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Chapter one-Introduction
1.1 Introduction of the study
In todays fast moving world, business is more complex and competitive.
Banking is an essential industry. It is where we often wind up when were
seeking a loan to purchase a new automobile, tuition for college or trade
school, financial advice on how to invest our savings, credit to begin a new
business, a safe deposit box to safeguard our valuable documents or even
more commonly, a checking account or Credit card to keep track of when
and where we spend our money. This industry, composed of thousands of
firms worldwide, literally affects the welfare of every other industry and the
economy as a whole.
In fact, bank is the vitality of modern economy. Developed and organized
banking system is a prerequisite of every kinds of economy- capitalistic,
socialist, developed and underdeveloped countries whatever it may be.Todays banking is an industry in change. Rather than being something in
particular, it is continually becoming new- offering new services, merging
and consolidating into much larger and more complex business, adopting
new technologies that seem to change faster than most of us can
comprehend, and facing a new and changing set of rules as more and more
nation cooperate to regulate and supervise the banks that serve their citizen.
Bangladesh is not exception in this case. Marketing strategies for banking
business is one of the most vital issues now in Bangladesh. Because, after
liberation, the government of the Peoples Republic of Bangladesh formally
took over the charge of administration of different banks. The banking
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institutions are the custodians of private savings and a powerful instrument
to provide credit. They mobilize resources of the country by accepting
deposits and canalize them for industrial and national development by
granting advances. Hence, in order to implement the above-mentioned state
policy, the Government of Bangladesh decided to nationalize all the banks
of the country. At that time all the existing 12 banks were nationalize and
were converted into six new banks.
From 1983, privatization and denationalization process started in the
banking sector. As a result 2 (out of 6) nationalized commercial banks were
completely denationalized (in 1983) and one partly denationalized and other
three were kept under government ownership. In addition, 8 new private
commercial banks were permitted to function in the banking sector. Over the
time there are 31 private commercial banks and 14 foreign banks now
operating their business in Bangladesh.
During the last six years, many new banks have emerged to cater the needs
of the customers. They are continuously trying to attract people towards
them by offering new types of products and services to face competition and
fresh challenges thrown by their rival. Efforts are made to satisfy customers
needs by providing superior value than their competitors.
FSBL, Agrabad Branch is a bank of 21 st century commenced their journey
only 4 years ago. Within these 4 years, the bank has developed many
attractive financial products and services at a pretty interest rate to help the
people for saving their money and for meeting loan demand.
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Ive tried to know about the general banking services offered by FSBL the
problems faced by them and the prospects they will enjoy.
1.2 Significance of the study
The study carries much importance in view of the fact that the economic
development of Bangladesh is closely linked with the strong and healthy
financial organizations, which facilitate mobilization of domestic and
foreign funds on a large scale. Banking organizations are doing their jobs
more competitively now a day. Attracting the people to save their money by
developing various products and schemes, investing the funds in different
profitable sectors, helping in export and import business, providing services
in case of inward and outward remittance etc. are the main focus of the
banking institutions. As First Security Bank Limited is a new bank; no
research work has been made to highlight the banking system, the problems
and the prospects in this regard. This research gap induced me to undertake
the study. It is hoped that the findings of the study will be useful for the
readers and young learners to get knowledge about the topic.
1.3 Scope and Objectives
At FSBL, Agrabad Branch, Chittagong, Ive tried to acquire knowledge
about the overall banking system. The bank has classified its total operation
into three sections. These are:
General Banking
Credit
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Foreign Exchange
Ive worked with two of those three sections to acquire knowledge about the
operations, procedures of the work followed by the bank.
Analyzing the variable, like different deposits, loans and advances, customer
services, profitability of the bank is one of the objectives of the study.
In addition of the principal objective, the following are some of the common
but significant objectives of the study:
1. To know about the general banking operation of FSBL Limited.
2. To know about the scopes of Deposit collection of the bank.
3. To know about the area of general Credit.
4. To know about the procedure of settle Loan.
5. To examine the loan collection process.
6. To know about the documents of the Credit.
7. To identify the problems of FSBL, Agrabad Branch, Chittagong is
facing and the possible solutions of these problems.
1.4 Methodology of the study
Sample design: In this Project work, FSBL, Agrabad Branch, Chittagong is
selected to conduct the study.
Selection of variables: Deposits, Loans and Advances, Customer services,
Profits etc. are selected as variables.
Data collection: For conducting the study I used the following methods-
Collection of primary data: Some study related data are collected from
designing questionnaires, personal interview, and from related instruments.
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Collection of secondary data: To prepare the report, I used many data and
literary information for which I had to depend on secondary sources. This
are-
Annual reports of FSBL Limited.
Different prospectors of FSBL,Agrabad Branch,
FSBL Limited.
Others related books.
Along with these, observation is another method that was also given
emphasis in the study.
1.5 Limitations of the study
In every program or activities, one has to face numerous constraints. During
my 2 months internship program, I have also faced some problems. These
are:
1.Bank is a busy organization with comparison to others. There are
rushes of people for about whole the day and the officers have to
transact with them. So it is very much tough for them to allocate time
for an internee.
2. The allocated time this project work is not sufficient for us to gatherknowledge and to make the study a complete and fruitful one.
3.The study is restricted only to FSBL, Agrabad Branch, Chittagong.
4.The study also suffered from inadequacy of data provided by FSBL
Limited.
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5.Most of the employees are not familiar with internship program.
Chapter Two-Profile of FSBL Limited
2.1 Background of FSBL Limited
FSBLis a bank of 21st century. It is a private commercial bank with head
office at Dilkhusa, Dhaka, Bangladesh . The bank has 25 branches spread all
over the country. The founders of FSBL Limited are committed to make it a
little more different and a bit special qualitatively.
This bank has a new vision to fulfill and a new goal to achieve. The bank has
been manned with experienced executives equipped with modern technology
so as to make it most efficient to meet the needs of 21st century. With assets
of TK.722,74,49,242 and more than 120 employees, the bank has diversified
activities in retail banking, corporate banking and international trade.
The total amount of Deposits is Tk.523, 03,01,832 and the total Loans and
Advances are Tk.410, 26,07,964 at the end of the year 2005 that shows a
great performance of FSBL Limited. The Credit-Deposit ratio is 78.44%.
Till 31st December 2005, the total amount of export is Tk.1988.40 million
and the total amount of import is Tk.3750.60 million. The total profit at the
end of the year 2005 is Tk.12.71 crore and the expected profit of year 2006is Tk.25 crore.
The bank has 10-division namely Human Resource Division, Credit
Division, International Division, Audit and Inspection Division,
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Development and Marketing Division, Research and Planning Division,
Information Technology Division, General Service Division, Treasury and
Money Market Division. The bank selects its basic workforce from internal
source mainly through directors recommendation.
So, in general the employees are not highly qualified. But the executives
were selected through interview and they had a long banking experience. So
they are now the assets of the company.
2.2 Management of FSBL Limited
The decision making process of FSBL is democratic and decentralized. The
upper level management hardly bothers about the operational task of the
bank.
The sponsors Directors of the bank are well-established businessmen and
professionals of the country having business in and out Bangladesh. A boardof Directors is formed taking 26 members out of the entrepreneurs and
Mrs.Nasim Sikder has elected as a chairperson unanimously.
Highly qualified and efficient professionals manage the bank. The Managing
Director of the bank is Mr.Syed Ashraf Ali who has rich experience of
managing both the nationalized and private sector banks as Chief Executive.
Most of the cases pending at Head Office level solved with higher priority
for smooth functioning of bank operation and quick disposal of the
proposals. All the decisions made at Head Office level through different
committee.
At branch level all the decision taken by the Branch manager complying
rules and regulations set by the Head Office. Branch manager has the
supreme authority to final disbursement of the facility to the customer. All
credit facilities under branch delegation exercise through credit committee.
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Deputy manager coordinates all the functions of the branch as Manager
Operation.
2.3 Organization structure of FSBL Limited
a. FSBL of Bangladesh Ltd. (Head Office)
Chairman
Managing Director (M.D)
Deputy Managing Director (D.M.D)
Executive Vice President (E.V.P)
Senior Vice President (S.V.P.)
Vice President (V.P)
Senior Assistant Vice President (S.A.V.P)
Assistant Vice President (A.V.P)
Senior Principal Officer (S.P.O.)
Principal Officer (P.O.)
Executive Officer (E.O.)
Officer
Junior Officer (J.O)
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b. FSBL of Bangladesh Ltd. (Agrabad Branch)
Senior Assistant Vice President (S.A.V.P)
Assistant Vice President (A.V.P.)
Principal Officer (P.O.)
Executive Officer (E.O.)
Officer
Junior Officer (J.O)
2.4 Sources of Fund
FSBL uses various sources to raise its funds. Among the available sources,
deposits occupy the lion share of the sources. FSBL has introduced various
types of attractive saving schemes that motivate the saver to save their
money at a pretty interest rate.
The total amount of deposits, which was Tk.3080.20 million at the end of
the year 2001 have increased to Tk.5230.30 million at the end of the year
2005. It shows a greater improvement in creating funds.
Besides deposits, paid up capital, provision and reserves and other liabilities
are the main sources of fund.
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2.5Capital Adequacy Ratio
In terms of section 13(A) of Banking Companies Act 1991 and BRPD
circular no. 01,14 and 10, required capital of the Bank at the close of
business on 31st December 2004 was required to be Tk.337,724,216as
against available core capital of Tk.253,660,186 and supplementary capital
of Tk.38,863,488, that is, a total of Tk.292,523,674.
Amounts in
Taka
At 31st Dec.2004
Core Capital (Tier-1)
Paid up capital 200,000,000Statutory reserve 18,026,557
Other reserve 24,000,000
Retained profit 11,633,629
253,660,186
Supplementary capital (Tier-2)
General provision on unclassified loans (1%) 37,444,410
Exchange equalization account 1,419,078
38,863,488
292,523,674
This shortfall of Tk.45, 200,542 (337,724,216-292,523,674) is yet required
to be filled up.
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2.6 Credit and Advance Policy
FSBL invests both in public sector and private sector. Its credit portfolio is
consisted of Financing in export and import.
Financing in working capital.
Financing in business transaction.
Financing in purchasing consumer goods.
Financing in projects etc.
FSBL has been expediting financing in small and medium sized industries
and business with the aim of creating enthusiasm among the entrepreneurs.
2.7 Financial Products/Services of FSBL Limited
Products and Services of FSBL can be described in 3 dichotomies:
Depository Products:
01.Current Account 04. FDR
02. Saving Account 05. Deposit Schemes03. STD Account a) Monthly Saving Scheme
b) Double Benefit Deposit Scheme
c) Monthly Benefit Deposit Scheme
Loan Products:
1. Loan General
2. Secured Overdraft
3. Cash Credit (Hypo)
4. Lease Finance
5. Hire Purchase6. Consumer Credit Scheme
7. Packing Loan
8. Payment Against Document
9. Loan Against Trust Receipt
10.Loan Import Merchandise
11.Export Cash Credit
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Other Products and Services
01.Ready Cash
02.Remittance
03.Collection of Utility Bills
2.8 Special features of FSBL Limited
01.Encashment of Cheque within 45 seconds
02.Attractive interest rate
03.Competitive L/C commission and other charges
04.Emphasis on small loan disbursement
05.Promoting saving tendency of mass people by introducing attractive new
saving scheme.
06.Expedite industrialization by providing long-term loan through lease
finance.
07.Micro Credit facility for middle class people.
08.Step taken for elevation of poverty by opening branch in rural areas and
providing loan facility in income generating project of rural middle class and
others.
09.Reducing dependence on interest income by increasing fee based income.
10.Decentralized delegation of authority, 75% decision is taken at branch
level.11.Application of modern technology and producing quality service for the
customer.
2.9 Performance of FSBL Limited
As on Dec.31, 2004 As on Dec.31, 2005
Paid up Capital Tk.21, 12,40,429 Tk. 25, 36,60,186
Total asset Tk.4459529149 Tk.7227449242
Deposit Tk.3080.20 million Tk.5230.30 million
Loans and Advances Tk.2539.80 million Tk.4102.61 million
Import Tk.2222.60 million Tk. 3750.60 million
Export Tk.1514.50 million Tk.1988.40 million
Profit Tk.7.59 crore Tk. 12.71 crore
No of Branches 20 25
Manpower 165 225
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Chapter Three
Operations of FSBL,Agrabad Branch, Chittagong.
The importance of the mobilization of savings for the economic
development of our country can hardly be over emphasized. We consider
savings and deposits as lifeblood of the bank. More the deposit, greater is the
strength of the bank. The bank intends to launch various new savings
scheme with prospect of higher return duly supported by a well-orchestrated
system of customer services. The bank would cater to the credit needs of
individuals as well as corporate clients. Initially it will emphasize on trade
finance, which would be short term and self-liquidating in nature.
Considering the importance of foreign trade in our country, financing and
handling of Export & Import business and also handling of foreign
remittance would be given top most priority.
3.1 Customer Service & Account Opening Department
Functions:
Account opening Cheque book issuing
Signature scanning
MSS opening
MSS closing
Account transfer
Account closing
Answering customers quarries
Procedure of opens an Account in FSBL Limited:First of all, one has to fill up an Account opening form and a Cheque
requisition form. An introducer who is an account holder of this bank, attest
the customers photographs and the form. Then the banker will put an
account number and give a Deposit slip to the customer. The customer must
deposit minimum Tk.1000 to that account number of the bank. Then the
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Relationship between the Banker and the Customer will establish. After
that the bank will issue a Cheque Book on the customers name.
Procedure of close an Account in FSBL Limited:
At first the client will apply to close his account. The banker will verify the
signature of the application and take his Cheque book. Then the bank will
provide him the deposited amount after deduction of the closing charge(s).
In case of current account at first the liability will be adjusted with his
deposit and then make payment.
Requirements for Opening an Account:
SB (Savings)
An introducer
Photograph of the A/C holder (2 copies)
Nationality certificate/First 7 pages of passport (Photocopy)
Photograph and signature of nominee.
CD (Individual/Joint)
An introducer
Photograph of the A/C holder (2 copies)
Nationality certificate/First 7 pages of passport (Photocopy)
Photograph and signature of nominee.
CD (Proprietorship firm)
An introducer
Photograph of the A/C holder (2 copies)
Nationality certificate/First 7 pages of passport (Photocopy)
Photograph and signature of nominee.
Attested photocopy of trade license.
CD (Partnership firm)
An introducer
Photograph of the A/C holder (2 copies)
Nationality certificate/First 7 pages of passport (Photocopy)
Photograph and signature of nominee.
Attested photocopy of trade license
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Certified copy of Partnership Deed duly signed by all the partners.
Partnership A/C agreement
Resolution signed by all the partners to open A/C.
CD (Limited Company) An introducer
Photograph of the A/C holder (2 copies)
Nationality certificate/First 7 pages of passport (Photocopy)
Certified copy of the Memorandum & Articles of Association
Certified copy of Certificate of Incorporation
Certified copy of Certificate of Commencement (In case of Public
Limited Co.)
List of Directors
Certified copy of Resolution of the Board of Directors for opening &operating of the A/C.
Interest Rate of Different Deposits:
Deposits Rate
1. Short term deposit
2. Savings deposit3. Fixed deposit
For one month
For three months
For six months
For one year & above
5.5%
7.5%
8%
9.5%
10.00%
10.50%
Monthly Savings Scheme:Small savings can formulate large deposit. Savings increases mental power
of a man, form capital and increases the confidence of a depositor.
FSBLintroduce a saving scheme with high profit for the purpose of increases
saving mentality. In this savings scheme one can deposit money in every
month and will get a handsome amount of money at the end of certain
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period. The amount of savings/deposits as per monthly installment and
period is shown in below:
Period Monthly
installment
Tk.250
Monthly
installment
Tk.500
Monthly
installment
Tk.1000
Monthly
installment
Tk.50005 years Tk.19615 Tk.39230 Tk.78460 Tk.392300
8 years Tk.37367 Tk.74735 Tk.149470 Tk.747350
10 years Tk.52702 Tk.105405 Tk.210810 Tk.1054050
3.2 Bills and Remittance Department
Bank has branches throughout the country and therefore, they serve as best
medium for remittance of funds from one place to another. This service is
available to both customers and non-customers of the bank.
Functions:
Issuing TT, DD, PO, SDR
Collection of outward Cheque
Collection of inward Cheque
Providing Accounts statement
Settlement of MBSS, DBDS, FDR
Solvency certificate issuing
Payment Order / Pay Order (P.O)
This is an instrument issued by the branch of a bank for enabling the
Customer/Purchaser to pay certain amount of money to the order of a certain
person/firm/organization/office within the same clearinghouse area of thepay order-issuing branch.
Characteristics of P.O
The issuing branch and paying branch are same.
Application for payment within the clearinghouse area of the
issuing branch.
This may be open or can be crossed.
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Demand Draft (D.D)
This is an instrument through which customers money is remitted to another
person/firm/organization in outside the clearinghouse area from a branch ofone bank to an outstation branch of the same bank or to a branch of another
bank (with prior arrangement between that bank with the issuing branch).
This is an order instrument in which the issuing branch gives instruction to
the payee/drawer branch to pay certain amount of money to the order of
certain person/firm/organization.
Telegraphic/ Telephonic Transfer (T.T)
This is a mode of transfer of customers money from a branch of one bank to
another branch of the same bank through telegraphic/telephonic message.
The issuing branch used to send the message of such remittance through
telegraph/telephone adding certain code number or test number on the basis
of test key apparatus developed by the concerned bank for its different
branches.
Characteristics of T.T
Issued by one branch to other branch and message is tale-
communicated.
Remittance/ transfer of money is done through tested tale-messages. Remittance is affected on the basis of tested message.
Test key apparatus is required.
Clearing house
Clearing House is a place in the Central Bank where different banks come to
settle their interrelated liabilities.
Clearing House SystemThe mechanism of working at a Clearing House in general is as follows:
Every Bank of the locality, which is a member of the clearinghouse,
prepares a Bank-wish list of cheques after receive from customers and
drawn on different Banks of the locality.
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An officer, in charge of clearinghouse, goes to the clearinghouse in the
morning with the cheques and their list. He delivers the cheques to the
officials of the respective banks. Similarly, he also receives the cheques
drawn on his Bank from the officials of the other banks.
The official of each bank computerizes the final balance, payable or
receivable by his Bank after taking into account the various amount of
receipt and payment.
The official return of their respective Bank to meet again in the afternoon
to return any dishonored instruments to the officials of the respective
Banks.
The final settlement is effective by the supervisor of the clearinghouse by
debiting or crediting, as the case may be, the accounts of the respective
Banks as maintained with the clearinghouse.
3.3 FOREIGN EXCHANGE DEPARTMENT
Foreign Exchange refers to the process or mechanism by which the currency
of one country is converted into another country. Foreign exchange is the
means and methods by which rights to wealth in a countrys currency are
converted into rights to wealth in another countrys currency. The foreign
exchange department of FSBL,Agrabad branch is playing an important role
in enhancing exports earning. Which aids economic growth and will be
helpful for economic boost. On the other hand, it also helps to meet those
goods and services, which are more demanding and note adequate in our
country.
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Foreign Exchange Department in FSBL Agrabad Branch:
Foreign exchange department of FSBLAgrabad Branch has been
divided into two sections----
1. Foreign Remittance.
2. L/C Operation.
L/C operation can be aging classified into two sections: Import Section.
Export Section.
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Importoperation.
Foreign CurrencyA/C
Exportoperation.
Inwardremittance
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Foreign RemittanceL/C Operation
Outward
remittance
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Some important terms of foreign exchange:
Letter of Credit:
Letter of credit can be defined as a Credit Contract whereby the buyersbank is committee (on behalf of the buyers) to place an agreed amount of
money at the sellers disposal under some agreed conditions. Since the agreed
conditions include amongst other things, the presentation of some specified
documents, the letter of credit is called Documentary letter of credit. The
uniform customs and practices for documentary (UCPDC) published by
International Chamber of Commerce (1993) revision, publication no 500
define Documentary Credit.
Any arrangement however named or described whereby a bank (the issuing
bank) acting at the request and on the instruction of customs (the Application)
or on its own behalf,
Is to make a payment to or to the order of a third party (the
beneficiary) or is to accept and pay bills of exchange (Drafts) drawn
by the beneficiary or
Authorize another bank to effect such payment or to accept and pay
such bills of exchange (Drafts)
Authorize another bank to negotiate against stipulated documents
provide that terms and conditions are complied with.
FORMS OF DOCUMENTARY CREDIT:
1. Revocable Credit:
A revocable credit is one where the issuing bank at liberty to revoke i.e.
cancels the credit at any time. According to UCPDC a revocable credit may
amend or cancelled by the issuing bank at any moment and without prior
notice to the beneficiary before shipment of consignment against the L/C.
2. Irrevocable Credit:
An irrevocable L/C is one, which cannot be revoked, amended or modified
by the bank with the concurrence of the interested parties.
Parties involved in the process of Letter of Credit
Importer (Buyer)/ Application.
The Issuing Bank (Opening Bank)
The Advising Bank/ Notifying Bank
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Exporter/ Seller (Beneficiary)
Confirming Bank
Negotiating Bank
The Paying/ Reimbursing/ Accepting/ Remitting Bank.
a) Applicant:The person/ body (customer of the bank) that request the bank (opening
bank) to issue letter of credit. As per instruction and on behalf of the
applicant, bank open L/C in line with terms and condition of the sales
contract between the buyer and seller.
b) Opening bank/ issuing bank:
The bank which open/ issue on behalf pf the applicant/import. Issuing
banks obligation is to make payment against presentation of documents
drawn strictly as per terms of the L/C.
c) Advising/ notifying bank:The bank through which the L/C is advised/ forwarded to the beneficiary
(exporter). The responsibility of advising bank is to communicate the L/C to
the beneficiary after checking the authenticity of the credit. The advising
bank acts only as agent of the issuing bank without having any engagement
on their part.
d) Beneficiary:
Beneficiary of the L/C is the party in whose favor the letter of credit is
issued. Usually they are the seller or exporter.
e) Confirming bank:
The bank, which under instruction in the under letter of credit, addconformation of making payment in addition to the issuing Bank. It is done
at the request of the issuing Bank having arrangement with them. This
conformation constitutes a definite undertaking on the part of the confirming
Bank in addition to that of issuing Bank.
f) Negotiating Bank:
The Bank, which negotiate documents and pays the amount to the
beneficiary when presented complying credit terms. If the negotiation ofdocuments is not restricted to a particular Bank is the Banker of the
beneficiary.
g) Reimbursing / Paying Bank:
The Bank nominated in the credit by the issuing Bank to make payment
stipulated in the document, complying with the reimbursement Bank.
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Mechanism of L/C operation
Legends:
1. L/C opening
2. Present document.
3. Payment against document.
4. Confirming L/C.
5. Submit document.6. Makes document.
7. Issue L/C.
8. Forward Document.
9. Makes document.
IMPORT SECTION
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Buyer
(Importer) Seller (Exporter)
Issuing
Bank
Reimbursement Bank
Advising bank
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Import section deals with L/C opening and post import financing i.e. LIM &
LTR. Now the procedure from opening L/C to disbursement against L/C is
given below:
Application for opening L/C:At first, an importer will request banker to open L/C along with the
following documents.
An application.
Indent or Proforma Invoice.
Import Registration Certificate (IRC).
Taxpayers Identification Certificate (TIN)
Insurance cover note with money receipt.
A bank account in First Security Bank, Agrabad Branch.
Membership of chamber of commerce.
Indent or Proforma invoice:
Indent or proforma Invoice is the sale contract between seller and buyer in
import- export business. There is slight difference between indent and
proforma invoice. The sales contract, which is direct correspondence
between importer and exporter, is called Proforma invoice. There is no
intermediary between them. On the other hand, there may be an agent of
exporter in importers country. In this regard, if the sale contract is occurred
between the agent of exporter and importer then it is called indent.
DELIVERED FORMS BY BANKER TO IMPORTER:
After scrutinizing above-mentioned documents carefully, officer delivers the
following forms to be filled up by importer and banker should check:
Whether the goods to be imported is permissible or not.
Whether the goods to be imported is demanding or not.
The forms are:L/C Application Form:
L/C Application Form is a sort of an agreement between customer and bank
on the basis of which letter of credit is opened. First Security Bank, Agrabad
Branch provides a printed form for opening of L/C to the importer. A special
adhesive stamp of value Tk. 150 is affixed on the form in accordance with
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Stamp Act in force. While opening, the stamp is cancelled. Usually the
importer gives the following information.
Full name and address of the importer.
Full name and address of the beneficiary.
Draft amount.A availability of the credit by the sight
payment/acceptance/negotiation/deferred payment.
Time bar within which the documents should be presented.
Sales type (CIF/FOB/C&F).
Brief specification of commodities, price, quantity, indent no.
Country of origin.
Bangladesh Bank registration no.
Import License/LACF no.
IRC no. Account on.
Documents no.
Insurance Cover Note/Policy no. date, amount.
Name and address of Insurance Company.
Whether the partial shipment is allowed or not.
Whether the transshipment is allowed or not.
last date of shipment.
Last date of negotiation.
Other terms and conditions (if any).
Whether the confirmation of the credit is requested by thebeneficiary or not.
The L/C application must be completed/filled in properly a
signed by the authorized person of the importer before it is
submitted to the issuing bank.
L/C Authorization Form (L/CAF):
The Letter of Credit Authorization Form (LCAF) is the form prescribed for
the authorization of opening letter of credit/payment against import and usedin lieu of import license. The authorized dealers are empowered to issue
LCA forms to the importers as per basis of licensing of the Import Policy
order in force to allow import in Bangladesh. If foreigner exchange is
intended to be bought from the Bangladesh Bank against an LCAF, it has to
be registered with Bangladesh Banks Registration unit located in the
concerned area office of the CCI&E. The LCA Forma available with
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authorized dealers is issued in set of five (05) copies each. First Copy is
exchange control area of CCI&E office by authorized dealer/Registration
Unit of Bangladesh Bank. Quadruplicate Copy is kept as office copy by
authorized dealer/ Registration Unit. The Letter of Credit Authorization
Form (LCAF) contains the following- Name and address of the importer.
IRC no. and year of renewal.
Amount of L/C applied for (both in figure and word).
Description of item(s) to be imported.
ITC Number/ HS code no.
Signature of the importer with seal.
List of goods to be imported.
Imports permit form (IMP): L/C authorization form no.
Date
Value of taka
Registration of LCAF.
Quantity of goods.
Invoice value.
Country of origin.
Port of shipment.
Name of the vessel. Indenters address.
Preparation of L/C by Banker:
Banks officer prepares L/C when above-mentioned forms are to be
submitted by customer of importer. Before preparing L/C DBL
officer scrutinizes the application in the following manner.
1. The terms and conditions of the L/C must be complied with
UCPDC 500 and Exchange Control & Import Trade Regulation
2. Eligibility of the goods to be imported.3. The L/C must not be opened in favor of the importer.
4. Radioactivity report in case of food item.
Survey reports or certificate in case of old machinery is required.
Bank of the importer is called L/C Issuing Bank. Then issuing bank
inform its corresponding bank, called Advising Bank or
Confirming Bank located in exporters country to advise and the
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credit forward to the exporter and simultaneously officer makes L/C
opening vouchers.
Deskwork:
One debit voucher to be passed. Corresponding credit vouchers to be
passed (margin, commission, postage, stamp, F.F.C/ and othersLiability voucher to be passed.
Some inevitable notion in foreign exchange:
Bill of exchange:
According to the Section 05, Negotiable instrument (NI) Act- 1881 A
Bill of exchange is an instrument in writing containing an unconditional
order signed by the maker, directing a certain person to pay (on demand or
at fixed or a determinable future rate) a certain some of money only to or
to the order of a certain person or to the bearer of the instrument.
It may be either at sight or day sight. At sight means making payment
whenever the document will reach in the issuing Bank.
Commercial Invoice:
Commercial invoice issued by Exporter in the accounting document bywhich the seller charges the goods to buyer.
CHAPTER FOUR
Performance of FSBL AgrabadBranch
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4.1 Deposits of FSBL Agrabad Branch
Since this is a branch of FSBLso its main source of deposit is public deposit.
The various deposited amount of 30th September 2006 and 31st December
2006 is shown in the following table:
Deposits 30th Sep. 2006 31st Dec. 2006
C.D Tk.1, 65, 45,765.10 Tk.1, 88, 41, 884.15
S.D Tk.2, 99,38,149.55 Tk.3, 07, 33, 972.13
S.T.D Tk.3, 56,72,183.12 Tk.3, 41,67,222.80
F.D Tk.51, 79,27,390.00 Tk.51, 93,47,860.00
MSS
MBSS
DBDS
Tk.4, 45,32,575.85
Tk.9, 58,47,500.00
Tk.4, 55,11,578.32
Tk.4, 98,82,507.70
Tk.9, 79,22,500.00
Tk.4,59,93,594.16
Total Tk.78, 59,75,141.90 Tk.79, 68,89,540.90
So from the above table it is clear that the maximum deposit is Fixed
Deposit. And the total amount is increasing. So as per deposit the
performance is satisfactory.
4.2 Loans & Advances Portfolio
Now we show the credit portfolio of FSBLAgrabadBranch,in 31st December2006
Types of Loan 31st Dec.2006
Loan General Tk.1, 91,24,632.77
Loans against imported merchandise Tk.1, 89,71,801.52
LTR Tk.82, 62,362.52
Packing Credit Tk.15, 04,118.37
House Building Loan Tk.25, 29,194.43
P.A.D Tk.33, 69,943.13
Cash Credit (Hypo) Tk.3, 62,74,847.48SOD Tk.22, 17,39,491.87
CFS Tk.42, 85,489.89
Hire purchase Tk.36, 91,032.17
Car loan Tk.5, 44,993.00
FDBP Tk.36, 63,74,361.64
SOD: Export Tk.2, 66,24,455.85
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Total Tk.71, 32,96,724.64
From the above table we see the position of different types of loans
sanctioned by FSBL AgrabadBranch,4.3 Deposits and Loans & Advances
The total amount of Deposits and Loans & Advances made by FSBL,
Agrabad Branch from the year 2002 to 2003 are shown in the
following table:
2005 2006
Deposits Tk.58, 91,32,572.18 Tk.79, 68,89,540.90
Loans & Advances Tk.51, 16,97,445.56 Tk.71, 32,96,724.64
From the above table it is clear that Loans & Advances made by the branch
are less than its Deposits. Both Deposits and Loans & Advances are
increasing from year 2002 to tear 2003 that is good for the bank. The Credit-
Deposit ratio is 89.51% for the year 2003 that is good for the bank.
4.4 Income, Expenditure & Profit
The total amount of Income, Expenditure & Profit made by FSBLAgrabad
Branch, from the year 2002 to 2003 are shown in the following
table:
Year 2002 Year 2003
Income Tk.7, 85,92,954.57 Tk.11, 51,37,642.28
Expenditure Tk. 5,46,11,917.91 Tk. 7,40,31,287.84
Profit Tk.2, 39,81,036.66 Tk. 4,11,06,354.44
From the above table, it is clear that the profit of FSBLAgrabad Branch isincreases significantly in year 2003 from year 2002. So it is a satisfactory
performance of FSBLAgrabadBranch.
4.5 Customers Satisfaction Level
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By assessing the customers satisfaction, we find that around 85% customer
are satisfied with the services provided by FSBL AgrabadBranch. So, it isclear that FSBL AgrabadBranch provides a reasonably satisfactory serviceto the customer. But they have to improve their services to compete with
other Private Banks of our country.Reasons of Satisfaction
Well-furnish and air condition room.
Officers are cordial and well mannered.
Reasonably quick service.
Various types of saving deposit schemes and interest rate on these
schemes is competitively high.
Various types of Loans & Advance opportunities and Bank take very
little time to sanction Loan.
Transactions continue at launch period in the Bank.
Customer friendly terms & conditions.
Competitive interest rate.
Reasons of dissatisfaction
Junior officers & Assistant officers are not well qualified.
Some customer hopes more entertainment from the Bank.
Some customer think long-term credit facility is not available.
Absence of on-line Banking facility.
Very much profit oriented.
Limitations:
1. The promotional measures for marketing of existing services are not
taken aggressively to reach every initiatives and special facilities at
the door of the customers.
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2. Schemes for poor are not available.
3. The branch network is limited to some area. In Chittagong city there
are only two branches.
4. Maximum officers are working in a specific desk for a long period of
time. As a result, they may feel monotony, their skills do not increase,they do not know about the overall banking.
5. Absence of long-term credit.
6. Number of employees is more than required.
7. Officers in the junior level are not highly qualified.
8. Lack of modern business methods.
9. Training facility is not available, especially for lower level officers.
10.Necessary Documents like Prospectus, Annual Report, Bulletin,
Brochure etc. are not available in the Bank.
4.6 SOWT Analysis
By analyzing the performance of the bank, we get the following Strengths,
Weaknesses, Opportunities and Threats (SWOT).
Strengths:
1. It has well reputation in the market.
2. Not engaged in unfair business practice.
3. Executives are highly educated and experienced.
4. Bank has many attractive deposit schemes.
5. Well-furnished and Air-conditioned Bank.
6. Efficient management practice in the Bank.
7. Located in important commercial area.
Weaknesses:
1. Officers in the junior level are not highly qualified.
2. Short time experience of the Bank.
3. Absence of long-term credit.
4. Small market shares in banking business.
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5. Lack of training facility.
6. Lack of promotional activities.
Opportunities:1. Can increase the credit scheme.
2. Private Banks becomes more reliable to local public.
3. Have opportunity to increase market share.
4. Private Banks can contribute more in the economic
development of our country.
5. By doing social welfare activities it can create a good impact on
public mind.
Threats:
1. There are many competitors in the market.
2. Govt. pressures to reduce interest rate.
3. Banking technologies are changed.
4. Govt. imposes tax & VAT on profit.
5. Govt. restricted Banking activities.
Chapter Five- Recommendations & Conclusion
5.1 Areas Of Improvements
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From the driven findings, the following recommendations can be formulated
for FSBL:
Reduce the rate interest of loans & advances so that the borrowers havethe ability to conduct business as usual.
FSBL is running the risk of lending more than what they are provisioned
for. Albeit the negative relationship between banks credit risk and return
on equity is not significant in context of Bangladesh, FSBL can manage
to reduce their credit risk by increasing their amount of deposits.
FSBL can use its total assets so that it can increase the profit.
Increasing the individual banks deposit can also enhance the market size
of FSBL as a sequel they can improve their return on equity. This can be
concluded from the significant relationship existing between market size
and return on equity in context of Bangladesh.
FSBL can improve their distribution channel so that they can give
customers a sense of availability of their desired products.
To reduce cost of information.
FSBL considering the concentration factor can think of creating more
brand awareness as the reputed ones are enjoying the advantage.
FSBL can introduce new products so that customer can determine the
right product offering for their portfolio.
FSBL can bring in flexible loan offers to make them more attractive in
the core level.
FSBL will have to adopt standards in capital adequacy, income
recognition and provisioning norms.
Risk management setup in FSBL will need to be strengthened.
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Benchmark standards could be evolved.
Payment and settlement system will have to be strengthened to ensure
transfer of funds on real time basis eliminating risks associated with
transactions and settlement process.
Regulatory set-up will have to be strengthened, in line with the
requirements of a market-led integrated financial system.
Banks may have to evaluate on an ongoing basis, internally, the need to
effect structural changes in the organization. This will include capital
restructuring through mergers / acquisitions and other measures in the
best business interests.
There should be constant and continual up gradation of technology in the
Banks, benefiting both the customer and the bank. Banks may enter into
partnership among themselves for reaping maximum benefits, through
consultations and coordination with reputed IT companies.
The skills of bank staff should be upgraded continuously through
training. In this regard, the banks may have to re-look at the existing
training modules and effect necessary changes, wherever required.
Seminars and conferences on all relevant and emerging issues should be
encouraged.
Banks will have to set up Research and Market Intelligence units within
the organization, so as to remain innovative, to ensure customer
satisfaction and to keep abreast of market developments. Banks will
have to interact constantly with the industry bodies, trade associations,
farming community, academic / research institutions and initiate studies,
pilot projects, etc. for evolving better financial models.
5.2 Conclusion
FSBL have introduced a new dimension in the field of innovative and
benevolent banking in our country. The bank has successfully made a
positive contribution to the economy of Bangladesh with in very short period
of time. Its profit is gradually increasing.
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It plays a great role in collecting scattered Deposit, Loan settlement and
International Trade etc. The Bank ensures quality services to the customers.
For better growth and healthy economic position, it should introduce new
and lucrative long-term credit schemes especially for new investors andschemes for poverty alleviation like micro credit.
We hope FSBL do more work for socio-economic development besides
there banking business. To keep pace with ever-changing uncertain domestic
business environment and face the challenges of revised global economic
scenario, the bank should be more pro-active and responsive to introduce
new marketing strategy to hold the strong position in home and abroad.
I wish continuous success and healthy business portfolio of FSBL Agrabad
Branch, Chittagong.
BIBLIOGRAPHY
Books:
1. Principles Of Managerial Finance By
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Lawrence J. Gitman
2. Financial Management By
Brigham & Ehrhardt
3. Strategic Management By
Pearce & Robinson
Manual:
4. First Security Bank Limited Manual.
5. Annual Report Of First Security Bank Limited.
6. The website of First Security Bank Limited (www. first securitybank.com)
7.Various leaflets of the Bank.
8.Daily affairs of FSBL AgrabadBranch.9.Previous years internship report.
10. Iqbal Kabir Mohon- Modern Banking.
KEY WORD and SPECIAL TERMS
EXIM Export Import Bank of Bangladesh LimitedCD Current DepositSB Savings BankSTD Short Term DepositPO Pay-Order
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TT Telegraphic TransferMT Mail TransferDD Demand DraftIBC Inward Bills for CollectionOBC Outward Bills for CollectionSOD Secured OverdraftCC(H) Cash Credit (Hypo)CC(P) Cash Credit (Pledge)ECC Export Cash CreditDA Documents Against AcceptanceDP Demand Promissory NotePAD Payment Against DocumentLIM Loan Against Imported MerchandiseLTR Loan Against Trust ReceiptsLBP(D) Local Bill Purchase by Documents
LBP(C) Local Bill Purchase by CleanLBP(F) Local Bill Purchase by ForeignPC Packing CreditMC Micro CreditLG Letter of GuaranteeIRC Import Registration CertificateERC Export Registration CertificateSTA Special Trading Arrangement