Vous êtes sur la page 1sur 97

Chapter: 01


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,
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
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.

1.2 Objectives of the Study

1.2.1 Broad Objective

The prime objective of this study is to analyze the banking practices and performance of
Janata Bank Ltd.

1.2.2 Specific Objectives

To fulfill the broad objective, the specific objectives are as follows:

To give an idea about the major banking practice arena in Bangladesh;
To give an idea about financial performance and its measurement techniques;
To give an overview of the Janata Bank Ltd.;
To give an idea about major banking practice arena such as general banking activities,
credit management and foreign exchange operations of JBL.
To analyze the financial performance of JBL by using the CAMEL model and Z score
To analyze the strengths, weaknesses, opportunities, and threats of JBL; and
Finally, to make recommendations and draw a suitable conclusion regarding JBLs
activities and performance.

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,
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:

A collection of theories, concepts or ideas,

A comparative study of different approaches and

Critique of the individual methods (Wikipedia, 2008).

1.3.1 Selection of Sample:

The main objective of the study is to analyze the banking practices and performance of Janata
Bank Ltd. Data are collected for the period of five years from 2009 to 2013 for financial
performance measurement and the necessary data has been obtained from the audited annual
report of the Janata bank Ltd.

1.3.2 Desk Study

An extensive desk study has been conducted to have an idea about major banking practices
arena such as general banking activities, credit management, foreign exchange operations and
performance analysis techniques. This has helped me to frame theoretical background of the
study. In such a context, an extensive literature survey has been conducted. In this
connection, intensive use of internet has been considered as the main source of literature. In
addition to this, books and journals relevant to the study have also been consulted.

1.3.3 Primary Data

The primary data are those which are collected afresh and for the first time, and thus happen
to be original in character. To complete this report I have obtained primary data through:
practical desk work, face to face communication with customers, staffs and officers and my

1.3.4 Secondary Data

Latest annual reports of the sample enterprises have constituted the principal source of
secondary data. The annual reports of the sample enterprises which contained valuable
financial and non-financial information about the corporate affairs have been utilized for
constructing the reports. Besides, secondary data also include: research studies, the relevant
articles published in highly esteemed journals, books, different published documents of the
bank, and internet etc.

1.3.5 Analysis Techniques

This report is descriptive in nature which briefly reveals major banking practice arena such as
general banking activities, credit management, and foreign exchange operations of Janata

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.

1.4 Rationale of the Study

Over the last few years the banking world has been undergoing a lot of changes due to
deregulation, technological innovations, globalization etc. With the rapid growing
competition (due to free market economy) among nationalized, foreign and private
commercial banks as to how the banks operates its banking operation and how customer
service can be made more attractive, the expectation of the customers has immensely
increased. Reciprocating the sentiment, commercial/private banks are trying to elevate their
traditional banking service to a better standard, to meet the challenging needs and demands.
Side by side these banks have now concentrated their attention towards diversification of
their products for better performances and existence.
Banking sector in Bangladesh specially nationalized bank is facing challenges from different
angles. The recent shocks in the banking sector have exposed the vulnerability of the
seemingly resilient financial systems in the country. The recently detected Hall-Mark case
(2013) of forgery, as a nationalized bank, Sonali Bank Limited (SBL), is a testimony to poor
management, weak internal control and risk management, and above all, totals lack of
governance on the part of the bank. Thats why; I have selected my internship organization
on Janata Bank Ltd. which is a nationalized bank.
Almost all commercial banks in Bangladesh today are under great pressure to meet the
interests of their stockholders, employees, depositors, borrowers and customers. As the
numbers of investors in Dhaka Stock Exchange (DSE) are increasing day by day, a huge
numbers of investors of share markets are showing their interest to purchase and sell the
share of different commercial banks. But somehow, they are frustrated as the shares of
different commercial banks are not showing better performance yet. Therefore, evaluation of
banks' financial performance is important for all parties like depositors, bank manager,
stockholders, creditors, regulators and educationalist. By considering the above fact, I have
taken my internship topic titled An Analysis of Banking Practices and Performance of
Janata Bank Limited: A Study on a Nationalized Bank.
The study may help formulating policy regarding the ideas relating to the feelings of the
customers and bankers. Furthermore, Janata Bank Ltd. executives who are actually executing
the policies undertaken by the top management will have a chance to communicate their
feelings and will have the feedback about their dealing with the customers.

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.

1.6 Scheme of the Study

The study has been designed to present the findings in five different chapters. First of
all it is the introduction in which the research topic has been introduced by background,
objectives, methodology, study rationale, scope and limitations, and scheme of the study have
been described in this first chapter.
The second chapter titled Theoretical Framework which shows concept of bank and
banking, overview of banking sector in Bangladesh, major banking practices arena of a
nationalized bank such as general banking, credit management, and foreign exchange
operations; concept of performance and financial performance; usefulness of financial
performance; techniques to measure financial performance; and review of related literature
on financial performance.
The third chapter titled An Overview of Janata Bank Ltd. presents background of
JBL; profile of JBL at a glance; mission, vision and values of JBL; Strategic objectives of
JBL; product and services; organizational structure; human resources; report on sustainable
banking; key milestone; five years key financial information; and a brief idea of my
internship place (Gandamati Bazar Branch, Kotbari, Comilla) of JBL.
The fourth chapter titled Analysis and Findings depicts major banking practices arena
of JBL such as general banking, credit management, and foreign exchange operations of JBL;
financial performance and SWOT analysis of JBL.
The fifth and last chapter of the study is the recommendations and conclusion of the
whole study. The contributions of the report and scope for further research have also been
pointed out in this chapter.

Chapter: 02

Theoretical Framework

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
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."

2.2 Overview of Banking Sector in Bangladesh

2.2.1 Financial System in Bangladesh
Financial System is the set of well organized institutional set up which helps to transfer
excess funds from surplus unit to deficit unit. The financial system in Bangladesh includes
Bangladesh Bank (the Central Bank), scheduled banks, and non-bank financial institutions
like leasing etc, Microfinance institutions (MFIs), insurance companies, co-operative banks,
credit rating agencies and stock exchange. Banking sector occupies the lion portion share of
financial system in Bangladesh. Bangladesh bank is authorized for regulating and supervising
financial institutions in Bangladesh.

2.2.2 Banking sector in Bangladesh

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.

2.2.3 Bangladesh Bank

Bangladesh Bank, the central bank and main regulatory body for the country's financial
system and monetary system, was established in Dhaka as an independent organization
according to the Bangladesh Bank Order, 1972 (P.O. No. 127 of 1972) with was effective
from 16th December, 1971 [Bangladesh Bank website]. Now, it has nine offices located at
different division of the country among which two in Capital city namely Motijheel and
Sadarghat, two in Rajshahi division namely Bogra and Rajshahi and one is each of the rest
five divisions namely Chittagong, Khulna, Sylhet, Barisal and Rangpur.

Figure: Banking sector in Bangladesh

2.2.4 Functions of Bangladesh Bank

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 formulate and implement monetary and credit policies.

To regulate and supervise and monitor financial intermediaries like banks and non-bank
financial institutions.

Currency issuance and circulation across the country.

Payment system management.

Holder and manager of FX reserve of the country.

Bankers to the Government.

To prevent money laundering.

To implement Foreign exchange regulation Act.

Preserve all credit information.

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.

2.2.5 History of Scheduled/Commercial Bank State-Owned Commercial Bank
Bangladesh becomes independent after long nine months war. Before the liberation, most of
the banking company were owned by the then west Pakistanis. So, the then Government of
Bangladesh nationalized all the banks operating in Bangladesh except foreign Banks
(Incorporated in abroad). All these banks were grouped into commercial banks through
merger process. Among the six commercial banks, two banks namely Pubali bank and Uttara
bank were shifted to private sector in January, 1985 and another bank Rupali bank was
incorporated as public limited company with effect from December, 1986. The rest three
banks namely Sonali bank, Agrani bank and Janata bank were also transferred as public
limited company in 2007. So, now there are four state owned commercial banks operating in
In a report of IMF, it has been stated that the initial focus on state-led banking imitate the
Governments lively quest of industrial policies to inspire growth. SCBs were considered as
the proper means of generating savings that could be facilitate industrial finance to the sectors
of the economy with the best growth prospects. SCBs major drawbacks are the lack of
corporate governance and undue political pressure even in loan disbursements without
properanalyzing the prospects of the borrower. Despite recently some measures have been
undertaken but this legacy is still visible in high NPL ratios and frail solvency. The
Government of Bangladesh has indicated its desire to divest of the state owned banks, and
took an initiative in late 2008 to make them limited liability companies. The Ministry of
Finance, in consultation with the SEC and BB allowed the banks to move their accumulated
losses into capital surpluses based on the notion of Goodwill. The accumulated losses were
converted in a Goodwill asset that will be amortized out of future profits. This accounting
treatment is questionable and concerns remain regarding the true financial condition of these

10 | P a g e 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. Private Commercial Bank

Local private commercial bank started operation in the decades of 1980's. We can categorize
local private bank in the following manner:

First generation bank: Those established in the decades of 1980s.

Second generation bank: These banks started operation in 1990 to 1995.

Third generation bank: After 1998, these banks are established.

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. Foreign Commercial Banks (FCBs)

Before liberation, there were few FCBs operating in the country which was incorporated in
abroad. Among those foreign banks, Standard chartered Grindlays Bank was merged with
Standard Chartered Bank in 2003 and then American Express Bank further merged with
Standard Chartered Bank in 2005. Credit Agricole Indosuez bank was renamed as
Commercial Bank of Ceylon Ltd. in 2003. Currently, there are nine foreign commercial
banks operating in Bangladesh. Foreign Commercial Banks suffered for lack of wide spread

11 | P a g e
branch network. Their operation is basically limited to capital city and some other municipal
city corporation area. Scheduled Bank According to the Law

According to Bank Company Act, 2007, "All such banks operating in Bangladesh with
different paid-up capital and reserves having a minimum of an aggregate value of Tk. 50 lacs
and conducting their affairs to the satisfaction of the Bangladesh Bank have been declared as
scheduled banks in terms of section 37(2) of Bangladesh Bank Order 1972. In terms of
section 13 of Bank Company Act, 1991, the minimum aggregate value was Tk. 20 crores.
From 30th March, 2003, it was tk. 100 crores and from the 8th October 13, 2007, it has been
raised at the minimum of Tk. 200 crores" [Bank Company Act, 2007].

2.3 Major Banking Practice Arena of a Nationalized Bank

The major banking practices arenas of a Nationalized Bank are:
2.3.1 General Banking
2.3.2 Credit Management
2.3.3 Foreign Exchange

2.3.1 General Banking

General banking department is the heart of all banking activities. This is the busiest and
important department of a branch, because funds are mobilized, cash transactions are made;
clearing, remittance and accounting activities are done here.
General Banking consist the management of deposit, cash, bills and clearing house, account
opening, security instruments handling, customer services, locker facilities and other
ancillary services of the bank besides Advance and Foreign Trade.

The following departments are under general banking section: Account Opening Section Deposit Section Cash Section Remittance Section Bills and Clearing Section Accounts Section Dispatch Section Account Opening Section:
When a person wants to open an account in a Bank, needs to communicate with responsible
officer. For opening an account a person or company must fill up a bank account opening
form and needs to present the following things:
Fill up the specific type of form (Savings\Current\Std etc.) that the bank has given to
the customer.
The form should filled up by the applicant himself / herself
Two copies of passport size photographs have to give to the Bank. In case of
partnership account, all partners photograph have to submit.

12 | P a g e
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.

The account should be properly introduced by any one of the following:

An existing Current Account holder of the Bank.
Officials of the Bank not below the rank of an Assistant officer.
A respectable person of the locality well known to the Manager/Sub-Manager of the
Branch concerned. Deposit Section:

The term deposit of money means, to preserve money. After the consumption people want to
save some money for future uncertainty. So they deposit it to the bank. On the other hand
bank is a service organization that helps people to deposit their money for future. Banks
main motive is to mobilize the money and gain profit. Banks give loan to other people, they
invest it and give interest to the bank, by that the bank earns profit. By mobilizing that sum of
money, not only the individuals but also the economy is benefited.

There are four basic types of deposit are mainly used

1. Current Deposit.
2. Savings account.
3. Short term deposit (STD)
4. Fixed deposit (FDR) Cash Section:

Cash section is very much important for any bank. Without cash section, no bank can do their
activities properly. Cash section is directly related to the customer. Following tasks are made
in cash section:
Here the customer deposit and withdraw money.
Customer may receive different type of financial instrument like Prize bonds.
Here the customers can pay their utility bills.
The cash payments of any kinds of remittance (Pay order, Demand order etc.) are
made here. Remittance Section:

Money transferred from one place to another through banking channel is called remittance.
Remittances of funds are one of the most important activities of the Commercial Banks.
The main instruments used for remittance of funds are:
13 | P a g e
Payment order (PO):
Demand Draft (DD)
Telegraphic Transfer (TT)
Mail Transfer (MT) Bills and Clearing Section:

Clearing is the process of collection of proceeds of instruments of different banks by a
collecting bank through some systematic procedures with the involvement of Central Bank.
The amount of Cheques, Pay Order (P.O), and Demand Draft (D.D) collection from other
banks on behalf of its customer is a basic function of a Clearing Department.
Procedures of clearing as follows:
Crossing of the cheque.
Computer posting of the cheque.
Clearing seal & proper endorsement of the cheque.
Separation of cheque from deposit slip.
Sorting of cheque 1st bank wise and then on branch wise.
Computer print 1st branch wise & then bank wise.
Preparation of 1st Clearing House computer validation sheet
Examine computer validation sheet with the deposit slip to justify the computer
Copy of computer posting in the floppy disk.
Sent to the local office. Accounts Section:

Accounts department is very important department of general banking. There are many
transactions are made in every day in bank. Here the transactions are recording properly. If
there is any fault made then the accounts 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. Dispatch Section:

Those documents that are enter in the branch or exit of the branch must go through this
Keeping records of the documents send to other branches or banks.
Letters are sending to their respective destination.
Send those documents safely and correctly.
Receives documents come through different medium, such as postal service, courier
service, via messenger etc.

2.3.2 Credit Management

This is the survival unit of the bank because until and unless the success of this department is
attained, the survival is a question to every bank. If this section does not properly work the

14 | P a g e
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. Definition of Credit & Credit Management:

The word credit comes from the Latin word Credo meaning I believe. It is a lenders
trust in a persons/ firms/ or companys ability or potential ability and intention to repay. In
other words, credit is the ability to command goods or services of another in return for
promise to pay such goods or services at some specified time in the future.
Credit is a Contractual agreement in which a borrower receives something of value now and
agrees to repay the lender at some date in the future, generally with interest. The term also
refers to the borrowing capacity of an individual or a company.(Investopedia dictionary)
Credit Management:
Credit Management is the process for controlling and collecting of payments from
customers. This is the function within a bank or company to control credit policies that will
improve revenues and reduce financial risks. (Wikipedia dictionary)
According to King (2000), credit management is the policies and practices business follows
in collecting payment from their customers. General Concept of Loan and Advance:

These are the Asset based products of a bank and reflected in the asset side of the balance
There are various types of loans and advances offered by bank depending on the purpose of
the borrowing customer.

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 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. Five Cs of Credit:


15 | P a g e
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 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 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 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 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. Principles of Good Lending Every Banker Follows:

Spread/ Diversity
National interest
Advances should be expected to come back in the normal course. The repayment of the loan
depends upon the borrowers capacity to pay and willingness to pay. The capacity depends
upon the tangible assets of the borrower. The willingness to pay depends upon the honesty
and character of the borrower.
Liquidity is the availability of bank funds on short notice. The borrower must be in a position
to repay within a reasonable time. Liquidity also signifies that the assets should be salable
without any loss.
16 | P a g e
A banker would not throw away money for any purpose for which the borrower wants. The
purpose should be productive so that the money not only remains safe but also provides a
definite source repayment.
A banker has to see that major portion of the assets owned by it is not only liquid but also aim
at earning a good profit. The difference between the interest received on advances and the
interest paid on deposits constitutes a major portion of banks income. Besides, foreign
exchange business is also highly remunerative.
Security serves as a safety valve for an unexpected emergency. The security offered for an
advance is a cushion to fall back upon in case of need. An element of risk is always present in
every advance however secured it might appear to be.
Spread/ Diversity:
The advances should be as much broad-based as possible and must be in keeping with the
deposit structure. The advances must not be in one particular direction or to one particular
industry. Again, advances must not be granted in one area alone.
National Interest:
Bank has significant role to play in the economic development of a country. The banker
would lend if the purpose of the advance is for overall national development. Types of Credit:

These two broad categories of credit can be broken down into smaller more specific types of
credit, there are limitless specific types of credit outlined below are some of the more
popular options:

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
Secured Loan:

17 | P a g e
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. 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,
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
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.

18 | P a g e 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

Unclassified . all current loan all current loans with

required eligible security
Sub standard (SS) Continuous/demand/ term overdue is more than 3
When degree of risk for loan months but less than 6
non-payable is high but (less than 5 years) months if default amount of
there is reasonable respect installment is equal to
that the loan condition can installment payable in 6
be improved months
If default amount of
more than 5 years installment is equal to
installments payable in 12

overdue is more than 12

short term agri. credit and months but less than 36
micro credit months
Doubtful (DF) Continuous and demand overdue is more than 6
When chance of recovery is months but less than 9
uncertain months
Term loan less than 5 years If default amount of
installment is equal to
installments payable in 12

More than 5 years If default amount of

installment is equal to
installments payable in 12 to
18 months.

Short term agri. credit and Overdue is more than 36

micro credit months but less than 60

19 | P a g e
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

more than 5 years If default amount of

installment is equal to
installment payable in 24

Short term agri. credit and overdue is more than 60

micro credit months

Source: Studies in Bangladesh Banking, BIBM, 2000 Loan classification system (international standard):

Length of overdue Status of Rate of provision
Less than 3 months Unclassified 1%-5%

Loans overdue for 3 Sub standard (SS) 10%-25%

months but less than 6

Loans overdue for 6 Doubtful (DF) 50%-75%

months but less than 9

Loans overdue for 9 Bad/ loss 100%

months or more

Source: Studies in Bangladesh Banking, BIBM, 2000

20 | P a g e
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. Definition of Foreign Exchange:

Foreign Exchange means foreign currency and it includes any instrument drawn, accepted,
made or issued under clause (13), Article 16 of the Bangladesh Bank Order, 1972. All
deposits, credits and balances payable in any foreign currency and draft, travelers check,
letter of credit and bill of exchange expressed or drawn to Bangladeshi currency but payable
in any foreign currencies.

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" Review of related literature on foreign exchange:

The purpose of foreign exchange market is to enhance transfer of purchasing power

dominated in one currency for another currency. The foreign exchange market is not a
physical place rather it is an electronically linked network of banks, foreign exchange brokers
and dealers whose function is to bring together buyers and sellers of foreign exchange. It is
not confined to any one country, but is dispersed throughout the leading financial centers of
the world (Shapiro, 2001 cited by Al Amin, 2013).

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,

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

21 | P a g e
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,

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). Importance of Foreign Exchange:

The importance of foreign exchange is described in brief as under:-

Foreign exchange reserves show the financial strength and the stage of development
of the economy.
The acceptance of currency at a predetermined rate makes the international trade
The foreign exchange ratio shows a direct relationship between the prices of the
commodities in the national and international market.
The foreign exchange balances of a country directly affect the rates of exchange. A
hard currency nation has stability in foreign exchange rate.
The rising foreign exchange balances of a nation increases its credit worthless in the
international capital market. Functions of Foreign Exchange:

The Bank actions as a medium for the system of foreign exchange policy. For this reason, the
employee who is related to the bank to foreign exchange, especially foreign business should
have knowledge of these following functions:

Pre-shipment Advances
Post-shipment Advances
Export Guarantees
Advising/Confirming Letter of Credit
Facilitating project exports
Bills for collection

Opening letters of credit
Advance bills
Import loans and guarantees.

22 | P a g e
Exchange Dealings:
Rate computation
Nostro/Vostro Accounts
Forward contracts
Exchange position and cover operations

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

Submission of returns
Collection of credit information

2.4 What is Performance?

The results of activities of an organization or investment over a given period of time

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)

2.5 What is Financial Performance?

The word Performance is derived from the word parfourmen, which means to do, to
carry out or to render. It refers the act of performing; execution, accomplishment,
fulfillment, etc. In border sense, performance refers to the accomplishment of a given task
measured against preset standards of accuracy, completeness, cost, and speed.
Thus, financial performance refers to the act of performing financial activity. In broader
sense, financial performance refers to the degree to which financial objectives being or has
been accomplished. It is the process of measuring the results of a firm's policies and
operations in monetary terms. It is used to measure firm's overall financial health over a
given period of time and can also be used to compare similar firms across the same industry
or to compare industries or sectors in aggregation.

23 | P a g e
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).

2.6 Usefulness of financial performance to various

The analysis of financial performance is used by most of the business communities. They
include the following.
1. Trade Creditors
The creditors provide goods / services on credit to the firm. They always face concern about
recovery of their money. The creditors are always keen to know about the liquidity position
of the firm. Thus, the financial performance parameters for them evolve around short term
liquidity condition of the firm.
2. Suppliers of long term debt
The suppliers of long term debt provide finance for the on-going / expansion projects of the
firm. The long term debt providers will always focus upon the solvency condition and
survival of the business. Their confidence in the firm is of utmost importance as they are
providing finance for a longer period of time. Thus, for them the financial performance
parameters evolve around the following:
i) Firms profitability over a period of time.
ii) Firms ability to generate cash - to be able to pay interest and
iii) Firms ability to generate cash to be able to repay the principal and
iv) The relationship between various sources of funds.
The long term creditors do consider the historical financial statements for the financial
performance. However, the financial institutions \ bank also depends a lot on the projected
financial statements indicating performance of the firm. Normally, the projections are
prepared on the basis of expected capacity expansion, projected level of production \ service
and market trends for the price movements of the raw material as well as finished goods.
3. Investors
Investors are the persons who have invested their money in the equity share capital of the
firm. They are the most concerned community as they have also taken risk of investments
expecting a better financial performance of the firm. The investors community always put
more confidence in firms steady growth in earnings. They judge the performance of the

24 | P a g e
company by analyzing firms present and future profitability, revenue stream and risk
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.

2.7 Techniques to measure financial performance

There are various techniques available to judge the financial performance of the firm. They
include the following:
2.7.1 Ratio Analysis
2.7.2 DuPont Analysis
2.7.3 Z-Score Model
2.7.4 CAMEL Model
2.7.5 Common-Size Financial Analysis
2.7.6 Trend Analysis

2.7.1 Ratio Analysis

The Ratio Analysis is considered to be the most powerful tool of financial analysis. In simple
language ratio means relationship between two or more things. It is also said that a ratio is the
indicated quotient of two mathematical expressions.
The ratios are classified as under:
a) Liquidity Ratios
b) Leverage Ratios
c) Activity Ratios and
d) Profitability Ratios
The objective behind calculating each of the ratios is different and the outcome expected is
also different. Let us study the objective behind every type and sub-type of ratio.

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
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.

25 | P a g e
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.

2.7.2 DuPont Analysis

The DuPont Corporation created its method for analyzing return on equity in the 1920s. The
original three-step model deconstructs the above formula in three parts and at each point we
can measure different efficiency.

Three-Step DuPont Model:

The three-step DuPont model is expressed as follows:
ROE = Net profit margin Asset Turnover Equity Multiplier
Net Profit margin = Net Profit sales
Asset Turnover = Sales Total Assets
Equity Multiplier = Total Assets Shareholders Equity
The three-step DuPont model measures Managements effectiveness at generating profits
(Net Profit margin), managing assets (asset turnover) and finding an optimal amount of
leverage (equity multiplier).

Net Profit Margin:

The net profit margin (or net margin) of a company reflects managements pricing strategy by
showing how much earnings they can generate from a single rupee of asset.
Net Profit margins are also an expression of the amount of competition a company facesthe
more competitive the industry, all else being equal, the lower the profit margins for the

26 | P a g e
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).

2.7.3 Z-Score Model

The Z-Score Model for predicting bankruptcy was published in 1968 by Edward I.
Altman, who was, at the time, an Assistant Professor of Finance at New York University.
Edward I. Altman (born 1941) is a Professor of Finance at New York University`s Stern
School of Business. He is best known for the development of The Z-Score Model for
predicting bankruptcy. Dr. Altman was inducted into the Fixed Income Society's Hall of
Fame in 2001 and was amongst the inaugural inductees into the Turnaround Management's
Hall of Fame in 2008. He was named one of the "100 Most Influential People in Finance" by
the Treasury & Risk Management magazine in 2005. The Z-Score Model can provide a
significant idea about the financial soundness of the selected pharmaceuticals. The number
produced by the Model is referred to as the company's Z-Score, to represent the likelihood of
a company going bankrupt in the next two years. The Z-Score Model uses multiple corporate
income and balance sheet values to measure the financial health of a company. It is a linear
combination of five common business ratios, weighted by coefficients. It is proven to be very
accurate to forecast bankruptcy in a wide variety of contexts and markets. Studies show that
the model has 72%-80% reliability of predicting bankruptcy. However, The Z-Score Model
does not apply to every situation. It can only be used for forecasting if a company being

27 | P a g e
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).

Z = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + 0.99X5

X1: Working Capital / Total Assets
X2: Retained earnings / Total Assets
X3: Earnings before interest & taxes / Total Assets
X4: Market value of equity / Total debt
X5: Sales / Total Assets
Z: Overall index
The higher is the score, the healthier the company. It is a good idea to compare a companys
Z-Scores over time to get a better idea as to how the company is doing. The lower the Z-
Score, the more likely a company is to go bankrupt. The company is financially safe when
score is above 3.00, The Company is on alert to exercise the caution when score is 2.00-2.99,
there are chances that the company could go bankrupt in the next two years when score is
1.8-2.00, and The Companys financial position is embarrassing when score is below 1.8
(Cited by Thavamalar and Prasad, 2012).

2.7.4 CAMEL Model:

In the 1980s, the US supervisory authorities, through the use of the CAMEL rating
system, were the first to introduce ratings for on-site examinations of banking institutions.
The concept introduced a uniform system of rating a banking institution in the United States.
It is based on examiner assessment of a banking institution under certain supervisory criteria,
and is used by all three US supervisory agencies, i.e. the Federal Reserve System, Office of
Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC)2.
Under this system, each banking institution subject to on-site examination is evaluated on the
basis of five (now six) critical dimensions relating to its operations and performance, which
are referred to as the component factors. These are Capital Adequacy, Asset Quality,
Management Quality, Earnings Quality and Liquidity.

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

28 | P a g e
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.

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.

2.7.5 Common-Size Financial Analysis

Common-size statement is also known as component percentage statement or vertical
statement. In this technique net revenue, total assets or total liabilities is taken as 100 per cent
and the percentage of individual items are calculated likewise. It highlights the relative
change in each group of expenses, assets and liabilities.

29 | P a g e
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.

2.8 Review of related literature on financial performance

The measurement of bank performance particularly commercial banks is well researched and
has received increased attention over the past years (Seiford and Zhu, 1999). There have been
a large number of empirical studies on commercial bank performance around the world (Yeh,
1996; Webb, 2003; Lacewell, 2003; Halkos and Salamouris, 2004; Tarawneh, 2006).
The trend of commercial banking is changing rapidly. Competition is getting stiffer and,
therefore, banks need to enhance their competitiveness and efficiency by improving
performance. Normally, the financial performance of commercial banks and other financial
institutions has been measured using a combination of financial ratios analysis,
benchmarking, measuring performance against budget or a mix of these methodologies
(Avkiran, 1995).
Seeking to eliminate the weakness of the Beavers model, Altman (1968) used multiple
discriminate analysis (MDA) to derive a linear combination of the ratios which best
discriminate between financially failed and non-failed groups. He matched 33 bankruptcies
firms with the 33 non-distressed firms from the same industry and of similar size. 22 financial
ratios were used in his study and computed the Z-score with 5 most important financial ratios.
Companies with a Z-score lower than the cutoff score are financially distressed; firms having
a Z-score higher than the cutoff score are financially sound. The lower a firms Z-score, the
higher its probability of default.
Saleh Jahur and Parveen (1996) used Altmans MDA model to conclude the bankruptcy
position of Chittagong Steel Mills Ltd. They found that absences of realistic goals, strict govt.
regulations are the main reasons for the lowest level of bankruptcy.
Dheenadayalan and Deviananbrasi (2007) he had suggested that the Z score of the sample
units remain below the grey area from 1997-07 but in the year 2001-02, the Z score is -
0.29. After 2001-02, the decreases in the score indicate that the sample unit is not financially
sound and healthy. The sample units need to put in efforts to increases the score. This will
help the sample unit to avoid any damage to its liquidity and solvency positions, thereby
avoiding financial distress and bankruptcy (Cited by Dhevika et al.,2013).
Bhatasna and Raiyani (2011) in their paper A study on Financial Health of Textile Industry
in India: A Z Score Approach revealed that all the sample companies like SPML Ltd
and WIL Ltd were financially sound enough during the study period bearing SSML and
SKNL which had slightly lower Z score on the basis of average scores during the study
Kannandasan (2007) he has made an attempt to have an insight into the examination of
financial health of a watch company in India. To evaluate the financial conditions and

30 | P a g e
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

31 | P a g e
Chapter: 03

An Overview of Janata
Bank Limited.

32 | P a g e
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.

33 | P a g e
3.2 Profile of the JBL at a glance

Name of Company: Janata Bank Limited

Registered Office : Janata Bhaban
110, Motijheel C/A Dhaka-1000, Bangladesh
Legal Status : Public Limited Company
Date of Incorporation : 21 May 2007
Date of Commencement of Business : 21 May 2007
Banking license obtained from Bangladesh
Bank : 31 May 2007
Authorized Capital : BDT 20,000 Million
Paid up Capital : BDT 19,140 Million
Face value per share : BDT 100
Shareholding Pattern: 100% Share owned by Government of the
Peoples Republic of Bangladesh
Tax Identification No. : 001-200-2732
Vat Registration No. : 9011050160
Chairman of the Board of Directors : Professor Dr. Abul Barkat
CEO & Managing Director : Mr. S M Aminur Rahman
Chief Financial Officer (CFO) : Mr. Md. Nurul Alam FCMA, ACA
Company Secretary : Mr. Md. Mosaddake-Ul-Alam
Domestic Network
Number of Branch : 893
No. of Urban Branch : 450
No. of Rural Branch : 443
Number of Divisional office : 10
Number of Area Office : 47
Number of AD Branch : 57
Overseas Network
Number of Branch : 04
Location of Branches : Abudhabi, Dubai, Al-Ain and Sarjah. UAE.
Janata Capital and Investment Ltd : Dhaka
Janata Exchange Company srl. : Italy
Number of Correspondence : 1239
Number of Employees : 15485
Number of Exchange House : 68
Corporate Rating Status A+ in the long run, AR-2 in the short run
Entity Rating (2012) : As Government owned Bank : AAA in the
long run and AR-1 in the short run.
Telex : 675840JBDBJ, 671288 JBHOBJ
Phone PABX : 9560000, 9566020, 9556245-49.
Fax : 88-02-9564644, 9560869
E-mail : md@janatabank-bd.com
Website : www. janatabank-bd.com
Swift Code : JANB BD DH

34 | P a g e
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

Figure : Values of Janata Bank Limited

35 | P a g e
3.4 Strategic Objectives of JBL

JBL Have JBLs Need

Concern Sense of belonging (ownership)
Commitment Improve service mentality
Competence Human touch with clients
JBLs Strengths Proactive, team spirit
Nationwide networks, 893 branches Loosing branches make profitable
Foreign network, 4 branches and Chronic weak branches make strengthen
1239 foreign correspondence Managerial efficiency (GIS of good
State-owned image customer/
Goodwill borrowers; meeting each within 1 km radius)
Received globally recognized awards Strong cash recovery
Strong deposit base Strategic thinking
No capital shortfall More agricultural loan
No provision shortfall Broadening of deposit base; reaching all
Skill manpower Automation, on-line banking
Experienced higher level management Need based training
Newly recruited talents More remittance
Friendly board of directors Discipline, chain of command
JBLs Brand Hygienic bank premises
Quality and responsive staff Avoid intermediary between management
Efficient service and clients
High and sustained growth (deposit No hidden cost
advance, import, export, foreign remittance Avoid insurance engineering
noninterest income and recovery) Demand estimation of CC loan
Good quality loan Proper security valuation
Low classified loan Manager willing to take risk
Timely recovery Borrowers preference
Business diversification Disposal through ADR
Attract low cost deposit Synthesis of mass banking and elite banking
Participate in capital market Avoid loan sanctioning bureaucracy
Improve agricultural loan Innovative thinking
(Disbursement, recovery etc.) Free from corruption
High impact of CSR Aware gender sensitivity
Aesthetic infrastructure

36 | P a g e
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

37 | P a g e
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

38 | P a g e
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

39 | P a g e
3.6 Organizational Structure of JBL

Board of Directors

Managing Directors (MD)

Deputy Managing Directors (DMD)

General Manager (GM)

Deputy General Manager (DGM)

Assistant General Manager (AGM)

First Assistant General Manager (FAGM)

Senior Executive Officer (SEO)

Executive Officer (EO)

Assistant Executive Officer (AEO)

40 | P a g e
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

Following are the priorities of HR planning for 2014:

To bring performance measurement and performance based incentive related activities of
Training need analysis and process development;
Preparation of training and development roadmap;
Improvement of service benefit;
Improvement of HR policies and procedures;
Adoption of HR Accounting System;
Employee Engagement and Employer Branding initiative taking.

41 | P a g e
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

3.8.1 Economic contribution

Creating wealth for the communities in which JBL operate
JBLs performance in import and export was satisfactory. Total import and export business
handled during 2013 were BDT 176,671 million and BDT 153,252 million respectively. The
import business reduced by 6.16 percent over the previous year because Bangladesh achieved
self sufficiency in food grains. JBLs guarantee business in 2013 was BDT 12,581.5 million.
In 2013, the amount of foreign remittance sent by Bangladeshi workers from abroad through
JBL was BDT 103,982 million. JBL has been playing significant role in strengthening the
economic base of the country. The percentage of JBLs foreign remittance to National
Foreign Remittance is 9.61%.

3.8.2 Financial inclusion

Access to finance by the poor and vulnerable groups is a prerequisite for poverty reduction
and social cohesion. This has to become an integral part of our efforts to promote inclusive
growth. JBL is dedicated to serve financial services at an affordable cost to the vast sections
of the disadvantaged and low-income groups. The various financial services include credits,
savings, insurance and payments as well as remittance facilities. The objective of financial
inclusion is to extend the scope of activities of the organized financial system to include
people with low incomes within its ambit. JBLs policies aim at increasing the income and
employment opportunities on the one hand and on the other; it tries to finance programmes
which are capable of making the growth more inclusive.
In year 2013
No. of deposit A/Cs is 6,425,804 in 2013, where in 2012 it was 6,246,858

42 | P a g e
Total deposits in 2013 is BDT 478,535.57 million where in 2012 it was BDT 409,767.01
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
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.

3.8.3 Environmental contribution

As a part of green banking, JBL is providing support to the activities that are not harmful to
the environment. It has established a separate green banking unit and various measures have
been adopted to ensure green banking. Among others, green financing, creating awareness
among employees for efficient use of water, electricity and paper, giving preference to
preservation of ecosystem while financing commercial projects and reuse of equipments are
the some initiatives for turning JBL as a green bank. Initiative for green banking is the key to
shaping future. JBL works together with central bank namely Bangladesh Bank is effectively
working to sustain and keep our planet green.
Table of Green Banking Finance
Promoting Sustainable No. of Projects Funds Disbursed up to
Green Finance 2013 (BDT in millions )
Amount financed in plants having ETP 6 806.38
Amount financed to solar panel/renewable 31 2.39
energy plants
Amount financed to bio fertilizer/ bio gas 21 1.67
Amount financed to HHK project 4 771.08
Amount financed to other green projects 66 100.90
(zigzag bricks, vermy compost)
Total sustainable green finance 128 1682.42

3.8.4 Social contribution

Building a sustainable society
As one of the leading state-owned commercial banks in Bangladesh, JBL with its 897
branches and 15,485 employees have also realized its responsibilities to the society and are
contributing to the amelioration of the social life of the destitute people, infra-structure,
environment etc. There is no doubt, that through our day-to-day business operations JBL is

43 | P a g e
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:

Year Budget Utilization of Fund

( BDT in million) (BDT in million )
2009 30.00 17.07
2010 70.00 61.28
2011 100.00 68.80
2012 150.00 113.38
2013 310.00 292.28

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).

3.8.5 Human rights

JBL is committed to upholding the principles of the Constitution of the Peoples Republic of
Bangladesh, the associated Bill of Rights and labor legislation in our national operations.
JBLs values and the code of ethics are an extension of this commitment. An internally
developed appraisal system has been implemented for all other financial product types within
CIB. JBL distributes Right to know information instruction circular in line with the Right
to Information Act-2009 introduced by the government of Bangladesh in order to ensure
free flow of information and peoples right to know information. In order to protect customer
interest complaints boxes have been installed in all branches and offices of JBL. If any
complain of customer is found steps are immediately taken to address the complaints with
due consideration. A complaint cell has already been setup. JBL has also adopted the concept
of Help desk and already setup help desk in all its 897 branches. In addition another Help
Desk of the same nature has been set up in the 8th floor of the head office to handle
remittance related complains. As per regularity directives, citizen charters have been pegged
against the wall at the entrance of Head Office as well as in all other branches too. Customers
may ensure their access to necessary facilities through it.

Development of human resources and decent works

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

44 | P a g e
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.

3.9 Key Milestone of JBL

1972: Commencement of banking operation.
1976: Inaugurate 1st overseas branch in UAE.
1990: Launching 1st computer in JBL.
1999: 1st cash dividend paid.
2000: Deposit crossed BDT 100,000 million.
2001-2005, 2011: JBL awarded the bank of the year in Bangladesh by London based
financial times group.
2002: Incorporation Janata Exchange Company Srl, Italy.
2002: Inaugurate Janata Bank Software (JB Soft)
2002: Incorporate of ATM service.
2003: JBL crossed BDT 100,000 million of loans & advances.
2004: Received Asian Banking Award on Financing program for Women Entrepreneurship
from Asian Bankers Association (ABA) & Bank Marketing Association of the Philippines
2005: Received Asian Banking Awards on credit scheme for handicapped people from
Asian Bankers Association (ABA) & Bank Marketing Association of the Philippines
2006-2009: Received World Best Bank Award from New York based financial magazine
global finance.
2007: Incorporation and commencement of business as JBL.
2008: Commencement of NRB branch.
2009: Launching of speedy remittance service, Issuance of 1st bonus share in JBL.
2010: Incorporation & commencement of Janata Capital & Investment Ltd.
2010: Launching of BACH operation.
2011-2012: Received ICMAB Best Corporate Award from Institute of Cost and
Management Accountants of Bangladesh (ICMAB).
2011: Launching of JBL CIB online system.
2011: Launching BEFTN & EFT operation.
2011: Inauguration of online banking.
2011: Landmark of BDT 100,000 million of foreign remittance.
2011-2013: JBL achieved highest operating profit among SCBs.
2012: JBL at the top in CSR activities among the SCBs.
2012: Landmark of BDT 400,000 million deposit.
2012-2013: JBL Rewarded Wholesale Banking Awards &Retail Banking Awards&
Bank of the year Award by Asian Banking and Finance (CMG) Singapore.
2013: Full automation of JBL branches.
2012-2013: JBL Received Performance Excellence Award from Citi Bank N.A.
2013: Inauguration of online deposit, payment & remittance system.

45 | P a g e
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.

3.10 Five years key financial information

(BDT in millions unless stated otherwise )
Particulars 2013 2012 2011 2010 2009

Authorized capital 20000.00 20000.00 20000.00 20000.00 20000.00

Paid-up capital 19140.00 11000.00 8125.00 5000.00 5000.00
Reserve fund & 17976.20 6476.66 25944.20 15390.32 9924.74
Total Shareholders 37116.20 17476.66 34069.20 20390.32 14924.74
Total Assets 586082.98 511129.41 446111.42 345234.00 294727.00
Current liabilities 275,583.75 219,102.72 199,259.27 167,016.15 153,319.69
Long-term liabilities 273,483.04 274,821.01 212,782.95 157,827.53 126,482.57
Interest income 36,189.68 34,239.12 26,266.12 19,027.54 14,867.96
Investment income 13,736.50 7811.43 6,109.43 6,956.05 5,602.31
Non-interest income 5,145.67 7465.08 8259.58 4630.33 3603.03
Total Income 55,071.85 49,515.63 40635.53 30613.92 24074.10
Net profit after tax 9551.39 (15280.34) 4444.91 4907.97 2804.25
Import 176671.00 188284.00 197285.00 183744.00 118525.00
Export 153252.00 156525.00 153758.00 118515.00 88653.00
Foreign Remittance 103982.00 100089.00 72285.00 52640.00 56190.00
ROA 1.81% (2.51%) 1.99% 2.27% 1.92%
ROE 30.09% (49.74%) 16.32% 27.80% 23.38%
ROI 9.39% 8.01% 7.72% 4.89% 4.13%
Net profit per 0.62 (1.01) 0.30 0.38 0.21
Efficiency ratio 15.86% 15.11% 17.54% 21.61% 21.26%
Debt-equity ratio 13.13 24.09 10.62 14.05 16.49
Gross profit ratio 44.43% 56.39% 57.74% 68.17% 71.52%
Net profit ratio 23.90% 38.66% 13.70% 21.83% 15.81%
EPS 86.31 138.91 43.46 98.16 73.37
Cash 10 - 10 10 10
Bonus - - - 2875 -
Current ratio 1.04 1.02 1.06 1.03 0.98
Capital Adequacy 10.27% 3.70% 10.20% 9.19% 13.81%
Statutory liquidity 44.39% 33.24% 33.47% 27.72% 40.84%
Number of Shares 191.40 110 81.25 50 50
Number of Branches 897 888 873 861 851
Number of Employees 15485 15071 15020 12826 13122

46 | P a g e
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.

Organizational structure of the Branch:

Senior Executive Officer (SEO)

Executive Officer (EO)

Assistant Executive Officer (AEO)


Target customer of this Branch:

All types of people are the main customer of this branch. Such as student, business man,
farmer etc.
Total number of accounts of this branch:
Name of account Number
Current deposit 193
Savings bank deposit 4851
Fixed deposit 99
Deposit pension scheme 4
JB Savings Pension Scheme 32
JB deposit scheme 147
Education deposit scheme 0
Medical deposit scheme 0
JB monthly sanchay scheme 0
JB special deposit scheme 0
JB monthly amanot prokolpo 234
JBL school banking saving scheme 0
Special notice scheme 10
Retired saving scheme 0
JBL retired savings scheme 0
JB monthly benefit scheme 45
JB double benefit scheme 56
Deposits in foreign currency 0
Others deposit 0
Total deposits 5623
Total loans & advances 111

47 | P a g e
Chapter: 04

Analysis and Findings

48 | P a g e
This chapter is the heart of this report. This chapter is divided into three main parts are given
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

4.1 Major Banking Practices Arena of Janata Bank Ltd.

This report is conducted the following three major banking practices arena of JBL:

4.1.1 General Banking of JBL;

4.1.2 Credit Management of JBL; and
4.1.3 Foreign Exchange Operations of JBL.

4.1.1 General Banking of JBL

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: Account Opening Section Deposit Section Cash Section Remittance Section Bills and Clearing Section Accounts Section Dispatch Section.

49 | P a g e 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. Documents needed for opening an account:

The following documents duly completed shall be obtained from the customer at the time of
opening different types of accounts as applicable:
a) Individual/ joint:
Account opening form as applicable duly filled in.
Present and permanent address
Occupation and specimen Signature
Two photographs duly attested by introducer.
Nominee Form (if nomination given by the account holder).
Introducer name, address and account number
Initial deposit that varies depending on the type of account
National certificate and passport
b) Proprietorship Firm:
Account Opening Form.
Specimen Signature Card.
Copy of Trade License
Two photographs duly attested by introducer.
Proprietorship Rubber Stamp against all signatures of the proprietor.
Tax certificate.
c) Partnership Concern:
Account Opening Form.
Specimen Signature Card.
Copy of Trade License
Two photographs of each partner duly attested by introducer.
Partnership Rubber Stamp against all signatures of partners operating the accounts.
Partnership letter.
Partnership deed.
d) Private Limited Company:
Account Opening Form.
Specimen Signature Card.
Copy of Trade License.
Copy of Memorandum and Articles of Association duly attested by the Managing
Director/ Chairman of the Co.
Certificate of Incorporation.
List of Director as per return of Joint Stock Company with signature.
50 | P a g e
Resolution of the Board for opening account with the bank.
Photographs of each of the authorized signatories.

e) Public Limited Company:

Account Opening Form.
Copy of Memorandum and Articles of Association.
Certificate of commencement of business.
List of Directors as per returns of Joint Stock Company with their signature.
Resolution of the Board for opening account with the Bank.
Certification of incorporation. Specimen Signature Card.
Copy of Trade License.
Photograph of Directors and account operators other than Director.
f) Clubs/ Association/ Society etc. (Non-Trading Concerns):
Account opening Form for current account or SB accounts.
Specimen Signature Card.
Certified copy of Bye laws/ constitution of the organization.
List of the Executives of Managing Committee with their signature and present and
permanent address.
Resolution of the Committee for opening account with the bank.
2 Photographs of each operator of the account.
g) Corporation/ Autonomous Bodies/ Govt. Organization:
Account Opening Form as applicable.
Specimen Signature Card.
Copy of the Act or Ordinance Showing authority to open account.
Letter from the authorized persons in absence of the Board.
h) Account Of Constituted Attorney :
Account Opening Form (As applicable)
Specimen Signature Card
Power of Attorney Account Opening Regulations & Precautions

Know your customer
The objective of knowing a customer is to have a fair idea about the identity, financial
resources, and general information about the customer at the time when the relationship is
being established. A banker must have proper following information about the customer.
Account name :
Enter complete name as mentioned in original National ID card/ valid passport/ genuine driving
license of other valid business documents. Regarding this field highest caution must be measured
because in editing an accounts information all other fields can be edited/ rectified but not account
name. So all photocopies of documents should be accepted only after verifying the original copies.
Now-a-days, all of Bangladesh nationalities are available with a National voter ID card. So in
terms of personal accounts, account name as well as parents name have to be according to
that National ID card.

51 | P a g e
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.

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 :

52 | P a g e
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. Special types of Account

A contractual relationship is created between the Banker and customer by opening an
account. Basically a person whose age is 18 years or more can be competent to open an
account with the bank. But there is some special types of account holder specified below:
a) Minor
According to the law of Bangladesh, a person who has not competed 18 years of age is a
minor. A minor is not capable of entering into a valid contract. A minor cannot open any
account or operates it until he completes 21 years. The bank records the date of birth of the
minor while opening an account. A Banker should be very careful in dealing with a minor. If
an overdraft or advance is granted to a minor even by mistake or unintentionally, the Banker
has no legal remedy to recover the amount from the minor.
b) Married women
A married woman is competent to enter into a valid contract. The Banker may therefore open
an account in the name of a married woman. In case of a debt taken by the married woman
her husband shall not be liable. But if the wife works as an agent of his husband, then the
husband has to be liable for his wife's debt. While granting loan to a married woman the
Banker should therefore examine her owns assets and ensures that the assets are sufficient to
cover the amount of loan.
c) Illiterate person
Illiterate person cannot sign their names and hence the Banker takes their thumb impression
as a substitute for signature and also a copy of their recent photograph. An approved witness
should attest the application form and the photograph.
d) Blind person
A blind person can open account and the procedure would be the same as illiterate persons. In
both cases the terms and conditions of opening account should have to be read infant of them
and if they agree with it only them the account can be opened.
e) Deaf and Dumb
Deaf and Dumb can open account but the respective Banker should have to become careful
about the background and character of the person.
f) Mad and Lunatic
Mad and Lunatic person cannot open a Bank Account.

53 | P a g e 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. Deposit Section

The function of the deposit section is very important. It is fully computerized. The Officer of
the deposit section maintains account number of all the customers of the bank. They are used
different code number for different account. By this section a depositor can know what is the
present position of his/her account. The officer makes three types of transactions such as
cash, clearing and transfer.
This section perform the following task
Post all kind of transaction.
Provide on demand report.
Cheque maintenance.
Preparation of day transaction position.
Preparation of closing monthly transaction.
A customer of JBL can open different types of accounts through this department such as:
a) Current Deposit (CD) Account.
b) Saving Bank (SB) Account.
c) Short Term Deposit (STD) Account.
d) Fixed Deposit Receipt (FDR) Account.
e) Janata Bank Deposit Scheme (JBDS)
f) Janata Bank Monthly Saving Scheme (JBMSS)
g) Education Deposit Scheme (EDS)
h) Medical Deposit Scheme (MDS)
i) Deposit Pension Scheme (DPS)

a) Current Deposit (CD) Account:

Current Deposit account is an account, which is generally opened by business people for their
convenience. A current account is a running and active account, which may be operated upon
any number of times during a working day.
There is no restriction on the number & amount withdrawals.
It does not allow any interest on this account
Opening Amount/ Initial Deposit Tk. 500
Service Charge (yearly) Tk. 100
Minimum Balance Requirement Tk. 5000

54 | P a g e
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.

b) Savings Bank (SB) Account:

This deposit is intended primarily for small-scale savers. The main object of this account is
promotion of thrift. Savings account is meant for those who want to save a certain amount of
their income and earn interest on that for future needs. All features are more or less like that
of CD a/c except for some restriction that is imposed by the bank. Number of withdrawals
over a period of time is limited. The withdrawing amount is not to exceed 25% of the total
balance. This A/C mainly opens a person name.
Initial deposit requires opening a savings account is TK.500.
Minimum balance of TK. 500 should maintain in this account.
Interest rate is5.5%
One cannot withdraw money not more than two times in a week.
To withdraw more than Tk20000 seven days notice is required.
Service charge is not fixed.

c) Short Term Deposit (STD):

Deposits under this category is withdraw able at a minimum of 7 (seven) days notice.
Withdrawal from the account shall be allowed on the following manner:
If cheque book is issued, withdrawal by cheque shall be allowed against 7 (seven) days
If no cheque book against the account is issued with drawl may be allowed as per written
instruction of the client either by pay order/Demand Draft or through transfer to his /her
current account with the branch.
If any account is operated like Current Account, the customer shall be advised to open a
Current Account instead of short term Account. Minimum balance requirement as fixed by
Head Office from time to time shall be in force.

d) Fixed deposit receipt (FDR) account:

Fixed Deposit shall be opened a fixed period, which is specific at the time of making deposit,
varying from 3 months to 3 years & payable at a fixed date of maturity. At a time the same
person is allowed to open more than one FD A/C in his own name. Every FD Account is
treated as a separate contract.
Amount of taka fixed
Time fixed
Rate of interest fixed
Photo & introduction not require
Single transaction A/C

55 | P a g e
Security A/C
Nominee facility
Renewal facility
Not transferable
Payment may be cash or collection
Not negotiable

Fixed deposit interest rate:

Duration Rate

1/2 month duration[at least tk 10 crore] 9.50

From 3 month to 6 month 10.50

From 6 month to 1 year 11.00

From 1 year to 2 year 11.50

e) Janata Bank Deposit Scheme (JBDS):

Special advantage with this scheme is that after the scheduled period the client can withdraw
the full amount or can draw pension on monthly basis. Besides the client can open account in
his name in any branch.
Procedure for operation of Janata Bank Deposit Scheme (JBDS):
The applicant should be of minimum 18 years age and Bangladeshi national.
The account holder can appoint one or more nominees.
On the death of the account holder his / her nominee can withdraw the whole amount
of money.
The account holder can change or cancel his nominee through a written notice.
On the death of the account holder, the nominees will be entitled to withdraw the
deposit according to the instruction of the account holder.
The account becomes inoperable on the death of the account holder.
The account under this scheme should be opened within the 10th day of any month
against deposit of the first installment in cash.

Monthly installment: TK.500, 1000,2000,5000,10000,20000

Tenure: 10 Years.
The monthly installment must be paid by the 10th day of every month.
In case of delay a fine @TK. 2 per day of defaulted installment will be charged and the fine
must be paid with the installment.

Total Amount=Principal amount + Interest + Bonus amount

56 | P a g e
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.

g) Education Deposit Scheme (EDS):

Client can nominate their children and open not more than three accounts. Procedure for
operation of Education Saving Scheme:
The applicant should be of minimum 18 years age and Bangladeshi national. Monthly
installment: TK.500,1000,2000,3000,4000,5000 and so on.
The monthly installment must be paid by the 10th day of every month.
In case of delay a fine @ TK. 2 per day of defaulted installment will be charged and
the fine must be paid with the installment.
The account under this scheme should be opened within the 10th day of any month
against deposit of the first installment in cash.
Features of the Education Deposit Scheme (EDS) account:
It may be 4 years, 6 years,8 years& 10years.
Installments are TK.1000, 2000,3000,4000&5000
18 years age, being of sound mind, and a Bangladeshi national.
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.

h) Medical Deposit Scheme (MDS):

The applicants / depositors should be of minimum 18 years age, being of sound mind, and a
Bangladeshi national.
The deposit under SBDS will be affected after expiry of each period as per the chart provided
Monthly Installment Quantum Money at the end of 5 years
(MIQ) TK. period. TK.
500 38225
1000 75425
2000 149900
3000 224350
4000 298799
5000 373249
6000 447700
7000 522149
8000 596599

57 | P a g e
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.

i) Deposit pension scheme:

Deposit pension scheme is familiar now-a-days. Main features of this scheme are as follows:
Only Bangladeshi who are above 18 can open this scheme
Duration of this scheme is 10 to 20 years
Installment must be paid within first 10 days of month
Interest rate is 15% Cash Section
Cash department is the most vital and sensitive organ of the branch as it deals with all kinds
of cash transactions. Cash section is directly related to the customer.
The following activities performed in this section: Cash Receipt Section

The cash receipts procedure, summarized below:
Pay-in-slip or credit voucher are given to the cash counter for depositing cash.
Cash deposit section checks the title if account, its number, amount in words and
figures in the pay-in-slip or credit voucher.
Cash receiving officer after receiving the cash giving records/denomination of the
currency on the back of the voucher shall enter the particulars of the voucher in the
cash receiving book under progressive serial number & puts his signature putting the
date stamp both on counter foil & pay-in-slip voucher. Then he will pass it on to the
officer- in-charge of cash section for his signature along with the register.
The officer will then detach pay-in-slip from the counter foil and return it to the
receiving officer along with the register.
The officer sends the pay-in-slip/ credit voucher to the deposit section in case of pay-
in-slips and credit vouchers to the respective section to which it relates.
Cashier and cash-in-charge puts signature on the book at time of closing cash. Cash Payment Section

Generally, Cheques, D.D, T.T, M.T and Pay Order etc. are received from customer and
institutions. The formalities are given below:
The instrument is checked for any discrepancy, posting and cancellation.
Specimen signature of cancellation officer should be available.
Cash is counted and the denominations of notes are written on the reverse of the
Cash is paid to the bearer of the instrument.
Particulars of the instruments are entered in paying cash book.
Paid instruments are kept with the paying officer. Posting and Cancellation of Cheque:

At the time of posting of cheques, the cheque is examined carefully. Attention on the
following more aspects are given:

58 | P a g e
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 . Cheque Dishonored by a Banker:

If a cheque is dishonored the Banker return it to the depositor. The statutory duty of a bank is
to honor his customer's but it is dishonored in the following circumstances:
If the amount mentioned in the cheque is greater than that of deposit.
If the cheque is past dated or a stole cheque.
If the cheque contains an apparent material alteration, which is not properly
mentioned by the drawer.
If the signature of the drawer is a forged one or does not tally with his specimen
On receipts of reliable information about the death of the customer.
If a debtor commits an act of insolvency as defined in the insolvency law.
If the cheque is not submitted during the banking hour.
If the Banker comes to know about the defective title of the party. Remittance Section

Remittances of funds are one of the most importance aspects of commercial banks in
rendering services to its customers. Among various services rendered by a commercial bank
to its customers, remittance facilities are very well known and popular.
In general there are two types of bank remittance. They are:
1. Inward Remittance
2. Out ward Remittance
The main instruments used by Branch for remittance of funds are:
a) Pay Order (PO)
b) Demand Draft (DD)
c) Telegraphic Transfer (TT)
d) Mail Transfer (MT)

a) Pay Order (PO):

The pay order is a document which instructs a bank to pay a certain sum to a third party. Such
orders are normally acknowledged by the bank which provides a guarantee that the payment
will be made. Only the branch of the bank that has issued will make the payment of pay
The procedures for issuing a Pay Order are as follows:
Deposit money by the customer along with application form.
The deposit may be cheque or cash.
Commission is charged by the issuing branch.
Give necessary entry in the bills payable (Pay Order) register where payee's name,
date, PO no, etc is mentioned.
Preparing the instrument.
After it has been scrutinized & approved by higher authority, the instrument is
delivered to customer.
Signature of customer is taken on the counterpart.

59 | P a g e

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
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.

b) Demand Draft (DD)

Demand draft is a negotiable instrument issued by a particular branch of a bank containing an
order to another branch of the same bank to pay a fixed sum of money to a purchased by for
himself or order on demand.
This instrument can be purchased by for himself or for beneficiary and can be handed over to
the purchaser. The delivery to the beneficiary bank issues drafts for a nominal commission.
The commission depends upon the amount to be transmitted. Janata Bank charges the
commission on D.D minimum charge is Tk. 15.

The procedures for issuing a DD are as follows:

DD application from filled in and money deposited by the customer.
Necessary entries are given to a register name DD OUT- concern (drawn on) branch. A
number, which is taken from this register, is known as "Controlling number".
An "Account payee only" crossed instrument given.
Payment is made by ordered branch.
Before payment the branch confirmed with sent advice and checks the test code.
Commission is charged.
Accounting Entries for DD

60 | P a g e
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.

After that the following entries are given:

JBL A/C drawn on branch---------Debit.
Customer's A/C --------------------------Credit.

c) Telegraphic Transfer (TT)

Telegraphic Transfer is quicker than a transfer of amount by DD. TT is the most rapid and
convening but expensive method. Telephone, Telex, Fax is different mode of TT. If an
applicant wants to remit the amount urgently to the payee is another city or district he/she
may request the Banker to send it by TT. The branch generally recovers from the telex charge
in additional to usual service charges.
Procedures for Issuing of TT:
Application by customer along with money given.
In receipt of money a cash memo is given to the customer containing TT serial number.
The customer informs this number to the awaiting party in the other branch.
Tested message is prepared, where TT serial no and the name of the concern party to
whom the money will be credited is mentioned.
Commission is charged.
Accounting Entries for TT
Cash A/C Customer's A/C -----------------------Debit.
JBLGeneral A/C (Corporate Branch)------------------Credit.
Procedures for the incoming TT:
After receiving the message, it is authenticated by test.
TT Serial number is verified by the "TT in-Concern branch" register.
Accounting Entries
JBL General A/C (Corporate Branch)-----------Debit.
Customer's A/C------------------------------------------------Credit.

d) Mail Transfer (MT)

When a customer requests the bank to transfer his money from this bank to any other bank or
the branch of the same other bank, the first he has to do is to fill an application form. Then
one branch request to another branch to pay specified amount of money to the specified
payee though Mail.

61 | P a g e 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)

1. Inward Bills for Collection (IBC)

When a particular branch receive instrument, which are on themselves and sent by other
member bank for collection is treated as IBC. This branch is known as paying branch.
2 Outward Bills for Collection (OBC)
When a particular branch receives instrument drawn on the other bank within the clearing
zone and sends those instrument for collection through the clearing arrangement is considered
as OBC for the particular branch. This branch is knows as collecting branch. There are two
types of OBC
OBC with different branches of the same bank
OBC with different branches of other banks

Precaution at the time of cheques receiving for Clearing

Name of the account holder same in the cheque and deposit slip.
Amount in the cheque and deposit slip must be same in words and in figure.
Date in cheque may be on or before (but not more than six months back) clearing
house date.
Bank and Branch name of the cheque, its number and date in the Deposit slip.
Cheque must be signed.
Signature for confirmation of date, amount in words / in figure cutting and mutilation
of cheque.
Cheque should be crossed (not for bearer cheque).
Account number in the deposit slip must be clear. Accounts Section

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.

Accounts Department does following works:

Packing of the correct vouchers according to the debit voucher and the credit voucher.
Recording the transactions in the cashbook.
Recording the transactions in general and subsidiary ledger.
Preparing the daily position of the branch comprising of deposit and cash.

62 | P a g e
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 Section.

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.

63 | P a g e
4.1.2 Credit Management of JBL Credit policy of JBL:

Policy entails projected course of action. JBL has its own policy granting credit. Although
credit is always a matter of judgment applying common sense in the light of one experiences.
A sound credit policy includes among other things safety of fund invested vis--vis
profitability of the bank. Encouraging maximum number of small loan is better than
concentration in a particular type of advances which ensures sufficient liquidity with least
insolence of bad debts. Objectives of credit policy:

There are some objectives of credit policy. These are as follows-
Provide guidance for giving loan.
Prompt response to the customer need.
Shorten the procedures of giving loan.
Reduce the volume of work form top level management.
Delegation of authority of work from top level of management.
To check and balance the operational activities. Credit Granting Process of JBL:

Although the Board of Directors holds the sole right of credit sanctioning, the power is
delegated to CEO & MD. The credit sanctioning authority is also delegated to various lower
level of the management line to strike a balance between adequate control and flexibility in
credit operations to ensure full transparency and accountability at all levels. Even a manager
of a small branch has the credit sanctioning authority. But there is a well defined, clear and
sound credit granting process applicable for all sanctioning authority. The process includes:
1. Selection of borrower;
2. Credit appraisal;
3. Credit assessment;
4. Credit risk grading;
5. Credit approval & sanctioning;
6. Credit disbursement;
7. Credit monitoring.

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:

64 | P a g e
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
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
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
65 | P a g e
Adherence to lending guidelines
Mitigating factors
Loan structure

4. Credit risk grading

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

5. Credit approval & sanctioning

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.

66 | P a g e
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
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:

Request for credit from the client to a branch

Credit application from filled up by the customer & collection of document

Scrutinizing the document

Analyzing the information

Sanctioning the credit

Preparing the proposal

The proposal; goes to the head office through other necessary steps

Information the client, loan disbursement, supervision and monitoring

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;

67 | P a g e
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
Timely corrective action is taken to address findings of any internal, external or regulator
inspection/audit. Credit Products of JBL:

JBL has been offering a wide range of credit products to meet the financial needs of its
customers. Grossly the products are two types: funded credit and non-funded credit.

Funded credit facilities

1) Term loan
If any loan is extended over a period exceeding one year, it is called Term Loan. These
loans are usually made to large well established business enterprise for Capital financing,
such as setting up of industry, balancing modernization of existing plant/merchandise of
industries, purchase of equipment etc. Covering the repayment period beyond one year.
Mid term loan: the tenure of mid term loan is greater than 1 year up to 3 years.
Long term loan: long term loan is allowed for 5 years.
2) Overdraft
In this case the customer is allowed on the basis of prior arrangements to overdraw his Current
Account by drawing cheques for amounts exceeding the balance up to an agreed limit within
certain period of time not exceeding one year, against acceptable securities. These facilities are
granted after the credit standing; financial ability and status of the customer as well as the
purpose have been favorably established.
3) Working Capital
CCS (Consumer Credit scheme)
Consumer credit scheme is a major program of JBL in CCS the Bank engages and
agent who works on behalf of the Bank. This agent performs all the words prior to the
sanction of the CCS. They do the inspection and made all the documents necessary for
CCS. For this purpose they get commission.

Cash Credit (Hypothecation)

This type of advance is made against the hypothecated possession and ownership of
goods or assets. In Hypothecation, the real possession remains to the borrower. Loan
disbursement and loan repayment occurs several times for a given amount of money for
a given period of time.

Cash Credit (Pledge)

When any advance is made against the pledge of goods or assets then it is known as
Cash Credit (Pledge). The possession and ownership passes to the Bank. Bank takes the
control of the assets or goods. Loan disbursement and loan repayment occurs several
times for a given amount of money for a given period of time.

68 | P a g e
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

LIM (Loan against Imported Merchandise)

Advances allowed for retirement of shopping documents and reendow goods imported
through L/C trading effective control over the goods by pledge in god owns under
Banks lock & key fall under this type fall under this type of advance.

LTR (Loan against Trust Receipt)

Advance allowed for retirement of shopping documents and release of good imported
through L/C false under this head. The goods are handed over to the importer under
trust with the arrangement that sale proceeds should be deposited to liquidate the
advances within given period.

ECC (Export Cash Credit)

Financial accommodation allowed to a customer for exports of goods falls under this
head and is categorized as Export Credit. The advances must be liquidated out of
export proceeds within 180 days.

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.

Non-funded credit facilities

1) Letter of credit (L/C)
It is the most important and commonly used in connection with foreign trade. Letter of Credit
is an undertaking by a banker of the importer to the exporter, to the effect that the amount of
the L/C will be duly paid. The banker on behalf of the importer issues the L/C in favor of L/C
will be duly paid. The banker on behalf of the importer issues the L/C in favor of the exporter
(beneficiary) and forwards the same to the exporter to the effect that the bill drawn by him
shall be duly accepted and paid. It creates confidence in the mind of the exporter so far as
payment of the bill is concerned. It is also facilitate the exporter to get the benefit of
discounting the bill before the date lf maturity.
2) Back-to-Back L/C
Back-to-Back L/C is one type of L/C, which is opened against lien on a valid export L/C. It is
opened for inland & abroad as well. Bank will supply the following papers/documents for
opening a Back-to-Back L/C.
L/C application form
LCA form
IMP form

69 | P a g e
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. Feature and Benefits of loans provided by JBL

1) Overdraft (OD)
This is a demand credit facility to meet day to day operational requirements.
Features and Benefits:
OD against cash collateral
OD under earnest money scheme
OD against hypothecation of stock of goods in trade
Tenure of OD is one year
Fees & Charges
13% p.a. at monthly / quarterly rests subject to change(s) that may be made by
the Bank from time to time.

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.

Features and Benefits

Easy documentaton
It is a revolving limit for one year but renewable.
Fees & Charges
Application Form for request for loan facility Taka 250/-.
2% on approved loan amount.
We are realizing only interest (i.e. 7% p.a. at quarterly rest or as fixed by Head Office
from time to time) from PC account.
Half yearly Service Charge:
Taka 1,000/- on each account for urban clients
Taka 500/- on each account for rural clients
3) Working Capital Finance
This is a loan facility designed to meet day to day operation of business concerns and
manufacturing companies.

Features and Benefits

Easy Documentation.
Any branch banking facilities.
Fast Processing.

70 | P a g e
Fees & Charges
13% p.a. at quarterly rests subject to change(s) that may be made by the Bank
from time to time

4) Loan Against Trust Receipt

We provide post shipment finance i.e. LTR to manage immediate liquidity of importers.

Features and Benefits

Easy Documentation.
Fast Processing
Allow an importer to take possession of the goods for resale.
Increase the present cash flow of the exporter to improve the financial
condition and strengthen the financial ability.
Global loan limit exposure for the client
Online banking facilities for repayment

Fees and charges

Application Form for request for loan facility Taka 250/-.
2% on approved loan amount.
13% p.a. at quarterly rests subject to change(s) that may be made by the Bank from time
to time.
Half yearly Service Charge: - Taka 1,000/- on each account for urban clients - Taka 500/-
on each account for rural clients

Application received from the customer for LTR facility.
Photograph of signatory to be attested by Chairman of the
Copy of valid trade license
Official seal with designation
Tax Certificate
KYC Form
Transaction Profile Various forms of JBL Credit

Bank credit is an important catalyst for bringing about economic development in a country.
Without adequate finance, there can be no growth or maintenance of a stable economy JBL,
being one of the specialized banks of the government of Bangladesh, has some prejudice to
finance directly on priority basis to agriculture, small industry and commerce sector for
strengthening the economic base of the country. Hence, it is very clear that, Janata Bank
plays an important role to move the economic wheel of the country. There are different types
of loans provided by the bank as follow:
Consumer loan

71 | P a g e
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

b) Sector wise classification

1) Private
2) Public
3) Commercial and industrial
4) House building etc Interest rate of Different loan of JBL

The interest rates of various types of loans are as follows:
Types Of Loans & Interest Collateral
Advances Rate Required
C.C(Pledge) 16% Not Compulsory
C.C(Hypothecation) 16% Do
Over Draft (O.D) 15% Bank Deposit
Real estate (Resident) 12% Documents of Assets
Real estate(Commercial) 15.5% Do
a)Palli porivohon 10% Personal Guarantee
b)Jomi bondhoki rin 13%

Service loan 16% Check of monthly

Consumer credit 15.50% Personal Guarantee

72 | P a g e
Doctors loan 15.50% Do
Cyber caf loan 15.50% Do
Prothibondhi loan 10% Do
General loan 10% Do Creation of charges for security loan:

For the safely of loan, JBL requires security from the borrower so that it can recover the loan
by selling security if borrower fails to repay. Creation of charge means making it available as
a cover for an advance. The method of charging should be legal perfect complete. The
importance of charging securities is as follows-
Protection of interest.
Ensuring the recovery of the money list.
Provision against unexpected change.
Commitment of the borrower.
There are two types of security. These are-
a) Primary Securities: Security deposited by the borrower himself/herself to cover the loan.
Such as: FDR, Cash, PSS, PSP, easily cashable items.
b) Collateral security: any type of security on which the creditor has personal right of action
on the debtor in respect of advance. Loan classifications

Classifications Scale
1. Unclassified: Repayment is regular
2. Substandard: Repayment is irregular or stopped but has reasonable prospect of
3. Doubtful Debt: Unlikely to be repaid but special collection efforts may result in partial
4. Bad/loss: Very little chance of recovery.

Table of Loan classification:

Loan Type Unclassified Substandard Doubtful Bad
(Month) (MONTH) (Month) (Month)
Continues Loan Expiry up to 5
6 to 8 month 9 to 11 month 12 month +
Demand Loan month
Term Loan Up to
0 to 5 month 6 to 11 month 12 to 17 month 18 month +
5 years
Term Loan more
0 to 11 month 12 to 17 month 18 to 23 month 24 month +
then 5 years
Micro Credit 0 to 11 month 12 to 13 month 36 to 59 moth 60 month+

73 | P a g e
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 Credit Risk Management of JBL:

Credit risk is simply defined as the potential that a bank borrower or counterparty will fail to
meet its obligations in accordance with agreed terms. However, credit risk could steam from
both on-balance sheet and off-balance sheet activities. It may arise from either an inability or
an unwillingness to perform in the pre-committed contracted manner. Credit risk comes from
a bank's dealing with individuals, corporate, banks and financial institutions or a sovereign.
The assessment of credit risk involves evaluating both the probability of default by the
borrower and the exposure or financial impact on the bank in the event of default. Credit risk
occupies the lions share of banks total risk. So credit risk management is a crucial issue of
risk management and an essential to the long-term success of any banking organization.
JBLs goal of credit risk management is to maximize its risk-adjusted rate of return by
maintaining credit risk exposure within acceptable parameter. So, JBLs management has
adopted appropriate policy, procedures and methods to manage the credit risk inherent in the
entire portfolio as well as the risk in individual credits or transactions. The bank also
considers the relationship between credit risk and other risks.

74 | P a g e
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: Import Export and Foreign remittance 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
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
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

75 | P a g e
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
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.

Opening Letter of Credit (L/C):

In global business environment, buyers and sellers are often unknown to each other. So seller
always seek guarantee of payment for his exported goods. In this situation bank plays an
important role. Bank gives export guarantee that it will pay for the goods on behalf of the
buyer. This guarantee is called Letter of Credit or LC. Thus the contract between importer
and exporter is given a legal shape by the banker by its Letter of Credit.

Procedure of opening the Letter of Credit (L/C):

The importer after receiving the proforma invoices from the exporter, by applying for the
issue of documentary credit, the importer requests his/her bank to make a promise of payment
to the supplier. Obviously, the bank will only agree to this request if it can rely on
reimbursement by the applicant. As a rule accepted as the sole security for the credit
particularly if they are not the shorts of commodity that can be traded on an organized
market, such an agreement would involve the bank in excessive risk outside its specialized
field. The applicant must therefore have adequate fund in the bank account or a credit line
sufficient to cover the required amount.
Banks deals with documents and not goods. Once the bank has issued the credit its obligation
to pay is conditional on the presentation of the stipulated documents within the prescribed

76 | P a g e
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.

77 | P a g e 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

Formalities of Export Procedure:

There are a number of formalities, which an exporter has to fulfill before and after shipment
of goods. These formalities or procedures are enumerated in brief as follows:
Obtaining Export Registration Certificate ERC: No exporter is allowed to export
any commodity for export from Bangladesh unless he is registered with Chief
Controller of Imports and Exports (CCI & E) and holds valid Export Registration
Certificate (ERC). After applying to the CCI&E in the prescribed from along with the
necessary papers, concerned offices of the Chief Controller of Imports and Exports
issues ERC. Once registered, exporters are to make renewal of ERC every year.
Securing the order: After getting ERC, the exporter may proceed to secure the export
order. He can do this by contracting the buyers directly through correspondence.
Obtaining EXP: After having the registration, the exporter applies to Janata Bank
Limited with the trade license, ERC and the Certificate from the concerned
Government Organization to get EXP. If the bank is satisfied, an EXP is issued to the
Signing of the contract: After communicating with buyer the exporter has to get
contracted for exporting exportable items from Bangladesh detailing commodity,
quantity, price, shipment, insurance and mark, inspection, arbitration etc.
Receiving the Letter of Credit: After getting contract for sale, exporter should ask the
buyer for Letter of Credit clearly stating terms and conditions of export and payment.
Procuring the materials: After making the deal and on having the L/C opened in his
favor, the next step for the exporter is to set about the task of procuring or
manufacturing the contracted merchandise.
Endorsement on EXP: Before the exporter with the customs or postal authorities
lodges the export forms, they should get all the copies endorsed by Janata Bank
Limited. Before shipment, exporter submits EXP. form with commercial invoice.
Then Janata Banks respective officers check it properly, if satisfied, certificate the
EXP. Without EXP exporter cannot make shipment. The customer must declare all
export goods on the EXP issued by the authorized dealers.

Disposal of Export procedure:

Original: Customs authority reports first copy of EXP to Bangladesh Bank
after shipment of the goods.
Duplicate: Negotiating bank reports the Duplicate to Bangladesh Bank in or after
negotiation date but not later than 14 days from the date of shipment.

78 | P a g e
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
Shipment of goods: Exporter makes shipment according to the terms and condition of

Presentation of export documents for negotiation:

After shipment, exporter submits the following documents to Janata bank Limited for
Bill of Exchange or Draft
Bill of Lading
Insurance Policy/Certificate
Certificate of origin
Inspection Certificate
Consular Invoice
Packing List
Quality Control Certificate
G.S.P. certificate

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.

Negotiation of export documents:

Negotiation stands for payment of value to the exporter against the documents stipulated in
the L\C. If documents are in order, Janata Bank Limited purchases (negotiates) the same on
the basis of banker- customer relationship. This is known as Foreign Documentary Bill
Purchase (FDBP).If the bank is not satisfied with the documents submitted to Janata Bank
Limited and gives the exporter reasonable time to remove the discrepancies or sends the
documents to L/C opening bank for collection. This is known as Foreign Documentary Bill
for Collection (FDBC).

Settlement of Local Bills:

The settlement of local bills is done in the following ways:
The customer submits the L/C to Janata Bank Limited along with the documents to negotiate.

79 | P a g e
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. Foreign remittance

Foreign Remittance means transfer of foreign exchange from one country to another country
through banking or authorized channel.
The major function of commercial Banks is mobilization of fund. Other than this, banks
provide ancillary services to its clients. Clients need to remit money from one place to
another for their business or other purposes. Banks fulfill this need of customers by means of
remittance service. Money can be remitted domestically or internationally, which known as
local remittance and foreign remittance. . The person who is the sender of the remittance is
remitter or remitor. There are two types of foreign remittance, which are as below:
Foreign inward remittance
Foreign outward remittance

Inward Foreign Remittance:

Inward remittance covers purchase of foreign currency in the form of foreign T.T.,
D.D, T.C. and bills etc. sent from abroad favoring a beneficiary in Bangladesh.
Purchase of foreign exchange is to be reported to Exchange control Department of
Bangladesh bank on Form-C.
Outward Foreign Remittance:
Outward remittance covers sales of foreign currency through issuing foreign T.T.
Drafts, Travelers Check etc. as well as sell of foreign exchange under L/C and against
import bills retired. Sale of foreign exchange is reported to Exchange control
Department of Bangladesh Bank on form T/M. Foreign Exchange Performance of JBL from 2009-2013

BDT in Crore
Year Import Export Remittance
2009 11852 8865 5619
2010 18374 11851 5264
2011 19728 15375 7228
2012 18828 15652 10009
2013 17667 15325 10398
Source: Annual Report of JBL, 2013.

80 | P a g e
Part: Two

4.2 Financial Performance Analysis of Janata Bank Ltd.

4.2.1 Financial Performance Analysis Using CAMEL Model:

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:

C Capital i) Capital Adequacy Ratio

Adequacy ii) Advances to Assets Ratio
A Asset Quality iii) Gross NPAs to Gross
M Management Efficiency iv) Total advances to Total
Deposits (Credit Deposit
v) Net Profit per Employee
E Earning Quality vi) Operating Income as a %
of Working Funds
vii) Net Profit Margin ratio
viii) Earnings Per Share
L Liquidity ix) Liquid Assets/Total

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:

i) Capital adequacy ratio:

It is the arrived at by dividing the sum of Tier I and Tier II capital (Capital Fund of the Bank)
by Risk weighted assets as per the given formula. Tier I capital includes equity capital and
free reserves. Tier II capital comprises subordinated debt of 5-7 Year tenure. The higher the

81 | P a g e
CAR, the stronger the bank. Capital adequacy Ratio = (Capital fund of the bank) / (Risk
weighted assets)*100

Year 2013 2012 2011 2010 2009

Capital adequacy ratio 10.27% 3.70% 10.20% 9.19% 13.81%

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.

ii) Advances to assets ratio:

This is the ratio of total advances to total Assets. Total advances also include receivables. The
value of total assets excludes the revaluation of all the assets.
Year 2013 2012 2011 2010 2009
Advances to assets ratio 48.76% 59.74% 57.79% 65.39% 56.45%

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.

iii) Gross Non-performing assets to Gross advances ratio:

The Non-Performing Loans (NPLs) Ratio is the most important indicator to identify the
problem inherent in asset quality. The bank should maintain a significant low ratio of NPLs
to total assets. Standard norm is 5% maximum.
Year 2013 2012 2011 2010 2009
Gross Non-performing assets to Gross 11.12% 17.42% 5.83% 5.24% 8.44%
advances ratio

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.

82 | P a g e
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%

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.

v) Net Profit per Employee:

This measure the efficiency of the employee at the branch level. It also gives valuable input
to assess the real strength of a banks branch network. It is arrived at by dividing the net
profit earned by the bank by total number of employees. The higher the ratio, the higher the
efficiency of management.
Year 2013 2012 2011 2010 2009
Net Profit per employee (Millions Tk.) 0.62 (1.01) 0.30 0.38 0.21

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:

vi) Operating Income as a % of Working Funds:

This is arrived at by dividing the operating profit by average working funds. Working funds
are the daily average of the total assets during the year. Which indicate how much operating
income is generated from Average working funds. The higher ratio indicates good
performance of the bank.

Year 2013 2012 2011 2010 2009

Operating income as a % of 2.24% 3.04% 3.97% 1.88% 3.05%
working funds

83 | P a g e
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%

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

viii) Earnings Per Share:

EPS serves as an indicator of a company's profitability and has been shown in the following
Year 2013 2012 2011 2010 2009
EPS (Tk.) 86.31 (138.91) 43.46 98.16 73.37

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:

ix) Liquid Assets/ Total Assets:

Liquid assets include cash in hand, balance with other banks (both in Bangladesh and
abroad), and money at call and short notice. The ratio is arrived by dividing liquid assets by
total assets.
Year 2013 2012 2011 2010 2009
Liquidity 8.2% 10.012% 11.56% 7.93% 8.89%

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.

84 | P a g e
4.2.2 Testing the Financial Soundness of Janata Bank Ltd. using Z-score
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
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

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
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%
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
85 | P a g e
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
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%
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:

Year 2013 2012 2011 2010 2009

Market Value of Equity to Total 13.13 24.09 10.62 14.05 16.49
liabilities Ratio (times)
The equity-debt ratio of Janata Bank Limited is depicted in Table-4. Among the study period,
the year 2012 recorded the highest equity-debt ratio (24.09%) compared to others. In 2013,
the ratio is 13.13%.
Table: 05
Net Sales to Total Assets Ratio of JBL:
Year 2013 2012 2011 2010 2009
Net Sales to Total Assets Ratio 6.82% 6.84% 7.27% 6.51% 6.02%
The total assets turnover of the Janata Bank Limited is depicted in Table-5. It is observed that
the year 2011 showed the highest total asset turnover ratio (7.27%). This implies that the year
2011 generated sales of 7.27 for every Tk. of investment in fixed.
Table: 06
Z-score of JBL:
Year 2013 2012 2011 2010 2009
Z-score 24.55 10.76 24.42 24.86 23.86
The Z score values of the Janata Bank Limited during the study period under review have
been depicted in the Table-6. It is understood from the table that during the years 2009-13 the
Bank showed the score much above the suggested value of financial health. It is also
understood that the financial health of the Janata Bank Limited in the future years is expected
to be sound enough to maintain liquidity because currently the score is more enough than the
Prof. Altmans highest recommended score above 3. Since, all of the years (2009-2013) Z
score is above 3, it indicated that the bank is financially safe.

86 | P a g e
Part: Three

4.3 SWOT Analysis

4.3.1 SWOT Analysis: A Conceptual framework

A SWOT analysis (alternatively SWOT matrix) is a structured planning method used to

evaluate the strengths, weaknesses, opportunities, and threats involved in a project or in a
business venture. A SWOT analysis can be carried out for a product, place, industry or
person. It involves specifying the objective of the business venture or project and identifying
the internal and external factors that are favorable and unfavorable to achieve that objective.
The technique is credited to Humphrey (2005), who led a convention at the Stanford
Research Institute (now SRI International) in the 1960s and 1970s using data from Fortune
500 companies. The degree to which the internal environment of the firm matches with the
external environment is expressed by the concept of strategic fit.


Internal External
Factors Factors

Strengths Weaknesses Opportunities Threats

Figure: SWOT Analysis

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.

Generally, this includes the answer of following:

What are the organizations strengths?
What does the organization do well?
87 | P a g e
What is the good track record?
What do other people see as organizations strengths?
Where does the organization compete well?

Weaknesses: characteristics that place the business or project at a disadvantage relative to

Generally, this includes the answer of following:
What can be developed?
What could organization improve?
What is working less optimally than organization wish?
What is being done badly?
What is the competition doing better?
What should organization avoid doing?

Opportunities: elements that the project could exploit to its advantage.

Generally, this includes the answer of following:

If there were no constraints what would organization like to do?
What might be possible?
What will happen in the next few years?
Where does the organization want to be in 5 years time?
Who might organization want to work with?
What could be a win win situation?
How may new technologies change your practices?
What financial / governmental / legislative changes can benefit you in the near future?

Threats: elements in the environment that could cause trouble for the business or project.

Generally, this includes the answer of following:

What are the barriers to your development?
What sort of obstacles do you face?
Who else might move in a take over your tasks / job / business?
What are rival organizations doing?
Can organization fund the short and long term?
Will new technologies / developments change you roles?
What change is coming?

88 | P a g e
4.3.2 SWOT Analysis of Janata Bank Ltd. Strengths:

Large customer base.

Strong capital and asset quality.
The bank is financially safe.
Community involvement.
Speedy foreign remittance payment system with Western Union Money Transfer.
The Image/Goodwill of the bank is very good.
The bank has huge amount of deposit and market potentiality.
Regulatory performance is strong and positive.
Bank has the reputation of being the provider of good quality services to its potential customers.
The bank has a marginal bad debt than other bank. Because the credit analysts of this bank are
well educated and have sound knowledge in accounting, Finance, economics and other related
The bank introduces NBR (Non Bangladeshi Resident) branch which is the new idea in
Bangladesh. 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. Opportunities:

Opportunity to increase retail banking due to available customer.

Government has taken some steps against illegal remittances.
The bank has many branches in the local areas of the country. So it can easily expand its
It has a good government patronization. So it has a trust to the people.
Janata Bank can attract the people by offering new schemes of deposits to the local area.
Government has banned some Jatiya Sanchoy Patras.

89 | P a g e Threats:

Rules and regulation of central bank.

Loan defaulter.
Political instability of the country.
The continuing increase in non-bank competitors offering similar services.
A large number of private banks are increasing in Bangladesh day by day by taking huge capital
and skilled human resources.
Private Banks provide handsome salary to the employees.
Government facilities may be insufficient when the economic condition of the country becomes
Private Banks provide loan very quickly to the customers but JBL takes long time to do it. But at
present, most of the people are very punctual etc.
The laws and customs related to the foreign exchange are changing very rapidly.

90 | P a g e
Chapter: 05

Recommendations and

91 | P a g e
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.

92 | P a g e
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.

93 | P a g e

94 | P a g e

Brigham, E. F., & Houston, J. F. (2011), Fundamentals of Financial Management,
10th Edition, Ohio, USA: Thomson South Western.
Kothari, C.R. (2006), Research Methodology, Methods and Techniques, New Age
International (P) Ltd., 2nd Edition.
Nwankwo G.O. (2001), Bank Management Principles and Practice, UK: Malthouse
Press Limited
Pandey, I. M. (1979), Financial Management, Vikas Publishing House Pvt. Ltd, New
Delhi, pp.109-116.
Redhead, K. and Hughes, S (1998), Financial Risk Management, India: Sower
Publishing Company Ltd.
Shapiro A.C (2001), Multinational Financial Management, India: Prentice Hall
Private Ltd., 4th Edition.


Altman, E.I. 1968, Financial Ratios, Discriminant Analysis and the Prediction of
Corporate Bankruptcy, The Journal of Finance, Volume: 23, Issue: 4, pp. 589-609.
Anifowoshe C.A. (1997), Management of Foreign Exchange: A Peep into the next
decade, Nigeria. Ballion, Volume: 21, Issue: 4.
Avkiran, N.K. (1995), Developing an instrument to measure customer service quality
in branch banking, Int. J. Banks Mark., Volume: 12, Issue: 06, pp. 10-18.
Barr, Richard S. (2002), Evaluating the Productive Efficiency and Performance of
U.S. Commercial Banks, Engineering Management, Volume: 28, Issue: 8, pp.19.
Bhatasna, Dr.P.B. and Raiyani, J.R. (2011), A Study of Financial Health of Textile
Industry in India: A Z Score Approach, Indian Journal of Finance, Volume: 05,
Issue: 01, pp.9-16.
Bhayani, S. (2006), Performance of the New Indian Private Sector Banks: A
Comparative Study, Journal of Management Research, Volume: 05, Issue: 11, pp.
Dhanabhakyam M. & Kavitha, M. (2012), Financial Performance of selected Public
sector banks in India, International Journal of Multidisciplinary Research, Volume:
02, Issue: 01, pp. 255- 269.
Dhevika, Dr. V.P.T.; Latasri, Dr. O.T.V.; and Gayathri, H. (2013), A Study on
Financial Performance Analysis at City Union Bank, International Journal of
Advanced Research in Management and Social Sciences, Volume: 02, Issue: 07, pp.

95 | P a g e
Fethi, Meryem Duygun & Pasiouras, Fotios (2010), Assessing bank efficiency and
performance with operational research and artificial intelligence techniques: A
survey, European Journal of Operational Research, Vol.204, pp.189198.
Guisse, M. L. (2012), Financial Performance of the Malaysian Banking Industry:
Domestic vs Foreign Banks, Institute of Graduate Studies and Research.
Gupta, Prof Sumeet and Verma, Dr Renu (2008), Comparative Analysis of Financial
Performance of Private Sector Banks in India: Application of CAMEL Model,
Journal of Global Economy, Volume: 04, Issue: 02, pp.160-184.
Gupta, R. and Kaur (2008), A CAMEL Model Analysis of Private Sector Banks in
India, Journal of Gyan Management, Volume: 02, Issue: 01, pp. 3-8.
Haghighat, J., and Nasiri, N. (2004), Bank Efficiency by data envelopment analysis
(case study Agricultural Bank), Economic Journal, Volume: 9, pp. 171-135.
Halkos, G. and Salamouris, D. (2004), Efficiency measurement of the Greek
commercial banks with the use of financial ratios: a data envelope analysis
Approach, Management Accounting Research, Volume: 15, Issue: 2, pp 201- 224.
Hays, Fred H.; Lurgio, Stephen A. Doe and Gilbert, Jr., Arthur H. (2009), Efficiency
Ratios and Community Bank Performance, Journal of Finance and Accountancy,
Volume: 9, pp. 15-1.
Islam, Md. Nazrul and Mili, Shamem Ara (2012), Financial Diagnosis of Selected
Listed Pharmaceutical Companies in Bangladesh, European Journal of Business and
Management, Volume: 04, Issue: 04, pp. 70-88.
Jahur, Mohammad Saleh & Parveen, Jannat Ara. (1996), An analysis of financial
performance of public enterprises- A case study of Chittagong Steel Mills Ltd.,
Chittagong University Studies (Commerce), Volume:12, pp.173-184.
Kannandasan, M. (2007), Measuring Financial of a Public Limited Company uses
Z Score Model A Case Study, The Management Accountant, pp.469-479.
Lacewell, S., K. (2003), Do Efficient Institutions Score Well Using Ratio Analysis?
An Examination of Commercial Banks in The 1990s, Journal of Commercial
Banking and Finance, Volume: 2, pp 17-33.
Majumder, M.T.H. and Rahman, M.M. (2011). Financial Analysis of Selected
Pharmaceuticals in Bangladesh, European Journal of Business and Management,
Volume: 03, Issue: 02, pp. 122-142.
Nanavati, Nihar Kiran (2013), Dupont Analysis To Measure Return On Equity of
Satyam Computer Services Limited (Now Known As Mahindra Satyam Limited),
Research Paper-Commerce, Volume: 02, Issue: 03, pp. 38-40.
Prasuna, D. G. (2003), Performance Snapshot, Chartered Financial Analyst,
Volume: 10, Issue: 11, pp.6-13.
Seiford, L., M and Zhu, J (1999), Profitability and Marketability of the Top 55 U.S.
Commercial Banks, Management Science, Volume: 45, Issue: 9, pp. 1270-1288.
Taker, Suat; Teker, Dilek and Kent, Oya (2011), Measuring Commercial Banks
Performances in Turkey: A Proposed Model, Journal of Applied Finance & Banking,
Volume: 1, Issue: 3, pp. 97-112

96 | P a g e
Tarawneh, M. (2006). A Comparison of Financial Performance in the Banking
Sector: Some Evidence from Omani Commercial Banks, International Research
Journal of Finance and Economics, Volume: 3, pp 103-112.
Thavamalar, D.H. and Prasad, M.Julius (2012), A Study on Financial Health of
Arasu Rubber Corporation, Kanyakumari District of Tamilnadu: A Z score
Approach, Research Journal of Economics and Business Studies, Volume: 01, Issue:
04, Pp. 11-15.
Velavan, M (2010), Measuring Financial Health of E.I.D. Parry Sugar Ltd Using Z
Scaore Model- A Case Study, Indian Journal of Finance, Volume: 04, Issue: 11,
Webb, R.M. (2003), Levels of efficiency in UK retail banks: a DEA window
Analysis, International Journal of the Economics of Business, Volume: 10, Issue: 3,
pp 305-322.
Yeah, Q. J. (1996), The Application of Data Envelopment Analysis in Conjunction
with Financial Ratios for Bank Performance Evaluation, Journal of the Operational
Research Society, Volume: 47, pp 980-988.

Web Sites:

Al Amin (2013), Advance working report on foreign exchange operation of EXIM

Bank Ltd., available at http://www.sb.iub.edu.bd/internship/Spring2013/0920049.pdf
King, P., (2008), Crunch time for business, Credit Management, Available from
www. Investopedia.com


Annual report of Janata Bank Limited (2009-2013).

Credit Manual of JBL.
Foreign Exchange Manual of JBL-2013.
Humphrey, Albert (2005), "SWOT Analysis for Management Consulting", SRI
Alumni Newsletter (SRI International).
Rashid, M. (2010), Banking Sector Challenges in Bangladesh, The Daily Star.

97 | P a g e