Sunteți pe pagina 1din 59

1.

1 BACKGROUND OF THE STUDY

The present economic state of Bangladesh demands immediate development of financial institutions. To keep pace with this situation, banks need executives with modern banking knowledge. To supply well-versed graduates, Bangladesh Institute of Bank Management (BIBM) is conducting Masters in Bank Management (MBM) program with the recommendation of World Bank & under direct supervision of Bangladesh Bank. In this perspective, an opportunity is offered by Centre for Post Graduate Studies, BIBM for its potential business post graduates to get about two months practical experience, which is known, as Practical Orientation in Bank. I was therefore placed in B. B. Avenue Corporate Branch of Pubali Bank Ltd. Practical

Orientation in Bank brings a student closer to the real life situation and thereby helps launch a career with some prior experiences.

1.2 ORIGIN OF THE REPORT

Any academic course of study has a great value when it has practical application in real life. Only a lot of theoretical knowledge will be little important unless it is applicable in practical life. So we need proper application of our knowledge to get some benefit from our theoretical knowledge to make it more fruitful. As the classroom discussion alone cannot make a student perfect in handling the real business situation, therefore, it is an opportunity for the students to know about real life situation through this internship program. This program consists of three phases 01. Orientation to organization: Accustoming the internee with the structure, functions and performance of the organization. 02. The Project Work: Pertaining to a particular problem matching with the internees capacity and organizations requirement. 03. The Report Writing: Epitomizing the internees analysis, findings and achievements, in the proceeding one phase. 1

In this connection, I was assigned to Pubali Bank Ltd, B. B. Avenue Corporate Branch for my practical orientation. I have prepared this report under the supervision of Dr. Prashanta Kumar Banerjee Professor, Core Faculty Member, BIBM, Mirpur, Dhaka.

1.3 OBJECTIVES OF THE REPORT The general objective of the report is to know about the management system of Pubali Bank Limited as a private commercial bank as well as its formation and its functional, operational and financial aspects and other objectives are a. To be acquainted with the progress of credit, foreign exchange and general banking department of Pubali Bank Ltd. b. To gain in depth knowledge of credit, general banking, export, import and remittances of Pubali Bank Ltd, B. B. Avenue Corporate Branch. c. To know about the various documents and procedures which are used for banking services. d. To make a bridge between the theories and practical procedures of banking day to day operations. To have some practical exposures that will be helpful for my second year courses in the MBM program.

1.4 SCOPE OF THE STUDY

Pubali Bank Limited is one of the top private commercial banks in Bangladesh containing a network of 410 branches over the country. The scope of the study is limited to the B. B. Avenue Corporate Branch only. The report covers the Organizational Structure, Credit operation, General Banking functions, ancillary services rendered and the performance of the bank branch as well as the bank.

1.5 METHODOLOGY

Data Collection: Both the primary and secondary form of information is used to make the report more meaningful and presentable. The details of these sources are given below: PRIMARY SOURCES

a. Major sources of information were collected through discussions with Deputy General Manager Md. Mohiuddin Ahmed, officers specially Mr. Uttam Kumar, Mr. Md. Mazedul Islam, Mr. Md. Dipu Khan, Mr. Md. Selim Hossain, of B. B. Avenue Corporate Branch. b. Some Information was collected through conversation with the clients. c. Practical work exposure from different desk of different Department of the Branch. SECONDARY SOURCES

a. Annual Reports of Pubali Bank Limited. b. Manual of Credit Department c. Different Documents d. Foreign Exchange Manual e. Periodicals published by BB f. Banking related books g. Various books of Business Communication

1.6 LIMITATIONS There were certain limitations regarding the study that is summarized below: Since I dont have any authorized empowerment to participate in daily banking activities rather to observe bankers activities. Since Banking services are of vast areas, it is not possible to go through the depth within this short period. Another limitation of this report is Banks policy of not disclosing some data and information for obvious reason, which could be very much useful.

The Bank employees especially Foreign exchange Department are very busy, so they could not give me enough time for discussion about various problems. This study was completely based on official records and annual reports. Inaccurate or Contradictory information. Field practice sometimes varies with the standard practice that also created problem.

1.7 REPORT PREVIEW

This report is divided into six chapters. The organization of the report on the branch banking is designed on the basis of job rotation. The following chapters are covered in the report Chapter one entitled Introduction covers background, objectives, origin, methodology and limitations of the report. Chapter two entitled Bank Profile contains general information about the bank. Chapter three entitled Branch Profile contains information about the branch. Chapter four entitled General Banking. Chapter five entitled Loans and Advances Chapter six entitled International Banking.

2.1 MANAGEMENT ASPECT OF PBL

The Bank was established primarily as Private Bank. After liberation it was nationalized and it remained so for quite a long period. Though it has been denationalized again and has gone back to its Private norm it could not get rid of all the rules and norms of Nationalized Bank. Like any other business organization, the top management makes all the major decisions in PBL. The Board of Directors being at the highest level of organizational structure plays an important role on the policy formulation. The Board of Directors is not directly concern with day-to-day operation of Bank. They had delegated their authority to the Managing Director who is assist by General Manager to look after the day-to-day affairs of the Bank. The Bank is running by an excellent management team under the direct supervision of a competent Board of Directors. The Board of Directors comprises total fourteen members headed by the Chairman. Mr. Hafiz Ahmed Mazumder is the present Chairman of the Board. The Managing Director (MD) heads management team. Under him a General Manager (GM) heads each department of the Bank. Mr. Helal Ahmed Chowdhury is the present Managing Director of PBL.

2.2 VISION AND MISSION OF THE PUBALI BANK LTD.

VISION

Providing customer centric life-long banking services.

MISSION To be the most respected and preferred brand among all financial services providers in Bangladesh. Providing a superior value proposition to the customers by fulfilling their financial needs in the fastest and most appropriate way. To provide world class finance, capital and risk management products bundled with diversity and differentiations, delivered economically through the clients choice of distribution channel recognizing the unique lifetime financial needs of clients. 5

To build an empowering organization with the structure, career development, training and rewards to ensure the vision is achieved. Using flexible technology, scale and risk management to ensure our services are of superior value.

2.3 CORPORATE OBJECTIVES, AIMS AND GOALS

OBJECTIVES

Growth Value Addition CSR Quality Standard

AIM

To match Corporate Objectives, With Ownership and Accountability To increase our value by releasing each individuals true potentials

2.4 SLOGAN OF PBL

To keep continue the growth with reputation and social responsibility, it has its own slogan is, Ai-thijjer Path Beya Arthonaytic Agrogoti

2.5 CREDIT RATINGS

Credit Rating is done by Credit Rating Agency of Bangladesh Limited (CRAB) on the basis of Audited Financial Statements. The Summary of the rating is presented below (For 2008):

Credit Rating Report (Surveillance Rating) Long Term AA3 Rating Outstanding (Updated 6 March,2012)
th

Short Term ST-1 (Highest Grade)

Double A Three (Very Strong Capacity)

Table 2.1 Credit rating report

CRAB has assigned AA3 rating of Pubali Bank Limited in the long term and ST-1 in the Short Term. This level of rating indicates strong capacity for timely payment of financial commitments in both Long Term and Short Term with low likeliness to be adversely affected by foreseeable events.

2.6 PUBALI BANK AT A GLANCE :

Particulars 2007 5,000.00 2,100.00 3,832.09 57,996.82 50,549.17 5,556.58 48,345.41 19,907.50 6.89 7087.63 4145.67 2941.97 1,353.51 71,560.66 1,367.23 5,270 19,009 361 6.45 2008 5,000.00 2,940.00 4,606.82 73,016.51 61,788.15 8,375.59 58,0009.10 24,795.65 6.89 9009.25 5563.39 3445.86 1,515.23 89,884.70 1,383.36 5,321 24,153 371 5.15 2009 5,000.00 3,822.00 5,687.25 88,466.46 74,203.33 12,168.65 60,493.85 24,739.65 6.89 10663.81 6824.34 3839.47 2,092.23 107,579.60 1,443.50 5,375 30,899 386 5.47

(in million taka) 2010 10,000.00 4,968.60 9,411.27 98,850.50 89,106.21 16,516.39 85,683.53 33,909.78 6.89 12828.53 7343.48 5485.05 3,233.09 128,462.6 3,330.32 5,534 86,200 399 6.51 2011 10,000.00 6,707.61 10,575.53 1,23,805.97 1,06,329.63 19,069.27 98,579.00 47,515.90 6.78 15189.70 9709.48 5480.22 3,233.09 1,57,153.71 3,369.19 6,219 1,12,065 406 4.68

Authorized Capital Paid-up Capital Reserve fund & other Reserves Total Deposits Total Advances Total Investment Import Business Export Business Bridge Finance Total Income Total Expenditure Pre-tax Profit Net Profit Total Assets Fixed Assets Other Information Number of Employees Number of Shareholders Number of Branhces Earning per ordinary Share (taka) (Absolute EPS for Taka 10 Face Value)

Table 2.2Pubali Bank at a Glance

2.7 FINANCIAL CONDITION

Percentage of Shareholding
3% 6% 10% 11% 66% 4% 0% General Public Directors Other Insitutions Banks & Financial Inst. Co-operative Society Non Resident Citizen Government

Figure 2. 1 Percentage of Share holder

Percentage Shareholding General Public Directors Other Institutions Banks & Financial Inst. Cooperative Society Non Resident Citizen Government

of 65.52 10.98 10.37 6.27

4.19

2.67

0.00

Shareholder's

Shareholder's Equity
Other reserve 20% General Reserve 14% Statutory Reserve 29%

Equity Paid up 37.31

Capital
Paid up Capital 37%

Statutory Reserve General Reserve Other reserve

29.10

13.42

20.17

Figure 2. 2 Percentage of Share Holders Equity

Deposit Mix
35 30 25 20 15 10 5 0 Current Bills Savings Fixed Deposit Payable Deposit Deposit STD Pension Others scheme

Deposit Mix Current Deposit Bills Payable Savings Deposit Fixed Deposit STD Pension scheme Others 11.55% 2.36% 29.3% 31.12% 10.76% 11.74% 3.17%

Figure 2.3 Deposit Mix

Credit in Different Area


70.00% 60.00% 50.00% Loan in % 40.00% 30.00% 20.00% 10.00% 0.00%

Credit in Different Area Area Credit (in %) Dhaka Chittagong Sylhet Barisal Khulna Rajshahi Rangpur 64.48 22.65 5.45 1.68 2.69 1.41 1.65

Area

Figure 2.4Credit in Different Area

10

18 16 14 12 10 8 6 4 2 0 Agriculture Jute Textile RMG Steel and engineering Food & Allied Ship Scrapping Edible oil Cement Paper & Packing Construction Energy & Power Transport & Pharmaceuticals Leather Services industries Others

Figure 2.5 Credit in Different Industries

Credit( Industry wise) Agriculture 0.31 Jute 0.64 Textile 17.62 RMG 10.46 Steel and 6.07 engineering Food & Allied 7.05 Ship Scrapping 4.15 Edible oil 9.73 Cement 3.11 Paper & 1.37 Packing Construction 4.36 Energy & 4.6 Power Transport & 0.74 Communication Pharmaceuticals 2.14 Leather 0.14 Services 16.1 industries Others 11.41

Deposit Trend
150000 Tk in Million 100000 50000 0 2004 2005 2006 2007 2008 2009 2010 2011 year Figure 2.6 Time Line of Deposit

Deposit (In million) 2004 2005 2006 2007 2008 2009 2010 39789.71 44503.33 48675.93 57996.82 73016.5 88466.46 99102.68

2011 120839.91

Advance Trend 11

Advance Trend
120000 100000 Axis Title 80000 60000 40000 20000 0 2006 2007 2008 2009 2010 2011

2006 40386.65 million 2007 50549.15 million 2008 61788.15 million 2009 74203.33 million 2010 89106.21 million 2011 106329.6 million

Figure 2.7 Time Line of Advance

6000 5000 4000 3000 2000 1000 0 2006 2007 2008 2009 1810.06 2941.97 3839.47 3445.86

5485.05

5480.22

2010

2011

Time line of profit


Figure 2.8 Time Line of Profit

12

3. FINANCIAL HIGHLIGHTS:

DEPOSIT Deposit mainly composed of General deposits which has several attractive scheme for customers like- saving bank deposit, special notice deposit account, fixed deposit, pubali pension scheme, deposit pension scheme, pubali sanchay prokalpa, shiksha sanchoy prokalpo, monthly profit based small deposit, dwigun sanchaya prokalpa, target based small deposit, edf adjustment a/c, current, account, cash credit account.

Deposit Comparison

Oct, 2012 Sept, 2012 Aug, 2012

Fig 3.1 Deposit Comparison

Particular GENERAL DEPOSITS MISC. DEPOSITS FOREIGN DEPOSITS BILLS PAYABLE A/C INT. PAYABLE ON TERM CURRENCY

Oct, 2012 1597.38 263.33 5.09

Sept, 2012 1404.42 329.94 5.96

Aug, 2012( In million) 1493.07 338.82 7.34

32.66 23.70

39.93 19.16

40.58 35.19

DEPOSITS TOTAL CONTRA LIABILITIES OTHER LIABILITIES TOTAL DEPOSIT 1714.62 13.35 3650.16 Table 3.1Deposit Comparison 1808.11 13.16 3620.76 1680.80 23.04 3618.86

13

Deposit Trend
4000000 3500000 3000000 2500000 2000000 1500000 1000000 500000 0 Oct, 2012 Sept, 2012 Month Fig 3.1 Deposit Trend Aug, 2012 GENERAL DEPOSITS MISC. DEPOSITS FOREIGN CURRENCY DEPOSITS BILLS PAYABLE A/C INT. PAYABLE ON TERM DEPOSITS Other liabilities

Particulars GENERAL DEPOSITS MISC. DEPOSITS FOREIGN CURRENCY DEPOSITS BILLS PAYABLE A/C INT. PAYABLE ON TERM DEPOSITS Total Deposit

Tk in Thousand

Oct, 2012 1978.48 470.30 97.23 45.36 15.82 2607.22

Sept, 2012 2273.78 521.41 97.65 55.05 29.13 2977.04

Aug, 2012 (in million) 2070.97 613.57 96.56 45.72 27.51 2854.35

Table 3.2 Deposit Trend

REVENUE Pubali Bank B. B. Avenue Corporate Branch mainly generates its income from interest received from Loans and Advances. Other sectors also contribute in revenue. Commission is charger for bank services like--Issuance of DD, TT, MT, PO, and Open/ammd. of Fore. L/C, open/ammd of local L/C, Issuance. Of Local Guarantee, Other transactions, commission. Exchange gain on foreign currency dealing/book and revenue is earned from Other income likeOnline service charge, telephone charge recovered, postage charges recovered, telex and fax charges, recovered, swift-income, service charges, CIB service charge, income - sale of lease asset, misc. income (transfer fee), miscellaneous income 14 L/C, miscellaneous handling

Particulars INTEREST RECEIVED COMMISSION A/C EXCHANGE A/C OTHER INCOME Total Income

Oct, 2012 285.09 38.18 26.51 5.10 354.90

Sept, 2012 256.04 35.04 24.69 4.49 320.28

Aug, 2012(in million) 226.50 29.67 23.31 4.01 283.50

Table 3.2 Income Trend

INCOME TREND
400000000 350000000 300000000 250000000 200000000 150000000 100000000 50000000 0

Oct, 2012 Sept, 2012 Aug, 2012

Fig 3.2 Income Trend

EXPENDITURE
200000 150000 100000 50000 0 Oct, 2012 Sept, 2012 Aug, 2012 CHARGES EXPENDITURE INTEREST PAID EXPENDITURE OTHER EXPENDITURE Total Fig 3.3Expense Trend 20496 2657 18057 2350 16034 2048 150178 173306 141734 162142 105809 123892

15

Particulars CHARGES EXPENDITURE INTEREST EXPENDITURE OTHER EXPENDITURE Total Expenditure PAID

Oct, 2012 20.46 150.17

Sept, 2012 18.05 141.73

Aug, 2012(in million) 16.03 105.80

2.65
Table 3.3 Expense Trend

2.35 162.14

2.04 123.89

173.30

COMPARISON OF INCOME, EXPENDITURE AND PROFIT

400 350 300 250 200 150 100 50 0 Sept, 2012 Oct, 2012 Month Nov, 2012

Tk in Thousand

Income Expense Profit

Fig 3.3 Comparison of Income Exp& Profit

Particulars Sept, 2012 Oct, 2012 Nov, 2012

Income 320.28 354.9 389.93

Expense

Profit 162.14 173.3 184.85

(in million) 158.14 181.6 205.08

Table 3.4 Comparison of Income Exp& Profit

16

Profit
250 200 181.6 150 100 50 0 Sept, 2012 Oct, 2012 Nov, 2012 158.14 Profit 205.08

Fig 3.4 Time Line of Profit

17

4.1 INTRODUCTION General banking is the starting point of all the banking operations. It is the department, which provides day-to-day services to the customers. Everyday it receives deposits from the customers and meets their demand for cash by honoring cheques. It opens new accounts, remits funds, issues bank drafts and pay orders etc. Since bank is confined to provide the services everyday, general banking is also known as retail banking.

4.2 CASH RECEIPT & PAYMENT SECTION

4.2.1 Cash Receiving Procedure Received cash by the teller at cash counter on deposit slip, credit ticket etc. Counting the notes and checking denominations given on the back of the deposit slips, credit ticket etc. etc.

Filling the cash proof sheet

Having the original and the duplicate copy of deposit slips signed by the cash officer

Returning the duplicate copy to the client

4.2.2 CASH RECEIVED TOOLS

Cash is received in following forms or slips i) ii) iii) iv) v) Deposit slips (for deposit into clients account) IBCA For inter branch cash transaction I.D.T (inter department ticket) Prize Bond Credit voucher

18

4.2.3 CASH PAYMENT TOOLS

Cash is Paid in following forms or slips 1) Cheque, draft, pay order, TT 2) Debit voucher (Realization of FDR proceeds) 3) Debit tickets 4) IBDA issued from the branch 5) IBCA issued by another bank of Head office.

4.2.4 CASH PAYMENT PROCEDURE

Presenting Check ( By order or by holder)

Scrutiny Cheque by teller

of the

Verification whether checked by the teller

Checking computerizes Statement of Balance of A/C by the cash in charge

Approving/canceling the Cheque by the sign of cash in charge

4.3 LOCAL REMITTANCE & ONLINE TRANSACTION: The banking system of Pubali bank has been updated by adopting online banking software Pubali Integrated Banking System (PIBS) developed by IT department. This enable local remittance and online transaction easy and fast. All the branches of Pubali bank is not under PIBS yet.

Local remittance can be analyzed in two sections: I. II. Local Remittance between inter branch of PBL Local Remittance PBL and other bank.

19

The cash department does remittance of cash. Instruments of local remittances at PBL for inter are follows :

Instruments of Local Remittance

Local Remittance Between Inter branch of PBL

Telegraphic Transfer

Demand Draft

Pay Order

Mail Transfer

4.3.1 TELEGRAPHIC TRANSFER (TT) Telegraphic Transfer now this term has been used as Telephonic Transfer which is faster than previous one for money transfer. On receipt of T.T payment instructions the following entries are passed by the Drawee branch if the T.T is found to be correct on verification of Test Number.

i)

Dr. PBL General A/C Cr. Remittance Awaiting Disposal- T.T Payable A/c

ii)

Dr. Remittance Awaiting Disposal-T.T Payable A/c Cr. Clients Account/P.O.A/C.

If the beneficiary does not maintain any a/c with the Drawee Branch a P.O is issued in favor of the payee and sent to his banker/local address as stated.

20

Procedure of Issuing TT Customers fill up a printed Application form. Cash dept. Receive cash with commission and postage stamps. On receiving IDT or applicant form with signature verified L/R make entries in to the register and issue inter bank credit advice in favor of Drawee branch

Cash dept. verified the signature of the client and checks the balance of a/c L/R dept. Debit customers a/c

4.3.2 Demand Draft (DD) Demand Draft is an instrument containing an order of the Issuing branch upon another branch known as Drawee branch, for payment of a certain sum of money to the payee or to his order on demand by the beneficiary presenting the draft itself. Procedure of issuing D.D Customers fill up a printed application form. Cash Dept. receive cash/cheque (for A/C holder) with commission @ 15% telex charge Tk. 50 and issue debit ticket to L/R

On receiving debit ticket L.R dept. make entries into the register & issue TT and issuing credit advice in triplicate Accounting treatment: Cash/ customer A/C Draft payable Dr Cr

LR dept prepares telex massage in duplicate for drawee branch and arrange to send the same through telephone.

Charge Rev

Cr 21

4.3.3 PAY ORDER

Pay order issue process For issuing a pay order the client is to submit an Application to the Remittance Department in the prescribed form (in triplicate) properly filled up and duly signed by application. The processing of the pay order Application form, despot of cash/cheque at the Tellers country and finally issuing a order etc, are similar to those of processing of D.D Application. Entries Dr. Tellers Cash/clients a/c Cr pays Order a/c Cr commission a/c

4.3.4 ADVICE OF T.T, D.D, P.O

For the entire transfer instrument the issuing bank send an advice to the drawee bank. If both the bank drawee and paying bank both has online banking facility then the paying bank get conformation early since mail advice takes less time to reach.

4.4 CLEARING SECTION The clearing section of Pubali Bank B. B. Avenue Corporate Branch operates in two segments. They are I. II. Clearing Outward Clearing Inward.

Generally both the inward and outward clearing is done considering inter branch and inter bank. Pubali bank has adopted online banking software that makes the clearing of cheques and drafts easy and fast.

4.4.1 CLEARING OUTWARD Cheques, Drafts, Pay Orders, issued from other banks, deposited at Pubali bank B. B. Avenue Corporate branch send to clearing house for collection on behalf of the customer. 22

The outward clearing process is as follows Process of outward clearing through Pubali Integrated Banking System (PIBS): With other bank (Bill Collection)

Chques& Drafts deposited at Customers A/C for collection

Upload Data Down load data Data input to PIBS & scan copy sent Confirmation Confirmation Data sent

Pubali Bank B.B. Corp.Branch

Head office

Download

Bangladesh bank Server


Upload

Chques& Drafts deposited at Customers A/C for collection

Other banks branch Inter Branch of PBL

Other bank Head office

Payment to A/C Data input to PIBS & scan copy sent Download Data

Pubali bankKawran Bazar Corp.Branch

Confirmation

Head office
Data

Pubali bank Confirmation Mirpur branch

23

4.4.2 ACCOUNTING TREATMENT OF CLEARING Every branch of Pubali bank deals an account with principal branch for clearing named as Clearing house Account. The house meets at the appointed hour on all working days under the supervision of two central bank officers or its agent as the case may be, and works within the regulations framed therefore on the basis of prevailing banking practices in Bangladesh, clearing house sites at Bangladesh bank where there is no office of the Bangladesh bank, Sonali bank acts as agent of Bangladesh Bank.

For Outward clearing: 1 Pubali bank General A/C Customer A/c Cr Dr

2.

PBL Clearing house A/C PBG A/C

Dr Cr

3. At clearing house Other bank clearing house A/C PBL clearing house A/C Dr Cr

For Inward clearing: 1. Customer A/C PBG A/C Dr Cr

2.

PBG A/C PBL clearing house A/C

Dr Cr

3. At clearing house PBL clearing house A/C other bank clearing house A/c Dr Cr

24

4.5 CLEAN CASH & ACCOUNTS SECTION Accounts Department is called as the nerve Centre of the bank. In banking At the counter every cheque, demand draft and other credit instrument tender for the credit of the customers account will be delivered. Deposits received by post will sent by the receiving officer to the bills department against acknowledgment of the dealing officer. The dealing officer is concerned here about four type entries. Those are Local Clearing IBC (Inter Branch Collection ) SC (Short Collection ) BT (Bank Transfer)

In case of local clearing one bank sends money by cheque or DD which will be collected in the name of the account holder of this branch. This cheque or DD will be taken to the clearing house where agents of all banks exchange these instruments. Important thing is that the paying Bank must be in the local area (Dhaka). The dealing officer of this desk should be aware of the following things about instruments: Name of the account is very clearly written on the deposit slip. Full particulars of the deposit instruments such as cheque numbers, name of bank, etc are properly recorded on the paying slip as required. The pay in slip has been signed by the depositor. Full particulars of the railway receipts and instruments of title goods, bills of exchange, invoice etc. associated with an inland documentary bill received from the depositors direct at the counter or by post from other branches/ banks endorsement thereon. All cheques, bills and other instruments are crossed with crossing seal.

After categorizing all the instruments and checked out the preliminary mandatory things, the dealing officer gives entries in the appropriate column of subsidiary ledger for crediting the accounts.

25

4.6 ACCOUNT OPENING SECTION In our country PCBs and foreign banks are appreciated to attract deposit because of their superior customer services. PBL, B. B. Avenue Corporate branch with its traditions customer service approaches faces difficulties to draw attention of new customers. Main functions of account opening are given below: To give answers to the queries regarding account opening To supply the appropriate type of account opening form To put a/c number from a computerized sheet on advice of new account To input date into computer from a/c opening form. To maintain and update the a/c opening file for different types of accounts. To maintain a register for cash type of recording details of a/c opening To supply deposit slip books and cheque book on requisition To act on request for closing and transferring of deposit a/c To act on request for closing and transferring of deposit a/c

4.6.1 CLASSIFICATION OF CUSTOMER Individual (personal) Proprietorship (Sole traders) Partnership firms (Register or Unregistered) Joint Stock Companies ( Private Limited and Public Limited ) Municipalities/Municipal Corporations/Local Bodies etc. Clubs / Societies / Associations /School / Colleges / Universities etc. Executors /Administrators Trustees Illiterate persons Constituted Attorney Wage Earners

26

4.6.2 TYPES OF ACCOUNT Current account; Short term deposit account; Savings account ; Cash credit account Non- Resident Foreign currency account. Foreign Currency account; Convertible taka account;

1) Current A/C : Interest free and generously withdraw able 2) Short Term deposit: Usually interest bearing and with draw able on short notice 3) Saving Bank A/C: Interest bearing and checkable with some restriction

4) Non Resident foreign currency deposit: All non residents of Bangladesh can open this interest bearing account in the form of term deposit with a minimum amount of $1000 or equivalent. 5) Private Foreign Currency A/C: Bangladeshi National residing abroad or foreign nationals may open this a/c with deposit mode from inward. 6) Convertible Taka Amount: A type of non-interest bearing current a/c designed specially for foreigners living here.

4.6.3 ACCOUNT OPENING PROCEDURE a) Applying in a printed application in a certain stipulated form printed by the bank itself. b) Supply a set of printed forms required for opening the account which will normally include i. Advise of new Account ii. Specimen Signature Cards 27

iii. Account Agreement iv. Deposit slip Book v. Cheque Book Requisition slip c) The account should properly introduced by any one of the following i. An existing Current Account holder of the bank ii. Officials of the Bank not below the rank of an assistant officer iii. A respectable person of the locality well known to the Manager or SubManger of the Branch concerned. d) A number of photographs which must be duly attested by the introducer in front of the manager or responsible officer. The signature of the introducer must be attested. After being scrutinize the application and the manager or authorized officer may give his consent to open the account. e) A package with deposit book, cheque book with a unique A/C No. given to the Customer maintaining the A/C opening register book.

4.6.4 PRECAUTIONARY MEASURES OF A/C OPENING a. Soon after the opening of a new Account a letter of Thanks should be sent to the introducer. b. A letter of thanks as per prescribed should also be sent to the account holder immediately upon opening the account, under registered post with a/c for verification of postal address as well as genuineness of the Account holder. c. In case of a new account is opened a proprietorship / partnership firm, having local business address, a responsible officer of the branch will inform the firm to obtain the confidential report on the firm.

4.6.5 FORMALITIES FOR OPENING CURRENT A/C AND STD A/C These accounts are meant for business firms and corporate bodies. Initial deposit requirement is Tk 5000 in addition to common documents required to open a saving a/c following additional documents will be required for depending upon the nature of the organization. 28

4.6.6 JOINT ACCOUNT OF TWO OR MORE PERSONS Mandate for Operation of Account: A clear authority by all the joint A/C holders containing instructions as to who will operate the account and how the account is to be operated should be obtained. The mandate should mention the name of the persons authorized to draw check. In case of death, insanity, insolvency of one or more of the joint a/c holders, the authority will cease to operate: For sole traders: a. Trade license b. A certificate with tax identification number from income tax authority c. Seal d. In case of current account an agreement to accept all responsibilities for all over draws, interest cost and expenditures

For Partnership firms: i) ii) iii) Trade license Notarized deed of partnership A mended in agreement form regarding operation of the account signed by the entire partnership firm iv) v) Sale/ Stump of the firms 2 copy photo of all partners

For Private and Public Limited Companies i) ii) iii) iv) v) vi) vii) Memorandum and Articles of association Certificate of incorporation Certificate of commencement of business if its Public limited Copy of board resolution to open a/c certificate by the chairman and secretary Power of attorney to operate a/c in favor of any one or more of directors. Balance sheet and income statement List of Directors and their address and chairman certificate.

29

4.6.7 FORMALITIES FOR OPENING PRIVATE FOREIGN CURRENCY A/C Documents required: When an eligible person is interested to open an F/C account his passport is to be checked and signature verified. When he is staying abroad his signature is to be verified and attested by i) ii) iii) iv) No. Declaration of source of income Bangladeshi embassy on that country His banker in this country Notary public of that country

4.6.8 ISSUE OF DUPLICATE CHEQUE BOOK Duplicate cheque book in lieu of lost one should be issued only when A/C holder personally approaches the bank with an application. Fresh Cheque Book in lieu of lost one should be issued after verification of the signature of the Account holder from the Specimen signature card and on realization of required excise duty only with prior approval of manager of the branch. Cheque series number of the new cheque book should be recorded in ledger card signature card as usual. Series number of lost cheque book should be recorded in the stop payment register and caution should be exercised to guard against fraudulent payment.

4.6.9 CANCELLATION AND DISHONOR OF CHEQUE The cheque is cancelled after signing by the authorized officer. Sometimes cheque might be dishonored due to following reasons: Wrong signature; Wrong entry ; Overwriting on the cheque; Cheque is post dated/out of date; Cheque crossed as Account payee only; Non-availability of fund in the respective account.

30

4.6.10 ORMALITIES MAINTAINED FOR CLOSING AN ACCOUNT The customer may inform the bank in writing of his/her intension to close the account. The customer has to apply to the branch in charge for closing the account. Then the in charge will remark on the account closing application for closing the account. By drawing a cheque of the whole amount and a nil balance confirmation to be taken from the account holder. Recover the unused cheque leaves and enter into the Broken cheque book register Remove the account opening form, specimen signature card and all other papers relating to the closed account. Remarks of account closing at the ledger folio should be authenticated by the manager or supervising officials The banker may itself ask the customer to close the account when the banker finds that the account is not been operated for a long lime. If the account is not operating upon for 06 months then the banker will try to do the bilateral communication with the account holder. But if the banker does not get any response from the account holder then the account becomes Dormant account. If the account is not operated upon for 2 years then the account becomes Inoperative account. A new register for unclaimed deposit account will be maintained called Unclaimed Deposit Account.

31

4.7 INTEREST RATE ON DEPOSIT Interest rate different types of deposit as prescribed by PBL head office from time to time irrespective of size of deposit: Sl. No Product 1 Saving Bank Account 2 Special Notice Deposit Less 1 Crore 1 Crore or above but less 25 Crore 25 Crore or above but 50 Crore 50 Crore or above but 100 Crore 100 crore or above 3 Deposit Pension Scheme 4 Pubali Pension Scheme 3 Years 5 Years 7 Years 10 Years 5 PubaliSanchayProkalpo 5 Years 10 Years 6 ShikhaSanchayProkalpo 7 DigunSanchoyProkalpo 10 Years 6 Years Description Interest Rate 4.50% 4.50% 5.00% 8.00% 8.50% 9.00% 15.00% 8.00% 9.00% 10.00% 11.00% 9.00% 10.00% 10.00% 12.25% 11.00% 8.00%

8 Monthly Profit Based FDR 5 Years 9 Fixed Deposit Receipt For 1 Month For 3 Months or above but below 6 months Below 10 lac 10 lac or above but below 50 lac 50 lac or above 6 months or above but below 12 months 12 months or above but below 36 months
Table 4. 1 Rate of Interest for Deposits

11.00% 11.50% 12.00% 12.00% 11.00%

32

5.1 TOTAL LOANS & ADVANCES AT B. B. AVENUE CORPORATE BRANCH:

Total Loan & advances


2800 2750 2700 2650 2600 2550 2500 2450 2400 Taka(In Correr)

september,2012 2713.4

October,2012 2749.52

November,2012 2548.03

Total Loan & advances (In million)

Fig 5. 1 Credit status of B. B. Avenue Corporate Branch

5.2 LOANS AT DIFFERENT INDUSTRIES Pubali bank, B. B. Avenue Corporate branch has provided loans and advances in different industries. This loan diversification has also reduced their risks. This branch mainly concentrates on seventeen sectors to provide loans and advances. Loans in Different Industries of B. B. Avenue Corp. Branch (In Lac)
1% 0% 5% 0% 2% 6% 29% Agriculture RMG Textile SME Loans 0% Trade Services Fig 5.2 Sector Loans & Advances at B.B. Avenue Corporate Branch

57%

33

Particulars Agriculture RMG Textile SME Loans Trade Services Residential real estate financing Consumer credit Commercial real estate financing Others

Loans in Different Industries of B. B. Avenue Corporate branch (In Lac) 466.74 1550.99 15496.26 107.52 7917.55 41.07 1192.91 266.34 94.66

Table 5.2 Sector Loans & Advances at B. B. Avenue Corporate Branch

Six sectors of our economy get priority in Pubali Bank B. B. Avenue Corporate Branch for Loans and advances. Other than these sectors there are also other businesses which are inextricably linked with loans and advances of this branch like Consumer Credit and Ship Breaking. The branch disburses the loans in different mode of repayment for a balanced income generation and risk minimization.

34

Sector Loans and Advances as on 30.09.2012 at B. B. Avenue Corporate Branch (Amount in Lac Taka) Loans for which collateral is held Sl. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Sector Agriculture RMG Textile Ship Building Ship Breaking Other Manufacturing Industry SME Loans Construction Power, Gas Transport storages and communication Trade Services Commercial real estate financing Residential real estate financing Consumer credit Capital Market operations Non-bank financial institutions Others TOTAL : Classified Unclassified 466.74 1550.99 15496.26 Loans for which no collateral is held Classifie Unclass d ified Total Amount Outstandi ng 466.74 1550.99 15496.26

91.16

16.36

107.52

504.69

7409.8 266.34

3.06

7917.55 266.34 2.5 1129.2 41.07 1192

3.81

37.26 63.68

3.99 512.49

90.67 25409.22

66.74

1145.6

94.66 27134.04

Table 5.1 Sector of Loans and Advances at B. B. Avenue Corporate Branch

35

5.3 ADVANCE DEPOSIT RATIO


Particulars LOANS AND ADVANCES Total Deposit Permisible for Credit (81%) PUBALI BANK GENERAL A/C (Capital) Total Balance Adv Deposit Ratio November, 2012 2548.03 1948.05 1577.91 387.294 1965.204 1.296
Table 5.2 Advance Deposit Ratio

October, 2012 2749.52 1922.18 1556.9658 448.88 2005.8458 1.371

September, (in million)

2012 2713.4

1799.42 1457.53 450.8 1908.33 1.421

5.4 TYPES OF LOAN Continuous Loan Demand Loan Fixed Term Loan Short-Term Agricultural Loan and Micro-credit.

Following the instructions of Bangladesh bank, the loans and advances of Pubali Bank has been customized with a purpose to serve better and attract customers. At B. B. Avenue Corporate Branch the loans accounts are as follows: Continuous Loan Current Account(Od) Cash Credit Account

Demand Loan Staff D/L(Pf) Motor Cycle, Car Staff Hbl General Hbl Loan Against Secured Mortgage Loan Against Fdr 36

Flood Loan Loan Against Pps Loan Against Psp Education Loan Motor Cycle/Car Loan Others Loan

Other Loans Consumers Loan Scheme Loans Against Imp. Merchandise Packing Credit Loan Against Trust Receipt Edf Loan Lease Asset

Pad A/C Pad Export Account Payment Against Document

Bills Discounted And Purchased Pubali Subarna (SME Loan)

Particulars Continuous loan Demand loan Other loans Pad a/c Bills discounted& purchased SME loan

Loans & Advances mix at November, 2012 (In million) 790.16 1038.02 533.64 34.97 149.66 1.56
Table 5.3 Credit mix at Nov,2012

37

Loans & Advances mix at November, 2012


0% 6% 21% 31% OTHER LOANS PAD A/C 41% BILLS DISCOUNTED & PURCHASED SME LOAN CONTINUOUS LOAN DEMAND LOAN

1%

Fig 5.4 Credit mix at November 2012

Continuous Loan: The limited loans with expiry date of loan payment, which can be transacted without any particular payment schedule, are termed as continuous loan, i.e.; CC, OD. Over Draft: Basically this is an agreement between a Pubali bank and his customer by which the later is allowed to withdraw over and above this credit balance in his/their current account for definite period. This is a temporary accommodation of fund to the client. This is termed as Current account loan in Pubali banks statement. Generally it is given to the businessmen to maintain their business activities. Pubali bank issued Over Draft against security popularly known as SOD. Pubali Bank sanctions SOD against different security. Based on different types of security, we can divide SOD in the following categories Against guarantee Against FDR in the name of Borrower/ 3rd party Against savings certificate Against DPS

38

Cash Credit (CC): Cash Credit (CC) is an arrangement by which a banker allows his customer to borrow money up to a certain limit. CC is a favorite mode of borrowing by traders, industrialists etc. for meeting their working capital requirements. It is operated like overdraft account. Depending on the needs of the business, the borrower can draw on his cash credit account at different time and when he gets money can adjust the liability. Pubali Bank charges interest on the daily balance in the account. Depending on charging security there are two forms of cash credit Pledge

Cash credit account

Hypothecation

Demand Loan: The loans, which become eligible for payment when demanded by the bank, are termed as demand loan. If contingent or any other debt becomes forced loan, then those are also termed as demand loan, i.e. Forced Lim, PAD, FBP, and IBP etc.

39

5.6 RATES OF INTEREST Interest rates of Loans & Advances

Sl. No 1 2 3 4 5 6 7 8 9 10 11

product Cash Credit Over Draft Secured Over Draft Inland Bill Purchase Payment Against Document Loan Against Imported Merchandise Loan Against Trust Received HBL General All Export Loan Agri Credit and Medium Industries Loan Non Residence Credit Scheme

Interest Rate 16.5% 16.5% 16.5% 16.5% 16.5% 16.5% 16.5% 14.5% 7% 13% 12% 16.5% Above 2% pledged FDR 14% 16.5% 16.5% 15.5% 14% 14% 14% 14% 16.5% 14% 14% 14% 14% Interest 13%, Agent Com.3%, Risk Fund 1% Interest 14%,Risk Fund 1% Interest 14%, Agent Com.3%, Risk Fund 2%

12 Loan Against FDR(Other Bank) 13 Loan Against FDR(Own Bank) 14 15 16 17 18 19 20 21 22 23 24 25 Loan Against DPS Loan Against Secured Mortgage Loan Against Transport Term Loan Loan Against LCI Flood Loan Loan Against PPS Loan Against PSP Loan Against other Securities Loan Against SSP Education Loan Loan Agri University Special

26 Miscellaneous Sector 27 Consumer Credit Scheme - Car 28 Consumer Credit Scheme - Flat 29 Consumer Credit Scheme - House Hold

30 Consumer Credit Scheme - Medical Equipment Interest 14%, Agent Com.3%, Risk Fund 2 31 Consumer Credit Scheme - Primary Teacher 32 Lease Financing Scheme Interest 14%, Risk Fund 1% 18%

40

33 34 35 36 37 38

PubaliSubarna (SME) PubaliKarmoUddyog PubaliSujon PubaliProshar PubaliProchesta PubaliProtyasha


Table 5.3 Interest Rates for Loans and Advances

16.5% 16.5% 16.5% 16.5% 16.5% 16.5%

5.7 TREND OF LOANS & ADVANCES Loans disbursement and repayment cause a simultaneous change in total amount of loans and advances. The change of this figure depicts a scenario of branchs performance and the loan trend. This can be illustrated by comparison among the figures of 3 consecutive months.
Particulars Continuous loan Demand loan Other loan PAD A/c Bill discound& purchase SME Loan Total Loans And Advances November,2012 790.16 1038.02 533.64 34.97 149.66 1.56 2548.01 October,2012 830.05 1064.92 605.2 37.74 210.00 1.60 2749.51 September,2012(In million) 887.00 938.87 618.04 44.18 223.57 1.63 2713.29

Table 5.4 Comparison of Different Loan Item (In Lac)

Loans at different period


3000 2000 1000 0 Sep-12 Oct-12 Nov-12 Continuous Loan Demand Loan Other Loan PAD A/C Bill Discount & Purchase SME Loan

Fig 5.5 Total Loans of 3 consecutive months

41

5.8 A GENERAL OVERVIEW OF LOAN ISSUING PROCESS AND OPERATIONS The lending procedure starts with building up relationship with customer through account opening. Control of credit operations is done at branch and Corporate Office Level. 5.8.1 CREDIT ASSESSMENT Step-One: A loan procedure starts with a loan application from a client who must have an account with the Bank. At first it starts form the branch. Branch receives application from client for a loan facility. In the application, client mentions what type of credit facility he/she wants form the bank including his personal information and business information. Branch Manager or regarding Officer in-charge of credit department conducts the initial interview with the customer. Pubali Bank maintains the following form: Step-Two: After receiving the loan application form, the bank sends a letter to Bangladesh Bank for obtaining a credit inquiry report of the customer. This report is called CIB (Credit information Bureau) report. This report is usually collected if the loan amount exceeds Tk. 50 thousand. The purpose of this report is to be informed that whether the borrower has taken loan from any other bank or not, if yes then whether these loans are classified or not. Step-Three: If Bangladesh Bank sends positive CIB report on that particular borrower and if the Bank thinks that the prospective borrower will be a good one, the bank will inspect the documents. Required documents are: Incase of Corporate Client, Financial documents of the company of last three to five years. If the company is new then projected financial data are required. Personal net worth of the borrower/borrowers. In this stage, the Bank will look whether the documents are properly filled up and signed. Credit in charge of the relevant branch is responsible to know about the ins and outs of the clients business through discussing with him. Application for advances (For individual and firms) FL-59

42

Step-Four: Bank officially inspects the project for which the loan is applied. Projects existence, distance from bank office, viability, monitoring cost and possibilities are examined.

Step-Five: Any loan proposal needs to be evaluated on the basis of financial information provided by the applicant. Credit Risk Grading (CRG) is a technique by which the risk of the loan is calculated. Banker must analyze CRG when loan application is above one crore. Experienced people of Credit department in Pubali Bank do this grading. It is a ranking whose total score are 100. Among this score, 50% is for Financial Risk, 18% for Business or Industry Risk, 12% for Management Risk, 10% for Security Risk and remaining 10% for Relation Risk. Pubali Bank maintains the following Credit Proposal and Approval Form: Credit proposal and approval form FL60

Step-Six: Obtain vetting or legal opinion on the collateral provided by the applicant, whether those are properly submitted -regular and up to date or else those documents will be asked to regularize by the client.

Step-Seven: Then come, the processing stage of loan. In this stage, the Bank will prepare a Proposal. The proposal contains following relevant information: a) Name of the Borrower/borrowers b) Nature of Limit c) Purpose of Limit d) Extent of Limit e) Collateral f) Margin g) Rate of Interest h) Repayment 43

i) Validity

Step-Eight: If the proposal meets Pubali Banks lending criteria and is within the managers Discretionary powers, the credit line is approved. The manager and the sponsoring officer sign the credit line proposal and issue a sanction letter to client. If the value of the credit line is above the branch managers limit then it is send to head office or zonal office for final sanction with detailed information regarding clients, business or purpose of the loan, security papers.

Step-Nine: Head office processes the credit proposal and afterwards puts up a memorandum to credit committee. The credit committee reviews the credit proposal and accepts or rejects the proposal.

5.8.2 GRANTING OF CREDIT After approval by the Credit Committee head office or zonal office gives an approval letter to the branch and branch gives a sanction letter. The client should accept sanction advice with seal, which will prove his agreement with the terms and condition offered by the bank.

5.8.3 CREDIT DISBURSEMENT After the sanction advice, Bank will collect necessary charge document. Charge documents vary on the basis of types of facility, types of collateral.

5.9 LOAN MONITORING AND POST LOAN REVIEW Supervision keeps track of the end use of fund lent. It includes adequate arrangements by bank for maintaining close contact with the borrower and his activities in order to remain well informed about the position and progress of the purpose financed and to offer appropriate guidance to the borrower, where necessary. 44

Follow-up includes efforts to ensure that the terms and conditions of the advances predisbursement, post disbursement and recovery stages are complied with and money lent is repaid as per schedule of repayment. It also includes effort to regularize the irregular advances. Post loan review Banks makes advances from the funds deposited by or collected from the deposits and money borrowed from other banks including Central Bank of the Country. Depositors and or borrowed are repayable as and when demanded. Therefore advances made by the banks must be recovered to meet the demands of the depositors and lenders and also to continue and expand the credit operations of the banks. It has been mentioned that effective supervision and follow-up are essential to ensure recovery of advances as per schedule of repayment and also for recovery of over due and stuck-up advances. This can only be achieved only proper post loan review is done.

5.10 TOOLS FOR APPRAISAL CREDIT In addition to the formal credit appraisal, the credit officer of PBL try to judge the possible client based on some other criteria. These criteria are called the C's of good and bad loans. These Cs are described bellow: Character Make sure that the individual or company you are lending to has outstanding integrity. Capacity Make sure that the individual or company you are lending to has the capability of repaying your loan. Conditions Understanding the business and economic conditions can and will change after the loan is made. Capital Make sure that the individual or company you are lending to has an appropriate level of investment in the company. Collateral Make sure that there is a second way out of a credit but do not allow that to drive the credit decision. Complacency Do not rely on past history to continue. Stay alert to what can 45

go wrong in any loan. Carelessness Remember that documentation, follow-up and consistent monitoring are essential to high quality loan portfolios. Communication Share credit objectives and credit decision-making both vertically and laterally within the bank. Contingencies Make sure that you understand the risks, particularly the downside possibilities and that you structure and price the loan consistently with that you structure and price the loan consistently with that understanding

46

Flowchart of Processing Loan CUTOMER


MOA: Memorandum of Articles AOA: Articles of Association TL: Trade License BS: Balance Sheet LOM: List Of Machineries SEC: Security BR: Board Resolution CIB: Credit Information Bureau FSS: Financial Spread Sheet CRG: Credit Risk Grading FS: Facility Structure PV: Project Verification SV: Security Verification MD: Managing Director BOD: Board Of Directors EC: Executive Committee p

Primary

Yes

No
Decline

Application (MOA, AOA, TL, BS, LOM, SEC, BR)

Detailed Analysis

(CIB, FSS, CRG, FS, PV, Analysis

Decline Unfavorable CIB

SV)Favorable CIBInquiry Branch (Delegation of Inquiry Division MD, BOD, EC, PC

Head Office

Credit

Power Sanction 10 lacs and

above)

Head OfficeCredit Division (Sanction)

Decline

Sanction letter to Credit Division , Branch

Customer

Charge Documents, Property Documents, Deeds

Monitoring

Disbursement

47

5.11 DOCUMENTATION

A document is a written statement of facts of proof or evidence arising out of particular transaction which on placement may bind the parties there to answerable and liable to the court of law for satisfaction of the charge in question. The execution of documents in proper form and according to the requirements of law is known as documentation. The documentation does establish a legal relationship between the lending bank and the borrower. The terms and conditions of loans and advances, the securities charged and the repayment schedule are recorded in writing. Proper documentation is a sinequanon to safeguard the future interest of the bank. Document is necessary for the acknowledgement of debt by the borrower and charging of securities to the bank by him. Proper and correct documentation is essential not only for the safety of an advance but also necessary for talking legal action against the debtors in case of nonrepayment of dues.

5.11.1 ADVANTAGE OF DOCUMENTATION

It is essential that the proposal defines clearly the purpose of the facility, the sources of repayment, the agreed repayment schedule, the value of security and the customer relationships considerations implicit in the credit decision. Where security is to be accepted as collateral for the facility all documentation relating to the security shall be in the approved form. All approval procedures and required documentation shall be completed and all securities shall be in place, prior to the disbursement of the facilities. General documentation as required for different kinds of advance are enumerated below. There may be requirement of specific banking or legal documents to secure a credit according to sanction terms and conditions, which should also be obtained in addition to the following Procures a written evidence of transaction. Identifies the borrowers, co-borrowers and guarantors. Identifies the security. Identifies the nature of charge created by the bank. Include proactive clauses to safeguard the interest of the bank. 48

5.12 CREDIT RISK GRADING

Definition of Credit Risk Grading The Credit Risk Grading (CRG) is a collective definition based on the pre-specified scale and reflects the underlying credit-risk for a given exposure. A CRG deploys a number/ alphabet/ symbol as a primary summary indicator of risk associated with a credit exposure. CRG is the basic module for developing a Credit Risk Management System.

5.12.1 HOW TO COMPUTE CRG

The following step-wise activities outline the detail process for arriving at risk grading. Step I Identify all the Principle Risk Components Credit risk for counterparty rises from n aggregation of the following: Financial Risk Business Risk Management Risk Security Risk Relationship Risk

Each of the above mentioned key risk areas require to be evaluating and aggregating to arrive at an overall risk grading measure. Step II Allocate weight ages to Principal Risk Components According to the importance of risk portfolio, the following weight ages proposed for corresponding principal risks.

49

Principal Risk Components Financial Risk Business Risk Management Risk Security Risk Relationship Risk

Weights 50% 18% 12% 10% 10%

Table 5.5 CRG Principal Risk Component

5.12.2 NUMBER AND SHORT NAME OF GRADES USED IN THE CRG The proposed CRG scale consists of eight categories based on the aggregated scores of principal risk factors with Short names and Numbers. They are as follows:

Number 1 2 3 4 5 6 7 8

Risk Grading Superior Good Acceptable Marginal/Watch list Special Mention Sub standard Doubtful Bad & Loss

Short Name SUP GD ACCPT MG/WL SM SS DF BL

Score Fully secured 85+ 75-84 65-74 55-64 45-54 35-44 35<

Review Frequency Annually Annually Annually Half yearly Quarterly Quarterly Quarterly Quarterly

Table 5. 6 Risk Grading of CRG

50

A clear definition of the different categories of CRG is given as follows: Superior (SUP) 1 Credit facilities, which re fully secured i.e. fully cash covered. Credit facilities fully covered by government guarantee. Credit facilities fully covered by the guarantee of a top tier international Bank Good (GD) 2 Strong repayment capacity of the borrower. The borrower has excellent liquidity and low leverage. The company demonstrates consistently strong earnings and cash flow. Borrower has well established, strong market share. Very good management skill and expertise. All security documentation should be in place. Credit facilities fully covered by the guarantee of a top tier local bank. Aggregate score of 85 or greater based on the risk grade score sheet.

Acceptable (ACCPT) 3 Borrowers have adequate liquidity, cash flow and earnings. Credit in this grade would normally be secured by acceptable collateral. Acceptable management. Acceptable parents/ sister company guarantee. Aggregate score of 75-84 based on the risk grade score sheet.

Margin/Watch list (MG/WL) 4 Weaker business credit and early warning signals of emerging business credit detected. The borrower incurs a loss. Loan repayments routinely fall past due. Account conduct is poor, or other untoward factors are present. 51

Credit requires attentions. Aggregate score of 65-74 based on the risk grade score sheet.

Special Mention (SM) 5 Severe management problems exist. Facilities should be downgraded to this grade if sustain deterioration in financial condition is noted. Aggregate score of 55-64 based on the risk grade score sheet.

Substandard (SS) 6 Financial condition is week and capacity or inclination to repay in doubt. These weaknesses jeopardize the full settlement of loans. Bangladesh Bank criteria for substandard credit shall apply. Aggregate score of 45-54 based on the risk grade score sheet.

Doubtful (DF) 7 Full repayment of principle and interest is unlikely and the possibility of loss is extremely high. Bangladesh Bank criteria for doubtful credit shall apply. Aggregate score of 35-44 based on the risk grade score sheet.

Bad & Loss (BL) 8 Credit of this grade has long outstanding with no progress in obtaining repayment or on the verge of windup. Prospect of recovery is poor and legal options have been pursed. Bangladesh Bank criteria for substandard credit shall apply. Aggregate score of less than 35 based on the risk grade score sheet.

52

5.12.3 HOW PUBALI BANK EVALUATE CRG Pubali bank uses to following format to evaluate CRG.

PUBALI BANK LIMITED


B. B. AVENUE CORPORATE BRANCH
CREDIT RISK GRADING SCORE SHEEET Reference No.:

Borrower: Group Name (If any): Aggregate Score:

B. B. Avenue Corporate
Branch: Industry/Sector Date of Financials Completed by Approved by: 30/06/20111 (Audited) Corporate Branch Risk Grading:

Number

Grading

Short

Score Fully cash secured, secured by

Superior

SUP

Government / International Bank Guarantee

2 3 4 5 6 7 8

Good Acceptable Marginal/ Watch list Special Mention Substandard Doubtful Bad & Loss

GD ACCPT MG/WL SM SS DF BL

85+ 75-84 65-74 55-64 45-54 35-44 <35

Table 5. 7Credit Risk Grading Score Sheet

53

5.12.4 FUNCTIONS OF CREDIT RISK GRADING Well-managed CRG system promotes bank safety and soundness by facilitating informed decision-making. Grading system measure credit risk and differentiate individual credits and groups of credits by the risk they pose. This allows bank management and examiners to monitor changes and trends in risks levels. The process also allows bank management to manage risk to optimize returns.

5.12.5 USE OF CREDIT RISK GRADING The CRG matrix allows application of uniform standards to credits to ensure a common standardized approach to assess the quality of individual obligor, credit portfolio of a unit, line of business, the branch or the Bank as a whole. Some evident, the CRG outputs would be relevant for individual credit selection, wherein either borrower or particular exposure is rated. The decision would be related to pricing and specific features of the credit facility. These would largely constitute obligor level analysis.

5.13 LOAN CLASSIFICATION

5.13.1 LOANS & CLASSIFIED LOANS AT B. B. AVENUE CORPORATE BRANCH At B. B. Avenue Corporate branch total amount of classified loans and advances change with period. After every three moths the branch evaluates the amount of its classified amount and it shows that the amount is declining with period through out the year.
Period September,2012 Advance 27134.04 Lac Classified 1125.62 Lac In Percent 4.14% 1.72%

Total Classified Loans in Banking Sector of BD (Dec, 2011)


Table 5.8 Classified Loans and Advances

54

6.1 INTRODUCTION For export import and international business appropriate payment method and foreign currency dealing is very important. For this purpose Bangladesh Bank issues Authorized Dealer (AD) license by observing the banks performance and also the customers associated with the bank for conducting foreign dealings. The department, which conducts foreign dealings, is call foreign exchange department. Some national and international laws regulate functions of this department. UCP URR Export Import policy Bangladesh Bank Guideline Foreign Exchange Act, 1947 Import and Export Control Act, 1950

Pubali Bank considers the following factors while dealing their foreign exchange section of its Authorized Dealer (AD) branches. Because getting paid in full and on time is the ultimate goal for each export sale, an appropriate payment method must be chosen carefully to minimize the payment risk while also accommodating the needs of the buyer. There are four primary methods of payment for international transactions. 1. Open Account 2. Documentary Collections 3. Letters of Credit 4. Cash-in-Advance

6.2 SECTIONS OF FOREIGN EXCHANGE Foreign exchange business of PBL can be divided into following sections: o Import section o Export section

55

o Foreign Remittance. Function of Foreign exchange (An overview):

Foreign exchange
IMPOR T EXPOR T FOREIGN REMITTAN CE Endorsement FDD Traveler cheque

Opening of L/C PAD/LIM LTR

Advising Export L/C Preshipment finance Post- shipment finance FDBP

6.3 BUSINESS OVERVIEW OF FOREIGN EXCHANGE AT KAWRAN BAZAR CORPORATE BRANCH:

comparison of Imp L/C opened


120 100 80 60 40 20 0 BBL/C Import L/C Inland L/C Total (In lac)

TK in Lac

Sept, 12 31.64 5.25 23.57 60.46

Oct, 12 61.13 3.61 49.34 114.08

Nov,12 23.26 7.62 13.83 44.71

56

Comparision of Exp L/C Opned


70 60 50 40 30 20 10 0 Garment Industry Other Industry Total

Tk in Lac

Sept, 12 34.96 1.7 36.66

Oct, 12 61.73 3.01 64.74

Nov, 12 27.16 3.72 30.88

Fig 6.1 Comparison of Exp L/C Opened

Exp Imp & BoT when L/C Opned


6000 5000 4000 Tk in Lac 3000 2000 1000 0 Export import Balance of Trade Sept, 12 4241.77 2503.03 1738.74 Oct, 12 4729.96 2963.54 1766.42 Nov, 12 5213.72 3217.01 1996.71

Fig 6.2 Balance of Trade for L/C Opening

57

Exp Imp Remit Comparision


16000 14000 12000 Tk in Lac 10000 8000 6000 4000 2000 0 Export import Remittance Aug, 12 8648 14681 6.53 Sept, 12 6971 9453 21.7 Oct, 12 6468 8908 36

Fig 6.3 Foreign Exg Business Comparison

58

APPENDIX

BIBLIOGRAPHY Raymond V. Lesikar, Richard D.Irwin, Basic Business Communication, 7th Edition Gordon, E and Natarajan, K Banking: Theory, Law and Practice Varshney, P.N. Banking Law and Practice Sultan Chand and Sons http://www.bangladeshbank.org http://www.thedailystar.net http://www.hbr.org http:// www.pubalibankbangla.com

59

S-ar putea să vă placă și