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Internship Report

On

“A Study on Credit ManagementOf

BASIC Bank Limited Dhanmondi Branch”

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Supervisor Declaration

This is certify that Kouchher Ahammed, ID:BBA070102050, student of BBA program of Northern University Bangladesh has done an internship titled Credit Management of BASIC Bank Limited, Dhanmondi Branch under my supervision & guidance.

The student showed keen interest in application of financial concept into practice and was given opportunity to interest & participate in live situation. The student in found to be intelligent, sincere and hardworking. The student has put in lot of work and has also brought forth his views & ideas which are being studied for implementation at appropriate place at appropriate time.

------------------------------ --------------------------------Md. Masukujjaman Committee ChairmanLecturerDepartment of Business AdministrationNorthern University Bangladesh.

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EXECUTIVE SUMMARY

Importance of banking system in a country is increasing day by day. It is quite impossible for any country to develop in industrial and

commercial sector without sound banking system in modern economic era. Credit Management is one of the significant functions of

the bank. It plays a vital role in overall economy of the country. Bank collects information from numerous sources relating to cost and

revenue from Credit Management. Through Land, Loan, and Other financial department of the banks earns their profit. Banks is the

intermediary of all Land, Loan, and Financial activities.

Globalization of national economies has given a boost to international trade. The seller and the buyer in an international trading

transaction must agree for a product or its quality, price etc. enter into a sales contract, spelling out precisely shipping and delivery

details, terms of payment, required documentation and other related issues including dispute settlement procedure and legal

framework available.

This internship report has been prepared to fulfill the requirement for getting BBA degree. As a part of my course, it is mandatory to

get involved with an organization for a certain period of time to acquire the practical knowledge. The placement committee of

Department of Business Administration, The Northern University Bangladesh places me at BASIC Bank for doing my internship. This

report is the outcome of my internship in BASIC Bank. The report covers organizational aspects of BASIC Bank and a project title “A

Study on Credit Management of BASIC Bank Limited Dhanmondi Branch”.

All the discussions are presented in detail in the project part of the report. Hope it will help the reader to have a distinct picture of the

whole project work. Any kind of criticism is welcome for the betterment of the project.

List of Abbreviations

BASIC Bangladesh Small Industries and Commerce

HRD Human Resource Division

SSI Small Scale Industries

GOB Government of Bangladesh

NGOs Non- Government Organizations

LAN Local Area Network

WAN Wide Area Network

ADB Asian Development Bank

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KfW kreditanstalt fur Wieder-aufbau

T.T Telegraphic Transfer

D.D Demand Draft

IBCA Inter branch Credit Transfer

SWIFT Society for Worldwide Interbank Financial Telecommunication

BB Bangladesh Bank

CIB Credit Information bouru

IRR Internal Rate of Return

LIM Loan against Imported Merchandised

CRG Credit Risk Grading

CRGM Credit Risk Grading Model

D.P Demand Promissory

NOC No Objection Certificate

LTR Loan against Trust Receipt

RU Recovery Unit

LRA Lending Risk Analysis

OD Over Draft

CRM Credit Risk Management

RM Relationship Managers

SSI Small Scale Industries

MSI Medium Scale Industries

LSI Large Scale Industries

BRIEF CONTENTS

PART – 1 [Introduction]PARTICULARS PAGE NO.

Cover Page 1[1.1] Introduction 2[1.2] Origin of the report 3[1.3] Objective of the study[1.4] Methodology of the study[1.5] Scope of the study[1.6] Limitation of the studyPART – 2 [Organizational Part]

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Cover Page 4 Company Profile[2.1] Historical Background 5-6[2.2] Nature of business 7[2.3] Management with chain of command (hierarchy) [] Organogram of BASIC Bank 8 [] Board of Directors 9[2.4] Current business Scenario 10[2.5] Organizational mission & vision 11[2.6] Major objectives 11[2.7] Corporate Strategies 12[2.8] Detailed description of departments of BASIC Bank 12-18[2.9] Branch of BASIC Bank 18[2.10] Sources of Fund 23-25PART – 3 [PROJECT PART]Cover Page 26[1.1] Introduction 27[1.2] Significance of the Study 27[1.3] Objective of the Study 28[1.4] Methodology of the Study 29[1.5] Limitations of the Study 30PART – 3 [CREDIT ( LOANS & ADVANCES]Cover Page 31[3.1] Introduction 32[3.3] Types of Credit Facilities 33-39[3.3] Selection of Borrower 40[3.4] Lending Criteria 41[3.5] Processing of Loan Proposal 42-44[3.6] Security Selection & control 545-46[3.7] Modes of Charging Securities 47[3.8] Mortgage type & Required papers 47-48[3.9] Documentation 49-503.10] Disbursement of Loan 51-523.11] Loan Classification 523.12] Branch Position 533.13] List of largest Borrowers of Branch 533.14] Case study 54-56PART – 4 [RECOMMENDATION & CONCLUSION]Cover Page 57[4.1] Recommendation 58

[4.2] Conclusion 59PART – 5 [REFERENCES & BIBLIOGRAPHY]Cover Page 60[5.1] References 61[5.2] Bibliography 62

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[1.1]

INTRODUCTION:

BASIC Bank Limited is the state owned schedule Bank. Last year Bangladesh Bank under look a project to review the list of best performing Bank. BASIC Bank placed topped in that list.

Banking is one of the most important sectors for a countries wealth building activities. At present the modern business, industrialization foreign trade almost is dependent on banks. But now a day the banking sector of Bangladesh is suffering the default culture, which is the consequence or result of bad performance of most of the banks of Bangladesh.

BASIC Bank Limited playing an important role toward the growth and economic development of Bangladesh.

This study is an attempt to produce a constrictive report performance of BASIC Bank Limited with special features of Credit activities.

Last year Bangladesh Bank undertook a project to review the global best practices in the banking sector and examines in the possibility of introducing these in the banking industry of Bangladesh. Four 'Focus Groups' were formed with participation from Nationalized Commercial Banks, Private Commercial Banks & Foreign Banks with representatives from the Bangladesh Bank as team coordinators to look into the practices of the best performing banks both at home and abroad. These focus groups identified and selected five core risk areas and produce a document that would be a basic risk management model for each of the five 'core' risk areas of banking.

The five core risk areas are as follows: -

1. Credit Risks;

2. Asset and Liability/Balance Sheet Risks;

3. Foreign Exchange Risks;

4. Internal Control and Compliance Risks; and

5. Money Laundering Risks.

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ORIGIN OF THE REPORT:

The study reflects the Financial Strategies and Fiscal Policies of BASIC Bank Ltd Bangladesh in terms of its awareness in our country. It offers a critical analysis regarding these aspects. Hence it sums up the internship report thereby.

The study has appraised the prospect of BASIC Bank Ltd and the researcher has experienced the virtual tour inside the departments of BASIC Bank situated in Dhanmondi during the apprenticeship.

The primary and secondary sources of data are as follows:Primary Source of Info. Secondary Source of Info.

Virtual tour @ BASIC Bank Ltd BASIC Bank annual reports & pamphlets

Forum with BASIC Bank Executives Evaluation of answers provided by BASIC

Time Frame

2009/2010 November Nov Nov Dec Dec Jan Feb

Gathering information

Organizing information

Analyzing information

Arranging contents

Writing the report

Upgrade the report

& Printing

Report submission & Presentation

[1.2] OBJECTIVES OF THE STUDY

The main objectives of education are to acquire knowledge. To acquire knowledge ultimately we must do some practical application

in addition to theoretical knowledge. Through this report, I tried my level best to present my practical knowledge as find out some

objectives:

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To acquire the depth knowledge on credit functions.

To understand the necessity & objective of consumer credit management.

To formulate new scope of credit.

To identify the weakness & problems in credit functions.

To learn the mode of financing & repayment of loan

METHODOLOGY OF THE STUDY:

The following methodology will be followed for the study: -

Primary Sources, and Secondary Sources.

Both primary and secondary data sources will be used to generate this report. Primary Sources:

Primary data sources are scheduled survey, informal discussion with professionals and observation while working in different desks.

The primary sources of my information are as below:

Direct observation Special outlook Questioning the concerned persons. Discussion with the other Bankers.

Secondary Sources:

The secondary data sources are annual reports, manuals, and brochures of BASIC Bank Limited and different publications of Bangladesh Bank.

The secondary sources of my information are as below-

Annual report of BASIC Bank Limited Desk report of the related department Other manual information Different reference books of the library Some of my course elements as related to this report.

To identify the implementation, supervision, monitoring and repayment practice- interview with the employee and extensive study of the existing file was and practical case observation was done.

[1.4]

LIMITATIONS OF THE STUDY:

Objective of the practical orientation program is to have practical exposure for the students. My tenure was for twelve weeks only, which was somehow not sufficient. After working whole day in the office it way very much difficult, it not

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impossible to study again the theoretical aspects of banking. On the other hand to prepare my internship report I have faced some limitations as follows.

To collect data and information, it is a common tendency of any departments to keep back their departmental data and information.

Unavailability to required published documents.

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[2.1] COMPANY PROFILE HISTORY:

The BASIC Bank Limited (Bangladesh Small Industries and Commerce Bank Limited) establishes as a banking company under the companies Act 1913 launched its operation in 1989. It was incorporated under the Act on the 2nd of August, 1988.The Bank started its operation from the 21st of January, 1989 .It is governed by the Banking Companies Act 1913.The Bank was established as the policy makers of the country felt the urgency for a bank in the private sector for financing Small Scale Industries (SSIs). At the outset, the Bank started as a joint venture enterprise of the BCC Foundation with 70 percent shares and the Government of Bangladesh (GOB) with the remaining 30 percent shares. The BCCI, the Government of Bangladesh took over 100 percent ownership of BASIC on 4 th

June 1992.Thus there is state-owned. However, the Bank is not nationalized; it operates like a private bank as before.

Basic Bank is unique in its objectives. It is blend of development and commercial banks. The Memorandum and Articles of Association of the Bank stipulate that that 50 percent of loan able funds shall be invested in small and cottage industries sector.

Steady growth in client base and their high retention rate since Bank’s inceptions testify to the immense confidence they repose on its services. Diversified products both liability and assets sides particularly a wide range of lending products related to development of small industries and micro enterprises, and commercial and training activities attract entrepreneurs from varied economic fields. Along with promotion of products special importance is given to individual clients through providing personalized services. In fact individuals matter in this Bank. This motto has been followed for development of clientele as well as human resources of the Bank.

Coping with the competitive and rapidly changing financial market of the country, BASIC Bank Limited maintains close connection with its clients, the regulatory, the shareholders (Government of Bangladesh), other banks and financial institutions.

[2.2] NATURE OF BUSINESS

The nature of business of BASIC Bank Limited is banking business. It has been constituted under the companies Act 1913 and

subsequently 1994. It is an full fledged state owned commercial Bank. It’s main target is to serving people as well as earning profit.

Its important function is to receive deposits, lend money, discount bills, and finance foreign trade issue guarantee and transfer money.

In industrial sector, the highest disbursement of BASIC Bank is in Textile and readymade Garments sector.

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BASIC BANK LIMITED OFFERS :

Term loans to industries especially to small-scale enterprise.

Full-fledged commercial banking services including collection of deposit, short-term trade finance, working capital finance in processing and manufacturing units and financing and facilitating international trade.

Technical support to Small Scale Industries (SSIs) I order to enable them to run their enterprise successfully.

Micro-credit to the urban poor linkage with Non-Government Organizations (NGOs) with view facilitating their access to the formal financial market for mobilization of funds.

In order to perform the above tasks, BASIC works closely with the clients, the regularly authorities the shareholders Government Of Bangladesh (GOB), banks and other financial institution.

[ 2.3] MANAGEMENT WITH CHAIN OF COMMAND

[ORGANOGRAM OF BASIC BANK]

CHAIRMA

GM

(Admin)

GM (Operation)

Industrial Credit

Division

HRDivision

Deputy General Manager

Assistant General Manager.

Manager

Deputy Manager

Assistant Manager

BOARD OF DIRECTORS

CentralAccounts

Establishment&

Branch Control

Credit Division

International Division

MANAGING DIRECTOR

GM(Audit & Inspection)

DEVELOPMENT

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BOARD OF DIRECTORS:

As stated earlier the government holds 100 percent ownership of the Bank. The Government of Bangladesh appoints all the Directors of the Board. The secretary of the Ministry of Industries is the Chairman of the Bank. Other Directors of the Bank are high Government and central Bank executives.

The Managing Director is an ex-officio member of the Board of Directors. There are at present 7 Directors including the Managing Director.

BOARD OF DIRECTORS BOARD OF DIRECTORS BOARD OF DIRECTORS

[1]Dr. Nurul AminChairmanBASIC Bank Limited &Secretary Ministry of IndustriesGovt. of the People’s Republic of Bangladesh.

[2]Mr. Md. Mahbubur RahmanChairman BSIC &Director BASIC Bank LimitedHead Office Dhaka.

[3]Mr. Mahbub AhmedAdditional secretary &DirectorBASIC Bank Limited

[4]Mr. Mostafa MohiuddinDirectorBASIC Bank Limited &Joint Secretary

[5]Mr. Md. Ehasanul HoqueDirectorBASIC Bank Limited &Derector Geneneral,Chief Advisors Office

[6]Mr. Asaduzzaman KhanDirectorBASIC Bank Limited &Executive DirectorBangladesh Bank.

Mr. AKM Sajedur Rahman .Managing Director

BASIC Bank Limited.Head Office

Dhaka.

Officer

Assistant Officer

Clerical Staff: Banking Staff Go-down Staff

Non-Clerical Staff: Messenger Staff Security Staff

NAME OF BOARD OF DIRECTORS:

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[2.4] CURRENT BUSINESS SCENARIOS :

Particulars 2006 2007 2008 2009

Authorized capital 2,000.00 2,000.00 2,000.00 2,000.00

Paid-up capital 945.00 1247.00 1309.77 1455.30

Total Assets 29,417.09 38,774.00 46,651.53 45699.56

Deposits 24,084.65 31948.00 38,368.23 34501.69

Total Loans and Advances 19,000.00 22,263.00 27,269.13 29261.53

Profit before tax and provision 585.49 808.00 1534.11 1568.34

Export 11,097.23 15,463.74 22,270.87 19887.7

Import 14,094.96 17,804.27 27,359.77 33976.6

Loan to Deposits liabilities 69.33 69.61 71.07 84.81

Net Profit to Gross income 12.81 19.31 10.87 12.57

FINANCIAL HIGHLIGHTS OF BASIC BANK LIMITED:

2006 , 2007,2008 & 2009 (Million in TK.)

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[2.5] ORGANIZATIONAL MISSION & VISION:

BASIC Bank Limitedsmall industries, trade, commerce and service sector etc.

The Banks main manifest to progress as an institution par excellence to customer satisfaction. Global Banking has change rapidly and BSIC as worked hard to adapt to these changes. To pay a vital role in human development and employment generation. To undertake project promotion to identify profitable areas of investment. To search for newer avenues for investment and develop new products to suit such needs. To establish linkage with other institution which are engaged in financing micro enterprise. BASIC keeping pace with the changing environment. To corporate and collaborate with institutions entrusted with the responsibility of promoting and aiding SSI sector. Deep commitment to the society and growth of national economy.

[2.6] MAJOR OBJECTIVES

To serve people with minimum cost & higher benefit To earn higher profit To develop new entrepreneur To up lift the industrial development of the country Global banking has changed rapidly and BASIC as worked hard to adapt to these changes The banks main manifest during force for the banks progress as an institution par excellence to customer satisfaction. Fully computerized accounts maintenance. Well decorated and air conditioned facilities. To pay a vital role in human development and employment generation. A fully operational computer network which is currently being implemented .The work of Local Area Network (LAN) and

Wide Area Network (WAN) installation having reliable and secured communication between the branches and the Head Office is in progress to facilitate Any Branch Banking and ATM Services.

Money counting & Money checking machine making cash transactions easy, security and prompt. The bank look forward with excitement and a commitment to bring greater benefits to customers. Eighteen out of twenty seven branches are authorized dealers of foreign exchange. This facilities speedy disposal of

transaction of export and import trades.

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A group of professional bankers to render personalized services. BASIC dedicated their service to the nation through active financial participation in all segments of economy, small

Industries, trade, commerce and service sector etc. BASIC keeping pace with the changing environment. Deep commitment to the society and the growth of national economy.

[2.7] CORPORATE STRATEGIES :

Financial establishment of small units industries and businesses and facilitate their growth. Steady and sustainable growth. Investment in a cautious way. Adoption of new building technology. Profit maximization. Establishing small industries.

[2.8]

DETAILED DESCRIPTION OF DEPARTMENTS OF BASIC BANK:

The bank has 31 branches, 6 Zones spread throughout the country. At the head office level there are 12 divisions most of which have more than one functional department which are headed by DGM and Training institute by a director with the rank of CGM.

THE NAMES OF THE DIVISIONS ARE:

Human Resource Division (HRD). Establishment & Common Service Division. Human Resources Development Division. Secretary’s Division (Aboard Division). General Credit Recovery Division. Industrial development finance division. International division. Control development & co ordination division. Audits an inspection division. Planning and research and statistics division. Computer system and procedures division. And Law division.

These are the different division of BASIC bank that are serving their services to the bank as well as to the country with great efforts according to their respective fields.

[2.9] BRANCHES OF BASIC:

BASIC Bank is a 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.

BRANCH NETWORK:

At present, there are thirty one conveniently located branches in all over Bangladesh. These Branches are given below: -

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DHAKA [Eleven Branches in the capital city] CHITTAGONG [Six Branches in the commercial city] NARAYANGANJ [Two Branches in] NORSHINNGDI [One each in] RAJSHAHI SAIDPUR BOGRA KHULNA JESSORE SYLHET BARISAL CHAWMUHONI COMILLA. SIRAJGONJ RANGPUR

[2.10

SOURCES OF FUND:

Like any other financial intermediaries, BASIC is no exception in performing its core functions viz, mobilization of fund and utilizing such und for profitable purpose.

Mobilization of Fund:

The main sources of fund for BASIC are: -

a) Deposit.b) Borrowing.

Chart:2. Deposit Mix in 2008:

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DEPOSIT:

Deposit is the mainstay for BASIC Banks sources of funds. The following includes the usual types of deposits of the Bank:

Current Deposit -

Different group of industrial customers encouraged to open current deposit account includes: commercial, small scale industry, medium scale industry, and large-scale industry. Minimum requirements for current deposits worth TK 50,000, and maximum amount can be deposited up to TK 10,00,00,000.

Savings Deposit-

General clients are targeted group of savings deposit along with the industrial customers. Savings deposit has no particulars to deposit minimum, and maximum. But depositors used to get deducted facilities for drawing money from the deposited figure.

Term Deposit-

Depositors with a minimum TK10,000 are given term deposit facilities for at least six months by means of highest interest rates. Fix deposit term valid up to six years, and then afterwards depositor can redeposit the sum. Another form of term deposit called short-term deposit (STD), a minimal rate of interest given to deposits whereby depositors can withdraw the after term over. Both for Fixed Deposit (FDD), and Short Term Deposit (STD), all type of commercial, and industrial customers are given preferred services to open a term deposit along with a credit & commerce account.

FUNCTIONS OF SOME IMPORTANT DIVISIONS:

HUMAN RESOURCE DIVISION (HRD):

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This division is headed by a D.G.M. Under this division, there are five departments namely: -

1. Recruitment department, 2. Promotion department, 3. Transfer department,4. Records department, and5. Salaries and welfare department.

Their functions are as follows: -

Frame personnel policies of the bank and implement these in harmony with the overall objectives and policies of the bank and the Government.

Ensure recruitment, promotion, transfer and posting of all officers and staff of the bank in conformity with policies, rules and procedures of the bank and the government.

Maintain personnel records the officers and staff and update those for ensuring appropriate personnel actions such as promotion, transfer training etc.

Deal with compensation package of the employees that include such items as salaries T.A. D.A., house rent, and medical bills.

Deal with sports cultural and welfare activities for the employees. Carry put overall manpower planning form the bank assess the need for recruitment, training and

development and sources, methods, and media of training, maintaining and update various types of data on training and skill of the employees.

Cater training needs of the various categories of the employees of the bank. Organization workshop, seminar, symposium and other programs for developing human resources of the

bank.

ESTABLISHMENT AND COMMON SERVICE DIVISION:

Under this division, there are 4 departments namely: -

1. Dead stock & Equipment department,2. General transport pool,3. Security department, and4. Divisional administration department.

This division performs the following functions : -

Procure, supply and repair furniture fixture and other office equipment. Collect bank’s necessary articles security papers etc. Distribute all sorts of stationary. Dispatch and receive mail, telephone, telegram telex etc. Maintain and control vehicles and purchase spare parts tires, tubes etc. and when necessary. Deal with divisional staff administrative matters.

HUMAN RESOURCES DEVELOPMENT DIVISION:

Human resources development division performs following functions: -

Frame human resources development policies of the bank and implement these in harmony with the overall objectives and polices of the bank and government.

Carry out overall manpower planning for the bank assesses the need for recruitment training and development and sources.

Methods and media of training maintain and skill of the employees. Cater training needs of the various categories to the employees of the bank.

BOARD DIVISION:

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The Board division‘s functions and activities are as follows: -

Performing ass duties relating to MD/ Review committee/Board of Directors meeting.

Supervising all functions of MD’s secretariat including appointment with visitors, maintaining liaison with government, autonomous bodies and other financial institutional.

Dealing with matters relating to fund management bill purchase and utilization of surplus fund, credit budgeting banks and maintenance of the records of comparative positions of all financial institutions.

GENERAL CREDIT RECOVERY DIVISION:

It is also one of the vital divisions in the head office and headed by a DGM. General Credit Monitoring department are:

There are two departments namely: -

1. Advance department.2. Recovery department.

This division performs the following functions: -

Co- ordinate and supervise all credit policies and operation of the bank except rural credit and industrial development credit.

Prepare, monitor and review the central credit budget of the bank. Supervise all classified advances other than micro credit and industrial credits. Exercise special control over jute advances of all branches and zones. Take necessary steps for effective recovery efforts.

INDUSTRIAL DEVELOPMENT & FINANCE DIVISION (IDFD):

Under this division there are 4 departments namely: -

1. Appeal & sanction department.2. Implementation department.3. Follow up & recovery department.4. Accounts statistics & data feeding department & special credit department.

IDFD performs the following functions: -

Appraisal industrial projects and process for sanction, Inspect, supervise and monitor implementation of projects, Follow up and supervised use of loans, and Plan and undertake recovery drives.

INTERNATIONAL DIVISION (ID):

ID performs the following functions: -

Preparation of the work plan program of the division and distribution of the same among different departments of the division for action or information,

Accounts and reconciliation activities of the foreign bank account and reconciliation of account section, Import and export finance activities of the import financing section and export financing section, and Foreign aid/loan/barter/grant operation activities of the aid and barter financing section.

CONTROL DEVELOPMENT & CO – ORDINATION DIVISION:

This division is responsible for issuance of operational guidance and instruction to the branches including supply of the operational manual where required. It also ensures maintenance of the existing systems and procedures in respect of general banking by the branches.

AUDIT & INSPECTION DIVISION:

Audit & Inspection division is headed by a DGM. There are 6 sections under this division.

This division performs the following functions: -

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Plan and prepare programs for auditing branches. Select audit these and give audit programs to them for implementation. Supervise the activities of the audit team. Conduct special audit of branches for detection of fraud & forgeries. Scrutinize audit reports. Submit consolidated compliance report received from branches to the commercial audit department ministry of

finance and Bangladesh bank. PLANNING RESEARCH & STATISTICS DIVISION (PRSD):

It has 4 departments namely: -

1. Business & mgmt. Planning department.

2. Research & publication department.

3. Statistics department. and

4. BASIC bank central library.

The functions of PRSD are given following: -

Identify problem /gap areas of operation and management for the purpose of conducting research. Appraise system and procedures for updating. Evaluate the progress of the bank periodically. Develop new services & review existing ones for improvement. Prepare annual reports of the bank.

COMPUTER SYSTEM & PROCEDURE DIVISION (CSPD): This division has 4 sections these are as follows: -

1. Systems and programming section.

2. Computer operation section.

3. Data encoding section. And

4. Banking mechanism section & data control section.

The functions of this division are given below: -

Identify the computerization needs of the bank. Co ordinate with other divisions. Plan oration of the bank’s computer with optimum benefit.

LAW DIVISION:

Law division has two performing wings. They are: -

1. Follow-up and suit filling wing.2. General and monitoring wing.

Law division performs overall supervision of following: -

Follow- up and suit filling activities of the concerned departments.

General and monitoring activities of the concerned departments pertaining to counseling service to the top management checking legal prints, drafting lease deeds, checking and verifying deferent forms of the bank.

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UTILIZATION OF FUND:

BASIC utilizes its funds in accordance with its organizational goals and corporate strategy. Main use is for lending to industrial and trade sectors. Maintenance of cash and statutory liquidity reserve with the Bangladesh Bank covers 20 percent demands and time liabilities. Placement of funds in Nostrums Accounts to handle foreign trade and investment in money market is also done as usual.

Chart:3 Utilized Fund:

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[3.1] History of Dhanmondi Branch:

The Dhanmondi are started October,12,2004. This Branch was a loss project up to 2008.But 2009, this branch earn profit. Day by day profit is increasing and client also increases.

[3.2] DEPARTMENTS OF DHANMONDI BRANCH

The Branch is headed by Assistant General Manager and there some 4 departments which are as follows :

1. General Banking Department 2. Cash Department3. Foreign Exchange Department4. Credit Department

[3.3] Hierarchy of the position Structure of BASIC, Dhanmondi Branch:

Branch In charge & AGM

M

AM

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Source: Official Staff & personal Observation

Workforce of Dhanmondi Branch:

The total employees of Dhanmondi Branch are Twenty three (23). Such as: Branch In charge one (1), Manager three(3), Assistant Manager Three(3), Assistant Officer four (4), Officer three(3), Junior Officer three(3), Messenger three (3),Guard two (2), Tea boy one(1)

3.5 Workforce of Dhanmondi Branch:

SI. No. Designation Category Number of Employees

01.

02.

O3.

04.

05.

06.

07.

08.

Branch Incharge & AGM

Manager

Assistant Manager

Officer

Assistant Officer

Messenger

Guard

Tea boy

01

02

04

07

03

03

02

01

Total = 23

Source: Official document

O(FE)

O(Cash)

O(GB)

O(GB)

O(IT)

Messenger 1

Messenger 2

Guard (Arms)

AO

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Internship Position, Duties And Learning Points:

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I joined in BASIC Bank Limited as an internee on the 1st September, 2010. After joining I followed what they do, how handle the

customer, behavior with employee etc. Day by day I adopted with officials especially the environment and started my work. In BASIC

Bank limited, Dhanmondi branch, the employees are mostly courteous, friendly in nature and eager to help in spite of the assigning

tremendous workload. They helped me as their level best. I tried to maintain the office time strictly that is why everybody liked me

very much.

This internship period was three month and I worked in the bank every section but I emphasis on general banking activities. There I

learned a lot of things such as; how to open a new bank Account, activities of Cash section/Remittance/ bill clearing section. At first I

joined at Finance and Administration section where my key responsibility was to sorting voucher then I started my work at general

banking division. I have tried to complete all the part of general banking

They are following-

1. Account Opening section

2. Cash Section

3. Bill Clearing section

4. Remittance section

5. Account section

Firstly, I got a brief idea about the general banking then started work. I learned account opening, required documentation, maintaining

accounts, and way of closing that etc. are some of instances of learning points. Remittance like telegraphic transfer, Mail transfer,

Pay order, Demand drafts, and cheque issue, clearing was also the learing aspects of this 3 months study.

First day at Bank:

I have started my internship program in BASIC Bank at Dhanmondi Branch on 1 st september 2010.At the First day of my office, I

reached Bank at 9.30 a.m. and I met the Branch Incharge, Mr. Moinul Islam firstly. According to his instruction, I met with second

manager Md. Nazmul Hasan, who introduced me with all of the office staff. After that he placed me at General Banking department.

That day I work till 6 p.m.

Internship Positions and duties:

Positions Responsibilities Date Number of Days

Finance & AdministrationDepartment

1. Voucher sorting

2. Put entry to voucher registration

books

From 01/09/2010 to

30/09/2010 30 days

Investment Department 1. Checking customer database 1/10/10 to 30/10/10 30 days

General Banking

Department

1. help to open an account

2. Making Cheque books

3. Checking cheque books

From 01/11/2010 to

15/11/2010

15 days

Foreign Ex-change Department 1. Pay order writing From 09/05/2010 to

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2. Giving the payment of western

union.

30/11/2010 15 days

Learning Points:

After rigorous effort in the intern period at the bank, the following knowledge is added with me.

1. I learn how to open an account, what are the document require to open an account, and account opening process.

2. I learn how many types of depository product are available in BASIC Bank, at Dhanmondi Branch, and what are the profit

rates distributed to the customer for their deposit.

3. I learn the cash management procedure, who is responsible to open the vault, how to write a voucher, how to prepare

installment receipt, how cash pay to customer and so on.

4. I learn how to provide cheque book to customer.

5. I learn the payment process by Western Union.

6. I learn how to write Demand draft, Pay order, MT etc.

7. I learn the function of clearing house way of clearing the dues with different clients and banks.

8. I learn what are the Non-depository service are available in the BASIC Bank.

9. I learn various charge rate/commission and other service charge that bank receive as profit. .

10. I learn how to cope up with a banking environment

11. I learn how to deal with customer and the best way to provide best service to them.

12. I learn how to work with adverse environment in the bank.

PART: 5

Interest Income:

[5.1] INTRODUCTION :

The two main functions of a bank are borrowing money from public as deposit and lending to trade, commerce , industry and persons.

The making of loans and advances is a prominent and profitable function of a bank . Advances are made by the banks as Overdraft,

Cash Credit, Term Loan, Short Term Loan, LBP , LTR, L/C etc. Banks follow some process through which they sanction loans and

disburse Loans. At first they select appropriate borrower, process the loan proposal, attach security through applicable charge ,

complete documentation , Disburse Loan, supervise and realize loan. The whole process has been narrated in brief below:

[5.2] TYPES OF CREDIT FACILITIES

Bank credit can be categorized according to maturity, method of disbursement and repayment, origin, purpose and security. A

combination of these aspects may be used for the purpose of a categorization. According to BRPD circular no. 16/98 loans and

advance are classified as under:

i. Continuous loan: A continuous loan has no specific repayment schedule. Rather it has only limit and an expiry

date. Examples of continuous loan are OD, CC and LIM facilities.

ii. Demand loan: Loan that is repayable on demand by a bank is termed demand loan, Examples of demand loan

are PAD, forced LIM, FBP and IBP.

iii. Fixed/time/term loan: These kinds of loans are repayable according to a pre-determined schedule. According to the

repayment time, these loans are again classified as:

a. Short term loan - Repayable within 12 months.

b. Medium term loan - Repayable within 12-60 months.

c. Long term loan - Repayable after 60 months.

iv. Short term agricultural and micro credit: Loans which are disbursed under

the loan program of the Agricultural Division of Bangladesh Bank are termed as short term agricultural loan.

BASIC Bank offers term loans to industries especially to small-scale and micro enterprises, working capital finance in processing and

manufacturing units, financing and facilitating international trade and commercial activities. These a!] can

be categorized as under:

1. Funded facilities

A. Term loan

- For small scale projects of fixed cost upto Tk 50.00 lac.

- For other small and medium scale projects

- Other commercial (HBL, transport, NBFIs etc.) purpose

- Staff loan (HBL, 3 Basics, Computer, Consumer, against PF)

B. Micro credit

- For NGO

Interest Income:

- For individual

C. Working capital [CC (H & P), ECC, SOD, TOD, PC, LTR, LIM, LBP, FBP, LAFB etc.]

- For small-scale projects of fixed cost upto Tk 50.00 lac.

- For other small and medium scale projects

- Other commercial purpose

D. Demand loan

E. Other special programs

- Employee Separation Program (ESP)

- Black Bengal Goat Rearing Credit Guarantee Scheme

2. Non-funded Facilities

- L/C, BB L/C

- Bank guarantee (Bid bond, PG, APG, Customs bond)

B. Different type of funded facilities

In Bangladesh lending products of banks are limited and have remained the same over the years, except that lease finance and hire

purchase have come into use recently. Based on the modes of making disbursement and operation of accounts, the major types of bank

advances are: loan, overdraft, cash credit and foreign trade related advances namely payment against documents (PAD), loan against

imported merchandise (LIM), loan against trust receipt (LTR), export cash credit (ECC), packing credit (P.C) and bill purchase

(LBP/FBP). However, BASIC has not yet introduced lease finance and hire purchase facilities.

i. Term/ time/ fixed loan

In the case of a loan the entire amount is disbursed in one or a number of phases by debiting the loan account. Repayment of the loan

can be made either in one or’ more than one installments. Amounts repaid cannot be redrawn. Interest is calculated OH the outstanding

balance. Short-term loans with repayment period, usually one year are sanctioned mostly to meet seasonal working capital needs,

particularly seasonal agricultural activities. Long-term loans, 3 to 10 years, are sanctioned for acquisition of capital goods for

development of manufacturing / processing industry as well as agriculture. This type of account is not suitable for trading purposes,

particularly trading activities with a number of repetitive operating cycles in a year or season. The security is usually mortgage of

immovable property, hypothecation of machinery, pledge of fixed deposit receipts, other financial obligations etc.

ii. Micro credit

Pursuant to the objectives of the Bank and recognizing the need for helping the destitute low-income group of the population, the

Board of Directors of BASIC Bank in 1994 formulated a micro-credit scheme for the poor. The Bank since then has been providing

funds to destitute individual and to NGOs for onward lending to their poor members.

Although according to The Commission of the European Communities, a micro-enterprise has to satisfy the criteria for the number of

employees, which is maximum 10, Basic Bank do not have any official definition in this respect. However, it perceives that micro-

enterprises are generally of cottage industry nature and have the following characteristics:

• Run by owner and his family members.

• Outside labor employment is low.

• Traditional, indigenous technology.

• Mixed with household economy.

• Few fixed assets.

• Little or no reinvestment.

Interest Income:

• Low skill requirement.

• Low literacy.

• Often part-time and / or seasonal.

• No or few written business records.

• Not taxable.

• Highly diverse and multiple activities.

• Market entry relatively easy but numerous competitors.

• Local markets.

• Informal economy.

• Generate high and rapid return to capital employed.

• Tend to be more concerned with access to credit than its cost.

• Very few grow into larger scale businesses.

• Highly risky, frequent business failures, but

• Owner cannot afford to go "out of business" - and will often turn to another enterprise if first one fails.

iii. Overdraft

Overdraft facilities are allowed in current deposit accounts only. It represents permission to overdraw a current account up to a

sanctioned limit. Unlike loans, withdrawals and deposits can be made any number of times, provided the debit balance does not

exceed the agreed limit is usually allowed against excusable securities such as fixed deposit, other financial obligations, assignment of

bills collaterally secured by mortgage of property. Sometimes overdraft is allowed without any security for a very short period.

The use of overdraft facility is discouraged for commercial purposes.

iv. Cash Credit

Cash credit is an account operated almost like an overdraft facility in current deposit account, except that a separate account is opened

and the account in general, cannot be in credit balance. It can be in debit and nil balance. Cash credit limit is sanctioned for a specific

period, usually a year or shorter period. Withdrawals from deposits cash credit account can take place without restrictions, provided

debit balance remains within the sanctioned limit

v. Payment Against Document (PAD)

The Bank, which 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

lodges the shipping documents in their books and responds to the debit advice originated by foreign correspondent to the debit of

payment against document (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.

vi. Loan Against Imported Merchandise (LIM)

Loan against imported merchandise is allowed against imported merchandise storing the same in bank's custody. 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

vii. Loan against Trust Receipt. (LTR)

Loan against Trust Receipt is a form of short-term loan where the bank delivers the import documents against a trust receipt given by

the importer to pay the bank's dues within a stipulated time limit. LTR is allowed to only first class tested parties when the documents

covering an import shipment or other goods pledged to the Bank as security are given without payment.

Interest Income:

viii. Export Cash Credit (ECC)

Export Cash Credit is allowed as cash credit against hypothecation of raw materials for processing goods for export. The advance is

usually adjusted from the export proceeds.

ix. Packing Credit (P.C)

Packing credit is essentially a short-term advance granted by a Bank to an exporter for assisting him to buy, process, manufacture,

pack and ship the goods.

x. Purchase and Discounting of Bills

In the case of purchase or discounting of a bill, the banker credits the customer's account with the amount of the bill after deducting

his charges. The demand bills are repayable on demand, no time period being allowed for maturity. The banker is entitled to demand

their payment immediately on presentation to the drawee. This practice, adopted in the case of demand bills (viz. - Cheque, bill drawn

on sight L/C etc.) is known as purchase of bills.

xi Leasing Finance and Hire Purchase

Leasing Finance: Leasing is a commercial arrangement whereby an equipment/asset owner the lessor coveys to the equipment user

(the lessee) the right to use the equipment in return for the payment of specified rentals over an agreed period of time. The ownership

remains with the lessor. There are two principal types of leasing arrangement: a finance lease and an operating lease.

Hire purchase: Hire-purchase is a type of installment credit under which the hire-purchaser, called the hirer, agrees to take the

equipment on hire with an option to

purchase at specified rental, which is inclusive of repayment of principal as well as interest. Hire-purchase agreement, generally

includes the following terms:

i) Possession of equipment is delivered by the owner to the hirer on condition that the hirer pays

periodical installments as agreed.

ii) The ownership of the equipment is to pass to the hirer on payment of the final installment; and

iii) The hirer has a right to terminate the agreement at any time before the ownership so passes.

C. Different type of Non-funded facilities

i. Letter of Credit (L/C or DC)

L/C is a form of guarantee of payment issued by a bank on behalf of a borrower that assures the payment of interest and repayment of

principal on bond issues.

ii. Bank Guarantee (BG)

Any one negotiating a contract naturally wants to be sure that the other party involve will perform as promised. Bank Guarantees are

widely used to provide this assurance

BGs are used for so many purposes. So, types of guarantee depend on which type of

transaction is guaranteed. Very popular types of guarantees are:

a. Bid-bond: A tenderer participating in tender must submit bid-bong along with its offer Stipulated in the terms

of tender, usually the amount vanes from 1% to 5% of the amount of the offer.

Interest Income:

b. Performance Guarantee (PG): To assure payment to the beneficiary, the guaranteed amount in the event the

supplier / seller has not me! or insufficiently fulfilled his contractual obligations. Stipulated in the contract,

usually the amount varies from 5% to 20% of the value of contract.

c. Advance Payment Guarantee (APG): As per terms of payment for major sale, the buyer usually pay an

installment for purchase of raw materials and cost of production.

d. Bill of lading Guarantee

e. Custom Guarantee

f. Counter Guarantee: It is an irrevocable undertaking of the instructing party to the guarantor to compensate at

the event.

[5.3] SELECTION OF BORROWER :

Selection of borrower is very important for making advance . It will be clear that advance, to be safe, should be granted to a reliable

and honest borrower, who has the capacity to conduct his business. The study of a borrower involves the study of the three "Cs" of the

party, i.e. his Character. Capacity and Capital or, in other words, his Reliability, Responsibility and Resourcefulness.

Character: Character denotes integrity of the borrower, i.e. he or she should have willingness to repay the money borrowed.

Capacity: Capacity means the ability to employ the funds profitably and repay the advance according to the terms and conditions of

the sanction. The capacity of the borrower has to be determined and, for this purpose, enquiries will be necessary to find out his

qualifications and experience in the line in which he is working.

Capital : Capital denotes financial soundness, The borrower must have his or her own stake in business, i.e. he or she must take a part

of the risk in the business. This is to be done by putting his or her own money into the business. That creates a sense of involvement in

the business in the mind of the borrower, if he or she has sufficient capital of his or her own to invest in the business, besides the

advance applied for, he will be considered a more suitable borrower.

[5.4] LENDING CRITERIA:

Entrepreneur:

Entrepreneur/promoter has to be creditworthy and compete enough to run the proposed industry.

Viability of the Project:

The project should be viable from organizational, technical, commercial, financial and economic points of view.

Technical Viability:

The project should be technically sound and environment friendly.

Interest Income:

Building should be well planned and well constructed.

Commercial viability:

Market prospect potential for the product has to be fully assured at competitive prices. Marketing channel for the product should be accessible to the entrepreneurs.

Financial Viability:

There should be reasonable debt equity ratio as determined by the a bank on individual case basis. Debt service coverage ratio should be at least 2.5 times at the optimum level of production. IRR should preferably be not less than 20 percent.

Economic viability:

The project should ensure benefit to the national economy and create sufficient employment opportunity.

5.5] PROCESSING OF LOAN PROPOSAL :

BASIC Bank Limited has been preparing a policy guideline for loan processing at Branch and Head Office level with documentation

procedure which has been summarize as below:

Generally, all credit proposals shall be rooted from branch. The Relationship Manager (RM) at the branch shall conduct a thorough

credit and risk assessment prior to forwarding any proposal to Head Office with due observation/ recommendation of the branch credit

committee (BCC). The results of this assessment shall-be presented in the credit line proposals. The RM shall be the key person of the

customer relationship, and must be held responsible for the accuracy of the entire credit application submitted for approval. RMs must

be familiar with the bank's Credit Policy and Procedural Guidelines and should conduct due diligence on borrowers, principals, and

guarantors

Application Process

Any bona-fid Bangladeshi citizen who is

a. not under the age 18,

b. physically fit and menially sound to run any business,

c. not seasonally lunatic,

d. neither a loan defaulter nor declared as a bankrupt, and

e. not engaged in any activity subversive to the state or against the law can make an

f. application to BASIC Bank Ltd. seeking any sort of credit facility .

application shall have to contain the following:

Purpose of the loan / advance.

Amount of loan / advance required.

Period of loan / advance.

Source and terms of repayment.

Security against the loan / advance.

His/ Her experience in the business (in cases of trade loans).

Source / sources of margin / equity

Required papers/ documents

The customer shall have to submit the following papers/ documents in support of his / her application for credit: -

• Business Reports / Balance Sheet, Profit & Loss Account for last three years.

• Trade License.

• Income Tax Clearance Certificate / Vat Registration. Certificate

• Persona! Assets Statement of the customer (Individual / Proprietor/ Partners/ Directors)

• Statement of bank accounts (deposit accounts / loan accounts) of the customer (Individual / Proprietor / Firm / Company) or his /

their allied accounts.

Interest Income:

• Memorandum & Articles of Association / Certificate of Incorporation / Certificate of Commencement / List of Directors /

Resolution of the Board of Directors for borrowing etc. (in case of loans / advances to Limited Companies). Partnership Deed / Letter

of Partnership (in cases of Partnership Firms)

• Copy of papers / documents related to primary security

• Copy of property documents for collateral security (if any)

• Other related papers /documents depending on the nature of loans & advances applied

for.

• Any other papers/ documents required to analyze the particular product sought for.

Processing of credit proposals at Branch

Any credit facility may be allowed lo a customer only after approval of the same by an authorized official. Any customer seeking a

credit facility against acceptable security must make an application in Bank's prescribed form enclosing papers/ documents . RM shall

verify the information furnished by the customers, shall arrange interview with the customers and shall conduct a thorough

inspection /investigation about the customer and his business position, i.e, shall visit the business of the borrower to assess his

business position / condition and visit the collateral to assess the valuation and condition of the properties. After completion of the

analysis, RM shall prepare the Credit Application and Risk Grade Score.

The RM at Branch shall make a preliminary study of the affairs of intending customer by consulting the following:

i. Customers application

ii. Confidential Opinion

iii. Statement of accounts of (he customer with own and other Banks Statement of assets

and liabilities

iv. Financial statements for the last 3 years

v. Trade and other reports

The RM at Branch shall arrange an interview with the intending customer to know on the following points:

i. Present and future prospect of the customer's project/ business

ii. Total investment required in the project/ business

iii. Customer's stake in the project/ business

iv. Amount of credit required ........

v. Customer's experience in this line

vi. Purpose

vii. Period for which the credit is required

viii. Source of repayment

ix. Customer's previous Banker

x. Present liabilities, if any, with other Bank and conduct of the same

xi. Securities offered

xii. Proposed mar-gin

xiii. Type of charge to be created against the proposed security

xiv. Terms of repayment

xv. Kate of interest

The RM will prepare CLP ( Credit Line Proposal ) as per Bank’s Prescribed format and with specific recommendation the proposal

shall be submitted to the respective division at Head Office

On the basis of the recommendation of the branch Head Office sanctioning authority shall sanction the loan quoting the terms & condition .

Interest Income:

[5.6] SECURITY : SELECTION & CONTROL :

Security : An element of risk is always present in every advances, in whatever degree a banker knew his customer personally and

intimately, in whatever degree he has the confidence in the integrity and honesty of a customer. When a banker ordinarily takes as

things assets, goods, valuables, financial papers, surety, guarantee, etc. against the risk for lending is called security.

Importance of security: Banks always lay stress on three elements while making advances:

a) Borrower's integrity and honesty

b) Genuine purpose

c) Assurance of return of money advanced.

Security serves the purpose of the third element. It: covers risks of non-payment

- determines to a significant extent bankers willingness to lend

- secures a person's undertaking to pay or repay money.

Personal Security: Security by which a borrower is personally made liable to repay the loans / advances. Demand Promissory Note,

Persona] Guarantee, Bill of Exchange, etc.

Tangible Security: Tangible assets like stock of goods, bonds, deposit receipts, bill of landing, bills receivables, warehouse receipts,

real estate, shares, assignable insurance policies, etc. are taken as security against lending.

Primary Security: The security which is deposited by the borrower himself against lending is called primary security. Primary

security is the main cover for the advance made by banks. Primary security is associated with the purpose for which the lending

allowed. "Stock in trade, industrial plants, land and building, bills receivables, deposit receipts, shares, etc. which are deposited by the

borrower shall be treated as primary security.

Collateral Security: Additional, subsidiary or secondary security in addition to primary security is called collateral security.

Direct Collateral Security: Collateral security obtained from the borrower himself to secure his own account is known as Direct

Collateral Security.

Indirect Collateral Security: Collateral security given by a third party / persons to secure a customer's loan account is called Indirect

Collateral Security.

The most common types of securities that are lodged as cover of loans in our country are:

- Real Estate

- Deposit Receipts (FDR, CDR, Sanchaya Patra. etc.)

- Balances in Deposit Accounts.

- Shares and Securities (Security papers, Shares, Debentures)

- Life Insurance Policies.

- Documents of Title to Goods.

- Goods and Commodities.

- Gold and Gold ornaments,

- Plant and Machineries.

Collateral Security is usually taken in our country against trade finances (hypothecation of stock) which is considered as weak

security.

[5.7] MODES OF CHARGING SECURITIES :

Modes of creation of charge on securities are of different types. These are dependable on the basis ofNature of loans and advances and nature of properties for securities.Charges may he of different types like Legal Charge , equitable charges, fixed charges ,i- Uniting charges etc. .

Interest Income:

Mode of charges

Following arc the different modes of creation of charges : i) Pledge ii) Mortgage iii) Assignment iv) Hypothecation v) Lien vi) Set Off [5.8] MORTGAGE TYPES & REQUIRED LAND PAPERS :

Mortgage :

When immovable property, like land and building are offered by a customer as a security for loan, charge thereon is created by means

of a mortgage. According to section 58 of Transfer of Property Act-1872 , a mortgage is '. "the transfer of an interest in specific

immovable property for the purpose of securing the payment of money advanced or ,to be advanced by way of loan, existing or future

debt, or the performance of an engagement which may give rise to a pecuniary liability." Therefore a mortgage under the act is a

transfer of interest of a specific immovable property.

The characteristics of mortgage are :

Mortgage to be created for securing loan or performing any contract

There should be a specific immovable property

The immovable property means land and the property attached to land

There will be Mortgagor , Mortgagee, Mortgaged Property and Mortgage deed.

There are different types of mortgage, such as :

i. Simple/Registered /Legal Mortgage

ii. English Mortgage

iii. Mortgage by condition of sale

iv Equitable mortgage

v) Usufractuary mortgage

vi) Anomalous mortgage

Required Land Papers:

a) Title Deed/ Certified Copy of Title Deed With Discharged Original receipt

b) Bia Deed atleast for Last 25 years

c) Mutation Porcha as per RS operation along with Original DCR

d) Moha Nagar Jorip (DP Khatian)

e) Ground Rent ( Khajna) Receipt up to date

f) Certified Copy of CS, RS & SA Porcha

g) Moza Map

i) Holding Tax Receipt if any

j) Up-to-date Non encumbrance Certificate (NEC) issued by Sub Register

k) Legal opinion

[5.9] DOCUMENTATION :

Charge documents: Charge, documents are generally prescribed in printed forms used by the bank against credit to be executed by

the borrower/party concerned.

Interest Income:

These are as follows:

1) Demand promissory note (DP note)

2) DP note delivery letter

3) Letter of arrangement 4} Letter on continuity

5) Revival letter- f

6) Revival letter-II

7) Letter of guarantee

8) Letter of Hypothecation of goods

9) Letter of Hypothecation of machinery

10) Letter of Hypothecation of bills

11) Letter of Hypothecation of debt assets

12) Letter of pledge-goods

13) Letter of lien - 1sl party

14) Letter of lien- 3rd party

15) Letter of counter guarantee,

16) Letter of trust receipt

17) Letter of ownership

18) Memorandum of deposit of title deeds

19) Disbursement letter

20) Letter of disclaimer

21} Letter of undertaken and declaration with other bank liability

Branch should obtain initially two sets of charge documents. One set is to be duly filled in, signed, stamped and witness. In every

renewal/enhancement/reschedule of loan, branch should obtain afresh set of charge documents.

Where advance are allowed to Limited Company

1. Copy of trade license duly attested

2. Memorandum of association (copy)

3. Article of association (copy)

4. Certificate of incorporation (copy)

5. Certification of commencement (public limited company)

6. Personal guarantee of the directors (jointly and severely)

7. Registration of charge with RJSC

8. All share certificates of directors along with form 117

9. Photograph of all directors duly attested

10. Any other documents as per sanction advice

Where advance are allowed to partnership firm

1. Copy of trade license duly attested

2. Original copy of partnership deed

3. Photograph of each partners

4. Undertaking as required by the sanction letter

5. Personal Guarantee of all partners.

Interest Income:

[5.10] DISBURSEMENT OF LOAN :

The bank disburse the loan after completing all formalities such as

1. Obtain Application of Borrower

2. Obtain necessary information and justify them

3. Obtain related document papers

4. Process the Loan proposal to Head Office for sanction

5. Obtain Head Office sanction

6. Issue Sanction letter by Branch as per H.O. Sanction

7. Get the sanction letter accepted by the Borrower.

8. Complete Documentation formalities and receive original Documents

9. Get Bank’s Charge documents signed by The Borrower

10. Create Loan Accounts

11. Disburse the Loan to the Borrower

[3.11] LOAN CLASSIFICATION :

Loan classification attempts to categorize the debt information in a systematic manner. Loan classification is defined in terms of

degree of risk associated with loans.

Loans are classified which are judged to have a reduced chance of repayment Loans are classified as substandard, doubtful and

had/loss as per classification guidelines by the Bangladesh Bank.

BASIS FOR LOAN CLASSIFICATION:According o BBRD circular No. 16, 1998 all loans & advances are classified as under

Unclassified Current loans with required adequate eligible securities

Overdue is less than 6 months

Sub-standard (SS)

Overdue is more than 6 months but less than 9 months.

Doubtful Overdue is more than 9 months but less than 12 months.

Bad Loss Overdue is more than 12months and above.

CALCULATION OF INTEREST ON CLASSIFIED ADVANCES:

* Interest on Substandard & doubtful loan accounts should be credited to "Interest Suspense Account" instead of crediting the same to the interest income account.

* Calculation of interest on Bad Loss loan accounts should be deferred instead of calculating the same on those accounts.

Interest Income:

* If there is any recover,- on the above accounts mat recovery/portion of recovery will be treated as interest recovery, not principal recovery. After adjustment of interest due, principal portion of respective loan account will be adjusted later on

RATE OF PROVISION ON CLASSIFIED ADVANCES:

SL. No. Type RateStatus

A. Continuous. Demand & Time:1.00%20.00%50.00%100.00%

(a) Unclassified (UC)

(b) Sub-standard (SS)

(c) Doubtful (DF)

(d) Bad Loss (BL)B. Short Term Agricultural & Micro: 5.00%

100.00%

(a) Doubtful (DF) Sub-standard (SS)

(b) Irregular & Regular Loans Bad Loss

[5.12] BRANCH POSITION :

Branch Position as 31.12.2009

Type of A/C Achievement Deposit 441.53 croreAdvance 104.00 crore

Profit 2.56 croreImport 62.00 croreExport 17.52 crore

Advance to Deposit 24%Classified Loan Nil

[5.13] List of Largest Borrowers of Dhanmondi Branch

1. Pailac Chemical Co. – 1250.00 lac

2. Muslim Store - 76.00 lac

3. Taragonj Hatchery Ltd. – 626.58 lac

4. City Heart Mobile Centre -336.94 lac

5. Shah Amanat Shipping - 903.88 lac

6. City Communication - 586.05 lac

7. Interiors ACCOM Consortium Ltd. -735.32 lac

8. Surmi Cold Storage Ltd. – 353.61 lac 9. E.B. Solution Ltd. -705.49 lac

10. Easynet Data System Ltd - 81.00 lac

11. N. D. Printing & Embroidery- 266.87 lac

13. ASA -1103.38 lac

14. Ayesha Macro Products - 110.40 lac

Major Sector where we financed:

Interest Income:

1. Garments Accessories2. Water Transport3. Poultry4. Paint Manufacturer5. Cold Storage6. IT Project7. Food item

[5.14] CASE STUDY :

Pailac Chemical Co. a borrower of Dhanmondi Branch :

Pailac Chemical Co. a paint manufacturer company is the one of the valued client / Borrower of Dhanmondi Branch. They are availing project loan , working capital , L/C and LTR facilities from this Branch. their total exposure is about 12.50 crore.

Pailac Chemical Co. has its presence in the Paint Market since 1980s’ . They have a steady market share of around 10- 15%. Pailac is a quite popular brand. The company has a strong financial position and huge company resources including premises and machinery. As the Management has observed that there is a market gap between demand and supply, they plan to upgrade and expand the existing production capacity to capitalize on the potential market demand. Pailac has a good brand image and is well known in the banking sector. The proposed security is adequate to cover our loan exposure

The major findings of company are given below:

Location : Existing: 83/B, Hazari Bagh, Dhaha, near Sonali Bank, Hazari Bagh Br.

Proposed: 39.90 decimal land beside Berry Band at Hazaribagh, Dhaka.

North Sonaton Garh, beside Berry Band & near Sikder Medical College

Utility : Electricity: a) Existing : 150 MW b) Proposed: 300 MW Water :

a) Existing: WASA Lineb) Proposed: own arrangement – deep Tube well

Communication:

a) Existing: 30 feet road in front of Factory, which is well connected to Main Road

b) Proposed: 40 feet link road which is connected to Gabtoli, Sadargahat and also connected to Dhaka City through many roads

Manpower : a) Existing: 300 persons b) Proposed: 450 persons

Name of products :

a) Existing: Oil base Paint, Water base Paint, Cement base Paintb) Proposed:Oil base Paint, Water base Paint, Cement base Paint

Land :a) Existing: 2 Kathas of land 4 storied building

b) 39.90 decimal land beside Berry Band at Hazaribagh, Dhaka.

Building:a) Existing: 4 storied building

b) New: 3 storied Steel Structure

Furniture:a) Existing: Table , Chiair , file cabinet, Sofa almirah etc Worth Tk. 20.00 Lac written value

Interest Income:

Production capacity: Existing: 100% capacity

Taka in Crore

Item Quantity

a. Oil base paint 36.08

b. Water base paint 19.76

c. Cement paint 2.92

Total 58.76

Annual sales: declared by Owner 2005 35 .00 crore

2006 40.00 crore2007 45.00 crore

Vehicle & Transportation: (As declared by sponsor)

Existing: Vehicle No. valueTruck 4 Tk. 80.00 Lac

Pick up 5 Tk. 45.00 Lac

Car for MD& Other Ditrectors

5 Tk. 90.00 Lac

Car for Directors 1 Tk. 15.00 Lac

Cover Van Type 8 Tk. 70.00 Lac

Project Cost: Particulars Existing Total CostLand 39.90 decimal & Development 2.45 crore 2.45 croreCivil construction & Steel Structure 3.28 crore 3.28 croreImported Machineries 3.21 crore 3.21 croreExisting machineries 1.90 crore 1.90 crore

Local Machinery Nil Nil

Initial working Capital 8.00 crore 8.00 croreOthers 2.90crore 2.90croreTotal Project Cost 18.46 crore 18.46 crore

Interest Income:

Finding of the study:

The following have been identified during the period of my internship at BASIC Bank Limited:

Problems:

The Account Opening procedure is not easier to the customer, such as the names of the introductory, no separate desk for

this.

There are few number of ATM booth, the number of ATM booth is only 5.

Although the profit earning is satisfactory, but customer service quality of this branch is not yet top class.

The working procedure of the branch along with the office set up could be more organized.

Interest Income:

Efficient work force along with proper division of work is vital for the success of any bank, BASIC Bank has the scope to

consider these factors to enhance and sustain it growth.

Lack of variety of services in the general Banking.

The cash counter and the whole General Banking section as I found at Dhanmondi Branch is congested and the procedures

are also traditional.

Small Market share, therefore Market pressure for lowering of lending rate.

BASIC bank has limited branch network.

High concentration on fixed deposits and largescale loans.

Strengths :

BASIC Bank has larger corporate client.

BASIC Bank has experienced and efficient management team and human resources.

BASIC Bank provides quaity products and services

Company has reputation and goodwill

Sound profitability and growth with good internal capital generation

BASIC Bank better infrasructural facilities.

BASIC Bank commited to provide quality service

BASIC Bank provide service according to Bangladesh Bank.

Loan processing

Loan application

4.11 Loan Sanctioning Procedure of BASIC Bank

Interest Income:

12

3

S10

20000000

40000000

60000000

80000000

100000000

120000000

Series1

Loan Disbursement:

Sending HO for approval

4. Receiving Sanction Letter

Documentation

Disbursement

Interest Income:

So, Loan Disbursement is increasing day by day. At 2009 the expected amount are increases rather than 2008, and at 2010 disbursement are more than 2009.So, the branch position is stable day by day.

4.14 Sector Wise Distribution of Loans in BASIC

4.29 Classified Loan of BASIC Bank Ltd.

Interest Income:

Deposit:

Loans and Advances:

Interest Income:

3 year’s comparative position of Deposit, Advance, Profit/Loss, Classified loan & SMA

5.4 BASIC Bank, Dhanmondi Branch at a Glance

Interest Income:

Number of Loan A/C

SL.# Mode Amount in lac Taka

% of total loans of the branch

01. Industrial (SSI) 1686.29 6.93%02. Industrial (MSI &

LSI)17903.13 73.62%

03. Commercial(Medium & Large)

351.75 1.45%

04. CommercialSmall Enterprise

3734.14 15.35%

05. Micro Credit 0.00 --06. Consumer Finance 0.00 --07. Staff loan 362.44 1.49%

5.5 Distribution of loans of the branch

Interest Income:

I get the following Strengths, weaknesses, opportunities, and threats (SWOT) from my practical observation in three months Internship Program, of BASIC Bank Ltd. as follows:

Strengths Weaknesses

1. Conservative approaches to reduce the risk of

classification.

1. The techniques specified for credit

appraisal is not sufficient.

2. Assign adequate power to the top management

to monitor credit operation

2. More dependency rests on government

sources for deposit mobilization.

3. Clearly specifies the documentation

process to reduce the risk of classification.

3. Services offered are not adequate.

4. Provide guideline to furnish loans only to

small-scale industries for short time, which

minimizes hug loss.

4. Small market in Banking-business.

5. Clearly defined measure in dealing with

foreign exchange transaction.

6. Strong procedure in selection of new borrower

Opportunities Treats

1. Suitable for small-scale business, this is

growing day by day.

1. Not suitable for future competition in the

market.

2. Government and other International

agencies positive attitude toward low

classification rate.

2. Major economic depression.

3. Opportunity to expand in business banking. 3. Govt. pressures to reduce interest rate

5.6 SWOT Analysis

Interest Income:

RECOMMENDATION & CONCLUTION:

[6.1]

Basic Bank is one of the top class banks in our country. When I was placed at Dhanmondi Branch I didn’t have serious problems regarding the operation, customer service, management, human resource department or anything else. In spite of this I found few problems as follows:

The time to reach Permanent Position from probation period takes almost two years, which is a very long time process as I considered and it should be less than two year.

Some Officers of the bank are not self-motivated. They should be self-motivated by training.

Basic Bank has only 31 branches, which are not so satisfactory to serve the country widely. It requires more branches throughout the country.

Some banking operations are still operated in manual basis rather than computer system that take more time. Computer should be used in all their activities.

The branch should obtain AD license for operate full fledged foreign exchange banking.

We require some valuable information for the purpose of making Internship report but these kinds of information is not available. We strongly suggest helping us in this matter.

Credit should be diversified.

No. of officers relating to Credit should be increased.

[6.2]

The BASIC Bank Limited has been trying to operate its business successfully in Bangladesh since 1994. Basic Bank has already developed goodwill among its clientele by offering its excellent services through General banking, Credit division and Foreign Exchange divisions. This success has resulted from the dedication, commitment and dynamic leadership among its management over the periods. The working atmosphere of the BASIC Bank Limited is very simulating. During the short span of time of its operation, the bank has been successfully to the position itself as a progressive and dynamic financial institution in the country due to the following reasons:

Although there was huge loss in the establishment period of the bank due to huge sunk cost and operating cost, from the second year the bank was gradually able to reduce cost proportionately through an effective management.

The growth of total exposure of the branch is very satisfactory. Total exposure of Dhanmondi Branch is Tk. 104.00 crore which is very satisfactory for a branch which has launched at the end of 2004. Moreover , Classified loan is Zero which is really praiseworthy.

Interest expanses of the bank are reducing proportionately compared to interest income due to huge accumulation deposits as a result of increasing number of depositors. The number of depositors and the amount of deposits lie in the upward trend due to offering attractive services to the customers.

CONCLUSION:

RECOMMENDATION:

Interest Income:

Other income of the bank is also going up every year due to the increase of commission, exchange and brokerage fees in the foreign exchange section. Foreign exchange of the bank is operating effectively.

All this together with its adoption of modern trend of Banking system has enable it to turn out as potential profiteering financial Institution. My course of internship in this Bank has been very valuable.

Interest Income:

[6.1]

We took help from the following sources for preparing this report they are: - Annual Report of BASIC Bank Limited 2009 Various types of publications of BASIC Bank Limited. http://www.basicbankbd.com http://www.bangladeshbank.com Officers of the Branch

OTHER SOURCES OF INFORMATION: -

Information was collected from the different publication, and books. For collecting books and periodicals I have used the following library:

BASIC Bank Library DBL Library BIBM Library Bangladesh Bank Library UAP Library

SOME BOOK REFERENCES:

The Banking sector crisis and government in Bangladesh, Thoughts on Economics, Vol-7, no 3 & 4. By, Hossain Mr. Kabir.

Investment Analysis and Management, 7th Edition, By, Charles P Jones, Chapter 3 & 8.Investment Analysis, 9th Edition, By, Brigham, Part-2, Chapter no 6.

International Monetary Fund Staff Papers, 35 (September 1988): 534-36.Elgari, Mohamed Ali. "A Short Term Financial Instrument Based on the Contract.

The Experience of Bangladesh,”Managerial Finance, Volume 25, Number 5, 1999: 60-113.Hassan, M. Kabir and Adnan.

REFERENCES

Interest Income:

[6.2]

Annual reports, BASIC Bank Limited 2009 BASIC Bank 5 years of progress Book. http://www.basicbankbd.com http://www.bangladeshbank.com Various types of publications of BASIC Bank Limited.

SOME BOOK REFERENCES:

Performance Evaluation of Private Sector Commercial Banks," The Indian Journal of Economics, Vol. LXXIII, Part II, No. 289, October 1992.

Investment Analysis, 9th Edition, By, Brigham, Part-2, Chapter no 6.

International Monetary Fund Staff Papers, 35 (September 1988): 534-36.Elgari, Mohamed Ali. "A Short Term Financial Instrument Based on the Contract.

The Experience of Bangladesh,” Managerial Finance, Volume 25, Number 5, 1999: 60-113.Hassan, M. Kabir and Adnan.

The Banking sector crisis and government in Bangladesh, Thoughts on Economics, Vol-7, no 3 & 4. By, Hossain Mr. Kabir.

Economics Research Bureau.  Akkas, S. M. A. (1995). “Modeling Operation of Islamic Banks Under Conventional Banking Framework: A Comparative Efficiency Analysis in Deployment of Investible Fund”. Thoughts on Economics, Vol. 5 No. 3 & 4, July-December 1995. Dhaka.

Minsky, H. P. (1982). “Can it Happen Again”. In M. E. Sharpe (ed.), Essays on Instability and Finance.Minorsky, N. (1962). Non-linear Oscillations, Litton. Sametz, A. W. (1982). “The Capital Market”. In Polakoff & Others (ed.), Financial Institutions and Markets: Special Issue. Boston: Houghton Miffin Co.

BIBLIOGRAPHY: