View with images and charts General Banking Activities of EXIM Bank of Bangladesh Ltd. 1.0 Introduction “A Customer is the most important visitor on our premises. He is not dependent on us, we are dependent on him. He is not an interruption on our work, he is purpose of it. He is not an outsider of our business; he is a part of it. We are not doing him a favor by serving him; he is doing us a favor by giving us an opportunity to do so�. ----------- Mahatma Gandhi
The banking sector of Bangladesh played an important role towards economic growth. From the beginning of financial year 2003, Bangladesh Bank took initiatives in reforming financial sector. The importance of commercial banks in the country is inevitable. It is considered as the fuel harbor of the economy. Primarily, commercial banks are the one of the major sources of funds in the economy of Bangladesh. By borrowing money from the depositors and lending the same to the businessmen and others as loans and advances, they perform an important function. People and Govt. itself are very much dependent on the effective and efficient services provided by the banks in the financial markets of the country. Commercial banks act as financial intermediaries by performing the functions of mobilizing the funds and utilizing them in the proper way.
EXIM Bank Limited is a service and profit oriented organization. It gains profit through successful efficient management, which is achieved through its human resources. Getting and keeping good people is critical to the success of every organization, whether profit or nonprofit, public or private. Those organizations that are able to acquire, develop, simulate, and keep outstanding workers will be both effective and efficient. The report will give an overall idea about the General Banking of EXIM Bank Limited. 1.1 Objectives of the Report: There had been some objectives set forward in doing this report so that it can be determined what task I have to perform in the bank. The objective of the report can be divided into two partsBroad Objective: • An overall idea about the General Banking of EXIM Bank Limited. Specific Objective: • •
To bridge the gap between banking theory and current practice. To evaluate how information technology in modern business help bankers to manage their activities.
•
To grasp the day-to-day activities of the employees who ceaselessly work for General Banking facilities.
1.2 Methodology of the Report: Data Collection Method:
The process of financial data collection is not hassle-free for any outsider. As I worked there for three months, they have allowed me to collect data from MIS of Branch. Some times, they have provided data verbally and I took note of that. Data taken both from internal sources and external sources. In current scenario analysis, related data were taken from Head Office & Savar Branch of EXIM Bank. Statistical analysis of the data was done with the help of MS Excel Program.
Source: Information provided on this report is of two types. One is primary source and another is secondary source. In fact, most of the information was collected from primary sources. ♦ Primary sources: • Face-to-face conversation with the respective officers and stuffs of the branch and head office. • Face-to-face conversation with clients visited the branch. • Practical work experience in the different desk of the department of the branch covered. • Relevant field study as provided by the officer concern. ;
Moreover, we have maintained a close contact with the direct sales team members of EXIM Bank Ltd. who regularly visit clients and consult with prospective customers. Secondary Sources 1. 2. 3. 4. 5. 6. 7. 8.
EXIM Bank Limited Annual Reports 2002-2006. Product Program Guide [PPG]. Credit Assessment Guideline. Loan files of the client. Bangladesh Bank’s Prudential Guideline on General Lending. Different procedure manual published by EXIM Bank Ltd Different circular send by head office or EXIM Bank Ltd and Bangladesh bank. Various book articles regarding general banking function, foreign exchange operations and credit policies. 9. Websites and so on. 10. www.google.com
Internal Sources: Bank's Annual Report. Group Business Principal Manual. Group Instruction Manual & Business Instruction Manual. Prior research report. Any information regarding the Banking sector. External Sources: Different books and periodicals related to the banking sector. Bangladesh Bank Report. Newspapers. Web Sites. 2.1 Performance of EXIM Bank Within a short time period EXIM Bank Ltd has been successful to position itself as a progressive and dynamic financial institution in the country. The Bank widely acclaimed by
the business community, from small business/entrepreneurs to large traders and industrial conglomerates, including the top rated corporate borrowers from forward-looking business outlook and innovative financing solutions. The bank achieved satisfactory progress in all areas of its operation and earned an positive operating profit almost in every year.
Growth of Bank Figure:01
in Crore
Sl. No Particulars
2003
2004
2005
2006
2007
1
Authorized Capital
100.00
100.00
100.00
350.00
350.00
2
Paid-up Capital
31.39
62.78
87.90
171.38
214.22
3
Reserve Fund
22.82
35.73
57.00
81.09
113.40
4
Deposits
1524.30
1907.82 2831.90 3503.20
4154.65
5
Investment (General)
1228.91
1933.20 2604.60 3264.13
4019.5
6
Investment ( Shares on 237.70 Bonds)
154.30
245.77
7
Foreign Business
3461.96
4931.24 7294.00 9617.51
11790.10
a) Import Business
1926.00
2678.10 4143.20 4959.67
6139.90
b) Export Business
1512.46
2241.84 3128.50 4623.46
5579.1
c) Remittance
23.50
11.31
22.30
34.38
71.10
8
Operating Profit
56.27
83.58
117.58
137.87
190.80
9
Loan as a % of total 80.62% Deposit
101.33% 91.97% 93.18%
96.75%
10
No. of Correspondent
187
190
222
246
256
11
Number of Employees
627
768
934
1020
1104
12
Number of Branches
19
28
28
30
35
13
Return on Assets
3.15%
3.44%
3.49%
3.94%
4.09%
Exchange
Foreign
Fig. 01: Growth of EXIM Bank BD Ltd. Branch Overview
163.30
223.33
EXIM BANK LIMITED, SAVAR BRANCH
3.1 Branch Overview EXIM Bank Savar Branch at a Glance: Item March 2008 Total deposit 445719059.17 Total advance 61931770.37 Demand deposit 235501062.88 Time deposit 37541392.41 Profit 9284701.19 Table 1: Three Month Activity of 2008
April 2008 429323216.30 654992309.78 216867886.53 378689502.35 14778976.18
Three month's profit of Savar Branch 20000000 15000000 10000000
14778976.18
17289936.6
9284701.19
5000000 0 Mar-08
Apr-08
Figure 02: Three month’s profit of Savar Branch
May-08
May 2008 430627306.19 677649187.97 223040401.14 373261636.71 17289936.60
800000000 677649188 654992309.8 700000000 600000000 429323216.3 430627306.2 500000000 445719059.2 400000000 300000000 200000000 61931770.37 100000000 0 Mar-08 Apr-08 May-08 Total deposit Total advance Figure 03: Three month’s Total deposit & advance of EXIM bank of Savar Branch 4.0 "Company Profile" 4.1 Historical Background of EXIM Bank Ltd.: EXIM Bank Ltd. was established under the rules and regulations of Bangladesh Bank and the Bank companies act. 1991, on the 3rd August 1999 with the leadership of later Mr. Shahjan Kabir, founder chairman. He had a long experience as a good banker. Among them Mr. Nazrul Islam Mazumder became the honorable chairman after the demise of the honorable. From this inception EXIM Bank Bangladesh Ltd. was known as EXIM Bank Ltd., which stands for Bangladesh Export Import Bank Limited. But some legal constraints the bank renamed as EXIM Bank Ltd. which means Export Import Bank Bangladesh Limited. The bank starts it’s functioning from the 3rd August 1999 with Mr. Alamgir Kabir, FCA as the advisor and Mr. Mohammad Lakiotullah as the Managing Director. Both of them have long experience in financial sector of our country. By this pragmatic decision and management directives in the operational activities, this bank has earned a secured and distinctive position in the banking industry in terms of performance, growth and excellent management. The authorized capital and paid up capital of the bank are Tk. 1,000.00 million and Tk. 253.13 million respectively. 4.2 An overview of Banking Environment in Bangladesh : Banking business has a very old history, in the days it was originated in Greece and Rome. Persons who were not habitually bankers conducted banking business in ancient society in unorganized way. They carried on banking business as subsidiary to their main business. Gradually, a separate class of people as “bankers” took up banking function. Money links the origin of banking. When money was introduced in the place of barter, people faced a new problem-"Where to save surplus money in safe position?” The money came to help trade and commerce. But borrowing and lending for trade & commerce could not be carried on banking. Hence money created a legal necessity of banks.
The Banking in Bangladesh has passed three decades through different policy environment and comprises central bank at the apex, nationalization commercial banks, private commercial banks, foreign commercial banks and specialized financial institutions. The country's central bank, Bangladesh Bank, controls and monitors the banking industry. At present there are 34 (focal, foreign) commercial banks, 5 development financial institutions, 17 finance & leasing companies in Bangladesh. Government has recently issued licenses to 8 merchant banks. Primary decision has been taken to allow another couple of commercial banks soon. In the decade of 70s, in an atmosphere of fully regulated banking, the Nationalized Commercial Banks played the active role in intermediation and allocation of credit along with the specialized financial institutions. The decade of the 80s witnessed the active operation of bath the Nationalized Commercial Banks and Private Commercial Banks (local and foreign). Before liberation of Bangladesh in 1971, the total banking system was private owned, urban based and profit oriented. But after liberation, the government of Bangladesh nationalized all the banks operating in Bangladesh in 1972, except a few foreign bank branches. Currently the major financial institutions under the banking systems include-Bangladesh Bank. Commercial Banks, Islamic Banks (For interest free Islamic banking in adherence to the Islamic principles & practice), Leasing Companies Finance Companies, Merchant Banks. Generally the commercial banks and finance companies provide a myriad of banking products /facilities and services to the needs of their customers. These include 24 hours banking, (Tele banking via modems and phones) and general banking and service products. For customers' convenience, such products are available throughout the bank branches in our country. However the Bangladesh banking industry is characterized by the tight banking rules and regulations set by Bangladesh Bank. All banks and financial institutions are highly governed and controlled under the banking companies act 1993, which lays out many restrictions, besides other guidelines. Among the many regulations imposed, Bangladesh Bank does not allow any FI to into bankruptcy or insolvency. The range of banking products and financial services is also unlimited in scope. Besides all local banks are imposed 5% cash reserve requirement which is non interest bearing and 15% statutory liquidity requirement. This has given rise to higher cost of fund. With the liberalization of markets, competition on banking products and financial services seem to be more intense and competitive. In addition as banking products, which can be offered in our country, are fairly homogeneous in nature due to the tight regulation imposed by Bangladesh Bank? Competing through differentiating the range of products offered is often difficult and not effective. Moreover any innovative banking service launched is quickly duplicated by 7 other banks such as ATMs, Tele banking, online (real time) computerization bank branches etc. Hence the key to establish a competitive edge in banking industry of Bangladesh is to provide better customer service quality.
There are different types of generations in banking history: a) 1st Generation Banks (Established 1982-1988) National Bank Ltd., The City Bank Ltd., United Commercial Bank Limited, Arab Bangladesh Bank Ltd., 1FIC Bank Ltd., Islamic Bank Bangladesh Ltd., and Al Baraka Bank Ltd. b) 2nd Generation Bank (Established 1992-1996) EXIM Bank Limited, National Credit and Commerce Bank Limited, Prime Bank Limited, Southeast Bank Ltd, Dhaka Bank Ltd., AI Arafah Islami Bank ltd., Social Investment Bank Ltd., and Dutch-Bangla Bank Ltd. c) 3rd Generation Bank (Establish 1996-2003) Mercantile Bank Ltd., Standard Bank Ltd, One Bank Ltd, EXIM Bank ltd, Premier Bank Ltd, Mutual Trust Bank Ltd, First Security Bank Ltd, Bank Asia Ltd and the Trust Bank Ltd. 4.3 Historical background of EXIM Bank of Bangladesh Ltd: Export Import Bank of Bangladesh is a public listed scheduled bank categorized in private sector and established under the ambit of Bank Companies Act, 1991 and incorporated as a Public Limited Company under the Companies Act, 1994 on June 02, 1999. The Bank started commercial banking operations effective from traditional banking operation on July 01, 2004 after obtaining approval from Bangladesh Bank. During the span of time the Bank has been widely acclaimed by the business community, from small entrepreneurs to large traders and industrial conglomerates, including the top rated corporate borrowers for forward-looking business outlook and innovative financing solutions. With a view of the company's activities and program on the basis of Islamic Shariah, within this period of time it has been able to create an image of responsibility for itself and has earned significant reputation in the country's banking sector. As a matter of policy, the bank conducts its business on the principles of Mudaraba, Murabaha, Bai-Muazzal & Hire Purchase transaction approved by Bangladesh Bank. The Bank is one of the interest-free Shariah-based Banks in the country and its modus operandi is substantially different from those of other commercial banks. It is a great pleasure that by the grace of Almighty Allah, Exim Bank have migrated at a time all the branches from its conventional banking operation into Shariah based Islami banking operation without any trouble. Lot of uncertainties and adversities were there into this migration process. The officers and executives of Exim Bank motivated the valued customers by counseling and persuasion in light with the spirit of Islam especially for the non-Muslim customers. Their IT division has done the excellent job of converting and fitting the conventional business processes into the processes based on Shariah. It has been made possible by following a systematic procedure of migration under the leadership of honorable Managing Director. 5.0 Scope of the Study: This report has prepared to gain a clear view of the General Banking process. It includes all my experience in Savar Branch. I tried to show how EXIM Bank Ltd. handles all the activities necessary service to its clients. But there are some policy issues like which loan needs to be reviewed, what should be the interest rates, how many documents should be made compulsory for security reasons, who will be liable for the default loan, how responsibility will be delegated to officials and so on. These issues have not addressed in this report – as my goal was to reveal how work is done not how it should be done.
7.0 Mission of EXIM Bank Ltd.: • • • • •
To be the most caring and customer friendly and service oriented Bank. To create a technology based most efficient banking environment for customers. To ensure ethics and transparency in all levels. To ensure sustainable growth and establish full value of the honorable shareholders. To add effective contribution to the national economy.
8.0 Vision of EXIM Bank Ltd.: The gist of EXIM Bank's vision is "Together Towards Tomorrow". EXIM Bank LTD, as the name implies, is not a type of Bank in some countries on the globe, but is the first of its kind Bangladesh. It believes in togetherness with its customers, in its march on the road to growth and progress with services. To achieve the desired goal, there will be pursuit of excellence at all stages with a climate of continuous improvement, because, in EXIM Bank, we believe, the lien of excellence is never ending. Bank's strategic plans and networking will strengthen its competitive edge over others in rapidly changing competitive environments. Its personalized quality services to the customers with the trend of constant improvement will be cornerstone to achieve our operational success. Overall Management Activities of EXIM Bank of BD Ltd. 9.0 Management: For any financial and non-financial organization, management is the most valuable and important aspect And a well organize management provides the organization to reach its ultimate goal. Management means planning, organizing, staffing directing and controlling of all financial and non-financial resources of an organization. Different aspects of management practice in EXIM Bank are discussed below: EXIM Bank has done its planning within the preview of the corporate plan. The overall planning approach in EXIM Bank is top-down. Each branch can plan according to the goal imposed by the corporate level. It doesn't plan independently. EXIM Bank has a planning division. The department is mainly responsible for the overall planning.EXIM Bank is organized as per the existing business locations. It has 31 branches, each of which is a separate entity. Each unit is responsible for own performance. Within each branch it is organized functionally. The recruitment in EXIM Bank is done in two ways. One as a "Probationary Officer" for the management program and it has a probation period of one year. Another one is 'non-management level as "Trainee Officer". Probationary Officer is recruited in officer category and their career path is headed towards different managerial jobs. Works of EXIM Bank are designed in such a. way that one cannot leave without clearing the tasks as he is assigned for a day. Sitting arrangement in all office is done in a way that the superior can monitor the subordinate all time. Budgeting, rewarding, punishing, etc are also practiced as control mechanism. 9.1 Human Resources Management: Employees are the core resources of any organization. Without them, one cannot run their organization. Human resources approach is concerned with the growth and development of
people toward higher level of competency, creativity and Fulfillment. It helps employees become better, more responsible persons and then it tries to create a climate in which they may contribute to the limits of their improved abilities. It assumes that expanded capabilities and opportunities for people will lead directly to improvements in operating effectiveness. Essentially, the human resources approach means that better people achieve better results. 9.2 Recruitment: The set-vice rule of EXIM Bank states the recruitment policy of the bank. In, general the board of directors determines the recruitment policy of the bank from time to time. The minimum entry-level qualification for any official position other than supportive management is a Bachelor Degree. However, informally the management prefers a minimum Master's Degree for the appointment of probationary officers in the Executive Officer position. The recruitment for entry-level positions begins with a formal written test, which is conducted and supervised by the Institute of Business Administration, University of Dhaka. After successful completion of the written test, a personal interview is conducted for the successful candidates by a panel of experts comprising of renowned bureaucrats and prominent bankers of the country. 9.3 Risk Management: The risk of Export Import Bank of Bangladesh Limited is defined as the possibility of losses, financial or otherwise. The risk management of the Bank covers 5 core risk areas of banking i.e. Credit Risk Management, Foreign Exchange Risk Management, Asset Liability Management, and Prevention of Money Laundering and through establishment of Internal Control and Compliances. The prime objective of the risk management is that the bank takes well calculative business risks while safeguarding the Bank's capital, its financial resources and profitability from various risks. In this context, the Bank took steps to implement the guidelines of Bangladesh Bank as under. 9.4 Asset liability management: The Asset Liability Committee (ALCO) of the Bank monitors Balance Sheet risk and liquidity risks of the Bank. The Balance Sheet risk is defined as potential change in earnings due to change in rate of interest, foreign exchange rates which are not of trading nature. Asset Liability committee (ALCO) reviews liquidity requirement of the Bank, the maturity of assets and liabilities, deposit and lending pricing strategy and the liquidity contingency plan. The primary objective of ALCO is to monitor and avert significant volatility in Net Profit Income (NPI), investment value and exchange earnings. 9.5 Foreign exchange risk management: Foreign exchange risk is defined as the potential change in earnings arising due to change in market prices. The foreign exchange risk of the Bank is minimal as all the transactions are carried out on behalf of the customers against underlying Foreign Exchange transactions. Treasury Department independently conducts the transactions and the back office of treasury is responsible for verification of the deals and passing of their entries in the book of account. All foreign exchange transactions are revalued at Market-to-Market rate as determined by Bangladesh Bank at the month-end. All nostril accounts are reconciled on monthly basis and the management for their settlement reviews outstanding entries beyond 30 days. 9.6 Investment risk management:
Investment risk is one of the major risks faced by the Bank. This can be described as potential loss arising from the failure of a counter party to perform as per contractual agreement with the Bank. The failure may result from unwillingness of the counter party or decline his/her financial condition. Therefore, the Bank's investment risk management activities have been designed to address to all these issues. A separate Investment Division has been formed at Head Office since inception of the Bank, which is assigned, with the duties of maintaining effective relationship with the customer, marketing of investment products and exploring new business opportunities. In line with Bangladesh Bank guideline the Bank has segregated marketing, approval and monitoring/recovery functions. The investment risk management includes borrower risk analysis, financial statement analysis, industrial analysis, historical performance of the customer, security of the proposed investment facility and market reputation of the borrower etc. In determining single borrower/large investment, the instructions of Bangladesh Bank' are strictly followed. Investments are classified as per Bangladesh Bank's guideline. 9.7 Corporate Culture: EXIM Bank is one of the most disciplined Banks with a distinctive corporate culture. Here they believe in shared meaning, shared understanding and shared sense making. Their people can see and understand events, activities, objects and situation in a distinctive way. They mould their manners and etiquette, character individually to suit the purpose of the Bank and the needs of the customers who are of paramount importance to them. The people in the Bank see themselves as a tight knit team/family that believes in working together for growth. The corporate culture they belong has not been imposed; it has rather been achieved through their corporate conduct. 9.8: Corporate Management Organ gram Chairman Director Managing Director Company Secretary Additional Managing Director Deputy Managing Director Executive Vice President
Senior Vice President Vice President Chart 2: Corporate Management Organ gram 9.9 Branch Management Organ gram Assistant Vise President & Manager Senior Principal Officer Executive Officer Officer Management Trainee Officer Junior Officer Assistant Officer Trainee Officer (Cash) Assistant Officer (IT) Chart 3: Branch Management Organ gram 10.0 Marketing Offers PRODUCTS OF GENERAL BANKING DIVISION Fig 4: Marketing Product
HAJJ DEPOSITS SCHEME
MONTHLY INCOME SCHEME
MULTIPLUS SAVINGS 10.1: Various Deposit: Al-Wadia Current Deposit Mudaraba Savings Deposit Mudaraba Short Term Deposit Mudaraba Term Deposit • • • • • •
One Month Three Month Six Month Twelve Months Twenty-four Months Thirty-six Months
MONTHLY SAVING
SUPER SAVINGS SCHEME
Foreign Currency Deposit Mudaraba Savings Scheme • • • •
Monthly Savings Scheme (Money Grower) Monthly Income Scheme (Steady Money) More than Double the deposit in 6 years (Super Savings) More then triple the Deposit in 10 years (Multiplus Savings)
Mudaraba Hajj Deposit Investment Division: • Corporate Finance • Industrial Finance • Project Finance • Syndicate Investment Mode of Investment a) b) c) d) e) f) g)
Murabaha, Bai Muazzal, Izara Bil Baia, Wazirat Bil Wakala, Quard, Local Documentary Bill Purchased, Foreign Documentary Bill Purchased.
11.0 Current Business Performance of EXIM Bank of Bangladesh Ltd: Financial overview: The performance of the bank, during the period under review, is more significant simultaneously in development and achievements of continuous growth rate in all the areas of banking operations. The Bank has successfully been marching ahead with its prime business objective by earning a pre-tax profit of Tk.1063.30 million registering an annual growth of 64.69% than that of the previous year. It has successfully mobilized Tk.28319.21 million deposits from depositors and has arranged disbursement of Tk.26046.34 million as investment to 14,532 accounts as on 31st December 2006 through its 28 Branches. Capital and Reserve Fund The Bank started its voyage with an authorized Capital of Tk. 1,000 million while it's initial Paid up Capital was Tk.225.00 million subscribed by the sponsors in the year 1999, The Capital and Reserve of the Bank as on 31st December 2006stood at Tk.2179.81 million including paid up capital of Tk.878.85 million. The Bank also made provision on unclassified investment, which is amounted to Tk.263.18 Million. Deposit Deposit is one of the principal sources of fund for investment of commercial banks and investment of deposit is the main stream of revenue in banking business. The total deposit of the Bank stood at Tk. 35032.02 million as on December 2006 against Tk. 28319.21 million of
the previous year which is an increase of 23.70%. This growth rate may be termed as a remarkable achievement for the Bank. The present strategy is to increase the deposit base through maintaining competitive rates of Profit and having low cost of funds. Investment Total amount of Investment of the Bank stood at Tk.32641.27 million as on December 31, 2006 as against Tk. 26046.34 million as on December 31, 2006 showing an increase of Tk.6594.93 million with growth rate of 25.32%. Investment is the core asset of a Bank. The Bank gives emphasis to acquire quality assets and does appropriate lending risk analysis while approving commercial and trade investment to clients. Investment (Share & Bonds) The size of the investment portfolio in 2006 is Tk. 2233.25 million while it was Tk.1633.03 in 2006. The portfolio comprises Islamic Investment Bond, Shares and Prize Bonds. The Balance Sheet of EXIM Bank Ltd is as follows: Balance Sheet 31st December 2007 Table 2 :BS Property & Asset Cash: In Hand (including foreign currencies) With Bangladesh Bank and Sonali Bank (Including foreign currencies)
Amount in Tk. 2007
2006
417038832 4198001365 4615040197
236122796 3082999752 3319122548
Balance with other banks and Financial institutions In Bangladesh 377934754 Outside Bangladesh 915100915 1293035669 Money at call and short notice: Investments (shares and bonds) 2250000000 Government securities Others 207716314 2457716314 Investments 38214429999 General Investments 1980809223 Fixed assets 200702928 Other assets 2741293655 Total assets 51503027985 BALANCE SHEET Liabilities: Borrowing from other banks, financial institutions and agents
2007
945738588 473605876 1419344464 2000081900 233172388 2233254288 30567133959 2074136357 178431761 2002117585 41493540962 2006 Amount Tk.
in
Deposit & other A/C Current Deposits and other accounts: Al wadeah Current deposits and other accounts Bills payable Mudaraba savings Bank deposits Mudaraba term deposits Call deposits Foreign currency deposits
41546568592
35032024625
4778629437 743645368 2209666103 33682916577 -------------131711107 41546568592 5413930707 10093393939
3463314632 316705918 1684526998 29479565759 ------------87911318 35032024625 3649831258 8658363853 Amount in Tk. 2142196800 1713757500 -------------342751500 -------------85687875 94162500 94162500 62775000 62775000 608754548 810880421 1134639838 1670283
Other liabilities Total liabilities Capital/Shareholder’s equity Paid up Capital Proposed cash dividend Proposed issue of bonus shares Share premium Dividend equalization account Statutory reserve Retained earnings
Total shareholders equity Total liabilities and shareholders equity
3111685079 41793540962
Off balance sheet items Contingent liabilities Acceptance and endorsements Letters of guarantee Irrevocable letters of credit Bills for collection Other contingent liabilities
1574148312 7452716000 1308859198 8658363853
1866915726 9260231000 1412114208 10093393939 22632654873 ----------------22632654873
Total contingent liabilities Other commitments Total off balance sheet items
18994087363 --------------18994087363
PROFIT AND LOSS ACCOUNT Table 3: IS Tk) Particulars
31 ST December 2007 2007
(Amount in 2006
Invest income Profit paid on deposits, borrowings, etc. Net investment income
4943468082 (3587536228) 1355931854
3808085566 (2953607619) 854477947
Income from investment in shares/securities Commission, exchange brokerage Gain on sale of investment in shares Other operating income Total operating income
124378550 1042456394 81216333 216439446 2820422577
120461375 882976105 998967 155041956 2013956350
Salaries and allowances Rent, taxes, insurance, lighting, etc. Legal expenses Postage, stamp, telegram and telephone Audit fees Stationery, printing, advertisement etc. Managing Director’s remuneration Managing Director’s fees Director’s fees Depreciation on and repairs to Bank’s property Other expenses Total operating expenses
515785817 83969332 1819276 42088151 235125 32647994 4887000 144000 2177217 57349344 171115272 912218528
330992966 72158724 3090674 39201661 382875 28883882 3919032 196500 1578096 44748138 110130729 635283277
Profit before provision Provision for investment Provision for diminution in value of shares Profit before tax
1908204049 176243963 113163000 1618797086
1378673073 179182138 ------------1199490935
Provision for tax Deferred tax Profit after tax Retained earnings brought forward Transfer from provision for investment (share) Adjustment for (under)/over provision for tax made in earlier years Profit available for appropriation Appropriations: Statutory reserve Issue of bonus shares
687953479 -----------930843607 1670358 ----------------------932513965
539032593 10166000 650292342 42989805 4963123 (27244800) 671000470
323759417 ----------------
240890812 428439300
Earnings per ordinary share
43.45
43.48
HIGHLIGHTS OF THE OVERALL ACTIVITIES Sl No.. 1. 2. 3.
Particulars Paid up capital Total capital Surplus/Shortage of capital
2007 2142196800 4569562645 498916145
2006 1713757500 3467368068 551245578
4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22.
Total assets Total deposits Total investment Total contingent liabilities and commitments Ratio on investments and deposits Ratio on classified investments & total investments Profit after tax and provisions Classified investments for the year Provision held against classified investments Surplus/(Shortage) of provision Cost of fund Profit earning assets Non-profit bearing assets Return on investment (shares & bonds) Return on assets (after tax) Income on investment (shares & bonds) Earnings per share Net income per share Price earning ratio (times)
51503027985 41546568592 40195239222 22632654873 96.75% 1.58%
41793540962 35032024625 32641270316 18994087363 93.18% 1.80%
930843607 635106791 270763271 -9.07% 42357645536 9145382449 8.77% 2.00% 205594883 43.45 43.45 9.02
650292342 588173168 90887038 6950000 9.17% 35161475381 6632065581 6.55% 1.73% 121460342 43.48 37.95 7.74
Table 4: Overall Activity Learning Part 12.0 Observation EXIM Bank, Elephant conducts all types of commercial banking operations. The core business of the bank comprises of trade finance, term finance, working capital finance and corporate finance. The bank is also providing personal credit; services related to local and foreign remittances and several products related services. The scheme of the Bank, which is designed to help the fixed income group in raising standard of living is competitively priced and has been widely appreciated by the customers. The Bank has achieved success in all sectors and the achievement has been possible because of the able leadership, dedicated and committed services provided by all levels of management and staff and all the trust and confidence that the valued client had reposed in the Bank. EXIM Bank Ltd. is a third-generation private commercial Bank in the country with commendable operating performance. Directed by the mission to provide prompt and efficient services to clients, EXIM Bank has successfully celebrated its wide range of commercial banking services. The Bank has achieved success among its peer group within a short span of time with its professional and dedicated team of management having long experience, commendable knowledge and expertise in convention with modern banking. 12.1 General Banking Division The division of general banking plays an important role in all commercial banks. It's mainly a liability side. EXIM bank facilitates sections and facilities of general banking. General Banking Division can be functioned in the following way:
General Banking Division
Account opening section
Clearing section
Remittance section
Cash section
Chart 4: General Banking Division 12.2 Account Opening Section: One who want to open an account, he has to fill up an account opening form. This form is a legal contract between the bank and prospective customers. The rules and regulations for opening of an account vary from customer to customer, if he wants to open different types of accounts. First of all various types of customers such as individual, joint, proprietorship, partnership, private limited company, public limited company, associations, clubs, societies, trusts etc. can open their various types of accounts as their requirements which are mentioned below: 1. Individual Account: • If individual wants to open an account than introducers must be needed to open current and savings account that has current or savings account in the bank. • The introducer must be signed in the two passport size photographs. • Individual must be submitted his/her certificate of Word Commissioner or the photocopy of the passport (valid) 2. Joint Account: This account can be opened by 2 persons or more than 2 persons and each person should fulfill the requirements of individual account. The account holders should mention the mode of operation. 3. Proprietorship Account: • The requirements of individual account should be Proprietor • Must be submitted a copy of trade license. • The form of sole proprietorship declaration of EXIM Bank must be tilled up. 4. Partnership Account: • Partnership account is as like as joint account. • Must be submitted a copy of partnership deed • The partners also fill up the partnership letter of EXIM Bank with their name and signature. • Must be submitted a trade license. 5. Public/Private Limited Company: • • •
A form of Specimen of Resolution to be passed by a limited Company for Opening an account with the bank should be filled up. Memorandum and Articles of Association Certificate of commencement of Business (in case of Public Limited
•
Company). Certificate of incorporation.
6. Various Types of deposit account: EXIM Bank offers following types of deposit account: 1. 2. 3. 4.
Current Account Fixed Deposit Receipt Account Savings Account Short term Deposit Account
General procedure of openings account: Step 1: Bank provides account opening form to the prospective customer or applicant, Step 2: Applicant fills up the form, Step 3: Application submits the form dully signed by an introducer and along with, Step 4: The authorized officer scrutinizes the application form and Step 5: If they are satisfied, they will open the account, Step 6: They issue deposit slip and deposit must be made it, Step 7: After deposition one checkbook is issued, Step 8: Bank preserves the specimen signature card to verify the signature of the client, Step 9: Account is opened. 1. Current Account: Current account facilitates the account holder to draw money at any times but no interest is given to the current account deposited money. Current accounts can be opened by any individual or joint or any name of proprietorship business, private limited company or public limited company, association, clubs, societies, trusts etc. Generally, current account is opened for businessman and traders for easy transaction. By taking this liability, EXIM Bank takes service charge 100/- for six months. 2. Fixed Deposit Receipt Account (FDR}: It's a certain period deposited system, which is not repayable before the maturity date of a fixed period. EXIM Bank offers higher rates of interest on such deposits. Usually customers are allowed to open this account for a certain period and the rate of interest varies in accordance with the terms of the deposit. The features of FDR are as follows: Minimum balance: TK 10000.00
3 months 12.25%
Profit
6 months 12.30%
1 year 12.75%
3. Savings Account: To maintain smooth and certain life in future Savings account is very suitable for middle class groups. The attributes of Savings Account are: • • •
500/- is the minimum amount of initial deposit. Client can not withdraw money more than twice a week, The interest rate is 8% against S.B. Account.
For opening of this type of accounts following requirements are necessary: a) The introducer must be attested photograph. b) The introducer must be account holder of SB and CD of EXIM Bank Bangladesh Ltd. 4. Short Term Deposit (STD): Short Term Deposit has following attributes: • 6% interest rate against STD. • No restriction over withdrawal of money • 50000/- is the minimum balance. EXIM Bank extends some special schemes or products for clients: 1. Monthly Savings Scheme (MSS) 2. Multiply Savings Scheme (MPSS) 3. Monthly Income Scheme (MIS) 4. Super Savings Scheme (SS) a) Monthly Savings Scheme (MSS) It's a sure investment for a steady return. It can be opened for 5, 8, 10, or 12 years for Tk.500, Tk.1000, Tk.2000, and Tk.5000. The savings amount is to be deposited within the 10th of every month. If the depositor has a separate account in the bank for which a standing instruction can be given to transfer the monthly deposit in the scheme's account. Incase of failure to make the monthly installment in the schedule time 5% on overdue installment amount will be charged. The lowest charge will be Tk. 10 and this will be added with the following months installment. After 3 years of savings in this schemed the depositor is eligible for a loan up to 80% of his deposited amount. Highlights of the Scheme 1) Higher monthly income for higher deposit 2) This scheme is for a 5, 8, 10, 12 year of period. 3) 5007- is the minimum deposit 4) Monthly income will be credited to the depositor's account on the 10th of each month.
Term
Monthly Installment
Monthly Installment
Monthly Installment
Monthly Installment
_______
500.00
1000.00
2000.00
5000.00
5 Years
41400.00
82800.00
165000.00
414000.00
8 Years
81800.00
163600.00
327200.00
818000.00
10 Years
118450.00
236400.00
472800.00
1184500.00
12 Years
165993.00
331986.00
663973.00
1659932.00
Table 5: Various Scheme Conditions of the Scheme 1) By filling up a form an account is opened. 2) A non-transferable deposit receipt will provide to the customer after opening the account. 3) If the deposit is withdrawn before a 5-year term, then saving interest rate will be applicable and paid to the depositor. However, no interest will be paid if the deposit is withdrawn within 1 year of opening the account and Monthly Income paid to the customer will be adjusted from the principal amount. 4) This scheme will be credited to the loan account until liquidation of the loan amount inclusive of interest. A depositor can avail loan up to 80% of the deposit amount under this scheme. b) Multiples Savings: Savings works as the very foundation of development. Savings is the prime source of business investment in a country. So it helps to build up capital. To create more awareness and motivate people to save, EXIM Bank offers Multiples Savings Scheme. Conditions Of The Scheme: a) b)
c)
The deposit can be made in multiplies of TK. 10000.00. This is 11 years period deposit. But the deposit can be withdrawn at any year with interest. As an example, if deposit is withdrawn after completion of 1 year but before 2 years then deposit with interest will be paid for 1 year only. The same rule will apply for other years. If deposit is withdrawn before 1st year then no interest will be paid, The depositor can avail loan up to 80% of the deposit under this scheme.
C) Monthly Income Scheme: This scheme is opportunity for the people who try to save their excess money. In this scheme minimum deposit is Tk. 25000. Deposit will be high in case of higher monthly income. The scheme is for a five-year period. Monthly Income will be credited to the depositor's account on the 5th of each month. If the deposit is withdrawn before a five-year term, the saving interest will be applicable and paid to the depositor. No interest will be paid if the deposit is
withdrawn within one year of opening the account and monthly income paid to the customer will be adjusted from the principal amount. A depositor can avail loan up to 80% of the deposit amount under this scheme. In this case interest will be charged against the loan as per bank's prevailing rate. During the tanner of the loan, the monthly income will be credited to the loan account until liquidation of the loan amount inclusive of interest. Deposit Amount (Tk.)
Monthly Income (Tk.)
2500.00 5000.00 100000.00 20000.00 50000.00 100000.00
250.00 500.00 1000.00 2000.00 5000.00 10000.00
Figure: Monthly income according to deposit amount. D) Super Savings Scheme: Capital is the prime source of business investment in a country. For this reason savings helps to build up capital to motivate the foundation of development. To create more awareness and motivate people to save, EXIM Bank offers Super Savings Scheme. Conditions of the scheme: • Any individual, company, educational institute may keep their savings under this scheme. • The deposit can be multiplies of TK. 10000. • The period of deposit is for eight years. • Any customer can open more than one account in a branch in his name or in joint names. A deposit receipt will be issued at the time of opening the account. • If the deposit is withdrawn before seven years term, then savings interest rate +1% will be supplied before payment is made. However, no interest will be paid if the deposit is withdrawn 1st year. • A depositor can avail loan up to 80% of the deposited amount under this scheme. • In case of the death of depositor, before the term, the deposit (with interest at savings rate +1%) will be given to the nominee; the legal heirs/successors will be paid on production of succession certificate. • In case of issuing a duplicate deposit receipt the rules of issuing duplicate of Term Deposit will be applicable. Some examples are given below: Deposit
Term
Payable at maturity
Payable Amount
10000.00
8 years
Double
20000.00
20000.00
8 years
Double
40000.00
50000.00
8 years
Double
100000.00
100000.00
8 years
Double
200000.00
200000.00
8 years
Double
400000.00
500000.00
8 years
Double
1000000.00
12.3 Clearing Section: The main function of clearing section is to operate with safety and security of financial transaction of financial instrument like DD, PO, check etc. on behalf of the customers through Bangladesh Bank Clearing House, Outside Bank Clearing (OBC), Inter Branch Clearing (IBC). This section examines in the following way: • Whether the paying bank within the Dhaka city. • Whether the paying bank outside the Dhaka city. Then these checks can be cleared by OBC, OBC stands for Outward bill for collection. • Whether the paying is their own branch. These checks can be cleared by LBC, LBC stands for Local Bill for Collection, Outward Clearing: When the financial instruments like P.O.D.D. and Checks collected by specific branch within the Dhaka city and not of their own branch then the Outward clearing will be functioned. The procedures of Outward Clearing are followed: • The instruments with schedules to the main branch of EXIM Bank Bangladesh Ltd. With issuing an Inter Branch Debit Advice (1BDA). • Clearing stamps are affixed on the instruments. • Checked for any apparent discrepancy. • The authorized signature endorses instruments. • Particulars of the instruments and vouchers are recorded in the 'Outward Clearing' register • The clients receive the duty signed instruments and also branch code number affixed on the instruments. Inward Clearing: When the checks of its customer are received for collection from other banks, the following should be checked very carefully; • The check must be crossed. • The check should not carry a date older then the receiving date for more than months. • The collecting bank must check whether endorsement is done properly or not. • The amount both in words and figures in deposit slip should be same and also it should be in conformity with the amount mentioned in words and figures in the checks. Essential elements for Clearing: There are three essential elements are required for clearing the Instruments: 1. Clearing Seal, 2. Crossing Seal. 3. Endorsement Seal.
12.4 Remittance Section The word 'Remittance' means sending of money from one place to another place through post and telegraph. Commercial banks expose this facility to its customers by means of receiving money from one branch of the bank and making an easier arrangement for payment to another branch within the country. Considering this quick transaction, the modes of bank remittance are categorized as under:
Remittance Pay Order (PO)
Demand Draft (DD)
Telegraphic Transfer (TT)
Chart 5: Remittance 1. Payment Order (P, O): Payment Order is a process of money transfer from payer to payee within a certain clearing area through banking channel. It's an order of local payment on behalf of the bank or its constitution. A customer can purchase different modes of payment Order such as pay order by cash and pay order by check. EXIM Bank charges different amount of commission on the basis of payment order amount. 2. Demand draft (D.D): Demand Draft is a most popular instrument of money transfer from one corner of the country to another. A customer from a particular bank’s branch of the same bank to pay a fixed sum of money to a certain person or order on demand can issue this. Its may be paid in cash to the payee on proper identification or the amount may be credited to his account (in case of A/C holder of the bank). EXIM Bank charges commission for DD is 0.15% of the principal amount. How DD works: 1. The applicant is an A/C holder in an EXIM Bank 2. Applicant files up the relevant form with a credit voucher for the Bank 3. DD is handed over to the customer where paying bank is mentioned and payment will be made from another branch. 4. An IBCA along with photocopy of DD is sent to the paying bank 5. If DD comes to the bank on which it is drawn, the bank honors it. 3. Telegraphic Transfer (TT): Telegraphic Transfer is the most rapid and convenient but expensive method. There are different modes of telegraphic transfer such as Fax, Mobile, Telephone Telex, and Telegram.
If an applicant wants to transfer money quickly to the pay in another city or district he /she may request the banker to send it by TT. 12.5 Cash Section: Cash section plays a vital role in the general banking procedure. Because it deals with most liquid asset. This section receives cash from depositors and pays cash against checks, drafts, and pay order and in slip over the counter. This branch also facilitates electronic counting machines to the customers for a huge amount of cash money can be counted within a few minutes. 1. Cash receiving procedure: Depositors deposit cash, checks, drafts, pay order etc. In these types of deposits, the depositors must be written the following way: • Date of the instrument. • The title of the account and its number. • The amount in figure and in words as same. • The signature of the depositors. After writing all these things the teller will accept cash, check, draft, pay order etc against deposit slip. The teller will place signature and affix 'cash received' rubber stamp seal and record in the cash received register book against the account number. After finishing all these procedure, the cash officer passes the deposit slip by posting in the computer section and returns the customer's copy. 2. Cash Payment Procedure: Before honoring a check, the paying banker has to observe the check in the following way: • Whether a check is an opened or crossed check, it must be looked. • Whether the check is drawn on his/her branch, it must be observed. If the check is postdated then it must not be paid. • If the check is mutilated materially altered then the officer must not honor that check. • The officer must verity the regulatory of the endorsement. • The officer must compare the signature of the check with the signature on the specimen signature card. 3. Passing The Check: After verifying all these documents the officer passes it to the computer section for more verification. By putting 'pay cash' seal, the officer gives the cash amount to the holder and record in the paid register. 4) Dishonor of Check: EXIM Bank's Banker can dishonor a check in the following situations: • Insufficient fund. • Check is post dated. • Crossed check must be presented through a bank. • Clearing stamp required cancellation. • Check crossed "Accounts pay only". • Collecting bank's discharge irregular.
• • • • •
Payment stopped by drawer. Effect not clear on the check. Full over not received. Payee's endorsement irregular. Drawer signature differs
13.0 SWOT Analysis of EXIM Bank of Bangladesh Limited:
Strengt h
Weaknes s
Opportun ities
Threats
Strong Non Interest earning base. Wide branch network among 3rd generation bank. Low infection in loan exposure. Wide product line.
High cost of fund Highly exposed to volatile Garment business. Excessive dependency on term deposits. Inadequate delegation of power. Inadequate IT infrastructure.
Credit card business. Scope of market presentation through diversified products and wide banking network. Regulatory environment favoring private sector development.
Increased competition in the market for public deposits. Market pressure for lowering the interest rate. Deteriorated export, import ad guarantee business due to indecent competition as well as economic slump.
14.0 Problems Identified 1. In general banking division of EXIM Bank of Bangladesh Ltd, they follow the traditional banking system. Their entire general banking procedure is not fully computerized. They are not using Data Base Networking in Information Technology (IT) Department. So, they are transferring data by using floppy disk and paper documents. 2. They do not provide any sort of after sale services, like, bulk SMS via cell phoebe, email or any other updated communication for the sake of better customer service. 3. As the account opening form is very complicated and sometimes confusing, it is not easy for customers to fill up. 4. EXIM bank does not take adequate promotional activities whereas competitive banks spend a lot of money for promotional activities to strengthen relationship with customers. 5. The branch lacks adequate computers in remittance section of EXIM bank, Elephant road Branch. 6. As job description is not clearly known to each and every employee in general banking division, this creates many problems and interpersonal conflicts and reduces the spirit of teamwork. Job Rotation is not adequate in General Banking Division of EXIM Bank of Bangladesh Ltd, Elephant road Branch. Thus, monotony incurs among the employees. 7. Physical appearance of the employees is not up to the mark. The employees of the branch are not always in sophisticated attire. It is an important dimension of service quality by which customers can perceive the service quality of the bank. 8. Most of the employees don’t have the sufficient knowledge about computer literacy, which is very much essential for an employee as well as for the organization for building a better business in a science for a structured business system 9 EXIM bank don’t have the 24hrs Call Center, not even the 9am to 5pm Customer Services for building a better customer service 10. EXIM bank doesn’t have the sufficient ATM services, which is very much available in the Banking market now a day. 15.0 Recommendations 1) The General Banking Division of EXIM Bank of Bangladesh Ltd, Elephant road Branch should be fully computerized to facilitate fast and better services to the customers.
2) The bank can design a new and easy format for Account Opening Form to reduce hassle of the clients. 3) The bank should undertake huge promotional activities to strengthen relationship with customers. 4) Sufficient computers should be arranged as soon as possible to provide remittance Services quickly to its customers. 5) Job responsibility should be clear and specific to each and every employees of general banking division 6) The employees should be given more training for the better communication with Customers. 7) The employees should be formal in dress as well as in communication with the customers 8) EXIM bank needs to launch more ATM Booths for delivering better customer services. 9) They should have attest 8hrs of Call Center services initially and day after 24hrs of Call Center as customer increases day after day. 16.0 Conclusion The authority of the EXIM Bank Limited has claimed that the bank is now well positioned to meet both internal and global challenges. It is expected to continue its efforts to strive for innovating initiatives and capturing opportunities for vibrant growth, value creation and quality improvement of its financial products. The past achievements prove this aspiration. The bank has keen intention to contain its present customers and also search for potential customers. It will implement this strategy by extending its products and services and improving the level of customer service delivery. In its pursuit for growth, the bank will adhere to good corporate governance and best practices and sound risk management policies and strict credit evaluation procedures. The past history of performance indicates its ability to achieve its goal. Overall the performance of the General banking at EXIM Bank ltd. is quite satisfactory which helps it earn a handsome amount of income. However, there does have still room for further improvement and expansion. From the practical implementation of customer dealing procedure during the whole period of my practical orientation in EXIM Bank ltd. 1 have reached a firm and concrete conclusion in a very confident way. I believe that my realization will be in harmony with most of the banking thinkers. It is quite evident that to build up an effective and efficient banking system to the highest desire level computerized transaction is must. EXIM Bank Ltd. is a new generation Bank. It is committed to provide high quality financial services/products to contribute to the growth of G.D.P of the country through stimulating
trade and commerce, accelerating the pace of industrialization, boosting up export, creating employment opportunity for the educated youth, poverty alleviation, raising standard of living of limited income group and overall sustainable socio-economic development of the country. The is not so far when it will be in a position to overcome the existing constraints and it may be expected that by establishing a network over the country and by increasing resources this bank will be able to play a considerable role in the portfolio of development of financing. Success in the banking business largely depends on effective lending. Less the amount of loan losses, the more the income will be from credit operations. The more the income from credit operations the more will be the profit of the EXIM Bank Ltd. and here lays the success of credit financing. It can be argued that though the results achieved so far are not satisfactory, credit financing is a modern scientific technique for enhancing EXIM Bank's strength and there lies the opportunities to make it more effective in the future for our own benefit. From the learning and experience point of view I can say that I really enjoyed my internship at EXIM Bank Ltd. from the very first day. I am confident that this 03 (Three) months internship program at EXIM Bank Ltd. will definitely help me to realize my further carrier in the job market. References 1. Modern Money and Banking. Miller & Van Hoose. 2. Banking Law and Practice. P.N Varshnay & Shri H.C. Sarkar. 3. Foundations of Financial Market & Institution (3rd edition) Frank. J. Fabozzi, Frank J. Jones, Michael G. Ferri, Framco Modigliani 4. Bangladesh Banks Prudential Guideline On General Lending-2004. 5. Annual Report of EXIM Bank Ltd. For the year of 2004, 2005, 2006 & 2006. 6. Economic Review 2006, Ministry of Finance Government of Bangladesh. 7. Bangladesh Bank Bulletin (Oct.-Dec. 2006) 8. Various Internship Reports 9. Bangladesh Bank Website: www.bb.org
10. EXIM Bank Website: www.eximbd.com 11. Website of Bangladesh Government: www.gov-bd.org 12. Commercial Bank Management Peter S. Rose