General
Banking Activities of First Security Islami Bank Ltd.
Executive Summary: This report is based on working experience at First Security Islami Bank Ltd (FSIBL) as a part of the internship program. During my internship period, got the opportunity to work at the General Banking Department of Mirpur branch of the bank. In order to incorporate the practical knowledge I have chosen to prepare my report on General Banking Activities of First Security Islami Bank Ltd. The report is aimed to exhibit general banking activities of the bank, how it works and to what extent the customers are satisfied with the service of the bank. The report also offers some suggestions for the improvement of providing services in terms of revenue and in order to achieve a superior level of customer satisfaction. First Security Islami Bank Limited (FSIBL) was incorporated in Bangladesh on 29 August 1999 as a banking company under Companies Act 1994 to carry on banking business. It obtained permission from Bangladesh Bank on 22 September 1999 to commence its business. It was commenced its operation as a conventional banks but from 1st January’ 2009 it was converted from interest based bank to an Interest free bank. At present The Bank carries banking activities through its 86 branches in the country. Like other private commercial banks First Security Islami Bank Limited (FSIBL) encompass a wide range of services including accepting deposits, making loans, discounting bills, conducting money transfer and foreign exchange transactions, and performing other related services such as safe keeping, collections and issuing guarantees, acceptances and letter of credit. This report basically deals with “General Banking Activities”. After observing and doing the internship have found the some problems comparing to other private commercial bank (Mutual Trust Bank Ltd, Exim Bank Ltd.) that take places in the banking system. At the age of modern technology computer and online leads the every sphere of lives including banking system but more than half of officers of First Security Islami Bank Ltd are not experts in computer and online system. Its IT department is not so developed and experts like other banks’ IT.They face some problem due to using differences types of software like Bankultimus, PCbank etc.Few officers are skilled and experienced in banking sector that’s why sometimes they take more times handling tasks owing to handling more tasks. First Security Islami Bank Ltd has brought SMS, Mobile and Internet banking systems as a modern service but it does take any measures to popularize and make strong.
Apart from, due to not having own ATM booth, clients are to pay more charge for using others bank’s ATM booth. Normally Accounts Opening section takes more responsibilities without its duties. It is a problem for Accounts Opening section.It does not provide service to bring attention of target customers. Problems aside, First Security Islami Bank Ltd. is collecting more deposit and trying to provide new services to clients to meet their satisfaction which is well for First Security Islami Bank Ltd. Chapter One 1.0
Introduction:
Banking sector is considered as a pillar of the economy of any nation on which economy of that country is standing. At the time of bearing the economy banks exercise different types of banking activities and take responsibilities. As an intern choose an Islamic Bank called First Security Islami Bank Ltd which is leading and reputed private commercial Islami bank in Bangladesh is playing important role in country economy. First Security Islami Bank Limited (FSIBL) was incorporated in Bangladesh on 29 August 1999 as a banking company under Companies Act 1994 to carry on banking business. It obtained permission from Bangladesh Bank (BB) on 22 September 1999 to commence its business. From on 1 st January 2009, First Security Bank Ltd is continuing as an Islami Bank called First Security Islami Bank Limited. Banks provides the opportunity to its clients to deposit and lending money also at the same time attractive services are ensured as per the client’s needs wants & demand with the changing environment and competition. Activities of a bank permits to open & close accounts, issuing cheque books, remit funds, pay order, demand draft, receive cheque for clearing, FDR (Fixed Deposit Receipts)DBS(Double benefit Scheme) opening with attractive interest rate etc. It also includes the process of communicating, summarizing and explaining the economic events of a bank within a specific period of time. 1.1 Origin Of The Report “General Banking Activities in Private Commercial Bank of First Security Islami Bank Ltd”is a topic of my internship report. To make this report the performed internship at this organization for three (3) months. Internship program is the partial requirement of B.B.A program. After completing of my forty courses, it was my legal obligation to get the practical knowledge of the corporate world. That’s why had to join in the First Security Islami Bank Ltd. Mirpur Branch and internship report is based on the practical workings that the performed. The tried best to accomplish the report is an essential part of BBA program. The assigned to First Security Islami Bank Ltd. Mirpur Branch and conducted a study on “General Banking Activities of First Security Islami Bank Ltd” 1.2 Significance of the Report: Education will be most effective when theory and practice blends. Theoretical knowledge gets its perfection with practical application. And the internship is designed to bridge the gap between the theoretical knowledge and real application. We all know that there is no alternative of practical knowledge which is more beneficial than theoretical aspects. The prime reason of this study is to become familiar with the practical business would and to attain practical knowledge about the overall Banking and Corporate world.
1.3 Scope of the Report: In order to maintain the speed of development now banks must compete in the market place both with local institution as well as foreign ones. The presentation of the organizational structure and policy of First Security Islami Bank Limited and investing the strategy applies by it provide the scope of this report. An infrastructure of the organization has been detailed and looks into the future. The scope of this report is limited to the overall description of the company, its services, its position in the industry, practical progress of its operation. The scope of the study is limited to organizational set up, function and performances: Recent performance of FSIBL in terms of deposit, investment and foreign exchange. • -To analyze the banks current financial flows performed by FSIBL. • -To obtain practical experience about general about general banking activities by involving such type of program. •
-To build professional carrier in the banking sectors as well as any credit providing institution.
First Security Islami Bank Limited has 84 branches all over the country. I was placed to the Mirpur Branch, Dhaka by the Human Resource Department of the Bank. During my internship period, I have learned and gathered experience of general banking activities from Account Opening Section, Cash Section, Clearing Section and Accounts Section. The scope or span of this report is to highlight the general banking activities practiced in private commercial banks specially focusing on general banking activities of First Security Islami Bank Ltd, Mirpur Branch. 1.4 Objectives of the Report Objective is an important thing for different purpose. Objective helps to go in a good way which is related with the report. I segment the objective in two ways as follows: 1.4.1 Broad Objective The board objective is to analyze the general banking activities of FSIBL. 1.4.2 Specific Objectives •
To learn General Banking Activities of First Security Islami Bank Ltd practiced in branch.
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To identify the problems & make some recommendations against this problem in General Banking Division in First Security Islami Bank Ltd.
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To show the comperative analysis among IBBL & Al-Arafa Islami bank.
1.5 Methodology of the Study The study is performed based on the information extracted from different sources collected by using a specific methodology. This report is analytical in nature. 1.5.1 Data Collection:
Sources of data of this report can be divided into two categories: 1.5.2 Secondary Sources: • Annual reports (2010) of First Security Islami Bank Ltd. •
Printings & Brochures of First Security Islami Bank Ltd.
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Prospectus of First Security Bank Ltd
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Website
1.5.3 Data Analysis & Presentation Data analysis has been done by using different types of computer application programs such as MS Excel, MS word. 1.6 Limitations of the Report •
• To complete all of these mentioned above, the face some limitations like: The major Problem was time constraints. The duration of my internship Program was only three months. But this allocated time is not enough for a complete and fruitful study.
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Due to some legal obligation and business secrecy Bank is not disclosing some expected data and information for obvious reason, which could be very much useful.
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The data and various information of FSIBL Bank are not in organized way that’s why Bank failed to provide all information.
Chapter Two 2.0 Banking System 2.1 History of Banking System When money became an accepted medium of exchange, the need arose to keep the money safe. In addition, some people needed to borrow money. These needs led to the development of banks. The earliest banking records, dated around 2000 B.C., indicate that Babylon had a highly developed banking system. Babylonian banks were not unlike the banks of today, except that you might say they had a monopoly. Many years later, in the sixth century B.C., the first private bank emerged. Like today's bank, it accepted for deposit money on which it paid interest. It also lent money to persons who needed the money for worthwhile purposes and who repaid the borrowed funds with interest. By the fourth century B.C., Greece was the dominant nation in the world. Private and city-state-owned banks existed in the outlying lands of the Greek Empire, but
only privately owned banks were allowed in Greece. Government to a great extent regulated those banks; however, Rome then became the dominant empire. Under early Roman law, banks could only be privately owned, but law regulated them. With the fall of the Roman Empire, banking became essentially illegal until the third century A.D. By the fourteenth century, when trade routes were being developed, privately owned banks were once again allowed. And by the fifteenth century, banks were needed to advance the huge sums of money required to send out ships to bring back valuable commodities such as spices, silk and gold. At this time in history, banking was big business. 2.2 Banking Scenario in Bangladesh The banking in Bangladesh has passed four decades through different policy environments and comprises central bank at the apex, nationalized commercial banks (NCBs), private commercial banks (PCBs), foreign commercial banks (FCBs) and specialized financial institutions. In the decade of seventies, in an atmosphere of fully regulated banking, the nationalized commercial banks played the active role in intermediation and allocation of credit along with the specialized financial institutions. The decade of the eighties witnessed the active operation of both the NCBs and PCBs (local and foreign) in the banking sector. Before liberation of Bangladesh in 1971, the total banking system was private owned, urban-based and profit oriented. But after the liberation, the Government of Bangladesh nationalized all the banks operating in Bangladesh in 1972, except a few foreign banks branches. It was due to the economic policy of Pakistan Government that we were having a privatized banking structure, till the independence of Bangladesh in 1971. Therefore, under such a situation, Bangladesh Government had no other alternative but to take up the control and nationalize the enterprises including the banks. Following nationalization, the government also recognized the existing commercial banks into six (6) distinct new banks in the following manner in terms of the Bangladesh Banks (Nationalization) Order, 1972: Existed Bank The National Bank of Pakistan The Habib Bank Ltd. The United Bank Ltd. The Standard Bank Ltd. The Estern Mercantile Bank Ltd. The Estern Banking Corporation Ltd.
Reorganized Bank Sonali Bank Agrani Bank Janata Bank Rupali Bank Pubali Bank Uttara Bank
Source: Khan, Mohammad Khalid, “Banking System in Bangladesh: 1972-1982” The Bangladesh Times, March 20, 1982 Reorganization of Commercial Banks of Bangladesh In 1972 First Generation Banks (Established 1982-1988) • National Bank Limited, • The City Bank Limited, • United Commercial bank Limited, • AB Bank Limited, • IFIC Bank Limited, • Islami Bank Bangladesh Limited, •
Oriental (Al-Baraka) Bank Bangladesh Limited. At present it is ICB Islamic Bank Limited.
Second Generation Banks (Established 1992-1996) • Eastern Bank Limited, •
National Credit & Commerce Bank Limited,
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Prime Bank Limited,
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Southeast Bank Limited,
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Dhaka Bank Limited,
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Al Arafa Islami Bank Limited,
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Social Investment Bank Limited,
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Dutch-Bangla Bank Limited.
Third Generation Banks (Established 1996-2000) • Mercantile Bank Limited, •
Standard Bank Limited,
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One Bank Limited,
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EXIM Bank Limited,
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Premier Bank Limited,
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Mutual Trust Bank Limited,
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First Security Bank Limited,[now a days it’s incorporated FSIBL]
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Bangladesh Commerce Bank Limited,
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Bank Asia Limited,
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The Trust Bank Limited
Fourth Generation Banks (Established 2000-2011) • Shahjalal Bank Limited, •
Jamuna Bank Limited,
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BRAC Bank Limited.
Fifth Generation Banks (Established 2012-Till Now) • Union Bank Limited, •
Modhumoti Bank Limited,
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The Farmers Bank Limited,
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Meghna Bank Limited,
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Midland Bank Limited
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South Bangla Agriculture and Commerce Bank Limited.
2.3 Definition of Islami Banking System An Islamic Banking is a financial institution that operates with the objective to implement and materialize the economic and financial principles of Islam in the banking arena. According to The Organization of Islamic conference (OIC) defined an Islamic Bank as “a financial institution whose statutes, rules and procedures expressly state its commitment to the principles of Islamic Shariah and to the banning of the receipt and payment of interest on any of its operations.” 2.4 History of Islamic Banking Modern banking system was introduced in Muslim countries at a time when they were politically and economically slave to the western world. Western Banks established their branches in the Muslim countries and territories to fulfill requirements of foreign business. The Muslim community generally avoided the foreign banks for religious reasons but with the passage of time, it became more and more difficult to engage in trade and other activities without making use of commercial banks. Even then, a large number of Muslims confined their involvement to transaction activities such as current account or hundred percent cash margin letter of credits. Borrowings from commercial banks or placement the access funds and saving accounts were strictly avoided by practicing Islam in order to keep away from interest which is prohibited by Islam. With the passage of time, however, due to increase in cross-border transactions and other socio-economic forces are demanding more involvement in national economic and financial activities, avoiding the interaction with the banks became impossible. Local banks were established in Muslim countries (including the names like Muslim Commercial Bank) on the same lines as the interest-based foreign banks and they began to expand within the country bringing the banking system to more and more people. Governments, businesses and individuals began to transact business with the banks, with or without liking it. This state of
affairs drew the attention and concern of Muslim intellectuals which gave emergence to the contemporary Islamic banking. By the midst of the last century, many Muslim countries started their efforts to adopt the Islamic economic and banking systems. Many scholars, economist and experienced bankers came with different solutions to initiate the Islamic banking. Those experiences paved the route for modern Islamic banking. Nowadays Islamic financial institutions (IFIs) are spread all over the world including European countries and the United States. In particular these have their significant presence in Pakistan, Saudi Arabia, Bahrain, United Arab Emirates, and other GCC countries, Malaysia, Sudan and Iran. 2.5 Chronology of Islamic Banking Development: •
1940: Deliberations by Islamic Scholar on modalities of Islamic system of financing and banking.
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Mid-1940s: Experiment with Islamic Bank in Malaysia, It did not materialize.
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Mid-1950s: Experiment with Islamic Bank In Pakistan, It too proved unsuccessful
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1962: Pilgrims bank established in Malaysia.
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1963:Ghamr Bank established in Egypt
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1970:Deliberations on Islamic Bank in Islamic Conference in Karachi, Makka and London
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1975: Islamic Development Bank established in Jeddah
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1975: The Dubai Islamic Bank established by a group of businessman from several countries.
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1977:Faisal Islamic Bank established in Egypt and Sudan
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1978: Pakistan converted into interest free banking system
• 1983: Fist Islamic Bank---Islamic Bank Bangladesh Ltd established in Bangladesh 2.6 Objectives of Islamic Banking System We should first try to understand the objectives of Islamic banking, which are as follows: • The objective of Islamic Banking is not only to earn profit, but to do well and bring welfare to the people, Islam upholds the concept that money, income and property belong to Allah and this wealth is to be used for the good of the society. •
It provides Shariah compliant and prudent banking opportunities; that is, banking transactions –in a Halal way: In other words, this is just an effort to avoid Riba and other prohibited elements from commercial and banking transactions, in order to ensure that we do “Nothing-Haram”; 2.7 Principles of Islamic Banking System: Islamic banking has the same Principles Like conventional banking, that are operates in accordance with the rules of Shariah, known as Fiqh al-Muamalat (Islamic rules on transactions). •
The basic principle of Islamic banking is the sharing of profit and loss and the prohibition of riba (usury).
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Common terms used in Islamic banking include profit sharing (Mudharabah), safekeeping (Wadiah), joint venture (Musharakah), cost plus (Murabahah), and leasing (Ijarah).
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an Islamic mortgage transaction, instead of loan, banks buy the item itself from the seller, and re-sell it to the buyer at a profit, while allowing the buyer to pay the bank in installments.
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There are no additional penalties for late payment. But In order to protect itself against default, the bank asks for strict collateral.
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The goods or land is registered to the name of the buyer from the start of the transaction. This arrangement is called Murabaha.
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Another approach is EIjara wa EIqtina, which is similar to real estate leasing.
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Islamic banks handle loans for vehicles in a similar way (selling the vehicle at a higher-than-market price to the debtor and then retaining ownership of the vehicle until the loan is paid).
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If default occurs, both the bank and the borrower receive a proportion of the proceeds from the sale of the property based on each party's current equity. This method allows for floating rates according to the current market rate such as the BLR (base lending rate).
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Mudaraba is venture capital funding of an entrepreneur who provides labor while financing is provided by the bank so that both profit and risk are shared. Such participatory arrangements between capital and labor reflect the Islamic view that the borrower must not bear all the risk/cost of a failure, resulting in a balanced distribution of income and not allowing lender to monopolize the economy. 2.8 Characteristics of Islamic Banking System: • It follows balanced and dynamic economic system • It is most efficient banking system • It runs on as per Islamic Shariah • It always avoids interest or Rhiba • Islamic system is non-inflationary; this is a very important and fundamental aspect of Islamic banking. • In case of Islamic banking system, depositors also bear the risk. • Islamic banking cannot invest excess liquid amount in approved securities or other bank crisis due to existence of interest in transaction process. • It faces some problems due to interest free banking system. • Modes of financing are totally different compared to conventional banking. • It uses Islamic term • Inter Bank transaction is profit-loss sharing basis. • It invests to stimulate income of poor • To ensure social justice and welfare. • Friendly and cooperative relationship. • Duel target: implementing objectives of Shariah and earning profit.
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Business policy is socio-economic basis. Integration of ethical and moral values with its banking operation.
2.9 Benefits of Islamic Banking •
Islamic banking and the finance industry is growing at an annual rate of 20%.
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International giant banks such as HSBC (HSBC Amanah), Citi Bank (Citi Islamic) and Standard Chartered have already established their Islamic units and functioning in the Middle East region.
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Islamic banks are restricted to useful goods and services and refrain from financing alcoholic beverages and tobacco or morally unacceptable services such as casinos and pornography.
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Islamic banks do not consider only the credit worthiness and interest rate as standards.
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It reduces the social and economic cost of such harmful products and activities.
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Islamic banks eliminate the barrier between those who save and those who invest, and bring them closer to the real market. 2.10 Islamic Bank in Bangladesh Bangladesh joints the caravan of the Islamic bank in 1983 when a shariah based bank ---Islamic Bank Bangladesh Ltd was established as a joint venture bank. Since then 6 banks established. One commercial banking ---Exim Bank Ltd previously chartered as conventional interest based bank has switched to Islamic bank. Some bank has also opened separate “Islamic windows” to seek patronage of the people of Bangladesh who by and large attach a stigma to conventional interest based banks. By now the Islamic banks have carved out a nice niche in the banking arena in terms of collecting deposits and providing finances to a large number of entrepreneurs and investors. 2.11 Some Islamic Banking in Bangladesh •
Islamic Bank Bangladesh Ltd.
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First Security Islami Bank Ltd.
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Al-Arafah Islamic Bank Ltd.
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Shahjalal Islamic Bank Ltd.
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Social Investment Bank Ltd.
• Exim bank Ltd. 2.12 Relevant Laws/Acts/Order for Bankers/Financial Institutions The following Law, Acts and Order are guiding Banks and Financial Institutions-operating in Bangladesh: • • • • • •
The Artha Rin Adalat Act-1990 The Bangladesh Bank Order-1972 The Banker’s Books Evidence Act-1891 The Banking Companies Act-1991 The Bankruptcy Act-1997 The Bangladesh Bank (Nationalism) Order-1972
• • • • • • • • • • • • •
The Bill of Exchange Act-1882 The Companies Act-1994 The Contract Act-1872 The Co-operative Societies Act-1940 The Insurance Act-1938 The Pre-Shipment Inspection order-1999 The Partnership Act-1932 The Securities & Exchange commission Act-1993 The Foreign Exchange Regulation Act-1947 The Bangladesh Export Processing Zones Authority Act-1980 The Export Policy- 1997-2002 The Guidelines for Foreign Exchange Transaction-1996 (Bangladesh Bank) The Import Policy Order- 1997-2002
2.13 Major Differences: Islamic Banking and Conventional Banking It is an advance step to achievement of Part of capitalist based financial system beauty of Islamic Economic Try to ensure social justice and welfare
Not concern
Flow of financial resources are in favor Not concern of poor and disadvantaged section of society Investment funds for asset less, poor but All plan for rich physically fit It invests to stimulate income of poor
No such program.
Interest is avoided at all level of All transaction is interest basis transaction Islamic Banking and Conventional Banking Depositors bear risk, no need of deposit Depositor does not bear any risk insurance Friendly and cooperative relationship
Debtor-Creditor relationship
Socially needed investment are Project below fixed rate are not considered considered Eliminations of exploitation of interest. It helps to increase capital of capitalists It bears the loss of business partner It does not bear any loss Commitment to implement welfare
No commitment
Inter-banking transaction is PLS basis
Inter-banking transaction is interest basis
It works under Shariah surveillance No surveillance Low morale problem due to brotherhood High moral problem due to relation monetary relationship transaction basis Business policy is socio-economic basis
Business policy is to earn profit
Paid Zakat on income and inspire client
No Zakat system
2.14Comparative Analysis of Islamic Banking and Conventional Banking System Islamic Banking system always avoids interest due to restriction of Islam. On the other side; Conventional Banking system considers interest as a profit. So Islamic is more efficient than conventional banking. Commitment: Islamic Banking system is committed to ensure social justice and welfare. On the other side, conventional banking system does not commit to ensure social justice and welfare. Objective: To ensure social welfare and justice by financing under shariah. On the other side, To earn profit by financing, not social justice and wellbeing. Relationship: Between depositors and bank relationship is friendly and cooperative, that’s why, and moral problem is low. On the other side, moral problem is high owing to depositorcreditors relationship. Policy: maximizing wealth by ensuring socio-economic welfare. On the other side, Earning profit of shareholders by implementing policy. Religious Perception: Perception about Islamic banking is positive because of avoiding interest. On the other side, Muslim country has negative perception due to business based on interest. Profit: It is not specific or certain percentages, it totally depends on profit and loss. On contrary, interest is fixed, so, no bearing risk. Chapter Three Organizational Overview 3.0 Organizational Overview Name of the Company Chairman
First Security Islami Bank Ltd. Mohammad Saiful Alam
Vice Chairman
Alhaj Mohammad Abdul Maleque
Managing Director
A.A.M. Zakaria
Company Secretary
Abdul Hannan Khan
Legal Status
Public Limited Company
Date of Incorporation
August 29, 1999
Date of Commencement of August 29, 1999 Business Date of Permission from September 22, 1999 Bangladesh Bank
Date of Opening of First October 25, 1999 Branch Registered Office House- SW(I) 1/A, Road-8, Gulshan1,Dhaka-1212, Bangladesh Line of Business Banking Authorized Capital
Tk.4,600 Million
Paid up Capital
Tk.2,300 Million
Date of consent of IPO
04 June 2008
Phone Fax
88-02-9888446 (Hunting), 9565594/9554208 (ITDivision) 880-02-9891915
bcs@fsiblbd.com , info@fsiblbd.com
Website
www.fsiblbd.com
SWIFT
FSEBBDDH
Auditors
Syful Shamsul Alam & Co.Chartered Accountants. Phone:9555915,9560332 ,Email: syful@int echworld.net The LawCounsel ,Barrister&Advocates,Phone: 9349647-8 Fax:9349866,9567029 ,Email: l .counsel@bdonline.com K.M. Hasan FCA ,K.M. Hasan & Co. Chartered Accountants Phone: 9351457,9351564 Fax: 9345792112
Legal Advisor
Tax Consultant
3.1Corporate Information 3.1.1 Background First Security Islami Bank Limited (FSIBL) was incorporated in Bangladesh on 29 August 1999 as a banking company under Companies Act 1994 to carry on banking business. It obtained permission from Bangladesh Bank on 22 September 1999 to commence its business. The Bank carries banking activities through its 86 branches in the country. The commercial banking activities of the bank encompass a wide range of services including accepting deposits, making loans, discounting bills, conducting money transfer and foreign exchange transactions, and performing other related services such as safe keeping, collections and issuing guarantees, acceptances and letter of credit. It was commenced its operation as a conventional banks but from 1st January’ 2009 it was converted from interest based bank to an Interest free bank. The company philosophy “Symbol of Security”; the bank has been operating with talented and brilliant personnel, equipment with modern technology so as to make it most efficient to meet the challenges of 21st century. During this short span of time the Bank successful in positioning itself as progressive and dynamic financial institution in the country. The sponsor and director of the bank are a successful and prominent business group in our business community. 3.1.2 Vision
To be the unique modern Islami Bank in Bangladesh and to make significant contribution to the national economy and enhance customer’s trust and wealth, quality investment, employee’s value and rapid growth in shareholder’s equity. 3.1.3 Mission • • • • • •
To be the most caring and customer friendly and service oriented bank. To create a technology based most efficient banking environment for it’s Customers. To ensure ethics and transparency in all levels. To ensure sustainable growth and establish full value of the honorable Shareholders Above all, to add effective contribution to the national economy.
3.1.4 Strategies • • • • • • •
To strive our customers best satisfaction & win their confidence. To manage & operate the bank in the most effective manner. To identify customers’ needs & monitor their perception towards meeting To review & updated policies, procedures & practices to enhance the ability to extend better customer services. To train & develop all employees & provide them adequate resources so that the customers’ needs reasonably addressed. To promote organizational efficiency by communicating company plans policies & procedures openly to the employees in a timely fashion. To ensure a congenial working environment. 3.1.5 Objective of the Bank
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To explore a new horizon of innovative modern banking creating an automated and computerized environment. To provide one stop services and prepares itself to face the new horizon of innovative modern banking creating an automated and computerized environment. To provide one stop services and prepares itself to face the new challenge of globalization and competition. To be a provider of high quality products and services to its potential market. To deal with the needs of its corporate clients. To provide a comprehensive range of financial services to national multinational companies.
3.1.6 Values • • • • •
Value pillars of FSIBL that are central to our core ideologies and that must always be reflected in everything we do: We are aggressive in business self-driven We empower people, create leaders and drive change We treat people with respect and dignity We are personally accountable for delivering on commitments to high built –trust relationship with customers and to ensure customers delight
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We focus on managing risks and costs in order to be doubly profitable We act in ways that reflect the highest standards of integrity.
3.1.7 Board of Directors SL.NO. Name 1 Alhaj Md. Saiful Islam 2 Alhaj Md. Abdul Maleque 3 Ms. Rahima Khatun 4 Mrs.Atiqun Nesa 5 Md. Sharif Hossain 6 Mr. Md. Wahidul AlamSeth 7 Mr. Shahidul Islam 8 Mr. Mohammed Ohedul Alam 9 Md. Kutub Uddowllah 10 Md. Abdul Hamid Miah 11 Ahsanul Alam 12 A.A.M Zakaria 3.2 Management
Designation Chairman Vice Chairman Director Director Director Director Director Director Depositors Director Independent Director Director Managing Director
3.2.1 Senior Management FSIBL is functioning with a highly professional management team headed by the Managing Director Mr. A. A. M. Zakaria. Among other senior executives currently Two DMD, One Principal (Training Center), Two SEVP, six EVP, Seven SVP, Eleven VP, Nine FVP, fifteen SAVP, sixteen AVP and eighteen FAVP are discharging their services in progression of the banks business 3.2.2 Team Management Managing Director Deputy Managing Director Principal of Training Centre Senior Executive Vice President Executive Vice President Senior Vice President Vice President First Vice President Senior Assistant Vice President Assistant Vice President First Assistant Vice President
Principal Officer Senior Officer Officer Junior Officer-1 Junior Officer-2
3.2.3 Human Resources Development FSIBL has a separate Human Resources Division (HRD) to manage the employee policies and practices. As on FYE 2011, Total 1400 executives & officers of the bank have been working for smooth banking operations. Bank follows a standardized human resources policy. HRD of the Bank follow a transparent and free & fair system to ensure the standard recruitment, training & development of human resources of the bank. The bank has defined HR policies including recruitment, training & development, promotion, leave, transfer and disciplinary action policy. Usually internal recruitment procedures are considered to fill up the mid and top management positions, while entry-level positions are filled with regularly through competitive recruitment exams. They follow transparent, well-defined and strict rules for appointment of officers and staff in the Bank's service. 3.2.4 Corporate Governance Corporate governance is about how corporation is running its operations to achieve its corporate objectives. Bangladesh Bank (BB) gives emphasis on implementing corporate governance among the financial institutions and to do that, BB emphasizes implementation of the guidelines issued by them for improving corporate governance in banking. Good Corporate Governance practices enhance an entity's corporate image and market credibility, which attract capital and increase its borrowing power. These can be reflected in the quality of financial reporting and disclosures; strength of internal control system and internal audit function induction of professionally competent, independent non-executive Directors on corporate Board; formation of Audit Committee; delegation of authority to executives and staff; protection of corporate governance for strengthening organizational strength. With a view to ensure effective participation and deep interest in the affairs of the company and as per Articles of Association of the Company and as per Bangladesh Bank Circular No. 16 dated March 24, 2003 the bank has set up the following 2 committees:
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Executive committee
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Audit Committee
3.2.5 Executive Committee FSIBL has constituted 09 members executive committee of the board as per Bangladesh Bank guidelines to ensure corporate governance in the business of which managing director of the Bank is Ex-officio Member. The executive committee of the board is responsible for developing policy and strategy for smooth operations of business and business development of the bank to ensure maximization of shareholders wealth’s protecting other stakeholder’s interest in the company . 2.5 Audit Committee FSIBL has formulated an audit committee can play an effective role in formulating an efficient and secured banking system. The Audit Committee Has been formed comprising three members of the Board of Directors. As per corporate governance guidelines the Chairman of the Audit Committee should have sound knowledge and expertise in finance & accounting or auditing. 3.3 Branch Network At present, First Security Islami Bank Ltd. has 84 Branches in overall Bangladesh. All the 84 Branches are computerized. Among them 62 Branches are under distributed server environment, other are ruining with our Core Banking Software (CBS). All the Branches will be migrated from distributed server to CBS, First Security Islami Bank Ltd (FSIBL) has already started their on-line, SMS and ATM banking facilities for their clients. , First Security Islami Bank Ltd (FSIBL) will add mobile banking and e-banking facilities within short period of time. Branches of First Security Islami Bank Ltd Division Dhaka Chittagong Khulna Sylhet Rajshahi Khulna Rangpur
Number of Branches 35 Branches 28 Branches 7 Branches 7 Branches 3 Branches 2 Branches 2 Branches
3.4 Information Technology Division FSIBL has an Information Technology Division at the head office to provide IT support to all its branches. The Bank has well documented guideline on information and communication technology (ICT). From the very beginning FSIBL was using computerized banking software “PcBank/Bank Ultimus’’ for all the branches to provide online banking facilities to its clients. FSIBL is now providing online banking facilities with distributed system. The Bank
also has SMS banking service. , First Security Islami Bank Ltd (FSBL) has a plan to introduce centralized system for online banking. 3.5 Products 3.5.1 Deposits Scheme • Al-Wadiah Current Deposit • Mudarabah Savings Deposit • Mudarabah Short Term Deposit Mudarabah Term Deposit• One Month • Three Months • Six Months • Twelve Months • Twenty Four Months • Thirty Six Months Foreign Currency Deposit • Mudarabah Savings Scheme • Monthly Savings Scheme • Monthly Profit Scheme • More than double the deposit in 6 years • Consumer Finance Scheme First Security Islami Bank Ltd. In 2011 Introduced New Deposit Scheme • • • • • • • • • • • • • •
Alo Mudarabah Education Deposit Scheme Bondhon Mudarabah Wedding Deposit Scheme Niramoy Mudarabah Treatment Deposit Scheme Obosor Mudarabah Pension Deposit Scheme Onkur Mudarabah Student Savings Deposit Prapti Mudarabah Salary Savings Deposit Somman Al-Wadiah Premium Account Provin Mudarabah Senior Citizen Savings Deposit Morjada Al- Wadiah Current plus Account Zakat Fund Mudarabah Hajj Savings Deposit Mudarabah Monthly Deposit Scheme Mudarabah Double Deposit Scheme Mudarabah Monthly Profit Scheme
We are also emphasizing on non-fund business and fee based income. Bid bond/ bid security can be issued at our customer's request. Our Bank is posed to extend L/C facilities to its importers / exporters through establishment of correspondent relations and Nostro Accounts with leading banks all over the world.
3.5.2 Investment Scheme Investment / Deployment of Funds: • Bai-Murabaha (Deferred Lump Sum/ Installment Sale) •
Bai-Muajjal (Deferred Installment / Lump Sum Sale)
•
Ijara (Leasing)
•
Musharaka (Joint-Venture Profit-Sharing)
•
Mudaraba (Trustee Profit-Sharing)
•
Bai-Salam (Advance Sale and Purchase)
•
Hire-Purchase
•
Direct Investments
•
Post Import Investment
•
Purchase and Negotiation of Export Bills
•
Inland Bills Purchased
•
Murabaha Import Bills
•
Bai-Muajjal Import Bills
•
Pre Shipment Investment
•
Quard-ul-Hasan (Benevolent Investment)
• • • • • • • • •
Letter of Guarantee Tender Guarantee Performance Guarantee Guarantee for Sub-Contracts Shipping guarantee Advance Payment guarantee Guarantee in lieu of Security Deposits Guarantee for exemption of Customs Duties
Others: Letter of Credit (L/C) / Back to Back Letter of Credit (L/C) Specialized Schemes • • •
Consumer Investment Scheme SME Investment Scheme Lease Investment Scheme
• • • • • •
Hire Purchase Earnest Money Mortgage Investment Employees House Building Scheme ATM VISA Investment Card EEF etc.
Investment
Scheme,
3.6 Services 3.6.1 Online Any Branch Banking First Security Islami Bank Ltd (FSIBL) have set up Wide Area Network through Radio, Fiber-Optics & other available communication media systems to provide any branch banking to our customers. Customer of one branch is now able to deposit and withdraw money at any of our branches. All Branches are included in our Wide Area Network. No TT/DD or cash carrying will be necessary. 3.6.2 SMS Banking First Security Islami Bank Ltd. has officially launched SMS banking service from December 17, 2007. 3.6.3 Mobile Banking First Security Islami Bank Ltd. (FSIBL) has introduced mobile banking and payment services titled, “First pay, Sure Cash” for its customers on27 March, 12.Through this service, people staying at anywhere of the country would get various banking services, such as, opening up new account, cash deposit, cash withdrawal, money transfer, bill payment, remittance disbursement, ticketing of train, bus and cinema, payroll and utility services. The bank teamed up with the state-owned telecom service provider Teletalk to facilitate the mobile banking services. Besides, the bank will also receive technical assistance from ‘ProgatiSystems’. 3.6.4 ATM Banking First Security Islami Bank Ltd. has implemented successfully Automated Teller Machine (ATM) /DBDIT card transaction from June 25, 2008. Through Automated Teller Machine (ATM) /Debit card, customer can avail the facilities like withdrawal money, balance inquiry and purchase goods from Point of sale (POS) using Dutch Bangla Bank Ltd. ATM Booth and POS.
3.6.5 Locker Service For safekeeping of customer's valuables like important documents and goods like jewelries and gold ornaments, , First Security Islami Bank Ltd (FSIBL) Locker Service is available in most of the Branches in urban areas. 3.6.6 Utility Bills
The utility bill's received following Branches: Branch Name
Bill’s Type
Mohakhali, Dhaka
DESCO
Topkhana, Dhaka
Under process (Electric bill)
Gulshan , Dhaka
Titas Gas
Shafipur ,Gazipur
Dhaka Pally Biddut Shomitty
Keranihat,Chittagong
Pally Biddut Shomitty
Biswanath , Sylhet
Pally Biddut Shomitty
Banking Activities: In Bangladesh, all conventional private commercial banks and Islamic banks (First Security Islami Bank Ltd.) exercise daily general banking activities in banking hour. Basically all general banking activities are same but a some differences are found in concept of banking, name of activities and terms& conditions .Now will choose Mutual Trust Bank Ltd. as a Private Commercial Bank and First Security Islami Bank Ltd. Where doing internship program as for comparison in general banking activities done by both banks.
Private Commercial Bank First Security Islami Bank Private Commercial Bank First Security Islami Bank
Private Commercial Bank
First Security Islami Bank
Concept Interest based. Interest free bank. Name Current Account, Savings Account &Fixed Deposit Rate Al-Wadiah Current Deposit, Mudarabah Savings Deposit and Mudarabah Term Deposit Terms & Conditions Depositor doesn’t bear any loss of bank if bank fails to earn profit. Depositor bears any loss of bank if bank fails to earn profit.
Functions Of First Security Islami Bank Ltd The functions of First Security Islami Bank Ltd (FSIBL) are divided into three divisions these are: 1) General Banking. 3) Investment 2) Foreign Exchange.
First Security Islami Bank Ltd (FSIBL) provides their services under t three divisions. Each of this section serves various services for satisfying their clients. General Banking Division: General Banking Division is considered as the direct customer service center. It is the starting point of all the Banking operation. It opens new accounts, remits funds, honor cheque, takes deposits, issues pay order etc. General Banking is also known as retail Banking. Following are the major section in general banking: • • • •
Account opening section Clearing section Accounts section Cash section
Account Opening Section Account opening is the gateway for clients to enter into business with bank. It is the foundation of banker customer relationship. This is one of the most important sections of a branch, because by opening accounts bank mobilizes funds for investment. Various rules and regulations are maintained and various documents are taken while opening an account. Different Types Of Accounts • Current Account A current account is a running and active account, which may be operated upon any number of times during a working day. It is purely demand deposit account because the bank is bound to pay the amount to the accountholder on demand at any time within the banking hour. The account holder not gets any interest against their current account • Al-Wadeeah Current Deposit Account The word “Al-Wadeeah” derived from the Arabic word “Wadium” means ‘Amanat. Amanat means to keep or deposit something to any person or institution for safe preservation maintaining original ownership and bound to return to owner on demand with original shape. The term Al-Wadeeah means deposit of money allowing some body to claim in the account. In case of Al-Wadiah Deposit, Bank must take permission from owner to invest the fund with other bank’s fund. Because of owner involves neither earning profit nor any loss. So, Banks not only will enjoy 100% profit but also will bear full losses. Account Holder pay fees for maintain the account and other costs. Savings Bank Account (Conventional) A saving account is meant for the people of the lower and middle classes who wish to save a part of their incomes to meet their future need and intend to earn an income with a fixed rate of interest from their savings, it encourages savings of non-trading persons, institutions, society and clubs etc. The deposits are mostly small amounts. Mudarabah Savings Deposit Accounts The term ‘Mudaraba’ derived from Arabic word ‘Dard’/ ‘Darbun’ which means “Travel” thus the word ‘Mudarah’ means “Travel” for undertaking business.
‘Mudaraba is a partnership in profit whereby one party provides capital and the other party provides skill and labor. The provider of capital is called “Shahib-al- Mal/Rabbul-Mal” (Owner of the fund) while the provider of skill and labor is called “Mudarib” (organizer/Manager). Depositors will deposit money and bank will invest fund as per Islami Shariah without any intervention of depositors. Depositor will gain profit according to specified Weight age 0.75 and will bear loss at ratio of deposit. The provisional profit will be given two (2) times (June-December) which will be adjusted after the final profit has Calculated at the year end. Weekly 2 (two) times, Monthly 4 (four) times and ¼ of the balance amount or Tk. 50,000.00 whichever is lower can be withdrawn without any notice. Fixed Deposits Receipts: (Conventional) The Interest rate is fixed for the fixed amount and time. The depositor are ensured for getting the interest as fixed when deposits are mobilized, even if the bank occur a huge loss without any negligence or violation of the conditions agreed. Mudarabah Term Deposit (MTD) Accounts The bank is authorized by the depositor to invest the Mudarabah fund at the risk of the Sahib Al- Mal. MTD account is opened with certain fixed amount of money for a particular period by person/persons individually/jointly, by business entities for periods of 1 month, 3 months, 6 months, 12 months, 24 months, 36 months, as approved by the Head Office from time to time. The deposit in MTD account will enjoy higher rate of weight age respectively 0.75, 0.88, 0.92, 0.96, 0.98 and 1 in profit compared to Mudarabah savings account for different period respectively. No transaction is allowed in MTD account and hence no cheque book is issued. Credit/debit of actual profit/loss shall be made after audit of the final account of the bank. In the mean, time profit on MTD Account shall be paid at the provisional rate as on when due and as fixed by the Head Office from time to time depending on their period of maturity. Mudarabah Monthly Deposit Scheme (MMDS): Revised Profit Rate of this scheme is now 12%. Size of installment has been extended up to TK 25000/- (Twenty Five Thousand Taka). You are requested to the follow the following table for MMDS. Insurance facility will be added with this scheme.
1000
1500
2000
2500
5000
10000
15000
20000
250 00
installment
500
5 Yrs
Principal amount
150 30000 60000 90000 120000 150000 300000 600000 900000 1200000 000 0
maturity value
40850 81700 122550 163350 204200 408350 816700 1225050 1633400 204 175
0 Principal amount
240 48000 96000 144000 192000 240000 480000 960000 1440000 1920000 000 0
maturity value
399 80000 159950 239900 319900 399850 799650 1599300 2398950 3198550 820 0
Principal amount
300 60000 120000 180000 240000 300000 600000 1200000 1800000 2400000 000 0
maturity value
575 115050 230050 345100 460100 575100 1150200 2300400 3450600 4600800 100 0
8 Yrs
10 Yrs
Mudarabah Monthly Profit Scheme (MMPS): Revised Profit Rate of this scheme is now 12%. Under this Scheme clients will get TK. 1000/- (One Thousand Taka) per month against TK. 1, 00,000/- (One Lac taka) deposit (Govt. Tax Applicable). Insurance facility will be added with this scheme. Mudarabah Deposit Double Scheme (MDDS): Revised Profit Rate of this scheme is now 12%. Deposit Rate will be double in 6(Six) years instead of 6.5 years after revision. Insurance facility will be added with this scheme. Calculation/Fixing Of Weightage: The longer period of deposit, the greater the risk they bear with regard to fluctuation of the rates of profit and erosion of the value of deposit due to inflation. Some deposit shall have to forgo profit if incased within fixed minimum period and also to forgo some profit in case of predetermine encashment through reduce weightage. Some depositors shall have to forgo some profit in case of default of scheduled payment. Calculation Of Profit On the basis of above principles, let us work out the rates of profit using the information and figures given below: a. Total Investment Tk. 1000/b. Total Investment Income Tk. 150/C. Total Fund employed i. Bank’s Equity & Al-Wadeeah Deposit Tk. 200/ii. Mudaraba Deposit Tk. 800/Therefore the share of the investment of Mudaraba Deposit will be (150/1000*800) = Tk. 120/Less: a. 20% Management Fee Tk. 24/b. 15% Loss off-setting Reserve Tk. 18/- Total Tk. 42/-
Procedure Of Account Opening
Account Opening (Mudarabah Savings Scheme): 1. Fill up the account opening form correctly. 2. Two copies of photograph of every signatory. 3. Photocopy of National ID Card/Passport/Citizenship certificate with original copy of verification purpose. 4. Details of nominee. 5. Signature and one copy of photograph of each nominee (must be attested by account holder). 6. The account holder itself will sign in front of account opening officer in the account opening form Mudarabah Savings Deposit and Al-Wadiah Current Deposit both need following necessary documents, information for opening an account. For Individual 1. Fill up the account opening form correctly (must be introduced by Introducer) 2. Two copies of photograph of every signatory(must be attested by Introducer) 3. Photocopy of National ID Card/Passport/Citizenship certificate with original copy of verification purpose 4. Details of nominee 5. Signature and one copy of photograph of each nominee( must be attested by account holder) 6. The account holder itself will sign in front of account opening officer in the account opening form. Sole Proprietorship 1. Request letter/Application for account opening purpose 2. Up to date Trade License, TIN and VAT of firm 3. Seal and Visiting Card of Signatory ( if applicable) 4. Two copies of photograph of every signatory(must be attested by Introducer) 5. Photocopy of National ID Card/Passport/Citizenship certificate with original copy of verification purpose 6. Signature and one copy of photograph of each nominee( must be attested by account holder) 7. Membership Certificate of Trade Association, Chamber of Commerce and Industry 8. Tenancy Agreement copy( if applicable)
Partnership 1. Request letter/Application for account opening purpose 2. Registered Partnership deed on non-judicial stamp of TK.150/ & List of the Partners with Portfolio. 3. Up to date Trade License, TIN and VAT of firm 4. Resolution regarding operation of bank account and signing of Bank’s charge documents with execution of Mortgage Deeds and other bank’s papers as per partners. 5. Seal and Visiting Card of Signatory ( if applicable) 6. Two copies of photograph of every signatory(must be attested by Introducer) 7. Photocopy of National ID Card/Passport/Citizenship certificate with original copy of verification purpose 8. Signature and one copy of photograph of each nominee( must be attested by account holder) 9. Membership Certificate of Trade Association, Chamber of Commerce and Industry 10. Tenancy Agreement copy between Firm and Landlord( if applicable) Limited Liability Company 1. Request letter/Application for account opening purpose 2. Certificate of Incorporation 3. The certified copy of Memorandum and Articles of Association by Register of Joint Stock and Firm. 4. Resolution regarding operation of bank account and signing of Bank’s charge documents with execution of Mortgage Deeds and other bank’s papers as per Memorandum and Articles of Association. 5. Seal as per resolution. 6. Two copies of photograph of every signatory(must be attested by Introducer & Visiting Card of Signatories ) 7. Photocopy of National ID Card/Passport/Citizenship certificate with original copy of verification purpose 8. Complete Bio-Data with passport size of photographs of all directors signed by them 9. The certified copy of Form No. XII and XX dully issued by Register of Joint Stock and Firm.
10. Up to date Trade License, TIN and VAT of firm 11. Signature and one copy of photograph of each nominee( must be attested by account holder) 12. Membership Certificate of Trade Association, Chamber of Commerce
and Industry
13. Tenancy Agreement copy between Firm and Landlord( if applicable) 14. List of Directors with permanent and present address with signature & Telephone nos. Association/Trust/Society 1. Request letter/Application for account opening purpose 2. Two copies of photograph of every signatory (must be attested by Introducer) 3. List of members of Managing Committee 4. Resolution of Managing Committee regarding opening & operation of Bank Account. 5. Certified Copy of constitution / bylaws/ rules & regulations. 6. . Trust Deed (for Trust account only). Head Office approval for opening Trust Account (for Trust account only). Cheque Book Types of ▫ Savings Account – ▫ Current Deposit Account ▫ Current Deposit Account – 25 Leaves (CDTF)
Cheque 10 –
10
Issues Book’s: Leaves Leaves
Two Types Of Cheque Issuing Chegue Issuing Direct Requisition Slip
Cheque Book’s Requisition Slip
Account Opening Officer receives cheque requisition slip from the client’s and if new account holder request for cheque book then officer sends cheque requisition under processing. Processing means entry Account Number, Account Name and old serial Number. of cheque book in Head Office of First Security Islami Bank Ltd. via network. After five working days cheque books reach in branch. Then officer entrees the Account Name, Account No. and new serial No. of Cheque Book in cheque book register. Account holder collects cheque book from branch signing in cheque book register. Account Closing For two reasons, one can be closed. One is by banker and other is by the customer.
By Banker: If any customer doesn’t maintain any transaction within six years and the A/C balance becomes lower than the minimum balance, banker has the right to close an A/C. Besides, bank keeps right to block the A/C due to many reasons. By Customer: If the customer wants to close his/her A/C, he/she writes an application to the manager urging him to close his A/C. Closing Process For Al-Wadiah Current Deposit & Mudarabah Savings Deposit After receiving customer’s application the officer verifies the balance of the A/C. He then calculates interest and other charges accumulated on the A/C. If it bears a credit balance, the officer writes advice voucher. He gives necessary accounting entries post to accounts section. The balance is returned to the customer. And lastly the A/C is closed. But in practice, normally the customers don’t close A/C willingly. At times, customers don’t maintain any transaction for long time. Is this situation at first, the A/C becomes dormant and ultimately it is closed by the bank. Closing Charge For Account CD A/C SB /C MMDS TK.230 TK.230 TK.230
MMPS TK.230
MDDS TK.230
Difference: Besides above mentioned activities, First Security Islami bank Ltd.’s Account Opening section provides extra services and facilities like providing statement , providing information , transferring and posting the pay-order as well as entry incoming –out going documents in inward and outward register book. Mutual Trust Bank Ltd’s Account opening section does not complete these like First Security Islami bank Ltd. Cash Section: Cash section plays a vital role in the general banking procedure. Because of it deals with most liquid asset. This section receives cash from depositors and pays cash against checks, pay order and in slip over the counter. This branch also facilitates electronic counting machines to the customers for a huge amount of cash money can be counted within a few minutes. This section performs the main function. • Cash receipts •
Cash payments
Cash Receiving Procedure: Depositors deposit cash, checks, pay order etc. In these types of deposits, the depositors must be written the following way: Date of the instrument. The title of the account/customers and its number. The amount in figure and in words as same. The signature of the depositors. After writing all these things the teller will accept cash, check, pay order etc against deposit slip. The teller will place signature and affix ‘cash received’ rubber stamp seal and record in the cash received register book against the account number. After finishing all these procedure, the cash officer completes posting in the bank website network via computer and returns the customer’s copy. Cash Payment Procedure: Before honoring a check, the paying banker has to observe the check in the following way: Whether a check is an opened or crossed check, it must be looked. Whether the check is drawn on his/her branch, it must be observed. If the check is postdated then it must not be paid. If the check is mutilated materially altered then the officer must not honor that check. The officer must verify the regulatory of the endorsement. The officer must compare the signature of the check with the signature on the specimen signature card. After verifying all these documents by putting ‘pay cash’ seal, the officer gives the cash amount to the holder and record in the paid register. Dishonor Of Check: Fist Security Islami Bank Ltd’s Banker can dishonor a check in the following situations: Insufficient fund. Check is post dated. Crossed check must be presented through a bank. Clearing stamp required cancellation. Check crossed “Accounts pay only”. Collecting bank’s discharge irregular. Payment stopped by drawer. Effect not clear on the check. Full over not received. Payee’s endorsement irregular. Drawer signature differs. Difference: First Security Islami Bank Ltd. Mirpur Branch collects daily utility bills of a specific area like accept deposit and payment. This branch provides also locker services facility by maintaining process and necessary all documents. Besides, this branch accepts Taka for Initial Public Offering (IPO) of some companies, firms and industry and takes all responsibility it’s related.
While, Most of Private commercial banks in Bangladesh especially Mutual Trust Bank Ltd. provides above mentioned services and facilities like First Security Islami Bank Ltd. Clearing Section: Cheque, Pay Order (P.O), Demand Draft (D.D.) Collection of amount of other banks on behalf of its customer are a basic function of a Clearing Department. The main function of clearing section is to operate with safety and security of financial transaction of financial instrument like DD, PO, check etc. on behalf of the customers through Bangladesh Bank Clearing House, Outside Bank Clearing (OBC), Inter Branch Clearing (IBC). This section examines in the following way: • Whether the paying bank within the Dhaka city. • Whether the paying bank outside the Dhaka city. Then these checks can be cleared by OBC, OBC stands for Outward bill for collection. • Whether the paying is in own branch. These checks can be cleared by LBC, LBC stands for Local Bill for Collection. Clearing: Clearing is a system by which a bank can collect customers fund from one bank to another through clearing house. Clearing House: Clearing House is a place where the representatives of different banks get together to receive and deliver check with another banks. Member Of Clearing House: First Security Islami Bank Ltd is a scheduled Bank. According to the Article 3 7(2) of Bangladesh Bank Order, 1972, the banks, which are the member of the clearinghouse, are called as Scheduled Banks. The scheduled banks clear the cheque drawn upon one another through the clearinghouse. Types Of Clearing Outward Clearing: When the Branches of a Bank receive cheque form its customers drawn on the other Banks within the local clearing zone for collection through Clearing House, it is Outward Clearing. Inward Clearing: When the Banks receive check drawn on them from other Banks in the Clearing House it is Inward Clearing. Types Of Clearing House: There are two type of clearing house: Those are 1) Normal clearing house (for less than TK.500, 000/) 2) Same day clearing house (for greater than TK.500, 000/)
Normal Clearing House: 1) 1st house: 1st house normally stands at 10 am to 11 am 2) 2nd house: 2nd house normally stands after 3 p.m. and it is known as return house. Same Day Clearing House: 1) 1st house: l house normally stands at 11 a.m. to 12 pm 2) 2nd’ house: 2nd’ house normally after 2 p.m. and it is known as return house. • Who will deposit cheque for Clearing: Only the regular customers i.e. who have Savings, Current, STD & Loan Account in the Bank can deposit cheque for collection of fund through clearing house. • Precaution at the time of cheque receiving for Clearing, Collection of LBC, OBC & Transfer: 1. Name of the account holder same in the cheque & deposit slip. 2. Amount in The cheque & deposit slip must be same in words & in figure 3. Date in cheque may be on or before (but not more than six months back) clearing house date. 4. Bank & Branch name of the cheque, its number & date in the Deposit slip. 5. Cheque must be signed. 6. Signature for confirmation of date, amount in words / in figure Cutting & Mutilation of cheque. 7. Cheque should be crossed (not for bearer cheque). 8. Account number in the deposit slip must be clear. 9. Depositor’s signature in the deposit slip. Essential Elements For Clearing: There are three essential elements are required for clearing the Instruments: 1. Clearing Seal, 2. Crossing Seal. 3. Endorsement Seal. Difference: First Security Islami bank Ltd. and other conventional private banks specially Mutual Trust Bank Ltd. finish all activities related clearing in same way and same procedure. So, in clearing section no difference is normally found. Accounts Section: Account department is the most important department of the bank. Because it is concerned with: • Revenue : In business, revenue is income that a company receives from its normal business activities, usually from the sale of goods and services to customers. Revenue may refer to business income in general, or it may refer to the amount, in a monetary unit, received during a period of time, as in "Last year.
• Expenses The economic costs that a business incurs through its operations to earn profit. Assets: A resource with economic value that an individual, corporation or country owns or controls with the expectation that it will provide future benefit. Liabilities: A liability is a present obligation of the enterprise arising from past events, the settlement of which is expected to result in an outflow from the enterprise of resources embodying economic benefits. These are the pillars of any business. In this department, all the vouchers that are posted in banking hour daily sent to the account department next day. These vouchers are already posted to computer by the concerned department. So computer also sends a report to the accounts department. The accounts department has to tell that the requirements for cheque and vouchers are fully checked. If any kind of renovation or construction or rebuilding is done, all is paid from the accounts department. Like petrol for the car of EVP or VP, stationery charges, medical allowance, etc. are all paid by this department. Primary duties of this section are to determine the revenue, expense, assets, liabilities and equity as well as prepare any kind of financial statements. Daily Customer Movements List All the changes that are made in accounts of customer are shown in the daily customer movement list. By using this list, people of accounts department can prepare the vouchers. Following activities are performed by account department: • Voucher preparation • Preparation of daily, weekly, monthly, and annual statement. • Budgeting and fixed assets • Employer’s benefit • Expenditure approval. The bank does not make payment of a cheque bearing a six month or older date. If an account is not operated in six months, it is called dormant account. Difference: In this section between First Security Islami Bank Ltd and & other banks a little differences are found. Accounts section of most of private commercial banks and Mutual Trust Bank Ltd. also provides these services like remittance, providing statements and more so on but primary duties of this section. On the other hand, First Security Islami Bank Ltd sees remittance side accept primary duties.
Remittance: The need of remittance is commonly felt in today’s business. A major function of any bank is to “transfer of funds from one place to another”. Remittance is basically a service of foreign exchange department but some branches of banks provides remittance service especially local remittance and inward foreign remittance under general banking activities. Similarly First Security Islami Bank Ltd. Mirpur Branch provides this service under general banking activities but some branches provides it as an activity of foreign exchange department in commercial area. Local Remittance: When money is sent from one place to another place for the customer is not only important service of banks but also important part of country’s payment system. For this service, people, especially businesspersons can transfer funds from one place to another place very quickly. There are five kinds of techniques for remitting money locally from one place to another place. These are: Pay Order Demand Draft Telegraphic Transfer Telephone Transfer Telegraphic and Telephone Transfer (TT) are almost the same, both are them are known as TT in short. Pay Order: Pay order gives the payee the right to claim payment from the issuing bank. It is payment from issuing branch only. Within the clearinghouse area of issuing branch, Payment is made through clearing. Total Amount TK.1-1000/= TK.1001-100000/= TK.100001-500000 TK.500001-100000/=
Commission TK.15/= TK.25/= TK.50/= TK.100
VAT TK.2/= TK.4/= TK.8/= TK.15/=
Total TK.17/= TK.29/= TK.58/= TK.115/=
Demand Draft: This is an instrument through which customer’s money is remitted to another person/ firm/organization in outstation (Outside the clearing house area) from a branch of one bank to an outstation branch of the same bank or to a branch of another bank (with prior arrangement between that bank with the issuing branch) Commission Tk 1.50 for Tk 1000
VAT 15% on total DD amount
Total Commission + VAT
Telegraphic Transfer This is a mode of transfer / remittance of customer’s money from a branch of one bank to another branch of the same bank or to a branch of another bank (with prior arrangement between those banks with the TT issuing branch) through telephonic message. The issuing branch used to send the message of such remittance /transfer to the drawer/payee branch through telephone adding certain code number or test number on the basis of text key apparatus developed by the concerned bank for its different branches. Commission Tk 1.50 for Tk 1000
VAT 15% on total
Telex Total Tk 50 amount of Commission+ TT VAT+Telex
Mail Transfer (MT) o Where there is no telex machine or telephone line, then this method is used. o It is the least used technique for transferring fund because it is time consuming and risky because mail may be missed. o When the transfer of fund from one branch to another takes place by mail but most of the time over telephone, it is called MT. o The process of TT and MT is almost identical, only difference is the media. Besides, most of private commercial banks provide inward foreign remittance services with many money transfer system • Western Union Money Transfer •
Placid Express
•
Suprex Ten
•
E-Cash
•
Money gram transfer system
•
Own Foreign Exchange House etc.
Difference: Most of private commercial banks use above mentioned instruments for local and inward foreign remittance but First Security Islami Bank Ltd. use pay-order and online service for local remittance as well as Western Union Money Transfer, Placid Express ,Superex Ten ,ECash, Money gram transfer system, Own Foreign Exchange House etc. for inward foreign remittance. After comparison between Mutual Trust Bank Ltd. as private commercial bank and First Security Islami Bank some differences are found in general banking.
Some Differences In General Banking Activities Between Private Commercial Banks And First Security Islami Bank Ltd. Private Commercial Banks.
First Security Islami Bank Ltd.
Some Banks have specific information centre.
First Security Islami Bank don’t have specific centre.
Acount Opening section normally does not execute FSIBL - Acount Opening section normally executes task of other section. task of other section. They prvide Demand Draft, Telegraphic Transfer But First Security Islami Bank Ltd. just provides and Pay-Order service. Pay-Order service. Most commercial banks don’t provide locker First Security Islami Bank Ltd. provides it. service. Accounts section: Commercial banks also provide First Security Islami Bank Ltd sees remittance side these services like remittance, providing statements accept primary duties. and more so on but primary duties of this section. Commercial banks use various instruments for local First Security Islami Bank Ltd use only one remittance like: DD, TT and Pay-Order. instrument for local remittance: Pay-Order
Chapter Four Comperative Analysis Among the Selective Bank: First Security Islami Bank Ltd. Is the 3 rd generation bank. Islami Bank Bangladesh Ltd is the 1st generation bank & Al-Arafah Islami Bank is the 2nd generation bank. For the reason, have choosen Islami Bank Bangladesh Ltd and Al-Frafa Islami Bank to compare service with First Security Islami Bank Ltd.It is very important to find the bank that will properly fulfill the banking services in order to find an appropriate bank the following factors should be considered. Number of Branches and ATM(2010) Service
FSIBL
IBBL
Al-Arafah
Islami
Bank Branches 84 266 78 ATM Booths Used DBBL Booth 100 40 Interpretation: Since, the FSIBL is the second largest bank among the selective banks. The amount of branch and ATM booth of FSIBL is second position than the IBBL & Al-Arafa Islami Bank Authorised Capitan & Paid Up Capital:
Subject Authorised Capital Paid Up Capital Interpretation:
FSIBL Tk. 4600 million Tk. 2300 Million
IBBL
Al-Arafah
Islami
Tk. 10000million Tk 7413.12million
Bank Tk 5000million 4677.28million
The amount of authorised capital & paid up capital of FSIBL is lower than the other selective bank. Deposits & Investment: Subject
FSIBL
IBBL
Al-Arafah
Islami
Bank Deposit Tk 56344.95million Tk 341,361million Tk 47.46billion Investment Tk 52123.90million Tk 341,031million Tk 43.96billion Interpretation: the amount at deposit & investment of FSIBL is lower than IBBL & higher than Al-Arafa Islami Bank. Total Aseets & Total Liabilities: Subject Total Assets
FSIBL Tk
IBBL 20,448.66 Tk
Al-Arafah Bank Tk
Islami 23,175.07
million 28,400.03million Million Total Liabilities Tk 194,445million Tk 330,586million 2,92,368.08million Interpretation: the amount of total asset and total liability is lower than the selective banks. Import, Export & Foreign Remittance: Subject
FSIBL
IBBL
Al-Arafah
Islami
Bank Import Tk 28391.2 million TK 246,281million Tk 2924million Expoort Tk 5868.9 million TK 148,421million Tk 3075million Remittance Tk 843.47 million Tk 2,14,629million Tk 6093million Interpretation: FSIBL is in the better possition than the Al-Arafa Islami Bank in case of export and import. But in foreign remittance, Al-Arafa Islami Bank in in better position than FSIBL. And IBBL is in the better position from both of the selective bank. Total Income and Total Expenses: Subject Total Income Total Expenses
FSIBL Tk.208,520,7938 Tk.881607,207
IBBL
Al-Arafah
Islami
Tk.15,675,014,026 Tk.60,87,318,956
Bank Tk.1816.14million Tk.162,4859million
Interpretation: The amount of total income & total expense is lower than the both selective banks.
Chapter Five Findings: I have found some problems during Internship period, they are following: •
Some branches use PCbank software. Some use Bank-ultimus software. This difference of software creates problem in online transaction.
•
There is no information desk to inform about banking & services.
•
SMS,Mobile and Internet banking systems are not upgraded like other commercial banks.
•
FSIBL Mirpur Branch does not provide DD, TT and commercial banks.
•
FSIBL does not have any specialized marketing team to extend deposit and to loan sanction like private commercial banks such as Dutch-Bangla, Standard Chartert.
•
FSIBL says it is profit-loss sharing based business but there is a doubt whether it follows that policy.
•
Their banking process is not competitive with the other private banks like IBBL & AlArafa Islami bank.
•
Incase of large amount ,authoriing by manager or any senior officers is time consuming can dissatisfy the clients.
•
Without any letter of authorisation cheaque book even statement is provided to others on the part of client with permission of manager or senior officers.
•
The deposits and investment of FSIBL is comperatively lower than IBBL.
so on like other private
Recommanations:
• All branches of First Security Islami Bank Ltd. should use same software for avoiding software problems during operating banking activities.
• There should hsve information desk to provide information about any service and questions.
• Details of Account Holder should be entried & saved properly to avoid any mistake.
• In cash section trainned officers should be more employed to accelarate speed of activities.
• Account open procedure should be more easy and acceptable.
• Every officer should show corporate behavior to every clients. • Skilled & experinced in banking sector such officers should be employed. • bank should provide Demand Draft and Telegraphic Transfer like other commercial banks.
• Internet & SMS,Mobile banking should upgraded and develped to popularize. • Every section should accomplish their own activities not depending on other sections.
• Bank should provide attractive and acceptable services to clients. • Bank should not provide cheaque book or any statement to others on behalf of customers but letter of authorisation.
• Man power is not sufficient in the Mirpur Branch of FSIBL than Ibbl & Al-Arafa Islami Bank. Conclusion: Banking sector is considered the pillar of the economy.First Security Islami Bank Ltd. is a important member of that pillar .It stsrted banking operation in 1999.After starting the operation Security Islami Bank Ltd. is playing role in the economy of Bangladesh as well as in employment. Security Islami Bank Ltd. is providing difference sort of services what provided by other private commercial banks and it is trying to introduce new banking services under Islami Shariah, rules and regulations of Bangladesh Bank. After all, Security Islami Bank Ltd. has some problems and limitations like other private commercial banks road to providing services such as ATM Booth, some unexperienced and unskilled officers ,corporate manner,weak SMS,Mobile & Internet Banking system,IT networks,proper trainning etc. Ithink that from my personal opinion,Security Islami Bank Ltd. Authority and Management will draw attention to remove promlems & limitation thinking the talks of future.Because by removing the promlems First Security Islami Bank Ltd. will be able to achive customer satisfaction, more profit and more important role in the economy of the country. Without any doubt,it can say that after removing problems First Security Islami Bank Ltd. will meet the demand of customers and will provide qualityful services as well as new services by exercising proper general banking activities. Bibliography:
We have collected information from many sources. http://www.fsiblbd.com/ First Security Islami Bank Annual Report- 2010 Md.Khairul Alam and Md.Asadul Azad, First Security Islami Bank Ltd Prospects and Brochures Lecture Notes (Prof.Abdul. Awal Sarker) From Book called A Text Book on Islamic Banking by Mr. Kabir Hassan From Book called Banking Law and Practice by Syed Ashraf Ali and R A howlader http://www.usc.edu/dept/MSA/economics/islamic_banking.html http://www.imf.org/external/pubs/ft/wp/2008/wp0816.pdf Islamic Banks and Financial http://www.radicalmiddleway.co.uk/topics/finance/top-500-islamic-financial-institutions www.wdibf.com/organizations.html http://www.irfi.org/articles/articles_301_350/is_islamic_banking_islamic.htm http://bankinfobd.com/blog/six-more-new-banks-get-bb-approval Appendix: Balance Sheet of FSIBL First Security Islami Bank Ltd. Balance Sheet As At 31 December 2010 Particulars Property and Assets Cash In hand Balance with Bangladesh Bank & its agents
Notes
Amount in Taka 31.12.2010 31.12.2009
3
Balance with others bank & Financial Institutions In Bangladesh Outside Bangladesh
4
Investment in Shares & Securities Government Other
5
Investments General Investment Bills Purchased & Discount
6
Fixed Assets
7
612,173,146 4,245,369,057 4,857,542,203
432,907,731 4,600,624,708 5,033,532,439
926,081,336 110,117,741 1,036,199,077
494,050,218 237,100,103 731,150,321
2,331,134,100 528,220,461 2,859,354,561
1,610,674,000 241,352,032 1,852,026,032
47,640,238,696 4,483,664,468 52,123,903,164 573,610,332
35,616,450,493 3,109,424,281 38,725,874,774 376,477,387
Other Assets Non-Banking Assets Total Assets Liabilities & Capital Liabilities Deposits & Other Accounts Al-Wadiah Current Account Bills Payable Savings Account Mudarabah Term Deposits Bearer Certificates of Deposits Mudarabah Deposits under Scheme Other Liabilities Total Liabilities Capital/Shareholder's Equity Paid-up Capital Statutory Reserve Other Reserve Retained Earnings
Total Liabilities &Shareholder's Equity
8
2,169,188,462 ---63,619,797,799
1,259,491,999 ---47,978,552,952
7,043,747,274 545,866,334 3,987,763,459 33,076,189,284
3,958,510,256 561,376,373 2441458467 26,684,564,624
11,691,392,816 56,344,959,167 3,354,827,146 59,699,786,313
8,777,183,002 42,423,092,722 2,690,049,475 45,113,142,197
3,036,000,000 460,169,845 24,000,000 399,841,641 3,920,011,486
2,300,000,000 263,449,699 24,000,000 277,961,056 2,865,410,755
63,619,797,799
47,978,552,952
First Security Islami Bank Ltd. Financial Statement As At 31 December 2010 Particulars
Notes Amount in Taka 31.12.2010
31.12.2009
Investment Income
18
5,547,047,795
Profit Paid on Deposits
19
(4,125,826,500)
Net Investment Income Income from investment in Share & Securities 20
1,421,221,295 264,208,027
Commission, Exchange & brokerage
21
282,561,956
Other Operating Income
22
117,216,660 663,986,643
Total Operating Income Less: Operating Expenses
2,085,207,938
4,348,674,5 53 (3,333,800, 367) 1,014,874,1 86 53,510,5 27 194,631,4 19 64,617,5 76 312,759,5 22 1,327,633,7 08 255,480,9
Salary & Allowance
23
418,301,777
82
Rent, Taxes, Insurance ,Electricity etc.
24
107,050,007
50
Legal Expense
25
963,915
74
Postage, Stamps, Telecommunication etc.
26
9,127,540
43
Stationary, Printings, Advertisement etc.
27
58,551,363
47
Managing Director's Salary & Allowance
28
9,916,130
00
410,000
00
74,824,4 2,534,4 7,810,2 43,387,2 8,700,0 400,0 Auditors fees
2,174,7 Director's Fee & Expense
29
2,188,870
09
Sharih Committees Fee & Expense
30
46,000
50
Depreciation & Repair of Bank's Assets
31
72,915,674
92
4,979,720
38
197,156,211
74
881,607,207
59
1,203,600,731
49
175,8 50,143,6 15,117,4 Zakat Expense
116,046,8 Other Expense
32
576,795,9 Total Operating Expense
750,837,7 Profit Before Provision and Tax Provision for Classified Investment
35,200,000
100,000,0
Provision for unclassified Investment
11.2
150,000,000
00
Provision for diminution in value of investment in Share
4,000,0 34,800,000
00 104,000,0
Total Provision
220,000,000
00 646,837,7
Total Profit Before Tax Provision for Taxation Differed Tax
11.1 2.8.4
983,600,731
49
(435,000,000)
(320,000, 000)
(435,000,000) Net Profit After Tax For The Year Retained Earnings Brought Forward From Previous Year
548,600,731 277,961,056 826,561,787
(320,000, 000) 326,837,7 49 80,490,8 57 407,328,6 06
Appropriations 129,367,5 Statutory Reserve Other Reserve
196,720,146 230,000,000
50 129,367,5
426,720,146 Retained Earnings Carried Forward Earnings Per Share(EPS)
33
399,841,641 2.33
50 277,961,0 56 1.42