Banking Strategy of BASIC Bank Limited

Banking Strategy of BASIC Bank Limited

In the beginning BASIC Bank Limited (Bangladesh Small Industries and Commerce Bank Limited) started its operation as a joint venture enterprise. The joint ventures were the BCC Foundation with 70 percent shares and the Government of Bangladesh with 30 percent shares. In 1992 the Government of Bangladesh took over 70 percent shares from the BCC Foundation.

Because BCC foundation being nonfunctional following the closure of the BCCI. After that Government of Bangladesh became 100 percent owner of the Bank. However, the Bank is not nationalized as well as it operates like a private bank as before.

The BASIC Bank Limited was established as a banking company under the company Act 1913 and launched its operation in January 1989.It is governed by the Banking Companies Act 1991 adjudged as one of the soundest banks in Bangladesh. From the beginning of the bank BASIC Bank is unique in its objectives because the bank mixes its development and commercial banking functions together. They maintain a steady growth in client base and also they maintain high retention rate of clients year by year for its products and services. Basic Bank diversified products in both liability and asset sides. Mainly they offer a wide range of lending products related to development of small and medium and commercial sectors to attract entrepreneurs from varied economic fields. Along with promotion of products special importance is given to individual clients through providing personalized services.

Basic Bank’s first priority is to develop the economic situation of the country; therefore the Bank has already made a distinct mark in the area of Private Sector Banking through personalized service, innovative practices, dynamic approach and efficient Management.

The BASIC Brand

BASIC’s superior service quality, strong corporate governance has given it an Excellent “Brand Image”. To continue to reinforce the BASIC’S Brand, BASIC Bank limited is continuously improving its customer service, corporate governance and CSR activities by remaining innovative and caring.

Bangladesh is a developing country. Most of the people in our country live in the poverty level. To develop our country’s economy situation we need more money and capital. We all know that Economic development of a country depends on its strong Banking and Financing Institutions. In our country Banks and Financial Institutions plays an important role to make our economic situation better than earlier. Also it plays an important role to develop our country’s infrustracture as well as bringing growth in people’s economic life.

Banking is now an essential part of our life. Banking may develop any country’s infrastructure, education, business, economy, communication etc. This is developed if the banking system is developed. BASIC Bank Limited plays important role in the development of business and industry to local area. The effectiveness of its role would depend on how efficiently the banks resources could be utilized.

Banks as the financial services industry is approaching full historical cycle. Originally the banking system operated as full service industry, performing directly or indirectly all financial services. Banks are direct agents to create opportunities for development in a country and provide large scale of employment opportunities(Journal of Business Research, 2012).

Strategic Priorities of BASIC

The Bank is focused on few strategic issues. They applied various policies, processes and activities to ensure continuous, sustainable and qualitative growth. The company believes that communication with, and feedbacks from its clients help it achieve its goal of providing world class products and services. It also constantly monitors its standards, and strives to exceed client’s expectations. Other strategies are as follows-

• Steady and sustainable growth.
• Investment in a cautious way.
• Adoption of new banking technology.
• To employ funds for profitable purposes in various fields with special emphasis on small scale industries.
• To undertake project promotion on identify profitable areas of investment.
• To search for newer avenues for investment and develop new products to suit such needs.
• To establish linkage with other institutions which are engaged in financing micro enterprises.

BASIC Branches

BASIC is operating all over the country with 65 branches. Most of branches are in Dhaka but they have braches in all the main cities like- Chittagong, Sylhet, Khulna, Jessore and Rajshahi, Comilla, Barisal, Bograetc ( Annual Report, 2011).

Profile of BASIC Bank Limited

1 Date of Incorporation : 2nd of August, 1988

2 Date of Inauguration of Operation : 21st of January, 1989

3 Name of the Chairperson of the Board : Mr. Sheikh Abdul HyeBacchu

4 Name of the Managing Director : Mr. KaziFaqrul Islam

5 Number of Branches : 65

6 Banking Operation System : Conventional Banking System

7 Technology Used : Member of SWIFT Online Banking KASTLE Core Banking System

8 Head Office : SenaKalyanBhaban (5th Floor) 195 Motijheel C/A, Dhaka-1000

Product & Customer Service

(a) Deposit Scheme

BASIC Bank always values highly the needs of people. To fulfill the savings desire of people/clients, they always think to develop and present initiative products. In line with these objectives they developed some innovative deposit products that will meet the savings need of the common people and at the same time Bank will mobilize individual level deposit to increase  loan able fund to make more investment in the productive sector that will ultimately contribute to overall economic development of the country. Keeping this view in mind BASIC has introduced the following deposit products to cater the savings needs for a rainy day of the common people:

• BASIC Double-Benefit Scheme
• BASIC Fixed Deposit Scheme
• BASIC Fortune Plus
• BASIC Saving Account
• BASIC Current Account
• BASIC Premium Plus Current Account
• BASIC Monthly Benefit Scheme
• BASIC School Banking Scheme

(b) Loan Scheme

• General Loan scheme
• Small and Medium Enterprise
• Cash Credit
• Sod ( small over draft against fixed deposit )
• Term loan

Credit risk

The word credit comes from the Latin word “Credo” meaning “I believe”. It is a lender’s trust in a person’s/ firm’s/ or company’s ability or potential ability and intention to repay. In a simple word Credit risk means a borrower will fail to meet the agreed terms and conditions. In other words, it is the loss that associated with lack of credit worthiness of the borrowers. In a Bank’s portfolio losses comes from entire default due to the inability or unwillingness of the customer to meet financial transactions. Credit risk may take the following forms:

• In direct lease/term finance: rentals/principal/and or interest amount may not be repaid
• In issuance of guarantees: applicant may fail to build up fund for settling claim, if any;
• In documentary credits: applicant may fail to retire import documents and many others.
• In factoring: the bills receivables against which payments were made, may fail to be paid
• In treasury operations: the payment or series of payments due from the counter parties under the respective contracts may not be forthcoming or ceases
• In securities trading businesses: funds/ securities settlement may not be effected
• In cross-border exposure: the availability and free transfer of foreign currency funds may either cease or restrictions may be imposed by the sovereign

Credit Risk Management Policy

Every financial institution should have a credit risk management policy. Credit risk management should have the documents that contain risk identification, risk measurement, risk grading, and legal issues to measure the credit risk. To build up a credit risk management framework, the top management level of the financial institutions should develop and establish credit policies and credit administration procedures as a part of credit risk management and get those approved from Board. Then those policies and procedures should be treated as a scale of lending different types of loans such as corporate, commercial, SME etc. Credit risk policies are as follows:

• Provide detailed and formalized credit evaluation appraisal process.
• Provide risk identification, measurement, monitoring and control.
• Define target markets, risk acceptance criteria, credit approval authority, credit origination/ maintenance procedures and guidelines for portfolio management.
• All the officers in credit risk management have clear ideas about institutions approaches and credit sanction procedure. Also it is necessary for them to communicate with the branch controlling officers.

Purpose

The main purposes of the credit risk policies are –

• Establishing an appropriate credit risk environment.
• Setting up a sound credit approval process.
• Maintaining an appropriate credit administration and monitoring process.
• Ensuring adequate controls over credit risk.

Credit Risk Strategy

The very first purpose of banks credit strategy is to determine the risk acceptance by the Institution. Once it is determined the bank could develop a plan to optimize return while keeping credit risk within predetermined limits. It is essential that the banks consideration their target market while planning credit risk strategy. The credit procedures should aim to obtain an indepth understanding of the clients, their credentials & their businesses in order to fully know their customers.

Future Strategies: Launching of Deposit Products

BASIC Bank always to introduce new products to satisfy the needs of different strata of people and they are on the verge of launching the following Deposit Products:

• Reality Pension Scheme
• BASIC Marriage Deposit Scheme
• BASIC Education deposit Scheme
• Hajj Deposit Scheme

Green Banking

Green Banking is a part of international initiative. Government and central banks have been undertaking initiatives and make directions to support green banking activities. From past few years Banks or other enterprises takes initiative to save environment from global warming, climate change, green house effect, air pollution, water pollution, waste disposal. BASIC Bank being socially and environmentallytrying to improve its own standard and also contributing to build up socially responsible business. BASIC bank has taken initiative at the very beginning to implement green banking and formulated its Green Banking policy approved by the Board of Directors. This policy has been circulated to all branches as well as all the clients in the Bank. As a part of green banking Basic Bank invested in those industries that omit low carbon in the environment.

Poverty Alleviation

It is globally accepted that the Non Government organization (NGOs) have been performing an impressive role in poverty alleviation across the globe, especially in Bangladesh. Since 1995 Basic Bank works with 65 NGO’s of different categories and capacities to finance for poor communities of the country. They invested at a privileged interest rate for poor people. Such activities also contributed to generation of income and employment as well.

Women Empowerment

As half of our population are women. A sustainable national progress can’t be attained if women are left aside. Therefore, they should progressively be brought to the mainstream of our development activities. Considering this reality BASIC Bank has been mobilizing credit facilities to the capable women entrepreneurs at a reduced rate of interest. So far they have financed several women entrepreneurs and it will gain due momentum in the days

Operational Network Organogram

Management Hierarchy

BASIC Bank limited is a hundred percent government scheduled bank. The shareholders are the proprietors of the banks. There are 10 members of the Board of Director who are managing the total management & Human Resources of the bank. At present Mr.Sheikh Abdul HyeBacchu, is the chairperson of BASIC & the Managing Director of this bank is Mr.KaziFaqrul Islam.

The chairperson & Managing Director both are the members of this bank. The chairman of the bank is the head of the Board of Directors. The main function of the Board of Directors is to formulate policy. From the top to the bottom management body of BASIC Bank Limited can be divided into four levels:

• Top Level Management
• Executive Level Management
• Mid Level Management
• Junior Level

Vision for the Future

“To be the best Commercial Bank in Bangladesh in terms of efficiency, capital adequacy, assetquality, sound management and profitability having strong liquidity”

“To build BASIC Bank Limited into an efficient, market driven, customer focused institution with good corporate governance structure.

Continuous improvement in our business policies, procedure and efficiency through integration of technology at all levels”

To establish general banking through the introduction of welfare oriented banking system and to ensure equity and justice in the field of all economic activities, to achieve balanced growth and equitable development through diversified investment operations particularly in the priority sectors and less development areas of the country is the mission of BASIC Bank Ltd. Its aims are to encourage socio-economic uplift and financial services to the low income community particularly in the rural areas and specially, small business and industry.

SWOT Analysis of BASIC Bank Limited

SWOT analysis refers to analysis of strengths, weaknesses, opportunities and threats of an organization. This facilitates the organization to make its future performance improved in comparison to its competitors. An organization can also study its current position through SWOT analysis. For all of these, SWOT analysis is considered as an important tool for making changes in the strategic management of an organization.

(a) Strengths of BASIC

Followings are strengths of BASIC:

The management –The BASIC Bank Limited is operated by a very efficient management group. The top management officials have all worked in reputed banks and their years of banking experience, skill, and expertise will continue to contribute towards further expansion of the bank. So, the top management of the bank is the major strength for BASIC

Company Reputation – BASIC has already established a favorable reputation in the banking industry of the country. It is one of the leading private sector commercial banks in Bangladesh. The bank has already shown a tremendous growth in the profits and deposits sector.

Many Branches – In Bangladesh, The bank has 63 branches to provide services to the people. All these branches are located in such places where customers feel Comfortable and safe to make their transactions. This creates a positive image in the minds of the potential customers and many people get attracted to the bank.

Corporate Culture – BASIC has an interactive corporate culture. The working environment of BASIC is very friendly, interactive and informal. And, there are no  hidden barriers or boundaries while communicate between the superior and the employees. This corporate culture works as a great motivation factor among the employees of the bank.

Various Products and Services – BASIC offers various types of products and services to their clients. So those, Customers can choose the right products that will fulfill their needs.

Technological Advancement – The bank started online service in all branches. It is fully online service provider.

(b) Weakness of BASIC

Followings are Weakness of BASIC:

Heavily depended on head office for decision making – Branch manager can not take any decision without Head office permission. Each and every branch is heavily depended on head office decision.

Absence of upgraded website– Although Basic Bank Limited started online banking services but the website they use is not upgraded. They still use the old version software, which is very slow indeed.

Low promotion campaign- Basic Bank Limited’s promotional activities are not sufficient. Even most of the people around Islampur do not know about their bank and products.

(c) Opportunities of BASIC

Followings are opportunities of BASIC:

Product line proliferation: BASIC must expand its product line to enhance its sustainable competitive advantage. For example, BASIC can introduce mobile banking.

Introducing more branches: There are many important places in Bangladesh, where customers are eagerly waiting for doing banking transactions. But no existence of banks is in those places. Although BASIC already has 63 branches to provide services to its customers, it must also open more branches in those places where people needs banking facilities.

Introducing special corporate scheme: BASIC can introduce special corporate schemes  for the corporate customers or officers who have an income level higher from the service holders. At the same time, they can introduce schemes or loans for various service holders. And the schemes should be separate according to the professions, such as engineers, lawyers, doctors etc.

Developing new products and services: The bank should offer new products and service

(d) Threats of BASIC

Followings are threats of BASIC:

• The default risks of all terms of loan have to be minimizing in order to sustain in the financial market. Because default risk leads the organization towards to bankrupt. BASIC has to remain vigilant about this problem so that proactive strategies are taken to minimize this problem if not elimination.
• Certain Bangladesh Bank rules and regulations.
• Some commercial/ foreign as well as private banks.
• Similar types of retail banking products: Other banks can also capture a huge market share by offering similar products and services provided by the Bank.

Nature and Specific Responsibilities

Internship is a part of our studying method. But it is very important in our life. Because it will helps us to overcome from the upcoming obstruction in our job sector. Basically the intention is to get practical knowledge about the job life. As I am studying in Marketing and Finance sector, so it is important for me to know the markets as well. Therefore, I think internship training will bring positive result for me. As a student of finance I need to know the financial industry of Bangladesh. Also we know that in our country Banks are playing a vital role in finance market. Therefore I liked to work in a Bank. Fortunately I got the opportunity and joined the Basic Bank Limited (Islampur Branch). In Basic Bank Limited I worked both in depository products and loan able products. First 15 to 20 days, I worked in general banking. General banking basically related with the depository products like current account/FDR/monthly deposit scheme and savings account, also different types of paper work like clearing the check, bill payment, salaries etc. After that I worked with Loan able products Cash credit account, Special over drafts etc. As we know that Loan department is the most important and risky department in the bank, therefore it is not possible for me to does all the work like field visiting and giving authority, even I am not allowed to watch all the documents, files and information. In the loan and advanced department I typed different types of Loans related documents and read different types of circular. Also I did group work with my colleagues about promotional activities such as School Banking.

Different Aspects of Job Performance

I think doing internship at Basic Bank Limited is a great opportunity for me because I worked in two departments and learn how all departments worked together and co-ordinate with each other. Even though Basic Bank Limited has 65 branches all over the country but the entire branches worked like a family. Each of the branches can easily access to the others bank. As I have informed earlier that I worked under Loan department and General Banking Division, therefore it is easy for me to access with the other department as well. That’s why I got easily access in different departments and the employees also helped me all the time. Besides these there are some other aspects such as-

• I got real life example from branch manager and deputy general manager and my initial boss. Also I learned how to get rid from the problems. I think it will be e big bonus for me from my internship.
• I learned different banking terms from my boss and managers. As they have arranged a meeting in every Thursday morning for the employees about different banking problems and the solutions. I am pleased to attend those classes.

Critical Observation and Recommendation

Working at Basic Bank Limited was a great experience for me. I able to learnt many things throughout my internship period. I think it will help me when I will work for banks, corporate house or any other multinational companies. Internship gives me an opportunity to know the real working environment and get real life experience. Also it allowed us to know, what types of difficulties we are going to face in the future and how to get rid from those difficulties as well. From my internship period I have observed some things and from my little knowledge I have made some recommendation for the bank. Such as-

• All the employees and managers of the bank are very friendly and they are ready to help me all the time.
• The working environment of the bank is very friendly. Throughout my internship period they never underestimate me for anything. What I have needed, they are ready to give it.
• They are strictly following the rules, which I really like. They never ignore the rules.
• Chain of command is excellent in the branch, as well as with the other branches of the bank.
• Basic Bank Limited (Islampur Branch) need to have highly qualified employees. I do not say that current employees are not good but they need more training about banking terms and rules.
• They have to arrange more training programs around the branch and also around the bank as well.
• They should arrange more meetings to increase employee’s efficiency in the branch.
• Man power of the branch is not sufficient, so they have to increase the man power.

Observation

Working for BASIC Bank Limited, Islampur Branch was totally different experience for me. From my point of view it was an experience of a life time because there I involved in working environment and gained practical knowledge like time maintaining, following rules and regulations, communicate with the consumers as well. Besides these I observed their activities and problems that BASIC Bank Limited faced during my internship period. During my internship period I worked in both general banking as well as loan and advanced department.

Although my main focuses was to learn more about loan able products and services. As I have mentioned it earlier that BASIC Bank Limited is one of the leading commercial Bank in Bangladesh. They have 65 branches all over the country and they provide superior services to their clients. Therefore BASIC Bank Limited, Islampur Branch collect more than 70 corer taka in less than two years, which is quite impressive in number. BASIC Bank Limited collected deposits through different types of depository accounts like FDR, Savings A/C, Current A/C, Monthly deposit schemes. BASIC Bank Limited provide highest interest rate against FDR than the others bank. They provide 12.5% interest rate, where other banks interest rate is up to 11.5 to 12% maximum. Therefore they are able to collect maximum deposit from the FDR. Also BASIC Bank Limited gives interest against Current A/C, which is known as Premium Current A/C.

Premium Current A/C is a unique services provided by BASIC Bank Limited because other commercial banks does not give any interest against Current A/C. Besides these their other depository A/C’s like savings and monthly deposit schemes are also attractive for the customers.

On the other hand BASIC Bank Limited provides different types of loan able products like Industrial Loan, Micro Credit Scheme and commercial Loan. BASIC Bank Limited provides loans at a lower interest rate than the other banks. The interest rate for industrial loan is 17%, where other bank’s interest is more than 18%. BASIC Bank Limited categorized this Industrial loan in two different sectors such as Small enterprise and Medium Enterprise. These two types of enterprises are also categorized in different sub-features, which are given in the project part.

Micro-credit Scheme is a kind of services where BASIC Bank Limited works with different NGO’s to help poor people in the country. The main motto of this service is to reduce the poverty level of the country and support the poor people. The interest rate of Micro Credit Scheme is also get able for the poor people. Besides this BASIC Bank Limited provide Commercial Loans such as CASH Credit A/C, Overdrafts and Term Loan. CASH Credit A/C is known as CC A/C. CC A/C is a kind of loan where loans are given for a short period of time, which is not more than a 1 year or less than 1 year. CASH Credit Loan is given on the basis of two conditions such as Credit against Pledge and Cash Credit against Hypothecation. Cash Credit against pledge means borrowers surrenders their physical possession under Bank’s control. Cash Credit against Hypothecation means Bank’s claimed against borrower raw materials and finished goods. Although the time period for CC A/C is only 1 year, after 1 year if borrower wants to continue the CC A/C and if Bank allow and both the parties comes into mutual then the CC A/C will continue for the next year. Therefore CC A/C is also known as Continuing Credit A/C. Besides these in CC A/C clients can withdraw and deposit money anytime during the time period and of course clients have to withdraw money with in the limitation given by the Banks. Overdraft A/C is a kind of loan able product which provided against clients FDR. This A/C is also known as SOD A/C. SOD stands for Special Overdrafts A/C. Sometimes client needs urgent money; therefore they can close the FDR accounts and withdraw money from the bank. To avoid such liquidity problem and to help the clients BASIC Bank Limited provides SOD A/C. For an example if a client hold a FDR A/C of 20 Lacs taka.

Then BASIC Bank will give him or her less than 20 lacs taka as a SOD loan as a security. The interest rate against SOD A/C is 3% higher than the FDR A/C such as if interest rate against FDR A/C is 12.5%, so the interest rate against SOD A/C’s will be 15.5%. Term Loan is a kind of CC A/C. But the differences between CC A/C and Term Loans are time duration and withdraw process. Term Loan is given for more than 1 year and clients have to withdraw all the money at the beginning of the loan period. Also clients need to return all the deposit at the end of the loan period. There are some procedures that both Banks and clients need to fulfill to sanction the loans. The charges documents need by the Banks should be provided by the clients to make the procedure easier. Also Bank should evaluate clients according to his or her credibility. The evaluation process should not be done according to the relationship among Banks and clients.

During my internship period I observed that Banks only given less than 20% deposit to the clients as a Loan. Although Bank has more than 70 crore taka as a deposit but they are able to give only 13 to 15 crore taka as a loan to the direct clients. Rest of deposit goes to the Head Office. Then Head Office distributes these deposits to the other branches. Other branches then provide these deposits as a loan to their clients. After that those branches return money along with the interest rate after the loan period to the head office. Then Head Office returns those amounts of money to the Islampur Branch. But the problem is that Islampur Branch collects deposits at 12.5% interest rate from the clients. Also Head Office collects deposits from Islampur Branch at the same interest rate, which is 12.5%. So there is no gain from here for the Islamlam Branch. By this process they are generating loss. During my internship period I saw at the end of June, 2013 they were in loss of 37 lacs taka. The loss amount was huge for a new branch.

Although the entire BASIC Bank limited are in good situation. The profit level is in satisfactory level for a commercial Bank. From my point of view I can say that instead of Head Office if Islampur Branch can provide loans to direct clients then they will able to generate profits.

Because then they will able to collect 17 to 18% interest rate from the clients, rather than 12.5% interest rate from the Head office. So generally then the will be able to increase their profit. There are some restrictions which creates problem in loan sanction procedure. Heavily dependent on the Head office decision and third party guarantee are one of those restrictions.

Another thing is that BASIC Bank does not provide any kinds of individual’s loans likeeducation loan, car loan, home loan, credit card etc. Therefore their clients cannot take this kind of loans from BASIC Bank. That’s why BASIC Bank has enough liquidity on their hand but they are not able to utilize it in proper way.

Conclusion

BASIC started its journey on 21st January, 1989 with the commitment of economic and social development of Bangladesh. After passing almost 24 years, BASIC still have a distinguished place among the finest banks in Bangladesh. The bank has 65 branches, about 1700 dedicated employees and more than 55,000 valued clients. The bank is always committed to deliver utmost satisfaction to the customers. The bank is dedicated to provide unique service to its customers, come up with timely and innovative products and services while emphasizing on the latest technology.

The management of BASIC is taking strategic steps to enable the bank to emerge as a strong and progressive institution. With a bulk of qualified and experienced human resource, the bank can exploit any opportunity in the banking sector. It is continuing to make efforts to refine its products and operations to make them more compatible. New deposit schemes have been introduced and action plans have been taken to maintain revenue growth in future.

The image created by the bank is very good and the total condition is almost within their control. BASIC has the capacity to utilize all its resources. If it can utilize its all resources, it can earn more profit and can acquire the highest position among the banks inside Bangladesh. I am quite satisfied with their overall performance so far and wish a good success and bright future of the Bangladesh Small Industries and Commerce Bank Limited (BASIC).