Internship Report On BASIC Bank Ltd

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Internship Report On BASIC Bank Ltd


Introduction & Background of the study

1.1 Background

It has long been recognized that credit is an important tool in increasing productivity and thereby increasing the income of borrower. Adequate flow of credit can remove the financial constrains of the borrower. There has been phenomenal growth in the flow of credit after liberation due to governments desire to increase productivity in the country. All the credit institutions were geared up thorough a dynamic credit policy to disburse both short-term credit and long-term credit. As a result the flow of annual credit has increased significantly. As the volume of loan default increased substantially over the years, the percentage of loan default increased gradually. Although loan is one of the major assets of the banking sector, it becomes a liability when the loan is not repaid. Since the late 70s the whole banking sector of Bangladesh is being haunted by the specter of problem loans.

A great bulk of problem loans and their ever deepening thrust on Bank credit has brought a gloomy situation in the cost of fund. The impact of such loan in banking arena hinders the flourishing of banking business. Default culture has started in Bangladesh mainly after the nationalization o banks. However, it was enhanced by the availability of hue amount of credit in the name of developing private and industrial sector. From a statistic of Government it is seen that investment Board did not find may existence of 4422 industrial units amongst he sanctioned 7531 units during the years 1985 to 1990. There happened interesting events in the name of industrial credit. Valuation certificates were managed hundred times over the collateral security. Industry set-up was shown as sick industry to get additional loan and relieve from interest.

Despite various Acts, Ordinances as well as various circulars issued by Bangladesh Bank from time to time and special instructions by individual Banks, the striving for realization of such credits proved discouraging.

The Bank of Bangladesh Small industries and commerce (BASIC) Bank Limited, which was established to promote the development of Small-scale industries in Bangladesh, is also prone to such disappointing features of problem loans.

1.2 Origin of the Report

The report titled “Credit Management Policy”-A case study on BASIC Bank Ltd, is a partial requirement of the MBA Program. The internship program was carried out in Bangshal Branch of BASIC Bank Ltd, under the supervised by Mr. M.A.KASHEM, Deputy General Manager. During the internship, the student is required to prepare a report on the organization where he has been attached. He has also to undertake a management problem/ are of investigation of the organization for reporting.

Assigned by the guide teacher, this report is prepared as partial fulfillment of MBA requirement.

1.3 Objective of the Report

The principal intent of this report is to examine Credit Policy of BASIC Bank Ltd. In particular the objectives are as follows:

1. To have a glace at the commercial banking system in Bangladesh.

2. To examine the present banking system in Bangladesh.

3. To get acquainted with the loan structure, size, profile of sector wise outstanding position of loans and system of loan classification of BASIC.

4. To know the deposit behavior of NCBs, FCBs, PCBs and BASIC bank and to cross-examine any structural changes regarding deposit behavior.

5. To examine the credit operations by our commercial banking system.

6. To explain the procedures, systems of credit management and appraisal of BASIC Bank.

7. To find out the nature and size of problem loans in BASIC Bank.

8. To find out the causes of problem loans.

9. To analyze the effects of problem loan on income of BASIC bank Ltd.

10. To evaluate the various loans programs of BASIC bank which includes Industrial, Trade and Commerce, Transport etc.

11. To inspect the recovery of loans by BASIC Bank.

12. To examine whether the attributes of gook performance are observed in BASIC bank.

1.4 Scope

The report concerns about the credit policy in BASIC Bank. The study is made primarily only on the basis of the observation of BASIC’s operations in its Bangshal Branch.

1.5 Data sources

Primary sources of the data collections were direct observations, face-to-face i8nterview with both the customers and the staff, obtaining responses from the customers through questionnaire. A model of the questionnaire is including in the appendix. Secondary data is collected from Annual Report, Booklets and credit manual of BASIC Bank Limited and a report titled “Credit Policy” in study Bangladesh Small Industries and Commerce Bank Ltd- by Dr. Jamal uddin Ahmed.

1.6 Limitations

· The study is done on the basis of survey in the Bangshal Branch.

· Lack of adequate time to complete the report successfully.

· Unavailability of relevant data and information.

1.7 Methodology

To prepare the report following methodology is adopted:

a. Collection of data

Required information or data were collected mainly form the secondary sources. The sources are:

· Annual reports and performance reports of the Bank

· Various files and documents of Credit and industrial Credit Division of BASIC Bangladesh limited.

· Articles related to problem loans in different journals and magazines.

· Study of files and documents of some default borrowers of the main Branch of BASIC

The primary source of data and information was the interviews with managers and officials of the Head Office and Main Branch of Basic.

Necessary data were segregated from the source material and collected data were complied and processed to prepare the report.

b. Sample size

Outstanding loans of the Bank are analyzed in totality to fulfill the objectives of the study.

Chapter Two

Profile of BASIC

2.1 Background

The Bank of Bangladesh Small Industries & Commerce Limited (BASIC) established as Banking Company under the Companies Act 1993 launched its operation 1989, 21 January, incorporated by 1988, August 2. The Banking companies Act 1991 govern it.

At the outset, the Bank started as a joint venture enterprise of the Bangladesh Credit Commerce (Bcc) foundation with 70 percent shares and Government of Bangladesh (GOB) with the remaining 30 percent shares. The BCC Foundation being non functional following the closure of the BCCI, the Government of Bangladesh took over 100 percent ownership of the Bank on 4th June 1992. The bank was established as the policy makers of the country felt the urgency for a bank in the private sector for financing Small scale Industries (SSI).

BASIC is unique in its objectives. It is a blend of development and Commercial Banks. The memorandum and Articles of Association of the Band stipulate that 50% of Loan able funds shall be invested in Small and Cottage industries Sector.

Table: 1 Banks Capital Position


Authorized Capital Paid up Capital Total Reserve up to
5oo 300 461

2.2 Functions

The Banks offers

  • Term Loans to industries especially to Small-Scale enterprise.
  • Full fledged commercial banking Service including collection of deposit, short term trade finance, Working capital finance in processing an manufacturing units and facilitating international trade.
  • Financing & Technical support to Small Scale Industries (SSI) in order to enable them to run their enterprises successfully.
  • Micro Credit to the urban poor trough Linkage with NGOs with a view to facilitating their access to the formal financial market for the mobilization of resources.
  • Financing in import and export business like other commercial like other Commercial leeks.
  • General banking facility like CD, FDR, SB, STD, BCD, FCA etc available here.

2.3 Corporate Strategy

  • Financing establishment of Small units of industries and business and facilitate their growth.
  • Small Balance sheet size composed of quality assets.
  • Steady and sustainable growth.
  • Investment in a cautions way.
  • Adoption of new banking technology.

2.4 Organizational Goal

  • To employ funds for profitable purposes in various fields with special emphasis on small-scale industries.
  • To undertake project promotion to identify profitable areas of investment.
  • To search for newer avenues for investment and develop new products to suit such needs. To establish linkage with other institutions which are engaged in financing micro enterprises.

2.5 Lending Criteria


Entrepreneur/ Promoter has to be creditworthy and competent enough to run the proposed project efficiently.


The project should be viable in line with organizational, Technical, commercial, financial and economic points of view.


· Technical process proposed should preferably be a proven one.

· The project should be technical sound and environment friendly.

· Technology transfer in case of borrowed know how ought to be ensured.

· Building should be well planned and well constructed at a suitable location.


· Market prospect and potential for the product has to be fully assured at competitive prices.

· Marketing channels existing for the product should be accessible to the entrepreneurs.


· There should be reasonable debt –equity ratio as determined by the Bank on individual case basis.

· The project should be found viable in financial analysis done by the Bank.


· The project should benefit the national economy by creating employment and increasing income.

· Savings/Earnings of foreign currency may give an additional dimension.

2.6 Organizational Structure

To achieve its organizational goals, the bank conducts its operation in accordance with the major policy guidelines laid down by the Board of Directors, the highest policy making body. The day-to-day operation of the blank is looked after by the management.

2.6.1 Board of directors

The Government holds 100% ownership of the bank. All the directors’ of the Board are appointed by the Government of Bangladesh. The Secretary of the Ministry of Industries is the chairman of the bank. Other directors of the bank are high government and central Bank executives. The Managing Director is an ex.-official member of the Board of Directors. There are at present 7 directors including the Managing Directors of the Board. The present Board of Directors of the Bank consists of the following members.

2.6.2 Management

The management is headed by the managing Directors. He is assisted by the General Manager and Departmental heads in the head office. BASIC is different in respect o hierarchical structure from other bank in that it is much more vertically integrated as for as reporting to the chief Executive is concerned. The Branches in charge of the Bank report directly to the Managing Director and for functional purposes, to the Head of Department consequently, quick decision making in disposal o9f cases is ensured.

Figure 1: Organogram of BASIC.

2.7 Resource & Capabilities

BASIC is well prepared to and capable of meting the demand for a broad range of banking services. It has got adequate resources, both human and physical, to provide the customers with best possible services.

2.7.1 Physical and Technological Resources

A great dial of investment fir devolving the physical resource base of the bank has been made. BASIC has its presence in all the major industrial and

commercial hubs of Bangladesh in order to cater to the needs of industry and trade. At present, there are twenty- five conveniently located branches throughout Bangladesh. There are 9 branches in the capital city of Dhaka, 6 in Chittagong and one each in Narayangonj, Narshingdi, Rajshahi, Sandspur, Bogra, Khulna, Jessore, Sylhet, Moulivibazar and Commilla.

Major features of these branches:

· Fully computerized accounts maintenance.

· Well-decorated and air-conditioned facilities.

· A fully operational computer network, which is currently being implemented. The work of LAN and WAN installation to facilitate fast communication between the branches and the head Office is in progress.

· Money counting machine for making cash transaction easy and prompt.

2.7.2 Human Resources

BASIC Bangladesh Ltd. has a well-diversified pool of human resources, which is composed of people with high academic background. Most employees are comparatively young in age yet nature in experience. In the increasingly competitive market for highly skilled staff, we are focusing on providing a stimulating compare environment and an attractive compensation package. At present the total employee strength is 497 .

Table: 2 Human Resource of BASIC

Employees Category Level of education Age
Management Support


Post Graduate Graduate Under Graduate Below




Number 132 144 153 117 6 215 61
% 47.83 52.17 55.44 42.39 2.17 77.90 22.1


The Bank follows a strict recruitment policy in order to ensure that only the best people are recruited. The bank, so far, has recruited four batches of entry-level management staff, all of who have got excellent academic Background.


Intensive training program, on a regular basis, is being imparted to employees of both management and non-management levels to meet the challenges in the banking industry and to help employees to adapt the changes and new working conditions.

During the year 2001, a total of 100 employees of the Bank were provided with training in various fields. Out of them 8 employees participated in training courses held abroad.

2.8 Financial Resources

Like any other financial intermediaries, BASIC is no exception in performing its cure function viz. Mobilization of fund and utilizing such mobilized fund for profitable purposes.

2.8.1 Mobilization of Fund

The main sources of fund for BASIC are:

1. Deposit

2. Borrowing

(1) Deposit: Deposit is the mainstay of BASIC’s sources of fund. Following usual practices, it collects deposit through:

– Current Deposit

– Saving Deposit

– Fixed Deposit

Figure 2 Deposits Mix of BASIC in 2001(Graph)





Current & others



(11) Borrowing for Development Finance: Apart from deposit BASIC received funds from the following sources:

– Bangladesh Bank.

– Asian Development Bank.

– KfW (Kreditanstalt fur Wiedraufnbau- Credit Institution for Reconstruction), German Development Bank.

All of these funding sources fund are for relatively longer period. Receiving the credit lines from ADB and KfW has been recognition of BASIC’s highly satisfactory performance.

Table 3 Borrowing for Development Finance


Year 1996 1997 1998 1999 2000 2001
Amount 196.45 273.29 344.61 368.85 555.98 582.82
Growth Rate (%) 18.29

2.8.2 Utilization of fund

Utilization of bank fund was more of less satisfactory during the year 2001. Given the difficult economic situation, the management of bank focused on the consolidation and quality of assert rather than in growth. The total assets of the Bank increased to Taka 9,722 million at end 2001 from Taka 7,731 million in the previous year. The growth rate was 26 percent. Deposit rose from Taka 5,845 million in 2000 to. Taka 7,513 million in 2001 showing a growth rate of 29 percent.

As expected for a bank, loans and advances gad the largest share in the assert portfolio of the bank. It accounted for 54% of total assert of the bank. Balance with other banks and liquid cash were the constituents being 12% and 6% of the assert portfolio respectively. Investment in securities came in size with 19% of total asset portfolio.

Figure 4 Borrowing for Development Finance

Industrial Credit

BASIC’s services are directed towards the entrepreneurs in the small industries sector. A small industry, as per industrial policy 199 approved by the cabinet, has been defined as an industrial undertaking whose total fixed investment is less than Tk. 100 million. Industrial credit outstanding at the end of December2001 was Tk. 377.00 million compared to Tk. 2735.50 million as at end of 2000.It reflects a growth of 37.86 percent over the previous year. Total outstanding term loans stood at Tk. 1238.79 million as on December 31, 2001 compared to Tk 796.18 million in 2000 reflecting a 55.59 percent growth. The outstanding working capital finance extended to industrial units stood at Tl 2532.21 million at the end of the reporting period compared to Tk 1929.26 million in 2000. Growth rate was 30.58 Percent. Exposure to medium scale industries constituted 10.06 percent of the total loans and advances. Whole finance to small industries sector accounted for 50.32 percent of the total loans and advances. The textile sector including garments being one of the major contributors to national

economy dominated the loan portfolio of the Bank. Other sectors financed includes engineering, food and allied industries, chemicals, pharmaceuticals and allied industries, paper, printing and packaging, glass, ceramic, and other non-metallic, goods and jute products. Recovery rate of project loan was 87 percent.

Table 4 Industrial Credits

1994 1995 1996 1997 1998
1408.25 2028.50 724.70 915.20 914.40 1408.25 2028.50
Growth Rate (%) 220.62 26.29 0.09 54.01 44.04
ALL Banks Balance 90461.9 105189.6 131009.7 177571.8 213086.1
Growth Rate (%) 6.17 17.31 16.39 16.45 20.02

Commercial Credit

BASIC lends support towards development of trade, business and other commercial activities in the country. Short-term trade finance and other non-fund services get full attention of the bank. The bank offers a complete range of services to the exporters and importers by extending various facilities. The Bank provides cash credit for local trade, export cash credit, packing credit, local and foreign bills purchase facilities. As on December 31, 2001 total outstanding commercial loans stood at Tk 2305.98 million compared to Tk. 1762.83 million of 2000 representing a growth of 30.81 percent. This includes cash credit for local trade Tk. 1244.00 million-export cash credit including packing credit Tk. 200.99 million, locals’ bills purchase Tk. 300.30 million and foreign bills purchase Tk. 2199.60 million.

Table 5 Commercial Credits

1994 1995 1996 1997 1998
BASIC Balance 513.30 641.50 798.10 1177.55 1121.70
Growth Rate (%) -32.51 24.98 24.41 47.54 -4.74


Balance 9071730 103164.10 114462.80 131483 148904
Growth Rate (%) -0.09 13.72 10.95 14.87 13.25

Micro Credit

BASIC launched a micro credit scheme in 1994. Micro Credit scheme provides support for the poor for generation of employment and income on a sustainable basis particularly in urban and suburban areas.

Micro credit disbursed during 2001 amounted to Tk. 128.40 million compared to Tk. 80 million in the previous year. Total micro credit outstanding as on December 31, 2001 was Tk. 184 million against Tk. 120 million at the end of 2000. A total of 45,913 borrowers benefited from the micro credit program of the Bank in 2001.These are:

· Lending to the NGOs who on-lend to their members. At present there are 16 such NGOs.

· Lending directly to the target groups or Ultimate borrowers under the bank’s own management.

· Lending directly to the member borrowers and NGOs providing non-financial services like group formation and monitoring and supervision fee.

Table 6 Micro credit to Total Loan


BASIC 2001 2000 1999 1998 1997
53.19 46.75 40.66 42.21 35.83

Foreign Trade

The bank handles foreign trade in which it has comparatively a large share despite its small size. BASIC provides various facilities related to L/C and post import finance like loan against imported merchandise (LIM) and loan against trust receipt (LTR) to the importers and back to back L/C and reshipment finance facilities like export credit, packing credit and foreign bills purchase (FBP) to exporters.

So far the bank has established correspondence relationships with as many as 11 foreign banks in order to facilitate foreign trade. The Bank total export business of Tk 5957.90 million and import business of Tk 7542.80 million in 2001.

The export business grew by 9.82 percent and import business declined by 7.54 percent. Major items of exports were garments and jute products. Items of import include mainly industrial raw materials, garments accessories, and capital machinery. The decrease of import in the year 2001 was mainly due to imposition of restriction on L/C margin.

Table 7 Import Finance

1998 1997 1996 1995 1994
BASIC Balance 7208.20 7017.56 4986.10 4658.10 2614.00
Growth Rate (%) 2.71 40.74 7.04 78.19 29.17
ALL BANKS Balance 3900968 3005368 2457.70 2285.70 1943.30
Growth Rate(%) 2.98 22.28 7.56 17.23 23.21

Table 8: Export Finance Million

Year 2001 2000 1999 1998 1997
Export Finance 5957.90 5557.00 5060.80 5818.60 3985.24

Other activities

The bank provides services for remittance, underwriting. Guarantee public offering of shares etc. The bank also provides funds to investment and leasing companies.

Table 9 Remittance Million

Year 2001 2000 1999 1998 1997
Total Amount 10547.78 9459.00 6920.80 5818.60 3985.24

2.9 Performance of Bank

The performance BASIC has been satisfactory since its inception respect to all the measurement parameters. A good year for the Bank again. It performed fairly in 2001 in spite of severe competition in the banking sector of the country. The Board of Directors was happy with the overall performance of the Bank, particularly for maintaining quality of assets and improving shareholders value.

The total assets of the Bank increased to Taka 9,722 million at end 2001 from Taka 7,731 million in the previous year.

The growth rate was 26 percent. Deposit rose from Taka 5,845 million in 2000 to Taka 7,513 million in 2001 showing a growth rate of 29 percent.

The Banks borrowing increase by 5 percent in 2001 compared to 51 percent growth in 2000.Borrowing facility from an established credit line of Bangladesh Bank was utilized for providing greater amount of term loans in 2001 compared to the previous year. Loans and advances stood at Taka 6,261 million as on December 31, 2001 against Taka 4,619 million at the end of 2000, recording a growth rate of 36 percent compared to 17 percent in the previous year. All out efforts were made to improve the recovery rate and control non-performing loans and advances. The proportion of non-performing loans to total loans decreased slightly to 3.67 percent in 2001 from 3.73 percent in 2000. Emphasis in the maintenance of quality of assets remained the centerpiece of BASIC Banks business strategy.

2.10 Strategies and programs for the future

The banking sector has never been so competitive. More so because new banks are trying to proceed very aggressively. It is apprehended that competition will be tougher in years to come. The management, being filly aware of it, is making all out effort to face the unfolding challenges of the future. Several issued are being looked into in this regard.

BASIC is committed to developing the capabilities of its employees. All the officers are being imparted training in turn. More investment for the development of human resource is being contemplated. Apart from this, the recruitment of new officers with excellent academic career is planned in order to instill dynamism.

Investment for the development of physical resource is also being made. Process for the development of a fully operational networking system that includes installation of both LAN and WAN is underway. BASIC bank has its own software developed in 1991. Already Local Area Network (LAN) has been installed in Head Office and 15 branches of the Bank. Wide Are Network (WAN) has been set up between Head Office and branches using X.28 leased line of BTTB. The Bank has undertaken a project for introduction of “Automated Teller Machine” and “Debit Card” at its 16 branches in Dhaka and Chittagong.

The project will be implemented in 2002.Once completed, the valued customers will be able to withdraw or deposit cash from any branch in Dhaka and Chittagong during office hours, withdraw cash, transfer funds and pay utility bills at any time from any ATM and pay their shopping bills using a debit card. The Bank is considering offering new financial products in conformity with the needs of the present and prospective clients to sustain in the long run. To meet the challenge of the next century the management has been advised to prepare a comprehensive perspective plan.

2.11 Dividend

In view of the robust financial results the Board is pleased to propose, subject to approval at the Annual General Meeting, Payment of final cash dividend of Tk. 26.67 per share which, when added to the interim dividend of Tk. 23.33 per share paid on January 1, 2002 gives a total dividend of Tk. 50.00 per share for the year. Total dividend for the year comes to Tk… 150 million. This is 25 percent higher than the last year’s dividend of Tk. 120 million, which included stock dividend of Tk. 60 million.

2.12 Risk Management

In banking environment no reward can be expected without risk. In this backdrop, the management has established a formal program for managing the business risk faced by the Bank. Considering the present non-performing loan position of the country, BASIC is very much cautious about its investment.

Every loan proposal is placed under careful scrutiny before approval. Proposals of large amount of loans need approval of the Board of Directors. Credit lines are established for each borrower group. Internal Audit team and exercise close monitoring on every loan transaction.

Management regularly reviews the Banks overall assets and liabilities structure and makes necessary changes in the mix of balance sheet. The Bank also has a liquidity policy to ensure financial flexibility to cope with unexpected future cash demands.


Chapter Three: Commercial Banking in


3.1 Historical perspective of the commercial Banking

At the time of liberation there were around thirteen domestic scheduled banks and a few foreign banks operating in the region of Bangladesh. Two of the smaller commercial banks, namely, Easter Banking Corporation and Eastern Mercantile Bank had their head offices in the erstwhile East Pakistan. The major banks only their regional offices in Dhaka. The management accepts the two East Pakistani banks were, however, almost solely in the hands of non-Bengalis. All these banks except National Bank of Pakistan were in the private sector. The Government owned even National Bank of Pakistan only to the extent of 25 percent. However, the management of the National Bank of Pakistan was almost totally free from interference by the Government. Interestingly, the then central bank namely, the state bank of Pakistan was owned by general public to the extent of 49 percent.

After the emergence of Bangladesh, all the banks except the foreign banks were nationalized. The commercial banks were merged into sox larger banks namely, sonali, Janata, Agrani, Rupali, Pubali and Uttara bank. With the exodus of Pakistanis who manned the top and upper middle echelon of management, a sudden vacuum emerged in the effective top management of the nationalized banks. As the banks departed from following the standard norms and practices, the state of affairs of the banks became vulnerable leading to large-scale loan defaults. The loans taken by the public sector bodies like Bangladesh jute Mills Corporation, Bangladesh Textile mills corporation and other state- owned enterprises were stuck- up at these institutions used bank loans mostly for loss- financing.

Considering the backwardness of agriculture as well as its high importance in the overall economy, drive was made at the instance of Government to launch Tk. 100 core special agricultural credit programs in 1977. It was crash program to disburse credit to the cultivators as crop loan. As the NCBs were frawn in a big way for agricultural loan for the first tim, in fact, it paved the way for large-scale default culture in this respect mainly bemause of lack of experience in dealing with agricultural credit by the NCBs.

During early 1980s the role of banks in the private sector was felt as an important factor to invigorate the economy.

A good number of new private banks were allowed to function. Banks following Islamic tents also started funetiong. Most notable development was de-nationalization of two of the six NCBs,namely, Uttara and Pubali.A few more foreign banks were also allowed to operate in the capital and port cities.

During mid 1980s when the private banks started to expand its lending activities, these banks experienced somewhat new situation. The sponsor directors were especially interested to use their influences for taking the loans for their own business houses or for

enterprises owned by their relatives or accomplices. Though the executives were free from the dictates of the bureaucrats, but had to show their allegiance to their new masters.

To correct the above-mentioned problems and to ensure the maximum benefits that should be achieved from banking sector in 1990, the Bangladesh Government started with a five-year financial sector reform project with the following ten agenda:

a) Introduce a more liberal interest rate policy

b) Introduce and implement an improved loan classification system

c) Introduce capital adequacy requirement and enforce these on the banking system

d) Develop improved supervision systems for identify problem areas within the banking system

e) Develop money market instruments and initiate the auctioning of a short term money market instrument

f) Improve the operation of the capital markets and take the regulatory steps needed to improve such markets

g) Clean up the jute debt in the commercial banking system and eliminate any risk to the commercial bank portfolio

h) Reform the NCBs in a three step process: 1) Recapitalize the NCBs2) Improve their operating systems 3) Develop strategic approaches to their future development

i) Improve loan recovery through introduction of better legislation

j) and courts to collect delinquent loans, improve the bankruptcy law to ease the problems of liquidating companies, improve the flow of credit information for new loans, and rtequire4 the NCBs to improve their debt collection

k) Initiate an immediate program of improvement to manpower through upgraded training for bankers

In addition, the following initiatives were also taken under FSRP:

Performance planning system (PPS): A performance planning system (PPS) has been introduced in the NCBs under which participants (branch managers) are require to develop- a number of clearly specified, measurable and dated goal statement to b4e accomplished over the following year.

New loan ledger (NLL): As the loan ledgers of the NCBs contain adequate data to monitor their loan portfolio effectively, a new system called new loan ledger (NLL) has been introduced. To correct record keeping at the account-by account level (FSRP) Designed the New loan ledger (NLL) system.

New MIS: FSRP develop a new Management information system (MIS) for banks including an Executive summary Reports, which contains critical management information. The number of monthly MIS reports thus in produced stood at 83 by October 1984.

Although the FSRP (1990-95) introduced a number of changes in the banking system, there is still a lot of be dine. Accordingly, the Govt. initiated the commercial banking-restructuring project (CBRP) in 1997 to ensure a continuity of the reforms as well as to attain the following objectives:

1) Strengthening bank management with increased accountability, improved auditing and loan management practices and procedures

2) Improving the legal environment for dint recovery

3) Modernizing the technology in the banking sector

4) Restoring the capital adequacy of banks on risk weighted assets

5) Improving income position of bank’s

6) Strengthening the supervisory and monitoring capacity of the central bank.

3.2 Commercial Banking at a Present

Bangladesh Bank, the central bank of the country, is the guardian of banking institutions of Bangladesh. Bangladesh Bank (BB) head office is

located at Motijheel, Dhaka. There are two branches in Dhaka and there is one branch in each of the divisions. The structure of the banking system is present in table-1. There are 4 NCBs operating with 2 average branches and 13 PCBs operating with 89 average branches.

Table- the distribution of urban and rural branches in Bangladesh. In Bangladesh around 75% people live in rural areas. Urban- rural ratio for NCBs is 585, which is in line with the necessity of rural branches in our country. There is no FCBs in rural area and PCBs had very few branches in rural area. FCBs are guided by the policy of their parent company but private banks should open their branches in rural areas.

Table 1: The Structure of Commercial Banking System In Bangladesh


Type Numbers Branches Employee
Nationalized Commercial Banks 4 3608 7000
Foreign Commercial banks 13 34 1500
Private commercial banks 23 1268 42526
Islamic banks 4 NA NA

Source: Quarterly Scheduled Bank Statistics and Economic Trends

Table 2: Distributions of Urban and Rural Branches in Bangladesh


Type Urban Branches Rural Branches
Nationalized Commercial Banks 1501 2107
Foreign Commercial Banks 34
Private Commercial Banks 960 308

Source: Quarterly Scheduled Bank Statistics`


Bangladesh Bank (Central Bank)



1. Agrani Bank

2. Janata Bank

3. Rupali Bank

4. Sonali Bank



1. Pubali Bank Ltd.

2. Uttara Bank Ltd.

3. National Bank Ltd.

4. The City Bank Ltd.

5. United Commercial Bank Ltd.

6. Arab Bangladesh Bank Ltd.

7. International Finance Investment & Commerce Bank Ltd.

8. Estern Bank Ltd.

9. National Credit & Commerce Bank Ltd.

10. Prime Bank Ltd.

11. South East Bank Ltd.

12. Dhaka Bank Ltd.

13. Dutch Bangla Bank Ltd.

14. Marcentile Bank Ltd.

15. Standard Bank Ltd.

16. One Bank Ltd.

17. Export Import Bank Of Bangladesh Ltd. (EXIM)

18. Bangladesh Commerce Bank Ltd.

19. Mutual Trust Bank Ltd.

20. First Security Bank Ltd.

21. The Premier Bank Ltd.

22. Bank Asia Ltd.

23. The Trust Bank Ltd


1.Amrican Express Bank Ltd. (AMEX)

2.Standard Charted Bank.

3.Standard Charted Grindlays Bank Ltd.

4. State Bank of India.

5. Habib Bank Ltd.

6. Credit Agricol Indosuez

7. National Bank of Pakistan.

8.Muslim Commercial Bank Ltd.

9. City Bank Ltd.

10. Hanil Bank Ltd.

11. Hsnhking snd Shanghi Banking Corportion Ltd.

12 Faysal Islamic Bank of Bahrain E.C.


1. Islamic Bank Bangladesh Ltd.

2.Albaraka Bank Bangladesh Ltd.

3. Al-Arafat Islamic Bank Ltd.

4. Social Investment Bank Ltd.


1. Bangladesh Krishi Bank

2. Bangldesh Shilpo Bank

3. Bangladesh Small Industries & Commerce Bank Ltd. (BASIC)

4. Bangladesh Krishi Unnion Bank

5. Bangladesh Shilpo Rin Shasta

3.3 Some selected Indicators of Commercial Banks

3.3.1 Branch Expansion

Branch expansion by commercial banks: Branch expansion by NCBs shows that they are growing very slow. Compared to

other two categories of Bank PCBs has grown very fast in the period 1990-2001.Partivularly in years 95 and 96 the highest number of commercial banks have bee opened.

FCBs show the slowest branch expansion rate among the three categories of commercial banks. Their urban-based operation strategy is the main reason for their slow growth.

3.3.2 Employment Generation

Employment generation by the commercial banks: The most employment-creating bank under the study period is PCBs. As their branches grow more in number other than two categories of banks so they create more employment other than two categories of banks. In case of NCBs a cutback strategy of their manpower was found to restore viability among them. It is evident from the tale that in year 1994 a huge number of employees (1580).

Have joined their jobs in NCBs and simultaneously 208 employees left their job from PCBs. More interestingly, in the following year 823 left from NCBs and 978 joined in PCBs.

As number of branches grows slowly in case of FCBs so their

employment generation rate is also slow. However, from 1997 and onwards there are some changes in this track.

Table 3: Branch Expansion by Commercial Banks

No. Of




No. Of branch Increase


No. Of branch Increase


2001 3608 1268 34
1999 3627 -2 1153 33 29 1
1998 3629 -2 1120 39 28 3
1997 3631 3 1081 16 25 2

Source: Calculate from Economic Trends

Table 4: Employment Generations by Commercial Banks

No. Of Employees Increase


No. Of employee Increase


No. Of employee Increase


1995 63801 18804 888
1996 63803 2 20177 1373 926 38
1997 63731 -72 21144 967 1016 90
1998 62723 -1008 21856 712 1125 109
1999 63583 860 22526 670 1262 137

Source: Calculated from Economic Trends

Table5: Net Profits and Total Productivity of Commercial Banks

Net profit Total productivity Net profit Total productivity Net profit Total productivity
1995 74.91 1.04 16.4 1.05 68.32 2.30
1996 233.22 1.12 76.49 1.13 90.76 2.21
1997 64.17 1.03 137.87 1.20 98.72 1.84
1998 225.15 1.08 119.87 1.23 135.02 1.68
1999 189.36 1.07 160.97 1.16 149.63 1.79

Source: Calculated from Economic Trends

Note: Profit figured is in crore Taka.

3.3.3 Net profit performance

Net profit figures show that FCBs are the moist profitable banks. They make a positive net profit. But NCBs make loss for the years 2001 to 1993 and PCBs modes loss for the year’s 1991 to1994. Also the profit figures for NCBs and PCBs does not show trend, they are volatile over the years. But the profit figures for FCBs are gradually increasing year after year.

3.3.4 Total Productivity

Total productivity measures the ratio of input and output. In case of banks productivity means the ratio of income and expenditure. If income substantially outweighs expenditure then productivity of the bank is good. Table-5 shows productivity ratio for foreign commercial banks, private commercial banks and nationalized commercial banks. If productivity ratio is above one it is an ad