AB Bank

OnOverall Performance of AB Bank Ltd.

Jubilee Road Branch, Chittagong

Submitted to

Prof. Dr. Milan Kumar BhattacharjeeProfessor & Chairperson

Faculty of Business Studies

Premier University ,Chittagong.

Submitted by

Suman DasProgram:MBA

Roll No- 0410230293Semester: Jan’05

Department of Business Administration Premier University, Chittagong

Internship Duration: February01-May 01, 2007

Submission Date: 05.05.2007

Prepared by Suman Das.

LETTER OF SUBMISSION

May 05.05.2007.

ToThe Chairperson Faculty of Business StudiesPremier University, Chittagong.

Sub: Application for Submission of Internship Report.

Dear Sir,

It’s my pleasure that I am submitting a report on AB Bank Ltd., Jubilee

Road Brach, Chittagong, where I have been assigned to complete the

internship program to have better concepts over the practical Banking

arena. I was placed in all of the departments such as- General Banking,

Accounts, Credit, Cash, Account Opening and Foreign Exchange to

cope with the Banking practice on practical arena.

I focused basically on key functions and different desk task to upgrade my practical expertise based on theoretical concepts and notions.


Whenever you would like to any topic of this report with me I will be available at your convenience.

Sincerely yours

PREFACE

Internship program is one of the most significant topics of our M.B.A.

program. Now the world is competitive. So we have to earn the

knowledge about the critical environment of business. This type of

program helps the student to acquire practical knowledge about the

contemporary business organization. It will also help the student to be

an effective executive in future. Different organizations take different

kind of policies to operate their business. A reputed private Bank like

AB Bank Ltd. takes different kind of modern Banking system to satisfy

their customers.

As a student of MBA, Premier University of

Chittagong, I have been assigned to prepare the


internship report on “Overall Performance of AB Bank”

considering AB Bank Ltd., Jubilee Road Branch,

Chittagong, as a model .I have tried my best with all my

aptitude to complete this report with aptness.


ACKNOWLEDGEMENT

This internship report is on “Overall Performance of AB”

considering AB Bank Ltd., Jubilee Road Branch,

Chittagong, as a model I want to give unique thanks to

all of the employees of AB Bank for providing me all sort

of instructions that I needed. My honorable teacher

Professor Dr. Milan Kumar Bhattacharjee, gave me

detail instructions how to collect data from primary

sources as well as secondary sources. He used up his

valuable time to give me theoretical knowledge about

research methodology of banking system.

For carrying out my internship program I have selected

AB Bank, Jubilee Road Branch, Chittagong. I have been

ongoing my internship program for three months on the

following Bank. I worked there in the amiable and

affable atmosphere. I work on the entire department of

the Bank. I also bring together information from several

high officials. All of the officials were very much

supportive and candid en serving me in every feature.

They provide me all sort of necessary articles whatever I

needed.


I feel highly gratified to my teacher for his hearty and

close co-operation and also all of the employees of AB

Bank Ltd., Jubilee Road Branch, Chittagong.

(Suman Das)


EXECUTIVE SUMMARY

Proximity of practical scenario is a must to male the theoretical concept and

learning fruitful. Practical orientation is an exciting opportunity to be well

conversant with the practical Banking.

During the practical orientation period I was assigned to three key departments by rotation. These comprised:

General Banking. FCD Credit. Cash Account Opening Foreign Exchange. Remittance. Dispatch.


These three departments form the core of banking practice of AB Bank Ltd. One of the vital departments is General Banking, Comprises accounts, remittance, account opening, inward and outward collection. Meeting customer’s satisfaction through faster and better service is the key mission of the General Banking Department.

The influential one is credit department, which keeps a key role to augment the banks growth and earning. Providing different sort of credit and schemes like trust receipt, Bank guarantee, industrial loan, IT loan, consumer credit schemes, house finance is the main mission of credit department.

Foreign Exchange the topmost section for international trade-moves the wheel of economy moving. AB Bank Limited is providing different sorts L/C services like L/C opening, lodgment, BLC and facilitating Import in the country.

However this some timely initiative will ensure better, smarter and faster banking boom for the AB Bank Ltd. The way AB Bank is moving up to also mind blowing and auspicious. Now it’s time to take off to unlimited prospect.

TABLE OF CONTENTS

CHAPTER – I

Internship Report, Prepared by Suman Das.- 1 -

Background of the Report

--------------------------------------------- 1

Objective of the

Study-------------------------------------------------- 2

Methodology of the

Study---------------------------------------------- 3

Limitation of the Study------------------------------------------------- 4

Background of the AB Bank------------------------------------------- 5

Corporate Information at a

Glance----------------------------------- 6

Corporate Mission of the AB

Bank----------------------------------- 7

Functions of the AB Bank of Bangladesh

Ltd---------------------- 8

Organogram-------------------------------------------------------------

- 9

Organogram of Jubilee Road

Branch--------------------------------- 10

Resources and

Capabilities---------------------------------------------- 10

Monetary / Financial

Resources--------------------------------------- 12

Performance of the AB

Bank------------------------------------------ 16


CHAPTER – II

General

Banking----------------------------------------------------------- 17

Functions of General

Banking------------------------------------------ 17

Sections of General

Banking-------------------------------------------- 18

Documents to be obtained for different types of account------

25

Remittance

Section-----------------------------------------------------

27

Cash

Section------------------------------------------------------------- 31

Clearing and Bills

Section---------------------------------------------- 35

Outward Bills for Collection

(OBC)--------------------------------- 37

Mail Receive and Dispatch

Section---------------------------------- 38

Accounts

Department-------------------------------------------------- 39

CHAPTER – III


Loans and

Advances--------------------------------------------------- 41-53

Foreign

Exchange------------------------------------------------------ 54-57

Guarantee----------------------------------------------------------------

58-77

Foreign

Remittance---------------------------------------------------- 78-80

SWOT Analysis of AB Bank

Ltd------------------------------------ 81

CHAPTER – IV

Overall performance of AB Bank are shown by

means

of graphical

representation-------------------------------------------- 82-90

CHAPTER – V

Recommendation-----------------------------------------------------

--- 91

Acronyms-----------------------------------------------------------------

93


Bibliography------------------------------------------------------------

-- 94

CHAPTER – I

BACKGROUND OF THE REPORT

MBA Program conducted by the Premier University of

Chittagong is a very much theoretical and practical

oriented program in the arena of business and non-

business financial sector. Since, the students of the

program were engaged with very much theoretical

course work. For my academic curriculum purposes I

have completed my Internship Program. The sole aim of

the Internship Program is to blend our academic

knowledge with that of practical ones and give us an

insight into the Management of organization in real life

situations. As a part of practical orientation program I


was attached to AB Bank, Jubilee Road Branch for three

month. On completion of the practical orientation

program it was supported to me to prepare and submit

a report of such program. The report comprising with

the organizational overview, operation of Banking in the

different section such as General Banking, Loans &

Advances and Briefly analysis the performance of the

Branch. Finally the report has been concluded with

some recommendations. It is expected that the report

will highlight the task performed and experienced

gained during the practical orientation program.

OBJECTIVE OF THE STUDY

The first objective of writing this report is to fulfill the

partial requirements of the M.B.A program. Other

objective of the report is to familiarize with the

operation in the Banking arena including Management

overview of bank and analysis of banking operation in


different section. Import & export and credit facilities

provided by the bank in Foreign Trade. More especially

the objectives of the study are:

To highlight on the profile of AB Bank of

Bangladesh Ltd.

To examine the general banking functions.

To examine the activities of the loans and

advanced department.

To evaluate the performance of AB Bank.

To recommend some corrective measures to

resolve the problem.

METHODOLOGY OF THE STUDY

In order to complete this report I proceeded through a work plan. I physically visited and discussed with executives and top level management of Bank of Small Industries and Commerce Bangladesh Limited become conversant with the banks philosophy, working


procedures, management system and decision making process of the banks.

The details of the work plan are furnished below:

Data collection methodRelevant data for this report has been collected primarily by direct investigations of different records, papers, documents etc. operational process and different concerned personnel. The interviews were administered by formal and informal discussion. No structured questionnaire has been used. Information regarding office activities of the bank has been collected through consulting bank records and discussion with office personnel.

Data sourcesThe information and data for this report have been collected from both the primary and secondary sources.

Data ProcessingData collected from secondary sources have been processed manually and qualitative approach has been used throughout the study.

Data analysis and interpretation

Qualitative approach has been adopted for data analysis

and interpretation taking the processed data as the

base. So the report relies primarily on an analytical

judgment and critical reasoning.


LIMITATION OF THE STUDY

Objective of the practical orientation program is to have

practical exposure for the students. Our tenure was for

three month only, which was somehow not sufficient.

After working whole day in the office it was very much

difficult, if not impossible to study again the theoretical

aspects of banking.

Other limitations are as follows:

For the lack of our practical knowledge, some

shortcoming may be available in the paper.

The bank has naturally shown us some

indifference connecting its most confidential

information.

The executives of Arab Bangladesh Bank

Limited were too busy to spare time for the

internee.

The duration of my internship program is only

3 months. The allocated time is not sufficient

for us to gather knowledge and to make the

study a complete and fruitful one.



BACKGROUND OF THE AB BANK

AB Bank Ltd. started its operation on 31st december3rd

1981 as a public limited company under Companies Act 1913, subsequently replaced by The Companies Act 1994, and governed by The Banking Companies Act 1991. The Bank went for public issue of its shares on 28 December 1983 and its shares are listed with Dhaka Stock Exchange and Chittagong Stock Exchange for trading ABBL has 66 branches all over Bangladesh including 1 Islami Banking branch, 1Overseas branch at Mumbai, India and 2 representative offices each in London and Myanmar. The bank has a subsidiary company, AB International Finance Ltd, incorporated in Honkong. It is the first private commercial Bank in Bangladesh.

With general commercial banking AB Bank plays an important role and contribution toward conducting business in the countries exports and imports. Providing financial assistance to business communities & exporters and importers, and for functioning as the principal financial institution for coordinating the working of institutions engaged in financing export and import of goods and services with the view to promoting the country’s international trade and for matters connected there with or incidental there to.

Thus, AB Bank is the apex body in respect of Export and import finance. AB Bank provides loan for extending export and establishing alternative imported industry very easy condition. To the commercial banks, AB bank


offer refinances and rediscount facilities against export advances made by them.

To the banks overseas, AB Bank offers re-lending facilities to enable them to finance imports from Bangladesh. For these reasonable causes the establishment of AB Bank is a new emergence of the banking function. It is governed by the banking companies act. 1991.

CORPORATE INFORMATION AT A

GLANCE(Information as per last Annual Report 2005)

Name of the bank : AB Bank of Bangladesh

Limited

Status : Public Limited company:

Date of Incorporation : 31December, 1981.

Inauguration of the Jubilee Road Branch : 26th July ,

1994.

Head Office:

BCIC Bhaban, 30-31,

Dilkusha Commercial Area,

Dhaka

Chairman : Faisal M. Khan

Managing Director : Kaiser A Chowdhury

Manager of Jubilee Road Branch : Mr. Md. Abdul Jabber

Authorized Capital : TK.800 Million


Paid up Capital : TK. 519.76 Million

Directors : 8

Number of branches : 67

Deposit : Tk. 27,361.44 Million

Loan : Tk. 21,384.63 Million

Number of Employees : 1525


CORPORATE MISSION OF THE AB

BANK

1. To receive, borrow or raise money on deposit, loan

or otherwise, upon such terms as the company may

approve and to give guarantees and indemnities in

respect of all debts and contacts.

2. To establish maintain, carryon, transact and

undertake all kinds of investment, merchant and

financial business, including underwriting,

managing and distributing the issue of stocks,

shares bonds, debentures, import permits other

securities directly or thorough jointly with one or

more banks or financial institution.

3. To carry on the business of dealers in foreign

exchange including buying and selling of foreign

exchange, dealing in foreign currency notes,

granting and issuing of letters of credits, travelers

cheques, circular notes and negotiating, and

discounting of export documents and all other

matters related to foreign exchange business.

4. To carry on the business of buying and selling gold

and other valuable species.

5. To provide for safe deposit vaults and safe custody

of valuables of all kinds.


6. To act as agents for the sale and purchase of any

stocks, shares or securities or for any other

monetary or mercantile transaction.

7. To form, manage, join or subscribe to any

syndicate, or any holding company or trust to carry

on business of an investment trust company.

8. To act as official liquidator and receiver.

9. To conduct the business of banking in its branches

and abroad.

10. To act as executors and trustees of wills,

settlements and trust deeds of any kind made by

customers and other matters related thereto.

FUNCTIONS OF THE AB BANK OF

BANGLADESH LTD

a. The main task of the AB Bank is to accept deposited

from various customers through various accounts.

b. Provides loans on easy terms and condition.

c. It creates loan deposit.

d. The bank invest it fund into profitable sector

e. It transfers money by Demand Draft (DD), Pay

Order (PO), On-line and Telegraphic Transfer etc.


f. The bank is doing the transaction of bill of

exchange, Cheque etc. on behalf of the clients.

g. AB Bank assists in the Foreign Exchange by issuing

Letter of Credit.

h. The bank insures the securities of valuable

documents of clients.

i. It brings the increasing power of dimension of

transaction.

j. Above all, AB bank helps the businessmen

financially by giving discount facility for bill of

exchange and by providing the facility of Letter of

Guarantee.


ORGANOGRAM:


Chairman

Vice Chairman

Board of Director

Managing Director & President

SEVP SEVP SEVP SEVP

EVP EVP EVP EVP

SVP SVP SVP SVP

VP VP VP VP

SAVP SAVP SAVP SAVP

AVP AVP AVP AVP

SPO SPO SPO SPO

PO PO PO PO

SO SO SO SO

OFFICER OFFICER OFFICER OFFICER

ORGANOGRAM OF JUBILEE ROAD BRANCH

RESOURCES AND CAPABILITIES

AB Bank is well prepared to and capable of meeting the

demand for a broad range of banking services. It has

got adequate resources, both human and physical, to

provide the customers with the best possible services.

Physical and Technological Resources

A great deal of investment for developing the physical

resource base of the Bank has been made. AB Bank has

its presence in all the major industrial and commercial

hubs of Bangladesh in order to cater to the needs of


GeneralBankingIn charge

Deposit & Account Opening

Information Technology

In charge

CreditIn charge

Cash In charge

Head Office

Remittance

industry and trade. At present, there are twenty-nine

conveniently located branches throughout Bangladesh.


Major features of these branches are:

Fully computerized accounts maintenance.

Well decorated and air conditioned facilities.

A fully operational computer network, which is

currently being implemented. The work of Local

Area Network (LAN) and Wide Area Network (WAN)

installation to facilitate fast communication between

the branches and the Head Office is in progress.

Money counting machine and Money detecting

machine for making cash transactions easy and

prompt.

Human Resources

Quality human resources denote an organization

worthy, knowing of one’s job and having interest in it, is

a precondition of good functioning. AB has a well-

diversified pool of human resources, which is composed

of people with high academic background. Also, there is

a positive demographic characteristic. Most of the

employees are comparatively young in age and mature


in experience. As at end 2005 the total employee

strength is about 1525.


Training

Training, on a regular basis, is being imparted to

employees of both management and non-management

levels. Human resource is a precondition of good

functioning; with this view in mind AB bank trained

their Officers and Executives both home and abroad.

Recruitment of New Officers

The Bank follows a strict recruitment policy in order to

ensure that only the best people are recruited. With

view to improving efficiency of human resource AB bank

always recruit fresh and enthusiastic youth who have

completed their studies from universities directly as

officers through competitive examination.

MONETARY / FINANCIAL

RESOURCES

Like any other financial intermediaries, ABBL is no

exception in performing its core functions viz.

Mobilization of fund and utilizing such mobilized fund

for profitable purpose.

1. Mobilization of Fund:

The main sources of fund for BASIC are:


Deposit Capital and Reserve Fund

Deposit

Deposit constitutes the core of AB Bank’s fund

mobilization. Total deposit of the Bank at the end

of 2005 stood at Taka 27361.44 million compared

to Taka 28,299.23 million in 2004. During 2005,

the fixed deposit increased to Taka 17487.15

million from Taka 13360.14 million in June

2005registering a growth of 30.89 percent. Saving

bank deposit increased to Taka 1310.77 million in

June 2005compared to Taka 1080.60 million in

2004 with a growth rate of 21.30 percent. Deposit

in current and other accounts including bills

payable increased to Taka 2692.63 million in June

2005 from Taka 1463.95 million in 2004 a growth

of 83.92 percent.

Capital and Reserve Fund

The authorized capital of the bank is Tk. 800 million.

The paid up capital of the bank at the end of 2005


stood Tk. 519.76 million compared to Tk. 495.01

million in 2004.

The bank raised its reserve from Tk.623.99 million to

Tk. 826.33 million.

2. Utilization of fund

AB utilizes its funds in accordance with its

organizational goals and corporate strategy. Main use is

for lending to industrial and trade sector. Maintenance

of cash and statutory liquidity reserve with the

Bangladesh Bank covers 20 percent of demand and time

liabilities. Placement of funds in NOSTRO Accounts to

handle foreign trade and investment in money market is

also done as usual.

Investment

In an effort to secure more stable and predictable

earning from its investment, the Bank focused its

attention on investment in Govt. securities, shares

and call money market. The total investment of the

bank stood at Tk. 4060.95 million as on December

2005 as against Tk. 6738.15 million in the previous

year showing an increase of(39.73) %

(Amount in million)


Year 2005 2004 2003

Govt. Securities 1500.57 1500.68 2200.36

Others 120.47 42.29 176.71

Total Investment (HO)

1621.04 1542.97 2377.07

(Source: Annual Report 2005 )

Loan and Advances

ABBL lends support towards development of trade,

business and other commercial activities in the

country. The bank provides cash credit for local

trade, export cash credit, packing credit, and local

bills purchased and foreign bills purchased

facilities. As on 31.12.2005, total amount

outstanding in respect of those facilities stood at

TK. 21384.63 million including compared to Taka

17008.50 million of 2004 representing a growth of

25.73%

(Amount in million)

Year 200 200 2003Loan and Advance(Jub Road Br.)

211.00

27.18 412.00

(Source: Annual Audited Report 2006)

Foreign Trade


The Bank handles foreign trade in which it has a

comparatively large share despite its small size.

ABBL provides various facilities related to L/C and

post import finance like loan against imported

merchandise (LIM), loan against trust receipt

(LTR), back to back L/C and pre-shipment finance

facilities like export credit and packing credit to

exporters. So far the Bank has established

correspondence relationship with as many as

foreign banks in order to facilities foreign trade.

The Bank handled total export business of Taka

12595.20 million .And import business of Taka

23150.85 million in 2005. The import business

increase by 20.16 percent and export business

increase by 24.70 percent. Major items of exports

were garment sand jute products. Items of import

included mainly industrial raw materials, garments

accessories and capital machinery.

Head Office(Amount in million)

Year 2005 2004 2003

Import Finance 23150.85

19266.00

19281.23

Export Finance 12595.20

10100.00

9743.08


(Source: Annual Report 2005)

Other activities

The Bank provides services for remittance,

underwriting, guarantee, public Offering of shares

etc. The Bank also provides funds to investment and

leasing Companies.

PERFORMANCE OF THE AB BANK

The overall performance of AB Bank Ltd. so far is shown

as follows:

(F

igure in MillionTaka)

Seri

al

No.

Particulars 2005 2004 2003

1. Authorized

Capital

800.00 800.00 800.00

2. Paid-up Capital 519.76 495.01 471.44

3. Reserve Fund 826.33 623.99 592.10

4. Deposits 27361.44 28299.23 27260.16

5. Advances 21384.63 17008.50 20435.24

6. Investment 4060.95 6738.15 3335.87

7 a) Import

Business

23150.85 19266.00 19281.23


b) Export

Business

12595.20 10100.00 9743.08

c) Remittance 115.41 83.47 73.65

Total 35861.46 9777.96 12183.84

8. Operating Profit 162.45 90.07 17.12

9. Number of

Branches

67 70 69


CHAPTER – II

GENERAL BANKING

Out of three major sections General Banking is

important one. General banking is the heart of total

banking system. Through this section bank has to

receive and disburse money, to develop banker

customer relationship by opening different types of

account and providing prompt services to the

customers. This department collects money from the

depositor and uses these deposits to earn profit.

FUNCTIONS OF GENERAL BANKING:

The functions of general banking department of AB

Bank of Bangladesh Ltd. are as follows:

1. Maintenance of different types Deposit A/C:

Saving Accounts Current Accounts

Fixed Deposits Short Term

Deposits

Other Saving Schemes

2. Opening different types of accounts.

3. Receipts & payment of cash.

4. Handling transfer transactions.


5. Operations of clearing house.

6. Maintenance of accounts with Bangladesh Bank &

other banks.

7. Collection of Cheques & Bills.

8. Issue and payment of Demand Drafts, Telegraphic

Transfers, Online Transfers & Payment Orders.

9. Maintenance of Safe Deposit Lockers.

10. Maintenance of Internal Accounts of the

banks.

11. Reporting to the Head Office about daily

position of the bank.

12. Saving record of all transactions in computer.

13. Closing and transfer of different types of

accounts.

14. Keeping good relation with valued customer.

15. Providing necessary support to the customers.

SECTIONS OF GENERAL BANKING:

During my practical orientation in AB Bank, Khatunganj

Branch, it came to the observation that general banking

section is divided with four areas. These are:

Account opening section

Remittance section

Bills and clearing section


Cash section

Mail receive and dispatch section

Account Opening Section:

One of the vital sections under general Banking is the

account opening section. Banker customer relationship

begins through this section. Various tasks are

performed in this section. Such as:

Opening of different types of account.

Issue of checkbook.

Transfer and closing of account.

Enquiry of account.

Checking The Signature of the client.

Various types of account offered by AB Bank:

AB Bank offers various types of account to its different

types of customer. These are as follows:

Current deposit (CD) account

Savings bank (SB) account

Short term deposit (STD) account.

Fixed deposit (FDR)

Current Deposit (CD) Account:A current account is an account, which is generally

opened by business people for their convenience. A


current account is a running and active account, which

may be operated upon any number of times during a

working day. There is no restriction on the number &

amount withdrawals from current a/c. It does not earn

any interest.

It has the following properties:

Opening Amount/ Initial Deposit Tk.

10000

Service Charge (yearly)

Tk. 500

Minimum Balance Requirement Tk.

10,000

Savings Bank (SB) Account:

This deposit is intended primarily for small-scale savers.

The main object of this account is promotion of thrift.

Savings account is meant for those who want to save a

certain amount of their income and earn interest on that

for future needs. All features are more or less like that

of CD a/c except for some restriction that is imposed by

the bank. Number of withdrawals over a period of time

is limited. . This A/C mainly opens on person name.

SB account has the following properties:



10,000


Tk. 300.00


10,000

Interest rate

6%

One cannot withdraw money more than two

times in a week.

The withdrawing amount is not to exceed 25%

of the total balance.

If customer withdraws money more than twice

in a week than no interest is given to

customers on his account.

Fixed Deposit Receipt (FDR) Account:

In this category are included the deposit with the bank

for a fixed period which is specified at the time of

making the deposit. A fixed deposit is repayable on the

expiry of a specified period, chosen by the depositor to

suit his purpose and to enable him to get back money as

and when he needs it. The fixed deposit may be made

for 3 months, 6 months, 1 year, 2 year or 3 year. As the


date of repayment of fixed deposit is determined in

advance, the banker need not keep more cash reserves

against it and can utilize such amount more profitably.

The banker therefore offers higher rate of interest on

such deposits. Fixed deposit has grown in importance

and popularity in our country during recent years.

When a matured FDR is withdrawn, the principle

amount along with the interest amount (deducting 15%

tax from the total) is paid to the client.

The rate of interest and the terms of the Fixed Deposit receipt are given below:

Term 1 mont

h

3 month

s

6 mont

hs

1 Year

2 year

s

3 Years and above

Interest rate

(Up to Tk 1,00,000

9.50% 11.00% 11.50%

11.50%

12.50%

12.50% & Above

Interest rate

(Above Tk

5,00,000

9.50% 12.00 12.25%

25.50%

12.50%

12.50% & Above

More than 1,00,000 & less than 5,00,000

Short Term Deposit (STD):

It is a deposit account opened by customer where customer deposited money for short period. Customer can draw money after giving short notice. This account


holder enjoys the same facilities of CD account including receiving interest on his deposited money. Interest rate of STD is less than the interest rate of SB account. account has the following properties:


50000


Tk. 250


50000

Interest rate

4 %

Various types of Savings Schemes offered by AB

Bank:

AB Bank offers various types of Savings Schemes to its

different types of customer.

These are as follows:

Monthly Savings Scheme (MSDS).

Monthly Income Scheme (MIS).

Super Savings Scheme (SSS).

Multi Plus Super Savings Scheme (MPSS).

Monthly Savings Deposit Scheme (MSDS):


Small savings can formulate large deposit. Savings

increases mental power of a man, form capital and

increases the confidence of a depositor. AB Bank

introduces a saving scheme with high profit for the

purpose of increases saving mentality. In this savings

scheme one can deposit money in every month and will

get a handsome amount of money at the end of certain

period. The amount of savings/deposits as per monthly

installment and period is shown in below:


Monthly Savings Deposit Scheme.

The installment amount, tenure and matured value is tabled hereunder:

Monthly

Deposit Money

(Tk)

Payment after

05 (Five) years

Payment after

10 (ten) years

500.00 38,388.00 94,786.00

1000.00 76,776.00 1,89,572.00

1500.00 1,15,164.00 2,84,358.00

2000.00 1,53,552.00 3,79,144.00

2500.00 1,91,940.00 4,73,930.00

3000.00 2,30,328.00 5,68,716.00

3500.00 2,68,716.00 6,63,502.00

4000.00 3,07,104.00 7,58,288.00

4500.00 3,45,492.00 8,53,074.00

5000.00 3,83,880.00 9,47,860.00

Monthly Incomes Schemes (MIS):

In this type of scheme one can invest certain amount of

money for certain period of time for receiving a steady

return after every certain period of time. Lowest amount

of investment is Tk. 1,00,000 and the period of this


scheme is 3 years. The amount of money invest should

be the multiple of 1,00,000.

Table showing the income per deposited amount:

Deposit Amount (Tk.)

Income (Tk.)

1,00,000.00 1000.00

2,00,000.00 2000.00

4,00,000.00 4000.00

Super Savings Scheme (SSS):

Savings helps to build up capital and capital is the

prime source of business investment in a country.

Investment takes the country towards industrialization,

which eventually creates wealth. That is why savings is

treated as the very foundation of development to create

more awareness motivates people to save. AB Bank

offers Supers Savings Scheme. The client will get

double amount of his principle amount after maturity.

Minimum Amount Required Tk. 5000

The amount should be the multiple of 10,000

The amount should be double after 6 years


Tax rate is 10%

Multi Plus Savings Scheme (MPSS):

Under this scheme the amount will be doubled in 11

years term. Compound interest rate is counted. The

amount multiples three times after 10 years. It has the

same properties as like as Supers Savings Scheme.

DOCUMENTS TO BE OBTAINED FOR

DIFFERENT TYPES OF ACCOUNT:

When anyone comes to open an account he has to submit some documents to the banker. Different types of document needs for different customer. Some common documents require for all types of account are:

Introducer recommendation.

Specimen signature card.

Account opening agreement form.

Two copies of Photograph of account holder

and two copies of nominee (if any).

Deposit slips book.

Chequebook requisition slip.


Letter of mandate authorizing another person

to operate the account on behalf of the

account holder.

Certain types of documents are needed for special customers. These are:

Proprietorship Account:

Document requires for proprietorship business to open an account are:

Introducers with account number. Valid trade license from City Corporation,

Attested copy should be submitted. Tax Identification certificate. Nationality certificate from local authority.

Partnership Account:

Documents to be obtained for opening an account of partnership firm are:

Trades license or board resolution. Deeds of partnership signed by all partners. Two copies photograph of each partner. Partnership resolution signed by all partners

to open account. Resolution must indicate authorized person

who operates the account. Limited Company Account:


Document required for Limited Company account to open an account are:

Memorandum and Articles of Association of Company.

Resolution of Board of Director. Certificate of incorporation. Certificate of commencement of business in

case of public limited company. List of director. Two copies of passport size photograph of

account operators. Others: name director s with signature,

minutes of board of director.

REMITTANCE SECTION

The major function of commercial Banks is mobilization of fund. Other than this, banks provide supplementary services to its clients. Clients need to remit money from one place to another for their business or other purposes. Banks fulfill this need of customers by means of remittance service. Money can be remitted domestically or internationally, which known as local remittance and foreign remittance.

There are three ways of transferring fund domestically. The modes of transferring funds are:

Pay- Order (PO). Demand Draft (DD).


Telegraphic Transfer (TT). Mail Transfer (MT). Online Transfer.

Payment Order / Pay Order (P.O)

This is an instrument issued by the branch of a bank for

enabling the Customer/Purchaser to pay certain amount

of money to the order of a certain

person/firm/organization/office within the same

clearinghouse area of the pay order-issuing branch.

Characteristics of P.O:

The issuing branch and paying branch are

same.

Application for payment within the clearing

house area of the issuing branch.

This may be open or can be crossed.

Procedure of Issuing Payment Order:

Obtain P.O. application from duly filled in and

signed by the Purchaser/application.

Receive the amount in cash/transfer with

commission amount.

Issue Pay Order.

Enter in Pay Order register.


Table showing the Charge for Pay Order:

Amount Commission Vat @ 15%

on

Commission

Total

Charge

Less than

TK.1000

25 2 17

TK. 10,001-

1,00,000

50 4 29

Tk. 1,00,001-

5,00,000

75 8 58

TK. 5,00,001

above

100 15 115

Demand Draft (D.D)

This is an instrument through which customer’s money

is remitted to another person/firm/organization in

outside the clearinghouse area from a branch of one

bank to an outstation branch of the same bank or to a

branch of another bank (with prior arrangement

between that banks with the issuing branch). This is an

order instrument in which the issuing branch gives

instruction to the payee/drawer branch to pay certain

amount of money to the order of certain


person/firm/organization. Commission, vat and postage

are charged for issuing DD.

Example: - To transfer money from Chittagong to

Dhaka.

Procedure for issuing D.D.:

Obtain D.D. application from duly filled in and

signed by the purchaser/application.


prescribed commission and postage amount.

Issue the D.D. duly in and signed by the

authorized officer.

Insert test number (where applicable)

Enter in the D.D. issue register.

Issue advices to the payee branch.

Procedure for payment of D.D.:

Examine the D.D. by verifying the signature,

test number, serial number etc.

Enter the D.D. payable register.

Verify with the IBCA number.

Pass necessary vouchers.

Charge for Demand Draft:

Minimum amount for a DD is TK. 25.

Commission is the 0.10% of the DD amount.


Vat is TK. 15% on the commission amount.

Telegraphic/ Telephonic Transfer (T.T)

This is a mode of transfer of customer’s money from a

branch of one bank to another branch of the same bank

through telegraphic/telephonic message. The issuing

branch used to send the message of such remittance

through telegraph/telephone adding certain code

number or test number on the basis of test key

apparatus developed by the concerned bank for its

different branches. The drawer and the payee is

required to have account with the bank in order for this

transaction to take place. TT is issued against cash,

check, letter of instruction etc.

Characteristics of T.T

Issued by one branch to other branch and message

is tale-communicated.

Remittance/ transfers of money are done through

tested Tele-messages.

Remittance is affected on the basis of tested

message.

Test key apparatus is required.


Procedure for issuing T.T.:

Obtain T.T. application from duly filled in and

signed by the purchaser/application with full

A/C particulars of the beneficiary.


prescribed commission, telephone/telex and

postage amount.

Prepare T.T. message inserting the test no.

Enter in T.T. issue register.

Issue advice to the payee branch.

Procedure for payment of D.D.:

Note the message T.T. and verify the test

number and confirm the T.T. serial no. etc. is

ok.

If ok make entry in to T.T. payable Register

Pass necessary vouchers for payment.

For quickest remittance customer use this means to

transfer money from one place to another place. Within

10 minutes beneficiary will get the amount.

Charge for T.T.:

Minimum amount for a TT is TK. 25.

Telephone Charge is TK. 50

Commission is the 0.10% of the TT amount.


Vat is TK. 15% of the commission amount.

CASH SECTION

Cash section is an important section where cash

transactions are made. Cash sections demonstrate

liquidity strength of a bank. It is also sensitive as it

deals with liquid money. Maximum concentration is

given while working on this section. Tense situation

prevails if there is any imbalance in the cash account.

There are various systems maintain by cash officer that

is under:

Vault Cash Payment

Cash Receive Evening banking.

The cash department is the riskiest department of the

bank. This is the section where tight security is required

to avoid any accidents. There is a limit to be amount of

cash that each counter can carry; carrying of excess

cash is avoided for safety reasons. If there is any surplus

in the cash then the excess amount should sent to the

Bangladesh Bank or if there is any shortage in the cash

then the shortage amount should be borrowed by the

bank from Bangladesh Bank or from the Head Office or

Other Banks.


Cash Receipt:

When clients deposit cash in the bank, the bank officer

should follow the following common precaution:

Check and count the received cash.

Make sure that the amount in word and number in

the deposit slip are same.

Check the account title and the number.

Both the deposit slip is in order.

Depositor’s signature is in the slip.

Receive seal in the slip is a must.

Write the domination of the currency at the back of

the pay in slip or the credit voucher and affix stamp

in the slip/voucher.

Enter particulars of in slip/credit voucher in the

receiving cash officer book.

At least, send the pay in slip/voucher to the deposit

department or to the respective department.

The respective officer must sign deposit slip.

Carbon copy of the deposit slip must be handover

to the client with proper seal and signature.

Cash Payment :


Cheques, demand drafts, pay orders, pay slips and debit

cash vouchers etc. are received from various

departments for payment of cash to customers/payees.

Prior payment of cash it is the officer’s duty to make

sure that the cheque/or the instrument has been

genuinely passed. The following common precaution is

thoroughly practiced before honoring a cheque:

The branch name in the cheque.

The date in the cheque is very crucial. Cheques

are normally valid for six months and pre-dated

cheques are asked to present after the date

given.

Tk in words and figure of the cheque is same.

Balance in the account is available.

The apparent tenor of the cheque. Whether any

figure, date or anything has been altered in the

cheque presented. If any, then the respective

officer must check whether the client is making

his signature for alteration or not.

The specimen card signature and signature in

the cheque should match.

Signature of recipient is obtained on the reverse

of cheque.


In case, where a prior arrangement has been

made with the bank, a client may overdraw

against a Cheque.

Books maintained by cash department:

Vault Register: This is the book where amount of cash

available in the branch is maintained. That is, the

amount in the vault register book.

Cash Receive Register: This register keeps record of

all incoming cash.

Cash Payment Register: Similar to the cash register

book, this books keeps tracks of all outgoing cash, that

is all payments.

Cash Position Register: This is the book where cash

balance is recorded by counting the notes and coins that

are physically available. The balance in this book is

compare with the vault register, which should be the

same. In case there is an error, then the figures would

not match but if no discrepancy is found then nothing is

to be worried about.

Other Registers:


Money Remittance Register

Prize Bond Register

Stamp in hand Register

Cash Section has two Automatic Machine.

Money Counting Machine: With the help of

this machine officer can easily count the

money. It save time and also provide accuracy.

Money Detector Machine: This machine

helps officer to find out the fake money.

CLEARING AND BILLS SECTION

Clearing and bills section is an important section of

General Banking. This is the section through which

branch has to clear it’s inter branch and inter bank

transaction. Customers do pay and receive the

collecting branch the system is known as IBC.

Clearing:

As far as safety is concerned customers get crossed

cheque for the transaction. As we know crossed cheque

cannot be encased from the counter, rather it has to be


collected through banking channel i.e. clearing. For

example, a client of AB Bank received a cheque of

another bank, which is located within the clearing

range; deposit the cheque in his account at AB Bank.

Now AB Bank will credit his account and collected it.

Though the amount is credited in the customers account

but he will not get the money until he cheque is

honored.

Types of Clearing:

1. Outward Clearing: Outward clearing means when a

particular branch receives instrument drawn on the

other bank within the clearing zone and those

instruments for collection through the clearing

arrangement is considered as outward clearing for

that particular branch.

2. Inward Clearing: When a particular branch

receives instruments which on themselves and sent

by other member bank for collections are treated as

inward clearing.

Clearing house


Clearing House is a place in the Central Bank where

different banks come to settle their interrelated

liabilities.

Clearing House System

The mechanism of working at a Clearing House in general is as follows:

Every Bank of the locality, which is a member of the

clearinghouse, prepares a Bank-wise list of cheques

after receive from customers and drawn on different

Banks of the locality.

An officer, in charge of clearinghouse, goes to the

clearinghouse in the morning with the cheques and

their list. He delivers the cheques to the officials of

the respective banks. Similarly, he also receives the

cheques drawn on his Bank from the officials of the

other banks.

The official of each bank computerizes the final

balance, payable or receivable by his Bank after

taking into account the various amount of receipt and

payment.

The official return of their respective Bank to meet

again in the afternoon to return any dishonored

instruments to the officials of the respective Banks.


The final settlement is effective by the supervisor of

the clearinghouse by debiting or crediting, as the

case may be, the accounts of the respective Banks as

maintained with the clearinghouse.

OUTWARD BILLS FOR COLLECTION

(OBC):

Customers deposit cheque, drafts etc. for collection,

attaching their deposit slip. Instruments within the

range of clearing are collected through local

clearinghouse. But the other, which is outside the

clearing range, is collected through OBC. A customer of

AB Bank, Jubilee Road Branch, is depositing a cheque of

Sonali Bank, Dhanmondi Branch. As a collecting bank

AB Bank, Jubilee Road Branch sends IBCA along with

cheque to AB Bank Collecting. AB Bank, Main Branch

will collect it by AB Bank, Dhanmondi Branch, the

agent. They will forward the bill to that particular

(Dhanmondi) branch. OBC number is given on the

forwarding letter.


Charge for OBC:

Amount Minimum

Amount

Commissi

on

Postage

Charge

Vat 15%

on

Commission

Tk. 1-25,000 TK. 25 0.15% 20 ”

TK 25,001 -

1,00,000

Tk. 50 0.15% 20 ”

1,00,001 -5,00,000 Tk. 200 0.10% 20 ,,

5,00,001-

10,00,000

Tk. 500 0.05% 20 ,,

10,00,001 & Above Tk. 750 0.05% 20 ,,

Inward Bills For Collection (IBCA):

In this case bank will work as an agent of the collection bank. The branch receives a forwarding letter and the bill. Next steps are:

Entry in the IBCA register, an IBCA number given. The instrument is sent to clearing for collection.

An IBCA is dispatched in this regard.

If dishonored in this case the instrument is returned to the collecting branch along with return Memo indicating the cause of dishonored.

MAIL RECEIVE AND DISPATCH SECTION

Banking is the business of correspondence. Lot of mail comes to the bank and dispatch from the branch daily. Lot of money document causes much loss for bank. That


is why bank has to record all Mail received and dispatched through the bank.


Mail receiving:

All mail comes to the bank recorded in this desk. For this reason a register book maintained called inward mail register. A number is given on receiving mail and records particulars of document in the register book.

Mail Dispatching:

Before dispatching mail from the bank must record in outward mail register. A number is given on the mail. Destinations, date of dispatch are recorded in that register book.

ACCOUNTS DEPARTMENT

Accounts division is the nerve center of a bank. As all transactions carried by a bank is being legalized as far as accounting is concerned. If transactions were not recorded properly there would be disequilibrium in state of the bank. There can be imbalance in the cashbook thus the whole mechanism will collapse. The regular tasks of department are:

To record all transactions in the cashbook. To prepare daily fund position, weekly

position, periodic statement of affairs. Prepare necessary statements for reporting

purpose. To pay all expenditures on behalf of the

branch. Make salary statements and pay salary. Branch to branch fund remittance and

supporting accounting treatment. Prepare statements for customer.


Publishing basic data of the branch etc.

General practices of an Accounts Department:

AB maintains slip system of accounting.

Scrutinizing Vouchers:

At the day end all vouchers are sent to the accounts department by the respective department from where vouchers are originated. On the next day an `activity report’ is received from computer department. The activity report is the detail statement of all the transactions carried by the branch of a particular date. It is the summary of all account position. It also displays cash, clearing, transfer position, individual deposit account position etc.

Statement Prepared in Account Section: The following weekly / monthly / quarterly and half-yearly statements should be submitted to Central Accounts Division of Head Office:

SL No

Particulars of Statement

Period Last date of

submission to HO.

01 Weekly Position Weekly By every thurs day

02 S.B.S.—1 Monthly 1-3th next month

03 S.B.S.—2 Quarterly 5th next month

04 Quarterly Statement of Scheduled Bank

Quarterly 7th next month


05 Statement of Deposit Landing and Borrowing

Half Yearly

7th next month

06 Business Performance report

Monthly 1st next month

This department also prints the following statements:

Daily Statement of Affairs.

Daily Statement of Income & Expenditure.

Daily Loan Listing.

CHAPTER – III

LOANS AND ADVANCES

The two main functions of a bank are to borrow money

from public by accepting deposit and lending it to the

public for the development of trade, commerce, industry

and agriculture. Banks give some interest to depositors

for deposit and take higher interest for lending. The

margin is the bank’s profit. So, lending is by far the

most important function of modern bank. The strength

of a bank is, thus, primarily judged by the soundness of

its advances. A wise and prudent policy in regard to

advances is considered an important factor inspiring


confidence in the depositors and prospective customers

of a bank.

Advances not only play an important part in gross

earnings of bank, but also promote the economic

development of the country. All types of business

activity includes trade, industry and agriculture have to

depend on bank finance in one form to offer. Bank by

channeling accumulate savings of the nation into

productive uses, help both the depositors and the

borrowers. AB disburses advances in two broad areas.

These are industrial credit and commercial credit

scheme.

Industrial credit:

Industrial credits are given for industrial purpose. The

sector where some process involves is called industry,

such as shape of material. Industry can be two types:

1. Manufacturing industry- Cement, steel factory

etc.

2. Service industry- Hotel, transport, etc.

Industrial credit is given for two purposes:

Term loan - fixed assets financing. Working capital - current assets financing.


Commercial Credit:

Commercial credits are given for trading purpose where

no process involved. AB Bank lends support towards

development of trade, business and other commercial

activities in the country.

Forms of Loans and Advances:

The making of loans and advances has always been

prominent and profitable function of a bank.

Sanctioning credit to customers and others out of the

funds at its deposal is one of the principle services of a

modern bank. Advances by AB Bank are made in

different forms. Such as:

Overdraft Term loan Bills Portfolio Packing Credit Bank Guarantee Commercial Loan


Overdraft (OD):

The overdraft is a kind of advances always on a current

account operated upon by cheque. The customer may be

sanctioned a certain limit upon which he can overdraw

his current account within a stipulated period. Here,

withdrawal or deposits can be made any number of

times of the convenience of the borrower provided the

total amount withdrawn does not, at any time exceed

the agreed limit. Interest is calculated and charged only

on the actual debit balance on daily (produced) basis.

While in a current account cheques are honored if the

balance is in credit, the OD arrangement enables a

customer to draw over and above his own balance up to

the extent of the limit stipulated.

It is essential that a letter of continuity must be

obtained in case of OD account. The letter makes the

customer liable to the final balance of his account by

confirming the intervening debits and credits in his

account. Interest rates for OD are 13.50% or interest

rate of the Financial Paper (FDR etc.) plus 2%.

AB has the following types of OD: SOD against financial obligation SOD against FDR


SOD general Others


Term Loan:

The loan which, is repayable in fixed fixture date, is

called term loan. This loan is made to large well-

established business enterprise for financing capital

expenditure. Businessman requires this loan for

purchase or renovation of funds, buildings, and factory

sheds, and machinery etc. the loan is to be repaid for

according to a scheme of repayment by installments.

Installments may be monthly, quarterly, semiannually,

annually depending on type of loan. This type of is given

for long term, mid term, short term and requires large

investment. Market study and environment is necessary

before allowing such loan. ABBL charges 13% /14%

interest for such loan.

Staff Loan :

AB provides loan facilities to its employees. Interest

rates vary on the nature and objective of loan. Basically

staff loan is disbursed for staff house building purpose

and household consumption. In case of staff loan

repayment procedure is followed on monthly basis.

Bills Portfolio:


Bank can allow credit to customers in the way of

purchasing and discounting bills. When client submit

bills, a margin (covering also the interest on the loan)

amount is deducted from the face value of the bill and

the rest is provided to the client .Bills can be local or

foreign. This may be clean or documentary.

Documentary bill is supported by various documents

such as ---

Local Bill Purchase supported by

Documents [LBP (D)]

Foreign Bill Purchase supported by

Documents [FBP (D)]

Packing Credit:

Packing Credit (P.C.) is provided to the client against

confirmed export orders (Export L/C) covering

maximum 90% of the value of the order. As the name

implies this type of loan is provided to procure &

process the raw materials for making finished goods to

be exported. This loan is provided at reduced interest

rate as per Bangladesh Bank’s instruction. However,

Bank can avail refinance subsidy from Bangladesh Bank

to compensate the reduced interest rate. The packing

credit is adjusted through the export proceeds. The

Export L/C becomes primary security for the loan. The


loan is sometimes collateralized by equitable mortgage

of property. In any case Export Finance Guarantee from

Sadharan Bima Corporation has to be obtained before

the lain is disbursed. Interest rate is 13%

Bank Guarantee:

Bank Guarantee is also a non-funded facility provided to

the client. Bank on behalf of the client undertakes to

pay agreed amount of money at certain time if client

fails in due performance. Bank Guarantee is generally

provided in Lieu of earnest money for bidding in tender

by the client (Bid Bond) or as guarantee for due

performance of contracted work (Performance

Guarantee).AB Bank generally provides guarantee

facility for maximum one year. Usually 10% - 25%

margin is obtained from the client against the guarantee

amount.

Commercial Loan:

This type of credit facilities is mainly related to post

import financing. It is given for short period. BLC, LIM,

LTR are fall in this category. The details are as follows:

BLC:


This means Bills Under Letter Of credit. After getting

documents from negotiating bank-opening bank informs

importer for clear the documents and bank creates a

loan account. 30 days are allowed for this type of loan.

Bank charge interest @ 13% in this credit facility. The

Bank that establishes the letter of credit is bound to

honor its commitment to pay for import bills when these

are presented for payment, if drawn strictly in terms of

the letter of credit. The foreign correspondent, who

negotiates the documents, gets payment as per

stipulated reimbursement terms of the L/C to the debit

of the account of the L./C opening bank’s F. C account.

The opening bank lodge the shipping documents in their

books and responds to the debit advice originated by

foreign correspondent to the debit of Bills under Letter

of Credit ( payment against documents (PAD)) account.

In fact, the amount stands as advance to the importer,

which is adjusted by delivery of documents against

payment, or by allowing post import finance such as

LIM or LTR.


LIM:

LOAN AGAINST IMPORTED MERCHANDISE (LIM)

is connected with import facilities. As per pre-

arrangement or under forced situation when the client

is unable torture the LC documents, bank then clear the

imported goods from the customs and store it in banks

warehouse. LIM is given for maximum 60days within

which customer has to adjust liability and take delivery

of the imported goods from the banks custody. Bank

charges interest @ 13% on this credit facility. The bank

through its approved clearing agent clears the

merchandise. The advance is adjusted by delivering the

goods against payment by the importer. The documents

remain with the Bank.

LTR:

LOAN AGAINST TRUST RECEIPTS (LTR) is also post-

import finance facility. This type of facility is given to

creditworthy and selective customer. In LTR goods are

sent to the customers’ go-down after clear from Port.

Customer has to adjust liability within 90 days or the

days determined by the client and banker of taking such

facility. Bank charge interest @ 14% for this credit

facility.



Procedures of Loan Sanction and Disbursement

Bank follows some necessary steps to sanction loan to

borrower. This procedure mainly applicable for

sanctioning and disbursing term loan although other

advancing procedures are also follows nearly the same

procedure.


Loan Application From

First Information Sheet

Credit Investigation

Loan Appraisal

Credit List Proposal

Loan Disbursement

Follow Up

Loan Adjustment

Sanction Letter

Loan Documentation

Recovery of Loan

Documents required for procuring Loan Proposal:

Following are the client should supply the documents:

a. TIN certificate of the client.

b. Bank statement for last two years.

c. Up to date trade license.

d. Present liability position of the company and

owners.

e. Name and Address of the Sister concern

f. Export and Import performance.

g. Personal information in a prescribed from.

h. Balance sheet for the last three years

i. Memorandum & Article of association signed

by the Managing Director

j. Profile of directors or partners.

Credit Investigation and Loan Appraisal:

After getting Loan application from the customer, bank

started appraisal of the loan.

For this bank

First collect necessary information about the

client.

And then with help of this information bank

appraisal the loan application.

Collection Of Credit Information:


For the purpose of assessing the creditworthiness of a

borrower a banker has to collect the above-mentioned

information from a number of sources. Every bank

maintains a Credit investigation department at its

head office and main offices in larger cities to collect

information regarding the financial position of its

borrowers. At other centers, branch mangers perform

credit investigation. The credit information is

collected through the following sources:

Borrower: Most of the information may be secured

from the borrower directly. The loan application form

seeks basic information about the borrower and his

business. The banker may examine his accounts

books and note his past dealings with other banks or

parties.

Market Reports: Banks try to find out the

creditworthiness of the party by making enquiries

from the brokers, traders and businessmen in the

same trade or industry. Their individual opinions may

differ but a balanced opinion may be formed about

the borrower on the basis of the feelings expressed by

a number of such persons.


Exchange of Credit Information amongst

Banks: It is the practice and customary usage

amongst banks to exchange credit information

relating to the constituents in their mutual interest.

But the credit reports exchanged by banks are brief

and superficial. They are in general and guarded

terms. Banks are reluctant to exchange meaningful

credit information because they apprehend that legal

protection available to them will be lost if more facts

are divulged to the enquiring banks.


Loan appraisal:

With the help of the above information the bank

appraise the loan proposal by the following points:

Credit Worthiness of the client on the basis of

5 C’s.

i) Capital, ii) Character, iii) Capacity,

iv) Control and v) Collateral

Background of the Client’s family.

Nature and scope of the business of client.

Market reputation of the client.

Turnover of the business of client.

Dealings of client with the bank and turnover

in client’s bank account.

Client’s business experience.

Worth & property of the client.

Location of business/firm/industry.

Amount and Purpose of the loan.

Turn over of the sister concern (if any).

Preparation of Loan Proposal and Sanction:

Branch if satisfied with the client and want to sanction

credit to the client then it prepare a loan proposal with

all details as discussed above and send to the higher

authority for approval.


Credit proposal is include with the following:

1) Application of the borrower

2) Stock Report

3) Undertaking from the borrower

4) Valuation report of Collateral

If higher authority approved then branch will sanction

credit to the client.

Necessary documents for Loan Settlement:

For SOD against F.D.R/P.S.P./Saving

Scheme/General Loan:

a) Demand promissory (D.P.) note.

b) Letter of Arrangement.

c) Letter of Lien.

d) Letter of Continuity.

For SOD General, Cash Credit (C.C.)

Hypothecation:


b) Letter of Arrangement.

c) Letter of Hypothecation.

d) Letter of continuity.

e) Supplementary Arrangement.

For Staff Loan:



b) Letter of Undertaking.

c) Letter of Authority.

d) Letter of installment.

e) Letter of Disbursement.

f) Letter of Arrangement.

g) Letter of Hypothecation.

h) Supplementary letter of

i) Hypothecation/pledge.

For Public Limited Company:

With the above documents “Personal

Guarantee” of all directors is necessary.

Loan Disbursement

Loan is allowed for a single purpose where the entire

amount may be required at a time or in a number of

installments within a period of short span. After

disbursement of the entire loan amount, there will be

only repayment by the borrower. A loan once repaid in

full or in part, cannot be drawn again by the borrower.

Entire amount of loan is debited to the loan A/C in the

name of the customer and is paid to him through his

STD/CD Account. Some times loan amounts are

disbursed in dash.


Follow up and recovery of the Loan:

After disbursement of lone to a client it is the sole duty

of the disbursing branch to follow up loan, whether it is

properly utilized or not. So report on development and

submit the same to the manager/sanctioning authority.

If loans properly follow up by the disbursing branch,

then the risk of default will minimize.

FOREIGN EXCHANGE

Commercial bank collects the ideal saving from the

people and supplies them into productive channels. The

success of a commercial bank depends on how

successfully it can be mobilizing saving and advance

short and long term credit to business community. In

addition to deposit mobilization and credit management,

commercial bank as well as AB Bank of Bangladesh

Limited deals in foreign exchange, which includes

remittance of currency and financing, exports and

imports. Foreign exchange dealing is one of the main

functions of the bank and it generates a significant

portions a bank’s income.


Foreign Trade is one of the most important segments of

Bank Business. With the changes of time international

trade is diversifying gradually. Modern banks (like

ABBL) are playing significant role in foreign trade.

Foreign trade Comprises of Import & Export business. A

lot of work relating to export and import are done by

banks. While performing those tasks bank should be

very much cautious as lot of complexities are there.

Foreign trading is strictly controlled by the Bangladesh

Bank. Therefore a deviation or mistake will cost bank a

more. Dealing in foreign trading needs a lot of

concentration, accuracy and technical know how as any

mistake or malpractice may lead to disaster for a Bank’s

Business. Personnel should posses the above qualities to

work in this arena.


Summery of Foreign Exchange Procedure:

The buyer and the seller conclude a sales contract

providing for payment by documentary credit.

The buyer instructs his bank-the issuing bank to issue

a credit in favor of the seller (beneficiary).

The issuing bank asks another bank of the seller, to

advise or confirm the credit.

The advising or confirming bank informs the seller

that the credit has been issued.

As soon as the seller receives the credit and is

satisfied that he can meet its terms and conditions, he

is in a position to load the goods and dispatch them.

The seller then sends the documents evidencing the

shipment to the bank where the credit is available

(the nominated bank). This may be the issuing bank,

or the confirming bank or a bank named in the credit

as the paying, accepting or the negotiating bank. If

the credit allows for negotiation by any bank there

will not be negotiates bank and documents be sent to

any bank willing to negotiate.


The bank checks the documents against the credit. If

the documents meet the requirements of the credit,

the bank will pay, accept or negotiate according to

the terms of the credit. In the case of a credit

available by negotiation, the issuing bank or the

confirming bank will negotiate without recourse. Any

other bank including the advising bank if it has not

confirmed the credit, which negotiates, will do so with

recourse.

The bank, if other than the issuing bank, sends the

documents to the issuing bank.

The issuing banks checks the documents & if they

meet the credit requirements, either

Effects payment in accordance with the terms of

the credit, either to the seller if he sends the

documents directly to the issuing bank or to the

bank that has made funds available to him in

anticipation, or

Reimburses in the pre-agreed manner the

confirming bank or any bank that has paid

accepted or negotiated under the credit.


When the documents have been checked by the issuing

bank and found to meet the credit requirements, they

are released to the buyer upon payment of the

amount due or upon other terms agreed between him

and the issuing bank.

The buyer sends the transport document to the carrier

who will then proceed to deliver the goods.


Foreign Exchange Mechanism

O R

Sources: International Trade Finance - Journal, (Page - 30)

Bangladesh Institute of Bank Manage Management


BUYER/IMPORTER

SELLER/EXPORTER/

BENEFICIARY

ISSUING BANKL/C OPENNING BANK

ADVISING BANKCONFIRMING BANKNEGOTIATING BANK

PAYING / REIMBURSING BANK

INDENTOR

Issuing L/C

Forwards

Makes

Sales/ purchase Contract

Mak

es P

aym

ent

Pre

sent

doc

umen

ts

Pay

or

Rei

mbu

rses

Instructs to pay or Reim

burse

Application for opening L

/C

Makes P

ayment against

documents

Subm

its documents

Adv

ises

or

conf

irm

s L

/C

Types of Fign Exchange Limit Sanctioned by Commercial Banks

Foreign Exchange Limits can be broadly into these categories:

r Letter of Guarantee.

r Export Business.

r Import Business.

r Foreign Exchange Remittance.

I shall discuss the above mentioned in detail next.

GUARANTEE

A guarantee is an irrevocable undertaking to pay in case

of a certain eventuality. Guarantee serves as a

protection against losses, which may occur if anyone of

the party fails to fulfill his/her contractual obligations.

Coverage is also required if one partner make advance

performance of some kind i.e.; a down payment before

he/she has obtained the relevant counter performance

form his/her partner. According to contract act-1872

under section 126 guarantees can be defined as a

contract to perform the promise or discharge the

liability of third person in case of his default. The

promise to pay is usually unconditional and must be


honored by the guarantees on first demand. A guarantee

is usually for a specified time period.


Letter of Guarantee : Inland and Foreign

Export Performance bonds

Backed by Counter Guarantee of party

Backed by ECGS cover

Fully secured (backed by 100% cash

margin)

Fully secured by approved securities.

Partly secured (with minimum cash margin

of say 25%)

Unsecured guarantees (with a margin less

than 25%)

Deferred Payment Guarantees (DPG) (Fully

secures by collateral)

Different sort of guarantees:

Tender guarantee/bid bond/Tender bond

The tender guarantee assures the tender that tenders

shall uphold the conditions of his tender during the

period of the offer as binding and that he/she will also

sign the contract in the event of the order being

granted. A demand can be made under a tender

guarantee if the beneficiary provides a written

statement that the tendered failed to comply with one of

the above conditions.

Performance Guarantee:


A performance guarantee expires on completion of the

delivery or performance. Beneficiaries find that as a

guarantee, the contract will be fulfilled in every respect

and can retain the guarantee as per provision for long

time. Including a clause stating that the supplier can

claim under the guarantee, by presenting an acceptance

certificate signed by the buyer can counteract this.

Down payment Guarantee

Down payment guarantee assures to the importer that

his down payment or advance payment will be refunded

if the exporter fails to comply in full or in part with his

contractual obligations.

Warranty Guarantee

In most cases, it is not possible for the importer to

check immediately the quality of the goods he has

ordered and received. A warranty guarantee provides a

security that within the specified period he will receive

a certain amount if the goods are not the agreed quality specifications and the exporter does not honour his obligations to

remove discrepancies, defects or repair damage.

Payment Guarantee

Through the payment guarantee, the buyer’s bank

undertakes to pay the seller if the buyer defaults, the


seller ensures compliance with the terms of payment

and thus the purchase price will be paid.

Export Business (Financing) and Procedures

Export brings the foreign currency in the economy.

Higher the export higher the reserve of foreign

currency. The export section of AB is engaged with

various export-related activities for the encouraging the

exporter. The major function of this section is comprises

with purchase, collection and negotiate the export bill,

provide the exporter in export financing and helps the

exporter in different issues.

A person desired to export should make application to

obtain ERC (Export Registration Certificate) from

CCI&E. Then the person should step in to a bank along

with ERC to obtain EXP from the bank. He must submit:

2 Trade license.

2 ERC.

2 Membership Certificate from chamber of

commerce.


Pre - Shipment Finance

8 Advance against duty drawbacks (DD’s)8 Advance against cash incentives.8 Advance against Recluses.8 Shipping Loan (with ECGS cover)8 Shipping Credits (with ECGS cover)

Post - Shipment Finance

8Foreign bills purchased (FOBP sight bills DP under L/Cs of Prime bank)8FOBP (sight/ DP bill without L/C)8FOUBP (usance) without LC but with ECGS cover 8Advance against DDS8Advance against cash incentives 8Advance under IPRS (International Price Reimbursement


Financing at Pre-shipment stage:

Pre-shipment credit covers credit facilities extended to

the exporters by the commercial banks at the pre-

shipment stage i.e. prior to the actual shipment of goods

for export.

Credit can be allowed for the following purposes: -

Cash for local procurements and meeting

related expenses

Procuring and processing raw materials

Packing and transporting of goods for export

Payment of Insurance premium

Inspection fees

Freight charges etc.

Pre-shipment credit facilities are essentially a short-

term credit, which is to be liquidated by

negotiation/purchase of export bills covering the

particular shipment. Pre-shipment credit facilities can

be allowed against irrecoverable letter of credit of a

good foreign Bank considering the credit worthiness of

the exporters. Pre-shipment credit is allowed in the

following forms: -

1. Export Cash Credit (Hypothecation)

2. Export Cash Credit (Pledge)

3. Export credit against trust receipt

4. Packing credit


5. Back to Back letter of Credit

Back to Back letter of Credit (Inland)

Back to Back letter of Credit (Import)


1. Export Cash Credit (Hypothecation):

Such credit facility is allowed to the credit worthy

exporters for procuring and processing of goods or raw

materials into finished goods for export against

hypothecation of stock of raw materials into finished

goods for export against hypothecation of stock of raw

materials/goods-in-process/finished goods meant for

export. Normally collateral securities are obtained in

case of such facility.

2. Export Cash Credit (Pledge):

Such a credit facility is allowed against pledge of

exportable goods or raw materials. Sometimes collateral

securities may be obtained which may depend on the

quality of goods pledged generally.

3. Export Credit against Trust receipts:

Such a credit is allowed to a credit worthy exporters

against exportable goods where retaining the goods

under bank’s pledge. The exporter by signing the

stamped trust receipt holds the goods in trust on behalf

of the bank. Collateral security is generally obtained.

4. Packing Credit:

Such advance is provided to the exporter against: -

Lien on the Export L/C


Copy of Invoice

The security of Railway Receipt/Steamer

Receipt/Barge Receipt/Truck Receipt

evidencing transportation of the goods to the

port.

Undertaking of the C&F agent entrusted with

the task of arranging shipment to the effect

that they shall hold the goods under the lien of

the Bank.

Insurance Coverage.

5. Back to back letter of Credit:

Operation of BBLC:

Before opening B.B.L.C credit report on the

applicant, the supplier / beneficiary and on the

buyer of R.M.G. to be prepared (Credit report on

the beneficiary of the B.B.L.C. is not a must if the

L/C limit does not exceed TK. 5 Lac). Report from

CIB of BB is to be obtained and LRA is to be

prepared. If necessary B.B.L.C may be opened up

to the extent of 75% of F.O.B value of export L/C

in case of both woven and knit garments. Where

FOB value exceeds US$ 60/ dozen and cutting

and making charges not less than US$ 12 per

dozen, back to back L/C may be opened up to

80% and 85 % of FOB value of export L/C for

quota and non quota category (of woven ready

made garments respectively). B.B.L.C up to 805


of F.O.B value for all children items may be

opened.

B.B.L.C may be opened on usage basis covering

usage period of not more than 120 days and

interest for usage period shall not exceed

L.I.B.O.R.

The production capacity of the factory and the

time gap available between the shipment date (of

export L/C) and expected arrival date of raw

materials must be examined carefully to

ascertain whether the garment products can be

exported within the shipment validity to avoid

stock lot.

Branch will obtain pre and post shipment Export

credit guarantee from Sadharan Bima

Corporation to safe guards the bank’s interest.

Adequate insurance policy covering the risk of

fire, R.S.D. (Riot, Strike and Damage), flood,

cyclone and burglary should be obtained from

the bonded warehouse and the factory.

On receipt of import bills drawn under B.B.L.C,

the branch will examine the documents very

carefully and must inform the negotiating bank

over telex about the discrepancy if found within

7 banking days following the day of receipt of the

documents. The importer must also be notified as

to discrepancies if the documents comply all the

terms and conditions of B.B.L.C. acceptance is

communicated to negotiating bank fixing up the


maturity date for payment of import bills without

delay.

Branch will arrange clearance of imported

consignment by deputing suitable bank’s

representative to escort the consignment from

the port up to the factory premises.

Goods to be cleared through a C&F agent

nominated by the garments industry and

approved by the bank.

During the course of production, the branch will

exercise close supervision and control over

manufacturing process.

If the goods become stock lot the matter should

be advised to National Board of Revenue (N.B.R)

and Bangladesh Bank immediately.

Paper / Documents Required For Opening BBLC

1 Master L/C

1 Valid Import Registration Certificate (IRC) and

Export Registration Certificate (ERC) issued by

C.C.I & E.

1 L/C application form and L.C.A. form duly filled

in and signed.

1 Performa Invoice and Indent.

1 Insurance cover note with money receipt.

1 Duly signed IMP form.

Back to Back Letter of Credit (Inland):


Such facility is allowed to the exporter who received

export letter of credit from overseas buyer but is not the

actual producer/manufacturer of the goods for export.

In such a case, the bank at the request of the exporter

opens Inland letter of credit in favour of the actual

producer within the country. The inland letter of credit

on the strength of export letter of credit must confirm to

the terms and conditions of the export letter of credit

with the following exceptions: -

2 Name of the beneficiary will be actual supplier.

2 L/C value will be less than that of the export

letter of credit i.e. less margin of profit of the

exporter.

2 Period of validity will be earlier than the expiry

of the export L/C

Back to Back Letter of Credit (Import):

Where permitted by CCI & E and Bangladesh Bank,

Back-to-Back L/C can be opened in favour of foreign

supplier for import of raw materials for manufacture of

exportable items.

Financing at Post Shipment Stage:

Banks in this country generally extend post-shipment

credit to the exporters through:

2 Negotiation of documents under letter of

credit

2 Purchase of DP and DA bills


2 Advances against Export bills surrendered for

collection.

1. Negotiation of Document under letter of Credit:

Under this arrangement, after the goods are shipped,

the exporter submits the concerned documents to the

negotiating bank for negotiation. The documents should

be negotiated strictly in accordance with the terms and

conditions and within the period mentioned in the letter

of credit.

2. Purchase of DP and DA Bills

In such a case, the banks purchase/discount the DP

(Documents against payment) and DA (Documents

against acceptance) bills at a rate published by the

International Division of the Bank. While doing so, the

banks should scrutinize all the export documents

carefully and clear instructions have to be obtained

from the drawer of the bill in regard to all-important

issues related to the negotiation of the bills.

In case of purchase of export bills, the bank requires to

obtain clear instructions from the drawers of the bills

regarding the course of action to be taken in respect of

the following issues relating to the collection of the

proceeds of the documents:

2 Protest clause


2 Notice of dishonor

2 Collection charges and interest

2 Protection clause

2 Presentation clause

3. Advances against Bills for collection :

If an exporter fails to get the documents negotiated by

the bank, he has to take resort to alternative course of

obtaining advance from the banks against the security

of export bills surrendered for collection. In such a case,

banks may give advance to the extent of certain

percentage of the value of goods depending upon the

standing of the exporter and importer, nature of the

good etc.

Year Wise Advances against Bills for collection

Position

(Jubilee Road Branch)

(Amount in Million Tk.)

Year 2006 2005

Local Document Bills

Purchase

12 As on audit 09

Foreign Document Bills

Purchase

997.02 As on

audit

249.25

Total 304558.49 258.25


r Some Defective Point / Clause Appeared In the

Export L/C:

Issuing bank is not reputed.

Credit advised by the advising bank without

authentication.

Port of destination is absent.

Nomination of specific shipping / air line.

No specific reimbursement clause.

UCP clause not mentioned.

Shipment or presentation period is not

sufficient.

Original documents to be sent to buyer or

nominated agents.

Part shipment is restricted.

Negotiation is restricted.

Shipper’s load and count is not acceptable.

Import Business (Financing) & Types of

Procedures

Bangladesh is one of the poorest countries of the world.

Import of goods into Bangladesh is regulated by the

Ministry of commerce in terms of the Import and Export

(Control) act, 1950, various import policy orders and

also public notices issued from time to time by the office

of the CCI & E.


In Bangladesh now emphasis is giving on export led

growth strategy. Further for liberalizing the trade

sector following measures have been taken:

2 Import lubrication through removal of

significant reduction of tariff & non-tariff

barriers.

2 Rationalization of tariff structure.

2 To promote export through simplification of the

procedure.

The import section comprising with the function of

opening LC, pre-import and post-import financing and

other function of doing the import business.

Import can be two types:

2 Cash Import (usually):

In this case margin should deposit in issuing

bank for import.

2 Back to back Import:

In this case import can be done on the basis

of Master LC

Sources of Financing Imports

The sources of financing imports available to us are as

under: -

2 Cash Foreign Exchange Resources of the

country.

2 External Economic Aid (Commodity Aid, Loan or

Credit & Grant)

2 Commodity Exchange:


Barter

Special Trading Arrangement (STA)

Types of Importer’s

1 Actual users

1 Commercial Importers

1 Industrial Consumers

1 Import by Ministers, Govt. Departments & other

Public Sector Agencies.

1 Lease Financing Importers.

Financing of importers by commercial banks:

Commercial Banks play an important role in financing

imports of the country. A substantial portion of the total

bank credit is deployed for financing import trade.

Major import items receiving bank finance are iron,

steel, engineering & other Textiles, fuel & lubricants,

Food grains, oil seeds, consumer goods and

miscellaneous important merchandise.

Imports into our country are allowed only against

opening of Irrevocable Letter of Credit except a few

exceptional cases. The financing of imports are made by

the bankers at various stages starting from the opening

of letter of credit to the arrival and storied of the

imported merchandise. Financing of imports by the

banks may broadly be classified as under: -

Pre-Import finance


Post-Import finance

Pre-import business (finance):

The finance, which is extended to Importer to the

arrival of the imported merchandise, is termed as “Pre-

Import” finance. Pre-Import finance is allowed in the

form of following:

Letter of Credit:

Letter of credit (L/C) can be defined as ‘Credit Contract’

whereby the buyer’s bank is committed (on behalf of the

buyer) to place an agreed amount of money at the

seller’s disposal under some agreed conditions. Since

the agreed conditions include, amongst other things, the

presentation of some specified documents, the letter of

credit is called Documentary Letter of Credit. The

Uniform Customs & practices for Documentary Credit

(UCPDC) published by International Chamber of

Commerce (1993) Revision; Publication No. 500 defines

Documentary credit.

Any arrangement, however named or described,

whereby a bank (the “issuing bank”), acting at the

request and on the instructions of a customer (the

“Applicant”) or on its own behalf,

Is to make a payment to or to the order of a

third party (the beneficiary), or is to accept


and pay bills of exchange (Drafts) drawn by

the Beneficiary, or

Authorizes another bank to effect such

payment, or to accept and pay such bills of

exchange (Drafts)

1 Authorizes another bank to negotiate, against

stipulated document(s), provided that the

terms and conditions are compiled with.

Banks open letter of credits only on behalf of their own

customers who maintain accounts with them and are

known to be participating in the trade. By opening letter

of credit on behalf of the importer, the bank undertakes

liability to pay the L/C amount to the foreign seller

subject to submission of documents drawn in strict

compliance with the credit terms. With the negotiation

of import documents “NOSTRO A/C” of the L/C opening

bank is debited.

Parties to a Letter of Credit:

There are a number of parties involved in a L/C and the

rights & obligations of the different involve parties also

differ from each other.

The involved parties can be named below:

1 Importer / Buyer

1 Opening / Issuing Bank

1 Exporter / Seller / Beneficiary

1 Advising / Notifying Bank

1 Confirming Bank


1 Negotiating Bank

1 Paying / Reimbursing Bank.

Importer / Buyer is the person who requests/ instructs

the opening bank to open a L / C. He is also called

Opener or Applicant of the credit.

Opening / Issuing Bank is the bank which opens /

issues an L/C on behalf of the importer. It is also called

the importer’s / buyer’s bank.

Exporter / Seller / Beneficiary is the party in whose

favour the L/c is advised to the exporter. It is the bank

situated in the exporting country and it may be branch

of the opening bank or a correspondent bank. It may

also assume the role of confirming and / or negotiating

bank depending upon the conditions of the credit.

Confirming Bank is a bank, which adds its

confirmation to the credit, and it is done at the request

of the issuing bank. The confirming bank may or may

not be the advising bank.

Negotiating Bank is the bank, which negotiates the

bill and pays the amount to the beneficiary. It has to

carefully scrutinize the documentary credit before

negotiation in order to see whether the documents

apparently are in order or not. The advising bank and

the negotiating bank may not or may not be one and the

same. Sometimes it can also be the confirming bank.


Paying / Reimbursing Bank is the bank or whom the

bill will be drawn ( as per conditions of the credit ). It is

nominated in the credit to make payments against

stipulated documents complying with the terms of the

credit. It may or may not be the issuing bank.

Details regarding the rights and obligations of the

different parties involved in the documentary credit

operations may be had from UCPDC.


Operations of Documentary Letters of Credit:

The following five major steps are involved in the

operation of a documentary letter of credit:

1 Issuing 1 Advising

1 Amendment (if necessary) 1 Presentation

1 Settlement

Issuing a Letter of Credit:

Before issuing an L / C, the buyer and seller located in

different countries, concludes a sales contract providing

for payment by documentary credit. As per requirement

of the seller, the buyer then instructs the bank - the

issuing bank - to issue a credit in favour of the seller

(beneficiary). Instruction / Application for issuing a

credit should be made by the buyer (importer) in the

issuing bank’s standard form. The credit application

which contains the full details or the proposed credit

Also serves as an agreement between the bank and the

buyer. After being convinced about the necessary

conditions contained in the application form and

‘sufficient conditions’ to be fulfilled by the buyer for

opening a credit, the opening bank then proceeds for

opening the credit to be addressed to the beneficiary.

Advising a Letter of Credit:


Advising through a bank is a proof of apparent

authenticity of the credit to the seller. The process of

advising a credit consists of forwarding the original

credit to the beneficiary to whom it is addressed. Before

forwarding, the advising bank has to verify the

signature (s) of the officer (s) of the opening bank and

ensure that the terms and conditions of the credit are

not in violation of the existing exchange control

regulations and other regulations relating to export. In

such act of advising, the advising, the advising bank

does not undertake any liability.

Amendment of Credit:

Parties involved in a L / C, particularly the seller and the

buyer, can not always satisfy the terms and conditions

in full as expected due to some obvious and genuine

reasons. In such a situation, the credit should be

amended.

In case of revocable credit, it can be amended or

canceled by the issuing bank at any moment and

without prior notice to the beneficiary. But in case of

irrevocable credit, it can neither be amended nor

canceled without the agreement of the issuing bank, the

confirming bank (if any) and the beneficiary.

Presentation of Documents:


The seller being satisfied with the terms and conditions

of the credit proceed to dispatch the required goods to

the buyer and after that, has to present the documents

evidencing dispatching of goods to the negotiating bank

on or before the stipulated expiry date of the credit.

After receiving all the documents, the negotiating bank

then checks the documents against the credit. If the

documents are found in order, the bank will pay, accept

or negotiate to the issuing bank. The issuing bank also

checks the documents and if they are found as per

credit requirements, either

1 Effects payment, or

1 Reimburses in the pre-agreed manner.

Settlement:

Settlement means fulfilling the commitment of issuing

bank in regard to effecting payment subject to satisfying

the credit terms fully. This settlement may be done

under three separate arrangements as stipulated in the

credit. These are:

a) Settlement by Payment:

Here the seller presents the documents to the paying

and the bank then scrutinizes the documents. If

satisfied, the paying bank makes payment to the

beneficiary and in case this bank is other then the

issuing bank is satisfied with the requirements, is

obtained by the paying bank from the issuing bank.


b) Settlement by Acceptance:

Under this arrangement, the seller submits the

documents evidencing the shipment to the accepting

bank accompanied by a draft drawn on the bank

(where credit is available) at the specified tenor. After

being satisfied with the documents, the bank accepts

the documents and the draft and if it is a bank other

than the issuing bank, then sends the documents to

the issuing bank stating that it has accepted the draft

and at maturity the reimbursement will be obtained in

the pre-agreed manner.

c) Settlement by Negotiation:

This settlement procedure starts with the submission

of documents by the seller to the negotiating bank

accompanied by a draft drawn on the buyer or any

other drawee, at sight or at the tenor, as specified in

the credit. After scrutinizing that the documents meet

the credit requirements, the bank may negotiate the

draft. This bank, if other than the issuing bank, then

sends the documents and the draft to the issuing

bank. As usual, reimbursement will be obtained in the

pre-agreed manner.

Post-Import Finance:


The finance extended after arrival of the goods is

termed as “Post-Import” finance, which may be in the

form of

1 Loan against Imported Merchandise (LIM)

1 Cash Credit (CC) &

1 Loan against Trust Receipt (LTR).

Loan Against Imported Merchandise (LIM)

LIM is created under two circumstances. Firstly, if

there is an arrangement with the importer the

commercial bank will provide finance against imported

merchandise with usual margin, Secondly, when the

importer fails to retire the documents the bank is

compelled to create LIM to avoid

demurrage/pilferage/damage etc. also to safeguard the

interest of the bank, which is called “Forced LIM”. The

sets of documents usually obtained are: -

1 DP Note

1 Letter of Arrangement

1 Letter of disbursement

1 Letter of pledge

1 Insurance policy covers.

Loan Against Trust Receipt (LTR)

The bank handover the shipping documents to the

importer for taking delivery of the goods from the port

without receiving payment there-against by taking a


trust receipt from him. In the trust receipt the importer

specifies the goods and agrees that he is holding the

goods not as their owner but as an agent for the bank.

Thus, the bank continues to have the rights of the

pledge. However, in practices, trust receipt does not

secure the position of the bank to a significant extent.

As such, the loan is usually allowed only to corporate

bodies and first class parties. It is allowed for a period

of 30 days to 90 days. In addition to the Trust Receipt

the following documents are also to be obtained: -

DP Note

Letter of Arrangement

Letter of Disbursement

Import letter of Credit (L/C) limit - on DP/DA

basis.

Inland L/C limits - on DP/DA basis

Loan against merchandises (Pledge).

Trust Receipt facility.

Revolving inland L/C including back-to-back

L/Cs / Transferable L/Cs.

FOREIGN REMITTANCE

Foreign remittance refers to the transfer of fund from

one country to another either through the office channel

i.e. banking channel, Post office or the informal channel.

In Bangladesh still informal market is playing a


significant role. However, we shall limit our discussion

within the official channel.

BASIC places an important role to transfer money from

other countries to Bangladesh and Bangladesh to other

countries. Inward and outward T.T, M.T and draft are

the main components of foreign remittance.

Foreign earnings are very low as export earnings are

very limited while import spending are huge which

makes the balance of trade position in a chronic deficit

situation. Foreign remittance is very important for the

country as valuable foreign is involved in the transfer

mechanism. From the year 1990, financial liberalization

has been started which is still going on. Due to

liberalization, restrictions on foreign remittance become

ease. Bangladeshi Taka. is convertible for current

account transactions on March 24, 1994 with the view

to achieve better exchange rate management system.

And from April 1994 Bangladesh Government has

accepted the status of Article VIII of international

monetary fund.

Foreign remittance has two wings i.e. inward and

outward remittance. This can be shown below:


Foreign Remittance

Foreign Inward Remittance

Foreign Outward Remittance

Foreign inward remittance

Foreign inward remittance refers to the currency

remitted from abroad to our country. The remittance in

foreign currency that receives from outside the country

to our country is known as foreign inward remittance. In

case of inward remittance, TT/MT/Drafts etc. are drawn

in local bank by the foreign banks of exchange houses.

When foreign bills, TCs & cash foreign currency is

purchased by a local bank is also known as inward

remittance. A local bank also receives indenting

commission of local firm, trademarks, patent fee etc.

Inward remittance can be classified into two

groups:

1 Visible inward remittance such as export

proceeds,

1 Invisible inward remittance such as family

maintenance, constancy fee etc.

Foreign Outward Remittance

Foreign outward remittance refers to the remittances in

foreign currency made from this country to abroad.

Foreign outward remittance includes issuance of TT,

MT, FDD issued by local banks on foreign banks.

Further it includes rate of foreign currency, notes, TC’S,

reimbursement against import, bills retired etc.


Forward outward remittance can be divided into two

groups:

2 Visible outward remittance such as payment

against import.

2 Invisible outward remittance such as

membership fee, subscription fee etc.

Outward remittance can be made for traveling purpose,

educational purpose, attending seminar & workshop,

medical treatment, business travel quota, evaluation

fee, membership fee, visa fee, pre-shipment fee,

advertising of Bangladesh commodities etc. In case of

purchase of foreign currency, an applicant must be

made to an AD and if necessary requires to Bangladesh

Bank. For payment against imports the prescribed

application form is IMP form & for other types of

remittance TM form.


SWOT ANALYSIS OF AB BANK LTD

Strength

1. Wide image 2. Excellent management 3. High commitment of

customer and qualified & experienced human

4. resources 5. Sophisticated

automated system has been introduced

6. Bank has many attractive schemes.

7. Well furnished & air conditioned Bank.

8. Govt. has banned Jatiya Sanchay Patra

Weakness

1. Heavily depends on Head Office for decision making.

2. All branches are not equally not well decorative

Opportunities

1. Increasing demand of customer finance

2. Investment potential of Bangladesh

3. Relationship management

4. Introduction of Online Banking throughout all branches within Bangladesh.

Threats

1. Some Commercial & foreign bank as well as private bank.

2. Similar type of retail banking products.

3. Certain Bangladesh Bank rules and regulation.

4. Customer awareness of pricing & services.

.


CHAPTER – IV

OVERALL PERFORMANCE OF AB BANK ARE SHOWN BY MEANS OF GRAPHICAL REPRESENTATION:

Total equity from year 2001 upto 2005

Year

Year






Year



Profit and Loss Statement for the year ended 31 December 2005

Amounts in TakaYear ended

31 Dec. 2005Year ended

31 Dec. 2004


Operating Income

Interest incomeInterest paid on deposits, borrowings, etc.Net interest income

Investment incomeCommission, exchange and brokerageOther income

Total operating income (a)Operating expensesSalary and allowancesRent, taxes, insurance, electricity, etc.Legal expensesPostage, stamps, telecommunication, etcStationery, printing, advertisement, etc.Chief executive’s salary and feesDirectors’ feesAuditors’ feesCharges on loan lossesDepreciation and repair of Bank’s assetsOther expenses

Total operating expenses (b)Profit before provision (c=a-b)Provision against loans and advancesProvision for diminution in value of investmentsOther provision

Total provision (d)Total profit before taxation (c-d)Provision for taxationNet profit after taxationAppropriations

Statutory reserveGeneral reserveDividends, etc.

Retained surplus

Earnings per share (EPS)

2,262,947,768(1,571,542,00

0)691,405,768317,472,805486,441,224

82,178,472

886,092,5011,577,498,26

9

466,373,810142,943,673

769,62128,528,86623,404,603

4,691,609977,171445,250

--53,051,297

101,284,907822,470,807755,027,462212,111,511

--135,462,343

347,573,854407,453,608245,000,000

162,453,608

81,490,722----

81,490,72280,962,886

31.26

2,051,741,482

(1,540,836,908)

510,904,574408,397,598436,425,432104,629,887

949,452,9171,460,357,4

91

417,050,639158,053,602

646,26730,048,19219,637,226

2,900,0001,154,382

255,000307,655,000

51,837,050111,053,5341,100,290,8

92360,066,599170,000,000

----

170,000,000190,066,599100,000,00090,066,599

38,013,320----

38,013,32052,053,279

18.19


Balance Sheet at 31 December 2005

Amounts in TakaAt

31 Dec. 2005At

31 Dec. 2004Property and AssetsCashIn hand (including foreign currencies)Balance with Bangladesh Bank and its agent bank(s)(Including foreign currencies)Balance with other banks and financial institutionsIn BangladeshOutside Bangladesh

Money at call and on short noticeInvestmentsGovernmentOthers

Loans and advancesLoans, cash credits, overdrafts, etc.Bills purchased and discounted

Fixed assets including premises, furniture and fixturesOther assetsNon-banking assetsTotal assets

Liabilities and capitalLiabilitiesBorrowings from other banks, financial institutions, and agentsDeposits and other accountsCurrent depositsOther demand depositsBills payableSavings bank depositsShort term depositsFixed depositsBearer certificates of depositsOther depositsOther liabilitiesTotal liabilities

Capital/Shareholder’s EquityPaid-up capitalStatutory reserveOther reserveRetained earnings

1,935,415,308447,609,426

1,487,805,882

540,799,38058,756,465

482,042,915

389,841,1834,060,946,9423,275,356,000

785,590,94221,384,633,90020,494,759,758

889,874,142

370,056,9704,383,708,872

--33,065,402,555

1,910,530,44827,361,442,1543,438,832,4151,389,662,491

545,669,5986,949,853,0812,258,788,337

12,127,312,542127,493,553523,830,137

2,266,550,11631,538,522,718

519,763,600650,203,611176,127,054180,785,572

1,526,879,83733,065,402,555

2,910,258,213424,564,899

2,485,693,314

994,140,94115,815,086

978,325,855

437,497,0856,738,151,7656,379,123,400

359,028,36517,008,497,46916,567,561,650

440,935,819

276,665,1254,148,268,828

--32,513,479,426

761,463,41928,299,226,7443,418,474,8301,120,874,616

573,560,4036,343,878,6182,070,763,039

13,802,702,710126,412,684842,559,843

2,209,212,48831,269,902,651

495,012,900556,311,76967,678,720

124,573,386

1,243,576,77532,513,479,426


Total Shareholders’ EquityTotal liabilities and Shareholders’ Equity


Highlights of the overall activities of the Bank

Particulars2005 2004

1. Paid-up capital 519,763,600 495,012,900

2. Total capital 1,727,437,899 1,470,221,873

3. Capital surplus 32,720,297 15,235,387

4. Total assets 33,065,402,555 32,508,626,792

5. Total deposits 27,361,442,154 28,299,226,744

6. Total loans and advances 21,384,633,900 17,008,497,469

7. Total contingent liabilities and commitments 14,662,518,178 15,714,898,944

8. Credit-deposit ratio 78.16 60.10

9. Ratio of classified loans against total loans and advances

8.21 11.37

10. Profit after tax and provision 162,453,608 90,066,599

11. Loans classified during the year 448,302,000 1,933,526,346

12. Provision kept against classified loans during the year

182,111,511 170,000,000

13. Provision surplus/(deficit) 21,300,999 5,396,000

14. Cost of fund 8.60% 8.53%

15. Interest earning assets 24,066,766,329 22,260,823,917

16. Non-interest earning assets 9,058,636,225 10,247,802,875

17. Return on investments (Rol) 5.88% 2.03%

18. Return on assets(RoA) 0.50% 0.39%

19. Income from investments 317,472,805 408,397,598

20. Earnings per share 31.26 18.19

21. Net income per share 31.26 18.19

22. Price-earnings ratio (Times) 11.68 20.95


CHAPTER – V

RECOMMENDATION:

In order to competitive advantage and to deliver quality service, to management should try to modify the services:

Rectify the existing problem: The synergy of dedicated manpower, technology,

market opportunity can lead the organization to achieve the goal, a bank must establish and adhere to adequate of loan provision & reserve.

AB Bank should train up their Branch personnel about all sort of information regarding SWIFT and its services.

Due to lack of proper knowledge about the operation procedure and services provided by the SWIFT, certain customer are facing problem, as they have to wait for certain time to get service and sometimes personnel are not being able to operate SWIFT without any confusion. They are not fully independent of handling SWIFT. Officials training are the solution to this problem.

AB Bank should always monitor the performance of its competitors in the field of foreign trade.

Mercantile Bank Ltd. Standard Bank Ltd. Mutual Trust Bank Ltd. Premier Bank Ltd. First Security Bank Ltd. Eastern Bank Ltd. Bank Asia Ltd. and Dhaka Bank Ltd. and all other private banks are


emerging competitors of AB Bank. They should continuously strive and introduce new products and services as access card. ATM with future improved quality service.

For customer convenience in foreign exchange department of AB Bank Ltd. should provide more personnel to deliver faster service to their honorable customer.

It seems to me that day to day customer’s operation is increasing individual employee has to handle different types of job. But that is pocking a back for an employee. As a result it might be happen any big mistake by the employee and service is also time consuming and customer has to suffer for his situation. May be it would the reason for employees de-motivation as well as the customers dissatisfaction.

ABBL should focus on their promotional activities. The should also focus on the marketing aspects to

let customers know about their product and offering and more promotion should be given to attract new customer

ABBL must develop electronic banking system to modernize the service. Technological advantage of a bank ensuring its competitive edge in the market place can only be achieved by efficient manpower. It is market share to reduce its operating cost and to generate new revenue. Electronic banking system also allows increased access to the financial system by its customers.


Some other important factor that should be focused on the development process: Time consumed at service level should be

minimized at optimum level. Evaluate customer’s needs from their perspective

and explain locally the shortcomings. Customer convenience should receive priority over

other. Improve office atmosphere to give customers better

feeling. Use appropriate techniques in evaluating

customers need professionally. To deliver quality service top management should

try to mitigate the gap between customers expectation and employees perception.


ACRONYMS:

A/CADB/LBBBOECCI & ECFRCIBCIFDDDP NoteEPBEXPFCFDDFOBHS CodeIBCIBCAIBDAIMPIRCL/CLCAFOBCPOPSISWIFTTCTINTRTTSTDFDRCCC & FCRFERCIBCTLIMLTRPAD/BLCSODUCPDC

AccountAuthorized DealerBill of LadingBangladesh BankBill of ExchangeChief Controller of Import & ExportCost & FreightCredit Information BureauCost Insurance & FreightDemand DraftDemand Promissory NoteExport Promotion Bureau Export FormForeign CurrencyForeign Demand DraftFree on BoardHarmonized System of CodingInward bills for collectionInter Branch Credit AdviceInter Branch Debit AdviceImport FormImport Registration CertificateLetter of CreditLetter of Credit Authorization FormOutward Bills for CollectionPayment OrderPre Shipment InspectionSociety for Worldwide Inter Bank Financial Transaction.Travelers ChequeTax Identification NumberTruck ReceiptTelegraphic TransferShort Term DepositFixed Deposit ReceiptCash CreditClearing & ForwardingClean Report FindingsExport Registration CertificateInterbranch Credit TransactionLoan Against Imported MerchandiseLoan Against Trust Receipt / Bills Under Letter of CreditPayment Against Document


Secured OverdraftUniform Custom & Practice for Documentary Credit

BIBLIOGRAPHY:

Annual Report AB Bank Ltd.2005

Annual audited report of ABBL - 2006, Jubilee Road

Branch.

Article – Trade – Hongkong and Shanghai Banking

Corporation Limited (HSBC)

What the Banker Does – Abul Hashem

Ali Md. Manboob – “Foreign Remittance”.

Journals of Bangladesh Institute of Bank

Management.

Mr. Ahamed Nasiruddin – “ Precaution to be taken

at the time of opening letter of credit.

Ali Md. Mahboob – “Import Financing”

International Business & Multinational Enterprises

– Robert Brookeson.

Credit Management – Bangladesh Institute of Bank

Management.

Article – International Business Management. –

Mark Humble


Conclusion

There is no doubt that AB bank has made a good position in modern banking arena. It is a model banking institution with different outlook to the valued customers, a comprehensive range of financial services and innovative products for sustainable mutual growth & prosperity. My course of internship in this bank has been the best part of gathering knowledge.

-The End-
