Performance and Evaluation of SIBL

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Performance and Evaluation of SIBL

EXECUTIVE SUMMARY

This report gives a clear idea the activities, the operation strategies, and the performance of SIBL. SIBL incorporated in 5^th July 1995 and being into its commercial operation on 22^nd November with a view to provide exclusive service facilities to its client and accordingly meet the demand of banking service all over Bangladesh. During the short span of its operation the bank had been widely acclaimed by the business community from small business persons to industrial conglomerates for forward looking business outlook and innovative financial solution.

In this competitive age, foreign trade becomes very much crucial for any country in the world. Specially, in the country like Bangladesh import is becoming very much crucial with the increasing rate of population. Every year a lot of food grains, machinery spare parts, dyes and chemicals, industrial raw materials, cotton textiles, pharmaceutical, cements, steel, fuel etc. are imported from various countries of the world. At the same time, the exportable goods of Bangladesh are jute, jute goods, jute yarns, carpets, tea, leather and leather goods, pottery, handicrafts, shrimps, ready-made garments, fishes, frog legs, spices etc. so the foreign trade is playing an important role for the economic development of our country.

Commercial Banks are playing a vital role in financing imports and exports of our country. It is not possible to run any business or production activity in this age. Export and importers need finance in various stages of their activities. Exporters need finances in two states pre shipment finance and pot shipment finance. Pre-shipment finances are export cash credit, packing credit, Back to Back letter of credit etc. post shipment finances are negotiation of documents under L/C, loan against bill in collection (foreign bills) etc. Again import financing are Payment against Documents (PAD), Loan against Import Merchandise (LIM) etc. all these facilities are provided by commercial banks in Bangladesh. For this purpose, banks consider the borrowers business standing, integrity, liability with the Bank, terms and conditions of the L/Cs, securities offered etc. There are lots of risks involved in foreign trade. Therefore, the Financing Banks have to clearly justify the customers from a neutral point and gather the current information about the market. In the case of import-export, SIBL has a gradual-increasing trend from 2007. However, in order to capture higher market share than the competitors, the policy of SIBL in these regards should be reviewed and it should be made more flexible and competitive than the present.

The whole report consists of two parts. The first segment is based on the SIBL and the service it provides. And the second segment is based on the performance evaluation of SIBL.

CHAPTER: 1

INTRODUCTION

1.4 OBJECTIVE OF THE STUDY

This reposting study is aimed at focusing on Islamic Banking operational system in Bangladesh. In addition to this a comparative observations would be made with other commercial banking operation. The objectives are:

• To be acquainted with how bank perform its operation.
• To know about the modes of investment of Islamic Banks.
• To focus on products, services and financial condition of SIBL.
• To expose strengths and weakness of SIBL in comparison with competitors.

1.5 METHODOLOGY OF THE STUDY

In order to make the Report more meaningful and presentable, two sources of data and information have been used widely.

1.5.1 Sources of Data /Information

Primary sources

· Face-to-face conversation with the respective officers and staffs of the Branch.

· Informal conversation with the clients.

· Observing banking activities for three month.

Secondary sources

· Annual Report of SIBL.

· Periodicals published by Bangladesh Bank.

· Various book, articles, compilations etc.

· Prior research reports.

· Website Information.

1.5.2 Analysis of data /Information

Two approaches have been mainly used in this report.

• Conceptual Approach.
• Empirical Approach.

1.6 AREA OF STUDY

This project is limited in overall banking system of the bank. All three functional areas of the bank are taken to the scope of study.

1.6.1 General Banking.

1.6.2 Foreign Exchange Area.

1.6.3 Investment Area.

1.7 ACTIVITY SCHEDULE

	1stweek	2nd week	3rd week	4th week	5th week	6th week
Project design
Questionnaire design
Data collection
Data processing
Submission of draft report
Submission of final report

1.8 LIMITATIONS OF THE STUDY

It is obvious that every study has some limitations. The study I have made is of great importance and required me huge work. Those limiting factors that hampered my smooth workings in bank and finally in preparing this report are as follows:

· The organization maintains strict confidentiality about their financial and other information. They are afraid of any type of information leakage to their competitors. So there was always difficulty to have appropriate information from them.

· Duration of this study was too short to have a sound understanding of the overall banking.

· Scope of my study is so wide that analytical and comprehensive study is not possible.

· Lack of sufficient books, papers and journals etc.

· Web site of the Organization isn’t up to date to gather valuable information.

1.9 REPORT PREVIEW

This project is short one providing only the facts and figures of current situation of operational activities and performance of the bank.

CHAPTER: 2

2.1 INTRODUCTION

Since the establishment of Social Investment Bank Limited has come forward as a private commercial bank and very encourage has come forward as the stimulator of economic activities in the country. The bank has been entrusted with the responsibility of undertaking various steps related to the development of the country’s commercial, industrial and agricultural sectors. The banking sector of a country is called the economic barometer of the country. As a pioneer commercial bank in the private sector in Bangladesh, Social Investment Bank provides considerable financial helps to the business sector that imports industrial goods and/or exports excess production outside the country for profit. Thus for imports the Social Investment Bank provides LIM (Loan against Import Merchandise) and LTR (Loan against Trust Receipt) facility and for exports provides both pre shipment and post shipment finances. Thus with these bank helps the prospects in the business sector has increased more than ever before.

2.2 HISTORICAL BACKGROUND OF SIBL

Social investment Bank Limited (SIBL) is a banking company registered under the companies Act 1994 with its head office in 15 Dilkusha C/A, Dhaka-1000. The bank operates as a scheduled bank under a banking license issued by the Bangladesh Bank, Central Bank of the country. The Bank started its operation from 22, November 1995. SIBL is a capitalized new generating Bank with an authorized capital and paid up capital of Taka 585 million in 2005 and also. 585 million respectively as of December 2004.Currently the bank has 24 branches of which 12 in Dhaka, 4 in Chittagong, 1 in Sylhet, 2 in Narayanganj, 1 in Bogra, 1 in Khulna, 1 in Rajsahi, 1 in Sirajgonj. The bank undertakes all types of banking transaction to support the development of trade and commerce in the country. SIBL services are also available for the entrepreneurs to set up new venture and BMRE of industrial units.

To provide clientele services in respect of international trade it has established wide corresponded banking relationship with local and foreign banks trade and financial interest home and abroad.

Since the very inception, Social Investment Bank Ltd. is working with the philosophy of serving the nationals as an ideal and unique financial house. Every organization has some objectives of its own. The prime objective of Social Investment Bank Ltd. is to earn profit throw undertaking the responsibility of providing financial help for the development of the country’s commercial and industrial sector.

2.3 FORMATION OF SOCIAL INVESTMENT BANK

2.3.1 Formation:

The Bank was incorporated in Bangladesh in the year 1995 as a banking company under the companies Act, 1994, all types of commercial banking services as provided by the Bank from time to time besides as a matter of policy the Bank conducts its Business on the principles of Mushataka, Murabaha, Bai-Muazzal and Hire Purchase transaction approved by Bangladesh Bank.

2.3.2 Branches Information

At present, 24 (twenty four) branches are in operation all over the country. A list of branches is appended below:

Sl.No	Name of the Branch & Date of Opening.	Address	Telephone No.
1	Principal Branch	15, Dilkusha C/A, Dhaka.	01713-018779
2	Agrabad Branch	103, Agrabad C/A, Chittagong.	031-714041
3	Khulna Branch	2 Sir Iqbal Road, Khulna.	041-722133
4	Sylhet Branch	Central Plaza, Amberkhana, Sylhet	01711-946325
5	Rajshahi Branch	219 Shahe Bazar Main Road, Rajhahi.	0721-812317
6	Gulshan Branch	125, Gulshan Avenue, Dhaka.	01819-215161
7	Babu Bazar Branch	Sultan super Market 18/4, Armanin Street,	7395118-9
8	Moulvi Bazar Branch	77/7 Wahid Center, Moulvi Bazar,	01911-350966
9	Bogra Branch	Tin Potty, Borogola, Bogra.	051-65833
10	Sirajgonj Branch	Zaman Complex, S.S. Road	0751-63203
11	IDB Bhaban Branch	Sher-E-Bangla Nagar, Dhaka.	8115789
12	Khatunganj Branch	96, Khatungonj, Chittagong.	01819-315328
13	Panthapath Branch	Bashundhara City Shopping Mall,	01913-088821
14	Chandaikona Branch	Pabna Bazar, Royganj Sirajgonj	01715-805435
15	Sonargaon Branch	Mograpara, Sonargaon, Narayangonj.	01819-251709
16	Foreign Exchange Branch	BIWTA Bhaban, 141-143, Motijheel C/A,	01817-530004
17	Halishahar Branch	VIP Plaza, Plot # 15/A, Road # 2, Block-G	01819-345299
18	Hasnabad Branch	Hasnabad Super Market,Keranigonj.	01711-565893
19	Dhanmondi Branch	House # 84, Dhanmondi R/A, Dhaka.	01819-274072
20	Nawabpur Road Branch	82 Nawabpur Road.	7174994-5
21	Jubilee Road Branch	610/11, jubilee Road, Chittagong.	01819-326288
22	Uttara Branch	Plot # 27, Road # 7, Sector # 3, Uttara	8961124
23	Fatullah Branch	Fatullah Bazar, Narayanganj	01911-358157
24	Mirpur Branch	Block – Kha, Sec – 6, Main Road – 1	01819-403982

2.3.3 Capital Structure:

Capital structure of social investment bank Ltd. is as under:

1. Authorized capital

(4000.00 million, ordinary shares of Tk 1000 each)

2. Paid up capital

(585.00 million, ordinary shares of Tk 1000 each)

The directors may revise the capital structure from time to time according to the need.

2.4 OBJECTIVES & GOALS OF SIBL

i) Sectoral objectives

The key sectoral objectives are:

a. To humanize corporate finance in the formal sector through participatory market mechanism with collateral.

b. To socialize non-corporate finance in the non-formal sector through non-market and participatory custom-tailored micro-level credit package without collateral.

c. To monetize voluntary sector through participatory financing mainly on joint ownership basis.

d. To integrate these three sectors operational activities of the Bank to various will-conceived and well-planned “Social Assignment and Investment Schemes” or “Social Fund” for making them economically and ethically “transparent” and “revealed”

ii) Overall Operational goals

The key thrusts of the operational goals are as follows:

a. Empowering the family of the poor by creating income opportunities as well as strengthening the family of the rich for a better future generation.

b. Achieving sustainable participatory economy, Social Security, and peace for a society.

2.5 MISSION OF SIBL

· High quality financial services with the latest technology.

· Fast, accurate and satisfactory customer service.

· Balanced & sustainable growth strategy.

· Optimum return on shareholder’s equity.

· Introducing innovative Islamic banking products.

· Attract and retain high quality human resource.

· Empowering real poor families and create local income opportunities.

· Providing support for social benefit organizations- by way of mobilizing funds and social services.

2.6 VISSION OF SIBL

Social Investment Bank Ltd started its journey with the concept of 21^st Century Islamic participatory three sector banking model: i) Formal Sector- Commercial Banking with latest technology; ii) Non-Formal Sector – Family Empowerment Micro-Credit & Micro-enterprise program and iii) Voluntary Sector – Social Capital mobilization through CASH WAQF and others. Finally, “Reduction of Poverty Level” is our Vision, which is a prime object as stated in Memorandum of Association of the Bank with the commitment “Working Together for a Caring Society”

2.7 FUCNTIONS OF SIBL

1. Mobilization of idle resources of the country by accepting Deposits from the general public.

2. Granting Loans and Advances to the individual firms and companies for activating and developing trade, commerce and industries and other productive activities in the country.

3. To give facilities to the client and shareholders in a systematic way.

4. Give encouragement to the people for savings.

5. To increase investment.

6. To make easy transfer of foreign currency.

7. To identify consumer’s demand and fulfill their demand by supplying money.

8. To improve economy by borrowing financial facility.

9. To assist capital market.

2.7.1 Management Hierarchy

Chairman

MANAGING DIRECTOR

DEPUTY MANAGING DIRECTOR

EXECUTIVE VICE PRESIDENT

SENIOR VICE PRESIDENT

VICE PRESIDENT

SENIOR ASSISTANT VICE PRESIDENT

ASSISTANT VICE PRESIDENT

FIRST ASSISTANT VICE PRESIDENT

SENIOR EXECUTIVE OFFICER

EXECUTIVE OFFICER

SENIOR OFFICER

OFFICER

JUNIOR OFFICER

ASSISTANT OFFICER

TRAINEE ASSISTANT OFFICER

2.7.2 The Ownership Pattern

This is a private sector commercial Bank providing comprehensive range of banking services. The bank is owned as follows:

Promoters 50%

Government 5%

Public 45%

At present the Bank has an amount of Tk.4000.00 million of Authorized Capital and Tk. 585.00 million of Paid-up Capital.

2.7.3 Human Resource

There is no alternative to skilled and trained manpower in service Industry. Bearing this in mind the well educated, promising and honest workers are being appointed and trained. Bank has given top priority to develop skilled manpower and introduce them with modern technologies with the purpose of developing quality customer services. The Bank has undertaken program to train up its employees of all strata at its own Training Institute. A highly experienced person was appointed as Director (Training) of the Institute in the year 2001 with the task of formulating various training modules. Steps are being taken to shift the Institute to separate premises for facilitating training activities. Side by side, both inland and foreign training also imparted during the year as usual.

A highly experienced, well educated and motivated workforce is playing vital role towards the growth of the Bank deserve appreciation. The number of Executives and Officers as on 31^st December 2007 was 512 as against 455 as on 31^st December 2006.

2.7.4 Training Institute

Well educated peoples are needed to achieve the objectives of a firm. With a view to build enthusiastic and skilled work force, Social Investment Bank Training Institute was established in 24^th October, 1996 at Shyamoli, Dhaka. Every year the Institute trains sufficient number of employees. By the side of the new employee/officer, it is possible to trained SIBL’s existing employee/officer. There is a library in SIBL. There is about 2 thousand books remain in this library. Accounting, Management, Marketing, and Computer related books are in this library. In 2006, 1383 officer and no-officer was trained.

2.7.5 Foreign Correspondents of SIBL

In order to gain maximum advantage from Foreign Exchange related business, the Bank has entered into correspondent relationship with almost all major 122 Banks of 109 countries of the world like Standard Chartered Bank, American Express Bank Limited, HSBC, HBZ Finance, Mashreq Bank PSC, Dresdner Bank AG and with local banks in Pakistan, India, Nepal and Bhutan etc with whom we have advising, reimbursing and confirming arrangement.

2.7.6 Overseas Operations of SIBL

Social Investment Bank has set up joint venture Exchange Company named Gulf Overseas Exchange Co. Ltd, in Oman contributing 25% of its paid up capital. The present paid up capital of the company is Riyal Omani 1, 82,000.00. The Chairman of the company is the ex-minister of the government of Oman. The exchange company, established in 1985, now has three branches in Oman and is being managed fully by officials of SIBL. The company is running in profit. SIBL is also exploring possibilities of opening branches in the Middle East, Switzerland and USA. SIBL has entered into the Management contract with a Kuwati Exchange company to provide management and technical services. SIBL has acquired equity and management of Nepal Arab Bank Ltd. which is the largest and highly profitable Private Commercial Bank in Nepal.

2.7.7 Products & Services

· Mudaraba Term Deposit.

· Mudaraba Savings Deposit.

· Al-Wadia Current Account.

· Mudaraba Notice Deposit.

· Mudaraba Scheme Deposit.

· Cash Waqf.

· Mudaraba Hajj Savings Deposit.

· Mudaraba Monthly Savings Scheme.

· Mudaraba Special Deposit Pension Scheme (5 Years).

· Mudaraba Monthly Profit Deposit Scheme.

· Mudaraba Education Deposit Scheme.

· Mudaraba Home Saving Scheme.

· Mudaraba Millinery Deposit Scheme.

· ATM Service.

· Locker Service.

· One Line Banking

2.7.8 Non-Formal and Voluntary Sector Banking Programs:

Since the opening of the Bank on 22^nd November 1995, Non-Formal sector has started implementing its programs in various areas. Those are as follows:

A. Environment-friendly program: Tokai Project:

The project has a special strategic value. Till December 1995 only one group consisting of six members was formed at Hossain Marker, Utter Badda, Gulshan Thana. Group savings from the members is under process. Formation of more groups of ‘Tokai Pannaya Bavshee’ (Tokai goods Traders) is under process at different areas including Hossain Market.

B. Real Life Non-formal School of Management:

As a part of environmentally friendly program, the bank is committed to educate the Tokai and this has a worldwide strategic value. Till December 1995 one Tokai Non-formal School has been started at Hossain Market, Uttar Badda, Gulshan, Dhaka with 30 students with a view to giving them real-life education with Islamic orientation. In the process of learning, the Tokai developed propensity for savings. As a result they are regularly depositing a small portion of their income as savings.

C. Mosque Property Development Program:

Construction of Mini Market at Kazi Bari Mosque, Uttar Khan, Uttara, Dhaka, consisting of 4 shops has been completed where Bank has invested Tk.1.28 laces. Recovery rate in this sector is 100 percent.

D. Capital Market Instruments-Securitization of voluntary sector:

In the voluntary sector, the bank is in the process of organizing Voluntary Capital Market Operation for mobilization of necessary fund and in the process of developing the following financial instruments with different sets of rules in con formality with Shariah:

a) Waqf Properties Development Bond (specific and general).

b) Cash Waqf Deposit Certificate (specific and general).

c) Family Waqf Certificate.

d) Mosque Properties Development Bond (specific and general).

e) Mosque Community Share.

f) Quarn-e-Hasana Certificate (specific and general).

g) Zakat/Ushar payment Certificate.

h) Non-Muslim Trust Properties Development.

i) Municipal Properties Development Bond (specific and general).

The value of all the bonds and Qurd-e-Hasana Certificate are guaranteed by the Bank against surrender of the instruments on maturity.

2.7.9 Rural Credit Program

Agriculture is the main driving force of economy in Bangladesh. And the whole economic growth of the country depends on the development, modernization and investment of money in this connection. As a non-Government financial institution SIBL has been actively participation in rural credit program in the economic activities for large population of the country since 1992. SIBL has been working intensively in collaboration with Barindra Multipurpose Development Authority by conducting the Rural Credit program particularly in Rajshahi, Naoga, Chapainowabgong, and the northern part of the country in general. In the last 10 years bank has distributed the credit for Tk.69.85 million. The recovery of loan in this project is 94%. In 2001 bank has distributed the loan for Tk.7.00million. This is the first program for any private bank. Moreover, SIBL has been participating in Agro Based Industries and Technology Development project Loan financed by USAID since 1996.

2.8 OPERATING PERFORMANCE

Total Operating Income of the Bank as on 31st December 2007 stood at Tk.902,503,334 million against Tk. 632,241,136 million of the preceding year. The Bank made an operating profit of Tk. 295,891,481million in 2006 against Tk.480, 782,904 million of 2007.

A summery of operating result of the Bank as on 31st December 2007 vis-à-vis the position as on 31.12.2006 is shown below:

(Taka in million)

Particulars	31.12.2006	31.12.2007	Growth Rate
Income from Investment	1,898,663,277	2,092,951,320	10.23 %
Profit paid on Depositors	1,596,612,146	1,705,054,119	6.79 %
Net Investment Income	302,051,131	387,897,201	28.42 %
Commission, Exchange & Other Income	268,731,415	350,231,722	30.33 %
Total Operating Income	632,241,136	902,503,334	42.75 %
Total Operating Expenses	336,349,655	421,720,430	25.38 %
Profit Before Provision	295,891,481	480,782,904	62.49 %
Total Provision	175,665,808	212,920,488	21.21 %
Profit Before Tax	120,225,637	267,862,416	122.80 %

Operating result of the Bank as on 31st December 2007

CHAPTER: 3

3.1 GENERAL BANKING AREA

Financial institution/ intermediary that mediates or stands between ultimate borrowers and ultimate lenders is knows as financial institution. Banks perform this function in two ways- taking deposits from various areas in different forms and lending that accumulated amount of money to the potential investors in other different forms. General banking department aids in taking deposits and simultaneously provides some ancillaries services.

General banking is the front-side banking service department. It provides those customers who come frequently and those customers who come one time in banking for enjoying ancillary services. In some general banking activities, there is no relation between banker and customers who will take only one service form bank. On the other hand, there are some customers with who banks are doing its business frequently. SIBL General banking is divided into six sections.

1) Account opening section.

2) Bills and clearing section.

3) Remittance section.

4) Cash section.

5) Locker Service.

6) Closing of an account.

3.1.1 Account Opening Section

Under this section, SIBL officer opens different types of accounts on the request of clients. The procedure of opening account is given below.

3.1.1.1 Procedure for Opening of Accounts

Before opening of a current or savings account, the following formalities must be completed by the customer:

1. Application for the prescribed form

2. Furnishing photographs

3. Introduction by an account holder

4. Putting specimen signatures in the specimen card

5. Mandate if necessary

After fulfilling the above formalities, SIBL provides the customer a pay-in- slip book and a checkbook.

3.1.1.2 Application Form for Current/ Savings Account

Followings are the contents of the application form for opening Savings or Current account in SIBL,-

1) Type of the Account: Individual/ Joint/ Proprietorship/ Partnership/ Limited Company/ Club/ Society/ Co-operatives

2) Name of the Applicant(s)

3) Father’s/ husband’s Name

4) Present Address

5) Permanent Address

6) Number, Date of issue, Date of Expiry & Place of Issue of Passport (if any)

7) Date of Birth

8) Nationality

9) Occupation

10) Nominee (s)

11) Special Instruction of Operation of the Account (if any)

12) Initial Deposit

13) Specimen Signature (s) of the Applicant (s)

14) Introducer’s Information (Name, Account Number, Specimen Signature)

In case of Join Account

a) Operation instruction of the account

b) Signature (s)

In case of Partnership Account

a) Partner’s Signature

b) Partner’s Name ——-

The following formality along with the documents is to be completed before opening an account:

a) Two copies of photograph of the Account Holder (s) duly attested by the Introducer.

b) Account to be introduced properly.

c) Introducer’s signature on Account Opening Form to be verified by an officer under full signature.

d) Letter of thanks to Account Holder(s) and Introducer to be sent under registered post.

e) In case of joint account, operational instructions are to be signed by the Join Account Holders.

In case of Club/ Society,-

a) Up to date list of office bearers.

b) Certified copy of Resolution for opening and operation of account.

c) Certified copy of Bye-laws & Regulations/ Constitution.

d) Copy of Government approval (if registered.)

In case of Co-operative Society/ societies Limited,-

a) Copy of Bye-law duly certified by the Co-operative officer.

b) Up to date list of office bearers.

c) Resolution of the Executive Committee as regards of the account.

d) Certified copy of Certificate of Registration issued by Registrar, Co-operative Societies.

In case of Non- Government College/School/ Madrasha/ Muktab,-

a) Up to date list of the Governing Body/ Managing committee.

b) Copy of resolution of the Governing Body/ Managing Committee.

In case of Trustee Board,-

a) Prior approval of Head Office of the Bank.

b) Certified copy of Deed of Trust, up to date list of members of the Trustee Board and Certified copy of the Resolution of Trustee Board to open & operate the account.

In case of Minor’s Account,-

a) Putting the word “MINOR” after the title of the account.

b) Recording special instruction of operation of the account.

c) The account opening form is to be filled in and signed by either of the parents or the

legal guardian appointed by the Court of Law & not by the Minor.

In case of Limited Company,-

a) Certified true copy of the Memorandum & Articles of Association of the company.

b) Certificate of Incorporation of the company for inspection and return with a duly certified photocopy for bank’s records.

c) Certificate from the Registrar of the Joint Stock Companies that the company is entitled to commence business (in case of Public limited Co. for inspection and return) along with a duly certified photocopy for Bank’s records.

d) Latest copy of Balance Sheet.

e) Extract of Resolution of the Board. General Meeting of the company for opening the account and authorization for its operation duly certified by the Chairman/ Managing Director of the company.

a) List of Directors with address (a latest photocopy of the form-xii).

b) Authorized signature.

c) Name.

General conditions of governing Current / Savings Account,-

(a) Minimum Balance to be maintained in current account Tk. 10,000 /- and in Savings account Tk. 5.000/- .

(b) A suitable instruction by an introducer acceptable to the Bank is required prior to opening an account.

(c) Recent photographs of the Account openers duly attested by the Introducer must be produced.

(d) When cheques deposited are payable by other banks or outstation they are available after clearing or collection only, Service charge will be charged @ Tk, 100 /- in Current account and Tk 50 /- in Savings account yearly or as charged by the Bank from time to time as and when required. Provisional profit rate for Savings Account (SB) @ 6.85% (Half years compounding).

3.1.1.3. Deposits Accepted by SIBL

Mudaraba Saving Deposit (MSD)

These are profit bearing deposit accounts. The drawings are restricted in respect of both the amount of withdrawal and the frequency thereof so that the payment of interest does not become any compensating for the banker. Some time the restrictions are ignored against the depositor’s written confirmation to forgo his claim for interest on the total balance for the whole month of withdrawal.

Special Saving Scheme

• Mudaraba Hajj Saving Scheme

Hajj is one of the basic pillars of Islam- the complete code of life. SIBL has introduced a scheme in the name & style “Mudaraba Hajj Saving Scheme” to facilitate the intending Muslims to perform Hajj properly at appropriate age. This is purely a saving scheme for Hajj. Any Muslim intending in perform Hajj by building –up deposit required for meeting Hajj expenses will select one of the 20 alternative choices based on duration of period from 1 year to 20 years for building- up savings by monthly installments under this scheme.

• Mudaraba Education Scheme

SIBL being encouraged by the success of the Mudaraba deposit accounts, has introduced another savings scheme namely “Mudaraba Education Scheme”

Initial Deposit	Maturity Period	Total Payment	Monthly Education Allowance
25,000	7 Years	55,000	1,000
25,000	10 Years	77,000	1,500
25,000	15 Years	136,000	2,500
25,000	20Years	240,000	4,500

• Mudaraba Millionaire Scheme

People of Bangladesh are the followers of Islam. They are mostly interested to make interest free deposits. Taking these facts into consideration SIBL a joint venture Islamic bank introduced a monthly installment based “Mudaraba Millionaire Scheme”

Rules and regulations of this scheme:

Tk. 550/-, Tk. 1050/- or Tk. 2050/- is taken as monthly installment under Mudaraba principles of Islamic Shariah.

Duration of this scheme will be 15, 20 and 25 yrs. After maturity an estimated amount will become as follows:

Duration	Monthly Installment	Estimated amount after maturity
15	2,050/-	Tk. 10 lac
20	1,050/-	Tk. 10 lac
25	550/-	Tk. 10 lac

The amount in the above is an estimated amount and may vary at maturity.

After starting of operation of this scheme size of installment cannot be changed

• Mudaraba Special Savings (Pension) Scheme

Any Bangladeshi person aged above 18 yrs and having sound mental condition can may open this scheme. To open this account there must be a signature of a valued introducer. Parents or legal guardians can open this scheme in the name of their underage children.

After maturity estimated profit will be applied as follows:

Monthly Installment	Estimated amount after maturity
	5 years	10 years
100	8,000	22,500
200	16,000	45,000
300	24,000	67,000
400	32,000	90,000
500	40,000	1,12,500
1000	80,000	1,25,000

• Mudaraba Monthly Profit Deposit Scheme

The features of this scheme are as follows:

1. Tk. 1, 00,000/-, 1, 10,000/-, 1, 20,000/- or 1, 25,000/- or any amount multiple can be deposited under this scheme.
2. The duration of the amount should be for Five years.
3. Profits shall be distributed under this scheme as follows:a. 1,00,000/- Tk. 900 (net)b. 1,10,000/- Tk. 1000 (net)

   a. 1,20,000/- Tk. 1,100 (net)

   b. 1,25,000/- Tk. 1150 (net)

4. The payable profit will become due after 1 month of deposit. But the amount will be deposited to account in the last week of the month.
5. Generally, a depositor cannot withdraw the amount before 5 years. But, in unavoidable circumstances the depositor can withdraw the amount and in that case the depositor will have to submit the duly filled application form of the scheme.

Mudaraba Term Deposit

Mudaraba Term Deposit is one, which is repayable after the expiry of a predetermined period fixed by him. The period varies form 1 month to 1 year or above. These deposits are not repayable on demand but they are withdrawing able subject to a period of notice. Hence, it is popularly known as ‘Mudaraba Time Deposit’ or ‘Time Liabilities”. Normally the money on a fixed deposit is not repayable before the expiry of a fixed period.

In case of MTDR Account the Bank needs to maintain a cash reserve. So SIBL offers a high interest rate in MTDR accounts. The Interest rates followed by SIBL

For 1 month	@10.50
For 3 months	@11.75
For 6 months	@12.00
For 1 year or above	@12.25

Al Wadiah Current Deposit

1. ALWADIAH Current Deposit A/c’s are opened proper introduction with minimum initial deposit fixed by the Bank.
2. ALWADIAH Deposit is accepted on ALWADIAH principles which mean al Amanah with permission to use. According to this principle Bank can use the fund of the account along with other funds as per Shariah at bank’s own risk. Account holder(s) will not share any profit/loss.
3. The Law and regulation of Bangladesh, usual customs and procedures common to banks in Bangladesh including Islamic Banking Principles shall apply to and govern the conduct of account opened with the Bank.

3.1.2 Bills and Clearing Section

SIBL Local Office branch performs the bill clearing function through Local office. SIBL Local office acts as the agent of all SIBL branches for the clearing house of the Bangladesh Bank. There are two types of cheque which are-

1. Inward clearing cheque

2. Outward clearing cheque.

3.1.2.1 Inward Cheques:

Inward cheques are those ones drawn the respective branch which have been presented on other banks and will be cleared / honored through the clearing house of Bangladesh Bank. For example the cheque drawn on SIBL Local Office Br, then the cheque is called inward cheque of SIBL Local Office Br,

Accounting treatment:

Customer’s A/C Debit.

SIBL General A/c Credit

3.1.2.2 Outward Cheques:

Outward cheques are those ones drawn on other bank branches which are presented on the concerned branch for collection through clearing house of Bangladesh Bank. These cheques are called outward cheques.

For example, the cheque drawn on Mercantile Bank LTD, Kawran Bazar Br has been presented on SIBL Local Office Br. This cheque is called the outward cheque of SIBL Local Office. Hence it is said that the cheque which is the inward cheque of one bank is the outward cheque of another bank.

3.1.2.3 Outward Bills for Collection (OBC).

By OBC, we mean that those cheques drawn on other banks which are not within the same clearing house. Officer gives OBC seal on this type of cheques and later sends a letter to the manager of the branch of the some bank located in the branch on which cheque has been drawn. After collection of that bill branch advises the concerned branch in which cheques has been presented to credit the customer account through Inter Branch Credit Advice (IBCA).

In absence of the branch of the same bank, officer sends letter to manager of the bank on which the cheques is drawn. That bank will send pay order in the name of the branch. This is the procedure of OBC mechanism.

3.1.2.4. Clearing:

The scheduled banks clear the cheque drawn upon one another through the clearinghouse. SIBL 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. This is an arrangement by the central bank where everyday the representative of the member banks gathers to clear the cheques. The place where the banks meet and settle their dues is called the clearinghouse. The clearinghouse sits for two times a working day.

The SIBL Local Office Br sends the instruments through Inter Branch Debit Advice (I.B.D.A). SIBL Local Office acts as an agent in this case. For this, Local Office branch gives the following entries,

SIBL General A/C (Local Office Br) —————Dr.

Customer’s A/C———————————Cr.

If the instrument is dishonored, the instrument is returned to the Local Office branch through I.B.D.A. along with the following entries,

Customer’s A/C—————Dr.

SIBL General A/C——————Cr.

3.1.2.5 Receiving Cheques for Collection:

In SIBL, cheques of its customers are received for collection from other banks. In case of receiving cheques, following points should be checked very carefully-

a) The cheques should not carry a date older than the receiving date for more than 6 months. In that case it will be a ‘stale cheque’ and it will not be allowed for collection. Again the date of the cheque should not be more than 1 day’s forward than the receiving date.

b) The amount in figures and words in both sides of the pay-in-slip should be same and it should also be same with the amount mentioned in figures and words in the cheque.

c) The name mentioned in the cheque should be some in both sides of the pay-in-slip and it should be the same with the name mentioned in the cheque.

d) The cheque must be crossed.

3.1.2.6. Cheque and Crossing

A “Cheque” is a bill of exchange drawn on a specified banker and not expressed to be payable other wise than on demand. [According to section-6, Negotiable Instrument Act, 1881.]

A cheque may be classified into:

a) An open cheque which can be presented for payment by the holder at the counter of the drawer’s bank.

b) A crossed cheque which can be paid only through a collecting banker.

Crossing cheque: A cheque is said to be crossed when two transverse parallel lines with or without any words are drawn across the face.

Crossing may be general, special or restrictive.

3.1.2.7. Issuing Cheque Book:

Following procedures are maintained by SIBL, Local Office for issuing checkbook.

(a) Firstly the customer will fill up the check requisition form.

(b) The leaves of the checkbook under issue are counted to ensure that all the leaves and the blank requisition slip are in tact.

(c) The officer writes A/C number and branch name on all the leaves of the checkbook.

(d) The name and the A/C number of the customer are than entered in the checkbook register against the particular checkbook series.

(e) Then the officer sightseer, checkbook, and requisition slip

(f) Lastly the checkbook is handed over to the customer after taking acknowledgement on requisition slip.

A cover file containing the requisition slip is effectively preserved as vouchers. If any defect is noticed by the ledger keeper, he makes a remark to that effect on the requisition slip and forward it to the cancellation officer to decide whether a new checkbook to be issued to the customer or not.

3.1.3 Remittance of Funds:

Remittance of funds is ancillary services of SIBL. It aids to remit fund from one place to another place on behalf of its customers as well as non- customers of bank. SIBL has its branches in the major cities of the country and therefore, it serves as one of the best mediums for remittance of funds from one place to another.

The main instruments used by SIBL, Local Office Br for remittance of funds.

-Pay Order/ Banker’s check.

-Demand Draft.

-Telegraphic Transfer.

3.1.3.1 Bank’s cheque/ Pay order.

The pay order is an instrument issued by bank, instructing itself a certain amount of money mentioned in the instrument taking amount of money and commission when it is presented in bank. Only the branch of the bank that has issued it will make the payment of pay order. The banker’s cheque must come the branch for payment wherever it is presented.

Issuing of Pay Order:

The procedures for issuing a Pay Order are as follows:

1. Deposit money by the customer along with application form.

2. Give necessary entry in the bills payable (Pay Order) register where payee’s name, date, PO no, etc is mentioned.

3. Prepared the instrument.

4. After scrutinizing and approval of the instrument by the authority, it is delivered to customer. Signature of customer is taken on the counterpart.

Cancellation of a Pay Order:

If a buyer wants to cancel it, he should submit a letter of instrument in this regard and also return the instrument.

3.1.3.2 Bank Draft:

The person intending to remit the money through a pay order has to deposit the money to be remitted with the commission which the banker charges for its services. The amount of commission depends on the amount to be remitted. On issue of the pay order, the remitter does not remain a party to the instrument i) Drawer branch ii) Drawee branch iii) Payee. This is treated as the current liability of the bank as the banker on the presentation of the instrument should pay the money. The banker event on receiving instructions from the remitter cannot stop the payment of the instrument. Stop payment can be done in the following cases:

i) Loss of draft before endorsement: in this case, “Draft reported to be lost, payee’s endorsement requires verification” is marked.

ii) Loss of draft after endorsement: In this case, the branch first satisfies itself about the claimant and the endorsement in his favor.

Charges:

A commission of 0.15% is taken on the draft value & Tk.50/= is taken as postal charge.

3.1.3.3 Mail or Telex Transfer (TT):

Telex transfer is another widely used mode for remittances of funds. In case of telex transfer the message for transfer of funds is communicated through tested telex. SIBL generally recovers from the telex charges in addition to the usual service charges.

Issuing of TT:

SIBL follows the following procedures:

i) The customer deposits money with SIBL to be sent.

ii) The customer obtains a cash memo containing TT serial number.

iii) TT serial number, notifying part name is mentioned in the telex message.

iv) The Telex Department confirms transmission of the telex.

Accounting entries for TT:

Cash A/C, Client’s A/C ———————–Dr.

SIBL General A/C (Local Office branch) —————Cr.

Procedures for the incoming TT:

After receiving the telex, it is authenticated by test. TT Serial number is verified by the “TT in-Concern branch” register. The following entries are given in the vouchers,-

SIBL General A/C (Local Office branch)———————–Dr.

Client’s A/C——————————————Cr.

Tk. 50/= is taken as postal charge. The minimum commission is Tk. 50/= or o.15% of the amount whichever is higher.

3.1.4 Cash Section:

The cash section of any branch plays very significant role in general banking department. Because, it deals with most liquid assets The SIBL Local Office Br has an equipped cash section. This section receives cash from depositors and pay cash against cheque, draft, PO, and pay in slip over the counter.

3.1.4.1 Receiving Cash:

Any people who want to deposit money will fill up the deposit slip and give the form along with the money to the cash officer over the counter. The cash officer counts the cash and compares with the figure written in the deposit slip. Then he put his signature on the slip along with the ‘cash received’ seal and records in th