General Banking Practice of Shahajalal Islami Bank Limited.

Executive Summary

Banks plays vital role in the economy of the country. Countries development greatly depends on the activities of the banks. Commercial banks take deposit & give away loans. This loan build on industrialization’s Commercial Bank helps in savings. Savings create investment. Investment contributes the GDP. Finally the commercial banks play on important role in import of country through opening of bank L/Cs. It helps to earn foreign currency by helping the exporters in export.

This report is prepared on the basis of my three months practical experience at Bangshal Branch, Shahjalal Islami Bank Limited. The internship program helped me to learn about the practical situation of a financial institution. This program helped me to implement my theoretical knowledge into practical & realistic work environment.

In the age of modern civilization bank is playing its spending role to keep to the economic development wheel moving. The co-operation of the bank is needed in every economic activity. Bank provides means & mechanisms of transferring command over resources from those who have an excess of income over expenditure to those who can make use of the same for adding to the volume of productive capital. There are a large number of small savers with small amount of savings who are generally reluctant to invest their surplus income because of their lack of adequate knowledge about complicated investment affairs. The bank provides them with the safety, liquidity and profitability by means of different savings media offering varying degrees of a mix of liquidity return and safety of savings. The saving banks use as their key of business. They invest the savings in higher degree of return and maximize their profit in business Shahjalal Islami Bank Limited is a scheduled Islamic commercial bank registered by the Bangladesh Bank. Shahjalal Islami Bank follows the rules and regulations prescribed by the Bangladesh Bank for Scheduled commercial banks. The functions of the bank cover a wide range of banking and functional activities to individuals, firms, corporate bodies and other multinational agencies.

Brief Introduction of the Study:

Banks plays vital role in the economy of the country. Countries development greatly depends on the activities of the banks. Commercial banks take deposit & give away loans. This loan build on industrialization’s Commercial Bank helps in savings. Savings create investment. Investment contributes the GDP. Finally the commercial banks play on important role in import of country through opening of bank L/Cs. It helps to earn foreign currency by helping the exporters in export. In the age of modern civilization bank is playing its spending role to keep to the economic development wheel moving. The co-operation of the bank is needed in every economic activity.

Rationale of the Study:

The long drawn struggle to establish a Shajalal Islami Bank Limited in Bangladesh becomes a reality when Shajalal Islami Bank Limited was established in 10 May 2001 with a clear manifesto of demonstrating the operational meanings of participatory economy banking and financial activities as an integral part of an Islami code of life and Shajalal Islami Bank limited. Basically SJIBL is an Islami Bank based on “Islami Shariah” It has already established its 64 branches in different district in Bangladesh. It follows the alternative concept of Islami Banking, which represents unique human approach to credit and banking based on profit-oriented economy avoid of interest. In this regard SJIBL has introduced a number of income generating programs for the millions of urban and rural poor. With that objective in view SJIBL has formulated a profitable investment option for the rich to invest.

Objectives of the Study:

Board Objective:

Recommend for overall Activities of Shahjalal Islami Bank Ltd., by analyzing the present investment system, policies and practices of the Shahjalal Islami Bank Ltd.

Specific Objectives:

• To get the real life exposure in the Banking sector.
• To make a bridge between the theories and practical procedures of banking day-to-day operations.
• To comply with the banking procedures of Shahjalal Islami Bank Foreign Exchange Branch.
• To analyze the present overall activities of the Shahjalal Islami Bank Ltd.
• To know how far development activities of Shahjalal Islami Bank Limited (SJIBL) are operating through Islamic viewpoint, which is base on shariah.

Methodology of the Study:

 Source of Data

 Sources of information for writing this report are:

• Personal experience gained by visiting different desks.
•  Study of old files.
• Personal investigation with bankers.
• Different circulars sent by Head Office of Shajalal Islami Bank Limited Ltd..
• Annual Report.
• Internet browsing (Background of the bank).

There are many process and techniques of data collection. And we know data collection is the primary task of any study. Mainly, there are two methods of data collection. . These are: Primary Data & Secondary Data.

Primary Data

The primary data are those, which are collected a fresh and for the first time and thus happen to be original in character. We know there are several methods of collecting primary data. The main methods are:

a) Observation method

b) Personal communication

c) Through Questionnaires

d) Through schedules and

Now in our study we emphasis on the following two methods;

a) Observation method

b) Personal communication

a) Observation Method

It is the most commonly used method. In a way we all observe things around us specially our related field. In my study, I have visited Midford Branch of Shahjalal Islami Bank Ltd., for observed and collect data.

b) Personal communication

It is the important methods of collecting primary data. It is very effective method. I have gathered data through personal discussion with the officers of different level of employees of The Shahjalal Islami Bank Ltd., Midford Branch; they provide information about banking operations. Other information has been collected by personal discussion with the Manager.

Secondary Data

Secondary data means data that are already available i.e. they refer to the data, which have already been collected and analyzed by someone else. We know there are many sources of secondary data. It may be published or unpublished; the published data are available in:

• Various publications of central,
• Various publications of foreign governments,
• Technical trade journals,
• Books, magazines and newspapers,

The sources of unpublished data are many; they may be found in diaries letter, unpublished biographic and autobiographies and also may be available with scholars and other public/ private individuals and organizations.

However in our study, we have mainly gathered the secondary data from the following sources:

a) Annual report of SJIBL,

b) Circular letter and journals

c) Published papers on loans and advances of SJIBL,

d) Other published and historical documents of SJIBL;

The present study is concerned with the analysis of Overall practice of Shahjalal Islami Bank Ltd., Bangshal Branch. The approach adopted here is basically analytical and interpretation in nature considering the objectives of the study.

Literature Review

Background of the Bank

It is very much difficult to mention that word ‘Bank’ is derived from which word. There are different opinions in this regard. According to some authors, the word ‘Bank’ was derived from the words Banco, Bancus, or Banque, all of which means a bench. There are others, who thought that the word “Bank” is originally derived from the German word ‘Back’ means a joint stock fund.

The Banking Companies Ordinance was promulgated on the 7^th June 1962. This has been adopted in Bangladesh and is applicable to the banking companies only. Nothing of this ordinance shall apply to a co-operative Securities Act (1912). The main forms of Business of Banking Companies:

• Borrowing, raising or taking up money.
• The lending or advancing of money either upon or without security.
• Dealing in securities and investments.

Bank is a service-oriented financial institution. It provides financial services to the economy by mobilizing fund from surplus unit to deficit unit. Bank mobilizes funds by introducing various financial products. Efficient & effective fund mobilization depends on individual bank’s capability of designing financial products. The Shahjalal Islami Bank Limited is also trying to design the financial product efficiently, nevertheless. Vision may differ from the reality.

Shahjalal Islami Bank Limited has a vision and mission to improve the financial sector of Bangladesh i.e. economic condition of Bangladesh by providing effective and innovative banking and financial product in financial market. However, in every economy of the world financial sector is highly regulated sector. Therefore, financial products of every bank are almost same as same law & regulations regulate them.

Evolution of Banking Business

1)      Ancient ages (5000BD-2000BD)

2)      Vaidic ages (2000BD-1150AD)

3)      Moughal Regime (1150AD-1757AD)

4)      British Regime (1757AD-1947AD)

5)      Partition  of  India and Pakistan Regime (1947AD-1971AD)

6)      Partition of Pakistan and During Bangladesh time (1971AD-till date)

Ancient ages (5000BD-2000BD)

Actually in this age no banking business was found. People used to transact only the goods in the form of barter system.

Vaidic ages (2000BD-1150AD)

In this period there was a vast revolution in the banking business. These sorts of prove have been found in the Hindus holy Bade. Even this is also known that at this period banking business was run based on temples and other religious centers.

Moughal Regime (1150AD-1757AD)

This subcontinent was under the rule of Moughal at about 6 hundred years. Basically different valued gold’s were used for transaction. Some prominent and rich families like as Jogotshet used to control the monetary business. Even in some cases government used to take loan from Jogotshet family with interest. In India first modern bank was established in 1700AD with the name of “The Hindustan Bank”.

British Regime (1757AD-1947AD)

In 1784 another modern bank was opened in this region named-“The Bengal Bank” whose different branches were also opened in Bangladesh from 1862 to 1926 in Dhaka, Chittagonj, Mymonsingh, Rongpur, Chadpur and Narayongonj. Meanwhile, “Bank of Kolkata” in 1806, “Bank of Bombey” in 1840 and “Bank of Madraj” in 1843 was established.

Partition of India and Pakistan Regime (1947AD-1971AD)

After the division of the subcontinent in 1948 “State Bank of Pakistan” and in 1947 “National Bank of Pakistan” were established. And accordingly by 1971 here in total 36 schedule banks were opened.

Partition of Pakistan and During Bangladesh time (1971AD-till date)

(1) Central Bank:

Bangladesh Bank is the successor Bank of the State Bank of Pakistan, which was established in 1948. Reserve Bank of India was established as the central Bank in 1935, which was nationalized by government of India in 1948.

Up to 1935 Imperial Bank used to act as the Central Bank, which was established in 1921 by amalgamating Presidency Bank of Bengal (1806), Presidency Bank of Bombay (1840) and Presidency Bank of Madras (1843). The function of Bangladesh Bank is a wholly government owned Bank.

(2) Commercial Banks:

Commercial Banks, as the very name indicates, function primarily as deposit takers and lenders to trade and commerce. But through a historical process, these Banks are now also engaged in long medium and short term industrial lending, agricultural financing including development financing. Commercial Banks are of three types Nationalized, Local Private and Foreign Commercial Banks.

(3) Specialized Bank:

The specialized banks like Bangladesh Krishi Bank (BKB), Rajshahi Krishi Unnayan Bank, and Grameen Bank (GB) are specialized in financing agriculture and land-less people. BKB was formerly known as agriculture development Bank. These Banks are specialized in financing the agriculture sector, which includes long, medium and short term agriculture lending including crop financing. Grameen Bank has been specially created to finance the rural and land-less people of the country who cannot offer any collateral security. This is not a scheduled commercial Bank.

(4). Specialized financial Institution:

These are the financial institutions created for specific purposes, mainly for financing development and development needs. In this group comprise Bangladesh Shilpa Bank, Bangladesh Shilpa Rin Shangstha, Investment Corporation of Bangladesh.

Islamic Banking Concept

     (A) Islamic Banking

 The definition of Islamic Bank as approved by the General secretarial of the OIC is stated in the following manner. “An Islamic Bank is a financial institution whose status, rules and procedures expressly state its commitment to the principle of Islamic shariah and to the banning of the receipt of and payment of interest on any of its operations.”

Dr. shawki Ismail shehta viewing the concept from the perspective of an Islamic economy and the prospective role to be played by an Islamic bank to incorporate in its functions and practices commercial investment and social activities, as an institution designed to promote the civilized mission of an Islamic economy.

Dr. Ziauddin Ahmed says, “Islamic Banking is essentially a normative concept and could be defined as conduct of banking in consonance with the ethos of the value system of Islam.”

It appears from the above definitions that Islamic banking is a system of financial intermediation that avoids receipt and payment of interest in its transactions and conducts its operations in a way that it helps achieving the objectives of Islamic economy. Alternatively, this is a banking system whose operation is based in Islamic principles of transactions of which profit and loss sharing (PLS) is a major feature ensuring justice and equity in an economy. That is why Islamic banks are often known as PLS-banks.

(B) Concept of Islamic Banking:

Conventional banking is essentially based on debtor-creditor relationship between the depositors and the bank in the one hand, and between the borrowers and the bank on the other. Interest is considered as the price of credit, reflecting the opportunity cost of money.

Islam on the other hand, considers loan to be given or taken, free of charge, to meet any contingency and that the creditor should not take any advantage of the borrower. When money is lent out on the basis of interest, more often it happens that it leads to some kind of injustice. Thus, financial relationship in Islam has been participatory in nature. Several theorists suggest that commercial banking in an interest-free system should be organized on the principle of profit and loss sharing. The institution of interest is thus replaced by a principle of participation in profit and loss. That means, a fixed rate of interest is replaced by a variable rate of return based on real economic activities. The distinct characteristics, which provide Islamic banking with its main points of departure from the traditional interest-based commercial banking, are:

◘ The Islamic banking system is essentially a profit and loss sharing system and not merely an interest (riba)-free banking system; and

◘ Investment (loans and advances in conventional sense) under this system of banking must serve simultaneously both the interest of the investors and those of the local community. The financial relationship as pointed out above is referred to in Islamic jurisprudence as mudarabah.

Goals of Islamic Bank

1)      To eliminate riba from all sectors of economy

2)      To establish Baiya (Trade, Com. & Industry)

3)      To mobilize savings for productive purposes.

4)      To earn reasonable profit through Halal transaction.

5)      To create more employment opportunities by increasing economic activities.

6)      To ensure equitable distribution of resources.

7)      To safeguard the excess money lying idle in the hands of customers.

8)      To contribute towards economic development.

9)      To establish balanced trade and welfare.

10)  To develop human resources and self-assessment.

11)  To prevent allowing of concentration of wealth.

12)  To establish justice and humanity.

13)  To serve all classes of people in general and specially to favor the weaker classes.

14)  To establish good and eliminate evils.

The Distinct Features of the Islamic Banking System

1)      Islamic bank do not transact on credit.

2)      The relation between Islamic bank and its customer is not that of a debtor and creditor but one of participation in profit and loss.

3)      Islamic banks segregate capital funds from deposits firm.

4)      Islamic bank mobilize resources to use for development not only for profit.

5)      Islamic bank is a multipurpose bank.

6)      Investment in Halal Business.

7)      Investment based on profit sharing or profit and loss sharing.

8)      Prohibition of Interest.

9)      Halal Paths and procedure is a precondition for deposit and investment.

10)  Islamic bank never becomes bankrupts.

11)  Islamic bank does not create credit.

The distinguishing between Islamic banks VS Conventional Banking Compared

Background of Shahjalal Islami Bank Limited

Shahjalal Islami Bank Limited (SJIBL) commenced its commercial operation in accordance with principle of Islamic Shariah on the 10th May 2001 under the Bank Companies Act, 1991. During last 10 years SJIBL has diversified its service coverage by opening new branches at different strategically important locations across the country offering various service products both investment & deposit. Islamic Banking, in essence, is not only INTEREST-FREE banking business, it carries deal wise business product thereby generating real income and thus boosting GDP of the economy. Board of Directors enjoys high credential in the business arena of the country, Management Team is strong and supportive equipped with excellent professional knowledge under leadership of a veteran Banker Mr.Abdur Rahman Sarkar.

Shahjalal Islami Bank Limited is a scheduled Bank under private sector established under the ambit of bank Company Act, 1991 and incorporated as a Public Limited Company under Companies Act, 1994 on April 01, 2001. The Bank started commercial banking operations effective from May 10, 2001. During this short span of time the Bank had been successful to position itself as a progressive and dynamic financial institution in the country. The Bank had been widely acclaimed by the business community, from small entrepreneur to large traders and industrial conglomerates, including the top rated corporate borrowers for forward-looking business outlook and innovative financing solutions. Thus within this very short period of time it has been able to create an image for itself and has earned significant reputation in the country’s banking sector as a Bank with vision. Presently it has fifty one branches in operation.

Shahjalal Islami Bank Limited has been licensed by the Government of Bangladesh as a Scheduled Bank in the private sector in pursuance of the policy of liberalization of banking and financial services and facilities in Bangladesh. In view of the above, the Bank within a period of 3 years of its operation achieved a remarkable success and met up capital adequacy requirement of Bangladesh bank.

It has been growing faster as one of the leaders of the new generation banks in the private sector in respect of business and profitability as it is evident from the financial statements for the last 4 years.

The Bank has made a significant progress within a very short period of its existence and occupied an enviable position among its competitors after achieving remarkable success in all areas of business operation.

Mission of SJIBL

Shahjalal Islami Bank Ltd. aims to become one of the leading Banks in Bangladesh by prudence, flair and quality of operations in their banking sector. The bank has some mission to achieve the organizational goals. Some of them are as follows as:

• To provide high quality service to customers.
• To set high standards of integrity.
• To make quality investment.
• To ensure sustainable growth in business.
• To ensure maximization of shareholders’ wealth.
• To extend our customers innovative services acquiring state-of-the-art technology blended with Islamic principles.
• To ensure human resource development to meet the challenges of the time.

Vision

To be the unique modern Islamic bank in Bangladesh & to make significant contribution to the national economy and enhance customers’ trust & wealth, quality investment, employees’ value and rapid growth in shareholders’ equity.

Credit Rating

Shahjalal Islami Bank Limited was rated by Credit Rating and Information Services Limited (CRISL). In their report on April 2010, they rated the Bank as AA for long term and ST-2 for short term. The gradation in long term rating has been done in consideration of its good capital adequacy, appropriate asset quality, increased non funded business and sound liquidity position. The short term rating indicates high certainty with regard to the obligators capacity to meet its financial commitments.

Objectives of SJIBL

From time immemorial Banks principally did the functions of moneylenders or “Mohajans” but the functions and scope of modern banking are now a days, very wide and different. They accept deposits and lend money like their ancestors, nevertheless, their role as catalytic agent of economic development encompassing wide range of services is very important. Business commerce and industries in modern times cannot go without banks. There are people interested to abide by the injunctions of religions in all sphere of life including economic activities. Human being is value oriented and social science is not value-neutral. Shahjalal Islami Bank believes in moral and material development simultaneously. “Interest” or “Usury” has not been appreciated and accepted by “the Tawrat” of Prophet Moses, “the Bible” of Prophet Jesus and “the Quran” of Hazrat Muhammad (sm). Efforts are there to do banking without interest Shahjalal Islami Bank Limited avoids “interest” in all its transactions and provides all available modern banking services to its clients and wants to contribute in both moral and material development of human being. No sustainable material well-being is possible without spiritual development of mankind. Only material well-being should not be the objective of development. Socio-economic justice and brotherhood can be implemented well in a God-fearing society.

The objectives of Shahjalal Islami Bank include:

• To conduct interest-free and welfare oriented banking business based on Islamic Shariah.
• To implement and materialize the economic and financial principles of Islam in the banking arena.
• To contribute in sustainable economic growth.
• To help in poverty alleviation and employment generations.
• To remain one of the best banks in Bangladesh in terms of profitability and assets quality.
• To earn and maintain a ‘Strong’ CAMEL Rating
• To introduce fully automated systems through integration of information technology.
• To ensure an adequate rate of return on investment.
• To maintain adequate liquidity to meet maturing obligations and commitments.
• To play a vital role in human development and employment generation.
• To develop and retain a quality work force through an effective Human Resources Management System.

Goals of SJIBL

Shahjalal Islami Bank Ltd. will be the absolute market leader in the number of loans given to small and medium sized enterprises throughout Bangladesh. It will be a world-class organization in terms of service quality and establishing relationships that help its customers to develop and grow successfully. It will be the Bank of choice both for its employees and its customers, the model bank in this part of the world.

Strategies of SJIBL

The strategies of Shahjalal Islami Bank include:

• To strive for customers’ best satisfaction
• To manage and operate the Bank in the most efficient manner
• To identify customers’ needs and monitor their perception towards meeting those requirements
• To review and update policies, procedures and practices to enhance the ability to extend better service to customers.
• To train and develop all employees and provide them adequate resources so that customers’ needs are reasonably addressed.
• To promote organizational effectiveness by openly communicating company plans, policies, practices and procedures to employees in a timely fashion
• To cultivate a congenial working environment
• To diversify portfolio both in the retail and wholesale markets
• To increase direct contact with customers in order to cultivate a closer relationship between the bank and its customers.

Performance of Shahjalal Islami Bank Limited

Background Performance of the Shahjalal Islami Bank  Limited 

Shahjalal Islami Bank Limited, a Shariah Based Commercial Bank in Bangladesh was incorporated as a Public limited company on 1^st April, 2001 under Companies Act 1994. The bank commenced commercial operation on 10^th May, 2001 by opening its 1^st branch, i.e. Dhaka Main Branch at 58, Dilkusha, Dhaka obtaining the license from Bangladesh Bank, the Central Bank of Bangladesh. Its corporate head office is situated at 10, Dilkusha commercial Area, Jibon Bima Bhaban, Dhaka-1000, and Bangladesh. The bank opened 2(two) branches in 2001, 6(six) branches in 2002, 2(two) branches in 2003, 2(two) branches in 2004, 4(four) branches in 2005, 5(five) branches in 2006, 5(five) branches in 2007, 5(five) branches in 2008 & 20(Twenty) branches in 2009. Total number of branches stood at 64 in 2010 and some more branches are likely to be opened in important business locations of the country during 2011-2012 subject to the approval of Bangladesh Bank.

Operational Performance

Net asset value per share:

Net asset value per share has increased by 19.70 in 2010 from 17.98 in 2009. It was 14.90 in 2007. It gives a clear picture of its strong operational performance.

Earning Per Share:

Another indicator of better performance is Earning per Share. In 2010, SJIBL has achieved a tremendous growth of Earning Per Share which was 6.05. But in previous year it was only 3.91.

Return On Asset:

In 2010, Return on asset has increased to 3.01% which was 2.08% in 2009. It indicates high profitability of Shahjalal Islami Bank  Limited.

Net Income Ratio:

Net income ratio has reached to 21.79 in 2010 from 15.04 in 2009.this growth proved that SJIBL is going to right direction to achieve its goals.

Economic Value Addition:

Economic Value Addition indicates the true economic profit of the company. In 2010, the amount of EVA is 1854.54 million taka. It was only 715.46 million taka in 2009.

Deposits

Deposit is the “life- blood” of a bank. Bank has given utmost importance in mobilization of deposit introducing a few popular and innovative schemes. The mobilized deposits were ploughed back in economic activities through profitable and safe investments:

• Monthly Deposit Scheme (MDS)
• Millionaire Scheme (MIS)
• Monthly Income Scheme (MIS)
• Double Benefit Scheme (DBS)
• Multiple Benefit Scheme (MBS)
• Hajj Palan Scheme
• Housing Deposit Scheme
• Cash Waqaf Deposit Scheme
• Lakhopati Deposit Scheme
• Mohor Deposit Scheme
• Marriage Deposit Scheme
• Education Deposit Scheme
• Small Business Deposit Scheme
• Special Term Deposit Scheme

Banking Operation in Computer

Automation in Banking Operation

Shahjalal Islami Bank is an Industry standard, Islamic Shariah & latest technology based modern bank. The bank is equipped with state-of-the-art technology and committed to provide technology based modern banking solutions to its valued customers.

OnLine Banking

To provide better services to the valued customers using the latest technology and electronic media competing with other private banks to set and establish full automated, on-line, centralized banking systems interfacing (connecting software) with all delivery channels. Like: ATMs (Automated Teller Machine), POS (point of sale-Fund transfer machine for purchasing at any shop/service center etc.) Any branch banking, home banking, tele banking, Internet banking etc. online banking/ any branch banking is a system where transactions, query and system where transactions, query and statements of any client of a certain branch may be carried out from another branch of the bank.

SJIBL Visa Card

Card is considered as a new dimension of product resulting from technological development in the banking arena. In line with our affiliation with VISA International for VISA ATMs and POS, the following two products are launched broadening service products of the bank to the clients:

• VISA Electron (SJIBL VISA Debit card-Local)
• VISA Prepaid (SJIBL VISA Prepaid Card)
• SJIBL VISA Prepaid Card-Local
• SJIBL VISA Prepaid Card –International
• SJIBL VISA Prepaid Card-Dual

SMS/ Pull Push Service

Benefit of SMS-

• A new technology based service will attract new client base.
• Clients will be facilitated with Cell phone based banking service.
• Enhanced and extended customer services levels on a collaborative basis.
• Will reduce teller quest.
• Services- Balance inquiry,
• Cheque book request,
• Cheque leaf status,
• FC rate information,
• Cheque stop payment instruction, statement request by e-mail, last three transaction statement, help inquiry & PIN change.

Personnel Management Information Systems (PMIS)

In Head Office PHIS system is going to be implemented in full phase with the following features-

Employees’ recruitment, posting, personal, leave, increment, promotion, training, retirement, attendance, payroll, PF, Tax etc should be controlled by PMIS. This system should be run in LAN & WAN environment and centrally controlled data of all employees. Employees ID, Biometric Image with signature will remain be enrolled in the software.

SWIFT

Shahjalal Islami Bank Limited is a member of the society for Worldwide Inter Bank Financial Telecommunication (in abbreviation S.W.I.F.T). SWIFT is the industry-owned co-operative supplying secure, standardised messaging services and interface software to nearly 8,100 financial institutions in 207 countries and territories. SWIFT members include banks, broker-dealers and investment managers. The broader SWIFT community also encompasses corporate as well as market infrastructures in payments, securities, treasury and trade.

REUTERS

 The bank has also established liaison with the facility of REUTERS, through which the bank received regular, latest information about the exchange rate, etc and other price sensitive information to take prompt and correct decision.

Relationship between customer & banker

Banker & Coustomer Relationship

The Banker Customer relationship is essentially a debtor-creditor contractual relationship. This relationship may be divided into two categories.

• Legal relationship
• Behavioral relationship.

After the contractual relationship is established between the banker and customer, they have to avoid by some implied conditions of the contract as well as practices of the bank.

Some of the condition and practices are as follows:

Customer is to use checkbook while demanding payment from his account.

Customer should keep checkbook in his safe custody.

Customer must inform the bank on time for any loss of check leaf or checkbooks.

Customer while depositing money or presenting check, they must do that during business hour of the bank.

Bankers also should give necessary banking advice and help the customer in various banking activities.

 Right & Duty of Customer & Banker Relationship

Bills

Bank collects the bills through clearing in both inward and out ward.

Clearing is one of the important jobs of a bank. To run the banking business smoothly and to provide serve to customer, every bank has to collect cheques, POs, Drafts, etc which are drawn on other Bank on behalf of their A/c holder.

On the other hand, every Bank has to pay against his A/c holder’s Instrument, which are received from other Banks. In a word, we can say, the bank needs to collect or pay money on behalf of its A/c holder against A/c payee instruments. The process by which way the bank collects or pays the money is called clearing.

Clearing House

Clearing House is a place where various Banks’ representatives gather with their Clearing Instrument and settle each other’s claims. Normally, clearing house sits in the Central Bank. Where there is no branch of Central Bank, the clearing house sits in a general place selected by the Central Bank. Clearing is held under the supervision of the Central Bank. In our country, Bangladesh Bank controls the clearinghouse.

 Bangladesh Bank has divided the whole country in various clearing zones such as, Dhaka, Chittagong, Khulna, Barishal etc.  Some where Sonali Bank arranges & controls the clearing house as a representative of Bangladesh Bank.

Every Bank does not get the clearing facility. To avail the clearing facility every bank and its branches need to become a member of the Clearing House.

Our SJIBL Foreign Branch is a member of Dhaka Clearing House and our clearinghouse sits in Bangladesh bank. We cannot do our clearing jobs directly. We do our clearing jobs through our Head office at Dilkusha C/A, Dhaka.

Description of Outward Clearing

Bank does not involve in clearing house directly. They make their clearing through Head office, Dilkusha. They just prepare the Instrument and send it to clearing department of Head Office for collection.

On the other hand, the A/c Holder of our Branch gives our Branch’s instrument to their party who is not our A/c holder as payment. The party deposits the following instruments in their A/c for Collection through clearing house. We receive those instruments from Clearing house and make payment on behalf of our A/c holder. This is called Inward Clearing

Except Clearing Instrument the Clearing Department also Collect the following instruments on behalf of their customer.

LBC Cheques

LBC Stands for Local Bills Collection. LBC is a process of collection of instrument, which is held between the two different Branches of the Same Bank in the Same Clearing House. For example, if any A/c holder of our branch deposited a cheque which is drawn on our Babu Bazar Branch. In this case we will collect the proceeds through LBC.

OBC Cheques

OBC stands for Out Wards Bills Collection. Like LBC it is a process of collection of instrument which is held between the two different Branches of the Same Bank in the Different Clearing House/Different City. For example if any A/c holder of our branch deposited a cheque which is drawn on our Agrabad Branch Chittagong. In this case, we collect the proceeds through OBC.

Commission of OBC of our Branch

Below Tk. 1 Lac         0.15%

Above Tk. 1 Lac         0.10%

Postage Charge Tk. 10.00

IBC (Inward Bills Collection)

We collect the instrument on behalf of our customer through LBC/OBC which is drawn on other Branches of our Bank. Like this collection we also make payment on behalf of our customer against LBC/OBC instrument, which are received from other Branch but drawn on our Branch. For example if any A/c holder of our Branch gives a cheque to his customer who maintains a/c with our Babu Bazar Branch & deposited the Cheque in his A/c. Babu bazar Branch will send the said Cheque to our Branch through LBC for collection. Receiving of this kind of Instrument is called IBC.

Mudaraba Savings Account

The depositor is the Shahib Al- Mal (owner of the fund) and the bank is the Mudarib (organizer /Manager). The bank is authorized to invest the Mudaraba funds at the risk of the Shahib Al-Mal (depositor). Minimum balance that should be deposited in this account is Tk.2000.The account holder can deposit money at any time during the month. The lowest balance of the account within first six days of the month will be considered as the deposit of the month. Maximum 4-times withdrawal in a month is permissible for distribution/calculation of profit. On a single instance, maximum withdrawing should be one fourth of the balance in the account or Tk.25000 whichever is lower; violation of it will bar distribution of profit. Seven days prior notice to be given for withdrawal of any amount exceeding Tk.25000 and in that case profit may be allowed on the balance amount. However, the Account holder needs to maintain the requisite minimum balance throughout the month to receive the profit. Required information & documents which are needed for opening private individual accounts / Single accounts / joint account are-

1)      Application form

2)      Specimen Signature card

3)      Photograph of the account holder

4)      Photograph of the Nominee (for each nominee)

5)      Letter of authority (if required)

6)      Joint account opening form with minor participant

7)      Photocopy of passport/Certificate of chairman or commissioner/Voter ID card/Employer certificate

8)      TIN certificate if available

9)      KYC & TP

Al-Wadiah Current Account

        This account can be open for Individual/ Joint account, Private firms, Limited companies, Club/Societies/Educational institution etc.

 Nature of Account

Al-Wadiah Current Account is one of the deposit accounts in practice in Islamic Banking Deposits are accepted in Al-Wadiah Current Account by the bank in the normal banking traditions, the only difference is SJIBL obtains consent of the depositors by accepting the rules of account opening form to use their funds in amalgamation with other funds of the bank, at bank’s own risk. It is a non-profit/ loss sharing account, guaranteed by the bank for full repayment less bank’s charges if any.

Shariah Principles:

The operation of the Al-Wadiah current Account is primarily guided by the principles of Al-Wadiah which means the banks receives money from the clients for safe custody. It is under obligations to return the money on demand by the customer either through cheque or by any other means as stipulated.

Who can open an Al-Wadiah Current Account

Any individual, Proprietary concern, Partnership concern, Limited Companies etc. can open an Al-wadiah Current account. Charitable Institutions, Provident and other funds of benevolent nature of the local bodies, Autonomous corporations, Associations, Educational institution etc can also open such accounts.

Introduction of account

No account shall be opened without having suitable introduction from a respectable party known to the bank or Al-Wadiah Current Account holder.  Mudaraba Deposit Account holder shall not be accepted for Al-Wadiah Current Account except particular cases.

Admittance of signature and manager’s approval

 The “Signature admitted” shall be affixed in the account opening form and specimen signature card.

Minimum Balance

 Minimum balance to be maintained in Al-Wadiah Current Deposit is Tk.5000.

Profit Payment

Deposits of Al-Wadiah current Deposit Account is accepted as per Al-Wadiah Principles. Clients will not be entitled to receive any profit against the Al-Wadiah Current Deposit Account.

Documents

      Required information & documents for opening this account are-

 Individual/ Joint Account:

• Application form
• Specimen Signature card
• Photograph of the account holder
• Letter of authority (in case of operation by other person)
• Current Account Survivorship form
• Current a/c either or sur5vivorship agreement for OD (in case of 2 persons)
• Photocopy passport/Certificate of employer/Certificate of Chairman or commissioner/ Voter ID card
• TIN certificate if available
• KYC & TP

Private Firms accounts (Proprietorship):

• Application form
• Specimen Signature card
• Letter of authority (in case of operation by other than Proprietor)
• Up to date Trade License
• Partnership deed, the deed should be notarized or registered. Power of attorney in case of operation of account by manager or agent.
• Partnership letter in case of partnership firm if partnership deed is not submitted.
• Photograph of the operator
• Firm seal
• Photocopy of passport/Certificate of chairman or Commissioner/Voter ID Card.
• KYC & TP.

 Limited Companies Account:

• Application form
• Specimen Signature Card
• Photograph of the operator & ID
• Memorandum of Association
• Articles of Association
• Certificate of incorporation
• Prospectus (if possible)
• Certificate of Commencement of business in case of Public Ltd Co.
• Resolution of the company regarding bank account opening with request letter
•  List of existing Director with full address
• Balance Sheet
• List of 1^st Director and changes of Directors
•  Seal of the Company
•  KYC & TP.

Club/Societies/ Educational Institution etc.:

• Application form
• By laws/rules constitution
• Photograph of the operation/operators & ID
• List of members of executive Committee/ Management Committee with address.
• Seal
• Registration from the registrar of societies in case of club societies
• Papers relating to affiliation in case of school, collage, universities etc.
• Resolution of executive committee/managing committee appointing the name of banker and nominating the official to open and operate the account.
• Registration from registrar of Co-operative societies (in case of  co-Operative Society)
•  KYC & TP
•  Head Office approval if required (if required)

To confirm the genuineness of customer’s identity personal interview should be taken. Bank official may visit or verify the customer’s address and his genuinely. After opening of account thanks letter should be issue both the account holder & introducer under authenticated mail.

Formalities

1. Application on the prescribed form: The person desiring to open a current account with the bank has to make application in the prescribed form. This form must be properly filled up and signed by the applicants.

2. Introduction of the applicant: The applicants also required furnishing in the application form the names of the references from whom the banker may make inquiries regarding the character, integrity and respectability of the applicants. In most cases, the customer of the bank or some other person known to the bank by signing on the application form with his/her account number (if any) does the introduction.

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

4. Mandate for operation of the account by an agent: In case a customer desires to get his / her account operated upon by another person then the bank will obtain a mandate in writing to that effect as well as the specimen signature of the person in which favor the mandate is given.

Opening and operating the account

After the above formalities are over, the banker opens an account in the name of applicant. Generally the minimum amount to be deposited initially is Taka 5000/= for opening a current account. Then the bank provides the customer with:

A pay-in –slip/ Deposit Book: With a view to facilitate the receipt of credit items paid in by a customer, the bank will provide him/her pay-in-slip either loose or in a book form. The customer has to fill up the pay-in-slip at the time of depositing the money with the bank. The cashier with his/her initial and stamps will return the counterfoil to the customer on the receipt of the money.

Chequebook: To facilitate withdrawal and payment to third parties by the customer, the bank will also provide a chequebook to the customer. Nevertheless, it is noted that to get a chequebook, the customer had to dully fill the cheque requisition slip to the banker.

Mudaraba Short Notice Deposit/Time Deposit:

Shahjalal Bank also receives term deposit from the clients.The term deposit, of course, altogether different from that of the interest-based banks. Fixed term deposits while received by Islamic Bank as termed as “Term Mudaraba Deposit”. Like this SBL collect “Mudaraba Short-Notice Deposit” or (MSND). It is also a Time Deposit account.

The formalities for opening of this account are similar to those required for Al-Wadeah Current Account. The only difference is that seven- (7) day notice is required for withdrawal of any sum and profit is paid. The rate of profit for this account is 6.5%. If the withdrawal on demand is desired, it may be paid subject to the for-feature of profit for the period of notice or the expired period of notice.

Different types of deposit scheme

The Shahjalal Bank limited containing:

• Monthly Deposit Scheme (MDS)
• Mudaraba Term Deposit Receipt (MTDR)
• Millionaire Scheme (MIS)
• Monthly Income Scheme (MIS)
• Double Benefit Scheme (DBS)
• Multiple Benefit Scheme (MBS)
• Hajj Palan Scheme
• Housing Deposit Scheme
• Cash Waqaf Deposit Scheme
• Lakhopati Deposit Scheme
• Mohor Deposit Scheme
• Marriage Deposit Scheme
• Education Deposit Scheme
• Small Business Deposit Scheme
• Special Term Deposit Scheme

Some of these are described in following-

Mudaraba Term Deposit Receipt (MTDR): It is like a fixed deposit in the conventional banking system but it does not receive or accept interest rather, this account give profit and collect deposits. In this mode Tk1000/- or above can be deposited against client will get non-transferable instrument of equal amount. The depositor will not receive any chequebook for this account. If a customer withdraws his or her money before one month s/he will not get any kind of profit. On the other hand, after the matured if client don’t withdraw his/her money it will be auto renewed with imposed profit for the next days. In case of one year or more than that, if a depositor does not withdraw his capital it will work as a primary deposit for the next year. If a depositor would like to withdraw his profit after six months s/he will get the profit accordance with previous years profit rate. After the announced yearly profit or loss, if bank felt in loss position then the depositor bound to incur the loss. In absence of account holder the selected nominee will get the money. If the accountholder does not mention any nominee, in that case, the inheritance of the depositor will enjoy the profit accordance to inheritance certificate. Any kind of tax or excise duty can be cut down according to government circular.

Profit on MTDR

 Monthly Deposit Scheme (MDS): It is like a deposit pension scheme. A depositor can open a MDS account for depositing of Tk500, Tk1000, Tk2000, Tk10000, Tk5000, and Tk25000, Tk.50000/- for 5 years or 8years or 10years. The installment will be paid within first 25 days of the month. If the 25^th of month is off day, then the installment will be paid on next working day. The deposit of installment can be paid by cheque. In the case of cheque, clearing date of the cheque will be the actual deposited date.

The depositor can pay installment from his account through prior permanent instruction. In this term, the accountholders(s) are bound to pay Tk.25 for fine charge. If the account is close before the maturity then profit will be calculate according to savings rate. If a depositor fails to pay consecutive four installments then the account will be closed automatically and profit will be calculate as Savings rate. But for first six-month no profit will be calculate. Nominee will enjoy the profit in absence of the accountholder.

Monthly Income Scheme (MIS): It is the scheme for profit earning. In this account depositor can deposit minimum amount of 50,000/- and above. Depositor will get 500/- against 50,000/-. But depositors have to deposit the amount for 5 years. If accountholder close his or her account before maturity then s/he will receive the profit accordance with savings rate. In the absence of accountholder, the specified nominee will get the amount.

Double Profit Mudaraba Savings Scheme (DPMSS): In this scheme depositors can deposit more than 10,000/- for 6years and after the maturity accountholder will receive double than his deposited amount. If depositor want to close his account before maturity then he is bound to receive at the savings rate. For opening this account applicant need one copy of recent photograph and one copy photograph of nominee (if any).

Millionaire Scheme (MS15, MS20& MS25): Normally, it is the account for children or inheritance. Here, applicants are the selected people for operating the account on behalf of the accountholder. The depositor should to deposit the account within first 15 days of the month; neither will s/he be designated as debtor to the bank. If 15^th date is the off day then the next working day will be schedule date. The installment can be paid through cheque. No chequebook will be issued for this account, but the bank will provide deposit book.

Special Term Deposit Scheme (STDS)

For most of the people on fixed income the opportunity to supplement their monthly earning is a golden one. And SJIBL Special Deposit Scheme gives a customer just that.

Under this scheme, customers can deposit money for a term of 5 years. The deposited money is fully refundable at the expiry of the term. At the same time, during the term period they can enjoy a monthly profit corresponding to their deposited amount. As for instance, under this scheme a deposit of Tk, 55,000/- gives a monthly income of Tk.500/-

Issuance of Cheque Book & deposit book

To withdraw money from the bank you need a cheque book. The bank issue three different type of cheque book. The cheque book is different of consist of pages on the book.

SJB A/C-10 pages

ACD A/C-20 pages

Public ltd A/C-50 pages