“E-recruiting practices of Prime bank Limited”
The Prime Bank ltd is large national banking group that is corporate banking in our country. At the very arena of globalization and technological innovation, banking business is a very competitive. To cope with this, banker should have vast theoretical knowledge and professional knowledge as well as technical basic. As a MBA student with major in HRM felt bank was my destiny to gather the real practical knowledge. The requirement of MBA program and as well as gain practical experience. The appointed as an intern in the Prime bank ltd at head office .There had to work three month in HR division and general banking division. This report entitled “E-recruiting practices of Prime bank Limited”
In the first chapter, the discussed about the objective of the study methodology and limitation of the study. In second chapter discuss in banking sector in Bangladesh and chapter the history of the PBL, its management hierarchy, branches network, and then overview of human resource management.
And finally discuss e-recruiting process, benefit, function and other activates.
At last the tried to include all necessary information related to the e-recruiting practices of Prime bank limited. While preparing the term paper have tried level best to make it authentic and at the same time easily understandable. For this came up with a number of reference book and browsing internet backup. In of heart and soul effort there may be some mistakes and unforeseen errors, which may arise due to experience.
The human resource management function includes a Varity of activities and key among them is deciding what staff you have and whether to use independent contractors or hire employees to fill the needs, recruiting and training ,the best employee ,ensuring they are high performance, dealing with performance issues. so E-recruiting is the most important issue of Prime Bank Ltd. This bank fulfill there needs Appling this way .Now a days e-recruiting is the most popular way of many organization. Prime Bank Ltd provides this way in job applicants. As result bank easily collect resume from applicants and easily serve applicant resume. It’s faster of banking human resource activities.
E-Recruitment covers a range of Web-based application tools used for the provisioning (typically) of human resources. These applications assist in the recruitment of suitable candidates for vacant positions. Some applications do this by semi-automating the entire recruitment and hiring process. E-recruitment applications (or software packages that are web-enabled) typically enable recruitment teams to create job postings, manage job application responses, schedule interviews and manage other recruitment tasks. This dramatically reduces the labour and money spent on physical recruitment.
This report is an attempt to reflect the position of Prime bank Ltd in the banking industry of the country in respect of her activities in the arena of Human resource Department.
1.1 BACKGROUND OF THE STUDY:
We are living in global village now. Globalization is combination or much freer in goods and service. Commercial banks in Bangladesh economy are to face an increasing competition for their business in coming days, like any other emerging market economies. Their business is no longer remaining easy as they earlier. The real change in the banking business has started to come with the government’s decision to allow the business in the private sector in the middle of the Eighty’s. This report is an effort to reflect a clear idea about the strategies, activities, and performance of Prime Bank Ltd. regarding human resource department.
The human resource department is the important part for any organization. It’s maintained and good manage of organization employees and provide compensation, salary and other benefit. So it is very important to have an effective and sound management system in E-recruiting practices of prime bank ltd.. As a business studies student it is necessary for me to have vast acquaintance regarding e-recruiting practices and wanted to be acquainted with the whole procedure of e-recruiting.
1.2ORIGIN OF THE REPORT:
This report is originated having three months long internship program originated after completing the MBA program from Department of Human resource Management under Stamford University Bangladesh. During the internship a student has to undertake an arena of investigation of any organization for in depth study. This report is the outcome of the assigned internship, suggested by the human resource department of Prime Bank Limited, Head Office.
1.3 OBJECTIVE OF THE REPORT:
In this report, tried to furnish all sorts of practical dealings that are conducted in case of handling various types of activities in human resource department, the theoretical aspects, that is what should be the procedures and requirements maintained from first to last, and actual practices as well as the ultimate gain for the bank in conducting e-recruiting activities are mainly discussed. So the purpose and objective of this report can be summarized as follows:
As it is an overall study of human resource department so going to analyze the related factors of E-recruiting process of Prime bank Ltd.
Specific: To focus on the Brief description of human resource department
To know deeply about e-recruitment process
To examine bank’s performance in human resource department
To focus on some other activities of e-recruitment of bank
To specify some findings on given topic
To reveal some recommendation for better performance in human resource department
The methodology of this report is very different from conventional reports. The emphasized on the practical observation though this report has to need some primary and secondary data. Nevertheless, eventually almost the entire report consists of my practical observation.
1.5 SOURCES OF DATA COLLECTION:
While preparing the report, I have taken information from the following sources:
1.5.1 Primary Sources:
§ Observation of banking activities.
- Overflowing Conversation with the in-charge of the HR department of Prime Bank Limited.
§ Working with my own experience while internship program.
§ Questioning and interviewing
§ Collect data deferent level of employees.
1.5.2 Secondary Sources:
- Daily diary (containing my activities of practical orientation in Prime Bank Ltd) maintained by me,
- Various publications on Bank
- Annual Report of the bank
- Personal investigation with bankers,
- Different circulars issued by Head Office and Bangladesh Bank
1.6 SCOPE OF THE REPORT:
The report is highlighting the major functional area of Human resource department and procedure of E-recruiting. It is not possible to pinpoint the each & every aspects of human resource department due to this short span of time.
1.7 LIMITATION OF THE REPORT:
During my internship period, the faced some problems, which hindered me to cover all the aspects of my study, like:
- The Human Resource Department is very busy could not get information as required my study although they have good intention to provide.
- Three-month time is not sufficient to have practical knowledge and prepare a report such a big subject of E-recruitment While colleting data they did not disclose much information/data due to the secrecy of the organization.
- Lacking of time of banking work
- Rush and business another reason.
- No statistical analysis is done.
- Maximum time HR employee is more busy
- Everybody is not frankly.
So that’s all problem the facing prepare my report.
Overview of Banking Sector in Bangladesh
This chapter discusses the overview of the banking sector which gives us a better understanding regarding the ancient banking and modern banking. After all that deals with the organizational overview which includes the history, vision, and mission.
The Jews in Jerusalem introduced a kind of banking in the form of money lending before the birth of Christ. The word ‘bank’ was probably derived from the word ‘bench’ as during ancient time Jews used to do money -lending business sitting on long benches. First modern banking was introduced in 1668 in Stockholm as ‘Svingss Pis Bank’ which opened up a new era of banking activities throughout the European Mainland.
In the South Asian region, early banking system was introduced by the Afgan traders popularly known as Kabuliwallas. Muslim businessmen from Kabul, Afganistan came to India and started money lending business in exchange of interest sometime in 1312 A.D. They were known as ‘Kabuliawallas’.
A bank is a financial institution whose main objective is the mobilization of fund from the surplus unit to deficit unit. In the process of acceptance of deposits and provision of loan, Bank creates money. This characteristics feature sets bank apart from other financial institutions. A bank is an economic institution whose main objective is to earn profit through exchange of money and credit instrument.
2.2 BANKING INDUSTRY IN BANGLADESH AND ITS OPERATION:
Bank is very old institution that is contributing toward the development of any economy and is treated as an important service industry in modern world. Now a day the function of bank is not limited to with in the same geographical limit of any country. Due to globalization and free market economy, this industry is facing severe competition in any country and implementation of WTO will further increase competition. The overall performance of Bank does not only depend upon the banking industry itself but also on the performance of economy where it is operating.
After the birth of Pakistan in 1947, the State Bank of Pakistan, the central bank of the Country, came into being in 1948. Later, the National Bank of Pakistan, a commercial bank was set up in 1949. In all, 36 scheduled commercial banks were in operation throughout Pakistan. Pakistanis owned most of these banks. Only three of them, namely, National Bank of Pakistan, Habib Bank, and the Australasia Bank had a branch in East Pakistan in 1949. During 1950-58, three other Pakistani-owned banks, the Premier Bank, Bank of Bawalpur and Muslim Commercial Bank had opened branch offices in East Pakistan. Four Pakistani-owned banks, the United Bank, Union Bank, Standard Bank and Commerce Bank conducted business in the province during 1959 – 1965. The province had only two banks owned by local business groups and with headquarters at Dhaka, the Eastern Mercantile Bank (now pubali bank) and Eastern Banking Corporation (now uttara bank), established in 1959 and 1965 respectively.
The banking system in the territory of Bangladesh grew slowly during the British and Pakistan periods. There were only 25 bank branches in 1901 and the number grew to 668 ‘n 1946. Creation of Pakistan was a deterrent in the sector as was evidenced by the closure of bank branches, which came down to 148 in 1950. In 1965, the number rose again to 545 Subsequent years, however, showed dramatic changes in the situation and the number of bank branches increased to 1,025 in 1970. The banking system in Bangladesh started functioning with 1,130 branches of 12 banks inherited from Pakistan. Subsequently, these banks were nationalised and renamed after being merged into six banks. The new names of the banks were the sonali bank (The National Bank of Pakistan, The Bank of Bawalpur, The Premier Bank), agrani bank (Habib Bank, Commerce Bank), janata bank (United Bank, Union Bank), rupali bank (Muslim Commercial Bank, Standard Bank), pubali bank (Australasia Bank, Eastern Mercantile Bank) and uttara bank (Eastern Banking Corporation).
2.3 BANKING OPERATION IN BANGLADESH:
The development process of a country largely depends upon its economic activities. Banking is a powerful medium among other spheres of modern socio-economic activities for bringing about socio-economic changes in a developing country like Bangladesh. Three different sectors like Agricultural, Commerce and Industry provide the bulk of a country’s wealth. The nourishment of these three is only possible through an adequate banking facility. The banking service facilitates these three to be integrated in a concerted way. For a rapid economic growth a fully developed economic system can provide the necessary boost. The whole economy of a country linked up with its banking system.
With the passage of time the functions of a bank, lending is far by the most important. They provide both long-term and short-term credit. The customers come from all walks of life, from a small business of a multi-national corporation having its business activities all around of the world. The banks have to satisfy the requirements of different customers belonging to different social groups.
Banks particularly have a very important role in rising of the financial resources because of their capacity to tap resources from a wider spectrum of people and diversified nature of their operations. The banking business has therefore, become complex and requires specialized skills. They function as a catalytic agent for bringing about social, economical, industrial, and agricultural growth and prosperity of the country.
Ranks are the custodians of the society’s economic resources and if they are socialized, the socialistic government can acquire with them a tremendous power of intervention in every type of business enterprise, both large and small and wide spread power of control and planning over the entire economy. In our country where about 80% of the population lives below the poverty line, this poverty line can be declined by the success of banks. So bank plays an active role in the economic development, as a result different types of banks have come into existence to suit the specific requirements.
The regardless the numbers of bank nature of their functions and activities, a central bank exists to regulate the activities of other banks. All the commercial private/ nationalized/ specialized banks perform service related activities within the jurisdiction of the central bank. In our country, Bangladesh, the role of the central bank is entitled to be executed by the Bangladesh Bank.
bangladesh bank, the central bank of the country, was set up on 16 December 1971 by the Bangladesh Bank Order 1972. The government accepted the assets and liabilities Of the Deputy Governor’s office of the State Bank of Pakistan in Dhaka and declared the Bangladesh Bank as a fully effective and permanent central bank.
To conduct banking in Bangladesh, all banks have to have licenses from the Bangladesh Bank under the Bank Companies Act 1991. To be able to get a license, all intending banks have to be registered with the Registrar of Joint Stock Companies under the companies act 1994, and collect Certificate of Incorporation. Moreover, to collect capital through public offerings of shares, intending banks have to obtain permission from the countries.
2.4 SECURITIES AND EXCHANGE COMMISSION: imam
Banking institutions in Bangladesh can be classified under different groups. Most banks fall under the category of branch banking i.e. the banks operate through branches at home and abroad under the control of their head offices. Foreign branches of Bangladesh banks have to abide by home country regulations.
2.5 UNDER THE OWNERSHIP-BASED CLASSIFICATION
Banks in Bangladesh are classified as government/nationalized, private, foreign, and joint ownership banks. The country had 6 (Six) nationalized commercial banks (NCB) until 1983, when one of them, the Rupali Bank was denationalized. Another government bank, the Pubali Bank, was denationalized in 1986.
2.6 DOMESTIC PRIVATE BANKS:
INTERNATIONAL FINANCE AND INVESTMENT BANK (ific bank, estd. 1976), islami bank bangladesh (1983), united commercial bank (1983), city BANK (1983), NATIONAL BANK (1983), ARAB BANGLADESH BANK (1985), AL BARAKA BANK (1987), EASTERN BANK (1992), NATIONAL CREDIT AND COMMERCE BANK (1993), PRIME BANK (1995), SOUTH-EAST BANK (1995), DHAKA BANK (1995), AL-ARAFAH ISLAM! BANK (1995), SOCIAL INVESTMENT BANK 1995), PREMIER BANK (1996), DUTCH-BANGLA BANK (1996), MERCANTILE BANK (1999), STANDARD BANK (1999), ONE BANK (1999), EXPORT IMPORT BANK (1999), BANGLADESH COMMERCE BANK (1999), MUTUAL TRUST BANK (1999), TRUST BANK (1999), BANK ASIA (1999) and FIRST SECURITY BANK (1999).
The three NCBs now operating in the country are the SONALI BANK, JANATA BANK , AGRANI BANK. and RUPALI BANK There is a special group of nationalized banks known as specialized or development financial institutions to support specific economic purposes of the country. These include two for agricultural development, the Bangladesh krishi bank (estd. 1973) and RAJSHAHl krishi UNNAYAN bank (estd. in 1987 with branches of Bangladesh Krishi Bank in Rajshahi division), one for industrial development, the Bangladesh shilpa bank (estd. 1972) and one for supporting unemployed youths in their self-employment activities, the employment bank (estd.1997). The country has a Co-operative Bank established in 1948, as the apex institution of all co-operative societies in Bangladesh. The main function of this bank is to mobilize small savings and assist members of co-operative societies to build up capital and provide them with loan/financial assistance for the development of agriculture, commerce, fisheries, urban and rural cottage industries, etc. It also provides loan to promote other income generating activities in the society.
2.7 FOREIGN PRIVATE BANKS WHICH HAVE BRANCHES IN BANGLADESH:
Are thestandard chartered GR1NDLAYS BANK, AMERICAN EXPRESS BANK, STANDARD CHARTERED BANK, STATE BANK OF india, credit AGRICOLE IN’DOSUEZ, HONGKONG AND SHANGHAI BANKING CORPORATION (HSBC), national bank of pakistan, citibank n a, habibbank, and hanvit bank.
Some branches of both nationalized and private commercial banks have been permitted to conduct foreign exchange business under the Foreign Exchange Regulation Act 1947. Such banks are called authorized dealers and their club or association bears the name RAPED A – Bangladesh Foreign Exchange Dealers Association. Apart from the authorized dealers, more than 400 Money Changers throughout the country are engaged in buying r and selling of foreign exchange.
Depending upon the relationship with and the degree of control of the Bangladesh Bank banks in Bangladesh are divided into scheduled and non-scheduled banks. Scheduled banks are enlisted by the Bangladesh Bank under the provisions of section 37 of the Bangladesh Bank Order 1972. They are promise bound to obey central bank instructions, rules and regulations especially, those relating to required capital and provisions, statutory liquidity reserves, audited returns etc. Through scheduling, banks gain special status and enjoy some special facilities from the central bank such as re-discounting, participation in the money market, membership of the clearing house and deposit insurance scheme. Non-scheduled banks do not enjoy such privilege. The list of non-scheduled banks in Bangladesh includes the Eden Bank, Saidpur Commercial Bank, Comilla Co-operative Bank, Dinajpur Industrial Bank, Rajshahi Bank, Shankar Bank, Faridpur Banking & Corporation and Madaripur Commercial Bank.
Banks in Bangladesh have correspondent relationship with other banks in foreign countries in order to sell their services or to purchase services from them. Although only three in number, nationalized commercial banks dominate banking activities in the country, especially the mobilization of deposits and making advances. Their share in total bank deposits on 31 March 2000 was 57.28%, while that of domestic private banks, foreign private banks, and the specialized banks was 29.01%, 8.42% and 5.29% respectively. The share of NCBs, domestic private banks, foreign private banks and specialized banks in advances on the same date was 51.66%, 29.25%, 6.03% and 13.06% respectively.
Laws that directly regulate the banking system of Bangladesh are: Bangladesh Bank Order !972; Bank Company Act, 1991; Bangladesh Bank (Nationalization) Order 1972; Companies Act 1913 and 1994; Deposit Insurance Order 1984; Bankruptcy Act 1997; Insolvency Act 1920; Financial Court Act 1990; Foreign Exchange (Regulation) Act 1986; Financial Institutions Act 1993; Financial Institutions Rules 1994; and Co-operative Societies Ordinance 1984.
Laws that indirectly influence the banking system and for which references are made in the Banking Company Act 1991 are: Code of Civil Procedure 1998; Code of Criminal Procedure 1898; Evidence Act 1872; General Clauses Act 1897; Limitations Act 1908; Negotiable Instruments Act 1881; Penal Code 1860; Trust Act 1882; Transfer of Property Act: and Bangladesh Chartered Accountant Order 1973.
Sources: Chowdhry, L.R. (2002, 2nd edition), “A Text Book On Banker Advances
Some words used as a abbreviate form in the diagram are:
BKB – Bangladesh Krishi Bank
RAKUB – Rajshahi Krishi Unnayan Bank
BSB – Bangladesh Shilpa Bank
BSRS – Bangladesh Shilpa Rin Shangshta
BASIC – Bangladesh Small Industries & Commerce.
BSBL – Bangladesh Samabaya Bank Ltd.
CCBL – Central Co-operative Bank Ltd.
PCS – Primary Cooperative Societies.
2.8 OVERVIEW OF PRIVATE BANK:
The development process of a country largely depends upon its economic activities. Banking is a powerful medium among other spheres of modern socio-economic activities. So private bank is a important role o country economic situation. This type of bank work within country branches way are the International Finance and Investment Bank (ific bank, estd. 1976), islami bank Bangladesh (1983), united commercial bank (1983), city BANK (1983), NATIONAL BANK (1983), ARAB BANGLADESH BANK (1985), AL BARAKA BANK (1987), EASTERN BANK (1992), NATIONAL CREDIT AND COMMERCE BANK (1993), PRIME BANK (1995), SOUTH-EAST BANK (1995), DHAKA BANK (1995), AL-ARAFAH ISLAM! BANK (1995), SOCIAL INVESTMENT BANK 1995), PREMIER BANK (1996), DUTCH-BANGLA BANK (1996), MERCANTILE BANK (1999), STANDARD BANK (1999), ONE BANK (1999), EXPORT IMPORT BANK (1999), BANGLADESH COMMERCE BANK (1999), MUTUAL TRUST BANK (1999), TRUST BANK (1999), BANK ASIA (1999) and FIRST SECURITY BANK (1999).
All this are private bank in Bangladesh. They are various functions. They established district wise branches. These branches maintain all banking work all Bangladesh. This private bank provide various loan like education loan, business loan, car loan, family loan and other loan.
The ratio of bank deposits to GDP in Bangladesh has increased from 19.53% in 1990 to 32.35% at end 2001. As the private sector banks are still in a rudimentary stage, they are way behind the SCBs in terms of deposit mobilization and asset accumulation. But classified loans of SCBs are large, constituting 3.94% of GDP in 1990 and 8.66% in 2001. In 1990, the SCBs had 27.59% of their total outstanding loans classified, compared to 23.73% in private commercial banks and 20.65% in foreign commercial banks. The NPL ratio reached 44.62% in the SCBs and 25.76% in private banks,
So this are all private bank activates and concept.
2.9 OVERVIEW OF PUBLIC BANK:
The Jews in Jerusalem introduced a kind of banking in the form of money lending before the birth of Christ. The word ‘bank’ was probably derived from the word ‘bench’ as during ancient time Jews used to do money -lending business sitting on long benches. First modern banking was introduced in 1668 in Stockholm as ‘Svingss Pis Bank’ which opened up a new era of banking activities throughout the European Mainland.
Public bank is most important role on economic activities in country.This bank ownership is government. Its mainly control by central bank.There are some public bank now operating in the country are the SONALI BANK, JANATA BANK , AGRANI BANK. and RUPALI BANK There is a special group of nationalized banks known as specialized or development financial institutions to support specific economic purposes of the country. These include two for agricultural development, the Bangladesh krishi bank (estd. 1973) and RAJSHAHl krishi UNNAYAN bank (estd. in 1987 with branches of Bangladesh Krishi Bank in Rajshahi division).They provide various service like agrictural loan ,business loan and other government work .This bank license provide by central bank. They work under by government rules & regulation. Public bank collect more foreign currency.And this currency expense for country develop purpose. The established branches all over country and service provide all level of people.
So all this is the information of public bank.
2.10 OVERVIEW OF FOREIGN PRIVATE BANK:
Foreign bank another important banking sector in Bangladesh and they are more helpful for economics situation in bank n country but now a days, many foreign banks are established in Bangladesh. They can provide much service in country. They similar service provide as domestic private bank but this bank introduce more new technology of our country like online banking system, ATM Card, Master Card and other card system banking. There are some foreign private bank like the standard chartered GR1NDLAYS BANK, AMERICAN EXPRESS BANK, STANDARD CHARTERED BANK, STATE BANK OF india, credit AGRICOLE IN’DOSUEZ, Hongkong and Shanghai Banking Corporation (hsbc), national bank of pakistan, citibank n a, habibbank, and hanvit bank.
Some branches of both nationalized and private commercial banks have been permitted to conduct foreign exchange business under the Foreign Exchange Regulation Act 1947. Such banks are called authorized dealers and their club or association bears the name RAPED A – Bangladesh Foreign Exchange Dealers Association. Apart from the authorized dealers, more than 400 Money Changers throughout the country are engaged in buying r and selling of foreign exchange. These banks follow up government rules and regulation.
2.11 OTHER BANKS INFORMATION:
The birth of Pakistan in 1947, the State Bank of Pakistan, the central bank of the Country, came into being in 1948. Later, the National Bank of Pakistan, a commercial bank was set up in 1949. In all, 36 scheduled commercial banks were in operation throughout Pakistan. Pakistanis owned most of these banks. Only three of them, namely, National Bank of Pakistan, Habib Bank, and the Australasia Bank had a branch in East Pakistan in 1949. During 1950-58, three other Pakistani-owned banks, the Premier Bank, Bank of Bawalpur and Muslim Commercial Bank had opened branch offices in East Pakistan. Four Pakistani-owned banks, the United Bank, Union Bank, Standard Bank and Commerce Bank conducted business in the province during 1959 – 1965. The province had only two banks owned by local business groups and with headquarters at Dhaka, the Eastern Mercantile Bank (now pubali bank) and Eastern Banking Corporation (now uttara bank), established in 1959 and 1965 respectively.
The banking system in the territory of Bangladesh grew slowly during the British and Pakistan periods. There were only 25 bank branches in 1901 and the number grew to 668 ‘n 1946. Creation of Pakistan was a deterrent in the sector as was evidenced by the closure of bank branches, which came down to 148 in 1950. In 1965, the number rose again to 545 Subsequent years, however, showed dramatic changes in the situation and the number of bank branches increased to 1,025 in 1970. The banking system in Bangladesh started functioning with 1,130 branches of 12 banks inherited from Pakistan. Subsequently, these banks were Nationalised and renamed after being merged into six banks. The new names of the banks were the Sonali bank (The National Bank of Pakistan, The Bank of Bawalpur, The Premier Bank), Agrani bank (Habib Bank, Commerce Bank), Janata bank (United Bank, Union Bank), Rupali bank (Muslim Commercial Bank, Standard Bank), Pubali bank (Australasia Bank, Eastern Mercantile Bank) and Uttara bank (Eastern Banking Corporation).
2.12 B A N G L A D E S H R E S E A R C H
Swinging Banking: Not Very Promising
Not too bad if you may claim so ….
The Bangladesh banking sector relative to the size of its economy is comparatively larger than many economies of similar level of development and per capita income. The total size of the sector at 26.54% of GDP dominates the financial system, which is proportionately large for a country with a per capita income of only about US$370.The non-bank financial sector, including capital market institutions is only 3.22% of GDP, which is much Than the banking sector. The market capitalization of the Dhaka Stock Exchange was US$1,025 million or 2.19% of GDP as at mid-June 2002. In contrast, the size of the total financial sector in India, including banks and non-banks as well as the capital market is 150% (March 2002) of its GDP, with commercial banks accounting for 58.3% of GDP. I access to banking services for the population has improved during the last three decades. While population per branch was 57,700 in 1972, it was 19,800 in 1991. In 2001 it again rose to 21,300, due to winding up of a number of branches and growth in population. Compared to India’s 15,000 persons per branch in 2000, Bangladesh is not far behind in this regard. This indicates that access to the banking system in the country is not a significant problem.
However the story tells a different tale
The finance sector remains predominantly bank-based, accounting for 96% of the sector’s resources. While there are sound banks, based on IAS, the banking sub-sector as a whole is technically insolvent. Consolidated data reported tend to have significantly understated provisions. Adjusting partly for the understatements, the financials of the banking sub-sector are characterized by about 32% NPL ratio, US$720 million shortfall in provisions, US$1,106 million shortfall in provisions and capital combined, and losses of US$685 million after adjusting for the shortfall in provisions in mid 2001. The adjustments would possibly be larger if provisioning as followed by major international auditors were applied. State-owned Commercial Banks (SCBs) also have disproportionately large and unexplained “Other Assets” that include, in particular, jute and other subsidized credits, suspense accounts and various receivables. To what extent these questionable assets have been provisioned remains unclear.
Wonder why so?
The large capital deficiency, operating inefficiencies and recurring losses of the banking system is the product of a combination of different factors including: a) weak corporate governance (bank-wide structures, policies, systems and procedures, especially credit risk management); b) deficient executive and staff banking skills; c) absence of professionalism, accountability and incentives; d) policy lending (particularly to jute and other loss-making State-owned Enterprises or SoEs); e) political patronage and directed lending in the SCBs; f) insider lending in private local banks; g) pervasive systemic default culture; h) non-cost recovery for governmental services extended; i) loss-making branches; j) unproductive assets; k) politically-influenced recruitment, extraordinary staff redundancy, bank-wide security of tenure, and disruptive union activity; and l) poor IT/MIS that hinders efficient and cost-effective operations.
Who is who?
At mid-2001, the US$13 billion stock of financial market instruments was predominantly tilted toward banking products (72.2%), basically in the form of term deposits, and secondarily toward non-bank debt instruments (27.8%), with private sector obligations accounting for 0.4% of all non-bank debt instruments and GOB-related instruments making up for the balance of 99.6%. Of the GOB-related instruments, Savings Schemes, redeemable instruments with disproportionately high yields, accounted for 59.3%, the balance made up of T-Bills (26.7%) and Treasury Bonds (13.9%). Private sector instruments are basically debenture-type issues mainly of one business group listed in the stock exchanges. With the exception of T-Bills and private sector debentures, the fixed income securities are non-transferable and, where they are transferable, there is no secondary market activity. There are no government securities dealers or market makers and the ‘buy-hold’ culture is quite pronounced. The commercial banks have not issued any securities to raise funds, other than for government-administered programs
Pot belly or belly up already?
The ratio of bank deposits to GDP in Bangladesh has increased from 19.53% in 1990 to 32.35% at end 2001. As the private sector banks are still in a rudimentary stage, they are way behind the SCBs in terms of deposit mobilization and asset accumulation. But classified loans of SCBs are large, constituting 3.94% of GDP in 1990 and 8.66% in 2001. In 1990, the SCBs had 27.59% of their total outstanding loans classified, compared to 23.73% in private commercial banks and 20.65% in foreign commercial banks. The NPL ratio reached 44.62% in the SCBs and 25.76% in private banks, but in foreign commercial banks, it came down to 3.74% in 2001. The banks achieved some success in reducing the percentage of non-performing assets by 3.31% of cumulative total loans, although in absolute figures it aggravated by 3.32% between 2000 and 2001. NPLs came down from 34.92% (of total loans and advances) in 2000 to 31.61% in 2001. About 86.60% or Tk204.35 billion in the total classified loans of Tk235.99 billion in 2001 have been identified as bad or irrecoverable. Classified loans during the 1997-1999 were 33.49%, 40.65%, and 41.11% respectively. Most of the banks were running with a deficit on loan provisioning as well as risk-weighted capital adequacy requirement.
Spreads trimmed but bottom-line up….
The interest spreads available to scheduled commercial banks in Bangladesh are actually not so high as being perceived, compared to both developed and developing countries. Interest spread came down recently mainly because they have to offer considerably higher rates on deposits to compete with various high yield savings instruments of the Government-run schemes as well as to compensate for the huge burden of NPLs. Despite a decline by 0.11% in the average lending rate recently, the average yield on loans and advances increased significantly, mainly due to time factor in incidence of the rates. Average deposit interest rate decreased by 0.18%. Actual yield on loans and advances for the sector came down much below the lending rate due to a huge component of non-performing advances. The performance of the banks during year 2001 was relatively better than the previous year. During 2001, the commercial banks registered a 14.12% growth in loans and advances, and reported increasing operating profits. Most of the listed commercial banks declared higher dividends for the year 2001 than for 2000 and some announced stock dividends. However, the banks are acutely undercapitalized, which enabled declaration of high percentage of dividends, though in the long run such trend could prove unproductive if not fatal.
Cost of inefficiency … who is paying?
The operational cost (i.e. general and administrative cost) in the banking system is a staggering 3.13% of net assets against an international norm of 1%. In neighboring India it is 2.5%, also on the higher side. The substantial excess cost therefore stands at 2.13% of net banking assets, which translates to 0.56% of the current GDP. On the other hand, the recapitalization needed to meet the statutory capital adequacy requirement is 3.20% of GDP. The annual cost of servicing the recapitalization at 10 percent interest per annum therefore stands at 0.32% of current GDP. The total of the two cost indicators indicates that the annual cost of inefficiency of the banking sector in Bangladesh is 0.88% of current GDP. Again, there are reasons to believe that the recapitalization needs are grossly understated, especially in provisioning against loans and advances to the SoEs and sector corporations. Based on other studies, the recapitalization requirement can be estimated at around US$2.89 billion and the annual cost of financing placed at 0.62% of GDP. Using these figures, the total annual cost of the banking sector inefficiency would stand at 1.18% of GDP. The recapitalization requirement of the development financial institutions (DFIs) and specialized banks are also large, and the cost of financing would be roughly around an additional US$1.165 billion or 0.24% of GDP. Thus, the aggregate cost of refinancing for banks and DFIs and specialized banks through issuance of bonds with 10% coupon would be as high as 1.42% of GDP. In comparison, such refinancing cost in India is roughly at 0.75% of GDP.
The road map ahead…
The Bangladesh economy registered noteworthy developments and growth in some major areas including the social sector and achieved relative fiscal stability in the decade of the 1990s. However, the vulnerability of the apparent stability has been exposed in the aftermath of the September terror and changing environmental uncertainties. The authorities now have limited room for maneuver in responding to external shocks. Substantive unresolved or unattended issues remain which could pose a threat to macroeconomic stability. There is a strong need to introduce a legislative program that would enable the regulatory authorities to take timely measures to ensure soundness and efficiency of the banking system, strengthen credit discipline among borrowers as well as speed up the recovery process. The resolution of issues relating to the banking sector could strengthen macroeconomic stability, while enhancing growth and depth, governance, efficiency, private sector presence, and an enabling environment. Conceptually, and potentially by any measure, the Banking Reform and Development (BRD) should be the centerpiece for any program for the finance sector, with other supporting projects having varying degrees of impact. A holistic strategic framework for the finance sector could include potential response initiatives that address targeted performance metrics and strategic results relating to growth and development, governance, sustainability, efficiency, reach, governmental presence and the enabling environment. Some time-bound quantitative indicators and targets could be considered for the banking sector. Few such targets and indicators could be:
1) Review of all financial sector and specifically banking related laws, rules and regulations within 1 year;
2) Enactment of foreclosure law within 1 year;
3) Provision shortfall and re-capitalization requirement of SCBs met through market priced bonds within the next 2 years;
4) Transformation and divestment of the BASIC Bank within the next 2 years;
5) Adoption of all IAS and ISA standards by the Institute of Chartered Accountants of Bangladesh within 2 years;
6) Establishment of an AMC to take over bad debts of commercial banks within 3 years;
7) Only one commercial bank under state ownership at the end of 5 year;
8) No fully state-owned commercial bank after 10 years etc.
2.13 HELPING BANGLADESH BANKING SECTOR TO GROW IT FULL POTENTIAL:
A Government initiative for a strong and effective regulatory and supervisory system for Bangladesh’s banking sector is moving ahead. The World Bank is supporting the Central Bank Strengthening Project (CBSP) to enable Bangladesh Bank to play its role as country’s monetary authority, bank regulator and supervisor.
Under CBSP, the World Bank is assisting Bangladesh Bank in three areas: (I) Strengthening the Legal Framework; (II) Reorganizing and Modernizing Bangladesh Bank by focusing on (a) Functional Reorganization, (b) Automation, and (c) Human Resources Development; and (III) Capacity Building of Bangladesh Bank focusing on (a) Strengthening the Research Department, (b) Strengthening Prudential Regulations and Bank Supervision, and (c) Strengthening Accounting and Auditing systems.
This project started in 2003 with a World Bank commitment of US$ 37 million, out of a total cost of US$46.13 million. Under this project, a merit based promotion policy has been adopted recently, while international central banking accounting and auditing standards have been introduced. It also strengthened regulations and supervisions by revising regulations on corporate governance, accounting policy, capital adequacy, loan classification and provisioning and foreign exchange and interest rate risk, among others.
Progress on the human resources reforms has been gradual. The most significant progress is the implementation of the Performance Management System (PMS). A proposal of defining Bangladesh Bank’s salary and compensation package from the Civil Services is now under active consideration of the government.
The Government is also speeding-up the implementation of Bangladesh Bank automation, and procurement of IT systems, the largest component of the project. Under a separate arrangement, the World Bank Institute has also helped Bangladesh Bank in setting up a Policy Analysis Unit to spearhead research on all aspects of macroeconomics including monetary policy and central banking.
Introduction of the Prime Bank Limited
Bank is a financial institution. The economy is mostly depended on the bank since the bank facilitates the economic and financial transactions. Prime bank limited is a fast growing private sector bank and the bank is already at the top slot in terms of quality services to the customers and value addition for the shareholders. The bank made satisfactory progress in all areas of business operation in 2006.
Prime Bank Ltd. is one of the few banks permitted by the Bangladesh in the early 90’s. These banks are known as the second-generation banks and fortunate to remain immune from the bad loan culture. Prime Bank Limited was designed to provide commercial and investment banking services to all types of customer ranging from small entrepreneur to big business firms. Besides investment in trade and commerce, the bank participates in the socioeconomic development through the participation in priority sectors like agriculture, industry, housing and self-employment. Prime Bank Limited wants to establish, maintain, and conduct all types of banking, investments and businesses in Bangladesh and abroad with superior service quality and performance.
The bank has consistently turned over good returns on Assets and Capital. During the year 2005, the bank has posted an operating profit of Tk.1520.34 million and its capital funds stood at Tk.3177.32 million. Out of this, Tk.1400 million consists of paid up capital by shareholders and Tk.1777.32 million represents reserves and retained earnings. The bank’s current capital adequacy ratio of 9.96% is in the market. In spite of complex business environment and default culture, quantum of classified loan in the bank is very insignificant and stood at less than 0.96%.
Presently the bank has 41 branches all over the Bangladesh and a booth located at Dhaka Club, Dhaka. Out of the above 41 branches, 05 (Five) branches are designated as Islamic Branch complying with the rules of Islamic Shariah, the modus operandi of which is substantially different from other branches run on commercial conventional basis.
3.1 The Policy, Vision, Mission, Goals & Objectives of Prime Bank Ltd:
Policy: A bank with a difference
Vision:To be the best Private commercial Bank in Bangladesh in terms of efficiency, capital adequacy, asset quality, sound management and profitability having strong liquidity.
Mission: To build Prime Bank Limited into an efficient, market driven, customer focused institution with good corporate governance structure. Continuous improvement in our business policies, procedures and efficiency through integration of technology at all levels.
Goals and Objectives:
Maximization of Profit through customer satisfaction is the main objective of the Bank. In addition, the others relevant objectives are:
§ To be market leader in high quality banking products and services.
§ Active excellence in customer service through providing the most modern and advance technology in the different spheres of banking.
§ To participate in the industrial development of the country to encourage the new and educated young entrepreneurs to under take productive venture and demonstrate their creativity and there by participate in the national development.
§ To provide credit facilities to the small and medium size entrepreneur located in urban & sub-Urban area and easily accessible by our branches.
§ To develop saving attitude and making acquaintance with modern banking facilities.
§ To inspire for undertaking small projects for creation employment through income generating activities.
§ To play a significant role in the economic development of the country.
3.2 CORPORATE INFORMATION IN BRIEF
|Memorandum and Articles of Association signed by the Sponsors||5-Feb-1995|
|Incorporation of the Company||12-Feb-95|
|Certificate of Commencement of Business||12-Feb-95|
|License issued by Bangladesh bank||20-Feb-95|
|License issued for opening the first branch, Motijheel Branch||8-Apr-95|
|Formal launching of the Bank||17-Apr-95|
|Initial Public Offering (IPO):|
|– Publication of Prospectus||29-Aug-99|
|– Subscription Opened||9-Sep-99|
|– Subscription Closed||22-Sep-99|
|Listed with Dhaka Stock Exchange Ltd||27-Mar-00|
|Listed with Chittagong Stock Exchange Ltd||15-Nov-00|
|Dividend declared in the 5th AGM (First after the IPO)||3-Mar-00|
|Registered as Merchant Banker with Securities & Exchange Commission||29-Mar-01|
|License issued from Bangladesh Bank as Primary Dealer||11-Dec-03|
|Registered as Depository Participant of CDBL||29-Mar-04|
|Trading of Shares started in Demat from in Stock Exchanges||15-Jun-04|
|Agreement with Temenos for Core Banking Software T24||30-Jun-05|
3.3 ORGANOGRAM OF PRIME BANK LIMITED
3.4 HIERARCHY OF PRIME BANK LIMITED
3.5 A BRIEF DESCRIPTION OF BUSINESS ACTIVITIES, PRODUCT & SERVICES AND FINANCIAL POSITION OF PRIME BANK LIMITED:
3.5.1 Business Activities of PBL:
The Principal activities of the bank were banking and related businesses. The banking businesses included deposits taking, extending credit to corporate organization, retail and small & medium enterprises, trade financing, project financing, international credit card etc. Prime Bank Limited provides a full range of products and services to its customers, some of which are mentioned below with a brief overview of the major business activities.
As a part of risk diversification strategy PBL expended the lending activities in this sector during 2005. The growth rate of PBL’s consumer financing was 45.43% during this year. The loan schemes offered by the bank include Home Loan, Loan against Salary, Marriage Loan, Car Loan, Hospitalization Loan, Education Loan, Doctors Loan, Travel Loan etc.
Job creation is essential and it must come from Small and Medium Enterprise that will ultimately dominate the private sector. During 2005 bank’s Strategy was focused on customer convenience. The Bank provided working capital loans to suppliers or dealers of large corporations or clusters of small exporters of non-traditional items. The exposure is well diversified among over 500 customers in manufacturing; trading and service sector like Light Engineering and manufacturing, Cottage and power loom industries, CNG, Paper and pulp etc. The outstanding loan against SME is 343 million.
PBL’s strategy is to provide comprehensive service to the clients of this segment who are large and medium size corporate customers with expertise in trade finance and related services. Besides trade finance bank are providing working capital finance, project finance and arranging syndication for our corporate clients. Syndication and structured Finance Unit of the Bank strengthened its footstep in the consortium financial market and arranged a number of syndication deals for its corporate clients.
For the development of Islamic Banking Business, 2005 was also a commendable year. It has been observed that compliance of Shariah has improved in 2005 as compared to the preceding years. According to their advice Islamic Banking operation of the bank has been separated from the operation of Conventional Banking and shown separately in the bank’s financial statement. It is found that the investment and deposits grew by 82.07% and 11.59% respectively in the year 2005.
In the year of 2005, Prime Bank Ltd has launched VISA. Before that PBL started its credit card operation in 1999 by introducing Master Card. Now PBL has become the first local Bank of the country to achieve principal membership of both the worldwide-accepted plastic money network i.e. Master Card and VISA. PBL has redesigned the credit card facility by providing the incentive of “Free Life Insurance Coverage” for their valued cardholders to mitigate the financial risk.
PBL equator fulfills its strategic commitment to provide custody and clearing services. Equator’s focuses are on the following:
§ Commitment to quality
§ Dedication to customer needs
§ Sustained investment in people and systems
3.5.2 International Trade Management:
This division is operational throughout the group and PBL’s core strength is trade finance and services. With an experience, Prime Bank has developed knowledge of trade finance, which is world class. Principle services to importers include imports letter of credit, import bills for collection and back-to-back letters of credit facilities. Services provide to exporters include export letters of credit, direct export bills, bonds, and guarantees.
Prime Bank recognizes the importance of cash management to corporate and financial institutional customers, and offers a comprehensive range of services and liquidity management.
Prime Bank Limited provides a wide range of services to institutional clients, commercial, merchant and central banks; brokers and dealers; insurance companies; funds and managers, and others. It provides relationship managers who are close to their customers and speak local language. This wide network of institutional banking facilities includes transaction, introduction, problem solving and renders advice and guidelines on local trading condition.
Treasury operations had been consideration as an important avenue for income generation purpose within Head Office. In fact, in the past, income from treasury operation was quite sizable and significant to the total income generated by the bank. The treasury division publishes daily and weekly currency newsletters, which provide analyses of currency trends and related issues. Seminars and workshops are conducted for customers from time to time on foreign exchange related topics. Prime Bank is one of the first local banks in Bangladesh to integrate treasury dealings of local money market and foreign currency under one Treasury umbrella. The bank has handl