Overall Banking Activities of Standard Bank Limited

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Overall Banking Activities of Standard Bank Limited

Chapter-1

Introduction

1.1 Origin of the report

All over the world, the dimension of banking is changing rapidly due to deregulation, technological innovation and globalization. Banking in Bangladesh has to keep pace with the global change. Now banks must compete in the market place both with local institutions as well as foreign ones. To survive and thrive in such a competitive banking world, two important requirements are: development of financial infrastructure by the central bank and development of ‘Professionalism’.

Bangladesh is a least developed country, whose economy is agro-based. The agriculture system is primitive and frequently affected by natural disaster. Poverty is the main problem of this country. About 47.6% of its population is living below the poverty line whoever as about 18% of the population is living below the hard core poverty line (with less then 1800 calories per head per day).

After the devastating flood 1998 and 2001, the economic activities of the country resume by taking various rehabilitation program and bumper production in the agriculture sector help to recover the blow. Bangladesh economy has faced severe set back again after the terrorist attack on world trade center of USA on 11^th September 2001, Afghan war, Iraq war & Lebanon war. These events have changed the world economics scenario and caused global economic slow down. This global slow down has severely affected export system & Bangladesh economy like readymade garments industry, Frozen food, Manpower export hotel and Tourism sector etc. Due to global slow down foreign financial assistance also severely affected.

1.2 What is banking?

The Jews in Jerusalem introduced a kind of banking in the form of money lending before the birth of Christ. The word ‘bank’ was probably derived from the word ‘bench’ as during ancient time Jews used to do money-lending business sitting on long benches.

First modern banking was introduced in 1668 in Stockholm as ‘Saving Pis Bank’ which opened up a new era of banking activities throughout the European Mainland.

In the South Asian region, lending money system was introduced by the Afgan traders popularly known as Kabuliwallas. Muslim businessmen from Kabul, Afghanistan came to India and started money-lending business in exchange of interest sometime in 1312 A.D.They were known as Kabuliwallas.

The word “Banking” has been defined to mean the accepting, for the purpose of lending or investing, of deposits money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft and order or otherwise. The term “Banking” has also been defined as:

USA: Act of Congress defined banking, “as the business of dealing in credits.”

Japan: Act of 1927 in Japan defined as “institutions, which carry on operations of giving as well as receiving credit.”

1.3 Overview of financial institution of Bangladesh:

Banks play an important role in the economy of a country. After liberation except the foreign banks all banks were nationalized in Bangladesh. These banks were merged and grouped into six commercial banks. Of the six commercial banks Uttara and Pubali were transferred to private sector from 1985. There are 51 schedule banks operate in Bangladesh. Of them 4 nationalized commercial banks, 5 specialized banks, 30 private commercial banks and 12 foreign banks. The bank and the other financial institutions have become dynamic after taking initiatives to reform the banking sector by the finance minister of Bangladesh. Up to February 2005, of fiscal 2004-2005, total deposit and loan of all banks is taka 95259.8Cr and Taka 79392.6 Cr. Respectively.

1.4 Role of private commercial banks in the economic development of Bangladesh:

A bank is usually defined as a financial institution which deals in money. Today however the functions of a bank have increased so much that it is considered a very vital agent of development in country like ours. Because of their positive involvement in trade, industry, business finance and a host of other allied services, banking system has become today a very important part of an economy.

A bank like private commercial bank helps to develop economy as follows:

Demonstrates and achieve optimistic results in terms of overall economic growth. The gloomy picture of nationalized banks is mainly due to:

· Lack of quality services.

· Management inefficiency.

· Minimum of commitment toward institution.

· Lack of security.

· Excessive intervention of collective bargaining agent (CBA).

· Documentation of loans and advances debarring legal action in case of default.

· Slow rate of recovery plan.

· Lack of supervision and monitoring of loans and advances.

· Political instability.

· Directive Loans.

· Transitional inconsistency while formatting policy Issues on banking.

Standard Bank Limited is a scheduled Bank under private sector established under the ambit of Bank Company Act, 1991 and incorporated as a public limited company under Companies Act,1994. The Bank started commercial banking operations effective from June 06, 1999. During this short span of time the Bank had been successful to position itself as a progressive and dynamic financial institution in the country.

1.5 Objectives of the study

The objective of the study is to gather practical knowledge regarding banking system and its operations. More precisely we can identify the objectives of this report as follows:

· To apply theoretical knowledge in the practical field.

· To find out the position of Standard Bank Limited in the banking industry.

· To know about the remittance of funds.

· To know about the general Banking activities of the Standard Bank Ltd.

· To examine the rules and regulations of Standard Bank Ltd.

· To observe the various investment indicators of Standard Bank Ltd.

· To find out existing problems of the bank.

· To formulate alternative strategies for solving the problems.

· To formulate a contingency plan as a safeguard for changing situation.

· To study the existing overall banker customer relationship.

1.6 Scope of the study:

The report will cover the all departmental activities as performed by Standard Bank Ltd.Analysis of the facts and figures and conclusion will be drawned based on the findings. These will help for the development & in the audited financial statements of the Standard Bank Ltd.

· Anoverview of the Standard Bank Ltd.

· Foreign Exchange activities and its contribution to total income.

· Loans and advances of the Standard Bank Ltd.

· Main focus of this report will be a project appraisal which was funded by the bank.

· General Banking activities of the Standard Bank Ltd.

1.7 Methodology

The report will be written on the basis of information collected from primary as well secondary sources. The primary information will be collected from the bank as well as some clients of the bank.

The Secondary information will be collected from the bank’s records, corporate newsletter, branch manuals, various publications of the bank and Bangladesh Bank.

For successful completion of the report, I will use the following tools and techniques:

· I will analyze the report descriptive as well as numerical way.

· I will use various capital budgeting tools and techniques such as NPV, IRR, Pay back period, ROI, ROE, break even point etc.

· I will also use various graphs and tables for analyzing collected data.

1.8 Limitations of the report

There have been some limitations from which these report suffers. The limitations are briefly pointed out below:

· Time is the first limitation as the duration of the program was three months only.

• Another limitation of this report is Bank’s policy of not disclosing some data and

information for obvious reason, which could be very much useful.

• Annual report 2008 has not been published yet.
• The data that seems insufficient may be suffering from lack of reliability to some extent.

· Supply of more practical and contemporary data is another shortcoming.

· The study was not done very successfully due to inexperience.

Chapter-2

An Overview of Standard Bank Ltd.

2.1 Introduction

Standard Bank Limited is a scheduled Bank under private sector established under the ambit of Bank Company Act, 1991 and incorporated as a public limited company under Companies Act,1994. The Bank started commercial banking operations effective from June 06, 1999. During this short span of time the Bank had been successful to position itself as a progressive and dynamic financial institution in the country.

The motto of the Standard Bank Ltd. Is to explore a new horizon of innovation modern banking creating an automated and computerized environment providing ONE STOP service and prepare itself to face the new challenges of globalization and 21^st century . One of the main objectives of the bank is to be a provider of high quality products and services to attract its potential market .The bank also caters to the needs of it corporate clients and provides a comprehensive rang of financial services to notional and multinational companies .

2.2 CAPITAL AND CAPITAL ADEQUACY RATIO

Authorized Capital—3,00,00,000 ordinary shares of taka 100/ each ,(31-12-05).The bank increased its authorized capital from taka 125 corer to taka 300.00 corer by passing capital a special resolution in the bank’s 24^th extra ordinary general meeting held on 4^th May 2007 .

Issued, subscribed and fully paid-up capital: 66, 00,000 ordinary shares of taka 100/ each issued for cash 43, 29,600 ordinary share of taka 100/ each issued as bonus shares.

Out of the total issued, subscribed and fully paid-up capital of the bank 33,00,000 ordinary shares of taka 100.00 each amounting to taka 330,000,000 was raised through public offering of shares in 2003.

The capital adequacy ratio of the bank as on December 31^st ,2007 was 18.61% as the minimum requirement of 10% of which core capital was 17.20% against minimum requirement of 5% and supplementary capital was 1.40% which testifies to the sound capital base of the bank .The capital adequacy ratio of the bank in the year 2006 was 16.68%, of which core capital was 15.37% and supplementary capital 1.33%.

2.3 Organ gram of the Standard Bank Ltd.

Serial number Based on position

Figure 1: Organizational configuration of Standard Bank Ltd.

2.4 Management hierarchy of the Standard Bank Ltd.

Figure 2: Organizational configuration of every Branch, Standard Bank Ltd.

2.5 INFORMATION TECHNOLOGY

STANDARD BANK is committed to deliver efficient, prompt and personalized service to their distinguish customers who are their first priority and driving forces. They want to provide them quality services through the integration of the latest state of the art technology.

IT division has been COM powered with more manpower to drive the bank technologically. They have started ON-LINE banking services for their 10 branches (Principal branch , Dhanmondi branch , Gulshan branch , Agrabad branch, Khatunganj branch , Jubilee road branch , Topkhana and Khulna br. ) .where clients can

deposit or withdraw their money .

Communication backbone of their bank has been connected through VAST, FIBER-OPTIC or RADIO LINK by using CISCO ROUTERS. More branches are being brought under the network of ON-LINE banking.

2.6 PROFIT AND OPERATIONAL RESULT

The bank has earned an operating profit of Tk697.14 million during the year 2007 compared to Tk616.34 million during the year 2006 showing an increase of 18.94% .The bank has earned substantial amount of profit during the last year compared to preceding year. The progress was possible due to the pragmatic policies and right direction of their board of directors as well as active support and co-operation of their valued clients and shareholders.

Operating profit

(Figure in million)

2.7 DEPOSITS

The deposit base of the bank continue to register steady growth and stood at Tk19213.75 million as on December 31^st ,2007 as against Tk14220.80 million as on December 31,2006. It is an increase of 35.11%, the bank has by this time achieved a stable and sizable deposit base managed its deposit and invest able fund efficiency for the purpose of both liquidity and profitability In addition to the normal deposit scheme, the bank introduces highly lucrative, innovative and attractive deposit schemes, to encourage and mobilize the deposits as well as for the benefit of the people.

Our various purpose-oriented deposit schemes have been appreciated by general people and have received popular response .Steps are being taken to further increase, the deposit base continuously at a reduced average cost of funds.

2.8 LOANS AND ADVANCES

The total loans and advances of the bank stood Tk17310.87 million (including bill purchased and discounted) as on December 31, 2007 compared to TK.12633.99 million as on December 31, 2006 showing an increase of 37%.The bank has been continuing to explore new and diversified areas of operation to extend credit facilities throughout the year to the various sectors of the economy such as in wholesale/retail trading. Hotel, restaurant, real-estate, service sector &transport sector. The total loans are grouped in Tk17047.73 million as unclassified loans and Tk263.14 million as classified loan.

2.9 RETAIL BANKING

According to the statistics and market research paper available, the consumer lending market in Bangladesh has a size of BDT 1600 billion whereas loan outstanding of September 30, 2005 as per schedule bank statistics of Bangladesh bank is around BDT 52 billion. This indicates that only 32% of the market has been utilized by the financial institutions. So the remaining 68% of the market holds tune potential for the loan giving institutions. We have disbursed about Tk 4,64,00,000/- (Four crore sixty four lac) under CCS and Tk 80,21,58,730/- (Eighty crore twenty one lac fifty eight thousand seven hundred thirty) under SME loan financing as on 31.12.2007. To exploit the rapidly increasing opportunities in the fast expanding SME sector through maximizing effectiveness of our product development, distribution & sales strategies of Standard bank ltd.has established a retail banking division in 2006 with the launching of consumer financing & small enterprise financing. The division has introduced the following asset products on consumer financing:

· Salary loan scheme

· Car /auto vehicles loan

· House renovation loan

· Self employed professional loan

· Land purchased loan

· Marriage loan

In the past years micro-finance has received an increasing attention from private sector. Besides, playing a role in alleviation it has also widely participated in the creation of a “Enterprise Culture “ to accompany this growing number of small business from the informal to the formal sector and to fond practical solution to fill the gap in skill/talent &finance. Standard bank ltd with innovative ideas launched traditional & untraditional products like bee keeping. Mushroom production, churi, &imitation jewelry, weaving, verities handicrafts etc. We have also special products launched for our rural branches. The products are:

· Diary, beef fettering ,goat farm

· Bee keeping

· Fishery in ponds

· Mushroom cultivation

· Horticulture/Nursery

The division ha always been discovering the potential of retail & consumer finance in Bangladesh, understanding the current market condition and examining the latest development within the retail banking , mastering new & successful ways to reduce or mitigate the risk of retail & and small financing .

2.10 INVESTMENT

The investment always has an inverse relationship with capital adequacy ratio although it contributes to the desire bottom figure . The size of the investment portfolio in the year 2007 raised take 2013.75 million including government treasury bill and other security bonds against taka 16149.27 million showing an increase of 27.58%.STANDERD BANK is operating 32 branches .

Investments

(figure in million)

2.11 INTERNATIONAL TRADE

Foreign exchange operation of the bank played a significant role in the overall business of the bank. During the year 2007 the bank has contributed in the country’s national economy after successfully handling of foreign exchange transactions VIZ. import, export and remittance. In 2007 volume of import has significantly increased fom Tk.16144.65 million to Tk.18269.57 million, which was 13.16& higher than last year, the volume of export business has tremendously increased from Tk. 7569.13 million to Tk. 10707.48 million which was 41.46% higher than last year and foreign remittance business also remarkably increased from Tk.204.26 million to Tk. 565.12 million which was 176.67% higher than last year. The volume of total foreign exchange business has significantly increased from Tk.25879.68 million to Tk.34003.77 million, which was 31.39% higher than previous year.

Foreign Exchange business

(Figure in million)

2.12 CORRESPODENT BANKING DIVISION

The main aim of Standard bank limited is to increase its foreign exchange business and in this connection they are doing international banking with all major banks of the world. At present they are maintaining correspondent banking relationship with 23 major banks of the world. These are:

The Hong Kong and Shanghai banking corporation. Citibank N.A., Standard chartered bank, American Express bank ltd., Mashreq bank PSC.,Wcchovia bank, The bank of Tokyo-Mitsubishi ltd.,Union De Banques Et Arabes Francaises, Danske bank ltd.A/S,Commerz bank ,Dresdner bank, Bank Islam Malaysia Berhad,Nepal Bangladesh bank ltd., NIB bank ltd.,Arab Bangladesh bank ltd., AB international finance limited, Bhutan national bank,UTI bank ltd.,The bank of Nova Scotia and ICICI bank limited ,Habib bank Ag Zurich, Nordea bank and Samen bank.

2.13 EXCHANGE HOUSE

Standard bank limited is maintaining drawing arrangement with 1(one) exchange house in the UK and another 1 (one) in the USA for inward foreign currency remittance. these 2(two) exchange house are remitting sufficient funds through our bank. Establishment of some exchange house in the U.A.E. are going to execute very soon.

2.14 TREASURY

Treasury unit is a core-banking unit and Standard Bank limited’s treasury unit is one of the best earnings sources of the bank. The bank is well equipped with skilled human resources for efficient dealing. Our everyday business evolves around participation in foreign exchange market and money market in a substantial volume.

2.15 RISK MANAGEMENT

The strategy of every commercial bank is to control & manage the risks which are inherent with the very nature of its business. So as to eliminate the possibility of loss & to aim maximize profit.

The board of directors of Standard bank limited gives full cognizance on the importance of various risk involved in the business of banking. The risk areas are managed by experienced, skills & prudent bankers duly supported by modern technologies i.e. Credit risk grading manual under credit risk management. The management of SBL has been given top priority on core risks in banking and the process of proper structuring is under way as per prudential guidelines provided by Bangladesh Bank for efficiently managing the risk elements in order to protect the investments of their valued clients & honorable shareholders.

2.16 DIVIDEND

The Board of Directors recommended 12% stock dividend subject to the approval of the Honorable shareholders for the year ended 31^st December, 2007 .in order to maintain satisfactory capital base of the bank.

DIVIDEND

2.17 ANTI MONEY LAUNDERING (AML)

STANDARD BANK Ltd. Established anti money laundering department (AMLD) headed by one Vice President designated as Chief Anti Money Compliance Officer (CAMLCO).The department since its inception,has been conducting seminear,workshop and training on regular basis for awareness against money laundering among the executives and officers of the branch level and head office level.Anti money laundering department also implements the instructions of Bangladesh Bank circulars issued from time to time .The bank has an anti money laundering policy and guide notes under managing core risk in banking duly approved by the board of directors of the bank.

The Anti Money Laundering Department of the bank has developed uniform KYC format covering all information of the constituents and account opening checklist and those were distributed to the branches to ensure obtainments in support of information incorporated in the A/C opening form to protect un-scrupulous persons at the entry point of the branches.

Chapter-3

General Banking

3.0 Introduction

During my internship, I was placed in Dhanmondi Branch of the Standard Bank Ltd. First I have completed General Banking in this branch. General banking department is the heart of all banking activities. This is the busiest and important department of a branch. General banking of this branch consists of different sections namely,

1) Account opening section

2) Cheque Book issue

3) Dispatch Section

4) Deposit section

5) Cash section

6) Remittance section

7) Clearing section

8) Accounts section

According to the law and practice, the Banker-Customer relation arises only from contract between these two. And opening of account is the contract that establishes the relationship between a banker and a customer. So this section plays a very important role in attracting customer and therefore should be handled with extra care.

According to the international code of conduct banks should maintain the following steps regarding their customers-

· Banks will act fairly and reasonably in all their dealings with their customers.

· Banks will help customers understand how their accounts operate and seek to give them a good understanding of banking services.

· Banks should maintain confidence in the security and integrity of banking and payment systems.

3.1 ACCOUNT OPENING SECTION:

Account opening is the gateway for clients to enter into business with bank. It is the foundation of banker customer relationship. This is one of the most important sections of a branch, because by opening accounts bank mobilizes funds for investment. Various rules and regulations are maintained and various documents are taken while opening an account. A customer can open different types of accounts through this department. Such as:

i. Savings Account

ii. Current Account

iii. Short Term Deposit (STD) Account

iv. Fixed Deposit Receipt (FDR) Account

v. Deposit Scheme Account.

3.1.1 Savings Account

This deposit is primarily for small-scale savers. There are certain limitations in Savings Account, i.e, customer can draw only twice a week, if they want to get interest on the deposited money. If a customer draws more than twice in a week he will not receive any interest for that month . Heavy withdrawals are permitted only against prior notice. Some Important Points are as follows-

· Minimum opening deposit of Tk.5000/= is required;

· Below 1.00 lac interest rate is 6%, Tk. 1.00 lac to 5.00 lac interest rate is 8%, above 5.00 lac interest rate is 8.50%.

· Minimum Tk. 1000/= balance must always maintain all the time;

· Withdrawal amount should not be more than 1/4^th of the total balance at a time and limit twice in a month.

Customer Benefit:

· Cheque book facility

· Opportunity to apply for safe deposit locker

· Utility payment service

· Collect foreign remittance

· Transfer of fund from one branch to another by-

– Demand draft

– Mail transfer

– Telegraphic transfer

· Online banking service.

3.1.2 Current Deposit Account

The Dhanmondi branch of Standard Bank facilitates customers with different types of current account. There are current accounts for individuals, proprietorship firms, partnership firms, joint stock company, school, college, association, trust and N.G.O. Account opening form for these categories are different.

Some terms and documents may differ but the overall process of account opening is similar to that of the saving account. Here I like to state what kinds of information to be furnished in the form and which documents customer should provide.

Current Account (individual): Dhanmondi branch uses the forms distributed by the SBL head office for opening a current personal/ individual account. A customer should meet the following requirements to see an account has been opened in his/ her name:

· Name of the applicant

· Profession or business of applicant

· Address of the applicant

· Photographs of the applicant

· Introduced by an account holder of the branch

· Signature on the application form

· Signature on the specimen signature card

· Verification of details and signatures by authorized officer.

Current Account (Proprietorship): To open a proprietorship current account photocopy of trade license, attached by the concerned officer, is required along with the procedure mentioned for individual current account.

Current Account (Partnership): Opening procedure of a partnership current account is almost same as the opening of individual current account but some additional documents are required which are follows:

· Partnership deed

· Letter of partnership

· Trade license

Current Account (Joint Stock Company): All the formalities of individual current account opening should be met for the opening of joint stock company, additionally following documents also should be submitted to the bank. These documents are:

· Registration certificate from Register of joint stock companies

· Certificate incorporation

· Memorandum of association

· Articles of association

· Annual audit report

· Copy of board Resolution containing

· Name of the persons authorized to operate the bank account on behalf of the company.

· Name of the persons authorized to deal documents with the bank.

SBL current account meets the needs of individual and commercial customers through its schedule benefit.

Minimum balance :Tk 5000/-

Interest rate : Nil

Customer Benefit:

· Cheque book facility

· Opportunity to apply for safe deposit locker facility

· Collect foreign remittance in both T.C. and Draft.

· Transfer of fund from one branch to another by

· Telegraphic Transfer

· Demand Draft

· Mail Transfer

· Collection of cheque through clearing house

· Online banking service.

3.1.3 Short Term Deposit (STD):

Short Term Deposit or STD account opening procedure is similar to that of the saving account. The difference is the interest rate.

3.1.3.1 Bank Deposit:

3.1.3.2 Other than Bank Deposit:

• Public Bank Deposit: ( Govt., Semi Govt., Autonomous Body, Educational Institutions, Association, Trust and NGO)

• Private Deposit:

Features:

· Minimum 7 days notice is needed for the withdrawn of the both STD. but it is now become practice to withdrawn money by the client without any earlier notice.

· If any financial organization or any autonomous bodies open this account then no excise duty will be deducted but tax will be deducted.

· Interest rate is calculated on daily basis.

3.1.4 Fixed Deposit Receipt

Fixed Deposit is the amount deposited by the customer for a fixed period of time. It offers comparatively higher rate of interest. For 1 month interest rate is 9%, for 3 months interest rate is 11%, for 6 months interest rate is 12.5% and for 1 year interest rate is 13%.

Procedure of FDR Account:

· Bank provides the interested customer a Fixed Deposit form.

· Customers fill the form, which contains name of the customer, amount of money, duration, rate of interest etc.

· After filling the form customer pay the money by cash or cheque.

· After receiving the form from the customer the respected officer look for the cash seal or transfer seal. If any of these are present and the form is properly signed the officer provides a specimen signature card to the customer.

· Customer signs thrice on the specimen signature card along with his or her full name.

· At the same time respected officer issue a fixed deposit receipt on the specific FDR block.

· This block includes:

· Name of the customer

· Amount of money deposited

· Date on which the is deposited

· Due date- on which the FDR will be matured.

· Duration for which FDR has been made.

· Rate of interest to be paid.

An FDR is renewed automatically if the customer does not come to cash it after the maturity period. It can also be renewed upon the direction of the customer.

Features:

· Interest is compounded once a quarter

· Loan may be allowed up to 80% of the deposited amount under lien.

· Excise duty and source tax etc. are deductible from the depositor profit.

3.1.5 Deposit Scheme

Under deposit scheme, the Standard Bank Ltd (SBL) offers different types of products (scheme) to help the fixed income people to save money and meet any future financial obligations. The schemes offer a large amount of money after a certain period of time if the account holders deposit a specific amount on monthly basis. The schemes are-

I. Three stage savings scheme

II. Monthly benefit scheme

III. Marriage savings scheme

IV. Juniors savers scheme

V. Lakhpati scheme.

3.1.5.1 Three stage savings scheme (TSSS)

The scheme is designed to help the fixed income group to save money and build up a sizable fund with which they can go for some income generating venture to improve the quality of their life and/ or meet any future financial obligations. Any citizen of Bangladesh can open this scheme. The scheme can be opened in the name of an individual only. TSSS is perfect for those 18 years of age or elder.

Product Name: The name of the scheme is “Three Stage Savings Scheme”.

Monthly Deposit Amount

To open the scheme requires monthly installment of BDT 500 or its multiple up to BDT 5000 till maturity. This is a fixed term deposit savings scheme.

Tenure

The scheme is for 2, 4 & 6 years (every 2^nd year is known as a stage), interest rate 8% to 13%.

Loan Facility:

Loan may be allowed up to 80% of the deposited amount under lien on the same after at least 2(two) years of regular payment of installments.

Example: monthly deposit Tk.500/-

3.1.5.2 Monthly Benefit scheme (MBS)

The Monthly Benefit Scheme (MBS) is a deposit scheme where the depositor gets monthly benefit out of his deposit. The scheme is designed for the benefit of persons who intend to meet the monthly budget of their families from the income out of their deposit.

Any citizen of Bangladesh can open this scheme. The scheme can be opened in the name of an individual only. MBS is perfect for those 18 of age or older.

To open the scheme requires deposit of BDT 1,00,000/= or its multiples but maximum BDT 1,00,00,000/=. The deposit will be for a period of 2/3/5 years and the principal amount is refundable on maturity.

Monthly Benefit: Benefit will be as per the following example:

3.4 DEPOSIT SECTION

Deposit is the lifeblood of a bank. From the history and origin of the banking system

We know that deposit collection is the main function of a bank.

3.4.1 Accepting deposits:

The deposits that are accepted by Standard Bank like other banks may be classified in to,—

a) Demand Deposits

b) Time Deposits

a) Demand deposits:

These deposits are withdrawn able without notice, e.g. current deposits. Standard Bank accepts demand deposits through the opening of,-

i) Current account

ii) Savings account

iii) Call deposits from the fellow bankers

b) Time deposits:

A deposit which is payable at a fixed date or after a period of notice is a time deposit. Standard Bank accepts time deposits through Fixed Deposit Receipt (FDR), Short Term Deposit (STD) and Bearer Certificate Deposit (BCD) etc.

While accepting these deposits, a contract is done between the bank and the customer. When the banker opens an account in the name of a customer, there arises a contract between the two. This contract will be valid one only when both the parties are competent to enter into contracts. As account opening initiates the fundamental relationship & since the banker has to deal with different kinds of persons with different legal status, Standard Bank officials remain very much careful about the competency of the customers.

3.5 CASH SECTION

Banks, as a financial institution, accept surplus money from the people as deposit and give them opportunity to withdraw the same by cheque, etc. But among the banking activities, cash department play an important role. It does the main function of a commercial bank i.e. receiving the deposit and paying the cash on demand. As this department deals directly with the customers, the reputation of the bank depends much on it. The functions of a cash department are described below:

3.5.1 Function of Cash Department:

3.5.1.a Cash Payment:

1. Cash payment is made only against cheque

2. This is the unique function of the banking system which is known as “payment on demand”

3. It makes payment only against its printed valid Cheque

3.5.1.b 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 collects money only its receipts forms

3.5.1.c Cash packing:

After the banking hour cash is packed according to the denomination. Notes are counted and packed in bundles and stamped with initial.

3.6: LOCAL REMITTANCE:

Carrying cash money is troublesome and risky. That’s why money can be transferred from one place to another through banking channel. This is called remittance. Remittances of funds are one of the most important aspects of the Commercial Banks in rendering services to its customers.

3.6.1 Types of remittance:

· Between banks and non banks customer

· Between banks in the same country

· Between banks in the different centers.

· Between banks and central bank in the same country

· Between central bank of different customers.

The main instruments used by the Standard Bank of remittance of funds are

· Payment order ( PO)

· Demand Draft ( DD)

· Telegraphic Transfer (TT)

Pay Order gives the payee the right to claim payment from the issuing bank. Payment is made from issuing branch only. Generally remit fund within the clearinghouse area of issuing branch. Bank charge only commission for this. However party must have an account with the bank, so that whenever the fund refund they(party) can collect it. But for the student and the pay order for job purpose of any applicant, account with the bank is not mandatory. Because in this case fund are non-refundable.

Demand Draft is an order of issuing bank on another branch of the same bank to pay specified sum of money to payee on demand. Payment is made from ordered branch. Generally remit fund outside the clearinghouse area of issuing branch. Payee can also be the purchaser. Bank confirm through checking the ‘Test Code’ Bank charge a commission and telex charge for it.

Issuing branch requests another branch to pay specified money to the specific payee on demand by Telegraph /Telephone. Payment is made from ordered branch. TT can be remit anywhere in the country. Bank charge a commission plus telephone charge. However this service is available only for a limited number of customer.

3.6.2 Test – key Arrangement:

Test key arrangement is a secret code maintained by the banks for the authentication for their telex messages. It is a systematic procedure by which a test number is and the person to whom this number is given can easily authenticate the same test number by maintaining that same procedure. Standard Bank has test key arrangement with so many banks for the authentication of LC message and for making payment.

3.7 CLEARING SECTION:

Cheques, Pay Order (P.O), Demand Draft (D.D.) Collection of amount of other banks on behalf of its customer are a basic function of a Clearing Department.

• Clearing:

Clearing is a system by which a bank can collect customers fund from one bank to another through clearing house.

• Clearing House:

Clearing House is a place where the representatives of different banks get together to receive and deliver cheque with another banks.

Normally, Bangladesh Bank performs the Clearing House in Dhaka, Chittagong, Rajshahi, and Khulna & Bogra. Where there is no branch of Bangladesh Bank, Sonali bank arrange this function.

• Member Of Clearing House:

Standard Bank LTD. is a scheduled Bank. According to the Article 37(2) of Bangladesh Bank Order, 1972, the banks, which are the member of the clearinghouse, are called as Scheduled Banks. The scheduled banks clear the cheque drawn upon one another through the clearinghouse.

· Types of Clearing:

A) Outward Clearing: When the Branches of a Bank receive cheque from its customers drawn on the other Banks within the local clearing zone for collection through Clearing House , it is Outward Clearing .

B) Inward Clearing: When the Banks receive cheque drawn on them from other Banks in the Clearing House , it is Inward Clearing .

• Types of clearing house: There are two type of clearing house: Those are

1) Normal clearing house

2) Same day clearing house

Normal clearing house:

1) 1^st house: 1^st house normally stands at 10 a.m. to 11a.m

2) 2^nd house: 2^nd house normally stands after 3 p.m. and it is known as return house.

Same day clearing house:

1) 1^st house: 1^st house normally stands at 11 a.m. to 12 p.m

2) 2^nd house: 2^nd house normally stands after 2 p.m. and it is known as return house.

• Who will deposit cheque for Clearing: Only the regular customers i.e. who have Savings, Current, STD & Loan Account in the bank can deposit cheque for collection of fund through Clearing house.

• Precaution at the time of cheque receiving for Clearing, Collection of LBC, OBC & Transfer:

1) Name of the account holder same in the cheque & deposit slip.

2) Amount in The cheque & deposit slip must be same in words & in figure

3) Date in the cheque may be on or before (but not more than six months back) clearing house date.

4) Bank & Branch name of the cheque, it’s number & date in the Deposit slip.

5) Cheque must be signed.

6) Signature for confirmation of date, amount in words / in figure Cutting &

Mutilation of cheque.

7) Cheque should be crossed (not for bearer cheque).

8) Account number in the deposit slip must be clear.

9) Depositor’s signature in the deposit slip.

Return house:

Return House means 2^nd house where the representatives of the Bank meet after 3 p.m. to receive and deliver dishonored cheque, which placed in the 1^st Clearing House.

Cheque may be dishonored for any one of the following reasons:

1) Insufficient fund.

2) Amount in figure and word differs.

3) Cheque out of date/ post- dated.

4) Payment stopped by the drawer.

5) ………….Payee’s endorsement irregular / illegible / required.

6) Drawer’s signature differ / required.

7) Crossed cheque to be presented through a bank.

8) Other specific reasons not mentioned above.

The dishonor cheque entry in the Return Register & the party is informed about it. Party‘s signature required in the return register to deliver the dishonor cheque. After duration, the return cheque is sent to the party’s mailing address with Return Memo.

If the cheque is dishonored due to insufficiency of funds than STANDARD Bank charges. 25/=as penalty.

Responsibility of the concerned officer for the Clearing Cheque:

1) Crossing of the cheque.

2) (Computer) posting of the cheque.

3) Clearing seal & proper endorsement of the cheque.

4) Separation of cheque from deposit slip.

5) Sorting of cheque 1st bank wise and then on branch wise.

6) Computer print 1^st branch wise & then bank wise.

7) Preparation of 1^st Clearing House computer validation sheet.

8) Examine computer validation sheet with the deposit slip to justify the computer posting

9) Copy of computer posting in the floppy disk.

Bills Collection:

In modern banking the mechanism has become complex as far as smooth transaction and safety is concerned. Customer does pay and receive bill from their counterpart as a result of transaction. Commercial bank’s duty is to collect bills on behalf of their customer.

Types of Bills for Collection

i. Outward Bills for Collection (OBC).

ii. Inward Bills for Collection (IBC).

OBC

OBC means Outward Bills for Collection .OBC exists with different branches of different banks outside the local clearing house . Normally two types of OBC :

1) OBC with different branches of other banks

2) OBC with different branches of the same bank

Procedure of OBC:

1) Entry in the OBC register.

2) Put OBC number in the cheque.

3) “Crossing seal” on the left corner of the cheque & “ payees account will be credited on realization “ seal on the back of the cheque with signature of the concerned officer.

4) Despatch the OBC cheque with forwarding.

5) Reserve the photocopy of the cheque, carbon copy of the forwarding and deposit slip of the cheque in the OBC file.

Commission for collection:

Inward bills for collection (IBC)

When the banks collect bills as an agent of the collecting branch, the system is known as IBC. In this case the bank will work as an agent of the collection bank. The branch receives a forwarding letter and the bill.

Procedure of IBC:

1. IBC against OBC: To receive the OBC cheque first we have to give entry in the IBC Register .The IBC number should put on the forwarding of the OBC with date.
2. Deposit of OBC amount: OBC cheque amount is put into the “sundry deposit-sundry Creditors account”, prepare debit & credit voucher of it . If the OBC cheque is honored, send credit advice (IBCA) with signature & advice number of the concern branch for the OBC amount.
3. If the OBC cheque is dishonored, the concerned branch is informed about it .
4. Again place in the clearing house or send the OBC cheque with Return Memo to the issuing branch according to their information.

3.8 ACCOUNTS SECTION:

Accounts Department is called as the nerve Centre of the bank. In banking business, transactions are done every day and these transactions are to be recorded properly and systematically as the banks deal with the depositors’ money. . Improper recording of transactions will lead to the mismatch in the debit side and in the credit side. To avoid these mishaps, the bank provides a separate department; whose function is to check the mistakes in passing vouchers or wrong entries or fraud or forgery. This department is called as Accounts Department. If any discrepancy arises regarding any transaction this department report to the concerned department.

Besides these, the branch has to prepare some internal statements as well as some statutory statements, which are to be submitted to the Central Bank and the Head Office. This department prepares all these statements.

Workings of this department:

· Recording the transactions in the cashbook.

· Recording the transactions in general and subsidiary ledger.

· Preparing the daily position of the branch comprising of deposit and cash.

· Preparing the daily Statement of Affairs showing all the assets and liability of the branch as per General Ledger and Subsidiary Ledger separately.

· Making payment of all the expenses of the branch.

· Recording inters branch fund transfer and providing accounting treatment in this regard.

· Preparing the monthly salary statements for the employees.

· Preparing the weekly position for the branch which is sent to the Head Office to maintain Cash Reserve Requirement (C.R.R)

· Preparing the monthly position for the branch which is sent to the Head Office to maintain Statutory Liquidity Requirement (S.L.R)

· Make charges for different types of duties

· Preparing the budget for the branch by fixing the target regarding profit and deposit so as to take necessary steps to generate and mobilize deposit.

· Checking of Transaction List

· Recording of the vouchers in the Voucher Register.

· Packing of the correct vouchers according to the debit voucher and the credit voucher

Chapter-4

Foreign Exchange

FOREIGN EXCHANGE

4.1 Introduction:

International trade involves a flow of goods from seller to buyer in accordance with a contract sale .Different amount of natural resource, while other might have not. Therefore, countries need to exchange goods to satisfy mutual needs and wants.

4.2 INTERNATIONAL TRADE:

International trade involves a flow of goods from seller to buyer in accordance with a contract of scale. It is the exchange of goods and services between peoples of different countries.

4.2.1 Reason for international trade:

Main reason for international trade is as follows:

?Uneven resources distribution: different cou