Basic Bank Limited

Page 1

Basic Bank Limited [1.1] Introduction: BASIC Bank Limited (Bangladesh Small Industries and Commerce Bank Limited) is a stateowned scheduled bank. It is one of the leading commercial bank in Bangladesh .The name of the bank is problem-solving of its nature.The BASIC Bank Limited was established as a banking company under the Companies Act 1913 launched its operation in 1989. It was constituted under the Act on the 2nd of August, 1988.The Bank started its operation from the 21st of January, 1989 .It is governed by the Banking Companies Act 1913.The The Bank was established to make the policy of the country & provides financial help for the private sectors & Small Scale Industries (SSIs). At the beginning, the Bank started as a joint venture enterprise of the BCC Foundation with 70 percent shares and the Government of Bangladesh (GOB) with the remaining 30 percent shares. The BCCI, the Government of Bangladesh took over 100 percent ownership of BASIC on 4th June 1992.Thus there is state-owned. However, the Bank is not nationalized; it operates like a private bank as before. BASIC Bank is the only one of its objective. The Memorandum and Articles of Association of the Bank demand that 50 percent of loan able funds shall be invested in small and cottage industries sector. Along with promotion of products special importance is given to individual clients through providing personalized services. In fact individuals matter in this Bank. This idea has been followed for development of clientele as well as human resources of the Bank. Coping with the competitive and rapidly changing financial market of the country, BASIC Bank Limited maintains close connection with its clients. The performance of BASIC Bank Limited has been suitable since its activity in respect of all the size parameters. The total assets of the Bank increased to Taka 45,308.31 million at the end 2009 from Taka 46,651.53 million in the previous year registering a decrease by 2.87 percent. Total deposit of the Bank at the end of 2009 stood at Taka 34,501.70 million (75.50% of Total liabilities) compared to Taka 38,368.23 million (82.24% of Total liabilities) in 2008. Total amount of deposit declined by 10.07%. Loans and advances stood at Taka 27,269.13 million as on December 31, 2008 against Taka 22,263.35 million at the end of 2007, recording a growth rate of 22.48 percent compared to 23.86 percent in the previous Year. All out hard work were made to improve the recovery rate and control non-performing loans and advances. Although the recovery rate of project loans remain stable in the locality of 96 percent the amount of non-performing loans to total loans increased to 3.25 percent in 2008 from 3.70 percent in 2007. Year 2008 was a period of high growth in loans and advances with 22.48 percent increase compared to 23.86 percent increase in 2007. Growth of industrial finance was reasonable and loans to small and medium industries were 23.91 percent of total loans and advances. The industrial loan of Tk. 17226.40 million was distributed among 13 sectors. Textile sector registered the highest focus being 36.24 percent of industrial loans and 23.59 percent of total loans. Textile sector is followed by: food & related industries - 13.73 percent of industrial loans and 8.94 percent of total loans, chemical & related industries - 12.97 percent of industrial loans and 8.44 percent of total loans and production - 11.44 percent of industrial loans and 7.45 percent of total loans. [1.2] Background of the Study: Though the title is not required to be introduced or detailed about the importance but it is earning almost half of the total income of any bank depends on the smooth operation of the loan and deposit activities. It needs strong observation for the management because it earns enough for bank along with great risk. For the internship program, each student is attached


with an organization. This paper is allowed “Loan & Deposit Activities of BASIC Bank Limited” originated from the performance of the internship program. [1.3] SCOPE OF THE STUDY: The subject of the study is to analysis the overall Deposit and Loan activity handled by the BASIC Bank Ltd. The study mainly focuses on the Loan and Deposit policy rather than all other Deposit and Loan schemes. And its also focus on the different deposit feathers along with records of different account and present position of different deposit schemes are covered in this study. Loan policy of the bank, Loan procedure, records different type of Loan, borrowers Loan worthiness etc covered in Loan part of the study. [1.4] Objectives of the Study: General objective The general objective of the study is to know the overall loan & deposit activities of BASIC Bank Limited, at savar Branch. Specific objective: The Specific objectives of the study are as follows:     

To know the different types of loan & deposit activities of BASIC Bank Limited. To evaluate loan & deposit activities of BASIC Bank Limited. To know about borrower Loan worthiness To find out the problem of loan & deposit activities of BASIC Bank Limited. To prescribes some suggestions about loan & deposit activities of BASIC Bank Limited.

[1.5] Methodology of the Study: This is an exploratory type of research in nature. To conduct this report, both primary & secondary data have used. Secondary sources: • Different Circulars issued by the Head Office and Bangladesh Bank. • Banks Annual Report. ( Year, 2007, 2008, 2009 & 2010). •

Prior research Report.

Some printed materials like brushier, hand notes etc.

Conversation with clients.

Web site of Bangladesh Bank.

Web site of BASIC Bank.

Primary sources: For the primary data, following steps are given below: Target population: Target population is officers & Clients of BASIC Bank Limited at savar branch.


Sample size: The sample sizes were 15 individuals. Eight officers & Seven Clients were selected of this branch. Sample Selection: Sample is selected with the help of convenience sampling technique. The sample element is officers & clients of the BASIC Bank Ltd. Target population of this bank and sampling Unit is 8 (eight) officers & 7 (seven) Clients of the bank. Also this research is extent within the BASIC Bank Limited at savar branch .And Time limits were March 07 to June 07, 2011. Method of Data Collection: The relevant primary data were collected through direct interview from the personnel of this firm & question prepared based on 3 months practical knowledge of the bank then question asks to the selected employees. For some indirect question or direct question (unstructured questionnaire) have used. Data Analysis: For data analysis, different types of statistical tools (charts, tables and graphs) have been used. Different types of computer like “MS Word & MS Excel” have been used. Discussions, Analysis & Findings [2.1] TYPES OF LOAN OFFERED BY BASIC BANK LTD. A Bank is nothing but a financial intermediary and it takes deposit from excess economic units and deploys the fund to shortage economic units. So, the more recoverable Loan is deployed the more profit is gained. In fact this Loan operation process is run under Loans & Advances department in branch and Head Office level. The types of Loan offered by BASIC Bank are: A. Continuous loan • • •

Cash Loan (Hypothecation) Cash Loan (Pledge) Secure Overdraft (SOD)

B. Demand Loan • • •

Loan Against Trust Receipt (LTR) Payment Against Document (PAD) Packing Loan (PC)

C. Term Loan • • • • •

House Building Loan (Com.) House Building Loan (Staff) Any purpose Loan. Consumer Finance. Project Loan.


• • •

Agro Finance. SME Women Finance.

[2.2] CONTINUOUS LOAN Cash Loan (CC) By this understanding, a banker allows his customer to borrow money up to a certain limit. CC is a favorite type of borrowing by traders, industrialists, etc. for meeting their working capital requirements. It is operated like an overdraft account. Depending on the needs of the business, the borrower can draw on his cash Loan account at different time. Similarly, the liability can be used to at any time. The Bank charges interest on the daily balance of the account. Based on the creation of charge on securities, the bank allows are two forms of cash Loan. According to 2010 financial year their Cash Loan (CC) is amount of Tk. 10000000000. Hypothecation It is cash Loan facility against hypothecation. Hypothecation is a legal responsibility of the borrower to the bank where both title and control of goods remain with the borrower. The banker has only equitable charge on stocks, which practically means nothing. So, Cash Loan (Hypothecation) facility is allowed against sufficient collateral security like registered mortgage of land and building and personal guarantee of Directors. According to 2010 financial year their Cash Loan (Hypo) is amount of Tk. 7,103,025,139. Pledge It is cash Loan facility against pledge. Pledge is the goods as security for payment of a debt or performance of a promise. In case of pledged goods, the bank acquires the control of the goods or a right to hold goods until the repayment for Loan with a special right to sell after due notice to the borrower in the event of non-repayment. The bank usually does not allow this type of Loan facility these days. . According to 2010 financial year their Cash Loan (pledge) is amount of Tk. 2896974861. The processes of opening a CC a/c are as follows: • • • • • • •

The interested party must have a current A/C and good transaction with the branch; Applies for CC pledge or hypothecation arrangement; Fills up the ‘Loan Application Form’ as provided by the respective officer; The concerned officer prepares a ‘Loan Line Proposal’ (CLP) detailing all relevant information; Sends the CLP to the Head Office, General Advances Division for necessary action; Head Office, General Advances Division examines the proposal and if finds it viable then sanctions it and sends it to the branch; The branch issues two copies of ‘Sanction Advice’, one for its own record and the other for the party to keep.

After getting the cash Loan arrangement, the banker will issue a claque book for withdrawing cash from the account. Whenever the CC account holder wants to withdraw cash from the account, the cash officer will scrutinize the amount of cherub in order to make sure that the total drawing does not exceed the sanctioned limit.


AM OUNT IN TAKA

12000000000 10000000000

8000000000 6000000000 4000000000 2000000000 0 2008

2009

2010

Fig 1: Growth of Cash Loan Explanation: This graph shows that BASIC Bank, savar Branch’s growth of Cash loan has increased in year 2010 compare to year 2008 and 2009 respectively. Overdraft (OD) It is a continuous advance facility. By this agreement, the banker allows his customer to overdraft his current account up to his Loan limits sanctioned by the bank. The interest is charged on the amount, which he withdraws, not on the sanctioned amount. OD facilities are of two types. According to 2010 financial year their total overdraft is amount of Tk. 2,169,655,450. Temporary Overdraft (TOD): It is given to the valued customers only. It is not that much secured. Usually it forwards without any security or sometimes exercise lien against the instrument, deposited in the bank. It is given by the branch manager open power. Though it is given, but it never popular. According to 2010 financial year their total temporary Overdraft is amount of Tk. 64,326,938. Secured Overdraft (SOD): According to 2010 financial year total Overdraft secured (Bond and Share) is amount of Tk. 00.00, Overdraft secured Mortgage Tk. 149,767,158 and Overdraft secured (other securities) Tk. 1,955,561,354 respectively. AM OUNT IN TAKA

4500000000 4000000000 3500000000 3000000000 2500000000 2000000000 1500000000 1000000000 500000000 0

2008

2009

2010


Fig 2: Growth of SOD Explanation: This graph shows that BASIC Bank, savar Branch’s growth of SOD has increased amount of Tk. 4000000000 in year 2010 compare to year 2008 and 2009 amount of Tk.2000000000 and more than Tk. 2000000000 respectively. 2.3 DEMAND LOAN Loan against Trust Receipt (LTR) Advance allowed for retirement of shipping documents and release of goods imported through L/C falls under this head. The goods are handed over to the importer under trust with the arrangement that sale proceeds should be deposited to liquidate the advances within a given period. This is post import finance by BASIC Bank Ltd. According to 2010 financial year total Loan against Trust Receipt (LTR) is amount of Tk. 3,913,007,955. Payments against Documents (PAD) Payment made against documents on behalf of sell of goods to local export oriented industries which are deemed as exports and which are denominated in Local currency/foreign currency falls under this head. The bill of exchange is held as the primary security. The client submits the nuisance bill and the bank discounts it. This temporary liability is adjustable from the proceeds of the bills. According to 2010 financial year total their Payments against Documents (PAD) is amount of Tk.195, 745,072. [2.4] TERM LOAN BASIC Bank considers the loans, which are sanctioned for more than one year as term loan. Under this facility, an enterprise is financed from the starting to its finishing, i.e. from installation to its production. BASIC Bank Ltd. offers this facility only to big industries. According to 2010 financial year total their term loan is amount of Tk.9, 126,766,504. House Building Lone (HBL) BASIC Bank provides House building loan for general people as well as employees. Every terms and conditions are same for both. The likely borrower will have to mortgage his land to bank. The total amount of the money sanctioned to the party is not transferred to him wholly. After completion of certain stage of the building the respective official will inspect it and if satisfied the next amount will be transferred to his account. Another important point is to avail HBL the party must have the one forth margin of the total amount required to build his building and he have to show it to the bank. According to 2010 financial year total their house Building Lone (HBL) is amount of TK. 3,988,159,551. [2.5] LOAN PRINCIPLES:


Some principles or standards of lending are maintained in approving loans in order to keep Loan risk to a minimum level as well as for successful banking business. The main principles of lending are given below: Liquidity Liquidity means the availability of Bank funds on short notice. The liquidity of an advance means it repayment on demand on due date or after a short notice. Therefore, the banks must have to maintain sufficient liquidity to repay its depositors and trade off between the liquidity and profitability is must. Safety Safety means the assurance of repayment of distributed loans. Bank is in business to make money but safety should never be sacrificed for profitability. To ensure the safety of loan the borrower should be chosen carefully. He should be a person of good character & capacity as well as bank must have to maintain suitable number of security from borrower. Profitability Banking is a business aiming at earning a optimal profit by keeping the service quality at the expected standard. The difference between the interest received on advances and the interest paid on deposit constitutes a major portion of the bank income, besides, Trade Finance business is also highly remunerative. The bank will not enter into a transaction unless a fair return from it is sure. Intently Banks sanction loans for productive purpose. No advances will be made by bank to any unproductive sector though the borrower may be free from all risks. Security The security offered against any Loan facility is an insurance to fall bank upon incases of need. Security serves as a safety value for an unexpected crisis. Since risk factors are involved, security coverage has to be taken before a lending. National interest Banking industry has significant role to play in the economic development of a country. The bank would lend if the purpose of the advances can contribute more to the overall economic development of the country. [2.6] PRESENT POSITION OF LOAN IN BASIC BANK LTD.

AM OUNT IN TAKA

50000000000 40000000000

Fig 3: Growth of Credit

30000000000

Explanation:

20000000000

This graph shows that BASIC Bank, savar Branch’s growth of

10000000000 0

2008

2009

2010


Credit has increased amount of Tk. more than 4000000000 in year 2010 compare to year 2008 and 2009 amount of Tk. more than 2000000000 and less than 3000000000 respectively. [2.7] LOAN POLICY BASIC was established to provide term loan (including working capital loan) and other financial assistance (including all kinds of banking facilities) to increase speed the pace of development to small industry of Bangladesh. It is mandated in the Memorandum & Articles of Association of Bank to advance a minimum of 50% of the loan able fund to the small industry sector. As a broad policy idea in respect of small industry financing the Bank undertakes the following tasks:        

Extend financial assistance to small industries in private sector. 50% of total loans and advances will be to small industry sector. Extend financial assistance to micro-enterprises and collaborate with other institutions engaged in financing and developing such enterprises. All lending will be adequately secured with acceptable security and margin requirements as laid down by the Head Office Loan Committee. The Bank will not incur any uncovered foreign exchange risk (currency exposure) in the lending of funds. No term loans will be approved for the commercial sector. Exceptions will be rare and will require approval of the Head Office Loan Committee. End-use of term loan and working capital facilities will be closely monitored to ensure that the funds are used for the purpose for which they were advanced. Spreads over cost of funds on loans and advances and commissions and fees on other transactions should be commensurate with the rating of the borrower, quality of risk and the prevailing market conditions.

[2.8] GENERAL PROCEDURE OF LOAN:


[2.9] COMMON DOCUMENTATION FOR LOAN AND ADVANCE: Records are obtaining such agreement where all the terms and condition and securities are written and signed by the borrower. It specifies rights and liabilities of both the banker and the borrower. In records each type of advances requires a different set of documents. It also differs with the nature of securities. The documents should be stamped according to the stamp Act. There are no hard and fast rules of records and it varies from bank to bank. The common document require for any kinds of Loan are:           

Demand promissory note: Here the borrower promises to pay the loan as and when demand by bank to repay the loan. Letter of arrangement. Letter of continuity. Letter of hypothecation of goods and capital machinery. Stock report: This report is used for OD and CC. In this report, information about the quality and quantity of goods hypothecated is furnished. Memorandum of deposit of title deed of property duly signed by the owners of the property with resolution of Board of Directors of the company owning the landed. Personal guarantee of the owners of the property. Guarantee of all the directors of the company. Resolution of the board of directors to borrow fund to execute documents and completes other formalities Letter of Revival Letter of lien for advance against FDR.

[2.10] ANALYSIS OF BORROWER LOAN WORTHINESS: Borrower Loan worthiness can be determined by analysis of 6 Cs which has given below: ♣ Character The first section queries about the applicants’ general biographical information. ♣ Capacity


The second portion of the application form is about the business/ service information of the applicant. Here the name of the company/office is vital. If relationship with current employer is less than two years then previous employers name must also be mentioned. ♣ Capital This portion enquires about the expected cost of purchase and tenure of the loan. This section analyzes the explanation of the loan amount to the purchase cost. ♣ Collection This section asks whether the application will be 100% secured with the hypothecation over purchased asset and about the security ratio and the applicable interest rate. ♣ Condition Understanding the business and economic conditions can and will change after the loan is made. ♣ Control Conditions refer to the economic policies and actions that may affect the nature of business of the applicant and may have future control on the repayment behavior. And control refers to the amount of which the bank can check the customer in case of defaults. If the borrower's found satisfactory in terms of all C’s only then it is suggested to entertain the borrower. [2.10.1] Suggestion to reduce that problem (numerical judgment to select a particular borrower): Under the LOS, the bank is dealing directly with many borrowers at time and is providing unsecured loan to them and apply some numerical judgment to select a particular borrower for unsecured loan disbursement. In this regards, BASIC Bank uses numerical credit scoring model. Under the model, the potential borrower is asked a set of question at the beginning of processing of loan proposal. The answer are then scored based on the standard s value previously set to score a loan application . Based on the score , a credit proposal is stated to process further or refused .The model is as followed:


SL No 1

2

3 4 5

6

7 8 9 10 11 12 13 14

particulars Professions Fixed salaried person (Govt./ reputed organization) Professionals Monthly Net Cash Flow (in BDT) 5000-6000 6001-8000 8001-10000

Allotted points 0-5

100,001-15,000 15,001-20,000 20,001-25000

40 43 45

25,001-30000

48

30,001-40000 40,001-50000 50,001-60000 60,001-80000 80,001and above Ownership of a car Holding a land phone residence Ownership of a house in the metropolitan area

50 53 55 58 60

0-3 Allotted points 30 33 35

Assigned points 5

Point scored

60

3 2 3

Customer of the bank having other well performed credit facility/considerable deposit/LOS loan availed earlier & repaid as per term. Other mentionable regular income/earning by spouse 0-3 Guarantors status 1-2 Social status/Reputation of the customer 0-3 Holding a passport 1 Income tax payer 0-2 First class club member 1 FDR of form of securities 1-10 Reputation of suppliers 0-2 Total points Table 1: Numerical judgment to select a particular borrower

3

3 2 3 1 2 1 10 2 100

Different classes of scores are fixed and a limit of the loan is to be fixed based on the scores. Different classes are shown below where total scoring is calculated based on cumulative value of hundred.


SL NO 1 2 3 4 5 6 7 8 9 10 11

Scores (Ranges) 35-37 38-40 41-43 44-46 47-50 51-54 55-58 59-61 62-65 65-70 70+

Limit of the credit which can be offered (in BDT) 20,000-25,000 25,000-30,000 30,000-40,000 40,000-50,000 50,000-70,000 70,000-80,000 80,000-90,000 90,000-100,000 100,000-150,000 150,000-200,000 200,-000-300,000 Table 2: Limit of the credit DEPOSIT ACTIVITY

[3.1] TYPES OF DEPOSIT Deposit is the main sources of fund of BASIC Bank. The following includes the common types of deposits of the Bank: A. Demand Deposit: Demand deposit is with draw able at time and without notice. BASIC Bank accepts demand deposit through: • Savings Deposit. • Current Deposit • Special notice Deposit (STD). B. Time Deposit: A deposit which is payable at a fixed date or after a period of notice is time deposit. BASIC Bank accepts demand deposit through: • • • •

Fixed Term Deposit Basic Fortune.(DPS) Monthly Benefit Scheme (NEW) Double Benefit Scheme(NEW)

Fig 4: percentage of different types deposit A/C

Explanation: This graph shows that BASIC Bank, savar Branch’s has increased its different types of deposit account is now term deposit 82%, savings deposit 6% , current and others deposit


12% respectively . Here the percentage of term deposit is high compare than savings, current and others deposit accounts.

[3.2] PRESENT DEPOSIT POSITION AMOUNT IN TAKA

50000000000 40000000000 30000000000 20000000000 10000000000 0

2008

2009

2010

Fig 5: Deposit Growth

Explanation: This graph shows that BASIC Bank, savar Branch’s growth of its deposit has increased amount of Tk. more than 50000000000 in year 2010 compare to year 2008 and 2009 amount of Tk. more than 35000000000 and 30000000000 respectively. [3.3] SAVINGS DEPOSIT: This deposit especially for small- scale saves. The main objective of this account is promotion of thrift. Hence, there is restriction on withdrawals in a weak. Heavy withdrawals are permitted only against prior notice. . According to 2010 financial year total their saving deposit is more than TK. 1200000000. General Features:


As per Bangladesh Bank instruction 90% of SB deposits are treated as time liability and 10% of it as demand liability • Small-scale savers generally operate SB accounts. • Not more than one account may be opened in one name by an individual. • Interest on Savings Bank Accounts shall be allowed. • All accounts are to be made up to date before half yearly and yearly closing. • Account holders can earn interest at a yearly rate of 7% twice in a year depending on the monthly minimum balance. • For withdrawals of amounts of over the Transaction profile limit, the customer shall be required to give 2 days notice in writing. • No interest will be paid in a Savings Bank Account for the month in which withdrawals have been made more than twice a week. • For opening saving account the client need to deposit at least 500 taka. • No Savings bank account shall be allowed to overdrawn. • Accounts maintaining fee half yearly and yearly 200 taka and vat taka 30. • BASIC Bank provides 10 page Magnetic Link Character Recognition (MICR) cheque leaf and Deposit slip to savings account without any cost. • Account closing charge is taka 300 and vat 15%. • On line charge on savings account for withdrawal and receive is cost free. Documents require for opening SB account    

Two copy passport size photograph attested by the introducer. One copy passport size photograph of nominee attested by the account holder. Photocopy of National ID card / Passport / Driving license / Office ID / Birth certificate / Other ID acceptable to the Bank. Minor accounts additionally require 1 copy photograph of minor.

Present position of SB Deposit AM OUNT IN TAKA

1400000000 1200000000 1000000000 800000000 600000000 400000000 200000000 0

2008

2009

Fig 6: SB Deposit Growth

2010


Explanation: This graph shows that BASIC Bank, savar Branch’s SB deposit growth has increased amount of Tk. less than 1400000000 in year 2010 compare to year 2008 and 2009 amount of Tk. more than 800000000 and 1000000000 respectively. [3.4] CURRENT DEPOSIT: Different group of industrial customers encouraged to open current deposit account includes: commercial, small scale industry, medium scale industry, and large-scale industry. According to 2010 financial year total their current deposit is more than TK. 4000000000. General Features: • • • • • • • • • • • •

In Current Accounts there is no restriction on withdrawals. This type of account is most suitable for the depositors who need to deposit and withdraw money frequently. Individuals, traders, import & exporters, general merchants, other business and nonbusiness enterprises, manufacturers, government offices etc. generally handle this type of account. In BASIC Bank ltd open current account for Individuals, Proprietorship firms, Partnership firms, Joint stock Company and Corporate Body. For opening current account the client need to deposit at least 1000 taka. Bank does not pay any interest to CD Account holders. Funds in the Current Deposits Account shall be payable on demand. The Bank through current account grants loans and advances to the customers. In practice of BASIC Bank ltd maintain a minimum balance of TK.1000. BASIC Bank provides 20/50 page Magnetic Link Character Recognition (MICR) cheque leaf and Deposit slip to savings account without any cost. Accounts maintaining fee half yearly and yearly 400 taka and vat 15%. Account closing charge is taka 300 and vat 15%. On line charge on CD account for withdrawal and receive is cost free. Documents require for opening CD account • The valid Trade License • Tax Paying Identification Number (TIN). • Declaration of Proprietorship. • Copy of partner deed of the firm. • Certified true copy of the Memorandum. • List of partners with there address. • Two copy passport size photograph of every partner attested by the introducer. • Company/Partnership/Individual seal. • Certified true copy of Incorporation of the company.

Present position of CD Deposit


AMOUNT IN TAKA

5000000000 4000000000 3000000000 2000000000 1000000000 0

2008

2009

2010

Fig 7: CD Deposit Growth Explanation: This graph shows that BASIC Bank, savar Branch’s CD deposit growth has increased amount of Tk. more than 4000000000 in year 2010 compare to year 2008 and 2009 amount of Tk. more than 2000000000 and less than 3000000000 respectively. [3.5] SPECIAL NOTICE DEPOSIT (SND): When the depositors need not to make regular withdrawals of their money, this type of account is justified as it earn interest @ 5.80% per annum, although lesser than SB accounts. The large companies, organizations, various government departments maintain SND accounts where frequent withdrawals are discouraged. This type of depositors normally uses SND account to transfer excess money from current account in order to earn interest. According to 2010 financial year total their special notice deposit (SND) is more than TK.6000000000. General Features: •

SND account can be treated as semi-time deposit.

• •

• • •

Frequent withdrawal is discouraged and requires prior notice. Volume of SND A/C is generally high. In BASIC Bank various big companies, organizations, Government Departments keep money in SND accounts. For opening SND account the client need to deposit at least 1000 taka. BASIC Bank provides 20/50 page Magnetic Link Character Recognition (MICR) cheque leaf and Deposit slip to SND account without any cost. Accounts maintaining fee half yearly and yearly 400 taka and vat 15%. Account closing charge is taka 200 and vat 15%. On line charge on SND account for withdrawal and receive is cost free.

The interest offered for SND is less than that of savings deposit.

• •

TK.0 Corer to TK.1 Corer TK.1 Corer to TK.25 Corer

5.40% 5.50%


TK. 25 Corer to TK.50 Corer TK. 50 Corer to TK.100 Corer TK. 50 Corer to TK.100 Corer

5.60% 5.70% 5.80%

Table 3: Rate of interest on SND Deposit Documents require for opening SND account • • • • • • • • •

The valid Trade License Tax Paying Identification Number (TIN). Declaration of Proprietorship. Copy of partner’s deed of the firm. Certified true copy of the Memorandum. List of partners with there address. Two copy passport size photograph of every partner attested by the introducer. Company/Partnership/Individual seal. Certified true copy of Incorporation of the company.

Present position of SND Deposit AMOUNT IN TAKA

7000000000 6000000000 5000000000 4000000000 3000000000 2000000000 1000000000 0

2008

2009

2010

Fig 8: SND Deposit Growth Explanation: This graph shows that BASIC Bank, savar Branch’s SND deposit growth has increased amount 0f Tk. more than 6000000000 in year 2010 compare to year 2008 and 2009 amount of Tk. 3000000000 and 3000000000 respectively. [3.6] FIXED TERM DEPOSIT: Fixed Term Deposit is an important factor for the bank and volume of Fixed Term Deposit determines the investment base of the bank. Basically this is the recruitment unit of the Bank. Fixed Term Deposit is time deposits or time liabilities. In this deposit scheme, a customer deposits an amount of cash in Bank for a specified fixed period. According to 2010 financial year total their fixed term deposit is more than TK. 40000000000.


General Features: • Fixed Term Deposit shall be opened for a fixed period, varying from 1 months to 2 years or above and are payable at a fixed date of maturity. • The bank needs not to maintain cash reserves against these types of deposits. Thus BASIC Bank ltd. offers high interest for such deposit scheme. • But as the interest rate changes continuously due to intense competition and changing monetary policy of the government. •

Can be opened by all. The current rate of interest and maturity period as offered by BASIC Bank Ltd. is given bellow: PERIOD 1 Month Tenure 3 Month Tenure 6 Month Tenure 12 Month Tenure 24 Month & Above

INTEREST RATE 8.75% 8.25% 8.50% 8.75% 9.00%

Table 4: Rate of interest on Fixed Term Deposit Documents require for opening Fixed Term Deposit: • The depositor has to fill an application form. • In case of a deposit in joint name, BASIC Bank Ltd. also takes the instructions regarding payment of money on maturity of the deposit. • The banker takes the specimen signatures of the depositor(s). • Necessary entries are given on the Fixed Term Deposit register. • A Fixed Term Deposit is then issued to the depositor acknowledging receipt of the sum of money mentioned therein. It also contains the rate of interest & the date on which the deposit will fall due for payment. •

In case of withdrawal before maturity the previous maturity period is considered to pay interest – it is known as Break Down Payment

Introducer is not needed

• •

Two copies of party’s and two copies of nominees photograph are needed. Loan can be sanctioned against this Fixed Term Deposit.

Present position of Fixed Term Deposit


AM OUNT IN TAKA

45000000000 40000000000 35000000000 30000000000 25000000000 20000000000 15000000000 10000000000 5000000000 0 2008

2009

2010

Fig 9: Fixed Term Deposit Growth Explanation: This graph shows that BASIC Bank, savar Branch’s Fixed Term deposit growth has increased amount of Tk. more than 40000000000 in year 2010 compare to year 2008 and 2009 amount of Tk. 35000000000 and 30000000000 respectively. [3.7] BASIC FORTUNE (DPS): DPS is a pension scheme, which was recommended by the Government in the eighties. Nowa-days banks are reluctant to open such an account because the Government is not showing its interest any more. The Branch is only maintaining those accounts opened previously. The interest rate on this account is 9% per annum’s Depositor can open any Deposit Pension Account for deposit of TK.500/-, TK.1000/-, TK.5000/-, TK.10000/-, and TK.20000/- in each month. And for this the depositor will have to deposit the specified amount of money by the 15th day of each month either in cash or link with SB Account. The depositor of this account can select more than one nominee for claiming the deposited money after his death. A Depositor can withdraw the total amount of deposit (Principal + Interest) at a time after a specific period of 3, 5, 7 or 10 years General Features:

1 2 3 4

Can be opened by all.

Depositor can choose any denomination of deposit per month at time of opening the scheme.

There is no particular deposit book for deposit amount to DPS account, Only SB deposit book is applied in this case.

Inns. Amt 500 1000 2000 5000

3 Years

5 Years

7 Years

10 Years

Tk.=20627.00 Tk.=41254.00 Tk.=82508.00 Tk.=206270.00

Tk.=37658.00 Tk.=75316.00 Tk.=150632.00 Tk.=376580.00

Tk.=57893.00 Tk.=115786.00 Tk.=231572.00 Tk.=578930.00

Tk.=95601.00 Tk.=191202.00 Tk.=382404.00 Tk.=956010.00


5 6

10000 20000

Tk.=412540.00 Tk.=753160.00 Tk.=825080.00 Tk.=1506320.00

Tk.=1157860.00 Tk.=2315720.00

Tk.=1912020.00 Tk.=3824040.00

Table 5: Maturity Value Table of DPS Documents require for opening BASIC Fortune (DPS) • Two copy passport size photograph of account holder attested by the introducer. • One copy passport size photograph of nominee attested by the account holder. • Photocopy of National ID card / Passport / Driving license / Office ID / Birth certificate / Other ID acceptable to the Bank. [3.8] MONTHLY BENEFIT SCHEME: Monthly Benefit Scheme is a new scheme of BASIC Bank Ltd. for gaining more clients. It is one kind of Time Deposit for the period of 5 years. General Features: •

The client must open a savings account before opening Monthly Benefit Scheme.

Interest of this scheme is 12%.

The interest of this scheme is transferred to clients savings account in every month.

The principal amount will be returned to customer after 5 year maturity date.

The amount of this scheme is about 25 thousand to 50 lac.

Documents require for opening Monthly Benefit Scheme. • Two copy passport size photograph of account holder attested by the introducer. • One copy passport size photograph of nominee attested by the account holder. • Photocopy of National ID card / Passport / Driving license / Office ID / Birth certificate / Other ID acceptable to the Bank. [3.9] DOUBLE BENEFIT SCHEME: Double Benefit Scheme is a new scheme of BASIC Bank Ltd. for gaining more clients. It is one kind of Time Deposit for the period of 5 years & clients get double benefitof their total deposit. And its general features & documents as like to monthly benefit scheme. [4.1] FINDINGS: The Loan management of BASIC Bank Limited enables it to make sure a soft loan system. •

BASIC bank follows the Loan risk policy guidelines as instructed by Bangladesh Bank in different circulars at different times.

Interest rate on different loan and advance is lower than other commercial banks, which makes its loan products very attractive to the client’s. Interest rate of savings account (7%) is higher than other commercial Banks. Online transaction is fully cost free; it’s a very attractive feather for clients.

• •


• • • • • • •

No charge for cheque leaf is another attractive feather of BASIC Bank. Interest rate of fixed term deposit is lower than other commercial Banks. Mentionable that BASIC Bank Ltd. is 100% state owned schedule Bank. Interest rate of Deposit pension scheme of BASIC Bank (9%) is lower than other commercial Banks. There are few number (only 5) of ATM booths. Castle On-line banking software is used by BASIC Bank Ltd. This is quite difficult to use for the employees who are not well trained. BASIC Bank has only 35 branches. But in future come to know that they will open 10 more branches & 15 SME Centre within this year. Overall they do not have any hidden charge like other private Commercial Banks which makes it more attractive to its customer.

[4.2] SUGGESTIONS: Although Loan Operations department is the key department of the banking operations, a number of problems have been detected while working this bank. These problems along with the recommendations for solving them are stated here: In spite of this found few problems as follows: •

BASIC Bank should emphasize on more promotional activities.

To minimize the risks of default loans & deposit, it needs to improve their super in the Loan department, testing supervision is necessary to avoid loan defaulters. The bank official should do regular visit to the project vision and control units. Information system should be more developed to manage up with the present customer’s need. Bank must establish more new branches without ado. Bank should increase the DPS interest rate. Bank should set up more ATM booth. BASIC Bank, usually, does not provide overdraft without full coverage of security. As a result, its overdraft facility is not increasing. Every nationalized bank has huge political involvement. So, BASIC bank believe that if a portion of its share is sold in stock market, the problem may be overcome.

• • • • • •

[5.1] CONCLUSION: BASIC Bank Limited is only one of its kinds in terms of establishment, its permission, and its objectives. Through this the Bank has in the mean time found its own special position in the sector at the higher support of the self. BASIC Bank is expected to continue to maintain strong competitive frame in banking sector in Bangladesh in the years in advance. Through Bank’s area and included approach, The Bank aims to build a strong position in the industrial development of Bangladesh. The Bank also plans to maintain its focus on managing capital and costs to maximize shareholders' value. In this environment, The Bank expects to make further gains in revenue, income and return on capital.


Recent Bank’s performance in different field of banking strongly suggests that BASIC Bank is one of the soundest banks operating in the country. Although Government of Bangladesh is the sole shareholder of this Bank and the way thinking forward is quite inspiring. BASIC is a trend setter in banking industry. Much improvement in different sector with a practical manner can make a difference in the banking business. Online Banking is the demand of today’s active world and BASIC is way towards performance of Online Banking within two years from now. Appendix:-1 [5.2] PERFORMANCE ANALYSIS: (Taka in Core) SL

Particulars

2010

2009

1 2 3 4 5 6 7

Paid up Capital Total Capital Capital Surplus / (Deficit) Total Assets Total Deposits Total Loans and Advances Total Contingent Liabilities and Commitments Credit - Deposit Ratio Percentage of Classified Loans against total Loans and Advances Profit after Tax and Provision Amount of Classified Loans and Advances Provision Kept against Classified Loan Cost of Fund Interest Earning Assets Non-interest Bearing Assets Return on Investment (ROI) Return on Assets (ROA) Incomes on Investment Earnings Per Share (EPS) Net Income Per Share

1,964,655,000 5,073,072,836 221,442,836 61,569,386,675 49,259,600,843 46,341,513,504 22,161,472,129

1,455,300,000 4,293,562,623 1,108,492,823 45,308,315,925 34,501,698,265 29,261,534,342 16,069,084,643

8 9 10 11 12 13 14 15 16 17 18 19 20

94.08% 4.83%

84.81% 4.83%

660,936,270 2,239,968,230

648,853,399 1,412,346,626

734,544,770

523,394,422

8.13% 52,810,422,036 8,758,964,640 10.01% 1.24% 651,524,002 33.64

7.58% 40,172,871,716 5,135,444,209 12.67% 1.41% 761,821,420 44.59

33.64

44.59

Table: 6 Highlights on the overall activities of the BASIC Bank for the year 2010 and 2009. Appendix:-2 [5.3] Recovery Target 2011: (Taka In core) Targets Classification amount as on Oct’10 Target of recovery from CL for ‘11 Written off amount as on Oct’10 Recovery target against Written off amount up to 2011 SMA amount up to Oct’10 Recovery against amount may be CL during 2011

Main Branch 562.36 350.00 263.18 190.00

Savar Branch 85.15 45.00 930.94 688.00

46.91 25.00

0.00 0.00


Total Recovery Target for 2011 565.00 Projected year Classified amount 158.00 end up to Dec’ SMA amount 0.00 11 Business performance up to December 2010 (Taka In core) Advance Main

733.00 0.00 0.00

Savar Branch

Achieved Dec ‘09 3211.05 Achieved Nov ‘10 55489.84 Target Incremental 12488.95 2010 Outstanding 44500.00 Achieved Incremental 31273.02 Dec ‘10 Outstanding 63284.07 % Vs Incremental 250.41% Achieve Vs outstanding 142.21% Single month’s position 7794.23 Table 7: Business Performance Profit Target 2011: (Taka In core) View Head office Main branch Target 2010 31.85 25.00 Achieved 2010 58.47 24.68 Target by Branch 2011 45.29 30.00 Initial Target 2011 50.00 33.00 Target Modified by H.O. 2011 60.00 30.00

3931.13 5593.11 3068.87 7000.00 3249.75 7180.88 105.89% 102.58% 1587.77

Savar 3.00 2.99 3.25 3.55 4.00

Table 8: Profit target of the bank. Loans and Advances Target 2011: This target is set after analyzing past results and current resources. (Taka In core) Particulars Target 2010 Achieved 2010 Target by 2011 Initial Target by Branch 2011 Target Modified by H.O. 2011

Main Branch 445.00 632.84 800.00 850.00 800.00

Savar 70.00 71.81 90.00 92.00 90.00

Loans and Advances Target 2011 with last 05 years position: (Taka In core)


Items 2005 Advance 2006 Achieve 2007 2008 2009 Avg. Growth Sep ‘10 Dec ’10 Br. Est. Dec. ’10 H.O. est. H.O. Target 2010 Branch Target 2011 H.O. Target 2011 Target Modified by H.O. 2011 % increase from 2010 Dec. Est.

Main 265.87 304.99 351.93 385.43 320.11 8.75% 497.60 618.00 630.00 445.00 800.00 850.00 800.00 34.92%

Savar 31.97 31.05 48.74 45.19 39.31 1.82% 55.86 70.00 75.00 70.00 90.00 92.00 90.00 26.67%


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