General Banking Activities of International Finance Investment and Commerce Bank Ltd
EXECUTIVE SUMMERY
The internship report is a partial requirement for the Bachelors of Business Administration. As a part of internship program, The placed at Stock Exchange Branch of International Finance Investment and Commerce (IFIC) Bank Limited in Dhaka. During the three month internship. The learned a lot about commercial banking operation of the organization.
This report not only explores IFIC Bank’s activities as one of the leading non-government companies, but also highlights the role of IFIC Bank in the financial sector of Bangladesh.
This report contains information about all commercial activities that the bank is dealings with. The discussed with banking activities in a classified manner. The divided this report in two major parts. First one is “General Banking operations”. The second part belongs to “Loans and Advanced”.
General banking operation includes all the general activities performed by the bank. The part one covers the following tropic in a systematic manner. Then have discussed about the types of account holder and different types of accounts such as-Saving Account, Current Account, and Fixed Deposit Rate (FDR), Pension Saving Scheme (PSS) etc.
The activities performed in cash department and the basic matter to be look after. Remittance collection and bill payment procedure section covers the pay order, TT, and DD, clearing of cheque, IDBC, IDBR. The discussed about the account section where the maintenance of transfer book, cash vouchers, and different types of register book.
The report also covered the Loans and Advance Section of the branch where explain different types of loan such as-Auto loan, Consumer loan, Easy loan, Porua Loan, Flexi Loan, Thikana Loan, Possession Loan, Peshajibi Loan, and Retail Loan etc.
Then explained credit policy and portfolio, risk management, financial highlight, new product, history of Stock Exchange Branch, function and various department, target customer of IFIC Bank, documentation of Loan, credit Folio, manager conference, yearly report, SWOT analysis and many other thing are included this report.
Chapter One
INTRODUCTION
1.0 Introduction:
Due to globalization and expansion of international Business, finance plays the major roles for the economic development. The development of a modern economy would not have been possible without the use of money. A fundamental characteristic of money is that it is like a collective commodity. There is a parallel relationship between the money and banking. Bank is an important and essential financial institution for the necessity of the use of money and the protection of the money.
In the backdrop of economic liberalization and financial sector reforms, a group of highly successful local entrepreneurs conceived an idea of floating a commercial Bank with different outlook. For them, it was competence, excellence and consistent delivery of reliable service with superior value products. Accordingly, IFIC Bank Ltd. was set up at the instance of the Government in 1976 as a joint venture between the Government of Bangladesh and sponsors in the private sector with the objective of working as a finance company within the country and setting up joint venture banks/financial institutions abroad. The Government held 49 per cent shares and the rest 51 per cent were held by the sponsors and general public. In 1983 when the Government allowed banks in the private sector, IFIC was converted into a full-fledged commercial bank. The sponsors are reputed personalities in the field of trade and commerce and their stake ranges from shipping to textile and finance to energy etc.
IFIC Bank Limited has already made significant progress within a very short period of its existence. The Bank has been graded as 4th in the country through internationally accepted CAMEL rating. The Bank has already occupied an enviable position among its competitors after achieving success in all areas of business operation.
IFIC Bank Ltd. offers all kinds of Commercial, Corporate and Personal Banking services covering all segments of society within the framework of Banking Company Act and rules and regulations laid down by Bangladesh Bank. Diversification of products and services include Corporate Banking, Retail Banking and Consumer Banking right from industry to agriculture, and real state to software.
1.1 Origin of the Report:
This internship report entitled “General Banking Activities of IFIC Bank Ltd” has started at July 06, 2010 under the instruction of honorable internship supervisor Md. Mamun Ur Rashid sir for the partial fulfillment of the requirement of BBA program.
1.2 Scope of the Report:
The scope of this paper is limited to the organizational structure, background, and objectives, functions, and performance of IFIC Bank Ltd as a whole. The scope is also limited to different general banking aspects.
1.3 Objectives of the Report:
The first objective of writing the report is fulfilling the requirements of the BBA program. In this report, we have attempted to give on overview of International Finance Investment and Commerce Bank Limited in general.
The specific objectives of this report are:
· To familiar the history and operations of IFIC Bank Ltd.
· To show overall investment proposal, appraisal procedures, documentation system of IFIC Bank Ltd.
· To identify strength and weakness of operations of IFIC Bank Ltd.
· To identify the problems related to operation faced by IFIC Bank Ltd.
· To gather practical experience about operation of IFIC Bank Ltd.
1.4 Research Methodology:
In the organization part, much information has been collected from different published articles; journals, brochures, previous and recent annual report of IFIC Bank Limited and also based on the experience that gathered during the period of internship. Within this period worked in two departments, General Banking (GB) department and Loans & advance departments.
1.5 Sources of Data:
All the information incorporated in this report has been collected both from the primary sources and as well as from the secondary sources.
Primary Source: Personal experience gained by working in, different desks and face to face communication with employees of the IFIC Bank Ltd.
Secondary Source: Secondary sources of data include
· Annual reports of IFIC Bank Ltd.
· Data collected from internal report.
· Bank records.
· Journals of the Bank
· Different books, training papers, manuals etc. related to the topic
· Official Website of the Bank.
1.6 Limitations of the Study:
· As, had more dependence on the primary sources, so there might be some level of inaccuracy with those collected information. Though, adequate verification and cross- checking was used, to minimize the error level.
· Confidential information regarding past profit or product cost, financial information was not accurately obtained. Alike all other banking institutions, IFIC Bank Ltd is also very conservative and strict in providing those information. In those cases, have relied upon some assumptions, which in result have created certain level of inaccuracy. Still, had tried best in obtaining those sensitive in formations, as much as possible.
· In reality it was hard to understand all the concepts and acquire sufficient knowledge about the particular field within three months which cover the Internship program.
Chapter Two
An Overview of the IFIC Bank Limited
2.0 Banking Industry-Overview:
Banking sector has a vital role to play in the economic activities and development of any country. This sector is much more important in a developing country like Bangladesh. The whole scenario of the economy of a country can be ascertained by examining the condition of the banking sector. In Bangladesh, the banking sector dominates the financial sector and macroeconomic management largely depends on the performance of the banking sector. Banking sector grew primarily in the public sector with main emphasis on restructuring of the financial system and development needs of the war-torn economy with gradual liberalization in subsequent years. It was increasingly felt that banks should be allowed in the private sector for giving a fillip to development process on the basis of private initiative. In the 80’s for the first time a number of banks in the private sector were allowed. Subsequently in the mid 90’s some more banks in private sector also commenced operations. Finally, in 1999, 3rd generation of private sector banks was given permission to operate. As a result while up to 80’s public sector banks dominated financial sector, banks in the private sector were given increased responsibility with the passage of time.
Private commercial banks are divided into three groups according to their commencement of business. They are familiar in the name of 1st generation, 2nd generation and 3rd generation banks.
1st Generation Banks (Established 1982-1988):
National Bank Limited, The City Bank Limited, United Commercial Bank Limited, AB Bank Limited, IFIC Bank Limited, Islami Bank Bangladesh Limited and Al-Baraka Bank Bangladesh Limited.
2nd Generation Banks (Established 1992-1996):
Eastern Bank Limited, Prime Bank Limited, National Credit & Commerce Bank Limited, Southeast Bank Limited, Dhaka Bank Limited, Al Arafa Islami Bank Limited, Social Investment Bank Limited and Dutch-Bangla Bank Limited.
3rd Generation Banks (Established 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, BRAC Bank Limited and Shahjalal Bank Limited.
Number of Organization in the Industry
Nationalized Commercial Banks | 04 |
Specialized Banks | 05 |
Private Commercial Banks | 30 |
Foreign Commercial Banks | 9 |
Number of Branches | 6,930 |
Source: Scheduled Banks Statistics, Quarterly April’ 09- June’09
The following table shows the overall deposits of last three years. The total volume is shows in terms of deposit BDT. 251046.30 crores in 2009, while in 2008 the total deposit was BDT. 216105.00 crores. During the one-year the volumes of deposit have increased more than BDT. 34943 crore.
Table: 2.1 Overall Deposits
June 2007 | June 2008 | June 2009 |
184860.50 | 216105.00 | 251046.30 |
(Figures BDT in Corers)
Source: Scheduled Banks Statistics, Quarterly April’ 08 – June’09
The table below shows the overall advances of last three years. The total volume in terms of advances BDT. 255920.00 crores in 2009 while in 2008 the total was BDT. 215929 crores. During the one-year the volume of advances have increased more then BDT.39991 crores. Besides these the liquidity status of all the banks was satisfactory.
Table: 2.2 Overall Advances
(Figures BDT in Crores)
June 2007 | June 2008 | June 2009 |
190135.80 | 215929.00 | 255920.00 |
Source: Scheduled Banks Statistics, Quarterly April’ 09 – June 09’
2.1 Organization Overview:
As a fully licensed commercial bank, a highly professional and dedicated team is managing IFIC Bank (International Finance Investment and Commerce Bank Limited) with long experience in banking. They constantly focus on understanding and anticipating customer needs. As the banking scenario undergoes changes so the bank and its responsibilities itself changed in the market condition. IFIC Bank Ltd is a banking company incorporated in the People’s Republic of Bangladesh with limited liability. It was set up at the instance of the Government in 1976 as a joint venture between the Government of Bangladesh and sponsors in the private sector with the objective of working as a finance company within the country and setting up joint venture banks/financial institutions abroad. The Government held 49 per cent shares and the rest 51 per cent were held by the sponsors and general public. In 1983 when the Government allowed banks in the private sector, IFIC was converted into a full-fledged commercial bank. The Government of the People’s Republic of Bangladesh now holds 35% of the share capital of the Bank. Leading industrialists of the country having vast experience in the field of trade and commerce own 34% of the share capital and the rest is held by the general public.
IFIC Bank Ltd. being a Banking company has been registered under the companies Act 1913 with its registered office at BSB Building (8th, 10th, and 15th to 19th floor) 8 Rajuk Avenue, Dhaka 1000. IFIC Bank operates as a scheduled Bank under Banking license issued by Bangladesh Bank, the central bank of Bangladesh. This Bank is having an authorized capital of Tk. 500 million and Paid up Capital Tk. 406.44 million sponsored by 14 members of board of directors.
2.2 Milestones in the Development of IFIC BANK:
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2.3 Vision of IFIC Bank:
To be the best Private Commercial Bank in Bangladesh in terms of efficiency, capital adequacy, asset quality, sound management and profitability having strong liquidity.
2.4 Mission of IFIC BANK:
IFIC Bank’s Mission is to provide service to their clients with the help of a skilled and dedicated workforce whose creative talents, innovative actions and competitive edge make their position unique in giving quality service to all institutions and individuals that they care for.
In Broad sense, their mission is to provide service to their clients with the help of a skilled and dedicated workforce whose creative talents, innovative actions and competitive edge make their position unique in giving quality service to all institutions and individuals that they care for.
They are committed to the welfare and economic prosperity of the people and the community, for they drive from them their inspiration and drive for onward progress to prosperity.
They want to be the leader among banks in Bangladesh and make our indelible mark as an active partner in regional banking operating beyond the national boundary.
In an intensely competitive and complex financial and business environment, they particularly focus on growth and profitability of all concerned.
2.5 Objectives of IFIC BANK:
- IFIC Bank Limited is designed to provide commercial and investment banking services to all types of customers ranging from small entrepreneurs to big business firms. In this regard it emphasizes on the priority sectors of the economy like agriculture, industry, housing and self-employment.
- Besides the bank aims to provide different customer friendly deposit and loan products in the field of personal banking to fulfill the banking needs of individual customers.
- On delivery of quality service in all areas of banking activities with the aim to add increased value to shareholders investment and offer highest possible benefits to their customers.
2.6 Management Hierarchy:
2.7 Organization Structure and Responsibilities:
The thirteen members of the Board of Directors are responsible for the strategic planning and overall policy guidelines of the Bank. Further, there is an Executive Committee of the Board to dispose of urgent business proposals.
2.8 Functional Structure of IFIC:
2.8.1 General Banking Section:
Its main functions include –
- Issuing of power of attorney to the officers of the Branches.
- Maintaining general correspondence with Bangladesh Bank and other Banks etc.
2.8.2 Head Office Accounts:
It deals with all the head office transactions with Banks and its Branches and all these are controlled under the following heads:
- Income, Expenditure Posting: All income and expenditure are maintained and posted under this head.
- Cash Section: Cash section generally handles cash expenditure for office operations and miscellaneous payments.
- Bill Section: This section is responsible for only inland bills.
- Salary Wages of the Employees: Salary and wages of the head office executives, officers & employees are given from this department.
- Maintenance of Employee Provident Fund: Here employee’s provident fund accounts are maintained.
2.8.3 Consolidation of Branch’s Accounts:
All branches periodically (especially monthly) send their income & expenditure i.e., profit and loss accounts and head office made the consolidated statement of income and expenditure of IFIC Bank Limited. Here Branch statements are reviewed. This division also prepares different monthly, quarterly, half-yearly statements and submits to Bangladesh Bank. It also analyzes and interprets financial statements for the management and Board of Directors.
2.8.4 Credit Division:
The main function of this division is managing IFIC Bank’s credit portfolio. Major functions are the followings:
1) Receiving proposal
2) Appraising the proposals
3) Getting approval from the head office credit committee.
4) Communication with the customer and sanctioning the credit.
5) Monitoring and follow-up of the credit facilities
6) Setting prices for credits and making it effective.
7) Prepares required statements as made mandatory by the Bangladesh Bank.
2.8.5 International Division:
The objective of this division is to assist the management to make international dealing decisions and guide Branches to implement the decisions made. Its functional areas are follows-
- Maintaining correspondence relationship.
- Monitoring foreign trade & exchange dealings.
- Maintaining accounts and reconciliation;
- Authorizing of signature and test key;
- Monitoring Foreign Exchange returns &statement;
- Sending updated exchange rates to concerned branches.
2.8.6 Information Technology Division:
IFIC Bank uses automated accounting system. Its transaction system is fully automated. And the computer Division is responsible for keeping the system running. The major functions of this division are: –
- Designing software to support the account operation;
- Provide required hardware & software.
- Updating software if there is any lacking.
- Train the concerned executives and officers regarding the operation of newly developed software.
- Hardware & software trouble shooting;
- Provides updated CD’s of Online accounts to the branches;
- Provides routine check-up of computers of different branches.
2.8.7 Public Relations Division:
Public Relations Division is responsible for making liaison with the stakeholders. The Board’s routine functions can be enumerated as follows:
1) Receiving and sanctioning of all advertisement application;
2) Keeping good relation with different newspaper offices;
3) Inviting concerned one for any occasion;
4) Keeping good relation with different offices of electronic media.
2.8.8 Marketing Division:
Marketing division is responsible for making the stakeholders concerned about the different products of IFIC Bank Limited. The marketing department is always in persuasion for attracting different customers to take their facilities.
2.8.9 Human Resource Division:
HRD performs all kinds of administrative and personnel related matters. The broad functions of this division are as follows:-
- Selection & recruitment of new personnel
- Placement of manpower
- Dealing with transfer, promotion and leave of personnel
- Training & development
- Termination and retrenchment of employees
- Keeping records of every employee of the Bank
- Maintenance of employee welfare fund
- Arranges workshop for employees & executives;
2.8.10 Audit Division:
Audit division works as internal monitoring and inspection division of the company. The officers of this division randomly go to different Branches and examine the necessary documents regarding each single account. If there is any discrepancy, they inform the authority concerned to take care of that/those discrepancy. They help the Bank to comply with the rules and regulations imposed by the Bangladesh Bank. They inform the Bangladesh Bank about the current position of the rules and regulations followed by the Bank.
2.8.11 Credit Card Division:
IFIC Bank is a member Q-Cash VISA DEBIT/CREDIT card. The Q-cash card is more just than an ATM card. It can be used as a combination of debit and credit facility. Customers can withdrawal their money not only from IFIC’s booth but also they can withdrawal money from those bank’s booth who are also member of Q-Cash.
2.8.12 Merchant Banking and Investment Division:
This division concentrates its operation in the area of under writing of Initial Public Offer (IPO) and advance against shares. This division deals with the shares of the company. They also look after the securities portfolio owned by the company. The company has a large amount of investment in shares and securities of different corporation as well as government treasury bills and prize bond.
2.8.13 Board and Company Secretary Division:
The main functions of this division are as follows:
- Conducting meeting of the Board of Directors;
- Dealing with Company Act;
2.8.14 IFIC Bank Training Institute:
IFIC Bank Training Institute is all along supporting the Bank through various in house training courses, workshop and seminars. The Institute is playing a significant role in strengthening the capabilities of their human resources.
2.8.15 IFIC Bank Foundation and Social Services:
The Bank has taken strong initiative to ensuring compliances and attaining greater social goals through good governance. Accordingly, IFIC Bank Foundation had been formed in the later part of 1990 to undertake social welfare related activities. IFIC Bank Limited has always laid emphasis on its commitment to the society and seeks to reinvest parts of its profits for community welfare. The Foundation and employees of the Bank take part in diverse charitable and voluntary programs. The main objective of the Foundation is to invest part of the Bank’s profit in poverty alleviation and community welfare. The Foundation has made allocation in different areas of poverty alleviation and primary health care programs for the low income group. Substantial fund has also been allocated for research works on various socio-economic issues confronting the nation. In all their business decisions, they strictly adhered to environmental and safety regulations and in no way do they compromise on ecological imbalance for which future generation.
2.9 Product and Services:
Besides traditional Banking services, IFIC Bank Limited has added a wide range of products/services in its service portfolio. Various products & services offered by IFIC Bank Ltd. include:
2.9.1 Deposit Schemes:
· Current Account Deposits;
· Savings Bank Deposit;
· Fixed Deposit;
· Short Term Deposit;
· Monthly Benefit Deposit Scheme;
· Special Deposit Scheme;
· Pension Savings Scheme;
· Double Benefit Scheme
2.9.2 Loan Schemes:
The IFIC Bank is offering the following loan and advance product to the client for financing different purpose that fulfill the requirements of the bank and have good return to the investment as well as satisfy the client. The loan and advance products are as the following:
· General Loan Scheme;
· Lease Finance;
· Consumer Credit Scheme;
· Car Loan;
· Any purpose Loan;
· Loan Against Salary;
· Doctors loan;
· House Building Loan/Apartment Loan Scheme
· Small And Medium Enterprise Scheme,
· Credit Card;
· Educational Loan;
· Marriage Loan;
· Vacation Loan;
· Computer Loan;
· CNG Conversion Loan.
2.10 Automation in Banking Operation:
Technology integration for automation of business process and procedures is an integral part of IFIC Bank. Since the very beginning, they have made conscious efforts for induction and up gradation of information technology at various levels to gain competitive edge over the others. Almost all their branches are now in an automated environment as far as customer transactions are concerned and excepting a few branches in locations not accessible by Lease Line, all other branches are under a wide area network. Their Website “www.ificbankbd.com” is frequently visited from home and abroad. The site is always updated with current information about their services and products. All necessary information about their product and services are available at their website.
2.11 Capital Structure:
The authorized capital of IFIC Bank Limited is Tk. 500 million and with the increase of Paid-up Capital to Tk. 406.44 million, the capital base of IFIC Bank Limited has become one of the strongest. The Bank raised its Paid-up Capital from Tk. 406.39 million to Tk. 406.44 million during 2005. The total Capital Funds of the Bank at the year end 2005 stood at Tk 1754.41 million against Tk. 1,608.80 million in the previous year. Total deposit Increase from 20,774.49 million to 22,505.17 million during 2005.
2.12 Performance at a Glance:
The Authorized Capital of IFIC Bank Limited is Tk.500 Million. The Paid-up capital is Tk.406.44 Million at 31.12.2006. The highlights of financial position for the last 3 years are given below:
Table: 2.12.1
(Taka in Million)
Sl. | Particulars | 2009 | 2008 |
01 | Paid up Capital | 670.72 | 406.39 |
02 | Total Capital | 3,045.09 | 2,028.39 |
03 | Capital Surplus | 644.64 | 172.33 |
04 | Total Assets | 39,914.15 | 36,080.48 |
05 | Total Deposits | 29,900.05 | 28,620.91 |
06 | Total Loan & Advances | 28,361.46 | 25,490.66 |
07 | Total Contingent Liabilities & Commitments | 19,422.59 | 16,521.41 |
08 | Credit Deposit Ratio | 94.85% | 89.06% |
09 | Percentage of Classified Loan Against Total Loans & Advances | 8.11% | 5.64% |
10 | Profit after Tax & Provision | 964.93 | 253.83 |
11 | Amount of Classified Loans during the year | 2,299.90 | 1,437.39 |
12 | Provision Kept Against Classified Loans | 984.02 | 970.77 |
13 | Provision Surplus/Deficit | 1.59 | 678.03 |
14 | Cost of Fund | 6.58% | 6.35% |
15 | Interest Earning Assets | 35,520.23 | 30,940.57 |
16 | Non-interest Earning Assets | 4,393.92 | 5,139.91 |
17 | Return on Investment (ROI) | 13.56% | 9.11% |
18 | Return on Assets (ROA) | 2.42% | 0.70% |
Source: www.ificbankbd.com/ificporfile.php
2.13 An Overview of Stock Exchange Branch of IFIC Bank Limited:
In October of 2009 IFIC bank Limited has opened its 70thbranch in the, 16, Motijheel C/A, at Dhaka. It has a total number of 20 employees. The workforce is very much co-operative both to each other and to the clients. It is expected that soon it can be counted among the best five operated branches of IFIC Bank both in terms of profitability and operational efficiency.
2.13.1 Organizational Hierarchy of Stock Exchange Branch:
As any other commercial bank in Bangladesh, the Senior Assistant Vice President/Relationship Manager is fully responsible for the activities of the bank and accountable for the day-to-day activities of his branch. Under him, the Assistant Vice President or Operational Manager is working. The AVP supervises all the operations of each department. Then the other three departments have their in-charges, who supervise the activities of their respective departments.
2.13.2 Departments within Stock Exchange Branch:
This branch has four departments as the following.
1. General Banking (GB) Department
2. Credit Department
3. Cash Department &
4. Marketing and Customer Care Department
The bank also has an Accounts Department, which has only one employee. He is responsible for making salary statements, checking and maintaining vouchers and accounts, credit card management, etc.
General Banking (GB) Department:
Some of the day-to-day activities of this department are the following.
· Account Opening
· Issuance of Cheque
· Receiving Cheques for Clearing, Transport, and Dispatch
· Issuance of TT {Telegraphic Transfer), PO (Pay Order), DD (Demand Draft), etc.
· Opening and Maintaining of FDR, MBDR, and other Scheme Deposits
· Fund Transfer
· Closing and Transfer of Accounts
· Maintaining the Locker of the Bank
· Outward Clearing of IBC and OBC
· Maintaining On-line Voucher
- Cash Department:
- This department is responsible for cash payment and receipt. The employees in this department are also liable for computer posting, passing cheques, and accuracy of posting, balancing on-line accounts, etc.
- Credit Department:
- This department is responsible for the following jobs.
- Meeting the requirements of existing and potential RCS customers
- Meeting the requirements of Head Office and Customers of General
- Credit to cooperate with other departments for smooth operation
- Preparing CIB and CL Statements
- Preparing Credit Proposal and Statement
- Administration of Retail Credit
Marketing and Customer Care Department:
Searching for new customer, answer the inquiry about the product to the customer. They also look whether customer all documents are given.
2.14 SWOT Analysis of IFIC Bank Limited:
SWOT analysis enables an organization to have a comprehensive insight about its current position in the industry compared to its competitors. It provides the organization a scope to strategically improve its position in the market. Here, the internal strength and weakness of IFIC Bank Ltd. as well as the external opportunities and threats are discussed-
2.14.1 Strength:
Company Reputation:
Company reputation is the best strength of IFIC Bank Limited. Since its inauguration IFIC Bank Ltd has managed to operate with an image to serve people. It has the reputation to work with integrity and efficiency.
Sponsor:
IFIC Bank Limited has sponsors from various sectors of Bangladesh. The most successful entrepreneurs from various sectors started this company. As a result there was a combination of different thoughts and skills in the management of the bank, which is very much essential for success in today’s competitive market.
Top Management:
IFIC Bank Limited has a very competent and experienced top Management. The current Managing Director Mr. Mosharraf Hossain has banking experience of 30 years. He had the experience of marketing and customer relationship management in his long career.
Strong employee bonding and belongingness:
Employees are one of the major assets of the company. The employees of IFIC Bank Limited have a strong sense of commitment towards organization and also feel proud and a sense of belonging towards IFIC Bank Limited. The strong culture of this Bank is the main reason behind this strength.
Capital Structure:
The huge paid up capital of Taka 406.44 million gives IFIC Bank the strength to freely operate in the worst economic conditions. It also gives the depositors assurance of the safety of their deposits, which is very much important for a bank to achieve.
Facilities and Equipment:
IFIC Bank has a network of 82 Branches over the country which gives it the ability to reach a larger portion of the people of the country. Very few private banks have a network of this size. IFIC Bank is always in the endeavor to provide the best technology for its employees so that they can provide the best service to the customers. The automated banking system of the bank makes it very easy and quick for the employees to provide service.
The Bank has taken up a new project with Misys International Banking System Inc. (UK) to further upgrade its banking operation to state-of-art world class on-line banking solutions to provide faster and even more convenient centralized services to the clients.
2.14.2 Weakness:
Advertising and Marketing:
Marketing is the weak point of IFIC Bank Limited. It is far behind from its competitors in this side. Not much effort is given for introducing the people with its products.
Reference Appointment:
The practice of reference appointment is well established here. It is a big draw back, because without competitive recruitment process it is not possible to have qualified persons in right positions. And if right persons are not in the right position then it is not possible for a business concern to operate successfully.
Low Remuneration:
Low remuneration package is a major disadvantage for IFIC bank. If the employees are not satisfied with their return then it would be hard for the bank to have competent employees, which will hamper the service quality of the bank very much.
2.14.3 Opportunity:
Diversification:
The company has the opportunity to diversify its products and services with the huge paid up capital to back up the diversification process. In the developing economy of Bangladesh there is still opportunity to explore with diversification of operations such as Merchant banking, etc.
Online Banking:
The online banking system of IFIC Bank is not fully operational yet. There is a semi-online system operating, and some branches are still out of that system. By introducing full online banking system the bank can grab a strong position in the market.
2.14.4 Threats:
Multinational Banks:
Multinational banks are a major threat for IFIC Bank Limited. With their huge capital support and international connection they are tough competitors. The company should take special notice of the factor.
Default Culture:
The default culture is a foremost threat for the banking sector of Bangladesh. IFIC Bank Limited is not out of that threat. The bank should establish a sound credit policy and review it as often as possible to cope up with this problem.
Chapter 3
CREDIT ANALYSIS AND DESCRIPTION
3.0 Credit Analysis and Description:
The Bank is committed to provide high quality financial services/products to contribute to the growth of the country through stimulating trade and commerce, accelerating the pace of industrialization, boosting up export, creating employment opportunity for the youth, poverty alleviation, raising standard of living of limited income group and overall sustainable socio-economic development of the country. In achieving the aforesaid objectives of the Bank, Credit Operation of the Bank is of paramount importance as the greatest share of total revenue of the Bank is generated from it, maximum risk is centered in it and even the very existence of Bank depends on prudent management of its credit portfolio. The failure of a commercial Bank is usually associated with the problem in credit portfolio. As such, credit portfolio not only features dominant in the assets structure of the Bank, it is critically importance to the success of the Bank also.
3.1 Guiding Principles of Sound Lending:
It is necessary to develop a sound lending principle and modern lending techniques to ensure the performances of the credit provided by the bank. Credit is very much dependent on the judgment of the sanctioning authority. Banker’s ability in taking proper prior measures to minimize the risk is very important. To do this a Bank must follow the “Guiding Principles of Sound Lending” which include:
3.1.1 Principle of Safety:
The first lending Principle of sound lending is safety. The very existence of a bank depends upon the safety of its advances. Safety should not be sacrificed for profitability. So utmost care should be exercised to ensure that the funds go to the right type of borrower, are utilized in such a way that they remain safe and the repayment comes in the normal course.
3.1.2 Principle of Purpose:
The Bank should not lend money for any purpose for which the borrowers demand loan, the purpose should be productive. So another important point to be considered by a credit officer before lending is the purpose for which the loan is required and also the resources through which the borrower is expected to repay.
3.1.3 Principle of Liquidity:
The banker while making advance must see to it that the money lent is not locked up for a long time because, majority of Bank’s liabilities are payable either on demand or after short notice. So the banker should make sure that the loans are liquid enough to meet the banks liability structure. Liquidity means availability or readiness of bank funds on short notice. The liquidity of advance means its repayment on demand on due date or after a short notice. The loan must have fair chances of repayment according to repayment schedule. Otherwise, the liquidity position of a bank may be threatened.
3.1.4 Principle of Security:
The security offered by a borrower for an advance is insurance to the banker. It serves as the safety value for an unforeseen emergency. So another principle of sound lending is the security of lending. The security accepted by a banker to cover a bank advance must be adequate, readily marketable, easy to handle and free from any encumbrance.
3.1.5 Principle of Profitability:
Commercial Banks obtain funds from shareholders and if dividend is to be paid on such shares it can only be paid by earning profit. Even in the case of public sector banks although they work on service motive they also have to justify their existence by earning profit. This is not possible unless funds are employed profitably. So the fund should be employed in reliable and profitable sources, but for the sake of profitability, the other two principles safety and liquidity can not be sacrificed.
3.1.6 Principle of Diversification:
The advance should be as much broad based as possible and must be in conformity with the deposit structure. The advances should not be in one particular direction/ industry/ activity or one or few borrowers because adversity faced by that particular industry will have serious adverse affect on the bank.
3.1.7 Principle of National Interest:
The development of banking has reached a stage where a banker is required to identify his business with national policies. Banking Industry has significant role to play in the economic development of a country. So, the savings of the people which are mobilized by banks must be distributed to those sectors which require development in the country’s Planning Program.
3.2 Types of Loans and Advances:
On a broad basis IFIC Bank Limited offers two types of advances –
1) Unsecured Advance;
2) Secured Advance;
3.2.1 Unsecured Advances:
Unsecured advances are granted to a constituent, which is not backed by any security.
Features:
An unsecured facility is allowed in exceptional circumstances, only for a short period, with definite repayment arrangement, subject to restrictions imposed by Bangladesh Bank or any other competent authority to a customer based on his personal credit worthiness, standing and reliability. A definite arrangement for repayment, whether by installments or otherwise, must, as a rule, is ensured.
3.2.2 Secured Advances:
Secured advances are granted to a constituent that is guaranteed by tangible securities subject to margin restrictions. Secured advances given by the Credit Department are classified as follows:
LOAN (GENERAL):
Loans are a type of advance allowed to a constituent for a specific purpose and for a definite period.
Types of Applicants: Individual, firms, industries;
Time Duration: Short term- Up to 12 months; Medium term- More than 12 and up to 36 months; Long term- More than 36 months;
Mode of Distribution: The total loan amount is disbursed at a time or in trances within a specific time.
Mode of Repayment: The principal and interest are repayable by installment on agreed terms.
HOUSE BUILDING LOAN:
Loans allowed for construction of house (residential or commercial) fall under this type of advance-
Types of Applicants: Individuals, firms and bank staffs;
Loan Size: Maximum 75 lac.
Loan Period: Maximum 15 years.
Mode of Disbursement: The amount of loan is disbursed in three equal installments as under:
Mode of Repayment: The loan amount and interest are repayable through equal specific numbers monthly installments after the completion of house.
LEASE FINANCING:
Lease financing is one of the most convenient sources of acquiring capital machinery and equipment whereby a client is given the opportunity to have an exclusive right to use an asset usually for an agreed period of time against payment of rent.
Type of Applicants: Manufacturing concerns.
Time Duration: Maximum for five years.
Mode of payment: Payment is made directly to the seller of the machines.
Mode of Repayment: At a specific rent, this is inclusive of the repayment of principal as well as interest for adjustment of the loan.
Other Features:
a) Non equity payment is required by the client.
b) Exempted from the tax for the lease-financing period.
CONSUMER CREDIT SCHEME:
IFIC Bank Limited plays a pioneer role in providing necessary finance to the fixed income group for buying items that are necessary for raising the quality of living through the Consumer Credit Scheme. Through this special scheme IFIC Bank Ltd. offer Necessity, Convenience and Comfort.
Types of Applicants: Reputed Government and Private Service holders.
Time Duration: Specific period as per agreed terms and conditions.
Mode of Payment: Payment is made directly to the seller of the goods after obtaining a portion of equity from the borrower and personal guarantee.
Mode of Repayment; The loan amount and interest are repayable through equal specific numbers monthly installments after the purchases of goods.
CREDIT CARD:
A Credit Card is an instrument assuring the Merchant (by the Acquirer) for the payment made by the Cardholder against goods, services or withdrawing Cash from Bank/Institution or Automated Teller Machine (ATM).
IFIC Bank Limited is a member of VISA and thus issuing VISA Card in Bangladesh. IFIC Bank is offering following types of VISA Card:
- Gold VISA Card- International;
- Gold VISA Card-Local;
- VISA Standard (Silver) Card-International;
- VISA Standard (Silver) Card-Local;
All Credit Cards are issued by IFIC Bank Card Division in Head Office. Branches just dispatch the application to Card Division and deliver the issued card to its customers. It also collects the Card Bill on behalf of Card Division.
SMALL AND MEDIUM ENTERPISE CREDIT SCHEME (SME):
IFIC Bank Limited is offering a unique credit scheme only for the Small and Medium Enterprise (SME).
Objectives:
The main objective of the Small and Medium Enterprise Credit Scheme is to provide credit in flexible terms and conditions for the development of small and medium enterprises in the region easily accessible by the branches of IFIC Bank Limited.
The second objective of this scheme is to create opportunity for employment and economic growth through providing facilities to develop the small and medium enterprise sector of the country.
Eligibility for Application: The entrepreneur of the Small and Medium Enterprise must have following qualities to avail the credit facility under the scheme:
- Literate;
- Minimum two years of management experiences of the business;
- Age limit between 25-50 years;
- Owner of a Small or Medium Enterprise;
- The project must be financially viable and socially desirable;
Nature of Loan:
- Working Capital;
- Capital Machinery;
Wide Loan Coverage:
The scheme provides coverage for small enterprises up to Tk. 2, 50,000 and for medium enterprises up to Tk. 75, 00,000.
Time Duration:
One Year for the continuous loan;
Maximum five years for the term loan;
Mode of Repayment:
Continuous Loan- The client as per his requirement can withdraw the total loan limit time to time subject to certain conditions.
Term Loan- The client can withdraw the total loan amount at a time.
Security:
- Personal Guarantee from two persons acceptable to the Bank.
- Any other acceptable securities available to the borrower.
- The borrower has to maintain a Savings A/C with a compulsory deposit of 5% of outstanding loan amount per month for building up his own fund.
3.3 Non Funded Facility:
Non funded credit facility to a customer refers to a bank’s commitment to a third party on behalf of the customer. The commitment itself constitutes facility but does not involve cash outflow from the bank. The bank’s commitment essentially states that in the event of occurrence or non-occurrence of a particular event, within a particular date, due to a particular reason or reasons, a specific sum of money shall be paid by the bank to the third party upon claim in a particular manner. The non funded facilities are:
- Letter Of Credit:
A Letter of Credit is a commitment (undertaking) by the Bank to pay an agreed sum to the seller of goods on behalf of the buyer (client) under precisely defined condition. This is a non funded facility provided to the client for import of goods from abroad or in some cases to procure them locally.
The