CUSTOMER SERVICE : WAYS TO INCREASE THE SATISFACTION LEVEL OF THE CUSTOMERS
CHAPTER-I Introduction 1.1. Origin of the report: Now we are living in the age of competition at anything in any places. From that tendency recently Education is also in the age of competition. So the procedures and standards of teaching are upgraded by different universities and institution in our country. In respect to that, internship is mandatory for our MBA program offered by Dhaka University. To do so I decided to complete my internship in Prime Bank Limited. In connecting, HRD of PBL sent me to the Motijheel Branch and assigned to prepare this report.
1.2. Rationality: Internship program is the practical aspect of our theoretical learning. It makes a bridge between the gap of classroom learning and practical learning. In this view, Internship plays a pivotal role for each professional degree like MBA. The study will help formulate suitable policies taking into consideration different ideas, suggestions and feelings of the customers and bankers. Further more, it may noted that Prime Bank executives who are really executing the policies undertaken by the top management will have a chance to communicate their interaction and provide necessary feedback..
1.3. Objectives: Objectives regarding this study are as follows: •
To fulfill academic requirement;
•
To gain practical knowledge in banking;
•
To compare PBL deposit schemes with other private sector Banks.
•
To make a general evaluation of PBL activities among different professionals;
•
To find out the real picture of PBL in terms of deposits and other financial products.
•
To get an overview of the private Banking in our country.
•
To identify major strength and weakness of PBL in respect to other Banks.
•
To analyze the different type of interest rates and ratios of PBL with other Banks.
•
To assess and evaluate the growth trends on PBL among other Banks.
•
To recommend ways and means to solve problems regarding Banking.
1.4. Duration: The duration of the study was a very short span of time. It was three month long internship program ( July 2006 to September 2006). It was very much hard to complete a report as well as assigned tasks by the Bank. So I had to complete this study facing very much time presser.
1.5. Area of Operation: This report covers only General Banking Services, activities and procedures of Prime Bank Limited. Especially this report emphasizes on the comparison of different bank interest rate and deposit schemes, in a word financial products. It considers only one Branch from all well known private Banks.
1.6. Methodology: To make the Report more meaningful and presentable, two sources of data and information have been used widely. Source of Data
PRIMARY DATA
SECONDARY DATA
Figure: Sources of data Both primary and secondary data sources were used to generate the report.
Primary: Interview, observation, and 3-month work experience with different divisional in charge and suggestions of many executives of the bank
Secondary: Annual reports of PBL, Instruction circular of Head Office, Brochures of different Banks, News Paper & Magazine regarding Banking issues, Seminar papers and so on.
1.7. Limitations: The major limitations of this study are: •
Sufficient records, publications were not available as per my requirement.
•
Information is not processed through computer.
•
Time and budget constraint.
•
Non-cooperative behavior of some officials of the bank.
•
3 months are very short time to prepare this.
CHAPTER-II History of Banking 2.1. Introduction: Bank is an establishment which makes such advances of money to individual, as may be required with which individuals entrust money when not required by them for use. A bank is one, who in the ordinary course of his business receives money which he repays by honoring cheques of persons from whom or on whose account he receives it. Banks deal mainly with money and credit. They purchase and sell money and credit.
2.2. Evolution of the Word “Bank”: Etymology deals with the roots and origin of the word ‘bank’. Regarding etymology or origin of the word bank there is no unanimous opinion among the writers of banking. According to some writers the word bank derived from the word BANCO, BANCUS, BANQUE, and BANC, all of which mean bench upon which the early bankers used to display their coins and transact business in the market place.
According to the some other writers the word ‘bank’ has been derived from the German word ‘BANKE’ which means a joint stock fund. The 1st version is widely accepted because at one time the banking history, money changing was looked upon as the most widely accepted function of a banker. Banking in the ancient times was largely confined to money changing and money lending.
2.3. Emergence of Modern Banking: In middle Europe the bankers of Lombardy were very famous. To them belongs the credit of modern banking. In other words they planted the seed of modern banking in England. They settled in London at a place known as Lombard Street. Florence was the capital of Lombardy. Lombardy was a province in North Italy. Most of the prominent bankers of there present were from Lombardy. Among those prominent bankers we can named one who were famous not only in banking but also in political history in Europe. These Lombardy people were very much disturbed in 13’s by internecine work which was followed by plunder by Kaiser Frederick two. Lombardy people in large number as a result started migrating to more settled countries such as England, French, and Belgium. In England these Lombardy people brought the idea of modern banking and thus England becomes the home of modern banking.
2.4. Bank Development in Bangladesh: Indigenous banking in Bangladesh is as old as banking in other parts of the world. Money used to be accepted as a deposit and advances used to be given. During Mughal period, indigenous banking flourished. The Subarna bank the bullion trading community used to do banking in the then Bengal. Subsequently, larger banking in Bangladesh was gradually taken over by the upcountry bankers who were known as Seth, shah etc. but subarna baniks continued to operate in rural Bengal. With the British gradually coming over to Bengal and settling here, banking in the form of agency house, exchanging house started to flourish in kolkata. Entry of the Bengalese into
banking started in the part of this
century, especially in the wake of the swadeshi movement. In 1947 after the separation of Bengal, bank business faced a severe disaster as nonMuslim bankers migrated to India. In order to rebuild the bank business State bank of Pakistan was established as a central bank of Pakistan in 1948.
severe disaster as non-Muslim bankers migrated to India. In order to rebuild the bank business State bank of Pakistan was established as a central bank of Pakistan in 1948. In 1971 Bangladesh became independent. After liberation “Bangladesh bank was automated with the asset and liabilities of former “State bank of Pakistan”. There were several banks before independence of Bangladesh as follows: (1) The national bank of Pakistan (2) The bank of Vowalpur ltd. (3) The premier bank ltd. (4) The Habib bank ltd. (5) The commerce bank ltd. (6) The united bank ltd. (7) The union bank ltd. (8) The Muslim commercial bank ltd. (9) The standard bank ltd. (10) The Australasia bank ltd. (11) The eastern mercantile bank ltd. (12) The eastern banking corporation ltd. Bangladesh Bank nationalization Order promulgated on 26 March in 1972. After the liberation war the above 1st three banks were converted to The Sonali Bank, The 2nd two banks were converted to The Agrani Bank, the next two banks were converted toThe Janata Bank, the next three banks were converted to The Rupali Bank, the next one bank was converted to The Pubali Bank and the last bank was converted to The Uttara Bank.
2.5. Concluding Note: Today’s bank in Bangladesh has not developed over night. Before and after independence of Bangladesh the concept of bank was developed in Bangladesh gradually. So I can easily say that bank history is as ancient as the human civilization.
CHAPTER-III Overview of Prime Bank Limited 3.1. Introduction:
Prime Bank Limited, (PBL) ‘a bank with a difference’ is a fast growing private commercial bank and it is already at the top slot in terms of quality service to the customers and value addition for the shareholders. Yes, in the backdrop of economic liberalization and financial sector reforms, a group of highly successful local entrepreneurs conceived an idea of floating a commercial bank with a different outlook. For them it was competence, excellence and consistent delivery of reliable service with superior value products. Accordingly, Prime Bank Limited was created and commencement of business started on 17th April 1995.
3.2. Profile of the Bank: Prime Bank Ltd. is operating as a scheduled bank under the banking license issued by Bangladesh Bank (BB), the Central Bank of the country on April 17, 1995 through the opening of its Motijheel Branch at Adamjee Court Annex Building, Motijheel commercial area, Dhaka-1000. PBL was actually registered under the Companies Act of 1913 with its registered office at 5, Rajuk Avenue, Motijheel commercial area, Dhaka1000 which was later shifted to Adamjee Court Annex Building, 119-120, Motijheel commercial area, Dhaka-1000. Contact With Prime Bank Ltd. Address : Adamjee Annexe Motijheel
court Building-2,119-120, C/A, Dhaka-1000
Bangladesh Phone :
9567265, 9570747-8 PABX
Fax
880-2-9567230, 9560977
:
880-2-9566215 Telex : E-mail :
642459 PRIME BJ 671543 PBL MJ BJ info@prime-bank.com primebnk@bangla.net
Web Site : SWIFT :
www.prime-bank.com PRBLBDDH
AS a fully licensed commercial bank, Prime Bank Limited has being managed by highly professional and dedicated team with long experience in banking. They constantly focus
on understanding and anticipating customer needs. As the banking scenario undergoes changes so does the bank and it adjusts and repositions it to the changed conditions. In its 10th year of operation in 2005, Prime Bank has made substantial headway in terms of business growth, profitability and establishing its image as one of the leading private commercial banks. Its march towards reaching greater heights in operation continues with full vigor and enthusiasm. Prime Bank has made significant progress within a very short period of its existence. The bank has been graded as a top class bank in the country through internationally accepted CAMEL Rating. The bank has already occupied an enviable position among its competitors after achieving success in all areas of business operations. Prime Bank Limited offers all kinds of corporate, personal and commercial banking services covering all segments of society within the framework of banking rules and regulations laid down by the Central Bank. Diversification of products and services include corporate banking, retail banking and consumer banking right from industry to agriculture, real state, software and other sectors. Prime Bank Limited is one of the strong capital based banks in the country with capital adequacy ratio of 10.74% as on December 2004, which is well above the stipulated requirement of 8%. The authorized capital of the bank is Tk. 4000.00 million and paid up capital stood at Tk. 1000.00 million as on 31 st December 2004. On this date the reserve fund of the bank stood at Tk. 986.51 million while the equity fund was Tk.2239.8 million. The total asset of the company was Tk. 32361.62 million in 2004. The sources of fund of Prime Bank Limited are paid up capital (3%), reserves and surpluses (5%), deposits (81%) and other Liabilities (12%). The use funds is concentrated as loans and advances (63%), investments (10%), fixed assets (1%, liquid assets (21%) and other assets (5%). Prime Bank has been very selective in locating branches so that customers are better served. The bank’s currently has a network of 44 branches allover Bangladesh and a booth located at Dhaka Club, Dhaka. The bank also plans to add a few branches to its network that will give the bank strategic advantage in terms of operation and business potential. Prime Bank’s aim is to be the leading bank in the country's principal markets
3.3. Branch Network of PBL:
There are 44 Branches of PBL till now. They are located in 6 Divisional cities as follows:
Dhaka Division: 25 Branches are: (1)
Motijheel
(2)
Moulvi Bazaar
(3)
Dilkusha (IB)
(4)
Mohakhali
(5)
Kawran Bazaar
(6)
Elephant Road
(7)
Mouchak
(8)
Gulshan
(9)
Narayangonj
(10)
Banshal
(11)
Ganakbri (Savar)
(12)
Uttara
(13)
Foreign Exchange (Motijheel)
(14)
Dhaka Club Booth
(15)
Dhanmondi
(16)
New Eskaton
(17)
Madhabdi,( Narsingdi)
(18)
Banani
(19)
Mirpur (IB)
(20)
Pragati Sarani
(21)
Shimrail, (Naryangonj)
(22)
Asad Gate
(23)
Tongi (Gazipur)
(24)
Panthapath
(25)
S.B. Tower (Motijheel)
Chittagong: 7 Branches are: (1) Khatungonj (2) Agrabad (3) Jubilee Road (4) O.R. Nizam Road (IB) (5) Pahartali (IB)
(6) Fatickchari (7) Laldighi Sylhet: 6 Branches are: (1) Sylhet (2) Amberkhana (IB) (3) Court Road (4) Tajpur (5) Upashahar (6) Beani Bazar Khulna: 2 Branches are: (1) Khulna (2) Jessore Rajshahi: 2 Branches are: (1) Rajshahi (2) Bogra Barisal: 1 Branch is: (1) Barisal. However, there is 1. Proposed branches of PBL as follows: (1) Biswanath Branch (Sylhet)
3.4. Commencement of Operation: Prime Bank Ltd. started its operation on 17th April 1995 with an authorized capital of Tk. 1000 million and paid up capital of Tk. 100 million by a group of highly successful entrepreneurs who are established in various fields of economic and business activities. PBL is a fully licensed scheduled commercial bank set up in private sector in pursuance of the Government of Bangladesh to liberalize banking and financial services. Till now, the branch network of Prime Bank Ltd. increased to 43 with 5 new branches in the last of the year 2005. Currently, there is no proposed branch. The commercial and investment services of PBL range from small enterprises to big business loans to all type
of customers. Besides this, the bank actively participates in socio-economic development of priority sectors like agriculture, industry, housing, self-employment, etc. PBL is also a pioneer in providing consumer loans as well as financing the industries and transport sector through attractive leasing and higher purchase scheme.
3.5. Vision of Prime Bank Ltd: To be the best Private Commercial Bank in Bangladesh in terms of •
efficiency,
•
capital adequacy,
•
asset quality,
•
sound management, and
•
Profitability having strong liquidity.
3.6. Mission of Prime Bank Ltd: To build Prime Bank limited into an efficient. Market driven, customer focused institution with good corporate governance structure. Continuous improvement in Bank’s business policies, procedures and through integration of technology at all levels.
3.7. Objectives of Prime Bank Limited: Prime Bank aims to continuously update and develop its product line and range of services to cater to the needs of retail and corporate customers. To achieve this goal, efforts have been directed in three main areas: Design and introduction of new products and services Shaping and developing the system to face new challenges and emerging need of the market Full implementation and utilization of the Bank’s excellence program which aims to provide service to customers. While strengthening risk management and improving asset quality is the main focus of the bank, it is also aware of its responsibility to the society. With this noble intention, Prime Bank Foundation was established in 2001, which took part in diverse charitable and voluntary programs to alleviate poverty and community welfare.
3.8. Walkway of prime bank ltd: Prime bank Ltd. started its activities with the help of renowned bankers and entrepreneurs of the country as follows:
1995: Created and commenced its operation on 17 th April 1995. Renowned banker Mr. Luthfur Rahman Sharker was the first Managing Director of this Bank. 1996: Incorporated in Dhaka Stock Exchange. On 21st November Mr. Sharker resigned. 1997: On 8th April Mr. Kazi Abdul Mazid took over the leadership of the bank as a Managing Director. No of branches of the bank reached at 16 th covering all divisional city of Bangladesh. Paid up capital reached from TK. 100 to 200 million. One Islamic Banking branch started its operation at Motijheel. 1998: No of branches reached at 18 including two Islamic banking branches. 1999: Mr. Naser Bukhtear Ahmed joined as a deputy Managing Director with lot of experience and foreign banking exposure. No of branches reached at 20. Online banking and credit card facilities were started. 2000: No.1 bank in CAMEL rating announced by Bangladesh Bank in Bangladesh. Mr. M. Shajahan Bhuian joined as a Senior Executive Vice President came from United Commercial Bank Limited. 2001: Number of branches reaches at 26. Mr. Kazi Abdul Mazid resigned from the Bank and Mr. Naser Bukhtear Ahmed took over the charge as a Managing Director. Mr. M. Shajahan Bhuian was the Deputy Managing Director. Also the no.1 bank in terms of the CAMEL Rating announced by Bangladesh Bank in Bangladesh. 2002: Mr. Shah Md. Nurul Alam joined as a Managing Director from Southeast Bank Limited after Mr. Bukhtear resigned. Still it is the number one bank in terms of CAMEL Rating. Number of branches reached at 27 including three Islamic banking branches. 2005: The number of Prime Bank branches reaches 38, and of it 5 branches are designated Islamic branches complying with the rules of Islamic Shariah the modus operandi of which is substantially different from other branches run on commercial conventional basis.
3.9. Organizational Structure of prime bank limited: Prime Bank is listed with promoter shareholders’ collectively holding a 46% stake in the bank. One of the main reasons for the bank’s good financial condition is that the bank’s promoters, who have other business interests as well, have refrained from using the bank for insider lending. This is a huge issue for Bangladeshi private banks and together with
somewhat lax supervision, is the single biggest factor for the poor financial condition of most private banks. While Prime Bank has so far benefited from its promoter shareholders’ approach of maintaining an arms-length relationship between the bank and their other businesses, whether this would continue to be the case in future, particularly when the second-generation promoters become directors of the bank remains to be seen. The bank had a rather large board (20 members in all) with representatives from all the major shareholders. Previously central bank norms prevented any one shareholder individually holding an equity stake of greater than 5% in the bank; this was the reason for the 20 directors sitting in the board. The central bank rules in this regard have undergone a slight change. Now the rules are that the individual holding has been enhanced to 10% and the size of the Board will now be restricted to 13 members, which should include at least two independent directors. The bank’s board has a position amongst various members; consequently the bank has a new Chairman every year. The executive management also appears a bit top-heavy (relative to the size of the bank) with one additional managing director besides the managing director, a Senior Executive Vice President, four Executive Vice Presidents and many Senior Vice Presidents. Prima-facie the rotating Chairman and the presence of effectively two managing directors may lead to some overlapping responsibilities and possible conflict; however this does not seem to have happened so far in the bank’s history and the bank continues to perform satisfactorily.
3.9.1. Organizational Structure: Designation in ascending order Sl. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.
Designation Managing Director Deputy Managing Director Senior Executive Vice President Executive Vice President Senior Vice President Vice President Senior Assistant Vice President Assistant Vice President First Assistant Vice President Senior Executive Officer Executive Officer
12. 13. 14. 15. 16.
Principal Officer Senior Officer Management Trainee Officer Junior Officer Assistant Officer Trainee Assistant
3.9.2. Managerial Hierarchy of Prime Bank Ltd:
Chairman
Top Management
Board of Directors Executive Committee Managing Director Additional Managing Director
Executive Level Management
Deputy Managing Director Senior Executive Vice President Executive Vice President Senior Vice President Vice President Senior Assistant Vice President Assistant Vice President
Mid Level Management
First Assistant Vice President Senior Executive Officer Executive Officer Principal Officer
Junior Level Management
Senior Officer Management Trainee Officer Junior Officer
3.10. Own View About Prime Bank Limited:
Prime Bank Ltd. Motijheel branch is the largest and most profit-earning branch. It is a three-storied branch. In the 1st floor there is General Banking Division. In the 2nd floor there is Credit Department, Accounts Department and the chamber of branch manager and in the 3rd floor there is foreign exchange department. The working environment is very good here. Employees can work in a very calm but important area considering its location. The branch has some big clients who are continuously giving earning to the branch. Among them there are Square Toiletries, Saudi Bangla Fish Feed, Index Agro, Computer Valley, , Dhaka Ice Cream, Lilac Chemicals, Scholastica Pvt. Ltd, Standard Group, AK Traders, Pacific Motors, TM International etc. The performance of the branch is very successful. Last fiscal year the branch was well ahead of its target in terms of profit, deposit and loan.
3.11. Concluding Note: The bank by concentrating on the activities in its area of specialization has achieved good market reputation with efficient customer service. Prime Bank consolidated its position and retained its product line and financial services aimed at various target groups. In a challenging market conditions, this bank continued to provide more innovative products and better services to retain and expand its market share. The bank is committed towards providing continuous training to its staff to keep them up to date with modern practices in their respective fields of work. This bank also tries to fulfill its share of community responsibilities. By such measures the bank intends to grow and increase shareholder’s earning per share
CHAPTER –IV Overall Banking Services of Limited
Prime Bank
4.1. Introduction: This is one of the most important chapter in which I have tried to describe the core activities of the bank. Here I have discussed the functions performed by the prime bank ltd. There are twelve divisions of the bank which works in different ways for achieving their goals and objectives.
4.2. Functional Structure:
4.2.1. General Service Division (GSD): The functions of GSD are classified as Establishment and General Banking (GB).
(a) Establishment: The main function of GSD is to procure and supply the tangible goods to branches of PBL. Those are:
Tangible functions of opening a branch, for example, interior decoration, making lease agreement
Print all security papers and bank stationeries, forms, registers and distribute them to the branches
Purchase and distribution of bank’s furniture and fixtures
Find out the demand of equipment from the branches and divisions and arrange the purchase and delivery of them to the branches concerned
Install and maintain different facilities in different branches.
(b) General Banking: General department performs the majority functions of a bank. It is the core department of any bank. The activities of GB of PBL are mainly divided into the following categories:
Account opening section
Local remittance section
Online branch banking section
Deposit scheme section
Clearing section
Collection section
Cash section
Accounts section
All of the above activities of GB are discussed elaborately in the next chapter which is the core chapter of this report.
4.3. Head Office Accounts (HOA): It deals with the Head Office transactions with banks and its different branches and these are recorded under the following headings:
Income and expenditure positioning: It maintains all the income and expenditure information
Cash section: It handles cash expenditure for office operations and payments.
Bills section: It deals with inland bill transactions.
Salary and wages section: Salary and wages of head office executives are given from this account.
Provident fund: Employee provident fund are maintained here.
4.4. Consolidation of Branch Accounts (CBA): All branches of PBL have to periodically send their income and expenditure, profit and loss accounts to head office. This division consolidates all these information and makes statements to submit to Bangladesh Bank.
4.5. Credit Division (CD): Bank is a financial intermediary whose prime function is to move scarce resources in the form of credit from savers to those who borrow for consumption and investment. The word “credit” is derived from the Latin word “credere”, which means to trust. The fundamental nature of credit is that an element of trust exists between buyer and sellerwhether of goods or money. In a modern industrial society Banks are uniquely important because of their ability to create money. Lending comprises a very large portion of a Bank’s total assets and forms the backbone of the Bank and interest on lending constitutes the highest proportion of income of a Bank. As such credit quality remains the prime indicator of its commercial success. Unsound credit reduces the ability of a Bank to provide credit towards profitable borrowers and undermine liquidity and solvency. Therefore lending is very important for the profitability and success of a Bank. When a bank advances a loan, it does not pay the amount in cash. But it opens an account in his name and allows him to withdraw the required amount by cheque. Banks provide credit facilities to businessmen by way of loans and advances, overdraft and cash credit. When a loan is granted or overdraft is sanctioned, the amount of loan or overdraft is entered in the account of the customer and he is allowed to draw a cheques up to the amount agreed upon. Thus the bank creates a deposit in the name of the borrower. Basically credit is the function by which people can perform their job by depositing and lending money from the bank with an implied interest rate and bank performs here as a middleman. Banks create money and credit. It happens in two ways. First, when a customer is granted loan, he has to sign a promissory note and receive in turn, a bank’s
demand deposit, or cash. The promissory note does not act as money but it receives money and can readily spend almost everywhere. Thus it creates credit. Second, the entire systems of banks also create money as the deposits generated by lending flow from bank to bank. By law, each bank must set aside a fractional reserve behind each deposit it receives and the remaining excess can be loaned out. No single bank can lend out more than its excess reserves, the entire banking system can create a multiple volume of deposit money through credit creation.
4.5.1. Types of Bank Credit: Modern banking operations touch almost every sphere of economic activity.
The
extension of bank credit is necessary for expansion of business operations. Bank credit is a catalyst for bringing about economic development. Without adequate finance there can be no growth or maintenance of a stable output. Bank lending is important to the economy, for it makes possible the financing of agricultural, commercial and industrial activities of a nation. The credit facilities are generally allowed by the bank may be in two broad categories. They are: (1) Funded Facilities: Funded facilities can also be divided into the following categories: Loans: i) Short term
Up to 12 months.
ii) Medium term
More than 12 and up to 36 months.
iii) Long term
More than 36 months.
Overdrafts: # Against hypothecation of goods/stock # Against pledge of goods/stock # Against any other permissible securities. Other advances: # Against import bills. # Against imported merchandise. # Against Trust receipts (T/R). # Against Export Bills Purchased/Discounted # Against Work order # Against other securities.
(2) Non-Funded Facilities: •
Letter of credit (L/C)
•
Letter of Guarantee (L/G)
4.5.2. Types of Advances Offered by PBL: 1.
Secured Advances:
A.
The following type of secured advances is allowed against tangible securities subject to margin restrictions: •
Loan (General)
•
House Building Loan
•
Other Loans to Staff
•
Cash Credit (Hypothecation)
•
Cash Credit (Pledge)
•
Hire-Purchase
•
Lease Financing
•
Consumers’ Credit
•
SOD (Export)
•
SOD (Others)
•
PAD
•
LIM
•
LTR
•
IBP
•
Packing Credit
•
FDBP (Foreign)
•
FDBP (Local)
•
FBP
B.
These advances are allowed against the following securities: •
Shares of various Companies approved by Head Office from time to time and listed in the Stock Exchange.
•
Term Deposit Receipts issued by any Branch of our Bank.
•
Lien on balance in Savings A/C, Current A/C. and other Savings Schemes
•
Government Promissory Notes.
2.
•
Various Sanchaya Patras
•
Surrender value of Life Insurance Policies.
•
WEDB
•
Assignment of bills against work orders/supply orders and receivables
•
Stock of goods in trade (Permissible goods only) pledged or hypothecated.
•
Hypothecation of power driven vehicles or watercrafts.
•
Hypothecation of capital Machineries and equipments.
•
Immovable Property.
•
Imported merchandise - pledged or hypothecated.
•
Trust Receipts.
•
Import Bills (PADs)
•
Bills Purchased
•
Scheduled Bank/Insurance Guarantees
•
Export Bills
•
Inland Bills.
•
Personal Guarantee
•
Corporate Guarantee Unsecured Advances:
An unsecured or clean Advance is one, which is granted to a constituent without obtaining any security subject to restrictions imposed from time to time by Bangladesh Bank or any competent authority. In such case only charge documents are held. A.
Unsecured Advances mean and include: i)
Clean Overdrafts, and
ii)
Clean Loans.
B. I. A customer should not ordinarily be permitted to overdraw his account without security. However, an unsecured facility may be allowed in exceptional circumstances, only for a short period, with definite repayment arrangement, subject to restrictions imposed by Bangladesh Bank or any other competent authority, with prior approval of Head Office, to a customer on the basis of his personal credit worthiness, standing and reliability.
II. It shall not be granted unless the Sanctioning Authority has full confidence in the ability and reputation of the customer to repay it, on demand, or at its maturity if it is a loan. Definite arrangements for repayment, whether by installments or otherwise, must, as a rule, be made.
4.5.3. Procedure of Giving Advance: 1. The borrower has to apply to PBL for loan by filling up of a specific application form. 2. After receiving loan application form, PBL sends a letter to Bangladesh Bank for obtaining a report. This report is called CIB (Credit Information Bureau) report. Giving of this report is essential if the loan amount exceeds Tk. 50 lac. The purpose of this report is to being informed that whether the borrower has taken from any other bank; if ‘yes’, then whether these loans are classified or regular. 3. After receiving CIB report, if the bank thinks that the prospective borrower will be a good borrower, then the bank will scrutinize the documents. In this stage, the bank will look whether the documents are properly filled up and signed. 4. Then comes processing stage. In this stage, the bank will prepare a proposal. A proposal contains all relevant information (e.g. name of the client, type of the loan, amount of the loan, period of giving loan, security, date of application, financial data, etc.) Branch incumbent (Local Office) has the discretionary power to sanction loan (SOD) up to Tk.25 lac against financial obligations by informing head office. But in that case, the branch manager has to give attention on the following matters: a) The interest of the loan must not be less than 14.5%, and b) The borrower must maintain 10% margin. Except this case, the branch manager has to send a proposal to the head office. Head office will prepare a minute and submit it before the executive committee. The minute has to be passed in the executive committee (EC) under certain cases. After passing the minute, it will be sent to the Bangladesh Bank for approval in the following cases: a) If the proposal limit exceeds 15% of bank’s equity.
b) If the proposal limit against cash collateral securities exceeds 25% of the bank’s equity. After getting the proposal it will again come to the head office. 5. After the processing stage, a sanction advice will be prepared in favor of the client. 6. After the sanction advice, bank will collect necessary documents (charge documents). 7. After receiving all the documents, the bank will disburse the loan to the borrowers. For withdrawing the loan amount, customer creates a current account and the loan amount is transferred to this account.
4.5.4. Lending Principles: For sound lending the following points should be kept in view: •
Judicious selection of Customers
•
Purpose
•
Safety
•
Security
•
Liquidity
•
Adequate return (Profitability)
•
Supervision
•
National/Social interest
•
Credit Control Policy of Bangladesh Bank
It is to be always remembered that the Bank is the custodian of public money and as such we must be judicious, careful and selective while lending out the depositors’ money to ensure timely recovery. The deciding factors for recovery of loans are selection of right type of borrowers, end-use of credits and effective follow-up and proper supervision.
4.5.5. Processing Of Credit Proposals: 1. A secured credit facility may be allowed to a customer only after getting a limit sanctioned by the authorized officials. 2. The customer seeking a credit facility against acceptable security must make an application in banks printed form “Request for Credit Limit” PF-146 enclosing necessary papers/documents to his nearest Branch of the Bank where he maintains his operative account.
3. Make a preliminary study of the affairs of the intending borrower by consulting the followings: •
Borrowers application
•
Reports in confidence collected through all feasible means regarding the state of the business of the intending borrower.
•
Borrower’s own mode of dealing
•
Statement of accounts of the borrower with own and other Banks
•
Statement of assets and liabilities
•
Financial statements for the last 3(three) years
•
Income Tax statement
•
Trade and other reports
•
Arrange an interview with the intending borrower to know on the following points : Λ Present and future prospect of the customer’s business Λ Total investment required in the business Λ Borrower’s stack in the business Λ Amount of advance required Λ Experience in the line Λ Purpose Λ Period for which the advance is required Λ Source of repayment Λ Customer’s previous Banker Λ Present liabilities, if any, with other Bank and conduct of the same Λ Securities offered Λ Proposed margin Λ Type of charge to be created against the proposed security Λ Terms of repayment Λ Rate of interest
4. Before finally selecting the borrower, be satisfied that; •
The customer possess character, capacity and capital
•
The account is remunerative one
•
Dealing items and primary security of the customer possess the quality of easy marketability, durability and storability
•
Collateral security offered possesses the quality of easy marketability and is not encumbered and its valuation is judiciously assessed so as to leave sufficient margin after covering the advance and belongs preferably to the borrower.
•
Repayment arrangement is satisfactory
•
Means, standing and respectability of the applicant and the guarantor (if any) are satisfactory.
•
Credit worthiness of the applicant is reasonable
•
Location of the business is good.
5. If the proposed facility is beyond the delegated business power of the Branch Manager, the proposal shall be submitted to Credit Division, Head Office duly recommended in the specified Format. The following Papers/documents are to be submitted by the Branch Managers along with the proposals: •
Request for Credit limit of customers.
•
Project Profile / Profile of Business
•
Copy of Trade License duly attested
•
Copy of TIN Certificate
•
Certified copy of Memorandum and Articles of Association, Certificate of Incorporation, Certificate of commencement of business in case of Public Ltd. Co., Resolution of Board of Director, Partnership Deed, (where applicable)
•
Personal Net worth Statement of the Owner/Director/Partner/Proprietor in Bank’s Format.
•
Valuation Certificate in Bank’s Format along with photograph of collateral security (land & building with detail particulars on the back duly authenticated by the Branch Manager.
•
In case the value of the property offered as security exceed Tk.50.00 lac, the value to be assessed by bank’s enlisted surveyor and report thereof to be obtained.
•
3 years Balance sheet and profit and loss A/C
•
CIB Enquiry Form duly filled in (For proposal of Tk.10.00 lac and above)
•
Lending Risk Analysis for Credit facilities of Tk.50.00 lac and above
•
Inspection/Visit Report of Factory/Establishment/Business premises of the customer.
•
Stock Report duly verified (where applicable)
•
Credit Report from other Banks.
•
Indent/Proforma Invoice/Quotation (Where applicable)
•
Price verification report (where applicable)
•
Statement of A/C (CD/SB/CC) for the last 12 months. In case the customer maintaining account with other Bank, Statement of Account for the last 12 months of the concerned Bank should be furnished.
•
In case of renewal/enhancement of credit facility, Debit Turnover, Credit Turnover, highest drawing, lowest drawing, Total income earned, Detailed position of existing liabilities of the customer i.e. Date of sanction, Date of expiry, Present outstanding, Remarks, if any.
•
Declaration of the customer of the name of sister/allied concerns and liabilities with other Banks, if any, and an undertaking to the effect that they have no liability beyond those declared.
•
In case of L/C proposal, detailed performance of L/C during the last year i.e. No. and date of L/C opened, commodity, L/C value, Date of creation of PAD, date of retirement, mode of retirement etc.
•
Whether the applicant is Shareholder/Director of Prime Bank Ltd. as per definition of Banking Companies Act.
•
Financial Analysis to be prepared by the Branch Manager based on the financial performance of the company which should show trends in sales/profitability, liquidity, leverage etc. It should also contain an assessment of the competence and quality of the business management, the general economic & competitive environment of the borrower’s industry and any other pertinent factors that is relevant for management’s credit decision.
•
Justification/consideration for the facility.
6. Approval of Limit: The sanctioning authority on receipt of the proposal shall scrutinize the same and ensure that:
•
The proposal contains all pertinent information relating to the proposed facility and the borrower.
•
All necessary papers and documents have been submitted.
•
The proposal has been duly signed by the members of the Branch Credit Committee including the Manager.
•
The proposal has been duly recommended.
•
The proposal does not fall within the existing credit restriction
•
Minimum margin requirement against the credit facility has been proposed.
•
The primary security has got easy marketability, durability and storability
•
The value of the property offered as collateral security is judiciously assessed
•
The proposal is viable and stands all credit tests
•
The proposed borrower is not defaulter of any Bank/Financial Institution
•
There is no request from other Bank/Financial institution for not allowing/stoppage of facility to the prospective borrower
•
The proposal meets all the provisions/requirement of Bank Companies Act/Rules of Bangladesh Bank/Other Laws / Rules
•
Where the proposed accommodation in the form of working capital may be considered on the project financed by any other Bank including DFI. Favorable status report and No Objection Certificate (NOC) from the financing Institution to be obtained.
•
Where 2nd charge on the fixed and floating assets (in case of a limited company) or 2 nd mortgage on real estate is offered, clearance in respect of creation of 2 nd charge on the property together with confirmation that documents will be held by them on behalf of the Bank and that they shall not part with the same without consent of the Bank, is obtained from the 1st mortgagee.
7. Check list of action to be taken by the Branch Manager/Second Officer/Credit Officer before disbursement of Credit facilities – •
Acceptance of customers relating to the terms & conditions to be obtained on the duplicate copy of sanction advice.
•
They will thoroughly examine and ensure that the subject credit facility does not contradict any law, rules and regulation of the country, Bangladesh Bank and Bank’s credit policy.
•
They will obtain NOC from Bank where the customer has existing liability.
•
CIB Report on the borrower to be obtained through Head Office.
•
Lending Risk Analysis as per FSRP Formula in case of credit of Tk.50 lac and above.
•
No objection certificate of Bangladesh Bank in case the credit facility exceeds 15% of Capital Funds of the Bank.
•
Regularization/Adjustment of classified/overdue credit of the customer/their sister/allied concerns with our Bank/other Banks, if any.
•
Original Title deed, Bia deed, Khatian, Mutation parcha, uptodate rent receipt, Municipal Tax receipt, Map, Plan approved by RAJUK/Municipality, Power of attorney, relay certificate about the actual physical possession of the property to be mortgaged, valuation certificate, photograph of the property to be mortgaged with detail particulars on the back.
•
Non-encumbrance certificate relating to the property to be mortgaged from the Bank’s panel lawyer.
•
Deed of Mortgage and power of attorney to be drafted and executed under the supervision of B.L.A.
•
Lawyer’s certificate to the effect that proper Registered/Equitable Mortgage (as the case may be) has been created on the land and building in favor of the Bank as per the terms & conditions of the sanction letter.
•
Registered Power of attorney to be obtained from the borrower (contractor) as per Head Office’s approved specimen assigning the work order favoring the Bank.
•
The power of attorney to be filed with the work order-giving Agency. A consent letter to be obtained from them that they will issue all cheques in payment of bills against the work order favoring the Bank A/C the customer as per the power of attorney.
•
Storage of pledge goods in Bank’s godown (as the case may be) under proper security and the same duly insured.
•
Insurance Policies covering risks as per sanction terms & conditions.
•
Charge documents as per sanction letter.
•
Ostentation of certified copies of Blue Book/Registration Certificate, Route Permit, Tax Token, Fitness Certificate, Insurance Policy in respect of vehicles finance.
•
Procurement of post-dated cheques against installments of loans/HirePurchase/Lease /CCS (as the case may be).
•
Satisfaction certificate of the lawyer in respect of all documentation both banking & legal. The Branch Managers should show all the legal & charge documents to their lawyer & obtains their certificate that documents have been completed as per sanction terms & are in order for extending the facility.
•
Entry has been made in the Safe-in and Safe-out Register and the documents are preserved under joint custody of the 2nd man/ In-charge of the Credit Deptt./ F.Ex. Deptt.
4.5.6. Securities: To make the loan secured, charging sufficient security on the credit facilities is very important. The banker cannot afford to take the risk of non-recovery of the money lent. PBL charges the following two types of security, a) Primary security: These are the security taken by the ownership of the items for which bank provides the facility. b) Collateral security: Collateral securities refer to the securities deposited by the third party to secure the advance for the borrower in narrow sense. In wider sense, it denotes any type of security on which the bank has a personal right of action on the debtor in respect of the advance.
Modes of Charging Security: There are different modes of charging security are exercised by the bank: 1. Pledge: Pledge is the bailment of the goods as security for payment of a debt or performance of a promise. A pledge may be in respect of goods including stocks and share as well as documents of title to goods such as railway receipt, bills of lading, dock warrants etc. duly endorsed in bank’s favor. 2. Hypothecation: In case of hypothecation, the possession and the ownership of the goods both rest the borrower. The borrower to the banker creates an equitable charge
on the security. The borrower does this by executing a document known as Agreement of Hypothecation in favor of the lending bank. 3. Lien: Lien is the right of the banker to retain the goods of the borrower until the loan is repaid. The bankers’ lien is general lien. A banker can retain all securities in his possession till all claims against the concern person are satisfied. 4. Mortgage: According to section (58) of the Transfer of Property Act,1882 mortgage is the ‘’transfer of an interest in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, existing or future debt or the performance of an engagement which may give rise to a pecuniary liability”. In this case the mortgagor does not transfer the ownership of the specific immovable property to the mortgagee, only transfers some of his rights as an owner. The banker exercises the equitable mortgage.
4.5.7. Documentation: Documentation can be described as the process or technique of obtaining the relevant documents. In spite of the fact that banker lends credit to a borrower after inquiring about the character, capacity and capital of the borrower, he must obtain proper documents executed from the borrower to protect him against willful defaults. Moreover, when money is lent against some security of some assets, the document must be executed in order to give the banker a legal and binding charge against those assets. Documents contain the precise terms of granting loans and they serve as important evidence in the law courts if the circumstances so desire. That’s why all approval procedure and proper documentation shall be completed prior to the disbursement of the facilities.
4.5.7.1Charge Documents: Following charge documents are necessary while giving loans. Letter of guarantee: This is a document given by the proprietor, directors or the third party in favor of the principal debtor. The beneficiary of this document is the bank. Surety is bound to pay the guaranteed amount if such situation arises. Counter guarantee:
The principal debtor agreeing that if the guarantor pays any amount, the principal debtor is bound to pay this amount gives this guarantee. Letter of authority: BY this letter, the principal debtor gives the authority to the bank to debit the current account or investment account of the principal debtor for the following cases: i.
Wages of the godwon keeper and godwon guard.
ii.
Rent of the godwon.
iii.
Insurance premium and
iv.
Any other expenses regarding these functions.
Letter of recall the loan: This letter is given to the bank by the borrower, giving the bank the right of recalling the loan amount at any time if the borrower fails to repay any one of the installments. And the borrower cannot protest such recalling. Letter of continuity: By this letter, the borrower agrees that the promissory note given by the bank will be act as security for the repayment of the ultimate balance or sum remaining unpaid on account of the overdraft or advance. Letter of revival: By this letter, the borrower agrees that he will be liable to bank for payment of the promissory note with interest in respect of all present and future indebtedness liabilities secured thereby which promissory note is to remain in force with all relative securities, agreements and obligations. Joint promissory note: This promissory note is given to the bank by the borrower if the borrowers are more than one person. Single promissory note: The borrower to the bank gives this promissory note if the borrower is a single person. Letter of undertaking: This document is given to the banker by the borrower acknowledging the right to cancel the facility at any time with or without intimation to the borrower. Loan disbursement letter: By this letter, the borrower request to disburse the loan sanctioned in his favor by the bank. All the persons, in whose names the account is opened, should sign the letter.
Charge over bonds or certificate of shares etc.: It is a document given by the borrower to the banker declaring that the stocks, shares, debentures, securities and investments which are now deposited to the bank and which may from time to time be deposited by the borrower shall stand charged and hypothecated to bank as security for the payment to bank on demand of the balance of the loan amount and of any other indebtedness and liability to the bank of any kind whether mature or accruing and whether incurred alone or jointly with others and whether as principal or surety including all interest document, commission, expenses, charges and costs incurred by the bank in relation any such indebtedness or liability. Letter of lien against fixed deposit receipt: By this letter, the borrower gives the right to the bank to hold the Fixed Deposit Receipt (FDR) if the borrower fails to repay or adjust the loan on demand or discharge the liabilities to bank. In this letter, FDR number, issuing branch, name of the favoring person and amount are written. Letter of authority to encash FDR: By this letter, the borrower gives the right to bank to encash the FDR in case of need. Here the amount and address of the bank of issue and the signature of the holders are given. Memorandum of deposit of title deeds: It is a deed that is necessary in case of mortgage by deposit of title deed or equitable mortgage. Here the mortgagor agrees that he has deposited necessary documents of the property to the bank. Hypothecation of goods to secured a demand cash credit or overdraft or loan account: Here the amount of loan, interest, and the name of the borrowers are written. Here the bank and the borrowers agree on the following terms: •
Security
•
Balance due to the bank
•
Borrowers not to the encumber or parts of the goods
•
Sale
•
Inspection
•
Insurance
•
Margin
•
Interest rate
•
Repayment
•
Sale of goods
•
Deficiency
•
Surplus
•
Statement of account
•
Continuing security
•
Title
•
Saving
•
Change of borrowers and
•
Notices
Guarantee by third party: Sometimes third party guarantee is needed for allowing loan. Here third party gives the guarantee that of the principal debtor fails to repay the loan, and then the guarantor will be bound to repay the loan to bank. Hypothecation of vehicle: This document is necessary in case of transport loan. Here the borrower hypothecated the vehicle to the bank. In case of failure of repay the loan, bank will sell the vehicle to collect the money.
4.5.7.2 Documents required for relevant advances: 1. Loan: a.
D P Note signed on revenue stamp
b.
Letter of arrangement.
c.
Letter of disbursement.
d.
Letter of partnership (partnership firm) or Board of resolution (limited companies).
e.
Letter of pledge.
f.
Letter of hypothecation.
g.
Letter of lien and ownership / share transfer form (in case of advance against share).
h.
Letter of lien for packing credit.
i.
Letter of lien (in case of advance against F D R)
j.
Letter of lien and transfer authority.(in case of advance against P S P, B S P)
k.
Legal documents for mortgage of property (As draft by legal adviser)
l.
Copy of sanction letter mentioning details of terms and condition duly acknowledge by the borrower
m.
Trust receipt.
2. Overdraft: a.
D P Note.
b.
Letter of partnership.
c.
Letter of arrangement.
d.
Letter of continuity.
e.
Letter of lien.
f.
Letter of lien and ownership /share transfer form (in case of advance against share).
g.
Letter of lien and transfer authority.
h.
Legal documents for mortgage of property.
3. Cash Credit: a.
D P Note.
b.
Letter of partnership.(in case of partnership farm) or Board of resolution (in case of limited company)
c.
Letter of arrangement.
d.
Letter of continuity
e.
Letter of hypothecation [In case of cash credit (Hypothecation)]
f.
Legal documents for mortgage of property
g.
Letter of pledge or Agreement of pledge.[In case of cash credit (pledge)]
4. Bills purchased: a.
D P Note.
b.
Letter of partnership.(in case of partnership farm) or Board of resolution( in case of limited company)
c.
Letter of arrangement.
d.
Letter of acceptance, where it calls for acceptance by the drawee.
e.
Letter of hypothecation of bill.
4.5.8. Loan Schemes Offered By PBL: Consumer Credit Scheme General Loan Scheme Lease Finance Small and Medium Enterprise House Building/Apartment Loan Scheme
4.6. International Division (ID): This division is responsible for monitoring and supervising the foreign exchange dealings of the bank. It performs the following functions:
Making guidelines and frameworks for foreign dealings complying the rules of Bangladesh Bank
Circulating instructions of Bangladesh Bank
Maintaining correspondence with foreign banks and exchange houses with which it has exchange arrangement
Maintaining NOSTRO accounts with banks in abroad
Fixing and sending foreign exchange rates to Authorized Dealer (AD) branches and Bangladesh Bank as follows:
4.6.1. Export Section:
Creation of wealth in any country depends on the expansion of production and increasing participation in international trade. By increasing production in the export sector we can improve the employment level of such a highly populated country like Bangladesh. Bangladesh exports a large quantity of goods and services to foreign households. Readymade textile garments (both knitted and woven), Jute, Jute-made products, frozen shrimps, tea are the main goods that Bangladeshi exporters export to foreign countries. Garments sector is the largest sector that exports the lion share of the country's export. Bangladesh exports most of its readymade garments products to U.S.A and European Community (EC) countries. Bangladesh exports about 40% of its readymade garments products to U.S.A. Most of the exporters who export through PBL
are readymade garments exporters. They open export L/Cs here to export their goods, which they open against the import L/Cs opened by their foreign importers. Export L/C operation is just reverse of the import L/C operation. For exporting goods by the local exporter, bank may act as advising banks and collecting bank (negotiable bank) for the exporter.
4.6.2 Export Policy:
Export policies formulated by the Ministry of Commerce, GOB provide the overall guideline and incentives for promotion of exports in Bangladesh. Export policies also set out commodity-wise annual target. It has been decided to formulate these policies to cover a five-year period to make them contemporaneous with the five-year plans and to provide the policy regime. The export-oriented private sector, through their representative bodies and chambers are consulted in the formulation of export policies and are also represented in the various export promotion bodies set up by the government.
4.6.3 Export Incentives: A. Financial Incentives: Restructuring of Export Credit Guarantee Scheme; Convertibility of Taka in current account; Exporters can deposit 40% of FOB value of their export earnings in own accounts in dollar and pound sterling; Export Development Fund; Expansion of export credit period from 180 days to 270 days; 50% tax rebate on export earnings; Duty draw back; Bonded warehouse facilities to 100% export oriented firms; Duty free import of capital equipment for 100% export oriented firms;
B. General Incentives:
National Export Trophy to successful exporters; Training course on external trade; Arrangement of international trade fairs, commodity-based exhibitions in the country and participation in foreign trade fairs;
C. Other Incentives: Assistance in improvement of quality and packaging of exportable items; Simplification of export procedures;
4.6.4. Export Procedures: The import and export trade in our country are regulated by the Import and Export (Control) Act, 1950.Under the export policy of Bangladesh the exporter has to get valid Export registration Certificate (ERC) from Chief Controller of Import & Export (CCI&E). The ERC is required to renew every year. The ERC number is to incorporate on EXP forms and other papers connected with exports.
(a) Registration of Exporters: For obtaining ERC, intending Bangladeshi exporters are required to apply to the controller/ Joint Controller/ Deputy Controller/ Assistant Controller of Imports and Exports, Dhaka/ Chittagong/ Rajshahi/ Mymensingh/ Sylhet/ Comilla/ Barishal/ Bogra/ Rangpur/ Dinajpur in the prescribed form along with the following documents: Nationality and Assets Certificate; Memorandum and Article of Association and Certificate of Incorporation in case of Limited Company; Bank Certificate; Income Tax Certificate; Trade License etc.
(b) Securing the Order: After getting ERC Certificate the exporter may proceed to secure the export order. He can do this by contacting the buyers directly or through agent.
In this purpose the exporter may get help from: License Officer; Buyer’s Local Agent; Export Promoting Organization; Bangladesh Mission Abroad; Chamber of Commerce (local & foreign) Trade Fair etc.
(c) Signing the Contract: After communicating buyer, exporter has to get contracted (writing or oral) for exporting exportable items from Bangladesh detailing commodity, quantity, price, shipment, insurance and marks, inspection and arbitration etc.
(d) Receiving Letter of Credit: After getting contract for sale, exporter should ask the buyer for Letter of Credit (L/C) clearly stating terms and conditions of export and payment. The following are the main points to be looked into for receiving/ collecting export proceeds by means of Documentary Credit: (1) The terms of the L/C are in conformity with those of the contract; (2) The L/C is an irrevocable one, preferably confirmed by the advising bank; (3) The L/C allows sufficient time for shipment and negotiation. (Here the regulatory framework is UCPDC-500, ICC publication) Terms and conditions should be stated in the contract clearly in case of other mode of payment: •
Cash in advance;
•
Open account;
•
Collection basis (Documentary/ Clean)
(Here the regulatory framework is URC-525, ICC publication)
(e) Procuring the materials: After making the deal and on having the L/C opened in his favor, the next step for the exporter is to set about the task of procuring or manufacturing the contracted merchandise.
(f) Shipment of goods: Then the exporter should take the preparation for export arrangement for delivery of goods as per L/C and
incoterms,
prepare and submit shipping documents for
Payment/ Acceptance/ Negotiation in due time.
Documents for shipment: EXP form, ERC (valid), L/C copy, Customer Duty Certificate, Shipping Instruction, Transport Documents, Insurance Documents, Invoice, Other Documents, Bills of Exchange (if required) Certificate of Origin, Inspection Certificate, Quality Control Certificate, G.S.P. Certificate, Phyto-sanitary Certificate.
(g)Final Step: Submission of the documents to the Bank for negotiation.
4.6.5 Export Financing: Financing exports constitutes an important part of a bank’s activities. Exporters require financial services at four different stages of their export operation. During each of these phases exporters need different types of financial assistance depending on the nature of the export contract. Pre-shipment credit Post-shipment credit
A. Pre-shipment credit: Pre-shipment credit, as the name suggests, is given to finance the activities of an exporter prior to the actual shipment of the goods for export. The purpose of such credit is to meet working capital needs starting from the point of purchasing of raw materials to final shipment of goods for export to foreign country. Before allowing such credit to the exporters the bank takes into consideration about the credit worthiness, export performance of the exporters, together with all other necessary information required for sanctioning the credit in accordance with the existing rules and regulations. Preshipment credit is given for the following purposes: Cash for local procurement and meeting related expenses. Procuring and processing of goods for export. Packing and transporting of goods for export. Payment of insurance premium. Inspection fees. Freight charges etc.
An exporter can obtain credit facilities against lien on the irrevocable, confirmed and unrestricted export letter of credit in form of the followings: a) Export cash credit (Hypothecation) b) Export cash credit (Pledge) c) Export cash credit against trust receipt. d) Packing credit. e) Back to back letter of credit. f) Credit against Red-clause letter of credit.
(a) Export cash credit (Hypothecation): Under this arrangement, a credit is sanctioned against hypothecation of the raw materials or finished goods intended for export. Such facility is allowed to the first class exporters. As the bank has got no security in this case, except charge documents and lien on exports L/C or contract, bank normally insists on the exporter in furnishing collateral security. The letter of hypothecation creates a charge against merchandise in favor of the bank. But neither r the ownership nor the possession is passed to it.
(b) Export cash Credit (Pledge): Such Credit facility is allowed against pledge of exportable goods or raw materials. In this case cash credit facility is extended against pledge of goods to be stored in the godown under bank’s control by signing letter of pledge and other pledge documents. The exporter surrenders the physical possession of the goods under banks effective control as security for payment of bank dues. In the event of failure of the exporter to honor his commitment, the bank can sell the pledged merchandise for recovery the advance.
(c) Export Cash Credit Against Trust Receipt: In this case, credit limit is sanctioned against trust receipt (TR). Here also unlike pledge, the exportable goods remain in the custody of the exporter. He is required to execute a stamped export trust receipt in favor of the bank, he holds wherein a declaration is made that goods purchased with financial assistance of bank in trust for the bank. This type of credit is granted when the exporter wants to utilize the credit for processing, packing and rendering the goods in exportable condition and when it seems that exportable goods cannot be taken into bank’s custody. This facility is allowed only to the first class party and collateral security is generally obtained in this case.
(d) Packing Credit: Packing Credit is essentially a short-term advance granted by a Bank to an exporter for assisting him to buy, process, manufacture, pack and ships the goods. Generally for movement of goods from the hinterland areas to the ports of shipment the Banks provide interim facilities by way of Packing Credit. This type of credit is sanctioned for the transitional period starting from dispatch of goods till the negotiation of the export documents. Practically except for single transaction, most of the pre-shipment credits are allowed in the form of limits duly sanctioned by Bank in favor of regular exporters for a particular period. The drawings are required to be adjusted fully once within a period of 3 to 6 months. Suiting to the breed and nature of export, sometimes an exporter may also be allowed to avail a combined Cash Credit and Packing Credit limit with fixed ceiling on revolving basis. But in no case the borrower would be allowed to exceed individual credit limit fixed for the purpose. The drawings under Export Cash Credit limits are generally adjusted by the drawing in packing credit limit, which is, in turn liquidated by the negotiation of export documents.
Charge Documents for P.C. Banker should obtain the following charge documents duly stamped prior to disbursement: I)
Demand Promissory Note
ii)
Letter of Arrangement
iii)
Letter of Lien of Packing Credit (On special adhesive stamp)
iv)
Letter of Disbursement
v)
Packing Credit Letter
Additional Documents for P.C. a)
Letter of Partnership along with Registered Partnership Deed in case of Partnership Accounts.
b)
Resolution of the Board of Directors along with Memorandum & Articles of association in case of Accounts of Limited Companies. In case of Corporation, Resolution of the Board Meeting along with Charter.
c)
Personal Guarantee of all the Partners in case of Partnership Accounts and a=of all the Directors in case of Limited Companies.
(e) Back to Back Letter of Credit (BTB): Bangladesh is a developing country. After receiving order from the importer, very frequently exporters face problems of scarcity of raw material. Because some raw materials are not available in the country. These have to be collected from abroad. In that case, exporter gives lien of export L/C to bank as security and opens an L/C against it for importing raw materials. This L/C is called Back To Back L/C. In back to back L/C, PBL keeps no margin. Sometimes there is provision in the export L/C that the importer can use the certain portion of the export L/C amount for importing accessories that are necessary for the making of the product. Only in that case, BTB is opened.
Payment of Back to Back L/C: Client gives the payment of the BTB L/C after receiving the payment from the importers. But in some cases, client sells the bills to the PBL. But if there is discrepancy, the PBL sends it for collection.
In case of BTB L/C, PBL gives the payment to the beneficiary after receiving the payment from the L/C of the finished product (i.e. exporter). Bank gives the payment from DFC Account (Deposit Foreign Currency Account) where Dollar is deposited in national rate. For BTB L/C, opener has to pay interest at LIBOR rate (London Inter Bank Offering Rate). Generally LIBOR rate fluctuates from 5% to 7%.
A schedule named Payment Order; Forwarding Schedule is prepared while making the payment. This schedule is prepared when the payment of L/C is made. This schedule contains the followings: i.
Reference number of the beneficiary’s bank and date.
ii.
Beneficiary’s name.
iii.
Bill value.
iv.
Payment order number and date.
(f) Advance against Red-clause Letter of Credit: Under Red clause letter of credit, the opening bank authorizes the Advising Bank/Negotiating Bank to make advance to the beneficiary prior to shipment to enable him to procure and store the exportable goods in anticipation of his effecting the shipment and submitting a bill under the L/C. as the clause containing such authority is printed in red ink, the L/C is called Red clause and Green clause respectively. Though it is not prohibited, yet very rare in Bangladesh.
Post Shipment Credit: This type of credit refers to the credit facilities extended to the exporters by the banks after shipment of the goods against export documents. Necessity for such credit arises as the exporter cannot afford to wait for a long time for without paying manufacturers/suppliers. Before extending such credit, it is necessary on the part of banks to look into carefully the financial soundness of exporters and buyers as well as other relevant documents connected with the export in accordance with the rules and regulations in force. Banks in our country extend post shipment credit to the exporters through: a) Negotiation of documents under L/C; b) Foreign Documentary Bill Purchase (FDBP): c) Advances against Export Bills surrendered for collection;
(a) Negotiation of documents under L/C: The exporter presents the relative documents to the negotiating bank after the shipment of the goods. A slight deviation of the documents from those specified in the L/C may rise an excuse to the issuing bank to refuse the reimbursement of the payment already made by the negotiating bank. So the negotiating bank must be careful, prompt, systematic and indifferent while scrutinizing the documents relating to the export.
(b) Foreign Documentary Bill Purchase (FDBP): Sometimes the client submits the bill of export to bank for collection and payment of the BTB L/C. In that case, bank purchases the bill and collects the money from the exporter. PBL subtracts the amount of bill from BTB and gives the rest amount to the client in cash or by crediting his account or by the pay order. For this purpose, PBL maintains a separate register named FDBP Register. This register contains the following information: # Date # Reference number (FDBP) # Name of the drawee
# Name of the collecting bank # Conversion rate # Bill amount both in figure & in Taka. # Export form number # Export L/C number
(c) Advances against Export Bills surrendered for collection: Banks generally accept bills for collection of proceeds when they are not drawn under an L/C or when the documents, even though drawn against an L/C contain some discrepancies. Bills drawn under L/C, without any discrepancy in the documents, are generally negotiated by the bank and the exporter gets the money from the bank immediately. However, if the bill is not eligible for negotiation, the exporter may obtain advance from the bank against the security of export bill. In addition to the export bill, banks may ask for collateral security like a guarantee by a third party and equitable/registered mortgage of property.
4.6.6 Export Documents Checking: General verification: a) L/C restricted or not. b) Exporter submitted documents before expiry date of the credit. c) Shortage of documents etc. Particular verification: a) Each and every document should be verified with the L/C.
Cross verification: a) Verified one documents to another
After proper examination or checking of a described Export document banker may find following discrepancies: GENERAL: •
L/C over-drawn
•
Partial shipment or transshipment beyond L/C terms.
•
Late shipment
•
Late presentation
•
L/C expired
BILL OF EXCHANGE (B/E) •
Amount of B/E differ with Invoice.
•
Not drawn on L/C issuing Bank.
•
Not signed
•
Tenor of B/E not identical with L/C.
•
Full set not submitted.
COMMERCIAL INVOICE(C/I): •
Not issued by the Beneficiary.
•
Not signed by the Beneficiary.
•
Not made out in the name of the Applicant
•
Description, Price, quantity, sales terms of the goods not corresponds to
the
Credit. •
Not marked one fold as Original.
•
Shipping Mark differs with B/L & Packing List.
PACKING LIST: •
Gross Wt., Net Wt. & Measurement, Number of Cartoons/Packages differs with B/L.
•
Not market one fold as Original.
•
Not signed by the Beneficiary.
•
Shipping marks differ with B/L.
BILL OF LADING/AIRWAY BILL ETC (TRANSPORT DOCUMENTS): •
Full set of B/L not submitted.
•
B/L is not drawn or endorsed to the Order of Prime Bank Ltd.
•
“Shipped on Board”, “Freight Prepaid” or “Freight Collect” etc. notations are not marked on the B/L.
•
B/L not indicate the name and the capacity of the party i.e. carrier or master, on whose behalf the agent is signing the B/L.
•
Shipped on Board Notation not showing name of Pre-carriage vessel/intended vessel.
•
Shipped on Board Notation not showing port of loading and vessel name ( In case B/L indicates a place of receipt or taking in charge different from the port of loading).
•
Short Form B/L
•
Charter party B/L
•
Description of goods in B/L not agree with that of Invoice, B/E & P/L
•
Alterations in B/L not authenticated.
•
Loaded on Deck.
•
B/L bearing clauses or notations expressly declaring defective condition of the goods and/or the packages.
OTHERS: N.N. Documents not forwarded to buyers or forwarded beyond L/C terms. Inadequate number of Invoice, Packing List, B/L & Others submitted. Short shipment Certificate not submitted. While checking the export documents following things must be taken in consideration.
L/C terms: Each and every clause in the L/C must be complied with meticulously and ensure the following:
That the documents are not state;
That the documents are negotiated within the L/C validity,
That the documents value does not exceeds the L/C value.
Draft/Bill of Exchange: Draft is too examined as under:
Draft must be dated It must be made out in the name of the beneficiary’s bank or to be endorsed to the bank. The signature of the drawer must be verified by the negotiating bank. Amount must be tallied with the Invoice amount. It must be marked as drawn under L/C No……Dated…..Issued by………..Bank.
Invoice: It is to be scrutinized to ensure the following: The Invoice is addressed to the Importer The full description of merchandise must be given in the invoice strictly as per L/C. The price, quality, quantity, etc. must be as per L/C. The Invoice must be languaged in the language of L/C. No other charges are permissible in the Invoice beyond the stipulation on the L/C. The amount of draft and Invoice must be same and within the L/C value. If L/C calls for consular invoice, then the beneficiary’s invoice is not sufficient. Number of Invoice will be submitted as per L/C. The shipping mark and number of packing list shown in the B/L must be identical with those given in the Invoice and other documents. The Invoice value must not be less than the value declared in EXP Forms. Invoice amount must be correct on the basis of price, quantity as per L/C. Invoice amount, indicate sale terms/ Incoterms VIZ FOB, CFR, CIF etc.
OTHER DOCUMENTS:
Beneficiary statement, VISA/Export License issued by EPB, Certificate of Origin, Weight Certificate, Phyto sanitary Certificate, Packing List, and Inspection Certificate. Certificate of analysis, quality certificate, MCD duly signed and any other documents required by L/C each of these certificates/documents conform to the goods invoice and are relevant to L/C.
Negotiating Bank will check the above documents whether it is as per L/C or not. If Negotiating Bank finds everything in order or as per export L/C, bank will negotiate the document and will disburse the generated fund as per Banks norms. If the Negotiating Bank finds any discrepancies in the documents, they will send the documents on collection or they can negotiate under reserve by the request of the exporter or they can seek permission/Negotiation authority from issuing Bank to allow Negotiating Bank to Negotiate the documents despite the discrepancies. L/C issuing Bank will inform the matter to buyer, if the buyer accepts the discrepancies mentioned by Negotiating Bank, issuing bank will authorize the Negotiating bank to negotiate the discrepant documents.
4.6.7. Foreign Remittance Section: On March 24, 1994 Bangladesh Taka was declared convertible for Current account International Transaction. As a prelude to this wide-ranging reforms were made in the country’s foreign exchange regime to lay the ground for a market friendly environment to induce investment, growth and productivity. Following liberalization under convertibility, most remittances are now approved by the Authorized Dealers themselves on behalf of the Central Bank. Only a few remittances of special nature require Bangladesh Bank’s prior approval. Foreign remittance means remittance of foreign currencies from one place/persons to another place/person. In broad sense, foreign remittance includes all sale and purchase of foreign currencies on account of Import, Export, Travel and other purposes. However, specifically foreign remittance means sale & purchase of foreign currencies for the purposes other than export and import. As such, this chapter will not cover purchase & sale of foreign currencies on account of Import & Export of goods. All foreign remittance transactions are grouped into two broad categories- Outward remittance & Inward remittance.
4.6.8. Outward Remittance:
The term “Outward remittances” include not only remittance i.e. sale of foreign currency by TT. MT, Drafts, Traveler’s cheque but also includes payment against imports into Bangladesh & Local currency credited to Non-resident Taka Accounts of Foreign Banks or Convertible Taka Account.
4.6.9. Types of out ward form Two forms are used for Outward Remittance of foreign Currency such as: •
IMP FORM
•
T.M. FORM
IMP Form
: All outward remittance on account of Imports is done by form IMP.
T.M. Form
: For all other outward remittances form T.M. is used.
(a) Private Remittance: 1. Family remittance facility: a) Foreign Nationals working in Bangladesh with approval of the Government may remit through an Authorized Dealer 50% of Salary and 100% of leave salary as also actual savings and admissible person benefits. No prior approval of Bank is necessary for such remittance. b) Remittance of moderate amounts of foreign exchange for maintenance abroad of family
members (spouse, children, parents) of Bangladesh Nationals are allowed
by Bangladesh
Bank on written request supported by certificate from the
Bangladesh Mission in the concerned country.
2. Remittance of Membership fees/registration fees etc. Authorized Dealer may remit without prior approval of Bangladesh Bank, membership fees of foreign professional and scientific institutions and fees for application registration, admission, examination (TOEFL, SAT etc.) in connection with admission into foreign educational institutions on the basis of written application supported by demand notice/letter of the concerned institution.
3. Education:
Prior permission of Bangladesh Bank is not required for releasing foreign exchange in favor/on behalf of Bangladesh students studying abroad or willing to proceeds abroad for studies. Authorized Dealers shall allow exchange facilities for this purpose according to the following drill:
•
Application duly filled in by the student as per prescribed format of Bangladesh
Bank. •
Original and photocopy of admission letter issued by the concerned institution in
favor of the student. •
Original and photocopy of estimate relating to annual tuition fee, board and
lodging incidental expenses etc. issued by the concerned institutions. •
Attested copies of educational certificates of the applicant and
•
Valid passport.
4. Remittance of Consular Fees: Consular fees collected by foreign embassies in Bangladesh Taka and deposited in a Taka Account maintained with an AD solely for this purpose may be remitted abroad without prior approval of Bangladesh Bank.
5. Remittance of evaluation fee: Authorized Dealers without prior approval of Bangladesh Bank may remit evaluation fee on behalf of Bangladeshis desiring immigration to foreign countries for getting educational certificates of the person concerned evaluated by a foreign institution. A demand note of the foreign immigration authority is required for this purpose.
6. Travel: Private travel quota entitlement of Bangladesh Nationals is set at US$3000/- per year for visit to countries other than SAARC member countries and Myanmar, Quota for SAARC member countries and Myanmar is US$1000/- for travel by air and US$500/for travel by overland route. Authorized Dealers may release this travel quota in the form of foreign currency notes up to US$500/- or equivalent and balance exchange in the form of TCs or total quota in the form of TCs the annual quotas mentioned above are for adult passengers. Fore minors (Below 12 year in age) the applicable quota will be half the amount allowable to adults. Authorized Dealers may release above travel quota without prior approval of Bangladesh Bank subject to observation and satisfaction of following pointsi) The intending traveler is a customer of the AD bank or is sufficiently well known to the AD Bank or the intending traveler has paid relevant Travel Tax. The intending traveler has a valid passport. ii) The AD should verify and satisfy itself that any foreign exchange released for an earlier travel was utilized with his journey being actually undertaken or was duly encashed unutilized.
iii) The intending traveler is in possession of confirmed air ticket for journey to be undertaken and that the intended journey to be undertaken not later than two weeks after the date on which exchange is issued. iv) The amount releases is endorsed on the passport and air ticket of the traveler with indelible ink, with the signature and the name of the AD branch embossed in the passport and ticket However, while issuing foreign exchange to the Diplomats/ privileged persons/ UN personnel, Govt. Officials traveling on officials’ duties, such endorsement in the passports need not be made. v) in each case of release of foreign exchange for travel abroad, photocopies of first six pages of the passport and the page recording endorsement of foreign exchange and photocopies of the pages of ticket showing name of the passenger, route and date of journey and endorsement of foreign exchange along with the relative T.M. form should be sent to Bangladesh Bank along with monthly returns.
7. Health & Medical: Authorized Dealers without prior approval of Bangladesh Bank may release foreign exchange up to US$10,000/- for medical treatment abroad on the basis of the recommendation of the medical Board set up the Head Directorate and the cost estimate of the foreign medical institution.
8. Seminars & workshops: Without prior approval of Bangladesh Bank AD may release US$200/- per diem and US$250/- per diem to the private sector participants for attending seminars, conferences and workshops organized by recognized International bodies in SAARC member countries or Myanmar and in other countries respectively for the actual period of the seminar/workshop/conference to be held on this basis of invitation letters received in the names of the application or their employer institutional.
9. Foreign Nationals: i) The Authorized Dealers may issue foreign currency TCs to foreign nationals without any limit and foreign currency notes up to US$300/- or equivalent per person against surrender of equivalents amounts in foreign currencies. The TCs and foreign currency notes should however, be delivered only on production of ticket for a destination outside Bangladesh and the amount issued should be endorsed on the relative passports. ii) Authorized Dealers may allow reconversion of unspent Taka funds of foreign tourists into foreign exchange on production of the encashment certificate of foreign currency. Reconversion shall be allowed by the same AD with which the foreign currency was encashed earlier. AD should retain the original encashment certificate and relative FMJ forms where reconversion exceeds US$5000/-.
10.Remittance for Hajj: Authorized Dealers may release foreign exchange to the intending pilgrims for performing Hajj as per instructions/circulars to be issued by the Bangladesh Bank each year.
11. Other Private remittance: Applications for remittances by private individuals for purposes other than those mentioned above should be forwarded to Bangladesh Bank for consideration & approval after assessing the bonafides of the purpose of remittance on the basis of documentary evidence submitted by the applicant. (b)Official & Business Travel: 1. Official Visit: For official or semi officials visits abroad by the officials of govt., Autonomous/Semiautonomous institutions etc., Authorized Dealers may release foreign exchange as per entitlements fixed by the Ministry of Finance from time to time, In such cases, the applicant for foreign exchange shall be required to submit the sanction letter and the competent authority’s Order/Notification/Circular authorizing the travel.
2. Business Travel Quota for New Exporters: Up to US$6,000/- or equivalent may be issued by an AD without prior approval of Bangladesh Bank to a new exporter for business travel abroad, against recommendation letter from Export Promotion Bureau, Bonafide requirement beyond US$6000/- is accommodated by Bangladesh Bank upon written request through an AD with supporting documents.
3. Business Travel Quota for Importers and Non-exporting producers: I) Subject to annual upper limit of US$5000/- importers are entitled to a business travel quota @ 1% of their imports settled during the previous financial year. ii) Subject to annual upper limit of US$5000/- non exporting producers for the local markets are entitled to a business travel quota @1% of their turnover of the proceeding financial year as declared in their tax returns.
The same business organization engaged in imports as well as production shall however; draw business travel quota entitlement only on one count.
4. Exporters’ Retention Quota: I) Merchandise exporters may retain up to 40% of realized FOB value of their exports in foreign currency accounts. However, for exports of goods having accounts. However, for exports of goods having high import content (such as readymade garments, POL products including naphtha, furnace oil bitumen, electronic goods etc.,) the retention quota is 7.5% of the repatriated FOB value. Funds from these accounts can be used to meet bonafide business expenditure, such as business visits abroad, participation in export fairs and seminars, establishment and maintenance of office abroad, import of raw materials, machinery and spares etc. without prior approval of Bangladesh Bank. Exporters may at their option, retain the foreign currency in interest bearing renewable term deposit accounts with Authorized Dealers in US Dollar, Pound Sterling DM or Japanese Yen with a minimum account of US$2000 or Pound 1500/ii) Service exporters (excluding indenting commission or agency commission of indenting house of buying house respectively) may retain 5% of their repatriated income in foreign currency accounts or as renewable time deposits with Authorized Dealers, Funds from these accounts can be used to meet expenses for bonafide business travel abroad.
(c) Commercial Remittances: 1. Opening of branches or subsidiary companies abroad:
Remittance of upto US$30,000/- or equivalent per annum may be released by the Authorized Dealers without prior approval of Bangladesh Bank to meet current expenses of offices/branches opened abroad by resident in Bangladesh or Commercial/Industrial concern incorporated in Bangladesh. Such remittance may only be made in the names of concerned offices/subsidiary companies abroad subject top examination of following papers:I) Approval letter of the competent authority of the country concerned for opening the office in that country copy of report submitted to Bangladesh banks, as per prescribed format, within one month of opening of foreign branches/subsidiaries. Before effecting remittances for subsequent years the Authorized Dealers shall verify the renewed lease agreement (if applicable and shall satisfy itself about the actual necessity of remitting funds by examining the actual and/or estimated incomes and expenses of the offices/subsidiaries abroad as revealed from the its audited accounts and the other papers/vouchers.
2. Remittance by shipping companies airlines & courier service: Foreign Shipping Companies, airlines and courier service companies may send, through an AD, funds collected in Bangladesh towards freight and passage after adjustment of local cost & Taxes, if any without prior approval of Bangladesh Bank.
3. Remittance of Royalty and technical fees: No prior permission of the Bangladesh Bank of BOI is required by the enterprises for entering into agreement involving remittance of royalty, technical know-how or technical assistance fees, operational services fees, marketing commission etc., if the total fees and other expenses connected with technology transfer do not exceed. a)
6% of the cost of imported machinery in case of new projects.
b)
6% of the previous year’s sales as declared in the income tax returns of the
ongoing concerns.
The Authorized Dealers may remit such royalty and other fees without prior approval of Bangladesh Bank. Royalty and other fees beyond the rate mentioned above may be remitted by the Authorized Dealers without prior approval of Bangladesh bank provided specific approval of BOI has been obtained by the applicant company.
4. Remittance on account of training & consultancy. Industrial enterprises producing for local market may remit through Authorized Dealers upto 1% of their annual sales as declared in their previous years’ tax return for the purpose of training and consultancy services as per relevant contract with the foreign trainer/consultant, without prior approval of Bangladesh Bank.
5. Remittance of profits of foreign firms/branches: Authorized Dealers may without prior Bangladesh Bank approval remit abroad the post tax profits of branches of foreign firms and companies including foreign banks & other financial institutions subject to submission of relevant documents/information along with the application.
6. Remittance of Dividend: Prior permission of Bangladesh Bank is not required fori) Remittance of dividend income to non-resident shareholders on receipt of application in the prescribe form from the companies concerned. ii) Remittance of dividend declared out of previous years’ accumulated reserves.
7. Subscriptions to foreign media services:
On application from the local newspapers, Authorized Dealers may remit foreign exchange towards cost of subscription of news items, features, articles of foreign news agencies subject to submission of (I) contracts entered into between the applicant and the foreign news agency and (ii) NOC of the Ministry of Information.
8. Costs/ for Reuter monitors: Authorized Dealers may remit abroad costs/fees on account of their own subscription to foreign media services such as Reuter monitor service, without prior approval of Bangladesh Bank.
9. Advertisement of Bangladeshi Products in mass media abroad: Prior permission of Bangladesh is not required by the Authorized Dealers for remittance of charges for advertisement of Bangladeshi commodities in mass media abroad subject to submission of Invoice from the concerned foreign mass media along with the applications of the remitter. The applicant will have to submit copy of the advertisement to the Ad within one month of this issuance.
10. Bank Charges: The Authorized Dealers may affect remittances towards settlement of dues to foreign banks of bank charges, cost of cables and other incidental charges arising in their normal course of the business without prior approval of Bangladesh Bank.
4.6.10. Inward remittance: The term” Inward Remittance” includes not only purchase of Foreign Currency by TT, MT, Drafts etc. but also purchases of bills, purchases of Traveler’s cheques.
4.6.11. Types of inward form: Two forms as prescribed by Bangladesh Bank are used for purchase of Foreign Currencies such as. a) EXP form b) Form C EXP Form: Remittances received against exports of goods from Bangladesh are done by
form
EXP. SForm C: Inward remittances equivalent to US$2000/- and above are done by Form” C” . However, declaration in Form C is not required in case of remittances by Bangladesh Nationals working abroad.
Utmost care should be taken while purchasing Currency Notes, Travelers cheque, Demand Draft & similar Instrument for protecting the bank from probable loss as well as safety of the Bank officials concerned.
1. Purchase of Currency Notes, Travelers cheques, Drafts etc. Following
General
observations
are
required
in
addition
to
common
judgment/intelligent /vigilance of the dealing officers: i) Currency notes to be checked very carefully so as to avoid risk of purchasing counter fiet Notes. ii) While purchasing Travellers cheque signature of the holder to be obtained on the TC/s in front of the Bank officials and should be verified with the signature of the holder already given at the time of issuance of T.Cs, iii) Drafts should not be purchased under any circumstances unless the holder is a regular/valued customer of the bank. Indemnity Bond to be obtained for revering the amount paid in advance to the holder in case of dishonor of the instrument. iv) Private Chqeue should not be purchased under any circumstance without prior approval of Head Office. 2. Dealing in Foreign Currency Notes & Coins: Only Authorized Dealers and Authorized Money Changer are permitted to deal in foreign currency notes & coins Authorized Dealers and Money Changers may freely buy foreign currency from incoming passengers regardless of nationality and regardless of whether or not a declaration on form FMJ is produced at the time of encashment. If this form is produced, the amount encashed should be endorsed on it.
The Authorized Dealers may also purchase foreign currency notes, coins and other travel instruments freely from Authorized Money changers without production of Form FMJ.
3. Disposal of Foreign Currency notes. /Coins & others by Incoming passengers: Incoming passengers may bring in any amount of foreign exchange with declaration FMC at the time of arrival. No declaration is necessary for amounts upto US$5000/- for non residents, the entire amount brought in with declaration or upto US$5000/- brought in without declaration may be freely taken out at the time of departure or may deposit the amount in F.C Account subject to submission of form FMJ for excess of US$5000.or equivalent. An incoming person, who is ordinarily resident in Bangladesh (I) may retain foreign exchange upto US$5000/- or equivalent brought in without declaration or (ii) take-out the same freely at the time of departure form Bangladesh without endorsement in passport and air ticket concerned.
(ii) deposit the amount in RFCD account of the person
4.6.12. Miscellaneous Services Given by this Department:
Student File
Students who are desirous to study abroad can open file in the bank. By opening this file, bank assures the remittance of funds in abroad for study. ‘Non –resident Investors’ Taka Account is an account by which Non-
NRIT
resident Bangladeshi can deposit foreign currency for investment in
Account
security of stock exchanges. For such accountholders, 5% of primary shares are reserved.
F.C. Account
Foreign Currency accounts are opened in the names of Bangladeshi nationals or persons of Bangladeshi origin working or self-employed in abroad and are maintained as long as the account holders’ desire. Stands for Non-resident Foreign Currency Deposit
NFCD
Eligible persons may open such accounts even after their return to Bangladesh, within six months of their arrival. Stands for Resident Foreign Currency Accounts
RFCD
Persons ordinarily resident in Bangladesh may maintain foreign currency
Accounts
accounts with foreign exchange brought in at the time of their return to Bangladesh from visit abroad. Balance of such accounts is freely remittable to abroad.
4.7. Treasury Division (TD): Treasury is considered to be an important division for income generation purpose within the head office. The treasury of PBL continues to efficiently manage bank’s cash flow. It optimizes the investment of the bank’s excess liquidity. Treasury is also expected to provide quality services and products to meet the demand of the customer needs and play a major role in raising bank’s income.
4.8. Information Technology Division (ITD):
This division operates and keeps the record of all transactions, assets, liabilities of PBL by using integrated software. Though the technology of PBL is not advanced, the computer division tries to provide the following functions:
Supply and installation of computer as per requirement
Design software to support accounts operation
Train the officers and employees about the operation of different software
Updating the software if there is any lagging in its operation.
4.9. Marketing Division: There are two types of marketing division. These are: Asset Marketing: It refers to various kinds of loan and advances. This division maintains communication with corporate clients gives incentive to take loan from PBL and approaches them to borrow from PBL in profitable projects Liability Marketing: This refers to marketing for collecting funds through buying of depository products from large depositors. The division communicates to the persons or organization having excess fund of deposit, informs them about the attractive features of the depository products and convince them to invest in PBL in various deposit scheme.
4.10. Human Resources Division (HRD): The Human Resource Division performs the activities related to administration and personnel. The main functions of HRD are:
Selection and recruitment of new personnel
Appropriate placement of human resources
Maintain the detail about transfer, promotion and leave of personnel
Training and development of human resource
Keeping employee records and personal file
Taking disciplinary action if necessary
4.11. Credit Card Division (CCD): In 1999, PBL obtained the membership of Master Card and a separate division has been assigned to look after the credit card operation. There are four types of credit card, Local Silver Credit Card, International Silver Credit Card, Local Gold Credit Card, International Gold Credit Card.
4.12. Research and Development (R&D): This division is maintained to do the research and development work to innovate new products and services as well as to improve existing products and services.
4.13. Committee Functioning Division (CFD):
Prime Bank Ltd. has both democratic and consultative decision making process. The subordinates are given chance to participate in the goal and objective setting of the bank. In this regard, there are three committees functioning in the bank. These are:
Policy Committee: In this case, the committee members are drawn from the Board of Directors. The committee reviews the principles, policies, rules and gives a decision which later requires the approval of the Board.
Executive Committee: This committee consists of the members of the Board. To approve the matters beyond the delegation of the board, this committee exercises the power delegated by the Board from time to time.
Management Committee: This committee consists of the Managing Directors and Head Office Executives. They discuss about the progress and improvement on the guidelines regarding deposit, loans, gives different ideas, decision regarding various issues.
4.14. Concluding Note: These are the overall functional areas of PBL which offers the overall banking services to the customers in different ways to be the number one bank in the country.
CHAPTER – V General Banking Services of Prime Bank Limited
5.1. Introduction: When I decided to perform as an intern and selected by PBL, I had been placed in the General Banking Department for whole time of my internee. Several activities are performed here. I have prepared this report based on this department. So this is the core part of this report.
5.2. Area of Operations: General Banking department performs the majority functions of a bank. It is the core department of PBL like other commercial banks. In fact, bank operates with the people’s money. And this process starts with the General Banking Department. The activities of the General Banking Department of PBL are mainly divided into the following categories: Account Opening Section, Local Remittance Section, Online Branch Banking Section, One Stop Utility Services Section, Deposit Schemes Section, Clearing Section, Collection Section, Cash Section, Accounts Section,
5.3. Account Opening Section: To establish a Banker and customer relationship Account opening is the first step. Opening of an account binds the Banker and customer into contractual relationship. But selection of customer for opening an account is very crucial for a Bank. Indeed, fraud and forgery of all kinds start by opening account. So, the Bank takes extremely cautious measure in its selection of customers.
5.3.1. Types of Account: •
Current Account.
•
Savings Account.
•
Fixed Deposit Account.
5.3.2 Procedure to open an Account: •
For opening an account, at first the prospective account holder will apply for opening an account by filling up account opening form. Account opening form consists of the name of the branch, type of account, name of the applicant(s), present address, permanent address, passport number (if any), date of birth, nationality, occupation, nominee(s), special instruction (if any), initial deposit, specimen signature(s) of the applicant(s), introducer’s information etc.
•
The prospective customer should be properly introduced by the followings: i. An existing customer of the bank. ii. Officials of the bank not below the rank of Assistant Officer. iii. A respectable person of the locality who is well known to the Manager or authorized officer.
•
Two copies of passport size photograph duly attested by the introducer.
•
Signature of the prospective account holder in the account opening form and on the specimen signature card duly attested by the introducer.
•
Then the concerned authority will allocate a number for the new account.
•
The customer then deposit the “initial deposit” by filling up a deposit slips. Initial deposit to open a current account in PBL is Tk. 1000.00 and saving account is Tk. 100.00.
After depositing the initial deposit, the account is considered to be opened. PBL maintains all of its accounts in computer. After depositing the initial deposit, PBL records it in the computer by giving new account number. Then it issues cheque book requisition slip by the customer. Then it distributes all relevant papers to respective department.
5.3.3. Activities and Papers Necessary for Opening an Account: (A) Joint Account: If the account is a joint account, then the joint account holder should submit a declaration and operational instructions of the account along with their signature. The declaration is “Any balance to the credit of the account is and shall be owned by us as joint depositors. Any liability whatsoever incurred in respect of this account shall be joint and several.” (B) Partnership firm: The following documents have to be submitted for preparing an account of a partnership firm: •
Partnership deed.
•
(a) If the partnership firm is a registered one, then one copy of registration forms. (b) If not, then a copy of certificate from the notary public.
(C) Limited Company: For the opening of an account of a limited company, following documents have to be submitted:
•
A copy of resolution of the company that the company decided to open an account in the Prime Bank.
•
Certified true copy of the Memorandum & Articles of Association of the Company.
•
Certificate of Incorporation of the company for inspection and return along with a duly certified Photocopy for Bank’s records.
•
Certificate from the Registrar of Joint Stock Companies that the company is entitled to commence business (in case of Public Ltd. Co.
For
inspection and return) along with a duly certified Photocopy for Bank’s records. •
Latest copy of balance sheet.
•
Extract of Resolution of the Board/General Meeting of the company for opening the account and authorization for its operation duly certified by the Chairman/Managing Director of the company.
•
vii) List of Directors with address (a latest certified copy of Form-XII)
(D) Club/Society: Following documents have to be obtained in case of the account of the club or society: •
Up to date list of office bearers.
•
Certified copy of Resolution for opening and operation of account.
•
Certified copy of Byelaw and Regulations/Constitution.
•
Copy of Government Approval (if registered).
(E) Cooperative Society:
Following documents have to be obtained in case of the account of Cooperative Society: •
Copy of Bye-Law duly certified by the Co-operative Officer.
•
Up to date list of office bearers.
•
Resolution of the Executive Committee as regard of the account.
•
Certified copy of Certificate of Registration issued by the registrar, Cooperative societies.
(F)
Non-Govt. College / School / Madrasha / Muktab:
Following documents have to be obtained in case of the account of non-govt. college / school / madrasha / muktab: •
Up-to-date list of Governing Body/Managing Committee.
•
Copy of Resolution of the Governing Body/Managing Committee authorising opening and operation of the account duly certified by Gazetted Officer.
(G) Trustee Board: Following documents have to be obtained in case of the account of trustee board: •
Prior approval of the Head Office of PBL.
•
Certified copy of Deed of Trust, up to date list of members of the Trustee Board and certified copy of the Resolution of Trustee Board to open and operate the account.
(H) Minor’s Account: Following documents have to be obtained in case of the account of minor: •
Putting the word “MINOR” after the title of the account.
•
Recording of the special instruction of operation of the account.
•
The AOF is to be filled in and signed by either the parents or the legal
guardian appointed by the court of law and not by the minor.
5.4. Local Remittance: Local remittance is one of the main components of general banking. The activities of local remittance are --i.
Telegraphic Transfer,
ii.
Demand Draft issue,
iii.
Pay order.
5.4.1. Telegraphic Transfer (TT): It is an order from the issuing branch to the drawer bank / branch for payment of a certain sum of money to the beneficiary. The payment instruction is sent by telex and funds are paid to the beneficiary through his account maintained with the drawee branch or through a pay order if no account is maintained with the drawee branch.
Procedure of issuing TT: Following procedures are followed while issuing of TT:
The applicant fills up the relevant parts of the prescribed application form in triplicate, duly signed the same and gives it to the GB.
GB will fill up the commission part for bank’s use and request the applicant to deposit necessary cash or cheque at the cash booth.
GB will prepare telex in appropriate form, sign it and send it to the telex operator for transmission of the message.
GB will prepare necessary advice. Debit advice is sent to the client if client’s account is debited for the amount of T.T.
T.T. Confirmation Advice is sent to the drawer branch.
Credit Ticket (second copy of the application form) is used to credit the PBL General Account.
The first copy of the application form will be treated as Debit Ticket while the second copy will be treated as Credit Ticket. The third copy will be handed over to the applicant as customer’s copy.
Accounting Treatment: For telegraphic transfer, PBL gives the following entries--Client’s Account
.Dr.
Prime General Account…….. .Cr. Telex Account………………. Cr. Commission Account……….. Cr.
Payment of T.T. On receipt of T.T. payment instructions the following entries are passed by the drawee branch if the T.T. is found to be correct on verification of the Test number— a) Prime General Account
Dr.
DAD Account – TT Payable……... Cr.
b) DAD Account – TT Payable
Dr.
Client’s Account/Pay Order……….. Cr.
In case the beneficiary does not maintain any account with the drawee branch a pay order will be issued in favor of the payee and sent to his banker / local address as the case may be. Every branch maintains a prescribed T.T. Payable Register. All the particulars of T.T. are to be properly recorded in this register duly authenticated. A separate Type of T.T. confirmation advice is sent to the drawee branch on the same day. On receipt of T.T. confirmation advice, the particulars of T.T. are verified with reference to particulars already recorded in the T.T. payable register.
5.4.2. Demand Draft (DD): Sometimes customers use demand draft for the transfer of money from one place to another. For getting a demand draft, customer has to fill up an application form. The form contains date, name and address of the applicant, signature of the applicant, cheque number (if cheque is given for issuing the DD), draft number, name of the payee, name of the branch on which the DD will be drawn and the amount of the DD. The form will be duly signed by the applicant and by the authorized officer. PBL charges .15% commission on the face value of DD as service charge.
Process of issuing Local Draft: Following procedures are followed while issuing local draft—
Get the application form properly filled up and signed by the applicant.
Complete the lower portion of the form for the bank’s use.
Calculate the total amount including the bank’s commission.
If the cheque is presented for the local draft, the officer should get the cheque duly passed for payment by the authorized person and record the particulars of local draft on the back of the cheque.
If the client wants to debit his account for the payment of the draft amount, the officer should get the account holder’s signature verified properly, from signature card on record of the branch and debit clients account for the total amount including commission.
The first copy of the application form will be treated as Debit Ticket while the second copy will be treated as Credit Ticket and kept by the GB. The third copy is handed over to the applicant as customer’s copy.
The GB Department maintains a prescribed L.D. Issue Register. All the required particulars of LDs issued by PBL should be entered in that register duly authenticated.
Issue of Duplicate Draft: Duplicate Draft is not normally issued unless getting of satisfactory evidence is produced regarding loss of the draft. If the L.D. is reported to be lost or stolen, the issuing branch on receipt of a written request from the purchaser may issue a duplicate draft.
Before issuing duplicate L.D. the branch should observe the followings—
i)
Verify the purchaser’s signature on the request letter from the signature appearing on the original application form.
ii)
Immediately issue a stop payment instruction to the drawee branch under advice of head office and obtain confirmation of non-payment the L.D. in acquisition.
iii)
After the drawee branch has acknowledged the stop payment order and confirmed that the local draft in acquisition remains unpaid at their end, the issuing branch should obtain an Indemnity Bond on stamp paper as per prescribed format from the purchaser duly signed by him. The branch will thereafter write to head office for their approval to issue a duplicate draft.
iv)
The head office on receipt of the request from the issuing branch will immediately issue a caution circular to all the branches regarding the lost of the local draft asking them to record stop payment.
v)
The head office will thereafter issue clearance to the issuing branch for issuing for issuing a duplicate draft in lieu of original reported lost.
vi)
On receipt of the clearance from head office, the issuing branch will issue a completely fresh draft marking clearly the words duplicate issued in lieu of original draft no………………. dated …………….in bold letters on the top of the front page of the draft. The printed serial number on the draft should not however be struck off. Intimation should be given to the drawee branch furnishing full particulars of the duplicate draft.
vii)
The particulars of the duplicate draft must resemble those of the original draft in all respects, i.e., all the particulars to the duplicate draft must be identical with those in the original draft. No further IBCA is to be issued for the duplicate draft.
viii)
Prescribed duplicate issuance charge is to be recovered for issuing the duplicate draft and credited to “Income Account”.
Cancellation of Local Draft: The followings are followed while canceling a L.D.—
The purchaser should submit a written request for cancellation of the L.D. attaching therewith the original L.D.
The signature of the purchaser will have to be verified from the original application form.
Manager’s prior permission is to be obtained before refunding the amount of draft.
ďƒ˜
Cancellation charge is to be recovered from the applicant and only the amount of the draft less cancellation charge should be refunded. Commission charge, posted charge etc. recovered for issuing the L.D. should not be refunded.
ďƒ˜
The original entries are to be reversed giving proper narration. An IBDA for the cancelled L.D. should be issued on the drawee branch.
ďƒ˜
Cancellation of L.D. should also be recorded in the L.D. Issue Register.
Payment of L.D.: While payment of L.D. PBL performs the following functions— i)
On receipt of Credit Advice (IBCA) from the issuing branch the following entries are to be passed – Prime General Account
Dr.
DAD Account………. Cr. ii)
When L.D. is presented for payment at the paying branch, its details are to be carefully examined with reference to the following points— a)
Whether the draft is drawn on the Local office.
b)
Whether the draft is crossed or not. Amount of crossed draft is not paid in cash to the payee but to be paid to his account with a bank.
c)
Draft must have to be signed by two authorized officers of the issuing branch. Their signatures are to be verified from the specimen signature book for being sure that draft that the draft is genuine. The verifier should put his initial.
d)
Endorsement on the back of the draft must be regular in case the draft is presented through clearing.
e)
The amount of the draft should not exceed the amount written in red ink at the top of the draft.
f)
The payee is to be properly identified in case of cash payment.
g)
The particulars of the draft i.e. the draft number, date, amount and the name of the payee should be verified from the L.D. Payable Register.
iii)
In case of payment, the draft should be cancelled with red ink. The date of payment should be recorded in the L.D. Payable Register.
Accounting Treatment: While payment: DAD –L.D. Payable Account……………..
Dr.
Client’s Account…………………………..
Cr.
An IBCA should be sent with this.
Stop payment of Local Draft: The payee or purchaser of the draft cannot give stop payment instruction to the drawee branch. If the paying branch receives a request from the purchaser of the draft for stopping payment of the draft, it will ask the purchaser to approach the issuing branch about the purpose. The paying branch should however exercise necessary precaution in this regard. Only the issuing branch can issue instruction for stop payment of the draft under special circumstances.
5.4.3. Pay Order (PO): For issuing a pay order, the client is to submit an application to GB in the prescribed form. This form should be properly filled up and signed. For issuing pay order PBL charges commission on the following rate—
# For Tk. 1 to 10,000, the commission is Tk.10. # For Tk. 10,001 to 1,00,000, the commission s Tk. 15. # For Tk 1,00,001 to 5,00,000, the commission is Tk. 50. # For Tk 5,00,001 to 10,00,000, the commission is Tk. 75.
Payment of Pay Order: The pay order is presented to the bank either through clearance or for credit to the client’s account. While payment, relative entry is given in the pay order register with the date of payment.
Cancellation of Pay Order: The following procedures should be followed for the cancellation of the pay order:
The client should submit a written request for canceling the pay order attaching therewith the original pay order.
The signature of the purchaser will have to be verified from the original application form.
Manager’s prior permission is to be obtained before refunding the amount of the pay order.
Cancellation charge is to be recovered from the applicant and only the amount of the pay order less cancellation charge should be refunded. Commission recorded for issuing of the original pay order should not be refunded.
Then the officer should write “cancelled” on the pay order
The original entries should be reversed with narration.
Cancellation of the pay order should also be recorded in the register.
5.5. Online Branch Banking Section: 5.5.1. Prime Line: The Bank has set up a Wide Area Network (WAN) across the country to provide Online Branch Banking facility to its valued clients. Under the Scheme, clients of any branch shall be able to do banking transaction at other branches of the bank. Under this system a client will to be able to do following type of transactions:
Cash withdrawal from his/her account at any branch of the Bank irrespective of location.
Cash deposit in his/her account at any branch of the Bank irrespective of location.
Cash deposit in other's account at any branch of the Bank irrespective of location.
Transfer of money from his/her account with any branch of the Bank.
Any amount can be deposited or transferred under Prime Line. In the system, however, at present there is a limit for cash withdrawal through bearer or by account holder himself.
5.5.2. Requirement of Prime Line service: The Clients who has account in prime bank or who will open account in prime bank and would be interested to maintain substantial deposits in Savings, Current or STD accounts, will be eligible to get Prime Line Service. Intending and eligible clients have to apply in prescribed application form to the branch to get the online service from the bank. The client should submit two copies photographs and signature cards along with the application form. To avail the Prime Line service, no charge should be paid for online transaction within a locality where the account is domiciled. But charges should be paid by the customer for inter city online transaction.
Online Transaction Membership Fee:
Membership fee of Tk. 50/- per month for the Online Branch Banking Service.
5.5.3. Transaction Limit: 1.
Maximum ceiling of cash withdrawal by self is Tk. 5,00,000/- (five lac) only per transaction.
2.
Maximum ceiling of cash withdrawal by third party (bearer) per transaction is below Tk............... Only (Account holder will determine the amount).
3.
Cash deposit/transfer by online transaction is unlimited. But as per central bank regulation, a Cash Transaction Report is prepared for all transaction over Tk 5.00 lac (Taka Five Lac).
5.5.4. Charges for Online Transaction: 01. There will be no charge for transaction within the city where the account is domiciled. 02. Fee Tk. 50/- will be realized from the customer’s account for each remote transaction (inter-city) for amount up to Tk. 1, 00,000 (one lac). 03. Fee at the rate of 0.075% will be realized from the customer’s account for each remote transaction of amount more than Tk. 1,00,000 (one lac).
5.6. Deposit Schemes of Prime Bank Limited: Bank is the largest organization of mobilizing surplus domestic savings. For poverty alleviation, we need self-employment, for self-employment we need investment and for investment we need savings. In the other words, savings help capital formations and the capital formations help investments in the country. The investment in its turn helps industrialization leading towards creation of wealth of the country. And the wealth finally takes the country on road to progress and prosperity. As such, savings is considered the very basis of prosperity of the country. The more the growth of savings, the more will be the prosperity of the nation. The savings rate in Bangladesh is one of the lowest in the world rate of domestic saving being 17.78 %. In order to improve the savings rate, Financial Institutions responsible for mobilization of savings should offer attractive Savings Schemes so that the marginal
propensity to save increases. The savings do not, of course, depend only on the quantum of income but largely depend on the habit of savings of the people.
PBL has formulated the following Savings Schemes: Contributory Savings Scheme, Monthly Benefit Deposit Scheme, Special Deposit Scheme, Education Savings Scheme, Fixed Deposit Scheme, Prime Bank Money Scheme, Prime Bank Insured Fixed Deposit Scheme.
5.6.1. Contributory Savings Scheme: This is a Savings Scheme in which a person gets the opportunity to build up savings by contributing monthly instalments and receives an attractive fixed amount at the end of a specified term. The Scheme is designed to help the fixed income group to save money.
The salient Features of the Scheme are given below:
The size of the monthly instalment starts with Tk. 500/- and multiplies of Tk. 1000/- up to Tk. 25000
The term of saving shall be for 5 years.
A lump sum amount shall be paid to the depositor after maturity of respective terms of savings as per the following table:
Monthly deposit size
Terminal value after 5 Monthly pension for
500 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 11000 12000 13000 14000 15000 16000 17000 18000 19000 20000 21000 22000 23000 24000 25000
years 40000 80000 160000 240000 320000 401000 481000 561000 641000 722000 802000 882000 962000 1043000 1123000 1203000 1283000 1364000 1444000 1524000 1604000 1685000 1765000 1845000 1925000 2006000
next 5 Years 870 1739 3457 5186 6915 8644 10373 12102 13831 15560 17289 19018 20746 22475 24204 25933 27662 29391 31120 32849 34578 36307 38036 39765 41493 43222
Account under the Scheme can be opened on the separate Form designed for the purpose.
The chosen size of instalment, at the time of opening the account will not be allowed to change afterwards.
Account may be opened in the name of individual or joint names of two individuals. Account in the name of minors can be opened under the Scheme to be operated by the guardian.
A person can open more than one account for different size of installments in any Branch of the Bank.
The Account holder may appoint a nominee (s) to receive the balance in the account.
The specified amount on maturity at any slab shall be paid after one month from the date of deposit of the final instalment.
Normally no withdrawal shall be allowed before 5 (five) years. But, if any depositor intends to withdraw his savings due to certain unavoidable reasons before 5 (five) years, he will be allowed to do so, in the following manner: •
No benefit or interest shall be allowed for pre – mature encashment within one year.
•
If the account is closed after one year of its opening, benefit shall be allowed on the deposit at normal Savings Deposit rate.
5.6.2. Monthly Benefit Deposit Scheme: This is a Deposit Scheme where the depositor gets a fixed amount of profit every month without disturbance to the principle. The Scheme is designed to attract: 1) The retirement benefits of service holders. 2) The investment of Wage Earners who want to pay a fixed amount monthly to their families dependents in Bangladesh from the profit of their investment. 3) The deposit of those persons who intend to meet the monthly expense of their family from the income of their deposit. 4) Investment of fund of Trusts and Foundations which award monthly Scholarships / Stipends to students. 5) Trusts
and
founders
or
other
scholarship/stipends to students etc.
associations,
which
award
monthly
Features: Deposit Amount: Initial deposit starts from TK. 25000/- (taka twenty five thousand) and its multiplies i.e., 50,000/-, 75,000/-, 1,00,000/- up to Tk. 25,00,000/- (taka twenty five lac).
Period: The scheme is for 5 years.
Return: The customer will get monthly profit @ Tk. 1000/-* per tk. 1,00,000/- for the five years term. The principal amount will be repaid on maturity. Senior Citizens will get 0.50% higher rate of interest in comparison to other depositors. That is senior Citizens will get monthly profit @ Tk. 1042/-* per tk. 1,00,000. * Taxes if any, applicable.
Additional Benefit: These MBDS allow you to enjoy loan facility up to 80% of your deposit amount.
Terms & Conditions: 
Payment of monthly profit shall start from the subsequent month after a clean minimum gap of 30 days from date of deposit.

Normally, the deposit will not be encashable before 5 (five) years. But if any depositor intends to withdraw his deposit before maturity, the following rules will apply : -
No benefit including interest shall be allowed for premature encashment within one year.
-
If the accounts/ deposits are closed/ encased after one year of its opening, benefit shall be allowed on the deposits at exiting savings deposits rate.
-
If the amount of monthly profit already paid exceeds the amount payable at exiting savings rate, the difference shall be realized from the principal deposit amount, if and when necessary.

In case of death of a depositor, the A/C shall cease to be operative and the amount deposited so far shall be paid to the nominee, as mentioned in the account opening form, and in absence of nominee, to the legal heirs of deceased as per rules in force.
5.6.3. Special Deposit Scheme: This is a Deposit Scheme where deposit Installment is issued for the full amount payable after a specified period against deposit of a certain amount. The minimum term of deposit is 5 years and the scheme provides beneficial scope for investment of Provident Fund, Trust Fund, Reserve Fund/ Security Fund of various Institutions. It will provide opportunities to the Wage Earners for profitable investment of their savings.
The salient features of the Scheme are given below: 01. Deposit of Tk. 1,00,000.00 and multiples thereof may be invested under the Scheme.
02. Bank will issue 'Order Instrument' payable to a particular person, organization, firm etc. for an amount payable at maturity as written on the face of the Instrument as per the following table: Term
Initial
5 years 7 years 10 years
(Taka) 1,00,000 1,00,000 1,00,000
Deposit Value Payable at Maturity (Taka) 1,65,000 2,00,000 3,00,000
03. The Instrument shall not be Encashable before maturity. It may, however, be discounted at the counter of the issuing Bank at any time @15% on the remaining period of maturity, if necessary. The Instrument can also be discounted by any other Bank/ Organization/ Firm/ person. In case the Instrument is discounted by other Bank/ Organization/ Firm/ person, the Instrument may be retained with them till maturity or presented at the counter of the issuing Bank for immediate payment at the discounting rate. But, in no case the depositor shall receive less than the principal invested. 04. In case of death of the payee before maturity, the amount of the Instrument will be paid at a discounted rate to the nominee of the payee or, in the absence of nomination, to the legal heirs of the payee on production of Succession Certificate.
05. The Instrument will be acceptable as primary/ collateral security against any advance / loan subject to registering the lien of the same with the issuing Branch of the Bank. 06. In case of loss of the Instrument, rules pertaining to issuance of Duplicate FDR after loss of Fixed Deposit Receipt (FDR) shall be applicable for issuance of 'Duplicate'.
5.6.4. Education Savings Scheme: The educational expenses particularly the expenses for higher education are sharply increasing day by day in our country. Sometimes, the children are deprived of getting the desired level of education because of the inability of the parents to meet their educational
expenses. But the parents would not feel any difficulty to defray such expenses if a proper financial planning is made much ahead of time. Moreover, Prime Bank Ltd. is receiving demands from the Islamic minded people of our country for an attractive Savings Scheme on the basis of Islamic shariah so as to encourage them to save in Islamic way for education of their children. With this end in view, Prime Bank Limited has introduced a Savings Scheme entitled Education Savings Scheme” in accordance with the principles of Islamic Shariah i.e., on the basis of profit and loss sharing. The scheme provides a unique opportunity to the parents to make a future provision for the educational expenses of their children when they enter into Schools, Colleges and University out of the benefit of a small amount of savings with the Bank at an opportune moment.
Features: Deposit amount: Initial deposit starts from tk. 50,000/- and multiplies of the same amount up to 5,00,000/(taka five lac.).
Period: This scheme is for 5 years.
Education allowance: The accountholder will get a fixed handsome amount at once after maturity or he will get a certain amount of Monthly Educational allowance for over the next five years according to the deposit size.
Additional benefit: The account holder can use this scheme as a collateral security against any investment.
Terms and Conditions: 
For Islamic Banking branches, final amount and monthly allowances will be calculated according to profit sharing/weight age basis. The minimum weight age for profit sharing under this scheme will be 1(one).

To avail the monthly education allowance the depositor is required to surrender the savings instrument to the bank duly discharged with a written instruction to the bank to pay the allowance to his ward on monthly instalment basis as stipulated in the scheme.

Normally, the deposit will not be encashable before 5 years. But if any depositor intends to withdraw his deposit before maturity, the following rules will apply: -
No benefit including interest shall be allowed for pre-mature encashment within one year.
-
benefit If the accounts/ deposits are closed/encashed after one year of its opening, shall be allowed on the deposit at existing Savings Deposit rate.
Education savings Scheme- Investment and returns: Initial deposit
Final amount payable Monthly
50000 100000 150000 200000 250000 300000 350000 400000 450000 500000
at maturity 83308 166616 249925 333233 416541 499850 583158 666467 749775 833083
education
allowance for next 5 years 1786 3570 5355 7139 8923 10707 12492 14276 16061 17845
5.7. One Stop Utility Services Scheme: Like any other country of the world, the people living in the urban areas of our country lead a very busy life. Times are very valuable to them. Despite this, they are to waste their valuable time at the counter of. Different Banks and other Institutions for payment of their monthly bills of different utility services like Electricity, Telephone etc. They, as such, face enormous difficulties for payment of their monthly bills in time. Such inconveniences of the urban people can be removed by making an arrangement to collect all the bills of various utility services at one Point.
5.7.1. Scope of Services: With this end in view, Prime Bank Limited has introduced a Scheme entitled “ONE STOP UTILITY SERVICES SCHEME”. The scheme is designed to provide all the required services to the customer in making payment of their following bills on their behalf from the counter of the Bank: To pay Electricity Bills To pay Telephone Bills To pay Gas Bills To pay WASA Bills To pay Insurance Premium To pay House Rent To collect House Rent To pay Municipal Taxes To collect Pension Money Issuance and Renewal of License of TV, Radio, etc. Any other like Services.
5.7.2. Objectives:
To help the customers in payment of their different utility Bills in time and thereby relieve them of their worries and save their valuable time.
To help different corporations/ organizations in timely collection of their Bills.
To help the senior citizens of the country in collecting their Pension Money every month.
To extend financial assistance to the customers by way of overdraft in timely payment of their Bills.
Deposit Rate Offered by PBL SL. 01.
02. 03.
Particulars Deposit Rate Short Term Deposit a) Below Tk.1.00 Crore 4.00% b) From Tk. 1.00 Crore but below 6.00% 10.00 Crore C) Tk 10.00 Crore and above Saving Deposit Fixed Deposit a) 1(one) months b) 3(Three) months c) 6(Six) months d)1(One )Year and above
6.50% 6% Any amount 10.50% 12.25% 12.25% 12.50%
5.8. Clearing Section: According to the Article 37(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. This is an arrangement by the central bank where everyday the representative of the member banks gathers to clear the cheque. Banks for credit of the proceeds to the customers’ accounts accept Cheque and other similar instruments. The bank receives many such instruments during the day from account holders. Many of these instruments are drawn payable at other banks. If they were to be presented at the drawee banks to collect the proceeds, it would be necessary to employ many messengers for the purpose. Similarly, there would be many cheque drawn on this the messengers of other banks would present bank and them at the counter. The whole process of collection and payment would involve considerable labor, delay, risk and expenditure. All the labor, Risk, delay and expenditure are substantially reduced, by the representatives of all the banks meeting at a specified time, for exchanging the instruments and arriving at the net position regarding receipt or payment. The place where the banks meet and settle their dues is called the Clearinghouse.
5.8.1. Activities of the Section: (a) Preparation of Clearing Outward and Inward Lodgment and record maintenance of the same. (b) Batch posting as and when required. On receipt of instruments, the same is endorsed here. Then clearing section will sent IBDA to head Office for clearing purpose and on receipt of IBCA from Head Office amount is credited to customers account and vice versa. If the instrument is return then the same is given back to the customer.
5.9. Collection Section: Checks, drafts etc. are drown on bank located outside clearing house are sent for collection. Motijheel Branch collects its client’s above-mentioned instruments from other branches of PBL and branches other than PBL. In case of out ward bills for collection customers account is credited after finishing the collection processor. And in case of in ward bills customers account is debited for this purpose. So it places dual role as follows: i)
Collecting Banker
ii)
Paying Banker.
5.9.1. Activities of the Section: Preparing of Outward and Inward Collection Item. Inter-Branch Transfer. Batch posting and checking as and when required. Other works as and when require.
Collection is done when (i) Paying Bank is located out side Dhaka City. (ii) Paying Bank is other branches of PBL situated inside Dhaka City.
(i)
Paying Bank is outside Dhaka City:
Collection department of Motijheel Branch (Principal Branch), PBL sends outward bills for collection (OBC) to the concerned paying bank to get inter Bank Credit Advice (IBCA) from paying Bank. If the paying bank dishonors the instrument, the same is returned to principal Branch.
(ii)
The Paying Bank of their own branches inside Dhaka City:
Collection Department sends transfer delivery item to other branches of same bank situated inside Dhaka City. Upon receiving IBCA customer’s a/c is credited.
5.9.2. Procedures for Outward Bills for Collection:
Deposit-slip depositing the cheque along with Crossing of the cheque are done indicating the Branch as collecting bank
Endorsement “Payee’s A/C will be credited on realization” is given Entries are given in the Outward Clearing Register
5.9.3. Commission for Collection: Up to 1 lac --------------------------------------------- 0.15% Above 1 lac--------------------------------------------- 0.10% Above 5lac ----------------------------------------------0.05% Maximum charge is Tk. 3000 and minimum charge is Tk.20.
5.10. Accounts Section: In banking business transactions are done every day and these transactions are to be recorded properly and systematically as the banks deal with the depositors’ money. Any
deviation in proper recording may hamper public confidence and the bank has to suffer a lot. Improper recording of transactions will lead to the mismatch in the debit side and credit side. To avoid these mishaps, the bank provides a separate department whose function is to check the mistakes in passing vouchers or wrong entries or fraud or forgery. This department is called Accounts Department. Besides these, the branch has to prepare some internal statements as well as some statutory statements, which are to be submitted to the Central Bank and the Head Office. This department prepares all these statements.
5.10.1. Functions of Accounting Department: We can divide the functions of accounting department into two categories. One is day-today task and another is periodical task. a. Day to day functions: Here day-to-day function refers to the every day tasks. Accounting department of PBL performs the following day to day functions: Recording of transaction in the cashbook, general and subsidiary ledger. Preparing the daily position of deposit and cash. Making the payment of the expense of the branch. Recordings of inter branch fund transfer. Checking whether all the vouchers are correctly passed. Recording the voucher in the voucher register. Packing and maintains the total debit and total credit vouchers. b. Periodical functions: Periodical functions of accounts department include the preparation of different weekly, fortnightly, monthly, quarterly and annual statement. The accounts department prepares the following statements: 1.
Monthly statement of deposits, loans and advances, profit and loss etc.
2.
Quarterly statement of deposits, loans and advances, profit and loss etc.
3.
Yearly statement of deposits, loans and advances, profit and loss etc.
4.
Yearly statement of classified Loans and Advances.
5.
Statement of Affairs.
6.
Yearly Budget of the Branch, etc.
5.11. Cash Section: Cash section is a very sensitive organ of the branch and handle with extra care. Operation of this section begins at the start of the banking hour. Cash officer begins his/her transaction with taking money from the vault, known as the opening cash balance. Vault is kept in a much secured room. Keys to the room are kept under control of cash officer and branch in charge. The amount of opening cash balance is entered into a register. After whole days’ transaction, the surplus money remain in the cash counter is put back in the vault and known as the closing balance. Money is received and paid in this section.
5.11.1. Cash Receipt: At first the depositor fills up the Deposit in Slip. For saving account and current account same Deposit in Slip is used in this Branch. After filling the required deposit in slip, depositor deposits the money. Officers at the cash counter receives the money, count it, enter the amount of money in the register kept at the counter, seal the deposit in slip and sign on it with date and keep the banks’ part of the slip. Other part is given to the depositor. In this branch, i.e., Motijheel Branch, two different officers maintain two different books for entering such entries. All deposits of saving account are maintained by one officer and other accounts by another officer. At the end of the day entries of both of these registers are cross checked with the register kept at the cash counter to see whether the transactions are correct or not.
5.11.2. Cash Payment: Λ When a person comes to the bank to cash a cheque, (s) he first gives it to the computer desk to know the position of the check and posting of the cheque. If the account has sufficient fund the computer in charge will post it into the computer, will sign it and seal it.
Λ This cheque is then sent to the concerned officer. There are two officers who verify the cheques – one for savings and similar types of account and another for current and similar types of account. Λ After receiving the cheque respective officer first checks it very carefully for any kind of fraudulent activity. (S) He also checks the date of the cheque, amount in word, amount in figure and signature of the drawer. Λ If the instrument is free of all kind of error the officer will ask the bearer to sign on the back of it. Λ He will then put his/her initial beside the bearers’ signature. (S) He will also sign it on its face; will write down the amount by red pen. Λ Then the cheque will be sent to the cash counter. At the cash counter bearer will be asked again to sign on the back of the instrument. Λ The cash officer will then enter the details of the cheque in his/her register and will pay the money to the bearer. Λ At the end of the day these registers will be compared to ensure the correctness of the entries.
5.12. Conclusion: Bank is the largest organization of mobilizing surplus domestic savings. Attractive Savings Schemes are offered by PBL such as Contributory Savings Scheme, Monthly Benefit Deposit Scheme, Special Deposit Scheme, Education Savings Scheme, Fixed Deposit Scheme, Prime Bank Money Scheme, Prime Bank Insured Fixed Deposit Scheme as well as different accounts to save money. Schemes are designed concentrating in different purposes to help the fixed income group people to help in need. Bank-Officials are also whole-hearted and dedicated to serve their customer with utmost care.
CHAPTER –VI
Trend Analysis of Prime Bank Limited 6.1. Introduction: Prime Bank Ltd. has an 12 year’s history. From 1995 it is working very successfully till now. Now it is the leading banking organization in the country. Here I have tried to analyze 12 years of financial performance of it in the several areas. For example authorized capital, paid up capital, reserve fund and deposits etc well.
6.2. Performance at a glance: Particulars
1995
Authorized Capital 1000.00 Paid-up Capital 100.00 Reserve Fund 1.45 Equity Fund Deposits 1554.35 Advances 228.78 Investment 213.02 Foreign Exchange 314.10 Business Operating income Operating Expenditure Operating Profit Fixed Assets 19.31 Book Value per share Earning per Share Loan as a % of total 15% Deposit No. Of Foreign 100 Correspondents Number of 161 Employees Number of Branches 5
1996
1997
1998
1999
2000
2001
1000.00 100.00 185.46 275.44 3144.77 1202.60 554.80
1000.00 200.00 140.20 310.63 4236.18 1752.11 583.07
1000.00 200.00 93.70 262.56 5313.25 3127.77 604.30
1000.00 400.00 319.23 668.46 7660.02 5121.03 964.81
1000.00 400.00 573.73 895.28 11168.72 7667.73 1524.54
1000 500.00 362.92 1258.26 13259.87 9074.94 1730.74
2913.50 4142.10 10711.30 17855.40 24029.50 263.35
177.31
355.80
549.10
837.83
67.38
94.35
320.43
188.08
244.63
221.26 35.24 258.46 171.98
96.16 42.27 170.10 5.21
221.27 60.84 146.85 18.59
361.02 99.56 179.80 51.47
593.20 125.18 243.43 90.11
38%
41%
59%
67%
69%
129
169
200
240
350
239
305
362
452
518
10
14
18
20
21
27614.20 1100.14 344.05 756.09 174.27 221.65 96.60 68% 398 613 26
Capital Ratio Ratio
Adequacy of
11.68%
Classified
Loans to Total Loans
13.58%
13.79%
9.86%
15.14%
15.18%
0.07%
1.01%
1.78%
1.63%
1.49%
17.50% 1.13%
2001
2002
2003
2004
2005
1000.00 500.00 761.43
1000.00 600.00 807.92
1000.00 700 602.89
1000.00 1000 815.89
4000 1400 1055.98
1258.26 13259.87 9074.94 1730.74 27614.20 13427.60 14186.60
1526.41 16902.29 12686.85 1996.23 31753.70 19564.00 12189.70
1781.86 20483.23 16492.22 2749.71 41930.80 25440.7 16490.10
2239.8 28069.24 23219.67 3083.81 56248.80 36747.00 19501.81
2808 36022.46 31916.11 3939.50 69185.00 40303.00 28882.00
2175.00 1987.58
3659.30 2250.96
4247.73 1593.69
4085.15 1970.37
5302.8 2406.43
1231.49 756.09 705.09 174.27 15736.94 30% 5:1 271.63
1503.12 747.84 696.84 218.50 20047.70 20% 6:1 234.81
592.28 1001.41 769.91 265.17 24249.13 20% 3:7 233.12
824.23 1146.14 1064.24 321.68 32361.62 2:5 223.98
886.09 1520.34 1200.83 372.12 41506.29 1:4 200.57
share 18.Earning per Share 96.60 19.Market Value per 409.50
69.69 307.51
37.55 374.25
43.71 879.50
40.59 681.5
share (Tk.) 20.No. of Employees 613 21. Number of 26
730 27
777 30
894 36
1024 41
Branches 22.No. of Share holder 1081 23.No.of Foreign 398
1727 422
1993 441
2620 501
4467 517
correspondents 24.CapitalAdequacy
17.50%
12.43%
11.90%
10.74%
9.96%
Ratio 25. Return on Assets
4.80%
3.73%
2.61%
1.54%
81%
89%
Particulars 1.Authorised Capital 2.Paid-up- Capital 3.Reserve Fund 4.Equity Fund 5.Deposits 6.Laons & Advances 7. Investment 8.Foreign Exchange Import Export 9. Business Guarantee 10.Income 11.Expenditure 12.Operating Profit 13.NPBT 14.Fixed Assets 15.Total Assets 16.Dividend: Cash Bonus 17.Book Value per
26.Loan as % of total 68%
75%
1.72% 78%
2006
deposits 27.Ratio of Classified 1.13%
1.48%
Loans to Total Loans.
Graphical Analysis of Financial Health:
1.98%
1.52%
0.96%
Analysis: The above figure shows the foreign business volume increases gradually. The amount of deposits and loans and advances are both increase year by year. The operating profit and the profit before tax are both increase year to year. The amount of deposit comes from the depositors of 88%in 2005. The funds are used of 77% in loans and advances and in investments of 9%. So I can easily say that the Prime Bank Ltd. is a fast growing private commercial bank (PCB) in the country.
6.3. Comparison with Other Banks There are about 45 private commercial banks in the country. They are working and giving services to the customers continuously. They render services to the people in different ways. Their services and performing systems are different but nearly each other. Here I have made comparisons of PBL with other banks currently working in the country.
6.4. Top to Bank As Per Clients’ Perception & Preference:
This is a comparative study and comparisons are made under the following criteria:[I have set criteria weight for rank 1 = 10, 2 = 9, 3 = 8, 4 = 7, 5 = 6, 6 = 5,
7 = 4, 8 = 3, 9 =
2, 10 = 1. The obtained score & rank from 200 clients are furnished bellow: Rank 1.
Score 1750
Name of the Bank Standard Chartered
Remark
2.
1410
HSBC
3.
1380
Prime Bank Ltd.
4.
1030
Dhaka Bank Ltd.
5.
820
Duch Bangla Bank Ltd
6.
720
AB Bank Ltd.
7.
710
Islamic Bank (BD) Ltd
8.
One should be eight from (7) depend on others criterion
9.
590
IFIC
10.
350
The city Bank Ltd.
6.5. Maximum A/C Holder in Bank:
At least 37 branches of different private banks located in Motijheel area different types of A/C holder are furnished bellow:
Account type
No of client
Current Account (CD) Saving Account (SB) Short term Deposit (STD) Fixed Deposit Receipt (FDR) Deposit Scheme (CSS/DPS Others
60 170 10 50 50 10
6.6. More Interest Payable A/C as Per Client Opinion:
I want to just measure the knowledge of interest rate or seriousness of those clients who are valued and repeat clients of banks most of them are right in choosing the maximum interest payable account which is FDR and CSS (DPS).
6.7. Service Charge Comparison: PBL Vs Other: Majority of client support that prime bank service charge is reasonable compare the other Banks. The real picture is: Service Charge Lower Reasonable Higher
No of Client 30 170 0
6.8. Customer Chosen Bank to Deposit Money: This question has three options to deposit their money as per their choice. Type of Bank Private (Local)
No of Client 130
Private (Foreign)
70
Government
10
There were only 10 respondents who liked to deposit both private local & foreign Bank.
6.8.1. Why They Do So:
Particulars
No of Client
Service Security
190 50 10
Personal need
Business need
50
6.9. Simply Clients Are Motivated By: Particulars Interest Rate Banking Service (Quick)
No of Client 130 200
6.10. Any Bank That Pays More Interest, Service Attention & Information than Prime Bank: In this regard a good no of client mentioned just the name of Bank EXIM, AB, SCB, Dhaka, Islamic (BD) Ltd., Brac, and HSBC. So we may take these banks as our competitor and we have to handle them seriously and carefully.
6.11. Information Cell Establishment: Cent percent client support that every branch should have an information cell from where customers can get easily their required information. Because without exact information customer will be confused about the bank management and personnel who are not able to provide to the point or exact information.
6.12. Customers Level of Satisfaction Regarding PBC Performance:
Level of Satisfaction Very Satisfied
No of Client 50
Satisfied
120
Indifference / Neutral Dissatisfied Very Dissatisfied
30 0 0
6.13. Decreasing Affection of Interest Rate by Bangladesh Bank:
Positive: Maximum respondents were positive regarding this issue. Because industrialist will invest more many in industrial sector receiving loan from Banks. For this reason employment facilities will increase, economic development increase Bank will gain more due to less interest payment to depositors. There will always exist competition and diversified services and business. Businessmen will get loan at low interest rate to expand their area of business.
Negative: There is a negative effect regarding this issue. Every individual will loose interest / encourage saving money. It will create problem for small savers compare to other country and it is bad for economy. Middle class people will suffer specially in case of getting interest from their deposited money.
6.14. Customers Suggestion to Improve Activities of PBL:
Prime Bank activities should be more advance, better service; customers want diversification of facility, nightly technology based and automatic of maximums type of tasks.
6.15. Monthly Deposit Schemes of Different Banks: I. Contributory Saving Scheme (PBL): Duration
Monthly Installment
5 Years
100 8,000
500 40,000
1,000 80,000
2000 1,60,000
5,000 4,00,000
10,000 8,00,000
8 Years
15,000
75,000
1,50,000
3,00,000
7,50,000
15,00,000
10 Years
20,000
1,00,000
2,00,000
4,00,000
10,00,000
20,00,000
II. Monthly Savings Scheme (EXIM)
Duration
Monthly Installment
5 Years
100 --
500 41,400
1,000 82,800
2000 1,65,000
5,000 4,14,000
10,000 8,28,000
8 Years
--
81,800
1,63,600
3,27,200
8,18,000
16,36,000
10 Years
--
1,18,450
2,36,400
4,72,800
11,84,000
23,64,000
Monthly Installment 100 500 1,000
2000
5,000
10,000
5 Years
8,000
40,000
80,000
1,60,000
4,00,000
8,00,000
8 Years
--
--
--
--
--
--
10 Years
22,500
1,12,500
2,24,500
4,50,000
11,25,000
22,50,000
III. Special Saving Scheme (NCC) Duration
IV. Mudaraba Special Saving (Pension) Scheme (IBBL) Duration
Monthly Installment 100 500 1,000
2000
5,000
10,000
5 Years
7,704
38,518
77,036
1,54,072
3,85,180
7,70,360
8 Years
--
--
--
--
--
--
10 Years
22,071
1,10,354
2,20,708
4,41,416
11,03,540
22,07,080
V. Mudaraba Monthly saving Scheme (SIBL) Duration
Monthly Installment
5 Years
100 --
500 40,000
1,000 80,000
2000 1,60,000
5,000 4,00,000
10,000 8,00,000
8 Years
--
75,000
1,50,000
3,00,000
7,50,000
15,00,000
10 Years
--
1,05,000
2,10,000
4,20,000
10,50,000
21,00,000
VI.
Monthly Saving Scheme (UCBL)
Duration
Monthly Installment
100
500
1,000
2000
5,000
10,000
5 Years
--
38,000
76,000
1,52,000
3,80,000
--
8 Years
--
--
--
--
--
--
10 Years
--
1,05,400
2,10,400
4,21,600
10,54,000
--
6.16. Monthly Benefit Deposit Scheme: 1. Monthly Benefit Deposit Scheme
2.
Special
(PBL):
(NBL):
Deposit
Scheme
Deposited
Monthly
Deposited
Monthly
Amount (Tk.)
Income (Tk.)
Amount (Tk.)
Benefit (Tk.)
1,20,000 2,40,000 3,60,000 4,80,000 6,00,000
1,000 2,000 3,000 4,000 5,000
55,000 1,10,000 1,65,000 2,20,000 2,75,000
500 1,000 1,500 2,000 2,500
3. Special Fixed Deposit Scheme
4. Monthly Income Scheme
(NCC):
(EXIM):
Amount
of Monthly
Deposit
Deposit (Tk.)
Profit (Tk.)
Amount (Tk.)
50,000 1,00,000 2,00,000 3,00,000 4,00,000 5,00,000
500 1,000 2,000 3,000 4,000 5,000
25,000 50,000 1,00,000 2,00,000 5,00,000 10,00,000
Income (Tk.) 250 500 1,000 2,000 5,000 10,000
6.17. Share Market Position of Different Banks:
Dhaka Stock Exchange Bank
FV/ML (Tk/No.)
Turnover
Price
Share
Closing Chg. (%)
Pre. Day
IFIC Bank Ltd.
100/5
242.00
0.73
240.25
10
Islamic Bank BD Ltd.
1000/1
2640.50
-0.12
2643.75
3
National Bank Ltd.
100/20
204.75
0.12
204.50
220
Rupali Bank Ltd.
100/10
127.00
-0.20
127.25
340
UCBL
100/5
245.00
-0.71
246.75
355
Uttara Bank Ltd.
100/5
622.25
-0.12
623.00
238
The Oriental Bank Ltd.
1000/5
1233.00
2.66
1201.00
10
Prime Bank Ltd.
100/50
236.00
0.00
236.00
1450
Southest Bank Ltd.
100/50
203.50
0.25
203.00
2350
Dhaka Bank Ltd.
100/50
200.00
0.00
200.00
5850
Dutch Bangla Bank Ltd.
100/50
376.00
-0.07
376.25
250
Midas Financing Ltd.
100/50
176.25
-0.70
177.50
400
Source: The Daily Star, June-2005.
6.18. Conclusion: After analyzing the above trends I can come in a decision that the overall financial health is better of this bank. In CAMEL rating this bank is in the first position from 2000 to 2005. Side by side this bank is in the third position in overall performance. So this is very good news of this bank.
CHAPTER-VII Present Status of Prime Bank Limited
7.1. Introduction: In this chapter I have tried to highlight PBL in its position, current status, Capital Adequacy, Asset Quality, Management Standard, and Earning and Liquidity (CAMEL) and SWOT analysis which refers to Strength, Weakness, Opportunity and Threat of PBL.
7.2. CAMEL Rating of 49 Banks: (Weekly “Investment”, July 2, 2006) The capital adequacy, Asset quality, Management standard, Earning and Liquidity rating (CAMEL) of all commercial banks on the basis of credit management performance till December 2005 have been rated by Bangladesh Bank (BB). It is mentionable that Prime Bank Ltd. and Mutual Trust Bank Ltd. got the top position in “A” class banks. The performance of both of the banks are same but volume of business, net worth and customer base of Prime Bank is almost double than Mutual Trust. There are two systems of CAMEL Rating. One is ‘on-site’ and the other is ‘off-site’. The off-site rating is as follows: The total operations of every bank were assessed according to five fixed criteria. These criteria are capital adequacy, asset quality, Management Efficiency, Earning capacity and Liquidity (CAMEL).
7.2.1. Capital Adequacy: For the safety and protection of depositor’s benefit, capital adequacy must be maintained at 9%. It is also the coverage of financial debacles like loan loss, share market loss, foreign currency dealing loss, interest rate fluctuation loss and the protection for off
balance sheet affairs hit. During the year 2005 the banking sector of Bangladesh has been able to keep an average 8.7% capital adequacy against the minimum requirement of 9%.
7.2.2 .Asset Quality: A total of 60.7% assets of banking sector were used as loans and advances. But the high rate of classification has enhanced vulnerability of assets. In 2005, the classified loan of NCBs was 14.6% against the asset, which was 5.6% for PCBs, 0.9% for foreign banks and 26.6% for specialized banks. A good number of banks have not been able to keep required provision against the classified loan risk from the profit during the year.
7.2.3. Management Efficiency: Management is the key to the development and expansion of a bank. Management efficiency judged on the basis of the ratio of total expenditure to income, operational expenses and total expenses, per head employee income & expenditure and interest rate spread. The average expenditure-income ratio during the year 2005 was 102%, which is a painful scenario for our banking management.
7.2.4. Earning Capacity: Strong earning and high profitability is the good sign of a bank’s present and future strength. Any loss can be compensated from the profit of a bank. Earnings calculated on the basis of return on asset (ROA), return on equity (ROE) and Net interest margin (NIM) ratios.
7.2.5. Liquidity: The banks have to keep 16% SLR against their deposit with central bank, of which 4% average in the form of CRR. The central bank - Bangladesh Bank (BB) keeps CRR in current account and rest of SLR in cash and government securities. Islamic banks have to
keep 10% SLR and specialized banks are given exemption of keeping the SLR but they have to keep 4% CRR.
CAMEL Rating: Analyzing the overall operational activities of all commercial and specialized banks; central bank, the regulatory authority of country’s banking sector has ranked 14 ‘A-class’, 11 ‘B-class’, 11 ‘C-class’, 9 ‘D-class’ and 3 ‘E-class’ banks by the end of 2005, which was completed recently.
A- Class Banks: 1. Prime Bank Ltd. & Mutual Trust Bank Ltd. 2. Dutch Bangla Bank Ltd. 3. Bank Asia Ltd. 4. Exim Bank Ltd. 5. Mercantile Bank Ltd. 6. Jamuna Bank Ltd. 7. Dhaka Bank Ltd. 8. BASIC Bank Ltd. 9. Standard Bank Ltd. 10. Commercial Bank of Ceylon. 11. Citibank N.A. 12. State Bank of India 13. HSBC
B – Class Banks: 1. Eastern Bank Ltd. 2. Premier Bank Ltd. 3. The Trust Bank Ltd. 4. BRAC Bank Ltd. 5. Southeast Bank Ltd. 6. NCC Bank Ltd. 7. One Bank Ltd. 8. Standard Chartered 9. Woori Bank 10. Bank Alfalah Ltd. 11. National Bank of Pakistan.
C- Class Banks: 1. Islami Bank Bangladesh Ltd. 2. Pubali Bank Ltd. 3. Uttara Bank Ltd. 4. National Bank Ltd. 5. The City Bank Ltd. 6. UCBL 7. Shahjalal Islami Bank Ltd. 8. Al – Arafah Islami Bank Ltd. 9. IFIC Bank Ltd. 10. AB Bank Ltd. 11. First Security Bank Ltd. 12. Habib Bank Ltd.
D- Class Banks: 1. Social Investment Bank Ltd. 2. Bangladesh Commerce Bank Ltd. 3. Agrani Bank 4. Janata Bank
5. Rupali Bank Ltd. 6. Sonali Bank 7. Bangladesh Shilpa Rin Sangstha 8. RAKUB
E-Class Bank: 1. Bangladesh Krishi Bank 2. Bangladesh Shilpa Bank 3. The Oriental Bank
7.3. SWOT Analysis: I get the following Strength, weakness, opportunity, and threat (SWOT) from my practical observation in three months Internship Program, of PBL as follows:
Strength: It has well reputation in the market Not engaged in unfair business practice. Concentrated market. Officers are highly educated. Executives are highly qualified and experienced. Bank has many attractive deposit schemes. Well-furnished and Air-conditioned Bank. Efficient management practice in the Bank.
Weakness: Deposit is lower than advance. Short time experience of the Bank. Officer has limited experience and not enough trained. Long-term credit is not sufficient. Small market shares in Banking-business.
Opportunities: Can increase the credit scheme. Can increase the advertising of the Bank. Private Banks becomes more reliable to local public. Govt. has banned some ‘Jatiya Sanchaya patra’.
Threat: There are many competitors in the market. Competitors have more deposit. Ruling Government is not conducive in the viewpoint of the Bank. Govt. imposes tax and VAT on profit Govt. pressures to reduce interest rate
7.4. The Role of PBL in the Economy of Bangladesh
Bangladesh is an agro- based country. The fiscal year 2005 witnessed a growth momentum based on improvement in macroeconomic performance despite adverse impact from devastating flood, oil and commodity price hike and other external shocks. This is a good news to the economy overall. In this case The PBL plays a pivotal role by performing different activities in different area of the economy as follows:
7.4.1. Business Review: The banking and financial industry experienced further intensification of competitive pressure as the national and international banks operating in Bangladesh strongly pursued the banking and financial needs of the corporate, retail , SME and credit card sector.
7.4.2. Credit: The credit portfolio of the bank increased by TK. 8,697 million during 2005 registering a growth of 37.45%. Significant growth took place in Export financing…………………………………….. 110.50%, Industrial loan………………………………………...48.92% Retail Lending………………………………………..45.43% However, commercial lending that represents international and local trade finance was the highest contributor and its share to Total loans and advances ……………………………. 22.97% Industrial loan as a group……………………………..38.53% Export finance……………………………….. ………12.93% Share of textile industry……………………… ………19.60%
7.4.3. Corporate credit: Beside trade finance, they are providing working capital finance, project finance and arranging syndication for their corporate clients. During 2005 the bank arranged syndication deal of TK. 740 million as lead and agent bank for project financing in ceramic and pharmaceuticals sector. At the end of year 2005, the bank arranged the biggest syndication term loan of TK. 2 million where the highest numbers of banking institutions (17) participated.
7.4.4. Import and Export Business:
The Bank’s performance in this area was satisfactory. Total import and export business transacted were TK. 40,303 million and 28,882 million respectively during 2005. The growth rate of the import business was 10% and the main items of import were industrial machines, raw materials, commodities and other consumer products. The growth rate of export business was 48% and the items of export were RMG, Shrimp, Jute & Jute goods, Leather, Tobacco etc.
7.4.5. Retail banking/ consumer credit: As a part of risk diversification strategy they have expanded their lending activities in this sector during 2005. The growth rate of their consumer financing was 45.43% during the year. A number of products were developed and existing products were re-launched which received good response. The loan schemes offered by the bank includes home loan, loan against salary, marriage loan, car loan, hospitalization loan, education loan, doctors loan, any purpose loan, travel loan, CNG conversion loan etc.
7.4.6. Credit Card: Prime Bank Ltd. started its credit card operation in 1999 by introducing Master Card. In 2005 the bank has also launched VISA. Now it has become the first local bank of the country to achieve principal membership of both the world wide-accepted plastic money network i.e. Master Card and VISA.
7.4.7. SME lending: In the country like Bangladesh job creation is essential and it must come from small and medium enterprise that will ultimately dominate the private sector. This sector suffers from capital shortage and to grow they need stronger business environment and access to right kind of financial and non-financial support. During 2005 bank’s strategy was focused on customer convenience. The exposure is well diversified among over 500 customers in manufacturing, trading and service sector viz. However, the Prime Bank Ltd. plays a vital role to the economy of Bangladesh by the following ways: (1) Enhancement of production (2) Encouragement of trade (3) Expansion of business as a whole (4) Proper use of funds (5) Minimization of regional disparity (6) Creation of credit (7) Formation of capital
(8) Facing business fluctuation
7.5. Employment Creation: From the starting this bank employs a number of people every year. This is the source of employment creation by this bank in the country. Here I have showed the 11 years employment creation number as follows: Number of employees in 11 years: Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Number of employees 161 239 305 362 452 518 613 730 777 894 1024
7.6. Conclusion: If anybody follows the above rating of 49 banks, he can easily understand that the Prime Bank Ltd. is the class-A bank and in CAMEL rating it is in the first position in the country. However, this bank plays a vital role in consumer credit schemes, loans in SMEs, corporate loan and loan of syndication which contribute to the country’s economy greatly.
CHAPTER-VIII Conclusion 8.1. Problems/Findings: There are several problems which I practically observe of PBL as follows:
1. Lack of Segmentation: The Bank has no segmentation to handle different type of customers. They are equally treating of all the customers to provide service. But high status clients seek on extra honor from Bank or institution.
2. Lack of Up to Date Decoration: The Branch is not decorated with ultra modern facility and not so nice to look at. Their furniture’s and relevant materials are not so high standard.
3. Work Environment is not so suitable: The work environment is noisy and full of crowd sometimes. It is bad for any financial organization and also bad for security. There is no siting arrangement of good no of people.
4. Hard Rules & Regulation to Open A/C: The procedures to open an account are full of hard & fast rules and regulations (as per Bangladesh Bank). But compare to other Bank prime bank is not as flexible as they are doing to open A/C or attract customers.
5. Root level Clients are deprived From Deposit: Branch management has already closed amount of the Tk. 250, 500, 1000 CSS deposit from clients. So many customers come and back to pavilion with a frustration. So they are neglected and deprived to get banking service.
6. Lack of Sufficient Computers & Technology: Computers are carrying need of any organization in the age of technology. But the branch has only 4 computers to use by almost 27 employees. This is very few to run the task through computer. Lack of good software and format PO, DD are manually prepared in the branch.
7. Non-quality Photocopy Machine: The branch has only one photocopy machine which is sometimes in clinical death. The output of this machine is not ensuring the quality of original documents. So it is an image problem of the Bank.
8. Un Smart Peon, Messenger, Security & Tea Bay: It is a matter of great regret that the peon staffs of the branch are lazy, whimsical, and above all illiterate to behave and work with someone.
9. Customer Objectives: Many customers complain to me to improve and first the service as well as behavior of the staff as it is a private bank. It should not be like Sonali Bank. Customers require especially quick, accurate service and good behavior from bankers.
10. Lack of Good Cooperation: Every organization has this type of problem. But it should be minimized to faster the service as it is the financial institution and one depends to another to complete a process fully.
11. Some Sort of Ego: Some employees of this branch feel always some sort of ego that they are something different. But this is not a symbol of good sign. Ego drive is harmful for team work specially.
12. Lengthy Procedures & Process: The scheduled activities of the bank like A/C opening A/C closing and issuing of solvency certificates are delay sometimes due to lack of proper initiates. This tendency is bad for banking good service. CSS maturity and closing require 3 days, which is an image of Govt. Bank.
13. Low Interest Rate Cannot Attract Customers:
Compare to many others Banks prime Bank offer low interest rate to depositors. So they are not interested to keep there money in low rate of interest. The PBL management is only hunting to ward low cost and no cost deposit.
14. Customers’ Complains: Customer’s all complains are related with lengthiness and time consuming of tasks. The small depositor like CSS A/C holder claim to receive money instantly. But it is not possible for slow and lack of cordial interruption of the management.
8.2. Policy Guidelines / Recommendations: On the basis of theoretical analysis and practical experience of 3 months internship program. I may suggest the following issues:
1. Provide Up To Date Technology: The branch should be more technologically rich than present time. Then all manual tasks will be converted into computerized system
2. Information Cell Establishment: Each and every branch should establish an information cell with one/two dump smart executives who will be able to provide all sort of information regarding banking and respective branch. In my question Almost 200 responded are agreed with my proposal.
3. Provide Nice Decoration: Now a day’s private Bank is an image building and most nice environment organization. So the decoration should be unique and better than our competitors.
4. Handling Customers Well: I think the staffs of the branch should be trained up how to handle different type of customers. The training should not limit only GB, Credit, And Foreign exchange etc.
5. Behavior Modification of the Employees: Very few employees’ behavior should be modified enough to maintain positive attitude toward banks. They should always think it is a private bank and fully service oriented organization. “Customer is the king / Queen” they should remember it almost every time in office or out side the office.
6. Maintain Service Quality:
We believe in quality not quantity. Quality is an important phenomenon of service organization always quality should achieve the pick of standard. If quality of service is good then 50% problem will be automatically reduced.
7. Offer Competitive Interest Rate: PBL should offer high competitive interest rate to attract depositor to increase the liquidity. Then it will able to deal with call money business in the age of fluting rate of exchange.
8. Site Selection of Branch: Management should carefully consider the location to set up a new branch. Because it is a question-which is vital to deal business? Answer is location, location and location.
9. Deposit Mobilization: Prime Bank has to increase their deposit mobilization growth. Also AB bank has to take necessary action to maintain and improve their deposit mobilization growth rate.
10. Operating Income: For the maximizing the operating income, prime bank should try to take necessary action to increased the operating income.
11. Reduce Expenditure: Very essential to reduce the expenditure of the prime bank. Prime bank expenditure is very high other than two banks.
12. Remove Slow Rate of profit: Prime bank profit is increased previous year but grow rate is low. So take necessary steps to increase the profit.
13. Foreign Trade: Foreign trade increase is the essential for the prime bank. The maximum amount of total earning comes from foreign trade.
14. Performance Increase: Prime Bank should increase their performance by engaging efficient decision maker in the managerial level.
15. New Planning: All commercial banks including both nationalized and private should introduce performance planning system for increasing their operational efficiency or purpose the following other recommendation: •
It should utilize properly idle money, because idle money is one of the major problems of banking sector.
•
Proper standard should be set by the movement for comparative performance measurement.
•
Proper decision should be taken for banking sector which should not be changed rapidly.
•
Proper training should be given in order to create efficient personnel.
•
World Bank’s prescription for banking reform programmed should bee analysis before implementing.
16. Proper Autonomy: Private Banks should be give proper autonomy and be kept free from political and other sorts of intervention. Though, autonomy does not mean lack of monitoring by the authority, yet it has advantages of being quick and flexible in implementing different plans and programs.
17. Comparison Commands: i. In regard to earning per share Dhaka Bank performance is good.
Prime
bank performance is also good ii.
In regard to cash-deposit ratio is better. Because PBL growth rate is gradually increased.
iii. In regard to loan-deposit ratio of prime bank performance is the second position in the year of 2001. And bank Asia position is the first.
But
average performance of Prime Bank is the better than other three banks. iv. In regard to Debt-equity ratio prime Bank performance is lower than the other three banks. Here Dhaka Bank position is number one. v. Dhaka Bank offers by the Excel Account but other three banks not offer Excel Account.
8.3. CONCLUDING REMARKS: From the detail discussions above I can easily conclude that In spite of all problems Prime Bank Ltd. is the fastest growing private commercial bank in the country. The bank is already at the top slot in terms of quality service to the customers and value addition for the shareholders because, despite difficult circumstances, the Bank closed the year of 2005 with a number of achievements. The Bank also made satisfactory progress in all areas of business operation up to June 2006. The Bank further expanded and consolidated its customer base in both of its core businesses and General Banking Services.
Bibliography 1. Annual Report, Prime Bank Ltd, 2003 2. Annual Report, Prime Bank Ltd, 2004. 3. Annual Report, Prime Bank Ltd, 2005. 4. Economic Trends, March-2006, Statistics Department, Bangladesh Bank. 5. Different Instruction Circular, Issued by Prime Bank Head office. 6. “The Daily Star”
January 2006-June 2006
7.
January 2006-June 2006
Monthly Economic Review
8. Website: www.prime-bank.com
Advices & Suggestions are given by the following persons: Mr. S.M. Mainuddin Chowdhury, Executive Vice President, PBL Mr. Md. Abdul Matin; Principal Officer, Credit division, PBL. Mr. Md. Masum Mahmud Baqui, Principal Officer, Credit Division, PBL. Mr. Md. Rashadul Hasan Khan, Junior Officer, General Banking, PBL.