Chapter One

INTRODUCTION

1.1 Introduction
Economic history shows that development has started everywhere with the banking system and
its contribution towards financial development of a country is the highest in the initial stage.
Schumpeter (1933) regarded the banking system as one of the two main agents (other being
entrepreneurship) in the whole process of development. Keynes also emphasized the role of
banking services in the process of economic development of a country, while SHE was
addressing the House of Lords regarding International and Monetary System (quoted in Sharma
1985). Moreover Alexander Gerschenkron (1962) in his popularly known Gerschenkrons
Hypothesis explained the banking system as the key role player at certain stage of the
industrialization process.
Modern banking system plays a vital role for a nations economic development. Over the last
few years the banking world has been undergoing a lot of changes due to deregulation,
technological innovations, globalization etc. These changes in the banking system also brought
revolutionary changes in a countrys economy. Present world is changing rapidly to face the
challenge of competitive free market economy. It is well recognized that there is an urgent need
for better, qualified management and better-trained staff in the dynamic global financial market.
Bangladesh is no exceptions of this trend. Banking Sector in Bangladesh is facing challenges
from different angles though its prospect is bright in the future.
The course under B.B.A program designed with an excellent combination of theoretical and
practical aspects. The whole course is divided into eight (8) semesters of 6 months each. After
the completion of 8th semester consisting of theoretical exposure, the students are sent to
different organization to obtain some practical exposure in different sectors which would help
them in taking up more professional courses in M.BA. As a student of B.B.A, I have assigned to
B.B. Avenue branch, The City Bank Ltd. for my internship.
As MY program director directed us to present the report in different way that will be based on
the personal observations from each department. I have described each department I have
worked in by following way:

(1) Understanding:
In this part I have tried to make acquaintance with the departments I have worked of this
branch.

(2) Things are done here

In this part I have tried to see the things what are being done in each department of the
branch.

(3) Personal observations:

In this part I have tried to present my personal observations from each department of this
branch. I had an opportunity to be acquainted with the practical banking prevailing in Banga
Bandhu Avenue Branch, The City Bank Ltd. The knowledge, which has been acquired in my
Internship Period, I have tried my level best to show in this report.

1.2 Work schedule

Department Rotation:
NAME OF THE

FROM

TO

DEPARTMENT
General Banking

NUMBER OF
DAYS

24-05-06

18-06-06

26

Credit department
19-06-06
Till now
Schedule Source: Suggested by Branch Manager, City Bank Ltd, B. B. Avenue Branch.

1.3 Objectives of the study

The objective of the study is to gather practical knowledge on banking system and operation.
This internship gives us a chance to co-ordinate with the theoretical knowledge and the practical
experience. The following are of objective for internship in bank:

To apply theoretical knowledge in the practical field.

To have exposure to the functions of general banking section.

To analyze the service procedure of Prime Bank Ltd.

To know the banking operation.

To know the area of General Credit.

To know the process of loan disbursement.

To know the process of loan collection.

To know the documents of credit.

To know the import & Export finance procedure.

1.4 Coverage of the study

3

In this report, three major areas in commercial banks have been covered which are:
(a)

General banking section.

(b)

Credit section.

(c)

Foreign exchange section

1.5 Methodology of the study

For smooth and accurate study every one has to follow some rules & regulations. The study
input were collected from two sources:

(a) Primary sources

(i)

Practical desk work

(ii)

Face to face conversation with the officer

(iii)

Direct observations

(iv)

Face to face conversation with the client

(v)

Consultation with the Following Persons

MR. Md. Abdul Halim, Senior Vice President & Manager, CBL, BB Avenue Br.
Mr. A.S.M Shokrana, Vice President, PBL, BB Avenue Br.
Mr. Mohammad Mortaja, Senior Executive Officer, Credit Department, CBL,BB Avenue
Br.
Md. Sohel Rana, Officer, Accounts Section.

(b) Secondary sources

(i)

Annual report of City Bank Ltd.

(ii)

Files & Folders

(iii)

Memos & Circulars

(iv)

Daily diary (containing my activities of practical orientation) maintained by me,

(v)

Various publications on Bank,

(vi)

Websites,

Different circulars sent by Head Office and Bangladesh Bank.

1.6 Limitations of the Report

There were some problems while I have undergone the internship program. A wholehearted
effort was applied to conduct the internship program and to bring a reliable and fruitful result.
In spite of having the wholehearted effort, there exits some limitations, which acted as barrier.
The limitations were -- The study was limited only to the City Bank Limited, B.B. Avenue Branch.
Another Problem was time constraints. The duration of my internship Program was only
two months. But this time is not enough for a complete and fruitful study.
The Bank was a busy one having heavy rush of people, whom officers need to deal with.
So allocation of time for an internee is very much tough for the officers of the bank.
Sometimes I was assigned to do some jobs without explaining why this work is to be
done. This situation has created a lot of problems to understand why a specific function
is being performed.

Chapter TWO

OVERVIEW OF THE BANK

2.1 Evolution of the Word Bank:

The word bank originated from Italian word Banca which means long bench. In ancient time
Italian Jews merchant used to do business of lending money by sitting on the bench. It is
assumed that the word bank derived from the word Banca. To meet the expense of war of
1171 one type of credit certificate was launched in Italy at an interest rate of 5%. It was called
as Monte in Italian language and Banke in German language when German language was
widely used in Italy. As a result the word Banke gradually changed to the word Banca from
which the word Bank originated.

2.2 The Emergence of Modern Banking:

The linguistics and etymology suggests an interesting story about banking origins. Both the old
French word Banque and the Italian word Banca were used centuries ago to mean a bench or
moneychangers table. This describes quite well what historians have observed concerning the
first bankers, who lived more than 2000 years ago. They were money changers, sitting usually
at table or in a small shop in the commercial district, aiding travellers who came to town by
exchanging foreign coins for local money or discounting commercial notes for a fee in order to
supply merchants with working capital.
The first bankers probably used their own capital to fund their activities, but it was not long
before the idea of attracting deposit and securing temporary loans from wealthy customers
became a source of bank funding. Loans were then made to merchants shippers and
landowners at rates of interests low as 6 percent per annum to as high as 48 percent a month for
the riskiest ventures! Most of the early bank was Greek in origin.
The banking industry gradually spread outward from the classical civilizations of Greece and
Rome into northern and western Europe. The early bank in Europe were places for safe keeping
of valuable items (such as gold and silver bullion) as people were fearing loss of their asset due
to war, theft, or expropriation by government. When colonies were established in North and
South America, old world banking practices were transferred to the new world.

2.3 Banking in Bangladesh

Since early British rule, the history of banking in Bangladesh territory shows that the
traditional trade-networks developed before the banks invaded rural areas. And the banking
services have slowly flourished in Bangladesh territory. Even today, in many places,
7

moneylenders provide credit services. Small shopkeepers and businessman use informal credit
at high interest rate, traditional Mahajan,s money lending business gradually declined due to
expansion of bank and the micro credit programs of NGOs, Cooperative banks and government
agencies.

Public Sector Banks:

During the liberation war in 1971, the economic, political, and social systems including the
banking system were severally damaged. At that time, all big and medium financial institutions
except two small banks had their head office in the West Pakistan. The non-Bengali owners and
managers of the financial establishments that operated in East Pakistan had abandoned them.
After independence in 1971, the new government had to take over management and ownership
of all such institutions. The bank Nationalization Order 1972 was issued to nationalize banks
and financial institutions (except those incorporated abroad) in order to control chaos in the
field of ownership, party bureaucracy, the intelligentsia, and pressure group. By several orders

six nationalized commercial banks (NCB), one industrial bank (BSB), one agricultural
bank (BKB), and one industrial development financial institution (BSRS) were created
The banks and financial institutions, which originated during the Pakistan period and were
merged, and renamed and functioning after independence of Bangladesh. In the year 1983, the
government allowed private sector to participate in the banking business. The Pubali Bank and
the Uttara Bank were denationalized in 1985, due to non-profitability. This action reduced the
number of NCBS to four. Such restructuring of public sector banks was in order to play their
role in industry, agriculture, exporting, self employment etc.

Private commercial banks:

Taking advantage of the liberalization policy of the government regarding participation of
private sector in the banking business, a number of private banks were established in and
after 1983. With the emergence of private banks in Bangladesh, a competitive situation in the
sector has been created. Now there are 52 commercial banks in Bangladesh. The emergence of
private banks has added a new dimension to the banking system in Bangladesh. The private
commercial banks show a steady growth in terms of number of branches deposits and advances.

Foreign banks:
The state bank of India opened one branch July -September 1975. In 1975, the four foreign
banks operating in Bangladesh were: American Express International Banking Corporation,
Grind Lays Bank, The Chartered Bank and the State Bank of India. Now there are more than 15
foreign banks.
The historical process shows the influence of the various social groups in the governance of the
country and the banking systems. During the British regime banking was concentrated only in
the areas of commercial and administrative importance. With the independence of India and
Pakistan, the banking sector had to be reshaped. The government of Pakistan had to take major
initiatives for the growth and extension of banking services to the different sectors of the
economy and also to different regions.
Independence of Bangladesh was yet another major change in the banking sector. Immediately
after independence of Bangladesh, banks started their operations under full government
ownership. Later, some of the banks were denationalized and the government allowed banks to
be established in the private sector. Banking operations have been diversified and a number of
specialized banks were established. Development finance institutions also exist to supplement
the baking sector in an effort to boost the economy; government has been following a pragmatic
policy relating to the banking sector in Bangladesh.
Despite many odds and problems now facing banking sector, it is expected that it would be able
to meet up the challenges ahead, particularly of the nest century.

2.4 COMPANY STATUS

2.4.1 Background of City Bank Limited
City Bank Ltd started its operations on 28 March 1983 with an authorized capital of Tk 200
million divided into 2,000,000 ordinary shares of Tk 100 each and paid up capital of Tk 34
million, of which Tk 30 million was paid up by its promoters and the remaining amount by the
government of the People's Republic of Bangladesh. In 2000, the bank's paid up capital rose to
Tk 160 million, of which Tk 80 million was subscribed by the sponsors/promoters and the
remaining amount by the general public. On 31 December 2000, the bank's reserve fund was Tk
263.1 million as compared to Tk 125.22 million in 1995. But there was shortfall in total capital

adequacy ratio of the bank during 1997-2000 as per BIS (Bank for International Settlement)
standards to be followed by banks operating in Bangladesh.
The management of the bank is vested in a 13-member board of directors. That includes the
chairman and a vice-chairman. The managing director is the chief executive. Three deputymanaging directors, three executive vice presidents, fourteen vice presidents, fifty-four assistant
vice presidents and some other employees of different categories assist him. The total number
of employees of the bank stood at 1,845 at the end of business year 2000. That time the bank
had 76 branches throughout the country. Sixty-one of them were urban and 15 were rural. It had
6 regional offices established at the 6 divisional towns/cities.
The bank conducts all types of commercial banking activities. Core businesses of the bank
include deposit mobilization, lending and foreign exchange dealings. At the end of the initial
year of its operations in 1983, the total deposits were Tk 320.2 million, which rose to Tk
11,603.2 million in 2000. Total and net loans and advances of the bank amounted to Tk 9,964.6
million and Tk 7,698.2 million respectively in December 2000. The broad economic sectors in
which the bank provides lending are agriculture (0.80%), term loans to large and medium scale
industries (18%), housing (1.75%), working capital and commercial lending (35%), import
(9.9%), export (10.5%) and others (24.05%).
The quality of the bank's lending assets deteriorated due to huge non-performing loans. The
ratio of its classified loans was 43% in 1997, 40.85% in 1999 and 39.57% in 2000. Total assets
of the bank including off-balance sheet items accounted for Tk 30,806.9 million in 2000, when
its gross earning assets and liquid assets were valued at Tk 14,884.3 million and Tk 6,430.8
million respectively. In 1999, the total foreign exchange business handled by the bank stood at
Tk 9,838.3 million (import 87%). Dealings in foreign remittances were only Tk 815 million
during 1999. Out of its 76 branches, 19 are now authorized to deal in foreign exchange. The
bank has correspondent relationships with 255 bank/bank offices and other financial
institutions abroad.
Total investment of the bank at the close of the year 1999 was Tk 1,492.8 million, of which Tk
1,140 million was in

TREASURY BILL s.

Other investments included those in shares and

securities. The income on all investments that year was Tk 101.1 million. The bank earned an
operating income of Tk 1,356.5 million and incurred operating expenses of Tk 375.7 million in
business year 2000. Net profit of the bank before deducting tax and provision for classified

10

loans stood at Tk 188.3 million in the same year. After appropriation of operating profit with
accumulated losses of Tk 121.6 million, the bank still suffered a cumulative loss of Tk 66.7
million up to December 2000.

Source: Internet

11

2.4.2 Goals and objectives of The City Bank Limited

To build up strong pillar of capital.
To promote trade, commerce and industry.
To discover strategies for achieving systematic growth.
To improve and broaden the range of product and services.
To develop human resource by increasing employment opportunities.
To enhance asset of shareholders.
To offer standard financial services to the people.
To create congenial atmosphere so that the client becomes interested to deal with the prime
bank limited.
To keep business morality.
To develop welfare oriented banking service.
To offer highest possible benefit to customers.
As to its position among its counterparts is held high to let the viewers cast their very
first look at it.
To carry on the business of discounting and dealing in exchange of specie and securities
and all kinds of mercantile banking.
To provide for safe-deposit vaults and the safe custody of valuables of all kinds.
To carry on business as financiers, promoters, capitalists, financial and monitory agents,
concessionaires and brokers.
To act as agents for sale and purchase of any stock, shares or securities or for any other
momentary or mercantile transaction.
To establish and open offices and branches to carry on all or any of the business abroad
and within the country provided prior permission is obtained from Bangladesh bank.

2.4.3 Operation
The City Bank Limited, since its inception is an IT-focused Bank. The bank has by now a
network of 77 branches strategically located in different cities. All the branches are functioning
in computerized environment and integrated through Wide Area Network (WAN) .The branches

12

are full fledged units and can provide all commercial and investment banking service raging
from small and medium enterprises to big business conglomerates and houses.
The Bank always tries to reduce its dependence on interest earnings by giving more emphasis
on the fee based income through introduction of capital market operation and Leasing .The
Capital Market operation includes Portfolio Management, Investors Account, Underwriting,
Mutual Fund Management etc.
The Bank introduced modern system of Leasing Operation as in practice with Banks in all other
countries of the world. The Lease Finance portfolio of the bank is the first of its kind in a
Commercial Bank in Bangladesh.
Entrepreneurship Development Training is arranged to impart operational skill and modern
technique of management to introduce new entrepreneurs in the field of industrialization on the
basis of participatory finance.
City Bank Limited is one of first few Bangladeshi Banks who have become member of SWIFT
(Society for Worldwide Inter-Bank Financial Telecommunication). SWIFT is a member owned
co-operative, which provides a fast and accurate communication network for financial
transactions such as letters of Credit, Fund transfer etc.
Prime Bank Limited is operating branches on both interest based Banking and Islamic Sariah
based Banking. The Islamic Sariah based Banking is completely different From the
conventional one.
The Bank is Maintaining separate set of accounts for Islamic Banking branches according to the
standard adopted by Financial Accounting and Auditing organization for Islamic Financial
Institution.
City Bank Limited will try to achieve excellence in customer service. The customer is most
important for them. Their policy is customer driven. The Bank has introduced Special Savings
Schemes; Special Credit Scheme for the benefit of the low-income group, especially for the self
employment of the educated youth.

2.4.4 Mission and vision of City Bank Limited

The effort of City Bank Limited is focused on delivery of quality service in all areas of banking
activities with the aim to add increased value to shareholders investment and offer highest

13

possible benefits to the customers. There must have the mission as well as vision what should
back every efforts of the organization. as it is said that mission without vision is a daydream
and vision without mission is a nightmare.

Mission:

To contribute to the socio-economic development of the country.

To attain highest level of customer satisfaction through extension of

services by dedicated and motivated team of professionals.

To maintain continuous growth of market share ensuring quality.

To maximise banks profits by ensuring its steady growth.

To maintain the high moral and ethical standards.

To ensure participative management system and empowerment of human

resources.

To nurture an enabling environment where innovativeness and

performance is rewarded.

Vision:
To be the leading bank in the country with best practices and highest social
commitment.

14

2.4.5 Managerial Hierarchy of City Bank Ltd.

Top Management

Executive Level
Management

Mid Level
Management

Junior Level
Management

Chairman
Vice Chairman
Directors
Managing Director
Asstt. Secretary
Deputy Managing Director
Senior Executive Vice President
Executive Vice President
Senior Vice President
Consultant
First Vice President
Vice President
Senior Assistant Vice President
Assistant Vice President

First Assistant Vice President

Senior Executive Officer
Executive Officer
Principal Officer

Senior Officer
Management Trainee
Officer
Junior Officer
Assistant Officer

2.4.6.SOWT Analysis
From my practical observation, I get the following Strength opportunity, weakness and threat
(SOWT).

15

Strength:

It has well reputation in the market

Not engaged in unfair business practice.

Concentrated market.

Officers are highly educated.

Executives are highly qualified and experienced.

Bank has many attractive deposit schemes.

Well-furnished and Air-conditioned Bank.

Efficient management practice in the Bank.

Weakness:
Deposit is lower than advance.
Short time experience of the Bank.
Officer has limited experience and not enough trained.
Long-term credit is not sufficient.
Small market shares in Banking-business.

Opportunities:
Can increase the credit scheme.
Can increase the advertising of the Bank.
Private Banks becomes more reliable to local public.
Govt. has banned some Jatiya Sanchaya patra.

Threat:
o There are many competitors in the market.
o Competitors have more deposit.
o Ruling Government is not conducive in the viewpoint of the Bank.
o Govt. imposes tax and VAT on profile.
o Govt. pressures to reduce interest rate

16

2.4.7 Performance Review of The City Bank Ltd.

Performance at a Glance (amount in million TK.):
Particulars

2001

2002

2003

2004

2005

Authorized Capital
Paid-up- Capital
Statutory Reserve

400.00
160.00
160.00

400.00
240.00
173.10

400.00
240.00
213.81

1750.00
480.00
378.42

1750.00
720.00
604.61

Other Reserve
Retained Earnings
Total Shareholders Equity
Deposits
Loans and Advance
Import
Export
Investment
Total Asset

103.12
80.00
503.12
17183.98
12729.22
13503.20
3982.10
1977.95
20726.40

240.60
130.00
783.70
19683.30
13884.90
12262.60
6213.50
2511.40
24481.60

240.60
102.78
797.21
20046.31
14778.55
17292.74
7719.70
3379.26
23698.56

240.60
78.43
1417.47
22236.96
17027.84
17909.94
12198.69
3161.38
26375.56

240.60
33.17
1958.40
30647.83
23326.34
21363.21
18218.97
3648.27
35303.74

Total Income
Total Expense
Profit Before Provision
Total Provision
Profit Before Tax
Provision for Tax
NET Profit After Tax
Return on Equity (%)
Return on Asset
Capital adequacy Ratio
(%)
Credit Deposit Ratio
EPS (TK.)
Book Value Per Share
(TK.)
market
Value
Per
Share(TK.)
No. of employee
Executive
Officers
Staffs
No. of Branches
A/D Branches
No. of Shareholders

1749.07
1341.68
407.39
1840.80
222.59
142.59
80.00
17.27%
0.42%
6.63%

2120.89
1569.66
551.23
485.60
65.63
52.30
13.33
2.07%
0.06%
8.16%

2475.04
1799.17
675.87
472.41
203.46
190.00
13.46
1.70%
0.06%
6.56%

2707.84
1785.79
922.05
99.00
823.05
442.79
380.26
34.34%
1.52%
9.78%

3476.85
2227.99
1248.86
117.93
1130.93
590.00
540.93
32.05%
1.75%
9.63%

74%
50.00
314.45

71%
5.55
326.54

74%
5.61
329.37

77%
79.22
230.70

76%
75.13
272.00

266.80

300.00

227.65

877.75

770.75

1688
141
958
589
76
20
3256

1751
142
1011
598
76
20
3027

1692
164
943
585
77
20
3247

1803
178
1032
593
77
20
3486

1829
203
1022
604
77
20
5678

Source: Annual Report 2005

Capital & Reserve

17

CBL as a first generation bank has strengthened its capital base by raising the authorized capital
to TK. 1750 million and paid up capital to Tk.720 million. The capital adequacy ratio was 9.65
at the end of 2005.

Deposits
The deposit as at 31st December 2005 rose to Tk.30648 million registering a growth of 38%
over preceding year (Tk.22236 million).

Deposit mix of bank as on 31st Dec. 2005 stood as follows:

S.L No

Type of Deposit

Amount

in % of share

million Tk.
1.
2.
3.
4.
5.

Current and others

Savings
Short term
Fixed deposit
Scheme
Total

5090.48
5820.42
2324.90
12451.65
4960.38
30647.83

16.61
18.99
7.59
40.63
16.18
100%

Loans and advances

The Bank continued to reengineering process to raise its assets portfolio by implementing new
credit policy with diversified and well structured asset portfolio and separation of
responsibilities and segmentation of divisions. The outstanding amount of loans and advances
as on 31st December 2005 stood at Tk.23326 million with a record growth of Tk.6298 million
(37%). The outstanding amount at the same period of previous year was Tk.17027 million. City
bank Limited has a plan to maintain the following proportions to design and maintain credit
portfolio:

18

Table: Comparative Position of Sector Wise Exposure

As on 31.12.05
SL.
No.

Sector

Agriculture

2
3

Amount (in
million TK.)

TK. % of share

171.00

0.73

L & M Industry (Term Loan)

3542.30

15.19

Working Capital & Commercial lending

8739.79

37.47

Export Finance

3762.40

16.13

Import Finance

4094.61

17.55

Housing

224.46

0.96

Others

2791.74

11.97

23326.30

100.00

Total

Non-Performing Loan
Non-performing loan dropped to Tk.1332 (5.71% of total loan portfolio) million only from an
amount of Tk.1800 (10.48% of total loan portfolio) million of previous year.

In million Tk.

19

During 2005 a significant amount of Tk.303 million was recovered from non-performing loan.

Import
Import growth in 2005 is19%(Tk.17910 in 2004 to Tk.21363 in 2005).

20

Export
The bank achieved significant growth (49%) in 2005.

2.4.8 PRODUCTS AND SERVICES OF CBL

Since commencement of banking operation, City bank Limited has not yet only gained
enormous popularity but also been successful in mobilizing deposit and loan products. The
bank has made significant progress within a very short time period due to its dynamic
management and introduction of various consumer-friendly loan and deposit products. All the
products and services offered by the bank can be classified under two major heads:

Deposit Products

Monthly Benefit Deposit Scheme

Fixed Deposit Scheme

Saving Deposit Account(Three Stage Saving Scheme)

NFCD (Non Resident Foreign Currency Deposit Account)

21

NITA (Non Resident Investors Taka Account)

Loan Products

Consumers Credit Scheme

Lease Finance

Hire Purchase

Small and Medium Enterprise Credit Scheme

Loan Against Shares and Securities

House Building Financing Scheme

Financing Scheme For Contractors

Computer Software Financing Scheme

City Bank Maser Credit Card

City Bank VISA Credit Card

Working Capital Financing

Import Financing

Export Financing

Industrial Financing

Other Service
Consistent with the modern edge and competing in the competitive market, City Bank Limited
has introduced some innovative banking services that are remarkable in a country like
Bangladesh. The services offered by the bank are as follows:

On-line Banking
The bank has set up Wide Area Network (WAN) across the country within its all branches to
provide on-line branch banking facility to tits valued customers. The service named Finacle
Core has opened up several possibilities of improved customer services. Under this facility
client of one branch are able to do banking transaction at any other branch of the bank. The

22

bank hosted its Web Site (www.citybank.com) to facilitate dissemination of information about
the banking services and facilities of City Bank Limited all over the world.

Information Technology in Banking Operation

Prime Bank Limited has adopted automation in banking operation from the first day of its
business. The main objective of this automation is to provide efficient and prompt services to its
valued clients. At present all the branches of the bank are computerized under UNIX operating
system to provide best security to the information. City Bank Limited is providing
comprehensive range of banking services with utmost care and efficiency to its customers. Auto
Teller Machine is used to count money properly to save clients valuable time as well. The
customer can draw money/cash from their account within a minute. s

SWIFT Service
City Bank Limited is one of the first few Bangladeshi Banks to obtain membership of SWIFT
(Society for Worldwide Inter-bank Telecommunication). SWIFT is a members owned
cooperative which provide a first and accurate communication network for financial
transactions such as Letter of Credit, Fund Transfer etc.

2.4.9.Recent Performance at a glance of Banga Bandhu(B.B)

Avenue Branch
Year
Deposit target (in crore)
2005
60
2006(JAN- 73.67

Achievement (in crore)

57.35
73.34

%
94.5
99.55

Achievement (in crore)

Achievement (in crore)
6.20
73.05
3.34
Achievement
(in crore)
46.27

%
%
88.57
140.45
74.22
%
52.88

JUNE)

Year
Profit target (in crore)
Year
Export target (in crore)
2005
7.00
2005
52
2006(JAN4.50
Year
2006(JAN- Import
87.50 target(in crore)
JUNE)
Year
Recovery
target (in lac)
2005
100
JUNE)
2005
180
100
2006(JAN- 40

Achievement
(in lac)
134.14
18
49.11
3.30

%134.14
10.00
7.549.11

JUNE)

23

Year

Advance target (in crore)

Achievement (in crore)

2005

80

86.36

107.95

94.82

89.72

2006(JAN- 105.68
JUNE)

Recovery of Classified Loans

Recovery of Classified Loans up to 31st December 2000: TK.20.93 lac. After this year the year
wise recovery position of classified accounts are given below:

Year
2001
2002
2003
2004
2005
2006(Jan.- June)

Classified amount at the year

Recovery during the

end (in 000 TK.)

year (in 000 TK.)

23,777
15,695
14,855
1,013
1,232
118.76 lac

3,266
172
13,353
1,138
2,502
2.30 lac

Statement of Overdue Bill of Entry

Year

2001

2002 2003 2004

2005

Total Total Amount

B.B.Avn. Br.

Nill

Nill

Nill

U.S. $ 27,026.20

Recovery and defaulting installments and amount under consumer

credit scheme for the month of May 2006:
1. No. of total borrowers
2. Total authorized loans
3. Total amount disbursed
4. Total amount recovered
5. Total amount outstanding
6. Total overdue amount

: 62
: TK. 4,466,710.00
: TK. 4,466,710.00
: TK. 3,873,335.00
: TK. 1,881,506.88
: TK. 509,300.00

24

Position of newly developed liability products (Jan-June 2006)

Name of the product

Total a/c opened

Total amount

TSS (Three Stage Saving Scheme)

MBS (Monthly Benefit Scheme)
JSS (Juniors Savers Scheme)
LSS (Lachpoti Savings Scheme)

768
06
Nill
Nill

2,400,000
2,250,000
-

Chapter THREE

GENERAL BANKING
25

GENERAL BANKING
At first I have been placed in the General Banking Department. General Banking department
performs the majority functions of a bank. It is the core department.
In fact, bank operates with the peoples money. And this process starts with the General
Banking department. The activities of the General Banking Department of CBL are mainly
divided into the following categories:

Account Opening Section,

Local Remittance Section,
Online Branch Banking Section,
One Stop Utility Services Section,
Deposit Schemes Section,
Clearing Section,
Collection Section,
Cash Section,
Accounts Section,
3.1 Account Opening Section:
To establish a Banker and customer relationship Account opening is the first step. Opening of
an account binds the Banker and customer into contractual relationship. But selection of

26

customer for opening an account is very crucial for a Bank. Indeed, fraud and forgery of all
kinds start by opening account. So, the Bank takes extremely cautious measure in its selection
of customers.

3.1.1 Types of Account:

Current Account.
Savings Account.
Fixed Deposit Account.

3.1.2 Procedure to open an Account:

For opening an account, at first the prospective account holder will apply for opening an
account by filling up account opening form. Account opening form consists of the name
of the branch, type of account, name of the applicant(s), present address, permanent
address, passport number (if any), date of birth, nationality, occupation, nominee(s),
special instruction (if any), initial deposit, specimen signature(s) of the applicant(s),
introducers information etc.

The prospective customer should be properly introduced by the followings:

i. An existing customer of the bank.
ii. Officials of the bank not below the rank of Assistant Officer.
iii. A respectable person of the locality who is well known to the

manager or

authorized officer.

Two copies of passport size photograph duly attested by the introducer.

Signature of the prospective account holder in the account opening form and on the
specimen signature card duly attested by the introducer.

Then the concerned authority will allocate a number for the new account.

The customer than deposit the initial deposit by filling up a deposit slips. Initial
deposit to open a current account in PBL is Tk. 1000.00 and saving account is Tk.
500.00.

After depositing the initial deposit, the account is considered to be opened. CBL maintains all
of its accounts in computer. After depositing the initial deposit, CBL records it in the computer
by giving new account number. Then it issues chequebook requisition slip by the customer.
Then it distributes all relevant papers to respective department.

27

3.1.3 Activities and papers necessary for opening an account:

(A)

Joint Account:

If the account is a joint account, then the joint account holder should submit a declaration and
operational instructions of the account along with their signature. The declaration is
Any balance to the credit of the account is and shall be owned by us as joint depositors. Any
liability whatsoever incurred in respect of this account shall be joint and several.

(B)

Partnership firm:

The following documents have to be submitted for preparing an account of a partnership firm:

Partnership deed.

(a) If the partnership firm is a registered one, then one copy of registration forms.
(b) If not, then a copy of certificate from the notary public.

(C)

Limited Company:

For the opening of an account of a limited company, following documents have to be submitted:

A copy of resolution of the company that the company decided to open an

account in the City Bank.

Certified true copy of the Memorandum & Articles of Association of the

Company.

Certificate of Incorporation of the company for inspection and return along with a
duly certified Photocopy for Banks records.

Certificate from the Registrar of Joint Stock Companies that the company is
entitled to commence business (in case of Public Ltd. Co. for inspection and
return) along with a duly certified Photocopy for Banks records.

Latest copy of balance sheet.

Extract of Resolution of the Board/General Meeting of the company for opening

the account and authorization for its operation duly certified by the
Chairman/Managing Director of the company.

vii) List of Directors with address (a latest certified copy of Form-XII)

28

(D)

Club/Society:

Following documents have to be obtained in case of the account of the club or society:

(E)

Up to date list of office bearers.

Certified copy of Resolution for opening and operation of account.

Certified copy of Byelaw and Regulations/Constitution.

Copy of Government Approval (if registered).

Cooperative Society:

Following documents have to be obtained in case of the account of Cooperative Society:

Copy of Byelaw duly certified by the Co-operative Officer.

Up to date list of office bearers.

Resolution of the Executive Committee as regard of the account.

Certified copy of Certificate of Registration issued by the registrar, Co-operative

societies.

(F)

Non-Govt. College / School / Madrasha / Muktab:

Following documents have to be obtained in case of the account of non-govt. college / school /
madrasha / muktab:

Up-to-date list of Governing Body/Managing Committee.

Copy of Resolution of the Governing Body/Managing Committee authorising

opening and operation of the account duly certified by Gazetted Officer.

(G)

Trustee Board:

Following documents have to be obtained in case of the account of trustee board:

Prior approval of the Head Office of CBL.

Certified copy of Deed of Trust, up to date list of members of the Trustee Board
and certified copy of the Resolution of Trustee Board to open and operate the
account.

(H)

Minors Account:

Following documents have to be obtained in case of the account of minor:

Putting the word MINOR after the title of the account.

29

Recording of the special instruction of operation of the account.

The AOF is to be filled in and signed by either the parents or the legal guardian

appointed by the court of law and not by the minor.

3.2 Local Remittance:

Local remittance is one of the main components of general banking. The activities of local
remittance are --i.

Telegraphic Transfer,

ii.

Demand Draft issue,

iii.

Pay order.

iv.

Pay slip.

3.2.1 Telegraphic Transfer (TT):

It is an order from the issuing branch to the drawee bank / branch for payment of a certain sum
of money to the beneficiary. The payment instruction is sent by telex and funds are paid to the
beneficiary through his account maintained with the drawee branch or through a pay order if no
account is maintained with the drawee branch.

Procedure of issuing TT:

Following procedures are followed while issuing of TT:

The applicant fills up the relevant parts of the prescribed application form in triplicate,
duly signed the same and gives it to the GB.

GB will fill up the commission part for banks use and request the applicant to deposit
necessary cash or cheque at the cash booth.

GB will prepare telex in appropriate form, sign it and send it to the telex operator for
transmission of the message.

GB will prepare necessary advice. Debit advice is sent to the client if clients account is
debited for the amount of T.T.

T.T. Confirmation Advice is sent to the drawee branch.

Credit Ticket (second copy of the application form) is used to credit the CBL General
Account.

30

The first copy of the application form will be treated as Debit Ticket while the second
copy will be treated as Credit Ticket. The third copy will be handed over to the applicant
as customers copy.

Accounting Treatment:
For telegraphic transfer, PBL gives the following entries--Clients Account
City General Account

Dr.
Cr.

Telex Account

Cr.

Commission Account

Cr.

Payment of T.T.
On receipt of T.T. the drawee branch passes payment instructions the following entries if the T.T.
is found to be correct on verification of the Test number
a) City General Account

Dr.

DAD Account TT Payable

b) DAD Account TT Payable
Clients Account/Pay Order

Cr.
Dr.
Cr.

In case the beneficiary does not maintain any account with the drawee branch a pay order will
be issued in favor of the payee and sent to his banker / local address as the case may be.
Every branch maintains a prescribed T.T. Payable Register. All the particulars off T.T.
are to be properly recorded in this register duly authenticated. A separate Type of T.T.
confirmation advice is sent to the drawee branch on the same day. On receipt of T.T.
confirmation advice, the particulars of T.T. are verified with reference to particulars already
recorded in the T.T. payable register.

3.2.2 Demand Draft (DD):

Sometimes customers use demand draft for the transfer of money from one place to another. For
getting a demand draft, customer has to fill up an application form. The form contains date,
name and address of the applicant, signature of the applicant, cheque number (if cheque is
given for issuing the DD), draft number, name of the payee, name of the branch on which the

31

DD will be drawn and the amount of the DD. The form will be duly signed by the applicant and
by the authorized officer.

Process of issuing Local Draft:

Followed procedures are followed while issuing local draft

Get the application form properly filled up and signed by the applicant.

Complete the lower portion of the form for the banks use.

Calculate the total amount including the banks commission.

If the cheque is presented for of the local draft, the officer should get the cheque
duly passed for payment by the authorized person and record the particulars of local draft
on the back of the cheque.
If the client wants to debit his account for the payment of the draft amount, the

officer should get the account holders signature verified properly, from signature card on
record of the branch and debit clients account for the total amount including commission.
The first copy of the application form will be treated as Debit Ticket while the

second copy will be treated as Credit Ticket and kept by the GB. The third copy is
handed over to the applicant as customers copy.
The GB Department maintains a prescribed L.D. Issue Register. All the required

particulars of LDs issued by CBL should be entered in that register duly authenticated.

Issue of Duplicate Draft:

Duplicate Draft is not normally issued unless getting of satisfactory evidence is produced
regarding loss of the draft. If the L.D. is reported to be lost or stolen, the issuing branch on
receipt of a written request from the purchaser may issue a duplicate draft
Before issuing duplicate L.D. the branch should observe the followings
i)

Verify the purchasers signature on the request letter from the signature appearing
on the original application form.

ii)

Immediately issue a stop payment instruction to the drawee branch under advice
of head office and obtain confirmation of non-payment the L.D. in acquisition.

iii)

After the drawee branch has acknowledged the stop payment order and confirmed
that the local draft in acquisition remains unpaid at their end, the issuing branch
should obtain an Indemnity Bond on stamp paper as per prescribed format from

32

the purchaser duly signed by him. The branch will thereafter write to head office
for their approval to issue a duplicate draft.
iv)

The head office on receipt of the request from the issuing branch will
immediately issue a caution circular to all the branches regarding the lost of the
local draft asking them to record stop payment.

v)

The head office will thereafter issue clearance to the issuing branch for issuing
for issuing a duplicate draft in lieu of original reported lost.

vi)

On receipt of the clearance from head office, the issuing branch will issue a
completely fresh draft marking clearly the words duplicate issued in lieu of
original draft no. dated .in bold letters on the top of the
front page of the draft. The printed serial number on the draft should not however
be struck off. Intimation should be given to the drawee branch furnishing full
particulars of the duplicate draft.

vii)

The particulars of the duplicate draft must resemble those of the original draft in
all respects, i.e., all the particulars to the duplicate draft must be identical with
those in the original draft. No further IBCA is to be issued for the duplicate draft.

viii)

Prescribed duplicate issuance charge is to be recovered for issuing the duplicate

draft and credited to Income Account.

Cancellation of Local Draft:

The followings are followed while canceling a L.D.

The purchaser should submit a written request for cancellation of the L.D. attaching
therewith the original L.D.

The signature of the purchaser will have to be verified from the original application
form.

Managers prior permission is to be obtained before refunding the amount of draft.

Cancellation charge is to be recovered from the applicant and only the amount of the
draft less cancellation charge should be refunded. Commission charge, posted charge etc.
recovered for issuing the L.D. should not be refunded.

33

The original entries are to be reversed giving proper narration. An IBDA for the
cancelled L.D. should be issued on the drawee branch.

Cancellation of L.D. should also be recorded in the L.D. Issue Register.

Payment of L.D.:
While payment of L.D. CBL performs the following functions
i)

On receipt of Credit Advice (IBCA) from the issuing branch the following entries
are to be passed
City General Account Dr.
DAD Account

ii)

Cr.

When L.D. is presented for payment at the paying branch, its details are to be
carefully examined with reference to the following points
a)

Whether the draft is drawn on the Local office.

b)

Whether the draft is crossed or not. Amount of crossed draft is not paid in
cash to the payee but to be paid to his account with a bank.

c)

Draft must have to be signed by two authorized officers of the issuing

branch. Their signatures are to be verified from the specimen signature
book for being sure that draft that the draft is genuine. The verifier should
put his initial.

d)

Endorsement on the back of the draft must be regular in case the draft is
presented through clearing.

e)

The amount of the draft should not exceed the amount written in red ink at
the top of the draft.

f)

The payee is to be properly identified in case of cash payment.

g)

The particulars of the draft i.e. the draft number, date, amount and the
name of the payee should be verified from the L.D. Payable Register.

iii)

In case of payment, the draft should be cancelled with red ink. The date of
payment should be recorded in the L.D. Payable Register.

Accounting Treatment:
While payment:
DAD L.D. Payable Account Dr.

34

Clients Account

Cr.

An IBCA should be sent with this.

Stop payment of Local Draft:

The payee or purchaser of the draft cannot give stop payment instruction to the drawee branch.
If the paying branch receives a request from the purchaser of the draft for stopping payment of
the draft, it will ask the purchaser to approach the issuing branch about the purpose. The paying
branch should however exercise necessary precaution in this regard. Only the issuing branch
can issue instruction for stop payment of the draft under special circumstances.

3.2.3 Pay Order (PO):

For issuing a pay order, the client is to submit an application to GB in the prescribed form. This
form should be properly filled up and signed. For issuing pay order CBL charges commission on
the following rate
# For Party TK 50 plus VAT 15%
Other than Party:
# For Tk. 1 to 50,000, the commission is Tk.50 plus VAT 15%
# For Tk. 50,001 and above, the commission s Tk. 100 plus VAT 15%

Payment of Pay Order:

The pay order is presented to the bank either through clearance or for credit to the clients
account. While payment, relative entry is given in the pay order register with the date of
payment.

Cancellation of Pay Order:

The following procedure should be followed for the cancellation of the pay order:

The client should submit a written request for canceling the pay order attaching therewith
the original pay order.

The signature of the purchaser will have to be verified from the original application
form.
35

Managers prior permission is to be obtained before refunding the amount of the pay
order.

Cancellation charge is to be recovered from the applicant and only the amount of the pay
order less cancellation charge should be refunded. Commission recorded for issuing of
the original pay order should not be refunded.

Then the officer should write cancelled on the pay order

The original entries should be reversed with narration.

Cancellation of the pay order should also be recorded in the register.

3.3 Online Banking:

3.3.1 Finacle Core:
The Bank has set up a Wide Area Network (WAN) across the country to provide Online Branch
Banking facility to its valued clients. Under the Scheme, clients of any branch shall be able to
do banking transaction at other branches of the bank.
Under this system a client will to be able to do following type of transactions:

Cash withdrawal from his/her account at any branch of the Bank irrespective of location.

Cash deposit in his/her account at any branch of the Bank irrespective of location.

Cash deposit in other's account at any branch of the Bank irrespective of location.

Transfer of money from his/her account with any branch of the Bank.

Any amount can be deposited or transferred under Prime Line. In the system, however, at
present there is a limit for cash withdrawal through bearer or by account holder himself.

3.3.2 Requirement of Finacle Core service:

The Clients who has account in City bank or who will open account in City bank and would be
interested to maintain substantial deposits in Savings, Current or STD accounts, will be eligible
to get Finacle Core Service.
Intending and eligible clients have to apply in prescribed application form to the branch to get
the online service from the bank. The client should submit two copies photographs and
signature cards along with the application form. To avail the Finacle Core service, no charge

36

should be paid for online transaction within a locality where the account is domiciled. But
charges should be paid by the customer for inter city online transaction.

Online Transaction Membership Fee:

Membership fee of Tk. 50/- per month for the Online Branch Banking Service.

3.4 Deposit Schemes of City Bank Limited

Bank is the largest organization of mobilizing surplus domestic savings. For poverty alleviation,
we need self-employment, for self-employment we need investment and for investment we
need savings. In the other words, savings help capital formations and the capital formations
help investments in the country. The investment in its turn helps industrialization leading
towards creation of wealth of the country. And the wealth finally takes the country on road to
progress and prosperity. As such, savings is considered the very basis of prosperity of the
country. The more the growth of savings, the more will be the prosperity of the nation.
The savings rate in Bangladesh is one of the lowest in the world rate of domestic saving being
17.78 %. In order to improve the savings rate, Financial Institutions responsible for
mobilization of savings should offer attractive Savings Schemes so that the marginal propensity
to save increases. The savings do not, of course, depend only on the quantum of income but
largely depend on the habit of savings of the people.
CBL has formulated the following Savings Schemes:

Monthly Benefit Deposit Scheme,

Fixed Deposit Scheme,

Three Stage Savings Scheme,

3.4.1. Monthly Benefit Deposit Scheme

This is a Deposit Scheme where the depositor gets a fixed amount of profit every month
without disturbance to the principle. The Scheme is designed to attract:
1) The retirement benefits of service holders.
2) The investment of Wage Earners who want to pay a fixed amount monthly to their
familys dependents in Bangladesh from the profit of their investment.

37

3) The deposit of those persons who intend to meet the monthly expense of their family
from the income of their deposit.
4) Investment of fund of Trusts and Foundations which award monthly Scholarships /
Stipends to students.
5) Trusts and founders or other associations, which award monthly scholarship/stipends to
students etc.

Features
Deposit Amount
Tk. 1,00,000 to TK. 1,00,00,000
Period
The scheme is for 2years/ 3 years/ 5 years.
Return
Term

Deposit (TK.)

Monthly Interest (TK.)

Interest After Tax (TK.)

2 years
3 years
5 years

1,00,000
1,00,000
1,00,000

900
900
945

810
810
850

* Taxes if any, applicable.

Additional Benefit
These MBDS allows you to enjoy loan facility up to 90% of your deposit amount.
Terms & Conditions

Payment of monthly profit shall start from the subsequent month after a clean minimum
gap of 30 days from date of deposit.

Normally, the deposit will not be encashable before maturity. But if any depositor intends
to withdraw his deposit before maturity, the following rules will apply:
-

No benefit including interest shall be allowed for premature encashment within

one year.

If the accounts/ deposits are closed/ encased after one year of its opening, benefit
shall be allowed on the deposits at exiting savings deposits rate.

If the amount of monthly profit already paid exceeds the amount payable at
exiting savings rate, the difference shall be realized from the principal deposit
amount, if and when necessary.

38

If the client fails to deposit installment for consecutive 3 months, in this case the
scheme will be closed for adjusting loan.

In case of death of a depositor, the A/C shall cease to be operative and the amount
deposited so far shall be paid to the nominee, as mentioned in the account opening form,
and in absence of nominee, to the legal heirs of deceased as per rules in force.

3.4.2 Three Stage Savings Scheme (TSSS)

For regular income people it is a good opportunity to deposit money for long term in high
interest rate. Details are:

Term:

2 years/4 years/6 years

Monthly deposits: Tk.500-Tk.5000

An example of total sum after maturity (where monthly installment Tk.500):

Term
1 year

Interest Rate
8%

Total sum after maturity

Tk.13, 093 (1st stage)

2 year

9%

3 year
4 year

10%
11%

Tk.28, 955 (2nd stage)

5 year
6 year

12%
13%

Tk.48, 548 (3rd stage)

3.5 UTILITY SERVICES SCHEME:

Like any other country of the world, the people living in the urban areas of our country lead a
very busy life. Times are very valuable to them. Despite this, they are to waste their valuable
time at the counter of.
Different Banks and other Institutions for payment of their monthly bills of different utility
services like Electricity, Telephone etc. They, as such, face enormous difficulties for payment of
their monthly bills in time. Such inconveniences of the urban people can be removed by making
an arrangement to collect all the bills of various utility services at one Point.

39

Scope of Services: The scheme is designed to provide all the required services to the customer in making payment
of their following bills on their behalf from the counter of the Bank:

To pay Electricity Bills

To pay Telephone Bills
To pay Gas Bills
To pay WASA Bills
To pay Insurance Premium
To pay House Rent
To collect House Rent
To pay Municipal Taxes
To collect Pension Money
Issuance and Renewal of License of TV, Radio, etc.
Any other like Services.
Objectives

To help the customers in payment of their different utility Bills in time and thereby
relieve them of their worries and save their valuable time.

To help different corporations/ organizations in timely collection of their Bills.

To help the senior citizens of the country in collecting their Pension Money every month.

To extend financial assistance to the customers by way of overdraft in timely payment of

their Bills.

Deposit Rate Offered by CBL

SL.
01.

02.
03.

Particulars
Deposit Rate
Short Term Deposit
a) Below Tk.1.00 Crore
5.00%
b) From Tk. 1.00 Crore but below 6.00%
10.00 Crore
C) Tk 10.00 Crore and above
Saving Deposit
Fixed Deposit (FDR)
a) 1-3 Months

6.50%
6%
Up to 1.00 Crore
11%
40

b) 4-11 months
c) 1(One) Year and above

12%
13%

3.6 Clearing Section

According to the Article 37(2) of Bangladesh Bank Order, 1972, the banks, which are the
member of the clearinghouse, are called as Scheduled Banks. The scheduled banks clear the
cheque drawn upon one another through the clearinghouse. This is an arrangement by the
central bank where everyday the representative of the member banks gathers to clear the
cheque. Banks for credit of the proceeds to the customers accounts accept Cheque and other
similar instruments. The bank receives many such instruments during the day from account
holders. Many of these instruments are drawn payable at other banks. If they were to be
presented at the drawee banks to collect the proceeds, it would be necessary to employ many
messengers for the purpose. Similarly, there would be many cheque drawn on this the
messengers of other banks would present bank and them at the counter. The whole process of
collection and payment would involve considerable labour, delay, risk and expenditure.
All the labour, Risk, delay and expenditure are substantially reduced, by the representatives of
all the banks meeting at a specified time, for exchanging the instruments and arriving at the net
position regarding receipt or payment. The place where the banks meet and settle their dues is
called the Clearinghouse.

3.6.1 Activities of the Section:

(a) Preparation of Clearing Outward and Inward Lodgement and record maintenance of the
same.
(b) Batch posting as and when required.
On receipt of instruments, the same is endorsed here. Then clearing section will sent IBDA to
head Office for clearing purpose and on receipt of IBCA from Head Office amount is credited
to customers account and vice versa. If the instrument is return then the same is given back to
the customer.

41

3.7 Collection Section:

Checks, drafts etc. are drown on bank located outside clearing house are sent for collection.
B.B. Avenue Branch collects its clients above-mentioned instruments from other branches of
CBL and branches other than CBL. In case of out ward bills for collection customers account is
credited after finishing the collection processor. And in case of in ward bills customers account
is debited for this purpose. So it place dual role as follows:
i)

Collecting Banker

ii)

Paying Banker.

3.7.1 Activities of the Section:

Preparing of Outward and Inward Collection Item.

Inter-Branch Transfer.

Batch posting and checking as and when required.

Other works as and when require.

Collection is done when

(i) Paying Bank is located out side Dhaka City.
(ii) Paying Bank is other branches of PBL situated inside Dhaka City.

(i)

Paying Bank is outside Dhaka City:

CBL sends Outward Bills for Collection (OBC) to the concerned paying bank to get Inter Bank
Credit Advice (IBCA) from paying Bank. If the paying bank dishonours the instrument, the
same is returned to principal Branch.

(ii)

The Paying Bank of their own branches inside Dhaka City:

Collection Department sends transfer delivery item to other branches of same bank situated
inside Dhaka City. Upon receiving IBCA customers a/c is credited.

3.7.2 Procedures for Outward Bills for Collection:

Depositing the cheque along with
deposit-slip
Crossing of the cheque are done
indicating the Branch as collecting bank

Endorsement Payees A/C will be

Credited on realization is given
Entries are given in the Outward
Clearing Register

42

Commission for Collection:

Minimum TK. 50 to maximum TK.700.

3.8 Accounts Section:

In banking business transactions are done every day and these transactions are to be recorded
properly and systematically as the banks deal with the depositors money. Any deviation in
proper recording may hamper public confidence and the bank has to suffer a lot. Improper
recording of transactions will lead to the mismatch in the debit side and credit side. To avoid
these mishaps, the bank provides a separate department whose function is to check the mistakes
in passing vouchers or wrong entries or fraud or forgery. This department is called Accounts
Department.
Besides these, the branch has to prepare some internal statements as well as some statutory
statements, which are to be submitted to the Central Bank and the Head Office. This department
prepares all these statements.

3.8.1 Functions of Accounting Department:

We can divide the functions of accounting department into two categories. One is day-to-day
task and another is periodical task.
a. Day to day functions: Here day-to-day function refers to the every day tasks.
Accounting department of CBL performs the following day to day functions:

Recording of transaction in the cashbook, general and subsidiary ledger.

Preparing the daily position of deposit and cash.

Making the payment of the expense of the branch.

43

Recordings of inter branch fund transfer.

Checking whether all the vouchers are correctly passed.

Recording the voucher in the voucher register.

Packing and maintains the total debit and total credit vouchers.

b. Periodical functions: Periodical functions of accounts department include the

preparation of different weekly, fortnightly, monthly, quarterly and annual statement. The
accounts department prepares the following statements:
Monthly statement of deposits, loans and advances, profit and loss etc.
Quarterly statement of deposits, loans and advances, profit and loss etc.
Yearly statement of deposits, loans and advances, profit and loss etc.

Yearly statement of classified Loans and Advances.

Statement of Affairs.

Yearly Budget of the Branch, etc

3.9 Cash Section:

Cash section is a very sensitive organ of the branch and handle with extra care. Operation of
this section begins at the start of the banking hour. Cash officer begins his/her transaction with
taking money from the vault, known as the opening cash balance. Vault is kept in a muchsecured room. Keys to the room are kept under control of cash officer and branch in charge.
The amount of opening cash balance is entered into a register. After whole days transaction, the
surplus money remain in the cash counter is put back in the vault and known as the closing
balance. Money is received and paid in this section.

3.9.1 Cash Receipt:

At first the depositor fills up the Deposit in Slip. For saving account and current
account same Deposit in Slip is used in this Branch.

After filling the required deposit in slip, depositor deposits the money.

Officers at the cash counter receives the money, count it, enter the amount of money in
the register kept at the counter, seal the deposit in slip and sign on it with date and keep
the banks part of the slip. Other part is given to the depositor.

44

In this branch, i.e., B.B.A.Branch, two different officers maintain two different books
for entering such entries. One officer and other accounts by another officer maintain all
deposits of saving account.

At the end of the day entries of both of these registers are cross checked with the
register kept at the cash counter to see whether the transactions are correct or not.

3.9.2 Cash Payment:

When a person comes to the bank to cash a cheque, he/she first gives it to the computer
desk to know the position of the check and posting of the cheque. If the account has
sufficient fund the computer in charge will post it into the computer, will sign it and seal it.

This cheque is then sent to the concerned officer. There are two officers who verify the
cheques one for savings and similar types of account and another for current and similar
types of account.

After receiving the cheque respective officer first checks it very carefully for any kind of
fraudulent activity. (S) He also checks the date of the cheque, amount in word, amount in
figure and signature of the drawer.

If the instrument is free of all kind of error the officer will ask the bearer to sign on the back
of it.

He will then put his/her initial beside the bearers signature. S/he will also sign it on its
face; will write down the amount by red pen.

Then the cheque will be sent to the cash counter. At the cash counter bearer will be asked
again to sign on the back of the instrument.

The cash officer will then enter the details of the cheque in his/her register and will pay the
money to the bearer.

At the end of the day these registers will be compared to ensure the correctness of the
entries.

3.10 Conclusion
Bank is the largest organization of mobilizing surplus domestic savings. Attractive Savings
Schemes are offered by CBL such as Contributory Savings Scheme, Monthly Benefit
Deposit Scheme, Special Deposit Scheme, Education Savings Scheme, Fixed Deposit
Scheme, City Bank Money Scheme, City Bank Insured Fixed Deposit Scheme as well as
45

different accounts to save money. Schemes are designed concentrating in different purposes to
help the fixed income group people to help in need. Bank-Officials are also whole-hearted and
dedicated to serve their customer with utmost care.

Chapter FOUR
46

LOAN AND ADVANCE

Services Offered by Credit Department:

Bank is a financial intermediary whose prime function is to move scarce resources in the form
of credit from savers to those who borrow for consumption and investment. The word credit
is derived from the Latin word credere, which means to trust. The fundamental nature of
credit is that an element of trust exists between buyer and seller-whether of goods or money. In

47

a modern industrial society Banks are uniquely important because of their ability to create
money. Lending comprises a very large portion of a Banks total assets and forms the backbone
of the Bank and interest on lending constitutes the highest proportion of income of a Bank. As
such credit quality remains the prime indicator of its commercial success. Unsound credit
reduces the ability of a Bank to provide credit towards profitable borrowers and undermine
liquidity and solvency. Therefore lending is very important for the profitability and success of a
Bank.
When a bank advances a loan, it does not pay the amount in cash. But it opens an account in his
name and allows him to withdraw the required amount by cheque. Banks provide credit facilities
to businessmen by way of loans and advances, overdraft and cash credit. When a loan is granted
or overdraft is sanctioned, the amount of loan or overdraft is entered in the account of the
customer and he is allowed to draw a cheques up to the amount agreed upon. Thus the bank
creates a deposit in the name of the borrower. Basically credit is the function by which people
can perform their job by depositing and lending money from the bank with an implied interest
rate and bank performs here as a middleman. Banks create money and credit. It happens in two
ways. First, when a customer is granted loan, he has to sign a promissory note and receive in
turn, a banks demand deposit, or cash. The promissory note does not act as money but it
receives money and can readily spend almost everywhere. Thus it creates credit. Second, the
entire systems of banks also create money as the deposits generated by lending flow from bank
to bank. By law, each bank must set aside a fractional reserve behind each deposit it receives and
the remaining excess can be loaned out. No single bank can lend out more than its excess
reserves, the entire banking system can create a multiple volume of deposit money through credit
creation.

4.1 Salient features of City banks Credit Policy:

Assets are built based on customers deposit, which should not exceed 90% of customers
based deposit.

Rate of interest is variable based on customers integrity and risks associated.

Type of security varies on the basis of risks associated in credit.

Diversification from all angel viz. type of credit, geographical location, size of credit,
sectors and sub-sectors etc.

48

Credit operations are carried out in branch through branch credit committee as per
authority delegated to head of branch and through Head Office Credit Committee in
respect of credit sanction authority delegated to the CEO.

Credit Risk Grading is done in all cases.

Assessment of volume or amount of credit properly.

Utmost care is taken in providing loans to directors.

4.2 Credit Portfolios and Ratio of City Bank Limited:

The Bank continued to reengineering process to raise its assets portfolio by implementing new
credit policy with diversified and well structured asset portfolio and separation of
responsibilities and segmentation of divisions. The outstanding amount of loans and advances as
on 31st December 2005 stood at Tk.23326 million with a record growth of Tk.6298 million
(37%). The outstanding amount at the same period of previous year was Tk.17027 million. City
bank Limited has a plan to maintain the following proportions to design and maintain credit
portfolio:

SL.
No.
1
2

Sector

Agriculture
L & M Industry (Term Loan)

As on 31.12.05
Amount (in
TK. % of
million TK.)
share
171.00
3542.30

0.73
15.19

Working Capital & Commercial

3
4
5
6

lending
Export Finance
Import Finance
Housing

8739.79
3762.40
4094.61
224.46

37.47
16.13
17.55
0.96

Others

2791.74

11.97

23326.30

100.00

Total
Table: Comparative Position of Sector Wise Exposure

49

4.3 Types of Bank Credit:

Modern banking operations touch almost every sphere of economic activity. The extension of
bank credit is necessary for expansion of business operations. Bank credit is a catalyst for
bringing about economic development. Without adequate finance there can be no growth or
maintenance of a stable output. Bank lending is important to the economy, for it makes possible
the financing of agricultural, commercial and industrial activities of a nation. The credit facilities
are generally allowed by the bank may be in two broad categories. They are:

1. Funded Facilities:
Funded facilities can also be divided into the following categories:
Loans:
i)

Continuous Loans

ii)

Demand Loans.

iii)

Term Loans up to 5 years

iv)

Term Loans over 5 years

v)

Short Term Agro-Credit and Micro credit

Overdrafts:
Against hypothecation of goods/stock
Against pledge of goods/stock
Against any other permissible securities.
Other advances:
Against import bills.
Against imported merchandise.
Against Trust receipts (T/R).
Against Export Bills Purchased/Discounted
Against Work order
Against other securities.

2. Non-Funded Facilities:
Letter of credit (L/C)
Letter of Guarantee (L/G)

50

4.4 Types of Advances Offered by CBL:

1.

Secured Advances:
A. The following type of secured advances are allowed against tangible securities subject to
margin restrictions:

Loan (General)
House Building Loan
Other Loans to Staff
Cash Credit (Hypothecation)
Cash Credit (Pledge)
Hire-Purchase
Lease Financing
Consumers Credit
SOD (FO)
SOD (WO)
SOD (OT)
SOD (EXPORT)
SOD (IMPORT)
PAD (Payment Against Documents)
BLC (Bills Against Letter of Credit)
LIM (Loan Against Import Merchandise)
LTR (Loan Against Trust receipt)
IBP
Packing Credit
FDBP (Foreign)
FDBP (Local)
FBP
B. These advances are allowed against the following securities:

51

 Shares of various Companies approved by Head Office from time to time and listed in
the Stock Exchange.
Term Deposit Receipts issued by any Branch of our Bank.
Lien on balance in Savings A/C, Current A/C. and other Savings Schemes
Government Promissory Notes.
Various Sanchaya Patras
Surrender value of Life Insurance Policies.
WEDB
Assignment of bills against work orders/supply orders and receivables.
Stock of goods in trade (Permissible goods only) pledged or hypothecated.
Hypothecation of power driven vehicles or watercraft.
Hypothecation of capital Machineries and equipments.
Immovable Property.
Imported merchandise - pledged or hypothecated.
Trust Receipts.
Import Bills (PADs)
Bills Purchased
Scheduled Bank/Insurance Guarantees
Export Bills
Inland Bills.
Personal Guarantee
Corporate Guarantee

2.

Unsecured Advances:

An unsecured or clean Advance is one, which is granted to a constituent without obtaining any
security. In such case only charge documents are held an unsecured facility may be allowed in
exceptional circumstances, only for a short period, with definite repayment arrangement, subject
to restrictions imposed by Bangladesh Bank or any other competent authority, with prior
approval of Head Office, to a customer on the basis of his personal credit worthiness, standing
and reliability.
A. Unsecured Advances include:

52

i)

Clean Overdrafts, and

i)

Clean Loans.

B.
I. A customer should not ordinarily be permitted to overdraw his account without security.
However, an unsecured facility may be allowed in exceptional circumstances, only for a
short period, with definite repayment arrangement, subject to restrictions imposed by
Bangladesh Bank or any other competent authority, with prior approval of Head Office,
to a customer on the basis of his personal credit worthiness, standing and reliability.
II. It shall not be granted unless the Sanctioning Authority has full confidence in the ability
and reputation of the customer to repay it, on demand, or at its maturity if it is a loan.
Definite arrangements for repayment, whether by installments or otherwise, must, as a
rule, be made.

4.5 Procedure of Giving Advance:

1. The borrower has to apply to CBL for loan by filling up of a specific application form.
2. After receiving loan application form, CBL sends a letter to Bangladesh Bank for obtaining a
report when loan amount exceed 100 lac. This report is called CIB (Credit Information Bureau)
report.
3. After receiving CIB report, if the bank thinks that the prospective borrower will be a good
borrower, then the bank will scrutinize the documents. In this stage, the bank will look whether
the documents are properly filled up and signed.
4. Then come processing stage. In this stage, the bank will prepare a proposal. A proposal
contains all relevant information (e.g. name of the client, type of the loan, amount of the loan,
period of giving loan, security, date of application, financial data, etc.) Branch incumbent
(Local Office) has the discretionary power to sanction loan (SOD) up to Tk.25 lac against
financial obligations by informing head office. But in that case, the branch manager has to give
attention on the following matters:
a) The interest of the loan must not be less than 14%, and
b) The borrower must maintain 10% margin.
Except this case, the branch manager has to send a proposal to the head office. It Is fall under
the delegation of Managing Director (MD), the MD approves the loan. If it is again beyond the

53

delegation of MD, head office will prepare a proposal and submit it before the executive
committee of the Board. The proposal has to be approved by the executive committee (EC).
After getting the proposal approved head office issue a sanction advice. According to that
sanction advice, at the branch the following activities are done:
1. A sanction advice will be prepared in favour of the client.
2. After the sanction advice, bank will collect necessary documents (charge
documents).
3. After receiving all the documents, the bank will disburse the loan to the borrowers.
For withdrawing the loan amount, customer creates a current account and the loan
amount is transferred to this account.

4.6 Lending Principles:

The bankers have to follow some principles or policies or take into consideration some factors
for lending money on sound basis. In working out these principles, or constituents a banker is
exposed to the following three basic questions.

Is the borrower credit worthy?

Are loan terms, or in other words, loan agreements properly structured and documented?

Has the bank been able to perfect its claim on the assets or securities?

If a banker handling a credit can find the answers to the above three basic questions in a proper
fashion lending operation carried out by him based on the same is expected to be sound. To
answer the question as to whether the borrower is credit worthy a banker is to have clear idea
about the following Cs concerning the borrowers.
i. Character
ii. Capacity
iii. Cash Flow
iv. Collateral
v. Condition
vi. Control

54

The 6Cs reflect the following points, which should be kept in mind for sound
lending:

Judicious selection of Customers

Purpose

Safety

Security

Liquidity

Adequate return (Profitability)

Supervision

National/Social interest

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.

4.7 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. CBL charges the
following two types of security, Primary security: These are the security taken by the ownership of the items for which
bank provides the facility.
Collateral security: Collateral securities refer to the securities deposited by the third party
to secure the advance for the borrower in narrow sense. In wider sense, it denotes any type of
security on which the bank has a personal right of action on the debtor in respect of the advance.

Modes of Charging Security:

There are different modes of charging security are exercised by the bank:
1. Pledge:

55

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. duly endorsed in
banks favour.
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 favour 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:
According to section (58) of the Transfer of Property Act, 1882 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. 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.

4.8 Documentation:
Documentation can be described as the process or technique of obtaining the relevant
documents. In spite of the fact that banker lends credit to a borrower after inquiring about the
character, capacity and capital of the borrower, he must obtain proper documents executed from
the borrower to protect him against wilful defaults. Moreover, when money is lent against some
security of some assets, the document must be executed in order to give the banker a legal and
binding charge against those assets. Documents contain the precise terms of granting loans and
they serve as important evidence in the law courts if the circumstances so desire. Thats why all
approval procedure and proper documentation shall be completed prior to the disbursement of
the facilities.

56

4.8.1 Charge Documents:

Following charge documents are necessary while giving loans.
Letter of guarantee:
This is a document given by the proprietor, directors or the third party in favor of the principal
debtor. The beneficiary of this document is the bank. Surety is bound to pay the guaranteed
amount if such situation arises.
Counter guarantee:
The principal debtor agreeing that if the guarantor pays any amount, the principal debtor is
bound to pay this amount gives this guarantee.
Letter of authority:
By this letter, the principal debtor gives the authority to the bank to debit the current account or
investment account of the principal debtor for the following cases:
i.

Wages of the stock keeper and stock guard.

ii.

Rent of the stock.

iii.

Insurance premium and

iv.

Any other expenses regarding these functions.

Letter of recall the loan:

This letter is given to the bank by the borrower, giving the bank the right of recalling the loan
amount at any time if the borrower fails to repay any one of the installments. And the borrower
cannot protest such recalling.
Letter of continuity:
By this letter, the borrower agrees that the promissory note given by the bank will be act as
security for the repayment of the ultimate balance or sum remaining unpaid on account of the
overdraft or advance.
Letter of revival:
By this letter, the borrower agrees that he will be liable to bank for payment of the promissory
note with interest in respect of all present and future indebtedness liabilities secured thereby
which promissory note is to remain in force with all relative securities, agreements and
obligations.
Joint promissory note:
This promissory note is given to the bank by the borrower if the borrowers are more than one
person.

57

Single promissory note:

The borrower to the bank gives this promissory note if the borrower is a single person.
Letter of undertaking
This document is given to the banker by the borrower acknowledging the right to cancel the
facility at any time with or without intimation to the borrower.
Loan disbursement letter:
By this letter, the borrower request to disburse the loan sanctioned in his favor by the bank. All
the persons, in whose names the account is opened, should sign the letter.
Charge over bonds or certificate of shares etc.:
It is a document given by the borrower to the banker declaring that the stocks, shares,
debentures, securities and investments which are now deposited to the bank and which may from
time to time be deposited by the borrower shall stand charged and hypothecated to bank as
security for the payment to bank on demand of the balance of the loan amount and of any other
indebtedness and liability to the bank of any kind whether mature or accruing and whether
incurred alone or jointly with others and whether as principal or surety including all interest
document, commission, expenses, charges and costs incurred by the bank in relation any such
indebtedness or liability.
Letter of lien against fixed deposit receipt:
By this letter, the borrower gives the right to the bank to hold the Fixed Deposit Receipt (FDR)
if the borrower fails to repay or adjust the loan on demand or discharge the liabilities to bank. In
this letter, FDR number, issuing branch, name of the favoring person and amount are written.
Letter of authority to encash FDR:
By this letter, the borrower gives the right to bank to encash the FDR in case of need. Here the
amount and address of the bank of issue and the signature of the holders are given.
Memorandum of deposit of title deeds:
It is a deed that is necessary in case of mortgage by deposit of title deed or equitable mortgage.
Here the mortgagor agrees that he has deposited necessary documents of the property to the
bank.
Hypothecation of goods to secured a demand cash credit or overdraft or loan account:
Here the amount of loan, interest, and the name of the borrowers are written. Here the bank and
the borrowers agree on the following terms:
Security
Balance due to the bank

58

 Borrowers not to the encumber or parts of the goods

Sale
Inspection
Insurance
Margin
Interest rate
Repayment
Sale of goods
Deficiency
Surplus
Statement of account
Continuing security
Title
Saving
Change of borrowers and
Notices.
Guarantee by third party:
Sometimes third party guarantee is needed for allowing loan. Here third party gives the
guarantee that of the principal debtor fails to repay the loan, and then the guarantor will be
bound to repay the loan to bank.
Hypothecation of vehicle:
This document is necessary in case of transport loan. Here the borrower hypothecated the
vehicle to the bank. In case of failure of repay the loan, bank will sell the vehicle to collect the
money.

4.8.2 Documents required for relevant advances:

1. Loan:
a.

D P Note signed on revenue stamp

b.

Letter of arrangement.

c.

Letter of disbursement.

d.

Letter of partnership (partnership firm) or Board of resolution (limited companies).

e.

Letter of pledge.
59

f.

Letter of hypothecation.

g.

Letter of lien and ownership / share transfer form (in case of advance against share).

h.

Letter of lien for packing credit.

i.

Letter of lien (in case of advance against F D R)

j.

Letter of lien and transfer authority.(in case of advance against P S P, B S P)

k.

Legal documents for mortgage of property (As draft by legal adviser)

l.

Copy of sanction letter mentioning details of terms and condition duly acknowledge by
the borrower

m.

Trust receipt.

2. Overdraft:
a.

D P Note.

b.

Letter of partnership.

c.

Letter of arrangement.

d.

Letter of continuity.

e.

Letter of lien.

f.

Letter of lien and ownership /share transfer form (in case of advance against share).

g.

Letter of lien and transfer authority.

h.

Legal documents for mortgage of property.

3. Cash Credit:
a.

D P Note.

b.

Letter of partnership.(in case of partnership farm) or Board of resolution (in case of

limited company)

c.

Letter of arrangement.

d.

Letter of continuity

e.

Letter of hypothecation [In case of cash credit (Hypothecation)]

f.

Legal documents for mortgage of property

g.

Letter of pledge or Agreement of pledge. [In case of cash credit (pledge)]

4. Bills purchased:
a.

D P Note.

b.

Letter of partnership. (in case of partnership farm) or Board of resolution( in case of

limited company)

c.

Letter of arrangement.

60

d.

Letter of acceptance, where it calls for acceptance by the drawee.

e.

Letter of hypothecation of bill.

4.9 Loan Schemes Offered By CBL:

Consumer Credit Scheme
General Loan Scheme
Lease Finance
Small and Medium Enterprise
House Building/Apartment Loan Scheme

4.9.1 Consumer Credit Scheme:

Consumer Credit is the credit, which is provided to people having fixed but regular income for
acquiring consumer durables and other assets for personal use to service from their monthly
income. Consumer credit is a collateral free credit.
Objectives of the scheme:

To sell our services to a wide range of customers and increases our CCS portfolio.

To introduce and carry on collateral free credit operation.

To improve the standard of living of the fixed income bracket people.

To take part in the socio-economic development of the country.

To ensure access to credit by mass people as far as possible.

Security:

a. The client will submit crossed cheque in advance for all the stipulated instalments in favour
of the bank towards repayment of loan including interest.
b. The customer will provide following personal guarantee/Bank Guarantee/Insurance
guarantee according to the Banks Prescribe forms/financial instruments.
Name of security
Personal
Guarantee
Financial

Particulars
For Employee of govt. semi-govt.& corporate organizations.
For Businessmen and employees of Non Corporate Private
Organizations.
Personal Guarantee will be waived.

Instruments

61

Bank

Personal Guarantee will be waived.

Guarantee
Insurance

Personal Guarantee will be waived

Guarantee
Ownership of

Sole name of Bank/Joint name of Bank and customer.

vehicles
Insurance for

Comprehensive coverage from acceptable

Vehicle
Corporate

Insurance companies.
For corporate arrangement with Head Office approval.

Guarantee
Charge Documents:

Letter of declaration

Demand Promissory Note

Loan agreement under consumers Credit Scheme

Letter of Hypothecation

Letter of Guarantee

Letter of Authority

Other Required charge documents

For a car or any other vehicles:

Photocopy of Blue Book/ Certificate of Registration

Photocopy of Certificate of Insurance.

Supervision and Monitoring:

The mechanism of supervision and monitoring are as follows.

Regular checking the balance of clients SB/CD A/Cs.
Regular communication with defaulting customers and guarantors- physically/over telephone.

Issuance of letter to customers immediately after dishonour of cheque.

Issuance of letter to defaulting customers and respective guarantors.

Contact the employers of the defaulting customers (After 03 overdue instalment).
Issuance of legal notice to the customers and guarantors prior to the classification of the loan
Issuance of appreciation / greeting letter to the regular customers.

62

 Periodical visit to the customer to maintain relationship and supervision of supplied articles.
Legal actions to be taken after all possible efforts to recover the Banks dues have gone in
vain.

4.9.2 General Loan Scheme

Depending on the various nature of financing, all the lending activities have been brought under
the following General Loan:
Short term Loan
Medium term Loan
Long term Loan

More specifically this is classified as follows:

i)

Continuous

Loans:

For

Small

Enterprise

Financing(SEF),

Consumer

Financing(CF), Orher than SEF &CF etc.

ii)
i)

Demand Loans: For SEF, CF,& others.

Term Loans up to 5 years: For SEF, CF (other than HF &LP), House Financing (HF),

Loans for Professionals to Set Up Business (LP), Others(other than SME & CF)
vi)

Term Loans over 5 years: For the same as previous.

vii)

Short Term Agro-Credit and Micro credit

The loans are allowed to individual/firm/industries for a specific purpose but for a definite
period and generally repayable by installments fall under this head. This type of lending are
mainly allowed to accommodate financing under the categories (i) Large & Medium Scale
Industry and (ii) Small & Cottage Industry. Very often term financing for (1) Agriculture (ii)
Others.

4.9.3 Lease Finance

Lease financing is one of the most convenient long-term sources of acquiring capital machinery
and equipment. A client is given the opportunity to have a right to use an asset, usually for an
agreed period of time, against payment of rent. The lease is obligated to make lease payment
until the expiration of the lease agreement, which corresponds to the useful life of the asset.

Objectives

63

City Bank Ltd. has introduced the lease finance with the following objectives:
To assist the genuine and capable entrepreneurs for acquiring

Capital Machinery and

Equipments to undertake enterprises without equity.

To encourage the new and educated young entrepreneurs to undertake productive venture
and demonstrate their creativity and thereby participate in the national development.
To participate in the industrial development of the country.

Lease Items/ Equipment

City Bank Ltd. offers lease finance for acquiring the use capital

machinery, equipments,

medical instruments, automobiles etc. The customers are entitled to decide the specification,
price and model of the lease item/ equipment. Bank will purchase the item (s) in accordance
with the specifications given by the clients.

Security
The entrepreneur will be required to provide the following securities:
1.The lease items will remain in the name of the Bank i.e. Bank will be the sole owner of
the leased items.
2.Collateral securities having liquidation value covering at least 100% of the amount of
finance.
3.Deposit of Listed Shares, National Savings certificates, ICB unit certificates,
Assignment of Life Insurance Policies, Bank Guarantee, and Insurance Guarantee etc. will also
be acceptable as collateral securities.
4.In case of existing industrial units requiring BMRE, change may be created the existing
Fixed Assets as collateral securities for the finances. In case of existing Automobile enterprise,
creation of charge on the existing vehicles will also be acceptable as collateral securities.
5.

In case of default in payment of lease rental for consecutive 2 (two) months, the

Bank will take over the lease items without giving any prior notice.

In case of taking over the lease items by the Bank before

maturity the Lessee

will be liable for the loss, if any, caused to the Bank for such Premature taking over.

The Bank will exercise close and intensive supervision of such project. An officer
of the Bank will be engaged separately for supervision of such projects to ensure proper
utilization of the lease items and time repayment of the monthly rentals.

64

 Transport Leasing:
Transport is one of the most widely traded lease items in the developed as well as developing
countries of the world. The reasons behind success of transport leasing in many countries could
by attributed to tax benefit, efficiency in found management and above all to the fact that user
could exclusively use the leased transport by paying reasonable rental.
The major issues of transport leasing are detailed below:
1. Selection of Vehicle
The customer has the right to decide the brand of vehicle, negotiate the price with the
manufacturers of dealers, and arrange after sales services with the supplier.
2. Acquisition Cost
The acquisition cost shall be the actual purchase price after bargaining and all other incidental
expenses incurred by the Bank including financial expenses.
3. Lease Term
In case of Transport leasing, the term shall be maximum 4 (four) years starting from the date of
execution. But when the lease is cancelled for any reason the lessee will have to return the
vehicle to the Bank together with the stipulated loss value mentioned in the agreement.
4. Lease Rental
Lease rentals calculated on the basis of acquisition cost and lease term shall be paid monthly.
5. Insurance
The vehicle shall be covered by Insurance throughout the lease term with the coverage decided
by the Bank. The lessee shall pay the premium.
6. Repair & Maintenance
The lessee shall be obliged to maintain the vehicle for ensuring its normal operation and shall
be solely responsible for loss/ damage as long as it is in his possession. Accordingly, repairing
and maintenance cost for normal operation during the lease period shall be borne by the lessee.
7. Registration
The lessee will arrange the registration of the vehicle in the name of the Bank at his own cost and
also pay annual taxes and fees payable to the concerned authority. In case of his failure, Bank will
do it and recover the cost from him.

4.9.4 Small and Medium Enterprise Credit scheme:

It is the prime concern for the nation to generate income through creation of job opportunity and
employment. Creation of job opportunity in large scale is not a easy task. What can be done is to
65

help self-employment through financial support. For this Reason City Bank has chosen the
scheme SME to boost up entrepreneurs with innovative idea, spirit and potentiality.

Objectives of the Scheme:

To Provide credit Facilities to the Small and Medium size entrepreneurs in urban and sub-urban
areas.

To flow credit for creation of employment and generation of income

To assist potential entrepreneurs.

To assist dependence on moneylender.

To make the small and medium enterprise self-reliant.

To develop saving habit and making acquaintance with banking facilities.

To inspire for undertaking small projects for creation of employment.

Securities
a) Registered mortgage of loan and building (if available).
b) Mortgage / Assignment of possession right.
c) Assignment of security money, advance rent,
if any.
d) Assignment of trade receivable not older than 90 days.
e) Hypothecation of machineries, equipment, vehicles, stock-in-trade, raw materials,
work-in-process and finished good.
f) Personal Guarantee from person acceptable to the bank.
g) Post dated cheque.
h) Lien on deposits/saving certificates/financial certificates.
i) Any other securities to be deemed suitable by the bank depending on the situation like
insurance guarantee, assignment of contract, security money etc.
Period of Loan:
a) In case of continuous loan: 01(one) year.
b) In case of Term Loan: 5(five) years or above.

Mode of Repayment:

i) In case of continuous loan credit turnover in the account must be equal to the limit in a quarter
and full adjustment within the validity period.

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ii) In case of term loan, the loan should be repaid by monthly instalments through post-date
cheques as per schedule.
iii) Sale proceed should be deposited in the account regularly.

4.9.5 House Building / Apartment Loan Scheme

Loans allowed to individual/enterprises for construction of house (residential or commercial)
fall under this type of advance. The amount is repayable by monthly installment within a
specified period. Such advances are known as Loan (HBL-GEN).
Loans allowed to our Bank Employees for purchase /construction of house shall be headed Staff
Loan (HBL-STAFF).

4.10 Issuing Of Bank Guarantee:

Bank Guarantee is a profitable product of a bank. Sometimes customers need bank guarantee for
their business purposes. CBL offers three types of guarantee
i.

Bid bond: This guarantee is given to the business people for the purpose of
participating in the tender.

ii.

Performance guarantee: This guarantee is in favour of the client for assuring

that the client will perform some specific works.

iii.

Advance payment security: By this guarantee, CBL gives assurance of payment

in case of advance payment. It helps in deposit mobilization.

The procedure of each guarantee is same. For issuing bank guarantee, customers have to apply to
CBL in their own pad. Then bank issue guarantee on judicial stamp. But the conditions for
issuing bank guarantee are that --1. Customers must maintain a current account.
2. Customers must keep certain percentage of guaranteed money as margin.
a. Furthermore, customer has to maintain certain some other requirements.

4.10.1 Accounting Treatment Regarding Bank Guarantee:

While issuing guarantee, bank performs the following function:
Customers Liability Dr.
Bankers Liability

Cr.

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Bankers liability becomes credit because the guarantee becomes the liability of the bank. If the
bank pays the guaranteed amount to the beneficiary, then CBL reverses the entry and collects
money from the customer and issues the bank draft. But sometimes, while the guarantee remains
unused, customer gives another written in his own pad. Then again bank reverse the previous
entry. CBL also issue revolving bank guarantee.

4.11 Credit Disbursement:

Having completely and accurately prepare the necessary loan documents, the loan officer ready
to disburse the loan to the borrowers loan account. After disbursement, the loan needs to be
monitored to ensure whether the terms and conditions of the loan fulfilled by both bank and
client or not.

4.12 Credit Monitoring, Follow-Up And Supervision:

Credit monitoring implies that the checking of the pattern of use of the disbursed fund to ensure
whether it is used for the right purpose or not.
CBL Officer checks on the following points:
a. The borrowers behaviour of turnover.
b. The information regarding the profitability, liquidity, cash flow situation and trend in sales in
maintaining various ratios.
Lending Rate Offered by CBL:
Sl.
1
2
3
4

Particulars
Term Loan (Project Loan)
Working Capital Funding
Pre-Shipment Export Credit (Packing Credit)
Trade Finance (Cash Credit, Hire Purchase, TR Loan,

5
6
7

IBP etc)
Small/Cottage and SME (Term Loan)
Other Special Program (Other than Commercial)
Others: a) Loan against FDR, MBDS, CCS and all

other scheme Deposit of Prime Bank Limited

b) Loan against Shares
Source: Advance Department, City Bank, B.B. Avenue Branch

Lending Rate
14.00% to 16.00%
16.00%
7.00%
16.00%
16.00% to 18.00%
16.00%
3.00% above the Deposit
Rate
14.00% to 16.00%

4.13 Classification Procedure:

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After the date of expiry, if the borrowers do not adjust their loan, CBL at first gives a notice to
them. The period of giving notice depends on the nature of the loan. For continuous loan, CBL
gives notice for three months. For five-year term loan, CBL gives notice for six months. And for
more than five-year term loan, CBL gives notice for more than 12 months.
After giving notice, if the borrower does not repay the loan, the loan will be considered as
classified.
5th STAGE CLASSIFICATION

Classified (CL)

Unclassified (UC)

Classification
Status

Demand
Loan
0 to 2 months

Length of overdue
Rate of
Continuous Term Loan Term Loan Provision
Loan
(Below 5 Yr) (Above 5 Yr)
0 to 2
0 to 2 months
0 to 2
1%

Special

3 months or

months
3 months or

3 months or

months
3 months

Mention

above

but

above but

above but

or above

Account

below

below 6

below 6

but below

(SMA)
Substandard

months
6 months or

months
6 months

months
6 months or

12 months
12 months

(SS)

above

but

and above

above but

or above

below

but below 9

below 12

but below

Doubtful

months
9 months or

months
9 months

months
12 months or

18 months
18 months

(DF)

above

but

and above

above but

or above

below

12

but below

below 18

but below

months
Bad & Loss 12 months or

12 months
12 months

months
18 months or

24 months
24 months

(BL)

and above

above

or above

Standard

above

5%

20%

50%

100%

Following measures are available for non-repayment of loan-

To issue notice for adjustment

To issue legal notice for filing suite.

To encash securities (in case of demand loan)

To issue legal notice for selling the hypothecated goods (in case of transport loan,

cash credit-hypo).

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To issue suite for foreclosure.

Finally to sue in money loan court or insolvency court which is suitable.

4.14 Conclusion
Credit Management policies and techniques used in CBL at present is comparable to
international standards. The officials follow the policy very strictly. They are choosy and
conservative in sanctioning loan. The proposal is thoroughly scrutinized by the loan sanctioning
authority. The total function of the credit division is monitored periodically. The banks
classified loan to the total Advance is very low. Management and others related to City Bank are
trying to formulate new services and products.

Chapter Five

70

PROBLEMS,
RECOMMENDATION &
CONCLUSION

Problems
City Bank Ltd. is one of the most potential Banks in the banking sector. It has a large portfolio
with huge assets to meet up its liabilities and the management of this bank is equipped with the
expert bankers and managers in all level of management. So it is not an easy job to find out the
drawbacks of this branch. According to my observation and study the following limitations are
prevailing:

Insufficient industrial loans:

It seemed to me that the bank having a large amount of deposit is not encouraging the large
scale producers that much of long term industrial loans to accelerate the economy as well as to
help the economy to solve unemployment problem.

Improper Division of Labour In The Desk:

There is lack of division of labour in the branch. Therefore every body has to handle every type
of banking services. This decreases the level of performance of the personnel, though it reduces
monotonousness. But lack of division of labour hampers the discipline of working environment.

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So customers are to wait for some time for the desired service, which is contrary to the Bakings
objective.

Insufficient Manpower:
The number of human resources in import section and in clearing section is really insufficient to
give services to huge number of customers. So, number of staff should be increased in those
sections.

Lack of having Business Knowledge

Most of the personnel have no business education. So the are making mistakes in some cases
like selection of customers, financial analysis, dealing with customers, selection of account
holders and in some other cases.
Semi skilled Human Resources:
Human resource is another sector for the branch to be developed urgently. Human resources, in
many cases, have limited banking knowledge. Majority of the human resources have limited
basic knowledge regarding money, banking, finance and accounting.

Insufficient Cash Counting Facility:

Cash section is not well equipped. Limited cash counting machines create bottleneck which
delay to serve to customer.

Improper Maintenance of Files:

City Bank Ltd. gives personalized services. They cannot properly maintain the customer files. In
many cases, application forms are not properly filled up and documents are not properly filed.

Improper Maintenance of Office Premises:

B. B. Ave. Branch is supposed to be very neat and clean and well decorated. But sometimes it
loses its glamour. The cleaners are not regular in their duties and files and papers are kept here
and there by the officers during the busy hour. Moreover, the sitting arrangement is very
insufficient comparing with the number of customers.

Incomplete Communication System and Maintenance of Machineries:

Sometimes Communication System remains out of order and it is also true for the photocopiers.
Less attention is given on proper maintenance of phone, computer, fax machine and photocopier.

Insufficient Forms and Vouchers:

There are always shortages of application forms, vouchers, etc. in the branch.

Slow online service:

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Online service is not dynamic and modernized. Sometimes services are being delayed. For this
reasons, customers are to wait for long time, which is a threat for loosing customer.

Recommendation
It is a large organization and banking is a complex and comprehensive task. So it is difficult for
me, by my little knowledge, to recommend to solve the problems. But as an eyewitness of some
problems I am just giving some instructions, which may be followed.
So for the improvement of the service the following measures may be taken:

Providing more industrial loans:

Much of long term industrial loans should be provided to accelerate the economy as well as to
help the economy to solve unemployment problem.

Ensure Proper Division of Labor In The Desk:

To ensure proper service proper division should be maintained.

Ensure Sufficient Manpower:

The number of human resources in import section and in clearing section is really insufficient to
give services to huge number of customers. So, number of staff should be increased in those
sections.

Need Personnel having Business Knowledge

Most of the personnel have no business education. So selection of employee from business
school can give proper solution.
Development of Human Resources:
Human resource is another sector for the branch to be developed urgently. Human resources, in
the branch, need to be equipped with adequate banking knowledge. Majority of the human
resources must have basic knowledge regarding money, banking, finance and accounting.
Without proper knowledge in these subjects, efficiency cannot be optimized. Bank can arrange
training program on these subjects.

Cash Counting Procedure Should Be Developed:

Cash section should be well equipped. More cash counting machine should set up.

Ensure Proper Maintenance of Files:

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City Bank Ltd. gives personalized services. All the officers have to give concentration to the
customers, while maintaining the customer files. Every staff should try to reduce these
irregularities.

Ensure Proper Maintenance of Office Premises:

B. B. Ave. Branch is supposed to be very neat and clean and well decorated. This habit must be
changed. Moreover, the sitting arrangement is very insufficient comparing with the number of
customers. So this branch of CBL must pay attention to this issue.

Ensure

Proper

Communication

System

and

Maintenance

of

Machineries:
Sometimes Communication System remains out of order and it is also true for the photocopiers.
Attention should be given on proper maintenance of phone, computer, fax machine and
photocopier.

Ensure Sufficient Forms and Vouchers:

There are always shortages of application forms, vouchers, etc. in the branch. These Forms and
vouchers must be maintained in sufficient quantity. Otherwise, customer service will be
hampered

Offer Some Loan and Deposit Scheme Exclusively for The Premium
Customers:
All the lending and savings packages offered to the Premium customers are same as offered to
the general customers, excepting the waiver of service charges for Premium Ones. City Bank
Limited should try to introduce more attractive lending and savings scheme to its Premium
customers to create more business for the Bank. The Bank can pay more attention to this
segment of customers, as it is the most solvent group from which income can be generated if the
package is designed properly.

More Gifts and Discounts for The Premium Customers:

Premium Customer should be offered occasional gifts and discounts, which can make the
Premium Service more attractive and keep consumer delight. The interest rates on several loan
and deposit schemes should be differentiated for the Premium customers.

Fast online service:

Online service should be dynamic and modernized. Sometimes services are being delayed. For
this reasons, customers are to wait for long time, which is a threat for loosing customer.

74

Conclusion
Notwithstanding some limitations The City Bank Ltd. is doing better and holding a good
percentages of market share in banking sector. CBL, the first generation bank in Bangladesh
came into being in 1983 under the entrepreneurship of 12 prominent businessmen in the
country. Established with the objective of bringing about a qualitative change in the sphere of
banking and financial management, the bank today serves its customers spread across 77
branches within Bangladesh and 300 overseas connections.
CBL provides services tailored to the specific needs of the customers in the area of trade,
comers and industry, besides the domestic network. While services like Credit Cards, ATMs and
SWIFT payment systems are already in place, the bank plans to introduce Real Time Online
Integrated Banking System with all modern delivery channels in the future.
CBL has earned recognition at the national and international level. It was one of the 12 banks in
Bangladesh to be evaluated by ASIA WEEK for Asset, Deposit and Profit and was ranked
among the top 500 banks in Asia. Besides, the bank also received the Top Ten Company
awarded from the Prime Minister of The Peoples Republic of Bangladesh for the period 199293. So, if the Bank can remove all of its present problems, it will be able to reach to its mission
& vision.

Bibliography:

Brochures of City Bank Limited.

City Banks Website-www.citybank.com

City Bank Annual Report 2005.

George H. Hempel and Donald G. Simonson (1998), Bank Management: Test and
Cases, 5th Edition, New York: South-Western Pub.

Joel Bessis (2001) Risk Management in Banking, 3rd Edition, New York: John
Wiley & Sons Ins.

Peter S. Rose (2001), Commercial Bank Management, 5 th Edition, New York:

Irwin Professional Pub.

75

Peter S. Rose and Sylvia Conway Hudgins (2003), Bank Management &
Financial Services, 5th Edition, New York: McGraw-Hill.

Reading Materials on General Banking & Credit Department.

Radhaswami, M. and S. V. Vasudevan (2000), Text Book of Banking, 3 rd Edition,

New Delhi: S. Chand & Company Limited.

Timothy W. Koch and Steven Scott Macdonald (2002), Bank Management, 5 th

Edition, New York: South- Western Pub.

Woelfel, Charles J. (1994), Encyclopedia of Banking and Finance 10th Edition,

New Delhi: S. Chand & Company Limited.

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