Report on Prime Bank Limited commercial activities of a private bank

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Report on Prime Bank Limited commercial activities of a private bank

EXECUTIVE SUMMARY

Prime Bank Ltd. (“the Bank”) was incorporated as a public limited company in Bangladesh under Companies Act, 1994. It commenced it’s banking business with one branch from April 17, 1995 under the license issued by Bangladesh Bank. Presently the bank has 50 branches all over Bangladesh and booth at Dhaka Club, Dhaka. The Bank had no overseas branches as at 31 December 2006. Out of the above 50 branches , 05 ( five ) branches are designed as Islamic Banking Branch complying with the rules of Islamic Shariah , the modus operandi of which is substantially different from the other branches run on conventional basis . The bank is listed with Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited as a publicity traded company for its general class of shares.

The principal activities of Prime Bank Ltd. are to provide all kinds of commercial services to it’s customers through it’s branches in Banglaedsh, such as – granting loans and taking deposits from its clients. Prime Bank Ltd. offers all kinds of Commercial Corporate and Personal Banking services covering all segments of society within the framework of Banking Company Act and rules and regulations laid down by our central bank. Diversification of products and services include Corporate Banking, Retail Banking and Consumer Banking right from industry to agriculture, and real state to software.

In order to retain competitive edge, investment in technology is always a top agenda and under constant focus. Keeping the network within a reasonable limit, our strategy is to serve the customers through capacity building across multi delivery channels. Our past performance gives an indication of our strength. We are better placed and poised to take our customers through fast changing times and enable them compete more effectively in the market they operate. Prime Bank Ltd. has already made significant progress within a very short period of its existence. The bank has been graded as a top class bank in the country through internationally accepted CAMEL rating.

INTRODUCTION

Bangladesh, a land endowed with rich natural resources and a deep-rooted cultural heritage has been steadily improving her socio-economic conditions since its independence in 1971. To bring her economy in line with other developing nations, it is continuously improving and implementing various monetary and fiscal policies.

Various important steps towards financial reforms were initiated by the Government of Bangladesh to bring its economy in line with global expansion of the free market and international trading. To streamline the financial sector, the government introduced Financial Institutions Act 1993 (Act 27). As a result, a healthy and stable atmosphere has been created, allowing private sector finance companies to operate smoothly and profitably, in the emerging economy of Bangladesh.

There are now 51 (fifty one) commercial banks of which 4 (four) are Nationalized Banks (NCB), 31 (thirty one) private sector commercial banks (PCB), 11 (eleven) foreign commercial banks (FCB), 5 (five) specialized banks and 20 (twenty) Development Financial Institutions (DFI). These banks are controlled by the Bank Companies Act 1991.

The country also has 29 (twenty nine) Financial Institutions (FI), 29 (twenty nine) Merchant Banks, 6 (six) Manager to the Issue and one Issue Manager & Underwriter to promote its growing economy. These institutions are governed by the Financial Institutions Act, 1993 and Merchant Banks & Portfolio Managers Regulation 1996 respectively.

The name bank derives from the Italian word banco “desk/bench”, used during the Renaissance by Florentines bankers, who used to make their transactions above a desk covered by a green tablecloth.^{<href=”#cite_note-0″ title=””>[1]} However, there are traces of banking activity even in ancient times.

In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders would set up their stalls in the middle of enclosed courtyards called macella on a long bench called a bancu, from which the words banco and bank are derived. As a moneychanger, the merchant at the bancu did not so much invest money as merely convert the foreign currency into the only legal tender in Rome- that of the Imperial Mint.

In modern time, the banks are being divided into many categories depending on it’s structure , ownership , forms of business organization , function , clients and income . One of it’s kind is the “Commercial Bank”.

The term “commercial” was used to distinguish it from an investment bank. Since the two types of banks no longer have to be separate companies, some have used the term “commercial bank” to refer to banks which focus mainly on companies. In some English-speaking countries outside North America, the term “trading bank” was and is used to denote a bank. After the great depression and the stock market crash of 1929, the U.S. Congress passed the Glass-Steagal Act 1930 (Khambata 1996) requiring that commercial banks only engage in banking activities (accepting deposits and making loans, as well as other fee based services), whereas investment banks were limited to capital markets activities. This separation is no longer mandatory.

And Commercial Banking is a process by which financial institution hold deposits from the clients by different types of account and provide different types of loans from these deposited amount .\

ORIGIN OF THE REPORT

In our BBA program, we have course named Finance and Banking in which we are asked by to write a report on a particular bank and its functions to give a clear view of its activities. So, we have chosen Prime Bank limited to work on because Prime Bank ranks first among all the private bank according to the CAMELS rating and also it is also a reputed bank in Bangladesh.

By doing this report on Prime Bank Limited we will get a clear picture of the commercial activities of a private bank. This report is going to help us in gathering not only theoretical but also practical knowledge about commercial banking science we had to approach personnel of the prime bank to get the information’s that were required for this report .

OBJECTIVES OF THE REPORT

The main objective of this report is to understand commercial banking of Prime Bank limited and to compare with other commercial bank to show how its commercial activities differ from other commercial bank. In this report we have also provided some suggestions to prime bank limited which we thought is are necessary to over come it’s lacking .

SCOPE OF REPORT

While doing this report we have taken all the branches of Prime Bank in Bangladesh under consideration. Our report covers commercial banking sector of Prime Bank not only of a particular area but also all over Bangladesh. By doing so, we have tried to put up a total picture of commercial banking sector of Prime Bank.

METHODOLOGY

We have used both primary and secondary types of methodology in our report. In case of primary methodology we have collected facts about commercial banking of Prime Bank from Md. Rakibuzzaman, Management Trainee of Information Technology Division of Prime Bank, who was kind enough to provide us the required an essential data required for this report. We have collected secondary data from web sites.

LIMITATIONS

While preparing this report we faced some problems which acted as the barrier for us .

1. First of all we would like to mention about the time limitation problem that we faced .While doing this report , we felt that time allotted to us was just not enough for us .We needed little more time to complete this report more properly .

2. Then we would like to mention about the topic problem. After choosing the topic for the report , we realized that this particular topic needed to more coverage as this topic ( on Commercial Banking ) is a vast topic . But with the help and cooperation of all our group members, we were able to over this hurdle.

3. The third problem was identifying whether to do this report on only one branch of Prime Bank Ltd . Or to do on the Prime Bank Ltd as whole .

4. Last y , we were not confident enough to approach the officials of Prime Bank Ltd . as this was our first time to approach the officials of any company or organization .

LITERATURE REVIEW

We can say that – A commercial bank is a type of financial intermediary and a type of bank. After the Great Depression, the U.S. Congress required that banks only engage in banking activities, whereas investment banks were limited to capital market activities. Since the two no longer have to be under separate ownership, some use the term “commercial bank” to refer to a bank or a division of a bank that mostly deals with deposits and loans from corporations or large businesses.

Commercial Banks have various functions .

A: General functions

1. Receive deposits:

The first and foremost function of commercial bank is to receive or collect deposit from the public. Generally, deposits are collected from the public in different forms of accounts e.g. current savings and term deposit accounts. No interest is charged in the current accounts lower rate of interest in the savings account and comparatively higher rates given in fixed deposits. This commercial bank builds up customer network.

Accepting of Deposits. Deposits are an important source of a bank’s funds . They can broadly be classified into three categories.

(a)Savings Deposits. These deposits are of small amounts and are accepted by banks to encourage persons of small means to make savings. Frequent withdrawals are not allowed.

(b) Fixed Deposits. These deposits are made with the banks for fixed periods specified in advance. They are also known as term deposits.

(c) Current Deposits. These deposits are repayable on demand. The banks undertake the obligation of paying all cheque drawn against these deposits by the customer till they have adequate funds of the customer. The banks usually do not pay any interest in respect of such deposits.

2. Accommodate loans & advances:

Commercial bank attaches much importance providing loans and advances at a higher rate than the deposit rates and thus earns profits on it. For expansion and smooth running of business working capital finance is given to the borrower. In the similar manner, commercial bank extends financial accommodation for the development of agriculture and industry. Credit accommodation is provided to he entrepreneurs and also for reviving sick and old industries as per govt. directives. Thus , commercial bank extends welfare service to the people at large.

Lending of Money. A major portion of the deposits received by a bank is lent by it. This is also the major source of a bank’s income. However, lending money is not without risk and , therefore, a banker must take proper precautions in this process. The lending may be in any of the following forms:

(a) Loan. It is a kind of advance made with or without security. It is given for a fixed period at an agreed rate of interest. The amount of loan is usually credited to the credit of the customer’s account who may withdraw from there as per his requirements. The loan may be secured or unsecured.

(b) Cash Credit. It is an arrangement by which a banker allows his customer to borrow money up to a certain limit against security of goods.

(c) Overdraft. It is an arrangement whereby a customer has been allowed temporarily to overdraw his current account. It is without any security.

(d) Discounting and purchasing of bills are discounted while demand bills are purchased by the bank in both the cases the banks credit the account of their customers by the amount of bills less any discount or commission charged for such discounting or purchasing or the bills.

3. Create loan deposits:

Commercial bank not only receives deposits from public and accommodates loans to public but also creates loan deposits. Example: while paying money in the from of loan deposits to the borrower’s account. The borrower does not withdraw the full amount at a time. The balance left in the account creates loan deposits.

4. Create medium of exchange:

Sometimes in the past commercial bank used to issue notes. At present Central bank has got its exclusive right to issue notes. Of late, Commercial Bank creates medium of exchange by issuing cheques. Like notes, cheque is transferable and cheque is popularly transactions.

5. Contribute in foreign trades:

Commercial bank plays a vital role on enhancing Imports and exports business in the country. Commercial Bank contributes much in the economy by financing both import and export and thus earns foreign exchange for the country.

6. Form capital:

Commercial bank extends financial assistance for the formation of capital in the trade, commerce and industry in the country. Which ultimately expedites its economic development.

7. Create investment environment:

Commercial bank plays a significant role in creating investment environments in the country.

B. Public Utility Functions:

In modern banking commercial bank executes public utility services

1. Remit money

Remittance of money to the public from one place to another is one of the functions of Commercial bank. Remittance of money is affected in the form of demand draft , mail transfer, telegraphic transfer through different branches and correspondents home and abroad.

2. Help on trade and commerce:

Commercial bank helps in expanding trade and commerce. In inland and foreign trade customers are allowed credit accommodation in the form of letter of credit ,bills purchased and discounted etc.

3. Safe custody of valuables:

Commercial bank introduces ‘Lockers’ service to the customers for safe customer of valuables documents, shares & securities etc.

4. Help in foreign exchange business:

While opening letter of credit commercial bank obtains report of the suppliers and thus help in expending import &export business.

5. Act as a referee:

Commercial band acts as a referee for on behalf of the customers.

6. Act as an adviser:

Commercial bank provides valuable advice to the customers on the feasibility of business and industry.

7. Collect utility-service bills:

As a social commitment, commercial bank collects utility service bills e.g. water, electricity gas , telephone etc. from the public.

8. Purchase and sale of prize bonds, sanchaya patra etc.

Commercial bank undertakes to purchase and sale of sanchaya patra and prize Bonds as part of social commitments.

9. Help people traveling abroad:

Commercial bank helps customers in traveling abroad through issuance of travelers cheques, draft etc.

C. Agency Functions:

Besides above stated functions commercial bank acts as a representative of the customers

1.Collection and payment:

Commercial bank collects and pays values of cheque, bill of exchange , promissory notes, pension, dividends, subscription, insurance premium , interest etc. on behalf of the clients.

2. Purchase and sale of shares and securities:

Commercial bank is entrusted with the responsibility of purchase and sale of shares and securities on behalf of the customers

3. Maintenance of secrecy:

Maintenance of secrecy is one of the most important functions of commercial bank.

4.Act as a trustee:

Commercial bank acts as a trustee on behalf of the customers.

5. Economic development and welfare customer

Commercial bank contributes much for the welfare and economic development of the country.

Creation of deposit by loan of commercial bank:

1. Through credit extending
2. Through bill discounting
3. Through O/D
4. Through investment

Documents / Instruments of commercial bank loans:

1. Promissory note
2. Bill of lading
3. Warehouse receipt
4. Trust receipt
5. Shares and debentures
6. Others assets and policy

Sources of fund of commercial bank:

1. Paid up capital
2. Reserve fund
3. Collection of deposit
4. Borrowing

PROJECT PART

Prime Bank also has a branch named as Prime Exchange Pte in Singapore to provide its banking facilities there .

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Management & Human Resource

Prime Bank Limited recrutes very efficient and able persons . Their personnels are mentioned below –

<href=”#imam><href=”#azam>Mohammed Aminul Hoque

Chairman

Quazi Sirazul Islam

Vice Chairman

In Management , Prime Bank Ltd has –

<href=”#shahjahan”>M. Shahjahan Bhuiyan

Managing Director

Nasiruddin Ahmed

Additional Managing Director

Mahbubul Alam

Deputy Managing Director

R.Q.M Forkan

Deputy Managing Director

<href=”#shahidul”>M. Shahidul Islam

Senior Executive Vice President

Corporate Credit Operation & Corporate Marketing

<href=”#nasiruddin”>Md. Mukhter Hossain

Senior Executive Vice President

<href=”#nasiruddin”>Md. Mehmood Husain

Senior Executive Vice President

<href=”#nasiruddin”>Ahmed Kamal Khan Chowdhury

Senior Executive Vice President Financial Administration

<href=”#nasiruddin”>Manash Kumar Ghosh

Executive Vice President

Board Secretary

In Board of Directors , Prime Bank Ltd has –

<href=”#azam”>Azam J. Chowdhury

Chairman

<href=”#shahnaz”>Shahnaz Quashem

Vice Chairperson

<href=”#hasina”> Hasina Khan

Vice Chairperson

<href=”#imam”><href=”#aminul”>Mohammed Aminul Hoque

Director

<href=”#sirazul”>Quazi Sirazul Islam

Director

<href=”#imam”>Capt. Imam Anwar Hossain

Director

<href=”#saleemul”>Qazi Saleemul Huq

Director

<href=”#razia”>Razia Rahman

Director

<href=”#ferdousi”>Ferdousi Islam

Director

<href=”#nafis”>Nafis Sikder

Director

<href=”#shaheda”>Saheda Pervin Trisha

Director

Mohammed Delwar Hossain

Director

<href=”#maksudur”>Maksudur Rahman Sarkar

Director

<href=”#shahjahan”>M. Shahjahan Bhuiyan

Managing Director

Financial Products and services:

Deposit Products:

Contributory Savings Scheme

Monthly Benefit Deposit Scheme

Special Deposit Scheme

Education Savings Scheme

Fixed Deposit Scheme

Prime Bank Money Scheme

Prime Bank Insured Fixed Deposit Scheme

Saving Deposit Account

STD Account

Multi Currency Account

Foreign Currency Deposit Account

Non Resident Taka Account

NFCD(Non Resident Foreign Currency Deposit Account)

NITA (Non Resident Investor’s Taka Account)

Loan Products:

Consumers’ Credit Scheme

Lease Finance

Hire Purchase

Small and Medium Enterprise Credit Scheme

Loan Against Shares and Securities

House Building Financing Scheme

Financing Scheme For Contractors

Computer Software Financing Scheme

Prime Bank Maser Card Credit Card

Prime Bank VISA Credit Card

Working Capital Financing

Import Financing

Export Financing

Industrial Financing

Other Products/Services:

Online Banking Services

SWIFT Services

L/C Delivery Services

Locker Services

PROGRESSION OF PRIME BANK Ltd.