Introduction
Retail banking is a major source of earning for Prime Bank. The principal issue to be considered while giving the facilities to individual consumer or to groups is the opportunity associated with such activities. Retail banking opportunity is analyzed through considering a number of factors involved in it. All financial institutions have their individual way of measuring and managing opportunity to keep it at the highest possible level.
Objective:
The objective of this report is to focus on two broad issues. One is to briefly look at Prime Bank Ltd and understand the whole banking process, keeping close attention on their culture. The second objective and the main issues of this report is as follows-
To briefly discuss about the current customer satisfaction level after increasing some charges and fesses.
Scope:
The report limits its scope to Standard Chartered Bank only.
Limitations:
Customers financial Information and information at the bank is confidential & critical.
Total customer satisfaction level judged by statistical measurement no such financial judgment is used here.
Methodology:
Approach:
Prime bank Ltd is the leading Local bank in Bangladesh. The report is based on both primary and secondary research. The secondary research provided the main input for the report. This provided a theoretical basis of the report. The primary research was done to know about the banks working procedures and different segments of banks.
Primary source:
Primary data was collected form the users of software T24 Software. Head of Retail and respective unit heads are interviewed who are using this software to analyze the Condition of Retail Banking.
Secondary source:
The secondary data has been collected from the different publication and brochures of Prime Bank Ltd. To clarify about different product Internet, different articles published in the journals & magazines are used.
Sample Information:
Sample is collected randomly from department of Prime Bank Ltd.
Data Collection Method:
For the organization part information has been collected through different published articles, journal, and brochures. Formal questionnaire for data collection is used for better understand of customers’ current satisfaction level after the charges increased by bank. Basic company Information is collected through informal discussions with Relationship managers & respective Unit heads of SCB.
Data analysis:
In the organization part information is provided in a descriptive manner. In the project part data analysis has been done into two parts. One is the data presentation. The second part is analysis.
Organization part
PRIME BANK LTD: AN OVERVIEW
Prime Bank Ltd. is operating as a scheduled bank under the banking license issued by Bangladesh Bank, the Central Bank of the country on April 17, 1995 through the opening of its Motijheel Branch at Adamjee Court Annex Building, Motijheel commercial area, Dhaka-1000. PBL is now offering a number of credit facilities to its customers with a view to support its clients for converting there dream into real-life deeds. The recent offers of PBL includes: General Loan Scheme, Consumer Credit Scheme, Lease Finance, House Building / Apartment Loan Scheme, Hire Purchase, Advance against Share, and Small and Medium Enterprise (SME) Loan Scheme.
Well-managed investment/ credit risk grading systems of PBL promote bank safety and soundness facilitating informed decision-making. Grading systems measure investment/ credit risk and differentiate individual investment/ credits and group of investment/ credits by the risk they pose. This allows bank management and examiners of PBL to monitor changes and trends in risk levels. The process also allows bank management to manage risk to optimize return.
Considering the national and international market scenario, PBL will follow differential sector wise growth policies. For example: Real Estate: Shrink, Transport: Shrink, Cement: Shrink, Textile: Grow, Telecom: Grow, Trade Finance: Grow, Construction: Maintain etc. At the same time, it will also discourage some business types like- businesses that directly or indirectly affect social / normal values, Military Equipment/ Weapons Finance, Highly Leveraged Transactions, Finance of Speculative Investments, Logging, Mineral Extraction/ Mining, or other activity that is ethically or environmentally sensitive.
To diversify the risk of investment PBL will not concentrate its investment to a particular sector through it is profitable. Rather PBL will go for investment diversification for employing fund in different sector to minimize risk. Bank will establish a specific industry sector exposure cap to avoid concentration in any one-industry sector by reviewing sector wise performance and market conditions from time to time.
Among the other operational activities of PBL, General banking & Foreign Exchange operations are the vital considerations. General banking department is the heart of all banking activities. This is the busiest and most important department of a branch, because funds are mobilized, cash transactions are made clearing; remittance and accenting activities are done here. In Prime Bank Ltd. SMR Branch, followings are the departments, which are being operating in a regular basis: Cash Section, Remittance section, Clearing Section, Accounts Opening section. Moreover, the operations of Foreign Exchange department takes place through four basic operational part of PBL’s day-to-day activities. They are- Import, Export, Foreign Remittance, International Division &Treasury.
In short, Prime Bank Ltd. is such a Commercial Bank which is rendering all commercial banking services to the customers in addition to make available Micro-Credit & SME finance to the millions of needy people of the country. As part of a Corporate Social Responsibility, it is playing a remarkable role to help the distressed people of the society in different welfare related activities.
At last, we can conclude that the organization has diversified its products in a significant manner to match its customer’s needs and satisfaction. There is no iota of doubt that PBL will go forward with its new missions and visions in the days to come.
INCORPORATION OF THE ORGANIZATION
In the backdrop of economic liberalization and financial sector reforms, a group of highly successful local entrepreneurs conceived an idea of floating a commercial bank with a different outlook. For them it was competence, excellence and consistent delivery of reliable service with superior value products. Accordingly, Prime Bank Limited was created and commencement of business started on 17th April 1995.
Prime Bank Ltd. is operating as a scheduled bank under the banking license issued by Bangladesh Bank, the Central Bank of the country on April 17, 1995 through the opening of its Motijheel Branch at Adamjee Court Annex Building, Motijheel commercial area, Dhaka-1000. PBL was actually registered under the Companies Act of 1913 with its registered office at 5, Rajuk Avenue, Motijheel commercial area, Dhaka-1000 which was later shifted to Adamjee Court Annex Building, 119-120, Motijheel commercial area, Dhaka-1000.
As a fully licensed commercial bank, Prime Bank Limited has being managed by highly professional and dedicated team with long experience in banking. They constantly focus on understanding and anticipating customer needs. As the banking scenario undergoes changes so does the bank and it adjusts and repositions itself to the changed conditions.
In its 10th year of operation in 2005, Prime Bank has made substantial headway in terms of business growth, profitability and establishing its image as one of the leading private commercial banks. Its march towards reaching greater heights in operation continues with full vigor and enthusiasm. Prime Bank has been graded as a top class bank in the country through internationally accepted CAMEL Rating.
COMMENCEMENT OF OPERATION
Prime Bank Ltd. started its operation on 17th April 1995 with an authorized capital of Tk. 1000 million and paid up capital of Tk. 100 million by a group of highly successful entrepreneurs who are established in various fields of economic and business activities. PBL is a fully licensed scheduled commercial bank set up in private sector in pursuance of the Government of Bangladesh to liberalize banking and financial services.
Till now, the branch network of Prime Bank Ltd. increased to 51 with 5 new branches in the last of the year 2005. Currently, there is no proposed branch. The commercial and investment services of PBL range from small enterprises to big business loans to all type of customers. Besides this, the bank actively participates in socio-economic development of priority sectors like agriculture, industry, housing, self-employment, etc. PBL is also a pioneer in providing consumer loans as well as financing the industries and transport sector through attractive leasing and higher purchase scheme.
VISIONS, MISSION AND GOALS OF PBL
Vision of Prime Bank Ltd.
To be the best Private Commercial Bank in Bangladesh in terms of efficiency, capital adequacy, asset quality, sound management, and profitability having strong liquidity.
Mission of Prime Bank LTD.
To build Prime Bank limited into an efficient. Market driven, customer focused institution with good corporate governance structure. Continuous improvement in bank’s business policies, procedures and through integration of technology at all levels.
Objective of Prime Bank Ltd.
Prime Bank aims to continuously update and develop its product line and range of services to cater to the needs of retail and corporate customers. To achieve this goal, efforts have been directed in three main areas:
Design and introduction of new products and services
Shaping and developing the system to face new challenges and emerging need of the market
Full implementation and utilization of the Bank’s excellence program which aims to provide service to customers.
Branches of PRIME BANK in Bangladesh
The bank established its business on 17th April 1995. The first branch was opened at Motijheel area in Dhaka. Now the total number of branches will be 71 at the end of the year 2008. PBL divided its branches network into six zones i.e. Dhaka, Chittagong Khulna, Rajshahi, Sylhet & Barisal Arena with 38, 14, 2, 6, 10 & 1 branch respectively among these branches, 25 of them have been licensed by Bangladesh bank as Authorized Dealers in Foreign Exchange.
Motijheel
Foreigm Exchange
IBB Dilkusha
Mohakhali
Kawranbazar
Mouchak
Elephant Road
Gulshan
Bangshal
Narayangonj
Gonakdari
Moulvi Bazar
Uttara
Satmasjid Road
New Eskaton
Madhabdi
Banani
Islamic Banking Branch
Pragatisarani
Shimrail
Panthapath
Dhanmondi
Asad gate
Tongi
SBC Tower
Mirpur- 01
Tangail
Asulia
Bijoy Nagor
Ring Road
Pallabi
Bashundhara
Joypara
Adamjee EPZ
Bhairab
Mynensingh
Organizational Structure of PBL
Chairman
Board of Directors
Executive Committee
Managing Director
Additional Managing Director
Deputy Managing Director
Senior Executive Vice President
Executive Vice President
Senior Vice President
Vice President
Senior Assistant Vice President
Assistant Vice President
First Assistant Vice President
Senior Executive Officer
Executive Officer
Principal Officer
FUNCTIONAL STRUCTURE
The functions of GSD are classified as Establishment and General Banking (GB).
General service division
The main function of GSD is to procure and supply the tangible goods to branches of PBL. Those are:
Tangible functions of opening a branch, for example, interior decoration, making lease agreement
Print all security papers and bank stationeries, forms, registers and distribute them to the branches
Purchase and distribution of bank’s furniture and fixtures
Find out the demand of equipment from the branches and divisions and arrange the purchase and delivery of them to the branches concerned
Install and maintain different facilities in different branches.
Head office accounts
Its deals with the Head Office transactions with banks and its different branches and these are recorded under the following headings:
Income and expenditure positioning: It maintains all the income and expenditure information
Cash section: It handles cash expenditure for office operations and payments.
Bills section: It deals with inland bill transactions.
Salary and wages section: Salary and wages of head office executives are given from this account.
Provident fund: Employee provident fund are maintained here.
Consolidation of branch accounts
All branches of PBL have to periodically send their income and expenditure, profit and loss accounts to head office. This division consolidates all these information and makes statements to submit to Bangladesh Bank.
Credit division
The main functions of this division are:
To Manage PBL’s credit portfolio
Receive credit proposal from branches
Appraise and approve the proposals
Sanction letters and send them to branches
Monitor and follow up the loans and advances provided by the bank
Set up prices for credits and ensure their effectiveness
Prepare various statements to submit to Bangladesh Bank
International division
This division is responsible for monitoring and supervising the foreign exchange dealings of the bank. It performs the following functions:
Making guidelines and frameworks for foreign dealings complying the rules of Bangladesh Bank
Circulating instructions of Bangladesh Bank
Maintaining correspondence with foreign banks and exchange houses with which it has exchange arrangement
Maintaining NOSTRO accounts with banks in abroad
Fixing and sending foreign exchange rates to Authorized Dealer (AD) branches and Bangladesh Bank.
Treasury
Treasury is considered to be an important division for income generation purpose within the head office. The treasury of PBL continues to efficiently manage bank’s cash flow. It optimizes the investment of the bank’s excess liquidity. Treasury is also expected to provide quality services and products to meet the demand of the customer needs and play a major role in raising bank’s income.
Computer division
This division operates and keeps the record of all transactions, assets, liabilities of PBL by using integrated software. Though the technology of PBL is not advanced, the computer division tries to provide the following functions:
Supply and installation of computer as per requirement
Design software to support accounts operation
Train the officers and employees about the operation of different software
Updating the software if there is any lagging in its operation.
Marketing division
There are two types of marketing division. These are:
Asset Marketing: It refers to various kinds of loan and advances. This division maintains communication with corporate clients gives incentive to take loan from PBL and approaches them to borrow from PBL in profitable projects
Liability Marketing: This refers to marketing for collecting funds through buying of depository products from large depositors. The division communicates to the persons or organization having excess fund of deposit, informs them about the attractive features of the depository products and convince them to invest in PBL in various deposit scheme.
HR divisions
The Human Resource Division performs the activities related to administration and personnel. The main functions of HRD are:
Selection and recruitment of new personnel
Appropriate placement of human resources
Maintain the detail about transfer, promotion and leave of personnel
Training and development of human resource
Keeping employee records and personal file
Taking disciplinary action if necessary
Committees and group division
Prime Bank Ltd. has both democratic and consultative decision making process. The subordinates are given chance to participate in the goal and objective setting of the bank. In this regard, there are three committees functioning in the bank. These are:
Policy Committee: In this case, the committee members are drawn from the Board of Directors. The committee reviews the principles, policies, rules and gives a decision which later requires the approval of the Board.
Executive Committee: This committee consists of the members of the Board. To approve the matters beyond the delegation of the board, this committee exercises the power delegated by the Board from time to time.
Management Committee: This committee consists of the Managing Directors and Head Office Executives. They discuss about the progress and improvement on the guidelines regarding deposit, loans, gives different ideas, decision regarding various issues.
Performance
From the very beginning of its journey, PBL is growing immensely. Its capital base is as solid as its profit is high. Not only these two, is almost every aspect of this bank very strong in the context of our country. The following table will give a clear idea about the strength of PBL and its continuous growth.
Investment Facilities Offered by PBL
PBL has formulated the following Loan Schemes
General Loan Scheme
Lease Finance
House Building / Apartment Loan Scheme
Small and Medium Enterprise (SME)
Consumer Credit Scheme
Hire Purchase
Advance against Share
General Loan Scheme
Depending on the various nature of financing, all the lending activities have been brought under the following General Loan:
Short term Loan
Medium term Loan
Long term Loan
The loans are allowed to individual/firm/industries for a specific purpose but for a definite period and generally repayable by installments fall under this head. This type of lending are mainly allowed to accommodate financing under the categories (i) Large & Medium Scale Industry and (ii) Small & Cottage Industry. Very often term financing for (1) Agriculture (ii) Others.
Lease Finance
Lease financing is one of the most convenient long-term sources of acquiring capital machinery and equipment. In a capital scarce economy like ours, Lease Financing is suitable for firms to acquire Capital Machinery, Equipments, Medical Instruments, Automobiles etc. And thereby employ their own resources more advantageously in some other investments.
Objective:
Prime Bank Ltd. has introduced the lease finance with the following objectives:
01. To assist the genuine and capable entrepreneurs for acquiring Capital Machinery and Equipments to undertake enterprises without equity.
02. To encourage the new and educated young entrepreneurs to undertake productive venture and demonstrate their creativity and thereby participate in the national development.
03. To participate in the industrial development of the country.
Eligibility for Availing Lease finance:
All genuine entrepreneurs having adequate experience and expertise are eligible to apply for Lease Finance under the scheme. The amount of Lease Finance will not generally exceed Tk. 1.00 crore, but in exceptionally good cases, the limit can reasonably be exceeded on condition that the Bank will depute an officer for close and intensive supervision of the project. In other cases of Lease Finance for amount below Tk. 1.00 crore, an officer of the Bank will supervise a number of projects at a time according to convenience.
Documents & Security:
The entrepreneur will be required to provide the following securities:
01. The lease items will remain in the name of the Bank i.e., Bank will be the sole owner of the leased items.
02.Collateral securities having liquidation value covering at least 100% of the amount of finance.
03.Deposit of listed Shares, National Savings Certificates, ICB Unit Certificates, Assignment of Life Insurance Policies, Bank Guarantee, Insurance Guarantee etc. will also be acceptable as collateral securities.
House Building / Apartment Loan Scheme
Loans allowed to individual/enterprises for construction of house (residential or commercial) fall under this type of advance. The amount is repayable by monthly installment within a specified period. Such advances are known as Loan (HBL-GEN).
Loans allowed to our Bank Employees for purchase /construction of house shall be headed Staff Loan (HBL-STAFF).
Small & Medium Enterprise (SME)
There are many small and medium entrepreneurs in the country that have innovative idea, spirit and potentiality to do something productive for local consumers as well as export abroad. They can generate income and contribute to the GDP. They may also provide employment to other people. Development and growth of Small and Medium Enterprise is vital for national development.
In view of the above a credit scheme titled “Small and Medium Enterprise Credit Scheme” has been formulated as follows. It may also be mentioned that USAID has approved PBL to receive their guarantee facility to lend money to Small and Medium business Houses. 50% of losses, if any, be paid by USAID.
Objective:
01. To provide credit facilities to the small and medium size entrepreneurs located in Urban & Sub-urban areas and easily accessible by our Branches.
02. To encourage the new and educated young entrepreneurs to undertake productive venture and demonstrate their creativity and thereby participate in the national development. To flow credit for creation of employment and generation of income on a sustainable basis through development of small & medium enterprises.
03. To assist potential entrepreneurs to take part in economic activities so that they can improve their living standard.
04. To reduce dependence on money lenders;
05. To make the small & medium enterprises self– reliant;
06. To develop saving habit and making acquaintance with banking facilities.
07. To inspire for undertaking small projects for creation employment through income generating activities.
. Consumer Credit Scheme
In order to provide financial assistance to the limited income group for raising their standard of living by acquiring domestic durables like Refrigerator, T.V., Washing machine, Furniture, Computer, Motor Car, etc., we have introduced a Scheme to improve the quality of life particularly of the fixed income earner of the society and this scheme is known as Consumer Credit Scheme.
There are a number of credit facilities under this Head. They are shown below:
Figure 3: Consumer Credit Schemes Offered By PBL
Graph 1: Sector-wise Retail Loan distribution
(a) Household Durable Loan
Household durable loan will be sanctioned against guarantee of third parties acceptable to the bank or pledge of FDR, Saving instrument of Banks and assignment of salary where applicable.
Loan Limit and Period of Loans
Name of the Item Loan Limit Duration of the Loan
Motor Cycle Tk. 1,00,000 2-yrs
PC/Lap Top Tk. 1,00,000 2-yrs
Photocopier/Fax Tk. 1,00,000 2-yrs
Other Item/Furniture Tk. 5,00,000 3-yrs
(b) Doctors Loan
Any Bangladesh citizen who is a graduate in Medical Science / Dentist / Eye / Allopathic / General Practioners desiring to set up chamber, medical store with necessary medical equipments and to become self-employed have the opportunity to take this loan.
(c) Any Purpose Loan
This scheme is to meet the emergency need for fund by fixed income group of salaried person in Govt./Semi govt. /Autonomous bodies/ Multinational Co./ Banks/Insurance/Financial Inst./Educational Inst. with confirmed 3-years service ahead. Letter of introduction including name, fathers name, designation, date of birth, date of joining, place of posting, date of last promotion, date of retirement, basic salary, total emolument, take home salary etc. will be required. This scheme is only for service holder.
Loan Limit and Period of Loans
Type of Customer Loan Limit Duration of the Loan
Salaried Person Tk. 1,50,000 2-yrs
(d) Travel Loan
This scheme is for meeting fund for travel purpose of salaried person in Govt./Semi govt. /Autonomous bodies/ Multinational Co./ Banks/ Insurance/ Financial Inst./Educational Inst. with confirmed 3-years service ahead and businessman having adequate cash flow.
Loan Limit and Period of Loans
Type of Customer Loan Limit Duration of the Loan
Salaried Person/ Businessman Tk. 2,00,000 3-yrs
(e) CNG Conversion Loan
This scheme is to meet the funds requirement for CNG conversion of vehicles for those who are salaried person in Govt./Semi govt. /Autonomous bodies/ Multinational Co./Banks/Insurance/Financial Inst./Educational Inst. with confirmed 3-years service ahead, businessman having adequate cash flow and corporate Bodies.
Loan Limit and Period of Loans
Type of Customer Loan Limit Duration of the Loan
Owner / Valid user of the vehicle Tk. 60,000 1.5-yrs
Corporate Bodies Tk. 1,00,000 1.5-yrs
(f) Car Loan
Car Loan will be sanctioned against Registration of the Vehicle in the name of the Bank. Instead of down payment, the Customers shall have option to avail loan against their FDR or any other savings instruments up to 90% of the loan amount.
Loan Limit and Period of Loans
Name of the Item Loan Limit Duration of the Loan
New Vehicle Tk. 40,00,000 5-yrs
Recondition Vehicle Tk. 15,00,000 4-yrs
Bus / Truck for Corporate Bodies for own use only Tk. 40,00,000 5-yrs
(g) Advance Against Salary
This scheme is for salaried Bangladeshi person in Govt./Semi govt. /Autonomous bodies/ Multinational Co. / Banks / Insurance / Financial Inst. / Educational Inst. with confirmed 3-years service ahead. A Letter of introduction including name, fathers name, designation, date of birth, date of joining, place of posting, date of last promotion, date of retirement, basic salary, total emolument, total in PF, take home salary etc. will be required. Loan limit is 8 times of gross salary who have Salary A/C with us and 6 times of gross salary who have not Salary A/C with us subject to highest Tk. 3.00 lac.
Loan Limit and Period of Loans
Type of Customer Loan Limit Duration of the Loan
Salaried Person Tk. 3,00,000 2-yrs
(h) Marriage Loan
This scheme is to meet the fund requirement for marriage purpose of salaried person in Govt./Semi govt. /Autonomous bodies/ Multinational Co./Banks/Insurance/Financial Inst./Educational Inst. with confirmed 3-years service ahead and businessman having adequate cash flow.
Loan Limit and Period of Loans
Type of Customer Loan Limit Duration of the Loan
Salaried Person/ Businessman Tk. 3,00,000 3-yrs
(i) Hospitalization Loan
Hospitalization loan will be provided for treatment purpose or surgery where hospitalization is necessary. The loan shall be available for the salaried person, i.e., employee of the Govt. Organizations / Semi-Government Organizations / Autonomous Bodies / Multinational Companies / Banks / Insurance Companies / Educational Institutions / Corporate Bodies.
Loan Limit and Period of Loans
Type of Customer Loan Limit Duration of the Loan
Salaried Person Tk. 5,00,000 2-yrs
(j) Education Loan
For higher education parents of a student can apply for the loan. Here, the applicant would be the guardian having income and the beneficiary would be the children of that applicant. If the applicant is a service holder then the applicant’s monthly income must be minimum Tk.12000 and if the applicant is self-employed then the applicant’s monthly income must be Tk.25000 at a minimum. To be eligible the applicant should have a bank account in any bank with in Bangladesh and should have satisfactory transaction. The age limit of the applicant must be between 25-60 year (at the time of repayment). Maximum loan sanctioned for this purpose is 5 lac. Maximum loan period is 4 year.
(k) Advance Against Share
In order to contribute to the development of the Capital Market of the country Prime Bank Limited extends credit facilities against pledge of Shares to the individuals as well as to the Member of DSE & CSE.
Terms & Conditions:
1. For availing of credit facilities against pledge of shares the intending borrowers shall deposit shares of at least three (3) Companies which are preferably registered in his/her name.
2. Credit facilities in the form of Secured Overdraft (SOD) Limit may be allowed up to 50% of the Value of shares pledged calculated on the basis of current market prices or previous 6 months’ average market prices, whichever is lower.
3. In case of ICB Unit Certificates SOD limit up to 80% of the face value Certificate may be extended.
4. The Share Certificates must be accompanied by Form -117 containing the signature of the Shareholders duly checked and verified.
5. The maximum ceiling shall be Tk. 20.00 Lac for individual borrowers.
Hire Purchase
Hire Purchase is a type of installment credit under which the Hire Purchase agrees to take the goods on hire at a stated rental, which is inclusive of the repayment of Principal as well as interest for adjustment of the loan within a specified period.
Master Card
Prime Bank Limited obtained Principal Membership of Master-Card International in the month of May 1999. Within a period of 6 months, the bank successfully launched Master Card-Credit Card, which created a new dimension in its customer service and consumer financing.
Prime Bank Limited issues 4 types of cards. These are Gold Local & International and Silver Local & International. Local cards can be used in Bangladesh only.
Followings are the main feature of MasterCard Credit –
Prime Bank Ensure High Level of Security by inserting your Photograph on the Card.
20 to 50 days credit form the date of transaction. When you receive your monthly statement, you can either choose to pay in full or just minimum due amount shown on the statement. No interest is charged if you pay in full within payment due date.
24 hours a day, 365 days worldwide service.
No joining/administrative fees.
Waiver of annual fees for International Card: If you accumulate 20,000 Prime Bank Bonus Point for your Gold Card or, 10,000 Bonus Point for your Silver Card in a year then you enjoy our Card without fees ($ 1 purchase: 1 Bonus).
Cash advance facilities.
Interest on Loans and Advances
Bank will compete with other financial institutions in the country. So it cannot fix up its interest rate unilaterally. As far as possible the terms and conditions and especially interest rates of other banks should to be taken into consideration while fixing its rate of interest on different types of advances and loans; Interest on various lending categories will depend on the level of risks and types of security offered. It should be borne in mind that rate of interest is the reflection of risks in the transaction. The higher the risk, the higher should be the interest rate. Preferably all rates should be commensurate with the cost of funds plus a reasonable margin of profit. Effective yield can be improved to the extent the borrowers are required to maintain deposits to support borrowing activities.
Important Legal Documents
Some important legal documents are given below:
Promissory Note
Demand Promissory Note Delivery Letter
Letter of Disbursement
Letter of Installment
Letter of Guarantee
Letter of Continuity
Pledge of MTDR
Letter of Hypothecation
Letter of undertaking
HP Agreement
Balance Confirmation Letter
Credit Risk Grade sheet
Well-managed investment/ credit risk grading systems promote bank safety and soundness facilitating informed decision-making. Grading systems measure investment/ credit risk and differentiate individual investment/ credits and group of investment/ credits by the risk they pose. This allows bank management and examiners to monitor changes and trends in risk levels. The process also allows bank management to manage risk to optimize return.
A Real-Life Case on CRG Calculation & Loan Sanction Process
XYZ Limited (the original name of the organization is not being used because of preserving the confidential promises of the customer and the bank), a computer selling firm applied for a short-term loan at 28th January, 2008 in order to fulfill their working capital requirement for a short-span of time. In order to evaluate their performance and ability to repay the loan the SMR branch of PBL conducted the following CRG calculations For XYZ Ltd.
Charging Security
Third party collateral should not be encouraged. As per existing law no equitable mortgage is permitted. So the collateral security, if it is land and building, should be registered mortgaged with the Bank.
In case of limited company 1st charge should be created on all the fixed and floating assets of the company with Registrar of Joint Stock Companies and Firms (RJSC). In case of syndicated financing pari-passu charge should be created with RJSC.
In case of taking FDR/TDR of other Bank as security optimum care should be taken. Lien Marketing of FDR must be ensured from the issuing Branch. Lien marketing must be confirmed from Area Office/ Regional Office/ Zonal Office/ Head Office of the issuing Branch of the concerned FDR/TDR. In this case Bangladesh Bank letter No. Ma Lo Pro Bi-267/2004-3937 dated 19.10.2004 should be followed.
The common methods of charging securities are:
Lien: Lien is the right of one person to certain goods and securities in his possession belonging to another until certain legal debts due to the person retaining the goods are satisfied. In other words, it is the right of the creditor to retain the goods and securities in his possession, belonging to a debtor, until the debt due is paid. Lien dose not give the power of sale but only to retain property.
Hypothecation: The mortgage of movable property is called hypothecation. But hypothecation differs from mortgage in two aspects. Firstly, mortgage relates to immovable property whereas hypothecation relates to movables. Secondly, in a mortgage, there is transfer of interest in the property to the creditor but in hypothecation there is only obligation to repay money and no transfer of interest.
Pledge: The usual method of obligation a title to goods offered as security is by way of pledge. In pledge the ownership remains with the pledger. It is only a qualified property that passes to the pledge who acquires a special priority and lien that is not of ordinary nature and, so long as his loan is not repaid, no other creditor or authority can take away the goods or its price. In case of default the pledge has the power to sell the goods after giving due notice.
Assignment: An Assignment means transfer of an existing or future right, property or debt by one person to another person. The person who assigns the right, property or debt is called the assignor. The person to whom the right etc is transferred is called the assignee. It is same as mortgage with the only difference that in a mortgage there is always a right of redemption but in an assignment it is provided by a separate agreement.
Mortgage: Mortgage is another method of charging. This type of charging is done in case of immovable property. Immovable property includes land and things attached to the earth like trees, building and fixed machinery. In SIBL, they mainly consider two types mortgage. These are given below
Simple Mortgage
Register Mortgage
Guideline to Prepare Investment Proposal
To prepare and sending the proposal at IRM at Head Office, RM should follow following instructions:
1) Application of the client (in A4 size white paper in case of individual and in letter Head pad in case of business concern) with original photograph(s) duly attested by the Branch Incumbent. An authorized Official of the Branch also must verify applicant’s signature.
2) IF-48& IF-49 form (duly filled in) along with supporting papers.
3) Copy of valid Trade License of the business concern and TIN certificate duly authenticated by an authorization Officer of the Branch.
4) Copy of registered Partnership deed is required in case of partnership concern.
5) Visit report of the business concern stating the overall conditions of the business of the applicant. This report should contain, among others, following information (at least for one year): a. Sales b. Purchase c. Stock Position d. Godown Position e. Profitability and f. Staff Position.
6) Up to date stock statement showing items wise quality and value duly signed with date. Old and obsolete stock to be discarded. A declaration to be furnished in this respect that the stocks are free from any encumbrances and not charged anywhere. If charged, the name and address of financial institution/ Bank, extend of charge to be mentioned.
7) CIB inquiry form (duly filled in) for onward submission to Bangladesh Bank. Branches are advised to send the CIB inquiry form at least 15 (fifteen) days before sending the proposal to Head Office.
8) Current Account statement of the client preferably for one year but at least for six months.
9) In case of private Limited Company, copy of company’s memorandum and articles of association, certificate of incorporation duly attested by an authorized officer (RO) of the Branch and a resolution of the company’s Board of Directors regarding obtaining investment facilities from SIBL to be furnished. For a public limited company, certificate of commencement of business is to be furnished in addition to the requirement as in case of private limited company. Latest shareholding certificate issued by Registrar of Joint Stock Companies and Firms and any changes thereafter to be submitted.
10) Copy of audited income statement and balance sheet preferably for last 3 years duly attested by an authorized officer of the branch is to be submitted. In case of new company projected balance sheet for next three years is to be submitted
11) LRA in full format for investment facilities for tk.50.00 lac and above is a must.
12) A declaration of assets (immovable and movable) giving detail description of the property/ partner/ directors to be furnished. If there is any charge on any of the property by any bank/ DFI, that is to be clearly mention. Similarly declaration of liability to be submitted mentioning therein the name o the bank, nature of investment/ credit limit being enjoyed, and extent of outstanding, overdue or classified amount, if any. In case of no liability ‘NIL’ liability statement to be given.
13) For mortgage able property, copy of Title Deed, BIA Deed, mutation parcha, up to date rent receipt, DCR etc. of the property to be submitted along with clear-cut Mouza map.
14) Legal opinion and Non-Encumbrance Certificate (NEC) of the proposal collateral security. Legal opinion must be based on original documents.
15) In case of 3rd party collateral letter of consent along with photograph of the owner of the property offered for mortgage to be submitted. Letter of consent must incorporate the schedule of the property.
16) Valuation certificate is to be submitted in the Banks format. Where a survyor firm makes valuation, separate valuation is also to be made by the Branch on the basis of their own findings and judgment.
17) Where survey firm makes valuation, the surveyor must put comment in their report about the possession and ownership of the land on the basis of their discussion with the owners of the property offered for mortgage and discussion with local people. If feasible, they may take photograph of the owner of the property and submit the same with the report.
18) A declaration to be given if the applicant/ client have any sister concern or business firm having interest therein. If so, the client of interest or shareholding and liabilities of the concern with name of Bank/ DFI to be mentioned.
19) In case of applicant for investment facility relates to working capital for industries, the following to be submitted:
a. Assessment of working capital requirement based on installment present working capacity of production, requirement in quantity and value of imported and local raw materials at 100% capacity and the volume of cash/ credit purchase and sale.
b. List of machinery and equipments with year of purchase, cost price, written down value and present working efficiency.
20) In case of application for real estate financing, the followings are to be submitted:
a. Copy of approval layout plan along with approval letter of concerned authority,
b. Approved site plan.
c. Detailed cost estimation of construction.
d. Sources of fund to cover the construction cost.
e. Sources of repayment of Investment Amount with rent/Profit.
f. Present monthly income and expenditure statement of the individual/ business concern and expected monthly income from the project.
21) In case of project investment, the following additional papers/ documents to be submitted:
a. Project profile/ feasibility report.
b. Copy of appraisal containing marketing, management, commercial, technical and financial aspect of the investment project.
c. Approval/ permission of relevant authority as may be required.
d. Clearance from the Department of Environment is required.
e. No objection certificate from the local authority as to setting up of the proposed industry.
f. Building and machinery layout.
g. 3 sets of competitive price quotation from 3 different suppliers for the selected machinery and equipments monitoring which one is accepted.
h. For BMRE proposal, detailed particulars of existing machinery and equipments, year of purchase and value, present written down value and present working capacity along with audited Balance Sheet.
22) In case of large loan, the following papers to be submitted:
a. Latest Audited Balance Sheet and Profit & Loss Account
b. Cash Flow Statement
c. Fund Flow Statement
d. LRA in complete form
e. Declaration of Repayment Ability
f. For new cases projection of Profit & Loss for next 3 years.
Sending Proposal to Head Office
Branch than send the investment proposal to the Head Office for approval. The Manager, Managing Director, and Board of Director analyze of all the positive and negative part of the investment proposal. If the project is favorable than the Bank approve the proposal and send it to the Branch.
Investment Approval
The approval process must reinforce the segregation of Relationship management / Marketing from the approving authority. The responsibility for preparing the investment Proposal is rest with the RM of the Branch as well as the Corporate Banking Department (for project/ syndicated financing or large investment) at head office. Investment proposals should be recommended for approval by the RM team in the Branch and Corporate Banking (for project/ syndicated financing or large investment) department and to be forwarded to the approval team within the IRM at Head Office and to be approved by authority as delegated by the Board of Directors. IRM approval team will take necessary steps to get approval of the proposal from the competent authority. Total approval process is classified into two ways as under:
Proposal for other than Project and Syndicated Finance:
In this case RM (Relationship Management) team at Branch level will recommend and forward the proposal to Head Office IRM (Investment Relationship Management) Division for approval. IRM approval team after proper analysis of the proposal will prepare relevant note/ memo for approval of Managing Director directly or through recommendation of the management Committee. If the proposal is beyond the discretionary power of Managing Director, the Managing Director will place to the Executive Committee (EC) of the Board or to the Board of Director (BOD) the proposal. EC/ BOD wills advice the decision regarding the proposal to IRM. After getting approval from the competent authority IRM approval team will communicate the branch about the decision of the authority. Branch will then take necessary steps according to the communication/ sanction letter of the Head Office.
Proposal for other than Project and Large Finance:
Proposal under project or syndicated finance or large loan/ investment categories will be prepared, recommended and forward by RM at Branch to Corporate Banking at Head Office. Corporate Banking at Head Office also may prepare the investment proposal under large loan/ investment, project/ syndicated Finance. In both the cases, Corporate Banking will send the proposal to IRMD at Head Office with their recommendation for approval. Approval Department of IRMD after proper checking, risk analysis will prepare note/ memo for getting approval from concerned authority. If the proposal is beyond the discretionary power of Managing Director the proposal will be placed before the Executive Committee of the Board or before the Board of Director by the Managing Director, EC/ BOD will advice the decision regarding the proposal to IRMD. After getting decision from the authority IRM approval Department will communicate the same to Corporate Banking. Corporate Banking will communicate the same to the respective Branch to take necessary action.
Disbursement Process
Figure 5: Disbursement Process
Activities After Making Investment
Branch monitoring process will be started from the completion of documentation formalities. Monitoring/ recovery department/ cell will check the document status of the related investment account getting investment documentation checklist from documentation and custodian cell of the branch. If any deviation from the sanction advice is found, the monitoring cell will instantly bring it to the notice of documentation officers as well as the branch manager for immediate correction. A complain report will be prepared by the documentation officer jointly signed by himself and disbursement officer and to be sent to the investment monitoring cell at head office.
Follow up & Communication With the Client
Supervision and follow-up of advances are the direct responsibilities of the branch. Branch is the unit wherefrom the proposal is made for any advance, disbursements are made. The borrower maintains his account with the branch, operations are submitted through the account, and the borrower to the branch submits reports and returns.
In conducting follow-up branches have to follow the under noted common methods:
Keep a watch over the ledgers and accounts to ensure that operations are regular and as per procedure. Particular care should be aken when the balance in the account remains very near or goes beyond the drawing limit or there is no good turnover.
Keep watch over the inflow and outflow of fund.
Collect periodical reports, returns and information about the borrower and examine the activities of the project/ enterprise financed.
Ensure that security / collaterals have been obtained as per terms of sanction and valuation has been assessed correctly and the security is maintained properly.
Ensure that the security has been properly insured where required as per policy, procedure and practices,
Ensure that the documents have been obtained as per terms of sanction and as per procedure for such type of advance. If not, get the documents regularized.
Keep regular contact with the borrower both formally and informally and pay regular visits to the project/ enterprise financed.
Ensure that appropriate actions are taken in time to regularize the irregularities and recover the loan as per schedule.
Obtain periodical balance confirmation from the borrower and where necessary fresh documents are obtained as per procedure/ practice.
Keep watch over the repayment trend and see that the advance does not turn up as irregular or stuck up and becomes time-barred.
Task Related to CIB
The credit information that has so far been collected by Bangladesh Bank from scheduled banks and other financial institutions are not broad- based and systematized to be used by Bangladesh Bank, scheduled banks, and financial institutions. Government of Bangladesh and other agencies for credit policy and other purposes.
The Credit Information Bureau (CIB) of Bangladesh Bank has undertaken the task of collating and storing detailed credit information from scheduled banks and other financial institution in its proper prospective so that these can be exchanged among the scheduled banks, financial institutions and Bangladesh Bank for quick processing of new loan proposals and re-scheduling of existing loans.
The CIB has also been supplying credit information to be Government and other national and international organizations that are engaged in the formulation of monetary, economic and credit policy. The information so far collected by CIB is:
i. Debtor’s / Borrower’s Information (Segment-1)
ii. Owner’s Information (Segment-2)
iii. Group/ Affiliations Information (Segment-3)
iv. Credit/ Exposure Matrix or Financial Information (Segment-4)
v. Third Party Guarantors Information (Segment-5)
Inspection of Security
In order to ensure an effective supervision, it is necessary for the banker to take care of the following factors:
End-use of Fund: The banker has to see that the funds lent to the funds lent to borrower are used for the purpose for which they have been given. Any diversion of funds and deviation by the borrowers from the terms and deviation by the borrowers from the terms and conditions stipulated by banks has to be noticed and timely action has to be taken.
Monitoring of Borrowers Accounts: Careful monitoring often result in heading off trouble before it arises. For effective credit management, it would be adequate if borrower’s accounts are kept under a close watch. Bank should obtain in advance a list of usual suppliers of goods to the borrower.
Security: Through the banks are now expected to lay greater emphasis on the purpose for which the borrower needs money rather than security he can afford to give, security continues to be one of the most important factors which determines to a significant extent the banks willingness to lend money. So the bank has to see that the security offered is safe and continues to remain available for repayment of loan.
Process of Rescheduling & Waiver Proposal
Generally the Board of Director of the Bank discourage waiver of profit as well as compensation against any investment. In some cases the Branches have not take adequate securities to cover the investment, which has become overdue/classified due to non-payment by the client. In such situation, taking legal action against the client would not yield a better result, when the bank may consider waiver of a portion of profit and or compensation to induce the client to make a package deal for adjustment of the liability within a short span of time.
In case of renewal/ enhancement/ recasting proposal all related formalities stated as above to be observed. In addition to that following documents/ information to be furnished:
I. Compliance Report of previous sanction.
II. Lawyer Certificate to the effect that all mortgage papers, where applicable, and other required documentation formalities against the investment have duly been verified and found in order which will be countersigned by the Manager of the Branch as per instruction circular No. INV/05/02/012 dated 07.04.2005. No renewal proposal will be considered without this certificate.
III. Performance of Investment A/C as per following format:
Mode Limit Sanctioned Amount Disbursed Amount Realized Amount Outstanding Profit Earned
IV. Statement of investment Account to be submitted.
V. In this case Surveyor Report for valuation purpose is not required. But if a new Branch Manager has taken over the charge of the Branch, he should give a certificate regarding valuation made by during the tenure of his predecessor. New manager may prepare a fresh valuation certificate with proper justification.
Investment Monitoring / Recovery Cell
Monitoring and recovery cell at Branch will be responsible for monitoring and recovery of past due accounts of the Branch. The functions of monitoring/ Recovery Cell will be as under:
Conditions and Covenant Breach Monitoring
Monitoring of past due, Limit, Expiry and Documents Efficiency.
Determine Action Plan/ Recovery Strategy.
Taking appropriate steps for recovery the overdue
Ensure Adequate and timely investment loss provision, as per CL statement is made based on actual and expected losses.
Regular review of grade 6 or worse accounts.
Compliance of internal Audit/ Bangladesh Bank Inspection Report.
Preparation of Classified Loans
Classified Loans
A classified loan or commitment is one, which is classified as substandard, Doubtful or Loss as per policy of loan classification set by Bangladesh Bank or Head Office of the bank.
Loan Classification means to categorize the debt information in a systematic manner. But in true sense it is defined in terms of degree of risk associated with these loans. The objectives/importance of loan classification are:
• To find out Net Worth of a bank;
• To assess financial soundness of a bank;
• To calculate the required provision and the amount of interest suspense;
• Strengthen credit discipline;
• To improve loan recovery position and
• To put the bank on sound footing in order to develop sound banking practice in Bangladesh.
Position of classified loans and advances and other assets should be placed before the Board of directors of the bank.
The following are the broad definitions of the classified categories: however instruction issued by Bangladesh bank / Head Office of the bank regarding basis of loan classification and provisioning should be followed:
Figure 6: Classified Loans
Substandard
A well-defined weakness is present in loans f this category, which could affect the ability of the borrower to repay. This is clearly a troubled situation, for one reason or another, which requires immediate and intensive effort to correct and reduce the possibility of loss.
Doubtful
A serious doubt must exist that full repayment will not be forthcoming but the exact amount of the loss cannot be ascertained at the time of classification.
Taking Action if Default
In case of continuous investment, at least 30 days before of due date, the IMRC of the branch will issue a letter to the client informing the due date and will respect the client to adjust his liabilities within the due date. In case of term investment or installment basis investment IMRC of the branch will make a phone cell to the client before at least 10 days of the due date informing the client that the cheque which is already bank’s custody, will be placed on that date and requesting him to keep fund available in his concerned account so that the cheque will be honored. In case of past due accounts the IMRC of the branch will take the following steps:
Days Past DUE Action to be taken
1-15 Letter, verbal contact and persuasion over phone
15-45 1st reminder letter and follow up on serial no. 1
46-60 2nd reminder letter and single visit
61-90 o 3rd reminder letter mentioning warning on legal action
o Group visit by the team member of IMRC
o Follow up over phone
o Letter to guarantor
o Warning on legal action
90-120 Final reminder/ demand notice to be issued failing which permission to initiative legal action is to be sought from head office.
121 and above o Recovery efforts to be continued through verbal contract/ telephone call or any other suitable manner to be continued.
o Letter of different banks
o Taking action as per instruction of the head office.
Artha Rin Adalat Ain:
According to Artha Rin Adalat Ain2003 Section 12 (1): Sell of certain mortgage property by financial institution-
“If a financial institution wants to sell any property of the defendant which have been mortgage or kept lien or pledge when taking loan and the plaintiff has legal rights to sell the same or the same has been placed under the disposal of the plaintiff, the plaintiff shall not file any suit in the Artha Rin Adalat until the same has not been sold or adjusted with loan so granted to the defendant.”
“ Deposit the provision of subsection (1), if any financial institution file any suit in the Artha Rin Adalat without selling any mortgaged property through it was not under his possession and control, and the same shall be sold according to system mentioned earlier and the amount so received by selling should be adjusted against the debt and the same shall be sold according to system mentioned earlier and the amount so received by selling should be adjusted against the debt and the same should immediately be brought to the notice of the court”.
“When any financial institution granted loan to a defendant under mortgage of immovable or hypothecated movable property and has been empowered to sell the aforesaid property by power of attorney at the time mortgage, shall not file any suit in the Artha Rin Adalat until such property has been sold and has not been adjusted the sold amount so received against any debt or has failed to sell the property.”
GENERAL BANKING OPERATION
General banking department is the heart of all banking activities. This is the busiest and most important department of a branch, because funds are mobilized, cash transactions are made clearing; remittance and accenting activities are done here. Since bank is confined to provide the services everyday, general banking’. In Prime Bank Ltd. SMR Branch, the following departments are under general banking section.
Cash Section
Remittance section
Clearing Section
Accounts Opening section
Cash Section
Banks as a financial institution accept surplus money from the people as deposit and give them opportunity to withdraw the same by cheques, etc. but among the banking activities, cash department pay an important role. It does the main function of a commercial bank i.e. receiving the deposit and paying the cash on demand. As this department deals directly with the customers, the reputation of the bank depends much on it.
The functions of a cash department are described below:
Cash Payment: Cash payment is maid only against cheque. This is the unique function of the banking system, which is known as “Payment on Demand”. It makes payment s only against its Printed valid cheques.
Cash Receipt: It receives deposit from depositors in form of cash. So it is the “Mobilization Unit” of the banking system. It collects money only its receipts forms.
Cash Packing: After the banking our cash is packed according to the denomination. Notes are counted and packed in bundles stamped with initial.
Remittance Section
Carrying cash money is trouble some and rislky. That’s why money can be transferred from one place to another through banking channel. This is called remittance. Remittances of funds are one of the most important aspects of the Commercial Banks in rendering services to its customers.
Types of remittances:
Between banks and non-banks customers
Between banks in the same country
Between banks in the different centers.
Between banks and the central bank in the same country.
Between central banks of different countries.
The Main Instruments of Local Remittances:
The basic three types of Local Remittances are:
Pay Order (PO): PO gives the payee the right to claim payment from the issuing bank. The payment is maid from the issuing bank only. It is generally used to remit fund within the clearinghouse area of issuing branch. Paying Bank makes the payment through Clearing. Only commission plus VAT is charged.
Demand Draft (DD): It is an order of issuing bank on anther branch of the same bank to pay specified sum of money to payee on demand. The payment is made from the ordered branch. People used it to remit fund outside the clearinghouse area of issuing branch. Payee can also be the purchaser. The payment process of the paying bank is: a) confirm that the DD is not forged one, b) confirm with sent advice, c) check the “Test Code”, d) make payment. Only commission plus telex charge is imposed.
Telegraphic Transfer (TT):
In Telegraphic Transfer, issuing branch requests branch to pay specified money to the specific payee on demand by Telegraph/Telephone. Payment is made from the ordered branch. It is used to remit fund anywhere in the country. Payment process of the paying bank refers to: a) confirm issuing branch, b) confirm payee account, c) confirm amount, d) make payment, and e) receive advice. Charges include – Commission plus Telephone charge.
Clearing Section
Clearing: When the bill is within the range of local clearinghouse it is sent for collection through clearing. A clearing house is where locally operating scheduled assemble there inter bank transaction through the exchange of check, drafts & other demand instrument drawn on each other and received from their respective customers for collection. The banks clear the balances through the cheque of Bangladesh Bank. The dishonored cheques are sorted & returned with return memo. Clearing is held under two head: Outward Clearing, Inward Clearing.
@ Outward Clearing:
The instrument is received duly in the voucher/deposit slip to be recorded in the subsidiary book. The particular to the instrument is entered in the outward clearing register/computer. The instruments are arranged bank branch wise. The computer diskettes with the relative instrument are sent to our branch for clearing purpose.
The amount of the instrument receives from the branches & the clients are entered in the outward clearing register/computer and IBDAs are entered in the IBDA received register.
The clearinghouse book computer diskette is prepared in duplicate and the total is balanced with the clearing register/computer.
@ Inward Clearing:
The instruments drawn on our bank as received from other banks in clearinghouse are crediting the computer/clearinghouse book from the main schedule of the respective bank mentioning the amount and the number of the instruments.
Accounts Opening section
Accounts Opening Procedure:
The account should be properly introduced by any one of the following:
An existing savings/current A/C holder of the bank
Officials of the bank not below the rank of Assistant Officer.
A respectable person of the locality well known to the Manager/Operation manager of the branch concerned.
Receiving filled up application in the bank’s prescribed form mentioning what type of account is account is desired.
The form is filled up by the applicant himself/herself. Two copies of passport size photographs from individuals are taken; in case of firms, photographs of all partners are taken. Applicants must submit required documents and sign specimen signature sheet and give mandate. The legal officer verifies introducer’s signature and sign.
Authorized officer accepts the application.
Minimum balance is deposited (only cash is accepted)
Finally, the account is opened and a chequebook is issued to the account holder.
Deposit Schemes
PBL has formulated the following Savings Schemes for its customers:
Figure 7: Deposit Schemes of PBL
(a) Contributory Savings Scheme
This is a Savings Scheme in which a person gets the opportunity to build up savings by contributing monthly installments and receives an attractive fixed amount at the end of a specified term.
The Scheme is designed to help the fixed income group to save money and build up a sizable funds with which they can go for some income generating venture to improve the quality of their life and/or meet any future financial obligations.
(b) Education Savings Scheme
The educational expenses particularly the expenses for higher education are sharply increasing day by day in our country. Sometimes, the children are deprived of getting the desired level of education because of the inability of the parents to meet their educational expenses. But the parents would not feel any difficulty to defray such expenses if a proper financial planning is made much ahead of time.
Moreover, we are receiving demands from the Islamic minded people of our country for an attractive Savings Scheme on the basis of Islamic Sariah so as to encourage them to save in Islamic way for education of their children.
(c) Short Term Deposit
A short-term deposit (STD) account is a running account with amounts being paid into and drawn out of the account continuously. These accounts are called Demand Deposits or Demand Liabilities since the banker is under obligation to pay the money in such deposits on demand. Business Organization, Public Institution, and Corporate Bodies generally open these accounts. An individual person may open an STD account also. It is an interest bearing deposit. Interest is calculated on daily basis as per Banks Prescribed Rate and is credited to account on half yearly basis. Current interest rate on STD account is 5.00%.
(d) Double Benefit Deposit Scheme
Under this scheme a customer can keep a fixed amount of money for six year end of the maturity period the amount will become double. .Deposit of Tk. 25,000/- (Taka twenty five thousand) and multiplies thereof but maximum limit of Tk. 25,00,000/- (Taka twenty five lac) at a time will be acceptable under the scheme. The instrument shall be issued for 06 (six) years term. The instrument will be acceptable as collateral security against any investment subject to registering lien with the issuing branch. In case of instrument is lost the procedure for the issuance of a duplicate receipt will be the same as applicable in case of loss of FDR.
(e) Resident Foreign Currency Deposit Account
Persons ordinarily resident in Bangladesh may open and maintain Resident Foreign Currency Deposit (RFCD) accounts with foreign exchange brought in at the time of their return from travel abroad. Any amount brought in with declaration to Customs Authorities in form FMJ and up to US$ 5000 brought in without any declaration can be credited to such accounts. Interest in foreign exchange shall be payable on balances in such accounts if the deposits are for a term of not less than one month and the balance is not less than US$ 1000 or £ 500 or its equivalent.
(f) House Building Deposit Scheme
HBDS is given for the purpose of building houses, apartments or purchasing flats and so on. The tenor of the House Building Deposit Scheme will be 5/7/10 years. Minimum Equity building amount shall be Tk. 10.00 lac. The depositor will have the option to choose any installment size at the time of opening of the A/C. and will not be allowed to change the size of installment afterwards.
(g) Monthly Benefit Deposit Scheme
This is a Deposit Scheme where the depositor gets monthly benefit out of his deposit. The scheme is designed for the benefit of the persons who intend to meet the monthly budget of their families from the income out of their deposit. Deposit of Tk. 25,000.00 (Taka twenty five thousand) and multiples thereof, but maximum Tk. 25,00,000/- (Taka twenty-five lac) shall be acceptable under the Scheme. The Deposit shall be for a period of 5 (Five) years. The Principal amount is refundable on maturity.
(h) Fixed Deposit Scheme
Under this scheme customer can devote a fixed amount of money for one month, three months, six months or twelve months for interest rate of 7.5%, 11% or 11.5%. Treasury Division will deal with interest on Bank Deposit separately. For the Senior Citizenship Scheme 0.25% higher rate may be offered only for an amount of maximum Tk. 50.00 lac (maximum ceiling of deposit is Tk. 50.00 lac per customer).
(i) Lakhopati Deposit Scheme
Under this scheme, size of the monthly installments are Tk.250.00, Tk.500.00, Tk1285.00, Tk.2400.00 depositor will receive Tk.1,00,000.00 after a number of period depending on installment size .Higher the installment size lower will be the maturity period . When a depositor fails to deposit any installment, he/she will have to pay a fine @5% of the overdue amount payable at the time of depositing the next installment or Tk. 20/- whichever is higher. The clients are encouraged to give standing instructions to the Bank to deposit the monthly installments, debiting their CD/SB accounts maintained with the concerned Branch. In that case, no charge will be realized for such service.
(j) Foreign Currency Account
Bangladesh nationals residing abroad, foreign nationals residing abroad or in Bangladesh, foreign firms registered abroad and operating in Bangladesh or abroad, and foreign missions and their expatriate employees in Bangladesh can open Foreign Currency (FC) accounts. Local as well as foreign payments may be made freely from foreign currency accounts. Banks may pay interest on such accounts at rates determined from time to time.
(k) Prime Millionaire Scheme
This scheme is similar as Lackhopati deposit scheme only the installment amounts is larger and at maturity depositor will get 10, 00,000.00. Monthly installment shall be Tk. 12,465.00 /Tk. 7,890.00 /Tk. 4,570.00 for the tenor of 5/7/10 years respectively. In case of death of a depositor, the A/C. will cease to be operative and the amount deposited so far shall be paid to the nominee, and in the absence of nominee, to the legal heirs of deceased as per rules in force.
SWOT Analysis
SWOT analysis enables an organization to have a comprehensive insight its current position in the industry to its competitors. It provides the organization a scope to strategically improve its position in the market. Apart from data analysis, there was some information, which had been unfolded by observation discussion with the personnel of the CCS department Mohakhali Branch of Prime Bank Limited. Consequently on the basis of that information a SWOT analysis was done to recognize the strengths, weakness, opportunities and threat of Prime Bank Limited regarding CCS. SWOT analysis on CCS is discussed below:
STRENGTHS
Consumer Service
CCS has a good relationship with its clients. As a result of such service it has currently more than 9, 95, 297 customers highest in the private sector commercial Bank of our country.
Human Resource
CCS department has quality human resources. All officers are qualified and efficient and it makes its position stronger.
Quality of Asset
The asset of PBL is of very high quality. The major portion this asset is loan and advances. The default rate of PBL is 1.54% whereas the average default in Bangladesh is 30%. This proves that the credit risk of CCS very low.
Environment
The working environment of CCS department is very friendly and co-operative. There is no senior, junior, boss, employee and internee relationship all treated in the same way and mane reason of this department is its friendly environment.
WEAKNESSES
Technology
One of the major weaknesses of CCS department is the technology used by the Bank. There is no enough computers, telephones or fax machine in this department which often slower the pace of work.
Remuneration
The pay scale of employees in PBL is not competitive compared to other private banks of the country. The employees of PBL get compensation of around 60% of what other private banks for example Dhaka Bank, Southeast Bank etc offer to their employees.
Promotion
When an employee gets a promotion to the next level, he/she gets more compensation CCS department is regular in giving promotion, but the employees get late effect of this promotion.
OPPORTUNITY
Better Output
As CCs has trained human resource and proficient recruit, which will result in utmost output it properly utilized.
Functional Expansion
CCS department is growing very quickly. PBL is only bank that provide loan to low-income people, which cannot think HSBC, or Standard Chartered Bank.
Banking Software
Providing quality service is one of the major goals of PBL. To increase more operational efficiency in respect CCS, CCS activities will be more dynamic which can easily grab the market.
THREAT
Political Unrest
The political unrest as well as the law and order situation of Bangladesh is always a threat for banking industry. The current economic situation is very likely to get worse further. In this case, the whole banking industry is facing a big threat.
Level of Competition
Competition is always a major threat for any organization. In recent Years, the number of private bank is increasing. These banks always pose a threat for others by coming up with new product line, innovative technology, quality services etc. Thus the level of competition rises and creates threat for CCS department.
Strategies
Risk is the investments and returns thereon are interrelated. An investment Policy that emphasizes a high return must accept relatively high risk. Conversely, an Investment Policy that will tolerate only small amount of risk must be prepared to accept a relatively low return.
As such, it is really difficult whether to select a high return portfolio with high risk or low risk portfolio with a low return.
Nevertheless, considering all aspects following guidelines shall be followed as strategy for Bank’s Investment:
I. If two portfolios have the same risk but different returns, the portfolio having higher return shall be preferred.
II. If the two portfolios have the same expected returns, but different returns, but different degree of risk, the portfolio having lower degree of risk shall be preferred.
III. If one portfolio has both higher return and low risk than another, the first portfolio shall be preferred.
IV. Keeping in view the risk factor, the Bank shall maintain flexibility in determination of rate of return on investments on case to case basis in consideration of the risk element involving in the respective investments i.e., higher rate of return or taking higher degree of risk a comparatively low rate of return for asking lower degree of risk.
Discouraged Business Types
PBL will discourage following business types:.
Directly of indirectly affect social / normal values.
Military Equipment/ Weapons Finance
Highly Leveraged Transactions.
Finance of Speculative Investments
Logging, Mineral Extraction/ Mining, or other activity that is ethically or environmentally sensitive.
Lending to companies listed on CIB black list or known defaulters.
Counter parties in countries subject to UN sanctions.
Share lending
Taking an Equity Stake in Borrowers.
Lending to holding companies
Bridge loans/ investment relying on equity/ debt issuance as a source of repayment.
Investment Pricing
The pricing of investment products shall be judiciously and appropriately made taking in view the Bank Rate, cost of fund, risk factor involved, current investment prices of the banking sector, demand/ supply interaction of the investment products, socio-economic impact of investment products and national priority. Flexibility and competitiveness shall also be taken into consideration to ensure that the pricing is appropriate and competitive for easy marketing of the products, to yield fair rate of return on investments as well as uphold the social welfare objectives of the Special Investment Schemes. The pricing shall be reviewed and evaluated from time to time and be adjusted as per prevailing situation and experience.
Bank Issue Different type of guarantee. These are given below:
Tender guarantee
Performance guarantee
Shipping Guarantee
Customs & Accessory guarantee
Investment guarantee
In Investment Process five-core risks are
01. Credit Risk
02. Asset & Liability / Balance Sheet Risk
03. Foreign Exchange Risk
04. Internal Control & Compliance Risk
05. Money Laundering Risk
Branch’s Investment Administration Department will be comprised of four unit or cell:
o Disbursement
o Custodian Cell
o Monitoring/ Recovery Cell
o Compliance Cell
The Branch manager will act as coordinator of total investment procedures. He will look after works of the relationship management department as well as investment administration department of the branch.
Recommendations
People have no way but to come to the Banks for the risk minimization of individuals’ assets and for higher financing, so the operations and way of holding policies need to be much sharpened. The ways can be recommended as:
Prime Bank should ensure adequate supply of modern technological instrument, such as, computers, access to Internet.
Prime Bank should arrange regular training on technological changes for its employees to be familiar with modern technological changes so that they can take it as a challenge to convert technological changes into organizational advancement.
Prime Bank may also go for online application procedure for its consumer credit loan that may reduce many paperwork, duplicity of work, and harassment of employees significantly.
The bank may also establish online tracking of customers’ creditworthiness through software. This kind of tracking will help to grade the customers by analyzing past records. It will help identify the creditworthiness of customers who have availed themselves for the second time or afterwards. It may happen that for transfer of one officer the new officer in charge may sanction a loan to a person of worse credit rating for his/her ignorant about the customer. Therefore initiation of such kind of application helps management taking better decision undoubtedly.
PBL should concentrate on Smoothing service and reducing time consumption. Therefore, PBL should recruit more employees at their branches.
They should invest at minimum possible risk because of the current economic condition of the whole world.
They should maintain Bangladesh Bank circular & ensure compliance.
PBL should invest in agricultural sector because it is more profitable project than others.
They can build a strong security system against any terrorism activities that will give safety to people’s life and wealth in the present crime prone world. Because bombing as terrorism is spreading all over the country and has made a big phobia among the people.
A complaint book regarding service should offer by the bank, and also accountability and proper monitoring which could strengthen the service.
A complaint book for the employees should be offered also, because complaints from the employees are being overlooked.
Interpersonal relationship needs to be built among the employees and superiors in the top level of management.
The rate of FDR should be increased which issue is becoming a vital reason behind the lessening of deposit level.
To encourage inward foreign remittance commercial banks may reduce the gap between B. C selling rate and TT clean rate and reduce the handling charge of foreign remittance.
Though Prime Bank developed a website for its customers and interested persons to inform about their products and services, it rarely updates its website. I think this kind of practice may misguide its customers about up to date information. Prime Bank can target its website as an important medium of advertisement for consumer credit products. Therefore should regularly update its website.
Finally, PBL should increase the remuneration package for the employee.
Conclusion
Banks play a very vital role in the economic development of the country. The popularity of banks is increasing day by day which leads to increase competition as well. Currently 52 Banks are operating in Bangladesh. All the Commercial banks are offering almost the same products and services and almost same their operation system. But the ways they provide the services are different from each other. So people choose their Bank according to their satisfaction and need. And they will prefer the bank of which service is easily accessible and understandable. One the other hand, Bank innovate new products and services to attract their desired customers.
In short, Prime Bank Ltd. is such a Commercial Bank which is rendering all commercial banking services to the customers in addition to make available Micro-Credit & SME finance to the millions of needy people of the country. As part of a Corporate Social Responsibility, it is playing a remarkable role to help the distressed people of the society in different welfare related activities.
They focus on dignified, prompt and personalized services being rendered to their customers. They believe in developing strong interpersonal relationship with each other. As such, they are morally bound to provide high quality banking services with the latest technology to obtain optimum return on shareholder’s equity ensuring safety of depositor’s money and making all out efforts to introduce their innovative Islamic Banking products to their existing and prospective customers. They are really happy that they have given enough emphasis to empower poor families to create income opportunity by providing financial support to make them self-reliant. They consider their services no less important towards improvement of the fate of deserving people in the society.
