In today’s world only academic education does make a student perfect to become competitive with the corporate & Global business world. By doing an internship program, a student can get the opportunity to learn facing about real business world. Internship is highly needed to gain idea knowledge and experience. I am a BBA graduate from the Stamford University Bangladesh one of the reputed and largest Private University in Bangladesh. It has designed its curriculum of the BBA Program such a way that the international standard graduates will be produced. After completing my 139 Credit hours I Need to go for further professional experience through Internship program in a Business organization EXIM Bank Ltd. is a place where I have learned the business dealings. This organization has created a positive image to the customer’s mind by providing better service specifically I am telling about the Panthapath Branch. This branch has introduced an exclusive modern banking system that has got high market sharing and rating in the prominent business & banking avenue in Panthapath Bank way.
As an BBA Internee Office I have tried to maintain the pace with the competitive business environment on official Activities Culture Philosophy Norms & Styles. It should be reflect the best at any field of my Professional life; The Vice President & Manger is my overall Guide Philosopher & Superior. By receiving his all sorts of cordial support I have been availed the opportunity to work with this branch for three months from 10th January 2010 to 9th March 2010. I acquired idea about real business and corporate world.
1.2 Objective of the Report:
Prime objects to a large-scale study on Banking System.
1.3 General objective of the Report:
The report specification based on the overall banking performance evaluation and special focus on foreign exchange division of EXIM Bank Ltd.
1.4 Specific objective of the Report:
To apply theoretical knowledge in the practical field.
To make a bridge between the theories and practical procedures of banking day-to-day operations.
To know the different modes of scheme, in EXIM Bank.
Trend analyses of the different scheme.
To know the financial activity of bank.
An overview on the major financial activity and practices of EXIM Bank
To identify the strategies for EXIM Bank Limited, implementing in constant prosperity of the company
Analyzing the performance trends of EXIM Bank.
To give some idea about its management and organization structure
To present and overview of EXIM Bank Ltd.
Compare the different mode of scheme of Exim Bank with other similar bank.
1.5 Scope of the Report:
First the report presents about the current economic condition of Bangladesh and the present condition of the banking sector of our country and next it gives some ideas about EXIM Bank Ltd. Then it analyzes the performance of the bank based on financial analysis and SWOT analysis. After that, it emphasizes or foreign exchange division. By reading this report one can easily have some ideas about the performance and foreign exchange division of EXIM Bank Ltd.
1.6 Limitations of the Report:
Although there were sincere co-operation from employees of EX1M Bank Limited, Panthapath Branch, they could not manage enough time to provide the necessary information for the completion of the report. During the preparation of the report the following problems occurred that may be termed as the limitation or shortcomings of the study.
Some of the limitations faced in preparing this report are:
Confidentiality the Bank’s policy restricts disclosing some data
Data about the performance of the bank of the year 2008 have not yet been disclosed by the bank.
The study of such a short course of time is not free from limitation.
The data relevant for the analysis report writing sometimes could not be collected due to excessive year-ending workload at the branch.
It is too much difficult to comment and suggest based on only the annual report and information collected from written documents.
As some assumptions were made with the help of limited information, there may be some personal mistake in the report
It was very difficult to collect the information from various incumbents for the job restriction.
1.7 Methodology of the Study:
Although there were so many limitations, it was tried to use both the primary and secondary sources of collecting information to make the report presentable with as less abstraction as possible.
1.8 Sources of Information:
Two sources (i) Primary & (ii) Secondary
A. Primary data: Primary data is always known as survey data. This type of data is collected from the respondent. For this personal Interview with the offices and customers have been conducted.
B. Secondary Data: Data that were published before for some other reason can be collected using internal and external sources.
i) Internal secondary data: To furnish the report properly some papers has been collected from the officials of EXIM Bank Ltd. Information from annual reports journals, newspapers and other published documents have been used besides other published information about the organization, depth interview of the branch manager and second branch manager have also taken.
ii) External Secondary data: For better interpretation some data has been collected from Bangladesh Bank. Internet Browsing is also one source of external Secondary data.
2. ECONOMIC CONDITIONS IN BANGLADESH
Bangladesh has an agrarian economy with 32% of GDP coming from the Agriculture Sector. Major agricultural products are rice, jute, wheat, potato, pulses, tobacco, tea and sugarcane. . The country is the largest exporter of jute and jute goods in the world. Readymade garments are among the most exportable items. Tea, frozen shrimp, fish, leather goods and handicrafts are also major exportable commodities. The country has under gone a major shift in its economic philosophy and management in recent years. At Bangladesh’s birth, the country embraced socialism as the economic ideology with a dominant role for the public sector. But, since the mid-seventies, it undertook a major restructuring towards establishing a market economy with emphasis on private sector-led economic growth. During the nineties, the country has completed a major stabilization program which has reduced inflation as well as fiscal and current account deficits and established a healthy foreign exchange reserve position with low and sustainable debt-service liabilities. With modest economic growth, the basic indicators related to health, education and poverty have all shown sustained improvement. According to a World Bank estimate, Bangladesh has the 36th largest economy in the world in terms of GNP based on the purchasing power parity method of valuation, and the 55th largest in terms of nominal GNP in U.S. Dollars.
Bangladesh economy grew on an average at above 6.0 percent in the last four years up to FY07 . According to the provisional estimates of the Bangladesh Bureau of Statistics (BBS),real GDP recorded a strong growth of 6.5 percent in FY07,which is marginally lower than 6.6percent recorded in FY06 . This growth was commendable as it was achieved in challenging environment marked by high and volatile oil price ,phasing out of the MFA quota, labour unrest in the garment industry and confrontational political situation of the country in the first half of FY07.
With reasonable support from agriculture sector, the 6.5percent real GDP growth was underpinned mainly by industry sector and services sector. The expansion was broad based, registering positive growth by all sectors and sub-sectors of the economy. Spurred by a robust 9.5 percent growth in industry sector and 6.7 percent growth in services sector, GDP growth during the year was also aided by 3.2 percent growth in the agriculture sector.
The domestic savings-investment gap was met with net factor income from abroad which increased by 37.0 percent in FY07 from 4.4 percent in FY06 reflecting higher savings growth. The domestic savings investment gap was met with net factor income from abroad which increased by 37.0 percent in FY07.
The rising trend of inflation of FY06 as measured by CPI continued in FY07 mainly due to higher prices of oil and some other imported goods in the international market, distortion in the supply side factors and demand pressure generated from excess money supply .Slower import of consumer necessities pulling their domestic prices heightened the price pressures. Annual average CPI (base FY96) inflation as of end June 2007was 7.20 percent, compared to 7.16 percent as of end June 2006. There was notable increase of food prices component of CPI inflation from 7.8 percent as of end June 2006 to 8.1 percent as of end June 2007.
Maintaining a favorable investment environment and a sound macroeconomic management are important to strengthen private sector investment in the economy. In view of medium term outlook of sustainable economic growth and low inflation for world and south Asian economies and assuming continuation of prudent policies and progress in advancing structural reforms, the near and medium term economic prospects of Bangladesh appear favorable.
3. INDUSTRY ANALYSIS
Bank plays an important role in this modern world. The development of industries and business sectors of a country mainly depends on good banking system. The industries and businessman are taking short and long term loan from banks. In the modern world international businesses are fully depended on banks. Without sound banking system no country can develop in international trade.
Bank constitutes an important segment of the financial infrastructure of any country. The economic history of many countries reveals that economic development and growth of financial infrastructure go hand in hand. Financial system of a country is the heart of a country’s economic system as it connects suppliers of the funds and demanders of fund, which is needed to produce economic goods. It also provides a large arena of employment opportunity. As Bangladesh is containing a bank base economy, its economic development is largely depended on the development of banking sectors.
Bangladesh appeared as a new nation on the world map in the year 1971. After independence financial institutions, especially banks played a vital role in re-constructing the war-torn economy of Bangladesh. Bangladesh Bank is the central bank of the country and is in charge of monetary policies of the Government and controls all commercial banks.” Development and growth of our banking system may be divided into three parts. The performance of our banking system during 1972 to 1982 was commendable in respect of expending network and providing easy credit to the socially desirable sectors but equally frustrating with regard to maintaining validity and customer services. The second phase from 1983 to 1989 was characterized by denationalization and privatization of banking system without broad-basing the prudential and information regulatory framework; however, these measures of denationalization and privatization could not bring the viability and operational efficiency of banking system.
Under the above circumstances and with the recommendation of World Bank, a Financial Sector Reform Project (FSRP) was undertaken in 1989 by the government, which can be identified with third phase of the development of our banking system. The government of Bangladesh has also enacted some important acts namely financial institutions act 1993, Securities and Exchange Commission act 1993, the companies’ act 1994 and recently Bankruptcy act 1997.
The present day banking structure has evolved over several decodes. The far-reaching program of economic reform is being carried out at present towards efficient utilization of scare resources and the development of private entrepreneurship. Banks are financial service firms, producing and selling professional management of the public’s fund as well as performing many other roles in the economy. Banks are those financial institutions that offer the widest rang of financial functions of any business firm in the economy.
Competition is strengthened by the entry of new and innovative provides of financial services, through the development of Money market and Capital market. Money market is designed for the making of short-term loans where individuals and institutions with temporary surplus of funds meet borrowers who have temporary cash shortages. Capital market is deigned to finance long-term loans where individuals and institutions with temporary surplus of finds meet borrowers who have temporary cash shortages. Capital market is designed to finance long-term investments. Private sector commercial banks are private companies operate under the legislative framework, which covers both Company Act, and Banking Company Act, under the ongoing financial liberalization, EXIM Bank emerges as a new Bank in private sector to operate at the Banking arena of Bangladesh It is committed to provide high quality financial services/ products to contribute to the growth of GDP of the country through stimulating trade and commerce, accelerating the pace of industrialization, boosting up export, creating employment opportunity for the educated youth , poverty alleviation, raising standard of living of limited income group and overall sustainable socio-economic development of the country.
4. COMPANY ANALYSIS
4.1 HISTORICAL BACKGROUND OF THE EXIM BANK
EXIM Bank– Export Import Bank of Bangladesh Ltd. was named at first as BEXIM Bank BEXIM stands for Bengal Export Import of Bangladesh. This new commercial Bank was opened in August 03, 1999 with some new innovative visions in customer services. The Bank received the certificate of incorporate no.C-37864 (2164)/99 under the commencement of the business on the same day by the section 150(2) under companies Act. A part from the head office in Dilkusha C/A, it stared its first local branch in Motijheel C/A simultaneously in order to provide all kinds of Banking support to the clients. On December 02, 1999 the second branches both in Dhaka City and other cities. Now it has twenty-five branches in the country.
The gist of EXIM bank vision is ‘Together Towards Tomorrow’. Export Import Bank of Bangladesh Limbed believes in togetherness with its customers, in its march or the road to growth and progress with services. To achieve the desired goal, there will be pursuit of excellence at all stages with a climate of continuous improvement, because, in EXIM Bank, they believe, the line of excellence is never ending. Bank’s strategic plans and networking will strengthen its competitive edge over others in rapidly changing competitive environments. Their personalized qualities services to the customers with the trend of constant improvement will be cornerstone achieve their operational success.
The bank has checked out the following corporate objectives in order to ensure smooth achievement of its goals-
To be the most caring and customer friendly and service oriented bank.
To create a technology base most efficient banking environment for its customers
To ensure ethics and transparency in ail levels
To ensure sustainable growth and establish full value of the honorable shareholders and
Above all, to add effective contribution to the national economy
Eventually the bank also emphasize on:
Provide high quality financial services in export and import trade
Providing efficient customer service
Maintaining corporate and business ethics
Being trusted repository of customers’ money and their financial adviser
Making its products superior and rewarding to the customers
Display team spirit and professionalism
Sound Capital Base
Enhancement of shareholders wealth
Fulfilling its social commitments by expanding its charitable and humanitarian activities
Bangladesh is now integral part of global market. As such there is an urgent requirement for Bangladesh to place the traditional banking pretties in harness with the global trades of a free market economy by following international banking customs, practices and standards. Today clients of a bank in Bangladesh are exposed as well as international markets. They have to stay update with their practice and standards to meet the demands of achieving harmony in the high standards of a free economy.
EXIM Bank fully appreciates the importance and implication of the rapidly emerging competition in the banking and finance sector of Bangladesh. It intends financing its customer suited to his or her place in the market. In this regards EXIM Bank emphasizes in its employment the software aspects of human resource capability. It also emphasizes competence among its banking professional to cater to vary customer requirements to the modern time.
The objectives of EXIM BANK is not only to earn profit but also to keep the social commitment and to ensure its co-operation to the person of alt level, to the businessman, industrialist specially who are engaged in establishing large-scale industry by consortium and the agro-based export oriented medium and small scale industries by self inspiration.
EXIM BANK is always ready to maintain highest quality of services by upgrading banking technology prudence in management and by applying high standard of business ethic through its established commitment and heritage.
EXIM BANK is committed to ensure its contribution to national economy by increasing its profitability through professional and disciplined growth strategy for its customer and by creating corporate culture in international banking area.
In order to reach the goal it is important to build strategy and follow the policies. If it can select the appropriate strategy and choose the right policy, it will be very easy to touch its desired position. The distinguishing attribute of policy is to set the over all boundaries for activities. According to this system when the bank was started it has to decide what kind of business it is going to be in. The Bank also has to decide on its growth and communicate through am system of major objective of the business is to reach the goal, to reach the desired position from the current status. There might be a number of ways to reach there and its has to be decided which path would be easier to reach the objective. So the authority has no decided which path they select to proceed. The following figure can be explained clearly.
Slogan of the EXIM Bank: “Local Bank Global Network”
The world EXIM implies the meaning of its operation. Through it is a new type of Bank in Bangladesh; it is familiar with so many countries in the world such as Export Import Bank of the United States, Export Import Bank of Japan. Despite it is a local Bank, It has spread of its operation in the whole world through foreign Banking. To achieve the desired goal, it has intention to pursuit f excellence at 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 strength its competitive edge over in rapidly changing competitive environment. It motto I to provide quality service to the customers all over the world so, the slogan of the Bank “Local Bank Global Network” is completely adjustable with its operation.
THE GENERAL BANKING DIVISION
Internship has provided the opportunity to coordinate the theoretical knowledge that one has gathered in MBA Class with the practical field. Although three months is not a very long period to learn the whole thing that usually occurs in an organization. The supervisor divided this report into three parts. 1) The general banking department 2) The Investment department 3) The foreign Exchange department.
Learning experience from General Banking Division:
The main business of this Division is dealing with Deposit. There are two types of Deposit in this Branch and General Banking division as the following section:
1. Deposit section
2. Account Section
3. Remittance section
4. Clearing section
5. Customer Service section
6. Cash section and
7. Information Technology section
Task I Handled in this Division is
1. Opening Accounts
2. Opening Monthly saving scheme,
3. Modaraba Term Deposit Account Current
4. Deposit foreign current Deposit Account
5. Modarada short notice Deposit (STD).
6. Fixed Deposit, Steady Money.
7. Demand Draft (D.D)
8. Telegraphic Transfer (T.T)
9. Payment Order (P/O)
10. Travelers Check (T.C)
11. Issuing Check.
Pay Order (PO):
Pay order is one kind of unconditional promissory note or instrument that is issued by the Bank to the customer. The difference between check and pay order is the mode of encasement.
Demand Drafts are made for the transfer of money from one place to another in the form of cheques through a particular Bank, which can be ensued right way. The Bank issues DD for their outer district branches.
Telegraph/ Telephone Transfer:
When a certain amount of money is asked by the client to transfer from one branch to another than it is called telegraph/ telephone transfer. For TT, there is a particular from. When the form is filled up properly and deposits the amount by the applicant, the authorized officer issued a cost memo to the application for their confirmation.
lssuing cheques Books:
Checkbook issue is a very sensitive because most of the fraud occurs through this checkbook. Customer requiring check books to fill out requisition ship. For saving accounts 10 pages check book issued and CD/SOD/ CC accounts issued 25 and 50 pages checkbook.
In clearing section the work is to clear the cheques, DD’s and PO’s through
Bangladesh Bank that are submitted for cash collection. Everyday morning
House another in the evening called return house. In the hose all the Banks representative sit together and exchanges their money receive instrument of their particular bank to clear the paper and transfer to money the paper partlcular accounts.
Type of Clearing:
There is two type of clearing
2) Out –Ward
Those Cheques or instrument of EXIM, which are submitted to other banks for collections are called In – Ward Clearing.
The cheques of other banks that are submitted to the EXIM for collections are called out-ward Clearing.
Cash is the main element of all financial activities. The cash section of any branch plays very significant role. It’s very sensitive place of the branch, because it deals with most liquid assets. The EXIM Bank Mirpur Branch has an equipped cash section. This section receives cash from depositors/Client and pays cash against cheques draft, payment order and pay to slip over the counter This section deals with all type as of negotiable instruments and in includes volt. Used as the store of cash instrument, the main functions of the sections are cash receipt and cash disbursement.
Accounts Opening Section:
This section deals with opening of different types of accounts. It is also deals with issuing of books and different deposit boos to the different accounts opener. A customer can open different types of accounts through this department such as:
l. Current Account
2. Saving Account
3. Fixed deposit account (FDR)
4. Short term Deposit (STD)
5. Monthly saving Scheme (Money Grover)
6. Monthly income scheme (Steady money)
7. Smart saver Scheme
8. Multi plus saving Account
9. Super saving scheme
10. Education saving scheme
EXIM Bank gives special importance various deposit schemes are:
l. Monthly saving Scheme (money Grower)
2. Monthly income scheme (Steady Money)
3. Multi plus savings A/C
4 Super saving scheme
5. Double benefit Scheme
6. Smart saver Scheme
7. And Education saving Scheme
Types of Accounts with Terms and Conditions
Current (CD) Account:
Current account is purely a demand deposit account. There is no restriction on withdrawing money from the account. It is basically justified when funds are to be collected and money is to be paid at frequent interval. Some Important Points are as follows-
• Minimum opening deposit of TK.1000/- is required;
• There is no withdrawal limit.
• No interest is given upon the deposited money;
• Minimum Tk.1000/= balance must always maintain all the time.
Savings (SB) Account:
The bank provides savings account services for the ease of its clients. It offers both personal and corporate Savings Account to its clients in every branch. Hence, there is a restriction on withdrawals in a month. Heavy withdrawals are permitted only against prior notice. Some Important Points are as follows-
• Minimum opening deposit of Tk.5000/= is required;
• Minimum Tk. 1000/= balance must always maintain all the time;
• Withdrawal amount should not be more than 1/4th of the total balance at a time and limit twice in a month.
• If withdrawal amount exceed 1/4th of the total balance at a time no interest is given upon the deposited money for that month.
• The current rate on deposit amount is 6%.
• Closing of saving accounts will cost 300tk to a customer.
Short Term Deposit (STD) Account:
Normally various big companies, organizations, Government Departments keep money in STD account. Frequent withdrawal is discouraged and requires prior notice. The deposit should be kept for at least seven days to get interest. The interest offered for STD is less than that of savings deposit. Interest is calculated based on daily minimum product and paid two times in a year. Interest rate is 4.50%.
Call Deposits (Money at Call):
Sometime the banker secures funds from the money markets usually from other bankers against receipt to meet his purely tepmorary shortage of funds. These debts are repayable immediately at call. When the money market is tight such derosits attract higher rate of interst and then to be treated as banker’s borrowings as call loans.
To dill with the bank individuals need to have an account first. The particulars are essential for identification of the account holders individually so that the banker can discharge his obligations to every one correctly and to the extent due.
Documents required for opening account
□ Individual / Joint Account:
1. Introduction of the account.
2. Two photographs of the signatories duly attested by the introducer.
3. Identity (copy of passport).
4. Joint Declaration Form (For joint a/c only).
5. Employee’s Certificate (in case of service holder).
□ Partnership account:
1. Introduction of the account.
2. Two photographs of the signatories duly attested by the introducer.
3. Partnership letter duly signed by all partners (Sign should be similar as stated in Partnership Deed).
4. Partnership Deed duly certified by Notary public.
5. Registration (If any).
6. Updated Trade license.
□ Proprietorship account:
1. Introduction of the account.
2. Two photographs of the signatories duly attested by the introducer.
3. Valid copy of Trade License.
4. Rubber stamp.
5. TIN number certificate.
6. Identity (Copy of passport).
7. Permission letter from DC/ Magistrate (in case of newspaper)
8. □ Limited company:
1. Introduction of the account.
2. Two photographs of the signatories duly attested by the Introducer.
3. Valid copy of Trade License.
4. Board resolution of opening A/C duly certified by the Chairman/Managing Director.
5. Certificate of Incorporation.
6. Certificate of Commencement (In case of Public limited company).
7. Certified (joint stock) true copy of the Memorandum and Article of Association of the Company duly attested by Chairman or Managing Director.
8. List of directors along with designation & specimen signature.
9. Latest certified copy of Form – xii (to be certified by register of joint stock companies) (In case of Directorship change).
10. Rubber Stamp (Seal with designation of each person)
11. Certificate of registration (In case of Insurance Company – Obtained from department of Insurance from the Peoples Republic of BD).
□ Club / societies account:
1. Introduction of the account.
2. Two photographs of the Signatories duly attested by the introducer.
3. Board Resolution for Opening A/C duly certified by President/ Secretary.
4. List of Existing Managing Committee.
5. Registration (if any).
6. Rubber Stamp.
7. Permission letter from Bureau of N.G.O. (In case of N.G.O. A/C).
• Monthly Income Scheme
• Multiplus Savings
• Smart saver
• Super Saving Scheme
• Monthly Savings Scheme (Money Grower)
• Hajj Scheme
• Corporate Finance
• Industrial Finance
• Lease Finance
• Hire Purchase Finance
• Commercial Loans
• Project Finance
• Syndicate Loans
• Retail Loans
• Mortgage Loans
• Loan against Share and Securities
• Account Opening Procedures:
The account should be properly introduced by Any one of the following:
An existing Current Account holder of the Bank.
Officials of the Bank not below the rank of an Assistant officer.
A respectable person of the locality well known to the Manager/Sub-Manager of the Branch concerned.
Receiving filled up application in bank’s prescribed form mentioning what type of account is desired to be opened.
The form is filled up by the applicant himself / herself
Two copies of passport size photographs from individual are taken, in case of firms photographs of all partners are taken
Applicants must submit required documents
Application must sign specimen signature sheet and give mandate
Introducer’s signature and accounts number – verified by legal officer
Authorized Officer accepts the application
Minimum balance is deposited – only cash is accepted
Account is opened and a Cheque book and pay-in-slip book is given
The routine daily tasks of the accounts department are as follows:
1. Recording the daily transactions in the cash book
2. Recording the daily transactions in general and subsidiary ledgers
3. Preparing the daily position of the branch comprising of deposit and cash
4. Preparing the daily statement of affairs showing all the assists and liability of the branch as per ledger and subsidiary leader separately.
5. Making payment of all expenses of the Branch
6. Recording inters branch fund transfer and providing accounting treatment in this regard.
7. Checking whether all the vouchers are correctly passed to ensure the
Conformity with the Activity Report; if otherwise making it correct by calling the respective official to rectify the voucher.
8. Recording of the vouchers in the Voucher Register
9. Packing of the correct vouchers according to the debit voucher and the credit voucher.
The routine periodical tasks performed by the department are as follows.
1. Preparing the monthly salary statements for the employees
2. Publishing the basic data of the branch
3. Preparing the weekly position for the branch this is sent to the Head Office to maintain Cast Reserve requirement
4. Preparing the monthly position for the branch, this is sent to the Head office to maintain statuary liquidity requirement.
5. Preparing the weekly position for the branch comprising of the break up of sector wise deposit, credit etc.
6. Preparing the weekly position for the branch comprising of the denomination wise statement of cash in tills.
7. Preparing the budget for the branch by fixing the target regarding profit and deposit so as to take necessary steps to general and mobilize deposit
8. Preparing an Extract’ which is a summary of all the transactions of the Head Office account with the branch to reconcile all the transaction held among the accounts of all the branches.
General account is important one, which has to be maintained by each branch. Indeed general account is are record of Oregonian and responding transactions among inter- branches of the same bank. All types of assets and liabilities of one branch with another one are settled through this account. Branch can know how much the bank is liable with Head Office. The debit and credit balance shows assets and liabilities of the respective branch.
Statement or Affairs:
Accounts section prepares the statement of affairs for finding the profit/ loss as well as amount of assets and liabilities of concerned branch per day
Theoretically, it is called financial statement and has tow parts:
1. Income and Expenditure Account
2. Statement of Assets and Liabilities
Amortization and Depreciation:
Amortization is the allocation of the cost of an intangible asset to expense for example, prepaid expenditure, prepaid insurance and good will etc Amortization schedule is determined by the decision of management.
This section deals with employee’s salary, much type of internal expenses such as purchase of pen, paper equipment, machinery and payment of labor Cost and employee conveyance. In cause of leave of absence employee collects prescribed from this section.
LOANS AND ADVANCES DEPARTMENT
Banking is essentially a business dealing organization with money and credit like all other business activates. Banks are profit-oriented organization. A bank invites its find many ways to earn more and more profit and most of its income is derived from loans and advances. Bank makes loans and advances to traders, Businesspersons, industrialists and many other persons against security of some cautions policy and sound lending principle in the matter of lending. EXIM Bank is a lending bank in loans and advances and it grant loans in various sectors especially in industry, trade and commerce.
Types of loans and advances:
There may be different types of loans and advance given from the commercial banks such as EXIM Bank Ltd. Of our country. Loans and advances may be in the following types:
1. Cash credit
3. House Building loan (General and Staff)
4. Transportation (Car) loan (only for senior staff)
5. Consumer credit Scheme
6. Loan against Imported Merchandise (LIM)
7. Loan Bills purchases Documentary (LBPD)
8. Loan against Other Securities (LAOS)
9. Term Loan
Brief Idea about the different types of loans and advance:
Cash Credit (CC):
Cash credit is an arrangement by which the customer is allowed to borrow May up to a creation limit. This permanent arrangement and the customers need not to draw the sanctioned amount of money at a time. The borrower can draw the money when required. The borrower can put back any surplus, amount, which he/she may he affect frequently. Intersect is charged only to the amount with drawn and not he whore amount sanctioned cash credit arrangement is usually divide into two ways such as:
1. Cash credit pledge
2. Cash credit hypothecation
Cash Credit Pledge:
In case of cash credit pledge possession of the goods dealings to bank and ownership of the of the goods belongs to borrower and bank the possessions of the goods as primary security. The goods storied in go down under lock and key by direct supervision of the bank. If the borrower wants to sell any potion of the pledged goods he/she permission of bank with returning the value of the loan amount. It is therefore regarded as the most secured type of advance.
Cash Credit hypothecation:
In case of cash Credit hypothecation possession of the goods not transferred to the bank and therefore such and advance is no better than a clean loan, such an advance can thus only be granted to a person in whose integrity the barked has full confidence cash credit in the form of Hypothecation is normally accompanied with mortgagee of immovable properties. The pray/ borrower possesses the lock and key of the down.
The Formalities of opening cash Credit:
There intending cash credit holder should submit the following documents and being fill up properly:
1. Stock repot, rend receipt
2. Trade license
3. Up to date income tax clearings certificate
4. Charge documents
5. Letter of Continuity
6. Letter of arrangement
7. DP (Demand Promissory) note
8. Letter of guarantee
9. Letter lien
10. Limit sanction advice
11. Non-Encumbrance Certificate
Observing the documents the bank authority prepares a cc proposal from that contains the following information:
1. Nature of business
2. Banking with EXIM
3. Transition with CD account by the client
4. Allied deposit with SB/STD account.
5. Number of adjustment (s) how many times the CC holder made his/her
Account nil that means debit balance equal to credit balance.
6. Recycling it is ration of total credit summation to the limit. If the ratio is
Higher it is better from banker’s points of view.
7. Turn over in the account
8. By the encasement authority the bank holds the power to encase the FDR the encasement authority at any time in case borrower’s failure to repay the loan amount with interest in due time.
Based in the above-mentioned information the dealing officer of the loans and advances department prepares recommendation about the prospect of granting the CC loan to the client.
Overdraft is an arrangement between the banker and the customer by which the letter is allowed to withdraw over his/her credit balance in the current account up to an agreed limit. The borrower is permitted for draw and repays any number of times, provided he total amount overdrawn dose not exceeds the agreed limit. Here the interest is charged only for the amount withdrawn over the limit. Not for the whole amount. Overdraft is divided into tow categories:
■ Secured overdraft (SOD)
■ Temporary overdraft (TOD)
Secured overdraft: It is allowed against the full security (i.e. FDR, ICB unit
Temporary Overdraft: It is allowed to the customer for a very short period of time. But EXIM bank deals only secured overdraft.
This is a special type of loan, which is only provided for the staff of EXIM
Bank. Usually AVP and above level officers get this kind facility. This loan is reimbursed on instrument basis and repayable after each month.
House Building loan (General and Staff):
General house building loan is providing into two sectors:
Naturally house building loan is paid for the construction of commercial building, and owners etc, procedures for sanctioning house- building loan as follows:-
■ Application for sectioning loan
■ Application properly filled up for credit facilities supplied by the bank.
■ Personal net worth statement each director
■ Enquiry form
Required papers for sanctioning HB loan:
■ Copy of general power of attorney
■ Copy of material certificate
■ Copy of engineer’s estimate
■ Copy of projected cash flow
In case of loan the banks sanction some of money for a certain period of time. The enter amount is one time disbursement and paid in cash or credit loan A/C.
The interest is charged on full sanctioned amount @16%. The bank generally sanctions loan to establish industry. These types of loan are granted for capital expenditure such as purchase of land, constriction of factory building, purchase of new machinery and modernization of plant. The borrower cannot withdraw this type of loan once repaid in full or in part again.
Formalities for extending project loan:
Loan application form:
After receiving the loan application from the borrower the branch scrutinizes the application whether it is viable or not. Loan application from contains the following particulars amongst other detail below:
■ Particular description of the Project.
■ Nature of the Project
■ Detail information about the borrower
■ Statements of assets and liabilities of the borrower with declaration
■ Detail information about proposed products, machinates and manpower etc
■ Project cost and source of fund.
■ Market for the proposed project.
This report is provided by the borrower, which includes the following aspects of the project:
■ Marketing aspect
■ Technical aspect financial aspect
■ Managing aspect
■ Socio-economic aspect
1) Classification Procedure
1. Categories of Loans- At first all loans and advances will be grouped into four categories for the purpose of classification, such as- (a) Continuous Loans (b) Demand Loans (c) Fixed Term Loans and (d) Short Term and Agriculture & Micro Credit.
(a) Continuous Loans : The loan A/C in which transaction may be made within a certain limit and have an expiry date for full adjustment will be treated as continuous loan. Exp CC, OD etc.
(b) Demand Loans: The loan that becomes repayable by the party on demand by his bank will be treated as demand loans. If any contingent or any other liabilities are turned into forced loan will also be treated as demand loan. Exp. LIM, PAD, FBP, IBP etc.
(c) Fixed Term Loans: The loan which is repayable with in the specific time period under a pacific repayment schedule will be treated as Fixed Term Loans.
(d) Short Term Agriculture & Micro Credit: Short Term Agricultural Credit will be as per list issued by Agricultural Credit and Specialized Programmers Department (ACSPD) of Bangladesh Bank under the Agricultural Credit Programmed. Credit in the Agricultural sector repayable within 1(one) year will also be included herein. Short Term Micro Credit includes any micro credit not exceeding TK. 25,000.00 and repayable within 12 months.
2) Basis for Loan Classification:
(A) Objective Criteria
(1) Past due/ over due:
In this point we saw four factors those are;
a) Any continuous loan if not repaid / renewed within the fixed expiry date for repayment be treated as past due/ overdue from the following day of the expiry date. any demands loan if not repaid/ rescheduled within the fixed expiry date will be treated as past due/ overdue from the following day of the expiry date.
b) In case any installment of a fixed term loan (repayable within fives) is not repaid within the fixed expiry date, the amount of unpaid installment will be treated as past due/ overdue (defaulted instilment) from the following day of the expiry date of the particular installment.
c) Incase of any installment or part installment of a Fixed Term Loan (repayable over five years) is not repaid within the fixed expiry date, the amount of unpaid installment will be treated as past due/ overdue after 6(six) months of the expiry date of that particular installment.
d) The Short Term Agriculture & Micro Credit if not repaid within the fixed expiry date for repayment will be considered as past due/ over due (defaulted instilment) after 6(six) month of the expiry date.
(B) Qualitative Judgment;
If any uncertainty or doubt arises in respect of recovery of any continuous,
Demand or Term Loans the same will have to be classified as Sub- Standard or Doubtful or Bad/ Loss. Considering the merit of the A/C on the basis of qualitative judgment be it classified or not on the basis of objective criteria.
The Bank will classify on the basis of qualitative judgment and can be- classify loans if qualitative improvement does occur. But if a loan classified by Bangladesh Bank inspection Team, the same can be de- classified with the approval of the Board of Directors of the Banks.
Before making credit report to the head office the lending branch takes the credit information to the borrower from the CIB (credit Information Bureau) of Bangladesh Bank and other financial institutions. For obtaining this report the branch sends Inquiry form’ to CIB duly filled in particulars of the borrower. The report id divided into 5 segments.
It is the reinvestment analysis done by Banker before a project is approved. Project appraisal in the Banking sector is needed for following reasons:
■To ensue repayment of the Bank finance
■To achieve the organizational goals
■To establish industrialists in a country.
The main tasks of the project appraisal is to justify the soundness of an investment by the Banker by means of a capital and systematic of the different elements of the Project For this purpose Banks use two types of analysis:
■Lending Risk Analysis (LRA)
■Spread Sheet Analysis (SSA)
Lending risk analysis:
Lending risk analysis is modern methodologies, which describes how to access the risks that are inherent any credit extension and how to access the likelihood that the customer will repay a loan. The LRA form contains 16 pages to analysis different categories of Risks. The Financial Sector Reform project introduces the lending Risk analysis format in 1993. LRA is a standardize format for analyzing the credit worthiness of a borrower and the likelihood that the borrow will repay. Bangladesh bank issued a letter number BCD (p) 611/13/290 dated 17-07-1994, which now makes it mandatory for the commercial Banks to implement the LRA approach to credit analysis prior to extending credit facilities to a Borrower.
The modern concept of lending is purpose and production oriented and not security oriented. The emphasis should be given not any security rather on he likelihood of repayment, the credit worthiness of the customer soundness and viability of the business etc.
The Principle of lending is a collection of certain accepted time tested standards, which ensure the proper use of Investment fund in a profitable way and its timely recovery. Different authors describe different principles for sound lending.
4. Adequate yield
Process of Investment
Application Applicant applies for the Investment in the prescribed form of the bank describing the types and purpose of Investment.
Sanction 1. Collecting credit information about the applicant to determine the credit worthiness of the borrower. Sources of information
2. Personal Investigation, Confidential Report from other bank, Head Office/Branch/Chamber of Commerce.
3. CIB (Central Information Bureau) report from Central Bank.
i. Evaluation of compliance with its lending policy.
ii. Evaluating the proposed security.
4. LRA is must for the Investment exceeding one crore – as ordered by Bangladesh Bank.
5. If everything is in accordance the Investment is sanctioned
Documentation a. Then bank prepare a Investment proposal which contains terms and conditions of Investment for approval of H.O. or Manager.
b. Takes the necessary papers and signatures from borrower
Disbursement An Investment Account is opened. Where customer A/C—————————————————————————————Dr.
Respective Investment A/C —————————————-Cr.
FOREIGN EXCHANGE DEPARTMENT
One of the largest businesses carried out by the commercial bank is foreign trading. The trade among various countries fills for close link between the parties dealing in trade. The situation calls for expertise in the field of foreign exchange operations. The bank, which provides such operations refereed to as rending international Banking operation. Mainly trisections with overseas countries are respects of import, export and foreign remittance come under the preview of foreign exchange transaction, and international trade demands a flow of goods from seller to buyer of payment from buyer to seller. In this case the Bank plays a vital role to bridge between the buyer and seller.
Foreign Exchange Mechanism in Flow Chart:
Forward Forward documents
Makes payment Makes payment
Foreign Exchange department of EXIM Bank is department of all departments. This department handles various types of activates by three separate sections:
1. Import Section
2. Export section
3. Foreign Remittance.
The functions are of the section is mainly to deal with various components such as
■ Letter of Credit (L/C)
■ Payment against Document (PAD)
■ Payment against Trust Receipt (PTR)
■ Loan against Imported Merchandise (LIM)
Letter of Credit (L/C):
A letter of credit can be defined as an arrangement where in a Bank Guarantee on behalf of these customers to make payments to the beneficiary upon presentation of documents specified in the credit.
Parties involved in L/C:
The person who opens the L/C is known as opener/ buyer/importer of the L/C. The buyer and the seller conclude a sales contract providing for payment by documentary credit.
The Bank issuing the L/C in favor of exporter is known as opening Bank. The opening bank opens L/C on request of importer according to application of the importer.
The Bank through L/C is advised their agent (correspondent Bank) abroad. The duty of the advising Bank is to authenticate the message so that is to the seller can act on it without any fear of forgery etc.
Seller and exporter in whose favor the L/C are opened. The beneficiary is normally the seller of good who receive payment under documentary credit. If has compiled with terms and conditions thereof.
The Bank that is authorized to handle (purchase) the documents under the L/C in the exporting country is known as negotiating Bank. L/C will stipulate either a notified bank to negotiate (restricted L/C) or any bank can negotiate in the seller’s country (unrestricted L/C).
The Bank that is (by the L/C issuing Bank) to effect reimbursement is known as reimbursing bank. Reimbursing Bank authorized to honor the reimbursement claims in settlement of negotiation/ accepting/ payments lodged with its by the paying/ negotiating/ accepting Bank.
A Confirming Bank is one which adds the guarantee to the credit opened by another bank. Therese undertaking the responsibility of payment/ negotiating/ acceptance under the credit in addition to that of the issuing Bank. A confirming Bank normally does so it requested by the issuing Bank.
Types of L/C:
– Revocable/ irrevocable L/C
– Confirmed/ unconfirmed L/C.
– Transferable L/C
– Back to back L/C
– Acceptance L/C
– Revolving L/C
– Red clause L/C
– Green close L/C
The EXIM Bank basically deals with irrevocable L/c. which can not be amended or cancelled by the issuing Bank at any moment and without prior to the beneficiary.
It also deals back to back L/C, which is the letter of credit, provided by the exporter to the import the raw materials from abroad in order to produce the exportable commodity for the importer.
Procedures for opening L/C:
Application for opening L/C:
An importer who is desirous to import goods from foreign country will apply
Issuing Bank for opening a L/C. The importer will provide an application mentioning the following aspects:
○ Full particulars of applications Bank account.
○ Types of business
○ Historical background
○ Amount of required L/C limit
○ Amount of L/C margin.
○ Term of payment
○ Name of imported goods
○ Repayment schedule and source of fund
Document schedule and source of fund.
An importer or L/C opener has to submit the following documents
○ Application from (provided by the Bank)
○ Import registration certificate
○ Pro-forma invoice
○ Four sets of IMP from
○ Insurance cover not
○ VAT registration number
○ Tex registration number
○ Letter of credit authorization form
Examination for opening L/C:
Application must be carefully checked by the concerned officer considering the facts mentioning below:
▪The terms and conditions of L/C applications are consistent with exchange control and import trade resolution UCPDC 500.
▪Illegibility of imported goods
▪The L/C must be opened in favor of importer
▪That is signed by the importer and agreed with the terms and conditions.
▪ Indenting registration number
▪Goods are not of Israel and vassals to be used are not of Israel
▪Insurance cover note with date of shipment.
▪Whether RC is up to date or not
▪Whether IMP form is duly filled up and singed
▪The imported goods are marketable
After scrutinizing all thee legal aspects necessary entry is given to the margin register and charge, commission and margin in realized.
Transmitting the L/C:
The L/C is transmitted to the advising Bank for advising the L/C to he beneficiary. L/C is generally transmitted through tested Telex of Fax. Before transmission of final examination of the L/C contents is necessary for the issuing Bank. It is customary to advice a credit to the beneficiary through advising Bank. Advising Bank after receiving L/C documents informs to the beneficiary for receiving L/C.
Very often advising Banks received request from the issuing Bank to add their conformation 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 Bank is repute reliable and institution and good enough to discharge this obligation.
Amendment o f L/C:
In case of revocable L/C amendment is brought without prior notice of the beneficiary-issuing Bank. But in cage of irrevocable L/C prior notice of the beneficiary is essential.
Issuing Bank will accept amendment of the L/C after getting consent of both importer and exporter.
Payment against Document (PAD):
The issuing, Bank starts (PAD) procedure after getting all necessary documents from the exporter as evidence of export in goods. Documents required for PAD is mentioned below:
○Original (non-negotiable) bill of landing
○Certificate of insurance
○Certificate of origin
○Bill of exchange
○Pre-shipment inspection certificate
○clean report of Finding (CRF)
Examination of PAD documents:
Scrutinizing documents is very important for the issuing Bank. As after Examining all the documents the issuing Bank will make payment to the Negotiation Bank. So, any mistake in the examination process may cost issuing Bank.
Examining the bill of exchange:
■It is drawn a duly signed by the market indicating as the beneficiary
■It is drawn on the import indicating him draw.
■L/C number quoted on it.
■Tenors of the draft are strictly in conformity with the terms stipulated in the L/C.
■Amount is identical
■Amount in words and in figures is same
■Examining the commercial invoice
■It is addressed to the importer
■It is dated, signed and submitted in required number
■It must bear detailed description of goods that must tally with L/C and bill of landing
■Price, quality, quality etc is corresponded to L/C.
■It must be prepared in the language of L/C.
■Invoice must bear L/C authorization and other relevant number.
■Charge relevant to merchandise is included in the invoice and is permitted by the L/C.
Examination of transport document:
■It is presented in full set of negotiable and non-negotiable copies.
■Date of shipment on the bill of landing.
■Bill of landing must be made out in the name of Bank notify the importer.
■Description of goods in the bill of landing must agree with invoice and L/C.
■Port of shipment and destination is as per L/C.
■Bill of landing is singed by shipping company or their agent.
Examination of other document:
Weight lists, inspection certificate, quality certificate, certificate of origin, packing list etc. should agree with L/C terms and conditions and also signed by the appropriate authority. These certificates are usually dated before the date of shipment.
Common discrepancies of the import document:
Following are the common discrepancies found in the documents operation:
■Inadequate number of invoice
■Late shipment of transshipment beyond L/C terms
■one broad endorsement unsigned or not dated on the bill of lading.
■Specifications of goods are not as per terms of L/C.
■Tenor of draft wrong.
■Inconsistent documents presented
■Absence of some documents
If any major discrepancies found in the documents it is informed to the buyer for his/her opinion. If discrepancies are minor then these are overlooked
Lodgment and retirement of import document:
Date of payments: Usually payment is given within 7 days of documents received. Otherwise incase of documents purchased by negotiating Bank it may claim for interest.
Intimation letter: Before payment intimation letter is given to the International department for arranging necessary fund before final payment.
■Receive all kinds of documents
■Checking of documents as per L/C terms
■Entry of PAD registers
■Vouching of PAD register
■Posting of voucher
■Sending credit advice to the head officer
■Informing importer about receiving documents.
Loan against Trust Receipt (LTR):
There may be situation where storage of collateral in an independently controlled filled where house is impractical and improper may require the Goods for further processing of for display the merchandise in order to make the final sale. In such cases a financing institution that as a great degree of trust in the importer may be willing to release the negotiable bill of landing and thereby also the good to the importer against the signing of trust receipt. After the importer has made his/her final sale and received the proceeds, he/her can pay the financing institution that he/ she received as advance.
Loan against imported Merchandise (LIM):
If the importer does not come to negotiate the shipping documents from the issuing Bank then it creates LIM though the Bank clears the goods from the port and holds the goods in its go down. Beside the above as soon as the imported goods come to the port the party may fall into financial crisis and requests the Bank to clear the goods from the port making payment to the exporter. In this case the party late may take the goods partly or fully from the Bank by making require payment (if he/ she takes the goods time to time payment will be adjusted simultaneously).
This section negotiates the export documents and collects and purchases the export in relation to export credit.
○Post shipment finance
Export finance arises from trade between two traders trading in two different countries. A brief idea of the both categories is given below:
When an exporter intends to ship the goods to an oversea buyer he/ she need fund for purchasing goods to be exported. He/ she may also depend upon the bank for arranging credit for he supplies of goods.
Post shipment finance:
Post shipment finance is more concerned with Banks than pre-shipment finance. This type of finance starts after the goods have already been shipped.
Function of export section:
Export section performs different types of tasks such as:
■Back to Back L/C open
■Foreign Document Bill for Collection (FDBC)
■Foreign Document Bill for purchase (FDBP)
■Local Documentary Bill for purchase (LDBP)
■Secured Overdraft (SOD) export
■Export Cash credit (ECC)
■pacing Credit (PC)
■Accepted Bills Payable (ABP)
Back to Back L/C Open:
It is secondary letter of credit opened by the advising bank in favor of a domestic/ foreign supplier on behalf of the beneficiary originals foreign L/C.
As the original letter of credit of Bank by import letter, it is called back to back L/C. The second L/C is opened on he strength of the original for a smaller amount i.e. maxlmum75% is shipped under lien and 10% under packing credit. There is three of Back L/C opened by EXIM bank of Bangladesh ltd.
Back to Back L/C (Foreign):
When the BTB L/c is opened in a foreign country supplier it is called BTB L/C (Foreign). It is general payable within 120 days at sight.
Back to Back L/C (EDF):
EDF stands for Export development fund that is provided by the ADB to Bangladesh Bank for Export promotion of 3’d world country like Bangladesh. When the Bank is not in a position to support the amount of Back L/C then apply for loans to the Bangladesh Bank for Back L/C (EDF).
Back to Back L/C (Local):
When the Back to Back L/C is opened for local purchase of materials is called Back to Back L/C (Local). It is generally payable within 90 days at sight.
Procedures for Back to Back L/C:
Exporter should apply for Back to Back L/C.
Exporter L/C or master V under is lien.
Opening of Back to Back L/C.
Terms and conditions for Back to Back L/C.
That the customer has credit lien facility.
That L/C is issued as per UCPAD 500.
That on the export L/C negotiation clause in present.
That there is no provision for Blank endorsement of B/1.
That payment clause is thereon the L/C issuing Bank ensuring payment.
Consideration for a back L/C.
▪Whether client can manufacture within the time period
▪The unit of the finished pro-forma invoice should be considering while allowing margin.
▪Consider the expiry date and shipment date.
▪On-side inspection whether manufacturing is carried out.
Payment under Back to Back L/C:
Deferred payment is made in cause of Back to Back L/C as 6, 90,120,180 date of maturity period. Payment will be given after realizing export proceeds from the L/C issuing Bank from the abroad.
Reporting of Bangladesh Bank:
At the end of every month reporting of Bangladesh Bank is mandatory regarding the whole months export operation. The procedures in this respect are as follows:
■To fill up the E-e schedule of S-l category. The whole month import amount, quality, goods category, country, currency etc. all are mentioned. Respective IMP forms are also attached with the scheduled to fill up the E-3/P-3 for all invisible payment.
■Original IMP is forwarded to Bangladesh Bank with mentioning novice value.
■Duplicate IMP is skipped with the Bank along with the Bill of entry.
A person desirous to exports should apply to obtain ERC from CCLNE. Then the person should take step for export purpose into he Bank for obtaining EXP from. He/ she must submit the following documents:
■Certificate from concerned government organization
After satisfaction on the documents the Banker will issue EXP from to the Exporter. Now the exporter will be getting shipping and other documents from the shipment procedure. Exporter should submit all these documents alone with letter of indemnity to the Bank for negotiation.
Documents of Export:
Following major documents are required for export purpose.
■Bill of lading.
■Bill of exchange.
■Certificate of origin.
■Quality control certificate.
Procedures for collection of export Bill:
There are two types of procedures regarding collection of export Bill
Foreign Documentary Bill for collection (EDBC)
Foreign Documentary bill for Purchase (EDBP).
Foreign Documentary bill for Collection (FDBC):
Exporter cans collection the Bill through negotiating banks on the basis of collection. Exporter in this case will submit al the documents to the negotiating Bank for collection of Bill from inspector, the exporter will get money only when the issuing Bank gives payment. In this connection Bank will scrutinize all the documents as per terms and conditions mentioned in L/C.
Entry given twice in this register
-When document is forwarded to the issuing Bank.
-When proceeds realized.
Foreign Documentary Bill for purchase (FDBP)
When exporter sale all the export documents to the negotiating Bank it is as FDBP. In this case the exporter will submit all the documents to the Bank. The Bank gives 60%-80% amounts to the exporter against total L/C value.
Local Documentary Bill for purchase (LDBP):
◊Incoming of LIC customer with the L/C to negotiate.
◊Documents given with L/C.
◊Scrutinizing documents as per L/C terms and conditions.
◊Forward the documents to L/C opening Bank.
◊L/C issuing Bank gives acceptance and forward acceptance letter.
◊Payment given to the party by collection basis or by purchasing documents.
Packing Credit (PC):
It is one kind of credit sanctioned by export department to meet the exported goods shipment timely. The Bank will give the facility after decoction of Back to Back L/C from total L/C value.
Secured Overdraft (SOD):
Secured overdraft is one kind of facility enjoying by the exporter from the export section. It is generally given to meet the Back to Back L/C claim Sometimes it is given to the exporter by force for meeting the Back to Back L/C claim due to delay of Master L/C payment.
Foreign remittance section:
Different funds are mobilized form foreign country to our thought the foreign remittance section. Purchase of foreign currencies constitutes inward foreign remittance and sales of foreign currencies constitute 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 remittances of foreign exchange between the tow countries
EXIM Bank bas authorize dealership. Different branch of EXIM Bank such as Motijheel branch, Mirpur branch etc. is providing the foreign remittance services to its customers. But EXIM Bank Gazipur chowrasta branch has no authorized dealership. For this reason this branch can not provide the foreign remittance services to its customer. EXIM Banks foreign remittance facilities include FBC, LFBC purchase and sales of FCY, FTT, and traveler cheque, FBP.
Way of transferring the funds:
An Account of the branch named which in a multinational Bank for the Transferring of the fund called NOSTRO Accounts. Just this account use only this Branch
VOSTRO Account is the opposite of NOSTRO Accounts where a multinational Bank maintains account in the local Bank to meet the requirements of sending fund. These accounts are not use able.
Remittance procedures of foreign currency:
There are two types of remittance:
1. Inward remittance
2. Outward remittance.
1. Inward Foreign Remittance:
Inward remittance covers purchase of foreign currency in the form of foreign T.T., D.D, and bills, T.C. etc. sent from abroad favoring a beneficiary in Bangladesh. Purchase of foreign exchange is to be reported to Exchange control Department of Bangladesh bank on Form-C.
2. Outward Foreign Remittance: Outward remittance covers sales of foreign currency through issuing foreign T.T. Drafts, Travelers Check etc. as well as sell of foreign exchange under L/C and against import bills retired.
Working of this department:
1. Issuance of TC, Cash Dollar /Pound
2. Issuance of FDD, FTT & purchasing, Payment of the same.
3. Passport endorsement.
4. Encashment certificate.
5. F/C Account opening &filing.
The remittance process involves the following four modes
Dollar/ Pound Sell Bank sells Dollar / Pound for using in abroad by the purchaser. The maximum amount of such sell is mentioned in the Bangladesh Bank publication of ‘Convertibility of Taka for Currency Transactions in Bangladesh’.
Purchase Bank can purchase dollar from resident and non – resident Bangladeshi and Foreigner. Most dollars purchased comes from realization of Export Bill of Exchange.
(TC) Issue of TC TC is useful to traveler abroad. Customers can encash the TC in abroad from the drawee bank. TC is alternative to holding cash and it provides better security than holding cash in hand.
Of TC If any unused leaf of TC is surrendered bank buys it from the customer. All payments are made in local currency. Banks generally buy only those TC.
Telex Transfer Outward TT It remits fund by tested TT via its foreign correspondence bank in which it is maintaining its NOSTRO Account.
Incoming TT It also makes payment according to telegraphic message of its foreign correspondence bank from the corresponding VOSTRO Account.
Foreign Demand Draft Bank issue Demand Draft in favor of purchaser or any other according to instruction of purchaser. The payee can collect it for the drawee bank in which the Issuing bank of Demand Draft holds its NOSTRO Account. Bank also makes payment on DD drawn on this bank by its foreign correspondence bank through the VOSTRO Account.
Telegraphic Transfer (TT):
TT is one of the important tools of transferring foreign currency from one country to another. The persona who wants to send TT to the abroad at first he/ has to submit an application from duly mentioned it TT amount and he /she has to deposit amount mentioned in voucher to the cash department. It is generally performed by the Bank branch through their respective NOSTRO account who is maintaining any foreign Bank account outside the country. The originating Bank sends a message to the paying foreign Bank for making payment against the mentioned TT accounts number. The foreign make payments to the party and also make debit account against respective Bank. At him same time foreign Bank send advice to head office ID division for acknowledging the debited amount. Head officer ID division sends debit advice to the respective branch for acknowledging the payment.
Outward remittance includes sales of TC and FC notes etc.
Dales of IC and FC notes:
To get TC and FC notes at least the customer has to submit an application from Filling up the required column, which is formatted by the Bank, is caped T/M from. After checking up the from the desk officer passes voucher and issues a TC and gives cash dollar to the customer. In both the cases the Bank endorse total amount in customer’s passport. The Bankers required photocopy of customer’s passport (page-l -7) and endorsement paper. The charge of endorsement taken by the branch is Tk. 200 only. Sale of TC and FC note amount varies from different countries:
5. COMPETITIVE POSITION OF EXPORT IMPORT BANK OF BANGLADESH LIMITED WITH PREMIER BANK LIMITED.
The performance of the bank is more significant in both development and achievements of continuous growth rate in all the areas of banking operations. If we see the balance sheet of 2007 of Exim Bank Ltd., we can say that in all over Exim Bank Ltd. performing better than other banks in Bangladesh. In the year of 2007 the bank has successfully earned a pre-tax profit of Tk.1,618.80 Million registering an annual growth of 34.96% than that of the previous year. It has successfully mobilized Tk.41,546.57 million deposit from depositors and has arranged disbursement of Tk.40,195.24 million as investment through its 35 Branches. The return on assets after tax was 2% well above the banking-industry average.
Below we compare the performance of Exim Bank Ltd. with Premier Bank Ltd. in some of the areas of banking operations.
Capital and Reserve Fund:
Exim Bank Ltd.
Amount in Million.
Premier Bank Ltd.
Amount in Million.
Above the chart shows that capital and reserve fund of Exim Bank Ltd. is much better than the Premier Bank Ltd.
Assets position of Export Import Bank of Bangladesh Limited is good compare to Premier Bank Ltd. The growth rate of assets of Exim Bank Ltd. is better than the Premier Bank Ltd. For the year of 2007 the growth rate of assets of Exim Bank Ltd. was 23.23% instate of Premier Bank Ltd. 19.88%.
Investment of Exim Bank Ltd. is much better than the investment of Premier Bank Ltd. But the growth rate of investment of Premier Bank Ltd. is better than the Exim Bank Ltd. For the year of 2007 the growth rate of investment of Premier Bank Ltd. was 44.65% instate of Exim Bank Ltd. 23.83%.
Foreign Trade business of Exim Bank Ltd. is much better than Premier Bank Ltd. Foreign Trade business of Exim Bank Ltd. increasing year by year but Foreign Trade business of Premier Bank Ltd. decrease in year 2007 from 2006.
Foreign Remittance of Premier Bank Ltd. is much better than the Exim Bank Ltd. Although foreign remittance of Exim Bank Ltd. is increasing year by year but the Premier Bank Ltd foreign remittance receive amount always higher than the Exim Bank Ltd.
Conclusion of Competitive Position:
From the above circumstances we can say that in overall Exim Bank Ltd. financial position is much better than the Premier Bank Ltd. Their reserve fund, asset position, investment position, foreign trade business, very well position rather than the Premier Bank Ltd. position. But foreign remittance position is not that much well. They should try to develop this sector and to develop the sector the bank need to take initiatives to make remittance arrangements with some leading exchange houses at abroad because foreign remittance effect the export-import business.. And Exim Bank Ltd. mainly focus on export-import business, that’s way their name is Export Import Bank of Bangladesh Limited.
6.1 SWOT ANALYSIS
SWOT analysis is the detailed study of an organization’s exposure and potential in perspective of its. This facilitates the organization to make their existing line of performance and also foresee the future to improve their performance in comparison to their competitors. As though this tool, an organization can also study its current position, it can also be considered as an important tool for making changes in the strategic management of the organization.
EXIM Bank Limited has already established a favorable reputation in the banking industry of the country. It is one of the leading private sector commercial banks in Bangladesh. The bank has already shown a tremendous growth in the profits and deposits sector.
EXIM Bank has provided its banking service with a top leadership and management position. The top management officials have all worked in reputed banks and their years of banking experience, skill, and expertise will continue to contribute towards further expansion of the bank.
EXIM Bank Limited has already achieved a high growth rate accompanied by an impressive profit growth rate in 2007. The number of deposits and the loans and advances are also increasing rapidly.
EXIM Bank has an interactive corporate culture. The working environment is very friendly, interactive and informal. And, there are no hidden barriers or boundaries while communicate between the superior and the employees. This corporate culture provides as a great motivation factor among the employees.
EXIM Bank has the reputation of being the provider of good quality services too its, potential customers.
The main important thing is that the bank has no clear mission statement and strategic plan. The banks not have any long-term strategies of whether it wants to focus on retail banking or become a corporate bank. The path of the future should be determined now with a strong feasible strategic plan.
The bank failed to provide a strong quality-recruitment policy in the lower and some mid level position. As a result the services of the bank seem to be Deus in the present days.
The poor service quality has become a major problem for the bank. The quality of the service at EXIM Bank is higher than the Dhaka Bank, Prime Bank or Dutch Bangla Bank etc. But the bank has to compete with the Multinational Bank located here.
Some of the job in EXIM Bank has no growth or advancement path. So lack of motivation exists in persons filling those positions. This is a weakness of EXIM Bank that it is having a group of unsatisfied employees.
In terms of promotional sector, EXIM Bank has to more emphasize on that. They have to follow aggressive marketing campaign.
In order to reduce the business risk, EXIM Bank has to expand their business portfolio. The management can consider options of starting merchant banking or diversify into leasing and insurance sector.
The activity in the secondary financial market has direct impact on the primary financial market. Banks operate in the primary financial market. Investment in the secondary market governs the national economic activity. Activity in the national economy controls the business of the bank.
Opportunity in retail banking lies in the fact that the country increased population is gradually learning to adopt consumer finance. The bulk of our population is middle class. Different types of retail lending products have great appeal to this class. So a wide variety of retail lending products has a very large and easily pregnable market.
A large number of private banks coming into the market in the recent time. In this competitive environment EXIM Bank must expand its product line to enhance its sustainable competitive advantage. In that product line, they can introduce the ATM to compete with the local and the foreign bank. They can introduce credit card and debit card system for their potential customer.
In addition of those things, EXIM Bank can introduce special corporate scheme for the corporate customer or officer who have an income level higher from the service holder.
At the same time, they can introduce scheme or loan for various service holders. And the scheme should be separate according to the professions, such as engineers, lawyers, doctors etc.
All sustaining multinational banks and upcoming foreign and private banks pose significant threats to EXIM Bank Limited. If that happens the intensity of competition will rise further and banks will have to develop strategies to compete against these local and foreign banks.
The default risks of all term loans have to be minimized in order to sustain in the financial market. Because of default risk the organization may become bankrupt. EXIM Bank has to remain vigilant about this problem so that proactive strategies are taken to minimize this problem if not eliminate.
The low compensation package of the employees from mid level to lower level position is not able to keep the employee motivation. As a result, good quality employees leave the organization and it effects the organization as a whole.
6.2 RATIO ANALYSIS
Analyzing the financial performance (also called financial analysis) is so much essential for each and every business institution as well as for the Banking institutions to assess their past financial performance and to identify the sources, where the necessary improvement is needed to perform better in the future and to meet the future challenges by taking effective business strategy. Financial analysis typically is associated with ratio analysis. Ratio analysis involves the methods of calculating and interpreting the financial ratios to analyze the firm’s relative financial performance. The main purpose of this analysis is to analyze and monitor the firm’s financial performance, so, that the interested parties (both the external and internal) can realize the firm’s actual performance easily and conveniently, which is so much essential for the parties. There are several ratios that help a particular analyst to analyze the past performance of a particular firm and to diagnose the various relevant variables, which are important for improving the future operation of that firm. The financial ratios, that are useful for analyzing the past financial performance of a financial institution, such as
Return on Investment(ROI)
Return on Equity(ROE)
Now we are going to comparison above the ratio EXIM Bank Ltd. with Premier Bank Ltd.
Current Ratio: A measure of liquidity, calculated by dividing the current assets by current liabilities. It shows the level of current assets that a particular firm has against per Taka of current liabilities of that firm. So the equation becomes:
Current ratio = Current Assets / Current Liabilities
EXIM Bank Ltd.
We know that, the current ratio measures a firm’s liquidity by measuring the portion of its current asset relative to its current liabilities and the higher the ratio, the higher the liquidity of the firm. So, after observing the graph shown above, it can be said that the company’s current ratio is up warding year by year and Bank’s current ratios are always below the standard level (2), which is not good and risky for the firm – EXIM Bank. In 2007 it was highest. But in the year 2005 to 2006 Bank’s current ratio as well as the liquidity is increasing at slow rate, which is good for the Bank and the reason is that the Bank has maintained a steady level of current liabilities during this period of time.
Premier Bank Ltd.
We know that, the current ratio measures a firm’s liquidity by measuring the portion of its current asset relative to its current liabilities and the higher the ratio, the higher the liquidity of the firm. So, after observing the graph shown above, it can be said that the company’s current ratio is up warding year by year and it is the highest in the year 2007.
We know that, the current ratio measures a firm’s liquidity by measuring the portion of its current asset relative to its current liabilities and the higher the ratio, the higher the liquidity of the firm. We can say that Premier Bank Ltd. current ratio is better than EXIM Bank Ltd. current ratio.
Return on Investment (ROI):
The Return on investment (ROI), which is often called the firm’s return on total assets, measures the overall effectiveness of management in generating profits with its available assets. The higher the ratio, the better performance of the organization is ensured.
It is calculated as follows: ROI = Net Profit after Tax / Total Asset
EXIM Bank Ltd.
After having a careful view on the graph I am able to say that the Bank’s effectiveness to generate return by using its available assets is fluctuating year to year and the Bank has generated maximum amount of ROI in the year of 2007 and due to lack of efficiency in utilization of assets the Bank’s ROI falls in the minimum level in the year of 2006.
Premier Bank Ltd.
|Year||Net Profit after Taxes||Total Assets||Return on Investment|
We know that, The Return on investment (ROI), which is often called the firm’s return on total assets, measures the overall effectiveness of management in generating profits with its available assets. In graphical presentation; the ROI is 0.0080 in the year 2005, increasing in 2006 and again decreasing in 2007. So bank should be concerned with this matter.
We know that, The Return on investment (ROI), which is often called the firm’s return on total assets, measures the overall effectiveness of management in generating profits with its available assets. After having a careful view on the above data, I am able to say that the Bank’s effectiveness to generate return by using its available assets is fluctuating year to year. But comparatively EXIM Bank Ltd. ROI is much better than ROI of Premier Bank Ltd.
Return on Equity (ROE): It measures the return earned by the funds invested by the common stockholders.
It is calculated as follows:ROE=Net Profit after Tax/Shareholder’s Equity
The Company’s return on equity is decreasing over the time, which is not good for the Bank. The EXIM Bank has generated maximum amount of ROE in the year 2003, which is 34.05% but after that, the Bank’s ROE is decreasing year to year, which is not favourable for the EXIM Bank. The ROE is decreasing from the year 2004 to year 2006 as the amount of proposed dividend and paid up capital of the Bank has increased lot during this period of time but compare to that the amount of net profit is not increasing that much as the operating income of the Bank is increasing as the Bank as established some new branches during this period of time.
Premier Bank Ltd.
|Year||Net Profit after Taxes||Stockholders’ Equity||Return on Equity|
We know that, The Return of Equity (ROE) measures the return earned on the owner’s (both preferred and common stockholders’) investment. In graphical presentation; the ROE is increasing in 2006 and decreasing in 2007. So bank should be concerned with this matter.
The Return of Equity (ROE) measures the return earned on the owner’s (both preferred and common stockholders’) investment. Generally, the higher this return, the better off the owner’s. So, to see the above data we can say that ROE of EXIM Bank is better than the Premier Bank.
Debt Ratios: The ratio analyzes a firm’s debt position, which indicates the amount of other people’ money being used in the firm to generate profits by measuring the portion of total asset financed by the firm’s creditor.
This ratio is calculated as follows:Debt Ratio=Total Liabilities/Total Asset
EXIM Bank Ltd
After having a careful view on the graph, we can see that the company, EXIM Bank has financed on an average of above 94% of its total assets with debt in every year but from the year 2005 the Bank’s debt position is started to fall, as the Bank is now emphasizing on equity capital financing and the Bank has lowest level of debt ratio in the year 2007 as the Bank has increased its paid up capital of Tk. 214.22 crore.
We know that, the debt-equity ratio indicates the relationship between the long-term funds provided by creditors and those provided by the firm’s owners. The results of debt ratio are low in 2005, lowest in 2006 and better in 2007.so bank recover the problem in last year.
We know that, the debt ratio measures the proportion of total assets provided by the firm’s creditors. So, after observing the both banks graph shown above, it can be said that the EXIM bank debt ratio is better than the Premier bank .
Conclusion of Ratio Analysis:
Financial analysis typically is associated with ratio analysis. Ratio analysis involves the methods of calculating and interpreting the financial ratios to analyze the firm’s relative financial performance. The main purpose of this analysis is to analyze and monitor the firm’s financial performance, so, that the interested parties (both the external and internal) can realize the firm’s actual performance easily and conveniently, which is so much essential for the parties. From the above circumstances we can say that, although all over performance of Exim Bank Ltd. is much better than the Premier Bank Ltd. but to develop more the bank need to develop and achieve continuous in all the areas of banking operations. Because the performance of the bank is more significant in both development and achievements of continuous growth rate in all the areas of banking operations.
® There has computer-networking system between the branches of EXIM Bank.
® There is no training institute of EXIM Bank which is very much essential for employees for betterment for the job.
® Encoding and decoding process of test number consume most of time of the officer who works in that desk. But a simple computer program could do the same if the system computerized.
® Officer of the bank are competent even through may of them simply know the working procedure but they lack of the depth of knowledge about of that particular job that they are doing.
® The bank may give more to its customer better service if all of its departments are computerized and incorporated under local area network (LAN).
® Bank should provide advances towards the true entrepreneur with considering conventional system of security collateral; moreover the whole process should be completed within an expected time.
To get competitive advantage and to deliver quality service, top Management should try adapting the following service:
1. Credit card and automated teller Machines (ATM) should be introduces
As soon as possible.
2. EXIM Bank should develop E-Banking system.
3. EXIM Bank should develop its own networking system between braces
so that they can exchange their information pastier and efficiently.
4. EXIM Bank always should monitor the performance of its foreign trade.
5. EXIM Bank Ltd. Should focuses on their promotional activities & bank marketing.
6. They should also focus on the marketing aspect to late customer known
About their product and offerings and more components should be given on customer service to attract new customer.
7. Separate officers may be allotted for their special parties in the import and export division will maintain every work of then form L/C opening payment.
8. The branch Manager Officers and executives who achieved target in all respect may be rewarded.
9. Now days, Many well established banks give emphasis in advertisement of their existing products like Prime Bank, EBL etc. EXIM Bank should concentrate on this matter seriously.
Export Import Bank of Bangladesh Limited is a third generation private commercial bank in the country with commendable operating performance
Directed by the mission to provide prompt and efficient services to clients.
EXIM Bank has successfully celebrated its Tenth years of operation. It provides a wide rage of commercial banking services EXIM Bank has a achieved success among it peer group within a short span of time with its professional and dedicated team of management having long modern banking.
With all its resources, the management of the Bank firmly believes that the bank would be able to encounter problem that my arise both at micro macro economic levels. The management of the Bank is maintaining an efficient portfolio in order to have a healthy growth and retain customer satisfaction. EXIM Bank is engaged in modern banking. It is expected that EXIM Bank by its efficient Asset and liability management will be able to maintain its trend of growth and thus overcome the treat.
Neither EXIM Bank having small and targeting niche markets is likely to be less affected by restrictive monetary and or fiscal policy. The Management of the Bank is planning to meet the required capital adequacy withering the stipulated time frame, and a loan and advance policy that expected the loan loss provisioning in future will be within tolerable limit having little material impact on future profitability as well as net worth. A although EXIM Bank is yet to be fully automated the Bank has an adequate modern technology to meet its present requirement and it proceeding aggressively to enhance its technology level. As EXIM Bank is perforating good in traditional general banking and there is a good demand for Islamic Banking and the opinion of then (The Management) that the performance of the Bank is getting much better than past. I wish and hope that in future EXIM Bank will be number one commercial Bank in Bangladesh.