Social Islami Bank Limited (Sibl) & its Principles
ORGANIZATION
Definition of a Bank:
* A bank is a business that deals in money and credit.
* Banks are different to other business as they do not sell goods to the customer but they sell financial services.
INTRODUCTION
Since the establishment Social Islami 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 in 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. Competition has also increased in the commercial arena and obviously it is a symbol economic uplift of our country.
HISTORICAL BACKGROUND OF SIBL
Social Islami Bank Limited (SIBL) is a banking company registered under the companies Act 1994 with its head office 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. 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. More branches are planning to be opened soon. 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 ventured 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 covering major trade and financial interest home and abroad.
SIBL understands all types of banking transactions to support the development of trade and commerce of the country. SIBL’s services are also available for the entrepreneurs to set up new ventures and BMRE of industrial units.
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.
Formation of Social Investment Bank
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.
The Bank is one of the interest-free Shariah Banks in the country and its modus operandi is substantially different from those of other commercial Banks.
Register office:
15, Dilkusha C/A, Dhaka, Bangladesh.
Fax: 880-2-9559013
Telex: 632285 SIBL BJ
e-mail: sibl@bdonline.com
Telephone: 9557499, 9568098
Branches:
At present, 24 (twenty four) branches are in operation all over the country. A list of branches is appended below:
- Principal Branch : 15, Dilkusha C/A, Dhaka.
- Gulshan Branch: 125, Gulshan Avenue, Dhaka.
- Babu Bazar Branch Branch: 18/4, Armanin Street, Dhaka.
- Moulvi Bazar Branch: 77/7 Wahid Center, Moulvi Bazar, Dhaka.
- Panthapath Branch: Bashundhara City Shopping Mall, Panthapath.
- IDB Bhaban Branch: Sher-E-Bangla Nagar, Dhaka.
- Sonargaon Branch: Mograpara, Sonargaon, Narayangonj.
- Foreign Exchange Branch: BIWTA Bhaban, 141-143, Gulshan C/A, Dhaka.
- Dhanmondi Branch: House # 84, Dhanmondi R/A, Dhaka.
- Uttara Branch: Plot # 27, Road # 7, Sector # 3, Uttara
- Mirpur Branch: Block – Kha, Commercial Plot # 29 & 30, Sec – 6, Main Road – 1
- Fatullah Branch: Fatullah Bazar, Narayanganj.
- Hasnabad Branch: Hasnabad Super Market,1st Floor, Keranigonj, Dhaka.
- Agrabad Branch: 103, Agrabad C/A, Chittagong.
- Khatunganj Branch: 96, Khatungonj, Chittagong.
- Halishahar Branch: VIP Plaza, Plot # 15/A, Road # 2, Block-G, Halishahar Housing Chittagong.
- Jubilee Road Branch:
· Khulna Branch: 2 Sir Iqbal Road, Khulna.
- Rajshahi Branch: 219 Shaheb Bazar Main Road, Rajhahi.
- Bogra Branch: Tin Potty, Borogola, Bogra.
- Sirajgonj Branch: Bania Potty, Sirajgonj.
- Chandaikona Branch: Chandai Kona, Sirajgonj.
- Sylhet Branch: Central Plaza, Amberkhana, Sylhet.
- Nawabpur Road Branch: 82 Nawabpur Road.
Capital Structure:
Capital structure of social investment bank Ltd. is as under:
1. Authorized capital
(10000000 ordinary shares of Tk 1000 each)
2. Paid up capital
(260000 ordinary shares of Tk 1000 each)
The directors may revise the capital structure from time to time according to need.
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 sectoral 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 their income opportunities as well as strengthening the family of the rich for a better future generation.
b. Re-empowering Islamic Socio-economic Institutions and tools of redistribution of income.
c. Achieving sustainable participatory economy, Social Security, and peace for a society.
MISSION OF SIBL
Social Investment Bank Limiter’s business mission is to assist the business development of private sector institutions, industry, and household. It provides products and services that encourage savings. Then it directs the fund in deposit to invest in other endeavors by extending advances to suit the need of commercial and industrial enterprises. It also emphasizes. It also emphasizes on a reasonable return from its investment to satisfy the shareholders.
SIBL’s main business mission is to obtain a sustainable position in the banking sector of Bangladesh as well as internationally.
SOCIAL INVESTMENT BANKS CORPORATE SLOGAN:
“Working Together For a Carrying Society”
VISSION OF SIBL
Social Investment Bank Ltd started its journey with the concept of 21st 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”.
FUCNTIONS OF SIBL
1. Mobilization of idle resources of the country by accepting Deposits from the general public.
2. Granting of 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. To give opportunity of the people to do job in SIBL.
5. To give encourage to the people for savings.
6. To increase investment.
7. To make easy to transfer foreign currency.
8. To identify consumers demand and fulfill their demand by supplying money.
9. To improve economy by borrowing financial facility.
10. To assist capital market.
11. To assist social activities is another function of SIBL.
BOARD OF DIRECTORS
| Major (Retd.) Dr. Md. Rezaul Haque | : | Chairman |
| Mr. Md. Humayun Kabir Khan | : | Vice Chairman |
| Alhaj Nasiruddin, | : | Vice Chairman |
| Mr. Md. Shah Alam | : | Director |
| Alhaj Sultan Mahmood Chowdhury | : | Director |
| Mr. Kamal Uddin Ahmed | : | Director |
| Mr. Abdul Awal Patwary | : | Director |
| Mr. Munshi Akhtaruzzaman | : | Director |
| Mr. Ahmed Akbar Sobhan | : | Director |
| Mr. Mohammed Shamsuzzaman | : | Director |
| Mr. Anisul Haque | : | Director |
| Mr. Mohammad Azam | : | Director |
| Alhaj Mohd. Afzal Hossain | : | Director |
| Mr. Md. Sayedur Rahman | : | Director |
| Mr. K. M. Ashaduzzaman | : | Managing Director |
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 |
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. 1,128,033,017 million of Authorized Capital and Tk. 585,000,000 million of Paid-up Capital.
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 for developing skilled manpower and introducing them with modern technologies with the purpose to develop 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 growth of the Bank deserve appreciation. The number of Executives and Officers as on 31st December 2006 was 512 as against 455 as on 31st December 2005.
TRAINNING INSTITUTE
Well educated peoples are needed to achieve the objectives of a firm. With a view to build enthusiastic and skilled working force Social Investment Bank Training Institute was established in 24th October, 1996 at Shyamoli, Dhaka. Every year the Institute trains sufficient number of employees. Twenty five trainers can trained for each batch in this institution. 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. Account, Management, Marketing, and Computer related books are in this library. In 2006, 1383 officer and no-officer was trained. Not only are those, the executives also trained up here.
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 add confirming arrangement.
OVERSEAS OPERATIONS OF SIBL
Social Investment Bank has set up joint venture Exchange Company named Gulf Overseas Exchange Co. LLc, 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.
SOME PRODUCTS & SERVICES
ü Mudaraba Term Deposit Receipts
ü Mudaraba Savings Deposit
ü Mudaraba Notice Deposit A/C
ü Mudaraba Scheme Deposit
ü Cash Waqf
ü Mudaraba Hajj Savings Deposit
ü Mudaraba Monthly Savings Scheme
ü Mudaraba Bashsthan Savings Scheme
ü Mudaraba Special Deposit Pension Scheme (5 Years)
ü Mudaraba Monthly Profit Deposit Scheme
ü Mudaraba Education Deposit Scheme
ü ATM Service
Non-Formal and Voluntary Sector Banking Programs:
Since the opening of the Bank 22nd 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) are 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 of 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 lacs. 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.
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.
BALANCE SHEET AS ON 31 TH DECEMBER, 2006
OPERATING PERFORMANCE
Total Operating Income of the Bank as on 31st December 2006 stood at Tk. 632,241,136 million against Tk. 522,144,931million of the preceding year. The Bank made an operating profit of Tk. 295,891,481million in 2006 against Tk. 213,568,303million of 2005.
A summery of operating result of the Bank as on 31st December 2006 vis-a-vis the position as on 31.12.2005 is shown below:
(Taka in million)
| Particulars | 31.12.2006 | 31.12.2005 | Growth Rate |
| Income on Investment | 1,898,663,277 | 1,677,511,184 | 13.18% |
| Profit paid to the Depositors | 1,596,612,146 | 1,400,115,021 | 14.03% |
| Net Investment Income | 302,051,131 | 277,396,163 | 8.84% |
| Commission, Exchange & Other Income | 268,731,415 | 218,535,164 | 22.97% |
| Total Operating Income | 632,241,136 | 522,144,931 | 24.91% |
| Operating Expenses | 336,349,655 | 308,576,628 | 9.00% |
| Profit Before Provision | 295,891,481 | 213,568,303 | 38.59% |
| Provision against Investment & Others | 175,665,808 | 159,365,800 | 10.23% |
| Profit Before Tax | 120,225,637 | 54,202,503 | 121.81% |
4 BRANCH OPERATION: GENERAL BANKING AREA
Financial institution/ intermediary that mediates or stands between ultimate borrowers and ultimate lenders is knows as banking 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 bank are doing its business frequently. SIBL General banking is divided into five sections.
1) Account opening section.
2) Bills and clearing section.
3) Remittance section.
4) FDR section.
5) Cash section.
4.1.1 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 is given below.
PROCEDURE FOR OPENING OF ACCOUNTS:
Before opening of a current or savings account, the following formalities must be completed by the customer:
1. Application on 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.
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).
DEPOSITS ACCEPTED BY SIBL (LOCAL OFFICE)
Deposits that are taken by SIBL are:
(a) Current Deposit
(b) Saving Deposit.
(c) Fixed deposit Receipts.
(d) Short Term Deposit (STD)
(e) Bearer Certificate Deposit (Bcd).
(f) Gift cheque.
(g) Marriage pension Scheme.
(h) Deposit pension scheme.
Theoretically, total deposits are divided into categories on the basis of withdrawal procedure. Time deposit & demand deposit. In case of demand deposit money is withdrawn on demand. It includes current deposit & saving deposit. on the other hand, A deposit whish is payable at a fixed date or after a period of notice is a time deposit; SIBL accepts time deposit, For example, FDR. Short Term Deposit (STD) is hybrid A/C in which the features of current and saving account exist. In short Term Deposit account the deposit should be kept for at least seven days to get interest. The interest offered for STD is less than that of saving deposit. In SIBL, various big companies, Organizations, government departments keep money in STD accounts. Frequent withdrawal is discouraged and requires prior notice.
Provisional profit rate for STD Account – 5.60% (Half years compounding). In SIBL, usually customers give an instruction the Bank that their current account will be debited whenever its deposited amount crosses a certain limit and this amount will be transferred to the STD account. So bank follows this instruction by giving following entries.
Customer’s Current A/C Debit.
Customer’s STD A/C Credit.
Bearer Certificate of Deposit (BCD):
The objective of BCD is to convert black money into white and to reduce Hundi business. Bearer Certificate of Deposit account is almost same as Fixed Deposit account. But in case of BCD account no name and address are mentioned, The customer opens this type of account as a bearer, Any person who bears the BCD receipt can encash it. Another difference of BCD with FDR is that the customer deposits the money deducting the interest. AT the maturity he withdraws the total money for whish he opened the BCD account.
Interest rate on BCD account is same as Fixed deposit account,-
For 1 months @ 10.50%
For 3 months @ 11.75%
For 6 months @ 12.00%
For 1 Year or above @ 12.25%
Accounting treatment in case of issuing of BCD,-
Cash A/c Debit.
BCD A/c Credit.
Accounting treatment in case of encashment of BCD,-
BCD A/c ………………….Dr.
Excise Duty on Deposit ……..Cr.
Tax on Interest ……………….Cr.
Cash A/C …………………Cr.
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
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.
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.
Whenever a cheque is brought to the collection officer does two functions:-
i. Giving the special crossing with “Dhaka Bank. Local Office Branch, Dhaka”
ii. Endorsed by the collecting bank.
The following table is showing endorsement of instrument in SIBL.
ENDORSEMENT
Payee’s A/C credited pay to Mr. X
Received payment
Payee’s A/C credited Pay to SIBL. Mr., X
Payee’s A/C credited pay Mr. SIBL
Payee’s A/C will be credited on realization Bills for Collection
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.
CLEARING:
The scheduled banks clear the cheques 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.
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.
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.
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.
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
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.
A customer can purchase PO in different modes:
By cash:
| Cash A/C | Debit |
| Bills payable (PO) A/C | Credit. |
| Income on commission A/C | Credit. |
By account:
| Customer’s A/C | Debit |
| Bills payable (PO) A/C | Credit. |
| Income on commission A/C | Credit. |
By transfer:
| SIBL General/ other Dept Clients A/C | Debit |
| Bills payable (PO) A/C | Credit. |
| Income on commission A/C | Credit. |
PO A/C is the current liabilities of bank, which is acquired to be discharged by beneficiaries against cash or through an account.
Settlement of a PO:
When PO submitted by collecting bank through clearing house, the issuing bank gives payment.
| Bills payable (PO) A/C | Debit |
| SIBL General A/C | Credit. |
But before giving payment it is duty for issuing to observe whether endorsement was given by the collecting bank or not, then the instrument is dishonored and marking ‘Endorsement required’.
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.
Accounting treatment:
Adjustment entry wills be-
| Bills payable (PO) —————Dr. |
| Customer A/C——————Cr. |
When PO is lost:
If the instrument is lost, the holder will inform to the issuing bank immediately. Bank will mark ‘stop payment’ on the Bills payable (PO) Register. Buyer will then ask for a new instrument by submitting a GD copy, and indemnity bond. A new instrument will be delivered.
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.
Accounting treatment:
In case of issuing of the instrument:
Cash/ customer’s A/C———————Dr.
SIBL General A/C (Drawn on branch)————–Cr.
Income A/C commission—————————Cr.
After giving these entries an Inter Bank Credit Advice is prepared which contains the controlling number, depicting that the branch is credited to whom it is issued.
An I.B.C.A. implies the following entries,
SIBL General A/C Issuing Branch —————Dr.
Drawn on branch————————-Cr.
Role of the Drawn Branch:
After receiving the I.B.C.A. lodgment is done by the branch. The following entries are given “DD In-Issuing branch” register
Issuing branch A/C————————-Dr.
Bills Payable ————————————-Cr.
(After receiving an I.B.C.A.)
Bills Payable (DD) A/C————————–Dr.
Client’s A/C————————Dr.
Entries are given in “DD In-Issuing branch” register,-
Issuing branch A/C—————Dr.
Bills Payable——————————-Cr.
(After receiving an I.B.C.A.)
Bills Payable (DD) A/C————————–Dr.
Client’s A/C————————Dr.
Charges:
A commission of 0.15% is taken on the draft value & Tk.50/= is taken as postal charge.
Cancellation:
To cancel an issued DD, the client has to submit an application. Issuing branch then sends an Inter Branch Debit Advice (I.B.D.A) to the drawn branch against previously issued I.B.C.A.
After that the following entries are given,-
General A/C drawn on branch——————————Dr.
Client’s A/C ————————————————–Cr.
Issuing of Duplicate DD:
If the customer wants to issue a duplicate DD, than customer is asked to do the following formalities,-
i) Making a general diary (G.D.) in the nearest Police Station.
ii) Furnishing an Indemnity Bond in Tk.50/= stamp
The banker immediately marks “stop payment” in the register after receiving the application from the customer and a duplicate DD is issued.
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.
Fixed deposit:
Fixed deposit is one, which is repayable after the expiry of a predetermined period fixed by him. The period varies form 3 months to 1 year. These deposits are not repayable on demand but they are withdraw able subject to a period of notice. Hence, it is a popularly known as ‘Time Deposit’ or ‘Time Liabilities”. Normally the money on a fixed deposit is not repayable before the expiry of a fixed period.
Before opening a Fixed Deposit Account a customer has to fill up an application form which contains the followings:
a) Amount in figures
b) Beneficiary’s name and address
c) Period
d) Rate of interest
e) Date of issue
f) Date of maturity
g) Instructions:
– To be renewed automatically with interest for the next period.
– Not to be renewed for next period.
– Pay interest to account no. (——-) on maturity
h) Special instruction
i) How the account will be operated (singly or jointly)
j) Signature (s)
k) F.D.R. no.
Then a FDR account is opened and it is recorded in the FDR Register which contains the following information,-
a) FDR A/C no.
b) FDR (Fixed Deposit Receipt) no.
c) Name of the FDR Holder with address
d) Maturity period
e) Maturity date
f) Interest rate
In case of Fixed Deposit Account the Bank needs to maintain a cash reserve. So SIBL offers a high interest rate in Fixed Deposit accounts. The Insterest rates followed by SIBL in Fixed Deposit accounts are,-
| For 1 month | @10.50 |
| For 3 months | @11.75 |
| For 6 months | @12.00 |
| For 1 year or above | @12.25 |
The FDR becomes renewed automatically in SIBL if the customer does not encash it within 7 days of maturity. In case of encashment of F.D.R in maturity, following accounting treatments are given:
Excise Duty on FDR——————–Dr.
Income Tax on interest —————-Dr.
FDR A/C———————————-Dr.
Cash A/C———————————Cr.
Interest on FDR A/C——————–Cr.
If the customer wants to draw the interest only, then following entries are given-
Interest on FDR A/C—————–Dr.
Cash A/C—————————–Cr.
In case of ‘before maturity enactment’ interest is calculated for the days from the date of opening the FDR account.
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 a equipped cash section. This section receives cash from depositors and pay cash against cheque, draft, PO, and pay in slip over the counter.
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 the cash receive register book against A/C number.
At the end of the procedure, the cash officer passes the deposit slip to the counter section for posting purpose and delivers duplicate slip to the clients.
Account treatment:
| Particulars | Dr./Cr. |
| Cash A/C | Dr. |
| Customer’s A/C | Cr. |
Disbursing Cash:
The drawn who wants to receive money against cheque comes to the payment counter and presents his cheque to the officer. He verifies the following information-
a) Date of the cheque
b) Signature of the A/C hold
c) Material alteration
d) Whether the cheque is crossed or not
e) Whether the cheque is endorsed or not
f) Whether the amount in figure and in word correspondent or not
Then he checks the cheque from computer for further verification. Here the following information is checked:
1) Whether there