General Banking Practices of IFIC Bank Limited

Introduction:

Generally by the word “Bank” we can easily understand that the financial institution deals with money. But there are different types of banks like; Central Banks, Commercial Banks, Savings Banks, Investment Banks, Industrial Banks, Co-operative Banks etc. But when we use the term “Bank” without any prefix, or qualification, it refers to the ‘Commercial banks’. Commercial banks are the primary contributors to the economy of a country. So we can say Commercial bank is a profit-making institution that holds the deposits of individuals & business in checking & savings accounts and then uses these funds to make loans. For these people and the government is very much dependent on these banks as the financial intermediary. As banks are profit-earning concern; they collect deposit at the lowest possible cost and provide loans and advances at higher cost. The differences between two are the profit for the bank.

Banking sector is expanding its hand in different financial events every day. At the same time the banking process is becoming faster, easier and the banking arena is becoming wider. As the demand for better service increases day by day, they are coming with different innovative ideas & products. In order to survive in the competitive field of the banking sector, all banking organizations are looking for better service opportunities to provide their fellow clients. As a result, it has become essential for every person to have some idea on the bank and banking procedure.

The Banking Companies Ordinance was promulgated on the 7th 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).

IFIC 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.

 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.

Rationale of the study: 

In today’s modern and globalization world, business sector is competitive. Theoretical knowledge is not enough for a business student because there is a gap between theoretical knowledge and practical field. It is more competitive in the financial institution like bank. Now a day’s local banks are playing a key role for economic growth and development of the country. In that case IFIC Bank is playing a pioneer role for structural development of the country. This study mainly covered the areas of performance of IFIC Bank, its services, types of deposits, remittance, loans & advance, recovery system and its growth.

 Objectives of the study:

◊To analyze the general banking activities of IFIC Bank Ltd.

◊To review the credit management system of the bank.

◊To identify the problems of general banking practices of IFIC Bank Ltd.

◊To provide suggestion to overcome the problems of the bank.

 Scope of the study:

An infrastructure of the organization has been detailed, accompanied by a global perspective and look into the future. The scope of this report is limited to the overall description of the company, its services, and its position in the market and its marketing strategy. The scope of the study is limited to organizational setup, functions, and performances for customer satisfaction, also

 The study would focus specifically on the following areas:

General Banking of IFIC Bank Ltd.

Remittance and clearing section of IFIC Bank.

Credit operation of IFIC Bank Ltd.

Foreign Trade of IFIC Bank Ltd.

Each of the above areas would be critically analyzed in order to identify the service quality of the bank.

 Methodology of the study:

Different data and information are required to meet the goal of this report. Those data and information were collected from various sources, such as, primary and secondary which is shown below:

  Data Analysis:  For the analysis purpose I have basically undergone some financial analysis and also judged some qualitative factors responsible for the IFIC Bank position in banking sector.

To continue the study, I have collected the useful data by two methods:

• Conceptual approach.
• Empirical approach.

These two data analysis techniques provided independently derived information that could be crosschecked, thus enhancing validity.

 Sources of collecting data:

There are commonly two sources of data and information which have been used widely. They are shown and discussed below:-

• Primary Data:   

This report has been prepared through extensive use of primary data. The sources of my primary data are as follows:-

• Face to Face conversation with the officers and staffs of the banks.
• Informal conversation with the clients/customers.
• Practical work exposures from different desks of the Branch.
• Secondary Data:
• The secondary sources of data are as follows:-
• Annual Reports of IFIC Bank limited.
• Various books and journals on general banking functions and their Customers services.
• My diary maintained while undergoing the practical orientation.

Techniques of collecting data:

  Primary data collection Method

Primary data was collected from IFIC bank Ltd., Mirpur Branch. To prepare a report, I have collected data and information by following way:

 Questionnaire method

To collect information for my practical training at first, I made a questionnaire with the help of my honorable supervisor. After preparing the questionnaire I collected the information and data from the officers, personnel and other concerned people of my targeted bank

        Interview Method

I have collected the information and data through interview. I have taken interview of the officers, executives and supervisors and they all responded all of questions friendly.

     Observation Method

I was present physically in every department of IFIC bank Ltd., Mirpur Branch, for the purpose my internship training period and observe all the functions. From this observation and with the help of my practical knowledge, I have collected some information and data about the bank.         

  Secondary Data Collection Method

The only source of secondary data was official record of bank. Others sources of secondary data are as follows:

•   Some published and unpublished research report
•   Books, magazines, statistics documents and papers
•   Business and technical journals and Public records

Limitations of the study:

There is a certain boundary to cover this study. It was not possible due to shortage of time to cover each and every activity performed by the bank. So the study has covered only the General banking Activities of IFIC Bank Limited.

Like any other articles and theories, this study is not free from limitations. I have tried my level best to overcome these limitations through extensive study, hard and sincere devotion to the assigned duty. The major limitations are:

• I complete my internship in a small town branch, Mirpur Branch. So I don’t get the proper information which I need.
• The bank personnel and officials were very busy with their daily activities. Hence it was little bit difficult for them to help within their high schedule.
• Relevant data and document collection were difficult due to the organization confidentiality.

An Overview of the IFIC Bank Ltd.

 Historical Background

International Finance Investment and Commerce Bank Limited (IFIC Bank) is a banking company incorporated in the People’s Republic of Bangladesh with limited liability. It was set up at the initiate of the Government in 1976 as a joint venture between the Government of Bangladesh and sponsors in the private sector with the objective of working as a finance company within the country and setting up going venture banks/financial institutions abroad. The Government held 49 percent shares and the sponsors and general public held the rest. In 1983 when the Government allowed banks in the private sector, IFIC was converted into a full-fledged commercial bank. The Government of the People’s Republic of Bangladesh now holds 32.75% of the share capital of the Bank. Leading industrialists of the country having vast experience in the field of trade and commerce own 8.37% of the share capital and the general public holds 58.88%.

 Objectives of IFIC Bank:

• `To earn profit by providing various banking services.
• To collect deposit of various types.
• To create medium of exchange near to cash.
• To increase savings and accumulate capital.
• To provide loans of various types to enhance trade and businesses.
• To Expand of Trade and Commerce.
•  To develop industrial bases of the country etc.

Banks Mission Statement

“Our Mission is to provide service to our clients with the help of a skilled and dedicated workforce whose creative talents; innovative actions and competitive edge make our position unique in giving quality service to all institutions and individuals that we care for. We are committed to the welfare and economic prosperity of the people and the community, for we drive from them our inspiration and drive for onward progress to prosperity. We want to be the leader among banks in Bangladesh and make our indelible mark as an active partner in regional banking operating beyond the national boundary. In an intensely competitive and complex financial and business environment, we particularly focus on growth and profitability of all concerned. ”

(Source: Profile of IFIC Bank Ltd.)

Logo

 Slogan:

“Your Satisfaction first”

 Departments of IFIC Bank Limited:

If the jobs are not organized considering their interrelationship and are not allocated in a particular department it would be very difficult to control the system effectively. IFIC Bank Limited does this work very well. Different departments of PBL are as follows:

  Human Resources Division

  Personal banking Division

   Treasury Division

   Operations Division

   Computer and Information Technology Division

   Credit Division

   Finance & Accounts Division

   Financial Institution Division

Milestones in the development of IFIC Bank

Organizational Structure

Hierarchy of the Management of IFIC Bank Ltd

IFIC Bank Limited
Balance Sheet
Assets on December 31, 2010

Property & Assets
Cash
In hand (including foreign currency)
Balance with Bangladesh Bank (including
foreign currency)
Balance with sonali Bank

Balance with other Banks and financial
institutions
In Bangladesh
Outside Bangladesh

Money at call and short notice
Investments
Government
Others
Outside Bangladesh

Loans and advances
Loans, cash credit, overdraft etc.
Bills purchased and discounted

Fixed Assets including premises, furniture &
fixture
Other assets
Non-banking assets

Total Assets

LIABILITIES AND CAPITAL

Liabilities

Borrowings from other Banks, financial

institutions & agents

In Bangladesh

Outside Bangladesh

Deposit and other accounts

Current deposit and other accounts

Bills payable

Savings bank deposits

Bearer Certificate of deposits

Term Deposits

Other liabilities

Total Liabilities

Capital/Shareholders equity

Paid up capital

Statutory reserve

Other reserve

Proposed Bonus Share @ 10% (2003)

Proposed Bonus Share @ 10% (2004)

Proposed Bonus Share @ 10% (2005)

Proposed Bonus Share @ 24% (2006)

Surplus in Profit and Loss Account.

Total shareholders’ equity

Total liabilities and shareholders’ equity

OFF BALANCE SHEET ITEMS:

Contingent liabilities

Acceptances and endorsements

Letter of Guarantee

Irrevocable letter of credit

Bills for collection

Other commitments Forward assets purchased and forward

deposits placed

Total off balance sheet items including

contingent liability

2.10 IFIC Bank Limited Background AT A GLANCE

Contact Information:

 Products and Services of IFIC Bank Limited

Joint Ventures Abroad

IFIC is the first among the banks in the private sector to have operations abroad. In 1983, the Bank set up a joint venture bank in Maldives known as ‘Bank of Maldives Limited’ (BML) at the request of the Government of the Republic of Maldives. This is the only national bank in that country having branches throughout that country. IFIC Bank managed the affairs of BML from 1983 to 1992. IFIC Bank sold its shares in 1992 to the Government of the Republic of Maldives and handed over the Management of BML to Maldives Government.

NIB Bank Ltd., Pakistan

IFIC Bank had two branches in Pakistan, one in Karachi and the other in Lahore. Karachi Branch was opened on 26th April 1987, while Lahore Branch was opened on 23rd December 1993.
To meet the Minimum Capital Requirement (MCR) of the State Bank of Pakistan, the Overseas Branches in Pakistan have been amalgamated with a reputed leasing company in Pakistan named National Development Leasing Corporation Ltd. Therefore; the existence of our above Overseas Branches has ceased w.e.f. 2nd October 2003 and a new joint venture bank entitled NDLC – IFIC Bank Ltd. emerged in Pakistan w.e.f. 3rd October 2003. The Bank was subsequently renamed as NIB Bank Ltd. IFIC Bank presently holds 7.31% equity in the Bank.

Nepal Bangladesh Bank Ltd. (NB Bank)

Nepal Bangladesh Bank Ltd. (NB Bank), a joint venture commercial bank between IFIC Bank Ltd. and Nepal nationals, started operation with effect from June 06, 1994 in Nepal with 50% equity from IFIC Bank Ltd. The Bank has so far opened 17 (seventeen) branches at different important locations in Nepal. IFIC Bank presently holds 25% shares in NB Bank.

Nepal Bangladesh Finance & Leasing Limited (NB Finance)

Nepal Bangladesh Finance & Leasing Co. Ltd. (subsequently renamed as Nepal Bangladesh Finance & Leasing Ltd.), another joint venture leasing company between IFIC Bank Ltd. and Nepali Nationals, started its operation on April 18, 1999 in Nepal. IFIC Bank presently holds 15% share in the company.

 Oman International Exchange LLC (OIE)

Oman International Exchange LLC (OIE), a joint venture between IFIC Bank Limited and Oman nationals, was established in 1985 to facilitate remittance by Bangladeshi wage earners in Oman. IFIC Bank holds 25% shares, and the Omani sponsors hold the balance 75%. The exchange company has a network of 10 branches covering all the major cities/towns of Oman. The operations of the branches are fully computerized having online system. The affairs and business of the company is run and managed by the Bank under a Management Contract.

Technology

Since the beginning of its journey as a commercial bank in 1983, IFIC Bank has been giving great emphasis on the adoption of modern technology. It became the pioneer in the field of automation by introducing computerized branch banking right in the same year. Subsequently, all the branches were brought under similar automated platforms with upgraded software applications to offer all the critical banking features. At present all 65 domestic branches are fully computerized under networked environment. The Bank has taken up a new project with Misys International Banking System Inc. (UK) to further upgrade its banking operation to state-of-art world class on-line banking solutions to provide faster and even more convenient centralized services to the clients. Besides, the Bank is also operating fully on-line Automated Teller Machine (ATM) services under the banner Q-Cash at a number of locations in Dhaka and Chittagong. The ATM facilities are available to the customers at Q-Cash booth. Since the importance of Web presence in the Internet is absolutely critical, IFIC Web Site www.ificbankbd.com has long been launched for the convenience of the customers, where all the activities and information are constantly being posted and updated. A Central Mailing System is operational at the Head Office to let the customers have direct electronic access to the selected staff.

Human Resource Development (HRD)

Human Resources Development (HRD) is focused on recruitment and in-house training for both on the job and off the job Bank staff members through the Bank’s Academy. IFIC Bank Academy – the oldest institution in the private sector – was conceived of, as an in-house training center to take care of the training needs of the Bank internally. Academy is fully equipped with a professional library, modern training aids and professional faculty. Library has about 4941 books on banking, economics, accounting, management, marketing and other related subjects. Main training activities consist of in-depth foundation programs for entry level Management Trainees. Specialized training programs in the areas like general banking; advance, foreign exchange, marketing and accounts etc. are also organized by the Academy depending on need. Frequently outreach programs are organized to meet demand for new and specialized skills. During its 23 years of existence, Academy not only conducted courses, workshops and seminars as required by the Bank, but it also organized training programs for the Bank of Maldives, Nepal Bangladesh Bank Limited and Oman International Exchange LLC. In addition, Academy has also the credit of organizing system of Bank of Maldives.

In addition to conducting courses internally, The Academy also selects candidates for nomination to various courses conducted by distinguished training organizations in the country including Bangladesh Bank Training Academy and Bangladesh Institute of Bank Management. The Academy also re-designs its courses, programs etc, regularly to need the requirement of new skills arising out of various directives, guidelines of the Central Bank and significant changes in the banking sector from time to time.

 District Wise Branch Distribution

The branches of the Bank cover all the important trading and commercial centres in Bangladesh. As date, it has 99 branches & 5 SME within Bangladesh. All the branches are equipped with computers in addition to modern facilities, logistics and professionally competent manpower.

An Over View of the IFIC Bank Ltd.

Mirpur Branch

Historical Background

In Dhaka zone, it has only one branch. The IFIC Bank, Mirpur Branch was established in 4 May. 1985 in Shaheb Bazar, at the present time, number of officers and staff at this branch one 17 which include, manager, second officer principal, principal officer, senior officer, officer, cashier, and others.

Organizational Structure

Organization structures of IFIC bank Ltd. at Mirpur Branch are as follows:

Name of the Chief of the Organization

Md. Monzur Murshed Khan, Senior Assistant Vice President & Manager of IFIC Bank Ltd. at Mirpur, Branch.

Objectives of IFIC Bank Ltd.

The main objectives of IFIC Bank Ltd. are as follows:

1. To earn profit and
2. To give service.

• To maximize profit and wealth for the shareholder.
• Implementation of Government poverty alleviation program.
• To improve the socio-economic conditions.
• To help the Government for salving the unemployment problem of Bangladesh.

Data Analysis and Interpretation

Theoretical Concept of Overall Performance

Financial performance means the financial strengths and weakness of farm. So, we can say that financial performance is the picture of financial results of a farm. Financial performance of a business shows by various financial reports balance sheet, cost sheet, profit and loss account, auditors report, fund flow statement, cash flow statement, value added statement and others statistical highlights. From these statements one can know the liquidity position, profitability position, leverage, solvency position and activity level of any business. Basically these are the indicators of financial performance. When we want to know the financial performance of any banking institution then at first time we have to look for the loan disbursement and loan recovery, amount of outstanding loan and over due loan, liquidity position and profitability situation of the bank.

Selection of Borrowers

Borrower selection is more vital/important factor distribution of loan. The following factor is considering selecting a borrower. Such as borrowers:

1. Must have ability to use loan to repay the loan and he must be a possessor of good will in economic transaction.
2. Must not be loan defaulter.
3. Must be registered with Joint Stock Company if it is limited company.
4. Must be registered with the register of the co-operative if it is a co-operative society.
5. Must no be insane.

4 p may be mentioned in the loan selection procedure. Here 4p means

P = Person

P = Purpose

P = Profitability

P = Property/security

Investigation of Loan Case

Loan application must submit necessary papers with the loan application. After submitting necessary papers responsible officers take some step against loan application. Loan officers investigate loan application to go to the spot and evaluate loan application. Loan evaluation officers scrutinize the necessary papers and documents of security and he she will go to local office.

 Forecasting

There are three types of forecasting of IFIC bank Ltd. Loan officer write a report about project appraisal. Loan forecasting or loan evaluation is very important. In the time of forecasting, loan officer considers the amount of loan, sources of equipment in case of equipment loan and the availability equipment, project viability in case of project loan, suitable use of loan etc. A part from this loan officer attached income and expenditure, statement cash payment and receiving statement with the forecasting report.

Problems of Loan Disbursement

Loan disbursement and recovery is the main task of IFIC bank Ltd. In this case IFIC Bank Ltd. at first accomplishes the activities of loan disbursement. But IFIC bank faces some problems to disburse credit. These are as follows:

1. The first problem is selection of appropriate promoters.
2. Another problem is the promoter does not supply equity in due time.
3. The lack of management of the project cannot be evaluated accurately. Consequently it is difficult to disburse credit.
4. It is not possible to disburse credit on account of ratability of promoters to operate the project activity.
5. Entrepreneurs can not manage working capital in due time.
6. Statutory problems.
7. Lack of foreign currency fund/credit line.
8. Political mediation now it is a main problem in field of loan disbursement.

 Loan Recovery Procedure

To make of the recovery sure, IFIC takes the following steps:

 1. Issue of Demand Notice: Demand notice is issued before one moth being due of outstanding loan or installment. It is sent to the borrower through field supervisor.

 2. Field Recovery:  Field supervisors recover the recovered loan through I.O. receipt by visiting the spot and house of the borrowers.

If all the procedure except legal action of recovering loan becomes failed, than certificate case is field against borrower. It borrower is in the following category then the case has to be field with priority.

1. Unwilling to repay the loan although, he is financially solvent.
2. Every effort of loan recovery becomes failure.
3. Detrimental to the interest of bank loan.

Problems of Loan Recovery

The main problems of loan recovery are given below:

1. Most of the people organization of our country is poor and needy. They took loan for productive purpose but most of the amounts and used for consumption purpose. As a result they are failed to repay the loan.
2. The amount of loan recovery is very insignificant. Because the loan recovery strategy of the bank is not effective. Bank does not take necessary step to recover the loan in harvesting time of crops. Many borrowers think that owner of loan money are got. As a result they do not seem to repay the loan.

 Current position:

IFIC Bank Ltd. made operating profit of Tk.207.55 crore as of Dec.2010 against its corresponding position of Tk.178.00 crore as of Dec. 2009, which is 16.89% more than that of the year before.

The business positions of IFIC Bank as of may 2010:-

                                                                                                 (In Taka Crore)

Source: Annul reports of IFIC bank Ltd.(2010)

 During the year 2009, only 01 (one) branch could achieve all its business targets. The name of the branch is Uttara branch. 14 branches could achieve their profit targets. Motijheel branch topped the list in respect of profit with a profit of Tk. 72.57 crore against a target of Tk. 68.00 crore as fixed by Head office

Sector of Loan Disbursement
The IFIC Bank Ltd. distributes its loan into financial and non – financial sector. Total sector of loan has divided mainly seven sectors, which seven sectors are recognized more preferable.

Sector of loan disbursement

Source: Annul reports of IFIC bank Ltd (2010)

Comment: Previous table shows the different category of loans and advances of the IFIC Bank Ltd. during 2007-2009. The total disbursement of term loan, housing loan, cash credit, LATR, CCS, overdraft and others of total TK. 268190607.11 in 2007, Tk. 264641536.79 in 2008 and Tk. 509598556.10 in 2009 respectively. So, we have seen that the loans and advances is decreasing for 2008 and increasing for 2009 of the IFIC Bank Ltd.

Performance of IFIC Bank Limited

Source: Annul report of IFIC Bank Ltd of 2010

PERFORMANCE ANALYSIS- 2009 & BUDGET – 2010 AT A GLANCE

(Figure in crore Tk.)

Present Products & Services

Source: Annul report of IFIC Bank Ltd of 2010

AN OVERVIEW OF GENERAL BANKING OF IFIC BANK

Introduction   

General banking is the heart of banking activities. Total banking procedure start with this department. General banking department perform the core function of bank operation and it is known as “Retail Banking”. They take the deposits from the customer and meet their demand for cash honoring their checks. It opens new accounts, remit funds, issues bank draft and pay order. Account opening section, Remittance, Checks clearing, Cash, FDR, Accounts section are part of general banking.

 Organ gram

General Banking is designed to serve the general people is saving money, smoothing transactions for commercial people and ensure security of the precious wealth of the clients lot of important activities. IFIC Bank has all the required sections of general banking activities come under General Banking section of IFIC Bank are as follows:

 Account Opening Section

This section opens accounts .Selections of customer is very important for the bank because banks success and failure largely depend on their customers. If customer is bad, they may create fraud and forgery by their customers. If customers are bad, they may create fraud and forgery by their account with bank and thus destroy goodwill of banks. So; this section takes extreme caution in selecting its customer base.

 Accounts opening process

Documents needed from the Account opener of the following types

1. Certificate of incorporation
2. Copy of Memorandum and articles of association
3. Copy of Resolution of the Board of Directors.

 Types of Account maintained by this branch- comparative discussion

Current Account(CD)

.Generally opened by businessmen

.No interest is provided for deposited amount.

.Minimum opening balance is TK.5000. If it falls below TK.1000 an incidental charge of TK 50 is charged.

Savings Accounts(SB)

.Any one expect limited company can open.

.6% interest is provided to depositors.

.Minimum balance is Tk1000.

.twice withdrawal in a week is allowed, for more withdrawal depositors is not entitled any interest.Times Deposits

Fixed Deposit Receipts(FDR)

.Can be opened by all

.12.5% interest is provide the deposit 1 year.

.In case of withdrawal before maturity the pervious maturity period is considered to pay interest-it is known as Break Down Payment.

Short Term Deposit(STD)

.Generally opened by big business firm.

.Interest depends on the amount deposited.

 Target Customer of IFIC Bank Mirpur Branch:

 Types of Accounts

Deposit is life-blood of a commercial bank. Since commercial bank deals with other people’s money, without deposit there is no business for the commercial bank. Accepting deposit is one of the main functions of commercial bank. IFIC bank’s deposits can be broadly classified as follows:

 Current Account

Current Account is most suitable for private, individuals, traders, merchants, importers and exporters, mill and factory owner etc. For opening of a current

Minimum deposit of TK. 2000.00 is required along with introductory reference. No interest is given the current account deposited money. One can enjoy maximum flexibility and convenience when s/he opens a current account with IFIC bank limited. This account offers:

   Any number of transactions a day

   Free check book

   Statement of account at any desired frequency

   Statement by fax on demand

 Savings Account

The saving account is primarily for small-scale savers. The main objective of this account promotion is thrift. Hence, there is restriction on withdrawals are permitted only against prior,

   Minimum amount of TK. 1000.00 is required as initial deposit.

   Frequent withdrawal is not encouraged.

   7 days is required for withdrawal of large amount

   The rate of interest is 5.50 % against SB account.

Short-Term Deposit (STD) Account

In short term deposit account, the deposit should be kept for at least six month to get the interest. The STD account is a very important class of account in this bank. The minimum amount of balance has to be maintained with STD account is TK. 30000 Interest is given at a rate of 4% percent which is less than savings account. Normally various big companies, organizations, government departments keep money in STD account. For this type of account, frequent withdrawal is discouraged. Deposit should be kept for at least seven days to get interest. Prior notice is required for the withdrawal of money from STD account. The account holder must give seven days before the withdrawal that is why STD is also called ‘Seven days notice’ current account.

Interest rate

Fixed Deposit Receipt (FDR)

This branch maintains a separate section for fixed deposit. FDR is an important factor for the bank and volume of FDR determines the investment base of the bank. FDR is found to be 60% of the total deposit of this branch. Basically this is the mobilization unit of the bank. It is obvious to give due importance.

Types of FDR maintained by this branch along with their respective interest rate

 Liquidation of FDR

1. Only the amount holder himself and the authorized person can liquid the FDR after maturity.

2. In case of joint name, authentication from both is necessary.

3. In case of ‘Either of Survivorship’ clause – any one can liquid.

4. In case of Death, the survivor cannot encase the FDR even if there exist the either or survivor clause-succession certificate from the court is needed.

5. If demanded before the maturity the last expired duration is considered to pay interest.

FDR section provides another service on behalf of the government. These services this bank issues and encase the following govt. securities.

Closing Procedure of an account

For two reasons account can be closed –

By Banker: banker has the right to close the account if the customer does not maintain any transaction six years and the balance is become lower than the minimum balance.

By Customer: if the customer wants to close his account he will write an application to the manager and the manager then close the account.

Firstly, the concerned customer has to apply for closing his/her account. Then to close the account the cheque book is to be returned to the bank. After charging the account closing charge the Manager will close the account. Closing charges are as follows:

      For below 6 months 100 tk.

      For over 6 months 200 tk.

      The rest amount of money laid in the respective account is paid to the customer by a payment order. In case of payment order certain commissions and vat are cut off from the account.

Cash Section

Cash department is the most vital and sensitive organ of the branch as it deals with all kinds of cash transactions. This department starts the day with cash in vault. Each day some cash that is opening cash balance are transferred to the cash officers from the cash vault. Net figure of this cash receipts and payments are added to the opening cash balance. The figure is called closing balance. This closing balance is then added to the vault. And this is the final cash balance figure for the bank at the end of any particular day.

Functions of Cash Department

Cash payment or check cancellation process

1. Date of the check (it is presented within 6 month from issue date)
2. Issued from this branch
3. Amounts in figure and sentence written does not differ
4. Signature of the drawer does not differ
5. Check is not torn or mutilated

Step 3Gives pay cash seal and sends to the payment counterStep 4Payment officer makes payment

 Books Maintained by this Section

Cheque Clearing and Remittance Department

This department receives cheque from its depositors for the purpose of collection by a deposit slip over the counter crediting their account. Clearing of cheque is done through the clearinghouse in Bangladesh bank. Everyday the first house starts at 9 a.m. and returns house at 5 p.m.

 The main objective of clearing and remittance department is to provide an extra facility to the customer other than cash receipt and payment. We can divide this department into two parts. One is Clearing & Transfer Delivery section, and the other one is Local Remittance section. In IFIC Bank, Mirpur Branch, there are three employees, working in this department. I am trying to present my findings in the following parts regarding these two sections.

 Clearing

According to the Article 37(2) of Bangladesh Bank Order 1972, the banks, which are the member of the clearinghouse, are called as Scheduled Banks. The scheduled banks clear the cheque drawn upon one another through the clearinghouse. This is an arrangement by the central bank where everyday the representative of the member banks gathers to clear the cheque. Banks for credit of the proceeds to the customer’s accounts accept cheque and other similar instruments. The bank receives many such instruments during the day from account holders. Many of these instruments are drawn payable at other banks. If they were to be presented at he drawer banks to collect the proceeds it would be necessary to employ many messengers for the purpose, Similarly there would be many cheque drawn on this the messengers of other banks would present bank and then at the counter. The whole process of collection and payment would involve considerable labor, delay, risk and expenditure. All the labor, risk, delay and expenditure are substantially reduced by the representative of all the banks meeting at a specified time, for exchanging the instruments and arriving at the net position regarding receipt or payment. The place where the banks meet and settle their dues is called the Clearinghouse. The clearinghouse sits for two times a working day. The members submit the climbable cheque, in the respective desks of the banks and vice versa. Consequently the debit credit entries are given. At the debit summation and the credit Summation are calculated. Then the banks clear the balance through the cheque of Bangladesh Bank. The dishonored cheque are sorted and returned with return memo named ‘Memorandum’.

Debit: Sundry Deposit A/C- Difference in clearing Credit: Bills Payable A/C- Pay Order issuedStep 12If the amount of the advice received is more than the amount of the instruments received or the amount of the advice sent is less than the amount of the instruments delivered, the following entry is passed and the entry is reversed when the Pay Order is received. Debit: Sundry Asset A/C- Clearing AdjustmentStep 13When an instrument is presented in special clearing on request of the customer, the instrument is stamped and suitably endorsed (Special Clearing).Step 14Such instruments should invariably be drawn on Bank with whom the main branch maintains account (Bangladesh Bank & Sonali Bank).Step15Branch sends the instrument duly entered in Outward Clearing Register and Sub-main Schedule to the branch representing the Clearing 1 louse (When representing branch maintains A/C).Step 16Branch representing the Clearing Mouse sends the instruments to the drawee Bank duly entered in Pay-in-Slip of the Bank for credit of the proceeds in the account maintained with them.Step 17On receipt of the information of credit of the proceeds from the drawee Bank, the branch representing Clearing House then sends an Inter Branch Credit Advice (IBCA) to the branch concerned.Step 18Where instruments drawn on Banks other than those, with whom the branch, representing Clearing House does not maintain account, Pay Order/ Bangladesh Bank Check issued by the drawee Bank in payment of the instrument are lodged in clearing.

REMITTENCE

Remittance can be done by telegraph transfer, mail transfer, traveler’s cheque and drafts and cheque. There are two steps of remittance:

Local Remittance

Sending money from one place to another place for the customer is another important service of banks. And this service is an important part of country’s payment system. For this service, people, especially businessmen can transfer funds from one place to another place very quickly. There are five kinds of techniques for remitting money from one place to another place. These are:

1)     Money Transfer

2)   Pay Order

3)   Demand Draft

4)   Telephone Transfer

5)   Mail Transfer – Time consuming and not frequently used

 Money Transfer

IFIC Bank Ltd. earns a huge amount of money by selling several customer services. The IFIC Bank Ltd. offers the following services to its customer:

Demand Draft (DD)

DD is the most popular instrument of remitting fund. It is an order to pay money drawn by one branch of a bank upon another branch of the same bank for a particular sum of money which is payable to order and demand.

 Issuing of a Demand Draft (DD):

                  The steps of issuing a DD to be followed:

• The applicants have to fill up the relevant part of the prescribed application form duly signed & give it to the officer of the remittance department.
• Ø The officer fills up the commission & VAT (15% on commission) part meant for the bank’s use & requests the applicant to deposit the amount by cash I cheque to the cash. By that time the authorized officer get the ‘Test Number.’
• Ø The cash department completes their formalities & then return back the form to the remittance department.
• After receiving the form the remittance department prepares the DD facing all the information along with the amount in two parts & also give entry in the DD issue register.
• After signed the two part of DD by two authorized officer of the bank the main part is given to the client & after signed at the back of the counter part of the DD.
• Ø When the DD is given to the client, remittance department prepares the necessary advice.

Payment Order (PO)

A payment order is an instrument from one branch to another of the same bank to pay specified sum of money to the person named therein of his order. Unlike cheque, there is no possibility of dishonoring pay order because before issuing bank takes our money of the pay order in advance.

                     Amount of DD                  Commission (TK)

                       TK 0 to TK. 1000                      10

                      TK. 1000 to TK. 100000             25

                      TK 100000 to TK 500000           50

                      Above TK. 500000                     100

 Issuing of a Pay Order:

        The steps of issuing a Pay Order to be followed by the client & the bank

• The applicants have to fill up the relevant part of the prescribed application form duly signed & give it to the officer of the remittance department.
• The officer fills up the commission & VAT (15% on commission) part meant for the bank’s use & requests the applicant to deposit the amount by cash I cheque to the cash.

• The cash department completes their formalities & then returns back the form to the remittance department.
• After receiving the form the remittance department prepares the Pay Order facing all the information along with the amount in three parts duly crossed “A/c payee” in the main part & also give entry in the Pay Order issue resister.
• After signed the three parts of Pay Order by two authorized officer of the –bank two Ws are given to the client & after signed at the back of the counter part of the Pay Order.

Telegraphic Transfer (TT)

TT is the fastest means of money transfer between two branches of the same bank. The formalities of TT is as same as MT, there are taken some extra charge for telephone.

Telegraphic and Telephone transfer are almost the same, both are them are known as TT in short. IFIC bank helps people transfer their money from one district to another in the quickest possible time at the lowest service charge.

 Cancellation of DD/PO/TT

STEP 1Application in written to the Manager of the account maintain branch.STEP 2Verification of the specimen signature.Step 3

Journal positingIncomingBills  payable DD payable A/C—DR

IFIC General  A/C—–CR

OutgoingIFIC General  A/C—– DR D

Bills  payable DD payable A/C —–CR

Party A/C————–Step 4Step letter to the paying bank.

Foreign Remittance:

When a bank got this T.T, M.T, T.C and cheque from outside bank, which is not situated in the home country than it, will be called foreign remittance. Using these methods also has done it.

Types of foreign Remittance: Between bank and non‑banks customers.

• Between banks in the same country
• Between banks in the different country
• Between banks’ and central banking the same country.
• Between central bank of different country

 Different Types of Bank Books

Scroll Book:

Cash receipt of cheques of customers is written in scroll book. Telegraphic Transfer (TT), Mail Transfer (MT), Demand Draft (DD), Pay Order, Special Receipt (SDR) is also written in this book.

Token Book:

Verifying the given cheque as follows:

        Verify the date of the cheque (No money will be given to future date cheque)

        Verify the amount and compare mathematical and written amount.

Accounts Section

This is obviously an independent and unique department, which works as the composition of all the departments of the branch, but it is under the In-Charge of the General Banking in this branch. This section in this branch is fully computerized. So the conventional large ledger and journal books are not kept like the nationalized banks. Only two personnel maintain the entire accounts Section. It receives the vouchers from all departments and prepares the subsidiaries and maintains accounts. End of the day all data are stored in CD and at the month end they are send to Head Office.

Computer Department

IFIC Bank uses computers extensively all over the branches and head office. Computer system is assigned with the responsibility of maintaining accounts records. All the account SB, CD, STD, Loan accounts are maintained in computer. The statement of affairs and other daily and monthly statements are produced from this system. The security measure of the branch is also maintained by this computer system.

Foreign Exchange Function of IFIC Bank Ltd.

In our internship program we have an opportunity to learn about foreign Exchange. At this branch we have because familiar with the following function of the bank.

1. Issuing letter of credit. (C/C)
2. Selling and buying of foreign exchange and
3. Operating the wage earners scheme.

The Import-Export Function

The import export financing of the IFIC Bank Ltd has been the area on which I was suggested to concentrate. The present report collaborates the issue accordingly this part of the report begins with letter of credit and then in turns discusses the foreign exchange functions of the bank.

 EVALUATIONS OF DIFFERENT RATIOS

Bank is a financial intermediary between the depositors and the borrowers. Every bank tries to earn a good profit. The profitability analysis of any bank is also very complex task.

It becomes a mammoth task if there is lake of relevant information. However, we will try ourselves best to do so. The following points may evaluate the different ratios which are calculated before:

i)             Gross profit ratio helps to identify the total profitability of the branch. From this profit, we can determine the ability of the firm to earn profit comparing its total sales. Normally standard Gross Profit is 20 % to 25 %. But this ratio is not followed by every branch of the bank. From analyzing the past ratio we can say that the branch has a satisfactory profitability.

ii)            In the same way, Net Profitability expresses the true and real profitability of the bank. Every bank has to keep a reserve in its fund. The standard Net Profit ratio is normally taken 10 % to 15 %. From our previous chapter we can see that the branch earns between the above standard. So the profitability of the branch is truly much satisfactory.

iii)           Comparing the current asset with its current liabilities, we find that the branch has double or more than double comparing to its current liabilities. It signifies the ability of the branch to meet its current claims.

iv)           The Quick ratio of the branch is not satisfactory. Standard ratio is 1:1. But we have less current assets comparing with its current liabilities.

v)            Net profit to capital employed ratio Is also satisfactory. So we can say that the branch is sound enough to continue its business.

SWOT ANALYSIS OF THE BRANCH

SWOT analysis is the most important element to analyze the overall situation of any organization. It becomes easier to achieve the goals analyzing SWOT elements carefully. I have included SWOT analysis in my study for this reason. I think that corporate body can be able to overcome any challenges through this SWOT analysis.

SWOT is short of strength, weakness, opportunity and threats. So we can show as follows:

          S =Strength (Positive + Internal)

         W = Weakness (Negative + Internal)

          O = Opportunity (External + Positive)

          T = Threat (External + Negative)

SWOT is internal and external factor of a bank. Internal factors are controllable but external factors are uncontrollable, internal factors are management related that is controlled by the bank. The impact of SWOT may negative or positive on the bank. Favorable impact of SWOT can create organizational growth and unfavorable SWOT creates organizational problem.

OBJECTIVE OF SWOT ANALYSIS

        To asses overall strong competitive position.

        To decide whether to continue current strategy or not.

        To determine possible course of actions.

        Development of functional strategy.

 STRENGTH

IFIC Bank LTD. is a modern private Bank. It has more capacity to adopt new technology when the environment will be changed. This branch has various types of strength elements. Such kind of strength are representing below:

i)             Best asset quality, Conventional and Islamic Banking.

ii)            Diversified product line, experienced management.

iii)          Satisfactory non-funded business, corporate reputation.

5.5 WEAKNESS

i)             Cost of deposit is high.

ii)            Mix of deposit is unfavorable.

iii)          Dependence on volatile deposit.

iv)          Yield of advance / Low investments.

v)            Employee productivity & quality needs to be improved.

 OPPORTUNITY

i)             SME, retail and AGRO based industry finance through dedicated sales staff.

ii)            Real-time on-line banking through tremens and opportunity for providing ATM, SME and internet banking.

iii)          Capitalize employee loyalty through best human resource practices.

 THREATS

    i) Increased competition in the market both in terms of IT support and Business.

ii)            Market pressure for dollar crisis.

iii)          Foreign investment in NCBs, conversion of NCBs to PCBs will intensify competition.

iv)          Some PCBs are coming out of problem bank status will intensify   competition.

v)            Employee turnover.

Major Findings

The International Finance Investment and Commerce IFIC Bank Ltd. faces some government problems, economic problems, General Problems, which have a great impact of the banking activities:

• Early sanction and disbursement of loan to the borrowers without proper inspection of the project by the bank on account of pressure from lobbing group.
• Lack of evaluation of technical and economic feasibility of the program.
• Delay in disbursement of credit.
•  Lack of proper supervision.
• Illiteracy of borrowers.
• Negative attitude of the borrowers to repay the loan.
• Deterioration of the value system of the borrowers.
• Lack of competent and required expertise creates a great problem to the non-the non-recovery of loan.
• Many borrowers do not utilize the loan money in the sanctioning project.
• Sometimes borrowers invest their money outside the country.
• Political leaders offer encourages default.
•  Inadequate staff of credit institution and lack of timely persuasion for repayment is also responsible for the loan default.
• The lack of willingness of the borrowers to pay loans.
• The lack to necessary rules, which are required to collect loans.
• Some times the amount of loan is paid through cheque. In this case it the cheque is dishonored A suit is done recovery of loan.
• Some times government gives facility of interest exemption borrowers do not pay the loan in due time.
• Changing in the management pattern may delay the recovery of the matured loan of the bank.
• Frequent changes in government policies in regard to recovery of loan.

Conclusion of the Study

Loan disbursement is the principal function of a bank and portion of bank income generated from loan disbursement and recovery. The main objective of the report is to upgrade loan performances and reduce recovery problems of the IFIC Bank Ltd. At mirpur. The report also analyzed the funds and cost of operation of the study bank. During the period of the different types of deposit collection of the bank is better and the total deposit collection increased significantly. A good portion of collected deposit of the bank has utilized for the loan and advances. The bank provides loan and advances in different sector such as Financial, industrial development activities and has been playing a significant role for the economic development of the country. It has also been found that a large amount of the bank loans are became classified and the classification trend in increasing even a lot of measures have been taken to prevent the classification of loans and advances. During the study period the bank succeeds to generate sufficient net profit for the shareholders. However, the cost of operation analyses of the bank revealed that the bank generates sufficient interest income from the loans and advances and investment activities. Due to stack up advances of the bank total cost of operation is slightly higher and sometimes the bank has failed to generate positive spread over the period. On the other hand the banks burden position is much better due to narrate sufficient non-interest income compared to non-interest cost. At last, we can conclude that the banks overall position is at the satisfactory level compared to the overall banking sector condition in the country.

Policy Recommendations

Since the IFIC is the leading financial bank of Bangladesh, it must have to remove its limitation in banking service. In my study I have find out several weakness in banking services and my recommendation are given below:

1. Process and procedures of lending should be liberalized keeping in view the problems and constraints faced by the borrower or intending borrowers.
2. The value of the security must be valued properly by the independent value and constantly watched so that the value of mortgage properly becomes sufficient for the recovery of default loan.
3. Necessary guidance is to be imparted to the ways and means leading to self-reliance. This may be ensured by the way of enhancing the better communication with the indenting borrowers.
4. Publishing the names of defaulters as well as good and regular payers in various dailies and granting various sorts of facilities to good borrowers will create a moral persuasion of the borrowers. This may decrease the member of defaulters and the volume of large outstanding loan amount as well.
5. Aged old laws to bank loan recovery should be changed.
6. The new entrepreneurs should be encouraged in disbursing loans and those who have the records of regular repayment should be given preference.
7. Despite stringent measures taken by the government the recovery is very negligible because of the pressure of the interested lobby. The chamber bodies also make lobbying against any type of stricter steps. Steps should be taken to avoid many type of pressure like these in strengthening the position of loan recovery.