Loan Products and Services of First Security Bank Limited
In 1980s, the Government of Bangladesh changed its policy regarding banking business, which was until then restricted to the public sector only besides a few number of foreign banks. With the change of policy, the country witnessed initiation of banks in private sector. This shift in policy also covered the way of establishing non banking finance company to build up capital market of the country.
The First Security Bank Limited registered under the Companies Act 1913. This institution came into existence as an Investment Company in the name and style of First Security Bank Limited in September 22, 1999. The aim of the company was to activate resources form within and invest then in such way so as to develop country’s industrial and trade sector and playing a catalyst role in the formation of capital market as well.
First Security Bank Limited was incorporated in Bangladesh as a banking company under the Companies Act 1994. The principal place of business is the registered office at 23 Dilkusha Commercial Area, Dhaka 1000. It has 20 branches all over Bangladesh. It carries out all banking activities through its branches in Bangladesh
The Bank is listed with Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited as a publicly quoted company for its shares.
At present, the Authorized capital of the Bank is TK, 250.00 crore as enhanced by the shareholder in the extraordinary General meeting held on 27.03.2006 and paid up capital is at present tk 79.01 crore (Including bonus share of TK. 18.23 crore for the year 2005) which will be increased to tk 109.40 crore with the issued of proposed rights share as approved by the securities and exchange commission.
Objectives of FSBL
To be recognized as the leading financial institution encourages the base of investment and develops the capital market with good profit and sound growth and contributes the formation of national capital. Provide technology based banking services and create value to customers through its products and services and maintain harmonious banker customer relationship.
Mission of FSBL:
Providing a premium set of innovative products and services and granting superior value to their stakeholders – shareholders, customers and employees.
Vision of FSBL:
Continue to build their track record and in seek for excellence. They strive to meet the needs of both their customers and their employees. At FSBL ensure customer satisfaction by providing high quality banking services. This is made possible by the professionalism of their employees all of whom are provided with the requisite training and opportunities to enable them to realize their full potential.
Objective of the study
Without any specific objective no mission could be a successful one. In the same way without setting any objective a study can’t be completed. Before starting our work, we too have set some objectives and tried to work in line with those objectives. Our objectives were:
Get the knowledge about report writings.
- To make a study (theoretical & practical) and prepare a report that reflects our understandings and knowledge attained during the period.
- To know about the company and its products / services.
- To get a good understanding of general activities of the bank.
- To make some findings and put forward some recommendations.
The needed for conducting the study have been collected from the primary sources as well as secondary sources. In collecting the necessary data, care has been taken so that all the variables that may in some way can’t affect the objectives of the study. The information that we used in this study is collected from the following sources:
- Personal interview with the employees
- Practical desk work
- Face to face conversation with the client
- Bulletin published by the bank
- Annual statement of the bank
- Previous research books and journals
- Different books about banking
The collected data are properly scrutinized and for analyzing the data we have used analytical techniques like SWOT Analysis, charts, diagrams etc. Proper reference has been given where needed.
Scope of the Report
The main focus of the study is “General Banking systems of FSBL”. The topic is fixed. But the report has tried to cover overview of FSBL objectives, functions, management, business policy and other things. This report has also mentioned some problems of FSBL’s Operating systems and its solutions. The empirical part includes only the published information and current practices of the First Security Bank Limited.
Limitation of the study
Like every other studies, we too faced some constraints during our project period which otherwise would have enabled us in making our study more appropriate and logical. The limitation were from both side; the bank as well as ourselves. The followings were some of the shortcoming, we came across:
FSBL has an Information Technology Division at the head office to provide IT support to all its Branches. The Bank has well documented guideline on information and communication technology(ICT) From the very beginning FSBL was using computerized banking software “pcBank/M” for all the branches. Recently the Bank has replaced pcBank/M software with pcBank2000 to provide online Banking facilited with distributed system. The Bank also has SMS banking service.
Organization Structure plays an important role on the profitability of any organization. FSBL is a centralized organization and operates in a functional oriented structure. Activities are designed are designed on the basis of traditional banking business, such as credit, international division, administration etc. FSBL has a formal organizational structure that is highly specialized and centralized. (DC) is a written undertaking by a bank (Issuing Bank, Opening Bank) to a seller (Beneficiary, exporter) at the request and on the instruction of the buyer (Applicant, Importer) to pay either at sight, if it is a sight bill, DP (Sight) or a determinable future date, if it a term bill, DA (Usance), a stated some of money against stipulated documents and ypo)
- Cash Credit (CC Pledge)
- Overdraft (OD)
- Trust Receipt (TR)
- Foreign Bill Purchase (FBP)
- Loan Against Important Merchandise (LIM)
Product and services:
FSBL has a very broad line products under the various business group, from short term to long term deposits, various types loans and advances, account service, it provides finance for export and import, finance for working capital, project financing, capital investment, remittance service, trade service, foreign exchange service, online banking, cash management service, locker service, Profit & loss sharing and also has other miscellaneous product and services around the nation.
Cash Credit (Hypothecation):
Hypothecation is a charge on a company for a debt but neither ownership nor possession passes to the creditors. In hypothecation, both ownership and possession remains with the debtor. The change is created by the debtor to the lender on his execution of the document (Letter of Hypothecation). In the said document the debtor binds himself to give possession of the hypothecated goods to the lender, if the lender so requires.
As per the goods remain in the possession of the borrower, bank grant hypothecation facility normally to first party. The bank may also demand security from the party before making advance. It depends mainly upon the trust worthy of the party. Advance is generally allowed against hypothecation of the following:
- Raw materials
- Finished products
- Book debt of the debtor
Cash Credit (Pledge):
Cash credit allowed against pledge of goods is known as CC (pledge).
- A letter of pledge is signed by the borrower in favor of the bank.
- Pledge means bailment of goods as a security for repayment of debt or performance of a promise.
- The bailment must be made by the debtor or indenting debtor of his duly authorized agent.
- The ownership of goods remains with the borrower while possession of the goods is transferred to the bank until the debt is repaid.
The overdraft is a kind of advance always allowed on a current account operated upon by cheque. The customer may be sanctioned a certain limit upon which he can overdraw his current account within a stipulated time. The agreed interest is calculated and charged on the debit balances on daily product basis.
Loan Against Trust Receipt (LTR):
This type of loan is allowed to the importer to retire documents and release the consignments from the authority against a trust receipt. The bank get the TR signed by the customer, agreeing to hold the goods or their sale proceeds in trust, for the banker, so long as the entire amount, due to the borrower is not paid off. Validity of LTR may be allowed for 60-90 days time to make payments. Interest is charged on the amount due.
Loan against Imported Merchandise (LIM):
In this case advance is made to the importer based on the imported goods as security. When the goods under a documentary credit arrives but where the customer does not wish to effect immediate payment, he can request the bank to effect payment for him and arrange to have the goods stored in the go down under the name of the bank. In case the customer wants to have the goods, he can arrange with the bank to take the delivery of the goods against payment to the bank or against trust receipt.
Foreign Bill Purchased (FBP):
This loan is given to the exporter, after shipment of goods, the exporter present the documents to the banker for negotiation. Sight bill or Term bill might be negotiated by the exporter’s bank. The bill with the shipping documents will be handed to the bank, which will then pay the exporter, but retaining a right of resource of to the exporter in the event that the bills are dishonored.
Letter of Credit (L/C):
Documentary credit fulfillment of all the term and condition in the DC.
Sending money from one place to another place for the customer is another important service of the bank. This service is an important part of transaction system. In this service system, people, especially businessman can transfer funds from one place to another place easily. There are three kinds of technique for remitting money from one place to another these are:
-Demand draft (DD)
-Pay order (PO)
-Telegraphic Transfer (TT)
Demand Draft (DD)
DD is an order of issuing branch on another branch of the same bank to pay specified sum of money to payee on demand. It is generally issued when customer wants to remit money in any place i.e. outside or the clearing house area of issuing branch. Payee can be the purchaser himself or another mentioned in the DD. It is safe technique of transferring money from one place to another.
Payment process of the paying bank:
-Test confirmation if the DD value is more then Tk. 25,000.00
-Confirm that the DD is not forged one.
-Confirm with sent advice.
Commission and charges of DD:
Postal charge Tk. 15.00 + commission 0.1% + 15% Vat on commission. No telex charge.
Definition of Deposits:
Bank deposit means a sum of money placed by a customer with a bank. The deposit may or may not attract interest and may be instantly accessible or accessible at a time agreed by the two parties.
Deposits are the foundation upon which banks thrive and grow. Deposit provides most of the raw material for bank loans, and thus, represents the ultimate source of bank profits and growth.
Mixes of Deposits:
- Current Account
- Short Term Deposit
- Sundry Deposit
- Savings Bank Account
- Foreign Currency Account
- Monthly Savings Scheme
- Monthly profit Based Savings Scheme
- Double Benefit Deposit Scheme
- Fixed Deposit Revenue
Definition of Different MIXES
Current account is purely demand deposit account because the bank is bound to pay the amount to the account holder on demand at any time. It is running and active account, which may be operated upon any number of times during a working day. There is no restriction on the number and the amount of withdrawals from a current account. The special characteristics of a current account are as follows:
The primary objective of current is to serve big customers such as businessmen, joint stock companies, private limited companies, public limited companies etc. from the risk of handling cash by themselves.
The cost of providing current account facilities is considerable to the bank since they undertake to make payments and collects the bills, drafts, cheques for any number of times in a particular day. The bank therefore does not pay any interest on current deposit while on the other hand some banks charge for incidental charges on such account.
For opening of a current account minimum deposit of taka 1000/= is required. Introductory reference is also required for opening of such account.
Savings account (SB)
A savings account is meant for the people of the lower and middle classes who wish to save a part of their incomes to meet their future need and intend to earn an income from their savings. it aims to encouraging savings of non trading persons, institutions, society and clubs etc. by depositing small amount of money in the bank. Both the elements of time and demand deposit are present in this account.
Fixed Deposit Receipts (FDR)
These are the deposits, which are made with the bank for fixed period specified in advance. It is purely a time deposit account. The bank doesn’t maintain cash reserves against these deposits and therefore the bank offers higher rates of interest on such deposits.
Short term deposit
It is also a time deposit account. The formalities for opening of this account are to those required for current account. The only difference is that 7 days notice is inquired for withdrawal of any sum and interest is paid.
Monthly Savings Scheme
- Building the habit of savings
- Attract small savers
- Saving for rainy days
- Ensure regular income flow
Monthly installments of various sizes for a fixed deposit.
Lump sum returns after various terms of period
Monthly Benefit Scheme
- Help the retired persons for investing their retirement benefits
- Create investment opportunities for non resident Bangladeshi
- Explore investment opportunities for school, college, university etc
Deposit a fixed amount of money, say tk. 50000 or it’s multiply for five years.
A fixed amount of money in every month for five years
Double deposit scheme
- Gives maximum profit
- Help in meeting specific needs like education, marriage etc
Deposit a fixed amount of money, say tk. 50000 or it’s multiply for 7 years.
After seven years deposited amount will be doubled.
Pricing of bank deposit means the collecting cost of deposit. Main source of financial fund of commercial bank s’ are this money which are collect from deposit. Bank gives a profit or interest against the deposit.
Form the learning and experience point of view we can say that we really enjoyed our time in FSBL Ltd. We are confident that this program will definitely help us to realize our career in the job market.
Performance analysis of a bank is not so sufficient to measure and express perfectly within this short time period. But it is a great opportunity for us to get used to with the operational environment of commercial banking of FSBL. We have tried by soul to incorporate the necessary relevant information in our report.
Top management of FSBL should conduct a comprehensive study or survey on the branches’ performance, its management’s performance and the employees’ performance and their motivation as well. Few loyal committed customer bases, lack of modern and effective technology or facilities, not enough skilled employee in some sector, considering all of these very important factors. FSBL should always try to improve their service level in every term.
The marketing department should think freshly about their marketing objectives and practices. Rapid changes can quickly make yesterday’s wining strategies out of date. As a developing private bank in Bangladesh, FSBL shouldn’t allow their client to get dissatisfied with their service. They have their competitors who actively striving to take the advantages in every side.
First Security Bank Ltd. has officially launched SMS banking service from
December 17, 2007. It may brings opportunity for this Bank.
Online Banking: FSBL should move towards the online banking operations. It is high time to go for, because some banks are already in to online banking operation.
Threats of the organization:
Multinational Bank: The rapid expansion of multinational bank poses a poetical threat to the new private commercial Banks. Due to the booming energy sector, more foreign banks are expected to operate in Bangladesh. Since the foreign banks have tremendous financial strength, it will pose threat to local banks to a certain extent in terms of grabbing the lucrative clients.
Upcoming Banks: The upcoming private local banks can also pose a threat to the that Bank. It is the expected that in the next few year, many of the local private banks may emerge. If that happens the intensity of competition will rise further and banks will have to develop strategies to compete these banks.
The allocated time was not enough for getting a sound knowledge about the study.
We had to go to almost every Department of FSBL as part of the internship program. There is a very short span of time to get in-depth knowledge about a massive organization like FSBL.
Officials of FSBL maintain a very busy schedule. So they were not always able to provide enough time to enlighten the internee students every time, even if they had the intention to do so.
The area covered by the report “General Banking systems of FSBL” concerns a huge number of activities, and it is very difficult to sketch a total picture of the financial activities in a report of this scale.
Supply of more practical and contemporary data was another shortcoming.
Strength & Weakness (SWOT Analysis):
SWOT analysis is an easy technique through which managers create quite overviews of company’s strategic situation. It is based on the assumption that an effective strategy derives from a sound ‘fit’ between a firm’s internal capability (strengths and weakness) and its external situation (opportunities and threats). A good fit maximizes a firm’s strengths and opportunities and minimizes its weakness and threats.
Strength of the organization:
- Strength is a resource skill or other advantage relative to competitors and the needs of the markets a firm serves or expects to serve.
- FSBL has adequate physical facilities and equipment’s to provide better service to the customers. The bank has computerized banking operation Counting machine in the teller counter has been installed for speedy and secured service at the cash counter.
- The top management of the bank is also a major strength for the FSBL and contributed heavily towards the growth and development of the bank. The top management officials all have had reputed of banking experience, skill and expertise.
- Computerized statements for the customers as well as for the internal use of the banks are also available.
- All the branches of FSBL are equipped with telex, fax and internet facilities.
- Many jobs are performed in groups of two or three in order to reduce the workload and enhance the process of completion of the job.
- First Security Bank Limited developed smooth relationship with their clients and corporate business holders. Following the rules of Bangladesh Bank they have operated handsome banking activities throughout the country.
- In case of services offered by all private banks in our country, FSBL has maintained high quality.
- Well organized human resources than other banks.
- Since the govt. has imposed some new rules regarding private banking operation, FSBL easily copes up the given rules.
- Regarding contribution towards country’s GDP they have contributed a handsome amount per year.
- All branches of First Security Bank Limited have been networked to provide customer any branch banking: 24 hours of banking services from selected branches have also been introduced for services convenience.
- Experienced and competing workforce who have expertise knowledge about the bank.
- Some loyal customers who always bring in new customers
- Management consists of knowledgeable and authoritative personnel.
- Interaction of the employees with the top management.
- The bank is making profit every year at a steady rate. The rate of deposit collection as well as the rate of giving advance every year is increasing at a positive rate.
- The environment within the organization is very helpful, positive and informal.
Weakness of the Originization:
A weakness is a limitation of deficiency in resources skills or capabilities that seriously impedes a firm’s effective performance.FSBL’s weaknesses are as follows:
- To open an account some times people have given incomplete information which will become a very acute when any dispute arises.
- Because of good relationship some time branch manager authenticated the account with introducer, sometimes it is very difficult for the employee to void such circumstances, which in turn brings questions.
- When a client try to open an A/C he must have to need an introducer, sometime it may create a problems for the new clients.
- There are not available card services.
- There have error regarding advice.
- Sometimes the process of information transferring to the management is lengthy.
- Big parties or for big amount parties wouldn’t tk.100 notes but the Bangladesh Bank issues mix notes.
- In cash department because of in frequent promotion output decreases.
- On the counter service is sometimes unsatisfactory because of not having enough employees for the counter sector.
- In case of advances in different project, the interest rate is too high.
- Maximum parties have no financial strength.
- In terms of law & order situation sometimes it is very for the bank.
- To liquidate the collateral when the party is unable to pay the debit.
- Most of the time parties are creating some sort of pressure to get the loan.
- There are some mortgage problem such as, acquisition & proprietorship, problem of asset.
- In case of method of granting security against loan, hypothecation is much risky as compared with other charging security. But it is being used massively in FS.
- Interest rates for different types of loan and advances vary to different customers. A prospective customer is allowed to take credit facilities at a lower interest rate. Again, the interest is charged at a higher rate to a customer who is not so prospective. But I think that there should be a transparent interest policy that will be prospective for the bank, the borrower and the country.
- There is no provision or laws against taking discrepancy charges in L/C. Practically this charge is well-accepted in banking word.
Opportunity of the organization:
Debit Cards and Tele Banking: These are the new retail banking services provided by the foreign banks. FSBL can evaluate the option of launching Debit Cards and Tele banking system.