit risk grading systems will promote bank safety and soundness by
facilitating informed decision making. Grading systems will measure credit risk and
differentiate individual credits and groups of credits by the risk they pose. All banks should
adopt a credit risk grading system. All facilities should be assigned in risk grade. Where risk
deterioration is noted, the risk Grade aligned to the borrower and its facilities should be
immediately changed. Borrower risk Grades should be clearly stated on credit Application.
The proposed CRG scale consists of 8 categories with short names and numbers are
provided as follows-
Number Grading Short name Range of Score
1 Superior SUP 100
2 Good GD 85+
3 Acceptable ACCPT 75-85
5 Marginal/watch list MG/WL 65-75
5 Special mention SM 55-65
6 Sub standard SS 55-55
7 Doubtful DF 35-55
8 Bad and loss BL 35
The respective officer of Head Office appraises the project by preparing a summary named
Top Sheet or Executive Summary. Then he sends it to the Head Office Credit Committee
(HOCC) for the approval of the loan. The Head Office Credit Committee (HOCC) considers
the proposal and takes decision whether to approve the loan or not. If the loan is approved by
the HOCC, the HO sends the approval to the concerned branch with some conditions. These
are like.
Drawing will not exceed the amount of bill receivables.
The tern over in the account during the tenure of the limit should not be less than four
times of the credit limit.
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All other terms and conditions, as per policy and practice of the bank for such
advance to safeguard the bankers interest shall also be applicable for this sanction
also.
Branch shall not exceed the sanctioned limit.
Required charge documents with duly stamped should be obtained.
Drawing shall be allowed only after completion of mortgage formalities and other
security arrangement.
After getting the approval from the HO, the branch issues the sanction letter to the borrower.
The borrower receives the letter and returns a copy of this letter duly signed by him as a
token of having understood and acceptance of the terms and conditions above.
Diagrammatically the whole loan approval and sanctioning process is given below:
6. Credit disbursement
After verifying all the documents the branch disburses the loan to the borrower. A loan
repayment schedule is also prepared by the bank and given to the borrower.
7. Credit monitoring
Monitoring is a process of taking case of loan cases starts from the selection of the borrower
and remains live throughout the life of a loan. To minimize credit losses, monitoring
procedures and systems should be in places that provide an early indication of the
deteriorating financial health of a borrower. At a minimum, systems should be in place to
report the following exceptions to relevant executives in CRM and RM team:
Past due principal or interest payments, past due trade bills, account excesses, and breach of
loan covenants;
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Loan terms and conditions are monitored, financial statements are received on a regular basis,
and any covenant breaches or exceptions are referred to CRM and the RM team for timely
follow-up.
Timely corrective action is taken to address findings of any internal, external or regulator
inspection/audit.
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SOD (Secured Over Draft)
Advances allowed to individual/firms against financial obligation (i.e. lien of
FDR/PSP/BSP/ Insurance policy/Share etc.). This may or may not be a continuous
Credit.
PC (Packing Credit)
Advance allowed to a customer against specific L/C or Firm contract for
processing/packing of goods to be exported falls under this head and is categorized as
Packing Credit.
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Charge document papers
The above papers must be completed, filled & signed by the party thereto. The party will
submit the entire filled document along with application in printed form of the designated
Bank which is also an agreement between application & the Bank.
3) Bank guarantee
A Bank guarantee is a written irrevocable obligation by the Bank to pay an agreed sum of
money to the beneficiary in the event of default by a third party in fulfilling their obligations
under the terms of the Bank Guarantee. Bank Guarantee is not a financing instruments but
merely a guarantee.
2) Packing Credit
We provide pre - shipment finance in the form of Export Packing Credit (PC) to assist cash
flows for manufacturing or packing goods for export from Bangladesh.
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Fees & Charges
13% p.a. at quarterly rests subject to change(s) that may be made by the Bank
from time to time
Requirements
Application received from the customer for LTR facility.
Photograph of signatory to be attested by Chairman of the
company.
Copy of valid trade license
Official seal with designation
Tax Certificate
KYC Form
Transaction Profile
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Letter of Credit
Micro credit
Small Industry / Enterprise loan
Medium Industry / Enterprise loan
Large Industry loan
Trade loan
Packing Credit
Real estate loan
Other Demand I Forced Loan
Loan against documentary bills accepted by the banks
Lease financing
Import financing (LIM, PAD etc).
Though these types of credit facilities basic bank playing a vital role for the economic growth
of Bangladesh.
Besides the above, credit facilities given by the banks can be classified in the following way:
a) On the basis of term
1) Short term
2) Mid term
3) Long term
4) Working capital
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Doctors loan 15.50% Do
Cyber caf loan 15.50% Do
Prothibondhi loan 10% Do
General loan 10% Do
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Scenario of Classified loan and advances of JBL in 2013:
BDT in Million
Classified loans 269455.87
Substandard 7076.52
Doubtful 4296.11
Bad/Loss 20394.23
Total Classified loans and advances 31766.86
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4.1.3 Foreign Exchange Operations of JBL
Foreign exchange department of Janata Bank Limited is one of the most important
departments among all departments. This department handles various types of activities.
Among these main three are as follows:
4.1.3.1 Import
4.1.3.2 Export and
4.1.3.3 Foreign remittance
4.1.3.1 Import:
Import means purchase of goods or services from abroad. Normally, consumers, firms and
Government organizations import foreign goods or services to meet their various necessities.
Main import items are food item, edible oil, fertilizer, petroleum, machineries, chemicals, raw
materials of industry, cement clinkers etc. So, in brief, we can say that import is the flow of
goods and services purchased by local agent staying in the country from the foreign agent
staying abroad.
Import procedure:
Authorized Dealer, banks is always committed to facilitate import of different foods into
Bangladesh from the foreign countries. Import Section, which is under the Foreign Exchange
Department of a bank, is assigned to perform this job. And to serve its parties demand to
import goods, it always maintains required formalities that are collectively termed as Import
Procedure.
i) At first, the importer must obtain an Import Registration Certificate (IRC) from the CCI &
E submitting the following papers:
Up to date Trade License.
Nationality and Asset Certificate.
Income Tax Certificate.
In case of company, Memorandum & Articles of Association and Certificate of
Incorporation.
Bank Solvency Certificate, etc.
Required amount of registration fee
ii) Then the importer has to contact with the seller outside the country to obtain the Proforma
Invoice. Usually an indenture, local agent of the seller or foreign agent of the buyer makes
this communication. Beside these other sources are:
Trade fair.
Chamber of Commerce.
Foreign Missions in Bangladesh.
Journals, etc.
iii) When the importer accepts the Proforma Invoice, he/she makes a purchase contract
with the exporter detailing the terms and conditions of the import.
iv) After making the purchase contract, importer settles the means of payment with the
seller. An import procedure differs with different means of payment. The possible means are
Cash in Advance, Open Account, Collection Method and Documentary Letter of Credit. In
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most cases, the Documentary Letter of Credit in our country makes import payment.
Purchase Contract contains which payment procedure has to be applied.
Payment Modes:
Cash in advance: Importer pays full, partial or progressive payment by a foreign DD,
MT or TT. After receiving payment, exporter will send the goods and the transport
receipt to the importer. Importer will take delivery of the goods from the transport
company.
Open Account: Exporter ships the goods and sends transport receipt to the importer.
Importer will take delivery of the goods and makes payment by foreign DD, MT, or
TT at some specified date.
Collection Method: Collection methods are either clean collection or documentary
collection. Again, Documentary Collection may be Document against Payment (D/P)
or Document against Acceptance (D/A). The collection procedure is that the exporter
ships the goods and draws a draft/ bill on the buyer. The exporter submits the
draft/bill (only or with documents) to the remitting bank for collection and the bank
acknowledges this. Then the remitting bank sends the draft/bill (with or without
documents) and a collection instruction letter to the collecting bank. Acting as an
agent of the remitting bank, the collecting bank notifies the importer upon receipt of
the draft. The title of goods is released to the importer upon full payment or
acceptance of the draft/bill.
Letter of credit: Letter of credit is the well-accepted and most commonly used means
of payment. It is an undertaking for payment by the issuing bank to the beneficiary,
upon submission of some stipulated documents and fulfilling the terms and conditions
mentioned in the letter of credit.
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time limit. The applicant cannot prevent a bank from honoring the documents on the grounds
that the beneficiary has not delivered goods.
The importer submits the following documents with the application for opening the L/C:
Tax Identification Number (TIN)
Valid trade license
Import registration certificate (IRC)
The bank will supply the following documents before opening the L/C:
LCA form
IMP form
Necessary charger documents for documentation
The above documents/papers must be completed duly signed and filled by the parties
according to the instruction of the concern banker.
L/C Application Form (L/CAF):
L/C Application Form is a sort of an agreement between customer and bank on the basis of
which letter of credit is opened. Bank provides a printed form for opening of L/C to the
importer. A special adhesive stamp of value Tk.200 is affixed on the form in accordance with
Stamp Act currently in force. While opening, the stamps are cancelled. Usually the importer
expresses his decision to open the L/C quoting the amount of margin in percentage. Usually
the importer gives the following information
Full name and address of the importer
Full name and address of the beneficiary
Draft amount
Availability of the credit by sight payment/ acceptance/ negotiation/ deferred payment
Time bar within which the documents should be presented
Sales type (CIF/FOB/C&F)
Brief specification of commodities, price, quantity, indent no. etc.
Country of origin
Bangladesh Bank registration no.
Import License/LCAF no.
IRC no.
Account no.
Documents no.
Insurance Cover Note/Policy no., date, amount
Name and address of Insurance Company
Whether the partial shipment is allowed or not
Whether the transshipment is allowed or not
Last date of shipment
Last date of negotiation
Other terms and conditions (if any)
Whether the confirmation of the credit is requested by the beneficiary or not.
The L/C application must be completed/filled in properly and signed by the
authorized person of the importer before it is submitted to the issuing bank.
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4.1.3.2 Export
Janata Bank Limited exports a large quantity of goods and services to many countries.
Readymade textile garments (both knitted and woven), Jute, Jute-made products, frozen
shrimps, tea, hide and skin, vegetables are the main goods that Bangladeshi exporters exports
to foreign countries. Garments sector is the largest sector that exports the lion share of the
countrys export. Bangladesh exports most of its readymade garments products to U.S.A and
European Community (EC) countries. Bangladesh exports about 40% of its readymade
garments products to U.S.A. Most of the exporters who export through Janata Bank Limited
foreign exchange Branch are readymade garment exporters. They open export L/Cs here to
export their goods, which they open against the import L/Cs opened by their foreign
importers.
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Triplicate: On realization of export proceeds the same bank to the same authority
reports Triplicate.
Quadruplicate: Finally, the negotiating bank as their office copy retains
Quadruplicate.
Shipment of goods: Exporter makes shipment according to the terms and condition of
L/C.
Examination of Document:
Banks deal with documents only, not with commodity. As the negotiating bank is
giving the value before repatriation of the export proceeds it is advisable to scrutinize and
examine each and every document with great care whether any discrepancy(s) is
observed in the documents. The bankers are to ascertain that the documents are strictly as per
the terms of L/C Before negotiation of the export bill. Bank officers assigned for examining
the export documents may use a checklist for their convenience.
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Janata Bank Limited officials scrutinize the documents to ensure the conformity with the
terms and conditions.
The documents are then forwarded to the L/C opening bank.
The L/C issuing banks gives the acceptance and forwards an acceptance letter.
Payment is given to the customer on either by collection basis or by purchasing the
document.
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Part: Two
CAMEL is basically ratio based model for evaluating the performance of banks. It is a
management tool that measures capital adequacy, assets quality, efficiency of management,
quality of earnings and liquidity of financial institutions. The Banks use various ratios for
measuring the financial performance which tells us the true financial position of the bank. In
the present study, CAMEL Model has been applied for the same purpose. Various ratios
calculated under the Model help in identifying the strengths/weaknesses of banks and
suggesting improvement in its future working. In the present study, following financial ratios
under CAMEL Model have been used for the analysis of Financial Performance:
1. C (Capital Adequacy):
The capital adequacy reflects the overall financial condition of a bank and also the ability of
the management to meet the need for additional capital. The ratios which are used under
capital adequacy are following:
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CAR, the stronger the bank. Capital adequacy Ratio = (Capital fund of the bank) / (Risk
weighted assets)*100
Interpretation:
The minimum capital requirement in Bangladesh is 10% of total risk weighted asset. Here,
the capital adequacy ratio is the highest in 2009 (13.81%) and lowest in 2012 (3.70%)
compared to other years. In 2013 it is greater than the minimum capital requirement, so, the
bank is in a good position.
Interpretation:
Among the different years, the advances to assets ratio is the highest position in 2010
(65.39%) and in the lowest position in 2013 (48.76%) compared to other years. The bank
should look to give more advances to its customer because the ratio in 2013 is lower.
2. A (Asset Quality):
The prime motto behind measuring the asset quality is to ascertain the component of non-
performing assets as a percentage of the total advances.
Interpretation:
From the above table, it was seen that the non-performing loan ratio is the highest in 2012
(17.42%) and is the second highest in 2013 (11.12%). It is not a good sign for the bank, so,
the bank should give loan after proper evaluation of the loan proposal so that it is productive.
3. M (Management Efficiency):
It involves a subjective analysis for measuring the efficiency of the management; this
research uses ratios like, advances to deposits and net profit per employee.
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iv) Total advances to Total Deposits:
This ratio measures the efficiency of the management in converting the deposits available
with the bank (excluding other funds like equity capital, etc.) into advances as shown in the
following table:
Year 2013 2012 2011 2010 2009
Total advances to Total deposits 59.71% 74.52% 71.28% 78.77% 67.58%
ratio
Interpretation:
Among the different years, the total advances to total deposits ratio is the lowest position in
2013 (59.71%) compared to other years. Therefore, bank should convert more deposits into
advances to generate more income.
Interpretation:
From the above table, it was seen that net profit per employee was the maximum in 2013
(0.62 million) where as a negative figure (loss) in 2012. It is a good sign that the bank
reached in highest position in 2013 compared to other years.
4. E (Earning Quality):
This parameter gains importance in the light of the argument that much of a banks income is
earned through non core activities like investments, treasury operation, and corporate
advisory services and so on. In this section we try to assess the quality of income generated
by core activity- income from lending operations. The ratios which are used under earning
quality are following:
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Interpretation:
From the above table, it was seen that the ratio is the highest in 2011 (3.97%) but it was
reduced to 2.24% in 2013. Therefore, the bank should concentrate on it.
vii) Net profit Margin Ratio:
Net Margin or Net Profit Margin Ratio refers to a measure of profitability. Higher Net Profit
Margin Ratio indicates the comparative higher profitability of the Bank.
Year 2013 2012 2011 2010 2009
Net Profit Margin Ratio 23.90% 38.66% 13.70% 21.83% 15.81%
Interpretation:
The net profit margin ratio is the second highest position in 2013 (23.90%) compared to other
years. So, the bank should maintain this or improve this than other years to keep its function
smoothly.
Interpretation:
Among the different years, EPS is the highest in 2010 (98.16) and is the lowest position in
2012 (-138.91) compared to other years. In 2013, EPS is the second highest position
achieved, its not a bad at all.
5. L (Liquidity):
Liquidity is one of the important parameters through which the performance of a Bank is
assessed. This parameter of CAMEL Model assesses the ability of a Bank to pay its short
term liabilities towards its deposit holders in a particular span of time. It can be measured
with the help of the following ratio:
Interpretation:
From the above table, it was seen that the ratio is the highest in 2012 compared to other years.
In 2013, it is the second lowest figure indicated that banks liquid assets are lower.
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4.2.2 Testing the Financial Soundness of Janata Bank Ltd. using Z-score
Model:
For the purpose of the financial soundness testing, I have used Prof. Altmans Z-score
model. The specified variable used is explained in Table- A and the interpretation of Z score
value is presented in Table -B. To study the financial health of the company, the different
(five) ratio used in Altmans Z-score approach.
Table: A
Financial Ratio Coefficient of the Ratio
(Recommended by Prof. Altman)
Net working capital to total assets (X1) 1.2
Retained earnings to total assets (X2) 1.4
EBIT to total assets (X3) 3.3
Market value of equity to total liabilities (X4) 0.6
Net sales to total assets (X5) 0.99
Z-score = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + 0.99X5
Table: B
Score Interpretation
Above 3.00 The company is financially safe
2.00-2.99 The company is on alert to exercise the
caution
1.8-2.00 There are chances that the company could go
bankrupt in the next two years
Below 1.8 The companys financial position is
embarrassing
Results:
Table: 01
Net Working Capital to Total Assets Ratio of JBL:
Year 2013 2012 2011 2010 2009
Net Working Capital to Total 1.73% 1.61% 2.81% 0.90% 0.69%
Assets Ratio
Interpretation:
Net working capital to total assets ratio of Janata Bank Limited is presented in Table-1. It is
concluded that among the different years studied, the Bank showed highest earnings in the
year 2011(2.81%). However, there is a progressive improvement in the Net working capital
to total assets ratio from 2011 to 2013. It indicated that the Bank is in a good position from
meeting its current obligations.
Table: 02
Retained Earnings to Total Assets Ratio of JBL:
Year 2013 2012 2011 2010 2009
Retained Earnings to Total Assets 1.29% (2.99%) 0.60% 0.96% 0.56%
Ratio
Interpretation:
The retained earnings to total assets ratio of Janata Bank Limited is depicted in Table -2. As
observed from in Table-2, among the different years studied, the Bank showed highest
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earnings to assets ratio in the year 2013 (1.29%). However, there is a lowest ratio in 2012 (-
2.99%) compared to other years. Therefore, it is seen that the bank is in a good position in
2013.
Table: 03
EBIT to Total Assets Ratio of JBL:
Year 2013 2012 2011 2010 2009
EBIT to Total Assets Ratio 1.81% (2.51%) 1.99% 2.27% 1.92%
Interpretation:
The return on total assets of the Janata Bank Limited is depicted in Table-3. Among different
years, 2010 sustained the highest return on total assets ratio (2.27%) followed by 2011
(1.99%), 2009 (1.92%), 2013 (1.81%) and in the lowest position in 2012 (-2.51%). This
indicated that the operational efficiency in 2013 is satisfactory but it is lower compared to
other years except in 2012.
Table: 04
Market Value of Equity to Total liabilities Ratio of JBL:
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Part: Three
SWOT
analysis
Internal External
Factors Factors
Setting the objective should be done after the SWOT analysis has been performed. This
would allow achievable goals or objectives to be set for the organization.
Strengths: characteristics of the business or project that give it an advantage over others.
Threats: elements in the environment that could cause trouble for the business or project.
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4.3.2 SWOT Analysis of Janata Bank Ltd.
4.3.2.1: Strengths:
4.3.2.2: Weaknesses:
Lack of technological resources such as computerized banking as well as Internet banking.
Because of manual service, it is more costly and time consuming.
Lack of promotional activities.
Poor information based website.
There is no specific training institute for JBL employees.
The bank has more non-performing assets.
Incentive system is very weak than private bank.
Credit providing procedures are very lengthy. So most of the people fell boring to take loan.
JBL provides slow rate of interest to the saving accounts holders. Low rate of interest shifts the
customers to the other banks to earn more profit.
Most of the people of Bangladesh are very poor. But, Janata Bank Ltd. does not provide any
special facilities for them.
Interest rate is about same for both high risk borrower and low risk borrower.
4.3.2.3: Opportunities:
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4.3.2.4: Threats:
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Chapter: 05
Recommendations and
Conclusion
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5.1 Recommendations
By observation I have some suggestions, where the change for the development is utmost
important. Realizing the importance of this section, efforts have been made to give feasible
recommendations, which are categorized under the following:
In general banking, credit and foreign exchange department should be computerized.
The amount of non-performing loan should be reduced by analysis proper evaluation
of loan proposal and monitoring.
The bank should go for mass online banking to meet the demand of the customer.
The management should give more emphasize on the promotional activities.
The web site of the bank should be improved with available needed information.
More ATM booth should be introduced in near to every customer place.
The bank should establish separate training institute for their employees.
Proper incentive system should be introduced to motivate employees.
JBL should built separate loan recovery division if it happen then their classified loan
amount will reduce.
JBL must come up with innovative product to meet up the demand of time.
Officials to be posted in Foreign Exchange, General Banking and credit Department
should be commerce background.
Janata Bank Ltd. should provide short-term scheme like Micro credit for poor people.
They should spread their service to the rural area by introducing branch in that area.
Decoration of JBL should to develop to compare other commercial bank.
JBL should give the competitive interest rate, so that the clients are not shifting their
accounts to other bank.
It may be a fair deal if the high-risk borrowers and the low risk borrowers should not
have to pay the same interest rate. Interest rate could be arranged according to the sum
they borrow.
The institution should conduct some primary research to get a better understanding of
the target market. They should also conduct surveys to find the extent to which their
services are meeting the needs and wants of target market.
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5.2 Conclusion
An efficient operation of banking sector enables the smooth financial resources
intermediation of an economy. Economic growth is contributed greatly by the efficiency of
banking sector in resources generation and its proper allocation. The smooth and efficient
operation of banking sector also helps to reduce risk of failure of an economy. Therefore, the
performance of banking sector is always been a source of interest for researchers to judge the
economic condition of a country. From this view point, the study is done on the analysis of
banking activities and financial performance of Janata Bank Ltd. JBL plays an important role
in the banking sector as well as in our economy. It plays a great role in collecting scattered
deposit, loan settlement and international trade etc. At present there is no such organization
in the world that is free from problem and challenges. Every concern has to strive and
struggle a lot to be more profitable and to go more competitive edge. The study showed that
the bank is financially safe and its capital adequacy ratio is also good. The great limitation is
that the bank has more non-performing assets. The bank is not computerized in all
departments, has a few online banking branch, no aggressive promotional activities, and has
no separate training institute for their employees. Another important limitation is that the
incentive system of the bank is poor compared to private bank. When Janata Bank Limited is
able to overcome this type of problem then it would be more structured compared to any
other bank operating local or foreign in Bangladesh. The current situation of Janata bank
Limited is satisfactory. But in the age of competition, if the bank does not provide extra
ordinary that means superior services then it will be difficult to continue banking because
everybody wants to maintain quality. For the future planning and the successful operation in
its prime goal in this current competitive environment, I hope this report can provide a good
guideline. I wish continuous success and healthy business portfolio of Janata Bank Limited.
The importance of this study stems from the importance of the Bangladeshi commercial
banking sector which has a huge share in the Bangladeshi economy. In addition, this study is
anticipated to make contributions in two folds: first, contributions to the management in the
field of banking; secondly, contributions to the academic field.
The expected contributions of this study to the management in the field of banking can be
said to be that: this study may help decision makers to pay more attention on the major
banking activities that may help in increasing the financial performance positions. In
addition, the financial information of this study will help the management of the Janata Bank
Ltd. in setting up plans and financial strategies. The expected contributions of this study to
the academic fields can be said to be that: from an academic point of view, this study
provides a new perspective in evaluating the financial performance of a leading Bangladeshi
commercial banks as well as the finding of this study can be added to the present literature
and it can help researchers in their future studies.
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