General Banking Activities of Social Islami Bank Limited with special reference to Accounts section
Internship Program is very essential fGeneral Banking Activities of Social Islami Bank Limited with special reference to Accounts section or every student; especially the internship program is very helpful to conduit the space between the theoretical knowledge and real life experience as a part of BBA program. This internship report has been designed to have a practical experience through the theoretical understanding.
For every student, especially for the student of Business Administration, which helps him or her to know the real life situation? For this reason a student takes the internship program at the last stage of the bachelor’s degree, to launch a career with some practical experience.
This report is prepared for fulfilling a practical requirement of both BBA and the internship program. On this regard been posted in Social Islami Bank Limited (SIBL), Begum Rokeya Sarani Branch immediately after completion of BBA course for three (3) months duration internship program (Policies & Practices of Investment Activities Of Social Islami Bank Limited) and have been advised by the honorable management to submit my practical learning in written form at different phases. Being stimulated by this constructive thought of management submitting paper for these phases mainly focused on the General Banking Activities of SIBL, Begum Rokeya Sarani Branch.
The purpose of the study is to analyze the general banking procedures, criteria, activities and overall client’s feedback and meet their demand in the context of Social Islami Bank Ltd. For fulfilling the requirement for the degree of BBA.
The scope of this internship work is limited to the overall description of the bank & its services. The scope of this study may be stated as follows:
· The study would help top management in planning and decision making.
· The study would help top management in planning and decision making.
· The study would help the management in identifying the key areas of strengths & weakness of deposit accounts/schemes the study would help the management to take corrective and appropriate measure timely to remove the problems from deposits account.
· The study would also help the clients, borrowers & shareholders as a guide to company’s present and future situation.
This study is aimed at providing me valuable practical knowledge about banking operation system especially Islamic banking in Bangladesh. It will also help me to develop concept of banking and its operation. The objectives are:
· To know the banking system of Social Investment Bank Limited and to give an idea about how SIBL emerged
· To understand the various services the bank offers and to understand the mechanism of the services
· To understand, analyze and evaluate the modes the different Deposit Accounts/schemes of Bank
· To analyze t& Investment of Social he Ratio of SIBL to evaluate the performance
The study is of exploratory nature. The finding of this study is based on analyzing both the primary and secondary data. Moreover, this is a combination of both fieldwork and desk research.
A. Primary Data:
· Notes that taken from the day to day-working activity.
· Consulting with the officers of the Branch.
B. Secondary Data:
· Annual Report of SIBL
· Different Book
Personal interview was used to collect information. Before interview the questioner was tested and modified. The collected data are then edited and transferred to a master sheet. For secondary data web sites containing information regarding these banks and fliers were helpful.
Two approaches have been mainly used in this report
1. Conceptual Approach
2. Empirical Approach
This project is limited in overall banking system of the bank. All three functional areas of the bank are takes to the scope of study.
1. General Banking
2. Foreign Exchange Area
3. Investment Area
There are many limitations that faced while preparing this report is mentioned here:
· Only 12 weeks were not sufficient to collect and understand all the activities related to Banking.
· In the research areas, the authorities could not express to us accurate data easily for the reason of their confidentiality.
· The executives of the bank could not give adequate time because of their work.
· All the interpretation and conclusion about the result of study is based on the analyst own perspective.
· SIBL, Begum Rokeya Sarani Branch is a small branch and their concentration is very small area.
Social Islami Bank Limited an interest-free Shariah bank in Bangladesh incorporated as a banking company on 5 July 1995 under the COMPANIES ACT 1994. It commenced banking operations on 22 November 1995 with an authorized capital of Tk. 1,000 million divided into 1 million ordinary shares of Tk. 1,00 each. The initial paid up capital was Tk. 118.36 million folly subscribed by its 38 sponsors including 3 Arab nationals. The paid up capital was enhanced several times and stood at Tk. 260 million on . 31 December 2000. The bank is listed with the Dhaka Stock Exchange. In 2000, total liabilities and shareholders equity of the bank stood at Tk. 5,671.99 million.
The bank provides all types of commercial banking services and it conducts business on the Islamic principles of Musharaka, Murabaha, bai-muazzal and hire purchase transactions. The broad-spectrum operational aspects of the bank have been set out to encompass three sectors – formal, non-formal and voluntary – in a comprehensive programmed. In the formal corporate sector, the bank offers banking services through deposit and investment accounts, trade financing, collection of bills, money transfers, lease of equipment and consumers’ durable, hire purchase and installment sale of capital goods, investment in low-cost housing and real estate management, and financing projects in agriculture, transport, education and health sectors. In the non-formal non- corporate sector, it is involved in opening and introducing various savings and investment schemes for the unemployed poor and the educated. In the voluntary sector, it is involved in the development and management of WAQF and mosque properties, management of inheritance properties, and joint venture projects relating to religious affairs and charitable activities. Total deposits of the bank amounted to Tk. 4,863.21 million in 2000 compared to Tk. 124.73 million in 1995 and included currency and other deposits, bills payable, term deposits and savings deposits. On 31 December 2000, the loans and advances in various sectors stood at Tk. 3,522.24 million as against Tk. 0.22 million in 1995. On 31 December 2000, the classified investments (loans and investment) of the bank amounted to Tk. 173.1 million (4.91% of the total). Foreign exchange business handled by the bank in 2000 accounted for Tk. 4,250 million, which comprised export servicing, import financing and remittance facilities. That year the assets of the bank were valued at Tk. 5,672 million and the off-balance-sheet-items Tk. 1,060.04 million. The bank started having net profits since 1998 and the net profit after adjusting all provisions for taxation and classified loans amounted to Tk. 38.1 million. The profitability of the bank is severely affected by the fact that it has to maintain a substantial amount of provision for its classified loans each year.
The management of the bank is vested in a 27-member board of directors headed by a chairman. There is a 5-member Shariah Council of the bank to ensure the compliance of Islamic rules in its activities. The bank has also a 13-member honorary foreign members’ international advisory council to advice it on international business affairs, particularly in Islamic countries. In December 2000, the bank had 13 branches and in aU, 310 employees including executives of different cadres.
|Bangladesh Bank||Asian Clearing Union (ACU)|
|Bangladesh Export Promotion Zones Authority||Asian Development Bank (ADB)|
|(BEPZA)||Bank for International Settlements (BIS)|
|Bangladesh Government Official Forms||International Labor Organization (ILO)|
|Board of Investment (BOI)||International Monetary Fund (IMF)|
|Chittagong Stock Exchange (CSE)||World Bank (WB)|
|Dhaka Chamber of Commerce and Industries||World Trade Organization'(WI’O)|
|Dhaka Stock Exchange (DSE)|
|Economic Relations Division (ERD)|
|Export Promotion Bureau (EPB)|
|Federation of Bangladesh Chamber of|
|Local Enterprise Investment Centre (LEIC)|
|National Board of Revenue (NBR)
Securities and Exchange Commission (SEC)
Securities and Exchange Commission (SEC)
2.2 Mission & Vision
· High quality financial services the latest technology.
· Fast, Accurate and Satisfactory customer service.
· Balanced & sustainable growth strategy.
· Optimum return on shareholders’ equity.
· Introducing innovative Islamic Banking products.
· Attract and retain high quality human resources.
· Empowering real poor families and create local income opportunities.
· Providing support for social benefit organizations- by way of mobilizing funds and social service.
Social Islami Bank Ltd started its journey with the concept of 21st Century Islamic participatory three sector banking model: I) Formal Sector- Commercial Banking with latest technology; ii) Non-Formal Sector – Family Empowerment Micro-Credit & Microenterprise program and iii) Voluntary Sector – Social Capital mobilization through CASH W AQF and others. Finally, “Reduction of Poverty Level” is our Vision, which is a prime object as stated in Memorandum of Association of the Bank with the commitment “Working Together for a Caring Society”.
Total Operating Income of the Bank as on 31st December 2009 stood at Tk. 1717.64 million against Tk.1291.78 million of the preceding year. The Bank made an operating profit of Tk. 1064.30 million in 2009 against Tk. 787.36 million of 2008.
Summery of operating result of the Bank as on 31st December 2009 vis-à-vis the position as on 31.12.2006 is shown below:
|Income on Investment||3078.98||2732.26||12.69%|
|Profit paid to the Depositors||2063.62||2071.38||(0.37%)|
|Net Investment Income||1015.36||660.88||53.64%|
|Commission, Exchange & Other Income||702.28||630.83||11.33%|
|Total Operating Income||1717.64||1291.71||32.97%|
|Profit Before Provision||1064.30||787.36||35.17%|
|Provision against Investment & Others||337.42||432.55||(21.99% )|
|Profit Before Tax||726.88||354.81||104.86%|
· Information & Communication Technology Division
· Financial Administration Division
· International Division
· Managing Director’s Secretariat
· Business Development & Marketing Division
· Audit & Inspection Division
· Chairman’s Secretariat
· Share Division
· Board Secretariat
· Human Resources Division
· Shariah Board Secretariat
· SIBL Training Institute
· SME Banking Division
· Law & Recovery Division
· Board Audit Cell
· MIS, Planning & Research Division
· Internal Control & Compliance Division
· Investment Risk Management Division
· Voluntary Banking Division
2.5 Organogram of SIBL
|City Name||Sl.no||Branches Name||Address|
|01||Principal Branch||15, Dilkusha C/A, Dhaka – 1000|
|02||Gulshan Branch||Nafi Tower (1st Floor)53, Gulshan South C/A, Gulshan Avenue, Gulshan-1, Dhaka|
|03||Babu Bazar Branch||31, Nawab Yousuf Road, Naya Bazar,Dhaka|
|04||Moulvi Bazar Branch||77/7, Wahid Center (1st Floor) , Moulvi Bazar, Dhaka|
|05||Begum Rokeya Sarani Branch||Bangladesh Lions Foundation Bhabanh, 3/c,
West Agargaon, Begum Rokeya Sarani, Dhaka
|06||Panthapath Branch||Level – 2, Block – A, Bashundhara City 13/Ka/1, Panthapath , Dhaka|
|07||Foreign Exchange Branch||141-143, Motijiheel C/A, BIWTA Bhaban, Dhaka|
|Dhaka||08||Dhanmondi Branch||House # 84, (Old-176), Road # 7/a (old-14),
Satmasjid Road, Dhanmondi R/A, Dhaka.
|09||Nawabpur Road Branch||82, Nawabpur Road(1st Floor), Nawabpur Road, Dhaka.|
|10||Uttara Branch||Latif Emporium, 27 Uttara C/A, Road # 7,Sector- 3, Uttara, Dhaka.|
|11||Mirpur Branch||Plot No-29-30, Block-Kha,Main Road (Goal Chakhar-10), Mirpur, Dhaka.|
|12||Banani Branch||48 Kamal Attaturk Avenue (Ground & 1st Floor). Banani, Dhaka-1213|
|13||Qaderia Tayebia Madrasha Branch||9/2A Madrasha Road, Joint Quarter, Block -F, Mohammadpur, Dhaka-1207|
|14||Rosulpur Branch||49 Rosulpur, Kutubkhali Donia, Jatrabari, Dhaka|
|15||Rampura Branch||Modina Tower (Opposite TV Center), Weat Rampura DIT Road, Thana- Khilgoan, Dhaka.|
|Savar||16||Savar Branch||Yousf Tower (2nd Floor), 35 Tatti, Dilkhusha Bagh, Savar Bus Stand, Savar, Dhaka.|
|17||Hasnabad Branch||Hasnabad Super Market, Suvadda, Keranigonj, Dhaka|
|Keranaiganj||18||Keranaiganj Branch||East Aganogor Mosjid Market, Shuvadda, Thana- Keranaiganj, Keranaiganj,|
|19||Sonargaon Branch||Haji Jalal Tower(1st Floor), Mogra Para, Sonargaon, Narayangonj.|
|Narayangonj||20||Fatullah Branch||Fatullah Bazar, Narayangonj.|
|21||Gopaldi Branch||Gopaldi Bazar, P.S: Araihazar,
|22||Agrabad Branch||Quaderi Chamber 37, Agrabad C/A, Chittagong.|
|23||Khatungoj Branch||96, Khatungoj, Chittagong.|
|24||Halishahar Branch||VIP Plaza, Plot # 5/4, Road # 2, Block –G, Halishahar Housing Estate, Halishahar, Chittagong.|
|Chittagong||25||Jubilee Road Branch||Haque Market(1st Floor)610/1, Jubilee Road, Chittagong.|
|26||Lohagara Branch||Mostofa City, Lohagara, Chittagong.|
|27||Patherhat Branch||Patherhat , Noapara, Raozan, Chittagong.|
|28||Nanupur Branch||Nanupur Bazar, P.O: Nanupur, P.S: Fatikchari, Dist: Chittagong.|
|29||GEC Mour Branch||CDA Avenue, East Nasirabad, GEC Mour, Chittagong.|
|Rajshahi||30||Rajshahi Branch||219, Shaheb Bazar Main Road, Rajshahi.|
|Khulna||31||Khulna Branch||22, Sir Iqbal Road, G.M. Baksh Tower (Ground Floor), Khulana City Corporation, Khulna.|
|32||Paik Gacha Branch||Main Road ,Paik Gacha, Khulna.|
|33||Sylhet Branch||781, Karima Mansion, Dargah Gat, Sylhet-3100|
|Sylhet||34||South Surma Branch||Baipass Road, P.O: Sylhat Sadar, P.S: South Surma , Sylhet.|
|Bogra||35||Bogra Branch||Bhandary Monjil, 776, Rangpur Road, Borogola, Bogra.|
|36||Sirajong Branch||Zaman Complex, S.S. Road, Sirajong.|
|Sirajong||37||Chandaikona Branch||Pabna Bazar, Raigonj, Sirajong.|
|38||Elliotgonl Branch||Elliotgonl Bazar, P.O: Elliotgonl, P.S: Dawudkhandi, Dist: Comilla.|
|Comilla||39||Comilla Branch||95/96 ,Chawk Bazar(2nd Floor), P.O: Chawk Bazar, P.S: Kotowali, Comilla.|
|Noakhali||40||Chowmuhoni Branch||Hossain Market, 276-284, D.B. Road, Chowmuhoni Powrosova, Begumgonj, Noakhali|
|Chandpur||41||Chandpur Branch||Faisal Shopping Complex, Bishnudi, Chandpur Bus Stand, Thana- Chandpur, Dist- Chandpur|
|Cox’s Bazar||42||Cox’s Bazar Branch||Evan Plaza(in front of Cox’s Bazar Pourashva), Thana Road, Cox’s Bazar|
Currently Social Islami Bank Limited has 38 branches. IDB Bhaban Branch (E/8-A, Rokeya Sharani, Sher-e- Bangla Nagar, Dhaka-1207) is one of them. It became operational on 23 Septemberl999. The founder Chairman Prof. Dr. M.A Mannan, former secretary General of Rabeta Dr. Abudullah Omar Nasseef was presented its opening ceremony. This bank has gotten more popularity in Sher-e- Bangla Nagar. The customer’s this branch is increasing day to day. Because of narrow space this branch shifted to Begum Rokeya Sharani Branch (3/C, Loins Bhaban, West Agargaon, Begum Rokeya Sharani, Dhaka-1207) from IDB Bhaban branch. There are twenty staff in this branch. Mr. Monzurul Haq Shoaib is Senior Assistant Vice Present and Manager and Mr. Meftah Uddin Ahmed is first assistant vice president and second officer of this branch.
3.2 Branch Business Volume on 31.10.09
3.3 Branch Performance on 31.10.09
‘exposit: Investment = 3.64: 1
income from service = 1350703.85 (in taka)
investment: Classification of loan = 94 : 1
3. 4 Product Mix (Deposit):
No Cost (Mudaraba Current account) = 64942716.06
Low Cost (Mudaraba Saving Account & Mudarabah Special Notice Account) = 209052564.68
High Cost (Fixed deposit) = 576238034.00
SIBL (Social Islami Bank Limited) General banking is divided into five sections.
1. Account Opening Section
2. Bills and Clearing Section
3. Cash Section
4. Remittance Section
5. Closing of an Account
Under this section, SIBL officer opens different types of account on the request of clients.
The procedure of opening account is given below.
Procedure and rules to open a new account
Mudaraba Saving Account (Code No: 134)
Before opening of a savings Bank Account the following formalities must the completed by the coustomers:
1. Account opening Form: To be filled in and signed by each account holder.
2. Latest passport size photograph (2copy) for each account holder attested by the introducer.
3. Account payee cheque in favor of the account holder or cash deposit.
4. Copy of voter identity card/Ward Commissioner Certificate.
5. Introduction of account holder (Mandatory): To be signed by the introducer with ID an account number.
6. 1 (one) copy of nominee’s photograph (attested by the account holder).
7. Copy of voter identity card (nominee).
8. Initial deposit TK. 500 (Five hundred taka only).
After fulfilling above formalities, open and account for the client and provide the customer with a deposit book and a checkbook.
Al-Wadiah Current account (individual)
1. Account opening From: To be filled in and signed by each account holder.
2. Latest passport size photograph (2 copy) for each account holder attested by the introducer.
3. Attested copy of valid Trade license.
4. Attested copy of passport of the proprietor.
5. Company seal and TIN (Tax identification Number) Certificate.
6. Copy of voter identity card.
7. 1 (one) copy of nominee’s photograph (attested by the account holder).
The condition of Al-Wadiah Current account of Begum Rokeya Sharani baranch as following:
Mudarabah Special Notice Account
a. Any companey, business entity, debt of gov. Organization and trust or any person can open this account.
b. This account is operated under Mudaraba principle.
c. Any amount can be withdrawn or transferred to all wadiah current account or any other accounts after placing a notice of seven days.
d. Cheque books are provided for these accounts.
e. The profit rate is comparatively lower.
A. In case of partnership Account:
1. Introducer (Current Account holder).
2. 2 copy passport size photograph dully attested by introducer.
3. Copy of voter identity card all partners.
4. Attested copy of valid Trade License.
5. Seal of Firm.
6. Copy of the TIN (Tax identification Number) Certificate.
7. Partnership deed.
8. Fill the KYC form.
B. In case of Private/ public limited Company Account:
1. Memorandum and Articles of Association- duly certified by the Register of Join Stock Companies and Firms.
2. Certification of Incorporation- duly certified by the Register of Join Stock Companies and Firms.
3. Board Resolution- duly certified by the Chairman/ Secretary of the Company.
4. List of Member of the Managing Committee/Executive Committee-duly certified by the Chairman/ Secretary.
C. In case of Club/Society:
1. Certified copy of Registration Certificate.
2. Certified copy of Charter/Bye-Laws and Regulation/Constitution of the relevant organization.
3. Copy Resolution of Registration of Managing Committee/Executive Committee for opening Account with SIBL and operation of account- duly certified by the Chairman/Secretary.
4. List of Member of the Managing Committee/Executive Committee-duly certified by the Chairman/ Secretary.
D. In case of Non-Government School/College/University/Madrasha/Muktab:
1. Certified copy of Registration Certificate.
2. Copy Resolution of Registration of Managing Committee/Governing Body authorizing opening and operation of account with SIBL- duly certified by President /Secretary of the management committee.
3. List of Member of the Managing Committee/ Governing Body- duly certified by a Gazette Officer.
E. In case of Sector Corporations:
Certified copy of the relevant Order/Act of Parliament establishing the Corporation.
Regulation of Board Of Directors/Competent Authority to open Account with SIBL.
Certified list of the Board of Directors (if any).
F. In case of Local Authorities, City Corporation etc:
1. Certified copy of the Statute/ any other Law by which the body is created and governed.
2. Resolution of Municipal Committee/Managing Body (if any) to open Account with SIBL- duly certified by Chairman/Mayor/Competent Authority.
3. List of Member of such Committee/Body-duly Chairman/Mayor/Competent Authority.
3.6.1 Deposit Account by SIBL
Mudaraba Saving Deposits (MSD)
These are profit bearing deposit account. The drawing are restricted in the respect of both the amount of withdrawal and the frequency three of so the payment of interest does not become any compensating for the banker. Some time the restriction are ignored against the depositor’s written confirmation to forgo his claim for interest on the total balance for the whole month of withdrawal.
Special Saving Scheme
1. Mudaraba Hajj Saving Scheme
· A person intended to perform Hajj within 1 to 10 years can open this account for a period at his convenience.
· A year is divided into 12 installments.
· Profit is given for the daily balance based on a weight of 1.1%
· There is no provision for withdrawal.
2. Mudaraba Education Scheme
SIBL being encouraged by the success of the Mudaraba deposit account has introducer another saving Scheme namely “Mudaraba Education Scheme”
|Initial Deposit||Maturity Period||Total Period||Monthly Education Allowance|
3. Mudaraba Millionaire Scheme
People of Bangladesh are the Following of Islam. They are mostly interested to make interest free deposit. Taking these Facts into consideration SIBL a join venture Islami bank introduced a monthly installment based “Mudaraba Millionaire Scheme”.
Duration of this Scheme will be 15, 20 and 25 years. After maturity an estimated amount will become as follows:
|Duration||Monthly Installment||Estimated amount after maturity|
|15||Tk. 2,050||Tk. 10 lac|
|20||Tk. 1.050||Tk. 10 lac|
|25||Tk. 550||Tk. 10 lac|
4. Mudaraba Special Saving (pension) Scheme
Any Bangladeshi person aged abode 18 years and having sound mental condition can may open this scheme. To open this account there must be a signature of a valued introducer. Parents or legal guardians can open this scheme in the name of their underage children.
After maturity estimated profit will be applied as follows:
|Monthly Installment||Estimated amount after maturity|
|5 Years||10 Years|
5. Mudaraba Monthly Profit Deposit Scheme
The features of this scheme are as follows:
1. Tk, 1,00,000, 1,10,000 1,20,000 or 1.25.000 or any amount multiple can be deposited under this scheme.
2. The duration of the amount should be for Five years.
3. Profits shall be distributed under this scheme as follows:
1,00,000 Tk. 900 (Provisional)
1,10,000 Tk. 1000 (Provisional)
1,20,000 Tk. 1100 (Provisional)
1,25,000 Tk. 1150 (Provisional)
4. The Payable profit will become due after 1 month of deposit. But the amount will be deposited to account in the last week of the month.
SIBL Local Office branch performs the bill clearing function through Local office. SIBL Local office acts as the agent of all SIBL branches for the clearing house of the Bangladesh Bank. There are two type of cheque which are-
1. Inward clearing cheque
2. Outward clearing cheque
A. Inward Cheque
Inward cheque are those ones drawn the respective branch which have been presented on other banks and will be cleared/honored through the clearing house of Bangladesh Bank.
|SL NO.||Particular||Amount||SL NO.||Particular||Amount|
|01||Customer’s A/C||***||01||SIBL A/C||***|
B. Outward Cheque
Outward cheque are those ones drawn on other bank branches which are presented on the concerned branch for collection through cleaning house of Bangladesh Bank. These cheque are called outward cheques.
The cash Section of anybranch plays very significant role in general banking department. Because, it deals with most liquid assets the SIBL Local Office Branch has an equipped cash section. This section receives cash from depositors and pay cash against cheque, draft, PO and pay in slip over the counter.
1. Receiving Cash:
Any people who want to deposit money will fill up the deposit slip and give the form along with the money to the cash officer over the counter. The cash officer counts the cash and compares with the figure writer in the deposit slip. Then he put his signature on the slip along with the ‘cash received’ seal and records in the cash receive register book against A/c number.
At the end of procedure, the cash officer passes the deposit slip to the counter section for posting purpose and delivers the duplicate slip to the clients.
|SL NO.||Particular||Amount||SL NO.||Particular||Amount|
|01||Cash A/C||***||01||Customer’s A/C||***|
2. Disbursing Cash
The drawn who wants to receive money against cheque to the payment counter and presents his cheque to the officer. He verifies the following information:-
I. Date of the cheque
II. Signature of the A/C hold
III. Material alteration
IV. Whether the cheque is crossed or not
V. Whether the cheque is endorsed or not
VI. Whether the amount in figure and in word correspondent or not
3.9 Remittance of Funds
Remittance of funds is ancillary services of SIBL. Its aids to remit fund form one place to another place on behalf of its customer as well as non-customers of bank. SIBL has its branches in the major cities of the country and therefore, its serves as one of the best mediums for remittance of funds form one place to another.
The main instruments used by SIBL, Local Office Branch for remittance of funds.
I. Pay Order/ Banker’s cheque.
II. Demand Draft.
III. Telegraphic Transfer.
Pay Order/ Banker’s cheque
The pay order is an instrument issued by bank, instructing itself a certain amount of money mentioned in the instrument taking amount of money and commission when it is presented in bank. Only the branch of the bank that has issued it will make the payment of pay order. The banker’s cheque must come the branch for payment wherever it is presented.
Issuing of Pay Order:
The procedures for issuing a pay order are as follows:
Deposit money by the customer along with application form.
Give necessary entry in the bills payable (Pay Orders) register where payee’s name, date, Po no, etc is mentioned.
Prepared the instrument.
After scrutinizing and approval of the instrument by the authority, it is delivered to customer. Signature of customer is taken on the counterpart.
Cancellation of a pay Order
If a buyer wants to cancel it, should submit a letter of instrument in this regard and also return the instrument.
The person intending to remit the money through a pay order has to deposit the money to be remitted with the commission which the banker charges for its services. The amount of commission depends on the amount to be remitted. On issue of the pay order, the remitter does not remain a party to the instrument 1) Drawer branch 2) Payee.
Stop Payment can be done in the following cases:
a) Loss of draft before endorsement in this case. “draft reported to be lost payee’s endorsement requires verification” is marked.
b) Loss of draft after endorsement: In the this case, the branch first satisfies itself about the claimant and the endorsement in his favor.
Mail or Telex Transfer (TT)
Telex Transfer is another widely used mode for remittances of funds.
Issuing of TT:
1. SIBL follows the following procedures:
2. The customer deposit money with SIBL to be sent.
3. The customer obtain a cash memo containing TT serial Number.
4. TT serial number, notifying part name is
5. The telex Department confirms transmission of the telex.
For two reasons, one can be closed. One is by banker and other is by the customer.
1. By banker : If any customer doesn’t maintain any transaction within six years
and the A/C balance becomes lower then the minimum balance, banker has the right
to close an A/C.
2. By customer: If any customer wants to close his A/C, he write an application to
to the manager using him to close his A/C.
Different procedures are followed in cash of different types of A/C to close. Fixed deposit A/c is closed after the termination of the period.
Closing process for current & saving A/C:
After receiving customer’s application the officer verifies the balance of the A/C.
He then calculates interest and other charges accumulated on the A/C.
If it bears a credit balance, the officer writes advice voucher. He gives necessary accounting entries post to accounts section.
He balance is returned to the customer. And lastly the A/c is closed.
But in practice, normally the customer don’t close A/C willingly. At times, customer don’t
Maintain any transaction for long time. Is this situation at first, the A/C becomes dormant and
Ultimately it is closed by the bank.
The bank extends Investments under the principals of
3. Bai- Murabaha (Contract Sale)
4. Hire Purchase under Shirkatul Meelk (HPSM)
5. Bai-Muajjal (Sales under deferred payment)
6. Bai- Salam (Advanced Purchase)
7. Bai- Istisna
1) Mudaraba (The Hiring of Capital):
Mudaraba is one of the most well known investments. permissible under Islamic Shariah and widely used by all countries where Islamic systems of banking are functioning. Mudaraba finance combines financial experience with business experience. Mudaraba is a contract in profit sharing where one party provides capital funds and the other labor/ work. Under this system, banks provide the capital and clients provide expertise and profit is shared according to agreed ratio. In case of loss, the bank bears the financial risk and the client loses only his labor! effort and his expected share of profit.
Important Features :
· Mudaraba is generally limited to self-liquidating transactions.
· The assets of Mudaraba should be easily recognizable and must be realized and liquidate so that the proceeds can be easily distributed between the partners at the termination of operations, completion of deal, or the achievement of Mudaraba objectives.
· I f the partners want to renew the Mudaraba, a new contract must be negotiated, but only after the old one has been terminated and the rights and liabilities of the parties concerned have been recognized and settled.
· Mudaraba is generally limited to trading activities.
· The entrepreneur has no right to mix the Mudaraba funds with his own funds, unless he was permitted to do so by the bank.
· Before liquidation of distribution of profits, the Mudareb possesses an uncontested right not only to his share in profits but also to any gains or appreciation in the value of output or assets of the joint venture that might occur during the life of the Mudaraba contract.
· The Mudaraba accounts must be recorded properly and the books of accounts should be audited.
2) Musharaka (Partnership Profit Sharing):
Musharaka is another type of financing mechanism used by Islamic Banks. This mode of finance is represented by two or more financiers in contributions of equal or unequal ratios of capital to establish a new project or to participate in an established one and all partners are entitled to share the total profits of the venture according to ratio as mutually agreed upon allowing for managerial skills to be remunerated; but the losses are shared exactly in proportion to capital proportion. Participation parties have the right to participate in the management of the project and at the same they may also waive this right in favor of any specific partner.
There are two types of Musharaka contracts:
Ø Constant (permanent)
Ø Decreasing (diminishing) Participation.
In the first case, the bank participates in the equity and receives share of profit on pro-rata basis annually and period of termination of the contract is not mentioned/ specified. So, the contract may continue as long as the parties concerned agree it to continue.
The diminishing partnership of Musharaka IS getting more popular In Islamic Banks because of its potentialities than permanent Muskaraka. In constant! permanent Musharaka funds are committed for a long period; but this is not so in the case of diminishing Musharaka. Decreasing Musharaka allows equity participation in the first place and share profit on pro-rata basis. This system also provides/ extends for future payments of money over and above the bank’s share in the profit as a repayment of the part of equity held by the bank. In this manner, the equity held by the bank is reduced progressively with the passage of time. After lapse of certain period of time, the bank will have zero equity and will cease to be a partner.
· The bank is not guaranteed a fixed return on its participation.
· Banks benefits in financing fixed assets or working capital or both lie in the profit sharing scheme between the banks and venture.
· Profits are shared pro-rata with equity and are calculated for this purpose,
after allowing for management fees and before depreciation and provisions, as non-cash- items.
3) Murabaha (Contract Sale):
Murabaha is one of the most widely used modes of finance undertaken by the Islamic Banks. About 70 to 80 percent of financial operations of the most Islamic Bank belong to this segment. It is suitable for investment for financing industry,. agriculture, trade or any other sectors. It enables the client! investor to obtain finished goods, raw materials, machinery or equipment from the local market or through import by opening letter of credit under Murabaha commercial.
Murabaha is one kid of sale transaction. Under this system of investment, a sale transaction is taken place between client and bank. The client requests the bank to purchase certain goods as prescribed by him/them with a price confirmed by. the client from a supplier seller in the country or abroad. The bank, itself or through an agent (may be the client himself) collects all the information about the nature and specification of the goods, its price, terms of delivery etc.
Murabaha is also a double sale and bye. Under this technique, bank buys the goods upon the request of the client and then sells the goods to him/ them. The goods are purchased by the customer from the bank within a fixed period of time or by installment with a cost include cost of goods plus mark up profit. The profit mark up as fixed before the deal cannot be increased even if the client does not take the delivery within the scheduled time.
When Murabaha sale is made of deferred payment basis, this is called Murabaha -BaiMuajjal. Under this sale. Bank sells the commodity to the client on the basis of deferred payment against an agreed price, which includes the price and mark up profit. Murabaha sale is also one kind of absolute sale, which is divided into four kinds in respect of price. These are given below:
01. Bargain Sale: Selling of commodity at a price already agreed upon irrespective of its
02. Tawlia Sale (respective Sale): Selling the commodity at purchased price without any additional or discount.
03. Discount Sale: Selling the commodity at a purchased price allowing certain discount.
04. Murabaha Sale: Selling a commodity at a purchased price plus certain profit as agreed upon. This profit margin may be determined on a percentage of the purchased price or a lump sum as agrees to. The last three sales are called: Amana (honesty) Sales”
4) Hire Purchase under Shirkatul Meelk:
Hire purchase under Shirkatul Meelk is a special type of contract that has been developed through practice. Actually, it is a composition of three contracts:
1) Shirkat: Shirkat means partnership. Shirkatul Meelk means share in ownership.
When two or more persons supply equity, purchase an asset, own the same jointly, and share the benefit as per agreement and bear the loss in proportion to their respective equity, the contract is called Shirkatul Meelk contract.
2) Ijarah (Leasing): The Ijarah financing under Islamic Shariah is akin to the western concept of leasing. In Ijarah financing, Islamic banks finance capital goods to industrial project against payment of a rent by installment.
In Arabic the Leasing is defined as contract between a leasing company (called as the less or) of one part and the user of the equipment asset (called the lessee) of other party whereby the lessee/ loaned agrees to pay the less or an agreed amount of money as rentals over a specified/ obligatory period of time in consideration for the use of capital equipment owned by the less or. The less or retains ownership of the equipment and seeks to receive the capital cost of the equipment plus a profit margin out of the lease rentals payable during the period of the lease.
There are two types of leases recognized under this system of investment. These are-
a. Operational Lease: Under this system of finance, Islamic Banks hold a number of various assets to respond to the needs of different customers. These assets have usually high degree of marketability. The bank rents these assets to its client who is desirous to utilize the same for a team to be agreed upon on payment of rental. After expiry of the lease period, the assets are returned to the bank. The bank then looks for new lessee.
b. Lease Purchase: The lease purchase or lease out that ends with possession is a new technique of investment innovated By the Islamic Banks. Under this system, bank does not hold the assets; but purchases the assets in response to an emphatic request from one of the customers to own the assets through lease that ends with possession. Therefore, the assets will not remain as the property of the bank at the end of the lease period as is the case in the operation lease. As soon as the purchase amount of household goods along with rental is paid off with in the lease period, the ownership of the leasehold item transfers to the lessee automatically as
3) Sale: This is a sale contract between the buyer and a seller under which seller transfers the ownership of certain goods or assets to buyer against agreed upon price paid/ to be paid by the buyer.
Thus, in Hire Purchase under shirkatul Meelk both the bank and the client supply equity in equal or unequal proportion for purpose of an asset like land, building, machinery, transport etc, purchase the asset with that equity money, own the same jointly, share the benefit as per agreement and bear the loss in proportion to their respective equity. The share, part or proportion of asset owned by the bank, is hired out to the client partner for a fixed rent per unit of time for a fixed period. Lastly, the bank sells and transfer the ownership of its share/ part! portion to the client against payment of price fixed for that part either gradually part by part or in lump sum within the hire period or after the expiry of the hire agreement.
Hire Purchase under shirkatul Meelk Agreement has got three stages:
· Purchase under joint ownership
· Sale and /or Transfer of ownership to the other partner Hirer.
5) Bai- Muajjal:
Bai- Muajjal means sale for which payment is made at a future fixed date or within a fixed period. Bai-Muajjal may be defined as contract between a buyer and a seller under which the seller sells certain specific goods to the buyer at an agreed fixed price payable at a certain fixed future date in lump sum or within a fixed period by fixed installments.
In bank, Bai- Muajjal is treated as a contract between the bank and the client under which the bank sells to the client certain specific goods, purchased as per order and specification of the client at an agreed price payable within a fixed future date lump sum or by installment.
6) Bai-Salam (Advance Sale and Purchase):
Bai-Salam may be defined as a contract between a Buyer and a Seller under which the seller sells in advance the certain commodities/ products permissible under Islamic Shariah to the Buyer at an agreed price payable on execution of the said contract and the commodities/products are delivered as per specification, size, quality, quantity at a future time in a particular place. Under this transaction the cost of commodity is advanced in cash to the seller who agrees to believer the commodity on a definite due date. The delivery of the commodity sold is deferred but the payment of the price is immediate.