INTRODUCTION
Banks play an important role in the business sector and industrialization of a country. Basically bank take deposit from the customers against interest and lend it to the borrower’s interest for a certain period. Under this sphere, the bank offers different interest notes and other options to there customers to remit and deposit there money. Most of the common between the banks, only the customer service and other facilities vary.
In the backdrop of economic liberalization and financial sector reforms, a group of highly successful local entrepreneurs conceived an idea of floating a commercial bank with different outlook. For them, it was competence, excellence and consistent delivery of reliable service with superior value products. Accordingly, Export Import Bank of Bangladesh Limited started commercial banking operations effective from August 03, 1999.The sponsors are reputed personalities in the field of trade and commerce.
As a fully licensed commercial bank, Export Import Bank of Bangladesh Limited is being managed by a highly professional and dedicated team with long experience in banking. They constantly focus on understanding and anticipating customer needs. As the banking scenario undergoes changes so is the bank and it repositions itself in the changed market condition.
Export Import Bank of Bangladesh Limited has already made significant progress within a very short period of its existence. The bank has been graded as a top class bank in the country through Credit rating. The bank has already occupied an enviable position among its competitors after achieving success in all areas of business operation. This study also focuses on the service of Export Import Bank of Bangladesh Limited, where the in influencing factors are analyzed in order to determine the prerequisites of providing quality service in the banking Industry.
Historical Background of the Bank:
Export Import Bank of Bangladesh Limited is a public listed scheduled bank categorized in private sector and established under the ambit of Bank Companies Act, 1991 and incorporated as a public limited company under the Companies Act, 1994 on June 02. The Bank started commercial banking operations effective from August 03, 1999. The Bank converted its Banking Operations into Islamic Banking based on Islamic Shariah from traditional banking operation in July 01, 2004 after obtaining approval from Bangladesh Bank.
During the span of time the Bank has been widely acclaimed by the business community, from small entrepreneurs to large traders and industrial conglomerates, including the top rated corporate borrowers for forward- looking business outlook and innovative financing solutions. With a few of the Company’s activities and program on the basis of Islamic Shariah, within this period of time it has been able to create an image of responsibility for itself and has earned significant reputation in the country’s banking sector. Within an operative period as eight years, the bank has arrived at a strong financial and business position by expanding its market share compared to its contemporaries and to some extent to the 2nd even 1st generation banks of private sector.
In edition, the Bank has also made a significant contribution to the national economy under the prudent leadership and untiring support of the member of the Board of Directors, who are leading business personalities and reputed industrialists of the country.
As a matter of policy, the Bank conducts its business on the principles of Mudaraba, Murabaha, Bai-Muazzal and hire purchase transaction approved by Bangladesh Bank. The Bank is one of the interest-free Shariah-based Banks in the country and its modus-operandi is substantially different from those of other commercial banks.
OBJECTIVES OF THE STUDY:
The general objective of the study is to analyze the status and dynamic of various function indicators and to find out the pattern and magnitude of relationship that exists among different parameters of EXIM Bank. The main object of the study is to observe the existing system by the EXIM Bank. The specific objective of the study are listed below-
To be experienced about the appliance of the knowledge, gathered during our 4 years of studies (up to graduation level) in practical.
To evaluate the effectiveness of operational management of EXIM Bank.
To identify the problem area of EXIM Bank.
To delve into the existing system of rural credit, innovated and practical by the bank.
T study the requirements of a Bank to yield maximum turnover.
To learn about the vivid operations of EXIM Bank.
To identify the beneficiaries of the credit programs.
To study the working atmosphere of EXIM Bank, as an incentive to the effectiveness of the credit programs.
To provide suggestions and preliminary recommendation for improvement by undertaking indent study in the line of findings.
To learn about the comparative study of EXIM Bank with other banks on the ratio of success on the program.
To have an exposure about the real management situation.
To have an exposure on the financial institution such as banking environment of Bangladesh.
To familiarize with practical lob environment.
To gain experience on different function of the different department of the bank.
To relate the theories of banking with the practical banking.
To examine the profitability and productivity of the bank.
To observe banker and customer relationship.
To face the various situation.
As an internee, I had the opportunity to go through some study on:
Performance of EXIM Bank in Bangladesh.
The latter one allowed me only to go through some reading, where as in the former case, and could work properly according my need. Therefore, my work on EXIM Bank gave me much broader scope for study.
At EXIM Bank I have conducted studies on the following areas:
Objectives of the Bank.
Operational procedures.
Management of EXIM Bank.
Contribution of Exim Bank to national economy.
Social welfare activities of EXIM Bank.
Expansion of business activities.
Customer services of EXIM Bank.
Comparison with other banks.
The report covers the banking service to the customer specially the customer of EXIM Bank of Bangladesh Limited. This has been prepared through extensive discussion with the bank employees and also with the customer. The bank deals with all types of General banking operation, Foreign change and Credit operation to the rules and regulation provide by the Bangladesh Bank.
Key Function of EXIM Bank:
Like other commercial banks like EXIM bank performs all traditional banking business including introduction of a wide range of caving and credit products, retail banking and ancillary service with the support of modern technology and professional management, but the Exim Bank Bangladesh Limited emphasizes its function in export and import trade handing and financing of export oriented industries will enhance wealth, quotes more employment opportunities helps formation of capital and reduces in balance in the balance of payment in the country.
Social Commitment:
The purpose of the banking business is, obviously, to earn profit, but the promoters and the equity holders of EXIM bank are aware of their commitment to the society to which they belong. A chunk of the profit is kept aside and/or spent for socio-economic development through trustee and in patronization of art; culture and sports of the country and the bank want to make a substantive contribution to the society where we operate, to the extent of our separable resources.
Corporation Culture:
This bank is one of the most disciplined Banks with a distinctive corporate culture. Here we believe in shared meaning, shared understanding and shared sense making. Our people can see and understand events, activities, objects and situation in a distinctive way. They mould their manners and etiquette, character individually to suit the purpose of the Bank and the needs of the customers who are of paramount importance to us. The people in the Bank see themselves as a tight knit team/family that believes in working together for growth. The corporate culture they belong has not been imposed; it has rather been achieved through their corporate conduct. The Bank achievement has been possible because of the able leadership; dedicated and committed services provided by all levels of management and staff which all possible because of a good and quality full corporate culture.
Communications Strategy of EXIM Bank:
EXIM Bank is a third generation bank. It has converted into Islami Banking in July 01, 2004 with the approval of Bangladesh Bank. EXIM Bank mainly emphasis on public relation out of four communications strategy. EXIM Bank does following activities for their market promotion and advertising.
1. When they open new branch, send letter to the elite persons, offices and industries in that area for opening account in their bank.
2. Every year they arrange get together for their loyal customer in Dhaka and Chittagong. For that reason EXIM Bank build good relationship with their clients. EXIM Bank also solves the clients problems and they show the procedure the overcoming the problem.
3. They arrange the ceremony of award to the honorable person in every year.
4. They send gift item at the beginning of the year to the senior citizen of the society. These items include pen, dairy, calendar, pen stand, wall clock etc.
5. They also give special gift to the elite person in different occasions.
6. In every month the higher authority of EXIM Bank give information about the market condition and suggestion to the branch manager.
7. The managers of every branch tell present condition of his branch to the head office in every month.
8. Head Office updates deposit and investment guideline to the branch manager.
9. EXIM Bank sponsors different types of National games.
EXIM Bank will soon setup a Research and Development Division and separate marketing divisions, which are, help them to implement better marketing strategy.
Place Strategy of EXIM Bank:
One of the simplest methods of segmenting markets is by their geographic location. People who are living in one region of the country have consuming and purchasing habits that differ from those who live other regions. For example, the usage of woolen sweaters and jackets is higher in north India, due to the extreme cold during cold during the winter months, compared to consumers in south India.
Even in local markets, geographic segmentation is important. A bank branch in the western part of the city may attract account holders from that part of town to the bank. However, the bank branch manager may find it difficult to attract customers from the eastern part of the city due to the location inconvenience. When marketers analyze geographic data, they study sales by region, by state, city size, specific locations and the kind of retail outlets where sales are made.
Its may be seen and unseen it is not necessary that bank perform its activities by branch network. Bank may be deal contacts with a client or corporation in different location out of Bank branch. EXIM Bank has 28 branches in urban and rural area. But most of them are in urban commercial area.
Business Functions:
The Bank operates through its Head Office at Dhaka and 35 branches in Bangladesh. At Dhaka (Motijheel Branch), Panthapath Branch (Dhaka), Dhanmondi Branch (Dhaka), Mawna Chowrashta Branch, Agrabad Branch (Chittagong), Khatungonj Branch (Chittagong), Gazipur Chowrashta Branch (Gazipur), Imamgonj Branch (Dhaka), Gulshan Branch (Dhaka), Sonaimuri Branch (Noakhali), Sylhet Branch ((Sylhet), Nawabpur Branch (Dhaka), Jessore Branch, Asulia Branch, Malibagh Branch, Narayangonj Branch (Narayangonj), Shimrail Branch (Dhaka), Islami Banking Branch (Motijheel Dhaka), Eskaton Branch (Dhaka), Islami Banking Branch (Uttara, Dhaka), Laksham Branch (Comilla), Mirpur Br. (Dhaka), Jubilee Road Br. (Chittagong) & Elephant Road Br. (Elephant Road Dhaka).Rangpur Branch(Rongpur), Bashundhara Branch(Badda),MoulvibazarBranch,(Moulvibazar),Fenchugonj,Branch(Fenchugonj,Sylhet),Savar Bazar Branch (Savar,Dhaka), Karwan Bazar Branch(Karwan Bazar, Dhaka),Comilla Branch(Monoharpur Comilla). The Bank also carries out international business through a Global Network of Foreign Correspondent Banks.
Slogan of the Exim Bank “Local Bank Global Network”:
The word Exim implies the meaning of its operation. Thought it is a new type of banking in Bangladesh, it is familiar with so many countries in the world such as export import bank of united states, export import bank of Japan, despite it is local bank it has a spread of its operation in the whole world through foreign banking. To achieve the desired goal, it has intention to pursuit of excellence at all stages with a climate of continuous improvement. Because it believes, the line of excellence is never ending. It also believes that its strategic plans and business networking will strengthen its competitive environment. Its motto I to provide quality services to the customers all over the world’s the slogan of the bank” Local bank global network” I completely adjustable with its operation.
Mission of Export Import Bank of Bangladesh Limited:
Export Import Bank of Bangladesh Limited mission statement states:
• To be the most caring and customer friendly and service oriented bank.
• To create a technology based most efficient banking environment for our customer.
• To ensure ethics and transparency in all levels.
• To ensure sustainable growth and establish full value of the honorable shareholders.
• To add effective contribution to the national economy.
• Provide high quality financial services in export and import trade.
• Become trusted repository of customers’ money and their financial advisor.
• Display team spirit and professionalism.
• Create sound capital base.
• Enhance shareholders wealth.
Vision of the Export Import bank of Bangladesh limited:
The gist of their vision is “Together towards Tomorrow”. Export Import Bank of Bangladesh Limited, as the name implies, is not a type of Bank in some countries on the globe, but is the first of its kind in Bangladesh. It believes in togetherness with its customers, in its march on the road to growth and progress with services.
Provides the greatest return to the stakeholders by the stakeholders by achieving sound profitable growth.
Be perceived by the customers and employees as the best whenever it operates.
Customer Services and Automation:
“To err human and forgiveness divines” a proverb, the bank believes but the customers will not accept. Because for a service they pay for they want it 100% defect free. So improvement of the customer service should always be their matto altered expectation of the customer have shifted the focus from resource base productivity.
To operate in the globalize environment, the banks future plan is to equip all the units of the bank with the modern technology, such as online computer network telex, fax, e-mail etc. for the service of the customer round the clock, it has a plan to install ATMs suitable places in Dhaka and other cities of the country.
Organizational Development of the Exim Bank:
In the 1450s and 1960s a new integrated type of training originated knows was organizational development. Organizational development is an intervention strategy that uses group processes to focus on the whole culture of an organization in order to bring about planned change, it seeks to change belief attitudes, values structure and practices so that organization can better adapt to technology and live with the fast pace of change.
The general objective of organization development is to change all parts of the organization in order to make humanly responsive, more effective, and more capable of self-renewal.
The organizational development process does not preclude the use of conventional training method, which are useful for some purpose. The management of Exim Bank is also concern about the training for its development. They believe that if the employees will be trained enough they would contribute more for the development of the banking business that is why, they send some employee in every batch. So a number of employee took training from different training institutions such as Bangladesh Bank, National Bank training Institute, Bangladesh Institute of Bank Management.
Organizational Structure of Exim Bank:
The development of on organization depends on the management style of their organizations the same the development if the bank is being occurred only for the good management team. Management of the Exim Bank controlling of all the resources of the organization. To achieve the ultimate objective of making Exim Bank the finest banking of the country, the workforce will be futuristic in outlook, professional in attitude and honest in reputation.
The board of directors wants to repose in the management all executive powers to run this service industry administration and credit portfolio independently without any undue influence from outside. The board formulates policy and give policy directives to themanagement. Transparency and accountability are strictly ensured at all leaves of the bank. Bank operate with integrity, competence and farsightedness abiding by all the principals and provisions laid down in the bank company act 1991, 1994 and the guidelines of Bangladesh Bank. The bank is committed to pursue a straight forward, upright legitimate banking business, never be tempted by the abnormal prospect of large returns to do any thing. It will only do what may be done under the national policy. Management Structure of Exim Bank:
*In the annual report of the year 2000, capital structure did not contain any value for the component of proposed cash dividend, but in the annual report of the year 2001, it was mentioned hat proposed cash dividend was 31.5 million taka for the year 2000. Annual reports 2000, 2001, 2002and 2003.
From the table in the last page, paid up capital was the largest component of the bank’s capital structure for each year though contribution of this component in the capital structure was declining gradually. Two components of the capital structure; proposed issue of bonus share and share premium had no contribution in the capital structure in the year 2000. It is observed that in the year 2003, there is neither proposed issue of bonus share nor proposed cash dividend. Instead of these two things the amount of retained earnings became too large.
The authorized and paid up capital of the bank was Tk. 1000 million and Tk. 225.00 million while it started its banking operation in 1999. The capital and reserve of be bank as on 31st December 2005 stood at Tk. 14000.00 million. The bank also made a 1% general provision on unclassified investments of the bank, which amounted to Tk. 188.22 million.
General Banking
Introduction:
Bangladesh is one of the less development countries. So the economic development of the country depends largely on the activity of commercial banks. So I need to emphasis whether these commercial banks are effectively and honestly performing their functions, assign their duties, and responsibilities.
In thus respect I need to know the general banking function of those Banks as well as the EXIM Bank Limited, is to provide the general banking service.
The general banking department does the most important and basic works of the bank. All other department are linked with this department. It also pays a vital role in deposit mobilization of the branch. EXIM Bank provides different types of accounts, locker facilities and special types of saving scheme under general banking. For proper functioning and excellent customer service this department is divided into various sections namely as follows:
1. Deposit Section.
2. Account Opening Section.
3. Cash Section.
4. Bills and Clearing Section.
5. Remittance Section.
6. FDR Section.
7. Accounts Section.
Deposit:
Deposit is one of the principal sources of fund for investment of commercial banks and investment of deposit is the main stream of revenue in banking business. The total deposit of the bank stood at Tk. 35,032.02 million as on December 2006 against Tk. 28,319.21 million of the previous year which is an increase of 23.70%.
In 2006 Al wadeah current deposit and other account stood at Tk. 3,463.14 million, Bills payable stood Tk. 316.70 million; Mudaraba savings bank deposits stood Tk. 1,684.52 million, Mudaraba term deposits stood Tk. 29,479.56 million and foreign currency deposits stood Tk. 87.91 million.
Assets:
The total asset of the bank stood at Tk. 41,793.54 million as on December 2006 against Tk. 33,716.69 million of the previous year which is an increase of 23.95%.
In 2006 the total assets consist of cash of Tk. 3,319.12 million, balance with other banks and financial institutions Tk. 1,419.34 million, investment (Share & bonds) Tk. 2,233.25 million, investments Tk. 32,641.27 million, fixed asset Tk. 178.43 million, other assets Tk. 2,002.11 million.
Investment:
Total amount of investment of the bank stood at Tk. 32,461.27 million as on December 31, 2006 as against Tk. 26,046.34 million as on December 31, 2005 showing an increase of Tk. 6,594.93 million with growth rate of 25.32%.
In the investment, general investments amounting Tk. 30,567.13 million and other investment amounting Tk. 2,074.13 million.
Investment (Share & Bonds):
The size of investment portfolio in 2006 is Tk. 2,233.25 million while it was Tk. 1,633.03 in 2005.
In year 2005 to 2006, the Investment (share & bonds) increased by 36.75%.
In this investment Government securities amounting Tk. 2,000.08 million and others amounting Tk. 233.17 million.
Import Business:
During the year, the bank opened 25,817 import letter of credit and import volume stood at Tk. 49,596.73 million while it was Tk. 41,432.10 million in 2005. The growth is 19.73% in comparison with previous year.
Export Business:
During the year, the banks export volume stood at Tk. 46,234.59 million while it was Tk. 31,285.37 million in 2005. The growth is 47.78% in comparison with previous year.
Foreign Remittance:
Foreign Remittance of the bank stood at Tk. 343.78 million as of December 31, 2006 against Tk. 222.97 million in 2005.
In year 2005 to 2006, the Foreign Remittance increased by 54.18%.
Performance Evaluation in 2006 of E
A bank is essentially an intermediary of short-term funds. It can carry out extensive lending operations only when it can effectively channels the saving of community. A good banker is one who effectively mobilizes the saving of the community as well as makes such use of saving by making it available to productive and priority sectors of the economy thereby fostering the growth and the development of the nation economy.
Therefore deposit is the blood of bank. From the history and origin of the banking system, we can know those deposit collection the main function of a bank.
Accepting Deposit:
The deposits that are accepted by EXIM Bank like other banks may be classified into,
• Demand deposits.
• Time deposits.
Demand Deposits:
These deposits are withdrawn without notice, e.g. current deposit.
EXIM Bank accepts demand deposit through the opening of,
• Current account.
• Saving account.
• Call deposit from the fellow bankers.
Time Deposits:
A deposit which is payable at a fixed date or after a period of notice is a time deposit. EXIM Bank accepts time deposits through fixed deposit receipt (FDR), short time deposit (STD), bearer certificate deposit (BCD)
etc. While accepting these deposits, a contract is executed between the bank and the customer. This contract will be a valid one only when both the parties are competent to enter into contracts. As account initiates the fundamental relationship and since the Banker has to deal with different kinds of persons with different legal status, EXIM Bank officials remain very much careful about the competency of the customer.
Account Opening Section:
Deposits the life blood of a bank which is invested in a bank through opening an account.
This section deals with opening of different types of accounts. It is also deals with issuing of checkbooks and different deposits books to the different accounts openers. A customer can open different types of accounts through this department such as:
• Current account
• Saving account.
• Short term deposit (STD)
• Fixed deposit (FDR)
After fulfilling above formalities, opens an account for the client and provide the customer with a pay-in-slip book and a checkbook in case of savings account and current accounts.
Types of deposit accounts and their formalities :
Current Account:
In this kind of account a customer can deposit this money and can write one or more check to withdraw their money. For doing this notice is not required. He/she can deposit it whenever he/she wants to and also can withdraw it whenever he/she wants to.
In the Name of Individual:
The client has to fill up a light green account opening form. Terms and conditions are printed on the back of the form. The form contains the declaration clause, special instructions etc. two copies of passport size photograph duly attested by the introducer are affixed with the form.
In Joint Name:
In this type the formality is same as individual account, but in the special instruction clause, either or ‘survivor’ or ‘former or survivor’ clause is marked.
Proprietorship:
In addition the customer has to submit the valid trade license and tax paying identification numbers (TIN) along with the application.
Partnership:
In case of partnership account the banks ask for,
• A copy of partnership agreement (partnership deed).
• A letter signed by all partners contained the following particulars.
• The name and address of all partners.
• The nature of firms business.
The name of the partner authorized to operate the account in the name of the firm, including the authority to draw, endorse and accepting the bills and mortgage and sell the properties belonging to the firm.
The account opening procedure is same but in exception is that the Registration Certificate from the Social welfare Department of Government must be enclosed with application.
Joint account in the name of Minor:
A Minor cannot open an account in his/her own name due to the in capacity to enter into a contract. He/she can open an account in EXIM bank in joint name of another person who will be guardian of him/her.
Saving bank account:
This deposit is basically meant for small-scale savers. There is restriction on withdrawals in a month. Heavy withdrawals are permitted only against prior notice. Interest is paid on these types of accounts.
Short term deposit (STD):
In short term deposit, the deposit should be kept for at least seven days to get interest. The interest offered for STD is less than that of savings deposit. In EXIM bank various big companies, Organization, Government Departments keep money in STD accounts. Frequent withdrawal is discouraged and requires prior notice.
Fixed deposit:
They are also known as time deposit or time liabilities. These are deposits, which are made with the bank for a fixed period, specified in advance. The bank need not maintain cash reserves against these deposits and therefore, the bank offers higher of interest on such deposits.
In EXIM Bank, fixed deposit account is opened in two forms-midterm (MTD), which is less than one year and the other is term deposit, which is more than one year.
Opening of fixed Deposit Account:
The depositor has to fill an account form where in the mentions the amount of deposit, the period for which deposit is to be made and name/names is which the fixed deposit receipt is to be issued. In case of a Joint name EXIM Bank also takes the instructions regarding payment of money on maturity of the deposit. The banker also takes specimen signatures of the depositors. A fixed deposit account is then issued to the depositor acknowledging receipt o the sum of money mentioned there. In also contains the rate of interest and the date on will due for payment.
Term Deposits:
These rates are not negotiable. In this table we can find out the percentage that are given by the bank for specific period of time to the customer.
Loss of FDR:
In case of lost of FDR the customer is asked to record a GD (General Dairy) in the nearest police station. After that the customer has to furnish an Indemnity Bond to EXIM Bank a duplicate FDR is then issued to the customer by the bank.
Renewal of FDR:
In EXIM Bank, the instrument is automatically renewed within seven days after the date of its maturity if the customer does not come to encash the FDR. The period for renewal is determined as the previous one.
Bearer Certificate Deposit (BCD):
The bearer certificate deposit is a document of title similar to time deposit receipt issued by the bank. The document is a bearer document, hence readily negotiable. Whoever presents it to the bank has the right to get the money. There is no prescribed interest rate on such funds but EXIM Bank offers 1% less than the rate of the term deposit of different maturity. The face value of the instrument is the future value. The face is the sum of the principal amount and the interest. It is beneficial to both EXIM Bank and the investor because of the following reasons.
1. The banker is not required to encase the deposit before the date of maturity. Hence it is assured of funs for a minimum period.
2. The investor is assured of ready liquidity. In case of need he can sell the certificate in the secondary market.
As the identification of the owner is not given in the instrument, it is very much popular. During the encasement of the instrument, the excise duty and income tax (10%) is deducted. In case of premature encashment, the principal amount is only paid to the customer.
Dishonor of Cheque:
If the cheque is dishonored, EXIM Bank sends a memorandur (cheque returns memo) to the customer stating the reason in the following way:
• Refer to drawer.
• Not arranged for
• Effects not cleared. May be presented again.
• Exceed arrangements.
• Full cover not received.
• Payment stopped by drawer.
• Payee’s endorsement irregular/required.
• Payees endorsement irregular, require banks confirmation.
• Drawer’s signature differs/required.
• Alterations in date/figures/words require drawer’s full signature.
• Cheque is post dated/differ.
• Crossed cheque must be presented through a bank.
• Clearing stamp required/requires cancellation.
• Addition to bank discharge should be authenticated.
• Cheque crossed ‘Account payee only’.
• Collecting bank discharge out of date/mutilated.
• Amount in words and figures irregular/required.
If the cheque is dishonored due to insufficiency of funds than EXIM Bank charges Tk. 50/= as penalty.
Rules for Passing Cheque:
In order to enable the branches to facilitate their day-to-day transaction smoothly/efficiently/accurately, the following schedule of power for passing of cheque/instrument signature of vouchers shall come into force with immediate effect.
An authorized officer shall pass cheque for less than Tk. 10,000.00 singly after proper supervision in computer print out.
Cheque for Tk. 10,000.00 and above but below Tk. 50,000.00 shall be passed jointly by any two authorized officers after proper supervision by any one-officer computer print out. He will however also ensure that no factitious/wrong credit in the account has been posted on the day by referring to credit vouchers of the day.
Cheque for Tk. 50,000.00 and above shall be passed under joint signatures of two officers, one of whom must be Manager of the branch. The procedures regarding supervision of cheque as at (2) above must however be followed.
All’s suspense’s A/C (debit) vouchers, Sundry Deposit (Debit) vouchers, Credit A/C Debit vouchers, Expenditure A/C vouchers must be signed by the incumbent in-charge of the branch with any other authorized officer. As at the close of Business of the day all transactions (both debit & credit) shall be checked by referring to computer print out and relative cheque/vouchers.
Apart from the above it will also be ensured that the total amount of debit & credit totaling to current A/C, saving, STD & Term Deposit corresponds with the total of cash receipt/payment, transfer clearing ( both outward and inward).
Different types of products offered by EXIM Bank:
Steady money-‘Make your money work for you’
Monthly income scheme:
A monthly income scheme that really makes good sense. A sure investment for a steady return.
Highlights of the Scheme:
• Minimum deposit Tk. 25,000/-
• Higher monthly income for higher deposits.
• The scheme is for a five years period.
• Monthly income will be credited to the depositors account on the 5th of each month.
Objective of the Scheme:
• An account is to be opened by filling up a form.
• The bank will provide to thew customer a deposit receipt after opening the account. This receipt is non-transferable.
• If the deposit is withdrawn before a 5 year term, then saving interest rate will be applicable and paid to the depositor. However, no interest will be paid if the deposit is withdrawn within 1 year of opening the account and monthly income paid to the customer will be adjusted from the principal amount.
A depositor can avail loan upto 80% of the deposit amount under this scheme. In this case, interest will be charged against the loan as per banks prevailing rate. During the tenure of the loan, the MSS will be credited to the loan amount inclusive of interest.
Smart Sever:
What is Smart Saver?
Smart sever is a high return investment plan which helps a customer build up sizeable amount in a period of 5 years. This scheme offers a customer to buy Smart Saver Term Deposit 5 times the invested amount. Smart Saver is a 5 year term deposit scheme.
How does it work?
Smart Saver is available unit wise. One unit of SM is Tk. 25,000. For purchasing one unit SM a customer has to invest Tk. 5000 as down payment and the Bank will provide loan for Tk. 20000 the is repayable monthly in equal installment of Tk. 490 for a period of 5 years. At the end of the 5 years period. The SM term deposit will be encashed and customer will be paid Tk. 45,000.
Flexible Repayment Schedule:
Customer also has the option to repay in 12,24,36,48 and 60 monthly installment.
Maximum Investment:
400 units i.e. Tk. 1,00,00,000 (one crore) in single /joint names.
Terms and Conditions:
1. One unit of Smart Saver Term deposit is Tk. 25,000.
2. During the tenure of the loan the term deposit will be kept in the bank as security.
3. The customer will have to open an account and monthly installment of loan will be debited from the account commencing from 30 days after the loan account.
4. Within the 1st year if the customers fail to repay 3 consecutive installments then only the principal amount of Smart Saver Term Deposit will be encashed and the loan will be liquidated inclusive of accrued interest and the balance paid to the customer. After completion of 1 years, Savings rate will be added to the principal amount of Smart Saver Term deposit. In both cases closing charges will be Tk. 500.
5. For missed installment on due date customer will be charged Tk. 25 per month.
6. In the event of death of customer, the bank shall be entitled to encash the term deposit and adjust the dues first before any refund is made to the nominees /successors.
7. The bank reserves the right to amend the rules and rates as and when deemed necessary.
Super Savings Scheme:
Savings help to build up capital and capital 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 create more awareness and motivate people 0 save, EXIM Bank offers SUPER SAVINGS Scheme.
Terms and Conditions of the Scheme:
1. any individual, company, educational institution, government organization, NGO, trust, society etc. may invest their savings under this scheme.
2. The deposit can be made in multiples of Tk. 10,000/-.
3. The period of deposit is for six years.
4. Any customer can open more than one account in a branch in his name or in joint names deposit receipt will be issued at the time of opening the account.
5. If the deposit is withdrawn before six years term, then savings interest rate +1% will be applied before payment is made. However no interest be paid if the deposit is withdrawn within 1st year.
6. A depositor can avail loan upto 80% of the deposited amount under this scheme.
7. In case of death of the depositor, before the term, the deposit (with interest at savings 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.
Some examples are given in the table below. Any amount can be deposit in multiples Tk. 10,000.
Money Grower: (Monthly Savings Scheme)
Secure your future with ease. A small savings today will provide you comfort tomorrow.
Savings period and monthly installment rate:
The savings period is for 5,8,10 or 12 years. Monthly installment rate is Tk. 500/-, 1,000/-, 2,000/- or 5,000/-.
It is a project of EXIM Bank, which is a scheme like DPS. The savings amount is to be deposited within the 10th of every month. The deposit may also be made in advance. The depositor can have a separate account in the bank for which a standing instruction can be given to transfer the monthly deposit in the scheme account. In case of failure to make the monthly installment in the scheduled time 5% of overdue installment will be charged. The charged will be added with the following months installment and the lowest charges will be Tk. 10. After three years savings in this scheme the deposited (if an adult) is eligible for a loan up to 80% of his/her deposited amount. In that case, interest rate on the loan will be applicable as per prevailing rate at that time. If the depositor fails to pay three installments in a row, then he/she will be disqualified from this scheme.
Generally, withdrawal is not advised before a five years term, but if it is withdrawn before the above term, then interest will be paid at savings rate. However no interest will be paid if the deposit is withdrawn within one year of opening the account. In case the depositor wishes to withdrawn between the 5,8,10 or 12 year period then full interest will be paid for a completed term and savings rate will be applicable for the functional period.
Table: Total savings on the basis of monthly installment and total time.
Multiplus Savings:
Savings help to build up capital and capital is the prime source of business investment in a country. Investment takes the country towards industrialization, which eventually creates wealth. That is why saving is treated as they very foundation of development. To create more awareness and motivate people to save, EXIM Bank offers Multiplus Savings scheme.
Terms and Conditions of the Scheme:
1. Any individual, company, educational institution, government organization, NGO, trust, society etc. may invest their savings under this scheme.
2. The deposit can be made in multiplus of Tk. 10,000.00.
3. The period of deposit is 10 years. But the deposit can be withdrawn at any year with interest. As an example, if deposit is withdrawn after completion of 1 year but before 2 years then deposit with interest will be paid for 1 year only. The same rule will apply for other years. If deposit is withdrawn before 1st year then no interest will be paid.
4. 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 time of opening the account.
5. The depositor can avail loan up to 80% of the deposit under this scheme.
6. In case of issuing duplicate receipt the rules of issuing a duplicate receipt of term deposit will be applicable.
7. (A) in case of death of depositor before the term, the deposit (with interest at savings rate) will be given to the nominee. In the absence of nominee, the heirs/successors will be paid on production of succession certificate.
(B) The nominee may, at his option continue the scheme for the full
term.
Figure: Multiplus savings according to deposit amount.
Education Savings 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. EXIM Bank offers customer ‘Education Savings Scheme’ to assist customer in financial planning well ahead in time for customers children’s higher education.
Terms and Conditions of the Scheme:
1. Deposit of Tk. 25,000/- and multiples there of at a time will be accepted under the scheme.
2. The instrument shall be issued for 7 years, 10 years, 15 years, 20 years term.
3. The deposit is payable at maturity with benefit either in lumpsum or on monthly basis as education allowance for 6 (six) years starting after the completion of respective term.
4. To avail the education allowance, the depositor is required to deposit the receipt or instrument with the bank duly discharged by him with the written instruction to pay the amount to his/her nominated person on monthly installment basis as stipulated in the scheme.
5. Normally, no withdrawal will be allowed before maturity. But if any depositor intends to withdraw his deposit before maturity, the following rules will be applicable:
a. if withdrawal is made before seven years, interest will be calculated and paid as per prevailing savings rate.
b. if withdrawal is made at any time after seven years, the total amount payable at maturity of the immediate preceding term will be paid along with interest for the fractional period at prevailing saving rate.
6. The depositor can avail loan up to 80% under this scheme.
7. A) in case of death of the depositor the proceeds will be paid to the nominee of the depositor or in absence of nomination to the legal successors of the depositor on production of succession certificate.
8. B) if after death of depositor the nominee intends to continue the deposit to get monthly educational allowance for 6 years as admissible under the rules of the scheme, the receipt of the deposit should be surrendered to the Bank duly discharged by the nominee and duly authenticated by the legal guardian on maturity.
9. in case of issuing duplicate receipt the rules of issuing duplicate receipt of term deposit will be applicable.
Closing of an Account:
The closing of an account may happen.
• If the customer is desirous to close the account.
• If the EXIM Bank finds that the account is inoperative for a long duration.
• If the court of EXIM 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 to his/her account less the amount of closing an other 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. The fee for closing of an account is Tk. 25.00 for SB account and Tk. 50.00 for CD or STD account.
Cash Section:
The cash section of EXIM Bank deals with all types of negotiable instrument, cash and other instruments treated as sensitive section of the bank. It includes the vault that is used as the beyond this time, the excess cash is then transferred to Bangladesh Bank. This section perform the following functions:
Cash Packing:
After the banking hour cash is packed according to the denomination. Notes are counted and packed in bundles and stamped with initial.
Allocation of Currency:
Before starting the banking hour all tellers give requisition of money through ‘Teller cash proof sheet’. The head teller writes the number of the packet denomination wise in ‘Reserve sheet’ at the end of the day, all the notes remained are recorded in the sheet.
Bills and clearing section:
For safety and security in financial transaction people use financial instruments like DD, PO, Cheque etc. Commercial Banks duty is to collect these financial instruments on behalf of their customer. This process that the Banks use is known as clearing and collection.
The mail function of this section is to collect instruments on behalf of the customers through Bangladesh Bank, clearing house, outward bills for collection (OBC), inward bills for collection (IBC).
Upon the receipts of the instruments this section examines the following things:
Whether the paying bank within the Dhaka city.
Whether the paying bank outside the Dhaka city.
Whether the paying bank is their own bank.
Outward Bills for Collection (OBC):
Collection of bills, which is beyond the clearing range and collected through OBC mechanism.
Inward Bills for Collection (IBC):
Collection of bills, which EXIM Bank does as an agent is called collection through IBC mechanism.
Clearing :
According through the 37 )2) of Bangladesh Bank Order 1972, which are the member of the clearing house, are called as scheduled bank. The schedules banks clear the cheques drawn upon one another through the clearing house. This is an arrangement by the central Bank where every day representative of the member banks gather to clear the cheques. Banks for credit of the proceeds to the customers account accepts cheques and other similar instruments. The banks receive many such instruments during the form 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 many cheque drawn on this the messengers of other banks would present bank and then at the counter. The whole process of collection and payment would involve considerable labor, delay, risk and expenditure. All the labor, risk, delay and expenditure are substantially reduced by the representative of all the banks meeting at a specified time, for exchanging the instruments and arriving at the net position regarding receipt of payment.
The place where the banks meet and settle their dues is called the clearinghouse. The clearinghouse sits for two times a working day. The members submit the climbable cheque in the respective desks of the banks and vice-versa. Consequently the debit and credit entries are given. At the debit summation and the credit summation are calculated. Then the banks clear the balances through the cheques of Bangladesh Bank. The dishonored cheque are sorted and returned with return memo.
Processing for Collection:
The following procedures are taken for collection:
Remittance Section:
Banks have a wide range network of branches all over the country and offer various kinds of remittance facilities to the public. Telegraphic transfer, mail transfer travelers cheque, and drafts and cheque can do remittance. There are two steps of remittance:
Inland Remittance:
When one banks sends these T.T., M.T., T.C. or cheque to another bank then it will be called inland remittance.
Foreign Remittance:
When a bank got this T.T, M.T, T.C and cheque from outside bank, which is not situated in the home country than it will be called foreign remittance.
Types of Remittance:
Between banks and non banks customer.
Between banks in the same country.
Between banks in the different centers.
Between banks and central bank in the same country.
Between central bank of different customers.
The main instruments used my the EXIM Bank of remittance of funds are:
Payment order (PO).
Demand Draft (DD).
Telegraphic Transfer (TT).
Payment Order (PO):
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 modes such as pay order by cash, pay order by cheque.
EXIM Bank charges different amount of commission on the basis of payment order amount. The bank charges for pay order are given in the following chart:
Demand Draft (DD):
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 n demand. DD is very much popular instrument for remitting money from one corner of a money to another. Commission for DD is 0.15% of the principal amount.
Difference between pay order and demand draft:
There are some difference between pay order and demand draft, which are:
in case of demand draft both the payer and payee need to have accounts. But there is no certain rule for pay order.
PO is used for same clearing area. DD is used for all kinds. DD cannot be done in the same clearing area.
DD is drawn on a certain bank office. But there is no certain rule for PO.
Telegraph Transfer (TT):
A telegraph transfer (TT) is an instruction for transfer of money by telegraph cable and telex from a bank in one center to another bank in a different center. Generally this is an instruction from the importers bank to the exporters bank or some other bank in the exporters country for transfer of money to a named person.
Here the remitter bears the additional charge of telex/telephone. Charge for TT is 0.15% of the principal amount and the additional charge for telex. Telephone is Tk. 50.00.
Traveler’s Cheque:
It is the safest way to carry money from one country to another. It can be change in any country of the world. Even if the travelers cheque (TC) is lost then the holder of the T.C. can inform it to the bank and the bank will inform it to the agencies so that no one can en-cash the TC while issuing a Traveler Cheque (TC) a signature is needed, so that no one can n-cash it except the holder and also another signature is needed in encashment in front of the banker. So TC is the safest way to carry out side the home country. Accounts Section:
This is very much crucial department for each bank of a commercial bank. Records of all the transactions of every department are kept here as well with order respective branches. Accounting department verifies all financial amounts and contents of transactions.
If any discrepancy arises regarding any transaction this department report to the concerned department.
Task of Account Department:
Account department plays a vital role in commercial banking. I private banking sector accounts department of EXIM Bank of Bangladesh Ltd. Performs its tasks properly. The activities of account section are as follows:
Record all transaction in the cash book.
Record all transaction in the subsidiary and general ledger.
Prepare daily fund function, weekly position, periodic statement of affairs etc.
Prepare necessary statement for reporting purpose.
Pay all expenditure on behalf of the bank.
Make salary statement and pay salary.
Branch to branch fund remittance and support for accounting treatment.
Budgeting for branch.
Make charges for different types of duties.
Credit Division
Advance Banking:
Advance banking is one of the significant schemes on the EXIM Bank limited. It contributes a huge portion of income in the EXIM Banks total revenue, provides different types of loan to its borrowers as a lender. The bank operates advance facilities through different branches but the entire loan sanction procedure is controlled and monitored by Head Office.
Certain terms and condition are followed when the loan is sanctioned to the borrowers. Now advance banking is discussed in detail as follows:
Credit Policy:
EXIM Bank is a new generation Bank. It is committed to provide high quality financial services /products to contribute to growth of GDP of the country through stimulating trade & commerce, accelerating the pace of industrialization, boosting up export, creating employment opportunity for the educated youth, poverty alleviation rising standard of living of limited income group and over all sustainable socio-economic development of the country.
To achieve the aforesaid objective of the bank, credit operation of the bank is of paramount importance as the greatest share of total revenue of the Bank is generated from it, maximum risk is centered in it and even the vary existence of Bank depends, on prudent management of its credit port-folio. The failure of a commercial batik is usually associated with the problem in credit portfolio and is less often the result of shrinkage in the value of other assets. As such credit portfolio is not only features dominants in the assets structure of the Bank also.
To provide a broad guide line for the credit operation towards achieving the objective of the ban, for efficient and profitable development of its mobilized resources and to administer the credit portfolio in the most efficient way, a clearly defined, well planned, comprehensive and appropriate credit policy and control guidelines of the bank is a prerequisite.
In view of the above, this credit policy and guidelines of the bank has been prepared subject to amendment, revision, re-adjustment and refinement as and when required by the bank.
The purpose of this policy statement, which replace all previous ones, is to set out the credit policies of the Board of Directors. The policies are described under.
Credit principles.
Global credit portfolio limits.
Types of credit activities.
Credit administration.
Credit Principles:
The following are the principles to be adopted for lending authority, approval, monitoring and control on a basis consistent with the global operational objectives and business strategies of the bank.
General :
The bank will provide suitable credit services and products for the markets in which it operates.
Loans and advances shall be normally be financed from customer deposits and not out of temporary funds or borrowing from other Bank. Credit will be allowed in a manner, which will in no way compromise the bank’s standards of excellence and to customers who will complement such standards. All credit extension must comply with the requirements of the Bank’s Memorandum & Articles of Association, Banking Companies Act 1991 as amended from time to time, Bangladesh Bank’s instruction and other applicable rules and regulations.
The authority structure extension of credit should enable effective adaptation to changes in the economic, technological, regulatory and competitive environment within which the Bank operates.
Performance :
The conduct and administration of the loan portfolio should contribute. Within define risk limitation, to the Bank’s achievement of portfolio growth and superior return on the hank’s capital.
Credit advancement shall focus on the development and enhancement of customer relationship and shall be measured on the basis of the total yield for each relationship with a customer (on a global basis), through individual transactions should also be profitable.
Credit facilities will be extended to those companies/persons, which can make best use of them, thus, helping to maximize our profits as well as economic growth of the country. To ensure achievement of this objective it will base its leading decision mainly on the borrower’s ability to repay. If credit facilities are grantee on a transaction one-off basis the yield from the facility should be commensurate with the risk.
Loan Pricing:
Interest on various lending categories will depend on the level of risk and type of security offered. It should be kept in mind that late of interest is the reflection of risk in the transaction. The higher is the risk the higher is the interest rate. Interest may be reviewed at least once in 6 (six) months and more often when appropriate. Fixed interest rate should be discouraged, preferably all rates should vary with cost of funds fluctuation based on a spread for profit.
Effective yield can be enhanced to the extent borrowers are required to maintain deposits to support borrowing activities. Commitment fee and service charges should further improve yield where possible. All pricing of loans should however have relevance with the market condition and be approved by the executive committee/Managing Director from time to time.
Administration/Monitoring: The administration of the loan process shall ensure. Compliance with all laws and regulations at both local and global levels including bank policy as set out in this document and the Banks credit manual/circulars.
Proper analysis of credit proposal is complex and requires a high level of numerical as well as analytical ability and common sense to ensure effective understanding of the concepts and thus common sense. To ensure effective understanding of the concepts and thus to make the overall credit portfolio of the bank healthy proper staffing of the credit departments shall be done through placement of qualified officials who have got the right aptitude, formal training in finance, credit risk analysis, bank credit procedures as well its required experience. Where repayment and interest servicing performance of a credit deteriorates shall be identifies at an early state and closely monitored to avoid low losses.
Loans/facilities, where appropriate and related security shall be monitored and reviewed by a separate unit unconnected with the credit approval process on a regular basis in order to assess the collect ability of the loan and effectiveness of the security. This unit will report to the Managing Director or his designated officer.
Exception of Loan Policy:
It is recognized that there will be exception to the state policy, which can be justified. However, the board should approved these by the Executive Committee or and the circumstance must be fully documented in the credit file.
Global Credit Portfolio Limits:
The nature of credit portfolio shall be governed within guidelines set down by Head Office and regulatory requirement. These guidelines will however be consistent with the global limits identified below for the banks credit portfolio in aggregate. Criteria for exposure to customers are set as under. Total Facilities :
The aggregate of all cash facilities shall not exceed 80% of customer deposit. It is further government by the statutory and liquidity reserve requirement of Bangladesh Bank.
Term Facilities:
Aggregate long-term facilities shall not exceed 20% of the total credit portfolio. Facilities shall not be allowed for a period exceeding 5 (five) years. Any exceptions will require the approval of the board of directors.
Country /Cross Border Exposure:
Limits to be established by the board for individual country as well as for aggregate bank credit exposures to different countries. These times are to be reviewed from time to time with due regard to the political and economic environment in each country. The country exposure limits may be utilized up to maximum amounts for different mature, as follows:
For maturity up to one year: 100%
For maturity up to two year: Maximum 50% of the limit.
For maturity up to three year: Maximum 25% of the limit.
For maturity beyond three year: Maximum 10% of the limit.
For exceptions, approval is required from the Board of Director.
Exposure to Customer Groups:
Credit facilities in aggregate extended to any one customer group shall not normally exceed 15% of the capital fund or Tk. 10 (ten) crore which ever is lower. However, Board of Directors may relax these limits in deserving cases. All proposals submitted to Head Office will also be required to indicate the extent of Banks global exposure to that customer group.
Sector Wise Allocation:
Sector wise allocation of credit shall be made annually with the approval of Executive Committee/Board of Directors. This will be reviewed from time to time.
Security :
Security accepted against credit facilities shall be properly valued and affected in accordance with the laws of the country in which the security is held. An appropriate margin of security will tic taken to reflect such factors as the disposal costs or potential price movements of the underlying assets.
Only one factual study has been made of the extent to which term loans be divided among more than one banks. That study was part of the Federal Reserve business loan survey of 1955. At that time about 30 percent of outstanding term loans conceited of individual loan contract under which the credit had been extended by more than one Bank. The use of multiple participation may arise in either of three kinds of Circumstances.
First, a small Bank may be faced with a credit demand that is in excess of its legal lending limit, in which case it may seek in dispose of the ‘over line’ credit to its city correspondent. This form of ‘over line’ lending is way of accommodating large local customers while at the same time avoiding, the commutative risk of losing them to some other city lender. It is generally understood implicitly that a city correspondent will not solicit the business customers of its country correspondents without their permission.
Second, Large Banks, hared pressed for reserve funds, often sell portions of their term and, other loans to country correspondents. The extent to which this practice is followed varies with the tightness of money markets. In recent years New York has often been hard pressed for funds while country financial institutions have still had unused lending capacity.
Third, some financial institutions prefer participation in lending in order to improved their credit diversification. This, circumstance has arisen particularly during those periods in which, the demand for special kinds of loans in some areas of the country has been so large that the local institutions have become overburdened with this one type of credit. For example-Banks in the southwestern state sometimes have encountered heavy demands, for petroleum industry loans. Large scale syndicates or pools were often formed for the granting of such loans.
Types of Credit Activities:
Depending on the various nature of financing all the lending activities has been brought under the following major heads.
Loan (general):
Short term and long term loans allowed to individual/firm/industries for a specific purpose but a definite period and generally repayable by the installments fall under this head. This type of lending are mainly allowed to accommodate financing under the categories.
a) Large and medium scale industries.
b) Small and cottage industries, very often term financing for agriculture and others are also included here.
House Building Loan (General):
Loans allowed to individual /enterprise construction of house (residential or commercial ) fall under this of advance. The amount is repayable by monthly installment within a specified period, advances are known as loan (HBL-GEN).
Introduction:
House building loans is one of the common credit policies of Banking sector. There was only one institution in our country, which is specified in HBFC, Bangladesh House Building Finance Corporation. Now a days, besides this bank many commercial bank and leasing company provides house building loan to the customers.
Interest Rate:
Currently the interest rate is 15%. But it may changes from time to time depending on the market interest rate. From the customer point of view this change have an adverse impact on the customers. Some times if they have to bear a higher interest on the principal amount which causes a great burden on them.
But from the bank’s point of view this is very good to maintain the mark-up. Because when the market interest rate raises 1% than they are getting 1% less mark-up. So for, these clauses of increasing interest rate they can have the same markup by increasing the interest rate changing on the clients. So this is very effective for the Bank to maintain markup.
Disbursement Procedure:
The disbursement procedure or timing of disbursement depends on the client or the progress of work of the construction. The disbursement can be made two or three stages or more depending on the above conditions.
Made of Repayment:
The loan shall be adjustment by monthly installment basis. The repayment will stall from 6 (six) months, of the date of first disbursement (it may change according to the terms and conditions or the agreement).
Collateral:
The land and the construction o the land are normally given as collateral. It may changes:-
The documents to be obtained:
a) DP note.
b) Letter of disbursement.
c) Letter of installment.
d) Letter of guarantee.
Cash Credit (Pledge):
Financial accommodations to individual /Firms for trading as well as for wholesaler to industries as working capital against pledge of goods as primary security fall under this head of advance. It is also a continuous credit and like the above allowed under the categories.
a) ‘Commercial Lending’
b) ‘Working Capital’.
The formalities for opening cash credit:
The intending cash credit holder should submit the following documents and being fulfill properly.
stock report, rent receipt.
trade license
up to date income tax clearing certificate
charge documents
letter of continuity
letter of arrangement
DP (demand promissory ) note
letter of guarantee
letter lien
limit sanction advice
non-encumbrance certificate.
Observing the documents the bank authority prepare a CC proposal from that contains the following information.
Transaction with CD account by the client.
Allied deposit with SB/STD account.
Number of adjustment (S) (applicable only for renewal of CC).
Recycling: it is the ratio of total credit summation to the limit. If the ratio is higher it is better from bankers point of view.
Turn over in the account.
Based on the above mentioned information the dealing officer of the loans and advances department prepare recommendation about the prospect of granting the CC loan to the client.
Hire Purchase:
Hire purchase is a type of installment credit under which the higher purchaser agrees to take the goods on hire at a stated rental. Which is inclusive of the repayment of principal as well as interest for adjustment of the loan within a specified period.
Lease Financing :
Lease financing 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 the time against payment or rent. It is a term financing repayable by installment.
Lease Finance of RYJM Bank Ltd. :
The lease financing is major financial instrument in banking sector. As the bank is a leading financial institution in the financial sector in our country.
Consumers Credit Scheme of EXIM Bank Ltd.:
Introduction:
Consumer’s Credit Scheme is a major program of EXIM Bank Ltd. In CCS the bank engage an agent who works on behalf of the Bank. This agent performs all the works prior to the sanction of the CCS. They do the inspection and make all the documents necessary for CCS. For this purpose they get commission.
Clients:
The clients are service holders and businessmen. Service holders can be Govt. and private. In case of govt. officer, the main client must be an officer in rank.
Products:
Electronic goods, cars jeeps, microbus, mobile telephone, T & T telephone etc.
Interest Rate:
Interest rate is 16%, 2% risk fund and 2% service charge.
Down Payment:
Down payment is 20% of the CCS amount. It is considered as equity. The payment is 50% for vehicles.
Maturity and Loan Limit:
1-2 Years for electronic goods. Here limit is 1,00,000/-, 3 years for vehicles. Here limit is 3700.000/-.
The documents, which is demands by the bank:
Two letters of guarantee.
Bank statements the assets and liabilities of the clients.
Assurance letter from the organization where lie is currently working.
Trade license for the businessman or Articles of Association.
Non judicial stamp amounting Tk. 300/-.
Penalties:
2% penal interest is charged in the residual amount.
Recovery Rate:
Recovery rate is 93%.
It is a special credit scheme of the purchase of consumers’ durable to the fixed income group to raise standard of living. The customers allow the loans on soft terms against personal guarantee and deposit of specified percentage of equity. The loan is repayable by monthly installment within a fixed period.
SOD (Secured Overdraft) General:
Advance allowed to individual/firms against financial obligation (i.e. lien on FDR/PSP/BSP/insurance policy share etc.). This may or may not be a continuous credit.
SOD (Secured Overdraft) Others:
Advance allowed against assignment of work order or execution of contractual works falls under this head. This advance is generally allowed for a definite period and specific purpose i.e. it is not a continuous credit. It falls under the category ‘others’.
SOD (Secured Overdraft) Export:
Advance allowed for purchasing foreign currency for payment against L/Cs (Back to Back) where the exports do not materialize before the import payment. This is also an advance for temporary period, which is known as export finance and under the category ‘commercial lending’.
PAD (Payment Against Document):
Payment made by the bank against lodgment of shipping documents of goods imported through L/C falls under this head. It is an interim advance connected with import and is generally liquidated against payments usually made by the party for retirement of the documents for release of imported goods from the customer’s authority. It falls under the category ‘commercial bank’.
LIM (Loan Against Imported Merchandise):
Advances allowed for retirement of shipping documents and release of goods imported through LIC taking effective control over the goods by pledge in go downs under banks lock & key fall under this type of advance. This is also a temporary advance connected with import, which is known as post-import financing, falls under the category ‘commercial lending’.
LTR (Loan Against Trust Receipt):
Advance allowed for retirement of shipping documents, release of goods imported through LIC falls under trust with the arrangement that sale proceed should be deposited to liquidate within a given period. This is also a temporary advance connected with import, which is known as post-import financing, falls under the category ‘commercial lending’.
IBP (Inland Bill Purchased):
Payment made through purchase of inland bills/checks to meet urgent requirement of the customer falls under this type of credit facility.
This temporary advance is adjustable from the proceeds of bill/checks purchased for collection. It falls under the category ‘commercial lending’.
Export Cash Credit (ECC):
Financial accommodation allowed to customer for exports of goods falls under this head is categorized as ‘Export Credit’. The advance must be liquidated out of export proceeds within 180 days.
Foreign Documentary Bill Purchased (FDBP) (Foreign):
Payment made to a customer through purchase/negotiation of a foreign documentary bills falls under this head. This temporary advance is adjustable from the proceeds of the shipping /export documents. Its falls under the category ‘Export Credit’.
FDBP (Foreign Documentary Bill Purchase ) (Local):
Payment made against documents representing sells of gods industries, which are deemed as export, and which is currency/foreign currency falls under this head. This temporary liability is adjustable from proceeds of the bill.
LDBP: Payment made to a customer through purchase of inland documentary bills. This temporary liability is adjustable from proceeds of the bill.
Credit Administration:
The principle elements of bank credit administration are as follows:
a) Credit approval.
b) Credit file maintenance.
c) Facility evidence maintenance.
d) Credit monitoring and review.
• Credit Approval:
The primary factor determining the quality of the Bank’s credit portfolio is the ability of each borrower to honor, in a timely basis, all credit commitments made to the bank. The authorizing credit personnel period to credit approval must accurately determine this.
The credit approval process shall be governed by the bank credit policy framework, which can be summarized under the following:
Credit Evaluation Principles:
To have the optimum returns from the deployed funds in different kinds of lending, more emphasis shall be given on refund of loans and advances out of funds generated by the borrowers from their business activities (cash flow) in read of realization of money by disposing of the securities held against the advance which is very much uncertain and time consuming.
Accordingly the credit evaluation principles must be adhered to at every level of approval.
The lending risk analysis tool containing analysis of both the business risk and security risk provides overall rating of risk in a particular to in under the following lending process:
• Assess risk of failure to repay.
• Decide whether to accept or reject a loan proposal.
• Set price and items.
• Obtain sanctioning documents and disburse loan.
• Monitor performance and ensure repayment /recovery.
The most prominent and part or the process is assessment of risk of failure to repay which deals with the overall lending risk combining the business risk and the security risk in a matrix derived out or six segments of the business risk.
Suppliers risk.
Sales risk.
Performance risk.
Resilience risk.
Management competence risk.
Management integrity risk.
The overall matrix provides four kinds of lending risk for decision makers:
Good
Accepted
Marginal
Poor
Which are detailed in the lending risk analysis circular/credit manual. Bank shall not approve any lending having an overall risk as ‘managerial’ and ‘poor’ without proper justifications-except for renewal of existing facilities under compelling circumstance or for other reason such as salvage, which shall also contain convenience future improvement of the position. All credit applications rated ‘Poor’ shall require approval of the board regardless of purpose, tenor or amount. Credit Risk Evaluation:
The importance of a detailed and complete credit risk assessment for each facility and customer relationship cannot be over emphasized. The steps that should be followed in carrying out such an assessment are set out in the bank credit manual and in Head Office circulars issued from time to time. All proposals of credit facilities must be supported by a complete analysis of the proposal credit. A comprehensive and accurate appraisal of risk in every credit exposure of the bank is mandatory. No proposal can put up for approval unless there has been a complete written analysis. It is the absolute responsibility of the proposal officer to ensure that all necessary proposal documentation is collected before the facility request is sent to the sanctioning officer.
Lending Authority:
Assure proper and orderly conduct of the business of the Bank, the Board of Directors’ will empower the Managing Director and other Executives of the Bank to lend up certain amount under certain terms and conditions at their discretion. The lending officer is broadly categorized as follows:
• Managing Director
• Deputy Managing Director
• Executive Vice-President Asstt.
• Senior Vice-President
• Vice President
• Senior Asstt. Vice-President
• Asstt. Vice-President.
The amount and scope of each officers lending authority is a function of the amount and extent of authority required by the officer to carry out his/her responsibilities to the Bank and its clients ma prudent, effective manner. It must be emphasized that an officer will not be delegated lending authority only on the basis of his position. In other words, an officer does not automatically get lending authority by virtue of his corporate and /or functional title. Specified lending authority will be delegated by the Managing Director to various Executives after taking into consideration his proven credit judgement, knowledge and experience. The amount of lending authority approved by the board for various executives form the upper limits of the authority that may be delegated to an officer holding corporate title. Each individuals lending authority will be delegated to him in writing. The Managing Director with the Executive Committee/Board will review all lending authorities periodically.
Approval under Dual Signature:
All approval of credit facilities must be conveyed under dual signature, and ideally both the signatures must have the lending authority. If however, two lending officers of the required lending authority are not available, one of the signatories must have the lending authority.
New Product Development
The new product can be developed in new market or existing market. New product can also be launched in improved market or in the new market. Innovation a product essentially means developing a product resulting in an increase in the product line. These enable diversifying business risks, continuing life cycle of a product and also ensures profits.
Foreign Exchange
Foeign Exchange Department:
One of the largest businesses carried out by the commercial bank is foreign trading. The trade among various countries falls for close link between the parties dealing in trade. The situation calls for expertise in the field of foreign operations. The bank, which provides such operation, is referred to as rending international banking operation. Mainly transactions with overseas countries are respects of import, export and foreign remittance come under the preview of foreign exchange transactions. International trade demands a flow of goods from seller to buyer and of payment from buyer to seller. In this case the bank plays a vital role to bridge between the buyer and seller.
Foreign exchange department of EXIM Bank is one of the most important department of all departments. This department handles various types of activities by three separate sections:
1. Import section.
2. Export section.
3. Foreign remittance section.
Import Section:
The function of this section is mainly to deal with various components such as :
Letter of credit
Payment against document (PAD)
Payment against trust receipt (PTR)
Loan against imported merchandise (LIM).
Formalities for opening foreign currency (FC) account:
The AD may without prior approval of the Bangladesh Bank open Foreign Currency (FC) account in the name of:
1. Bangladesh national residing abroad.
2. Foreign nationals residing abroad/in Bangladesh and also foreign firms. Registered abroad and operating in Bangladesh and abstract.
3. Foreign missions and their expatriate employees.
4. Resident of Bangladesh nationals working with the foreign/international organization operating in Bangladesh provided their salary in paid in foreign currency.
Papers Required:
Application duly billed in and signed.
Photograph (two copies)
Passport photocopy
Work permit from board investment (in case of foreign nationals).
Foreign exchange earned through business done or service rendered in Bangladesh cannot be put into these accounts.
No payment in foreign currency (FC) may be made to any resident in Bangladesh out of the foreign currency (FC) account.
All citizens of Bangladesh and other persons are residing to Bangladesh who became the owner of any foreign currency (FC).
Formalities for Cash Assistance:
Eligible Party:
• The party , which is engaged making fabrics locally from, threads and used in the readymade garments, which are finally, exported abroad.
• The party which are engaged making fabrics locally from, thread and to supply the fabrics to the manufacturers of readymade garments.
Papers Required:
1. Application (as per format provided of Bangladesh bank).
2. Cash memo/delivery challan/letter of credit through which the party procure thread. Up to 3.00 (three) lack party can purchase thread by cash. Other cases thread will be procured by cheque/ draft/P.O. or L/C.
3. Delivery challan
4. Copy of L/C for providing fabrics to garments
5. Copy of commercial invoice /truck receipt /delivery challan
6. Copy of exporters L/C
7. PRC
8. Certified invoice
9. Certificate bill of lading or air way bill
10. Certified of back to back L/Cs open against master L/C.
Rate of Exchange:
It means the price of one currency expressed in terms of another currency. Rate of exchange is the rate by which the relation among different foreign currencies is established in terms of local currency of that country. Value at which one countries currency can be converted into another’s country.
In exercise of the power conferred by section three of exchange regulation ACT 1947, Bangladesh has issued license to certain bank to deal in foreign exchange is called authorized dealer.
1. Spot rate: it is quoted for transaction where the foreign currency bought or sold is to be received or delivered immediately. The current rate of exchange quoted in the foreign exchange market.
2. Forward rate: when a rate is applied to a future date it is called forward rate at which foreign exchange can be sold or bought for delivery at a future time.
3. Cross rate: the rate of exchange quoted expressing the quotation for any two currencies in term of a third.
4. SWAO: sport rate against forward purchased or a spot purchase against forward rate.
5. Pence rate/direct quotation: rates are quoted in term’s foreign currency per one unit of foreign currency.
6. Currency rate/indirect quotation: rates are quoted in terms of foreign currency per one unit of home currency.
7. Buying rate: authorized dealer applies this at the time of purchasing/negotiation of export document and payment against TT.MT, check and drafts required from abroad.
8. Selling rate: authorized dealer applies this at the time of lodgment of import documents, realization of LC margin from importer and other foreign exchanges transaction on overseas bank.
9. Telquel rate: This is the rate when rate of foreign currency is quoted according to the since of the bill.
10. Forward rate at a discount: when forward rate is higher than that of spot rate.
11. Forward rate at a premium: when for ward rate is lower than that of spot rate.
Import Procedure:
To import a person should be competent to be an ‘importer’ according to import an export control act 1950, the office of chief controller of import and export provides the registration (IRC) to the importer. After obtaining this person has to secure a letter of credit authorization from Bangladesh Bank. And then a person becomes a qualified importer. He is the person who requests or instructs to open an LC he is also called opener or applicant of the credit.
Importers applications for LC limit margin:
To have an import LC limit an importer submits an application to department of EXIM Bank. Furnishing the following information:
full particulars of bank account.
nature of business
required amount of limit
payment terms and condition
goods to be imported
offered security
repayment schedule.
Now if the officer things the application to open an LC is not fit, the following entries are given to realize the LC, charges postage and LC margin.
Presentation of the documents:
The seller being satisfied with the terms and the condition of the credit proceeds to dispatch the required goods to the buyer and after that has to presents the documents evidencing dispatching of goods to negotiation bank. After receiving all the documents the negotiation bank when checks the documents against the credit. If the documents are found in order the bank will pay and accept are negotiated to EXIM Bank checks the documents and the documents are stated below:
Invoice
Bill of lading
Certificate of deposit
Packing list
Weight list
Shipping advice
Non negotiable copy of bill of lading
Bill of exchange
Per shipment inspection report
Shipment certificate.
Following paper required for new imported while opening on LC:
The following papers are required when opening a new LC:
Valid import registration certificate (IRC)
Trade license
TIN certificate
VAT certificate
Three (3) copies declaration by the importer that they have paid /submitted return of income tax of processing last year.
Membership certificate of chamber of commerce industry.
According to be maintained with the bank.
Membership certificate BGMEA (in case of garment Ind.)
Banded ware house license (in case of export oriented industry)
LCA form
Insurance cover note
Proforma invoice /indent.
Application for opening of LC duly billed in and signed
IMP form duly signed
Memorandum articles of association of the company
Certificate of incorporation with RJSC
Certificate of board of directors.
Resolution of commencement
Resolution of board of directors
Confidential report to be obtained from their previous bank
Report/inquiry to be obtained from CIB of bank
Credit reports to be obtained from correspondent bank, internationally reputed agency introspect to the supplier.
LRA to be maid in case of big liability.
Payment procedure of the import documents:
This is the most sensitive tusk of import department. The officials have to be very much careful while making payment. This tusk constitutes the following:
1. Date of payment: Usually the payment is made within seven days after the documents have been received. If the payment is become deferred the negotiation bank may claim interest for making delay.
2. Preparing sell memo: A sell is made at Bangladesh currency to the customer. As TT and OD is paid to the international department (I.D.) the deference between these two rates in exchange trading. Finally an inter branch exchange trading credit advice is sent to ID.
3. Transmission of telex: A telex is transmitted to the correspondent bank insuring that payment is being made.
Advising a LC:
It is customary to advice a credit to the seller through an advising bank. Advising through a bank is a proof of apparent authenticity of the credit the beneficiary to whom it is addressed. Before forwarding /advising the credit to the seller under appropriate forwarding coverage the advising have to verify the signature of the opening bank and ensure that the terms and conditions of the credit are not violation of the existing exchange controlled regulation and other regulations. Relating to export. Very often advising bank receives request from issuing bank to add their confirmation while advising credit to the beneficiary. The advising can do it if there is prior arrangement between advising and issuing bank or if it feels that the issuing is a reputed a reliable institution and good enough to discharge its obligation. It is also seen that some times’ banks receive credit addressed to them containing the name of the beneficiary in the body of the credit. In such case the advising bank prepares fresh letter of credit to the beneficiary containing all the terms and conditions of the original credit and signature by themselves.
Amendment of LC:
The buyer and seller the terms and conditions of a credit mutually before opening the same and the involved parties are expected to comply with the settle terms and conditions in course of performing their respective roles in the operations of a credit. But in real situation parties involve to a LC, particularly the seller and the buyer can not always satisfy the terms and condition in full as expected the time of setting the terms and conditions due to some obvious and genuine reasons. The roll of establishing a credit might gate frustrated. So in order to avoid such situation the credit should be emendate. In case of revocable credit it can be amended and cancelled be the issuing bank at any moment and without prior notice to the beneficiary. But the case of the issuing bank confirming bank (if any) and the beneficiary. Partial expectance of amendment is not also effective without the agreement of all the above named parties. If a bank issues the services of another bank to give the credit advice to the beneficiary it missed also use the services of the same bank what any amendments must be completed and accurate. If unclear or incomplete instructions are even to emend a credit, the requested to act on such instructions will give preliminary notification to the beneficiary.
Import financing:
Letter of Credit (LC) Facilities:
Bank in favor of exporter on behalf of the importer issue LC. LC is issued through import goods for trading and manufacturing process.
LIM:Loan against import merchandise (LIM) is post import finance which is granted in favor of the importer to retire shipping documents against import of goods. This is generally repaid within thirty days.
LTR:Loan against trust receipt (LTR) is post import finance extended to the importer of goods. Importer issues a trust receipt favor of bank and takes possession of the goods markets and sells the products and repay within the stipulated period.
Export Procedure:
The export form Bangladesh is subject to export trade control exercise by the ministry of commerce through chief controller of export and imports (CCI & E) no exporter is allowed to a export any commodity permissible for export from Bangladesh unless he is registered with CCI & E and holds valid export registration certificate (ERC). The export registration certificate is required to be renewed every year. The export registration certificate (ERCO is to be incorporated on EXP forms and other documents connected with export).
The formalities and procedure are enumerated as follows:
Obtaining exports LC: To get export LC form exporter issued by the importer.
Submission of export documents: Exporter has to submit all necessary documents to the collecting bank after shipping of goods.
Checking of export documents : After getting the documents banker used to check the documents as per LC terms.
Negotiation of export documents: If the bank accept the document and pay the value draft to the exporter and forward the document to issuing bank that is called a negotiation bank. If the bank does buy the LC then the bank normally act as collecting bank.
Realization of proceeds : This is the period when the issuing bank has realized the payment.
Reporting to the Bangladesh Bank: As per instruction by Bangladesh bank the bank has to report to respective department of Bangladesh bank by mentioning latest payment.
Issue to proceeds realization certificate (PRC): Bank has to issue proceed realization certificate of export LC to the supplier/exporter for getting cash assistance.
Following papers to be obtained from the new export while they desire to make export through EXIM Bank:
1. ERC
2. Trade license
3. Membership certificate from chamber /EPB
4. Account to be maintained with bank
5. Export LC contract
6. EXP form to be certified
7. TIN
8. VAT
9. Memorandum and article of association of the company
10. Confident credit report to be obtained of the importer
11. Registered partnership deed (In case of partnership concern).
a) ECC:
Export cash credit (ECC) is extended to the companies who are involved in exporting goods and services. Export cash credit (ECC) is provided to procure raw materials, packing list, wages, salary, utility etc. the quantum of export cash credit (ECC) is usually 75% of export LC.
b) PC:
Packing credit (PC) is granted to export oriented industry usually garment industry to finance their expenses for utility, salary, wages etc. the quantum of packing credit is usually 10% to 155% of the value of the export LC.
c) BTB:
Back to back credit facility (BTB) is issued to import raw materials for export oriented industry usually of garments. The primary security of back to back credit (BTB) is export LC usually the quantum of BTB LC is 75% of the value of master LC.
d) FDBP:
Banks purchases exports bills to the working capital needs to the customer.
The documentary letter of credit (LC):
The letter of credit is a credit compact where by the buyers bank on behalf of the buyer is committed to place and agreed amount if money at sellers disposal under some agreed terms and conditions.
Since the agreed conditions include amongst other things the presentation of some specified documents the letter of credit is called documentary letter of credit. The UCPDC published by international chamber of commerce (1993) revision, publication no: 500 defines documentary credit.
‘Any agreement however named of described where by a bank (The insuring bank) acting at the request and on the instruction of the customer (The applicant) or on its own behalf’.
Parties to a letter of credit (LC):
1. Import /buyer/applicant
2. Export/seller/supplier
3. Issuing bank /operating bank
4. Advising bank/notifying bank
5. Confirming bank
6. Negotiating bank
7. Paying bank/reimbursing bank.
• Importer: The persons who request the issuing bank open a LC.
• Exporter: The party in whose favor LC is established
• Issuing bank: The opens issue LC.
• Advising bank: The bank advice for LC.
• Confirming bank: The bank, which acts confirmation to the credit.
• Negotiation bank: The bank, which negotiates the bill.
• Paying bank: The bank, which effects reimbursements.
All the instructions of the opening bank, advising may confirm negotiates the documents and also be the reimbursing bank under the credit. The reimbursing may be different and even may be located in the third country. Intermediary bank is usually the foreign correspondent of the importers bank through which the LC is advice to the suppliers if the intermediary of the importers bank simply advises/ notifies the LC to the exporter without any obligation on its part, it is called as advising bank. If it adds undertaking to honor the credit while advising the same to the beneficiary, it became the confirming bank.
Different type letter of credit (LC):
1. Revocable credit:
A documentary credit can be revoked at any time with out prior notice to the beneficiary.
2. Irrevocable Credit:
A credit can not be revoked/amended /canceled without consent all parties their to.
3. Confirmed Irrevocable Credit:
At the request seller, the buyer can ask for an irrevocable to be confirmed.
4. Unconfirmed Credit:
A confirmed credit is one in which no confirmation of advising bank or another bank is added.
5. Transferable Credit:
Letter of credit LC under which beneficiary has the right to request the negotiating bank to make the credit available in whole or in part to one or more parties. The bank can transfer a transferable credit only if it is expressly designated as ‘transferable’.
6. Non Transferable Credit:
A credit which not transferable by the first beneficiary to the subsequent beneficiary. That means transfer of credit is restricted.
7. Restricted Letter of Credit:
Negotiations of documents are restricted to particular bank.
8. Open Credit:
The beneficiary may present the documents for negotiation to any bank.
9. Documentary Credit:
The cells for submissions/presentation of some documents.
10. Clear Credit:
The credit does not cell for any presentation of documents.
11. Sight Letter of Credit:
A credit in which the issuing bank commits to pay the beneficiary on the presentation of documents.
12. Usance Letter of Credit:
A documentary credit in which the bank commits to pay the beneficiary at a future specified date.
13. Anticipatory Credit:
The anticipatory credit makes provisions for pre shipment finance to the beneficiary in anticipation of effecting the shipment as per letter of credit LC terms (red clause and green clause credit).
14. Red Clause Credit:
When the credit authorizing the negotiating bank to provide pre-shipment advance/finance to the beneficiary is printed/typed in red ink the credit is called red clause credit.
15. Green Clause Credit:
It is printed/typed in green ink is extension of red clause which authorizes the negotiating bank to grand finance to the beneficiary for storage facility at the port in addition to the pre-shipment finance.
16. Bank to Back Letter of Credit:
A new credit is opened on the basis of an existing credit in favor of the new beneficiary one credit backs another.
It is a guarantee in the form of letter of credit. An instrument payable against presentation of documents.
Documents required in letter of credit operation:
Bill of exchange (Drawer, drawee and payee)
Invoice
Packing list
Certificate of origin
Inspection certificate
Insurance
Marine insurance policy
Three types of marine policy:
1) ICC (A): Covers maximum risk
2) ICC (B): Covers moderate risk
3) ICC (C): Covers minimum risk.
1) ICC (A):
It covers all risk of loss or damage, but it does not stay any specific list as B & C.
2) ICC (B):
Payments of back to back letter of credit:
In case back to back as 60 days, 90 days, 120 days and 180 days of maturity period different payment is made. Payment is given after realizing export proceeds from the LC issuing bank.
Test key arrangement:
Test key arrangement is a secret code maintained by the banks for the authentication for their telex messages. It is a systematic procedure by which a test number is given and the person to whom this number is given can easily authenticate the same test number by maintaining that same procedure. EXIM Bank has test key arrangement with so many banks for the authentication of LC message and for making payment.
Foreign Remittance:
Different fund are mobilized from foreign country to our country through the foreign remittance section. Purchase of foreign currencies institutes inward foreign remittance and sale of foreign currencies constitutes outward foreign remittance. EXIM Bank has a rich environment where funds flow from different countries.
The transaction of the authorized dealer in foreign exchange involves either inward or outward remittance of foreign exchange between the two countries.
EXIM Bank has authorized dealership. Different branches of EXIM Bank such as Motijheel Branch, Panthapath Branch etc. are providing the foreign remittance services to its customers. EXIM Banks foreign remittance facilities include FBC, LFBC purchase and sale of FCY, FTT, travelers check, FBP.
Remittance procedures of foreign currency:
There are two types of remittance.
Inward remittance:
Inward remittance can be divided into different types. Those are as follows.
Foreign Demand Draft (FDD):
If any draft is sent to the name of any organization from abroad then the draft holder is to fill-up form ‘C’ where the draft holder is to fill-up who has send this draft, from where this draft has been sent etc. whether family purpose or not, if the draft has been family purpose then no VAT is required against the draft.
Import Business:
During the year, the bank opened 25,817 import letter of credit and import volume stood at Tk. 49,596.73 million while it was Tk. 41,432.10 million in 2005. The growth is 19.73% in comparison with previous year.
Export Business:
During the year, the banks export volume stood at Tk. 46,234.59 million while it was Tk. 31,285.37 million in 2005. The growth is 47.78% in comparison with previous year.
Foreign Remittance:
Foreign Remittance of the bank stood at Tk. 343.78 million as of December 31, 2006 against Tk. 222.97 million in 2005.
In year 2005 to 2006, the Foreign Remittance increased by 54.18%.
Performance Evaluation in 2006 of Export Import Bank of Bangladesh Limited with the Islami Bank Limited and Shahjalal Islami Bank Limited
Capital and Reserve Fund:
Capital and reserve fund for Export Import Bank of Bangladesh Limited is Tk. 3,111 million, Islami Bank is Tk. 3456 million and Shahjalal Islami Bank is Tk. 1362.68 million in 2006.
Above chart shows that Exim Bank not much far behind from the Islami Bank but compare to shahjalal islami bank Export Import Bank of Bangladesh Limited has huge amount of capital and resave fund.
Growth rate of capital and reserve fund is 62.70% for Export Import Bank of Bangladesh Limited, 25.00% for Islami Bank and 60.61% for Shahjalal Islami Bank Limited in 2006.
Assets:
Assets for Export Import Bank of Bangladesh Limited is Tk. 41,793.5 million, Islami Bank Limited is Tk. 15025.2 million and Shahjalal Islami Bank Limited is Tk. 21342.5 million in 2006.
Assets position of Export Import Bank of Bangladesh Limited is good compare to other Banks.
Growth rate of assets is 23.95% for Export Import Bank of Bangladesh Limited, 22.27% for Islami Bank Limited and 47.72% for Shahjalal Islami Bank Limited in 2006.
Investment:
Investment for Export Import Bank of Bangladesh Limited is Tk. 32,641 million, Islami Bank Limited is Tk. 113575 million and Shahjalal islami Bank Limited is Tk. 15515.79 million in 2006.
Growth rate of investments is 25.31% for Export Import Bank of Bangladesh Limited, 21.22% for Islami Bank Limited and 46.50% for Shahjalal islami Bank Limited in 2006. Their growth rate is steady because they are now in the pick position on investment.
Import Business:
Import Business for Export Import Bank of Bangladesh Limited is Tk. 49,596 million, Islami Bank Limited is Tk.96870 million and Shahjalal islami Bank Limited is Tk.18684 million in 2006. Import sector the Bank is mordarate compare to other two banks.
Growth rate of import business is 19.70% for Export Import Bank of Bangladesh Limited, 29.98% for Islami Bank Limited and 42.47% for Shahjalal islami Bank Limited in 2006.
Export Business:
Export Business for Export Import Bank of Bangladesh Limited is Tk. 46,234 million, Islami Bank Limited is Tk. 51133 million and Shahjalal islami Bank Limited is Tk.11282 million in 2006. In export business the Bank is doing well compare to other two banks.
Growth rate of export business is 48.07% for Export Import Bank of Bangladesh Limited, 41.37% for Islami Bank Limited and 79.22% for Shahjalal islami Bank Limited in 2006. Here the bank position is middle compare to other two banks.
Foreign Remittance:
Foreign Remittance for Export Import Bank of Bangladesh Limited is Tk. 343 million, Islami Bank Limited is Tk.53819 million and Shahjalal Islami Bank Limited is Tk.3535 million in 2006. In foreign remittance sector the Bank is in very bad position compare to other two banks.
Growth rate of foreign remittance is 53.03% for Export Import Bank of Bangladesh Limited, 45.66% for the Islami Bank Limited and 412.31 for Shahjalal Islami Bank Limited in 2006.
Ratio analysis of Exim Bank
Current Ratio:
In 2006 the current ratio of Export Import Bank of Bangladesh Limited is 0.76 and in 2005 the ratio is 1.16. As we know in current ratio less than 1.00 is bad liquidity condition. That means Export Import Bank of Bangladesh Limited liquidity condition is not good in 2006 compare to 2005. It decreased by 34.49%.
Debt to Equity:
In 2006 debt to equity of Export Import Bank of Bangladesh Limited is Tk. 12.43 and in 2005 it is Tk. 16.63.
Debt to equity is decreased by 25.26% in 2006.
Debt to Total Asset:
In 2006 debt to total asset of Export Import Bank of Bangladesh Limited is 0.93 and in 2005 it is 0.94.
Debt to equity is decreased by 1.06% in 2006.
Current Capital:
In 2006 the current capital of Export Import Bank of Bangladesh Limited is Tk. (2,230.68) million and in 2005 it is Tk. 882.32 million.
Compare with last year this year their current capital position is very bad.
Return on Assets:
In 2006 the return on assets of Export Import Bank of Bangladesh Limited is 1.73% and in 2005 it is 1.65%.
In 2006 return on assets is good compare to 2005. It increased by 4.85%.
Return on Equity:
In 2006 the return on equity of Export Import Bank of Bangladesh Limited is 25.88% and in 2005 it is 33.53%.
In 2006 return on equity is not good compare to 2005. It decreased by 22.81%.
Net Income per Share:
In 2006 the net income per share of Export Import Bank of Bangladesh Limited is Tk. 37.95 and in 2005 it is Tk. 48.61.
In 2006 net income per share is not good compare to 2005. It decreased by 21.93%.
Earning per Share:
In 2006 the earning per share of Export Import Bank of Bangladesh Limited is Tk. 43.48 and in 2005 it is Tk. 48.61.
In 2006 earning per share is bad compare to 2005. It decreased by 10.55%.
Price earning ratio:
In 2006 the price earning ratio of Export Import Bank of Bangladesh Limited is 7.74 times and in 2005 it is 10.53 times.
In 2006 price earning ratio is bad compare to 2005. It decreased by 16.49%.
In 2006 the overall performance of Export Import Bank of Bangladesh Limited is in satisfactory level. Because, in 2006 Banks performance is better compare to 2005 performance, in almost every aspect. Their Return on Equity, earning per share and price earning ratio decreased during the year. On the other hand their capital & reserve fund, deposit, assets, investments, Return on Assets etc increased during the year.
Highlights on the overall activities of Export Import Bank of Bangladesh Limited
Amount in million (Taka)
SL No. Particulars 2006 2005
1 Paid up capital 1713.75
878.85
2 Total capital 3467.36 2179.81
3 Surplus of capital 551.24 (131.52)
4 Total asset 41793.54 33716.70
5 Total deposit 35032.02 28319.21
6 Total investment 32641.27 26046.34
7 Total contingent liabilities and commitments 18994.08 15941.52
8 Ratio on investment and deposits 93.18% 91.97%
9 Ratio on classified and total investment 1.8% 1.89%
10 Profit after tax and provision 650.29 555.33
11 Classified investment for the year 588.17 490.99
12 Provision held against classified investments 90.88 32.54
13 Debt to Equity 12.43 16.63
14 Debt to Total Asset 0.93 0.94
15 Profit earning assets 35161.47 28743.43
16 Non-profit bearing assets 6632.06 4973.26
17 Return on investment 6.55% 6.63%
18 Return on assets 1.73% 1.65%
19 Income on investment 121.46 108.22
20 Earning per share (Taka) 43.48 48.61
21 Net income per share (Taka) 37.95 48.61
22 Price earning ratio (Times) 7.74 10.53
Finding and Analysis
FINDINGS OF THE STUDY
This study is focused on the various schemes of EXIM Bank, some of which are not now in force and others, are carrying on well. We will now discuss in brief, what we have found after this research under the strength, weakness and success status of various schemes.
In order to improve the service quality customers expressed different opinion in their point of view. I can summarize their opinion, which is the gist of their suggestions. They have to take some more steps to improve the service quality. Each department of the bank should be computerized. The cash transaction process would be easier and very prompt that it would take a very short time. More branches should be opened in Dhaka city and other the other cities of the country. They will have to start consumer credit scheme and other scheme that will help the consumer. It is badly needed to provide modern banking services such as credit card, ATM card, visa care etc. EXIM Bank is providing better service comparing to other private banks. But there are almost fifty two banks in our country. In the near future some new banks are going to be opened. So in order to complete in the market EXIM Bank should be very careful about their service. They will have to improve their service quality and provided more facility.
Recommendation and Conclusions
Recommendation:
1. The interest rate and other charges may be competitive in orders to compete with competitions and attract customers as well as keeps the old ones.
2. Once a person becomes an expert in each department he/she should not be switch to another department as standardization is extremely important to increase workers efficiency.
3. Sitting arrangement should be adequate.
4. To provide quality service to the customers it is necessary to have a trained teem of an organization or an institution. For this reason the bank should recruit more fresh, bright and energetic persons as M.B.A., B.B.A., B.B.M. etc.
5. Bank should offer more facilities to the customers as credit card, visa card, ATM machine etc.
6. Branch expansion in Dhaka city as well as other cities i.e. Khulna is also a key factor to serve more people better service and earn more profit.
7. The bank should attempt to enter the share market by issuing shares to capitalize more money and invest thereafter by expanding the number of branches around the city.
8. One of the business strategies is promotion. So to improve the business status bank should introduce more promotional programs.
9. IN general banking department it is necessary to implement modern banking process instead of traditional system. It should be more computerized.
10. The loan sanction process should be easier that the client can feel convenient to take loan from the bank.
11. Foreign exchange department should be fully computerized that the exchange would be convenient for both bankers and the clients.
12. Salary structures may be revised in comparison with other commercial bank which will motivate employee to show more performance for bank which is essential for the bank’s prosperity.
13. Business power to be delegated gradually to the Branch Manager for business development.
14. Online services should be added to get more satisfaction and popularity from customer.
15. The management should organize more training for the employees so that they can develop their knowledge and skill.
16. The bank has a provision for internship program but it is not wll organized. Although the officials are very careful and cooperative with the interns, the authority should be more structured. If they can properly make them trained it will be very fruitful to recruit them because they learn overall banking in the internship period, so in the beginning of the job they can work as experienced persons. It is also very important that they should give honoree to the intern.
Conclusions:
From the practical implementation of customer dealing procedures during the whole period of my practical orientation in EXIM Bank Bangladesh Limited I have reached a firm and concrete conclusion in a confident way. I believe that my realization will be in harmony with most of the banking thinkers.
EXIM Bank is one of the newest banks in Bangladesh. For that point of view, this bank is not highly experienced about the banking industry in this country. The more aggressive the bank will become the more intense the competition will be. In coming days they are to face various key challenges such as:
It is quite a evident to build up an effective and efficient banking system to the highest desired level computerized transaction is a must. So this issue should be considered as soon as possible. Besides every bank has to survive a midst of a large number of banks including local and foreign banks. That’s why to keep pace with expected profit margin of the time being and for the future every bank should try heart and soul to please the customers in a smart and trusty way.
But quite regretful to mention that most our bank face decreasing profit trend due to switch over of their presents customers to those foreign with higher customer service facilities. So timely decision for introducing sophisticated banking instruments should be taken as early as possible.
After taking effective and defeating measures regarding efficient employees and instruments will help the local office of EXIM Bank to reach the pinnacle of success with high profit and productivity.
