History of Banking:
Bangladesh inherited its banking structure from the British regime and had 49 banks and other financial institutions before the Partition of India in 1947. The Dhaka Bank established in 1806 was the first commercial bank in the Bangladesh region of British India. Bengal Bank, the first British-Patronized modern bank established in India in 1784, had opened its two branches in 1873 in Sirajganj and Chittagong of Bangladesh region. Later in 1862, the Bengal Bank Purchased the Dhaka Bank and opened its first branch in Dhaka in the same year by reconstituting and merging the Dhaka Bank. Thereafter, another branch of Bengal Bank was opened in Chandpur in 1900. A number of other branches of Bengal Bank were opened in this region and some branches had been closed in Course of time. There were six other branches of Bengal Bank in operation in the territory of Bangladesh until the Partition of British-India in 1947 and these branches were at Chittagong (1906), Mymensing (1922), Rangpur (1923), Chandpur (1924), and Narayanganj (1926).
Following the emergence of Pakistan in 1947, Stat Bank of Pakistan, the Central Bank of the country, came into being in July 1948. Later, the National bank of Pakistan, a strong commercial bank was set up in 1949. In all, 36 scheduled commercial banks were in operation in the whole Pakistan until 1971. Pakistanis owned most of these banks and only three of them namely, National Bank of Pakistan, Habib Bank Ltd. and the Australasia Bank Ltd, had one branch of each in East Pakistan in 1949. During 1950-58, there other Pakistani-owned banks, Premier Bank Ltd., Bank of Bahawalpur Ltd. and Muslim Commercial Bank, had opened their branch in East Pakistan. Four Pakistan-owned banks, the United Bank Ltd., Union Bank Ltd., Standard Bank Ltd. and the commerce Bank Ltd. Conducted banking business in the Province during 1959-1965.But all of them Had their headquarters in west Pakistan. East Pakistan had only two banks Owned by local business groups white headquarters in Dhaka. These were the Eastern Mercantile Bank Ltd. (Presently Pubali Bank Ltd.) And Eastern Banking Corporation Ltd. (Presently Uttara Bank Ltd.) Established in 1959 and 1965 respectively.
In the beginning of 1971, there were 1130 branches of 12 banks in operation in East Pakistan. The foundation of independent banking system in Bangladesh was laid through the establishment of the Bangladesh Bank in 1972 by the Presidential Order No. 127of 1972 (which took effect on 16th December, 1971). Through the Order, the eastern branch of the former State Bank of Pakistan at Dhaka was renamed as the Bangladesh Bank as a full-fledged office of the central bank of Bangladesh and the entire undertaking of the State Bank of Pakistan in, and in relation to Bangladesh has been delivered to the Bank.
Bangladesh Bank has been entrusted whit all of the traditional central banking functions including the sole responsibilities of issuing currency, Keeping the reserves, formulating and managing the monetary and credit policy, regulating the banking system, stabilizing domestic and external monetary value, preserving the par value of Bangladesh Taka, fostering economic growth and development and the development of the country’s market.
The Bangladesh Banks (Nationalization) Order enacted in 1972 nationalized all banks except foreign ones. Six nationalized banks were formed through merging the existing banks of the period.
The rate of growth and development of banking sector in the country was extremely slow until 1983 when the government allowed to establish private banks and started
Denationalization process: initially, the Narayanganj Bank in the same year and thereafter, the Pubali Bank, and the Rupali Bank in 1986. Growth pattern of banks during the period 1973-1983.
History of Private Banks in Bangladesh:
There were no domestic private commercial banks in Bangladesh until 1982; When the Arab-Bangladesh Bank Ltd. commenced private commercial banking in the country. Five more commercial banks came up in 1983 and initiated a moderate growth in banking financial institutions. Despite slow growth in number of individual banks, there had been a relatively higher growth of branches of nationalized commercial banks (NCBs) during 1973-83. There number had increased from 1512 in 1973-74 to4603 in 1982-83.
Financial sector reforms to strengthen the regulatory and supervisory framework for banks made headway in 2006 although at a slower than expected pace. Overall health of the banking system showed improvement since 2002 as the gross Non-performing Loans (NPL) declined from 28 percent to 14 percent while net NPL (less Provision) reduced to 8 percent from 21 percent. This led significant improvement in the profitability ratios. Although the Private Commercial Banks (PCB) NPL ratio registered a record low of 6 percent, the four Nationalized Commercial Banks (NCB) position are still weak and showed very high NPL at 25 percent. The NCBs have large capital shortfalls with a risk-weighted capital asset ratio of just 0.5 percent (June 2006) as against the required 9percent. For the PCBs risk-weighted capital asset ratio stood at 10 percent. Bangladesh Bank issued a good number of prudential guidelines during the year 2006 and the first quarter of 2007 which among others relate to:
Rationalization of prudential norms for loan classification and provisioning,
Policy for rescheduling of loans,
Designing and enforcing an “integrated credit risk grading manual”,
Credit rating of the banks, and
Revisions to the make-up of Tier-2 capital.
Besides, recent decision of the Government to corporative the remaining three NCBs along with the initiative to sale the Rupali Bank are bound to usher in changes in the banking sector competitiveness aspect. Bangladesh Bank has also taken up the task of implementing the Basel II capital accord. Further, the recent enactment of the Micro-credit Regulatory Authority Act (MRAA) for the regulation of the Micro Finance Institutions (MFI) has been a major development in the year 2006. Since 1998 CAMEL rating of banks gradually improved and in 2006 Bangladesh Bank updated this rating model by incorporating the market risk and the new Model is known as CAMELS.
Modern banks play an important part in promoting economic development of a country. Banks provide necessary funds for executing various programs underway in the process of economic development. They collect savings of large masses of people scattered throughout the country, which in the absence of banks would have remained idle and unproductive. These scattered amounts are collected, pooled together and made available to commerce and industry for meeting the requirements. Economy of Bangladesh is in the group of world’s most underdeveloped economics. One of the reasons may be its underdeveloped banking system. Government as well as different international organizations have also identified that underdeveloped banking system causes some obstacles to the process of economic development. So they have highly recommended for reforming financial sector. Since, 1990, Bangladesh government has taken a lot of financial sector reform measurements for making financial sector as well as banking sector more transparent formulation and implementation Of these reform activities has also been participated by different international organization like World Bank, IMF etc.
Current Structure of Banks in Bangladesh:
Bangladesh Bank (BB) has been working as the central bank since the country’s independence. Its prime jobs include issuing of currency, maintaining foreign exchange reserve and providing transaction facilities of all public monetary matters. BB is also responsible for planning the government’s monetary policy and implementing it thereby.
The BB has a governing body comprising of nine members with the Governor as its chief. Apart from the head office in Dhaka, it has nine more branches, of which two in Dhaka and one each in Chittagong, Rajshahi, Khulna, Bogra, Sylhet, Rangpur and Barisal.
Background of the Bank:
Agrani Bank is a state-owned commercial bank of Bangladesh established in 1972. Its headquarter is situated at Motijheel in Dhaka, the capital city of Bangladesh. It started functioning as nationalized commercial bank taking over assets and liabilities of the erstwhile Habib Bank ltd and commerce Bank ltd. function in the East Pakistan. It has been privatized on 15th November 2007 and emerged as Agrani Bank Limited (ABL) taking over assets, liability and goodwill of Agrani Bank. The authorized capital of the Bank is Tk. 800 crore.
Agrani Bank Limited, a leading commercial bank with 867 outlets strategically located in almost all the commercial areas throughout Bangladesh, overseas Exchange Houses and hundreds of overseas Correspondents, came into being as a Public Limited Company on May 17, 2007 with a view to take over the business, assets, liabilities, rights and obligations of the Agrani Bank which emerged as a nationalized commercial bank in 1972 immediately after the emergence of Bangladesh as an independent state. Agrani Bank Limited started functioning as a going concern basis through a Vendors Agreement signed between the ministry of finance, Government of the People’s Republic of Bangladesh on behalf of the former Agrani Bank and the Board of Directors of Agrani Bank Limited on November 15, 2007 with retrospective effect from 01 July, 2007.
Agrani Bank Limited is governed by a Board of Directors consisting of 13(thirteen) members headed by a chairman. The Bank is headed by the Managing Director & Chief Executive Officer; Managing Director is assisted by Deputy Managing Directors and General Managers. The bank has 10 Circle offices, 30 Divisions in head office, 53 zonal offices and 868 branches including 27 corporate and 40 AD( authorized dealer) branches.
Objective of Agrani Bank Ltd:
To facilitate and handle all kinds of commercial banking services to its customer authorized by Bangladesh Bank
To handle the export and import trade of Bangladesh
To take part in international banking etc
The Bank renders commercial banking services to all types of customers. The range of services offered by the Bank includes- accepting deposit, making loans and advances, discounting bills, conducting domestic and international money transfers, carrying out foreign
Exchange transactions in addition to international money transfers, and offering other customer services such as safe keeping, collections and issuing guarantees, acceptances and letters of credit. Core business of the Bank includes- deposit mobilization and lending activities comprising short- term, long- term, import and export financing. Financing activities are extended to different sectors of the economy that could be grouped in to several sectors including Rural & agriculture, Garments & Textiles, Jute, Cement & Bricks, Tannery, Steel & Engineering, Food & Beverage, Chemical & Pharmaceuticals, Printing & Packing, Glass & Ceramics and Miscellaneous.
Mission of ABL:
Provide excellent quality customer services
Provide expert workers and professionalism
Maintenance of business ethics
Become trusted: repository (place where things are stored) of customer’s money and their financial advisor
Sound capital base
ABL mission is to provide Banking services to their valued clientele with utmost proficiency and sincerity reinforced by an efficient workforce and the latest state of technology.
Vision of ABL:
By assuring satisfaction to the customers, through a proper training of its most selected group of employees, it plans to pursue its mission. Also it plans to accomplish its mission through the constant innovation of its product line and establishing constant network with prospective corporate client.
Milestone of ABL:
Industry: Banking
Founded: March 26, 1972
Headquarters: Dilkusha commercial area, Dhaka, Bangladesh
Area served: Bangladesh
Key people: Dr. Khondoker Bazlul Hoque{Chairman)
Products: Finance
Net income: Tk 264.6 crore (US$ 38.35 million) 2008<href=”#cite_note-Independent_Auditors.27_Report-0″>[1]
Employees: 13,269
Website: http://www.agranibank.org
Organizational Organ Gram
Products and Services of ABL:
Deposits
| Accounts & Deposits | ||
| Savings Deposits |
| Fixed Deposit Receipt (FDR) | ||
| Far Farmers Account | ||
Savings Bank Account (SBA) – Savings Bank Account can be opened in any branch of Agrani Bank by any Bangladeshi citizen in the name of an individual or a group of individuals which can be operated singly or jointly:
Requirements for opening a Savings Bank Account
| Account Opening Form to be duly filled out and submitted to a chosen branch of Agrani Bank along with three passport sized copies of the applicant’s recent photograph duly attested by an introducer who must be an Account Holder of any Branch of Agrani Bank. Attested copy of Bangladesh Passport of the applicant may also serve as an Introducer | |
| An initial deposit of Tk. 100/- is required for opening of the A/c. | |
| Minimum balance of Tk. 50/- to be maintained in the A/c. | |
| A Savings Bank Account may also be opened in the name of a minor which has to be operated by the minor’s guardian. | |
| An account in the name of an illiterate person can also be opened which is to be operated by the Account Holder’s thumb impression. For each and every transaction of the Account the illiterate Account Holder has to present himself/herself before the concerned Branch officials. | |
| All required information as per terms mentioned in the Account Opening Form | |
| Interest for the Account is applied in June and December on monthly product basis. | |
| An amount of Tk. 20,000/- or 25% of the balance, whichever is lower, can be withdrawn at a time from the account; two withdrawals per week are permissible. Otherwise, the Account is deprived of interest accrued in the month when the permissible provisions are not complied by. |
Fixed deposit– Fixed Deposit Account
Opening a Fixed Deposit Account for different terms with any Branch of Agrani Bank is very simple. Any individual or a group of individuals can step in to any Branch of Agrani Bank, fills out a prescribed form, hand out over the counter cash or easily cashable instrument of any amount and leave the Branch with a Fixed Deposit Receipt
Schemes
| Agrani Bank Pension Sanchay Scheme |
| Agrani Bank Bishesh Sanchay Scheme |
Loan Scheme
Term Loan – The Bank takes collateral against giving any Term Loan to a firm. Bank prefer short- term loan (like- current assets, accounts receivable and inventory) which can be transferred in to cash much sooner than fixes assets.
Loan (General) – Bank does not take any collateral. For a specific purpose this short period loans are taken. Only a note is used by the Bank which is signed by the borrower where states the conditions and length of taking this loan including interest rate.
Secured Overdraft (SOD) – In it, Bank takes security of customer’s FDR or balance in DPS/ SDPS/ MDS/ SDS/ EDS A/Cs are marked as lien.
Transport Loan – To buy any type of transport, the borrower apply for this loan. Here, the collateral is only that transport which the borrower will buy by this Transport Loan.
House Building Loan – For giving this house loan the Banks takes collateral of that house’s land and building.
Payment against Document (PAD) – Suppose customer’s documents are alright but importer is willing to retire the documents – In this case, Bank is obligated to pay price of exported goods. Since importer did not pay for bill of exchange, this payment by bank is one kind of credit to the importer and this credit in banking is known as PAD.
Loan against Imported Merchandise (LIM) – Everything is O.K. but importer fails to clear goods from the port and request bank to clear – In this case, Banks clear the goods and takes delivery like same, by paying customs duty and sales tax etc. So, this expenditure is debited to the importer’s account and in banking it is called LIM.
Loan against Trust Receipts (LTR) – Advance (Loan) against a Trust Receipt obtained from the Customers, which are allowed only to the first class tested parties. When the documents are covering an import shipment or other goods pledged to the Bank as security are given without payment. However, for such advances prior permission/sanction from Head Office must be obtained. The customer holds the goods or their sale-proceeds in trust for the Bank, till such time, the loan allowed against the Trust Receipts is fully paid off.
Consumer Finance Scheme – There are branches and finance centers under this division which have qualitative workforce of employees. Some of the services provided by this division are unsecured personal loans, credit cards, and vehicle related lease etc.
Hire-Purchase Scheme – As Bank make their own investment in Government securities (like- Government treasury bills, prize bonds, Bangladesh Bank bills, special treasury bonds & reverse report) and in other investment which sometime borrower wants to hire as a loan from the Bank. That is why this loan is known as hire of Bank’s purchase scheme.
Services
ATM Banking – Agrani Bank Ltd. has implemented successfully Automated Teller Machine (ATM) /DEBIT card transaction from June 25, 2008. Through Automated Teller Machine (ATM) /Debit card, customer can avail the facilities like withdrawal money, balance inquiry and purchase goods from Point of sale (POS) using Dutch Bangla Bank Ltd. ATM Booth and POS.
SMS Banking – Agrani Bank Ltd. has officially launched SMS banking service from December 17, 2007.
Lockers– For safekeeping of customer’s valuables like important documents and goods like jewelries and gold ornaments, ABL Locker Service is available in most of the Branches in urban areas. Their nature of service is like custody of locker/ safe and nature of charge is like rent.
Education Remittance – Students who are desirous (wishing or wanting) to study abroad for them this Bank is giving education remittance service. In this service, this Bank assures their remittance of funds in abroad for study.
Board of Directors:
Board of Directors of Agrani Bank Ltd (ABL) is given below.
Chairman
Mr. Ranjit Kumar Chakraborty Mr. Shekhar Dutta Mr.NagibulIslamDipu
Director Director Director
Mr. Md. Abdus Sabur Barrister Zakir AhammadMr. Sahzada Mohiuddin
Director Director Director
Mr. Abduz Jahir ChowdhuryMr. K.M.N. Manjurul Hoque Mr. A.K. Gulam Kibria
Director Director Director
Luna Shamsuddoha Mr. Syed Bazlul Karim Mr. Syed Abdul Hamid
Director Director Managing Director & CEO
Senior Management:
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Credit management:
ABL has already adopted the Credit risk management Guidelines issued by the Bangladesh Bank for improving the risk management culture, establishing minimum standards for segregation of duties and responsibilities, and promoting the ongoing process for improvement of the Banking Sector in Bangladesh in the context of globalization. This puts in place a robust process for proactive management of loan portfolios in order to minimize
Loss and enhance return to shareholders. The Bank has introduced credit policy guidelines for CRM
Human Resources Division:
In ABL has a separate Human Resources Division (HRD) to manage the employee policies and practices. In 2007 total human resources strength of ABL was 13,209. Bank follows a standardized human resources policy. The Bank has defined HR policies including recruitment, training & development, promotion, leave, transfer, and disciplinary action policy. Usually internal recruitment procedures are considered to fill up the mid and top management positions, while entry-level positions are filled with regularly through competitive recruitment exams. The Bank established fully equipped training center.
Corporate Governance:
To assess Bank’s corporate governance practices CRAB evaluates the quality of financial reporting and disclosures, strength of internal control system and internal audit function; induction of professionally competent, independent non-executive directors on corporate Board, formation of audit committee; delegation of power to executives and staff; protection of shareholder rights etc. FSIBL has addressed most of the issues of corporate governance for strengthening organizational strength. But the Bank has not yet appointed independent director which is required by SEC
In Bangladesh Bank; there is a very large room, which contains fifty (50) or more tables for each Bank which known as the Clearing House. Clearing is a system by which a Bank can collect customers fund from one Bank to another through the Clearing House. It’s a place, where the representatives of different banks get together to receive and deliver cheque with one another. Normally, Bangladesh Bank performs the Clearing House in Dhaka, Chittagong, Rajshahi, Khulna and Bogura. Where there is no branch of Bangladesh Bank, Sonali bank arranges this function. Here, only the regular customers, i.e. who have- Savings A/C, Current A/C, STD & Loan A/C can deposit cheuqes for collection of fund through the Clearing House. Natures of clearing house are: (i) 1st clearing house and (ii) return clearing house. In clearing, there are two types of cheque comes for clearing, they are: outward and inward cheques. Return house means the 2nd house where the representative of the Bank meets after 3 p.m. to receive and deliver dishonored cheque, which was placed in to the 1st clearing house.
Clearing process in ABL:
Like other banks, ABL also has a representative in Bangladesh Bank, where they work as like delivering the cheque to those banks from which ABL do expect to collect money on behalf of their customer and receiving the cheque which ABL customers have drawn for other bank’s customer. Both receiving and delivering of cheques are done within the local clearing zone. After the above process, about the cheques which are honored and dishonored at first that information comes to the Zonal Office of ABL and then the Head office inform to different branches about their particular clearing cheques. The customers whose cheques are honored, their money will be transferred in to their account. But the cheques which are dishonored those cheque’s customer will get informed by the Bank. So, they can take necessary step to make it honored by consulting with the drawn Bank’s customer.
Clearing Department:
This department has three main jobs:
Outward cheque clearing
Inward cheque clearing
Attending house
Outward cheque clearing:
Outward cheques are those cheques which come from another bank to the name of ABL’S account holder. To collect money for the ordered person, the cheque of different Bank comes, which is known as Outward Cheque Clearing. As the account holder wants to claim the cheque’s amount through its Bank. The whole procedure of claiming is done by the Clearing House of Bangladesh Bank.
(a) Procedure for Receiving & Recording:
Clearing officer check all the cheques and deposit slip very carefully before receiving from its customer. Then the Bank at first gives 3 important seal- Crossing, Clearing & Endorsement. Then these cheques go for entry in to the computer software and in Registry Book. When both work of entry in computer and in registry book are done a posted seal is given on the cheque by authorized initial.
(b) Descriptions of the Three Important Seals Are:
(i) Crossing
In Crossing, Bank’s name and branch name are given. Crossing seal is mainly given to show that the cheque now belongs to ABL. For example the seal is like:
Agrani Bank Limited
Narayanganj Branch
(ii) Clearing
In Clearing, the next banking day’s date are indicated with month, as the cheque will at first go to Bangladesh Bank’s Clearing House and then after passing at their the amount will get by the account holder. The above process takes at least two days after getting any outward cheque. In clearing seal the next day’s of banking is given to show that when those outward cheque will go for clearing to the Bangladesh Bank. So that customer could understand that when they will be going to get their claimed money in to their account. For example, suppose today is 16 of June and next banking day is 17 of June, so the seal is like:
17 June ’11
CLEARING
(iii) Endorsement
Here, three different types of endorse seal are being used by the Bank depending on the face of the outward cheque. Same thing is not always written on the ‘PAY TO’ part of the cheque. That is why some example has been given, as below–
When on the cheque only person’s name/institution names are indicated then the seal is like:
| Payee’s A/C Credited
For Agrani Bank Ltd Narayanganj Branch, Dhaka |
When on the cheque only cash/self/Bank’s names are indicated then the seal is like:
| Received Payment
For Agrani Bank Ltd Narayanganj Branch, Dhaka |
| Received Payment
Payee’s A/C Credited For Agrani Bank Narayanganj Branch, Dhaka |
When on the cheque Bank’s name, account title and account number all together are given then the seal is like:
(c) How to Maintain Outward Registry Book
Here,the total information of a cheque need to give- by a serial number: name of the bank, name of the branch, cheque number, depositor’s name, account number and at last the amount need to be written. Also at the day end, the total amounts in figure need to mention with the amount in words. All these are done to keep record that to the Bangladesh Bank’s Clearing House which cheques have gone for clearance and on which date. As on top of every page in registry book clearing dates are mentioned
(d) Transactions, Which Are Done in Terms of Outward Cheque’s Clearing
After receiving any outward cheque the debit and credit procedure is done like: when the cheque go for entry in to the computer then the transaction will be as follows:
| Sundry Asset………………………..Debit Deposit Slip……………………………….Credit |
As the money has not yet came to the customer’s account that is why customer account will be debited with a title of sundry asset. This sundry asset is look like a fund from where Bank takes the cheques amount until the real cash comes to that customer account and the cheque’s deposit slip will be credited as bank will keep the deposit slip to them by sending the cheques to the Clearing House.
After getting honored from Bangladesh Bank’s Clearing House, the transaction will be as follows:
| IBTA………………………………………….Debit Sundry Asset………………………………………..Credit |
As now the real cash comes to those customers account that is why sundry asset will be credited by debiting IBTA (Inter Branch Transaction Account). This IBTA will be debited because the honored cheque information at first comes to the Head Office for which customer’s claimed money also comes to them, as then they keep those money in IBTA from where every branch of ABL takes and keep it on their owns customer account.
If any outward cheques are dishonored then the transaction will be as follows:
| Customer Account …………………..Debit
Clearing House Adjustment ………………Credit |
As the Bank does not get their customer’s claimed money that is why customer account will be debited and as clearing house is returning the cheque that is why clearing house adjustment will be credited.
(e) Procedure of Sending the Outward Cheques:
The posted cheque’s print out is made, which is known as Top Sheets, where it shows that from each and every bank how many cheques have been received by ABL’s Narayanganj Branch. These top sheets are stapled with each bank’s cheque. For example, suppose from EBL (Eastern Bank Limited) 3 cheques have been received by ABL’s Narayanganj Branch. So on the top sheet that 3 different cheque’s amount with their cheques number will be indicated and as a whole also will be indicated with total number of cheque, as like these way, for every bank’s cheque a top sheet has been made. Then it will be send to the Zonal Office. It is done, so that Zonal Office may find out easily the whole information of outward cheques from their every branch of ABL
(f) Precaution in Terms of Receiving Any Outward Cheque from the Customer:
Name of the account holder need to be same on the cheque and on the deposit slip
Amount on the cheque and on the deposit slip need to be same in word and in figure.
Date on the cheque may be current or before (but not more than 6 months back) clearing house date.
Bank and Branch name of the cheque need to be written on the deposit slip with cheque number/ with warrant number.
Cheque must be signed.
Account number on the deposit slip need to be clear
Depositor’s signature on the deposit slip
(g) Responsibilities of Clearing Officer for outward cheque clearing:
Must be checked whether on the outward cheque crossing seal has been given with clearing seal and with proper endorsement seal
Computer posting of the cheques
Examine with the computer’s posting that the total number and total amount of outward cheque matches with the registry book.
Separation of cheque from the deposit slip.
Posted cheque’s print out
Copy of computer’s posted cheque in to the floppy disk.
(h) Cost of Clearing:
The collection cost normally varies with the distance and ABL does not charge for the collection within the Dhaka City or within the district. But when anyone issue cheque of ABL without having enough money in the account then the clearing department fine TK 100 for it.
Above, the whole processes are done for outward cheques clearing, in ABL. After which the outward cheques go to the Bangladesh Bank’s Clearing House for further process, from where ABL comes to know that which are the cheques are honored and which are dishonored.
Inward Cheque Clearing:
It is the opposite flow of outward cheque clearing; here ABL’s customers draw cheque for the other Bank’s account holder. That Bank will do the same thing to claim money from ABL with the same procedure. At the time of inward cheque for clearing, the initial things must have to be checked like- whether the Banks have given: the clearing seal, endorsement seal and the branch seal. Sometime, when some valued customer’s drawn cheque comes in ABL’s Narayanganj Branch, that time, if for any reason the Bank employees find out any difficulty in passing their drawn cheque, then they inform their valued customer about the problem. The difficulty may be like- signing problem, insufficient fund, etc, reason may occur. So, then their valued customer may try to sought out the problem about their drawn cheque. It is informed because if any valued customer is having insufficient fund for his drawn cheque then often those customer comes to the Bank to deposit the money which they have drawn for their party.
As informing the valued customer about their cheque’s problem, helps the Bank to less their return cheques quantity as much as possible which is important for any Bank to improve their Bank image in to the society and also it helps to improve a good relation, specially with their valued customer.
(a) Transaction for Inward Clearing Cheques:
| Customer’s A/C………………Debit
ABL General A/C…………………..Credit |
(b) Procedure of Keeping Record
(i) In Inward Registry Book Here, also the total information of a cheque needs to give only without the name of the depositor. As for these inward cheques, ABL’s money will go to the other Bank that is why depositor name does not come in this case. Inward cheques are written in register book by giving current date and the headings are like- with the serial number: name of the bank, name of the branch, cheque number and account number and at last the amount. It is done to keep record, that which inward cheques have came to ABL for each date and also in registry book it is marked down with red pen that which cheque has gone for return. At last from the total amount in figure the return cheques are deducted and then the final amount in figure and in word is written.
(ii) Entry in to the Computer
Like outward cheque, inward cheque is also entered in computer database. As for this, the Bank can verify their customer signature with the inward cheque and also can find out that do the customer has sufficient fund for the cheque’s payment. After the verification, the posted seal is given on every inward cheque with authorized initial. But after verification if anything wrong appears then that inward cheque is returned by attaching a return memo. Then ABL’s clearing officer copy (applicable in both cases for outward & inward cheques) all the documents from their computer to the floppy disk as per Bangladesh Bank’s requirement. Because when the cheques go to the Bangladesh Bank’s Clearing House, ABL representative’s first job is to deliver the floppy to the Bangladesh Bank Computer Department.
(c) Responsibilities of Clearing Officer for Inward Cheque Clearing:
Need to match the Bank’s customer signature with the inward cheque signature.
Do the customers are having sufficient fund for their cheques payment.
Date (advance date cheque will not be passed)
Amount in figure & in word need to be same
Computer posting of the cheque
Examine with the computer’s posting that the total number and total amount of inward cheque matches with the registry book.
At last, Officer also needs to be aware that do any of their customers have announced any ‘stop payment’ or not.
(d) Return cheques penalty
The cheques which will go return for not having sufficient fund in that particular customer’s account. ABL charges Tk 25/= as penalty from that customer account’s money. But if this Tk 25/= is also not available in to that customer bank account then this penalty would not be charged, this penalty will be dismiss.
(e) Example of a Return Memo:
Suppose a cheque will be return back for not having sufficient fund on the date of 7th of October, if the cheque number is cq- 368876 and amount is Tk 1,00,000/=. So for it, on the return memo the procedure will be like as follows: (on the next page)
Figure: 3 Format of a Return Memo
| Cheque Return Memo |
Memorandum Date 14-06-10
Agrani Bank Limited
Narayanganj Branch
Draft/ Cheque (s) No. ……368876……………for Tk …1, 00,000/=…
Is/are returned unpaid for reason No ………… (4)…………………..
Not arranged for
Effects not cleared May be Presented again
Exceeds arrangements
Full cover not received/ Balance insufficient
Payment stopped by drawer
…………………………………………. Payee’s endorsement
Irregular/ illegible/ required.
…………………………………………. Payee’s endorsement
Irregular, required Bank’s confirmation.
Drawer’s signature differs/ required
Alterations in date/ figures/ words require drawer’s full Signature
Cheque in post dated/ out of date/ mutilated
Amount in words and figure differs
Crossed cheque must be presented through a Bank
Clearing stamp required/ requires cancellation
Addition to Bank discharge should be authenticated
Cheque crossed “Account, Payee Only”
Collecting Bank’s Discharge irregular/ required
Cheque not drawn on us
……………………….
……………………….
……………………….
xxxxxx
Authorised Officer
The 17 reasons are given in a cheque return memo, if any one of them occurs then the inward cheques will be return back. But if the return reason does not fall on none of the above 17 mentioned reason then there is a blank space in 18, 19 and 20 to mention the reason.
Above are the processes which are done for inward cheque clearing. After which the inward cheque goes to the Bangladesh Bank’s Clearing House, from where the claimed bank get to know that whether their cheques are honored or dishonored.
Above are the processes which are done for inward cheque clearing. After which the inward cheque goes to the Bangladesh Bank’s Clearing House, from where the claimed bank get to know that whether their cheques are honored or dishonored.
At the Day End
In Outward & Inward Cheque clearing when all the work is done. The Bank gives a special posting in to the computer from where they could find out that whether the Bank for the day is in a profit (favorable) position or in a loss (disfavor able) position. As for the outward cheques, the Bank gets fund for their customer account, which may be refer as input and for the inward cheques the Bank has to draw fund for other Bank’s customer which may be refer as output. So, if input becomes greater than the output then it will be known as Favorable for this Bank. But if input becomes less than output then it will be known as Disfavor able for this Bank.
Attending House:
(a) LBC (Local Bills for Collection)
Here, the transactions took place within the local zone. Like in Dhaka City – suppose, a customer has account in Gulshan Branch but that customer has presented a cheque in Motijheel Branch. For the online facility, the customer can withdraw the money from Motijheel Branch but the transaction will be as follows:
| IBTA……………………….Debit
Customer Account………………..Credit |
As IBTA means inter branch transaction account that is why from this IBTA the Motijheel Branch will draw the cheque for that Gulshan Branch’s customer and will make that customer account credit by making IBTA debit.
(b) OBC (Outward Bills for Collection)
If any cheque from other district comes to the Dhaka Branch then this OBC take place. Suppose, from Rupali Bank’s Chittagong Branch a cheque has come to the ABL’s Narayanganj Branch then in this case OBC will take place.
(c) OBC Are Normally Two Types:
OBC with different branches of the same bank
OBC with different branches of other banks
Actually Bank wants to save their customer’s money as much as possible. That is why Bank prefers to send the OBC to those districts where they are already having their branches. As sending that outward cheques through their district branch to the original branch (from where the cheques belong to) their customers can avoid the OBC charges. But in other districts, where ABL has not any of their branches, there they send the cheque directly to the original Bank’s branch. Then for commission and for VAT that Bank charge from the customer’s claimed money.
For the OBC, the other Banks will charge 15% for three things. They are:
(a) Commission-
In commission, the rule is 20 or above 20. Likeafter deducting 15% commission from the cheque’s amount, if in calculation the commission comes less than Tk20. Then they will still charge Tk20.But if comes more than Tk20 or exact Tk20 then the commission will be same as like as the calculated amount.
(b) Postage Charge-
Here the process is same as like as commission.
(c) VAT –
In VAT, whatever the amount comes after calculation. That amount will be exactly being applied for charges.
If OBC is send to those districts, where ABL is already having a branch then from there the cheque will be return as CA (Credit Advice). But if OBC is send to those districts where ABL is not having any branch then from there the cheque will be return as DD (Demand Draft) to the ABL’s Narayanganj Branch.
In terms of DD the cheques will be returned back to ABL’s Narayanganj Branch. By taking above three charges from the cheque’s amount. Then the ABL’s Narayanganj Branch. will also charge 15% (commission, postage charge and VAT) from that remaining cheque’s amount. As customer do not need to pay any extra charges in terms of CA for which the cheques amount remain same as it was written on the cheque but when ABL’s Narayanganj Branch will get return of the outward cheque then they will take 15% charge in CA also for commission, postage charge and VAT from the actual cheque amount.
(d) OBC Procedures Are Also Two Types:
Record keeping procedure
After getting return procedure
So suppose, a cheque of Bangladesh Krishi Bank (BKB) from Chittagong Branch about TK 28000/= is presented on the date of 22nd of September by the Inner Vision who is the customer of ABL’s Narayanganj Branch. Then the processes are like as follows:
Figure: 4 Format of an OBC Form:
ABL/Naryan/Outward no./2011
Narayanganjl Branch
OBC Forwarding Schedule
To ……………………
The Manager….. Date: 14.06.2010
Bangladesh Krishi Bank
Chittagong Branch
We enclose the following Bills/ Cheque(s) for collection
and request you for remittance proceeds by first class Bank.
Draft of your ……………
Please acknowledge receipt
Our no. Bank Place Amount
OBC BKB BKB 28 000/=
80/08 Chq: 4084723 Chittagong
Dt: 22/09/08 Branch
Total Tk. 28 000/=
Total (in words) Taka: Twenty Eight Thousand Taka Only…..
Checked by Authorized Officer
After getting any outward cheque, the Bank will at first give entry in to the OBC’s registry book. Where the headings are like- date, Bank’s number, customer’s name, drawn number, and amount on the left side of the registry book.
Entry will be as follows:
(Left Side of the Book)
| Date | Our no. | Customer | Drawn on | Amount |
| 16.06.10 | 80/10 | Inner Vision | BKB Chittagong | 28,000/= |
After it, the Bank will put OBC number and Crossing Seal on that outward cheque with ‘Payee’s A/C will be credited on Realization’ seal of endorse on the back of the cheque with the signature of authorized officer. Then that cheque will be attached with that OBC form and then ABL’s Narayanganj Branch will send it by postal to the Chittagong as this cheque belongs to BKB’s Chittagong Branch. By reserving a photocopy of the cheque, carbon copy of the forwarding and deposit slip of the cheque, in the OBC file.
As in Chittagong, ABL is already having their branch that is why this BKB’s outward cheque with an OBC form will be send through any of their Chittagong Branches to that BKB’s Branch of Chittagong. For which after passing of this BKB’s cheque it will be send back as CA (Credit Advice) to the ABL’s Narayanganj Branch by not taking any charges.
After getting return of that outward cheques the entry will be on the right side of the registry book, where the headings are like- particulars of instrument, collecting agent, initial, date paid, commission, postage, advice no and remarks. Like as:
Entry will be as follows:
(Right side of the Book)
| Particulars of Collecting Initial Date Comm Postage Advice Remarks
Instrument Agent Paid no. CQ: 4084723 CA # 05/08 xxx 07/10 225 20 05/10 Chq DT: 12.06.10 Dt: 29.05.10 Raised Tk 28000 Agrabad Br. DT: 22.09.08 Dt: 29.09.08 Raised Tk 28000 Agrabad Br. |
When ABL will get inform by the Bangladesh Bank’s Clearing House that the BKB’s cheque is honored. Then they will collect this fund through IBTA and will send it to the Inner Vision’s account after taking their charges (commission, postage charge and VAT) from that cheques amount.
(e) IBC (Inward Bills for Collection ):
Here, the Bank collects the cheque with forwarding letter (OBC Form) from outside Dhaka. It means that the cheque of ABL which are presented in any district through ABL’s customer, those cheques will send by that district to ABL for further process.
Procedure for IBC:
IBC is done against OBC: To receive the OBC cheque first the Bank give entry in to the IBC Register .Then the IBC number will be putted on the forwarding letter of OBC with date.
Deposit of OBC amount: OBC cheque amount is put into the “sundry deposit-sundry Creditors account”, by preparing a debit & credit voucher of it. If the OBC cheque is honored, send credit advice (IBCA) with signature & advice number of the concern branch for the OBC amount.
If the OBC cheque is dishonored, the concerned branch is informed about it.
Again place in the Clearing House or send the OBC cheque with Return Memo to the issuing branch according to their information.
The above processes of LBC, OBC & IBC are known as attending house in Clearing Department of ABL’s Narayanganj Branch.
Carrying cash from one place to another is troublesome and risky too. That is why money can be transferred through banking channel, which is known as remittance. The most important aspects of the Commercial Bank in terms of presenting services to its customer are these remittances of fund.
The Main Instruments Used by ABL in Local Remittance Department are Follows:
DD (Demand Draft)
TT (Telegraphic Transfer)
PO (Pay Order)
PS (Pay Slip)
Register for FDR (Fixed Deposit Rate) is also done in local remittance department of ABL’s Narayanganj Branch.
FDR (Fixed Deposit Rate)
This is like the deposits; it is also known as time deposits which are made with the bank for a fixed period, specified in advance. The Bank need not to maintain cash reserves against these deposits and therefore, the bank offers higher of interest on such deposits.
(a) Procedure For Registration of FDR
The depositor has to fill-up an FDR form, where it mentions about the period of time for which the deposit has to be made, the amount for deposit and for whom the FDR will be issued that person’s name is mentioned with a nominee.
If th