General Banking System of AB Bank Limited.

EXECUTIVE SUMMARY :

AB Bank Limited is financial institution. Among several Private Commercial Banks (PCBs), AB Bank Limited has already gained a foothold in the commercial banking sector of Bangladesh. As a fully licensed commercial bank, a highly professional and dedicated team is managing AB Bank Ltd. with long experience in banking. The bank has been graded as a top class bank in the country through internationally accepted CAMEL rating. AB Bank Ltd. offers all kinds of commercial, corporate and personal banking services covering all segments of society within the framework of banking company rules and regulations laid down by the central bank. The bank total assets as of December 31, 2009 amounted to Tk. 106912.31 million as compared to 2005 amounted to Tk. 33065.40 million. The total deposit of the Bank increased sharply from Tk. 68560.47 million at the end of 2008 to Tk. 53375 million at the end of 2007. Deposits of the bank stood at tk. 85765.220million at the end of December 2009. Deposits of the bank include savings bank deposits, term deposits, current and other account deposits and bills payable. Both total income and net profit of AB Bank are increasing at a good rate each year. The bank’s Advance to deposit ratio has been increasing as well which proves the bank’s more aggressive stand than before.

 The purpose of the report is to analyze the operating procedures of the general banking system in Bangladesh and discuss on those issues. Banks in general performs three basic functions valued by the overall economy. Another purpose is to understand various departmental activities and their key responsibilities, to give some suggestion to overcome the weakness and problems that exists in the existing system, to become familiar with organizational culture, to recommend necessary steps to overcome such problems.

A banker must have adequate knowledge on the role of banks in the overall economy of the country. He must possess clear concept on mechanism of banking operation. So, for the purpose banking sector requires skilled and talented personnel. On this point of view this report is prepared to gather adequate knowledge about the operating procedures of the commercial banks of Bangladesh. In this regard the experiences and knowledge gathered during the period of practical orientation and working as an internee in the AB Bank Limited, Head Office was manipulated.

 Three types of schedule commercial banks are in operation in our economy. They are Nationalized Commercial Banks, Local Private Commercial Banks and Foreign Private Commercial Banks. ABBL has discovered a new horizon in the field of banking area, which offers different General Banking, Investments and Foreign Exchange banking system. So I have decided to study on the topic “General Banking Operations of AB Bank Limited.”. This also provides an opportunity to me to minimize the gap between theoretical and practical knowledge. Students are required to work on specific topics based on their theoretical and practical knowledge acquired in their study life. That is why I have prepared this report.

Objective of the Study

 The study has conducted for the following objectives:-

 To observe the working environment in AB bank

• To present an overview of AB Bank.
• To get an overall idea about the condition of Operational Control System of General Banking in AB Bank Limited.
• Acquiring experience for future working life.
• To describe the customer service process of AB Bank Ltd.
• To get knowledge about the products and services offered by AB Bank Ltd.

 AB Bank Ltd. is one of the largest private commercial bank, which provides its banking services through almost seventy branches in Bangladesh. This bank is a reputed and leading one in our banking sector for its performance. It’s my pleasure to get opportunity work with AB bank. This report has been prepared through extensive discussion with bank employees and with the clients. While preparing this report, I had a great opportunity to have an in depth knowledge General Banking Operations practiced by “AB Bank Ltd.” It also helped me to acquire a firsthand perspective of a leading private Bank in Bangladesh. Specifically the report covers the following areas:

• Background of AB Bank Ltd.
• General Banking Operations of AB Bank Ltd.
• Analysis and evaluation of the strength and performance of ABBL.

From the intention to make the report realistic and properly accepted this report has been conducted. Like any other study the limitations of this study is not out of questions. But the following factors seem to me the main points of weakness of this study, despite all out co-ordination from the bank officials. However, many problems appeared in the way of conducting the study. The study considers following limitations:

• Another limitation was the sensitivity of the data. As it is a highly competitive market, in some cases management were reluctant to give some specific data.
• Limitations of bank’s policy of not disclosing some data and information for obvious reasons, which could be very much useful. For the sake of confidentiality of the organization, employees did not disclose much information.
• Lack of comprehension of the respondents was the major problem that created many confusions regarding verification of conceptual question
• Confidentiality of data was another important barrier that was confronted during the conduct of this study.

 Methodology of the study includes direct observations, face-to-face conversation with the employees of different desk, study of files, circular etc. & practical deskwork.  In conducting this report basically, there have been two types of data and information used. The name of those two types and their sources to reveal the information for preparing this report has been showed in a flow chart.

2.1 Method of data collection & data collection instruments used:     

Primary Sources

• Bangladesh Bank’s Circular
• Govt. Act & Order
• Annual Report Of ABBL
• AB Bank Operational Manual
• AB Bank Website
• Different guidelines of Head Office, ABBL

  Secondary Sources

• Interview of the employees
• Relevant books, Research papers, Newspapers and Journals.
• Personal observation
• Internet and Study of selected reports.

2.2 Presentation of Data

Collected data were compiled in charts and tables and presented in the body of the report.

 2.3 Processing of Data

Collected data were compiled and processed for the purpose of preparing the report.

 AB Bank is known as one of leading bank of the country since its commencement 27 years ago. It is the first private sector bank under Joint Venture with Dubai Bank Ltd, UAE incorporated in Bangladesh on Dec 31, 1981. The bank commenced its operations in April 12, 1982.

 During the last 27 years, AB Bank Limited has opened 74 Branches in different Business Centers of the country, one foreign Branch in Mumbai, India and also established a wholly owned Subsidiary Finance Company in Hong Kong in the name of AB International Finance Limited. To facilitate cross border trade and payment related services, the Bank has correspondent relationship with over 220 international banks of repute across 58 countries of the World. It is listed on Dhaka Stock Exchange Ltd and Chittagong Stock Exchange Ltd. AB Bank has a branch network of 74 branches in Bangladesh. The overseas operations of the bank are conducted through its Mumbai branch in India and its subsidiary company, the AB International Finance Ltd in Hongkong.

 As of December 31, 2009, the Authorized Capital and the Equity (paid up Capital and Reserve) of the Bank are BDT 6000 million and BDT 10,087 million respectively. The 28^th Annual General Meeting held on July 15, 2010.

 The products and services offered by the company include retail banking, corporate banking, SME banking, project finance, NRB banking, money transfer, Islami banking, investment banking and cards. In the corporate banking segment, the products offered include working capital finance, trade finance, cash management, syndicated finance, and equity finance and corporate advisory services. The bank also has drawing arrangements with 14 exchange/money transfer remittance houses all over the globe to facilitate fast, reliable and hassle

AB Bank Ltd. (ABBL) was incorporated on 31st December 1981, under the company’s act-1913 as a pioneer commercial bank in the private sector in Bangladesh with its Head Office in Dhaka. The bank started functioning from 12th April 1982 with the approval of Bangladesh Bank under the guidelines, rules and regulations given for scheduled commercial banks operating in Bangladesh. It was initially a joint venture commercial bank between Bangladeshi sponsors and Dubai Bank Ltd. Dubai (U.A.E.) having respective share holdings as under:

20%

Bangladeshi General Public15%

Bangladesh Government05%

Dubai Bank Ltd. 60%

        Table 1: Organizational Structure of AB Bank Ltd

Subsequently, the Union Bank of Middle East Ltd. inherited the shares of Dubai Bank Ltd. in 1986 and continued as its shareholder till early 1987, when they decided to offload their investment in Bangladesh. As per provisions of the bank Articles of Associations, with the approval of Bangladesh Bank and the controller of Capital issue Government of Bangladesh, the shares (60%) held by the Union Bank of Middle East (UBME), were purchase by the Bangladeshi Sponsored Directors, raising total shares of holding to 80% of total share capital. However, as desired by the government of Bangladesh the sponsors. Directors, who acquired the 60% shareholdings of Union Bank of Middle East (UBME), unclosed 50% of share, purchased by them from UBME to the general public of Bangladesh raising the public share holdings to the 45% of total share capital of the bank. The Objective of the bank is to undertake all kinds of banking and foreign exchange business in Bangladesh as well as abroad through its brandies/correspondents.

The authorized capital of AB Bank Ltd. is taka 400.00 crore divided into 4.00 crore ordinary shares of taka 100 each, from the existing Tk. 200.00 crore on 05 march, 2008. The total paid up capital rose to taka 743.00 million at the end of 2008. At present the composition of the existing shareholders of the bank is as under:

Table 2: Capital Structure of ABBL

Change of Name & Logo of ABBL

Arab Bangladesh Bank Ltd. was incorporated on 31st December 1981, under the company’s act 1913. The bank started functioning from 12th April 1982.It is the first private bank in Bangladesh. Motijheel Branch is the corporate branch of this bank. The branch has enjoyed its 28^th anniversary during this year.

 Arab Bangladesh Bank Ltd. Changed its name to AB Bank Limited (ABBL) with effect from 14 November 2007 vides Bangladesh Bank BRPD Circular Letter No-10 dated 22 November 2007. Prior to that Shareholder of the Bank approved the change of name in the Extra-Ordinary General Meeting held on 4 September 2007. Effective 1 January 2008, ABBL changed its Logo as well.

Legal Form: A public limited company incorporated on 31st December, 1981 under the Companies Act, 1913 and listed in the Dhaka Stock Exchange Ltd and Chittagong Stock Exchange Ltd.

 In AB Bank Ltd. (ABBL) an incumbent has to start his carrier as a provisionary officer. For this candidate has to seat for a competitive examination. It is under full authority of the Board of Directors. The following figure shows the hierarchy of carrier ladder in ABBL:

Objective

“To exceed customer expectations through innovative financial products & services and

establish a strong presence to recognize shareholders’ expectations and optimize their rewards through dedicated workforce.”

Vision of AB Bank Limited:

“To be the trendsetter for innovative banking with excellence & perfection”

Mission of AB Bank Limited:

“To be the best performing bank in the country

Products & Services of AB Bank Limited

General banking department is the heart of all banking activities. This is the busiest and important department of a branch, because funds are mobilized, cash transactions are made; clearing remittance and accounting activities are done here. Since bank is confined to provide the services everyday, general banking is also known as ‘Retail banking’. In AB Bank LTD, the following departments are under general banking section:

• Account Opening Section
• Cash Section
• Remittance Section
• Clearing Section
• Collection Section
• Pay order

 Different Types of Accounts

Account opening is the gateway for client to enter into business with bank. It is the foundation of banker customer relationship. This is one of the most important sections of a branch, because by opening accounts bank mobilizes funds for investment. Various rules and regulations are maintained and various documents are taken while opening an account. A customer can open different types of accounts through this department, Such as:

• Current Deposit.
• Savings Account.
• Short Term Deposit (STD).
• Fixed Deposit Receipt (FDR/TDR).
• Monthly Savings Deposit Account.
• Monthly Income Deposit Account.
• Any Other type(s) authorized from time to time.

Current Account

Current account is purely a demand deposit account.  There is no restriction on withdrawing money from the account. It is basically justified when funds are to be collected and money is to be paid at frequent interval. Some Important Points are as follows-

• Minimum opening deposit of TK.10007-is required.
• There is no withdrawal limit
• No interest is given upon the deposited money
• Minimum Tk. 1000 balance must always maintain all the time

Savings Account

This deposit is primarily for small-scale savers. Hence, there is a restriction on withdrawals in a month. Heavy withdrawals are permitted only against prior notice. Some Important Points are as follows-

• Minimum opening deposit of ik.5000 is required;
• Minimum Tk 1000 balance must always maintain all the time;
• Withdrawal amount should not be more than l/4th of the total balance at a time and limit twice in a month.
• If withdrawal amount exceed l/4th of the total balance at a time no interest is given upon the deposited money for that month.

Short Term Deposit (STD)

Normally various big companies, organizations, Government Departments keep money in STD account. Frequent withdrawal is discouraged and requires prior notice. The deposit should be kept for at least seven days to get interest. The interest offered for STD is less man mat of savings deposit Interest is calculated based on daily minimum product and paid two times in a year. Interest rate is 6.00%.

Fixes Deposit Receipt (FDR/TPR)

Fixed deposit is a deposit scheme for the customers. The time limit is given in fixed deposit receipt. Depositors have to withdraw the interest after maturity date. If the depositors intend to withdraw the interest earning before expiration of the maturity date the bank is not bound to pay the interest.

       Interest Rate of FDR

Up to 50,00,000

Above 50,00,000

9.50%

10.00%FDR (Tenure 6 months):

Up to 50,00,000

Above 50,00,000

9.00%

9.50%FDR (Tenure 1 year):

Up to 50,00,000

50,00,001 to 1,00,00,000

Above 1,00,00,000

8.50%

9.00%

10.00%FDR (Tenure 2 years):

8.00%

• OPENING OF FIXED DEPOSIT ACCOUNT

The depositor has to fill an application form where he mentions the amount of deposit, the period for which deposit is to be made and the name in which the fixed deposit receipt is to be issued In case of a deposit in Joint name, AB Bank also takes the intentions regarding payment of money maturity of the deposit The banker also takes the institution regarding payment of money on maturity of the deposit.

• PAYMENT OF INTEREST

It is usually paid on maturity of the fixed deposit. AB Bank calculates interest at each maturity date and provision is made on that “Miscellaneous creditor expenditure payable accounts” is debited for the accrued interest.

• ENCASHMENT OF FDR

In case of premature FDRAB Bank is not bound to accept surrender of the deposit before its maturity date. In order to deter such a tendency the interest on such a fixed deposit is made, cut a certain percentage less than the agreed rate. Normally saving bank interest is during the encashment of the instrument after maturity, the instrument have to be surrendered, the excise duty and income tax (10%) is deducted from the total interest earned during the time of deposit.

• LOSS OF FDR

In case of a loss FDR, the customer is asked to record a GD (General Diary) in the nearest Police Station. After that the customer has to furnish an Indemnity Bond to AB Bank, a duplicate FDR is then issued to the customer by the bank.

• RENEWAL OF FDR

In AB Bank, the instrument is automatically renewed within seven days after the date of its maturity if the customer does not come to en-cash the FDR. The period for renewal is determined as the previous one.

Monthly Savings deposit Account (MSDS)

MONTHLY SAVING DEPOSIT SHCHEME is a liability product where existing and prospective customers can open an account in his/her name r with an amount of tk.500/- or it’s multiple. The client shall have to agree to deposit similar amount o9n monthly basis for tenure of 5 or 10 years and shall be entitled to receive a fixed amount after completion of the respective as per the terms agreed upon. The product will be designed by H.O. from time to time.

 Monthly Income Deposit Account

 MONTHLY INCOME DEPOSIT ACCOUNT is a liability product where the existing customer as well as the prospective customer can create Term Deposit in his/her name with a principal amount of tk.100000/- or its multiple for a tenure of three or five years and shall be entitled to receive a fixed income on monthly basis as per the terms and conditions of the product.

The principal amount, tenure and the monthly fixed income to be received by the client (excluding levy, income tax etc. imposed by the government from time to time) will be designed by the H. O time to time.

 Deposit Double Scheme Account

 “Double your Deposit” scheme allows a customer to double his/her deposit in six years at a market competitive rate. The product offers the flexibility of premature encashment at a predetermined value as well as the convenience of borrowing against amount, details of which are given below:

Product characteristics

• Deposit amount will be double in six years.
• Effective rate of interest 12.25% with annual compounding.
• Ensures substantial return on customer’s deposit.
• Create long-term core deposit base for the bank.
• Deposit will be treated as fixed deposit with option of premature encashment
• Loan 80% of deposit amount.
• Opportunity to grow secured loan portfolio.
• Applicable tax on interest and other government charges will be borne by the depositor (the amount will be deducted from the final payment to the customer).
• Minimum deposit amount BDT. 50000.
• Maximum deposit amount BDT. 5000000.
• KYC requirements: As applicable.

The product allows the flexibility of premature encashment with predetermined rates, which is a unique feature in that no other bank offers this flexibility.

  Account Opening Procedure

• An existing Current Account holder of the Bank.
• Officials of the Bank not below the rank of an Assistant officer.
• A respectable person of the locality well known to the Manager/Sub-Manager of the Branch concerned.

Step 2Receiving filled up application in bank’s prescribed form mentioning what type of account is desired to be openedStep 3

• The form is filled up by the applicant himself / herself
• Two copies of passport size photographs from individual are taken, in case of firms photographs of all partners are taken
• Applicants must submit required documents
• Application must sign specimen signature sheet and give mandate Introducer’s signature and accounts number – verified by legal officer

Step 4Authorized Officer accepts the applicationStep 5Minimum Balance is deposited, only cash is accepted.Step 6Account is opened and a Cheques book and pay-in-slip book is given

 Documents Required for Opening Account

 Individual/Joint Account

1. Introduction of the account
2. Two photographs of the signatories duly attested by the introducer.
3. Identity (copy of passport / Employer s certificate/A certificate issued by ward commissioner   or Chairman of any respectable persons who is acceptable to the bank regarding identification & Nationality of the person concerned).
4. Joint Declaration Form (For joint a/c only)
5. Trade License
6. Tin Number (if possible).
7. Employee’s history.
8. A transaction profile

Proprietorship account

1. Introduction of the account.

1. 2.   Two   photographs of the signatories duly attested by the introducer.
2. Valid copy of Trade License.
3. Rubber stamp.
4. TIN number (if possible).
5. Identity (Copy of passport/ Employer’s certificate/ a certificate issued by ward commissioner or Chairman of any respectable persons who is acceptable to the bank regarding identification & Nationality of the person concerned).
6. Trade License

 Limited company

1. Introduction of the account
2. Two photographs of the signatories duly attested by the Introducer.
3. Valid copy of Trade License.
4. Board resolution of opening A/C duly certified by the Chairman/Managing Director.
5. Certificate of Incorporation.
6. Article of Association
7. Memorandum of Association.
8. All information Stated in individuals A/c
9. Trade License
10. Certificate of Commencement (In case of Public limited company).
11. List of directors along with designation & specimen signature.
12. Rubber Stamp (Seal with designation of each person)
13. Certificate of registration (hi case of Insurance Company – Obtained from department of Insurance from the Peoples Republic of BD).

 Club / Societies Account

1. Introduction of the account
2. Two photographs of the Signatories duly attested by the introducer.
3. Bio data of office bears
4. Bye laws or constitution
5. Board Resolution for Opening A/C duly certified by President’ Secretary.
6. List of Existing Managing Committee.
7. Registration (if any).
8. Rubber Stamp.
9. Permission letter from Bureau of N.G.O. (In case of N.G.O, A/C).
10. All information Stated in individuals A/c

 Closing of an Account

• The closing of an account may happen,
• If the customer is desirous to close the account
• If the AB Bank finds that the account is inoperative for a long duration.
• If the court of AB Bank issues garnishee order.

A customer may close his/her account any time by submitting an application to the branch. The customer should be asked to draw the final check for the amount standing to the credit of his/her account less the amount of closing another incidental charge and surrender the unused check leaves. The account should be debited for the account closing charge etc. and the authorized officer of the bank should destroy unused check. In case of joint account the application for closing the account should be signed by the joint account holder.

  Issue of Duplicate Cheque Book

Cheque Book in lieu of lost one should be issued only when the account holder (s) personally approaches the bank with an application/ letter of Indemnity in the prescribed pro-forma agree to indemnify the bank branch for the lost cheque book. Fresh cheque book in the lieu of lost one issued after verification of the signature of the account holder (s) from the specimen signature card and only with prior approval of Manager/ second manager of the branch Cheque series number of the new cheque book is recorded in computer ledger as usual.

REMITTANCE

Remittance is another significant part of the general Banking. The bank receives and transfers various types of bills through the remittance within the country. The bank charges commission on the basis of bill amount.

Telegraph transfer, mail transfer, traveler’s cheque, and drafts and cheque can do remittance. There are two steps of remittance:

• Inland Remittance.
• Foreign Remittance.

• INLAND REMITTANCE

When one bank sends these IT, M.T, T.C or cheque to another bank then it will be chatted as inland remittance. It is done within the country from one bank to another.

• FOREIGN REMITTANCE

When a bank got this IT, 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 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

CLEARING

According to the article 37(2) of Bangladesh Bank Order 1972, the banks, which are the member of the clearinghouse, are earned as Scheduled Banks. The scheduled banks clear the cheque drawn upon one another through clearinghouse. This is an arrangement by the central bank where every day the representative of the member banks gamers to clear the cheque. Banks for credit of the proceeds to the customer’s account 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 the drawer banks to collect the proceeds it would be necessary to employ many messengers for the purpose. Similarly there would be many cheque draft on this the messengers or 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 specific 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.

REASON FOR DISHONORED CHEQUE

Following are the general reasons to dishonor cheque in the process of clearing by the bank of clearing:

• Refer to drawer.
• Not arranged tor.
• Balance insufficient.
• Effects not cleared may be presented again.
• Exceed arrangements.
• Full cover not received.
• Payment stopped by drawer.
• Payee’s endorsement irregular/illegible/ required
• Payee’s endorsement irregular, require banks confirmation.
• Drawer’s signature differs/ required.
• Alterations in date/ figures words require drawer’s full signature.
• Cheque is post dated/out of date mutilated.
• Amount in words and figure differs.
• Crossed cheque must be presented through a bank.
• Clearing stamp required/ requires cancellation.
• Addition to Bank’s discharge should be authenticated.
• Cheque crossed “Account payee only” (18) Collecting discharge irregular/ required.

TYPES OF CLEARING

1. Outward Clearing: When the Branches of a Bank receive cheques from its customers drawn on the other Banks within the local clearing zone for collection through Clearing House, it is Outward Clearing.

2. Inward Clearing: When the Banks receive cheque drawn on them from other Banks in the Clearing House, it is Inward Clearing.

v  Types of clearing house:

There are two type of clearing house:

1. 1.      Normal Clearing House
2. 2.      Same Day Clearing House

1. Normal clearing house

a)  1^st house: 1^st house normally stands at 10 a.m. to 11 a.m

b)  2^nd house: 2^nd house normally stands after 3 p.m. and it is known as return house.

2. Same day clearing house

a)   1^st house: 1^st house normally stands at 11 a.m. to 12 p.m

b)   2^nd house: 2^nd house normally stands after 2 p.m. and it is known as return house.

Who will deposit cheque for Clearing:  Only the regular customers i.e. who have Savings, Current, STD & Loan Account in the bank can deposit cheque for collection of fund through clearing house.

Precaution at the time of cheque receiving for Clearing, Collection of LBC, OBC & Transfer:

1. Name of the account holder same in the cheque & deposit slip.
2. Amount in The cheque & deposit slip must be same in words & in figure
3. Date in the cheque may be on or before (but not more than six months back) clearing house date.
4. Bank & Branch name of the cheque, its number & date in the Deposit slip.
5. Cheque must be signed
6. Signature for confirmation of date, amount in words / in figure Cutting
7. Multilatitation of cheque.
8. Cheque should be crossed (not for bearer cheque).
9. Account number is in the deposit sleep must be clear.
10. Depositor’s signature in the deposit sleep.

RETURN HOUSE

Return House means 2^nd house where the representatives of the Bank meet after 3 p.m. to receive and deliver dishonored house which placed in the 1^st Clearing House.

 COLLECTION

One of the important functions of the bank is to collect different types of bills including cheques, drafts, payment order, dividend warrant, FDR, Shanchay Patra, Unit Certificate, Bonds etc. in favor of its clients On the other hand, as a paying banker the branch has to honor those instruments drawn on itself when they are presented by other banks through collection.

 PAY ORDER

A pay order is a draft issued by one another or on its branch. The purchase of a draft makes to the seller in local currency at the domestic center while the paying after presentation of the draft by the beneficiary pays the beneficiary. There is also risk of loss of the draft in transit

A)    ISSUING OF A PAY ORDER

The steps of issuing a Pat Order to be followed by client and the bank:

• The applicants have to fill up the relevant part of the prescribed application from duly subtitled and give it to the officer of the remittance department
• The officer fills up the commission and VAT part meant for the bank’s use and requests the applicant to deposit the amount by cash/ cheque to the cash section.
• The cash department completes their formalities and 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 Payee⁷⁷ in the main part and also give entry in the Pay Order issue register.

B)    PAYMENT OF PAY ORDER

As the pay order is crossed A/C Payee, the same are presented to the issuing branch for payment either through clearing, or for credit to the client’s account. Pay orders when presented for payment are proceed in the remittance department. On making payment, the relative entry in the pay order register is marked of by entering the data of payment in the pay order register duly authenticated. The paid instruments treated as debit instrument

 C)    REFUND OF PAY ORDER

The following procedures are followed for refund of pay order by cancellation:

• The purchaser should submit a written request for cancellation of Pay order attaching therewith the original pay Order.
• The signature of the purchaser verified from the original application form on record
• Manager second-manager’s prior permission is to be obtained before refunding the amount on cancellation.
• Prescribed cancellation charge is recovered from the applicant and only the amount of the draft less cancellation charge is refunded Commission postage etc. Charges recovered for issuing the Pay order will not refunded ticket.

The DD should be affixed with a stamp “CANCELLED” under proper authentication and the authorized officers signatures on that are cancelled with RED INK but in no cases should be torn. The cancelled DD then kept with the relevant ticket.

 As an internee, I got the opportunity to observe the performance of AB Bank Limited, their competitive advantage and success over the banking industry. Based on my observation, experience and knowledge, I tried to make company analysis of AB Bank Limited. For the purpose, I used two effective tools of company analysis- SWOT Analysis and Competitive Forces- Porter’s 5 Forces Model. This tool will elaborate the strength, opportunity of ABBL as well as its threats and competitive factors in the banking industry. Before analyzing, a brief description of these two tools is given here under.

 SWOT Analysis

The acronym for SWOT stands for Strength, Weakness, opportunity, and Threat. The SWOT analysis comprises of the Organization’s internal strength and weakness and external opportunities and threats. SWOT analysis gives an organization an insight of what they can do in future and how they can compete with their existing competitors. This tool is very important to identify the current position of organization relative to others, who are playing in the same field and also used in the strategic analysis of the organization.

Strengths of ABBL

The strengths of the company are the most important building blocks required for growth to take place. AB Bank is a company that has much strength in the industry. The followings are the few of the most relevant strengths that AB Bank has at the present time.

 Accountable Corporate Governance

Good Corporate Governance is an issue of vital importance to the Board and Management of AB Bank. The Board of Directors, as the apex level of authority, is responsible and accountable for the overall direction and is ultimately answerable to regulatory authorities and shareholders for the activities, strategies and performance of the company.

 AB Bank board has a formal schedule of matters especially reserved for its decision including corporate strategy, approval of budgets and balance sheet, annual financial results, Director’s appointment, proposal for dividend, approval of major corporate transactions and credit proposals beyond the delegated business power of the management.

 Experienced Senior Management

The senior management of the bank is responsible for promoting the highest level of business ethics and integrity. Their aim is to create and foster a culture throughout the bank that emphasizes and demonstrates the importance of maintaining high business ethics and close relationship with customers.

 Qualify Customer service

Customers are the focal point of all the banks activities. AB Bank is committed to its customers for excellent, innovative and speedy solutions across all customer segments. The bank provides a full range of banking services to small and medium size companies and also to private individuals and entrepreneurs. They have expertise corporate banking, retail banking and trade finance.

 Compensation Package

AB Bank maintains an equal opportunity in recruitment, training and promotion of all employees regardless of gender or ethnic origin. The bank tries to pay all its employees the best compensation package. Accordingly, AB Bank’s salary structure is revised upward on a regular basis. The bank also keeps in employees informed about the progress of the business and their part in it for their constant commitment to the bank. They also encourage the development of the employee involvement in the bank through formal and informal meetings.

 AB Bank Shares

Shares of AB Bank are one of the most actively traded stocks on the Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE). The continual improvement in the bank’s underlying profitability is the reason for trust and confidence of investors on the bank.

 Social Welfare

AB Bank has fully commitment towards serving the communities in which it operates. The bank believes that healthy economy and sound banking go together. A chunk of the bank’s annual profit is being given to the AB Bank Foundation for social welfare. The main objective of the foundation was to invest part of the bank’s profit in poverty alleviation and community welfare.

 Online Banking Services

AB Bank is among the few banks in Bangladesh, which provides the online banking services to its customers. By using the modern banking services, AB Bank customer can withdraw or deposit an amount of cash under the AB Bank account no matter in which branch the actual account exist. This service gives its customer huge flexibility. More and more- urban customers are becoming attracted to this service day by day.

 Training and Development

AB Bank has a personnel-training society with good resources. They give regular training to the officer of both middle and lower levels. Again if there is any strategy or technology change, there will be special training program arranged based on individual needs.

Weaknesses of ABBL

The fault of an organization is the most important internal problems that might hamper the growth rate to take place in a company. Though AB Bank is a company that has many strengths but it also as well has some weaknesses of its own. The following are a few of the most common weaknesses that AB Bank has at the present time.

High emphasize on fixed deposits

AB Bank gives high emphasize on fixed deposits every year, which means that they always end up paying high interest expense for their deposit mix. Certainly, this will decrease their dealing spread and keeps them always in pressure. So, their cost of goods sold is very high which is not very good for any company in this competitive market.

No feedback from bottom level employees

The bottom-level employees and even the mid-level managers at AB Bank don’t take part in the decision-making process. So the information flow is mostly one way. Though AB Bank has some unofficial way to collect information from the bottom level employees, but it is not effective at all.

 Less emphasis on advertising through the electronic media

AB Bank does not promote their brand or products on a regular basis. They seem to be over confident over their company’s publicity. They sometimes see it as an extra expenditure. They also don’t do much electronic media advertising. On the other hand competitor’s like- Dhaka Bank, Dutch Bangla Bank, AB bank, Jamuna Bank and others do the opposite frequently come up with creative adds for their banks. This is a big weakness for AB Bank, which may prove to be very big mistake in the future. To company should concentrate more on its promotional activities.

 Immense number of employees

AB Bank currently has quite a big number of employees compared to its capabilities. This decreases the employee’s individual efficiency as well as effectiveness, hi addition to that, a few of the employees are not too sound and loyal as they are supposed to be. There is a tendency that middle level managers want to avoid their responsibilities and want it to be done by others.

 Agency Problem

The front desk employees are often found not to be too keen on taking care of their customers. Though they have a long employee line in every branch, their loyalty to the company and their ethics level are not very satisfactory. Most of the employees always think about their own interest, which proves that agency problem is there. Some of them create unofficial groups through which they solve each other’s problem and support each other to achieve their personal goals, not too much concern about their personal interest.

Opportunities of ABBL

An organization’s opportunities are positive external environmental factors. An organization should explore all possible opportunities available to it. These opportunities are intended to improve the organization. By making improvements, the organization should be able to become more competitive in the market the following are opportunities available to AB Bank in order for it to become more aggressive.

Using their Good market image

AB Bank has quite a strong market image. Local people know AB Bank as a center of trust and professional where local expertise use to serve. If they expand their business and utilize this strength as more diversified business opportunities, they can create stronger image in the country.

Mobile telephone bill collection

As telecommunication industry is expanding with an alarming rate recently, so AB Bank could maintain good business relation with those telecommunication companies. They can look forward to make some mutual agreement of responsibility of bill collections. This will give them more liquid money, which will boost up their cash requirement.

 Premium Service Banking

AB Bank can improve its customer service by tailoring the individual business needs. This service enhancement collectively will allow a customer to manage their business finances and cash resources more efficiently and conveniently. The services like –

• Courier
• Auto Fax Report
• Hotline (Your single point of contract)
• Inward remittance information services
• Express payments
• Foreign Exchange and Money market information

 Expanding the business area

AB Bank could also boost the number of branches to take advantage of increase demand among the existing customer with better services and thus generate more net profit. In recent years the bank has opened al lot of new branches, which is a good sign of improvement and also a commendable strategy.

 Globalize the Business

As the bank has a strong business brand image, it holds a great opportunities to globalize their business more extensively. They can arrange more foreign correspondent banks or by establishing .more foreign branches as the foreign branches have better and big business opportunities.

 Upgrading the Online banking service

AB Bank’s online banking service is not up to the standard of the service the foreign banks provide. They usually serve the sender based on the historical data, not real time basis. So, the bank should take initiative to add some additional services for their loyal clients. This will give them better opportunity to acquire more market share.

 Expanding its network outside Dhaka and Chittagong

The bank has not been effective in increasing the number of branches outside Dhaka and Chittagong. Most of AB Bank’s branches are targeted at the city people only; they have not concentrated of the rural people too much. That’s why the company could not capture a large portion of the market as well as market store. The authority of the bank needs to take this into consideration not only for them but also for the poor rural people. After all there is question of ethics come in every steps of business.

 Government’s changing attitude towards Private Sector Development

The government is favoring private sector investment, which is good for the AB Bank, as they can now expand their business with the favoring rules and regulations of Government of Bangladesh. This kind of government support will lessen their problems. As AB Bank is a local private bank it holds more diversified opportunities to do business on their own interest. They always can expect feedback from government.

 Openings to take market share away from rival firms

The private local commercial banks of Bangladesh are very similar in the way they operate. This is especially true for the banks in the same strategic group. So if AB Bank somehow manages to differentiate their financial products and services from the other then there is good chance that it will gain more market share. If the bank manages to achieve diversified products and wide banking network there is a scope for market penetration. The bank can serve more customers groups if they expand their expanding geographic coverage and service segments. Also, AB Bank can portray itself as different by exploiting emerging new technologies in banking and improving services like credit card, telephone banking etc.

Threats to ABBL

An organization’s threats are negative external environmental factors. An organization should explore all possible threats available to it. These threats are intended to diminish the organization. By making improvements and proper monitoring of the threats, the organization should be able to turn more competitive in the market The following are threats are available to AB Bank in order to threaten its existence.

Fierce Competition

As the banking industry of Bangladesh has promising prospects in, AB Bank is facing strong competition the entrance of new potential competitors. The second-generation banks like- Dhaka Bank, Dutch Bangla Bank and Southeast Bank are the main competitors for AB Bank. Also foreign banks operations in Bangladesh are also taking a big portion of market share. These foreign banks have successfully created better market image than those of local banks in Bangladesh.

Political Interference and Government Regulations

AB Bank is facing political interference in big loan sanctioning and also there is to some extent unethical recruitment of employees. Also there is 45% tax rate for all financial institutions, which is very high and also a real threat for the growth of the company.

Highly Capital Reserve Requirement imposed by the Central Bank

If there is liquid money crisis the market, AB Bank will find it hard to manage its capital reserve requirement. As Banking Law Act 1991, Bangladesh Bank is regulated the capital requirement not less than 9%. And if for some reason the bank fails to meet the reserve requirements then the consequences and sanctions will be severe.

Decreasing banking business area

Nowadays banking businesses are being narrowing down and its services and products are also diversifying in other sector of the financial market. Few banking services are being done by insurance companies, leasing firms, house building loan companies and so on. So, banks are now surviving by doing general banking, which is already threat and can be bigger in future. AB Bank management should start to think about this issue more closely and have to take necessary steps.

 The Central Bank changing the interest rates

In Bangladesh the Central Bank decides the interest rates. They give a range and within that range the banks have to maintain the interest rates they offer. So the result is that all the banks end up having very similar interest rates.

 Also it is the Central Government who changes the interest rates. They either increase or decrease it depending on the economy according to the policies they want to implement. And whatever changes the Government makes the banks of Bangladesh have to abide by it and the amount deposits received by banks was significantly reduced as people were now investing in other non-banking financial institutions and the stock market Also people’s tendency to take loans increase as the interest charge on loans was also reduced. But in the recent days, due to pressure from IMF and World Bank the Central Bank is going to increase the interest rates.

It is not up to the banks to decide what interest rate they will offer on the deposits. In fact it is the Central Government that makes that decision for them whether the banks like it or not. Also if the Central Government comes up with additional regulations that will mean more costs for the banks to maintain them.

 Unstable political environment of the country

The political environment of Bangladesh is quite unstable and it affects the Industry from performing efficiently. In Bangladesh where the political environment is absolutely unpredictable the external forces constantly keep on changing. For instance, a sudden call of Hartal or strike might end up with the cancellation of the events. Thus, there is an enormous possibility of incurring a huge loss.

 AB Bank Limited is a first generation private commercial bank in the country with commendable operating performance directed by the mission to provide prompt and efficient service to clients. It is providing a wide range of commercial banking service. AB Bank has achieved success among its peer group within a short span of time with its professional and dedicated team of management having long experience, commendable knowledge and expertise in conversion with modem banking. With all its resources, the management of the bank firmly believes that the bank would be able to encounter problem that may arise both at micro and macroeconomic levels. The management of the bank is maintaining an efficient portfolio in order to have a healthy growth and retain customer satisfaction. AB Bank is engaged in modem banking. It is expected that AB Bank by its efficient asset and liability management will not be able to maintain its trend of growth and thus overcome the threat. Neither AB Bank nor any other commercial bank can effectively combat risk. However, AB Bank having small and target niche market, is likely to be less affected by restricted monetary and fiscal policy. The management of the bank is planning to meet the required capital adequacy within the stipulated time frame. Although AB Bank is yet to be fully automated, the bank has an adequate modem technology to meet its present requirement and it is proceeding aggressively to enhance its technology level. Thus it can enhance its operational procedures and can be able to take the competitive advantage over others in the industry.

 This report is being done on the subject of “General Banking Operations of AB Bank Limited” .From the survey and observation of the study I try to gain some practical experience on both general banking system. From the observation of my internship I have gain some practical knowledge on general banking system as well as some elements of payment solution system. I think this experience will set me in the advantageous position in future.

Although there are some problems in General Banking system, the system will become beneficiary for both banks and clients. Bangladesh Bank can overcome such problems by taking following steps:

®    For increasing more funds customer may be offered different types of prizes.

®    The account opening department needs skilled staffs for smooth workings.There is totally a tremendous pressure on him/her. A helping hand should be given for relieving his pressure to accurate and proper working.

®    There is a great demand for Islamic banking and that should be considered. This idea is also placed by some Islamic minded customers.

®    HRD should train their employees with computer knowledge and their human resources department should arrange training program frequently.

®    Their statement should be computerized which is cost effective and safe.

®    They should increase promotion campaign and they should participate in social activities for creating good image in targeted customer mind.

®    ABBL should reduce there interest rate on different credit scheme.

®    Cleanliness services should be proper and up to date.

®   To increase the Return on Assets, the bank needs to increase its non-interest income by various service charges and non-traditional activities. At the same time non-interest expenses such as overhead and advertising expenses should be reduced.

®   It needs to develop internal source of funds to improve the liquidity;

• P.N. Varshney, “Banking Law & Practice”, Sultan chand & Sons, 20^th Edition.
• AB Bank Ltd, 2008, Annual Report
• AB Bank Ltd, 2009, Annual Report
• AB Bank Ltd, 2008, Manual (General Banking & Credit)
• Operational Manual, AB Bank Limited
• www.abbank.com.bd
• www.wikipedia.org