internship

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MARKETING STYLE OF BANK ASIA LIMITED AN INTERNSHIP REPORT

Prepared for:Dr. Sanjib Kumer Shaha ProfessorDepartment of MarketingUniversity of RajshahiBangladesh

Prepared by:MD. EMRAN KABIREMBA, 4th batch Roll-10153011

UNIVERSITY OF RAJSHAHI

BANGLADESH

March 23, 2012

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Letter of submission

March 23, 2012

Dr. Sanjib Kumer Shaha ProfessorDepartment of MarketingUniversity of RajshahiBangladesh

Subject

: Submission of Internship report on “Marketing Style & Evaluation of Bank Asia limited”.

Dear Sir,

I would like to submit the report on “Marketing Style & Evaluation of Bank Asia limited” that you assigned me as partial fulfillment of my EMBA degree requirement. In preparing the report I collected and analyzed all the pertinent information. I have tried my best to analyze the information as comprehensively as possible and if you need any further information, kindly call me at your cnvenience.

Sincerely yours,

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MD. EMRAN KABIREMBA, 4th batch Roll-10153011UNIVERSITY OF RAJSHAHI

BANGLADESH

TABLE OF CONTENTS

Page No.Chapter 1 (INTRODUCTION)

Origin of the Study 1

Objective of the study 1

Methodology of the Study 1

Limitations of the Study 1

Company background 2-3

Chapter 2

(DEPARTMENTS OF THE BRANCH)

Customer service & Clearing 4-11

Cash 12-15

Accounts 16-17

Foreign Trade 18-26

Credit 27-46

Chapter 3(CONCLUSION) 47

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ACKNOWLEDGEMENT

It was difficult to prepare a report within this short period. A good number of

personnel from the branch helped in various ways by providing their valuable time,

information and idea to me. At the very beginning, I obviously express my heartiest

thanks and appreciation to Mr. Md. Mozaffor Hossain, Manager & Senior Vice

President of the branch.

Finally, I convey my sincere thanks to my parents, brother, friends , colleagues and

relatives who inspired me in completing the report in different ways.

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Executive Summary

Financial sector in Bangladesh comprises of mainly banking sector, insurance companies,

stock market, non-bank financial institutions and micro financing institutions. Out of

these, banking sector dominates the financial system, accounting for more than 95% of its

total assets. Banking system of Bangladesh has gone through three phases of

development --Nationalization, Privatization and Financial Sector Reform.

Like in many other emerging market economies, commercial banks in the Bangladesh

economy are to face an increasing competition for their business in the coming days.

Their business will no longer remain easy as they had earlier. In the beginning of 1990’s,

seven more private commercial banks were permitted, of which of course, two were

reconstituted in new names after their collapse. These banks have become known in our

economy as the second-generation banks. In a third wave, a dozen more banks are

permitted by the Bangladesh Bank and a number of new foreign banks entered into our

economy. These banks have become known in our economy as the third-generation

banks. Now, we can say, our commercial banking business, which is an important

segment of the financial sector, consists of two dozen private commercial banks, fourteen

foreign banks, four NCBs. The other segment of the financial sector is represented by

about two dozen insurance companies, six non-banking financial institutions, few leasing

companies and twenty newly permitted merchant banks. Bank Asia Limited is one of the

few banks permitted by the Bangladesh bank in the late 90s; the other banks permitted

earlier are Mercantile Bank Limited, Standard Bank Limited, One Bank Limited, EXIM

Bank Limited, Premier Bank Limited, Mutual Trust Bank Limited, First Security Bank

Limited, The Trust Bank Limited, Jamuna Bank Limited, BRAC Bank Limited and

Shahjalal Islami Bank Limited. These banks are known as the third generation banks and

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fortunate to remain immune from the bad loan culture. However, the performance of

these banks are not the same, the Bank Asia Limited remained as one of the top

performers among them.

Chapter 1:

Introduction

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1.1ORIGIN OF THE STUDY:

This report has been prepared after three month’s Internship program in Bank Asia ,

Bogra Branch. I worked under the supervision of Mr. Md. Mozaffor Hossain SVP &

Manager, for his assistance and guidance in completing this report on Bank Asia Ltd. I

am going to describe the various day to day activities that I have observed in the various

departments of the branch.

1.2 METHODOLOGY OF THE STUDY:

The information, required to prepare the report, has been collected from primary as well as secondary sources.

Primary Sources:Primary information regarding the Bank Asia Limited has been obtained through

face to face conversation with some of the officials of the branch, personal

observation by visiting different desks during internship period, official Records of

Bank Asia Limited.

Secondary Sources:Annual reports, bank’s records, leaflets, corporate newsletters, branch manuals,

bank’s website, various publications of the bank are the sources for collecting the

Secondary information.

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1.3 LIMITATIONS OF THE STUDY:

Although it is difficult for me to get co-operation from all employees of Bank Asia Ltd,

in some departments such as, customer service and cash, they were extremely busy. So

they were not able to give more time as there should be. Total duration of job rotation

program was not sufficient to give me complete understanding of the function of the

various departments I was rotated through.

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Chapter 2:

Company Information

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2.1 COMPANY BACKGROUND:

Bank Asia Limited is one of the third generation private commercial banks (PCBs), incorporated in Bangladesh on 28 September 1999 as a public limited company under the Companies Act 1994, and governed by the Bank Companies Act 1991. The Bank went for public issue of its shares on 23 September 2003 and its shares are listed with Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited. At present the Bank has 36 branches and 18 ATM booths.Bank Asia Limited acquired the business of Bank of Nova Scotia (incorporated in Canada), Dhaka, in the year 2001 and at the beginning of the year 2002, the Bank also acquired the Bangladesh operations of Muslim Commercial Bank Limited (MCBL), a bank incorporated in Pakistan, having two branches at Dhaka and Chittagong. In taking over the Bangladesh operations, all assets and certain specific liabilities of MCBL were taken over by Bank Asia Limited at book values.The registered office of the Bank is located at Tea Board Building (1st floor), 111-113, Motijheel C/A, Dhaka-1000.The principal activities of the Bank are to provide all kinds of commercial banking services to its customers through its branches in Bangladesh.The Bank obtained the Islamic Banking unit permission vide letter no. BRPD (P-3)745(53)/2008-4804 dated 17 December 2008. The Bank commenced operation of this unit from 24 December 2008 and its office is located at House-79A, Road-07, Sector-4, Uttara Model Town, Uttara. The Islamic banking unit is governed under the rules and regulations of Bangladesh Bank.

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During this short span of time the Bank had been successful to position itself as a progressive and dynamic financial institution in the country. The Bank had been widely acclaimed by the business community, from small entrepreneur to large traders and industrial conglomerates, including the top rated corporate borrowers for forward-looking business outlook and innovative financing solutions. Thus within this very short period of time it has been able to create an image for itself and has earned significant reputation in the country’s banking sector.

The Company Philosophy – “For a Better Tomorrow” has been preciously the essence of the legend of bank’s success.

2.2 Corporate information:

Letter of Intent received : 24/02/1999

First meeting of the Promoters held : 15/04/1999

Certificate of Incorporation received : 28/09/1999

Certificate of Commencement of Business : 28/09/1999

First meeting of the Board of Directors held : 01/10/1999

Banking License Received : 06/10/1999

First Branch license received : 31/10/1999 Inauguration of Bank : 27/11/1999 Date of Publication of Prospectus : 29/06/2003

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Date of IPO Subscription : 23/09/2003,

Number of Promoters : 22 Number of Directors : 12 Number of Branches : 72

2.3 The Mission of Bank Asia is noted below:

To assist in bringing high quality service to our customers and to participate in the growth and expansion of our national economy.

To set high standards of integrity and bring total satisfaction to our clients, shareholders and employees.

To become the most sought after bank in the country, rendering technology driven innovative services by our dedicated team of professionals

2.4 Vision of bank Asia limited is noted below:

Bank Asia’s vision is to have a poverty free Bangladesh in course of a generation in the new millennium, reflecting the national dream. Our vision is to build a society where human dignity and human rights receive the highest consideration along with reduction of poverty.

2.5 Organizational hierarchy of bank Asia limited:

MANAGING DIRECTOR

DEPUTY MANAGING DIRECTOR

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SENIOR EXECUTIVE VICE PRESIDENT

EXECUTIVE VICE PRESIDENT

SENIOR VICE PRESIDENT

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

FIRST ASSISTANT VICE PRESIDENT

SENIOR EXECUTIVE OFFICER

EXECUTIVE OFFICER

SENIOR OFFICER

OFFICER

JUNIOR OFFICER

ASSISTANT OFFICER

BANKING OFFICER

TRAINEE OFFICER

Diagram: Organizational Hierarchy

A.H.J. Rahman

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Board of directors

CHAIRMANMr. A Rouf Chowdhury

VICE CHAIRMANMr. Md. Safwan ChowdhuryMr. Mohammad Lakiotullah

DIRECTORSMr. Anisur Rahman SinhaMr. A M Nurul IslamMr. Romo Rouf ChowdhuryMs. Rumee A HossainMr. Moshiur RahmanMr. Faisal SamadMr. Md. Irfan SyedLt. Col. (Retd.) Fariduddin AhmedMs. Sohana Rouf ChowdhuryMr. Shah Md. Nurul AlamMr. Nafis Khandaker

PRESIDENT & MANAGING DIRECTORMr. Mehmood Hussain

COMPANY SECRETARYMr. Aminul Islam

Board’s Audit Committee

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Management Executives

PRESIDENT & MANAGING DIRECTORMd Mehmood Hussain

DEPUTY MANAGING DIRECTORAminul IslamS.M. Khorshed AlamMohammed RoshangirHumaira Azam

SENIOR EXECUTIVE VICE PRESIDENT

Md. ArfanAli A.H.J. RahmanNasirul HossainSyed Nazimuddin

EXECUTIVE VICE PRESIDENTSwapan DasguptaA.K.M. ShahnawajMohammad BorhanuddinMd. Sazzad HossainMaruf Mohammed Ahsan

SENIOR VICE PRESIDENTMd. Ashrafuddin AhmedMd. Mozaffor HossainMd. Abu Bakar LaskerMohd. ShahabullahA.K.M. Shaiful Islam ChowdhuryS.M. Iqbal HossainSyed Iltefath HossainRaja Miah

VICE PR ESIDENT

Niaz Ahmed ChowdhuryMd. Zahid HossainMd. Zia ArfinMd. Azharul IslamMd. Afzal HaqueSufi Tofael Hossain

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Chapter 3:

Department of the branch

3.1 Overview of the activities of the branch:

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At the very first day, as an intern of Bank Asia Ltd, Bogra branch I was assigned for Job Rotation Program. The program helped me to understand the overall activity of each and every departments of the Bank at a glance. From the program, I come to know that a bank divides its operation among some departments and deploys its workforce to the department to cope with the customer’s unique demand. To provide the customer instant and prompt service, a bank divides its operation among following departments:

01. Accounts department02. Customer service department03. Cash or teller area04. Foreign exchange department05. Credit department06. Consumer credit department/ recovery unit07. SME(short and medium enterprise)08. Reception desk

The activities performed by some crucial departments are elaborated below:

3.2 Accounts departmentAccounts Department is at the central position of any Banking operation that controls and

monitors all the transaction in the form of check and balance. This is the desk of a

banking system that works in background to make sure that all the operations are being

performed correctly. This is basically back end activities and performed at the end of

every transaction. Any deviation in proper recording may hamper public confidence and

the bank has to suffer a lot otherwise. Improper recording of transactions will lead to the

mismatch in the debit side and the credit side. To avoid these mishaps, the banks provide

the separate department - Accounts department, whose function is to check the mistakes

in passing vouchers or wrong entries or fraud or forgery.

3.2.1 CHART OF ACCOUNTS:

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Generally a chart of accounts is maintained in any transaction record. There are five

major head of Chart of accounts:

Asset

Liability

Capital

Income

Expense

All the transaction regarding loans and advances goes under liability head and any sorts

of transaction of deposits goes to asset head. These are usually party accounts.

Actually any effect of asset is reflected in income, which can be interest income, or non-

interest income. On the other hand any effect of liabilities goes under expense account.

Any transaction related to income and expense within a branch is posted under General

Ledger account and any inter branch transaction posted under Bank Asia General

Account

As per the function of Accounts department we can divide the whole work under two

categories:

Daily job

Periodical job

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Figure: Daily Function of Bank Asia Ltd.’s Accounts department

3.2.2 Day Beginning & Ending:

Day Beginning and Ending are software operations that are used to differentiate among

transactions of different days and record them accordingly. At the very beginning of a

day, the accounts department begins the day. At this stage, all the transactions that are

entered into the system in the previous day are processed. If all the accounts are found

correct, then the previous day is ended and the new day is begun. Similarly that day is

closed in the next day morning and a new day is begun.

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System Open

Daily Works in Progress

Day Close

Expense Control

Voucher Posting

Remove Posting Related Barriers Expenditures of

Other Department

Activities Start in Other Department

Vouchers from Various Department

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3.2.3 Statement Preparation:

Accounts department prepares statement on daily, weekly, monthly, quarterly, semi-

annually and annually. These statements are prepared comprising all the accounts existed

in the banking operation. All types of assets, liabilities, incomes & expenses are the

components of the statements. Asset & Liability are the items of Balance Sheet and

Income & Expenditure are the items of Profit & Loss Account. From the accounts

balance statement, position of the bank in terms of the above account can be found.

The accounts department also prepares statement for the Bangladesh Bank Statistical

purpose. Those are SBS 1, 2 & 3. SBS 1 is a monthly statement while SBS2 & 3 are sent

quarterly.

3.2.5 General Accounts Reconciliation:

Everyday, a lot of inter branch transactions take place in the form of Demand Drafts, Pay

Orders etc. Such Inter-branch transactions by any particular bank involve the general

account maintained with that particular branch. To reconcile the accounts, IBCA & IBDA

are sent. Responding bank responds to those instruments and final transaction is settled.

3.2.6 Check & Balance of Every Account:

This is one of the prime tasks of the accounts department to check every transaction

posted in a day. This can be performed by checking the Stelar output with the respective

voucher. Error may take different forms like error of omission, commission, cross error

etc. accounts department checks carefully those transactions and finally rectifies them.

The output of every transaction found in the Stelar in General Ledger mode. Trial

Balance summary & details are selected to get those data.

3.2.7 Accounts Department Related Voucher Preparation:

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Generally establishment related expenditures are controlled by the accounts department.

Different types of bill payments are made through this department. The payments may be

for the house rent, plantation or office security. These payments are made in pay orders.

3.2.8 Provisioning:

The accounts department keeps provisions for some expenditure & income. Interest

payable, bills payable, etc are some examples of provisioning. These provisions can be

categorized as Expense Provision & Income Provision. Expense provision includes

provision on different types of deposit account in terms of interest. Depreciation

calculation and making appropriate provision is another field. Income provision includes

interest receivable from the loan account.

3.2.9 Extract:

Extract is a statement of all originating and responding transitions among inter branches

through inter branches debit and credit advice. Actually extract shows the balance of

general account of the branch. The objective of preparing it is to know how many

transitions have been originated and responded by the respective branch per day. Branch

has to send it its Head Office keeping one copy.

3.2.10 PERIODICAL ACTIVITIES OF ACCOUNTS DEPARTMENT:

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Other than the daily work that the accounts department has to do every day they are some

other things that this department has to perform. They are as follows:

Maintaining Accrued Expense account –where any sorts of monthly bill payable

and provisioned before month end.

Marinating Lease rent account to meet up monthly Rent payable

Execute the month end, half-year and year end procedure.

Weekly Statement is given on the over all position of the asset, liability ,income

and expense of that week

Weekly and Monthly Deposit Statement required by the corporate office

Monthly SBS-1 and Quarterly SBS-2 prepare.

Necessary response to the Corporate Office

The statements which are submitted by different branch’s Accounts Department are also

consolidated by Corporate Office later on.

3.3.3 Reason behind the return of cheques: Usually a bank return or dishonor cheques for the following reasons:

Insufficient fund. Check out of date/post dated. Amount in figure and word differs.

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Drawer’s signature differs from the specimen recorded in our office.

Payment stopped by drawer. Crossed check to be presented through a bank. Payee’s endorsement required. Or any other reason as written on the memo.

3.4 Cash department:

Cash section of a bank is one of the most important parts of the bank. Here they are dealing with most liquid assets. It is a place of huge responsibility and it urges huge concentration. It is also important in terms of Goodwill and customer satisfaction with their quality and prompts services.Usually the cash section performs the following activities as described chronologically:

3.4.1 Receive Counter: The receive counter performs the following jobs:

a) Cash Receive over counter: This counter receive cash deposit from the customer and a cash receive transaction is performed by the following formalities:

Count Notes and check fake notes by fake note detector.

Check Deposit Slip whether it’s wording is correct. Here usually we check Account no belongs to which branch

Give Cash Receive Seal on the deposit slip and signed by the teller.

Take authorization sign form authorized officer. Give the counter part (customer copy) of

deposit slip to the customer. Credit the amount to customer account by

proper posting in STELAR and write the transaction No. on the Deposit slip.

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Give Posting in Cash Register usually maintained in XL Sheet by mentioning denomination notes.

3.4.2 Payment Counter :At this counter cash is paid to the customer on demand by placing a check over counter. Payment counter performs its job as follows:

Check the check leaf whether it is worded properly. Usually this checking is termed as Four-corner check.

Four Corners of Check The most important parts of the cheque that should be clarified before honoring the cheque:

To make it sure whether the cheque is crossed or not. If it is crossed it must be cleared through the account of the customers. Here cash payment is not possible. Make sure that branch seal and the date of the cheque is accurate (There is no post dated cheque or 6 months pre-dated cheque) Signature of the depositor/depositors is accurate Account No: of the depositor is accurate There is no mismatch between the amount in numerical term and in words.

If there is any overwriting then it has to be authorized by the depositor by giving sign beside the place of overwriting.

Verify the signature with the specimen signature and give verification seal and signature of the verifier.

Put ‘paid’ seal on the check. Take receiver signature on backside and verify it with

earlier one given on backside when placing the check in the counter and make payment to the client. And also write down the denomination of notes behind the check.

Give posting in Stelar and debit Drawer account and note the transaction no. on the top of the check.

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At the end of the day, this teller also reports to the cash In-charge providing data on Receipt form vault, Receipt from Teller 1, Payment to the customer, and Balance in hand at the end of the day.

3.4.3Cash Management:Cash management deals with the management of inflow and out flow of cash of the Branch. It forecast cash inflows and outflows and accordingly arranges sufficient cash to meet client’s cash withdrawal demand. This job is assigned to Cash In-charge of the Branch to estimate the trade off between cash inflow and cash outflow.

3.4.5Vault Limit:

It is a critical issue for the cash department. It defines the limit that is insured by an insurance company. That means the limit of cash reserve covered by the insurance premium. The vault limit of Bogra branch is Tk.1.5 crore.

3.5 Customer Service:

Customers are the solitary of any business. And as a service oriented organization there is no alternative of high level customer for banks. It is central to assess the needs and demands of customers to be on the spiky edge in today’s competitive business environment. So it is important to seize the new customer and at the same time provide higher service to the existing customers.

A typical customer service desk renders wide range of services to its customers.

3.5.1 Opening of New Account:Responsibility of the customer service starts with opening of new account in the name of new customer. This is the

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starting point of the client bank relationship. By opening an account, the bank bridge it’s customer to avail the facilities provided by the bank. The accounts offered by the Bank Asia to its customer:

Savings Bank (SB) Account:This is an interest bearing account and only individuals can open this type of accounts. Interest rate may differ from bank to bank. This may be considered as low cost deposit for bank.

Current Deposit (CD) Account:It is popular known as Current Account. Any individual, company, firm, may open this type of account in its own name. This is non-interest bearing account. So it is a cost free deposits for bank, On the other hand, customers enjoy the right to withdraw money as many times as they wish.

Short Term Deposit (STD) Account: This is opened and operated for short term and for specific purpose. It is also an interest bearing account and where rate of interest is generally below the savings rate.

Fixed Deposit Receipt (FDR) Account:Individuals, Firms, Companies, Associations may open this account. The deposit is taken for a specific fixed period of time, such as 1 months, 2 months, 3 months, 6months, 1-year etc. In case of premature encashment generally no interest is awarded.And in view of this, account-opening procedure goes with the following steps:

At first customer service desk want to know whether the customer has introducer to open the account or not? If yes then give him a printed Account opening Form along with Specimen Signature Card, Customer

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Transaction Profile Form, citizenship certificate and Info form on Money Laundering. And request customer to fill up the form duly and submit the form with required documents.

In the form we extract information on: Account Name or Title Mailing address Type of account he wants to maintain Currency in which he wants to operate the

account Detail Personal information of the Applicant Signature instruction to operate the account Declaration by the applicant clarifying the

gennunity of the information provided by him Detail of Introducer Reference Info. Amount of Initial Deposit Period of Deposit Interest Payment Instruction Maturity Instruction Nominee Information Signature of the applicant to operate the account Specimen Signature in the signature card

Then the customer return the Form duly filled in with the following Documents:

Two Copies of Passport size photographs of the applicant attested by the Introducer and one copy passport size photograph of the Nominee attested by the applicant.

Copy of passport/National Identity Card/ Voter ID Card/ Certification from Word Commissioner or Union Perished Certificate.

Signature Card duly signed. Transaction Profile Form duly filled in and signed. Info form on Money Laundering duly signed. Card for ATM and SMS service duly signed. Any other Documents required by the Bank from

time to time.

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Additional documentation and formalities to be observed before opening the account for the following entities:

For Limited Companies:

Certified true copy of memorandum and Article of Association

Certified true copy of certificate of Incorporation Certified copy of Certificate of Commencement of

Business Copy of the Resolution of the Board of Directors

authorizing for opening account and specimen Signatures for operation of the Account duly attested by the Chairman.

Latest audited Balance Sheet Trade License Tin Certificate

For Partner Ship Enterprise:

Certified copy of the constitution of the firm. Registered Partnership Deed/duly Notarized

Partnership deed at will (incase of unregistered firm)

For Associate/Club/Society/Charity:

Minutes of the Committee meeting authorizing the opening of an account with the Bank duly certified by the Secretary and the Chairperson.

A copy of Laws and Bye-Laws/Constitution duly attested by proper authority.

A Copy of the resolution of the Committee authorizing Signatories to operate the account

Certificate of Registration; where applicable.A) Then the responsible officer of Customer Service will scrutinized the form and attached documents accordingly.B) Another important issue regarding the account opening is KYC (Know Your Customer). Here the concern officer rated the account holder based on the related risk. Here give focus on the a/c holders source of income or profession, net worth/sales turnover, relation with the bank, expected value of monthly transaction, No: of transaction, No: & Value of cash transaction. We proposed point for

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each category of information and if the point of overall is less than 14 then it is called low risk otherwise it is called high risk. Finally the concern officer gives a comment about the account holders. C) Then the officer will fill up the “For Bank’s Use Only” portion in the Account opening form and take proper approval accordingly. And upon approval he will open account in the name of the applicant by making posting in STELAR and proceed to the next step.

a) Then with duly filled deposit slip he requests customer to deposit the Initial account-opening amount in the cash counter. And upon deposit the account will be eligible to operate.

b) Then the responsible officer will issue checkbook to the new account holder and also give him deposit slip.

c) Then the officer files the account opening form and other attached papers in appropriate file and preserve in file cabinet.

d) After opening of Account Bank send thanks letter to the new client expressing thanks and gratitude to make relation with us. Another objective of this letter is to verify correctness of the customer’s address.

Notes:

The account must be open by cash money or any transfer cheque but not any clearing cheque.

3.5.2 Issuance of Check Book: Customer service desk issues checkbook on request of the customer. Usually the client by himself or by his authorized person send the check requisition slip duly signed and sealed to the bank and then the officer in Customer Service, receive the requisition request and request the client to come on specific time to receive the check book. In this time the officer issues the checkbook and enters leaf no. in STELER and perform other sealing formalities in the checkbook as, Branch Seal, A/c type seal (Savings, STD, Terms), A/c No. Seal and also give authorized signature on the requisition slip. And then

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note down the Check issue registration no in the top left corner of the checkbook and note the A/c title and No. on the top right corner of the check book.

3.5.3 Issuance of Pay Order (PO): For transferring fund from one location to another in safe and secured way banks provide the services to its customer.

Issue of PO:

Receive duly filled up PO prescribed form by the applicant.

Ensure that require amount is deposited or debited from account along with applicable charges.

Prepare leaf for PO Prepare vouchers for charges. Obtain signature of authorized persons. Give posting in the register Deliver the documents to the customer Give posting in the STELAR and send advice to the

Drawn on BranchPay Order (PO):

Pay order is encashed in the same counter where from it was issued. PO is drawn in favour of an Organization/Party known as beneficiary. Usually PO is issued with in the clearing region.

3.5.4 Other activities

1 Provide Account Statement to the customer:Customer service desk sends monthly, quarterly statement of Accounts to the customers. And also provide statement to the customer on request.

2 Selling of Bank’s deposit products:Besides opening of various accounts, customer service sells bank’s own deposit schemes as Deposit Pension Scheme (DPs +), Monthly Benefit Plus (MB +), Double Benefit Plus (DB +), triple benefit.

3 Encashment of Deposit Products:

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Customer Service Desk provides encashment service to the FDR and Deposit Schemes holder on maturity. Encash the instrument and transfer the money to the linked account of the customer or renew the FDR as per the choice of the customer.

4 Closing Account:If any customer desires to close his/her account then the client apply to the branch manager and accordingly close the account upon proper authorization.

5 Attend customer query in desk as well as over phone:

The customer service desk attends all queries form different clients and customers over desk or over phone like account’s balance enquiry, deposit slip issue etc.

3.6 Import Section

This section provides services in import business. A country with deficit production of any commodity usually imports goods from those countries with surplus production of that specific commodity obeying the country’s import policies under the practice of general business rules and regulations.

As importer and exporter are from different global location, they want to secure their transaction. And at this point both parties rely on 3rd party institution to secure the transaction and this institution is Bank.

The importer may make payment to the exporter in Advance in L/C form that is upon shipment of the goods. Now the question is what is L/c and how it operates.

3.6.1 Letter of Credit (L/C):

L/C is an irrevocable documentary credit, which is an undertaking by the issuing bank on behalf of the applicant – generally importer, to pay a

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certain sum of money to the beneficiary – generally exporter, if certain terms and conditions are fulfilled as stated in the L/C.

3.6.2 L/C cycle: After agree with the terms and conditions by the exporter and importer, they are going to devolve L/C relationship. Then the importer the import applies to bank for opening an L/C. After fulfillment of all formalities and on submission of necessary document the issuing bank issues the LC and sends it to the advising bank. Advising bank then advises the exporter about the LC and exporter then makes shipment of goods and submits the shipping documents to negotiating bank. It should be mentioned here that the advising bank and negotiating bank might be same or different banks.At this stage the negotiating bank scrutinizes the entire document and if there is no discrepancy then they send these shipping documents to the issuing bank and claim to the reimbursement bank. Reimbursement bank reimburse by dent of reimbursement authority given to them by issuing bank. The process closes with the exporter realizing payment from the reimbursing bank.

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Exporter /Beneficiary

Issuing/Applicant Bank Advising Bank/ Negotiating Bank

Importer / Applicant

Reimbursement Bank/ Confirming Bank

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3.6.3Required document for opening an LC:

The applicant must have a CD account with the bank.

Formal LC opining application. Must have the import Registration Certificate

(IRC), TIN certificate. Credit Information Bureau (CIB) report of the

client. Charge Documents such as DP note, GLCA, Letter

of hypothecation, Counter guarantee etc. Duly filled up and signed LC application from, IMP

(Important Form), LACF (L/C authorization form) Indent/ Pro-forma Invoice/ Contracts applicant Credit Report of the supplier Insurance cover note with money receipt Registration from CCI & E (Chief Controller of

Import & Export)

Pro-forma Invoice: Of the beneficiary company/ exporter do not have any agent in our country then they themselves send quotation in their company pad. This is called pro-forma invoice.

Indent: If the beneficiary has agents in Bangladesh then the agent send quotation on behalf of the company then it is called indent.

3.7 Export SectionThis section ensures the proper export proceeds to the exporter. Usually the exporter may ask his importer or buyer to make payment by L/C. Generally proceeds come by L/C form. Now we would discuss the export activities of a bank under a real example.

Instance: Assume that Mr. ‘Akash’ is our client and his business is RMG manufacturing & export. Recently he has received a buying order from one of his foreign

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buyer of USD 300,000.00 and a purchase agreement took place between those two. We would now illustrate our role as a bank in this dealing.

Illustration: The total procedure of this export can be sequentially discussed as follows,First Phase:

Let us assume that Mr. ‘Akash’ has agreed to accept the payment for export via L/C. Then he would ask his buyer to open L/C for aforementioned amount. Then the buyer would request his bank issue consequently.

The buyer’s bank will open L/C upon the purchase agreement and send the L/C copy to advising bank to advise our bank on this L/C.

The advising bank will advise on this L/C to our bank and also to us. We may also derive a copy of the L/C directly from the buyer.

Upon receipt of the L/C, we will clarify each and every point of L/C and advise our client regarding this L/C. Then our customer will go through the L/C and arrange for necessary amendment.

Second Phase: Upon receipt of L/C, Mr. ‘Akash’ will initiate to

start production and for that purpose, definitely he would be in need of raw materials, accessories and other supplies that would put him in necessity of working capital and here comes the bank to facilitate the necessary finance. The bank allows the exporter to open BTB L/C by lien of the master L/C and supply required cash to the supplier. By this BTB L/C, Mr. ‘Akash’ will purchase required supplies and will start production and on completion of the production, will go for the shipment to the importer.

After shipment of the goods, Mr. ‘Akash’ will prepare all the L/C documents as per L/C and

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place all these L/C documents to us to negotiate with the issuing bank for export proceeds. Usually export L/C requires the following documents,

Forwarding letter by the exporter. Bill of exchange. Shipping documents (packing list,

commercial invoice, weight list, bill of lading)

Certificate of origin. Shipment advice. Beneficiary certificate. Export form duly filled up. Purchase agreement or contract

Then his bank will check all the papers and send the documents to ad confirming bank and seek the proceeds accordingly. Otherwise the documents would go directly to the issuing bank for L/C proceeds. Then the ad confirming bank or the issuing bank will check all the documents and if there is no discrepancy, it would clear the payment. Otherwise the bank will negotiate with the client and undertake the necessary arrangements for the rectification and then the proceeds will s

When exporter’s bank receives the proceeds, it would be immediately adjusted to the BTB L/C payment or other debit figure of this L/C and then credit the remaining amount to the client’s account.

3.8 CREDIT

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Credit can be termed as the gainful employment of deposits received. In banking, a bank

receives various types of deposits that it has to employ somewhere for further benefit.

That is why a bank lends that fund to people or organization under certain terms &

conditions for repayment with an additional amount or benefit. As we know that a bank

lends money that it has borrowed, we can assume that creation of credits is a very

important task of a bank and a major source of its income. In the following section, we

shall focus on the process & steps in creation & extension of credit.

Bank Asia offers Credit facilities in 3 categories. They are:

Corporate credit

Consumer / retail credit

Small & Medium Enterprise (SME) credit

Bank Asia extends both funded and Non-funded credit facilities. Among all the funded

and non-funded facilities Bank Asia does not provide all but those which are

commensurate with the Bank’s policy and strategy. The various funded and non-funded

credit facilities that Bank Asia provides to its borrowers are:

3.8.1 FUNDED FACILITIES:

The funded credit facilities are those which involve direct cash. In other words any type

of credit facility whish involves direct outflow of Bank’s fund on account of borrower is

termed as funded credit facility. The following funded credit facilities are provided by

Bank Asia ltd.

Cash Credit: Cash credit is a Continuous loan facility usually provided for

working capital fund requirements purpose of the customer. Cash credit is generally

given to traders, industrialists for meeting up their working capital requirements. Cash

credit can be given on Hypothecation or pledge of goods but Bank Asia only practices

Cash credit on Hypothecation.

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Overdraft: overdraft facility is also a continuous loan arrangement on a

customer’s current account permitting him/her to overdraw upto a certain approved

limit for an agreed period. Here the withdrawals of deposit can be made any number of

times at the convenience of the borrower, provided that the total overdrawn amount does

not exceed the agreed limit. Customer can return any amount at any time within the pre-

fixed time of the facility. Turn over of an over-draft facility is the most important

phenomenon on which renewal of the facility depends. Over draft facility is given to the

businessman for financing working capital requirement and high net worth individual to

overcome temporary liquidity crisis.

Secured Overdraft: this is a type of overdraft facility given to the borrowers

keeping sufficient collateral from the customer in most liquid form. This facility provides

specific right to a client to over draw within a pre-fixed limit for a certain period of time.

Secured Overdraft is normally granted against the security of tangible asset such

as Lien of Fixed Deposit Receipt (FDR), Bonds, and Sanchaypatra. But currently Secured

Overdraft is given only against Fixed Deposit Receipt (FDR) because Bangladesh Bank

has recently prohibited Secured Overdraft against Bonds, and Sanchaypatra. Interest

charged on the Secured Overdraft is calculated on the basis of the security liened.

Term Loan: Term Loans are given to finance of capital assets. Loan agreements

often contain restrictive covenant and loan is repayable in accordance to amortization

schedule. Collateral is must for term loan.

Under term loan there are three categories:

Short term loans – loans having maturity less than one year falls under

this category.

Midterm loan- this loan facility is extended for loans having maturity

more than one year but less than three years.

Long term loan- tenure of long term loans is more than three years.

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Personal Credit: Bank Asia Ltd. also offers personal credit facility to its

customers for buying household appliances. No securities are kept for such type of credit

facility but a guarantee from third party is required who ought to be a prominent person

or government service holder. Anyone with continuous employment for reasonable

length of time in an organization is entitled to enjoy this facility. A quotation needs to be

submitted on the office pad from where the goods to be purchased.

Limit of Personal Credit range from Tk. 50,000 to 3,00,000 and interest rate is

17.00% which is subjected to change.

Loan Against Trust Receipt (LTR): loan against trust receipt given on good

faith on the importer. This is a loan facility up to a satisfactory limit to the traders/

customers by Bank Asia against security of the value of the imported goods. Customer

holds the goods or their sales proceeds in trust for the bank for certain period of time till

the loan allowed against such trust receipt is fully paid. The duration of LTR ranges from

thirty (30) days to three hundred and sixty (360) days.

3.8.2 NON-FUNDED FACILITIES:

Non–funded facilities are also known as continent facilities are those where bank’s fund

is non required directly. A non-funded facility can be turned to a funded facility as per

situation creates. Bank receives commission rather than interest income by providing

Non–funded facilities. Following non-funded facilities are provided by Bank Asia ltd.

Letter of Credit (L/C): A Letter of Credit can be defined as a Credit Contract

whereby the buyer’s bank is committed (on behalf of the buyer) to place an agreed

amount of money at the seller’s disposal under some agreed upon condition. Since the

agreed upon conditions include amongst other things the presentation of some specified

documents, the letter of credit is called Documentary Letter of Credit. The Uniform

Customs and Practices for Documentary Credit (UCPDC) published by International

Chamber of Commerce (ICC 1993) Revision, Publication No. 500 defines Documentary

Credit:

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Any arrangement however named or described, where by a bank (the “issuing

bank”), acting at the request and on the instruction of the customer (the ‘applicant”) or on

its own behalf,

1. Is to make a payment or to the order of third party (the Beneficiary), or is to

accept and pay such bills of exchange (Drafts) drawn by the Beneficiary, or

2. Authorized another bank to effect such payment, or to accept and pay such

bills of exchange (Drafts).

3. Authorizes another bank to negotiate, against stipulated document (s),

provided that the terms and conditions are complied with.

Bank Asia provides only irrevocable letter of credit (L/C) facility.

Guarantee: Bank Asia offers guarantee for its reliable and valuable customer as

per requirements. This is also a credit facility in contingent liabilities.

Loan Syndication: A bank can lend up to 15% of its paid-up capital without any

approval of Bangladesh Bank. If the loan amount exceeds 50% of the paid-up capital then

bank goes for syndicated loan. Lead bank makes the arrangement and Head office makes

the facility agreement by the Banker’s lawyer. All terms and conditions such as security

sharing, mode of creating charges, mode of repayment, covenants of the loan are written

on the facility agreement.

It can be a corporate credit or a consumer credit, even an employee house building loan

or a car loan. Whichever the credit is there are several common steps to follow for

granting & recovery of a credit when a borrower makes the first approach for a credit (Or

the bank itself may go to the borrower with the offer of a credit if the borrower seems

attractive to the bank).

3.8.3 STEPS IN CREDIT GRANTING:

The following are the major steps that take place while approval & the repayment of a

certain credit provided to a client:

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1. Credit Analysis:

In the very first line we said that credit is to gainfully employ deposits received by a

bank. The very important phrase “gainfully employ” means securing the certain benefit

from the credit approved. To secure the benefit, the credit analyst has to analyze a credit

proposal from various perspectives which are discussed below:

Identification of the purpose of the credit: First the analyst has to determine

what the credit is for – which field the borrower is willing to put the money in, what

is the tenure, what is the timing of cash inflow of the investment in which amount &

what can be the repayment source and method.

Structure of the borrower (Knowing exactly to whom we are lending): We

have to know what is the legal entity of the client – is it an individual, a partnership

business or a subsidiary of a holding company.

Careful attention has to be given if the client company is a subsidiary of a group

that makes complicated transactions with the other companies in the group – that

may transfer the fund to sister companies. At the same time, the bank should look to

grant loan in favor of the subsidiary rather than to the holding company.

The bank must also know who the key decision-makers of the borrowing company

are, that can provide the necessary information.

Business Analysis: The analyst must gather enough idea of the borrower’s

business and the environment in which it is going to play to identify future

sources of repayment.

First of all, the analyst has to know the macro environment of the business, what

is the overall industry condition of the business along with the rules & regulations

set by the policymakers.

The second concern is the firm itself that the bank is going to finance. What type

of product & service is the borrower going to offer with what kind of demand. At

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the same, the analyst must consider the competitive situation of the firm along

with the core competencies of the borrower.

Financial Analysis: This is a very important stage where the analyst has to

determine/quantify how worthy the borrower is for the credit. This worth is

measured in numeric terms with the help of various ratios. Those are as follows:

Income Statement Analysis/Profitability: A credit analyst may start with the

profitability as it is the most critical single element in a firm’s financial condition

as it is directly positively related with asset & negatively related with debt &

interest.

Balance Sheet Analysis: The first thing to analyze in the liability structure is the

borrower’s leverage (i.e. the amount of debts & liabilities relative to net worth).

At the same time, the analyst must consider how well the firm’s earnings cover

the principal repayment obligations of debt. High leverage indicates high risk but

may be acceptable if the firm is earning enough to cover its debts.

On the other hand, the quality of the assets of the borrower has also to be

analyzed. The focus should be on the market value and liquidity of the assets.

This is important because these assets may be the last refuge for the bank

to recover the loan by selling them what we can call the security. In common we

can divide securities into two broad categories. Those are:

Primary Security: The Security directly related with the purpose of the credit

(Example: Goods imported through an L/C).

Secondary Security: Any security not directly related with the purpose of the

credit. (Example: A sole proprietors land mortgaged for loan sanctioned for

development of his grocery shop).

Cash Flow Analysis: Cash flow is an important source of repayment. Cash flow

can be constructed directly or indirectly. In the direct method, all cash inflows

and outflows from operating activities, investment activities and financing

activities are recorded. In the indirect method, cash flow is generated by adjusting

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non-cash inflow and out flow with the net income

Perspective: Not only the ratios from Income statement, balance sheet and the

cash flow has to be calculated and analyzed, those has to be compared from

different perspectives. First, the borrower’s trend over the time period has to be

compared – that means comparison of current performance with previous

performance.

While the past & previous performance of the borrower has to be compared, the

recent performance has to be also compared with the industry benchmarks.

Accounting: The accounting method followed by the borrower may mislead the

analyst because of following any particular method. The analyst must keep an eye

on which accounting method has been followed by the borrower while preparing

the financial statements. At the same time the analyst must also look for the off-

balance sheet items that have not been disclosed.

After calculating all the above factors, the credit department of the branch prepares a

credit proposal to be sent to the loan granting authority through the Zonal Head.

Typically, the proposal contains the following topics:

Background of Organization/borrower

Applicant’s Name

Address (Office/Factory)

Name of Business

Constitution (formation)

Date of Establishment

Capital Structure (Authorized Capital, Paid Up Capital, Retained Earning)

Bank Checking (CIB report result)

Particulars of Directors

Brief Description of the management

Sister concerns

Relationship officer for the client

Account Turnover

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Business performance with the bank & bank’s earnings from the business

Business performance with other banks

Liabilities with the bank

Liabilities with other banks, group liabilities, if applicable

Major information from the financials and comment on them

Estimate of requirement of the borrower

Particulars of the proposed facility

Projected earnings for the bank by providing the facility

Branch’s visit report, if applicable

Documentation status

Comments & recommendation

3.8.4 Pre-sanction documents:

In fact the first part of documentation for granting a credit is done before the credit

proposal is placed before the granting authority. In the initial documentation, the

following documents are scrutinized & collected:

1. Bank’s loan application duly filled in, required for Public Limited

Company only

2. Certificate of commencement of business for Public Limited Company

only

3. Certificate of Incorporation

4. Certified copy of memorandum and articles of association, both for Public

& Private Limited Company

5. Certified copy of Form XII of Joint Stock Company, if there is any change

in the directors

6. Up to date Trade License – for Importers & Exporters

7. Bank’s loan application duly filled in

8. Board resolution of the company to create loan

9. Annexure “ka” form of Bangladesh Bank duly signed and sealed for

collecting CIB report

10. Up to date Income Tax Clearance Certificate

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11. Net Worth of the Directors including Chairman and Managing Director

12. Name & address of the Directors and their number & percentage of shares

13. Name & address of sister concerns

14. Global liabilities of the company and sister concerns

15. Last three year’s audited balance sheet(For old company)/Three years

projected balance sheet(For new company) of the borrower company

16. Projected cash flow statement

17. Production Plan

18. Stock Report(Hypothecation & Pledge) report of the Borrower Company,

applicable for old companies

19. Bio-data of the directors and other key personnel with two passport size

photographs of each

20. Organization Chart

21. Name & address of the of the warehouse owner and up to date rent receipt,

for rented warehouse

22. Name & address of five large customers and their purchasing percentage

23. Last audited balance sheet of two similar companies

24. Last three year’s industry Turnover (National) of this type of company

25. List of aged debtors

26. For Manufacturing company, Environmental Certificate duly signed by

the authority

27. Clearance Certificate of electricity, gas and water supply authority

28. Project Profile for Project loan

29. List of machineries with description and price list

30. Partnership deed for Partnership Firm

31. CIB report for any amount of credit

Along with the above analysis and documentation, doing the Lending Risk Analysis is a

must if the loan amount is Tk. 1 core or above. At the same time, in case of any large

loan, the bank must not invest more than 50% of its paid up capital (in form of both

funded & non funded loan) in a single loan, in which, the funded loan must not be more

than 25%.

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For Equitable Mortgage, simply the original deed of the mortgaged property is taken

against Memorandum of Deposit of Title Deed. In Equitable Mortgage, the bank must

make sure that the documents of the property are authentic and are the main deeds. In

case of new land, the certified deed may be considered the main documents. At the same

time, the “Daag” number, Ledger number & Mouza number of the land will be also

traced to locate the land.

For registered Mortgage, the deed of the property is not kept with the bank. Instead, the

property is registered from the sub-registrar’s office. Here, the bank must confirm the

ownership of the applicant on the property. Bank appointed surveyor certifies the

ownership while the banker may physically visit the site or obtain a certificate from the

A/C land regarding the ownership of the land. The banker must also check the chain of

ownership and the possession of the borrower over the property. For Registered

Mortgage, the borrower needs bank’s sanction letter and TIN certificate.

3.8.5 Approval:

There are two different panels that approve credit proposals sent from different branches.

The authority of the panels is not the same. The panels are:

Management Committee: The management committee can approve

credits not exceeding amount by Tk. 1 core & tenure less than or equal

to 1 year.

Board of Directors: Any credit proposal exceeding the limit of the

authority of Management committee needs the approval of the Board of

Directors.

Besides these two panels, the branch can approve credits covered by cash (or quasi cash)

collateral like liquid cash, FDR, shares (of blue chip companies).

After considering all the analysis & statements as well as the recommendations, the panel

approves the loan if it finds it feasible for the borrower as well as for the bank. When

approved, the Head office informs the branch of the approval of the loan.

3.8.6 Post-sanction Documentation:

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After the branch has got the approval, it informs the client of the approval of the credit

through a letter that contains the amount approved, the rate of interest payable, repayment

procedure etc. As the client accepts the proposal, the major part of documentation begins.

This part of documentation includes the Charge documents (Whichever is applicable) that

are signed by the borrower and/or the guarantor. The charge documents may be registered

or unregistered. If registered, the registration has to be done with RJSC (Registrar of the

Joint Stock Company).

3.8.7 Required Post Sanction Documents:

1. Accepted Advice Letter - the received copy of the sanction letter by the

customer

2. Acknowledged Assignment of Receivables/Contract Proceeds if the

borrower has agreed to assign receivables/contract proceeds to the bank

3. If Mortgage being taken the Agreement to Mortgage

4. Bia Deed, that shows whom the land is bought from

5. Board Resolution for Corporate Guarantee, if corporate guarantee taken

6. Board Resolution of Borrowing Authority - standard document taken in all

cases

7. Central Bank Approval – applicable if the loan is over 15% of paid up

capital

8. Continuing Guarantee that is taken if personal guarantee is taken

9. Counter Indemnity, if bank guarantee given

10. Cross Corporate Guarantee, taken when all members of a group of

companies provide a guarantee for a particular group member

11. CS Parcha, survey showing history of land during British period

12. Demand Promissory (DP) Note – Charge Document. Promise to pay back a

specific amount. Standard document taken in all cases

13. General Loan + Collateral Agreement – Charge Document. Standard

document taken in all cases

14. Insurance Policy for Inventory/Fixed Assets – taken If inventory/fixed assets

hypothecated

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15. Letter of Continuity – Charge Document. Standard document taken in all

cases

16. Letter of Disbursement – Charge Document. Standard document taken in all

cases

17. Letter of Hypothecation - If Hypothecation takes place

18. Letter of Lien – If a security such as FDR is being taken

19. Letter of Lien and set off for GOB Bonds, If bonds are kept as security

20. List of Project’s Machineries, If Machinery is being Hypothecated

21. Memorandum of Deposit of Title Deed, If equitable mortgage taken. Title

deed has to be kept with the bank

22. Mouza Map + Site plan – to help identify the land

23. Mutation Parcha. To show the name of the property if land is security

24. No Objection letter from RAJUK if plot is RAJUK’s

25. Non-Encumbrance certificate, to show that property has not been mortgaged

elsewhere

26. Original Plan of Building, if building is kept as security

27. Personal Guarantee of Owners, if Guarantee being taken as security

28. Registered Hypothecation of Debts & Assets, for Limited Companies if

hypothecation done, has to be registered with the RJSC

29. Registered Hypothecation of Fixed Assets, for Limited Companies if


30. Registered Hypothecation of Inventory, for Limited Companies if


31. Registered Mortgage at Sub Registry Office, if this is done, it is not

necessary to keep title deed. But bank keeps the title deed in practice

3.8.8 Disbursement:

Once a loan has been granted and documentation has been finished, the disbursement

stage starts. The branch uses a given format for loan disbursement (For Bank Asia

Limited there is a format in the Stelar system which generates disbursement schedule as

input is given into it regarding the total amount of loan, repayment method etc.). As per

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the financing need of the client the branch disburses the total amount of loan – it can be

in one single payment or in parts. Even after one partial payment, the bank continues

monitoring the implementation of the loan, and if needed, the bank reschedules its

disbursement schedule.

3.8.9 Supervision:

Supervision is very important in the aspect of loan sanctioning and disbursing process.

Because, if the bank is failed to identify the real borrower there may be possibility of

classification of loan. As a result, bank will incur the total loss.

The bank continuously monitors the usage of the loan in the disbursement phase. But that

does not suffice the responsibility of the bank. Continuous monitoring is needed for the

safety, security & repayment of the loan provided to the client. For that purpose, the bank

makes time to time monitoring in formal and even informal visits to ensure the proper

utilization of the loan.

3.8.10 Recovery:

Advance is such kind of arrangement that its clients are repayable this either on demand

at the expiry of fixed period or as per repayment schedule agreed upon while granting the

facilities.

The last but a very important step is the recovery of the loan disbursed. The borrower

may repay the whole amount at once or part by part depending on the type of the loan. If

the investment is in a seasonal inventory, the payments may come at the end of the

season. In a longer-term inventory and receivables financing, the repayments would be

made from profit margins or from refinancing and in parts. If it is a Project loan, the

repayment comes from the sale of resource and also usually in installments.

The sale of the security is actually not the ultimate solution if the credit is classified as

bad. But in some cases, the bank has to take that last refuge and recover its investment.

The bank follows these procedures as per the Money Loan Court Act 2003, which is

enacted from May 1, 2003.

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3.8.11 Credit Risk Grading (CRG):

One of most significant risks a bank is exposed to is, what is generally termed as, ‘credit

risk’. Since the largest slice of income generated by a bank and a major percentage of

assets is subject to this risk, it is obvious that prudent management of this risk is

fundamental to the sustainability of a bank.

Credit risk is the primary financial risk in the banking system. Identifying and assessing

credit risk is essentially a first step in managing it effectively. In 1993, Bangladesh Bank

as suggested by Financial Sector Reform Project (FSRP) first introduced and directed to

use Credit Risk Grading system in the Banking Sector of Bangladesh under the caption

“Lending Risk Analysis (LRA)”. The Banking sector since then has changed a lot as

credit culture has been shifting towards a more professional and standardized Credit Risk

Management approach.

Credit Risk Grading system is a dynamic process and various models are followed in

different countries & different organizations for measuring credit risk.

Credit risk grading is an important tool for credit risk management as it helps the Banks

& financial institutions to understand various dimensions of risk involved in different

credit transactions. The aggregation of such grading across the borrowers, activities and

the lines of business can provide better assessment of the quality of credit portfolio of a

bank or a branch. The credit risk grading system is vital to take decisions both at the pre-

sanction stage as well as post-sanction stage.

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 Credit Risk Grading deploys a number/ alphabet/ symbol as a primary summary

indicator of risks associated with a credit exposure.

Credit Risk Grading is the basic module for developing a Credit Risk

Management system.

Credit risk for counterparty arises from an aggregation of the following:

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Financial Risk

Business/Industry Risk

Management Risk

Security Risk

Relationship Risk

Each of the above mentioned key risk areas require be evaluating and aggregating to

arrive at an overall risk grading measure.

a) Evaluation of Financial Risk:

Risk that counterparties will fail to meet obligation due to financial distress. This

typically entails analysis of financials i.e. analysis of leverage, liquidity,

profitability & interest coverage ratios. To conclude, this capitalizes on the risk of

high leverage, poor liquidity, low profitability & insufficient cash flow.

b) Evaluation of Business/Industry Risk:

Risk that adverse industry situation or unfavorable business condition will impact

borrowers’ capacity to meet obligation. The evaluation of this category of risk

looks at parameters such as business outlook, size of business, industry growth,

market competition & barriers to entry/exit. To conclude, this capitalizes on the

risk of failure due to low market share & poor industry growth.

c) Evaluation of Management Risk:

Risk that counterparties may default as a result of poor managerial ability including

experience of the management, its succession plan and team work.

d) Evaluation of Security Risk:

Risk that the bank might be exposed due to poor quality or strength of the security

in case of default. This may entail strength of security & collateral, location of

collateral and support.

e) Evaluation of Relationship Risk:

These risk areas cover evaluation of limits utilization, account performance,

conditions/covenants compliance by the borrower and deposit relationship.

3.8.12 BASIS FOR LOAN CLASSIFICATION

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Loan category

Non repayment period Status

1. Continuous After expiry date:

3 months or more but less than 6 month



12 months or more

Special Mention Account

Substandard

Doubtful

Bad/loss

2. Demand Same as continuous loan

3.Term loan for

a) 5 years maturity

b)More than 5 years

maturity

Installment failure:

3 installment

6 installment

12 installment

18 installment

6 installment

12 installment

18 installment

24 installment

3.8.13 Maintaining Provision:

The bank has to maintain provision against its classified loans (Continuous, Demand &

term loans):

Standard 1%

Special Mention Account 5%

Substandard 20%

Doubtful 50%

Bad 100%

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After deducting the value of eligible security and interest, provision has to be maintained

at the above mentioned rate against outstanding classified loans. A general provision has

to be maintained against unclassified loans also at a rate of 1%.

3.8.14 Additional Tasks of the Credit Department:

In addition to disbursement & recovery of credit, the credit department has to perform

some other tasks. The following statements are required to be submitted to Bangladesh

Bank in time to achieve good rating for the Bank as well as for Bangladesh Bank’s

statistical purpose. Those statements are mentioned below:

1. Monthly CIB statement of Tk. 1 core and above

2. Monthly statement of credit (Rescheduled/Increased/Newly sanctioned)

3. Monthly statement of Deposit held by the government

4. Monthly statement of Bank Loan & Advances held by the Government Sector

5. Monthly statement of loan in Agro-based industry

6. Quarterly statement of Industrial Credit

7. Quarterly statement of Loans disbursed irregularly

8. Quarterly statement of Outstanding and Classification status of loans disbursed

during last 5 years

9. Quarterly statement of SBS-3

10. Quarterly statement of Loans to the Bank Directors

11. Quarterly statement of Loans to Director of other Banks

12. Quarterly statement of Branch Summary of loan classification and provision

13. Quarterly CIB statement of Tk. 1 lac to below 1 crore

14. Quarterly statement regarding sanction of large loan

15. Quarterly statement of Loan under Agricultural credit

16. Quarterly statement of recovery against classified loan

17. Quarterly statement regarding write off

18. Half-yearly statement regarding loans disbursed in ternary sector

19. Half-yearly statement regarding suit filed and settled in Artha Rin Adalat & others

20. Half-yearly statement regarding Loans disbursed in jute sector

21. Half-yearly statement of sector wise Advance

22. Half-yearly statement regarding Loans & Advances of Tk.1 core and above

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4.9 Risk Measurement of Bank Asia

Risk Management within the Bank always calls for careful and responsible handling of

the risks. Taking risk is at the core of bank business and risk is generated from both

external and internal sources and may make the way hazardous for Bank’s existence if

not mitigated or minimized properly. Introduction of Basel II has envisioned a

comprehensive set of Risk Management practices for a sound banking system across the

globe. Accordingly the Central Bank has identified five core areas of risk and outlined

various processes to effectively manage them.

The risk areas are:

1. Credit Risk

2. Asset and Liability/ Balance sheet Risk

3. Foreign Exchange Risk

4. Internal Control and Compliance Risk

5. Money Laundering Risk

Bank Asia always tries to find a balanced way of managing risk that can protect the

interest of the shareholders and depositors by keeping risk at a minimum level and

providing maximum return. Towards strengthening the risk management of the Bank

with special attention to the five core risk areas, committees have been formed at the

Corporate Office level. The objectives of the committees are to develop and implement

the Bank’s Risk control principles, frameworks, limits, and processes across the five core

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risk areas as identified by Bangladesh Bank. Bank Asia’s approach and action in the Risk

areas are briefly discussed below

1. Credit Risk

Credit risk is defined as the risk that arises from the uncertainties of counterparty’s ability

to meet its obligations to the Bank as they become due. In banking, this is an obvious

area that needs to be managed. Since there are many types of counterparties - from

individuals to sovereign governments and many different types of obligations, from auto

loans to derivatives transactions, credit risk takes many forms. Every loan exposure or

transaction with counterparty exposes the Bank to some degree of credit risk. Credit Risk

Management is designed and continuously updated to identify, measure and mitigate

credit risk to maintain and improve quality of loan portfolio and to reduce potential and

actual losses. To mitigate the credit risk, segregation of duties of the officers and

executives in the credit related activities has been introduced. At Corporate office, the

Bank has established separate departments which are entrusted with the tasks of

marketing of credit products, maintaining effective relationship with the customers,

exploring new business opportunities etc. Three separate units have been formed within

the credit division. These are i) Credit Risk Management Unit ii) Credit Administration

Unit, and iii) Credit Monitoring and Recovery unit. Our endeavor in identifying,

measuring, monitoring and controlling credit risk for each borrower and also at the

portfolio level is fully guided by the principle of credit risk management. Disciplined

processes are in place within the branches and the Corporate Office to ensure prompt

identification, accurate assessment, proper approval and consistent monitoring and

reporting of credit risk. We manage, limit, and control concentrations of credit risk

wherever we identify them. Our recent focus on retail credit is a step towards minimizing

our concentration risk.

2. Asset and Liability/ Balance Sheet Risk

Asset Liability Management (ALM) is an integral part of bank management. It is

essential to have a structured and systematic process for managing the balance sheet.

According to the guidelines of the Central Bank, banks must have a committee

comprising of their senior management to make important decisions related to their

balance sheets. Efficient management of both on and off balance sheet activities of the

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Banks by maintaining required liquidity position leads to maximum profit, keeping the

soundness of the banks intact. Bank Asia's Asset Liability Committee (ALCO) routinely

meets to monitor the liquidity position, the maturity structure of assets and liabilities and

the pricing strategy of deposit and lending of the Bank, in order to manage the balance

sheet risk better. The ALCO is also entrusted with the responsibility of ensuring

sufficient liquidity at all timesto meet its obligations when these become due without

compromising the earning potential of the funds. In the year 2008, the Bank successfully

maintained required liquidity along with earning good profit and building sound Assets

base.

3. Foreign Exchange Risk

Foreign exchange risk is the exposure of an institution to Foreign exchange risk is the

exposure of an institution to the potential impact of movements in foreign exchange rates.

Managing foreign exchange risk is a fundamental component in the safe and sound

management of all institutions that have exposures in foreign currencies. It involves

prudently managing foreign currency positions in order to control, within set parameters,

the impact of changes in exchange rates on the financial position of the institution. The

frequency and direction of rate changes, the extent of the foreign currency exposure and

the ability of counterparts to honor their obligations to the institution are significant

factors in foreign Exchange risk arises has been structured by operationally and

physically segregated front office and back office. The front office carries out the deals

while the back office makes the lodgment of the transaction into the book of Record. This

is done with the view to double checking of every transaction and ensuring transparency

and accuracy. The department has also been equipped with better human and technical

resources following the central bank guidelines.

4. Internal Control and Compliance Risk

Since banking business deals with risk, the presence of effective internal control system,

corporate governance, transparency and accountability is vital to ensure smooth operation

of the Bank. Internal Control and Compliance Risk is defined as risk of unexpected losses

happening due to inadequate internal processes, human errors, fraud and forgeries, and

technology failure. Under active guidance and governance of the Audit committee of the

Board, an Internal Control and Compliance Department (ICCD) has been put into place

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to ensure controls at every operational level of the Bank. For identifying and correcting

operational lapses, a comprehensive Audit Manual and an Internal Control and

Compliance Manual duly approved by the Board of Directors have been circulated to the

branches for meticulous compliance. A Management Committee

(MANCOM) routinely reviews the overall effectiveness of the Bank’s internal control

system. In the year 2008, the Bank adopted a risk-based internal audit system for all the

branches.

5. Money Laundering Risk

Money Laundering Risk can be defined as the violation of regulations and being

negligent in the prevention of money laundering; for Prevention of which Money

Laundering Act 2002 (Act No. 7 of 2002) has been enacted in Bangladesh.

In order to combat money laundering risk, Bangladesh Bank preached the awareness of

money laundering issues across the country, especially the rural areas, and selected some

Banks for certain areas for spreading the awareness. An updated Anti Money Laundering

Manual was prepared and distributed to all the branches of the Bank. Know Your

Customer (KYC) and Transaction Profile (TP) of old customers have been updated at the

branch level and all other regulations are being complied meticulously. The Bank is

conducting training programs and regular workshops for developing awareness on anti-

money laundering measures. In line with our objective towards prevention of money

laundering, all the relevant departments are instructed to be vigilant, to prevent such

activities. More manpower was trained during the year within the Bank to strengthen the

compliance system, and Branch Compliance Officers were designated in all the branches.

In addition, an audit on anti-money laundering compliances has been conducted in the

branches. Transaction profiles of our customers are embedded into the Stellar (online

Banking Software) which helps in preventing illegal transactions.

4.10 Du-Pont Analysis

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Actually the company’s managers developed this approach for evaluating performance of

the company as well as to find out the reason behind the increase/decrease of a firm’s

ROE. We can divide DuPont Analysis by two parts- DuPont Equation and DuPont Chart.

DuPont Equation: A formula that gives the rate of return on assets by

multiplying the profit margin by the total assets turnover.

DuPont Chart: A chart designed to show the relationships among return on

investment, asset turnover, the profit margin, and leverage.

4.11 Evaluation of Bank Asia based on CAMEL rating

Capital adequacy: A bank capital adequacy ratio determined by the K/A ratio.

Here, K= Capital

A= Assets

9% and above: strong 1

8% to 8.99%: satisfactory 2

7% to 7.99%: fair 3

6% to 6.99%: Marginal 4

5.99% and lower: unsatisfactory 5

According to annual report the Bank Asia’s capital adequacy ratio is 11.24%, which

indicates the bank is staying at strong position with the ranking of 1. Therefore, banks has

more chance to survive in the market because their loss absorb power is very high.

Assets quality:

It is determined by the ratio of total classified loans to total capital & reserve.

Total Classified Loan / Total Capital & Reserve

1% to 5% and above: strong 1

5.01% to 10.00%: satisfactory 2

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[Classified Loans include Standard, Sub-Standard and Bad Loans]

of Bank Asia

10.01% to 15.01%: fair 3

15.01% to 20.00%: Marginal 4

Above 20%: unsatisfactory 5

Total Classified Loan / Total Capital & Reserve=32.16%. This measure reminds that the bank is in unsatisfactory level with a ranking of 5.

Earnings Records:

Earning is assessed by ROA of a bank:

Net income at the previous calendar year / Total asset (as per the same calendar year)

.85%: strong 1

.65%: satisfactory 2

.45%: fair 3

.35%: marginal 4

Net loss: unsatisfactory 5

The calculation shows that result is 1.50% which proves that Bank Asia is in strong position by holding rank 1.

Liquidity position:

The banks whose are dependent on more outside source, such banks are more likely to

experience a liquidity crisis because they are forced to borrow excessive amounts of

funds from outside sources. We can measures the liquidity position by the following way

Total loans/Total deposits

Strong: 60% 1

Satisfactory: 80% 2

Fair: 85% 3

Marginal: 90% 4

Unsatisfactory: 91% 5

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The Bank Asia ratio is 94.20 percent, which reveals that it is not in strong position.

Nevertheless, the liquidity position is in unsatisfactory level.

Management Quality:

Management quality can be determined by the average of the ratings of above four

ratios. Here the regulators verify whether the management is efficient enough to handle

any unfavorable situations or economic inflation or deflation. We can calculate the

management ratio by the following formula

(C+A+E+L)/ 4.

Management Quality = (1+5+1+1.5)/4

= 1.4

Here we consider the total rating of these four sub-factors. The ranking of management

are as follows

1 to 1.49: strong 1

1.5 to 2.49: satisfactory 2

2.5 to 3.49: fair 3

3.5 to 4.49: marginal 4

4.5 to 5 : unsatisfactory 5

Management administrative skill and ability is very high since the relation falls under the

category of strong and can be ranked 1.

Composite rating:

It is determined by the average of rating of all five components of CAMEL as follows:

Composite rating = (C+A+M+E+L)/5

= (1+5+1+1+1.5)/5

= 1.3

Composite rating is classified as bellow:

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1 to 1.4: strong 1

1.5 to 2.4: satisfactory 2

2.5 to 3.4: fair

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MARKETING STYLE

Bank Asia Limited list the marketing management functions, including the elements of a

marketing plan and discuss the importance of measuring and managing return on

marketing investment. For sustaining & effective growth strategic planning is very

important. Bank Asia initiate this matter & make plan in some ways, such as- define the

business mission, determine the target, listing the investment & planning based on

effective way. How to design business portfolios & develop growth strategies. Here

Bank Asia explain marketing role in strategic planning & how marketing works with its

partners to creat and deliver customers value.

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MARKETING HEIRERCHY OF BANK ASIA

HEAD OF MARKETING DEPARTMENT

CORPORATE AFFAIRS & BRANDING

LIABILITY MARKETING

PUBLIC RELATIONSHIP OFFICER

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5.1 Marketing Analysis:

Bank Asia analyses all over the evaluation of present market condition. For doing this they analise the SWOT. This is an over all evaluation of a company’s Strength(S), weakness (W), Opportunities (O) and Threats (T).

5.2 Marketing Planning

Marketing Planning involves deciding on marketing strategies that will help the company attain its overall strategic objectives. The Head Of Marketing department plan about that matter. At first they express their plan of decision at the written form. Here all kinds of marketing planning is preserved. Queeckly changeable market’s wants & demands, anticipating the future market, the initiative of crucial moment, how bank will face that. For doing that the Head Of Marketing Department followed the following steps

EXECUTIVE SUMMERY

LIST OF SUBJECT

PRESENT MARKETING CONDITION

OPPORTUNITY & ISSUE ANALISYS

OBJECTIVES

STRATEGY OF MARKETING

ACTION PLAN

FINANCIAL PROJECTION

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IMPLIMENTATION & CONTROL

5.3 Marketing Implementation:

Marketing Implementation is the process that turns marketing plans into action assignments and ensure they accomplish the plans stated objectives. Liability marketing department of Bank Asia implement it. And as the part of implement, the whole country divides into different cluster. One DMD is treated as cluster head & its assigned as zone based. In Rajshahi zone the marketing implementation deals by the leadership of Mr. Khorshed Alam DMD Of Bank Asia. This zone is consist of three branches, Rajshahi Br, Iswardi Br. & Bogra Br. Cluster Head assign the yearly target to the Branch Manager. Branch Manager divided the target market to his fellow personnel on the basis of their designation & locality.

5.4 Marketing organization

To organize the marketing the Branch Manager take plan based on the root levels market situation. According to the situation the Branch Manager form the several team under a leader. The leader organize the strategy about functional, geographic, product management, or market management. All over the function run by the direct influence of Branch Manager.

5.5 Marketing Control:

Marketing Control is the process of measuring and evaluating the result of Marketing strategies and plans and taking corrective action to ensure. Here plays two kinds of control. One is operational control and the another is strategic control. Operational control verify the the function of institution is run properly? Or not? And here need any kind of correction? By controlling this it can be evaluate the sells of organizations, profits, and another targets. The another control is strategic. It is related about the received opportunity & the fundamental strategy. The Branch Manger evaluate it and take initiative and also report it to the concern authority. Here Branch Manager compare the factor is-

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FIXATION OF TARGET (WHAT EVER WE EARN)

RESPONSE OF WORK (WHAT IS HAPPENING)

EVALUATION OF WORK (WHY IT IS HAPPENING)

INNITIATIVE OF CORRECTION(WHAT SHOULD BE DONE)

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Chapter: 5

RECOMENDATION, SUGGESTION AND CONCLUSION

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5.1 RECOMMENDATION AND SUGGESTION

BAL should also be aware of its gradual recession of liquidity position. However,

though its liquidity position has been squeezed but BAL follows front-end

investment strategy that does not provide high return.

It is evident from the analysis that BAL follows a high concentration of deposits.

In this regards, it is suggested that the bank should establish a back up fund for

meeting upcoming large deposit due.

The world today is a world of Information Technology that gave rise to the

concept of on-line and any branch banking. Though, BAL follows the online

banking, but there is a limitation in the amount that can be transacted. This

deprives the customers to enjoy the true benefits of the real time online banking

services. This limitation should be eliminated to enable the customers enjoy the

benefits of real time online banking services.

Formulation of MMP - Model Marketing Plan

The management of the Bank should work for the creation of conceptual

framework covering the core elements of a developed “Model Marketing Plan –

(MMP)” of Bank Asia Limited. This would help them to face the competition

and the changes in the banking industry into the new millennium for a sustainable

growth of business / profitability of the bank. To accomplish the tasks of

formulation of “MMP” focus should be made on the following issues :

a. Business philosophy that identifies current and future opportunities, defines

magnitude and quantum, determines target markets and cluster, decides on

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products, services and programs to secure entry to markets for economic and

financial gains were made. The aim of planned marketing efforts is to understand

customers and to ensure that offered products and services adapt to targeted

customers’ needs perfectly. The marketing plan to be designed to perform tasks of

stimulating demands for Bank’s products and services to influence the level

timing and composition of demand help customers’ consummate their business

objectives.

b. Ideas of satisfying the customers’ needs by means of products and the entire

cluster of action as associated with creation / delivering and finally consuming the

products and services.

c. Process to be employed to interpret markets, customers’ needs and

transformation: defining mission / objectives and goals, portfolio plans and new

business plans. The plans were structured in 3 (three) operational levels :

corporate level, business level and product level. The marketing mission was

converted into specific objectives for each level targeted at: profitability, market-

share, positioning, risk-diversification and innovation. The objectives to be made

quantifiable, realistic and consistent towards useful implementation of the

marketing action plan. The portfolio plan involved in reviewing of the current

portfolio of businesses and deciding on new businesses and potential thrust

sectors.

d. Selection of target markets including dividing the markets into major market

segments sharing common properties, evaluation, selecting and targeting

segments and deciding on ways of positioning in each market.

e. Identification of market opportunities through analysis of subjective issues,

concepts, strategies and techniques of penetration to create market along with

efforts to integrate actions based on collected data to fit into real banking solution

having operational linkages with the marketing plan “Model Marketing Plan –

(MMP)” of Bank Asia Limited.

f. Natural inducement of the target groups to Bank Asia Limited is that customers

must perceive greater degree of satisfaction from the offered services. The

qualitative improvement and development of cutting-edge products precipitate in

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higher degree of customers satisfaction and Bank Asia Limited to plan for

improvement of services, adding flair to the products like introduction of ATM /

On-line banking / Credit Card / Debit Card / introduction of relationship Manager

and Customer-friendly deposit schemes.

g. Executives and officers working at various levels in the Bank to be groomed with

clear understanding of the entire range of products and banking services ensuring

quality of services help accomplish set target of customers satisfaction. The

techniques those to be pursued for transforming of strategies into action through

“Model Marketing Plan – (MMP)” to achieving the goal of higher customer

satisfaction along with sustained growth of profitability for the Bank are:

Proper grooming of employees through classroom and hands on training.

Receive the customers with smile

Improve office atmosphere to give customer friendly feeling

Provide intimate attention to your customers’ needs

Customers’ convenience will receive priority

Evaluate customers’ needs in proper perspective and shortcomings be

explained logically.

Time consumed in servicing customers be minimized.

Deeply familiarize customers with benefits of offered financial services.

Use modern tools and techniques and evaluate customers’ credit needs

professionally.

Decision making process should be free of ambiguity and be time conscious

Alternative solutions should be explored and evaluated

Develop communication skills

Develop effective management information systems (MIS)

Diagnose macro and micro environment niches and explore the prospects.

Help new entrepreneurs to formulate business plans.

Fresh entrepreneurs should be provided with counseling.

Understand customers’ funding needs and create ‘Total Solution’.

Monitoring of disbursement and need based use of loans.

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Recycling of credit ensuring recovery as per repayment schedule.

Ensure reasonable spread and return on assets.

Influence of employee moral and emotional needs as associated with delivery

for services cannot be ignored towards improvement of the quality of services.

The contribution of the following persuasive techniques is to be motto of

Bank Asia Limited under the ‘MMP’ to appease the human apathy towards

goal congruence:

Attend problems of subordinates with tender care.

Inter-personnel relationship should be cordial.

Display positive attitude to problem solving.

Practice group participation in problem solving.

Innovative ideas should be nurtured.

Organization goals should be comprehensive and visible.

Update banking knowledge by organizing training programmes and seminars.

Motivate subordinates through leadership skills.

Preparation of performance budget should focus on the following issues:

In the context of the current local a global economic scenario the Performance Budget of

the Bank should be drafted particularly keeping in view the rationales as under:

a. In the current deregulated regime the fierce competition continues in the Banks

for mobilization of new liabilities (deposits) will tend to push up the prices of

deposits (Time / Term deposits)

b. The shortfall of the government revenue collection compounded with the present

recession in the economy is likely to have negative impact on the economic

recovery / the expected expansion of the economy may be slowed down.

c. The governments (GoB) as evident from the track have become increasingly

dependent on banking systems / domestic savings towards meeting the revenue

expenditures / local components of the ADP.

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d. The disbursement of Infra structural Project Loans (Foreign) / Foreign Aid / Loan

and FDI are on decline and the size of ADP are being slashed / limited.

e. The inflationary pressures on the economy are building up and the replacement

costs of goods and services are on constant rise because of depreciation of the Taka.

The growth of exports has slumped because of the poor infrastructural support as

required to gear up the export productions / shipments.

f. The bankers have been experiencing increased difficulties to mobilize new

deposits and the costs of liabilities (ACF) are on constant increase. And, nevertheless

because of the short supply of financially / economically viable businesses / good

clientele : loan prices cannot and perhaps be renegotiated in the upper direction.

Improvement of the HRD

The HR department of the bank is one of the weakest areas and many of the human

resource development policies and practices are not being followed or implemented.

Though, there has been performance appraisal for the employees but still it is lying idle

and no action has been taken. The management should immediately apply the

performance appraisal system and take appropriate actions on the basis of that appraisal.

All sorts of promotions or other benefits should be based on the report of the performance

appraisal. The traditional method of considering years of work experience as the criteria

should be changed and rather the new method of looking at the output, productivity and

quality of the work should be considered. The HR wing has to be more active rather than

maintaining administrative duties. Other than the head of this division, the staffs in this

wing are incompetent for this position. More qualified and skilled HR professional

should be recruited for this department for the future growth of the HR in BAL. The HR

department should be gradually extended at the branch level as the bank is expanding so

that each branch has a HR official.

Formulation of Recruitment / remuneration policy:

a. Better recruitment

BAL must pursue a strong and an effective recruitment system so that the right people are

recruited at the right job. As already mentioned earlier, Management Trainees there are

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major flaws in the recruitment of the staffs from other banks during the emergent stage.

But now as the bank is expanding, it must focus on attracting, getting and retaining

qualified personnel for filling up its positions. It is worth spending more on attracting

qualified human resources rather than getting the wrong people in the wrong positions.

b. Stop Reference Appointment

BAL management and particularly the Board of Directors must change the system of

appointing people by giving their reference. It has been deeply observed that most of the

reference appointees are not up to the standard and have a poor performance. For the sake

of the bank’s future and further strengthening the quality of work force, this tendency to

appoint people on reference must be stopped. It may not be absolutely possible to

eliminate the reference appointment system as it is a local private company. But still the

tendency can be reduced to a certain extent if bold steps are undertaken by the

management and the Board of Directors.

c. Disguised Employment

Currently this has become a major problem at BAL. The situation of too many heads but

few hands must be eliminated for the future of the bank. In order to enhance the

productivity of the work force at BAL, the management must consider the appropriate

amount of work force requires and must assess the productivity of each employee. It must

ensure that the right jobs are being carried out at the right time and none of the employees

are having a free ride. Stern action must be taken against the disguised employee and any

form of overstaffing must be eliminated.

d. Enhancement of remuneration package

A remuneration package does not only include the regular monthly salary – rather it’s a

combination of different benefits provided by the organization. The present compensation

package at BAL - in terms of monthly salary - is quite impressive. But comparing with

the other benefits like car loan, staff house building loan etc. of other banks – Bank Asia

Limited is a bit behind of many other banks. This leads to some dissatisfaction of the

employees and the bank faces difficulty to retain those personnel.

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Many skilled and devoted officers of the bank are depressed with their compensation

package. The bank must redesign its compensation package to attract quality human

resources particularly qualified MBA’s for the bank. Since the foreign banks pay 1.5

times of that of BAL and few other local private banks also have a higher scale than

BAL, it is high time that the management should consider revising the remuneration

package in order to attract quality human resources.

Improvement of quality of service:

Service industry has no point of perfection – rather has a target of continuous

improvement. Like in many other emerging market economies, commercial banks in the

Bangladesh economy are to face an increasing competition for their business in the

coming days. Having a reputation of providing good customer service must not be a point

of satisfaction for the bank. The business would no longer remain easy as they had been

earlier.

Branch Expansion:

Both the first generation and second generation banks already have a vast network within

the country. At the same time, the third generation banks also are not sitting idle to spread

the network. Therefore, for expanding the network geographically, the bank should open

up new branches in strategically important places. We would suggest that the bank can

open branches in Mirpur, Malibag, Kakrail, New Elephant Road, New Eskaton of Dhaka

City,. Some of its rivals already entered in some of these regions and some are on the

way, so the bank should expand in these regions without making any delay. Before

entering into a new market the bank should do extensive market survey.

Put emphasis on corporate clients:

BAL should provide sophisticated services to big corporate clients and should introduce

many innovative and enterprising schemes to support the corporate clients. Now the bank

should increase its investments in sectors like real state, consumer loans, health care etc.

in order to make adjustment in its credit portfolio. BAL can also pursue promotional

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campaigns with its customers particularly the corporate clients in order to build up a

stronger rapport with them.

Do not overlook the small ones:

A little contrasting with the previous suggestion, Bank Asia Limited – many locations has

an image of a bank that only deals with the large customers. But there is a huge scope for

the bank to explore the retail banking if it can deploy quality personnel to design and

market such products.

Reduction of Expenditure:

Each branch of Bank Asia Limited, with gorgeous interior and exterior looks, starts with

a huge burden of setup cost. This ultimately results in regular heavy overhead cost that

the branch has to bear. The bank may consider ways to minimize such costs to prove its

efficiency in controlling such costs.

Promotion:

Promotion may take different forms. When many banks are at the media with their

marketing plan of mass marketing in electronic and printed media – Bank Asia Limited

has been neglecting such promotional efforts. BAL should pursue an aggressive

advertising campaign in order to build up a strong image and reputation among the

potential customers. It must give up the idea of maintaining a low profile in the market.

Rather, it should come in to the limelight through an aggressive marketing campaign such

as advertisement in the newspapers and magazines, billboards and neon signs, publicity

messages and promotional campaigns. BAL can also pursue promotional campaigns with

its customers particularly the corporate clients in order to build up a stronger rapport with

them. Television advertisement is also a major method for attracting the potential

customers. As it is a new bank, a strategy of exposing the bank to the public must be

taken so that the general people are aware about the emergence and the growth of the

bank.

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Delegation of authority.

As a part of introducing participative management system in the organization, there

should be gradual delegation of authority in order to develop future leaders with in the

organization. Authority should be delegated gradually to a certain extent at the branch

level for speedy disposal of financial matters and providing faster services. Moreover, in

a decentralized organization there will be both top down and bottom up communication

and therefore the communication channel with in the company becomes stronger. The top

management also comes to know better ideas from the lower level and many ideas from

there can be implemented for the development of the bank.

More Staff Meetings

All the departments in the Head Office as well as in the branches should have more staff

meetings and inter departmental meetings. This would allow each department to monitor

its on going progress and identify the hindrances or the hurdles while achieving their

targets or carrying out the activities. Through staff meetings at all start of the

management would make a concentrated effort of all the employees to achieve their goals

and which in turn would allow the organization to achieve the targets. Departmental staff

meetings can be held weekly or fortnightly and this would allow in charge of each

department to identify the problem areas and corrective actions can be taken immediately

or can be informed to the higher authorities. The process of pro-active strategies can be

implemented through regular staff meetings instead of pursuing a reactive strategy where

each department waits for the feedback from their higher authorities.

Develop IT sector

a. Trained system operators:

Currently the branches do not have qualified system operators, rather ordinary persons

have been appointed in this position and they learned the job by a trail and error process.

This tendency should be eliminated immediately and next time the management or the

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concerned department should recruit qualified and skilled system operators who have

both hands on experience as well as some academic background.

b. Introduction of advanced banking software

As there are service limitations in the present Stelar software that is quite inadequate in

providing speedy services both to the customer and internal uses of the bank. Therefore,

the concerned authorities should consider upgrading the Stelar system with more

advanced banking software.

5.2 Conclusion

This report is the result of Three months internship program in the Dhanmondi Branch of

Bank Asia Ltd. This period is certainly not enough for understanding the various

functions of the bank in depth fully.

BIBLIOGRAPHY

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Annual Report of Bank Asia Limited, 2004





Bank Asia Limited Website www.bankasia-bd.com .

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http://www.bankasia-bd.com/

internship

Documents

emran kabir emba

longer remain easy

advanced banking software

emerging market economies

ad confirming bank

joint stock company

job rotation program

bank asia limited