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“Loan and Advance and Overall Customer Satisfaction toward the Level of International Finance Investment and Commerce (IFIC) bank Ltd.”

Introduction Chapter 1.0 Introductory Thoughts study on “IFIC Bank Ltd.” The report is distributed in many parts according to nature and requirement of organization Practice makes a man perfect- the proverbs tell us about to practice those procedures that we have learned through out the graduation program. Theoretical knowledge does not highlight the reality as clearly as practical knowledge. Theoretical knowledge is a guideline but practical knowledge is experience oriented. But both of them are equally important. The internship report comprises a brief study on “IFIC Bank Ltd.” The report is distributed in many parts according to nature and requirement of organization and according to the instructions of the supervisor of the report. The purpose of study is to develop skills through learning various aspects of organization. The study enables to get command on bookish knowledge through practical approach and to understand the difference in both approaches. This thing increases the knowledge and brings betterment in working within organizational environment. It includes practical experience through which have gone through whole internship program. 1.2 Origin of the Report This report paper has been prepared as a part of the Internship Program of Master of Business Administration of Stamford University Bangladesh. The report titled “Loan and Advance and Overall Customer Satisfaction toward the Level of International Finance Investment and Commerce (IFIC) bank Ltd.” is an out come of three months Internship program at IFIC Bank Ltd. The report topic was approved by the faculty supervisor to satisfy the organizational requirements and fulfillment of the internship program. This report has been prepared under both of their direct supervision. 1.3 Background of the study Banks are the life-blood of modern economy. Banks are established to earn profit and help economic and financial activities so as to help economic development of a country. In such a context, the main business of Banking is to take deposits from customers and sanction credit to the borrowers. Thus the Banks act as financial intermediaries.


As a servicing industry, the Banks are customers oriented. Customers are the driven power of a Bank and it earns profit by servicing customers. In general, he, who has an account in a Bank, may be treated as a customer. In broad sense, customers may be seen from the two wings. Depositors and Borrowers. Beside these, other short-term served customers may exist in a Bank. However, as the Banking area is very hard and competitive, so in order to survive and successfully complete with other Banks, a Bank not only have to serve but have to nicely and effectively serve its customers. Now, in Bangladesh more than 50 scheduled Banks are operating their activities. Among those The IFIC Bank Ltd. has a positioned well & would be able to create a strong confidence in banking sector. However, the present study in attempt to measure the overall banking performance of IFIC Bank Ltd., therefore, to determine the limit of how efficiently and how effectively the banking performance are served by the IFIC Bank officials and staffs. It will also be aimed at to suggest some recommendations in order to improve the existing performance of IFIC Bank. In the context, this measure will help in assessing the overall performance of IFIC Bank Ltd. find out any short comings in performance of IFIC Bank and finally some suggestions and recommendations to improve the present banking performance of IFIC Bank Ltd. 1.4 Objective of the Study The primary objectives of the study are summarized in the following manner: To fulfill the requirement of MBA program. To learn desk-wise activities in Bank Branch. To study financial activities of the Bank. To analyze the performance of Elephant Road branch. To gain practical experiences and view the application of theoretical knowledge in the real life. The Secondary objectives of the study are summarized in the following manner: Provide an overview of the procedure of general banking and credit facilities of IFIC Bank Ltd. Identify the over all customer satisfaction level. Study on how to improve customer satisfaction level. 1.5 Scope of the Study Banking sector is a large and difficult area. A Bank has different products, different services and different customers. Different departments of a Bank perform different activities. As an Intern, my scope was very much limited and restricted. had to maintain some official formality for the collection of data of my report. had the opportunity to work only at the IFIC Bank Ltd., Elephant Road Branch. The report is based on my observation and studies during my internship period in Elephant Road Branch of the IFIC Bank. The study covers the Bank’s functional areas i.e. Service of IFIC Bank & its other department such as General Banking, Loan and Advance, Account opening, Clearing and Foreign exchange. 1.6 Methodology of the Report This report is prepared using both Primary and Secondary information.

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1.6.1: Nature Of the study The nature of the study has to be explanatory rather than testing any hypothesis. Being the nature of this study an exploratory one and using descriptive tools rather than inferential statistical ones, the present study is both a theoretical as well as empirical study. 1.6.2: Primary Information was collected through Informal interview with the organization officials of concerned department. Face to face conversation with the respective officers and staffs of the Branch. Informal conversation with the clients. Practical work exposures from the different desk of the three department of the branch were covered. 1.6.3: Secondary Information that was used for this report is collected mainly from Statement of affairs and Statement of Income account of the specific branch on yearly basis. Other sources areAnnual report of IFIC Bank Ltd. Web site of the bank. Bank papers and hand notes. Different lending forms and schemes used by the Bank. 1.6.4: Sample Size The sample size used in this study is 30. The sample size was low assuming that the homogeneity prevails in customer perception related to service quality. The respondents were the regular customer of IFIC visiting Elephant Road Branch on regular interval. 1.6.5: Sampling Techniques and Procedure The sampling technique used in this study is non- probabilistic in nature. More accurately convenient sampling was used. That is why the sample size was not mathematically calculated. 1.7 Limitations of the report One of the major limitations is the shortage of internship period. To prepare a report on some issues takes much time but in practice we are given a short time. The study was conducted only on the Branch level. Overall banking performance could not be evaluated for time constraints. Respondent haven’t agree withal the service related issues and some answer were indistinct.

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Also some secrecy was maintained in the bank and the not exposed to activities. Finally, the lack of the depth of my knowledge and the analytical capacity for writing such report is also a shortcoming of this study. Chapter 2.0 Discussion on Banking 2.1: Origin of the word, Bank A bank is a financial institution licensed by a government. Its primary activities include borrowing and lending money. The name bank derives from the Italian word banco “desk/bench”, used during the Renaissance by Florentine bankers, who used to make their transactions above a desk covered by a green tablecloth. However, there are traces of banking activity even in ancient times. In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders would set their stalls in the middle of enclosed courtyards called macella on a long bench called bancu, from which the word banco and bank derived. As a moneychanger, the merchant at the bancu did not so much invest money a merely convert the foreign currency into the only legal tender in Rome- that of the Imperial Mint. In fact, even today in Modern Greek the word Trapeza means both a table and a bank. 2.2 Definition of Banking The definition of a bank varies from country to country. Under English Common Law, a banker is defined as a person who carries on the business of banking, which is specified as: Conducting current accounts for his customers Paying Cheques drawn on him, and Collecting Cheques for his customers. In most English common law jurisdictions there is a Bill of Exchange Act that codifies the law in relation to negotiable instruments including cheques, and this Act contains a statutory definition of the term banker. “Banker includes a body of persons, whether incorporated or not, who carry on the business of banking” (Section 2, Interpretation). Although this definition seems circular, it is actually functional, and because it ensures that the legal basis for bank transactions such as Cheque does not depend on how the bank is organized or regulated. The business of banking is in many English Common Law countries not defined by statute but by common law, the definition above. In other English Common Law Jurisdiction there are statutory definitions of the business of banking business. When looking at these definitions it is important to keep in minds that they are defining the business of banking for the purposes of the legislation, and not necessarily in general. In particular, most of the definitions are from legislation that has the purposes of entry regulating and supervision banks rather than regulating the actual business of

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banking. However, in many cases the statutory definition closely mirrors the Common Law one. Examples of statutory definitions: “ Banking Business” means the business of receiving money on current or deposit account, paying and collecting cheques drawn by or paid in by customers, the making of advances to customers, and includes such other business as the Authority may prescribe for the purposes of this Act; (Banking Act: Singapore), Section 2, Interpretation.) “ Banking Business” means the business of either or both of the following: Receiving from the general public money on current, deposit, savings, or other similar account repayable on demand or within less than(3 months)… or with a period of call or notice of less than that period. Paying or collecting Cheques drawn by or paid in customers. Since the advent of EFTPOS (Electronic Funds Transfer at Point of Sale), direct credit, direct debit and internet banking, the Cheque has lost its primacy in most banking systems as a payment instruments. This has led legal theories to suggest that the Cheque based definition should be broadened to include financial institutions that conduct current accounts for customers and enable customers to pay and be paid by third parties, even if they do not pay and collect cheques. Chapter 3.0 IFIC Bank Limited. 3.1 Portrait of IFIC Bank International Finance Investment and Commerce Bank Limited (IFIC Bank Ltd.) is a banking company incorporated in the people’s republic of Bangladesh with limited liability. It was set up at the instance of the Government in 1976 as a joint venture between the Government of Bangladesh and sponsors in the private sector with the objective of working as a finance company within the country and setting up joint venture banks/ financial institutions abroad. The Government held 49 percent shares and the rest 51 percent were held by the sponsors and general public. In 1983 when the Government allowed banks in the private sector, IFIC was converted into a full-fledged commercial bank. The Government of the People’s Republic of Bangladesh now holds 35% of the share capital of the Bank. Leading industrialists of the country having vast experience in the field of trade and commerce own 34% of the share capital and the rest is held by the general public. 3.2 MISSION OF IFIC BANK LTD The mission of IFIC Bank Ltd. is to provide service to its clients with the help of a skilled and dedicated workforce whose creative talents, innovative actions and competitive edge make our position unique in giving quality service to all institutions and individuals that we care for. IFIC Bank is committed to the welfare and economic prosperity on the people and the community, for the Bank derives from them its inspiration and derives for onward progress of prosperity. IFIC Bank want to be the leader among the banks in Bangladesh and make it’s indelible mark as an active partner in regional banking operating beyond the national boundary.

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In an intensely competitive and complex financial and business environment, IFIC Bank particularly focuses on growth and profitability of all concerned.

3.3 Ownership Structure Ownership of the Bank is held by the sponsors in the private sector and Government of the People’s Republic of Bangladesh. Sponsors and individuals now own about 62% of the share capital and the Government own a little more than 38% of the shares. 3.4 Organization Structure:

Chairman

Vice Chairman Director Managing Director Deputy Managing Director) Senior Executive Vice President Executive vice President Senior Vice President First Vice President Vice President Senior assistant Vice President First Assistant Vice President Assistant Vice President Senior Staff Officer Staff Officer Officer grade - I Probationary Officer (P.O) Officer Grade – II Computer/Cash Officer Office Assistance Office Attendant

Governing Body

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3.5 Board of Directors

Chairman Mohammad Lutfar Rahman

Directors Directors

Abu Tahir Mohammad Golam Abu Tahir Mohammad Golam Maruf Maruf Murshed Murad Ibrahim Murshed Murad Ibrahim Aminur Rahman Aminur Rahman Md. Yasin Ali Md. Yasin Ali Didarul Alam Didarul Alam Chowdhury Nafeez Sarafat Chowdhury Nafeez Sarafat Gulzar Alam chowdhury Gulzar Alam chowdhury Tanim Noman Sattar Tanim Noman Sattar Mahmudul Huq Bhuiyan Mahmudul Huq Bhuiyan Arastoo khan Arastoo khan Sayed monjurul Islam Sayed monjurul Islam Mohammad Ali khan Mohammad Ali khan

Managing ManagingDirector Director Mosharraf Hssain Mosharraf Hssain

3.6 Policy Committee All matter relating to the principals, policies, rules and regulation etc. for operation and management of Bank is recommended by the committee to the board of Directors. 3.7 Corporate Culture IFIC Bank is one of the disciplined Banks with a distinctive Corporate Culture. Here it believes in shared meaning, shared understanding and shared sense making. IFIC Bank’s people can see and understand events, activities, objects and situations in a distinctive way. They maintain their manners

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and etiquette, character individually to suit the purpose of the Bank and the needs of the customers who are of paramount importance to them. People in the Bank see themselves as a tight knit than family that believes in working together for growth. The corporate culture IFIC Bank belongs has not been imposed; it has rather been achieved through IFIC Bank’s Corporate Culture. 3.8 Different Divisions Human Resources division: Investment Division Marketing Division International Division General Banking Division General Service Division Financial administration Division Internal Control and Compliance Division 3.9 Joint Ventures Bank of Maldives Limited: IFIC is the first among the private banks to have operations abroad. In 1983, the Bank set up a joint venture bank in Maldives known as “Bank of Maldives Limited” (BML) at the request of the Government of the republic of Maldives. This is the only national bank in that country having branches throughout that country. IFIC Bank managed the affairs of BML from 1983 to 1992. IFIC Bank sold its shares in 1992 to the Government of the Republic of Maldives and handed over the Management of BML to Maldives Government. NIB Bank Ltd., Pakistan: IFIC Bank had two branches in Pakistan, one in Karachi and the other in Lahore. Karachi Branch was opened on 26th April 1987, while Lahore Branch was opened on 23rd December, 1993. To meet the Minimum Capital Requirement (MCR) of the State Bank of Pakistan, the Overseas Branches in Pakistan have been amalgamated with a reputed leasing company in Pakistan named National Development Leasing Corporation (NDLC) Ltd. Therefore, the existence of the above Overseas Branches has ceased on 2nd October 2003 and a new joint venture bank entitled NDLCIFIC Bank Ltd. Emerged in Pakistan on 3rd October 2003. The Bank was subsequently renamed as NIB Bank Ltd. IFIC Bank presently holds 7.31% equity in the Bank. Nepal Bangladesh Bank Ltd. (NB Bank): Nepal Bangladesh Bank Ltd. (NB Bank), a joint venture commercial bank between IFIC Bank Ltd. And Nepal nationals, started operation with effect from June 06, 1994 in Nepal with 50% equity from IFIC Bank Ltd.

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The Bank was so far opened 17 (seventeen) branches at different important locations in Nepal. IFIC Bank presently holds 25% shares in NB Bank. Nepal Bangladesh Finance & Leasing Limited (NB Finance):Nepal Bangladesh Finance & Leasing Co. Ltd. (subsequently renamed as Nepal Bangladesh Finance & Leasing Ltd.), another joint venture leasing company between IFIC Bank Ltd. and Nepal Nationals, started its operation on April 18, 1999 in Nepal. IFIC Bank presently holds 15% share in the company.Oman International Exchange LLC (OIE): Oman International Exchange LLC (OIE), a joint venture between IFIC Bank Limited and Oman nationals, was established in 1985 to facilitate remittance by Bangladeshi wage earners in Oman. IFIC Bank holds 25% shares, and the balance 75% is held by the Omani sponsors. The exchange company has a network of 10 branches covering all the major cities/towns of Oman. The operations of the branches are fully computerized having online system. The affairs and business of the company is run and managed by the Bank under a Management Contact. 3.10 Technology Since the beginning of its journey as a commercial bank in 1983, IFIC Bank has been giving great emphasis on the adoption of modern technology. It became the pioneer in the field of automation by introducing computerized branch banking right in the same year. Subsequently, all the branches were brought under similar automated platforms with upgraded software applications to offer all the critical banking features. At present all 65 domestic branches are fully computerized under networked environment. The Bank has taken up a new project with MYSYS International Banking System Inc. (UK) to further upgrade its banking operation to state-of-art world class on-line banking solutions to provide faster and even more convenient centralized services to the clients. Besides, the Bank is also operating fully on-line Automated Teller Machine (ATM) services under the banner Q-Cash at a number of locations in Dhaka and Chittagong. The ATM facilities are available to the customers at Q-Cash booth. Since the importance of Web presence in the Internet is absolutely critical, IFIC Web Site www.ificbankbd.com has long been launched for the convenience of the customers, where all the activities and information are constantly being posted and updated. A Central Mailing System is operational at the Head Office to let the customers have direct electronic access to the selected staff. 3.11 Human resource Development The Bank has a Human Resource Development & Research Department to develop human resources internally. The Academy is equipped with professional library, modern training aids professional faculty and other facility. The Academy conducts regularly foundation courses, specialized courses and seminars on different areas of banking to take care of the professional needs 3.12 IFIC BANK AT A GLANCE (1) Name of the Bank (2) Head office

: International Finance Investment & Commerce Bank Ltd. : 8, Rajuk Avenue, Motijheel, Dhaka.

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(3) Date of establishment

: 24th June, 1983.

(4) Company registration Number : 4967, dated October 08, 1976 (5) Market Category (6) Objectives

: A Category : To establish maintain, carry on transect undertake and conduct all types of banking financial investment and trust business in Bangladesh and abroad.

(7) Branch

: 80 Domestics & 4 Affiliates

(8) Control

: Board of directors.

(9) Board of directors

: 14 executing members including chairman & director.

(10) Number of employee

: 2193.

(11) Number Of shareholders

: 34152

(12) Customers (13) Capital & Reserve million.

managing

: 200,000 : Authorized capital Tk. 5350 million, paid up capital Tk. 1744

(14) Share : Ownership of the Bank held by the sponsors in the private sector and Government of the People’s Republic of Bangladesh. Sponsors and individuals now some 65 percent of the share capital and the Government own a little more than 35 percent of the shares (15) Auditing System

: Both internal & external.

(16) Future Plan :( a) to increase market share in opening student through logistic support including media support.

providing

(b) To increase sale of TCs through providing all logistic account.

support

3.13 PROGRESS REPORT OF IFIC BANK LTD: Progress report of IFIC Bank Ltd for the five years is given below: GROWTH OVER THE YEAR:

PARTICULARS

2005

2006

2007

2008

2009

Authorized Capital

500.00

500.00

500.00

1600.00

5350.00

Paid-up Capital

406.39

406.44

406.39

1341.43

1744.00

Total Capital

1608.8

1754.41

2028.89

3045.09

4928.76

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Deposit

20774.49

22505.17

28,620.91

29,900.05

50017.96

Credit

18189.70

19502.70

25,490.66

28,361.46

32412.79

Total Loans & Advances

1623.45

2169.49

2549.07

2836.15

37793.89

Total Income

2687.02

2672.20

3687.80

5196.50

7243.83

Total Expenditure

1986.77

2122.66

2825.10

3693.60

4221.75

Total Assets

28575.83

30201.05

36080.48

45729.47

62901.86

Number of Shareholders

6210

5669

5724

9286

34152

Number of Employees

1860

1883

2003

1997

2193

No. of Branches

62

65

65

78

84

3.14 List of Branches SERIAL CODE BRANCH NAME NO

BRANCH MNUMONIC

1

2030

AGRABAD BRANCH

0801

1197

ASHULIA BRANCH

ASHU

3

1112

BAJITPUR BRANCH

BJIT

4

1096

BANANI BRANCH

BANA

5

6187

BANESHWAR BRANCH

BNSW

6

1011

BANGSHAL BRANCH

0808

7

5064

BARISAL BRANCH

BARI

8

3138

BEANI BAZAR BRANCH

BEAN

9

6188

BELKUCHI BRANCH

BELK

10

4166

BENAPOLE BRANCH

BENA

11

6082

BOGRA BRANCH

0812

12

4067

BORO BAZAR BRANCH

BORO

13

2034

BRAHMANBARIA BRANCH

BBAR

14

2054

CDA AVENUE BRANCH

CDAB

15

6086

CHAPAI NAWABGANJ BRANCH

CHAP

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16

2040

CHAWK BAZAR BRANCH

CBZR

17

2050

CHOUMUHANI BRANCH

CHOU

18

2035

COMILLA BRANCH

COMI

19

2148

COMPANYGANJ BRANCH

CPNY

20

2044

COX'S BAZAR BRANCH

COX

21

1193

DANIA BRANCH

DANI

22

1006

DHANMONDI BRANCH

0814

23

6083

DINAJPUR BRANCH

DINA

24

1014

ELEPHANT ROAD BRANCH

0810

25

1023

FARIDPUR BRANCH

FDP

26

2152

FATIKCHARI BRANCH

FATK

27

1008

FEDERATION BRANCH

0807

28

2041

FENI BRANCH

FENI

29

1109

GHORASAL BRANCH

GHO

30

3151

GOALA BAZAR BRANCH

GOAL

31

1002

GULSHAN BRANCH

0802

32

2137

HATHAZARI BRANCH

HATH

33

9900

HEAD OFFICE

HO

34

1005

ISLAMPUR BRANCH

0799

35

4061

JESSORE BRANCH

0811

36

1017

KAWRAN BAZAR BRANCH

0816

37

1195

KERANIGANJ BRANCH

KERN

38

2031

KHATUNGANJ BRANCH

0800

39

4060

KHULNA BRANCH

0804

40

1121

KONABARI BRANCH

KONA

41

4062

KUSHTIA BRANCH

KUSH

42

1025

LALMATIA BRANCH

LAL

43

2153

MADAM BIBIR HAT BRANCH

MBHB

44

1118

MADHABDI BRANCH

MADB

45

1019

MALIBAGH BRANCH

MALI

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46

1094

MOHAKHALI BRANCH

MOHA

47

1001

MOTIJHEEL BRANCH

0796

48

1004

MOULVI BAZAR BRANCH

0797

49

3046

MOULVI BAZAR BRANCH (DIST.)

MBD

50

1115

MUKTARPUR BRANCH

MKT

51

1022

MYMENSINGH BRANCH

MSIN

52

6085

NAOGAON BRANCH

NAOG

53

1003

NARAYANGANJ BRANCH

0798

54

1110

NARSINGDI BRANCH

NAR

55

1029

NAWABPUR ROAD BRANCH

0817

56

1020

NAYA PALTAN BRANCH

NAYA

57

1016

NETAIGANJ BRANCH

NTG

58

4163

NOAPARA BRANCH

0815

59

1028

NORTH BROOKE BRANCH

60

6084

PABNA BRANCH

PBNA

61

1027

PALLABI BRANCH

PLLB

62

1173

PANCHABOTI BRANCH

PANC

63

6080

RAJSHAHI BRANCH

0805

64

6081

RANGPUR BRANCH

RANG

65

1198

RUPGONJ BRANCH

RUP

66

4065

SATKHIRA BRANCH

0813

67

1171

SAVAR BAZAR BRANCH

SAVR

68

2042

SHAH AMANAT MARKET BRANCH

SAM

69

1007

SHANTINAGAR BRANCH

SHAN

70

1092

SHARIATPUR BRANCH

SHAR

71

2132

SHEIKH MARKET BRANCH (OLD)/ NOJU NOZUMIA HAT BRANCH (NEW)

72

2045

SHEIKH MUJIB ROAD BR

SMR

73

3047

SHREEMONGAL BRANCH

SMGL

HALL

ROAD

NBHR

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74

1090

STOCK EXCHANGE BRANCH

STOK

75

3043

SUBID BAZAR BRANCH

SUBD

76

3033

SYLHET BRANCH

0803

77

1126

TAKERHAT BRANCH

TKHT

78

1091

TANBAZAR BRANCH

TANB

79

2036

TERRI BAZAR BRANCH

0809

80

3139

TULTIKAR BRANCH

TULT

81

3049

UPOSHOHAR BRANCH

UPO

82

1024

UTTARA BRANCH

0818

Branches of IFIC Bank Limited 3.15 Information about the Employee of IFIC Bank Ltd.

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(Elephant Road Branch): IFIC Bank Limited. Elephant Road Branch 73/1, Elephant Road. (1st floor), Dhaka Tel: 9672119, 8613361 (T-Fax), PABX: 9676151-2 IFIC Bank Limited of Elephant Road Branch is one of the Profitable Branch of IFIC Bank Ltd. It started its journey at the year 1989, 31st October. Manpower Position of IFIC Bank, Elephant Road Branch S.L. No.

Category of employee

Number

1

First Vice President & Manager

1

2

First Assistant Vice President

2

3

Senior Staff Officer

3

4

Staff Officer

2

5

Office grade 1

6

6

Probationary Officer

3

7

Office grade 2

3

8

Cash officer

4

9

Computer officer

2


10

Security guard

3

11

Office attendants

3

TOTAL

32

Chapter 4 Different Departments of IFIC Bank Limited

4.1 General Banking

68 General banking is the standing point of the banking operation. It is the department which provides day to day services to the customers. Main function of general banking department is the following: General Banking

Account Opening Section

Cash Section

Clearing Section

Accounts Sections

Remittance Section

Deposit Section 4.1.1 Account Opening Section The relationship between banker and customer begins with the opening of an account by the customer. Opening accounts binds the banker and customers into contractual relationship. But selection of the customer for opening an account is very crucial for a bank. In fact, fraud and forgery for all kinds start by opening an account. So bank should take extreme caution in this section. Customers can different types of accounts through this department such as: Current deposit account. Saving deposit account.


Fixed deposit account (FDR) Short term deposit (STD) Sanchay patra opening Pension saving scheme (PSS) Monthly saving scheme 4.1.2 Deposit Section There are some requirements that have to be completed for opening an account. 4.1.2.1. Current Deposit Account Current account is the account where the account holders can make numerous transactions within working day. There is no restriction on the number and the amount of withdrawals from the current account with in availability of founds. As the banker is under the obligation to repay this deposit on demand, no interest is paid in this account. Generally current account is opened for businessmen and traders for easy transaction. But a person can open a current account for special purpose. Private firm: Proprietorship firm: Declaration of proprietorship. Photograph An introducer of IFIC Bank Ltd. Introducer must be a CD account holder Photograph must be attested by the introducer Signed and rubber stamp seal of the client. Account agreement form. Valid trade license from City Corporation. Mandate if operation by third party is to be allowed. Partnership Firm: There is a different account form for proprietorship firm; introduction of running an account is given in this form. The following documents are required to open this type of accounts: Photograph. An introducer of IFIC Bank Ltd. Introducer must be a CD account holder. Photograph must be attested by the introducer. Photocopy of partnership deed registered with Register of firm duly Attested by notary public.

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Photocopy of registration certificated duly attested by notary public. Resolution signed by all partners to open the account. Letter of partnership duly signed by all partners in case of non-registered firm. Mandate as to operation of the account. Account agreement form. Valid trade license from City Corporation Club society: The following documents duly completed shall be obtained from the customer at the time of current deposit account of association/ club/ society etc. Photograph Signed and rubber stamp seal of the client An introducer of IFIC Bank Ltd. Introducer must be a CD account holder. Certified copy of the constitution. Certified registration of the association. List of the members of governing body. Exact of resolution of the association. Limited company: A separate account opening form is used for limited company. There are two kinds of limited company: public limited company and private limited company. The bank always takes precautions for opening this type of accounts. Several documents are submitted by the client, which should be checked carefully by the bank to. The following documents are required to open this type of accounts: Private limited company: Photograph An introducer of IFIC Bank Ltd. Introducer must be a CD account holder. Photograph must be attested by the introducer. Memorandum of association and articles of association duly certified by the Chairman or Secretary. Principal agreement form. Resolution of board, duly chairman/ secretary/ authorizing to open the account with the bank and naming the persons who will operate the account, as per provision of Articles of Association. Certificate of incorporation duly certified by chairman/ Secretary. List of directors as per return of joint stock Company with signature

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Public limited company: Photograph An introducer of IFIC Bank Ltd. Introducer must be a CD account holder. Photograph must be attested by the introducer. Certificate of incorporation duly certified by chairman/ Secretary. Memorandum of association and articles of association duly certified by the Chairman or secretary. Resolution of board duly chairman/ secretary/ authorizing to open the account with the bank and naming the persons who will operate the account, as per provision of Articles of Association. Principal agreement form. Certificate of commencement of business. List of directors as per return of joint stock Company with signature. 4.1.2.2. Savings Deposit Account Saving account is meant for the people of the lower and middle classes who wish to save part of their income to meet their future needs and intended to earn an income from their savings. For opening this type of accounts following requirements are necessary: Photograph must be attested by the introducer. An introducer of IFIC Bank Ltd. Introducer must be a SD account holder. For joint accounts, signatures of all the account holders are necessary. Interest rates of saving deposit and short-term deposit (STD) are as follows: The interest rates on deposits is being revised which came into effect from 01.03.2008-

Types of Deposit

Deposit Rates

Savings Bank Deposits (SB)

6.00%

Short Term Deposit (STD) Less than TK. 1.00Crore

4.00%

TK.1.00crore and above but less than TK.5.00crore

4.50%

TK.5.00crore and above but less than TK10.00crore

5.00%

Above TK10.00crore

5.50%

Bank to Bank

2.50%

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4.1.2. 3. Fixed Deposit Revenue (FDR) FDR is one kinds of fixed deposit scheme. Normally it can be fixed for one month, three months, six months and twelve months. Its interest rate is higher than normal account. The required documents for FDR are as follows: PP size photos of account holder Photocopy of national ID card. One PP size photo of nominee. The interest rate on deposits are being revised with effect from 16-08-2008 Types of Deposits (FDR)

Deposit Rates

One month

9.50% -12%

Three month

10.00% - 12.00%

Six month

10.00% -12.00%

Twelve month

12.50%

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Different types of deposits

Amount

Percentage

Current Account & Others

48,572,209.30

7.88%

Savings Account

145,727,807.58

23.64%

Short Term Deposits (STD)

2,163,400.66

0.35%

Fixed Deposit (FDR)

344,694,232.92

55.91%

Double Deposit Scheme (DPS)

5,942,000.00

0.96%

Pension Savings Scheme (PSS)

27,984,830.35

4.54%

Bills Payable

8,270,044.46

1.34%

Others

33,106,660.38

5.37%

Total

616,461,185.65

100.00%

Deposit Mix of 2009 in IFIC Bank Ltd. (Elephant Road Branch) 4.1.3 Cash Section Cash section is a very sensitive organ in a branch and it is handled with extra care. Operation of this section begins at the beginning of the banking hour. Cash officer begin his/her transaction with taking money from the vault, known as the opening cash balance. Vault is kept in a much secured room. Keys of the room remain under control of the cash officer and branch in charge. The amount of Opening cash balances is entered into the cash register. After transaction of whole day, the surplus money remains in the cash counter is put back in the vault and known as the Closing balance. The maximum amount of money that the branch can keep in its vault is only TK. 15,000,000 according to the permission of the Bangladesh Bank and relative insurance policy. Money is received and paid in this section. Cash Receipt: At first the depositor fills the deposit slip. There are two types of deposit slips in this section. One for saving account and another for current account. Officer at the cash counter receives the money, count it, enter amount of money in the scroll register dept at the counter, seal the deposit slip and sign on it with date. After filling the required deposit slip, depositor deposits the money. At the end of day, entries of both of the registers and cross cheques used with the registers are kept at the cash counter to see whether the transaction is correct or not. Then this slip is passed to another officer who enters the scroll number given by the cash counter in his register along with the amount of the money, signs the slip and kept the bank’s part of the slip. The other part is given to the depositor.

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Cash Payment: When a person comes to the bank to cash a cheque, he/she first gives it to the cash payment counter. If his/her account has sufficient fund, then the computer in charge will post it into the computer. There is a computer desk for both saving account and current account. The cheques are placed at that computer desk. If the cheque is not dishonored the bearer will get a token as to show that he/she is the true owner of the cheque while receiving the money from cash counter. 4.1.4 Clearing Section According to the Article 37(2) of Bangladesh Bank Order, 1972, the banks which are a member of the clearing house are called as Scheduled Banks. The scheduled banks clear the cheques drawn upon one another through the clearing house. This is an arrangement by the central bank where everyday the representative of the member banks sits to clear the cheques. For clearing, there is a department in every Bank. This department receives cheques, drafts and like instruments from its customers for the purpose of collection with a deposit slip over the counter crediting their accounts. Clearing of cheque is done through the clearing house in Bangladesh Bank. Everyday the first hour starts at 10:00 a.m. and returns house at 5:00 p.m.. Here shows the types of cheque clearing: Inward Clearing Bills refers the instrument drawn on IFIC, FEx. Branch received from other banks in the clearing house by their representative(s). Settlement process is as following: OBC (Outstanding Bills for Collection) received along the instrument by the respective branch

Cheques are directly sent to the respective branch

When IBCA comes, customer’s account is credited.

IBCA is sent from that branch to this branch.

Entry passed in OBC register of that branch

Settlement Process of Inward Clearing Bills Outward Clearing Bills refers the instruments drawn on the other banks received by IFIC Bank Ltd. Branch. They are of three kinds as follows –

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Sett FEx. Branch collects cheques

IBDA along with bills are sent to FEx. Branch.

Depositor’s account is credited with IFIC FEx. Branch.

These bills are sent to clearing house from FEx. Branch through FEx. Branch that branch

lement Process of Outward Clearing Bills 4.1.5 Remittance Section Local Remittance Department:

The commercial bank’s remittance facility towards the customers is to enable them avoid risk rising from carrying cash money from one place to another or making payment to some one in another place. Banks take this risk by remitting the fund on behalf of the customers to save them from any awkward happening through the network of their branches and ensure payment to the beneficiary in exchange of a little benefit known as commission. There are four mode of remitting money from one place to another:

Local Remittance

Pay order (PO)

Demand Draft (DD)

Telegraphic Transfer (TT)

Mail Transfer (MT)

a. Pay order (PO): Following procedure is maintained for the issuance of pay order (PO): After filling the form carefully, the customer pays the money in cash or by cheques. Customer is given a pay order form. The concerned teller then issues pay order on its special block. This block has three parts, one for bank and another two for customer. “A/C payee” crossing its seal on all PO issued by the bank. The teller then writes down the name and address of beneficiary on the main part of the PO block. In other two parts, name and address of the customer is written. Two authorized officer signed the PO block. The teller gives an entry to the registry book and maintains the same number of PO block. At the end, customer is provided with the two parts of the PO block after signing on the backs of bank’s part.

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Pay Order Issuing Process IFIC Bank Ltd. Pay order charges: Description

Commission

VAT

Up to TK. 1000.00

10.00

2.00

TK.1001 –TK. 100000

25.00

3.75

TK.100001 –TK. 5000000

50.00

8.00

TK. 500001 and above

100.00

15.00

b. Demand Draft (DD): DD is called ‘Banker’s Draft’. It is an instrument, issued by a particular branch, drawn on another branch of the same bank, instructing to pay a certain sum of money. It is very popular instrument for remitting fund from one corner of a country to another. DD is issued in favor of a customer who maintains an a/c with IFIC Bank. It can be issued against Cash or Cheque. If DD amount is more than TK. 50,000/=, a test code is given on IBCA. The a/c treatments will be - after giving these entries an Inter Bank Credit Advice (IBCA) is prepared which contains the controlling number, depicted that the branch is credited to whom it is issued.

Applicant has an A/C with IFIC

He fills up the relevant form with a credit voucher for the Bank

If DD comes to the Bank on which it is drawn, the Bank honors it

DD is handed over to the customer, where paying bank is mentioned and payment will be made from another Bank

An IBCA along with photocopy of DD is sent to the paying Bank

Demand Draft Issuing Process Following procedure is maintained for the issuance of Demand Draft (DD): Customers are supplied with DD form. Customer fill up the form, which includes the name of the drawer, name of the payee. Amount of money to be sent, commission, name of the drawer branch, signature and address of the drawer. The customer may pay in cash or by cheques from his accounts.

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After the money is paid and the form is sealed, accordingly it is given to the DD issuing desk. The block has two parts: one for bank and another for customer. Bank part contains issuing date, drawer’s name, payee’s name and sum of the money and name of the drawee’s branch. After finishing all the required information entry of the DD given in the DD issuing register and at the same time bank issues a DD confirmation slip. It is entered into the DD advice issue register and a number is put on the confirmation slip form in the same register. Later the bank mails this advice to the drawer branch.

The income from DD and PO in Elephant Road Branch in last five years is given in the following table. It shows that income increases in 2009 than 2008. (TK’ in Lac)

Bills Payable

2005

2006

2007

2008

2009

Payment Order Issued

64.14

53.33

116.35

82.01

112.23

DD Payable

8.98

8.61

1.85

.68

3.45

Total

73.13

61.95

118.21

82.70

115.68

c. Telegraphic Transfer (TT): Sometimes the remitter of the funds requires fund immediately. In that case, the banker is requested to remit the funds telegraphically. Different modes are Telegram, Telephone, Telex, Fax. Telegraphic Transfer is the most rapid and convenient but expensive method. The drawer and the payee should have accounts with IFIC Bank Ltd. TT is issued against cash, cheque, and letter of instruction.

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Fl Applicant has an account with IFIC

Applicant fills up the relevant form with a credit voucher (Income A/C) for the Bank

Text of telex is written or the relevant information along with Test code is sent to the payee Bank through fax or telephone.

Another 2 copies of the text is sent through courier to the Payee’s Bank The reconciliation department reconciles two copies and detects the fraud or forgery if any

Payee’s account credited

One copy from drawer’s Bank and another from Payee’s Bank are sent to the reconciliation department of HO Before that the Payee’s Bank decodes the test and if test is agreed

ow Chart of TT (Outward) Working Process

4.1.6 Accounts section Accounts department maintains all records of transactions and all types of statements. At the end of transaction hour, all concerned sections send vouchers of transactions to this department. Accounts department compares all figures/ amounts, contents of transactions with supplementary statement prepared by computer. If any discrepancy arises regarding any transaction, then this department reports to the concerned department. Following are the activities of accounts department: To record all transaction in the cash book. To prepare daily, weekly, monthly, half-yearly and yearly fund position. To prepare all kinds of statements related to Bangladesh Bank, Head office and National Board of Revenue (NBR). To prepare monthly salary statement, provident fund statement and administrative expenditure statement. To make charges for different types of duty. 4.1.7 Other services Utility Bills Payment

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To offer customers a greater banking convenience, one can pay following utility bills from any of the locations: DESA Grameen Phone. Card Service IFIC Bank provides only credit card facilities to its customers. But recently they introduce new types of card named Pre-Paid card. LOAN AND ADVANCE

4.2

CREDIT DEPARTMENT

4.2.1 Credit Services of IFIC Bank Ltd. This is the survival unit of a bank, because the success of this section is a question to every bank. If this section is not properly working, the bank itself may become bankrupt. This is important because this is the earning unit of the bank. Banks are accepting deposits from the depositors in condition of providing interest to them as well as keeping their deposits safely. Now the question may gradually arise how the bank will provide interest to the clients and the simple answer is advance. We often use loans and advances as an alternative to one another. But academically this concept is incorrect. Advance is the combination of such items where loan is a part only for this credit section of the bank. To run operations and to earn profit thereby, every bank advances and invests it’s deposited money and reserves equity and other available funds in various profitable sectors. The effective and profitable policies concerning advancing and investment is needed increasingly. Without proper mobilization of deposits under the shadow of advances and investments, no bank can exist. In the area of investment and advancing, IFIC Bank Limited plays a vital role among the private commercial banks of the country. Advances are the main revenue generating area for any bank. But a commercial bank cannot advances all of its deposits and Bangladesh Bank governs the rules that a maximum of 80 percent of total deposit can be advanced to the clients. The rest 20 percent of the total deposit has to be kept in the Bangladesh Bank as government policy. IFIC bank ltd has extended its advance facilities for the past years with the policy guidelines of Bangladesh Bank. 4.2.2 Types of Advances All loans and advances that are provided by this bank can be categorized into there heads according to the nature and characteristics of each product: ADVANCE

Continuous

Term Loan

Loan General

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Figure: different types of advances 4.2.3 Nature of different types of Advances a. Continuous Loan IFIC Bank gives in the following Continuous Loan: Cash Credit Hypothecation (CC HYPO) Cash Credit Pledge (CC PLEDGE) Secured Overdraft (SOD) Cash Credit Hypothecation (CC HYPO) Cash credit is given through the cash credit account. Cash credit is an active and running account where deposits and withdrawals may be made frequently. The debit balance of the account on any day can not exceed the agreed limit. The instrument is HYPOTHECATION DEED. 50% margin requires opening a CC account. (varies) Operation of cash credit is same as that of overdraft. The purpose of cash credit is to meet working capital needs of traders, farmers, and industrialist. It is granted only the first class parties. It is charged against a property where neither the ownership nor the possession is passed to the bank. Cash Credit Pledge (CC PLEDGE) The nature, operational work, and characteristics of CC- PLEDGE in as same as CC HYPO. CC.PLEDGE in different from CC-HYPO only from the securities or business goods against the loan amount. It is charged against properties where the ownership may remain to the borrower but the possession is passed to the bank. The instrument is Pledge Deed. Cash Credit HYPOTHECATION (CC HYPO & PLEDGE) IFIC Bank Ltd., Elephant Road Branch Month of Distribution

Amount (taka)

February-2009

54593854.25

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March-2009

52858711.82

April-2009

50014025.11

May-2009

50178910.00

C.C. (Hypo & Pledge) 55000000

Amount

54000000 53000000 52000000 51000000 50000000 49000000 48000000

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47000000 Feb-09

Mar-09

Apr-09

May-09

Month

Source: Monthly Statement of IFIC Bank Ltd., Elephant Road Branch Secured Overdraft (SOD) Overdrafts are those drawings, which are allowed by the banks in excess of the balance in the current account up to a specified amount for definite period as arranged for. Generally it is given to the businessmen to increase their business activities. Usually provide against FDR, PSS, i.e. financial obligation or any primary securities. The interest charges from the date of first withdraw. Interest is calculated and charged only on the actual debit balance on daily product basis. Balance of OD account are fluctuates The interest rate of SOD is 3% above of FDR interest rate, if the FDR is in IFIC Bank. If the FDR is in other bank then the interest r1te is 14.50%. b. Term Loan IFIC Bank gives in the following Term Loan: Industries Loan


Others loan Staff House Building Loan (SHBL) Staff loan against Provident Fund (SLPF) Loan against PSS House Building Loan Consumer Credit Scheme It. Industries Loan: It is a term loan. It is given for three (3) years at equal installment. Gross period is allowed of these types of loan. Gross period is the period that requires earning visible returns ii. Others Loan: Loan provided for other purposes which is productive and less risky than industrial sector are treated as others loan. The terms and conditions of these types of loan are same as industry loan. iii. Staff house Building Loan: 120 times of basic salary is provided as SHBL. Bank rate + 1 % interest is charged to the loan amount. Repayment adjusted from their monthly salary. Repayment is made at equal monthly installment. iv. Staff Loan against Provident Fund: 10% of basic is contributed by employee. Repayment is adjusted from their own salary. v. Loan against PSS: This loan is provides against PSS fund. 80% are given of the PSS fund. This is 100% secured for the bank. vi. House Building Loan: This loan is give for the construction of building house. It is gives for three (3) years at equal monthly installment. This loan is not provided frequently. Consumer Credit Scheme: Under this scheme, credit is given to the customer to purchase necessary and luxury commodities like computer, motor vehicle, television, refrigerator, music system, sewing machine, furniture etc.

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Other than the employees, it is given to the valuable clients. It is a 24, 36, 48 installment system @ 15.50% interest. c. Small Enterprise financing (SEF) IFIC Bank gives loan in the following important sectors of Small Enterprise: Easy Commercial loan Retailers loan Transport Loan Commercial house building loan Possession right loan Contractor's loan Letter of guarantee Working capital loan Letter of credit Loan against imported merchandise (LIM) Loan against trust receipt (LTR) Bidder's loan Project loan Easy Commercial loan: Individual, business enterprises (other than public Limited Company) engaged in any business to meet business requirement. Any Bangladeshi individual or any business house having valid trade license and must have an account with IFIC Bank Ltd can apply for this loan. Minimum age 21(twenty one) years. Security needed- Pledge of instrument duly discharged by the other (where applicable),FDR/other deposits with IFIC Bank Ltd/ FDR/other Financial instrument issued from other Banks/ ICB unit certificate/ PSS account/MIS/ Demand shares of A & B group Traded in SDE & CSE/ Any other Government security eligible for credit facility (ies). Maximum 90% of the face value of FDR/NCD/WEDB. Face value would mean the original amount for which the FDR/NFCD/WED was issued or the amount renewed, Maximum 90% of the MIS amount where interest is not allowed be withdrawn until adjustment of the liability. The tenor for the loan is maximum 12(twelve) months.2% is to be charged as a penal interest on overdue amount (if any). Taka.500/- to be realized before disbursement as processing fee. Retailers loan: Individual/ Proprietorship firm engaged in retail business. They need this type of loan to meet working capital/ capital finance requirement. Any Bangladeshi individual or small and retail business house having valid trade license and must have an account with IFIC Bank Ltd can apply for this loan.

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The tenor for the loan is maximum 24(twenty four) months.2% is to be charged as a penal interest on overdue amount (if any). 1% on the loan amount to be realized before disbursement as its service charge and Taka. 500/- to be realized before disbursement as processing fee. Transport Loan: Individual, business Enterprises (Other than Public Limited Company) engaged in transport business. They need fund to Purchase of Road/ Water Transport for commercial use. Any Bangladeshi Customer of the respective branch having business house/ office in the command area with at least 2(two) years experience in their line of business. Additional 2% charged on the overdue amount as its penal interest. The tenor for the loan maximum 48(forty eight) months.0.50% is charged as service charge on loan amount to be realized at the time of disbursement of loan. 1 % on loan amount (Maximum Tk. 10,000/-) to be realized at the time of disbursement of loan for process the loan. Commercial house building loan: Individual, business Enterprises (Other than Public Limited Company) having commercial plot can apply for this loan to construct of commercial building. Any individual or business house in the command area having account with the branch have the eligibility to apply for this loan. Additional 2% on the overdue amount charged as penal interest, if any. The maximum term of loan is maximum 5(five) years including grace period. 0.25% is treated as service charge on loan amount to be realized at the time of disbursement of loan. Loan processing fee is 1% on loan amount (Maximum Tk. 10,000/-) to be realized at the of disbursement of loan.

Possession right loan: Proprietorship concern having no collateral security to offer other than possession right of shop can apply for this loan to meet up the need of Fixed Working capital Customer of the respective branch having shop/ business place in the command area having at least 2(two) years experience in their line of business have the eligibility for applying this loan. Additional 2% per month on the overdue charged as penal interest (amount if any). The tenor of the loan is maximum 36(thirty six) months. Tk. 2000/- to be realized at the time of disbursement of loan as a loan processing fee. Service charge is 0.50% charged on loan amount to be realized at the time of disbursement of loan. Contractor's loan: Individual, business Enterprises (Other than Public Limited Company) engaged in construction and supply business can apply for this loan to execute work order awarded by Govt. Semi Govt. & Autonomous Bodies. Any business house in the command area having at least 2(two) years experience in their line of business has the eligibility for this loan. Additional 2% is charged per annum on the overdue amount as its service charge (if any). The tenor for this loan is maximum 12(twelve) months. Taka. 2000/- to be realized at the time of allowing of

68


drawings as the processing fee of the loan. Service charge is 0.25% on loan amount to be realized at the time of disbursement of loan maximum Taka. 5000/-. Letter of guarantee: Business Enterprises (Other than Public Limited Company) engaged in construction, supply and other business can apply for this loan to participate in tender(s) invited by Govt. / Semi Govt. & Autonomous Bodies and execute job against work order awarded from different agencies and for any other obligation. Customer of the respective branch having business place in the command area with at least 2(two) years experience on their line of business have the eligibility for application. The margin is depending upon Banker-Customer relationship. Working capital loan: Business Enterprises (Other than Public Limited Company) engaged in manufacturing/ trading business can apply for this loan to meet working capital requirement. Firms or companies incorporated in Bangladesh, customer of respective branch having shop or business place is in the command area with at least 2(two) years experience on their line of business. Additional 2% is charged on the overdue or excess over limit as the penal interest (if any). The tenor for the loan is maximum 12(twelve) months. Tk. 2000/- to be realized before disbursement of loan as its processing fee. Service charge is 0.25% charged on loan amount or maximum Tk. 5000/-. Letter of credit: Letter of Credit (LC) is a commitment or an undertaken or a guarantee of a bank to the exporter on behalf of importer in regard to the payment of certain amount subject to the payment of certain conditions. Therefore it's called conditional guarantee. Business Enterprises (Other than Public Limited Company) can use this service to facilitate foreign exchange or in some cases of local payment or goods transfer. Import or procurement of merchandize Loan against imported merchandise (LIM): Business Enterprises (Other than Public Limited Company) engaged in import business can apply for this loan to make the clearance of imported consignment. Additional 2% per annum is charged on the overdue amount (if any) as the penal interest. The procedure of giving loan is conducted according to the nature of imported terms and or Bangladesh Bank guideline (if any). Loan against trust receipt: Business Enterprises (Other than Public Limited Company) engaged in import of merchandize have the eligibility for applying this loan on the purpose of retirement of shipping documents. Penal interest is charged on the overdue amount (if any) as a additional 2% per annum. The procedure of giving loan is conducted according to the nature of imported terms and or Bangladesh Bank guideline (if any) Bidder's loan:

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Individual, business Enterprises (Other than Public Limited Company) engaged in construction and supply business can apply for this loan on the purpose of issuance of Payment Order/ Security Deposit Receipt/ Demand Draft only for participation in the tender. Any business house in the command area of the branch at least 2(two) years experience on their line of business has the eligibility for application. The Enterprise to be enlisted with Govt. /Semi Govt. / Autonomous Bodies not below the status of Category 'C' Penal interest is additional 2% charged on the overdue amount, if any. The tenor of the loan is maximum 12(twelve) months. 1% on loan amount (Maximum Tk. 2000/-) to be realized at the time of disbursement of loan.0.25% on loan amount to be realized at the time of disbursement of loan (Maximum Tk. 5000/-). Project loan: Business enterprises (Other than Public Limited Company) engaged in manufacturing/ service industry can apply for this loan to set up new manufacturing/ service unit. To BMRE existing manufacturing/ service unit. Firms/ companies incorporated in Bangladesh. The firm/ company should have business account with the branch. The firm/ company should generate sufficient cash flow from operation from which firms can make the repayment of the loan. Penal interest is additional 2% per annum charged on the overdue amount. The tenor of the loan is maximum 5(five) years including grace period. The length of grace period is to be determined on the fund generation of the project. 0.10% on loan amount (Minimum Tk. 2000/-) to be realized before disbursement of loan. 0.25% on loan amount subject to minimum of Tk. 5000.00 to be realized before disbursement of loan. d. Consumer Financing IFIC Bank Ltd. introduced Consumer Credit Scheme for its customer during 1999 duly approved by the Board of Directors of the bank in their 251st meeting held on April 4, 1999 with the following loan products: Vehicle loan Domestic appliances loan Office equipment loan Entertainment purpose loan Loan for intangible loan Guidelines under the prudential Regulation and Direction of Bangladesh bank have been formulated. These guidelines will assist the branches as to how the CCs loan port-folio should be managed. The committee studied existing products available in the market. Considering the market demand and investment opportunities in Consumer Financing Sector, the committee has formulated the following 7 (seven) products for IFIC Bank to be launched under Consumer Financing Scheme: Easy loan (Secured Personal loan).

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Consumer Durable loan 'Parua' (Education loan) 'Thikana' (House building loan) 'Flexi' loan (Personal loan) Peshajeebi loan (Loan for professional) Auto loan Festival Loan Easy loan (Secured Personal Loan): Any individual can apply for this loan to meet personal financial requirement. This potential borrower with minimum age 18 years must have an account with IFIC Bank Ltd. repayment will be made in lump sum within expiry or as per acceptable terms and interest to be serviced as and when due. Consumer Durable loan: The applicant for this loan are employees of Government/semi Govt./ Corporation/ autonomous bodies, employee of reputed multinational corporations and large local corporate, employees of reputed university/college/school, employees of reputed NGOs/ Aid Agencies, other salaried persons acceptable to the bank, tax paying businessmen having adequate cash flow, tax paying self employed person and individual having reliable source of income. The purpose for this loan is to purchase of consumer durables for personal/family use, goods may be like as-television, refrigerator, Air-conditioner, Washing machine, computers or any other household durables. The potential customer with an age limit of 25-60 (twenty five to sixty) having an account with IFIC Bank Ltd. can apply for this loan. The size of the loan amount is maximum Taka. 1,00,000/- (Taka one lac). The rate of interest for this type of loan is 16.50% per annum with quarterly rest or as revised from time to time. Parua (Education Loan): People who are employees of Government/ Semi Govt./ Corporation/ autonomous bodies; employees of commercial banks, foreign banks and other reputed financial institutions; employees of reputed Multinational corporations and large local corporate; employees of reputed Universities / college / school; employees of reputed NGOs and Aid Agencies; other salaried persons acceptable to the bank can apply for this loan. The purpose for this loan is to get higher education. Any Bangladeshi citizen having a bank account with IFIC Bank Ltd. can apply for this loan. Thikana (House Building Loan): The applicant for this type are employees of Government/semi Govt./ Corporation/ autonomous bodies, employee of reputed multinational corporations and large local corporate, employees of reputed university/college/school, employees of reputed NGOs/ Aid Agencies, other salaried persons acceptable to the bank, tax paying businessmen having adequate cash flow, tax paying self employed person and individual having reliable source of income and the purpose for this loan is to purchase

68


flat or construction of own house. The customer must have an bank account with IFIC Bank Ltd. The age limit for the customer is twenty five to sixty five (25-65). Flexi-Loan (Personal Loan): People who can apply for this loan are employees of Government/ Semi Govt./ Corporation/ autonomous bodies; employees of commercial banks, foreign banks and other reputed financial institutions; employees of reputed Multinational corporations and large local corporate; employees of reputed Universities / college/ school; employees of reputed NGOs and Aid Agencies; other salaried persons acceptable to the bank. Customer are seeking this loan on various purpose such as- marriage expenses, holiday expenses, emergency medical needs, CNG conversion for own private car, home renovation or interior decoration and any other purpose. The potential borrower must have an account with IFIC Bank Ltd. Peshajeebi Loan (Loan for Professional): This type of loan is only for the people who can define under the sector of general physician and dentist, engineers, IT professional, management consultants, other professional’s individuals. The purpose for this loan is to purpose of items to support professional’s needs that are purchase of medical beds, ultra-sonogram machine, engineering or mechanical tools, or set up an office/ chamber on small scale etc. The customer must have an bank account with IFIC Bank Ltd. The age limit for the customer is twenty five to sixty five (25-65). The size of the loan is maximum Taka 3,00,000/- (TK. Three Lac) without collateral security and maximum Taka 500,000/- (TK. Five Lac) with collateral preferably liquid security. Auto Loan: People who can apply for this loan are employees of Government/ Semi Govt./ Corporation/ autonomous bodies; employees of commercial banks, foreign banks and other reputed financial institutions; employees of reputed Multinational corporations and large local corporate; employees of reputed Universities / college / school; employees of reputed NGOs and Aid Agencies; other salaried persons acceptable to the bank. The purpose of this loan is to purchase new or reconditioned vehicles for personal use only but not for commercial use. Any Bangladeshi, holding Bangladeshi originality having a bank account with IFIC Bank Ltd. with an age limit of twenty five to sixty (25-60) is eligible for this type of loan. Festival Loan: Extended to meet expenses of major religious festival like Eid, Puja, Christmas and Budda Purnima. 4.2.4Consumer Financing Over the Year: Consumer Financing of IFIC Bank (2007 to 2009)

(In Taka)

YEAR

2007

2008

2009

Consumer Financing

418,600,000

2944,400,000

178,431,000

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Consumar Finance 418,600,000

450000000 400000000

294,400,000

Amount

350000000 300000000 250000000

178,431,000

200000000 150000000 100000000 50000000 0

2007

2008

2009

Year

In 2007 Consumer Finance scale is high But 2008 & 2009 consumer Finance Scale is low because more invest in Commercial landing, large and medium industry and other sector. 4.2.5 Credit: Credit portfolio of the Bank consists of Trade Financing, Project Loans for new projects and BMRE of the existing projects, Working Capital financing and Small Scale Industrial financing. Besides, the Bank is financing the need of individual borrowers under Consumer Credit Scheme. The Bank is also involved in financing Agriculture sector. Credit portfolio recorded a growth of 11.26 percent in 2007. The total outstanding loans and advances stood at Tk. 2836.15 million at the end of December 2007 as against Tk, 2549.06 million in December 2006.

Credit Portfolio of the Bank was as under as on 31.12.2009 (Taka in Crore) Particular

Amount

Percent

1. Agriculture

23.29

0.82

2. large & Medium Industry (TL)

548.89

19.35

3. Working Capital

303.13

10.68

4. Export finance

150.84

5.32

5. Import financing

488.87

17.24

6. Transport

59.81

2.11

7. Commercial lending

616.55

21.74

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8. House Building loan

484.52

17.08

9. Consumer Credit Scheme

111.29

3.92

10. Others

48.96

1.73

Total

2836.15

100.00

Credit portfolio pie chart

Consumer Credit Scheme 2% Others 4% House Building loan 17%

Commercial lending 22%

Agriculture 1%

Large & Medium Industry (TL) 19%

Working Capital 11% Export finance 5%

Transport 2%

Import financing 17%

Loans & Advance Len dining Operations: Growth has been seen in all types of lending facilities with more emphasis nationwide being made on entrepreneurial ventures and the re-emergence of micro, small and medium sectors which pawning potential contributors to the overall profitability of the Bank and to the economy of the country.

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Business

TermSEF, Finance OD &

Others, 30.02%

Term Finance, 24.58%

LTR

LTR, 8.98%

Cash Credit

Staff Loan, 1.53%

Consumer Credit

Bill Purchased, 14.50%

Consumar Credit, 0.49%

Cash Credit, 19.91%

68 Rules, Document & Securities for Loan.

CHAPTER GOALS 4.2.6 Guideline for bank for giving loan 4.2.7 Process of Loan Section 4.2.8 Prudential Regulation 4.2.9 Required Securities 4.2.10 Legal Documents 4.2.11 Credit approval authority 4.2.12 Credit Investigation 4.2.13The integrity and reliability of the borrower 4.2.13 Sources of credit information 4.2.14 Credit Information Bureau (CIB) 4.2.6 GUIDELINES4.2.15 FOR BANK FORRate GIVING LOAN: Landing These guidelines include objective / quantitative parameters for the eligibility of the borrowers and determining the maximum permission limit per borrower.


Fundamentally, credit policies and procedures can never sufficiently capture all the complexities of the product Therefore, the following credit principles are the ultimate reference points for making SE financing decisions: Assess the entrepreneur's character for integrity and Only lend when the entrepreneur's has capacity and ability to repay.

willingness

to

repay.

Only extend credit if bank can sufficiently understand and manage the risk. Use common sense and past experience in conjunction with through evaluation and credit analysis. Do not base decision solely on customer's reputation, accepted practice, other Lender's risk assessment or the recommendation of other officers. Be proactive in identifying, managing and communicating credit risk. Be diligent in ensuring that credit exposures and activities comply with me requirement set out in product program 4.2.7 Process of Loan Section: Step-1 :

Sanctioning by the competent authority

A secured advance may be grant to a party only after getting a limit sectioned from the competent authority. Step-2 :

Loan/Advance Proposal

For obtaining a loan/advance the party must make an application in standard form in writing to the branch where he maintains his operative account. After receiving the application from the party, the branch manager will take immediate steps to compile report regarding the party based on the following sources of information: Personal investigation Confidential supports from Other banks, Chamber of commerce CIB from Bangladesh bank as the earnable. Treading account P/C, B/S. M/A if' any and other documents submitted by the party. The average balance and the present maintained in the account. The nature of operations during the last six months and the date of opening account. Step-3 :

Preparation of limit proposals

The branch, may prepare a limit proposal after being fully satisfied with the following points:

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The financial position of the party. Purpose for which advance is required. Nature of securities offered. The payment arrangement. Step-4 :

Renewal Proposal.

Step-5 :

Approval by Head Office and Branch responsible.

Limit proposal sent to HO. Sanction/reject Receive the limit section advice. Step-6 :

Disbursement of loan.

Step-7 :

Loan monitoring and administration.

Rules and Documents:

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4.2.8 PRUDENTIAL REGULATIONS: REGULATION: 1 Source and capacity of repayment and cash flow backed lending A. Bank shall specifically identify the sources of repayment and asses the repayment capacity of the borrow on the basis of assets conversion cycle and expected future cash flows. In order to add value, the bank must asses the conditions in the particular sector/ industry they are lending to and its future prospects. The banks must be able to identify the key drivers of their borrowers, business, the key risks to their business and their risk mitigate. B. The rationale documented and bank.

and parameters annexed with

used the

to project the future cash flow analysis

cash flows undertaken

shall be by the

REGULATION:2 Personal guarantees All facilities to SEs shall be backed by the personal guarantees of the owners of SEs. In case of limited companies, guarantees of all directors other than nominee directors shall be obtained. In case of proprietorship concern, spouse's guarantee other than the personal guarantee of the owners may be taken. REGULATION: 3 Per party exposure limit


The minimum and maximum exposure of a bank on a single SE shall remain within the range of TK. 50 lac respectively subject to the following: In case of working capital finance - maximum up to 100% of the net required working capital or 75% of the sum of total of inventory and receivables whichever is lower. In case of fixed assets purchase - maximum up to 90% of the purchase price. REGULATION: 4 Aggregate exposure of bank on small enterprise sector The aggregate exposure of the bank on SE sector shall not exceed the limits as specified below: % of classified SE advances to total portfolio of Maximum limit SE advances a. below 5% b. below 10% c. below 15% d. up to and above 15%

10 times of equity 6 times of the equity 4 times of the equity Up to the equity

68 Regulation: 5 Limit on clean facilities In order to facilitate growth of smaller loans, banks are free to determine security requirements for loans up to TK. 5 lac. Guidelines for security requirements for loans of amounts more than TK. 5 lac are given in Regulation-6. Regulation: 6 securities consequent to the regulation stated in Regulation-5, facilities provided to SEs shall be secured by banks as follows: Below TK. 10 lac. As a minimum banks must take charge over assets being financed. For loan amounting TK. 10 lac and above. Legal mortgage Attorney.

over

Personal Hypothecation plant & machineries.

immovable on

the

properties inventory,

with

registered

receivables,

Guarantees of spouse/ parents/ other family members. One third party personal guarantee, Post dated cheques for each installment and undated cheque for full loan

advance

Power

of

payments,


value including full interest. Regulation: 7 Loan documentation For all facilities, banks must obtain (as applicable) and not limiting to following documents before disbursement of loan can be made: loan Application Form duly signed by the customer. Acceptance of the terms and conditions of Sanction Advice. Trade License. in case of partnership firm: a) Copy of registered partnership deed certified as true copy or partnership deed on non-judicial stamp of TK. 150 denomination duly notarized. 5. in case of limited company: a) copy of memorandum & Articles of Association of the company including Certificate of incorporation duly certified by Register joint Stock Companies (RJSC) and attested by the managing director accompanied by an up-to-date list of Directors, copy of Boarder solution of the company authorizing managing director/chairman/director and operation of the accounts, an undertaking not permission of the bank, copy of last audited subject to regulation-10)

to

change financial

the

for availing credit facilities and for execution of documents

management

statement

up

to

of last

the 3

company years

(as

without

prior

applicable

and

assets

the

Personal guarantee of all directors including the Chairman and managing directors. certificate of registration of company duly issued by RJSC,

charges

over

the

fixed

and

floating

of

certificate of registration of amendment of charges over the fixed and floating assets of the company duly issued by RJSC in case of repeat loan or change in terms and condition of sanction Advice regarding loan amount, securities etc.., Demand Promissory Note Letter of hypothecation of stocks and goods Letter of hypothecation of book debts and receivables Letter of hypothecation of plant & machinery Charge on fixed assets

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personal Letter of guarantee Wherever practical, insurance policy for 110% of the stock value covering all risks with bank's mortgage clause in joint name of the bank and client. In the case of individual person: 2 (two) copy passport size photographs of intending borrower & guarantor. Letter of introduction from employer (where require) Bank Statement (for last 6 months) Personal Net worth Statement. Copy of passport/voter ID/Driving License (if any) Utility bill copy (Telephone/Gas/Electricity)-anyone Salary Certificate/ Trade License. T.I. N. Number. Copy of offer letter from recognized college/university for studying abroad. For local private university/Medical college submission of evidence related to admission and cost. CIB report on the borrows as required. In the case of sole proprietorship firm: One copy passport size photograph. Copy of trade license. Personal net worth statement. Hypothecation of stock. Personal guarantee of a businessman having business at the same area or any person acceptable to the bank. REGULATION:8 Margin Requirements Banks shall adhere to the minimum margin requirement as prescribed by Bangladesh Bank (if any).

REGULATION: 9 Credit information Bureau (CIB) clearance

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While considering proposals for any exposure, banks should give due weights to the credit report relating to the borrower and his group obtained from a Credit Information Bureau (CIB) of Bangladesh Bank. The economic of obtaining CIB report will be governed by rules and regulations as prescribed by Bangladesh Bank from time. REGULATION: 10 Minimum conditions for taking exposure 1. Banks shall, as a matter of rule, obtain a copy of financial statements duly edited by a practicing Charted Accountant, relating to the business of every borrower who is a limited company or where exposure of a bank exceeds TK.40 lac, for analysis and re-record. However, financial statements singed by the borrower will suffice where the exposure is fully secured by liquid assets. It is recognized that a large number of enterprises other than limited companies (I.e., sole proprietorship/partnership firms etc.) may not have proper books of accounts including balance sheet, profit & loss account and they may not be able to prepare current and future cash flows due to lack of sophistication and expertise. It is expected in such cases, banks shall assist the borrowers in obtaining/developing such books of accounts as performs/formats prescribed by each bank. Reference with regard to how the formats should be prepared has been made in the development guidelines. Each bank shall develop their own Loan Application Form and "BORROWERS Basic Fact Sheet". Banks shall not approve and/or provide any exposure (including renewal, enhancement and rescheduling) until and unless the prescribed loan application Form is accompanied by a borrower's basic fact sheet under the seal and signature of the borrower. REGULATION: 11 Proper utilization of loan The bank should ensure that the loans have been properly utilized by the SEs and for the same purpose for which they were acquired / obtained. Banks should develop and implement an appropriate system for monitoring the utilization of the loans. REGULATION: 12 Registration on facilities to related parties Banks shall not take any exposure on a SE in which any of its director, shareholder, employer or their immediate family members are holding 5% or more of the share capital of the SE. THROUGH THE INSTRUCTION OF Regulation-12 of Prudential Guideline for Small enterprise financing banks are barred to take any exposure on a small enterprise in which any of its director, shareholder, employer or their immediate family members are holding hare capital of 5% or more. However, this restriction for the shareholder has been withdrawn and henceforth, the word 'shareholder' should be considered as omitted.

REGULATION: 13 Classification and provisioning for assets

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LOANS/ADVANCES 1. Banks shall observe the prudential guidelines given at Appendix-X in the matter of classification of their SE asset portfolio and provisioning there-against. In addition to the time-based criteria prescribed in appendix-X, subjective evaluation of performing and non-performing credit shall be made for risk assessment and, where considered necessary, any account including the performing account will be classified, and the category of classification determined on the basis of time based criteria shall be further downgrade. Such evaluation shall be carried out on the basis of credit worthiness of the borrower, its cash flow, operation of the account, adequacy of the security, inclusive of its realizable value and documentation covering the advances. Apart from specific provisioning requirement as prescribed above, banks will create adequate general provision over the entire credit portfolio of Small Enterprise business. Therefore, all banks shall maintain at all times a general provisions of 20% of unclassified SE assets outstanding in its books. REVERSAL OF PROVISION: 4. The provision held against classified assets will only be released when cash realization starts exceeding: i.

In case of loss category the net book value of the assets

ii.

In case of doubtful category 50% of the net book value of the assets; And

iii.

In case of sub-standard category 25% of the net book value of the assets. Further, the provision made on the advice of Bangladesh Bank will not be reversed prior approval of Bangladesh Bank.

without

SUBMISSION OF RETURNS: 5. Banks shall submit the borrower-wise annual statements regarding classified loans/advances to the Banking Inspection Department. TIMING OF CREATING PROVISION: 6. Banks shall review, at least on a quarterly basis , the collectibles of their loans /advances portfolio and shall properly document the evaluations so made. Shortfall in provisioning, if any, determined, as a result of quarterly assessment shall be provided for immediately in their books of accounts by the banks on quarterly basis.

VERIFICATION BY THE AUDITORS:

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The external auditors as a part of their audits of banks shall verify that all requirements of Regulation -12 for assets have been complied with. Bangladesh Bank shall also check adequacy of provisioning during their on-site inspection. 4.2.9 Required Securities: The bank requires some securities that are compulsory for getting loan and the securities are: •

Personal guarantee of a businessman having business at the same area or any person acceptable to the bank.

Personal guarantees of Spouse/ Parents.

Hypothecation of vehicles. The vehicles to be registered with BRTA/ BIWTA/ Mercantile & Marine dep’t. with Bank mortgage clause.

Comprehensive insurance in the joint name of the Bank & borrower.

Legal mortgage of land& building within City Corporation and/ or Municipal area preferably 1st party.

Registered Power of Attorney to sell the mortgaged property (ies) without intervention of court.

Personal guarantee of partner (s) / Director (s) (in case of partnership firm/ private limited company).

Registration of charges with Joint Stock Companies under relevant section where required.

Pledge of Financial Instrument if any.

Tripartite agreement among the Bank, Lessor & Borrower to the effect that the Lessee and Lessor can not transfer possession right of the property without prior consent of the Bank (in case of the private owner). Confirmation from the concerned authority that no transfer of ownership will be allowed without prior written consent of the Bank (Govt., Semi Govt., Autonomous Bodies, Corporation). Notarized Power of Attorney to sell the possession Right as per possession right deed of agreement executed between Lessor and Lessee. 12 (twelve) post-dated cheques in favor of Bank for payment of monthly installments each duly signed by the borrower. After 1 (one) year fresh cheque to be obtained along with memorandum of deposit of cheques. One cheque covering residual amount of loan duly signed by the borrower. Memorandum deposit of cheques. Assignment of work order. Notarized Power of attorney in favor of the Bank to collect cheque (s).

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Confirmation from Work awarding Authority that favor of the borrower A/c. IFIC Bank Ltd. ------------branch.

all

cheques

will

be

issued

in

Counter Guarantee. Lien on financial obligation. Hypothecation of machinery, where required. Pledge of stocks duly insured with bank mortgage clause. Documents of title to goods when received. In case of L/C, borrowers acceptance on Bill of Exchange drawn by L/C opening branch. Lien on export L/C contract. As per Banker-Customer relationship. Imported goods to be stored at go down under effective control of Bank duly insured covering all relevant risks with Banks mortgage clause. Trust Receipt. Legal mortgage of the fixed assets of the company comprising land and building and machinery already installed or to be installed thereon. Personal guarantee of the mortgagor (s) (in case of third party mortgage). Creation of charge with the RJSC under relevant section. 4.2.10 Legal Documents: The legal documents that are needed for getting the above mentioned loan are followingD.P. Note Letter of arrangement Letter of installment Letter of disbursement Personal guarantee of guarantor Personal guarantee of Spouses/Parents 24 (twenty four) post dated cheques in favor of Bank for payment of monthly installments each duly signed by the borrower. One post dated (expiry) blank cheque duly signed by the individual or proprietor. Memorandum of Deposit of Cheque. Letter of Hypothecation of vehicles Letter of authority to debit the account Memorandum of deposit of Title deed

68


Deed of mortgage registered with Sub-Register Registered Power of Attorney to sell the mortgaged property without intervention of court. Letter of guarantee (i.e.) Registered partnership deed (in case of partnership firm) along with letter of partnership in Banks prescribed format. Broad resolution to borrow fund including completion of documentation as per Memorandum & Article of Association, (in case of private limited company) Registration of vehicle with bank mortgage clause. Comprehensive Insurance coverage with Bank mortgage clause. Registration of charges with RJSC under relevant section. Pledge of Financial obligation where applicable. 12 (twelve) post-dated cheques in favor of Bank for payment of monthly installments each duly signed by the borrower. After 1 (one) year fresh cheque to be obtained along with memorandum of deposit of cheques. One cheque covering residual amount of loan duly signed by the borrower. Personal guarantee of the Directors in case of Private Limited Company. Personal guarantee of all the partners (in case of partnership concern). Letter of lien where applicable. Letter of hypothecation of stock. Insurance Policy. Notarized Power of Attorney to sell the possession as per possession right deed in favor of Bank. One blank cheque dated maturity date of loan duly signed by the borrower. Tripartite agreement among the Bank, Lesser & Borrower to the effect that the Lessee and Lesser can not transfer possession right to the property without prior consent of the Bank (in case of the private owner). Letter of confirmation from the concerned authority that no transfer of ownership will be allowed without prior written consent of the Bank (Govt., Semi Govt, Autonomous Bodies, Corporation. Notarized Power of Attorney to sell the possession Right as per possession right deed of agreement executed between lessor and lessee. Notarized Power of Attorney in favor bank to collect cheque with confirmation from work awarding authority to issue all cheques favoring the borrower A/c. IFIC Bank Ltd. counter guarantee. Resolution of Board of Directors to issue guarantee including completion of documentation. (in case of limited company)

68


Appropriate form of letter of lien on security (in case of financial obligations). Letter of Pledge. Letter of hypothecation of machinery, if applicable. Letter of continuity Letter of disclaimer (in case of rented premises) Letter of understanding Trust Receipt Lien Confirmation from issuing branch in case of FDR issued by our bank. Lien Confirmation from issuing authority duly authenticated by the Head office of the issuing bank in case of FDR issued by other banks. List of the latest Directors of the company (From XII) NOC from competent authority for creation of legal mortgage in favor of the bank (if required) Letter of partnership in prescribed form of Bank (in case of partnership firm) Authority to debit account. 4.2.11 Credit approval authority: The authority to sanction or approve loans shall be delegated to Senior Executives by the managing board based on the Executive's knowledge and experience. Approval authority shall be delegated to individual Executives and not to committed to ensure accountability in the approval process. The following should apply in the approval or sanctioning of loan: Credit approval authority shall be delegated in writing from the MD & Board (asappropriate), acknowledged by recipients and records of all delegation retained in CRM. Delegated approval authorities shall be reviewed by Board or MD from time to time. The approval function shall be separate from the marketing or relationship management function. The role of credit committee shall be restricted to only review of proposals i.e. recommendations or review of bank's loan portfolios. Approvals shall be evidenced in writing or by electronic signature. Approval file shall be kept on file with the credit application. All credit risks shall be authorized by the executives within the authority limit delegated to them by the MD. credit approval shall be centralized within the CRM function. Regional credit centers may be established, however all large loans shall be approved by the board/ Deputy Managing Director/ Head of Credit/ delegated Head Office Credit Executive.

68


The aggregate exposure to any borrower or borrowing group shall be used to determine the approval authority required. MD/ DMD/ Head of Credit Risk Management must approve and monitor any Cross border exposure risk. Any branches of lending authority should be reported to MD, DMD, Head of Internal Control and Head of CRM. Authority will be delegated to each individual in writing by the managing director. Authority delegated to the individual will not automatically be transferred to a replacement lending authority. 12.

All the officials in different ranks shall exercise their delegated authority for conducting day to day business of the bank judiciously, potentially abiding by the directives, circulars, standing instructions or order issued by the bank and or Bangladesh Bank from time to time and conforming of the credit policy of the Bank.

13. The Managing Director will have the right to exercise lending authority delegated to other executives having authority lower than him. The Managing Director is authorized to sub-delegate his business discretionary authority, if deemed necessary for quick disposal of business proposals either wholly or partially to Deputy Managing Director, head of Credit Risk Management, credit executives, Credit Managers or any other officer within CRM. The Managing Director further will have the right to suspend or withdraw either partially or fully the business discretionary authority delegated to any subordinate officials for a temporary and permanent period, if so required, in order to protect the interest of the Bank through the issuance of office orders. Once the credit facility is granted to any individual or group by business power delegated to higher authority, exercise of lower authority by the subordinate will automatically stand ceased for the same individual or group. Any credit proposals that do not comply may be referred to managing director for decision.

with

guidelines

regardless

of

amount

A monthly summary of all new facilities approved, renewed, enhanced and a list of proposals declined stating reasons there of should be reported by CRM to MD

Procedure for the selection: 4.2.12 Credit Investigation: Lending is one of the most important functions of a bank and with the modern concept of social order and participation of commercial banks in various phases of commercial, industrial. Agricultural and other economic activities of the country, it is of paramount importance that banks have to be very

68


careful while choosing a borrower. security is not the only thing to be relied upon. There have been cases where forged share certificates were offered as security and the banker found to the utter bewilderment that the advance was really on an unsecured basis. There are also instances where the same go down was placed to two different bankers and the respective bankers were taken to the go down for inspection through two different entrances, creating an impression on each that it was the go down pledged to him. A variety of commercial commodities are being offered as security for advance. It is neither possible nor feasible for the banker to conduct a detailed inspection of all the stocks to ascertain their quality and quantity. HE has to depend upon the borrower's records and can conduct only what is known as a “test check" by physically verifying some of the stocks in bags or tins out of many pledged or hypothecated goods. In the event of non-payment by the borrower, when the securities are brought for sale, a portion of stocks may not be in saleable condition or the borrower may contest the banker right of sale under one pretext or the other and, thereby, causing delay in disposal of the goods. The advances may mot be entirely liquidated in such cases. if the banker has to realize every advance by going to a court or selling the securities, it will mean considerable expenditure and waste of time, apart from the loss which may occur in a forced sale. Thus, in the affair of bank credit, nothing is more significant than the character and responsibility of the be obtained is the integrity and business-like dealings of the customers. It is not the tangible/collateral security offered by a borrowing firm which should govern its credit worthiness, maintain solvency. 4.2.13 The integrity and reliability of the borrower: It will be clear from the above study that advance, to be safe, should be granted to a reliable and honest borrower, who has the capacity ton conduct his business. The study of a borrower involves the study of the three "Cs" of the party' i.e. his character, capacity and capital or in o9ther words, his reliability, responsibility and resourcefulness. Character: Character denotes integrity of the borrower, i.e. he should have willingness to repay the money borrowed. This is the greatest single asset any individual can have and is the first factor to be evaluated. A person who is really honest will rarely change whatever be the testing factors. His determination to be honest and willingness to repay, when possible, will remain steadfastly like a rock. This aspect is the good part of the security for any bank advance, however, honesty alone does not constitute character. Character of a customer, besides honesty, involves promise in a planned way in order to keep the reputation with whom he deals. To know about the borrower, the banker should proceed on the following lines: 1.Who the borrower is and, what is his family background? 2.What is the reputation of the borrower in business circles, both among his friends and competitors? Are his dealings with other businessmen honest? Are there commitments?

instances

where

he

was

not

sincere

in

honoring

his

68


Does he indulge in speculative activities? What is the reputation of the borrower among his employees? An interview with the customer must give an impression to the banker about the prospective borrower. All these points have to be considered and a balanced opinion in regard to the character of the borrower formed. As a matter of fact, half if the worries of the lending banker are over after selection of the right type of borrower. Capacity: Capacity means the ability to employ the funds profitably and repay the advance according to the terms and conditions of the sanction. The capacity of the borrower has to be determined and, for these purpose, enquiries will be necessary to find out his qualifications and experience in the line in which he is working. The commercial banks simply meet the short term capital requirements of a business firm established at the vital period of production. The borrower may need genuine financial accommodation to keep the wheels of production moving with the banks are also providing finance on a small scale to new entrepreneur ship who has technical know-how. Bankers have to collect information about the borrower as to 1 .What is his business and when did he start it?

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Has he recently shifted to a new line of business? Has he the required knowledge to carry on the business? Is he well established in the business; what is the working result or is he still making experiments to make his business steady? What is the popularity of other units in the same industry?

his

products

in

the

market,

compared

to

those

of

All these study will enable the banker to arrive at a conclusion, whether the borrower has the capacity to run the business on sound lines. Capital: Capital denotes financial soundness. The borrower must have his own money into the business. i.e. must take a part of the risk in the business, this is to be one by putting his own money into the business, that creates a sense of involvement in the business in the business in the mind of the borrower. If he has sufficient capital of his own to invest in the business, besides the advance applied for, he will be considered a more suitable borrower than one working entirely, or mostly, with borrowed money. Of course, where the borrower cannot bring his own part of the capital, as in the case of advances to the weaker sections of the community and in many other genuine cases, bankers do finance the entire capital. Some American authors have preferred to add two more C's to these, viz., collateral and conditions the former refers to security and the later to external factors, say, business climate which plays a good part in deciding the prospects of the borrowers, business. In order to obtain information in respect of all the C's of the borrower, the lending banker will have to compile a report which is termed as credit report or status report or confidential report or financial


report on the prospective borrower. All the terms carry more or less the same meaning. The necessity of a complete credit report cannot be overemphasized, since it is the only barometer to judge about the feasibility of a proposal for advance. Thus, to get a complete picture of the borrower's credit worthiness, enquiries will have to be made regarding character, honesty, ability and financial soundness of the borrower. 4.2.14 Sources of credit information: The bankers have to collect information from different sources about a prospective borrower to assess credit worthiness. There was no such specialized credit agencies in Bangladesh which could assist banks by giving reports on borrower. Even a report on a borrower obtained through banks in Bangladesh was usually brief and sketchy and did not give sufficient information that could be of much practical use except that an adverse report may give a warning signal. Our country needs to establish credit agencies like that of British or American type so that healthy business activities can be smoothly financed by bankers. Bangladesh Bank however, established a credit information bureau in 1992 with a view to collect all sorts of data about borrowers to assess their credit worthiness to strengthen credit discipline. 4.2.15 Credit Information Bureau (CIB): The credit information which has so far been collected by Bangladesh bank from scheduled banks and other financial institutions are not broad-based and systematized to be used by Bangladesh bank, scheduled banks financial institutions. Government of Bangladesh and other agencies for credit policy and other purposes. Under the situation, it has become imperative to equip the banks with requisite credit information for processing the loan applications of the borrowers. With this end in view creation of credit information bureau was urgently felt and proposal was put forward by various organizations. The proposal finally came into reality when the board of directors of Bangladesh bank in its meeting held on August 18.1992 approved the creation of a full fledged credit information bureau in Bangladesh bank with a view to strengthening credit discipline and strengthening all sorts of data. The credit information bureau(CIB) of Bangladesh bank has undertaken the task of collecting, collating and storing detailed credit information from scheduled banks and other financial institutions in its proper prospective so that these can be exchanged among the scheduled banks, financial institutions and Bangladesh bank for quick processing of new loan proposals and re-scheduling of existing loans. The CIB has also been supplying credit information to the government and other national and international organizations who are engaged in the formulation of monetary, economic and credit policy. As a matter of policy, all the scheduled banks are required to submit data on quarterly basis and other financial institutions on half-yearly basis on each borrower having outstanding of tk. I LAC and above to Bangladesh bank on a specially designed form (CIB01). In addition, Bangladesh bank also collects information from the scheduled banks in respect of big selected borrowers having outstanding of tk. I crore and above on monthly basis

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The object of compilation of complete credit information about the borrower at Bangladesh bank is to standardize information flow on loans credit and to increase the speed and accuracy with which the credit information is made available to banker assessing credit risk and, thereby, assist them for effective support for lending operations. This will also create MIS (management information system) on credit information viz. recovery, disbursement, classifications etc. for use of the government, Bangladesh bank and other national and international financial institutions. Since the inception of CIB in Bangladesh bank, various credit information (pertaining to banks and financial institutions) are being collected, processed and distributed the commercial banks, financial institutions, government offices and security exchange commission. The information so far collected by CIB are: Debtors/borrowers information (segment-1) Owners information (segment-2) Group/affiliations information (segment-3) Credit/exposure matrix or financial information (segment-4) Third party guarantors information (SEGMENT-5) The information under the above segments have been structured and necessary software has been developed for providing credit information to the banks and financial institution for loan processing and MIS purposes. CIB is also collecting data relating to the CRR (credit risk rating),financial scores, viz., y-score and z-score from the scheduled banks. these information will ultimately be retrieved to the scheduled banks in order to provide more helpful tools to them to decide issues regarding sanction of loan more promptly and smoothly. These scheduled banks who make LRA (lending risk analysis) will directly supply information on CRR from overdue risk score matrix. Information on financial score, such as, Y-score and Z-score may be supplied from spread sheet. The detail calculations on Y-score and Z-score have been given on lending risk analysis in the chapter 31 .those banks who do not process information by LRA may supply information (by grading) making a comparison with overall risk score matrix, (for detailed guidelines to supply information in CIB-01 form and other related segments, a handbook of guidelines issued by CIB Bangladesh bank, may be consulted). After establishment of credit information bureau (CIB) at Bangladesh bank, collection of information about the borrower has become easier. Bankers, of course, have their own ways to collect information about the prospective borrower from the following sources to assess their judgment before proposal for any credit facility is taken into consideration.

4.2.16 Landing Rate: Name Statement

of

the of

Bank: Revised

IFIC rates

Bank of

Limited interest

68


(Per Effective Date: 01.04.2008

annum

percentage)

Lending Rate (Mid-rate)

1.

Agriculture

12.00

2.

Large & Medium Industry (Terms Loan)

13.25

3.

Small Scale Industry (Terms Loan)

14.75

4.(Ka)

Large & Medium Industrial Loan (Working Capital)

13 (w.e.f. 06/10/2008)

4.(Kha)

Small Scale Industrial Loan (Working Capital)

14.75

5.

Exports

7.00

6.

Commercial Lending

14.75

7.

Housing Loan

14.75 & 13.50

8.

Consumer Credit Scheme

15, 15.50 & 16.50

9.

Credit Card

2 (Per month)

10.

Lending to non-Banking Financial Institutions (NBFIs)

14.75

11.

Others

14.75

5.1

FOREIGN EXCHANGE DEPARTMENT

Foreign Exchange Department is the international department of the bank. It deals globally. It facilitates international trades through its various modes of services. It bridges between importers and exporters. The branch acts as the authorized dealer in foreign exchange market. It can remit foreign exchange from local country to foreign country. This department mainly deals in foreign currency. Some national and international laws regulate functions of this department. Among these, Foreign Exchange Act 1947 is for dealing in foreign exchange business. And Import and Export Control Act 1950 for Documentary Credits (UCPDC-1993 revision and International Chamber of Commerce Publication no-500) is also an important law for settlement of terms and conditions between exporter and importer in International Trade. Government Import and Export Policy is another important factor for import and export operation for banks. 5.1.1 Services provided by authorized dealer a. Foreign Trade: For Importers

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Opening Letter of Credit. Providing necessary financial facilities to the importers. For Exporters Advising of Export Letters of Credit. Negotiation of export documents. Providing export financing facilities. Confirmation of Export L/C. Issuance of Foreign guarantees favoring beneficiaries within Bangladesh and Overseas beneficiaries. Remittance Outward remittance by telegraphic transfers and payment of inward telegraphic transfers. Issuance of Demand Drafts (AUD, CAD, EURO, GBP and US$) Issuance of foreign currencies (in US$ and GBP) Handling of Student File of the students going abroad for educational purpose (AUD, CAD, EURO, GBP and US$) Issuance of AMEX and THOMAS COOK BRAND Travelers Cheques (in US$) Issuance of Wage Earners Development Bond for expatriate Bangladeshis. Providing different types of Treasury Functions for Corporate Clients. 5.1.2 Deposit Product In Foreign Currencies: IFIC offers following opportunities to build savings and investment in foreign currencies in US$ and GBP at attractive rates: Foreign Currency Account (FCAD, FCAP) by-Bangladesh nationals residing abroad. Foreign nationals residing abroad or in Bangladesh and also foreign firms registered abroad and operating in Bangladesh or abroad. Foreign missions and their expatriate employees bringing foreign exchange by inward remittance. Resident Foreign Currency Deposit (RFCD): Foreign Currency Account for Bangladesh residents bringing foreign exchange in the time of return from travel abroad Non-Resident Foreign Currency Deposit (NFCD): Interest bearing Foreign Currency term deposit account for Bangladesh nationals living abroad.

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5.1.3 Functions of Foreign Exchange Department The bank acts as a media for the system of foreign exchange policy. For this reason, the employees related to the foreign exchange dept. of the bank should have knowledge of these following functions:Rate of Exchange How the rate of exchange works Risk of exchange rate Forward and spot rate Premium and discount Convertibility Foreign exchange transaction Exchange arithmetic Export & Import letter of credit Non-commercial letter of trade Foreign exchange trading Exchange control Cause of exchange rate Finance of foreign trade Intervention money Exchange position National and function of foreign exchange market Rules and regulations used in foreign trade Methods of quoting exchange rate.

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Foreign Exchange Export

Import Operat ion of L/C Loan against

Payment against Document Loan against imported merchandise

Inwar Guarantees d bill Inland & collect Foreign ion Dealing Section Quotin g rate of Recon ciliatio n (Forei

Forward Cover (Booking of Contract)

Guidance of rates trends to Customer

Export L/C Document

Pre shipment Finance

Pre shipment Finance

Foreign bills for collection

Export certificate

Realization

Remittance Inward Remittance

Outward Remittance (FDD MT)

Pre shipment Finance

Foreign bills for collection

Travel Issue & sales of foreign

Purchase of encashment foreign currencies &TC

Return

Return to Bangladesh

Other returns HO (IDB)

Student File

Figure: Functions of Foreign Exchange Department 5.1.4 Import Operation: Import section helps businesses and other people to import goods. In international environment, buyers and sellers are often unknown to each other. So seller always seek guarantee for the payment for his goods exported. Here comes the role of the bank. Bank gives export guarantee that it will pay for the goods on behalf of the buyer. This guarantee is called Letter of Credit (L/C). Thus the contract between importer and exporter is given a legal shape by the banker by L/C. 5.1.5 Letter of Credit (L/C): On behalf of the importer, if the bank undertakes to make payment to the foreign bank, it is known as Documentary Credit or Letter of Credit.

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A Letter of Credit (L/C) is an instrument issued by a bank to a customer placing at the letters disposal such agreed sums in foreign currency as stipulated. An importer in a country requests his bank to open a credit in foreign currency in favor of his exporter at a bank in the latter’s country. The L/C is issued against payment of amount by the importer or against satisfactory security. The L/C authorizes the exporter to draw a draft under its term and sell to a specified bank in his country. He has to hand over to the bank, the Bill of Exchange, shipping documents and such other papers as may be agreed upon between the exporter and the importer. The exporter is assured of his payment because of the credit while the importer is protected because documents in respect of export of goods have to be delivered by the exporter to the paying bank. Finally, the payment is made a. Forms of Letter of Credit: A Letter of Credit (L/C) may be of two forms. These are as below: 1) Revocable L/C: If any L/C can be amended or changed of any clause or cancelled by consent of the exporter and importer, is known as Revocable L/C. 2) Irrevocable L/C: If any L/C can not be changed or amended without the consent of the exporter and importer, is known as Irrevocable L/C.

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b. Parties to the L/C: Importer

Who applies for L/C

Issuing Bank

The bank, which opens / issues a L/C on behalf of the importer.

Confirming Bank

The bank, which adds its confirmation to the credit and it is done at the request of issuing bank. Confirming bank may or may not be advising bank.

Advising Notifying Bank

The bank through which the L/C is advised to the exporters. This bank or is actually situated in exporter’s country. It may also assume the role of confirming and / or negotiating bank depending upon the condition of the credit.

Negotiating Bank

The bank, which negotiates the bill and pays the amount of the beneficiary. The advising bank and the negotiating bank may or may not be the same. Sometimes it can also be confirming bank.

c. Types of L/C: Letter of Credit is classified into various types according to the method of settlement employed. All credit must clearly be designated in major categories. Sight Payment Credit Deferred Payment Credit


Acceptance Credit Transferable Credit Red clause Credit Negotiation Credit Revolving Credit. Sight Payment Credit: The most commonly used credits are sight payment credits. These provide for payment to be made to the beneficiary immediately after presentation of the stipulated documents on the condition that the terms of the credit have been complied with. Deferred Payment Credit: Under a deferred payment credit, the beneficiary does not receive payment when he presents the document, but at a later date specified in the credit. Acceptance Credit: With an acceptance credit, payment is made in the form of a term bill of exchange drawn on the buyer or the issuing bank. Once he has fulfilled the credit requirements, the beneficiary can demand that the bill of exchange be accepted and returned to him. Thus, the accepted bill takes the place of a cash payment. Transferable Credit: Transferable credits are particularly well adapted to the requirements of international trade. A trader who receives payment from a buyer in the form of a transferable documentary credit can use that credit to pay his own supplier. This enables him to carry out transaction with only a limited and lay off his own funds. Red clause Credit: In the case of a red clause credit, the seller can obtain an advance for an agreed amount from the correspondent bank, goods that are going to be delivered under the documentary credit. Negotiation Credit: Negotiation means the purchase and sale of bill of exchange or other marketable instruments. A negotiation credit is a commercial letter of credit opened by the issuing bank in the currency of its own country and addressed directly to the beneficiary. The letter is usually delivered to the addressee by a correspondent bank. This credit is sometimes also called Hand on credit. Revolving Credit: Revolving credit can be used when goods are to be delivered in installment at specified intervals. The amount available at any one time is equivalent to the value of one partial delivery. d. Contents of Letter of Credit: Banks normally issue L/C on forms which clearly indicate the banks name and extent of the banks obligation under the credit. The contents of the L/C of different banks may be different. In general, L/C contains the following information: Name of the buyer: Also known as the accounted, since it is for his account that the credit has been opened. Name of the seller: Also known as beneficiary of the credit. Moment of the credit: This should be the value of the merchandise plus any shipping charge intent to be paid under the credit. Tenor: This normally is dependent upon the requirements of the buyer.

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Trade term: Such as F.O.B and CIF. Expiration date: It specifies the latest date documents may be presented. In this manner or by including additionally an attested shipping date, the buyer may exercise control over the time of shipment. Documents required: Normally include commercial invoice; consular or customers invoice; insurance policies as certificates, if the source is to be effected by the beneficiary and original bills of lading. General Description of the merchandise: It briefly and in a general manner, duly describes the merchandise covered by a letter of credit. e. Payment against Documents: Banks deal in documents and not in goods. If the shipping document against the L/C is in order, then the L/C opening bank must have to make payment to the foreign bank within 3 days or 72 hours according as Uniform Customs and Practice for Documentary Credit (UCPDC) 500 of revision of ICC. If the shipping documents have any discrepancy, then the L/C opening bank informed to the negotiating bank within 7 days. Otherwise, the shipping documents have not discrepancy. If the importers have not adequate funds in the bank account, then the bank makes payment to the foreign bank against the shipping documents. f. Steps for Import L/C Operation: Step 1- Registration with CCI &E For engaging in international trade, every trader must be first registered with the Chief Controller of Import and Export (CCI&E). By paying specified registration fees to the CCI&E, the trader will get IRC/ERC. To open L/C with bank, this IRC is must. Step 2- Determination of the terms of credit The terms of the letter of credit are depending upon the contract between the importer and exporter. The terms of the credit specify the amount of credit, name and address of the beneficiary and opener, tenor of the bill of exchange, period and mode of shipment and name of destination, nature of credit, expiry date, name and number of sets of shipping documents etc.

Step 3- Application by importer to the banker for opening letter of credit For opening L/C, the importer is required to fill up a prescribed application form provided by the banker along with the following documents: 1. Pro - forma invoice

5. Tax information certificate

2. Authority to debit account

6. Filled up amendment request Form

3. Demand promissory note

7. Insurance cover note

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4. IMP form

8. Filled up LCA form

Step 4- Opening of L/C by the bank for the opener Taking filled up application from the importer. Collecting credit report of exporter from exporter’s country through his foreign correspondence there. Issuance of credit by the opening bank via air mail or cable followed by credit advice as asked for by the opener through his foreign correspondent or branch as the case may be, at the place of beneficiary. The advising bank advises the credit to the beneficiary on his own form where it is addressed to him or merely hands on the original credit to the beneficiary if it is so addressed. Step 5- Shipment of goods and submission of documents by exporter The exporter ships the goods to the destination of the importer’s country. Then he sends the documents to the L/C opening bank through his negotiating bank. Generally, the following documents are sent to the opening banker with L/C: 1. Bill of Exchange

6. Packing List

2. Commercial Invoice

7. Advice Details of Shipment

3. Bill of Lading

8. Pre-shipment Inspection Certificate

4. Certification of Origin

9. Vessel Particular

5. A certificate stating that each packet contains the description of goods over the packet.

Step 6- Lodgment of documents by the opening bank from the negotiating bank After receiving the documents, the opening banker scrutinizes the documents. If any discrepancy found, the importer is informed. If importer accepts the fault, then opening bankers call importer retiring the document. At this time, many things can happen. These are indicated in the following: Discrepancy found but the importer accepts- no problem occurs in lodgment. Discrepancy found and importer not agreed to accept- In this case, importer protests and sends back all the documents to the exporter. Here, the banker is not bound to pay, because the documents send by exporter is not in accordance with the terms of L/C. Documents are Okay but importer is willing to retire the documents- In this case, bank is obligated to pay the price of exported goods. Since importer did not pay for bill of exchange, this payment by bank is one kind of credit to the importer and this credit in banking is known as FORCED PAD.

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Everything is Okay, but importer fails to clear goods from the port and request bank to clear- In this case, banks clear the goods and takes delivery of the same by paying customs duty and sales tax etc. So, this expenditure is debited to the importer’s account and in banking, it is called LIM. 5.1.6 Export Operation: Bangladesh exports a large quality of goods and services to foreign households. Readymade textile garments (both knitted and woven), Jute, jute-made products, tea are the main goods that Bangladeshi exporters export to foreign counties. Garments sector is the largest sector that exports the lion share of the country’s export. Bangladesh exports most of the readymade garments products to USA and European Community (EC) countries. Bangladesh exports about 40% of its readymade garment exporters. They open export L/Cs here to export their goods, which they open against the import L/Cs opened by their foreign importers. Export L/C operation is just reverse of the import L/C operation. For exporting goods by the local exporter, bank acts as advising bank and collecting bank for the importer. As an advising bank: It receives documents from the foreign importer and hands it over to the exporter. Sometimes it adds confirmation on the L/C on request from the opening bank. By adding confirmation, it assumes the responsibility to make payment to the exporter. As negotiating bank: It negotiates the bills and other shipping documents in favor of the exporter. That is, it collects the proceeds of the export bill from the drawee and credits the exporter’s account for the same. Collection proceed from the export bill is deposited in the bank’s NOSTRO account in the importer’s country. When the bill matures, bank represents it to the drawee to encase it. In our country, Export and Importer operation of bank is much related with one another because of use of back to back L/C and maturity of payment for back to back L/C is set in such that it can be paid out of export proceeds. So, export and import sections work as one unit. These two operations can hardly be separated from one another in the branch. 5.1.7 Scrutiny of documents: The L/C opening bank being received the negotiated bank will scrutinize the documents with the respective L/C terms and conditions. Forwarding Schedule of Negotiating Bank Whether there is any instruction Whether these instruction can be complied with Whether the negotiating commission is realized. Bill of Exchange (Draft) Whether it is drawn in order Whether the amount of draft corresponds with the L/C amount Whether the date of the draft is within the date as per L/C etc.

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Bill of Lading (B/L) Whether the bill of lading is clean and signed by the shipping authority Whether the date of B/L is within the date of shipment as per L/C Whether the part of shipment and part of destination are similar as per L/C Whether the title of B/L belongs to L/C opening bank Whether the full sets of B/L dispatched by negotiating bank etc. Commercial Invoice Whether the full particulars of goods have been incorporated Whether the amount of invoice corresponds with the amount of bill of exchange and as per the L/C terms Whether the IRC no etc. have been incorporated Whether it is signed by the beneficiary.

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Other Documents Whether all other documents are prepared as per L/C. After scrutinizing, the official concerned may found the following:Documents are in order, i.e.: no discrepancy Major discrepancy may be acceptable to the regulation or those are irremovable Minor discrepancy may be acceptable to the importer. After performing necessary formalities and entry in respective registers, documents are to be handed over to the importer on proper acknowledgement after certification and endorsement of the documents 5.1.8 Monthly Return: On the last working day of the month, returns of bills lodged during the month through IMP form are to be sent to foreign exchange department, Bangladesh Bank.

Chapter 6.0 Conclusion 6.1 RECOMMENDATION


The study was limited to some specific variables assuming other variables are insignificant to selection the borrowers. Moreover, in the organization part the area of activities of IFIC Bank ltd. specifically loans and advance division is highlighted. For the viewpoint of above the followings can be recommended: The rules and regulation that a borrower must follow is very difficult sometime impossible. So, the bank should make the procedure easy understandable to attract the potential customer.

and and

It is necessary to make some new product to come on the stage of competition with other banks. In recent years, some banks launched a number of innovative products to attract their customer. IFIC may follow the way to be a leader of modern banking. Clearance from IFIC Bank Limited or other bank at the time of taking new loan from IFIC Bank Limited or other bank may be made compulsory. Introduction and at the same time proper implementation of this system may be expected to accelerate the selection procedure. The names of defaulters as well as good and regular payers may published in various dailies and provide various facilities to good borrower will encourage a borrower to be a good borrower. This initiative can help the bank in decreasing the number of defaulter and the volume of large outstanding loan amount as well. In the selection procedure, the new entrepreneur should be encouraged in getting loans and those who have the records of regular repayment may be given preference. There will be the least loan proposals, if more requirements of IFIC Bank Ltd.

possibility competent

of wrong appraisal and employee are employed

Review the borrowers financial position periodically implication from the beginning to full repayment of loan. Not to emphasize on experience providing loan facilities. Rather, be taken into account.

of the elasticity

to

evaluation as per

measure

borrowers as the key and future prospective

the factor need

of the risk in to

Lending procedure needs a very lengthy time in IFIC Bank, that's why applicants are sometime fell harassment and disturbance. People are applying for loan to fulfill their immediate necessity. So, it's a responsibility and a way to provide better service through stopping unnecessary time consuming. IFIC Bank Ltd. can follow the modern banking approach called 'Unit Banking'. Unit banking makes the rules and regulation for their banking area and applicants are easily fulfilling bank's requirement. By following this approach bank can easily invest its fund and people can get loan easily.

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6.2 CONCLUSION 6.2.1 FEW SUGGESTATIONS: IFIC Bank should reduce interest rate for given customer and small enterprise loan. IFIC Bank should reduce penal interest on overdue amount, which depends on the category of loan. Penal interest is burden for the customers. Loan processing fee of 1%, which is very high, should be reduced. Maximum loan limit size of the bank should increase. At the time of disbursement of loan Bank charges 0.50%-.25% as service charge that should be reduced. "Down payment" that the customers have to pay to get a big amount of loan so Bank should reduce the rate of payment. The Bank takes more time to sanction loan that should be reduced. IFIC Bank Ltd. needs to advertise through various media about types of loan offers and other products. 6.2.2 Conclusion: Form the learning and experience point of view I can say that I really enjoyed my internship period in IFIC Bank Ltd. At Elephant Road Br. from the very first day. I am confident that this 3 (three) months internship program will definitely help me to realize my further carrier in the job market. Loans & Advances of a bank is not so sufficient to measure and express perfectly within this short time of my internship period. But it is a great opportunity for me to get used to with the Loan & Advance Procedure of commercial banking of IFIC Bank. The tried by soul to incorporate the necessary relevant information in my report.The selection and the awareness about the loans type is one of the key determinants of the right and proper use of fund. The loan default in the banking sector of our country has been hindering the growth of the economy. The problem has also been reducing the level of investment, the productivity of capital and the volume of savings. In managing loans and advances of the commercial banking sectors, the critical factors are needed to be identified and managing of those factors will have positive impact on the overall banking sector. The analyzed factors are not the only determinants of the loans and advances as well as the selection procedure. In this study, several qualitative factors are considered and casual relationship of types of loan and the selection procedure, compliance with covenants by borrowers and strength of supervision is established. The study was conducted by using the data of the Bank. So, findings of this study are not applicable in the macro environment but further study can be conducted on the basis of the findings of the report. During the course of my practical orientation the tried to learn the practical banking to relate it with theoretical knowledge, what the gathered and going to acquire from various courses. Appendix: 1 Deposit Mix of 2008 in IFIC Bank Ltd. (Elephant Road Branch)

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Deposit Mix (Elephant Road Br anch), for the year 2008 Current Account & Others

5.37%

Savings Account

1.34% 4.54%

7.88%

Short Term Depos its (STD)

0.96%

Fixed Depos it (FDR)

23.64%

Double Depo. Schem e (DPS) Pens ion Savings Schem e (PSS)

0.35%

Bills Payable

55.91%

Others

Appendix: 2 Number of Different Accounts Maintained by this Department Appendix 3:

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Amount Deposited in Different Accounts Maintained by this Department

400000000 350000000

Current Account

300000000

Savings Account

250000000 200000000

Short Term Deposit

150000000

FDR

100000000

PSS FDR(MIS)

50000000 0

Advances over the year

Amount Deposited in Different Accounts Maintained by this Department

YEAR

Appendix: 4

2836.15

2009

2549.06

2008

Advances over the Year

2169.49

2007

2128.09

2006

2045.09

2005 TAKA IN CRORE


Appendix: Figure shows the different types of advances

ADVANCE

Continuous Loan

Term Loan i.Industries Loan ii.Staff

i. Cash Credit Hypo.

House

Building

Loan

(SHBL) iii.Stuff loan against Provident

ii. Cash Credit Pledge.

Fund

(SLPF)

Appendix: 6

v.House

i. Easy commercial Loan. ii. Retailers Loan.

Building

Loan vi.ConsumesCredit

Consumer Financing

Agriculture financing

i.Easy loan (Secured Personal loan).

i. Phalphasali Rin (for Fruit Orchard)

ii. Consumer Durable loan iii. 'Parua' (Education

iii. Transport Loan.

iv.Loan against PSS iii. Secured Overdraft

Small Enterprise Financing.

loan) iv. 'Thikana' (House building loan)

iv. Commercial House Building Loan. v. profession Right Loan

v. 'Flexi' loan (Personal loan)

ii. Shech Saronjam Rin (for Irrigation Equipments)

iii. Poshupokkhi & Motsho Khamar Rin (for Live Stock & Fish Culture)

vi. Peshajeebi loan

Cash Credit HYPOTHECATION (CC HYPO & PLEDGE) of IFIC Bank Ltd., Elephant Road Branch Scheme Month of Distribution vii. Others loan February-2009 March-2009 April-2009 May-2009

vi. Contractor’s Loan

(Loan for professional

Amount (taka)

vii. Auto loan

vii. Letter of Guarantee

54593854.25 viii. Festival Loan 52858711.82

viii. Working Capital Loan. Etc

50014025.11 50178910.00

)

iv. Krishi Saronjam Rin (for Agriculture Equipments)

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C.C. (Hypo & Pledge) 55000000 Amount

54000000 53000000 52000000 51000000 50000000 49000000 48000000 47000000 Feb-09

Mar-09

Apr-09

May-09

Month

Source: Monthly Statement of IFIC Bank Ltd., Elephant Road Branch Appendix: 7 Figure: Shows the Components that analyzed in the LRA

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LENDING RISK ANALYSIS

Business Risk Supply Risk Industry Risk Industry Risk Company Risk

Sales Risk

Performance Risk Company

Management Risk

Reliance Risk

Mgt. Competence Risk Mgt. Integrity Mgt. Competence Risk

Security Control Risk

Appendix: 8

Security Risk Security Cover Risk

It is easy & safe to take loan advances at The IFIC Bank Ltd.


Easy & safe to take loan 30

Frequency

20

10

0 SD

D

N

A

SA

Easy & safe to take loan

Appendix: 9 The IFIC Bank Ltd. has your best interest at heart.

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has your best interest at heart 30

Frequency

20

10

0 N

A

has your best interest at heart

Appendix: 10 The promise of “Your Satisfaction First” truly goes to The IFIC Bank Ltd.

SA


The promise of " Your Satisfaction First" truly goes 20

Frequency

10

0 A

SA

The promise of " Your Satisfaction First" truly goes

Questionnaire

68

Gender:

Female Male

Age Range:

18-25 26-35 36-45 46-55 55-65 66-Or Older

Occupation: Student

Service Holder Businessperson Housewife

Transaction Time during a month:

1-2

3-6

6-8

9-10

10 or more

Monthly Income: Perception: [Where 1= Strongly Disagree, 2=Disagree, 3=Neuronal, 4=Agree, 5=Strongly Agree] Please Tick (√) on the boxes: Sl No:

Questionnaires

1

The IFIC Bank Ltd. has a fresh environment to satisfy you.

2

The IFIC bank Ltd. has modern looking equipment.

3

The IFIC Bank Ltd. physical facilities are visually appealing.

4

The IFIC Bank Ltd. employees are presentable & neat appealing.

5

Materials associated with the service are visually appealing at the IFIC Bank Ltd.

1

2

3

4

5


6

When The IFIC Bank Ltd. promises to do something by a certain time, it does so.

7

The IFIC Bank Ltd. performs the services right the first time.

8

The IFIC Bank Ltd. provides its services at the time needed.

9

The IFIC Bank Ltd. insists on error free records.

10

When you have a problem, The IFIC Bank Ltd. shows a sincere interest in solving it.

11

Employees at The IFIC Bank Ltd. tell you exactly when service will be performed.

12

At The IFIC Bank Ltd. account opening is very much beneficiary.

13

Employees at The IFIC Bank Ltd. give you prompt service.

14

Employees at The IFIC Bank Ltd. are always willing to help you.

15

Employees at The IFIC Bank Ltd. never too busy to respond your request.

16

The behavior of employees at The IFIC Bank Ltd. instills confidence in you.

17

You feel safe in your transactions with The IFIC Bank Ltd.

18

You are satisfied with charges deducted from your account by The IFIC Bank Ltd.

19

You are satisfied with the current interest along with each service at The IFIC Bank Ltd.

20

Employees at The IFIC Bank Ltd. are consistently courteous with you.

21

Employees at The IFIC Bank Ltd. have the knowledge to answer your question.

22

Each department at The IFIC Bank Ltd. provides you the prompt service.

23

The IFIC Bank Ltd. gives you individual attention.

24

The IFIC Bank Ltd. has operating hours convenient to all its customers.

25

The IFIC Bank Ltd. has employees who give you personal attention.

26

The IFIC Bank Ltd. reminds the regular client as its co-

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partner. 27

It is easy to take loan advances at The IFIC Bank Ltd.

28

The IFIC Bank Ltd. thinks about to satisfy their client.

29

The IFIC Bank Ltd. has your best interest at heart.

30

The promise of “ Your Satisfaction First” truly goes to The IFIC Bank Ltd.

Please Indicate Your Highly Overall Level of Satisfied Satisfaction

Satisfied

Indifferent

dissatisfied

Highly Dissatisf ied

Please Tick (√)

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Loan and advance and overall customer satisfaction toward the level of international finance investm