An Overall Banking System of AB Bank Limited
1. 2 BACKGROUND OF THE STUDY
Business world is becoming very much complex day by day. Without sufficient practical experience business becomes difficult and in some cases impossible. The whole world is moving because of business relation. Business plays a very important role in developing economy of a country. So, in the business world, practical experience is regarded as a media through whom we have an acquaintance with the real world. Through this report an individual can expect to have a good knowledge and understanding on the various methods of operation performed by AB Bank Limited particularly in the area of Financial Institutional Services. From the last three months of the bank’s disbursement, everything is tried to include in precise form. Have tried level best to put more emphasis on the welcome pack and its recovery process. This report is to be used only for the academic purpose. have collected all the necessary and relevant data from various primary, secondary and tertiary sources. After eight week long hard labor, it has become possible for me to make the report comprehensive and factual. The data is truly and strictly confidential and no one can use its components in full or partial. Would like to give thanks to everyone who has helped and encouraged me in the process of preparing this report. The authorized to prepare a report on Overall Banking division and performance evaluation of the Abar Bangladesh Bank Ltd. for partial fulfillment of my course requirement.
1.3 OBJECTIVES OF THE STUDY
This report has been prepared through extensive discussion with employees of the bank and with the clients. While preparing this report, The had a great opportunity to have an in depth knowledge of all the banking activities practiced by the AB Bank limited. It also helped me to acquire a fast hand perspective of a leading private bank in Bangladesh and the date of information concentrate within the period 2005 to 2009.
1.3.1 Primary objective:
The primary objective of this report is to prepare a report on “Overall Banking System of National Credit Commerce Bank Limited” as the partial requirement of B.B.A program
- To get real life experience from the organization
- To gather Knowledge about the function & transaction of different departments of the AB bank
- To know the organizational framework of the bank
- To identify the pattern of the different types of loan system.
- Loan features and recovery system of some loan schemes with launching of some new scheme with special features.
- To evaluate the contribution of Scheme deposits in total collection of loan.
- To evaluate of the total collection of loan or provided in AB then other bank
1.3.2 Secondary objectives:
The study was conducted to achieve the following secondary objectives-
- To present an overview of National Credit & Commerce Bank Limited.
- To appraise the principal activities of the Bank.
- To appraise the financial performance.
- To identify the problems of AB Bank Limited.
- To suggest measures for the development of National Credit & Commerce Bank Limited.
1.4 SCOPE OF THE REPORT
This paper will cover the details of AB Bank’s practices about various Overall Banking system of AB Bank. Now a day’s overall banking system is very much important for all banks because they are easily received profit from their customers. In this paper, will try to focus on the various functions of Loan activities, its using business correspondence analysis of this sector as well as its role in our economy. It will also cover the total system of credit management procedures and performance of Abar Bangladesh Bank Ltd. The deterioration of loan quality will also affect the intermediation efficiency of the financial institutions and thus the economic growth process of the country. This establishes the fact that banks should provide increasing emphasis on various analytical tools and techniques for screening proposals and loan decision taking.
1.5 LIMITATIONS OF THE STUDY
Since the paper is concerned with the comparison of General banking department of The AB Bank Limited with other private banks, different private commercial bands, such as, Eastern Bank Limited, United Commercial Bank Limited, Dhaka Bank Limited, HSBC, and Bank Asia Ltd etc are also deal with this loan sector. Basically all bank of their main target gain maximum profitability by providing loan to the customers. So a lot of information could not obtain because the banks were not interested to disclose their information, policy, and data to maintain their secrecy. The had to depend on the websites of the respective banks for much information. There are certain limitations regarding the studies that are summarized below:
- Field practice varies with the standard practice that also created problem.
- Time provided for conducting the study is another important constraint.
- The employees in The AB Bank Limited are so much busy in their responsible fields.
- The total report like “Loan Disbursement and recovery system of the Arab Bangladesh Bank Ltd ” is vast and not possible to make it over a night. So it is the hard task to prove all the information on that necessary segment which might make report more resourceful and out standing. I couldn’t prepare the report as the best of my capability because much information could not gathered for the recourses of confidentially. During the Banking hour there were many customers who has to be served time offered per customer was not adequate to ask about their satisfactory and dissatisfactory level in connection with scheme related transactions which might have helped to focus in more detail.
- In case of performance analysis secondary data are used.
1.6 METHODOLOGY OF THE STUDY
National Credit &Commerce Bank Limited is one of the well-known private commercial bank in Bangladesh. Its public reporting system is appreciable. Data is managed in well manner. Data arrangement is logical that helps in easy application of analytical tool. Statistical tools and much graphical presentation are used for performance analysis.
1.6.1Research Design:
Exploratory research has been conducted for gathering better information that will give a better understanding on various information in General banking sector, how to communicate customer and other bank employee, all are gathering knowledge about this sector of Loan. Both primary and secondary sources of data collection procedure have been used in the report. Primary data has been collected mainly through the writer’s observation of the approval process and monitoring techniques, informal interviews of executives, officers and employees of The AB Bank Limited.
1.6.2 Sources of Data Collection:
To make the Report more meaningful and presentable, two sources of data and information have been used widely such as…
Source of Data
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Figure: Sources of data
Both primary and secondary data sources were used to generate this report.
1.6.3The Primary sources are follows:
Primary data are measurements observed and recorded as part of an original study. When the data required for a particular study can be found neither in the internal records of the enterprise, nor in published sources, may it become necessary to collect original data. For the completion of this report, the primary sources of data are-
· Face-to-face conversation with the respective officers and staffs of AB Bank Limited.
· Informal conversation with the clients.
· Practical work exposures from the different desks of the departments of the Branch.
· Study of the relevant files as instructed as instructed by the officers concerned
· Experts’ opinion and comments,
1.6.4The Secondary sources and data are follows:
The data, which has already been collected by others, such data are called Secondary data. For this internship report, the secondary data are collected from the below sources-
· Annual report of AB Bank limited
· Unpublished data from the branch
· Banker’s training book
· Training materials available at the BIBM library,
· Various books articles, compilations etc. regarding marketing of financial products are informed below:
· Published of different products,
· Office circular and other published papers,
· Website of the AB; www.ABbank.com.db
1.7 Purpose of the Study
The purpose of this study is to find the evaluation of Arab Bangladesh Bank Ltd . General Banking, Foreign Trade and Credit Division of Arab Bangladesh Bank Ltd are provided for enriching the knowledge by knowing these activities.
1.8 Internship Team
Although as an internship project it was primarily undertaken by only one individual, several other people were directly or indirectly related with the project and made significant contribution in its completion. The team can be shown as:
1.9Type of study
The study took place through exploitation of secondary data from the Internet, research and analysis of AB Bank limited itself. This data mining included extracting data from research carried out by in-house AB Bank Limited. The filtered data then was put into use in compiling this report.
1.9 Intent of study
The intent of this study is to understand the Branch Information and Financial Statement of AB Bank Limited. By these activities of General Banking, Credit Section and Foreign Trade of AB Bank Limited can be known. It was then further analyzed to understand the true need of an efficient banking system.
1.10 Sampling Frame
· Calculation of the expense ratios
· Making the necessary comparing tables
· Incorporate graphical charts
Calculations of the above-mentioned tools are done by the help of Microsoft Excel Program.
Work Schedule
My work schedule was planned by rotation
| Name of the Department | Total Days |
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14 days |
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5 days |
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7 days |
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7 days |
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10 days |
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10 days |
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21days |
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7days |
|
8 days |
Table-1: Work Schedule
ORGANIZATIONAL PROFILE
2.1 INTRODUCTION
The prosperity of a country depends on its economic activities. Like any other sphere of modern socio-economic activities, banking is a powerful medium of bringing about socio-economic changes of a developing country. Without adequate banking facility agriculture, commerce and industry cannot flourish. A suitable developed banking system can provide the necessary boost for the economic growth of the country. Because banking system is linked with the whole economy.
Abar Bangladesh Bank Ltd (ABBL) is a private commercial bank. It is also contributing to the growth of our country’s economy. It is a progressive commercial bank in private sector. It creates new opportunities for its clients. It gives customized services and maintains harmonious banker-client relationship. It contributes towards formation of national capital, growth of savings and investment in trade, commerce and industrial sector.
2.1 HISTORY OF AB BANK LIMITED:
AB Bank Limited is one of the fasted growing banks among all the commercial banks in Bangladesh. ABBL bears a unique history of its own. The aim of the company was to mobilize resources from within and invest them in such way so as to develop country’s industrial and Trade Sector and playing a catalyst role in the formation of capital market as well. Its membership with the bourse helped the company to a great extent in this regard.
AB Bank Limited, the first private sector bank was incorporated in Bangladesh on 31st December 1981 as Arab Bangladesh Bank Limited and started its operation with effect from April 12, 1982.
AB Bank is known as one of leading bank of the country since its commencement 28 years ago. It continues to remain updated with the latest products and services, considering consumer and client perspectives. AB Bank has thus been able to keep their consumer’s and client’s trust while upholding their reliability, across time.
During the last 28 years, AB Bank Limited has opened 77 Branches in different Business Centers of the country, one foreign Branch in Mumbai, India and also established a wholly owned Subsidiary Finance Company in Hong Kong in the name of AB International Finance Limited. To facilitate cross border trade and payment related services, the Bank has correspondent relationship with over 220 international banks of repute across 58 countries of the World.
In spite of adverse market conditions, AB Bank Limited which turned 28 this year, concluded the 2009 financial year with good results. AB attained highest ever profitability in the history of the Bank’s 28 years of existence. The Banks consolidated profit after taxes amounted to Taka 336.20 crore which is 46.11% higher than that of 2008. The asset base of AB stood at taka 10691.20 crore (growth of 27 percent) while total capital crossed the threshold and reached the level of taka 1079.0 crore at the year end
2.2 Organizational Structure of ABBL.
Abar Bangladesh Bank Ltd . (ABBL) was incorporated on 31st December 1981, under the company’s act-1913 as a pioneer commercial bank in the private sector in Bangladesh with its Head Office in Dhaka. The bank started functioning from 12th April 1982 with the approval of Bangladesh Bank under the guidelines, rules and regulations given for scheduled commercial banks operating in Bangladesh. It was initially a joint venture commercial bank between Bangladeshi sponsors and Dubai Bank Ltd. Dubai (U.A.E.) having respective share holdings as under:
| Bangladesh Sponsors | 20% |
| Bangladeshi General Public | 15% |
| Bangladesh Government | 05% |
| Dubai Bank Ltd. | 60% |
Table 1: Organizational Structure of Abar Bangladesh Bank Ltd
Subsequently, the Union Bank of Middle East Ltd. inherited the shares of Dubai Bank Ltd. in 1986 and continued as its shareholder till early 1987, when they decided to offload their investment in Bangladesh. As per provisions of the bank Articles of Associations, with the approval of Bangladesh Bank and the controller of Capital issue Government of Bangladesh, the shares (60%) held by the Union Bank of Middle East (UBME), were purchase by the Bangladeshi Sponsored Directors, raising total shares of holding to 80% of total share capital. However, as desired by the government of Bangladesh the sponsors. Directors, who acquired the 60% shareholdings of Union Bank of Middle East (UBME), unclosed 50% of share, purchased by them from UBME to the general public of Bangladesh raising the public share holdings to the 45% of total share capital of the bank.
The Objective of the bank is to undertake all kinds of banking and foreign exchange business in Bangladesh as well as abroad through its brandies/correspondents.
2.3 Capital Structure of ABBL.
The authorized capital of Abar Bangladesh Bank Ltd . is taka 600.00 crore divided into 6.00 crore ordinary shares of taka 100 each, from the existing Tk. 300.00 crore on 05 march, 2009. The total paid up capital rose to taka 2564.00 million at the end of 2009. At present the composition of the existing shareholders of the bank is as under:
| Bangladeshi sponsors/ Directors | 50% |
| Bangladeshi General Public | 49.43% |
| Govt. of Bangladesh | 0.57% |
Table 2: Capital Structure of ABBL
2.4 Change of Name and Logo of ABBL.
Arab Bangladesh Bank Ltd. was incorporated on 31st December 1981, under the company’s act 1913. The bank started functioning from 12th April 1982. It is the first private bank in Bangladesh. Motijheel Branch is the corporate branch of this bank. The branch has enjoyed its 28th anniversary during this year.
Arab Bangladesh Bank Ltd. Changed its name to AB Bank Limited (ABBL) with effect from 14 November 2007 vides Bangladesh Bank BRPD Circular Letter No-10 dated 22 November 2007. Prior to that Shareholder of the Bank approved the change of name in the Extra-Ordinary General Meeting held on 4 September 2007. Effective 1 January 2008, ABBL changed its Logo as well.
| Previous Name & Logo | New Name & Logo | ||||||
| Arab Bangladesh Bank Ltd. | Abar Bangladesh Bank Ltd | ||||||
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Table: Name & Logo of ABBL
2.5 Corporate Information of ABBL.
Legal Form: A public limited company incorporated on 31st December, 1981 under the Companies Act, 1913 and listed in the Dhaka Stock Exchange Ltd and Chittagong Stock Exchange Ltd.
The Abar Bangladesh Bank Ltd (ABBL) started its operation in 25th November 1985 as a non-banking financial institution under the name of National Credit Limited (NCL). 26 businessmen sponsored it as a public limited company under the Companies Act 1913 with an authorized capital of taka 300 million. AB Bank was incorporated as a banking company under the Companies Act 1994. In end 2001 it had 30 branches all over Bangladesh. It carries out all its banking activities through these branches among which 17 branches are authorized dealer of foreign exchange. The bank is listed in the Dhaka and Chittagong Stock Exchanges as a publicly quoted company for its general class of shares. The authorized capital of the bank is now taka 750 million. The Bank raised its paid up capital from Taka 195 million to Taka 390 million during the year through IPO of which sponsor directors/ shareholders equity stood at Taka 198 million. With the increase of paid up capital to Taka 390 million, the capital base of the Bank has become strong. AB Bank is now positioned to best suit the financial needs of its customers and make them partners of progress.
2.3 MISSION
· Anticipating business solutions required by all our customers everywhere and innovatively supplying them beyond expectation
· Setting industry benchmarks of world class standard in delivering customer value through our comprehensive product range, customer service and all our activities
· Building an exciting team-based working environment that will attract, develop and retain employees of exceptional ability who help celebrate the success of our business, of our customers and of national development
· Maintaining the highest ethical standards and a community responsibility worthy of a leading corporate citizen
· Continuously improving productivity and profitability, and thereby enhancing shareholders value
2.4 VISION
To be in thee forefront of national development by providing all the customers inspirational strength, dependable support and the most comprehensive range of business solutions, through our team of professionals who work passionately to be outstanding in everything we do.
2.5 VALUES
Value Pillars of AB Bank that are central to our core ideologies and that must always be reflected in everything we do:
- We are aggressive in business and self-driven.
- We empower people, create leaders and drive change.
- We treat people with respect and dignity.
- We are personally accountable for delivering on commitments to build high-trust relationship with customers and to ensure customer delight.
- We focus on managing risks and costs in order to be doubly profitable.
- We act in ways that reflect the highest standards of integrity
2.6 FUNCTIONS AND OPERATION
AB Bank Limited opened its 65th branch with online facility at Progati Soroni, Badda on 26 January 2010. Vice Chairman of the Bank Lion M. Harunur Rashid MP formally inaugurated the branch as chief guest. Managing Director & CEO Mohammed Nurul Amin presided over the function. Mohammed Nurul Amin, Managing Director & CEO of the Bank in his speech citing various schemes and services of AB Bank said that the bank would open more branches, SME Centers and branches of Brokerage House in different places of the country in this year. Stressing on social responsibility of the Bank, he said that Bank is not only a profit earning organization but also working for social welfare, which will continue in future.
The bank has by now a network of 17 branches strategically located in different cities. All the branches are functioning in computerized environment and integrated through Wide Area Network (WAN). This interconnected system is fictionalized with Oracle based software called Flora. The branches are full-fledged units and can provide all commercial and investment banking services ranging from small and medium enterprises to big business conglomerates and houses
2.6ORGANIZATIONAL HIERERCHY OF ABBL:
2.7 MANAGEMENT OF ABBL
Management of ABBL is professional and experienced. Top management and the policy formulation of the Bank is vested on the Board of Directors. The board of directors consists of 26 members headed by chairman. Most of the directors are owners of large business groups having high net worth. The executives and officers of the bank execute the policies and programs formulated by the board.
The Managing Director is the chief executive of the bank and he is assisted and supported by other qualified executives like Senior Executive Vice Presidents, Executive Vice President (EVP), Senior Vice President (SVP), Vice President (VP), Senior Assistant Vice Presidents and other officers and staffs. There are nine divisions in this Bank and one training institute
2.10 CORPORATE CULTURE
AB Bank is one of the most disciplined Banks with a distinctive corporate culture. In this bank, it believes in shared meaning, shared understanding and shared sense making. The people of bank can see and understand events, activities, objects and situation in a distinctive way. They mould their manners and etiquette, character individually to suit the purpose of the Bank and the needs of the customers who are of paramount importance to them. The people in the Bank see themselves as a tight knit team/family that believes in working together for growth. The corporate culture they belong has not been imposed; it has rather been achieved through their corporate culture.
2.11 ACHIEVEMENT
Bank’s performance may be termed as satisfactory in respect of Deposit mobilization and profit earning. During the year under review the Bank could enhance quality of its assets and recovered it’s over dues from default borrowers. At the end of 2007, bank’s operating profit stood at tk. 178.02 crore as against tk. 127.00 corer of the year 2006.
The Authorized Capital of the Bank remained at tk. 2500.00 million during the year as before but Paid- up capital rose to tk. 1352.12 million as against tk. 1201.80 million of 2006. The reserved fund increased to tk. 1995.36 million during the year by registering 64.15% increase over last year’s tk. 1215.58 million.
3.1 PRODUCT SERVICES INFORMATION OF THE ABAR BANGLADESH BANK LTD
3.1.1 Deposit Scheme:
- AB Bank Special Savings Scheme (SSS)
- Fixed Term Deposit (FDR)
- Short Term Deposit (STD)
- Savings Bank Account (SB A/C)
- Current Deposit Account (CD A/C)
- Current Deposits (CD)
- Premium Term Deposit (PTD)
- Instant Earning Term Deposit (IETD)
- Wage Earners Welfare Deposit Pension Scheme (WEWDPS)
- Money Double Program Deposit (MDP)
3.1.2 Foreign Exchange:
· Non Resident Foreign Currency Deposit Account (NFCD)
· Non Resident Taka (BDT Deposit) Account (NRTA)
· Resident Foreign Currency Deposit Account (RFCD)
· Foreign Currency Deposit Account
· Money Gram
· UAE Exchange
· Placid Express
· Arab National Bank (ANB)
· Dhaka Janata
· Habib Qatar
· Al Fardan
3.1.3 Money Transmission Products
- Payment Order / Security Deposit Receipt (SDR)
- Demand Draft
- Telegraphic Transfer
- Outstanding Bills for Collection (OBC)
- Travelers Cheque.
3.1.4 International Business Products
- Letter of Credit
- Back to Back Letter of Credit (BTB L/C)
- Buying and Selling of Foreign Exchange
- Foreign Demand Draft
- Foreign Telegraphic Transfer (FTT)
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3.1.5 Loans & Advances:
3.1.6 Lending Products:
a) Continuous Loan
- Secured Over Draft Against Financial Obligation [SOD (FO)]
- Secured Over Draft Against Work Order/Real Estate etc.[SOD(G)]
- Cash Credit (Hypothecation)
- Cash Credit (Pledge)
- Export Cash Credit (ECC)
b) Term Loan
· Project Loan
· Transport Loan
· House Building Loan
· Lease finance
· Loan under Syndication
· Consumer Finance
· Personal loan
c) Demand Loan
· Loan General
· Demand Loan Against Ship Breaking
· Payment Against Documents (PAD)
· Loan Against Imported Merchandise (LIM)
· Loan Against Trust Receipt (LTR)
· Forced Loan
· Packing Credit (PC)
· Secured Over Draft Against Cash Incentive
· Foreign Documentary Bills Purchased (FDBP)
· Local Documentary Bills Purchased (LDBP/IDBP)
· Inland Bill Purchased (IBP)
· Foreign Bill Purchase (FBP)
· Festival business loan
· d) SME Loans
· Small Business Loan
· Consumer Finance Scheme
· Lease Finance
· Personal Loan
· House Repairing & Renovation loan
· Festival Business loan
· Festival Personal loan
· Car Loan Scheme
e) Agro Credit
- Agro-based Industrial Credit
- Crop Loa
f) Special Credit Product
- Credit card
- Earnest Money Financing Scheme
- AB Bank Housing Loan Scheme
- Overseas Employment Loan Scheme
- g) Loan Product for Wage Earners
- Land Mortgage Loan
- Special House Building Loan
- Advance Against Remittance
- Wage Earners Rehabilitation Loan
3.2 TYPES OF ACCOUNT
3.2.1. Savings Accounts.
1. Individual A/C
2. Joint NC
3. Non trading concern.
3.2.2. Current Accounts
1. Individual A/C
2. Proprietorship A/C
3. Partnership NC
4. Limited Company NC
3.2.3. Fixed Term Deposit (FDR)
3.2.4. Short Term Deposit (STD)
3.2.5. Special Savings Deposit Scheme (SSS)
3.2.6. Special Deposit Scheme (SDS)
3.3 FOREIGN EXCHANGE DEPARTMENT
Foreign exchange Dept. of AB bank:
AB bank foreign exchange dept. plays a vital role to earn the bank’s maximum profit. The dept. is classified according to their activities. The foreign exchange dept. consists of three sections: –
1. Import section,
2. Export section,
3. Foreign remittance section
3.3.1 IMPORT SECTION
Import of into Bangladesh is regulated by the Ministry of Commerce in terms of the import & export act 1950, with import policy orders issued periodically and public notices issued from time to time by the office of the Chief Controller of Import & Export (CCI&E). In terns of importers, exporters and indenters order 1981; no person can import goods into Bangladesh unless he is registered with the CCI&E. On the next step the importers applies to Bangladesh Bank through authorized dealers for import goods. In order to import a product from abroad, the importer needs to submit an application letter requesting for opening Letter of Credit (L.C) with the bank.
3.3. 2 EXPORT SECTION
The export section of AB bank of main branch is responsible for opening L/C negotiation of export documents, purchase of inland bill etc. As per 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 customer or to such other person as the Bangladesh Bank may specify in this behalf that foreign exchange representing the full export value of the goods has been or will be disposed by Bangladesh Bank.
The following documents are required to apply for registration of exports:
a) Trade License
b) Income clearance certificate,
c) Nationality certificate,
d) Bank solvency certificate,
e) Asset certificate,
f) Registration certificate,
g) Memorandum of association,
h) Rent receipt of business premises,
i) Certificate of incorporation,
3.3.3 REMITTANCE
Remittance is the best mediums to transfer funds from one place to another. This function eliminates the individual difficulties and the hazards in transformation of physica1 cash from one place to another.
To expend its network for distribution of remittance, the Bank has taken steps by entering in to an agreement with TMSS-a reputed NGO to use their 250 remote outlets under a join t venture of DFID & Bangladesh Bank called RPCF.
Under the agreement, the Bank will have the advantage of remitting funds to even remote areas where it has no branches. Total amount received by this Bank in 2007 was more than BDT.7, 443.50 million.
Peop1e can send their money from outside or within the country. According to that we can divide the remittance into two categories:
· Local remittance
· Foreign remittance
3.3.3.1 LOCAL REMITTANCE:
Transferring money among the country is called local remittance. In ABBL, they provides following Local Remittance services:
· Pay Order
· Demand Draft
· Telegraphy/Telephone Transfer
3.3.3.2 FOREIGN REMITTANCE:
These remittance services are providing for exchange foreign currency. Those services are as follows:
Foreign Remittance
· Foreign Demand Draft
· Endorsement of US$ in passport
· Traveler’s Cheque
· Money Gram
· AFX
· Express Money
· Habib Exchange
3.4 CASH SECTION
3.4.1 CASH
Cash department is an important department of any bank. Cash amount is the main source of all banking activities. For that every day bank has to remain certain amount in cash in accordance with the rules and regulations of Bangladesh Bank. Cash section is a very sensitive organ of the branch and handle with extra care.
3.4.2 FUNCTIONS OF CASH SECTION
The cash department mainly performs the following functions:
1. Cash Receipt
2. Cash Payment.
3.5 CLEARING& BILLS SECTION
3.5.1 CLEARING
Local offices branch of AB Bank receives different types of instruments, such as cheque, PO, DD etc. from its customers for collection. It also pays on behalf of its customers for those instruments that come to it through clearinghouse. When instruments of AB Bank are sent for collection or received for payment through clearing house it is called Inter Bank Clearance or IBC.Clearing stands for mutual settlement of claims made in among member banks at an agreed time and place in respect of instruments drawn on each other.
3.5.2 TYPES OF CLEARING
There are two kinds of clearing:
· Inward Clearing
· Outward Clearing
- Inward Clearing: The bank provides the instruments to other banks through Clearing House which have been collected form different clients. It performs this kind of service for its clients without requiring any charge or the remittance
- Outward Clearing: Outward clearing means when a particular branch receive instruments drawn on the other bank within the clearing zone and those instruments for collection through the clearing arrangement is considered as outward clearing for that particular branch.
4.1 CENTRAL BANK
The Bank which Supervises and controls the activities of all other banks is called Central Bank. It also issues money, controls credit in the country and acts as a representative and financial advisor to the government.
Central Bank: The important functions which a Central Bank performs are discussed below:
1. Issue of Not es:
The central bank has the sole authority of issuing paper note in a country. The central bank issues the paper money and maintains stability of the monetary system in the country. The money issued by the central bank is called “legal tender” the responsibility of keeping its internal and external values stable has been given to the central bank.
Government’s Bank:
The central bank acts as the banker to the government. It collects money due to the government from different sources and makes payments of debts on behalf of the government. It keeps accounts of the internal and external loans of the government and plays the role in its management in monitory affairs.
2. The Central bank acts as banker to other commercial banks:
The commercial banks are to keep a certain percentage of their deposits with the central bank. The central bank by raising or lowering this percentage can control to a great extent the capacity of commercial banks to advance credit.
3. Credit Control:
One of the major functions of the central bank is credit control. The loans given by the commercial banks increase the supply of money in the country. If the total supply of money increases because of excessive advance made by the commercial banks, there may be inflation in the country. The central bank adopts different credit control policies with a view to controlling inflation and deflation.
4. Lender of the Resort:
The central bank functions as a lender of the last resort. When the commercial banks face financial crisis and fail to obtain loans from other source, they approach the central bank for loans. In this situation, the commercial banks face financial crisis, so the central bank is called the tender of the last report.
6.Clearing House:
The central bank acts as a cleaning hose for the settlement of mutual debts and credits of the commercial banks. In the day to day business transactions, cheques are used. This creates debits and credits among the commercial banks. The central bank settles the inter bank debits and credits through cheques.
5. Maintenance of foreign exchange rate:
The central bank tries to maintain the stability of exchange rate of the domestic currency in terms of foreign currencies. For this purpose it purchases and sells foreign currencies.
6. Development Activities:
The Central bank plays an important role in the economic development of a country. Collection of important data, undertaking research for economic development and giving assistance in making budget are the functions of central bank.
7. Other Functions:
In addition to the above functions, the central bank performs many other functions. For example, the central bank of every country functions as the store house of the international currencies and the representative of the World Bank. The central bank preserves gold, silver and other valuable metals. It also preserves the foreign currencies earned.
4.2 COMMERCIAL BANK:
Commercial banks are the heart of trade and commerce. The functions of a commercial bank are discussed below:
- Receiving deposits:
One of the most important functions of a commercial bank is to receive deposits from the public. Generally deposits of a bank are three types, (a) current deposits (b) saving deposits and (c) fixed deposits. The deposit which can be with drawn at any time by the by the depositor is called current deposit. Bank does not pay any interest on this deposit. Money from the savings account can be withdrawn once or twice in a week. The banks pay small interest to depositor for this deposit. The deposits which can be withdrawn after a specified period of time is called fixed deposit. The depositors of fixed deposits are paid interest at a high rate.
- Giving Loans:
The Second major function of the commercial bank is to give loans. It keeps a certain percentage of the deposits received from the public and lends the rest to businessmen and industrialists. Generally, the commercial banks keep valuable property as mortgage against these loans.
- Creation of medium of exchange:
One of the important functions of commercial banks is to create medium of exchange. Now a- days the power of issuing notes lies alone with the Central Bank. The commercial banks issue cheque, bank darfts, bonds, traveler’s cheques act as medium of exchange.
- Rediscounting bond:
Rediscounting bonds and bills of exchange is another important function of a commercial bank. The owner of the bond can get cash money before the maturity of the bond by rediscounting it. The banks earn profit out of the scheme.
- Helping Internal and Foreign Trades:
The commercial banks help the buyers and sellers in making payment in the internal and foreign trades. The majority of tasks of foreign trade are done though the commercial banks.
- Transfer of money:
Commercial banks transfer money rapidly and safely from one place to another. The banks issue cheque, bank drafts, pay order, traveler’s cheques and make telegraphic transfers and thus help us in transferring money from one place to another.
- Other Function:
Besides the functions mentioned above, a commercial bank performs other activities as agents for the benefit of its clients. Out of these the following may be mentioned as remarkable:
a) It purchases and sells bonds, stocks, shares and debentures as representative of the customer.
b) It makes payments of house rent, income tax, Insurance Premium and telephone and electric bills on be half of the clients.
c) It makes payments of house rent, income tax, insurance premium and telephone and electric bills on be half of the clients.
d) It keeps their valuable ornaments, documents etc. as safe deposits.
4.3 HISTORY OF BANK IN BANGLADESH
Banks are financial intermediary institutions. The core is to mobilize the financial surplus of saver in the form of deposits & allocate these savings to the credit worthy borrowers of different sector of economy in the form of loans & advances. The advance of the intermediary functions between the savers & investors would certainly in the lower level of savings & investment & thus lower the economic growth. There is a well recognized maxim that economize development of a country is indispensable. That development of the financial intermediaries & instrument (both in case of deposit & advance) will lead to the development of the economy of a country.
After liberation, the Bangladesh Government of the newly born country being recognized as Bangladesh in the world society made the entire existing Bank’s, Bima, Financial Institutions, and Nationalized Banks except three Foreign Banks by an Ordinance named as “Bangladesh Bank Ordinance Dated the 26th March, 1972.”
According to the President Ordinance 127 of the 6th of December, 1972 State Bank of Pakistan of East Bengal is considered as “Bangladesh Bank” and also got acceptance as a ‘Central Bank of Bangladesh’. Under the reformation plan of banking system, the following Banks were renamed which were before liberation period:
· Janata Bank Limited
· Pubali Bank Limited
· Rupali Bank Limited
· Uttara Bank Limited
· Agrani Bank Limited
· Bangladesh Silpa Bank
· Sonali Bank Limited
· ICB
· BHBFC
· BSRS
A number of foreign private commercial bank which were operating since earlier days were the only commercial banks in the private sector. These foreign private banks with limited branch network could only meet a small portion of the financial needs of the private sector in the country. In the early eighties with liberalization of the economy as also for catering to the credit needs of the emerging private sector a number of commercial banks were allowed in the private sector. Consequently upon the strategy of economic development based on increasing role of the private sector and after a decade long experience of public banking system, following the nationalization of all banks, the government has taken steps to set up commercial banks in the private sector.
Subsequently Government followed a denationalization policy-allowing establishment of banking institution in the private sector and released three nationalized banks in the private sector.
They are:
o Uttara Bank Limited
o Rupali Bank Limited
o Pubali Bank Limited
In present time a large number of private banks have been established. According to their commencement of business these private commercial banks are divided into three groups. They are familiar in the 1st Generation, 2nd generation & 3rd Generation banks.
o 1st Generation of Banks (1982-1988)
National Bank Limited, City Bank Limited, United commercial Bank Limited, AB Bank Limited, International Finance Investment and Commerce Bank Ltd, Islamic Bank Bangladesh Limited & Al-Baraka Bank Bangladesh Limited.
o 2nd Generation of Banks (1992-1996)
Eastern Bank Limited, National Credit & commerce Bank Limited, Southeast Bank Limited, Dhaka Bank Limited, Al-Arafah Islamic Bank Limited, Social Investment Bank Limited & Dutch-Bangla Bank Limited etc.
o 3rd Generation Banks (1999 to present)
Mercantile Bank Limited, Standard Bank Limited, One Bank Limited, EXIM Bank limited, Premier Bank limited, Mutual Trust Bank Limited, First Security Bank Limited, Bank Asia Limited, The Trust Bank Limited, Jamuna Bank Limited & BRAC Bank Limited etc.
4.4 ROLE OF BANK IN THE ECONOMIC DEVELOPMENT
Banks play an important role in economic growth of developing country. Generally, economic development involves investment in various sectors of financial system. The banks collect savings from the people and mobilize saving for investment in industrial project. The investors borrow from banks to finance the projects. Promote the growth rate through the reorientation of loan policy. Special funds are provided to the investors for the completion of projects. The banks provide a guarantee for industrial loan from international agencies. The foreign capital flows to developing countries for investment in projects.
Besides normal banking the banks perform agency services for the client. The banks buy and sell securities, make rent payments, receive subscription funds and collect utility bills for the government departments. Thus these banks save time and energy of busy peoples. Banks arrange foreign exchange for the business transaction with other countries. The facility of foreign currency account has resulted in an increase of foreign exchange reserves. By opening a letter of credit the banks promote foreign trade.
The banks are not simply collecting funds but also serve as a guide to the customer investment of their funds. The policy of banks is an instrument in wide dispersal of credit in country.
We know, the modern banking system plays a critical role in underpinning economic development. Over the last few years the banking world has been undergoing a lot of change due to deregulation, technological innovations, globalization etc. These changes also made revolutionary changes of a country’s economy. Present world is changing rapidly to face the challenging of competitive free market economy. It is well recognized that there is an urgent need for better qualified management & better-trained staff in the dynamic global financial market. Bangladesh is also including in that trend. Banking sector in Bangladesh is facing challenges & also tries to overcome all those challenges though its prospect is bright in the future.
Against the background of Financial Sector Reform Policies in Bangladesh, National Credit and Commerce Bank Ltd. has resulted in great success in all areas of operation with a view to improve the socio-economic development of the country.
Day by day function of this bank also provides some services & facilities which are most equal to an international banking system. It helps the banks to get closer towards the consumers. ATM, Credit card, worldwide correspondence etc are the popular products of this bank which has worldwide demand as well as into the country’s.
For my internship choose this bank because of its potentiality & fast growing attitudes which make it popular & well acceptable to all within a short period of time.
5.1: Deposit Section
In fact, a bank operates with the people’s money. The banking activity of a person starts with the opening of an account. ABBL generally gives facility to open th following accounts:
a) Current Deposit (CD)
b) Savings Deposit (SB)
c) Short Term Deposit (STD)
d) Fixed Deposit (FDR)
e) Bearer certificate of Deposit (BCD)
f) Sundry
5.1.1: Different Deposit of ABBL
a) Current Deposit Account:
ABBL opens current accounts for its clients to facilitate their day-to-day operations. The amount deposited in the current account can be withdrawn at any time. No interest is given on the current account. In certain cases, however, interest is available at an agreed rate where withdrawals are subject to a written notice for a specified period. The minimum balance requirement for this account is Tk.1000 and Tk.250 is deducted from the account in case of closing the current account.
Account opening Section:
It is said that, there is no banker customer relationship if there is no a/c of a person in that bank. By opening an a/c banker and customer create a contractual relationship. However, selection of customer for opening an account is very crucial for a Bank.
Account Opening Procedure in a flow chart:
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