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Which is on “General Banking (Operations) of Pubali Bank Limited

Chapter -1

Origin of the study This Report, which is on “General Banking (Operations) of Pubali Bank Limited ”, is formally assigned by Professor Dr. Mahfuzur Rahman Course instructor and Dean of Eastern University. This internee report is the integral part of Regular MBA program.

Objective of the study The objectives of the study are as follows: •

To earn practical knowledge.

To apply theoretical knowledge in the real situations.

To know the investment decision.

To know the modes of investments.

To know how loans are classified.

To know the process of recoveries.

To know about bank’s customers.

To learn the organizational behavior of Pubali Bank Ltd.

To learn the making process of the proposal for approval of the head office.

To learn how the bank performs Lending Risk Analysis(LRA)

To know the dealings process of the commercial bank with the Bangladesh Bank.

Above all, to know the overall banking process.

Methodology The information and the data have been collected by interviewing observing factors, which involves different department of Pubali Bank Ltd. Both primary and secondary sources of data is being used, these sources are as follows:

a) Primary source:

Discussion with the employees Pubali Bank Ltd.

Expert opinions.

Oral and informal information provided by honorable Deputy General Manager and other officers of Pubali Bank Ltd..

b) Secondary sources: •

Annual report of Pubali Bank Ltd.

Manual and directive of different department of Pubali Bank Ltd..

Web site of Pubali Bank Ltd. (

Different journals and publication of Bangladesh.

Limitation of the study: The problems, which are encountered in preparing the paper, are as follows: •

In spite of sincere efforts I could not have enough time to make an in-depth analysis of the topic.

Main limitation is that some facts and figures are sensitive enough not to disclose publicly.

Communication and financial problems were faced.

CHAPTER 2 • • • • •

Overview of Pubali Bank Limited Introduction of Pubali Bank Limited History of “Pubali Bank Limited” Highlights Performance of Pubali Bank

OVER VIEW OF PUBALI BANK LIMITED INTRODUCTION OF PUBALI BANK LIMITED After liberation the government of the new born country being recognized as Bangladesh in the world society made all the existing banks nationalized by an ordinance named as "Bangladesh Bank (BB) Ordinance" dated the 26 march 1972. Later a government of the self declared president H.M.Ershad following a denationalization policy allowed establishment of banking institution in the private sector and released three of such nationalized banks in private sector. The policy seems to be contentiously followed by the present elected government of Bangladesh Nationalist Party being abbreviated as BNP.

In the world of modern age importance of banking business is immeasurable. Agricultural and industrial prosperity cannot be imagined without the existence of an expedient banking system in the country. Absence of a fair banking system is identified as prime cause of backwardness of any country in respect of its commerce and industry. Banks have been playing effective role in the capitalist as well as socialistic countries of the world in their internal distribution of wealth. Banking system of Bangladesh has not also remained less advanced in the above banking atmosphere. Now-a -days banks play an important role in the economy development of a country. For executing various programs in the process of economic developments, banks provide necessary funds. They collect savings of large masses of people scattered throughout the country, which in the absence of banks would have remained idle, and unproductive. These scattered amounts are collected, pooled together and male available to commerce and industry for meeting their requirements. Without banking facilities, modern method of complicated large-scale production would have been a very difficult task. Our business or industry requires two types of capital, namely short-term and long-term. We know, there is a gap between expenditure of production and the realization of income from the good produced. This gap is filled up by the supply of short-term capital by banks. This short-term capital enables the producers and traders to meet the expenses of raw materials, wages and salaries of their employees, marketing finished goods etc. the longterm capital is obtained by issues on the capital markets for setting up factories and purchasing machineries and equipments. The public subscription, which is raised, is not sufficient to meet the establishment and running costs of factories. For the successful operation of these factories banks assist them with short-term and long-term capital. As a commercial based bank Pubali Bank Limited is always trying to develop the condition of the economy and society of Bangladesh. Pubali Bank Limited strongly believes that the interest free banking is only way to develop the economy and society of a developing country like Bangladesh because, this system is very convenient for our people. The activities of Pubali Bank Limited are collect deposits from people which are scattered over the country and invest the deposited money in the profitable and less risky sector from where they will get return easily. It is providing assistance to the exporter and importer of our country. Another important activity of Pubali Bank Limited is that it is very conscious to

create employment opportunities for the unemployed people of Bangladesh, which is the most significant demand of our young generation. Analyzing today's business world as the student of Business Administration need to survive in this complex situation with regards to acquire vast knowledge. We ought to know "ins and outs" of the present and future situations. After passing four consecutive years in BBA, a practical program has been introduced to me as a essential part for the outgoing business students. Considering the matter an internship program is organized to give me an opportunity for enhancing my capabilities and assigned me to prepare a project specializing on "General Operations of Different Sections of “Pubali Bank Limited”

HISTORY OF “PUBALI BANK LIMITED” The Bank was initially emerged in the Banking scenario of the then East Pakistan as Eastern Mercantile Bank Limited at the initiative of some Bengali entrepreneurs in the year 1959 under Bank Companies Act 1913. After independence of Bangladesh in 1972 this Bank was nationalized as per policy of the Government and renamed as Pubali Bank. Subsequently due to changed circumstances this Bank was denationalized in the year 1983 as a private bank and renamed as Pubali Bank Limited. The Government of the People's Republic of Bangladesh handed over all assets and liabilities of the then Pubali Bank to the Pubali Bank Limited. Since then Pubali Bank Limited has been rendering all sorts of Commercial Banking services as the largest bank in private sector through its branch network all over the country.

HIGHLIGHTS As at 31s' December ( In Million Taka) 2000 Authorized Capital Paid-up Capital Reserve Fund and other Reserve Deposits





































Import Business






Export Business






Bridge Finance






Total Income






Total Expenditure






Pre-tax Profit






Net Profit












Total Assets Fixed Assets

36370.90 39068.30 553.80


Other Information Number of Employees






Number of Shareholders






Number of Branches










Earning per Ordinary Share ( Taka )


PERFORMANCE OF PUBALI BANK Share Capital The authorized capital and paid-up capital of the bank stood at Tk.5000 million and Tk.200 million respectively in 2004. Out of total 6562 shareholders, 4 nationalized institutions including the Govt. of people Republic of Bangladesh held shares of Tk.6.64 million. Various institution and individuals held the remaining shares of Tk.193.36 million.

Statutory and other reserves At the end of the year 2003, reserve and other reserves of the bank stood at Tk.1931.75 million, Out of which statutory reserve was Tk.1201.14 million, other reserve was Tk.730.61 million. The total reserve stood at Tk.2107.76 million at the end of the year 2004, due to increase of statutory reserve by Tk.48.98 million and increase of general reserve by Tk.85.72 million from current profit and 51.31 million from sale proceeds of property.

Deposit The total deposit at the end of the year 2003, Tk.35852.60 million. During the year 2004, the amount stood at Tk.39789.71 million, which was 10.98% higher than the position of the previous year. Out of the total deposit, time deposit and demand deposit were Tk.29, 678.80 million and Tk. 10, 111.90 million i.e. 74.59% and 25.41% respectively.

Borrowings from other Banks The borrowing from other banks for the business purpose was Tk.131.62 million as on 31.12.2004. Such borrowing during the previous year was Tk.320.48 million.

FOREIGN EXCHANGE BUSINESS Import Business During the year 2004, the Bank handled import business worth Tk.18024.30 million. During the previous year, the amount was Tk.12141.30 million. The amount of import business handled by the bank increased by Tk.5883 million during the year 2004, which was 48.45% higher than the previous year.

Export Business The bank handled export business worth Tk.13670.50 million during the year 2004, as against Tk.11648.20 million in the previous year registering an increase of Tk.2022.30 million over the previous year.

Inward Foreign Remittance Non resident Bangladesh sent foreign exchange equivalent to Tk.11753.90 million through the bank during the year 2004, which was Tk.31753.30 million during the previous year.

Investment Total investment of the bank was Tk.4938.86 million during the previous year 2003. During the year 2004, total investment of the bank increased by 803.26 million and stood at Tk.5742.12 million at the end of year. The sectors of investment were mainly govt. bonds, treasury bills, approved debentures and shares and debentures of private institutions.

Earning from call Loan As on 31.12.2004 call loans allowed by the bank stood at Tk.710 million which was Tk.440 million lower than the previous year. Due to active participation in the inter bank money

market, total earning from call loans during the year 2004, amounted to Tk.286.45 million which was less by Tk. 8.13 million over the amount of previous year.

Advances The total advances of the bank during the year 2003, amounted to Tk.26282.69 million, which was Tk.27, 542.33 million during the current year registering an increase of Tk.1259.64. In the interest of national economic development, the bank made advances mainly in sectors such as commercial loan, import and export, term loan to large and medium scale Industries, house building loan, working capital loan, consumer’s credit etc.

Position of Profit and Loss Total income and total expenditure of the bank during the year 2004, Tk.3455.32 million and Tk.2830.41 million respectively resulting in a profit of Tk624.91 million before making provision for bad and doubtful debts and income tax. During the year 2004, bank made a provision of Tk. 380 million against bad and doubtful debts and other provision of Tk.110.20 million for taxation. As such net profit of the bank stood at Tk.134.70 million, which the board of directors proposed to appropriate in the following manner. Net Profit.........................................

Tk.134.70 million

Transferred to statutory reserve fund........

Tk.48.98 million

Transferred to General reserve fund.........

Tk.85.72 million Tk.134.70 million.

Human Resources and Training The Pubali Bank Limited believes that professional development of manpower of the bank is vital to establish the bank as an institution rendering quality services to its clients. With this end in view we have arranged training. This year the number of officers and employee of the bank stood at 4797, twenty six course on different subjects were organized at the bank training institute and 603 officials of different levels received training. Beside these the bank utilized the training services rendered by other training institutions. In August 2004 a one day national workshop was held in Dhaka which was attended by all the 351 branch managers and senior executives of Head office of the bank. On the occasion 45 managers were rewarded as “Best Branch Managers" by giving crest for their outstanding performance.

CHAPTER -3 • • • •

Departments Of PBL General Banking Department Remittance Department Investment Department

DEPARTMENTS OF PUBALI BANK LIMITED GENERAL BANKING (OPERATIONS) DEPARTMENT It is a customer service section. Here two employees of the bank are always ready to serve their customers. In this section people come to open different kinds of accounts, and schemes. They advise their clients that how can they (clients) open an account. They are very friendly and cordial to their clients. Here the employees also issue new checkbooks, remit money from one place to another through DD, TT, Pay Order within the country, and clear the financial instruments. People can receive their foreign remittance from this section. They maintain different kinds of registers such as DD, TT, Pay Order register, account opening register, checkbook issue register, balance book, cheque-clearing register. They also use computer for posting purposes. There are four types of accounts and they are, a) Deposit Account/Saving Account. b) Current Account. c) Fixed Deposit Receipt Account. d) Short Term Deposit Account. The short discussion of each account is given below:

Deposit Account/ Saving Account This is such kind of account that provides a rate of profit on the principal deposit. Saving account can be single or joint. Besides education institutions, clubs/societies, associations and financial institutions can also open the saving account. In the PBL saving account is denoted as SB. The interest rate of SB is usually 8%. There are some rules governing Deposit Account and they are as follow:

It is opened on proper introduction with minimum initial deposit of Tk.500 (Five hundred) only for all cases. But initial deposit can vary with the relationship of the customer.

The deposit is accepted on the basis of commercial rules and the fund is invested in accordance with business principles.

60% of income of the bank derived from investment (minus the investment out of capital of the Bank) is distributed among the depositors at present.

If the amount of deposit at any time becomes less than Tk.500.00 (one thousand) only in any month it shall not be eligible for profit, until it again reaches the limit of Tk.500.00 (one thousand) only.

The profit is credited to the account in the next period (June and December each year). If the profit is not withdrawn it will automatically be added to the principal amount and entire amount will earn profit/loss.

Withdrawals from the account are allowed not more than two times in a week and for a total amount not exceeding one for the of total deposit on Tk.10,000.00 (ten thousands) only which ever is less. For withdrawals of large amounts, seven days notice in writing is required to be given. In the contravention of the rule, the depositors will not be given any profit in this account for that month.

Alteration/addition of rules shall be ‘made with the consent of the depositors.

• Procedures of Opening Saving Account •

To open SB there are some responsibilities both the customers and bankers. The responsibilities are given below:

• Responsibilities of the Customers •

Customer will fill up the Account Opening form (AOF) properly.

Customer should submit two copies passport size photograph attested by introducer.

The introducer must have an account with the bank.

The customer must select one or more nominee and give his/her/their two copies photograph.

The customer must sign on a Specimen Signature Card (SSC) and the introducer must sign on the form.

The signature must be that by which the customer operates his/her transactions.

In case of joint account: the name of account must contains the name of both account holders, operational instructions are signed by all the joint account holders, and both of them must submit two copies of photograph.

In case of club/society/cooperative society ltd.: customer must provide the up to date list of office bearers, resolution for opening and operating of account, and a copy of Bylaws/Regulation/Constitution.

In case of Non-government College/School/Madrasha/Maktab: customer must provide up-to-date list of the Governing Body/Managing Committee, and copy of resolution of the Governing Body/Managing Committee authorizing opening and operation of the account duly certified by a Gazette Officer.

In case of minor account: the word minor must be putted after the title of the account, the person operating the account on behalf of the minor will sing on the SSC, and the form must contain the date of birth of the minor.

Responsibilities of Bankers •

The specimen signature should be verified.

The verification seal will be given on the form along with authorized officer's signature.

Acceptance of specimen signature seal will be given.

Manager's approval seal with signature of manager will be given on the form.

A copy of photograph will be added to the form, and to the SSC.

New account number will be given on the form and on SSC from the list of account number.

Introducer signature should be verified.

At least two signatures of the SSC are taken in front of responsible officer. The banker should check the introducer signature on the form.

The banker should check the instruction of operation of account in case of

Joint account.

Checking and initiating the account opening register.

Checking that account properly introduced as per Head Office (HO) instructions.

Checking past transactions and present balance of introducer satisfactory.

Signature card authenticated and filed

Thanks giving letter should be posted to the account holder and introducer sent under registered post.

Current Account This kind of account does not provide any interest on total balance; usually business persons/organizations open such kind of account because this account provides the facility of unlimited times of withdrawal of money. The current account is denoted as CD /CA. In the bank, there are seven kinds of current accounts. Each account requires some documents. The Table-1, given below will show the types of accounts and documents required for opening of a new account. There are also some responsibilities both the customers and bankers.


Two copies passport size photograph of each person who will operate the account duly attested by the introducer.

The introducer must be current account holder.

Signing on the SSC.

If the account holder wants to give authority to other person to operate the account he must sign on the Mandate Form where the account holder will also attest the authorized person's specimen signature. The authorized person will sign on the SSC as well.

Types of Current Account (A/C) and documentation of a new A/C SI. No. 01 02 03 04

Types of Accounts (A/C)

Documents Required for Opening a New

Current A/C Individual Current A/C (Jointly) Current A/C (Proprietary

A/C 1. AOF 2. SSG 1. AOF 2. SSC 3. Special Instruction 1. AOF 2. SSC

Concern Current A/C (Partnership)

3. Municipal Trade License 1. AOF 2. SSC 3. Partnership Deed 4. Partners Agreement to Open A/C 5. Municipal Trade License


Current A/C (Public Ltd. Co.)

1. AOF 2. SSC 3. Memorandum and Article of Association 4. Certificate of Incorporation 5. List of Directors on the Company's Letter Head Pad 6. Municipal Trade License 7. Board Resolution Regarding Opening of


Current A/C

A/C and Authorization of the Same 1. AOF 2. SSC


3. Board Resolution Regarding Opening of


A/C and Authorization of the Same 4. Certified True Copy of Bye Laws/Rules & Regulation/Constitution


Current A/C (Trust)

5. List of Members of Executive Committee 1. AOF 2. SSC 3. Trust Deed.

Banker's Responsibilities •

Carefully check the AOF and signature card.

Verify the introducer signature.

All papers are checked carefully.

Such account can become a loan account so bankers should be careful of the time of opening the account.

Giving an account number on the AOF.

Fixed Deposit Receipt (FDR) Account This account provides the different profit rates against deposited amount for different period of times. A person/organization can open numbers of accounts for different terms. 241,242,243,244 starts the account numbers for the term three months, six months, twelve months, and twenty-four months respectably. If the account holder allows the provision of auto renewal then the FDR account will be auto renewed after the maturity. Payment

generally made by the Pay Order. A FDR account holder can get 90% loan provision against his FDR account. Here the TDRlFDR will be lien to the bank. The Table-2, given below will show the period and profit rate.

The Terms and Profit Rate Terms Profit Rate

3 Months

6 Months 12 Months 24 Months 36 Months 5 Years








The deposited money should not be less than Tk.5000.00 (five thousands) only.

The bank preserves right to invest the deposited amount if it thinks fit.

The profit credited on maturity in case of 3,6,12 months and in case of more than 12 months the profit adds to the principle amount annually.

FD Receipt is not transferable instrument.

FD Receipt issued by one branch can not be paid or renewed at another branch.

Alteration/addition of rules shall be made with the consent of the depositors.


Dully fill up the AOF.

Signing on SSC.

Depositing the FDR amount through a simple credit voucher. Accepting the FDR block.


Properly check the AOF.

Checking signature who secured the account.

Giving account number and FDR number.

Issuing date and maturity date properly written.

Maintaining ledger for every FDR account.

The FDR Block

The FDR Block has two parts. The smaller part remains in the bank and the largest part remains to the account holder. Both the parts contain some information. The information is: •

Serial number of FDR.

Issuing date.

Received from (name of the Account holder).

Sum of Taka.

The rate of profit and period.

Date of maturity.

Authorized officer signature.

Short Term Deposit Account This is a special type of term deposit. It is denoted as STD. Sometimes it is known as Special Notice Term Deposit. The profit rate on this account is 5.50%. It is just like CD except the profit.

Issuance of new cheque book •

The steps to issue a new cheque-book for both saving and current account are given below:

The account holder will fill up the Cheque Requisition Slip and will be submitted.

The authorized officer will match the signature on requisition slip with the signature on the SSC.

Then the authorized officer will check whether all the leaves of the previous cheque book have been used or not.

If in both case answer is positive then the officer can issue a new cheque book.

The officer will take a new cheque book and seal the account number on every page.

The issuing date and name of the account holder will also be written on the requisition slip of new cheque book.

The officer must sign on every leaf of new cheque book.

The serial numbers of the new cheque book are also written on the old requisition slip.

Entry will be given in a cheque issuing register and take the initial of the account holder.

New series will be posted on the computer against that account.

Dispatch It is said that the banking activities begin from the dispatch section. This section is important because all inward and outward mails are recorded here. One person is working in this section. The letters of all sections come to this section. After giving entry in the registration book the letters are sending to the outside. There are some peons who bear the letters. Besides the letters send by courier service or by telex or by mail. On the other hand when any letters come to this office, then this section received the letter fast and then gives entry in the registration book. After completion register he sends to the addressed person. The employee of this section also operates the telex machine and typing machine. He maintains inward and outward registration book.

REMITTANCE DEPARTMENT Remittance of fund means transfer of money from one place to another place or one city to another city of the same bank within the country is called local remittance and fund transfer to outside the country through correspondent agent is called foreign remittance.

Issuance of Telegraphic Transfer (TT) This is a modern process of transferring money. In this process money is remitted through telex, telephone, or mobile phone. In this process, a party can transfer money within short time. The desire person can get money instantly. The most important part of a TT is its Test Number. The Test Number is important to make payment. If the Test Number of the originating branch matches with responding branch, only then the TT payment occurs. The process of incoming and outgoing TT has been described below.

Incoming TT •

TT receives through telex or phone or mobile.

A TT voucher is prepared then.

If test agree then payment is given.

Accounting Debit: PBL General Account-Originating Branch. Credit: Bills Payable Account-TT Payable. Debit: Bills Payable Account-TT Payable. Credit: Party Account

Outgoing TT •

Party fills up the TT application form. The form contains the payee's account name, responding branch name, amount in words, and in figure, commission charge, tele/telex charge, applicant name and signature and address.

The party will deposit the TT amount along with commission and teleltelex/ mobile charges at the cash counter.

A cost memo is given to the party.

The voucher will be made and the authorized officer signed the voucher.

The TT will be delivered the responding branch either telex/telephone.

Accounting Debit: PBL General Account-Responding Branch. Credit: Income Account Commission on Remittance Inland. Credit: Income Account-Tele/Telex Charge. Credit: Other liability Account-VAT on Commission.

Commission •

Minimum commission Tk.150.00 up to Tk.150000.

More than Tk.150000 the commission will be counted as 1-% interest rate.

Telex Charge Tk.40.00 only (fixed).

Other Liability Account-15% VAT on Commission.

Payment Order (Pay Order) The Pay Order is an instrument used as an alteration of physical cash. It is applicable only for Dhaka City. They use specific Pay Order Block. It has some special features and they are •

It is an order to pay the account mentioned on the Pay Order Block.

The issuing branch will make the payment.

Pay Order must be Account Payee.

To issue a Pay Order the following steps are followed: •

The party will fill up the Pay Order form containing the favoring name, amount in figure and words, applicant's name, address, signature and date.

The authorized officer will fill up the commission voucher attached to the pay order form.

The party will deposit the amount of the Pay Order along with the commission.

Then the officer prepares a Pay Order Block. The block has three parts-one for the bank and the remaining parts belong to the applicant. The two small parts contains the beneficiary name, applicant name, amount in figure and date. The main Block contains the date, beneficiary name, and amount in words and in figure. Not Over Tk. --------- also be written on the top of the main Block.

Signature of two Power of Attorney (PA) holders will be given on the Pay Order Block.

Applicant will receive the Block signing on the backside of the office portion.

Commission 1. Commission fixed on Payment order Tk.50.00. 2. Other Liability Account-15% VAT on Commission.

Demand Draft (DD) DD is a one kind of bill of exchange. DD is the most frequently used mode of inland remittance. DD is an unconditional order of the bank from one branch to another branch to pay certain amount of money to a certain person on demand. It is applicable out side the Dhaka City. The DD generally issued for party's safety. If there is a huge amount to bear one place to another, then customer can do the DD and bear it to his destination instead of cash.

Commission •

Minimum Tk.50.00 only/ 10% of Purchase Amount.

When the amount will be exceeded more than 50000.00 then the commission will be counted as 1 % interest rate.

Postage Charge Tk.25.00 only.

Other Liability Account-15% VAT on Commission.

Banker's Cheque (BC) BC is used only to make the payment of different kinds of bills like utilities bill of the bank. Some special features of BC are as follows: •

It should be Crossed Cheque and Account Payee Only.

There is no commission for issuing a pay slip.

Bank is the maker of the pay slip.

A revenue stamp is required in case of payment.

It has two parts; one part belongs to the account payee and the other to the bank. The first part contains the date, beneficiary, amount in figure and for which purpose the bank issue the BC and second part contains two date (issuing date and payment date), beneficiary, amount is figure and in words.

Accounting Debit: Others Liability Adjusting Account Credit. Credit: Bills Payable Account-BC Issued.

Inter Branch Credit Advice (IBCA) It is an advice written by originating branch to the responding branch to credit the general account of responding branch for the transaction mentioned on it. IBCA is issued to responding branch to pay. The responding branch makes payment.

Accounting Debit: PBL General Account-Originating Branch. Credit: PBL General Account Responding Branch.

Inter Branch Debit Advice (IBDA) It is an advice written by originating branch to the responding branch to debit the general account of responding branch for the transaction mentioned on it. IBDA issued to collect money from other branch. The originating branch collects money.

Accounting Debit: PBL General Account-Responding Branch.

Credit: PBL General Account- Originating Branch.

Outward Bills for Collection (OBC) Collection of cheques of a bank outside the clearing zone is known as OBC. Suppose a party which have an account with the PBL, Motijheel Branch, submit a cheque of Sonali Bank of Tongi Branch. In this case the bank does not send the cheque to the Clearing House rather than they send OBC to the Sonali Bank, Tongi Branch to collect the amount.

System of OBC Lodgment •

Accepting the instrument with deposit receipt from the clients.

Investigating the instrument and deposit carefully especially, date of cheque, amount, account number, name and sign of depositor.

The following seals are applied on the instruments: Special Cross Seal.

OBC Seal with OBC Number.

Entry is given in the OBC register.

Making two copies of schedule. One is enclosed with the instrument for collection and other is kept as office copy.

ACCOUNTING Debit: Outward Bills-Lodged. Credit: Outward Bills-Collection. If the cheque honors then the accounting process would be: Debit: Outward Bills-Collection. Credit: Outward Bills-Lodged. Debit: IBCA and Number. Credit: Party Account and Number.

Commission 1. Tk.1.00 to Tk.15000.00------- Tk.25.00 only. 2. Tk.15001.00 to Tk.100000.00------- Tk.40.00 only and

15% VAT on Commission.

3. Tk.100000.00 to Tk.500000.00------- Tk.150.00 only and 10% VAT on Commission.

4. Over Tk.5000.00------- Minimum Tk.500.00 only & Maximum Tk.2500.00 only and 5% VAT on Commission.

Inward Bills for Collection (IBC) When cheques of other branches that are situated out side the clearinghouse come to a branch of the same bank then the whole process is known as IBC. This time an BCA is send to the OBC sending branch.

Clearing the Cheque Before clearing the cheque we will briefly know about the clearinghouse. A clearinghouse is an institution of credit where reciprocal liabilities of the local bands are counter-balanced against one another. In Bangladesh clearinghouse started about 1972. The clearinghouse sits in BB and covers only Dhaka City Corporation. Clearing House sit for two times in a day. In course of its business each bank receives from its customers for collection a large number of cheque and drafts payable at other banks. The collection of these instruments presents a big problem. Similarly each bank may have to made payments to other bands in respect of cheque drawn on it and deposited with the other banks for the purpose of collection. Then everyday each bank has to make large payments in respect of cheque drawn on it and held by other banks. And each bank has to receive money in respect of cheque received for collection from its customers. Clearing House provides the mechanism for clearing such transactions between banks. Clearance involves offsetting reciprocal claims against one another and setting merely such balances of differences as remain outstanding. A Clearinghouse ensures many advantages. In the absence of clearinghouse. each bank has to send its messenger to every other bank, present the cheque and drafts across the counter and collect amount of cash. Similarly, each bank has to pay cash every day for cheque presented across its counter by the other local banks. A clearinghouse prevents frequent and tedious walks by a bank's employee for the collection of cheque and drafts, the payment of the instruments in cash, and the consequent danger of loss in transit. It thus ensures convenience and economy. Only the differences of the mutual claims are settled and hence the banks can carry lesser cash reserves.

Customers deposit cheque to the bank with the deposit slip. Bank accepts the cheque and gives the following seal•

Instantly give cross seal and check the cheque carefully.

If there is bank name in the cheque then "received payment for the concern bank and branch" seal is given.

If there is individual name then "payee's account credit for the concern bank and branch" seal is given.

After the giving all entries into the computer a list of all cheque and bank print out the cheque list. With the print out sheet all cheque are sent to the representative of the bank who will go to the clearinghouse. The Principal Branch of PBL deals with the clearing cheque. That means the Principal Branch is representative of clearinghouse. In the house every representatives delivers to other the cheque and other claims that his bank holds against them. Similarly, he receives from others the claims that they hold against his bank. Cheque and other instruments dishonored are returned to the concerned representative. Each representative adds the amounts receivable and payable and the balance is stuck. Transferring balances kept at the central bank by the members of the clearinghouse makes the final settlement. The customer can get amount within two days after depositing the cheque. PB presently started a new clearinghouse that is called the "Same Day clearing". The special features of same day clearing are •

The amount of cheque must be 5 (five) lacks or more.

It is effective within the area of one kilometer of BB.

The customer can get the amount within a day.

After getting the cheque from the Principal Branch the branch identifies the -ignored and dishonored cheque. For the honored cheque the branch make payment or credit party account. The dishonored cheques are returned to the ~a"~

Accounts Section Account Section is the heart of a bank. Because it maintains all accounts of the bank. So, it is very important section. The employee of this section should have sound knowledge in accounting and should have patience. They should work with cool headed. In the Stadium

Branch, there are six employees in the account section. All of them are very sincere regarding their tasks. In general they deal with the following three transactions: 1. Cash-cash receive or payment. 2. Clearing-clearing cheque, DD etc. 3. Transfer-transferring amount from one account to another. After getting the vouchers from the all sections the account section starts its work. So we can say that the end of others sections is the beginning of the account section. Different sections create vouchers and those send to the account section. The employees of the account section firstly separate them into debit and credit. After separation they find out which for cash, which for clearing and which for transfer. Now they write them in the supplementary. They maintain supplementary for different head such as bills payable, banker's liability, others liability, PBL general account etc. Each supplementary have cash, clearing transfer columns. There are two kinds of supplementary and the are 1.Debit Supplementary---contains the debited cash, clearing and transfer. 2. Credit Supplementary--- contains the credited cash, clearing and transfer. The add all cash, clearing and transfer separately and transfer them in the rough cash-book or summary sheet. In the rough cash-book both clearing and transferring debit and credit must be equal. But debit and credit of cash may not be equal. One interesting thing is that after adding closing balance of previous day with credit cash balance of that day and adding closing of that day with debit balance then the cash balance of debit and credit must be equal. From that rough cashbook, they finally prepare Cash Cum-Day Book. The peculiar feature of cash cum-day book is that the debited amount of rough cashbook will be credited and credited amount of cash book will be debited in the Cash Cum-Day Book. Besides, from the rough cashbook they make daily affairs. In the meantime, they also are post the amount in the General Ledger and Subsidiary Ledger. The summaries of daily tasks are given below. They also prepare some weekly, monthly, quarterly, half-yearly and yearly statements.

Weekly Statement: 1. Weekly Affairs. 2. Weekly Return Statement Submission to PB.

Summary of Daily Tasks General Ledger Posting

Vouchers Come From Different Sections

Separation of Debit and Credit Vouchers

Monthly Statement 1. Deposit Statement:

Creating Supplement ary

Preparing Rough Cash Book

Preparing Cash cumDay Book

Subsidiary Ledger Posting

a) Deposit Position. b) Break Up of Deposit. c) Deposit by Sector Corporation. 2. Monthly Account Statement: a) Monthly Profit and Loss Account. b) Monthly Balance Sheet. 3. Return on SBS-1 Submission to PB. 4. Financial Position Submission to HO. 5. Salary Statement: a) Salary Statement Submission to Financial Control Division (HO) b) Salary Statement Submission to Human Resource Division (HO) Statement of Provident Fund (PF).

INVESTMENT DEPARTMENT The investment decision is the most important of any bank's three major (investment, financing and asset management) decisions. But it is universally recognized that the most important problem in banking administration is that of investing its deposits and paid up

capital in various forms of earning assets. This is also known as the portfolio policy. The bank's portfolio is nothing but an arranged and digested scheme of its assets. The investment policy of the bank depends on the nature of its funds. If it can acquire funds of a more or less permanent nature, it can acquire more profitable assets. If the funds subject to wide fluctuations, it has to keep a large part of funds in liquid form. It is said that the soundness of a bank is reflected in the distribution of its funds on different types of assets. A good banker is one who follows a wise investment policy that brings maximum profits to shareholders and provides maximum security to the depositors. No uniform rules can be laid down to determine the portfolio of a bank. The local conditions in which the bank operates will necessarily have a bearing on its investment policy. The nature and availability of funds as also assets differ widely from country to country and also from region to region within the same country. The banks in rural areas face certain problems that are materially different from those of the banks in the urban areas. In rural areas the demand for loans is usually loss. Those difference policy of the bank.

GENERAL PRINCIPLES OF GOOD INVESTMENT The bank follows the following principles at the time of appraising an investment proposal: 1. Safety: "Safety First" is the most important principle of good investment. When they extend financial assistance they must feel certain that the money will definitely come back. The party is acceptable to the bank who is reliable trustworthy and who has character, capacity and adequate capital of his own. The bank must have confidence in his customers' integrity and ability to run the business. The investment party must have adequate financial stake in the business. He should neither be over trading nor under trading, nor should he be indulging speculative activities. Safety of an investment is directly related to the basis on which the decision to provide financial assistance is taken, the type and amount to be provided and the terms and conditions on which the investment will be made available. The bank ensures that financial assistance goes to the right type of entrepreneur and utilized in such a way that it will not only be safe at the time of making investment but will remain go throughout and after serving a useful purpose in the trade industry/agriculture where it is employed, is repaid with profit. The bank ensures the safety of each investment by adapting a two pronged approach

a. Pre-sanction appraisal to determine the" bank ability" of each investment/financial assistance. b. Post-sanction controls to ensure proper documentation (before disbursement) and follow-up and supervision of each investment. 2. Liquidity: It is not enough that the money will come back; it is also necessary that it must come back on demand or in accordance with agreed terms of repayment. The party must be in a position to repay within a reasonable time after a demand of repayment is made. This can be possible only if the party for short-term requirements employs the money and not cocked up in acquiring fixed assets. Bankers ensure liquidity of investment in their capacity to deploy the funds in quickly realizable assets and in realizing the funds as per stipulation. Liquidity depends upon the type of investment as to whether the investment is for short-term needs, viz., working capital or for long terms needs viz., term investments for acquiring fixed assets. Some times the bank invests a large portion of money from which return come in but slowly. In this situation the bank is affected seriously in spite of the safety of investment. 3. Profitability: In the commercial banking, profitability is more important because the bank thinks about the safety and commitment given by them to the honorable clients and there is no chance for the loser because the market is very much competitive and the clients will not continue their relationship with bank if they (The Depositors) face loss. For that reason the bank opts for a project that will pay back the investment with maximum profit within the shortage possible time. After meeting all these items of expenditure are reasonable profit must be made, otherwise, it will not be possible to satisfy the depositors, to carry anything to the reserve and pay dividend to the shareholders. 4. Purpose: The purpose should be productive and income generating so that the money not only remains safe but also provides a definite source of repayment. The purpose should also be short-termed so that it ensures liquidity. Bank should not finance for hoarding, speculation, over trading, over trading, antisocial, anti-national, illegal and immoral purposes. As fast as possible, parties are discouraged to take new financial assistance to clear off the old liability.

5. Amount: An important matter for consideration is whether the amount is likely to be sufficient for the given purpose. It should be reasonable in relation to the customer's own resources. To verify customer's own resources the bank investigates very carefully. 6. Source of Repayment: The next point upon which information will be required before the bank accedes to a request for recommendation is the source from which repayment is promised. Self-liquidation investments however give little or no trouble. 7. Diversification: Another important principle of good investment is the diversification of investment. An element of risk is always present in every investment, however secure it might appear to be. In fact, the entire banking business is on of taking calculated risks and a successful banker is an expert in assessing such risks. He is keen on spreading the risks involved in providing finance, over a large number of parties, over a large number of trade/industries and areas, and over different types of securities. 8. Security: Security is not only a sort of insurance against risks, but also serves as a hold on the investment parties. Security in excess of investment amount serves as a margin to cover up market falls of securities, storage losses, pilferage etc. Security is to be easily marketable and manageable. Security is to be of adequate value and such value is to be ascertainable. 9. National Interest: Even when an investment satisfies all the aforesaid principles, it may still be not acceptable. The investment may run counter to national interest. There may be credit restrictions imposed by PB. There also may have some of their own strategy of bank on investment decision that may follow during the investment. Security Cover Risk - is the risk that the realized security/collateral value is less than the exposure. To assess the security risk they do the following things •

Obtain the type of security.

Then, they find out expected realizable value at liquidation.

Then they assess the expected time (in year) taken to liquid this security.

Next, they calculate the present value of the security.

Then they identify the potential exposure (limit or outstanding whichever is higher).

Finally they calculate the security cover in percentage and give comment on it.

Selection of Investment Party

Selection of investment party is very important. A good selection of investment party means the bank is going to get the return. On the other hand, a bad selection of investment party means the bank will not get the return on time. So the banker must be very careful to select the investment party. To select the investment party Lending Risk Analysis (LRA) is very important. Basically the banker depends on the LRA to select the investment party. LRA is the analysis of different kinds of risks. LRA is the most important for every investment decision. The banker should be careful about LRA. Because, on the basis of LRA, they take decision whether they will invest or not. In the LRA form they analyze the different kinds of lending risks. They have a prescribed form to analyze the lending risk. The bank divided the lending risk mainly in two ways Business Risk and Security Risk. The Figure will show the all-lending risks at a glance. Business Risk There are two kinds of business risks - I. Industry Risk and II. Company Risk. Industry Risk: In the industry risk, the bank mainly tries to assess the supply risk and sales risk. Supply Risk - is the risk that the business suffers from external disruption to the supply of inputs. The price, quantity or quality of supplies may be disrupted. They measure the supply risk by the following ways: a. First, they obtain cost breakdown (labors cost, raw material, equipment & power, premises and other). b.

Then assess the disruption risk of each item.


Next, comment on any significant risk of supply disruption.

d. Finally, assess the risk that the company will be damaged by disruption to its supplies. Sales Risk - is the risk that the business suffers from external disruption to sales. Sales may be disrupted by changes of market size, increases in competition, switching on to the other competitors. Besides, sales also hamper by changing of regulations or the loss of a single large customer. They assess the sales risk by the following ways: •

To assess sales risk, they first analysis industry turnover for last three years. But in practice they do not do that.

Secondly, they assess the competitive pressure by analyzing two major competitions (their turnover, profit, working capital, and market share percentage).

Next, they measure the barriers to entry (in case of new co.).

Then assess the risk that changes in regulations will damage sales.

Now assess the risk that single customer responding a significant proportion of sales, switches to a competitor.

Finally, give their overall assessment of sales risk.

Company Risk There are two kinds of company risks. I. Company Position Risk and II. Management Risk. Company Position Risk: The company position risks are measured by the following two ways: Performance Risk - is the risk that the company's position is so weak that it will be unable to repay the loan even under expected external conditions. Steps to assess the performance risk are given below. •

First, obtain the sales, net worth, profit/loss from the most recent three years financial statements.

Then, they assess the strengths and weaknesses of the company.

Now, they try to obtain the company's strategy by which the company wants to differentiate itself from its competitors.

Then, they analysis the cash flow statement of the company.

Finally, they comment upon the overall performance risk.

Resilience Risk - Is the risk of failure due to lack of resilience to unexpected external conditions. Resilience risk is very important to take investment decision. The following steps are involved to measure the resilience risk: •

To assess resilience risk, they first obtain the company's leverage (liability/equity). In the same time they also disclose the Credit Investigation Bureau (CIB) report.

Then they assess the shareholders' ability to support the company.

Next, they go through the ratio analysis, which is very important for investment decision.

After that they try to obtain the company's fixed costs and how readily this company is able to reduce costs if sales fall.

Finally, they comment on resilience risk.

Management Risk Management risk is measured by assessing the Management Competence Risk and Management Integrity Risk. Management Competence Risk - is the risk the company fails because the management is incompetent. The competence of the managers depends on their ability and level of teamwork. The bankers to assess the management competence risk follow the following steps. •

To assess management ability, first consider the ability of the owners of board members.

Then assess the ability of the managers responsible for finance and operations.

Next, comment on the strengths and weaknesses of any other key personnel and give their overall assessment of management ability.

To assess level of management teamwork, first analysis the organization structures.

Then assess how the management team will work together, and, give their overall evaluation of managerial teamwork.

Finally, use their assessment of management ability and teamwork to give an overall evaluation of management competence.

Management Integrity Risk - is the risk that the company fails to repay its loan due to lack of management integrity. The term management integrity is a combination of honesty and dependability. Though it is very difficult to assess, thus they try to do the following two things a. First, assess management honesty by evaluating the reliability of the information supplied by management. b. Then assess management dependability and give overall rating of management integrity. Security Risk

In the security risk they analysis how they control the risk and how they cover the risk. So, the divided security risk in two ways I. Security Control Risk and II. Security Cover Risk Security Control Risk - is the risk that the bank fails to realize the security/collateral. The risk of failing to realize the security depends on the difficulty with which the bank can both obtain a favorable judgment and take possession. To analysis the security control risk they do the following two thingsa.

First analysis the case with which the bank can obtain a favorable judgment. b.

Then analysis the case with which the bank could take possession and give their overall assessment of security control risk. Security Cover Risk - is the risk that the realized security/collateral value is less than the exposure. To assess the security risk they do the following things •

Obtain the type of security.

Then, they find out expected realizable value at liquidation.

Then they assess the expected time (in year) taken to liquid this security.

Next, they calculate the present value of the security.

Then they identify the potential exposure (limit or outstanding whichever is higher).

Finally they calculate the security cover in percentage and give comment on it.

For the selection of the investment party the bank prepares the following two things: 1. Credit Report 2. Proposals on investment

CREDIT REPORT The branch on investment party for assessing his 5ps (character, capacity; capital, condition and collateral) must prepare Credit Report. The various sources of information for compiling credit report are: •

Investment Application.

Market Reports through friends/rivals from the party's trade or business.

Party's Account with the bank and statements of account with other bank.

Financial Statement Analysis.

Records of the Registrar.

Income Tax Statement.

Wealth tax returns.

Sales Tax Return.

Municipal Tax paid Receipts.

Trade and other reports in the press.

Certificate of Chamber of Commerce.

Mode of living.

Personal interview.

Spot visits.

Other banks confidential credit reports on the party.

CIB complication.

Before compiling the branch must kept in mind the following things: 1. The financial statement should be audited by Chartered Accountant (CA).

2. Assessing the valuation of movable and immovable properties of the company. 3. Assessing the account receivable turn over and collection period. 4. Where a guarantor is necessary, separate credit report should be prepared as in case of any individual.

Proposal on Investment The proposal on investment contains the following things: •

All proposals for investment /financial assistance should be prepared on the relevant forms prepared by the bank.

A proposal must contain exhaustive information under all the columns in the prescribed form.

No query should be left unreeled or vaguely replied.

A resume of the party's relation with the bank should be given in detail.

The proposal must contain the details as to the amount, type of security, nature of the change to be created, rate of return, margin, insurance risk to be covered etc. It must also contain the sources of the payment clearly. f.

Where a guarantor is

proposed the credit report on the guarantor and his worth should be prepared. •

. The class to which the party belongs, his character, and ability to run the particular business, his reputation in the trade of profession, his technical or other qualifications, the demand and potential for the end product, the purpose for which the investment is being raised, the condition of the industry as a whole, and if it will help in earning foreign exchange for the country reduce unemployment, promote all round production in the agricultural and industrial field etc are some of the important information which require to be reported/taken care of when processing a proposal for investment.

Modes of Investment There are mainly three modes of investment in The PUBALI Bank Limited. The modes of investment are given below: A. Contract Based Investment (CBI). B. Client to Bank Investment (CTBI). C. Hire Purchase (HP).

A. Contract Based Investment It is contract; of credit sale under which the price of the item involvement is payable on or before a specified future date either in lump sum or in installment, where in the client desires to purchase raw material. Finished goods, spares, machinery, or any other goods/items requests the bank to procure the items and sell it to him/them at a price with profit. The ownership including possession of the sold items is transferred to the client. CBI again divided by the following four sub-modes: 1. CBI-Hypothecation (Hypo) If the client wants to expansion his business and if he needs money for that expansion, he can come to the bank and can pray for money. This kind of investment is under the CBI (Hypo). There are eighty-three (83) CBI (Hypo) and the equivalent Tk.1143473215.00 (one billion fourteen core thirty-four lakes three thousand two hundred and fifteen) only in this branch (up to October 2004). 2. CBI-Packing Credit (PC) It is given to the investor as against the master (L/C). When a client needs money for the raw material packing, go-down rent, electricity bill, salary of staff etc. then he applies to the bank for a loan. Before giving loan the client must have a L/C. The client keeps the L/C as security for that loan. The client will be allowed this kind of loan only 10% to 15% of exported goods according to the HO decision. The exporter repays money after his goods exported and get the money from the importer. This kind of loan gives only to the top exporter whose have L/C. There are three (3) CBI (PC), amount of Tk.26450294 (two core sixty four lacks fifty thousand two hundred ninety four) only in the Motijheel branch (up to October 2004). 3. CBI-Trust Receipt (TR) This mode of investment mainly disburses for the custom duty. When party's imported goods come to the air port/sea port/railway station and if the party has cash problem then the party ask for the amount of custom duty. There are thirteen (13) CBI (PC), amount of Tk.42316481 (four core twenty-three lacks sixteen thousand four hundred eighty one) only in the Motijheel Branch (up to October 2004). 4. CBI-Consumer Facility Scheme (CFS)

This kind of investment mainly disburses for the household appliances such as to buy television, computer, air condition, refrigerator etc. There are sixty-eight (68) CBI (CFS) in the Motijheel Branch (up to October 2004). Before disbursement of CBI (CFS) the employee pass the vouchers as follows: Debit: Party Account. Credit: Bills Payable Account-Pay Order Issued. Debit: Party Account (down payment 15%, service charge 2%, risk fund 1 %, pay order commission, VAT 15% on commission). Credit: PBL-CFS-Party Account. Credit: Income Account-Service Charge. Credit: Other Liability-Risk Fund. Credit: Income Account-Commission on Remittance Inland. Credit: Other Liability-15% VAT on Commission. Credit: Stamp in Hand. Credit: Income Account-Miscellaneous Earning. Salient Features of CBI 1. The bank is not under obligation to advise the cost of goods/items and profit margin separately to the client. 2. Sale price of the goods/items is payable by the client of a certain future date, in lump sum or in installment. 3. The deal, being a credit sales, ownership and possession of the sold items is transferred to the client by the bank prior to receipt of sale price. 4. There should be three parties involved in sale agreement-the bank, the client and the supplier of goods/items. 5. Once the agreement is made then bank will not share in any loss or refix the sale price of commodity at a lower rate even if the goods/items, non-it can add any profit when the client earns high rate of profit due to increases of the price of goods. 6. Bank cannot charge penalty or similar fee from the client, in case the client pays in sales price to bank later than the date mentioned in the agreement.


The client must fulfill the application form that is provided by the bank. The client must duly sign the application form.

Processing and appraisal Branch will outright reject the proposals that are: 1. restricted by PB, and 2. In conflict with HO guidelines. 3. Which is against interest of the clients. Branch manager visits the business site, verify the things mention in the application, client honesty, integrity and business dealing as reasonable sources. Branch not finalize the proposal until receipt of confidential report from all local banks and financial and credit institution. Branch manager prepares appraisal report on prescribed form for all proposals. Branch will have inspected the property of the client that will be mortgage. Lawyer declaration is also need for this purpose.

Process of Loan Sanction and Disbursement On completion of appraisal the branch send a proposal to the HO for approval of CBI investment. The HO perusal the proposal and if it thinks fit for investment HO give approval and sent to the branch. HO shall not issue any separate sanction/regret advice to the branch. The branch obtains a copy of CBI Advice from the client duly accepted. This should be preserved with other documents as here under provided. They maintain all kinds of ledger and register books.

Charge Documents of CBI 1. Demand promissory (D.P) Note (Proprietary or Individual) - the party promise to pay money on demand with profit and principal. 2. Letter of Disbursement - letter far pray by which party want and transfer money for investment account to other account. 3. Letter of Authority - letter by which party give permission and fight to debit his account for the following:

Salary of go-down keeper.

Guard salary of go-down.

Go-down rent.

Insurance premium.

Other charges regarding investment.

4. Letter of Continuity - the letter by which the party gives right to keep all charge documents as continuous security. 5. Letter of Arrangement - the letter by which the party agree by the following conditions: •

If bank will then the bank can stop to pay without prior concern of the party.

Unconsciously, if party draws excess money from the bank instantly the party will be paid cash or submit cheque for the due money.

If the transactions of the party are not satisfactory to the bank, then the bank can stop the payment (with notice or without notice). In this case party must pay the full amount due to the bank within twenty-four hours by oral or writing notice given by the bank.

The party also promises to pay each installment timely with profit/rent.

6. CBI Agreement (Goods) - agreement between first party (bank) and second party (client). The bank and client must satisfy the following conditions: •

On the request of the client, the bank purchased in its own name.

The party will be made directly to the seller/ suppliers of the goods/commodities.

The client purchased the above-mentioned goods/commodities from the bank at a price.

The period of this agreement.

The physical possession and control of the goods/commodities will be with the client for use in the course of his normal business activities. But the client to cover the allpossible risks must duly insure the goods.

Prior to the purchase of the goods/commodities, the client will create an equitable/registered mortgage of real state as collateral security. The owner of the property also is bank.

The client will made full payment of the bank against the goods/commodities.

The client will complete and sign all the charge documents as may be required by the bank in the connection.

The bank as cancelled if any of the terms and conditions of this agreement and the sanction letter is not fulfilled by the client may treat the sanction.

The client will furnish monthly "stock report" on the said goods and commodities pertaining to this agreement regularly.

The client shall deal in business according to the BB.

If the client fails to make full payment, he will be considered a defaulter and bank will serve notice on the client to this effect. On the service of such notice, the bank will have the right to take all the legal actions necessary to recover its dues along with costs/damages.

7. Memorandum of Deposit of Title Deed- it is a deed by which party deposit equitable mortgage on the proprietary for securing the repayment of sanction money. By this memorandum the bank keep right to hold the deed until the amount repay. 8. Letter of Guarantee (Second Party). 9. Letter of Guarantee (Third Party). 10. Trust Receipt.

Insurance The assets shall be kept insured to the extent of its book value plus 10% covering all risks including fire, R&D, R.C.C. in the joint name of the bank as owner and the client as hirer at bank's cost. The condition of obtaining of insurance policy may however be waived for the assets representing consumer durable with prior permission of HO. On receipt of the policy from the insurance co.; check it up to ensure that it has been issued for the amount and with the warranties desired by the bank and also the policy is duly stamped.

Purchase of Goods Branch should engage a responsible officer to purchase/procure goods from market as per invoice /quotation or according to specification as requested by client. The branch must obtain transit insurance in case the goods are required to be procured/purchased from outstation. Help of local branch may be obtained to purchase goods. Imported goods must be cleared from the custom authority through clearing agent or bank's approved list.

Valuation of Commodity Valuation of the goods to be purchased for investment shall in no case exceed: 1. The landed cost at the port of entry as assessed by the customs in case of imported goods. 2. The ex-mill/factory price in the case of domestic manufacture commodities. 3. The wholesale price fixed by the government, if any, when no such wholesale price is fixed by the government valuation will be based on the competitive price to be ascertained by the bank.

Custody and Control of Goods Just after procurement/purchase goods, branch should prepare a schedule of goods. This schedule is to be signed jointly is by the incumbent-in-charge/officer-in-charge, investment department and the go-down inspector/keeper of the branch. The client will also put his signature on the schedule as a token of his consent regarding procurement of the goods as per his order. The go-down deeper shall retain one copy of the schedule in a file to be maintained in the go-down.

Follow Up, Supervision and Recovery If any CBI investment is secured by personal guarantee of any third party he should be brought under constant and effective follow up. Branch should send reminder to the client before fifteen days of due date of the payment so that the investment does not become overdue. The client will be served a final notice to make payment within seven days form the date of notice. If no response is received, steps should be taken to dispose off the hypothecated goods/mortgage properties to recover the amount. Suit may be field with permission from HO. Out of sale proceeds of securities, the investment account of the client will be adjusted and excess amount if any will be refunded to him by issuing and account payee payment order in his favor. In case of shortfall the matter may be immediately intimated to HO. Cash security, if any should also be appropriated.

Accounting under CBI

When the investment proposal is sanctioned and documentation is fully completed and bank's approval lawyer gives his opinion in writing as to the adequacy and completion of documentation then the branch will pass the vouchers. The vouchers to be passed are: Debit: CTBI Investment Account (name of the client) with the total amount of cost of the goods. Credit: Pay Order/D.D. in the name of the supplier/seller. When the profit will be recovered the following vouchers will be passed: Debit: Cash/Party's Account. Credit: Income Account (pool-wise). When the principal amount is deposited/realized the voucher: Debit: Cash/Party's Account. Credit: CBI Investment Account.

Client to Bank Investment (CTBI) "BANK TO CLIENT INVESTMENT" is a kind of sale transaction. Under this system of investment, a sale transaction is arranged between the bank's client and the bank. The client will request the bank on prescribed form to purchase for him/her certain goods with a certain price from a supplier/seller in the country or abroad. The client from the bank will purchase the goods within a determined period of time with a cost that includes cost of goods and fixed margin of profit. Sellers offer must be substantiated by pro forma invoice and/or other documents. The buyer/client should give a purchase offer supported by L/C or like banks thus, buys from the seller with a confirmed sales offer and sells to the buyer/client with an equally confirmed purchase offer. The delivery of goods will be given only against full payment of principal and profit. Part delivery may also be given on proportionate payment of principal and mark-up price. The operation may be compared to pledge mechanism of conventional banks. The profit markup once fixed before the deal can not be increased, even if the client does not take delivery of the contracted goods within specified period of time. If the client lifts the goods before the stipulated time, he may be allowed a rebate with prior approval of HO. This gives an opportunity to fix-up a longer period of repayment. In a CTBI deals the following terms and conditions are observed by the branch manager:

The client makes a request to the bank or prescribed pro-forma along with the original purchase memo/invoice of the goods from the supplier of goods. The client specifically mentioned the price of the goods and amount of profit he likes to offer to the bank.

The branch verifies the actual wholesale and retail price of the goods, its quality and its present, past and future market trend through its marketing personnel. The marketing report of the goods duly signed by the authorized officer is a part and parcel of the investment proposal. The credit report of the client must invariable be included in the proposal. After being fully satisfied about the client, the branch on receipt of HO approval will purchase the goods in the name of the bank.

The payment is made directly to the supplier/seller of the goods/commodities through account payee-pay order after completion of all documentation and other formalities required by bank.

The branch will retain margin in goods, as determined by the bank.

The goods are insured covering all possible risks with bank's mortgage clause in the joint name of the bank and the client. Registers like, CTBI ledger, stock valuation register, insurance register etc. must be maintained.

The goods are purchased and transported to the banks or client's go-down. As the case may be under strict control and supervision of the bank and the goods are stored under bank's lock and key.

The client has to execute, sign and submit documents before making disbursement of investment amount. It varies for firms & individual and limited company. In case of firms and individual:

CTBI Agreement.

D. P Note.

Letter of Pledge along with original purchase memo/ invoice of the goods.

Letter of Authorization.

Letter of Acknowledgment.

Letter from the client handing over physical possession of go-down.

Letter from the client making them liable in case of theft from go-down. h. Insurance policies.

i. In case of partnership, letter signed by all the partners authorizing one or more of the partners to execute documents on behalf of the firm and acknowledging joint and several liability and partnership deed in original. j.

Letter of disclaimer from

the owner of the go-down in case of third party go-down. •

Stock report dully signed by the client.

In case of limited company the following documents in addition to documents mentioned above are to be obtained from the client:

a. Article/Memorandum of Association. b. Certificate of Incorporation.

c. Certificate of Commencement of business (in case of public limited co.).

List of Directors.

Financial Statement for the last three years certified by auditor.

DP Notes (individual and joint & several).

Resolution to open and operate the account.

Registration of charges with the Registrar of joint stock Company under form XVIII necessary under section 109 of the Company Act.

Common seal of the company on the documents executed by the company.

Letter of guarantee signed by the directors in their personal capacity.

List of assets of all directors.

The go-down plate (signboard) is to be fixed at a conspicuous place.

If the client fails to lift the goods entirely making full payment there against with the stipulated period, the client will be considered a defaulter and the bank may, after serving notice in writing to the client sell the goods to any third party which the bank deems fit for adjusted of the bank's liability.

10. The bank reserves all right to cancel the CTBI Agreement either wholly or partially with or without notice or to alter all or some of the conditions of the agreement at any time with or without assigning any reason to the client.

11. In case of any dispute regarding the terms and conditions of CTBI Agreement or interpretation thereof, the arbitration of the bank's management is treated as final and binding upon the client.

Accounting under CTBI When the investment proposal is sanctioned and documentation is fully completed and bank's approval lawyer gives his opinion in writing as to the adequacy and completion of documentation then the branch will pass the vouchers. The vouchers to be passed are: Debit: CTB Investment Account (name of the client) with the total amount of cost of the goods. Credit: Pay Order/D.D. in the name of the supplier/seller. When the profit will be recovered the following vouchers will be passed: Debit: Cash/Party's Account. Credit: Income Account (pool-wise). When the principal amount is deposited/realized the voucher: Debit: Cash/Party's Account. Credit: CTBI Investment Account.

Hire Purchase (HP) It is a contract under which the bank invests in equipment, machinery, building, transport or other durable articles for the client against an agreed rental together with an undertaking from the client to make full payment of price to the bank either in lump sum by periodical installments for the purpose of eventual purchase of the concerned rental article. There are three sub modes of HP and they are: 1. HP--Project/Car/Others 2. HP--House Building Loan (General) 3. HP--House Building Loan (Staff)

Important Features of HP 1.Bank retains ownership of the assets and is entitled to receive agreed rental until full payment of purchase price thereof by the client is met up. 2. Possession of the asset is passed on to the client for his/her/their exclusive use. In case of investment in transport sector, the vehicle is registered in the joint name of the bank and the client; bank as the owner and the client as the hirer. 3. In case of HP, the hirer acquires ownership of the asset on full payment of agreed value, but in case of leasing operations, ownership asset is not transferred to the lessee.

Induction of Client 1. Request potential client to open a CD. Let him/her/their maintain the current account satisfactorily for a reasonable period. 2. Hold preliminary discussion with the prospective client regarding him/her/their investment needs and business experience. 3. Brief the client the salient features of HP mode of investment. The usual terms and conditions under which the bank makes HP investment. 4. Look to the past performance of the client.

Application Obtained application in prescribed form from all types of client.

Processing and Appraisal HP mode shall generally be practiced in respect of investment in transport sector. This mode most convenient for those assets whose ownership needs registration with some regulatory bodies. This mode is however, also suitable for investment in the following areas: 1. Fixed investment of trade, commerce and industry (like machinery/equipment) where investment under CBI mode is not feasible/desirable. 2. Firm machinery e.g. tractors, tailors, fishing boats, solar energy plant, bio-gas plants etc. investment in housing sector. 3. Consumer durable such as car, motorcycles, scooters and household goods. Since the possession of the asset is passed on to the client, this mode of investment is more risky than CTBI mode. The following things they carefully consider: 1. The asset must be new. 2. In case of investment of trade, commerce and industry, firm machinery etc. the client will be in a position to generate sufficient cash by utilizing the assets to pay the amount of stipulated installment including a good margin as his profit. 3. The client is in a position of furnish required amount of cash and collateral securities. 4. The asset is not exposed to hazards of technological changes that will make it obsolete. 5. The quality and other specification of the assets as desired by the client can be ensured. 6. The bank will be in a position to procure the goods in time and at desired price.

Appraisal Report for all proposals other than the proposal of industrial and agricultural investment The proposal will be classified by sector as under 1. Industrial. 2. Commercial. 3. Agricultural. 4. Real Estate.

Sanction and Disbursement On completion of appraisal the branch send a proposal to the HO for approval of HP investment. The HO perusal the proposal and if it thinks fit for investment HO give approval and sent to the branch. HO shall not issue any separate sanction/regret advice to the branch. The branch obtains a copy of HP Advice from the client duly accepted. This should be preserved with other documents as here under provided. The price of assets should be to the supplier/client. They maintain all kinds of ledger and register books.

Charge Documents of HP 1.

Single Party D.P. Note (if there is no guarantor).


Double Party D.P. Note (if there is guarantor/s).


D.P. Note Delivery Letter in all cases.


HP Agreement duly notarized with the Notary Public at client's cost.


Photocopy of the Blue Book and Route Permit (in case of investment made in

transport vehicle). The Blue Book and Route Permit be obtained in the name of the bank as owner.

Insurance The assets shall be kept insured to the extent of its book value plus 10% covering all risks including fire, R&D, R.C.C. in the joint name of the bank as owner and the client as hirer at bank's cost. The condition of obtaining of insurance policy may however be waived for the assets representing consumer durable with prior permission of HO. On receipt of the policy from the insurance co.; check it up to ensure that it has been issued for the amount and with the warranties desired by the bank and also the policy is duly stamped.

Procurement / Purchase of the Assets A responsible officer is engaged to purchase/procure the asset from market as per invoice/quotation or according to specification, quality, quantity, design, make, size brand etc. as requested by the client. If the assets are required to be procured/purchase from outstation market, transit insurance policy must be obtained. Imported asset must be cleared from the custom authority through Clearing Agents on bank's approved list duly complying with all required formalities.

Custody and Control of the Assets The asset remains at the custody and control of the client. It shall, however, be seized by the bank if the client violates the terms and conditions of the HP Agreement. The client will be asked to produce transport vehicle for physical inspection at least once in a month or more frequently as deemed necessary till full adjustment of HP Account.

Follow - Up, Supervision and Recovery Complete file client-wise with the copies of application, appraisal report, HP investment advice and other documents and papers. Copy of all correspondences made and reply thereto shall be chronologically preserved in this file. Maintain a due date diary showing the date of payment of installment and rent. The client in particular is advised that unless the amount of arrears installment and rent is paid immediately the bank shall seize and take charge of the asset of HP Agreement. The asset supplied on HP basis is inspected regularly. If any misuse or improper handling is noticed in course of inspection, the client will be advised to use/handle the same properly.

Accounting under HP When the investment proposal is sanctioned and documentation is fully completed and bank's approval lawyer gives his opinion in writing as to the adequacy and completion of documentation then the branch will pass the vouchers. The vouchers to be passed are: Debit: HP Investment Account (name of the client) with the total amount of cost of the goods.

Credit: Pay Order/D.D. in the name of the supplier/seller. When the profit will be recovered the following vouchers will be passed: Debit: Cash/Party's Account. Credit: Income Account (pool-wise). When the principal amount is deposited/realized the voucher: Debit: Cash/Party's Account. Credit: HP Adjusted Account.

Loan Pricing The price of loan is the interest rate the borrower must pay to the bank, in addition to the amount borrowed that is principal. The price of loan or interest is determined by the true cost of loan to the bank it is called BASE RATE & PROFIT / RISK PREMIUM for the bank's services and acceptance of risk. Base rate: Base rate is consist of three components are : Interest Expenses: It is determine by the interest paid to the depositors & borrowing from Central Bank including other borrowing Administration Cost: Salaries and allowances paid to the employees to maintain the operation in the market. Cost of Capital: Return on capital or the rate of return excepted by the investors from the investment in the bank. Risk Premium: Risk is the measurable possibility of losing the loan of not return the value with principal. The primary risk is the repayment risk, which is measurable possibility that a borrower will not repay their obligations as agreed. A good lending is to minimize the repayment risk. The price a borrower must pay to the bank for assessing and accepting this risk is called premium risk. Risk premiums are generally based on the historical, quantifiable amount of losses in that category. When the loans & advances become non-performance that is classified bank could not earn any interest on them then the question of risk premium is arises. As a result the loan prices become high. If there is no loss in loans & advances the premium risk is zero or nothing and loan price will be low.

We could find the changes in the following example: We think it is balance sheet of a bank. ASSETS Reserve - 80 Loans - 600

LIABILITIES (Fig. In Lac Deposit - 500 Borrowing - 100 Capital - 80 From the above balance sheet we can find that this bank has no losses loans. If the above bank's cost of fund is 3.00 % , Administrative cost is 2.00 % and cost of capital is 10.00% Then the base rate will be 1. Cost of fund = 500 x 3.00% =15.00 2. Administrative cost = 500 x 2.00% = 10.00 3.Cost of capital= 80x 10.00 % = 8.00 Total base rate = (15.00 + 10.00 + 8.00) = 33.00 So the loan price will be = (331600) x 100 =5.50 % Now if we consider that the bank's has losses loans amounting Tk. 100 Lac then the revised Balance sheet will be as follows: ASSETS


Reserve 80 Loans - 500

Deposit - 500 Borrowing - 100 Capital - (20)

Now the loan price will be = (33/500) = 6.60 % Here the difference may be called the risk premium (6.60% - 5.50% ) = 1.10%

Time Value of Money The time value of money based upon the idea that an amount of money available today can be safely invested to accumulate to a larger amount in the future. In this regard we could remember a popular example that if $ 1 is received 1996 years ago, invested in 6 %, could now be used to purchase all the wealth in the world. The three most important elements for which the money has time value as follows: •

Attitude of individuals with respect to the importance of current consumption over future consumption

The availability of opportunities for productive investment.


Present Value: The concept present value refers to an amount of money available today.

Future Value: It is simply to which a present value will accumulate over time. The difference between a present value and future value is the interest that is included in the future value. The interest accrues over time. Therefore, the difference between the present value and the future value depends upon the following two factors: •

The rate of interest at which the present value increases

The length of time over which interest accumulates.

Formulas to time value of money: To determine the future value of a single amount: FV = PV ( 1+i )n FV = Future Value PV = Present Value I = Rate of interest N = Number of period. Out of the four factors, if the three factors are known the other factor can be determine. To determine the future value of an annuity: •

FU = A {1/(1+i)}n

Here, A is annuity amount and other as above.

Capital Budgeting Techniques Capital budgeting decision represents a long-term investment decision. It involves a current outlay or series of cash resources in return for an anticipated flow of future benefit s over long term in the form of increased revenues of reductions in costs.

Basic Features of Capital Budgeting •

It involves large volume of investment.

Potentially large anticipated benefit

A relatively high degree of risk.

A relatively long time period between the initial outlay and the anticipated return.

Importance of capital budgeting: •

It affect the profitability of the firm

Spans long time and affects the company's future cost structure.

It once made is not easily reversible without losses as the secondhand market for plant and equipment is not available.


Capital investment involves large costs and majority of the firms has scarce capital resources.

Capital budgeting techniques can be grouped under two heads: Unsophisticated and Sophisticated, 2"° one is more valuable as it consists with achievement of the firm's goal. A. Unsophisticated Techniques: 1. Average rate of return or accounting rate of return (ARR). (ARR) = Average profits after taxes/Average investment 2. Pay back period ( PBP) : It is the number of period / year required to recover the initial investment. It is calculated by figuring exactly how long it takes to recover from cash inflow.

B. Sophisticated Techniques: 1. Net present value (NPV) = Present value of cash inflows - Initial Investment. If NVP is more than one or equal to zero the project to be acceptable. 2. Benefit cost ratio (BCR) = Value of cash inflows / Initial investment. If BCR is more than one or equal to zero the project to be acceptable. 3. Internal rate of return (IRR): If IRR is greater than or equal to cost of capital the project to be acceptable. Cost - Volume - Profit Analysis Cost -volume -profit analysis (CPV) involves study of the relationship between volume, fixed cost, variable cost, prices and profit of a business firm. It is used to determine the usefulness of the profit planning process of the firm. Cost -volume -profit analysis provides answer to the questions addressed by a business firm such as: 1. What should be the sales level to earn a target profit? 2. What will be the effect of changes in prices, costs, & volume on profit? 3. How will the profit be affected when sales mix is changed? 4. What will be the new break - even points (BEP) under 2 & 3? 5. Which product is the most profitable and which one is the least profitable? 6. Should the sale of a product be discontinued? 7. Should or not the firm be shutdown temporally? And so on. BEP = Fixed cost / Contribution per unit.

Marginal Safety (MS): It is the amount of sale over the sale point of break even point. MS= Excepted sales - Break Even point. Profit-volume (PV) Ratio: Contribution /Sales x 100



RECOMMENDATIONS No doubt PBL has an excellent image in our country. As a financial and service oriented organization PBL has been providing services since 1959 in Bangladesh. It has an excellent management team and qualified, experienced, dedicated and well-trained personnel. The servicing system of PBL is not rigid but flexible. Day to day it is creating a strong banking network over the world for its FE business. So far I observed I traced out some points as its weakness. The main weakness of PBL is that the working speed is slower than the other bank & they are little bit inattentive to their customer service. As because the slower rate of work the customer is reluctant with their service that could causes great damage of banks image. Moreover service charges in some areas of banking operation a little bit higher than that of the nationalized banks and their competitors & interest rate also little bit less than their competitors, which discourage middle class customers & higher class as well specially business persons. In some extents there is shortage of effective, efficient and well-trained manpower. Sometimes it invests in the wrong place and does not get return. There are over 52 banks in Bangladesh along with foreign banks. All of these are competitors for the PBL. As a Commercial Bank, it is thinking to launch Islamc Banking System. Because now a days in our country Islamic banking system is getting popularity in our country frequently. On the other hand Dhaka Bank Limited and Export Import Bank are going to introduce the Islamc Shariah based banking. All of competitors are providing same products and services. If all competitors fight with the same weapons, the natural result is declining profit. It also going to start central or network banking system by this system an account holder can withdraw his money from anywhere from the Bangladesh. Some of our

country’s bank has already started this service such as Eastern Bank Limited and Dutch Bangla Bank Limited. In the above three paragraphs, I have tried to find out the strengths, weaknesses and threats of PBL respectively. There are some weakness and threats for every organization in the business; PBL is not exception from those. To run the smooth banking business, PBL needs to deal the weaknesses and threats very carefully. PBL has excellent opportunities to compete with others and to dominate in the banking market. The opportunities are given below: •

PBL can increase the branches by which it can deal with more customers.

Investment intention and opportunities of people of Bangladesh are increasing. So PBL can take step to give loan with a comparatively low profit than others.

They can improve their working speed.

They can increase the interest of FDR or Short Term Deposit.

Foreign investors are also interested to invest in the Bangladesh. So, the bank has opportunity to expand n the business banking.

PBL has opportunities to introduce ATM, VISA and MASTER card for the convenient of the customers.

Computerized banking is the time demand of the customers as well as the providing better services. So, PBL can start e-banking.

PBL should start “One Stop Service” instead of traditional token system services.

PBL can take several steps for the well being of our society like tree plantation, anticorruption that rise people’s awareness and bank’s image.

CHAPTER -5 • CONCLUSION CONCLUSION Banking Institutions in the modern world are rightly termed as “life-blood” of economy. It is also true in the case of Bangladesh. The economic development of Bangladesh depends

mainly upon the banking system. Hence the future of banking system in our country largely depends on how efficiently and effectively they can work. Now days banks play an important role in economy development of a country. For executing various programs in the process of economic developments, banks provide necessary funds. They collect savings of large masses of people scattered throughout the country, which in the absence of banks would have remained idle, and unproductive. These scattered amounts are collected, pooled together and male available to commerce and industry for meeting their requirements. Without banking facilities, modern method of complicated large-scale production would have been a very difficult task. PBL is well known bank in the Bangladesh. As a private sector bank it is providing a better service to its customers than the other banks. Its servicing system is not rigid, but flexible. The bank always changes its servicing system according to its satisfaction. The educated staff team of this bank is always ready to serve their customers. Day-by-day, it is introducing new systems of services. Banking, as we know, is very technical job. So it requires a better training for its personnel to run the banking services more smoothly, more skillfully and more successfully. The bank is also very conscious about its employees. The bank arranges different training programs to increase its staff skill. I have been really enjoyed my three months industrial attachment with Pubali Bank Limited (PBL). The employees of the Kawran Bazar Branch, PBL are very friendly and cordial to me. They always tried to help me and gave all answers of my quarries. This internship program taught me to work with a team, to motivate a work team and to practice high level of integrity. No doubt it is a great opportunity for me. In simple language, I am very much lucky for this kind of opportunity.

Bibliography •

Annual report of Pubali Bank Limited 2003 & 2004.

Bank Company Act.

Web site of Pubali Bank Ltd.(

Different journals and publication of Bangladesh.

The Pubali Bank Limited, Investment Manual-1988.

Bank Review, Quarterly Journal of Pubali Bank Ltd.

Hussey, R. A Dictionary of Accounting. 2 nd edition, Oxford University Press, New York, 1999.

Kabir Md. Alamgir, Fund Management Policy: A Study on the City Bank Ltd. As a Private Sector Bank, Dhaka, 2002.

general banking (operations) of pubali bank limited