“General Banking and Foreign Exchange Operation of Islami Bank Bangladesh Limited”
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After the surrender of the Pakistani forces on 16th December 1971, the government of the Peoples Republic of Bangladesh formally took over the charge of the administration of the territories now constitute Bangladesh. In order to rehabilitate the war devastated banking system of Bangladesh, the government promulgated a law called Bangladesh Bank (temporary) Order, 1971(Acting Presidents Order No 2 of 1971). By this order the State Bank of Pakistan was declared as Bangladesh Bank and the offices, branches and assets of the said State Bank was declared to be deemed as offices, branches and assets of Bangladesh Bank. It was also declared by the aforesaid Order that all currency notes and coins issued by the said State Bank and government of Pakistan and were in circulation in Bangladesh shall be deemed to have issued by the Bangladesh Bank. By the steps stated above, the banking system of Bangladesh started with a legal shape.
The number of banks in all now stands at 49 in Bangladesh. Out of the 49 banks, four are Nationalized Commercial Banks (NCBs), 28 local private commercial banks, 12 foreign banks and the rest five are Development Financial Institutions (DFIs). Sonali Bank is the largest among the NCBs while Bank Asia is leading in the private ones. Among the 12 foreign banks, Standard Chartered and HSBC has become the largest in the country. Besides the scheduled banks, Samabai (Cooperative) Bank, Ansar-VDP Bank, Karmasansthan (Employment) Bank and Grameen bank are functioning in the financial sector. Bangladesh Bank (BB) regulates and supervises the activities of all banks.
Private sector banks started functioning during the year 1983-84 with the objective of government policy to make sure effective and meaningful participation of the private sector in the overall national economy.
The perception of Islamic banking has been bloomed from the inspiration of building up a society on justice in accordance with basic socio-economic principles of Islam. The difference between Islamic bank and conventional bank is on principles. The functions of this type of bank are completely different. This bank is established on Islamic Shariah and all types of transactions are free from interest. Justified profit is the basis of financial transaction of this bank. This bank is committed to establish socio-economic justice. Islami Bank Bangladesh Limited is the first interest free commercial bank in South-East Asia. The bank has opened 196 branches covering important commercial areas.
Islami Bank Bangladesh is a financial institution whose status, rules and procedures expressly state its commitment to the principle of Islamic Shariah. Consequently Islamic banks operate on Islamic principles of profit and loss sharing, strictly avoiding interest, which is the root of all exploitation and is responsible for large-scale inflation and unemployment. In this report, I undertake microscopic analysis mainly on “General Banking and Foreign Exchange operation.”
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The first objective of writing the report is fulfilling the partial requirements of the BBA program. In this report, I have attempted to give on overview of Islami Bank Bangladesh Limited in general. Following are the main objectives
· To familiar the history and operations of Islami Banking in Bangladesh.
· To show the investment mechanism and product offerings in different modes of IBBL.
· To show overall investment proposal, appraisal procedures, documentation system of IBBL and Conventional Banks.
· To show the differences with conventional banking regarding investments aspects
· To identify strength and weakness of investments of IBBL.
· To identify the problems related to investments faced by IBBL.
· To recommend actions that may be necessary to redesign the investments of IBBL.
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For carrying out this project paper had to study the actual banking operations of IBBL.
In order to carry out this study, two sources of data and information have been used:
· Primary data
Discussed with the executives & officials of the IBBL and found the approximate data, which has been presented in the report. Also discussed with the officials of conventional Banks & IBTRA regarding the issue and found necessary information, which has been presented in the report.
· Secondary data
? Annual Reports of 2000-2007of Islami Bank Bangladesh Ltd.
? Desk report of the related department
· Training sheets which are provided by Islami Bank Training and Research Academy (IBTRA).
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The scope of this paper is limited to the organizational structure, background, and objectives, functions, and investment performance of IBBL as a whole. The scope is also limited to different investment schemes, modes, mechanism, investment proposal appraisal procedures, monitoring and documentation of IBBL.
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There are some limitations in our study. Faced some problems during the study which I am mentioning them as below-
ii) Insufficient data:
Some desired information could not be collected due to confidentiality of business.
iii) Lack of monitory support:
Few officers sometime felt disturbed, as they were busy in their job. Sometime they didn’t want to supervise us out of their official work.
iv) Other limitation:
As we are newcomer, there is a lack of previous experience in this concern. And many practical matters have been written from our own observation that may vary from person to person.
2.1 Derivation of Islami Bank
Bangladesh is one of the largest Muslim countries in the world. The people of this country are deeply committed to Islamic way of life as enshrined in the holy Quran and the Sunnah. Naturally, it remains a deep cru in their hearts to fashion and design their economic lives in accordance with the precepts of Islam. The establishment of Islami Bank Bangladesh Limited on March 13, 1983, is the true reflection of this inner urge of its people, which started functioning with erect from March 30, 1983. This bank is the first of its kind in South-East Asia. It is committed to conduct all banking and investment activities on the basis of interest fee profit-loss sharing system. In doing so, it has unveiled a new horizon and ushered in a new silver lining of hope towards materializing a long cherished dream of the people of Bangladesh for doing their banking transactions in line with what is prescribed by Islam. With the active co-operation and participation of Islamic Development Bank (IDB) and some other Islamic banks, financial institutions, government bodies and eminent personalities of the middle east and the gulf countries, Islami Bank Bangladesh Limited has by now earned the unique position of a leading private commercial bank in Bangladesh.
Banking plays an important role in the economy of any country. In Bangladesh Muslim constituted more than 80% of its population. These people possess strong faith on Allah and they want to lead their lives as per the constructions given in the holy Quran and the way shown by the prophet Hazrat Muhammad (Sm). But no Islamic banking system was developed here up to 1983. The Traditional banking is fully based on interest or “Riba”. But interest is absolutely prohibited by Islam. As a result the people of Bangladesh have been experiencing such a non-Islamic prohibited banking system against their normal values and faith.
The present world especially the third world is affected by unemployment socio economic injustice inflation, inequitable distribution of income and wealth etc. The main aim of traditional banking is to earn profit by borrowing and lending money in exchange of interest. As a result there is an unfair competition among the bankers and among the customers.
Under conventional framework a bank borrows to lend and it mobilizes savings/deposits by borrowing from savers and loans those deposits to productive interest on deposits and advances respectively. The banks generally maintain a difference is known as interest spread, which is the main income of an interest-based bank. There is no interest received by the Islami Bank. In this case IB receives its entire deposits from the investment of the clients on the basis of profit- sharing place it to the actual entrepreneurs on the basis of the profit sharing. So, it is clear that in case of the traditional banking systems, a fixed percentage of interest, irrespective of income earned is paid to the depositors.
The depositors of IBBL are never deprived of excess income, which the bank may make at the end of year, not only this traditional bank give fixed interest rate even when they incur operational loss. The critics of Islamic banking system are of the opinion that both are found same in terms of deposits mobilization and advances investment.
Banking functions of IBBL is an important aspect in our economy as it has broken the line of interest based traditional banking system through the introduction Islamic Shariah based banking. Since its commencement in 1983, it has already gained a good reputation in customers as well as the masses of people of Bangladesh. Islamic Banking is especially important in the world countries, which are characterize by unemployment, inequitable distribution of income and wealth, etc. But there are so many constraints in our country in terms of functioning of the Islamic Bank Bangladesh Ltd. (IBBL). The paper is an attempted to evaluate the modes of IBBL in terms of productivity and effectiveness. Since it is difficult to measure the productivity of a bank, especially the interest-free IBBL, as it does not any visible product. Some specific indicators have been selected for the purpose of measurement of productivity.
2.2 Historical Background of IBBL
In August 1974, Bangladesh signed the Charter of Islamic Development Bank and committed itself to reorganize its economic and financial system as per Islamic Shariah. In January 1981, Late President Ziaur Rahman while addressing the 3rd Islamic Summit Conference held at Macca and Taif suggested. “The Islamic countries should develop a separate banking system of their own in order to facilitate their trade and commerce”.
This statement of Late President Ziaur Rahman indicated favorable attitude of the Government of the People’s Republic of Bangladesh towards establishing Islamic banks and financial institutions in the country. Earlier in November 1982, Bangladesh Bank, the country’s Central Bank, sent a representative to study the working of several Islamic Banks abroad.
In November 1982, a delegation of IDB visited Bangladesh and showed keen interest to participate in establishing a joint venture Islamic Bank in the private sector. They found a lot of work had already been done and Islamic banking was in a ready form for immediate introduction. Two professional bodies Islamic Economics Research Bureau (IERB) and Bangladesh Islamic Banker’s Association (BIBA) mode significant contributions towards introduction of Islamic Bank in the country.
They came forward to provide training on Islami Banking to top bankers and economists to fill up the vacuum of leadership for the future Islamic banks in Bangladesh. They also help seminars, symposia and workshops on Islamic economics and banking throughout the country to mobilize public opinion in favor of Islamic banking.
Their professional activities were reinforced by a number of Muslim entrepreneurs working under the aegis to the then Muslim Businessmen society (now reorganized as industrialist & Businessmen Association). The body concentrated mainly in mobilizing equity capital for the emerging Islamic Bank.
At last, the long drawn struggle to establish an Islamic bank in Bangladesh becomes a reality. Islamic Bank Bangladesh Limited was established in March 1983. In which 19 Bangladeshi nationals, 4 Bangladeshi institutions, and 11 banks, financial institutions and government bodies of the Middle East and Europe Including IDB and two eminent personalities of the kingdom of Saudi Arabia Joined hands to make the dream a reality.of IBBL
Business Philosophy of IBBL
The philosophy of IBBL is to the principles of Islamic Shariah. The organization of Islamic conference (OIC) defines an Islamic Bank as “a financial institution whose status, rules and procedures expressly state its commitment to the principles of Islamic Shariah and to the banking of the receipt and payment of interest on any of its operations. The sponsor, perception is that IBBL should be quite different from other privately owned and managed commercial bank operating in Bangladesh, IBBL to grow as a leader in the industry rather than a follower. The leadership will be in the area of service, constant effort being made to add new dimensions so that clients can get “Additional” in the matter of services commensurate with the needs and requirement of the country growing society and developing economy.
2.3 Mission and objective
§ To conduct interest free banking.
§ To establish participatory banking instead of banking on debtor creditor relationship.
§ To invest through different modes permitted under Islamic Shariah
§ To accept deposits on profit-loss sharing basis.
§ To establish a welfare-oriented banking system.
§ To extend co-operation to the poor, the helpless and the low-income group for economic uplift.
§ To pay a vital role in human development and employment generation.
§ To contribute towards balanced growth and development of the country through investment operations particularly in the less developed area.
§ To contribute in achieving the ultimate goal of Islamic economic system.
· Objectives of Islami Bank
It is a golden desire of every Muslim that his social and political lives should be in accordance with the divine guides prescribed in the holy Quran and the Sunnah. In the same tune of aspiration as above, he desires to follow a unified life in financial and business life. So, the objectives of the Islamic Banking may be derived from the broader objectives of the Islamic economy. Two quotations may help us understand our objectives.
Ibn al- Qayyim says. The basis of the Shariah is the wisdom and welfare of the people in this world as well as the hereafter. This welfare lies in complete justice, mercy, well-being and wisdom. Anything that departs from justice to oppression, from mercy to harshness, from welfare to misery and from wisdom to folly, has nothing to do with the Shariah Al-Ghazali says, “The very objective of the shariah is to promote the welfare of the people which lies in safeguarding their faith, their life, their intellect, their posterity and their property. Whatever ensures the safeguard of these five serves public interest and is desirable.”
However M. Umer Chapra, in his book “Towards a just Monetary System discussed some of the most fundamental characteristics of Islamic money and banking system. Those are as follows:
1. Broad-based economic well-being with full employment and optimum rate for economic ground;
2. Socio-economic justice and equitable distribution of income and wealth;
3. Stability in the value of money to enable the medium of exchange to be a reliable unit of account, a just standard of deferred payments, and a stable store or value.
4. Mobilization and investment of savings for economic development in an equitable manner such that a just return is ensured to all parties concerned, and
5. Effective rendering of all services normally expected from the banking system.
Islamic economy including Islamic banking is now entering a new phase, which calls fore more integrative as well as a more critical approach to meet the present day complex financial needs. Now, the economists are faced with the challenging task of reviewing the whole situation emerging at least in three areas.
Firstly, To bring together the works done by different economists into a comprehensive view of the monetary system of Islam in its fullness, as against concentrating on specific, sometimes even disjointed, elements of money and banking.
Secondly, To review critically the different models of Islamic banking presented over the years in the context of the practice of Islamic banking with a view to refining the theory as well as improving the practice.
Thirdly, It is essential to put the whole theory and practice of Islamic banking in the perspective of an Islamic economy and the Islamic moral and social order. Any element of the Islamic system, however important, cannot produce the desired results, if it is allowed to operate in isolation. It must lead to other complementary changes to complete the process.
2.4 Role of contribution of IBBL to Bangladesh Economy
Islami Bank Bangladesh Limited has many success stories of achievements. These are summarized below:
3 IBBL is the pioneer institution of Islamic Banking in Bangladesh.
4 The success of IBBL has imbibed other sponsors at home and abroad to establish Islamic Banking in Bangladesh. Four national, one international Islamic Banks have since been established in the country. A private sector traditional bank has also established two full-fledged Islamic Banking branches. Several other existing and proposed traditional banks have also expressed their intention to introduce Islamic Banking.
5 IBBL has successfully mobilized deposits from a section of people who hither-to-before did not make any deposit with interest based banks.
6 The Islamic Banking products which are offered by IBBL through its 185 branches located at important centers all over the country and spontaneous acceptance of those products by the people proves the superiority of Islamic by the people proves the superiority of Islamic banking.
7 IBBL’s market share of deposit investment and ancillary business is steadily increasing
8 IBBL, through still a tiny bank, handless more than 10% of country’s export and import trade.
9 Among the contemporary commercial Banks IBBL’s position is first in respect of mobilization of deposit, deployment of found and earning profit.
10 Investment in industrial sector occupies nearly 49.19% of IBBL’s investment portfolio. This is a unique example of industrial finance by a commercial Bank.
11 More than 1.15,000 workers are employed in the industrial projects financed by IBBL. IBBL has thus made significant contribution to solving unemployment problem of the country.
12 Dhaka-the capital of Bangladesh being a Mega city has acute transport problem. IBBL has joined hands with an enterprising group to introduce a fleet of Premium Bus service, which has attracted the attention of all section of the people and mitigated transportation problem of the city to some extent.
2.5 Opportunity & Threats of IBBL
Problems & Prospects of Islamic Banking in Bangladesh
Despite tremendous popular support spectacular success in terms of mobilization of deposit and distribution of profit Islamic banking in Bangladesh yet to achieve the desired level of success due to the absence of appropriate legal framework for carrying out Islamic Banking operations in the country. All the government- approved securities in Bangladesh are interest bearing, Besides, Islamic Money Market in Bangladesh is yet to develop. As a result the Islamic banks, which are committed to avoid interest, cannot invest the permissible part of their Statutory Liquidity Reserve and short Term Liquidity in those securities.
Inspire of the present limitations, Islamic -banking system has tremendous potentiality and prospect in Bangladesh, Firstly, the successful launching and needs to an Islamic Money Market in the country. Secondly Islamic banks have brought together many depositors and entrepreneurs under their fold and coverage. These depositors and entrepreneurs so long avoided interest-based banking on grounds of religious injunctions.
The gradual and successful globalization of Islamic banking coupled with growing awareness of the people about its financial and social benefits makes it clear that the next century is going to be the century of Islamic banking.
2.6 Special features of the IBBL
Islami Bank Bangladesh Limited (IBBL) was incorporated on13.03.1983 as a public company with limited liability under the companies act, 1913. The bank started functioning with effect from 30.03.1983 as the first Shariah based interest-free bank in South-East Asia.
2.7 The bank is committed to run all its activities as per Islamic Shariah. IBBL through its steady progress and continuous success has, by now, earned the reputation of being one of the leading private sector banks of the country. The distinguishing features of IBBL are as under:
2.8 All its activities are conducted on interest-free system according to Islamic Shariah.
2.9 Investment is made through different modes permitted under Islamic Shariah.
2.10 Investment income of the bank is shared with the Mudaraba depositors according to a ratio to ensure a reasonably fair rate of return on their deposits.
2.11 Its aims are to introduce a welfare-oriented banking system and also to establish equity and justice in the field of all economic activities.
2.12 It extends Socio-economic and financial services to the poor, helpless and low-income group of the people for their economic enlistment particularly in the rural areas.
2.13 It plays a vital role in human resource development and employment generation particularly for the unemployed youths.
2.14 Its aim is to achieve balance growth & equitable development of the country through diversified investment operations particularly in the priority sectors and in the less developed areas.
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The operation of Islamic Bank Bangladesh limited can be divided into three (3) major categories:
General Banking
It includes: –
a. Mobilization of deposits
b. Receipts and payment of cash.
c. Handling transfer transaction.
d. Operations of clearing house
e. Maintenance of accounts with Bangladesh bank and other bank.
f. Collection of cheques and bill.
g. Issue and payment of Demand Draft, telegraphic transfer and payment order.
h. Executing customers standing instructions.
i. Maintenance of safe deposit lockers.
j. Maintenance of internal accounts of the bank.
While doing all the above noted work IBBL issue cheques-book, Deposit account operating form, SS card, Ledgers, Cash book, Deposit account ledgers, preparation statement of accounts, Pass book, Balance of different accounts and calculates profits.
Islami Bank Bangladesh limited offers to open the following account to the depositors:
1. Al-Wadeah Current Account.
2. Mudaraba Savings Account.-MSA
3. Mudaraba term deposit Receipt. (3 month / 6 month / 12 month / 36 months term)-MTDR
4. Mudaraba Special Scheme-MSS
5. Mudaraba Hajj Savings Account (1 year to 25 year term)-MHSA
6. Mudaraba Special short notice Account.-MSNA
7. Mudaraba Savings bond (5 year & 8 year term)-MSB
8. Mudaraba Foreign Currency Deposit.-MFC
9. Mudaraba Monthly profit Distribution scheme.-MMPDS
10. Mudaraba Moharana Account.-MMS
11. Mudaraba (wakf) cash Account.-MWCA
Investment
It includes:
IBBL invests its money in various sectors of the economy through different modes permitted by shariah and approved by Bangladesh Bank. The modes of investment are as follows:
Bai-Mechanism
3 Bai-Murabaha
4 Bai- Muazzal
5 Bai-Salam
6 Istishna
Leasing, Ijara, Hire Purchase (HP) Hire Purchase under shirkatul Melk (HPSM)
Shirkatul Mechanism
7 Musharaka
8 Mudaraba
Foreign Exchange Business
Foreign Exchange Business plays a vital role in providing substantial revenue in the bank income pool. Like all modern Banks IBBL operates in the area of the foreign Exchange business. IBBL performs the following tasks:
a) Opening letter of credit (LC) against commission for importing industrial, agricultural and other permissible items under Islamic Shariah and Import policy.
b) Opening letter of credit on the principle of Mudaraba sale, on the principle of Musharaka sale and under wage earner scheme.
c) Handling of export/import document.
d) Negotiation of export / import document when discrepancy occurs.
e) Financing in import under MPI (Mudaraba Post Import)
f) Financing to export on profit or loss sharing.
g) Handling Inward and outward remittance.
Other activities
TheIBBL performs the following task for the welfare of the society:
p Income generating scheme is for the unemployed youth of the nation.
p Standard sales center for marketing home made garments, handicrafts and other items.
p Education scheme for assisting poor scholar student to case and help them to continue their study.
p Health scheme for fulfillment of health needs of rural people.
p Islamic bank hospital was established to extend first hand modern and contemporary medical service to the people on non-profit business.
p Humanitarian assistance is being provided to the poor, families affected by river erosion and for marriage of poor girls.
p Energy relief operations are provided to the people affected by natural calamities.
p Contribution to Mosque for construction, repair and renovation.
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As on 31st December 2007
Date of Incorporation : 13th March 1983
Inauguration of 1st Branch : 30th March 1983
(Local office, Dhaka)
Formal Inauguration : 12th August 1983
Share of Capital
Local Shareholders : 42.64%
Foreign Shareholders : 57.36%
Authorized Capital : Tk.5, 000.00 million
Paid-up Capital : Tk.3, 801.60 million
Deposit : Tk.166, 325.29 million (As on 31-Dec-2007)
Investment : Tk. 188,848.85 million (As on 31-Dec-2007)
Foreign Exchange Business : Tk. 286,017.00 million (As on 31-Dec-2007)
Number of Branches : 196
Zone : 8
Number of Shareholders : 26,715
Manpower : 9,273
9 Capital position from 2000 – 2007
(In million Taka)
Particulars | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 |
Authorized capital | 1000 | 1000 | 1000 | 3000 | 3000 | 5000 | 5000 | 5000 |
Paidup Capital | 320 | 640 | 640 | 1920 | 2304 | 2764.80 | 3456 | 3801.60 |
Reserve fund | 1759.65 | 1998.04 | 2852.07 | 3280.37 | 4329.92 | 5450.92 | 6551.23 | 8039.74 |
Total equity of the bank as on 31st December 2006 was at 10,435.96 million as against tk 8,331.14 million as on 31st December 2005 comparative position equity of the year 2001- 2007 is given below:-
(In million)
Particular | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | |
Core Capital: i) Paid up capital | Taka 640 | Taka 640 | Taka 1920 | Taka 2304 | Taka 2764.80 | Taka 3456 | Taka 3801.60 | |
ii) Share Premium | 1.99 | 1.99 | 1.99 | 1.99 | 1.99 | 1.99 | 1.99 | |
iii) Statutory Reserve | 528.3 | 727.11 | 887.51 | 1256.12 | 1688.60 | 2270.33 | 3026.49 | |
iv) General reserv | 241.75 | 447.37 | 278.37 | 462.62 | 464.76 | 419.61 | 140.41 | |
v) Investment Loss-Offsetting Reserve | 644.43 | 644.43 | 644.43 | 644.43 | 644.43 | 644.43 | 644.43 | |
vi) Dividend Equalization Account | – – – | 32.00 | 32.00 | 32.00 | 32.00 | 32.00 | 32.00 | |
vii) Distributable reserve | 160.00 | 160.00 | 384.00 | 460.80 | 691.20 | 864.00 | 1572.09 | |
Total core capital | 2216.47 | 2652.90 | 4148.30 | 5161.96 | 6287.78 | 7688.36 | 9219.02 | |
Supplement capital: i) Provision classified investment ii) Assets Revaluation reserves iii) Exchanges Equalization | 355.20 386.06 35.51 | 448.83 400.38 38.41 | 572.93 506.83 38.41 | 773.97 716.78 38.41 | 1060.17 944.78 38.41 | 1568.96 1140.23 38.41 | 2005.72 1137.98 38.41 | |
Sub Total | 776.77 | 887.62 | 1118.17 | 1529.16 | 2043.36 | 2747.60 | 6546.92 | |
Total | 2993.24 | 3540.52 | 5266.47 | 6691.12 | 8331.14 | 10435.96 | 15765.94 | |
Total risk-Based assets | 32387.79 | 40973.23 | 55851.30 | 72628.26 | 88230.30 | 110664.24 | 140971.58 |
As per new Capital Adequacy Policy prescribed by Bangladesh Bank, the Central Bank of the country, banks are to maintain 9.74(p) % capital on its Risk-Weighted Assets against which present total equity of the Bank as on December 31, 2006 stood at Taka 10435.96 million.
This was Taka 8,331.14 million in 2005,Taka 6,691.12 million in 2004, Taka 5,266.47 million in 2003, Taka 3,540.52 in 2002, Taka 2,993.24 million in 2001,Taka 2,671.06 million in 2000.
Performance of IBBL for last 7 years
(Amount in million Taka)
(Note: One Million = Ten Lac) |
Trend of IBBL Operating Result
Trend of Net Profit
Retained Earnings
Trend of foreign exchange business of IBBL
Items | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 |
Remittance | 9,879 | 14,670 | 16,668 | 23,669 | 36,948 | 53,819 | 84,143 |
Import | 25,907 | 33,788 | 46,237 | 59,804 | 74,525 | 96,870 | 1,37,086 |
Export | 16,082 | 16,673 | 21,738 | 29,151 | 36,169 | 51,133 | 66690 |
GENERAL BANKING OF IBBL
Introduction
General Banking is the heart of Banking. Here money collection procedure occurs. Other services, like cheque encashment, account transfer; account closing, bills and remittance are given here. So general banking is the most important thing in banking service.
3.1 Procedures
1. Issuance of token, Maintenance of subsidiary day Book, writing of day Book, balancing of Ledger.
2. Opening of A/c Mudaraba Savings A/cs Mudaraba term deposit A/c Al?Wadiah current A/cs, Mudaraba Hajj saving A/cs, writing of A/c opening registers and issuance of pass book and cheque Book.
3. Maintenance of current A/c ledgers, deposit ledger and TDR ledger and operation of computer.
4. Writing of transfer scroll, statement of current A/cs and deposit A/c and Hajj deposit A/c pass book.
5. Bills: Outward & inward Bills (OBC & IBC) and clearing.
6. Remittance: Issuance and payment of DD, TT, PO etc.
7. Writing of clean cash Book and posting of General Ledger and checking of computer final sheets with General Ledger.
8. Maintenance of charges, suspense and sundry deposit A/c, maintenance of dead stock and stationery articles registers.
9. Schedule Telegram and preparation of General ledger A/c statement.
10. Establishment: Preparation of Salary, pay sheet, LPC, maintenance leave register, personal files and method of correspondence and payment of income tax.
11. Reconciliation of General A/c.
3.2 Dispatch:
3.2.1 Inward
1. Inward mail, other than those which are registered, marked confidential and addressed personally to same official, may be opened by an authorized member pf staff who should enter in the inward mail register and mention serial number of the mail register on the letter/ paper received, affix “Received” date stamp on it and delivery the same to the concerned officials against acknowledgment.
2. Letters addressed personally to any official shall be opened by the address only.
3. Registered mails and mails marked confidential will be opened by an officer or management in small branches. All these letters shall however entered in the inward mails registers.
4. Stop payment instructions and court orders shall be received authorized officials who will immediately note date & time on it and take necessary steps.
3.2.2 OUTWARD
1. Outward letters must bear serial number and entry in the register with name and address.
2. Each typist will maintain a typist master file and dispatch Clark also maintain a separate master file for future record.
3. Local letters may be delivered through peon book. If the area is large and letters are many in number service of post-office may be utilized.
4. Letters dispatched must be entered in the outward mail register and bear proper postal stamps, if sent through post office.
5. Remarks such as ‘Urgent’ ‘By Airmail’ ‘Register’ ‘Registered with A/D’ ‘Confidential’ etc. must appear on top of the letter as well as envelop.
6. If the letters are sent by registered post or courier service, postal receipt/ courier receipt must be maintained by the dispatch department in a file. Similarly acknowledgments received back should be maintained in the file.
7. If any telegram is sent by any branch, a copy of the message duly signed by authorized officer must be sent by post to the address as confirmation.
8. Similarly when the branch receives any inward telegram, they must compare it with the confirmatory copy when received.
9. Receipt for telegraphic message issued by telegraph office should be maintained in a file and authorized officer must check them at the time of passing expenses voucher.
10. If any telegram is sent relating to services given to a customer. Charges should be recovered from the customer concerned.
11. Manager and other officers of the bank must ensure economic use of telephone. Trunk call & STD conversation must be short. If telephone is used on account if customers, charges must be recovered.
12. Trunk calls & STD calls must be recovered in the trunk call register and verified with the telephone bill when received from T&T office.
4 General Characteristics of Deposit Account:
Bank receives deposit by different accounts. Those are two types:
i) Al Wadiah -?? Client A/C is conducted under Al ? Wadiah system
ii) Mudaraba Mode ??? Client? Sahib Al Mal
Bank? Mudarib
Under this arrangement ? profit distribution under agreed ratio and loss (if any) will be borne by Sahib Al Mal
Under Mudaraba mode there are many accounts as under:
i) MSA – Mudaraba Savings Account
ii) MHSA ? Mudaraba Hajj Savings Account
iii) MSB ? Mudaraba Savings Bond
iv) MSS ? Mudaraba Special Scheme
v) MTDR ? Mudaraba Term Deposit Account
vi) MMPDS ? Mudaraba Monthly Profit Deposit Scheme
vii) MMS ? Mudaraba Mahor Savings A/C
viii) MSNA ? Mudaraba Short Notice A/C
3.4 Al?Wadiah Current A/C (AWCA)
AWCA accounts are unproductive in nature, is nature, as banks lovable investment fund is concerned sufficient fund has to be kept in liquid from, as current deposits are demands liabilities. Thus huge portion of his fund becomes on performing for this reason banks do not pay any of AWCA – CD account holder. Businessmen and companies are the customers of this product.
3.5 Mudaraba Saving Account (MSA)
As per Bangladesh bank instruction 90% of SB deposit are treated as time liability and 10% of it as demand liability. In IBL there is a restriction about drawing money from SB account but any time holder may draw money of any amount with prior motive. General house holder and individuals are the clients of this account
Mudaraba Term Deposit (MTDR)
Fixed deposits are of two kinds midterm deposit (MTD) and term deposit (TD) instrument whose maturity period is within one year are known as MTD and those above one year are considered as term deposit. Calculation of profit TDR and provisioning regarding this is quite complicated issue. Profit is calculation at each maturity date and provision is made on that. Also at the month and provision of profit is made.
Mudaraba saving Account (MSNA) A/C
MSA account can be treated can be treated as semi term deposit. Deposit should be kept in these accounts for at least seven days to get interest of MSA accounts is less then SB accounts. (5.5%) Generally profit but may increase to 6% or more depending on the fund Checkbook is issued them but frequent use of checkbook is discouraged. Governmentally organization big corporate house and banks are generally the clients of this account.
4 Account Opening Eligibility
a) Persons over 18 years (except some restricted persons)
b) Account of Club
c) Association
d) Agent
e) Govt.
f) Semi Govt.
g) Organization
h) Liquidators
i) Minor
j) Married Women
k) Pordanshil Women
l) Illiterate Persons
5 Account Closing:
First a customer has to submit an application with his/her signature mentioning that he/she wants to close his/her A/C. Then the signature will be verified by the officer. Customer has to certify by different department (Advance, Foreign Exchange department) of Bank that he/she has no liabilities to the Bank. After that the Customer’s A/C is debited and then Bank issue a Pay Order in the name of A/C holder.
6 Account Transfer
7 Customer has to submit an application mentioning that he/she wants to transfer his/her A/C to his desired Branch and the officer will verify the signature, Customer has to be certified by different department of Bank that he/she has no liabilities to the bank. Then total particulars of A/C holder will prepare and sent to the Customer’s desired branch. Liability of Recognizer is secondary and account holder is Primary.
8 General Practice at Regarding Accounts, in Account Opening Register:
After fulfilling all the requirements for opening account necessary entries are given in the account opening register. There are several registers for several accounts as MSA, AWCA, TDR etc. Date of opening name of the account holder, nature of business, address, initial deposit, and introduction various information are recorded in that register. New accounts number is given from the list of new numbers provided by the computer department.3.7.1
The principles of calculation and distribution of profit to Mudaraba Depositors generally followed by different Islami Banks are as under:
9 Mudaraba Depositors share income derived from investment activities i.e. from the use of fund.
10 Mudaraba Depositors do not share any income derived from miscellaneous banking services where the use of fund is not involved, such as commission, exchange, service charges and other fees realized by the Bank.
11 Profit and loss resulting from the use of funds are separately maintained in the accounts from other income and expenditure relating to other activities and services offered by the Bank.
12 Mudaraba Deposits get priority in the matters of investment over Bank’s equity and other cost free funds.
13 Mudaraba Depositors do not share any income derived from investing Bank’s equity and other cost free fund.
14 The amount of the statutory cash reserve and the liquidity reserve, which are required to be maintained with Bangladesh Bank, is deducted from the aggregate balance of Mudaraba Deposits to arrive at the net balance of profit sharing deposit.
15 The gross income derived from investments during the accounting year is, at first, allocated to Mudaraba Deposits and cost-free-funds according to their proportion in the total investment.
16 The share of gross investment income of Mudaraba Deposits as worked out in terms of principle shown against serial No 7 above is distributed as under:
17 The Bank’s Management at its discretion to rationalise the Rates of profit to Mudaraba Depositors might further raise Mudaraba Depositors’ share of 65% of gross investment income but it would not be reduced during any accounting year without giving prior declaration
18 The rest amount of gross investment income is retained by the Bank as management fee for managing the investment & for making reserve for Bad & doubtful investments.
19 Islami Bank Bangladesh Ltd, at present, applies the following weightages to Mudaraba Deposits:
Sl. no. | Particulars of Deposits | Weightages |
1. | Mudaraba Hajj Savings A/C : 11 to 12 years | 1.35 |
2. | Mudaraba Hajj Savings A/C : Upto 10 years | 1.30 |
3. | Mudaraba Special Savings (Pension) A/C (MSS): 10 years | 1.30 |
4. | Mudaraba Special Savings (Pension) A/C (MSS) : 5 years | 1.10 |
5. | Mudaraba Muhur Savings Account (MMSA) : 10 years | 1.30 |
6. | Mudaraba Muhur Savings Account (MMSA) : 5 years | 1.10 |
7. | Mudaraba Savings Bond (MSB) : 8 years | 1.25 |
8. | Mudaraba Savings Bond (MSB) : 5 years | 1.10 |
9 | Mudaraba Monthly Profit Deposit A/C (MMPDS) | 1.20 |
10. | Mudaraba Term Deposit Account (MTDA) : 36 months | 1.00 |
11. | Mudaraba Term Deposit Account (MTDA) : 24 months | 0.98 |
12. | Mudaraba |