Introduction
Generally by the word “Bank” we can easily understand that the financial institution dealing with money. But there are different types of banks like Central Banks, Commercial Banks, Savings Banks, Investment Banks, Industrial Banks, Co-operative Banks etc. But when we use the term “Bank” without any prefix, or restriction, it refers to the ‘Commercial banks. Commercial banks are the primary contributors to the economy of a country. So we can say Commercial banks are a profit-making institution that collects the deposits from the surplus unit of the society and then lend the deposits collected to the deficit unit of the society. So the people of the society and the government are very much dependent on the commercial banks as the financial intermediary. As banks are profit-earning concern they collect deposit at the lowest possible cost and provide loans and advances at higher. The differences between two are the profit for them.
Banking sector is expanding its hand in different financial events every day. At the same time the banking process faster, easier and the banking arena is becoming wider. As the demand for better service increases day by day, they are coming with different innovative ideas & products. In order to survive in the competitive field of the banking sector, all banking organizations are looking for better service opportunities to provide their fellow clients. As a result it has become essential for every person to have some idea on the bank and banking procedure.
Internship program is essential for every Business Administration student. In other words it is mandatory for the student of any professional degree. It helps them to get acquainted with the real life situation. For the student of IBS it is the requirement of the MBA program as it holds 3 credits and that is why I was placed in the Dutch-Bangla Bank Ltd. to complete internship for the period of 3 months.
Origin of the Report
The report entitled “General Banking Activities of Dutch-Bangla Bank Ltd.” has been prepared as a partial fulfillment of MBA program authorized by the Director, Institute of Business Studies, DarulIhsanUniversity.
Objective of the Report
The objective of the internship program is to familiarize myself with the real market situation, to compare them with the business’ theories & at the last stage make a report on assigned task. The main objective of this report is to have an assessment on General Banking Activities of Dutch-Bangla Bank Ltd. I tried my best to know how the Bank is providing facilities to its clients & to suggest remedial measure for the development of overall banking activities if required. In addition, the study seeks to achieve the following objectives:
♣ To review the present position of Dutch-Bangla Bank Ltd.
♣ To find out some problems which are faced by Dutch-
Bangla Bank Ltd in customer recovery.
♣ To determine the qualitative change of customer
recovery position.
♣ To determine the sectors that is responsible for increasing the better service.
♣ To familiarize with practical Job Environment.
♣ To have an exposure on the financial institution, especially on banking environment of Bangladesh.
♣ To relate the theories of banking with the practical banking activities.
♣ To present an overview of Dutch-Bangla Bank Ltd.
♣ To appraise the Trade Service performance of Dutch-Bangla Bank Ltd.
♣ To identify the problems facing by Dutch-Bangla Bank Ltd.
♣ To suggest remedial measure for the development of Dutch-Bangla Bank Ltd.
Methodology of the Study
Study Design
The report was fully investigative in nature. Data have been collected from two sources:
1. Primary sources.
2. Secondary sources.
Data Collection
This study is mainly based on secondary data available from the various divisions and departments of Dutch-Bangla Bank Ltd, in addition to these other necessary information have been collected from the daily news papers, relevant journals, annual reports of Dutch-Bangla Bank Ltd, Bangladesh bank, Ministry of Finance and Planning and publications of other relevant institutions have also been taken into consideration.
Primary sources of data:
- Face to face conversation with the bank officers &
- staffs.
- Conversation with the clients.
- Different’ manuals of Dutch-Bangla Bank Ltd.
- Different circulars of Dutch-Bangla Bank Ltd.
- Secondary sources of data:
- Annual report of Dutch-Bangla Bank Ltd, 2004.
- Different papers of Dutch-Bangla Bank Ltd.
- Unpublished data.
- Different text books.
Scope of the Study:
This report has been prepared through extensive discussion with bank employees and with the clients. While preparing this report, I had a great opportunity to have in depth knowledge of all the banking activities practiced by the Dutch-Bangla Bank Ltd.
Limitations of the Study:
The present study was not out of limitations. But as an intern it was a great opportunity for me to know the banking activities of Bangladesh specially Dutch-Bangla Bank Ltd. Some restraints are disclosed bellow:
The main constraint of the study is insufficiency of information, which was required for the study. There are various information the bank employee can’t provide due to security and other corporate obligations.
- Due to time limitations many of the aspects could not be discussed in the present report.
- Every organization has their own secrecy that is not revealed to others. While collecting data through interviewing the employees, they did not disclose much information for the sake of the confidentiality of the organization.
- Since the bank personals were very busy, they could provide me very little time.
- Another significant problem faced during the preparation of this report was the contradictory explanation of a single subject by different employee.
- The clients were very busy to provide me much time for interview.
- I carried out such a study for the first time, so in experience is one of the main constraints of the study.
The Bank
Dutch-Bangla Bank Ltd. (DBBL) is the first Bangladesh- European joint venture commercial bank incorporated on July 04, 1995 under the Companies Act 1994. it is a public company limited by shares. With the permission of Bangladesh Bank, it commenced its commercial banking operation on June 03, 1996. The head office of Dutch-Bangla Bank Ltd is at Sena Kallyan Bhaban (4th floor), 195, Motijheel C/A, Dhaka-1000.
DBBL conducts all types of commercial banking activities and renders all types of personal and corporate banking services to the customers of all strata of the society within the framework of Bank Companies Act 1991 and rules and regulations laid down by Bangladesh Bank from time to time.
The Netherlands Development Finance Company (FMO) of the Netherlands is the international sponsor of the Bank. The FMO is the Dutch Development Bank of the Netherlands specialized in financing of private enterprises in Asia, Africa, Latin America and Eastern Europe.
Under a technical assistant grant from the FMO, ABN-AMRO Bank of the Netherlands provided technical assistance to Dutch-Bangla Bank Ltd. During the first year of operations of the bank (1997-1999).
Background of DBBL
Dutch-Bangla Bank Limited is a brainchild of its chairman Mr. Mohammed Shahabuddin Ahmed. He dreamed it long back, when he had been trying to arrange fund for Tamijuddin Textile Mills Limited (TTML) AND Kader Synthetic Fibers Limited (KSFL) through the traditional banking system. Those projects were implemented, but had to face time and run over due to procedural delay in getting access to credit facilities, among others, this might be a good reason for thinking about a bank where the entrepreneurs will have easy access to modern banking services. Mr. Ahmed has had a close relationship with FMO, the Netherlands Development Finance Company since 1983. He opened a dialogue with FMO regarding the banking project in 1989. Mr. Groosman , a brilliant officer of FMO visited Bangladesh and wrote to Mr. F. J. Smit, Deputy Managing Director of FMO about Mr. Ahmed’s proposal.
FMO sent fact finding terms that initially responded negatively and commented that is little scope in Bangladesh to float a banking business. But Mr. Ahmed don’t give up, rather he started exploring more vigorously. At last Mr. E. H. J. Groot of small scale department of FMO in hid letter dated December 07, 1992 responded positively indicating, “Small Enterprises Department of FMO is in a position to finance intermediary bank” and accordingly asked for a business plan. In the year 1995, Bangladesh Bank in their letter no. DBOD (D) 200/59-7999/95 dt. 23/07/1995 issued consent for establishing the bank.
Mission of Dutch-Bangla Bank:
The main element that brings success for a bank is customer satisfaction, state of the art products and services, competence and efficiency that based on professionalism. For this purpose, DBBL has remained dynamic in its continued efforts to improve and increase core competency and service efficiency by constantly upgrading product quality, service standards, protocol and their effective participation in making use of the state of the art technology.
Global banking has changed rapidly and DBBL has worked hard to adapt to these change. The bank looks forward with excitement and commitment to bring greater benefits to customers. As a step of adopting the change, DBBL has gone on to Online Banking Service recently.
DBBL has given services to Bangladesh through active financial participation in all segments of the economy, trade and commerce, Industry, service and agriculture etc.
Vision of Dutch-Bangla Bank:
Dutch-Bangla Bank dreams of better Bangladesh, where arts and letters, sports and athletics, music and entertainment, science and education, health and hygiene, clean and pollution free environment and above all a society based on morality and ethics make all our lives worth living.
Global Banking has changed rapidly and DBBL has worked hard to adapt to these changes. The bank looks forward with excitement and a commitment to bring greater benefits to customers.
DBBL’s main vision is to dedicate their service to the nation through active financial participate in all segments of the economy, Industry, trade & Commerce, Agriculture, and Service Sector etc.
Business Objectives of DBBl:
- To make sound loans and investments.
- To build up a low cost fund base.
- To meet capital adequacy requirement at all time.
- To install a scientific MIS to monitor bank’s activities.
- To ensure 100% recovery of all advances.
- To adopt appropriate management technology.
- To ensure a satisfied work force.
- To focus a free-based income.
Business Philosophy:
The DBBL’s corporate philosophy is to build its non-funded face and commission income stream, thus reducing its reliance on interest income alone. By providing a one window service to its customers- the Bank is committed to being a sophisticated, prominent and professional institution. During the first five years Dutch Bangla Bank’s strategy was focused on continuing in provident of internal procedures and operating structures, to have a greater control on the quality of its business and to provide better management direction.
DBBL’s focus is to provide one counter service to its clients covering-
Commercial Banking (Deposit Accounts)
Customer banking (Retail Banking).e.g.,
1. Traveler Cheques
2. Foreign and Inland Remittance
Financial Services
Corporate banking
Asset and liability management
Liquidity and capital Resources Management
Information Technology
Human Resource
Strategic Decisions of DBBL:
On-Line Banking:
Dutch Bangla Bank Limited now using locality developed Branch Banking software in almost all its branches. But with a view to provide world class banking facilities to its customer, DBBL has undertook upon an ambitious program by investing Tk.250.00 million for acquiring a state-of-the-art total automation project which DBBL claimed to said as “Truly On Line Banking”. The decision of acquiring the automation program has been based on the Bank’s own core competence in its IT division, reinforced with the site visit of bank’s highest management of similar installations of different banks in India and SriLanka.
DBBL chose “FLEXCUBE” from “i-flex solution”, a world leader in technology solutions for the financial services industry, which will enable DBBL to render a fully automated real time any-where any-branch banking services, covering 24 hours a day and 365 days a year.
As part of the on-line banking program, internet banking, DBBL Nexus Debit Card, DBBL Maestro/ cirrus Debit Card and DBBl Credit card will also be launched shortly and all preparations regarding this are in final stage.
To fulfill this decision, DBBL has set-up a most modern and largest state of the art data centre and have assembled a core group of competent IT professionals and other persons. These persons have undergone a two-month extensive training course in Bangalore and Mumbai, India on FLEXCUBE.
The Data Centre will also have an on-line Diaster Recovery site (DRS), the first of its kind in the country, to safe-guard the customers’ interest and to have an effective disaster management system in place. This will help maintain and preserve all necessary data at a separate and more-safe custody. The scrutiny of DBBL’s computer system stands on four (4) layers, which are at application, in networking, in database and in the operating systems.
Organizational Structure of DBBL :
Chairperson (Owner)
↓
Directors (Owners)
↓
Managing Director
↓
Deputy Managing Director
↓
Senior Executive Vice President
↓
Executive Vice President (EVP)
↓
Senior Vice President (SVP)
↓
First Vice President (FVP)
↓
Vice President (VP)
↓
Senior Assistant Vice President (SAVP)
↓
First Assistant Vice President (FAVP)
↓
Assistant Vice President (AVP)
↓
Senior Executive officer (SEO)
↓
Executive officer (EO)
↓
Officer
↓
Assistant officer
↓
Trainee Officer
Board of Directors of DBBL:
Chairman
Mr. Mohammad Sahabuddin Ahmed
Directors
Mr. Abedur Rashid khan
Mrs. Momtaj Islam
Mr. Bernhard frey
Mr. Sahabuddin Ahmed
Mr. Abul hasnat md. Rashidul Islam
Mr.Md. Shahidur Rahman
Mr. Md.Yeasin Ali
The Strength of DBBL
♦ DBBL is the first Bangladeshi-European joint venture Bank
Bangladesh.
♦ DBBL Directors and/or their family member4s do not maintain any sort of bank account with DBBL, since its inception.
♦ DBBL Directors do not avail of any facility or even any fee/ remuneration from the Bank for attending Meetings of the Board/ Executive Committee/ Audit Committee.
♦ DBBL’s sponsoring shareholders did not take any dividend for the initial 5 years in order to increase the capital base of the Bank.
♦ DBBL allows all local remittances such as TT, DD, PO etc. free of cost
♦ DBBL’s classified loan as on December 31, 2004 is only 0.16% of total loans and advances.
♦ DBBL’s Regulatory capital as on December 31, 2004 Stood at Taka 1.43 billion (i.e. taka 143 crore).
♦ DBBL’s Capital Adequacy Ratio (CAR) as on December 31, 2004 stood at 10.13% as against Bangladesh Bank’s minimum requirement of 9.00%.
♦ DBBL maintains general provision on unclassified Loans and Advances @ 3% instead of minimum requirement of 1% as set forth by Bangladesh Bank’s regulatory provision.
♦ DBBl extends free medical facilities under its “Rural Health Service Program” to the members of the general public around the rural branches.
♦ DBBL supports humanitarian and philanthropic activities and cause and spends a substantial amount from its income for these purposes.
♦ DBBL promotes different socio-cultural and sports activities.
♦ DBBL awarded 500 scholarships to meritorious and needy students of the country till this year. From the year 2007, the number of scholarships will be 1250 for which the Bank will need to provide Taka 3.75 crore each year.
♦ DBBL provides 27% of its total advances as Term Loan and a substantial amount as working capital loan to support industrial development and boost up export earnings of the country.
♦ DBBL has setup the Dutch Bangla Bank Foundation for carrying out social and philanthropic activities. From the last yea 5% of the bank’s annual operating profit is earmarked for the foundation which was 2.50% earlier.
♦ DBBL distributes 2.50% of its annual profit among the employees as profit sharing.
♦ DBBL, in addition to its statutory auditors, M/s. Rahman Haque engaged M/s. Hoda Vasi Chowdhury & Co. as special auditor to conduct detailed audit of day to day operations of the Bank and submit quarterly reports to the Audit Committee of the Board and thus help the Committee to discharge its duties more professionally and accurately. This exceptional step has been taken by the Board of Directors of DBBL with a view to bringing absolute transparency and accountability in the overall performance of the bank.
♦ DBBL’s objective is not only to make profit, but also simultaneously contribute towards social and human development through various altruistic activities.
Operating Results and Profit Appropriation:
Investments:
The Bank’s investments, during the year 2004, were made in government securities and in call money market only, which stood at Taka 2034.97 million as on December 31, 2004 as against Taka 2537.62 million in 2003. Out of the total investments of Taka 2034.97 million, Taka 2027.82 million were in government securities. The Bank continued its policy of ensuring safe and stable return of its investments.
Gross Income:
The Gross Income of the Bank increased to Taka 2366.91 million in 2004 as against Taka 2115.49 million in 2003, an increase of 11.88%.
Gross expenditure:
The Gross Expenditure of the Bank stood at Taka 1734.50 million as against Taka 1661.70 million in 2003, an increase of 4.38%. The ratio of increase was less mainly because of the Bank’s success in reducing its cost of fund.
Operating Profit:
The Operating Profit for the year 2004 was Taka 632.41 million as against Taka 453.79 million in 2003, an increase of Taka 178.62 million or 39.36% over 2003. While net profit (before tax) for 2004 stood at Taka 499.02 million against Taka 382.10 million of 2003, an increase of taka 116.92 million or 30.60% over 2003.
Chart: Operating Profit
Major Functions of DBBL:
Deposits:
The deposit graph will depict that the deposit base of the Bank continued to register a steady growth and stood at Taka 21067.56 million as on December, 2004 as against Taka 17133.81 million in December 2003, which is an increase of 22.96%. The overall deposit mix of the Bank also showed marked improvement with the time deposits stood at 86.02% and demand deposits stood at 13.98%, which during the year 2003 was 87.86% (time deposits) and 12.14% (demand deposits). The cost of fund also noticeably came down from 8.53% in 2003 to 6.90% in 2004.
Chart: Deposits
Advances:
DBBL is in the forefront in implementing the guidelines for managing five core risks in banking, one of which is credit risks, as put forth by Bangladesh Bank. The end-result of all these is evident very clearly from the fact that the classified loan reduced to 0.16% in 2004 from 0.36% in 2003. The absolute amount also reduced from Taka 41.58 million in 2003 to Taka 23.24 million in 2004.
Loans and advances stood at Taka 14976.06 million in 2004 as against Taka 11431.32 million in 2003, an increase of 31%. Bank’s term loan portfolio stood at Taka 3754.53 million in which Taka 102.09 million was Bank’s participation in syndicated loan. Most important in order to enable its customers to become more cost effective and increase their sustainability from the fierce competition, DBBL reduced its lending rates thrice during the year under review with rate of interest now varying between 7.00% to 12.00% in comparison to 7.00% and 14.50% in 2003.
Chart: Advances
Dividend:
The cash dividend of Taka22.50 per ordinary share of Taka100 each for the year 2004. It may also be mentioned that the Bank, as per existing tax rule, has to bear income tax of 10 percent of the proposed dividend amounting to Taka 4.55 million. In addition, a Dividend Equalization Fund of Taka5.05 million has been created in accordance with the provision of BRPD Circular Letter No: 18, dated October 20, 2002, which will be consider as a component of permanent capital (Tier 1) of the Bank.
Credit Lines & Short Term Credit Facilities:
FMO Foreign Currency Loan for Export Oriented Industries
A foreign currency loan arrangement for US$5 million was initially signed with Netherlands Development Finance Company (FMO) on September 9, 2003 to provide financial assistance for procurement of capital machinery to the export oriented industrial units of Bangladesh. Subsequently, on November 10, 2004 under a revised agreement the credit line amount was increased to US$8.75 million.
DEG Foreign Currency Loan for Export Oriented Industries
DBBL also signed an agreement on December 30, 2004 with Garman Investment and Development Company (DEG) for a similar type of foreign currency loan of US$3.75 million for financing the importation of capital machinery exclusively of export oriented industry. Disbursement under this loan is expected to be received shortly and the process for financing is underway.
FMO Local Currency Loan for Housing Financing
Initially, Netherlands Development Financing Company (FMO) had extended long-term local currency loan equivalent to EURO 5 million in October, 2002 to finance small scale enterprises in manufacturing, agriculture, transport, tourism and productive trade & commerce and service industries of the country. Subsequently, on our approach, FMO widened the eligibility list by including financing in housing sector. Again in November 2, 2004 FMO increased the loan amount to EURO 7.50 million for financing residential houses only for fixed income group.
International Trade:
The import trade business of DBBL registered a very impressive growth of 48.01% from Taka 17549.60 million in 2003 to Taka 25974.44 million in 2004. on the other hand, export trade also showed a significant growth of 77.33% form Taka 7659.17 million in 2003 to Taka 13581.71 million in 2004.
Capital Market:
The average of DBBL’s share at the close of 2004 was Taka 868 per share of Taka 100 each with the highest of Taka 2000 and the lowest of Taka 396.
Ancillary Services of DBBL:
The services other than main functions of a bank are known as ancillary services of a bank. Mainly all services except taking deposits, honoring check, lending and borrowing money are known as ancillary services. Ancillary services of a bank imply non-fund agency services and the income earned from this source includes income by the way of commission, brokerage fees and other non-interest receipts.
Generally, these services involve very nominal commitment of bank funds, although these need a considerable amount of man-hour. Ancillary services include collections, locker service, remittance, guarantees, exchange etc. Unlike deposits and advances ancillary business can’t budget in concrete term.
Bank as service oriented commercial organization play a significant role in an economy by their intermediation process. Bank around the world now engaged in multidimensional field of financial activities. In recent times banking business has a sharp change in their character and composition due to number of measures and growing demand of a variety of customer services. In this backdrop, the attention of the bank management is no longer concentrated only to the traditional banking business, i.e. accepting deposits and making loans rather to the provision of a number of ancillary services bringing them risk less or less risk free income to sustain profitability.
Generally the branch manager may however analyze the quantum of such services during the past couple of years, see the trend and then assess the potentialities of these services in the light of existing ensuring change in the environment. The following are such services those are rendered by DBBL:
♦ Accept deposits in the form of Current Deposit, Savings Deposit, Short-Term Deposit (STD) and Fixed Deposit Receipt (FDR).
♦ Remittance of fund for both inland as well as international.
♦ Doing project financing.
♦ Pay loans and Advances facilities.
♦ Facilitate Export-Import business that is trade financing.
Human Resources Development:
DBBL, since its inception, has always laid emphasis on Human Resource Development. DBBL believes in the factor that helps the banks survive is closely interlinked with the quality of service and satisfaction of the requirements of the clientele and that directly depends on the qualification and efficiency of the employees. With this objective in view, DBBL excels the performance of its member of the staff by creating opportunities through providing proper training, rewards and recognition. To attract and retain qualified and efficient staff, DBBL has formulated a number of well thought policies for the welfare of its employees, in the form of Gratuity Fund, DBBL Superannuation Fund, DBBL Employees House Building Loan Scheme, Car Leasing Scheme, Group Insurance policy, etc.
Branch Network:
As on January, 2005 DBBL branches continued to be 21 as because the Bank Management took a cautious approach in its expansion program and instead put all its effort nurturing some of the DBBL branches opened in 2002. 12 more new branches are proposed to be opened in different strategic locations in then Country during the year 2005.
SL. No. Branch Name District Name Branch Code
1 Local Office Dhaka 101
2 Agrabad Chittagong 102
3 Banani Dhaka 103
4 Nababpur Dhaka 104
5 Motijheel Foreign Exchange Dhaka 105
6 Narayangonj Narayanganj 106
7 Kawran Bazar Dhaka 107
8 Shantinagar Dhaka 108
9 Baburhat Narsingdi 109
10 Dhanmondi Dhaka 110
11 B.B. Road Narayanganj 111
12 Patherhat Chittagong 112
13 Hathazari Chittagong 113
14 Mohakhali Dhaka 114
15 Mirpur Dhaka 115
16 Gulshan Dhaka 116
17 Uttara Dhaka 117
18 Islampur Dhaka 118
19 Dania Dhaka 119
20 Khulna Khulna 120
21 Sylhet Sylhet 121
Limitations of DBBL Mirpur Branch:
Inadequate number of Employees:
The main problem I have noticed in the DBBL Mirpur Branch is that it has insufficient number of employees. Too much responsibility is given on one person. There is too much work left for one person. In the remittance department I have seen that only one person has is issuing TT, DD and Pay Order. I have seen some dissatisfaction of customers if there is a little delay in issuing the Pay Order.
In the clearing section I have seen that only one person is dealing with the OBC, IBC and he also has to receive all the incoming checks. What I have seen in the three months that this tusks are very much tough for one person to deal with. If there were a few more persons these could have been done very easily and it could have been done without any mistake.
Too much pressure over one person:
As I have said earlier there is too much pressure on one person it creates some problem. This creates some panic in the employees mind. As a result some times the employees cannot control their emotions and miss-behave with the customers though the customer is not always right. A few times I have seen happing in the DBBL Mirpur Branch also.
Lack of Control:
I think there is some lacking in the management of DBBL. The Mirpur Branch has no such control over the other branches of DBBL. I often have seen that the clearing section has finished their branch job but the other branches haven’t yet sent their messenger with the checks. So, the Mirpur Branch employees had to wait for the other branches.
Unreasonable Transfer Order:
In my period of internship I have seen a transfer order that was issued by DBBL Head Office. By being polite and not questioning about the management’s ability I want to say that I was not satisfied with the transfer order. As far as I have seen in the three months that a particular employee of Mirpur Branch was transferred to another branch.
But I think that he was very suitable and skilled for that section. As he was transferred, the other employees had to make some extra effort to fulfill that position and had to train the new employee, which needed some extra effort and was a time consuming job also.
But if the transfer is for the rotation of employees to create the employees more eligible for almost all kinds of banking activities it is very much right. But I have seen that, that particular employee was also not satisfied with the transfer order.
Recommendations:
Recruit Adequate Number of Employees:
The major problem I have identified in the DBBL Mirpur Branch is inadequate number of employees. So, at first DBBL has to increase the number of employees So that the employees can work without any pressure. And it will also reduce the dissatisfaction that they are paid low compared to other employees of private bank and according to their responsibility.
Increase Control Over the Branches:
DBBL should increase its control over the branches to force all the branches of DBBL work like a team. If there is more control of management over the branches than they will work like a team and the daily General Banking activities will be done in time and the employees will be more satisfied. Then the employees will be ready to perform their activities with their heart and soul.
Make a Transfer Order More Reasonable:
I recommend DBBL to make the transfer order more reasonable. Consulting directly with the employees about their choice can do this and by not making the transfer order only the management themselves. The management has also to observe that the right man is being put in the right place.
GeneralBanking Department of DBBL Mirpur Branch:
General Banking:
General banking is the heart of all business banking activities. General banking department performs the core function of bank, operates the day-to-day transactions. It is the storage point of all kinds of transaction of foreign exchange department, loans and advance department and itself. General banking department deals generally deals with the following sections:
1] Account opening section
2] Account section
3] Clearing
4] Remittance
Account Opening Section:
The relationship between customer and banker beings with opening of an account by the customer. Opening an account binds banker and customer into contractual relationship. All kinds of fraud and forgery state by opening an account. So, the bank should take extreme caution in selecting customers.
DBBL Mirpur Branch mainly operates the following accounts:
1] Current Deposit (CD)
2] Savings Deposit (SB)
3] Fixed Deposit (FDR)
4] Short Term Deposit (STD)
5] Monthly Term Deposit (MTD)
Account Opening Section of DBBL Mirpur Branch:
Current Account Opening:
A current deposit account may be operated in several times during a working day. There is no restriction on the number and the amount of withdrawals from a current and banker does not allow any interest on this account. It is important to mention here that DBBL has imposed interest on current account recently, which is a unique offer in the banking industry.
As the banker is under obligation to repay these deposits on demand, they are called demand liabilities of a banker. To meet such liabilities the banker keeps sufficient cash reserves against such deposit. There are two facilities for the person who opens a current account. They are:
Overdraft facility
Collection of check transfer of money rendering agency, general utility service.
A person can open a current account or any entity the entry can be a partnership firm, Ltd, company, proprietorship firm, association, clubs etc. for opening a current a/c of the above, the requirements and steps, which are followed by this branch are the following
For a person:
There is an individual application from for opening personal current account. The person, who wants to open this type of a/c, is said to fulfill the following requirements:
Name, father’s/husbands name
Occupation
Mandate in writing
Declaration of nominee
Letter of introduction
Specimen signature
Two copies of passport size photographs
Initial deposit of Tk 1000.
For Joint stock companies, Association, Clubs etc:
In case of opening a current a/c of joint stock companies, association, clubs etc, the following requirements are said to fulfill:
True copies of certificate of incorporation or registration
True copies of certificate of commencement of business (in case of limited companies only)
True copies of memorandum and articles of association ( in case of limited companies)
Regulation by laws (in case of associations, clubs etc)
True copies of resolution of the board of Directors of Managing committee/Governing body, regarding conduct of a/c.
Certificate list containing names and signature of Directors/Officer bearers.
For Partnership/Proprietorship Company:
To open a current a/c on the name of any partnership or proprietorship company, the following documents are required:
Filled up application from stating about the name and address of the firm.
Partnership deed.
Trade license.
Two copies of photograph.
Endorsement of an a/c holder on the same branch.
Undertaking / declaration about the partnership is taken by the bank in a write paper ( for proprietorship firm)
For public and private limited company:
The documents required to open a current a/c will be:
Copy of certificate of incorporation or registration, trade license.
Copies of the Certificate of Business.
True copy of memorandum of association and articles association abide by the law.
True copy of resolution of the board of Directors / Managing Directors /Governing Body regarding conduct of the a/c.
Certificate list containing names and signature of Directors/Officer bearers.
In order to open an account, the customer is first of all asked to fill up the application form given from the bank. The bank requires few documents of the client due to the procedure, such as proposal for opening an account, name and full address, occupation.
Saving Account Opening:
A saving is meant for the person of the lower and middle classes who wishes to save a part of their income to meet their future needs and intend to earn an income from their saving.
All the features are like CD a/c as no restriction imposed by the bank.
The bank offers a reasonable rate of interest.
The necessary steps for opening a saving a/c.
Names and Addresses of the party.
Occupation.
Father’s / Husband’s name
Mandate in writing.
Declaration of nominee.
Letter of introduction.
Power of attorney.
Specimen signature.
Two copies of passport size photograph.
Initial deposit of Tk 1000.
In this, the deposit supplied with the pass and checkbook for depositing and withdrawal purpose of money for which the banker maintain saving bank a/c opening register.
Short Term Deposit:
Special notice account which is commonly known as short term deposit a/c will keep in the short term ledger. The customer should dully sign a/c opening form and specimen signature card.
Entries Passed:
A deposit shall be prepared crediting the STD a/c with the amount of deposit.
Cash—————-Dr
STD a/c —————-Cr
If the amount is deposited by the check or transfer a/c, the following entries shall be passed.
Party C/D, S/D a/c————–Dr
STD a/c———————————–Cr
The account opening shall be pasted in the pasting file in numerical order.
The credit voucher shall be passed in the STD a/c of the party.
In case of letter of attorney to debit the STD a/c of the customer voucher will be prepared and the following entries shall be passed:
STD a/c ( party ) —————-Dr
C/D ( party ) —————————Cr
Minimum seven days notice in required for withdrawal of any sum from STD a/c.
Banker is not legally liable to the customer, if the check is dishonored under the following conditions, although the check is properly drawn:
If the fund is insufficient.
If the payment is stopped by the drawer.
If payment is stopped by the court by issuing gamishee order.
Any competent authority issues attached order.
Check is presented after the death of the customer.
Notice of assignment.
Check presented after the business/banking hour as declared earlier.
Letter of introduction:
This is a letter of certification, from a person, who is valid customer of that particular or any other branch and maintaining any kind of a/c. usually, a customer from other branch is not allowed to be the introducer, it is permitted. The process of introducing a new client can be done on the form itself. There is a space in the application form where the introducer will write his/her a/c no, address and sign his/her specimen signature.
It is always advisable on the part of the banker to allow the prospective customer to open an a/c only with a proper introduction from a responsible person, known to both the parties. A letter of introduction always protects a banker in the following ways-
Protection against fraud.
Protection against inadvertent overdraft.
Protection against un-discharged bankrupt.
Protection against negligence under sections 131 of Nl act.
Protection against giving incorrect information to allow banker.
Declaration of nominee:
The person who wants to open an a/c can mention one or two nominee. The application will give a declaration in the space given on the a/c opening form, stating the name and father’s name, age, address, relation and percentage of share. The a/c holder can change the nomination any time and it will be valid, only after the death of the a/c holder.
Specimen signature:
The applicant will sign on the application and he will be provided with an extra paper where he will sign three or more signatures, which he has to maintain all through the duration of the account.
Interview: At the time of the opening of a new a/c, this concerned branch always takes an interview with prospective customer so as to obviate the chances of preparation of any fraud at the latter stage.
Initial deposits:
It is always a common practice among the bankers to allow a new customer to open an account only in cash and DBBL; takes tk.500 as initial deposit foe saving account and tk.1000, for current deposit a/c.
Operating Instruction/Mandate in writing:
If any party wants his a/c to be operated by somebody else, he will provide the banker in writing statement about the operator.
Verification of documents:
The banker should verify some of the important documents, like the Memorandum of Association, Article of Association, and by laws copy etc. in other cases, the verification of certain other documents like, Trust Deed Probate, letter of administration etc, may be needed.
Conversation with the provision of special acts, since a banker is to deal with different classes of customers, he has to be thoroughly conversant with certain laws.
Pay in slip, Check-book and Pass book:
The customer is supplied with a part-in-slip to use for depositing cash or check of bill into a/c. the customer is also supplied with a check book for drawing money as and when the customer wishes, which normally contains 10 to 20 bank forms. If the customer dose not likes to have check book, then he can make use of suck kind of form.
In addition to the above, a customer is given a passbook, which reflects the customer’s a/c in the banker’s ledger. It usually contains the rules and regulations of the bank and terns and conditions of deposits.
Fixed Deposit Accounts:
A fixed deposit account is repayable after the expiry of a predetermined period fixed by the customer himself. The period varies from three months to three years. The customer may open his/her account for different time periods, which may be for three months, six months, one year, two years and three years.
Though FDR is an A/c, it is something different from other a/c. FDR is a long term deposit. Usually customers are allowed to open this a/c for a certain period. The rate of interest varies in accordance with the terms of deposit.
Opening of FDR:
There is a prescribed form for opening FDR. No introducer and photograph is required for opening this a/c a minimum amount as determined by the H.O is required to open such an account.
Premature Encashment of FDR:
A depositor has the right to claim for refund of his deposit before expiry of the fixed term there of. Bank may in special consideration allow premature encashment on application of the deposit subject to the under noted condition:
For FDR which are 3 months maturity no interest will be payable at premature encashment, only the principle amount will be refunded.
When premature encashment is allowed of and FDR with tenure of over 3 months, interest will be paid if enchased before expiry of 6 months at the rate of 3months prescribed interest rate.
Premature encashment is allowed of and FDR with tenure of over 6 months, interest will be paid if enchased before expiry of over 12 months at the rate of 6 months prescribed interest rate and the same theory will also be applicable for premature FDR encashment of 2 years and 3 years.
Monthly term Deposit:
It is an innovative offer of DBBL, which is a scheme like FDR but in different definition. In this scheme the MTD holder can withdraw the interest amount after end of each months where principle amount will remain as usual. Different interest of DBBL:
PERIOD INTEREST RATE
1 month (MTD) 8.50%
3 months 8.75%
6 months 9.25%
1 year 9.50%
2 year 9.75%
3 year 10.00%
Closing of an account:
A customer may close his/her account any time by submitting an application to the manager or to the branch in charge. The account of the customer is then checked to see how much money is still in it. The customer is then asked to draw a final check for the final account in the account excluding account close charge and other incidental charges. The customer then surrenders remaining checks to the respective officer who tears off these checks. Vouchers are then issued debiting the particular account and crediting.
In case of joint account the application to close the account must be signed by the holders even though the account is operated either of them. The entire joint holder should also sign the last check of withdrawal of the available balance in the account.
Clearing Department of DBBL Mirpur Branch:
Check clearing section of DBBL Mirpur Branch receives checks, Demand Draft (DD) and Pay orders etc. from its customers for collection. It also plays in behalf of its customers for those instruments that come to it through clearinghouse. When instruments of DBBL are sent for collection or received for payment through clearinghouse it is called inter bank clearance or IBC. These are When instruments of DBBL are sent for collection or received for payment through clearinghouse it is called inter bank clearance or IBC. These are treated in a little different manner than instruments of other banks.
When the checks are presented to a bank by the other bank by the other banks for collection of fund and to credit that into the party’s account, the instruments must be cleared through Bangladesh Bank Clearing House. A receiving officer receives checks by a deposit slip over the counter.
Mirpur office represents the bank in the clearinghouse as agent of all the branches in Dhaka city. Clearing section examines:
When the paying bank within Dhaka City
When the paying bank outside Dhaka City
When the paying bank of their own branch.
The paying bank within Dhaka City:
The check clearing section of DBBL Mirpur branch receives Inter Branch Debit Advice (IBDA) from the branches on the receiving day of the instruments. The DBBL Mirpur Branch takes those instruments to the clearinghouse on the following day. If the instruments is dishonored, the respective branch sends IBDA to the other local branches. The total procedure takes three days to encash the instrument if everything is in order.
The paying bank outside Dhaka City:
The check clearing section of DBBL Mirpur branch receives Outward Bills for Collection (OBC) to the concerned paying bank to get IBDA from the paying bank. If the paying bank dishonors the instrument, the paying bank returns it to the respective branch with the description of the causes of dishonoring instruments. The procedure takes around a week.
The paying bank of their own branch:
The check clearing section of DBBL Mirpur branch sends Outward Bills for Collection (OBC) to the concerned paying bank to get Inter Branch Credit Advice (IBCA) from the paying branch. If the paying bank dishonors the instrument branch, the paying branch returns it to DBBL Mirpur Branch describing why the instrument is dishonored.
Cash Department of DBBL Mirpur Branch:
Cash is the most liquid asset and it should be dealt with very carefully. So this department is really handled with extreme care. This depart starts the day with cash in vault. All cash receipts and payments are made through this department. This depart starts the day with cash in vault. All cash receipts and payments are made through this department.
Cash section is very sensitive organ of the branch and handled with extra care. Interns are not authorized to deal in this section because of its sensitivity. But I was fortunate enough to know the procedures of this section. Operating of this section begins at the start of the banking hour Cash Officer begins his/her transaction with taking money from vault, known as the opening cash balance. Vault is kept in vary secured room. Keys of room are kept under control of cash officer and branch in charge. The amount of opening cash is entered into a register.
After a whole day’s transaction, the surplus money remaining in the cash counter is put back in the vault and known as the closing balance. Money is received and paid in this section.
Cash Receipt:
Money is received through cash with the help of deposit slip or through the negotiable instruments. On receipt of pay in slip/credit voucher the receive cash officer shall:
Check the title of A/c, its number, amount in words and figures.
Receive cash dully counted and checked.
Write denomination of currency on the back of the pay in slip or credit voucher.
Keep cash in drawer during business hours.
Enter particulars of pay in slip or credit voucher in the receiving cash officer book.
Authorized officer check the particulars entered in the receiving ash officer’s book.
Send the pay in slip or credit voucher to the deposit department or to the respective department.
Cash payment:
Upon the receipt of the instrument for payment, the cash officer observes the following things:
The date of the check
Signature of the account holder
Where the check is crossed or not
Where the check is endorsed or not
Where the amount in word and the amount in figure correspond or not
Where there is sufficient balance or not
Where there is a stop payment or not
Where there is any legal obstruction or not (i.e., Garnishee Order)
If all the particulars are in order, the cash officer makes payment to the customer.
Pay Order (PO):
It is like cash but not exactly cash. It is an instrument, which is issued from a certain branch of a bank and must be encased from the same branch. Unlike check, there is no possibility of dishonoring pay order because before issuing pay order bank takes out money of the pay order in advance.
It is not a negotiable instrument because it can’t be endorsed or crossed.
Pay order gives payee the right to claim payment from the issuing branch. In other wards it is an undertaking by the issuing bank to pay a certain sum of money to the payee or to order on demand.
Commission: free for account holder.
Entries for PO:
Clients A/c———————————–Dr
Pay order——————————————————-Cr
Income A/c commission on remittance————Cr
Refund of Pay Order:
The following procedure should be followed for refund of pay order by cancellation:
The purchaser should submit a written request for refund of pay order by cancellation attaching therewith the original pay order.
The signature of the purchaser will have to be verified from the original application from on record.
Prescribed cancellation charges should be refunded. Commission recorded for issuing the pay order should not be refunded.
The PO should be affixed with a stamp “cancelled” under proper authentication and dully signed by authorized officer.
The original entries are to be reversed with proper narration.
Cancellation of the pay order should also be recorded in the pay order register.
After receiving the document the officer inters them in a register kept in his/her desk and distributes them to the appropriate sections. When papers or documents are sent for official purpose the officer enters them in another register, writes down the address in the envelop and sends them through proper channel.
Dispatch section of Mirpur Branch performs another duty. It enters the transfer instruments in the scroll and sends those to the computer section.
Accounts Department of DBBL Mirpur Branch:
Account is the Nerve Center of a bank. Account department maintains all records of transactions and all types of statement. At the end of transactions hour all concerned departments send to this department vouchers of transactions. The account section of Mirpur branch is fully computerized. The computer now maintains the ledgers; Computer also provides all the statements required for the branches, head office and Bangladesh Bank.
Account department compares all figures/amounts, contents of transaction with supplementary statement prepared by computer. If any discrepancy arises regarding any transaction then this department reports to the concerned department.
Following are the activities if account department.
To record all transactions in the cashbook.
To record all transactions in the general and subsidiary ledger
To prepare daily fund position, periodic statements of affairs etc.
Prepare necessary statement for reporting purpose
To pay all expenditure on behalf of the branch
Make salary statement and pay salary
Branch to branch fund remittance and supporting accounting treatment
Budgeting for branches
The bank mainly provides following services to customers.
Provide solvency Certificate
Provide statement of affairs to customers. It is provided daily, weekly, monthly, and yearly also.
Letter of credit (L/C) Documentary Credit:
Letter of credit can be defined as a ‘credit contract’ whereby the buyer’s bank is committed (on behalf of the buyer) to place an agreed amount of money at the seller’s disposal under some agreed conditions. L/C is also known as Documentary Credit. A documentary credit may be revocable or irrevocable.
Summary of L/C operation:
The buyer and the seller conclude a sales contract providing for payment by the documentary credit.
The buyer instructs his bank the “issuing” bank to issue a credit in favor of the seller (beneficiary).
The issuing bank asks another bank, usually in the country of the seller, to advice or confirm the credit.
The advising or confirming bank informs the seller that the credit has been issued.
As soon as the seller receives the credit and is satisfied that he can meet its terms and conditions, he is in a position to load the goods and dispatch them.
The seller then sends the documents evidencing the shipment to the bank where the credit is available. This may be the issuing bank, or the confirming bank or a bank named in the credit as the paying, accepting, or negotiating bank. If the credit allows for negotiation by any bank, there will not be a ‘nominated bank’ and document may be sent to any bank willing to negotiate under the credit.
The bank checks the documents against the credit. If the documents meet the requirements of the credit, the bank will pay, accept, or negotiate according to the terms of the credit.
The bank, if other than the issuing bank, sends the documents to the issuing bank.
The issuing bank checks the documents and, if they meet the credit requirements, reimburses in the pre agreed manner the confirming bank or any bank that has paid, accepted or negotiated under the credit.
When the documents have been checked by the issuing bank and found to meet the credit requirements as they are released to the buyer upon payment of the amount due or upon other terms agreed between him and the issuing bank.
The buyer sends the transport document to the carrier who will then proceed to deliver the goods.
Parties of Documentary Credit:
Parties to the documentary credit may be an issuing bank, an advising bank, a confirming bank or a negotiating bank.
Issuing bank:
The issuing bank or opening bank is one, which issues the credit, i.e., undertakes, independent of undertaking of the applicant, to make payment provided the terms and conditions of the credit have been complied with. The payment may be at sight if the credit provides for differed payment.
Especially the issuing bank should satisfy him on the credit worthiness of the uniform customs and practices for documentary credit (UCPDC)-IC publication no.500 edition of 1993.
Advising bank:
The advising bank advises the credit to the beneficiary authenticating the genuineness of the credit. The advising bank is generally situated in the country/place of the beneficiary.
Confirming bank:
A confirming bank is one which adds its guarantee to the credit opened by another bank, thereby, undertaking the responsibility of payment/negotiation/acceptance under the credit in addition to that of the issuing bank. When the credit worthiness of the issuing bank is in doubt, beneficiary’s bank may request the issuing bank to give additional confirmation by another bank. It is said ‘Add Confirmation’ in practice.
Negotiating bank:
A negotiating bank is the bank nominated or authorized by the issuing bank to pay, to incur a deferred payment liability, to accept drafts or to negotiate the credit.
Reimbursing bank:
A reimbursing is the bank authorized to honor the reimbursement claims in settlement of negotiation/acceptance/payment lodged with it by the negotiating bank or the accepting bank. It is normally the bank with which the issuing bank has account from which payment to be made.
Conclusion
This is a well established statement that practical situations always differ from theoretical explanation. During the three months internship program at Mirpur Branch of Dutch Bangla Bank Limited almost all the desks have been observed. And I have found theory deviates from the practice more or less though three months are not enough time to find out all the discrepancy between theory and practice. Among all experiences some noticeable observations are described below:
The officers were mostly courteous, friendly in nature and eager to help despite the tremendous workload. Employees are very mush loyal to the organization.
As a private bank DBBL is trying it’s best to extend their service to the public. A very good working environment was remaining in the DBBL Mirpur Branch. During the internship, it is found that the DBBL Mirpur Branch provides all kinds of commercial banking services to its customers. General Banking is engaged in cash receipt and payment, check clearing, local remittance etc.
I think the limitation DBBL has is very insignificant compare to the strengths that DBBL has. So when DBBL overcomes these limitations-this bank will be in a far better position than previous years and where their will be no competitors who can reach them. As long as DBBL continuous increasing their branches and as long as they keep on updating their technology on competitor can stop them from going at the top.
Working with DBBL for three months was truly an interesting experience, which brought me to the contact of the real life-banking world and made it possible for me to compare the classroom theories with practical experience. During my practical orientation, I observed the function of different departments of DBBL that; I believe will prove to be a foundation block in my career as a professional banker in future.
It is a great pleasure for to have practical exposure in DBBL. Because without practical exposure it couldn’t be possible for me to compare the theory with practice. And it is well established that theory
without practice is blind. During the practical orientation I have observed the function of General Banking, Foreign Exchange, and Credit department of DBBL which help me a lot to be a professional banker in future.
Out of the above discussion a conclusion can be drawn after saying that, the present customer dealing procedure is quite well at this moment. The computerized transaction makes the system efficient and effective.
