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1. General Banking
The General Banking section is what keeps the overall banking going. All sorts of
day-to-day transactions are performed here as it plays a vital role in banking. The
General Banking department consists mainly of the following:
1. Customer Service Department
2. Cash Section.
3. Clearing Section
4. Accounts Department.
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open account in the name of the applicant by making posting in STELAR and
proceed to the next step.
6. Then with duly filled deposit slip, he requests customer to deposit the amount of
initial deposit in the cash counter. And upon deposit the account will be eligible to
operate.
7. Then the responsible officer will issue chequebook to the new account holder and
also give him deposit slip.
8. Then the officer files the account opening form and other attached papers in
appropriate file and preserve in file cabinet.
9. After opening of Account Bank send thanks letter to the new client expressing
thanks and gratitude to make relation with us. Another objective of this letter is to
verify correctness of the customers address
of
the
Notes:
Introduction: The introduction is the initial reference about a prospective
customer that ensures genuineness of his identity, occupation, address etc.
Existing customers, respectable person and employees of the bank can be
introducer of prospective customer.
Transaction Profile: As per Money Laundering Act, Banks must obtain this
profile from all customers wherein the customer will clearly declare what
kind and volume of transaction may be conducted in the account he
opened/he will open. It is necessary to analyze the risk of account by KYC
Profile Form. It includes information like maximum size per Transaction,
type, number & total value of Monthly Transactions.
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And renewal charge is Tk. 100 per year. The minimum amount that can be withdrawn
is TK. 500/= and the maximum amount being TK. 20,000/=. This service is available
to the valued customers 24 hours a day, 7 days a week, and through out the year
1. b. Remittance Section:
Cash handling from one place to another is very risky and thus banks remits funds on
behalf of customers to save them from any awkward happening through the network
of their branches.
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Officer check his/her overall history of transactions and enquire all leaves of
cheque book to know whether all active or not.
He/she sends it for taking NOC (Non Objection Certificate) from three
departments namely Accounts, Credit and Foreign Trade.
If account has fund, after deducting the due charges it is given to customer
through issuing PO or crediting the same to another account
Statement of the closed account is taken showing zero ending balance.
4. Attend customer query in desk as well as over phone: The customer service
desk attends all queries form different clients and customers over desk or over
phone like accounts balance enquiry, deposit slip issue etc.
5. Encashment of Deposit Products: Customer Service Desk provides encashment
service to the FDR and Deposit Schemes holder on maturity.
1. Request for encashment of FDR/BASP/MB+/ DPS+: It is done through:
a. By cash.
b. By issuing PO.
c. By crediting the amount to consumer account with BA.
2. Request for encashment of PO/DD: It is completed through:
a. By cash.
b. By crediting the proceed of above PO/DD to consumer account with
BA.
6. Transfer:
1. Request for transfer of interest against FDR A/C to another A/C.
2. Request to transfer the amount from one account to another account or another
persons account with BA.
7. Withdrawal Service: Request for withdraw of interest against FDR A/C: It is
done through:
1. By cash
2. By issuing PO.
3. By crediting the amount to consumer account with BA.
8. Standing Instruction:Customer service provides the following services on the
request of customer:
9. Other Services:
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It provides other services as SMS banking, Internet banking facilities and related
works regarding this. And overall marketing of Banks assets and liabilities
All the activities stated above are vital for the bank not only that those earn handsome
share of Banks income but also for building relation with the public, business entity
and the community as a whole. So we can define customer service as the window of
the bank that aid to oversee the whole world. By ensuring prompt and flawless flow of
all these services a bank can create a sound and strong base comprises with bulk of
satisfied customers. And this ensures to achieve long time vision in brighter future.
There fore, to ensure sustainable growth the bank management must give proper focus
on the arrangement of Customer Service Desk and its service team.
Credit Card
BA Credit Card offers customer having an account with BA, free credit facility upto
45 days and minimum 15 days without any interest. BA Master card gives facility to
draw cash upto 50% of the credit limit against local master card. Customer can have
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access to ATMs across the country which shows Master Card/VISA logo for cash
withdrawal.
Card Cheque: BA Credit Cheque is issued in favor of credit cardholder to enable
him/her in making payment through A/C payee cheque. The bank shall accept Card
Cheque till there is enough credit limit in his/her BA credit card
5. Western Union Money Transfer:
Money transfer from anywhere in the World to Bangladesh in minutes.
The western union money transfer is the fastest money transfer service around the
globe. The fastest track of money remittance was introduced by BA. This is
undoubtedly one of the safest and fastest way people can get their fund in time of
need.
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b.1.1. Cash Receive over counter: This counter receives cash from the customer with
deposit slip/credit voucher through over the counter. Cash receive transaction is
performed by the following formalities:
1. Count Notes and check fake notes by fake note detector.
2. Check Deposit Slip whether its wording is correct. Here we check account
Title and number, date, amount in word and number figure, depositor sign,
etc. Here also we check Account no belongs to which branch.
3. If every thing is found correct, give Cash Receive Seal on the deposit slip,
write the amount in words and figure in red ink and give signature.
4. Take authorization sign form authorized officer.
5. Give the counter part (customer copy) of deposit slip to the customer.
6. Credit the amount to customer account by proper posting in STELAR and
write the transaction No. on the Deposit slip.
7. Give Posting in Cash Register usually maintained in XL Sheet by
mentioning denomination notes.
8. Place the cash notes in the respective drawer of teller desk.
b.1.2. Cheque received over counter: Customer usually deposit account payee
cheques by deposit slip. And here the tellers perform his job as follows:
1. Check Deposit slip and Cheque leaf whether the A/c belongs to this branch.
And also we check here the wording of the deposit slip like cash receive.
2. Give Receive seal on Deposit slip and give proper mark on the cheque.
3. Give the counter part (customer copy) of deposit slip to the customer.
4. Give Cross/Account payee seal quoted Bank Asia Ltd., on the Cheque.
5. Send all the clearing and collection cheques to the clearing section.
6. If the Cheque is for inter branch fund transfer then pass transfer entry in
STELAR to transfer the fund.
And at day end, this counter produces report to the Cash In-charge. The report
furnishes data on Cash Received (incoming cash) from customer over counter (usually
cash received for DG+, ATM, City Corporation /GP /RanksTell /IUB bill, cash from
account holder and other transfer payment i.e. Cash DD, TT & PO), received form
vault, Payment to cash payment teller and Balance in hand at the end of the day.
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4. Also check Account no belongs to which branch. For other branchs cheque
more than BDT 500,000/= is not to be paid over counter.
5. Verify the signature with the specimen signature and give verification seal
and signature of the verifier.
6. Check proper endorsement is given behind the cheque leaf in case of
Cheque Drawn on Payees in the name of any Firm. For cheques in the name
of Firm, Attestation by authorized person to draw cheque is required along
with Firms common seal to be paid over the cash counter.
7. Check the drawer account whether the account has enough balance and if
enough has, give posting in STELAR and debit drawer account and note the
transaction no. on the top of the cheque. In case, where a prior arrangement
has been made with the bank, a client may overdraw against a cheque
8. Put paid seal on the cheque & write the denomination notes on the back of
the cheqe.
9. Take receiver signature on backside and verify it with earlier one given on
backside when placing the cheque in the counter and make payment to the
client. And also write down the denomination of notes behind the cheque.
10. Return cheque is refused for refusal reason.
At the end of the day, this teller also reports to the cash In-charge providing data on
Receipt Form vault about receipt from Cash Receive Teller, payment to the customer
(outgoing cash) and balance in hand at the end of the day.
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heavily then the vault balance exceed this limit and then cash in-charge
deposit excess amount to our account in Bangladesh Bank as per the
instruction from treasury. And when vault suffers from cash shortage then
Cash In-charge as per direction of Treasury, draws cash from Bangladesh
Bank A/c.
c) Cash In-Charge give opening cash at the beginning of the day to the teller
and collect the day end cash in the hand of teller and keep it in vault.
d) And at the end of the day Cash In-Charge along with joint custodian will
check the vault cash balance with the balance in the Vault register. Daily
Cash Position Memo is prepared every day to show cash balance and signed
by him; and signed by the head official and counter signed by the joint
custodian.
****
Add:
1. Withdrawal from Bangladesh Bank
2. Receive from Tellers
3. Received from other bank
****
****
****
a. Total
*****
Less:
1. Deposit to Bangladesh Bank
2. Cash Payment
3. Payment to other branch
****
****
****
b. Total
*****
*****
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Due care and concentration is required to perform all these activities successfully and
faultlessly and this is very crucial for smooth continuation of Bank business as cash is
treaded the most sensitive asset of any organization. And for bank it is the lifeblood
proper circulation of which result on the good health of the bank.
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authorized official of every bank attend clearing house floor at opening time with all
collection Cheques in his hand drawn on other banks and settle down their transaction
by the arrangement of clearing house.
Usually all the collected cheques are presented in this clearinghouse. Usually each
member takes sit at around 9:00 A.M. and return house sits at 5:00 P.M or as directed
by the House Super. And then we place the Cheques collected earlier day, in
clearinghouse today for settlement. And at day end i.e. at 5 P.M. after coming back
from return house we credit the collected amount to the customer account and the
customer can withdraw money form his account on next transaction day or may draw
by ATM or through evening banking facility if provided by the Bank. That means the
customer gets money on next transaction day.
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clearing region e.g. Chittagong city clearing house member branch. The bank then
debits its customer account and issue DD to us drawn on any of its member branch
in Chittagong city. And then we collect the DD by placing it in Chittagong
clearinghouse.
4. Sorting the Cheques as branch wise and classify them according to different
Banks.
5. Perform Sealing formalities:
a. Special Cross Seal: Affix cross seal on the left corner of Cheques that will be
placed on clearinghouse for collection.
Crossing: Drawing of two parallel transverse lines with or without any words
across the face of negotiable instrument is called crossing. It is a direction to
the paying bank to pay money to the bank and not to pay to the holder of the
instrument over counter in cash. Generally, crossing is done on the left-hand
top of the instrument.
i. General Crossing: When customers cross the cheques by two parallel
lines with or without word, which is called general crossing. General
crossing implies that this cheque is not eligible for payment over counter
and payment must be made by clearing basis
ii.
Special Crossing: Usually, bank use special crossing, when it
receives the cheque to clear, on the top left corner by mentioning bank
name and branch name. The purpose of special crossing cheque is that
the specific banks branch that is marked as crossed is only eligible to
clear this cheque
b. Clearing Seal: Affix this seal on all Cheques to be placed on clearinghouse
c. Endorsement Seal.
Sl
a.
b.
Received Payment
For Bank Asia Ltd.
Agrabad Branch, Chittagong
c.
d.
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Causes of Endorsements
For say Payee is Mr. Karim and He is our A/c Holder in
Agrabad Branch Branch, Bank Asia Limited. This
endorsement means that we credited payees account by
this amount of Cheque.
Here Payee is Bank Asia Limited/Cash/Self/Own. This
endorsement means that Bank Asia A/c is credited for
this Cheque amount.
When Self is written on Cheque, then this endorsement
seal is used.
For OBC: This endorsement is made when Cheque is
sent to other region for collection. And this endorsement
means that payees A/c will be credited upon realization
of the Cheque amount. Here also we give OBC seal with
OBC No. & Date on the Cheque.
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e.
First House:
10. Then the authorized officer of Bank go to clearing house in Bangladesh Bank (BB)
in early morning next day and give the disk to the computer division and then the
officer exchange Cheques with other banks and receive Cheques drawn on his
bank from other banks desk. Here the bank officers check errors with the cheque
amount and NIKASH entry amount and other Cheques. And in case of any errors
take initiatives to correct it with the respective banks officer. And then BB
representative cross matches the Cheques by the aid of NIKASH software. And
BB representative announces the printing of cross match posting and take print of
NIKASH posting and after print no one is allowed to place new Cheques for
clearing or make any correction or change. And then give all the banks
representative copy of NIKASH printed statement. Here BB make the following
posting to settle the transaction as follows:
For Cheques placed to other Bank for collection (Outward):
Respective Banks A/c
Bank Asia Limited A/c
Dr.
Cr.
Dr.
Cr.
11. Then the bank officer comes back to his office along with the Cheques drawn on
his bank (Inward Cheques) and the printed statement. Then he checks manually all
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the Cheques and send all the Cheques drawn on other branches to have the
confirmation on fund sufficiency in the respective customer account and to debit
accordingly from customer account.
For Cheques placed by other Bank for collection (Inward):
Respective Br./Customers A/C
Dr.
Clearing Adjustment A/c
Cr.
12. Then within 5 p.m., sort out the Return Cheques with Cheque Return Memo of
respective bank. And in return memo specific mark is given to the reason for
cheque return. Usually a bank return or dishonor Cheques for the following
reasons:
Insufficient fund.
Amount in figure and word differs.
Check out of date/post dated.
Drawers signature differs from the specimen recorded in our office.
Payment stopped by drawer.
Crossed cheque to be presented through a bank.
Payees endorsement required.
Or any other reason as written on the memo.
13. Then the respective bank officer will make posting of return Cheques in Nikash
and take print and affix the copy with return Cheques bank wise and also take a
copy of Nikash posting in Floppy disk.
Return House:
14. And then he attends Return House and places the disk to computer section and
again exchange the return Cheques and cross match the return Cheques with each
other. And then BB representative upon making announcement take print of
NIKASH posted cross match entries of return Cheques and give this print copy to
each bank representative and then the bank officer come back to his office with the
return cheques of its customer. And he makes posting in STELAR for return
cheques and debit/bounce respective customers account and now clear the under
process mark on the amount that was posted todays morning. Here BB makes the
following posting for return cheques:
For Return cheques placed to other Bank for collection (Outward):
Bank Asia Limited A/c
Respective Banks A/c
Dr.
Cr.
Dr.
Cr.
And the Bank officer when come back his office, pass the following posting
in his system for return cheques as follows:
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Dr.
Cr.
Dr.
Cr.
15. And then the clearing section of Bank collects cheques for next day settlement and
takes same arrangement as illustrated here.
All the activities as illustrated above require proper care and concentration. And this
will ensure the collection and payment of local remittance to the customer account
with in least possible time, successfully and accurately.
3.e.
A
Typical
Operation:
example
on
clearing
For Say Mr. X is an A/C holder in Bank Asia Limited, CDA Avenue Branch and this
branch is not member of clearing house. And he deposited his account by an A/C
Payee cheque amounting Tk. 100,000 drawn on Prime Bank Ltd., Agrabad Branch.
Now describe how this cheque will be collected and transaction will be settled?
Illustration:
Here CDA Avenue Branch will receive the cheque and send it to Chittagong zone
clearing house branch i.e. Agrabad Branch with OBC (Outward Bill for Collection)
forwarding and proper endorsement i.e. Payees A/c will be credited after
realization.
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Then Agrabad Branch clearing section will make proper arrangement to place the
cheque in clearing house i.e. it will cross the cheque, give clearing seal and make
endorsement as Our Branch Endorsement confirmed and then give posting in the
IBC register and place this cheque in house.
And then in the house via Bangladesh Bank this cheque will be given to Prime Bank
Local Office (clearing Branch) and receive payment from Prime Bank vide BB.
And then Prime Bank Local office will send this cheque to their Agrabad Brach and
accordingly collect money of the cheque.
And upon receipt from Prime Bank via BB, Bank Asia Limited, Agrabad Branch will
credit the amount in CDA Avenue Br. A/c and send an IBCA (Inter Branch Collection
Advice) to CDA Avenue Branch and then CDA Avenue Branch will cr. Customer A/C
by the Amount.
And also note here that if the cheque is returned from Prime Bank, Agrabad Branch
then it will send the cheque with return memo to its local office. And then local office
will back us (Bank Asia Limited, Agrabad Branch) the return cheque with return
memo and debit the amount from our BB A/C vide BB. Then we will return the
cheque to our CDA Avenue Branch with the return memo and a forwarding letter and
debit the cheque amount in CDA Avenue Branch Account and then CDA Avenue
Branch will return the cheque with return memo to its respective customer.
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Daily Functions:
Preparing Daily Clean cash
Preparing the daily position of deposit, loans and advances, and cash.
Prepare statement of affairs.
Making the payment of the expense of the branch.
Recordings of inter branch fund transfer.
Checking whether all the vouchers are correctly passed.
Posting Vouchers in the system.
Filing and maintaining the total debit and total credit vouchers.
Periodical Functions:
Monthly statement of position or affairs, profit and loss etc.
Quarterly statement of position or affairs, profit and loss etc etc.
Yearly statement of position or affairs, profit and loss etc etc.
Yearly statement of classified Loans and Advances.
Statement of Affairs.
Yearly Budget of the Branch, etc.
SBS (Schedule Bank Statistics) report to Bangladesh Bank.
Other Functions:
Maintaining service file and records of the officer.
Supervising service of the guard, cleaner and messengers.
Record keeping and well maintenance of office furniture, fixtures,
computers, stationary, lights, air-conditions and other assets.
Ensure proper operation of IT/CCTV/Photocopier/Generator.
Maintenance of office garden and all other interior decorations.
Make payment for all day-to-day and other expenses including logistic
services.
Payment of salaries and bonus to the officers and service peoples.
Posting Vouchers in the system.
Balancing accounts with the systems.
Closing monthly accounts and prepare monthly report and submit to
Corporate office accordingly on due time.
A daily affair is a statement that shows the position of all the assets and liabilities at
the end of the day. The broad heads of an affair of Agrabad Branch are as follows:
Liabilities
Current Deposits (BDT)
Current Deposit (FCY)
Savings Deposit
Short Term Deposit
Fixed Deposit (BDT)
Fixed Deposit (FCY)
Interest Payable A/c
Deposit Scheme
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Statement of Affairs
Assets
Cash in Hand (BDT)
Cash in Hand (FCY)
Investment Prize Bond
Loan and Advances General
Consumer Credit Scheme
Bill Purchased (Local)
Bill Purchase (Foreign)
Staff Loan
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TOTAL ADVANCES
Bank Asia General Account
(BDT)
Bank Asia General A/c (FCY)
Fixed Assets
Other Assets
Contra Accounts
Expenses Accounts:
Interest Expense
Non Interest Expenses
Grand Total
Under the head of Inter Branch Account, if Bank Asia General Account shows balance
at asset sides then the branch is earning interest on the money they have lent to
corporate office and if it shows balance in liability side then the branch is paying
interest to head office against their borrowings.
As accounts department is the mirror of the branch, accurate refection of the branchs
position solely depends on the reliability of the system as well as sincerity and
flawless operation of the Accountant.
2. Credit Division
Credit department plays an important role in generating banks income. It deals with
the asset of the bank. Generally financial institutions like commercial banks collect
fund from society in terms of deposit & channel this fund in terms of credit to
different firms in business community as well as to individuals with deficit fund in the
society. And this facility is generally known as loan. So in a broader sense we infer
that bank is providing solutions to the business as well as to the individuals for their
financial problems. Schedule Bank has to deposit to Bangladesh Bank around 5% of
cash balance and 13% statutory reserve. So, bank has to earn profit from 82% of the
total deposit.
2.a. bjectives:
a. Investment at different business sector.
b. Generate Income.
2.b. Function:
a.
b.
c.
d.
e.
f.
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LOAN
Funded
Continuous Loan
Overdraft (OD)
Non-Funded
Import Credit
Term Loan
PAD
Bank Guarantee
LTR
Secured OD
Letter of Credit
LIM
Demand Loan
Acceptance
Export Credit
Packing Credit (PC)
Bill Purchase/Discounting
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c.1. Funded Credit: Any type of credit facility that involves direct outflow of
Banks fund is known as funded credit. Funded credit facilities may be classified into
five major types: i) Continuous Loan, ii) Export Financing, iii) Import Financing, iv)
Demand Loan, and iv) Term Loan.
i. Continuous Loan: Here the customer avails the loan facility continuously for a
specific time period. And also noted here, with in stipulated limit he can enjoys the
facility as much as he desires. Thats why this loan arrangement is also termed as
revolving loan. This is a very much popular form of loan facility in the business
community. Two most popular continuous loans are as follows:
a. Over Draft (OD): This loan is disbursed in clients present current account as
maintained with the bank. The customer may be sanctioned a certain limit within
which he can overdraw. The amount up to which overdrawing is permitted is
depend on the need of the customer, the previous conduct of his account with the
Bank and turnover in the account, average balance maintained. OD facility is
generally granted to businessman for financing working capital requirement and
high net worth individual to overcome temporary liquidity crunch. Customer can
draw money over and above his credit amount in his account up to that limit. This
loan is for one year time and renewable upon maturity. Generally on maturity the
customer clear all debit balance of this account and request the bank to renew the
facility and then bank proceed on to renew the facility.
Overdraft clean
Secured OD: When the over draft facility is secured by financial
obligation or cash equivalent i.e. FDR certificate, DPS certificate, or any
other Savings Instrument, this is called Secured Over Draft (SOD).
OD against stock of goods (Working capital)
OD against Work order/Bills Receivables.
At present overdraft facility is around 21% of total loan facility of Agrabad
Branch. And present interest rate charged on this loan ranges between 14
16% in Bank Asia Ltd. And interest on this loan is calculated on daily basis but
charged in customer account quarterly.
b. Cash Credit (CC): It is like an OD account. The borrower may operate the
account within stipulated limit as and when required. The drawing is subject to
drawing power. CC is generally given to traders, industrialist rather than individual
for meeting working capital needs. Usually this loan is provided to procure raw
materials and to complete it in finished goods. The primary security of CC is the
subject mater of loan i.e. the finished goods stock. Some other securities are also
kept for this facility like savings instruments. Cash credit depending on its nature
classified in the following types:
1. CC Hypothecation: in this arrangement the possession of goods (subject
mater of the loan) goes with the client or borrower but the ownership is in
banks hand. And client repays loan form the sales proceeds by turn. Here
primary security is the goods purchased by the sanctioned loan and
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50% of total advances. And this loan is reported in Classified Loan Listing
under the head of continuous loan.
c. LIM (Loan against Imported Merchandise): Parties, who are not in a
position to retire the documents, they may be allowed to retire PADs through
LIM account. It is like as LTR and used to make payment of import bills. But
here the goods are held in banks godown under its possession and
ownership and bank allow the customer to discharge goods a certain portion
and make payment from the sales proceeds and so on. This loan is also
reported under the head of continuous loan.
iv.
Demand loan: These loans are short-term loans which is repayable by the
borrower on demand. That means for this loan the borrower is bound to pay back on
demand of bank. And hence this loan become due after one day of its drawing.
Usually they are made for periods of 3 month to one year to cover short term
funding requirements. There is no principal reduction during the loan term, the entire
balance becoming due on maturity.
v.
Term Loan: This loan is given for a specific term and usually repaid in Equal
Monthly Installment (EMI) or interest paid quarterly and principal at the end of
Loan tenor. Depending of the loan tenor this is classified as:
a. Short-term loan: The tenor of this loan is less then one year.
b. Mid Term loan: The tenor of this loan is between one to five years. This
type of loan is most preferred by both bank and the borrower. This loan is
comprises with consumer credit, Agro credit, Micro Credit etc.
c. Long Term Loan: the tenor of this loan is more that five years. This is not
viable for the banker as here the fund is locked up for a long period and
hence risk exposure is higher that other term loans.
c.2. Non-funded Loan: These types of credit facilities are primarily non-funded
in nature but at times it may turn into funded facilities. Liabilities against these types
of credit facilities termed as contingent liability. For instance:
i. Letter of Credit (L/C): It is an undertaking of issuing bank on behalf of the
importer favoring the exporter to pay a certain sum of money under certain
terms and conditions.
ii.
Bank Guarantee: The guarantee of the bank on behalf of
this customer to make payment to the beneficiary if the client fails to make
payment.
iii.
Acceptance: Undertaking by the bank to pay a bill drawn
on the bank on behalf of its client on maturity.
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Risk
Business Risk
Industry Risk
Supply Risk
Sales Risk
Security Risk
Control Risk
Cover Risk
Company Risk
Resilience Risk
Management
Performance Risk
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Overdue
Installments
Less than 6
3 installments
Provision
percentage
2%
2%
6 installments
12 installments
18 installments
20%
50%
100%
Classified loans are non-performing assets of bank and are a matter of great concern.
Monetary authority also is cautious about these loans. So the rule is to keep certain
percentage of these loans as provision. This provision requirement varies on the basis
of the phase of classified loan as stated above.
7. Reporting: this department prepares various reports on
daily, weekly, monthly, quarterly and yearly basis and
provide those report for internal uses, head office and
to the Bangladesh Bank through Head office
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Character
Capacity
Capital
Collateral
Condition
The 5Cs reflect the following points, which should be kept in mind for sound lending:
1. Judicious selection of Customers
2. Purpose
3. Safety
4. Liquidity
5. Security
6. Adequate return (Profitability)
7. Spread.
8. Suitability.
9. National/Social interest
10. Credit Control Policy of Bangladesh Bank
It is to be always remembered that the Bank is the custodian of public money and as
such we must be judicious, careful and selective while lending out the
depositors money to ensure timely recovery. The deciding factors for
recovery of loans are selection of right type of borrowers, end-use of
credits and effective follow-up and proper supervision.
2.f. Securities:
To make the loan secured, charging sufficient security on the credit facilities is very
important. The banker cannot afford to take the risk of non-recovery of
the money lent. Bank charges the following two types of security, -
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1. Primary security: These are the security taken by the ownership of the
subject matter of loan for which bank provides the facility.
2. Collateral security: If bank ask for additional securities with the subject
matter of loan, these is termed as collateral securities. It denotes any type of
security on which the bank has a personal right of action on the debtor in
respect of the advance.
There are different Modes of Charging Security:
1. Pledge: Pledge is the bailment of the goods as security for payment of a
debt or performance of a promise. A pledge may be in respect of goods
including stocks and share as well as documents of title to goods such as
railway receipt, bills of lading, dock warrants etc. and duly endorsed in
banks favor.
2. Hypothecation: In case of hypothecation, the possession and the ownership
of the goods both rest the borrower. The borrower to the banker creates an
equitable charge on the security. The borrower does this by executing a
document known as Agreement of Hypothecation in favor of the lending
bank.
3. Lien: Lien is the right of the banker to retain the goods of the borrower
until the loan is repaid. The bankers lien is general lien. A banker can retain
all securities in his possession till all claims against the concern person are
satisfied.
4. Mortgage: Mortgage is the transfer of an interest in specific immovable
property for the purpose of securing the payment of money advanced. In
this case the mortgagor does not transfer the ownership of the specific
immovable property to the mortgagee, only transfers some of his rights as
an owner. The banker exercises the equitable mortgage.
Credit the most crucial and sensitive division of a Bank. So it must be competent
enough to chose the right place to land others money and ensure
sustainable growth of the bank as well as the society at a whole.
Otherwise it will cut long-term loss of the bank that may lead to threat to
the existence of the bank. So utmost care and sincerity must be placed in
choosing the business house to extend loan facilitate.
33
Trade Finance Division upon the diversity of functional exposure. Basically this
division facilitates both the importer and exporter to settle down their transaction and
in this process, provides finance to them.
In international trade, as importer and exporter are from different global location,
problems often arise during the delivery of the goods and the settlement of payment.
Then, they want to solve these problems and secure their transaction. And at this point
both parties rely on 3rd party institution to secure the transaction and this institution is
Bank. It is known as Trade Financing. It includes any instrument drawn, accepted,
made, withdrawn or issued via foreign currency.
Only Authorized Dealer (AD) of Bangladesh Bank can involve with trade financing.
Every branch of a bank cannot involve in foreign exchange business.
And bank as a ubiquitous financial institution has been rendering financial backup for
this foreign business by its foreign trade products. This division comprises with the
following three sections:
3.1. Objectives:
1.
2.
3.
4.
3.2. Functions:
This division performs its functions under three main sections and these are:
a. Import Business.
b. Export Business.
c. Foreign Exchange Remittance.
To do these
bank:
1.
2.
3.
34
to bring in goods from abroad that may be in the form of goods or services. Import of
goods from global market takes place in a country when the country is in a shortage of
that product or if purchasing it from abroad is cheaper. In import of goods the basic
instrument is an L/C. This import business is governed by the countrys import
policies under the practice of general business rules and regulations. Usually, import
business takes place in the form of government, commercial and industrial import.
Importer
(In Bangladesh)
Pa
y
me
nt
Pa
y
me
nt
Do
cu
me
nts
Do
cu
me
nts
Sales Contract
Exporter
(In China)
Documents
Collecting Bank
(In Bangladesh)
Payment
Remitting Bank
(In China)
35
beneficiary generally exporter, if certain terms and conditions are fulfilled as stated
in the L/C. Bank deals in documents and not in goods.
An L/C may be opened against a Performa invoice, if the exporter has no agent or
otherwise against an indent if the foreign supplier has an indenting agent.
36
Pay
me
nt
Doc
ume
nts
&
Draft
After
Ship
ment
Requ
est
to
open
L/C
&
L/C
Doc
ume
ntati
on
L/
C
Ad
vis
ed
Communication
Applicant
(Importer)
Doc
ume
nts
&
Draf
t
Pay
me
nt
Pay
me
nt
Proforma Invoice/Indent
Beneficiary
(Exporter)
Pay
me
nt
Nominated Bank
(Beneficiarys Bank)
Reimbursement Bank
Advising Bank
37
normally obligated to reimburse the issuing bank for any payments made under
L/C. He is here an auxiliary party. Because, after contract between applicant
and issuing bank, only issuing bank is liable to pay to beneficiary. So only
exporter claim for payment from L/C issuing bank not to importer.
5. Advising Bank: It advises the L/C to the exporter at the request of the issuing
bank. It may be a branch of the issuing bank or a correspondent bank in the
beneficiarys country. It may also assume the role of confirming and/or
nominated bank. The advising bank simply advises the letter of credit without
any obligation on its part. However, the advising bank shall take reasonable
care to check the apparent authenticity of the credit that it advises.
6. Correspondent bank. It may also assume the role of confirming and /or
nominated bank depending upon the conditions of the credit.
7. Reimbursement Bank: The bank or to whom the bill will be drawn. It is
mentioned 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.
8. Confirming Bank: The bank that adds its confirmation to the credit and it is
done at request of the issuing bank. The confirming bank may or may not be
the advising bank.
2.5. L/C Types: General LC can be divided into two broad heads:
L/C
Revocable
Irrevocable
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that very account. Then upon receipt of any L/C request, the following steps are
initiated:
i. Opening a Current Account.
ii.
L/C opening form is duly filled up and submitted along with the
following papers:
Import registration certificate
Trade license
Proforma Invoice
Tax identification certificate
Vat registration certificate
Associations membership certificate
L/C and LCA form
IMP form
The submission of all these papers gets the proposal to the next step.
3. Collect CIB Report:
The bank would ask for CIB report. At this step a formatted CIB inquiry form is dully
filled and sent to Bangladesh Bank. The term CIB refers to Credit Information
Bureau. This is the specialized department of Bangladesh bank preserving all the data
and credit status of all the customers of all Banks related to advance. Here we must
remember that without having CIB clearance about the credit worthiness of our client,
we are not supposed to issue L/C or render any other credit facility to any of our
clients. Upon receipt of a clean report from CIB, we proceed to the next step.
4. Collect Credit report:
Then the Bank collects the suppliers credit report to know the credit worthiness of the
supplier. Usually suppliers credit report is asked for in case of indent and if the total
L/C value is more than BDT. 10,00,000.00 and in case of Performa Invoice of BDT.
5,00,000.00, then SCR is required.
5. Arrangement of margin and settlement mode:
Here we usually negotiate with client for L/C margin and accordingly the clients
deposits the margin amount of money. Another issue at this stage is to negotiate with
the customer on the retirement of the L/C, i.e. how the customer will reimburse the
L/C amount due. The customer may reimburse the payment in cash or this can be
managed by any loan facility to the favor of the client agreed by the bank. Usually the
following loan arrangement is made by the commercial banks to facilitate the import
trade.
LTR (Loan Against Trust Received): This is a special type of loan
arrangement by the commercial banks to facilitate its clients to retire L/C and
clean goods. Here the client takes the loan by execution of trust receipt and
make the payment on maturity usually from sales proceeds of the imported
goods. In this process the goods remain under the possession of the client.
LIM (Loan against Imported Merchandise): In this process the possession
as well as the ownership of the goods belongs to the bank. The client cleans a
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portion of goods upon the agreement with the bank, sales them and proceeds
the payment to the bank for the retirement of the goods and it continues. This
process results to less risk exposure for the bank as compared to LTR.
6. Preparation and Submission of the Proposal to Head Office:
Upon the settlement of the margin as well as the mode of retirement, the L/C moves to
the next step. Based on all the information collected from the client, the import
division prepares a formal L/C proposal and send it to the Head office with all the
supporting documents. Usually a proposal contains the details of the applicant, the
nature & the strength of the business of the client, capital structure, particulars of the
proprietor or the directors etc. alongside the following documents in particular:
CIB status.
Business relation with the bank and the current liability position, if
any.
Liabilities with other banks or financial institutions.
Particulars of L/C, i.e. purpose, quality, name of the item, value,
country of origin, suppliers credit report, port of shipment, L/C
expiry date, landed cost, market price etc..
Present working capital structure
Particulars of proposed credit facility.
Security collateral and control over security.
Recommendation.
Then head office will evaluate the proposal and upon due approval send the proposal
to the branch
7. L/C issue and transmit:
Open the L/C and transmit the L/C to the advising Bank or confirming bank (if
confirmation is required) to advice the seller and its bank regarding the issuance of
this L/C. At the same time the importer receives the copy of L/C. Usually this
transmission procedure takes place by SWIFT or TELEX or EMAIL format.
Then upon receipt of the L/C, the supplier, first, put his promise on all the terms and
conditions and if required, undertakes necessary steps to put in the amendments and
upon satisfaction, arrange for the necessary shipment as per the agreed conditions of
the L/C.
8. Receive & scrutinize Shipping Documents:
Upon shipment of the goods, the supplier prepares documents as per the direction of
the L/C and ask his bank to negotiate with us for payment. These documents are as
follows:
Commercial invoice,
Transport Document:
o Bill of lading
o Airway Bill (AWB)
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o Courier Receipt.
o Railway/Truck Receipt (TCR)
Insurance Document
Bill of exchange
Packing List
Pre-shipment Inspection (PSI) certificate,
Certificate of origin,
Suppliers compliance certificate,
Other certificates as per the L/C terms and conditions.
Then the suppliers Bank, negotiate the documents to the ad confirming Bank to
proceed the payment. The ad-confirming bank makes the payment of the document
(off course, devoid off any discrepancy) to the negotiating bank and sends the
documents to the issuing bank for reimbursement. In case of noninvolvement of any a
confirming bank, the negotiating Bank negotiates the documents to the issuing bank
for further procedure. The issuing bank must inquire off any discrepancy of the
documents. Upon satisfaction, the issuing Bank asks its client to make necessary
payments and upon receipt of the due amount, the issuing bank reimburse the
proceeds to the ad confirming bank as negotiating bank under the concurrent
consequences. Here the significant feature is that in case of sight L/C, payment may be
made by 100% cash or by the arrangement of LTR or LIM. But in case of deferred
L/C, acceptance is given duly on maturity and payment is made accordingly.
9. Lodgment and retirement of import documents:
At this step, the issuing bank makes payment to the negotiating bank by creating a
temporary loan A/C termed as PAD. When it collects payment from the customer,
PAD is washed out. Usually the bank is to wash out PAD within 30 days of its
opening. Generally, within 5 to 10 days of negotiation, the client makes the payment
and clear documents from the bank and goods from warehouse storage. In case of any
discrepancy, the bank asks his client whether it is acceptable or not. The client may
ask the supplier to come up with necessary amendment or alternatives.
10. Collect Bill of Entry & close the file:
Issuing bank must collect the copy of bill of entry from importer who collects it from
custom authority upon the clearance of goods. When bill of entry is satisfied itself in
connection with invoice value, then international trade is deemed to be successful.
Issuing bank must report to Bangladesh Bank regarding it and L/C and close this file.
The bill of entry is mandatory for closing the file
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a.4. Import
Importer: SubmissionProcedures
of IRC , TIN, Indent/ Proforma Invoice, and
Insurance Cover Note & Application to the Bank
Bank: LCA, IMP Form & Application Agreement for confirmed L/C.
Bank: Check Sanctioning approval, creditability of Importer.
Yes
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2.b.2. Export
Procedures
Exporter:
Obtaining export Registration
Certificate (ERC) from CCI&E
Exporter: Securing Export order from foreign
buyer directly or through agent.
Bank: Receive LC from the issuing bank
through an Advising Bank or from exporter
Certification of EXP Form
by Exporters Bank
Will the Exporter be allowed preshipment facilities?
Yes
Shipment of commodities by
Exporter
Receive the export/ shipping
documents from exporter
Scrutiny of Export Documents.
Yes
No
Discrepancies
removed?
Yes
No
Inform Issuing
Bank about
Discrepancies
Does it allow
Negotiation?
Yes
Yes
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2.
c.1.Inward Remittance:
Family maintenance.
Indenting commission.
Donation.
Gift.
Foreign investment.
Export proceeds.
Others.
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4. Conclusion
Job Rotation is one of the effective tools of Human Resources Division to make the
new employees effective and efficient at their banking job. As a fresh one, I got some
preliminary knowledge about the different sections of Branch Banking at Agrabad
Branch. All the members were very cooperative and I got immense support to learn
how to move with the job.
Banking sector plays vital role for the economic development of a country. It is
required to ensure quality banking service for flourishing the economic sector and
enhancing the overall business and manufacturing environment of the country that
will ultimately accelerate the national growth wheel. In recent times in Bangladesh
banking industry has been considered the most prospective, compared to the other
service sectors, for their quality service and transparency.
Now a days, a bank is not just selling services but we may define it as selling of
solution to the business community as a whole to the society basically solution for the
finance. So it is very important to ensure most efficient work force with innovative
ideals and proper technological back up to render such an important solution to the
society that will ensure sustainable growth of the economy.
Todays business world is dynamic and ever changing. To cope up with all these
changes and adopt with new scenario a group of skilled and talented word force is the
first requirement. Bank Asia has rightly focused on skill development of employee
and at the same time introducing technology in almost every step of its day-to-day
activities to insure prompt and quality service.
And we have to focus on the current competition level in the industry as in such a
small economy we have about 50 banks and the giant nationalized banks are operated
with private management. And this will make the competition more severe. This
severe competition can be only faced with learning process and adoption of latest
technology. This will help us to read the environment properly and adjust in the
changed environment.
Bank Asia, started its journey in 1999 for A Better Tomorrow Its friendly and
congenial environment, dedication to service and ability to proved equality, at low
cost, with high efficiency has been able to develop a reputation in market. If all the
efforts which were put forward in past, can be continued again with renovation and
increased integrity then we can hope that it will not only be able to build a Better
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Tomorrow for itself but also for the whole nation that will lead us to build a
developed and civilized nation.
4. References
1. Some Articles about General Banking of Bangladesh Institute of Bank
Management (BIBM).
2. Different articles and documents collected from branches.
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