Southeast Bank Limited is one of the fastest growing bank among all the Private Commercial Banks (PCBs)
EXECUTIVE SUMMARY Banking sector comprises an important segment of the financial infrastructure of a nation. Today banking has become the most essential parts of our life and the central driving force of every economy. It moves the heart of the economy in each country. Most of the financial transactions are now being made through the bank. Worldwide, banks have become the center points of the economy and Bangladesh is no exception. Banks are playing vital role in our economy. Economy of Bangladesh is in the group of worldâ€™s most underdeveloped economics. One of the reasons for this may be its underdeveloped banking system. Modern banking system plays a vital role for a nationâ€™s economic development. As a first phase of gathering practical knowledge about Modern Banking doing internship program at Southeast Bank Limited where my concerned area was General Banking Activities. Here analyze different type of ratio to find out what is the financial condition of Southeast Bank Limited as well as the profitability situation of that bank. had also analyzed some ratios which show the management efficiency of the Southeast Bank Ltd. analyze the SWOT of Southeast Bank Ltd and also figure out some problem and tried to recommend some solution. Have written the working procedure of different departments, under the General Banking. Those departments include Account Opening, Local Remittance, Clearing Department, Cash Department, Financial Control Department (FCD), and Loan Department etc. At the end of my report the tried to find out what are the problems of Arab Bangladesh Bank in General banking area. Here found different types of problems which cause the low slandered of General Banking Activity Like, Online Operation,
Manpower, Marketing, Infrastructural Facility, and Motivation etc. And recommend some ways to solve those problems.
INTRODUCTION Banking sector is expanding its hand in different financial events every day. At the same time the banking process s becoming faster, easier and the banking arena is becoming wider. As the demand for better service increases day by day. Generally by the word â€œBankâ€? we can easily understand that the financial institution deals with money. But there are different types of banks like; Central Bank, Commercial Bank, Savings Bank, Investment Bank, Industrial Bank, Co-operative Bank etc. Here going to discuss a bank which name is Southeast Bank Ltd, which is a commercial bank. Southeast Bank limited has a long and relishing heritage. It is a second generation Bank which was established in 1995 with the vision to stand out as a pioneer banking institution in Bangladesh and contribute significantly to the national economy. It was incorporated on March 12, 1995 as a Public Limited Company. Certificate of commencement of business of the Bank issued by the Registrar of joint stock companies &Firms was also dated March 12,1995. the Banking License for the Bank was issued by Bangladesh Bank on March 23, 1995. The Bank and its first Branch at the busiest commercial hub of the country at 1, dilkusha commercial Area, Dhaka was opened on May 25, 1995 by Mr. M. Saifur Rahman, Honorable Finance Minister, Government of the peoples Republic of Bangladesh as the chief guest. The Authorized Capital of the Bank is Tk 2, 500million. Its paid up capital and reserve reached Tk. 2236.84 million as on December 31, 2005. The Bank has 913 staff of which 76 are executives, 683 are officers and 154 are other staff as on December 31, 2005. The Bank is managed shy a team of efficient professionals. There prevails a positive organizational climate in the Bank that generates feeling of dignity, trust, discipline and openness in its people and results in monitoring them to post better result continuously in the Bank. The culture of maintaining congenial work- environment in the Bank has further enabled the staff to Benchmark themselves better against management expectations. A commitment to quality and excellence in service is the hallmark of their identity.
Objective of the Study
During my internship the area of study was the General Banking of Southeast Bank Ltd. Through achievement of the objectives outlined below, would like to gather some practical knowledge about the General Banking activates.
The objectives of this internship report are as follows: 1. To analyze the general banking activities of SEBL 2. To undertake a comparative analysis of SEBL performance over the last four years of its operation; 3. To identify the problems relating to general banking activities of SEBL and to make suitable suggestions to solve these problems. 4. To recommend some guidelines and policies based on the findings of the study.
RESEARCH METHODOLOGY Research is a systematic inquiry whose objective is to provide information to solve a particular problem. Good research generates dependable data, being derived by practices that are conducted professionally and that can be used reliably for decisionmaking about problem. Here made research on Southeast Bank Limited (SEBL), Uttara Branch, which is the biggest branch of SEBL. The conducted that research to gather the information about the general banking activity of SEBL and which will help to solve those problem that found during research time. Research could be two type they are:I. Quantitative: - When we work with the numerical data we defined it as the quantitative research. II. Qualitative: - But when we work with the data those are not numerical but descriptive than it will know as the qualitative analysis. Actually my research was based on the qualitative judgments of SEBL. But when analyze the performance of the SEBL made the quantitative judgment.
Sample Design A sample is a part of the target population, carefully selected to represent that population. target population was the every employees of the SEBL but it was not possible to work with them all, thatâ€™s why chose the employee of the SEBL Uttara Branch as a sample to conduct my research.
Basically made survey by the face to face interview with the in-charge of different department and also the responsible officer of those departments. And another most important and the primary source to collect necessary data was the observation method. Here did different type of work by own which help to get a clear concept about the work here done. Also made a questioner, on the basis of which asked question to the employee and answer of those question helped to find out the problems in different department and the customer demand to the bank. The questioner is following Q: - What are the problems you face in your department? a) Infrastructural b) Manpower Q: - Are your customer satisfied with your service? a) Yes b) No c) Complain sometime Q: - How could you improve your service? a) By recruiting new manpower b) By arranging a training program for existing employee Q: - Are you happy with salary and other benefit a) Yes b) No c) Meet minimum level d) No-comment Q: - Are you satisfied with the work environment? a) Co-operative b) No Q: - Are the client suggests for the online service? a) Yes b) No Q: - Do you think online will improve work efficiency? a) Yes b) No c) May Be Q: - How could SEBL Attract Customer? a) By launching new product
b) By improving service c) By launching automation d) By proper marketing Q: - What is the main driving force of the SEBL? a) Customer loyalty b) Modern Banking System c) Quick service d) Proper marketing Q: - Do you think bank should offer more interest on its deposit especially on FDR? If yes how much? a) No b) Yeas • More than any existing bank • Same to existing bank Q: - What do you think about the customer loyalty to the bank, SEBL is in which position? a) Less b) Almost Same c) Batter than any Bank d) Same to leading banks
Data Analysis and Interpretation The collect annual report of Southeast Bank Limited for financial year 2002, 2003, 2004 and 2005. From those annual reports get the necessary information like, net income after tax, total assets and liabilities, total operating income and expenses etc. which help me to find out different type of ratio of Southeast Bank limited to measure their performance. Other than this made a questionnaire on the basis of which ask question to the employee of the Southeast Bank Limited, Uttara Branch. By analyzing those question’s answer find out some problem and some way to solve those problems.
Scope and Limitation There were so many problems had to face to prepare this report. The main problem was the time limitation because have to submit that report before the end of by internship period. Another problem had to face that had worked in FDR department
Under (General Banking) about 2 months that’s why can’t spend enough time in another department.
BACKGROUND OF SOUTHEAST BANK LIMITED Southeast Bank Limited is one of the fastest growing bank among all the Private Commercial Banks (PCBs) in Bangladesh. The emergence of Southeast Bank Limited at the juncture of liberalization of global economic activities, after the URUGUAY ROUND has been an important event in the financial sector of Bangladesh. The experience of the prosperous economies of Asian countries and in particular of South Asia has been the driving force and the strategic operational policy option of the Bank. The company philosophy- “A Bank with Vision” has been precisely the essence of the legend of bank’s success. The Government of Bangladesh as a Scheduled Bank in the private sector has licensed Southeast Bank Limited in pursuance of the liberalization of Banking and Financial Services in Bangladesh. The Bank was established under the bank Company Act 1991 & incorporated as a public limited company on March12, 1995 under the Companies Act 1994 and commenced banking operations through the Principal Branch at 1, Dilkusha Commercial Area, Dhaka from May 25,1995. The then Finance Minister of the county, Mr. M Saifur Rahman, inaugurated the Branch. The Sponsor-Directors of the Bank are successful group of prominent local and nonresident Bangladeshi investors who have earned high credentials and excellent reputation in their respective fields of business at home and abroad. The Directors had elected Mr. M. A. Kashem, a noted industrialist as the founder Chairman of the Board of Directors of the Bank while Mr. Syed Anisul Huq was given the charge of the founder President and Managing Director of the bank. Mr. Shah Md. Nurul Alam as the Senior Executive Vice President supported him. But the present Chairman of the Board of Directors of the Bank is Mr. Yussuf A. Harun and the present President and Managing Director is Mr. Shah Md. Nurul Alam who is successfully supported by Mr. M.A. Muhith as the Senior Executive Vice President. The Bank had set up a network of 12(twelve) Branches in Dhaka, Chittagong, Sylhet and Khulna. It has no overseas branch.
OUR VISION To stand out as a pioneer banking institution in Bangladesh and contribute significantly to the national economy
OUR MISSION *High quality financial services with the help of the latest technology. *Fast and accurate customer service. * Balanced growth strategy. *High standard business ethics. * Steady return on shareholders equity. *Innovative banking at a competitive price. Attract and retain quality human resource. • Firm commitment to the society and the growth of national economy.
COMMITMENT *Provide service with high degree of professionalism and use of most modern banking technology. Create life-long relationship based on mutual trust and respect. Respond to customer needs with speed and accuracy. • Share their values and beliefs. • Grow as our Customers grow. • Offer first –rated solutions of clients banking problems and issues. • Provide products and services at competitive pricing.
Ensure Safety and Security of customer’s valuables in trust with us Keeping ahead of other competitors in productivity and profitability.
FUTURE PLAN Ref: - 06
To exceed customer expectations, the management likes to turn this bank into a worldclass bank so that all banking related services could be provided efficiently and effectively. Automation will play a vital role. All the branches will come under one network so that customer will enjoy the banking services. Corporate clients will be provided banking services at their doorsteps. Mobile ATM services will be introduced so that customers can be served in any corner of the cities. This service will help to ease the tension of carrying large quantity of money during the salary period. Phone banking and Internet banking will allow the customers to withdraw and transfer money at any time. More specifically the bank will provide the following: • Electronic Fund transfer • Electronic L/Cs • Mobile ATM service • Utility bill payment through ATM cards • One stop service • Corporate banking • Real time banking
CURRENT SITUATION OF THE SEBL Ref: - 07
Operating Profit of the Bank more than doubled during the year 2005 and taka 755.04 million which was the combined effect of 35% growth in Net Interest income and appropriate expenditure control measures among others. Bank excelled in its margin management in a fiercely competitive market. Bottom line was further bolstered by 11%increase in Non-funded income for the year although investment income reduced by 22% compared to 2004. Profit before tax also doubled at Taka 407.47 million. Earning per share (EPS) stood at taka 31.26 while return on equity (ROE) and Return on assets (ROA) were 10.64 and 0.50% respectively.
Deposits The deposit products have been diversified to suit wide range of customers. The accumulated total deposits of the Bank was Tk. 38258.15 million as on December 31,2005 as against Tk. 27930.84 million as on December 31, 2004 registering an increase of 36.97%. The present strategy is to increase the deposit base through maintaining competitive interest rates and having low cost of funds that would ensure a better spread with the lending rate. Deposite
18% FDR 44%
Savings CD Others
Loans and Advances In 2005 southeast Bank limited registered phenomenal growth in the credit portfolio. Because of visionary policy of the Bank management, loans and advances had increased by 47.95% than that of the previous tear. The loans and advances of bank stood at Tk. 32551.09 million as on December 31, 2005 as against Tk.22001.70 million in the previous year. The growth as achieved has been possible due to support and patronage of the customers. The Banks policy for the year was to expand the portfolio in the export oriented industries and the result of this policy is well reflected in the export business of the Bank. The credit portfolio of the bank is well diversified having a balanced mix covering a wide spectrum of spectrum of business and
industries including Readymade Garments, Textiles and spinning, telecommunication, pharmaceuticals, steel & engineering, ship scraping, cement, edible oil, real estate, education, transport etc. the Bank also expanded its financing to the small enterprise & consumers under Consumers Credit Schemes for acquiring various household items.
International Trade International Trade is one of the focused sectors of sector of our Bank. In the tear 2005, the volume of import increased to Tk. 29079.30 million from Tk20229.62 million of the previous years showing a growth of 44%. The volume of export showed a phenomenal growth of 100% reaching Tk. 676.93 million of the previous years. This is the result of our policy to give added focus on export business.
Merchant Banking Operation Merchant Banking is a new product of Southeast Bank Limited. They have already recruited qualified professionals to man the Merchant Banking Division of Head Office. It is expected to emerge as a big profit center for the Bank. Necessary permission under the Merchant Banking and Portfolio Management Regulation 1996 from the Securities and Exchange Commission is in the offing. The Division is poised to start the full- fledged merchant banking activities, which include the following:
• Issue Management •
Under writing • Portfolio Management
Islamic Banking Southeast Bank limited provides both traditional & Islamic Banking services to the customer in compliance of the provisions of the Bank Companies Act 1991, Bangladesh Banks directives and the principles of Islamic Shariah. The Bank has 31 Branches as on December 31, 2005. out of them, 05 branches are designated Islamic Banking Branches. The modus operandi of Islamic Banking is substantially different from that of traditional banking.
The Bank is maintaining a separate set of accounts for Islamic Banking Branches based on Islamic Shariah Principles. All activities of Islamic Banking Branches are conducted on interest- free basis. Investment is made through different modes and investment income is shared with the
Mudaraba depositors on an agreed ratio ensuring a reasonably fair rate of return on their deposits based on Islamic Shariah. There is a Shariah Council of the Bank that consists of Leading Islamic scholars and reputed Islamic Bankers who are well versed in Shariah concerning Islamic banking operations.
Card Division SEBL is the first domestic commercial bank in Bangladesh to introduce Visa Electron and Visa Credit Card ant the same time. SEBL also the only Bank in Bangladesh to introduce Visa ATM Acquirer along with POS Acquirer, which opened the opportunity for all the Visa Cardholder (domestic and international) to use our ATMs. Recently SEBL have opened an ATM booth in Cox’s Bazar.
PERFORMANCE ANALYSIS OF SEBL Ref: - 02 & 07
Return on Equity (ROE) Return on Equity (ROE) is the ratio of a bank’s net after-tax income divided by its total equity capital. Return on Equity (ROE) is a measure of the rate of return flowing to the bank’s shareholders. It approximates the net benefit that the stockholders have received from investing their capital in the bank that means placing their funds at risk in the hope of earning a suitable profit.
Return On Equity (ROE) 10.64%
8.00% 6.00% 4.00%
In the above graph we see that in year 2004 and 2005 the Return On Equity increased by 4 and 5 times respectively than the year 2003 which indicate that Southeast Bank use more debt than equity. Which raises the returns to the shareholder but it also raise risk for the bank.
Return on Assets (ROA) Return on Assets is the ratio of a Bank’s net after-tax income divided by its total assets. Thus ROA is primarily an indicator of managerial efficiency; it indicates how capably the management of the bank has been converting the institution’s assets into net earnings.
Return On Assets (ROA) 0.49%
0.50% 0.40% 0.28%
0.30% 0.20% 0.10% 0.00%
Here In above graph we see that the ROA is also increasing almost as same as the ROE it’s happen because of the efficiency of the management level. They are become so efficient in year 2004 and 2005 as we see in the above graph the ROA is increase by almost 6 and 10 times respectively.
Net Interest Margin The Net Interest Margin is efficiency measures as well as profitability measures, including how well management and staff have been able to keep the growth of revenues (which come primarily from the bank’s loans, investments, and service fees)
ahead of rising costs (principally the interest on deposits and money market borrowings and employee salaries and benefits). The net interest margin measures how large a spread between interest revenues and interest costs management has been able to achieve by close control over the bankâ€™s earnings asses and the pursuit of the cheapest sources of funding.
Net Interest Margin 2.50% 2.00%
1.50% 1.00% 0.50% 0.00%
In the above graph we see that the net interest margin is increasing year by year, which indicate the efficiency and the competitiveness of the management and the staff of the SEBL. It also indicates that the spread between the income and the cost of SEBL is increasing day by day. It may happen because of bankâ€™s efficiency to provide the loan to its client at a highest but reasonable rate of interest which is competitive but not higher than the other bank and the financial institution which are operate in our country.
Net Non-Interest Margin The non-interest margin, I contrast, measures the amount of non-interest revenues stemming from deposit service changes and other service fees the bank has been able to collect (called fee income) relative to the amount of non-interest costs incurred (including salaries and wages, repair and maintenance costs on bank facilities, and loan-loss expenses). For most banks, the non-interest margin is negative: non-interest costs generally outstrip fee income; through bank fee income has been rising rapidly in recent years as a percentage of all revenues.
Net Non-Interest Margin 0.00% -0.20% -0.19%
-0.80% For-1.00% most bank
the non-interest margin is negative and that the normal. But in case of -1.20% -1.04% SEBL the positive thing is that the spread between the non-interest income and the -1.21% -1.40% expenses is become less day by day. In the above figure we see that in year 2002 the non-interest margin was -1.21% but in year 2005 it was only -0.19% which proves that the bank generating more income which is not related to the loan or interest than it did before. And in future it could be in positive figure.
Earning Per Share Earning per share is the ratio of bankâ€™s net â€“ income after tax divided by the total common equity share outstanding which means how much profit will get the shareholder on their owned share. Earning per share is the main indicator of an organizationâ€™s wealth. If the EPS is increasing year by year then we can say that the organization is doing well. Earning Per Share 35 30 25 20 15 10 5 0
31.26 18.19 5.78
Here in the above graph we see that the EPS of SEBL in year 2005 is increased by 10 times than the year 2003 when SEBL went through a bad time. But now they are in a position, which is more than the satisfactory level.
Net Profit Margin The Net Profit Margin (NPM), or the ration of the net income to total revenues, is subject to some degree of management control and direction. It reflects the effectiveness of expense management (cost control) and service pricing policies. It reminds us that banks can increase their earnings and their return to their stockholders by successfully controlling expenses and maximizing revenues. 12.00%
Net Profit Margin
Where the net profit margin shown the efficiency of the management control and direction we can say that the management of SEBL is doing well in the recent time than the before. If we see the net profit margin in year 2002 and year 2003 it was 2.12% and 1.32% respectively but in last year the net profit margin was 10.30%. Which shows the managementâ€™s control over the expense and the strong but reasonable pricing policies of their service, which they offer to their customer.
Assets Utilization (AU) Assets Utilization (AU) ratio is the product of Total Operating Income divided by the Total Assets that means how much income bank generate by using a single unite of assets. This ratio reflects portfolio management policies, especially the mix and yield
on the bank’s assets. By carefully allocating the bank’s assets to the highest-yielding loans and investments while avoiding excessive risk, management can raise the bank’s average yield on its assets.
Asset Utilization (AU) 5.00% 4.00%
3.00% 2.00% 1.00% 0.00%
Assets Utilization ratio shows that how efficiently the bank use their assets to generate revenue. In above graph we see that SEBL develop their assets utilization ration by a contentious basis. Which reveal their strong management team, who made the careful and the effective decision about portfolio investment and by avoiding risk as much as possible?
Equity Multiplier The Equity Multiplier (EM), or assets-to-equity-capital ratio, is normally the largest, averaging about 15* or larger for most bank. The biggest banks in the industry often operate with multipliers of 20* or more. The multiplier is a direct measure of the bank’s degrees of financial leverage--how many portions of assets must be supported by each amount of equity capital and how much of the bank’s resources therefore must rest on debt. Because equity must absorb losses on the bank’s assets, the larger
the multiplier, the more exposed to failure risk the bank is. However, the larger the multiplier, the greater the bank’s potential for high returns for it’s stockholders. Equity Multiplier (EU) 30
15 10 5
The multiplier ratio tells us that the higher the multiplier is higher the income and also 0 2002 2004 In the 2005 it lead high risk of 2003 bank’s failure. above graph we see that the multiplier is decreasing by the time which means that the risk of SEBL is decreasing by the time but the income to the shareholder may decrease with the time.
Tax Management Efficiency Tax Management Efficiency ratio reflects the bank’s use security gains or losses and other tax-management tools (like buying tax-exempted bonds) to minimize its tax exposure. Tax Management Efficiency 60.00% 50.00% 40.00% 30.00%
50.21 47.38 % 36.33 % 39.87 % %
20.00% 10.00% 0.00% 2002
In the above graph we see that the Tax management efficiency was not in a stable level. Some time it was up and some time it was down so we can’t say that the SEBL manage their tax over they’re earning very efficiently as their expectation.
Expenses Management Efficiency Expenses Management Efficiency ratio is the ratio to before-tax income to total revenue as an indicator of how many Taka of revenue survives after operating expenses are removed expense management efficiency measurement is a measure of operating efficiency and expenses control.
Expenses Management Efficiency
30.00% 25.00% 20.00%
15.00% 10.00% 5.00% 0.00%
4.38% 3.64% 2002
If we see to the above graph we could realize that the operating expenses of the SEBL were well managed by the last two years. Where we see that in year 2002 and 2003 the expense management efficiency was only 4.38% and 3.64% respectively but in year 2005 it become 25.83%. That shows a strong management control over the expenses.
Assets Management Efficiency Assets Management Efficiency ratio is the product of Total Operating Income divided by the Total Assets that means how much income bank generate by using a single unite of assets. This ratio reflects portfolio management policies, especially the mix and yield on the bankâ€™s assets. By carefully allocating the bankâ€™s assets the highest Assets Management Efficiency yielding loans and investments while avoiding excessive risk, management can raise the 5.00% bankâ€™s average yield on its assets. 4.77% 4.00% 3.00%
2.00% 1.00% 0.00%
Asset management efficiency is same as the asset utilization. Asset management efficiency shows that how efficiently the bank uses their assets to generate revenue. In above graph we see that SEBL develop their Asset management efficiency by a contentious basis. Which reveal their strong management team, who made the careful and the effective decision about portfolio investment and by avoiding risk as much as possible.
Fund Management Efficiency The Fund Management Efficiency, or assets-to-equity-capital ratio, or Equity Multiplier is normally the largest, averaging about 15* or larger for most bank. The biggest banks in the industry often operate with multipliers of 20* or more. The multiplier is a direct measure of the bank’s degrees of financial leverage--how many portion of assets must be supported by each amount of equity capital and how much of the bank’s resources therefore must rest on debt. Because equity must absorb losses on the bank’s assets, the larger the multiplier, the more exposed to failure risk the bank is. However, the larger the multiplier, the greater the bank’s potential for high returns for it’s stockholders. Fund Management Efficiency 30
15 10 5 0
The fund management ratio is same to the Equity Multiplier ratio; the multiplier ratio tells us that the higher the multiplier is higher the income and also it lead high risk of bank’s failure. In the above graph we see that the multiplier is decreasing by the time which means that the risk of SEBL is decreasing by the time but the income to the shareholder also decreasing by the time.
By analyzing the performance of SEBL we see that this bank really doing well last two years. In year 2004 their net profit margin was 6.17% and year 2005 it become 10.30% which shows their strong management efficiency and the strong control over the operating expenses. Now a day’s people want better product and service at reasonable price. And Southeast Bank provides that batter product and service at reasonable price which attract more customer loyalty. The ultimate goal of a business organization is to maximize their wealth not the profit, and the indicator of wealth maximization is increase in share price. In case of SEBL we see that in year 2004 the Earning per Share was 18.19 and in year 2005 it become 31.26 it was almost doubled as compare to the previous year. That influences the investor to invest their money in the Southeast Bank Limited share because the return on those shares will increase year by year. Existence of an organization depends upon mainly two things one is, Are they generate sufficient amount of profit and another things is the loyalty of customer and the investor regarding that organization. Here we see that the profit of Southeast Bank Limited become almost doubled in year 2005 than the previous year and the investor will more attractive when they see that the return on share also become doubled in last year. So we can say that, Southeast Bank limited has good enough potentials in the money market of Bangladesh.
SWOT ANALYSIS Ref: - 01
Sizing up a firm’s resource strengths and weaknesses and it’s external opportunities and threats, commonly known as SWOT analysis, provided a good overview of whether a firm’s business position is fundamentally healthy or unhealthy. SWOT analysis is grounded in the basic principle that strategy-making efforts must aim at producing a good fit between a company’s resource capability and its external
situation. Perceptive understanding of a company’s resource capabilities and deficiencies, its market opportunities, and the external threats to its futures well being is essential to understand or predict the essential of that company. To understand or predict the essentials of Southeast Bank Limited. Now I am going to perform SWOT analysis of Southeast Bank Limited.
Strength • Customer Loyalty • SEBL has got the highest number of branches throughout the nation as a private bank.
• Friendly behaves to the employer. • Attractive coordination. • Proper direction to the employer. • Employer can do any work under pressure. • Employee feels any problem than upper level (AVP, VP) understood this.
Weakness • SEBL still not in online operation. • SEBL does not have sufficient amount of ATM booth.
Opportunity • Huge Number of depositor. • Reputed Bank in Bangladesh Bank ranking.
Threat • New Banks, who offer more interest on deposit • New Product offered by the new bank • Arrival new foreign Bank. • Political situation.
Strengths and the Opportunity are normally shows the potentiality of the bank. SEBL also have some weakness and threat but they already take some initiative to remove
those weakness and threat. SEBL start their operation to introduce automation in there daily banking operation and most of their branch now ready to go for online. SEBL take initiative to established ATM in different important location. To avoid the threat of new bank, SEBL now offer same interest on deposit as offer the new banks. SEBL also launch some new product in the market, which will attract new customer and also help the bank to compete with the new bank. So, here we see that SEBL have got the high potentials in the money market of Bangladesh because they have many Strengths and weakness and they already take initiative to avoid the weakness and external threat.
PROBLEMS IDENTIFICATION Ref: - 07
Online Operation The major problem of Southeast Bank is, till now they don’t introduce the online operation while the most of the private bank going through the online operation. As a result the customer, who have account with the bank that has online operation, can withdraw money or deposit money from any of that branch but Southeast Bank Ltd can’t provide that facility to its customer. That deficiency dissatisfied their customer and lead them to switch other private bank those has online operation because consumer always looking for batter services.
Use of Equity Capital In above graph (Equity Multiplier) we see that the equity multiplier ratio is decreasing by the time which indicate that Southeast Bank Ltd using more equity capital than the debt. That way could help them to reduce the risk but, in future, it could reduce the rate of return to the shareholder.
ATM Booth In today’s banking service the most popular one is ATM (Automated Tailoring Machine) service by which customer can withdraw their money (up to a certain limit) without gone through the bank or without issuing any Cheque. Mention able amounts of private bank have sufficient number of ATM booths in the country, especially in Dhaka City. But Southeast Bank Ltd. doesn’t have sufficient amount of ATM booths to meet its existent customer demand, not yet.
New and Diversified Product In our country now the most booming industry is banking industry. And it is happened because a noticeable number of bank coming into this industry and they offer different kind of product to meet the customer attraction to them. Here Southeast Bank doesn’t trying to innovate something new to its customer.
Marketing The most important and biggest source of income for a bank is the interest on loan. To increase that interest bank has to disburse more loans to the client and to get more client bank need to have a good marketing team. Because in today’s world the consumer are highly influenced by the marketing and more specifically by the advertisement, through which they can know different kind of information about a product and be able to compare one product with another, that’s why now the most effective way to attract consumer attraction is marketing. While some of private bank has a separate marketing team whom especially work to increase the deposit and loan for the bank. But Southeast Bank doesn’t have that kind of team.
ACCOUNT OPENING There are five major functions in account opening department. Those are:• Account Opening • Account Closing • Account transfer • Cheque Book issue • Safety looker • Fixed Deposit (Local Remittance) According to the law and practice the banker – customer relation arises only from contract between the two. And opening of account is the contract that establishes the relationship between a banker and a customer. So this section plays a very important role in attracting customer and therefore should be handled with extra care Account opening is the gateway for clients to enter into business with bank. It is the foundation of banker customer relationship. This is one of the most important sections of a branch, because by opening accounts bank mobilizes funds for investment. Various rules and regulations are maintained and various documents are taken while
opening an account. A customer can open different types of accounts through this department. Such as: I. II. III. IV. V. VI.
Savings Account (SB) Current Account (CD) Short Term Deposit (STD) NFCD (Non-Residential Foreign Currency Deposit) FC Account (Foreign Currency Account) SDR (Security Deposit Receipt)
Account Opening Procedure The account should be properly introduced by Any one of the following: • An existing Current Account holder of the Bank. Step 1
• Officials of the Bank not below the rank of an Assistant officer. • A respectable person of the locality well known to the Manager/Sub-Manager of the Branch concerned. Receiving filled up application in bank’s prescribed form mentioning what type of account is desired to be opened
• The form is filled up by the applicant himself / herself • Two copies of passport size photographs from individual are taken, in case of firms photographs of all partners are taken • Applicants submit two passport size photographs of nominee Step 3
• Applicants must submit required documents • Application must sign specimen signature sheet and give mandate • Introducer’s signature and accounts number – verified by legal officer
Step 4 Step 5 Step 6
Authorized Officer accepts the application Minimum balance is deposited – only cash is accepted Account is opened and a Cheque book and pay-in-slip book is given
Documents Required For Opening Account •
Individual / Joint Account
o Introduction of the account o Fill-up the KYC (Know Your Customer) form o Two photographs of the signatories duly attested by the introducer and two photographs of nominee. o Identity (copy of passport / voter ID card) o Joint Declaration Form (For joint a/c only). o Employee’s Certificate (in case of service holder) Partnership Account • Introduction of the account • Fill-up the KYC (Know Your Customer) form • Two photographs of the signatories duly attested by the introducer. • Partnership letter duly signed by all partners (Sign should be similar as stated in Partnership Deed) • Partnership Deed duly certified by Notary public • Registration (If any) • Updated Trade license Proprietorship Account • Introduction of the account • Fill-up the KYC (Know Your Customer) form • Two photographs of the signatories duly attested by the introducer. • Valid copy of Trade License • Rubber-stamp. • TIN number certificate
• Identity (Copy of passport) • Permission letter from DC/ Magistrate (in case of newspaper) Limited Company • Introduction of the account • Fill-up the KYC (Know Your Customer) form • Two photographs of the signatories duly attested by the Introducer. • Valid copy of Trade License • Board resolution of opening A/C duly certified by the Chairman/Managing Director. • Certificate of Incorporation • Certificate of Commencement (In case of Public limited company) • Certified (joint stock) true copy of the Memorandum and Article of Association of the Company duly attested by Chairman or Managing Director. • List of directors along with designation & specimen signature • Latest certified copy of Form – xii (to be certified by register of joint stock companies) (In case of Directorship change). • Rubber Stamp (Seal with designation of each person) • Certificate of registration (In case of Insurance Company – Obtained from department of Insurance from the Peoples Republic of BD) Club / Societies Account • Introduction of the account • Fill-up the KYC (Know Your Customer) form • Two photographs of the Signatories duly attested by the introducer. • Board Resolution for Opening A/C duly certified by President/ Secretary. • List of Existing Managing Committee • Registration (if any) • Rubber-Stamp. •
Permission letter from Bureau of N.G.O. (In case of N.G.O. A/C).
Closing of an Account The closing of an account may happen,
o If the customer is desirous to close the account, o If the SEBL finds that the account is inoperative for a long duration. o If the court of SEBL issues garnishee order A customer may close his/her account any time by submitting an application to the branch. The customer should be asked to draw the final check for the amount standing to the credit of his/her account less the amount of closing an other incidental charge and surrender the unused check leaves. The account should be debited for the account closing charge etc. and the authorized officer of the bank should destroy unused check. In case of joint account the application for closing the account should be signed by the joint account holder. The fee for closing of an account is Tk.200.
Cheque Book Issue After opening the account customer need a Cheque book to withdraw money. To get this Cheque book first the customer has to submit a requisition sleep to the account officer and that requisition sleep provided by the bank in case of new account. But in case of existing customer they have to bring a page from the Cheque book which is specially made to submit to bank to get the Cheque book. Account officer receive the Cheque book and verify the account name, number and the signature and than issue a Cheque book to the customer.
Account Transfer Sometime an existing account holder may wants to transfer from one branch to another branch for several reasons. In that case the account holder has to submit an application to the account officer and have to handover his or her Cheque book to the account officer. Account officer receive application and Cheque book and send account opening form and a IBCA (inter branch credit advice) of clients depositâ€™s money to the branch where the clientâ€™s wants to transfer his or her account.
Safety Looker To open a safety looker the client have to submit an application form to the account officer along with two passport size photograph and the main condition is that, the person who apply for safety looker he or she must have an account with the SEBL.
Account officer check the availability of looker if there is empty looker available then account officer issue to that applicant.
Charge for safety Lookers SL 01 02 03 04 05
Types Charges Small Size 1500.00 TK Yearly Medium Size 2000 TK Yearly Large Size 5000.00 TK Yearly Security Money 2000.00 TK Yearly Replacement of lost At Actual plus Handling Charges money 25.00%
Personal Banking SOUTHEAST BANK LIMITED
Approved Interest Rate effective from 18th April, 2005
Interest Rate on Deposits Savings Deposits
Special Notice Deposits (STD)for minimum Tk. 5.00 lac 4.00% and above Security Deposit Receipts (SDR) / Call Deposit
Rate as per daily FX rate
RFCD (minimum balance US$2000 or its equivalent for Rate as per daily FX rate other currency and minimum tenor one month) Fixed Deposit ( Time Deposits) 3 (Three) Months
6 (Six) Months
1 (One) Year
Double benefit scheme (DBS)
CLEARING DEPARTMENT Clearing is a system by which a bank can collect customers fund from one bank to another through clearing house. A Cheque, Pay Order (P.O), Demand Draft (D.D.) Collection of amount of other banks on behalf of its customer is a basic function of a Clearing Department. Clearing House is a place where the representatives of different banks get together to receive and deliver Cheques with another banks. Normally, Bangladesh Bank performs the Clearing House in Dhaka, Chittagong, Rajshahi, Khulna & Bogra. Where there is no branch of Bangladesh Bank, Sonali bank arranges this function. There are the three major functions in Clearing House • Inward Cheque Posting • Return Cheque Sending • Outward Cheque Sending
Inward Cheque Posting Those Cheque or Payment Order, which are drawn on our branch but submit on another bank and they send to us is known as inward Cheque. When inward Cheque comes to our branch first we figure out the Cheque which will be returned for any reason, then we posting the rest of the Cheque into Misys. Like Dhaka bank receive some Cheque from Transcom Electronics Limited which is drawn on SEBL Uttara Branch. Dhaka Bank sends those Cheques to their Head office and head office sends those Cheques to the Bangladesh Bank Clearing house in next
working day. SEBL Messenger collects those Cheque and send to the SEBL Uttara Branch through the Head Office. Uttara Branch Clearing Department receives those Cheques and identifies those Cheque which will be returned and send them to the head office before 2.00 PM so that the Messenger could be able to returned those in the 2 nd house of the day. Then SEBL Uttara Branch make posting of those Cheque into Misys. Here they make SEBL General Account -----------Debit (Total Return Amount)
Client Account----------------------Debit (Honored Cheque Amount) SEBL General Account------------------Credit (Total Inward Cheque Amount)
Outward Cheque Sending Outward Cheques are those Cheques, which are submitted to our branch by the client, but those Cheques are drawn on other branches are known as the outward Cheques. When clearing department gets those Cheques from different department, clearing department first posting those Cheques into Bangladesh Bank prescribed software. Then they make Los and send them to the Head office. Head office sends those Cheques to the Bangladesh Bank clearing house at next working day. And the representative of SEBL head office distributes those Cheques to the Messenger of banks on which those Cheques are drawn. Like SEBL Uttara Branch gets some Cheques which are drawn on the Dhaka Bank Banani Branch. In that case SEBL Uttara Branch first posts those Cheques into the BB prescribed software and then makes a Los and then sends them to the SEBL Head Office. Head Office sends those Cheques to the BB clearing house on the next Working day. And the Messenger of SEBL handover those Dhaka Bank Messenger. When clearing department of SEBL Uttara Branch makes the Los the have to make the voucher
1. X Clearing ---------------------Debit DAD Clearing -----------------------Credit 2. DAD Clearing -----------------Debit X Clearing ----------------------------Credit On the next working day we debited the party account by the amount which is mentioned in the Cheque SEBL General Account --------------Debit
Party Account Credit-------------------------Credit
Here we Debited SEBL General Account because we issue IBDA to the Head office. And that the normal thin when we debited SEBL General Account we have to Issue IBDA and when we credited SEBL General Account we have to issue IBCA. Here when clearing department of SEBL Uttara Branch credited the Party account, the party canâ€™t withdraw the credited amount at that day. Because that credit is the shadow credit, and the client could withdraw the credited amount on the next working day when the SEBL Uttara Branch will be sure that the Cheque which the party submit duly will not be returned.
Return Cheque Sending A Cheque may returned for several reason which are discussed below
Account Closed A Cheque may be drawn on an account which is already closed, in that case the Cheque will be returned because there is no such account from which the bank could debit the money. Like Transcom Electronics get a Cheque from Sharat Fashion and Transcom Electronic submit it on Dhaka Bank Karwan Bazar Branch, they send it to SEBL Uttara Branch because Sharat Fashion have account with them but it is closed just after gave the Cheque to the Transcom Electronics, in that case the Cheque will be returned.
Insufficient funds or nor arranged for There is no sufficient money in the drawer account (who writes this Cheque) as much he or she mentioned in the Cheque. In that case the Cheque will return to the bank that sends it to the SEBL Uttara Branch.
Payment stopped Sometime the drawer make request to the bank to stop the payment. In that case the cheque should be returned.
Effects not cleared may be presented again The instruction may not clearly write on the Cheque. Like the drawer didnâ€™t clearly mention the name of the drawee.
Amount in word and figure differ
Sometime the amount which mentioned on the Cheque may differ between the numerical and the word. Like drawer numerically write 10000.00 but in word he or she writes One thousand Taka only in that case the Cheque will be returned.
Drawer’s signature differs Bank keep two specimen signature of every account holder, so when the Cheque is come for collection the account officer check for difference between the signature which is on the Cheque and which is keep on the bank. If there is difference between the two signatures then the Cheque will return to the sender bank.
Alteration requires drawer’s full signature If any kind of alteration or change is made on the Cheque then it requires a full signature of drawer on that change. Like the drawer first write Md. Jamal and than make it Md. Kamal, in that case the drawer have to put his or her full signature otherwise the Cheque will be returned.
Mutilation requires drawer’s confirmation If any kind of damage or disfigurement happened with the Cheque then it require the drawer confirmation.
Cheque post dated or out of date Cheque can’t be post dated more than the three months and not advanced dated more than one day if otherwise happened then the Cheque will return to the sender.
Date incomplete or missing The date which is mentioned in the Cheque may be missing or incomplete which confuse the clearing officer to understand that, is that Cheque post dated or out of dated.
Payee’s endorsement requires or irregular The sender bank’s (where drawee submit that Cheque) endorsement may be missing or not clear, any one of those case the Cheque will be return to the sender bank.
Payee’s endorsement required bank confirmation Sometime the payee’s endorsement is present but the bank confirmation is absent in that case also the Cheque will be returned.
Clearing house stamp missing In the back and the front of every inward Cheque the clearing house stamp is required if it is missing then the Cheque will be returned.
Not drawn on us Sometime the Cheque may be presented to us who is not drawn on us but on other bank.
Present through banker Sometime the Cheque may be presented personally, but the Cheque will be returned.
LOCAL REMITTANCE TT/ Telegraphic Transfer Telegraphic Transfer is the easiest way to transfer money from one place to another. To issue TT the Drawer must have account with SEBL other than there will have some risk of money laundering. There are four Parties in case of TT issue they are:i. Issuer :- Which Branch issue this TT ii. Drawer :- Who ordered to bank to issue TT iii. Drawn :- On which Branch TT issued iv. Drawee :- To Whom TT issued TT can be issued by three ways. I. By Cash II. By Balance Hold III. By Foreign Remittance
Step’s of TT outgoing • Receive application or request of TT from the customer who have account with us. • Verify signature, commission and other information. From the three copies of TT application Credit Ticket goes for posting, Telex massage goes for TT passing and department filling, third copy is the Customer’s copy which goes to customer.
• Entry it into the register • Put the TT number and the TTICA (Telegraphic Transfer Issuing Credit Advice) number. • Sent it for authorized signature • Issue Test number • Send it to Drawn Branch through Telephone or Telegraph • Post into the Computer • Send the TTICA copy to the drawn branch.
TT Cancellation Sometime client (who ordered for issue TT against someone) wants to cancel the TT. It is possible if the drawee (to whom TT issued) didn’t withdraw the money yet from his or her account. In that case client inform the issuing branch to stop the payment and the branch ordered Drawn branch (on which branch it was issued) to stop the payment. In that case the drawer has to write a latter to the issuing branch manager with the explanation of the reason for which he or she ordered for stop payment. If the drawn branch credited the drawee account and the drawee didn’t withdraw the money yet then they debited the drawee account.
TT Incoming This is the work done by the drawn branch:• Receive the TT from the issuing branch • Check that the TT number and the Test number is correct • Entry it into the TT incoming register • Make the Client or Drawer account Credit and SEBL (Southeast Bank Limited) general account Debited • Put the authorized signature in Debit and credit Voucher • Post it into the online (Leads software which is used by SEBL)
TT Commission Commission: - .1% on the TT amount. If amount is less than 25000 then commission is 25 Taka. Like if the TT amount is 500000.00 then we charge the
commission .1% on 500000.00. But if TT amount is 24000.00 or 20000.00 than we charge 25 taka only.
Exchange: - 15% on the commission Postage/cable: - 50 Taka.
Collection There is two type of collection made by the Southeast Bank Limited (SEBL). Collection is basically two types they are:I. Inward Collection II. Outward Collection
Inward Collection Inward Collection item is those Cheque and Pay-order, which was sent by another branch to your branch for collection. There are the following steps which have to follow in case of inward collection:• First collection item is come to cash department; they verify the signature which is on the Cheque, and check the balance of the drawer. If he or she don’t have adequate balance as she or he write in Cheque then the check will return to the issuer bank. If the collection item is check than it come through the cash department and if it is pay-order then it come to Local Remittance Department directly. • Entry into the Inward Collection Registry • Make the instrument (Cheque or pay-order) debit and the SEBL General Account Credit. • Write IBCA (Inter Branch Credit Advice) • Authorized Signature on IBCA • Send those IBCA to the issuer branch, that mean’s those branch who sent collection to us.
Outward Collection Sometime customers of SEBL submit some Cheque or pay-order which is drawn on another bank or on other branch of SEBL to collect those instrument’s money. So
when SEBL sent Cheque or pay-order those are drawn on another bank or another branch of SEBL then it will know as outward collection. We can divide the outward collection into two categories, like:A. Within the Dhaka City B. Outside the Dhaka City
Collection within the Dhaka City If the collection item is drawn on the SEBL and within the Dhaka city then it will known as OTD (Outward Transfer Delivery). Following steps are followed in case of collection within the Dhaka City • First collection item come into the cash department • Cash department send it to the local remittance department • Entry into the OTD registers and put the OTD number on the deposit slip and the instrument. • Writing Forward (Two Copies) which will sent to the Drawn bank • Authorized Signature • Filling one copies of forward and deposit slip • Send another copy or forward and the instrument to the Drawn Bank. When the collection is made and the IBCA is send to us from the Drawn branch we mark it into the collection book or OCL book by entering Realization date, amount realized and the Remarks (IBCA number).
Collection outside the Dhaka City Collection item outside the Dhaka City can be two types one is sent to the SEBL where they have branch and another is directly sent to the Drawn branch. Like one Cheque is drawn on Sonali Bank Comilla Branch but SEBL don’t have any Branch in Commila so they send the instrument directly to the Sonali Bank Commila Branch. And in another case a Cheque drawn on Sonali Bank Feni Branch in that case we send that instrument to the SEBL Feni Branch not to the Sonali Bank Feni Branch. Bank
registers the outward collection into the OCL Book. Bank goes through the following steps in case of outward collection outside the Dhaka City. • First collection item come into the cash department • Cash department send it to the local remittance department • Entry into the OCL registers and put the OCL number on the deposit slip and the instrument. • Writing Forward (Four Copies) which will sent to the SEBL another Branch or Drawn bank • Authorized Signature • Send forward to the SEBL another Branch or Drawn bank.
Collection Charge:SL 01 02 03 04
Amount Up-to 25000.00 TK
0.15% or Min25.00 TK Above 25000.00 TK but not more than 100000.00 TK. 0.15% or Min 50.00 TK. Above 100000.00 TK but not more than the 0.10% or Min 500000.00TK. 200.00 TK. Above 500000.00 TK but not more than the 1000000.00 0.05% or Min TK 500.00 or Max 1500.00TK. Above 1000000.00 TK 0.05% or Min 750.00 or Max 2000.00TK. Charge of Postage (in case of foreign collection E-mail, At actual TK FAX or Phone charge will be 50.00) 25.00
DD/ Demand Draft Demand Draft is the lengthy way then Telegraphic Transfer to transfer money from one place to another. To issue TT the Drawer must have account with SEBL other than there will have some risk of money laundering. When client came to our bank to
issue TT on a bank where SEBL have no branch, in that case SEBL suggest them to issue DD other than the TT. There are four Parties in case of DD issue, they are v. Issuer :- Which Branch issue this DD vi. Drawer :- Who ordered to bank to issue DD vii. Drawn :- On which Branch TT issued viii. Drawee :- To Whom DD issued DD can be issued by three ways. IV. By Cash V. By Balance Hold VI. By Foreign Remittance Bank has to follow the following steps to issue DD:• DD first come to the Cash Department (if cash or balance hold) or Foreign Remittance Department (if foreign remittance). • Cash Department check balance and send it to the Local remittance • Receive the DD application • Check commission, exchange and postage/cable charge. In that case if the DD amount is less than the 50000.00 then the postage charge will be 25.00 but if the amount is more than 50000.00 then the postage charge will be 50.00 TK • Entry into the Register • Write DD Block (one copy goes to client/ foreign remittance, one copy for the posting and another one copy keep department’s file) • Put DD and Controlling number • Put IBCA number • Put the TEST number (if the DD amount is more than 50000.00 TK) • Make the Client Account/Cash Debit and SEBL General Account Credit • Send the IBCA to the Drawn Branch.
DD Incoming SEBL go through the following steps in case of DD incoming:There are two conditions in case of DD incoming
A. Client Claim for DD money first B. IBCA come first Incase of Client Claim first
• Make the DD payable without IBCA Account Debit and the client account Credit • When IBCA will come Make the SEBL General account Debit and the DD payable without IBCA account credit
In case to IBCA come first • Make the SEBL general account Debit and the DD payable account Credit (against IBCA) • When the client claim make the DD payable Debit and the Client account credit.
DD Commission Commission: - .1% on the DD amount. If amount is less than 25000 then commission is 25 Taka. Like if the DD amount is 500000.00 then we charge the commission .1% on 500000.00. But if DD amount is 24000.00 or 20000.00 than we charge 25 taka only.
Exchange: - 15% on the commission Postage/cable: - If the DD amount is less than the 50000.00 TK then the Postage/Cable charge will be 25.00 TK. But if the DD amount is more than the 50000.00 TK the Postage/Cable Charge will be 50.00 TK. Because in that case SEBL have to put TEST number on the DD and also inform to the Drawn branch by Telegraph or Telephone.
DD Cancel Sometime client wants to cancel DD for some specified, like the Drawee don’t feel the necessity for the DD. In that case the client may request to the Issuer Bank to cancel the DD. If the DD Release by the drawee than the client doesn’t have to bear any cost for the DD cancellation but if the Drawee don’t do that than the client have to pay 50.00 TK as a DD Cancellation fee. When the issuer Branch cancels a DD they have to issue an IBDA to the Drawn Branch where they Debited the SEBL general account and Credited the Client account. And in response the Drawee Branch make the SEBL General Account Debited which was credited before and credited the DD payable.
Pay order Pay order is the most safe and sound money transfer way than any other instrument. The most attractive things of Pay-order is it never been dishonored. Pay-order is a kind of instrument which is issued and payable at a same branch of a bank. In case of pay-order client or the beneficiary may submit it in another bank or another bank but it will come to the issuer branch for honor. In case of pay-order the client come to the bank and applies to bank to issue him a pay order in favor of himself / herself and any other person and organization. Here are some steps which are followed by SEBL to issue a Pay-order. • Fill-up Pay-order form by the customer where he/she has to mention the ordered amount, purchaser name, beneficiary of that Pay-order. • Submit it to the cash with ordered amount and the commission. Client draw a pay-order by his/her balance hold, by check and by cash. • Cash department send it to the Local remittance after checking the commission, if client ordered for his/her balance hold than checking the client balance and verify the signature. • Write the Pay-order (in pay-order block) and put the pay-order number on the pay-order application form. • Entry it into the pay-order register. • Two authorized signature on the pay-order • Hand-over pay-order to the client after receiving a signature on the pay-order block.
Pay-order Commission Ordered Amount
FDR The Local Remittance section of Southeast Bank Uttara Branch also issues FDR. They are also known as time deposit or time liabilities. These are deposits, which are made
with the bank for a fixed period, specified in advance. The bank need not maintain cash reserves against these deposits and therefore, the bank offers higher of interest on such deposits. Opening of Fixed Deposit Receipt: The depositor has to fill an account form where in the mentions the amount of deposit, the period for which deposit is to be made and name/names is which the fixed deposit receipt is to be issued. In case of a Joint name Southeast Bank Uttara Branch also takes the instructions regarding payment of money on maturity of the deposit. The banker also takes specimen signatures of the depositors. A fixed deposit account is then issued to the depositor acknowledging receipt of the sum of money mentioned there. It also contains the rate of interest and the date on which the deposit will fall due for payment. Steps are following which have to follow during the opening of FDR:• Fill-up the FDR form (by the client) •
Made the Voucher
• Posting it into Misys Cash/Cheque/Transfer A/C--------------Debit Matured FDR A/C------------------------Credit Term Deposits: These rates are not negotiable. In this table we can find out the percentage that is given by the bank for specific period of time to the customer.
Up-to 500000.00(Five Lac)
Fixed Rate 9%
Up-to 500000.00(Five Lac)
Payment of interest: It is usually paid on maturity of the fixed deposit. When FDR become matured calculates interest on principal amount (duly determined) and deduct the 10% Tax on interest realized and also deduct the Axis duty, which is depending upon the principal amount. In case of FDR payment Bank
Debit the Matured FDR account and issue a CFT/CMM (Cancel Money Market) which delete the FDR A/C and made the client A/C credit by the principle amount and the interest realized. Encashment of FDR In case of premature FDR Bank did not bound to accept surrender of the deposit before its maturity date. Bank gave principal amount with out interest. Renewal of FDR In Arab Bangladesh Bank Karwan-Bazar, the instrument is automatically renewed within seven days after the date of its maturity if the customer does not come to encash the FDR. The period for renewal is determined as the previous one. In case of auto renewal the bank allow the normal interest rate to the customer but if renewal is made by the client then he or she may get the special rate which bank offer during that time. Some time customer made the instruction that his or her interest will go his or her account and the FDR will renewal on the principle amount in that case the customer issue the FDR as par customer instruction.
LOAN DEPARTMEN In all business dealings, officers and employees must be guided by the principles of honesty and integrity and safeguard the interest of the shareholders and the depositors of the bank. They should strictly adhere to the Banking Laws, Rules and Regulations of the Govt. of Bangladesh and the instructions issued by the Bangladesh Bank from time to time, which affect the business practices of the bank. Landing is the incomer generating function of a Bank. But though it is the profitable side to the banking business, it is also highly risky. Loans and Advances always accompany credit risk arising out of borrowers, default in repaying the money. A banker should, therefore, manage the loan business in the profitable and safe manner. He should take all precautions to minimize the risk associated with loan. In formulating a credit judgment and making quality credit decisions the lending officer must be equipped with all information needed to evaluate a borrowerâ€™s character, management competence and capacity, capital, ability to provide collaterals and external conditions which may affect has ability in meeting financial obligation.
For my batter understanding I categorize the Credit Activity into three major parts, they are:-
I. Service II. Documentation III. Recovery
SERVICE Service means whatever the customer wants from the bank as related to the loan. Service include the following things • Receiving the loan application from the client • Check the application form to see that the client fill-up all the necessary information which is asked on that form. • Verify other necessary information and document which is provided by the potential client • Send those document and information along with loan application with a recommendation for the loan to the head office for approval. (this step is followed in case to unsecured loan but in case of secured loan branch manager can make the approval) • Head Office approve the loan against some condition • Credit officer inform the Applicant about the condition • Sanction the loan and credit to the client account ( if the applicant meet all the condition made by the Head Office) Before recommend to head office for loan, credit officer has to perform two basic studies
I. Credit Risk Analysis II. Landing Risk Analysis
Credit Risk Analysis When applicant come to the credit officer for loan along with the application, first credit officer check the application form and collect the necessary information and document. Then he or she analyzes the credit ability of the potential client. Bank distributes the risk by the following way:-
Credit Risk Sl. Risk Type 01 Financial Risk…………...50%
03 04 05
Leverage Risk…….15% Liquidity………….15% Profitability…….....15% Coverage…………….………….05% Business or Industry Risk....18% Size of Business…………….…..05% Age of Business………………...03% Business Outlook……………….03% Industry Growth………………...03% Market Competition………….....02% Entry /Exit Barriers……………..02% Management Risk…………12% Experience……………………...05% Second Line/Succession………..04% Team Work……………………..03% Security Risk…………..…10% Security Coverage……...............04% Collateral Coverage…………....04% Support…………………………02% Relationship Risk…………10% Account conduct……….……….05% Utilization of Limit………….….02% Complaisance of Convents……..02% Personal Deposit………………..01% Total Risk 100%
Grading of Risk Grading
Fully secured by cash or Govt. Guarantee Good GD 85+ Acceptable ACCPT 75-84 Marginal/Watch list MG/WL 65-74 Special Mention SM 55-64 Substandard SS 45-54 Doubtful DF 35-44 Bad/Loss BL <35 If the risk Grading is Superior, Good or Acceptable bank will provide the applied loan to the client.
Landing Risk Analysis Landing Risk comprises the following things:-
Company Position risk
After analyzing those risk if bank satisfied, that means if the risk level is within the accepted level then the bank provide the loan to the customer.
DOCUMENTATION It is not enough to obtain securities. These securities are to be charged against the loans and advances. And it is through DOCUMENTATION that this chagrin of securities are effected. DOCUMENT is the written statement of facts or proof or evidence arising out of a particular transaction, which on placements may bind the parties thereto answerable and liable to the court of law for satisfaction of the charge in question. When the approval of the loan comes to the branch the documentation is start. Documentation means those activities which are performing by the bank to secure the loan form the default in future. Documentation can be described as the process or technique of obtaining the relevant documents. In spite of the fact that banker lends credit to a borrower after inquiring about the character, capacity and capital of the borrower, he must obtain proper documents executed from the borrower to protect him against willful defaults. Moreover, when money is lent against some security of some assets, the document must be executed in order to give the banker a legal and binding charge against those assets. Documents contain the precise terms of granting loans and they serve as important evidence in the law courts if the
circumstances so desire. That’s why all approval procedure and proper documentation shall be completed prior to the disbursement of the facilities. The activity like ensuring the mortgage against the loan, physical verification of assets which will keep as a mortgage, made the charge on the Fixed and Plotting assets of Public or Private limited or the Joint Stock Company. Charge: - Charge means to own the right on the assets of the private or public limited and the joint stock company. This right gives by the Register of the joint stock company. If the bank gets this right from the register of the joint stock company directly that will be known as the First Charge. In that case no bank and financial institution get the charge on that organization’s assets without the permission of the bank who get the first charge. If the bank (who get the first charge) make the permission to the bank that will be known as Paripassue. There are different modes of charging security is exercised by the bank: Pledge Pledge is the bailment of the goods as security for payment of a debt or performance of a promise. A pledge may be in respect of goods including stocks and share as well as documents of title to goods such as railway receipt, bills of lading, dock warrants etc. duly endorsed in bank’s favor. Hypothecation In case of hypothecation the possession and the ownership of the goods both rest the borrower. An equitable charge on the security is created by the borrower to the banker. This is done by the borrower by executing a document known as Agreement of Hypothecation in favor of the lending bank. Lien Lien is the right of the banker to retain the goods of the borrower until the loan is repaid. The bankers’ lien is general lien. A banker can retain all securities in his possession till all claims against the concern person are satisfied. Mortgage According to section (58) of the Transfer of Property Act,1882 mortgage is the ‘’transfer of an interest in specific immovable property for the purpose of securing the
payment of money advanced or to be advanced by way of loan, existing or future debt or the performance of an engagement which may give rise to a pecuniary liability”. In this case the mortgagor dose not transfer the ownership of the specific immovable property to the mortgagee only transfers some of his rights as an owner. The banker exercises the equitable mortgage.
RECOVERY There are two type of loan from the validity point of view I. Unclassified or Regular Loan: - Unclassified loan are those loan which till now have under the deadline of repayment. II. Classified Loan or Past Due Loan: - Classified loan are those loan which are over the deadline of repayment. Recovery activities are related to the procurement of the loan or collect the loan. Bank can recover the loan by the following way:• By mutual discussion • En-cash the FDR • Sale the mortgage • Appeals to the court to sale those property over which the bank has charge Bank collects the amount which they sanctioned to the client by the above way. If the bank gets more money than they sanctioned to the client, then they have to repay those money to the client. Bank Keep the provision for loan loss by the following ways:-
Provision For Loan Loss 5% 20%
3 Months-Specil Notice A/C (SMA) 6 Months-SubStandered (SS) 9 Months- Doubt Full (DF) 12 Months- Bad Loss (BL)
In the above graph we seen that Arab Bangladesh Bank Ltd keep 5% provision for the loan which repayment date over by the 3 months, if it is 6 months bank keep 20%, if it
is 9 months bank keep 50% provision and when the deadline over by the one year bank have to keep provision of 100%.
ACCOUNTS DEPARTMENT Accounts Department is called as the nerve Centre of the bank. In banking business, transactions are done every day and these transactions are to be recorded properly and systematically as the banks deal with the depositors’ money. Improper recording of transactions will lead to the mismatch in the debit side and in the credit side. To avoid these mishaps, the bank provides a separate department; whose function is to check the mistakes in passing vouchers or wrong entries or fraud or forgery. This department is called as Accounts Department. If any discrepancy arises regarding any transaction this department report to the concerned department. Besides these, the branch has to prepare some internal statements as well as some statutory statements, which are to be submitted to the Central Bank and the Head Office. This department prepares all these statements.
Workings of this department • Recording the transactions in the cashbook. • Recording the transactions in general and subsidiary ledger • Preparing the daily position of the branch comprising of deposit and cash. • Preparing the daily Statement of Affairs showing all the assets and liability of the branch as per General Ledger and Subsidiary Ledger separately. • Making payment of all the expenses of the branch. • Recordings inter branch fund transfer and providing accounting treatment in this regard. • Preparing the monthly salary statements for the employees. • Preparing the weekly position for the branch which is sent to the Head Office to maintain Cash Reserve Requirement (C.R.R) • Preparing the monthly position for the branch which is sent to the Head Office to maintain Statutory Liquidity Requirement (S.L.R) • Make charges for different types of duties
• Preparing the budget for the branch by fixing the target regarding profit and deposit so as to take necessary steps to generate and mobilize deposit. • Checking of Transaction List • Recording of the vouchers in the Voucher Register. • Packing of the correct vouchers according to the debit voucher and the credit voucher
FINANCIAL CONTROL DEPARTMENT (FCD) The main responsibility of FCD department is to keep record of inter-branch transaction and all the expenses and income of the branch including salary of all employees. FCD maintain four types of inter-branch transaction, they are:I. Respondent Debit II. Respondent Credit III. Originating Debit IV. Originating Credit FCD maintain all kind of Assets with Depreciation. They calculate depreciation in two ways
Straight Line Depreciation: - Like the assets value is 100000.00 Tk and bank could use it for 5 years, so the deprecation will be 20000.00 Tk for each year
Weighted Depreciation: - In that case first year the depreciation will be 20% on 100000.00 Tk, but in next year the depreciation will be 20% on (100000-20000) 80000.00 Tk that is 16000.00 Tk. FCD prepared Cumulative Profit and Loss Account for every months and Cumulative Balance Sheet for Every individual financial Year. That department also store all the batches from the different department. Motivation To get the best possible output from the employee an organization should have to motivate their employee by all means. In recent time employee don’t motivate only by raising the salary but the organization should have to fulfill their psychological needs also. But in case of Southeast Bank Ltd. bank doesn’t pay the expected salary to their employee, they don’t have any initiative to motivate their employee. They didn’t provide profit bonus on the right time and the right amount.
RECOMMENDATION & SUGGESTION Southeast Bank Ltd. could collect the returned Cheque on the second working day through phone or Fax. If they do it they will be able to credit those parties account who’s Cheque didn’t returned and the parties will be able to withdraw that money on the second working day. Bank could give authority to the accounts opening officer to verify the signature, at least only for Cheques requisition. As a result accounts opening officer could verify the signature and issue Cheque book to the clients which means clients don’t have to wait for long. Southeast Bank Ltd. should update their infrastructural facility by adding some new technological equipment, which is required to maintain the daily banking activity. Bank also could take some initiative to increase the efficiency of the employee. They could arrange seminars on recent banking issue specially the problem in banking sector; they also could arrange different kind of training program to train up their employee. One of the most important functions of General Banking sector is the loan function. To attract the customer for loan a bank should have sound marketing activity. From my point of view, one of the most noticeable lack of Southeast Bank Ltd. is they doesn’t have strong and effective marketing active in the market. While the customers are highly influenced by the marketing of other banks operate in our country. And think Southeast Bank Ltd. should give more emphasis on the marketing of their product and service those they provide to their customer. Southeast Bank Ltd. should take some imitative to motivate their employee. As a whole, Southeast Bank Ltd. could pay a sufficient amount of profit bonus to its employee. Other than this an individual branch could give some gift to its employee at the year-end or at any other special day like Pahela Navo Barsha, Eid, and New Year etc. think those initiative could motivate the employee and they will be more dedicated to their duty than before.
At the last phase of my report could say that Southeast Bank Ltd. still has some problems to take care. One of the most important problem is they doesnâ€™t operate in online while most of the private go through online. But the good thing is Bank can realize that problem and they already take some initiatives to face that problem that means they are preparing to go into online operation. When analyze the performance the most concern-able thing seen that Southeast Bank Ltd collect more equity than the debt which is decreasing the risk of failure but it may decrease the rate of return to the shareholder in future. Another thing needs to mention here that a huge amount of new private bank now operating in our country so Southeast Bank Ltd. should take sound initiative to compete with them. During internship program one common thing seen, that most of the employee of the Southeast Bank Ltd is not happy about their position, so think bank should take some initiative to motivate their employee.
REFERENCE SL 01
Thompson Arthur A; Strategic Management, Concept and Cases, Thirteenth Edition, PP-116-121.
Rose S Peter; Commercial Bank Management, International Edition, PP-150-164.
Cooper R Donald; Business Research Methods, Eight Edition, PP-64-76, 87, 96-102.
Islam Nurul A. K. M.; Unique Banking, First Edition. PP-30-47
The Industry, Weekly Paper, Published At 03-09-06.
Annual Report of Southeast Bank Ltd.