Practical Orientation of AB Bank Limited

Main objective of this report is to discuss overall about Practical Orientation of AB Bank Limited. Here major focus on the functions of general banking section and the functions of credit section. Report also analysis the functions of foreign exchange section and observe the working environment in commercial banks. In this report briefly explain on existing banker customer relationship. Finally find out some problems and draw recommendation to overcome.

Objective of the study

The main objective of the study is to gather practical knowledge regarding banking system and operation. This practical orientation gives us a chance to Co-ordinate out theoretical knowledge with the practical experience. The following are of objective for this practical orientation in bank:

To apply theoretical knowledge in the practical field.
To help the students in taking up professional courses in the second year.
To have exposure to the functions of general banking section.
To have exposure to the functions of credit section.
To have exposure to the functions of foreign exchange section.
To observe the working environment in commercial banks.
To study existing banker customer relationship.

Coverage of the study

In this report, three major areas in commercial banks have been covered which are:

General banking section.
Credit section.
Foreign exchange section

Methodology of the study

For smooth and accurate study every one have to follow some rules & regulation. The study inputs were collected from two sources:

Primary sources

Practical desk work
Face to face conversation with the officer
Direct observations
Face to face conversation with the client

Secondary sources

Annual report of ABBL
Files & Folders
Memos & Circulars

BACKGROUND OF AB BANK

AB Bank Limited, the first private sector bank under Joint Venture with Dubai Bank Limited, UAE incorporated in Bangladesh on 31st December 1981 and started its operation with effect from April 12, 1982.Dubai Bank Limited (name subsequently changed to Union Bank of the Middleast Limited) decided to off-load their investment in AB Bank Limited with a view to concentrate their activities in the UAE in early part of 1987 and in terms of Articles 23A and 23B of the Articles of Association of the Company and with the necessary approval of the relevant authorities, the shares held by them in the Bank were sold and transferred to Group “A” Shareholders, i.e. Bangladeshi Sponsor Shareholders. During the last 28 years, AB Bank Limited has opened 77 Branches in different Business Centers of the country, one foreign Branch in Mumbai, India and also established a wholly owned Subsidiary Finance Company in Hong Kong in the name of AB International Finance Limited. To facilitate cross border trade and payment related services, the Bank has correspondent relationship with over 220 international banks of repute across 58 countries of the World.

STRATEGIES OF AB BANK

AB Bank as a provider of diversified financial service covering a wide spectrum of banking products and service is in a position to offer its’ clients, among other facilities, projects finance, corporate financed, syndication service, treasury based financial solution, auto loan, consumer loans, cash flow based financing products including lease financing, equity financing, risk management tools and advisory service. With its’ experience and know how of the financial market, it is uniquely positioned to take advantage of the opportunity offered to it.

Its’ study of engaging its’ client-centric-relationship groups to aggressively market wide range of products and service to its’ clients has yielded rich dividends. In the projects finance segment, it has mainly focused on structured project finance in the infrastructure, health gas and petrochemical sectors.

OBJECTIVES OF AB BANK

The objectives of the bank are as follows:

Give maximum benefits to the customers and the shareholders.
Expand the economic sector and reach the service to the common people.
Ensuring the maximum utilization of human resources through increasing the efficiency.
Increasing the confidence of traders through making the transaction easier.
Determining the need of the customer and supply short and long-term financial assistance.
Proper stewardship and utilization of resources.
Participate in the various weal-fear activities of the country.
Making capital market more effective through its presence.
Maximum utilization of information technology and relate the customers in banking activities.
Strengthening the discipline in bank management and giving the customers best service through establishing long-term relation.
Earning a handsome growth in the economy through participating in various social activities and in trade and commerce.
Increasing the goodwill of the bank in home and abroad.

PRODUCT AND SERVICES

Corporate Banking
Corporate Lending
Structured Finance
SME Loan
Project Finance
Investment Banking
Merchant Banking Wing (MBW)
Custodial Service
Brokerage Service
Non Resident Bangladeshi Banking (NRB)
Money Transfer
Islamic Banking

Account opening department

Understanding

The relationship between a banker and his customer begins with the opening of an account by the former in the name of the latter. Initially all the accounts are opened with a deposit of money by the customer and hence these accounts are called deposits accounts. Banker solicits deposits from the members of the public belonging to different walks of life, engaged in numerous economic activities and having different financial status. There is one officer performing various functions in this department.

Things Are Done Here

The following things done in this department:

(i) Accepting of deposit

(ii) Opening of account

(iii) Check book issue

(iv) Transfer of account

(v) Closing of account

PERSONAL OBSERVATIONS

Personal observations from this department:

Accepting of deposits:

In this branch the various types of accounts are offered to various customers, which are grouped in to:

Demand deposit account.
Time deposit account.
Demand deposit account:

The amount in accounts are payable on demand so it is called demand deposit account. The following accounts are under demand deposit accounts:

Current account.
Savings account.
Special Notice time deposit (STD).
Resident foreign currency deposit account (RFCD).

(i) Foreign currency account in dollar (FCAD).

(ii) Foreign currency account in pound sterling (FCAP).

Current account.

This type of account is opened by both individuals and business concerns. Frequent transactions (deposits as well as withdrawal) are allowed in this type of account. A current a/c holder can draw checks on his account for any amount for any numbers of times in a day as the balance in his account permits. This account provides no interest. The minimum balance to be maintained is Tk. 5000. No new account can be opened with a check.

Savings account:

Individuals for savings purposes open this type of account. Current Interest rate of these accounts is 8% per annum. A minimum balance of Tk. 200 is required to be maintained in a SB account interest on SB account is calculated and accrued monthly and credited to the account half yearly. Interest calculation is made for each month on the basis of the lowest balance at credit of an account in that month. A depositor can withdraw from his SB account not more than twice a week up to an amount not exceeding 25% of the balance in the account.

Special Notice time deposit (STD):

The deposits in this account are withdrawal on prior notice varying from 7 to 29 days and 30 days or more. The interest is paid on the balance of the account. Current interest rate is 6.50% per annum.

(d) Resident foreign currency deposit account (RFCD):

A Bangladeshi National can deposit foreign currency (dollar and pound sterling) within 6 month of returning from abroad provided the foreign exchange- (i) Is not a receipt against export of goods or services from Bangladesh, (ii) Is not a commission due from abroad arising from business deal in Bangladesh. The balance in the account is withdrawal only when the account holder goes abroad. He can endorse the amount in his passport. Normally bank does not give any interest on this a/c.

(i) Foreign currency a/c in dollar (FCAD).

(ii) Foreign currency a/c in pound sterling (FCAP).

Bangladeshi nationals working and earning abroad other than from Bangladesh sources can open a foreign currency a/c under this scheme after giving declaration regarding his claim. The a/c holder selects a nominee who will operate the a/c on his behalf and fills in a nomination form. The a/c holder is also required to submit photocopies of passport, work permit /contract. As this is a current a/c no interest is paid.

Time deposit account:

The amount in this a/c is payable only after stipulated time. The following A/Cs are under time deposit A/C:

Fixed deposit account.
Bearer certificate of deposits (BCD).
Non-resident foreign currency deposit.

Opening of account

Account opening procedure

Any one of the following should properly introduce the account:
An existing Current Account holder of the Bank,
Officials of the Bank not below the rank of an Assistant officer.
A respectable person of the locality well known to the Manager/Sub-Manager of the Branch concerned.

The type of account, the prospective Customer wishes to open should be ascertain. Highlight the main features of the account obtained necessary papers prescribed for opening of the particular type of account including two copies passport size photo of the account holder duly attested by the Introducer and verified by the Authorized officer of the Bank.

Supply a set of printed forms required for opening the account, which will normally include.

Advise of new Account
Specimen Signature Cards
Agreement
Deposit slip Book
Check Book Requisition slips.

Request the customer to carefully read and fill up the printed Forms supplied to him.

Signature of the customer on the reverse of the signature card. Any special instructions with regard to operation of the account should be noted on the relevant signature card boldly duly authenticated by the a/c holder should be obtained.
The required Account Number for the new Account from the Account Opening Register should be obtained.
Obtain the signature and a/c number of the Introducer on the advice of new accountant the place meant for the purpose and gets the signature properly verified by an Authorized official of the Bank.

The Deposit slip properly filled in and signed by the customer in duplicate should be collected. Then the new a/c number should be written at the appropriate place of the Deposit slip and mark new Account on both the copies of the deposit slip and request the customer to deposit the money at the Teller’s counter.

Place the signature cards, Advice of new account, a copy of Deposit slip, photographs and other necessary papers/documents etc. in a file and obtain approval of the Authorized officer for opening the new account on all relevant papers while giving approval for opening an account the Authorized official should be satisfied about the bonafide of the Introducer, keeping in view the operations of his account.
Get each signature of the Customer/Introducer on the Advice of New A/c and on the signature cards admitted by the authorized official of the Bank using a small rubber stamp. The Authorized officer on the advice of new A/c and on the specimen signature cards should also attest the signature of the new a/c holder.
After approval of the opening of the a/c, get the Checkbook requisition slip signed by the customer. Debit the customer’s Account for the amount of Exercise duty payable for the checkbook.
Deliver the checkbook to the customer after properly marking the Account number name and place of the branch on each leaf of the checkbook.
On completion of account opening open a file for the new a/c holder and file all relevant papers forms etc. Signature cards, copies of Advice, Deposit slip Debit ticket etc. is distributed to concerned departments.

Classification of customers

a) Individual (personal)

b) Proprietorship (Sole traders)

c) Partnership firms (Registered or Unregistered)

d) Joint stock Companies (Private Limited companies/Public ltd.)

f) Public Sector Corporations

g) Municipalities/Municipal Corporations /Local Bodies etc.

h) Clubs/Societies/Associations/Schools/Colleges/ Universities etc.

i) Executors/Administrators

j) Trustees

k) Illiterate persons

l) Constituted Attorney

m) Wage Earners.

Document required for opening new accounts

Documents Common for all types of Accounts & Customers:

Advise of New Account (in duplicate)
Specimen signature cards (in duplicate)
Account Opening Agreement Form.
Photographs of Account Holders (in duplicate)
Deposit Slips Book.
Cheque Book Requisition slips.
Letter of mandate authorizing another person/s to operate the A/c on behalf of the Account holder, where necessary.

Additional document / forms are to be obtained for opening some special accounts.

Joint Accounts of two or more persons

Mandate for Operation of Accounts:

A clear authority signed by all the joint A/C holders containing instructions as to who will operate the account and how the account is to be operated should be obtained. The mandate should mention the name of the persons authorized to draw check. In case of death /insanity/insolvency of one or more of the joint a/c holders, the authority will cease to operate.

Executor:

Probate: From a court of law along with a certified copy of the will duly attested by a notary public.
A mandate in case there is more than one Executor, signed by all the executors, as to how the a/c will be operated.

Administrator:

Letter of Administration from a court of Law along with a certified copy duly attested by a Notary Public appointing him as an Administrator of the Estate of the deceased. The operation of the a/c is to be allowed as per instructions of the letter of administration.

Proprietorship Firm.

Declaration of Proprietorship
Trade License from Municipality.
Account Agreement Form
Mandate if operation by third party is to be allowed.

Partnership Firm:

Photocopy of partnership deed registered with Registrar of Firm duly attested by Notary Public.
Photocopy of Registration Certificate duly attested by Notary Public in case of a Registered Firm.
Letter of Partnership duly signed by all the partners, in case of non-Registered Firm.
Resolution signed by all the partners to open the a/c.
Mandate as to operation of the a/c.
Account Agreement Form
Trade License from Municipality.

Private limited Joint Stock Company.

Memorandum of Association and Articles of Association duly certified by chairman or secretary.
Resolution of the Board duly certified by chairman /Secretary authorizing to open the a/c with the Bank and naming the persons who will operate the a/c, as per provisions of Articles of Association.
Corporate Agreement Form.
Certificate of Incorporation duly certified by Chairman/Secretary.
List of Directors duly certified by Chairman/Secretary.

Public limited joint Stock company.

Memorandum and Articles of Association duly certified by chairman /secretary.
Certificate of Incorporation duly certified by chairman /Secretary.
Resolution of the Board duly certified by Chairman/Secretary authorizing to open the a/c with the Bank and naming the persons who will operate the a/c as per provisions of Articles of Association.
Corporate Agreement Forms
Certificate of commencement of business
List of Directors duly certified by Chairman /Secretary.

Clubs/Societies/Trustee/Associations/Non-trading Institutions etc.

Resolution-who will operate the a/c. must be noted-for club
In case of death, a/c. should be stopped until the club nominates an other person.
Trust deed is needed-for trustee

Municipal Corporation /Local Bodies:

Copy of the Municipal Act/charter duly certified by the chairman /Administrator.
Resolution of Municipal committee authorizing the opening of the a/c in the Bank and naming the persons who will operate the a/c duly certified by the chairman/Administrator.
Accounts of constituted Attorney: Certified copy power of Attorney duly verified with the original by the concerned Bank official under seal and signature.

Issue of Check Book

(A) Issue of fresh checkbook

Fresh checkbook is issued to the account holder only against requisition on the prescribed requisition slip attached with the checkbook issued earlier, after proper verification of the signature of the account holder personally or to his duly authorized representative against proper acknowledgment.

Issue of Duplicate checkbook:

Duplicate checkbook in lieu of lost one should be issued only when an A/C holder personally approaches the Bank with an application Letter of Indemnity in the prescribed Proforma agreeing to indemnify the Bank for the lost checkbook. Fresh check Book in lieu of lost one should be issued after verification of the signature of the Account holder from the Specimen signature card and on realization of required Excise duty only with prior approval of manager

of the branch. Check series number of the new checkbook should be recorded in ledger card signature card as usual. Series number of lost checkbook should be recorded in the stop payment register and caution should be exercised to guard against fraudulent payment.

Account Transfer:

The customer submits an application mentioning the name of the branch to which he wants the account to be transferred. His signature cards, advice of new account and all relevant documents are sent to that branch through registered post with acknowledgment the balance standing at credit in customers account is sent to the other branch through Inter Branch Credit Advice (IBCA).

Closing of account

Upon the request of a customer an account can be closed. After receiving an application from the customer to close an Account, the following procedure is followed by a banker. The customer should be asked to draw the final cheque for the amount standing to the credit of his a/c less the amount of closing and other incidental charges and surrender the unused cheque leaves. The a/c should be debited for the account closing charges etc. and an authorized officer of the Bank should destroy unused cheque leaves.

In case of joint a/c the application for closing the a/c should be signed by all the joint holders.

LOCAL REMITTANCE DEPARTMENT

UNDERSTANDING:

ABBL has its branches spread throughout the country and therefore, it serves as best mediums for remittance of funds from one place to another. This service is available to both customers and non-customers of the bank. There are four employees including one officer, three assistant officers in this department.

THINGS ARE DONE HERE

The Following things are done in this department:

Issuing & Payment of Demand Draft.
All related correspondence with other Branches & Banks
Compliance of Audit & Inspection
Balance of L.D. payable & L.D. Paid with advice
Attached to Sanchaya Patra and Wage Earners Development Bonds.
Payment of Incoming TT.
Issuing, encashment of Pay Order and maintenance of record and proof sheet.
Issuing and encashment of all kinds of Sanchaya Patras and wage Earners Development Bond.
All related statements & correspondences with Bangladesh Bank & other Branches.
Issuance of Local Drafts
Issuing and encashment of BCD.
All related correspondences.
Issuing of Outgoing TT.
Issuance of Local Drafts.

PERSONAL OBSERVATIONS

Personal observations from this department:

Remittance of funds:

Any one of the following methods may make remittance of funds from one place to another.

Telegraphic Transfer (T.T)
Local Draft (L.D)
Pay order (p/o)

(1) Telegraphic Transfer (T.T)

It is an order from the Issuing branch to the Drawee Bank /Branch for payment of a certain sum of money to the beneficiary. Telex/ Telegram sends the payment instruction and funds are paid to the beneficiary through his account maintained with the Drawee branch or through a pay order if no a/c is maintained with the drawee branch.

T.T issue process:

The Applicant fill up the relevant part of the prescribed Application form in triplicate duly signs the same and gives it to the Remittance Department.
Remittance Department will fill up the commission part meant for Bank’s use and request the Applicant to deposit necessary cash or check at the Teller’s Counter.
The Teller after processing the Application form, Cash or check will validate the Application form .The first copy is treated as Debit Ticket while the second copy is treated as Credit Ticket and sent to Remittance Department for further processing. The third copy is handed over to the applicant as customer’s copy.
Remittance Department will prepare the Telex/Telegram in appropriate form, sign it and send it to the telex Operator/Dispatch Department for transmission of the message.
Remittance Department will prepare the necessary advice
Debit Advice is sent to the client if client’s a/c is debited for the amount of T.T
Debit ticket is used to debit the client’s account if necessary.
T.T Confirmation Advice is sent to the Drawee Branch.
Credit Ticket (2nd copy of the Application Form) is used to credit the ABBL General Accounts.

Accounting entry:

Dr. Cash /client’s A/C

Cr. ABBL General A/C

Cr. Communication.

Cr. Commission.

Payment of T. T’s:

On receipt of T.T payment Instructions the following entries are passed by the Drawee branch if the T.T is found to be correct on verification of Test Number.
Dr. ABBL General A/c

Cr. Remittance Awaiting Disposal- T.T Payable A/c

Dr. Remittances Awaiting Disposal -T.T Payable A/c

Cr. client’s Account /P.O. A/C.

In case the beneficiary does not maintain any a/c with the Drawee branch a P.O is issued in favor of the payee and sent to his banker/local address as the case may be.

Every branch maintains a prescribed T.T. Payable Register. All the particulars of T.Ts are to be properly recorded in this Register duly authenticated. A separate type of T.T confirmatory advice is sent to the Drawee branch on the same day. On receipt of the T.T Confirmatory advice/ confirmation copy of Telegram from the Issuing branch, the particulars of the T.T are verified with reference to particulars already recorded in the T.T payable Register.

The Confirmatory advises are kept attached with the relative Ticket No further responding entry is required to be passed on receipt of such confirmation copy.

On payment of T.T the particulars are to be incorporated in the Extracts of Responding Debit entries as usual and sent to HORC.

Local Draft (D.D)

Local Draft is an instrument containing an order of the Issuing branch upon another branch known as Drawee branch, for payment of a certain sum of money to the payee or to his order on demand by the beneficiary presenting the draft itself.

Process of Issuing a Local Draft.

Get the Application form properly filled up and signed by the applicant.
Complete the lower portion of the Application Form meant for Bank’s use.
Calculate the total Taka amount payable including Bank’s commission /charges etc.
If a cheque is presented for the payment of the L.D officer should get the check duly passed for payment by the competent authority and record the particulars of L.D on the back of the cheque.
If the purchaser desires his account with the branch to be debited for the amount of L.D the officer should get the A/C. holder’s signature verified properly, from signature card on record of the branch and debit client’s a/c for the total amount including commission/ charges etc.
If cash deposit is desired, request the purchaser to deposit the money at the Teller’s Counter.
The Teller, after processing the Application Form, Cash or Cheque, will validate the Application form.
The first copy of the Application form is treated as Debit Ticket while the second copy is treated as Credit Ticket and sent to Remittance Department for further processing. The third copy is handed over to the Applicant as customer’s copy.
Each branch maintains a running control serial number of their own for issuance of L. D. on each Drawee branch. This control serial number should be introduced at the beginning of each year, which will continue till the end of the year.

L.D Issue Register:

The Remittance Department maintains prescribed L.D Issue Register. All the required particulars of all L. Ds issued should be entered in that Register duly authenticated. Separate folios are opened for each Drawee Branch. While issuing local Drafts of

TK.50, 000/- and above, branches shall put a test number in RED INK on the upper portion of the drafts so that the Drawee branch can immediately make payment of the L.D on presentation after getting the Test agreed, if otherwise found in order.

Issue of Duplicate Draft

Duplicate L.D should not normally be issued unless thoroughly satisfactory evidence is produced regarding loss of a draft. If the L.D is reported lost/stolen, a duplicate draft may be issued by the Issuing branch on receipt of a written request from the purchase.

Before issuing a duplicate L.D the branch should observe the following:

Verify the Purchase’s signature on the request letter from the signature appearing on the original application form.
Immediately issue a stop payment instruction to the Drawee branch under advice to Head Office and obtain confirmation of non-payment of the L.D in acquisition.
After the Drawee branch has acknowledged the stop payment order and confirmed that the local draft in acquisition remains unpaid at their end, the Issuing branch should obtain an Indemnity Bond on stamped paper /letter of indemnity as per prescribed format from the purchase duly signed by him. The branch will thereafter write to head office, for their approval to issue a Duplicate draft.
The Head Office on receipt of request from the issuing branch will immediately issue a caution circular to all the branches regarding the loss of the local draft asking them to record stop payment.
The Head Office will thereafter issue clearance to the Issuing branch for issuing a Duplicate draft in lieu of original reported lost.
Prescribed duplicate issuance charge is to be recovered for issuing the duplicate draft and credited to Income A/c.

Cancellation of Local draft

The following procedure should be followed for cancellation of a L.D:

The purchase should submit a written request for cancellation of the L.D attaching therewith the original L.D.
The signature of the purchase will have to be verified from the original application form on record.
Manager /Sub -Manager’s prior permission is to be obtained before refunding the amount on cancellation.
Prescribed cancellation charge is to be recovered from the applicant and only the amount of the draft less cancellation charge should be refunded. Commission/Postage etc. charge recovered for issuing the L.D should not be refunded.

The L.D should be affixed with a stamp Cancelled under proper authentication and the authorized officer’s signature on the L.D should also be cancelled with Red in but in no case should be torn. The cancelled L.D should then be kept with the relevant Ticket.
The original entries are to be reversed giving proper narration. An IBDA for the cancelled L.D should be issued on the Drawee branch.
Cancellation of the L.D should also be recorded in the L.D Issue Register.

Payment of L.D

On receipt of Credit Advice (IBCA) from the Issuing branch the following responding entries are then be passed by the Drawee branch.

Dr. ABBL General A/c Branch

Cr. Remittance Awaiting Disposal L.D payable A/c

Extracts of responding entries are to be sent to HORC on the same day.

When a L.D is presented for payment at the paying branch its details are to be carefully examined with references to the following points
Whether the draft is drawn on their branch.
Whether the draft is crossed or not Amount of a crossed draft is not paid in cash to the payee but to be paid to his account with a bank.
Two authorized officials of the Issuing branch must have signed draft. Their signatures are to be verified from specimen signature book let to be sure that the draft is genuine. The verifier should put his initials in red ink against the authorized signatures in the draft.
Endorsement on the back of the draft must be regular in case the draft is presented through clearing.
The amount of the draft should not exceed the amount protect graphed /written in red ink on the top of the draft.
The payee is to be properly identified in case of cash payment.
The particulars of the draft i.e. the draft number date amount and the name of payee, should be verified from the L.D payable Register.
On payment the L.D is affixed with the branches Paid stamp and signatures there on are cancelled with red ink. The date of payment is recorded in the L.D payable

Stop payment of L.D

As the Issuing branch issues the draft, the payee or purchaser of the draft cannot give stop payment instructions to the Drawee branch. If a paying branch receives a y request from the payee/endorsee or the purchaser of a draft for stopping payment of the draft, it will ask them to approach the issuing branch for the purpose. The paying branch should however exercise necessary precaution in this regard. Only the Issuing branch can issue instructions for stop payment of draft under special circumstances. However, if a stop payment order is received from a court of law the same should be carried out. If a draft on which stop payment order has been issued buy account is presented for payment the same should be returned unpaid with the answer court prohibited payment quoting court order number and date.

Cancellation of L.D

Only the purchaser can request the Issuing branch for cancellation of a L.D. The drawee branch cannot cancel a L.D. The Drawee branch can accept cancellation instructions only from the Issuing branch, when the Issuing branch the relative entry in the ABBL general a/c is reversed cancels a draft and IBDA is issued on the Drawee branch. On receipt of the advice of cancellation through IBDA from the Issuing branch, the Drawee branch should reverse the original liability entries on the strength of the IBDA and record suitable remarks in the L.D payable Register/ related IBCA of the draft.

CASH DEPARTMENT

UNDERSTANDING:

The cash department deals with all types of negotiable instruments, cash, and other instruments and treated as a sensitive section of the bank. There are one senior officer, three officers and Teller in this department.

THINGS ARE DONE HERE

The following things are done in this department

(a) Shall be responsible for all Cash & Cash Items related matters including record keeping of the information’s received regarding cash remittances

(b) Shall supervise the Cash Remittance under direct guidance of Sub-Manager

(d) Keeping liaison with the Bangladesh Bank, Cash department.

PERSONAL OBSERVATIONS

I have observed the following things:

Cash Payment

Cash payment of different instruments is made in the cash section. Procedure of cash payment against cheque is discussed under elaborately.

Cash payment of cheque

Cash payment of cheque includes few steps.

First of all the client comes to the counter with the check and gives it to the officer in charge there. The officer checks whether there are two signatures on the back of the cheque and checks his balance in the computer. After that the officer will give it to the cash in charge.
Then the cash in charge verifies the signature from the signature card and permits the officer in computer to debit the client’s account by giving posting. A posted seal with teller number is given.
Then the cheque is given to the teller person and he after checking everything asks the drawer to give another signature on the back of the cheque.
If the signature matches with the one given previously then the teller will make payment keeping the paying cheque with him while writing the denomination on the back of the cheque.

Cash paid seal is given on the cheque and make entry in the payment register.

There are few things that shall be scrutinized and checked before making payments.

Name of the drawer
Account number
Specimen signature
The validity of the cheque and make it sure that it is not post dated or undated.
The amount in words and figures are same.

Cash Balance calculation

The officer in charge of cash section does this calculation and then manager or authorized officer will check the balance and sign in the cash balance book. The balance is maintained in the balance book. Opening balance of current day is the closing balance of the previous day. Total receive of the current day is added with the opening balance and total payment is deducted for calculating the closing Balance or cash balance.

Receipt of check, draft, pay order for clearing and collection:

If an instrument (check, draft, pay-order) drawn on a bank located with in the clearing house is deposited then the Teller uses the seal “ Received for clearing “ and provides special endorsement so that no bank other than ABBL, Principal branch can en cash the instrument.

If an instrument (Check, draft, pay-order) drawn one bank located outside the learning house is deposited, the Teller uses the seal “Received for collection”.

COLLECTION DEPARTMENT

UNDERSTANDING

Checks, drafts etc. are drown on bank located outside clearing house are sent for collection. Principal Branch collects its client’s above-mentioned instruments from other branches of ABBL and branches other than ABBL. In case of out ward bills for collection customers account is credited after finishing the collection processor. And in case of in ward bills customers account is debited for this purpose. So it place dual role as follows:

Collecting Banker
Paying Banker.

THINGS ARE DONE HERE

Preparing of Outward and Inward Collection Item.
Inter-Branch Transfer.
Batch posting and checking as and when required.
Other works as and when require.

Personal Observations:

Observations over the desk are given below:

Collection is done when

(i) Paying Bank is located out side Dhaka City.

(ii) Paying Bank is other branches of ABBL situated inside Dhaka City.

Paying Bank is outside Dhaka City :

Collection department of Principal Branch, ABBL sends outward bills for collection (OBC) to the concerned paying bank to get inter Bank Credit Advice (IBCA) from paying Bank. If the paying bank dishonors the instrument, the same is returned to principal Branch.

The Paying Bank of their own branches inside Dhaka City:

Collection Department sends transfer delivery item to other branches of same bank situated inside Dhaka City. Upon receiving IBCA customer’s a/c is credited.

FCD CLEARING DEPARTMENT

UNDERSTANDING

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 chouse drawn upon one another through the clearinghouse. This is an arrangement by the central bank where everyday the representative of the member banks gathers to clear the chouse. Banks for credit of the proceeds to the customers’ accounts accept Chouse and other similar instruments. The bank receives many such instruments during the day from account holders. Many of these instruments are drawn payable at other banks. If they were to be presented at the drawee banks to collect the proceeds, it would be necessary to employ many messengers for the purpose. Similarly, there would be many chouse drawn on this the messengers of other banks would present bank and them at the counter. The whole process of collection and payment would involve considerable labor, delay, risk and expenditure.

All the labor. Risk, delay and expenditure are substantially reduced, by the representatives of all the banks meeting at a specified time, for exchanging the instruments and arriving at the net position regarding receipt or payment. The place where the banks meet and settle their dues is called the Clearinghouse.

THINGS ARE DONE HERE

The following things are done in this department

(a) Preparation of Clearing Outward and Inward Lodgment and record maintenance of the same.

(b) Batch posting as and when required.

PERSONAL OBSERVATIONS

Following thins are observed in the period of Practical Orientation in this department:

The clearinghouse sits for twice in a working day. The members submit the climbable checks in the respective desk of the banks and vice versa. So, instruments are exchanged over there.

On receipt of instruments, the same is endorsed here. Then clearing section will sent IBDA to head Office for clearing purpose and on receipt of IBCA from Head Office amount is credited to customers account and vice versa. If the instrument is return then the same is given back to the customer.

Accounting Entries:

For inward instruments:

Customer A/C ———————————-Debit

ABBL General A/C ——————————- Credit

Incase of return:

ABBL General A/C ————————— Debit

Customers A/C ———————————— Credit

For Outward instruments:

ABBL General A/C ————————— Debit

Customers A/C ———————————— Credit.

In case of return:

Customer A/C ———————————-Debit

ABBL General A/C——————————- Credit.

FINANCIAL CONTROL DEPARTMENT

Understanding:

Financial control department is called as the above center of the bank. In banking business, transaction are done every day is their transaction are to be recorded properly and systematically as the banks deal with the depositors money. Any deviation in proper recording many hamper public confidence and bank has to suffer a lot otherwise. Improper recording of transaction will lead to the mismatch in the debit side and the credit side. To avoid these mishaps, the bank provides a separate department, whose function is to check the mistake in passing voucher on wrong entries or fraud or forgery. This department is called Financial Control Department. In this branch there are one Chief Officer, two Assistant Officers in this department.

THINGS ARE DONE HERE.

Overall supervision of FCD.
Passing all Expenses Vouchers.
Maintenance of client’s account statements including Balance Confirmation Certificate.
Branch’s PD&US.
Dealing with the public issue of Shares including Lottery Tickets.
Other works as & when required.
Compliance of Audit & Inspection and consolidation of Audit report & timely Submission.
Preparation of AD-1, AW-1.
Maintenance of Personnel Files, up dating of leaves records.
Maintenance of Salary Cards.
Staff Training Record and Cards.
Monthly Progress Report of Prob. Officer and Trainee Asstt. Officer.
Maintenance of ABBL, Dividend warrants Record.
Preparation of deals Extract.
Checking of Transaction List.
Checking of Vouchers & maintenance of related Registrar.
Filling and distribution of daily Computer Reports.
Preparation of months, quarterly, half-yearly Account Statements.
Monthly amortization voucher preparing/posting/checking and responding Inter-Branch Entries.
Preparation of Salary.
Depreciation Record in Assets Cards.
Petty Cash.
Transfer Items.

PERSONAL OBSERVATIONS

The bank has to prepare some internal statements as well as some statutory statements which to be submitted to the central bank. Accounts Department prepares these statements also. The department has to submit some statements to the Head office, which is also consolidated by the Head Office later on. The tasks of the department may be seen in two different angles:

Daily Task: The routine daily tasks of the Accounts Department are as follows,

Recording the transactions in the cashbook.
Recording the transactions in general and subsidiary ledger.
Preparing the daily position of the branch comprising of deposit and cash.
Preparing the daily Statement of Affairs showing all the assets and liability of the branch as per General Ledger and Subsidiary Ledger separately.
Making payment of all the expenses of the branch.
Recording inters branch fund transfer and providing accounting treatment in this regard.
Checking whether all the vouchers are correctly passed to ensure the conformity with the ‘Activity Report’; if otherwise making it correct by calling the respective official to rectify the voucher.
Recording of the vouchers in the Voucher Register.
Packing of the correct vouchers according to the debit voucher and the credit voucher.

Periodical Task: The routine periodical tasks performed by the department are as follows,-

Preparing the monthly salary statements for the employees.
Publishing the basic data of the branch.
Preparing the weekly position for the branch which is sent to the Head Office to maintain Cash Reserve Requirement (C.R.R)
Preparing the monthly position for the branch which is sent to the Head Office to maintain Statutory Liquidity Requirement (S.L.R)
Preparing the weekly position for the branch comprising of the break up of sector wise deposit, credit etc.
Preparing the weekly position for the branch comprising of denomination wise statement of cash in tills.

Preparing the budget for the branch by fixing the target regarding profit and deposit so as to take necessary steps to generate and mobilize deposit.

Preparing an ‘Extract’ which is a summary of all the transactions of the Head Office account with the branch to reconcile all the transactions held among the accounts of all the branches.

SHANCHAY PATRA AND WAGE EARNERS BONDS

Understanding:

ABBL Principal branch sales shanchay patra and wage earners bonds as its ancillary services rendered to customers on behalf of govt. Through Bangladesh bank. Shanchay patra is issued by Jatio Shanchay Bureau guided by Bangladesh bank and Ministry of finance of People’s Republic of Bangladesh issues wage earners bonds (WEB). WEB’s are only for the welfare of wage earners that are Bangladeshi national working out side Bangladesh. This branch gets 1 % commission on this. There are two persons one is senior officer dealing with WEB’s and other person is officer dealing with shanchay patra.

Things are done here:

The following things are done in this department:

Selling of shanchay patra and wage earners bonds.
Making payment on maturity.
Responding to Bangladesh bank.
Calculation of interest.

Personal observations:

Personal observations from two desks one is for shanchay patra and other is for wage earners bonds in this department are given below:

Shanchay patra.

Shanchay patras is received from Bangladesh bank (BB). People purchasing these bonds by depositing money in this branch and payment are made on maturity to customers from this branch only. Every transaction is reported to Bangladesh bank. In case of issuance, report to be reached to BB within 48 hours, otherwise penalty is imposed. Money is realized from BB after making payment to customer.

There is various type of shanchay patras is sold here. They are as follows:

(i) 8 years defense Savings certificate:

Interest rate:

After 1 year 10.75% and per year 1% interest increases and on maturity 17.75%.

Denomination: (Tk.)

500, 1000, 10000, 50000, 100000, 200000.

(ii) 5 Years Bangladesh Shanchay patras :

Interest rate:

After one year 10.50% and 1% increases every year. On maturity 14.50%.

Denomination: (Tk.) 500, 1000, 10000, 25000, 50000.

(iii) 5 years investment scheme on half yearly rest.

Interest rate:

13.50% (fixed)

Denomination: (Tk.) 100000, 200000, 500000.

(iv) 5 years family savings certificate scheme:

Interest rate: 13.20% (fixed)

Denomination: (Tk.) 10000, 50000, 100000, 200000, 500000.

Wage Earners bonds:

Only wage earners bonds that are Bangladeshi national staying out side Bangladesh is entitled for this bonds through FC a/c. Bonds are received from Bangladesh bank. Bonds are sold to customer in this branch and payment on maturity also made here. Every transaction is reported to BB. In case of issuing bonds, report to be reached to BB within 4 days otherwise penalty is imposed. Money is realized from BB after making payment to customers.

CREDIT SECTION

Credit service department

Loan administration department

CREDIT SECTION

Lending of funds to the constituents mainly traders, buying and industrial entrepreneurs, constitutes the main buying of a banking company. The major portion of bank funds is employed by way of loans and advances, which is the most profitable employment of its funds. The major part of bank’s income is earned from interest and discount on the funds so lent.

The buying of lending nevertheless is not without certain inherent risk largely depending on the borrowed funds a banker cannot afford to take under risk in lending. While lending his funds, a banker, therefore, follows a very cautious policy and conducts his business on the basis of the well-known principles of sound lending in order to minimize the risk.

PRINCIPLES OF LENDING

The Principle of lending is a collection of certain accepted time tested standards, which ensure the proper use of loan fund in a profitable way and its timely recovery.

Different authors describe different principles for sound lending.

ABBL follows the following five principles in its lending activity.

Safety
Security
Liquidity
Adequate yield
Diversity

Safety

Safety should get the prior importance in the time of sanctioning the loan. At the time of maturity the borrower may not will or may unable to pay the loan amount. So in the time of sanctioning the loan adequate securities should be taken from the borrowers to recover the loan. Banker should not sacrifice safety for profitability.

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 properly evaluate the proper value of the security. If the estimated value is less than or equal to loan amount, the loan should be given against such securities. The more the cash near item the good the security. In the time of valuing the security the Banker should be more conservative.

Adequate Yield

As a commercial origination Banker should consider the profitability. So banker should consider the interest rate when go for lending. Always Banker should fix such an interest rate for it’s lending which should be higher than its savings deposits interest rate. To ensure this profitability Banker should consider the prospect of the project.

Diversity

Banker should minimize the fort polio 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. So if it faces any problem in any sector it can be covered by the profit of another sector.

The following three departments are under Islampur Branch, Arab Bangladesh bank ltd.:

Credit service
Loan administration
Credit recovery cell

CREDIT SERVICE DEPARTMENT

UNDERSTANDING:

The job in this department starts from the application made by the client, approve the same, which is disbursed to customers. There are three employees one is chief officer, one is senior officer and one is officer currently Working over desks in this department

THINGS ARE DONE HERE

The following things are done in this department:

Preparation of sanction letter as per Ho approval.
Monitoring & follow-up of credit facilities extended from this
Compliance of review of MSOCF, Client-wise Position, LIM/TR.
Reporting of daily task force & daily LDOs position to H.O.
Export L/C checking & preparation of credits Memos relating to back-to-back l/ CS, monitoring Project loans of Garments Projects.
Preparation of Statement and maintaining all records of the credit extended under ADB Project.
Preparation of Statements relating to NRIT A/C and maintaining record of the Foreign Investments.
Preparation for proposal of Project loan for boards Approval.
Monitoring of the Credit Facility Extended to garments projects.
Statement of Monthly Garments position, Interest Subsidy, Forced loan etc.
Monitoring of Foreign investments in capital market through the branch.
All works related to custodial service.
All type of correspondence related to credit Service Dept.
Preparation of Credit Memos for approval/renewal of the Credit facilities.

PERSONAL OBSERVATIONS

I have observed the following things:

Credit Facilities:

The credit section of AB BANK LTD. Islampur Branch provides two kinds of credit facilities

Funded Credit Facilities.
Non-Funded Credit Facilities.

(i) Funded Facilities:

These are facilities that are associated with direct fund involvement.

These include:

Overdraft (OD)
Advance against work order
Advance against FDR
Loan against Trust Receipt. (LTR)
Staff Loan
House Building loan
Time loan
Term Loan (Project loan)
Consumer credit Scheme.

(ii) Non-Funded Facilities:

There is no direct monetary involvement.

These include:

(a) Bank Guarantee.

(b) Letters of Credit.

(i) Funded Facilities:

a . Overdraft (OD)

Overdraft is an arrangement where a borrower is allowed to withdraw over and above his credit balance in current account up to an agreed limit. The borrower is permitted to draw and repay any number o times, provided the total amount overdrawn does not excel the agreed limit. Overdraft facility is sanctioned against the primary security of hypothecation of raw materials and or finished goods. The borrower by signing a letter of hypothecation, duly stamped, creates a charge for an amount of debt but neither the possession nor the ownership is passed on the bank. The borrower binds him to give possession of the goods to the bank when called upon to do so. Practically the bank has no security in this case except the charge documents. Hence the bank insists on the borrower on furnishing some collateral securities.

Advance against work order

Advance is granted to a client against the work order of Government Department, Corporation, Autonomous bodies and reputed multinational/ private organization. The client’s managerial capability, equity strength, nature of the scheduled work is judged to arrive at a logical decision. Disbursement is made after completion of documentation formalities. Besides usual charge documents a notarized irrevocable power of attorney to collect the bills from the concerned authority and a letter from the concerned authority confirming direct payment to the bank is also obtained. The work is strictly monitored to review the progress at each interval.

Advance against DR/ Sanchayapatra

Loan against Trust Receipt (LTR):

Advance against a TR obtained from the customer is allowed when the documents covering an import shipment are given without payment. The customer holds the goods or their sale proceeds in Trust for the bank until the LTR is fully paid off. TR is a document, which creates the banker’s lien on the goods. The period of TR may be 30, 45, 60/90 days. The sale proceeds of goods held in trust must be deposited to the bank by the borrower irrespective of period of TR.

Staff Loan:

Bank official from senior officer and above is eligible for this loan. The maximum amount disbursed is Taka.50, 000/- for a period of 2 years. The rate of interest is 8% per annual.

House Building Loan:

This loan is provided against 100% cash collateral. Besides, the land & building are also mortgaged with the bank. Rate of interest is 16.5%.

Time Loan: This loan matures with in one year.
Term loan: These are loans with maturity period of 2 years or above. These loans are repayable in installments.

(i) Consumer Credit Scheme: This scheme is aimed to attract consumers from the middle & upper middle class population with limited income. The borrower should have an account (SB or CD) with the bank. The bank finances maximum Taka. 5 lacs (for cars & Taka. 2 lacs (for other items). Minimum 25% of the purchase cost of the product is to be deposited by the borrower with the bank as equity before the disbursement of the loan. The rest 75% is to be kept as cash collateral (FDR, sanchay patra etc.) with the bank. The purchased items are hypothecated with the bank. The disbursement of the loan is effected by debiting time loan / term loan account to be opened in the name of the borrower. Loan amount is disbursed through A/C payee pay order / Demand Draft Directly to the seller after submission of indent, deposit of client equity & completion of documentation formalities, Interest is 14% per quarter, 2% of loan amount is taken as processing fees. The bank obtains post dated A/C payee checks drawn in favor of the bank for the monthly installments covering the lending period from the borrower & the loan amount is adjusted on the due date of installments.

(ii) Non-Funded Facilities:

a .Letters of credit:

Credit department sends proposal for L/C (cash as well as back to back) to head office for approval. L/C is discussed in detail under import section.

b . Letter of guarantee:

According to the Section 126 of Contract Act, 1872, guarantee can be defined as a contract to perform the promise or discharge of liability of a third person in case of his default. The person who gives the guarantee is called the ‘surety’, the person in respect of whose default the guarantee is given is called ‘the principal debtor’ and the person to whom the guarantee is given is called the ‘creditor’. It is an irrevocable undertaking to pay in case of a certain eventuality. The details about guarantee are discussed later.

LOAN ADMINISTRATION

UNDERSTANDINGS

The job of loan Administration Department starts from the disbursement of credit facilities to the customers, as they desired. There are 4 employees one is Senior Officer, two Officers and one Asst. Officer in this department performs various jobs to disburse the credit, to keeping the recovery records of credit extended to different types of borrowers.

THINGS ARE DONE HERE

The following things are done in this department:

Bank Guarantee related all works.
Preparation of MSOCF of the Branch.
Preparation of Offering Sheet & Memo against Cash Collateral Loans and advances.
Preparation of statement of 1 crore and 10 crore & above.
Balancing of non-judicial & adhesive stamps.
Loan documentation Scrutinizing and preparation of related papers.
Maintaining records and safety of all Loan Documents/related papers along with the records of the Loan port Folio.
Follow-up with Legal Advisor regarding legal matters and other related works.
Preparation of Tickets related to Loans and Advances.
Execution of Registered Mortgage formalities with the Sub-Registrar.
Creation of first charge with the Registrar of jt. Stock Co.
Assist in Loan Administration Dept.
Preparation of CL Returns.
Preparation of CIB, SBS-3 and other monthly, quarterly & yearly statements elating to Loans & Advances.
Preparation of checklist and Offering Sheet.
Maintaining records, Calculation and Treatment of Interest Suspense for the past due accounts.

PERSONAL OBSERVATION

I have observed the following things:

DOCUMENTATION

Documentation can be described as the process or technique of obtaining the relevant documents. In spite of the fact that banker lends credit to a borrower after inquiring about the character, capacity and capital of the borrower, he must obtain proper documents executed from the borrower to protect him against willful defaults. Moreover, when money is lent against some security of some assets, the document must be executed in order to give the banker a legal and binding charge against those assets. Documents contain the precise terms of granting loans and they serve as important evidence in the law courts if the circumstances so desire. That’s why all approval procedure and proper documentation shall be completed prior to the disbursement of the facilities.

Foreign exchange section

L/C Import (Cash) Department
L/C Back to Back Department
EXPORT Department
Foreign Remittance Department

FOREIGN EXCHANGE

Modern banks facilitate trade and commerce by rendering valuable services to the business community. Apart from providing appropriate mechanism for making payments arising out of trade transactions, the banks gear the machinery of commerce, specially in case of international commerce, by acting as a useful link between the buyer and the seller, who are often too far away from and too unfamiliar with each other. According to foreign exchange regulation act 1947 “ Any thing that conveys the right to wealth in another country is foreign exchange”.

Foreign exchange department plays significant roles through providing different services for the customers. Opening or issuing letters of credit is one of the important services provided by the banks.

Letter of credit L/C:

Letter of credit is a letter issued by a bank (known 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 have been complied with.

The customary clauses contained in a L/C are the following,

(i) A clause authorizes the beneficiary to draw bills of exchange up to a certain on the opener.

(ii) List of shipping documents, which are to accompany the bills.

iii) Description of the goods to be shipped.

(iv) An undertaking by the opening bank that bills drawn in accordance with the conditions will be duly honored.

(v) Instructions to the negotiating bank for obtaining reimbursement of payments under the credit.

Parties to a letter of credit: The parties to a L/C are,

Importer/buyer
Opening bank/Issuing bank
Exporter/Seller/Beneficiary
Advising bank/Notifying bank
Negotiating bank
Confirming bank
Paying/Reimbursing bank

The Advising Bank: It is the bank in the exporter’s country (normally the exporter’s bank), which is usually the foreign correspondent of importer’s bank through which the L/C is advised to the supplier. If the intermediary bank simply advises/notifies the L/C to the exporter without any obligation on its part, it is called “Advising Bank”.

The Confirming Bank: If the Advising Bank also adds its own undertaking to honor the credit while advising the same to the beneficiary, he becomes the Confirming Bank, in addition, becomes liable to pay for documents in conformity with the L/C’s terms and conditions.

The Negotiating Bank: The bank that negotiates the bill of exporter drawn under the credit is known as Negotiating Bank. If the advising bank is also authorized to negotiate the bill drawn by the exporter, he becomes the Negotiating Bank.

The Accepting Bank: A Bank that accepts time or unasked drafts on behalf of the importer is called an Accepting Bank. The Issuing Bank can also be the Accepting Bank.

The Paying Bank & The Reimbursing Bank: If the Issuing Bank does not maintain any account with a bank that will be negotiating documents under a L/C, then arrangement is made to reimburse the negotiating Bank for the amount to be paid under from some other bank with whom the Issuing Bank maintains his account. The latter bank is known as Reimbursing bank. A letter of credit may be either.

In the AB Bank Ltd. Islampur Branch foreign exchange section performs various functions under three departments:

(i) Import department

(ii) Export department

(iii) Foreign Remittance.

L/C IMPORT (CASH) DEPARTMENT UNDERSTADING

IMPORT

Imports are foreign goods and services purchased by consumers, firms & Governments in Bangladesh.

IMPORT PROCEDURE

To import through BL, a customer requires,

(i)Bank account

(ii) Import Registration Certificate

(iii) Tax Paying Identification Number

(iv) Performa Invoice Indent

(v) Membership Certificate

(vi) LC Application form duly attested

(vii) One set of IMP Form

(viii) Insurance Cover note with money receipt

Adding confirmation:

The confirming bank does adding confirmation. Confirming bank is a bank, which adds its confirmation to the credit, and it is done at the request of the issuing bank. The confirming bank may or may not be the advising bank. The advising usually does not it if there is not a prior arrangement with the issuing bank. By being involved as a confirming agent the advising bank undertakes to negotiate beneficiary’s bill without recourse to him.

L/C Transmitting

Letter of credit can be transmitted to the advising bank through three methods. They are in Telex, Courier or SWIFT (Society for Worldwide Interbank Financial Transaction). L/C is send to advising bank in three copies. The advising bank authenticates the original copy of L/C and delivers it to the exporter. The duplicate copy is kept with the advising bank.

Negotiating

The beneficiary (exporter) receives the letter of credit from advising bank. After proper shipment of goods as per terms and conditions of the L/C, required documents like Commercial Invoice, Bill of Lading, and bill of exchange are presented to the negotiating bank by the beneficiary for negotiation. If the documents are in order as per L/C then the negotiating bank negotiates the drafts making payment to the beneficiary. Then the negotiating bank forwards the drafts along with the shipping documents to the L/C opening bank. The negotiating bank reimburses the amount paid against the draft from reimbursement bank (authorized by opening bank) by debiting Nostro A/C of the opening bank. Negotiating banks have the option the to send the drafts and documents to the opening bank for collection.

Amendment

After opening of L/C sometime alteration to the original terms and conditions become necessary. These amendments involve changes in (i) unit price (ii) extension of validity o the L/C (iii) documentary requirements etc. such amendments can be affected only if all the concerned parties agree i.e. the beneficiary, the importer, the issuing bank and the advising bank.

For any amendment the importer must request the issuing bank in writing duly supported by revised indent/ Proforma invoice. The issuing bank then advises the required amendment to the advising bank. L/C amendment commission including postage is charged to the clients A/C.

L/C BACK TO BACK DEPARTMENT

Back-to-Back L/C

Back to Back letter of credit may be fined as a credit which is opened at the instruction and request of the beneficiary of the original Export L/C on the basis of strength of that L/C. Ready-made garment industries and specialized textile units are allowed the facility of importing fabrics and other materials needed for manufacture of garments/ specialized textiles against back to back L/C arrangement. Back-to-Back L/C is of two types.

(i)Foreign back letter of credit.

(ii)Inland back-to-back letter of credit.

A back-to-back L/C is opened against an irrevocable L/C opened bank having reasonable period of validity to cover shipment of merchandise after completion of validity to cover shipment of merchandise after completion of the manufacturing process. The export L/C is lien marked with the back-to-back L/C issuing branch. import L/C is opened on usance basis covering usance of not more than 180 days. The import L/C is opened for 75% of the value of Export L/C. The payment is normally made form the proceeds of export bills negotiated after shipment.

Procedure for opening back-to-back L/C:

The following papers / documents are required to be submitted by the exporter to the bank for opening foreign back-to-back L/C.

L/C Authorization forms duly filled and signed.
Indent/ pro forma invoice

Along with the above papers / documents, original export L/C is to be submitted by the exporter. On receipt of these documents the bank scrutinizes the terms and conditions of the export L/C. After getting approval from head office through Credit Section, The particulars of the L/C are entered in the L/C opening register.

EXPORT DEPARTMENT

UNDERSTANDING

The goods and services sold by Bangladesh to foreign households, businessmen and Government are called export. The export trade of the country is regulated by the Imports and Exports (control) Act, 1950. There are a number of formalities, which an exporter has to fulfill before and after shipment of goods. The exports from Bangladesh are subject to export trade control exercised by the Ministry Of Commerce through Chief Controller of Imports and Exports (CCI & E).No exporter is allowed to export any commodity permissible for export from Bangladesh unless he is registered with CCI & E and holds valid Export Registration Certificate (ERC). The ERC is required to be renewed every year. The ERC number is to be incorporated on EXP forms and other documents connected with exports.

There are one chief officer, one senior officer, one officer and one probationary officer working in this department.

THINGS ARE DONE HERE

The following things are done in this department:

Scrutiny of Export Shipping Documents.
Follow-up for realization of Export Proceeds.
All Correspondence relating to Export Department.
Compliance of Audit & Inspection.
Advising of Export L/Cs to the beneficiary.
Authentication of L/C and Amendments from other Correspondent Bank.
Transfer of Export L/C to the 2^nd Beneficiary & issuance of notice of transfer to L/C issuing Bank.
Recording of Export L/C particulars in Export L/C Transfer Register.
Realization of transfer changes.
Issuance of precedes realization certificates.
And other works as & when directed by the manager and Sub-Manager.
Certificate of EXP Forms.
Posting of Tickets.
Lodgment of Export Bills (FBP, FDBC, IBP & IBC).
Preparation of tickets elating to negotiation of documents.
Negotiation of Inland Bills.
Maintenance of all records related to FBP, FDBC and Inland Bills.
Balancing of FBP, FDBC, and IPB & A/R Export A/Cs.
Preparation of statement and all returns to Bangladesh Bank and Head Office (Weekly/ Monthly/ quarterly).

EXPORT FINANCE

(I) Pre-shipment credit:

Pre-shipment credit usually takes the following forms

Overdraft against hypothecation of exportable commodities.
Overdraft against Trust Receipt (T.R)

O/D (Hypothecation):

Under this arrangement, limit is sanctioned against hypothecation of raw materials / finished goods meant for export. The exporter creating a charge in favor of the bank on the goods hypothecated signs a letter of hypothecation. Possessions ownership and control of goods remain with borrower. Bank sometimes takes collateral security in the form of land and building.

O/D against (T.R)

Under this arrangement the exporter is required to execute a Trust Receipt in favor of the bank undertaking hold the goods or rate proceeds there of in trust on behalf of the bank till the loan is liquidated. This type of credit facility is granted to very trustworthy customer whose integrity is beyond doubt.

Packing Credit: –

Packing credit limit is sanctioned to the exporter against the security of Railway Receipt, Truck, and Receipt etc. in addition to the usual charge documents and the original export letter of credit. This type of credit is given for transit period staring from dispatch of the goods to the port till the negotiation / purchase of export bills, to enable the exporter to finance purchase of further goods for export.

(ii) Post shipment Credit: –

Post shipment credit refers to credit facilities extended to export after actual shipment of goods against shipping documents. It is usually provided in the following ways.

Bill negotiation / purchase.
Bill for collection

(i) Bill negotiation / purchase

The most usual method of financing exporters at the post-shipment stage is negotiation of documents under L/C. Here the bank acts as negotiating bank. After the shipment of the goods, the exporter submits the relative documents to the branch for negotiation. The documents generally include a) Bill of Exchange b) Bill of lading c) Insurance policy d) Invoice e) Certificate of origin. f) Inspection Certificate g) packing lit h) Any other documents specially mentioned in the letter of credit. 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 entered into the Foreign bill Purchased (F.B.P) register. The documents are sent to the L/C opening branch with a forwarding letter and 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 ABLE head office Nostro A/C maintained with the named correspondent bank abroad under telex intimation tot he Principal branch and Head Office (International Division).

On negotiation/ Purchase of the export bills, the exporter is paid the value of the bill (converted into Bangladesh Taka at the ruling bill buying rates). The branch completes the duplicate copy of EXP form and forwards the same to Exchange Control Department (E.C.D) of Bangladesh Bank.

(ii) Documents on collection basis:

The documents, which are not negotiable by the branch due to some discrepancies, are sent to L/C opening bank on collection basis. The bank mentions the discrepancies on their forwarding schedule. On receiving the documents, the L/C opening bank will further scrutinize the document with the L/C and inform the importer regarding discrepancies found in the documents. If these are acceptable to the importer and or permissible with the exiting Exchange control regulation, the documents will be lodged and L/C opening bank will send the payment instruction to the collection bank.

FOREIGN REMITTANCE DEPARTMENT

UNDERSTANDING

AB Bank Ltd. Islampur Br. is an authorized dealer of foreign exchange. There dealing in foreign exchange involves buying and selling of foreign exchange covering inward remittances received from abroad and outward remittances sent abroad.

THINGS ARE DONE HERE

The following things are done in this department:

Overall supervision of Foreign Remtt. Deptt.
Correspondence to Nostro Account.
Foreign TT payment & Purchase of F. Drafts, Chouse & preparations of F.B.P.
Checking of all Batches.
Assist in preparation of IBCA/IBDA etc.
Trading Blotter.
Compliance of Audit & Inspection.
Issuance of outward TT & FDD.
Issuance of PRC
Foreign Collection, Bangladesh Bank Clearing Cheque Collection, which comes from all branch of ABBL.
Withdrawal from F.C.A/C.
Encashment of TCs & Cash Dollar and Sterling
Deduction of Tax and VAT.
Issuance of TC & Cash Dollar, Correspondence with different Bank/Institution related to TC/Dollar.
Student Case handling & preparation of related statements (Head Office and Bangladesh Bank).
Balancing of Account Statements.
Batch posting and all related statements.

Personal observations:

I have observed the following things:

Inward Foreign Remittance: Inward remittance covers purchase of foreign currency in the form of foreign T.T, D.D, and bills, T.C.s 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. Sale of foreign exchange is reported to Exchange control Department of Bangladesh Bank on form T/M.

Foreign exchange means foreign currency and includes all deposits, credits and balances payable in foreign currency s well as foreign currency instruments such a Drafts, T.C.s Bills of Exchange and Letters of Credit Payable in any Foreign Currency. All foreign Exchange transactions in Bangladesh are subject to exchange control regulation of Bangladesh Bank.

Foreign Remittance Department deals with the following instruments.

(A) Travelers Check (TC)

(B) Foreign demand draft (FDD)

(A) Travelers Cheque.

Traveler’s cheque is a very popular method of foreign remittance. It is usually used by the travelers who are willing to remit fund to the place where they are going to visit and encash it

from there. Traveler’s cheque is a substitute for cash and it is the safest method of transferring fund.

Issue of Travelers cheque

Requirements

There are some requirements, which are to be fulfilled by the Travelers cheque purchaser.

Air ticket has to be confirmed.
The passport must be a valid one.
Passport holder himself has to be present to issue Travelers cheque.

Steps involved in issue of Travelers cheque

After verifying all these documents the customer is asked to fill up prescribed application form.
In the application the customer states the amount he is willing to endorse and it is be verified that his required amount is within the stipulated amount.
Then the customer pays cash or by debiting his account the Travelers cheque is issued.
Endorsement is given on the passport and on the ticket. Customer fills up the Travel & Miscellaneous form.
Purchase Application Form is prepared and handed over to the purchaser along with the Travelers cheque.
Entry given in three registers, Foreign Currency issue register, Travelers cheque on hand register and Foreign Currency in hand register

Payment of Travelers cheque

When a customer wants to encase his Travelers cheque he has to show his passport and it is to be verified from the passport that he has traveled outside the country.

Then the Travelers cheque will have to be scrutinized very strictly.
If every thing in the Travelers cheque is in order then the customer will be asked to give his signature on the place of “Counter signature”.
If the signature agrees with the one in the place of “The signature of the holder” then the payment will be made through giving cash to the customer or crediting his account.
Travelers cheque will be crossed and endorsement given on the back of the received travelers cheque.

(B) Foreign Demand Draft

Foreign Demand Draft (FDD) is popularly used for educational purpose in our country. It is used for other commercial purposes also.

Issue of FDD

The relevant papers which establish, that the issuing bank requires the purpose of issuing the FDD. The procedure concerning issue of FDD is same as issue of Travelers cheque except that the customer is not required to submit his passport.

Payment of FDD

After receiving the FDD for payment there are few steps, which are to be followed.

At first the FDD is to be crossed.
Serial number is given.
Forwarding letter to the bank with which the bank has agreement.
Party is given the cash or his account is credited.

Conclusion

AB Bank Limited is the first generation bank. After gathering practical experience from Islampur Branch of AB Bank Limited, it is stated that Islampur Branch have a nice chin of command and functions level of strategy to achieve their expected target. Several functions departments available at this branch such as Account opening, Credit Department, Remittance & Financial Control Department and Cash Department. Islampur Branch is performing better to satisfy their customers by using On-line Banking and Expert staff. Islampur Branch is always trying to satisfy their customer by providing hassle free services at fast & reliable ways.

Recommendation

Banks internal charge may want to decrease to achieve high level of customer satisfaction and ensure provide equal opportunity to every level of customer. There are some shortest of manpower and branch than any others commercial Bank. ABBL should introduce account for student like some other banks. Bank staff remunerations should increase to inspire them to do more for the organization. ATM care services should start in every Branch to provide customers hassle free service than others. Training facility available for every level of employees by establish a training institution. Require a marketing department in every Branch for acquire more customer.