“General Banking System of Dutch Bangla Bank Ltd.”
1.2 Objectives of the Study:
The broad objective of the research is to know about banking services provided for International Business through Dutch-Bangla Bank Limited, Dhanmondi branch.
Objectives regarding this study are as follows:
- To fulfill academic requirement.
- To assess the performance of DBBL overall banking activities in both absolute and relative term in a comparative manner.
- To analyze the status of different parameters of DBBL overall banking activities dealings which contribute to the economy of this country.
- To gain practical knowledge in banking.
- To identify major strength and weakness of DBBL in respect to other Banks.
- To assess and evaluate the growth trends on DBBL among other Banks.
- To recommend ways and means to solve problems regarding banking.
The scope of this report is very limited to the Dutch Bangla Bank Ltd., Dhanmondi Branch only. To the investigation, observance and practices the activities of DBB, Dhanmondi Branch during my internship period and to go through some documents and reports.
The information used to prepare this report has been collected from practical desk work, face to face conversation with officers, direct observation, face to face conservation with clients and annual report of DBBL, various publications on Bank also from website, sent by Head Office and Bangladesh Bank.
1.5 Limitations of the Report:
There were some problems while I have undergone the internship program. A wholehearted effort was applied to conduct the internship program and to bring a reliable and fruitful result. In spite of having the wholehearted effort, there exits some limitations, which acted as barrier. The limitations were:
- The study was limited only to the Dutch Bangla Bank Limited, Dhanmondi Branch.
- Another problem was time constraint. The duration of my internship program was only three months. But this time is not enough for a complete and fruitful study.
- The Bank was a busy one having heavy rush of people, whom officers needed to deal with. So allocation of time for an internee is very much hard for the officers of the bank.
- Confidentiality of Data.
2. Banking Sector in Bangladesh
2.1 Historical Background of Banking:
Banks and other financial institutions play a vital role in fostering the economic and social condition of a country. They help to develop a conducive climate for capital formation through three stages such as savings, financing and investment and the role of banks is instrumental in all these stages. Banks in Bangladesh now constitute the core of the country’s organized financial system. They mobilize the savings of people and channel the resources towards different sector of the economy.
The objectives of this paper are to trace the following:
- How banks evolved over periods,
- What were the factors that shaped the modes of credit and other services,
- How was the policy framework evolved and
- Who looks after control and regulations of banking institutions.
In order to fulfill the objectives, basically historical method of research has been applied. The available book. research works, articles, publications of Bangladesh Bank were reviewed. The required items of information were developed, searched, noted from sources without bias and organized into an appropriate order.
2.2 Banking in Ancient and British Period:
Banking in India is traceable in ancient Vedic era. Ancient bankers performed the functions such as accepting deposit, granting loan against security, acting as bailee to customers or as treasurers and bankers to the state and managing the currency of the country also they used loan deeds. During Buddhist period, Brahmins and Kshatriyas entered the banking business. The concept of Hundis or indigenous bills of exchange came in use (Ahmad 1992.25).
During Mughal rule, indigenous banks granted loans for both domestic and foreign trade, assisted the state, issued metallic coin, and acted as moneychanger, revenue influence and power. They financed trade, performed treasury functions and were trusted custodians of deposits (Ahmad 1992:27). However, the Jagath Seth did not provide banking services.
The tradition and culture of the Bengalis reflect their conscious of money and assets. They have been exposed to the principles of cash transaction, savings, investment, credit, interest, and several kinds of mortgages since Indian classical civilization. By the third century BC, Mauryan urban economy extended up to Mahasthan (Bogra), where its silver coins have been found (Maloney and Ahmed, 1988:1).
In seventeenth century, the English traders and the East India Company utilized indigenous bankers for borowings and collection of land revenue. But the business and power of indigenous bankers declined due to the emergence of the English Agency Houses (in Calcutta and Bombay) which began banking business in addition to their commercial business. Other causes of decline of the indigenous bankers can be attributed to the break up of the Mughal Empire and establishment of uniform currency throughout the country in 1835. Also changes in trade routes and trade relations with other countries due to development of railways, steamships, post and telegraph etc. badly affected the indigenous bankers. Indigenous bankers lost their business in urban areas and the European bankers captured the urban banking. Then, indigenous bankers existed in rural areas by concentrating on banking services to agricultural and internal trade. The Agency Houses were bankers of the East India Company and the European merchants in India. The Agency Houses financed the crops trade, issued paper money and paved the way for the establishment of joint stock banks (Ahmad 1992:28).
Commercial banks in Bangladesh’s territory have been functioning for the last two centuries. “The Bank of Hindustan” was the first modern bank formed in 1770 by an English Agency House in Calcutta but was wound up in 1832 (Guru Datta 1987:5 in Abrol, (1987); Ahmad 1992:30). The Bengal Bank and the General Bank of India were established in about 1785 chartered by the East India Company (Ahmad 1932:30). In the first quarter of the nineteenth century, the state aided bank facilitated government borrowing and helped the trading class. In the year 1806 the first presidency bank, the Bank of Bengal, was established, followed by the Bank of Bombay (1840) and the Bank of Madras (1843). The East India Company and European private shareholders mostly owned these banks. The presidency banks had the monopoly of government banking and the issue of notes. In 1876, the Presidency Banks Act was passed and government had withdrawn its capital. The government’s balances were kept in three reserve treasuries. The policy of the Presidency Banks Act was to safeguard the interest of the government and also it imposed restriction on all three banks to carry out the business of banking only (Ahmad 1992:30). In that period, the English agencies established mostly the joint stock banks. After 1813, several joint stock banks were established by the British settlers in India but most of them could not stay long as they failed to confine to banking business only (Ahmad 1992:31). Between 1861 and 1865 there was a mushroom growth of banking companies. Under the Indian management, the Oudh Commercial Bank was first formed in 1880 followed by the Punjab National Bank and the Alliance Bank of Simla [Srinivasaraghavan, 1955:567). The three presidency banks and Indian joint stock banks were established by the acts of Indian legislature. In 1860, the principal of limited liability was first applied to the banks (Ahmad 1992:30).
The failure of Indian banks (upto 1935) was mostly because they indulged in other activities. Such as large sums of money were locked up in speculative businesses, the banks had provided long-term finance to businesses without efficient investigation into their surroungings, for getting the chance of earning large profits and also short term deposits were invested for this purpose. Many of the directors and managers of these banks were incapable and dishonest. Loans to directors and concerns in which they were interested were unrestricted (Ahmad 1992:32).
The political stimulus of the “Swadeshi Movement” in the early twentieth century inspired the opening of important joint stock banks. (such as Bank of India, the Cenara Bank of Baroda) Srinivasaraghavan, 1985:568; Ahmad 1992:31). In order to face the competition of foreign banks, the three presidency banks were amalgamated and the Imperial Bank of India was formed in 1920 (Ahmed 1992:31).The Imperial Bank of India Act was passed in 1920. Before the establishment of RBI, commercial banks were regulated by different acts. The establishment of RBI was the first organized initiative to bring banking and monetary system of the sub-continent in a disciplined way.
After 1942, circumstantial forces changed the traditional pattern of banking policy in India. The subcontinent experienced a tremendous inflow of money due to expenditure in war and post-war reconstruction (Ismail in Uzair 1967:42]. The British rulers pursued a policy package that had two characteristics:
(i) The exploitative relation between the United Kingdom and India and
(ii) The dominance of the British over the Indians.
The maintenance of imperial systems received the highest priority. The philosophy and socio-economic intent of the British rules concentrated mostly on administration for laws and regulations for protecting the imperial interest. The government monopoly was retained in the sphere of post, telegraph and telecommunication. The banking and insurance etc. were encouraged for private enterprises (Ahmad 1987:68). The foreign exchange banks, which were fifteen in number, were not under the control of the Indian government.
2.3 Banking during Pakistan Period:
In Bengal, the rural informal credit was part of the social, economic and trade culture. Traditional Mahajans were goldsmiths, and Hindu businessmen, especially “Baniyas” who acted as moneylender since long. But, many had left for other areas of India and their place in money lending was taken by Muslim landowners (Maloney and Ahmed, 1988:49).
The areas that fall within the boundaries of Pakistan had been fairly well provided with commercial banking facilities during the pre-1947 period. In March 1947, the number of Indian scheduled bank offices in undivided India was 3,496, of which 631 were in Pakistan. Of the total number of bank offices, 487 (77%) were in the West Pakistan and 144 (33%) were in the East Pakistan. Small and mostly non-scheduled banks mainly provided banking facilities in the then East Pakistan.
After the announcement of independence of Pakistan in August 1947, the banking services in Pakistan were seriously hampered and the number of banks declined to 38 with 195 bank offices. Many funds and accounts were transferred to India. Most of the bank offices, which belonged to India, had closed their business. This resulted in a sharp curtailment of banking business in Pakistan, which had only two banks owned by Pakistani nationals. In East Pakistan, number of bank offices remained unchanged but banking functions reduced sharply due to the fact that non-Muslims had withdrawn all their deposits and went to India. In June 1948, of the 195 bank offices that remained in Pakistan, 81 were in the West Pakistan and 114 were in East Pakistan (Srinivasaraghavan, 1955:569). At that time, Pakistan’s banking system consisted primarily of non-Indian foreign banks. The Australia Bank had been functioning in Pakistan prior to June 1947. Nineteen non-Indian foreign bank offices and a number of Indian banks were in limited operation. Prior to June 1947, only one Muslim-managed schedule bank, Bank of Bahawalpur Limited, was functioning in the Pakistani territory. The Habib Bank Limited, established in 1941, had transferred its head office to Karachi after partition (Andrus and Mohammed, 1966:105). The number of Pakistani banks on the 30th June, 1948 was 4 with 23 branches (Banking Statistics of Pakistan, 1960-61, 1964-65).
2.4 Banking in Bangladesh:
Since early British rule, the history of banking in Bangladesh territory shows that the traditional trade-networks developed before the banks invaded rural areas. And the banking services have slowly flourished in Bangladesh territory. Even today, in many places, moneylenders provide credit services. Small shopkeepers and businessmen use informal credit at high interest rate (Maloney and Ahmed, 1988: 54). Traditional Mahajans’ money lending business gradually declined due to expansion of banks and the micro credit programs of NGOs, cooperative banks and government agencies.
2.4.1 Public Sector Banks:
During the liberation war in 1971, the economic, political, and social system including the banking system were severally damaged at that time, all high and medium financial institutions except two small banks had their head office in the West Pakistan. The non-Bengali owners and managers of the financial establishments that operated in East Pakistan had abandoned them. After independence in 1971, the now government had to take over management and ownership of all such institutions. The Baths Nationalization Order 1972 was issued to nationalize banks and financial institutions (except those incorporated abroad) in order to control chaos in the field of ownership party, bureaucracy, the intelligentsia and pressure group. By several orders six nationalized commercial banks (NCBs), one industrial bank (BSB), one agricultural bank (BKB), and one industrial development financial institution (BSRS) were created. The banks and financial institutions, which originated during the Pakistan period and were merged, renamed and continued their functioning after independence of Bangladesh have teen presented in Table-3. The banks were consolidated and nationalized. The nationalized banks and foreign banks constituted the total banking system of Bangladesh. Investment Corporation of Bangladesh was established in 1976. Grameen Bank, a specialized bank for the poor but not under control of the Central Bank, was established in 1983. In the year 1983, the government allowed private sectors to participate in the business.
The Pubali Bank and the Uttara Bank were denationalized in January 1985 due to non-profitability. This action reduced the number of NCBs to four. The nationalized banks continue to receive refinancing and other subsidies in order to fill credit demand and government desires. Rupali Bank was converted into a public limited company on 14th December, 1986. Rajshahi Krishi Unnayan Bank was established in 1987 through a bifurcation of the offices of Bangladesh Krishi Bank of Rajshahi division. Bank of Small Industries and Commerce Bangladesh Ltd. was established in 1993. This was made with the intention of reversing the urban monopoly of banking and the flow of capital from rural to urban areas. Such restructuring of public sector banks was in order to attain economic growth and policies were formulated for scheduled banks to play their role in industry, agriculture, export, self-employment etc. As a result there has been an advancement in the public sector banks in terms of increase in the number of branches, deposit mobilization,and advances to the society (Table-4). There are nine public sector banks, of which four are nationalized commercial banks and five are specialized banks.
2.4.2 Private Commercial Banks:
Taking advantage of the liberalization policy of the government regarding participaiton of private sectors in the banking business, a number of private sector banks was established in and after 1983. With the emergence of private banks in Bangladesh, a competitive situation in the sector has been created. There are twenty seven private banks in Bangladesh. They are: The City Bank (1983), International Finance Investment and Commerce Bank (1983), Arab Bangladesh Bank (1986), Al-Baraka Bank Bangladesh (1995), South East Bank (1995) Dhaka Bank (1996), Dutch Bangla Bank (1996), Al-Arafa Islami Bank (1996), Social Investment Bank (1996), Mercantile Bank, Standard Bank, One Bank, EXIM Bank, Bangladesh Commerce Bank, Mutual Trust Bank, Premier Bank, The First Security Bank, Bank Asia and The Trust Bank. The emergence of private banks has added a new dimension to the banking system in Bangladesh. The private commercial banks show a steady growth in terms of number of branches, deposits, and advances (Table-5).
2.4.3 Foreign Banks:
The State Bank of India opened one branch during July-September in 1975. In 1975, the four foreign banks operating in Bangladesh were:
- American Express International Banking Corporation
- Grindlays Bank
- The Chartered Bank and
- State Bank of India.
Now, there are thirteen foreign banks – American Express Bank, ANZ Grindlays Bank, Standard Chartered Bank, State Bank of India, Habib Bank, Citibank N.A., Credit Agricole Indousez, National Bank of Pakistan, Muslim Commercial Bank, The Bank of Nova Scotia, Hanil Bank, Hongkong and Shanghai Banking Corporation, Faysal Islamic Bank of Bahrain E.C. The foreign banks show a steady growth in terms of number of branches, deposits, and advances.
2.4.4 Cooperative Banks:
Cooperative banks are indigenous banks in model and function. They are organized in three tiers and their form of functioning is unit banking. The then British government promulgated cooperative rules in 1904 and 1912 to shape the organization. In 1947 the then East Pakistan had twenty-six thousand cooperatives, which collapsed after partition. The traditional cooperatives in Bangal were mostly organized by savings and credit societies. In 1948, Union Multipurpose Cooperative Societies (UMPCSs) were formed with government patronage but were mostly dissolved due to malfunctioning. The cooperative financing and (Maloney Ahmed, 1988: 115-6) The Land Mortgage Banks have been operating in India since 1929. They supplied long-term and medium term loans to their members on the mortgage of land for agricultural purpose. They also performed banking functions of deposit mobilization, supply of credit and provision of remittance facilities.
2.5 Factors Affecting Change in Banking System:
After independence, Bangladesh Bank had taken measures such as credit expansion, branch expansion, deposit mobilization, advances to priority sectors through the banks. (Chowdhury, 1973:1). Immediately after independence, to recover and reconstruct the war affected economy, Bangladesh signed several trade agreements with different countries, donor agencies, and international banks for inflow of capital in the form of aid, grant, loan, etc. The Government and the Bangladesh Bank implemented several loan schemes for economic development and the government continuously adopted deficit budget and followed foreign aid financed development strategy. All these contributed to the growth of banks in Bangladesh (Sobhan and Islam, 1988, 182; Hossain, 1988: 211; Hashemi, 1988: 213; Bhattacharya, 1988:233: Ahmad, 1988:309). The main factors which shaped the nature of development of the banking system in Bangladesh are:
- Nationalization of banks in 1972.
- Inflow of capital under trade agreement to reconstruct the war affected economy.
- Bangladesh Bank’s policy measures for the growth of disciplined banking system and services to the deposit mobilization and loans to priority sectors.
- De-nationalization and permission to open new private banks.
- Gradual growth in foreign trade.
- Inflow of capital from the World Bank, Asian Development Bank, Islamic Development Bank, and other organizations and agencies.
- Wage earners’ remittances.
Some Important Modern Bank Some Important Ancient Bank
|Sonali Bank||Shansi Bank
Bank of Venice
Bank of Saint George
Bank of Barcelona
Riksbank of Sweden
Bank of England
Bank of Prussia
The Hindustan Bank
Central Bank of India
Bank of France
Bank of Calcutta
Bank of Bombay
Bank of Madras
Bank of Japan
Federal Reserve System
Imperial Bank of India
Reserve Bank of India
Habib Bank Ltd.
State Bank of Pakistan
The National Bank of Pakistan
Eastern Mercantile Bank
3. Organizational Overview
Dutch-Bangla Bank is a second generation commercial private Bank. During the period of its operation, this bank created a milestone of success in banking sector. This bank holds an experienced team of banking professionals. They achieved this success because of their experienced banking professional team, proper management & so on.
Dutch-Bangla Bank Limited is a Bangladesh–Netherlands joint venture scheduled commercial bank established in Bangladesh with the primary objective to carry on all kinds of banking business in and outside of Bangladesh.
Starting with one Branch in 1996, DBBL has expanded to one sixty four (164) branches including nine Branches outside of the capital. To provide client services all over Bangladesh it has established a wide correspondent banking relationship with a number of local banks. To facilitate international trade transactions, it has arranged correspondent relationship with large number of international banks which are active across the globe.
In addition to its banking activities, Dutch-Bangla Bank Limited takes part in different national activities promoting sports, culture, social awareness, etc. Participation in these activities as sponsors is part of its business development policy.
3.2 Philosophical Standing of DBBL:
The objectives of Dutch-Bangla Bank Limited remain to offer modern & innovative products & services to its clients in Bangladesh. The partnership with FMO is optimistically seen to offer scopes and opportunities to draw on modern tools & techniques of Banking from western world which could be blended with the currently prevalent local customs & practice. The Bank is committed to being a sophisticated, prominent and professional institution, providing a one window service to its customers. During the first five years, Dutch-Bangla Bank’s strategy was focused on continuing in provident of internal procedures and operating structures, to have a greater control on the quality of our business and to provide better management direction. After five years of working on the Banks structure, its culture and controls, the management is confident that the Bank can move forward on a rapid growth path. The DBBL’s corporate philosophy is to build its non-funded fees and commission income stream, thus reducing its reliance on interest income alone.
3.3 Core Objective of DBBL:
Dutch-Bangla Bank believes in its uncompromising commitment to fulfill its customer needs and satisfaction and to become their first choice in banking. Taking cue from its pool esteemed clientele, Dutch-Bangla Bank intends to pave the way for a new era in banking that upholds and epitomizes its slogan “Your Trusted Partner”.
3.4 Focus of DBBL:
DBBL’s focus is to provide one counter service to our clients covering:
- Commercial Banking (Deposit Accounts)
- Consumer Banking (Retail Baking):
(i) Traveler Cheques
(ii) Foreign & Inland Remittances
- Financial Services
- Corporate Banking
- Asset & Liability Management
- Liquidity & Capital Resources Management
- Information technology
- Human Resources
3. 5 Mission of DBBL:
Each business unit needs to define its specific mission within the broader company mission. Dutch-Bangla Bank engineers enterprise and creativity in business and industry with a commitment to social responsibility. “Profits alone” do not hold a central focus in the Bank’s operation; because “Man does not live by bread and butter alone”. Mission statements are at their best when they are guided by a vision.
3. 6 Tactics of DBBL:
- To manage and operate the Bank in the most efficient manner to enhance financial performance and to control cost of fund.
- To strive for customer satisfaction through quality control and delivery of timely services.
- To identify customers’ credit and other banking needs and monitor their perception towards our performance in meeting those requirements.
- To review and update policies, procedures and practices to enhance the ability to extend better service to customers.
- To train and develop all employees and provide them adequate resources so that customers’ need can be reasonably addressed.
- To promote organizational effectiveness by openly communicating company plans, policies, practices and procedures to employees in a timely fashion.
- To diversify portfolio both in the retail and wholesale market.
- To increase direct contact with customers in order to cultivate a closer relationship between the bank and its customers.
3.7 Aim of DBBL:
- To establish relationship banking and improve service quality through development of Strategic Marketing Plans.
- To remain one of the best banks in Bangladesh in terms of profitability and assets quality.
- To introduce fully automated systems through integration of information technology.
- To ensure an adequate rate of return on investment.
3.8 Organizational (General) Hierarchy of DBBL:
Flow chart-3.8 Organizational (General) Hierarchy
3.9 Services and Products:
3.9.1 Products and Services offered by DBBL:
- Remittanceand collection
- Importandexport handlingand financing
- Corporate Banking
- Project Finance
- Investment Banking
- Consumer credit
- Agriculture Loan
- Real time any branch banking
- 24 Hours Banking through ATM
- DBBL-NEXUS Debit car
- DBBL-Maestro/Cirrus Debit card
- DBBL Credit card
- Internet Banking
- SMS Banking
- On line Banking through all Branches
- Retail Banking
3.10 Banking Products:
3.10.1 Various Deposits:
- Savings Deposit Account
- Current Deposit Account
- Short Term Deposit Account
- Resident Foreign Currency Deposit
- Foreign Currency Deposit
- Convertible Taka Account
- Non-Convertible Taka Account
- Exporter’s FC Deposit (FBPAR)
3.10.2 Loan & Advances:
- Lease Finance
- Other Term Loan
- FMO Local Currency Loan for SME
- FMO Foreign Currency Loan
- Cash Credit (Hypothecation)
- Small Shop Financing Scheme
We can find DBBL ATMs beside our home, in our office premise, nearby market, university, college & school premises, airport, railway stations etc., throughout the country.
3.10.3 ATM Services:
Using any of the DBBL ATM pools any where in the country, you can perform the following:
- Account balance enquiry
- Cash withdrawal 24 hours a day, 7 days a week, 365 days a year
- Cash deposit to a certain number of ATMs any time
- Mini statement printing
- PIN (Personal Identification Number) change
- All the ATMs can accept DBBL-NEXUS ATM / POS card, DBBL
- Maestro/Cirrus Debit card and DBBL Credit card.
Table 3.10.3: ATMs of DBBL
|ATM||NEXUS Debit card||All a/c Holders||Yes|
|ATM||Maestro Debit card||All a/c Holders||Yes|
|ATM||Maestro Debit card||All a/c Holders||Yes|
|ATM||DBBL Credit (OD) card||Limited||Yes|
|Internet Banking||All a/c Holders||Yes|
|SMS Banking||All a/c Holders||Yes|
3.10.4 Account Service:
DBBL provides all the accounts services as prescribed by the guidelines of Central Bank (Bangladesh Bank). We offer competitive interest rate and provide premium quality services for the accounts. Account services are:
- Foreign Currency Account
- Non-Resident Foreign Currency Deposit Account (NFCD)
- Resident Foreign Currency Deposit Account (RFCD)
- Convertible and Non-Convertible Taka Account
3.10.5 DBBL Internet Banking:
DBBL Internet banking enables customer to access his/her personal or business accounts anytime anywhere from home, office or when traveling. Internet Banking gives customer the freedom to choose his/her own banking hours. It can save time, money and effort. It’s fast, easy, secure and best of all.
Using any of the DBBL ATM booths any where in the country, its customers can perform the following:
- Securities with DBBL Internet Banking
- A/C Opening & Accessing Internet Banking
- Internet Banking Features
- Terms & Conditions of Internet Banking
4. General Banking Activities
General Banking department is the “Heart” of all banking activities. General Banking department performs the core functions of Bank, operates the day-to-day transactions. General banking is the starting point of all banking operations. General banking is the front-side banking service department. It provides those customers who come frequently and those customers who come one time for enjoying banking ancillary services. In some general banking activities, there is no relation between banker and customers who will take only one service from bank. Since bank is confined to provide the services everyday, general banking is also known as ‘retail banking’
4.2 Functions of GB Department:
General Banking department generally deals with the following section:
- Front Desk
- Clearing Section
- Accounts and ATM Section
- Clearing Section
- Account Opening
- Transfer of Account
- Closing Account
4.2.1 Front Desk:
Front desk of DBBL, Dhanmondi Branch is one of the important parts of general banking department. The works and procedures of conducting those are given bellow:
(a) Types of Account:
The relationship between banker and customer begins with the opening of an account by the customer. Opening an account binds the customer into contractual relationship. Infact all kinds of fraud & forgery start by opening an account. So, the bank should take extreme caution in selection customers.
Under this section, DBBL Bank Assistant Officer opens different types of account on the request of clients. Such as:
- Current Deposit (CD)
- Saving Deposit (SB)
- Other type
(i) Current Account:
A current deposit account may be operated in several times during a working day. There is no restriction on the number and the amount of withdrawals from a current account and banker does not allow any interest on this account DBBL Banks normally prefer current account due to its cost free nature.
(ii) Savings account:
A saving account is meant for the person of the lower and the middle classes who wishes to save a part of their income to meet their future needs and intend to earn an income from their savings .This is an interest bearing account and a reasonable rate of interest is offered, which is higher than that of short term deposit account but lower than that of fixed deposit account.
(iii) Other type account:
- For Joint Stock companies, Association, Clubs etc: In case of opening a current account of joint stock companies, association, clubs etc, are said to fulfill true copies of certificate of incorporation or registration (in case of companies and registered bodies only).
- For Partnership / Proprietorship Company:To open a current a/c on the name of any partnership or company, the following documents are required to fill up application from stating about the name and address of the firm.
We can get an idea by observing this chart.
(b) Bank activity:
After selecting the type of account, customer needs to fill up a form which is known as account opening form. After filling up the account opening form by customer, the assistant officer does the following job:
- Verify all information
- Entry all customer information into DBBL’s online server
- After completion of entry, assistant officer sends it to Second officer/Manager for authorization.
- If Second officer/Manager is satisfied with customer information, he gives authorization. Assistant officer gets new account number for certain customer after authorization.
4.2.2 Procedure of Opening Account:
The procedure of opening account is given below:
|Step1||Receiving filled up application and signed by account holder in bank’s prescribed form mentioning what type of account is desired to be opened.|
|Step2||# The form is filled up by the applicant himself / herself.
# Two copies of passport size photographs from individual are taken. In case of firms, photographs of all partners are taken.(attested by the introducer).
#Applicants must submit citizenship certificates: Photocopy of valid passport or ward commissioner certificate
# Application must sign in A/c opening form and KYC (Know Your Customer) form.
# Introducer’s signature and accounts number – verified by legal officer.
# Nominee name, signature and photograph one copy.
|Step3||Authorized Officer accepts the application|
|Step 4||Minimum balance is deposited – only cash is accepted|
|Step 5||Account is opened and a pay-in-slip book is given.|
After fulfilling the above formalities, DBBL Bank provides the customer pay-in-slip book through which they deposit their initial deposit.
(a) Cheque book issuing:
There are tw0 different procedures of issuing cheque book for savings account holders and current account holders. For savings account holders officer needs to send online request for cheque book. It takes three working days to prepare their cheque books. After two working days the clients have to collect their cheque books from front desk..
(b) Account related activities:
In general banking bankers maintain some other activities such as:
- Scanning photo and signature of new account holder and linked with server.
- Proper preservation of respective files.
- Change of account holder’s address (application from customer).
- Change of Board resolution of several limited company accounts.
- Issuing of thanks letter to A/C holders & introducers etc.
(c) Account Balance inquiry:
Customers can inquiry about their account balance or any transaction within the banking hour.
(d) Transfer of an A/C:
Account holder may transfer his account from one branch to another branch. For this he/she must apply to the manager of the branch where he is maintaining account. Then manager sends a request letter to the manager of the branch where the account holder wants to transfer his account. With his request he sends original copy of account opening application and specimen Signature Card and photocopy of application for transferring the account with the balance remained account. But now-a-days customers do not need to transfer their accounts from one branch to another branch. They can make transaction from any DBBL branch with truly on-line facility.
Bank is a financial intermediary, which mobilizes fund from surplus unit and allocates it to deficit unit. Surplus unit means the people who have surplus money and willingness to save. Deficit unit means the people who need money for industry, trade, business or for personal use but don’t have sufficient money of their own for such purposes. Bank mobilizes the fund by accepting deposits from depositors and allocates the fund by providing loan to borrower. Therefore, accepting deposits is one of the two classic functions of commercial banks.
Deposit Services of DBBL:
(i) Current Deposit Account:
Current deposit accounts are unproductive in nature as per bank’s loanable fund is concerned. Sufficient fund has to be kept in liquid form, as current deposits are demand liability. Businessmen and companies are the main customers of this product. Thus huge portion of this fund become non-performing. For this reason banks do not pay any interest to CD account holders. There is no restriction on the number and the amount of withdrawals from a current account. Service charge and incidental charges are recovered from the depositors since the bank makes payments and collects the bills, drafts, cheques for any number of times daily. The Banks through current accounts grant the loans and advances in practice of DBBL, a minimum balance of TK.5000 has to be maintained.
(ii) Savings Deposit Account:
As per Bangladesh Bank’s instruction 90% of savings deposit accounts are treated as time liability and 10% of it as demand liability. Interest is paid on this account. DBBL offers a reasonable rate of interest (5.00%) for SB A/C on day basis. Generally, banks require a 7-day prior notice if the total amount of one or more withdrawals on any date exceeds 25% of the balance of the account unless it is given. But in DBBL there is no restriction about drawing money from savings account. Any time holders may withdraw money of any amount without prior notice. Generally householders, individuals and other small-scale savers are the clients of this account. Minimum Balance of Tk.500 is to be maintained. But initial deposit is Tk 2000.Very limited service charge (Tk.100 per year) as it is an interest bearing account. Govt. charge only 10% interest on income of the customer.
(iii) Short Term Deposit Account (STD):
Customers deposit money for a shorter period of time. STD account can be treated as semi-term deposit. STD should be kept for at least thirty days to get interest. The interest offered for STD is less than that of savings deposit. In practice, DBBL offers 5.00% rate of interest (half yearly compounding) for STD account. It may increase depending on the fund. Volume of STD A/C is generally high. In DBBL, various big companies, organizations, government departments keep money in STD accounts. Frequent withdrawal is discouraged and requires prior notice.
(iv) Local Remittance:
In banking language money transmitted domestically are known as local remittance. For local remittance purpose DBBL purchases and sells some instruments for its customers. The instruments are Pay Order (PO), Demand Draft (DD), Telegraphic Transfer (TT) and Mail Transfer (MT).
(a) Pay Order (PO):
Pay order is an instrument, which is used to remit money within a city through banking channel. The instruments are generally safe as most of them are crossed.
From the above accounting treatments it is clear that the money, which is received by the bank from selling the instrument, is kept under bills payable account. It is current liability on the part of bank, which implies that, money received in this purpose has to be paid to the payees collecting bank on placement of the instrument. But in the local banking arena DBBL offers 57.50 tk for issuing of Payment Order for everybody.
Types of PO:
Account payee only : Only can en-cash it by depositing it in his account.
Blank Crossed: Any one can en-cash it by depositing in their account.
Cash payment: P.O. can be paid in cash if buyer gives a letter of identification regarding payee.
Settlement of a PO:
When P.O is submitted by collecting bank through clearinghouse, the issuing bank gives payment. Thus bank’s liability is settled by debiting bills payable. But before giving payment it should be examined whether endorsement was given by the collecting bank or not. If not then the instrument is dishonored marking “Endorsement required”.
Cancellation of a PO:
If buyer wants to cancel the P.O. he has to give a letter of instruction in this regard. He will also have to return the instrument.
Collection of PO:
A customer of DBBL who is the payee of a P.O will deposit it for collection. The instrument is given to the clearing that will place it to the issuing bank in the clearinghouse. Before placement, DBBL as a collecting bank gives necessary endorsement.
Special Caution must be taken for the following customers:
|In the name of Individual||The client has to fill up an account opening form. Terms and conditions are printed on the back of the form. The form contains the declaration clause, special instructions etc.|
|In Joint Name||In this type, the formality is same as individual account, but in the special instruction clause, either ‘survivor’ or ‘former’ clause is marked.|
|Proprietorship||In addition, the customer has to submit the valid Trade License and Tax Paying Identification Number (TIN) along with the application.|
|Partnership Firm||. A copy of notarized partnership deed certified by all the partners or Registered partnership deed.
. Resolution of the partners regarding account opening.
. Photographs attested of those who will operate.
. Trade license.
. Mandate as to operation of the account.
|Public Limited Company||. Certificate of Incorporation.
. Copy of Memorandum and Articles of Association duly certified by the Register of Joint Stock Companies.
. Certificate of Commencement.
. Form XII and schedule X – duly certified by the Register of Joint Stock Companies.
.Copy of Resolution of the Board of Directors.
|Private Limited Company||. Certificate of Commencement is not necessary.
. Certificate of Incorporation.
. Copy of Memorandum and Articles of Association.
. Resolution of the Board of Directors.
4.3 Bill Collection and Clearing Section:
Customers do pay and receive bill from their counter party as a result of transaction. DBBL collects the bills on behalf of their customers. Collection mechanisms in DBBL are clearing, Outward Bills for Collection (OBC), Inward Bills for Collection (IBC).
When the bill is within the range of the clearinghouse it is sent for collection through clearing section. As far as safety is concerned customers get crossed cheque for the transaction. Crossed check can’t be encashed from the counter; rather it has to be collected through banking channel in clearing. If a client of DBBL received a check of another bank that is located within the clearing range and deposits the instrument in his account at DBBL, then DBBL will collect the money through clearing house. After receiving the check, DBBL will credit client account. However, the amount is credited in the customer a/c but he will not get the money until the check is honored.
4.3.2 Procedures for Collection:
- “Received” seal is stamped on the cheque.
- Crossing of the cheques are done.
- Proper endorsement is given.
- “Clearing” seal with date is given.
- Cheques are sorted bankwise and entries are given to the software NIKASH2 (Provided by Bangladesh Bank).
4.3.3 Functions in the Clearing House:
- The clearinghouse is an assembly of the locally operating scheduled banks for exchange of checks, drafts, and other demand instruments drawn on each other and received from their respective customers for collection.
- The house meets at the appointed hour on all working days under the chairmanship of the central bank. The clearinghouse sits twice in a working day.
- The members submit the claimable checks in the respective desks of the banks and vice-versa.
- Consequently, the debit and credit entries are given.
- At the end, the debit summation and the credit summation are calculated. Then the banks clear the balances through the check of Bangladesh Bank.
- The dishonored checks are sorted and returned with return memo.
- If the instruments are dishonored then they are sorted again and sent back to the returning house along with their return memo.
- Later on all the instruments of DBBL which were claimed by other banks are sorted and delivered to respective branches.
4.3.4 Accounts and ATM Section:
(i) ATM Card:
An account holder gets a NEXUS Debit card at free of cost after opening account. It takes usually three weeks to prepare the card and sends him by mail.
(ii) PIN mailer of ATM Card delivery:
After opening account an inactive ATM card is sent to customer within two or three weeks. Then account holder come to the branch with card and fill up the form for requesting activation of ATM card. A secret PIN number is delivered to the account holder. Concern officer verifies the signature and photo of account holder. ATM Card will be activated within one week and user can use it.
(iii) Term Deposits:
The fixed deposit account is repayable after the expiry of a predetermined period fixed by the customer himself. The period varies from three months to three years. The customer may open his /her account for different time periods, which may be for three months, six months, one year, two years and three years.
(a) General Characteristics:
- Popularly, it is known as Fixed Deposit Receipt (FDR). Term deposits are made with the bank for a fixed period of time.
- The bank needs not to maintain cash reserves against these deposits and therefore, the bank offers high rate of interest on such deposits.
- In DBBL, fixed deposit account is opened in customer choice time.
(b) Fixed Deposit:
Fixed deposit is one, which is repayable after the expiry of a predetermined period fixed by him. The period varies form 3 months to 1 year. These deposits are not repayable on demand but they are withdrawal subject to a period of notice. Hence, it is popularly known as ‘Time Deposit’ or ‘Time Liabilities”. Normally the money on a fixed deposit is not repayable before the expiry of a fixed period.
The depositor has to fill an application form. In case of a deposit in joint name, DBBL also takes the instructions regarding payment of money on maturity of the deposit. The banker also takes the specimen signatures of the depositors. Necessary entries are given on the FDR registerand online. An FDR is then issued to the depositor acknowledging receipt of the sum of money mentioned thereby. It also contains the rate of interest & the date on which the deposit will mature.
5. Loan and Advances
Making advances is the primary function of a bank. A major portion of its funds is used for this purpose and this is also the major source of bank’s income.
Loans are the right to receive payment or an obligation to make payment on demand or at some future time on account of the immediate transfer of goods (securities).
Loans are the largest asset items, which generally account for half to almost three-quarters of the total value of all bank assets. A bank’s loan account typically is broken down into several groups of similar type loans. The Loan and Advances made by the DBBL can broadly be classified by following categories:
- Continuous Loan
- Demand Loan
- Term Loan
- Other Special Scheme