Bangladeshi nationals are employed in a variety of professions in reputed
organizations all over the world. Their expertise and professional acumen have
earned Bangladesh not only fame and prestige but also hard currency
strengthening the backbone of our economy. Bangladeshi nationals living abroad
are to remit their hard earned savings through banking channels, but not all of
them are aware of friendly banking channels they may send their money through.
Agrani Bank Ltd. a leading commercial
bank with 866 outlets strategically located in almost all the commercial areas
throughout Bangladesh, overseas Exchange Houses and hundreds of overseas
Correspondents, came into being in 1972 immediately after the emergence of
Bangladesh as an independent state. It started functioning as nationalised
commercial bank taking over assets and liabilities of the erstwhile Habib Bank
ltd and the commerce Bank ltd., functioning in the former East Pakistan.
having established contractual relationship with about 400 Overseas
Correspondents and 30 Exchange Houses all over the world, is ready to cater to
the banking needs of foreigners as well as Bangladeshis living abroad as far as
incoming remittance is concerned.
To ensure quick remittance inflow into Bangladesh
Agrani Bank Limited has also made Special Arrangement with Citi Bank N.A. Under
the arrangement, Citi bank N.A. and its correspondents, subsidiaries and
affiliates outside Bangladesh will collect remittances and will issue Drafts on
designated branches of Agrani Bank Limited. Designated Agrani Bank Limited
Branches shall honour /execute payments of all the Drafts instantly within the
stipulated time of 72 hours.
With a view to serving a huge number of
Bangladeshi guest workers in Singapore, Agrani Bank Limited has taken a bold
step to open in Singapore Agrani Exchange House Pvt. Ltd, a subsidiary company
fully owned by Agrani Bank Limited, which started its operation since 8th
Bangladesh government has put emphasis on
increasing remittance inflow and is determined to deter money transfer through
non-banking channels. Anyone involved in money laundering activity in any form
like “Hoondi” business are sure to be awarded heavy punishment, if
found guilty under “Money Laundering Prevention Act, 2002” passed
recently by Bangladesh Government. We request all concerned, especially our
Bangladeshi brothers and sisters, to send their money through banking channels
and help Bangladesh develop with their hard earned foreign currency.
been maintaining around 903 number of correspondent including Exchange Houses
located in different parts of the world to facilitate our international trade
and other transactions of trade and remittances globally. The expatiate
Bangladesh who are working abroad, can easily take the opportunity to remit
their hard earned foreign exchange to their respective beneficiaries utilizing
our correspondent services.
The Bank is
fully owned by the Government of the People Republic of Bangladesh. Agrani Bank Limited is governed by a
Board of Directors consisting of 7(seven) members headed by a chairman. The
Managing director (Chief Executive) heads the Bank; Deputy Managing Director
and General Managers assist Managing Director. The bank has 7 Circle offices,
30 Divisions and a head office, 52 zonal offices and 866 branches including 10
corporate and 40 AD (authorised dealer) branches. The corporate and AD branches
are authorised to deal in Foreign exchange business.
Establishment and Status of the Bank:
Agrani Bank is a Nationalized Commercial
Bank established by the Bangladesh Bank’s (Nationalization) Order 1972 (P.O. 26
of 1972) and is fully owned by the Government of the People’s Republic of
Bangladesh. The Bank had 866 branches as on 31 December 2008 (no overseas
branch). The bank also has two wholly owned subsidiary Companies named Agrani
Exchange House (Pvt) Ltd. in Singapore and Agrani Remittance House SDN, BHD,
Nature of Business:
The principal activities of the Bank are
providing all kinds of commercial banking services to its customers and the
principal activities of its subsidiaries are to carry on the remittance
business and to undertake and participate in any or all transactions, and
operations commonly carried or undertaken by remittance and exchange houses.
Scope and objective:
The accounting policy comprises principles
and basic assumptions, concepts, rules, practices,and procedures adopted by the
management for reporting the activity of the Bank and financial statements
preparation and presentation. The purpose of accounting policy is to provide
the necessary organizational and methodological direction in carrying the
accounting activity of the Bank.
1.3 ORGANOGRAM OF AGRANI BANK LTD.
1.4 GEOGRAPHICAL POSITION OF AGRANI BANK LTD. IN
1.5 EXISTING DIVITION OF AGRANI BANK LTD.
1.6 HILIGHTS ON THE
OVERALL ACTIVITIES OF THE BANK FOR THE YEAR 2007 AND 2008:
Paid up Capital
Total loans and advances
Total contingent liabilities and commitments
Credit deposit ratio(%)
Profit after tax and provisions
Amount of classified loans
Provisions kept against classified loans
Cost of fund (%)
Average interest earning assets
2.1GENERAL BANKING OF
AGRANI BANK LTD.
Banking department is considered as the direct customer service-centre. The
clients and customers build their impression whether they are going for further
dealings with the bank or not on the basis of their service. Moreover this is
the first impression about the bank. So general banking section must be taken
Banking department conducts different sorts of functions that ultimately affect
the success of the whole bank. Functions that AGRANI BANK Limited, A. H. Road
Branch performs are discussed below:
Banker Customer relationship;
customer’s money from one place to another;
bills for customers;
deposit and honouring Cheque drawn over the A. H. Road Branch.
2.3 CONSTITUENTS OF GENERAL BANKING DEPARTMENT:
Banking Department constitutes with the following sections:
- Account Opening Section
- Remittance Section
- Bills Section
- Clearing Section
of the different sections are discussed below:
2.4 ACCOUNT OPENING:
One of the vital sections under general Banking is the account opening
section. Banker customer relationship begins through this section. Various
tasks are performed in this section. Banking business is very much correlated
with banker customer relationship. To be a customer one person must have some
sort of accounts with the banker. Account Opening section establishes this
relationship by opening new accounts. Vital thing to open any individual
account also fill up the KYC (Know Your Customer) form and fill up the
transaction profile to avoid or identify the black money protection or money
laundering. It is ordered by Bangladesh Bank.
of different types of account:
Limited (AGRANI BANK) may open the following types of accounts and may receive
the deposits in those accounts:
Savings Bank Deposit;
Short Term Deposit;
Monthly Savings scheme.
Agrani Bank Pension scheme ABPSP (5years, 10year)
All these type accounts are briefly described in
A current account is an account that is generally opened by business
people for their convenience. Money can be deposited and withdrawn at any time.
It does not allow any interest on this account. Two important privileges
customer can enjoy in a current account
a) Overdraft facility
b) Other facilities like collection of checks, transfer of money,
rendering agency and general utility services. Current Deposit Accounts
shall be opened with a minimum amount of Tk.1000.00. But under special
circumstances it may be opened with Tk.500.00. It is payable on demand. No
interest is paid in these types of accounts.
2.4.3 Savings Bank Account:
This deposit is intended primarily for small-scale savers. The main
object of this account is promotion of thrift. Hence, there is restriction of
withdrawals in a month.
of Tk.5000.00 is required for opening this type of account. The account may not
be retained if the balance falls below Tk.200.00. Not more than one account
shall be opened in one name. A depositor shall be allowed to withdraw per week
up to 25% of the balance of his account. For calculation of interest the
minimum balance at the credit of an account between the close of 8th
in the beginning of the month should be taken into consideration.
2.4.4. Fixed Deposit Account:
A fixed deposit is one that is repayable after the expiry of a
predetermined period fixed by the customer himself. The period varies from
three month to three year and above. Fixed deposit accounts are opened for a
fixed period varying from three months to three years or above and are payable
at a fixed date of maturity. Interest on this deposit is paid at the rate fixed
by H.O. from time to time depending on the period of maturity. Interest is
payable only at the maturity of the deposit.
The following table shows different FDR rates:
Table-2: Different FDR rates
FDR RATE (%)
months up to 6 months
months up to 1 year
From I year
up to 2 year
From 2 year
up to 5 year
It is a deposit account open by customer where customer deposited money
for short period. Customer can draw money after giving short notice. The deposits
held in these accounts that should be payable on short time for 7 days or 21
days. The deposits may be accepted for period and rate of interest is fixed by
H.O. from time to time. The STD interest rates in AGRANI BANK are 3%.
3.1 Agrani Bank Pension Scheme
It is one type of savings scheme where
instalment payment should be deposited to the bank within first 10 days of each
month. Monthly Savings Scheme in AGRANI BANK has been introduced replacing
Deposit Pension Scheme since March 1995;lt can be opened for five or ten year’s
maturity period for Tk.100.00 or Tk.500.00 monthly.
Table-3: Monthly Instalment of APS:
Table-3: Monthly Instalment of ABS:
3.2 Nature of Accounts (Ownership Status):
BANK, A. H. Road Branch the following types of accounts may be opened:
Proprietorship Firm Accounts
Partnership Concerns Accounts
Private Limited Companies Account
Public Limited Companies Account
Accounts of Societies, Clubs, Association etc.
Accounts of Local Authorities
3.3 GENERAL PROCEDURES OF OPENING ACCOUNTS:
3.3.1 Current Deposit Account:
are needed to follow in case of opening a current deposit account is as
- The account opening form of
current account and specimen signature cards are supplied to the
customers, which is filled and signed by them.
- In case of individual account,
an account holder signs the AOF and SSC ‘in his individual capacity both
under “Yours Faithfully- and “Specimen Signature”. In case
of Partnership firms & Proprietary concerns it is to be signed by the
persons/partners in their individual capacity under “Yours
Faithfully” and in their official capacity under ‘Specimen Signature’
In other cases (Pvt. Ltd. Company, Public Ltd. Company) both the
signatures must be in official capacity.
- A CD account holder of the bank
shall introduce the account. An elite of the locality well known to the
banker can introduce it. Official other than staff of AGRANI BANK can also
- Clear instructions with regard
to operations are noted in the AOF and SSC, especially III case of death
or inability of any of the joint account holder.
- The officer in charge, Deposit
Department, verifies the signature of the introducer. The stamp
“Signature Verified” is affixed near the signature of the
introducer & deposit officer signs over it.
- Approval of the branch in charge
is obtained on the Account Opening Form.
- The signature of the account
holder is admitted by the in charge of deposit department, and
“Signature Admitted” stamp is affixed near the specimen
signature of the account holder.
- Particulars of the account
opening form is entered in the ‘Account Opened and Closed Register’ in
- The account number allotted to
the new account is given on the AOF, SSC, and Cheque, Book requisition
- The customer is supplied with
Pay-in -slip Book (SF, -9) and requested to deposit the money with cash
- Cheque is issued only after the
Account Opening Form has been completed in all respects and initial cash
deposit has been made. The chequebook series is noted in the Cheque
- Particulars of the Account
Opening Form are entered in, the Reference Book under alphabetical order.
- The officer in charge initials
the Account Opening Register and Reference Book. AOF, SSC und chequebooks
Requisition Slip are sent to the ledger keeper for opening the account in
the CD ledger.
- The title of account and other
particulars are written in bold letters neatly on the ledger folio.
- The chequebooks series are
entered in the cage provided for the ledger.
- The Opening of the account and
the issue of cheque books in the ledger are authenticated by the manager
deposit department by signing across the title of the account and in the
cheque series cage.
- Accounting Opening form shall be
posted in a file in serial orders. The specimen signature card shall be
placed in the specimen signature card box in numerical order.
- Account Opening Form is posted
in file in serial order.
- While issuing new chequebook,
signature on the new chequebook requisition forms shall be properly
3.3 .2 Savings Bank Accounts:
of opening Current Deposit Accounts are applicable for opening Savings Bank
Accounts with the following exceptions:
- Separate Account Opened and Closed
Register, Reference Book and Posting Files are maintained.
- Pay-in-slip Book No. SF-8 and
Savings Book Ledger are used.
opening form (SF-16) and specimen signature card shall be given to the customer
and get them filled in and signed by him. Voucher no SF-12 crediting
“Fixed Deposit Account” with the amount of deposit with full
narration viz. The name of the party, period of deposit, and rate of interest
etc. shall be prepared and be given to the depositor to deposit cash with cash
officer after recording the particulars in the scroll book. in case of payment
by cheque it shall be attached to the credit voucher and sent to the deposit
department for posting and cancellation. On receipt of the vouchers from the
cash department a Fixed Deposit Receipt shall be prepared and entered in the
Fixed Deposit Ledger. To admit the signature of the account holder the stamp
‘Signature Admitted’ shall be affixed near the specimen signature in the
account opening form and specimen signature card.
The AOF, SSC,
the ledger and the voucher shall be sent to the officer in charge for
signature. The in charge shall sign the receipt and initial the ledger. At the
time of signing the receipt, he shall verify the authenticity of the voucher.
documents shall be sent to the Manager /Authorised Official for his signature
on the receipt and across the stamp ‘Signature admitted’ on the account opening
form, Specimen Signature Card, and the related voucher. The branch manager
shall ensure that the printed number on the deposit receipt forms and in
deposit receipt books in use are invariably noted in the respective ledger in
At the close
of each business day the officer in charge shall verify the total amount for
which the Deposit receipt have been used during the day both from the credit
vouchers and the counter foils of the various deposit receipts.
Bank should always consider the following matters while opening accounts
for the limited company:
? Chairman, managing director or secretary duly attests that all documents.
? Consistency among all the papers submitted by company.
? Any change of existing director shall be informed to the bank with supported documents.
TO BE OBTAINED FOR DIFFERENT TYPES OF ACCOUNT:
When anyone comes to open an accounts he has to submit some documents to
the banker. Different Types of document needs for different customer. Some
common documents require for all types of account are:
Specimen signature card.
Account opening agreement
Two copies of Photograph of
account holder and two copies for nominee (if any).
Deposit slips book.
Letter of mandate
authorising another person to operate the account on behalf of the account
h. Special instruction ”
either or survivor” for joint account.
Document require for Proprietorship business to open an account are:
Introducers with account
Valid trade license from
Rajshahi City Corporation. Attested copy should be submitted.
Receipt of Tax revenue copy
from Rajshahi City Corporation.
3.4.2 Partnership account:
Documents to be obtained for opening an account of partnership firm are:
Trades license or board
Deeds of partnership signed
by all partners.
Signature of at least two
Two copies photograph of
signed by all partners to open account.
must indicate authorised person who operates the account.
3.4.3 Limited company
Documents require for Limited company to open an account are:
Memorandum and Articles of
Association of company.
Power of attorney.
Resolution of board of
Certificate of commencement
of business (in case of public limited company).
List of directors
Two copies of passport size
photograph of account operators.
Others: name of directors
with signature, minutes of board of directors.
3.5 ISSUE OF
CHEQUEBOOK TO CUSTOMERS:
A cheque is a
very important document. Cheque is an instrument in printed form containing an
unconditional order, signed by the account holder directing a certain person
signed by the account holder directing a certain person to pay a certain sum of
money only to or to the order of a certain person or to the barer of the
instrument, A cheque is always supposed to be drawn against the funds in the
party’s account in the bank. It may be crossed for safety
3.5.2 Types of Chequebook:
Types of Cheques in a flow chart
To issue of chequebook to account holder (current and savings bank) is
another major function of the account opening section. Chequebook is used for
drawing money from account. After filling the application form and submit it
with other documents customer gets a cheque issuing requisition slip. If
customer fill it and submit to the banker than he will get a chequebook. It has
been observed that for savings bank account holder bank is issuing a chequebook
containing 10 leaves. For current account bank is issuing two types of
chequebook. One type of cheque book containing 50 leaves and issued to customer
which doing more transaction and other type of cheque book consisting with 25
leaves for the customer having less transaction with the bank.
Before using all the leaves of cheque book customer has to submit the
requisition slip, which was kept at the last end of the chequebook with proper
signature and address. On receiving the chequebook requisition slip bank issues
new chequebook and record the cheque book serial number in the chequebook issue
register with customer’s signature. It is seen that in issuing cheque book the
concerned officer of the account opening section sealed the account number of
the account holder and location of the branch on each leaves of the cheque book
and finally hand over the cheque to the account holder.
3. 6 REMITTANCE SECTION:
The major function of commercial banks is mobilisation of fund. Other
than this, banks provide ancillary services to its clients. Clients need to
remit money from one place to another for their business or other purposes.
Banks fulfil this need of customers by means of remittance service. Money can be
transmitted domestically or internationally, which known as local remittance
and foreign remittance. Transferring money within the country is known as local
remittance and beyond the national boundary is known as foreign remittance.
3.7.1 Local Remittance:
There are three ways of transferring fund domestically. The modes of
transferring funds are:
• Demand Draft. (D.D.)
• Telegraphic Transfer (T.T.)
• Mail Transfer
Now we shall
discuss briefly about these instruments and their issuing procedure.
3.7.1 Demand Draft (DD):
Demand draft is an instrument which carry out the order of the issuing
branch upon another branch of the same bank known as drawee branch for the
payment of certain amount of money to the payee or to his order on demand by
the beneficiary presenting the draft itself.
DD is a very much popular instrument for remitting money from one corner
of a country to another. The instrument is basically used for transfer and
payment. Difference between PO and DD is in terms of place only. PO is used for
remitting money within the city where as DD is used for within the country.
3.7.2 Telegraphic Transfer (TT):
Telegraphic transfer is one of the fastest means of transferring money
from one branch to another or from one place to another. Regarding the TT the
branch is to be sure there is testing arrangement for authenticating the telex
messages with the desired branch to make payment. No instrument is given for
TT. Both parties should have account, as money is transferred. In Telegraphic
Transfer (T.T.) the issuing branch sends a telegraphic message to the branch at
the other end, to pay a certain amount of money to a named payee’s account
maintained with the drawee branch or through a pay order if no account is
maintained with the drawee branch. In AGRANI BANK, A. H. Road Branch the charge
for telegraphic transfer is Tk.1.1 per thousand. Telegraphic charge is Tk.50.
15% VAT is charged on the commission amount that is transferred to the
Government later on.
3.7.3 Procedure of Issuing T.T
customer is asked to complete application form no SF-64, which also treated as credit voucher for Head
Office accounts (branch concerned).
procedures is as follows:
i. Telegram charges are also
recovered from the customer and are credited
to Income Account Telegram Charges Recovered.
ii. A credit voucher is prepared for
iii. Test of telegram is written and
handed over to the in charge.
iv. The test is checked, coded and
tested by the In charge and the Manager v.
The message is typed on form (SF-60) in duplicate.
vi. The telegram is checked and
signed by the In charge and the Manager.
vii. Original Telegram and the
confirmation are sent to the despatch department.
viii. Inter branch credit advice is
prepared in duplicate. The original meant for Head
Office is send to Accounts Department.
ix. Separate register (SF-S8-40) is
maintained for Telegraphic Transfer Issued.
Charges are calculated and inserted in the cage provided in the application form.
b) Party is
advised to draw cheques favouring branch and deposit the same to the receiving cashier.
receives cheque and sent it to the Officer In Charge for passing and cancellation.
following entries are passed.
i If the cheque includes commission charges:
Cr. -H.O. A/c
Cr- Income A/c
Commission on T.T. (15% VAT on T.T.)
ii. If the cheque does not include commission charges:
Dr- party’s Account
Cr- H.O. a/c
Dr- Party’s A/c
voucher (No SF-11A) with the amount of
Account Commission on T.T.
e) Party is
asked to fill up the application form (No SF-64) f) Telegraphic Transfer is entered in the T.T. issued
g) T.T. number
is written In the voucher and the Voucher along with the register is send to the In charge for
procedure is adopted as explained in Para (b) of TT against cash.
Against a letter of instruction:
The letter is
sent to deposit department for verification of signature and then the following
entries are passed:
Dr- Party’s Account (with
T.T. commission and T.T. amount) Credit: H.O. account (Branch concerned)
account commission on T.T.
are similar to the T.T. against cash procedure.
3.7.4 Payment of Telegraphic Transfer
Receipt of Telegram:
a) Telegram is
detected and test is verified by the In charge and the manager
b) If the test
does bot agree or the telegram is received mutilated, a telegram is sent to the
branch concerned asking them to repeat the test of the message with correct
c) If the test
agrees, stamp (No.26) is affixed on the telegram and signed by the officers.
d) Following entries are passed:
Dr-H.O. general account (Branch Concerned)
Cr.-T.T. payable account
Dr-T.T. payable account
Advice to payee:
1) When the paying branch from the
issuing branch receives T.T. Advice, the advice (IBCA) is posted in the T.T.
register for response only without preparing any voucher.
2) If the
amount is to be credited to the payee’s account, following entries are passed:
account Date of payment is noted in the register and
3) If the T.T.
is to be issued:
i . The receipt number is noted on the register
ii. The receipt along with the register is sent for checking and
Of the in charge
iii. After the signature of charge the receipt signed by the
iv. The receipt is send to the payee.
Cash is one of
the most important sections of General Banking Department. It deals with cash,
the most liquid asset. The value of banking is insured for a certain some of
money. When money exceeds the limit it must be sent to the Central bank vault.
So Cash In charge should always be concerned about his custody. A Senior
Officer heads cash section of General Banking Department of AGRANI BANK, A.
Hamid Road Branch.
3.8.1. Functions of this Section:
- Receiving cash
- Paying cash
- Issuing vouchers
- Making Proper entries in the
Deposit may be
done by cash, cheque or clearing. Clearing will be discussed later in this
chapter. Procedure of deposit by cash:
Pay-in -slip or credit Voucher (Form no. SF-9) for CD accounts and Form no. SF-8 for SB accounts filled in by
At first he goes to the Scroll Writer. The Scroll Writer verifying the particulars enters them into the Scroll
Book under progressive serial and gives
the serial number on it.
After getting the scroll do the customer goes to the Cash receipt counters and submits it to the receiving cash officer. The officer checks the
title of’ the account, its
number, amounts in words and figures.
Receiving cash Officer receives cash duly counted and checked and enters the particulars in the Receiving cash-book
and gives Initials on it.
After that the Receiving Cash Officer gives it to the Computer Operator (an officer)
for entering in the computer ledger. In this case party’s account is credited.
- The computer operator then
affixes the Cash received stamp on the credit voucher.
At the end of
each day the total figure in the scroll book must be equal to the total figure
in the Receiving cash book and computer deposit statement so that ii is
withdrawals of cash through cheques, DD, Pay Order are discussed below-
- At first the bearer of an
instrument come to the Token Counter and submits his instrument to the
assistant Token Officer. The Token Officer verifies the account number,
date, title, branch name and signature. If these are correct he enters the
particulars in the Token book and receives signature of the bearer on the
opposite side of the instrument.
- He gives his signature and token
no on the opposite side of the instrument and gives a Token to the
- He sends the instrument to the
verifying officer for signature verification. If’ the signature is
authentic the verifying officer sends it to the computer operator for
making entries in the computer ledger. After entering the account number
in the computer, the computer shows the particulars of the customer’s
account including current balance. If there is available balance the
computer operator debits the customer’s account and affixes “POSTED”
and “PAY CASH” seal on the instrument and sign in the specified
place on the instrument. He makes a print out of present balance of the
- Then he sends back the
instrument and prints out of the present balance to the verifying officer and
the verifying officer signs over it and sends to the cash counter for cash
- Receiving the Token from the
customer the paying cash officer pays cash to the customer and enters the
amount to Cash Paying Register indicating the token number.
At the end of
each day the amount in the Token Book must equal to the amount in the Paying
Cash Register and Computer Withdrawal Statement.
3.8.4 Balancing Of Cash:
At the end of
each business day the Receiving and Paying Cashier’s Book are balanced. After Cash
Balance Book, is written the Cash Position Memo is prepared, checked and signed
by the Cash Officer. The Cash Position Memo is sent to the Accounts Department.
3.9 BILLS SECTION:
AGRANI BANK, A. H. Road Branch submit many instruments in the bill section for
collection. Bill section plays a vital role in collecting these bills. The
bills submitted for collection can be divided into two categories, namely
Outward Bills; and
3.9.1 Outward Bills for Collection:
The instruments are received duly entered in the
The instruments are checked for any apparent
discrepancy and are compared with the particulars noted in the Pay-in-Slip and
The counterfoil is stamped and signed by the
The instruments and the Pay-in-Slip detached from
the counterfoil, which is handed over to the customer.
The instruments are stamped
The instruments are suitable endorsed.
The details of the instruments and special
instructions are entered in the, Outward Bills Collection Register. And a
collection number is allotted in serial order which is also noted on the on the
instruments and the pay-in -slip.
The instruments are enlisted in the forwarding
schedule and any special instructions are noted therein.
The instruments drawn on other banks are sent to
the clearing section and instruments drawn on other branches of AGRANI BANK are
sent direct to the branch concerned.
Following entries are passed on contra voucher:
Dr- Outward Bills
Cr- Outward Bills
The instruments, schedules along with the
schedule and voucher are sent to the in charge for checking and signatures.
The instruments are attached with the forwarding
schedule and are handed over to Despatch Department against acknowledgement on
the office copy.
The pay in slip is attached to the office copy of
the schedule and filled in the “O.B.C. Outstanding File”
The Voucher is sent to the accounts department
In case the instrument drawn on other bank branch
which is not covered by the clearing area of Bangladesh Bank forwarding letter
are sent direct to that branch for collection and asked them to draw a pay
order in favour of A. H. Road Branch on any of the other bank’s office situated
3.9.2 Inward Bills for Collection:
- When instruments are received
from our branches or other banks they are checked for any apparent
discrepancy and are compared with the particulars in the schedule
- The instruments are stamped and
the schedule is attempted.
- The instruments are suitably
- The details of the schedule and
special instruction are entered in Inward bills for collection Register.
IBC numbers in serial order are allotted and noted on the schedule and the
- The following entries are passed
on the contra voucher:
- Bills Lodged
- Inward Bills
- The vouchers, schedules and
instruments along with the register are sent to the In charge for checking
- The instrument along with the
relative vouchers are sent to the clearing department
- The contra voucher is sent to the
- The schedule is filled in the
“IBC Outstanding File”.
3.9.3 Outward Bills for Collection:
- The account is balanced on
fortnightly basis in the following manner:
- Jotting of Outstanding bills is
taken from O.B.C. register on the balance book.
- The balance is agreed with the
figures of Outward Bills for collection in the Subsidiary Ledger.
3.9.4 Inward Bills for Collection:
- The account is balanced on
fortnightly basis, III the following manner:
- Jotting of outstanding bills is
taken from O.B.C. register in the Balance Book.
- The balance is agreed with the
figures of 1nward Bills for collection in the subsidiary Ledger.
ORGANIZATIONAL SET UP OF GENERAL BANKING DEPARTMENT:
4.1 LOAN AND ADVANCES
objective of a business organisation is to get more profit. If the business
rotates successfully the profit is gained in a satisfactory mode. As we know
very well that bank is nothing but a financial intermediary and it takes
deposit from surplus economic units and deploys the fund to deficit economic
units through credit deployment. So the more recoverable credit is deployed the
more profit is gained. In fact this credit deployment process is being run
under Advance department.
department is very important part of the branch operation that also provides
administrative support for the lending activities of’ the branch. The Advance
department provides an effective perfect check and balance on funds lend to
clients and that the transaction is within approved limit for borrower and
amount. In AGRANI BANK, A. H. Road branch a big amount of loans and advances
are sanctioned every year.
4.2 FUNCTIONS OF ADVANCE DEPARTMENT:
funds are disbursed only after compliance with terms and conditions or required
- Make sure that the bank has
always valid and current loan documentation.
- Ensuring that the collateral
security is adequate at times to support the loans. Keeping the loan
documentation under safe custody.
- Ensuring that the bank receives
sufficient valid insurance cover whenever required from a recognised
- Monitoring the receipt of
periodical receivable. Debiting the client for all charges, interest etc.
- Maintaining the central
liability records for all extensions of credit and balancing the totals
with General Ledger.
4.2.1 Interview and Application:
and profitability are conflicting considerations, AGRANI BANK as a Bank while
employing the funds pays due regard to both profitability and liquidity, The first
step in the sanctioning process of credit in favour of a customer/client is the
interview between the banker and the client. The credit officer should be
assured that he would gather as much of the data necessary for the credit
granting decision. In order to gain efficiency and credibility, checklists
should be developed and used. An application for credit is essential for every
loan request. Every applicant should indicate whether the loan request is to be
The type of credit
The financial information that can be used to
determining credit worthiness
The loan amount, maturity and for other
The credit application must be properly signed
4.3 PRINCIPLES OF SOUND LENDING:
In order to
secure a balance between liquidity, profitability and security AGRANI BANK
follows the following principles of sound lending:
local office exercises the lending function only when it is safe and the risk
factor is adequately mitigated and covered. Safety depends upon
offered by the borrower,
capacity and willingness of the borrower to repay the loan.
of bank is repayable on demand or at a. short notice. So the bank has to
maintain its liquidity at a sufficient level. Investment on building, plants,
machinery, land etc. cannot be recovered quickly, so it is less liquid.
needed to pay interest to depositors, depreciation and maintenance, declare
dividend to share holders, provide for reserve against bad & doubtful debts
etc. So like all other banks AGRANI BANK also disburse advances to earn profit.
safety of advances banks take different types of securities like FDR, Sanchaya
Patra, land, work order etc. Banker should ensure that the securities are
adequate, marketable and free from encumbrances.
Diversification of Risks:
It is very
risky for a bank to invest all its assets into a particular sector or a single
borrower or to one particular region. If somehow the businesses of that sector
or area or borrower collapse, the bank may fall in a critical situation. So it
is better to invest in different sectors/ borrowers and spread over the
Yield / Profitability:
commercial point of view AGRANI BANK considers sufficient yield or return while
financing a project.
Productivity of the loan
invest on those sectors, which are productive.
have a strong social objective and social conscience. Sometimes they invest in
neglected sector to boost the economy.
is important to know for what purpose the loan is taken. The bank should not
tolerate any misuse of the fund.
4.3 SELECTION OF BORROWER:
To have the optimum returns from the deployed funds in different
kind of lending, selection of borrower is mostly important. During the
discussion with the prospective client the bank manager has to focus on the
The loan officer must be secure about customers identity, it means
that the loan officer has to sure about customers full name, his address, and
Character is the greatest single asset any individual can have.
The character of the borrower indicates his intention to pay the amount
advanced. Character of a customer besides honest, involves the promptness in
payment, the ability and willingness to carry out the planned project to its
end and the reputation of the people with whom he deals.
Capacity means the ability to employ the funds profitability and
repay the advance according to the terms and conditions of the sanction. The
loan officer must be sure that the customer requesting has the authority to
request a loan and the legal standing to sign a binding loan agreement.
In general, borrowing customers have only three sources to draw
upon to repay their loans. Cash flow generated from sales or income. The sale
or liquidation of asset or Funds raised by issuing debt or equity securities.
4.4 TYPES OF ADVANCES PROVIDED BY A. Hamid Road Branch, Pabna:
Limited A. Hamid Road Branch, Pabna. Provides different types of advances to
its customers. Recovery rate is also satisfactory. Before discussing about
different types of advances, we shall try to represent an overall picture of
different types of advances provided by New Market Branch. The following figure
represents different types of Advances provided by A. H. Road Branch, Pabna.
convenience of the report foreign advances will not be discussed here. Those
will be discussed in Foreign Exchange Chapter.
** A. Hamid Road Branch, Pabna is not AD or Foreign exchange Branch
4.5 RATE OF INTEREST ON LENDING:
Table- 4: Rates of Interest on Lending
Interest (% Per Annum)
House Building Loan/ Urban housing
Loan &Brick Financing
4.6 ADVANCES (Overdrafts):
Overdraft, Temporary Overdraft, Cash Credit (Hypothecation), Cash Credit
(Pledge) are covered in this type of advance. Overdraft is an arrangement
between a banker and his customer by which the latter one is allowed to
withdraw over and above his credit balance in the CD A/C up to an agreed limit.
A Cash Credit differs from Overdraft in the respect that CC is used for long term
and Overdraft is made occasionally that is for a short duration.
4.6.1 Temporary Overdraft (TOD):
grant unsecured overdraft for small amounts to customers having CD account with
them. TOD is permitted only when reliable sources of funds are available to the
borrower for repayment. It is usually provided against DD, Cheque etc. that
have been presented for collection but not yet collected. Though these
documents are not liened but these are kept in the respective departments for
collection. When these are collected, the advances are realised from the
proceeds of these instruments.
Cr. –Party Account.
4.6.2 Secured Overdraft (SOD):
Banks permit Overdraft against securities like FDR, DPS, Saving Certificate,
WEBD, ICB Unit Certificate, Work Order etc. At present AGRANI BANK, A. H. Road
branch issues SOD only against financial obligations. They are:
- ICB Unit Certificate,
- Wage Earners Development Bond
Work Order is nut in practice since January 2001. Advance against share
certificate is not encouraged.
4.6.3 Formalities maintained for Issuing S0D
against different types of securities
SOD against FDR:1. The beneficiary duly
Letter of lien of FDR with Tk.150 stamp
Eighty- percent advance against FDR is allowed.
The processes of extending SOD are as follows: –
1. The party
must have a current A/C with the branch
2. If the
ownership of the firm is proprietorship, then a trade license must be submitted
and in case of a limited company, all the documents required to open a current
A/C that should be submitted. The financial statements of the concerned firm
should also be submitted.
3. The party
must maintain a good transaction with the branch and have a good turnover rate.
4. The party will apply to the
officer in charge of advance department of the branch for SOD arrangement
concerned officer of the branch will give him a Credit Application Form and the
party will have to fill up this form. In this form he discloses all the
information about his concern, purpose of the loan, description of security,
concerned officer will prepare a “Credit Line Proposal”, where he
writes about the business concern, details of proprietors/directors of the
concern, management structure, the existing credit facilities, the particulars
about the facilities that asked for – such as margin limit, date of expiry,
details of security, and any other relevant information. Then the proposal is
sent to the Head Office, Credit Division for approval.
responsible officer of the Credit Division will appraise the proposal and if it
seems to a viable one-, then the loan will be sanctioned.
8. After the
loan is sanctioned, the branch will issue two copies of a sanction advice,
where all the terms and conditions set by the bank is mentioned. The borrower
is advised to write, “accepted” on the original copy if he is
satisfied with the contract and conditions of the bank and retains the
duplicate one as record.
4.7 CASH CREDIT (HYPOTHECATION):
of movable property for securing loan is called hypothecation. Hypothecation is
a legal transaction whereby goods are made available to the lending banker as
security for a debt without transferring either the property in the goods or
either possession. The banker has only equitable charge on stocks, which
practically means nothing. Since the goods always remain in the physical
possession of the borrower, there is much risk to the bank. So, it Is granted
to parties of undoubted means with the highest Integrity.
4.7.1 The Process of Extending Cash Credit
- The party must have a current
account and good transaction with the branch
- At first the party applies for a
CC hypothecation arrangement
- Then the party Fills up the
“Credit Application Form” provided the respective officer.
- The concerned officer prepares a
-Credit Line Proposal” (CLP) detailing all relevant information. The
information includes the following.
1. Copy of’ party’s approach letter.
2. Stock Report.
3. Declaration of borrower containing the detail description
of the borrower and his business.
4. Declaration of grantor containing the detail description
of’ tfic grantor same as borrower
5. Credit reports on the borrower- & also on the grantor.
6. Physical verification report by the authority of AGRANI
BANK regarding the goods or raw materials to be hypothecated.
7. Legal opinion of the legal adviser of the bank.
8. Sanction advice III duplicate along with photograph of the
9. Statement of account.
10. Letter of
identification of grantor along with photograph.
11. Copy of’ letter of
- Advance Section sends the CLP to
the head office, Credit Division for necessary action.
- Head Office, Credit Division
examines the proposal and if finds it viable then sanctions it and sends
it to the branch. Credit Division may instruct to submit additional
- After that the branch issues two
copies of “Sanction Advice”, one for its own record and the
other for the party to keep.
4.8 ADVANCES (LOANS):
Loan is a kind
of advance. In case of loan the bankers advances a lump sum for a certain
period at an agreed rate of interest. The interest is charged for the amount
the customer withdraws from his account.
considers the following 5 Cs before sanctioning the loan.
• Character: The most
valuable asset of a person, which is
based on the integrity and
reliability of the borrower.
• Capacity: This
indicates the borrower’s ability to employ the funds profitably and repay the advance.
• Capital: It refers to
the borrower’s own funds invested in, the business.
• Collateral: It indicates the security offered
by the borrower.
• Condition: It refers to external a factor
that is Business Climate.
4.8.1 Required Information for Loan Sanction:
will have to be made about his business, trade experience, dealings, assets
& liabilities etc. from various sources. His account statement with other
banks will also be included in this investigation. His financial statements and
income tax returns will have to be seen. Personal interview will have to be
taken. So, before sanctioning a loan a banker should consider the fo1lowing
v Trade License,
partnership deed, Memorandum of Association
v Market Report
v Study of
v Other bank’s
v CIB report of
proposals to the Head Office the following documents are required:
of the borrower
v Declaration of the borrower
v Credit report on the borrower, which
should be prepared by the branch
v Limit sanction advice
v Statement of Stock
Memorandum of deposit of title deed
Mutation Certificate-parcha, Khatcan
Up to date rent pay receipt
Valuation certificate of the property
Now I shall
discuss about different types of loans and formalities required for sanctioning
those types of loans:
4.8.2 Consumer Credit:
It is a
personnel facility provided to the staff’s of the A. H. Road Branch. These
loans are provided for buying necessary household items. At first a staff
applies for loan in a prescribed form. He affixes the statement of his saving
account, and quotation of the good from three sellers of that good. After
receiving the application the authorised officer verify it. He prepares a
credit proposal and sends It to the Credit Division of Head Office. Credit
Division appraises the proposal on the basis of the balance in the account, the
designation of the employee. If Credit Division is satisfied it Fixes the
margin, amount of loan, mode of payment, rate of interest, and instruct for
obtaining other necessary documents from the customer. Credit Division prepares
a sanction letter mentioning all those information mentioned above. After
getting the letter the Advance Department inform the staff about that. Pay
Order section prepares a Pay Order in favour of the Seller with the amount of
loan and margin provided by the customer. The party hand-over the Pay Order to
the Seller and gets the furniture. The furniture is hypothecated to the Bank.
4.8.3Loans against Transport:
This type of
loan is usually provided to the customers who want to stun transport business,
or need a transport for carrying goods. The party brings quotation from three
sellers of the vehicle. License of the vehicle is made in Joint name of the
banker and the party. Payment is made directly to the seller through a Pay
Order. At the payment of’ Loan the party becomes the only owner of the car.
4.8.4 Loan General:
The purpose of
this type of loan is not specific. It can be sanctioned against any kind of’
security. Securities may be ABPS, WEDB, and F.D.R etc. He may also provide
another types of security, The money is transferred directly to the customer’s
Dr – Loan General Account
Cr. – Party Account
This type of
loan is provided only to the staffs of the batik, The purpose of this loan is
to buy Computer
Sewing machine etc. The balance of the customer’s account, his designation,
duration of job etc. are taken into consideration while sanctioning the loan.
The loan is realised from the monthly salary of the staff at a certain
instalment. In this case payment is directly made to the seller through Pay
Order. The furniture is hypothecated to the bank.
4.8.6 Staff Car Loan:
This is a
personnel facility provided to the higher officials of’ the bank. Officials of
the post of VP and above can get this loan. The car is licensed in the name of
the bank and the staff Jointly. The bank makes payment of the instalment of the
loan from its own fund. When the loan is fully recovered, the staff becomes the
owner of the car. But if he retires before recovery of the loan, he cannot
become the owner of the car rather bank becomes the owner then.
Dr –Staff Car Loan Account
Cr. –Party Account
4.8.7 House Building Loan (Staff):
This type of’
loan is provided to the Staff’s for building their own house. The staff must
have a land to Make house. The land and the building are mortgaged to the bank.
The loan is realised from the monthly salary of the customer. At the time of
sanctioning the loan the monthly salary of the staff, his designation, balance
of his account etc. are taken into consideration. The loan is not disbursed at
a time. On the basis of the progress of the work- the loan is disbursed.
4.8.8General House Building Loan
Thus type of’
loan is provided to customers for building house registered mortgage of the
land and building is taken from the customer.
documents are required for sanctioning this type of loan:
- Limit sanction advice
- Credit report on the borrower
- Photograph of the borrower
- Approach letter of the borrower
- Copy of the legal opinion
- Physical verification report
- GIR number of the borrower
- NOC and approved plan from RDA
- Statement of Account ‘
- Declaration of the borrower
- Copy of the agreement between
the buyer and the seller
- The party has to full-fill a
criterion of six months transaction for approaching any
- credit facility from the bank
- Information of the Guarantor
- Valuation certificate of the
- CIB report
4.9 PROJECT LOAN:
finances industrial sector through this type of loan. The bank sanctions loan
for civil construction, Imported Machinery, Local Machinery, Installation etc.
The Bank also provides Working Capital facilities on Raw Materials, Finished
formalities are maintained in case of project loan.
4.10 SECURITIES FOR PROJECT LOAN:
- Mortgage of project land
- Additional Collateral security
- Registered Mortgage is created
over the landed property
- Registered irrevocable power of’
attorney to be executed by the owner of’ the landed property and factory
building in favour of the bank authorising the bank to dispose of’ the
properties in case of’ default of’ repayment by borrower without reference
of the court.
- First Charge oils all assets and
book debts of the company with the register of Joint Stock Companies.
- Personal guarantee of all the
directors of the company.
- Hypothecation of all tiles
plant, machinery and equipment of the project.
- Pledge is furnished oil raw
- The company will be effective
any changes in the structure of the Board without prior permission from
- Fortnightly stock report should
he submitted by the company which should be verified and authenticated by
an authorised official of the bank.
- Drawing power should be
calculated correctly and drawings In tile account should be allowed on the
basis of the actual D.P.
- Good Turn Over In CC account are
to be ensured
- A whole time warehouse keeper
and guard are to be employed at borrower’s cost and are to be posted in
the warehouse to safeguard the goods.
- All fixed assets of the project
are to be insured against all risks covering under bank’s clause.
- CIB report about the party has
to be collected.
- Credit report about the party
has to be collected from all Banks.
- Project appraisal has to be
- Lending Risk has to be done.
4.11 PROCEDURE FOR GIVING ADVANCED:
4.11.1 First Step:
Ltd. Prospective borrower will submit application to the branch for loan by
filling in a specific Application form. The application for contains following
- Name of the borrower
- Account no
- Business address (with
telephone no.) Residential address and permanent address
- Intruder’s name, account no.
- Date of
- Trade license number, date and
- Tax Identification Number (TIN)
- Particulars of
- Experience and background of
individual proprietor Director.
- Full particulars of assets in the personal name of individual name
of individual/Proprietor with valuation.
- Name of
Subsidiaries/Affiliates, pretences of share holding and nature of business.
- Nature and details of
business/product for which credit facility is applied for markets,
estimate sales for next not year.
- Credit facilities required.
- Details of securities offered
with estimated value.
- Details of liabilities in the
name of the client or in the name of any other partners directors.
- Balance sheet income/statement
or statement of account of the following years attached.
- Other relevant information.
- Proposed debt/equity ratio.
- Signature of the applicant.
4.11.2. Second step:
the load application from Agrani Bank Ltd.
Sends a letter to Bangladesh Bank for obtaining a report CIB. This
report is essential for giving all kinds of advances. The purpose of this
report is to being information that whether the borrower has taken loan from
any other bank (s) and if taken whether these loans are classified not.
4.11.3. Third step:
receiving CIB report, if the bank thinks that the prospective borrower will be
good borrowed then the bank will scrutinize the documents. In this stage, the
bank will look whether the documents are properly filled in and signed.
4.11.4 Fourth step:
This is the
processing stage, the branch will prepare a proposal. The proposal contains
following relevant information.
- Nature of business
- Area of operation
- Unit f product
- Raw of production
- Raw materials
- Sources of raw material local %
- Requirement (in %) of raw
material product per unit of product
- Origin o capital machinery,
auxiliary machinery and line of production
- Number of basic machinery
auxiliary and line of product
- Utilized capacity day detailing
as unit shits working hours & capacity
- Sales prices units
- Total number of employees
- Export target
- Quota in hand
- Source of power
The branch has
to send the proposal to the Head Office will prepare a minute and submit if
before the Credit Committee and if the loan amount is very large it is place
before the Board of Directors, the minute has to be passed by the committee.
4.11.5. Fifth step:
receiving the sanction advice, the branch will collect necessary document.
These documents are:
Joint promissory note
Single promissory not
Letter of undertaking
Loan disbursement letter
Debit figure confirmation sheet
Letter of continuity
Letter of revival
Right of recall the loan
Right of recall the loan
Letter of guarantee
Letter of indemnity
Hypothecation of goods
Hypothecation of vehicles
Letter of line
Letter of lien in case of advance against FDR
Letter of lien in the authority for advance of
third parties against fixed deposit call depot/special deposit or margin or
Letter of authority of encase FDR
Letter of agreement for packing credit
Letter of guarantee of opening L/C
Changes over bond or certificates or shares etc.
by third party to secure specific and general liability
Memorandum of deposit of little deeds
Hypothecation of goods to secure a demand case
credit or overdraft/loan amount
Guarantee by third party.
Table-5: The type advances and
probable securities are as follows:
Types of advance
receipt obtained in lieu of important merchandise
of stock in trade goods produce and merchandise and Mortgage of immovable
document for import
4.11.6. Sixth step:
CREDIT RISK GRADING (CRG):
Credit scoring of large loan applications will be based primarily
on the credit risk grading guidelines of Bangladesh Bank. This is a system with
weighted scores assigned to five risk dimensions, namely:
Business and industry………………………………………..18%
The resulting aggregate score will determine whether or not a
particular application should be approved. For this purpose, the cut-off score
of 75 has been set as the minimum acceptable score, i.e., no application may be
considered if the aggregate score for a particular application is below 75.
Credit risks grading score sheet are as follows:
secured, secured by Govt.
4.11.7. Seventh Step:
verifying all the documents the branch disburses the loan to the borrower. A
Loan Repayment Schedule is also prepared by the branch and is given to
4.12 DIFFERENT TYPES OF ADVANCES OFFERED BY A. H
.Road BRANCH, Pabna:
Table- 7: Amount of Different Types of Advances
Types of Loan
Amount (Tk. In Lac)
(Source: AGRANI BANK Limited- A.H. Road Branch.
CREDIT APPROVAL AND DISBURSEMENT PROCESS IN
AGRANI BANK LTD.
5.1 CREDIT APPROVAL:
factor determining the quality of the bank’s credit portfolio is the ability of
each borrower to honour, on a timely basis, all credit committees made to the
bank. The authorising credit personnel prior to credit approval must accurately
determine this. If the report of the project appraisal is very satisfactory to
approve the loan proposal, than the following steps furnish the approval
Credit evaluation principles: To have the optimum
returns from the deployed funds in different kind of lending, more emphasis
shall be given on refund of loans and advance out of funds generated by the
borrowers from their business activities instead of realisation of money by
disposing by the securities held against the advance which is very much
uncertain and time consuming.
Credit risk evaluation assessment: The importance
of a detailed and complete credit assessment for each facility and customer
relationship cannot be over emphasised. The steps that should be followed in
carrying out such an amassment are set out in the bank credit manual and head
office circulars is used from time to time. All proposal of credit facilities
must be supported by a complete analysis of the proposed credit.
Lending authority: To assure proper and orderly
conduct of the business of the bank, the board of Directors will empower the
managing Director and other executive of the bank to lend up to certain amount
certain terms and condition at their discretion. The lending officers are
broadly categorised as follows:
Approval under dual signature:
approval of credit facilities must be conveyed under dual signature.
Ideally both the signatories must have the
required lending authority.
however, two lending officers of the required lending authority are not
available, one of he signatories must have the lending authority.
5.2 RESPONSIBILITY FOR CREDIT APPROVAL:
responsibilities for credit policy, procedure, approval & review shall vest
among the following groups:
5.2.1 Board of Directors:
· Establishing overall policies and procedures
for approving and reviewing credits.
· Delegating authority to approve and review
· Delegating authority to approve and review
· Approving credit for which authority is not
5.2.2 Executive Committee:
· Approving credit facilities as delegated by
the Board of Directors.
· Supervising the implementation of the
directives of the Board of Directors.
· Keeping the Board of Directors informed
covering the all above.
5.2.3 Policy Committee:
of lending policy.
policies and procedures for reviewing and analysing extensions of credit and
analysing and approving extension of credit in accordance with authority
established and delegated by the Board of Directors.
the quality of lending staff in the bank & take appropriate steps to
credit proposals to the Executive Committee/Board of Directors which are beyond
their delegated authority.
· The Branch Managers
will be the first line-lending officers and are responsible for exercising
their authority with due diligence and discipline. They must also:
· Comply with
the applicable instructions, manuals, and circular an other rules of the bank
as well as those of Bangladesh Bank including Banking Companies Act 1991.
· Ensure that
credit proposals submitted to Head Office, Credit Division are completed and
consistent with established policies and procedures.
· Ensure that
all credit facilities are covered by appropriate approval and that they are
kept within approved limits and ensure compliance with terms and conditions of
5.3 AGREEMENT FOR LOAN:
the appraisal indicates the proposal to be favourable to finance, bank will
send an offer letter to the customer. After the borrowers acceptance this will
be considered as loan agreement. This agreement has several parts and should
cover all important terms and conditions of the credit. Some of these are:
note signed by the borrower, which specifies the principal amount of the loan,
the interest rate, instalment period and amount etc.
documentation is a critical part of any sound lending. It is essential that the
proposal defines clearly the purpose of the facility, the source of repayment,
the agreed repayment schedule, the value of security and the customer
relationship consideration implicit in the credit decision. It has been stated
that between one third and one fourth of all loans, losses are caused by falls
security is to be accepted as collateral for the facility all documentation
relating to the security shall be in place, prior to the disbursement of the
facility. The loan officer must understand his legal obligation for compliance
documentation so that he may abide by all of the regulations that effect the
documentation, as required for different kinds of advance and are enumerated
below. There may be requirement of specific banking or legal documents below.
There may be requirement of specific banking or legal documents to secure a
credit according to sanction terms and conditions, which should also be
obtained in addition to the following.
5.4.1 Steps in Documentation:
Obtaining the documents
Exception of documents
Registration of documents
5.4.2 Common compulsory documents:
- Letter of acceptance about the
terms and conditions laid down in sanction advice
- D.P. Note
- Letter of agreement Bedsides
there are some documents that are to be obtained depending on the types of
advance such as:
5.4.3 In case of Loan:
Letter of disbursement
Letter of authority
Letter of hypothecation/pledge
Any other document as stated in sanction advice
5.4.4 In case of cash overdraft:
- Letter of disbursement
- Letter of authority
- Letter of hypothecation
- Insurance policy
- Any other document as stated in
5.4.5 In case of cash credit:
- Letter of disbursement
- Letter of authority
- Letter of hypothecation
- Insurance policy
- Any other document as stated in
5.4.6 In case of advance against lien of FDR
Insurance policy etc:
- Letter of lien
- Letter authority
- Any other document as stated in
5.4.7 In case of transport loan:
- Letter of hypothecation of
- Photocopy of blue book
- Photocopy of route permit
- Insurance policy under bank
- Any other documents state in
5.4.8 In case of legal mortgage:
- Mortgage deed
- Registration receipt
- Chain of documents of title
- C.S.S.A and R.S Parcha
- UP to date rent receipt
- Non-Encumbrance certificate
- Power of attorney
- Legal opining
- Valuation certificate
5.4.9 In case of equitable mortgage:
Chain of documents for title
Original title deed
C.S.S.A and R.S. Parcha
UP to date rent receipt
Memorandum of deposit of tile deed
Registered power of attorney
10. Non- encumbrance certificate
5.5 LOAN SANCTIONING AUTHORITY:
In Agrani Bank Ltd., the board
approved the delegation of business discretionary power for sanctioning loan
5.5.1 Consumer Credit Scheme:
Agrani Bank consumer credit scheme
is a part of its program to promote economic welfare though enhanced the living
standard of its customer belonging to the fixed income groups.
The scheme provides individual
customer an access to a loan to acquire consumer durable on a affordable terms.
5.5.2 Eligibility of customers:
Officers having a
confirmed/Permanent job in any one of the following organisations.
Semi-government an autonomous bodies
Banks insurance companies financial institutions
Armed forces BDR police and Ans.
Private organisation having a corporation
such as teachers of university/College/School doctors engineers’ architects;
journalist’s chartered account and self employed individual’s age group: 18 to
5.5.2 Eligibility of customers:
- Car, station, wagon, microbus, jeep
Appliances: Air condition refrigerator deep freezer, washing matting cooking
range, sewing machine furniture other domestic appliance.
5.6 DISBURSEMENT PROCESS OF CREDIT:
completing all the activities for sanctioning a loan the authority collects all
documents (charge documents, mortgage etc.) and the last step of the process is
disbursement. In this step when the agreement is made with the borrower, bank
disburses loan. Loan disbursement procedures follow the rules and conditions,
which was mentioned in the agreement. Both the banker and borrower have to
follow this terms and conditions. Mode of loan disbursement depends on the
agreement and types of loan. It may be disbursed at a time or step by step.
Bankers should be very careful in loan disbursement whether the conditions are
Figure-1: Deposit Position of the Branch:
Figure-2: Advance Position of the Branch:
Table-8: Loan & Advances to total Deposit
Position of the Branch:
Table-9: Total Classified Loans To Total
5.10 Classified Loans Position of the Branch:
Figure-3: Deposit Mix of the Branch:
Figure-4: Sector wise investment Position of the
SUPERVISION AND MONITORING OF CREDIT IN AGRANI
6.1 RECOVERY ACTIVITIES:
Existing loans (all categories)
due dates of repayment.
6.2 OVERDUE LOAN/ADVANCE:
Preparations of quarterly lists; branch copy,
controlling office copy and H.O. Copy.
Attempts made for adjustments of loan before
application of quarterly interest.
Must be adjusted or adjusted before being
6.3 CLASSIFIED LOAN/ADVANCE:
Target for recovery.
Steps for de-classification.
6.3.1 Interest for exemption:
Communication of decision quickly.
Basically the total procedure of a credit is
included in the credit administration but the most two important principle
element of bank credit administration is as follows.
6.3.2 Credit File Maintenance:
file on each facility shall contain all information necessary to facilitate
ready monitoring of that facility. It should contain a thorough history of the
customer relationship to;
- Help credit officers’ track any
- Assist a newly assigned credit
officer in understanding the customer and
- Make the lending process
maintenance of credit files shall be disciplined to force the lending officer
to obtain all relevant all relevant documents and encourages him to consider
all relevant information when analysing customer risk. Complete credit files
help prevent loan losses resulting from imperfect security.
6.3.3 Facility Evidence Maintenance:
legal and banking documentation and register of security shall be maintained,
at the branch, separately from the credit file in a location of utmost
legal and banking documentation i.e. charge documents shall be kept in
fireproof safe under dual custody of branch manager or his designate alternate
and another officer. A register of charge/security documents shall be
maintained under the supervision of Branch Manager.
6.4 IDENTIFYINFG PROBLEM LOAN:
reviewing the accounts and inspecting the stocks on the basis of the
discussions with the borrowers and branch managers, the inspecting officials
submit what is called a list of major irregularities or a list of serious
irregularities highlighting certain aspects of the advances, which require
immediate or urgent action for setting-right the irregularities or for securing
the bank interests. To maintain a continuous asset quality credit department
must be concerned about the problem loans.
6.5 SUPERVISION OF CREDIT:
of the most importance tasks before the banks today is the follow-up and
supervision of the credit provided by them. Banks have started financing in an
increasing measure to priority and preferred sectors and as a result the demand
for funds has increased substantially. Besides, credit is a scarce national
resource and therefore proper and rational distribution of credit is very
essential. In the circumstances, it is incumbent upon a banker to see that the
advances granted to the borrowers are being utilised for the purpose, which
they are given.
basis of supervision are risk of the transaction and repayment record, conduct
of the account, financial capacity and record of the borrower, collateral
conditions, supporting information, documentation and the degree of the
conformity to the bank policies. The follow up of bank credit was not effective
for lack of adequate data as stated above and in this situation many borrowers
were able to obtain finance from the banks disproportionate to their production
requirements and as a result the bank were obliged to sanction credit limits
much in excess of their deposits, thus throwing their credit plans completely
out of gear.
Prime banks credit policy the responsibility for review and monitoring of
credit facilities starts at branch level with the branch Manager and the Second
officer/credit officer and finally with Head office credit division. Regardless
of any formalised times for review or required report of facilities extended,
any circumstances may cause a facility to be reviewed and formally classified
by Branch Manager.
6.6 EARLY WARNING SIGNALS:
there is a “material change” in the borrower condition, present or expected the
implications of which are not clear is known as early warning system. Obvious
telltale signs of a problem loan are non-compliance with convenience, failure
to provide tax return timely, limit overdrawn, kiting, evasive responses to
questions, a drop in sales split borrowing, reduction in deposit, increases in
payable and continuous failure to keep commitments etc. The following items
manifest complacency and should always be guarded against:
v Lack of
adequate supervision of old and familiar borrower.
v Dependence on
oral information furnished by borrowers instead of reliable data.
interpretation of known credit weakness based on past survival of recurrent
hazard and distresses.
Understand clients business.
Analyse client’s financials condition.
Frequent visit to client.
Perfected legal documentation.
Investigate market rumours.
Use credit bureau checking.
6.8 IDENTIFICATION OF DELINQUENT FACILITIES:
A facility can
be identified as potentially being ‘delinquent’ as above by any of the
Second officer/credit officer of the branch.
Head office, Monitoring and inspection division.
Head office credit division:- Whenever a
facility is identified, as ‘delinquent’ recommendation is send to Head office
with full justification for classification of the facility incase of classification
as sub standard, doubtful or loss. It is the responsibility of the branch
/Manager/Second officer/credit officer to timely identify and to try to take
necessary steps to avoid classification of any facility.
6.9 DEVELOPING A LOAN ACTION PLAN:
default has occurred, it is essential to understands the reasons for the
deterioration of the credit and determine the current condition of the
borrower, guarantor and the condition, perfection and validity of any
collateral. The work officer must evaluate immediately the institutions
potential exposure, if any, to a lender liability claim and reduce that
exposure in the negotiations and restricting that follow the default actions
that may be taken are as follows..
corrective action plan. The bank now needs to decide what course of action will
be taken. If the review and analysis indicate the potential for long time
survival, a plan of corrective actions must be formulated. If long time
survival, a plan of corrective actions must be formulated. If long time
survival does not appear realistic then a liquidation plan needs to be
prepared. The bank will usually have a number of alternative actions from which
Continuation and rehabilitation
Move the debtor to another creditor.
Repossession and sale of collateral
Legal action against co-obligors
Implementation of the plan
projection on each alternative selected in order to determine the best course
of action. The concern bank authority determines fail-safe points and develops
contingency plans. Then the action is taken according to the plan step by step.
6.10 CLASSIFICATION OF CREDIT:
Bank Ltd. follows the Bangladesh Bank instructions strictly. Bangladesh Bank
issued BCD circular no. 09 on 15-02-2009 and circular no. 20 on 25-12-2009. The
circular provides the following guideline.
types of loan and advances are divided into 5 categories. Those are
Term loan up to 5 years
Term loan over 5 years
Short term Agricultural credit and Microcredit.
circular-09 and 20 is treated as base for loan classification.
6.11 CLASSIFICATION PROCEDURE:
Unclassified: Loans those are not
classified. It is divided into two categories:
a) Standard b) SMA
Substandard: The preliminary
Doubtful: Loans, which are
classified for a certain time, and bank, could not recover in the period, are treated
Bad and loss: Of which, possibility
of recovery is virtually nil.
Table-11: Classification Status:
3 months and
above but below 6 months
6 months and
above but below 9 months
9 months and
above but 12 months
Comparative Financial Performance of Agrani Bank Ltd., A. Hamid Road branch,
Pabna, from 2006 to 2009:
Received from loan & advance
Received from H.O. account
Total Interest Income (a+b)
Interest charges on deposit
Interest paid to borrowing
Interest Expense (a+b)
exchange & brokerage
operating Income (3+4)
Total Operating Expense (a+b+c)
PROFIT POSITION OF THE BRANCH:
Target & Achievement for the year 2009:
Recovery of classified loan (Target & Achievement):
7. FINDINGS AND RECOMMENDATION
The success of
a Bank depends on improved service delivery to its customers.In the Country
have emerged to satisfy the needs of customers. A lot of banks in Bangladesh
uses conventional Banking system. The AGRANI BANK Ltd., New Market Branch is
not exception to these trends.
on desk to desk, I had the following findings:
1) The Cheque
passing system of this branch is very time consuming. If a client places a
Cheque, it is handled in three places. Firstly,
it is registered on the supplementary sheet. Secondly, its come for computer posting (as well for first
cancellation). And thirdly it comes
to the section In-charge for verification of the signature of the drape and for
cancellation. Then it goes to cash payment officer for final payment. The
customer of the Cheque frequently has to enquire whether his Cheque is yet been
passed for payment or not. This process kills valuable time of customer. That
this creates dissatisfaction and bore for customer.
2) Due to lack
of one stop service, the customers are bound to move from one counter to
another counter. Today this type of movement of the client is treated a
harassment according to client’s point of view.
3) AGRANI BANK
Ltd. – A. Hamid Road Branch seeks credit report in case of loans and advances
that takes more time.
4) In some
cases, loans and advances are sanctioned due to the interference of invisible
hand. It increases the amount of classified loan and advance.
5) The loan
recovery performance is not satisfactory in A. Hamid Road Branch. The
classified loan up to 31st December 2008 is Tk.805000.
are acquired by the bank official to appraise a loan proposal are enough to
evaluate a borrower quality i.e. whether a high risks borrowers or low
7) Lack of
efficient employees to compete with the others fast growing Banks
8) Shortage of
staff for performing the activities.
9) Lack of
technological facilities, i. e. online banking.
infrastructure situation is not well equipped and well decorated.
recommendations are not the panacea to solve all the problems faced by the
Agrani Bank Limited in the process on loan recovery nor it will be able to
uproot all the causes of problems in the process. But it is expected that the
given recommendations may have positive impact on activities of Agrani Bank
It should clearly know about the management
condition-skill, efficiency and better performance of the project properly. If
the management performance is skilful and efficient, the credit can be extended
loans to an organisation.
Because the loan holder can fail to pay bank’s
loans, UBL should select accurate promoters before disbursement of credit.
Political interference has to be avoided in bout
credit disbursement and recovery. The politician of Bangladesh influence in
loan sanction and recovery. As a result, many unprofitable projects would be
taken by the Agrani Bank Limited.
The value of the security must be value properly
by the independent value and constantly watched so that the value of mortgage
property becomes sufficient for the recovery of default loan.
Stopping the grant of loan to any organisation by
the other banks, which is a defaulter to Agrani Bank Limited may be of much
help to pressure the defaulters for the paying its outstanding loan first and
take loan thereafter. Clarence from Agrani Bank Limited or other banks at the
time of taking loan from other banks may be made compulsory. Introduction and
at the same time proper implementation of this system may be expected to
accelerate the loan repayment trend by the borrower.
Publishing the names of defaulter’s ad well as
good and regular payers. In various dailies and granting various sorts of facilities
to good borrowers will create a moral persuasion on the borrowers. This may
decrease the number of defaults and the volume of large outstanding loan amount
Pressure from outsider and influence extorted by
borrowers are also a great impediment in the smooth functioning of loan
recovery process. The role of government in this case is the most important
factor required solving these sorts of problems.
More and more competent personals are required to
be employed as per requirements of Agrani Bank Limited so that there will be
the leas possibility of wrong appraisal and evaluation of projects. Government
embargo on the employment of Agrani Bank Limited must be relaxed in order to
stop the recurrence of this default. Moreover, action must be taken against the
wilful defaulters will also be of much help.
Aged old laws to bank loan recovery should be
entrepreneurs should be encouraged in disbursing loans and those who have the
records of regular repayment should be give preference.
should be taken that the guarantors cannot avoid their responsibilities.
observed that the defaulters generally get various sorts of exemptions as
declared by the government from time. Government must not show any kind of
mercy to the defaulters in any ways, which may encourage the default culture.
This type of action may discourage the borrowers to become wilful defaulters.
provision may be included in the loan agreement that the defaulters will be
declared “bankrupt” by the court at the instance of Agrani Bank Limited if the
outstanding loan exceeds a given percentage of loans taken or maximum period
for loan repayment.
really tough to recover loan when the borrowers diversify the loan and avoiding
the use in specific purpose. Limited liabilities of companies give the
borrowers a right to protest their own property of the borrowers in their own
name or in “Benami may help to stop this illegal practice.
stringent measures taken by the government the recovery is very negligible
because of the pressure of the interested lobby. The chamber bodies also make
lobbying against any type of stricter steps. Steps should be taken to avoid any
of pressure like these in strengthening the position of loan recovery.
- Journal of the
Institute of bankers Bangladesh.
-Published by Institute of Bankers Bangladesh.
- Modern Investment
-Br Robert A. Haugen.
- Law and Regulations
-Course material of BIBM.
- Commercial Banking
(The Management of Risk).
Fraser, B.E. Gup, J.W. Kolari
- Annul Report-2007
& 2008 Agrani Bank Ltd.
- Financial Analysis of
- Daily data collection
- Economic Trends,
Published by Bangladesh Bank.
Statements of the Branch.
- Different Manuals of
- Credit Risk
-Published by Agrani Bank Ltd.
- Car, station, wagon, microbus, jeep
- The account opening form of