Objectives of Islamic Banking Branch of Prime Bank Limited

Objectives of Islamic Banking Branch of Prime Bank Limited

Prime Bank Limited is one of the fastest growing banks in our country. It has performed very well since its commencement of business and the Bank is already at the top slot in terms of quality service to the customer’s ad the value addition to the shareholders.

Prime Bank Ltd. has already made significant progress within a very short period of its existence. The bank has been graded as a top class bank in the country through internationally accepted CAMEL rating . The bank has already occupied an enviable position among its competitors after achieving success in all areas of business operation.

Prime Bank Ltd. offers all kinds of Commercial Corporate and Personal Banking services covering all segments of society within the framework of Banking Company Act and rules and regulations laid down by our central bank. Diversification of products and services include Corporate Banking, Retail Banking and Consumer Banking right from industry to agriculture, and real state to software.

The bank has consistently turned over good returns on Assets and Capital. During the year 2006, the bank has posted an operating profit of Tk. 2131 million and its capital funds stood at Tk 4409.21 million. Out of this , Tk. 1750 million consists of paid up capital by shareholders and Tk. 2659.21 million represents reserves and retained earnings. The bank’s current capital adequacy ratio of 9.95% is in the market. In spite of complex business environment and default culture, quantum of classified loan in the bank is very insignificant and stood at less than 0.82%.

COMMENCEMENT OF OPERATION

Prime Bank Ltd. was established on 17th Apri l 1995 with an authorized capital of Tk.1000 million and paid up capital ofTk.100 million (raised to Tk.200 million in 1997) by a group of highly successful entrepreneurs from various fields of economic activities such as shipping, oil, finance, garments, textiles and insurance etc. It is a full licensed scheduled Commercial bank set up in the private sector in pursuance of the policy of the Government to liberalize banking and financial services.

The Founder Chairman of the bank, Dr. R A Ghani is a doctorate in science. He was a member of the board of directors of Bangladesh Bank (Central Bank) and a former minister of the state Government of Bangladesh. The former governor of Bangladesh Bank Mr. Lutfar Rahman Sarkar was the first managing director of the bank. Highly professional people having wide experience in domestic and international banking are managing the bank. The present managing director Mr. M. Shahjahan Bhuiyan has long experience in domestic and international banking. The bank has made significant progress within a very short time due to its very competent board of directors, dynamic management and introduction of various customers’ friendly deposit and loan products.

During the year under review, the network of branches increased to 51 with branches at Madhabdi to focus on rural development and deepen our stake in agricultural sector and licenses for few more branches are in hand which will be opened soon. The bank is providing commercial and investment banking services to all types of customers ranging from small enterprises to big business loans. Besides, investment in trade and commerce, the bank actively partiCipates in socio-economic development of the priority sectors like agriculture, industry, housing and self-employment. Prime Bank Ltd. is pioneer in providing consumer loans as well as financing the industries and transport sectors through attractive leasing and hire purchase scheme.

Prime is catering both conventional interest based banking and banking under Islamic Shariah Principles. The Islamic banking operations are completely separated from the conventional banking.

OBJECTIVE OF THE BANK

Prime Bank Limited is designed to provide commercial investment bank services to all type of customers ranging from small entrepreneurs to big business firms. In this regard, it gives emphasize on the priority sector of the economy like industry, housing and self employment. Besides, the bank aims to provide different customer friendly deposit and loan products to fulfill the banking needs of the individual customers .

VISION OF THE BANK

To be the best Private Commercial Bank in Bangladesh in terms of efficiency, capital adeq uacy, asset quality, sound management and profitability having strong liquidity.

MISSION OF THE BANK:

Two missions mentioned in the Annual Report 2007 are:

To build Prime bank Ltd into an efficient, market driven, customer focused institution with good corporate governance structure.
Continuous improvement in business policies and procedures through integration of technology at all level.

What is Islamic Banking System?

Islamic Banking System is such a banking system which is carried under Islami Shariah. Islami Shariah is based on the rules and regulations created by Allah . That means the Shariah constitutes based on what Allah has said in AI-Quran and what has said by Muhammad (SM). For the muslims it is very necessary to abide by the rules and regulations of Allah . For this reason the Islamic Banking system is introduced.

The phenomenon of Islamic branches of interest based banks has become a topical issue within the banking circle. Islamic Banking of the country is gaining momentum day by day without any direct support from the government and any international monetary agency. Some conventional banking is also converting into Islamic banking very sharply.

In Bangladesh, the Islamic banking was introduced in 1983 with Islami Bank Bangladesh Ltd. playing the pioneer role. Since then, five more Islamic banks have so far been established in the country. Excepting six shariah based banks, seven more conventional banks started Islamic banking through separate outlets side by side with their regular branches. Prime Bank Ltd is one of these seven banks.

Profile of Prime Bank Limited, Islamic Banking Branch:

Prime Bank Limited has started its operation as a Conventional Bank in Apri l 1995. But pretty soon afterwards, within few months, the Bank has taken up the Challenge to start Islamic Banking Operations. The Challenge is not so much as in operating Islamic Banking but in maintaining both the forms in Parallel. From its inception as an Islamic Bank the bank has proven itself to be worthy of its slogan of ‘Bank with a Difference’, through successful operation of Islamic Banking.

Prime Bank has started its Islamic Banking operation through its first Branch being inaugurated at 19, Dilkusha CIA, Dhaka on 18 December 1995. Since then it has so far has established four more branches at different locations in the Country. Because of its popularity and management’s commitment toward social well being gradual expansion of Prime Bank’s Islamic Banking operations is assured.

There are some salient features of Islamic Banking that is practiced in Prime Bank Limited:

All activities are conducted according to Islamic Shariah.

Interest free monetary operations.
Building partnership relation between the Bank and its customers
Following Islamic principles in its investment portfolio.
While investing special consideration to social needs is given.
Through small and long term deposit schemes providing hope to the poor income group of the society.
Client service centric banking, through which making the clients feel special.
Conduct welfare activates etc.

Objectives of Launching Islamic Banking operation in Prime Bank Ltd:

To cater to the needs of customers who want to have services in Islamic Modes
To give importance to the sentiment of people, majority of who are Muslims and are akin to the Islamic financial system
To introduce the partnership concept of business operations
To arrange for ensuring justice in distribution system – use of funds
To introduce wealth maximization concept through profiUloss sharing system in business and investment
To help distressed people develop their financial standing through Islamic Banking operation mechanism
To provide products and services free from interest suited to the needs of customers and establish justice in the society.

The general banking of PBl (IBB, Dilkusha):

The GB of PBL includes the following activities

The opening of varieties Islamic deposit scheme.
The cash management activities .
The clearing process.
The issuance of Pay Order, Demand Draft, n .
The collection process of local and outward bi lls for collection.
The issuance of cheuqe book.
Inter branch credit advice and debit advices are also maintained in GB.
The dispatch activities.
The preparation of daily statement.

Duties and responsibilities:

The following duties and responsibilities that I have performed in working here as an internee is given below:

Inward Mail:

All the letters received in closed envelops are opened by the manager and marked to the concerned Department in-charge.
Before the letters are delivered, they are duly stamped
Registered letters are entered in the inward mail register in progressive number which is also noted on them and letters delivered against acknowledgement of the recipients in the register.
Closed envelops are received on the counters are acknowledged by affixing stamp
Documents received on the counter are entered in Inward mail register and delivered to the recipients against initials in the register.

Inward clearing:

Collects of all clearing checks send from head office
Issue of all checks according to bank name, check no, amount and account number in inward clearing register
Sort out of the check returns and give entries in return book

Outward clearing:

Receive all out ward checks by giving signs and seals
Posting of all checks to the computer
Sort out of all checks in bank wise and then different branch wise
3 copies are made of all entries and sent to the head office before 5 p.m daily

In charge in IPO in clearing:

Monitoring all the forms collected by cash
Receive checks against IPO forms
Signs on the forms and give seals in necessary areas
Print out the validation on daily outward clearing and check for any miss match
Give numbers on the forms
Delivers the acknowledgement to the customers

Other duties and responsibilities:

Open different type of accounts like MTDR, Savings account etc
Write down the blocks of MTDR payment
Issue Pay order, Demand draft(DD)
Issue advices and give entries in IBCA and IBDA issue and
Respond ad vices and give entries in Incoming IBCA and IBDA
Fill up KYC (Know your customer) and prepare for inquiries for those clients

– whose accounts are not used for at least 6 months.

The Comparison of Islamic and Conventional Banking in determining the profit rate of the Mudaraba deposit scheme:

Actually the Islamic banking does give profit to its depositors at a predetermined fixed rate. It gives profit after calculating its net earnings at the year end or at six months end.

The profit is given based on the weight of the deposit scheme. At first, the total outflow from investment is deducted from the total inflow from investment. Then the reserve fund and general & administrative expenditure are deducted from that income from investment. Then the profit will be distributed to the depositors as per weight from those net earnings of the bank. As we learn in economics about the weighted index, the profit is given to the depositors based on this weighted index. The bank cannot invest all the deposits at the same time for the same maturity. The weight is determined based on the duration of the deposit scheme. This is why the Islamic banking can not give profit to the depositors at any fixed rate . Prime Bank Ltd also follows that weighted index principle of determining the profit rate. PBL has targeted some amount of deposits for the year 2007.

Based on this targeted amount and using the weighted index formula the profit rate for year 2007 is determined by the shariah council of PBL. Here, one thing should mention, the bank will not give any profit if any loss occurs. So the determination of profit rate depends on the following factors:

The targeted amount of deposit for the relevant year.
The economical condition of the country.
The investment opportunity.
The profit & loss of the bank.

But the conventional banks don’t follow the same procedure in determining the profit. They have to pay interest at a pre determined fixed interest rate.