An Analysis of The Overall Performance and Activities of SIBL

Introduction:

It has long been recognized that credit is an important tool in increasing productivity and thereby increasing the income of borrower. Adequate flow of credit can remove the financial constrains of the borrower. There has been phenomenal growth in the flow of credit after liberation due to governments desire to increase productivity in the country. All the credit institutions were geared up thorough a dynamic credit policy to disburse both short-term credit and long-term credit. As a result the flow of annual credit has increased significantly. As the volume of loan default increased substantially over the years, the percentage of loan default increased gradually. Although loan is one of the major assets of the banking sector, it becomes a liability when the loan is not repaid. Since the late 70s the whole banking sector of Bangladesh is being haunted by the specter of problem loans.

A great bulk of problem loans and their ever deepening thrust on Bank credit has brought a gloomy situation in the cost of fund. The impact of such loan in banking arena hinders the flourishing of banking business. Default culture has started in Bangladesh mainly after the nationalization o banks. However, it was enhanced by the availability of hue amount of credit in the name of developing private and industrial sector. From a statistic of Government it is seen that investment Board did not find may existence of 4422 industrial units amongst he sanctioned 7531 units during the years 1985 to 1990. There happened interesting events in the name of industrial credit. Valuation certificates were managed hundred times over the collateral security. Industry set-up was shown as sick industry to get additional loan and relieve from interest.

Despite various Acts, Ordinances as well as various circulars issued by Bangladesh Bank from time to time and special instructions by individual Banks, the striving for realization of such credits proved discouraging.

The Bank of Bangladesh Small industries and commerce (SOCIAL INVESTMENT BANK LIMITED) Bank Limited, which was established to promote the development of Small-scale industries in Bangladesh, is also prone to such disappointing features of problem loans.

Background of the Study:

This academic course of the study has a great value as it has practical application in the real life. Only a lot of theoretical knowledge will be little important unless it is applicable in the practical life . so, “The Overall Performance and Activities” of   Social Investment Bank Limited (SIBL). Is my report and I worked in Social Investment Bank Limited.

Origin of the Report:

The main objective of the study is to gain practical knowledge apart from our institutional teaching and also to acquire knowledge about the practice of banking business. Also the prime objective of the study is to know the existing banking business in Social Investment Bank Limited.

The other objectives bellow:

• To have an exposure on the banking environment of Bangladesh.
• To study pre-reform, reform and present situation in the banking and Financial Sector of Bangladesh.
• To gain experience on different functions of different department of the bank.
• To identify the business prospects and performance of the bank through various department.

Assigned by the guide teacher, this report is prepared as partial fulfillment of MBA requirement.

Objective of the Report:

The principal intent of this report is to examine Credit Policy of SOCIAL INVESTMENT BANK LIMITED Bank Ltd. In particular the objectives are as follows:

1. To have a glace at the commercial banking system in Bangladesh.
2. To examine the present banking system in Bangladesh.
3. To get acquainted with the loan structure, size, profile of sector wise outstanding position of loans and system of loan classification of SOCIAL INVESTMENT BANK LIMITED.
4. To know the deposit behavior of NCBs, FCBs, PCBs and SOCIAL INVESTMENT BANK LIMITED bank and to cross-examine any structural changes regarding deposit behavior.
5. To examine the credit operations by our commercial banking system.
6. To explain the procedures, systems of credit management and appraisal of SOCIAL INVESTMENT BANK LIMITED Bank.
7. To find out the nature and size of problem loans in SOCIAL INVESTMENT BANK LIMITED Bank.
8. To find out the causes of problem loans.
9. To analyze the effects of problem loan on income of SOCIAL INVESTMENT BANK LIMITED bank Ltd.
10. To evaluate the various loans programs of SOCIAL INVESTMENT BANK LIMITED bank which includes Industrial, Trade and Commerce, Transport etc.
11. To inspect the recovery of loans by SOCIAL INVESTMENT BANK LIMITED Bank.
12. To examine whether the attributes of gook performance are observed in SOCIAL INVESTMENT BANK LIMITED bank.

 Scope:

The report concerns about the Overall banking policy in SOCIAL INVESTMENT BANK LIMITED Bank. The study is made primarily only on the basis of the observation of SOCIAL INVESTMENT BANK LIMITED operations in its Principal Branch. This bank deals with all types of  general banking operations, foreign exchange operations, investment operations and credit operations under the overall control of Bangladesh Bank and thus follows the regulation set by the Bangladesh Bank.

Methodology:

Methodology includes direct observation, face-to-face discussion with employees of different department, study of files, circular, etc and also practical work.

In preparing this report both Primary Data and Secondary Data sources of information have been used.

 For collecting Primary Data:

I had to ask the respective officers. Others are like direct communication with the clients, exposure on different desk of the bank.

The primary source of data and information was the interviews with managers and officials of the Head Office and Principal Branch of Social Investment Bank Limited.

Necessary data were segregated from the source material and collected data were complied and processed to prepare the report.

The secondary sources are:

Annual reports and performance reports of the Bank

Various files and documents of Credit and industrial Credit Division of SOCIAL INVESTMENT BANK LIMITED .

Articles related to problem loans in different journals and magazines.

Study of files and documents of some default borrowers of the main Branch of SOCIAL INVESTMENT BANK LIMITED.

Some articles.

Different publication of Bangladesh.

Data sources

Primary sources of the data collections were direct observations, face-to-face interview with both the customers and the staff, obtaining responses from the customers through questionnaire. A model of the questionnaire is including in the appendix. Secondary data is collected from Annual Report, Booklets and credit manual of SOCIAL INVESTMENT BANK LIMITED Bank Limited and a report titled “Credit Policy” in study Bangladesh Small Industries and Commerce Bank Ltd.

Limitations:

The present study is not free from limitations. Those limitations are described in bellow:

Lack of secondary information:

The study could have been more representative if the banks could provide all the information is not available.

Limitation of scope

This type of limitation was faced when collecting information about the study. Every organization has their own secrecy that is not revealed to others. While collecting data i.e. Interviewing the employee, they did not disclosed much information for the sake of the confidentially of the organization.

Limitation of time:

The area of banking operation is very large. I had been working in this bank about three months. This time is not enough to understand all the banking functions. Besides the employees are very much busy for tremendous workload, so they could not able to extend their cooperation properly.

Organizational Structure of SIBL

Introduction:

                                        Social Investment Bank Limited is a joint venture Shariah based bank, which became operational on the 22nd November 1995. As a corporate objective, SIBL has defined its operation in three different sectors – formal, non-formal and voluntary. While formal sector deals with general commercial activities as a scheduled bank, non-formal sector aims at ‘Empowering Family’ by creating investment opportunities for micro and SME clients. Voluntary sector offers Cash Waqf Certificate Scheme-an innovative financial product towards welfare of the mankind.

SIBL is operating three-sector Banking such as Formal, Non-formal and Voluntary sector. SIBL is beginning a new era of Islamic Banking having social, ethical and moral dimension in each of its activities ranging from credit to construction.

SIBL’s Vision

Social Investment Bank Limited started its journey with the concept of 21^st Century Islamic participatory three sector banking model. Those are:

Formal sector-commercial banking with latest technology;

Non-Formal Sector-Family Empowerment Micro-Credit & Micro-Enterprise Programme and

Voluntary Sector-Social Capital Mobilisation through Cash Waqf and others. ‘Reduction of Poverty Level’ is our vision, which is a prime object as stated in Memorandum of Association of the Bank with the commitment— ‘Working Together for a Caring Society.

SIBL’s Mission:

High quality financial services with the latest technology.

Fast, accurate and satisfactory customer service. Balanced & sustainable growth strategy.

Optimum return on shareholders’ equity.

Introducing innovative Islamic banking products.

Attract and retain high quality human resource.

Empowering real poor families and create local income opportunities.

Providing support for social benefit Organizations-by way of Mobilizations of funds and social services.

ORGANOGRAM OF SIBL

Managing Director (MD)
Deputy Managing Director (DMP)
Senior Executive Vice President (SEVP)
Executive Vive President (EVP)
Senior Vice President (SVP)
Vice President (VP)
Senior Assistant Vice President (SAVP)
Assistant Vice President (AVP)
First Assistant Vice President (FAVP)
Senior Executive Officer (SEO)
Executive Officer (EO)
Principal Officer (PO)
Senior Officer (SO)
Management Trainee Officer (MTO)
Junior Officer (JO)

SIBL no more a “Problem Bank”

                                Social Investment Bank Ltd. (SIBL) has come out of problem bank list on November 05, Bangladesh Bank (BB) has informed that SIBL has earned remarkable progress in overall management and financial indexes. BB put SIBL in the problem bank list in October 2005 and asked SIBL to company with DOBBS (Directives Of Bangladesh Bank). SIBL Management with cooperation from all concerned has been successful to get desired progress in all the indexes of DOBBs.

A great change has occurred in the financial base of the bank. The capital of the bank as on September 2007 is Tk. 180.64 crore and 100% provision against debt has been preserved.

The bank has preserved provision of Tk. 40.24 crore against required 38.24 crore. Gross classified loan is 3.68 percent and net classified loan is 0.48 present. Thus the quality of assets of the bank has been improved significantly.

The adjusted capital shortfall of SIBL during its being listed as problem bank in 2005 was Tk. 64.71 crore and classified loan was 161.00 crore or 11.28 percent.

Bank’s Chairman Abdul Awal Patwary has expressed hope that the management of the bank would continue their efforts to develop overall business in the days to come.

Managing Director K M Ashaduzzaman stated that because of release from problem bank list clients’ confidence in the bank would increase and as such, in near future tremendous achievement would be possible in all business aspects.

Activities:

     Social Investment Bank has efficient and experienced human resources for rendering better services to its clients along with modern technology.

Islami Shariah based banking activities of this bank are as follows:

   Formal Sector

A. Deposit

Al-Wadiah Current: Deposit Account

Mudaraba Term Deposit Account

Mudaraba Notice Deposit Account

  Foreign Currency Account

Cash-Waqf Deposit Account

Different Schemes Account

i)  Mudaraba Monthly Profit Deposit Account.
ii)  Mudaraba Hajj/Umrah Savings Account.
iii)  Mudaraba Education Savings Deposit Account.
iv)   Mudaraba Special Savings (Pension) Scheme Account.
v)  Mudaraba Millionaire Scheme Account.
vi)  Mudaraba Monthly Savings Based Term Deposit Account.
vii)  Mudaraba Lakhopoti Deposit Scheme Account.
viii)  Mudaraba Double Benefit Deposit Scheme Account.
ix)  Mudaraba Foreign Currency Term Deposit Scheme Account.

B. Investment

Mudaraba- Trust Finance Partnership
Musharaka- Participation Financing/Equity Financing
Murabaha- Cost Plus Sale
Bai-Muajjal- Sale under deferred payment
Bai-Salam- Forward Purchase

Leasing–

The bank leases out machinery, transports, houses, ships etc. for an agreed period of time, the company being the legal owner and the lessee having the right to use the property for the duration of the contract.

Direct Investment-

This bank directly invests capital on medium and long-term basis in industry, agriculture, trade, transport, immovable property and for construction of house etc.

Hire Purchase–

In this system of business the bank invests for purchasing durable assists like machinery, equipment, transport, land and building along with the client with the stipulation that the client shall pay off the principal among with rent (at the agreed rate) in installment.

                      C. Foreign Exchange
To purchase and sell foreign currencies and carry on business of import through opening of L/C.

                      D. Remittance
The bank remits client’s money both at home and abroad, complete alt formalities of remittance in respect of Bangladeshis living abroad and other customers.

 E. Special Banking Services
In addition to sale and purchase of foreign currencies the bank issues guarantees, accepts certificates and shares, accepts articles & valuable documents, for safe custody locker service, discharges responsibility as investment trustee, acts as clients’ agents for recovery of clients’ demand and carries on transactions on their behalf within the stipulated period, works as correspondent of local and foreign banks and other financial institutions, acts as banker to the issue on behalf of the companies, provides consultancy service to the customers and all other banking services.
                    F. Information Technology Services:
As regard information technology, SIBL has uploaded its website which gives easy access to the world of communication technology.

Non-Formal Sector
SIBL has been successfully operating Family Empowerment Micro-Credit & Micro-Enterprise programme under non-formal banking sector since the inception of the bank in 1995. Meanwhile, it has been able to create job opportunities among significant numbers of micro-credit & micro-enterprise borrowers under SMEs financing, as we define Micro-credit & Micro-enterprise programme as small products of SMEs financing. Many of those borrowers have been able to establish themselves as successful entrepreneurs and to graduate from micro-credit to micro-enterprise programme. SIBL has been implementing Micro-credit Programme with the support from ILO to eliminate child labour from garment sector in Bangladesh. SIBL and UNICEF have been jointly implementing Micro-credit Programme to extend credit facilities among the parents/guardians of the former garment child workers.

SIBL & JOBS projects, USA1D in a collaborative effort are creating easy access to business capital for the small & medium enterprises (SMEs), which is an emerging sector in the context of economy of Bangladesh. At SIBL, there is a provision for micro-credit borrowers to graduate into Micro-Enterprise Programme and successful micro-enterprise graduates have the opportunity to get investment from the formal banking sector. SIBL, as part of its social commitment, keeps on patronising the SMEs clients under the coverage of Family Empowerment Micro-credit & Micro-enterprise Programme to fulfill their diversified needs.

The brief description of the programmed already been implemented and are being implemented through the Non-formal & Voluntary Banking Sector is given below:

1. Family Empowerment Micro-Credit Programme
2. Family Empowerment Micro-Enterprise Programme
3. Small and Medium Enterprises (SMEs) Programme
4. Displaced garments child worker stipend disbursement   programmed jointly with ILO.
5. Micro-Credit Programme to the Garments, child worker adult family member (parents) jointly with ILO under project finance from governments of Italy and Norway.
6. Access to capital & strengthening small medium and Micro-Enterprise Development Programme jointly with JOBS project, USAID.
7. Financial assistance among the 100 parents/guardians of former garments working children under Project UNICEF to continue their education.
8. Family Empowerment Micro-Enterprise Programme among parents/legal guardians of HTR (Hard to Reach) graduates to support their self-employment.

Islamic Voluntary Sector 

In the voluntary sector SIBL has also introduced Cash Waqf Certificate, a new product for the first time in the history of banking.

 Cash Waqf

Waqf is an Arabic word, the plural of which is Awqaf. It is meant for permanent donation/ endowment of fixed assets made by the effluent and rich people to be used for the welfare of the mankind for obtaining the spiritual benefit and satisfaction/blessing of Almighty Allah. The waqf properties are converted into income generating units and the income so derived is utilised as per instruction of the Waqif (the persons who made the Waqf) or on the basis of Islamic Shariah. Many of our ancestors made waqf of their valuable properties for the welfare of the mankind by establishing mosque, madrasha, eidgah, orphanage, graveyard etc. for spiritual attainment.

The term Cash Waqf may appear to be new to us. Waqf in the form of cash is called Cash Waqf. Cash Waqf provides a unique opportunity for making investment in different religious, educational and social services. Savings made from earning by the well-off and the rich people of the society is utilised in an organised manner in Cash Waqf. Income earned from such funds will be spent for different purposes like the purposes of the Waqf properties. The person who made waqf is called Waqif and to whom (persons or institutions) the waqf is made is called beneficiary.

The purpose of making Cash Waqf is welfare of mankind and society, which is considered as Hakkul Ebad, which paves the way for eternal peace & happiness. SIBL has brought this opportunity by introducing Cash Waqf Scheme for the first time in the history of banking.

The bank provides the following benefits for Cash Waqf Scheme:

1. Empowering Multigenerational Family Heritage.
2. Developing social capital market under Voluntary Banking Sector.
3. Commemorating self, alive or deceased parents, children and ancestors and   thus obtaining social actualisation and spiritual attainment.
4. Providing opportunity for doing welfare to the mankind.
5. Helping in building a caring society.

By opening a Cash Waqf Deposit A/C someone can get an opportunity to do welfare to the mankind through Sadak-e-Jariah. Charity is highly esteemed in Islam. So SIBL urges to all religious & effluent persons of the society to come forward to mobilise Cash Waqf Deposit so that the profit may be utilised for the well being of mankind. Lastly, as a scheduled bank, SIBL guarantees the proper management of Cash Waqf Fund & ensures proper distribution of its profit.

* The amount in Cash Waqf Account is a perpetual deposit (never be withdrawn)
To the best of our knowledge, SIBL is the only commercial bank in the country, which operates on the basis of integrated three-sector model: Formal, Non-formal and Voluntary sectors of the economy. This is the only bank in the country, which starts with the very phrase, ‘Targeting poverty’, while stating its objects in Memorandum of Association for achieving a goal of participatory economy for a caring society.

May Almighty Allah allow us to work together for turning Bangladesh into a model caring society.

SIBL BRANCHES

Dhaka

Chittagong

Khulna

Sylhet

Rajshahi

Bogra

Sirajgonj

SIBL DEPARTMENT

General Banking Sections, Types of Accounts, Products

General Banking
Financial institution/ intermediary that mediates or stands between ultimate borrowers and ultimate lenders is knows as banking financial institution. Banks perform this function in two ways- taking deposits from various areas in different forms and lending that accumulated amount of money to the potential investors in other different forms.

General Banking is the starting point of all the banking operating. General Banking department aids in taking deposits and simultaneously provides some ancillaries services. It provides those customers who come frequently and those customers who come one time in banking for enjoying ancillary services. In some general banking activities, there is no relation between banker and customers who will take only one service form Bank.

On the other hand, there are some customers with who bank are doing its business frequently. It is the department, which provides day-to-day services to the customers. Everyday it receives deposits from the customers and meets their demand for cash by honoring cheques. It opens new accounts, demit funds, issue bank drafts and pay orders etc. since bank in confined to provide the service everyday general banking is also known as retail banking.

General Banking consists of the many sections in the branch. These are:

• Customer Service.
• Account Opening/Closing.
• Remittance
  • Payment Order Issue
  • Demand Draft Issue/Collection
  • T.T. Issue/Collection
  • Endorsements
  • IBC/OBC Collection.
    • Deposit Department.
    • Locker Service.
    • Account’s Department.
      • Clearing.
      • Transfer.
      • Cash.

Customer Services of Social Investment Bank LIMITED:

Professional merit and Competency, Flexibility, Determination and Dedication are the core resources that SIBL consider to be of paramount importance for building a client oriented modern banking. Customer satisfaction is SIBL foremost professional undertaking. Therefore, a satisfied client is SIBL precious product and they consider them SIBL ambassador in the market.

Customer Service In Charge:
Mr. Kazi Imamul Haque (Senior Officer) who guide me as a friend.

Account Opening of SIBL:
Under this department, SIBL officer opens different types of account on the request of clients. The procedure of opening account is given bellow:

Types of Accounts:

General Products are:

 Current Deposit:
1.   Interest Rate 0.00%

2. Individual Account

3. Joint Account

4. Proprietor Ship Account

5.Limited Company Account

       Savings Deposits:

1. Interest Rate 6.25%
2.  Individual Account
3.  Joint Account
4.  Proprietor Ship Account
5.  Limited Company Account

      Short Term Deposits:

1. Interest Rate 6.00%
2. Individual Account
3.  Joint Account
4.  Proprietor Ship Account
5.  Limited Company Account

 Fixed Deposits:

Fixed deposit is one, which is repayable after the expiry of a predetermined period fixed by him. The period varies form 1 month to 12 months. These deposits are not repayable on demand but they are withdrawable subject to a period of notice. Hence, it is a popularly known as ‘Time Deposit’ or ‘Time Liabilities”. Normally the money on a fixed deposit is not repayable before the expiry of a fixed period.

Before opening a Fixed Deposit Account a customer has to fill up an application form which contains the followings:
▫ Amount in figures
▫ Beneficiary’s name and address
▫ Period
▫ Rate of interest
▫ Date of issue
▫ Date of maturity
▫ Instructions:
– To be renewed automatically with interest for the next period.
– Not to be renewed for next period.
– Pay interest to account no. (——-) on maturity
▫ Special instruction
▫ How the account will be operated (singly or jointly)
▫ Signature (s)
▫ FDR no.

Then a FDR account is opened and it is recorded in the FDR Register which contains the following information,-

• FDR A/C no.
•  FDR (Fixed Deposit Receipt) no.
•  Name of the FDR Holder with address
•  Maturity period
•  Maturity date
•  Interest rate

In case of Fixed Deposit Account the Bank needs to maintain a cash reserve. So SIBL offers a high interest rate in Fixed Deposit accounts. The interest rates followed by SIBL in Fixed Deposit accounts are:

 Interest Rate:

1 months and above but less than 3 months: 8.50%
3 months and above but less than 6 months: 11.00%
6 months and above but less than 12 months: 11.25%
12 months and above: 11.75%

Source: GB Department & Banking Operations Division, circular REF: IC#BOD/21/07, Date: 04-06-2007

The FDR becomes renewed automatically in SIBL if the customer does not encash it within 7 days of maturity. In case of encashment of FDR in maturity, following accounting treatments are given:

Excise Duty on FDR——————–Dr.
Income Tax on interest ————–Dr.
FDR A/C———————————Dr.
Cash A/C—————————————-Cr.
Interest on FDR A/C—————————Cr.

If the customer wants to draw the interest only, then following entries are given:
Interest on FDR A/C—————–Dr.
Cash A/C—————————————Cr.

In case of ‘before maturity enactment’ interest is calculated for the days from the date of opening the FDR account.

Festival Sanchay Prokalpa are:

 Eid-Ul-Azha Sanchaya Prokalpa:
Interest Rate 10.00%
 Eid-Ul-Fitre Sanchaya Prokalpa:
Interest Rate 10.00%
 Durga-Puja Sanchaya Prokalpa:
Interest Rate 10.00%
 Buddha-Purnima Sanchaya Prokalpa:
Interest Rate 10.00%
 Boro-Din Sanchaya Prokalpa:
Interest Rate 10.00%

SIBL Consumer Banking Products are:
1. Brick by Brick Savings Scheme
2. Monthly Benefit Plan
3. Save Everyday Plan
4. Childrens Education Plan
5. Consumer Credit Scheme
6. BestInvest Plan
7. Unique Savings Plan

Some of SIBL Consumer Products

 1. Brick By Brick Savings Scheme:

Monthly Installment 5 Years* 8 Years* 10 Years*

* The maturity value is an indicative figure. Tax/Excise Duty will be deducted as per govt. rules. 90% Loan Advantage on deposited amount. Thereafter in multiples of Tk. 5000 up to a limit of Tk. 100,000.

 2. MTB Monthly Benefit Plan:

Deposit Amount Income Amount for 3-year plan* Income Amount for 5-year plan*

* The maturity value is an indicative figure. Tax/Excise Duty will be deducted as per govt. rules. 90% Loan Advantage on deposited amount.

3. Save Everyday Plan:

Saving money for the future is a common practice in any society. Savings help you to build a better tomorrow. Regular saving makes a man become disciplined, self confident and successful.

SIBL offers you “Save Everyday” Plan. The primary advantage of this plan is that you are absolutely free to choose your own time for depositing money into this account. You can deposit daily, weekly or monthly. The choice is yours, but the transactions will have to be within the Bank’s transaction hour.

This is a 5 year plan and you will be required to open the account with an initial deposit of Tk. 2500/= only. We offer you very attractive interest rate which is accrued in this account on a daily basis.

 4. MTB Education Plan:

Monthly Installment 4 Years* 7 Years* 9 Years*

* The maturity value is an indicative figure. Tax/Excise Duty will be deducted as per govt. rules. 90% Loan Advantage on deposited amount.

5. Consumer Credit Scheme:

In order to make a significant contribution in the living standards of the people of medium and low income category, SIBL has introduced a scheme called “Consumer Credit Scheme”. With a view to materialize the dreams of those who are unable to make one time investment from their own savings, one can now afford to buy necessary household equipments and thus improve the standard of living.

All sorts of household durables eg. Television, Refrigerators, Computers, Air Conditioners, Video Cameras, Washing/ Drying Machines and Furnitures are allowed under this scheme. One can buy Motorcycle too under this programme.

The collateral security is minimum and the interest rates are one of the lowest in the market. Please contact the nearest branch for details.

 6. BestInvest:

BestInvest offers you efficient high return investment plan. This plan helps you to build up a sizeable income in easy and affordable installments. This plan allows you to own 5 times the initial invested amount. BestInvest offers two separate and convenient term deposit periods for 4 years and 6 years respectively.

BestInvest is available in units worth Tk.50,000/- each. You will invest Tk.10,000/- as down payment for purchasing 1 (one) unit and the Bank will provide loan for Tk.40,000/-. The customer also has the option to buy units in multiples of Tk. 50,000/- but maximum upto Tk. 1,00,00,000/- (one crore).

This is a unique high return plan catering to all income group. So do not miss the opportunity.

Customized Products are:

MTB Double Saver Plan:
Deposit Amount Maturity Value after 6 Years*

* The maturity value is an indicative figure. Tax/Excise Duty will be deducted as per govt. rules. 90% Loan Advantage on deposited amount.

MTB Triple Saver Plan:
Deposit Amount Maturity Value after 11 Years*

* The maturity value is an indicative figure. Tax/Excise Duty will be deducted as per govt. rules. 90% Loan Advantage on deposited amount.

MTB Millionaire Plan:
Monthly Installment Year Maturity Value*

* The maturity value is an indicative figure. Tax/Excise Duty will be deducted as per govt. rules. 90% Loan Advantage on deposited amount

 7. MTB Unique Savings Plan:
Unique Savings Plan is an any day, any amount savings plan. The beauty of this plan is that a customer can deposit any day, any time and any amount.

Unique Savings Plan offers you to deposit any amount of your choice but not less than Tk. 500/- for 3/4/5 years. This is a high income plan with withdrawal facilities. The withdrawal facility will help you at the time of any emergency. You can withdraw 50% of the deposited balance for once a month. At maturity you will get a handsome amount.

Procedure of Account Opening, Interest Posting, Cheque Book Issues & Account Closing

Procedure of Account Opening:

Account Opening (Normal Account):
▫ Collect an Account opening form from the Bank
▫ Fill all the requirements of the form.
▫ Nominee is must be specified.
▫ Photograph is most important for any account.
▫ The account holder sign of his/her own self in front or the specific bank principle Officer in the account opening form.

Account Opening (Saving Account)

▫ Collect an Account opening form from the Bank.
▫ Fill all the requirements of the form.
▫ Nominee is must be specified.
▫ Photograph is most important for any account.
▫ The account holder sign of his/her own self in front or the specific bank principle Officer in the account opening form.
▫ To open this account the most important things is that Passport Photocopy or the Word Commissioner Certificate must have to add with the account opening form.

Account Opening (Current Deposit Account):

▫ Collect an Account opening form from the Bank.
▫ Fill all the requirements of the form.
▫ Nominee is must be specified.
▫ Photograph is most important for any account.
▫ To open this account the most important things is that Passport Photocopy or the Word Commissioner Certificate must have to add with the account opening form and also enclose the form 12 with the account opening form.

Checklist of Documents to be obtained for various types of ACCOUNTS:

Sole Proprietorship:

1. Signature Card.
2. Photograph of signatories attested by introducer.
3. Copy of valid Trade License.
4. TIN Certificate.
5. 18-A permission from Bangladesh Bank (for GSA & Agents only).

 Partnership:

1. Signature Card.
2. Photography of signatories attested by introducer.
3. Partnership Deed.
4. Partners letter of authority to open account and authorization for operation.
5. Copy of valid Trade License.
6. 18-A permission from Bangladesh Bank (for GSA & Agents only).

 Limited Liability Company:

1. Signature Card.
2. Photograph of signatories attested by introducer.
3. Copy of Memorandum and Articles of Association (Certified by RJSC).
4. Copy of Certificate of Incorporation and commencement of business (In case of public Ltd. Co.).
5. Copy of Board Resolution to open the account and authorization for operation.
6. List of Directors and signatories along with addresses.
7. Latest copy of From XII.

 Association/Trust/Society:

1. Signature Card.
2. Photograph of signatories attested by introducer.
3. Copy of Resolution of governing body to open the account and authorization for operation.
4. Copy of consolation / bylaws/ rules.
5. Certificate of registration.
6. List of authorized signatories and members of the governing bodies along with address.
7. Trust Deed (for Trust account only).

• Interest Posting to Client’s account:
  
   Bangladesh Government has circulated that, 10% deduction from the Bank’s Internal Account’s. This 10% tax deduction from the client’s interest. Other wise another circulation is that, from the OBC collection every bank cut off there OBC commission as income account, here Bangladesh Bank said that 15% money cut off from the OBC collection as Vat on Others.

Cheque Book Issues:

Types of Cheque Book’s:
▫ Savings Account – 10 Leaves
▫ Current Deposit Account – 10 Leaves
▫ Current Deposit Account – 25 Leaves (CDTF)
▫ Current Deposit Account – 50 Leaves (CDF)
NB: CDTF: Current Deposit Twenty Five
CDF: Current Deposit Fifty

Cheque Issuing is Two Types:

 Direct requisition slip
 Cheque Book’s requisition slip

Customers Service Officer receives these types of slip from the client’s and gives the cheque books under processing. Processing means Cheque Book’s collect from the VOLT and the put account number in the cheque book, write down the serial number of the cheque book in the requisition slip and cheque book register, then Verified client signature. After all this things the Principal officer sign in the cheque leaves and sent the cheque book to another Principal officer for sign, after his sign the client receive the cheque book. These things the Principal Officer for sign, after his sign the client receive the cheque book. Then Principal Officer posting that cheque books leaves number in the computer data processing system.

A cover file containing the requisition slip is effectively preserved as vouchers. If any defect is noticed by the ledger keeper, he makes a remark to that effect on the requisition slip and forward it to the cancellation officer to decide whether a new checkbook to be issued to the customer or not.

Account Closing:

For two reasons, one can be closed. One is by banker and other is by the customer.

By banker: If any customer doesn’t maintain any transaction within six years and the A/C balance becomes lower than the minimum balance, banker has the right to close an A/C.

By customer: If the customer wants to close his A/C, he writes an application to the manager urging him to close his A/C.

Different procedures are followed in cash of different types of A/C to close:

 Fixed deposit A/C is closed after the termination of the period.
 Brick by Brick A/C is very easily closing if one of the clients didn’t pay his/her monthly installment at the bank three months one after one, in this way three months.
 Another account’s will be closed on the parties advice, if they want to close any one of the account clients must have to submit an A/C closing letter through des pass. Then the Sr. Principal Officer checks it out and closes the A/C.

Closing process for current & savings A/C:

 After receiving customer’s application the officer verifies the balance of the A/C.
 He then calculates interest and other charges accumulated on the A/C.
 If it bears a credit balance, the officer writes advice voucher. He gives necessary accounting entries post to accounts section.
 The balance is returned to the customer. And lastly the A/C is closed.

But in practice, normally the customers don’t close A/C willingly. At times, customers don’t maintain any transaction for long time. Is this situation at first, the A/C becomes dormant and ultimately it is closed by the bank.

Remittance, Main instruments, Payment Order & Demand Draft Issue, Cancellation, Charges, Duplicate

Remittance:

Remittance of funds is ancillary services of SIBL. It aids to remit fund from one place to another place on behalf of its customers as well as non- customers of Bank

SIBL has its branches in the major cities of the country and therefore, it serves as one of the best mediums for remittance of funds from one place to another.
The main instruments used by SIBL, Principal Branch for remittance of funds.

▫ Payment Order Issue/Collection
▫ Demand Draft Issue/Collection
▫ T.T. Issue/Collection
▫ Endorsements
▫ Travelers Cheque Issuance
▫ IBC/OBC Collection.

Payment Order Issue/Collection:

The pay order is an instrument issued by bank, instructing itself a certain amount of money mentioned in the instrument taking amount of money and commission when it is presented in bank. Only the branch of the bank that has issued it will make the payment of pay order.
Issuing of Pay Order:

The procedures for issuing a Pay Order are as follows:
▫ Deposit money by the customer along with application form.
▫ Give necessary entry in the bills payable (Pay Order) register where payee’s name, date, PO no, etc is mentioned.
▫ Prepared the instrument.
▫ After scrutinizing and approval of the instrument by the authority, it is delivered to customer. Signature of customer is taken on the counterpart.

Different modes of PO when a customer can purchase:

By cash:

Cash A/C Debit
Bills payable (PO) A/C Credit.
Income on commission A/C Credit.

By account:

Customer’s A/C Debit
Bills payable (PO) A/C Credit.
Income on commission A/C Credit.

By transfer:

SIBL General/ other Dept Clients A/C Debit
Bills payable (PO) A/C Credit.
Income on commission A/C Credit.

PO A/C is the current liabilities of bank, which is acquired to be discharged by beneficiaries against cash or through an account.

Settlement of a PO:

When PO submitted by collecting bank through clearing house, the issuing bank gives payment.

Bills payable (PO) A/C Debit
SIBL General A/C Credit.

But before giving payment it is duty for issuing to observe whether endorsement was given by the collecting bank or not, then the instrument is dishonored and marking ‘Endorsement required’.

Cancellation of a Pay Order:

If a buyer wants to cancel it, he should submit a letter of instrument in this regard and also return the instrument.

Accounting treatment: Adjustment entry wills be-

Bills payable (PO) —————Dr.
Customer A/C——————Cr.

When PO is lost:

If the instrument is lost, the holder will inform to the issuing bank immediately. Bank will mark ‘stop payment’ on the Bills payable (PO) Register. Buyer will then ask for a new instrument by submitting a GD copy, and indemnity bond. A new instrument will be delivered.

Demand Draft Issue/Collection:

The person intending to remit the money through a Demand Draft (DD) has to deposit the money to be remitted with the commission which the banker charges for its services. The amount of commission depends on the amount to be remitted. On issue of the DD, the remitter does not remain a party to the instrument: i) Drawer branch ii) Drawee branch iii) Payee. This is treated as the current liability of the bank as the banker on the presentation of the instrument should pay the money. The banker event on receiving instructions from the remitter cannot stop the payment of the instrument. Stop payment can be done in the following cases:

 Loss of draft before endorsement: In this case, “Draft reported to be lost, payee’s endorsement requires verification” is marked.
 Loss of draft after endorsement: In this case, the branch first satisfies itself about the claimant and the endorsement in his favor.

Accounting treatment

In case of issuing of the instrument:

Cash/ customer’s A/C———————Dr.
SIBL General A/C (Drawn on branch)———-Cr.
Income A/C commission—————————Cr.

After giving these entries an Inter Bank Credit Advice is prepared which contains the controlling number, depicting that the branch is credited to whom it is issued.
An IBCA implies the following entries,

SIBL General A/C Issuing Branch ——-Dr.
Drawn on branch————————————Cr.

Role of the Drawn Branch:

After receiving the IBCA lodgment is done by the branch. The following entries are given “DD In-Issuing branch” register:

Issuing branch A/C————————-Dr.
Bills Payable —————————————Cr.
(After receiving an IBCA)
Bills Payable (DD) A/C——————–Dr.
Client’s A/C——————————–Dr.

Entries are given in “DD In-Issuing branch” register:

Issuing branch A/C———————–Dr.
Bills Payable—————————————Cr.
(After receiving an IBCA)
Bills Payable (DD) A/C——————Dr.
Client’s A/C——————————Dr.

Charges:

A commission of 0.15% is taken on the draft value & Tk.50/= is taken as postal charge.

Cancellation:

To cancel an issued DD, the client has to submit an application. Issuing branch then sends an Inter Branch Debit Advice (IBDA) to the drawn branch against previously issued IBCA.

After that the following entries are given:

General A/C drawn on branch———Dr.
Client’s A/C —————————————Cr.

Issuing of Duplicate DD:

If the customer wants to issue a duplicate DD, than customer is asked to do the following formalities:

 Making a general diary (GD) in the nearest Police Station.
 Furnishing an Indemnity Bond in Tk.50/= stamp

The banker immediately marks “stop payment” in the register after receiving the application from the customer and a duplicate DD is issued.

T.T. Issue Collection, Accounting entries, Procedures, Endorsements, IBC & OBC, Locker Service

T.T. Issue/Collection:

Telex transfer (TT) is another widely used mode for remittances of funds. In case of telex transfer the message for transfer of funds is communicated through tested telex. SIBL generally recovers from the telex charges in addition to the usual service charges.

Issuing of TT:

SIBL follows the following procedures:

 The customer deposits money with SIBL to be sent.
 The customer obtains a cash memo containing TT serial number.
 TT serial number, notifying part name is mentioned in the telex message.
 The Telex Department confirms transmission of the telex.

Accounting entries for TT:

Cash A/C Client’s A/C ———————–Dr.
SIBL General A/C (Principal Branch)—————Cr.

Procedures for the incoming TT:

After receiving the telex, it is authenticated by test. TT Serial number is verified by the “TT in-Concern branch” register. The following entries are given in the vouchers:

SIBL General A/C (Principal Branch)——-Dr.
Client’s A/C——————————————-Cr.

Tk. 50/- is taken as postal charge. The minimum commission is Tk. 50/- or o.15% of the amount whichever is higher.

Endorsements:

SIBL endorses US$ in passports. To endorse US Dollar, the client has to apply in the prescribed from (TM Form).

The following entries are given in this regard:
Cash or Customers’ A/C—————–Dr.
Foreign Currency on Hand< Dollar Special> ———Cr.

IBC/OBC:

By OBC, we mean that those cheques drawn on other banks which are not within the same clearing house. Officer gives OBC seal on this type of cheques and later sends a letter to the manager of the branch of the some Bank

The word Bank comes from Latin words Banco, Bancus, Banke, Bangk and Banca. Bank is a financial institution act as an intermediary that receive deposits for savers at a lower interest rate and lend money to investors at a higher interest rate. Bank located in the branch on which cheque has been drawn. After collection of that bill branch advises the concerned branch in which cheques has been presented to credit the customer account through Inter Branch Credit Advice (IBCA).

In absence of the branch of the same bank, officer sends letter to manager of the bank on which the cheques is drawn. That bank will send pay order in the name of the branch. This is the procedure of OBC mechanism.

Actually OBC comes from the out side bank’s branch, or inter branches. Suppose AGRANI Bank, Jatrabari Branch sent a Cheque, which no: 012536, Tk. 5,00,000/- to Social Investment Bank Limited against AGRANI Bank Motijheel Corp. Branch. So this cheque could be an OBC. Now what Social Investment Bank Limited has to do? SIBL tries to collect this cheque through Bangladesh Bank Clearing House, and credited clients account.

OBC Collection Process

Create a Voucher against OBC: S/D A/C OBC Tk. 5,00,000/-

.10% Cut off as Commission on OBC Tk. 500
15% Cut off as Vat on Others Tk. 75
Tk. 20/- Cut off as Postage Recovery Tk. 20
Total Tk. 595/-

In this condition SIBL got the cheque amount of Tk. 5,00,000/-, but after cut off the commission, vat and postage recovery SIBL will be credited the amount Tk. (5,00,000 – 595)= Tk. 4,99,405/- in party account.

Bangladesh Bank Circulation about OBC:

Bangladesh Bank has circulated some things about OBC. These are given below:
 If the cheque amount will be under Tk. 1,00,000/- then bank’s OBC commission will be charged at .15%.
 If the cheque amount will be above Tk. 1,00,000/- to Tk. 5,00,000/- then Bank’s OBC commission will be charged at .10%.
 If the cheque amount will be above Tk. 5,00,000/- then Bank’s OBC commission will be charged at .5%.
 Against the OBC the Government Tax will be realized on 15% on Commission Amount.
 Postage Recovery will be realized Tk. 20/- for each OBC.

Locker Service:

SIBL Principal Branch is providing facility of locker service for the purpose of safeguarding the valuable property of customers. The person or organization that has any account in bank branch can enjoy this service. They keep their valuable assets in banker’s custody. Customers have right to look after with a key of their individual locker provided by bank. SIBL maintains the following types of lockers:

▫ Large locker.
▫ Medium locker.
▫ Small locker.

For enjoying this service, clients have to give charge yearly Tk.2500/-, Tk.2000/- and Tk.1500/- for large, medium and small locker respectively.

Accounts Department of a bank branch – Cash, Clearing & Transfer, deposit slip

Accounts Department

Accounts Department is play most vital role in Banking. Accounts Department is a department with which each and every department is related. It records the profit & loss A/C and statement of assets and liabilities by applying “Golden Rules” of book-keeping. The functions of it are theoretical & computerized based. SIBL Principal Branch records its accounts daily, weekly, and monthly every record. SIBL Principal Branch Accounts Department in Charge: Mr. Kazi Imamul Haque, Sr. Executive Officer (having 12 years of experience in banking sector). Another officer’s are: Mr. Tarek, (Officer), Mr. Hamid (Teller-Officer), Mr. Sohel(Teller-Officer).

This entire executive’s helps me a lot in my internship program at SIBL. They didn’t guide me as an Internee; they guide me as a training officer of SIBL to gather practical knowledge about Banking. They tried there best to inform me every thing about accounts department. I hope I knew every thing that gave me as a new comer in banking sector.

Basically Accounts Department is not alone. Accounts department is a mix of as follows:

1. Cash
2. Transfer
3. Clearing

CASH

Mr. Kazi Imamul Haque, Sr. Executive Officer and Mr. Md. Tarek (Officer) is the cash in charge. Both of the two senior executives help’s me lot to get practical knowledge and prepare this report.

The cash section of any branch plays very significant role in Accounts Department. Because, it deals with most liquid assets the SIBL Principal Branch has an equipped cash section. This section receives cash from depositors and pay cash against cheque, draft, PO, and pay in slip over the counter. Every Bank
must have a cash counter where customer withdrawn and deposit there money. When the valued client’s deposit their money at the cash counter they must have to full fill the deposit slip his/her own, then they sing as the depositor option’s then they deposit their money through cash officer at the cash counter.

SEVERAL TYPES OF DEPOSIT SLIP

There are several types of deposit slip as follows:
 Current Deposit A/C Slip,
 Saving’s Deposit A/C Slip,
 Festival Deposit A/C Slip,
 Brick By Brick Deposit A/C Slip,
 Pay order Slip,
 Demand Draft Slip,
 T.T. Slip.

After paying this kind’s of slip, the valued client waits for the deposit slip book out side of the cash counter. The cash officer deposit the money in there account through computer software, while the depositors account credited, then the cash officer put a seal in the deposit slip and return it to the client.

RECEIVING CASH:
Any people who want to deposit money will fill up the deposit slip and give the form along with the money to the cash officer over the counter. The cash officer counts the cash and compares with the figure written in the deposit slip. Then he put his signature on the slip along with the ‘cash received’ seal and records in the cash receive register book against A/C number.

At the end of the procedure, the cash officer passes the deposit slip to the counter section for posting purpose and delivers duplicate slip to the clients.

Account treatment:
Cash A/C——————— Dr.
Customer’s A/C————- Cr.

DISBURSING CASH:

The drawn who wants to receive money against cheque comes to the payment counter and presents his cheque to the officer. He verifies the following information:

▫ Date of the cheque
▫ Signature of the A/C holder
▫ Material alteration
▫ Whether the cheque is crossed or not
▫ Whether the cheque is endorsed or not
▫ Whether the amount in figure and in word correspondent or not

Then he checks the cheque from computer for further verification. Here the following information is checked:

▫ Whether there is sufficient balance or not
▫ Whether there is stop payment instruction or not
▫ Whether there is any legal obstruction (Garnishee Order) or not

After checking everything, if all are in order the cash officer gives amount to the holder and records in the paid register.

Account treatment:

Customer’s A/C Dr.
Cash A/C Cr.

The cash section of SIBL deals with all types of negotiable instruments, cash and other instruments and treated as a sensitive section of the bank. It includes the vault which is used as the store of cash instruments. The vault is insured up to Tk. 60 lacs. If the cash stock goes beyond this limit, the excess cash is then transferred to Principle Branch Office. When the excess cash is transferred to SIBL Principle Branch Office the cash officer issues IBDA.

Account treatment:
SIBL General A/C Dr.
Cash A/C Cr.

When cash is brought from SIBL Principle Branch Office.

Accounting treatment:
Cash A/C Dr.
SIBL General A/C Cr.

Transfer, Clearing, Clearing House Process, types, Clearing Cheque

TRANSFER

Transfer is not a critical sector in banking but it is very important. Transfers play a vital role in banking sector. So now we have to know what transfer is: basically transfer is a type of register maintaining matter. In this register officer write down every day transactions in Debit and Credit side then the officer calculate both the side of the register if both side shown same amount, it means that the total day’s transaction is completely okay.

CLEARING

Clearing is one of the magical parts of banking. I really enjoyed this part of the accounts department and banking sector. In Social Investment  Bank

The word Bank comes from Latin words Banco, Bancus, Banke, Bangk and Banca. Bank is a financial institution act as an intermediary that receive deposits for savers at a lower interest rate and lend money to investors at a higher interest rate.’); return false” href=”javascript:void(0)”Bank Limited clearing in charges Mr. Md. Jahir Ahmed (Officer), I did work with him. I went Bangladesh Bank lot’s of time with Mr. Md. Jahir Ahmed.

What is Clearing House?
In Bangladesh Bank, there is a very large room, which contains fifty (50) or more tables for each bank that is called the clearing house.

Nature of clearing house:
 1st Clearing House
 Return Clearing House

Clearing House Process:

Every bank has an officer of clearinghouse who is work with Bangladesh Bank clearing house. Acutally most of major client deposit their account in different kinds of bank cheques. Clearing officer check all the cheques and deposit slip very carefully and then he received the cheque. After that the clearing officer posting all the cheques in computer software which is recognized through Bankgladesh bank computer department. Then clearing officer seal all the cheques in advance date after that the officer endorsement all the cheques and sign all the cheques. All the cheques are posted in the computer by branch wise, then officer print the entire document and staple all the cheques by branch wise this is called schedule of clearing house. It is a very difficult job to staple all the cheques, because some time’s the cheques are huge in quantity, it may be 250 to 400, this is very vital job because every cheque must have to staple very carefully, it means cheque amount and the print sheet amount and cheque branch must have to be same. If the cheques staple in wrong direction, the cheque may be return from another bank, that’s why SIBL not to be able to credited party account.

Then the clearinghouse officer copying all the document in two floppy dist as per Bangladesh Bank requirement. When the clearing officers enter the clearinghouse, his first job is that the floppy dlivered to the Bangladesh Bank computer department.

All of the procedure the clearing in charge goes to the Bangladesh Bank clearing house before 10 am in the morning. The clearing officer check all the bank’s cheque and he put all the cheques in bank wise, like as this another bank’s delivered there cheques in SIBL desk. Then the officers of SIBL have to calculate all the cheques by using calculator machine, Staple pin remover, and then he divided all the cheques as SIBL Branch wise.

Types of Clearing Cheque:

SIBL Principal Branch performs the bill clearing function through Bangladesh Bank. SIBL Principal Branch acts as the agent of all SIBL branches for the clearing house of the Bangladesh Bank. There are two types of cheque which are-

1. Inward clearing cheque
2. Outward clearing cheque

INWARD CHEQUES:

Inward cheques are those ones drawn the respective branch which have been presented on other banks and will be cleared / honored through the clearing house of Bangladesh Bank. Then the cheque is called inward cheque of SIBL Principal Branch.

Accounting treatment:
Customer’s A/C Debit.
SIBL General A/c credit.

OUTWARD CHEQUES :
Outward cheques are those ones drawn on other bank branches which are presented on the concerned branch for collection through clearing house of Bangladesh Bank. These cheques are called outward clearing cheques.

Reason for the Return Cheques, Extract, Debit Voucher, Statement of affairs, Functions

 Reason for the Return Cheques:

  Memorandum

SOCIAL INVESTMENT  Bank
__________ Branch Date:_____________

Cheque(s) No:_________________ for Taka ________________

Is/are returned un-paid for reason(s) no_____________________

 Not arrange for

 Effects not cleared, may be present again.

 Exceeds arrangement.

 Full neither covers nor received.

 Payments stopped by drawer.

 ________ Payee’s endorsement irregular requires bank’s confirmation.

 ________ Payee’s endorsement irregular, illegible / required.

 Drawer signature differs / required.

 Alteration in Date / figures / words required drawer’s full signature.

 Cheque is post dated / out of date / mutilated.

 Amount in word and figure differs.

 Crossed cheque must be presented through a Bank.

 Clearing stamps required.

 Addition to Bank discharge should b authenticated.

 Cheque crossed “Account’s Payees Only”.

 Collecting Bank discharge irregular.
SCOPES:

 MTBL has a good General Banking & Account Department.

 It is one of the leading banks in Bangladesh.

 Information is available.

 Book’s notes and journals are available.

Extract:

Extract is a statement of all originating and responding transactions among inter–branches through inter branches debit and credit advice. At the end of the day, all the debit and credit advices of different department come to accounts department. It makes extract in light of all advices.

Actually extract shows the balance of MTBL Dilkusha Branch general A/C. The objective of preparing it is to know how many transactions have been originated and responded by the respective branch per day. Branch has to send it its Head Office keeping one photocopy.

Debit Voucher:

For making cash payment like entertainment, conveyance, Account Department writes a debit voucher. Amount is withdrawn through cash section by presenting debit voucher.

Statement of affairs:

Accounts section prepares the statement of affairs for finding the profit /loss as well as  amount of assets and liabilities of concerned branch per day. Theoretically; it is called financial statement and has two parts:

 Income and Expenditure A/C.

 Statement of assets & liabilities.

AMORTIZATION AND DEPRECIATION:

Amortization is the allocation of the cost of an intangible asset to expense. For example: prepaid expenditure, prepaid insurance and goodwill etc. Amortization schedule is determined by the decision of management.

Depreciation is a process of cost allocation of assets not a process assets valuation.

 Fixed Assets have been show at written down value.

 Depreciation is charged at the following rates on reducing balance method on all fixed assets other than motor vehicles, which are deprecated on straight-line basis:

Assets purchased during the year are depreciated from the date of acquisition.
FUNCTIONS PROVIDED BY ACCOUNTS DEPARTMENT:

Like all other Banks, in MTBL Accounts Department is regarded as the nerve Center of the bank. 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 otherwise. Improper recording of transactions will lead to the mismatch in the debit side and in the 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 as Accounts Department.

Besides the above, the Bank has to prepare some internal statements as well as some statutory statements which are to be submitted to the central bank. Accounts Department prepares these statements also. The department has to submit some statements to the Head Office, which is also consolidated by the Head Office late on.

The tasks of the Accounts Department of MTBL Dilkusha Branch may be seen in two different angles:

 Daily Tasks.

 Periodical Tasks.
DAILY TASKS:

The routine daily tasks of the Accounts Departments are as follows——–

o Recording the daily transactions in the cashbook.

o Recording the daily transactions in general and subsidiary ledgers.

o Preparing the daily position of the branch comprising of deposit and cash.

o Preparing the daily Statement of Affairs showing all the assets and liability of the branch as per General Ledger and Subsidiary Ledger separately.

o Making payment of all the expenses of the Branch.

o Recording inter branch fund transfer and providing accounting treatment in this regard.

o Checking whether all the vouchers are correctly passed to ensure the conformity with the ‘Activity Report’; if otherwise making it correct by calling the respective official to rectify the voucher.

o Recording of the vouchers in the Voucher Register.

o Packing of the correct vouchers according to the debit voucher and the credit voucher.
PERIODICAL TASKS:

The routine periodical tasks performed by the department are as follows:

o Preparing the monthly salary statements for the employees.

o Publishing the basic data of the branch.

o Preparing the weekly position for the branch which is sent to the Head Office to maintain Cash Reserve Requirement (C.R.R).

o Preparing the monthly position for the branch which is sent to the Head Office to maintain Statutory Liquidity Requirement (C.R.R).

o Preparing the weekly position for the branch comprising of the break up of sector-wise deposit, credit etc.

o Preparing the weekly position for the branch comprising of the denomination wise statement of cash in tills.

o Preparing the quarterly statements (SBS-2 and SBS-3) where SBS-2 shows “classification of deposits excluding inter bank deposits, deposits under wage earner’s scheme and withdrawals from deposits accounts” and SBS-3 shows “classification of advances (excluding inter bank) and classification of bills purchased and discounted” during the quarter.

o Preparing the budget for the branch by fixing the target regarding profit and deposit so as to take necessary steps to generate and mobilize deposit.

o Preparing an ‘Extract’ which is a summary of all the transactions of the Head Office account with the branch to reconcile all the transaction held among the accounts of all the branches.

DEFINITION OF FOREIGN EXCHANGE

                                 Foreign Exchange is a process which is converted one national currency into another and transferred money from one country to another countries.

According to  Foreign Exchange is that section of economic science which deals with the means and method by which right to wealth in one country’s currency are converted into rights to wealth in terms of another country’s currency. It involved the investigation of the method by which the currency of one country is exchanged for that of another, the causes which rented such exchange necessary the forms which exchange may take and the ratio or equivalent values at which such exchanges are effected.

Foreign exchange is the rate of exchange in the both country’s currency.

FOREIGN TRADE AND FOREIGN EXCHANGE

International trade refers to trade between the residents of two different countries.
Each country functions as a sovereign State with its set of regulations and currency. The difference in the national of the exporter and the importer presents certain peculiar problems in the conduct of international trade and settlement of the transactions arising therefrom. Important among such problems are :

(a) Different countries have different monetary units;
(b) Restrictions imposed by countries on import and export of goods;
(c) Restrictions imposed by nations on payment from and into their countries;
(d) Differences in legal practices in different countries

Foreign exchange means foreign currency and includes :
(i) All deposits, credits and balances payable in any foreign currency and any drafts,
travelers cheques, letters of credit and bills of exchange, expressed or drawn in Indian currency but payable in any foreign currency;
(ii) Any instrument payable, at the option of the drawee or holder thereof or any other party thereto. Either in Indian currency or in foreign currency or partly in one and partly in the other. Thus, foreign exchange includes foreign currency, balances kept abroad and instruments payable in foreign currency.

PRINCIPLES OF FOREIGN EXCHANGE

The following principles are involved in Foreign exchange:
i) The entire system
ii) The media used
iii) The monetary unit.

 FUNCTION OF FOREIGN EXCHANGE

The Bank For this reason, the employee who is related of the bank to foreign exchange, specially foreign business should have knowledge of these following functions :-

i) Rate of exchange.
ii) How the rate of exchange works.
iii) Forward and spot rate.
iv) Methods of quoting exchange rate.
v) Premium and discount.
vi) Risk of exchange rate.
vii) Causes of exchange rate.
viii) Exchange control.
ix) Convertibility.
x) Exchange position.
xi) Intervention money.
xii) Foreign exchange transaction.
xiii) Foreign exchange trading.
xiv) Export and import letter of credit.
xv) Non-commercial letter of trade.
xvi) Financing of foreign trade.
xvii) Nature and function of foreign exchange market.
xviii) Rules and Regulation used in foreign trade.
xix) Exchange Arithmetic.

Export Finance

Foreign Exchange Trade of SIBL is dealt with its 09 AD branches out of which 4 branches are in Dhaka and the remaining 05 are in Chittagong, Khulna, Sylhet, Rajshahi and Bogra. We as a 21st Century Bank, providing our services in foreign trade through import and export finance and also playing significant role in the area of foreign remittance. To facilitate the import obligation of our Bank as well as considering the requirement of foreign currency of our country we encourage potential exporters to do their export business with us. We provide working capital on their requirement. Presently our export finance is extended for RMG and for non-traditional item that is handled by a number of experienced bankers. We offer competitive exchange rate for foreign currency to our valued exporters. In the last 03 years our export business performance is significant.

Import Finance

We also deal in import business and our import business is extended to commercial importers (traders) for import of various shariah approved items and industrial importers (Users) for import of raw cotton, yarn, clinker, pharmaceutical raw materials, TV parts, Computer parts etc raw materials for their industries.

We also provide post import finance such as MPI (LIM), LTR and HPSM (Lease financing). Our post import finance is also provided for importing of capital machinery.

Foreign Remittance

We are playing important role in the Foreign Remittance sector also.

We have correspondent relationship with almost all major 122 Banks of 109 countries of the world like Standard Chartered Bank, American Express Bank Limited, HSBC, HBZ Finance, Mashreq Bank PSC, Dresdner Bank AG and with local banks in Pakistan, India, Nepal and Bhutan etc with whom we have advising, reimbursing and add confirming arrangement.

Visitors of our website can download our Foreign Currency Current Account (FCCA) Opening Form from the Download Section and also can take a print of the Form in Legal Size Paper.

SWIFT

SIBL is the member of SWIFT and we have 09 SWIFT workstations in all of our 09 AD branches. Besides our 24 branches are equipped with online banking. We are trying to keep all the SWIFT workstations under online system. Inward remittances are credited to the beneficiary ‘s account on the same day of receipt if the beneficiary maintains A/C with them or within next 24 hours on receipt of the same from our overseas correspondents. All correspondences of foreign trade both export and import are communicated through SWIFT. As a result foreign exchange trade becomes expeditious and instant.

Socil Investment Bank Limited is one of the first few Bangladeshi Banks who have become member of SWIFT (Society for Worldwide Interbank Financial Telecommunication) in 1999. SWIFT is members owned co-operative, which provides a fast and accurate communication network for financial transactions such as Letters of Credit, Fund transfer etc. By becoming a member of SWIFT, the Bank has opened up possibilities for uninterrupted connectivity with over 5,700 user institutions in 150 countries around the world.

LETTER OF CREDIT (L/C)

DEFINITION OF L/C

On behalf of the importer if the Bank to open a credit in foreign currency in favour of his exporter at a bank in the letters country. The letter of credit is issued against payment of amount by the importer or against satisfactory security. The L/C authorizes the exporter to draw a draft under is terms and sell to a specified bank in his country. He has to hand over to the bank, will the Bill of exchange, shipping documents and such other papers as may be agree upon between the exporter and the importer. The exporter is assured of his payment because of the credit while the importer is protected because documents in respect of export of goods have to be delivered by the exporter to the paying bank before the payment is made.

From of letter of credit

A letter of credit (L/C) may be two forms. These as below :
i) Revocable letter of credit.
ii) Irrevocable letter of credit.
(i) Revocable L/C:

If any letter of credit can be amendment or change of any clause or canceled by consent of the exporter and importer is known as revocable letter of credit.

A revocable letter of credit can be amended or canceled by the issuing bank at any time without prior notice to the beneficiary. It does not constitute a legally binding undertaking by the bank to make payment. Revocation is possible only nntil the documents have been honoured by the issuing bank or its correspondent. Thus a revocable credit does not usually provide adequate security for the beneficiary.

(ii) Irrevocable L/C:

If any letter of credit can not be changed or amendment without the consent of the importer and exporter is known as irrevocable letter of credit.

An irrevocable credit constitutions a firm undertaking by the issuing bank to make payment. It therefore, gives the beneficiary a high degree of assurance that he will paid to his goods or services provide he complies with terms of the credit.

TYPES OF LETTER OF CREDIT

Letter of Credit are classified into various types according to the method of settlement employed. All credits must clearly indicate in major categories.

i) Sight payment credit.
ii) Deferred payment credit.
iii) Acceptance credit.
iv) Negotiation credit.
v) Red close credit.
vi) Revolving credit.
vii) Stand by credit.
viii) Transferable credit.

(i) Sight payment credit :

The most commonly used credits are sight payment credits. These provide for payment to be made to the beneficiary immodestly after presentation of the stipulated documents on the condition that the terms of the credit have been complied with. The banks are allowed reasonable time to examine the documents.

(ii) Deferred payment credit :

Under a deferred payment credit the beneficiary does not receive payment when his presents the documents but at a later date specified in the credit. On presenting the required documents, he received the authorized banks written undertaking to make payment of maturity. In this way the importer gains possession of the documents before being debited for the amount involved.

In terms of its economic effect a deterred payment credit is equivalent to an acceptance credit, except that there is no bill of exchange and therefore no possibility of obtaining money immediately through a descant transaction. In certain circumstances, how ever, the banks payment undertaking can be used as collateral for an advance, though such as advance will normally only be available form the issuing or confirming bank. A discountable bill offers wider scope.

TYPES OF LETTER OF CREDIT

(iii) Acceptance Credit:

With an acceptance credit payment is made in the form of a tern bill of exchange drawn on the buyer, the issuing Bank  or the pendent bank. Once he has fulfilled the credit requirements, the beneficiary can demand that the bill of exchange be accepted and returned to him. Thus the accepted bill takes the place of a cash payment.

The beneficiary can present the we accented bill to his own bank for payment at maturity or for discounting, depending on whether or not he wants cash immediately. For simplicities sake the beneficiary usually gives on instruction that the accepted bill should be left in the safekeeping of one of the banks involved until it matures. Bill of exchange drawn under acceptances credit usually have a term of 60-180 days.

The purpose of an acceptance is to give the importer time to make payment. It he sells the goods before payments fall due, he can use the precedes to meet the bill of Exchange in this way, he does not have to borrow money to finance the transaction.

(vi) Negotiation credit:

Negotiation means the purchase and sale of bill of exchange or other marketable instruments. A negotiation credit is a commercial letter of credit opened by the issuing bank in the currency of its own country and addressed directly to the beneficiary. The letter is usually delivered to the addressee by a corespondent bank. This credit is sometimes also as Hand on credit.

The letter of credit empowers the beneficiary to draw a bill of exchange on the using bank, on any other named drawer or on the applicant for the credit. The beneficiary can them present this bill to a bank for negotiation, together with the original letter of credit and the documents stipulated therein.

Payment of the bill of exchange is guaranteed by the issuing bank on the condition that the documents presented by the beneficiary are in order. The most common form of negotiation credit permits negotiation by any bank. In rare case the choice is limited to specified banks.

(iv) Red clause credit:

In the case of a red clauses credit, the seller can obtain an advance for an agreed amount from the correspondent bank, goods that are going to be delivered under the documentary credit. On receiving the advances, the beneficiary must give a receipt and provide a written undertaking to present the required documents before the credit expires.

The advance is paid by the correspondent bank, but it is the using bank that assumes liability. If the sellers does not present the required documents in time and fails to refund the advance, the correspondent bank debits the issuing bank with the amount of the advance plus interest. The issuing bank, in turn, has reveres to the applicant, who therefore bears the risk for the advance and the interest accursed.

The clause permitting the correspondent bank to make an advance used to be written on red in home the name red clause credit.
(v) Revolving Credit :

                                       Revolving credit can be used when goods are to be delivered in installment at specified intervals. The amount available at any one time is equivalent to the value of one partial delivery.

A revolving credit can be cumulative or non-cumulative means that amount from unused or incompletely used portions can be carried forward to subsequent period. If a credit is non-cumulative, portions not used in the prescribing period case to be available.

(vi) Stand by credit:

                                   Stand by credit are encountered principally in the US. Under the laws of most US states, banks are prohibited from issuing regular quarantines, so credits are used instead. In Europe, too the use of this type of credit is increasing by virtue of their documentary credit, stand-by credit are governed by the UCP. However, their function is that of a grantee.

The types of payment and performance that can be guaranteed by stand-by credits include the following :

– Payment of thorium bill of exchange
– Repayment of bank advance
– Payment of goods delivered.
– Delivery of goods in accordance wets contract and
– Execution of construction contracts, supply and install contracts.

In order to enforce payment by the bank, the beneficiary merely presents a declaration stating that the applicant for the credit has failed to meet his contractual obligation. This declaration may have to be accompanied by other documents.

(vii) Transferable credit:

Transferable credit are particularly well adapted to the requirements of international trade. A trader who receives payment from a buyer in the form of a transferable documentary credit can use that credit to pay his own supplier. This enables him to carry out the transaction with only a limited and lay of his own funds.

The buyer supplies for an irrecoverable credit issued in the traders favour. The issuing bank must expressly designate the credit as transferable.
As soon as the trader receives the confirmation of credit he can request the bank to transfer the credit to his supplier. The bank is under no obligation to effect the transfer except in so far as it has expressly consented to do so.

The costs of the transfer are usually charged to the trader and the transferring bank is entitled to delete them in advance.

(iii) Acceptance Credit :

                                        With an acceptance credit payment is made in the form of a tern bill of exchange drawn on the buyer, the issuing Bank
or the pendent bank. Once he has fulfilled the credit requirements, the beneficiary can demand that the bill of exchange be accepted and returned to him. Thus the accepted bill takes the place of a cash payment.

The beneficiary can present the we accented bill to his own bank for payment at maturity or for discounting, depending on whether or not he wants cash immediately. For simplicities sake the beneficiary usually gives on instruction that the accepted bill should be left in the safekeeping of one of the banks involved until it matures. Bill of exchange drawn under acceptances credit usually have a term of 60-180 days.

The purpose of an acceptance is to give the importer time to make payment. It he sells the goods before payments fall due, he can use the precedes to meet the bill of Exchange in this way, he does not have to borrow money to finance the transaction.

(vi) Negotiation credit :

Negotiation means the purchase and sale of bill of exchange or other marketable instruments. A negotiation credit is a commercial letter of credit opened by the issuing bank in the currency of its own country and addressed directly to the beneficiary. The letter is usually delivered to the addressee by a corespondent bank. This credit is sometimes also as Hand on credit.

The letter of credit empowers the beneficiary to draw a bill of exchange on the using bank, on any other named drawer or on the applicant for the credit. The beneficiary can them present this bill to a bank for negotiation, together with the original letter of credit and the documents stipulated therein.

Payment of the bill of exchange is guaranteed by the issuing bank on the condition that the documents presented by the beneficiary are in order. The most common form of negotiation credit permits negotiation by any bank. In rare case the choice is limited to specified banks.

(iv) Red clause credit :

                                     In the case of a red clauses credit, the seller can obtain an advance for an agreed amount from the correspondent bank, goods that are going to be delivered under the documentary credit. On receiving the advances, the beneficiary must give a receipt and provide a written undertaking to present the required documents before the credit expires.

The advance is paid by the correspondent bank, but it is the using bank that assumes liability. If the sellers does not present the required documents in time and fails to refund the advance, the correspondent bank debits the issuing bank with the amount of the advance plus interest. The issuing bank, in turn, has reveres to the applicant, who therefore bears the risk for the advance and the interest accursed.

The clause permitting the correspondent bank to make an advance used to be written on red in home the name red clause credit.
(v) Revolving Credit :

Revolving credit can be used when goods are to be delivered in installment at specified intervals. The amount available at any one time is equivalent to the value of one partial delivery.

A revolving credit can be cumulative or non-cumulative means that amount from unused or incompletely used portions can be carried forward to subsequent period. If a credit is non-cumulative, portions not used in the prescribing period case to be available.

(vi) Stand by credit :

Stand by credit are encountered principally in the US. Under the laws of most US states, banks are prohibited from issuing regular quarantines, so credits are used instead. In Europe, too the use of this type of credit is increasing by virtue of their documentary credit, stand-by credit are governed by the UCP. However, their function is that of a grantee.

The types of payment and performance that can be guaranteed by stand-by credits include the following :

– Payment of thorium bill of exchange
– Repayment of bank advance
– Payment of goods delivered.
– Delivery of goods in accordance wets contract and
– Execution of construction contracts, supply and install contracts.

In order to enforce payment by the bank, the beneficiary merely presents a declaration stating that the applicant for the credit has failed to meet his contractual obligation. This declaration may have to be accompanied by other documents.

(vii) Transferable credit :

Transferable credit are particularly well adapted to the requirements of international trade. A trader who receives payment from a buyer in the form of a transferable documentary credit can use that credit to pay his own supplier. This enables him to carry out the transaction with only a limited and lay of his own funds.

The buyer supplies for an irrecoverable credit issued in the traders favour. The issuing bank must expressly designate the credit as transferable.
As soon as the trader receives the confirmation of credit he can request the bank to transfer the credit to his supplier. The bank is under no obligation to effect the transfer except in so far as it has expressly consented to do so.

The costs of the transfer are usually charged to the trader and the transferring bank is entitled to delete them in advance

PARTIES TO A LETTER OF CREDIT

 PARTIES TO A LETTER OF CREDIT

A letter of credit is issued by a Bank at the request of an importer in favour of an exporter from whom he has contracted to purchases some commodity or commodities. The importer, the exporter and the issuing bank are parties to the letter of credit. There are however, one or more than one banks that are involved in various capacities and at various stages to play an important role in the total operation of the credit.

i) The opening Bank.
ii) The Advising Bank.
iii) The Buyer and the Beneficiary.
iv) The paying Bank.
v) The negotiating Bank.
vi) The confirming Bank.

i) The opening Bank :

The opening Bank is one that issues the letter of credit at the request of the buyer. By issuing a letter of credit it takes upon itself the liability to pay the bills drawn under the credit. If the drafts are negotiated by the another bank, the opening Bank reimburses that Bank. As soon as the opening Bank, issuing a letter of credit (L/C), it express its undertaking to pay the bill or bills as and when they are drawn by the beneficiary under the credit. When the bills are presented to or when antic is received that bills have been presented to a paying or negotiating Banks its liability matures.

ii) The Advising Bank :

The letter of credit is often transmitted to the beneficiary through a bank in the latters country. The bank may be a branch or a correspondent of the opening bank. The credit is some times advised to this bank by cable and is then transmitted by it to the beneficiary on its own special form. On the other occasions, the letter is sent to the bank by mail or telex and forwarded by it to the exporter. The bank providing this services is known as the advising bank. The advising bank undertakes the responsibility of prompt advice of credit to the beneficiary and has to be careful in communicating all its details.

iii) The Buyer and the Beneficiary :

The importer at whose request a letter of credit is issued is known as the buyer. On the strength of the contract that he makes with the exporter for the purchase of some goods that the letter of credit is opened by the opening bank.

The exporter in whose favour the credit is opened and to whom the letter of credit is addressed is known as the beneficiary. As the seller of goods he is entitled to receive payment which he does by drawing bills under the letter of credit (L/C). As soon as he has shipped the goods and has collected the required documents, he draws a set of papers and presents it with the documents to the opening bank or some other bank mentioned in the L/C.

iv) The paying Bank :

The paying bank only pays the drafts drawn under the credit but under takes no opening bank, by debating the letters accounts with it if there is such an account or by any other measured up, between the two bankers. As soon as the beneficiary has received payment for the draft, he is out of the picture and the rest of the operation concerns only the paying bank and the opening bank.

v) The Negotiating bank :

The negotiating bank has to be careful in scrutinize that the drafts and the documents attached there to are in conformity with the condition laid down in the L/C. Any discrepancy may result in refused on the part of the opening bank to honors the instruments is such an eventuality the negotiating bank has to look back to the beneficiary for refund of the amounts paid to him.

vi) The Confirming Bank :

Sometimes an exporter stipulates that a L/C issued in his favour be confirm by a bank in his own country. The opening this country to add its confirming to the credit the bank confirming the credit is known as the confirming bank and the credit is known as confirmed credit.

CONTENTS OF THE LETTER OF CREDIT

Banks normally issued letter of credit (L/C) on forms which clearly indicate the banks name and extent of the banks obligation under the credit. The contents of the l/c of different Banks may be different .In general l/c contain the follwing information :-

i) Name of the buyer : who is also known as the accounted since it is for his account that the credit has been opened.
ii) Name of the seller : Who is also known as the beneficiary of the credit.
iii) Moment of the credit : Which should be the value of the merchandise plus any shipping charges intent to be paid under the credit.
iv) Trade terms : Such as F.O.B and CIF
v) Tenor of the Draft which is normally dependent upon the requirements of the buyer.
vi) Expiration date : Which is specified the latest date documents may be presented. In this manner or by including additionally a latest shipping date, the buyer may exercise control over the time of shipment.
vii) Documents required : Which will normally include commercial invoice consular or customers invoice, insurance policies as certificates, if the source is to be effected by the beneficiary and original bills of lading.
viii) General description of the merchandise : Which briefly and in a general manner duly describes the merchandise covered by a letter of credit.

 PROCEDURES OF OPENING THE L/C

The importer after receiving the proforma invoice from the exporter, by applying for the issue of a documentary credit, the importer request his Bank to make a promise of payment to the supplier. Obviously, the bank will only agree to this request if it can rely on reimbursement by the applicant. As a rule accepted as the sole security for the credit particularly if they are not the short of commodity that can be traded on an organized market, such an arrangement would involve the bank in excessive risk outside its specialist field. The applicant must therefore have adequate funds in the bank account or a credit line sufficient to cover the required amount.

Banks deal in documents and not in goods. Once the bank has issued the credits its obligation to pay is conditional on the presentation of the stipulated documents with in the prescribed time limit. The applicant cannot prevent a bank from honouring the documents on the grounds that the beneficiary has not delivered goods on redder reissues as contracted.

The importer submit the following documents before opening of the L/C :
a. Tax Identification Number (TIN)
b. Valid Trade License.
c. Import Registration Certificate (IRC)

The Bank will supply the following documents before opening of the L/C :
a. LCA form.
b. Application and Agreement form.
c. IMP form
d. Necessary charge documents for documentation.

The above documents / papers must be completed duly signed and filled in by the party according to the instruction of the banker.

Investment Banking 

Bai-Muazzal

Commercial

Bai-Muajjal is a contract between Buyer and Seller under which the seller sells certain specific goods ( permissible under Shariah and Law of the country ), to the Buyer at an agreed fixed price payable at a certain fixed future date in lump sum or within a fixed period by fixed installments. The seller may also sell the goods purchased by him as per order and specification of the Buyer. This mode is applicable for working capital finance. In conventional Banks, the allow loan in the from of cash credit against hypothecation of goods & collateral security

House Hold

Bai-Muajjal is a contract between Buyer and Seller under which the seller sells certain specific goods ( permissible under Shariah and Law of the country ), to the Buyer at an agreed fixed price payable at a certain fixed future date in lump sum or within a fixed period by fixed installments. The seller may also sell the goods purchased by him as per order and specification of the Buyer. This mode is applicable for working capital finance. In conventional Banks, the allow loan in the from of cash credit against hypothecation of goods & collateral security.

Trust Receipt

Bai-Muajjal is a contract between Buyer and Seller under which the seller sells certain specific goods ( permissible under Shariah and Law of the country ), to the Buyer at an agreed fixed price payable at a certain fixed future date in lump sum or within a fixed period by fixed installments. The seller may also sell the goods purchased by him as per order and specification of the Buyer. This mode is applicable for working capital finance. In conventional Banks, the allow loan in the from of cash credit against hypothecation of goods & collateral security.

HPSM:

Commercial

Hire Purchase ( Participatory Ownership) is a Special type of contract which has been developed through practice. Actually it is a synthesis of three contracts:

1. Shirkat
2. Ijarah and
3. Sale

1. Shirkatul Melk

Shirkat means partnership. Shirkatul Melk means participation in ownership. When two or more persons supply equity, purchase an asset; own the same jointly, and share the benefit as per agreement and bear the loss in proportion to their respective equity, the contract is called Shirkatul Melk contract.

2. Ijarah

The term Ijarah has been derived from the Arabic words Ajr and Ujrat which means consideration, return, wages or rent. This is really the exchange value or consideration, return, wages, rent of services of an ASSET. Ijarah has been defined as a contract between two parties, the Hiree and Hirer where the Hirer enjoys or reaps a specific service or benefit against a specified consideration or rent from the asset owned by the Hiree. It is a hire agreement under which a certain asset is hired out by the Hiree to a Hirer against fixed rent or rentals for a specified period.

1.   Sale

This is a sale contract between a Buyer and a seller under which the ownership of certain goods or asset is transferred by seller to the buyer against agreed upon price paid / to be paid by the buyer.

Thus in Hire Purchase (participatory ownership) mode both the Bank and the client supply equity in equal or unequal proportion for purchase of an asset like land, building, machinery, transport etc. Purchase the asset with that equity money, own the same jointly, share the benefit as per agreement and bear the loss in proportion to their respective equity. The share, part or portion of the asset owned by the Bank is hired out to the client partner for a fixed rent per unit of time for a fixed period. Lastly the Bank sells and transfers the ownership of it’s share / part / portion to the client against payment of price fixed for that part either gradually part by part or in lump sum within the hired period after the expiry of the hire agreement.

Real Estate

Hire Purchase ( Participatory Ownership) is a Special type of contract which has been developed through practice. Actually it is a synthesis of three contracts:

1. Shirkat
2. Ijarah and
3. Sale

1.    Shirkatul Melk

Shirkat means partnership. Shirkatul Melk means participation in ownership. When two or more persons supply equity, purchase an asset; own the same jointly, and share the benefit as per agreement and bear the loss in proportion to their respective equity, the contract is called Shirkatul Melk contract.

2.    Ijarah

The term Ijarah has been derived from the Arabic words Ajr and Ujrat which means consideration, return, wages or rent. This is really the exchange value or consideration, return, wages, rent of services of an ASSET. Ijarah has been defined as a contract between two parties, the Hiree and Hirer where the Hirer enjoys or reaps a specific service or benefit against a specified consideration or rent from the asset owned by the Hiree. It is a hire agreement under which a certain asset is hired out by the Hiree to a Hirer against fixed rent or rentals for a specified period.

3.    Sale

This is a sale contract between a Buyer and a seller under which the ownership of certain goods or asset is transferred by seller to the buyer against agreed upon price paid / to be paid by the buyer.

Thus in Hire Purchase (participatory ownership) mode both the Bank and the client supply equity in equal or unequal proportion for purchase of an asset like land, building, machinery, transport etc. Purchase the asset with that equity money, own the same jointly, share the benefit as per agreement and bear the loss in proportion to their respective equity. The share, part or portion of the asset owned by the Bank is hired out to the client partner for a fixed rent per unit of time for a fixed period. Lastly the Bank sells and transfers the ownership of it’s share / part / portion to the client against payment of price fixed for that part either gradually part by part or in lump sum within the hired period after the expiry of the hire agreement. Transport

Hire Purchase ( Participatory Ownership) is a Special type of contract which has been developed through practice. Actually it is a synthesis of three contracts:

1. Shirkat
2. Ijarah and
3. Sale

1.     Shirkatul Melk

Shirkat means partnership. Shirkatul Melk means participation in ownership. When two or more persons supply equity, purchase an asset; own the same jointly, and share the benefit as per agreement and bear the loss in proportion to their respective equity, the contract is called Shirkatul Melk contract.

2. Ijarah

The term Ijarah has been derived from the Arabic words Ajr and Ujrat which means consideration, return, wages or rent. This is really the exchange value or consideration, return, wages, rent of services of an ASSET. Ijarah has been defined as a contract between two parties, the Hiree and Hirer where the Hirer enjoys or reaps a specific service or benefit against a specified consideration or rent from the asset owned by the Hiree. It is a hire agreement under which a certain asset is hired out by the Hiree to a Hirer against fixed rent or rentals for a specified period.

 3. Sale

This is a sale contract between a Buyer and a seller under which the ownership of certain goods or asset is transferred by seller to the buyer against agreed upon price paid / to be paid by the buyer.

Thus in Hire Purchase (participatory ownership) mode both the Bank and the client supply equity in equal or unequal proportion for purchase of an asset like land, building, machinery, transport etc. Purchase the asset with that equity money, own the same jointly, share the benefit as per agreement and bear the loss in proportion to their respective equity. The share, part or portion of the asset owned by the Bank is hired out to the client partner for a fixed rent per unit of time for a fixed period. Lastly the Bank sells and transfers the ownership of it’s share / part / portion to the client against payment of price fixed for that part either gradually part by part or in lump sum within the hired period after the expiry of the hire agreement.

Mudaraba

 Bill of Exchange:

Bai-Murabaha is a contract between a Buyer and Seller under which the Seller sells certain specific goods permissible under Islamic Shariah and Law of the land to the Buyer at a cost plus agreed profit payable in cash on any fixed future date in lump sum or by installments. The profit marked-up may be fixed in lump-sum or in percentage of the cost price of the goods.

In case of Bai-Murabaha Banks procure the goods as per indent of the customer, retain it in its custody and sell the same part by part or at a time to the client who gave indent for the goods. This mode is applicable for working capital finance. In conventional Banks, they allow Loan against pledge of goods against fixed rate of interest.

Post Import:

Bai-Murabaha is a contract between a Buyer and Seller under which the Seller sells certain specific goods permissible under Islamic Shariah and Law of the land to the Buyer at a cost plus agreed profit payable in cash on any fixed future date in lump sum or by installments. The profit marked-up may be fixed in lump-sum or in percentage of the cost price of the goods.

In case of Bai-Murabaha Banks procure the goods as per indent of the customer, retain it in its custody and sell the same part by part or at a time to the client who gave indent for the goods. This mode is applicable for working capital finance. In conventional Banks, they allow Loan against pledge of goods against fixed rate of interest.

Musharaka:

Bai-Murabaha is a contract between a Buyer and Seller under which the Seller sells certain specific goods permissible under Islamic Shariah and Law of the land to the Buyer at a cost plus agreed profit payable in cash on any fixed future date in lump sum or by installments. The profit marked-up may be fixed in lump-sum or in percentage of the cost price of the goods

In case of Bai-Murabaha Banks procure the goods as per indent of the customer, retain it in its custody and sell the same part by part or at a time to the client who gave indent for the goods. This mode is applicable for working capital finance. In conventional Banks, they allow Loan against pledge of goods against fixed rate of interest

SOWT Analysis

SOWT Analysis:

SOWT analysis is an matter to know the present status of Strength, Opportunity, Weakness and Threats of SIBL. The analysis also helps the bank Management to take relevant measure to make up its weakness and to face the external threats of the competitors.

The term SOWT includes the following:

•   S      Strength
•   O     Opportunity
•   W     Weakness
•   T     Threats

Now we will discuss the Strength, Opportunity, Weakness and Threats in the following paragraphs:

Strength:

SIBL enjoy the following Strengths:

The banking services are easily accessible and feasible.

The advances growth of the bank is increasing rapidly.

The bank is a member of ATM network along with other ten banks which enabled the bank to extend modern banking facility to the customer.

The bank provides modern online banking services to the customer.

The existing employee of the Social Investment Bank, the Principal branch office is very efficient and skilled.

Opportunity:

SIBL enjoy the following Strengths:

The SIBL recently overcome restriction of the problem banking.

Now it will be easy to get permission from Bangladesh Bank to open branch.

In developing countries like Bangladesh, banking services would be the only sources of financing.

They can diversify their portfolio by introducing new sectors, like, introducing ATM card, one point services, tele-banking, and credit cards.

Weakness:

SIBL enjoy the following Strengths:

Lack of clearly defined marketing objectives.

Poor qualify of Strategic management decision-making.

Lack of promotional objectives and strategies.

Numbers of branches are very limited.

Numbers of ATM Booth are also very limited.

SIBL does not provide services to the rural area.

Threats:

SIBL enjoy the following Strengths:

The most of threats of SIBL’s are coming from the competitors.

Company has a chance to lose its market share to the competitors if it does not take necessary actions.

Opening of the recently permitted new banks, without implementation of the needed reforms, could lead to unethical competitor in and house trading in the country’s troubled banking sector.

The size of the market and the present state of economic activities did not provide adequate scope for business for a large number of banks with poor management and backdated operating system.

The customer services of the bank are not too good like other private Banks.

In general banking department they follow the traditional banking system. The entire banking procedure is not fully computerized.

Findings

During my internee period in the Social Investment Bank Limited, Principal Branch I have  worked in the General Bank and Foreign Exchange more than two months. During this period I have found that all the employees of those departments are very skilled, active, self-motivated and absolutely friendly to the customers. However major findings of my internship program are as follows:

There are no computers in payment order sections. That’s the services is not as promote as the customers demend.

The branch is not AD branch for this reason required more time in the foreign exchange operation.

In the principal branch, there is no place for the employees to take there lunch.

The Bank didn’t give employees time for lunch .

There is no place for taking lunch for that reason women employees irritate for that.

RECOMMENDATION

As per earnest observation some suggestions for the improvement of the situation are given bellow:

To attract more clients Social Investment Bank Limited has to create a new marketing strategy, which will increase the total export and import Business.

Effective and efficient initiatives are necessary to recover the default loan.

Alternative incentive package for the exporter will help to increase the Export and according it will diminished the balance of payment gap of Social Investment Bank Limited.

Long term training very much required for the bank officer’s.

Computerized banking system and latest communication devices are the most important elements for this country.

Foreign exchange operations of others banks are more dynamic and less time consuming. SIBL should take some initiative to complete with those banks.

Bank can provide foreign market report, which will enable the exporter to evaluate the demand for their products in foreign countries.

In opening A/C some additional documents are needed as compared with theoretical record. Like trade license, member of Dhaka chamber of commerce and industry (DCCL) in Dhaka city. Again some documents are not essential practically as referred in theory. For example, the photo of the person who will open A/C, and sometime introducer.

There is a rule to deposit at least an amount of money in case of opening an account. But it is not strictly followed. Sometimes more money is asked from a new customer who discourages him to open an account in the bank. I think the amount should be fixed at a level that is not altered from customer to customer.

In case of crossing cheque I did not observe any crossing with “Not negotiable” as much as I stayed in bank orientation. Though theory have been given emphasis on the effect of “A/C pay only” and “not negotiable”. The role of “Not negotiable” is not so much. There is no provision in law regarding “A/C payee crossing”. But it has been developed in practice. If the words, “A/C payee” are added to a crossing, it becomes an A/C pay crossing.

The degree of relationship between banker and customer determines how much theory is deviated from practical work.

When a client try to open an A/C he must have to need an introducer, sometime it may create a problems for the clients.

Under this department, practice strictly supports theories. There is not too much discrepancy between them. All the functions of Account Department provided by SIBL Principal Branch are based on accounting theories and procedures.

In case of amortization there is no pre-determined rate on which it will be charged. It fully depends on the decisions of the executives of Accounts Department or the instruction of H/O.

In case of depreciation only the straight-line is to be followed, but there are other methods of charging depreciation, such as-double decline, sum year-digit methods etc are used as method of depreciation. These are not followed by SIBL PRINCIPAL except the straight line method.        This department plays a vital role in the management information system. Management collects different types of information from this department.

Number of brunches is very limited of this Bank. They have to increase the number of brunches at various key points of the country.

There should be a Recovery Unit to manage directly accounts with sustained deterioration. To encourage Recovery Unit incentive program may also introduced.

Conclusion

 The overall banking operation system of SIBL  is satisfactory. Social Investment  Bank Limited (SIBL) action program is directed towards development of an authentic participatory Economy beyond Market Economy. The family empowerment credit program of SIBL is gaining ground at the grass root level in Bangladesh. Family empowerment micro credit and micro enterprise program has been designed in a manner so as to make finance, production, marketing, trading, local specific survey and resources as well as moral suasion in one package. In SIBL credit conveys the totality in life and clearly linked to social context and cultural setting in conformity with Sharih.

A banker can not sleep well with bad debts in his portfolio. The failure of commercial banks occurs mainly due to bad loans, which occurs due to inefficient management of the loans and advances portfolio. Therefore any banks must be extremely cautious about its lending portfolio and credit policy. So far Social Bank Limited has been able to manage its credit portfolio skillfully and kept the classified loan at a very lower rate —thanks goes to the standard and stringent credit appraisal policy and practices of the bank.
But all things around us are changing at an accelerating rate. Today is not like yesterday and tomorrow will be different from today. Given the fast changing, dynamic global economy and the increasing pressure of globalization, liberalization, consolidation and disintermediation, it is essential that Social bank limited has a robust credit risk management policies and procedures that are sensitive to these changes. To improve the risk management culture further, Social bank limited should adopt some of the industry best practices that are not practiced currently.There is a built in provision vertical social mobility with provisioning for social subsidy. It is thus felt that the linking credit to social goals and assignments will have far-reaching implications for development of the alternative concept of new participatory economics in the 21^st Century and there by laying the foundation of new theories of income, output and employment.