Adaptation, Implementation, Success & Failure of Retail Banking Products of Jamuna Bank Ltd

Executive Summary

This report is on “Adaptation, Implementation, Success & Failure of Retail Banking Products of Jamuna Bank Ltd.”. This report intends to meet the objectives of giving a detailed description of retail banking services and prouducts offered by Jamuna Bank Limited, being accustomed with the management policy and processes regarding the retail banking operation of JBL, identify the reasons behind the success and failure of retail banking products of Jamuna Bank Ltd and giving recommendation for ways and means to make the retail banking products more popular and solve problems regarding retail banking operation of Jamuna Bank Limited.

Jamuna Bank Ltd. started its operation from 3rd June 2001 under the Banking Company Act 1991. The authorized capital of the Bank is Tk.1600.00 million and paid up capital Tk.390.00 million, as of June 30, 2009 Paid up capital of the Bank is raised to Tk.1313.26 million. At present the Bank has 49 branches and 5 SME service centre. The Bank is a full service Commercial Bank and has a strong capital base, with low non- performing loans. The mission of the bank is to become a leading banking institution and to play a pivotal role in the development of the country. The Bank aims to continue expanding Branch network to reach wide spectrum of customers across the country and serve by offering products and services backed by latest technologies.

Retail banking refers to banking in which banking institutions execute transactions directly with consumers, rather than corporations or other banks. Services offered include: savings and checking accounts, mortgages, personal loans, debit cards, credit cards, and so forth. Jamuna Bank Ltd. There are four types of Retail Banking Products of JBL under the retail loan category. These are i)Consumer Credit Scheme (CCS) , ii) Auto Loan, iii) Any Purpose Loan and iv) Salary Loan. The maximum interest rate on retail loan is 17% p.a. Though this interest rate is much competitive but it has failed to gain competitive advantage compared with other local and foreign commercial banks. Jamuna Bank Ltd. is far behind in retail loan disbursement compared to the other banks, but in 2009 it has achieved considerable growth in retail loan disbursement, though retail loan as percentage of total loan portfolio has not considerably increased. Jamuna Bank disbursed only Tk. 72.84 million retail loan in 2009 whereas Brac Bank Ltd. disbursed Tk. 10672.62 million and Prime Bank Limited disbursed Tk. 5190.12 million. Due to diversified retail loan products of other banks, faster loan processing and activities of sales team they are gaining competitive advantage. It is observed that

1. INTRODUCTION

1.1 Origin of the Report

This internship report on “Adaptation, implementation, success and failure of Retail Banking products in Jamuna Bank Ltd. is prepared to fulfill the partial requirement of the internship program as full credit subject of the EMBA program, Faculty of Business Studies, University of Dhaka. This report is the outcome of my job experience as Probationary Officer in the credit department of Jamuna Bank Limited, Mirpur Branch. While working in the bank as a Probationary Officer for the last seven months the opportunity to processing the credit proposal for the retail banking products on account of different customers and to go through the procedural guidelines, approval process, credit administration, risk management, collection and remedial management of retail banking operation and products of the bank.

1.2 Objective of the Study

The primary objective of the study is:

· To fulfill the partial requirement of the internship program as a full credit subject of the EMBA program.

To have exposure to the retail banking production and its products of Jamuna Bank Limited.
To discuss the retail banking services offered by Jamuna Bank Limited.

· To be accustomed with the management policy or process regarding the retail banking operation of JBL.

· To identify the reasons behind the success and failure of retail banking products of Jamuna Bank Ltd.

· To recommend ways and means to solve problems regarding banking operation of Jamuna Bank Limited.

1.3 Methodology

This report is based mainly on first hand experience and observations that experienced while working in the credit department of Jamuna Bank Ltd., Mirpur Branch. Data required for this report were collected from the Product Program Guideline of Retail Banking Division, Head Office, Jamuna Bank Ltd., different retail credit proposals on account of customers and annual report of Jamuna bank Ltd.. Apart from these, helpful information was collected from online resources. To analyze the performance of Jamuna bank limited different statistical and financial tools such as ratio analysis, growth analysis were done.

So, this report is prepared by two sources

Primary Sources.
Secondary Sources.

Primary Sources: Basically this type of Sources included conversation and queries with the Executives/Officers of Retail Banking Division, Head Office, JBL, Dhaka.

Secondary Sources: Secondary data were collected in the following ways:

· Data gathered within the organization itself

· Product Program Guideline for Retail Banking

· Data gathered from Texts

· Internet sources.

· General reports

· Annual reports

· Official documents

1.4 Data collection Approach

Primary data was collected in the Survey Research approach. A questionnaire was used to collect primary data for the study. The questionnaire contained open-end questions.

1.5 Sampling Technique

For sampling unit the chosen some officers of Jamuna Bank Ltd, Brac Bank Ltd. and Prime Bank Ltd. To design Sample Size two Officers from the Retail Banking Division, Head Office, JBL, one Officer from Prime Bank Ltd., Mirpur Branch and one Officer from Brac Bank Ltd., Mirpur Branch were chosen. Sampling Procedure was non-probability sampling

1.6 Analyzing the Information

The collected information has been coded according to the need of presentation in the report. The data have been analyzed using computer software like (MS EXCEL). The report has been prepared based on the data and remarks and recommendations have been posted. In the next-to-last step in this report preparation, it was tried to extract potential findings from the collected data and information.

1.7 Scope & Limitation

In this report I have tried to use, as much as information possible but in some cases the information were not enough. Lacking of some essential footnotes hampered our work in some steps. The area of banking operating is very large. had been working in this bank as a “Probationary Officer” about seven months. During the probationary period of 1 year to cover all the desks as part of job rotation. The working in the credit department for the last two months. This time is not enough to understand all the banking functions of credit operation, especially retail banking. Moreover, sanction of retail loan and other approval process is done by Retail Banking Division, Head Office. So faced some problems when collect information as working in Branch level. Sufficient books, publications and figures were not available. If this limitation were not been there, the report would have been more useful. In spite of limitation got some facility to complete my internship report. The employees working in the Retail Banking Division, Head Office helped me lot. They gave me all essential data and conversation with. The university internship supervisor also helped me a lot. He gave guidelines how to prepare report more attractively and perfectly.

2. Company Information

2.1 About JBL, the Bank

Jamuna Bank Limited (JBL) is a Banking Company registered under the Companies Act, 1994 with its head office at Printers Building (2^nd floor and 8^th floor), 5, Rajuk Avenue, Dhaka-1000. The Bank started its operation from 3rd June 2001.

Jamuna Bank Limited is a highly capitalized new generation Bank started its operation with an authorized capital of Tk.1600.00 million and paid up capital of Tk.390.00 million, as of June 30, 2009 Paid up capital of the Bank raised to Tk.1313.26 million. The number of branches raised to 49 (forty nine) and 5 SME service centre as on December 31, 2009.

JBL undertakes all type of banking transactions to support the development of trade and commerce in the country. JBL’s services are also available for the entrepreneurs to set up new ventures and BMRE for industrial units. The Bank gives special emphasis on Export, Import, Trade Finance, SME Finance, Retail Credit and Finance to Women Entrepreneurs.

To provide clientele services in respect of International Trade it has established wide correspondent banking relationship with local and foreign banks covering major trade and financial centres at home and abroad

2.2 Mission of JBLION

To become a leading banking institution and to play a pivotal role in the development of the country.

2.3 Vision of JBL

The Bank is committed to satisfying diverse needs of its customers through an collection of products at a competitive price by using appropriate technology and providing timely service so that a sustainable growth, reasonable return and contribution to the development of the country can be ensured with a motivated and professional work-force.

2.4 Corporate Slogan of JBL

You’re Partner for Growth

2.5 Sponsors of JBL

The sponsors of Jamuna Bank Limited are successful leading entrepreneurs of the country having stakes in different segments of the national economy. They are eminent industrialist and businessman having wide business reputation both at home and abroad.

2.6 Management of JBL

JBL is managed by highly professional people. The present Managing Director of the Bank is a forward looking senior banker having decades of experience and multi discipline of knowledge to his credit both at home and abroad. Is supported by an educated and skilled professional team with diversified experience in finance and banking. The management of the bank constantly focuses on the understanding and anticipating customers’ needs and offer solution thereof. Jamuna Bank Limited has already achieved tremendous progress with in a short period of its operation. The Bank is already ranked as one of the quality service providers and known for its reputation.

2.7 Objectives of JBL

To earn and maintain CAMEL rating strong.
To establish relationship banking and service quality through development of Strategic Marketing Plan.
To remain one of the best banks in Bangladesh in terms of profitability and asset quality.
To introduce fully automated systems through integration of Information Technology.
To ensure an adequate rate of return on investment.
To keep risk position at an acceptable range (including any off balance sheet risks)

To maintain adequate liquidity to meet maturity obligations and commitments.

· To maintain a healthy growth of business with desired image.

To maintain adequate control systems and transparency in procedures.
To develop and retain a quality work force through an effective Human Resources Management System.

· To ensue optimum utilization of all available resources.

To pursue an effective system of Management by ensuring compliance to ethical norms, transparency and accountability at all levels.

2.8 Strategies of JBL

To manage and operate the bank in the most efficient manner to enhance financial performance and to control cost of fund.
To strive for customer satisfaction through quality control and delivery of timely services.
To identify customers credits and other banking needs and monitor their perception towards our performance in meeting those requirements.
To revive and update policies, procedures and practices to enhance the ability to extend better services to customers.
To train and develop all employees and provide them adequate resources so that customers’ needs can be responsibly addressed.
To promote organizational effectiveness by openly communicating company plans, policies, practices and procedures to all employees in a timely fashion.
To cultivate a working environment that fosters positive motivation for improved performance.

· To diversify portfolio both in the retail and wholesale market.

2.9 Organ gram of JBL

Chairman

2.10 Corporate Governance

Board of Directors

The Board of Directors consists of 17 members elected from the sponsors. The Board of Directors is supreme body of the Bank.

Executive Committee

All routine matters beyond the delegated powers of management are decided upon by or routed through the “Executive Committee, subject to ratification by the Board of Directors.

Audit Committee

In line with the guidelines of Bangladesh Bank, a three-member Audit Committee of the Board of Directors been formed to assists the Board in matters related to Audit and Internal Control System of the Bank.

Chairman

Sakhawat, Abu Khair Mohammad

Vice Chairman

Md. Ismail Hossain Siraji

Directors

Al-haj M. A. Khayer

Engr. A. K. M. Mosharraf Hussain

Engr. Md. Atiqur Rahman

Golam Dastagir Gazi (Bir Protik)

Fazlur Rahman

Al-Haj Nur Mohammed

Md. Tajul Islam

Al-Haj Md. Rezaul Karim Ansari

Md. Belal Hossain

Md. Mahmudul Hoque

Md. Sirajul Islam Varosha

Farhad Ahmed Akand

Kanutosh Majumder

Shaheen Mahmud

Gazi Golam Murtoza

A. S. M. Abdul Halim, Independent Director, represents Dhaka Insurance Limited

Deputy Managing Director

M. A. Salam

Md. Alauddin Al-Azad

Company Secretary

Malik Muntasir Reza

3. Retail Banking Operation of Jamuna Bank Ltd.

3.1 What is Retail Banking?

3.1 Difference between Core Banking & Retail Banking

Often retail banking is referred to as “non commercial banking” which would be common checking accounts and consumer loans. Where as “core banking” is often the very solid business accounts and commercial loans. It is referred to, as ‘core’ because it is a core or central to the banks business. Few banks survive from just retail banking services, they need those core business accounts that are perhaps more stable than retail business. The exact term usage may also be based on the part of the country one lives in as is often the case with our language.

3.2 Retail Banking in Bangladesh

Retail banking has gained notable popularity over the last five years and is increasing day by day on the back of rising trend of middle class people and access of banking services to the urban people. Specifically consumer loan for meeting up the demand of people to adapt to the new lifestyle of middle class and higher middle class people has gained much popularity. Several commercial banks – both local and foreign- have come forward to meet up this demand with diversified and multifarious retail banking services like car loan, consumer loan for purchase of household appliance, loan against salary; credit card etc has gained much popularity. For this purpose the commercial banks has concentrated in increasing their retail loan portfolio.

3.3 Retail Banking Products of JBL

Types of Retail Loan in JBL

There are four type of retail loan in JBL:

Consumer Credit Scheme (CCS)
Auto Loan – Against Car Registration
Any Purpose Loan – Against Security
Salary Loan

3.3.1 Consumer Credit Scheme (CCS)

· CCS-1: Customer Segment

i) Permanent/confirmed service holder of Govt., Semi-Govt., Autonomous organizations, Banks, Insurance Companies, Public Limited Companies, Multinational Companies, NGOs.

ii) Employees of Private Limited Companies, acceptable to the bank, covered by guarantee of another employee of equal or higher grade.

iii) Teachers of Universities, Colleges & Schools (Affiliated).

iv) Professional persons like Doctors, Engineers, Chartered Accountants, and Architects.

v) All regular Employees of Jamuna Bank Limited. (Service life will be minimum 6 month as permanent employee of Jamuna Bank Ltd.)

vi)Employees of Jamuna Bank Ltd must submit a guarantee of another confirmed equal or higher grade employee of Jamuna Bank.

vii) Loan life shall not exceed 36 months or unexpired service period of salaried customers.

viii) Bank at its discretion may also extend facility to any customer not mentioned above.

ix) Job security of a salaried applicant for such credit will be taken into consideration while processing his/her case for consumer credit.

Non Target Customer:

(1) Defense officials (2) Police (3) Lawyers (4) Public figure & media Personalities (5) Journalists (6) Travel Agents & C&F agents (7) Mariners (8) Employee of non reputed Proprietorship/Partnership firms (9) Politically affiliated personalities and (10) Negative listed individuals.

· CCS-2: Purpose

The purpose of consumer financing is to purchase the following Articles:

Consumer durable.
Household Items
Any other item not covered above but acceptable to the bank.

· CCS-3: Nationality

Bangladeshi by Birth.

· CCS-4: Age Limit

1. Minimum age 21 years / Maximum age 60 years

2. But loan tenor shall not exceed 63 years of age .

3. Loan tenor shall not exceed remaining service life of salaried person.

· CCS-5: Minimum Income

Net Income should be at least Tk. 15,000/- per month (exempted for JBL employees).

The Customer must have sufficient net cash flow to repay the loan installments.

· CCS-6: Loan Size

For Jamuna Bank employee – 12 times basic but maximum Tk. 3.00 lac

For the client – maximum Tk. 3.00 lac

· CCS-7 : Loan to Price Ratio

For Jamuna Bank employee – 80%

For the client – 60%

· CCS-8: Security/ Collateral

· Post dated cheques favouring the Bank for all installments both for customers and JBL employees.

· Hypothecation/ Lien / Registration / Mortgage of customer procured item, as feasible depending on the type of asset.

· Hypothecation/ Lien / Registration / Mortgage of any other asset, acceptable to the bank, as feasible depending on the type of asset.

· Personal guarantee of the client and his spouse (if any)

· Guarantee of a Person/Company/Institution acceptable to the Bank.(Guarantor shall be equal to or more creditworthy then the Principal applicant)

· Lien on Salary and service benefit of the customer duly confirmed by his employer on JBL standard format.

· Copy of Telephone bill/WASA bill/Municipality holding tax receipt.

o CCS-9: Legal/Charge/other Documents

· Acceptance of sanction terms.

· Usual charge documents.

· Salary Certificate from the Employer, if salaried and bank account statement.

· Letter of Lien on Salary and service benefit of the customer from his employer on JBL standard format.

· The Sale Receipt of goods in the name of the borrower.

· An undertaking in Bank’s prescribed form to pay monthly installments regularly.

· Employer’s certificate in the JBL standard format to the effect that the client is in the permanent service of the organization, if service holder.

· Letter of Authority to take repossession and sell the goods/item/asset purchased/procured under JBL financing.

· Letter of lien on monthly payment and service benefit of salaried customer.

· Letter of Hypothecation/ Letter of Lien / Registration/ Mortgage deed of procured asset/any other asset, acceptable to the bank, as feasible depending on the type of the asset.

· CCS-10: Interest Rate

For Jamuna Bank employee – 11% p.a.

For the client – 17% p.a.

For overdue – 4% penal interest.

· CCS-11: Maximum Term of Loan

For Jamuna Bank employee- Maximum 3 years.

For the client – Maximum 3 years.

Ø CCS-12: Repayment Method

By equated monthly installments.
Payment starts from the month following the month of disbursement.
Payment has to be made within 10^th day of every month.
Tk.500.00 shall be charged as penalty for each bounced cheque.
Default in payment of consecutive 2(two) installment shall constrain the bank to take legal measure.
Resignation/Termination of any salaried person from present employment shall make the loan immediately repayable.
The full value of the limit shall also be repayable on demand, if the bank assumes that, (1) the customer has lost his repaying capacity, (2) the customer may lose his repaying capacity, (3) the customer’s conduct with the bank does not remain at a satisfactory level and (4) any other uncontrollable factor which may constrain the bank for calling up the loan.

· CCS-13: Disbursement pre-condition

Standard account opening and properly filled in KYC.
Fulfillment of Documentation and clean CIB report.
Deposit of equity money and bank charges.
Contact point verification and income verification by the branch nominated and head office accepted official(s)/agency.

· CCS-14: Disbursement Mode

Bank’s sanctioned amount shall be disbursed through Payment Order/ Bank Draft directly to the supplier/seller.
In case employees of JBL, loan amount shall be directly credited to the borrower’s account against quotation.

· CCS-15: Debt Burden Ratio (DBR %)

Primarily 30% of monthly take home salary/ monthly net income.

· CCS-16: Verification of Personal Details and Quotation

Branch administration shall verify the personal details, contact point, Gross Monthly Income and quotation/supply order/ indent and the supplier.

· CCS-17: Other charges

Type of Charge	JBL Employee	Customers
Service Charge	N/A	1%
Risk Fund(Non-refundable)	N/A	1-2%
Application Fee	N/A	Tk. 100.00
Other Charges	At actual	At actual

3.3.2 Auto Loan – Against Car Registration

· Auto Loan-1: Customer Segment

i) Permanent/confirmed service holder of Govt., Semi-Govt., Autonomous organizations, Banks, Insurance Companies, Public Limited Companies, Multinational Companies, NGOs.

ii) Employees of Private Limited Companies, acceptable to the bank, covered by guarantee of another employee of equal or higher grade.

iii) Teachers of Universities, Colleges & Schools (Affiliated).

iv) Professional persons like Doctors, Engineers, Chartered Accountants, and Architects.

v) All regular Employees of Jamuna Bank Limited. (Service life will minimum 1 year as permanent employee of Jamuna Bank Ltd.)

vi) Employees of Jamuna Bank Ltd must submit a guarantee of another confirmed equal or higher grade employee of Jamuna Bank.

vii) Loan life shall not exceed 60 months or unexpired service period of salaried customers.

viii) Bank at its discretion may also extend facility to any customer not mentioned above.

ix) Job security of a salaried applicant for such credit will be taken into consideration while processing his/her case.

Non Target Customer:

· AUTO LOAN-2: Purpose

To procures brand new/unregistered Personal Transport, of age not more than 5 years, for use in lawful purpose.

· AUTO LOAN -3: Nationality

Bangladeshi by Birth.

· AUTO LOAN -4: Age Limit

1. Minimum age 25 years / Maximum age 54 years

2. but loan tenor shall not exceed 59 years of age.

3. Loan tenor shall not exceed unexpired service life of salaried person.

· AUTO LOAN -5: Minimum Income

Net Income should be at least Tk. 40,000/- per month. (to be substantiated by evidence)

The Customer must have sufficient net cash flow to repay the loan installments.

· AUTO LOAN -6: Size

For the client – Minimum 5.00 lac Maximum Tk. 20.00 lac

· AUTO LOAN -7 : Loan to Price Ratio

For the client – 70%

JBL employee – 80% (Price of the vehicle to be verified by the bank).

· AUTO LOAN -8: Security/ Collateral

· Post dated cheques favouring the Bank for all installments

· Registration of the vehicle in the name of the bank.

· Hypothecation/ Lien / Registration / Mortgage of any other asset, acceptable to the bank, as feasible depending on the type of asset.

· Personal guarantee of the client and his spouse (if any)

· Letter of authority of the borrower/user for repossession and sell the vehicle by bank, in case of default of 3 consecutive installments.

· Guarantee of a Person/Company/Institution acceptable to the Bank.(Guarantor shall be equal to or more creditworthy than the Principal applicant)

· Lien on Salary and service benefit of the customer duly confirmed by his employer on JBL standard format, if applicable.

· Comprehensive 1^st party insurance coverage favouring the bank from a reputed Insurance Company.

o AUTO LOAN-9: Legal/Charge/other Documents

· Acceptance of sanction terms.

· Usual charge documents & JBL standard Lease agreement.

· Salary Certificate from the Employer, if salaried and bank account statement.

· Letter of Lien on Salary and service benefit of the customer(if service holder) from his employer on JBL standard format.

· A copy of the customer paid utility bill.

· An undertaking in Bank’s prescribed form to pay monthly installments regularly.

· Employer’s certificate in the JBL standard format to the effect that the client is in the permanent service of the organization(if service holder).

· Letter of Authority to take repossession and sell the goods/item/asset purchased/ procured under JBL financing.

· Letter of lien on monthly payment & service benefit of salaried customer.

· Letter of Hypothecation/ Letter of Lien / Registration/ Mortgage deed of procured asset/any other asset, acceptable to the bank, as feasible depending on the type of the asset.

· Irrevocable Letter of authority to take possession of and sell Hypothecated/ under Lien / Registered / Mortgaged/ procured asset/any other asset, acceptable to the bank, as feasible depending on the type of the asset.

· AUTO LOAN-10: Interest Rate

For the client – 16%

For JBL Employee – 15%

For overdue – Penal interest 4%

· AUTO LOAN-11: Maximum Term of Loan

For the client – 3-5 years, within service life(for salaried)

For JBL Employee – 3-6 years

· AUTO LOAN-12: Repayment Method

By equated monthly installments.
Payment starts from the month following the month of disbursement.
Payment has to be made within 10^th day of every month.
Tk.500.00 shall be charged as penalty for each bounced cheque.
Default in payment of consecutive 3(three) installment shall constrain the bank to take legal measure.
Resignation/Termination of any salaried person from present employment shall make the loan immediately repayable.
The full value of the limit shall also be repayable on demand, if the bank assumes that, (1) the customer has lost his repaying capacity, (2) the customer may lose his repaying capacity, (3) the customer’s conduct with the bank does not remain at a satisfactory level and (4) any other uncontrollable factor which may constrain the bank for calling up the loan.

o AUTO LOAN -13: Disbursement pre-condition

· Standard account opening and properly filled in KYC.

· Fulfillment of Documentation and clean CIB report.

· Deposit of equity money and bank charges.

· Contact point verification and income verification by the branch nominated and head office accepted official(s)/agency.

· AUTO LOAN -14: Disbursement Mode

Bank’s sanctioned amount shall be disbursed through Payment Order/ Bank Draft directly to the supplier/seller upon receipt of registration and insurance coverage.

· AUTO LOAN -15: Debt Burden Ratio (DBR %)

Primarily 30% of monthly take home salary/ monthly net income.

· AUTO LOAN -16: Verification of Personal Details and Quotation Branch administration shall verify the personal details, contact point, Gross Monthly Income and quotation/supply order/ indent and the supplier.

AUTO LOAN -17: Other charges

Type of Charge	JBL Employee	Customers
Service Charge	N/A	1%
Risk Fund (Non-refundable)	N/A	1-2%
Application Fee	N/A	Tk. 100.00
Other Charges	At actual	At actual

3.3.3 Any purpose Loan-Against Security

· Any Purpose Loan-1: Customer Segment