General Banking Operation of First Security Islami Bank Limited

The Main objective of this report is to analysis General banking Operation through the analysis of some particular aspects. Other objectives are evaluate the principal activities of First Security Bank Limited and discuss in depth the operations of the banking sector. Finally identify services provided by First Security Islami Bank and draw SWOT analysis based on General Banking operation.

Introduction

A banking institution is indispensable in a modern society. It plays a pivotal role in the economic development of a country and forms the core of the money market in an advanced country. In recent times the banking sector over the world has been undergoing a lot of changes due to deregulation, technological innovation, globalization etc. Bangladesh banking sector is lagging far behind in adopting these changes. Bank plays an important role in the business sectors and in the industrialization of a country. Basically the banks take deposits from the customers against interest and lend it to the borrowers against interest cessation period. Under these circumstances of bank offers different interest rates and other options to the customers to remit and deposit their money. These options are very common among all the banks, but only the customer services and other facilities vary from bank to bank.

OBJECTIVE OF THE REPORT:

Main Objective:The Main objective of the study is to access General banking Operation through the analysis of some particular aspects. The main objectives are:

• To fulfill the course requirement of the BBA program.
• To acquaint with the day-to-day functioning of service oriented banking business.
• To have practical expose in banks that helps a lot to understand the future.

 Supporting Objective:

• To evaluate the principal activities of First Security Bank Limited.
• To know in depth the operations of the banking sector.
• To identify services provided by FSIBL.

General Banking:

Bank is nothing but an intermediary between lender (surplus unit) and borrowers (deficit unit). Savings and deposits are the main strength of the banks to provide loan. And the interest earned from the difference borrowing and lending is the major portion of banks income. Banks also earns from variety of operation.

General banking is the side where banks offer different alternatives to the clients to deposit and remit their money. Accounts division is also included in general banking. To encourage the clients, bank offers different options in front of their clients. Most of these options are very much similar between the banks, but the customer services and facilities may not be the same. First Security Islami Bank Limited has variety of services provided to the retail as well as for corporate clients.

The services provided under general banking include the following:

1. Account opening
2. Account closing
3. Cheque book issue
4. Remittance
5. Clearing
6. Crossing
7. Endorsements
8. Dispatch

Account opening:

Initially all the accounts are opened through deposit money by the customer and these accounts are called deposit account. Normally a person needs to open an account to take services from the bank. Without opening an account, one cannot enjoy variety of services from the bank. Thus, the banking usually begins through the opening of the account with the bank.

Bank accounts are mainly of three (3) types:

1. Al-Wadiah Current Deposit Account (CD)
2. Mudaraba Savings Deposit Account (SB)
3. Mudaraba Term Deposit Receipt/Account (MTDR)

There are also some other types of account facilities provided by the bank. These are:

1. Short Term Deposit (STD)
2. Mudaraba Monthly Deposit Scheme (MMDS)
3. Mudaraba Monthly Profit Scheme (MBPS)
4. Mudaraba Deposit Double Scheme (MDDS)
5. Advance Saving Scheme

Al-Wadiah Current Deposit Account (CD):

A current account is a running and active account, which may be operated upon any number of times during a working day. It is purely demand deposit account because the bank is bound to pay the amount to the accountholder on demand at any time within the banking hour. There is no restriction on the number and the amount of withdrawals from a current account. Generally the minimum amount to be deposited initially is Tk. 1000/- for opening a current account.

Mudaraba Savings Deposit Account (SB):

A saving account is meant for the people of the lower and middle classes who wish to save a part of their incomes to meet their future need and intend to earn an income from their savings, it encourages savings of non-trading persons, institutions, society and clubs etc. The deposits are mostly small amounts. Frequently withdrawals are not allowed.

Opening of Current and saving Account:

A current or a saving account could be opened through the following steps:

Step: 1

Application on the prescribed form: The person willing to open a current account with the bank has to apply in the prescribed form. The form must be filled up and signed accordingly by the applicant (s).

Step: 2

Documentation: The documents that must be provided by the party/parties willing to open a current account are mentioned according to different aspects:

Individual

• Two copies of passport size photograph
• Introducer’s signature in the A/C opening Card & photograph
• Nationality Certificate/passport’s photocopy (duly attested)
• Nominee’s Photograph
• Mother’s name
• Date of Birth & age
• TIN

Proprietorship

• Two copies of passport size photograph
• Introducer’s signature in the A/C opening Card & photograph
• Nationality Certificate/passport’s photocopy (duly attested)
• Up-to-date copy of trade license
• Nominee’s Photograph
• Mother’s name
• Date of Birth & age
• Seal TIN

Partnership

• Passport size photograph A/C Operator authorized by partners) Two copies (each)
• Introducer’s signature in the A/C opening Card & photograph
• Nationality Certificate/passport’s photocopy (duly attested)
• Up-to-date copy of trade license
• Seal
• TIN
• Partnership deed (from Notary public), partnership letter

Limited Company

• Passport size photograph A/C Operator (authorized by Board) Two copies (each)
• Introducer’s signature in the A/C opening Card & photograph
• Company resolution/Constitution
• Common seal of Company
• Memorandum & Articles of association (Certified by Joint Stock Company)
• List of Directors with sign
• Certificate of Incorporation
• Up-to-date copy of trade license
• Seal
• TIN

Societies, Clubs, etc

• Passport size photograph A/C Operator (authorized by Board) Two copies (each)
• Introducer’s signature in the A/C opening Card & photograph
• Nationality Certificate/passport’s photocopy (duly attested)
• Up-to-date copy of Office Bearers/ Governing Body/ Managing Committee
• Memorandum & Articles of association
• Seal

In case of saving account opening the following documents are required:

• Two copies of passport size photograph
• Introducer’s signature in the A/C opening Card & photograph
• Nationality Certificate/passport’s photocopy (duly attested)
• Nominee’s Photograph
• Employer certificate

Step: 3

Introduction to the Applicant:

The applicant required to furnish in the application form the names of the referees from whom the banker may make requires regarding the character, integrity and respectability of the applicants. In most cases, the customer of the bank does the introduction or some other person known to the bank by signing on the application form with the account number.

Step: 4

Specimen signature:

Every customer is required to supply to his banker with one or more specimens of his/her signature. These signatures are taken on cards, which are preserved by the banker, and his signature of the account holder on the cheque is compared with Specimen signatures.

Final Step:

After the above formalities are over, the banker opens an account in the name of applicant. Then the bank provides the customer with:

• A pay in slip/deposit book: To facilitate the receipt of credit items paid in by a customer, the bank will provide the customer a pay in slip either loose or in a book forms. The customer has to fill up the pay in slip at the time of depositing the money with the bank. The casher with his/her initials and stamps will return the counter foil to the customer on the receipt of the money.
• Cheque Book: To facilitate withdrawals and payments to third parties by the customer, the bank will also provide a cheque book to the customer. But it is noted that to get a cheque book, the customer has to dully fill up the cheque requisition slip to the banker.

Mudarabah Term Deposit Receipt/Account (MTDR):

These are the deposits, which are made with the bank for fixed period specified in advance. It is purely a time deposit account. The bank doesn’t maintain cash reserves against deposits and therefore the bank offers higher rates of interest on such deposits. A FDR is issued to the depositor acknowledging receipt of the sum of money mentioned therein.

Procedure of Opening Fixed Deposit Account:

Before opening a Fixed Deposit Account a customer has to fill up an application form, which contains the following:

• Amount in figures
• Beneficiary’s name and address
• Period
• Rate of interest
• Date of issue
• Date o of maturity
• How the account will be operated (singly or jointly)
• Signature (s)
• D. R. no
• Special instruction (if any)

After fulfilling the above information and deposit the amount, FDR account is opened. A FDR receipt is issued and it is recorded in the FDR Register, which contains the following information:

• FDR account no.
• FDR no.
• Name of the FDR holder with address
• Maturity period
• Maturity date
• Interest rate

At present the rate of interest for Fixed Deposit Receipt (FDR) in the First Security Bank Limited are as follows:

• For 1 month Interest rate for is 12%,
• For 3 month Interest rate for is 12.50%
• For 6 month Interest rate for is 13%,

Other Types of Deposit Accounts:

There are also some other types of account facilities provided by the bank. These are:

• Short Term Deposit (STD)
• Monthly Saving Schemes (MSS)
• Mudaraba Deposit Double Scheme (MDDS)

Short Term Deposit (STD):

It is also a time deposit account. The formalities for opening is of this account are to those required for current account. The only difference is that, frequent withdrawal is discouraged and 7 days notice is required for withdrawal of any sum and interest is paid.

In Short Term Deposit Account, interest offered is less than of savings deposit, 6% interest is paid on this deposit.

Monthly Saving Schemes (MSS):

Monthly Saving Scheme is that kind of scheme of FSBL, where deposit is monthly installments of various sizes for a fixed deposit and the benefit is lump sum returns after various terms of period.

Total Savings amount according to monthly Deposit amount and period, details are as under:

The objectives of this scheme are:

• Building the habit of saving
• Attract small savers
• Saving for rainy days
• Ensure regular income flow
• 1, 00,000/- (One Lac Taka) only Life Insurance Facility.

So this scheme is introduced to attract depositors and encourage saving (mainly the smaller earner people).

Monthly Benefit Saving Scheme (MBSS):

Monthly Benefit Scheme is that kind of scheme, where a fixed amount of money has to be deposited every month for five years.

Monthly benefit amount on the deposited amount are as under:

The objectives of this scheme are:

• Help the retired persons for investing their retirement benefits
• Create investment opportunities for nonresident Bangladeshi
• Explore investment opportunities for school, college, university etc.
• 1, 00,000/- (One Lac Taka) only Life Insurance Facility.

Double Benefit Deposit Scheme (DBDS):

In this scheme, a fixed amount of money, say Tk. 50,000 or it’s multiply for 6 years has to be deposited. After 6 years deposited amount will be doubled.

Deposit amount to be doubled in 6 years, details are as under:

The objectives of this scheme are:

• Give maximum profit
• Help in meeting specific needs like education, marriage etc.
• 1, 00,000/- (One Lac Taka) only Life Insurance Facility.

Account Opening Scenario of Mohammadpur Branch:

Closing of Current or Saving Account:

A customer’s account with a bank may be closed for the following circumstances:

Upon the request of a customer, an account can be closed:

• The customer may inform the bank in written of his/her intention to close the account. The customer has to apply to the branch in charge for closing the account. Then the in charge will remark on the account closing application for closing the account.
• By drawing a cheque of the whole amount and a nil balance confirmation to be taken from the account holder.
• Recover the unused cheque leaves and enter into the “Broken cheque book Register”
• Remove the account opening form, specimen signature card and all other papers relating to the closed account.
• Remarks of account closing at the ledger folio should be authenticated by the manager of supervising officials.

The bank may itself ask the customer to close the account when the banker finds that the account is not been operated for a long lime:

• If the account is not operated upon for 6 months the banker will try to do the bilateral communication with the account holder, but if the banker does not then the account becomes “Dormant” account get any response from the account holder
• If this not the operated upon for 2 years then the account becomes “inoperative” account.
• If the current account lying in “inoperative” current account for many years then the account will be transferred to the “unclaimed deposit account.
• A new register for unclaimed deposit account will be maintained called “unclaimed deposit account.

For withdrawal at any amount from the account, permission from head office or controlling office wins is required.

Account Closing Scenario of Mohammadpur Branch:

Source: Monthly record book of FSIBLMohammadpur Branch.

Remittance:

Sending money from one place to other places for the customer’s is another important service of banks and this service is an important part of countries payment system. For this service, people specially businesspersons transfer funds from one place to another very quickly. There are various types of remitting money, such as:

Pay Order (PO):

The pay order is used for making a remittance to the local creditor. Pay order gives the payee the fight to claim payment from the issuing bank; it can be en-cashed from issuing bank only. Unlike cheque, there is no possibility of dishonoring pay order because before issuing pay order bank takes out the money of the pay order in advance. Pay Order cannot be endorsed or crossed and so it is not negotiable instrument.

Demand Draft (DD):

Demand draft is an order of issuing bank on another branch of the same bank to pay specified sum of money to the payee on demand that is the named person or order of the demand. It is generally issued when customer wants to remit money in any place, which is outside of the clearing-house area of issuing branch. Payee can be purchaser himself or another mentioned in the DO. It is a negotiable instrument and it can be crossed or not.

Telegraphic or Telephonic Transfer (TT):

This method transfers money to one place to another place by telegraphic message. The sender branch will request another branch to pay required money to the required payee on demand. Generally, for such kind of transfer payee should have account with the paying bank. Otherwise it is very difficult for the paying bank to recognize the exact payee.

When sending money is urgent then the bank uses telephone for remittance. This service is only provided for valued customers, who is very reliable and with which banks have long-standing relationship.

Mail Transfer Advice (MTA):

Where the remitter desires the banker to remit the funds to the payee instead of purchasing a draft himself the banker does it through a mail transfer advice. The payee must have an account with the paying officer as the amount remitted in such a manner is meant for credit to the payee’s account and not for cash payment. It is the least used technique for transferring fund. Where there is no telex machine or telephone line then this method is used.

Clearing:

Clearing house is an assembly of the locally operating scheduled banks for exchange of cheque, drafts, pay orders and other demand instruments drawn on each other and received from their respective customers for collection. The house meets at the appointed hour on all working days under the supervision of two central bank officers or its agent as the case may be, and works within the regulations framed therefore on the basis of prevailing banking practices. In Bangladesh, clearing house sites at Bangladesh bank where there is no office of the Bangladesh bank, Sonali bank acts as agent of Bangladesh bank.

There are mainly two types of clearing system in Bangladesh, such as:

• Internal clearing or inter branch clearing or inward clearing.
• External clearing or inter banks clearing or outward clearing.

Outward Clearing:

When a particular branch receives instruments drawn on other bank with in the clearing zone and sends those instruments for collection through the clearing arrangement is considerate as outward clearing for that particular branch.

Inward Clearing:

Clearing returns (inward) consists of those instruments which were presented by us to other banks for payment but have been returned and unpaid by them due to specified reason through the clearing house.

The entire number banks representative daily conducts two meetings at a fixed time. In their first meeting they handover cheque, drafts etc. passed, which has drawn upon them. In case there are certain cheques, which could not be honored are returned to the presenting banks with the reason of non-payments in the second meeting at the clearing-house.

OBC (Outward Bills for Collection):

OBC/IBC is required when both the banks are not in the same clearing zone. Outward Bills for Collection (OBC) and Inward Bills for Collection (IBC) is required when both the bank (collection bank and playing bank) are not in the same clearing zone.

Operating Procedure:

Clearing operations are completed in three stages:

• Operation at branch level
• Operation at internal clearing house
• Operation at the clearing house in Bangladesh Bank

Bangladesh Bank clearing their house sites twice in a day. In its first meeting Bangladesh Bank clearing-house received instruments and distributes the same among the representatives comes with returned instruments and distributing among the representatives.

Software:

Software called NIKASH supplied by Bangladesh Bank is used in clearing of the cheque and other instruments. The in-charge of clearing section makes clearing slip for each cheque

Through computer using NIKASH and finally these cheques are sent to the Bangladesh Bank Clearing-House sorting bank wise.

Cash Department:

Cash Department is the most important part of General Banking. Cash department should be placed in a branch from where manager can watch everything from his table either client or the volt. It is the most important department of the bank since from desk cash department has direct interaction with customers.

Some register books uses in the cash department are mentioned bellow:

• Receiving Cashier’s Book
• Payment Cashier’s Book
• Cash Balance Book
• Vault Register
• Key Register
• Remittance Register

Cash Receive:

Cash is the blood of a branch. It is life of a bank. Cash may be received by –

• Cash Receiving by Pay Slip.
• Cash Receiving by Pay – Order, MTD.

Cash Payment:

Client has to give cheque to cash officer to get this money with signature on cheque and signature must be match with the ale number into the computer and check the balance the client have in his account. Cash officer should provide issue note i. e. fresh and accepted by the bank rather non-issue note i. e. torn and damage notes. Payment can be through transfer which is no physical cash but transfer account to account.

SWOT Analysis:

SWOT analysis is an easy technique through which managers create quite overviews of company’s strategic situation. It is based on the assumption that an effective strategy derives from a sound ‘fit’ between a firms’ internal capability (strengths and weakness) and its external situation (opportunities and threats). A good fit maximizes a firm’s strengths and opportunities and minimizes its weakness and threats.

Strength of the organization:

Strength is a resource skill or other advantage relative to competitors and the needs of the markets a firm serves or expects to serve.

• FSIBL has adequate physical facilities and equipment’s to provide better service to the customers. The bank has computerized banking operation Counting machine in the teller counter has been installed for speedy and secured service at the cash counter.
• The top management of the bank is also a major strength for the FSIBL and contributed heavily towards the growth and development of the bank. The top management officials all have had reputed of banking experience, skill and expertise.
• Computerized statements for the customers as well as for the internal use of the banks are also available.
• All the branches of FSIBL are equipped with telex, fax and internet facilities.
• Many jobs are performed in groups of two or three in order to reduce the workload and enhance the process of completion of the job.
• First Security Islami Bank Limited developed smooth relationship with their clients and corporate business holders. Following the rules of Bangladesh Bank they have operated handsome banking activities throughout the country.
• In case of services offered by all private banks in our country, FSIBL has maintained high quality.
• Well organized human resources than other banks.
• Since the govt. has imposed some new rules regarding private banking operation, FSIBL easily copes up the given rules.
• Regarding contribution towards country’s GDP they have contributed a handsome amount per year.
• All branches of First Security Islami Bank Limited have been networked to provide customer any branch banking: 24 hours of banking services from selected branches have also been introduced for services convenience.
• Experienced and competing workforce who have expertise knowledge about the bank.
• Some loyal customers who always bring in new customers.
• Management consists of knowledgeable and authoritative personnel.
• Interaction of the employees with the top management.
• The bank is making profit every year at a steady rate. The rate of deposit collection as well as the rate of giving advance every year is increasing at a positive rate.
• The environment within the organization is very helpful, positive and informal.

Weakness of the Organization:

A weakness is a limitation of deficiency in resources skills or capabilities that seriously impedes a firm’s effective performance. FSIBL’s weaknesses are as follows:

• To open an account sometimes people have given incomplete information which will become a very acute when any dispute arises.
• Because of good relationship some time branch manager authenticated the account with introducer, sometimes it is very difficult for the employee to void such circumstances, which in turn brings questions.
• When a client try to open an A/C he must have to need an introducer, sometime it may create problems for the new clients.
• There are not available card services.
• There have error regarding advice.
• Sometimes the process of information transferring to the management is lengthy.
• Big parties or for big amount parties wouldn’t tk.100 notes but the Bangladesh Bank issues mix notes.
• In cash department because of in frequent promotion output decreases.
• On the counter service is sometimes unsatisfactory because of not having enough employees for the counter sector.
• In case of advances in different project, the interest rate is too high.
• Maximum parties have no financial strength.
• In terms of law & order situation sometimes it is very for the bank.
• To liquidate the collateral when the party is unable to pay the debt.
• Most of the time parties are creating some sort of pressure to get the loan.
• There are some mortgage problem such as, acquisition & proprietorship, problem of asset.
• In case of method of granting security against loan, hypothecation is much risky as compared with other charging security. But it is being used massively in FS.
• Interest rates for different types of loan and advances vary to different customers. A prospective customer is allowed to take credit facilities at a lower interest rate. Again, the interest is charged at a higher rate to a customer who is not so prospective. But I think that there should be a transparent interest policy that will be prospective for the bank, the borrower and the country.
• There is no provision or laws against taking discrepancy charges in L/C. Practically this charge is well-accepted in banking word.

Opportunity of the organization:

• Debit Cards and Tele Banking: These are the new retail banking services provided by the foreign banks. FSIBL can evaluate the option of launching Debit Cards and Tele banking system.
• SMS Banking: First Security Bank Ltd. has officially launched SMS banking service from December 17, 2007. It may bring opportunity for this Bank.
• Online Banking:FSIBL should move towards the online banking operations. It is high time to go for, because some banks are already in to online banking operation.

Threats of the organization:

• Multinational Bank: The rapid expansion of multinational bank poses a poetical threat to the new private commercial Banks. Due to the booming energy sector, more foreign banks are expected to operate in Bangladesh. Since the foreign banks have tremendous financial strength, it will pose threat to local banks to a certain extent in terms of grabbing the lucrative clients.
• Upcoming Banks: The upcoming private local banks can also pose a threat to that Bank. It is the expected that in the next few years, many of the local private banks may emerge. If that happens the intensity of competition will rise further and banks will have to develop strategies to compete these banks.

Findings:

Bases on observation and interpretation I found some positive and negative side in FSIBL.

Those are given below:

• FSIBL have set up Wide Area Network through Radio, Fiber-Optics & other available communication media systems to provide any branch banking to our customers.
• Automated Teller Machine (ATM) / Debit card, customer can avail the facilities like withdrawal money, balance inquiry and purchase goods from Point of sale (POS) using Dutch Bangla Bank Ltd. ATM Booth and POS.
• FSIBL has no available Booth and Branches.
• Enter promotion and leave policy is well.
• FSIBL Recruitment process is lengthy
• FSIBL Locker Service is available in most of the Branches in urban areas.
• FSIBL is a centralized organization and operates in a functional oriented structure.

Conclusion:

Today the banking service is very competitive. From the practical materialization of customer dealing procedure during the whole period of my practical orientation in First Security Islami Bank Limited I have reached a firm and concrete conclusion in a very confident way. I believe that my realization will be in harmony with most of the banking thinkers. It is quite evident that to build up an effective and efficient banking system to the highest desire level, computerized transaction is must.

FSIBL is a bank which operates its banking functions according to Quran and Sunnah. Its banking activities based on profit and loss sharing. It does not create any illegal pressure on clients. It is committed to provide high quality financial service/products to contribute to the growth of G.D.P of the country through stimulating trade and commerce, accelerating the pace of industrialization, boosting up export, creating employment opportunity for the educated youth, poverty alleviation, raising standard of living of limited income group and overall sustainable socio-economic development of the country.

From the learning and experience point of view I can say that I really enjoyed my internship at First Security Islami Bank Limited Mohammadpur Branch. From the very first day I am confident that this 03 months internship program at First Security Islami Bank Limited. Will definitely help me to realize my further carrier in the job market.

Recommendations:

The following are some recommendations of FSIBL, Mohammadpur Branch:

• FSIBL should increase skilled manpower to operate its account opening division more efficiently.
• The authority of FSIBL should introduce more innovative and modern customer services.
• Mohammadpur branch should improve theiraccount opening division to get more customer.
• The bank can introduce Islami debit & credit cards for its clients as soon as possible.
• FSIBL mohammadpur branch should to recruit marketing executive to get more clients.
• FSIBL mohammadpur branch should go aggressive advertising and promotional activities to get more customers.