Performance Evaluation of IFIC Bank Limited

The major objective of this report is to analysis Overall Activities and Performance Evaluation of IFIC Bank Limited. Other objectives are find out the Management problems and solve the problems and satisfy the shareholders by informing about the company. Finally give some idea about its management and organization structure and develop capabilities as an employee in realistic field of the job market.

OBJECTIVE OF THE REPORT

The main objective of this report is to introduce myself with the Overall Activities and Performance of the bank and to give myself the opportunity to use this information in preparing a report on a firm.

The objective of the study may be viewed as: 1. General objective 2. Specific objective

General Objective

The general objective of the study is to prepare and submit a report on the topic “Overall Activities and Performance of IFIC Bank Ltd.”

Specific Objective

• Identify the strategies for IFIC Bank Ltd. implementing in constant prosperity of the company.
• Analyzing the performance trends of the fast growing banking corporation.
• To find out the Management problems and solve the problems
• To satisfy the shareholders by informing about the company.
• To give some idea about its management and organization structure.

HISTORICAL BACKGROUND OF IFIC BANK

International Finance Investment and Commerce (IFIC) Bank Limited started banking operations on June 24, 1983. Prior to that it was set up in 1976 as a joint venture finance company at the instance of the Government of the People’s Republic of Bangladesh. Government then held 49 percent shares while the sponsors and general public held the rest.

The objectives of the finance company were to establish joint venture Banks Finance Companies and affiliates abroad and to carry out normal functions of a finance company at home. When the Government decided to open up banking in the private sector in 1983, the above finance company was converted into a full-fledged commercial Bank. Along with this, the Government also allowed four other commercial Banks in the private sector. Subsequently, the Government denationalized two Banks, which were then fully Government-owned. While in all these Banks Government held nominal 5 percent shares, an exception was made in the case of this Bank. It retained 40 percent shares of the Bank.

The decision by the Government to retain 40 percent shares in IFIC Bank was in pursuance of the original objectives, namely, promotion of joint participation of Government and private sponsors to establish joint venture Banks, financial companies, branches and affiliates abroad.

MISSION OF IFIC BANK:

Our Mission is to provide service to our 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.

We are committed to the welfare and economic prosperity of the people and the community, for we drive from them our inspiration and drive for onward progress to prosperity.

We want to be the leader among banks in Bangladesh and make our indelible mark as an active partner in regional banking operating beyond the national boundary. In an intensely competitive and complex financial and business environment, we particularly focus on growth and profitability of all concerned.

Capital and Resources

The bank started with an authorized capital of Tk.100.00 million in 1983. Paid-up capital was then Tk.71.50 million only. Over the last Twenty One years, the authorized & paid-up capital has increased substantially. Authorized capital was Tk.500.00 million and the paid-up capital stood at Tk.406.39 million as on December 31, 2004.

The Bank has built up a strong reserve base over the years. In last twenty one years its reserves and surplus have increased significantly. This consistent policy of building up reserves has enabled the bank to maintain a better capital adequacy ratio as compared to others.

With the active support and guidance from the Government, the bank has been showing a steady and improved performance. In its twenty One years of operations, the bank has earned the status of a leading bank in terms of both business and goodwill.

Starting with a modest deposit of only Tk.863.40 million in 1983 the bank has closed its business with Tk.20, 774.49 million of deposit as on December 31,2004. The annual growth rate has mostly been higher compared to both banking sector growth and individual growth rates achieved by others.

As against a profit of Tk.21.94 million in 1984, the bank earned a record profit of Tk.700.25 million for the year ended on December 31, 2004.

FINANCIAL HIGHLIGHTS OF THE BANK (Figure in Million)

Working experience in iFIC bank

An internee usually writes a working report based on the working experience at the Organization he/she was placed for internship. Since I was placed as an internee at IFIC BANK, the working report consisted of the banking process that I had experienced during my course of internship. This working report contains very brief idea about each of the department, where I worked, which includes.

• General Banking Division.
• Credit (Loans and Advance Department).
• Foreign Exchange

It is needed to mention that the procedure of these services provided by the bank is totally backdated. The procedures are backdated in the sense that when the entire world has computerized their entire service, every one is running for speed and efficiency, IFIC BANK is still using the prehistoric manual procedures in providing services. As a result their overhead cost is very high and so many people are needed to involve in doing a job. Again, any process takes long time to perform. Because of these reasons the bank is loosing its efficiency. But it is a matter of hope that presently the authority is trying to computerize the entire organization, which will obviously help the Bank in achieving efficiency and thus customer satisfaction.

GENERAL BANKING

This report is prepared on the basis of 3 months practical experience at IFIC BANK of Bangladesh LTD. The internship program helped me to acquire lot of knowledge about the practical situation of a financial institution. During my internship I have learned many things. In this section I would like to explain my assign part that is “Performance Evaluation of IFIC Bank Ltd a Study of Pallabi Br.”. Following are the research findings have been discussed elaborately.

• General Banking,
• Lending Activities
• Foreign Trade Operation.

Although my assign task was “Performance Evaluation of IFIC Bank Ltd a Study of Pallabi Br” but I got opportunity to work all departments. After doing my internship it clear that how can a bank work and what are the activities of a Bank.

DIVISION OF GENERAL BANKING

General banking department is the heart of all banking activities. This is the busiest and important department of a branch, because funds are mobilized, cash transactions are made; clearing, remittance and accounting activities are done here.

Since bank is confined to provide the services everyday, general banking is also known as ‘retail banking’. In IFIC Bank LTD, the following departments are under general banking section:

i) Account Opening Section

ii) Deposit Section

iii) Cash Section

iv) Remittance Section

v) Clearing Section

vi) Accounts Section

Account Opening Section:

a) Different Types of Accounts

Account opening is the gateway for clients to enter into business with bank. It is the foundation of banker customer relationship. This is one of the most important sections of a branch, because by opening accounts bank mobilizes funds for investment. Various rules and regulations are maintained and various documents are taken while opening an account. A customer can open different types of accounts through this department. Such as:

• Current Deposit.
• Savings Account.
• Short Term Deposit (STD)

Current Account

Current account is purely a demand deposit account. There is no restriction on withdrawing money from the account. It is basically justified when funds are to be collected and money is to be paid at frequent interval.

Some Important Points are as follows-

Minimum opening deposit of TK.1000/- is required;

There is no withdrawal limit.

No interest is given upon the deposited money;

Minimum Tk.1000 balance must always maintain all the time;

Savings Account

This deposit is primarily for small-scale savers. Hence, there is a restriction on withdrawals in a month. Heavy withdrawals are permitted only against prior notice. Some Important Points are as follows-

Minimum opening deposit of Tk.5000 is required;

1. Minimum Tk.1000 balance must always maintain all the time;
2. Withdrawal amount should not be more than 1/4th of the total balance at a time and limit twice in a month.
3. If withdrawal amount exceed 1/4th of the total balance at a time no interest is given upon the deposited money for that month.

Short Term Deposit (STD)

Normally various big companies, organizations, Government Departments keep money in STD account. Frequent withdrawal is discouraged and requires prior notice.  The deposit should be kept for at least seven days to get interest. The interest offered for STD is less than that of savings deposit. Interest is calculated based on daily minimum product and paid two times in a year. Interest rate is 6.00%.

b) Account Opening Procedure

c) Documents Required for Opening Account

Individual / Joint Account

Introduction of the account.

Two photographs of the signatories duly attested by the introducer.

Identity (copy of passport / Employer’s certificate/A certificate issued by ward commissioner or Chairman of any respectable persons who is acceptable to the bank regarding identification & Nationality of the person concerned).

• Joint Declaration Form (For joint a/c only)
• Trade License
• Tin Number (if possible).
• Employee’s history.
• A transaction profile

Proprietorship account

Introduction of the account.

Two    photographs of the signatories duly attested by the introducer.

Valid copy of Trade License.

Rubber stamp.

TIN number (if possible).

Identity (Copy of passport/ Employer’s certificate/ a certificate issued by ward commissioner or Chairman of any respectable persons who is acceptable to the bank regarding identification & Nationality of the person concerned).

Trade License

Limited company

1. Introduction of the account.
2. Two photographs of the signatories duly attested by the Introducer.
3. Valid copy of Trade License.
4. Board resolution of opening A/C duly certified by the Chairman/Managing Director.
5. Certificate of Incorporation.
6. Article of Association
7. Memorandum of Association.
8. All information Stated in individuals A/c
9. Trade License
10. Certificate of Commencement (In case of Public limited company).
11. List of directors along with designation & specimen signature.
12. Rubber Stamp (Seal with designation of each person)
13. Certificate of registration (In case of Insurance Company – Obtained from department of Insurance from the Peoples Republic of BD).

Club / Societies Account

• Introduction of the account.
• Two photographs of the Signatories duly attested by the introducer.
• Bio data of office bears
• Bye laws or constitution
• Board Resolution for Opening A/C duly certified by President/ Secretary.
• List of Existing Managing Committee.
• Registration (if any).
• Rubber Stamp.
• Permission letter from Bureau of N.G.O. (In case of N.G.O. A/C).
• All information Stated in individuals A/c

Closing of an account

The closing of an account may happen,

If the customer is desirous to close the account,

If the IFIC Bank finds that the account is inoperative for a long duration.

If the court of IFIC Bank issues garnishee order.

A customer may close his/her account any time by submitting an application to the branch. The customer should be asked to draw the final check for the amount standing to the credit of his/her account less the amount of closing an other incidental charge and surrender the unused check leaves. The account should be debited for the account closing charge etc. and the authorized officer of the bank should destroy unused check. In case of joint account the application for closing the account should be signed by the joint account holder. The fee for closing of an account is Tk.50.

DIFFERENT Scheme:

Pension saving Scheme (A monthly savings scheme) (PSS):

Secure your future with ease. A small savings today will provide you comfort tomorrow.

Eligibility for PSS Account: A person of 18 years of age and above having a sound mind will be eligible to open an account in his/her own name.

Bonus Payment:

If the account holder, from commencement to maturity of term, pays all the monthly installments in time (i.e. within 10th day of each month) and never defaults in paying monthly installments, the account holder will receive extra bonus payment equivalent to 3 (three) times of monthly installment for 5 years term and 6 (Six) times of monthly installment for 10 years term.

Income Tax Rebate:

Under this Scheme, income tax rebate will be available on the total amount payable i.e. after maturity of deposited amount; such amount will also be income tax free. Monthly installments to PSS will also qualify for showing as investments (like provident fund) in yearly Income Tax Return.

Payment of Pension:

One can receive the entire deposited amount with interest at a time or receive a pension on monthly basis at a desirable amount of monthly installments.

Monthly installment:

The savings amount is to be deposited within the 10th of every month. In case of holidays the deposit amount is to be made on the following day.

The deposits may also be made in advance.

The depositor can have a separate account in the bank from which a standing instruction can be given to transfer the monthly deposit in the scheme’s account.

In case the depositor fails to make the monthly installment in time, then 2% on overdue installment amount will be charged. The charge will be added with the following month(s) installment.

With drawl:

Generally, withdrawal is not advised before a 5 year term, but if it is withdrawn before the above term, then interest will be paid at savings rate. However, no interest will be paid if the deposit is withdrawn within 1 year of opening the account. In that case Tk.200/- will be charged as bank service charge.

In case, the account is closed after 1 year but before completion of the term 3/5-year, the client will be paid back principal amount along with interest at Savings rate/PSS rate (whichever is lower) prevailing on the date of closure of the account, provided the client must deposit at least 12 installments to qualify under this clause

Loan Advantage:

After three years of savings in this scheme the depositor (if an adult) is eligible for a loan up to 80% of his deposited amount (but not less than Tk.20000/-) against the lien of the PSS account to meet the personal need, educational expenses of his/her children or for medical treatment . In that case, interest rates on the loan will be applicable as per prevailing rate at that time.

Automatic closure of A/C and its re-validation:

On failure to pay 4(four) consecutive monthly installment the account will be closed automatically. Installment is to be paid between 1^st to 10^th days of each month. However, if the 10^th day of a month falls within a holiday the next working day will be eligible for deposit for revalidation of the account, the following rules will apply:

If the client fails to deposit any monthly installment in the month when it is due, in that case he/she may deposit the same within 10^th of the following month by giving reasonable grounds in writing for cause of failure and the account will be revalidated when such installment will be deposited along with an additional amount of Tk.10/-,Tk.15/-, &Tk.25/-, being the penalty for late payment of monthly installment of Tk.500/-,Tk.1000/-, & Tk.2000/- respectively.

If the client fails to deposit any monthly installment continuously for 3 consecutive months, in that case, within 10^th of the 4^th month, the client will have to give reasonable grounds in writing for failing and the account will be revalidated when the client will pay additional Tk.30/-, Tk.45/-, & Tk.75/- along with the overdue monthly installment of Tk.500/-, Tk.1000/- & Tk.2000/- respectively.

Any account closed due to failure to deposit more than 3 installments will not be eligible for the revalidation irrespective of the duration of the account.

The client will have options for revalidation of the account 2 times for 3 years term and 3 times for 5 years term.

Rules

A form has to be filled at the time of opening the account. No introduction is needed but attested photographs are advised.

The depositor can select any of the installment amounts which cannot be subsequently changed.

In case of minors the guardians may open and supervise the account in his favor.

A single person can open more than one account for saving under several installment rates.

The accumulated deposit with interest will be returned within one month of completion of a term.

The depositor should notify the bank immediately on any change of address.

The government tax will be deducted from the interest accumulated in this scheme.

If necessary, at the request of the depositor, the scheme can be transferred to a different branch of the same Bank.

The Bank reserves the right to change the rules and regulations of the scheme as and when deemed necessary.

Consumer Credit Scheme (CCS):

RATES OF DEPOSIT SCHEMES:

SAVING DEPOSIT ACCOUNT

Saving Accounts are designed especially for the group who have tendency to save. They have been paid a fixed interest on their savings. There are two types of savings account in this bank.

Individual savings account

Joint saving accounts

The depositor is obligated to maintain a balance of at least Tk. 2,000 for the sake of earning interest. One limitation considering the savings deposit account is depositors can draw only twice a week if they want to get interest on the deposited money. If a depositor draws more than twice a week s/he will not receive any interest for that month. The interest rate for this account is 6 %.

 SHORT TERM DEPOSIT

This account is same as current account. The basic difference between short-term deposit and Current account is that

Less than Tk.1.00 crore                                                                                2.50%

Tk.1.00 crore &above but less than Tk.5.00 crore                                       5.00%

Tk.5.00crore &above but less than Tk.10.00 crore                                     5.50%

AboveTk.10.00 crore                                                                                    6.00%

Bank to Bank                                                                                                2.50%

And no interest is given to the current account depositor’s .Withdrawals require a prior notice of seven days.

FIXED DEPOSIT

Fixed deposit is the amount deposited by the customer for a fixed period of time. The time limit is given in fixed deposit receipt. Depositors have to withdraw the interest after maturity date. If the depositors intend to withdraw the interest earning before expiration of the maturity date the bank is not bound to pay the interest.

Interest Rate of FDR

 Monthly Income Scheme (MIS)

Procedures for paying monthly income: The payment of monthly income will start from the subsequent month after a clear minimum gap of 1 (one) month from the date of deposit. If an account is opened on 7th of any month, monthly income will be paid on 7th of the subsequent month.

The account holder will receive monthly income in any SB/CD account of same name maintained with the branch. In case, the account holder does not have any SB/CD account with the Branch, he/she/they will have to open a SB/CD account for receiving the monthly income. The minimum balance requirement will be waived for these types of accounts for a new customer. However, a minimum initial deposit of Tk.500/- will have to be deposited. This procedure will eliminate the hassle of coming to the Bank Branch for taking interest every month.

Eligibility for Monthly Income Scheme:

A person of 18 years of age and above having a sound mind will be eligible to open an account in his/her own name. A person can open more than one account in his/her/their name in the same Branch or any Branch of the Bank.

REMITTENCE DEPERTMENT

Remittance is another significant part of the general Banking. The bank receives and transfers various types of bills through the remittance within the country. The bank charges commission on the basis of bill amount

TYPES OF REMITTENCE

1. Between banks and non banks customer
2. Between banks in the same country
3. Between banks in the different centers.
4. Between banks and central bank in the same country
5. Between central bank of different customers.

CLEARING SECTION

The amount of Cheques, Pay Order (P.O), and Demand Draft (D.D) Collection from other banks on behalf of its customer is a basic function of a Clearing Department.

Clearing:

Clearing is a system by which a bank can collect customers fund from one bank to another through clearing house.

Clearing House:

Clearing House is a place where the representatives of different banks get together to receive and deliver Cheques with another banks.

Normally, Bangladesh Bank performs the Clearing House in Dhaka, Chittagong, Rajshahi, Khulna & Bogra. Where there is no branch of Bangladesh Bank, Sonali bank arranges this function.

Member of Clearing House:

IFIC Bank limited is a scheduled Bank. According to the Article 37(2) of Bangladesh Bank Order, 1972, the banks which are the member of the clearinghouse are called as Scheduled Banks. The scheduled banks clear the cheque drawn upon one another through the clearinghouse.

TYPES OF CLEARING:

• Outward Clearing: When the Branches of a Bank receive cheques from its customers drawn on the other Banks within the local clearing zone for collection through Clearing House, it is Outward Clearing.
• Inward Clearing: When the Banks receive cheque drawn on them from other Banks in the Clearing House, it is Inward Clearing.

ACCOUNTS SECTION:

The characteristics of the saving accounts and current accounts are more or less same without few exceptions. In case of savings account, around 6% interest is given to the depositors whereas in case of current account no interest is given. Some sorts of freedom are offered to the current account maintaining depositors that are mentioned here in after.

1. Depositors can withdraw their deposits any time in the working days; that is there is no time restriction.
2. No restriction in maintaining deposits.

SEVERAL INSTRUMENTS:

The main instruments used by the IFIC Bank of remittance of funds are

1. PO (pay Order)
2. DD (Demand Draft)
3. TT (Telegraphic Transfer)

a) PO (Pay Order)

Pay orders are the safest way of making payments, as they are drawn on the bank issuing them. So there is no scope of forgery. A pay order is issued only within the members of the Bangladesh bank clearing house (Dhaka Metro). It can be issued in favor of a customer holding an account, by debiting his account and crediting bills payable liability A/C. The account payees submit the pay order in their specific banks. The banks then send the pay order to the clearinghouse where these are received by the respecting issuing banks. The issuing banks verify the pay order, which are then send back to the respecting banks and payment made by debiting the payable account.

IFIC Bank charges different amount of commission on the basis of Payment Order amount. The bank charges for pay order are given in the following chart:

 b)DD (Demand Draft)

A Demand Draft (DD) is an instrument containing an order by the issuing branch upon another branch known as drawee branch, to pay a certain sum of money to the payee.

Commission for Demand Draft (DD) is 0.1% of the principal amount and Vat .15% of the commission amount and telex charge is Tk. 30.00.

c) TT (Telegraphic Transfer)

Issuing branch requests another branch to pay specified money to the specific payee on demand by Telegraph /Telephone

Commission for Demand Draft (DD) is 0.1% of the principal amount and Vat .15% of the commission amount and telex charge is Tk. 30.00.

So the basic three types of local remittances are discussed below:

ONLINE TRANSECTION

Clients of any branch of IFIC Bank can draw money nom any branch of IFIC. This is a superior service for the client’s of IFIC Bank than others.

LOCKERS SERVCE

The locker service of IFIC allows customers to keep their jewelries and other valuables in a safe and secure place. It is given so strict privacy that even bank officials are not permitted to know what item the customer is putting inside the locker. Clients must maintain a current or savings account with the bank.

FOREIGN CURRENCY ACCOUNT

In this case that is remitted from overseas will remain in same foreign currency Generally IFIC Bank Ltd. opens dollar account.

LENDING ACTIVITIES

There are different types of lending principles:

• Safety
• Liquidity
• Security
• Diversiy

Safety: Safety should get the prior importance in the time of sanctioning the loan. At the time of maturity the borrowers may not will or May unable to pay the loan amount. Therefore in the time of sanctioning the loan securities should be taken from the borrowers to recover the loan, Bankers should not scarify safety for profitability.

IFIC BANK LTD. Exercises the lending function only when it is safe. Safety depends upon.

• The security offered by the borrower and
• The repaying capacity and willingness of the debtor to repay the loan with interest

Liquidity: Banker should consider the liquidity of the loan in time of sanctioning it. Liquidity is necessary to meet the consumer need.

Security: Banker should be careful in the selection of security to maintain the safety of the loan. Banker should proper value of the security. If the estimated value is less than or equal to loan amount. The loan should be giver against such securities

Diversity: Banker should minimize the portfolio risk by putting its fund in the different fields. If Bank put its entire loan able fund in one sector it will increase the risk. Banker should distribute its loan able fund in different sectors. Sp if it faces any problem in any sector it can be covered by the profit of another sector.

Different types of loans and advances that IFIC Bank offers:

1. Secured Overdraft (SOD)
2. Agriculture
3. Term Loan
4. Loans to manufacturing units

Loan( General)

• Foreign Documentary Bill purchase(FDBP)
• Local documentary Bill Purchase (LDBP) Etc.

Some of them are discuss as below—

Secured Overdraft (SOD):

It is a continuous advance facility. By this agreement the Bankers allows his customer to overdraft his current account up to his credit limits sanctioned by the bank. The interest is charged on the amount which he withdraws. Not on the sanctioned amount .IFIC Bank sanctions SOD against different security

House building loan (general):

Loan allowed to individual enterprise construction of house (residential or commercial) fall under this of advance. The amount is repayable by monthly installment within a specified period, advance is known as loan (HBFC-STAFF)

House building loans (Staff):

Loan allowed to the bank employees for purchase/construction of house shall be known as Staff Loan (HBFC – STAFF)

Term loan:

IFIC Bank considers the loans, which are sanctioned for more than one year as term loan, under this facility; an enterprise is financed from the starting to its finishing, i.e. from installation to its production.

Loan (general):

Short terms and long-term loans allowed to individual /firms/ industries for a specific purpose but a definite period and generally repayable b y the installments fall under this head.

1. Large and medium scale Industries
2. Small and Cottage industries, very often financing for agriculture and others also included here.

Foreign Documentary Bill purchased (FDBP):

Payment made to a customer through purchase / negotiation of a foreign documentary bills falls under this head. This temporary advance is advance is adjustable from the proceeds of the shipping /export documents, it falls under the category “Export Credit’’

Local Documentary Bill Purchased (LDBP):

Payment made against documents representing sell of goods to local export oriented industries, which are denominated in local currency / foreign currency falls under this head. This bill of exchange is held as the primary security. The client submits the usance bill and the bank discounts it. This temporary liability is adjusted from the proceeds of the bills etc.

FOREIGN TRADE

MEANING OF FOREIGN TRADE

Foreign trade implies the transaction of goods, services and ideas from one country of the world to another country. And the medium of exchange for transacting these goods or services is known as Foreign Exchange (Currency of different countries that allow one country to settle amounts owed to other countries).

Necessities OF FOREIGN TRADE

Diversity in Natural Resources:

Trade may take place because of the diversity in productive possibilities among countries. For example one country may be blessed with a supply of petroleum, while another may have a large amount of fertile land.

Differences in Tastes:

A second reason for trade lies in preference, Even if the conditions of production were identical in all regions, countries might engage in trade if their tastes for goods were different.

Differences in Costs:

The most important reason for trade is differences some counties in production costs. For example, manufacturing processes enjoys economies of scale; that is they tend to have lower average costs of productions as the volume of output expands.

THE PRINCIPAL OF COMPARATIVE OBJECTIVE

It is only common sense that countries will produce and export goods for which they are uniquely qualified. But there is a deeper principle underlying all trade. The principal of comparative holds that a country can benefit from trade even if it is absolutely more efficient (or absolutely lees efficient) then other countries in the production of every good.

The Principle of comparative advantage holds that each country will benefit if it specializes in the production and export of those goods that it can produce at relatively low cost. Conversely, each Country will benefit if it imports those goods that it produces at relatively high cost. This simple principal provides the unshakeable basis for international trade. No country is self sufficient. One country has to depend on other countries for various reasons. One country may have a sound structure in one sector while its other sectors are not so well structured. As a result naturally it has to depend on another country to minimize these lacking of those sectors. On the other hand according to Ricardo’s comparative analysis theory. If a country is good at various sectors then it will continue its operations in its best sector, while for other sectors it will depend on others. When countries concentrate on their areas of comparative advantage under tree trade each country is better off. The underlying assumption here is that countries can concentrate properly in a specified area. As a result efficiency in production will increase. Product quality will increase while the price is lower. Countries will be able to market their products at a lower price. The surplus production will be sold outside of the county which known as export. By doing so countries will earn foreign currency. Again by spending those currencies they will buy the required goods from other countries for them that are known as import. The whole transaction is known as Foreign Trade and through the exchange of foreign currency the transaction ends up. Foreign trade is divided into import, export and remittance.

FOREIGN TRADE AND FOREIGN EXCHANGE OPERATION

a) Authorized Dealer or AD Holder Bank

As per section 2 of Foreign Exchange Regulation Act 1947, Authorized Dealers means a person, for the time being authorized under section 3 to deal in Foreign exchange. In other words Authorized Dealers means a Bank, Authorized by Bangladesh Bank to deal in Foreign under FER Act 1947.

b) License for Authorized Dealer

To get a License for Authorized Dealer, a Bank will apply the General Manager, Foreign Exchange Policy Department of Bangladesh Bank, Head Office, Dhaka complying following conditions­-

The Bank must have adequate manpower trained in Foreign Exchange.

1. Prospect to attract reasonable volume of Foreign exchange business in  desire location.
2. The Bank meticulously complies with the instruction of Bangladesh
3. The Bank will commit to deal in Foreign exchange with in the limit and will submit periodical returns as instructed by Bangladesh Bank.

c) Functions of authorized Dealers

Authorized dealer can handle all kinds of Foreign exchange instruction as per FER Act 1947 under the instruction of Bangladesh Bank. Following are the main function of an Authorized Dealer

• Exchange of Foreign Currencies.
• To make arrangement with Foreign Correspondent.
• Buying & Selling Foreign Currencies
• Handling inward & outward Remittance.
• Opening of L/C Settlement of payment.
• Investment in Foreign Trade.
• Opening and Maintenance of Accounts with foreign Banks under intimation of Bangladesh Bank.
• Export documents handling.

DEPOSIT PRODUCTS IN FOREIGN CURRENCIES:

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

Foreign Currency Account (FCAD, FCAP): Foreign Currency Account by (a) Bangladesh nationals residing abroad (b) Foreign nationals residing abroad or in Bangladesh and also foreign firms registered abroad and operating in Bangladesh or abroad (c) 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 at 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.

Foreign nationals, companies / firms incorporated / registered abroad & A-type (100 % foreign owned) industrial units in EPZ in Bangladesh may also open NFCD A/C.

LETTER OF CREDIT

A letter of credit is a letter issued by a bank (know as the opening or the issuing bank) at the instance of its customer (known as the opener) addressed to a person (beneficiary) undertaking that the bills drawn by the beneficiary will be duly honored by it (opening bank) provided certain conditions mentioned in the letter gave been complied with.

REQUIREMENTS OF OPENNING L\C

In order to export any goods or service to overseas, the exporter should have attested the photocopies if the following documents with the up to date export registration certificate (ERC).

1. Bill of exchange.
2. Commercial invoice/Pro-forma invoice.
3. Certificate of origin.
4. Delivery Chelan
5. Undertaking
6. Packing list.
7. Insurance coverage.
8. Beneficiary certificate where the exporter tells about the goods he/she wants to export.
9. Beneficiary fax (Confirmation of sending goods to the importer).

If the bank authority satisfies with all the information provided by the exporter, steps are taken to smooth out the process of export regarding collection of money or opening back to back L/C.

Thorough checking of Foreign Export L/C

At the very first stage, L/C should be thoroughly checked by keeping a close look on the following terms:

• Whether the L/C is revocable or irrevocable?
• Whether the L/C is freely advised or restricted?
• Whether negotiation of the L/C is restricted or not?
• Whether payment clause or reimbursement clause is favorable?
• Whether L/C expiry and shipment date is favorable?
• Amendment clause is incorporated with recourse or without recourse?

ADVISING OF OPENING L\C

The second step is to advise (forward) the L/C to the beneficiary. Charges are deducted from the client accounts in this purpose.

TRANSFER OF EXPORT L\C

An export may be transferred from the beneficiary to other party or parties; if the term transferable is incorporated on the L\C. Bank will arrange the transfer process. Beneficiary will endorse the Mother L\C to the other party; the party will then independently submit the L\C in his favorable Bank.

BACK TO BACK L\C

It is simply issued to the clients against an import L/C. Back-to-Back mechanism involves two separate L/C. One is master Export L/C and another is Back-to-Back L/C. On the strength of Master Export L/C bank issues bank to Back L/C. Back-to-Back L/C is commonly known as Buying L/C. On the   contrary, Master Export L/C is known as Selling L/C.

Features of Back to Back L/C

• An Import L/C to procure goods /raw materials for further processing.
• It is opened based on Export L/C.
• It is a kind of Export Finance.
• Export L/C is at Sight but back to Back L/C is at Usance.
• No margin is required to open Back to back L/C
• Application is registered with CCI&E
• Applicant has bonded warehouse license.
• L/C value shall not exceed the admissible percentage of net FOB value of relative Master L/C.
• Usance period will be up to 180 days.
• Here L/C issued against the lien of export L/C.
• Arrangements are such that export L/C matures first then out of this export profit, import L/C is paid out.

DOCUMENTS REQUIRED FOR OPENING A BACK TO BACK L\C

In IFIC Bank Principal Branch, following papers/ documents are required for opening a back-to-back L/C-

1. Master L/C
2. Valid Import Registration Certificate (IRC) and Export Registration Certificate (ERC)
3. L/C Application and LCAF duly filled in and signed
4. Pro-forma invoice or indent
5. Insurance Cover Note with money receipt
6. IMP Form duly signed

In addition to the above documents, the followings are also required to export oriented garment industries while requesting for opening a back-to-back L/C –

1. Textile Permission
2. Valid Bonded Warehouse License
3. Quota Allocation Letter issued by the Export Promotion Bureau (EPB) in favor of the applicant for quota items.

BILL OF REGISTER

After the arrival of documents related with Back to Back L/C, an entry should have to be given in the Bills of Registers are listed below:

1. Date received
2. B/E
3. L/C no.
4. L/A no.
5. Received from
6. Drawn on
7. Amount (Foreign currency I Rate)
8. Taka equivalent
9. Draft (Tenor- due date)
10. of documents (Draft-invoice-B/Ls–Others)
11. Steamer
12. Date goods cleared
13. Special instruction from sender
14. Date realized
15. Remarks-further recoveries etc.
16. Remarks- Disposal
17. Initials
18. Remarks

PAYMENT OF BACK TO BACK L\C

In case back to back as 60-90-120-180 days of maturity period, deferred payment is made. Payment is given after realizing export proceeds from the L/C issuing bank.

NEGOTIATION OF EXPORT DOCUMENT

The most common method of financing exporters is negotiation of documents under L/C. It is a post-shipment credit. Here the bank acts as a negotiating bank. After the shipment of the goods, the exporter submits the relative documents to the branch for negotiation.  The documents are to submit within the period mentioned in the L/C. after approval of negotiation of the bill the full particulars of the documents are branch with a forwarding letter. The branch claim reimbursement from the issuing bank or from the reimbursing bank, giving clear instructions to credit the proceeds of the bill to the IFIC Bank head office NOSTRO A/C maintained with the named correspondent bank abroad under telex intimation to the Principal branch and Head Office (International Division).

Negotiation stands for payment of value to the exporter against the documents stipulated in the L\C. If documents are in order, IFIC Bank purchases (negotiates) the same on the basis of banker- customer relationship. This is known as Foreign Documentary Bill Purchase (FDBP).

If the bank is not satisfied with the documents submitted to IFIC Bank gives the exporter reasonable time to remove the discrepancies or sends the documents to L/C opening bank for collection. This is known as Foreign Documentary Bill for Collection (FDBC) entered into the Foreign bill Purchased (F.B.P) register. The documents are sent to the L/C opening.

FOREIGN REMITTANCE

This bank is authorized dealer to deal in foreign exchange business. As an authorized dealer, a bank must provide some services to the clients regarding foreign exchange and this department provides these services.

The basic function of this department are outward and inward remittance of foreign exchange from one country to another country. In the process of providing this remittance service, it sells and buys foreign currency. The conversion of one currency into another takes place an agreed rate of exchange, which the banker quotes, one for buying and another for selling. In such transactions the foreign currencies are like any other commodities offered for sales and purchase, the cost (convention value) being paid by the buyer in home currency, the legal tender.

Remittance procedures of foreign currency

There are two types of remittance:

• Inward remittance
• Outward remittance.

Inward Foreign Remittance:

Inward remittance covers purchase of foreign currency in the form of foreign T.T., D.D, and bills, T.C. etc. sent from abroad favoring a beneficiary in Bangladesh. Purchase of foreign exchange is to be reported to Exchange control Department of Bangladesh bank on Form-C.

Outward Foreign Remittance:

Outward remittance covers sales of foreign currency through issuing foreign T.T. Drafts, Travelers Check etc. as well as sell of foreign exchange under L/C and against import bills retired.

SWIFT

SWIFT the Society for World Wide inter-Bank Financial Telecommunication is the Bank owned co-operative serving the financial community worldwide. The SWIFT Transport Network (STN) is a dedicated global network for secure communication between SWIFT Customer. Swift supports the financial data communication and processing needs of financial institution, through a range of financial messaging service and value-added processing. As well as, access through the STN and interface and application software. In short, SWIFT is a pioneer in the automation of the global financial industry.

In 1973 SWIFT was founded by 239 Banks in 15 countries having its headquarter in La-Hulpe, Belgium with the mission to standardize and automate international payment messaging for the benefit of Banks throughout the world In 1977 the first message was sent and 513 Banks in 15 countries joined SWIFT as its member. Now over 7000 financial institutions around 192 countries use SWIFT everyday.

Objectives of SWIFT:

Security at SWIFT meets 4 objectives:

• Confidentiality: Information is only disclosed to authorize person at authorized location.
• Integrity: Information can be relied upon to be complete accurate and unchanged.
• Availability: Information and associate service is accessible and usable when needed.
• Accountability: Every individual authorize to use the system is accountable.

Process: (The system architecture comprises  3 levels)

• Customer interface-the link to SWIFT at the customer level.
• Communication Network-a web of international telecommunication links.
• Message Processing System – Servers are central to the data processing system. They route message. Check the integrity of the contents and monitor the network.

Categories of messages:

• System messages.
• Customer payme
•  Financial institut
• Foreign Exchange.
•  Collections & Ca
• Securities Mark
• Precious Metals &.
• Documentary
• Travelers Cash
• System messages

PROBLEMS OF FOREIGN TRADE

Regarding foreign trade operation in Bangladesh there are some problem which is discussed in below.

Since Foreign Trade indicates exchange of goods and services between two countries, so it should occur in a smooth and balanced way. Otherwise the balance of trade position of a country will be hampered. Again if the amount of importation exceeds the amount of export then this particular country will be converted into a trading nation. Bangladesh is now standing in front of such a problem. If don’t move to industrialization we will not be able to overcome the problem of unemployment we are suffering now. An industrialized nation can utilize its total manpower effectively while a trading nation can’t because it acts only as a middleman, not involves in the total production process. Industrialization will help us to promote our export base and to earn foreign currency.

Bangladesh is a hugely populated country, so we an abundant supply of manpower. In this age of automation, not manpower but skilled manpower is needed who are able to cope with. The productivity of age-old machines are not enough compared with the automated one. If our industry base were capital oriented instead of labor oriented we would be able to produce more quality product within a short period of time. Sufficient supply of capital will ensure the set up of industrialization. This is very much needed now a day to complete. While others are using automated machineries how long can we expect to go only with our manpower?

When an importer imports certain commodities from another country, he has to undergo various sequential steps; otherwise he would not be able to import the desired goods from the particular country. It’s a time consuming as well as cost oriented matter. The importer adds this value of time and cost into his production cost, so the product price increases. While on the other hand, if a person can import the same goods illegal1y from another country it would easier for him to market those products. No doubt cheaper products win create a demand in the market than the legally imported products.

If the foreign exchange earnings yield from diversified fields then it would be easier to minimize risk resulting from one uncertain field. But in Bangladesh we are earning foreign exchange only from a limited number of sectors. Only RMG contributes almost 75% of the total foreign exchange earnings, through in this sector also we are not involved from the root of production process, we just problem the task of tailoring. So the foreign export base should be decorated in such a way so that all sectors of the economy can contribute significantly.

In this sector Bangladesh has the limitation of skilled manpower, which can understand and handle the foreign exchanges well. Performing the foreign exchange activities is a very tough job because it involves proper communication with the client, various Banks of the country as well as outside of the country. A single error may cost you thousands of dollars. This is a unique sector. The Banker has to well aware of the various trades, import and export policies of the government. He also has to aware of the exiting foreign exchange rate and the bilateral relationship between Bangladesh and other relevant countries. So the Banker should be well trained and groomed to cope with this situation.

From the geographical view point Bangladesh is not located in such a place to trade vigorously. We have encompassed by India from three sides. India has developed a strong industry base than us. They can produce the same quality of goods at a cheaper price compared to us. Now we declare our market as an open market, the Indian goods will cover our market. People will prefer these goods because their lower price and consequently demand for our local products will diminish. Entrepreneurs will loss their interest in establishing local industries because of the lower demand. So there will be a multiplier effect, in the absence of industries unemployment crisis will increase and so on.

Sufficient supply of raw materials we use in the production process. If we have the local raw materials we use in the production process. If we had the local raw materials we would be able to use them in the production process. But unfortunately we have to have to import the raw materials required in various production process. As a result Production cost increases, and consumers have to spend more to avail that particular Product. On the other hand, we can think in another way, if the local raw materials were available we would be able to export goods at a lower price than the competitions. Then certainly our exported goods would have a higher demand in the international market and consequently we would be able to earn foreign Currencies.

Policy and structure are an integral part of any kind of operations. It will suggest us how to perform the operation. But if the policy continues to change frequency it is not easy to plan and to perform also. This is the main problem of our country particularly the political parties. With the changes of Government new policies are formed, which is very difficult to cope with. It is hard for the business organizations and businessmen to settle themselves. They are always deviated from the old track, and have to run after the new track. So to keep in mind the interest of the country, there should be such a steady policy that is helpful for all.

Whenever an importer comes to the Bank to issue a LC in his favor, he has to deposit a certain amount (Known as margin say %) of the total LC value. After receiving of the export documents from the exporter the importer pays the rest (80%) of the amount. But up to this time this 20% amount is kept by the without giving any return to the importer, so it is a loss for the client. He can invest this money anywhere else and could earn some return. The importer adds this loss with his production cost, so the product price goes up that has to borne the ultimate consumer.

Balance of payment indicates the total flow of money into and out of a country. Balance of payment is divided into Current Account (import, export, remittance, bi­lateral trade, urn-lateral trade etc.) and Capital Account (gift, donation, foreign direct investment). It’s a problem for our country that yet we have not been able to make the Current Account fully convertible. Since we are talking about open market economy so the account should be fully convertible. Through initially we had to go to Bangladesh Bank for kind of foreign exchange transaction, but after the partial conversion of Current the situation has relaxed or improved to some extent.

After 2005 there will be no quota facility. Bangladesh has to then produce quality goods at a lower price to survive in the local market. We have to plan and work hard to improve our backward otherwise it would and work hard to improve our backward linkage facilities otherwise it would be too much difficult to compete.

FINDINGS OF THE STUDY

Every student have some specific finding, my report is not exception to this, In my study I want to show overview of IFIC Bank and the condition of Banking sector of Bangladesh and also try to evaluate the performance of IFIC Bank, In this study I had found that overall performance of IFIC Bank is significance, IFIC Bank has a strong growing financial based in Bangladesh. In a globalize world of to day “It is the survival of the fittest “. Being aware of this, IFIC Bank is fully prepared to face the same well prepared well ahead. The economic scenario to the country is predicted going to be brighter in the days to come.

Banking industry in Bangladesh is now on right track, the banks are gradually contributing their mite for the growth and development of the country, and the credit for this squarely goes to Bangladesh Bank, Bangladesh Bank initiated various measures and closely monitored the same for proper implementation. This has brought discipline in the industry, Its position intern of capital .deposit cash position .investment ,advance ,total asset ,net profit ,etc  is always showing an trend ,In this   Internship period I had also found its sound management that is efficient  regarding both financial and operational  management , I also have  found some area where the bank still got the scope to improve their performance,  Some specific findings are mentioned as below:

General Banking Department:

1. In general banking department they follow the traditional banking system the entire general banking procedures are not fully computerized. Therefore some procedures take long time to perform.
2. There is no computerizing system in account opening procedures. That’s why the service is not as prompt as the customer demand.
3. Lack of variety service is also a drawback of the general banking area of the IFIC Bank Ltd. The bank is only providing some traditional limited services to its client consequently the bank falling behind in competition.
4. This bank did not able to open online banking system for its customer; it is only open for its employee
5. In case of opening an account, some big parties are come to open account in reference with the high official of the bank, They do not submit all papers to opening an account and in future they do not feel any urge to submit those papers but already they becomes account holder, I think that in this types of ease the authority is violating the rules.

Foreign Exchange Department:

1. In the foreign exchange department, it is communicating with foreign bank frequently and quickly .To make this process easily modern communication media such as e-mail, Fax , Internet etc, although this banking is using this process but they are not too much active and communicative.

2. The bank may give better service to its customer if all of its department are computerized and incorporate under local area network.

Credit Operation Department:

1. Credit operation department takes a longer time to process a loan because the process of sanctioning of loan done manually.

2. Credit information Bureau report is nor readily available for Bangladesh Bank

3. Bank should provided advance towards the true entrepreneurs with considering conventional system of security collateral.

CONCLUSION AND RECOMMENDATION

I spent only a few weeks to have a practical experience about the performance of banks (which is a vast topic for analysis), which is not enough to have an in-depth knowledge about it. On the basis of my short observation, I recommend following possible changes to have the maximum benefit from the system.

IFIC Bank of Bangladesh ltd. is more capable of contribution towards economic development as compared their with conventional banks, by dint of commanding most of their funds as investment accounts which are invest in employment and also in export and import business. It may be expected that by establishing a network over the country and by increasing resources this bank will be able to play a considerable role in the portfolio of development of financing. The whole banking sector of Bangladesh is facing a great challenges and competition due to continuous foreign investment in this sector. IFIC bank is facing serve competition from the other key players, especially, excellent banks by offering similar and better playing services. The IFIC Bank is a promising commercial bank in Bangladesh in this competitive market IFIC Bank has to compete not only with the other commercial banks but also with the public banks. I think this report may show a guideline for IFIC Bank for its future planning and for its successful operation to achieve its goal in the environment of the competitive environment prevailing in the country now.

RECOMMENDATION

IFIC Bank should try to develop the process of providing services. To get a perfect process of delivering services, the customers should be asked. In the recent study customers put emphasis mostly on one-stop customer service. The other suggestions are as follows:

• Personal relationship should be build with the big customers/depositors. They can be sent different gift items like calendar, diary etc. on different occasions like Eid, New Year etc.
• The decoration of Local Office is very poor. The customer’s attitude toward the decoration is highly negative.
• Customers satisfied with the price charged, but they have not too much awareness about the price charged. Customer’s awareness should be build over pricing strategy.
• Local Office should take more bills that will develop the awareness of customer.

An exploratory research should be conducted to find out the other elements that have impact over the efficacy of customer service.

• The office layout should be designed in a way so that, there is no chance of confusing customer. The cash receive section will be totally separated from the cash paying section
• Some offices are decorated in a much unstructured way. All the offices should be decorated with the help of interior design Company, so that maximum efficacy of service can be provided.
• Customers are the hearts of the organization. They should provide more space in the office and if possible, they should have some entertainment facility. For example: A television with some dynamic channels like discovery, animal planet, national geography etc. As a result they will be more patient while the service has been processed.
• The employee of the different branch should be trained continuously.
• As because bank is a financial institution, the IFIC should recruit more persons, having commerce backgrounds.
• Each branch should be decorated with Electronic Display Board, which will show that which table is performing what function and now that is serving. The branches should be decorated with proper Sound System facility, which will be helpful to communicate with the customer more easily. This system will decrease the confuse ness of the customer, which ultimately will increase the efficacy of customer service.
• The employees of the cash counter are the persons who are having direct contact with the customer. So, these employees should be more smart and active.
• Foreign Exchange is the most profitable department of each branch. So, IFIC should think about opening more branches internationally, mostly where they have enough operations. It will facilitate the foreign trade. As a result, efficacy at the foreign trade will be increased.
• IFIC should establish security camera in its each branch. Establishing security camera will increase the security of a branch.