The report titled “General Banking System Of Habib Bank Ltd”, which especially focus on the works for a customer who is going to connected with the bank is prepared for fulfillment of the partial requirement of BBA Program of IIUC, DC. I have given my honest and sincere efforts while doing my internship work and preparing this report. All my efforts will be successful if it becomes helpful to HBL.
OBJECTIVES OF THE INTERNSHIP WORK AND THE REPORT
Every work is done to gain some particular objectives. My Internship program also contains certain important objectives. They are given below
- To understand the Banking business in Bangladesh. How Banking transactions Take place.
- To observe the authorities, tasks & Responsibilities of the bankers.
- The rules and regulations of private commercial Banks
- To know the background of the HBL
- To know the Overall Banking system of HBL
- To understand the Financial and Accounting techniques of HBL. Infect this is the prime objective and I have chosen this as the topic of my report.
- To have the idea about the communication between the branch office and Head office.
- To better understand about the foreign exchange activities.
- To learn the Banking Laws.
- To appraise the total achievements and success of HBL
RESEARCH OF METHODOLOGY
Time Period of the Study
I am doing my internship work At Habib Bank Ltd, Motijheel Branch from 03rd May 2009 and it will end after three months.
Sources of Data Collection
The data have collected from two sources, they are primary sources and the other is secondary sources.
Primary sources of data collection
- Day to day desk work
- Personal observation of the bank officials
- Discussion with the bank officials
- Discussions with the clients.
- Different file study and case history of bank’s parties
Secondary sources of data collection
- Annual report of HBL
- Different manual published by the Bangladesh Bank
- Official instructions from the head office of the Bank.
- Study of related books, seminar paper, training papers, Publication of statements,
- Manuals etc.
Banking Sector in Bangladesh
Definition of Bank:
Whoever, being an individual firm, company or corporation generally deals in the business of money and credit are called a bank. Banker means a person transacting the business of accepting for the purpose of lending or investment of deposit of money from the public repayable on demand or otherwise and withdraw able by cheques, draft or otherwise. The purpose of banking is to ensure transfer of money from surplus unit to deficit units. Banks in all countries work as the repository of money. The general public deposit money in the bank for safe custody as well as to earn interest on it.
Since liberation, Bangladesh passed through fragile phases of development in the Banking sector. Some banks were nationalized in the post liberation period to save the institutions and the interest of the depositors. Those handing the banking sector have borne the burden of putting banks on reliable footings.
Despite all that was done, some elements of irregularities appeared. With the assertion of the role of the Central Bank, Bangladesh Bank, started adopting measures for putting banking institutions on right track. Yet the performance of public sector management of banks left some negative effects in the money market in particular and the economy in general. The agility among the borrowers manipulates the banking sector as a whole. In effect, a default culture among other effects appeared on the scene.
The opening of private and foreign participants to the banking sector was intended to obtain desirable results from banking. The authorization of private bank was designed to create competition among the banks and competition in the form of efficiency within and the productivity in enterprises funded by banks. Unfortunately, for the people at large banking sector is yet to obtain the credit for efficiency, curability and growth.
The clever, among the user of banking services, have influenced the management of bands, for obtaining short term and long term loans. They sometimes showed inflated equity to get money for investment in business and industry. Few diverted their loan money to purposes different from the loan proposal, and invested in non‑profitable units have failed to repay their loans to the banks. For this reason new entrepreneurs are not getting capital while defaulting entrepreneurs have started obtaining either relief in the form of rescheduling of the repayment program of additional invest able money for diversified units.
Banking In Bangladesh Perspective
Banking is the backbone of national economy; all sorts of economic and financial activities revolve round the axis of the bank. As the industry produces goods and commodities, so does the bank creates and controls money‑market and promotes formation of capital. From this point of view, banking‑a technical profession can be termed as industry. Services to its customers are the products of banking industry besides being a pivotal factor in promoting capital formation in the country. As all economic and fiscal activities revolve round this important “Industry’, the role of banking can hardly be over emphasized.
Circumstances being such, it becomes imperative to find out the role of banks now playing in the country and analyze its operational aspects so as to ascertain the importance of this delicate financial sector and its over all impact on our national economy. To ascertain the role of banks
and to analyze its operational aspects and its overall impacts on our national economy a through study as to its distribution, expansion and contribution is essential to comprehend its past, present and future bearings for the growth and development of the banking sector of the country. In the global context, the role of banks is far‑reaching and more penetrating in the economic and fiscal discipline, trade, commerce, industry, export and import all carried through the bank. Banks are the only media through which international trade and commerce are being carried out and entire credit transactions, both national and international.
Brand & History of HBL
The Habib Bank Group is a leader in Pakistan’s services industry. An extensive network of 1425 domestic branches – the largest in Pakistan – and 55 international branches has enabled HBL to provide comprehensive services that meet customer needs. This has ensured thriving client relationships that form the backbone of the Bank’s operations.
Today, HBL plays a central role in Pakistan’s financial and economic development. It has come a long way from its modest beginnings in Bombay in 1941 when it commenced operations with a fixed capital of 25,000 rupees.
Impressed by its initial performance, Qaid-e-Azam Mohammed Ali Jinnah asked the Bank to move its operations to Karachi after the creation of Pakistan. HBL established itself in the Qaid’s city in 1943 and became a symbol of pride and progress for the people of Pakistan.
Habib Bank has been a pioneer in providing innovative banking services. These have included the installation of the first mainframe computer in Pakistan followed by the first ATM and more recently, internet banking facilities in all our 1425 domestic branches.
The Bank’s towering presence in Pakistan’s financial and commercial life has remained unchanged over the decades. The strength of its brand and image is symbolized by its prominent Head Office building that has dominated Karachi’s skyline for 35 years.
We continue to build on our track record and in our quest for excellence we strive to meet the needs of both our customers and our employees. At Habib Bank we aim to ensure customer satisfaction by providing high quality banking services. This is made possible by the professionalism of our employees all of whom are provided with the requisite training and opportunities to enable them to realize their full potential.
International Banking Group
From opening its first overseas branch in 1951, HBL’s international network now encompasses a presence in 25 countries as listed below:
- Habib Finance Australia Limited, Australia
- Habib Finance International Limited, Hong Kong
- Habib Allied International Bank Plc, United Kingdom
- Himalayan Bank Limited, Nepal
- Platinum Habib Bank Plc, Nigeria
PRODUCTS & SERVICES
The Bank’s international network provides a wide range of banking products and services to its customer base which includes government entities, financial institutions, corporations, small and medium-sized enterprises, nonprofit organizations, individuals, etc. Key products offered include:
- Deposits Corporate / Syndicated loans Retail / Consumer loans
- Trade Finance Foreign Exchange Home Remittances
- Payment and Clearing Services
Members of Management Committee:
Habib Bank Limited is a Pakistani international bank operating in Bangladesh. The bank is recognized as one of the leading financial institutions in South Asia, and a dynamic international bank in the emerging markets, providing customers with a premium set of innovative products and services. The bank has been in Bangladesh since 1976 and has two branches in Dhaka and Chittagong.
Habib Bank Limited has been providing services of only Commercial and Corporate Investment banking, aiming at serving the business-related part of the financial sector. However, the bank is now considering Consumer Lending.
This report addresses this type of business in the Bangladesh financial market and will see whether it is feasible for Habib Bank Limited to introduce and provide such new products to the market.
To describe Habib Bank Limited
- To provide a sketch of HBL worldwide
- To give a complete picture of its operations in Bangladesh.
- To financially examine HBL’s present position and performance over the past three years
- To examine HBL’s opinion in regard to its expectations from Consumer Lending
To describe the Bangladesh Commercial banking industry
- To examine the present market scenario of the Bangladesh commercial banking in respect to consumer lending and commercial banking services
- To give a brief description of consumer lending in Bangladesh
- To gather preliminary information from consumers in Bangladesh
- To analyze findings from a market survey
To provide a conclusion based on the information provided by all the information collected
Information of General Banking
Deposits are the foundation upon which banks thrive and grow. They are unique item on a bank’s balance sheet that distinguishes it from other types of business firms. The ability of a Bank’s management and staff to attract checking and savings accounts from businesses and customers is an important measure of the bank’s acceptance by the public. Deposit provides most of the raw material for bank loans and thus represents the ultimate source of bank profits and growth. Deposits generate cash reserves, and it is out of the excess cash reserves a bank holds that new loans are created.
CURRENT DEPOSIT ACCOUNT
Amount Deposited under this account gives the facility of withdrawal from the amount without any restrictions and within the funds available on credit. Ordinary no interest is paid on the amount deposited in this account.
SAVING DEPOSIT ACCOUNT
These are interest bearing deposit accounts. The drawing are restricted in respect of both the amount of withdrawal and frequency thereof so that the payment and of interest and does not become non‑compensating for the banker. Interests are paid half yearly on the amount deposited. These accounts are suitable for individual person.
TERM DEPOSIT ACCOUNT
Deposits are also accepted by the bank against acknowledgement in the form of receipts for the specified amount and fixed periods. In Term Deposit Interest rate depends on period of deposit. The longer the period the higher is the rate of interest on them. The receipts are not negotiable and not transferable. Sometimes encashment of a receipt before maturity is allowed upon surrender of interest.
SERVICES PROVIDED UNDER GENERAL BANKING
In cash section Banks provide service to the customer or client by providing cash or receiving cash against proper document and identification.
Bankers have to follow some rules for opening an account. The bankers must keep some records and particulars of each Account holder. The particulars are essential for identification for the account holder.
For all types of Accounts some Common particulars are needed. They are as follows:
- Recent Photographs
- Passport Photocopy/ Nationality certificate
Some other necessary additional particulars are also needed for some Accounts. They are as follows
- CD ‑ Proprietorship –Trade License, VAT, TIN is required.
- CD ‑‑ Partnership. Partnership deed and Trade License
- CD ‑ Joint Account The deed (This types of account is always discouraged by the Bank)
ACCOUNT OPENING FORM
Each bank has its own printed forms supplied by the head office to its brunches to distribute them for applying an account. Different types of forms are provided for different types of accounts and for different form business. It means different application process is applicable for different ownership system of the business. For example, Proprietorship, Partnership, Company limited by shares private or public.
who can open Account?
Any one can open an account with the banker, if he is not incapable of entering into a valid contract and the bank is satisfied of his bonafide and is willing to enter into the necessary business relations with them. A minor is not capable to open an Account under the prevalent rules and regulations.
Withdrawal of Deposit
The deposits accepted by the banker is withdraw able checks or by remittance or by transfers under written instructions of the customers.
CLOSING OF AN ACCOUNT
For closing an account, client must give a written application including why he want to close the account and give a charge for closing the account.
Remittance means transmission of money from one place to another. There are different modules of remittance. They are mainly two types of remittance: – In Land Remittance and Foreign Remittance
IN LAND REMITTANCE
- TT‑ Telegraphic Transfer
- DD‑ Demand Draft
- PO‑ Pay Order
TT‑ Telegraphic Transfer
TT is the quickest method of transferring funds from one place to another. The remitting branch sends a telegraphic/ telephonic/ Fax message to the branch at the other end, to pay a certain sum of money to a named payee. Here the remitter bears the additional charge of telex/ Telephone. Charge for TT is .15% of the principal amount and the additional charge for telex. The telephone charge is tk.30.
DD‑ Demand Draft
It is an instrument containing an unconditional order of one bank office to pay a certain amount of money to the named person or order the amount therein on demand. DD is very much popular instrument for remitting money from one corner of money to another. Commission for DD is 0.15% of the principal amount.
PO‑ Pay Order
It is process of money transfer from payer to payee within a certain clearing area through banking channel. A person can purchase payment order in different models such as Pay Order by cash, Pay Order by cheque.
- Money Gram
- UAE Exchange
- Express Money
- Placid Express
- Unicredito Italiano
In the law of Bangladesh Bank there are some difficulties to send money to another country from Bangladesh. But anyone can send money from outside the county.
Money Gram and other foreign Remittance
Money Gram is one of the International money transfers. Any people can send money to the bank from outside the country by Money Gram. A person with proper identification can withdraw the money from any Branch of the bank.
Clearing stands for mutual settlement of claims made in among member banks at an agreed time and place in respect of instruments drawn of each other.
Clearing House is an arrangement under which member banks agree to meet, through their representatives, at the appointed time and place to deliver instruments drawn on the other and in exchange to receive instruments drawn of them.
The nit amount payable or receivable as the case may be, is settled through an account kept with the controlling bank (Bangladesh Bank / Sonali Bank).
TYPES OF CLEARING:
Clearing returns (inward) consists of those instruments which were presented by us to other banks for payment but have been returned and unpaid by them due to specified reason through the clearing house.
When a particular branch receives instruments drawn on the other bank within the clearing zone and sends those instruments for collection through the clearing arrangement is considered as Outward Clearing for that particular branch. This branch is known as collecting branch.
Procedures of Inward & Outward Clearing:
Outward Cleaning —
FIRST TIRE: COLLECTING BRANCH
The instrument is deposited duly entered in the pay‑in‑slip or voucher.
- The instrument is checked for any apparent discrepancy and is compared with the particular noted in the pay‑in‑slip.
- In case an order instrument is being deposited in second payee’s account guarantee is obtained from the second payee and is attached to the pay‑in slip.
- In case the payee’s name on the specially crossed instrument differs slightly that of the depositor, the instrument may be accepted but only from customers well known to the bank and after obtaining an indemnity which is attached to the pay‑in‑slip.
Special Crossing: on the instrument
Clearing Stamp: Both on instrument & pay‑in‑slip.
Endorsement: Back of the instrument.
Duly signed and return of counterfoil to the customer,
- The particulars of the instrument and voucher are entered in the Outward Clearing Register / Computer.
- The Register is balanced; the vouchers are separated from the instruments.
- Prepare voucher: Dr. Susp A/ C Clearing adjustment.
Cr. All pay‑in‑slips / Vouchers.
Voucher to be passed on the following working day.
Sorting of instruments bank‑branch wise and accordingly prepares sub main schedules.
- Prepare House page according to main schedules.
- Tallied house page with Outward Clearing Register.
- The house page with instrument sent to Principal / Local Office / Main branch (2nd tire)
- In the following working day prepared voucher (SL No. 9) is to be passed. if any return and unpaid instrument is received from principal branch, in addition to above voucher the following voucher will be passed.
Dr. Party A / C
Cr. Susp A/ C Clearing adjustment.
When Advice is received from Principal / Local Office, the following
Voucher is to be passed.
Dr. Head Office A / C
Cr. Susp A/ C Clearing adjustment.
SECOND TIRE: PRINCIPAL BRANCH / LOCAL OFFICE / MAIN BRANCH.
INSTRUMENT RECEIVED BY THIS OFFICE: Same as previous section SL. 1 to 9.
LODGMENT BY THIS BRANCH:
- Received house pages with instruments from the branches.
- Recorded the amount in a Register from house page.
- The instruments with schedules are rearranged bank‑branch wise and prepare main schedules for each bank.
- Prepare house page.
- The instruments with schedules, house page and the house book are sent to the clearing house through bank representative.
THIRD TIRE: CLEARING HOUSE (BANGLADESH BANK / SONALI BANK
The instruments are delivered to the respective banks.
FIRST TIRE: CLEARING HOUSE (BANGLADESH BANK /SONALI BANK
- The instruments are drawn on our bank are received from other banks in the clearing house.
- The amount and number of instruments received are entered in the house book from the main schedule of respective banks.
- The amount of instruments delivered, received and the differences are written on a figure slip provided in the clearing h
Second tire: Principal Branch / Local Office / Main Branch
- The instruments with schedules are arranged branch wise.
- The amount of each schedule received is entered in the house pages of the respective branches.
- The respective house pages are totaled and check the amount amounts of instrument received from all banks.
- The instruments are sent to respective branches with the slip showing total amount and number of instruments.
- The instrument sent to the branches concerned for clearance and advice are collected from them for honored cheques.
The prime asset of any financial Institution consists of its loans and Advances and Other investments. These assets are created primarily out of funds received from the depositors, loans and some other liabilities. The depositors as well as the investors in the institution are interested in real / realistic value of the assets of the institution as often, contradiction is unfolded between written value and realistic value of the assets. The creditors are interested as they want to know the dept of risk on their deposits, while the equity holders desire to be acquainted with viability of their source of income. The management of the institution as well as their supervising authority i.e. The Central Bank evaluates the assets of the institution keeping in view the aforesaid aspects. This evaluation at stipulated intervals is called “Classification of Aÿÿances”.
Classification of Advances
IT is infecting placing all loans and advances under pre‑determined different Heads/Classes basing on the depth of risk each and every loan has been exposed to and to bring discipline in financial sector so far risk elements are concerned credit portfolio of banks. Bangladesh Bank, by issuing a circular, has introduced the self classification system on some norms, with effect from 31.12.1987.
At present Loans and advances are classified under three heads according to degree of risk element involves ‑‑‑‑‑‑‑‑‑ 1 # SUB‑STANDERD 2# DOUBTFUL 3# BAD/LOSS.
Good loans are classified as “UN‑ CLASSIFIED” loans. Naturally, depth of risk is more in Doubtful or Bad Loans than unclassified ones so far realization/ serving is concerned.
Creation of classification
Formally loans used to be classified by Bangladesh Bank on qualitative aspects only. Under the revised system status of loans are determined on the basis of following five criterions:
- Overdue criteria
- Required ‑payment in required period i.e. analysis of payment position of the loan within stipulated period.
- Legal action i.e. analysis of possibility to realize a loan by legal action.
- Limit overdrawn Criteria.
- Qualitative Judgments.
Different Types of Bank Credit and features
- May be short or long term
- Sanctioned for a fixed period of time.
- May be a demand loan repayable on demand.
- Entire sum is debited to loan account of party and credited in this current or savings account for withdrawal as per need of Loanee.
- Where disbursable in installments, amount of each installment is released as above.
- No cheque book is issued.
- No subsequence debit excepting for charging interest or incidental charges.
- Amount repayable either in lump sum or in installments.
- Interest is charged on debit balance at quarterly rests.
Small Loan Scheme
There are three types of Small Loan.
- Personal Loan (only for salaried person.) There are some obligations of salaried person. The person should be the employee of Government, Corporation, autonomous, Multinational Company and any well reported organization.
- Small Business Loan
- House repairing and Renovation Scheme.
- Guarantee of Salaries disbursement authority.
- Spouse Guarantee.
- Post dated cheque.
Small business loan:
- Guarantee of Land lord.
- Agreement Deed
- Somity Certificate.
- Up to date Trade License.
- Stock Report and five years experience.
- Photo ‑Three dimension And /Equitable mortgage.
OVER DRAFT (OD)
Customers having current account are accommodated by overdraft facility against security.
- Permission is given to overview current account up to sanctioned limit.
IT is continuous revolving credit & the borrower may operate any number of times within sectioned limit up to validity period of the limit.
Two types of Overdrafts are allowed SOD (FO) & SOD (General).
SOD (FO) is allowed by making lien (duly discharge) on financial obligations (FO) like FDR,
Other Term Deposit, SDS, PSP, BSP, WEDB etc.
SOD (General): SOD (General) is allowed against assignment of bills of a particular work order/supply order and obtaining adequate acceptable collateral securities. Its interest is charged on debit balance of daily products. And its a short term credit arrangement & renewable.
CASH CREDIT (CC)
Cash Credit is allowed in form ‑ CC (Hypo) & CC (Pledge)
The difference between hypothecation and pledge is that under the‑pledge borrowers goods are placed under bank’s possession under its own lock and key, whereas, under hypothecation ownership as well as possession of the goods remain with the borrower and merely equitably charged the bank under documents executed by the borrower in favor of the bank.
- Accommodation is allowed against primary security to goods.
- Generally availed by traders and Industrialists as working capital,
- It is operational and a separate account.
- Being a revolving credit, can be operated upon any number of times within sanctioned limit and drawing power.
- Interest charged on daily debit balances at quarterly rests
- Continuous loan credit valid for one year and renewable.
Discounting/Purchasing of Bills
- Buying or becoming transferee of bill by endorsement and delivery for value paid is discounting of
- Discounter is holder for value.
- Discounting / Purchasing of bills may be in the form of IBP, LDBIP or FDBP.
- Discounter’s right is absolute on the title of bill and so can sue in his own name.
- Discounter is not bailee.
- Discounter may deal and part with bill.
Loan Against Imported Merchandise (LIM)
Loan against the security of merchandise imported through the Bank may be allowed against Pledge of goods, retaining margin prescribed on their landed cost, depending on their categories and credit restrictions imposed by the Bangladesh Bank. Branches shall also obtain a letter of undertaking and indemnity (as per prescribed format) from the parties, before getting the goods cleared through LIM account.
Lim may be created in two ways
- LIM on importer’s request.
- Forced LIM (under forced circumstances when party fails to retire the documents)
DAILY ACTIVITIES REPORT
Every branch has to prepare a daily activities report for everyday. The daily activities show the daily transaction profile, daily current balance of individual account and individual head wise posting.
Accounting and Financial Techniques of HBL
According to the Banking Companies Act 1991 all the scheduled banks need to prepare an income statement for the financial year ended and Balance Sheet for the starting the affairs of business. Any bank registered in Bangladesh has to furnish the annual report at the end of the year. All the financial statements such as, Income Statements, Cash Flow Statement, Balance Sheet etc. has to prepare in the annual report.
Each branch has to complete SBS-1, SBS-2, and SBS-3 statements. SBS-1 is prepared for monthly and SBS-2 and SBS-3 are prepared for quarterly. These statements show the asset and liability situation of every branch. The main branch collects and accumulates the information and sends them to the statistics department. The bank maintains its accounts on double entry book keeping system which investigates that every business transaction has a two fold aspect, one received the benefit and other gives the benefit. This includes for the every debit there is a correspondence credit.
The Banking transaction is done in three ways. They are as follows:
- Cash transaction
Cash transaction– When the transactions are made by cash they are called Cash transaction. Cash is an asset of the bank. That is why when the bank receives cash it is debited and corresponding credit is made either by creating liability or revenue etc.
Clearing- A customer of the bank may receive cheques from others or issue a cheque to a person who may place the cheque in his account to other bank. In this case the customers account is credited or debited respectively and a corresponding advice is issued to the clearing house to clear the cheques.
Transfer– The transfer of an amount from one account to another does not affect the cash balance until the cash is withdrawn by the transferee. For such a transaction the transferor’s account is debited as he receives money from the bank and the transferees account is credited as he gives the money to the bank.
Office Account and Ledger
The individual accounts of the customer are maintained by the bank in computer with the use of software. The deposits and withdrawals are given input in the respective account showing the net amount receivable or payable by the holder.
The branch handles multifarious transaction everyday. These transactions are classified under different heads such as, assets, liabilities, incomes and expenditure. All accounts are mentioned in the general ledger in computer. These are also input manually.
Some Accounting Treatments
For cash deposit and withdrawal
For transaction of fund
For example a TT of Tk 3000000 is received from Agra bad Branch
# IBTA Agra bad Branch …………………….Dr
Bills Payable TT payable……………………..Cr
# Bills payable TT payable…………………..Dr
Summary of Findings
- HBL has some type of accounts like saving a/c, current a/c, STD a/c, FDR etc.
- They are serving people well by this types of a/c. Actually the business people are their main customer. They also serve individual people by their current a/c. Individual people can also open current a/c here.
- They are specially selling three years and five years SANCHAY PATRA which is published by Bangladesh Bank. They invest money in several places which is useful for the local people of Bangladesh.
- Beside this here have the excellent opportunity to transaction by L/C which is very familiar in the world business market.
- They are very much strong by their loan section. They people who have sanchay patra in this bank they are getting 90% loan from here.
- They update their clients every one year later. Their customers are always happy by behavior of the bank employees.
- They are always making contract with Bangladesh Bank in the entire situation of banking matter.
As per earnest observation some suggestions for the improvement of the situation are given below:
- To attract more clients HBL has to create a new marketing strategy, which will increase the total export Import business.
- Effective and efficient initiatives are necessary to recover the default loans.
- Attractive incentive ‑package for the exporter will help to increase the Export and accordingly it will diminish the balance of payment gap of HBL.
- Different types of training very much required for the bank officials and the bank requires more and better advertisement. Coz today it’s the world of Media. Better advertisement is the key of profitable achievement.
- Computerized banking system and latest communication device are the most important elements for this century. So, for the sound and stable Banking operation, HBL has no alternative but the modernization.
- Foreign exchange operations of other banks are more dynamic and less time consuming. HBL should take some initiative to compete with those Banks.
- Bank can provide foreign market report, which will enable the exporter to evaluate the demand for their products in foreign countries.
- The Bank must be to introduce On Line Banking between all branches.
- Number of branches is very limited of this Bank in our country. They have to increase the number of branches at various key points of the country.