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BASIC Bank Ltd.

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Basic Bank Limited

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BASIC Bank Ltd.Chapter 1: Introduction

1.1 Back Ground of the Report:

Free market economy is now world’s concern. Banks are key financial institutions that

play a vital role in the country’s economy. The present economic state of Bangladesh

demands immediate development of financial institutions. To keep pace with this

situation, banks need executives with modern banking knowledge. To supply well-

versed graduates, BIBM is conducting Masters in Bank Management (MBM) program

with the recommendation of World Bank & under direct supervision of Bangladesh

Bank. To equip them, “Practical Orientation in Banks” is a part and parcel of about 3

months duration. Under this system, I was sent to BASIC Bank Limited to familiarize

with day to day affairs of the bank from 7 th October 2001 to 27th December 2001. This

report has been prepared in the light of practical as well as theoretical knowledge. Also it

is prepared under the guidance of the core teacher and overall supervision of the Program

Director.

1.2 Objectives of the Report:

The prime objectives are –

To fulfill the course requirement of MBM Program;

To acquaint with day–to–day functioning of service oriented banking

business;

To have practical exposure in banks that helps a lot to understand the future

courses of the program.


BASIC Bank Ltd.1.3 Methodology of the study:

Methodology includes direct observation, face-to-face discussion with employees of

different departments, study of files, circulars, etc. and practical work. In preparing this

report, both primary and secondary sources of information have been used.

For collecting primary data, I had to ask the respective officer (s). Others are like –

Direct communication with the clients;

Exposure on different desk of the bank;

File study.

The secondary sources are –

Annual Report of BASIC Bank Ltd.;

Periodicals published by the Bangladesh Bank;

Different publications regarding banking functions, foreign exchange operation, and

credit policies.

I have covered both head office and Mirpur branch of BASIC Bank. But the body of the

report is prepared in the light of the branch. Only International Department (ID) and

project proposal appraisal part is covered in the head office.

1.4 Limitations of the study:

Despite all out co-ordination from the bank officials, I faced some limitations. The

notable some of these are as under:

Learning all the banking functions within just two and half months was really tough.

Another limitation of this report is Bank’s policy of not disclosing some data and

information for obvious reason, which could be very much useful.

1.5 Organization of the Report:


BASIC Bank Ltd.

This report is mainly divided into two (2) broad parts. Part One has two chapters. These

are as follows-

Chapter-1 covers with background, objectives, methodology and limitations of the

study.

Chapter-2 is concentrated on overview of the bank as well as the branch and also their

performance analysis.

Part Two contains practical experiences gathered during the orientation program. It is

again divided into three chapters. These are as follows-

Chapter-3 includes Credit Department. Experiences cited in the light of both Branch and

Head Office operations of loans and advances.

Chapter-4 contains General Banking operations, observed in the Mirpur Branch.

Chapter-5 includes Foreign Exchange Department. Report is prepared in the light of

branch’s foreign exchange dealings.

And Chapter-6 consist of Conclusion.


BASIC Bank Ltd. CHAPTER 2 OVERVIEW OF

THE BANK AND BRANCH

2.1 BACKGROUND INFORMATION

Bangladesh Small Industries and Commerce (BASIC) Bank limited1 is a banking

company registered under the Companies Act 1913. It was incorporated under the Act on

the 2nd of August 1988. The bank started its operations from the 21st of January 1989. It is

governed by the Banking Companies Act 1991. The bank was established as the policy

makers of the country felt the urgency for a bank in the private sector for financing

Small-Scale Industries (SSIs). At the outset, the bank started as a joint venture enterprise

of the BCC Foundation with 70 percent shares and the Government of Bangladesh

(GOB) with the remaining 30 percent shares. The BCC Foundation being nonfunctional

following the closure of the BCCI, the Government of Bangladesh took over 100 percent

ownership of BASIC bank on 4th June 1992. Thus, the bank is state-owned. However, the

bank is not nationalized; it operates a private bank as before.

BASIC bank is unique in its objectives. It is a blend of development and commercial

banks. The Memorandum and Articles of Association of the bank stipulate that 50

percent of loanable funds shall be invested in small and cottage industries sector.

1 Bank has renamed as Bangladesh Small Industries and Commerce (BASIC) Bank Limited. Earlier it was Bank of Small Induetries and Commerce (BASIC) Bangladesh Limited.


BASIC Bank Ltd.CAPITAL POSITION

Authorized capital Tk. 500 millionPaid up capital Tk. 300 millionTotal Reserve Tk. 397.77 million

2.2 MAIN FUNCTIONS

The Bank offers:

Term loans to industries especially to small-scale enterprises.

Full-fledged commercial banking service including collection of deposit, short

term trade finance, working capital finance in processing and manufacturing

units and financing facilitating international trade.

Technical support to Small Scale Industries (SSIs) in order to enable them to

run their enterprises successfully.

Micro credit to the urban poor through linkage with Non –Government

Organizations (NGOs) with a view to facilitating their access to the formal

financial market for the mobilization of funds.

In order to perform the above tasks, BASIC works closely with its clients, the regulatory

authorities, the shareholders (GOB), banks and other financial institutions.


BASIC Bank Ltd.

2.3 CORPORATE STRATEGY

Financing establishment of small units of industries and businesses and facilitate their growth

Small Balance Sheet size composed of quality assets

Steady and sustainable growth

Investment in a cautious way

Adoption of new banking technology

2.4 ORGANIZATIONAL GOALS

To employ funds for profitable purposes in various fields with special

emphasis on small-scale industries

To undertake project promotion to identify profitable areas of investment

To search for newer avenues for investment and develop new products to

suit such needs

To establish linkage with other institutions which are engaged in financing

micro enterprises

To cooperate and collaborate with institutions entrusted with the

responsibility of promoting and aiding SSI sector.

2.5 ORGANIZATIONAL STRUCTURE

To achieve its organizational goals, the bank conduct its operation in accordance with the

major policy guidelines laid down by the Board of Directors, the highest policy making

body. The management looks after the day to day operation of the Bank.


BASIC Bank Ltd.Management Hierarchy of BASIC Bank Limited:-


BASIC Bank Ltd.Source: Personnel Department, Head Office, BASIC Bank Limited

A) Board of Directors:

The Government holds 100 percent ownership of the bank. The Government of

Bangladesh appoints all the Directors of the Board. The Secretary of the

Ministry of Industries is the Chairman of the Bank. Other Directors of the

Bank are high government and central bank executives.

The managing director is an ex-officio member of the board of directors. There

are at present 7 (seven) Directors including the Managing Director.

B) Management:

The Managing Director heads the management. Two General Managers and

departmental heads in the Head Office assist him. BASIC is different in respect of

hierarchical structure from other banks in that it is much more vertically

integrated as far as reporting to the Chief Executive is concerned. The Branch

Managers of the Bank report directly to the Managing Director and, for functional

purposes, to the Heads of Departments. Consequently, quick decision making in

disposal of cases is ensured.

2.6 RESOURCES AND CAPABILITIES

BASIC bank is well prepared to and capable of meeting the demand for a

broad range of banking services. It has got adequate resources, both human

and physical, to provide the customers with the best possible services.

Physical and Technological Resources

A great deal of investment for developing the physical resource base of the Bank

has been made. BASIC has its presence in all the major industrial and commercial


BASIC Bank Ltd.hubs of Bangladesh in order to cater to the needs of industry and trade. At present,

there are twenty five conveniently located branches throughout Bangladesh.

There are eight branches in the capital city of Dhaka, six in Chittagong and one

each in Savar EPZ, Narayangonj, Narshingdi, Rajshahi, Saidpur, Bogra, Khulna,

Jessore, Sylhet, Moulvibazar, and Comilla.

Major features of these branches are:

Fully computerized accounts maintenance

Well decorated and air conditioned facilities

A fully operational computer network which is currently being implemented.

The work of Local Area Network (LAN) and Wide Area Network (WAN)

installation having reliable and secured communication between the

branches and the Head Office is in progress to facilitate any Branch Banking

and ATM services.

Money counting machine for making cash transactions easy and prompt.

Fifteen out of 25 branches are authorized dealers of foreign exchange. This

facilitates speedy disposal of transaction of exports and import trade.

A group of professional bankers to render personalized services.

2.7 MONETARY / FINANCIAL RESOURCES

Like any other financial intermediaries, BASIC is no exception in performing its core

functions viz. mobilization of fund and utilizing such fund for profitable purposes.

A. Mobilization of fundThe main sources of fund for BASIC are:

i. Deposit

ii. Borrowing


BASIC Bank Ltd.i. Deposit

Deposit is the mainstay of BASIC Bank’s sources of funds. The following

includes the usual types of deposits of the bank:

a) Current Deposit

b) Savings Deposit

c) Term Deposit

ii. Borrowing

Apart from deposit, BASIC received funds from:

a) Bangladesh Bank

b) Asian Development Bank (ADB)

c) KfW (Kreditanstalt fur Wieder-aufbau, Credit Institution for Reconstruction), a

German Development Bank

All of these funding sources are for relatively longer period. Receiving the credit lines

from ADB and KfW has been recognition of BASIC’s highly satisfactory performance.

B. Utilization of FundBASIC utilizes its funds in accordance with its organizational goals and corporate

strategy. Main use is for lending to industrial and trade sectors. Maintenance of cash and

statutory liquidity reserve with the Bangladesh Bank covers 20 percent of demand and

time liabilities. Placement of funds in NOSTRO ACCOUNTS to handle foreign trade and

investment in money market is also done as usual.

2.8 HUMAN RESOURCES

BASIC bank has a well-diversified pool of human resources, which is composed of

people with high academic background. As of 31st December 2000, the total employee

strength is 453. The strength is 345 excluding the menial staff. Most employees are

comparatively young in age yet mature in experience. And also their level of education

comprises 55.07 % post-graduate, 42.90 % graduate and rest under graduate. BASIC has


BASIC Bank Ltd.been investing its resources with a view to developing an efficient and professional work

force. Two approaches are mainly in this regard: Training and Fresh Recruitment.

Training: Training, on a regular basis, is being imparted to employees of both

management and non-management levels. During the last three years, a total of 335

officers were provided with training in various fields, home and abroad.

Fresh Recruitment: The bank follows a strict recruitment policy in order to ensure that

only the best people are recruited. The bank, so far, has recruited four batches of entry-

level management staff, all of whom have excellent academic background.


BASIC Bank Ltd.

CHAPTER 3 GENERAL

BANKING

General Banking Department performs the core functions of the bank. It deals day to day

transactions. It takes the deposit from the customer and meets the customer demands for

cash by honoring their checks. Broadly, it has the following core heads-

1. Accounts Opening Section2. FDR And Ancillary Services Section3. Local Remittance Section4. Collection And Clearing5. Cash Section6. Accounts Section.

3.1: ACCOUNTS OPENING SECTION

Banker-customer relationship begins with the opening of an account by the customer. Opening of an account binds the same into a contractual relationship. But the selection of customer is very crucial. In fact, fraud and forgery of all kinds start by opening of an account by the customer (s). So, the bank takes extra care in its selection. One of the basic functions of commercial banks is to accept deposits. For accepting deposits both demand and time, BASIC Bank Mirpur branch offers the following types of accounts-

A. Demand deposits (Withdraw able on demand)1. Saving Bank Account2. Current Account

B. Time deposits (Payable at a fixed date or after a period of notice)

1. Fixed Deposit Receipt (FDR)

2. Short Term Deposit (STD)

3.2 TYPES OF ACCOUNTS WITH TERMS AND CONDITIONS

This part covers only following types of accounts-

1. Savings Bank Account

2. Current Account


BASIC Bank Ltd.3. Short Term Deposit (STD) Account

Savings Bank Account

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

Minimum opening deposit of Tk.1000/= is required;

Check book issuing balance is also the same (Tk. 1000/=);

Withdrawal amount should not be more than 1/4th of the total balance at a time

and limit twice in a week;

Interest rate is 7.5% including 10% excise duty on interest rate. Interest paid

twice in a year depending on monthly minimum balance. When money is

deposited within 5 of the following month, then it is counted as monthly

minimum balance. If the interest amount is more than Tk. 200 or more, the

bank is paid the amount to the customer. Otherwise it is treated as Bank’s

Shadow Profit;

Can open the A/c individually or jointly. In case of joint a/c, Joint signature is

required if not authorized otherwise;

Minor (For withdrawal purpose), lunatic, insolvent, pardanshin women (Not

mandatory) can not open such type of account.

Current Account

Current account is purely a demand deposit account. There is no restriction on withdrawing money from the account. It is basically justified when funds are to be collected and money is to be paid at frequent interval. It is most suitable for private individuals, traders, merchants, importers and exporters, mill and factory owners, limited company’s etc. Some Important Points are as follows-

Minimum opening deposit of TK.5000/- is required;

There is no withdrawal limit. But in case of large amount say 2 lac or more,

bank requires one day before notice;

No interest is given upon the deposited money;


BASIC Bank Ltd. The Banker is under an obligation to repay these deposits on demand. So, they

are called demand liabilities of a Banker.

The primary objective of such account is to save big customers like

businessmen, join stock companies, public authorities, etc. from the risk of

handling a lot of cash.

The cost of providing current account facilities is considerable to the Bank as

they make payments and collect the bills, drafts, and checks for any number of

times daily. The Bank is, therefore, do not pay interest on current deposits. At

the same time, BASIC bank charges Tk. 200 as Incidental fee;

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

Minor can not open such type of account;

Account holder can enjoy SOD or even TOD facility.

Chart-Deposit Mix as on

November 11, 2006 (% of total deposits)


BASIC Bank Ltd.

STD (Short Term Deposit) Account

Normally various big companies, organizations, Government Departments keep money in

STD account. Frequent withdrawal is discouraged and requires prior notice. In BASIC,

customers usually give an instruction that their current account will be debited whenever

its deposited amount crosses a certain limit and this amount will be transferred to the

STD account. The deposit should be kept for at least seven days to get interest. The

interest offered for STD is less than that of savings deposit. Interest is calculated based on

daily minimum product and paid two times in a year. Interest rate is 5.75% including

10% excise duty on interest rate.

3.3 COMMON FORMALITIES REQUIRED FOR EVERY ACCOUNT

Duly filled up Account Opening Form.

Introducer’s signature on Account Opening Form to be verified by Manager under

full signature.

Two copies of passport size photograph of account opener(s) duly attested by the

introducer.

Note: Mandate or authority form filled up by an individual (s) or account openers are

to be obtained if the customer wants to authorize another person to operate an account on

behalf of him/ them.

3.3.1 DOCUMENTS REQUIRED FOR EACH ACCOUNT SEPARATELY

In case of Proprietorship Firm- Declaration of proprietorship. Trade licence. Tax Identification No (TIN) directed by Bangladesh Bank.


BASIC Bank Ltd.

In case of Partnership Firm- Account must be opened in the name of the firm. The firm should describe the names and addresses of all partners. Board Resolution signed by all partners to open the A/C. Photocopy of partnership deed duly attested by notary public. Letter of partnership duly signed by all partners. Trade licence from municipality. Tax Identification No (TIN) directed by Bangladesh Bank.

In case of Private Limited Join Stock Company- Memorandum of Association and Articles of Association duly certified by

Chairman or Secretary. Board Resolution duly certified by Chairman/ Secretary authorizing to open

the A/C with the bank and mentioning the name of the person (s) who will operate the A/C as per provisions of Articles of Association.

Certificate of incorporation duly certified by Chairman or Secretary. List of all Directors with Designation, Address & Specimen Signature duly

certified by Chairman or Secretary (Form XII). Latest copy of Balance Sheet Power of attorney. Tax Identification No (TIN) directed by Bangladesh Bank.

In case of Public Limited Join Stock Company- Photocopy of Registration certificate certified by Chairman or Secretary. Memorandum of Association and Articles of Association duly certified by

Chairman or Secretary. Board Resolution duly certified by Chairman/ Secretary authorizing to open

the A/C with the bank and mentioning the name of the person (s) who will operate the A/C as per provisions of Articles of Association.

Certificate of commencement duly certified by Chairman or Secretary. List of members of Managing/ Executive duly certified by Chairman or

Secretary. Tax Identification No (TIN) directed by Bangladesh Bank.


BASIC Bank Ltd.In case of Societies/Clubs-

Certified copy of Registration certificate under the societies Registration Act, 1962.

Certified copy of Resolution for opening and operation of account. Certified copy of Bye-laws & Regulations/ Constitution. Power of Attorney.

In case of Cooperative Society-

Copy of Bye-law duly certified by the Co-operative officer. Up to date list of office bearers. Resolution of executive Committee as regards of the account. Certified copy of Certificate of Registration issued by Registrar, Co-operative

Societies.

In case of Non-Government College/ School/ Madrasha, - Up to date list of the Governing Body/ Managing Committee. Copy of Resolution of the Governing Body/Managing Committee authorizing

opening and operation of the account duly certified by Gazetted Officer. In case of Minor’s account-

Putting the word “ MINOR” after the title of the account. Recording special instruction of operation of the account. The account opening form is to be filled in and signed by either of the parents

or the legal guardian appointed by the Court of Law & not by the Minor.

Account Opening Procedure in a flow chart:


Duly filled-up prescribed Application Form by the Applicant with introductory

reference by an account holder

Duly fill up the specimen signature card in front of a concerned person by the

applicantVerify the introductory reference and examine the documents by the authorized

personIssue the deposit slip and make deposit in cash. No cheque or draft is

acceptable.Issue one cheque book & a pay- in-slip

bookACCOUNT IS OPENED

BASIC Bank Ltd.

3.4 ISSUING CHEQUE BOOK

For New and Old Account

Fresh checkbook is issued to the account holder only against requisition on the

prescribed application form. In case of old account, requisition made on the

prescribed requisition slip attached with the checkbook issued earlier. Generate a

security no randomly for every check leaf by Manager or authorized person. Prepare

the instrument with respective security no on the back of each leaf and signed by the

authorized person. Make necessary entries in Check Issue Register. Finally issue the

checkbook for client (s).

For Duplicate Check Book

Duplicate checkbook in lieu of lost one is issued only when an A/C holder personally

approaches to the bank with an application agreeing to indemnify the bank for the lost

check book. Verify signature of the A/C holder with the specimen signature card.

Series number of lost checkbook is recorded in the stop payment register and caution

should be exercised to guard against fraudulent payment.

3.5 ACCOUNT ENQUIRY

A customer can obtain the statement of his A/C by submission of an application in

prescribed balance enquiry receipt. Normally it is supplied two times in a year. In

addition, customer can know his current deposit position informally.

3.6 TRANSFER OF AN ACCOUNT

Account holder may transfer his account from one branch to another. For this, he/she must apply with proper reason to the manager of the branch where he is maintaining account. Manager then requests to the manager of that branch where the A/C holder wants to transfer his account. Besides, he also sends original copy of account opening


BASIC Bank Ltd.form and SSC (Specimen Signature Card) and photocopy of application for transferring the account with the balance remained in the account.

3.7 CLOSING OF AN ACCOUNT

An account may close-

When the customer desirous to close the account.

When the account is inoperative for a long time.

In case of customer’s death, insanity or insolvency.

When the court on that particular A/C issues Garnishee Order.

To close an account, the checkbook is to be returned to the bank. BASIC bank charges

Tk. 200/= for the same by debiting the amount from his account and rest amount is then

paid to the customer. Necessary entries are given to the account closing register and

computer. Finally make sure that A/C holder is completely free from all dues.

Table- Excise Duties Applicable: For All Kinds of Deposits

Sl. No. Deposit Amount Limit Charge

1. Up to 10,000 Zero

2. 10,001 to 1,00,000 Tk. 120

Sl. No. Deposit Amount Limit Charge

3. 1,00,001 to 10,00,000 Tk. 250

4. 10,00,001 to 1,00,00,000 Tk. 500

5. 1,00,00,001 to 5,00,00,000 Tk. 2500

6. 5,00,00,001 and above Tk. 5000

Source: SRO no.137-Aine/96/248-excise, date 28-7-96, NBR


BASIC Bank Ltd.

3.8: FDR AND ANCILLARY SERVICES SECTION

3.8.1 FIXED DEPOSIT RECEIPT (FDR)

FDR AccountFixed deposits are time deposits or time liabilities. These are the deposits in which an

amount of cash is deposited in Bank for a fixed period specified in advance. Before

opening a Fixed Deposit Account a customer has to fill up an application form which

contains the followings-

Amount in figures Beneficiary’s name and address Time period Rate of Interest Date of Issue Date of maturity How the account will be operated ( singly or jointly) Signature (s) F.D.R. no. Special instructions (if any)

After fulfilling the above information and depositing the amount, FDR account is opened

and a FDR receipt is issued and it is recorded in the FDR Register which contains the

following information-

FDR account no. FDR (Fixed Deposit Receipt ) no. Name of the FDR holder with address Maturity period Maturity date Interest Rate

In case of FDR Account, the bank does not have to maintain a cash reserve. So, BASIC bank offers a high interest rate in these

accounts. The revised interest rates for FDR effected from November 05, 2001 followed by BASIC are-


BASIC Bank Ltd.a) For 3 months & above @ 8.25 %

b) For 6 months & above @ 8.50 %

c) For 12 months & above @ 8.75 %

d) For 24 months & above @ 9.25 %

In case of encashment of FDR [say for Tk.X ] on maturity, following accounting

treatments are given-

Interest on FDR A/C -------------------------------Cr. [say Tk. P]

Excise Duty on FDR -------------------------------Dr [say Tk. Q]

10 % Income Tax on interest --------------------- Dr. [say Tk. R]

FDR A/C ---------------------------------------------Dr. [Tk. (X+P-Q-R)]

Cash A/C ---------------------------------------------Cr. [Tk. (X+P-Q-R)]

If the customer wants to draw the interest only, then the following entries are given –

Interest on FDR A/C --------------------------------Dr.

Cash A/C ---------------------------------------------Cr.

Renewal of FDR

Customer supposes to inform the bank in writing 15 days before the maturity date for

encashment. If not, bank normally renews the amount just after the maturity date.

Renewal will be for previously agreed maturity period.

Loss of FDR

If the instrument is lost from the possession of the holder, the holder is asked to fulfill

the following requirements-

a) Holder should inform the bank immediately

b) Record a GD (General Diary) in the nearest Police Station.

c) Furnish an Indemnity Bond

On fulfilling the above requirements, BASIC bank is then issued a duplicate FDR.

Table- Pre-mature Encashment of FDR


BASIC Bank Ltd.Period Pre-mature Encashment

Interest Rate

013 months

Before 30 days No Interest

Every completed calendar months

SB (Savings Bank) Rate

026 months

Before 3 months SB RateBefore maturity but completes 3 months

Interest payable at 3 months Rate for a period of 3 months

0312 months

Before 3 months SB RateBefore expiry of 6 months

Interest payable at 3 months rate for a period of 3 monthsAfter expiry of 6 months but before maturity

Interest payable at 6 months rate for a period of 6 months04 24 monthsBefore 3 months SB RateAfter expiry of 6 months but before maturity

Interest may be allowed at 6 months rate for a period of 6 months


BASIC Bank Ltd.After expiry of 12 months but before maturity

Interest may be allowed at 12 months rate for a period of 12 monthsSource: Mirpur Branch, BASIC Bank Ltd.

3.9 SANCHAYAPATRA BASIC bank Mirpur branch is unique for selling Sanchay patra to its customers as its

ancillary services on behalf of govt. Sanchay patra is issued by Jatio Shanchay Bureau,

guided by Bangladesh Bank. It is received from Bangladesh Bank (BB). People

purchasing these bonds by depositing money in this branch and payment are made on

maturity to customers from this branch only. Every transaction is reported to BB. Within

72 hours, otherwise penalty is imposed. Money is realized from BB after making

payment to customer. This branch gets 1% commission for this service. As a whole

following things are conducted by this section-

Selling of Shanchaypatra Making payment on maturity Reporting to Bangladesh Bank Calculation of interest Accounting.

Details of Shanchaypatra

Table- Showing different types of shanchaypatras

Sl Types Limit Interest1. 8 years Pratirakha

Shanchay PatraSingly- 15 Lac. After 1 year 8.75% and per yr. 1%

increases and on maturity 15.75%.Jointly- 30 Lac.2. 5 years Bangladesh

Shanchay PatraSingly- 15 Lac. After 1 year 8.50% and per yr. 1%

increases and on maturity 12.50%.Jointly- 30 Lac.


BASIC Bank Ltd.3. 5 years Investment

Scheme on 6 months restSingly- 10 Lac. Interest rate - 12%

4. 3 years Investment Scheme on quarterly rest

Singly- 20 Lac. Interest rate - 12%Jointly- 40 Lac.

5. 5 years Paribar Shanchay Patra

Singly- 10 Lac. Interest rate- 11.92%. For premature withdrawal Postal Shanchay Bank Simple Interest Rate is applicable.

Source: Circular letter no. BASIC/HO/CAD/2001/6814 date 30.10.2006

3.10 LOCKER SERVICE

BASIC Bank Mirpur branch is also unique for providing locker service to its customers.

People usually keep their valuables for securing purpose.

Terms and Conditions

Renter must have an account either current or deposit.

All rentals are payable annually in advance.

Lockers will be rented for a period of one year in the first instance and will

automatically be renewed thereafter from year to year until terminated.

In order to terminate the hire written notices must be given at least one week

period to the expiry date of the hire and the locker with its keys must be

surrendered to the bank.

The renter shall have access to the locker at anytime during the Bank’s business

hours.

Lockers may be hired in two or more names but not exceeding four and in such

cases the renters must give explicit instructions as to whether access is to be

allowed to either renters singly or two or more of their member jointly.


BASIC Bank Ltd. If the renter loses the keys of the locker the bank must be notified without delay.

In such an even all expenses the renter shall pay regarding breaking the locker and

substituting a fresh lock and keys.

In respect of the hire of safe deposit lockers the relationship between the bank and

the renter is that of a licensor and licensee and not that of banker and customer.

Table-4.4: Locker service at a glance

Type of Locker Size (in cm.) Total No. Rented Annual Charge

Small 58 X 19 X 12.5 90 06 Tk. 1200

Medium 58 X 35.5 X 12.5 45 08 Tk. 1800

Note: Tk. 1500/= (Refundable) is applicable for all kinds of lockers as security

charge.

3.11: LOCAL REMITTANCE SECTION

Cash remitting from one place to another is risky. So, Banks remit funds on behalf of the

customer (s) to save them from any awkward happening through network of their

branches. There are three modes of remitting funds. These are–

Pay Order (PO)

Demand draft (DD)

Telegraphic Transfer (TT)

Call Deposit Receipt (CDR).

3.11.1 PAY ORDER (PO)

Pay order is an instrument, used to remit fund within a clearing zone. Unlike cheque,

there is no possibility of dishonoring PO. The PO can only be encashed through the

branch that has issued the instrument.


BASIC Bank Ltd.

Pay Order Issuing Process

For issuing a PO, following formalities are to be maintained. These are-

Duly filled up the application form by the customer.

Deposit money either in cash or by cheque with necessary charges.

Prepare the instrument and make necessary entries in the Bills Payable

Register where payee’s name, date, PO no. etc are noted.

Deliver the instrument to the customer after scrutinized and approved by

authority by taking signature of the customer on the counterpart.

PO Working Procedure, Shows in a Flow Chart


Purchaser has an account with BASIC and fills up the relevant form with a credit voucher Purchase the PO in favor of a person or

company

Deposit the PO in his account with BASIC or another Bank by the beneficiary

The collecting Banker presents the PO to paying Banker through clearing house

Collecting Bank sends an IBDA

Payee’s account credited with collecting Banker

Payee’s account credited with collecting Banker

If any A/C with BASIC

If deposited to another bank

BASIC Bank Ltd.Accounting Entry for Pay Order

Drawer’s/Issuer’s A/C ----------------------------Debit

Bills Payable (PO) A/C----------------------------------Credit

Income A/C Commission----------------- --------------Credit

Income A/C Postage--------------------------------------Credit.

Payment order is a current liability on the part of bank, which is required to be discharged

by the beneficiaries against payment in cash or through an account.

Modes of Purchasing Pay Order

a) By cash

b) By account

c) By transfer of money.

Payment of Pay order

As the PO issued by the bank is crossed one it is not paid over the counter. On the

contrary, this amount is transferred to the payees’ account. To transfer the amount the

payee must duly stamp the PO. The a/c treatments will be-

Bills Payable A/C----------------------Debit

HO A/C ‘Y’ branch--------------------------Credit.

Note: Before payment is made, it is duty for issuing bank to examine whether

endorsement was given by the collecting bank or not. If not, dishonor the instrument and

marking the instrument ‘Endorsement Requirement’.


The Payee deposits it to his Collecting Banker

Collecting Bank sends the P.O. to the issuing Bank through clearing house arrangement

The Pay Order is passed and cancelled in the deposit section Payment is given and is registered

in Incoming PO Payment Register.

BASIC Bank Ltd.Cancellation of PO

The following procedure is followed to refund the pay order by cancellation:

1. Submit written request to refund the pay order attaching therewith the

original PO.

2. Verify purchaser’s signature with the original application form on record.

3. Manager/ authorized person’s prior permission is required before refunding

the amount of pay order.

4. Pay order should be affixed with a stamp ‘cancelled’ under proper

authentication and the authorized officer’s signature on the pay order.

5. No charge is created for cancellation. Refund only the pay order amount.

6. The original entries are to be reversed with proper narration.

7. Record the cancelled pay order in the Pay Order Issue Register.

Loss of Pay Order

If the instrument is lost, the holder is asked to fulfill the following requirements-

a) Holder should inform the bank immediately.

b) Record a GD (General Diary) in the nearest Police Station.

c) Furnish an Indemnity Bond.

On fulfilling the above requirements, BASIC bank is then issued a duplicate pay order

and marked ‘In lieu of’. Banker will also mark ‘stop payment’ on the Bills Payable

Register.

Collection of Pay Order

If the payee is a customer of Mirpur branch, he will deposit it for collection. Then the

branch gives necessary endorsement as a collecting bank. Then the instrument places the

issuing bank through clearing house.

PO Charge

A commission of TK.40/= is charged for a pay order.


BASIC Bank Ltd.

3.11.2 DEMAND DRAFT (DD)

DD is called ‘Banker’s Draft’. It is an instrument, issued by a particular branch, drawn on

another branch of the same bank, instructing to pay a certain sum of money. It is very

popular instrument for remitting fund from one corner of a country to another. DD is

issued in favour of a customer who maintains an a/c with BASIC Mirpur branch. It can

be issued against Cash or Cheque. If DD amount is more than Tk.50000/=, a test code is

given on IBCA. The a/c treatments will be-

When DD is issued:

Cash/Customer A/C……………………Debit

H/O A/C ‘X’ branch…………………………Credit

Income A/c commission………………..……Credit.

After giving these entries an Inter Bank Credit Advice (IBCA) is prepared which contains

the controlling number, depicted that the branch is credited to whom it is issued. An

IBCA implies the following entries-

H/O A/C issuing branch………………Debit

Drawn on branch……………………………Credit.

DD Working Procedure: Shows in a Flow Chart


Applicant has an A/C with BASIC bank

He fills up the relevant form with a credit

voucher for the Bank

DD is handed over the customer where paying Bank is mentioned and payment will be made

from another Bank

An IBCA along with photocopy of DD is sent to the paying

Bank.

If DD comes to the Bank on which it is drawn, the Bank

honors it.

BASIC Bank Ltd.Payment Process of DD

After receiving the instrument, the IBCA lodgment is done by the branch. Necessary

entries are given in DD Inward Register. Controlling number of the IBCA should match

with the serial number of this register. The following accounting entries are made in

following cases-

When IBCA comes

H/O A/C Issuing branch………………………Dr

DD Payable A/C ……………………..……….Cr

When instrument comes

DD payable A/C.……………………………...Dr

Customer’s A/C..………………………………Cr

If advice does not come but instrument comesSuspense A/C………………………………….Dr

Party A/C………………………………………Cr

When advice comes

HO A/C Issuing Branch ……………………….Dr

Suspense A/C…………………………………..Cr

The banker even on receiving instructions from the remitter cannot stop the payment of

the instrument. Stop payment can be done in the following cases-

i) Loss of draft before endorsement: In this case, “Draft reported to be lost,

payee’s endorsement requires verification” is marked.

ii) Loss of draft after endorsement: In this case, the branch first satisfies

itself about the claimant and the endorsement in his favor.

Cancellation of DD


BASIC Bank Ltd.To cancel an issued DD, the client has to submit an application. Issuing branch then

sends an Inter Branch Debit Advice (I.B.D.A.) to the drawn branch against previously

issued Inter Branch Credit Advice (IBCA). After that the following entries are given-

H/O A/C drawn on branch-------------------------Dr.

Client’s A/C ----------------------------------------Cr.

Issuing of Duplicate DD

If the customer wants a duplicate DD, he then is asked to do the following formalities-

1. Throwing an application immediately by the original DD holder.

2. Making a General Diary (GD) in the nearest Police Station.

3. Furnishing an Indemnity Bond.

4. Put a ‘CAUTION’ mark in the register.

5. Inform to the Head Office by the issuing branch.

6. Inform all the branches by the HO for stop payment.

7. Issue a new DD (Put the same DD no. and mark DUPLICATE).

DD Charge

Commission @ 0.15% but minimum Tk.50/=.

Postage charge Tk. 20/= (Fixed).

DD cancellation charge Tk. 50/= (Fixed).

3.11.3 TELEGRAPHIC TRANSFER (TT)

Sometimes the remitter of the funds requires fund immediately. In that case, the banker is

requested to remit the funds telegraphically. Different modes are Telegram, Telephone,

Telex, Fax. Telegraphic Transfer is the most rapid and convenient but expensive method.

The drawer and the payee should have accounts with BASIC bank. TT is issued against

cash, cheque, and letter of instruction.

Flow Chart Shows How TT Works (Outward)


Applicant has an account with BASIC

Applicant fills up the relevant form with a credit voucher (Income A/C) for the Bank.

Text of telex is written or the relevant

information along withTest code is sent to the

payee Bank through fax or telephone.

Another 2 copies of the text is sent through courier to the Payee’s Bank.

One copy from drawer’s Bank and another from Payee’s Bank are sent to the reconciliation department of HO

Before that the Payee’s Bank decode the test and if test is agreed

The reconciliation department reconciles two copies and detects the fraud or forgery if any

Payee’s account credited

BASIC Bank Ltd.

Procedure for Issuing TT

Following procedure is followed for issuing a TT.

a) Deposit money by the customer along with application form.

b) In receipt of money a cost memo is given to the customer containing TT

serial number which informs the awaiting party of the paying branch by the

customer.

c) Tested telex message is prepared where TT serial number, notifying party’s

name is mentioned.

d) The telex department confirms transmission of the message.

e) Necessary entry is given to the ‘TT Outgoing Register’. Entries are as

follows-

Cash/Respective A/C (Issuer)……………..Dr

HO A/C Paying branch………….………...Cr (Principal amount)

Income A/C (Commission)………………...Cr

Procedure for Incoming TT

After receiving the telex, it is authenticated by tested. TT serial number is verified with

the ‘TT Incoming- Concern branch’ Register. Voucher is released in this regard giving

the following accounting entries-


BASIC Bank Ltd.HO A/C Paying branch------------------------------Dr

Customer A/C----------------------------------------Cr.

TT Charge

Commission @ 0.15% of the Principal Amount but minimum Tk.200/=.

Telex charge Tk. 50/= (Fixed).

3.11.4 CALL DEPOST RECEIPT (CDR)

CDR is also an instrument, issued by a particular branch, drawn on another branch of the

same bank, instructing to pay a certain sum of money not over the counter to a certain

person or his order. It is as like as Pay Order (PO), but main difference is that PO is

treated as bills payable and CDR is treated as sundry deposit. From banker’s point of

view, it is always desirable but its practice is limited. Only Tk. 40/= (Fixed) is charged

for this facility. If CDR amount is more than Tk.50000/=, a test code is given on IBCA.

When issuing the instrument, accounting treatment will be-

Party A/C-----------------------------Debit

HO A/C drawn on branch----------------Credit.

After receiving the instrument, accounting treatment will be-

HO A/C Issuing branch--------------Debit.

Party A/C------------------------------------Credit.

Besides, Staff and very Valued Customer’s of the bank enjoy Direct Fund Transfer

facility. In this case, no commission is charged.


BASIC Bank Ltd.3.12: COLLECTION AND CLEARING SECTION

COLLECTION

In modern banking the mechanism has become complex as far as smooth transaction and

safety is concerned. Customer does pay and receive bill from their counterpart as a result

of transaction. Commercial bank’s duty is to collect bills on behalf of their customer.

Flow Chart Shows Collection Procedure

After that, the following entries are given and a debit voucher is prepared-

Balance with Bangladesh Bank------------------Debit

Customers’ A/C ----------------------------------------Credit.


‘Received’ seal is stamped on the counterfoil of the pay-in-slip.

Special Crossing in favor of cheque-receiving branch is affixed

on the cheque.NIKASH Posting is made and gives code no.

Segregate cheque from Pay-in-slip.

Give respective endorsement.

Gets total from NIKASH2 and also get total from Pay-in-slip.

If both are same, sort the cheques according to banks.

Get all the schedules from NIKASH2

Affix schedules to the corresponding Bank’s cheques.

BASIC Bank Ltd.

Receiving Cheques For Collection

In BASIC Bank Limited, cheques of its customers are received for collection from

other banks. In case of receiving cheques, following points should be checked very

carefully-

1) The check should not carry a date older than the receiving date for more

than 6 months. In that case it will be a ‘Stale Check’. Again the check

should not be a ‘Post dated’ one.

2) The amount both in words and figures of the pay-in-slip should be the

same and also it should be in conformity with the check’s amount both in

figures and words.

3) The name mentioned both in the check and the pay-in-slip should be the

same.

4) The check must be crossed.

5) Collecting banker must check whether endorsement is done properly or

not.

ENDORSEMENT IN CASE OF

Payee’s A/C will be credited on

realization

Bills for collection

Types of Bills for Collection

i. Outward Bills for Collection

ii. Inward Bills for Collection.

A. Outward Bills for Collection (OBC)


BASIC Bank Ltd.If the bill is beyond the clearing range then it is collected by OBC mechanism. Customer

deposits cheques, drafts etc. for collection, attaching with their deposit slip. Instruments

outside the clearing range are collected through OBC mechanism. A customer of BASIC

bank Mirpur branch is depositing a check say of Janata Bank, Kotchandpur branch,

Jhenidah. Now as a collecting bank, Mirpur branch will perform the following tasks-

Procedure of OBC

a) Depositing the cheque along with deposit-slip

b) Crossing of cheques are done indicating Mirpur Br. as a collecting bank

c) Endorsement “Payee’s A/C will be Credited on realization” is given

d) Entries are given in the Outward Clearing Register.

Collecting bank can collect it either by its branch or by the drawer’s bank . They will

forward the bill to that particular branch. OBC number will give on the forwarding letter.

Now following procedures will take place in case of the following two cases.

Bills Collected through Branch Collecting branch will receive an I.B.C.A. from that particular branch. Accounting

treatment from collecting branch’s point of view will be-

HO A/C concerned branch ......................….Debit

Customer A/C ...........................................…….…Credit

Income A/C on commission/ Postage…………….Credit.

The process of collection is described below:

a) If the bill is drawn on BASIC Bank Mirpur Branch–i. Bills are sent to that branch through mail or courier;

ii. Branch collects the bills and sends an IBCA to that Branch;

iii. Depositor’s account is credited.

b) If the bill is drawn on another Bank and there is a branch of BASIC –i. Branch sends the bill direct to the branch of BASIC by OBC schedule.

ii. Request them to send the proceeds by IBCA and collect the bill.

iii. That branch of BASIC can collect the through clearing house arrangement exists there.


BASIC Bank Ltd.c) If the bill is drawn on another bank but there is no branch of BASIC-

i. Bill is directly sent to that Bank ii. Request them to send a draft in favour of this bank by an OBC schedule.

iii. That bank sends a DD mentioning the Paying Bank

iv. Then the bill is collected through clearing house process.

Balance Sheet Effect

OBC creates asset and liabilities simultaneously for bank. When send for collection, it is

bank’s liability and as well as customer’s liability i.e. banks asset.

Liability head Bills for collection being bills receivable as per contra

Asset head Bills receivable being bills for collection as per contra.

Customers liability A/C…………………………Debit

Bankers liability A/C…………………………………Credit.

After realization (Even if dishonored) Banker’s liability A/C…………………………………Debit

Customer liabilities A/C……………………………………Credit.

After realization the contra is settled. This item is a stock variable of balance sheet at a

particular date.

Balancing

Balancing is done on the banker’s liability account. The year end balance is shown on

balance sheet.

B. Inward bills for collection (IBC) When the banks collect bills as an agent of the collecting branch, the system is known as

IBC. In this case the bank will work as an agent of the collection bank. The branch

receives a forwarding letter and the bill. Next steps are as follows-

i. Entry in the IBC register

ii. An IBC number is given on the bill.

iii. Endorsement given- “Our branch endorsement confirmed”

iv. The instrument is sent for clearing.


BASIC Bank Ltd.Accounting Entries-

Clearing..........................................…………Debit

Miscellaneous Creditor A/C OBC ……………….Credit.

If honored, the accounting treatment will be-Miscellaneous Creditor A/C OBC…………Debit

H.O. Collecting branch A/C………………..……Credit.

An IBCA is dispatched in this regard

HO A/C agent branch………………………Debit

HO A/C collection branch…………………..…..Credit.

If dishonored,

The instrument is returned to the collecting branch along with a return memo.

3.12.2 CLEARING

According to the Article 37 (2) of Bangladesh Bank Order, 1972, the banks which are a member of the clearing house are called as Scheduled Banks. The scheduled banks clear the cheques drawn upon one another through the clearing house. This is an arrangement by the central bank where everyday the representative of the member banks sits to clear the cheques. For clearing there is a department in every Bank. This department receives cheques, drafts and like instruments from its customers for the purpose of collection with a deposit slip over the counter crediting their accounts. Clearing of cheque is done through the clearing house in Bangladesh Bank. Everyday the first hour starts at 10.00 a.m. and returns house at 5.00 p.m.

Types of cheques for clearing

i. Inward clearing cheques.

ii. Outward clearing cheques.

A. Inward Clearing Bills It refers the instument drawn on BASIC bank Mirpur Branch Limited, received from

other banks in the clearing house by their representative (s). Settlement process-


Bills collected from other banks through clearing house by Main Branch Drawn on BASIC Mirpur Br. BB debits the A/C of

Main Br. Maintained with BB.

Main Branch sends the bills to BASIC Mirpur Branch with an IBDA

BASIC Mirpur Branch debits customer’s respective A/C

BASIC Bank Ltd.

Accounting entry passed by this branch:

Respective A/C …………………………Debit

Head Office A/C (Main Br.) ..………………..Credit.

If cheques are returned, BASIC Bank Mirpur Branch passes an IBDA to Main Branch.

Then the necessary accounting entries will be-

HO A/C (Main Br.) ………………...…..Debit

Respective A/C ………………………….……Credit.

B. Outward Clearing Bills It refers the instruments drawn on the other banks received by BASIC bank Mirpur

Branch. They are of three kinds as follows-

a) Cheques drawn on another branch of BASIC. The settlement process –

b) Cheques drawn on another Bank which is situated within clearing house area.


Cheques are directly sent to the respective branch

OBC received along the instrument by the

respective branch

Entry passed in OBC register of that branch

IBCA is sent from that branch to this branch.

When IBCA comes, customer’s account is credited.

Mirpur Branch collects cheques.

IBDA along with bills are sent to Mirpur Branch.

These bills are sent to clearing house from Mirpur Br. through Main Branch

Depositor’s account is credited with BASIC Mirpur Branch.

BASIC Bank Ltd.

3.13: CASH SECTION

Cash is the lifeblood of all financial activities. Cash section is a very sensitive point

of the branch. This section deals with all types of negotiable instruments and it

includes vault, used as the store of cash, instruments. The vault is insured up to

Tk.20 lac. Insured amount yet to be enhanced to Tk. 40 lac. Operation of this section

begins when the banking hour starts. Cash officer begins his/her transaction with

taking money from the vault, known as the opening cash balance. Vault is kept in a

more secured place. The amount of opening cash balance is entered into a register.

After whole days’ transaction, the surplus money remains in the cash counter is put

back in the vault and known as the closing balance. If the cash stock goes beyond

this limit, the excess cash is then transferred to BASIC bank main

branch. The main functions of this section are-

1. Cash Receipt

2. Cash Payment

3.13.1 CASH RECEIPT

Cash receipt procedure is given below-

i. The depositor first fills up the Deposit-in-Slip.

ii. Depositor deposits the money.

iii. Officer receives the money, counts and then enters in the Cash Receipt

Register, and finally signs with seal and dates the deposit-in-slip.

iv. Slip is then passed to another officer, who enters the receipt details like

serial no, amount, etc. in his register, signs the slip and keeps the banks’

part of the slip. Other part is given to the depositor.

v. At the end of the day, entries are cross checked with the register kept at

the cash counter to see whether the transactions are correct or not.

Account ing t reatment -


BASIC Bank Ltd.When cash received, the following entries are made-

Cash A/C……………………….Debit

Party’s A/C………………………….Credit

3.13.2CASH PAYMENTSome important check points for making the payment are as follows-

1. Endorsement Endorsement is done by putting signature of the drawer on the back of the

negotiable instrument for the purpose of negotiation. By ‘blank endorsement’,

an order instrument is made as ‘bearer’. BASIC bank limited endorses the

instrument in the following ways-

ENDORSEMENT IN CASE OF

Payee’s A/C credited Pay to Mr.X

Received payment

Payee’s A/C credited

Pay to BASIC bank, Mr.X

Payee’s A/C credited Pay to Mr.X , BASIC bank

2. Crossing Generally two types of crossing are practiced, namely- General Crossing and

Special Crossing. Basically it gives a direction to the paying bank not to pay the

check amount over the counter. General crossing includes ‘A/C payee’ crossing

only. Drawing two parallel and transverse lines do it. On the other hand,

special crossing is like general crossing but in addition bank name is also

mentioned. This gives the direction to the same to pay the check only to the

banker, whose name appears in the crossing or to his agent.


BASIC Bank Ltd.

Cash payment procedure is given below-i. Customer first deposits the check (s) to the cash section. Authorized

individual checks whether it is materially altered, proper endorsed, crossed

or not. Being satisfied the total requirements; he passes it to the computer

for checking the balance. Operator verifies the check leaf security no. If

matched, then operator signs. Otherwise noticed to the individual for stop

payment;

ii. Authorized officer is then verified the signature with the Specimen

Signature Card (SSC);

iii. Send the instrument to the computer section once again for posting;

iv. Cash officer is then asked the bearer to sign on the back of the instrument.

At the same he just enters the payment details in his register and pays the

money to the bearer;

v. At the end of the day, these information must be tallied with computer

postings to ensure the correctness of payment.

Account ing t reatment -

When cash paid, the following entries are made-

Party A/C……………………….Debit

Cash A/C……………………………..Credit

Dishonor of Cheque

If the cheque is dishonored, BASIC bank sends a memorandum (cheque return memo) to

the customer stating the reason in the following way-

i. Refer to drawer

ii. Not arranged for.

iii. Effects not cleared. May be presented again.

iv. Exceeds arrangements.

v. Full cover not received.

vi. Payment stopped by drawer.


BASIC Bank Ltd.vii. -----------------Payee’s endorsement irregular/ illegible/ required.

viii. ----------------- Payee’s endorsement irregular/ require Bank’s

confirmation.

ix. Drawer’s signature differs/ required.

x. Alteration in date/ figures/ words requires drawer’s full signature.

xi. Cheque is post dated/ out of date/ mutilated.

xii. Amount in words and figures differs.

xiii. Crossed cheque must be presented through a bank.

xiv. Clearing stamp required/ requires cancellation.

xv. Addition to Bank’s discharge should be authenticated.

xvi. Cheque crossed “Account Payee Only”

xvii. Collecting Bank’s discharge irregular/ required.

xviii. ------------------------------------------------------

If the check is dishonored due to insufficiency of funds, BASIC bank charges Tk.100/= as penalty.

3.14: ACCOUNTS SECTIONAccounts department maintains all records of transactions and all types of statement. At

the end of transaction hour all concerned section sends vouchers of transactions to this

department. Accounts department compares all figures/ amount, contents of transactions

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 of accounts department:

To record all transaction in the cash book.

To prepare daily, weekly, monthly, half-yearly and yearly fund position.

To prepare all kinds of statements related to Bangladesh Bank, Head office

and National Board of Revenue (NBR).

To prepare monthly salary statement, provident fund statement and

administrative expenditure statement.

To make charges for different types of duty.


BASIC Bank Ltd.Table-4.5: Showing different types statements prepared by the Branch

Bangladesh Bank Related Statements

Weekly fund position (CRR-4% and SLR-16%)

Monthly sector corporation

Monthly Schedule Bank Statements-1 (SBS-1)

Quarterly Schedule Bank Statements-2 (SBS-2)

Quarterly statement of exchange of torn/ dirty notes

Half-yearly Schedule Bank Statements-3 (SBS-3)

Half-yearly deposit insurance pension scheme

Head Office Related Statements

Daily reconciliation statement

Weekly & monthly statement of affairs with income, expenditure & subsidiaries

Monthly comparative statement

Half-yearly statement of privilege creditors

Half-yearly detailed statement of sundry debtors

Half-yearly & yearly statement of sundry creditors

Half-yearly statement of other assets

Half-yearly statement of suspense A/C

Six column basis data sheet (deposit, loans, gross income & exp., net profit/ loss)

National Board of Revenue (NBR) Related Statements

Monthly challan regarding VAT

Monthly progress report

Quarterly challan regarding Income Tax of staff

Half-yearly challan regarding 10% source tax on interest of deposits

Half-yearly and yearly statement of fixed assets

Yearly challan of excise duty.


BASIC Bank Ltd.

CHAPTER 4 FOREIGN EXCHANGE DEPARTMENT

Foreign Exchange means foreign currency and it includes any instrument drawn,

accepted, made or issued under clause (13), Article 16 of the Bangladesh Bank Order,

1972. All deposits, credits and balances payable in any foreign currency and draft,

travelers cheque, letter of credit and bill of exchange expressed or drawn in Bangladeshi

currency but payable in any foreign currencies.

Bangladesh Bank issues Authorized Dealer (AD) license by observing the bank’s

performance and also the customers associated with the bank for conducting foreign

dealings. So, BASIC Bank Mirpur branch is an authorized dealer.

Back Ground of Bank’s InvolvementBanks play a vital role by minimizing the risk of two parties, namely buyer and seller. In fact without the help of banks we cannot think about a congenial international trade environment. Now the question comes how banks help international trade. We know that in a local trade there is a chance to know about each other. But in international trade the involved parties stay two distant places. For a buyer the following risks are involved-

Risk of non-delivery of goods.

Risk of receiving sub standard goods.

Risk of fraud in goods.

For the seller the following risk is involved-

Risk of non-payment.

To reduce the aforesaid risks an independent system is introduced which will safeguard

the buyer as well as seller in an international trade. Actually banks play due role by

getting into two parties and bind them.


BASIC Bank Ltd.

IMPORT SECTION

In case of Import, the importers are asked by their exporters to open a letter of credit. So

that their payment against goods is ensured.

4.1 Letter of Credit (L/C)Letter of Credit (L/C) is a payment guarantee to the seller by the buyer’s bank. It is in

fact, 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. If the conditions of the credit do not require for presentation of specified

documents, it is called Clean Credit. On the contrary, if the presentation of specified

documents is obligatory, the credit is called a Documentary Credit.

Buyers and sellers enter into contracts for buying and selling goods/ services and the

buyer instructs his bank to issue L/C in favour of the seller. Here bank assumes fiduciary

function between the buyer and seller.

Types of L/CBASIC Bank Mirpur branch deals with two types of L/C. These are-

1. Sight L/C

2. Deferred L/C.


BASIC Bank Ltd.Parties To Letter of Credit

The following parties are involved to a letter of credit, namely-

Obligatory Parties are

a) Importer/ Buyer/ Applicant

b) Opening Bank/ Issuing bank

c) Advising Bank/ Notifying Bank

d) Exporter/ Seller/ Beneficiary

Optional Parties (In case of need) are

e) Negotiating Bank

f) Confirming Bank

g) Paying/ Reimbursing bank

a. Applicant

The person or body (customer Of the bank) who requests the bank (opening bank) to

issue letter of credit.

b. Opening Bank / Issuing Bank

The bank that opens/issues letter of credit on behalf of the applicant/importer.

c. Advising Bank/ Notifying Bank

The bank through which the L/C IS advised to the beneficiary (exporter).

d. Exporter/ Seller/ Beneficiary

Beneficiary of the L/C is the party in whose favour the letter of credit is issued.

Usually they are the seller or exporter.

e. Confirming Bank

The bank, which under instruction in the letter of credit, adds their irrevocable

undertaking to that of the issuing bank. It is done at the request of the issuing bank


BASIC Bank Ltd.having arrangement with them. The confirmation constitutes a definite undertaking

on the part of confirming bank in addition to that of issuing bank.

f. Negotiating Bank

The bank that negotiates document and pays the amount to the beneficiary when

presented complying credit terms. If the negotiation of the documents is not restricted

to a particular bank in the L/C, normally negotiating bank is the banker of the

beneficiary.

g. Reimbursing / Paying Bank

The bank nominated in the credit by the issuing bank to make payment against

stipulated documents, complying with the credit terms. Normally issuing bank

maintains account with the reimbursing bank.

Necessity of L/C for Importing Goods

An importer can purchase the goods directly up to the limit UD$ 5000 from the exporter

without opening a L/C through Bank Draft. For releasing the goods from the custom

authority by the importer, bank will certify.

4.2 Import ProcedureAn importer is required to have the following formalities to import the goods through

BASIC Bank-

An account with BASIC Bank Mirpur Branch

Import Registration Certificate (IRC)

Tax Paying Identification (TIN) Number

Proforma Invoice/ Indent

Membership Certificate

LCA (Letter of Credit Application) form duly attested


BASIC Bank Ltd. One set of IMP Form

Insurance Cover note with money receipt

Others

4.3 Import MechanismTo import, a person should be competent to be an ‘Importer’. According to Import and

Export Control Act, 1950 the Office of Chief Controller of Import and Export provides

the registration (IRC) to the importer. After obtaining this, the person has to secure a

letter of credit authorization (LCA) from Bangladesh Bank. And then a person becomes a

qualified importer. He is the person who requests or instructs the opening bank to open an

L/C. He is also called opener or applicant of the credit.

4.4 Importer’s Application for L/C LimitTo have an import L/C limit, an importer submits an application to the Foreign Exchange

wing of BASIC bank Mirpur branch furnishing the followings-

i. Full particulars of bank account

ii. Nature of business

iii. Required amount of limit

iv. Payment terms and conditions

v. Goods to be imported

vi. Offered security

vii. Repayment schedule

A credit Officer scrutinizes this application and accordingly prepares a proposal (CLP)

and forwards it to the Head Office Credit Committee (HOCC). The Committee, if

satisfied, sanctions the limit and returns back to the branch. Thus the importer is entitled

for the limit.

4.5 L/C Application

BASIC provides a printed form for opening a L/C to the importer. A special adhesive

stamp is affixed on the form. While opening, the stamp is cancelled. Usually the


BASIC Bank Ltd.importer expresses his desire to open a L/C quoting the amount of margin in percentage.

The importer gives the following details-

Full name and address of the applicant.

Date and place of expiry of the credit

Applicant’s A/C number

Amount (both in figure and word)

The mode of transmission of document (SWIFT/ Courier/ Telex)

Confirmation of credit to the beneficiary (requested or not requested)

Partial shipment is allowed or not

The type of loading (loading on board)

Brief description of the goods to be imported with HS code no.

Credit available with by sight payment/ by acceptance/ by negotiation/ by deferred

payment at against the documents detailed herein/ and beneficiaries draft at on.

The time bar within which the document should be presented.

Sales terms (FOB/ C &F/ CIF)

Shipping Mark

IRC Number and LCA Number

Insurance cover note with money receipt

Country of origin

Additional Instructions are like-

i. Shipment by South African, Taiwanese, and Israeli flag vessels/ carriers or any

vessel/ carrier calling at any port of South Africa and Israel is prohibited.

ii. Radiation certificate is required in case of food items.

iii. All charge outside Bangladesh are of account of (importer/ beneficiary).

The above information is provided along with the following documents-

1. Proforma Invoice/ Indent stating the description of the goods including

quantity, unit price, etc.

2. Insurance cover notes with money receipt, name and address of issuing

company and the policy number.


BASIC Bank Ltd.3. Four set of IMP (Import) Form

4.6 Scrutinization of L/C ApplicationThe BASIC Official scrutinizes the application in the following manner-

The terms and conditions of the L/C must be complied with UCPDC 500

and Exchange Control & Import Trade Regulation;

Eligibility of the goods to import;

The L/C must not be opened in favor of the importer or his agent;

L/C must be signed by the importer agreeing all terms and conditions

mentioned in the application;

IMP form duly filled in and signed;

Validity of IRC;

HS code of the goods;

Insurance cover note with date of shipment;

Radioactivity report in case of food items;

Survey reports or certificate in case of old machinery (ies).;

Carrying vessel is not from Israel;

Certificate declaring that the item is in operation not more than 5 years in

case of car.

Accounting Procedure in case of L/C Opening

When the officer thinks fit the application to open a L/C, giving the following entries-

creates the following charges-

Table-Showing accounting treatment at the time of L/C opening

Particulars Debit/ Credit Charges in Taka

Customer’s A/C Debit


BASIC Bank Ltd.L/C Margin A/C Credit Commonly 10-30%

Commission A/C on L/C Credit 0.5%

VAT Credit 15% on commission

SWIFT Charge Credit 3500/=

Foreign Courier Charge (FCC) Credit 1000/=

Stamp Credit 150/=

Securities and Printing Credit 200/=

Source: Mirpur Branch, BASIC Bank

After that, L/C number and the above entries are given in the L/C Register. L/C opening

register has the following details-

Date, L/C No., Name of the customer, Foreign currency amount, Exchange

rate, Taka equivalent and source of import;

Goods, Country of origin, Advising bank, Expiry date, Tenor and Margin;

Charges: commission, postage, SWIFT, FCC and total;

Initial with date and remarks.

The contra entries stating the liability of the bank and the client are as follows-

Client’s Liability………………………….Debit.

Banker’s Liability………………………………Credit.

Then the transmission of L/C is done through SWIFT to advise the L/C to the

beneficiary.

4.7 Amendment of L/C

Involved parties in a L/C, particularly the seller and the buyer cannot always satisfy

the terms and conditions in full as expected due to some obvious and genuine

reason. In such a situation, the credit should be amended. Mirpur branch transmits

the amendment by SWIFT/ Telex to the advising bank. In case of irrevocable letter

of credit, it can not be revoked, amended or cancelled without the agreement of the

issuing bank, the confirming bank (if any) and the beneficiary. On the other hand,

revocable credit can be amended or cancelled by the issuing bank at any moment


Advising & Confirmation

BASIC Bank Ltd.and without prior notice to the beneficiary. According to UCPDC 500 L/C must be

an irrevocable one. For amended L/C’s, service charge and telex charge is debited

from the party’s account accordingly.

4.8 Advising the Import L/CAdvising depicts the proof of authenticity of the credit to the seller/ beneficiary. The

advising process consists of forwarding the original credit to the beneficiary. Before

forwarding the advising bank has to verify the signature (s) of the L/C opening bank

(BASIC Bank, Mirpur Branch). In addition, it ensures that the terms and conditions

of the L/C are not inconsistent with the existing regulations. In such a case, advising

bank does not undertake any liability.

L/C ADVISING MECHANISM

4.9 Adding ConfirmationThe confirming bank does adding confirmation. Confirming bank is a bank, which adds

its confirmation to the credit, and it is done at the request of the issuing bank. The

confirming bank may or may not be the advising bank. The advising usually does not it if

there is not a prior arrangement with the issuing bank. By being involved as a confirming

agent the advising bank undertakes to negotiate beneficiary’s bill without recourse to

him.

4.10 Presentation of the Documents


Importer/ Applicant L/C opening Bank

L/C Beneficiary

L/C Advising Bank

BASIC Bank Ltd.The seller being satisfied with the terms and the conditions of the credit proceeds to

dispatch the required goods to the buyer. Then he has to present the documents

evidencing dispatching of goods to the negotiating bank on or before the stipulated expiry

date of the credit. After receiving all the documents, the negotiating bank then checks the

documents against the credit. If the documents are found in order, the bank will pay,

accept or negotiate to BASIC. Then BASIC checks the documents. The usual documents

are-

Invoice

Bill of lading

Certificate of origin

Packing list

Shipping advice

Non negotiable copy of bill of lading

Bill of exchange

Pre-shipment inspection report

Shipment certificate.

4.11 Scrutiny of Documents

First of all it must be ensured that full set of documents as mentioned in the L/C has

been received. Following documents are included, namely-

1. Letter of Credit

2. Commercial Invoice

3. Bill of Exchange

4. Bill of lading

5. Insurance cover note

6. Certificate of origin

7. Others.

Some Key Check Points for the aforesaid documents are as follows-

1. Letter Of Credit

Whether the documents have been negotiated or presented before expiry of the credit

Whether the amount drawn exceeded the amount available under the credit


BASIC Bank Ltd.

2. The Commercial Invoice

Is the invoice made out in the name currency as the credit indicates?

Is the invoice made out in the name of the buyer with the same address specified in

the credit?

Does the invoice agree exactly with the credit as regards description of goods, value

of goods, unit prices & delivery terms?

Any special notation, confirmation & attestation were specified in the credit and those

have been complied with on the invoice and if required duly signed.

Does the invoice evidence the following; shipping marks/terms of delivery/weight

data &import license number etc.

3. Bill Of Exchange

Is the Bill of Exchange drawn in the language of the credit?

Is the bill of exchange properly prepared according to the credit conditions (on a sight

or time basis) and drawn on the specified bank?

Is it properly dated and signed?

Is the amount in figures corresponded exactly with the amount in word?

Does it contain all the prescribed notations and clauses?

As a rule, the amount of bill of Exchange must agree with the invoice amount (drawn

to cover only 90% or 80% of the invoice value.

4. Bill Of Lading

First of all it has to be cleared that the Bill of Lading is showing “Shipped on

Board” and it has to be properly endorsed to the bank.

The B/L should include the description of the merchandise according to invoice.

The port of shipment and destination, date of shipment and the name of the

consignee are in agreement with those mentioned in the L/C.

The shipping company or their authorized agents properly sign the B/L.

The date on the B/L is not ‘stale’ which means it is not dated in unreasonably

long time prior to negotiation.


BASIC Bank Ltd.

5. The Insurance Cover Note

Is the insurance documents specified in the credit submitted?

Does the insurance cover the risks mentioned in the credit in the currency

of the credit and for the prescribed amount but not less than CIF value?

Is the insurance documents dated not later than the shipping documents?

Does the insurance policy/Certificate agree with other document as

regards description, weight & marks of the goods, mode of transport & the

route?

Does the insurance company attached and so far as necessary, endorsed

issue all the copies?

6. Certificate Of Origin

Is the certificate of origin of goods is given as stipulated?

7. Others

Other documents called for in the credit if any such as packing list, weight

certificate, consular invoice, inspection certificate etc. to be checked

whether drawn and issued in accordance with the terms of the credit.

4.12 Lodgement of Shipping Documents

During scrutiny, if the documents are in order, the branch then lodges the

documents in PAD. The following steps are involved in lodgment-

First all the particulars of the documents are entered in the PAD

(Payment against Document) register and PAD No. Seal is given on all

the copies of the received documents.

Convert the foreign currency into Bangladeshi currency.


BASIC Bank Ltd. Reverse the contingent liability and entry made in the liability register.

Prepare lodgment voucher

Liability reversal vouchers

Banker’s liability on L/C………..……Debit

Customer’s liability on L/C…….………….Credit.

Prepare other voucher (s)

PAD A/C………………………………Debit

HO A/C…………………………..…………Credit

Interest on PAD…………………..…………Credit

Exchange Trading Earning…………..……...Credit.

Send an IBCA to the head office.

Make intimation to the importer.

After realizing the charges, the shipping documents are then stamped with PAD

number & entered in the PAD register. Intimation is given to the customer calling

on the bank’s counter requesting retirement of the shipping documents.

4.13 Retirement of Documents

The importer receives the intimation and gives necessary instruction to the bank for

retirement of the bills or for the disposal of the shipping documents to release the

imported goods from the customs authority. The importer may instruct the bank to

retire the documents by debiting his account with the bank or may ask for loan.

Loan is of two types, namely Loan against Imported Merchandise (LIM) and Loan

against Trust Receipt (LTR). BASIC bank Mirpur branch does not allow LIM

facility. But they offer LTR facility. Following steps are involvement for retirement

of documents-

Calculation of interest.

Calculation of other charges.

Passing vouchers.

Entry in the register.

Endorsement made on the back of the bill of exchange as ‘Received

Payment’ and bill of lading or other transport document is endorsed to


BASIC Bank Ltd.the effect ‘Please deliver to the order of M/S-------’, under two authorized

signatures of the bank’s officers (P.A. Holder).

Finally, documents are delivered to the Importer.

Accounting Effect

The Customer’s account and Margin on L/C is debited and PAD and Head office

and other income A/C are credited. In case of LTR, the LTR A/C is debited instead

of the PAD A/C.

4.14 Payment Procedure of Import DocumentsThis is the most sensitive task of the Import Department. The officials have to be very

much careful while making payment. This task constitutes the following-

a) Date of Payment: Usually payment is made within seven days after the documents

have been received. If the payment is become deferred, the negotiating bank may

claim interest for making delay.

b) Preparing Sale Memo: A sale memo is made at B.C rate to the customer. As the

T.T & O.D rate is paid to the ID, the difference between these two rates is exchange

trading. Finally, an Inter Branch Exchange Trading Credit Advice is sent to ID.

c) Requisition for the Foreign Currency: For arranging necessary fund for payment, a

requisition is sent to the International Department.

d) Transmission of Message: Message is transmitted to the correspondent bank

ensuring that payment is being made.

4.15 Loan Against Trust Receipt (LTR)LTR is post import finance, offered by BASIC Bank Mirpur Branch. From bank’s point

of view, it is risky because usually no security is taken. When customer’s commitment is

as good as cash, LTR is then issued. Loan is sanctioned based on trust receipt (prescribed

form) only. It is allowed for retirement of shipping documents and release of goods

imported through L/C. Normally it is forwarded to the industrial raw materials. Interest


BASIC Bank Ltd.rate is 15%. So, in this case title and possession of goods both lying with the customer.

Bank officials can exercise hypothecation of raw materials. Time period is fixed based on

the nature of the goods. The goods are handed over to the importer under trust with the

arrangement that sale proceeds should be deposited to liquidate the advances within the

specified period.

EXPORT SECTION

Foreign Exchange Regulation Act, 1947 nobody can export by post and otherwise than

by post any goods either directly or indirectly to any place outside Bangladesh, unless a

declaration is furnished by the exporter to the collector of customs or to such other person

as the Bangladesh Bank (BB) may specify in this behalf that foreign exchange

representing the full export value of the goods has been or will be disposed of in a

manner and within a period specified by BB.

Export section deals with two types of L/C that are as follows-

4.16 Back-to-Back Letter of Credit Back-to-back L/C is a secondary L/C (New Import L/C) opened by the seller’s bank

based on the original L/C (Master L/C) to purchase the raw materials and

accessories for manufacturing of the export product (s) required by the seller.

Under the ‘Back to Back’ concept, the seller as the Beneficiary of the master L/C offer it as a ‘security’ to the advising Bank for the issuance of the second L/C. The beneficiary of the Back-to-Back L/C may be located inside or outside the original beneficiary’s country. In case of a Back-to-Back L/C, the bank takes no cash security (margin). Bank liens the Master L/C and the drawn bill is an Usance/ Time bill.


BASIC Bank Ltd.

Flow Diagram of Back-to-Back L/C:

4.16.1 Documents Required for Opening a Back-to-back L/C

In BASIC Bank Mirpur Branch, following papers/ documents are required for opening a

back-to-back L/C-

Master L/C

Valid Import Registration Certificate (IRC) and Export Registration

Certificate (ERC)

L/C Application and LCAF duly filled in and signed

Proforma Invoice or Indent

Insurance Cover Note with money receipt

IMP Form duly signed

In addition to the above documents, the followings are also required to export oriented

garment industries while requesting for opening a back-to-back L/C –

Textile Permission

Valid Bonded Warehouse License

Quota Allocation Letter issued by the Export Promotion Bureau (EPB) in

favor of the applicant for quota items


Buyer, USA instructs his bank to issue an Import L/C in favour of Lenny Fashions Ltd, Bangladesh.

USA bank issues a L/C and forwards the same to Lenny Fashions Ltd.

through a B’deshi Bank (e.g. BASIC Bank, Mirpur Branch.).

Lenny Fashions Ltd. submits his Export L/C with a request to BASIC Bank Mirpur Br. to create lien against L/C and issue Back to Back L/C in favour of 'X' Textile Ltd.

BASIC issues a Back to Back L/C and forwards the same to 'Y' Textile Ltd. through another Exporter Bank.

BASIC Bank Ltd.In case the factory premises is a rented one, Letter of Disclaimer duly executed by

the owner of the house/premises to be submitted. A checklist to open back-to-back

L/C is as follows –

i) Applicant is registered with CCI&E and has bonded warehouse license;

ii) The master L/C has adequate validity period and has no defective clause;

iii) L/C value shall not exceed the admissible percentage of net FOB value of

relative Master L/C;

iv) Usage Period will be up to 180 days.

4.16.2 Check Points Noted in Master L/C

Following defective points are usually found in the Master L/C. So, these points are so

much carefully checked by the bank officials. These are-

i) Issuing bank is not reputed;

ii) Advising credit by the advising bank without authentication;

iii) Port of destination absent;

iv) Inspection clause;

v) Nomination of specific shipping/Air line or nomination of specified vessel

by subsequent amendment;

vi) Bill of lading endorses blank, endorses to 3rd bank, endorses to buyer or 3rd

party;

vii) No specific reimbursing clause;

viii) UCP clause not mentioned;

ix) Shipment/ presentation period is not sufficient;

x) Original documents to be sent to buyer or nominated agent;

xi) FCR or HAWB consigned to applicant or buyer;

xii) “Shipper’s load and count is not acceptable” clause;

xiii) L/C shall expire in the country of the issuing bank;

xiv) Negotiation is restricted.


BASIC Bank Ltd.4.16.3 Payment of Back-to-Back L/C

On 30/ 60/ 90/ 120/ 180 days of maturity period, deferred payment is made. Payment is

given after realizing export proceeds from the L/C Issuing Bank. For Garments Sector,

the duration can be maximum 180 days. In case of export failure or non realization/ short

realization of export proceeds, forced loan i.e. OAP has to be created in order to settle the

Back to Back L/C payment.

Accounting Treatment of Back to Back L/C

At the time of arrival document, the following vouchers are passed-

Customer’s A/C...........................................Debit

Commission on acceptance..................................Credit.

.

At the time of payment made,

When fund is at hand, the following accounting entries are given-

Sundry Deposit Margin on acceptance.......Debit

Customer’s A/C....................................................Credit.

If the party is paid in foreign currency, B.C. rate is applied in this regard. International

Department takes the T.T. & O.D. rate. If the payment is made to ID in local currency in

notional rate, ID follows T.T Clean Rate. When the party is be paid, OD Sight rate is

followed.

When fund is not available, the following vouchers are to be passed-

OAP (Own acceptance Purchase)................Debit

Customer’s A/C....................................................Credit.

4.16.4 Reporting to Bangladesh BankAt the end of every month, the reporting to Bangladesh Bank regarding the following

information is mandatory –

i) Filling of E-2/P-2 Schedule of S-1 category that covers the entire month’s amount

of import, category of goods, currency, county etc.

ii) Filling of E-3/P-3 Schedule of for all charges, commission with T/M Form.

iii) Disposal of IMP Form that includes:


BASIC Bank Ltd.a) Original IMP is forwarded to Bangladesh Bank with invoice and indent;

b) Duplicate IMP is kept with the branch along with the Bill of Entry/

Certified Invoice;

c) Triplicate IMP is kept with the branch for office record;

d) Qquadruplicate is kept for submission to Bangladesh Bank in case of

imports where documents are retired.

4.17 Export Letter of Credit The other type of L/C facility offered by Dilkusha Corporate Branch is Export L/C.

banglade4sh exports a large quantity of goods and services to foreign households.

Readymade textile garments (both knitted and wove), jute, jute-made products, frozen

shrimps, tea are the main goods that Bangladeshi exporters exports to foreign countries.

Garments Sector is the largest sector that exports the lion share of the country’s export.

Bangladesh exports most of its readymade garments products to USA and European

Community (EC) countries. Bangladesh exports about 40 % of its readymade garments

products to USA. Most of the exporters who export through Dilkusha Corporate Branch

are readymade garment exporters. They open L/Cs in this branch to export their goods,

which they open against the import L/Cs opened by their foreign importers.

4.17.1Formalities Required For Export L/CThe export trade of the country is regulated by the Imports & Exports (Control) Act,

1950. There are a number of formalities that an exporter has to fulfill before and after

shipment of goods. These formalities or procedures are enumerated as follows –

1. Export Registration Certificate (ERC) : The exports from Bangladesh are subject to

export trade control exercised by the Ministry of Commerce through Chief Controller

of Imports & Exports (CCI&E). No exporter is allowed to export any commodity

permissible for export from Bangladesh unless he is registered with CCI&E and holds

valid ERC. The ERC is required to be renewed every year. The ERC number is to be

incorporated on EXP (Export) Forms and others documents connected with exports.


BASIC Bank Ltd.2. The EXP Form : After having the registration, the exporter applies to BASIC Bank

Mirpur branch with the Trade License, ERC and the Certificate from the concerned

Government Organization to get the EXP Form. If the branch is satisfied, an EXP

Form is issued to the exporter. An EXP Form usually contains the following

particulars –

i) Name and address of the Authorized Dealer;

ii) Particulars of the commodity to be exported with particulars and code no;

iii) Country of destination;

iv) Port of destination;

v) Quantity;

vi) L/C value in foreign currency;

vii) Terms of sale;

viii) Name and address of Importer/ Consignee;

ix) Bill of Lading/Railway Receipt/Airway Bill/Truck Receipt/Post Parcel Receipt

no. and date;

x) Port of Shipment/Post Office of Dispatch;

xi) Land Custom Post;

xii) Shipment Date;

xiii) Name of the Exporter with address;

xiv) CCI&E’s registration number and date;

xv) Sector (public or private) under which the exporter fails.

3. Securing the Order : Upon registration, the exporter may proceed to secure the

export order. This can be done by contracting the buyers directly through

correspondence.

4. Signing of the Contract : While making a contract, the following points are to be

mentioned: a) Description of the goods; b) Quantity of the commodity; c) Price of

the commodity; d) Shipment; e) Insurance and marks; f) Inspection, and g)

Arbitration.


BASIC Bank Ltd.5. Procuring the Materials : After making the deal and on having the L/C opened in his

favor, the next step for the exporter is set about the task of procuring or

manufacturing the contracted merchandise.

6. Registration of Sale : This is needed when the proposed items to be exported are raw

jute and jute-made goods.

7. Shipment of Goods : The following documents are normally involved at the stage of

shipment: (a) EXP From, (b) photocopy of registration certificate, (c) photocopy of

contract, (d) photocopy of the L/C, (e) customs copy of ERF Form for shipment of

jute-made goods and EPC Form for raw jute, (f) freight certificate from the bank in

case of payment of the freight if the port of lading is involved, (g) railway receipt,

berg receipt or truck receipt, (h) shipping instructions, and (i) insurance policy.

The following points should be looked carefully for –

The terms of the L/C are in conformity with those of the contract

The L/C is an irrevocable one, preferably confirmed by the Advising Bank

The L/C allows sufficient time for shipment and a reasonable time for registration

If the exporter wants the L/C to be transferable, advisable, he should ensure those

stipulations are specially mentioned in the L/C.

At last, the exporter submits all these documents along with a Letter of Indemnity to the

branch for negotiation. An officer scrutinizes all the documents. If the documents are

clean one, the branch purchases the documents on the basis of banker-customer

relationship. This is known as Foreign Documentary Bill Purchase (FDBP).

4.17.2Procedure For FDBPAfter purchasing the documents, BASIC Bank Mirpur Branch gives the following entries

–


BASIC Bank Ltd.Before realization of proceeds

FDBP A/C ----------------------------------------Debit

Customer A/C -----------------------------------------Credit.

Adjustment after realization of proceedsHead Office A/C----------------------------------Debit

FDBP A/C------------------------------------------------Credit.

A FDBP Register is maintained for recording all the particulars. The salient contents of a

FDBP register are as follows-

i) FDBP Ref. no.ii) Dateiii) Drawer/ Beneficiaryiv) Drawee/ Applicantv) Foreign Currencyvi) Ratevii) Local Currencyviii) Margin (% of amount)ix) Modes of Transportx) Merchandisexi) Documentsxii) L/C no. and name of opening bankxiii) Name of collecting Bankxiv) Initial, due date, date realized, bank charges recovered with remarks.

4.17.3Foreign Documentary Bills For Collection (FDBC)BASIC bank Mirpur branch forwards the documents for collection due to the following

reasons-

a. If the documents have discrepancies.

b. If the exporter is a new client.

c. The banker is in doubt.

FDBC signifies that the exporter will receive payment only when the issuing bank gives

payment. The exporter submits duplicate EXP Form and Commercial Invoice.

Subsequently, the value of the bill is calculated and the following accounting entries are

given-

Head Office A/C----------------------------------Debit @ T.T Clean


BASIC Bank Ltd.Client’s A/C----------------------------------------------Credit @ OD sight

Postage A/C----------------------------------------------Credit

Income A/C profit on Exchange-----------------------Credit.

After passing the above vouchers, an Inter Branch Exchange Trading Debit Advice is

sent for debiting the NOSTRO account. EBL has 17 NOSTRO accounts with its

reimbursing bank An FDBC Register is maintained, where first entry is given when the

documents are forwarded to the issuing bank for collection and the second one is done

after realization of the proceeds.

4.17.4 Inland Letter of Credit (ILC)ILC means L/C within the same country. This type of L/Cs are opened when seller does

not believe the buyer though they are in the same country and also in the cases where the

sales contract is of a big amount. BASIC Bank Mirpur branch has couple of ILC.

Settlement of Local BillThe settlement of local bills is done in the following ways –

The customer submits the L/C to the branch along with the documents to negotiate;

The branch officials scrutinizes the documents to ensure the conformity with the

terms and conditions;

The documents are then forwarded to the L/C Opening Bank;

The L/C Issuing Bank gives the acceptance and forwards an acceptance letter;

Payment is given to the customer on either by collection basis or by purchasing the

document.

Accounting entries are made for purchasing of local bill–

Local Bill Purchase-------------------------------Debit

Party A/C-------------------------------------------------Credit

Commission----------------------------------------------Credit

Interest A/C-----------------------------------------------Credit.

A LBPD Register is maintained to record the acceptance of the issuing bank. Until the

acceptance is obtained, the record is kept in a collection register.


BASIC Bank Ltd.

4.17.5Modes of Payment For Export Bills Under L/CBroadly payment methods under a L/C are as follows-

Sight Payment Credit: In a Sight Payment Credit, the bank pays the stipulated sum

immediately against the exporter’s presentation of the documents.

Deferred Payment Credit: In deferred payment, the bank agrees to pay on a specified

future date or event, after presentation of the export documents. No bill of exchange is

involved. In BASIC, payment is given to the party at the rate of D.A 60-90-120-180 as

the case may be. But the Head office is paid at T.T clean rate. The difference between the

two rates us the exchange trading for the branch.

Another two types come under the same heads. These are as follows-

1. Negotiation Credit: In Negotiation credit, the exporter has to present a bill of

exchange payable to himself in addition to other documents, that the bank

negotiates.

2. Acceptance Credit: In acceptance credit, the exporter presents a bill of exchange

payable to him and drawn at the agreed tenor (that is, on a specified future date or

event) on the bank that is to accept it. The bank signs its acceptance on the bill and

returns it to the exporter. The exporter can then represent it for payment on maturity.

Alternatively he can discount it in order to obtain immediate payment.

4.17.6Advising L/CWhen export L/C is transmitted to the bank for advising, the bank sends an Advising

Letter to the beneficiary depicting that L/C has been issued.


BASIC Bank Ltd.4.17.7 Test Key Arrangement

Test key arrangement is a secret code maintained by the banks for the authentication for

their telex messages. It is a systematic procedure by which a test number is given and the

person to whom this number is given can easily authenticate the same test number by

maintaining that same procedure. BASIC has test key arrangements with so many banks

for the authentication of L/C messages and for transfer of funds.


BASIC Bank Ltd.

CHAPTER 5 CREDIT

DEPARTMENT

Banks are the principal source of credit for borrowers.

Banks provide loanable funds for millions of households

(individuals and families), for most local units of government and

for agricultural, commercial and industrial activities of a nation.

Worldwide, banks grant more installments loans to consumers than

any other financial institution. Bank credit is a catalyst for bringing

about economic development. Without adequate finance there can

be no growth or maintenance of a stable output. Bank lending is

important to the economy, for it makes possible the financing of

different sectors. At the same time, a bank will, therefore,

distribute its funds among various assets in a manner as to derive

sufficient income. But as liquidity and profitability are conflicting

considerations. BASIC Bank Ltd., as a bank, while employing the

funds pays due regard to both profitability and liquidity.

5.1 Credit Policy of BASIC Bank Limited

The credit policy of any banking institution is a combination of certain accepted time

tested standards, and some other dynamic factors determined by the realities of varying

and changing situations in the market place.

Credit policy lays down the basic principles and broad parameters of the lending

operations. The key is to a sound, healthy and profitable credit operation, however, lies in

the quality of judgment and sense of proportion of the officers making lending decisions,

and their knowledge of the borrowers and the market place.

Basic Principles of Loans and Advances

Basic principles of loans and advances are as follows-


BASIC Bank Ltd.01. Aggregate loans and advances shall not exceed ten times the Bank’s net worth or 65%

of customers’ deposits whichever is lower (excluding loans and advances covered by

specific counter-finance arrangements).

02. Within the aggregate limit of loans and advances as mentioned in (1) above, 50% of

lending will be to small industry sector in accordance with prescribed norms of the

Government and the Central Bank in terms of the Bank’s objectives with 50% to the

commercial sector.

03. No term loans will be approved for the commercial sector. Exceptions will be rare

and will require approval of the Executive Committee.

04. All lending will be adequately secured with acceptable security and margin

requirements as laid down by the Head Office Credit Committee.

05. The Bank shall not incur any uncovered foreign exchange risk (currency exposure) in

the lending of funds.

06. The Bank shall not incur any risk of exposure in respect of unmatched rates of

interest on funding of loans and advances beyond 15% of outstanding loans and

advances.

07. End-use of working capital facilities will be closely monitored to ensure lending user

for the purpose for which they were advanced.

08. Country risk in loans and advances will be accurately identified and shall be within

the country limits if any approved for the Bank. The same treatment will be given to

country risk arising out of contingent liabilities relating to Letters of Credit and

Letters of Guarantee.

09. Loans and advances shall be normally funded from customers’ deposits of a

permanent nature, and not out of short term temporary funds or borrowings from

other banks or through short term money market operations.

10. The aggregate outstanding loans and advances (excluding loans and advances covered

by specific counter-finance arrangements) shall be dispersed according to the

following guidelines (subject to item 2 above whereby 50% of lending being to small

industry section):

(a) Short term commercial lending (to include self liquidating and other short

term finance to retail and wholesale business clients to finance their usual


BASIC Bank Ltd.domestic and international trade/shipping of goods). This category to

include working capital to hotel and tourism.

(b) Facilities to Shipping and Transport (facilities for the purchase and

construction of ships/vessels and other modes of transport both by land

and air).

11. Spreads over cost of funds on loans and advances and commissions and fees on

other transactions should be commensurate with the rating of the borrower,

quality of risk and the prevailing market conditions.

12. Credit evaluation will include:

a) Prevalent credit practices in the market place.

b) Credit worthiness, background and track record of the borrower.

c) Financial standing of the borrower supported by financial statements and other

documented evidence.

d) Legal jurisdiction and implications of applicable laws.

e) Effect of any applicable regulations and laws.

f) Purpose of the loan/facility.

g) Tenure of the loan/facility.

h) Viability of the business proposition.

i) Cash flow projections.

j) Quality and adequacy of security, if available.

k) Risk taking capacity of the borrower.

l) Entrepreneurship and managerial capabilities of the borrower.

m) Reliability of the sources of repayment.

n) Volume of risk in relation to the risk taking capacity of the Bank or company

concerned.

o) Profitability of the proposal to the Bank or company concerned.

13. No credit shall be extended to a Customer Entity that exceeds in total

commitment more than 10% of the Bank’s capital and free reserves.

14. Exception will require approval of the Board of Directors.

5.2 Loans and Advances offered by BASIC Bank with Little Elaboration


BASIC Bank Ltd.

A. Overdraft (OD): It is a continuous advance facility. By this agreement, the banker

allows his customer to overdraft his current account up to his credit limits sanctioned by

the bank. The interest is charged on the amount, which he withdraws, not on the

sanctioned amount. OD is of two types practiced in BASIC Bank Mirpur branch. These

are as follows-

1. Secured Overdraft (SOD): Branch sanctions SOD against different

securities like FDR, Sanchaypatras and Work Orders.

2. Temporary Overdraft (TOD): It is given to the valued customers only. It

is not that much secured. Usually it forwards without any security or sometimes

exercise lien against the instrument, deposited in the bank. It is given by the

branch manager discretionary power. Though it is given, but it never desirable.

The processes of extending SOD are as follows –

i) The party must have a current A/C with the branch

ii) If the ownership of the firm is proprietorship, then a trade license must be

submitted and in case of a limited company, all the documents required to open a

current A/C, should be submitted. The financial statements of the concerned firm

should also be submitted.

iii) The party must maintain a good transaction with the branch and have a good

turnover rate.

iv) The party will apply to the officer in charge of credit department of the branch for

SOD arrangement

v) The concerned officer of the branch will give him a Credit Application Form and

the party will have to fill up this form. In this form he discloses all the information

about his concern, purpose of the loan, description of security, etc.

vi) The concerned officer will prepare a ‘Credit Line Proposal’, where he writes

about the business concern, details of proprietors/directors of the concern,

management structure, the existing credit facilities, the particulars about the

facilities that asked for – such as margin limit, date of expiry, details of security, and


BASIC Bank Ltd.any other relevant information. Then the proposal is sent to the Head Office,

General Advances Division for approval.

vii) The responsible Department of the General Advances Division will appraise the

proposal and if it seems to a viable then the loan will be sanctioned.

viii) After the loan is sanctioned, the branch will issue two copies of a sanction advice,

where all the terms and conditions set by the bank is mentioned. The borrower is

advised to write, “accepted” on the original copy if he is satisfied with the terms and

conditions of the bank and retain the duplicate one as record.

Table- Showing loans and advances offered by BASIC as on November 30, 2001

Credit Facilities Offered

By-

Outstanding Amount in

Lac. Tk.(Mirpur Br.)

BASIC Bank Ltd. BASIC Mirpur Branch

A. Commercial & Working Capital Loan

01. Over Draft TOD SOD

01. Over Draft

TOD

SOD

0.961203.82

02. Cash Credit CC (Hypo) CC (Pledge) CC (Export)

02. Cash Credit CC (Hypo)

516.66

03. Bills Portfolio FDBP (Doc) FDBP (Clean) LBP (Clean) LBP (Doc)

04. Bills Portfolio LBP (Doc) 0.45

05. Import Loan PAD LTR LIM

06. Import Loan PAD LTR

67.73397.91

07. Other Loans Loan General

08. Other Loans Loan General 4.75


BASIC Bank Ltd. Staff Loan Spl. Program (Micro Credit)

Staff Loan

13.97

Sub-total 2206.25B. Industrial Loan

01. Term Loan Small-scale Industries (SSI) Medium-scale Industries (MSI)

01. Term Loan SSI

443.85

02. Working Capital SSI MSI

02. Working Capital SSI

1206.85

Sub-total 1650.70Grand Total 3856.95

Source: Mirpur Branch, BASIC Bank Ltd.

B. Cash Credit (CC): By this arrangement, a banker allows his customer to borrow

money up to a certain limit. CC is a favorite mode of borrowing by traders, industrialists,

etc. for meeting their working capital requirements. It is operated like overdraft account.

Depending on the needs of the business, the borrower can draw on his cash credit account

at different time and when he gets money can adjust the liability. BASIC Bank charges

interest on the daily balance of the account. Based on charging securities, there are two

(02) forms of cash credit –

1. Cash Credit (Hypothecation): Hypothecation is a legal transaction whereby

goods are made available to the lending banker as security for a debt without

transferring either the property in the goods or possession. The banker has only

equitable charge on stocks, which practically means nothing. It is given against

Registered mortgage of land and building, hypothecation of goods and personal

guarantee of Directors.

2. Cash Credit (Pledge): Pledge is the bailment of goods as security for payment

of a debt or performance of a promise. Transfer of possession is the judicial sense.

In case of pledge goods the bank acquire the possession of the goods or a right to

hold goods until the repayment for credit with a special right to sell after due


BASIC Bank Ltd.notice to the borrower in the event of non-repayment. It is not applicable in

Mirpur branch.

The processes of opening a CC a/c are as follows–

1. The interested party must have a current A/C and good transaction with the branch;

2. Applies for CC pledge or hypothecation arrangement;

3. Fills up the ‘Credit Application Form’ as provided by the respective officer;

4. The concerned officer prepares a ‘Credit Line Proposal’ (CLP) detailing all relevant

information;

5. Sends the CLP to the Head Office, General Advances Division for necessary action;

6. Head Office, General Advances Division examines the proposal and if finds it viable

then sanctions it and sends it to the branch;

7. The branch issues tow copies of ‘Sanction Advice’, one for its own record and the

other for the party to keep.

After getting the cash credit arrangement, the banker will issue a cheque book for

withdrawing cash from the account. Whenever the CC account holder wants to withdraw

cash from the account, the cash officer will scrutinize the amount of cheque in order to

make sure that the total drawings does not exceed the sanctioned limit.

C. Loan (General); It is given against Personal guarantee, hypothecation of goods and

land & building.

D. Staff Loan: Mirpur branch provides advances to the staff for purchasing house

building, Sanchaypatras, and meeting up certain requirements like family medical,

personal medical, wedding purposes. Bank provides this facility under installments.

Loanble amount varies on the basis of purpose.

E. Bills Portfolio: Mirpur branch purchases demand bills of exchange that are called

‘Draft’ accompanied by documents of title to goods such as bill of lading, railway receipt,

truck receipt. The purchase of bill of exchange drawn at an issuance, i.e. for a certain

period maturing on a future date and not payable on demand or sight.


BASIC Bank Ltd.F. Term Loan: BASIC bank is advancing both short and medium term credit to the

commercial sector on the basis of their capital structure, constitution and liquidity

consideration. Interest rate is 12% for SSI and 13% for MSI. It is given against land and

building along with machinery, personal guarantee of Directors and hypothecation of raw

materials.

Table- Showing different types of Lending offered by BASIC with Revised Interest Rate effected

from November 05, 2001

Types of Lending Interest Rate

1) Agriculture a. Primary Products 12.00%

2) Industrious Term Lending a. Term Loan-SSI b. Term Loan-MSI

12.00%13.00%

3) Working Capital a. Small-scale industries with project

cost from Tk. 5 to 30 Lac.b. Other industries

12.00%

14.50%Types of Lending Interest Rate

4) Exporta. Export (Direct)

i. Readymade garments, frozen food, agro-based industries

ii. Othersb. Advance against Inland Documentary

Bills accepted by banksi. Payment in foreign currency

ii. Payment in local currency

7.00%

10.00%10.00%14.50%10.00%14.50%

5) Commercial Lending a. International Trade/Import Finance 15.00%

6) OD againsta. FDR Taka 50 Lac and

above2% above FDR rate subject to a


BASIC Bank Ltd.

b. FDR below Tk 50 Lac c. PSP/SP/Unit Certificate

minimum of 11.25%13.50%14.00%

7) Others (Transport, Construction, etc.) 15%Source: Mirpur Branch, BASIC Bank Ltd.

5.3 General procedure for Loans and AdvancesThe following procedure is applicable for giving loans to the customer. These are-

1 : Duly fill-up First Information Sheet (FIS)

2 : Application for Credit Line

3 : Collecting CIB report from Bangladesh Bank

4 : Making credit line proposal

5 : Project appraisal

6 : Head office approval

7 : Sanction letter

8 : Documentation

9 : Disbursement

10 : Monitoring

11 : Recovery

5.3.1 First Information Sheet (FIS):First Information Sheet (FIS) is the prescribed form provided by the respective branch

that contains basic information of the borrower. It contains following particulars

i. Name of the concern with its factory location, Office address and Tel No.

ii. Name of the main sponsors with their educational qualification.


BASIC Bank Ltd.iii. Business experience of the sponsors, details of past and present business, its

achievement and failures, name of all the concerns wherein the sponsors have

involvement.

iv. Income tax registration no. with the amount of tax paid for the last three years.

v. Details of unencumbered assets (movable & immovable) personally owned by the

sponsors.

vi. Details of liabilities with other banks and financial institutions including securities

held there against.

vii. Purpose of loan sought from BASIC Bank

viii. Estimated cost of the project & means of finance.

5.3.2 Application for Credit Line:After receiving the first information sheet from the borrower Bank official verifies all the

information carefully. He also checks the account maintains by the borrower with the

Bank. If the official become satisfied then he gives application for credit line form to the

prospective borrower. The Application for Credit Lines Contain the following particulars:

i. Name, address, telephone, telex no. & cable address.

ii. Date & place established/ incorporated, status/ constitution.

iii. Names of major shareholders (in excess of 5%). State relationship between

shareholders.

iv. Names and net worth of directors/partners/owners with background & relationship

with each other (Net worth statement of each person to be attached as per format).

v. Capital structure & how the capital is deployed in business.

vi. Details of properties/assets of the applicant, with valuation against each type of

property/assets and details of charges against them.

vii. Names and addresses of subsidiaries/affiliates/allied concerns, stating relationship

with applicant, nature of business and borrowings from banks against each (including

BCCI)

viii. Nature & details of business.

ix. Latest audited/ un-audited balance sheet and profit & loss statement attached will be

submitted by:


BASIC Bank Ltd.x. Management structure (Including their experience and qualification).

xi. Names & address of other bankers, sanctioned facilities & liabilities outstanding with

details of securities there-against.

xii. Type, extent and period of credit facilities required.

xiii. Purpose of facility, repayment arrangement (with dates and amount), sources of

repayment;

xiv. Details of securities offered & any other relevant information.

5.3.3 Collecting CIB Report from Bangladesh Bank:After receiving the application for credit line, BASIC Bank sends a letter to Bangladesh

Bank for obtaining a report from there. This report is called CIB (Credit Information

Bureau) report. Basically branch seeks this report from the head office for all kinds of

loans. The purpose of this report is to being informed that whether the borrower has taken

loan from any other bank; if 'yes', then whether the party has any overdue amount or not.

5.3.4 Making Credit Line Proposal (CLP):If the officer thinks that the project is feasible then he will prepare a Proposal. BASIC

Bank prepares the proposal in a specific from called credit line proposal. It contains

following relevant information:

i. Borrower;ii. Date established, constitution;

iii. Main sponsor/ director with background;iv. Capital structure, address;v. Account opening date, introduced by, type of business, particulars of previous

sanctions;vi. Existing vis-à-vis proposed credit limits;

vii. Particulars of proposed/additional facilities;viii. Security (Existing & Proposed/ Additional);

ix. Movement of accounts;x. Components on the conduct of the account;

xi. Details of deposit, liabilities of allied concerns, liabilities with other banks;xii. CIB report;

xiii. Stock position (Pls. Provide St. report);


BASIC Bank Ltd.xiv. Rated capacity of the project(Item wise);xv. Production/purchase during the period;

xvi. Sales during the period;xvii. Business received for the period (Last three years);

xviii. Earning received for the period;xix. Associated lending/business risk (s);

After fulfilling the previous particulars, the officer places the CLP to the BCC (Branch

Credit Committee). BCC is then find out the right borrower by considering the following

5 C’s. These are character, capital, capacity, collateral, condition (*economic).

Selection of right borrower: The borrower has to be creditworthy and competent

enough to run the proposed industry. Following are the considerations-

Preference given for educated / knowledgeable sponsors, who know about their

business concern, have technically know-how and expertise in the field of proposed

industry;

Who have own land and building for running the project;

Client with innovative ideas;

Client must have net worth more than 2.5 times of the equity required for

investment in the project;

Who have good dealings with the bankers /outside parties and has social contacts

and standings;

Have an a/c with BASIC Bank Mirpur Branch;

After approving the proposal by BCC, branch then sends the CLP to the respective

division in Head Office. In Head Office there are two divisions of credit department. One

is Industrial Credit Division (ICD) and another is Commercial Credit Division. After

receiving the CLP with application for credit line, resolution copy made in the special

meeting of the BCC, branch investigation report on borrowers real estate, statement of

stock and bank statement (statement of account), the respective divisions then divide the

loan proposals into SSI (Small-scale industries) and MSI (Medium scale industries)


BASIC Bank Ltd.according to the limit. For SSI the limit is up to 10 crore and for MSI it is 10 crore and

above. Then the respective officer goes for project appraisal.

5.3.5 Project AppraisalIt is the pre-investment analysis done by the officer before approval of the project.

Project appraisal in the banking sector is needed for the following reasons:

i) To justify the soundness of an investment

ii) To ensure repayment of bank finance

iii) To achieve organizational goals

iv) To recommend if the project is not designed properly

Basically Head Office is engaged in appraising the following projects:

a) Proposal for sanctioning a term loan.

b) Proposal for sanctioning a working capital.

c) Proposal for sanctioning a term loan and working capital.

d) Proposal for renewal of advance limit.

e) Proposal for enhancement of advanced limit.

f) Proposal for enhanced renewal of advanced limit.

g) Proposal for extension of repayment period.

Techniques of Project Appraisal In ICD

An appraisal is a systematic exercise to establish that the proposed project is a viable

preposition. The appraising officer checks the various details submitted by the promoter

in first information sheet, application for credit line and CLP. BASIC Bank considers the

following aspects in appraising a proposal:

1. Technical viability

2. Commercial viability

3. Financial viability

4. Economic viability


BASIC Bank Ltd.The Head Office (HO) mainly checks the technical, commercial and financial viability of

the project. For others HO is dependent on branch’s information. But when the loan size

is big, then the HO verifies the authenticity of information physically.

Technical Viability

It implies the assessment of various requirement of actual production process. It involves

a critical study of following factors:

Location or site of the project:

Selection of the optimum location, therefore, revolves around the joint consideration

and evaluation of the following factors-

Raw materials supplies

Transportation facilities

Power, water and fuel supply

Manpower

Natural and climatic factors

Plant, machinery and equipment:

The study should consider some important technological factors with regard to plant and

equipment, viz.:

Adequacy and suitability of the machinery and equipment and their specification

Plant layout

Balancing of different sections of the plant

Reputation of the machinery supplies, etc.

Production process:

It includes details of finished products by using the raw materials.

Management and Organizational Viability:

It is very much important for the success of a project. So it is necessary to evaluate the

following:

Overall background of the promoter, and their


BASIC Bank Ltd. Academic qualification

Business and industrial experience.

Past performance.

Commercial Viability:

This study indicates evaluation of a project’s feasibility in terms of market. The

market analysis contains:

Analysis of past and present demand

Analysis of past and present supply

Analysis of demand and supply gap

Determination of pricing per unit

Estimates project’s share in the market

Marketing channel for the product should be accessible to the entrepreneur.

Financial Viability:

Analysis of financial viability is an essential part of project appraisal. The financial

analysis focuses the following for judging this viability:

Cost of the project and means of finance: It is necessary to make a preliminary

assessment of the project and the means of the financing it. If the cost of the project is too

high that it is not possible to mobilize the resources of that magnitude through the

available resources, the project is out of question.

Debt-equity ratio: It is the ratio that shows the relationship between capital contributed

by the creditors and that contributed by the owners. A low ratio indicates greater long-

term financial safety.

Comparison with similar projects: If the proposed project is similar to other projects,

financed earlier by BASIC Bank, then it is only done.

Working Capital Assessment: If the borrower proposes for working capital, then the

bank does the assessment. It is done for the raw material (imported), raw material (local),


BASIC Bank Ltd.work-in-process and finished goods. The tied-up period for imported raw material is

generally 90 days, for local raw material 30 days, for work-in-process 7-10 days and for

finished goods 3-7 days. Ultimately tied-up period depends on the nature of the goods. It

is calculated by-

Requirement of fund: It includes allowable bank borrowing and proposed limit by the

credit committee on the basis of 70% of RM, WIP & FG and imported raw materials (if

any). CC (H), LTR and in case of imported materials L/C the bank offers such facilities.

Earning forecast: It includes capacity utilization (%), sales revenue, cost of goods sold,

gross profit, total operating expenses and operating profit. It is done for 3 years only. For

new projects, capacity utilization is 60%, 70%, 80% for year 1, 2, 3 respectively. Cost of

goods sold is around 70% of sales revenue.

Operating results: Mainly it deals with various ratios like gross profit to sales, operating

profit to sales, debt-service coverage ratio, internal rate of return (IRR), break even point

(sales), BEP (efficiency).

Debt-service coverage ratio: It is the ratio by which the service covered by profit. For

BMRE (Balancing, Modernizing, rehabilitation and Expansion) project, the ratio is

expected to be more i.e. around 3 and for new project it is expected to around 2. Rule of

thumb is that it must be greater than 1. It is calculated by-

Internal Rate of Return (IRR): IRR is a discount factor where summation of cash

inflow and cash outflow of a project equals to zero. In 1st year cash outflows for project

implementation. So it is always negative. In subsequent years cash inflows to the project

to make it viable. Normally economic life of a project is considered 10 years. When sum


BASIC Bank Ltd.of cash inflow and outflow is zero, project will operate at break even point. When it is

more than zero project will be profitable. Otherwise project will incur loss. The standard

IRR value is considered 20% to 35%. Respective officer does it by trial and error method.

Break Even Point: Break even point of an enterprise/firm is a point where total

revenue/sales proceeds/sale or output equals total cost. It indicates that level of output/

sale proceeds at which the firm recovers all its costs. It neither earns profit nor incurs any

loss. In other words, this is a point of zero profitability.

It is done in two ways, namely BEP (sales) and BEP (capacity). Both are calculated by

the following formulas

Table- Financial ratio wise standard normal values applicable for BASIC Bank.

Ratios Normal standard value

Gross profit to sales Around 20% for 1st year and will be

more in subsequent years.

Operating profit to sales Around 10% for 1st year and will be

more in subsequent years.

Debt-service coverage ratio Slightly over 2. If it is <1.5 or >3,

project is not viable.

Internal rate of return (IRR) 20% to 35%

Break even point (sales) --- units

BEP (efficiency). Around 30%

Source: ICD, HO, BASIC Bank Ltd.

Sensitivity Analysis: It is normally done in two ways

a) Lowering capacity utilization by 10%

b) Lowering selling price by 10%


BASIC Bank Ltd.The analysis is done to see that the project can absorb both the shocks and to

determine the project is more sensitive to one over another. Here also both

earning forecast and operating results are calculated in the aforesaid two cases.

Lending Risk Analysis (LRA): Usually experienced bank officials do the critical

and crucial job. LRA involves two types of risk aspects.

1. Business risk and

2. Security risk.

Business risk is again divided into two parts.

a) Industry risk which involves supply risk and sales risk.

b) Company risk which involves performance risk, resilience risk,

management competence risk and management integrity risk.

Again there are two elements of security risk.

a) Security control risk and

b) Security cover risk.

LRA is done in the head office, it is not given due weight in case of loan

disbursement. They think it is not such a helpful method to judge the client

because of its subjectivity. Even after they did it when the loan amount is more

than Tk. 5 Lac.

Decision matrix from LRA

From the LRA sheet we can calculate the following numbers and plotting them into the

matrix to get the decision. The calculated result criteria is as under-

Business RiskLow Risk Average Risk High Risk Excessive Risk

13 – 19 20 – 26 27 - 34 34 ++

Security Risk -20 ~ -15 -14 ~ 0 0 ~ 10 10 ++

Based on raw materials supply and selling of finished products and also demand

supply gap, bank officials determine the industry risk. And company risk is

determined by repayment behavior of the sister concern and by the competent


BASIC Bank Ltd.management Security risk is determined by creating the charges, taking charge

documents against registered mortgage of lands and others. LRA is a four-scale

rating.

Economic Viability:

The project should ensure benefit to the national economy and create sufficient

opportunity in the following areas:

Generation of employment;

Income distribution;

Self reliance;

Development of small scale industries & ancillary business;

Improvement of quality of life and well-being;

Environmental issues;

Opportunity cost.

5.3.6 Head Office Approval:The respective officer of Head Office appraises the project by preparing a summary

named “Top Sheet” or “Executive Summary”. Then he sends it to the Head Office Credit

Committee (HOCC) for the approval of the loan. The Head Office Credit Committee

(HOCC) considers the proposal and takes decision whether to approve the loan or not. If

the loan is approved by the HOCC, the HO sends the approval to the concerned branch

with some conditions. These are like:

Drawing will not exceeds the amount of bill receivables.

The tern over in the account during the tenure of the limit should not be less than

four times of the credit limit.

All other terms and conditions, as per policy and practice of the bank for such

advance to safeguard the banker’s interest shall also be applicable for this sanction

also.

Bank may charge/ alter/ cancel any clause (s) of the sanction without assigning any

reason whatsoever and that shall be binding upon the client unconditionally.

Branch shall not exceed the sanctioned limit.


BASIC Bank Ltd. Required charge documents with duly stamped should be obtained.

Drawing shall be allowed only after completion of mortgage formalities and other

security arrangement.

5.3.7 Sanction Letter:

After getting the approval from the HO, the branch issues the sanction letter to the

borrower. A sanction letter contains the following particulars amongst other details:

a) Name of borrower.

b) Managing partner

c) Nature of Facility

d) Amount

e) Expiry

f) Rate of interest

g) Purpose

h) Security

i) Other terms and conditions: Other terms and conditions are like-

i) Before availing the loan all documentation formalities must be completed.

ii) Registered power of attorney in favor of BASIC bank to sell the mortgaged

property without the consent of the court or owner of the lender.

iii) DP note and other usual charge documents/ undertakings etc. duly stamped must

be signed and submitted to the authority before the disbursement of loan.

iv) The loan shall be governed by all other terms and conditions as per policy and

practices of the bank which will be applicable for the sanction to safe guard interest

of the bank.

v) The bank reserves the right to amend, modify or withdraw any or all the terms of

the loan at any time without assigning any reason whatsoever or to terminate/ call

back the loan facility at any time for which bank or its official cannot be held

responsible for any loss (s) for such cancellation of the loan.

The borrower receives the letter and returns a copy of this letter duly signed by him as a

token of having understood and acceptance of the terms and conditions above.


BASIC Bank Ltd.

5.3.8 Documentation of loans and advances:In spite of the fact that banker lends credit to a borrower after inquiring about the

character, capacity and capital of the borrower, he must obtain proper documents

executed from the borrower to protect him against willful defaults. Moreover, when

money is lent against some security of some assets, the document must be executed in

order to give the banker a legal and binding charge against those assets. Documents

contain the precise terms of granting loans and they serve as important evidence in the

law courts if the circumstances so desire. That is why all approval procedure and proper

documentation shall be completed before the disbursement of the facilities. The

documents for loans and advances can be classified into two (02) categories, namely

Charge documents & Security documents.

Mode of Charging Securities

BASIC Bank Mirpur branch practices these two types of securities.

1. Primary securities – Cash or cash equivalent that is

easily liquidated or convertible into cash. Example–FDR,

Sanchaypatra, DP Notes, etc.

2. Secondary securities – These securities are tangible

securities which can be realized from sale proceeds or transfer of

property. Example– immovable properties like land, buildings, etc.

The modes of charging securities are as follows-

a) Pledge

b) Hypothecation

c) Lien

d) Mortgage

Lien: Lien is the right to retain possession and not right of ownership. Bank’s lien is

general lien over its own financial obligation to clients. Property under lien cannot be

realized/sold and proceeds thereof cannot be appropriated without notice to the owner

and sometimes without court’s order.


BASIC Bank Ltd.

Hypothecation: This is mortgage of movables by an agreement and here neither

possession nor ownership is transferred. Hypothecated goods cannot be sold out/disposed

off without notice and court’s order. However, if a special power of attorney is taken in

that case can be disposed off without going to the court.

Pledge: Pledge is the bailment of goods as security for payment of a debt or performance

or promise. Here, title and ownership are not transferred. Pledge goods may be sold out

and proceeds thereof may be appropriated towards adjustment of Liability in case of

failure of the borrower to repay or fulfill the terms and conditions.

Mortgage: Mortgage is the transfer of interest in immovable property to secure the

repayment of money advanced. Ownership remains with the mortgagor. In case of

equitable mortgage, Court Order is necessary and in case of registered mortgage court’s

order is not necessary for sale/disposal of the mortgaged property for adjustment of

advance.

Category Wise Documents

All securities are not suitable for all types of advances. There is common type of charge

documents for all types of advances. These are as follows:

Demand promissory note

Letter of arrangement

Letter of disbursement

Letter of continuity

Letter of revival (Form-1&2).

Other documents are required for following types of advances

Overdraft/ Loan (General)

Letter of partnership in case of partnership firm or Board resolution in case of

limited companies.

Letter of pledge/ Letter of hypothecation.

Letter of lien for ownership transfer of shares.


BASIC Bank Ltd. Letter of lien for packing credit.

Letter of lien in case of advance against F D R

Copy of sanction letter mentioning details of terms and condition duly

acknowledge by the borrower

Cash credit (Hypothecation)

Letter of hypothecation

Letter of authority empowering the bank to inspect the goods and take possession of

the goods in case of duly drafted by the lawyer of the bank.

Stock report duly signed by the borrower on fortnightly basis or after every deposit

in the loan account or before realizing fund against limit.

Letter of declaration duly signed by the party clearly stating that the goods

hypothecated are not in any case encumbered elsewhere.

Sufficient insurance cover inserting the name of the Bank as mortgage with bank

mortgage clause.

Letter of Disclaimer signed by owner of the godown in case of 3 rd party godown.

Third party Guarantee if required as per sanction advice.

Statements of other immovable property of the borrower stating those are not

encumbered.

Mortgage: Legal

Certificate from pourasava authority that the concerned property is situated within

pourasava area.

Original title deed of property.

Latest CS, RS parcha along with latest rent receipt of land, tax, wasa, gas, electric

bills, etc.

Bia-deeds/ parcha showing chain of transfer of title.

Letter of guaranty in case of 3rd party ‘s property

Non-encumbrance certificate by engineer and branch manager.


BASIC Bank Ltd. Lawyer’s certificate regarding genuineness of title on the property of the mortgage

and stating in clear term weather the property can be accepted as security against

advances to be allowed.

Letter of guarantee of the owner of the property in case of third party property.

Memorandum of title deed of property.

Registered irrevocable power of attorney duly drafted by bank’s lawyer and

executed by the owner of the property.

Registration certificate is required;

Valuation certificate (by engineer and branch manager forced sale value to be

considered.

Branch shall take note of the following points while accepting a property as a security

1. Land should be situated within municipality area, sub-urban area of city and

industrial or commercial important areas.

2. Rural property, pond and low lying area shall not be taken.

3. Vacant land shall not be taken. It the land is protected by the boundary wall and the

ownership is clearly identified, the same may however be accepted.

4. Land must be owned by the borrower/owner of the project/firm/company and/or

member(s) of the land shall be obtained duly attested.

5. Property owned jointly (‘Ejmali’ property) shall not be accepted.

6. Original title deed and bia-deed, Khatian, Parcha, Mutation, certificate, non-

encumbrance certificate, upto date rent receipt shall be obtained and duly checked

by the credit officer, branch manager and the lawyer.

7. The value of the property shall be at least twice the amount of loan.

Branch-in-charge shall personally ensure properly mortgaged of property and retain the

documents in safe custody. Original mortgage deed should be obtained from the

registration office in time.

Transport Loan:

Hire-purchase agreement for hypothecation of the vehicle (STAMPED and duly

NOTARISED)


BASIC Bank Ltd. Purchased documents.

Registration of the vehicle in the joint name of bank and borrower (copy of the blue

book to be retained in the branch)

Road permits jointly in the name of bank and borrower.

Insurance cover against all possible perils inserting name of bank as Mortgage with

bank mortgage clause.

Certificate signed by the borrower that he has received the vehicle in good condition

and that he will exercise due care for maintenance of the vehicle.

Letter of installment.

Undertaking by the party that he will keep the vehicle always ready for inspection

by bank officials.

Bank’s name must be written in the body of the vehicle in BOLD LETTERS.

Sanchaya Patraya:

Balance Conformation Slip

Letter of Disbursement

Bangladesh SanchayPatra/ Pratirakhaya Sanchaya Patra duly discharged

Identity Slip.

Letter of encashment.

Letter of lien (first party or third party, as the case may be).

Registered partnership deed.

Resolution along with Memorandum & Article of Association in case of limited

company & in case of Corporations, resolution of the Board along with charter.

Letter of Authority for encashment of Certificates on prescribed form.

A conformation regarding marking of lien for issuing authority.

Personal Guarantee of Directors (expecting nominated directors by

Govt./Conformations)

5.3.9 DisbursementAfter verifying all the documents the branch disburses the loan to the borrower. A loan

repayment schedule also prepared by the bank and given to the borrower.


BASIC Bank Ltd.

5.3.10 Follow-upAfter the disbursement of the loan bank officials' time to time monitor the loan by

physical observation of the activities of the party. It is done in the following manner:

Constant supervision

Working Capital Assessment.

Stock Report analysis.

5.3.11 RecoveryThe loan classification procedure for all types of loan is governed by the guidelines

contained in BRPD Circular no 16 dated 06.12.98 issued by Bangladesh Bank and

subsequently revised partially through BRPD Circular no 9 and 10 dated 14.05.2001,

According to this circular If any borrower fails to repay his amount or installment within

the following time period then it will fall under the following classification status.

Loan classification

Table-3.4: Showing Loan Classification Categories

Classification

Types of loan

Agricultural

short term

Continuous Demand Term (Up

to 5 years)

Term (> 5

years)

Unclassified12 months

or below

Less than 6

months

Less than 6

months

Less than 6

months

Less than

12 months

Substandard >12 months 6 months to 6 months to 6 months 12 months


BASIC Bank Ltd.but <= 36

months

< 9 months < 9 months or more or more

Doubtful

> 36 months

but <= 60

months

9 months to

< 12 months

9 months to

< 12 months

12 months

or more

18 months

or more

Bad loanMore than

60 months

12 months

or more

12 months

or more

18 months

or more

24 months

or more

Source: BRPD circular no.16 dated 06.12.1998 and no.9 & 10 dated 14.05.2001

In general the loans are repaid in installment according to bank’s direction. Some loans

are repaid all at a time. If any loan is not repaid then notices are send to the customer with

the consent of HO. HO has a separate credit recovery wing. It advises the branch to take

all necessary actions against the loanee. Sometimes legal actions may require recovering

the loan. All types of loans a Bank fall into following four categories:

a. Unclassified: Repayment is regular.

b. Substandard: Repayment is irregular but has reasonable prospect of

improvement.

c. Doubtful Debt: Unlikely to be repaid but special collection efforts may result

in partial recovery.

d. Bad/Loss: Very little chance of recovery.

Provision:

Provision is also made under the same circular which is as follows-

Types of Classification

Provision

(1) Agricultural short term loans

Unclassified, Substandard, Doubtful

Bad/Loss

5%

100%


BASIC Bank Ltd.(2) All other loans

Unclassified

Substandard

Doubtful

Bad/Loss

1%

20%

50%

100%

Source: BRPD circular no.16 dated 06.12.1998

Legal Framework For Loan Recovery

After being classified, bank goes for loan recovery by legal action. Head office appoints

legal advisers and advises to the branch to file a suit against the defaulted loanee. BASIC

Bank generally suits files under the Artha Rin Adalat 1990. Besides, other loan recovery

acts are as follows though these are not applicable in BASIC Bank.

1. Public Demand Recovery Act-1913.

2. Bankruptcy Act-1997.

3. Negotiable Instrument Act-1881 section 138 for insufficient fund (In case of term

loan).

5.4 BANK GUARANTEE

BASIC bank offers three types of Guarantee which are as follows:

Tender or Bid Bond Guarantee: The tender guarantee assures the tenderee that tenders

shall uphold the conditions of his tender during the period of the offer as binding and that

he /she will also sign the contract in the event of the order being granted.

Performance Guarantee: A Performance guarantee expires on completion of the

delivery or performance. Beneficiary finds that as a guarantee, the contract will be

fulfilled in every respect and can retain the guarantee as per provision for long time .

Including a clause stating that the supplier can claim under the guarantee, by presenting

an acceptance certificate signed by the buyer can counteract this.

Advanced Payment Guarantee (APG): This type of guarantee is given against work

order. For example, before the beginning of Jamuna Bridge construction, the Government


BASIC Bank Ltd.collected money from different sources to pay the contractors in advance. But there was a

risk for the Government that the contractors might not do there construction work even

they were paid in advance. So the Government asked Bank Guarantee from them. Then

they contractors submitted Bank Guarantee to the Government. This type of Guarantee is

called Advanced Payment Guarantee.


BASIC Bank Ltd. CHAPTER 6 RECOMMENDATIONS AND

CONCLUSION

Credit Department

The total picture of mobilizing and recovering loans and advances are very poor for the NCBs in our country. But BASIC, state owned bank has changed the scenario remarkably. The amount of classified loans is reducing year after year. Now it is little over 3.5% that are within the world standard. Mirpur branch has also a noted picture for the same. Only one (1) loan is defaulted (Outstanding amount is about 14 Lac.) out of Tk. 26 crore loan outstanding. The percentage is 0.53%. Even after there are some loop holes in disbursing and monitoring loans and advances. These are as follows–1. Interest rates for different types of loans and advances vary to different customers. A

prospective customer is allowed to take credit facilities at a lower interest rate. Again,

the interest rate is charged at a higher rate to a customer who is not so prospective.

So, the bank officials to create positive attitude to the clients should ban

discriminatory attitude.

2. Lending Risk Analysis (LRA) is done in the Head office, it is not given due weight in

case of loan disbursement. They think it is not such a helpful method to judge the

client because of its subjectivity. But it is not true. Actually this comes from

ignorance to some extent. So, LRA should be done in appropriate considering the

importance of the same.

3. Sensitivity analysis is an effective method in appraising the project. HO does so by

considering lowering capacity utilization as well as sales price. Market is very

sensitive. At any time product price may increase due to increasing cost of raw

materials, unavailability of supplies, and so on. So, it should do the same by

increasing the sales price.

4. Loan monitoring & follow-up is a continuous process. But it is not followed in due

manner. Monitoring the loans by on-site as well as off-site supervision helps the

banker to build banker-customer relationship. So, it should give importance on the

same.


BASIC Bank Ltd.

General Banking

Mirpur Branch, BASIC Bank Ltd. is very in the point of customer satisfaction. A

good no. of Govt. a/c is maintained satisfactorily that increases deposit position of

the branch. Besides, I have observed some irregularities. Based on my observation

some recommendations have made to improve the prevailing situation of the

branch. The observations and pertinent suggestions are as follows –

1. In case of account opening, terms and conditions are not printed on the back of

the A/C opening form. But if it is so, applicants open their A/C being fully aware

of the same. At the same time, bankers can easily follow the terms and conditions

strictly.

2. There is a provision of depositing a minimum amount of money at the time of

opening an account and also maintain a minimum balance all the time. But it is not

strictly followed, particularly for prospective customers. I think the amount should be

fixed at a level that is not altered from customer to customer.

3. Every account opening must have some documentary requirement (s). Without proper

documentation, sometimes accounts are opened. Bankers should take special care in

this arena to safe guard his position.

4. Trade license must be renewed by the a/c holder every year and that copy should be

deposited in the branch. But getting certified copy is very tough after opening the a/c.

I think bank can impose some sort of monetary penalty to the a/c holder if he/ she

fails so intentionally that ultimately motivates his/ her to update the documentary

requirement.

5. Letter of thanks is to be sent to the introducer as well as to the a/c holder to confirm

the authenticity of a/c holder and to get feedback from the introducer if finds any

dissimilarity by him. But it is not practiced. It should be implemented soon for the

aforesaid reason. In addition, it also builds up banker-customer relationship.

6. The Remittances Section needs more staffs for smooth working. The respective

officer, who used to record the incoming and outgoing DD, MT and TT, often

does all the works by himself. This is totally a tremendous pressure on him. A


BASIC Bank Ltd.helping hand for him should be given for relieving his pressure and for accurate

and proper recording of DD, MT and TT.

7. No customer is allowed to issue any PO or TT until he has no a/c with BASIC Bank

Limited. This policy is being followed according to the Bangladesh Bank Order to

restrain ‘Hoondi’ business.

8. Demand liabilities particularly cash payment is made within maximum 5 minutes that

helps the branch to attract more customer (s), doing banking business with the bank.

This is handled with personal care.

9. Flexible banking hour attracts more clients doing banking transactions with the

branch. In some cases, customers, coming outside the banking hour can honour the

cheque without delay. As per Bangladesh Bank Order, transaction hour is now-

9 am to 2 pm (During Romadan) and

9 am to 3 pm (Normal).

On the other hand, personnel dissatisfaction is also observed. To resolve this problem,

bank can introduce some monetary awards/ incentives to the cash related people.

Foreign Exchange

Mirpur Branch has declared Authorized Dealer (AD) branch on June 2000 by the

Bangladesh Bank. But its actual operation starts from January 2001. Even after branch

has an organized Foreign Exchange Department. The import and export businesses that

are usually done through the branch make it a profitable one. The branch’s foreign

exchange business position as on 30.11.2001 is as follows-

Sector Total Outstanding (Amount in Lac. Tk.)

Import 1948.78

Export 21.93

Remittance 13.61

All officials are competent in foreign exchange dealings and they have vast experiences

in this field. But couple of problems is associated with this department. I specifically


BASIC Bank Ltd.observe the following problems and in light of that some recommendations are cited to

overcome them-

1. Lack of co-operation exists between the credit and the Foreign Exchange Department

of the branch. Foreign trade needs lots of credit facilities as provided by the credit

department. This non-cooperation creates problem for the importers and exporters

who are in great need of credit facilities available in the branch. Coordinated

operation between these two vital departments should be established in order to

provide better service to the importers as well as exporters and make the branch a

more profitable one.

2. Branch uses SWIFT (Society for Worldwide Interbank Financial Telecommunication)

for dealing foreign exchange operations. System is swift but the cost taken by the

bank is very high. It takes Tk. 3500/= as SWIFT charge in addition to other charges.

It's a great burden for the customer to pay such a big amount. So, bank may reduce

the charge without disrupting the facilities.

3. Though I have incorporated ID (International Department) functions with this report,

it is not through studied due to time limitations. I have covered only SWIFT

operations and exchange rate determination.

Conclusion

This report has attempted to explain the banking practices that are followed by the

BASIC Bank Limited both in Head Office and Mirpur Branch. Also I have attempted to

harmonize the practical exposure during my tenure and link the theoretical knowledge,

gained in the previous terms of MBM program. But the banking trade is too vast that this

report can by no means claim exhaustive.

Competent human resource is urgency in the financial sector to meet up the challenges of

21st century. MBM program was introduced to do the same. No doubt, this practical

orientation program has enabled the students to study the future courses.


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