internship at exim bank ltd

Modes of Investment in EXIM Bank Ltd. – Procedure, problem and recommendation

Introduction of the report

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1.1 Origin of the report:

This report is originated having three months long internship program

originated after completing the BBA program from Business Administration under

Leading University.

During the internship a student has to undertake an arena of investigation of any

organization for in depth study. This report is the outcome of the assigned internship,

suggested by the EXIM Bank Limited, Fenchugonj Branch, sylhet.

My internship at EXIM Bank Limited started on February 01st, 2011 and it ended

on April 28th, 2011. During these 3 months I was assigned at the Fenchugonj Branch. I

had a lot of fun, but more importantly I finally understood working by actually being

there. This practical orientation is necessary for the development and preparation of a

person in the job world.

1.2 Background:

Bangladesh is one of the developing countries in the world. In an economy

like this, banking sector can play a vital role to improve the overall social – economic

condition of the country. The banks by playing the role of an intermediary can mobilize

the excess fund of surplus sectors to provide necessary finance, to those sectors, which

are needed to promote for the sound development of the country.

The word ‘Bank’ refers to the financial institution that deals with money

transaction. Banks collect deposits at the lowest possible cost and provide investment at

highest cost. The spread between the two is the profit for the bank. Commercial banks are

primary contributors to the national development of the country.

This report is an attempt to reflect the position of EXIM bank Ltd in the

banking industry of the country in respect of her activities in the arena of Investment

Policy.

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1.3 Objective of the report:

In this report, I tried to furnish all sorts of practical dealings that are conducted

in case of handling various types of activities in investment department, the theoretical

aspects, that is what should be the procedures and requirements maintained from first to

last, and actual practices as well as the ultimate gain for the bank in conducting financial

activities are mainly discussed. So the purpose and objective of this report can be

summarized as follows:

Focus on the Brief description of investment policy.

To know deeply about investment procedure.

To examine bank’s performance in investment activities.

To know how they minimize investment risks.

To focus on some other activities of investment policy.

To specify some findings on given topic

To reveal some recommendation for better performance in investment policy.

1.4 Scope of the report:

Banking sector is a large and difficult area. A bank has different products,

different services and different customers. However, the scope of present study was

limited in a specific area of an organization EXIM Bank Limited, Fenchugonj Branch,

sylhet. This study covers only various investment policies of EXIM Bank Limited,

Fenchugonj Branch, and sylhet.

1.5 Rationale of the study:

Commercial banks in Bangladesh economy are to face an increasing

competition for their business in coming days, like any other emerging market

economies. This report is an effort to reflect a clear idea about the strategies, activities,

and performance of EXIM Bank Ltd. The Investment Policy is the vital part for financial

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institution. It is linked with all other department. So it is very important to have an

effective and sound management System in banking business. As a BBA student having

major in Finance, Financial institutions are the most appropriate field to gather the

experience and among the financial institutions, Bank is the most prominent place.

1.6 Methodology of the report:

The methodology of this report is very different from conventional reports. I have

emphasized on the practical observation though this report has to need some primary and

secondary data. Nevertheless, eventually almost the entire report consists of my practical

observation. While preparing the report, I have taken information from the following

sources.

Primary Sources:

Observation of investment process, policy and activities.

Overflowing Conversation with the in-charge of general banking department of

EXIM Bank Limited, Fenchugonj Branch, sylhet.

Working with my own experience while internship program.

Secondary Sources:

Daily diary (containing my activities of practical orientation in EXIM Bank Ltd)

maintained by me,

Various publications on Bank,

Website of Bangladesh Bank,

Website of EXIM Bank Limited,

Annual Report of the bank,

Personal investigation with bankers,

Different circulars issued by Head Office and Bangladesh Bank

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1.7 Potential problems of this report:

Some of the limitations faced in preparing this report are:

It was very difficult to collect the information from various personnel for their job

constraint.

There were some difficulties in understanding some activities due to not being

relevant to the theoretical knowledge.

Due to confidentiality the Bank’s policy restricts disclosing some data.

The study of such a short course of time is not free from limitation. So time

limitation is the main point of limitation.

The data relevant for the analysis report writing sometimes could not be collected

due to excessive year-ending workload at the branch.

It is too much difficult to comment and suggest based on only the annual report

and information collected from written documents.

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Organizational overview of

the EXIM Bank Ltd.

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Export Import Bank of Bangladesh Limited 2.1 Background:

Export Import Bank of Bangladesh Limited was established in 1999 under the leadership

of Late Mr. Shahjahan Kabir, founder chairman who had a long dream of floating a

commercial bank, which would contribute to the socio-economic development of our

country. He had a long experience as a good banker. A group of highly qualified and

successful entrepreneurs joined their hands with the founder chairman to materialize his

dream. In deed, all of them proved themselves in their respective business as most

successful star with their endeavor, intelligence, hard working and talent

entrepreneurship. Among them, Mr. Nazrul Islam Mazumder became the honorable

chairman after the demise of the honorable founder chairman.

The bank was incorporated in Bangladesh on 2nd June 1999 as Banking Company under

the Companies Act. 1994. But it starts functioning from 3rd August 1999 with Mr.

Alamgir Kabir, FCA as the advisor and Mr. Mohammad Lakiotullah as the Managing

Director. Both of them have long experience in the financial sector of our country. By

their pragmatic decision and management directives in the operational activities, this

bank has earned a secured and distinctive position in the banking industry in terms of

performance, growth, and excellent management. The authorized capital and paid up

capital of the bank are Tk. 10000.00 million and Tk 6832.27 million respectively. The

Bank carries out its banking activities through 59 branches with around 1686 employees

operating as per Islamic Shariah in the country. It also went for public issue of shares in

the year 2004 and its shares are listed with Dhaka Stock Exchange & Chittagong Stock

Exchange in Bangladesh.

The bank has migrated all of its conventional banking operation into Shariah based Islami

banking since 1st July 2004. The bank has developed the world renowned Core Banking

Software namely TEMENOS-T24, for online banking.

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EXIM Bank Limited is the first private sector bank in Bangladesh, which established

exchange houses outside the country, for ensuring delivery of smooth and most reliable

remittance services to Non Residence Bangladeshis (NRBs) living and working in

abroad. The first exchange house of EXIM Bank Limited has started operation of its

wholly owned subsidiary “EXIM Exchange Company (UK) Ltd.” on 30th June 2009 in

London, United Kingdom, & the second one is “EXIM Exchange Company (Canada)

Ltd.” on 23rd January 2010 in Canada. These exchange houses are compliant official

money transfer channel to serve NRBs, outside the country.

The bank undertakes all types of banking transaction to support the trade and commerce

also available for the entrepreneurs to set up new venture of the country. The bank is

being managed by a group of highly educated and professional team with diversified

experience in finance and banking. The management of the bank constantly focuses on

understanding and anticipating customer needs. The bank has already ranked as one of

the quality service providers & is known for its reputation.

The operation of the bank is 10:00 A.M to 6:00 P.M from Sunday to Thursday with

transaction hour from 10:00 A.M to 4:00 P.M. the bank remain closed at Friday and

Saturday including government holidays.

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2.2 Key Statistics

Name of the Company

Date of Incorporation

Industry

Type

Headquarters

Company Size

Common Job Titles

Median Age

Median Tenure

Branches

Registered Office

PABX

Fax

SWIFT Code

Web Page

Auditors

:

:

:

:

:

:

:

:

:

:

:

:

:

:

:

:

Export Import Bank of Bangladesh Limited

June 02, 1999

Banking

Privately Held

Dhaka, Bangladesh

Around 1,700 employees

Officer (Around 71%)

28 years

3.5 years

59

Symphony, Plot No. SE (F): 9, Road No. 142

Dhaka-1212, Bangladesh

880-2-988 9363

880-2-988 9358

EXBKBDDH

www.eximbankbd.com

Hoda Vasi Chowdhury & co., Chartered Accountants

2.3 Vision:

The motto is “Together Towards Tomorrow”. Export Import Bank of

Bangladesh Limited believes in togetherness with its customers, in its march on the road

to growth and progress with service. To achieve the desired goal, there will be pursuit of

excellence at all stages with a climate of continuous improvement because, in EXIM

Bank, they believe, the line of excellence is never ending. Bank’s strategic plans and

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http://www.linkedin.com/search?search=&company=Export+Import+Bank+of+Bangladesh+Limited&title=Officer&currentCompany=co&trk=copro_titles

http://www.linkedin.com/companyDir?searchByInd=&ind=41&degDist=net&trk=copro_industry


networking will strengthen its completive edge over others in rapidly changing

competitive environment. Its personalized quality services to the customers with the trend

of constant improvement will be the cornerstone to achieve our operational success.

2.4 Mission:

The bank has chalked out the following corporate objectives in order to ensure

smooth achievement of its goals.

To be the most caring and customer friendly and service-oriented bank.

To create a technology based most efficient banking environment

To ensure ethics and transparency at all levels.

To ensure sustainable growth and establish to the honorable stakeholders.

Provide high quality financial services in export and import trade.

Being the trusted repository of customers’ money and their financial adviser.

Making its products superior and rewarding to the customers.

Sound capital base.

Fulfilling social commitments by expanding its charitable

2.5 Core Values:

The Bank providing the most courteous and efficient service for Customers

Promoting well being of the members of the staff.

Ensuring fair return on their investment through generating stable profit.

Socially responsible corporate entity for national policies and objectives.

Upholding ethical values and best practices.

2.6 Achievement:

The bank has migrated all of its conventional banking operation into Shariah

based Islamic banking since July/2004.

It is a first private sector bank to open exchange house in UK,

Implemented of the world renowned Core Banking Software namely

(TEMENOS-T24).

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Member of the SWIFT.

Online Branch Banking.

Listed with Dhaka stock exchange & Chittagong Stock Exchange in Bangladesh.

2.7 Corporate Social Responsibility

EXIM Bank always keeps itself associated with the various activities toward

the benefit of the society as well as the nation. In order to facilitate & smooth execution

of its activities, it has already established a foundation named “EXIM Bank Foundation”.

The bank allocates at least 2% of annual profit for the EXIM Bank foundation to conduct

CSR each year.

EXIM Bank started their CSR activities EXIM Bank Scholarship Programmed with the

theme of- “Promotion of education among all” in the year 2006. The bank has taken

around 1200 meritorious students from all corners of the country to take care their

educational expenses till their completion of educational life. So far Tk. 32.9 Million

(BDT 329, 00,000) has been disbursed as scholarship under this programmed including

Tk. 19.6 Million (BDT 196, 00,000) in 2010.

Under Education Promotion Scheme, interest free loan is provided for poor but

meritorious student to help them bear monthly educational expenses including food,

accommodation etc. The students are required to repay the principal amount in long term

monthly installments after they have joined a confirmed job after accomplishing their

education properly. By 31st December 2010, Tk. 25.7 Million (BDT 257,00,000) was

sanction to take care of around 200 poor but meritorious student from reputed educational

institutions in our country. Not on the above, but also the bank was donate to Prime

Minister’s Relief Fund for bereaved family members of the Army Officers during the

carnage in 2009 at BDR Head Quarter (Pilkhana, Dhaka).

EXIM Bank is always prompt to stands besides the helpless. The bank provides relief in

cash, foods, and equipment of infrastructure development etc. in time of flood,

earthquake, fire, cyclone and so on.

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2.8 Business Areas Of EXIM Bank Ltd:

EXIM Bank Ltd consists of some major functional divisions. Those are as

follows-

1. Corporate Banking Division

- Foreign trade & treasury

- Investment Administration

2. General Banking Division

3. Financial & Admin Division

4. Personal Banking Division

5. IT Division

2.9 Board of Directors:

Chairman

Mr. Md. Nazrul Islam Mazumder.

Directors

Mr. Md. Nazrul Islam Swapan. Mr.Md.Altaf Hossain.

Mr. Md. Fahim Jaman Pathan Mrs. Nasima Akhter.

Mr. Zubayer Kabir. Mr. Ad. Habibullah.

Mr. Md. Abdul Mannan M.P. Mr. Mohammed Sekandar Khan.

Mr. Mohammed Abdullah. Mrs. Nasreen Islam.

Mr. A.K.M Nurul Fazal Bulbul. Alhaj Md. Nurul Ami.

Mrs. Rizwana K. Riza. Mr. Anjan Kumar Saha.

Mr. Abdullah Al-Zahir Shaoan. Bay Leasing $ Investment Ltd.

Managing Director

Mr. Kazi Masihur Rahman.

Company Secretary

Mr. Md. Golam Mahbub.

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2.10 Shariah Council

Chairman

Maulana Mohammed SalahUddin, Khatib, Baitul-Mukarram National Mosque

Members

Maulana Mohammed Sadewl Islam Imam, Mohakhali Dohs Jame Mosjid

Prof.h.m.saidul islam barakaty, director, southeast university.

Mr.A.S.M.Fakhrul ahsan, Ex-Deputy Governor, Bangladesh Bank.

Hafez maulana Mufti Md.Khairullah, Amborshah Madrasha, Tezgaon, Dhaka.

Mr.Md. Nazrul Islam Mazumdar. Mr.Zubayer kabir.Mr.Abdullah Al-Zahir

Shapan.

Mr.Kazi Masihur Rahman. Mr.Md.Nurul Fazal Bulbul. Mr. Md. Abdul Mannan

M.P.

2.11 Organizational Hierarchy:

Managing Director (MD)

Additional Managing Director (AMD)

Deputy Managing Director (DMD)

Senior Executive Vice President (SEVP)

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Executive Vice President (EVP)

Senior Vice President (SVP)

Vice President (VP)

Senior Assistant Vice President (SAVP)

Assistant Vice President (AVP)

Senior Principal Officer (SPO)

Principal Officer (PO)

Executive Officer (EO)

Senior Officer (SO)

Management Trainee Officer (MTO)

Officer

Junior Officer (JO)

Assistant Officer

2.12 Highlights on the Overall Activities

As at 31st December 2010

(Values in Million BDT)

Sl.

No.

Particulars 2008 2009 2010

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01 Authorized Capital 3500.00 10000.00 10000.00

02 Paid up Capital 2677.75 3373.96 6832.27

03 Total Capital 5763.89 7718.89 10928.40

04 Reserve Fund 1532.55 2092.97 3154.76

05 Total Assets 68446.46 86213.37 113070.98

06 Total Liabilities 63457.26 79496.16 100596.13

07 Total Share holders’ Equity 4989.20 6717.21 12474.85

08 Deposits 57586.99 73835.46 94949.40

09 Investment (General) 53637.68 68609.91 93296.65

10 Investment (Shares & Securities) 2894.02 2169.44 6012.86

11 Operating Income 8356.82 10383.62 13646.76

12 Operating Expenditure 5838.43 7201.84 9752.98

13 Profit before Provision & Tax 2518.39 3181.78 5893.79

14 Profit Before Tax 1989.55 2802.12 5308.95

15 Net Profit after Provision & Tax 1096.63 1694.10 3476.01

16 Investment as a % of total Deposit 93.14% 92.92% 98.26%

17 Dividend:

Cash

Bonus

Right Share

26

--

26

--

35

--

35

1R:2

35

--

35

--

18 Cost of Fund 9.52% 9.09% 7.10%

19 Net Asset Value (NAV) Per Share 18.63 19.91 18.26

20 Earning Per Share (EPS) 3.40 2.64 5.35

21 Price Earning (P/E) Ratio 8.43 14.28 11.34

22 Return on Asset (ROA) after Tax 1.83% 2.19% 3.54%

23 Return on Investment (ROI) 2.03% 9.38% 35.01%

24 No. of Employees 1312 1440 1686

25 No. of Branches 42 52 59

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2.13 About Islamic bank:

An Islamic bank is a financial institution that operates with the objective of

implementing and materializing the economic and financial principles of Islam in the

banking arena.

The organization Of Islamic Conference (OIC) defines an Islamic bank as “a

financial institution whose statutes, rules and procedures expressly state its commitment

to the principles of Islamic Shariah and to the banking of the receipt and payment of

interest in any of its operations.”

2.14 Main condition for Islamic mode of transaction:

The transaction should be Riba (Interest) free

The transaction should be Gharar (excessive uncertainly) free

Maysir (Gambling) free.

2.15 Superiority of Islamic banks over conventional banks:

SL.NO Conventional Banking Islamic Banking

01. The functions and operating modes

are based on fully manmade

principles.

The functions and operating modes of

based on the principles of Islamic

Shariah.

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02. The investor is assured of a

predetermined rate of interest.

It promotes risk sharing between

provider of capital and user of funds.

03. It aims at maximizing profit without

any restriction.

It also aims at maximizing profit but

subject to Shariah restriction.

04. Leading money and getting it back

with compounding interest.

Participation in partnership business

is the fundamental function.

05. Borrowing from the money market

is relative easier.

It must be based on a Shariah

approved underlying transaction.

06. A conventional bank has to

guarantee all its deposit.

Guarantee only al-wadiah deposits.

07. These banks give greater emphasis

on credit-worthiness of the clients.

These banks give greater emphasis on

the viability of the projects.

2.16 Objective of EXIM Bank as a shariah based Islamic Bank:

To offer an interest free banking system in the financial market.

To establish a partnership relationship with customer and eliminate the idea of

debtor-creditor of traditional bank.

To invest on profit and loss sharing basis;

To invest to those business sectors that is found legal from the religious point of

view.

To accept deposits on profit and loss sharing basis.

To contribute towards establishment of an Islamic Economic and Social System

in the country.

2.17 Client Commitments of the bank

Founding life-long relationship based on mutual trust and respect.

Response to customer needs with quickness and accuracy.

Sharing their values and beliefs.

Mutual growth.

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First-rated solutions of the banking problems and issues.

Competitive pricing of products and services.

Safety and security of their money in trust with Bank.

2.18 Existing Products & Services of EXIM Bank Limited

(01) Deposit Products

Name Tenure Profit Rate (%)

Al-Wadiah Current A/C (CD) -- --

Mudaraba Savings A/C (MSD) -- 7

Mudaraba Short Term Deposit A/C (MSTD) -- 3

Mudaraba Term Deposit Receipt A/C (MTDR) 01 Month 12

Mudaraba Term Deposit Receipt A/C (MTDR) 03 Months 12





Mudaraba Super Savings Scheme (MSSS) 06 Years Double on Maturity

Mudaraba Multiplus Savings Scheme (MMSS) 10 Years Triple on Maturity

Mudaraba Monthly Income Scheme (MIS) 03 Years 12

Mudaraba Monthly Savings Scheme (MSS) 05-12 Years 10.50

Mudaraba Hajj Scheme 05-20 Years --

(02) Investment Products

There have several types of investment products are offered by EXIM Bank Limited in

our country. These are:

Corporate finance

Commercial finance

Industrial finance

Project finance

Lease finance

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Hire purchase finance &

Real estate finance.

(3) SME Investment Products

There have 4 basic types of SME products are offered by EXIM Bank:

Exim Abalamban.

Exim Uddyog.

Exim Buniyad.

Exim Kishan.

(4) Plastic Card Products

Their have four basic types of plastic cards are offered by EXIM Bank Limited in our

country.

VISA Islamic Card International & Dual Classic

VISA Islamic Card International & Dual Gold

VISA Islamic Card Local Classic

VISA Islamic Card Local Gold

(05) Remittance Services

EXIM Bank Limited provides remittance services through two exchange houses in

abroad. These are: “EXIM Exchange Company (UK) Ltd.” in London, United Kingdom,

& “EXIM Exchange Company (Canada) Ltd.” in Canada. These exchange houses are

compliant official money transfer channel to serve NRBs, outside the country. Not only

have these, but also the bank also provided remittance services through Western Union

Money Transfer, EL DORADO Money Transfer, and Online Banking without charges

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(06) L/C (Export & Import) Products

A letter of credit is an instrument issued by a bank to a customer placing at the letters

disposal such agreed sums in foreign currency as stipulated. It is issued against payment

of amount by the importer or against satisfactory security. EXIM Bank Ltd. issues several

types of L/C like- sight payment credit, deferred payment credit, acceptance credit,

negotiation credit, transferable credit, red close credit revolving credit, stand by credit,

and so on.

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Overall Banking and credit

Management procedure of

Private commercial banks.

3.1 History of Banking

Bangladesh inherited its banking structure from the British regime and had 49

banks and other financial institutions before the Partition of India in 1947. The Dhaka

Bank established in 1806 was the first commercial bank in the Bangladesh region of

British India. Later in 1862, the Bengal Bank Purchased the Dhaka Bank and opened its

first branch in Dhaka in the same year. There were six other branches of Bengal Bank in

operation in the territory of Bangladesh until the Partition of British-India in 1947.

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Following the emergence of Pakistan in 1947, State Bank of Pakistan, the Central Bank

of the country, came into being in July 1948. Pakistanis owned most of these banks and

only three of them namely, National Bank of Pakistan, Habib Bank Ltd. and the

Australasian Bank Ltd, had one branch of each in East Pakistan in 1949.But all of them

had their headquarters in west Pakistan.

In the beginning of 1971, there were 1130 branches of 12 banks in operation in East

Pakistan. The foundation of independent banking system in Bangladesh was laid through

the establishment of the Bangladesh Bank in 1972 by the Presidential Order No. 127of

1972 (which took effect on 16th December, 1971). Through the Order, the eastern branch

of the former State Bank of Pakistan at Dhaka was renamed as the Bangladesh Bank as a

full-fledged office of the central bank of Bangladesh.

3.2 Origin of Bank

Barter System→ Money→ Bank.

At past, people making transactions by barter system. In this system, they transactions

products. If someone has enough rice, but his required fish then he goes to fisherman for

collecting fish. On the other hand, fisherman has required rice & they transfer products

one to another. By using this system, they were continuing their lives. However, at a time

barter system failed due to divisibility. Due to failure this system, people develop money.

This is now the common medium for transactions. For securing money, people establish

bank. By which they are maintaining their transactions.

3.3 Definition of Bank:

The Word bank is come from banke German (Banko) Italy and then Bank

English. A brief definition "A broader definition” A bank is any financial institution that

receives collects transfer pays, exchanges, lend invest and safeguard money for its

customer. To be a bank must authorized by the central bank. Intact bank is the lifeblood

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of modern economy. Generally speaking bank is referred to an organization that deals in

money. The definition of bank is follow as: -

3.3.1 From the bank owner’s perspectives: -

Commercial institution like a bank owner main objective is to earn profit through

monetary exchanges.

Banks provide different types of services to the government and people of the

country.

In order to earn profit through rendering services, bank need to have a lot of good

will may be a bit more than other commercial institutions.

To earn maximize profits; banks need to provide efficient service for which they

require expert workforce.

3.3.2 From the government perspective:-

The government of different countries to provide its economy with a proper

exchange media through banks, which also take upon the duty of maintaining the

system.

The government wants that bank assist in the macroeconomic objective of capital

formation by encouraging people to participate in savings.

The government wants to consist in capital investment and industrialization by

lending out their accumulated capital.

Government tries to stabilize the money market through banks.

3.3.3 From the clients perspective : -

One of the banks main objectives is to accept its client’s deposits.

Providing safekeeping of its client’s monetary possessions and valuables is

another one of banks essential objectives.

Both the clients and government oily on the bank to act as their representative or

trustees of monetary exchange activities.

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By providing interests against their deposits banks help their clients to improve

their living standards.

3.4 Banking operation in Bangladesh:

The development process of country largely depends upon it economic

activities for bringing about socioeconomic changes in a developing country like

Bangladesh Three different sectors like agriculture, commerce and industry provide the

bulk of a country’s wealth.

Banks provide both short-term and long-time credit. The customers come from

all walks of life from small business a multi-national corporation having its business

activities all around the word. The banks have to satisfy the requirement of different

customers belonging to different social groups. The banking business has therefore

become complex and requires specialized skills. I regardless of the numbers of banks and

nature of their functions and activities, a central bank exists to regulate the activities of

other banks .All the commercials private and or nationalized and specialized bank

perform service related activities within the jurisdiction of the central bank. In our

country, Bangladesh the role of the central bank is entitled to be executed by Bangladesh

Bank.

3.5 Current Structure of Banks in Bangladesh:

Bangladesh Bank (BB) has been working as the central bank since the country's

independence. Its prime jobs include issuing of currency, maintaining foreign exchange

reserve and providing transaction facilities of all public monetary matters. BB is also

responsible for planning the government's monetary policy and implementing it thereby.

The BB has a governing body comprising of nine members with the Governor as its

24


chief. Apart from the head office in Dhaka, it has nine more branches, of which two in

Dhaka and one each in Chittagong, Rajshahi, Khulna, Bogra, Sylhet, Rangpur and

Barisal.

Nationalized Commercial Banks (NCBs):

SL. No. Name of Bank01. Sonali Bank02. Rupali Bank03. Janata Bank 04. Bangladesh Krishi Bank

Private Commercial Banks (PCBs):

SL. No. Name of Bank01. Pubali Bank Limited02. Agrani Bank Limited03. AB Bank Limited 04. EXIM Bank Limited 05. The City Bank Limited 06. IFIC Bank Limited07. Islami Bank Bangladesh Limited08. National Bank Limited09. United Commercial Bank Limited 10. Uttara Bank Limited 11. ICB Islami Bank Limited 12. Eastern Bank Limited 13. Al-Arafah Islami Bank Limited 14. Prime Bank Limited 15. South East Bank Limited16. Dhaka Bank Limited 17. National Credit & Commerce Bank Limited 18. Social Investment Bank Limited 19. Dutch-Bangla Bank Limited 20. Mutual Trust Bank Limited 21. Standard Bank Limited22. One Bank Limited 23. Bank Asia Limited24. Mercantile Bank Limited 25. Jamuna Bank Limited 26. BRAC Bank Limited27. Shahjalal Islami Bank Limited 28. The Premier Bank Limited29. The Trust Bank Limited

25

http://en.wikipedia.org/w/index.php?title=Shahjalal_Islami_Bank_Limited&action=edit&redlink=1

http://en.wikipedia.org/w/index.php?title=Jamuna_Bank_Limited&action=edit&redlink=1

http://en.wikipedia.org/wiki/ICB_Islami_Bank


30. First Security Bank Limited31. Bangladesh Commerce Bank Limited32. Al Baraka Bank Bangladesh Limited

Foreign Banks:

SL. No. Name of Bank01. HSBC Ltd.02. Standard Chartered Bank03. City Bank NA04. Habib Bank Ltd.05. National Bank of Pakistan06. State Bank of India07. American Express Bank08. Muslim Commercial Bank Ltd.09. Shamil Islami Bank of Bahrain EC10. Standard Chartered Grindlays Bank11. Credit Agricole Indosuez (The Bank)12. Hanvit Bank Ltd.

Specialized Development Banks:

SL. No. Name of Bank01. Bangladesh Krishi Bank 02. Rajshahi Krishi Unnayan Bank 03. Bangladesh Shilpa Bank 04. Bangladesh Shilpa Rin Sangstha 05. Bangladesh Small Industries and Commerce (BASIC) Bank

Limited

Other Banks:

SL. No. Name of Bank01. Ansar VDP Unnayan Bank 02. Bangladesh Samabai Bank Ltd. (BSBL) 03. Grameen Bank 04. Karmasansthan Bank

3.6 About Credit –

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http://en.wikipedia.org/w/index.php?title=BASIC_Bank_Limited&action=edit&redlink=1


“Credit is a promise of future payment in kind or in money given in exchange

for present money, goods, or services.”

Or “In general credit means the granting of a period of time by a creditor to

a debtor at the expiration of which the latter must pay the debt due.”

3.6.1 Types of credit: -

Funded credit: - Monetary credit provided by the bank is called funded credit e.g.

cash credit, term loan, Personal loan etc. This type of credit is also called direct

credit.

Non-funded credit: - Credit where money is not directed provided e.g. Letter of

credit, Letter of Guarantee etc. They are also called indirect loan facility or

documentary credit.

Another way of loan categorization is continuous loan, Demand loan, fixed loan,

term loan and short-term agricultural and micro credit.

Continuous loan: - Loan account without any specific repayment schedules, in

which transactions can be made within certain limit and have an expiry date for

full Adjustment is called continuous loans. Examples are: - CC, OD etc

1. Overdrafts: -OD is usually a temporary arrangement and is granted to the

customer having current accounts. It represents permission to overdraw a

current up to a sanctioned limit interest is charged only on the amount

actually utilized OD Accounts may be unsecured partly secured or fully

secured.

2. Cash Credit: -Cash credit arrangement is similar to OD except is so far as

OD Can be granted only where a current A/C is in existence cc is depend

as daily balance. Interest is charged the daily balance in the A/C. to the

service holders to buy car, furniture, computer, etc. The customer needs

two guarantors. Mostly this loan has a time period of 2 years to 3 years.

Demand Loan: -Loans that becomes repayable on demanded by the bank. Any

contingent or any other liabilities turned to forced loans (i.e. without any prior

approval as regular loan) will also be treated as demanded loans.

27


Fixed term loan: -The loan, which is repayable within a specific repayment

schedule, is called fixed term loan.

Short term Agriculture and Micro credit: - Any credit in the Agriculture sector

repayable within less then twelve month will also be included herein.

Hire purchase: -HP is a type of instilment credit under which the borrower agrees

to take the goose on live at a stately rental, which is including of the repayment of

well as interest for adjustment of the loan within a specified period.

3.7 Credit Management –

One of the two primary functions of a commercial bank is to extend credit to the

deficit economic unit that comprises borrowers of all types. Which comprises

agricultural, commercial and industrial activities of a nation. Therefore, a bank is

supposed to distributes loan able fund among economic agent-in-deficit in a manner that

it will generate sufficient income for it and at the same time benefit the borrower to

overcome his deficit.

3.8 Credit Management and Bangladesh Bank –

I have already mentioned that all the banks render services as per the instruction

and guidelines of Bangladesh Bank. So I would like to focus a spotlight on Bangladesh

Bank especially on the credit management in brief. Bangladesh Bank was established on

16th December 1971 under the Bangladesh Bank (Temporary) order 1971 (subsequently

substituted by the Presidential Order No. 127 of 1972).

The powers and functions of Bangladesh Bank are governed by the Bangladesh Bank

Order 1972 and Banking Companies Act 1991(Act 14 of 1991).

The functions of the bank may be classified into two categories-

(1) Central banking functions and

(2) General banking functions.

Bangladesh Bank formulates monetary and credit policies for attaining macroeconomic

objectives. The main instruments of selective credit control are as follows:

o Minimum margins for lending against selected commodities

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o Client on the levels of credit

o Charging of minimum rate of interest on advance against specified commodities.

Bangladesh Bank controls volume of credit in a quantitative way as to influence the total

volume of credit in the following way: -

Bank rate: The bank rate is the rate of interest at which Bangladesh Bank

re-discounts the first bills of exchange from commercial banks. Whenever

Bangladesh Bank wants to reduce credit, the bank rate is raised and

whenever the volume of the bank credit is to be expanded the bank rate is

lowered.

Open Market Operation: If Bangladesh Bank buys Government

Securities in the market from commercial banks, there is a transfer of cash

from Bangladesh Bank to commercial banks and this increases the cash

base of the commercial banks enabling them to expand credit and

conversely, When Bangladesh Bank sells Government Securities to the

commercial banks, reverse is happened.

Variable Reserve Requirements: Bangladesh Bank is legally authorized

to raise or lower the minimum reserve that the commercial banks must

maintain against their total deposit. Present minimum requirement is 4%

of total demand and time liabilities. Credit cannot be extended to an

unlimited extent because it would disturb price stability in the country,

Reporting of CIB of Bangladesh Bank: Irrespective of outstanding

amount, the banks have to submit credit information of all of then –

accounts of loans and advances to the CIB of Bangladesh Bank.

3.9 Category/classification of CIB Statements:

Range Period

Over 1 crore Monthly

Over 10.00 lac but Under 1.00 crore Quarterly

Under 10.00 lac but over 1.00 lac Quarterly

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3.9.1 Contents of CIB Statements:

Name and address of the Account Period

Borrower code Bank code

Branch Serial Nature of Advance

Sanction limit outstanding amount

Recovery amount Security code

Sanction code Class code

Expiry date Classification date

Complaint date Grade

Cumulative disbursement

Due for recovery amount during reporting period

Overdue amount = Due for recovery – Recovered amount

Economic purpose code

Cumulative recovery, total recovery

Guarantee amount 50% of collateral asset

Disbursed amount

3.10 Credit Investigation:(The process selection of borrower for the preparation of credit report)

Lending of money to different kinds of borrowers is the most profitable business of the

commercial bank and the major source of income. But the fact is this while going on

lending; a bank should be careful in selecting a borrower and must give paramount

important to it. This may ensure safety of the lending of a bank.

3.10.1 Sources of credit information: Broadly, a banker collects the required

information about a prospective borrower from the following sources:-

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Loan application – It contains information pertaining to the name of the concern,

constitution, place of business, year of establishment, borrower’s experience,

particulars of assets and liabilities, purpose of advance, amount required, period

of time, nature of security offered, sources of repayment etc.

Market reports - Reports can be obtained from his borrower, friends, rivals or

enemies. It is for the lending banker to analyze these reports and form a balanced

opinion about the sincerity, honesty, integrity, capacity and financial position of

the borrower.

Study of account – It will throw light on the aspect of keeping up commitments,

and if the cheques were never bounced that will give an impression. Also

requested to show the other bank’s relative passbook or statement of accounts so

that all accounts can be studied side by side.

Financial statement etc - The borrower should be requested to supply the latest

statement in regard to his assets and liabilities, income tax statement &VAT

payment document will give an idea about the sales.

Other sources - Other sources include press reports regarding purchase and sales

of property, auctions and decrees. Registration, revenue and municipal records

with advantage to verify the properties.

Personal Interview-The banker should be able to know from the interview the

customer’s specific requirements, the prospects of his employing the funds

prudently, his capacity to repay and the suitability of the security offered.

3.11 Credit Monitoring, Follow-Up and Supervision:

The other and equally important responsibility of the lending banker is to

follow up and supervise the use of the credit. The two terms supervision and follow up

are closely related.According to prominent writer of books on banking these are

explained as follows:

1) Supervision gives more emphasis on proper end use. Supervision keeps

track of the end use of fund lent. It includes adequate arrangement by banks for

maintaining close contact with the borrower and his activities in order to remain well

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informed about the position and progress of the purpose financed and offers appropriate

guidance to the borrower where necessary.

2) Follow up includes efforts to ensure that the terms and conditions of the

advances at pre-disbursement, disbursement, post disbursement and recovery stages are

complied with and money lent is repaid as per schedule of repayment. It also includes

efforts to regularize the irregular advances. Recovery of advances largely depends on the

effective follow up. Credit monitoring implies that the checking of the pattern of use of

the disbursed fund to ensure whether it is used for the right purpose or not. The credit

officer checks on the points:

a) The borrower’s behavior of turnover

b) The information regarding the profitability, liquidity, cash flow

situation and trend in sales in maintaining various ratios.

3.12 Risk Asset Management (RAM):

Contingent liabilities such as letters of credit and letter of guarantees must be

treated from a credit approval point of view as having the same credit exposure as funds

based assets. The purpose of RAM is for effective Risk Asset Planning and

administration. RAM helps in the containment of credit losses and improves profitability

of the bank through some steps-

i. Planning:

The bank officer should consider risk inherent in each market; criteria to define

characteristics of an acceptable customer.

The bank will define the terms of acceptances of Risk to target market

Bank will evaluate the client’s needs. Here the bank will also try to know client’s

business and its environment.

ii) Initiation:

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The bank encourages negotiation with prospective clients. While negotiation the

officer should bear in mind both customer situation and the terms of acceptance

for the target market.

Facility application package i.e. credit memo should include full background/

financial information, analysis of historical trend, prospects, anticipated

profitability vis-à-vis whether fund based or non-funds and/ or exchange business.

Any exception must be listed for approval by appropriate authority.

iii) Documentation and Disbursement:

The credit officer is suggested to identify any particular documents required for

each facility. The officer is also required to enlist outside legal assistance where

necessary e.g. when drawing up special term loan agreements etc. The credit officer

should go through the various items of documentation, which are required to certify in

the credit.

iv) Administration:

The branch should continue a close monitoring of the loan account.

The branch should maintain contact with the customer in a regular basis to be

knowledge about the client, his current activity, his business expansion and/or

diversification plans etc.

Security requirements should be update as per the requirements arisen.

3.13 Recent Development:

As all the schedule banks like as NCBs and other commercial banks have been

experiencing a heavy toll for their classified loans and advances and investments,

Bangladesh has taken various strict initiative in this regard which have resulted in the

following recent development-

The central bank is planning stringent regulation for banks next year to further

minimize default loan. Central bank sources said that the volume of classified loans came

33


down to 12 percent, hoping the classified loans to come down below 10 percent in the

next year Bangladesh Bank may increase the capital adequacy ratio for the commercial

banks and reduce the loan limit for individual borrowers to encourage banks to go for

more syndicate loans that has less risk. International best practices require that a loan be

classified as non-performing if its principal and/ or interest is three months or more in

arrears. Bangladesh Bank is allowed to classify non-performing loans based on a time

frame of six months. In order to strengthen credit discipline and bring classification in

line with international standards, this circular makes following adjustments:

A continuous credit demand loan or a loan which will remain overdue for a period

of 90 days or more will be put into “Special Mention Account” and interest accrued on

such loan will be credited to interest suspense. Account instead of crediting the same to

the income account. This will help banks to look at accounts with potential problems in a

focused manner and it will capture early warning signals for accounts showing first signs

of weakness. Loans in the “Special Mention Account” will not be treated, as defaulted

loan for the purpose of section 27 ka (3) of the Banking Companies Act, 1991 and the

status of loan (Special Mention) need not to be reported to the Credit Information Bureau

(CIB) of Bangladesh Bank.

34


Overall Investment Activities

the EXIM Bank Ltd.

35


As export import Bank of Bangladesh Ltd. Is shariah based Islamic bank, so

it uses the term investment instead of credit & loan. The term investment is uses by

other commercial bank credit &loan. Although it is shariah based Islamic bank but

EXIM bank always following the rules and regulations of Bangladesh Bank for

sanctioning the loan and credit as term investment.

4.1 Introduction: -

Export Import Bank of Bangladesh Limited is a new generation Bank. It is

committed to provide high quality financial services/products to contribute to the growth

of GDP of the country through stimulating trade and commerce, accelerating the pace of

industrialization, boosting up export, creating employment opportunity for the educated

youth, poverty alleviation, raising standard of living of limited income group and over all

sustainable socio-economic development of the country.

To provide a board guide line for the investment operation towards achieving the

objectives of the bank, for efficient and profitable deployment of its mobilized resources

and to administer the investment portfolio in the most efficient way, a clearly defined,

well planned comprehensive and appropriate policy and control guidelines of the bank is

a prerequisite.

4.2 About Investment: -

Investment means to layout of money or fund provided for a legal purpose for a

certain period with a risk of profit or loss. In Islamic banking investment means

utilization of fund or deployment of fund for a special legal purpose on profit/loss sharing

basis for a certain period. Islamic banking as per shariah deals with goods and services,

not money. Shariah law prohibited speculative trading that involves risk and uncertainty.

Shariah also forbade investing in haram business such as gambling, alcohol etc.

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4.2.1 Functions of the Investment Department: Before a customer enjoys

investments facilities it is important that the applicant should qualify for five Cs. The five

Cs are:

• Character – Intention to pay back the loan

• Capacity – Borrower’s competence in terms of utilizing the fund profitably and generate

income

• Capital –Financial strength to cover the risk

• Conditions – General business condition between two parties

• Collateral – Implies additional securities

4.2.2 Investment Sector: The guidelines contained general principles that are

designed for implementation by the bank. The bank shall provide suitable investment

services and products for the following sector-

Steel and engineering Food and allied

Agriculture Textile and garments

Service industries Housing and real estate

Bricks fields Cottage industry

Construction Company Trading (retail/whole sale)

Assembling industry Pharmaceuticals and chemicals

Electronics and electrical commodities Construction Company

Others

4.3 Investment categories-

Investment have primarily been divided into two major groups-

4.3.1 Izara bill baia (fixed term investment): These are investments made by the

bank with fixed repayment schedules. The term investments are defined as follows:

37


Short term : up to 12 months

Medium term : more than 12 and up to 36 months

Long term : more than 36 months

a) Agriculture:

Investment facilities to the agricultural sector falls under this category. It is subdivided

into two major heads:

Investments to primary producers: Financing investment facilities allowed to

production units engaged in farming (EXIM kishan), fishing, forestry or livestock.

Investment to dealers/distributors: It refers to the fincing allowed to input

dealers and (or) distributors in the agricultural sectors. As such, it may fall under

the head “Izara Bill baia/lzara bill baia (hp)/lzara (lf)”.

b) lzara bill baia for large & medium scale industry: This investments accommodate

the medium and long term financing for capital structure formation of new industries who

are engaged in manufacturing goods and services

c) Izara bill bhaia to small &cottage industries: These investment allowed to small

&cottage manufacturing industries such as land, building, machinery and equipment

(excluding taxes and duties) does not exceed 30million taka and investment in machinery

and equipment (excluding takes and duties) dose not exceed 10 million taka. No short

term or continuing investment is to be included in this category.

d. Working capital: investment allowed to the manufacturing units to meet their

working capital requirements, irrespective of their size-big, medium or small.

4.3.2 Bai-muazzal (continuing investment): These are investment having no

fixed repayment schedule, but have an expiry date at which it is renewable on satisfactory

performance. This investment also called Cash Credit (BAIM/HYPO). Another are –

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a. Investment on export: Investment facilities allowed to facilities export of all

times against letter of credit and confirmed export orders fall under this category.

It is accommodated under the heads-“musharakr pre-shipment (ECC), musharakr

pre-shipment (PC), foreign documentary bills purchased (FDBP), local

documentary bill purchased (LDBP) etc.

b. Commercial lending: Short term and continuing investment allowed for

commercial purposes other than exports. it includes import financing for internal

trade,service establishment etc. this category are allowed-“murabaha post

import(MPI),murabah import bills(MIB),bai-muazzal,izara bill baia,etc.

c. Others: Any investment that does not fall in any above category is considered

“others”.it include-“transport equipments, construction works including

housing(commercial/residencial),work order financing,personal investment,etc.

4.4 Investment facilities

Depending on the various nature of financing, all the lending activities brought

under the following major heads-

Izara bill baia (general): short term, medium term, long-term investment

allowed individual/firm/industries for a specific purpose but for a definite period

and generally repayable by installments.

Izara bill baia (HB): investment allowed to individual/enterprises for

construction of house (commercial). The amount is repayable by monthly

installment with a specific period.

Izara bill baia (staff HB): investment allowed to the banks own employees for

purchase/construction of house shall be know as investment (staff HB).

Bai-muazzal: investment allowed to individual/firm for trading as well as

wholesale purpose or to industries to meet up the working capital requirements

against hypothecation of goods as primary security. it is allowed under the

categories-

“commercial lending” when the customer is other than a industry

“working capital” when the customer is an industry

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Murabaha: Financial accommodation to individual, firm, wholesale or to

industries as working capital against pledge of goods as primary security. it is also

a continuous investment.

Musharaka (partnership) : The bank and customer contribute capital jointly for

marginal expertise and other essential service at agreed proportion.profit will also

be distribute as per contract.

Izara bill baia (HP): izara bill baia(HP) is a type of installment investment under

which the purchaser agrees to take the goods on hire at a stated rental, which is

inclusive of the repayment of principal as well as profit for adjustment of the

investment within a specific period.

Izara (LF): a client is given the opportunity to have an exclusive right to use an

asset usually for an agreed period of time against payment of rent.it is term

financing repayable by installment.

Household durable scheme (HDS): The investment are allowed on soft terms

against personal guarantee and deposit of specified of equity by the customers.

The investment is repayable by month installment within a fixed period.

Bai-muazzal(GENERAL/FO): Investment allowed to individual/firms against

financial obligation ( i.e. lien on MTDR/PSP/BSP/Insurance policy/Share etc.)

This may not be a continuous investment.

Bai muazzal (wo): investment allowed against assignment of work order for

execution of contractual work. This investment is generally allowed for a definite

period and specific purpose .i.e it is not a continuous investment.

Bai-muazzal(export): investment allowed for purchasing foreign currency for

payment against L/Cs (back to back)where the export do not materialize before

the date of import payment .this is also an investment for temporary period

Trust receipt (TR): investment allowed for retirement of shipping and release of

imported through L/C.the goods are handed over to the importer. This also a

temporary investment.

Foreign documentary bill payment (FDBP): payment to a customer through

negotiation of a foreign documentary bill payment for temporary investment.

40


Local export bill payment (LDBP): payment made against documents

representing sell of goods to local export oriented industries. This temporary

liability is adjustable from proceeds of the bill.

4.5 The Process of giving investment-

4.5.1 Investment Account Opening and Activation:

Using the “Investment Advance Module” opens a new “Investment Account”

for a specific SME Investment application and links the “Customer ID No”. Before fund

Disbursement checks whether the voucher for fee received from the respective unit office

and payment voucher from client’s link account for Investment processing fee,

documentation fee along with VAT and data verification charges against the Investment

are received with the Investment application. The Investment applicants also pay

Insurance Premium along with other fees.

Client ID is created and details customer information is filled in client

information module. Repeat applicants have the same client ID but a new Loan Account

number. After the client ID creation, a list of clients is created where the following

information are entered:

• Client ID

• Name of the business

• Accounts information (Branch, A/C No.)

• Approved Loan amount

• Unit Office & CRO information

• Disbursement date (As per the Loan application)

The senior officers check this file and after loan account activation, disbursement is

made to clients’ link account, which is mentioned in loan application.

4.5.2 Investment Sanction Activities:

The respective unit office sanctions Investment to the clients if it is

between 2 & 5 lacs and then sends the sanction letter including all necessary charge

documents to the asset operation division for disbursement. If the amount is higher than 5

lacs then the respective unit office sends the proposal to SME head office for sanction.

41


Bank shall not ordinarily go for any investment facilities for long-term basis.

Short term : up to 12 months

Medium term : more than 12 and up to 36 months

Long term : more than 36 months

Select potential enterprise: In this step the officer conduct a survey and identify

potential enterprise. Then they communicate with entrepreneurs and discuss the

loan program.

Collect confidential information: The sources of information are suppliers

regarding the client’s payment, customers regarding the delivery of goods of

services according to order, various banks where the client has account which

shows the banks transactions nature of the client.

Fill up CIB form: CIB form gives to the client for fill up and sign in it. In some

case if the client is illiterate then the CRO fill the form on behalf of the client.

Then send to the SME, head office.

Sending CIB to Bangladesh Bank: The SME, head office collects all

information and sends the CIB form to Bangladesh Bank for clearance.

Bangladesh Bank return this CIB form within 10-12 days with reference no.

CIB report from Bangladesh Bank: In the CIB report Bangladesh Bank uses

any of the following reference no:

1. NIL: if the client has no loan facility in any bank or any financial

institution then BB (Bangladesh Bank) use ‘NIL’ in the report

2. UC (Unclassified): if the client has any loan facility in any bank or

financial institution and if the installment due 0 to 5.99 then BB use UC in

the report

3. SS (Substandard): if the client has any loan facility in any bank or

financial institution and if the installment due 6 to 11.99 then BB use SS

in the report.

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4. DF (Doubtful): if the client has any loan facility in any bank or financial

institution and if the installment due 12 to 17.99 then BB use DF in the

report

5. BL (Bad lose): if the client has any loan facility in any bank or financial

institution and if the installments due for more than 18 or above months

then BB use BL in the report.

This report indicates that the client is defaulter and the bank should not provide loan the

client.

4.5.3 CIB Obtaining Process:

Credit Information Bureau (CIB) of Bangladesh bank has a central

database for all the lenders of Bangladesh. It contains the total credit history of a client

and act as the most dependable source to analyze the credit worthiness of a prospective

client.

To obtain a CIB report, AOD fills up the following Bangladesh bank

prescribed forms for each loan application-

Inquiry Form: CIB – 1A: For each individual/ institution

Inquiry Form: CIB – 2A: Owner information if borrower is institution

Inquiry Form: CIB – 3A: Group/ related business information of borrower

CIB Undertaking form “KA”: For each individual/proprietor/director/partner.

After receiving the reports from BB, prepares a summary of the report

and put that as reference in the loan file along with the photocopy of the CIB inquiry

forms, undertaking and copy of the original CIB report.

4.5.4 Investment Risk Management:

Investment proposal should summaries the results of the risk

assessment and include, as a minimum, the following details:

- Amount and type of investment(s) proposed.

- Purpose of investments.

- Investments Structure

- Security Arrangements

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In addition, the following risk areas should be addressed: -

Borrower Analysis: Any issues regarding lack of management depth.

Complicated ownership structure or inter group transaction should be addressed

and risk mitigated.

Industry Analysis: Any issues regarding the borrower’s position in the industry,

competitive forces and the strengths and weaknesses of the borrower relative to its

competition should be identified.

Historical Financial Analysis: An analysis of a minimum of 3 years historical

financial statement should address the quality and sustainability of earnings, cash

flow and the strength of the borrower’s balance sheet.

Project Financial Performance: where term facilities (tenor>1 year) are being

proposed indicating an analysis of the sufficiency of cash flow to service debt

repayments. It may not be granted if cash flow is insufficient.

Accounts Conduct: For existing borrowers, the historic performance in meeting

repayment obligations (Trade payments, cheques profit and principal payments

etc.) should be assessed.

Investment structure: The amount and tenors of financing proposed should be

justified based on the projected repayment ability and investment purpose.

Security: A current valuation of collateral should be obtained and the quality and

priority or security being proposed and insurance coverage should assess.

Bank Guarantee: Bank guarantee is nothing but giving a guarantee

(commitment) to a certain organization by a bank on behalf of its client stating

that if the client of the bank fails to perform certain contractual obligation, the

bank will settle the liability of the client to that organization (beneficiary).

44


4.6 Approval Authority:

The responsibilities for investment policy, procedure, approval & review shall vest

amongst the following groups-

Board of directors

Executive committee of the board

Managing director

Head of investment, head office

Head office investment committee

Branch marketing and investment committee

This policy is adopted with the view to minimize the risk by screening the proposal at the

approval stage. The following guidelines are to be applied in the approval/sanctioning

investment –

Must be delegated in writing from the MD and Board and records of all

delegation to be retained in IRM

Before sanctioning any facility must be ensured that the borrowers CIB report is

updated and clean

Approval evidence made in writing, or by electronic signature& must be kept in

the investment file

Any proposal that does not comply with lending guidelines, regardless of amount,

should be referred to head office for approval.

Delegated approval authority should review annually by MD/CEO/Board.

45


4.7 Security:

All assets must be covered under proper insurance risk with enlisted insurance

companies. Insurance coverage outside enlisted companies is discouraged. it may be two

types-

Primary: Hypothecation/mortgage on fixed and floating assets of the

business.

Collateral:

- For small entrepreneur: if the project is situated own land, mortgage

of the land along with guarantee of (with net worth statement) 02

reputed local persons (acceptable to the bank). If project is situated

on rental or leased property, security may be asked for on the basis

of nature/status of the investment proposal.

- For medium and large entrepreneur: satisfactory security should be

provided to cover the investment.

The security that may be acceptable to the Bank

- Wage earners bond

- ‘A’ category share

- Easily saleable & price stability

- L/C & guarantee

- Inventory

- Other values as considered deem it.

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4.8 Documentation -

All approval procedures and required documentation shall be completed and all

securities shall be in place, prior to the disbursement of the facilities. General

documentation, as required for different kinds of investment is enumerated below-

Demand promissory note (the borrower promises to pay the loan as and when

demand by bank to repay the loan)

Letter of partnership (in case of partnership concerns) or resolution of the board

of directors (in case of limited companies)

Letter of arrangement

Letter of continuity

Letter of lien (in case of investment against MTDR)

Letter of pledge (in case of pledge of goods)

Letter of hypothecation (in case of hypothecation of goods)

Trust receipts (for TR facility)

Legal documents for mortgage property (as drafted by legal adviser)

Copy of sanction letter mentioning details of terms &condition duly acknowledge

by the borrower

Letter of guarantee of all directors (in case of limited companies)

Stock Report – This report is report is used for OD and CC regarding the quality

and quantity of goods hypothecated is furnished.

Balance Confirmation

Letter of disbursement.

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4.9 Processing of investment proposal -

Investment proposal shall be prepared in the approved format of the bank

enclosing/furnishing documents/papers/information-

Pre-sanction inspection report containing KYC

Project profile of business

Copy of trade license dully attested

Copy of Tin certificate

Certified copy of memorandum and articles of association, incorporation,

commencement of business, resolution of board of directors, partnership deed

(where applicable)

Personal net worth statement of the owner/director/partner.

Valuation certificate with photograph of collateral security duly authenticated by

the branch manager

Three (03) years balance sheet, profit and loss A/C

CIB enquiry from duly filled in

Credit report from other bank

Stock report duly verified

Financial analysis to be prepared by the branch manager based on the financial

performance and show trend in sales/profitability, liquidity, leverage etc.

Justification/consideration for the facility.

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4.10 Pre Disbursement Activities -

-Money receipt (Risk fund)

-Sanction letter

-Demand promising note (With stamp of Tk 20/=

-Letter of arrangement (With stamp of Tk 150/=)

-General investment agreement (With stamp of Tk 150/=)

-Letter of undertaken (With stamp of Tk 150/=)

-Letter of stocks and goods (With stamp of Tk 150/=)

-Letter of hypothecation book debt and receivable (With stamp of Tk 150/=)

-Letter of disbursement

-Photocopy of trade license (attested by Manager)

-Insurance (Original copy)

-Blank cheque with signature (one cheque for full amount and others same as no

of installment on Favor of EXIM Bank, no date, no amount)

-Two guarantors (one must be Spouse/parents)

-If the investment provide for purchase of fixed assets or machineries and if the

investment amount is over Tk 50,000/= then the stamp of a certain amount is

require.

4.11 Disbursement:

Disbursement fund starts after documentation is completed and in line with the

terms and condition of investment as well as the stage of the progress mode.

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4.12 Account treatment of various investments:

4.12.1 initiation stage

a) Investment A/C of Mr.x …………………………………. Dr.

a) Current A/C No of Mr.x …………………………………. Cr.

4.12.2 Adjustment stage

a) Cash/ Current A/C No of Mr.x ………………………………Dr.

b) Investment A/C of Mr.x ……………………………………...Cr.

(Entire amount of net income including the principal shall be credited to and actual

profit/loss shall be reflected therein)

4.12.3 Appropriation of profit

a) Investment A/C of Mr.x …………………………………. Dr.

b) Income A/C of investment…………………………………Cr.

(Being bank’s share of profit)

c) Current A/C No of Mr.x …………………………………. Cr.

(Being party’s share of profit)

4.12.4 Appropriation of loss in 1 st deal

a) Investment (2nd deal) A/C of Mr.x …………………………………Dr.

(Being the amount of loss transferred from investment A/C No. Of the party)

b) Investment (1st deal) A/C of Mr.x …………………………………. Cr.

(Being the amount of loss transferred to new investment A/C No. Of the party)

4.12.5 Appropriation of loss in 2 nd deal

a) Income A/C of investment…………………………………Dr.

b) Investment A/C of Mr.x ……………………………………Cr.

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4.13 INVESTMENT RISK GRADING -

The Risk Grade assigned to a borrower and its facilities should be

immediately changed. Borrower Risk Grades should be clearly stated on investment

proposal.

Grade-1 Superior low risk = Fully cash covered, Govt./Int.guarantee

Grade-2 Good satisfactory risk = Strong Repayment Capacity

Grade-3 Acceptable faire risk = Consistent Earnings, Cash flow and Good Track

Record.

Grade-4 Marginal-watch list = Greater Attention Required –Above Average Risk.

Grade-5 Special Mention = Potential Weakness- Close attention required.

Grade-6 substandard = Weak financial condition

Grade-7 doubtful and bad (non-performing) = Repayment Unlikely

Grade-8 Bad & Loss = no progress in obtaining repayment/on the verge of wind-

up.

4.14 Investment monitoring management:

Oversight of the bank’s asset quality

Directly manage all substandard, doubtful &bad loss accounts to maximize

recovering and ensure that appropriate and timely investment loss provisions have

been made.

To ensure that all security documentation complies with the terms of approval and

is enforceable

To control investment disbursement only after all terms and conditions of

approval have been met.

To monitor borrower compliance with convenient and agreed terms and

conditions, and general monitoring of account conduct/performance.

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4.15 Non-performing investment:

An investment is said to be Non-performing when regular repayment is not

made as per schedule of repayment, improper documentation leads to non-repayment and

when value of security falls down/security become obsolete or security available does not

patch the investment outstanding.

4.16 Procedure for recovery of Non-performing investment:

Contracting the investment client in writing and meeting personally- In case

repayment as per schedule does not come manager shall personally enquire of non-

repayment. If necessary he will utilize the influence of the local elites to insist the

investment client.

Sending Resume of investment to head Office-the manager will send the resume of the

client to the head office including investment, security, irregularities occurred for taking

suggesting of future action.

Issuance of Registered Notice- If persuasion does not bring any fruitful result he will

issue a final registered demand notice for repay within 15 days time from the date of

issue.

Legal Notice to be issued- If the investment client does not come forward to repay

within a reasonable period, legal notice is to be served through panel lawyer of the bank

with copy endorsed to head office. The reaction of legal notice is also send to the head

office.

Suit to be filled- If filling of suit is allowed by head office the same should be filled

against the debtor/client concerned and the guarantor if any under civil procedure code 9

for specific performance to be deemed as breach of contract.In case the investment is not

by collateral security suit is to be filed with attachment of asset before judgement.on the

other hand if the investment is secured by mortgage property title suit to be filed. The

copy of plinth as well as copy of written statement submitted to head office for record.

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4.18 Write off –

When all the avenues of recovery of a debt stands exhausted, or had to be abandoned

for genuine reasons, the question of writing off a debt arises. Branches to approach head

office for such writing off, reasonably establishing no other avenue are left to recover the

dues.

4.19 Rate of Profit for investments –

For Retail/consumer/personal investment = 15% to 17%

For continues/cash credit (BAIM HYPO) = 13% to 17%

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Analysis of performance

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Table & Graph (a): Showing the Performance at this Branch FY: 20009-2010

(Amount in lac Tk.)

Year Total

Deposit

Total

investment

Total

Expenditure

Total

Income

Total

Profit

2009 167.64 50.10 12.05 14.33 2.28

2010 195.19 53.55 11.40 16.10 4.70

Amount in Lac Tk.

Figure: Showing the Total Performance of EXIM Bank FY 2009-2010

In this graph shows that overall performance of this branch. In 2009, income was Tk.14,

33,000 and expenditure Tk 12,05,000 and the end of the year branch was earned profit

Tk.2, 28,000.In 2010,income and expenditure both are increased but the profit was

increased double Tk.4, 70,000 than 2009.The client response also increased in investment

and deposit from 2009 to 2010.

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Table & Graph (b): Showing the various investment at this Branch FY: 20009-2010

(Amount in lack

Tk.)

Year Bai-Muajjai (CC)

Bai-Muajjai (FIN.OBL)

Bai-Muajjai (W.C)

IBB (HB) EXIM (Kishan)

2009 20.80 17.30 2.40 2.85 6.75

2010 21.10 16.90 1.90 3.20 10.45

Amount in Lac Tk.

Figure: Showing the various investments at this Branch FY: 20009-2010

This branch provides various type of investment for their client. But from the above chart

we see that, it more focus on Bai-Muajjai (CC) and EXIM (Kishan). As it is a rural

branch so, EXIM (Kishan) investment is more popular and at the end of 2009, total

investment amounted to Tk. 06,75,000 compared to the Tk. 10,45,000 in 2010 than other

investment.

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Table & Graph (c): Showing the investment activities at this Branch FY: 20009-2010

(Amount in lac Tk.)

Year Disbursement Recovery Outstanding

2009 50.09 45.85 26.99

2010 53.55 48.65 31.89

(Amount in lac Tk.)

Figure: Showing the investment activities at this Branch FY: 20009-2010

From the above chart we see that the investment activities of this branch in last two years.

In the year 2009,branch disbursed Tk.50, 09,000 and the end of the year investment

department recovered 45,65,000 but outstanding is more due to include of (previous year

outstanding + current year Disbursement - current year recovery). This situation occurred

when a client take a investment from this branch and he can not payment his full amount

in the end of the year but the beginning of new year that client take another investment

from this branch. For these situation outstanding is increased from 2009 to 2010.

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Table & Graph (d): Showing the various deposit at this Branch FY: 20009-2010

(Amount in lac Tk.)

Year Current deposit

Saving deposit

Short-term deposit

Fixed deposit

Deposit under scheme

2009 4.23 32.08 7.47 85.08 38.78

2010 5.10 40.90 9.05 92.85 47.29

(Amount in lac Tk.)

Figure: Showing the various deposit at this Branch FY: 20009-2010

In figure we see that this branch has a very good position of their various deposit account

due to better profit rate. From 2009 to 2010 fixed deposit and deposit under scheme

increased rapidly than other. It means that, the branch is now receiving more deposit from

its customers than that of any preceding years.

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Problem and SWOT analysis

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Problems in Investments

Prerequisite of any loan, CIB result often consume time sometimes it takes more

than a month that is the initial barrier for loan processing.

As per Bangladesh bank guidelines and banking acts there should be separate

marketing, monitoring, and recovery, disbursement division. But in this branch

there is no such kind of segregation.

There is not so much diversification in investment portfolio. The branch is only

focusing on trading business.

Investment Officers do not visit site to assess the customer location and the

condition of the property stock

Without informing the bank, borrowers change their existing business.

While borrowers taking investment sometimes provide false securities, colletarals.

Sometimes, borrowers financial condition have changed but the officers does not

properly examine all that things.

The process of investment proceeds takes more than a month which some times

makes the borrower helpless to get the investment on due time.

When borrowers show the income statement, balance sheet of their current

business but most of the time all the information is not correct. For which it

becomes difficult to measure their financial position & bank have to face

problems.

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The acronym for SWOT stands for:

STRENGTH

WEAKNESS

OPPORTUNITY

THREAT

The SWOT analysis comprises of the organization’s internal strength and

weaknesses and external opportunities and threats. SWOT analysis gives an organization

an insight of what they can do in future and how they can compete with their existing

competitors. This tool is very important to identify the current position of the

organization relative to others.

STRENGTH

Banking Experience of 12 years provides EXIM Bank Ltd the strength of being

one of the market leaders in the sector as the long-term success of a bank heavily

depends on its reputation while dealing with every sensitive commodity like

money.

EXIM Bank Ltd focus strongly on remittance business and with that aim they

opened rural branches where remittance business concentrates.

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In Bangladesh EXIM Bank Ltd has wide range of customer base and is operating

efficiently in this country.

EXIM Bank Ltd has a bulk of qualified, experienced and dedicated human

resources.

Strong network throughout the country.

Installation and use of highly sophisticated system enables the Bank to have on

time communication with all branches.

Online banking gave this bank a better position among private banks.

All the branches are computerized.

Having goodwill in the banking sector.

WEAKNESS

EXIM Bank Ltd has fewer branches than their competitors. Such as EXIM Bank

Ltd have only 62 branches whereas Uttara Bank Limited has 205 branches and 12

regional offices.

EXIM Bank Ltd does not provide any ATM facility to the customers. This is one

of the major weaknesses of EXIM Bank Ltd.

Some lengthy papers work and documentation for investment.

Lesser investment products in comparison to other Islamic bank.

OPPORTUNITY

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The activity in the secondary financial market has direct impact on the primary

financial market. Investment is a national socio economic activity. And activity in

the national economy controls the bank.

EXIM Bank Ltd is now focusing on lending to SME and Retail sector. The bank

is not only providing investment but also decided to popularize the SME sector by

participating in various trade shows organized in the country.

Government full support to banking sector will facilitate the long-term vision of

EXIM Bank Ltd.

Prospect of divers banking product and branch network

E banking gets priorities.

Banking on profit and loss sharing.

Local demand oriented deposit and investment product.

Prospect of SMEs and Agro based investment.

Experienced top and mid level management.

Large number of people earning foreign exchange within and outside the country

(RMG sector and NRBs)

THREAT

Increased competition with existing and upcoming banking business is also

another threat to EXIM Bank Ltd.

The central bank exercises strict control over all banking activities in local banks

like EXIM Bank Ltd. Sometimes these restrictions impose barriers in the normal

operations and policies of the bank.

Competitors can easily copy the product offering of EXIM Bank Ltd.Therefore

the bank is in continuous of product innovation to gain temporary advantage over

its rivals.

Cost of client satisfaction as well as banks performance.

Frequent change in govt. policy.

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Conclusion and recommendation

64


Conclusio

n

The last 3 months was quite intriguing to do my internship at EXIM Bank Limited,

fenchugonj Branch, sylhet. This three months internship orientation with EXIM Bank

Ltd. undoubtedly will help me a lot to understand and cope with any future typical

corporate culture.

The study of the report refers to the fact that people are aware of Investment facilities in

our country but they are not fully aware of the services or features of the Investment

process and its rules and regulations especially in case of individual or consumer loans.

From the study it seems that EXIM Bank focuses on the corporate sectors for the

Investment facility. In case of consumer loans there are lots of restrictions created by the

bank. But for the benefit of the bank also provide investment in agricultural and small &

cottage enterprise (SME) and always department of investment officers monitor their

client for the best return. The reason is that both sector is very risky and uncertain and

depends on natural climate. Best return from short-term investment is very good and also

proves to be very safe to finance.

Investment Division of EXIM Bank has a very qualified and dedicated group of officers

and staffs who are always trying to provide the best service to the clients. Before

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providing the Investment they analyze whether the Investment will be profitable and

whether the client is good enough to repay the loan within the given period of time.

The EXIM Bank philosophy – “Together towards Tomorrow” to be upheld always for its

successes. Here, all the employees are very much cooperative with their customers,

colleagues and simply visitors. I do believe that these will assist me in my banking

career. I wish EXIM Bank and everybody therein zenith success.

RECOMMENDATION

The motto of EXIM bank is “together towards tomorrow”. This says that

EXIM is in the business for increasing the financial ability of the customer and for

positive upward change in the overall social economic conditions. But the thing is that

like other local bank this bank cannot gain enough profit. Obviously there are some

reasons behind this. To overcome these problems I have tried to search following points:

To set up attractive signboard at visible place(s).

Emphasis may be given for local requirement of personnel for rapid business

development.

As other banks, granting of stipend to internees would add to EXIM image

Corporate social responsibility (CRS) activities through EXIM foundation to be

intensified especially in the field of education, healthcare, employment

generation.

Close monitoring and end-use of investment to the furthered.

Continues updating of software

Complain of the customer should be decreased on zero level

To create better client the bank should increase the amount of consumer

investment in a short-term basis.

As we see that, Media coverage of EXIM Bank Ltd is not so strong. To attract

new clients, they should go to mass media coverage.

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Improve and maintain a consistent relationship with customers, especially

retailing.

Even though EXIM Bank Ltd is running online business very successfully they

should open more ATM booths to meet customer needs and to meet the

competitions.

Reference:

General banking Manual of EXIM Bank Limited.

Annual Report of the Bank-2009-2010

Daily Statement of Affairs of Fenchugonj, Branch.

Several Booklets from EXIM Bank.

Several Newsletters from EXIM Bank.

www.eximbankbd.Com

EXIM Bank Limited prospectus.

Web page of EXIM Bank limited

Their regular circulars

Bangladesh Bank Credit Policy

Office files

Working papers

Annual Reports of other Banks

CSE and DSE Listings

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ABBREVIATION

EXIM Bank Ltd = Export Import Bank of Bangladesh Limited

HO = Head Office

BTB = Back to Back

CIB = Credit Information Bureau.

SWIFT = Society for Worldwide Inter-bank

Financial Telecommunication

BB = Bangladesh Bank.

L/C = Letter of Credit.

ROA = Return on Asset

BBA = Bachelor of Business Administration

EOD = End of the day

LBC = Local Bill Collection

OBC = Outward Bill Collection

VAT = Value Added Tax

CC = Cash Credit

OD = Overdraft

NCB = Nationalized Commercial Banks

IT = Information Technology

LDBP = Local export bill payment

FDBP = Foreign documentary bill payment

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RU = Recovery Unit

KYC = Know Your customer

MD = Managing Director

FSV = Force Sale Value

FY = Fiscal Year

ATM = Automatic Teller Machine

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internship at exim bank ltd

Documents

investment activities

investment procedure

modes of investment

position of exim bank

investment department

investment risks

organization exim bank

word bank