General Banking system of First Security Islami Bank Limited

Main objective of this report is to analysis General Banking system of First Security Islami Bank Limited. Report also focus on to explain the credit management system and find out the foreign exchange activities of First Security Islami Bank Limited. Here briefly describe on explore the relationships between performance appraisal and employee commitment. Finally find out the existing limitation and provide some recommendation to overcome these barriers.

Introduction

First Security Islami Bank Ltd (FSIBL) was incorporated in Bangladesh on 29August 1999 as banking company under companies Act 1994 to carry on banking business. It obtained permission from Bangladesh bank 22 September 1999 to commence its business. The bank carrying out banking business through its one hundred one (101) branches in the country.

The commercial banking activities of the bank encompass a wide range of services including accepting deposits, making loans discounting bills, conducting money transfer and foreign exchange transactions and performing other related services such as safe keeping, collections and issuing guarantees acceptance and letter of credit so on.

This report is originated as the course requirement of the BBA of Dhaka International  University of Under this program students of every department of this faculty must go through an internship program of three month duration. As practical orientation is an integral part of the BBA degree requirement

The report will mainly focus on A Study on General Banking System of First Security Islami Bank Limited” which consist of chapter one-Introduction, chapter two-FSIBL at a Glance, chapter three-General Banking of FSIBL, Chapter four- SWOT analysis of FSIBL, Chapter-Five- Findings, Recommendation, Conclusion and Reference.

The principal method of the study is sample survey. I used both primary & secondary data for preparing this report.

Performance appraisals are essential for the effective management and evaluation of staff. Appraisals help develop individuals, improve organizational performance, and feed into business planning. Formal performance appraisals are generally conducted annually for all staff in the organization. Their line manager appraises staff members. Directors are appraised by the Chairman & Managing Director, who is appraised by the chairman or company owners, depending on the size and structure of the organization.

Here I discuss about the General Banking System of First Security Islami Bank Limited. To discuss General Banking System I also give information about the vision, mission, objectives, goal, core values & all related information of the First Security Islami Bank Limited.

By conducting a survey, I am able to know the General Banking System of First Security Islami Bank Limited. That I find out common problems of bank & give proper suggestion to solve this problem.

Customers of the bank are moderately satisfied to the service of bank. Employees of the organization try to best to support the customer.

Annual performance appraisals enable management and monitoring of standards, agreeing expectations and objectives, and delegation of responsibilities and tasks. Staff performance appraisals also establish individual training needs and enable organizational training needs analysis and planning.

Objectives of the Study

Objectives

• To evaluate the performance of General Banking of FSIBL
• To Examine the credit management system of FSIBL
• To find out the foreign exchange activities of FSIBL
• To observe the working environment of FSIBL banks.
• To explore the relationships between performance appraisal & employee commitment.
• To find out the existing limitation & provide some recommendation to overcome these barriers.

Methodology:

This is an Exploratory research study to analyze the employee performance of the FSIBL. The method which I have followed of the study is sample survey.

Source of data:

I have collected the data from the following sources, which has helped me to make this report.

The source divided into two parts:

Primary:

Interview was the basic technique that was employed to collect primary data from people within the organization. For the procedure of different banking operations, I had observed the operations and worked with the officers at the same time. I had interviewed FSIBL Officials for getting more information.

Secondary:

Secondary data was collected from the annual report, journal, FSIBL report, FSIBL employee training, lecture sheet & the website of First Security Islami bank limited.

Relevant data for this report will be collected primarily by direct investigations of different records, papers, documents, operational process and different personnel. The interviews were administered by formal and informal discussion. Structured questionnaire has been used. Information regarding office activities of the bank has been collected through consulting bank records and discussion with bank personnel.

Data sources: 

The information and data for this report have been collected from both the primary and secondary sources.

The “Primary sources” are as follows:

• Face-to-face conversation with the respective officers and stuffs of the branch and head office.
• Face-to-face conversation with clients visited the branch.
• Practical work experience in the different desk of the department of the branch covered.

The “Secondary Sources” of data and the information are:

• Annual Report of FSIBL
• Website of the FSIBL.
• Various book articles regarding general banking functions, Foreign exchange operations and credit policies.
• Different procedure manual published by FSIBL
• Different circular sent by head office or FSIBL.

Background of First Security Islami Bank Limited

The First security Islami Bank Limited is the third generation private sector Bank in Bangladesh. FSIBL is fully owned by Bangladeshi entrepreneurs. The bank was opened on August 29, 1999 but the first branch at 23, Dilkusha Commercial Area, Dhaka started commercial operation on August 29, 1999. The 2nd Branch was opened on 11 November 1999 at Khatungonj, Chittagong.

At present, FSIBL has been carrying on business through its 52 branches and twenty (20) branch are to be launched immediately spread all over the country. FSIBL was the first domestic bank to establish agency arrangement with the world famous Western Union in order to facilitate quick and safe remittance of the valuable foreign exchanges earned by the expatriate Bangladeshi nationals. FSIBL was also the first among domestic banks to introduce international Master Card in Bangladesh. In the meantime, FSIBL has also introduced the Visa Card and Power Card. The Bank has in its use the latest information technology services of SWIFT and REUTERS. FSIBL has been continuing its small credit program for disbursement of collateral free agricultural loans among the poor farmers of Agrabad area in Chittagong district for improving their lot. Alongside banking activities, FSIBL is actively involved in sports and games as well as in various Socio-Cultural activities. Up to September 2006, the total number of workforce of FSIBL stood at 2449, which include 1689 officers and executives and 550 staff.

Philosophy of FSIBL

At present the bank has as many as 52 branches across the country and it is committed to become equal service providers compatible with the norms of commercial schedule bank. It renders all types of personal, commercial and corporate banking services to its customers within the purview of the Bank Companies Act, 1991 and in line with the directives and policy guidelines laid down by Bangladesh bank.

Vision of FSIBL

Ensuring highest standard of clientele services through best application of latest information technology, making due contribution to the national  economy & establishing ourselves firmly at home& abroad as a front ranking bank of the country are our cherished vision.

Mission of the FSIBL

Efforts for expansion of our activities at home & abroad by adding new dimensions to our banking services are being continued unabated. Alongside, we are also putting highest priority in ensuring transparency ,accountability improved clientele service as well as to our commitment to serve the society ,which we want to get closer & closer to the people of all strata. Winning an everlasting seat in the hearts of the people a caring companion in uplifting the national economic standard through continuous up gradation & diversification of our clientele services in line with national & international requirements is the desired goal we want to reach.

Goal of FSIBL:

Goal of FSIBL to establish & maintain the modern banking techniques to ensure the soundness & development if the financial system based on Islami principles &to become the strong efficient.

• To be most caring & Customer friendly & service oriented bank.
• To create a technology based most efficient banking environment.
• To ensure sustainable growth.
• To add effective contribution of the national economy.

Performances of FSIBL

First Security Islami Bank Limited closed the year 2009 recording significant growth in every sector despite volatile economic atmosphere of the country. During the year 2009 Deposit Mobilization, enhancement of loans and effective risk management has placed the bank in sound footings. Besides, Bank has maintained a strong market position by adding value to the shares. It may be said without hesitating that overall performance of the bank

Reserved Capital

The Reserve fund increased to 96.10 million during the year by registering 13.73 percent increase over last year Tk.84.50 million .

Profit and operating result

First Security Islami Bank Ltd generated an operating profit of TK. 421.90 million in 2008 and net profit after tax increased by 126.13 percent to TK. 30.60 million in 2009 after making provision for loans loses and income tax

Foreign Exchange

Bank gives paramount importance in its foreign exchange business to ensure profitability. Bank has been continuing to extend special importance on foreign business from the beginning of its establishment which is still prevailing during the year. To look after the business and also to ensure prompt service to the import and export officers having exposure and expertise in foreign exchange, posted both Head Office and Authorized Dealer branches.

Information Technology (IT) and Automation

All the branches of the FSIBL are fully computerized. New software is now in use to provide faster, accurate and efficient service to the clients. The bank is continuously striving for better services through extensive automation of its branches. They have already launched “One Branch Banking” through on-line connectivity. The bank has set up a full-fledged IT division to keep abreast of the latest development of IT for better service in the days to come.

Division of FSIBL

• Audit & Inspection Division.
• ATM Card Division
• Board Secretariat
• Budget & Monitoring Division.
• Credit Division-1.
• Credit Division. -2.
• Credit Card Division.
• Classified Loan Recovery Division.
• Financial Administration Division.
• General Banking Division.
• Human Resources Division.
• International Division.
• Information System & Technology Division.
• Law & Recovery Division.
• Marketing Division.
• Merchant Banking Division.
• Public Relations Division.
• Protocol Division.
• Reconciliation Division.
• System & Operations

General Banking of FSIBL

Product & Service of FSIBL:

First Security Islami Bank Limited is providing modern banking facilities to the customer. It is committed to fulfill every possible customer need with high efficiency and satisfaction. Its team of dedicated professionals is committed to provide an unparalleled service and to bring maximum benefits for the customers, the shareholders and the society at large. It’s a great pleasure of First Security Islami Bank limited to introduce following services:

Deposit Product of FSIBL:

1. Al-Wadeah Saving Account
2. Mudaraba Saving Account
3. Mudaraba Short Term Deposit
4. Mudaraba Term Deposit-
5. One Month
6. Three Month
7. Six Month
8. One Year
9. Two Year
10. Three Year
11. Mudaraba Monthly Income Scheme
12. Mudaraba Monthly Savings Scheme
13. Mudaraba Super Savings Scheme
14. Mudaraba Multi plus Savings Scheme
15. Mudaraba Haji Scheme
16. Mudaraba Education Saving Scheme.
17. Mudaraba Waqf Cash Deposit
18. Mudaraba Special Savings (Pension)
19. Mudaraba Muhar Savings

Investment Product of FSIBL

1. Izara Bill Baia (General)
2. Izara Bill Baia (HB)
3. Izara Bill Baia (Staff HB)
4. Bai-Muajjal (BAIM)
5. Izara (LF)
6. House Hold Durable Scheme (HDS)
7. Baia-Muazzal (General/FO)
8. Baia-Muazzal (WO)
9. Baia-Muazzal (Export)
10. Murabaha Import Bills (MIB)
11. Murabaha Post Import (MPI)
12. Trust Receipt (TR)
13. IBP
14. Musharaka Pre-Shipment (ECC)
15. Musharaka Pre-Shipment (PC)
16. Local Documentary Bill Purchase (LDBP).

Deposits service of FSIBL

Mudaraba Monthly Income Scheme

Bangladesh is a developing country. But in our country opportunity of is very low. People of our country always try to save their excess money and they are looking for where they can deposit the money. According to their demand FSIBL started this monthly income scheme.

Highlights of the Scheme:

• Minimum deposit Tk. 25000/
• Higher monthly income for higher deposits.
• The scheme is for a 5 years period.
• Monthly income will be credited to the depositor’s account on 5^th of each month.

Fig: Monthly income to deposit amount

Objective of the scheme:

• An account is to be opened by filling up a form.
• The bank will provide to the customer a deposit receipt after opening the account. This receipt is non-transferable.
• If the deposit is withdrawn before a 5 years term, the saving interest rate will be applicable and paid to the depositor, however, no interest will be paid if the deposit withdrawn within 1 years of paid to the customer will be adjusted from the principal amount.
• A depositor can avail loan up to 80% of the deposit amount under this scheme. In this case, interest will be charge against the loan as per bank’s prevailing rate. During the tenure of the loan, the monthly account until liquidation of the loan amount inclusive of profit.
• The Government taxes will be paid, if necessary taxes will be paid, if necessary, by the client.

Mudaraba Super Savings Scheme

Saving helps to build up capital and is the prime source of business investment in a country. Investment takes the country towards industrialization, which eventually creates wealth. That is why savings is treated as the very foundation of development. To save, FSIBL offers Super Saving Scheme.

Terms and Conditions of the scheme:

• Any individual, company, educational institution, government organization, NGO, trust, society etc may invest their savings under this scheme.
• The deposit can be made in multiples of Tk. 10,000/=
• The period of deposit is for six years.
• Any customer can open more than one account in a branch in his name or in joint names. A deposit receipt will be issued at the name of opening the account.
• If the deposit is withdrawn before six years terms, then savings interest rate +10% will be applied before payment is made. However, no interest will be paid if the deposit is withdrawn within 1^st
• A depositor can avail loan up to 80% of the deposited amount under this scheme.
• Incase of death of the depositor, before the term, the deposit (with saving rate +1%) will be given to the nominee. In the absence of nominee, the legal heirs/successors will be paid on production of succession certificate.
• Incase of issuing a duplicate deposit receipt the rules of issuing duplicate receipt of term deposit will be applicable.
• The client will pay the Government taxes if necessary, in future.

Some examples are given in the table below. Any amount can be deposited in multiples of Tk. 10,000/=

Mudaraba Multiplus Savings Scheme

Saving helps to built up capital and capital is the prime source of business investment in a country. Investment takes the country towards industrialization that eventually crates wealth. That is why savings is treated as the very foundation of development. To create, more awareness and motivate people to save, FSIBL offers Multi Plus Savings Scheme.

Terms and Conditions of the Scheme

• Any individual, company, educational institution, government organization, NGO, trust, society etc may invest their savings under this scheme.
• The deposit can be made in multiples of Tk. 10,000/=
• The period of deposit is for 10 years. But he deposit can be withdrawn at any year with profit. As an example of 1 year but before 2 years then deposit with interest with paid for 1 year only. The same rule will apply for other years. If deposit is withdrawn before 1^st year then no interest will be paid.
• Any customer can open more than one account in a branch in his name or in joint names. A deposit receipt will be issued at the name of opening the account.
• The depositor can avail loan up to 80% of the deposit under this scheme.
• Incase of issuing a duplicate receipt the rules of issuing a duplicate receipt of terms deposit will be applicable.
• Incase of death of the depositor, before the term, the depositor (with saving rate) will given to the nominee. In the absence of nominee, the legal heirs/successors will be paid on production of succession certificate.
• The government taxes will be paid, if necessary, by the client, in future.

Some examples are given in the table below. Any amount can be deposited in multiples of Tk. 10,000/=

Mudaraba Monthly Savings Scheme

The savings amount is to be deposited within the 10^th of every month. Incase of holidays the deposit amount is to be on the following day. The deposit may also be made in advance.

The depositor can have a separate account in the bank from which a standing instruction can be given to transfer the deposit in the scheme’s account.

Incase the depositor fail to make the monthly installment in time, then 5% on overdue installment amount will be charged. The charge will be added with the following month(s) installment and the lowest charge will be Tk. 10/=.

Rules

A form has to be filled at the time of opening the account. No introduction is attested photographs are advised.

• The depositor can select any of the installment amounts, which cannot be subsequently changed.
• Incase of minors the guardians may open and supervise the account in this favor.
• A single person can open more than one account for saving under several interest rates.
• The depositor should notify the bank immediately on any change of address.
• The government tax will be deducted from the interest accumulated in this scheme.
• If necessary, at the request of the depositor, the scheme can be transferred to a different branch of the same bank.
• The bank reserves the right to change the rules and regulations of the scheme as and when deemed necessary.

Mudaraba Hajj Scheme

Ninety percent of people in our country are Muslim. Hajj is mandatory of every rich and physically fit Muslim people. As a Islami Bank FSIBL offer Hajj Scheme to the customer to fulfill the desire of religious minded people.

One can open this type of scheme in different maturity by paying monthly installment.

Education Saving Scheme

The most gratifying experience for parents are proper education of their children. Educational expense is rapidly increasing and therefore appropriate planning needs to be done by all parents. FSIBL offers you “Education Saving Scheme” to assist in financial planning well ahead in for there children’s higher education.

Terms and Conditions of the Scheme:

• Deposit of Tk. 2, 50,000/= and multiples thereof at a time will be accepted under the scheme.
• The instrument shall be issued for 7 years, 10 years, 15 years or 20 years term.
• The deposit payable at maturity with benefit either in lump sum or on monthly basis as education allowance for 6 years starting after the completion of respective term.
• To avail the education allowance, the depositor is required to deposit the receipt to pay the amount to his/her nominated person on monthly installment basis as or instrument with the bank duly discharged by him with the written instruction stipulated in the scheme.
• Normally no withdrawn will be allowed before maturity. But, if any depositor intends to withdrawn his deposit before maturity, the following rules will be applicable:

(a) If withdrawn is made before seven years, interest will be calculated and paid as per prevailing saving rate.

(b) If withdrawn is made at any time after seven years, the total amount payable at maturity of the immediate preceding terms will be paid along with interest for the fractional period at prevailing saving rate.

• The depositor can avail loan up to 80% loan under the scheme.
• Incase of issuing duplicate receipt the rules of issuing duplicate receipt of terms deposit will be applicable.

Example Table

Debit Card

The Bank has launched Master card among its customers in joint collaboration with DBBL Bank Ltd.

FSIBL’s card is accepted at more than 5000 outlets spread around the country; this card can be used in purchase of everyday necessities to luxurious goods and services. This wide range of merchants include hotels, restaurants, airlines, travel agents, departmental stores, hospitals, clinics & diagnostic centers, jewelry shops, electronic shops, health clubs any many more. Numbers of outlets are increasing day by day to cater to growing needs.

FSIBL card provides cash withdrawal facility up to 50% of your credit limit; this may be availed from ATM or from any branches of FSIBL Ltd. With a nominal cash withdrawal charge.

Investment service of FSIBL Ltd.

Izara Bill Baia (General)

Short term, medium term & long term investments allowed to individual/ firm/industries for a specific purpose but for a definite period and generally repayable by installments fall under this head. These types of lending are mainly allowed to accommodate financing under the categories.

1. Large & Medium Scale Industry and
2. Small & Cottage Industry.

Very Often Terms Financing for

1. Agriculture &
2. Others are also included here.

Features:

• The Islamic Shariah principle of investment under Izara Bill Bia is Musharaka Mutanakasha, which means the rent, shall be devisable as per equity involved, unpaid rent if any shall not be treated as equity and the asset shall be acquired on participation ownership.
• Possession of the asset shall be passed on to the client for use as per practicability.
• Bank shall retain the ownership till payment of equity portion of the bank along with rental.
• The ownership of the asset shall gradually pass on to the client upon payment of bank’s equity involved and on the reverse upon increase of client’s equity.
• Rent shall not be compounded in any case i.e. no rent shall be charged on unpaid/outstanding rent. The client shall reduce incidence of rent proportionately with the reduction of equity of the bank of payment of installment.
• Since it is a kind of Musharaka, cash can be paid to the credit of clients account. However, the purpose for which cash is disbursed must be ensured from the point of banking.

Incase of need the equity portion may be increased or decreased by making lump sum payment by either side. Very often the client may require funds to run the equipments/machineries for short period as working capital which may be paid to the debt of respective Izara Bill Bia Account if found feasible and covered by the value of assets.

Izara Bill Baia (HB)

Investment allowed to individual/enterprises for construction of house commercial fall under this type of investment. The amount is repayable by monthly installment with a specified period. Such investment is known as Izara Bill Bia (HIB). No investment for construction of residential house building shall be accommodated to the banks customer where is no other business consideration.

Izara Bill Baia (Staff HB)

Investment allowed to our bank employees for purchase/construction of house shall be known as investment (Staff HB).

 Bai-Muajjal (BAIM)

It is a mode of investment under which the bank at the instance of the client procures certain goods permissible under Islamic Shariah and the law of the country and sells those to the client at a price payable at a fixed future date in lump sum or in fixed installments and the goods are delivered in advance and the fixed price is paid later or as agreed by the parties.

Important Features

• Goods are to be purchased from a third party excluding sister concern(s) of the client.
• Ownership of bank on the goods be established at least for a single moment before selling the same to client.
• Like Murabaha, bank is not bound to declare cost of goods and profit mark up separately.
• It is a credit sale by which ownership of the goods is transferred by the bank to the client before receipt of sale price. That is payment is deferred for a fixed period. Bank may ore may not retain possession of the goods considering the security the security aspects. (However, in our bank, generally goods are delivered to the investment client but sufficient collateral is kept).

Murabaha

Financial accommodation to individual/firm for trading as well as for wholesale or to industries as working capital against pledge of goods as primary security fall under this head of investment. It is also a continuous investment and like the above allowed under the categories.

1. Commercial Lending
2. Working Capital

Bai-Murabaha Investment

Bai-Murabaha may be defined as a contract between a buyer and seller under which the seller certain specific goods permissible under Islamic Shariah and the law of the land to the buyer at a cost plus agreed profit payable in cash or an any fixed future date in lump sum or by installments. The profit marked-up may be fixed in lump sum or any percentage of the cost price of the goods.

Ordinary Bai Murabaha

If there are only two parties, the seller and the buyer, where the seller as an ordinary trader purchases the goods from the market without depending on any order and promise to buy the same from him and sells those to a buyer for cost plus profit, then the sale is called ordinary Bai-Murabaha.

Bai-Murabaha on order and promise

If there are three parties, the buyer, the seller and the bank as an intermediary trader between the buyer and the seller, where the bank upon receipt of order from the buyer with specification and a prior outstanding promise to buy the goods from the bank, purchases the ordered goods and sell those to the ordering buyer at a cost plus agreed profit, the sale is called “Bai-Murabaha on or promise”, generally known as Murabaha.

Features

Bank shall purchase the goods so that ownership of bank on the good is established at least for a moment. The bank may also engage the investment client as buying agent as per previous agreement to purchase the goods from third party on behalf of the bank who after purchase shall handover possession of the same to the bank at least for a second and there after the same shall immediately taken into pledge of the bank. (Please refer to engaging investment client as buying agent for detailed procedure).

• There must be three parties in order to perform buying a selling under Murabaha (a) Bank (b) Seller of Goods (c) Purchaser of Goods. Goods however must not be purchased from client of from any of its sister concern. Goods must also be halal as per Shariah.
• A commodity in the true sense of the term must be involved in buying and selling.
• There must be an agreement between the bank and the client. Cost of the goods sold and the amount of profit added there with should be separately and clearly mentioned in the Murabaha Agreement.
• After procurement of the goods the client shall take delivery of the same signing on the reverse of the purchase schedule and immediately there after the bank shall take the goods in to pledge as security of bank’s investment.

Izara Bill Baia (HP)

Izara Bill Baia (HP) is a type of installment investment under which the purchaser agrees to take the goods on hire at a stated rental, which is inclusive of the repayment of principal as well as profit for adjustment of the investment within a specified period.

Izara (LF)

Izara (LF) is one of the most convenient sources of acquiring capital machinery and equipment whereby a client is given the opportunity to have an exclusive right to use an asset usually for an agreed period of time against payment of rent. It is a term financing repayable by installment.

House Hold Durable Scheme (HDS)

It is a special investment scheme of the bank to finance purchase pf consumer durable to the fixed income group to raise their standard to living. The customers allow the investments on soft terms against personal guarantee and deposit of specified percentage of equity. The investment is repayable by month installment within a fixed period.

Bai-Muazzal (General/FO)

Investment allowed to individual/firms against financial obligation (i.e lien of MTDR/PSP/BSP/Insurance Policy/Share etc.) This may not be a continuous investment.

Bai-Muazzal (WO)

Investment allowed against assignment of work order for execution of contractual work falls under this head. This investment is generally allowed for a definite period and specific purpose i.e. it is not a continuous investment.

Bai-Muazzal (Export)

Investment allowed for purchasing foreign currency for payment against L/Cs (Back to Back) where the exports do not materialize before the date of import payment. This is also investment for temporary period, which is known as export finance and falls under the category “Commercial Lending”.

Murabaha Import Bills (MIB)

Payment made by the bank against lodgment of shipping documents of goods imported through L/C falls under this head. It is an interim investment connected with import and is generally liquidated against payment usually made by the party for retirement of the documents for release of imported goods from the customs authority. It falls under the category “Commercial Lending”.

Murabaha Post Import (MPI)

Investment allowed for retirement of shipping documents and release of goods imported through L/C taking effective control over the goods by pledge in godown under bank’s lock & key fall under this type of investment. This is also a temporary investment connected with import is know as post import finance and falls under the category “Commercial Lending”.

Financial scenario of FSIBL

Reserved & Capital

Stock Dividend of 55% was declared for then year 2007 which increased paid-up capital of the bank from tk 1296.21million to tk 1921.21million in 2008 while authorized capital was 345 million.

The Reserve fund increased to 569.10 million in 2008 after maintaining 25% pretax profit. the total equity of shareholders of the bank stood at tk 3626.30 million at the end of the year 2012.

Import& Export Business

During the year, the bank opened 28,872 import letters of credit and the import volume stood at Tk. 61399.40 million with a growth of 23.80% in comparison with previous year of Tk. 49596.73 million.

The growth of the export business has been increased by 20.67%. It stood at Tk. 55790.42 million as of December31, 2007 against Tk. 46234.59 million of the previous year.

Deposits

The deposits of FSIBL registered an increase of 33.36 percent during the year under review, at the close of 2012 total deposits stood at Tk. 23,504 million against 17,592 million expanded branch network innovative deposit products, a huge number of customers, which contributed to the growth of deposit. The main customers include individuals, corporation, financial institutions, governments and autonomous bodies etc.

Deposits

Loans and Advances

First Security Islami Bank Ltd has been able to increase its loans and advances despite adverse conditions in the domestic as well as in the global economy. The Bank recorded a. growth of 36.42 percent with a total loans and advances portfolio of Tk. 18,616.23 million at the end of December 2012 compared to Tk. 13,646.00 million at the end of December 2011. The growth was due to parking of established business enterprises, new ventures of Syndication Loan, Housing loan, project loan, Agro loan etc. and usual growth in foreign trade.

Investments

In an effort to secure more stable and predictable earnings from its investment, the bank focused its attention on investment in Govt. securities, shares and call money market. The total investment of the bank stood at Taka 7760.38 million as on December 2011 as against taka 6239.83 million in the previous year.

Foreign Trade:

The Bank handle foreign trade in which it has comparatively large share despite its small size. FSIBL provides various facilities  related to L/C and post import finance like loan against imported merchandise (LIM), Loan against trust receipt (LTR), back to back L/C and pre shipment finance facilities like export credit and packing credit to exporters. So far the bank has established correspondence relationship with as many as foreign banks in order to facilities foreign trade. The bank handled total export business of Taka 22418.40 million. And import business of Taka 26781.80 million in 2011. The import business is increased by 39.05 percent and export business is increase by 48.22 percent. Major items of exports garment send jute products. Items of import included mainly industrial raw materials, garment accessories and capital machinery.

Head Office (Amount in million)

(Source: Annual Report 2011)

Source of fund

Main part of the source of capital of FSIBL is equity of share holder & savings of mass people that money used by the bank for short & long term debt /loan to the different enterprise & financial institutions &earns huge profit against that.

Application of fund

Number of branch

 Number of Employee

First security Islami Bank Ltd is the private bank sector. The number of employee increased through out its life because of growing nature. In 2012 the member of employee was 2432 & previous year which were 2270.

Foreign Remittance

First Security Islami Bank Limited has remittance arrangements with different banks and exchange house in various countries throughout in the world. Foreign Remittance of the bank stood at Tk 710.30 million as of December-31, 2012 which was 543.78 million in 2011 .Beside the bank has taken initiative to make remittance arrangements with some leading exchange house at abroad.

Other activities

The bank provides services for underwriting, guarantee, public offering of shares etc. The bank also provides funds to investment and leasing companies.

Foreign exchange: 

Refers to the process or mechanism by which the currency of one country is converted into the currency of another country. Foreign exchange is the means and methods by which rights to wealth in a country’s currency are converted into rights to wealth in a country’s currency, in bank when we talk of foreign exchange, we refer to the general mechanism by which a bank converts currency of one country into that of another.

Foreign exchange is divided in three parts.  

• Export
• Import
• Foreign Remittance

EXPORT:

The term exports means carrying out of anything from one country to another, as banker we define export as sending of visible things outside the country for sale. In a word export means goods are outwards and foreign currencies are inward. Export trade plays a vital role in the development process of an economy.

In order to export any goods or services to overseas the exporter must have attested photocopies of the following documents with the up to date ERC. The documents are as follows-

• Bill of exchange
• Commercial invoice
• Certificate of origin
• Packing list
• Insurance coverage
• Insurance coverage
• Beneficiary certificate

If the bank authority satisfies with all the information provided by the exporter, steps are taken to smooth out the process of export.

Procedure of Export:

The Exports Act, 1950 regulate the country’s export trade. There are a number of formalities, which an exporter has to fulfill before and after shipment of goods. These formalities or procedures of export mechanism are enumerated as follows:

Registration:

The exports from Bangladesh are subject to export trade control exercised by the ministry of commerce through chief controller of imports and exports. No exporter is allowed to export any commodity permissible for export from Bangladesh unless he or she is registered with CCI & E and holds valid export registration certificate (ERC). The ERC number is to be incorporated on EXP forms and other documents connected with exports.

Obtaining EXP:

After having the registration, the exporter applies to the bank with trade license and ERC for getting EXP. If the bank satisfied an EXP is issued to the exporter. Securing the order after having the registration, the exporter may proceed to secure the export order. Contracting the buyers directly through correspondence can do this.

Signing of the Contact: The following points are to be mentioned while making a contract-

• Description of the goods
• Quantity of the commodity
• Price of the commodity
• Shipment
• Insurance and marks

Procuring the Materials:

After making the deal and on having the L/C opened in this favor, the next step for the exports is to set about the task of procuring the contracted merchandise.

Shipment of Goods:

The following the documents normally involved at the stage of shipment 

• EXP form
• Photocopy of registration certificate
• Photocopy of the contract
• Photocopy of the L/C
• Freight certificate from the bank
• Railway receipt, barges receipt or truck receipt
• Shipping instructions
• Insurance policy

After those, exporter submits all those documents along with a letter of indemnity to the bank for negotiation; an officer scrutinizes all the documents. If the document is a clean one, FSBL purchases the documents on the basis of banker-customer relationship. This known as foreign documentary Bill purchase (FDBP).

Procedure for FDBP:

After purchasing the documents, FSBL takes FDBP charges from customers A/c. a FDBF register is maintained for recording all the particulars.

Foreign Documentary bills for Collection:  FDBP signifies that the exporter will receive payment only when the issuing bank gives payment. The exporter submits duplicate EXF form and commercial invoice, an FDBP register is maintained where first entry is given, when the documents are forwarded to the issuing bank for collection and the second one is after realization the proceeds.

Advising L/C:

When L/C export) is transmitted to the bank for advising the bank sends advising letter to the beneficiary depicting that L/C has been issued. The procedure of L/C advising is as follows—

• Verify the signatures
• Given entry in the L/C advising register.
• Issued voucher for L/C advising commission

Letter of Credit (L/C):

Letter of Credit (L/C) is an arrangement between an importer and the bank (issuing bank). The bank provides L/C in order to purchase goods from the exporter. The bank acts on the behalf of the clients to deal with exporter and the clients make the payments after receiving the goods accordingly.

Requirement of Opening a L/C:

• Current deposit account holder
• IRC (Import registration Certificate)
• Import policy
• L/C authorizing form duly registered
• L/C authorizing form duly registered
• L/C applications duly fill up and sign
• L/C applications duly fill up and sign
• Contract/indent
• Insurance coverage
• Income tax document
• Contingency liability voucher
• L/C registration

Back-to-Back Letter of Credit (BTB L/C):

A back-to-back letter of credit is a new credit. The banks main security is the original credit. Bank to back L/C is opened under a master L/C one or more L/C is opened against one master L/C.

Requirements of Opening a Back-to-Back L/C:

• Master L/C
• Valid import registration certificate and Export Registration certificate
• L/C Application and LCA form duly filled in signed
• Pro-forma invoice or indent
• Insurance cover note.
• IMP form duly signed.

Types of BTB L/C:

There three types of BTB L/C they are–

• Local BTB L/Cs
• Foreign BTD L/C
• EPZ

Opening Process of a L/C:

a) Approach by the applicant with submission of under mentioned documents:

• Approach letter
• L/C agreement
• L/C authorization form
• IMP form
• Pro forma invoice
• Insurance

b) Preparation of proposal by the branch. Parts of proposal are stated bellow:

• Name and address of the applicant
• Nature of constitution with name of owners
• Nature of business
• IRC # TIN #
• Commodity to be imported
• Beneficiary’s name and address
• Beneficiary’s credit report
• Country of origin Liability
• Security
• Other Conditions
• Recommendation 3 On receipt approval from the competent authority, branch issues L/C.

c) On the issuance of L/C, Branch may use the printed copy as prepared by the individual bank or developed by the concerned official. Related copies are stated bellow:

• Original copy
• Applicant copy
• Advising bank copy
• Issuing bank copy
• CCI and E copy (only for foreign L/C)

d) Parts of a L/C are discussed bellow:

• The L/C may be irrevocable document
• L/C opening date must be mentioned
• L/C number
• Beneficiary’s name with address
• Applicants name with address
• Advising bank
• Amount
• Date of shipment
• Sight
• Date and place of expiry
• Pro-forma invoice with date that had been sent by the Beneficiary
• Signature of authorized officials
• Other terms and conditions

Documentation:

At first prepare forwarding. Then arrange the following documents—-

• Bill of exchange
• Commercial invoice
• Packing list
• Certificate and other documents

Retirement:

This means wait for payment. When the beneficiary sends the goods, they send related documents for payment to the bank. The bank starts the retirement procedure. At first checking these documents with the L/C, L/C time, date number, invoice, terms and conditions, beneficiary’s.

Foreign Payment:

The issuing bank prepares voucher, then entries in the IBTA register, ETDA, and then send to the ID. Id informed the bank, which maintains liaison between the issuing bank and advising bank. Then the bank pays to the beneficiary after checking the authentication code.

Payment:

Then they pay in local payment and foreign payment

Local Payment:

Local payment, the bank used P.O and Demand Draft.

Import:

Import is foreign goods and services purchased by firms, customers and government in Bangladesh. An importer must have import registration certificate (IRC) given by Chief Controller of Import & Export to import anything from other country.

Import Procedure:

The importer enters in to a purchase contract with foreign suppliers. If suppliers have local agent, the importers obtain an indent and pro-forma invoice. If the suppliers have no local agents in Bangladesh, the importers holding valid import registration certificate (IRC).

Documents that needed for opening an import L/C are listed bellow:

• L/C application duly signed and sealed by the opener.
• At least 4 copies of pro-forma invoice/indent duly signed and sealed by the opener and beneficiary.
• Party application form duly signed and sealed by the opener.
• LCA/IMP forms duly signed and sealed by the opener.
• Beneficiary credit report
• Insurance cover note with money receipt.

Import Mechanism:

The exports and imports Act, 1950 regulate the country’s import trade. The chief controller of import and export provided the registration to the importer. Then the person secures a letter of credit Authorization from Bangladesh bank. And then a person becomes a qualified importer.

The import mechanisms are discussed bellow:

• To have an import L/C limit, an importer submits an application to the import department. An officer scrutinizes this application and accordingly prepares a proposal and forwards it to the head office. If the MD satisfies, he sanctions the limit and returns to the branch.
• After sanctioning the limit, an officer of FSBL makes a L/C application.
• After making the L/C application, must be scrutinized by the authority.
• The transmission of L/C is done through tested telex or fax or mai9l to advise the L/C to the beneficiary.
• After receiving all documents, the negotiating bank checks the documents against the credit. It the documents are found in order, the bank will pay accept or negotiate to FSBL.

The officials have to very much careful while making payment. This task constitutes the following–

• Usually payment is made within seven days after the documents have been received.
• A sale memo is prepared at B.C. rate to the customer. As TI and 00 rate is paid to the ID, the difference between these two rates is exchange trading. Finally, an inter Branch Exchange Trading credit advance is sent to ID.
• For arranging necessary fund for payment, a requisition is sent to the ID
• Telex is transmitted to the correspondent bank ensuring that payment is being made.

Remittance means to sent or transfer money worth from one place to another In this case, the bank acts as the media to transfer or remit the money. Against the service it charges some commissions from the client.

Drawing arrangements:    

Drawing arrangements is made to facilitate remittance through concluding accounting relationship between a bank and corresponding, which may exist in the following three forms of accounts.

NOSTRO A/C:

A foreign currency account that a local bank maintains that account with another bank in abroad.

VOSTRO A/C:

An account, which a foreign bank maintains with a local bank, is called VOSTRO A/C.

LORO A/C:

An account, which a third party maintains with a foreign bank, is called LORO A/C.

Types of Remittance: There are two types of Remittance:

Foreign inward remittance:

The remittance in foreign currency, which is received from outside the country to our country, is known as foreign inward remittance. The remittance can be performed in two proceeds:

• Visible inward remittance: e.g. export proceeds.
• Invisible inward remittance: e.g.; family maintenance consultant fee. Cash is remitted through TT, DO, etc.

Foreign outward remittance: Funds remitted to overseas on behalf of the client:

FSBL FOREIGN TARNSACTIONS:

• Great Britain pound
• S Dollar
• EURO
• YEN

SWOT Analysis of FSIBL  

SWOT Analysis of FSIBL Ltd.

SWOT analysis is the detailed study of an organization’s exposure and potential in perspective of its strengths, weakness, opportunity and threat. This facilitates the organization to make their existing line of performance and also foresee the future to improve their performance in comparison to their competitors. As though this tool, an organization can also study its current position, it can also be considered as an important tool for making changes in the strategic management of the organization.

Organisations often think the way to measure customer satisfaction is to examine the number of customer complaints. The problems with this method is that it is reactive, it only responds (if at all) after the event and it does not really measure satisfaction only dissatisfaction. Monitoring complaint levels does not really tell if the customers are any more or less satisfied with the product or service.

In the competitive arena of marketing era SWOT analysis is a must based on Product, Price, marketing policies of a financial institute like private bank. From the SWOT analysis we can figure out ongoing scenario of the bank.

Strengths

Bank reputation

FSIBL ltd. has already established a favorable reputation in the banking industry of the country. Within a period of 9 years, bank has already established a firm footing in the banking sector having tremendous growth in the profits and deposits. All these have leaded them to earn a reputation in the banking field.

Islamic banking Concept

As we are an Islamic Nation our major deals want to follow the Islamic rules and regulations. FSIBL always follows the Islamic rules. And it always helps the bank to attract the new and existing clients.

Sponsors

FSIBL ltd. was founded by a group of well-known entrepreneurs of the country having sufficient financial strength. The sponsor directors belong to prominent resources persons of the country. The Board of Directors headed by its Chairman Alhaj Md. Saiful Alam. Therefore, FSIBL has a strong financial strength and it built upon a strong foundation.

Top Management

The top management of the bank is also major strength. The top management officials have all worked in reputed banks and they are very experienced in the banking sector, skills, expertise will continue to contribute towards further expansion of the bank. At FSIBL Ltd. the top management is the driving force and the planning of the organization where policies are crafted and often cascaded down.

Facilities and equipment

FSIBL ltd. has adequate physical facilities and equipments to provide better services to the customers. The bank has computerized and online banking operations under a software. Counting machines in the teller counters have been installed for speedy service and the cash counters. Computerized statements for the customers as well as for the internal use of the banks are also available.

Modern branches

This creates a positive image in the minds of the potential customers and many people get attracted to the bank. This is also an indirect marketing campaign for the bank for attracting customers. All branches of the bank are impressive and are compatible to foreign banks.

Team work at mid level and lower level

At FSIBL Ltd. have mid level and lower level management, there are often team works. Many jobs are performed in groups of two or three in order to reduce the burden of the workload and enhance the process of completion of the job. People are eager to help each other and people in general are devoted to work.

Interactive corporate culture

FSIBL ltd. has an interactive corporate culture. Unlike other local organization, its work environment is very friendly, interactive and informal. There are no hidden barriers or boundaries while interacting among the superior or the subordinate. The environment is also lively and since the nature of the banking job itself is monotonous and routine, FSIBL. is likely work environment boosts up the spirit and motivation of the employees.

Weaknesses

Advertising and promotion of their new product

This is a major set back for FSIBL Ltd. and one of its weakest areas. Banks advertising and promotional activities are satisfactory but it SME loan is not advertised well. It does not expose its SME product to general public and are not in lime light. FSIBL does not have any sign or any advertisement for SME loan in the city. As a result people are not aware of the existence of this bank.

Low reward package

The reward package for the entry and the mid level management is considerably low. The compensation package for FSIBL. Entry level positions are even lower than the modern banks. Under the existing low payment structure, it will be very difficult to attract and retain higher educated employees in FSIBL.

Opportunities

Diversification

FSIBL can pursue a diversification strategy in expanding its current line of business. The management can consider options of starting merchant banking or diversify in to leasing and insurance. By expanding their business portfolio, FSIBL can reduce their business risk.

Product line proliferation

In this competitive environment FSIBL must expand its product line to enhance its sustainable competitive advantage. As a part of its product line proliferation, FSIBL can introduce the following products.

ATM: Try to submit ATM service As soon as possible .it is in under processing.

Threats

• There are many competitors in the marker
• The growth rate of competitors in the market
• Many of the competitor banks are well equipped & also providing better online services
• Regulatory requirements
• pressures to reduce interest rate
• Changing customers needs

Major Findings:

If they are aware of some simple setback, that might be better for HRD. The setbacks are as follows as under:

• There is no recording system of highly favorable and unfavorable employee’s actions.
• A single commitment to the organization.
• Subordinates’ developmental needs totally depend on Manager Cooperation, Leadership and attitude, which is absent in First Security islami bank Limited.
• Managers do not provide any brief/ discussion or guide to communicate the performance appraisal system of the bank.
• Rating scale is very high level for Understanding to Employee.
• Annual performance Appraisal systems are very wide-ranging.
• Before Evaluation HRD/Manager doesn’t notice, informed or guide to the employee.
• Employees are not addressed to understand their progress in the job or there is no formal mechanism of counseling system to improve performance.
• HRD did not undertake any research/query/survey on every employee performance, behavior, work attitude, and job satisfaction.
• Regular performance appraisal helps to develop employee morale and performance.
• Performance appraisal format exists for all levels of employee.
• There is positive relationship between performance appraisal and employee

Recommendations

I have focused and analyzed on performance of the bank while working as an intern. First Security Bank Limited is a new bank in Bangladesh, but its contribution to the socio economic aspect has greatest significance. Though my topic is “A study on Overall  Banking System of First Security Ismami Bank Ltd. ”, I have tried to identify the problems as a whole. I have found a fewer number of factors which impede the achievement of ultimate goals of the bank. It is not easy to find out the solution of the problems as inexperience intern like me, although I have developed some suggestion and generated a set of recommendation that might be helpful for solving few problems and improve the service as well as image of the bank.

 Service Quality must be improved:

Fast and prompt services should immediately be developed, as customers want their desired services without any delay. The management must take special care and steps to improve the service quality. Adequate people with proper training and skill should be place at this wing of the bank. So the employees should be well equipped and prompt in their work.

Decision should be decentralized:

The scope for bottom up communication is very essential and must be made without any delay. Many bright ideas are not being able to reach to the ladder to the top management; steps should be taken to make reach the ideas to the top. While making any decision all the ideas must be considered and discussion should be conducted with low and mid level management.

Branch level and Staff meeting should be increased:

Staff meetings and departmental meetings at the branch level must be increased to develop service quality as well as problem solving. Such meeting can also help interchange the inner-qualities of each other and improve qualities employees as well management. Branch level meeting can help interchange improved service qualities.

Change the shape of office space and maintain discipline:

Cubical type of design can be used in the office to prevent the noise pollution in the bank. It will also help to maintain discipline in the bank. Each desk should be in cube and separated from each other.

Reference employment must be stopped:

Recruitment should be in a systematic and effective process that can make sure that right people are in the right  place. Reference for recruitment should consider as disqualification.

Remuneration package should be improved:

Payment to the workforce should be such that will encourage the employees to work more. Remuneration package must be impressive and inconsistent with work performance. And it should also increase the remuneration to the employees to attract quality personnel.

Stop Influenced Credit Sanction:

The bank should be more careful about its credit operation. It should make its employees more trained and skilled about credit approval system. While granting Credit proper inspection must be made and reference Credit sanction must be stopped. Regular communication with the defaulter is must whether it is physical or over phone. Bank should issue reminder letters for collecting its overdue.

The bank must decide its vision or long-term strategies:

The bank must make its long-term strategies of whether it wants to focus on retail banking or become a corporate bank. The path for the future should be determined right now. A prescribed set of vision or target should be made as with consistent with time.

Improvement of human resource department:

The Human Resource wing has to be more active rather than maintaining administrative duties. More qualified and skilled Human Resource professional should be recruited for this department for future growth of the Human Resource of the bank. The management should immediately apply the performance appraisal system and take appropriate actions on the basis of that appraisal. All sorts of promotions or other benefits should be based on the report of the performance appraisal.

Increase advertisement and promotion:

The bank should give an aggressive advertisement campaign to build up a strong image and reputation the potential customers.

Conclusion

First Security Islami bank Ltd. has established goodwill through innovative products and services. It has many problems but is followed very sincerely the rules, regulations and advice of Bangladesh bank during the last nine years. From the practical implementation of customer dealing procedure during the whole period of the practical orientation in FSIBL .I have reached a firm and concrete conclusion in a very confident way. The realization will be in synchronization with most of the banking thinking. It is quite evident that to build up an effective and efficient banking system to the highest desire level computerized transaction is a must loan losses, the more the income will be from credit operation. The more the income from the credit operation the more will be the profit of the FSIBL and here lays the success of credit financing.

Through there are some drawbacks in implementing credit facilities in FSIBL as per manual, it can be further developed in light of the recommendations being discussed above. During the 03 month internship program at almost all the desk have been observed more or less. Gaining knowledge of practical banking and to compare this practical knowledge with theoretical knowledge. Though all departments and sections are covered in the internship program, it is not possible to go to the depth or each activities of division because of time limitation.

So, objectives of this internship program have not been fulfilled with complete satisfaction. However, highest effort has been given to achieve the objectives the internship program.