AB Bank

On
Overall Perform ance of AB Bank Ltd. Jubilee Road Branch, Chittagong

Submitted to Prof. Dr. Milan Kumar Bhattacharjee Professor & Chairperson Faculty of Business Studies
Premier University ,Chittagong.
Submitted by
Suman Das
Program:MBA Roll No- 0410230293 Semester: Jan05
Department of Business Administration Premier University, Chittagong Internship Duration: February01-May 01, 2007 Submission Date: 05.05.2007
Prepared by Suman Das.
LETTER OF SUBM ISSION

May 05.05.2007.
To The Chairperson Faculty of Business Studies Premier University, Chittagong.
Sub: Application for Submission of Internship Report. Dear Sir, Its my pleasure that I am submitting a report on AB Bank Ltd., Jubilee Road Brach, Chittagong, where I have been assigned to complete the internship program to have better concepts over the practical Banking arena. I was placed in all of the departments such as- General Banking, Accounts, Credit, Cash, Account Opening and Foreign Exchange to cope with the Banking practice on practical arena. I focused basically on key functions and different desk task to upgrade my practical expertise based on theoretical concepts and notions. Whenever you would like to any topic of this report with me I will be available at your convenience. Prepared by Suman Das.
Sincerely yours
PREFACE
Internship program is one of the most significant topics of our M.B.A. program. Now the world is competitive. So we have to earn the knowledge about the critical environment of business. This type of program helps the student to acquire practical knowledge about the contemporary business organization. It will also help the student to be an effective executive in future. Different organizations take different kind of policies to operate their business. A reputed private Bank like AB Bank Ltd. takes different kind of modern Banking system to satisfy their customers.
As
student
of
MBA,
Premier
University
of
Chittagong, I have been assigned to prepare the internship report on Overall Performance of AB Bank considering AB Bank Ltd., Jubilee Road Branch,
Chittagong, as a model .I have tried my best with all my aptitude to complete this report with aptness.
ACKNOWLEDGEMENT
This internship report is on Overall Performance of AB considering AB Bank Ltd., Jubilee Road Branch, Chittagong, as a model I want to give unique thanks to all of the employees of AB Bank for providing me all sort of instructions that I needed. My honorable teacher Professor Dr. Milan Kumar Bhattacharjee, gave me detail instructions how to collect data from primary sources as well as secondary sources. He used up his valuable time to give me theoretical knowledge about research methodology of banking system. For carrying out my internship program I have selected AB Bank, Jubilee Road Branch, Chittagong. I have been ongoing my internship program for three months on the following Bank. I worked there in the amiable and affable atmosphere. I work on the entire department of the Bank. I also bring together information from several high officials. All of the officials were very much supportive and candid en serving me in every feature. They provide me all sort of necessary articles whatever I needed.
I feel highly gratified to my teacher for his hearty and close co-operation and also all of the employees of AB Bank Ltd., Jubilee Road Branch, Chittagong.
(Suman Das)
EXECUTIVE SUMMARY
Proximity of practical scenario is a must to male the theoretical concept and learning fruitful. Practical orientation is an exciting opportunity to be well conversant with the practical Banking. During the practical orientation period I was assigned to three key departments by rotation. These comprised: General Banking. FCD Credit. Cash Account Opening Foreign Exchange. Remittance. Dispatch.
These three departments form the core of banking practice of AB Bank Ltd. One of the vital departments is General Banking, Comprises accounts, remittance, account opening, inward and outward collection. Meeting customers satisfaction through faster and better service is the key mission of the General Banking Department. The influential one is credit department, which keeps a key role to augment the banks growth and earning. Providing different sort of credit and schemes like trust receipt, Bank guarantee, industrial loan, IT loan, consumer credit schemes, house finance is the main mission of credit department. Foreign Exchange the topmost section for international trade-moves the wheel of economy moving. AB Bank Limited is providing different sorts L/C services like L/C opening, lodgment, BLC and facilitating Import in the country. However this some timely initiative will ensure better, smarter and faster banking boom for the AB Bank Ltd. The way AB Bank is moving up to also mind blowing and auspicious. Now its time to take off to unlimited prospect.
TABLE OF CONTENTS
CHAPTER I Background of the Report 1
--------------------------------------------Internship Report, Prepared by Suman Das. -1-
Objective Methodology
of of
the 2 the 3
Study-------------------------------------------------Study----------------------------------------------
Limitation of the Study------------------------------------------------- 4 Background of the AB Bank------------------------------------------Corporate Corporate Functions of Information Mission the AB of Bank of at the Glance----------------------------------Bank----------------------------------Ltd-----------------------Organogram Resources Capabilities---------------------------------------------Monetary Performance of / the Resources--------------------------------------Bank-----------------------------------------CHAPTER II of Jubilee Branch--------------------------------5 a 6 AB 7 Bangladesh 8 9 Road 10 and 10 Financial 12 AB 16
Organogram-----------------------------------------------------------
Internship Report, Prepared by Suman Das. -2-
General Banking----------------------------------------------------------- 17 Functions Sections of of General 17 General 18 Banking-----------------------------------------Banking--------------------------------------------
Documents to be obtained for different types of account-----25 Remittance Section---------------------------------------------------Cash Section------------------------------------------------------------- 31 Clearing Outward Mail Accounts Department-------------------------------------------------CHAPTER III 39 Bills Receive and for and Bills 35 37 Dispatch 38 Collection Section---------------------------------------------(OBC)--------------------------------Section---------------------------------27
Loans Advances--------------------------------------------------Foreign
and 41-53
Exchange------------------------------------------------------ 54-57 Guarantee--------------------------------------------------------------Foreign Remittance---------------------------------------------------- 78-80 SWOT Analysis of AB Bank 81 Ltd-----------------------------------CHAPTER IV Overall performance of AB Bank are shown by means of graphical 82-90 representation-------------------------------------------CHAPTER V Recommendation----------------------------------------------------------91 93 94 Acronyms-------------------------------------------------------------Bibliography----------------------------------------------------------58-77
CHAPTER I
BACKGROUND OF THE REPORT
MBA Program conducted by the Premier University of Chittagong is a very much theoretical and practical oriented program in the arena of business and nonbusiness financial sector. Since, the students of the program were engaged with very much theoretical course work. For my academic curriculum purposes I have completed my Internship Program. The sole aim of the Internship Program is to blend our academic knowledge with that of practical ones and give us an insight into the Management of organization in real life situations. As a part of practical orientation program I was attached to AB Bank, Jubilee Road Branch for three month. On completion of the practical orientation program it was supported to
me to prepare and submit a report of such program. The report comprising with the organizational overview, operation of Banking in the different section such as General Banking, Loans & Advances and Briefly analysis the performance of the Branch. Finally the report has been concluded with some recommendations. It is expected that the report will highlight the task performed and experienced gained during the practical orientation program.
OBJECTIVE OF THE STUDY
The first objective of writing this report is to fulfill the partial requirements of the M.B.A program. Other objective of the report is to familiarize with the operation in the Banking arena including Management overview of bank and analysis of banking operation in different section. Import & export and credit facilities provided by
the bank in Foreign Trade. More especially the objectives of the study are:
To highlight on the profile of AB Bank of Bangladesh Ltd. To examine the general banking functions. To examine the activities of the loans and advanced department. To evaluate the performance of AB Bank. To recommend some corrective measures to resolve the problem.
METHODOLOGY OF THE STUDY

In order to complete this report I proceeded through a work plan. I physically visited and discussed with executives and top level management of Bank of Small Industries and Commerce Bangladesh Limited become conversant with the banks philosophy, working procedures, management system and decision making process of the banks.
The details of the work plan are furnished below: Data collection method Relevant data for this report has been collected primarily by direct investigations of different records, papers, documents etc. operational process and different concerned personnel. The interviews were administered by formal and informal discussion. No structured questionnaire has been used. Information regarding office activities of the bank has been collected through consulting bank records and discussion with office personnel. Data sources The information and data for this report have been collected from both the primary and secondary sources. Data Processing Data collected from secondary sources have been processed manually and qualitative approach has been used throughout the study. Data analysis and interpretation Qualitative approach has been adopted for data analysis and interpretation taking the processed data as the base. So the report relies primarily on an analytical judgment and critical reasoning.
LIMITATION OF THE STUDY

Objective of the practical orientation program is to have practical exposure for the students. Our tenure was for three month only, which was somehow not sufficient. After working whole day in the office it was very much difficult, if not impossible to study again the theoretical aspects of banking. Other limitations are as follows:
For the lack of our practical knowledge, some shortcoming may be available in the paper.
The
bank
has
naturally
shown
us
some
indifference connecting its most confidential information.
The executives of Arab Bangladesh Bank Limited were too busy to spare time for the internee.
The duration of my internship program is only 3 months. The allocated time is not sufficient for us to gather knowledge and to make the study a complete and fruitful one.
BACKGROUND OF THE AB BANK

AB Bank Ltd. started its operation on 31st december3rd 1981 as a public limited company under Companies Act 1913, subsequently replaced by The Companies Act 1994, and governed by The Banking Companies Act 1991. The Bank went for public issue of its shares on 28 December 1983 and its shares are listed with Dhaka Stock Exchange and Chittagong Stock Exchange for trading ABBL has 66 branches all over Bangladesh including 1 Islami Banking branch, 1Overseas branch at Mumbai, India and 2 representative offices each in London and Myanmar. The bank has a subsidiary company, AB International Finance Ltd, incorporated in Honkong. It is the first private commercial Bank in Bangladesh. With general commercial banking AB Bank plays an important role and contribution toward conducting business in the countries exports and imports. Providing financial assistance to business communities & exporters and importers, and for functioning as the principal financial institution for coordinating the working of institutions engaged in financing export and import of goods and services with the view to promoting the countrys international trade and for matters connected there with or incidental there to. Thus, AB Bank is the apex body in respect of Export and import finance. AB Bank provides loan for extending export and establishing alternative imported industry very easy condition. To the commercial banks, AB bank offer
Internship Report, Prepared by Suman Das. - 10 -
refinances and rediscount advances made by them.
facilities
against
export
To the banks overseas, AB Bank offers re-lending facilities to enable them to finance imports from Bangladesh. For these reasonable causes the establishment of AB Bank is a new emergence of the banking function. It is governed by the banking companies act. 1991.
CORPORATE INFORMATION AT A GLANCE

(Information as per last Annual Report 2005)
Name of the bank Limited Status Date of Incorporation 1994.
: : :
AB Bank of Bangladesh Public Limited company: 31December, 1981. : 26th July ,
Inauguration of the Jubilee Road Branch
Head Office: BCIC Bhaban, 30-31, Dilkusha Commercial Area, Dhaka Chairman Managing Director Authorized Capital Paid up Capital : : : : Faisal M. Khan Kaiser A Chowdhury Mr. Md. Abdul Jabber TK.800 Million TK. 519.76 Million
Manager of Jubilee Road Branch :
Directors Number of branches Deposit Loan Number of Employees
: : : : :
8 67 Tk. 27,361.44 Million Tk. 21,384.63 Million 1525
CORPORATE MISSION OF THE AB BANK

1. To receive, borrow or raise money on deposit, loan or otherwise, upon such terms as the company may approve and to give guarantees and indemnities in respect of all debts and contacts. 2. To establish maintain, carryon, transact and undertake all kinds of investment, merchant and financial business, including underwriting, managing and distributing the issue of stocks, shares bonds, debentures, import permits other securities directly or thorough jointly with one or more banks or financial institution. 3. To carry on the business of dealers in foreign exchange including buying and selling of foreign exchange, dealing in foreign currency notes, granting and issuing of letters of credits, travelers cheques, circular notes and negotiating, and discounting of export documents and all other matters related to foreign exchange business. 4. To carry on the business of buying and selling gold and other valuable species. 5. To provide for safe deposit vaults and safe custody of valuables of all kinds. 6. To act as agents for the sale and purchase of any stocks, shares or securities or for any other monetary or mercantile transaction.
7. To form, manage, join or subscribe to any syndicate, or any holding company or trust to carry on business of an investment trust company. 8. To act as official liquidator and receiver. 9. To conduct the business of banking in its branches and abroad. 10. To act as executors and trustees of wills, settlements and trust deeds of any kind made by customers and other matters related thereto.
FUNCTIONS OF THE AB BANK OF BANGLADESH LTD
a. The main task of the AB Bank is to accept deposited from various customers through various accounts. b. Provides loans on easy terms and condition. c. It creates loan deposit. d. The bank invest it fund into profitable sector e. It transfers money by Demand Draft (DD), Pay Order (PO), On-line and Telegraphic Transfer etc. f. The bank is doing the transaction of bill of exchange, Cheque etc. on behalf of the clients. g. AB Bank assists in the Foreign Exchange by issuing Letter of Credit.
h. The bank insures the securities of valuable documents of clients. i. It brings the increasing power of dimension of transaction. j. Above all, AB bank helps the businessmen financially by giving discount facility for bill of exchange and by providing the facility of Letter of Guarantee.
ORGANOGRAM:
Chairman Vice Chairman Board of Director
Managing Director & President
SEVP
SEVP
SEVP
SEVP
EVP
EVP
EVP
EVP
SVP
SVP
SVP
SVP
VP
VP
VP
VP
SAVP
SAVP
SAVP
SAVP
AVP
AVP
AVP
AVP
SPO
SPO
SPO
SPO
PO
PO
PO
PO
SO
SO
SO
SO
OFFICER
OFFICER
OFFICER
OFFICER
ORGANOGRAM OF JUBILEE ROAD BRANCH

Head Office
General Banking In charge
Cash In charge
Credit In charge
Information Technology In charge
Deposit & Account Opening
Remittance
RESOURCES AND CAPABILITIES

AB Bank is well prepared to and capable of meeting the demand for a broad range of banking services. It has got adequate resources, both human and physical, to provide the customers with the best possible services. Physical and Technological Resources A great deal of investment for developing the physical resource base of the Bank has been made. AB Bank has its presence in all the major industrial and commercial hubs of Bangladesh in order to cater to the needs of
industry and trade. At present, there are twenty-nine conveniently located branches throughout Bangladesh.
Major features of these branches are: Fully computerized accounts maintenance. Well decorated and air conditioned facilities. A fully operational computer network, which is currently being implemented. The work of Local Area Network (LAN) and Wide Area Network (WAN) installation to facilitate fast communication between the branches and the Head Office is in progress. Money counting machine and Money detecting machine for making cash transactions easy and prompt. Human Resources Quality human resources denote an organization worthy, knowing of ones job and having interest in it, is a precondition of good functioning. AB has a welldiversified pool of human resources, which is composed of people with high academic background. Also, there is a positive demographic characteristic. Most of the employees are comparatively young in age and mature in experience. As at end 2005 the total employee strength is about 1525.
Training Training, on a regular basis, is being imparted to employees of both management and non-management levels. Human resource is a precondition of good functioning; with this view in mind AB bank trained their Officers and Executives both home and abroad. Recruitment of New Officers The Bank follows a strict recruitment policy in order to ensure that only the best people are recruited. With view to improving efficiency of human resource AB bank always recruit fresh and enthusiastic youth who have completed their studies from universities directly as officers through competitive examination.
MONETARY / FINANCIAL RESOURCES

Like any other financial intermediaries, ABBL is no exception in performing its core functions viz. Mobilization of fund and utilizing such mobilized fund for profitable purpose. 1. Mobilization of Fund: The main sources of fund for BASIC are:
Deposit Capital and Reserve Fund
Deposit
Deposit constitutes the core of AB Banks fund mobilization. Total deposit of the Bank at the end of 2005 stood at Taka 27361.44 million compared to Taka 28,299.23 million in 2004. During 2005, the fixed deposit increased to Taka 17487.15 million from Taka 13360.14 million in June 2005registering a growth of 30.89 percent. Saving bank deposit increased to Taka 1310.77 million in June 2005compared to Taka 1080.60 million in 2004 with a growth rate of 21.30 percent. Deposit in current and other accounts including bills payable increased to Taka 2692.63 million in June 2005 from Taka 1463.95 million in 2004 a growth of 83.92 percent.
Capital and Reserve Fund The authorized capital of the bank is Tk. 800 million. The paid up capital of the bank at the end of 2005 stood Tk. 519.76 million compared to Tk. 495.01 million in 2004.
The bank raised its reserve from Tk.623.99 million to Tk. 826.33 million.
2. Utilization of fund AB utilizes its funds in accordance with its organizational goals and corporate strategy. Main use is for lending to industrial and trade sector. Maintenance of cash and statutory liquidity reserve with the Bangladesh Bank covers 20 percent of demand and time liabilities. Placement of funds in NOSTRO Accounts to handle foreign trade and investment in money market is also done as usual. Investment In an effort to secure more stable and predictable earning from its investment, the Bank focused its attention on investment in Govt. securities, shares and call money market. The total investment of the bank stood at Tk. 4060.95 million as on December 2005 as against Tk. 6738.15 million in the previous year showing an increase of(39.73) % (Amount in million) Year Govt. Securities 2005 2004 2003 1500.57 1500.68 2200.36
Others Total Investment (HO)
120.47
42.29
176.71
1621.04 1542.97 2377.07
(Source: Annual Report 2005 )
Loan and Advances ABBL lends support towards development of trade, business and other commercial activities in the country. The bank provides cash credit for local trade, export cash credit, packing credit, and local bills purchased and foreign bills purchased facilities. As on 31.12.2005, total amount outstanding in respect of those facilities stood at TK. 21384.63 million including compared to Taka 17008.50 million of 2004 representing a growth of 25.73% (Amount in million) Year 200 200 2003 Loan and Advance(Jub 211.00 27.18 412.00 Road Br.) (Source: Annual Audited Report 2006) Foreign Trade The Bank handles foreign trade in which it has a comparatively large share despite its small size. ABBL provides various facilities related to L/C and post import finance like loan against imported merchandise (LIM), loan against trust receipt (LTR),
back to back L/C and pre-shipment finance facilities like export credit and packing credit to exporters. So far the Bank has established correspondence relationship with as many as foreign banks in order to facilities foreign trade. The Bank handled total export business of Taka 12595.20 million .And import business of Taka 23150.85 million in 2005. The import business increase by 20.16 percent and export business increase by 24.70 percent. Major items of exports were garment sand jute products. Items of import included mainly industrial raw materials, garments accessories and capital machinery. Head Office (Amount in million) Year Import Finance Export Finance Annual Report 2005)
2005
2004
2003
23150.85 19266.00 19281.23 12595.20 10100.00 9743.08 (Source:
Other activities Bank provides services for remittance,
The
underwriting, guarantee, public Offering of shares etc. The Bank also provides funds to investment and leasing Companies.
PERFORMANCE OF THE AB BANK

The overall performance of AB Bank Ltd. so far is shown as follows: (Figure in MillionTaka) Seri al No. 1. 2. 3. 4. 5. 6. 7 Authorized Capital 800.00 800.00 800.00 Paid-up Capital 519.76 495.01 471.44 Reserve Fund 826.33 623.99 592.10 Deposits 27361.44 28299.23 27260.16 Advances 21384.63 17008.50 20435.24 Investment 4060.95 6738.15 3335.87 a) Import 23150.85 19266.00 19281.23 Business b) Export 12595.20 10100.00 9743.08 Particulars 2005 2004 2003
8. 9.
Business c) Remittance 115.41 Total 35861.46 Operating Profit 162.45 Number of 67 Branches
83.47 73.65 9777.96 12183.84 90.07 17.12 70 69
CHAPTER II
GENERAL BANKING
Out of three major sections General Banking is important one. General banking is the heart of total banking system. Through this section bank has to receive and disburse money, to develop banker customer relationship by opening different types of account and providing prompt services to the customers. This department collects money from the depositor and uses these deposits to earn profit.
FUNCTIONS OF GENERAL BANKING:

The functions of general banking department of AB Bank of Bangladesh Ltd. are as follows: 1. Maintenance of different types Deposit A/C: Saving Accounts Accounts Fixed Deposits Deposits Other Saving Schemes 2. Opening different types of accounts. 3. Receipts & payment of cash.
Current Short Term
4. Handling transfer transactions. 5. Operations of clearing house. 6. Maintenance of accounts with Bangladesh Bank & other banks. 7. Collection of Cheques & Bills. 8. Issue and payment of Demand Drafts, Telegraphic Transfers, Online Transfers & Payment Orders. 9. Maintenance of Safe Deposit Lockers. 10. 11. 12. 13. 14. 15. Maintenance of Internal Accounts of the banks. Reporting to the Head Office about daily position Saving record of all transactions in computer. Closing and transfer of different types of Keeping good relation with valued customer. Providing necessary support to the customers.
of the bank.
accounts.
SECTIONS OF GENERAL BANKING:

During my practical orientation in AB Bank, Khatunganj Branch, it came to the observation that general banking section is divided with four areas. These are: Account opening section Remittance section
Bills and clearing section Cash section Mail receive and dispatch section Account Opening Section: One of the vital sections under general Banking is the account opening section. Banker customer relationship begins through this section. Various tasks are performed in this section. Such as: Opening of different types of account. Issue of checkbook. Transfer and closing of account. Enquiry of account. Checking The Signature of the client. Various types of account offered by AB Bank: AB Bank offers various types of account to its different types of customer. These are as follows: Current deposit (CD) account Savings bank (SB) account Short term deposit (STD) account. Fixed deposit (FDR) Current Deposit (CD) Account:
A current 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 from current a/c. It does not earn any interest. It has the following properties: Opening Amount/ Initial Deposit 10000 Service Charge (yearly) 500 Minimum Balance Requirement 10,000 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. . This A/C mainly opens on person name.
Tk.
Tk.
Tk.
SB account has the following properties: Opening Amount/ Initial Deposit 10,000 Service Charge (yearly) 300.00 Minimum Balance Requirement 10,000 Interest 6% One cannot withdraw money more than two times in a week. The withdrawing amount is not to exceed 25% of the total balance. If customer withdraws money more than twice in a week than no interest is given to customers on his account. Fixed Deposit Receipt (FDR) Account: In this category are included the deposit with the bank for a fixed period which is specified at the time of making the deposit. A fixed deposit is repayable on the expiry of a specified period, chosen by the depositor to suit his
Tk.
Tk.
Tk.
rate
purpose and to enable him to get back money as and when he needs it. The fixed deposit may be made for 3 months, 6 months, 1 year, 2 year or 3 year. As the date of repayment of fixed deposit is determined in advance, the banker need not keep more cash reserves against it and can utilize such amount more profitably. The banker therefore offers higher rate of interest on such deposits. Fixed deposit has grown in importance and popularity in our country during recent years. When a matured FDR is withdrawn, the principle amount along with the interest amount (deducting 15% tax from the total) is paid to the client. The rate of interest and the terms of the Fixed Deposit receipt are given below: Term 1 mont h 3 month s 6 mont hs 1 Year 2 year s 3 Years and above 12.50% & Above 12.50% & Above
Interest rate 9.50% 11.00% 11.50 11.50 12.50 (Up to Tk % % % 1,00,000 Interest rate 9.50% 12.00 12.25 25.50 12.50 (Above Tk % % % 5,00,000 More than 1,00,000 & less than 5,00,000 Short Term Deposit (STD):
It is a deposit account opened by customer where customer deposited money for short period. Customer can draw money after giving short notice. This account holder enjoys the same facilities of CD account including receiving interest on his deposited money. Interest rate of STD is less than the interest rate of SB account. account has the following properties: Opening Amount/ Initial Deposit 50000 Service Charge (yearly) 250 Minimum Balance Requirement 50000 Interest rate 4% Various types of Savings Schemes offered by AB Bank: AB Bank offers various types of Savings Schemes to its different types of customer. These are as follows: Monthly Savings Scheme (MSDS). Monthly Income Scheme (MIS). Super Savings Scheme (SSS). Multi Plus Super Savings Scheme (MPSS).
Tk.
Tk.
Tk.
Monthly Savings Deposit Scheme (MSDS): Small savings can formulate large deposit. Savings increases mental power of a man, form capital and increases the confidence of a depositor. AB Bank introduces a saving scheme with high profit for the purpose of increases saving mentality. In this savings scheme one can deposit money in every month and will get a handsome amount of money at the end of certain period. The amount of savings/deposits as per monthly installment and period is shown in below:
Monthly Savings Deposit Scheme. The installment amount, tenure and matured value is tabled hereunder: Monthly Deposit Money (Tk) 500.00 1000.00 1500.00 2000.00 2500.00 3000.00 3500.00 4000.00 4500.00 5000.00 Payment after 05 (Five) years 38,388.00 76,776.00 1,15,164.00 1,53,552.00 1,91,940.00 2,30,328.00 2,68,716.00 3,07,104.00 3,45,492.00 3,83,880.00 Payment after 10 (ten) years 94,786.00 1,89,572.00 2,84,358.00 3,79,144.00 4,73,930.00 5,68,716.00 6,63,502.00 7,58,288.00 8,53,074.00 9,47,860.00
Monthly Incomes Schemes (MIS): In this type of scheme one can invest certain amount of money for certain period of time for receiving a steady return after every certain period of time. Lowest amount of investment is Tk. 1,00,000 and the period of this scheme is 3 years. The amount of money invest should be the multiple of 1,00,000. Table showing the income per deposited amount:
Deposit Amount (Tk.) 1,00,000.00 2,00,000.00 4,00,000.00 Super Savings Scheme (SSS):
Income (Tk.) 1000.00 2000.00 4000.00
Savings helps to build up capital and capital is the prime source of business investment in a country. Investment takes the country towards industrialization, which eventually creates wealth. That is why savings is treated as the very foundation of development to create more awareness motivates people to save. AB Bank offers Supers Savings Scheme. The client will get double amount of his principle amount after maturity.
Minimum Amount Required Tk. 5000
The amount should be the multiple of 10,000 The amount should be double after 6 years Tax rate is 10%
Multi Plus Savings Scheme (MPSS):
Under this scheme the amount will be doubled in 11 years term. Compound interest rate is counted. The amount multiples three times after 10 years. It has the same properties as like as Supers Savings Scheme.
DOCUMENTS TO BE OBTAINED FOR DIFFERENT TYPES OF ACCOUNT:

When anyone comes to open an account he has to submit some documents to the banker. Different types of document needs for different customer. Some common documents require for all types of account are: Introducer recommendation. Specimen signature card. Account opening agreement form. Two copies of Photograph of account holder and two copies of nominee (if any). Deposit slips book. Chequebook requisition slip. Letter of mandate authorizing another person to operate the account on behalf of the account holder.
Certain types of documents are needed for special customers. These are: Proprietorship Account: Document requires for proprietorship business to open an account are: Introducers with account number. Valid trade license from City Corporation, Attested copy should be submitted. Tax Identification certificate. Nationality certificate from local authority. Partnership Account: Documents to be obtained for opening an account of partnership firm are: Trades license or board resolution. Deeds of partnership signed by all partners. Two copies photograph of each partner. Partnership resolution signed by all partners to open account. Resolution must indicate authorized person who operates the account. Limited Company Account: Document required for Limited Company account to open an account are:
Memorandum and Articles of Association of Company. Resolution of Board of Director. Certificate of incorporation. Certificate of commencement of business in case of public limited company. List of director. Two copies of passport size photograph of account operators. Others: name director s with signature, minutes of board of director.
REMITTANCE SECTION
The major function of commercial Banks is mobilization of fund. Other than this, banks provide supplementary 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. There are three ways of transferring fund domestically. The modes of transferring funds are: Pay- Order (PO). Demand Draft (DD). Telegraphic Transfer (TT). Mail Transfer (MT). Online Transfer.
Payment Order / Pay Order (P.O)

This is an instrument issued by the branch of a bank for enabling the Customer/Purchaser to pay certain amount of money to the order of a the certain same person/firm/organization/office within
clearinghouse area of the pay order-issuing branch. Characteristics of P.O: The issuing branch and paying branch are same. Application for payment within the clearing house area of the issuing branch. This may be open or can be crossed. Procedure of Issuing Payment Order: Obtain P.O. application from duly filled in and signed by the Purchaser/application. Receive the amount in cash/transfer with commission amount. Issue Pay Order. Enter in Pay Order register. Table showing the Charge for Pay Order:
Amount
Commission
Vat @ 15% on Commission
Total Charge 17 29 58 115
Less than TK.1000 TK. 10,0011,00,000 Tk. 1,00,0015,00,000 TK. 5,00,001 above Demand Draft (D.D)
25 50 75 100
2 4 8 15
This is an instrument through which customers money is remitted to another person/firm/organization in outside the clearinghouse area from a branch of one bank to an outstation branch of the same bank or to a branch of another bank (with prior arrangement between that banks with the issuing branch). This is an order instrument in which the issuing branch gives instruction to the payee/drawer branch to pay certain amount of money to the order of certain person/firm/organization. Commission, vat and postage are charged for issuing DD. Example: - To transfer money from Chittagong to Dhaka.
Procedure for issuing D.D.: Obtain D.D. application from duly filled in and signed by the purchaser/application. Receive the amount in cash/transfer with prescribed commission and postage amount. Issue the D.D. duly in and signed by the authorized officer. Insert test number (where applicable) Enter in the D.D. issue register. Issue advices to the payee branch. Procedure for payment of D.D.: Examine the D.D. by verifying the signature, test number, serial number etc. Enter the D.D. payable register. Verify with the IBCA number. Pass necessary vouchers. Charge for Demand Draft: Minimum amount for a DD is TK. 25. Commission is the 0.10% of the DD amount. Vat is TK. 15% on the commission amount. Telegraphic/ Telephonic Transfer (T.T)
This is a mode of transfer of customers money from a branch of one bank to another branch of the same bank through telegraphic/telephonic message. The issuing branch used to send the message of such remittance through telegraph/telephone adding certain code number or test number on the basis of test key apparatus developed by the concerned bank for its different branches. The drawer and the payee is required to have account with the bank in order for this transaction to take place. TT is issued against cash, check, letter of instruction etc. Characteristics of T.T Issued by one branch to other branch and message is tale-communicated. Remittance/ transfers of money are done through tested Tele-messages. Remittance is affected on the basis of tested message. Test key apparatus is required. Procedure for issuing T.T.: Obtain T.T. application from duly filled in and signed by the purchaser/application with full A/C particulars of the beneficiary.
Receive
the
amount
in
cash/transfer telephone/telex
with and
prescribed
commission,
postage amount. Prepare T.T. message inserting the test no.

Enter in T.T. issue register. Issue advice to the payee branch.
Procedure for payment of D.D.: Note the message T.T. and verify the test number and confirm the T.T. serial no. etc. is ok. If ok make entry in to T.T. payable Register Pass necessary vouchers for payment. For quickest remittance customer use this means to transfer money from one place to another place. Within 10 minutes beneficiary will get the amount. Charge for T.T.: Minimum amount for a TT is TK. 25. Telephone Charge is TK. 50 Commission is the 0.10% of the TT amount. Vat is TK. 15% of the commission amount.
CASH SECTION
Cash
section
is are
an
important Cash
section sections
where
cash
transactions
made.
demonstrate
liquidity strength of a bank. It is also sensitive as it deals with liquid money. Maximum concentration is given while working on this section. Tense situation prevails if there is any imbalance in the cash account. There are various systems maintain by cash officer that is under: Vault Cash Receive Cash Payment Evening banking.
The cash department is the riskiest department of the bank. This is the section where tight security is required to avoid any accidents. There is a limit to be amount of cash that each counter can carry; carrying of excess cash is avoided for safety reasons. If there is any surplus in the cash then the excess amount should sent to the Bangladesh Bank or if there is any shortage in the cash then the shortage amount should be borrowed by the bank from Bangladesh Bank or from the Head Office or Other Banks.
Cash Receipt:
When clients deposit cash in the bank, the bank officer should follow the following common precaution: Check and count the received cash.
Make sure that the amount in word and number
in the deposit slip are same. Check the account title and the number. Both the deposit slip is in order. Depositors signature is in the slip. Receive seal in the slip is a must. Write the domination of the currency at the back of the pay in slip or the credit voucher and affix stamp in the slip/voucher. Enter particulars of in slip/credit voucher in the At least, send the pay in slip/voucher to the receiving cash officer book. deposit department or to the respective department. The respective officer must sign deposit slip. Carbon copy of the deposit slip must be handover to the client with proper seal and signature.
Cash Payment:
Cheques, demand drafts, pay orders, pay slips and debit cash vouchers etc. are received from various departments for payment of cash to customers/payees. Prior payment of cash it is the officers duty to make sure that the cheque/or the instrument has been genuinely passed. The
following common precaution is thoroughly practiced before honoring a cheque: The branch name in the cheque. The date in the cheque is very crucial. Cheques are normally valid for six months and pre-dated cheques are asked to present after the date given. Tk in words and figure of the cheque is same. Balance in the account is available. The apparent tenor of the cheque. Whether any figure, date or anything has been altered in the cheque presented. If any, then the respective officer must check whether the client is making his signature for alteration or not. The specimen card signature and signature in the cheque should match. Signature of recipient is obtained on the reverse of cheque. In case, where a prior arrangement has been made with the bank, a client may overdraw against a Cheque. Books maintained by cash department:
Vault Register: This is the book where amount of cash available in the branch is maintained. That is, the amount in the vault register book. Cash Receive Register: This register keeps record of all incoming cash. Cash Payment Register: all payments. Cash Position Register: This is the book where cash balance is recorded by counting the notes and coins that are physically available. The balance in this book is compare with the vault register, which should be the same. In case there is an error, then the figures would not match but if no discrepancy is found then nothing is to be worried about. Similar to the cash register
book, this books keeps tracks of all outgoing cash, that is
Other Registers: Money Remittance Register Prize Bond Register Stamp in hand Register Cash Section has two Automatic Machine.
Money Counting Machine: With the help of this machine officer can easily count the money. It save time and also provide accuracy.
Money Detector Machine: This machine helps officer to find out the fake money.
CLEARING AND BILLS SECTION

Clearing and bills section is an important section of General Banking. This is the section through which branch has to clear its inter branch and inter bank transaction. Customers do pay and receive the collecting branch the system is known as IBC. Clearing: As far as safety is concerned customers get crossed cheque for the transaction. As we know crossed cheque cannot be encased from the counter, rather it has to be collected through banking channel i.e. clearing. For example, a client of AB Bank received a cheque of another bank, which is located within the clearing range; deposit the cheque in his account at AB Bank. Now AB Bank will credit his account and collected it. Though the
amount is credited in the customers account but he will not get the money until he cheque is honored. Types of Clearing: 1. Outward Clearing: Outward clearing means when a particular branch receives instrument drawn on the other bank within for the clearing zone and those instruments collection through the clearing
arrangement is considered as outward clearing for that particular branch. 2. Inward Clearing: When a particular branch receives instruments which on themselves and sent by other member bank for collections are treated as inward clearing. Clearing house Clearing House is a place in the Central Bank where different banks come to settle their interrelated liabilities. Clearing House System The mechanism of working at a Clearing House in general is as follows:
Every Bank of the locality, which is a member of the clearinghouse, prepares a Bank-wise list of cheques after receive from customers and drawn on different Banks of the locality. An officer, in charge of clearinghouse, goes to the clearinghouse in the morning with the cheques and their list. He delivers the cheques to the officials of the respective banks. Similarly, he also receives the cheques drawn on his Bank from the officials of the other banks. The official of each bank computerizes the final balance, payable or receivable by his Bank after taking into account the various amount of receipt and payment. The official return of their respective Bank to meet again in the afternoon to return any dishonored instruments to the officials of the respective Banks. The final settlement is effective by the supervisor of the clearinghouse by debiting or crediting, as the case may be, the accounts of the respective Banks as maintained with the clearinghouse.
OUTWARD BILLS FOR COLLECTION (OBC):
Customers deposit cheque, drafts etc. for collection, attaching their deposit slip. Instruments within the range of clearing are collected through local clearinghouse. But the other, which is outside the clearing range, is collected through OBC. A customer of AB Bank, Jubilee Road Branch, is depositing a cheque of Sonali Bank, Dhanmondi Branch. As a collecting bank AB Bank, Jubilee Road Branch sends IBCA along with cheque to AB Bank Collecting. AB Bank, Main Branch will collect it by AB Bank, Dhanmondi Branch, the agent. They will forward the bill to that particular (Dhanmondi) branch. OBC number is given on the forwarding letter.
Charge for OBC:

Amount Minimum Amount Tk. 1-25,000 TK 25,001 -1,00,000 1,00,001 -5,00,000 5,00,001-10,00,000 10,00,001 & Above Tk. 200 Tk. 500 Tk. 750 0.10% 0.05% 0.05% 20 20 20 ,, ,, ,, TK. 25 Tk. 50 Commissio n 0.15% 0.15% Postage Charge 20 20 Vat 15% on Commission
Inward Bills For Collection (IBCA): In this case bank will work as an agent of the collection bank. The branch receives a forwarding letter and the bill. Next steps are: Entry in the IBCA register, an IBCA number given. The instrument is sent to clearing for collection. An IBCA is dispatched in this regard. If dishonored in this case the instrument is returned to the collecting branch along with return Memo indicating the cause of dishonored.
MAIL RECEIVE AND DISPATCH SECTION

Banking is the business of correspondence. Lot of mail comes to the bank and dispatch from the branch daily. Lot of money document causes much loss for bank. That is why bank has to record all Mail received and dispatched through the bank.
Mail receiving: All mail comes to the bank recorded in this desk. For this reason a register book maintained called inward mail register. A number is given on receiving mail and records particulars of document in the register book. Mail Dispatching: Before dispatching mail from the bank must record in outward mail register. A number is given on the mail. Destinations, date of dispatch are recorded in that register book.
ACCOUNTS DEPARTMENT
Accounts division is the nerve center of a bank. As all transactions carried by a bank is being legalized as far as accounting is concerned. If transactions were not recorded properly there would be disequilibrium in state of the bank. There can be imbalance in the cashbook thus the whole mechanism will collapse. The regular tasks of department are: To record all transactions in the cashbook. To prepare daily fund position, weekly position, periodic statement of affairs. Prepare necessary statements for reporting purpose. To pay all expenditures on behalf of the branch. Make salary statements and pay salary. Branch to branch fund remittance and supporting accounting treatment. Prepare statements for customer.
Publishing basic data of the branch etc. General practices of an Accounts Department: AB maintains slip system of accounting. Scrutinizing Vouchers: At the day end all vouchers are sent to the accounts department by the respective department from where vouchers are originated. On the next day an `activity report is received from computer department. The activity report is the detail statement of all the transactions carried by the branch of a particular date. It is the summary of all account position. It also displays cash, clearing, transfer position, individual deposit account position etc. Statement Prepared in Account Section: The following weekly / monthly / quarterly and half-yearly statements should be submitted to Central Accounts Division of Head Office:
SL No 01 02 03 04 05 Particulars of Statement Weekly Position S.B.S.1 S.B.S.2 Quarterly Statement of Scheduled Bank Statement of Deposit Period Last date of submission to HO. Weekly Monthly Quarterly Quarterly Half By every thurs day 1-3th next month 5th next month 7th next month 7th next month
Landing and Borrowing 06 Business Performance report
Yearly Monthly 1st next month
This department also prints the following statements: Daily Statement of Affairs. Daily Statement of Income & Expenditure. Daily Loan Listing.
CHAPTER III
LOANS AND ADVANCES
The two main functions of a bank are to borrow money from public by accepting deposit and lending it to the public for the development of trade, commerce, industry and agriculture. Banks give some interest to depositors for deposit and take higher interest for lending. The margin is the banks profit. So, lending is by far the most important function of modern bank. The strength of a bank is, thus, primarily judged by the soundness of its advances. A wise and prudent policy in regard to advances is considered an important factor inspiring confidence in the depositors and prospective customers of a bank.
Advances not only play an important part in gross earnings of bank, but also promote the economic development of the country. All types of business activity includes trade, industry and agriculture have to depend on bank finance in one form to offer. Bank by channeling accumulate savings of the nation into productive uses, help both the depositors and the borrowers. AB disburses advances in two broad areas. These are industrial credit and commercial credit scheme. Industrial credit: Industrial credits are given for industrial purpose. The sector where some process involves is called industry, such as shape of material. Industry can be two types:
1. Manufacturing industry- Cement, steel factory etc. 2. Service industry- Hotel, transport, etc. Industrial credit is given for two purposes: Term loan - fixed assets financing. Working capital - current assets financing. Commercial Credit: Commercial credits are given for trading purpose where no process involved. AB Bank lends support towards
development of trade, business and other commercial activities in the country. Forms of Loans and Advances: The making of loans and advances has always been prominent and profitable function of a bank. Sanctioning credit to customers and others out of the funds at its deposal is one of the principle services of a modern bank. Advances by AB Bank are made in different forms. Such as: Overdraft Term loan Bills Portfolio Packing Credit Bank Guarantee Commercial Loan
Overdraft (OD): The overdraft is a kind of advances always on a current account operated upon by cheque. The customer may be sanctioned a certain limit upon which he can overdraw his current account within a stipulated period. Here,
withdrawal or deposits can be made any number of times of the convenience of the borrower provided the total amount withdrawn does not, at any time exceed the agreed limit. Interest is calculated and charged only on the actual debit balance on daily (produced) basis. While in a current account cheques are honored if the balance is in credit, the OD arrangement enables a customer to draw over and above his own balance up to the extent of the limit stipulated.
It is essential that a letter of continuity must be obtained in case of OD account. The letter makes the customer liable to the final balance of his account by confirming the intervening debits and credits in his account. Interest rates for OD are 13.50% or interest rate of the Financial Paper (FDR etc.) plus 2%. AB has the following types of OD: SOD against financial obligation SOD against FDR
SOD general Others
Term Loan: The loan which, is repayable in fixed fixture date, is called term loan. This loan is made to large well-established business enterprise for financing capital expenditure. Businessman requires this loan for purchase or renovation of funds, buildings, and factory sheds, and machinery etc. the loan is to be repaid for according to a scheme of repayment by installments. Installments may be monthly, quarterly, semiannually, annually depending on type of loan. This type of is given for long term, mid term, short term and requires large investment. Market study and environment is necessary before allowing such loan. ABBL charges 13% /14% interest for such loan. Staff Loan: AB provides loan facilities to its employees. Interest rates vary on the nature and objective of loan. Basically staff loan is disbursed for staff house building purpose and household consumption. In case of staff loan repayment procedure is followed on monthly basis. Bills Portfolio: Bank can allow credit to customers in the way of purchasing and discounting bills. When client submit bills,
a margin (covering also the interest on the loan) amount is deducted from the face value of the bill and the rest is provided to the client .Bills can be local or foreign. This may be clean or documentary. Documentary bill is supported by various documents such as -- Local Foreign Bill Bill Purchase Purchase supported supported by by Documents [LBP (D)] Documents [FBP (D)] Packing Credit: Packing Credit (P.C.) is provided to the client against confirmed export orders (Export L/C) covering maximum 90% of the value of the order. As the name implies this type of loan is provided to procure & process the raw materials for making finished goods to be exported. This loan is provided at reduced interest rate as per Bangladesh Banks instruction. However, Bank can avail refinance subsidy from Bangladesh Bank to compensate the reduced interest rate. The packing credit is adjusted through the export proceeds. The Export L/C becomes primary security for the loan. The loan is sometimes collateralized by equitable mortgage of property. In any case Export Finance Guarantee from Sadharan Bima
Corporation has to be obtained before the lain is disbursed. Interest rate is 13% Bank Guarantee: Bank Guarantee is also a non-funded facility provided to the client. Bank on behalf of the client undertakes to pay agreed amount of money at certain time if client fails in due performance. Bank Guarantee is generally provided in Lieu of earnest money for bidding in tender by the client (Bid Bond) or as guarantee for due performance of contracted work (Performance Guarantee).AB Bank generally provides guarantee facility for maximum one year. Usually 10% - 25% margin is obtained from the client against the guarantee amount. Commercial Loan: This type of credit facilities is mainly related to post import financing. It is given for short period. BLC, LIM, LTR are fall in this category. The details are as follows: BLC: This means Bills Under Letter Of credit. After getting documents from negotiating bank-opening bank informs importer for clear the documents and bank creates a loan
account. 30 days are allowed for this type of loan. Bank charge interest @ 13% in this credit facility. The Bank that establishes the letter of credit is bound to honor its commitment to pay for import bills when these are presented for payment, if drawn strictly in terms of the letter of credit. The foreign correspondent, who negotiates the documents, gets payment as per stipulated reimbursement terms of the L/C to the debit of the account of the L./C opening banks F. C account. The opening bank lodge the shipping documents in their books and responds to the debit advice originated by foreign correspondent to the debit of Bills under Letter of Credit ( payment against documents (PAD)) account. In fact, the amount stands as advance to the importer, which is adjusted by delivery of documents against payment, or by allowing post import finance such as LIM or LTR.
LIM: LOAN AGAINST IMPORTED MERCHANDISE (LIM) is connected with import facilities. As per pre-arrangement or under forced situation when the client is unable torture the LC documents, bank then clear the imported goods from the customs and store it in banks warehouse. LIM is given for maximum 60days within which customer has to adjust liability and take delivery of the imported goods from the banks custody. Bank charges interest @ 13% on this credit facility. The bank through its approved clearing agent clears the merchandise. The advance is adjusted by delivering the goods against payment by the importer. The documents remain with the Bank. LTR: LOAN AGAINST TRUST RECEIPTS (LTR) is also postimport finance facility. This type of facility is given to creditworthy and selective customer. In LTR goods are sent to the customers go-down after clear from Port. Customer has to adjust liability within 90 days or the days determined by the client and banker of taking such facility. Bank charge interest @ 14% for this credit facility.
Procedures of Loan Sanction and Disbursement Bank follows some necessary steps to sanction loan to borrower. This procedure mainly applicable for sanctioning and disbursing term loan although other advancing procedures are also follows nearly the same procedure.
Loan Application From First Information Sheet Credit Investigation Loan Appraisal Credit List Proposal Sanction Letter Loan Documentation Loan Disbursement Follow Up Loan Adjustment Recovery of Loan
Documents required for procuring Loan Proposal: Following are the client should supply the documents: a. TIN certificate of the client. b. Bank statement for last two years. c. Up to date trade license. d. Present liability position of the company and owners. e. Name and Address of the Sister concern f. Export and Import performance. g. Personal information in a prescribed from. h. Balance sheet for the last three years i. Memorandum & Article of association signed by the Managing Director j. Profile of directors or partners. Credit Investigation and Loan Appraisal: After getting Loan application from the customer, bank started appraisal of the loan. For this bank First collect necessary information about the client. And then with help of this information bank appraisal the loan application.
Collection Of Credit Information:
For the purpose of assessing the creditworthiness of a borrower a banker has to collect the above-mentioned information from a number of sources. Every bank maintains a Credit investigation department at its head office and main offices in larger cities to collect information regarding the financial position of its borrowers. At other centers, branch mangers perform credit investigation. The credit information is collected through the following sources: Borrower: Most of the information may be secured from the borrower directly. The loan application form seeks basic information about the borrower and his business. The banker may examine his accounts books and note his past dealings with other banks or parties. Market Reports: Banks try to find out the
creditworthiness of the party by making enquiries from the brokers, traders and businessmen in the same trade or industry. Their individual opinions may differ but a balanced opinion may be formed about the borrower on the basis of the feelings expressed by a number of such persons. Exchange of Credit Information amongst Banks: It is the practice and customary usage amongst banks
to
exchange
credit
information
relating
to
the
constituents in their mutual interest. But the credit reports exchanged by banks are brief and superficial. They are in general and guarded terms. Banks are reluctant to exchange meaningful credit information because they apprehend that legal protection available to them will be lost if more facts are divulged to the enquiring banks.
Loan appraisal:
With the help of the above information the bank appraise the loan proposal by the following points: Credit Worthiness of the client on the basis of 5 Cs. i) Capital, ii) Character, iii) Capacity, iv) Control and v) Collateral Background of the Clients family. Nature and scope of the business of client. Market reputation of the client. Turnover of the business of client. Dealings of client with the bank and turnover in clients bank account. Clients business experience. Worth & property of the client. Location of business/firm/industry. Amount and Purpose of the loan. Turn over of the sister concern (if any). Preparation of Loan Proposal and Sanction: Branch if satisfied with the client and want to sanction credit to the client then it prepare a loan proposal with all
details as discussed above and send to the higher authority for approval.
Credit proposal is include with the following: 1) Application of the borrower 2) Stock Report 3) Undertaking from the borrower 4) Valuation report of Collateral If higher authority approved then branch will sanction credit to the client. Necessary documents for Loan Settlement:
For
SOD
against
F.D.R/P.S.P./Saving
Scheme/General Loan: a) Demand promissory (D.P.) note. b) Letter of Arrangement. c) Letter of Lien. d) Letter of Continuity. For SOD General, Cash Credit (C.C.)
Hypothecation: a) Demand promissory (D.P.) note. b) Letter of Arrangement. c) Letter of Hypothecation. d) Letter of continuity.
e) Supplementary Arrangement. For Staff Loan: a) Demand promissory (D.P.) note. b) Letter of Undertaking. c) Letter of Authority. d) Letter of installment. e) Letter of Disbursement. f) Letter of Arrangement. g) Letter of Hypothecation. h) Supplementary letter of i) Hypothecation/pledge. For Public Limited Company: With the above documents Personal Guarantee of all directors is necessary.
Loan Disbursement
Loan is allowed for a single purpose where the entire amount may be required at a time or in a number of installments within a period of short span. After disbursement of the entire loan amount, there will be only repayment by the borrower. A loan once repaid in full or in part, cannot be drawn again by the borrower. Entire amount of loan is debited to the loan A/C in the name of
the customer and is paid to him through his STD/CD Account. Some times loan amounts are disbursed in dash. Follow up and recovery of the Loan: After disbursement of lone to a client it is the sole duty of the disbursing branch to follow up loan, whether it is properly utilized or not. So report on development and submit the same to the manager/sanctioning authority. If loans properly follow up by the disbursing branch, then the risk of default will minimize.
FOREIGN EXCHANGE
Commercial bank collects the ideal saving from the people and supplies them into productive channels. The success of a commercial bank depends on how successfully it can be mobilizing saving and advance short and long term credit to business community. In addition to deposit mobilization in foreign and credit management, which includes and commercial bank as well as AB Bank of Bangladesh Limited deals exchange, remittance of currency and financing, exports
imports. Foreign exchange dealing is one of the main functions of the bank and it generates a significant portions a banks income.
Foreign Trade is one of the most important segments of Bank Business. With the changes of time international trade is diversifying gradually. Modern banks (like ABBL) are playing significant role in foreign trade. Foreign trade Comprises of Import & Export business. A lot of work relating to export and import are done by banks. While performing those tasks bank should be very much cautious as lot of complexities are there. Foreign trading is strictly controlled by the Bangladesh Bank. Therefore a deviation or mistake will cost bank a more. Dealing in foreign trading needs a lot of concentration, accuracy and technical know how as any mistake or malpractice may lead to disaster for a Banks Business. Personnel should posses the above qualities to work in this arena.
Summery of Foreign Exchange Procedure: The buyer and the seller conclude a sales
contract providing for payment by documentary credit. The buyer instructs his bank-the issuing bank to
issue a credit in favor of the seller (beneficiary). The issuing bank asks another bank of the
seller, to advise or confirm the credit. The advising or confirming bank informs the
seller that the credit has been issued. As soon as the seller receives the credit and is
satisfied that he can meet its terms and conditions, he is in a position to load the goods and dispatch them. The seller then sends the documents evidencing
the shipment to the bank where the credit is available (the nominated bank). This may be the issuing bank, or the confirming bank or a bank named in the credit as the paying, accepting or the negotiating bank. If the credit allows for negotiation by any bank there will not be negotiates bank and documents be sent to any bank willing to negotiate.
The bank checks the documents against the
credit. If the documents meet the requirements of the credit, the bank will pay, accept or negotiate according to the terms of the credit. In the case of a credit available by negotiation, the issuing bank or the confirming bank will negotiate without recourse. Any other bank including the advising bank if it has not confirmed the credit, which negotiates, will do so with recourse. The bank, if other than the issuing bank, sends
the documents to the issuing bank. The issuing banks checks the documents & if
they meet the credit requirements, either Effects payment in accordance with the terms of the credit, either to the seller if he sends the documents directly to the issuing bank or to the bank that has made funds available to him in anticipation, or Reimburses in the pre-agreed manner the confirming bank or any bank that has paid accepted or negotiated under the credit. When the documents have been checked by the issuing bank and found to meet the credit requirements, they
are released to the buyer upon payment of the amount due or upon other terms agreed between him and the issuing bank. The buyer sends the transport document to the carrier who will then proceed to deliver the goods.
Foreign Exchange Mechanism
BUYER/ IMPORTER
INDENTOR Sales/ purchase Contract
SELLER/ EXPORTER/ BENEFICIARY Advises or confirms L/C
Application for opening L/C
ISSUING BANK L/C OPENNING BANK
PAYING / REIMBURSING BANK
Sources: International Trade Finance - Journal, (Page - 30) Bangladesh Institute of Bank Manage Management
Pay or Reimburses
Makes Payment against documents
Present documents
Submits documents
Issuing L/C
Forwards Documents Makes payment
ADVISING BANK CONFIRMING BANK NEGOTIATING BANK
O R
Makes Payment
Instructs to pay or Reimburse
Types of Fign Exchange Commercial Banks
Limit
Sanctioned
by
Foreign Exchange Limits can be broadly into these categories: r Letter of Guarantee. r Export Business. r Import Business. r Foreign Exchange Remittance. I shall discuss the above mentioned in detail next.
GUARANTEE
A guarantee is an irrevocable undertaking to pay in case of a certain eventuality. Guarantee serves as a protection against losses, which may occur if anyone of the party fails to fulfill his/her contractual obligations. Coverage is also required if one partner make advance performance of some kind i.e.; a down payment before he/she has obtained the relevant counter performance form his/her partner. According to contract act-1872 under section 126 guarantees can be defined as a contract to perform the promise or discharge the liability of third person in case of his default. The promise to pay is usually unconditional
and must be honored by the guarantees on first demand. A guarantee is usually for a specified time period.
Letter of Guarantee: Inland and Foreign Export Performance bonds Backed by Counter Guarantee of party Backed by ECGS cover Fully secured (backed by 100% cash margin) Fully secured by approved securities. Partly secured (with minimum cash margin of say 25%) Unsecured guarantees (with a margin less than 25%) Deferred Payment Guarantees (DPG) (Fully secures by collateral) Different sort of guarantees: Tender guarantee/bid bond/Tender bond The tender guarantee assures the tender that tenders shall uphold the conditions of his tender during the period of the offer as binding and that he/she will also sign the contract in the event of the order being granted. A demand can be made under a tender guarantee if the beneficiary conditions. Performance Guarantee: provides a written statement that the tendered failed to comply with one of the above
A performance guarantee expires on completion of the delivery or performance. Beneficiaries find that as a guarantee, the contract will be fulfilled in every respect and can retain the guarantee as per provision for long time. Including a clause stating that the supplier can claim under the guarantee, by presenting an acceptance certificate signed by the buyer can counteract this. Down payment Guarantee Down payment guarantee assures to the importer that his down payment or advance payment will be refunded if the exporter fails to comply in full or in part with his contractual obligations. Warranty Guarantee In most cases, it is not possible for the importer to check immediately the quality of the goods he has ordered and received. A warranty guarantee provides a security that within the specified period he will receive a certain amount if the goods are not the agreed quality specifications
and the exporter does not honour his obligations to remove discrepancies, defects or repair damage.
Payment Guarantee Through the payment guarantee, the buyers bank undertakes to pay the seller if the buyer defaults, the
seller ensures compliance with the terms of payment and thus the purchase price will be paid. Export Business (Financing) and Procedures Export brings the foreign currency in the economy. Higher the export higher the reserve of foreign currency. The export section of AB is engaged with various exportrelated activities for the encouraging the exporter. The major function of this section is comprises with purchase, collection and negotiate the export bill, provide the exporter in export financing and helps the exporter in different issues. A person desired to export should make application to obtain ERC (Export Registration Certificate) from CCI&E. Then the person should step in to a bank along with ERC to obtain EXP from the bank. He must submit: Pre - Shipment Finance 2 Trade license. 8 Advance against duty drawbacks (DDs) 2 ERC. 8 Advance against cash incentives. Membership Certificate from chamber of 8 2Advance against Recluses. 8 commerce. Shipping Loan (with ECGS cover) 8 Shipping Credits (with ECGS cover) Post - Shipment Finance 8Foreign bills purchased (FOBP sight bills DP under L/Cs of Prime bank) 8FOBP (sight/ DP bill without L/C) 8FOUBP (usance) without LC but with ECGS Internship Report, Prepared by Suman Das. cover - 83 8Advance against DDS 8Advance against cash incentives
Financing at Pre-shipment stage: Pre-shipment credit covers credit facilities extended to the exporters by the commercial banks at the preshipment stage i.e. prior to the actual shipment of goods for export. Credit can be allowed for the following purposes: Cash for local procurements and meeting related expenses Procuring and processing raw materials Packing and transporting of goods for export Payment of Insurance premium Inspection fees Freight charges etc. Pre-shipment credit facilities are essentially a short-term credit, which is to be liquidated by negotiation/purchase of export bills covering the particular shipment. Preshipment credit facilities can be allowed against irrecoverable letter of credit of a good foreign Bank considering the credit worthiness of the exporters. Preshipment credit is allowed in the following forms: 1. Export Cash Credit (Hypothecation) 2. Export Cash Credit (Pledge) 3. Export credit against trust receipt 4. Packing credit 5. Back to Back letter of Credit
Back to Back letter of Credit (Inland) Back to Back letter of Credit (Import)
1. Export Cash Credit (Hypothecation): Such credit facility is allowed to the credit worthy exporters for procuring and processing of goods or raw materials into finished goods for export against hypothecation of stock of raw materials into finished goods for export against hypothecation of stock of raw materials/goods-in-process/finished of such facility. 2. Export Cash Credit (Pledge): Such a credit facility is allowed against pledge of exportable goods or raw materials. Sometimes collateral securities may be obtained which may depend on the quality of goods pledged generally. 3. Export Credit against Trust receipts: Such a credit is allowed to a credit worthy exporters against exportable goods where retaining the goods under banks pledge. The exporter by signing the stamped trust receipt holds the goods in trust on behalf of the bank. Collateral security is generally obtained. 4. Packing Credit: Such advance is provided to the exporter against: Lien on the Export L/C
goods
meant
for
export. Normally collateral securities are obtained in case
Copy of Invoice The security of Railway Receipt/Steamer Receipt/Barge Receipt/Truck Receipt evidencing transportation of the goods to the port. Undertaking of the C&F agent entrusted with the task of arranging shipment to the effect that they shall hold the goods under the lien of the Bank. Insurance Coverage. 5. Back to back letter of Credit: Operation of BBLC: Before opening B.B.L.C credit report on the applicant, the supplier / beneficiary and on the buyer of R.M.G. to be prepared (Credit report on the beneficiary of the B.B.L.C. is not a must if the L/C limit does not exceed TK. 5 Lac). Report from CIB of BB is to be obtained and LRA is to be prepared. If necessary B.B.L.C may be opened up to the extent of 75% of F.O.B value of export L/C in case of both woven and knit garments. Where FOB value exceeds US$ 60/ dozen and cutting and making charges not less than US$ 12 per dozen, back to back L/C may be opened up to 80% and 85 % of FOB value of export L/C for quota and non quota category (of woven ready made garments respectively). B.B.L.C up to 805 of F.O.B value for all children items may be opened.
B.B.L.C may be opened on usage basis covering usage period of not more than 120 days and interest L.I.B.O.R. The production capacity of the factory and the time gap available between the shipment date (of export L/C) and expected arrival date of raw materials must be examined carefully to ascertain whether the garment products can be exported within the shipment validity to avoid stock lot. Branch will obtain pre and post shipment Export credit guarantee from Sadharan Bima Corporation to safe guards the banks interest. Adequate insurance policy covering the risk of fire, R.S.D. (Riot, Strike and Damage), flood, cyclone and burglary should be obtained from the bonded warehouse and the factory. On receipt of import bills drawn under B.B.L.C, the branch will examine the documents very carefully and must inform the negotiating bank over telex about the discrepancy if found within 7 banking days following the day of receipt of the documents. The importer must also be notified as to discrepancies if the documents comply all the terms and conditions of B.B.L.C. acceptance is communicated to negotiating bank fixing up the maturity date for payment of import bills without delay. for usage period shall not exceed
Branch
will
arrange by
clearance
of
imported banks
consignment
deputing
suitable
representative to escort the consignment from the port up to the factory premises. Goods to be cleared through a C&F agent nominated by the garments industry and approved by the bank. During the course of production, the branch will exercise close supervision and control over manufacturing process. If the goods become stock lot the matter should be advised to National Board of Revenue (N.B.R) and Bangladesh Bank immediately. Paper / Documents Required For Opening BBLC 1 Master L/C 1 Valid Import Registration Certificate (IRC) and Export Registration Certificate C.C.I & E. 1 L/C application form and L.C.A. form duly filled in and signed. 1 Performa Invoice and Indent. 1 Insurance cover note with money receipt. 1 Duly signed IMP form. Back to Back Letter of Credit (Inland): (ERC) issued by
Such facility is allowed to the exporter who received export letter of credit from overseas buyer but is not the actual producer/manufacturer of the goods for export. In such a case, the bank at the request of the exporter opens Inland letter of credit in favour of the actual producer within the country. The inland letter of credit on the strength of export letter of credit must confirm to the terms and conditions of the export letter of credit with the following exceptions: 2 Name of the beneficiary will be actual supplier. 2 L/C value will be less than that of the export letter of credit i.e. less margin of profit of the exporter. 2 Period of validity will be earlier than the expiry of the export L/C Back to Back Letter of Credit (Import): Where permitted by CCI & E and Bangladesh Bank, Backto-Back L/C can be opened in favour of foreign supplier for import of raw materials for manufacture of exportable items. Financing at Post Shipment Stage: Banks in this country generally extend post-shipment credit to the exporters through: 2 Negotiation of documents under letter of credit 2 Purchase of DP and DA bills
Advances against Export bills surrendered for
collection. 1. Negotiation of Document under letter of Credit: Under this arrangement, after the goods are shipped, the exporter submits the concerned documents to the negotiating bank for negotiation. The documents should be negotiated strictly in accordance with the terms and conditions and within the period mentioned in the letter of credit. 2. Purchase of DP and DA Bills In such a case, the banks purchase/discount the DP (Documents against payment) and DA (Documents against acceptance) bills at a rate published by the International Division of the Bank. While doing so, the banks should scrutinize all the export documents carefully and clear instructions have to be obtained from the drawer of the bill in regard to all-important issues related to the negotiation of the bills. In case of purchase of export bills, the bank requires to obtain clear instructions from the drawers of the bills regarding the course of action to be taken in respect of the following issues relating to the collection of the proceeds of the documents: 2 Protest clause
2 Notice of dishonor 2 Collection charges and interest 2 Protection clause 2 Presentation clause 3. Advances against Bills for collection: If an exporter fails to get the documents negotiated by the bank, he has to take resort to alternative course of obtaining advance from the banks against the security of export bills surrendered for collection. In such a case, banks may give advance to the extent of certain percentage of the value of goods depending upon the standing of the exporter and importer, nature of the good etc. Year Wise Advances against Bills for collection Position (Jubilee Road Branch) (Amount in Million Tk.) Year Local Document Bills Purchase Foreign Document Bills Purchase Total 997.02 As on audit 304558.49 258.25 249.25 2006 12 As on audit 2005 09
r Some Defective Point / Clause Appeared In the Export L/C: Issuing bank is not reputed. Credit advised by the advising bank without authentication. Port of destination is absent. Nomination of specific shipping / air line. No specific reimbursement clause. UCP clause not mentioned. Shipment sufficient. Original documents to be sent to buyer or nominated agents. Part shipment is restricted. Negotiation is restricted. Shippers load and count is not acceptable. or presentation period is not
Import Business (Financing) & Types of Procedures Bangladesh is one of the poorest countries of the world. Import of goods into Bangladesh is regulated by the Ministry of commerce in terms of the Import and Export (Control) act, 1950, various import policy orders and also public notices issued from time to time by the office of the CCI & E.
In Bangladesh now emphasis is giving on export led growth strategy. Further for liberalizing the trade sector following measures have been taken: 2 Import lubrication through removal of significant reduction of tariff & non-tariff barriers. 2 Rationalization of tariff structure. 2 To promote export through simplification of the procedure. The import section comprising with the function of opening LC, pre-import and post-import financing and other function of doing the import business. Import can be two types: 2 Cash Import (usually): In this case margin should deposit in issuing bank for import. 2 Back to back Import: In this case import can be done on the basis of Master LC Sources of Financing Imports The sources of financing imports available to us are as under: 2 Cash Foreign Exchange Resources of the country. 2 External Economic Aid (Commodity Aid, Loan or Credit & Grant) 2 Commodity Exchange: Barter
Special Trading Arrangement (STA) Types of Importers 1 Actual users 1 Commercial Importers 1 Industrial Consumers 1 Import by Ministers, Govt. Departments & other Public Sector Agencies. 1 Lease Financing Importers. Financing of importers by commercial banks: Commercial Banks play an important role in financing imports of the country. A substantial portion of the total bank credit is deployed for financing import trade. Major import items receiving bank finance are iron, steel, engineering & other Textiles, fuel & lubricants, Food grains, oil seeds, consumer goods and miscellaneous important merchandise. Imports into our country are allowed only against opening of Irrevocable Letter of Credit except a few exceptional cases. The financing of imports are made by the bankers at various stages starting from the opening of letter of credit to the arrival and storied of the imported merchandise. Financing of imports by the banks may broadly be classified as under: Pre-Import finance
Post-Import finance Pre-import business (finance): The finance, which is extended to Importer to the arrival of the imported merchandise, is termed as Pre-Import finance. Pre-Import finance is allowed in the form of following: Letter of Credit: Letter of credit (L/C) can be defined as Credit Contract whereby the buyers bank is committed (on behalf of the buyer) to place an agreed amount of money at the sellers disposal under some agreed conditions. Since the agreed conditions include, amongst other things, the presentation of some specified documents, the letter of credit is called Documentary Letter of Credit. The Uniform Customs & practices for Documentary Credit (UCPDC) published by International Chamber of Commerce (1993) Revision; Publication No. 500 defines Documentary credit. Any arrangement, however named or described, whereby a bank (the issuing bank), acting at the request and on the instructions of a customer (the Applicant) or on its own behalf,
Is to make a payment to or to the order of a third party (the beneficiary), or is to accept and pay bills of exchange (Drafts) drawn by the Beneficiary, or
Authorizes another bank to effect such payment, or to accept and pay such bills of exchange (Drafts)
1 Authorizes another bank to negotiate, against stipulated document(s), provided that the terms and conditions are compiled with. Banks open letter of credits only on behalf of their own customers who maintain accounts with them and are known to be participating in the trade. By opening letter of credit on behalf of the importer, the bank undertakes liability to pay the L/C amount to the foreign seller subject to submission of documents drawn in strict compliance with the credit terms. With the negotiation of import documents NOSTRO A/C of the L/C opening bank is debited. Parties to a Letter of Credit: There are a number of parties involved in a L/C and the rights & obligations of the different involve parties also differ from each other. The involved parties can be named below: 1 Importer / Buyer 1 Opening / Issuing Bank 1 Exporter / Seller / Beneficiary 1 Advising / Notifying Bank 1 Confirming Bank 1 Negotiating Bank
1 Paying / Reimbursing Bank. Importer / Buyer is the person who requests/ instructs the opening bank to open a L / C. He is also called Opener or Applicant of the credit. Opening / Issuing Bank is the bank which opens / issues an L/C on behalf of the importer. It is also called the importers / buyers bank. Exporter / Seller / Beneficiary is the party in whose favour the L/c is advised to the exporter. It is the bank situated in the exporting country and it may be branch of the opening bank or a correspondent bank. It may also assume the role of confirming and / or negotiating bank depending upon the conditions of the credit. Confirming Bank is a bank, which adds its confirmation to the credit, and it is done at the request of the issuing bank. The confirming bank may or may not be the advising bank. Negotiating Bank is the bank, which negotiates the bill and pays the amount to the beneficiary. It has to carefully scrutinize the documentary credit before negotiation in order to see whether the documents apparently are in order or not. The advising bank and the negotiating bank may not or may not be one and the same. Sometimes it can also be the confirming bank.
Paying / Reimbursing Bank is the bank or whom the bill will be drawn ( as per conditions of the credit ). It is nominated in the credit to make payments against stipulated documents complying with the terms of the credit. It may or may not be the issuing bank. Details regarding the rights and obligations of the different parties involved in the documentary credit operations may be had from UCPDC.
Operations of Documentary Letters of Credit: The following five major steps are involved in the operation of a documentary letter of credit: 1 Issuing 1 Amendment (if necessary) 1 Settlement Issuing a Letter of Credit: Before issuing an L / C, the buyer and seller located in different countries, concludes a sales contract providing for payment by documentary credit. As per requirement of the seller, the buyer then instructs the bank - the issuing bank - to issue a credit in favour of the seller (beneficiary). Instruction / Application for issuing a credit should be made by the buyer (importer) in the issuing banks standard form. The credit application which contains the full details or the proposed credit Also serves as an agreement between the bank and the buyer. After being convinced in the about the necessary form and conditions sufficient contained application 1 Advising 1 Presentation
conditions to be fulfilled by the buyer for opening a credit, the opening bank then proceeds for opening the credit to be addressed to the beneficiary. Advising a Letter of Credit:
Advising
through
bank
is
proof
of
apparent
authenticity of the credit to the seller. The process of advising a credit consists of forwarding the original credit to the beneficiary to whom it is addressed. Before forwarding, the advising bank has to verify the signature (s) of the officer (s) of the opening bank and ensure that the terms and conditions of the credit are not in violation of the existing exchange control regulations and other regulations relating to export. In such act of advising, the advising, the advising bank does not undertake any liability. Amendment of Credit: Parties involved in a L / C, particularly the seller and the buyer, can not always satisfy the terms and conditions in full as expected due to some obvious and genuine reasons. In such a situation, the credit should be amended. In case of revocable credit, it can be amended or canceled by the issuing bank at any moment and without prior notice to the beneficiary. But in case of irrevocable credit, it can neither be amended nor canceled without the agreement of the issuing bank, the confirming bank (if any) and the beneficiary. Presentation of Documents:
The seller being satisfied with the terms and conditions of the credit proceed to dispatch the required goods to the buyer and after that, has to present the documents evidencing dispatching of goods to the negotiating bank on or before the stipulated expiry date of the credit. After receiving all the documents, the negotiating bank then checks the documents against the credit. If the documents are found in order, the bank will pay, accept or negotiate to the issuing bank. The issuing bank also checks the documents and if they are found as per credit requirements, either 1 Effects payment, or 1 Reimburses in the pre-agreed manner. Settlement: Settlement means fulfilling the commitment of issuing bank in regard to effecting payment subject to satisfying the credit terms fully. This settlement may be done under three separate arrangements as stipulated in the credit. These are: a) Settlement by Payment: Here the seller presents the documents to the paying and the bank then scrutinizes the documents. If satisfied, the paying bank makes payment to the beneficiary and in case this bank is other then the issuing bank is satisfied with the requirements, is obtained by the paying bank from the issuing bank.
b) Settlement by Acceptance: Under this arrangement, the seller submits the
documents evidencing the shipment to the accepting bank accompanied by a draft drawn on the bank (where credit is available) at the specified tenor. After being satisfied with the documents, the bank accepts the documents and the draft and if it is a bank other than the issuing bank, then sends the documents to the issuing bank stating that it has accepted the draft and at maturity the reimbursement will be obtained in the pre-agreed manner. c) Settlement by Negotiation: This settlement procedure starts with the submission of documents by the seller to the negotiating bank accompanied by a draft drawn on the buyer or any other drawee, at sight or at the tenor, as specified in the credit. After scrutinizing that the documents meet the credit requirements, the bank may negotiate the draft. This bank, if other than the issuing bank, then sends the documents and the draft to the issuing bank. As usual, reimbursement will be obtained in the preagreed manner. Post-Import Finance:
The finance extended after arrival of the goods is termed as Post-Import finance, which may be in the form of 1 Loan against Imported Merchandise (LIM) 1 Cash Credit (CC) & 1 Loan against Trust Receipt (LTR). Loan Against Imported Merchandise (LIM) LIM is created under two circumstances. Firstly, if there is an arrangement with the importer the commercial bank will provide finance against imported merchandise with usual margin, Secondly, when the importer fails to retire the documents the bank is compelled to create LIM to avoid demurrage/pilferage/damage etc. also to safeguard the interest of the bank, which is called Forced LIM. The sets of documents usually obtained are: 1 DP Note 1 Letter of Arrangement 1 Letter of disbursement 1 Letter of pledge 1 Insurance policy covers. Loan Against Trust Receipt (LTR) The bank handover the shipping documents to the importer for taking delivery of the goods from the port without receiving payment there-against by taking a trust receipt from him. In the trust receipt the importer
specifies the goods and agrees that he is holding the goods not as their owner but as an agent for the bank. Thus, the bank continues to have the rights of the pledge. However, in practices, trust receipt does not secure the position of the bank to a significant extent. As such, the loan is usually allowed only to corporate bodies and first class parties. It is allowed for a period of 30 days to 90 days. In addition to the Trust Receipt the following documents are also to be obtained:
DP Note Letter of Arrangement Letter of Disbursement Import letter of Credit (L/C) limit - on DP/DA Inland L/C limits - on DP/DA basis Loan against merchandises (Pledge). Trust Receipt facility. Revolving inland L/C including back-to-back
basis.

L/Cs / Transferable L/Cs.
FOREIGN REMITTANCE
Foreign remittance refers to the transfer of fund from one country to another either through the office channel i.e. banking channel, Post office or the informal channel. In Bangladesh still informal market is playing a significant role. However, we shall limit our discussion within the official channel.
BASIC places an important role to transfer money from other countries to Bangladesh and Bangladesh to other countries. Inward and outward T.T, M.T and draft are the main components of foreign remittance. Foreign earnings are very low as export earnings are very limited while import spending are huge which makes the balance of trade position in a chronic deficit situation. Foreign remittance is very important for the country as valuable foreign is involved in the transfer mechanism. From the year 1990, financial liberalization has been started which is still going on. Due to liberalization, restrictions on foreign remittance become ease. Bangladeshi Taka. is convertible for current account transactions on March 24, 1994 with the view to achieve better exchange rate management system. And from April 1994 Bangladesh Government has accepted the status of Article VIII of international monetary fund. Foreign remittance has two wings i.e. inward and outward remittance. This can be shown below:
Foreign Remittance
Foreign Inward Remittance
Foreign Outward Remittance
Foreign inward remittance
Foreign inward remittance refers to the currency remitted from abroad to our country. The remittance in foreign currency that receives from outside the country to our country is known as foreign inward remittance. In case of inward remittance, TT/MT/Drafts etc. are drawn in local bank by the foreign banks of exchange houses. When foreign bills, TCs & cash foreign currency is purchased by a local bank is also known as inward remittance. A local bank also receives indenting commission of local firm, trademarks, patent fee etc. Inward remittance can be classified into two groups: 1 1 Visible inward remittance such as export Invisible inward remittance such as family maintenance, constancy fee Foreign Outward Remittance Foreign outward remittance refers to the remittances in foreign currency made from this country to abroad. Foreign outward remittance includes issuance of TT, MT, FDD issued by local banks on foreign banks. Further it includes rate of foreign currency, notes, TCS, reimbursement against import, bills retired etc. Forward outward remittance can be divided into two groups: 2 Visible outward remittance such as payment against import. etc. proceeds,
Invisible
outward
remittance
such
as
membership fee, subscription fee etc. Outward remittance can be made for traveling purpose, educational purpose, attending seminar & workshop, medical treatment, business travel quota, evaluation fee, membership fee, visa fee, pre-shipment fee, advertising of Bangladesh commodities etc. In case of purchase of foreign currency, an applicant must be made to an AD and if necessary requires to Bangladesh Bank. For payment against imports the prescribed application form is IMP form & for other types of remittance TM form.
SWOT ANALYSIS OF AB BANK LTD

Strength 1. Wide image 2. Excellent management 3. High commitment of customer and qualified & experienced human 4. resources 5. Sophisticated automated system has been introduced 6. Bank has many attractive schemes. 7. Well furnished & air conditioned Bank. 8. Govt. has banned Jatiya Sanchay Patra Opportunities 1. Increasing demand of customer finance 2. Investment potential of Bangladesh 3. Relationship management 4. Introduction of Online Banking throughout all branches within Bangladesh. . Weakness 1. Heavily depends on Head Office for decision making. 2. All branches are not equally not well decorative
Threats 1. Some Commercial & foreign bank as well as private bank. 2. Similar type of retail banking products. 3. Certain Bangladesh Bank rules and regulation. 4. Customer awareness of pricing & services.
CHAPTER IV
OVERALL PERFORMANCE OF AB BANK ARE SHOWN BY MEANS OF GRAPHICAL REPRESENTATION:
Total equity from year 2001 upto 2005
Equity
1600 1400 1200 1000 800 600 400 200 0
Million T
2001
2002
2003
2004
2005
Year
Operating Profit
800 600 400 200 0 2001 2002 2003 2004 2005 Million T
Year
Operating Profit (PAT)
300 250 200 150 100 50 0 2001 2002 2003 2004 2005 Million T
CAR%
12 10 8 6 4 2 0 2000 2001 2002 2003 2004 2005 2006 Standard Maintained
Doposit
30000 25000 20000 15000 10000 5000 0 2001 2002 2003 2004 2005 Million T
Classified Loan
30 25 20 15 10 5 0 2000 2001 2002 2003 2004 2005 2006 CL
Deposit Mix
FDR Savings CD Others
Loans & Advances
25000 20000 15000 10000 5000 0 2001 2002 2003 2004 2005 M illion T
Sectoral Credit Portfolio
Others Agriculture Industry & Credit Export Trade Finance Financial Institution Retail Loan Infrastuctural
Indudtry & Infrastructural Credit

R eal Estate Trasport P rint & P ackaging C ement Food & B everage Iron &Steel Textile & R M G Others
Import
25000 20000 15000 10000 5000 0 2001 2002 2003

Export
Million T
2004
2005
14000 12000 10000 8000 6000 4000 2000 0 2001 2002 2003 2004 2005
Million T
Year
Remittance
120 100 80 60 40 20 0 2001 2002 2003 2004 2005 Million T
Asset Utilization
80 70 60 50 40 30 20 10 0
Asset Utilization
2001
2002
2003
2004
2005
EPS
70 60 50 40 30 20 10 0 2001 2002 2003 2004 2005 EPS
BVPS
300 250 200 150 100 50 0 2001 2002 2003 2004 2005 BVPS
Profit and Loss Statement for the year ended 31 December 2005
Amounts in Taka Year ended Year ended 31 Dec. 2005 31 Dec. 2004
Operating Income Interest income Interest paid on deposits, borrowings, etc. Net interest income Investment income Commission, exchange and brokerage Other income Total operating income (a) Operating expenses Salary and allowances Rent, taxes, insurance, electricity, etc. Legal expenses Postage, stamps, telecommunication, etc Stationery, printing, advertisement, etc. Chief executives salary and fees Directors fees Auditors fees Charges on loan losses Depreciation and repair of Banks assets Other expenses Total operating expenses (b) Profit before provision (c=a-b) Provision against loans and advances Provision for diminution in value of investments Other provision Total provision (d) Total profit before taxation (c-d) Provision for taxation Net profit after taxation Appropriations Statutory reserve General reserve Dividends, etc. Retained surplus Earnings per share (EPS)
2,262,947,76 8 (1,571,542,0 00) 691,405,768 317,472,805 486,441,224 82,178,472 886,092,501 1,577,498,26 9 466,373,810 142,943,673 769,621 28,528,866 23,404,603 4,691,609 977,171 445,250 -53,051,297 101,284,907 822,470,807 755,027,462 212,111,511 -135,462,343 347,573,854 407,453,608 245,000,000 162,453,608 81,490,722 --81,490,722 80,962,886 31.26
2,051,741,4 82 (1,540,836, 908) 510,904,574 408,397,598 436,425,432 104,629,887 949,452,917 1,460,357,4 91 417,050,639 158,053,602 646,267 30,048,192 19,637,226 2,900,000 1,154,382 255,000 307,655,000 51,837,050 111,053,534 1,100,290,8 92 360,066,599 170,000,000 --170,000,000 190,066,599 100,000,000 90,066,599 38,013,320 --38,013,320 52,053,279 18.19
Balance Sheet at 31 December 2005

Amounts in Taka At At 31 Dec. 2005 31 Dec. 2004 Property and Assets Cash In hand (including foreign currencies) Balance with Bangladesh Bank and its agent bank(s) (Including foreign currencies) Balance with other banks and financial institutions In Bangladesh Outside Bangladesh Money at call and on short notice Investments Government Others Loans and advances Loans, cash credits, overdrafts, etc. Bills purchased and discounted Fixed assets including premises, furniture and fixtures Other assets Non-banking assets Total assets Liabilities and capital Liabilities Borrowings from other banks, financial institutions, and agents Deposits and other accounts Current deposits Other demand deposits Bills payable Savings bank deposits Short term deposits Fixed deposits Bearer certificates of deposits Other deposits Other liabilities Total liabilities Capital/Shareholders Equity Paid-up capital Statutory reserve Other reserve Retained earnings 1,935,415,308 447,609,426 1,487,805,882 540,799,380 58,756,465 482,042,915 389,841,183 4,060,946,942 3,275,356,000 785,590,942 21,384,633,900 20,494,759,758 889,874,142 370,056,970 4,383,708,872 -33,065,402,555 1,910,530,448 27,361,442,154 3,438,832,415 1,389,662,491 545,669,598 6,949,853,081 2,258,788,337 12,127,312,542 127,493,553 523,830,137 2,266,550,116 31,538,522,718 2,910,258,213 424,564,899 2,485,693,314 994,140,941 15,815,086 978,325,855 437,497,085 6,738,151,765 6,379,123,400 359,028,365 17,008,497,469 16,567,561,650 440,935,819 276,665,125 4,148,268,828 -32,513,479,426 761,463,419 28,299,226,744 3,418,474,830 1,120,874,616 573,560,403 6,343,878,618 2,070,763,039 13,802,702,710 126,412,684 842,559,843 2,209,212,488 31,269,902,651
519,763,600 650,203,611 176,127,054 180,785,572 1,526,879,837 33,065,402,555
495,012,900 556,311,769 67,678,720 124,573,386 1,243,576,775 32,513,479,426
Total Shareholders Equity Total liabilities and Shareholders Equity
Highlights of the overall activities of the Bank
Particulars
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. Paid-up capital Total capital Capital surplus Total assets Total deposits Total loans and advances Total contingent liabilities and commitments Credit-deposit ratio Ratio of classified loans against total loans and advances Profit after tax and provision Loans classified during the year Provision kept against classified loans during the year Provision surplus/(deficit) Cost of fund Interest earning assets Non-interest earning assets Return on investments (Rol) Return on assets(RoA) Income from investments Earnings per share Net income per share Price-earnings ratio (Times)
2005 519,763,600 1,727,437,899 32,720,297 33,065,402,555 27,361,442,154 21,384,633,900 14,662,518,178 78.16 8.21 162,453,608 448,302,000 182,111,511 21,300,999 8.60% 24,066,766,329 9,058,636,225 5.88% 0.50% 317,472,805 31.26 31.26 11.68
2004 495,012,900 1,470,221,873 15,235,387 32,508,626,792 28,299,226,744 17,008,497,469 15,714,898,944 60.10 11.37 90,066,599 1,933,526,346 170,000,000 5,396,000 8.53% 22,260,823,917 10,247,802,875 2.03% 0.39% 408,397,598 18.19 18.19 20.95
CHAPTER V RECOMMENDATION:
In order to competitive advantage and to deliver quality service, to management should try to modify the services: Rectify the existing problem:
The synergy of dedicated manpower, technology,

market opportunity can lead the organization to achieve the goal, a bank must establish and adhere to adequate of loan provision & reserve.
AB Bank should train up their Branch personnel about

all sort of information regarding SWIFT and its services.
Due to lack of proper knowledge about the operation

procedure and services provided by the SWIFT, certain customer are facing problem, as they have to wait for certain time to get service and sometimes personnel are not being able to operate SWIFT without any confusion. They are not fully independent of handling SWIFT. Officials training are the solution to this problem.
AB Bank should always monitor the performance of

its competitors in the field of foreign trade.
Mercantile Bank Ltd. Standard Bank Ltd. Mutual Trust

Bank Ltd. Premier Bank Ltd. First Security Bank Ltd. Eastern Bank Ltd. Bank Asia Ltd. and Dhaka Bank Ltd. and all other private banks are emerging
competitors of AB Bank. They should continuously strive and introduce new products and services as access card. ATM with future improved quality service.
For customer convenience in foreign exchange

department of AB Bank Ltd. should provide more personnel to deliver faster service to their honorable customer.
It seems to me that day to day customers operation

is increasing individual employee has to handle different types of job. But that is pocking a back for an employee. As a result it might be happen any big mistake by the employee and service is also time consuming and customer has to suffer for his situation. May be it would the reason for employees de-motivation as well as the customers dissatisfaction.
ABBL should focus on their promotional activities. The should also focus on the marketing aspects to let
customers know about their product and offering and more promotion should be given to attract new customer
ABBL must develop electronic banking system to

modernize the service. Technological advantage of a bank ensuring its competitive edge in the market place can only be achieved by efficient manpower. It is market share to reduce its operating cost and to generate new revenue. Electronic banking system also allows increased access to the financial system by its customers.
Some other important factor that should be focused on the development process:
Time consumed at service level should be minimized

at optimum level.
Evaluate customers needs from their perspective

and explain locally the shortcomings.
Customer convenience should receive priority over

other.
Improve office atmosphere to give customers better

feeling.
Use appropriate techniques in evaluating customers

need professionally.
To deliver quality service top management should try

to mitigate the gap between customers expectation and employees perception.
ACRONYMS:
A/C AD B/L BB BOE CCI & E CFR CIB CIF DD DP Note EPB EXP FC FDD FOB HS Code IBC IBCA IBDA IMP IRC L/C LCAF OBC PO PSI SWIFT TC TIN TR TT STD FDR CC C&F CRF ERC IBCT LIM LTR PAD/BLC SOD UCPDC Account Authorized Dealer Bill of Lading Bangladesh Bank Bill of Exchange Chief Controller of Import & Export Cost & Freight Credit Information Bureau Cost Insurance & Freight Demand Draft Demand Promissory Note Export Promotion Bureau Export Form Foreign Currency Foreign Demand Draft Free on Board Harmonized System of Coding Inward bills for collection Inter Branch Credit Advice Inter Branch Debit Advice Import Form Import Registration Certificate Letter of Credit Letter of Credit Authorization Form Outward Bills for Collection Payment Order Pre Shipment Inspection Society for Worldwide Inter Bank Financial Transaction. Travelers Cheque Tax Identification Number Truck Receipt Telegraphic Transfer Short Term Deposit Fixed Deposit Receipt Cash Credit Clearing & Forwarding Clean Report Findings Export Registration Certificate Interbranch Credit Transaction Loan Against Imported Merchandise Loan Against Trust Receipt / Bills Under Letter of Credit Payment Against Document Secured Overdraft Uniform Custom & Practice for Documentary Credit
BIBLIOGRAPHY:
Annual Report AB Bank Ltd.2005 Annual audited report of ABBL - 2006, Jubilee Road Branch. Article Trade Hongkong and Shanghai Banking Corporation Limited (HSBC) What the Banker Does Abul Hashem Ali Md. Manboob Foreign Remittance. Journals of Bangladesh Institute of Bank Management. Mr. Ahamed Nasiruddin Precaution to be taken at the time of opening letter of credit. Ali Md. Mahboob Import Financing International Business & Multinational Enterprises Robert Brookeson. Credit Management Bangladesh Institute of Bank Management. Article International Business Management. Mark Humble
Conclusion
There is no doubt that AB bank has made a good position in modern banking arena. It is a model banking institution with different outlook to the valued customers, a comprehensive range of financial services and innovative products for sustainable mutual growth & prosperity. My course of internship in this bank has been the best part of gathering knowledge.
-The End-

AB Bank

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AB Bank

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On

Overall Perform ance of AB Bank Ltd. Jubilee Road Branch, Chittagong

Premier University ,Chittagong.

Prepared by Suman Das.

LETTER OF SUBM ISSION

To The Chairperson Faculty of Business Studies Premier University, Chittagong.

Prepared by Suman Das.

Prepared by Suman Das.

Prepared by Suman Das.

Prepared by Suman Das.

Prepared by Suman Das.

--------------------------------------------Internship Report, Prepared by Suman Das. -1-

Internship Report, Prepared by Suman Das. -2-

General Banking----------------------------------------------------------- 17 Functions Sections of of General 17 General 18 Banking-----------------------------------------Banking--------------------------------------------

Internship Report, Prepared by Suman Das. -3-

Internship Report, Prepared by Suman Das. -4-

OBJECTIVE OF THE STUDY

Internship Report, Prepared by Suman Das. -6-

METHODOLOGY OF THE STUDY

LIMITATION OF THE STUDY

indifference connecting its most confidential information.

Internship Report, Prepared by Suman Das. -9-

BACKGROUND OF THE AB BANK

refinances and rediscount advances made by them.

CORPORATE INFORMATION AT A GLANCE

Name of the bank Limited Status Date of Incorporation 1994.

AB Bank of Bangladesh Public Limited company: 31December, 1981. : 26th July ,

Inauguration of the Jubilee Road Branch

Manager of Jubilee Road Branch :

Internship Report, Prepared by Suman Das. - 11 -

Directors Number of branches Deposit Loan Number of Employees

8 67 Tk. 27,361.44 Million Tk. 21,384.63 Million 1525

Internship Report, Prepared by Suman Das. - 12 -

CORPORATE MISSION OF THE AB BANK

FUNCTIONS OF THE AB BANK OF BANGLADESH LTD

Internship Report, Prepared by Suman Das. - 15 -

Chairman Vice Chairman Board of Director

Managing Director & President

Internship Report, Prepared by Suman Das. - 16 -

ORGANOGRAM OF JUBILEE ROAD BRANCH

General Banking In charge

Information Technology In charge

Deposit & Account Opening

RESOURCES AND CAPABILITIES

Internship Report, Prepared by Suman Das. - 17 -

Internship Report, Prepared by Suman Das. - 18 -

Internship Report, Prepared by Suman Das. - 20 -

MONETARY / FINANCIAL RESOURCES

Internship Report, Prepared by Suman Das. - 21 -

Deposit Capital and Reserve Fund

Internship Report, Prepared by Suman Das. - 23 -

Others Total Investment (HO)

1621.04 1542.97 2377.07

(Source: Annual Report 2005 )

23150.85 19266.00 19281.23 12595.20 10100.00 9743.08 (Source:

Other activities Bank provides services for remittance,

PERFORMANCE OF THE AB BANK

83.47 73.65 9777.96 12183.84 90.07 17.12 70 69

Internship Report, Prepared by Suman Das. - 26 -

FUNCTIONS OF GENERAL BANKING:

Current Short Term

SECTIONS OF GENERAL BANKING:

Internship Report, Prepared by Suman Das. - 32 -