Case study on general banking activities of bangladesh commerce bank ltd

General Banking Activities of Bangladesh Commerce Bank Ltd.

1.1 Background of the Study Banking sector is the driving force for an economic growth of a country. Every commercial bank acts as financial intermediary whose main aim is to earn profit through borrowing and lending funds in the profitable sectors and they also issue different types of credit instruments. Therefore, the Banking system occupies an important place and plays significant role in a nation’s economy building. Necessarily, banking sector also ensure commendable contribution in the economic development of a country and forms the core of the money market in an advanced country. This sort of financial intermediary accepting deposits and granting loans; offers the widest menu of services for different business ventures.

Commercial banks have significantly expanded their financial services to the clients and government around the world. In current business world is very dynamic and fast changing.

That’s why every professional have to have clear concept regarding this changes and he/she need to conform to these changing environments. In order to become a real professional people’s needed to enter into practical business world. A professional is a person who is skilled in the theoretical, scientific and practical aspect of an occupation and who performs with a high degree of competence.

1.2 Scope of Study Bangladesh Commerce Bank Ltd is one of the fast growing banks in the country. It’s actively competing with others leading commercial banks. It formally launched business activities on 06.09.1999. This report constructed on the basis of general banking activities of the organization and it covers the organization’s structure, chronological growth and development performance of the commercial banks. The main part of the repot consists of the “General Banking activities of the Bangladesh Commerce Bank Ltd.”. Due to successful completion of essential part of the report have the opportunity to discuss regarding following issues: • • • • • • •

Finding the bridge between academic study and practice in organization.

Importance of the General activities in banking.

Finding the bridge between academic study and practice in Organization.

What are the problems of Overall banking practice in BCBL? What are the basic difference between other commercial banks and BCBL’s activities?

How to maintain the organizational behavior inside the organization.

How General Banking performance does affects overall progress of the Organization.

1.3Objectives of the Study There are some certain objectives behind preparing this report. These acted as incentive to make the report. The primary and basic objective is to fulfill the course requirement and then understand the entire banking system of Bangladesh Commerce Bank Ltd (BCBL). Other than these two other objectives are as follows: • • • • •

To achieve concept regarding practical business world.

Find out similarities between academic knowledge and practical field.

Understanding the organizational environment.

How to maintain official rules and regulations.

Understanding the basic activities of Overall banking.

1.4 Review Literature General Banking General Banking is an operational function of the bank which consists the management of deposit, cash, clearing house, bills, account opening, security instruments handling, customer services, locker facilities and other ancillary services of the bank besides Advance and Foreign Trade.

General banking is one of the key drivers of the U.S. economy. General banking provides a safe place to save excess cash, known as deposits. It also supplies liquidity to the economy by loaning this money out to help businesses grow and to allow consumers to purchase homes, cars and consumer products. Banks primarily make money by charging higher on their than they pay for deposits.

Financial institution that mediates or stands between ultimate borrowers and ultimate lenders is known as banking financial institution. Banks perform this function in two ways – taking deposits from various areas in different forms and lending that accumulated amount of money to the potential investors in other different forms.

1.5Methodology Data Collection To prepare an authentic and informative report we had to study all the company’s information, record, company website and other relevant things. With these it was most significant to discuss with employees of different section regarding various confidential records. Besides we studied different congenial books and journal published on related subject and collected information from different sources.

Sources of Data To prepare an enrich report it require acquisition of huge information and study of different relevant works on it. That’s why we had to utilize both primary and secondary sources to collect relevant information.

A). Primary Sources of Data • Conversation with the organization’s stuff and Executives in the Principal branch and employees of Mailbag Branch.

• Conversation with bank’s clients.

• Study of relevant file.

• •

Observation of day to day activities.

Informal works exposures from different desks of the branches.

B) The secondary sources of Data This source includes: • Annual report of Bangladesh Commerce Bank Limited.

• Periodicals published by the Bangladesh Bank.

• Website of BCBL. • In order to prepare the report I have used these sources widely.

Data Analysis and Organize After collection of entire data different approaches are widely used to analyze and organize the data such as qualitative approach. In this process technological assistance was more significant and indispensable.

Profile of Bangladesh commerce bank limited 2.1 Background of the Bangladesh Commerce Bank Ltd. Bangladesh Commerce Bank Ltd. (BCBL) is a Commercial bank but it has some differences in its formation compare to other private banks. Bangladesh Commerce Bank Ltd. was established by recognizing the erstwhile BCI Ltd through passing act 12 of 1997 in the parliament of the People’s Republic of Bangladesh having paid up capital amounting to Tk. 92 crores consisting of Tk. 40 Crore cash money paid by the government and 3 state- owned Banks and Tk. 52 crores of BCI depositors’ money. The commercial operation of the Bank started since September 16, 1999 through opening of its principal branch and all other 23 branches were opened by 31st December 1999. Having incurred losses in the first two years the bank started earning profit since 2001. The Bank started its operation shouldering the legacy of BCI and has been progressing smoothly facing all hurdles and problems. The progress is satisfactory and noticeable.

Bank earned an extensive net profit Tk. 4.81 crores & Tk. 7.04 crores in the year of 2002 & 2003 respectively. Although the overall economic picture of the country was instable during 2003, but the bank registered a growth of 124% over that of previous year. The bank adequately covered capital adequate ratio as fixed by the Central Bank. This achievement had been possible due to positive attitude toward the organization, hard working, and honesty of the management team with the support of policy directives and guideline from the board of Directors. Out of deposited money of BCI Ltd. Tk. 163 crore has already been paid out of 180 crores of BCI which is a success for the bank. The said payment has been made through transferring Tk. 52 crores with investment BCI Ltd. and paying cash Tk. 62 crores. For the sake of BCI depositors Tk. 30 crores over the recovery of BCI investment has been paid to the depositors. In the year of 2003 the total deposit of the bank was Tk. 409.39 crores which is 46% more than that of previous year. At the same time the bank disbursed a total loan of Tk. 291.10 crores which is 71.11% more than that of previous year. The progress is continuing.

Bangladesh Commerce Bank Ltd. inherited 24 closed branches of former Bangladesh Commerce and Investment Limited. Having been registered with the Registrar of Joint Stock Companies and Firms with the prior approval of Securities and Exchange Commission, it commenced banking operation with the opening of its Principal Branch at 19, Rajuk Avenue,

Motijheel Commercial Area, the financial hub of the Capital City of Dhaka on 16th September 1999. In the year of 2002 by opening a branch in Commilla the total no. of branches have been increased to 25. The bank has planned to open more new branches and that will be implemented in phases after getting approval from Bangladesh Bank. In the year 2009 bank earned profit Tk. 7.25 crores. In the year 2010 bank earned profit Tk. 11.59 Crore.

It is known that Bangladesh Commerce Bank Ltd. Could not started its operation smoothly this had to launch its operation with a burden of Tk. 179 crores of BCI stuck up loans. Most of the loans were from BCI period there was no documents and against which were unsecured. With continuous and sincere efforts of the Officers a cash recovery of Tk. 4.50 crore has been possible during the year which led the cumulative recovery to Tk. 84.00 crores up to this time.

The Bank is concentrating the activities in its area of specialization has achieved good market reputation with efficient customer service. The Bank is committed to providing continuous training to its staff to keep them up to date with modern practices in their respective fields of work. The Bank also tries to fulfill its share in community responsibilities. By such measures the Bank intends to grow and increase shareholder’s earning per share. Bangladesh Commerce Bank Ltd. Promises to maximize customer satisfaction through services and build a trusting relationship with customers, which has stood the test of time for the last all years.

The total manpower strength is 375 out of which 213 are officers and 162 are staff. They are very much efficient in their professional area. They are being further trained to take up the challenging job.

2.2 The Objectives of the Bank As a member of the money market, BCBL plays a pivotal role in accelerating economic development of the country. Bangladesh Commerce Bank Ltd. has been established in order to achieve some certain objectives. Those objectives are as follows: • • • • • • • • • •

Providing services by diversifications to the doorstep of people in the economic sector.

Ensuring maximum utilization of professional manpower by developing skill and creativeness.

Offering maximum service to the clients and shareholders of the Bank, as per rules.

Creating savings attitude among various classes of people. Increasing investment for keeping the market economy operative.

Assessment of customers need and provide short-term and long- term finance on the basis of real need.

Earning confidence of all concerned by easing foreign trade and international transactions.

Proper maintenance of bank’s resources through appropriate investment and active participation in various welfare programmers of the country.

Involve customers with modern banking through proper uses of modern information technology.

Provide best services to customers through establishing firm discipline in bank management and long-term relations.

Achievement of economic growth through various socio- economic activities.

• •

Building image of the bank at home and abroad. Upgrading socio- economic aspects of Bangladesh by financing agro-based project.

Activate capital market by more participation in capital market.

2.3 Goals of the Organization The bank conducts its business activities toward some certain goals. These are as follows: • • •

The basic goal is to organize funds in order to invest for profitable purposes in various fields of small and medium scale of trading, large companies and corporate sectors.

To undertake project promotion to identify profitable areas.

To scrutinizes the opportunities for investment and developing the new products.

2.4 Mission of Bangladesh Commerce Bank Ltd. Mission of Bangladesh Commerce Bank Ltd. is as follows: • One Stop, Fast, and accurate customer services.

• High slandered business ethics • Balanced financial growth strategy.

• Attracting & nourishing quality human resources with right compensation.

• High quality financial services with the assistance of latest technological device.

• Innovation in banking service at a competitive price.

• Steady return on shareholder’s equity.

• Committed to the growth of society and economic development.

2.5 Vision of the Bank The vision of Bangladesh Commerce Bank Ltd. is to give experience to delight the customers and to give an environment where its own people will excel. At the juncture of global economic activities, BCBL has been driven by the strategic policy, as the prosperous economies of the global village are option. Its aim is to become the leader in banking sector of the country.

2.6 Functions of the Organization Beside normal Banking business, the bank is engaged in them following activities: • Borrowing from individual institutions.

• Lending against or without security for local or international trade.

• Carrying out functions of foreign trade and foreign exchange business including opening of L/C, issuance of T/C, Credit card, buying, selling discounting of bills, CDs, Promissory Notes, approved securities, etc.

• Buying and selling of foreign currencies.

• Direct customer Service like payment of utility bills, insurance premiums, receiving dividends, pensions, etc.

• Participating in the capital market as stock-broker and also as portfolio-investor.

• Reliable safe custody of Valuables.

• Providing excellent remittance facilities.

• Publication of Financial Statement.

• Provides withdrawal facilities of Deposits.

2.7 Organizational Structure of BCBL In the legislative body the chairman is the head of the Board of Directors. There is a Managing Director who is also the President or CEO mainly controls and supervises the

major divisions of the Bank. One Deputy Managing Director reports to him. Two Executive Vice President Reports to him. Executive Vice Presidents controls the credit, loan administration, international, financial control, accounts, marketing and human resource Division.

The organizational structure of Bangladesh Commerce Bank Ltd. is quite horizontal where each person reports to only one person, which refers to a very good working environment.

For example, each Officer reports to the AVP or VP or SVP, AVP or VP or SVP reports to EVP, EVP reports to DMD and DMD reports to MD. 2.8 Management Team To achieve the mission, a set of different drivers are mandatory. Commercial banks in Bangladesh are now in hard competition. This is because of the continuous growth of similar service oriented local banks along with special service providing foreign bank due to globalization. BCBL management team is sound experienced and enrich with excellent academic background and the legislative body or Board of Directors are responsible for selection of management team. The Board of Directors also sets objectives, policies and strategies and management team is the instrumental device, who implements those sets by the Board of Directors.

List of Management Personnel are given below...

1. Mr. S.A. chowdhury Managing Director 2. Mr. M. Ebadat Hussain Executive Vice President 3.Mr. Md. Shamsuddin Ahmed Senior vice president

4. Mr. Md. Gulam Nabi Senior vice president 5.Mr.Sagir Ahmed Senior vice president 6.Md.Salim Senior vice president

Hasan

2.9 Management Information System Bangladesh Commerce Bank Ltd. uses branch banking software, developed by a private company on windows platform. The head Office and branches use the software for book keeping, automatic interest calculation, daily transaction listing and auto trials, auto maturity and auto renewal of FDR, automatic integration customer’s ledger and general ledger, printing of general ledger position including balance of subsidiaries, monthly income and expenditure position etc.

2.10 Products and Services of BCBL BCBL is a rapid growing commercial bank in the country. It’s competing with wide range of product and services that play a convenient role to its attainment. Products and services of Bangladesh Commerce Bank Ltd. are as follows: General Banking General banking department offer following products: • Savings deposits on S/B A/C • Current deposit A/C. • Short Term deposit on STD A/C • Term Deposit • Fixed Deposit on FDR

• • •

Special Scheme(including double & triple growth deposit, Lacpati Deposit Scheme, Millionaire Deposit Scheme, Marriage Deposit Scheme, Education Deposit Scheme, Kotipoti Deposit Scheme, and new addition nandita & srijoni ) Consumers Financing Lease financing.

Foreign Exchange Foreign exchange department of the bank provide following service in order for convenience of the customers: • Issuing Letter of Credit • Letter of credit advice • (FDBP) Foreign Document Bill Purchase.

• (FDBC) Foreign Document Bill Collection • Bill of Exchange • Negotiating Bills • Issue of Traveler’s cheques and its encashment Loans and Advances Loans and advance department deals with following products and services: • Financing of small and medium Industries • Financing of Trade • Financing if Import and Export • Micro-Credit and Micro Enterprise schemes • Credit Scheme for women entrepreneurs • Consumers credit Scheme • Special Credit Scheme for service holder 2.11 Special Schemes Other than the normal banking business the bank has the following special schemes: • Small and medium scale entrepreneurs credit scheme.

• Scheme for loans to employees.

• Loan scheme for women entrepreneurs.

• Pension deposit scheme for small saver.

• Monthly deposit and profit scheme.

• Credit scheme against share.

• Interest free deposit.

• Agricultural credit Scheme.

• Life time savings Scheme.

2.12 Human Resource Management BCBL strongly believe that only well qualified manpower can meet the expectations of the clients. For this reason BCBL always conscious regarding its existing Human Resources and frequently hiring efficient manpower to meet the standard of quality services. BCBL often arranging training program for junior level executives at BCBL Institution and senior level officers and executives are sent at BIBM, Mirpur, and Dhaka for higher training. Abreast this BCBL also send its employees abroad for higher training.

2.13 Sources of Funds

There are various sources of funds of Bangladesh Commerce Bank ltd. Basically BCBL accumulate funds from following sources: Internal sources

Paid up Capital 92.00 Crore

Reserve

Profit Surplus 1.58 Crore

Statutory Reserve 1.26 Crore

Other Reserve 0.38 Crore Figure: 02, Sources of Fund 2.14 Branches of Bangladesh Commerce Bank Ltd. Bangladesh Commerce Bank ltd. operates its business activities with 25 branches around the country. Following table shows the Branches’ names, addresses, Telephone no etc.

Name of the Address Manager/Branch InContact Numbers Branches Charge Principal Yunus Trade Mr. Shamsuddin Ahmed Tel:9571581, 9559831-2 Branch Center: Level # 22, Senior Vice President Fax:9553832, 52-53, Dilkusha Talex:642557BCBLBJ C/A,Dhaka-1000, E-mail: bcbl@bdmail.net Banglabazar 52, North Brook Mr. Kaysarul Islam Vice Tel:712227 Branch Hall Road, President Fax: Banglabazar, Talex:632145BC-BBSDhaka.

BJ Banshal 124, Shahid Sayed Md. Abdur Raouf Tel:9566140,7166654 Branch Nazrul Islam Vice President Fax: Talex:632145 Sharany(Narht BCBLBJ South Road),Dhaka-1100 Mouchak 93/1, New circular Dewan Md Tel:8321072 Branch Road, Dhaka-1217 Moniruzzaman Vice President

Mirpur Branch

Mrs. Sabnam Sultana Principal Officer

Tel:8020115

Mr. Ali Azam Chowdhury Vice President

Tel:7215803

Tel:7311051

360,Enayet Bazar, Chittagong-4000

Mr. K.M. Ashraf Hossain Senior Vice President Mr. Md. Ashequl Haque Senior Principal Officer

Khatunganj Branch

279, Khatunganj, Chittagong-4000

Mr. Md. Jamaluddin Senior Principal Officer

Tel:011-701536, 031-618821

Dewanhat Branch

Mr. S.M. Alamgir Assistant Vice President

Tel:011-701745, 031-728145

Khulna Branch

1128 Shek Mujib Road, Ahmed Mansion, ChittagongG 141, Sar Iqbal Road, Khulna.

Mr. S.M. Waliullah Vice President

Tel:041-732595

Bogra Branch

99/1-b, Boragola, Bogra-5800G

Abdulah Al-Mahmud Senior Vice President

Tel:051-5441,65710

Commilla Zilla School Rd. Branch

35/32, Zilla School Rd., kandir par, Commilla.

16, Dilkusha C/A, Baliady Mansion

Mr. Aukhil Kumar Sarker Assistant Vice President

Tel:081-69951

Mr. Gazi Nazrul Islam Assistant Vice President

Tel:9571375, 7171263

75, Hosain Tower, Green Road Farm gate, Dhaka.

23, Goal ghat lane (1st fl.)

25/1 Zhigatola, Dhaka-1209

Mr. Md. Fazlur Rahman Vice President

Tel:8126886, 8154664

Mr. Md. Golam Nabi Senior Vice President Mr. Nizam Uddin Senior Principal Officer

Tel:7118665,7165912

Bidisha Super Market, Darpon Complex Gulshan 18, R.K.Mitra Road, Islam super

Mr. Md. Borhanuddin Senior Principal Officer

Tel:8818339,9892026

Mr. Anowar Rashid Assistant Vice President

Tel:7610321,7164750

Khilgaon Branch

Moulvy Bazar Branch Jubilee Road Branch

Dilkusha Branch Green Road Branch Dholai Khal Branch Zigatola Branch Gulshan Branch Tan Bazar Branch

Plot-28, (1st Fl & 2nd Fl) Avenue-4 Mirpur, Section-1, Mirpur, Dhaka.

290/3, Block-a, Khilgaon Railgate, Nahar tower(2nd fl), Dhaka-1219 77/6, Moulvy Bazar, Dhaka-1100

Tel:7311051

Tel:+8802862214

Market Narayan Gang-1400.

Dhamrai Branch

Kayet para, Dhamrai Bazar, Dhaka.

56, Agrabad C/A, Jiban Bima Bhaban, Chittagong.

Mr. Md. Khaibur Rahman Senior Officer Md. Zahangir Alam Vice President

Tel:06222-88139

Chaktai Branch

237,New Chaktai, Chittagong-4000

Tel:031-634612,0189321444

Sylhet Branch

Galaria Shoping & Appartment Complex (1st Fl.) ,West Zindabazar, Jallar par Road, Sylhetr.

727, Jessor Road, Daulatper, Khulna9202 Mohammadi Market, Bangabandhu Road, Nawgaon

Mr. Md. Rafiqul Islam Bhuyan Senior Officer Mr. Md. Imany Choery Vice President

Mr. Ehsan Ahmed Rouf Assistant Vice President

Tel:041-762589

Mr. Golam Mostafa Vice President

Tel:041-762589

Agrabad Branch

Daulatpur Branch Nawgaon Branch

Tel:031-726007, 724879, ,812781

Tel:0821-7232210, 0821-819521

Table: 01, Branches of BCBL 2.15 Foreign Exchange Business During the short span of life of the Bank, it has got momentum in the area of foreign trade business. It deals in all kinds of export, import, remittance and all other sorts of foreign exchange business. BCBL has got nine major correspondent banks in important business centers of the world and maintain quite a good number of Nostro accounts with many leading banks of the world. It works in the following main areas: • • • • • • • • •

Letter of Credit (L/C) Bill Purchase & discounting Export Credit (Pre-shipment & post-shipment) Remittances Foreign Currency Accounts Taka Drawing Arrangements Dealing Room SWIFT Spot & Forward Contracts.

2.16

SWOT Analysis of the Bank

SWOT provides an opinion and judgment whether an organization’s business condition is healthy or unhealthy. It is shown as bellow: 2.16.1 Strengths Chief Executive Officer (CEO) or the top management of the Bangladesh Commerce Bank Ltd. has contributed for the growth and development of the Bank is a key strength.

It has strong network and skilled manpower that able to provide quality services.

Positive professional relationships between bank and clients, which is an emotional tie in regular business.

Due to sophisticated system and technological advancement it’s easy to get the information without wasting paper works and time.

The Bank is always trying to add new and modern equipment and facilities to start online service from December next.

Employees are sharing good atmosphere in BCBL so that it gave them reason to work efficiently and to become dedicated in banking.

BCBL maintains corresponding relationship with many foreign banks so that it is an effective measure for the smooth business.

2.16.2 Weaknesses Market promotional activities are not actively working due to the lack of appropriate initiative and encouragement.

Doesn’t have effective plane for aggressive marketing activities.

People are discouraged to save their money with BCBL due to Problem Bank.

Due to lack of high quality personnel in the top level of management personality businessmen and entrepreneurs are less interested to work with BCBL. Well qualified personnel are not interested at all to work in BCBL due to less salary.

There is no well-developed infrastructure.

Most of the Branches are suffering for indiscipline problem.

The bank is far behind from technological advancement.

The branches are not well equipped by modern furniture whereas other commercial banks have sophisticated equipment.

D E

2.16.3 Opportunity Bangladesh Govt. has rendered its full support to the banking sector to develop the country’s economic position, at the same time creating employment opportunity.

It is almost decided that online banking will be started by December 2011 in BCBL and the wide area of network will facilitate the customer in BCBL Banking.

Bank will be able to accommodate knowledgeable, skilled, experienced and hardworking persons by offering attractive remunerations and fringe benefits with nice working environment.

By expanding the business portfolio, BCBL can start the investment business with foreign exchange curriculum.

By expanding the financing policy with credit facility customers are very much secured in business environment 2.16.4 Threats Defaulters are seriously affecting the smooth banking culture in Bangladesh. BCBL is a new type of bank which has been started by passing the bills in national assembly with defaulting burdens of BCI -LTD. Central bank is always supervising the local and foreign banks in Bangladesh and sometimes it is hampering the normal operations of Private Banks.

Though the innovation workings are in continuous process, but the other rival banks are copying it within the short period.

The worldwide trends and acquisitions in financial institutions the concentration goes on competitor’s products and increasing the power in their respective areas.

It is expecting that very shortly more financial institutions are coming with their new products and we should be prepared for hard competition in the following years.

Financial Performance of BCBL 3.1 Introduction Every bank is the financial institution in nature. Therefore, finance is the blood of any bank.

Necessarily the overall growth and development of the bank is totally depends on its financial performance. If the financial performances are being smooth the overall growth would be ensured other than the organizations growth would be disrupted.

3.2 Capital Structure The capital and reserve of the Bank as on 31 st December, 2010 stood at Tk.2237.80crores.

The reserve of the Bank increased from Tk.249.1 million during the year from Tk.148.60 million in the year 2009.the bank has made provision against off balance sheet items amounting to Tk. 8.16million in the year 2010.

3.3Capital and Capital Adequacy Ratio of BCBL According to the evidence of December 31, 2010.BCBL maintained a capital adequacy ratio of Tk.213.46 crore as on against the requirements of Tk.121.83 crore as set by the Bangladesh Bank as per Act 12 of 1997 up to 31-3-2004. It indicates that the bank maintained a satisfactory capital adequacy ratio during the year2010.

3.4 Deposit

At the end of the December 2010 the deposit of the bank was Tk.1218.76 crore against Tk.760.50 crore during the corresponding period of the previous year. The growth of deposit is 60.26% compared to last year. This growth rate may be termed as a remarkable achievement considering the adverse economic situation of the country during 2010. In the prevailing situation mobilizing of deposit had become very competitive and as a result average cost of fund of the bank in the private sectors had increased compared to previous year. The Bank has given stress on procurement of low cost funds including cost free funds for bringing down the average cost of fund. The deposit of their bank as on December 31, 2010 was as follows: Particulars

Crore Taka

Current and Others Deposit

210.37

Savings Bank Deposit

98.99

Short term Deposits

133.45

Deposit under different schemes

75.21

Fixed Deposit

502.65

Bills payable A/C

16.09

Others deposit

182.00

Total

1218.76

Table 04: Deposit Deposit 300 Amount Crore

250 200 150 100

th er s

P en

si on

O

F ix ed D S ep av os in gs it P B ra i ll ka s pa lp a ya bl e A /C

po si ts

D e

fit S

rm

pr o hl y

M on t

ch em e

os it ep rt te

S ho

gs S av in

C ur re

nt an d

O

B

th er

an k

s

D

D

ep

0

os it

50

Graph 04: Deposit 3.5 Investment The investment portfolio of the Bank during the year 2010 was Tk.147.23 crore against Tk71.01 crore in the previous year registering a growth of 107.34%. The portfolio of investment including Govt. Treasury Bills, Prize Bonds, Share in Public Limited Companies etc. The bank has always given emphasis on investment of funds in high yield areas and maintains statutory Liquidity requirements as fixed by Bangladesh Bank. Following listed seven years investment of BCBL. Year 2010 2009 2008

Investment 32.90 21.28 10.90

Table 05: Investment 0 10.9 2010 21.28

2009

32.9

2008

Graph 05: Investment 3.6 Dividend Due to shortfall in statutory provision on loans and advances, the bank was not in a position to declare dividend in 2010. Hopefully, the bank able to declare dividend in the next year if Tk.15.00 crore profits is earned in the year 2011 and the Bangladesh Bank allows declaring dividend without providing the required provisions for BCI classified loans and advances.

3.7 Comparative Financial Highlights from 2009 to 2010 Following table shows the Comparative Financial Highlights from 2009 to 2010: Particulars 2009 2010 Liquidity & Efficiency

Current Ratio

2.96 Times

3.11 Times

Solvency

Paid up capital Total Asset Total Deposit Total Loans & Advances Credit- Deposit Ratio Equity Ratio Net Profit Return of Total Asset (ROA) Return of Investment (ROI) Book Value per Share Basic earnings per share Price-earning Ratio

92.00 Crore 404.00 280.00 170.00 61% 23% 1.37 .34% 12.12% 100 1.50 53

92.00 Crore 541.00 410.00 291.00 71% 18% 4081 .89% 11.26% 105 5.23 34

Profitably

Market

Table: 06, Financial Highlight from 2009-2010

3.8 7 years Performance of Bangladesh Commerce Bank Ltd. BCBL has established in September 16, 1999 and formally launched its business activities.

From that day until today it’s conducting operation successfully. Therefore, following table shows the Performance indicator of Bangladesh Commerce Bank during the year 2004 to 2010.

Figure in Crore 2010 2009 2008 2007 2006 2005 2004 Authorized Capital 200.00 200.00 200.00 200.0 200.00 200.00 200.00 Paid-up-Capital Total Capital Interest Income Interest Expense Net Interest Income Other Operating Income.

Total operating Expenditure Operating Profit(Loss) Loans & Advances

92.00 101.86 40.73 26.29 14.08 7.26

92.00 99.55 36.12 24.64 11.48 10.53

92.00

92.00

82.00

82.00

30.00

32.80 22.80 10.00 6.59

20.56 13.69 6.87 4.49

17.80 12.80 5.00 2.32

1.00 8.00 3.00 0.65

34.00 34.30 (0.30) 3.17

12.35

12.82

9.55

8.21

7.04

5.93

7.55

11.59

8.41

7.04

3.15

0.22

(2.36)

(4.66)

307.29

317.51

291.10

170.00

57.00

10.10

-

Cash-in-hand & with Bangladesh Bank including other Banks Deposits Investment Recovery of BCBL Loans No. of Employees No. of Shareholders No. of Branches

152.93

124.80

118.00

109.22

117.31

103.96

41.89

423.04 32.90 4.80

428.17 21.28 4.50

409.39 0.90 4.50

280.00 1.02 7.32

176.00 1.00 12.55

91.40 0.33 12.12

8.90 52.33

425

447 1975 25

436 1975 25

375 3587 25

384 3777

367 4201 24

372 4235 24

25

Table 07: 7 years performance 3.9 Significant Accounting Policies A). Basis of Preparation of the Financial Statements The financial statements of the company are made up to 31 December each year and are prepared under the historical cost convention and in accordance with first schedule of Banking Companies Act (BCA) of 1991, Bangladesh Bank Circulars, Bangladesh Accounting Standards, the Companies Act 1994, the listing Regulations of the Exchange, the securities and Exchange Rule 1987 and other laws and rules applicable in Bangladesh on a going concern basis.

B). Revenue Recognition The revenue during the year are recognized as following which satisfy all conditions of revenue recognition as prescribed by BAS 18 “ Revenue Recognition”.

Interest is calculated on daily product on unclassified loan and advances but charged on quarterly basis.

Interest is charged on classified loans and advances as per Bangladesh Bank BRPD circular No. 16 of 1989 and such interest were not taken into income.

Dividend income is recognized at the time when it is realized.

Commission and bills on purchased and discount are recognized at the time of realization.

C). Fixed Assets and Depreciation Assets are stated at cost less accumulated depreciation.

Depreciation has been charged in diminishing balance method.

D). Earning Per Share (EPS) The company calculates earning per share (EPS) in accordance with BAS 33 “Earning per Share” which has been shown on the face of profit and loss account. This has been calculated by dividing the basic earnings by the weighted average number of ordinary shares outstanding during the year. A diluted earnings per share is required to be calculated for the year, as there is scope for diluted during the year under review.

E). Statement of Liquidity The liquidity statement has been prepared in accordance with the remaining maturity grouping of the value of the assets and liabilities as on December 31, 2010 F). Investment Values of investments have been shown as under: Treasury Bill : Face value (Including unearned Income thereon).

Prized Bond : Cost price Share and Debenture : Cost price G). Cash Flow Statement Cash flow statement is prepared principally in accordance with BAS 7 “Cash Flow Statement” and the cash flow from the operating activities have been presented under direct method as prescribed by the securities and exchange rules 1987 and considering the provision of paragraph 18 (b) of BAS-7 which provides that ‘Enterprise are Encouraged to report cash flow from operating activities using the direct method 3.9 Changes of Equity Following table shows the changes of equity for the year ended 31 December 2010 Particulars

Paid Capital

up Share Premiu m Account Balance as 920,000,00 . on 0 01January 2010 Share 39000000 . capital BCI Ltd

Statuary reserve

Other reserve

6579241 3

3848512

.

.

Revaluation Surplus Total Tk. Reserve on profit/ Loss Securities

.

(26127843 )

963513082

.

39000000

Dividend . . paid during the year Increased . . in statutory reserve Issuance 106874280 . of Share 0 Capital Surplus of . revaluation Reserve for HTM securities Net Profit/ . .

Loss for the year Balance as 202774280 . on 31 0 December 2010 Table 09: Changes of Equity

.

.

.

.

3253674 4

.

.

.

.

.

.

.

.

.

11836557

.

9832915 7

3,848,51 2

11836557

32536744

30771838

30771838

4643995

2146401021

General Banking of BCBL 4.1 Introduction Every commercial bank deals with different vital division such as: General Banking division Loans and Advance division Foreign Exchange division etc.

Among these three divisions General Banking is the core and leading division. General Banking division is the most important point of all activities. It is the storage point for all kinds of transactions of foreign exchange division, loans and advance division, and other relevant events. Except General Banking functions a bank cannot sustain for long. With the technological advancement this sector is growing tremendously. As a fast growing bank BCBL actively realizing that development and trying to conform to the changing environment.

4.2 General Banking Activities of BCBL Basically, General Banking division performs the core functions of a bank. It deals day to day transactional activities which include collection of deposit from customers and meet the customers demand for cash. Widely general banking division includes the following sections: • Account Opening Section/ Deposit Section • Collection and Clearing Section.

• Cash Section • Local Remittance Section • Bill Section

• • •

Accounts Section Dispatch Section Administrative Section

4.3 Account Opening Section To become a customer initially need to open an account with a particular bank and then a person is allowed to go for transaction. Through this process banker- customer relationship begins and continues until violation of any condition by the parties. According to the regulation of central bank and commercial bank everybody cannot open an account. In order to open an account customer need to fulfill some certain conditions and requirements provided by the bank.

4.4 Types of Account As we know there are different type’s accounts, however it depends on bank’s goals, objectives, mission and vision as well. Bangladesh Commerce Bank Ltd. provides the opportunity to open following types of account: • Savings Bank Account (SB) • Current Account CA) • Short Term Deposit (STD) • Fixed Deposit Ratio (FDR) • Deposit Pension Scheme (DPS) 4.5 Savings Bank Account (SB) This account is primarily for small scale saver. Any adult and mentally smooth person can open this type of account through the fulfillment of required conditions. Saving bank account is convenient for the people of the lower and middle classes who wish to save a part of their current incomes to meet their future needs and also intend to earn an income from their savings. However, account holders cannot withdrawal money more than two times in a week but he can deposit any time as he/she wishes. If any customers want to withdraw large amount of money he have to notice the bank early. At present its interest rate is 7.50%.

Abreast these some other relevant points listed below: 4.5.1 Requirements to open an Account: In order to open an account customer need to fulfill following requirements: • 2 copies of passport size photographs.

• Photocopy of 1-7 pages of valid passport (Absence of passport- driving license/ voter ID card/ Commissioner’s certificate).

• Introducer signature and account number at the back of account holder’s (person going to open an account) photographs.

• Photograph of nominee with the signature of account holder at the backside of nominee’s photograph.

• Initial deposit of TK. 1000.

• Two or more persons can open this account jointly.

• Parents can open an account on behalf of his minor children.

• Any private Organization can open savings account in its own name. In this regard 3324organizations need to submit name, photograph, and specimen signature of specific person who be responsible for the account.

4.5.2 Characteristics of the Savings Account The basic characteristics of saving bank account are as follows: • At the time of opening an account customers have to deposit minimum Tk.1000.

• One person can open only one account in one name.

• Interest paid twice in a year depending on monthly minimum balance.

• Minor cannot open an account.

• Customer can deposit money at any times during working hour.

• But customer can withdraw not more than twice in a week.

• Generally this account holder cannot take loan but in special case it might happen.

• The main purpose of this account is to construct fund.

• The Bank provide passbook to deposit money in account.

4.5.3 Types of Savings Account There are different types of savings account bank offers to its customers such as: • Home savings account • School savings account • Works savings account • Deposit pension account • Cumulative savings account • Loan Deposit account • Foreign currency account etc.

4.6 Current Account (CA) Current account is running and active account which may be operated upon any number of times during a working day. Basically it’s a pure demand deposit account. Since there is no restriction on withdrawal and deposit holder can withdraw and deposit money any times in a working day. Basically there are two types current account available in the Bank: General Current Account Special Notice Current Account The basic requirements and characteristics of this account are as follows: 4.6.1 Requirements for Current Account For person: • • • • •

2 copies of passport size photographs.

Photocopy of 1-7 pages of valid passport (Absence of passport- driving license/ voter ID card/ Commissioner’s certificate).

Introducer signature and account number at the back of account holder’s (person going to open an account) photographs.

Photograph of nominee with the signature of account holder at the backside of nominee’s photograph.

Initial deposit of TK. 2000.

For joint venture, Associations, and Clubs: If the party is joint venture, Associations, and Club then they have to fulfill following requirements: • True copies of certificate of incorporation or registration.

• True copies of certificate of commencement of business.

• True copies of memorandum and articles of association.

•

True copies of resolution of the board of directors.

For partnership Company: • Name and address of the firm.

• Partnership deed.

• Trade License • Endorsement of account holder of the same branch.

4.6.2 Characteristics: Basic Characteristics of this account are as follows: •

There is no restriction on withdrawal, but in case of large amount i.e. more than 2 lac banks requires one day prior notice.

• Interest is not allowed on this account.

• Closing charge Tk.200 prescribed by the bank shall be realized at time of closing down of a current account.

• Current account holders enjoy certain privileges compared to the saving account holders. I.e. Current account holders provided overdraft facilities.

• The banker is under an obligation to repay the deposits on demand. So, they are called demand liabilities of a banker.

• Clients are permitted for overdraft on basis of contract.

• Banker does not provide any passbook for this account but sometimes issue description card.

• Bank cannot invest from this account due to demand deposit.

4.7 Short Term Deposit Account (STD) We can assume the nature of this account from the name; it’s very short term in nature and payable on short notice. Generally large companies, firms, Institutions are the customer of this account. In order for withdraw money bank requires to prior notice. In BCBL customers are instructed that their current account would be debited whenever its deposited amount crosses a certain limit and this amount will be transferred to STD account. In this account deposited money requires to keep minimum seven days to earn interest at five percent rate.

Basically interest is calculated based on daily minimum product and two times in a year.

Minimum amount for opening STD account is about Tk. 10000 only. At present its interest rate is 4%. STD is mainly suitable for the large firms/ corporations/ public bodies, which have idle funds for deposit in a short term account.

4.8 Fixed Deposit Ratio (FDR) Fixed deposit account consists of long term deposit. Fixed deposit is normally high yield to earn the maximum possible return. Any amount to be deposited for three months, six months, and one year. BCBL currently offer the interest rate about 12.5%, and 11% respectively. The basic requirements to open a fixed account are almost same as savings and current account.

4.8.1 Procedure to open a Fixed Deposit Account To open a fixed deposit account customer need to fill up a specific form provided by the bank. At the time of opening account depositor sign in a contract paper with the bank and then depositor deposit money through payment slip. Bank return one part of the slip to the customer and rest of the part keep into the bank. In this account bank does not provide any cheque book, depositor can draw money after the end of the duration through payment slip.

Customers can open this account individually or jointly.

4.8.2 Features of Fixed Deposit Account The main features of fixed deposit account are as follows: • Payment slip is the major document of this account.

• This is for a certain period of time. After the end of period contract also get finished but customer can redeposit if he/she desire.

• Initial deposit should not less than Tk.2000 for individual and Tk.5000 Institutions.

• It earns higher income.

• Customer can deposit only one time and draw after end of duration.

• Payment slip is not transferable.

• It does not require cheque book.

4.9 Deposit Pension Scheme (DPS) Pension Scheme can be opened in the name of individual who crossed the minimum age level 18 years. Under this scheme joint account is not permissible. Account holder can deposit from Tk.500-5000 per month for minimum three years to maximum ten years. At the end of duration holder can withdrawal cumulated money with interest through monthly installment or over 3 to 10 years. BCBL currently offer the interest rate about 10%.

4.10 Account Opening Procedure in a flow chart Collection of Bank Account Opening Form Filling the Application & Specimen Signature Card Enclosing Documents with Application Form Submission of Application Form Primary Deposit Receiving Cheque and Pass Book Figure 03: Account Opening Procedure 4.11 Facilities for Customers toward an Account Bank provides some facilities to customers for their convenience like below: 4.11.1 Issuing Check Book/ Pass Book When account opening formalities is finished bank provides a checkbook/ pass book to account holders. In order get checkbook/ pass book account holder require to requisite on prescribed application form. In case of old account, requisition made on the prescribed slip attached with the checkbook/ pass book issued earlier. To avoid hassle it requires signing by the authorized officer on every page of the check.

4.11.2 Transfer of an Account There is opportunity to transfer account from one branch to another if any customer wish without any extra fee. In this regard, customer should formally apply to the branch manager

with reasonable causes. Manager then convey a request massage to the branch manager where the customer want to transfer account as well as manager also sends inventive copy of account opening form and specimen signature card and others relevant documents.

4.11.3 Closing of an Account No account for eternal, due some reasons account might be closed. If account holder wishes to close the account he/ she can do it any time. Beside this bank can close the account due to following reasons: • • • • • • •

Due to the death of account holder.

If the holder discontinue transaction for long time.

If the court send legal notice to close the account.

If account holder become mental abnormal.

Absence of minimum deposit requirement.

If bank receive notice regarding account transfer.

If it’s not profitable for bank.

After closing the account customer instructed to return the checkbook, pass book, and deposit slip. On the other hand bank return deposited money; but bank will charge Tk.100 by debiting the amount from his account.

4.12 Sample of Deposit Slip and Pass Book Bangladesh Commerce Bank Ltd. Mouchak Branch, Dhaka Date:……….

Name of Account: Savings/ Current

Account No. Name Description

Amount of Deposit

Amount In word ……………………………………………………

Serial No.

Sample of Deposit Slip

Depositor

Cash Officer

Officer

Sample of Pass Book Date

Description

June 2007 1 2 3 4

Balance Cash Mr. Alam Mr. Rahim

Cheque No.

Debit

Credit

500 SA046493 1500 SA046494 1000

Balance Officer’s Signature

5000 5500 400 5000

4.13 Local Remittance Section One of the most important aspects of commercial bank is rending services to its customers.

The word “Remittance” implies sending money from one place to another through post and telegraph to avoid any unexpected situation. Banks also extend these facilities to its customers by means of receiving money from one branch and making arrangement for payment to another branch around the country. One of the most aspects of the commercial banks is the rending service to its customers. Local remittance facilities are the most significant and congenial among the services provided by the bank. Local remittance facilities consist of three different categories: • • •

Demand Draft Telegraph Transfer Payment Order

4.13.1 Demand Draft (DD) Among different financial instruments Demand draft is most significant. Demand Draft issued by a particular branch on behalf of the customers to another branch instructing to pay a certain amount of money. According to the regulation if the amount is more than Tk. 25000 a test code is require to give on IBCA. In terms of DD serial number is much important in both receiving and payment of money.

In order to issue Demand Draft bank impose some charge is as follows: • Commission @ 0.15% but minimum Tk.50, Postage charge Tk.20 (Fixed), DD collection charge Tk.50 (Fixed).

4.13.2 Issuance of duplicates (DD) Bank provides the facilities for duplicate Demand Draft in order for convenience of the customers. If the customers demand for duplicate DD then they require filling up following formalities: • • • • • •

Drop an application by the original DD holder early Require to inform nearest police station Furnishing an Indemnity Bond Put a “Caution” mark in the register Inform head office instantly through issuing branch Inform all the branches around the country to pause payment

•

Issue a new DD by the bank.

4.13.3 Telegraphic Transfer: (TT) Due to the technological advancement it’s possible to transfer money over telegraphic modes.

Sometimes customers need money immediately, in that circumstances they ask for telegraphic transfer. There are some common modes for this type of transfer such as Telegram, Telephone, Telex, and Fax. Though telegraphic transfer is expensive but it’s fast and convenient. Customers have to pay for this service according to the rate determined by the central bank. Telegraphic transfer commission calculates as per Bangladesh Bank rate min Tk.25 and telex charge to be taken as Tk.30 per minute.

4.13.4 Payment Order (PO) Pay order means order to pay a certain amount of money to specific parties mentioned on the PO. It’s an instrument for bank and bank earns a percentage of money. Once PO was issued only to effect local payment of banks own but situation has been changed now it issued on behalf of customers. PO is not transferable and there is no chance to dishonor like a check does. Basically, PO can be purchased by three different modes such as: Payment Order is a current liability for bank and it required to be discharge against payment in cash or through an account. In order for pay order bank charge a certain amount of fees: Range Tk. Up to Tk.1000 Tk.1000 to 10000 Tk.10000 to 50000 Over Tk.50000

Charge Tk. 10 25 50 100

4.13.4.1 PO Issuing Process To issue a pay order need to maintain some formalities like below: • Fill up application form by the customers • Deposit specific amount of money either in cash or by check • Prepare the instrument and make necessary entries in the bills payable register where payees name, date, PO no. etc.

• Deliver the instrument to the customer after scrutinized and approved by authorized by taking signature of the customer on the counter part.

4.13.4.2 Entry for Pay Order As we know pay order is a current liability for the bank and it required to discharge against payment in cash or in account. For pay Order the bank’s accounting entry is like below: Drawer Account Bills Payable Account Income or Commission Income A/C Postage

Dr. Cr. Cr. Cr.

4.13.4.3 Payment Order Working Procedure Purchasers have to have an account with BCBL Fill up required form provided by the bank

Purchase the PO in favor of particular company or person.

Deposit the PO in customers account with BCBL or another bank by the beneficiary.

Collecting Bank sends IBAD

Payee’s account credited with collecting banker.

Collecting Banker Presents PO to Paying Bank through clearing house

Payee’s account debited with paying Bank

Figure 05: Working procedure of Pay Order 4.13.4.4 Cancellation of PO If it requires canceling pay order then purchaser need go through a predetermined procedure.

At purchaser have to submit written application to refund the pay order attaching therewith the original pay order. Then authority will confirm purchaser’s signature with the original signature. Beside this there have to have the permission of authorized employees prior refund the amount of pay order. Pay order should be affixed on the pay order. In order to cancel pay order there does not charge any fees, only refund the pay order amount and finally reserve original entries with proper description.

4.14 Bill Section The most important and mentionable task of general banking is to collect and payment of different bills on behalf of clients and the government. As a representative of client BCBL perform following basic tasks: • • •

Bill collection Clearing Transfer and Delivery

•

Outward and inward bill Collection.

4.14.1 Bill collection Under this section bank collect different types of bill on behalf of clients. Such as- Purchase and sale share and securities, pay the tax and vat, collect and disburse house rent, collect dividend, collect pension fund, invest the money etc. There are basically two different types of bill. Besides, bank receives check for collection from other bank on behalf of clients. In this case following points should be carefully investigated: • Cheque should not carry more six months from the date of transfer of funds. In that case check would be stale check.

• The amount should be identical both in word and in pay-in slip.

• The name mentioned should be same both in check and in pay- in-slip.

• Check must be crossed.

Clearing Clearing is one of the mentionable tasks of a commercial bank. Clearing means accomplishments of cheque drown on each other through clearing house. In general clearing house means “A place where representatives of local banks meet at an agreed time each day to exchange cheque and other items drown on each other and to settle the resulting balances.

This is an initiative of central bank to accumulate the representatives of schedule bank to clear their cheques. In order for clear the cheque BCBL developed a unique section that is responsible for receive checks, drafts, and other instruments like these from customers for the purpose of collection with a deposit slip over the counter crediting their accounts. Only the schedule banks are allowed to participate in clearing house. According to the Article 37 (2) of Bangladesh Bank Order, 1972, the banks which are the member of clearing house known as schedule bank. Accordingly BCBL is a schedule bank and actively participate in clearing function with clearing house on behalf of the customers.

Types of Clearing: Basically two types of clearing available: • Outward Clearing: When the branches of a bank receive cheques from its customers drawn on the other banks within the local clearing zone for collection through clearing house.

• Inward Clearing: When the bank receives cheque drawn on it from other banks in order for clearing function.

4.14.2.1 Considerable Factors to receive Cheque The Bank carefully consider following factors at the time of receiving the cheques for clearing: • Name of the account on the cheque and Deposit slip.

• Amount in the Cheque must be both in word and figure.

• Bank and Branch name, number and date of the cheque.

• Cheque must be signed by the holder.

• Cheque should be crossed.

• Account number in the cheque must be clear.

• Signature of the depositor.

4.14.3 Outward and inward Bill Collection This is the transaction occur outside and the debts that arise due to transaction among different branches of different banks are settled through Outward and inward Bill Collection.

4.15 Cash Section Cash section is most vital and significant section of the bank. Let’s they say cash is the blood of the bank. The main task of this section is receive and payment of money. As we know it has two major counters1. Cash receive counter 2. Cash payment counter 4.15.1 Cash Receive Counter In receive counter two/three efficient persons are responsible for cash collection. In this section cheque, pay order, drafts etc. are being received. These tasks accomplish through a predetermined process• • • •

At first customer need to fill up the deposit slip provided by the bank.

Deposit the slip to cashier.

Cashier receives money, confirm the amount and then enter into the cash receipt register book and finally sign with seal and date in the deposit slip.

Slip then passed to another officer who is responsible for taking details like serial number, amount etc. and return deposit slip to customer.

Cash payment Cash payment counter is responsible only for payment of cash on the basis of check, pay order, drafts etc. In terms of cash payment bank initiate some extra care regarding following things- whether the cheque is crossed or not, endorsement, date, specimen signature, amount, and other relevant things. To pay money bank follow process: • • • •

At customer need to deposit the cheque to the cash section.

Authorized individual verify required things- whether it is properly crossed if it is being cross cheque, endorsement, date, amount, signature, and also ensure current balance in the account and then it send to cashier if everything is positive.

Cashier is then asked bearer to sign on the back side of the cheque and pay the money.

Then cashier enter payment details into register book.

Account Section It’s regardless to analyze how much significant the account section are! Let’s the say account is the nerve center of the bank. Everyday huge transaction occur in different section, account section regularly keep record each and every transaction. In banking business bank need to go for various transaction and these transactions are to be recorded properly and systematically.

If the bank fails to record this transaction in an appropriate manner it might happen mismatch and misunderstanding between bank and customers and it also mismatch in the debit and credit side. To avoid this violence bank developed account section which is responsible record keeping of all transactions required information, prepare different statement and other relevant things. Basically accounts supply information to other sections of the bank according their requirement. Generally account section of BCBL responsible for following activities: •

Record keeping of all transactions in the cash book.

• • • • • • • • • •

Recording the transactions in general and subsidiary ledger.

Packing of the correct vouchers according to the debit voucher a credit voucher.

Constructing the daily position of the branch comparing of deposit and cash.

Make payment of all expenses of the branch.

Recording inters branch fund transfer and providing accounting treatment in this regard.

Preparing monthly salary statements for the employees.

Preparing weekly position for the branch which is sent to the Head Office to maintain cash reserve requirements.

Checking transaction list.

Recording of the vouchers in the voucher register.

Preparing the daily statement of affairs showing all the assets and liability of the branch as per general ledger and subsidiary ledger separately.

Loans and Advances Loans and advances is another vital function of commercial bank. Generally bank loan means the credit granted by a banker to his customers either in cash or any other means, is called bank credit or bank loan. Besides deposit collection BCBL lend money to its customer as well. The loans and advances of the bank registered an impressive growth during the year 2010. The total loans and advances amount to Tk.826.60 crore as on 31 st December 2010, against Tk.625.62 crores in the previous year showing an increase of 32.12%. The advance portfolio of the bank is well diversified and covers funding to a wide spectrum of business and industries. The classified loan of BCBL during the year under report was 3.75% which may be termed as encouraging in the socio-economic environment prevailing in the country.

The bank gives top most priority to acquire quality assets and does appropriate lending risk analysis while approving commercial and trade loans to clients. Bank provides different types of loan on the basis of customers demand.

Loans & Advances

Amount crore

350 300 250 200 150 100 50 0 2010

2009

2008

2007

2006

2005

2004

Year

Graph 13: Loans and Advances from 2004-2010 Credit Scheme BCBL offers following Schemes to its customer:

1. Financing of small and medium Industries 2.Financing of Trade

6. Credit Scheme for women entrepreneurs 7. Consumers credit Scheme

3.Financing if Import and Export

8. Special Credit Scheme for service holder

4.Micro-Credit schemes

and

Micro

Enterprise

1. Financing of small and medium Industries The main thrust of financing is given on small and medium enterprises. This is the priority sector of Bangladesh Commerce Bank.

2. Financing of Trade Trade Finance includes CC (Cash Credit), SOD (Secured Overdraft) FO (Financial Obligation), RE (Real Estate) working capital. This will help the local traders and businessmen to expand their trade and business unhindered.

3. Micro-Credit and Micro Enterprise Scheme For poverty alleviation micro-credit is provided to poor people without security for their selfsustenance and to rehabilitate them in the society.

4. Credit Scheme for Women entrepreneurs This scheme in order for develops Women entrepreneurship in the country. This type of credit is extended to unemployed and skilled women, through which they can transform their micro-credit in to small enterprises.

5. Consumers Credit Scheme Domestic useable items i.e. Computer, Photocopier, Furniture, Washing Machine, Air Cooler, Refrigerator, Sewing Machine, Car; Pressure Cooker etc are financed for comfortable and modern living of the people of limited source of income.

6. Special Credit Scheme for Service-holder Under this scheme service-holders of govt. bank or autonomous bodies are provided with 6 month's basic salary as loan realizable in 18 equal installments. Professionals are also covered under this special credit.

4.17.2 Considerations of Bank in Granting Loans and Advances Basically main task of the bank is to earn profit through borrowing and lending money.

That’s why bank need to proceed some significant principles to provide loans from its fund.

At the time of granting loan BCBL consciously investigates followings: Character of the Clients Financial solvency of borrower Capacity to use the loan Safety of loan Liquidity of the bank Whether sufficient profit is earning

7. Sources of Re-payment loan 8. National Interest 9. National Interest 10. Volume of loan 11. Order of the Central Bank.

4.17.3 Classification of Advances The Bangladesh Commerce Bank Ltd. classified its advances/ credit program in following forms: 4.17.3.1 Bank Advances on the basis of the objectives/ Uses A. Commercial Credit B. Non- Commercial Credit A. Commercial Credit: Bank provides this type of credit for the purpose of national and international business. Commercial credit may be short term or long term.

B. Non- Commercial Credit: Bank provides this credit for non- commercial purpose. The bank offers this credit to purchase house, Home materials, Social development, traveling, education, etc.

4.17.3.2 Bank’s Advances on the basis of Duration Short Term Credit: Bank offers this type of loan for very short time. The maximum duration of this loan is one year and minimum one hour. Basically individual, firms and industries are the main customer of this loan.

Mid Term Loan: Bank also provides credit for mid term between short term and long term.

The maximum duration of this credit is less than five years and minimum one year. Bank charge a certain percentage of interest against this credit and that is 11%-14%. Customers of the Long term credit are• • • •

General Businessman Importer Exporter The bank demand borrower land and properties as collateral against this loan.

Long Term Credit: Bank offers this credit for long term, generally bank grants this credit for five years to twenty years duration. Bank charge high interest against long term credit it is 15%-20%.

Normally bank grants long term credit under a certain project. However, bank provide long term loan to purchase land and machineries, house building, construction of industry and machineries purchase, etc. Bank also grants long term credit for small and cottage industries, fisheries, etc.

4.17.3.3 Loan Among all the advances loan is most significant and comparatively high demandable to the customers. Generally bank provides this loan through credit account, it does not provide in cash. Customers draw by the cheque from his / her account. Normally, loan need to repay within a certain time period. However, customers are allowed to repay loans in installment.

Necessarily bank demand high interest on different types of loan and customers are instructed to pay interest with principle amount of loan. BCBL grant loans for following different purposes: • • •

Purchasing Transportation Agricultural activities Industrial construction

• • •

Working Capital Small and Cottage Industries House building etc.

Generally bank offers two different types of loan: • •

Secured Loan Unsecured Loan

1. Secured Loan: Secured loan means any loan which is guaranteed by the borrower giving valuable property as security. Generally bank grant this types of loan against some movable or immovable assts or properties for the safe return of loans. If the customers fail to repay loan then bank sale all his security assets and properties to compensate the loss.

2. Unsecured Loan: Unsecured loan means any loan which grant without any security money or assets. Bank generally provide this loan to the persons with whom bank has long term relationship, honest, socially well-known persons, and the clients who has goodwill in the society. This type of loan contains high risk, if the borrowers get unable to repay the bank collect the loan by the help of the court.

Rate of interest on Loans and Advances: BCBL Charges interest on loans and advances according to the following rate: Types of Deposit

Rate of Interest

1. Commercial Sector

14.7%

2. Industrial Sector ( Term and Current)

16%

3. Export Sector

7%

4.17.3.4 Cash Credit Under the cash credit Banker specifies a limit, called the cash credit limit, for each customer up to which the customer is permitted to borrow against the security of tangible assts or guarantee. Bank generally offers this type of credit for businessman and industries for a certain period of time ( 6- 12 months) to meet their instant financial need.

Bank offers two different types of cash credit: 1. Cash Credit Hypothecation 2. Cash Credit Pledge 1. Cash Credit Hypothecation: The mortgage of movable assets or property for securing credit is known as hypothecation. Hypothecation is a legal transaction whereby goods are made available to the banker as security. Since the goods always remain in the physical possession of the borrower, that’s why it contain high risk for banker.

2. Cash Credit Pledge: Cash credit pledge imply the credit allowed against pledge of goods as security for credit. Bank retains an effective control over the pledged goods. The goods might be stored in the storehouse of the borrower under the active supervision of the bank.

Formalities for Cash Credit: If customers wishes to take cash credit ten they need to submit following documents: • Trade license • Up to date income tax clearing certificate.

• Charge of documents • Letter of continuity • Letter of arrangement • Demand Promissory note • Letter of Guarantee After end of the analysis of above documents bank prepares a CC proposal form that contains the following information’s: • Nature of Business • Banking with BCBL • Transaction with Current Deposit account by the client • Allied deposit with SB/STD account • Number of adjustment • Based on the above information the credit officer prepares recommendation about the prospect of granting the CC loan.

4.17.3.5 Process of Giving Loan In order to get the loan customers have to go through following process: Collections of Application forms and fills up by the customers and submit required documents demanded by the bank with application.

Bank verifies all the documents and information submitted by the customers in order to check the credit worthiness of the clients.

If everything is positive bank sanction the loan.

Bank prepare a loan proposal which contains terms and conditions of loan for approval of manager. Besides take necessary paper and signature from borrower.

Loan account is successfully opened, where Consumer A/C Dr. Respective loan A/C Cr.

4.17.3.6 Overdraft The overdraft is always allowed on a current account. The customers may be allowed to a certain limit up to which he can overdraw within a stipulated period of time. In an overdraft account withdrawal and deposit can be made any number of times within the limit and prescribed period. Interest is calculated and charged only on the actual debit balances on daily product basis. Generally bank grant three different types of overdraft such as: •

Temporary Overdraft (TOD)

• •

Clean Over draft ( COD) Secured Overdraft ( SOD)

1. Temporary over Draft: TOD is allowed to honor an important cheque of a valued client without any prior arrangement. As this facility is allowed for a very short period, it is called temporary Overdraft.

2. Clean overdraft: Sometimes overdrafts are allowed with other security other than the personal security of the borrower. These types of overdraft are known as clean overdraft.

3. Secured overdraft: When overdrafts are allowed against securities they are called secured overdraft.

4.18 Foreign Exchange Generally foreign exchange means the rate of exchange at which one currency is exchanged against another. Foreign exchange is a significant department of Bangladesh Commerce Bank Ltd. Bank provides extensive facilities in foreign exchange business. Generally bank provides the following service to foreign exchange business: • • •

Foreign Remittance Import Export

4.18.1 Foreign Remittance Foreign remittance section of BCBL is an integral part of foreign exchange department. This section normally deals withI. Inward Foreign Remittance II. Outward Foreign Remittance I. Inward Foreign Remittance: Normally inward foreign remittance comprises all incoming foreign currencies. Remittance issued by the correspondent banks situated in the foreign countries and thereby drawn on BCBL is considered to its inward foreign remittance. The major inward remittance of BCBL is as follows: • • • • •

FDD payable FTT payable TC payable Encashment of foreign currencies Purchase of foreign currencies.

II. Outward Foreign Remittance: Remittance issued by the BCBL to its foreign correspondent to fulfill their customers demand is considered to be outward foreign remittance. OFR comprises following activities: • FDD Issued • FTT Issued • TC Issued

• •

Endorsement of foreign currencies in the passport Sale of foreign currencies.

4.18.1.1 Methods of Foreign Remittance Applied BCBL The BCBL performs foreign remittance activities with following different ways: • Foreign Bills of Exchange • Foreign Bank Draft • Mail Transfer- MT • Telegraphic Transfer- TT • Personal Cheque • Cash Letter of Credit • Traveler’s Cheque • International Money Order- IMO • Cash paper Money and Coins.

4.17.2 Import Import means purchase of product and services from foreign countries. Sometimes private firms, businessman, and government organization purchase different a type of products from other countries in order to meet their demand and this is known as import from foreign country. BCBL actively assist in import business and make it easy for importer. Basically the bank work on behalf of the importer by the issuing and collecting different documents.

Sometimes the bank directly communicates with foreign exporter on behalf of the clients.

The function of BCBL in import business is to issuance of “Letter of Credit (L/C)” on behalf of importer and in favor of exporter.

4.18.3 Letter of Credit (L/C) A letter of credit is a document issued by the banker in one place authorizing any other banker or agent in another place or country, to honour the cheques or drafts of a person named in the document, to the extent of a certain sum stated in the letter and to charge the total sums of cheques and drafts so honoured to the account of the grantor.

In general “Letter of Credit” is a document where issuing bank undertake responsibility on behalf of his clients (Importer) to make payment if the importer fails to pay.

4.18.3.1 Types of Letter of Credit (L/C): There are different types of L/C’s are available in import and export business. Following are more common and frequently issued by the bank: • Confirmed Letter of Credit • Un- Confirmed Letter of Credit • Documentary Letter of Credit • Clean Letter of Credit • Revolving Letter of Credit • Fixed Letter of Credit • Revocable or open Letter of Credit • Irrevocable or Firm Letter of Credit • Back to Back Letter of Credit.

4.18.3.2 Parties in the Letter of Credit: Letter of Credit consists following parties • The Opening Bank

• • • • •

The Advising Bank The Buyer and the Beneficiary.

The paying Bank The negotiating Bank and The confirming Bank.

The Opening Bank: The opening bank is one that issues L/C at the request of buyers.

Through issuing LC the bank takes responsibility to pay the money if the client is unable to pay. If the draft is negotiated by another bank the opening bank reimburses to that bank.

Advising Bank: The letter of Credit often transmitted to beneficiary through a bank in the latter country which is known as advising bank. The bank may be a branch or correspondent of opening bank. The advising bank undertakes responsibility to prompt advice of credit to the beneficiary and has to be careful in communicating all its details.

Buyer and Beneficiary: The importers who buy the LC are known as buyer. Bank issue LC on behalf of the buyer. On the other hand, the exporter to whose favor bank issue LC is known as beneficiary. As a seller beneficiary is entitled to receive the money which he do by drawing bills under the LC. Paying Bank: The Paying is responsible for make sure the payment stated on the letter of credit by debating the latter accounts with it if there is such an account or by any other measured up between two bankers.

Confirming Bank: Sometimes an exporter stipulates that the LC issued in his favor be confirm by one of his local bank which is known as confirming bank.

4.18.3.3 Contents of Letter of Credit The contents of LC may vary bank to bank though most of the banks issue it on a specific form which clearly mentions the banks name and its area of obligations under the credit. The more common contents of a general LC are listed below: 1. Name of the buyer 2. Name of the beneficiary 3. Issuing and Payment date 4. Trade terms 5. Name of the participant banks

6. Required Documents 7. General description of merchandise 8. Amount of money 9. Name of the currency need to pay 10. Nature of Businesses

4.18.3.4 Procedure to Open a L/C In order to open a letter of credit buyer and banker need to go some process. The beginning of LC the importer receive a invoice from exporter, then the importer request his/ her bank issue a letter of credit on behalf of him/herself or organization in favor of the exporter. The bank willingly does that if it can rely on reimbursement by the buyer. Before doing that the bank carefully check the customers account whether enough funds are exit in his account. In order to get LC from the customer have to have sufficient funds in the account otherwise bank won’t provide LC. With this the customers need to submit some documents like below: 1. Tax Identification Number.

2. Valid Trade License.

3. Import registration Certificate etc.

After this customers need to fill up some forms provided by the bank such as LC form, Application form, Agreement form etc. Besides he/ she suggested to complete other relevant formalities.

4.18.4 Export If any Bangladeshi firm, organization and government Institutions sale products and services to foreign buyers that is known as export. The Bangladesh Commerce Bank Ltd. actively assists in export business. This is the most significant section of the bank, because every day they are to process an extensive number of export facilities. In export business bank need to perform huge formalities on behalf of the customers. Therefore, the foreign exchange of BCBL is always conscious toward their responsibilities in this particular context.

6. Findings During three months internship with Bangladesh Commerce Bank Ltd. I have achieved huge experience and also understood the entire banking system of BCBL and found different information regarding their activities which enriched my knowledge extensively. Here I have tried to present my experiences and knowledge in order for better judgment. Bangladesh Commerce Bank Ltd. is one of the first growing and committed private commercial bank in the country. It conducts business activities efficiently around the country to achieve its objectives, and goals and gradually forwarding toward its mission and vision. As a commercial bank sometimes its success and sometimes fail to its achievements. The bank have been achieving continuous growth rate in all spares of banking operation since its establishment. All of its departments, sections are working hard for better customer services.

Abreast these I also have found the following essence through careful investigation.

Findings about the Organization: Bangladesh commerce Bank Ltd. is one of the first growing and committed commercial bank conducting business activities around the country with 25 of its branches.

The bank offers wide range of products line to its customers.

It has strong and efficient management team, who works hard in order to survive successfully in the competition.

BCBL offers credit to all sectors of commercial activities having productive purpose.

General Banking activities are the driving force of the Organization.

Excellent interpersonal relation exists among the employees.

Account Opening procedure is comparatively essay.

The loans and advances of the bank registered an impressive growth in every year.

With normal banking business the bank offer some special scheme.

The gives top most emphasis to acquire quality assets and does appropriate lending analysis at the time approving commercial and trade loans.

BCBL provides excellent remittance facilities around local area through pay order, Demand Draft, Telephone Transfer, Mail Transfer and Transfer of funds by special arrangement.

The investment portfolio of the bank increasing gradually.

The Bank actively participates in international trade.

The Bank maintain correspondent relationship with world famous Banks in every important center to meet transaction requirements with global business development.

BCBL make arrangement for foundation training for all of officers in order for their better development at Bank’s own institute and BIBM. Bill section is most cash liquidity handle in banking transaction.

Some problems of BCBL Until now the bank apply traditional banking system, the bank is far behind from modernization.

The Bank could not introduce proper automation and database system. Only a few branch use automation system.

The working environment of the bank is not modern like other commercial bank.

The cash section of the bank could not properly develop. In order for cash receive and payment they employ traditional system that is extensive time consuming.

The bank did not formally develop the job description and job responsibility. That’s why one employee’s need to work in different working area.

Last but not the list banks depend on deposit collection less than to give loan.

They have no normal credit or debit card.

Some branches are to much less busy then other branches.

They have no ATM Booth.

Just principals Branch create more foreign transaction then others branches.

7. Conclusion Its high committed toward better customer services. The Bank by concentrating on the activities in its area of specialization has achieved good market reputation with effective customer services. The bank is committed to keep its working force modern by providing continuous training to its staff in their respective field of work. BCBL Pledges to maximize customers’ satisfactions through services and building a trusting relationship with customers, which has stood the least of time for the last seven years.

The bank offers wide ranges product line in order for customer convenience and marketing activities in banking is the most significant. Basically, General Banking activities are the driving force of the Organization. Abreast this bank also offers credit to all sectors of commercial activities having productive purpose and successfully performs foreign exchange activities.

Recommendations After analysis of all the gathered information and other relevant things the Bangladesh Commerce Bank Ltd. should consider the following matters.

Since today’s business world totally technology depended so the Bank should develop online banking system as soon as possible.

To sustain in the competitive market bank should modernize the working environment.

The Bank performs business activities with only 25 of its branches. Therefore in order to capture the market share bank should immediately enhance number of branches.

BCBL performs foreign exchange functions in principal branch and some other massive branches. But the bank should undertake initiative to launch foreign exchange activities in every branch.

The bank should introduce automation immediately in every branch to achieve efficiency of the employees.

Cash section is not well organized. The bank needs to make it more structured and disciplinary to collect and payment of money.

The bank should formally develop job description and job responsibility for the employees.

In order to build up excellent relationship between customers and bankers bank should take initiative. To do this bank can send gift items like calendar, books, dairy for their old and reliable customers.

The bank is somewhat reluctant toward advertisement, but they should participate more in advertise campaign in order to present themselves in front of the people.

In banking business Islamic banking is getting popularity gradually. That’s why bank might consider this. In accounts section need to employ more personnel in order for smooth operation.

The bank should care about employee’s satisfaction. Sometimes employees are dissatisfied with bank’s strategy and their job responsibility.

Banks create more SME loan and house loan because now every day will be more competitive and challenging.

Bibliography: 1.

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Annual Report of BCBL (2006 to 2010.)

Auditors Report of BCBL. Brochures of BCBL. Circulars/ Instructions Bangladesh Bank’s Circular New Management’s Action Plan Products and Services. Retrieved October 10, 2010, from www.bcbl-bd.com.

Website of BCBL (www.bcbl-bd.com) Internship Report on different topics of different banks.

INTERNET WABSITE GOGOLES.com Acronyms

A/C

Account

AVP

Assistant Vice President

BB

Bangladesh Bank

BCBL

Bangladesh Commerce Bank Ltd.

BCI

Bangladesh Commerce and Investment.

BIBM

Bangladesh Institute of Bank Management

CC

Cash Credit

CEO

Chief Executive Officer

DD

Demand Draft

EVP

Executive Vice President

FDD

Foreign Demand Draft

FDR

Fixed Deposit Ratio

L/C

Letter of Credit

MT

Mail Transfer

OBC

Outward Bill Collection

PO

Payment Order

RE

Real Estate

SOD

Secured Overdraft

STD

Short Term Deposit

SVP SWIFT TC TOD

Senior Vice President Society for Worldwide Inter Bank Financial Transfer.

Travelers Cheque Temporary Overdraft

VP DGDS MDS ESS ABB

Vice President Degun growth deposit scheme Marriage deposit scheme Education Savings scheme Any branch banking