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Deposit and loan scheme of banking sector in Bangladesh: A Case Study On Rupali Bank Ltd. CHAPTER-ONE RUPALI BANK LIMITED 1 INTRODUCTION

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Synopsis of Project Proposal

PAGE 80Deposit and loan scheme of banking sector in Bangladesh: A Case Study On Rupali Bank Ltd.

CHAPTER-ONE

RUPALI BANK LIMITEDINTRODUCTION

HISTORICAL BACKGROUND

Rupali Bank Ltd. was constituted with the merger of 3 (three) erstwhile commercial banks i.e. Muslim Commercial Bank Ltd. Australasia Bank Ltd. and Standard Banks Ltd. operated in the then Pakistan on March 26, 1972 under the Bangladesh Banks (Nationalization) Order 1972 (P.O. No. 26 of 1972), with all their assets, benefits, rights, powers, authorities, privileges, liabilities, borrowings and obligations. Rupali Bank worked as a nationalized commercial bank till December 13, 1986.

Rupali Bank Ltd. emerged as the largest Public Limited Banking Company of the country on December 14, 1986.

1. Deposit and loan scheme of Rupali Bank Ltd.

1.1 Deposit scheme of Rupali bank

1.1.1 Rupali deposit scheme (RDS)

Rupali deposit scheme is an installment based savings scheme of Rupali Bank for a single individual. Rupali Bank offers competitive interest rates and installments that are affordable for customers.

Monthly deposit:The minimum monthly deposit is BDT 500. One may deposit any amount in the multiples of BDT 500, subject to a maximum of BDT 5000.

Number of RDS Account: Only one account in an individual name.

Who can apply?

Any Bangladeshi citizen, 18 years or over is eligible to avail the facility of Rupali Bank RDS scheme. Account can not be opened by minor or in joint name.

Closure of account

The account will immediately cease to operate in case of the following:

Death of the account holder

Failure to pay 3 consecutive installments

Rate of interest: 7%

Documentation:

To open a RDS account, one will be required to do the followings:

Fulfilling account opening formalities (proper introduction and photograph)

Filling in RDS application form

Rupali Deposit scheme: Monthly installment VS maturity value

Monthly deposit amountMaturity value after 5 yearsMaturity value after 10 years

5003577385860

100071547171721

1500107321257582

2000143095343442

3000214642515164

5000357738858607

Miscellaneous:

Tax or charges will be imposed by govt. order (if any)

Authority deserves for any alteration of interest rate or addition or amendment.

1.1.2. Rupali Monthly earning scheme: (RMES)

There is a substantial demand of monthly earning long term deposit schemes among the retired service holders and wage earners residing abroad who want to help their dependants and relatives by contributing a certain amount of money on monthly basis from the interest of their one time deposit with the Bank. Again there are persons who want to meet day to day expense of their families out of monthly earning that may be received on their long term deposits.

Rupali Bank Ltd. as a pioneer of welfare banking is receiving demands from the vast majority for introduction of attractive monthly earning scheme to encourage them to meet their above needs out of earnings of their deposit.

One time deposit amount:

One time deposit amount is at least TK=50000/- and its multiple (i.e. 100000, 150000, 200000, 250000) there is no limit of maximum amount.

Period: Three years, interest note is 8% and Five years interest note is 8.50%

Account Open: One time deposit account may be opened in individual or institution name.

Credit facility: 80% of deposit and interest rate will be above 3% on deposit interest rate.

Sample calculation of Rupali monthly earning scheme (RMES)

One time depositTerm -3years interest note 8% per month earnings after taxTerm-5 years interest note 8.50% per month earnings after tax

TK= 100000/=TK= 600/=

TK=637/=

TK = 200000/=TK= 1200/=TK=1274/=

1.1.3. Fixed deposit:

There are many people who want to deposit them money for a certain period for increasing their fund / capital. After certain period they withdraw deposited money with interest. Rupali Bank has fixed deposit scheme with competitive interest rate. The following chart shows the picture of this scheme.

Term/Period of one time depositRate of interest

Three months7.50%

Six months above less than one year7.75%

One year and less than Two year8%

Two year and up to 3 years8.5%

1.2 Loan scheme of Rupali Bank Ltd.

1.2.1 PERSONAL LOANS

In response of the increasing demand, a new loan scheme in the name and style of Personal Loan has been introduced. The main objective of this loan scheme is to meet up the emergency financial requirement of the customers. No doubt this is the loan scheme to face the urgent financial needs and that is why it may be termed as Any purpose loan The salient features of this loan scheme are mentioned below:-

Name of the loan scheme: Personal Loan.

Objectives

: To meet the urgent financial needs of the customers.

Customer segment

:

*Employees of reputed Multi National Companies (MNCS) and large local corporate.

*Employees of medium sized or mid range local companies such as reputed schools, pathology labs, hospitals, restaurants, hotels, newspapers, airlines, travel agencies, real state developers, reputed companies, NGOs, aid agencies, UN bodies, reputed trading & business firm and all other salaried employees including Government Employees (except Rupali Bank Ltd. employees and their spouse/parents) etc. who has the means and capacity to repay bank loan.

1. Purpose:

To meet up the miscellaneous financial requirement, such as:-

*House renovation

*Marriages in the family

*Advance rental payments

*Hospitalization or other emergency medical needs,

*Trips abroad

*Others.

2. Age limit :

Minimum 25 years. Maximum 60 years (including loan maturity period)

3. Minimum service length : Minimum 3 years confirmed service length.

4. Loan size

:

Maximum TK.500000/= (Five Lac)

6. Security

:

* Letter of introduction from the employers.

* Letter of undertaking for salary and terminal benefits

assessment

* Personal Guarantee of spouse / parents.

* Bank statements for last Six months.

* Personal Net worth Statement.

* Post dated cheques equivalent to 48 monthly installments.

* One undated blank cheque (for future default covering full

Loan with interest)

*CF 1, 2, 6 & 11 to be obtained as applicable

*3rd party Guarantee of an individual having minimum solvency

/ Income not less than that of the borrower supported

By income proof

7. Loan period

:

Minimum: 12 months

Maximum: 48 months

8. Disbursement mode

:

By making credits to customers savings / current account maintained in the bank branch

9. Repayment method : Equal monthly installments.

10. Interest rate

: 13% (Changeable)

11. First repayment date

:

May be one month after the date of customers availing the loan

12. Debt Burden Ratio (DBR %) :

A maximum of 80% based on Net monthly salary.

13. Verification of personal details:

Bank official will verify the addresses both present and permanent, all telephone numbers of borrower, guarantor, referee, employment/occupational details, invoice etc. this will be a physical verification in all cases.

After the verification is done, the verification officer will submit a report on their findings in the prescribed form. The will be kept attached to the borrowers loan file.

14. Substantiation of income :

Following as appropriate

i. Salary certificate/ Salary Slip.

ii. Bank statements.

iii. Income tax returns of last period (where applicable).

iv. Any other document that may stands as a proof of income.

15. Present address : Borrower must reside for at least 12 months in the same address.

16. Restrictions on purpose of the facility:

Though specific disclosure of a need is not a mandatory requirement on customers part, yet no facilities can be granted for purpose that are legally in contradiction in the law of the land. It is therefore, advisable that the dealing officers should know the purpose of the facility and record the same.

17. Sanctioning and approval power:

Initially Branch manager can disburse up to TK 5.00 be Zonal head countering after verification.

18. Loan processing fee:

Loan amount up to TK 1 Lac TK 500/=.

19. Special terms and conditions:

a. In default of repayment of any three installment of loan, legal action should be taken to realize the full loan.

b. The documentation and legal aspects of all kinds of loans sanctioned by this bank will also be followed in this loan scheme meticulously.

c. All up-to-date clean CIB report should be taken before disbursement of this loan.

1.2.2 PROFESSIONAL LOANS

The professional personnel like established economist, Chartered Accountant, Doctor, Engineers, Computer personnel or highly qualified other professionals of the society may be considered as a potential sector of Banks lending. Such kinds of lending will ensure the financial assistance to the professional personnel to support their small scale purchase of different equipment tools and small machineries for their installation at their business sites / offices.

1. Name of the loan scheme: Professional loan.

2. Customer segment :

Any citizen of Bangladesh who has the means and capacity to repay Bank loan and engaged in the following professions as self - employed or salaried people:

Economist

Chartered Accountant

Doctors of Medical Professionals (not less than MBBS)

Engineers / Architects

IT professionals

Management Consultants

Highly qualified other professionals

3. Purpose :

For purchase of items to support professional need, such as:-

Purchase of X ray Machine.

Medical beds

Ultra Sonogram machine

Engineering / mechanical tools, or to set up of an office / chamber on a small scales

Others

4. Nationality :

Bangladeshi

5. Age limit :

Minimum 25 years

Maximum 60 years

6. Minimum service / length of business :

For salaried individual, must be confirmed employee of a relevant firm / office

For self employed individual, a business record of minimum 3 years

7. Minimum income :

2 times of monthly loan installment for salaried personnel

3 times of monthly loan installment for other profession

8. Loan size / limit :

Minimum: Up to Tk. 50,000/= (without collateral)

Maximum: From Tk. 50,001/- to Tk. 5, 00,000 (with collateral)

9. Loan to price ratio / margin financing: 80% of the cost of the item.

10. Loan period :

Minimum: 12 months

Maximum: 60 months

11. Interest rate : 12 % quarterly Compound (rate of interest changeable)

12. Disbursement mode: wherever possible, payment to be made by issuing P.O in venders name.

13. Repayment method: Equal monthly installment

14. Debt Burden Ratio (DBR %) :

33% of monthly income i.e. monthly personal income at least 3 (Three) times of installment amount

15. Securities / collateral:

(a) Up to Tk. 1 (one)lac:

Original certificate of terminal examination which will be kept in the bank branch until full liquidation / adjustment of full loan with interest

Personal Guarantee of spouse / parents

3rd party Guarantee of an individual having minimum solvency / income not less than that of the borrower supported by income proof.

Post dated cheques for each 12 monthly installment.

One undated cheque for full loan value including full interest to be taken in advance.

Certificate from registration authority.

CF 1, 2, 6, 8, 10,10A& 11 to be obtained as applicable.

(b) Above TK.1 (one)lac to 5(five) Registered mortgage of immovable properties covering 200% of loan limit or pledge of FDR/Wage Earners Development Bonds/ICB unit certificate of value covering 120% of the loan limit.

Personal Guarantee of spouse /parents.

3rd party Guarantee of an individual having minimum solvency/income not less than that of the borrower supported by income proof. Hypothecation over purchased assets.

Comprehensive insurance over assets (Policy must be renewed every year and copy of the policy must be submitted to the bank).

Post dated cheques for each 12 monthly installment.

One undated cheque for full loan value including full interest to be taken in advance.

Certificate from registration authority.

CF1, 2, 6, 8, 10, 10A&11 to be obtained as applicable.

16. Verification of personal details and quotation :

Details of an application have to be verified before an approval is accorded.

Letter from employer with details of employment and salary.

Borrower and Guarantors (if any) details (address- both present and permanent all telephone numbers of residence, Office & Mobile no.)

Personal net worth statement.

Quotation of the item has to be purchased/Item quotation is required.

Referees details.

Bank statements.

17. Substantiation of income :

Proper substantiation of income will be mandatory.

All or any of the following original/true copy of original (accepted only after seeing true originals) documents accepted for the purpose.

Last tax return.

Bank statements for minimum of last 6 months.

Personal net worth statements.

Any other document that may stand as a proof of income.

18. Approval power and loan limit :

Designation

Limit

SPO(Branch Manager)Up to TK. 50,000/-

AGM(Branch /Zone/Head office)From TK. 50,001/- To TK. 75,000/-

DGM(Branch /Zone/Head office)From TK. 75,001/- TK. 1,00,000/-

GM of Head officeFrom TK. 1,00,001/- to TK. 5,00,000/-

19. Processing of loan proposal:

Borrower will have to apply for a loan under this loan scheme to the designated Branches in the prescribed loan application from and submit other necessary papers and documents. Branches will process the loan proposal and if found correct. Branch incumbent will sanction the loan under his/her approval power. The loan proposal and beyond the sanctioning power will have to be sent to the next higher sanctioning authority with specific opinion and re commendation for approval.

20. Loan processing fee:

Loan amount up to Tk. 1 (one) lac Tk. 500 /=

Loan above Tk. 1 (one) lac Tk. 1000 /=

21. Special terms and conditions:

a) In default of repayment of any three installment of loan, legal action should be taken to realize the full loan forth with without fail.

b) The documentation and legal aspects of all kinds of loans sanctioned by this Bank will also be followed in this loan scheme meticulously.

c) An up to date clean CIB Report should be taken before disbursement of this loan.

1.2.3 Car Loan

1) Type of car:

New and reconditioned car

2) Loan limit:

Highest 10.00 lac3) Qualification of loan application :

(i)Executive of organization

(ii) Professionals

(iii) Businessman

4) Margin : 40%

5) Rate of interest : 13% (changeable)

6) Payment period :

(i) 48 months

(ii) Equal monthly installment with interest

(iii) Party or one time payment is also allowed.

7) Security :

(i) DP note , CF 11 ,8A

(ii) Car registration in favor of jointly Bank and borrower

(iii) Personal guarantee of borrower

(iv) Employers guarantee

(v) 3 quotations from supplier firm

(vi) Post dated cheque for every installment

8) Insurance: Car insurance must be ensured

9) Approval authority: Zonal head for branches and branch head for corporate branch

10) Rebate: 1 % if all installments paid timely.1.2.4 House Building Loan

1.2.4.1 Principles of selection of borrower

Individuals, partnership firm, public & private Ltd. company will be eligible for receiving such loan for the purpose of general house building (Residential ), commercial house building , residential cum commercial house building, Flat house building for sale & for buying flat.

Minor will not be eligible for this loan.

Applicant must be owner of land and client of bank.

Land location should be in City Corporation or in any commercial place.

If land is allotted by RAJUK or any divisional development authority, approval letter should be taken by such authority for giving registered mortgage in favor of bank.

There should be at least 12 feet road and connection with proposed building. And utility facilities (eg. Electricity, gas, water supply) must be available.

The area of land must be at least 2 katha (3.30 decimal) and proposed land must be viti.

Application for Extension of old building can also be accepted if previous construction is strong.

In case of married borrower his wife or her husband must be guarantor.

Approved design of house by authority, approval letter for house building, estimated cost of house and expected sent for house and other related paper should be enclosed with loan application.

1.2.4.2 Disbursement mode: At least four installments in case of residential house building. One time payment through pay order in case of flat buying. Before Dishousement of every installment, progress report from branch manager and engineer about proposed house building must be kept in loan file.

Serial no.Type of loan Highest limitRate of interestPeriod of loan

1Residential house building loan 2.00 crone12%15 years

2 Commercial house building loan According to case to case13%12 years

3 Extension of old house (with strong foundation) 20.00 lac12%15 years

4 Buying ready flat According to case to case13%15 years

5 Building flat to sell According to case to case13%2 years

Rebate: 1.50% on interest if all installments are paid within stipulated time. 1.2.5 Student loan

The purpose of this loan is to co-operate student specially those who want to study abroad .They (student or Guardian) need bank solvency certificate in studying abroad.

1. Qualification for applicant:

(i) Student who is willing to study abroad, they are qualified to get this loan.

(ii) Applicant must be resident of Bangladesh.

(iii) Applicant must be student.

(iv) Admission seeking student should possess qualification according to requirements of foreign Universities/Colleges.

2. Rules of application:(i) Application in white paper with resent two photographs should be taken.

(ii) Offer letter from foreign Universities/Colleges with other related papers will be taken.

(iii) All educational certificates with passport.

(iv) Statement of education expenditure.

(v) Photocopy of national ID card.

(vi) Character certificate from local authority.

(vii) Applicant must have a saving s account in related Bank branch and money of 15% margin must be deposited.

3. Loan limit:

Highest 30.00 lac under 15% margin

4. Rate of interest 13% (changeable)

5. Period of loan: Highest 6(six) months. Not renewable.

6. Securities of loan:

(i) CF, 1, 11, 19 should be taken before loan disbursement.

(ii) Money of loan with margin must be deposited in saving account. This account should be under lien. Letter of lien must be taken from applicant.

(iii) After expiry loan will be adjusted by debiting saving a/c.

(iv) Letter of lien, letter of agreement and letter of authority must be taken with consulting legal adviser.

7. Conditions:

(i) No other student can apply for this loan without abroad going student.

(ii) No Cheque Book will be issued in lien savings certificate.

(iii) To serenities whether all conditions are met according to offer letter .

8. Approval authority of loan: Branch manager.

1.2.6 SME LOANSmall and medium Enterprise Financing contributes to a positive impact in the economy of the country. In developing countries like Bangladesh, the demand for expanding SME business is increasing day by day. Even the donors are also encouraging to expand the volume of such kinds of business to face the challenge of poverty and to create employment opportunities in the country. Rupali Bank Ltd. also play a vital role in this sector and can help to promote the expansion of SME business in the country.

There are four product under SME financing.

These are (1) Sahaj Rin

(2) Sulav Rin

(3) Businessman Rin

(4) Majari (medium) Rin

1.2.6.1 Sahaj Rin:

i. Loan facilities up to 2.00 (two) lac

ii. Proprietorship and partnership firm only included in this scheme

iii. Loan will be approved by branch manager (But loan information must be furnished by weekend)

iv. Personal guarantee of a solvent family member and 3rd party guarantee of an acceptable individual or collateral security of equal value of loan will be taken against this loan.

v. A plan about the use of loan will be taken by borrower. And how much worker / employee (Full time or part time) will be employed should be mentioned in this plan.

vi. Post dated cheques equivalent to loan installment with interest and one cheque covering full loan from borrower.

vii. Loan processing fee TK= 1000/=(Nonrefundable)

viii. Trade license, photograph, partnership deed (if applicable) stock report, Income& Expenditure statement will be taken from borrower.

ix. Term loan (1-3) year by monthly or quarterly installment and exiting rules will be applicable in case of working capital / continuous loan.

x. Interest rate 11 % (changeable), 1% rebate in case of regular payment.

xi. Interest rate 10% in following specialized sectors.

(i) Solar installation.

(ii) Bio-gas based project.

(iii) Agro based project.

(iv) Skillness (at least three months Training from government approved institution)

1.2.6.2 Sulav Rin:i. Loan facilities up to 5.00 (five) lac

ii. Proprietorship & partnership firm included in this scheme. Besides professionals (engineer, doctors, lawyers etc.) will be given priority.

iii. Inially branch manager will approve and Zonal head will counternigh after verification

iv. Personal guarantee of a solvent family member and Declaration of asset (equimlent to loan amount) must be given. 3rd party guarantee of an acceptable individual to Bank will be taken.

v. A plan about the use of loan will be taken by borrower. And how much people (full time or part time) will get employment opportunity should be mentioned in plan.

vi. Post dated cheques equivalent to loan installment with interest and one cheque covering full loan will be taken from borrower.

vii. Loan processing fee TK = 5000/=(Nonrefundable)

viii. Trade license, Rupali Bank account, photograph, partnership deed (if applicable) stock report will be taken

ix. Term loan (1-4) years by monthly or quarterly installment and exiting rules will be applicable in case of working capital / continuous loan.

x. Interest rate 12 % (changeable), 1% rebate in case of regular payment.

xi. Interest rate 10% in following specialized sectors.

i. Solar installation.

ii. Bio-gas based project.

iii. Agro based project.

xii. Female entrepreneur will get 10.00 lac loan facilities under this scheme by complying same formalities.1.2.6.3 Business Rin

a. Loan facility up to 3 (three) crore.

b. Approval authority

1. Managing director : Above 30.00 to 3.crore

2. DGM (Zonal head): Upto 30.00 lac

3. AGM

: Upto 20.00 lac

c. Personal guarantee of a solvent family member and collateral security of forced sole Value equivalent to loan.d. A detailed plan about the objective, uses and payment of loan must be submitted. How much people will get employment opportunity (full time or part time) must be mentioned in this plan.

e. Post dated cheques equivalent to loan installment with interest and one cheque covering full loan will be taken from borrower.

f. Loan processing fee TK = 10000 /= (Nonrefundable)

g. Business license, trade license, Rupali Bank account, photograph, partnership deed (if applicable) Income expenditure statement, stock report, and personal networth statement will be furnished.

h. Interest rate 13 % (changeable), 1 % rebate in case of regular payment

i. Interest rate 10% in following specialized sectors.

Solar installation.

Bio-gas based project.

Agro based project.

1.2.6.4 Mazari (medium) Rin:

(i) Loan facility above 3.00 core to 20.00 core.

(ii) Approval authority board of directors

(iii) Personal guarantee of a solvent family member and collateral security of force sale value 1:1.25

(iv) A plan about the objective, use and payment of loan will be taken from borrower. How much people (full time or part time) will work in this project must be mentioned in this plan.

(v)Post dated cheques equivalent to loan installment with interest and one cheque covering full loan will be taken from borrower.

(vi) Loan processing fee TK = 15000 /=(Nonrefundable)

(vii) Business license, trade license, Rupali Bank account, photograph, partnership deed (if applicable), profit and loss statement, memorandum or article of association, audited balancesheet, financial statement, stock report, and other related paper will be furnished.

(viii) In case of term loan period will be 1 5 years by monthly or quarterly installment and in case of working capital, existing rules will be applicable.

(ix) Interest rate 13 % (changeable), 1 % rebate in case of regular payment

(x) Interest rate 10% in following specialized sectors.

Solar installation.

Bio-gas based project.

Agro based project.

1.2.7 Household loan (consumer financing)

People of developing countries like Bangladesh earn low income. They can not purchase household item like TV, refrigeration, Air cular etc. in spite of being necessary. For this reason they cannot improve their life standard. In order to help people specially limited income service holder to buy household item Rupali Bank Ltd. introduce this loan scheme.

1. Objectives of scheme:

(i) To help people / service holder in buying house item.

(ii) To help people / service holder in improving life standard.

2. Qualification of applicant:

2.1 Employee of government institution, semi government, sector, corporation and autonomous body, state owned commercial banks and insurance company, universities, government college, government school and madrasha , teacher of government primary, member of armed forces (military, BGB, Police and Ansar)

2.2 Besides Executives of NGOs, professional (doctor, engineer, lawyers, chartered accountant, journalist etc.) and business.

3. Age of applicant: Age limit will be from 21 to 55 years.

4. Usages of loan:

Only in buying household item- such as refrigerator, TV, DVD, motorcycle, washing machine, ac, sewing machine, personal computer.

5. Type of household item & highest loan limit:

Sl. No. Types of itemHighest limitDown paymentInterestPeriod

1Refrigerator2500025%16%2 years

2Color TV2000025%16%2 years

3Motorcycle,5000025%16%2 years

4Personal computer7500025%16%2 years

5Washing Machine2000025%16%2 years

6Furniture3600025%16%2 years

7Air Cooler3000025%16%2 years

5.1 Principles of borrower selection:

Incase of borrower mentioned in 2.1 serial, personal guarantee of employer/departmental head must be taken, loan proposal will be considered according to their recommendation and guarantee. Personal guarantee from an acceptable person to bank in case of borrower mentioned in 2.2.

6. Rules of application: Applicant must apply with prescribed bank form mentioning name, address, monthly salary etc. At least 3 quotations of desired articles will be submitted with application. Price of articles will be paid to seller/ supplier through bank draft/cheque/pay order. Cash memo will be in the name of bank and it will be changed in favour of client after realizing payment of bank.

7. Loan approval power:

DesignationUp to TK.

Manager (SPO) 0.50 Lac

Manager or Zonal Head (AGM)0.75 Lac

DGM1.00 Lac

8. Security:

Letter of hypothecation and undertaking

Employers undertaking in case of service holder

DP note $ C.F. 11

9. Rules:

Installment size should not above 50% of monthly salary

1% rebate in case of timely payment

Any damage or repairing of product must be born by borrower. Registration cost or license of product will be at the expense of borrower.

Only borrower will be articles/product, he has no right to rent or hand over product without bank permission.

1.2.8 Export financing

An exporter requires finance at two stages, namely

01. Pre shipment stage &

02. Post shipment stage

We may classify export finance into two categories

01. Pre shipment credit &

02. Post shipment credit

1.2.8.1 Pre shipment credit:

Pre shipment credit, as the name suggests, is given to finance the activities of an exporter prior to the actual shipment of goods for export. The purpose such credit is to meet working capital needs starting from the point of purchasing of raw materials to transportation of goods for export to foreign country. Before allowing such credit to the exporters the Bank takes into consideration the credit worthiness export performances of the exporters, together with all other necessary information required for sanctioned the credit in accordance with the existing rule sand regulations. Pre shipment credit is given for the following purposes:

(1) Cash for local procurement and meeting related expenses

(2) Procuring & Processing of goods for export

(3) Packing & transporting of goods for export

(4) Payment of Insurance Premium

(5) Inspection fees

(6) Freight charges etc.

An exporter can obtain credit facilities against lien on the irrevocable, confirmed, and unrestricted export letter of credit.

Pre shipment credit takes the following forms:

1. Export cash credit (Hypothecation)

2. Export cash credit (Pledge)3. Export cash credit against trust receipt.

4. Packing credit

5. Back to back letter of credit

6. Credit against Anticipatory letter of credit

1. Export cash credit (Hypothecation)

Under this arrangement a credit is sanctioned against hypothecation of the raw materials or finished goods intended for export. Such facility is allowed to the first class exporters. As the Bank has got no security in this case, expect charge documents and lien of export L / C contact, Bank normally insists on the exporter in furnishing collateral security. The letter of hypothecation creates a charge against the merchandise in favor of the Bank but neither the ownership not the possession is passed to it.

2. Export cash credit (Pledge)

Such credit facility is allowed against pledge of exportable goods or raw materials. In this case cash credit facilities are extended against pledge of goods to be stored in go down under Banks control by singing letter of pledge and other pledge documents. The exporter surrenders the physical possession of the goods under Banks effective control as security for payment of Bank dues. In the event of failure of the exporter to honour his commitment, the Bank can sell the pledge merchandise for recovery of the advance.

3. Export cash credit against trust receipt

In this case, credit limit is sanctioned against trust receipt (T. R.).In this case also unlike pledge, the exportable goods remain in the custody of the exporter. He is required to execute a stamped export trust receipt in favor of the Bank. Where in a declaration is made that goods purchased with financial assistance of Bank are held by him in trust for the bank. This type of credit is granted when the exporter wants to utilize the credit for processing, packing & rendering the goods in exportable condition when it seems that exportable goods cannot be taken into Banks custody. This facility is allowed only to the first class party and collateral security is generally obtained in this case.

4. Packing credit: In this case credit facilities are extended against security of railway receipt/ steamer/receipt/barge receipt/ truck receipt evidencing transportation of goods to the port for shipment of the goods in addition to the usual charge documents and lien of export letter of credit. This type of credit is sanctioned for transitional period from dispatch of the goods till negotiation of the export documents. The drawings under export cash credit limit are usually adjusted by drawings in packing credit limit which is in turn liquidated by negotiation of export documents.

5. Back to back letter of credit: Under this arrangement the bank finances export business by opening a letter of credit on behalf of the exporter who has received a letter of credit from the overseas but is not actual manufacturer or producer of the exportable goods. The letter of credit is opened in favor of the producer or supplier within or outside of the country. Since the letter of credit is opened on the strength of and of and backed by another letter of credit it is called Back to Back credit. The need for the Back to Back credit arise the beneficiary of the original (export) letter of credit may have to procure the goods from the actual producer who may not supply the goods unless its payment is guaranteed by the bank in form of letter of credit collateral security before opening the letter of credit. The back to back letter of credit must conform the terms and conditions of the original letter of credit with the following exceptions:

1. Names of the original beneficiary shall be submitted by that of the actual supplier.

2. The credit amount shall normally be lower than that of the original letter of credit, the difference being the amount of profit the exporter exports to earn from the deal.

3. The back to back letter of credit shall be made valid for shipment and negotiation prior to expiry of the corresponding date.

6. Advance against Anticipatory letter of credit (Red Clause L / C)

Under Red clause letter of credit, the opening bank authorizes the Advising bank / negotiating bank to make advance to the beneficiary prior to shipment to enable him to procure his exportable goods in anticipation of his effecting such authority is printed / typed in red ink and in green ink on the top of the L/C is called Red clause L/C.

The following documents papers are usually called for depending on the nature of the export credit facility to be provided at the Pre shipment stage:

i. Lien on confirmed irrevocable and unrestricted letter of credit from a first class Bank.

ii. Letter of Hypothecation duly stamped

iii. Letter of pledge duly stamped

iv. Detailed stock statement duly verified by Bank officials

v. Insurance coverage under Bank mortgage clause

vi. Letter of disclaimer to be signed by the owner of the go down in case of rented go down

vii. Documents of little to goods

viii. Trust Receipt

ix. Export Credit Guarantee Scheme

x. Export from duly signed by the exporter

xi. EPC / ERF duly certified by Bangladesh Bank

xii. Change and other documents, if any

1.2.8.2 Post Shipment Credit

This type of credit refers to the credit facilities extended to the exporters by commercial banks of the goods against export documents. Necessity for such credit arises as the exporter can not afford to wait for a long time for payment to local manufacturers/ suppliers. Before extending such credit, it is necessary to obtain report on creditworthiness the exporters and financial soundness of the buyers as well as other relevant documents connected with the export in accordance with the rules and regulations in force. Banks in our country extend post-shipment credit to the exporters through:

1. Negotiation of Documents under L/C.

2. Purchase of DP & DA bills.

3. Advance against Export Bills surrendered for collection

1. Negotiation of Documents under L/C

Under this arrangement, after the goods are shipped, the exporter submits the concerned documents to the negotiating bank for negotiation. The documents should be negotiated strictly in accordance with the terms and conditions and within the period mentioned in the letter of credit.

2. Purchase of DP &DA bills.

In such a case, the banks purchase/ discount the DP (Documents against payment) and DA (documents against Acceptance) bills at rate published by the Exchange Rate Committee of authorized dealers. While doing so, the Bank should scrutinize all the export documents separately and minutely and clear instructions are to be obtained from the drawer of the bill in regard to all important issues related to the negotiation of the bills.

3. Advance against Export Bills for collection

Banks generally accept export bills for collection of proceeds when they are not drawn under a L/C or when the document, even though drawn against an L/C contains some discrepancies. Bills drawn under L/C, without any discrepancy in the documents, are generally negotiated by the bank and the export gets the money from the bank immediately. However, if the bill is not eligible for negotiation, he may obtain advance from the banks against the security of export bills. Banks may give advance ranging from 50 to 80 percent of the documents value. In addition to the export bills, banks may ask for collateral security like a guarantee by a third party and equitable/ registerd mortgage of property.

Rate of interest 8%1.2.9 Import Financing

One of the important functions of the commercial banks in the world is to undertake import of merchandise into the country and payment of foreign exchange towards the cost of the merchandise to foreign suppliers. In such an international trade, because of distance involved, buyers and sellers do not know each other. Therefore, assure these things to happen simultaneously by opening letter of credit guaranteeing payment to seller and goods to buyer.

While opening letter of credit at the request of buyer, bank normally examines:

(i) Buyers creditworthiness.

(ii) Import Trade Regulations.

(iii) Exchange Control Regulations.

(iv) Suppliers Creditworthiness Report.

(v) Marketability of goods.

The buyer must submit the following papers at the time of opening a letter of credit.

(i) L/C application ( a guarantee executed by third party is also insisted)

(ii) Import License/ Import Authorization from or Import Registration certificate as the case may be.

(iii) Indent/ Performa Invoice.

(iv) Insurance Cover Note.

(v) IMP form and other documents/ papers etc.

1. Payment against documents (PAD)

The negotiating bank, on receipt of the shipping documents from the exporter, scrutinizes the documents to ensure that they are in strict conformity with the terms of L/C. If the documents are in order, the payment is effected by the negotiating Bank to the beneficiary (exporter) and debit the opening Banks account with it or claim reimbursement from the designated / reimbursing bank as instructed by the opening bank and in fact, the amount so debited or lodging claim for reimbursement stands advanced on behalf of the importer. The shipping documents along with debit advice are thereafter forwarded to the opening bank by the designated / reimbursing bank.

If the shipping documents are found in order, the opening bank will lodge the documents to their book by converting the foreign currency representing the bill and foreign correspondent charges etc., and will respond to the debit entry originated there against by the designated / reimbursing bank to the debit of Payment Against Documents (PAD) account or Bill of Exchange (B / E) account as the case may be and an intimation is sent to the importer asking him to retire the import bills immediately sending there with a cost memo indicating the amount payable by the importer under different heads.

Thus, liability under the letter of credit is converted to banks advance. It is a prac ice to allow the importer to retire the documents till the ship carrying the goods arrives. Normally, ontstanding under PAD should not take more than 21 days for adjustment. If the importer retires the import bill against payment, the transaction ends there and the outstanding under PAD stands liquidated.

2.Loan against Imported Merchandise (LIM)

At the time of opening the letter of credit the banks obtain from the importer an agreement on stamped paper which provides for financing and, if necessary, clearance and storage of goods by debiting importers account at his risk and responsibility.

Importer may also request the bank on banks prescribed form for clearance of goods from the port when the consignment arrives. In most of the cases, banks extend credit facility to the importer for retirement and clearance of the consignment. In that case, the bank recovers further margin from the importer to cover the customs duty, sales tax or VAT etc. A definite repayment schedule is also given to the importer to take delivery of the goods from banks custody against payment.

In case the importer does not come forward to retire the documents inspite of repeated reminders, it is in the interest of the credit issuing bank to take proper care of the goods and, on forced circumstances, clear the imported consignment on arrival of the same for fear of heavy demurrage at the which adds to the burden of commitment.

In both the cases, whether the importer requests the bank for clearance of goods or fails for retirement of documents against payment, the liabilities under PAD or B/E is converted to Loan against Imported Merchandise (LIM) account and the overdue interest from the date of accompanying Bill of Exchange or negotiation date to the date of transfer to LIM liability.

The advances against merchandise account is a loan account and only amounts for clearance charges , such as, customs duty, sales tax or VAT etc., are allowed to be debited to LIM account.

After clearance, consignments are stored in banks go down under its effective control waiting for taking delivery by the importer on full payment of banks liability. Normally part delivery is not allowed while on LIM account. When the delivery in part is desired by the importer, the LIM is converted into Cash Credit account retaining proper margin and executing proper charge documents. The delivery is effective there after on obtaining pro rata payment till adjustment of the entire liability.

Rate of interest 14%

Documents

1. Demand promissory note

2. Letter of continuity

3. Letter of agreement of opening letter of credit

4. Letter of Lien

5. Letter of indemnity (in case of clearance of consignment)

6. Letter of guarantee

CHAPTER-TWO

RUPALI BANK LIMITEDOVERVIEW OF THE COMPANY2.1 CORPORATE PROFILE

Present Capital Structure:

Authorized Capital

: Tk. 7000 million (US$ 120.70 million)

Paid up Capital

: Tk. 1250 million (US$ 21.55 million)

Break up of paid up Capital:

Government shareholding

: 93.11%

Private shareholding

: 06.89%

Present Share Structure:

Total Number of share (Each lot 10): 1, 25, 00,000

Share Demated by

Shareholders as on

: 749306

31.03.2010

Number of Branches:

Rupali Bank operates through 492 branches. It is linked to its foreign correspondents all over the world.

Number of Zones and Corporate Offices:

The Corporate Head Office of the Bank is located at Dhaka with one local office (Main Branch), four corporate branches at Dhaka, one in Chittagong and twenty-five zonal offices all over the country.

Number of Employees:

The total number of employees is 4293.

Board of Directors:

The Board of Directors is composed of eight members headed by a Chairman and the directors comprised of representatives from both public and private sectors and shareholders.

Chief Executive:

The Bank is headed by the Managing Director (Chief executive) who is a reputed professional Banker.

2.2 Vision, Mission, Objectives, Guiding Principles of Rupali Bank Ltd.

Vision:

Rupali Bank Ltd. dreams poverty free Bangladesh, where sports & athletics, science and education, health and hygiene, clean and pollution free environment and above all a society based on morality make all our lives worth living.

Mission:

The Bank participates actively in socio-economic development of the country by performing commercially viable and socially desirable banking functions.

Objectives:

The overall goal is to develop the bank into a people oriented sustainable and quality commercial enterprise with all modern facilities and systems. The specific objectives are.

Development a customer oriented and quality focused (CQF) system in place.

Identifying and selection clients through the use of best tools and judgment, and taking the responsibility of establishing professional relationship with clients through Appreciative inquiry (AI) and close monitoring of their performance.

Reducing classified loans at a comparable level of other banks and Change branches which are losing units.

Developing a community focused social banking system in close collaboration and partnership with other organizations.

Implementing innovation in the bank through human resources development information technology, partnership with development agencies, banks, etc.

Guiding Principles of Rupali Bank Ltd.

Transparency and accountability. Zero tolerance on corruption and inefficiency Flexibility in operation Constant review of clients performance Other guiding principles includes decentralization and devolution, defining roles and responsibilities, use of state of art modern technologies, bottom-up approach in planning, partnership etc.2.3 Rupali Bank Corporate Governance:

Rupali Bank believes in the continued improvement of corporate governance. This in turn has led the bank to commit considerable resources and implement internally accepted corporate standards in its day-to-day operations.

Being a public limited company, the Board of Directors of Bank has a pivotal role to play in meeting all stakeholders interest. The Board of directors and the Management team of Rupali Bank are committed to maintaining effective corporate governance through a culture of accountability, transparency, well understood polices and procedures. The Board of Directors and the Management team also persevere to maintain compliance of all laws taken by Bangladesh Bank.

Rupali Bank is truly transparent that performs banking functions at the highest level of integrity and accountability on global standard.

2.4 Corporate Social Responsibility (CSR)Rupali Bank Ltd. RBL has been rendering various services for attaining greater social goals and objectives. In this process, we aim to the development of the society as a whole and fulfillment of corporate social obligation in particular. To reinforce CSR activities, the bank has undertaken fresh initiatives in line with Bangladesh Bank guidelines in the areas of social service. Internship employment of poor, sports and culture, banking for the disadvantaged group, disaster and relief and activities.Social Services:

RBL has been rendering social services as per laid down guidelines of the govt. The bank has been disbursing pension of govt. employees, monthly salary of teachers, govt. and semi govt. officials without charge.Internship:

Rupali Bank has been rendering internship to students of various educational institutes at the level of graduate and post graduate.

Empowerment of Poor:

Rupali Bank Ltd. has been providing wholesale credit facilities to different micro credit institution who are in turn lending amongst the poor people in different income generating activities (IGA)Banking Service for the Disadvantaged Groups:

With 492 branches all over Bangladesh RBL could reach the banking services to the disadvantages group with the aim to encourage them mobilization of their hard earned saving and creation of investment opportunities for them.

Disaster Relief:

Rupali Bank Ltd. Always stands beside the helpless people at the times of natural calamities and extends helping hands to the sufferers. RBL donate TK. 15 Lac to the help the victims of cyclone Ayla to the relief fund of the Prime Minister.2.5 Organogram of Rupali Bank Ltd. (RBL)

2.6 Business growth of banking sector in Bangladesh and growth of Rupali bank. About 54 schedule banks operate banking business in our country. Every year these banks open new branch in various areas to increase their business. Undoubtedly banks are playing pivotal role in economic development through fund transfer from surplus sector to deficit sector. Banks finance in industrial, agriculture and trading sector to increase output/production by creating employment opportunity for people. We find that every bank (Government Bank & private bank) earn handsome increasing operating profit. Some banks have merchant banking wing to operate business in share market. Many private banks are opening branch in rual areas also to facilitate banking service to common people. As a result common people are benefited through getting banking service (eg. credit facilities, remittance facilities, deposit scheme etc). Banks are also making profit to increase banking service. The following chart indicates increased profit of banking sector in consecutive three year. It proves that expansion of banking business is taking place over the years.

Operating profit of bank (Fig in crore)

Name of Bank201020092008

Sonali Bank1000800636

Janata Bank1150800700

Arani Bank1077-632

Rupali Bank250200101

Islami Bank1143850832

AB Bank1000500465

Prime Bank770580430

Pubali Bank590427365

National Bank1025350350

Southeast Bank650465300

Brac Bank490400300

City Bank400230170

Exim Bnak607320267

UCBL512340260

Dhaka Bank370270254

NCC Bank410314236

DBBL450260218

Uttara Bank302250215

Shahjalal Bank388210207

Eastern Bank400315200

Bank Asia455300195

Mercantile Bank300-193

IFIC Bank419200178

One Bank207162175

Al-Arafa Bank300181158

Jamuna Bank253198109

First Security Bank1217625

Commerce Bank3418

Source: Prothom Alo: 02.01.2011

We can see here that net operating profit of Rupali bank in 2008 is Tk 101crore and in 2009,it is Tk 200 crore and in 2010 profit is Tk 250 crore Profit increased 100% in 2009 and 25% in 2010.2.7 Financial System of Bangladesh

Financial system is a set of institutional arrangement through which financial surplus in the economy are mobilized from surplus Units and transferred to deficit Unit.

2.8 Innovation of Different Financial Products & Services

Impact on banks Profitability

Innovation means introducing new ideas, methods etc. On the other hand, Financial Products refer to products or services provided by a bank or other financial institution. It includes deposits, loans, remittance services, lease, insurance policies etc. with or without other ancillary services/benefits. So, Innovation of Financial Products & Services means introducing new financial products & services. The aim is to meet customers changing needs and thereby to gain maximum business and profit.

Ways of Innovation: Innovation of financial products & services can be done in mainly three ways: (1) by introducing completely self-innovated new products, (2) by developing the existing products and (3) by introducing prevailing new products of other banks/financial institutions. It is however, noted that new product development is not an easy task. It needs effort, time and talent.

Importance of Innovation: Developing new product ideas and effective strategies to go with them is often the key to companys success and survival. It has become all the important considering the rapid changes in customers tastes, needs, technology and competition. Besides, it has become pertinent to the banks in many countries like Bangladesh following the gradual increase of risks in different financial products resulting in serious adverse effects on assets quality, revenue and profitability.

Risk of New Products: A new product may fail for many reasons and thus it may affect the companys profitability adversely. The reasons of failure may be summed up as under.

Not offering a unique benefit or under-estimating the competitors are common mistakes.

Sometimes the idea is good but initial cost is too high. The unit cost of the product may also be more than what was expected.

Some companies rush to introduce a product in the market which is already over saturated or sick.

Some companies rush to introduce a product in the market without developing a complete marketing plan.

Fast pace of change for many products may be a key to competitive advantage. But failure to fast enough can be a problem.

Steps to Succeed: To be able to move quickly and also avoid expensive new-product failures, it is useful to following and organized new-product development process, which moves logically through the following five steps:

Idea Generation to search for new products.

Screening new-product ideas in order to get good ideas and drop poor ones as soon as possible.

Concept Testing, i.e. testing new-product concept with a group of target consumers to find out if the concepts have strong consumer appeal.

Product Development, i.e. developing the product concept into a physical product in order to ensure that the product idea can be turned into a workable product.

Commercialization, i.e. introducing the new product into the market.

Scenario in Bangladesh: The banks and financial institutions in Bangladesh have already introduced many new financial products in order to improve their asset quality and to increase profitability. These innovations are on the rise following technological development. The new products include:

Introducing E-Commerce for marketing products over the internet.

Introducing electronic products like ATM, Credit Card, Debit Card.

One-stop service.

On-line banking.

Merchant banking.

Loan syndication.

Improving deposit mix by introducing different attractive new deposit products.

Improving loan portfolio by introducing new loan products like consumers credit, loans to professional, loans to SME etc.

2.9 Financial report of Rupali bnak ltd.

2.9.1 Balance sheetRUPALI BANK LIMITED

BALANCE SHEET

AS AT DECEMBER 31, 2009

ParticularsNotes20092008

TakaTaka

Property & Assets

Cash 3Cash in hand (Including Foreign Currencies)1,370,642,112

3,915,764,7201,453,582,275

5,154,344,688

5,286,406,8326,608,196,961

Balance with other Banks & Financial

Institutions 4

In Bangladesh

Outside Bangladesh

4,182,145308,043,540

4,182,145308,043,540

Money at Call on Short Notice

5

Investments 6Government

Others5,554,100,0004,474,700,000

13,633,834,449

669,169,95547,143,225,239

1,886,810,862

14,303,004,40412,545,717,273

Loans &Advances 7

Loans, Cash Credits, Overdrafts etc.

Bill discounted and purchased50,078,178,046

2,265,993,14447,143,225,239

1,886,810,862

52,344,171,19049,030,036,101

Premises and Fixed Assets

Other Assets 8Non-Banking Assets 9Total Assets 102,332,537,980

7,755,650,0322,323,315,942

7,021,822,063

87,580,052,58382,311,831,880

Capital & Liabilities

Liabilities

Borrowing from other banks

and financial institutions and agents 1116,468,82123,303,233

Deposits and Other accounts 12Current Deposits and other accounts

Savings Deposits

Fixed Deposits19,042,377,933

29,450,363,670

24,496,404,55218,128,695,812

27,684,681,464

24,474,189,893

Bills Payable72,989,146,155

923,634,239

73,912,780,39470,287,567,169

920,411,338

71,207,978,507

Other Liabilities 1319,232,576,34419,249,699,782

Total Liabilities93,145,356,73890,457,678,289

9316182555990,480,981,522

ParticularsNotes20092008

TakaTaka

Capital & Shareholders Equity

Paid up Capital 14

Share Money deposit 15

Reserve against Receipts of net asset value of

Karachi Branch 16

Statutory reserve 17

Other reserves 18

Balance of Profit and Loss Account 191,250,000,000

74,953,800

335,562,500

1,250,231,893

3,594,213,893

(12,086,734,230)1,250,000,000

352,353,800

335,562,500

916,533,197

1,897,926,549

(12,921,525,688)

Total Shareholders Equity5,286,406,8326,608,196,961

Total Liabilities &Shareholders equity87,580,052,58382,311,831,880

Off Balance Sheet Items 20

Contra Accounts:

Contingent Liabilities

Letter of Guarantee

Letter of Credit

Bills for collection

Other contingent Liability (DC Notes)

32793624864469340178

2033228291

27377589811

2124120273

12635612216891723

27562520463

1581135263

1263561

Total other contingent3153620193631361811010

Other Commitment --- ---

Total contingent Liabilities3153620193631361811010

2.9.2 Profit and loss statement.

RUPALI BANK LIMITED

Profit & Loss Account

For the year ended December 31, 2009

ParticularsNotes20092008

TakaTaka

Operating Income

Interest Income 21

Less-Interest Paid on Deposits & Borrowings etc. 22

497,8543,342

3,238,758,1844090581930

3080511189

Net Interest Income

Interest from Investment 23

Commission, Exchange, Service Charges etc. 24

Other Operating Income 251,739,785,158

1010070741

1,558,950,825

701,879,827

2,941,0811254382713

499021624

5726227

Total Operating Income (1)

Operating Expenses

Salary & Allowance 26

Managing Directors Fee

Directors Fee

Rent, Taxes, Insurance, Electricity Etc. 27

Legal Expenses

Postage, Stamp, Telegram &Telephone 28

Audit Fee 29

Stationery, Printing, Advertisement etc. 30

Loss/Expenses for bad loan

Depreciation and Repairs to Banks Property 31

Other Expenses 324,003,556,8912769201302

1,390,433,790

364,020

908,000

132,432,004

658,967

(8,353,691)

500,000

33,832,079

--

54,106,664

299,962,7411204929899

361080

868000

119226638

(2951093)

(2388996)

550000

32909845

--

28235117

242375685

Total Operating Expenses (2)

A)Profit before provision (1-2)

Transferred to Income 331,904,844,5741,624,116,175

2,098,712,3171,145,085,127

----

B) Total2,098,712,3171,145,085,127

Rupali Bank Limited

ParticularsNotes20092008

TakaTaka

C) Provision

Provision for Loan 34

Provision for Off Balance sheet Items 35

Provision for other Assets 36

Other Provision 371744000

24869092

403609903199607988

23663245

47716198

Total Provisiton

D) Total Profit / (Loss) Before Tax (B-C)

E) Provision for Tax

F) Toatal Profit / (Loss) After Tax (D-E)403222995270987431

1668489322

--874097696

--

1668489322874097696

Appropriation

Statutory Reserve

General Reserve 38

Dividend

Total Reserve333697864

500000000

--174891540

--

833697864174819540

Net Profit / Loss Adjusted to Accumulated Loss A/C

Earning per share 39834791458

133.48699278156

69.93

These Financial Statements should be read in conjuction with the annexed notes 1 to 44.

2.9.3 Cash flow statement.

RUPALI BANK LIMITED

Cash Flow Statement

For the Year Ended December 31, 2009

ParticularsNotes20092008

TakaTaka

A) Cash flows from operating activities:

Interest Received in cash

Interest Paid

Cash received from profit/Dividend

Fees, Commissions, Exchange & service charges receipts

Received from Written Off Loan

Cash Paid to employees

Cash Paid to suppliers

Income tax paid

Received from other operating activities

Paid to other operating activities

6151,202,600

(3,238,758,184)

5,080,727

701,879,827

353,500,000

(1,390,797,810)

(157,910,392)

-

2,941,081

(302,029,708)5340558913

(3080511189)

4405730

499021621

244308254

(1205290979)

(149747487)

-

5726227

(240842592)

Operating profit before changes in operating assts

and liabilities (A)2,125,108,1411417628498

B. Increase / Decrease in Curent assets & Liabilities:

Statutory Deposit

Purchase/Sales Trading Security

Loans and advances to other banks

Loans and advances to customers

Increase/decrease of Other assets

Increase/decrease of deposit (from other Banks)

Customers deposits

Other liabilities to customers Accounts

Other reserves

Trading liabilities

Other liabilities

--

(2,600,000,000)

--

(3,314,135,089)

(897,683,382)

59,929,000

2,606,163,422

--

--

--

(230,733,298)--

--

--

(1,949,716,564)

1237,856,736

62,759,000

(2,221,266,530)

--

--

--

(6807513)

Net increase in operating liabilities (B)(4,376,459,347)2,877,174,871)

C. Net Cash flow from operating activities (A+B)(2,251,351,206)(1,459,546,373)

ParticularsNotes20092008

TakaTaka

D. Cash flow from investments

Proceeds from Security Sold

Payment for Security purchased

Adjusted money for fixed assets

Assets installations and machinery purchases/sold

Subsidiary purchased & Sold

3307883647

(1532046168)

57694

(63032495)

--4222651000

(2625568200)

3055435

(1686506)

--

Net cash flow from investmetns17128626781598451729

E. Cash flow from financial activities:

Paid to loans & debt. Securities

Ordinary Share issue

Dividend paid

Increase/Decrease of other reserve

(6834412)

--

--

----

--

--

--

Cash flow from financial activities (E)

F. Difference between fixed assets schedule

& P/L A/C (depreciation)

G. Effect on cash & cash equivalent due to

changes in exch. Rate(6834412)

--

--(1975320)

--

Net increase/Decrease (C+D+E+F+G)

Opening cash and cash equivalent 40(545322940)

11399735242136930036

6779310465

Closing cash and cash equivalent 41108544123026916240501

2.9.4 Statement of Changes in EquityFor the year Ended 2009

Particulars Paid Up DepositShare MoneyStatutory ReserveOther ReservesAssets Rev. ReserveRetained EarningsTotal

PropertiesInvestment

Balance as at 1st January 091,250,000,000352,353,800916,533,19713,298,1702,145,561,11874,629,761(12,921,525,688)(8,169,149,642)

Restated Balance as per Change in accounting rules--------

Restated Balance as at 1st January-091,250,000,000352,353,800916,533,19713,298,1702,145,561,11874,629,761(12,921,525,688)(8,169,149,642)

Surplus? deficit on revaluation of properties Assets/ (Adjustment with Investment)-(277,400,000)-----(277,400,000)

Surplus/deficit on revaluation of investment (HFT)-----1,196,287,344-1,196,287,344

Difference due to changes in Currency revaluation-------

Receipts & Losses not recognized in the income statement-------

Net Profit during the year--333,697,864500,000,000-834,791,4581,668,489,322

Dividend paid--------

Issue of share capital--------

Balance as at 31st December-091,250,000,00074,953,8001,250,231,061513,298,1702,145,561,1181,270,917,105(12,086,734,230)(5,581,772,976)

Share Money Deposit have been adjusted with investment tk. 27,74,00,000/=

2.9.5 Liquidity Statement(Maturity Analysis of Assets & Libilities)

For the year ended December 31, 2009

ParticularsUp to 01 Month01 to 03 Month03 to 12 Month01 to 05 YearsMore than 05Total

Assets

Cash in hand5,286,406,832--------5,286,406,832

Balance with other banks and financial institutions4,182,145--------4,182,145

Money at call on short notice & FDR3,700,000,000100,000,0001,530,000,000224,100,000--5,554,100,000

Investment9,723,325----350,000,00013,943,281,07914,303,004,404

Loans and advances7,346,911,0008,094,478,39316,591,202,8344,648,567,00015,663,011,96352,344,171,190

Fixed assets (including premises, furniture and fixture)--------2,332,537,9802,332,537,980

Other assets567,537,627493,676,8141,251,046,709104,591,0595,338,797,8237,755,650,032

Non banking assets------------

Total Assets16,914,760,9298,688,155,20719,372,249,5435,327,258,05937,277,628,84587,580,052,583

Liabilities----

Borrowing from Bangladesh Bank, other banks, Financial institutions and agents----6,834,4129,634,409--16,468,821

Deposit accounts15,611,280,1006,905,903,28013,370,442,10611,358,530,00025,742,990,66972,989,146,155

Other accounts (bills payable)415,635,407323,271,984184,726,848----923,634,239

Provision & Other Liab.695,211,805365,807,605416,135,5602,160,361,80015,595,059,57419,232,576,344

Total Liabilities16,722,127,3127,594,982,86913,978,138,92613,528,526,20941,338,050,24393,161,825,559

Net Liquidity difference192,633,3171,093,172,3385,394,110,617(8,201,268,150)(4,060,421,398)(5,581,772,976)

These Financial Statements should be read in conjuction with the annexed notes 1 to 44.

2.10 Highlights on the Overall activities of the Bank

as on December 31, 2009

Figure in Crore (Except %)Particulars20092008

TakaTaka

1Paid up Capital125.00125.00

2Total Capital (Core+Supplementary(712.68)(898.80)

3Surplus / Shortage of Capital(1,278.99)(1,389.50)

4Total Assets8758.01(1,231.18)

5Total Deposits7391.287,120.80

6Total Loans & Advance5234.424,903.00

7Total Contingent Liabilities and Commitments3153.623,136.18

8Ratio of Loans and Deposit70.82%69.76%

9Ratio of Classified Loan against Total Loans and Advances20.91%31.29%

10Profit/Loss after tax & provision166.8587.41

11Classified Loans for the year1094.411,534.24

12Provision kept against Classified Loans775.79786.37

13Provision keept against Loans & Advances including off B.S. items852.86852.69

14Provision Surplus / (Deficit)174.41-

15Cost of Fund7.207.74%

16Interest Earning Assets6125.725,070.81

17Non interest Bearing Assets2632.293,160.37

18Return on investment (ROI)10.90%10.00%

19Return on Assets (ROA)1.17%0.46%

20Total income from investment155.90125.44

21Earning Per Share (after credit all provisions)133.4869.90

22Profit per Share (Before Provision)167.9091.61

23Price Earning Ratio (Times)10.7111.98

Credit Rating information:

Rating20082007

Long termBB3BB3

Short-termST3ST3

National SupportAAAAAA

CHAPTER-THREE

RUPALI BANK LIMITEDLITERATURE REVIEWThe purpose of the study was to present the relationship between service quality, switching cost and trust with customer satisfaction and customer loyalty in Rupali Bank Ltd.

3.1 Service quality

According to Berry et al. (1988), Service quality has become a significant differentiator and the most powerful competitive weapon, which all the service organizations want to possess. Definitions of service quality hold that this is the result of an evaluation process where customers compare their expectations about a service with their perception of the service to be received (Lewis & Booms, 1983; Lehtinen & Lehtinen, 1982, Gro nrooss, 1984, Parasuraman et al, 1985,1988,1994). They also added that service quality can be split into technical quality which means what is dome and functional quality which means how it is dome. Lehtinen and Lehtinen (1982) gave a three-dimensional view of service quality consisting interaction, physical, and corporate quality.

Numerous researches have been delineated service quality as forms of attitude- a long run overall evaluation, and the two constructs (service quality and attitude) are viewed as similar (parasuraman et al., 1988; Bitner, Booms, & Tetreault, 1990; Bolton and Drew, 1991; Cronin & Taylor, 1992; Bitner & Hurbert, 1994m). Allport (1995) defined attitude as a learned predisposition to respond to an object in a consistently favorable or and unfavorable way. As perceived service quality portrays a general overall appraisal of service, i.e. a global value judgment on the superiority of overall satisfaction with the service, it is viewed as similar to attitude (Sureshchandar et al., 2002)

Parasuraman et.al (1988) have developed a service quality measure, SERVQUAL which reasonable of the overall service quality dimensions. The researchers developed ten general dimensions named- tangibles, reliability, responsiveness, competence, courtesy, credibility, security, access, communication, and understanding. SERVQUAL was revised later by parasuraman et.al. (1991) based on the result of an empirical study on five service companies. They noticed that some of the ten dimensions were correlated. They refined it and finalized the instrument composed of five dimensions include reliability, responsiveness, assurance, empathy, and tangibles. In this present study these dimensions will be used to measure the service quality.

3.2 Dimensions of service quality

3.2.1 ReliabilityAccording to Philip Kotler (1999); Bitner, M. J. and Zeithaml, V.A. (2003) the ability to perform the promised service dependably and accurately is the reliability. Gilbert A. Churchill, Jr. & J. paul peter (1999) added that customers want performance to be consistent and dependable.

3.2.2 ResponsivenessAccording to Philip Kotler (1999); Bitner, M.J. and Zeithaml, V.A (2003) responsiveness is the willingness to help customers and provide prompt service. Gilbert A. Churchill, Jr.& J. Paul peter (1999) added that customer must see service provider as ready and willing to perform.

3.2.3 Tangibles

According to Philip Kotler (1999); Bitner. M.J. and Zeithaml, V.A. (2003), the appearance of physical facilities, equipment, personnel, and communication material of an organization is the tangibles. Gilbert A. Churchill, Jr. & J. Paul peter (1999) added that customer look for quality in the equipment, facilities, and communication materials used to provide the service.

3.2.4 EmpathyAccording to Philip Kotler (1999); Bitner, M. J. and Zeithaml, V.A. (2003), empathy means the provision of caring, individualized attention to the customer.

3.2.5 AssuranceAccording to Philip Kotler (1999); Bitner, M. J. and Zeithaml, V.A. (2003), assurance means the knowledge and courtesy of employees and their ability to convey trust and confidence.

3.3 Switching cost

According to Porter (1998), switching cost is the cost involved in changing from one service provider to another. In addition to measurable monetary costs, switching costs also include time and psychological effort involved in facing the uncertainty of dealing with a new service provider (Dick and Basu, 1994; Guiltian, 1989). According to Jackson (1985), it is the sum of economic, psychological cost, and physical costs. It includes the psychological cost of becoming a customer of a new firm, and the time effort involved in buying new brand (Klemperer, 1995; Kim et al., 2003). Hence, switching cost varies from customer to customer (Shy, 2002). Psychological cost is a perceived cost stemming from social bonds that form in the course of time and the uncertainty and risk associated with switching to and unfamiliar brand (Patterson and Sharma, 2000; 2003). Thus the switching cost can vary from customer to customer. The definition provided by Porter (1998) will be considered as switching cost in this study.

3.4 Trust

Trust is consistently related to the vulnerability of the trustor (Bigley and Pearce, 1998; Singh and Sirdeshmukh, 2000), because without vulnerability of the trustor upon the trustee, trust becomes irrelevant. In business studies, trust has been found to be important for building and maintaining long-tern relationships (e.g. Geyskens et al., 1996; Rousseau et al., 1998; Singh and Sirdeshmukh, 2000). Anderson and Narus (1990) postulated that, one party believe that the action of a third party will bring positive outcomes to him, trust can be build that the actions of a third party will bring positive outcomes to him, trust can be build. Trust was viewed as one of the most relevant antecedents of stable and collaborative relationships. The centrality of trust in market relationships are made evident by the many research and some wide literature review are already available (Castaldo, 1995; Blois, 1999). Doney and Cannon (1997) added that the third party also must have the ability to continue to meet its obligation within the cost-benefits relationship. Therefore, the customer should not only perceive positive outcomes but also believe these positive outcomes will continue in the future. According to Lau and Lee (1999), as one party trusts another and develop positive behavioral intentions towards the other, when customers trust brands they also form positive buying intentions towards those brands. Trust is sometimes conceived of having two components, performance or credibility trust and benevolence trust, as Ganesan (1994) pointed out in a business context.

3.5 Customer Loyalty

Customer loyalty represents the repeat purchase, and referring the company to other customers (Heskett et al. 1994). He also sated that customer loyalty is a figure that may be measured directly as measuring the actual repeated sales to customers. According to Duffy (2003) loyalty is the feeling that customer has about a brand which ultimately generates positive and measurable financial results. Improvements in retention and increasing in the share of the company are the obvious economic benefits of customer loyalty. According to Feick and Lee (2001), customer loyalty has been measured as the long-term choice probability for a brand or as & minimum differential needed for switching. Several earlier studies identified customer loyalty in several w3ays such as attitudinal approaches focused mainly on brand recommendations, resistance to superior products (Narayandas, 1996), repurchase intention (Cronin & Taylor, 1992) and willingness to pay a price premium (Bitner & Zeithaml, 2003). Czepiel and Gilmore (1987), define service loyalty as a specific attitude to continue in an exchange relationship based on past experience. Their definition implies that levels of service loyalty can be assessed by attitudinal measures such as the ones based on intentions to repatronize a service provider. Such attitudinal measures have an advantage over behavioral measures (e.g repeat patronage) in that they can provide greater understanding of the factors associated with the development and modification of loyalty ( Oliva et al., 1992).

3.6 Customer satisfaction

The most common interpretations reflect the notion that satisfaction is a feeling which results from a process of evaluating what was receive against that expected, the purchase decision itself and the fulfillment of needs or want (Armstrong & Kotler, 1996; Berkowitz et al. 1999). Kotler (1999) also noted that satisfaction is a function of perceived performance and expectations which identifies feelings of a person resulting from comparing a products perceived performance in relation to his or her expectations. Bitner and Zeithaml (2003) stated that satisfaction is the customers evaluation of a product or service in terms of whether that the perception of the word satisfaction influences the activities which we conduct to achieve it. Researchers have also identified customer satisfaction from a multi dimensional nature and view overall satisfaction as a function of satisfaction with multiple experiences with the service provider (Sureshchandar et al., 2002).

3.7 Relationship between service quality customer satisfaction.In more recent studySpreng and Mackoy(1996) addressed the relationship between service quality and customer satisfaction by using model developed by Oliver et al(1992).The model integrates the two constructs and suggests, among other things that perceived service quality is an antecedent to satisfaction Spreng and Mackoy showed that service quality leads to customer satisfaction.3.8 Relationship between service quality and customer loyalty

The relationship between service quality and customer preference loyalty has been examined, among others, by Boulding et al. (1993) and Cronin and Taylor (1992). Cronin and Taylor (1992) focused solely on repurchase intentions, whereas Boulding et al. (1993) focused on the elements of repurchasing and willingness to recommend. In the study by Cronin and Taylor service quality did not appear to have a significant (Positive) effect on repurchase intentions (in contrast to the significant positive relation between satisfaction and repurchase intention), while Boulding et al. (1993) found positive relationships between service quality and repurchase intentions and willingness to recommend. Furthermore, it has been argued that actually responding to dissatisfaction (e.g. complaining directly to the company or complaining to a third party ) is negatively related to the level of service quality (Beardon et al., 1979; Yi, 1990). Rust and Zahorik (1993) related service quality perceptions to consumer loyalty in banking, Crosby and Stephens (1987) investigated loyalty in the insurance industry and with regard to retailing, customer patronage was investigated in relation to service encounter failures by Kelley et al. (1993).

3.9 Relationship between switching cost and customer loyalty

It has been suggested that the degree of switching costs may have an influence on customer loyalty in a given industry (Anderson and Fornell, 1994; Dick and Basu, 1994; Fornell, 1992; Gremler and Brown, 1996). Anderson (1982; 1985) found empirical support for the effect of high switching costs on customer loyalty in relation to medical services. In addition to customer uncertainty and structure of the market, the level of competition and loyalty programs (e.g. membership program, customer clubs, seasonal tickets in theatres and opera houses) may increase the perceived and actual cost of switching (Gruen and Fergusson, 1994; Gummessson, 1995), in other words, in the presence of switching cost, customers who might be expected to select from a number of functionally identical brands display brand loyalty (Klemperer, 1987). In conclusion, it appears that there is a positive relationship between the level of switching costs and customer loyalty in service.

3.10 Relationship between trust and customer loyalty

Trust is logically and experientially a critical variable in relationships, as has been hypothesized and borne out n the marketing literature (Moorman et al., 1993; Morgan and Hunt, 1994). Those who are not willing to trust a vender in a competitive marketplace are unlikely to be loyal. The importance of trust in explaining loyalty is also supported by authors as Lim et al. (1997), Garbarino and Johnson (1999), Chaukdhuri and Holbrook (2001), Singh and Sirdeshmukh (2000) and Sirdeshmukh et al. (2002).

However, it must be admitted that, while in a market suitable alternatives lack of global and benevolence trust should lead to negative loyalty (desire and intention to switch), Positive benevolence and global trust may not necessarily lead to positive loyalty. In some markets where all or nearly all vendors are trustworthy, one could trust many vendors equally, one could expect trust as a normal part of doing business, and therefore be loyal or not without reference to trust. So, the trust-loyalty relationship, while positive, may be weak in some markets.

CHAPTER-FOUR

RUPALI BANK LIMITEDMETHODOLOGYResearch methodology is a way to systematically solve the research problem. It may be understood as a science of studying how research is done scientifically.4.1 SOURCE OF DATA:The study will focus on deposit and loan scheme of banking and customer satisfaction through practicing modern E-business systems. There is a growing independence between business strategy, rules & procedures on the one hand & marketing management is the art and science of choosing target markets and getting, keeping and growing customers through creating, delivering and communicating superior customer value on the other.

4.2 DATA COLLECTION PROCEDURE AND METHODThere are various techniques or methods in collecting the data. They are:

By observation

Through personal interview

Through telephone interview

By mailing of questionnaire

Through schedules

Data can be collected either through experiment or through survey. AS a researcher, I collected the information through personal interview. Interview with customer have done through questionnaire in order to discuss about the related matters before preparing the report. The annual report,various loan related circular of Rupali bank and internet were the main source of secondary data.The data was collected through questionnaire survey.

4.3 SAMPLING PLAN AND SAMPLE SIZEStudy population

A sample design is a definite plan for obtaining a sample from a given population. Due to time and budgetary constraint, the survey focused only into the various customers. The customers are almost the resident of Narayangonj and Munshigong. The sample had been selected on the basis of my working place.To investigate the factors for customers preference, Nonprobability Sampling Procedure has been used. The sampling unit was selected through Convenience Sampling: where the selection of the sampling unit is left primarily on the interviewer (Malhotra, 2001). The reason of choosing Convenience Sampling is many but here most importantly, there is no appropriate structure or framework that can aid to select the sample. Farther, these procedures are both time saving and inexpensive. The total sample size for the study was 100. 4.4 PRE TESTINGThe originally develop questionnaire will be pre- tested in order with few dummy respondent to ensure the quality of the questionnaire in terms of preciseness, conciseness, objectivity and understandability of the questions. CHAPTER-FIVE

RUPALI BANK LIMITEDDATA COLLECTION AND DATA ANALYSIS5.1 METHODS OF DATA COLLECTIONThere are two types of data: Primary data and Secondary data.5.1.1 Primary Data Collection

For this study, at first I selected the primary sources of data and collected data through interview. In selecting the primary sampling units, PPS (Probability proportion to size) sampling method is implemented. I took interview different executives of MIS, HR & Admin, Accounts,Development,SME departments of the Rupali bank ltd.

The questionnaires were as follow:Sample Questionnaire

Name:

Age:

Sex:

Occupation:

. For how long (years) have you been banking with Rupali bank?

A. (Please circle) 5. Do you bank with any other bank?

A. Yes

No

If yes, please name of the other bank(s):

(This questionnaire has been designed to conduct a research on evaluation of customer satisfaction to fulfill the course requirement of Master Paper:, under Bangladesh Open University. Your active participation will enable us to conduct the research work successfully.) 1.Why do you bank with Rupali bank? What do you expect from Rupali bank?A. --------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------(The scale rates from strongly agree to strongly disagree)

1. Interest rate on loan is low and bearable

5

4

3

2

1

2. Rupali Bank provides additional features in comparison with other Banks

5

4

3

2

1

3. Interest rate on deposit scheme is attractive

5

4

3

2

1

4