The City Bank Limited
The City Bank Limited started its business in 1983 (march 27) with an authorized capital of Taka 20 crore and paid up capital 3.8 crore. The bank has now authorized capital of Taka 175 crore and paid up capital 72 crore with Taka 132 crore as reserves totaling Taka 204 crore as paid Up capital and reserves. The City Bank Limited is manned by 1829 personnel with 83 branches Including 22 AD branches all over the country.
Vision of CBL: To be the leading bank in the country with best practices and highest social commitment.
Mission of CBL: •
To contribute to the socioeconomic development
•
To attain highest level of customer satisfaction through extension of services by dedicated an motivated team of professionals.
•
To maintain continuous growth of market share ensuring Quality
•
To maximize bank’s profits by ensuring its steady growth
•
To ensure participative management system and empowerment of Human Resources.
•
To nurture an enabling environment where innovativeness and performance is rewarded.
Board of Directors: Consists of 12 members including Mr. Aziz Al-Kaiser as the Chairman.
Major Committees of CBL: •
Executives Committee
•
Audit Committee
•
Management Committee
•
Credit Committee
•
Asset Liability Management Committee
•
Administrative & Disciplinary Committee
•
Procurement and Purchase
•
Technical and Audit Committee
Credit Rating of CRISL: •
Long Term
:A
•
Short Term
: ST-2
CAMEL(S) Rating of Bangladesh Bank: City bank is in good position in the camels rating of Bangladesh Bank C - Capital adequacy A - Asset quality M - Management quality E - Earnings L - Liquidity S - Sensitivity to Market Risk Five year’s performance (Business)
(Taka in Crore)
Particulars Deposit Advance Import Export Investment
2001 1718 1273 1350 398 198
2002 1968 1389 1226 621 251
2003 2005 1478 1729 772 338
2004 2224 1703 1791 1220 316
2005 3065 2333 2136 1822 365
Total Assets
2073
2448
2370
2638
3531
Deposit Mix of CBL
(Taka in Crore)
Particulars Current & Others Savings Short Term Fixed Deposits Other products/Scheme
2005 509 582 233 1245 496
% 17 19 7 41 16
Total
3065
100
Loans & Advance Mix
(Taka in Crore)
Particulars Working Capital Term Loan Agriculture Housing Import Export Others
2005 874 354 17 23 409 377 279
% 37 15 1 1 18 16 12
Total
2333
100
The City Bank Activities: Personal banking : •
Deposit Scheme / consumer Credit / Credit Cards / F.C A/C / Lockers Etc.
Corporate Banking: •
Small & Medium Business: CC (Pledge & Hypo)/ SOD(DO/FO)/ Large Business / Foreign Trade / Lease Financing.
Islamic Banking: •
Deposit / Investment / F. Exchange Business
Investor Relation: •
Right Share / Bonus Share/ Annual Report
New Products: •
SME Financing
•
Three Stage Savings Scheme (TSSS)/ Lakhopati Savings Scheme (LSS)
/
Junior Savers Scheme (JSS) / Monthly Benefit (MBS) / Marriage Savings Scheme (MSS)/ Education Savings Scheme (ESS). •
Life style loan, Auto loan
•
City foreign remittance
Swift Banking (Since 2000): •
L/C and Fund Transfer
SWOT analysis by Credit Rating Agency as on June, 2005 SMS Banking: City SMS gives you 24-hour access to the key financial information of your City Bank Account. It is the simplest way of finding out your account's daily/month-end balance. With City SMS you neither have to wait for your statement to arrive through mail nor have or call up branches to inquire about your balance and last few transactions. Once you become a member of SMS Banking you will have 24-hour access the key financial information.
Strength • • • • • • •
Stable source of fund Low cost of deposit Wide branch network Visionary top management Diversified product line Satisfactory IT infrastructure Surplus cushion against loan loss
Weaknesses • • • • • •
Asset infection rate is still high Relative high overhead expense Average corporate governance Marginal Liquidity Position High Large loan exposure Average human resource
Opportunities •
SME and Agro based industry loan
• •
Real Time online banking Credit card in dual currency
Threats • • • •
Increased competition in the market for quality assets Market pressure for increasing the interest rate Market pressure for increasing the SLR. Market pressure for increasing the provision against loan loss.
General Banking CBL Products: Liabilities Classification as per nature of account 1. Current Deposit Account: usually for business purpose, non interest bearing account, withdrawal not restricted, continuous transactions allowed. 2. Savings Account: usually for saving purpose, interest bearing account, withdrawal limited, continuous transactions allowed 3. Fixed Deposit Account: for 3 months to 1 year, interest bearing account, withdrawal restricted, continuous transactions not allowed. 4. Monthly Deposit: for 1 month, interest bearing account, as above. 5. Short Term Deposit Account: Interest bearing account, withdrawal not restricted, notice required, continuous transaction allowed. 6. Non Resident Foreign Currency Deposit Account: get interest at LIBOR rate. 7. Resident Foreign Currency Deposit Account: get interest at LIBOR rate, whenever a customer back to Bangladesh, he has to deposit the foreign currency within a month in this account. 8. Non Resident Taka Account: non resident people send their money in taka form. 9. FC Account: non interest bearing account, initial deposit is not required, nominee can operate this account as the instructions of the customer, bank will pay in taka form; if the customers like to get in foreign currency form under valid reason, and only then the bank can pay in foreign currency. 10. Convertible Taka Account: eliminated.
Classification as per nature of customer 1. Individual Account: single signatory
2. Joint Account: several signatory as per instructions. 3. Special Types of Account: •
Illiterate person: use customer’s fingerprint instead of his/her signature, no cheque book will be provided, only customer himself can make the withdrawal.
•
Minor: legal guardian is required to make the contract that means for account opening.
4.
•
Pardanshin woman: identity of the customer must be confirmed.
•
Blind person: be careful in sign verification.
•
Liquidator
•
Executor
•
Administrator
Trading Concern: o Proprietorship concern: copy of valid trade license, proprietorship rubber stamp against all signatures of the proprietor. o Partnership firm: copy of valid trade license, partnership deed, partnership rubber stamp against all signatures of partners operating the accounts. o Private Limited Company: Copy of valid trade license, copy of Memorandum and Articles of Association duly attested by the managing director/ chairman of the company, Certificate of Incorporation, list of directors as per return of joint stock company with signature, resolution of the board of directors for opening account with the bank. o Public Limited Company: Copy of valid trade license, certified copy of Memorandum & Articles of Association, Certificate of Incorporation, certificate of Commencement of Business, resolution of the Board of directors for opening account with the bank.
5.
Others Account:
•
Club/Association/Society: certified copy of bylaws/ constitution of the organization, resolution of the committee for opening account with the bank.
•
Power of attorney: power of attorney.
•
Accounts of Government: copy of the Act or Ordinance showing authority to open account, letter from the authorized persons in absence of the Board.
•
Accounts of Corporation: as above.
Liability Product of CITYBANK Limited FDR Period of Scheme: Can be opened for a 1 month to 12 months. Principal amount: Any handsome amount. Interest rate: Period 1 Month/ 2 Months / 3 Months 4 Months to 11 Months 12 Months
Rate 11.00 12.00 13.00
Features: • Interest is compounded once a quarter • Loan may be allowed upto 80% of the deposited amount under lien. • Excise duty and source tax etc. are deductible from the depositor profit. Junior Savings Scheme A Client can open a Junior Savings Scheme with BDT 5000/=, receive high return on monthly deposit and secure your children's future educational needs and it's a children financial education program. Period 10 Years
Initial Deposit 5000
EMI 1000
Matured Value 200,000
City Bank Junior Savers Scheme is a unique savings scheme designed to help you save for your children and it's a children financial education program.
Lakhpati Savings Scheme A client can open a Lakhpati Savings Scheme with BDT 3000/=, receive high return on monthly deposit and become a Lakhpati just after Six years. Period 6 Years
Initial Deposit 3000
EMI 1075
Matured Value 100,000
The Scheme is designed to help the fixed income group to save money and build up a sizable funds with which they can go for some income generating venture to improve the quality of their life and/or meet any future financial obligations. Three Stage Savings Scheme Client can open a Three Stage Savings Scheme with BDT 500 or it's multiple up to BDT 5000 and receives high return on maturity. Rate of Interest: 8% -13% Year EMI 1 2 3 500 4 5 6
Interest Rate 8% 9% 10% 11% 12% 13%
Payment After Maturity 13,093 for 1st Stage 28,955 for 2nd Stage 48,548 for 3rd Stage
Marriage Savings Scheme The term of savings shall be for 12 years. Installment size: Monthly installment Size is Tk. 250, Tk. 500, Tk. 1000, Tk. 1500, Tk. 2000 and Tk. 2500 Maturity: Depositors draw the following maturity amount at a time Monthly Deposit 250.00 500.00 1000.00 1500.00 2000.00 2500.00
Maturity Amount 65,000.00 1,30,000.00 2,60,000.00 3,90,000.00 5,20,000.00 6,50,000.00
ACCOUNT OPENING PROCEDURE OF CURRENT DEPOSIT (CD) ACCOUNT BY AN INDIVIDUAL What is CD Account? CD A/C is a regular operative and running account which may be operated upon any number of times during a working hour/day. Basic features of this type of A/C are: •
This A/C is opened basically for business purpose
•
Non-interest bearing A/C
•
Withdrawal not restricted
•
Continuous transaction allowed
•
Loans & Advance facility can be enjoyed against this A/C
Mandatory requirements to open a CD A/C by an individual •
Prescribed application form
•
Introducer (must be CD A/C holder)
•
2 copies of passport size photographs (must be attested by Introducer)
•
Credentials (nationality certificate/ copy of passport/ copy of utility bill (WASA/DESA))
•
KYC from duly filled in up
DEPOSIT CYCLE IN BRANCH AS PER CITY BANK PROCESS GUIDELINES (DOI-ICC)
STEPS OF OPENING AN ACCOUNT Step 1: Account opening form fill up STEPS OF CLOSING AN ACCOUNT 3 types: 1) Individual Step 1: Prayer by the party with reasons Step 2: Refund unused cheque books & pay in slip 2) Partnership Step 3: Documentation 3) Company Requirements Step 2: KYC are: form filled up by Account Opening Officer 1) Photographs 2) Copy of passport / Citizenship Certificate Additional documentation: A) For Partnership: 1) Partnership deed 2) Declaration of partners B) For Company: 1) AA & MA 2) Incorp. Cert. 3) Resolution 4) List of directors Step 4: Introducer’s signature A) For Savings Account: Saving A/C holder (Must be bank’s client) B) For Current Account: Current A/C holder (Must be bank’s client) C) For Other Account: Not practiced Step 5: Seal & Verification by concern officer Step 6: Confirmed and permitted by head of General Banking Step 7: Account opened & given number Step 8: Issuing of Cheque book and Deposit book Step 9: Issuing of thanks letter(address confirmation) Step 10: Transaction of cash Step 3: Confirmed by concerned officer Step 4: Closing the A/C
TYPES OF CHEQUE Open & Crossed
Bearer & Order
Ante-dated & Post-dated
Mutilated
Blank Cheque
Lost Cheque
Certified Cheque
Crossing of the Cheque Two types: A. Crossed Cheque: Generally Where a cheque bears across its face an addition of the words “A/C payee” between the two parallel transverse lines continuing the general crossing. The cheque besides being crossed generally, is said to be crossed “A/C payee” B. Crossed Cheque: Specially where a cheque bears across its face an addition of the name of a banker, either with or without the words “not negotiable” that addition shall deemed a crossing and the cheque shall deemed to be crossed specially; and to be crossed to that banker. Cancellation of Crossing
Only drawer can cancel the cancellation the cheque, and drawer might write “crossing cancelled, please pay cash” and he must sign his specimen signature. It is very careful for a banker because crossing a material past of a cheque as per negotiable instrument act1881. Endorsement The word endorsement is derived from Latin word, ‘In dorsum’ which means at the back. That is to say that endorsement is to be given on the back of the instrument with the objective to transfer it to another person. Reasons behind endorsement: a) to transfer ownership of instrument to another person b) to ensure validity and genuineness of the instrument Who can endorse? i.
The maker
ii.
The holder
iii.
The payee
Kinds of Endorsement •
Blank endorsement
•
Special endorsement or full endorsement
•
Restrictive endorsement
•
Partial endorsement
•
Conditional endorsement
•
Sans Endorsement
•
Facultative Endorsement
•
Sans frais
ACILLARY SERVICE: REMITTENCE BUSINESS: ISSUANCE OF TT/DD/PAY ORDER (PO) Remittance: transfer of money from one place to another place.
Remittance
Local (Transfer within a country)
Foreign (Transfer between countries)
TT: TT refers to telegraphic/telephonic transfer. This is the procedure ⇒ Used by the bank ⇒ At a written application by prescribed form ⇒ Against valid received ⇒ To send money quickly from one place to another. DD: DD refers to demand draft. It is a ⇒ Negotiable instrument ⇒ Issued by a bank ⇒ Drawn on another branch
One Stop Service Satisfied customers are the KEY to bank’s future. Bank cannot survive without them. On average, if some one is unhappy about how they are treated, they will tell 11(eleven) other people. This is how bank can lose business. When some one has received excellent customer service, they will generally tell 3 or 4 other people. This is how bank can grow its business. In line with customer’s feelings, expectations The City Bank has taken a project named One Stop Teller Service, which in fact will simplify the teller services (the cockpit of the bank), give an extra mileage to our customer service standard and also an opportunity to explore Finacle utilities. Initially our bank taken our Principal Office (PO) as a Pilot Project Branch and fixed up a dead line to introduce the One Stop Teller Service on 7th June 2006, we will move
forward to other finacle branches step by step (Gulshan is the next branch and the dead line to introduce is 15th June, 2006). CASH PAYMENT Customer After entering the branch, customer will follow/maintain queue as assigned (based on requirement either deposit or withdrawal) and will not brake up the cue as long as his turn is not coming. While his turn is on, straight away hand over the cheque to the teller and after receiving cash with satisfaction will leave the counter. This is single point contact teller Service or we can say it one stop teller Service How it Works (operational procedure) I) Day Start Before the day starts (by 9.00am) each teller will receive cash from the vault custodian (as per consumption) and will pass entry by his own ID in the system Dr. Cash in Hand (Teller) Cr. CBL Cash in hand II) Payment Processing After receiving the cheque from the customer, teller will check/verify the cheque at all levee, i.e.; •
Verify the Signature in the font page from Financle.
•
One Signature o the payee is in the back page.
•
Date is not post dated o back dated (up-to a limit).
•
Words & Figures Matches.
•
Check A/C balance is sufficient to withdraw money.
•
Security Paper is alright.
•
Entry and Posting in Finacle (Posting only if within he limit)
•
Round off the Signature of Payee.
•
Take a Signature of the Payee and tally with the existing one.
•
Put Cash Payment stamp on the Cheque.
•
Cancel the Cheque (if within the limit)
•
Cash is paid to Client.
Before making payment, teller has to satisfy every level and then put an entry/posting into the system: Dr. Customer Account Cr. Cash in Hand (Teller) Finally, after validation in the system (all procedure done) teller will directly pay the amount to the customer and the one stop teller service is over. III) Day End At the day end i.e. after the transaction hours are over, the respective teller will take print from the system with their own ID, which generally known as Transaction profile (day’s detail transaction are shown there with chronology). The teller will then pass an entry in to system: Dr. CBL Cash in Hand Cr. Cash in Hand (Teller) CASH RECEIVE Customer After entering the branch, customer will follow/maintain queue as assigned (based on requirement either deposit or withdrawal) and will not brake up the cue as long as his turn is not coming. While his turn is on, the deposit slip with cash is handed over straight away to the teller and after receiving the duplicate copy (customer copy) sealed and signed will leave the counter. This is single point contact teller Service or we can say it one stop teller Service. How it Works (operational procedure) I) Day Start
Before the day starts (by 9.00am) each teller will be at their respective counters and be ready with the system support, so that as soon as the branch door is opened, the customer can get the service. II) Receive Processing After receiving the deposit slip with cash from the customer, teller will count the cash (with condition of notes) check/verify the deposit slip, particularly at some points, for eg: Count Cash. Check & Tally Deposit Slip. Entry & Posting in Finacle. Put Signature in Deposit Slip, etc. III) Day End At the day end i.e. after the transaction hours are over, the respective teller will take print from the system with their own ID, which is generally known as Transaction profile (day’s detail transaction are shown there with chronology). At the day end: No balance will remain in the Cash in Hand (Teller), the balance must be zero (0). This is to check by Authorized Officer.
E-BANKING E-Banking? •
E-banking is an integral part of E-Commerce. E-banking means any form of banking activity done by using an electronic method of delivery. Generally it can be defined as payment system through electronic communication technology.
•
The term E-banking first came in the financial world in late 1980s and it is the result of modern technology and competitive edge of banking business.
Why E-banking? •
To provide prompt and efficient service.
•
To reduce operating costs.
•
To generate new revenues.
•
To increase efficiency.
Segments of E-banking: •
Electronic financial transaction system.
•
Financial instruments using electronic communication system.
•
Electronic financial system in global electronic commerce.
Structure of E-banking: •
Back-office electronic banking Back-office
electronic
banking
provides
information
management
services/automatic reconciliation services and quick fund transfer facilities. •
Front-office electronic banking: The front-office electronic banking offers automatic fund transfer/ online banking/ Internet banking/ electronic fund transfer/ direct deposit/ home banking electronic/ ATM.
LOANS & ADVANCES INTRODUCTION OF CREDIT: Lending is fundamental precept of banking every there that advances are made to customers in reliance on his promise to repay, rather than the security held by banker, Security is required by bankers as a protection against unquoted default in repayment by the customer. Thus the object of both eternal an internal control is to ensure the employment of bank fund in a profitable manner without under risk of loose to the capital. TYPES OF CREDIT: Credit
Short Term (Pay able withi
Medium Terms (Abo ve one
Long Term (above five years
Capital Finance i.e project Working Capital Finance finance, i.e, SOD, Commercial CC, PC, construction, LIM LTR Infrastructure Credit may further be divided into 4 categories: a)
Continuous Loan
b)
Demand Loan
c)
Fixed Terms Loan
d)
Short Term Agricultural & Micro Credit
a)
Continuous Loan
This type of loan has loan limit and expiry date but has not specific repayment schedule. For example, CC (Pledge), CC (Hypo), SOD (WO), SOD (FO) etc. b)
Demand Loan
The loan to be paid on claim is called demand loan. For example, PAD, FBP, Forced LIM etc. c)
Fixed Term Loan
This type of loan has loan limit, expiry date and specific repayment schedule. For example, House building loan, project loan, transport loan etc.
d)
Short-term agricultural and Micro credit.
The agricultural credit is disbursed for short-time i.e., for one year
Sources, Cost and utilization of Fund Banking is a business which is run on the confidence and trust of people. This confidence enjoyed by the banks enables them to mobilise funds from the various categories of sources comprising of : (i)
paid- up share capital
(ii)
Reserve fund and undistributed profit.
(iii)
Deposits from public in various accounts.
(iv)
Borrowing from Bangladesh Bank and other banks.
Cost of Fund :The components of cost include the following a) Cost of deposits. b) Cost of borrowing. c) Cost of equity. d) Administration cost. Cost of fund can be determined by two ways :1. Average Historical cost. 2. Marginal cost of funds. SELECTION OF BORROWERS: As bank lends its depositor’s money, the employment of such fund is, therefore, required to be made judiciously so that it comes back in the ordinary course of business. Son right selection of the borrower mostly ensures repayment of the fund. Right selection needs a careful and systematic study of the affairs of the intending borrower. At the time of selection of the borrower credit manager should consider the following five ‘C’s. •
Character
•
Capacity
•
Capital
•
Collateral and
•
Condition PRINCIPLES OF SOUND LENDING
The Government and Central Bank formulate lending principles. Bank provides loans and advances on the basis of these principles. Bankers and Economists give opinion of seven principles in appraising an advance proposal. These are:I. Safety II. Security III. Liquidity IV. Purpose V. Profitability VI. Diversity VII. National Interest. CREDIT POLICY Credit is business and it is an input in the production process of a country. So credit policy should be followed in all credit sector of Bangladesh. It is formulated by Bangladesh Bank, as the central bank of the country. Under This policy, banks hare been permitted to formulate their own policies in regard to fixing up minimum margin lending rate of interest etc on the basis of Banker customer relationship. Credit policy cannot be isolated from the broader monetary policy of the country. Like any other segment of economic policy, credit policy has multiple objectives which could be developmental and regulatory. It’s general aims ati)
creating healthy loan to ensure good interest earning for the bank,
ii)
Ensuring safety through judicious selection of assets based on its liabilities and,
iii)
Improving disciplines on use of resources.
Planning : Credit planning is one of the aspects of over all fiscal monetary and credit policy. In a developing economy, this occupies a paramount position as a part of resource planning for balanced regional development. It’s basic objective as to guide investment in proper way in the development plan formulated by the government. It is concerned not only with the quantum of credit expansion but also with the allocation of credit in the qualitative or directional aspects. There are two way process: i)
National credit plan and
ii)
Individual credit plan.
Credit control : One of the main functions of Bangladesh bank, as the central Bank of the country is to control credit provided to commercial banks in order to take appropriate regulatory measures to curb inflationary impact on the economy. Methods : The methods of credit control are usually two types. i)
General (on quantitative) method :- This method is institute for a) Bank rate policy. b) Variable reserve ration. c) Statutory liquidity requirements and d) Open market operations policy.
2) Selective (or qualitative) method: The various Disectives giver by Bangladesh Bank restricting quantum and other terms of granting credit against certain commodities. # New concept and criteria in Bank lending :Agricultural & other rural credit Small scale industry Financing to non- traditional export Small traders
Micro credit Self employed person, there are important developments in banking change in outlook, consideration of security, institutional security scheme i.e. export credit guarantee scheme etc. Concessional rate of interest & lead bank scheme. # Credit policy of the CBL :Lending to growing and potential sectors with preference to export oriented import substitution industries, SME’S, private loans, construction, and self employment.
TYPES OF LOANS & ADVANCES CASH CREDIT (HYPOTHECATION): Hypothecation is a charge against movable or immovable property. For of advance both the ownership and the possession remain with borrower. CC (Hypo) is allowed to industrial units for financing of raw materials or finished products. CC (Hypo) is also allowed to trading concerns for financing of stock in trade or current assets. Initial selection of the borrower on the basis of following issues: a)
CBL’s KYC (Know Your Customer): Branch will know their customers. They will corroborate customer information with face-to-face contact, factory/office visits, and financial date checking on the basis of application submitted for credit in Bank’s prescribed format along with business profile.
b)
Organizational structure and ownership position
c)
Length of relationship of the client with the Bank.
d)
Client’s financial involvement in the dealing i.e. debt equity ratio
e) Credit report on the borrower (i.e. to obtain CIB report on the client or confidential opinion from the local financial institutions, market reports and Track record). f)
Nature of security offered and its value along with the suitably, marketability and ownership/ title to be checked.
CASH CREDIT (PLEDGE)
Section 172 of Contact Act. 1872, defines pledge as bailment of goods as security for payment of a debt or performance of a promise. The person who offers the security is called the ‘Pledger’ and the bailee is called the ‘Pledgee’. Thus in case of Pledge: •
There should be bailment of goods
•
The objective of such bailment should be to hold the goods security for the payment of a debt
SOD (FO) SOD (FO) means secured overdraft against financial obligation. As such the facility is allowed against particular readily encephala security. Presently it is not allowed against Sanchaya Patra. But we should be very much careful to allow SOD (FO) against shares. This facility is allowed to all types of customers who maintain bank account & have legal entitlement to get the loan facility. Before allowing SOD (FO) one should carefully check: •
Genuineness of the FDR
•
The deposit is not in the name of a minor
•
Signature in loan application and in FDR should be the same.
•
Being satisfied with initial assessment one should initiate office note for due consent of credit in charge and branch manager.
SOD (WO) SOD (WO) means secured overdraft against work order. This kind of facility is allowed against the work order of a contractor involving construction, supply of goods or services. Before allowing the facility we have to observe the following issues: •
Length of the relationship of the customer with the bank
•
Client’s financial strength (equity) to participate in the tender.
•
Genuineness of the work order to be verified from the concerned authority
•
Experience of the client in this line of business.
•
Client’s
management
capability,
availability
of
necessary
equipments,
procurement source & manpower •
Whether advance payment or mobilization advance is available in the contact
•
Whether there is provision for payment of running bills at convenient point of progress of work
Being satisfied with the initial issues we should consider the client eligibility for having this facility. In this stage branch shall forward the formal proposal to Head Office with all relevant papers for due consideration.
SME LOANS SME stands for Small & Medium Enterprise. It is new Product in our banking sector. Small & Medium size Business enterprise can get SME loan facility to extend Their business. Definition of SME • Minimum 2 Years in Business. • An Enterprise with minimum 3 and maximum of 60 employees • Minimum Annual Turnover BDT 500,000 to Maximum BDT
5
Crores • Loan size of minimum Taka 100,000 to a maximum of 1 Crore (funded line not to exceed 70% of the maximum) Products • Shop Keepers Loan • Installment Loans • Short Term Loan • Installment Loans against FD / Govt. Securities/Bonds • Overdraft – Secured & Unsecured • Trade/Working Capital Loans • Deposit Products • Letters of Credit • Guarantees
•
Remittances
Target Segments: •
Shop Keepers
•
Small & Medium Entrepreneurs, Manufacturers, Traders, Suppliers to Corporate businesses
•
Professionals (Doctors, Engineers, etc)
•
Business Services
•
Cottage Industries
•
Fleet Financing
Indicative Interest Rates: •
50%+ Cash:
14.50%
•
15-35% Cash:
15.50%
•
Mortgage + Hypo: 16.00%
•
Possession & Hypo: 17.50%
•
Penal Interest Rate: 02.00% per month on overdue amount
SYNDICATION MEANING: SYNDICATION •
Syndication means joint financing by more than one bank to the same borrower against a common terms and conditions governed by a common document (or set of documents).
PARTIES OF SYNDICATION Lead Arranger: Lead Bank or Arranger has to co-ordinate all the activities at various stages of handling proposal and raising the fund from Banks/Financial Institutions. Lead Arranger : Captain of Loan Syndication Boat The borrower nominates lead Bank. It is very important factor for a borrower to nominate Lead Bank/Arranger in the light of maintaining long term relationship. It
leads to a Lead Bank being an Agent Bank of syndication, which is common practice. For this reason, it should be an organization with which the borrower is likely to feel comfortable over the whole loan period.
Credit appraisal Overview: Appraisal and approval process of a bank loan application involve a series of activities. These activates reveal a true element of banking Intermediation ranging from establishing relationship with a stranger (Walk-in customer) to structuring a credit line for the existing clients. The objective of the following process details is to provide guidelines as to how a loan application should be handled, appraisals made and approved or declined: THE PROCESS 1.
Beginning of Relationship
2.
Placement of Application by the client
3.
Credit rating verified
4.
Key Documents collected
5.
Site visit and KYC:
6.
Conformity to credit policy
7.
Management Analysis
8.
Financial Analysis:
9.
a)
The Spreadsheet analysis
b)
Profitability analysis
c)
Leverage/ gearing analysis
d)
IRR (where applicable/if possible)
e)
Break even point and Sensitivity analysis (if possible)
Some of the features of existing LRA form in use to be considered for advances exceeding TK 1 crore: 9.1
Demand and supply analysis:
9.2
Technical Aspect (Where applicable):
9.2
Economic Aspect (Where applicable):
9.3
SWOT Analysis:
9.4 International Certification to ISO certificates 10. Structuring the proposal: Based on financial and management analysis and need of the client and his capability of operating the business, RM/BM shall design the credit keeping in mind on the following issues: a)
Purpose of the credit
b)
Experience in the similar business
c)
Risk
d)
Remuneration
e)
Ancillary business
f)
Validity Loan period
g)
Business profitability
h)
Debt equity ratio
i)
Repayment capacity
j)
Production capacity
k)
Market demand of the product
11. Move the proposal: IF the preliminary findings are positive and acceptable to the bank as per Credit policy, BB Regulations, remuneration and risk profile, the RM/BM, shall move the proposal onward. 12. Approval processing at branch level: If the proposal is within the business powers delegated to the branch manager/Regional Manager it should be considered, approved or declined on the basis of the analysis already undertaken. 13. Approval Processing at HO level: Any proposal exceeding branch’s powers should be moved to HO with appropriate recommendation. 14.
Approval Level: On the basis of the aforesaid due diligence and levels of business powers the proposal will be placed to Divisional Head, Credit Committee and Managing Director or Board of Director.
15.
Sanction Advice:
15.1
Ho will send approval advice or rejection intimation to the branch directly.
15.2
Branch will prepare a detailed approval advice for the client whether approved at the branch or Ho level. Bank’s standard format shall be used for advising the approval to the client. Rejection intimation should be promptly sent.
15.3
Client’s signature on the duplicate copy of the sanction advice should be obtained as the confirmation of having accepted the terms and condition of approval.
16.
Documentation (security/charge documents) : The respective official/ officer shall complete documentation as per the sanction advice.
17.
Legal and regulatory compliance: For legal and regulatory compliances reference should be made to head office legal department (where applicable)
18.
Disbursement: Disbursement to be made after due diligence. On completion of documentation formalities and other procedures as required under sanction advice a certificate will be sent to H.O. and disbursement authorization to be obtained.
19.
Periodical review: Periodical review of all loan accounts should be made. The review may be made as frequent as necessary but not exceeding the period of three months. The ideal situation is to review within a week following each quarter to which it relates.
20.
Collection: Branch will collect the installments or the money for adjustment of liability as per the sanction advice. Proper record should be kept in the loan file regarding their collection status. In cases of default this should be reported to the branch manager and to head office as per exception statement-annexure-2.
21.
Workout of advance warning process: Workout on each slow or potentially risky account should be made and reported to Head Office on quarterly basis. Accounts that fall under BB norms of Special Mention Accounts should be carefully identified and reported to HO as per guidelines provided in circular no. –2005/01 dated 8the march, 2005 issued by Project & Corporate Finance Division.
22.
Legal procedures for delinquent loans: Legal process starts only when a loan is classified and considered non recoverable under normal interaction with the borrower. Decision for a legal action is made on case-to-case basis.
PROJECT LOAN :Implementation : The implementation phase for an industrial project, which evolves sitting up of manufacturing facilities, consists of several stages such as (i) project and engineering designs (ii) Negotiations and contracting (iii) construction (iv) Training and (v) plant commissioning Translating an environment proposal into a concrete project is a comply time consuming and risk task. Review :- When the project is commissioned the review plane has to be sent in motion. performance review should be clone periodically to compare actual performance with projected performance. A feedback device it is useful in several ways(i)
It throws light an low realistic were the assume underlying the project.
(ii)
It provides a documented log of experience that is highly valuable in future decision making.
(iii)
It suggests corrective action to be taken.
(iv)
It helps in uncovering judgmental biases.
(v)
It induces a desired caution among project sponsors. Facets of project Analysis:-
The important facets of project analysis are –
•
•
Marketing Analysis
•
Technical Analysis
Financial Analysis •
Economic Analysis
•
Ecological Analysis
Marketing Analysis:Market analysis is concerned with primarily two decisions – Aggregate demand of the proposed product – Market share of the project arrival. The market analyst requires a wide variety of information and appropriate forecasting methods . The kinds of information required are-
Conception trends in the past and the present conception level. Part and present supply position. Imports of Competitions. Structure of competitions. Cost sentence Elasticity of demand. Consumer blearier, intentions, motivations, attitudes performance and requirements. Restitution channels and marketing polices. Technical Analysis:Technical analysis seeks to determine whether the prerequisites for the successful commissioning of the project have been considered and reasonable good choices have been made with respect to location, size, process etc. The technical analysis are Preliminary test and studies. Availability of raw materials, power and other inputs has been established and alike. Financial Analysis:Financial analysis seeks to ascertain whether the proposed project will be financially viable in the sense of being able to meet the burden of servicing debt and will satisfy the return expectations. The aspects which have to be looked into which conducting financial appraisal are Investment outlay and cost of the project. Means of finance Cost of capital Projected Profitability Break even point Investment worth whiteness judge Projected financial position Level of Risk. Economic Analysis: - Economic analysis referred to as cost benefit analysis is concerned with judging a project from the large social print of view. I
Ecological Analysis: - Environmental concerns have assumed a great deal of significance. Ecological analysis should be done particularly for major project which have significant ecological implication environmental. Financial Analysis:To judge a project from the financial angle, we need information about the flowering. Cost of project Means of finance Cost of production Working capital assessment Break even point Projected cast flow statement. Projected Balance sheet.
CIB REPORT: The word CIB refers to the Credit Information Bureau. For the purpose of financing a beg project, lending institution should be assured about entrepreneur’s activities. 3.2. VARIOUS FORM OF THE SECURITY: Security serves as a safety value for an unexpected emergency. If they are left out there are chances that the borrower may raise funds from elsewhere by charging them to other. Forms Futurities: Charging a security means making it available as a “Cover” for an advance. Securities taken by a bank as cover of such advance may generally be classified as under. a.
Personal: Personal security involves a personal right of action against the customer
or third party. The following may be grouped under this type of security. -
Personal Bond
b.
-
Personal guarantee.
-
Promissory Note etc.
Impersonal: Impersonal security is something that can be realized by sale or
transfer. The following may be grouped under this type of security,
C.
-
Land
-
Stocks
-
Shares
-
Goods
Direct/ Indirect: Direct security is deposited by the customer himself. Indirect security is deposited by third party to secure a customers account. The following may be grouped under this type of security. - Advance against FDR/life polices in the name of the borrower himself. - Advance against FDR/life polices in the name of person other than the borrower.
d.
Movable/ Immovable: Movable securities are those, which can be transferred/ moved from one place to other. While immovable securities are those. Which cannot be moved/ transferred from one place to other? The following may be grouped under this type of security.
e.
-
Movable securities: Goods, Stock, Shares, etc.
-
Immovable securities: Land, building, factory premises, etc.
Primary: Primary security is that which is regarded as a main cover for an advance.
The following may be grouped under this type of security.
-
Advance against pledge of goods/ stock.
-
Advance against pledge of FDR/ Sanchay Patra.
-
Advance against hypothecation of goods/ Stocks
-
Demand promissory note (s)
f. Collateral: Collateral securities mean those securities which run parallel to or side by side with personal right of action against a debtor in respect of an advance. The following may be grouped under this type to security. -
Share certificates, bearers bond, title deeds, life policies etc. deposited by a customer. Any instrument or instruments that secure the debt and personal guarantee form a third party, Govt. guarantee or guarantees made by Legal mortgage/ equitable mortgage.
Lease Finance Financial institutions act as an intermediary. The main task of the financial system is to mobilize funds from the surplus budget unit to deficit budget unit. So, financial institutions are the key factors of the development of economy. Origin of Leasing •
The concept of leasing was being seen before 2000 B.C in the age of Sumerians. The leasing objects at that time were agricultural tools, farm land, cows, oxen etc.
•
Though this practice is changed as we leasing now a days the tune of these old age economic activities are vastly similar to the concept of leasing existing in the modern industrial lease world.
Classification of lease: Financial Accounting Standard Board (FASB) defined two categories of leases for financial reporting purposes, these are: •
Financial Lease
• •
Operating lease Financial Lease: A financial lease, a contract by which the lessee agrees to pay the lessor a series of payments whose sum equals or exceeds the purchase price of the asset. It’s a long-term lease. No cancellation clause is involved. Leased property owned by the lessee
•
Operating Lease: Short- term cancelable lease agreements are called Operating lease. Leased property does not owned by the lessee. In operating lease, the term is cancelable by the lessee prior to its expiration. The sum of all lease payments by the lessee does
not necessary fully provide for the recovery of the asset cost. Lessor provides service maintenance and insurance of the lease asset. These features are usually characterizing an operating lease. Lease Financing: Lease can be defined as a contractual agreement between the lessor and the lessee for use of a specific asset / assets selected by the lessee for a fixed term. In other words, the lessor pays for the product which is used by the lessee under certain agreed terms and conditions whereby the lesser remains the owners of the same, while the lessee is merely its user on payment of monthly rentals. In a very simple way we can say that Lease Financing is an arrangement that provides a firm with the use & control over assets. Those assets are: •
Plant
•
Machinery
•
Equipment
•
Vehicle
Key Features of Lease Financing: •
This is basically the same kind of alternative as ‘long term debt finance’.
•
The firm borrows asset rather than cash
•
The firm doesn’t get the title to the asset
•
The firm incurs a fixed obligation to make payment over an extended period of time
•
Scope of fund diversion is zero
Credit Card What is VISA? •
The largest payment system in the world
•
Owned by member financial institutions
•
Managed by Board of Directors elected by and from members
•
Advisory Groups made of member staff who are experts in respective functional areas
•
Business conducted in accordance with VISA By-Laws and Operating Regulations.
Why Credit Card? •
Plastic cards are just one way to pay
•
Cash is another way – people like it
•
To be successful payment cards need to be- a better or a preferred way to pay
•
It adds significant utility to the life living style of an individual in the form of ‘convenience’
Convenience- How? •
Less/ no cash carry- reduced risk
•
Crisis recovery
•
Wide acceptance- locally & internationally
•
Issue of prestige- recognition of status
Credit card Consumer Attractions •
It’s the bank money
•
“I want it now, I can have it now”
•
Flexibility of payment
•
Spending power
•
“Insurance” – just in case…
•
Prestige & Global reach
CITY CARD Credit Cards are pre-approved credit which can be used for the purchased of items now and payment of them later. City Card is one kind of credit card offered by the CBL. Product of CITY CARD •
Dual Gold
•
Local Gold
•
Dual Classic (Silver)
•
Local Classic (Silver)
Acquisition of City Card 1. Through sales Executive 2. Trough CBL officers & Executive 3. Through Branches 4. Direct from card division Fees & Charges for Citycard Annual Fee (Primary Card) BDT 3,500 + 15% VAT for Dual and International Card Gold BDT 2,000 + 15% VAT for Local Card BDT 2,000 + 15% VAT for Dual and International Card Silver BDT 1,000 + 15% VAT for Local Card Annual Fee (Supplementary Card) BDT 1,500 + 15% VAT for Dual and International Card Gold BDT 750 + 15% VAT for Local Card BDT 1,000 + 15% VAT for Dual and International Card Silver BDT 500 + 15% VAT for Local Card Replacement Fee BDT 600 + 15% VAT for Dual and International Card Gold BDT 400 + 15% VAT for Local Card BDT 600 + 15% VAT for Dual and International Card Silver BDT 200 + 15% VAT for Local Card Late Payment Fee USD $10 for Dual and International Card Gold BDT 200 for Local Card
Silver
USD $10 for Dual and International Card BDT 200 for Local Card
Over Limit Fee USD $15 for Dual and International Card BDT 500 for Local Card USD $15 for Dual and International Card Silver BDT 200 for Local Card Outstation Cheque Collection Fee Gold USD $10 for Dual and BDT 100 for local Silver USD $10 for Dual and BDT 100 for local Cheque Return Fee Gold / Silver USD $10 for Dual and BDT 100 for local Certificate Gold / Silver USD $5 for Dual and BDT 100 for local PIN Replacement Fee Gold / Silver USD $10 for Dual and BDT 500 for local Monthly Repayment Minimum Due 5% of the closing balance or 500 which is higher Due Date 15 Days after the statement date Service Charge (APR) Gold / Silver 30% p.a. for purchases & 24% for cash Gold
Credit Policy Under This policy, banks hare been permitted to formulate their own policies in regard to fixing up minimum margin lending rate of interest etc on the basis of Banker customer relationship. Credit policy cannot be isolated from the broader monetary policy of the country. Like any other segment of economic policy, credit policy has multiple objectives which could be developmental and regulatory. Its general aims ati)
creating healthy loan to ensure good interest earning for the bank,
ii)
Ensuring safety through judicious selection of assets based on its liabilities and,
iii)
Improving disciplines on use of resources.
Planning : Basic objective of credit planning is to guide investment in proper way in the development plan formulated by the government. It is concerned not only with the
quantum of credit expansion but also with the allocation of credit in the qualitative or directional aspects. There are two way process: i)
National credit plan and
ii)
Individual credit plan.
Credit control: One of the main functions of Bangladesh bank, as the central Bank of the country is to control credit provided to commercial banks in order to take appropriate regulatory measures to curb inflationary impact on the economy. Methods: The methods of credit control are usually two types. i)
General (on quantitative) method :- This method is institute for e) Bank rate policy. f) Variable reserve ration. g) Statutory liquidity requirements and h) Open market operations policy.
2) Selective (or qualitative) method: The various Disectives giver by Bangladesh Bank restricting quantum and other terms of granting credit against certain commodities. # New concept and criteria in Bank lending:Agricultural & other rural credit Small scale industry Financing to non- traditional export Small traders Micro credit Self employed person, there are important developments in banking change in outlook, consideration of security, institutional security scheme i.e. export credit guarantee scheme etc. Concessional rate of interest & lead bank scheme. # Credit policy of the CBL:-
FOREIGN EXCHANGE BUSINESS INTRODUCTION
Foreign Exchange is the pivotal department of any modern bank. The phenomenon "Foreign Exchange" arises for International Trade of a country is not confined in its own territory rather it deals with most of the countries of the world so far business is concerned. So international trade and international money and capital movement are the basis of foreign exchange dealings. On the other hand foreign exchange department of an AD branch plays a vital role in intermediation. Foreign Exchange department acts as a media between Exporter and Importer. Opening L/C, Payment of Foreign bills, FDD and all transactions relating Foreign Exchange department of a bank does foreign currency and foreign trade. FLOWCHART OF IMPORT & EXPORT FINANCE: Import Finance
Pre-Import Finance
Port Import Finance
1. Letter of Credit
1. PAD 2. LIM 3. Forced LIM 4. LTR Export
Pre Shipment Credit
Post Shipment Credit
1. Pre shipment Cash Credit (PCC/ECC)
1. Negotiations of Bill.
2. Back to Back L/C
2. Collection of Bill 3. DP/DA.
ISSUING OF LETTER OF CREDIT
Documentary credit is a definite undertaking given by a bank (issuing bank) at the request of a customer (Applicant) or on its own behalf to make payments to a beneficiary/ exporter subject to submission of stipulated documents provided all terms & condition of the credit is completed with. Basically L/C is two types 1.
Revocable Letter of Credit
2.
Irrevocable Letter of Credit
Parties to a Documentary Credit: 1. Importer/ Buyer/ Applicant 2. Beneficiary/ Exporter/ Seller 3. Issuing Bank 4. Advising Bank 5. Negotiating Bank 6. Confirming Bank 7. Paying Bank/ Reimbursing Bank
Lodgment of Documents Basically lodgment of documents starts from passing entries to the receiving register. Then following procedure will be made: 1. Scrutiny of the document a.Forwarding schedule of the foreign bank b. Bill of exchange. c. Transport documents e Commercial Invoice f Insurance cover note Others: g. Certificate of origin h. Inspection certificate (PSI)
i Packing list j. Other as per L/C terms & Condition 2.
Bill of exchange and bill of lading are invariably made out in favor of bank.
3.
Intimation to the importer is given in prescribed form.
4.
Endorsement of PAD amount on the LCA form is made.
5.
Entry in the lodgment register is made which contains the following head (Date, PAD No., name of forwarding bank and no., Drawee, Drawer, foreign currency, rate, equivalent to Tk., documents (B/E, Invoice, P/I., B/L C/O, CRF), quantity and description of goods, 6. Stamping with PAD no.-----, certificate of remittance on the invoice is made when lodged.
RETIREMENT After lodgment of documents, the bank informs the importer by party intimation letter. The importer comes to the bank to retire his documents. At the time of retirement the following documents are handed over to the importer: 1.
Commercial invoice (1 copy). On the back of it the bank will put seal “invoice value certified for US$ ----“
2.
Packing list (1 copy)
3.
Certificate of origin (1 copy)
4.
Bill of lading On the back of if bank will put seal "deliver to the order of M/S-----"
5.
Bill of exchange (in case of deferred payment B/E will not be handed over to the importer). On the B/E the bank will put seal "received payment"
EXPORT Introduction: Export means selling of goods or services to the other country from our country. Export is one of the vital sources of earning Foreign Currency. That is why Export Policy 2003-2006 is under implementation and also
required advantage from bank by financing that we called Export Financing.
Export Financing Pre-Shipment Financing 1. ECC/ PCC (Export/ Packing Cash Credit) 2. BBL/C (Back To Back Letter of Credit) Post-Shipment Financing: 1. Negotiation 2. DP/ DA (Document purchase/ Acceptance) 3. Collection BACK TO BACK CREDIT The concept "Back To Back" involves opening of second credit on the strength of first credit that is one credit backs another. Here the first credit is considered as security. The credit which is opened by the foreign buyer is usually known as mother export L/C or master export L/C. and the credit(s) which are subsequently opened against lien of such a master credit is called Back To Back Credit. Papers to obtain from Exporter: 1. Trade License, IRC&ERC, VAT&TIN 2. EPB Enrollment Certificate 3. Association Membership Certificate 4. BOI Registration 5. Custom's Bond License 6. Certificate From Chief Inspector Of Factories. 7. Fire License
8. NOC From Environment Directorate. 9. NOC From Lien Bank (if switching over from another bank) 10. Buyers Standardization. 11. Certificate Of Incorporation. 12. Certificate of Commencement ( In Case of Public Ltd. Co. ) 13. Memorandum & Articles of Association 14. Company's Board Resolution. 15. List of Directors 16. Bio-Data of Directors & Key Personnel. With Photographs. 17. Declaration of Assets & Liability of the Directors ( Instruction Circular No=2632) 18. 3 Years Audited Balance Sheet 1 3 Years Projected Balance Sheet. 19. List of Machinery. 20. Lease Deed of the Factory Premise ( if rented ) 21. Fire Policy of the Factory. 22. Offer of Co=Lateral Security: TYPES OF BBLC(s) The followings type of BBLCs is in upon practice. (1) BBLC-Foreign (2) BBLC-EDF. (3) BBLC-EPZ. (4) BBLC-Inland.
Bangladesh Bank has introduced 12 digit Harmonized Credit Numbering System. First 4 digit for AD code, second 2 digit for year code, third 02 digit as credit code and last 4 digit as credit number.
FOREIGN REMITTANCES Foreign Remittance termed as remittances in foreign currency are receive in & made out abroad. There are two types of foreign remittance. 1. Inward Remittance 2. Outward Remittance Inward Remittance: Remittance of foreign currency being received from abroad is called inward foreign remittance. Source of Inward remittance 1. expatriate Bangladeshis 2. Exporters Mode of foreign inward remittance 1. 2. 3. 4. 5. 6. 7.
TT DD MT TC PC to PC via Modem Foreign currency notes On Line remittance (SWIFT)
Outward Remittance: Remittance in foreign currency that goes out abroad is foreign outward remittance. Purpose of Foreign outward remittance •
to settle import payment
•
to meet travel expenses
•
to meet medical expenses
•
to meet educational expenses