Loan and Advance and Overall Customer Satisfaction of IFIC Bank

The major objective of this report is to observe and evaluate Loans and Advances activities and performance evaluation of different department of the IFIC Bank Limited. Other objectives are to analysis overall Customer Satisfaction and discuss sanction procedures also recovery procedures systems. Finally evaluate Loans and Advances performance and find out the benefits and incentives provides to the loans and advance proceeds of IFIC Bank.

Objective of the Study

The primary objectives of the study are summarized in the following manner:

• To learn desk-wise activities in Bank Branch.
• To study financial activities of the Bank.
• To analyze the performance of Elephant Road
• To gain practical experiences and view the application of theoretical knowledge in the real life.

The Secondary objectives of the study are summarized in the following manner:

• Provide an overview of the procedure of general banking and credit facilities of IFIC Bank Ltd.
• Identify the over all customer satisfaction level.
• Study on how to improve customer satisfaction level.

Scope of the Study

Banking sector is a large and difficult area. A Bank has different products, different services and different customers. Different departments of a Bank perform different activities.

As I was an Intern, my scope was very much limited and restricted. I had to maintain some official formality for the collection of data of my report. I had the opportunity to work only at the IFIC Bank Ltd., Elephant Road Branch. The report is based on my observation and studies during my internship period in Elephant Road Branch of the IFIC Bank. The study covers the Bank’s functional areas i.e. Service of IFIC Bank & its other department such as General Banking, Loan and Advance, Account opening, Clearing and Foreign exchange.

Methodology of the Report

This report is prepared using both Primary and Secondary information.

Nature Of the study

The nature of the study has to be explanatory rather than testing any hypothesis. Being the nature of this study an exploratory one and using descriptive tools rather than inferential statistical ones, the present study is both a theoretical as well as empirical study.

Primary Information was collected through

• Informal interview with the organization officials of concerned department.
• Face to face conversation with the respective officers and staffs of the Branch.
• Informal conversation with the clients.
• Practical work exposures from the different desk of the three department of the branch were covered.

Secondary Information that was used for this report is collected mainly from

• Statement of affairs and Statement of Income account of the specific branch on yearly basis.

Other sources are-

1. Annual report of IFIC Bank Ltd.
2. Web site of the bank.
3. Bank papers and hand notes.
4. Different lending forms and schemes used by the Bank.

Sample Size

The sample size used in this study is 30. The sample size was low assuming that the homogeneity prevails in customer perception related to service quality.  The respondents were the regular customer of IFIC visiting Elephant Road Branch on regular interval.

Sampling Techniques and Procedure

The sampling technique used in this study is non- probabilistic in nature. More accurately convenient sampling was used. That is why the sample size was not mathematically calculated.

Portrait of IFIC Bank

International Finance Investment and Commerce Bank Limited (IFIC Bank Ltd.) is a banking company incorporated in the people’s republic of Bangladesh with limited liability. It was set up at the instance of the Government in 1976 as a joint venture between the Government of Bangladesh and sponsors in the private sector with the objective of working as a finance company within the country and setting up joint venture banks/ financial institutions abroad. The Government held 49 percent shares and the rest 51 percent were held by the sponsors and general public. In 1983 when the Government allowed banks in the private sector, IFIC was converted into a full-fledged commercial bank. The Government of the People’s Republic of Bangladesh now holds 35% of the share capital of the Bank. Leading industrialists of the country having vast experience in the field of trade and commerce own 34% of the share capital and the rest is held by the general public.

MISSION OF IFIC BANK LTD.

The mission of IFIC Bank Ltd. is to provide service to its clients with the help of a skilled and dedicated workforce whose creative talents, innovative actions and competitive edge make our position unique in giving quality service to all institutions and individuals that we care for.

IFIC Bank is committed to the welfare and economic prosperity on the people and the community, for the Bank derives from them its inspiration and derives for onward progress of prosperity.

IFIC Bank want to be the leader among the banks in Bangladesh and make it’s indelible mark as an active partner in regional banking operating beyond the national boundary.

In an intensely competitive and complex financial and business environment, IFIC Bank particularly focuses on growth and profitability of all concerned.

Policy Committee

All matter relating to the principals, policies, rules and regulation etc. for operation and management of Bank is recommended by the committee to the board of Directors.

Corporate Culture

IFIC Bank is one of the disciplined Banks with a distinctive Corporate Culture. Here it believes in shared meaning, shared understanding and shared sense making. IFIC Bank’s people can see and understand events, activities, objects and situations in a distinctive way. They maintain 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 them. People in the Bank see themselves as a tight knit than family that believes in working together for growth. The corporate culture IFIC Bank belongs has not been imposed; it has rather been achieved through IFIC Bank’s Corporate Culture.

Different Divisions

Human Resources division:

• Investment Division
• Marketing Division
• International Division
• General Banking Division
• General Service Division
• Financial administration Division
• Internal Control and Compliance Division

Joint Ventures

• Bank of Maldives Limited:

IFIC is the first among the private banks to have operations abroad. In 1983, the Bank set up a joint venture bank in Maldives known as “Bank of Maldives Limited” (BML) at the request of the Government of the republic of Maldives. This is the only national bank in that country having branches throughout that country. IFIC Bank managed the affairs of BML from 1983 to 1992. IFIC Bank sold its shares in 1992 to the Government of the Republic of Maldives and handed over the Management of BML to Maldives Government.

• NIB Bank Ltd., Pakistan:

IFIC Bank had two branches in Pakistan, one in Karachi and the other in Lahore. Karachi Branch was opened on 26^th April 1987, while Lahore Branch was opened on 23^rd December, 1993.

To meet the Minimum Capital Requirement (MCR) of the State Bank of Pakistan, the Overseas Branches in Pakistan have been amalgamated with a reputed leasing company in Pakistan named National Development Leasing Corporation (NDLC) Ltd. Therefore, the existence of the above Overseas Branches has ceased on 2^nd October 2003 and a new joint venture bank entitled NDLC-IFIC Bank Ltd. Emerged in Pakistan on 3^rd October 2003. The Bank was subsequently renamed as NIB Bank Ltd. IFIC Bank presently holds 7.31% equity in the Bank.

• Nepal Bangladesh Bank Ltd. (NB Bank):

Nepal Bangladesh Bank Ltd. (NB Bank), a joint venture commercial bank between IFIC Bank Ltd. And Nepal nationals, started operation with effect from June 06, 1994 in Nepal with 50% equity from IFIC Bank Ltd.

The Bank was so far opened 17 (seventeen) branches at different important locations in Nepal. IFIC Bank presently holds 25% shares in NB Bank.

• Nepal Bangladesh Finance & Leasing Limited (NB Finance):

Nepal Bangladesh Finance & Leasing Co. Ltd. (subsequently renamed as Nepal Bangladesh Finance & Leasing Ltd.), another joint venture leasing company between IFIC Bank Ltd. and Nepal Nationals, started its operation on April 18, 1999 in Nepal. IFIC Bank presently holds 15% share in the company.

• Oman International Exchange LLC (OIE):

Oman International Exchange LLC (OIE), a joint venture between IFIC Bank Limited and Oman nationals, was established in 1985 to facilitate remittance by Bangladeshi wage earners in Oman. IFIC Bank holds 25% shares, and the balance 75% is held by the Omani sponsors. The exchange company has a network of 10 branches covering all the major cities/towns of Oman. The operations of the branches are fully computerized having online system.

The affairs and business of the company is run and managed by the Bank under a Management Contact.

PROGRESS REPORT OF IFIC BANK LTD:

Progress report of IFIC Bank Ltd for the five years is given below:

GROWTH OVER THE YEAR:

Different Departments of IFIC Bank Limited

General banking is the standing point of the banking operation. It is the department which provides day to day services to the customers. Main function of general banking department is the following:

Account Opening Section

The relationship between banker and customer begins with the opening of an account by the customer. Opening accounts binds the banker and customers into contractual relationship. But selection of the customer for opening an account is very crucial for a bank. In fact, fraud and forgery for all kinds start by opening an account. So bank should take extreme caution in this section. Customers can different types of accounts through this department such as:

• Current deposit account.
• Saving deposit account.
• Fixed deposit account (FDR)
• Short term deposit (STD)
• Sanchay patra opening
• Pension saving scheme (PSS)
• Monthly saving scheme

Deposit Section

There are some requirements that have to be completed for opening an account.

Current Deposit Account

Current account is the account where the account holders can make numerous transactions within working day. There is no restriction on the number and the amount of withdrawals from the current account with in availability of founds. As the banker is under the obligation to repay this deposit on demand, no interest is paid in this account. Generally current account is opened for businessmen and traders for easy transaction. But a person can open a current account for special purpose.

Private firm:

 Proprietorship firm:

• Declaration of proprietorship.
• Photograph
• An introducer of IFIC Bank Ltd. Introducer must be a CD account holder
• Photograph must be attested by the introducer
• Signed and rubber stamp seal of the client.
• Account agreement form.
• Valid trade license from City Corporation.
• Mandate if operation by third party is to be allowed.

Partnership Firm:

There is a different account form for proprietorship firm; introduction of running an account is given in this form. The following documents are required to open this type of accounts:

• An introducer of IFIC Bank Ltd. Introducer must be a CD account holder.
• Photograph must be attested by the introducer.

• Photocopy of partnership deed registered with Register of firm duly

Attested by notary public.

• Photocopy of registration certificated duly attested by notary public.
• Resolution signed by all partners to open the account.
• Letter of partnership duly signed by all partners in case of non-registered
• Mandate as to operation of the account.
  • Account agreement form.
  • Valid trade license from City Corporation

Club society:

The following documents duly completed shall be obtained from the customer at the time of current deposit account of association/ club/ society etc.

• Photograph
• Signed and rubber stamp seal of the client
• An introducer of IFIC Bank Ltd. Introducer must be a CD account holder.
• Certified copy of the constitution.
• Certified registration of the association.
• List of the members of governing body.
• Exact of resolution of the association.

 Limited company:

A separate account opening form is used for limited company. There are two kinds of limited company: public limited company and private limited company. The bank always takes precautions for opening this type of accounts. Several documents are submitted by the client, which should be checked carefully by the bank to. The following documents are required to open this type of accounts:

Private limited company:

• Photograph
• An introducer of IFIC Bank Ltd. Introducer must be a CD account holder.
• Photograph must be attested by the introducer.
• Memorandum of association and articles of association duly certified by the Chairman or Secretary.
• Principal agreement form.
• Resolution of board, duly chairman/ secretary/ authorizing to open the account with the bank and naming the persons who will operate the account, as per provision of Articles of Association.
• Certificate of incorporation duly certified by chairman/ Secretary.

List of directors as per return of joint stock Company with signature

Public limited company:

• Photograph
• An introducer of IFIC Bank Ltd. Introducer must be a CD account holder.
• Photograph must be attested by the introducer.
• Certificate of incorporation duly certified by chairman/ Secretary.
• Memorandum of association and articles of association duly certified by the Chairman or secretary.
• Resolution of board duly chairman/ secretary/ authorizing to open the account with the bank and naming the persons who will operate the account, as per provision of Articles of Association.
• Principal agreement form.
• Certificate of commencement of business.
• List of directors as per return of joint stock Company with signature.

Savings Deposit Account

Saving account is meant for the people of the lower and middle classes who wish to save part of their income to meet their future needs and intended to earn an income from their savings. For opening this type of accounts following requirements are necessary:

• Photograph must be attested by the introducer.
• An introducer of IFIC Bank Ltd. Introducer must be a SD account holder.

For joint accounts, signatures of all the account holders are necessary. Interest rates of saving deposit and short-term deposit (STD) are as follows:

The interest rates on deposits is being revised which came into effect from 01.03.2008-

Fixed Deposit Revenue (FDR)

FDR is one kinds of fixed deposit scheme. Normally it can be fixed for one month, three months, six months and twelve months. Its interest rate is higher than normal account.

The required documents for FDR are as follows:

• PP size photos of account holder
• Photocopy of national ID card.
• One PP size photo of nominee.

Cash Section

Cash section is a very sensitive organ in a branch and it is handled with extra care. Operation of this section begins at the beginning of the banking hour. Cash officer begin his/her transaction with taking money from the vault, known as the opening cash balance. Vault is kept in a much secured room. Keys of the room remain under control of the cash officer and branch in charge. The amount of Opening cash balances is entered into the cash register. After transaction of whole day, the surplus money remains in the cash counter is put back in the vault and known as the Closing balance.

The maximum amount of money that the branch can keep in its vault is only TK. 15,000,000 according to the permission of the Bangladesh Bank and relative insurance policy. Money is received and paid in this section.

Cash Receipt:

• At first the depositor fills the deposit slip. There are two types of deposit slips in this section. One for saving account and another for current account.
• Officer at the cash counter receives the money, count it, enter amount of money in the scroll register dept at the counter, seal the deposit slip and sign on it with date.
• After filling the required deposit slip, depositor deposits the money.
• At the end of day, entries of both of the registers and cross cheques used with the registers are kept at the cash counter to see whether the transaction is correct or not.
• Then this slip is passed to another officer who enters the scroll number given by the cash counter in his register along with the amount of the money, signs the slip and kept the bank’s part of the slip. The other part is given to the depositor.

Cash Payment:

• When a person comes to the bank to cash a cheque, he/she first gives it to the cash payment counter. If his/her account has sufficient fund, then the computer in charge will post it into the computer.
• There is a computer desk for both saving account and current account. The cheques are placed at that computer desk. If the cheque is not dishonored the bearer will get a token as to show that he/she is the true owner of the cheque while receiving the money from cash counter.

Clearing Section

According to the Article 37(2) of Bangladesh Bank Order, 1972, the banks which are a member of the clearing house are called as Scheduled Banks. The scheduled banks clear the cheques drawn upon one another through the clearing house. This is an arrangement by the central bank where everyday the representative of the member banks sits to clear the cheques. For clearing, there is a department in every Bank.

This department receives cheques, drafts and like instruments from its customers for the purpose of collection with a deposit slip over the counter crediting their accounts. Clearing of cheque is done through the clearing house in Bangladesh Bank. Everyday the first hour starts at 10:00 a.m. and returns house at 5:00 p.m.. Here showes the types of cheque clearing:

Inward Clearing Bills refers the instument drawn on IFIC, FEx. Branch received from other banks in the clearing house by their representative(s).

Outward Clearing Bills refers the instruments drawn on the other banks received by IFIC Bank Ltd. Branch.

Remittance Section

Local Remittance Department:

The commercial bank’s remittance facility towards the customers is to enable them avoid risk rising from carrying cash money from one place to another or making payment to some one in another place. Banks take this risk by remitting the fund on behalf of the customers to save them from any awkward happening through the network of their branches and ensure payment to the beneficiary in exchange of a little benefit known as commission. There are four mode of remitting money from one place to another:

Pay order (PO):

Following procedure is maintained for the issuance of pay order (PO):

• After filling the form carefully, the customer pays the money in cash or by cheques.
• Customer is given a pay order form.
• The concerned teller then issues pay order on its special block. This block has three parts, one for bank and another two for customer. “A/C payee” crossing its seal on all PO issued by the bank. The teller then writes down the name and address of beneficiary on the main part of the PO In other two parts, name and address of the customer is written.
• Two authorized officer signed the PO
• The teller gives an entry to the registry book and maintains the same number of PO
• At the end, customer is provided with the two parts of the PO block after signing on the backs of bank’s part.

Pay Order Issuing Process

IFIC Bank Ltd. Pay order charges:

Demand Draft (DD):

DD is called ‘Banker’s Draft’. It is an instrument, issued by a particular branch, drawn on another branch of the same bank, instructing to pay a certain sum of money. It is very popular instrument for remitting fund from one corner of a country to another. DD is issued in favor of a customer who maintains an a/c with IFIC Bank.

It can be issued against Cash or Cheque. If DD amount is more than TK. 50,000/=, a test code is given on IBCA. The a/c treatments will be – after giving these entries an Inter Bank Credit Advice (IBCA) is prepared which contains the controlling number, depicted that the branch is credited to whom it is issued.

Demand Draft Issuing Process

Following procedure is maintained for the issuance of Demand Draft (DD):

• Customers are supplied with DD form.
• Customer fill up the form, which includes the name of the drawer, name of the payee. Amount of money to be sent, commission, name of the drawer branch, signature and address of the drawer.
• The customer may pay in cash or by cheques from his accounts.
• After the money is paid and the form is sealed, accordingly it is given to the DD issuing desk.
• The block has two parts: one for bank and another for customer.
• Bank part contains issuing date, drawer’s name, payee’s name and sum of the money and name of the drawee’s branch.

After finishing all the required information entry of the DD given in the DD issuing register and at the same time bank issues a DD confirmation slip. It is entered into the DD advice issue register and a number is put on the confirmation slip form in the same register. Later the bank mails this advice to the drawer branch.

The income from DD and PO in Elephant Road Branch in last five years is given in the following table. It shows that income increases in 2009 than 2008. (TK’ in Lac)

Telegraphic Transfer (TT):

Sometimes the remitter of the funds requires fund immediately. In that case, the banker is requested to remit the funds telegraphically. Different modes are Telegram, Telephone, Telex, Fax. Telegraphic Transfer is the most rapid and convenient but expensive method. The drawer and the payee should have accounts with IFIC Bank Ltd. TT is issued against cash, cheque, and letter of instruction.

Accounts section

Accounts department maintains all records of transactions and all types of statements. At the end of transaction hour, all concerned sections send vouchers of transactions to this department. Accounts department compares all figures/ amounts, contents of transactions with supplementary statement prepared by computer. If any discrepancy arises regarding any transaction, then this department reports to the concerned department. Following are the activities of accounts department:

• To record all transaction in the cash book.
• To prepare daily, weekly, monthly, half-yearly and yearly fund position.
• To prepare all kinds of statements related to Bangladesh Bank, Head office and National Board of Revenue (NBR).
• To prepare monthly salary statement, provident fund statement and administrative expenditure statement.
• To make charges for different types of duty.

Other services

Utility Bills Payment

To offer customers a greater banking convenience, one can pay following utility bills from any of the locations:

• DESA
• Grameen Phone.

Card Service

IFIC Bank provides only credit card facilities to its customers. But recently they introduce new types of card named Pre-Paid card.

LOAN AND ADVANCE

 Credit Services of IFIC Bank Ltd.

This is the survival unit of a bank, because the success of this section is a question to every bank. If this section is not properly working, the bank itself may become bankrupt. This is important because this is the earning unit of the bank. Banks are accepting deposits from the depositors in condition of providing interest to them as well as keeping their deposits safely. Now the question may gradually arise how the bank will provide interest to the clients and the simple answer is advance.

We often use loans and advances as an alternative to one another. But academically this concept is incorrect. Advance is the combination of such items where loan is a part only for this credit section of the bank.

To run operations and to earn profit thereby, every bank advances and invests it’s deposited money and reserves equity and other available funds in various profitable sectors. The effective and profitable policies concerning advancing and investment is needed increasingly. Without proper mobilization of deposits under the shadow of advances and investments, no bank can exist. In the area of investment and advancing, IFIC Bank Limited plays a vital role among the private commercial banks of the country.

Advances are the main revenue generating area for any bank. But a commercial bank cannot advances all of its deposits and Bangladesh Bank governs the rules that a maximum of 80 percent of total deposit can be advanced to the clients. The rest 20 percent of the total deposit has to be kept in the Bangladesh Bank as government policy. IFIC bank ltd has extended its advance facilities for the past years with the policy guidelines of Bangladesh Bank.

Types of Advances

All loans and advances that are provided by this bank can be categorized into there heads according to the nature and characteristics of each product:

Nature of different types of Advances

Continuous Loan

IFIC Bank gives in the following Continuous Loan:

1. Cash Credit Hypothecation (CC HYPO)
2. Cash Credit Pledge (CC PLEDGE)
3. Secured Overdraft (SOD)

Cash Credit Hypothecation (CC HYPO)

• Cash credit is given through the cash credit account. Cash credit is an active and running account where deposits and withdrawals may be made frequently. The debit balance of the account on any day can not exceed the agreed limit.
• The instrument is HYPOTHECATION DEED.
• 50% margin requires opening a CC account. (varies)
• Operation of cash credit is same as that of overdraft. The purpose of cash credit is to meet working capital needs of traders, farmers, and industrialist.
• It is granted only the first class parties.
• It is charged against a property where neither the ownership nor the possession is passed to the bank.

Cash Credit Pledge (CC PLEDGE)

• The nature, operational work, and characteristics of CC- PLEDGE in as same as CC ­HYPO.
• PLEDGE in different from CC-HYPO only from the securities or business goods against the loan amount.
• It is charged against properties where the ownership may remain to the borrower but the possession is passed to the bank.
• The instrument is Pledge Deed.

 Cash Credit HYPOTHECATION (CC HYPO & PLEDGE)

IFIC Bank Ltd., Elephant Road Branch

Source: Monthly Statement of IFIC Bank Ltd., Elephant Road Branch

Secured Overdraft (SOD)

• Overdrafts are those drawings, which are allowed by the banks in excess of the balance in the current account up to a specified amount for definite period as arranged for.
• Generally it is given to the businessmen to increase their business activities.
• Usually provide against FDR, PSS, i.e. financial obligation or any primary securities. The interest charges from the date of first withdraw.
• Interest is calculated and charged only on the actual debit balance on daily product basis.
• Balance of OD account are fluctuates
• The interest rate of SOD is 3% above of FDR interest rate, if the FDR is in IFIC Bank. If the FDR is in other bank then the interest r1te is 14.50%.

Term Loan

IFIC Bank gives in the following Term Loan:

1. Industries Loan
2. Others loan

Staff House Building Loan (SHBL)

1. Staff loan against Provident Fund (SLPF)
2. Loan against PSS
3. House Building Loan

Consumer Credit Scheme

i.Industries Loan:

It is a term loan.

It is given for three (3) years at equal installment.

Gross period is allowed of these types of loan.

Gross period is the period that requires earning visible returns

Others Loan:

Loan provided for other purposes which is productive and less risky than industrial sector are treated as others loan.

The terms and conditions of these types of loan are same as industry loan.

iii.Staff house Building Loan:

120 times of basic salary is provided as SHBL. Bank rate + 1 % interest is charged to the loan amount. Repayment adjusted from their monthly salary. Repayment is made at equal monthly installment.

Staff Loan against Provident Fund:

10% of basic is contributed by employee.

Repayment is adjusted from their own salary.

Loan against PSS:

This loan is provides against PSS fund. 80% are given of the PSS fund.

This is 100% secured for the bank.

House Building Loan:

This loan is give for the construction of building house. It is gives for three (3) years at equal monthly installment. This loan is not provided frequently.

Consumer Credit Scheme:

Under this scheme, credit is given to the customer to purchase necessary and luxury commodities like computer, motor vehicle, television, refrigerator, music system, sewing machine, furniture etc.

Other than the employees, it is given to the valuable clients.

It is a 24, 36, 48 installment system @ 15.50% interest.

Small Enterprise financing (SEF)

IFIC Bank gives loan in the following important sectors of Small Enterprise:

1. Easy Commercial loan
2. Retailers loan
3. Transport Loan
4. Commercial house building loan
5. Possession right loan
6. Contractor’s loan
7. Letter of guarantee
8. Working capital loan
9. Letter of credit
10. Loan against imported merchandise (LIM)
11. Loan against trust receipt(LTR)
12. Bidder’s loan
13. Project loan

 Easy Commercial loan:

Individual, business enterprises (other than public Limited Company) engaged in any business to meet business requirement. Any Bangladeshi individual or any business house having valid trade license and must have an account with IFIC Bank Ltd can apply for this loan. Minimum age 21(twenty one) years. Security needed- Pledge of instrument duly discharged by the other (where applicable),FDR/other deposits with IFIC Bank Ltd/ FDR/other Financial instrument issued from other Banks/ ICB unit certificate/ PSS account/MIS/ Demand shares of A & B group Traded in SDE & CSE/ Any other Government security eligible for credit facility (ies). Maximum 90% of the face value of FDR/NCD/WEDB. Face value would mean the original amount for which the FDR/NFCD/WED was issued or the amount renewed, Maximum 90% of the MIS amount where interest is not allowed to be withdrawn until adjustment of the liability. The tenor for the loan is maximum 12(twelve) months.2% is to be charged as a penal interest on overdue amount (if any). Taka.500/- to be realized before disbursement as processing fee.

Retailers loan:

Individual/ Proprietorship firm engaged in retail business. They need this type of loan to meet working capital/ capital finance requirement. Any Bangladeshi individual or small and retail business house having valid trade license and must have an account with IFIC Bank Ltd can apply for this loan. The tenor for the loan is maximum 24(twenty four) months.2% is to be charged as a penal interest on overdue amount (if any). 1% on the loan amount to be realized before disbursement as its service charge and Taka. 500/- to be realized before disbursement as processing fee.

Transport Loan:

Individual, business Enterprises (Other than Public Limited Company) engaged in transport business. They need fund to Purchase of Road/ Water Transport for commercial use. Any  Bangladeshi Customer of the respective branch having business house/ office in the command area with at least 2(two) years experience in their line of business.

Additional 2% charged on the overdue amount as its penal interest. The tenor for the loan maximum 48(forty eight) months.0.50% is charged as service charge on loan amount to be realized at the time of disbursement of loan. 1 % on loan amount (Maximum Tk. 10,000/-) to be realized at the time of disbursement of loan for process the loan.

Commercial house building loan:

Individual, business Enterprises (Other than Public Limited Company) having commercial plot can apply for this loan to construct of commercial building. Any individual or business house in  the command area having account with the branch have the eligibility to apply for this loan. Additional 2% on the overdue amount charged as penal interest, if any. The maximum term of loan is maximum 5(five) years including grace period.

0.25% is treated as service charge on loan amount to be realized at the time of disbursement of loan. Loan processing fee is 1% on loan amount (Maximum Tk. 10,000/-) to be realized at the of disbursement of loan.

Possession right loan:

Proprietorship concern having no collateral security to offer other than possession right of shop can apply for this loan to meet up the need of Fixed Working capital Customer of the respective branch having shop/ business place in the command area having at least 2(two) years experience in their line of business have the eligibility for applying this loan. Additional 2% per month on the overdue charged as penal interest (amount if any). The tenor of the loan is maximum 36(thirty six) months. Tk. 2000/-  to be realized at the time of disbursement of loan as a loan processing fee. Service charge is 0.50% charged on loan amount to be realized at the time of disbursement of loan.

 Contractor’s loan:

Individual, business Enterprises (Other than Public Limited Company) engaged in construction and supply business can apply for this loan to execute work order awarded by Govt. / Semi Govt. & Autonomous Bodies. Any business house in the command area having at least 2(two) years experience in their line of business has the eligibility for this loan.

Additional 2% is charged per annum on the overdue amount as its service charge (if any). The tenor for this loan is maximum 12(twelve) months. Taka. 2000/- to be realized at the time of allowing of drawings as the processing fee of the loan. Service charge is 0.25% on loan amount to be realized at the time of disbursement of loan maximum Taka. 5000/-.

Letter of guarantee:

Business Enterprises (Other than Public Limited Company) engaged in construction, supply and other business can apply for this loan to participate in tender(s) invited by Govt. / Semi Govt. &

Autonomous Bodies and execute job against work order awarded from different agencies and for any other obligation.

Customer of the respective branch having business place in the command area with at least 2(two) years experience on their line of business have the eligibility for application. The margin is depending upon Banker-Customer relationship.

Working capital loan:

Business Enterprises (Other than Public Limited Company) engaged in manufacturing/ trading business can apply for this loan to meet working capital requirement.

Firms or companies incorporated in Bangladesh, customer of respective branch having shop or business place is in the command area with at least 2(two) years experience on their line of business. Additional 2% is charged on the overdue or excess over limit as the penal interest (if any). The tenor for the loan is maximum 12(twelve) months.

Tk. 2000/- to be realized before disbursement of loan as its processing fee. Service charge is 0.25% charged on loan amount or maximum Tk. 5000/-.

Letter of credit:

Letter of Credit (LC) is a commitment or an undertaken or a guarantee of a bank to the exporter on behalf of importer in regard to the payment of certain amount subject to the payment of certain conditions. Therefore it’s called conditional guarantee.

Business Enterprises (Other than Public Limited Company) can use this service to facilitate foreign exchange or in some cases of local payment or goods transfer. Import or procurement of merchandize

Loan against imported merchandise (LIM):

Business Enterprises (Other than Public Limited Company) engaged in import business can apply for this loan to make the clearance of imported consignment. Additional 2% per annum is charged on the overdue amount (if any) as the penal interest. The procedure of giving loan is conducted according to the nature of imported terms and or Bangladesh Bank guideline (if any).

Loan against trust receipt:

Business Enterprises (Other than Public Limited Company) engaged in import of merchandize have the eligibility for applying this loan on the purpose of retirement of shipping documents. Penal interest is charged on the overdue amount (if any) as a additional 2% per annum. The procedure of giving loan is conducted according to the nature of imported terms and or Bangladesh Bank guideline (if any)

Bidder’s loan:

Individual, business Enterprises (Other than Public Limited Company) engaged in construction and supply business can apply for this loan on the purpose of issuance of Payment Order/ Security Deposit Receipt/ Demand Draft only for participation in the tender.

Any business house in the command area of the branch at least 2(two) years experience on their line of business has the eligibility for application. The Enterprise to be enlisted with Govt. /Semi Govt. / Autonomous Bodies not below the status of Category ‘C’ Penal interest is additional 2% charged on the overdue amount, if any. The tenor of the loan is maximum 12(twelve) months.

1% on loan amount (Maximum Tk. 2000/-) to be realized at the time of disbursement of loan.0.25% on loan amount to be realized at the time of disbursement of loan (Maximum Tk. 5000/-).

Project loan:

Business enterprises (Other than Public Limited Company) engaged in manufacturing/ service industry can apply for this loan to set up new manufacturing/ service unit. To BMRE existing manufacturing/ service unit. Firms/ companies incorporated in Bangladesh. The firm/ company should have business account with the branch. The firm/ company should generate sufficient cash flow from operation from which firms can make the repayment of the loan.

Penal interest is additional 2% per annum charged on the overdue amount. The tenor of the loan is maximum 5(five) years including grace period. The length of grace period is to be determined on the fund generation of the project.

0.10% on loan amount (Minimum Tk. 2000/-) to be realized before disbursement of loan. 0.25% on loan amount subject to minimum of Tk. 5000.00 to be realized before disbursement of loan.

Consumer Financing

IFIC Bank Ltd. introduced Consumer Credit Scheme for its customer during 1999 duly approved by the Board of Directors of the bank in their 251^st meeting held on April 4, 1999 with the following loan products:

• Vehicle loan
• Domestic appliances loan
• Office equipment loan
• Entertainment purpose loan
• Loan for intangible loan

Guidelines under the prudential Regulation and Direction of Bangladesh bank have been formulated. These guidelines will assist the branches as to how the CCs loan port-folio should be managed.

The committee studied existing products available in the market. Considering the market demand and investment opportunities in Consumer Financing Sector, the committee has formulated the following 7 (seven) products for IFIC Bank to be launched under Consumer Financing Scheme:

1. Easy loan (Secured Personal loan).
2. Consumer Durable loan
3. ‘Parua’ (Education loan)
4. ‘Thikana’ (House building loan)
5. ‘Flexi’ loan (Personal loan)
6. Peshajeebi loan (Loan for professional)
7. Auto loan
8. Festival Loan

Easy loan (Secured Personal Loan):

Any individual can apply for this loan to meet personal financial requirement. This potential borrower with minimum age 18 years must have an account with IFIC Bank Ltd. repayment will be made in lump sum within expiry or as per acceptable terms and interest to be serviced as and when due.

Consumer Durable loan:

The applicant for this loan are employees of Government/semi Govt./ Corporation/ autonomous bodies, employee of reputed multinational corporations and large local corporate, employees of reputed university/college/school, employees of reputed NGOs/ Aid Agencies, other salaried persons acceptable to the bank, tax paying businessmen having adequate cash flow, tax paying self employed person and individual having reliable source of income. The purpose for this loan is to purchase of consumer durables for personal/family use, goods may be like as-television, refrigerator, Air-conditioner, Washing machine, computers or any other household durables. The potential customer with an age limit of 25-60 (twenty five to sixty) having an account with IFIC Bank Ltd. can apply for this loan. The size of the loan amount is maximum Taka. 1,00,000/- (Taka one lac). The rate of interest for this type of loan is 16.50% per annum with quarterly rest or as revised from time to time.

Parua (Education Loan):

People who are employees of Government/ Semi Govt./ Corporation/ autonomous bodies; employees of commercial banks, foreign banks and other reputed financial institutions; employees of reputed Multinational corporations and large local corporate; employees of reputed Universities / college / school; employees of reputed NGOs and Aid Agencies; other salaried persons acceptable to the bank can apply for this loan. The purpose for this loan is to get higher education. Any Bangladeshi citizen having a bank account with IFIC Bank Ltd. can apply for this loan.

Thikana (House Building Loan):

The applicant for this type are employees of Government/semi Govt./ Corporation/ autonomous bodies, employee of reputed multinational corporations and large local corporate, employees of reputed university/college/school, employees of reputed NGOs/ Aid Agencies, other salaried persons acceptable to the bank, tax paying businessmen having adequate cash flow, tax paying self employed person and individual having reliable source of income and the purpose for this loan is to purchase flat or construction of own house. The customer must have an bank account with IFIC Bank Ltd. The age limit for the customer is twenty five to sixty five (25-65).

Flexi-Loan (Personal Loan):

People who can apply for this loan are employees of Government/ Semi Govt./ Corporation/ autonomous bodies; employees of commercial banks, foreign banks and other reputed financial institutions; employees of reputed Multinational corporations and large local corporate; employees of reputed Universities / college/ school; employees of reputed NGOs and Aid Agencies; other salaried persons acceptable to the bank. Customer are seeking this loan on various purpose such as- marriage expenses, holiday expenses, emergency medical needs, CNG conversion for own private car, home renovation or interior decoration and any other purpose. The potential borrower must have an account with IFIC Bank Ltd.

Peshajeebi Loan (Loan for Professional):

This type of loan is only for the people who can define under the sector of general physician and dentist, engineers, IT professional, management consultants, other professional’s individuals. The purpose for this loan is to purpose of items to support professional’s needs that are purchase of medical beds, ultra-sonogram machine, engineering or mechanical tools, or set up an office/ chamber on small scale etc. The customer must have an bank account with IFIC Bank Ltd. The age limit for the customer is twenty five to sixty five (25-65). The size of the loan is maximum Taka 3,00,000/- (TK. Three Lac)   without collateral security and maximum Taka 500,000/- (TK. Five Lac)  with collateral preferably liquid security.

Auto Loan:

People who can apply for this loan are employees of Government/ Semi Govt./ Corporation/ autonomous bodies; employees of commercial banks, foreign banks and other reputed financial institutions; employees of reputed Multinational corporations and large local corporate; employees of reputed Universities / college / school; employees of reputed NGOs and Aid Agencies; other salaried persons acceptable to the bank. The purpose of this loan is to purchase new or reconditioned vehicles for personal use only but not for commercial use. Any Bangladeshi, holding Bangladeshi originality having a bank account with IFIC Bank Ltd. with an age limit of twenty five to sixty (25-60) is eligible for this type of loan.

 Festival Loan:

Extended to meet expenses of major religious festival like Eid, Puja, Christmas and Budda Purnima.

Consumer Financing Over the Year:

Consumer Financing of IFIC Bank (2007 to 2009)            (In Taka)

In 2007 Consumer Finance scale is high But 2008 & 2009 consumer Finance Scale is low because more invest in Commercial landing, large and medium industry and other sector.

Credit:   

Credit portfolio of the Bank consists of Trade Financing, Project Loans for new projects and BMRE of the existing projects, Working Capital financing and Small Scale Industrial financing. Besides, the Bank is financing the need of individual borrowers under Consumer Credit Scheme. The Bank is also involved in financing Agriculture sector.

Credit portfolio recorded a growth of 11.26 percent in 2007. The total outstanding loans and advances stood at Tk. 2836.15 million at the end of December 2007 as against Tk, 2549.06 million in December 2006.

Credit Portfolio of the Bank was as under as on 31.12.2009 (Taka in Crore)

Lendining Operations:

Growth has been seen in all types of lending facilities with more emphasis nationwide being made on entrepreneurial ventures and the re-emergence of micro, small and medium sectors which pawning potential contributors to the overall profitability of the Bank and to the economy of the country.

Credit approval authority:

The authority to sanction or approve loans shall be delegated to Senior Executives by the managing board based on the Executive’s knowledge and experience. Approval authority shall be delegated to individual Executives and not to committed to ensure accountability in the approval process. The following should apply in the approval or sanctioning of loan:

1. Credit approval authority shall be delegated in writing from the MD & Board (as appropriate), acknowledged by recipients and records of all delegation retained in CRM.
2. Delegated approval authorities shall be reviewed by Board or MD from time to time.
3. The approval function shall be separate from the marketing or relationship management function.
4. The role of credit committee shall be restricted to only review of proposals e. recommendations or review of bank’s loan portfolios.
5. Approvals shall be evidenced in writing or by electronic signature. Approval file shall be kept on file with the credit application.
6. All credit risks shall be authorized by the executives within the authority limit delegated to them by the MD.
7. credit approval shall be centralized within the CRM function. Regional credit centers may be established, however all large loans shall be approved by the board/ Deputy Managing Director/ Head of Credit/ delegated Head Office Credit Executive.
8. The aggregate exposure to any borrower or borrowing group shall be used
   to determine the approval authority required.
9. MD/ DMD/ Head of Credit Risk Management must approve and monitor any Cross border exposure risk.
10. Any branches of lending authority should be reported to MD,DMD, Head of Internal Control and Head of CRM.
11. Authority will be delegated to each individual in writing by the managing Authority delegated to the individual will not automatically be transferred to a replacement lending authority.
12. All the officials in different ranks shall exercise their delegated authority for conducting day to day business of the bank judiciously, potentiall abiding by the directives, circulars, standing instructions or order issued by the bank and or Bangladesh Bank from time to time and conforming of the credit policy of the Bank.
13. The Managing Director will have the right to exercise lending authority delegated to other executives having authority lower than him.
14. The Managing Director is authorized to sub-delegated his business discretionary authority, if deemed necessary for quick disposal of business proposals either wholly or partially to Deputy Managing Director, head of Credit Risk Management, credit executives, Credit Managers or any other officer within CRM.
15. The Managing Director further will have the right to suspend or withdraw
    either partially or fully the business discretionary authority delegated to any subordinate officials for a temporary and permanent period, if so required, in order to protect the interest of the Bank through the issuance of office orders.
16. Once the credit facility is granted to any individual or group by business power delegated to higher authority, exercise of lower authority by the subordinate will automatically stand ceased for the same individual or group.
17. Any credit proposals that do not comply with guidelines regardless of amount may be referred to managing director for decision.
18. A monthly summary of all new facilities approved, renewed, enhanced and a list of proposals declined stating reasons there of should be reported by CRM to MD

Procedure for the selection:

Credit Investigation:

Lending is one of the most important functions of a bank and with the modern concept of social order and participation of commercial banks in various phases of commercial, industrial. Agricultural and other economic activities of the country, it is of paramount importance that banks have to be very careful while choosing a borrower. security is not the only thing to be relied upon. There have been cases where forged share certificates were offered as security and the banker found to the utter bewilderment that the advance was really on an unsecured basis. There are also instances where the same go down was placed to two different bankers and the respective bankers were taken to the go down for inspection through two different entrances, creating an impression on each that it was the go down pledged to him.

A variety of commercial commodities are being offered as security for advance. It is neither possible nor feasible for the banker to conduct a detailed inspection of all the stocks to ascertain their quality and quantity. HE has to depend upon the borrower’s records and can conduct only what is known as a “test check” by physically verifying some of the stocks in bags or tins out of many pledged or hypothecated goods. In the event of non-payment by the borrower, when the securities are brought for sale, a portion of stocks may not be in saleable condition or the borrower may contest the banker right of sale under one pretext or the other and, thereby, causing delay in disposal of the goods. The advances may mot be entirely liquidated in such cases. if the banker has to realize every advance by going to a court or selling the securities, it will mean considerable expenditure and waste of time, apart from the loss which may occur in a forced sale.

Thus, in the affair of bank credit, nothing is more significant than the character and responsibility of the be obtained is the integrity and business-like dealings of the customers. It is not the tangible/collateral security offered by a borrowing firm which should govern its credit worthiness, maintain solvency.

The integrity and reliability of the borrower:

It will be clear from the above study that advance, to be safe, should be granted to a reliable and honest borrower, who has the capacity ton conduct his business. The study of a borrower involves the study of the three “Cs” of the party’ i.e. his character, capacity and capital or in o9ther words, his reliability, responsibility and resourcefulness.

Character:

Character denotes integrity of the borrower, i.e. he should have willingness to repay the money borrowed. This is the greatest single asset any individual can have and is the first factor to be evaluated. A person who is really honest will rarely change whatever be the testing factors. His determination to be honest and willingness to repay, when possible, will remain steadfastly like a rock. This aspect is the good part of the security for any bank advance, however, honesty alone does not constitute character. Character of a customer, besides honesty, involves promise in a planned way in order to keep the reputation with whom he deals.

To know about the borrower, the banker should proceed on the following lines:

1. Who the borrower is and, what is his family background?
2. What is the reputation of the borrower in business circles, both among his friends and competitors?

3. Are his dealings with other businessmen honest?
4. Are there instances where he was not sincere in honoring his commitments?
5. Does he indulge in speculative activities?
6. What is the reputation of the borrower among his employees?

An interview with the customer must give an impression to the banker about the prospective borrower. All these points have to be considered and a balanced opinion in regard to the character of the borrower formed. As a matter of fact, half if the worries of the lending banker are over after selection of the right type of borrower.

Capacity:

Capacity means the ability to employ the funds profitably and repay the advance according to the terms and conditions of the sanction. The capacity of the borrower has to be determined and, for these purpose, enquiries will be necessary to find out his qualifications and experience in the line in which he is working. The commercial banks simply meet the short term capital requirements of a business firm established at the vital period of production. The borrower may need genuine financial accommodation to keep the wheels of production moving with the banks are also providing finance on a small scale to new entrepreneur ship who has technical know-how. Bankers have to collect information about the borrower as to

1. What is his business and when did he start it?
2. Has he recently shifted to a new line of business?
3. Has he the required knowledge to carry on the business?
4. Is he well established in the business; what is the working result or is he still
   making experiments to make his business steady?
5. What is the popularity of his products in the market, compared to those of
   other units in the same industry?

All these study will enable the banker to arrive at a conclusion, whether the borrower has the capacity to run the business on sound lines.

Capital:

Capital denotes financial soundness. The borrower must have his own money into the business. i.e. must take a part of the risk in the business, this is to be one by putting his own money into the business, that creates a sense of involvement in the business in the business in the mind of the borrower. If he has sufficient capital of his own to invest in the business, besides the advance applied for, he will be considered a more suitable borrower than one working entirely, or mostly, with borrowed money. Of course, where the borrower cannot bring his own part of the capital, as in the case of advances to the weaker sections of the community and in many other genuine cases, bankers do finance the entire capital.

Some American authors have preferred to add two more C’s to these, viz., collateral and conditions the former refers to security and the later to external factors, say, business climate which plays a good part in deciding the prospects of the borrowers, business.

In order to obtain information in respect of all the C’s of the borrower, the lending banker will have to compile a report which is termed as credit report or status report or confidential report or financial report on the prospective borrower. All the terms carry more or less the same meaning. The necessity of a complete credit report cannot be overemphasized, since it is the only barometer to judge about the feasibility of a proposal for advance. Thus, to get a complete picture of the borrower’s credit worthiness, enquiries will have to be made regarding character, honesty, ability and financial soundness of the borrower.

Sources of credit information:

The bankers have to collect information from different sources about a prospective borrower to assess credit worthiness. There was no such specialized credit agencies in Bangladesh which could assist banks by giving reports on borrower. Even a report on a borrower obtained through banks in Bangladesh was usually brief and sketchy and did not give sufficient information that could be of much practical use except that an adverse report may give a warning signal. Our country needs to establish credit agencies like that of British or American type so that healthy business activities can be smoothly financed by bankers. Bangladesh Bank however, established a credit information bureau in 1992 with a view to collect all sorts of data about borrowers to assess their credit worthiness to strengthen credit discipline.

Credit Information Bureau (CIB):

The credit information which has so far been collected by Bangladesh bank from scheduled banks and other financial institutions are not broad-based and systematized to be used by Bangladesh bank, scheduled banks financial institutions. Government of Bangladesh and other agencies for credit policy and other purposes.

Under the situation, it has become imperative to equip the banks with requisite credit information for processing the loan applications of the borrowers.

With this end in view creation of credit information bureau was urgently felt and proposal was put forward by various organizations.

The proposal finally came into reality when the board of directors of Bangladesh bank in its meeting held on August 18.1992 approved the creation of a full fledged credit information bureau in Bangladesh bank with a view to strengthening credit discipline and strengthening all sorts of data. The credit information bureau(CIB) of Bangladesh bank has undertaken the task of collecting, collating and storing detailed credit information from scheduled banks and other financial institutions in its proper prospective so that these can be exchanged among the scheduled banks, financial institutions and Bangladesh bank for quick processing of new loan proposals and re-scheduling of existing loans.

The CIB has also been supplying credit information to the government and other national and international organizations who are engaged in the formulation of monetary, economic and credit policy.

As a matter of policy, all the scheduled banks are required to submit data on quarterly basis and other financial institutions on half-yearly basis on each borrower having outstanding of tk. I LAC and above to Bangladesh bank on a specially designed form (CIB01). In addition, Bangladesh bank also collects information from the scheduled banks in respect of big selected borrowers having outstanding of tk. I crore and above on monthly basis

The object of compilation of complete credit information about the borrower at Bangladesh bank is to standardize information flow on loans credit and to increase the speed and accuracy with which the credit information is made available to banker assessing credit risk and, thereby, assist them for effective support for lending operations. This will also create MIS (management information system) on credit information viz. recovery, disbursement, classifications etc. for use of the government, Bangladesh bank and other national and international financial institutions.

Since the inception of CIB in Bangladesh bank, various credit information (pertaining to banks and financial institutions) are being collected, processed and distributed the

commercial banks, financial institutions, government offices and security exchange commission. The information so far collected by CIB are:

1. Debtors/borrowers information (segment-1)
2. Owners information (segment-2)
3. Group/affiliations information (segment-3)
4. Credit/exposure matrix or financial information (segment-4)
5. Third party guarantors information (SEGMENT-5)

The information under the above segments have been structured and necessary software has been developed for providing credit information to the banks and financial institution for loan processing and MIS purposes. CIB is also collecting data relating to the CRR (credit risk rating),financial scores, viz., y-score and z-score from the scheduled banks. these information will ultimately be retrieved to the scheduled banks in order to provide more helpful tools to them to decide issues regarding sanction of loan more promptly and smoothly.

These scheduled banks who make LRA (lending risk analysis) will directly supply information on CRR from overdue risk score matrix. Information on financial score, such as, Y-score and Z-score may be supplied from spread sheet. The detail calculations on Y-score and Z-score have been given on lending risk analysis in the chapter 31 .those banks who do not process information by LRA may supply information (by grading) making a comparison with overall risk score matrix, (for detailed guidelines to supply information in CIB-01 form and other related segments, a handbook of guidelines issued by CIB Bangladesh bank, may be consulted).

After establishment of credit information bureau (CIB) at Bangladesh bank, collection of information about the borrower has become easier. Bankers, of course, have their own ways to collect information about the prospective borrower from the following sources to assess their judgment before proposal for any credit facility is taken into consideration.

Foreign Exchange Department

Foreign Exchange Department is the international department of the bank. It deals globally. It facilitates international trades through its various modes of services. It bridges between importers and exporters. The branch acts as the authorized dealer in foreign exchange market. It can remit foreign exchange from local country to foreign country. This department mainly deals in foreign currency.

Some national and international laws regulate functions of this department. Among these, Foreign Exchange Act 1947 is for dealing in foreign exchange business. And Import and Export Control Act 1950 for Documentary Credits (UCPDC-1993 revision and International Chamber of Commerce Publication no-500) is also an important law for settlement of terms and conditions between exporter and importer in International Trade. Government Import and Export Policy is another important factor for import and export operation for banks.

Services provided by authorized dealer

Foreign Trade:

For Importers

• Opening Letter of Credit.
• Providing necessary financial facilities to the importers.

For Exporters

• Advising of Export Letters of Credit.
• Negotiation of export documents.
• Providing export financing facilities.
• Confirmation of Export L/C.
• Issuance of Foreign guarantees favoring beneficiaries within Bangladesh and Overseas beneficiaries.

Remittance

• Outward remittance by telegraphic transfers and payment of inward telegraphic transfers.
• Issuance of Demand Drafts (AUD, CAD, EURO, GBP and US$)
• Issuance of foreign currencies (in US$ and GBP)
• Handling of Student File of the students going abroad for educational purpose (AUD, CAD, EURO, GBP and US$)
• Issuance of AMEX and THOMAS COOK BRAND Travelers Cheques (in US$)
• Issuance of Wage Earners Development Bond for expatriate Bangladeshis.
• Providing different types of Treasury Functions for Corporate Clients.

Deposit Product In Foreign Currencies:

IFIC offers following opportunities to build savings and investment in foreign currencies in US$ and GBP at attractive rates:

Foreign Currency Account (FCAD, FCAP) by–

1. Bangladesh nationals residing abroad.
2. Foreign nationals residing abroad or in Bangladesh and also foreign firms registered abroad and operating in Bangladesh or abroad.
3. Foreign missions and their expatriate employees bringing foreign exchange by inward remittance.

Resident Foreign Currency Deposit (RFCD):

Foreign Currency Account for Bangladesh residents bringing foreign exchange in the time of return from travel abroad

Non-Resident Foreign Currency Deposit (NFCD): Interest bearing Foreign Currency term deposit account for Bangladesh nationals living abroad.

Functions of Foreign Exchange Department

The bank acts as a media for the system of foreign exchange policy. For this reason, the employees related to the foreign exchange dept. of the bank should have knowledge of these following functions:-

• Rate of Exchange
• How the rate of exchange works
• Risk of exchange rate
• Forward and spot rate
• Premium and discount
• Convertibility
• Foreign exchange transaction
• Exchange arithmetic
• Export & Import letter of credit
• Non-commercial letter of trade
• Foreign exchange trading
• Exchange control
• Cause of exchange rate
• Finance of foreign trade
• Intervention money
• Exchange position
• National and function of foreign exchange market
• Rules and regulations used in foreign trade
• Methods of quoting exchange rate.

Import Operation:

Import section helps businesses and other people to import goods. In international environment, buyers and sellers are often unknown to each other. So seller always seek guarantee for the payment for his goods exported. Here comes the role of the bank. Bank gives export guarantee that it will pay for the goods on behalf of the buyer. This guarantee is called Letter of Credit (L/C). Thus the contract between importer and exporter is given a legal shape by the banker by L/C.

Letter of Credit (L/C):

On behalf of the importer, if the bank undertakes to make payment to the foreign bank, it is known as Documentary Credit or Letter of Credit.

A Letter of Credit (L/C) is an instrument issued by a bank to a customer placing at the letters disposal such agreed sums in foreign currency as stipulated. An importer in a country requests his bank to open a credit in foreign currency in favor of his exporter at a bank in the latter’s country. The L/C is issued against payment of amount by the importer or against satisfactory security. The L/C authorizes the exporter to draw a draft under its term and sell to a specified bank in his country. He has to hand over to the bank, the Bill of Exchange, shipping documents and such other papers as may be agreed upon between the exporter and the importer. The exporter is assured of his payment because of the credit while the importer is protected because documents in respect of export of goods have to be delivered by the exporter to the paying bank. Finally, the payment is made

Forms of Letter of Credit:

A Letter of Credit (L/C) may be of two forms. These are as below:

1) Revocable L/C:  If any L/C can be amended or changed of any clause or cancelled by consent of the exporter and importer, is known as Revocable L/C.

2) Irrevocable L/C: If any L/C can not be changed or amended without the consent of the exporter and importer, is known as Irrevocable L/C.

Parties to the L/C:

Types of L/C:

Letter of Credit is classified into various types according to the method of settlement employed. All credit must clearly be designated in major categories.

1. Sight Payment Credit
2. Deferred Payment Credit
3. Acceptance Credit
4. Transferable Credit
5. Red clause Credit
6. Negotiation Credit
7. Revolving Credit.

Sight Payment Credit: The most commonly used credits are sight payment credits. These provide for payment to be made to the beneficiary immediately after presentation of the stipulated documents on the condition that the terms of the credit have been complied with.

Deferred Payment Credit: Under a deferred payment credit, the beneficiary does not receive payment when he presents the document, but at a later date specified in the credit.

Acceptance Credit: With an acceptance credit, payment is made in the form of a term bill of exchange drawn on the buyer or the issuing bank. Once he has fulfilled the credit requirements, the beneficiary can demand that the bill of exchange be accepted and returned to him. Thus, the accepted bill takes the place of a cash payment.

Transferable Credit: Transferable credits are particularly well adapted to the requirements of international trade. A trader who receives payment from a buyer in the form of a transferable documentary credit can use that credit to pay his own supplier. This enables him to carry out transaction with only a limited and lay off his own funds.

Red clause Credit: In the case of a red clause credit, the seller can obtain an advance for an agreed amount from the correspondent bank, goods that are going to be delivered under the documentary credit.

Negotiation Credit: Negotiation means the purchase and sale of bill of exchange or other marketable instruments. A negotiation credit is a commercial letter of credit opened by the issuing bank in the currency of its own country and addressed directly to the beneficiary. The letter is usually delivered to the addressee by a correspondent bank. This credit is sometimes also called Hand on credit.

Revolving Credit: Revolving credit can be used when goods are to be delivered in installment at specified intervals. The amount available at any one time is equivalent to the value of one partial delivery.

Contents of Letter of Credit:

Banks normally issue L/C on forms which clearly indicate the banks name and extent of the banks obligation under the credit. The contents of the L/C of different banks may be different. In general, L/C contains the following information:

1. Name of the buyer: Also known as the accounted, since it is for his account that the credit has been opened.
2. Name of the seller: Also known as beneficiary of the credit.
3. Moment of the credit: This should be the value of the merchandise plus any shipping charge intent to be paid under the credit.
4. Tenor: This normally is dependent upon the requirements of the buyer.
5. Trade term: Such as F.O.B and CIF.
6. Expiration date: It specifies the latest date documents may be presented. In this manner or by including additionally an attested shipping date, the buyer may exercise control over the time of shipment.
7. Documents required: Normally include commercial invoice; consular or customers invoice; insurance policies as certificates, if the source is to be effected by the beneficiary and original bills of lading.
8. General Description of the merchandise: It briefly and in a general manner, duly describes the merchandise covered by a letter of credit.

Payment against Documents:

Banks deal in documents and not in goods. If the shipping document against the L/C is in order, then the L/C opening bank must have to make payment to the foreign bank within 3 days or 72 hours according as Uniform Customs and Practice for Documentary Credit (UCPDC) 500 of revision of  ICC.

If the shipping documents have any discrepancy, then the L/C opening bank informed to the negotiating bank within 7 days. Otherwise, the shipping documents have not discrepancy. If the importer have not adequate funds in the bank account, then the bank makes payment to the foreign bank against the shipping documents.

Steps for Import L/C Operation:

Step 1- Registration with CCI &E

• For engaging in international trade, every trader must be first registered with the Chief Controller of Import and Export (CCI&E).
• By paying specified registration fees to the CCI&E, the trader will get IRC/ERC. To open L/C with bank, this IRC is must.

Step 2- Determination of the terms of credit

The terms of the letter of credit are depending upon the contract between the importer and exporter. The terms of the credit specify the amount of credit, name and address of the beneficiary and opener, tenor of the bill of exchange, period and mode of shipment and name of destination, nature of credit, expiry date, name and number of sets of shipping documents etc.

Step 3- Application by importer to the banker for opening letter of credit

For opening L/C, the importer is required to fill up a prescribed application form provided by the banker along with the following documents:

Step 4- Opening of L/C by the bank for the opener

• Taking filled up application from the importer.
• Collecting credit report of exporter from exporter’s country through his foreign correspondence there.
• Issuance of credit by the opening bank via air mail or cable followed by credit advice as asked for by the opener through his foreign correspondent or branch as the case may be, at the place of beneficiary.
• The advising bank advises the credit to the beneficiary on his own form where it is addressed to him or merely hands on the original credit to the beneficiary if it is so addressed.

Step 5- Shipment of goods and submission of documents by exporter

• The exporter ships the goods to the destination of the importer’s country.
• Then he sends the documents to the L/C opening bank through his negotiating bank. Generally, the following documents are sent to the opening banker with L/C:

Step 6- Lodgment of documents by the opening bank from the negotiating bank

After receiving the documents, the opening banker scrutinizes the documents. If any discrepancy found, theimporter is informed. If importer accepts the fault, then opening bankers call importer retiring the document. At this time, many things can happen. These are indicated in the following:

• Discrepancy found but the importer accepts- no problem occurs in lodgment.
• Discrepancy found and importer not agreed to accept- In this case, importer protests and sends back all the documents to the exporter. Here, the banker is not bound to pay, because the documents send by exporter is not in accordance with the terms of L/C.
• Documents are Okay but importer is willing to retire the documents- In this case, bank is obligated to pay the price of exported goods. Since importer did not pay for bill of exchange, this payment by bank is one kind of credit to the importer and this credit in banking is known as FORCED PAD.
• Everything is Okay, but importer fails to clear goods from the port and request bank to clear- In this case, banks clear the goods and takes delivery of the same by paying customs duty and sales tax etc. So, this expenditure is debited to the importer’s account and in banking, it is called LIM.

Export Operation:

Bangladesh exports a large quality of goods and services to foreign households. Readymade textile garments (both knitted and woven), Jute, jute-made products, tea are the main goods that Bangladeshi exporters export to foreign counties. Garments sector is the largest sector that exports the lion share of the country’s export. Bangladesh exports most of the readymade garments products to USA and European Community (EC) countries. Bangladesh exports about 40% of its readymade garment exporters. They open export L/Cs here to export their goods, which they open against the import L/Cs opened by their foreign importers.

Export L/C operation is just reverse of the import L/C operation. For exporting goods by the local exporter, bank acts as advising bank and collecting bank for the importer.

1. As an advising bank: It receives documents from the foreign importer and hands it over to the exporter. Sometimes it adds confirmation on the L/C on request from the opening bank. By adding confirmation, it assumes the responsibility to make payment to the exporter.
2. As negotiating bank: It negotiates the bills and other shipping documents in favor of the exporter. That is, it collects the proceeds of the export bill from the drawee and credits the exporter’s account for the same. Collection proceed from the export bill is deposited in the bank’s NOSTRO account in the importer’s country. When the bill matures, bank represents it to the drawee to encash it.

In our country, Export and Importer operation of bank is much related with one another because of use of back to back L/C and maturity of payment for back to back L/C is set in such that it can be paid out of export proceeds. So, export and import sections work as one unit. These two operations can hardly be separated from one another in the branch.

Scrutiny of documents:

The L/C opening bank being received the negotiated bank will scrutinize the documents with the respective L/C terms and conditions.

Forwarding Schedule of Negotiating Bank

• Whether there is any instruction
• Whether these instruction can be complied with
• Whether the negotiating commission is realized.

Bill of Exchange (Draft)

• Whether it is drawn in order
• Whether the amount of draft corresponds with the L/C amount
• Whether the date of the draft is within the date as per L/C etc.

Bill of Lading (B/L)

• Whether the bill of lading is clean and signed by the shipping authority
• Whether the date of B/L is within the date of shipment as per L/C
• Whether the part of shipment and part of destination are similar as per L/C
• Whether the title of B/L belongs to L/C opening bank
• Whether the full sets of B/L dispatched by negotiating bank etc.

Commercial Invoice

• Whether the full particulars of goods have been incorporated
• Whether the amount of invoice corresponds with the amount of bill of exchange and as per the L/C terms
• Whether the IRC no etc. have been incorporated
• Whether it is signed by the beneficiary.

 Other Documents

• Whether all other documents are prepared as per L/C.

After scrutinizing, the official concerned may found the following:-

• Documents are in order, i.e.: no discrepancy
• Major discrepancy may be acceptable to the regulation or those are irremovable
• Minor discrepancy may be acceptable to the importer.

After performing necessary formalities and entry in respective registers, documents are to be handed over to the importer on proper acknowledgement after certification and endorsement of the documents

Monthly Return:

On the last working day of the month, returns of bills lodged during the month through IMP form are to be sent to foreign exchange department, Bangladesh Bank.

RECOMMENDATION

The study was limited to some specific variables assuming other variables are insignificant to selection the borrowers. Moreover, in the organization part the area of activities of IFIC Bank ltd. specifically loans and advance division is highlighted. For the viewpoint of above the followings can be recommended:

• The rules and regulation that a borrower must follow is very difficult and sometime impossible. So, the bank should make the procedure easy and understandable to attract the potential customer.
• It is necessary to make some new product to come on the stage of competition with other banks. In recent years, some banks launched a number of innovative products to attract their customer. IFIC may follow
  the way to be a leader of modern banking.
• Clearance from IFIC Bank Limited or other bank at the time of taking new loan from IFIC Bank Limited or other bank may be made Introduction and at the same time proper implementation of this system may be expected to accelerate the selection procedure.
• The names of defaulters as well as good and regular payers may published in various dailies and provide various facilities to good borrower will encourage a borrower to be a good borrower. This initiative can help the bank in decreasing the number of defaulter and the volume of large outstanding loan amount as well.
• In the selection procedure, the new entrepreneur should be encouraged in getting loans and those who have the records of regular repayment may be given preference.
• There will be the least possibility of wrong appraisal and evaluation of loan proposals, if more competent employee are employed as per the requirements of IFIC Bank Ltd.
• Review the borrowers financial position periodically to measure the risk implication from the beginning to full repayment of loan.

• Not to emphasize on experience of the borrowers as the key factor in providing loan facilities. Rather, elasticity and future prospective need to be taken into account.

FEW SUGGESTATIONS:

• IFIC Bank should reduce interest rate for given customer and small enterprise
• IFIC Bank should reduce penal interest on overdue amount, which depends on the category of loan. Penal interest is burden for the customers.
• Loan processing fee of 1%, which is very high, should be reduced.
• Maximum loan limit size of the bank should increase.
• At the time of disbursement of loan Bank charges 0.50%-.25% as service charge that should be reduced.
• “Down payment” that the customers have to pay to get a big amount of loan so Bank should reduce the rate of payment.
• The Bank takes more time to sanction loan that should be reduced.
• IFIC Bank Ltd. needs to advertise through various media about types of loan offers and other products.

Conclusion

Form the learning and experience point of view I can say that I really enjoyed my internship period in IFIC Bank Ltd. At Elephant Road  Br. from the very first day. I am confident that this 3 (three) months internship program will definitely help me to realize my further carrier in the job market.

Loans & Advances of a bank is not so sufficient to measure and express perfectly within this short time of my internship period. But it is a great opportunity for me to get used to with the Loan & Advance Procedure of commercial banking of IFIC Bank. I have tried by soul to incorporate the necessary relevant information in my report.

The selection and the awareness about the loans type is one of the key determinants of the right and proper use of fund. The loan default in the banking sector of our country has been hindering the growth of the economy. The problem has also been reducing the level of investment, the productivity of capital and the volume of savings. In managing loans and advances of the commercial banking sectors, the critical factors are needed to be identified and managing of those factors will have positive impact on the overall banking sector. The analyzed factors are not the only determinants of the loans and advances as well as the selection procedure. In this study, several qualitative factors are considered and casual relationship of types of loan and the selection procedure, compliance with covenants by borrowers and strength of supervision is established. The study was conducted by using the data of the Bank. So, findings of this study are not applicable in the macro environment but further study can be conducted on the basis of the findings of the report.