The report is prepared to analyze to overall performance of IFIC Bank
Executive Summary The report is prepared to analyze to overall performance of IFIC Bank and evaluate the Credit Financing Department of IFIC Bank. As a private commercial bank all the sectors of financing department are not highlighted in the report. The main ideas and which are more pertained in the bank those analyzed. At first in the introductory part mainly emphasized on the origin of the report, problem statement, scope and methodology and limitation of the report. In chapter two an overview of IFIC Bank is highlighted and in chapter three General Banking very shortly Literature review has been include. In chapter four all the Credit financing types terms and conditions, rules etc. are analyzed emphasized. In chapter five Foreign exchange are emphasized. There is also one chapter for problem finding of overall banking system and also the problem of the credit department and this is the last chapter, it also include suggestions to improvement of the overall banking system and the credit department. All over the report there are rules and regulations. Problems are identified. With all those the solutions are govern to improve the overall and the credit financing department, so that the services of the bank will be mere quick and unique, reduce the risk of providing longs by refund on time consider the borrower’s criteria etc., which will help the bank to develop their performances. Chapter One Introduction ORIGIN OF THE REPORT: This report is originated as the course requirement of the course “PRACTICAL ORIENTATION IN BANK” of MBA program of International Islamic University Chittagong (IIUC) Dhaka campus. As the practical orientation is an integral part of the MBA degree requirement. I was sent to IFIC BANK LIMITED (Motijheel Branch) to take real life exposure of the activities of banking financial institutions. OBJECTIVE: The prime objectives of the orientation are
To study various desk works of the principal Branch of IFIC bank Limited.
To analyze the performance of the branch as well as IFIC Bank limited as a whole.
How the practice of banking business is being carried out nowadays.
To acquainted with the entire branch banking procedures.
To make a bridge between the theories and practical procedures of banking and to find out whether any
deviations exist between theory and practice. •
To get oneself very familiar with the real banging environment as a student of IIUC.
SCOPE OF THE STUDY:
IFIC Bank Ltd. is one of the lending First Generation Private Banks of the country. As a result I come to know almost all the banking services and products offered by commercial banks as well as some special and innovative products by the bank itself. • SOURCES OF DATA: In order to make the report more meaningful and presentation, two sources of data and information have been used widely. The “Primary Sources” are as follows--•
Face-to face conversation with the respective officers and staffs of the Branch.
Informal conversation with the clients.
Practical work exposures from the different desks of the three departments of the branch covered.
Relevant file study as provided by the officers concerned.
The “Secondary Sources” of data and information are---
Different desk manuals published by IFIC Bank Ltd.
Annual Reports of the Bank.
Various circulars issued by the Head Office regarding general banking functions, foreign exchange
operations and credit policies.
The bank’s website: www.ificbankbd.com
The methodology of the report is given below: For the procedure of different banking operations, I had observed the operations and worked with the officers at the same time I had interviewed the IFIC Bank officials for getting more information. For the analysis part, data have been collected from different statement and the annual reports of the bank. The following table shows the department in which I have observed the deskwork of concerned department and the time I have taken for observing each department. Department General Banking Accounts Foreign Exchange Credit
Period 08th March----20th March 21st March----31st March 01st April ----15th April 16th April----30th April
LIMITATION OF THE STUDY: The following limitations are apparent in the report •
Time is the first limitations as the duration of the program was of eight weeks only.
The bankers who are very much busy with the customers often delay information gathering due to non-availability of time.
Chapter Two Organizational Overview THE BANK IN A SKETCH International Finance Investment and Commerce Bank Limited (IFIC Bank) is a banking company incorporated in the People’s Republic of Bangladesh with liability. It was set up at the instance of the Government in 1976 as a joint venture between the Government of Bangladesh and sponsors in the private sector with the objective of working as a finance company within the country and setting up joint venture banks/ financial institutions abroad. The Government held the sponsors and general public held 49 percent share and the rest 51 percent. In 1983 when the Government allowed banks in the private sector IFIC was converted into full-fledged commercial bank.
OWNERSHIP STRUCTURE The Government of the People’s Republic of Bangladesh now holds 35% of share capital of the Bank. Leading industrialist of the country having vast experience in the field of trade and commerce own 34% of the share capital and the general public holds the rest. COMPOSITION OF THE BOARD Unlike other banks in the private sector Board of Directors of the Bank is a unique combination of both private and Government sector experience. Currently it consists of 11 Directors. Of them six represent the sponsors and general public and four senior officials in the rank and status of joint Secretary/ Additional Secretary represent the Government. Managing Director is the ex-officio Director of the Board. CAPITAL AND RESERVES IFIC Bank has been consistently maintaining the ‘Capital Adequacy Ratio’ as prescribed by Bangladesh Bank. This has been made possible by a policy of building up both capital and reserves. It started with an Authorized and paid-up capital of Tk. 100 million and Tk. 63.20 million respectively in 1986. Authorized and paid-up Capital increased to Tk. 500 million and Tk. 406.39 million respectively in 2004. In additional to paid-up-capital, the Bank has built up a strong reserve base over the years. As against Tk. 21.20 million only in 1983, reserves and surplus increased to Tk. 737.19 million in 2003. Besides, the Bank had 1% General Reserve worth Tk. 393.31 million as on December 31, 2004. STRENGTH AND PERFORMANCE With the active support and guidance from the Government, Central Bank, Clients and patrons, the Bank has been maintaining sound financial strength and showing a steady and impressive business performance. IFIC Bank is one of the few mentionable banks, which maintains capital Adequacy ratio and has more than required provision as per Bangladesh bank Criteria. Starting with a modest deposit of only Tk. 863.40 million in 1983, the Bank had closed its business with a deposit of Tk. 20774.47 million as of 31st December 2004. Total credit stood at Tk. 21280.88 million as on 31.12.2004 against Tk. 20450.90 million last year. Bank has posted a pre-tax (un-audited) profit of Tk.740.25 million during the year ended 31 st December 2004.
CREDIT POLICY AND PORTFOLIO Credit policy of the bank works within the framework of three main objectives, namely, maintenance and improvement of quality of assets, recovery on time and building-up of an efficient customer oriented credit delivery system. The portfolio includes working capital financing, project financing, import-export financing and domestic trade financing etc. The Bank continued to extend working capital facilities to customers to ensure smooth and uninterrupted operation of their business. At the same time, it expanded project-financing portfolio to meet the growing demands of economy for longterm finance in a depressed capital market. Project loans were extended for setting up of new projects and BMRE of the existing projects as well. Due emphasis was given to financing export oriented and export linked industries without loosing sight of the need for long term loans by other domestic market based industries and ventures. So far the bank has financed 343 projects. Among them 48 projects were financed during 2004 amounting to Tk. 1534.57 million. In long-term portfolio, the bank has been diversifying from Textile and RMG industries to steel industries, paper products, CNG filling stations, Shipping, power sector, Micro Credit and health services etc. Moreover the bank has also been financing the Agro-based industries in accordance with Govt. policy. For improved customer services, the Bank now extends one-stop services to corporate clients who require term loan, working capital and import-export financing etc. The bank also participates in syndicate Financing and so far has sanctioned Tk. 1153.00 million in 12 projects. The bank successfully handled two credit lines viz-IDA credit No.2340 and ADB loan No. 1070 BAN (SF) with recovery rate of 100% and 87% respectively. Under these programs the bank sanctioned loans of Tk. 428.00 million to as many as 53 units. It helped local entrepreneurs to successfully implement small and medium sized industries. INTERNATIONAL OPERATIONS International Division at the Head Office is fully equipped with expertise including computerized operations to deal with foreign trade and foreign exchange operations of all kinds including Letter of Credit, Bill, Travelerâ€™s Cheques, Foreign Drafts, TTâ€™s, Remittances from Bangladeshi expatriates abroad and handling students remittances studying abroad etc. Such operations are conducted through 19AD (Authorized Dealer) branches throughout the country. All our 19 Authorized Dealer (AD) Branches have been brought under SWIFT Connectivity. Corresponding Banking (CB) IFIC Bank has wide correspondent network covering all major currencies (ACUD, AUD, CAD, CHF, EUR, GBP, JPY, USD etc.) all over the world. A part from traditional Telex Test Key, we have BKE (Bilateral Key Exchange) with most of the correspondents. Major correspondent banks are:
o o o o o o o o
American Express Bank Bank of Tokyo Mitsubishi Citibank N.A. Commerz Bank AG HSBC JP Morgan Chase Bank Mashreqbank psc Standard Chartered Bank
The international Division in maintaining 29 Standard Settlement Instructions (SSI) i.e. Nostro A/C in 8 Foreign Currencies at various major Financial Centers throughout the world. Bank’s dealing room is equipped with REUTERS 3000. Drawings Arrangement for Inward Foreign Remittance To facilitate inward foreign remittance in Bangladesh, we have both Draft Drawing Arrangement and Electronic Fund Transfer (EFT) Arrangement with different Exchange Companies and Banks. List Exchange Companies / Banks with drawing arrangement with IFIC Bank: • Oman International Exchange LLC-Oman, • Placid N.K. Corporation, U.S.A • Vigo Remittance Corporation, U.S.A • Instant Exchange UK Ltd., UK. • Doha Bank, Qatar (arrangement under process).
INFORMATION TECHNOLOGY Since its journey as a commercial Bank in 1983, IFIC Bank has been laying great emphasis on the adoption of latest Information Technology. Bank became pioneer in the field of IT by introducing computerized branch banking right in 1983. Subsequently all the important branches have been computerized. Recently the Bank has upgraded its Banking Software to bring all modules i.e. Deposits, Loans and Advances, Remittances, Foreign Trade, Foreign Exchange and Accounts Under same platform at all our branches. The Bank now runs under Intra-branch and Inter-branch network. Central Mailing System and Web facilities etc are being maintained in an automated environment at the Head Office and Branches. The bank has already introduced the ATM operations to ensure 24 hours customer services. At present it has 17 ATMs under shared Network in Dhaka City. Besides, 2 ATMs have been installed in Chittagong City and 2 ATMs in Sylhet City. Other major Cities like Khulna, Rajshahi; Bogra will be covered under ATM network gradually. The Bank is also in the process of introducing Credit Cards and various other IT based products. A new product “ Any Branch Banking” is already in operation to facilitate the anywhere banking. Moreover, the existing stand-alone systems of the branches will be converted to a
Centralized Database System soon with a view to introducing the real-time Online Banking facility for the customers of the Bank. Besides, the Bank has introduced some major IT based functions to maintain a strong infrastructure of IT like (a) Development and maintenance of the official Website (www.ificbankbd.com) and (b) Tele Banking operation in our major branches. All Head Office operations like personnel and Administration, Central accounts Credit, International operations, Share, Establishment and Audit and Inspection are computerized on stand-alone basis. NEW PRODUCTS Besides providing traditional services in the areas like, deposit, advance, import-export financing, remittance and collection, treasury operations and lockers, the Bank has in the recent years introduced a good number of new products to meet the increasing demands of the clients and the members of the public. Some of them are: Visa Debit Cards, ATMs (Automated Teller Machine), Phone Banking, Pension Savings Scheme, Death Risk Benefit Scheme, Monthly Income Scheme and Consumer Credit Scheme, Education Assistance Plan (Deposit Scheme). DOMESTIC BRANCHES OF THE BANK The branches of the bank cover all the important trading and commercial centers in Bangladesh. At present it has 62 branches within Bangladesh. All the branches are equipped with computers in addition to modern facilities, logistics and professionally competent manpower. Steps are underway to open new branches in important locations in the country during 2005. JOINT VENTURES ABROAD Oman International Exchange LLC (OIC): Oman International Exchange LLC (OIC), a joint venture between IFIC Bank Ltd. and Oman nationals, was established in 1985 to facilitate remittance by Bangladeshi wage earners in Oman. IFIC Bank holds 255 shares, and the Omani sponsors hold the balance 75%. The exchange company has a network of 7 branches and 2 counters covering all the major cities/ towns of Oman. The operations of the branches are fully computerized having online system. The affairs and business of the company is run and managed by the bank under a Management Contract. 17 Officers of the bank are engaged in the exchange house. Total share capital of the company is RO 500,000 (equivalent to BDT 76.70 million). The equity of the company stood at RO 684.503 eqvt. BDT 105.00 (provisional figure) as at 31 st December 2004. The performance of OIE was satisfactory during the year 2004. OIE established remittance arrangement with 8(eight) countries viz. Bangladesh, India, Indonesia, Pakistan, Qatar, Srilanka and UAE. In 2004, total remittance of OIE increased by 16.94% to BDT 3,273.28 million from BDT 2,820.91 million in 2003. out of the total remittance, share of remittance to Bangladesh is 76.03% against 79.70% in 2003. Total pre-tax profit earned by the company amounted to BDT 22.29 million (provisional figure) in the year 2004 as against BDT 8.66 million in the year 2003, showing an excellent growth of 157.39% in 2004.
Nepal- Bangladesh Bank Ltd. (NB Bank) Nepal-Bangladesh Bank Ltd.(NB Bank), a joint venture commercial bank between IFIC Bank Ltd. And Nepal nationals, started operation with effect from June 06,1994 in Nepal. IFIC Bank presently holds 25% share of NB Bank. The company is managed by IFIC Bank Ltd. under a Technical Service Agreement. The authorized and paid up capital of NB were NRs. 1,000 million and NRs. 359.92 million respectively as at close of business of Nepali FY As had 2060 (i.e. on 16.07.2003). Total equity of the company stood at NRs 683.92 as on 16.07.2003 against NRs 625.50 as on 16.07.2002. The Bank has so far opened 17 (seventeen) branches at different important locations in Nepal. The deposit and advance as on 16.07.2003 stood at NRs. 10,581.00 million and NRs. 7,961.51 million respectively. The deposit and advance of the Bank at the end of 2002 were NRs. 9,514.46 million and NRs. 8,083.97 million respectively. NB Bank made a pre-tax profit of NRs. 191.50 million during 2003 as against NRs. 104.95 million during 2002. Nepal- Bangladesh Finance and Leasing Company Ltd (N B Finance). Nepal Bangladesh Finance and Leasing Company Ltd., another joint venture leasing company between IFIC Bank Ltd. And Nepal nationals started its operation on April 18, 1999 in Nepal. The authorized and paid up capital of the company are NRs. 60.00 million and NRs. 30.00 million respectively. Total equity of NB Finance stood at NRs. 346.46 as at the close of Nepali FY Ashad 2060 (i.e. on 16.07.2003). IFIC bank Holds 30% share in the company. Total deposit and advance of the company as at the close of Nepali FY 2003 were NRS. 240.42 million and 186.82 million respectively. The company made a pre-tax profit of NRs. Million for the year 2003 against NRs. 1.02 million in 2002. NDLC â€“ IFIC Bank Ltd. (Pakistan) IFIC Bank had two branches in Pakistan; one is Karachi and the other in Lahore. Karachi Branch was opened on 26th April 1987, while Lahore Branch was opened on 23rd December 1993. Performance of both the Branches has been excellent. To meet the Minimum Capital Requirement (MCR) of the State Bank of Pakistan, the overseas branches in Pakistan have been amalgamated with a reputed leasing company in Pakistan named National Development Leasing Corporation Ltd. therefore, the existence of our above Overseas branches has ceased w.e.f. 2nd October 2003 and a new joint venture bank entitle NDLC-IFIC Bank Ltd. (NIB) emerged in Pakistan w.e.f. 3rd October 2003. IFIC Bank holds 20% equity in the Bank. The authorized and paid up capital of NIB are PKR 1,500 million and PDR 1,229.04 million respectively as on 30th September 2004. The equity of the company on the same date stood at PKR 1,298.11 million.
Total deposit and advance of NIB as on 30th September 2004 stood at PKR 8, 807.77 million and PKR 11,688.93 million respectively. Pre-tax profit earned by the company stood at PKR 30.18 million up to September 2004. WORKFORCE Total manpower stood at 1,895 as on December 31,2004. Out of them 1,294 were officers and 601 were non-officer employees. The number of female employees in the Bank on the date was 248. Growth in workforce of the Bank from 1983 to 2004 is given below: GROWTH IN WORKFORCE Year Officer Staff
Female Officers & Staff
1983 1884 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
61 152 264 303 334 369 465 512 506 617 600 912 964 1009 1088 1081 1124 1151 1189 1201 1266 1294
35 89 168 322 404 458 480 480 556 626 720 513 601 540 526 543 535 549 548 554 602 601
96 241 432 625 738 827 945 992 1062 1243 1320 1425 1565 1549 1614 1624 1659 1700 1737 1755 1868 1895
16 21 26 29 38 50 63 74 78 196 106 119 132 154 154 162 176 188 200 213 238 248
FUNCTIONAL DEPARTMENTATION AT HEAD OFFICE Managing Director, ex-officio Director of the Board, is the Chief Executive Officer (CEO) of the Bank. Next in the organizational hierarchy is the Deputy Managing Director or through the Deputy Managing Director.
The operations and activities at the Head Office are divided into twelve Groups including the office(s) of the (a) Board Secretariat and (b) MDâ€™s Secretariat. A group Executive heads each of the twelve Groups. Out of these twelve Groups three groups viz. (a) Law, (b) Group (General-I) and (c) Group (General-II) report directly to the Managing Director. Other groups report through the Deputy Managing Director. Other groups report through the Deputy Managing Director. All the Divisions/ Departments at Head office are required to report to the respective Group Executives. Name of the Departments under each Group are given below:
DEPARTMENTS OF HEAD OFFICE Group (Operations-I): General Credit Department Credit Administration Department Credit Information & Return Department Project Finance Department Lease Financing wing Group (Operations-II): Overseas & International Banking Relation Department Garments Department Foreign Trade Department Treasury Department Group (Operations-III): 10. Audit & Inspection Department Group (Operations -IV): 11. Central Accounts Department 12. General Banking Department 13. Establishment Department Group (Operations-V): 14. Recovery Department-1 15. Recovery Department-2 16. Recovery Department-3 Group (Operations-VI):
17. Monitoring Department 18. Compliance Department
BOARD OF DIRECTOR
DEPUTY MANAGING DIRECTOR
SENIOR EXECUTIVE VICE PRESIDENT
EXECUTIVE VICE PRESIDENT
FIRST VICE PRESIDENT
SENEOR STAFF OFFICER
OFFICER GRADE -I PROBATIONARY OFFICER GRADE-I OFFICER GRADE-II CASH/COM. OFFICER
ORGANOGRAM OF THE BRANCH MANAGER Vice President
Assistant Manager (AVP)
G. Banking (SSO) A/C Opening (SO)
Credit & Advance (SO)
F. Remittance GR-1 (1), GR-2 (2)
Sanction GR-1 (1)
Clearing & Collection GR-1 (1), GR-2 (2)
Cash Dept. GR-1 (1), GR-2 (5) Comp. Off. (1)
Foreign Trade (SO) Export GR-1 (1), GR-2 (2)
Account Dept GR-1 (1), GR-2 (1)
Local Remittance Department GR-1 (1), GR-2 (1)
Special Deposit & Locker Dept. GR-1 (1)
HUMAN RESOURCE DEPARTMENT
Recovery SO (1), GR-2 (1)
Import GR-1 (1), GR-2 (2)
Establishment& Personnel Dept GR-2 (1)
Human Resource Department (HRD) activities aim at fulfilling the Bank’s Mission. One of our four major missions is to: “ Provide service to our clients with the help of a skilled and dedicated workforce whose creative talents, innovative actions and competitive edge make our position unique in giving quality service to all institutions and individuals that we care for.” Skilled and dedicated workforce with creative talents, innovative actions are not always readily available. Appreciating the scarcity of such manpower, the Bank from the very beginning laid importance to HRD that conceptually includes activities like pre-recruitment drill, recruitment, induction training in the Academy, job rotation, placement and posting, reward and promotion. The bank plans all these activities in an integrated way aiming at manpower with required technical, managerial, human and conceptual skills. Management of IFIC Bank not only appreciates the need of skills required for day to day banking but also realizes the need for skills to meet the global and national financial and economic environments that are changing fast. Meeting the needs of new skills arising out of Financial Sector Reforms Programme (FSRP) is also a major concern of the management. THE ACADEMY At the very beginning, the Bank laid a foundation by setting up an Academy at Head Office under Human Resource Development Division to develop human resource internally. Equipped with a professional library, modern training aids, professional faculty and other facilities, the Academy of Bank is a leading one among the Banks in private sector. The Academy regularly conducts foundation courses, specialized courses and seminars in different areas of banking to take care of the professional banking needs. On addition, officers are regularly sent to Bangladesh Institute of Bank Management (BIBM) and Bangladesh Bank Training Academy for professional training. Sending officers abroad for higher training is a regular feature. A Research Department also works in aid of HDR and other operational areas. The Academy has to its credit the experience of conducting several courses for the officers of the Bank of Maldives (BML) and Nepal-Bangladesh Bank Limited. In addition, it built up the training system for the Bank of Maldives Limited. ACADEMY OBJECTIVES IFIC Bank Academy, established in 1983 as an in-house training institution, takes care of the training need of the employees of the Bank. The objectives of the Academy are to: Make available skilled and dedicated workforce within shortest possible time by reducing time required for on- the-job training. Develop understanding about law and practice of banking through foundation training;
Import technical skill to the operational level officers through case studies/practical exercises/demonstration/project visit for efficient desk operations; Develop analytical and decision making skills of the officers; Develop understanding about human/conceptual skill and organizational culture; Impart managerial skills to groom future Executives and to keep existing Executives upto-date with national and international environment. TYPE OF PROGRAMMES
For fresher, Foundation Courses on elementary knowledge of banking are organized Specialized Courses on the areas like Credit, Foreign Exchange, Accounts, Inspection, Marketing etc. are meant for officials working in those areas. Senior level courses are run on specific knowledge area. Certain courses are a blend of different knowledge areas. APPROACHES TO TEACHING
The Academy holds need-based training courses/workshops/seminars etc., which are finalized by HRD Division in consultation with various departments and senior Executives at Head Office. Training inputs are constantly reviewed/modified for achieving the Bank’s objectives. Methods in training including: discussion / lecture / case study / games / roleplay / film show / simulation / group work & presentation / project visit and so on. ON-THE-JOB TRAINING Foundation courses have two parts: theoretical training in the Academy and job rotation. The officers on probation are required to undergo both in a period of one year. During this period, three-phased training Programme is effective. On theoretical training in, say, General Banking the officers are required to undergo rotation in General banking activities under the supervision of the HRDD. Similar process is followed in case of Credit & foreign exchange. They report to the HRDD weekly about the progress in rotation when problem-oriented discussion takes place for better understanding. FACULTY The Academy has built up a pool of professional trainers within the Bank. In addition to permanent and professional trainers, speakers are drawn from operational side so that on-thejob experience may be exchanged and shared. Over and above, speakers from Central Bank, professional training institutions, research organizations and Govt. organizations are also invited to share views and experience. Senior and retried bankers are also regularly invited to enhance effectiveness of training.
LIBRARY The Academy has a good collection of books, journals and magazines. The books are mainly on subjects like Banking, Economics, Accounting, Management and Marketing etc. As on December 31, 2004 the library had 4,983 books/ titles. The books are issued to the employees usually for one month. In 1988, the Academy undertook steps to build up Mini Libraries at all the branches outside Dhaka with a view to helping the employees with books and reading materials for updating and upgrading their knowledge. Branches are supplied with books/ journals etc. for their Mini Library from time to time. Chapter Three
GENERAL BANKING General banking refers to the core banking facility that is available in any branch throughout the country. The main objective of general banking is to encourage the banking habit of a nation. A like other branches IFIC Motijheel branch also has the full-fledged set up for providing general banking facility. For the purpose, general banking division has three major departments. They are as follows: -GENERAL BANKING
Deposit Account Department
Cash Transaction Department
KINDS OF ACCOUNT HOLDERS INDIVIDUALS: Individuals are adult persons of 18 years of age or more who are competent to enter into the contracts. Adult persons include married women, pardanashin women, illiterate persons but lunatics’ persons of unsound mind and bankrupts are not adult persons. JINT ACCOUNTS: More than one jointly or adult with minors may constitute joint accounts.
SOLE PROPRITERSHIP CONCERNS: A business concern owned and managed by more than one person who may be registered is a partnership firm. Person who have entered into partnership with one another and called individually a “firm” and the name under which there business is carried on is the firm’s name. PRIVATE LIMITED COMPANY: A body corporate formed and registered under companies act, 1913 with limited members and liability having certificate of incorporation given by Register, joint stock companies and Memorandum of Association and Articles of Association. PUBLIC LIMITED COMPANY: A body corporate formed & registered under companies Act-1913 with limited liability of the shareholders and with no upper ceiling of shareholding having both Certificate of Incorporation & Certificate of Commencement given By Register, joint stock companies. It must have Memorandum of Association and Articles of association. Corporation, autonomous bodies are organizations created by special acts of the parliament or by Presidential orders. CLUBS / ASSOCIATIONS / SOCITIES: These are organizations created and registered or not registered under societies Registration act. Some of these may be registered under company act. NON-GOVT. ORGANIZATION: Non-Govt. organizations registered are voluntary organizations created and registered under Societies Registration Act or Co-operative Societies Act. DEPOSIT ACCOUNTS DEPARTMENT DIFFERENT TYPES OF DEPOSIT ACCOUNTS AND THEIR FORMALITIES A/C Opening / Cheques Issue The branches may open the following types of A/C:
Pension Savings Scheme A/C
Bearer Certificate Deposit A/c
CURRENT DEPOSIT A/C:
Current Deposit A/C
Saving Bank Deposit A/C
Short Term Deposit A/C
Fixed Deposit Receipt A/C
Current Deposit A/C is a non-interest bearing account. Business people usually open this type of account. They can withdraw any amount from their accounts without any restrictions within the banking hours. The account opening is as follows: •
Customer will fill up relevant A/C opening from supplied by the Bank.
A valued current account holder or a respectable personality acceptable to the bank must introduce the person.
Two photographs attested by the introducer are required, one of which will be stapled with filled up application form and the other with Specimen Signature (SS) Card.
The party will put his signature in the SS card in front of deposit in deposit in charge or the officer.
After the approval of the in charge to admit the signature, the officer will put his signature along with
‘Signature admitted’ stamp on the application form and SS card.
Finally, a number will be allowed and particulars will be entered in the A/C Opening & Closing
The party will deposit at least TK. 10.000/- to his/ her newly opened A/C.
Documents required for the proprietorship, societies, clubs, association etc are:
Trade License in case of proprietorship concern.
Certified true copy of byelaws rules and regulations constitutes in case of society.
True copy of resolution authorizing opening and operating of A/C with the branch.
List of members of executive committee.
Partnership deed and partnership letter incase of partnership firm.
Documents for limited companies, corporation & autonomous body are:
Memorandum of Article of Association
Resolution of Board of Directors authorizing opening of the A/C with the Bank.
List of Directors.
Certificate of Commencement of business.
SAVING BANK DEPOSIT A/C: The minimum balance in savings deposit account is Tk.5, 000 and the rate of interests on its INS 7.508%. Interest is given to the accounts at the time of June and December closing. If the party withdraws more than 25% of his deposited amount or more than two times in a week or more than Tk.2,000 without notice, the concerned account is not considered for the interest. IFIC Motijheel Branch has its own printed application form for opening a savings account. The application form contains the following particulars, which are to be fulfilled by the individual account holder— • Name of the account holder •
Business or profession of the account holder
Address of the account holder
Special instruction regarding the opening of the account
Instruction by any account holder
Verification by the concerned officer of the branch.
Documents required for opening a SB deposit account are:
Two copies photographs attested by the introducer;
Specimen signature card
STD ACCOUNT: This account is only for the government, proprietors and autonomous bodies. A short-term notice is to be served to withdraw the amount. The rate of interest on its INS is 5.50%. IFIC, Motijheel branch has its own printed form for opening a STD account. The application form contain the following particulars, which are to be fulfilled by the Account holder—
Name of the account holder
Business or profession of the account holder
Address of the account holder
Special instruction regarding the opening of the account
Instruction by any account holder
Verification by the concerned officer of the branch.
Specimen signature card
Photograph of the account holder
FIXED DEPOSIT RECEIPT A/C:
No introduction is necessary for opening an FDR account. It is opened for certain period. IFIC, the party can open more than one FDR A/C in the same branch. The party can give special instructions like Solely, jointly, either or Survivor, All of the survivors etc. The bank carefully maintains FDR no, controlling no, SS card and due date diary to encash it at its maturity. It has its own printed application form for opening a Fixed Deposit Account. The application form contains the following particulars, which are to be fulfilled by the account holder.
Name of the account
Address of the account holder
Specimen Signature card
Amount, period, rate of interest, date and signature.
Table: Rate if Interest in FDR Duration 3 months and above 6 months and above 12 months and above 24 months and above 36 months and above
Rate of Interest 8.00%- 9.00% 8.25%- 9.25% 8.50%- 9.50% 9.00%- 10.00% 9.50%- 10.50%
PENSION SAVINGS SCHEME A/C: IFIC Bank Limited has introduced a Pension Savings Scheme (PSS), which officers the depositor’s 5/10 year’s savings plan with attractive interest and bonus option at maturity. Under this scheme a client is able to save at a rate of Tk. 100/ 300/ 500/ 1000. the account holder can avail himself (maximum 80% of the deposited principle amount) by keeping PSS A/C under lien after two years from opening the A/C. BEARE CERTIFICATE DEPOSIT A/C: o No A/C opening form of SS card is required. o The party will deposit the cash/ Cheques through a credit voucher to the BCD A/C. • Then a BCD certificate containing serial no, date and maturity, rate of interest and amount will be given to the party. • The particulars shall also be written into the BCD register and due date diary. Table: Different Types of Accounts:
CURRENT SAVINGS STD FDR BCD PSS TOTAL
1237 3248 75 661 112 1485 7163
STATEMENT OF ACCOUNT:
In case of SS A/C, Pass Book (GB-28) or statements of accounts which ever are applicable and in case of CD A/C, statements of accounts shall be prepared and sent to A/C holders within seven days of the following month. In a statement / pass Book, the transactions are shown clearly and request the party to inform the Bank if there is any discrepancy.
For the SOD loan A/C, parties are requested to return the copy of the statements with signature.
CASH TRANSACTION DEPARTMENT ACCOUNTS DEPARTMENT CASH RECEIPT: Bank mobilizes direct cash form customers deposit in their account both deposit and loan account by Pay-in-slip, against remittance and other banks. Customers generally deposit cash to their accounts or any other purpose over the customer. The cash officer will check the account title and A/C no. and amount in words and figure. After receiving the cash, he will write the denominations of the currency on the backside of the voucher/pay-in-slip. He will enter the particulars of the voucher in the Cash Receiving register (GB-18) according to serial. Then he will put his/her signature along with date seal on the pay-in-slip/voucher. After that he/she will send the voucher& register to officer-in-charge. The following slips or vouchers are used in this purpose: o Pay-in-slip o Credit Vouchers o Cash receiving register. CASH PAYMENT
Steps are as follows:
After receiving the instrument the cash officer should check it for any apparent discrepancy, date of the check, amount in words & figure etc.
The cash officer will send the instrument to the cancellation officer. He will examine the apparent tenor of the Cheques very carefully and compare the signature of the Cheques with SS card.
It will be posted in the computer to debit the C/A.
If fund is available, the cancellation officer will cancel the Cheques and put a seal ‘PAY CASH’.
Double cancellations are necessary for the amount more than Tk. 5000.
After getting the cancelled instrument the cash officer will pay the cash to the party.
He will make an entry into the ledger and write the denominations on the backside of the Cheques.
The he will affix ‘CASH PAID’ seal.
At the end of the day the total amount entered in the paying cash register will agree with the total paid amount.
The in charges will Cheques the entries and instrument to find out the correctness of the payment and put an initial against each entry.
Finally the instruments will be sent to the accounts department
If the Cheques are returned unpaid, it will be given back to the bearer marking the cause of the ‘Return Memo’ after posting into the ‘Cheques Return register’.
CLEARING SECTION DEPARTMENT
Cheques clearing section of IFIC Motijheel branch receives Cheques, Demand Draft (DD) and pay order from their clients clearing section examines. • Whether the paying Bank within Dhaka city ;
Whether the paying Bank outside Dhaka city ;
Whether the paying Bank of their own Branch ;
THE PAYING BANK WITHIN DHAKA CITY
The clearinghouse was established in London in 1775. There are 52 scheduled banks in the clearinghouse situate in Bangladesh Bank. These are of two types: Outward Clearing Inward Clearing Outward Clearing: o The instruments drawn on other Banks received from the clients are sent to the clearinghouse for collection called out ward clearing. o The particulars of the instrument and the voucher are entered into the outward clearing register. o The register is balanced o The instruments are suitably discharged / endorsed. o The instruments are arranged bank-branch wise. o Schedules are prepared for each branch of a bank and main schedule for a bank. o The total of the schedules is taken and agreed with that of the register. o The house page is prepared in duplicate. o In case of other branch an IBDA is prepared debiting the Motijheel Branch. With the amount of the instruments and parties A/Cs are credited. o The instruments along with IBDA and house page are sent to the clearinghouse. Finally, a single debit voucher debiting IFIC General A/C is prepared and sent it to the A/Cs department along with third copy of IBDA and deposit slips. Inward Clearing:
The Cheques or other instruments drawn on branch received from other banks through clearing house are checked whether they are crossed or endorsed properly.
For payment of the instruments all formalities for Cheques payment are maintained.
Incase of other branch if any instrument returned unpaid for any reason shall be given to the sending bank through Motijheel branch with a return memo.
For the amount of returned Cheques IFIC, Motijheel branch will give an IBDA to the concerned branch.
This department maintains the following vouchers, scales and registers--•
Outward Clearing Register
Inward Clearing Register
The sub-main Schedule
The House page
THE PAYING BANK OUTSIDE DHAKA CITY
The bank receives crossed Cheques only to get statutory protection as per sec. 131 if N.I. act. Collecting banker recesses the bills for the collection in the following two ways— 1. Outward bills for collection (OBC) 2. Inward bills for collection (IBC) Outward bills for collection (OBC) IFIC Motijheel Branch there receives outward bills of two different banks or the Cheques of two branches of the same bank. To send the bills to the paying bank the following procedures are maintained--o o o o o
Only account holder’s Cheques are received. It is received with the pay-in-slip. OBC round seal is given on both the Cheques and pay-in-slip. Counter foil is given back to the customer. Necessary are duly endorsed.
o Forwarding schedule is prepared and attached with the Cheques and sent the paying bank. o Pay-in-slip is kept in OBC outstanding file. o After getting advice from the paying bank the proceeds of the Cheques is deposited to the account of the customer. o Balancing is done for the outstanding amount. o Monthly statement is prepared if the outstanding is more than two months. Inward Bills for Collection (IBC) For the inward bills for collection, the bank maintains the following proceduresâ€” o Cheques along with forwarding schedules are received by the manager. o The manager sends the said instrument to the Bills in Charge. o The bills in charge examine the endorsements, signatures of the officers and the officers and P.A.No. and gives necessary entries to the register. o The banker presents the Cheques to the customers. o After realization the amount from the customer the officer sanctions IBC No. against the OBC No. and prepares a credit advice to the collecting bank. o THE PAYING BANK OF THEIR OWN BRANCH IFIC, Motijheel branch has a special arrangement to settle the inter branch claims within the Dhaka city. IBTD section of this branch collects Cheques from different branches of the city. The branch debits IFIC General A/C and credits the related branch. The head office gives interest on the debit balance at the end of the year. For the Cheques other than Dhaka city IFIC Motijheel branch follows the procedure of Outward Bills for Collection (OBC) to get Inter Branch credit Advice (IBCA) from the paying branch. If the paying bank dishonors the instrument, the branch returns it to IFIC Motijheel Branch describing why the instrument is dishonored. REMITTANCE SECTION DEPARTMENT IFIC Motijheel branch earns a lot through remittance business. The following instruments are used for this purposeâ€”
DEMAND DRAFT (DD) Demand Draft (DD) is an instrument containing an unconditional order of the issuing branch upon another branch of the same bank known as drawee branch, for the payment of a certain
sum of money to the payee or to his order on demand by the beneficiary presenting the draft itself.
ISSUANCE OF DEMAND DRAFT
A customer intending to purchase Demand draft applies to the concerned branch to issue4 a DD through the printed application form of the bank. After filling the application form, the purchaser pays the equivalent amount of the DD plus bank charges at the @ 1.5 per thousand with a minimum Tk .25 on it. After that the branch issues the DD giving a serial number on it. For the issuance of DD over Tk.25000/- test number is applied on the upper portion of the draft withy the red ink so that the Drawee Branch can immediately make payment of the DD on presentation if the test agrees.
PAYMENT OF DEMAND DRAF
The issuing Branch sends Inter Branch Credit Advice (IBCA) after the issuance of DD to the paying Branch. When a DD is presented for payment at the paying branch, its details are to be carefully examined with reference to the following points: •
Whether IBCA is received or not
Whether the DD is drawn on their branch
Whether the DD is crossed or not
The payee is to be properly identified in case of cash payment
The amount of DD should not exceed the amount protect graphed on the top of the DD
The signatures of two authorized officers of the Issuing Branch must be verified with the specimen signature booklet to be sure that DD is genuine.
If the above points are in order, the paying branch makes payment to the purchaser.
STOP PAYMENT OF DEMAND DRAF
The issuing Branch instructs for stop payment of a DD when the purchaser approaches the Issuing Branch to do the same through an application.
CANCELLATION OF DEMAND DRAF
The purchaser can request the Issuing Branch to cancel the DD. After getting instructions from the Issuing Branch, the paying Branch can cancel the DD. TELEGRAPHIC TRANSFER (T.T) It is an order of the issuing branch to the paying Branch to pay a certain sum of money to the beneficiary. TT transaction is done in between the two branches of the same bank only. The
beneficiary should maintain an account with the IFIC Bank to get this facility. Before sending the message, the Issuing Branch must be sure that there is a test arrangement for authenticating the Telegraphic / Telex message with the branch designated to make payment. •
ISSUING OF TELEGRAPHIC TRANFER (T.T)
The procedures of issuing TT message are as follows— • •
The customer is asked to complete GB (F)-02 TT application form. Commission @ 1.5 per thousand with minimum charge Tk.25 and telephone charge Tk.50 along with the fund are realized from the customer. • Entries are given to the register to maintain the controlling number and records. • Out going Test No, TT No, amount in words and figure, name of the beneficiary and name of • the remittance in charge with P.A no are sent over the telephone. • If the playing branch is not reached by the telephone, the coded TELEX / FAX message is sent • to the end. • Two copies of IBCA are prepared in which one copy is sent to the Head Office for reconciliation through the account department and another copy is preserved as an office copy. •
The procedures of the payment of T.T are as follows: --• • • • • •
Remittance in charge receives incoming Test No, TT No, amount in words and figure, name of the beneficiary and name of the remittance in charge of the Issuing Branch with P.A no. An authorized officer verifies incoming Test No & TT no with the controlling no and A/C no of the beneficiary whether he has an A/C with the paying Branch or not. If test no agrees and TT no supports the serial no, particulars are positing to the TT payable register. Debiting IFIC General A/C and crediting Bills Payable A/C TT Payable entries are passed. Debiting Bills Payable A/C TT payable credits party A/C. IBDA is prepared in duplicate, the original is sent to the reconciliation department of Head Office through account department and true copy is kept as and office document.
PAYMENT ORDER (P.O) Pay-order in an undertaking of a certain branch to pay a certain sum of money in favor of a customer. Issuing Branch order itself to pay the amount containing by the instrument. Banker can sell it in exchange of commission. It is used as a means of local remittance. It may be called as the Cheques of the bank. Because bank pays house rent, electricity bill, borrowing from the other banks, and shortage of clearinghouse and other necessary costs through P.O. It can be negotiated through endorsement and delivery. It has the following characteristics--
• • • • •
Serial no and date Name of the branch Payee’s name Amount in words and figure Signatures of two authorized officer
ISSUING OF PAYMENT ORDER For issuing a pay order, the following procedures are maintained--•
Client is to submit an application to the remittance department in the prescribed form properly filled and duly signed. •
The client pays the equivalent amount of pay order plus interest on it is cash or by Cheques.
The issuing branch gives position to pay-order register.
Debiting cash and crediting bills payable A/C: Pay- Order issued & Income A/C Commission on Pay- Order entries is passed. •
Finally, it is prepared and delivered to the customer.
PAYMENT OF PAYMENT ORDER
As the pay order is crossed A/C payee, the party presents it with deposit slip to the Issuing Branch for payment through the clearinghouses or for credit to clients account. On presentation the pay order is verified and marked for transfer. The authorized officer cancels the P.O and separates it from the deposit slip. P.O is sent to the Issuing Branch through clearinghouse and proceeds are credited to the concerned account. The party is allowed to withdraw the amount after getting clearance the originating branch. The record of all business dealings that is transaction of the bank, which take place on daily basis are kept by the accounts department. The financial changes of an organization is brought about by assets, liabilities, owners equity, revenues or expenses of an entity, which are in turn affected by record able happenings or events referred by the transaction. SOUCE OF TRANSACTION Bank operates on the following transaction:
This transaction involves either receipt of cash or payment of cash by the bank.
This are the transaction that involves collection of Cheques, draft, bills drawn on other banks and deposited our bank. This will also include Cheques, drafts, and bills etc. drawn on our bank and presented by other banks for payment. Through these are transfers of funds yet they involve clearing through central bank. ď‚§
Transaction involving fund transfer from one account to another maintained in the same branch or between two branches or between one branch and head office without the help of clearing are transfer transactions. RECORDING OF TRANSACTION Thousands of cash, clearing and transfer transactions take place a day in a bank. All these transactions are recorded immediately in the book of accounts in a systematic manner and accounts are prepared and maintained according to the provision of the Companies Act-1994, Banking companiesâ€™ ordinance-1962 and Bangladesh Bank Order-1972. SYSTEM OF ACCOUNTING The system of recording of our bank is essentially double entry system of bookkeeping. But for quick and accurate recording as well as for arriving at daily financial position, a specialized from of double entry system of bookkeeping, namely slip system under the selfbalancing method is followed in the bank. Instead of recording transactions in a journal initially, these are directly posted in the ledger separating debits and credits by slip or voucher system. OVERVIEW OF FUNCTIONS OF THE ACCOUNTS DEPARTMENTS All the vouchers originating from any of the three sources are duly scrolled and recorded in respective books and then sent to the accounts department. On receipt of the vouchers, these are sorted according to the heads of the accounts and supplementary sheets are attached. The vouchers are totaled and the total is written on the supplementary sheets according to cash clearing and transfer and initiated by the authorized officer. The total of supplementary sheets are entered into the respective columns of the rough clean cash book, when both sides of the rough clean cash book agrees with each other, Daily Statement of Affairs is prepared stating the assets and liabilities separately. Afterwards from the supplementary sheets entries are made in the Clean Cash Register, General Ledger and Subsidiary Ledgers. The various book of accounts maintained in the Accounts department are described explained as under: 1. Transfer Book 2. Supplementary 3. Summary Book
4. Clean Cash Register 5. General Ledger 6. Statement of Affairs 7. Subsidiary Ledger 8. CD /SB Cheques/ progressive/ subsidiary ledger 9. Income ledger 10. Expenditure Ledger 11. Banker’s Ledger 12. Voucher Register 13. Balance Book TRANSFER BOOK
All transfer entries are recorded here in order to prove accuracy of the preparation and positing of transfer entries. Credit and debit vouchers are written in the respective columns of Transfer Book and serial number of the Books is written on the vouchers. A stamp giving transfer number is affixed on the face of the vouchers. Then vouchers are released. Transfer book is closed after recording all the vouchers of that date. The book is balanced. One side must be equal to another. A stamp is affixed and signed by the writer. The book is checked and signed by the A/C in charge.
SUPPLEMENTARY Supplementary is a sheet, which is used to supplement the preparation of cash-cum day Book. •
All vouchers are sorted head of account wise. All the credit vouchers under specific head are grouped together similarly all the debit vouchers are grouped together.
Voucher or group of vouchers falling under same head of Account are written on the supplementary sheets for credit vouchers and debit vouchers.
Supplementary sheet for current and savings Bank accounts are written ledger-wise by the deposit department.
Cash, clearing and transfer columns of each supplementary sheet are recorded correctly by adding the
amounts of the vouchers and the grand total of all the vouchers are also invariably stated.
In case of current deposit and savings bank deposit supplementary accounts numbers are invariably stated.
Supplementary sheets are checked and signed by the writer as well as the checker.
Summary Book (GB-66) summaries current deposit and savings bank supplementary prepared ledger-wise for posting the cash daybook. • • • •
All credit supplement areas are written on the credit side and likewise all debit side on side on summery book. All the columns are total no. Of vouchers should be recorded. The writer & Checked should sign the book by the in charge.
CLEAN CASH REGISTER Clean cash register is a book in which all the transactions of a particular date is recorded in clear, concise and classified way under different head of accounts. It reflects the daily position. All transactions increasing our cash position are debited and transactions decreasing the cash are credited. Different supplementary figure is written on the rough clean cashbook against appropriate heads of accounts. C.D. & SB summary figure should be incorporated in current deposit and savings bank deposit heads of Cash- cum-day- book respectively. Each column (cash, clearing and transfer) is totaled: • •
Receipt and payment of cash are balanced with the cash position memo and the total of debit and credit cash columns are balanced with each other. The totals of clearing columns are balanced with the total clearing of the day.
The totals of clearing columns are balanced with each other and the total of transfer book.
After balancing the totals of the supplementary sheets are recorded in the clean cash register.
Clean cash register is checked and signed by the officer-in-charge and counter signed by the manager.
GENERAL LEDGER It is the main and principal Book of Accounts of the bank that contains the cumulative total figure of different head of accounts since the opening of the branch till today with the exception of Income and Expenditure. The daily cash Book’s effects are recorded in the General ledger under different heads.
Main head of controlling head of accounts are maintained in the general ledger.
Positing of general ledger is done from Cash- Cum-Day-Book and balance of each account is taken out, credit total of a particular head of A/C in the cashbook added with credit balance or deducted from the debit balance or deducted from the credit balance. •
Total cash received is treated as a debit balance and added with cash in hand and total cash payment is treated as credit balance and deducted from cash in hand.
Positing is checked by the officer-in –charge and initiated.
DAILY STATEMENT OF AFFAIR Daily statement of affairs is not a balance sheet. It is a trial balance of a branch as on a particular date which reflects the overall picture (working position) of the branch. --- When the general ledger’s figures are written under different head of accounts on a piece of paper it becomes a statement of Affairs i.e. the carbon copy of the General Ledger figure. --- Credit balances are shown as liabilities and debit balances as assets. --- On the left hand bottom corner of the affairs total deposits and advance position are written and number of accounts on the right hand bottom corner. --- Back page of the affairs contains different sub-heads of sundry deposit, Suspense Sundry Assets A/C and balance of different banks with which branch maintains Account. SUBSIDIARY LEDGER Subsidiary ledger gives us a current view about different sub-heads of a main head of A/Cs. For example in the General ledger, sundry deposit., suspense Sundry Assets A/C is maintained as controlling accounts. But in the subsidiary ledger, these heads are elaborately recorded under different sub-heads. • • •
Positing of subsidiary ledger is done from the supplementary sheets and balance of each A/C is taken out which must be tallied with on the back page of the statement of affairs. Sundry Creditors, Margin vouchers, suspense A/C vouchers should be posted individually with full narration. Posting is checked by the in charge and initialed.
INCOME LEDGER It is ledger that records all heads of income A/C to show their respective figures separately since the general ledger keeps controlling head of Income A/C only. Generally two sets of boobs are maintained, one for Income A/C- interest received against various types of advances and the other is for Income A/C, other which keep record of the all other incomes e.g. commission, discount etc. In the income ledger all the income vouchers are posted according to title of the income vouchers under different heads of income. On a weekly basis, Income ledger is balanced and tallied with the figure of the General Ledger. Posting is checked by the in charge and initialed. EXPENDITURE LEDGER Expenditure Ledger is also a subsidiary ledger keeping details record of each and every expenditure voucher under different head of expenditure. Two separate sets of books are maintained- one to record interest paid against various heads of deposits, and other to record all other expenses under the title Expenses control-other. In the expenditure ledger all the expenditure vouchers are posted under different heads of expenditure. Each voucher is posted separately with full narration, as statements are prepared subsequently from the expenditure ledger. The ledger is balanced weekly and tallied with the figure of General Ledger. Then it is checked by the in charge to determine the correctness of posting and initialed. VOUCHER REGISTER It is a register, keeping record of all the vouchers passed every day. All the vouchers are stitched and sealed in cover according to the supplementary sheets. Due to huge workload in Motijheel on voucher register is maintained; rather all the vouchers are stored date-wise in separate bags. BALANCE BOOK It is a book used for balancing different ledger/ heads of accounts at periodic intervals i.e. daily, weekly, fortnightly monthly as deemed necessary in order to prove accuracy of posting/ preparation. 1. Separate balance book is maintained for each head of Accounts i.e. Suspense A/C or income. 2. Figures are taken out from the ledger after transaction hour of the day fixed for balancing. 3. Total figures of a balance book are tallied with controlling head/sub head of General Ledger/ Subsidiary ledger as the case may be. 4. Balanced book is checked by the in charge and initialed. EXTRACT
The Accounts Department is engaged in remitting the third copy or the reconciliation copy of the Inter-Branch transactions i.e. IBDA’s and IBCA’s. A statement is prepared on the daily basis recording all the originating and responding inter-branch transaction. Branches are remitted through these banks. Receiving money as call deposit or lending money on short notice, selling and encashing Sanchaya Patra also affect the balance of Bangladesh bank A/C. All the entries relating to the balance with Bangladesh bank A/C and Balance with other Bank A/C are recorded in separate Registers with date and narrations. Chapter Four
LOANS & ADVANCE The primary concern of commercial banks is to extension of credit to the borrowers. Bank credit is one of most important things for economic development Bank credit also pays a great role in industrial development in the country. Bank credit is the media of money circulation, which is extremely needed for the economic stability of the country. Banks make loans and advances to different kinds of traders, Businessman and Industrialist against the security of some assets or against the personal security of the borrower. And by making these loans and advances bank derives its income to run the banking business. The IFIC Bank Ltd. makes loans and advances after considering profitability and liquidity, as these two things are vita consideration for sanctioning loan Sources advance are:
Different kinds of deposits
Paid up Capital Undistributed profit and reserve Borrowing from Bangladesh Bank, other Banks and other sources.
TYPES OF LOANS AND ADVANCES The credit facility provided by IFIC Bank Ltd. may be classified into different categories. The following flow chart shows the type of advances: Forms of Advances
Funded Credit Facilities Credit Facilities
Cash Credit (OD)
Term Loan (CC)
House Against P/F
Over Draft (OD) Overdraft is an arrangement between a banker & his/her customer by which the latter is allowed to withdraw over his/her credit balance in the current account up to an agreed limit. The borrower is permitted to draw and repay any number of times, provided the total amount overdrawn doesnâ€™t exceed the agreed limit. Here the interest is charged only for the amount withdrawn over the limit, not for the whole amount. OD is divided into two categories. These are: 1. Secured OD 2. Temporary OD Secured Overdraft (SOD) An overdraft, which is allowed against collateral security, is known as security/ sanctioned overdraft (SOD). IFIC bank issues the SOD against two types of security they are as follows: Secured Overdraft facility
Share Certificate Fixed deposit Receipt ICB Unit Certificate Sanchaya Patra Wage Earners Development Bond a) Advanced Against Share Certificate Advance may be allowed against share of various companies listed in the DSE and CSE. In case of advance against share the general practice is to advance 60% of current market price
due to fluctuation of price. The limit is sanctioned on the stated basis. The following steps are taken for the security of share: 1. They are original share scripts and bear the seal of the company. 2. They share is fully paid up. 3. The shares tendered as security for advanced are registered in the name of the borrower. 4. The shares are accompanied with blank transfer deed. 5. A letter of lien should be obtained from the borrower. 6. The dividend is created the account of the borrower and bonus shares are kept along with other shares of the borrowers. b) Advanced Against Fixed Deposit 1. The borrower is allowing to taken 60% advanced against F.D.R. The following steps are taken for security. 2. The deposit receipt must have revenue stamp of adequate vale and his/her signature. 3. A letter of lien shall be obtained from the depositors. 4. Lien on partial amount on fixed deposit shall not be accepted.
c) Advance Against Sanchaya Patra (SP) And ICB unit Certificate 1.While issuing advances against SP and ICB unit certificate IFIC BANK LTD takes 20% margin. The following steps are taken for security. 2.The certificate has been issued in the name of the borrower. 3. The “Identity Slip” contains the specimen signature of the holder. 4. SP and ICB must be pledge and transferred in the name of the bank. [ d) Advances Against Work Order 1. Advances can be making to a client to perform a work order. The following points should be noted carefully to judge the merit of the case. 2. The work order of Govt. Dept. Corporation, semi Govt., reputed multination/ private organization can be considered. 3. The client’s management capabilities, equality strength nature of the scheduled worked and feasibility study should be made. 4. Besides assigning bills receivables additional collateral security should be taken to safeguard the bank’s interest. 5. The work should be strictly monitored to review the progress at each interval. Process of extending SOD
1. The party must have a CD account with the IFIC BANK LTD, Motijheel Branch. 2. If the ownership of the firm is proprietorship, then a trade license must be submitted and incase of a limited company, all the documents is required to open CD account. The firm also has to submit financial statements of the firm. 3. The party must maintain a good transaction with the bank and have a good turn over. 4. The party will apply to the officer in charge of credit department of branch for SOD arrangement. 5. The concerned officer of branch will give him a Credit application form and the party will have to fill up this form. In this form he discloses all the information about his concern, purpose of the loan, description of security, etc. 6. The officer of the credit department will prepare a “Credit Line Proposal”, where, he writes about the business concern, details of proprietors/ directors of the concern, management structure, the existing credit facilities, the particulars about the facilities that asked for – such as margin, limit, date of expiry, details of security, and any other relevant information. Then it sends to the head office for approval. 7. After a loan is sanctioned, branch will issue two copies of a sanction advice, where all the terms and conditions set by the bank is mentioned. The borrower is advised to write “accepted” on the original copy if he satisfied with the terms and conditions of the bank and retain the duplicate one as record. Temporary Overdraft (TOD) Credit department of IFIC BANK LTD sometimes allowed unsecured overdraft for small amounts to customer having current account with them. It is observed that almost all the TOD have been classified as Bad & Loss. At present IFIC BANK LTD simply does not permit to open TOD. Cash Credit (CC) Cash credit is an arrangement by which a banker allows his/ her customer to borrow money up to a certain limit. This is a permanent arrangement and the customer need not to draw the sanctioned amount at once, but draw the amount as and when required. Thus, CC is an active and running account to which deposit & withdraws may be effected frequently. Interest is charged only for the amount withdrawn and not for the whole amount charged. CC arrangement is usually made against the security of commodity hypothecated and pledge with the bank a) Cash Credit (Hypothecation) The mortgage of movable property for securing loan is called hypothecation. Hypothecation is a legal transaction whereby goods are made available to the lending banker as security for a debit without transferring either the property in the goods or either possession. The banker has only equitable charge on stocks, which practically means nothing. Since the goods always
remain in the physical possession of the borrower, there is much risk to the bank. So, it is granted to parties of undoubted means with the highest integrity. CC (Hypo) sanction Procedure In case of sanctioning the cash credit (Hypo), sends a proposal to the head office containing the following documents: 1. Copy of party’s approach letter. 2. Stock Report. 3. Declaration of borrower containing the detail description of the borrower and his/her business. 4. Declaration of grantor of containing the detail description of the grantor same as borrower. 5. Credit reports on the borrower & also on the grantor. 6. Physical verification report by the authority of the IFIC BANK LTD regarding the goods or raw materials to be hypothecated. 7. Legal opinion of the legal adviser of the bank. 8. Sanction advice in duplicate along with photograph of the borrower. 9. Statement of account. 10. Letter of identification of grantor along with photograph. 11. Copy of letter of consent. b) Cash Credit (Pledge) Bailment of goods as security for payment of debt of performance of a promise called pledge. Baylor in this case called the “ Pawnor” & the bailee is called the “ Pawnee”. In a contract of pledge, Pawnor must deliver the goods pledged to the Pawnee either actually or constructively. In case of pledge of goods the bank acquire the possession of the goods or a right to hold goods until the repayment for credit with a special right to sell after due notice to the borrower in the event of non-payment. The IFIC BANK LTD credit department gave the cash credit (pledge) with or without collateral security and the loan is given after deduction 30% of the stock is given as cash credit (pledge). Terms & Conditions against C.C (pledge) On the basis of the following terms & conditions C.C (pledge) is given: 1. The bank reserves the right to inspect plant & machinery, raw materials & finished stocks once in a month by its authorized officer. 2. Drawing power will be calculated correctly & drawing in the A/C will be allowed based on actual D.P 3. Excess over sanction limits is starkly prohibited. 4.
Stock will be inspected regularly by authorized officer of the branch & by the branch incumbent once in a month.
5. Insurance policy should be obtained 10% above the value of pledge stock to cover the limits. 6. Goods to be shifted in a first class go-down. 7. The borrowers should have an absolute title to the goods. 8. The goods to be stored in the presence of a responsible officer of the branch. 9. Careful valuation of goods & its quality will be insured. 10. The price of the goods offered as security will be ascertained from the market value & DP will be calculated on the basis of cost price on market price which ever is lower. 11. The goods to be insured against all risk & go-down keeper should be posted for watch & ward duty round the clock. 12. Nameplate of the bank to be displayed inside the go-down at a conspicuous place outside the go-down. 13. The borrower indicating the goods item by items, their quantity, rate & value that will be duly verified & authenticated by a dept must sign the stock report. With the branch. 14. Goods without valid documents will not be accepted. 15. Branch must have direct access to the go-down & effective control must be kept. 16. Pledge stock should not be allowed to remain stored beyond 90 days. 17. Before accepting pledge stock, the branch will ensure correct-valuation, quality of pledged stick & timely delivery against proportionate payment. 18. Drawing against CC (pledge) A/c is allowed against pledge of fresh stock & old stock if any should be got delivered. 19. Bank reserves the right to call back the advance at any time without assigning any reason whatsoever. 20. All legal formalities & documents must be completed before taking disbursement of limits renamed/enhanced/sanctioned. Term Loan
In case of loan, the banker advances a lump sum for a certain period at an agreed rate of interest. The entire amount is paid on an occasion either in cash or by credit in current account, which he can draw at any time. The interest is charged for the full amount sanctioned whether he withdraws the money from his account or not. The loan may be repaid in installments or at the expiry of a certain period. The loan may be made with off without security. A loan once repaid in full or the customer canâ€™t withdraw part again. In case, a borrower wants further loan he has to arrange for a fresh loan. United commercial bank sanctions the following loans, House building loans (HBL), Transport loan, General loan etc. Now on to the details:
House Building Loan IFIC BANK LTD sanction loan for the construction of house building 15.50% interest p.a. with quarterly rest subject to change of the rate of interest from time to time, after taking registered mortgage from the party as security. The loan is to be rapid at a monthly installment. For sanctioning this type of loan the client supply the following papers to the bank. Documents required 1. Loan application-----2 piece 2. Photograph of the borrowers-----3 copies 3. Income tax certificate (GIR) number 4. Declaration of the borrowers in bankâ€™s pro-forma 5. Title deeds (Original) 6. Mutation certificate 7. C.S, S.A, R.S khatian (all original) 8. Duplicate carbon receipt (original) 9. Up to date non-encumbrance certificate with searching fee receipt (original) 10. Valuation certificate of the landed property 11. Cost estimate for the construction work 12. Up to date rent paid receipt (original) 13. Approved plan for erection of the building, structure with letter of authorization issued by the office of the authorized officer, RAJUK After receiving these above documents the bank than go their own legal adviser to verify the legal formalities. Then the authorized officer of IFIC bank goes for the physical verification. After physical verification, the branch prepares a forwarding letter to the head office for the approval of the loan. Based on the forwarding letter, the head office sanctions the loan to the client. Cash Credit Scheme (CCS) 1. Name of the Scheme 2. Delivery Points
: Consumer Credit Scheme : 65 branches
Features IFIC Bank Ltd. Selection criteria A self-employed person of fixed income & a confirmed or permanent service holder. Products eligible For Finance Vehicles, Domestic Appliances, Office Equipment, Entertainment, Medical Expenses, Intangibles. Limit range
: Tk. 10,000 to Tk. 700,000
: Equal monthly 24, 36 or 48 installments to be paid (depending on the
nature of assets) Interest/ Fees: Interest: @ 16.5% P.A 14% p.a. where the loan is 100% secured with 20% margin via FDRs. MIS, PSS, BSPs (all issued from IFIC Bank). Service Charge: 2% of the loan amount (minimum Tk. 500/-) up front i.e. at the time of disbursement of the loan. Service charge will be 2% or 3% or 4% for loan duration of two, three or five’s years respectively. Down Payment Minimum 20% of the invoice value of the customer products. Down Payment for staffs of IFIC: Minimum 10% of the invoice value of the consumer products. Project Loan The term project means the establishment of a new enterprise or the introduction of some new products into an existing enterprise (L.R. Chowdhury, page 353). To meet capital expenditure of a project, this type of loan is given. A mentionable portion of IFIC BANK LTD’s total loan able fund is disbursed as project loan. Procedure of sanctioning Project Loan a) Loan Application: At first, the clients apply for project loan in a prescribed manner contains nature of the project. --- Details information about the product machinery, work force etc. --- Project cost source of fund. --- Further buyer for the product and its economic purpose information regarding BMRE --- Source of payment. b) Feasibility study report: Then the client submits a feasibility study reports (project profile) which contains— 1. Technical Feasibility: Technical feasibility implies the assessment of various requirement of actual production process. It includes a details estimate of all the goods and services needed for the project. Where adequate resources are not available in the country then the study of government policy regarding import and the actual condition study of the foreign market is essential. 2. Economic Feasibility: Economic feasibility is the earning capacity of the project. The repayment of borrowing mainly depends on the earning capacity of the project.
The more the demands, the more is the sale and the more is the earning also. So, the absorbency of the output in the market is carefully scrutinized. 3. Financial Feasibility: Financial analysis shows the financial condition of the project. A careful of financial feasibility is essential in case of project study. 4. Managerial Feasibility: The repayment prospect of the loan depends to a large extend on the competence of management of the project. A loan proposal is considered favorable where the technical competence, administrative capacity, integrity and resource fullness of the management are well established. c) Borrower’s Declaration Collection: After studying loan application from feasibility study report, if the concerned officer of IFIC Bank is satisfied, then the loan processing authority of IFIC bank want borrowers declaration, and also the guarantor’s declaration in a prescribed from supplied by IFIC Bank containing the mane and address of the borrower, date of the establishment of business, nature of business etc. The guarantor also declared the same by fill up the same form. d) CIB Report And Status report Collection: Before preparing credit report, IFIC bank credit information of the borrower from CIB (Credit Information Bureau) of Bangladesh Bank. The IFIC Bank also collects status report of the borrower from other banks operate in our country. e) Credit report preparation: After getting this two report, the banks prepare credit report on the borrower and also on the guarantors (if any) individuality and by the name of the company in a prescribed pro-forma. f) Project Appraisal: It is investment analysis done by the banker before a project is approved. The main task of the project appraisal is to justify the soundness of an investment by the banker by means of critical and systematic analysis of the different element of the project. For these purpose bank uses— 1. Landing Risk Analysis form (LRA) 2. Spreadsheet g) Inspection report Bank’s investigation official’s report is needed for valuation of the land properly which is selected for project. h) Credit proposal: After the project appraisal of the project loan the branch sends credit report to the head office accompanied by project proposal. Based on the inspection report, feasibility report and
discussion with the applications the dealing officer will prepare a credit report the following particularsâ€” 1. The constitutions of the firm. This includes name of directors, capital or investment in business. 2. Experience in that particular line of business. 3. Facilities requested by the borrower. 4. Past dealings 5. Net worth of the borrower. 6. Particular of previous sanction. i) Head office approval: Upon receive of the project proposal from the branch the head office again appraises the project then approve. j) Sanction Letter: After getting the approval of the head office the branch issues the sanction letter to the borrower. A sanction letter contains the name of the project, nature of loan amount of loan, security of the loan, demand of loan. Documentation Documentation can be described as the process or techniques 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 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. Thatâ€™s why all approval procedure and proper documentation shall be completed prior to the disbursement of the facilities. Charge documents as required by the different types of advances are mentioned below: a) Loan General 1. D.P note signed on revenue stamp 2. Letter of arrangement 3. Letter of disbursement 4. Letter of partnership (partnership farm) or Board of resolution (limited companies) 5. Letter of pledge 6. Letter of hypothecation 7. Letter of lien and ownership/share transfer form (in case of advance against share) 8. Letter of lien for packing credit 9. Letter of lien (in case of advance against FDR) 10. Letter of lien and transfer authority (in case of advance against PSP, BSP)
11. Letter documents for mortgage of property (as draft by legal adviser) 12. Copy of sanction letter mentioning details of terms and condition duly acknowledged by the borrower. 13. Trust receipt b) Over Drafts 1. 2. 3. 4. 5. 6. 7. 8.
DP note Letter of partnership Letter of arrangement Letter of continuity Letter of lien Letter of lien and ownership/ share transfer form (in case of advance against share) Letter of lien and transfer authority Legal documents for mortgage of property
c) Bills Purchased 1. DP note 2. Letter of partnership (in case of partnership farm) or Board of regulation (In case of limited company) 3. Letter of arrangement 4. Letter of acceptance, where it calls for acceptance by the drawee 5. Letter of hypothecation of bill Bank Guarantee Now a dayâ€™s banks render valuable services to their customers by providing guarantee on their behalf in favors of third parties specialty the government department and foreign importers and suppliers. A commission at the rate of 60% and some cash margin is required for issuing guarantee. Following types guarantees are available at IFIC BANK LTD, Motijheel: a) Bid Bond When usually a government department invites tender for supply of any materials of for executing some construction works, they require some guarantee of execution in the form of Bid Bond or Earnest money for say 5%-10% of the value of the bid. Bankers require minimum 10% margin against bid bond without collateral security and with collateral security 5%. b) Performance Guarantee When a successful bidder enters into contract bankerâ€™s guarantee against is required in the form of performance bond. It is an undertaking of the banker to the third party that client shall complete the job as per terms of the contract. For performance guarantee minimum cash margin is 15% without collateral security and with collateral security 10%. c) Perpetual or Continuous Guarantee
This is issued on behalf of the importer to the customs for a period of one year to guarantee payment of duty, VAT , income tax, license fees etc. d) Counter Guarantee It is issued on behalf of a foreign supplier in favors of government buyer (usually) against the guarantee of a foreign correspondent bank. No margin is required for issuing this type of guarantee. Commission is charged on foreign correspondent bank, on issuing guarantee contingent liability in which it is issued. e) Advance Payment Guarantee Sometimes advance payment guarantee is issued to secure payment in advance to the contractor or supplier. Issuance Procedure of Guarantee Bank guarantee is a contractual relationship between the account (client) and the beneficiary. The party requests to the bank to issue the guarantee. Normally the bank prepares the format of the guarantee. At the request of the account party the bank issues the guarantee in favor of the beneficiary. The customer applies to the bank to issue a guarantee along with the following information: 1. 2. 3. 4. 5.
Beneficiary (name and address) Amount Expiry (with claim period) Delivery object Information relating to a guarantee issued under a documentary credit (in case of a foreign guarantee) 6. Special Conditions 7. Handling over to principal/ beneficiary/ representative/ third party. After that, the bank official scrutinizes the application and takes the guarantee margin, commission, and postage charge from the customer. Collateral and Control Some common collateral and control measures are given below: 1. Assignment or Bills receivable under the guaranteed contract and power of attorney to receive the bills. 2. First charge on the goods and floating assets of the company. 3. Mortgage of immovable property.
4. Undertaking to arrange payment in case of invocation of the guarantee, if the A/C becomes overdue interest at the rate of 16.50% per annum shall be charge. 5. The bank reserves the right to call back the facility extended at any time. Account Procedure: a) Dr. Memo Client A/C Cr. Bankers Liability as per contra ( To recognize the bankâ€™s contingent liability on guarantee) b) Dr. Client A/C Cr. Margin A/C-Client Cr. Commission, Stamp etc. (On realization of Margin, commission, Stamp duty etc.) c) On cancellation of the guarantee after the expiry period following entries are made: 1) Dr. Bankerâ€™s Liability as per contra Cr. Memo Client A/C (To refund the contingent Liability) 2) Dr. Margin A/C -Client Cr. Client A/C ( To refund the margin to the client) Follow-up & Recovery After the disbursement of the loan the bank follows the borrower in the following manner: o o o o o
Constant supervision. Working capital assessment Stock report Break Even analysis Rescheduling of repayment
In general the loans are repaid in installment. This installment is according to bank directive. Some loans are repaid all at a time. If any loan is not repaid then notices served to the customer. Sometimes legal actions also taken for recover the loan. Reschedule of Loans If the borrower doesnâ€™t pay the due installment to the bank and shows his reluctance in that payment then the bank authority tries to teach to an understanding with that particular borrower so that he pay may repay the loan amount on easy terms and this process is known as rescheduling of loan. The installment payment pattern is determined based on the negotiation between and the bank authority.
Legal Framework for Loan recovery
After being classified, if the borrower is disable to adjust the loan then the bank can take the following legal actions by filling suit--1. Filling certificate cases under Public Demand Recovery Act-1993 2. Filling money suit cases under Artha Rin Adalat- 1990 3. Filling Bankruptcy cases under Bankruptcy Act â€“1997
Chapter Five Introduction: Bank plays a very important role in effecting foreign exchange transactions of a country. Mainly transactions with overseas countries are respect of imports; export and foreign remittance come under the purview of foreign exchange transactions. Banks are the vital sector by which such transactions are effected/ settled. Central Bank records all sorts of Foreign Exchange transaction and therefore, transaction effected by the Banks and other authorized quarters are to be reported regularly (viz. daily, fortnightly, monthly quarterly, yearly etc) to Bangladesh Bank. In the IFIC Bank, Motijheel Branch, foreign exchange department plays a vital role to earn the banks maximum profit. This department is classified according to their activities. The Foreign Exchange Dept. consists of three sections these are as follows: 1. Import Section 2. Export Section 3. Foreign Remittance Section
Fig: Organ gram of Foreign Exchange Department
Functions Of Foreign Exchange Department
I. II. III. IV. V. VI. VII. VIII. IX.
L/C opening L/C amendment Sanctioning PAD, LIM, LTR TC issuing Foreign Bill Purchase Local Bill Purchase Foreign remittance FC A/C maintaining Foreign currency remitting
Import Section Import of goods into Bangladesh is regulated by the ministry of Commerce in terms of the import & Export (Controls) Act 1950; with Import Policy Orders issued periodically & public notices issued from time to time by the office of the Chief Controller of Import & Export (CCI&E). In terms of the Importers, Exporters, and Indenters (Registration) Order 1981, no person can import goods into Bangladesh unless he is registered with the CCI&E. On the next step the importers applies to Bangladesh Bank through authorized dealers for import goods. Letter of Credit The L/C, infact a credit contract, whereby the buyerâ€™s bank is committed (on behalf of the buyer) to pay an agreed amount of money at the sellerâ€™s disposal under some agreed conditions. Types Basically of two types: a) Revocable; b) Irrevocable A revocable L/C is credit contract, which can be amended or cancelled by the issuing bank without prior notice to the seller. An irrevocable constitutes a definite undertaking of the issuing bank and it cannot be amended or cancelled without the agreement of all parties thereto. In practice in the most of the cases Irrevocable Confirmed Documentary Letter Of Credit is used. Irrevocable confirmed documentary letter of credit gives the double assurances of payment, since it represents both undertaking of the issuing bank and the confirming bank.
Parties to a L/C
There are number of parties involved in a L/C and the rights and obligation of the different involved parties will also differ from each other. The involved parties will also differ from each other. The involved parties to a L/C are named below: 1. 2. 3. 4. 5. 6. 7.
The Buyer/ The Applicant/ The Importer The Seller/ The Beneficiary/ The Exporter The Issuing bank/ The L/C Opening Bank The Advising bank/ The Transmitting Bank/The Notifying Bank The Confirming bank (in necessary) The Negotiating Bank The paying Bank/ The Reimbursing Bank
Characteristics of the importer who wants to open an L/C a) Must have an A/C in the branch b) Member of the Chamber of Commerce c) Must be a TIN holder Application for L/C limit The importer who has the above qualification he has to apply in the foreign exchange department for L/C limit. The application consists: i. Full particulars of bank account ii. Types of business iii. Amount of limit required iv. Security to be offered v. Description of goods imported, etc vi. Beside this the customer must submit the following documents: vii. Performa invoice or indent viii. Credit report of the borrower ix. The officer of the Motijheel Branch then verify that the goods imported are not a restricted item, the balance of the account is sufficient or not, the market of the goods etc. if he satisfied then he proceeds it to the head office for approval with Performa invoice or indent. After careful scrutiny HO approved the L/C limit. Opening of Import L/C: After the approval of HO, the branch officer gives a Documentary Letter of Credit application form and a LCA form. The Documentary Letter of Credit Application form contains the following particulars: i. ii. iii. iv. v. vi. vii. viii.
Full name & address of the importer Full name and address of the beneficiary Brief description of goods imported Unit price, quantity, quality, and origin of the goods Modes of shipment of transport Insurance Cover Note number and issuing company Tenor of draft Currency amount of L/C
Whether Shipment or transshipment allowed or not And any other relevant information
Documents required with L/C application form: i. ii. iii. iv. v. vi.
Import Registration Certificate (IRC) Membership certificate form any Chamber of Commerce Insurance Cover Note Tax Identification Number (TIN) IMP form LCA form
Dispatching the Import L/C: After opening of import L/C, IFIC Bank, Motijheel branch dispatches the L/C. Motijheel branch sends an original copy of the L/C for negotiating and a copy to the advising bank for advising. It also sends reimbursing bank for reimbursement. Receiving Documents: If the beneficiary is satisfied with the term and conditions of the L/C then dispatch the goods to the buyer. After that dispatch the documents evidencing dispatching of goods to the negotiating bank on or before the stipulated expiry date of the L/C. the documents include: 1. Commercial invoice 2. Bill if lading 3. Bill of Exchange 4. Shipment Certificate 5. Pre-shipment Inspection Certificate 6. Certificate of Origin 7. Packing List 8. Weight List 9. Insurance Cover Note 10. Radio Activity Report (applicable for import of foods only) After receiving all the documents, the negotiating bank then checks the documents against the credit. If the documents are found in order, the bank will sends to the IFIC Bank. Payment Against Document (PAD) This is most sensitive task of the Import Department. The Officials have to be very much careful while making payment. This task constitutes the following: i. Date of payment: Usually payment is made within seven days after the documents have been received. If the payment is become deferred, the negotiating bank may claim interest for making delay. ii. Preparing sale memo: A sale memo is made at B.C rate to the customer. As the T.T & O.D rate is paid to the ID, the difference between these two rates is exchange trading. Finally, an Inter Branch Exchange Trading Credit Advice is sent to ID. iii. Requisition for the foreign currency: For arranging necessary fund for payment, a requisition is sent to the International Department.
Transmission of telex: A telex is transmitted to the correspondent bank ensuring that payment is being made.
Loan Against Imported Merchandise (LIM) Loan against import merchandise through the bank may be allowed retaining margin prescribed on their Landed Cost, depending on the categories and credit restriction imposed by the Bangladesh bank/head office from time to time. Branches shall also obtain letter of undertaking and indemnity from the client, before getting goods cleared through LIM account. Clearance of the goods should be taken through Approved Clearing Agent of the Bank. The following points must be taken to consideration while allowing advance against the security of imported goods. Storage of imported goods under LIM facility may be allowed for specified time as prescribed by Bangladesh Bank/ head office of the bank within which period importer should take delivery of the goods against payment, Generally part is not allowed from LIM account. This may however, be allowed only on specific request and consideration. While allowing part delivery, it must be ensured that the landed cost of the merchandise is properly worked out before the goods are delivered to the customers against proportionate payments. Landed cost of valuable and less valuable items should not be averaged together.
Export Section The export section of IFIC Bank Motijheel branch is responsible for opening L/C negotiation of export documents, purchase of inland bill etc. As per Foreign Exchange Registration Act, 1947, nobody can export by post and otherwise than by post any goods either directly or indirectly to any place outside Bangladesh, unless the exporter furnishes a declaration to the collector of customs or to such other persons as the Bangladesh Bank may specify in this behalf that foreign exchange representing the full export value of the goods has been or will be disposed of in a manner and within a period specified by Bangladesh Bank. Registration of Exporters Under the registration order [Importer and Exporter] 1952, no person can export any goods from Bangladesh unless he is duly registered as an exporter with the Chief Controller of Imports and Exports, Government of Bangladesh authorized dealers should therefore, ensure before certifying and export form, as required, that the person is so registered. The registration number should be quoted on the relative export forms. Before the exporter with the customs authorities lodges the export forms, they should get all the copies certified by an authorized dealer. After receipt of the EXP forms from the exporters for certification
purposes, the authorized dealers will see and ensure that each set of the forms is duly field in and signed by the authorized dealer. The following documents are needed to apply for registration of exports: i. ii. iii. iv. v. vi. vii. viii. ix.
Trade license; Income clearance certificate; Nationality certificate; Bank solvency certificate; Asset certificate; Registered partnership deed; Memorandum of association; Rent receipt of business premises; Certificate of in corporation etc.
Negotiation of Export bills The Motijheel branch Foreign Exchange Branch checks all point in the export documents and if they are free of irregularity the bills are negotiated. Negotiation is nothing but making payment to exporter and sending the paper to the importer bank for reimbursement. The conversion rate of foreign exchange exchange of negotiating date is applied. The foreign bills negotiate account is debited and partyâ€™s account is credited. Transaction of foreign exchange are consolidated and sent to international division and accounts division of head office. The foreign bills negotiated account is credited by head office after the bills are realized. Bills are drawn or the invoice is written is not less than the invoice value stated on the form. The drafts, invoice, bill of lading, insurance policy and other documents i.e. certificate of origin, packing list, inspection certificate etc. are checked thoroughly. Back-To-Back L/C Issuing The benefit of an irrevocable Documentary letter of credit (the primary credit) may be made available to a third party where the primary beneficiaries use the L/C as security / collateral to obtain another L/C (second L/C) in favor of the actual suppliers. Back-To-Back L/C Issuing Process 1) Applicant instruments issuing Bank to issue an irrevocable credit in favor of the beneficiary. 2) Issuing bank issues the credit and forwards it to the beneficiary through advising bank. 3) The advising bank advises the Credit to the beneficiary 4) The beneficiary submits his original Credit to support a second Credit to be issued by a bank in favor of the secondary beneficiary. 5) The second issuing bank issues the Back-to-Back L/C in favor of the new beneficiary and forwards it through the second advising bank. 6) The second advising bank advices the L/C to the new beneficiary.
Export Cash Credit (Hypothecation)
This is for a shorter period mainly to purchases raw materials or to obtain exportable goods. The goods are kept under the control of the exporter. Bank creates charge at the time of disbursement, as the bank enjoys the right to take possession of the goods and in case of need, the bank can exercise the power to dispose at the goods for realization of the advance. The exporter has to submit stock report to the bank usually on monthly basis and the bank will very the physical stock. Export Cash Credit (Pledge)
This is also an advance for short period. The exportable goods are kept under the effective control of the bank either at exporters or at banks godown. Movement of the goods will be under supervision of the bank. Bank maintains its proper records through godown storage challan, delivery order, and godown register etc. the ownership of the goods although retained with the exporter. Bank, in this case too, by creating charges on the goods at the time of disbursement of credit, enjoys the right to dispose of the goods after serving proper notice to the exporter for realization of the outstanding if needed. Documentation: 1) Export registration certificate 2) Banks usual charge documents to be signed by the exporter or his duly authorized agent. 3) Confirmed irrevocable export letter of credit or firm contract made by the buyer with the exporter. 4) Insurance cover. 5) Export finances guarantee in favor of the bank 6) Bank may or may not call for collateral securities on the basis of the banker customer relationship in case of export cash credit (Hypothecation). Foreign Remittance “Foreign remittance” means purchase and sale of freely convertible foreign currencies as admissible under Exchange Control Regulations of the country. Purchase of foreign currencies constitutes inward foreign remittance and sale of foreign currencies constitutes outward foreign remittance. The transaction of the authorized dealer in foreign exchange involves either outward or inward remittances of foreign exchange from one country to another. As an authorized dealer the Motijheel branch of IFIC BANK provides its customer foreign remittance facilities by FBC, LFBC, sale and purchase of FCY, FTT, FDD, traveler’s check, FBP
Foreign Bill for Collection (FBC)
Foreign bills for collection refer to collection procedure of foreign DD/P.O/ Cheques as per arrangement between BASIC and its corresponding banks. The collection procedure is as follows: i. ii. iii. iv. v.
Entries in the FBC register and get a FBC number. This number will be on the bill and be treated as reference no. Forward the bill along with a forwarding letter to the corresponding bank. Send the draft through courier service and keep a courier receipt in the file. Crossing on the bill indicating IFIC BANK as a collection bank. Endorsement on the back of the bill-“Payees A/C will be credited on realization”. Prepare a liability voucher-Customer’s Liability--------------Dr. @ Notional rate. Banker’s Liability-----------------Cr. A photocopy of the bill to be kept on the file.
Local Foreign Bill for Collection (LFBC) Instruments originating outside Bangladesh but drawn on a Bangladesh bank is known as Local Foreign Bill. In LFBC a forwarding letter is send to the local drawn on bank/ branch along with the instrument and payment instruction is given to them. However payment instrument differs depending on the currencies the A/C is maintained. Tk. Account In case of Tk. A/C the collection procedure involves payment instruction by a P.O/ D.D. favoring the beneficiary. The instruments, after receiving will be send for collection through clearing preparing a Cr. Advice: Clearing---------------------Dr. Party A/C-------------------Cr. Foreign Telegraphic Transfer (FTT)
Incoming A credit memo received from ID along with a tested telex message. Enter in the FTT register. Treatment incase of Tk. A/C: HO A/C HO----------------------------------------------Dr. @ Ready Buying. Party A/C-------------------------------------------------Cr. @ T.T. Clean Income A/C Exch. On Bill/Remit--------------------Cr. [Diff. Between Ready Buying & T.T. Clean] Purchase to ID @ Ready Buying. IBETDA Credit advice to the party A/C. Treatment incase of FCY A/C. HO A/C HO--------------------------------Dr. @ Notional Rate FCY A/C-----------------------------------Cr. @ Notional Rate IBETDA and Memo also in notional rate. But during encashment HO A/C will be debited @ Ready Buying and Party A/C @ T.T.Clean.
FORM-C: In FORM-C party has to mention the purpose of this remittance. Incase of above $ %5000/= for individual or family; FORM-C is mandatory in any case. Outwards: Person having FCY A/C can remit money abroad through FTT subject to approval from Bangladesh Bank. Client shall mention the purpose of remittance and the name of the beneficiary, his/her bank, A/C no. etc. However the procedure of outward FTT is same as FDD issue. Account Treatment Party A/C------------------------------------------------------Dr. HO A/C HO---------------------------------------------------Cr. @ T.T. & OD Income A/C Exch. On Remit-------------------------------Cr. Diff. B.C.T.T & OD Income A/C Comm. On Remit-----------------------------Cr. Tk. 300/- IBETCA to the ID @ T.T. & OD. Foreign Demand Draft (FDD) i. ii. iii.
Issuance of a FDD Application by submitting $ permission form. TM form duly filled in.
Accounting Treatment Cash-------------------------------------------------Dr. HO A/C HO----------------------------------------Cr. @ T.T & OD Income A/C Exch. On Remit.-------------------Cr. Diff. B.C.-T.T & O Income A/C Comm. On remit.------------------Cr. Tk. 300/iv. v. vi. vii. viii. ix. x. xi. xii.
Deliver the instrument to the applicant. IBETCA to the ID @ T.T. & OD. Sale memo @ T.T. &OD Entry in the FDD register. Cancellation of FDD: Application by party with original FDD. Signature verified, checking in the counterpart. Cash Dr. voucher to return money to customer. HO A/C-----------------------Dr. @ T.T.Clean Party / Cash------------------Cr. Single Cr. Voucher: Income A/C Exch. On Bill/Remit--------Cr. Diff. T.T. clean & OD Trf. Income A/C Comm. On Remit-----------Cr. Tk.200/= cancellation charge Cash -----------------------------------------Dr. IBETDA & Purchase memo @ T.T.Clean. Cancellation mark on the register & instrument. The procedure seems to be peculiar as party depositing money and getting money back at the same time but this has been adopted to avoid complicates.
Traveler’s Cheques are issued by banks to avoid the risk of loss or inconvenience in having to carry large amount of cash while traveling. The salient features of T.C. are: i. ii.
The buyer of T.C. needs not to be a customer of IFIC bank. The buyer has to deposit money with the branch of IFIC Bank equivalent to the amount of the T.C. he wants to buy. Each T.C. is signed by the buyer at place marked “when countersigned below with this signature”, before the Officer. T.C. is issued in single name. It is not issued in joint names or names of clubs, societies and companies. There is no expiry period for the T.C.
iii. iv. v.
Table: 1 Glimpse of Growth in Import & Export Business by IFIC Bank Ltd. (Million Tk.) PARTICULAR 2001 2002 2003 2004 2005
EXPORT 19432.00 21718.90 24190.20 29534.90 33698.27
IMPORT 17410.30 19407.20 25412.20 24785.20 26629.45
Chapter Six Definition of Fund Management Fund management is a part of Bank management. Bank management means many things; such as Bank’s economical environment, financial environment etc. Again governmental policy involves in Bank management. This is why bank rate is involved with governmental policy. Bank of course cannot go beyond this policy. According to Mr. Abu Naser Al-Razi (S.A.V.P) of IFIC Bank Ltd. “Bank fund Management is a management of large amount of money when a depositor draws a large amount of Cheques at the time, Bank has not money to pay large amount of Cheques then bank borrow money any Bank or Bangladesh Bank it is called Bank fund management ”
Sources of Fund management of IFIC Bank Ltd o Paid-up capital: Paid-up capital is a main source of fund of a bank. Paid-up share capital indicates the contribution made by the shareholders of the bank. o Reserve Fund: Reserve fund is the amount accumulated over the years out of undistributed profit. It actually belongs to the shareholders. o Deposit: Deposit from public represent by far the most powerful source of funds to a bank, accounting for over 90% of the total. These deposits are the key to a bankâ€™s potential growth. Deposits are many types there are given below: o Current deposits: Current deposit is a running account into which the customer can deposit money any and draws out without notice; usually opened for business purposes. No interest is paid on credit balance in current account. o Savings bank deposits: Savings bank deposit accounts are opened for the purpose of encouraging the saving habit of the small savers who also expect an income from deposited savings. In this deposit account, the number and amount of withdrawals are limited over a period of time. o Fixed deposits: Fixed deposits are accepted by banks at a fixed rate of interest agreed upon, depending upon the period for which they are accepted.
o Borrowings: Borrowings from Bangladesh Bank and other Banks is also a source of raising funds.
Customer Service IFIC Bank provides various kinds of services to its customers like Deposit schemes, Loan Schemes, Foreign Exchange Services, Inland and Foreign remittance services. Also this bank provides ATM facilities to its regular depositors. These services have many categories. IFIC Bank Limited always tries to create new opportunities for its clients. o Deposit Scheme The deposit scheme of IFIC Bank Limited can be classified into two main categories like the other banks. One is time deposit and another is demand deposit. Those deposit schemes are available in many forms. o Time deposit A deposit which is payable at a fixed date or in a depositors, it gives fixed rate over a fixed period of time. The time deposits of the IFIC Bank Limited are as follows: • • • •
FDR STD BCD PPS
FDR (Fixed Deposit Receipt)
Fixed deposit accounts opened for a fixed period, varying form 03 months to one (01) year or above and deposits payable at a fixed date of maturity. After receiving the money from the depositors, a receipt is issued acknowledging the receipt of money on this account is called FDR. Premature encashment of FDR is allowed but interest will be paid for the prescribed period. No interest shall be paid if FDR is encased before 03 months period. o STD (Short Term Deposit) Short-term deposits accounts is also a well-known account whose deposits shall be payable on short notice. In this account the deposits may be accepted for any short period at the lower rate of interest fixed by head office from time to time. o BCD (Bearer Certificate of Deposits) BCD is special type of deposit where banks receive funds from general public for a period of specific time like 03 months, 06 months, 12 months for face value and its multiple. The interest amount is calculated earlier. The difference between the face value of the certificate
of deposit and the prepaid interest on BCD will be received from the purchaser at the time of issue. o PPS (Pension Saving Scheme) It is only oriented account where no withdrawal allowed before maturity except premature encasement. Rate of monthly subscription, period of deposit, date of first subscription repayment term etc. shall be duly mentioned. o Foreign Currency Deposit As a leading private commercial bank of Bangladesh, IFIC Bank Limited is contributing its best to provide the service of foreign transaction. It has been using the most upgraded technology for this purpose from the very beginning, and thatâ€™s why Bangladesh Bank has given them the permission to maintain different types of foreign currency accounts. These are as follows: i. ii.
Non-Resident foreign currency deposit account (NFCD) Resident foreign currency deposit accounts (RFCD)
Non-Resident foreign currency deposit account (NFCD) NFCD accounts are interest bearing time deposit accounts maintained with the authorized dealers. Bangladesh wage earners by transferring funds from their FC accounts. Resident foreign currency deposit accounts (RFCD) Persons ordinarily resident in Bangladesh are allowed to open and maintain foreign currency accounts with foreign exchange brought in at the time of their return to Bangladesh from visit abroad. These accounts are termed as RFCD accounts. o Demand Deposit Demand deposit means money is a bank account, which can be taken out by the depositors as much as their demand. He/she can do it just by writing a Cheque. Under the demand deposit there are several types of accounts. The accounts are as follows: i. ii. iii. iv.
Current account; Savings account; ATM account deposit; Margin under L/C (letter of credit)
Current deposit account A current account is common type of account where frequent transaction like deposit and withdrawals are allowed and funds in this account shall be payable on demand. Interest on balance of current account shall not be allowed, so banks prefer this type of account due to its cost free nature. Current account can be opened both in the name of an individual, firm, club, society etc. Savings accounts Individual for saving purpose opens savings accounts. In this account frequent deposits allowed but frequent withdrawals are restricted. Savings account shall be opened with a minimum of Tk. 1,000/-. It is interest-bearing account. No interest will be paid for the month in which withdrawals have been made more than twice a week or over 25% of the total balances. ATM account deposit Q-cash This is the name and slogan of the ATM service of IFIC Bank Limited. This is one kind of demand deposit. Where the depositors can withdraw their one by using the ATM card from the automated teller machine. Q-cash ATM has introduced a new era in banking services of IFIC Bank Limited. Q-cash ATMs provide multiple banks and word to allow their customers to conduct banking transactions and pay utility bills. The objective of this service is to give relief to customers from reaching the bank within the banking hour. Sometimes people have no other choice but to wait until the bank opened the next day. This kind of thing happens especially on holidays or after banking hours. But Qcash gives the depositors access to their account any time of the day whether its holiday or after banking hours. o Loan When an advance is made in a lump-sum repayable either in fixed monthly installments or in lump-sum and no subsequent debit is ordinarily allowed except by way in interest and incidental charges. Loan is allowed for a single purpose where the entire amount may be required at a time or in a number of installments within a period of short span. After disbursement of the entire loan amount there will be only repayment by the borrower. The IFIC Bank Limited provide the following type of loan:
Loan general SOD (Secured Over Draft) CCS (Consumer Credit Scheme) Cash Credit Import Loan Export Loan
Loan general IFIC Bank Limited allows general credits to help their business in the following categories: I. Overdrafts II. Cash credit Lease financing Leasing can be defined as a contract between a lessor (the owner of the lease item) and lessee (the user of the lease item) where in the right to use an asset is transferred to the lessee for a specific period of time for consideration form of payment of rentals to the lessor during the lese period. Categories of Lease Items: i. ii. iii. iv. v. vi.
Capital Machinery (Imported / Local) Medical Equipment Personal computer with dot/laser, jet printer, VPS, stabilizer and other required accessories. Air conditioner, left, standby generator etc. Photocopier, overhead projector, special bending M/S and laminating M/C etc. Video equipment for production of package program, ad-film etc.
SOD Allowed against financial obligation like lien of FDR, government securities, ICB mutual funds etc. for promotion of economic and business activities. Bank guarantee IFIC Bank Limited used bank guarantee generally for business or economic purpose for participating in the local or industrial tenders and other commercial activities. Import loan & Advance The bank allows credits to the importers in the following forms. Payment against document (PAD) In case of a sight L/C bank must make the payment to the beneficiaryâ€™s bank when it get the document. Bank does these things on behalf of the importer. Importer will make actual payment. So this practice creates a continent liability for the bank. And bank charges interest until they get the payment from the importer. Loan against importer merchandise (LIM) In this loan scheme borrower is allowed to retire documents and clear the consignment from the customs authority taking the goods under banks control.
Export Loan & Advances The bank allows credits to the exporters in the following forms. •
Foreign document bill for purchase (FDBP)
This is a post-shipment export financing. After exporting if the exporter needs the money immediately. IFIC Bank Limited can purchase the bill as a service to the exporter and charge interest on that. •
Local document bill for purchase
This is exactly like FDBP the only difference is this local and that is foreign, sometimes in the local market one party can import from another party an order to complete the export order. •
Remittance or fund transfer service is another area where IFIC Bank Limited is giving their service very efficiently. They are using most upgraded technology for this service. Their intention is to provide this service to the customers with minimum cost and time. The following section will define the two types of remittance service. One is inland remittance and another is foreign remittance. •
Demand draft (DD)
A demand draft is an unconditional order of the bankers from one branch to another to pay to the same person or order the amount mentioned therein on demand. The demand draft commission was calculated as per BB (Bangladesh Bank) rate @ 15%, min. Tk. 25/-. •
Telegraphic transfer (TT)
A telegraphic transfer is a method of remittance, which is effected by the banker through a coded telegram attested by secret check signal on receipt of which the paying office pay the amount to the payee by crediting his/ her account. The TT commission was calculated as per BB (Bangladesh Bank) rate@ 15%, min. Tk.25/-. And telex charge to be taken from customer as Tk. 60/- per minute. •
Pay order (PO)
A pay order is a written order issued by a branch of bank to pay a certain Cheques as a bank and payable issue it by itself
Security deposit receipt
A written undertaking issued by a branch of a bank to pay a certain sum of money to a specified person or organization. A security deposit receipt is issued and paid by the same branch of a bank and such the drawer and are the same. •
Foreign demand draft
FDD is another kind of foreign remittance system. If a customer wants to transfer money from Bangladesh to any foreign country through FDD then he/she must has an account in any foreign bank where he will deposit the FDD, and that bank will collect the money from the correspondent bank of IFIC Bank Limited. Bank, in that country, FDD is safer than any other foreign remittance system. If the client loses the FDD he/she can make stop payment by informing IFIC Bank Limited in Bangladesh. But in case of traveler’s Cheques and other system this benefit is not available. •
Society for Worldwide Telecommunication (SWIFT)
IFIC Bank Limited is members of the society for worldwide inter bank financial telecommunication (SWIFT). This is one kind of networking system between most of the banks in world. This is an Internet based Networking System, which provides e-mail facility to its member’s bank. Chapter Eight
Performance Evaluation FINANCIAL HIGHLIGHTS OF IFIC BANK LIMITED IFIC AT A GLANCE (In
01. Authorized Capital 02. Paid-up Capital 03. Reserves and Surplus 04. Share Holders Equity 05. Deposit
500.00 406.39 622.53 1028.92 17616.69
500.00 406.39 672.79 1079.18 19131.8
500.00 406.39 737.19 1143.58 19798.9
500.00 406.39 809.10 1215.49 20774.4
500.00 406.39 954.66 1361.05 22505.20
06. Counter Finance From Central 214.59
Bank 07. Credit
2899.00 2173.96 1925.96 248.00 161.20 101.60 27258.65
0 3192.90 2136.63 1986.92 149.71 79.30 30.48 28885.9
0 3367.10 2543.83 1921.76 117.08 64.39 ------27101.3
0 4302.00 2687.06 1986.81 130.75 71.91 44.70 28575.8
5744.94 2655.10 2065.60 149.30 82.20 -------29411.80
18. Fixed Assets 315.87 19. Number of Shareholders 5862 20. Number of Branches 54
0 352.96 6234 56
0 395.48 6162 62
3 178.81 6210 62
193.61 6660 65
(domestic) 21. Number
03 23 1755
04 25 1868
04 36 1895
04 46 1990
Outstanding 09. Import Business Handled 10. Export Business Handled 11. Foreign Remittance Handled 12. Total Income 13. Total Expenditure 14. Net Profit Before Tax 15. Net Profit After Tax 16. Dividend and Bonus Share 17. Total Assets
(overseas) 22. Number of Affiliates 23. Branches of Affiliates 24. Number of Employees
03 23 1737
* Provisional figures
EXPORT PERFORMANCE OF IFIC BANK LTD IN 2005
(Figure in Taka million) FDBP Categories
Amount No. In $ Of Bills
Amount No. In $ Of Bills
Amount No. In $ Of Bills
Amount No. In $ Of Bills
Amount In $
No. Of Bills
1144.49 355 6
1081.79 175 8
Source: Academic Calendar 2005, IFIC Bank Ltd.
Analysis Ratio â€˘ Profit Margin The profit margin measures the percentage of each deposit remaining after all cost and expenses including interest and taxes deducted. The higher firmâ€™s profit margins the better. The net profit margin is calculated as follows: Profit Margin on Deposits = Net profit after tax / Deposit.
Table Profit Margin from 2001 to 2005 Year
Profit Margin on Deposit (%) 161.20 / 17616.69 = 0.91% 79.30 / 19131.85 = 0.41% 64.39 / 19798.97 = 0.32% 71.91 / 20774.47 = 0.35% 82.20 / 22505.20 = 0.36%
2001 2002 2003 2004 2005
In this case also net profit margin has increased in 2005 last Two years. These have also increased significantly. •
Return on Asset
Calculating the return on total assets is another variation on measuring how well the assets of the business are used to generate profit Return on total assets also called return on investment. It measures the overall effectiveness of management to generate profit with its assets. It could be measures as follows: Return on Total Assets = Net profits after taxes / total assets Table Return on Asset from the year 2001 to 2005 Year Return on Asset (%) 2001 161.20 / 27258.65 = 0.59% 2002 79.30 / 28885.90 = 0.27% 2003 64.39 / 27101.30 = 0.24% 2004 71.91 / 28575.83 = 0.25% 2005 82.20 / 29411.80 = 0.28% In this case also Return on asset has increased in 2005 last Two years. •
Return on Equity
The return on shareholder’s equity is a measure of company performance from on shareholder’s perspective. It measures the return on the owner’s investment in the firm. Return on equity is calculated as follows: Return on equity = Net Profit after Tax / Stock Holder Equity Table Return on Equity from year 2001 to 2005 Year 2001 2002 2003
Return on Asset (%) 161.20 / 1028.92 = 15.67% 79.30 / 1079.18 = 7.35% 64.39 / 1143.58 = 5.63%
71.91 / 1215.49 = 5.92% 82.20 / 1361.05 = 6.02%
In this case also Return on equity has increased in 2005 last Two years. Summary of Performance Evaluation Banking sector is one of the major sectors of Bangladesh in term of earning revenue, it is always under pressure to perform and meet the objectives of the shareholders and customers. In this competitive world this sectors has stretched the wings enough to over any kind of banking oriented jobs in anywhere in this world. So each and every company has to face a tough competition and to service they should reduce their service charge and had to earn more profit margin on their assets and liabilities. By analyzing some trends of IFIC Bank it is found that the first few aspects like branches, employees, deposit, export, import and income have increased over last 05 (five) years. Total assets have also increased at a decreasing rate but there is decline in fixed asset in last two years. By analyzing some ratios it is found that Profit margin, ROA and ROE has also increased partially, which gives a good sign for any company. So, it can be easily stated that IFIC is one of the leading Bank in Bangladesh, which is performing better in this competitive market. Last but not the least it can be concluded that the management of IFIC has operated this Bank very efficiently and very effectively. SWOT ANALYSIS OF IFIC BANK LTD.
Lack Motivation o
High Commitment of Customer &
Absence of Teamw
Experienced Human Resource.
Increasing demand of Customer finance
Investment potential of Bangladesh
as well as p •
Similar ty Products.
Certain Ban regulation
Customer A services
Recommendation Private bank now has taken a good position in the people’s mind. The expectations of the general people is extremely high about the performances those who are involved in private Banking. The people those are involved in business and trade in different foreign countries, and then sometimes they need to get the opportunity to get the loans for trading and also for L/C. Also the general consumers need to take loan for buying different types of necessary home appliances. Now a day, providing this type of loan is bringing large amount of benefit to the bank. And the risk of providing long is almost same with compare to other loans. Many other private commercial banks are facilitating consumer loan to the general people. So for being competitive in the banking business sector IFIC bank should concentrate more on consumer loan as soon as possible. IFIC Bank should keep the business’s company profile and measure the reality of the company balance sheet, income statement, journal, annual report, dividend declaration for the last few years and then find out the trend and analyze the future position.
They should also measure the good positioned company and their competitors and also type of weaknesses. At last it can be said all the procedures must be very accurate and quick without any harassment of the customers and the bank will be to clear them about their operations and that’s why those who will be aware and not to try to involve any types of fraud. For all this at first the bank will have to train in terms of all types of risk adverse banking policy by giving loan for any terms attract more positive borrowers and provide a very quick and smooth service. The bank should make more flexible the consumer credit scheme for attracting the consumer and all other loan categories.
Conclusion International Finance Investment and Commerce Bank Limited is a very old private bank of Bangladesh, which has a good reputation also all over the country. The performances of the bank are well enough through they have different problems. As an old private bank the numbers of branches are lower comparing with other old banks. They have also another problem of their service sector because sometimes the services are slow, that’s why the clients being of shift to another institutions. The credit financing process is strict mainly their Consumer credit scheme (CCS), which make the clients more disturbed to get the facility to buy their necessary goods. When the bank goes for Lending risk Analysis (LRA), then they have to face different tropical conditions. Their credit financing process is very strict which helps the bank to reduce the risk of refund the loan and fraud case will be reduced. But on the other hand those who are real borrowers and don’t have any fraud idea, they can’t tolerate those type of rigid procedures by which when they go for taking loan. The bank has enough surpluses to invest but they have failed to utilize it properly. It is also seen that there is a huge classified loan and for this reason they have to expend more to recover it through recovery team or through legal action. But it is also found that their net income is increasing day by day as their net income is more than their net expenditure and their exporting level is also greater than their importing level.
IFIC has also failed to generate new idea for technological improvement. It is found that there is may bank, which are launching new technologies and retain a huger customer. IFIC should follow others banks idea and utilize it to innovate new technologies. Thus the way they can attract new customer as well as they can retain their existing customer. Bibliography
Annual Report of IFIC Bank Ltd.
Academic calendar 2005, IFIC bank Ltd.
Mr. Shafiqur Rahman, Coordinator, MBA Program, (IIUC, Dhaka Campus)
Mr. Mahmud Zubayer, Professional Supervisor of Internee Program, (IIUC, Dhaka Campus)
Gazi Mahmud Hassan, Senior Staff Officer, HRD & Research Division, IFIC Bank Ltd.
Internet Application: www.ificbankbd.com
The report is prepared to analyze to overall performance of IFIC Bank and evaluate the Credit Financing Department of IFIC Bank. As a privat...