GENERAL BANKING OF JAMUNA BANK LTD.
PART-1 INTRODUCTION Commercial Bank implies that banks devote most of their resources to meeting the financial needs of business firms. This institution offers the public both deposit and credit services as well as a growing list of newer and more innovating services, such as investment advice, security underwriting, and financial planning. In recent years, however, commercial banks have significantly expanded their offerings of financial services to consumers and units of government around the around the world. The result is the emergence of a financial institution that has been called a financial department store because it satisfies the broadest range of financial services needs in the global economy. The importance of commercial banks may be measured in a number of ways. Banks are still the principal means of making payments, through the checking accounts, credit cards, and electronic funds transfer services they offer. Banks are important because of their ability to create money from excess reserves made available from the publics deposits. The banking system can take a given volume of excess cash reserves and, by making loans and investment, generate a multiple amount of credit. Bangladesh is a developing country. After liberalization, we achieve a poor economic growth in last three decades. This is because of number of micro & macro factors as density of people; lack of proper education; lack of skilled manpower; lack of natural resources etc. In last three decades, we saw, what a poor political stability! Political instability is the major factor in Bangladesh that makes a vital hazard to achieve the economic growth. All of above, Banking industry brings a little bit hope that can be a better flavor to accelerate the economic growth in our country. This is the only sector (especially private banking) that getting a continuous develops from last two decades. Jumana Bank is a second generation commercial private Bank. It is starts its operation form 1995. During this short period of time, this bank creates a milestone of success in banking sector. This bank holds an experienced team of banking professional. They achieve this success because of their
experienced banking professional team, creativity in banking, proper management and so on. In this report, we will see a brief of how it generates its banking activity specially credit operation. OBJECTIVE OF THE STUDY As a partial fulfillment of the a Bachelor of Business Administration internship is a requirement at the end of the completion of all the credit courses. The main purpose is to be familiar with the real world situation and practical experience in a business firm. Commercial bank, especially Private Bank is one of the important business sectors in Bangladesh. Southeast Bank Limited is a scheduled commercial bank in the private sector, which is focused on the established and emerging markets of Bangladesh. The purpose of this study is to earn a real life practical experience on Banking System. The study mainly conducted with the following objectives: •
To understand how important Commercial Banks are in the functioning of a modern economy and financial system
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To see how the commercial are regulated
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To be able to read and understand bank financial statements and grasp how banks create and destroy money
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To see how to generate the credit division along with general banking system. METHODOLOGY The study methodology included observation of their work procedure, analysis of their information input forms and their output documents, face-to-face communication with the clients, interviews of relevant SBL officials. As per study objectives mentioned, the information used in this study has been received from the following sources: Primary Sources:
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Officials Records of Southeast Bank Ltd (SBL)
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Face-to-Face interview with the respective personnel Secondary Sources:
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Research, brochures, and various publications of Jamuna Bank Ltd.
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Annual report, Official data book, Internet.
LIMITATIONS: The objective of this study is to earn real life practical experience in Banking System. It requires long time to acquire to the real experience. Time limitation is the main constrain in this respect. The lack of available of data is another limitation. Maximum of banking activity are practical. . Just reading the manual is not enough. To earn such practical experience, it requires working with those events. The main limitations are as: •
Time constrain
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Banking people are very busy. Sometimes it seems hard to get their attention
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Lack of published relevant documents
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Some information is confidential-not open to public. Vision To become a leading banking institution and to play a pivotal role in the development of the country. Mission The Bank is committed to satisfying diverse needs of its customers through an array of products at a competitive price by using appropriate technology and providing timely service so that a sustainable growth, reasonable return and contribution to the development of the country can be ensured with a motivated and professional work force. Ethics & Social Responsibilities: An organization cannot move along. Organization needs people to generate its activities & people needs organization to get some kind of services. Southeast bank is an organization that is concerned to maximize its profit along with maintaining some kind of social responsibilities. It is fully devoted to fulfill the needs for its customers satisfaction as well as it is involved socio-economic development activities. STRATEGIES To raise capital up to Tk. 1000.00 million by March 2006. To manage and operate the Bank in the most efficient manner to enhance financial performance and to control cost of fund
To strive for customer satisfaction through quality control and delivery of timely services To identify customers' credit and other banking needs and monitor their perception towards our performance in meeting those requirements. To review and update policies, procedures and practices to enhance the ability to extend better service to customers. To train and develop all employees and provide them adequate resources so that customers' needs can be reasonably addressed. To promote organizational effectiveness by openly communicating company plans, policies, practices and procedures to employees in a timely fashion To cultivate a working environment that fosters positive motivation for improved performance To diversify portfolio both in the retail and wholesale market To increase direct contact with customers in order to cultivate a closer relationship between the bank and its customers. OBJECTIVES OF THE BANKS ARE: To earn and maintain CAMEL Rating 'Strong' To establish relationship banking and improve service quality through development of Strategic Marketing Plans. To remain one of the best banks in Bangladesh in terms of profitability and assets quality. To introduce fully automated systems through integration of information technology. To ensure an adequate rate of return on investment To keep risk position at an acceptable range (including any off balance sheet risk) To maintain adequate liquidity to meet maturing obligations and commitments. To maintain a healthy growth of business with desired image. To maintain adequate control systems and transparency in procedures. To develop and retain a quality work-force through an effective human Resources Management System. To ensure optimum utilisation of all available resources To pursue an effective system of management by ensuring compliance to ethical norms, transoarency and accountability at all levels. PART-2 HISTORY History
Jamuna Bank Limited (JBL) is a Banking Company registered under the Companies Act, 1994 with its Head Office at Printers Building (2nd & 8th Floor), 5, Rajuk Avenue, Dhaka-1000. The Bank started its operation from 3rd June 2001. Jamuna Bank Limited is a highly capitalized new generation Bank with an Authorized Capital and Paid-up Capital of Tk.1600.00 million and Tk.390.00 million respectively. The Paid-up Capital has been raised to 429.00 million and the total equity of the bank stands at 725.00 million as on June 30, 2005. Currently the Bank has 23 (twenty three) branches 10 in Dhaka, 1 in Gazipur, 4 in Chittagong , 3 in Sylhet 1 in Bogra, 2 in Naogaon, 1 in Munshigang and 1 in Narayanganj (including six Rural Branches). The Bank undertakes all types of Banking transactions to support the development of trade and commerce of the country. JBL's services are also available for the entrepreneurs to set up new ventures and BMRE of industrial units. Jamuna Bank Ltd., the only Bengali named new generation private commercial bank was established by a group of winning local entrepreneurs conceiving an idea of creating a model banking institution with different outlook to offer the valued customers, a comprehensive range of financial services and innovative products for sustainable mutual growth and prosperity. The sponsors are reputed personalities in the filed of trade, commerce and industries. The Bank is being managed and operated by a group of highly educated and professional team with diversified experience in finance and banking. The Management of the bank constantly focuses on understanding and anticipating customers needs. The scenario of banking business is changing day by day, so the bank's responsibility is to device strategy and new products to cope with the changing environment. Jamuna Bank Ltd. has already achieved tremendous progress within only two years. The bank has already ranked as one of the quality service providers & is known for its reputation. Jamuna Bank offers different types of Corporate and Personal Banking Services involving all segments of the society within the purview of rules and regulations laid down by the Central Bank and other regulatory authorities. Latest from JBL A prospectus of JBL has been published in the "The Financial Express" on December 15, 2005 OPENING DATE FOR SUBSCRIPTION:
February 05, 2006
CLOSING DATE FOR SUBSCRIPTION:
February 09, 2006
1. Jamuna Bank has opened its 23rd Branch at Narayanganj on 26/12/2005, 22nd Branch at Baligaon, Munshiganj on 22/12/2005, 21st Branch at Bogra on 18/12/2005 and 20th branch at Chistia Market (Gausia Market), 393/B Elephant Road, Dhaka on 27/11/2005. 2. Jamuna Bank has opened its 20th Branch at Chistia Market (Gausia Market), 393/B Elephant Road, Dhaka on 27/11/2005 \ 3. The bank has organized Customer Night-2005 at Dhaka Sheraton Hotel on August 04, 2005. 4. Jamuna Bank has signed an agreement with Banglalink to receive banglalink mobile bill through its 19 online branches 5. Mr. Arifur Rahman and Mr. Farhad Ahmed Akand have unanimously been elected as Chairman and Vice Chairman of the Board of Directors of Jamuna Bank Limited respectively in the 49th meeting of the Board of Directors held on May 10, 2005. Jamuna Bank has launched its Online Banking services on April 05, 2005 PRODUCT & SERVICES Online Banking Jamuna Bank Limited has introduced real-time any branch banking on April 05, 2005. Now, customers can withdraw and deposit money from any of its 23 branches located at Dhaka, Chittagong, Sylhet, Gazipur, Bogra, Naogaon, Narayanganj and Munshigonj. Our valued customers can also enjoy 24 hours banking service through ATM card from any of Q-cash ATMs located at Dhaka, Chittagong, Khulna, Sylhet and Bogra. All the existing customers of Jamuna Bank Limited will enjoy this service by default. Key features: •
Centralized Database
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Platform Independent
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Real time any branch banking
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Internet Banking Interface
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ATM Interface
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Corporate MIS facility Delivery Channels:
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Branch Network
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ATM Network
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POS (Point of Sales) Network
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Internet Banking Network Corporate Banking : The motto of JBL's Corporate Banking services is to provide a personalized solutions to our customers. The Bank distinguishes and identifies corporate customers' need and designs tailored solutions accordingly. Jamuna Bank Ltd. offers a complete range of advisory, financing and operational services to its corporate client groups combining trade, treasury, investment and transactional banking activities in one package. Whether it is a project finance, term loan, import or export deal, a working capital requirement or a forward cover for a foreign currency transaction, our Corporate Banking Managers will offer you the accurate solution. Our corporate Banking specialists will render high class service for speedy approvals and efficient processing to satisfy customer needs. Corporate Banking business envelops a broad range of businesses and industries. You can leverage on our know-how in the following sectors mainly:
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Agro processing industry
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Industry (Import Substitute / Export oriented) - Textile Spinning, Dyeing Printing - Export Oriented Garments, Sweater. - Food & Allied - Paper & Paper Products - Engineering, Steel Mills - Chemical and chemical products etc.
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Telecommunications.
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Information Technology
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Real Estate & Construction ·
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Wholesale trade
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Transport · Hotels, Restaurants ·
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Non Bank Financial Institutions
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Loan Syndication ·
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Project Finance · Investment Banking
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Lease Finance · Hire Purchase · International Banking ·
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Export Finance
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Import Finance Personal Banking Personal Banking of Jamuna Bank offers wide-ranging products and services matching the requirement of every customer. Transactional accounts, savings schemes or loan facilities from Jamuna Bank Ltd. make available you a unique mixture of easy and consummate service quality. We make every endeavor to ensure our clients' satisfaction. Our cooperative & friendly professionals working in the branches will make your visit an enjoyable experience. Deposit Accounts Q-Cash Round the Clock International Trade Finance International Trade forms the major business activity undertaken by Jamuna Bank Ltd. The Bank with its worldwide correspondent network and close relationships with key financial institutions provides an extensive trade services network to handle your transactions efficiently. Personnel experienced in International Trade Finance staff our key branches in Dhaka, Chittagong, Sylhet and Naogaon. These offices are the focal point for processing import and Export transactions for both small and large corporate customers. We offer a complete range of Trade Finance services. Our professionals will work with you to develop solutions tailored to meet your requirements, through mobilizing our full range of trade services locally, and drawing on our global resources. We can offer you professional advice on all aspects of International Trade requirements, namely:
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Issuing, advising and confirming of Documentary Credits.
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Pre-shipment and post-shipment finance.
• • • •
Negotiation and purchase of Export Bills. Discounting of Bills of Exchange. Collection of Bills. Assist customers to insure all risks. Foreign Currency Dealing etc. List of Foreign Correspondents
To provide International Trade related services we have established Correspondent Banking relationship with 336 locations of 106 world reputed Banks in more than 100 countries. Our main Correspondent Banks are: Citi Bank N.A., Standard Chartered, American Express Bank, Bank of New York, Bank of Nova Scotia, Duetche Bank, Dresdner Bank AG, Habib American Bank, Habib Bank AG Zurich, Bayerische Hypo Vareins Bank, Mashreq Bank PSC, Nordea Bank AB, Royal Bank of Canada, UBS AG, Union De Banques Arabes ET, Francaises, Wachovia Bank NA, Forties Bank S.A/NV, Svenska Handlesbanken, Bank of Ceylon, Banca Toscana, ABN Amro Bank, Commonwealth Bank of Australia, Danske Bank A/S. Absa Bank Ltd., Agricultural Bank of Chaina, Banca Intesa SPA, Banca Italo Albanese, Banca Popolare Commercio E Industria SPA, Bank Austria Credittanstal AG, Bank Commonwealth, Bank Madiri (Europe), Bank of Cyprus, Bank of Bahrain and Kuwait, Bank of Jordan Ltd., Bank Sadarat Iran, Blue Nile Bank, Commercial Bank of Kuwait, Commercial Bank of Qatar Ltd., Development Bank of the Philippines, Dexia Bank SA, EON Bank Berhad, First International Merchant Bank PLC., Foreign Trade Bank of North Korea, Foreign Trade Bank of Vietnam, Hiroshima bank, HVB, Hungary RT, ICICI Bank Canada. Industrial and Commercial Bank of China, ING Bank NV, Islamic Bank of Yemen and for Finance & Investment, Korea Exchange Bank, National Commercial Bank, Shinhan Bank, State Bank of India (Canada) UFJ Bank Ltd., United Bank of India, Bank of Bhutan, Allied Bank Philippines. Foreign Remittance Jamuna Bank Ltd. has a network of 19 branches in Bangladesh and 4 more branches are going to be added to network soon. Remittance services are available at all branches and foreign remittances may be sent to any branch by the remitters favoring their beneficiaries. Remittances are credited to the account of beneficiaries instantly through Electronic Fund Transfer (EFT) mechanism or within shortest possible time. Jamuna Bank Ltd. has correspondent banking relationship with all major banks located in almost all the countries/cities. Expatriate Bangladeshis may send their hard earned foreign currencies through those banks or may contact any renowned banks nearby ( where they reside/work) to send their money to their dear ones in Bangladesh.
To facilitate sending money in Bangladeshi Taka directly, Jamuna Bank Ltd. has Taka Drawing Arrangement with many banks/exchange companies in different countries. The expatriate Bangladeshis may send their money in BDT through the branches/subsidiaries of Jamuna Bank Ltd Credit Facilities The main focus of Jamuna Bank Ltd. Credit Line/Program is financing business, trade and
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industrial activities through an effective delivery system. Jamuna Bank Ltd. offers credit to almost all sectors of commercial activities having
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productive purpose. •
The loan portfolio of the Bank encompasses a wide range of credit programs.
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Credit is also offered to major thrust sectors, as earmarked by the govt., at a reduced interest rate to develop frontier industries. Credit facilities are offered to individuals including housewives, businessmen, small and big
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business houses, traders, manufactures, corporate bodies, etc. •
Loan is provided to the rural people for agricultural production and other off-farm activities.
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Loan pricing system is customer friendly.
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Prime customers enjoy prime rate in lending and other services.
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Quick appreciation, appraisal, decision and disbursement are ensured. Credit facilities are extended as per guidelines of Bangladesh Bank (Central Bank of Bangladesh) and operational procedures of the Bank Interest Rates of Loans & Advances Sl # 1. 2.
Type of Landings Agriculture Loan Term Loan to Large & Medium Scale
Interest Rate 10% (Mid Rate) 14.00% (Mid Rate)
3. 4. 5. 6. 7. 8. 9. 10.
Industry Term Loan to Small Industry Working Capital to Industry Export Trade/Commercial Financing Housing Loan Consumer Loan Credit to Non Bank Financial Institution Others
13.50% (Mid Rate) 14.00% (Mid Rate) 7.00% 14.50% (Mid Rate) 14.50% (Mid Rate) 15.00% (Mid Rate) 13.00% 15.00% (Mid Rate)
Shop Finance Scheme
Objectives: 01. To enable the small business community to run the business smoothly 02. Facilitating expansion of the existing businesses 03. To improve the banking habit of self employed persons 04. To diversify bank’s lending to Small & Medium Enterprises (SME) which are considered as less risky and help community developments. It may be noted down that the government is also encouraging investment in SME sector. Categories of eligible business: i)
Grocery/departmental/whole sale store
ii)
Confectionary/bakery (owned by the bakers)
iii)
Stationary shops
iv)
Cloth materials & small local garment traders
v)
Shoe makers/shops
vi)
PVC & plastic product traders/small manufacturers
vii) Tiles/sanitary items retailers viii) Computer/Photostat/Cyber Café. ix) Electrical & electronic items retailers x)
Pharmacy
xi) Gift shop/cosmetics shops xii) Restaurant/fast food joints xiii) Hardwire shops xiv) Glass/ceramic retail outlets xv)
Sports kit retailers
xvi) Photo studio xvii) Rod, Cement & C.I. Sheet (Tin) Shop xviii) Engineering Workshop xix)
Fertilizer & Pesticide shop
Maximum Loan Amount: 1) Up to a maximum of 10.00 lac in single case or 60% of possession value (distress value to be considered) whichever is lower. However, loan size will depend on creditworthiness of the borrower and the decision of the sanctioning authority. 2)
Branch Manager must verify the amount of possession money actually paid before
recommending such proposal. Tenure of the loan limit: Minimum 01 year - Maximum 03 years from the date of disbursement of the loan Eligibility criteria: The applicant must fulfill the following criteria to be eligible for loans and advances under the scheme: i)
Shop owner must run the establishment himself, having at least three years of successful
business experience ii)
Valid lease deed for a minimum period of 03 years up to 05 years
iii)
Satisfactory conducted deposit account with JBL for minimum 03 months.
iv)
To deposit the daily sales proceeds in the account maintained with JBL
v)
Agree to abide by credit rules & regulations of JBL
vi)
Furnishing net-worth of the applicant/client .
vii)
Clean CIB
viii)
The bank reserves the right to accept or reject any application without assigning any reason
whatsoever. ix)
The intending borrower loance shall apply through the letter head of the business firm or
through a plain paper requesting the branch manager for sanction of loan under the Shop Finance Scheme Security: i)
Simple deposit of valid lease deed of agreement of the shop.
ii)
A tripartite agreement to be signed in between leaseholder/shop owner/Bank- to the effect
that the leaseholder cannot rent out or transfer the leased property without the written consent of the Bank. iii)
The lease deed between the landlord and the borrower must be duly executed & the original
lease deed should be kept in the Bank as part of document. iv)
Lease must contain provisions enabling the landlord to forfeit the lease and enable the bank
to enforce a right to sell the possession of the shop to liquidate the default debt (if any). v)
Letter of disclaimer by the landlord to facilitate the bank to liquidate the default loan (if any)
vi)
Equal numbers of post dated cheques covering amount of each loan installment
Insurance All borrowing customers inventory i.e. Stock-in-trade will be insured against Fire, Rsd & other risks with the Bank mortgage clause cost of which will be borne by the shop owner/client/borrower. Repayment Schedule: Repayment schedule should be as under: i) In case of 01 year, 10 monthly installments for the loan limit up to Tk. 3.00 lac with 02 month grace period from the date of disbursement ii)
In case of 02 year, 22 monthly installments for the loan limit up to Tk.6.00 lac with 02 month
grace period from the date of disbursement
iii) In case of 03 year, 34 monthly installments for the loan limit above Tk.6.00 lac with 02 month grace period from the date of disbursement Q-Cash Round The Clock Banking Jamuna Bank Q-Cash ATM Card enables you to withdraw cash and do a variety of banking transactions 24 hours a day. Q-Cash ATMs are conveniently located covering major shopping centres, business and residential areas in Dhaka and Chittagong. ATMs in Sylhet, Khulna and other cities will soon start be introduced. The network will expand to cover the whole country within a short span of time. With your Jamuna Bank Q-Cash ATM card you can: •
Cash withdrawal Round The Clock from any Q-Cash logo marked ATM booths.
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POS transaction (shopping malls, restaurants, jewellaries etc)
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Enjoy overdraft facilities on the card (if approved)
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Utility Bill Payment facilities
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Cash transaction facilities for selective branches nationwide
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ATM service available in Dhaka and Chittagong Withdrawal allowed from ATM's of Jamuna Bank Ltd., AB Bank, The City Bank, Janata Bank, IFIC Bank, Mercantile Bank, Pubali Bank, Eastern Bank Ltd. respectively
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And more to come Is Q-Cash Is Q-cash Secure? Yes, Q-Cash is fully secure. Q-Cash cardholders can only carry out transactions on Q-Cash ATMs with Personal Identification Numbers (PIN). The PIN is a unique 4-digit number that allows you to access your account. You can change your PIN anytime from ATM machine. In case you have lost your card, transactions cannot be done without the PIN. Jamuna Bank Limited has installed its first Q-cash ATM at Dhanmondi Branch, Dhaka. Jamuna Bank is going to issue VISA card soon. In line with the issuance of Q-cash products JBL is going to introduce VISA card very soon. Lease Finance
Lease means a contractual relationship between the owner of the asset and its user for a specified period against mutually agreed upon rent. The owner is called the Lessor and the user is called the Lessee. Lease finance is one of the most convenient source of financing of assets viz machinery, equipment vehicle, etc. The user of the assets i.e. Lessee is benefited through tax advantages, conserving working capital and preserving debt capacity. Moreover, Lease is an off-balance sheet item i.e lease amount is not shown in the balance sheet of the lessee and does not affect borrowing capacity. Leasing enables the lessee to avail the services of a plant or equipment without making the investment or incurring debt obligation. The Lessee can use the asset by paying a series of periodic amounts called œlease payment or lease rentals to the owner of the asset at the predetermined rates and generally in advance. The payments may be made monthly or quarterly. Jamuna Bank Ltd., the highly capitalized private Commercial Bank in Bangladesh has introduced lease finance to facilitate funding requirement of valued customers & growth of their business houses Lease Items • •
Vehicles like luxury bus, Mini bus, Taxi cabs cars, Pick-up, CNG three-wheeler etc. Factory equipment.
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Medical equipment
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· Machinery for Agro Based Industry
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Construction equipment
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Office equipment
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Generators, Lift & Elevators for commercial place.
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Sea or River Transport.
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Computer for IT Education Center
SWIFT
Jamuna Bank Limited is the member of SWIFT (Society for Worldwide Inter-bank Financial Telecommunication). SWIFT is a member owned co-operative, which provides a fast and accurate communication network for financial transactions such as Letters of Credit, Fund transfer etc. By becoming a member of SWIFT, the bank has opened up possibilities for uninterrupted connectivity with over 5,700 user institutions in 150 countries around the world SWIFT No.: JAMUBDDH Trading of Government Treasury Bond & Other Govt. Securities The Bangladesh Bank for trading 5 years & 10 Years Treasury Bonds and other Government Securities have nominated Jamuna Bank Limited as a Primary Dealer. 1.
Eligibility criteria: (i) Individuals and institutions resident in Bangladesh, including provident funds, pension funds, bank and corporate bodies shall be eligible to purchase the BGTBs.
(ii) Individuals and institutions not resident in Bangladesh shall also be eligible to purchase the BGTBs, with coupon payment and resale/redemption proceeds transferable abroad in foreign currency subject to fulfillment of conditions as mentioned in the Bangladesh Govt. Treasury Bond Rules-2003. 2. Loan facility: JBL offers loan upto 95% of the present value of the bond/other securities against lien of the above instrument for their customers.. Interested Financial Institutions/ Corporations/ Insurance Companies/ Individuals are requested to contact the Bank in the following address: 01. Mirza Elias Uddin Ahmed, Sr. Vice President , Treasury Division, Head Office, Dhaka. Tel: 9558966, 7160053. PABX 9570912-16 Ext.103, 113.
02. Any of the following Branches of the Bank: DHAKA DIVISION 1 Dilkusha Br. Dilkusha, Dhaka
9565608, 9551419
1
CHITTAGONG DIVISION Agrabad Br. Agrabad, Chittagong
031727727
2 Mahakhali Br.
3 Sonargaon Rd. Br. 4 Moulvi Bazar Br.
Mahakhali, Dhaka
Sonargaon Rd., Dhaka Moulvi Bazar, Dhaka
5 Shantinagar Shantinagar, Br. Dhaka 6 Gulshan Br. Gulshan-2, Dhaka. 7 Dhanmondi Dhanmondi, Br. Dhaka. Nayabazar Islamic Br. 8 Nayabazar, Foreign Dhaka Exchange 9 Br. 2 DIT Avenue, Motijheel, Dhaka PART-3
98892734, 9899455
Patharghata, Chittagong Jubilee Road, Chittagong
031625454
3. Jubilee Road Islamic Banking Br. SYLHET DIVISION
031616266
1
Sylhet Br.
Zinda Bazar, Sylhet
0821725409
73159745 8355649
2
8852540
3
Goala Bazar Goala Bazar, Br. Sylhet Beani Bazar Beani Bazar, Br. Sylhet RAJSHAHI DIVISION
0822287352-3 0822388022
1
Naogaon Br.
2
Mahadevpu r Br.
074161840 0742675137-8
9670655 73150256
2
8613920
9568989
Khatunganj Br.
Sadar Rd, Naogaon. Mahadevpur Naogaon.
9554474
GENERAL BANKING Banking In Bangladesh WHAT IS A BANK ? A Bank is known by the functions it discharges. It may be defined only by stating what it performs. Sir John Paget says, “It is a fair deduction that no person or body, corporate or otherwise, can be a banker who does not (a) take deposit accounts (b) take current accounts, (c) issue and pay cheques and (d) collect cheques, crossed and uncrossed, for his customer†. Section 5 of the Bank Company Act, 1991 defines banking as the “Accepting, for the purpose of lending or investment, of deposits of money from the public repayable on demand or otherwise†and withdrawal by cheque, draft, order or, otherwise. The Act further provides that a banking company which transacts the business of banking must add the words Bank/Banking/Banker after its name.
What is Scheduled and Non-Scheduled Bank ? : Banks may be divided into scheduled banks and non-scheduled banks. Banks having paid up capital and reserves of Tk.______ and whose names have been enlisted by the Bangladesh Bank in their approved list of banks are called Scheduled Banks. There are at present _____ scheduled banks in Bangladesh: a. Commercial Banks: Nationalised banks: 3 Sonali Bank, Agrani Bank, Janata Bank. Foreign Banks: 7 ANZ Grindlays Bank, Standard Chartered Bank, American Express Bank, Habib Bank Ltd., State Bank of India, Banque Indosuez, National Bank of Pakistan, ……….. b) Development Banks: 4 Bangladesh Shilpa Bank, Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank, Bank of Small Industries and Commerce (BD) Ltd. c) Private Commercial Banks: 23 Bangladeshi ownership: 20 Rupali Bank Ltd., Pubali Bank Ltd., Uttara Bank Ltd., Arab Bangladesh Bank Ltd., United Commercial Bank Ltd., The City Bank Ltd., IFIC Bank Ltd., National Bank Ltd., Eastern Bank Ltd., NCCBL., Jamuna Bank Ltd., Dhaka Bank Ltd., Premier Bank Ltd., Prime Bank Ltd., Standard Bank Ltd., The Bank One Limited, EXIM Bank Ltd., Trust Bank Ltd., First Security Bank Ltd., The Bank of Asia Ltd., Jointly owned by foreigners and Bangladeshis: 3 Islamic Bank (Bangladesh) Ltd., Al-Baraka Bank (Bangladesh) Ltd., Dutch Bangla Bank Ltd., a. Besides there are a number of Co-operative banks which may be termed as non-scheduled banks. Other financial institutions: e) Besides the aforesaid commercial banks and specialized banks we have got two other financial institutions which perform in fact development ba industries in the country. These are: Bangladesh Shilpa Rin Sangstha (renamed as Development Bank Ltd.), Investment Corporation of Bangladesh(ICB). FUNCTIONS OF A COMMERCIAL BANK
A commercial bank carries out all the functions permissible under the Bank Company Act, 1991. The functions of a commercial bank cover a wide range of banking, foreign exchange and financial services to individuals, firms, private/public companies and other multinational agencies. The main functions of a commercial bank are – a. Mobilization of idle resources of the country by accepting demand and time deposit from the customer consisting of general public, firms and companies, corporations and local bodies etc. through opening of Current Account, Savings Account, Short Term Deposit, Fixed Deposit Account and Issuing bearer certificate of deposits of various terms, collection of cheques, drafts, bills etc. on behalf of the customers. a. Granting of loans and advances to the individual, firms and companies, corporations etc. for activating and developing trade, commerce & industries and other productive activities in the country by way of overdrafts (upto 12 months), demand loan, time loan (upto 12 months), term loans (above 12 months) etc. to finance the trade, commerce and industries either for working or long term fixed capital purposes. a. Issuance of Letter of Guarantee (L/G), Shipping Guarantee, Indemnities, Performance Guarantee, Bid Bond, Advance Performance Guarantee (APG) etc. a. Agency services: Such as collecting cheques, drafts, interest warrants, dividend warrants, interest on securities/shares etc. a. Remittance of funds: Arranging transfer of funds from one place to another by issuing TT/DD and encasing them. a. General Utility Services: This includes safe keeping of valuable articles and documents in lockers/safe vaults – Buying and selling of Foreign Currencies/Travelers cheques. – Collection of credit information for the exporters and importers. a. Foreign Exchange business: opening and advising of L/C – Preshipment and post-shipment export finance by way of negotiation/purchase/discount of export bills, packing credit, back to back L/c etc. Import finance by way of opening Irrevocable Documentary Letter of Credit – granting post import finance such as BLC., LIM., Advance against T/R etc. Buying and selling of foreign exchange in the forms of foreign DD, MT, TT, Cheques, Bills, TC and foreign currency notes. a. Establish correspondent relationship/agency arrangement with the foreign banks for handling foreign trade.
a. Provide Locker Services, Safe Deposits and other miscellaneous agency services to the customers. WHAT IS ENDORSEMENT ? GIVE EXAMPLE. HOW AN ENDORSEMENT IN FULL CAN BE CONVERTED INTO ENDORSEMENT IN BLANK ? The term “Endorsement†of a negotiable instrument means writing of a person’s name on the back of the instrument for the purpose of negotiation. The signature of the payee or holder in due course on the back of a cheque/draft or in case of need on a slip of paper annexed thereto (which is known as “Allonge†) is called an endorsement. Only order cheque requires endorsement. a. Blank endorsement: When the maker or holder puts his signature only on the back of the negotiable instrument it is called blank endorsement. a. Special endorsement or endorsement in full: When the endorser adds the name of the endorsee above his signature, with a direction to pay to his order, it is called special endorsement. c) Restrictive Endorsement: An endorsement which prohibits further negotiation of instrument. A restrictive endorsement gives endorsee the right to receive payment but no power to transfer his rights as endorser.An endorsement in full can be converted into endorsement in blank by putting a simple signature of the holder/transferee on the back of a cheque without making any direction as to whom the instrument is payable. A blank endorsement may be converted into full endorsement by writing the name of the endorsee over the signature of the endorser. It is also called special endorsement. WHAT IS CROSSING ? GIVE EXAMPLES OF DIFFERENT TYPES OF CROSSING. WHAT ARE THE DIFFERENCE BETWEEN GENERAL CROSSING AND SPECIAL CROSSING ? WHAT IS THE EFFECT OF CROSSING A CHEQUE ? DESCRIBE THE MAIN OBJECTIVE OF CROSSING? WHAT IS OPENING OF CROSSING ? Drawing of two parallel transverse lines with or without any words across the face of a negotiable instrument is called crossing. It is a direction to the paying bank to pay money generally to the bank or a particular bank as the case may be and not to pay to the holder of the instrument over the counter. Generally, crossing is done on the left hand top of the instrument. It may be written, stamped, printed or perforated. A cheque bearing such a direction is called a “Crossed Chequeâ€
and others without crossing are called “Open Cheques†which may be paid by banks over the counter. There are three distinct types of crossing – •
General Crossing
•
Special Crossing
•
Double crossing a. General Crossing: Where a cheque bears across its face two parallel transverse lines it shall be deemed a crossing and the cheque shall be deemed to be crossed generally. a. Special Crossing: Where a cheque bears across its face an addition of the name of a banker that addition shall be deemed a crossing and the cheque shall be deemed to be crossed specially, and to be crossed to that banker. Jamuna Bank Limited / Jamuna Bank Limited Not negotiable - Jamuna Bank Limited Account Payee a. Double Crossing: When a cheque bears two separate special crossing, it is said to have been double crossed. The banker may cross an uncrossed cheque or a cheque crossed generally, he may cross it specially to himself of if crossed specially to himself, he may again cross it to another banker for collection as agent is termed as double crossing. Where a cheque is crossed specially to more than one banker, except when crossed to an agent for the purpose of collection, the banker on whom it is drawn shall refuse payment thereon. Thus, a paying bank shall pay a cheque double crossed only when the second banker is acting only as the agent of the first collecting banker and this has been made clear on the instrument. Such crossing may be done in those cases where the banker in whose favour the cheque has been specially crossed does not have any branch at the place where the cheque is to be paid. JAMUNA BANK LTD. to
Sonali Bank As AGENT FOR COLLECTION Difference between General Crossing and Special Crossing: a. General crossing needs only two parallel transverse lines. But special crossing needs writing of the name of a particular bank between the two lines. Even if two lines are not drawn up but the name of a particular bank is written on the face of the cheque at the left hand corner, then it will serve the purpose of a special crossing. a. The mode of payment in general crossing is changed and the crossing signifies that the payment will be made to a banker who presents the cheque. But in special crossing the payment of the cheque is made only to the banker whose name is mentioned therein. Effect of crossing: Where a cheque is crossed generally, it cannot be paid otherwise than to a banker (i.e. through a bank account) and where it is crossed specially, otherwise than to the banker to whom it is crossed or his agent for collection, being a banker. Mere crossing of a cheque with the two transverse lines does not affect its negotiability or transferability, what it affects is the mode of payment of the cheque. Objective of crossing: a. To prevent the payment of a cheque to a wrongful holder. b. To assure safe payment of money to the genuine receiver of the proceeds of the cheque. c. To assure safety circulation of cheque. d. To facilitate in tracing the recipient of the money if, subsequently detected that he was not the rightful holder of the cheque. In a word, the objective of crossing is to ensure the safe transmission of money from the sender to the receiver. Cancellation of crossing: Cancellation of crossing of a cheque is called opening of crossing. The drawer of cheque sometimes cancels the crossing for making it payable over the counter. This must be done by writing “Crossing cancelled†or by writing “Pay Cash†under his signature as recorded with the banker and by an indication of having cancelled it. WHAT DO YOU MEAN BY “DRAWER†, “DRAWEE†AND “PAYEE†? GIVE EXAMPLE Drawer : Drawer is the account holder.
Drawee: Drawee is the Bank who is to pay the money. Payee : Payee is the beneficiary who is to receive the money. Jamuna Bank Limited Principal Branch Date: Pay to ______Mr. Abid___________________________________ Amount ___Five thousand only______________________________ Tk.= 5000/- _Rashid_ Signature Here : The signatory is the Drawer. Jamuna Bank Ltd., Principal Branch is the Drawee. Mr. Abid, the beneficiary is the Payee. WHAT ARE THE FUNDAMENTAL DIFFERENCES BETWEEN A CHEQUE AND A BANK DRAFT ? WHAT IS THE EFFECT OF CROSSING A BANK DRAFT ? Differences between Cheque and Bank Draft are as follows: Cheque Cheque
the
Bank Draft Bank draft is an order of a Bank to its
drawer/account holder to his bank. Only the drawer can make stop
another branch/correspondents. Only the purchaser of the Draft can make
payment. Cheque can be a bearer one.
stop payment. Bank Draft can never be a bearer one.
is
an
order
of
The effect of crossing: After crossing a bank draft, it is only payable through an account. DEFINE THE FOLLOWING: (A) DEBTOR & (B) CREDITOR Debtor: The person or organisation who takes the money from other person or organisation is called Debtor. In a word all loanee is called “Debtor†. Creditor: The person or organisation who gives money to another person or organisation is called Creditor. In a word all depositors are called Creditors.
Each transaction involves two parties – one is debtor and other is creditor. We debit one who receives the benefit in the transaction and we credit one who surrenders the benefit in the same transaction. FACILITIES ENJOYED BY SCHEDULE BANKS FROM BANGLADESH BANK: Bangladesh Bank is the lender of last resort. When the money market is tight and accommodation is not available from any other source, the Bangladesh Bank comes forward to provide financial assistance to the banks. At present the following types of accommodations are available from Bangladesh Bank: •
Demand Loans under Article 16(4) of Bangladesh Bank Order 1972 against the security of (a) stocks, G.P. Notes (b) such bills of exchange and promissory notes as are eligible for purchase or rediscount under Article 16(2) (a) & 16(2) (b) of the Order.
•
Seasonal finance under the bills rediscounting scheme for jute finance.
•
TT discounting facilities against lien of like amount on the Principal A/c of the banks maintained with Bangladesh Bank or against deposit of approved securities.
•
Emergency assistance in the form of Demand Loan or Overdraft under Article 17(1)(b) of the Bangladesh Bank Order 1972 against such form of security as the Bank may consider sufficient. Besides providing financial assistance to the Scheduled Banks, the Bangladesh Bank also allow facilities for remittance of funds from any branch of the Bangladesh Bank to any place where the Bangladesh Bank has a branch at confessional rate. Remittance of funds from any branch of the Bangladesh Bank for credit of the amount to the principal accounts of the Bank maintained with Bangladesh Bank, Dhaka is however allowed free of charge. As a lender of last resort, Bangladesh Bank also in a comfortable position to exercise greater control over the workings of the commercial banks and persuade them to abide b the directives/instructions issued from time to time. GENERAL PRINCIPLES OF BOOK-KEEPING Book-keeping: Book-keeping is the technique of recording business transactions in the books of accounts in a systematic manner with a view to know the end results at the end of a given period of time. Business Transactions: The dealings of a trader in regard to money or money’s worth are called transactions. In other word any financial change in a business is transaction.
Necessity of book-keeping: To have permanent record of al business transactions for future reference. It enables a trader to know the aggregate result of trade, i.e. gain or less and helps controlling the business by furnishing necessary management information. It is a tool of management. Double Entry System: A system of recording two fold aspect of each transaction, i.e. recording both debtor and creditor in each transaction. Each transaction has two sides or two parties – one who receives the benefits and the other who yields that benefit. The receiver is called DEBTOR and the giver is called CREDITOR. As there is double effect in each transaction, there must be double entry in the books of accounts. Debit & Credit: We debit one who receives the benefit in the transaction and we credit one who surrenders the benefit in the same transaction. Accounts and their classification – Golden rule regarding Debtor & Creditor: In order to know the aggregate results of trader for a particular period, transactions of similar nature or with the same persons must be classified under respective groups. Such a group or class of transactions relating to a particular person or things is called an Account. Accounts are mainly of three types – namely, (a) Personal Accounts, (b) Real Accounts and (c) Nominal Accounts and following rules are framed to identify Debit and Credit: a) Personal Accounts: Accounts relating to persons, firms and companies are called personal accounts, such as, Karim's Ac/, ABC Company’s a/c. DR - Who receives the benefit in the transaction. CR - Who surrenders the benefit in the transaction. b) Real Accounts: Accounts relating to properties, materials, things, possessions, rights etc. are called real accounts/property account, such as Cash Accounts, Building Accounts, etc. DR - What comes in (Value coming in the business) CR - What goes out (value going out from the business).
c) Nominal Accounts: Accounts relating to incomes/gains and expenses/losses are called nominal accounts as they exist only in the name having no real existence. For example - Interest on loan a/c, salary a/c, commission a/c etc. DR - All losses and expenses. CR - All gains and incomes. It may be noted that some impersonal a/cs may be personal in meaning e.g. capital a/c, drawings a/c, loan a/c while some a/c may be both real and nominal a/c e.g. stationary a/c, postage a/c etc. Journal and its function: Journal means a Register for recording daily transactions in a chronological manner, analyzing them into DEBIT and CREDIT transactions which facilitates entry in the ledger A/cs. Entry and its object: Entry means to enter a transaction i.e. recording a transaction in the Journal clearly and in a classified way with a short explanation called NARRATION, stating the exact nature of each transaction. Ledger: Ledger is the king of all Books of Accounts. It contains the final records of all accounts in a condensed and classified manner. Please note that the Journal contains a chronological record while Ledger contains a classified record of all business transactions. Posting and Folioing : The act of transferring each entry from the Journal to the respective accounts in the Ledger is called POSTING. Use the word “To†before each “DR†entry and “By†before each “CR†entry and put the page (folio) number of Journal in Ledger and Ledger folio number in Journal in the prescribed column. The act of posting each Folio number is called FOLIOING. Balancing and closing of Ledger Accounts: Balance means the difference between the two sides of an a/c. Balancing means equalizing the two sides of an a/c, by putting the difference in the lighter side. Closing an a/c means adding the two sides of an a/c after putting the amount of difference in the side which shows smaller total and then rule off putting two parallel lines at the bottom of each a/c.
Trial Balance: In order to test the arithmetical accuracy of Ledger posting, we prepare a Trial Balance. It is nothing but a list of closing balances (both debit and credit) of all the a/cs in the General Ledger. If both the debit and credit totals of a Trial Balance agree it may be concluded that posting in the ledger have been properly made and are arithmetically correct. The following errors will not however be detected through Trial Balance: •
Posting in wrong a/c
•
Omission in posting both DR and CR side of a transaction.
•
Compensating error.
•
Omission of recording an original entry in Journal. The following errors will prevent agreement of both sides of a Trial Balance:
•
Insertion of a debit balance in credit column or vice-versa.
•
Omission of extracting balance of any a/c from Ledger.
•
Casting mistakes.
•
Errors in digits i.e. 24 is posted as 42.
•
Omission in posting any debit or credit item in Trial Balance. Profit & Loss Account: After closing all accounts and preparing Trial Balance, we should go for stock taking and close the stock account. The value of unsold stock of goods is generally calculated “at cost†or “market price†whichever is lower. Thereafter, we should proceed to find out the trading result during a given period. INCREASE DECREASE Asset : DR Asset : CR Liability : CR Liability : DR Income : CR Income : DR Expense: DR Expense : CR ACCOUNT OPENING DEPARTMENT Account Opening department plays a vital role in the operation of banking. Opening of an account binds the banker and the customer into a contractual relationship. Department concerns must be very cautious while opening an account of any nature. Without obtaining introductory reference
from a responsible client as to the proposed customers and without obtaining required papers account should not be opened in order to avoid unpleasant consequences as well as to get legal protection. INSTRUCTIONS: a. Please use two Signature Cards for each of the signatories of the account. You may use the extra cards. The signatures in the cards shall have to be attested by the Chairman/Managing Director/Secretary of the Company. a. Copies of Memorandum and Articles of Association along with Certificate of Incorporation, Certificate of Commencement (if applicable) duly signed by the Chairman/Managing Director/Secretary of the Company. c) Resolution to open an account with the specific branch of a bank e.g. "Jamuna Bank Ltd., Principal Branch, Dhaka, Bangladesh" and to authorise the person(s) to operate the Account shall have to be taken, a copy of the resolution, duly signed is required. d) A clear instruction for operating the Account i.e. single signature/joint signature, capacity of the signatory(s), amount restriction to signatory(s) etc. should be incorporated in the Board Resolution. e) Signature in all the papers must be supported by respective stamps (Seal). DOCUMENTS COMMON TO ALL FOR OPENING AN ACCOUNT : a) A/c opening Form duly filled in and signed. Proper introduction is a must for opening an account. Signature of the introducer must be verified before opening of the a/c. b) Signature Card (2 copies) - duly filled in and introduced. c) Photographs (2 copies for each individual) duly attested by the introducer. ISSUANCE OF CHEQUE BOOK: a) Take requisition slip and verify the signature from the competent authority (Custodian of Specimen Signature Card). b) Be cautious that the receiver is the right person to take delivery of the cheque book. c) Write : Title of the account and account number in the Cheque Book Issue Register. a. Take a Cheque Book on the basis of the series mentioned in the Cheque Book Issue Register.
e) Record Account number on each leaves and on the requisition slip write Title of the Account, issuing date and put a round Seal and get it signed by an authorised signatory. f) Record cheque series number on the requisition slip. g) Deliver the Cheque Book after receiving signature on the register. h) Requisition slip be sent to the Computer department for POSTING. i) After posting be kept in the concerned file as per serial number of the cheques. REMITTANCE DEPARTMENT Remittance of fund means transfer of money from one place to another place or one city to another city of the same bank within the country is called local remittance and fund transferred to outside the country through correspondent agent is called foreign remittance. This facility is extended to its customers to enable them to avoid risk arising out of theft, loss etc. in carrying of cash money from one place to another for making payment to some one at some other places or to utilize themselves at some other places. Considering the urgency and nature of transaction the method of remittance may be categorized as under : a) Telegraphic Transfer (TT), b) Demand Draft (DD) or FD c) Travellers Cheque (TC) ISSUANCE OF T.T. It is an order from the issuing branch to the drawee branch for payment of certain some of money to the beneficiary. The payment instruction is sent by Telex/Telephone and funds are paid to the beneficiary on verification of the test number through his account maintained with the drawee branch. It is the quickest method of transferring fund from one place to another. TT can be made - a) against cash, b) against Cheque & c) against client's a/c debit. PROCEDURE - TT Against Cash : Fill up the TT Application Form in duplicate (first copy treated as CR voucher to credit H.O. General Account : 10802007 and second copy for the use of customer) by the applicant duly signed by him. Fill up the Commission part meant for Bank's use and arrange to deposit the TT amount through TT Application Form and also arrange to deposit Commission and Postage/Cable charge through two separate single CR vouchers as per following:
CR : Income A/C - Remittance (Voucher) : 40205007 Amount realised against commission of TT. CR : Income A/C - Telex (Voucher) : 40205007 Amount realised against Telex charge of TT. Charges:
0.15% of the total TT amount but not less than Tk.50/- as commission &
Postage/telex/cable charge : Tk.50/- for any amount. Issuance of TT: On getting the above vouchers duly received by the Cash Department, arrange to do the following: a. Provide a Issue Number (TT Number) from the TT Issue Register and TTICA number on the application form. b. Provide a Test Number on the TT Application Form. c. Send the message over phone/Telex. a. Send full set i.e. TT application form, Commission vouchers, CR vouchers for Telex charge to computer department for posting. b. Issue a TTICA (TT Issuing Credit Advice) on the same day to the responding/drawee branch mentioning full particulars of the TT including the Test number for their confirmation. TT Advice & Pay : Suppose we have received a TT from our Agrabad branch for Tk.110/- with advice to issue a P.O. favouring Mr. X, CD A/c No.100 with Agrani Bank, Sheraton Branch, Dhaka, in that case prepare the following vouchers after observing all other normal formalities stipulated above: DR - H.O. Gen. A/c : 10802007 : Tk.110/CR - TT Payable A/c : 30316106 : Tk.110/Amount responded against _____ Br. TT No._____ dated _______ fvg. Mr./ X, CD A/c No.100, Agrani Bank, Sheraton Branch, Dhaka. DR - TT Payable A/c : 30316106 : Tk.110/CR - Pay Order : 30335006 : Tk.100/P.O. No.______ issued fvg. Mr. X, CD A/c No.100, Agrani Bank, Sheraton Branch, Dhaka on account of Mr. _____ against TT No._______ dated______ of our ______ Br.
CR - Income Account - Postage : 40205007 : Tk.10/Amount realised against postage charge for issuance of Pay Order No.________ dated ________ against TT. No._____ dated _______ of our _____ Br. a) Record in the TT Payable Register. b) Record in the P.O. Register. c) Prepare Pay Order. Do not charge commission. d) Prepare a letter and send the P.O through Courier Service. TT through other Bank: Suppose you have received a Fax from one of your valued clients with a request to remit a sum of Tk.1,00,000/- to Eastern Bank, Khulna Branch A/c: M/s.__ No.1500. In this case prepare the following vouchers. Request H.O. to issue a Bangladesh Bank Cheque favouring EBL for Tk. - (TT amount + their commission + Telex charge). On getting the Cheque send the same through a forwarding letter mentioning the TT amount to be remitted + their commission + Telex charge. Retain the copy with photocopy of Bangladesh Bank Cheque. a) DR - Client's Account : Total amount including all charges. Amount debited for remittance of TT as per instruction dated ____________. b) CR : Income A/C - Remittance Fee: 40205007 : Tk. Our po Amount realized against commission of TT.rtion. c) CR : H.O. Gen. A/c : 10802007 : Tk. TT amount + EBL charges. For issuance of a Bangladesh Bank Cheque favouring Eastern Bank Ltd., to remit to EBL Khulna Branch. d) IBCA : To : Head Office : Tk. TT amount + EBL charges. For issuance of a Bangladesh Bank Cheque favouring Eastern Bank Ltd., to remit to EBL Khulna Branch. TT Against Cheque: In case TT through a cheque bearing "Yourselves" with following instruction on the overleaf duly signed by the a/c holder(s):
"Please transfer by TT an amount of Tk.______ favouring _____, CD Account No.____ with your ____ Branch, _____. In this case get the signature(s) of the account holder(s) verified by the Head Teller/Remittance Incharge and confirm that the cheque amount is available to his/their credit with posting and the cheque duly cancelled. a) DR : Client’s cheque amount CR : Income A/C - Remittance (Voucher) : 40205007 Amount realised against commission of TT. CR : Income A/C - Telex (Voucher) : 40205007 Amount realised against Telex charge of TT. Prepare a DR Voucher in case cheque amount do not cover T.T. amount plus charge and commission subject to client's written concurrence. TT through Other Banks: A valued client wants to remit an amount of Tk.12,00,000/- through TT to ABBL Khulna Branch, Narrate the procedure: Procedure: Prepare a request letter to ABBL, Principal Branch with a request to debit our STD a/c maintained with them and remit Tk.12,00,000/- to their Khulna Branch fvg. ............. CD a/c No. .................. As per arrangement with ABBL., Principal Branch, for this TT they will receive 50% of the Commission of .15% of the TT amount and total the amount of Telex charge of Tk.50/- (For ABBL: TT Amount Tk.12,00,000/- + Tk.900/- as commission + Tk.50/- as Telex charge = 12,00,950/- and SBL: Tk.900/- as commission only). PAY ORDER Payment Order is an instrument issued by a bank with an undertaking to pay the beneficiary on behalf of the client. It is also known as Managerial Cheque and more reliable than cheques. The issuing branch is the paying branch. Pay order is usually issued within the clearing area. There are also some exceptional cases. In that case that the proceeds of Pay Order is collected on collection basis. PO against Cash:
Fill up the Pay Order application form in Duplicate (First copy treated as CR voucher: 30315006 and Second copy for the use of customer) by the applicant duly signed by him. Fill up the Commission part of the application form meant for Bank's use and prepare the following single CR voucher on the basis of commission amount and arrange to deposit both the vouchers over the counter: CR - Other Fees & Commission : 40207009 Amount realised against commission of P.O. No…… . DR - Cash Commission rate: 10000 : Tk. 30/ 10,000 - 1,00,000 : Tk. 75/100,000 -5,00,000 : Tk.100/500,000 – 10,00,000 : Tk.150/Above 10 lac :Tk. 200/With VAT @ 5% on commision Issuance of Pay Order : Cash department on receipt of cash will deliver the above two vouchers to the concerned officer and his function will be to - make entry in the P.O. Issue Register duly authenticated and will record Register serial number (control number) on the face of the Application Form. - Issue Pay Order and write the Register serial number (Control Number) after the block series number on it. - Ensure that Pay Orders are crossed "A/c Payee" and get it signed by two authorised signatories. - Receive applicant's signature on the counter-foil of Pay Order and handover the Pay Order to the purchaser Register :
a) Pay Order Register b) Balance Book - Balancing on daily/weekly & on monthly. Encashment of Pay Order: a) Paid through clearing. b) Paid cash (subject to Manager’s written concurrence “Pay cash†on the PO duly signed) c) Payee's a/c credited (a/c maintained in our Bank) d) Purchaser's a/c credited (subject to “Release“ of the P.O. by the Payee/beneficiary on the overleaf of the PO). Payment of Pay Orders : As the Pay Orders are crossed A/c Payee they are not transferable/not negotiable. The Pay Orders are required to be presented to the issuing Branch for payment either through clearing house or for credit to the Payee's A/c. After presentation of the pay order for payment the concerned officer of the remittance department will enter the date of payment of that particular payment order in the Pay Order Issue Register duly authenticated by an authorised officer. The instrument itself is treated as debit voucher. The related entries are: Dr - Instrument - 30315006 (Just write A/c No.30315006 on the face of the Pay Order) CR - Payees A/c Exceptions: Purchaser may deposit the P.O. to another bank for clearing and if that bank satisfies about the purchaser's identity and endorse on the overleaf of the P.O. "Purchaser's A/c Credited". In that case all liability goes to that bank and we should not dishonour the Pay Order. Spoiled Pay Order instrument - Cancellation: Pay Order instrument spoiled while preparing the same, should not be destroyed but should be clearly marked as "CANCELLED" and be retained with the counter foil for record purpose. PO against A/C DR:
Use PO application form in TRIPLICATE in case client instructs to debit his account (First copy treated as DR voucher & 2nd copy treated as CR voucher and 3rd copy for the customer). In this case, get the signature of the account holder verified by the Head Teller/Remittance Incharge and confirm that the amount is available to his credit with posting and prepare the following single CR voucher: DR - Client's A/c (through PO Form) CR - Pay Order A/c : 30315006 (PO Form) CR - Other Fees & Commission: 40207009 Amount realised against commission of Pay Order. PO against Cheque: In case PO through a cheque bearing "Yourselves" with following instruction on the overleaf: "Please issue a Pay Order for Tk.______ favouring _____." In this case get the signature of the account holder verified by the signature verifying authority and confirm that the cheque amount is available to his credit with posting and duly cancelled. Prepare a separate DR Voucher (with advice) in case cheque amount do not cover PO amount plus Other Fees & Commission subject to client's written concurrence. DEMAND DRAFT (DD) an instrument in writing containing an order of the issuing Branch upon its another Branch known as drawee Branch for payment of a certain sum of money to the payee or to his order on demand by the beneficiary presenting the draft itself. DD's never become stale. PROCESSING INSTRUCTIONS FOR DD: 1) On approach by a customer for issuing a DD, get the application form properly filled up & signed by the applicant. 2) Complete the lower portion of the application form meant for Bank's use. 3) Calculate the total Taka amount payable including Bank's commission/charges etc. 4) If the purchaser desires his account with the Branch to be debited for the amount of DD, get the A/C number & the A/C holder's signature verified properly from Signature Card on record of the Branch and debit client's account for the total amount including commission/charges etc.
5) If a cheque is presented in payment for the DD, get the cheque duly passed for payment by the competent authority and record the particulars of DD of the bank of the cheque. 6) If cash deposit is desired, request the purchaser to deposit the money at the Teller's counter. 7) The Teller, after processing the application form, cash or cheque will validate the application form. 1. The first copy of the DD application form is treated as "Credit Voucher" to credit Head Office General Account : 10802007 while the second copy is treated as customer's copy. 1. All the required particulars of all DDs issued should be entered in the DD issue Register duly authenticated. Separate folios should be opened for each drawee branch in the DD issue register. 1. Each branch should use a running control serial number of their own for issuance of DD on each drawee branch. This control serial No. should be introduced at the beginning of each year which will continue till the end of the year. A fresh number should be introduced at the beginning of the next calendar year & so on. 2. While issuing Local Drafts of Tk.50,000/= and above, Branch shall put a TEST NUMBER in RED INK on the upper portion of the drafts so that the drawee Branch can immediatelymake payment of the DD on presentation after getting the test agreed, if otherwise found in order. 1. Issue of Drafts, must be followed by issue of credit advice (IBCA) by the issuing branch to the drawee branch. Fill up the Commission part meant for Bank's use as per rates prescribed by your Head Office from time to time and arrange to deposit the DD amount through DD application form, Commission and Telex/cable charge through two separate CR vouchers over the cash counter/transfer: CR : Income A/C - Remittance : 40205007 mount realised against commission of DD. No……… . drawn on ……. Br. CR : Income A/C - Telex/Postage : 40205007 Amount realised against Telex charge/Postage charge against DD No……. dawn on ……… Br. Remittance Charges : 0.15% of the total DD amount but not less than Tk.50/& Postage/telex/cable charge : Tk.50/-. ISSUANCE of DD:
On getting the above vouchers duly received by the Cash Department, arrange to do the following: •
Keep a record in the DD Issue Register on branch-wise mentioning full particulars of the DD.
•
Provide a Issue Number (DD Number, Register Sl. Number & Current year) from the DD Issue Register on branch-wise. Give a TEST NUMBER on the Application Form in case DD amount is >= Tk.50,000/-. Do not
•
provide test number on the face of the DD. Issue DD and HANDOVER the instrument to the purchaser duly received by him on the
•
overleaf of the perforated portion meant for Bank’s use. Inform through Telex/Letter to the responding branch giving full particulars of the DD issued
•
with Test Number on the same day duly signed by two authorised signatories. Issue IBCA to responding Branch (the branch on which DD was issued) on the DD amount
•
only (excluding Commission and Postage charge) giving full particulars of DD except test number. DD placed for payment after receipt of IBCA: Record the date of payment in the column “payment against advice†of the DD payable Register duly signed by an authorised signatory. DR : DD Payable : 30316007 : Tk.1,00,000/(Simply write: 30316007 on the DD instrument) CR : H.O. Gen. A/c : 10802007 (Voucher prepares by Clearing Department) Amount of ____ cheques/DDs drawn on us and honoured. Or CR : Payees A/c (in case of transfer) DD placed but IBCA not received: Record the date of payment in the column “payment without advice†of the DD payable Register duly signed by an authorised signatory. DR : DD paid without advice: 10730009 (write the a/c number on the instrument) CR : Party a/c (Voucher prepares by Clearing Department) On subsequent receipt of the credit advice (IBCA) from the issuing branch the following entries should be passed: DR : HO Gen. A/c (Against IBCA) : 10802007
CR : DD Payable : 30316007 Amount responded against IBCA No._________ dated _____ for onward payment against DD No.______ favouring ____________________. DR : DD Payable : 30316007 CR : DD paid without advice : 10730009 (G-006) Amount paid from DD Paid Without Advice on ______ now reversed on receipt of IBCA No.__________ dated ______ against DD No._______. DD against party A/c Debit: Use DD application form in TRIPLICATE in case client instructs to debit his account (First copy treated as DR voucher & 2nd copy treated as CR voucher and 3rd copy meant for customer). In this case, get the signature of the account holder verified by the Head Teller/Remittance Incharge and confirm that the amount is available to his credit with posting. Other formalities are as usual. DD against Cheque: In case DD through a cheque bearing "Yourselves" with following instruction on the overleaf: "Please issue a DD for Tk.______ favouring _____, CD Account No.____ with your ____ Branch, _____. In this case get the signature of the account holder verified by the Head Teller/Remittance Incharge and confirm that the cheque amount is available to his credit with posting and duly cancelled. Prepare a separate DR Voucher (with Advice) in case cheque amount do not cover DD amount plus charge and commission subject to clients written concurrence. CANCELLATION of DD: Only the purchaser can request the issuing branch for cancellation of a DD. The drawee branch can not cancel a DD. The drawee branch can accept cancellation instructions only from the issuing branch. When a draft is cancelled by the issuing branch the relative entry is reversed on receipt of IBCA from the drawee branch. At the request of the purchaser, issuing branch can request the drawee branch for cancellation of DD with a request to issue an IBCA. Here Principal Branch is the issuing branch and Agrabad branch is the responding (drawee) branch. Functions of drawer Branch:
Drawee branch on receipt of written request from the issuing branch will follow the following procedure: DR : DD Payable : 30316007 : Tk.10,000/CR : H.O. Gen. A/c : 10802007 : Tk.10,000 Amount reversed due to cancellation of DD No. ____ dated ______vide letter/telex dated ______ from our Principal branch. IBCA to Principal Branch: Amount reversed to your end in respect of your DD ______ No.______ dated ___________ cancelled vide your letter/telex dated _______. Functions of Issuing Branch: DR : H.O. Gen. A/c : 10802007 : Tk.10,000/(Respondent of IBCA) CR - Purchaser’s a/c : : Tk. 9,950/CR - Other Fees and Comm. : 40207009 : Tk. 50/Amount realised for cancellation of DD No.___ dated ____. Cancellation Charges : DD upto Tk.1000 : Tk.25/above Tk.1000 : Tk.50/STOP PAYMENT OF A DRAFT : Normally the payment of a draft can not be stopped by the bank as it goes against its own commitment in favour of a third party. However, stop payment instructions can only be issued by the issuing branch in special circumstances at the request of the purchaser or payee in case of a lost or stolen draft only. In such cases extreme caution should be exercised both by the issuing and the drawee Branch. SANCHAYAPATRAS Bangladesh Bank vide their Circular No.________ dated ___________ stated that no interest on the sanchayapatras can be allowed to the client by the bank when the same will be under lien. SANCHAYAPATRA - INTEREST ON QUARTERLY REST: 1998
a) Purchase Limit : Single name : Tk.1 lac to 20 lac Joint name : Tk.40 lac It may be mentioned that if any individual purchases the above sanchayapatra for Tk.20 lac he will not be allowed to purchase any more jointly. b) Interest : 1 lac : Tk. 3,375/- monthly 2 lac : Tk. 6,750/- " 5 lac : Tk.16,875/- " 10 lac : Tk.33,750/- " - It is an individual sanchayapatra, It has got no relation with other Sanchayapatra - Loan can be allowed against this sanchayapatra provided marking of lien. c) Premature Encashment: - No interest before one year. - 9% on completion of one year. - 10% on completion of two years. Basis of calculation: Principal amount minus amount paid against interest on quarterly rest plus interest to be paid for premature encashment FOREIGN REMITTANCE DEPARTMENT - CASH/T.C TCs are issued by the banks to the persons going abroad to avoid the risk of loss or inconvenience in carrying cash while travelling. While issuing TCs the purchaser is required to sign the TC in the prescribed place in presence of the issuing Officer and again countersign on the same at another prescribed place at the time of encashment before the encashing/Paying banker abroad. The paying Cashier will tally both the signatures and if they satisfied will make payment of the TC. TCs of reputed Companies/Banks are universally accepted for payment at all important financial centers/big cities of the world. There is no expiry date for the TCs. We used to collect TC/Cash USD from American Express Bank on requisition through forwarding letter on TR basis and after sales (By cash /by cheque or by Client's a/c DR) of TC/Cash USD we used to send statements daily or twice in a week along with a covering letter with instruction to debit our
a/c maintained with American Express Bank, New York and credit Travelers Cheque Division A/c for US $. QUOTA: a) Annual entitlement per person per calendar year for travel to outside Bangladesh on Private Ground: (Without prior approval of Bangladesh Bank). CASH - Other than SAARC countries & Myanmar : USD 3000 600 - SAARC countries & Maynmar : USD 1000 600 - India by land : USD 500 500 b) Minors below 12 years of age : 50% of quota. Commission : 1% of total TC amount Charge : Tk.200 per passport. Pre-requisite for issuing TC: a) Must be an account holder or proper reference for our safety regarding the identity of the traveler. b) Valid Passport with VISA. c) Ticket - both ways (O.K.) d) Date of departure must be within 14 days from the TC/Cash issue date. Business Quota: Prior approval of Bangladesh Bank is required. a. Every year a pass book is issued to the exporters who has export earning not less than Tk.5.00 million p.a. b. New Exporters : US$ 6,000/a. Importer: 1% of imports settled during the previous financial year. Maximum limit USD 5000/-. a. Non-exporting producers: 1% of turnover of preceding financial year. Maximum limit USD 5000/-.
COMMISSION & CHARGES e) DR - SUNDRY FC - SALES : 30316916 : TK. COMM.+ CHARGE CR - OTHER FEES & COMMISSION: 40207009: TK. COMM.+ CHARGE Commission and endorsement charge realised from the client for the issuance of Foreign Currency. TC SELLING: f) DR - SUNDRY FC - SALES : 30316916 : TK. TC AMOUNT ONLY CR - HEAD OFFICE GEN. A/C: 10802007 : TK. TC AMOUNT ONLY (Fex:28&29) For American Express Bank TC sold. IBCA to H.O. REF: TC settlement dated today. N : For Am. Ex. T.C. settlement : Tk. TC AMOUNT ONLY. Register: a) TC & Cash Register. b) TC Stock Register. c) Reserve Cash Register. Note: - TC to one person against entitlement of a group should be avoided except in case of a family group where the total amount released to the group may be endorsed on the Passport of the head of the family recording proper reasons for such release. - If the amount is released in TCs the person concerned must sign on the TC in presence of the issuing Officer. - Cash foreign currency notes may be issued to a Bangladesh Traveller upto a maximum amount of USD 600/- provided quota do not exceed. - The amount released should be reported to Bangladesh Bank on T/M form through usual monthly return along with prescribed schedule.
Statements to submit: a) VAT (15%) to be deposited to Bangladesh Bank on the same day as per Annexure - KA through Treasury Challan. b) Client be informed through PRC (Proceeds Realisation Certificate) i.e. as per Annexure - KHA together with photocopy of Bangladesh Bank Challan duly attested by authorised signatory. c) Collectorate of Customs, Excise & VAT be informed (As per Annexure - KHA) about the total tax deducted from the Indenting firm together with supporting papers. FOREIGN TELEGRAPHIC TRANSFER (FTT) 1) Receipt of FTT through Telex. If tested FTT and agreed by us, prepare following voucher Or If not a tested FTT, on receipt of H.O. letter regarding confirmation of credit to our Nostro A/c, prepare following vouchers: DR - H.O. Gen A/c : 10802007 (sv) Amount of USD realised from Am. Ex. Bank, N.Y. against our H.O. Advice dated _______. @ Tk.=_______(TT clean rate of payment date). CR - Client's a/c No._________. (Advice) US$ ______ credited to your a/c @ Tk.______ against FTT, ________ Bank, By order of (B/O) _____________. Issue an IBDA to H.O. Amount debited against FTT from _____ Bank as per your advice dated _________. FOREIGN BILLS FOR COLLECTION (FBC) - Entry in the FBC (Foreign Bills for Collection) Register. - FBC round Seal on the face of the cheque & deposit slip and record FBC Number. - Special Crossing Seal on the Cheque/Draft/Money Order. - Seal on the overleaf of the cheque "Payee's A/c will be credited on realisation".
- Collection Item Slip be filled in for each individual cheque/P.O. & must deliver through Courier Service keeping proper record. - Photocopy of Cheque/Draft/Money Order be kept in the file together with deposit slip, collection item slip and a letter. - Lodgement voucher: a) DR : Bills for collection (bill lodged) : 10908205 : Tk.1000 CR : Bills for collection : 30908201 : Tk.1000 (Fex-28&29) Amount of Cheque No._____ dated _______ drawn on _____ Bank, _________ Branch, N.Y. sent to ______ Bank for collection vide FBC No._______. c) Send the FBC through Am.Ex Bank - Through their prescribed collection forwarding. Other Banks - Through Letter On receipt of CR advice from the Bank with whom we maintain Nostro a/c, prepare the following vouchers: a) DR : Bills for Collection : 30908201 : Tk.4,96,200/CR : Bills for Collection (Bill Lodged) : 10908205 Amount of $ 12,000/- realised from Am.Ex., NY as per SBL H.O. advice dated 27.4.96 against our Ref: FBC/300/96 dated 11.4.96. b) DR : Head Office Gen. A/c : 10802007 : Tk.4,96,200/CR : Party's A/c (Fex:28&29) c) DR : Party's A/c : Tk. 550/Amount debited against Fx. collection charge Ref: FBC/300/96 dated 11.4.96. CR : Commission of Bills for collection : 40204006 : Tk. 500/-
Amount realised from the client's a/c No._______ against F.Ex. collection, Ref: FBC/300/96 dated 11.4.96. CR : Remittance Fees : 40205007 : Tk. 50/Postal charge realised from the client against FBC/300/96 dated 11.4.96. FUNCTIONS OF CLEARING DEPARTMENT Clearing House: A bankers clearing house is an autonomous institution having its own rules and regulations for admission of members and sub-members for the conduct of clearing. Clearing is a mechanism through which claims and counter claims of the clearing house members (banks) on account of cheques, drafts, bills, pay orders etc. drawn on each other and deposited by their customers for collection are settled daily. In other words, a clearing house provides a mechanism by which various bankers exchange local cheques, drafts etc. drawn on each other, which are received by them from their customers for collection. Under the clearing system, reciprocal claims of one bank against others are off set and only the net balance or difference between receipts and payments are settled by drawing on the account of the debtor bank maintained with the Central Bank. In Bangladesh, the Bangladesh Bank organizes the clearing house where it has an officer. In other places Sonali Bank acts as the clearing house. OUR COMMON FUNCTIONS: a) Check : See that the Cheque series number, date, amount, payee, Bank and branch are same as mentioned in the deposit slip. b) Seal : "Southeast Bank Limited (Special Crossing) Principal Branch" (on the face of the instrument) OUTWARD CHEQUES: (Other Bank's Cheques received by us for clearing) a) Clearing Seal on the face of the Cheque with next clearing day's date. a. Posting to Outward Clearing Register. b. Posting to computer for next clearing day’s operation d) Endorsement Seal on the overleaf of the cheque/PO/DD as under: When the beneficiary is : Endorsement
a) M/s./Personal Name : Payee's A/c credited b) Cash/Self cheque : Received Payment for Jamuna Bank Ltd. (can’t be a/c payee) c) SBL : Received payment for SBL d) SBL, Mr. _SBL Br. A/c : Received payment & Payee's A/c credited. e) Mr./M/s_ A/c_ SBL.,Br : Payees A/c Credited f) P.O. if deposited : Purchaser's A/c credited. (Duly released by the beneficiary) g) Date Change for clg. : "Date cutting in clearing stamp confirmed" h) Withdrawal of Chq. : "All our clearing stamp and crossing cancelled" i) Re-submission " : "Date cutting in clearing stamp & Clearing Stamp for next operation day†confirmed. j) OBC of other branch : Ctg: “Payee’s a/c will be credited on realisation†. PB : “Our branch endorsement confirmed†PRE-REQUISITE FOR SENDING CHEQUES FOR CLEARING: a) Sort-out the cheques on Bank-wise and branch-wise - Prepare Schedule on branch-wise - Prepare a global schedule on bank-wise on their local office. b) Clearing Summary Sheet be prepared for clearing house (Bank-wise). BANKERS' CLEARING HOUSE, DHAKA BANGLADESH BANK BUILDING (2ND FLOOR) a) Record the cheque series number, a/c number, bank's name and the amount in the clearing Register.
b) In the Summary Statement record total number of cheques and amount against concerned banks name in the "Delivered" column. c) Distribute the cheques to the respective banks' tables. d) Cheques received by us be posted in our "Received" cheque column of summary statement. e) Column "To Pay" or "Delivered" is our CR side. f) Original copy of Summary statement be delivered to the House Superintendent of Bangladesh Bank in the clearing house. g) Entry in the Inward Register (received instruments). h) If the amount of "To Pay" or "Delivered" side is higher than the amount of "To Receive" side then we can say that the house is in our Favour i.e. our a/c with Bangladesh Bank be credited, if not, our a/c with Bangladesh Bank be debited. i.
Cheques of our other branch(s) be separated and total number and amount of cheques be incorporated in the Inward Clearing Register and Grand Total must agree with the Summary Statement.
j) House ends when Bangladesh Bank's total DR and total CR agrees. If figure differs in hundred, each of the banks representative one by one call their "To Deliver" & "To Receive" figures mentioned in their hundred columns. k) If under unavoidable circumstances, Clearing House fails to settle both DR and CR, then our Favour/Against do not come into effect for that day because without settling the DR CR Clearing House do not DR or CR any banks account maintained with Bangladesh Bank. 1ST CLEARING HOUSE Prepare the following vouchers in the morning on the total clearing cheque/P.O. amount including cheques/POs of other Branches. Assume, total instruments received for clearing (including branches) valued Tk.500/- out of which cheques/POs/DDs of our Principal Branch is Tk.300/-, cheque of our Imamganj Branch is Tk.150/- and a cheque received from our Agrabad Branch through their OBC is Tk.50/-: DR : H.O. Gen. A/c : 10802007 : Tk. 500/Amount of 55 cheques/Pos/DDs (including 10 cheques of Imamganj Branch and 1 cheque of our Agrabad Branch) sent to Clearing House for collection. (Clearing Seal) Prepare: IBDA to H.O.
: Tk. 500/-
Amount of total 55 cheques (cheques/Pos/DDs (including 10 cheques of Imamganj Branch and 1 cheque of our Agrabad Branch) sent to Clearing House for collection. CR : Respective clients' A/c of PB. : Tk. 300/(deposit slip treated as CR Voucher) CR : Clearing House A/c : 30631118 : Tk. 150/(on branch amount) CR : IBC (Interbranch Collection A/c): 30316895 : Tk. 50/Amount of cheque No...... dated ............ drawn on ............. sent for collection vide OBC No....... of Agrabad Branch, Chittagong. Note : Please handover the above vouchers to the Computer Department in the morning as early as possible. Then send all instruments according to bank and branch-wise to Bangladesh Bank for clearing. RETURN Cheques received in the 2nd Clearing House - Preparation of Voucher: Out of the above total cheques/POs/DDs for Tk.500/- sent to 1 st clearing House, following cheques/POs/DDs returned unpaid (Bounced)/honoured: Bounced Honoured Principal Branch : Tk.100/- Tk.200/Imamganj Branch : Tk. 50/- Tk.100/Agrabad Branch : Tk.Nil Tk. 50/DR - Respective Clients' A/c of our Br.
: Tk.100/-
(Advice) Amount of Cheque No.________, ______ Bank returned unpaid. CR - H.O. Gen. A/c : 10802007 : Tk.150/(Single) Amount of 6 (six) clearing cheques (Imamganj : 2, Principal: 4) returned unpaid as on _______.
IBCA to Head Office : Tk.150/Amount of 6 (six) clearing cheques returned unpaid on 9.6.96 (Imamganj : 2 cheques for Tk.50/-). DR : Clearing House A/c : 30631118 : Tk. 150/Amount of 10 clearing cheques sent to Bangladesh Bank for clearing now reversed for adjustment. CR : H.O. Gen. A/c : 10802007 : Tk. 100/Amount of 8 (eight) IBCA to Imamganj Branch : Tk. 100/Amount of 8 (eight) clearing cheques honoured on _______. Note: 2 cheques returned unpaid/bounced for Tk.50 should be returned along with the IBCA to Imamganj Branch. DR - IBCA (Interbranch Collection A/c) : 30316895 : Tk. 50/Amount of cheque No...... dated ...... drawn on ..... sent for collection vide OBC No....... of Agrabad Branch, Ctg and honoured. CR : H.O. Gen. A/c
: 10802007 : Tk. 50/-
IBCA to Agrabad Branch: Tk. 50/Amount of cheque No...... dated ...... drawn on ..... sent for collection vide OBC No....... of your end and honoured. Note: Each individual client should be informed immediately over phone about the return of their cheque LOAN CLASSIFICATION AND PROVISIONING (5th Phase: Effective from 31.12.1998) In order to strengthen credit discipline and improve the recovery position of loans and advances by the banks, Bangladesh Bank has introduced a system covering loan classification & provisioning. Now, we are running with fifth phase effective from 31 st December, 1998. What is classification ?
:
Grading of risk involved in credit portfolio. To classify the loans/advances according to risk gradation on the basis
How it is done ?
:
loan classification Manual provided by FSRP. Based on the outstanding balance at reference date, the date on which the loan’s condition is used to classify, if any, to determine the provisions and treatment of interest (interest suspense).
Types of classification: 1) Unclassified : Involve sustainable risk. 2) Classified: Substandard (SS) : Greater than normal risk. Doubtful (DF) : 50% risk : 50% probability Bad/Loss (BL) : No probability (100% risk). Category of Loan: For classification purpose, loan portfolio is classified into 3 (three) categories: - Continuous loan - Demand loan - Term Loan Again Term Loan classified into - 5 years & above - Below 5 years Continuous Loan
:
The loan which has no particular repayment schedule, but contains date of expiry, credit limit etc. will be termed as
Demand Loan
:
Continuous Loan e.g. CC, OD etc. The loan which is considered repayable only after it is claimed by the banks, will be termed as Demand Loan. If contingent or any other liability is converted to Compulsory Loan or Forced Loan (i.e. loan without having prior approval as a regular loan) then it will be termed as Demand Loan, e.g. Forced LIM., BLC.,
Term Loan
:
TR., FBP., IBP etc. The loan which is repayable within a particular period of time
as per repayment schedule, will be termed as Term Loan (including short (upto and including 12 months), medium (more than 12 months upto and including 60 months) and long term (more than 60 months) loans with fixed repayment schedule. Criteria for Classification: Criteria 1. Overdue 2. Required Payment
Applicable to Continuous and Demand Loans Term Loan both less than 5 years &
3. 4. 5.
more than 5 years. Continuous Loans. All types of Loans. All types of Loans.
Limit Overdrawn Legal Action Qualitative Judgement
Rules for classification in terms of aforesaid criteria: (w.e.f. 31.12.2001) Sl. 1.
Criteria Overdue
Loan Continuous Loan & Demand
Overdue Period 0 - less than 6 6 - less than 9 9 - less than 12 12 months +
CL Status Unclassified Substandard Doubtful Bad/Loss
Loan As per new rule there is no restriction for getting/sanctioning any loan in favour of client having Substandard or Doubtful loan with other banks in his own name or in the name of sister concern. But if there is any Bad Loss (BL) there is restriction for getting/sanctioning fresh loan. Sl. 2.
Criteria
Loan
Overdue
Required
No. Term Loan : 0 - 6
Payment
less than 5
instalment CL Status
(Eqv. to 6 months) 6 - 12 12 - 18 18 + Term Loan : 0 - 12 More than 5 12 - 18 18 - 24 years. 24 + Criteria Loan Note Legal Action For all types Reference date of the years.
Sl. 3. 4.
Unclassified
Substandard Doubtful Bad/Loss Unclassified Substandard Doubtful Bad/Loss CL Status Bad/Loss
Qualitative
of Loans date of filing suit For all types On the judgement of Any status.
Judgement
of Loans
the Management over
Sl. 5.
Criteria Limit
Loan Continuous
the client. Note On the judgement of
Overdrawn
Loan
the Management over
criteria
CL Status Any status.
the client.
Exceptions: The advance need not be treated as overdue if the following two conditions are met: All interest on the advance has been paid as due The bank has approved eligible security equal or in excess of the amount due. Reference Date: The date on which the loan’s condition is used to classify, if any, to determine the provisions and treatment of interest (interest suspense). Overdue: The length of overdue is the time between the loan becoming due and the reference date. For example, if the reference date is 31.12.89 and the bank gave notice demanding repayment on 31.1.89 the loan becomes due on 28.2.89 and is now 10 months overdue. What is provisioning ? Accumulation of fund to offset any write off resulting from the loan classification. Provision Base (amount on which provision rate is applicable/applied):Total outstanding minus Interest Suspense minus approved eligible securities i.e. cash collateral, quazi cash collateral (Gold: 100%, Cash Collateral: 100%, Mortgage Property (Land/Building): 50% of the market value). Accounting procedure of interest of classified loan: If any credit or advance is classified as Sub-standard or Doubtful, the interest will be imposed on that credit account but such interest will not be transferred to the Income Account. Total interest imposed on Sub-standard or Doubtful Account will be kept in Interest Suspense. If any credit or advance is classified as Bad and Loss, imposition of interest on that account will be suspended forthwith. If any suit is required to be filed for recovery of such credit, the suit will be filed on the total amount of principal including interest calculated upto the period before the suit is filed. Such interest will be kept on Interest Suspense. In case of any other special reason if interest is imposed on Bad and Loss Account then such interest will be reserved in interest Suspense Account.
If any classified loan or part thereof is recovered i.e. actual deposit on account of recovery is made in the credit account, then recovery of non-imposed as well as imposed interest will be made first from such deposit. Then original loan will be adjusted. In case of classified loan of Continuous, Demand and fixed term credit the banks will keep Provision for Reserve at the following scale after adjustment of interest suspense and value of Eligible Securities (Security in respect of : lien against loan : 100%, Gold: present market value: 100%, Guarantee made by Govt. or Bangladesh Bank: 100%, market value of easily marketable goods: 50%, market value of the mortgaged land & building : 50%) from outstanding balance of classified credit the reservation of provisions will be kept on the calculated balance. General provision will also be kept at a rate of 1% on unclassified loans. Unclassified (UC) : 1% Substandard (SS) : 20% Doubtful (DF) : 50% Bad/Loss (BL) : 100% Definitions of Affiliations are: Affiliate
:
A firm which is associated with another. A company/a group of companies if holds below 50% share of a public holding company
Parent
:
having no control over that company will be considered as affiliate. A holding company or an operating company which has control over a number of other companies known as its subsidiaries may be termed as parent. The parent organizations are the Sector Corporations and the Group of Companies/Industries. Every Sector Corporation has some Subsidiary organizations and every Group of Companies/Industries has
Subsidiary
:
some Sister-concerns or Subsidiary organizations or both. A company is legally controlled by other company. Although a share holding of less than 50% may be sufficient to control a company effectively, it is not correctly described as a subsidiary unless between 50 and 100% of the shares are owned by another. Subsidiaries are retained by companies in order to allow local participation, a wish to conceal a business information or to avoid the cost and complication of
Sister-concern
:
integrating an acquired company. In different trade or manufacturing
units
where
partners/directors are common, are termed as Sister-concern. BOOK-KEEPING IN Jamuna BANK LTD.
some
In the normal course of business activities, a bank has to perform various types of dealings such as accepting of deposit, paying cash for withdrawal of money from clients accounts etc., all these dealings are called banking transactions. All these day-to-day transactions are to be recorded in the books of accounts for keeping permanent records. The act of recording the business transaction in a set of Books of Accounts systematically and permanently is known as Book Keeping system. In Jamuna Bank Limited we are maintaining Book Keeping system in our own. Accordingly, all our business transactions are to be recorded in the Books of Accounts through Journal Entries. Now we shall discuss about the Journal Entries which are required to be passed by the different departments of our branches and Head Office from the very opening of cash from the vault to start with operation of the day and closing of the cash. Cash: a. Teller’s accepting cash from the Incharge of Cash Department: DR : Tellers Cash CR : Reserve Cash a. Tellers accepting deposit from the depositors: DR : Tellers Cash CR : Clients a/c a. Tellers Paying cash to the A/c holder: DR : Clients a/c CR : Tellers Cash a. Tellers purchasing Foreign Currency: DR : Tellers Cash F.C. CR : Tellers Cash Taka a. Tellers Selling F.C.: DR : Tellers Cash Taka
CR : Tellers Cash F.C. a. Tellers Purchasing T.C. from clients: DR : Cash item F.C. CR : Tellers Cash Taka a. Tellers Selling T.C. to clients: DR : Tellers Cash Taka CR : Accounts Payable – T.C. (FC) In this connection we are maintaining record of total T.C. delivered by American Express in Memorandum A/c by passing a single entry which is reversed only on sale of T.C. h) Closing of Cash: DR : Reserve Cash CR : Tellers Cash In case of Transfer entries: Clients depositing a cheque for crediting the proceeds in his account – Transfer Cheque: if it is drawn on the bank herself. a) DR : Clients account on whom it is drawn CR : Clients account to whom it is deposited. b) Clearing Cheque: Outward Clearing. DR : Exchange for clearing CR : Deposit awaiting disposal DR : Deposit awaiting disposal CR : Clients account DR : Head Office General A/c.
CR : Exchange for clearing. c) Outward clearing cheque returned: DR : Clients account CR : Head Office General A/c Inward Clearing: a) DR : Exchange for clearing - Inward CR : Head Office General A/c. b) DR : Clients account CR : Exchange for clearing – Inward In case of return of Inward clearing cheque: DR : Head Office General A/c. CR : Clients account 1) SAVINGS BANK ACCOUNT: 2100.. DR - Withdraw by cheque: Tellers Seal & Posted Seal CR - Deposit :Tellers Seal & Posted Seal Or Clearing Seal & Posted Seal. CR Voucher in case of Collection Cheque: Narration: Amount of Cheque No._____ dated _______ _____ branch sent for collection through clearing house. 2) STD A/C: 3100 DR - Withdraw : Tellers Seal & Posted Seal Clearing Seal of other Bank & Posted Seal & on overleaf our Seal "Payee's a/c Credited". Transfer Cheque: DR - Client's a/c : Transfer, Crossed Seal "SBL, PB", Transfer Seal, Posted Seal.
Overleaf - Write: Credit a/c No...... Seal : "Payee's a/c credited". DR Voucher: 31000125. Amount transferred to CD/SB/... a/c No..... as per standing instruction. Seal : Posted & Transfer. PAYMENT AGAINST CHEQUE OF OUR OTHER BRANCH: This facility is provided to a gentleman on request who is a client of your other branch as well as yours as a very special case subject to Manager’s consent. On getting the cheque from the client of your other branch, confirm over phone about the balance and confirm to hold the amount and then prepare the following vouchers: DR - Head Office Gen. A/c - 10802007 CR - Party a/c Issue IBDA to the concerned Branch along with the Cheque. DR - Cheque CR - Cash CLOSING OF ACCOUNT: DR - Client’s A/c No…………. : Tk.200/Amount debited for closing charge of account as per instruction of the client vide letter No………………….... dated.………...... . CR - Other Fees & Commission : 40207009 : Tk.200/Amount realised against closing charge from the client against his a/c No........ . VOUCHER AGAINST SHARE MONEY: DR - Cash CR - COMPANY'S A/C : TK.
Amount received against ...... Nos. of shares through ......Nos. of share applications received from sundry parties.
FUNCTIONS OF ACCOUNTS DEPARTMENT/FCD DEPARTMENT: a) Sorting of vouchers b) Audit of daily transactions. c) Preparation of Extracts (daily) to send H.O. d) Preparation of Thursday position. e) Preparation of Daily Statement of Affairs. f) Preparation of Consolidated Statement of Condition - Profit & Loss (Monthly) g) Preparation of Statement of SBS - 01 (Monthly to H.O.) h) Preparation of Statement of SBS - 02 (Quarterly to H.O.) i) Preparation of Voucher for depreciation: - @10% on Furniture Fixture (Book value *10% ¸ 12 = Monthly depreciation amount) depreciated on 10 years basis. - @20% on Electrical appliances (other than Furniture Fixture) (Calculation: Book value *10% ¸ 12 = Monthly depreciation amount) depreciated on 5 years) basis. J) Monthly Salary: P.F. to SB A/c : Deposit to (PF Amount) : SBL Employees PF : 21005551 DR - P.F. Contribution : 20230301 Amount of provision made as PF contribution for the month of ...... as per attached sheet. CR - P.F. : 30637601 Amount of provision made for Bank's contribution against PF for the month of ....... as per sheet attached with DR voucher.
Income Tax: CR - Pay Roll Tax : 30637205 Amount deducted from salary of Executives, Officers, Staff for the month of ....... as per attached sheet. To Bangladesh Bank: DR - Pay Roll Tax : 30637205 CR - Pay Order Fvg. Bangladesh Bank through Treasury Challan No.IT 31 (B) Revised mentioning the Pay Order No. .. dated...... . GUARANTEE/INDEMNITY guarantee is a contract between the Guarantor (Surety) and the beneficiary wherein the Guarantor undertakes to be collaterally/secondarily responsible for the debt, default or miscarriage of a third party. A guarantee is a “Contract to perform the promise, or discharge the liability of a third person in case of his default†. In banking, it is an irrevocable obligation of a Bank to pay a certain sum of money in the event of non-performance of a contract by a third party. A Bank guarantee is a non-funded facility. It is a contingent liability for the Bank, which may or may not turn into a real liability within a future date. Non-funded facility to a customer refers to a bank’s commitment to a third party on behalf of the customer. The commitment itself constitutes facility but does not involve cash outflow from the bank. The Bank’s commitment essentially states that in the event of occurrence /non-occurrence of a particular event, within a particular date, due to a particular reason or reasons, a specific sum of money shall be paid by the bank to the third party upon claim in a particular manner. Foreign beneficiaries frequently stipulate for issuance of a guarantee by a bank in their own country. In this event, the principal debtor/customer request his bank to instruct a Bank in the beneficiary’s country to issue the guarantee. In accordance with the prevailing terminology the customer’s bank is called the first bank or instructing bank and the bank in the beneficiary’s country is called second bank or issuing bank. The instructing bank do not have any contractual relationship with the beneficiary and the beneficiary can never claim payment from the instructing bank.
ESSENTIALS OF GUARANTEES: - It is essential that an expiry date must be given so that the period of liability can be clearly ascertained from the text of the guarantee. - All guarantees must bear two authorized signatures, one of which must be that of Manager/SubManager. - A counter guarantee must be obtained from the customer. Both the guarantee and the counter guarantee must be appropriately stamped. Bid/Tender Bond: The invitation for tender require bidders to furnish a Bid/Tender Bond for a certain percentage of the project value, ordinarily, it ranges from 1 to 5% of the project value. A Bid Bond/Tender Bond may be defined as an undertaking given by the Bank at the request of its customer to pay certain sum of money to the beneficiary in the event of default by the customer in the obligations resulting from the submission of the tender. The purpose of the Bid Bond/Tender Bond is to provide an assurance of the intention of the party submitting the tender to sign the contract if his tender is accepted. Performance Bond: A Performance Guarantee is an undertaking given by a Bank at the request of its customer to the beneficiary to make payment of a stated amount of money in the event of default in due performance of the contract. The performance guarantee is intended as a safeguard against the party to whom the contract is awarded failing to meet his obligations under such a contract, which by its nature normally requires a period of time for completion. Advance Payment Guarantee: It is a Bank guarantee to guarantee the proper and faithful performance of the contractor under the clause of the Contract for an specified amount. This guarantee shall remain valid and in full effect form the date of the advance payment under the Contract until the authority, receives full repayment of the same amount from the Contractor but not exceeding the specific date. Indemnity Indemnity means security against compensation for loss or damage. As define in section 124 of the contract Act, the contract of indemnity is “a contract by which one party promises to save the
other from loss caused to him by the conduct of the promisor himself or by the conduct of any other person. Difference between the Guarantee and Indemnity:
Guarantee
Indemnity
Undertaking to pay the debts of the creditor
Assurance to compensate any loss.
(beneficiary). 3 parties involved e.g. creditor (beneficiary), principal debtor (Customer) and the
2 parties involved e.g. indemnifier and the indemnity holder.
guarantor/surety (Bank). 3
contracts:
Customer
&
beneficiary,
customer and the Bank, Bank & the
1 contract: between indemnity holder and the indemnifier.
beneficiary The
liability
of
the
guarantor
is
The liability of the indemnifier is primary.
secondary/collateral. There is an existing debt or duty
The liability arises on happening of a contingency.
The guarantor after discharging the debt owing to the creditor (beneficiary) can proceed for legal action against the customer (applicant) debtor. ISSUANCE OF BANK G'TEE/PG/APG/BID BOND CHARGE DOCUMENTS TO BE OBTAINED: a. DP Note b. Letter of arrangement c. Acceptance d. Letter of Continuity. e. Letter of Revival. f.
Counter Guarantee
g. Personal Guarantee ISSUANCE OF BANK G'TEE/PG/APG/BID BOND GUARANTEE/INDEMNITY
The loss falls on the indemnifier.
Issuance of Local guarantee/against counter guarantee of foreign Banks, prior approval of Head Office be obtained. Incase of issuance of Guarantee in foreign currency prior approval from Head Office as well as clearance from Bangladesh Bank under Exchange control regulation should be obtained. ESSENTIALS OF GUARANTEES: - It is essential that an expiry date must be given so that the period of liability can be clearly ascertained from the text of the guarantee. - All guarantees must bear two authorised signatures, one of which must be that of Manager/SubManager. - A counter guarantee must be obtained from the customer. Both the guarantee and the counter guarantee must be appropriately stamped. CHARGE DOCUMENTS TO BE OBTAINED: a) DP Note : Proprietor/Managing Director/ Authorised person d) Acceptance : The terms and conditions of sanction advice on duplicate copy. c) Letter of Continuity. d) Letter of Revival. e) Counter Guarantee : Proprietor/Managing Director/Authorised person f) Personal Guarantee : Third party/All the Directors in case of Limited Company. On 12.5.1998 we issued a Performance Guarantee for Tk.6,00,000/- with 10% margin for a period of one year. Tk.6,00,000 X 10% = Tk.60,000/- Margin amount Tk.6,00,000 X .6% = Tk. 3,600/- quarterly i.e. Tk.3600 X 4 = Tk.14,400/- annually We obtain .60% as commission per quarter on the Guarantee amount i.e. 2.4% annually. CREDIT RELATED QUESTIONS WHAT IS CREDIT ?
Credit is the confidence of the lender in the ability and willingness of the borrower to repay the loan at a future date. BASIS OF CREDIT: It is generally believed that confidence is the basis of all credit transactions. The fundamental principles upon which credit is generally based, are character, capacity and capital (3 C’s) or (3 R’s) i.e. reliability, responsibility and resources of the borrower. WHAT IS SLR ? WHAT IS THE CURRENT REQUIREMENT AND ITS DISTRIBUTION ? SLR stands for Statutory Liquidity Ratio. As per provision of Bangladesh Bank, every schedule bank is required to maintain with Bangladesh Bank/Sonali Bank 20% of their total demand and time liabilities or as may be decided by Bangladesh Bank from time to time of which 5% must be kept in the form of cash with Bangladesh Bank and rest 15% in the form of approved eligible securities or in cash in case of non-availability of approved eligible securities. WRITE DOWN THE NAMES OF THE 3 ‘C’s & 3 ‘R’s USED IN CONNECTION WITH SELECTION OF BORROWERS BY A BANK. Following re the 3 ‘C’s and ‘R’s used in connection with selection of borrowers by a bank: a) Character a) Reliability b) Capital b) Resources c) Capability c) Responsibility ADVANCE VALUE: The advance value of the securities is that part of their total market value which is arrived at by the banker after deduction of the stipulated margin. The advance value depends on the quantum of securities and may or may not exceed the sanctioned limit. MARKET VALUE: The total value of the primary tangible securities that the banker estimates for the purpose of allowing drawings thereagainst is called by him the “Market Value†of the securities. CREDIT DEPOSIT RATIO:Normally, the banker invests upto 70-75% of the total amount of deposits. The ratio that the total advances bear with the total deposits on a particular day is called the Credit Deposit Ratio.
OVERDRAFTS: Overdrafts are those drawings which are allowed by the banker in excess of the balance in the current account upto an agreed limit for a definite period as arranged for but not exceeding one year against acceptable securities. The advances may be clean or secured. The customer can freely operate on his account within the prescribed limit subject to the terms and conditions of sanction. TEMPORARY OVERDRAFTS: In practice, a banker also sometimes allows overdrawing in current account without any prior arrangement in order to honour a cheque of a valued constituent who has drawn it for a little higher amount than the balance, presumably being unaware of the exact amount in his credit. They are known as “Temporary Overdrafts†. Immediately after such a drawing is allowed the customer needs to be advised of it with the request for deposit of funds. CASH CREDIT ACCOUNT: Cash Credit Accounts are basically current accounts and are opened under prior arrangement for allowing credit facilities. The distinction between a current and a cash credit account is that the former is intended to be an account with credit balance and the latter an account for drawing of advances. After the loan is adjusted, it is not desirable to continue the account as Current Account. PACKING CREDIT: A Packing Credit facility is a pre-shipment advance granted to a customer to produce or buy goods for export to a foreign country against a letter of credit (L.C.), a banker’s letter of authority or a firm contract already in hand and lodged with the banker. Such a credit facility is allowed usually by way of cash credit to the extent of the contracted amount with or without any security. ASSIGNMENT: Assignment means transfer of an existing or future right, property or a debt by one person to another person. The transferor is known as the assignor and the transferee as assignee. Usually assignments are made of actionable claims, book debts, insurance claims. WHEN WE TRANSFER A LOAN TO PAST-DUE ACCOUNT AND WHY ? Advance remaining unpaid on maturity date are transferred to past-due account to facilitate monitoring and further follow-up. SPREAD: The difference between interest income and interest expenditure is known as Spread.
BURDEN: The difference between non-interest income and non-interest expenditure is known as Burden. PROFIT: Profit is just the difference between Spread and Burden.
ONE OBLIGOR CONCEPT: a) One obligor is defined to include: - Credit extended to any Corporation/Company, partnership or other business entity in which the borrower owns a “Direct†interest of 50% or more. - Credits extended to any business entity in which the borrower owns an “Indirect†interest of 50% or more, provided (a) the borrower exercises a degree of management control, either directly or indirectly (b) or if the fortunes of the indirectly owned units are affected by the business of the borrower or by the entities owned directly by him. - In case of credits extended to entities with less than 50% (direct or indirect) ownership of the borrower, if the control and/or business dealings of the borrower are of such impact as to influence the credit worthiness of the borrowers in the group. - All obligors related to the borrower as a result of guarantees, endorsements or other agreements/arrangements in favour of the Bank. - All obligors related as a result of common parent. b) The “One Obligor†total is to be taken into account while delineating the lending authority and determining level of approval. ACCRUALS: An accrual system is the method of recording and apportioning a sum or an amount into periods of time for making progressive entries to income or expense accounts. Although the following examples do not all relate to the loan function, they are given in order to provide a better understanding of accruals: a. When a Time Loan is made to mature in 90 days, the bank collect the interest from the borrower once a month for the portion earned for the interest period from the date of the loan to the last day of the current interest period and each month thereafter until maturity date. This amount of interest earned by the Bank for each interest period is charged to the borrower’s chequing account or billed to the borrower and credited to the Bank’s
earnings or income for accounting purposes. Thus the earned portion of the interest is properly spread and provides a more accurate accounting of the Bank’s position. a. When an expense is paid in advance such as Insurance Premium etc., the total of the expense item is debited to “Prepaid Expenses†and divided into equal monthly amounts for the period of time covered. The monthly portion is credited each month to “Prepaid Expenses†and debited to the corresponding Expense Account. Accruals provide a means of equalizing the monthly earnings and expenses on the Bank’s books which in turn reflects a more accurate current position of the Bank’s accounts. BANKER RIGHT OF GENERAL LIEN: Lien is the right of a creditor to retain goods/securities belonging to the debtor, till the debt is paid. Lien holder is in possession of the goods or securities but it does not give him the power of sale unless such a right is expressly conferred by the statute. This is possessory lien. Possessory lien is of two kings: a) Particular Lien & (b) General Lien. a. Particular Lien: A particular lien is attached to some specific goods. It is a right to retain possession over particular goods in connection with which the debt arose. a. General Lien: General Lien means the right to retain all the goods of another in the possession of the person until all the claims of the possessor are satisfied. It entitles a person to retain possession of goods belonging to another not only for a particular charge but also for a general balance of the account. NO AGREEMENT FOR CREATION OF LIEN NECESSARY: No agreement is necessary to create the right of lien, for under the law, such an agreement is implied by the terms of Section 171 of the Contract Act, 1872 so long as the same is not expressly excluded. But banks sometimes take a letter of lien to avoid future dispute. In order that the lien should arise (a) the property must come into the hands of the banker in his capacity as a banker, (b) there should be no entrustment for a special purpose inconsistent with the lien; (c) the possession of the property must be lawfully obtained in his capacity as a banker; (d) there should be no agreement inconsistent with the lien; Negative Lien This is an undertaking from the borrower that during currency of the loan, the assets/goods deposited against the loan shall not be charged in any manner without the banks permission. Bankers are entitled to General Lien but it also goes a step further to realise the security of his customer in case of default. Banker’s lien is equal to implied pledge and can sell the security after
reasonable notice to the debtor provided the property comes into the hands of the banker in the ordinary course of business. The right of lien can be exercised on goods or other securities standing in the name of the borrower only and not jointly with others. However, the banker’s right of lien is not applicable to the following properties of the customer viz. Safe custody deposits, bills of exchange or other documents entrusted for special purpose etc. WHY IT IS SO IMPORTANT TO OBTAIN ACCEPTANCE FROM THE WORK ISSUING AUTHORITY REGARDING CLIENT ASSIGNMENT OF BILLS IN FAVOUR OF THE BANK ? It is so important to obtain an acceptance from the Work Issuing Authority regarding client as assignment of bills in favour of the bank because on assignment on any property, the assignee gets absolute control over it. GIVE INSTANCES OF AT LEST TWO CASES OF CREDIT FACILITIES WHERE D.P. NOTE IS NOT OBTAINED ? a. Letter of Credit (L/C) b. Letter of Guarantee. LAW OF LIMITATION: The period of limitation for filing a suit for the recovery of money, lent under D.P. Note against the securities pledged/hypothecated is 3 years from the date of execution of the document. Even in case of temporary OD the suit must be filed within 3 years from the date of the OD. To determine the period of limitation, the cases may be categorised as follows: - Where demand for repayment is necessary. - Where demand for repayment is not necessary (i.e. in case of advances where D.P. Notes have been obtained). a. In the first case the period of limitation does not begin to run until demand has been duly made. b. In the second case, the period of limitation begins to run from the date of the debt (i.e. from the date of borrowing/the date of execution of D.P. Note and documents). The period of limitation within which a suit for recovery of the loans/advances lies, is the ordinary period of 3 (three) years from the date on which the advance was made: a. In case where the advance is made for a fixed period, the limitation period of 3 years begins to run from the date of expiry of the fixed period. b. For term loans payable in instalments, the limitation period is 3 years for each instalments, starting on the due date of each such instalments.
c. The limitation period for mortgage is 12 years beginning on the date of the mortgage deed. This is applicable only for enforcing personal liability of the borrower, the suit must be filed within 3 years from the date of repayment of the Term Loan or the date of mortgage deed. Generally, the bank takes equitable mortgage and in order to obtain a decree against the borrower personally (as for example, for attaching his other properties), the suit must be filed within 3 years of the date of the advance. For extending the validity of the pro-note for further years, the following procedures are to be followed: a. A letter to be obtained from the borrower(s) acknowledging the liability before the expiry of the limitation period of three years on the basis of the pro-note taken earlier; b. Confirmation over appropriate Revenue Stamps of the balance of a particular date (Balance confirmation); c. Part payment of interest or principal, provided the deposit slip is signed by the borrower (maker of the Pro-note); d. A fresh pro-note duly signed by the borrower(s). e. If part payment is made by cheque before expiry of the limitation period, the limitation period is extended for a further period of 3 years from the date when the cheque was tendered and the debt does not get time barred even if the cheque is cashed after the expiry of limitations. But if the cheque is dishonoured, the period of limitation will not be extended, but such dishonoured cheque will give a fresh cause of action against the borrower. PRIMARY AND COLLATERAL SECURITIES: The securities tangible or intangible, that the banker advances against directly are treated as Primary Securities i.e. those securities are primary ones on the basis and valuation of which the advances are allowed. In case of a clean advance the borrower personal security becomes the primary security. Collateral securities are obtained in addition to the primary securities to improve the overall security position of the advances and against which no drawing is allowed. A collateral security may be obtained from the borrower or from a third party by way of guarantee accompanied with the guarantor tangible securities as arranged for. MORTGAGE: A mortgage is the transfer of an interest in specific immovable property as a security for repayment of a debt. The banker is usually concerned with English mortgage or equitable mortgage or registered or legal mortgage for the purpose of making advances where the ownership of the property is transferred to he mortgagee by registration of the mortgage deed.
Normally, the possession of the property remains with the mortgagor who has a right to redeem the property on payment of the outstanding advances. In an equitable mortgage mere deposit of the title deed with the banker is sufficient to create the mortgage. But usually in such a mortgage, the title deed is deposited by the borrower through a memorandum of deposit setting forth the terms and conditions, which may or may not be registered. In both the cases of mortgage, the banker should hold the original title deed to avoid fraudulently create another mortgage, legal or equitable thereby. An officer responsible for completion of documentation must look into the following: a. Registered Mortgage/Equitable mortgage: Before execution of mortgage deed either equitable or registered clearance from the Banke Legal Adviser/Retainer must be obtained that the property documents are in order and the mortgagor has the right title over the property with draft deed duly authenticated by the Legal Adviser/Retainer. In case of lease-hold property, permission from the appropriate authority must be obtained for execution of mortgage deed in favour of the Bank. After execution of mortgage deed in favour of the Bank in the office of the Sub-Registrar, officer concerned must ensure that the Delivery Receipt of the mortgage deed has been duly discharged (must agree with the signature given by the mortgagor in the mortgage deed) by the mortgagor otherwise it will be difficult to collect the original mortgage deed from the Sub-Registrar Office. In case of execution of Equitable Mortgage (on the certified copy of the original deed with discharged delivery receipt) after obtaining legal opinion, Officer concern must inform the SubRegistrar regarding the execution of Equitable Mortgage deed against the sale Deed executed in his office on date by. with a request not to deliver the original deed to anyone without the consent of the Bank. PLEDGE: Pledge means bailment or delivery of goods or documents of title to goods by the borrower to the creditor with the intention of creating a charge thereon as security for debt. The ownership remains with the pledger subject to certain interests of the pledgee in the security concerned. In a pledge the debtor-customer delivers the possession of the securities to the banker and the banker holds the possession of securities until the debt is discharged. This is the essence of a pledge which is a bailment of movable property by one person to another to secure repayment of the securities is held by the banker (pledgee) the ownership thereof lies with the debtor (pledger) who is entitled to return of the same upon repayment of the debt including
interest and other expenses. If the debt remains unpaid the banker has a right of sale of the securities and can exercise this power with or without recourse to the court after giving a proper notice to the pledger. Generally, goods, produces and other merchandises of bulky nature are stored in the borrower’s godown. Other securities namely stock exchange securities are stored in the bank’s own strongroom. Wherever the pledged securities are stored, the banker has to keep them under his lock and key and to maintain watch and ward. Also, the securities are required to be adequately covered by insurance against fire and R.S.D. risks. All pledges should be accompanied by pledge letters or memorandum of deposits duly signed by the pledger. The pledger need duly receipt all deliveries made by the banker. HYPOTHECATION: Mortgage of movable property is called hypothecation. The securities remain in possession of the borrower and are only equitably charged to the banker under documents executed by him. The particulars of the securities and their quantities are declared by the borrower through periodical statements on the basis of which the drawings are regulated by the banker. VALUATION OF SECURITIES: The valuation of the primary securities are made by the banker conservatively and realistically so that at any time the forced sale value of the securities does not fall below the outstanding advance. It is usually done on the basis of the average ruling market prices of the securities and in case of imported goods, ruling market prices or landed cost whichever is lower. WHAT IS A MARGIN AGAINST LOANS AND ADVANCES ? HOW DOES IT DIFFER FROM DRAWING POWER ? Margin means the difference between the value of the securities/goods and the amount upto which the borrower is allowed to draw. The difference between the market value of the pledged/hypothecated goods to secure a loan/advance and the amount of the loan/advance (normally the drawing power) is known as. The value of the securities in excess of the banker advances is called the. Margin is obtained against loans and advances to cover the loss of value of the stock of goods due to price fluctuation, as well as accrued interest on the outstanding loans. Drawing Power (D.P.) means the value of securities/goods less margin. Drawing power is the amount of advance which the client can draw from the bank against the sanctioned limit out of the total value of stock pledged/hypothecated while the margin is the portion of the value of stock pledged/hypothecated which is retained by the bank by way of deduction from the total value of stocks at the agreed percentage.
Arithmetically total value of stocks minus margin is Drawing Power while margin is the difference between the value of stocks and Drawing Power as shown below: i) D.P. : Total value of stocks : Tk.100 Less : Margin 20% : Tk. 20 Drawing Power (DP) : Tk. 80 ii) Margin : Total value of stocks : Tk.100 Less : D.P._______ : Tk. 80 Margin : Tk. 20 SUPPOSE A WORKING CAPITAL FINANCE OF TK.16 LAC IS ALLOWED TO A MANUFACTURING COMPANY AT 20% MARGIN, WHAT SHOULD BE THE : (A) VALUE OF THE PRIMARY SECURITY ? (B) DRAWING POWER IN CASE THE PRIMARY SECURITY VALUE REDUCES TO TK.15 LAC ? Working capital limit : Tk.16.00 lac, Margin : 20% a. As we know : Limit = Stock (1 – Margin %) Limit 16.00 lac 16.00 lac 1 – Margin % 1 - .20 .80 a. Limit = Stock (1 – Margin %) = Tk.15.00 lac (.80) = Tk.12.00 lac (New D.P.) AN OD LIMIT OF TK.12.00 LAC WAS SANCTIONED TO M/S. XYZ & CO. AGAINST PLEDGE OF CEMENT AT 40% MARGIN. WHAT WILL BE THE MAXIMUM AMOUNT THE CLIENT WILL BE ABLE TO DRAW FROM THEIR A/C IN THE FOLLOWING SITUATIONS (SHOW CALCULATIONS): A. WHEN THE VALUE OF STOCK OF CEMENT IS TK.27.00 LAC B. WHEN THE VALUE OF STOCK OF CEMENT IS TK.16.00 LAC When the value of stock of cement is Tk.27.00 lac then the drawing power of the client will be Tk.16.20 lac and the margin will be Tk.10.80 lac as per following calculations: Tk.100 brings margin = Tk.40
40 100 40 X 2700000 100 And in the case of stock value is Tk.16,50,000/- drawing power will be Tk.9,90,000/- and margin will be Tk.6,60,000/- as per following calculations: Tk.100 brings margin = Tk.40 But in no case the client is allowed to exceed the limit as it is fixed at Tk.12,00,000/-. PB SANCTIONED AN OD LIMIT OF TK.10.00 LAC TO M/S. AB & CO. AGAINST PLEDGE OF CEMENT VALUING TK.15.00 LAC. IF THE STIPULATED MARGIN IS 20%, WHAT WILL BE THE MAXIMUM AMOUNT YOU CAN ALLOW THE CLIENT TO DRAW FROM THEIR A/C ? SHOW CALCULATIONS. OD Limit : Tk.10.00 lac and Margin : 20% Value of stock (Cement) : Tk.15.00 lac Less: Margin : Tk. 3.00 lac Net of Margin : Tk.12.00 lac If the value of the stock is the only concerned, the client can be allowed to draw Tk.12.00 lac. But since they have their limit of Tk.10.00 lac, therefore, we can allow drawing of Tk.10.00 lac from the clients a/c. WHAT ARE THE FUNDAMENTAL DIFFERENCES BETWEEN LOAN AND OVERDRAFT ? The difference between loan and overdraft are as follows: LOAN Loan can be availed both through Savings and
OVERDRAFT But overdraft can be availed through Current
Current Account. Loan is provided where finance is required for
a/c only. Overdraft is provided as working capital
specific business deal. Loan may be allowed to be adjusted within
finance for manufacturing business. In overdraft specific repayment date not
one year or more than one year.
exceeding one year is given within which client
In loan, interest is calculated on the disbursed
has to adjust his overdrawn amount. In overdraft interest is calculated on the
amount. Loan is given for a long time In loan, separate loan account is created for
outstanding balance. Overdraft is for a short time But in overdraft no separate account is
each loan.
created. Drawings are allowed in the current account of borrowers.
IN WHICH CASES WE NORMALLY OBTAIN LETTER OF INDEMNITY FROM THE CLIENT? •
Loss of FDR
•
Issuance of Duplicate Demand Draft
•
Loss of T.Cs
•
Loss of Safe Custody Receipts
•
Loss of Cheque Book
•
Loss of Pay Order
•
Negotiation of Export documents. WHAT STEPS SHOULD FOLLOW FOR ANALYSING ANY CREDIT PROPOSAL BEFORE MAKING APPROPRIATE RECOMMENDATIONS ? In analysing any credit proposal, the analyst should follow THREE distinct and logical steps to conclude on and make appropriate recommendations. These are: a. Historical Analysis (Identify nature of risk): Evaluate the past performance of the borrower. Determine the major risk factors and how they have been mitigated in the past. Identify factors in the borrowers present conditions and past performances which may foreshadow difficulties or indicate likelihood of success, in his ability to repay the loan, at a future time. a. Forecast (Judging future degree of risk): Having identified the nature of risk involved and how these are mitigated, make a reasonable forecast of the probable future conditions of the borrower and conclude on his ability to service the proposed level of debt. a. Debt Structure and protection: Assess the credit worthiness and prepare a proposal for structuring a credit facility that can be repaid or amortized given the assets or his projected and the facility offering adequate protection against loss and control of the lending relationship.
ON WHAT POINTS EMPHASIS SHOULD BE GIVEN BEFORE TAKING LEBNDING DECISION TO AVOID RISK MANAGEMENT ? While making lending decisions, particular attention should be given to the analysis of loan request from heavily leveraged companies and those dealing in non-essential consumer goods, taking special care about their debt servicing abilities. Emphasis should be given on the following sound credit principles: a. Present and future business potentiality for optimum deployment of fund to increase return on assets. b. Preference for self liquidating quality business. c. Avoiding marginal performers. d. Risk dispersion is basis to sound credit principles and policies. We should be careful about large and undue concentration of credit by industry, single obligors, common product line etc. e. Managing the amount, size, nature and soundness of single obligor exposures relative to the size of the borrower and our position among his other lenders. f.
Personal guarantees of the principal partners or the Directors of the companies closely held supported by personal wealth statement and where necessary, subordination agreement should be obtained.
g. Recognise impact of free income through Letter of Credit, Letter of Guarantee, Foreign Exchange business in enhancing return on assets. h. Normally not to entertain or encourage long term credit proposals. BANKER RIGHT TO SET-OFF: Where there is a credit balance in one account and debit balance in another of the same customer, the banker has a lien on the credit balance, which he can set-off against the debit balance. But if the credit balance is owned by the customer in one capacity and the debit balance is incurred in another capacity the banker cannot set-off these two balances. A debt accruing due cannot be set-off against a debt already due. BANK RATE: Bank rate means the rate at which the Central Bank of a country is prepared to advance loans to other banks against eligible approved securities. In terms of the provisions laid down in Article 21 of the Bangladesh Bank Order 1972, the Bangladesh Bank is required to make public from time to time the standard rate at which it is prepared to buy/rediscount bills of exchange or other commercial paper eligible for purchase or re-discount under the provisions of the order. The Bank rate was maintained @5% till 19.6.1974 since the inception of Bangladesh. At present Bank rate is ___ % from _________. Bank rate is an important tool of Bangladesh Bank for controlling the lending operations of the commercial banks.
CONTINGENT LIABILITY: A liability may happen in due course; but not certain. Bank’s commitment in a financial transaction is its contingent liability i.e. a financial transaction of a bank that may fall back upon as its liability in due course is called contingent liability. NAME THE LEGAL/CHARGE DOCUMENTS THAT MUST BE OBTAINED FROM THE CUSTOMER BEFORE CREATING LIM. •
Demand Promissory Note.
•
Letter of Agreement
•
Letter of Pledge
•
Merchandise to be duly insured with specific Risk clauses along with Banker mortgage clauses.
•
Letter of Disclaimer to be obtained from the owner of the godown in case of rented godown. NAME THE LEGAL/CHARGE DOCUMENTS THAT MUST BE OBTAINED BEFORE ALLOWING LTR.
•
Demand Promissory Note.
•
Letter of Agreement
•
General Letter of Trust Receipt with Supplementary Agreement.
•
Personal Guarantee of the proprietor/partners/Directors. WHAT ARE THE TEN CREDIT & MARKETING FUNDAMENTALS ? a. To place a high priority on the QUALITY of credit exposure, new proposals must meet our credit criteria and existing portfolio should be under constant review for improving risk positions. a. As maximizing profit is the basic aim of the Bank, every profit opportunity should be explored and negotiating skill fully employed in this direction. a. Growth of the size of customer base through constant alertness towards profitable business opportunity. a. To avoid unnecessary wastage of time and energy, clear, concise and summary type communications should be used. b. To be thoroughly familiar with the bank’s policies and functions. c. To put every effort in reducing and containing the size of classified advance port-folio. d. To keep the expense burden of credit operations to the barest minimum and endeavour to improve the cost efficiency of credit operations.
a. To contribute your best in all matters where your approval, concurrence or other action is involved. a. To apply strong commonsense in all credit matters by putting questions this make sense ? How to improve this ? a. To avoid all temptations which may jeopardize or compromise the banker risk assets. DOCUMENTATION AGAINST LOANS AND ADVANCES Document is a written statement of facts and a proof or evidence of existence of a particular transaction between parties involved thereto, to be answerable/liable on placement before a Court of Law for satisfaction of the charges created therein. Importance of Documentation: Completion of required documentation formalities as per approved sanction letter before disbursement of a loan is necessary to protect the interest of the bank from any distress situation and also necessary for acknowledgement of the debt by the borrower. Correct documentation enables the banker to take legal recourse against the defaulting borrowers. The bankers deal with other peoples money which are repayable on demand. Naturally, the banker’s prime consideration is the safety and liquidity of their depositor’s money. In case of the borrower’s inability to repay the loan the banker must have some alternative tangible assets of the borrower to fall back upon to recover the loan. The banker, therefore, tries to create some sort of a charge on any other assets of the borrower in his favour. Such charge makes the asset charged available to the banker when needed in satisfaction of the advances made to him. Herein lies the role and importance played by different types of securities in loans and advances of a Bank. TYPES OF DOCUMENTS: Documents related to securing loans and advances are classified into the following two categories (a) Charge Documents, and (b) Legal Documents: a. Charge documents are pre-formatted and printed forms provided by the Bank to the client for execution to create charge on the securities against loans and advances. b) Legal Documents are legal papers provided by the client certifying the legal status of the borrower, borrowing power, title to goods and property, legal deeds and power of attorney related to creation of charge on securities. PARTS OF DOCUMENTATION: Apparently there are three parts in documentation, namely : •
Obtaining instruments/Documents.
•
Stamping.
•
Execution and Registration. STAMPING
Execution of documents should be done with stamping as required under Stamps Act. Kinds of Stamps: •
Judicial
•
Non-Judicial
•
Adhesive
•
Embossed
•
There are some discution about these :
Judicial Stamps are used in the Court for filing suits and for judicial noting and are not required for loan documentation. Non-Judicial stamps are printed on special paper in different denominations and used for execution of Agreements, Undertaking, Indemnity bond, Sale deed, Mortgage deed, Power of Attorney etc. as prescribed by government. These are also called Impressed Stamps. Non-judicial stamps can be collected from Govt. Treasury Office against deposit of money to Bangladesh Bank through Challan. Special adhesive stamps for Tk.50/- are affixed on the documents like; Letter of Arrangement, Letter of Disbursement, Letter of continuity, Letter of Lien, Letter of Guarantee, Trust Receipts etc. Adhesive stamp of different denominations can be collected from Govt. Treasury Office against deposit of money to Bangladesh Bank through Treasury Challan. Revenue Stamps are affixed on the Promissory Note for Tk.20/- and can be collected from Post Office. Affixation of adhesive stamp/postage stamp on the promissory note shall be treated the document as unstamped. Such stamps need to be cancelled in an effective manner so that the same can not be used again. In case it is not cancelled the documents shall be treated as unstamped. Embossed stamps are used as seal of notary public and organisational stamps. EXECUTION OF DOCUMENTS:
Documents to be executed (signed) by the parties concerned competent to do so either in official capacity or in personal capacity as the case may be. In some cases such documents are required to be executed in presence of witness. The following precautions are to be taken at the time of execution of documents: a) Documents to be filled in and are executed in the presence of the Manager or an authorised officer of the Bank. He must put his initial in pencil so that in future it can be ascertained in whose presence the documents were executed. He may have to depose in a Court in future. b) The client should sign in accordance with the specimen signature recorded with the Bank. c) If documents consist of more than one page, all the pages are to be signed by the executants at the end of the form and also at the end of the schedule of securities. d) Mention of date and place of execution in a document is mandatory. e) All documents must be duly filled-in before execution. Documents should not be kept blank except one extra set of Promissory Note and Letter of Continuity. f) There should not be any cutting, overwriting, insertion, cancellation, or alteration in any document. If any such thing happens, it is to be authenticated by all the executants under their recorded signatures. g) After execution / Registration of documents, these should be entered into the Register (Safe custody Register for Loan Documents) duly scrutinised and initialled by an authorised officer of the Bank. h) Loan Disbursement of Credit facility should not be allowed before completion of documentation formalities. Release of Securities: No securities are to be returned to the borrower without approval of two authorised signatories one of which must be either Manager or Manager (Operations) LIMITATION PERIOD: Broad Guidelines regarding period of limitation are mentioned hereunder. However, for any clarification and to safeguard the interest of the Bank, Branch Manager must consult with the Legal Adviser / Retainer of the Bank regarding application of limitation period. Legal Action for recovery must be taken within limitation period.
a) The period of limitation within which a suit for recovery of an advance lies, is the ordinary period of three years from the date on which the advance is made. b) Law of limitation in case of Equitable/Legal Mortgage of property is 12 (Twelve) years. c) In case of bill of exchange and promissory notes payable on demand, the period of limitation, which is of 3 (three) years, begins to run from the date it bears. Incase the date column is left blank but the signatures of the borrowers are dated, the period of limitation will begin to run from the date whichever is later. When such instruments are payable at sight, the date of presentation, and in the case of bills and notes payable at a future date, the due date will be the date of the commencement of the period of limitation. d) The following have the effect of extending the validity of the pro-note for further three years from the date thereof: - A letter in writing from the borrower(s) acknowledging the liability before the expiry of the limitation period of three years on the basis of the pro-note taken earlier. - Confirmation over appropriate Revenue Stamps of the balance of a particular date (Balance confirmation). - Part payment of interest or principal provided the Deposit Slip is signed by the borrower. - A fresh pro-note duly signed by the borrower(s) Guidelines towards Documentation In addition to standard charge documents duly vetted by Legal Retainer, the following documents are to be obtained. Limited Company: - Memorandum and Articles of Association of the Company duly certified by the Registrar, Joint Stock Companies or Notary Public or Chairman / Secretary of the Company. - Resolutions of the Board of Directors for taking loan(s) from the Bank and authorising the Director(s) to execute the security documents. Resolutions must be duly certified. •
Personal grantee of all the Directors. Partnership Firm: - Registration certificate in case of Partnership deed registered with Registrar of firms.
- Duly certified Partnership deed registered either with Registrar of firms and/or at Sub-Registrars Office (Un-Registered firms be avoided). - Resolutions of the Partners for taking loan's and authorising Partner's to execute security documents. - Personal Grantee of all the Partners. - An undertaking as per Annexure `A' to the effect that Partnership shall not be changed or altered or dissolved. - Loan to Partnership - at - will may be avoided. - Inquiry be made about Income tax liability - preferably TIN/GIR Number should be obtained. Proprietorship firm: - Trade Licence to prove the ownership of the concern. - TIN/GIR Number to ascertain whether he is an Income tax assessee or not. In case of mortgage of property: - Original title deeds must be obtained. If the original deed has not been received from the Registration office, then the certified copy with duly discharged delivery receipt may be accepted in lieu of original deed. Equitable mortgage with certified copy of title deed can not be created. Deposit of title deed must be made by the mortgagor in the Branch wherefrom the loan is given. - If the deed in question is not 8-12 years old, Bia-deeds i.e. previous title deeds of the vendor and other papers showing the ownership of the vendor. - Land Revenue/Rent receipts, Records of right (parcha) and other supporting documents to prove possession. - Municipal rent payment receipts in respect of town property. - Non-Encumbrance certificate to be obtained from sub-Registers Office issued by a Registered Searcher. - Memorandum of Deposit of Title deed must be properly executed. Name, Address, (both present and permanent) Father's / Husband's name must be stated in the memorandum. Names, addresses and signatures of two witnesses must be taken. Power of Attorney:
- It should be on Proper Non-judicial Stamp paper. - Relating to immovable property, it should be registered. - If Bank is authorised by any Power of Attorney to realise bills, payments etc. from any authority/person, then the borrower must produce evidence that the said authority/person has acknowledged and accepted the said Power of Attorney. In most cases such authority/person denies unless prior acceptance is received from them. Tripartite Agreement: - Must be sealed and signed by all parties including the Bank. - Witnesses must also sign. CHARGE DOCUMENTS REQUIRED FOR DIFFERENT TYPES OF CREDIT FACILITY OVERDRAFT: a) Demand Promissory Note. a. Letter of Arrangement. b. Letter of Continuity. c. Letter of Revival. d. Letter of Pledge/Hypothecation with Supplementary Agreement. e. Letter of Disclaimer from the owner of the godown in case of rented godown, to be vetted by the Legal Retainer of the Bank. f.
Insurance Policy covering risks with Bank Mortgage clause for a sum of 10% above the sanctioned limit.
g. Subordination Agreement (where necessary). h. Notarised Power of Attorney to sell the pledged/hypothecated goods to be vetted by the Legal Retainer of the Bank. ADVANCE AGAINST WORK ORDER : a) D. P. Note. b) Letter of Arrangement. c) Letter of Disbursement. d) Letter of Continuity.
e) Letter of Revival. f) Notarised/Registered Irrevocable Power of Attorney to collect the bill directly from the concerned authority vetted by Bank's Legal Retainer. g) Letter of Authority from the relevant authority confirming acceptance of the Power of Attorney and for making direct payment to the concerned Branch of the Bank. In case advance is collaterally secured by creating charge on immovable assets (Land & Building) all legal formalities should be complied with duly vetted by Legal Retainer. ADVANCES AGAINST PRATIRAKHYA SANCHAYA PATRA AND BANGLADESH SANCHAYA PATRA a. Demand Promissory Note. b. Letter of Pledge with Supplementary Agreement. c. Letter of Arrangement.The Sanchaya Patras are signed by the holder on the back thereof, in accordance with his signature appearing on the "Identity Slip". If theSanchayaPatra is issued in joint names and/or payable to either or survivor it shall be discharged by all the holders named in the receipt on revenue stamp of adequate value and their signature be verified. d. Letter of Lien. f) Letter of Authority in duplicate for encashment of the Certificates on prescribed form (Annexure C). g) Identity Slip issued by the office of issue duly discharged. h) Letter of Continuity. i) Letter of Disbursement (in case of loan). ADVANCES AGAINST FIXED DEPOSIT RECEIPTS Advance against Fixed Deposit Receipt will be subject to credit Restrictions imposed from time to time by Head Office/Bangladesh Bank. Scrutinise the Fixed Deposit Receipts with regard to the following points:a) The Fixed Deposit Receipt is not in the name of a minor. b) It is duly discharged by the depositor on revenue stamp of adequate value and his signature is verified.
c) If the receipt is issued in joint names and / or payable to either or survivor it shall be discharged by all the depositors named in the receipt on revenue stamp of adequate value and their signatures, verified. Creation of liability on Fixed Deposit issued in joint names by any one of the depositors is irregular. d) If the Deposit Receipt is offered as a security for allowing advances, a letter of lien shall be obtained from the depositors, on the appropriate form. e) If the Deposit Receipt has been issued by the branch allowing advance, lien against that specific Deposit Receipt to be marked in the Fixed Deposit Register of the branch. f) In case of extending advances against FDR of other banks, all the formalities mentioned hereabove should be followed. The branch concerned should request the issuing bank to register lien against the Fixed Deposit and confirm in writing about registration of lien favouring the Bank. Further, the branch where the advance is allowed shall directly get the signature of the depositor on the letter of lien as well as his discharge on the back of the Fixed Deposit Receipts duly verified from the issuing bank branches. The borrower shall not be allowed, under any circumstances, to have such verification done on his own. g). The discharged receipt, the letter of lien duly verified by the issuing branch and the letter confirming registration of the lien on the deposit Receipts shall be kept along with other documents under safe custody of the Bank. h) Lien on the partial amount on Fixed Deposits shall not be accepted. i) The lien of the Bank has to be marked in red ink/rubber stamp on the face of the Deposit Receipt against which advance has been allowed. On adjustment of the advance, lien shall be released on the back of the Deposit Receipt. CHARGE DOCUMENTS : a) Demand Promissory Note. b) Fixed Deposit Receipt duly discharged. c) Letter of Lien d) Letter of Guarantee (In case of third party) e) Letter of Arrangement. a. Letter of Revival b. Letter of Authority for encashment of FDR.
c. For Loans : Letter of Disbursement. h) For Overdrafts : Letter of Continuity duly stamped. GUARANTEE/INDEMNITY a. D.P. Note. b. Letter of Arrangement. a. Letter of Continuity. b. Letter of Revival. c. Counter Guarantee. d. Acceptance on duplicate copy of sanction advice. LOAN AGAINST IMPORTED MERCHANDISE (L.I.M) a. Demand Promissory Note. b. Letter of Arrangement. c. Letter of Disbursement. d. Letter of Pledge with Supplementary Agreement. e. Comprehensive Insurance Policy covering all risks along with Bank Mortgage clause to be obtained. f) Letter of disclaimer to be obtained from the owner of godown in case of rented godown. LOAN AGAINST TRUST RECEIPT: a. Demand Promissory Note. b. Letter of Trust Receipt with supplementary agreement. c. Letter of Arrangement. d. Letter of Disbursement. e. Personal Guarantee of all the partners in case of Partnership firm. f.
Personal Guarantee of all Directors in case of Limited Company.
a. Comprehensive Insurance Policy covering all risks with Bank Mortgage clause is to be obtained. LOAN AGAINST HYPOTHECATION OF CARS, BUSES, TRUCKS, SCOOTERS AND WATER-CRAFTS
a) Sale receipt should be drawn in the Joint name of the Bank and client. Delivery of the vehicles to be taken under the supervision of an officer of the Branch. b) Vehicles are to be registered under the supervision of an officer of the Branch in the Joint name of the Bank and the client. c) Comprehensive Insurance Policy covering all risks with Bank Mortgage clause is to be obtained. d) Agreement of Hypothecation to be executed on Non-Judicial Stamp Paper as per prescribed format of the Bank. Execution of the document to be vetted by Legal Retainer in each case. e) All taxes in respect of the vehicles are to be paid by the client. f) A photocopy of the Blue Book duly attested by an officer of the Branch evidencing Joint Registration is to be obtained. CHARGE DOCUMENTS TO BE OBTAINED: a. Demand Promissory Note. b. Letter of Arrangement. c. Letter of Continuity. d. Letter of Disbursement. e. Letter of Revival. f.
Charge to be created with Registrar of Joint Stock Companies for hypothecation in case of Limited concerns.
ADVANCE AGAINST APPROVED SHARES : Before allowing the advance, obtain delivery of the shares and with Transfer Deeds (Form - 117) and thoroughly scrutinise them with regard to the following : a) The shares tendered as security for advance are registered in the name of the transferee. b) The shares are accompanied with blank Transfer Deed (Form - 117) duly signed by the person in whose name those shares stand and duly witnessed. c) The tansferor's signature on the Transfer Deed (Form-117) is verified by the authorised person of the company concerned under its seal. d) Number of Shares along with Transfer Deeds (Form - 117) are in marketable lots, determined by the Stock Exchange.
e) The shares are lodged with the companies concerned for registration with their original Transfer Deeds, duly completed in all respects, under a covering letter from the branch, requesting them to return the shares to the branch, as the Bank has its lien on them. f) A receipt is obtained from the companies and retained with branch, duly discharged by the shareholder, for exchange with the share certificates, when ready for delivery. g) The borrower's signatures on the fresh set of Transfer Deeds are verified by the companies concerned and retained with branch along with their respective share certificate when received back from them after registration. h) The branch should obtain a letter of lien from the borrower in respect of all such shares which stand in his name, or which have been sent to the various companies for registration, in his name. i) Where advance has been allowed to the borrower at the specific request of a third party against shares owned by them the letter of lien shall be obtained form third party and not from the borrower. j) The branch shall not generally resort to transferring the shares registered in the name of the borrower or any third party, in its own name. k) In the event of transferring the shares in the name of the Bank with the approval of Head Office, branches shall take special notice of any declaration of dividends, Bonus shares or any offer of Right Shares made by the companies concerned. They shall also ensure that all such Dividends and Bonus Shares are duly received by them. l) The dividend is credited to the account of the borrowers and the bonus shares are kept along with other shares of the borrowers. m) In case of an offer of Right Shares, branches shall send an intimation to the borrowers concerned inquiring from them if they were interested to acquire them for the value mentioned on the Letter of Right which should immediately be deposited by them with the Bank. n) If the borrowers do not deposit the money from their own resources or make any alternate arrangement in that behalf, the letter of right may be renounced with the permission of the Head Office and the sale proceeds should be credited to the borrower's account under intimation to him. CHARGE DOCUMENTS: a) Demand Promissory Note. b) Memorandum of Deposit of Shares.
c) Original Share Certificate. d) "Irrevocable Authority" to deliver shares to third party. e) Letter of Lien against shares & securities for first party or third party as the case may be. f) Letter of Pledge. g) Letter of Arrangement. h) Blank Share Transfer Deeds (Form - 117) duly signed by the holder of shares and his / her / their signature duly verified by the concerned companies. i) Letter of Continuity. j) Letter of Disbursement. k) An undertaking from the Directors of the Limited Company to obtain prior clearance from the Bank before declaring any interim/ final dividend. ADVANCE AGAINST LIFE INSURANCE POLICIES: The following precautions be taken while accepting a life policy as security for advance, subject to credit restriction imposed by Bangladesh Bank / Head Office: a) It is an endowment Insurance Policy. b) The policy does not bear any restrictive conditions likely to affect its value as a security. c) The surrender value of the policy to be ascertained from the Insurance Corporation / Company (Policies for less than three years have no surrender value) and after retaining prescribed margin on surrender Value limit should be fixed. d) The last premium receipt or other evidence of the payments is obtained along with standing instructions from the borrower to pay further premiums. e) Evidence of "AGE ADMITTED" must be incorporated in the Policy. f) The Policy is to be sent to the Insurance Company concerned for registering assignment in favour of the Bank along with a request letter from the assignor in the format given in para (g) below, with a request for return of the policy to the Bank. g) The form of assignment should be :
"I, the within named for valuable consideration hereby assign and transfer all my rights, titles and interests in the within written policy and the moneys thereby secured to the Southeast Bank Limited and its successors and assigns and declare that the receipt of the said Bank or its successors or assigns shall be a good and valid discharge for all money payable under the policy. Date _______ this ______ day of _____ , 1999. Witness : Occupation: Address : __________ SIGNATURE a. An undertaking to be obtained from the assured that he shall keep on paying the premium punctually, and produce the receipts to the Bank, and shall not do anything which might cause the policy to be void. CHARGE DOCUMENTS : a) Demand promissory Note. b) Letter of Arrangement. c) Letter of continuity. d) Letter of Disbursement. e) Original Insurance Policy. f) Insurance Policy to be assigned. g) Insurance Corporation/Company should record/register the assignment on the Insurance Policy. h) Letter of Undertaking from the assured. i) Age Admittance Certificate from Insurance Company if not already mentioned in the policy. Consumer Credit Scheme: a. Demand Promissory Note.
b. Letter of Arrangement. c. Letter of Continuity. d. Letter of Disbursement. e. Letter of Revival. f. Letter of Guarantee. g. General Letter of Hypothecation with Supplementary Agreement. h. Letter of Authority to the Employer to deduct the instalment from monthly salary. i. Acceptance of Letter of Authority by the Employer. j. Post dated cheques form the client mentioning the amount of each instalment. USUAL CHARGE DOCUMENTS AGAINST PACKING CREDIT : a) Demand Promissory Note. b) Letter of Arrangement. c) Letter of Continuity. d) Letter of Revival. THE SUPPORTING DOCUMENTS FOR SUCH ADVANCES ARE : a) Lien on Irrevocable and unrestricted Letter of Credit from a reputed Bank. b) Letter of pledge (in case of facility allowed against pledge of goods). c) Letter of Hypothecation ( Incase of facility allowed against Hypothecation of goods) along with supplementary Agreement. d) Detailed stock statement duly verified by Bank's Officials before disbursement. e) Comprehensive Insurance Policy with Bank mortgage clause. f) Letter of disclaimer to be signed by the owner of the godown in case of rented godown. g) Documents of title of goods like : Railway Receipt/Steamer Receipt/Barge Receipt/Truck Receipt/Combined Transport document evidencing despatch of goods.
h) Packing Credit Trust Receipt.Policy under Export Credit Guarantee scheme covering Pre-shipments & Post Shipment finance. EXP form duly signed by the exporter. Enhancement of Limit against execution of registered mortgage on the additional property: Suppose your bank has allowed an overdraft limit of Tk.10 Lac against a property mortgaged (registered) with the Bank. Now, the client has requested to enhance the limit from Tk.10 lac to Tk.15 Lac against Registered mortgage of an additional property. Now what should be the mortgage value of the second property ? In this case obtain legal vetting and opinion from your Legal Counsel and execute Registered mortgage on the additional property on Tk.5 Lac and execute an Equitable mortgage on the first and second property for Tk.15 Lac duly drafted and authenticated by the Legal Counsel. PRESCRIBED FEES FOR CREATION OF CHARGE WITH RJSC: ON TAKA FEES (TAKA) ON TAKA FEES (TAKA) 5,00,000 50 30,00,000 250 10,00,000 90 35,00,000 290 15,00,000 130 40,00,000 330 20,00,000 170 45,00,000 370 25,00,000 210 50,00,000 410 Fees will be Tk.20/- per five lac of above Taka fifty lac i.e. for Tk.53 lac fees will be Tk.410+ 20 = 430/-. ON TAKA FEES (TAKA) ON TAKA FEES (TAKA) 55,00,000 430 80,00,000 530 60,00,000 450 85,00,000 550 65,00,000 470 90,00,000 570 70,00,000 490 95,00,000 590 75,00,000 510 1,00,00,000 610
Above One crore the amount of fees will be Tk.610/- for the first crore plus Tk.400 per additional one crore e.g. for creation of charge with RJSC for Tk.4 crore the amount of fees will be Tk. 610 + 400 + 400 + 400 = 1810/-. Registered Mortgage Registration Fees: In case of a mortgage deed executed in favour of a bank or a financial institution, the amount secured by it shall be the value of the deed and Stamp Duty/Fees payable thereon shall be as follows: PROPER NON-JUDICIAL STAMP DUTY: a) Upto Tk.10.00 Lac : Tk. 1,500/b) Upto Tk.50.00 Lac : Tk. 3,500/a. Above Tk.50,00 Lac: Tk.3,500/- for the first Tk.50.00 Lac and for the remainder of the loan amount an additional duty at the rate of one tenth of one percent (.1%). Government Fees for registration: a) When the value does not exceed Tk.1.00 Lac: 1% ad valorem, subject to a minimum of Tk.50/- and maximum of Tk.500/b) When the value exceeds Tk.1.00 lac but does not exceed Tk.5.00 lac : Tk.500 + 1% of the value in excess of Tk.1.00 lac, subject to a maximum of Tk.2,000/-. c) When the value exceeds Tk.5.00 lac but does not exceed Tk.25.00 lac : Tk.2,000/- + 1% of the value in excess of Tk.5.00 lac subject to a maximum of Tk.8,000/-. d) When the value exceeds Tk.25.00 lac but does not exceed Tk.50.00 lac :
Tk.8,000/- + 1% of the value in excess of Tk.25.00 lac subject to a maximum of Tk.15,000/-. e) When the value exceeds Tk.50.00 lac but does not exceed Tk.1.00 Crore : Tk.15,000/- + 1% of the value in excess of Tk.50.00 lac subject to a maximum of Tk.25,000/-. f) For any value above Tk.1.00 crore: Tk.25,000/- + 1% of the value in excess of Tk.1.00 crore subject to a maximum of Tk.50,000/-. The following is a list of Non-Judicial Stamp requirement for various instruments effective from July 1, 1998 as per the Finance Act 1998: NON-JUDICIAL STAMP: a) Power of Attorney : Tk. 200/b) Affidavit
: Tk. 50/-
c) Certified Copy
: Tk. 20/-
d) Redemption Deed : Tk. 150/e) Personal/Insurance/Bank/Corporate : Tk. 150/f) Undertaking
: Tk. 150/-
g) Deed of Partnership : Tk.1000/h) Letter of Guarantee : Tk. 150/i) Floating charge on Assets/further charge : Tk. 150/j) Indemnity
: Tk. 100/-
k) Agreement for Sale/Purchase : Tk. 150/l) Agreement for Loan/Lease : Tk. 150/m) Cancellation of instrument : Tk. 150/n) Memorandum of Deposit of Title Deed : Tk. 150/-
o) Hypothecation/Floating charge : Tk. 150/Registration charges other than banks/financial institution on the Deed value: Within the City corporation: Outside the City Corporation Registration Fee : 2.50% Surcharge : 1.00% Tax : 1.00%
2.50%
.50%
2.00%
Gain Tax : 7.50%
7.50%
Stamp Duty : 10.00% 10.00% 22.00% 22.50% Note: In case of null land no gain tax is applicable. Search Fee : Tk.5/- for each year. Certified Copy : Tk.6/- for the first 300 hundred Bengali word Tk.12/- for the first 300 English word./ Emergency Fees: Each page minimum Tk.8/-. 1 Bigha = 33 decimal = 20 Katha 1 Katha = 1.65 decimal = 165 Ajutangsha 1 Acre = 100 Decimal = 60.60 Katha Katha * 1.65 decimal = Decimal Acre * 100 = Decimal Decimal ÷ 1.65 = Katha Katha * 1.65 = Decimal Decimal * 100 = Ajutangsha Ajutangsha ÷ 100 = Decimal
720 Sq. Feet = 1 Katha 144 Sq. inches = 1 Sq. foot 9 Square feet = 1 Square yard. 640 acres = 1 square miles. ANNEXURE UNDERTAKING The Manager Jamuma Bank Limited Principal Branch 1, Dilkusha C/A. Dhaka-1000. Dear Sir: We, the undersigned are the Partners of M/s. __________________________________. We confirm that we are jointly and/or severally responsible to the Bank for any liability of the firm with the Bank. The Bank may recover its claims from the estate of any or all the partners of the firm. We hereby under take that the partnership firm shall not in any case be changed, amended, altered or modified and/or shall also not be dissolved without written consent of the Bank and our individual responsibility to the Bank will continue until all liabilities of the partnership firm with the Bank are discharged. Thanking you. Yours faithfully, _________________________ SIGNATURE OF THE PARTNERS ANNEXURE "B" AGREEMENT OF HYPOTHECATION
FOR AVAILING TRANSPORT LOANS THIS AGREEMENT MADE THIS THE ___________ DAY OF ______________ 199__.
BETW EEN __________________________________, S/o._______________________________ of
Full
Address
__________________________________________________________________________________ ____________________________________________________________ called the BORROWER (which expression shall include his heirs, administrators, legal representatives and assigns) of the ONE PART. Jamuna BANK LIMITED, a banking company having its Office at ____________________________, ________________________ hereinafter called the BANK (which expression shall include its successors-in-interest, administrators, legal representatives and assigns) of the OTHER PART. whereas
the
BORROWER
has
applied
for
loan
to
the
BANK
for
purchase
of
_______________________________, thereinafter called the Vehicles, and the BANK has agreed to grant the loan on condition, inter-alia, that the said vehicles shall be hypothecated by the BORROWER to the BANK and the BORROWER shall execute an Agreement with the BANK incorporating such other conditions as may protect the BANK. AND WHEREAS the BANK has granted the loan of Tk. (Taka ) only to the BORROWER for purchase of the said Vehicles. NOW THE PARTIES HAVE AGREED AS FOLLOWS: a) That the BANK has granted a loan of Tk. (Taka ) only to the BORROWER for buying the Vehicles and that the BORROWER shall not utilize the said loan for any other purpose. b) That the loan shall bear interest @ per cent above the Bank rate subject to a minimum of per cent per annum with monthly / quarterly rests. c) That the loan amount together with the interest shall be paid in equal monthly instalments on the day of the month following. In the event of default of payment of any of the instalments, the BANK shall have exclusive right to call upon the BORROWER to repay the entire outstanding dues within a given date at a time.
d) That the BORROWER at his own cost, throughout the period as the loan or any part thereof would remain unpaid, shall keep the said Vehicles insured against loss or damage by fire, theft or accident or otherwise including third party risk with an Insurance Company in the joint names of the parties thereof for an amount not less than Tk. and shall always keep the BANK satisfied that the policy is in force. e) The BORROWED also hereby agrees that all insurance claims shall be payable to the BANK and that no insurance claim shall be payable to any other person without written consent of the BANK, and that BORROWER would cause the insurance Company to give an undertaking to the BANK to the said effect, provided, that such an undertaking will not be necessary if a clause to the said effect is inserted in the body of the insurance policy. f) That the Vehicles shall be registered with the Registration and Licensing authorities in the joint names of the BORROWER and the BANK. g) That the BORROWER shall not sell, dispose of or in any way encumber the Vehicles as long as the loan or any part thereof remains unpaid. h) That the BORROWER shall keep the Vehicles in running and good working condition (fair and reasonable wear and tear excepted) and that it shall be the responsibility of the BORROWER to upkeep the Vehicles in good order replacing, if necessary, the necessary parts / accessories at his own cost. i) That the BORROWER shall not remove or change the engine of the Vehicles or any major part thereof without the consent of the BANK in writing. j) That with effect from the date of disbursement of the loan or any part thereof the Vehicles shall remain and be continued to remain hypothecated to the BANK till such time as the entire loan is fully and entirely adjusted. k) That the BORROWER, if required by the BANK, shall be obliged to produce the Vehicles for inspection of the BANK through its officer or person nominated by the BANK at any time and place specified by the BANK. l) That in the event of default of payment of any of the instalment or breach of any of the terms hereof , the BANK shall be at liberty to direct the BORROWER to adjust the entire outstanding dues within given date, and / or take possession of the Vehicles and sell or otherwise deal with the same without any reference or notice to the BORROWER and apply the sale proceeds / income as the case may be towards reduction or adjustment of the liability / loan of the Borrower. After such application of the sale proceeds or income, the BANK shall always be entitled to proceed against the BORROWER for realization of short fall, if there be any, with interest.
m) That in the event of disposal of the Vehicles by sale or otherwise, the BANK shall always be deemed to have been hereby authorised by the BORROWER to give effect to the transaction and or cause necessary changes in the records of the registration and/or licensing authorities favouring the transferee consequent upon the sale by the BANK, and no reference shall be required to be made to the BORROWER for any purpose. The BANK shall be deemed to have been authorised to execute and/or sign any paper or document for and on behalf of the BORROWER. n) That the BANK shall always be deemed to have been authorised by the BORROWER to debit any reasonable amount on his account being costs of this agreement and such other costs as may arise out of or be connected with or be related to the purpose of this agreement including costs, if any, for sale or disposal of the Vehicles in the event mentioned hereinabove. o) That the BORROWER assures the BANK that he has not entered into any transaction with any person or financial institution in relation to the Vehicles mentioned in the Schedule below and that the Vehicles are free encumbrance. p) That the BORROWER shall execute, beside this agreement, other documents as may be required by the BANK. q) That the heirs, successors, administrators and or any person or authority claiming through the parties hereof shall be bound by the terms hereof. THE SCHEDULE Part - I Description Maker's No. of Engine Chassis of Vehicles Name Cylinders Number Number Cost Price IN WITNESS whereof the parties above named put their hands on the date above mentioned. (SIGNATURE OF THE BORROWER) (SIGNATURE OF THE BANK) Witnesses: FOREIGN EXCHANGE AND EXCHANGE CONTROL REGULATIONS IN BANGLADESH What is Foreign Exchange:
Foreign Exchange means foreign currency and includes all deposits, credits and balance payable in foreign currency as well as foreign currency instruments such as drafts, bills of exchange, Promissory notes, Traveller’s cheques, letters of credit, etc. payable outside Bangladesh. Exchange Control and its objectives: Exchange Control is administered by the Bangladesh Bank as per provisions laid down in Foreign Exchange Regulation Act 1947 with a view to restrict the demand for use of foreign exchange within the limited supplies, by compulsorily pooling all foreign exchange earnings and resources and spending the same through a process of rationing in accordance with preplanned priorities and allocations, thereby to avoid misuse. NOSTRO ACCOUNT/VOSTRO ACCOUNT/LORO ACCOUNT: Foreign currency Current Accounts maintained by us with corespondents abroad are termed by us as “Nostro A/c†means “our account with you†. The foreign correspondents will, however, term our F.C. Accounts with them as “Vostro A/c†. All our foreign exchange transactions are routed through these Foreign Currency Accounts with correspondents abroad. Similarly our foreign correspondents also some times maintain N/R Taka Accounts with us which is termed by us as meaning a/c with. . Foreign currency maintained by our correspondents abroad in the name of 3 rd party is termed by us a A/c meaning a/c with. WHAT IS RATES OF EXCHANGE ? WHAT ARE THE DIFFERENT TYPES OF RATES OF EXCHANGE ? WHAT IS THE MODE OF QUOTING RATES OF EXCHANGE ? The rates of exchange is the price of one currency in terms of another or in other words, the number of units of one currency which is exchanged for a given number of units of another. The rates are quoted either for spot/ready delivery or for forward delivery. Spot rates are quoted for transaction where the foreign currency bought or sold is to be received or delivered immediately. But in actual practice, such transaction are completed within two working days after the dealing date. Forward rates are quoted either at or at a discount or premium over spot rates but actual delivery of the foreign currency takes place at some future date as agreed upon at the time of the deal. Buying Exchange Rates are sub-categorized as under: a. T.T. Clean Rate: TT clean rate is applicable for purchase of clean and is arrived at by deducting Tk.1/32 (Tk.0.0313) per dollar from Bangladesh spot buying rate.
a. T.T. Documentary Rate: This rate is applicable for purchase of accompanied by documents and Tk.1/32 (Tk.0.0313) per U.S. Dollar from T.T. Clean rate is recovered. a. O.D. (Sight): This rate is applicable for purchase of sight export bills. b. O.D. Transfer: This rate is applicable for purchase of instruments other than export bills and TTs such as cash currency, personal cheques, demand drafts, T.Cs etc. Selling Exchange Rates are sub-categorised as under: a. TT/OD Rates: This rate is applicable for all types of outward remittance except import bills. a. B.C. Selling Rate: This rate is applicable only for retirement of import bills irrespective of whether such sales are effected by TT, MT or FDD. The rates of exchange is quoted in two ways. It may be quoted either as the price of one unit of home currency for so many number of foreign currency units or as the price of a given number of home currency for one unit of foreign currency. Rates quoted in terms of a given number of units of a foreign currency per one unit of home currency is known as while those quoted in terms of a given number of home currency per one unit of foreign currency is known as. REGISTRATION OF IMPORTERS AND IMPORT FORMALITIES As per State Policy and Exchange Control Regulations, Registration of Importers is the first and foremost requirement among others in connection with imports of goods into Bangladesh and without this registration with the Chief Controller of Imports and Exports, Government of the People Republic of Bangladesh, no importer can avail of the country import facilities, excepting the exemptions granted under specific separate authorization by the competent authority. REGISTRATION OF IMPORTERS: In terms of the Importers, Exporters and Indentors (Registration) Order 1981, no person can import goods into Bangladesh unless he is registered with the Chief Controller of Imports and Exports or exempted from the provisions of the said order. Upon completion of the registration formalities by the importers concerned, the Chief Controller of Imports and Exports issues an Import Registration Certificate (IRC) bearing a registration number printed thereon in favour of the respective Importers and a category Import Passbook (Commercial or Industrial category as the case may be) is also issued against the said IRC. The passbook is retained by the nominated bank (Authorised Dealer). Specification of items and entitlement of the importers are recorded in the Passbook. However, the original IRC is delivered to the importer who is to retain the same with him and produce to his nominated bank at the time of opening L/C for import purpose on each occasion. The IRC is required to be renewed annually by paying the requisite renewal fee through T.R. Challans to keep the IRC
valid for import purpose. No import can be made against an expired IRC unless renewed upto current date. Before any Letter of Credit is opened or remittance made on behalf of any importer for imports into Bangladesh, Authorised Dealers should ensure that the registration number of the importer is invariably furnished on IMP Form. Where the importer is exempted from such IMP Form. Even if an importer presents a valid L/C Authorisation Form but is not able to give the registration number, the Authorised Dealers should not open any L/C or deliver any shipping documents against payment for eventual remittance unless the importer furnishes the registration number or produces evidence to the effect that he is exempted from the requirement of registration. IMPORT FORMALITIES: Import of goods from outside Bangladesh is regulated by the Ministry of Commerce in accordance with Imports and Exports (Control) Act 1950 and the Notifications issued thereunder. Goods from South Africa and Israel or goods originated from these countries are not importable. Import of goods into Bangladesh is no permissible on the flag vessel of Taiwan, South Africa and Israel. Import formalities to be observed by an importer for import of goods into Bangladesh are briefly enumerated below: The intending importers holding a valid IRC may approach his nominated Authorised Dealer to open L/C for the import of the permissible item as per current Import Policy Order (IPO). For establishing the intended L/C, the importer is required to submit the following documents/papers with the Authorised Dealer: a) L/C application in the printed format of the designated bank (A.D.) duly filled in and signed by the importer or his authorised agent. This L/C application is also an agreement between the importer and the bank. This form is to be stamped with Tk.50 adhesive stamp affixed on it under the Stamp Act in force in Bangladesh. b) The importer must also submit the LCA Form, together with Indent/Contract/Purchase Order/Proforma Invoice/Sale Order (duly accepted by the importer) along with L/C application. a. The importer has also to obtain Marine Insurance cover for the import and submit the Marine Insurance cover note for the purpose of opening the L/C. a. Original IRC (duly renewed upto current date) should also be produced to the bank for verification and return. a. Membership Certificate of Local Chamber of Commerce and Industries as well as Municipal Trade Licence issued in favour of the importers should also be submitted to the bank for verification and return.
f) Authorized Dealer should also, in this connection, get a full set of IMP Form duly signed by the importer which subsequently is to be submitted to Bangladesh Bank along with monthly return for sale of Foreign Exchange for the import covered under the L/C. WHAT IS A BILL OF LADING ? NAME AT LEAST SIX DIFFERENT TYPES OF BILLS OF LADING USED IN FOREIGN TRADE. A Bill of Lading is a “Document, signed by the master of the ship, acknowledge the receipt on board the ship of certain specified goods for carriage, and embodying an undertaking on behalf of the ship owners, to deliver the goods to a named party or to his order and assigns or merely “To order†upon payment of the freight. Bill of Lading are of different types: a. Charter Party Bill of Lading b. Clean Bill of Lading c. Claused Bill of Lading d. Stale Bill of Lading e. Through Bill of Lading f.
The custody and port Bill of Lading
g. Shipped Bill of Lading. LETTER OF CREDIT (L/C) Basically, a Letter of Credit is a document in which a Bank undertakes to pay a party (the beneficiary) named in the documents a sum of money, provided certain term described in the Letter of Credit are met. Generally this money will be paid when the beneficiary submits proof, usually in the form of documents of having met the conditions. Types of Letters of credit: Documentary credits according to the degree of security provided – a. Revocable L/C: A revocable credit can be modified or cancelled by the issuing bank at any time even after shipment provided no payment has been made with or without notice to the seller. A credit is taken to be revocable if it does not expressly state that it has been irrevocably opened. Since this type of letter of credit can be cancelled at any time, is very risky to the seller. a. Irrevocable, Unconfirmed Credit: An irrevocable credit constitutes a definite undertaking of the issuing bank, provided that the terms and conditions of the credit are complied with. The irrevocable, unconfirmed credit is a commonly
used type of documentary credit. Once this commitment has been entered into, the bank cannot decline responsibility without the agreement of the beneficiary as in the case of a revocable credit. a. Irrevocable, Confirmed Credit: An irrevocable credit can also be confirmed. Whenever the Advising Bank/Issuing Bank’s Agent adds its own confirmation to the credit is called a Confirmed Irrevocable Letter of Credit. Otherwise, it is to be treated as unconfirmed L/C. Here the beneficiary not only has the undertaking of the Issuing Bank abroad but also that of a Bank in his own country and is of value if the Issuing Bank’s standing is doubtful. The confirmed credit offers a very high degree of security for the exporter. Documentary credits according to Payment Methods: a) Sight Credit: When the payment terms stipulate the presentation of sight draft, the beneficiary (the seller) receives the proceeds of the credit upon presentation and examination of the documents. The negotiating bank after making payment to the exporter sends the documents to issuing bank. After determining that the documents are in order, the issuing bank delivers them to the buyer and at the same time debits the buyer’s account which offsets reimbursements to the seller’s bank. b) Acceptance Credit/Term Credit (Credit with time drafts): In case of acceptance credit the exporter draws a time draft either on the issuing or confirming bank, or on the buyer or on another bank depending upon the credit terms. The payment date may be for example 90 days after the invoice date or the date of transport documents. When the documents are presented the draft is accepted instead of payment being made. c) Deferred Payment Credit: The credit with deferred payment differs slightly in its effect on the beneficiary from the time draft. The main difference is the lack of a draft. Upon presentation of the proper documents, the bank so authorised issues a written promise to make payment on the due date. Term credits i.e. acceptance credits and deferred payment credits are financing instruments for the buyer. During the payment period, the buyer can often sell the goods and pay the credit amount with the proceeds. d) Credit with Advance Payment: Some letters of credit provide for advance payment of a portion of the credit prior to compliance with all the credit provisions. The purpose of these advance is to give the exporter, the funds necessary to purchase or process merchandise specially for the buyer. Two typical arrangements deserve mention.
i) Progress Payments: The beneficiary is allowed to draw on the credit in proportion to the progress achieved in production of the merchandise or completion of a project. This arrangement is used in case of large capital out lays such as heavy machinery, plants and roads. The balance of the credit is available against complete compliance along with relevant documents. ii) Red Clause Credits: Under this type of letter of credit the opening bank instructs the negotiating (advising) bank to make advances to the beneficiary upto an aggregate amount in order to enable him to purchase and process merchandise. The advances with interest are to be realised on purchasing/negotiation of export bills to be tendered by the exporter. In this case all risks goes to issuing bank since the issuing bank undertakes the payment of such advances with interest should they not be repaid by the beneficiary prior to the expiration of this credit. In the event of non delivery of shipping documents by the beneficiary in time, the issuing bank will recover the amount advances plus the interest and any charges from the applicant who assumes all risks. Special types of Letter of Credit: a) Revolving Credit: When the importer anticipates having a regular flow of merchandise from a particular foreign supplier, he may wish to open a revolving letter of credit. Under a revolving credit the amount of the credit is automatically reinstated after drawing is fully met or after a specified period of time. b) Transferable L/C: Under this type of L/C, the beneficiary is permitted to transfer his rights in part or in full to another party. In some cases the seller is not the actual producer or manufacturer of the goods. In such cases the original beneficiary request for a transferable credit. A credit can be transferred only if it is expressly designated a “transferable†by the issuing bank. A transferable credit can be transferred once only. A. Standby L/C: Standby credit serves as an assurance or guarantee, the issuing bank assures the beneficiary that in the event of non-performance or non-payment of an obligation by the applicant, the beneficiary may get the payment from the Issuing Bank. d) Back-to-Back L/C:
The seller of the goods may not be the actual producer or manufacturer and may be only an export agent. In such an event, the beneficiary (export agent) can request the advising/confirming bank to issue a new credit in favour of his supplier on the strength of the original documentary credit which has been established in his favour by the buyer. This new credit is referred to as a “Back-toBack†Credit. The original credit is often called a “Selling Credit†while the back-to-back L/C is known as a “Buying Credit†. The handling of a “Back-to-Back†credit is similar to a transferable one. If the original L/C allows partial shipment, several back-to-back letters of credit may be issued against it. There are two types of Back-to-Back L/C viz. Inland and Foreign. Inland Back-to-Back L/C is opened on account of intermediary local buyers who process the goods from local mills/traders for ultimate export. Foreign Back-to-Back L/C is established in our country in the field of Garments Industry against or on the basis of a Foreign Export L/C for import of raw-materials from Foreign countries for execution of the relative export order. Parties to a Letter of Credit: A letter of credit is a legal instrument which binds all parties according to the terms and conditions incorporated in the credit. There are four principal parties in a Letter of Credit: a) The Importer/Buyer/Opener: The purchaser of the goods is called importer. Once the buyer and the seller have agreed to the sales transactions, it is the buyers’ responsibility to initiate the opening of the letter of credit. a. Issuing Bank/Opening Bank: The Bank which at the request of his customer (importer) opens a Letter of Credit is named as Issuing Bank. The Issuing Bank is the buyer’s bank/opening bank of the credit. a. The Seller/Exporter/Beneficiary: The supplier of the goods is called as seller or exporter or the beneficiary. The seller after shipping the goods as per terms of the credit presents the documents to the negotiating bank. a. Advising Bank: It is the correspondent bank of the issuing bank of the credit through whom the credit issued by the opening bank, is advised at seller’s country. Advising bank may also be a negotiating bank.
e) Negotiating Bank: The bank who negotiates/purchases/discounts the documents tendered by the exporter as per terms of the credit is known as negotiating bank. Additional parties to the Letter of Credit: a. Confirming Bank: Performing the same service as an Advising bank, the confirming bank, in addition, becomes liable to pay for documents in conformity with the letter of creditâ₏™s terms and conditions. a. Accepting Bank: A bank who (as specified in the letter of credit) accepts time usance drafts on behalf of the importer is called an accepting bank. The accepting bank can also be the issuing bank. a. Paying Bank: The bank who effects payment to the beneficiary (as named in the letter of credit) is known as Paying Bank/Drawee Bank. a. Reimbursing Bank: If the Issuing Bank does not maintain any account with a bank who will be negotiating documents under a L/C, then arrangement is made to reimburse the Negotiating Bank for the amount to be paid under a credit from some other bank with whom the Issuing Bank maintains his account. The latter bank is termed as Reimbursing Bank. OPENING OF L/C: After receiving the above documents and on scrutiny of the documents on the basis of importers application, Indent/Proforma Invoice, the Bank performs the following tasks: a) Prepare the L/C (Irrevocable L/C) 6 sets signed by two authorised signatories of the Bank. b) Reimbursement Authority (2 copies) After preparation of the above documents (by Issuing Bank), send the following documents to Advising Bank with a forwarding letter enclosing therewith a duplicate copy of Letter of Credit in favour of the beneficiary:
b) Send two copies of L/C papers (one for Negotiating Bank and another for the Exporter/Seller) with a forwarding letter to the Negotiating Bank. Also send "Reimbursement Authority" separately to reimbursement Bank. b) Original copy of Reimbursement Authority (1 copy) and a copy of L/C be sent to the reimbursement Bank separately. In case L/C - At sight Reimbursement Authority to be sent to Advising Bank to honor reimbursement claim of the claiming/Negotiating Bank against above noted credit by debit to our Head Office A/c No.______ maintained with Advising Bank in that country. maintained with Advising Bank in that country. In case L/C - Deferred Payment A clause be incorporated in the Original L/C that "claim reimbursement on maturity date" from Head Office account. AFTER SHIPMENT OF GOODS: The beneficiary of the L/C (supplier) after effecting shipment of the goods as per terms of the L/C, prepares/collects full set of B/L, Bill of Exchange, Commercial Invoice and necessary documents as required under the terms of the L/C and presents the drafts to the negotiating bank along with the supporting documents for negotiation. The negotiating bank negotiates the drafts and if they find the documents in order as per terms of L/C, they make payments to the beneficiary and forward the Drafts and the shipping documents to the L/C opening Bank under cover of a forwarding letter containing necessary instructions for L/C opening Bank. The negotiating bank also obtains reimbursement of the amount paid against the Draft either by debit to Nostro account of the L/C opening Bank or otherwise as stipulated in the L/C. When does Negotiating Bank send documents for collection to Issuing Bank (Advising Bank) ? a) In case discrepancies are found by the Negotiating Bank. b) In case of minor discrepancies, at the request of the beneficiary (seller/exporter). c) In case Negotiating Bank does not want to negotiate (purchase) documents/does not want to effect payment without collection of documents from the Advising Bank (L/C Issuing Bank). Following Books of Accounts are maintained in connection with opening of L/C under Cash: a) L/C opening Register b) L/C Margin/Liability Register
c) BLC Lodgement Register d) Trust Receipt (TR) Register CHARGES Margin - Client's margin (On mutual basis) (Total LC value in USD * B.C. rate) * margin % .50 % - Commission (on the total LC amount) - 1st Qtr. .30 % - From 2nd quarter and onward Tk.2000 - FCC Charges - Telex: 4000/Courier : 1500/Postage : Tk.400 Tk. 50 - LC opening set charge Tk. 50 - Stamp charge. BILLS UNDER LETTER OF CREDIT (BLC): It is a funded credit facility extended to the customers to lodge the import bills after satisfying that the documents have been drawn strictly in accordance with the credit terms and conditions. Usually, bills drawn under cash L/C are to be paid at sight. But most of the cases, it is observed that clients fails to place the required fund at the bank’s disposal to settle the negotiating bank’s claim. In such cases, Bank has to create a BLC account in the name of customer towards settlement of claim within 3 working days from the date of receipt of shipping documents. It is worth mentioning here that BLC is created for full invoice value from the date of negotiation of documents by the foreign banks and in this case clients participation i.e. margin will not be taken into consideration. When Bank lodges the import documents through debit of BLC, the documents are thereafter stamped with BLC number and entered into BLC Register. The shipping documents are then kept in safe custody for ultimate delivery to the importer. The importer should be immediately called in writing to retire the import documents. BLC liability is supposed to be adjusted with up-to-date interest within 21 days from the date of negotiation of shipping documents by the foreign banks. If an importer retires the documents within the stipulated 21 days, he will be entitled to receive interest on the margin amount at the prevailing savings rate of interest. LODGEMENT:
The procedure of recording/marking entries in the BLC Register of the Bank is technically known as LODGEMENT. After scrutiny, if the documents sent by the Negotiating Bank are found in order, send the same to BLC Department for lodgement . TRUST RECEIPT (T.R.) Trust Receipt is a non-renewable funded credit facility allowed by the Bank to its exclusively valued clients only. For such loan prior approval from Head Office must be obtained. In case of LTR, import documents are delivered to the customer WITHOUT PAYMENT. The period of Trust Receipt may be 30, 45, 60 or 90 days as allowed by Head Office. The loan is adjustable within the period. The customer holds the goods or their sale proceeds in Trust for the Bank till the loan is fully adjusted. The Trust Receipt is a document which creates the Bank's lien on the goods. The sale proceeds of goods held in Trust must be deposited in the Bank by the borrower, irrespective of the period of the Trust Receipt. Trust Receipt is always calculated on the amount arrived at after deducting the amount held in margin account. The following documents must be obtained before allowing LTR: a) Demand Promissory Note. b) General Letter of TR with supplementary Agreement. c) Letter of Agreement. d) Personal Guarantee of all the partners in case of Partnership firm. e) Personal Guarantee of all Directors in case of Limited Company. SHIPPING GUARANTEE FOR RELEASE OF IMPORTED GOODS The original shipping documents are evidence of shipment of merchandise under documentary credit. The importer gets the goods released from the port by presenting the original Bill of Lading (BL). Sometimes the goods arrive before the receipt of shipping documents by the Bank. In such cases, the importer may be able to obtain a STEAMSHIP GUARANTEE from the Bank for the merchandise. He can then turn this guarantee over to the carrier, in place of the Bill of Lading, and pick up his goods. A steamship guarantee is a document issued by the bank and addressed to the carrier. It asks the carrier to accept the guarantee in place of all original bill of lading and to release certain merchandise to the importer. The guarantee promises that there will be no legal consequences on
the carrier because he has released the merchandise without a bill of lading and that an original bill of lading will be forwarded as soon as it is received. The bank will realise full payment before issuance of a shipping guarantee. The importer will undertake/accept original documents even with discrepancies. The bank will also endorse nonnegotiable shipping invoice and bill of lading in favour of the importer. The bank will maintain a register for issuance of shipping guarantee. PAYMENT OF F.C.C. FCC means foreign correspondent charges. Foreign banks claim charges for the services rendered by them for the operation of the documentary credits. The foreign bank charges covers advising/negotiation commission, confirmation, reimbursement and other charges. These charges are payable either by seller or buyer. It should be clearly mentioned in the letter of credit as to who will bear the foreign bank charges. F.C. charges are payable in foreign currency. At the time of opening of L/C an amount of TK.2000/- is kept in the FCC Taka account debiting clientâ₏™s account. The negotiating bank realises their charges along with document value from the reimbursement bank as per terms and condition of L/C. AMENDMENT TO LETTERS OF CREDIT: The Letters of Credit opened by a Bank needs amendment because the terms and conditions incorporated in the L/C may conflict with those of the underlying contract between the buyer and the seller. These amendment involves changes in (a) Unit price (b) Documentary requirements (c) Extension of validity of the L/C etc. The bank should obtain a written from the importer who generally makes this request after obtaining consent of the supplier. Such amendments will be effective the L/C opening Bank, Advising Bank and the beneficiary agree to it. The opening bank will advise the required amendment to the Advising Bank by post/telex as the case may be, and recover amendment charges from the account of the importer. CANCELLATION OF L/C: The buyer instructs his Bank to open a credit in favour of a foreign seller in accordance with the agreement between seller and buyer. After opening of L/C sometimes cancellation of original credit becomes necessary. A revocable credit may be cancelled at any moment without prior notice to the beneficiary but an irrevocable credit constitutes a definite undertaking of the Issuing Bank and such undertaking cannot be cancelled without the agreement of all parties, namely the L/C Issuing Bank, the Advising Bank and the beneficiary. The importer request the opening Bank in writing for the cancellation of the original credit. At the request of the importer the opening bank will inform Advising Bank to call back original credit from the beneficiary for cancellation. The L/C will be treated as cancelled only on receipt of confirmation
from the Advising Bank that the beneficiary has agreed to cancel the credit. The opening bank must recover cancellation charge from the account of importer. Documents required for NEGOTIATION OF EXPORT BILLS: a) Bill of Exchange (Draft) in sets. b) Shipped "ON BOARD" Bill of Lading in full sets drawn to the order of the negotiating bank along with non-negotiable copies of Bill of Lading. Airway Bill/Air Consignment note if shipped by Air or Post parcel receipt, in case of export by post. c) Commercial Invoice d) Packing List. e) Insurance Policy, if called by L/C. f) Certificate of Origin. g) Consular/Customs Invoice. h) Pre-shipment Inspection Certificate. i) G.S.P. Certificate. j) Quality Control Certificate. k) Phyto-sanitary Certificate from Plant Protection Dept. l) EXP Form. m) Exchange Control copy of EPC/ERF, if applicable. DIFFERENT CATEGORY OF BUYING / SELLING RATES OF EXCHANGE THEIR APPLICATIONS The Authorised Dealer buying rates are divided into various sub-categories depending on involvement of loss of interest and other factors such as handling commission, postage etc. T.T. Clean Rate: T.T. stands for Telegraphic Transfer. In this transaction no loss of interest is involved and the bank is not required to handle any documents. T.T. clean rate is applicable for purchase of clean and arrived
at by deducting a cushion from Bangladesh Bank spot U.S. Dollar buying rate and cross rates of other major currencies converted into Taka by multiplying or dividing with U.S. Dollar/Taka rates. T.T. Documentary Rate: In this type of transactions, the bank is required to handle documents and as such allowed to recover an exchange cushion per U.S. Dollar from T.T. Clean rate. This rate is applicable for purchase of accompanied by documents. As for example, when payments against are to be made on production of invoice or other documents or when export bills are negotiated under documentary L/C against which reimbursement from the opening bank is obtained by T.T. O.D. (Sight): O.D. means on demand. This rate is applicable for purchase of sight export bills. Purchase of such bills involves loss of transit interest. O.D. (sight) buying rate is therefore, arrived at by loading appropriate amount of interest for a transit period and a cushion is deducted from T.T. Clean rate to cover postage, overhead etc. O.D. (Transfer): O.D. (Transfer) rate is applicable for purchase of instruments other than export bills and T.Ts such as cash currency, personal cheques, demand drafts, T.Cs. etc. and is arrived by loading interest for transit period with T.T. Clean rates for U.S. Dollar/Pound Sterling or other major currencies. Authorised Dealers Selling Rate is divided into two sub-categories viz. T.T./O.D. rate and B.C. Selling rate. T.T./O.D. Rate: This rate is applicable for all types of outward remittance except import bills. The Authorised Dealer is allowed to realise an exchange cushion per U.S. Dollar over the selling rate of Bangladesh Bank and cross rates of other major currencies converted into Taka by multiplying or dividing with U.S. Dollar/Taka rates. B.C. Selling Rate: B.C. Selling rate is applicable only for retirement/lodgment of bills under import L/C, irrespective of whether such sales are effected by T.T. or FDD. A.Ds are allowed to realise an exchange cushion over T.T./O.D. rate. PART-4 CONCLUSION:
Evaluating Bank Performance provides bank board members with an understanding of how to evaluate bank performance including key financial ratios, the use of peer groups, and key risk measures. Excellence in banking is the motto of Jamuna Bank Limited. Whether in personal, corporate, treasury or trade transactions SBL is committed to provide the best. Despite many challenges, SBL has been able to maintain the momentum of profit growth and strong performance in its core businesses for the seventh year in a row. Among the total banking sector in Bangladesh, now JBL has made remarkable progress practically in every sphere of his activities. In the last few years of operations, JBL has not only earned good reputation in the market but also performed well in terms of financial performance and it becomes possible because of strong management team of JBL. Moreover, so form the above discussion now it is clear that JBL the pioneer of banking sector in Bangladesh. To this end in view, bank always keeping them abreast with the latest technological development at home and abroad. COMMENTS: Banking sector is only the sector that enjoying a continuous growth over lasts two decades. This is because of their experienced professional, better management, resources and quality services. Due to globalization, each type of business falls in a hard competition. In this respect, success depends on quality of product & services. Private commercial Bank in Bangladesh also facing globalization effect. They are achieving success in this business field by offering multiple dynamic product and quality services to their consumers. Itâ₏™s really hard to make a better comment about a commercial bank only by having a little experience. For the purpose of this study, I just worked in the Principal Branch of Southeast Bank for a period of twelve weeks, commenced from June 1 st , 2004 to August 30th, 2004. During this short period, I worked with various departments starting from customer service to credit department. I am grateful to all staff & officials of Principal Branch because of their cordial behavior and help to me. As a second-generation commercial bank, Jamuna Bank established a landmark in the banking community in Bangladesh. JBL expanding its activities by offering multiple product & quality service to their consumer. Their product & quality services bring them a continuous growth in their success.
This is because of their proved banking professional, right management, available resources, and multiple product & quality services. I wish, Southeast Bank will invest the right effort to maintain this continuous growth in future by providing service to the consumer. I hope, Southeast Bank will be an example of success in the Banking community of Bangladesh. BIBLOGRAPY 1. Rose, h. B the Economic background to Investment, Cambridge, 1963, p. 238. 2. Kross, Herman E. & Blyn, Martin R. A history of financial intermediaries, Random house, inc. New work 1971, p. 85. 3. Husain, Fahat, Public Sector Comercial Bank in India, Deep & Deep Publications, New Delhi, 1986, pp. 159- 161. 4. Lesiker, Raymond V. & Pettit, John D. JR. Business Communication Theory and Application, Richard D. Irwin, Inc. Delhi, 1989. 5. Musa, Mohammad, “the role of risk analysis and investment decision in revival of capital markets†, Portfolio, CSE, October 1999. 6. IFC Emerging Stock Markets facts Book, 2000. 7. SEC Public issues rule 1998. 8. Jamuna Bank Limited Annual Report 2004 & 2005. PART-5 APPENDIX The Management Managing Director Mr. M. Nazrul Islam Deputy Managing Director Mr. Motior Rahman Senior Executive Vice President Mr. Kazi Fariduddin Ahmed Mr. Mohammed Abdul Gaffer Chowdhury Mr. Abdus Salam
Executive Vice President Mr. Y. N. Adnan Mr. Sk. Ruhul Amin Senior Vice President Mr. M. Hassan Ali Mr. Shahrukh Ahmed
Vice President
Mr. Md. Mahbubul Hoque
Mr. Md. Nazmul Hossain
Mr. Shahedul Alam Khan Mr. Md. Balayet Hossain Mr. Mirza Elias Uddin Ahmed
Mr. Md. Elias Ali Akanda
Mr. Shafiqur Rahman Khan
Mr. Md. Monjurul Ahsan Chowdhury
Mr. A. K. M. Saifuddin Ahamed
Mr. Mahboob Alam Choudhury
Ms. Nur-E-Jannat Begum
Mr. Quzi Mamun-Ul-Ashraf Mr. Istiaqul Jalil Khan Mr. Ahmed Parvez Shamsuddin Mr. Khorshed Ahmed Nayeem
Senior Assistant Vice President Mr. Mokhlesur Rahman Mr. Amiruddin Chowdhury Mr. Fazlul Jalil Mr. Md. Belal Hossain Mr. Khandaker Zia Hassan Mr. Md. Mofazzal Hossain Mr. Ahmed Nawaz Assistant Vice President
Mr. Monsuruzzaman Mr. Zashim Uddin Mr. Md. Shamsur Rahman Majumder Syed Shakir Uddin Mohd. Munir Zahurul Islam Khondoker Mr. Md. Habibul Islam Mr. Sk. Md. Salahuddin Mr. Md. Abdur Rahi Branch Network Branch Name & Name of Manager 01
02
Address
Mohakhali Branch ,Dhaka
Ismail Mansion
Branch Manager:
32 Mohakhali C/A, Dhaka
Mr. Khorshed Ahmed Nayeem Vice President
PABX : 9887269, 9889273-4
Sonargaon Road Branch,Dhaka Branch Manager: Mr. Mahboob Alam Choudhury Vice President
SWIFT: JAMUBDDH035 1/G, Free School Street Sonargaon Road, Kawran Bazar, Dhaka Tel: 9677048,9677049 PABX : 9670655,9677050
03
Moulvibazar Branch, Dhaka
SWIFT: JAMUBDDH039 Mustaquim Mansion
Branch Manage:
77/3, Moulvibazar, Dhaka.
Mr. Istiaqul Jalil Khan Vice President
PABX : 7315025, 7315026 SWIFT: JAMUBDDH036
04.
Agrabad Branch, Chittagong Branch Manager: Mr. Mohammed Abdul Gaffar Chowdhury Sr, Executive Vice President
Jahan Building No. 4 76-77, Agrabad C/A, Chittagong PABX : (031) 727727 SWIFT: JAMUBDDH038
05.
Dilkusha Branch, Dhaka Branch Manager
33, Dilkusha Commercial Area
Mr. Sk. Ruhul Amin Executive Vice President
Dhaka-1000 PABX : 9565608,9551419,9558972 SWIFT: JAMUBDDH037
06.
07.
Goala Bazar Branch ,Sylhet Branch Manager (In-Charge):
New Plaza, Goala Bazar
Nabil Ahmed
Osmani Nagar, Balaganj, Sylhet
Sr. Executive Office Beani Bazar Branch ,Sylhet
PABX : (08222) 87352-3
Branch Manager:
Fatehpur, Union 6 Beani Bazar
Mr. Harunur Rashid First Asstt. Vice President
Beani Bazar, Sylhet Phone :08223 - 88022
08.
Sylhet Branch , Sylhet Branch Manager:
Sahir Plaza, 7647, Zinda Bazar
Mr. Md. Fazlul Jalil Sr. Assistant Vice President
Kotoali, Sylhet PABX : 0821-725409
09.
Shantinagar Branch , Dhaka Branch Manager:
41/B, Chamelibag Shantinagar, Dhaka
Mr. Ahmed Parvez Shamsuddin Phone: 8355179 Vice President SWIFT: JAMUBDDH041
10.
Gulshan Branch, Dhaka
Land View Commercial Centre
Branch Manager:
28, Gulshan North C/A (2nd Floor)
Mr. Shafiquir Rahman Khan
Gulshan Circle-2
Sr. Vice President
Dhaka-1212 Tel: PABX:8852540 SWIFT: JAMUBDDH043
11.
Dhanmondi Branch ,Dhaka Branch Manager:
House –17 (Ground Floor) & 17/A (1st Floor)
Mr. Quzi Mamun-Ul-Ashraf Road –6, Dhanmondi R/A, Dhaka Vice President Tel: PABX: 8613920
12.
Nayabazar Branch (Islamic Banking), Dhaka
10/3 Malitola
Branch Manager:
North South Road
Mr. Mofazzal Hossain
Bangshal, Dhaka-1100
Sr. Assistant Vice President
Tel:9553977 SWIFT: JAMUBDDH040
13.
14.
Naogaon Branch, Naogaon Branch Manager:
247, Sadar Road, Naogaon
Mr. Sk. Md. Salahuddin
Tel: 88-08223-88022-3
Asstt. Vice President Mohadebpur Branch, Naogaon
SWIFT: JAMUBDDH044 Mohadevpur, Naogaon
Branch Manager:
Tel: 88-07426-75137
Mr. Md. Mahmub Alam First Asstt. Vice President
15.
Khatunganh Branch, Dhaka Branch Manager:
1575, Pathorghata, Chittagong, Tel: 88-031-625454
Mr. Md. Habibul Islam
16.
SWIFT: JAMUBDDH042
Asstt. Vice President Konabari Branch, Gazipur Branch Manager:
Plot # A-140&141(partial)
Syed Shakir Uddin Mohd. Munir
BSCIC Industrial Area
Assistant Vice President
Konabari, Gazipur Tel: 0173030683
17.
Bhatiyari Branch, Chittagong Branch Manager:
Uttarbazar
Mr. Md. Azam
Newaz Market
First Asstt. VIce President
Bhatiyari, Shitakundu Chittagong
18.
19.
Foreign Exchange Branch, Dhaka
Tel: 031-752695,714994 2, DIT Avenue (Extension)
Branch Manager:
Motijheel, Dhaka
Mr. Abdus Salam
Tel: 9554474
Sr. Executive Vice President
SWIFT: JAMUBDDH045
Jubilee Road Branch (Islamic Banking), Chittagong Modina Tower Branch Manager: Jubilee Road Md. Monjurul Ahsan Chowdhury Chittagong Vice President Tel: 031-616266
20.
Chistia Market Branch (Gausia Market), 393/B Elephant Road, Dhaka Chistia Market Branch Manager: (Gausia Market) Md. Abdur Rahim 393/B Elephant Road Asstt. Vice President
21.
22.
23.
Bogra Branch, Bogra
Tel: 9673742 Kazi Nazrul Islam Sarak
Branch Manager:
Borogola
Md. Nazmul Hossain
Bogra
Vice President Baligaon Branch, Munshiganj
Aziz Plaza, Baligaon Bazar
Branch Manager:
Tongibari
Md. Moazzem Hossain
Munshiganj
Jr. Asstt. Vice President Narayanganj Branch, Narayanganj
Holding# Old:137, New:207
Branch Manager:
B.B. Road, Chasasra
Md. Elias Ali Akanda
Narayanganj
Vice President BALANCE SHEET As at December 31, 2005 Property and Assets 2005 2004 2003 Amount (Tk.) Amount (Tk.)
Amount (Tk.) Cash In hand ( including foreign currency) 152,207,097 113,798,477 79,590,376 With Bangladesh Bank & Sonali Bank (including foreign currency) 659,108,935 274,037,264 335,728,605 Balance with other Banks & Financial Institutions 2,442,781,141 3,043,025,156 3,062,724,888 In Bangladesh 2,371,218,673 2,929,629,737 2,953,034,114 Outside Bangladesh 71,562,468 113,395,419 109,690,774 Money at Call & Short Notice 60,000,000
1,632,000,000 1,719,000,000 Investment 2,037,835,354 1,163,703,654 935,477,100 Government 1,505,698,800 950,302,500 730,322,100 Others 532,136,554 213,401,154 205,155,000 Loan & Advances 11,011,834,555 6,722,804,334 3,239,519,065 i) Loans, cash credit, overdrafts etc. 9,304,777,235 5,405,427,302 2,539,743,366 ii) Bills discounted & purchased 1,707,057,320
1,317,377,032 699,775,699 Fixed Assets 106,464,136 97,988,266 66,602,931 Other Assets 393,533,997 444,166,685 328,143,985 Non-Banking Assets Total Assets 16,863,765,215 13,491,523,836
Liabilities and Capital Liabilities Borrowing From Other Banks & Financial Institutions Deposits & Other Accounts i) Current deposit & other accounts ii) Bills payable iii) Savings deposit iv) Bearer certificate of deposit v) Short term deposit vi) Fixed deposit vii) Deposit under special scheme viii) Foreign currency deposit ix) Call deposit Other Liabilities Total Liabilities Capital
2005
2004 Amount (Tk.)
9,766,786,950 2003 Amount (Tk.)
867,800,000
2,048,500,000
2,355,000,000
14,454,129,315 1,543,069,330 109,286,849 749,516,507 384,028,052 10,899,416,811 731,073,005 37,738,761 734,695,291 16,056,624,606
10,450,160,991 905,888,757 78,479,501 614,956,477 238,793,721 8,023,257,967 581,391,394 7,393,174 385,542,317 12,884,203,308
6,614,059,192 529,209,427 68,271,519 282,748,281 101,958,239 5,138,561,797 490,809,194 2,500,735 346,360,220 9,315,419,412
Capital & Shareholders’ Equity i) Issued & Paid Up Capital (4,29,0000 ordinary shares of Tk. 100 each) ii) Statutory reserve iii) Proposed issue of bonus share
429,000,000
429,000,000
390,000,000
149,672,451 -
77,010,603 -
22,269,798 39,000,000
iv) Surplus in Profit and Loss A/C
228,468,158
101,309,925
97,740
Total Shareholders’ Equity
807,140,609
607,320,528
451,367,538
Total Liabilities & Shareholders’ Equity
16,863,765,215
13,491,523,836 9,766,786,950
INCOME STATEMENT For the period ended December 31, 2005 Particulars Interest income Interest paid on deposits, borrowings etc. Net interest income Income from Investment Commission, exchange and brokerage income Other operating income Total Operating Income Salaries and allowances Rent, rates, taxes, insurance, lighting etc. Legal expenses Postage, stamp, telephone Stationery, Printing, Advertisements etc. Managing director’s salary & allowances Directors’ fees & others Auditors fee Depreciation and Repair, maintenance of Bank’s assests Other expenses Total Operating Expenses Profit / (loss) before provision Provision for loans, advances and others Total profit before tax Provision for tax Net Profit/ (loss) after tax Retained surplus brought forward from previous year Retained surplus before appropriation Appropriations : Statutory (20% on pre-tax reserve profit)
2005 Amount (Tk.) 1,374,379,710 1,045,462,115 328,917,595 126,303,992 211,337,861 38,249,889 704,809,337 110,139,273 32,883,242 354,101 20,035,992 16,238,084 3,297,581 2,098,485 60,000 17,492,129
2004 Amount (Tk.) 1,004,359,239 726,064,552 278,294,687 80,439,298 133,703,617 20,036,441 512,474,034 94,493,095 26,775,150 272,257 9,452,847 11,459,595 4,197,096 2,174,953 60,000 13,919,940
2003 Amount (Tk.) 738,496,818 592,836,055 145,660,763 27,373,544 71,204,997 9,659,631 253,898,935 57,598,984 21,686,942 70,705 6,282,000 7,726,381 5,053,582 2,511,958 30,000 8,508,324
82,269,758 284,868,575 419,940,762 56,631,523
40,837,161 203,642,094 308,831,949 35,127,923
15,554,103 125,022,979 128,875,956 17,901,327
363,309,239 163,489,158 199,820,081 101,309,925
273,704,026 117,751,036 155,952,990 97,740
110,974,629 49,831,708 61,142,921 149,745
301,130,006
156,050,730
61,292,666
72,661,848
54,740,805
22,194,926
Proposed Dividend as bonus share (10:1) Retained Surplus Earning per share (EPS)/Adjusted EPS of 2003 Sl. Particulars No. 1 Paid up capital 2 Capital 3 Capital surplus/deficit 4 Total assets
-
99,450,000
39,000,000
228,468,158 46.58 2005
1,859,925 36.35 2004
97,740 14.25 2003
429,000,000 916,456,000 115,540,000 16,863,765,215
390,000,000 483,971,000 204,304,000 9,766,786,950
5
Total deposits
14,454,129,315
6 7
11,011,834,555 5,445,677,509 76.18% 0.46%
64.33% 0.04%
37.54% .02%
199,820,081 51,051,000 10,206,550
155,952,990 2,828,657 1,037,407
61,142,921 635,107 635,107
13 14 15
Total loans & Advances Total contingent liabilities & commitments Advance deposit ratio % of classified loans against total loans and advances Profit after taxation Amount of Classified loan Provision kept ag classified loan inclu. SMA (Fully provided) Provision surplus/deficit Cost of Deposit Interest earning assets
429,000,000 674,650,000 148,506,000 13,491,523,83 6 10,450,160,99 1 6,722,804,334 2,903,956,390
8.79% 15,551,752,250
8.94% 8,951,223,195
16 17 18 19 20 21 22
Non-interest earning assets Return on investment Return on assets Income from investment Earning per share Net Income per share Price earning ratio
1,312,012,965 6.20% 1.18% 126,303,992 46.58 46.58 188.14
7.84% 12,559,226,49 0 932,297,346 6.91% 1.16% 80,439,298 36.35 36.35 141.57
8 9 10 11 12
8,629,059,192 3,239,519,065 1,772,761,956
815,563,755 2.93% 1.32% 27,373,544 15.68 15.68 N/A
Financial Highlight Jamuna Bank Limited Questionnaire (To be filled by the Human resource Department) Name of the Company: ___________________________________________________ Name of the Department: _________________________________________________
Name of the Person: ______________________________________________________ Designation: ____________________________________________________________ (Please tick in the relevant boxes) 1. Recruitment Process is dealt by o o o
HRD Line Department. Both. 1. Higher priority goes the during Recruitment Selection Process to
o o o o
Education Experience. Reference Others 1. Do you concern prepare manpower plan?
o
Yes
o
No 1. How do you grade your employees?
o o o o o
Grade 1-X Grade X-1 Grade A-D Grade D-A Others 1. Senior positions are handled by
o o o
Manager of the HRD Department head of the required position. Managing Director. 1. Mid and Lower level positions are handled by ______________________________________________________________ 1. Did your organization give job advertisement in the internet?
o o
Yes No
1. Is there any reward and Recognition system for the employees? Present. Absent.
o o
1. Are the employees of your organization satisfied with the performance of HR Department? Yes No Unevaluated
o o o
1. Please tick which of the following sources are used by this concern for Recruiting Personnel? o o o o
Internal Promotion. Walks INS. Advertisement Campus Interview
o o o o o
Unsolicited Applications. Transfer Pending Bio-data file. Employment Exchanges. Recommendations.
o o
Consultancy Firms. Any other, Please Specify_______________________________________ 1. Which media is more effective for advertisement? Newspaper Magazine TV Radio
o o o o
1. Does Advertisement carry the following information? o o o o o o o
Salary Information Yes______ No_______ Company Benefit Yes______ No_______ Job Area Yes______ No_______ Necessary Qualification Yes______ No_______ Required Experience Yes______ No_______ Specific Age Yes______ No_______ Address of the Company Yes______ No_______
1. Please tick the elements your concern uses in selecting the employees and rank them according to their importance. (Rank: 1=Not important, 2=Less important, 3=Indifferent, 4=Important, 5=Very important)
o o o o
CV Application Form Bio-data Form. Written Test.
o
Interview/Viva Voce Test.
o o o
Audio-Visual Test. Groom Test. Extempore Test. 14.What types of relation between customer & employees---Good Excellent Moderate poor
• • • •
15.Can you satisfy the customer by your environment? Yes No
• •
16.Are you happy with your employees? Yes No Any other, please specify, ________________________________
• • •
Thank you for filling the questionnaire Signature Date: