General Banking, Credit and Advance Section of IFIC Bank Ltd

View With Charts And Images

General Banking, Credit and Advance Section of IFIC Bank Ltd

Chapter One: Introduction

1.2 Objectives of the Report

There are several types of objectives are involved in this report. These objectives are given below:

· To comply with the entire branch banking procedure.

· To know the General banking function of this branch.

· To acquire knowledge of practical operation.

· To know the credit facilities process of the branch.

· To know the credit facilities process of the branch.

· To know the advance department of the branch.

· To gain the overall idea and know about the financial condition of the bank.

· To find out the existing problem of the bank, Lalmatia branch.

· To acquire the knowledge of the product and services of the bank, lalmatia branch.

1.3 Methodology

This report was fully exploratory in nature. Data has been collected from both primary and secondary sources.

Primary sources of data

?Informal conversation with the clients.

? Personal experience gained by visiting different desks.

? Face to face communication with employees of the IFIC Bank Ltd.

Secondary sources of data

? Annual reports of IFIC.

? Data collected from internal report.

? Bank records.

? Journals of the Bank.

? Official Website of the Bank.

? Different circular sent by Bangladesh Bank.

1.4 Job Rotation:

This report has been prepared on the basis of experience gathered during the period of internship from 2^nd July to 2^nd October,2008.Withen this period visited two department namely General Banking, Credit & Advance departments.

Firstly total duration was divided into total working days that came to a total working day of 3 months and were distributed in the following manner:

Departments	Duration	Days
General Banking	from 2nd July to 3rd September	46
Credit & Advance	from 4th September to 2nd October	16

Duration of rotation in different departments in the branch is shown in the graph below:

1.5 Limitations of this Report:

The present study was not out of limitations. But as an intern it was a great opportunity to know the banking activities of Bangladesh especially IFIC Bank. Some constraints are as follows:

· First, one of the major limitations is the shortage of internship period. Since three month is not enough to know everything of a Bank, so this report does not contain all the area of IFIC Bank Ltd.

· Second, Because of the limitations of various sources of information the report doesn’t contain many important information and data. All scheduled commercial bank regulated by the instruction do central bank. Most of the instructions are confidential to the commercial bank. So, that was incapable to provide valuable information.

· Third, Due to time limitation; many of the aspects could not be discussed in the present.

· Fourth, every organization has there own secrecy that is not revealed to others. While collecting data they did not disclose much information for the sake of organizational confidentiality.

· Since banks personals were very busy they could provide me very little time.

Chapter Two: Profile of IFIC Bank Ltd.

2.1 THE BANK IN A SKETCH

International Finance Investment and Commerce (IFIC) Bank Limited started banking operations on June 24, 1983. 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.

The objectives of the finance company were to establish joint venture Banks Finance Companies and affiliates abroad and to carry out normal functions of a finance company at home.

In 1983 when the Government allowed banks in the private sector, IFIC was converted into a full-fledged commercial bank.

2.2 Ownership Structure:

Previously IFIC Bank Ltd was Government owned bank. Now the government of the Peoples Republic of Bangladesh holds 35% of shares of the bank. Leading industrialists of the country own 34% of the shares and the rest is held by the general public. The founder of IFIC Bank Ltd was Jahurul Islam of Islam Group of Industries. He was the first Chairman and A.S. F. Rahman was first Vice Chairman. Board of Directors of the Bank is a unique combination of both private and Government sector experience. Currently it consists of 13 Director. Of them eight represent the sponsors and general public and four officials in the rank and status of Additional Secretary/Joint Secretary represent the Government.

2.3 Board Of Directors:

Board of Directors of the Bank id a unique combination of both Private and Government sector experience. The current boards of Directors are given below:-

Mohammad Lutfar Rahman Chairman

Mr. Abu Tahir Mohammad Golam Maruf Director

Mr. Murshed Murad Ibrahim Director

Mr. Aminur Rahman Director

Mohammad Asian Ali Director

Mr. Didarul Alam Director

Mr. Chowdhury Nafeez Sarafat Director

Mr. Gulzar Alam Chowdhury Director

Mr. Tanim Noman Sattar Director

Mohammad Huq Bhuiyan Director

Mr. Mashiur Rahman Managing Director

2.4 Mission Statement:

Our Mission is to provide service to our clients with the help of a skilled and dedicated workforce whose creative talents, innovative actions and competitive edge make our position unique in giving quality service to all institutions and individuals that we care for.

We are committed to the welfare and economic prosperity of the people and the community, for we drive from them our inspiration and drive for onward progress to prosperity.

We 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, we particularly focus on growth and profitability of all concerned.

2.5 Branch Network:

The bank covers by its activities all the important tracing and commercial centers of the country. As on January 31, 2008 it has 70 branches within Bangladesh.

Bangladesh

Branch Distribution of IFIC Bank Ltd

In Different Districts

All the important branches are equipped with computers in addition to the modern facilities, logistics and professionally competent workforce.

2.6 Risk Management:

In view of the global recognition towards need of an effective risk management and control system in financial sector. IFIC Bank being cognizant of the importance of the subject has prepared and implemented the following policy guidelines on Risk Management:

2.7 Capital:

The bank started with an authorized capital of Tk.100 million in 1983 and paid up capital at that time stood a Tk.71.50 million. Over the last twenty four years the authorized capital has increased to Tk. 659.05 million and paid up capital also increased. The paid up capital stood at Tk. 406.38 million as on 31^st December, 2007.

2.8 Reserve and Surplus:

Reserve and Surplus increased to Tk.789.68 million in 2007 from Tk.21.20 million only in 1983.Annual average growth rate for the period 1983-2007 is around 26 percent.

As against a profit of Tk.21.20 million in 1983, the bank earned a profit of Tk. 1045.46 million for the year ended 31^st December 2007.

2.9 Products and services:

2.10 Branch Abroad:

· Pakistan Branch – IFIC Bank opened its first overseas branch in Karachi, Pakistan. It opened its second branch at Lahore in Pakistan.

· Nepal Bangladesh Limited – In December 1993,the Bank got permission to establish a joint venture bank with 50% equity capital in Nepal. The Bank known as, Nepal Bangladesh Ltd.came into operation in June 1994.

2.11 Human Resource Development:

The Bank has a Human Resource Development & Research Department to develop human resources internally. The academy is equipped with professional library, modern training aids professional faculty and other facility. It is now under personnel & Human Resource Development & Research Division. The academy conducts regularly foundation courses, specialized courses and seminars on different areas of banking to take care of the professional needs.

2.12 Hierarchy of the management of this bank:

Senior Executive Vice – President

Executive Vice – president

Senior Vice – president

Vice – president

Senior Asstt. Vice – president

First Asstt. Vice – president

Asstt. Vice – president

Senior Staff Officer

Staff Officer

Officer Grade – ?

Officer Grade – ??

Assistant Officer

Office assistant

Chapter Three: General Banking

General Banking

General banking is the starting point of all the banking operations. It is the department which provides day –to- day services to the customers. Everyday it receives deposits from the customers and meets their demand for cash by honoring cheques.It opens new accounts, remit funds, issues bank drafts and pay orders etc.since bank is confirmed to provide the services everyday, general banking is also known as “retail banking”

G B E A N N E K R I A N L G	1	Cash section
	2	Account Opening
	3	Cheque Clearing
	4	Test Arrangement
	5	Local Remittance
	6	FDR
	7	Establishment Section
	8	Accounts Section
	9	Total account of the branch

3.0 Function of this department:

This department maintains following schemes and special dealings

a. Pension savings scheme (PSS).

b. Three months Bangladesh sanchay patra.

3.1 Cash section:

Cash department is the most vital and sensitive organ of the branch as it deals with all kinds of cash transactions. This department starts the day with cash in vault. Each day some cash that is opening cash balance are transferred to the cash officers from the cash officers from the cash vault. Net figure of this cash receipts and payments are added to the opening cash balance. The figure is called closing balance. This closing balance is then added to the vault. And this is the final cash balance figure for the bank at the end of any particular day.

3.1.1 Functions of Cash Department:

Cash Payment	1. Cash payment is made only against cheque. 2.This is the unique function of the banking system which is which known 3.as “payment on demand’ 4. It makes payment only against its printed valid Cheque.
Cash Receipt	1. It receives deposits from the depositors in form of cash. 2.So it is the ‘mobilization unit’ of the banking system 3. It collets money only its receipts.

3.1.2 Cash payments or Cheque cancellation process.

Step 1	Receiving Cheque by the employee in the cash counter.
Step 2	Verification of the following by the cash Officer in the computer section 1. Date of the Cheque (it is presented within 6 month from issue date). 2. Issued from this branch. 3. Amounts in figure and sentence written does not differ. 4. Signature of the drawer does not differ. 5. Cheque is not torn of mutilated.
Step 3	Gives pay cash seal and sends to the payment counter.
Step 4	Payments officer makes payment.

3.1.3 Books maintained by this section

Vault Register	It keeps account of cash balance in vault in the bank.
Cash Receipt Register	Cash receipt in whole of the day is recorded here.
Cash Payment Register	Cash payments are made in a day are entered here.
Rough Vault -Register	Cash calculation for final entry in vault register is done here, as any error and correction here is not acceptable.
Cash Balance Book	Balance here is compared with vault register. If no difference is found indicates no error.

In book 1 and book 5, notes and currency are recorded by mentioning their denominations and number of each denomination.

3.2 Account Opening:

This section opens accounts .Selections of customer is very important for the bank because banks success and failure largely depend on their customers. If customer is bad, they may create fraud and forgery by their customers. If customers are bad, they may create fraud and forgery by their account with bank and thus destroy goodwill of banks.So; this section takes extreme caution in selecting its customer base.

3.2.1 Accounts opening process

Step 1	Receiving filled up application in bank’s prescribed form mentioning what type of account is desired to be opened.
Step 2	1. The form is filled up by the applicant himself/herself 2. Two copies of passport size photographs from individuals are taken, in case of firms photographs of all partners are taken. 3. Applicants must submit required documents. 4. Applicants must sign specimen signature sheet and give mandate. 5. Introducers signature and accounts number-verified by legal officer.
Step 3	Authorized officer accepts the application
Step 4	Minimum balance is deposited – only cash is accepted
Step 5	Account is opened and a cheque book and pay-in-ship book is given.

3.2.2 Special documents needed from the Account opener of the following types

Partnership Firm	1. Partnership deed must be taken 2. Mandate from the partners is essential-indicating who will operate the account.
Public limited company	1. Certificate of incorporation 2. Copy of Memorandum and articles of association 3. Certificate of commitment 4. Copy of Resolution of the Board of Directors.
Private limited company	Certificate of Commencement is not necessary 1. Certificate of incorporation 2. Copy of Memorandum and articles of association 3. Copy of Resolution of the Board of Directors.

3.2.3 Types of Account maintained by this branch- comparative discussion

Types of Deposits	Types of Accounts	Characteristics
Demand Deposits	Current Account(CD)	.Generally opened by businessmen .No interest is provided for deposited amount. .Minimum opening balance is TK.5000. If it falls below TK.1000 an incidental charge of TK 50 is charged.
	Savings Accounts(SB)	.Any one expect limited company can open. .6% interest is provided to depositors. .Minimum balance is Tk1000. .twice withdrawal in a week is allowed ,for more withdrawal depositors is not entitled any interest.
Times Deposits	Fixed Deposit Receipts(FDR)	.Can be opened by all .12.5% interest is provide the deposit 1 year. .In case of withdrawal before maturity the pervious maturity period is considered to pay interest-it is known as Break Down Payment.
	Short Term Deposit(STD)	.Generally opened by big business firm. .Interest depends on the amount deposited.

3.2.4 Those Accounts are opened by the bank, when I was worked in this section

SL	Types of A/C	Address	Profession	Relationship with nominee	Age of nominee(year)
1	Savings	Farm gate	Service	wife	32
2	Savings	Dhanmondi	Housewife	Husband	38
3	Current	Dhanmondi	Businessman	son	26
4	Savings	Nayapolton	Service	son	13
5	Savings	Mohammadpur	Businessman	Daughter	15
6	Savings	Kernigan	Businessman	wife	27
7	Savings	Kalabaghan	Housewife	son	10
8	Savings	Dhanmondi	Student	Father	45
9	Current	Manik Mia Avenue	Service	wife	29
10	Current (partnership)	Manik Mia Avenue & Kalbagan	Businessman	Daughter	16
11	Savings	Saver	Student	Brother	26
12	Savings	Kalabaghan	Service	wife	23
13	Current(Ltd.co)	Lalmatia	Businessman	Daughter	17
14	Savings	Farmgate	Student	Sister	29
15	Savings	Gizatolla	Businessman	Wife	26
16	Savings	Kalabagan	House wife	Son	15
17	Savings	Sonkor	Service holder	Daughter	16
18	Savings	Mohammadpur	Banker	Wife	21
19	Current	Dhanmondi	Businessman	Wife	23
20	Savings	Gizatolla	Service holder	Son	25
21	Current	Sonkor	Banker	Wife	18
22	Current	Lalmatia	Businessman	Father	43
23	Current(partnership)	Manik Mia Avenue & Kalbagan	Businessman	Wife	26
24	Current(Ltd.co)	Dhanmondi	Service holder	Son	18
25	Current	Gizatolla	Banker	Wife	30

Comments: The number of savings Account is more than Current Account.

Comments: The maximum number of nominee is wife, son is second and husband, brother, father, and sister are gradually decrease. The students are give the nominee to brother, sister and father.

3.2.5 Transfer of account:

Step 1	Application in written to the Manager of the account maintain branch
Step 2	Manager sends a request to the manager of the desired branch of deposits
Step 3	Sends original account opening application and specimen signature sheet with the balance remained in the account at he sent Manager’s request
Step 4	New account is opened at desired branch.

3.2.6 Dormant account:

If any account is inoperative for more than one year is called dormant. To operate these accounts manager permission is necessary.

3.3 Cheque clearing:

This section receives all kinds of Cheques in favor of the client for as the part of their banking service. After receiving the Cheque it is necessary to endorse it and cross it specially. Basically the cheque for clearing is of following types:

Types	Explanation		Clearing process
Inward clearing cheque	Cheques received from the Clearing House, of our bank.		Party’s A/C————–DR IFIC General a/c—————-CR
Outward clearing	OBC	Cheques of other branch of IFIC bank, within our clearing house area	These cheques are directly sent to the respective branch and request them to send IBCA, than customer’s accounts are credited for the amount of the cheque.
	Clearing cheque	Cheques of another bank, within our clearing horse area	These cheques are sent to clearing horse via the Motijheel Branch . When drawee bank honor the cheques,then the account of cheque depositors are credited.
	OBC	Cheques of another bank which is situated outside the clearing area.	These cheque are cleared in two ways: Firstly , if any branch of our bank exists within the clearinghouse area of drawee bank, then we send the cheque to that branch of our bank and that branch collects the proceeds through clearing house formalities and sends an IBCA to us. In second way, if there is no branch of our bank then we directly sends the cheque to the drawee bank and request them to send the proceeds by TT,MT,or DD of by in any other means.
Inward bills for Collection (IBC)	From other branch of IFIC bank		These cheques are settled by sending IBCA. Ie.debiting depositor’s account and crediting sender’s branch account.
	From another bank outside the clearinghouse		These cheques are settled debiting depositor’s account and sending TT, MT, or DD of by in any other means.

Possibility of dishonor

Unlike cheque, there is no possibility of dishonoring of PO/DD/TT because before issuing, issuing bank takes out the amount of the instrument in advance from customer-common for all instruments.

3.4 Test arrangement

For all these techniques of remittance except telephone tranfers, Test is deployed. Test is security number by decoding which the paying bank can be sure that the DD/TT/MT is not forged one. Only authorized officers know the test number. Bank maintains secret code for each of its officers, date, week, year and amount to be transferred.

3.5 Local Remittance

Sending money from one place to another place for the customer is another important service of banks. And this service is an important part of country’s payment system.

For the service, people, especially businessmen can transfer funds from one place to another place very quickly. There are five kinds of techniques for remitting money from one place to another place. These are:

Telegraphic Transfer and Telephone Transfer are almost the same, both are them are known as TT in short. so the basic three types of local remittances are discussed below:

Points	Pay order	Demand Drafts	TT
Explanation	Pay order gives the payee the right to claim payment from the issuing bank.	Demand Drafts is an order of issuing bank on another branch of the same bank to pay specified sum of money to payee on demand.	Issuing branch request another branch to pay specified money to the specific payee on demand by TT.
Payment from	Payment from issuing branch only	Payment from ordered branch	Payment from ordered branch
Generally used to Remit fund	Within the clearinghouse area of issuing branch	Outside the clearing house branch. Payee can also be purchaser.	Anywhere in the country.
Payment process of the paying bank.	Payment is made through clearing	1.confirm that the DD is not forged one 2.confirm with sent advice. 3.check the ‘Test Code” 4.Make payment	1.confirm issuing branch 2.confirm payee A/C 3.Confirm amount 4.make payment. 5.Receive advice.
Charge	Only commission	Commission+ telex	Commission+telex+vat

3.5.1 ACCOUNTING ENTRIES FOR THE PO, DD AND TT

CASES	PO/DD	TT/MT
Against cash-origination	Cash A/C————DR IFIC General A/C—–CR COMMISSION A/C—–CR	CASH A/C—–DR IFIC General A/C—–CR COMMISSION A/C—–CR Telex charge A/C———cr
Against transfer-origination	Party A/C——-DR IFIC General A/C—–CR COMMISSION A/C—–CR	Party A/C——–DR IFIC General A/C—–CR COMMISSION A/C—–CR Telex charge A/C———cr
Responding	IFIC General A/C—–DR Party A/C—————-CR	IFIC General A/C—–DR Party A/C—————-CR
When advice received for DD	IFIC General A/C——DR Bills payable DD payable A/C—CR
When DD placed against advice	Bills payable DD payable A/C—DR IFIC General A/C——CR
When DD paid without receiving Advice	Sundry Asset DD paid without advice A/C—DR Party A/C—————-CR

3.5.2 Cancellation of DD/PO/TT

STEP 1	Application in written to the Manager of the account maintain branch.
STEP 2	Verification of the specimen signature.
Step 3 Journal positing	Incoming	Bills payable DD payable A/C—DR IFIC General A/C—–CR
	Outgoing	IFIC General A/C—– DR D Bills payable DD payable A/C —–CR dddddddddddddddddA/C Party A/C————–
Step 4	Step letter to the paying bank.

3.5.3 Incoming T.T.from different branches on 7/9/2008

Branch name	No of A/C	Amount	Branch name	No of A/C	Amount
Rangpur	2	389000	Choumuhoni	10	500000
Chawkbazar	3	1900000	Khulna	1	1470000
Cox’s bazaar	1	850000	Mymenshingh	30	1302826
Tultiker	1	1700000	Dinajpur	1	600000
Noapara	5	5000	Syllet	22	4800000
Rajshahi	10	13000	comilla	3	1035000

3.6 FDR

This branch maintains a separate section for fixed deposit. FDR is an important factor for the bank and volume of FDR determines the investment base of the bank. FDR is found to be 60% of the total deposit of this branch. Basically this is the mobilization unit of the bank. It is obvious to give due importance.

3.6.1 Types of FDR maintained by this branch along with their respective interest rate

Fixed Deposit	Rate of interests
1months	10.00%
3months	12.50%
6months	12.50%
One year	12.50%

3.6.2 Liquidation of FDR

1. Only the amount holder himself and the authorized person can liquid the FDR after maturity.

2. In case of joint name, authentication from both is necessary.

3. In case of ‘Either of Survivorship’ clause – any one can liquid.

4. In case of Death, the survivor cannot encase the FDR even if there exist the either or survivor clause-succession certificate from the court is needed.

5. If demanded before the maturity the last expired duration is considered to pay interest.

FDR section provides another service on behalf of the government. These services this bank issues and encash the following govt securities.

· 3month Bangladesh sanchay patea

This section of this branch is also fully computerized. No ledger, no other subsidiary books are maintained separately in this section. All entry is given directly in the computer and then necessary information is printed when required.

3.7 ESTABLISHEDMENT SECTION

This section deals with employee’s salary, many types of internal expenses such as purchase of pen, paper, equipment, machinery and payment of labor cost and employee conveyance. In case of leave of absence employee collects prescribed from this section.

3.8 ACCOUNT SECTION

This is obviously an independent and unique department, which works as the composition of all the departments of the branch, but it is under the In-Charge of the General Banking in this branch. This section in this branch is fully computerized. So the conventional large ledger and journals books not kept like the nationalized banks. Only four personnel maintain the entire accounts section. It receives the vouchers from all departments and prepare the subsidiaries and maintains accounts.

3.9 Total account of this Branch

Types of Account	No. of Account	Amount (In Taka)
Current Account	540	6,41,80,169.55
Savings Account	3223	30,67,14,468.88
Short Term Deposit	50	3,14,20,587.55
FDR	820	99,21,34,567.54

Source: Affairs as on 2/9/2008

Credit and Advance

4.1

Banking is essentially a business dealing with money and credit. Like over other business activity, Banks are profit oriented. It depends mainly on how much profit they can make. Profit is the yardstick for the bank to move on. They work as reserves of “savings’ of the community and also as lenders or investors for trade business and industry. A bank invests its funds in many ways to earn income. The bulk of its income is derived from loans and advances.

Banks give loans and advances to traders, businesspersons and Industrialists against the security of some assets or on the basis of the personal security of the borrower. This is the survival unit of the bank because until and unless the success of this section the survival is a question to every bank. If this section is not properly working the bank may become bankrupt. This is important because this is the earning unit of the bank. Banks are accepting deposits from the depositors in condition of providing interest to them as well as safe keeping their interest. Now the question may gradually arise how the bank will provide interest to the clients and the simple answer is advance. Why the bank provides advances to the borrowers –

· To earn interest from the borrowers and give the depositors interest back

· To accelerate economic development by providing different industrial as well as agricultural advances

· To create employment by providing industrial loans

· To pay the employees as well as meeting the interest groups

Credit is continuous process. Recovery of one credit gives rise to another credit. In this process of revolving of funds, bank earns income in the form of interest. A bank can invest its fund in many ways. Bank makes loans and advances to traders, businessmen, and industrialists. Moreover nature of credit may differ in terms of security requirement, disbursement provision, terms and conditions etc.

Bank often uses loans and advances as an alternative to one another. But academically this concept is incorrect. Academically Advances is the combination such items where loans is a part only. For this credit section of the banks is known as advance section. It is the main profit source of the Bank. Banking business is like all other profit-oriented business. It depends mainly on how much profit they can make. Profit is the yardstick for the bank to move on. Banking is a business that deals only with money and credit. Banks are profit oriented. They invest their fund in many to earn income. Huge amount of income derives from loans and advances. Banks makes loans and advances to traders, businessman and industrialists against the security.

4.2 Target Customer of the IFIC Bank

The customers for loan and advances are categorized as follows:

1. Individual person
2. Sole proprietorship firm
3. Partnership firm
4. Private Limited Company
5. Public Limited Company
6. Government and semi Government Organization
7. Bank employee

4.3 Processing of loan and advances

Applicant applies for the loan in the prescribed form of bank.

Getting Credit Information:

1. Personal investigation
2. Confidential report from other bank head office/ Branch/ Chamber of the Commerce.
3. CIB report from Central Bank

4.4 Analyzing the Information

Banks then starts examination that whether the loan applied for is complying with its lending policy. If comply, then it examines the documents submitted and the credit worthiness. Credit worthiness analyses, i.e. analysis financial conditions of the loan applicant are very important. If loan amount is more than 50 lac then bank goes for Lending Risk Analysis (LRA) and Spreadsheet Analysis (SA) which are recently introduced by Bangladesh Bank According to Bank rule. LRA and SA are must for the loan exceed one crore.

If these two analyses reflect favorable condition and documents submitted for the loan appear to be satisfactory, then bank goes for further action.

4.5 Information Collection

The loans and advance department gets a form filled by the party seeking a lot of information. The information is listed below:

1. Name and address (present and permanent)
2. Constitution or status of the business
3. Particulars of properties, partners and directors
4. Background and business experience
5. Particulars of personal assets, names of subsidiaries, percentage of share holding and nature of business
6. Details of liabilities in name of borrowers, in names of any directors
7. Financial statement for the last three years
8. Nature and details of business/ products
9. Details of requested credit facilities
10. Details of securities offered
11. Other relevant information
12. Proposed debt equity ratio.

4.6 Relevant matter of Document checked before sanctioning any Loan:

· There must be an account of the person want to take loan. The account must transact for not less than 3 months to 6 months. Otherwise the loan will not be sanctioned.

· After checking the duration of account than the transaction made by the account holder must be checked. The debit credit position must be also checked, because it is related with future dealings of the borrower.

· The purpose for what the loan is taken by the borrower is another important matter to see and check. Whether the purpose is business or else must be checked with its marketability. Because there is risk of fraud and forgery by the borrower by seeing one purpose in cash of ding any illegal business.

· The banker should check through security whether it is enough or not.

4.7 Proper Supervision of the Project:

If such provision is kept in the sanction contracts the bank officials go the project area and observe how loan is utilized. Of no such close to supervise the loan is added, even the bank can see the performance of the project.

4.8 Loan Recovery

In general the loans are repaid in installment. Some loans are repaid all at a time. If any loan is not repaid in usual cause to action legal procedure is following to recover the money.

4.9 Documentation of the loan

These are the most common documents for creation of above mentioned charges and for other formalities of sanctioning loan.

1. Demand promissory note: Here, the borrower promises to pay the loan as and when demand by bank to repay the loan.
2. Letter of arrangement.
3. Letter of continuity.
4. Letter of hypothecation of goods and capital machinery.
5. Stock Report: This report is used for CD and CC. In this report, information about the quality and quantity of goods hypothecated furnished.
6. Memorandum of deposit to title of property duly signed by the owners of the property with resolution of Board of Directors of the company owning the landed property.
7. Personal guarantee of the owners of the property.
8. Guarantee of the all directors of the company.
9. Resolution of the board of director to borrow fund to execute documents and completes other formalities.
10. Letter of Disclaimer: By this letter, the borrower withdraws his all claim on the claim of the property/ goods lined/ mortgaged.
11. Form no. 18/19 for filling charges with the register of joint stock companies under relevant section.
12. Tax paying certificate.
13. Letter of installment.

4.10 Advances

The total advances amounted to TK. million, including bills discounted and purchased as on 31.10.99. Continued emphasis on quality assets resulted in more than hundred percent increases in assets base for the bank, trade-related and working capital financing were the principal areas where lending activities were concentrated.

Forms of Advance

Bank generally offers different kinds of credit facilities to their customer. They are in different forms with different categories. The credit facilities may be broadly classified into four categories. They are as follows:

Loans:

In case of loan, the banker advances a lump sum for a certain period at an agreed rate of interest. The entire amount is paid an occasion either in cash or by credit in this current account, which he can draw at any time. The interest is charged for the full amount sanctioned whether he withdraws the money from his account of not. The loan may be repaid in installments or at expire of a certain period. Loan may be demand loan or a term loan. Advance made in a lump sum repayment either on fixed installment basis or in lump sum on subsequent debit except by way of interest, incidental charge, etc. is called a loan. After creation of loan there will be only repayment by borrower. The loan may be repaid in installment or at expire of a certain period. Loans are normally allowed to those parties who have either fixed source of income who desire to pay it in lump sum. Banks gives different types of loan to his party.

The different types of loan that banks give to his party are as following:

i. Industrial loan

ii. Transport loan

iii. House building loan

iv. Staff house building loan

v. Loan against trust receipt

vi. Staff loan against PF (Provident Fund)

vii. Cash credit

viii. LIM (Loan against Imported Merchandise)

ix. Loan general/Demand loan

Before give loan credit department has to do certain functions. First they have to send CIB to Bangladesh Bank, Lending Risk Analysis, and Issuance of Bank Guarantee after completion of these jobs if the result is positive than officer can sanction loan. Every Bank has to send a quarterly CIB Report to the Bangladesh Bank for amounts due up to TK.50, 000/- mentioning the name of the borrower and the purpose for which loan has been sanctioned and a monthly statement for the amount due more 1 core Taka. Bangladesh Bank provides CF (Classification Form) to every bank for preparing this report. The procedure for loan classification is given by Bangladesh Bank under BRPD circular no 16, dated 06/12/1998.

Cash Credit (CC)

Cash credit is the favorite mode of borrowing by traders, industrialist etc. for meeting their working capital. Cash credit is a kind of continuous overdraft. For cash credit facilities Banks allow a limit for his customer. Cash credit facility is given for one year. In banking system cash credit is given for two purposes. The purposes are as following:

· Working capital

· Trading purpose

It is a favorite mode of advance for the customer. For cash credit facility bank allow a limit for his customer. The customer can make continuous transaction with in that limit. CC is given for one year. After one year the customer can renew his CC facility.

Interest

For CC facility interest is counted daily basis. That means customer has to only that amount of interest which is outstanding in his CC account. Interest is cut off from customer current in term wise.

Mode of security

For CC, banks take two type of security. These are as following:

· Pledge

· Hypothecation

In branch level bank cannot give more then 30 lac taka to his customer. But if bank want give more then 30 lacs. The branch has to get approval from head office of the bank.

For giving CC, bank takes following charge document:

1. DP note

2. Letter of arrangement

3. Letter of continuity

4. Letter of hypothecation of goods

5. Stock of goods report

6. Personal guarantee of all the director of the company

7. Deed on additional charge on the fixed assets of the company

8. Form for filling charge with register of joint stock companies

9. Resolution of board of directors

10. Insurance policy for stock

In CC facility bank only allow 50% credit facility of the stock that the customer has been pledge or -hypothecation. Bank gives CC only for one year. After one year customer has to renewal it.

Bills purchases and discounted

Banks grant advances to their customers by discounting bill of exchange or pro-note.

Overdraft

Overdraft is that advance which is allowed on current account operated upon by check. The customer may be sanctioned a certain limit within which he can overdraw his current A/C within a certain period The customer can withdrawals or deposits any numbers of within his limit. Interest is calculated and charged only on the actual debit balances on daily product basis. Overdraft facility is generally given to businessman for expansion of their business.

Bank gives overdraft in following two ways:

· SOD (secured overdraft)

· Cash credit

Secured Overdraft (SOD)

Secured overdraft is a continuous credit facility to the customer of the bank. This kind of credit facility is given on following security:

· Various kind of Sanchay Patras

· Government security

· FDR (fixed deposit receipts)

· Shares

· Work order

If any customer wants to get SOD facility from the Bank, he has to submit an application to the Bank manager It must be done in prescribed form of the bank. In this has to submit details about his business. After getting application form bank made an office note. In this note bank officer write down the following things:

· Nature of limit

· Extent of limit

· Security

· Margin

· Rate of interest rate

· Validity

Then the Bank Authority marks the security as a lien in their register. For getting any credit facility from the Bank the customer must have a current account in that bank branch. Bank can give up to 80% credit facility of the security like FDR, BSB, PSS, unit certificate.

SOD limit for FDR, BSB, PSS, unit certificate:

· Two corer from branch label

· Above from head office

SOD limit for different kinds share:

· 20 lac from branch label

· If it is more then 20 lac, the branch has to take approved from head office

For share bank can sanction 70% credit facility for “A” grade share and 60% for “B” grade share. In case of SOD on share the last six months average value or present value, which one is higher, is considered.

Security against Advances

The different types of securities that offered to a banker are as follows:

1. Immovable Property
2. Movable Property.

Such As

1. Pratiraksha Sanchay Patra, Bangladesh Sanchay Patra, ICB unit certificates, wage earner development bond.

2. Fixed deposit receipt.

3. Shares quoted in the Dhaka Stock Exchange and Chittagong Stock Exchange.

4. Pledge of Goods, produce.

5. Hypothecation of goods, produce and machinery.

6. Fixed assets of manufacturing unit.

7. Shipping documents.

Modes of Charging Security:

A wide range of securities is offered by banks to cover for loan, in case of borrower’s inability to repay, the banker can full upon the securities. In order to make the securities available to the banker, in case of default by customer, a charge should be created on the security. Creating charge means marketing in available a cover for advance. The following modes of charging securities are applied in IFIC Bank.

1. Lien

A lien is right of banker to hold the debtor’s property until the debt is discharged, bank generally retain the assets in his own custody but sometimes this goods is in the hand of third party with lien marked. When it is in the hand of third party, the third party cannot discharge it without the permission of bank. Lien gives banker the right to retain the property not the right to sell. For sell, permission from the appropriate court is necessary. Lien can be made on movable goods only such as raw materials finished goods, shares, debentures etc.

2. Pledge

Pledge is also like li