Consumer Banking of Prime Bank Limited

INTRODUCTION            

Consumer banking, in other words banking for man-in-the street has been in prevalence in the western world since long which may be traced back in the sixties of the last century. In the Southeast Asia it has emerged as one of the popular vehicles for credit providing activities by the bankers in the seventies. With the passage of time consumer banking has become popular in those areas of the world and its scope of operation has been widened to a considerable extent.

Prime Bank Limited is one of the leading banks in Bangladesh. Since its inception in the year 1995, the Prime Bank Limited has earned tremendous popularity and credibility among the people for its service.

Banks are providing various schemes for clients. Consumers Credit Scheme (CCS) is one of them. Consumers Credit Scheme (CCS) of Prime Bank Limited is gaining more and more popularity which is functioning from the very inception of the bank.

Prime Bank Limited is one of the principal banks who are offering Consumers Credit Scheme (CCS) for the people. It is very helpful to people specially for middle class people and lower middle class people. Under this scheme people can take loan to buy household goods. By installment basis they can repay the loan. As total loan amount is repaid on installment basis it puts less pressure on consumer.

Under Consumers Credit Scheme (CCS) people can take loan from banks and can buy their necessary goods. For limited income group Consumers Credit Scheme (CCS) is very helpful. Prime Bank Limited wants sustainable growth and continues to meet social obligations. Day by day the number of consumers in Prime Bank limited increases which indicate potentiality of the scheme.

I have taken Prime Bank Limited, and four other private sector banks to make a comparison between Consumers Credit Scheme (CCS) of these.

BACKGROUND OF THE REPORT

This report entitled “Consumer Credit Scheme of Prime Bank Limited: A Comparative Study” originated from the partial fulfillment of the internship program. I have completed my internship at Prime Bank Limited, Sreemangal Branch,Moulvibazar,Sylhet. This report has been prepared under the supervision of Mostofa Mahmud Hasan, Assistant professor, department of business administration Stamford University Bangladesh.

 RATIONALE OF THE STUDY

In Bangladesh consumer banking concept in a different flavor started sometime in late eighties which has now become a very popular area of the country’s banks’ credit operation. Here scope of operation of consumer banking is very limited to the fixed income bracket people in acquisition of consumer durables by them through bank financing. That is why, it is better called consumer credit scheme. From the name it means credit operation of a type being carried out by bankers extended to people having limited and fixed but regular income for acquisition of household articles and other assets for personal use.

Realizing the importance of providing quality credit services in the competitive Banking sector, I have selected my report title as – “Consumer Credit Scheme of Prime Bank Limited: A Comparative Study”.

OBJECTIVE OF THE STUDY

  • To o give an overview on Prime Bank Ltd. and its services.
  • To detail the Consumer Credit Scheme (CCS) Of PBL and its Consumer Credit Operation System.
  • To perform a comparative analysis on CCS of PBL and those other private banks.
  • Finding out the shortcomings of the Bank in its CCS operations and providing some Recommendation.

 METHODOLOGY OF THE STUDY

This research of which major objective is to describe the comparative study of customer service quality and how well the customers are accepting the services, is a single cross sectional design where preliminary information is gathered only from the existing clients (account holder) of Prime Bank Limited, The Premier Bank Limited, Dutch Bangla Bank Limited, National Bank Limited and BRAC Bank Limited to whom the quality of services is provided.

Primary Sources of Data Collections are:

  • Face to face conversation with the bank officers.
  • Some Questionnaire survey with the customers is made at Prime Bank Limited, The Premier Bank Limited, Dutch Bangle Bank Limited, National Bank Limited and BRAC Bank Limited.
  • Observing various organizational procedures.

Secondary Sources of Data Collections are:

  • Annual Report and website of Prime Bank Limited.
  • Different publications regarding banking functions.
  • Internet.

It has been preferred simple random sampling technique in this research. The sample size of this research is 100. Each responding is given a questionnaire to fill in. the survey method used in this study is primary data collection tool. Certain objectives are examined using secondary data.

SCOPE OF THE STUDY

My assigned work was limited by the report topic to observe and collect information on Consumer’s Credit Scheme of different private sector banks. For this I have collected data and information on Consumer’s Credit Schemes of four private sector banks, along with Prime Bank Ltd. These are as follows:

  1. Dhaka Bank
  2. BRAC Bank
  3. First Security Bank Limited
  4. Standard Chartered Bank.

I have selected these banks not on the basis of their size, but on the basis of the market acceptability of their Consumer’s Credit Scheme.

LIMITATIONS OF THE STUDY

In preparing this report, I faced some unavoidable problems. Due to these problems, in spite of my maximum effort there may be some lacking or misleading data. These problems are:

  1. Observing and analyzing broad performance of PBL and one of its branches is not an   easy job by this short duration of time (only three months).
  2. As I am a not an employee of PBL, some data could not be collected due to internal security of the bank.
  3. Collecting information on Consumer Credit Scheme from other banks was very tough.
  4. Because of shortage of employees in Banana Branch of PBL I had to work as a full time officer from 9a.m. to 7p.m. on every working day. so I didn’t get chance to give enough effort in preparing this report.
  5. Since there is no marketing department in this branch, I could not enrich my report with information on marketing procedures and promotional strategies of Prime Bank Ltd.

CHAPTER 02
ORGANIZATION OVERVIEW

HISTORICAL BACKGROUND OF PBL

In the backdrop of economic liberalization and financial sector reforms, a group of highly successful local entrepreneurs conceived an idea of floating a commercial bank with different outlook. For them, it was competence, excellence and consistent delivery of reliable service with superior value products. Accordingly, Prime Bank Ltd. was created and commencement of business started on 17th April 1995. The sponsors are reputed personalities in the field of trade and commerce and their stake ranges from shipping to textile and finance to energy etc.

As a fully licensed commercial bank, a highly professional and dedicated team is managing Prime Bank Ltd. with long experience in banking. They constantly focus on understanding and anticipating customer needs. As the banking scenario undergoes changes so is the bank and it repositions itself in the changed market condition.

Prime Bank Ltd. has already made significant progress within a very short period of its existence. The bank has been graded as a top Class bank in the country through internationally accepted CAMEL rating. The bank has already occupied an enviable position among its competitors after achieving success in all areas of business operation.

Prime Bank Ltd. offers all kinds of Commercial Corporate and Personal Banking services covering all segments of society within the framework of Banking Company Act and rules and regulations laid down by our central bank. Diversification of products and services include Corporate Banking, Retail Banking and Consumer Banking right from industry to agriculture, and real state to software. The bank has consistently turned over good returns on Assets and Capital. During the year 2008, the bank has posted an operating profit of Tk.1520.34 million and its equity funds stood at Tk. 2808 million. Out of this, Tk. 1400 million consists of paid up capital and Tk. 1055.98 million represents reserve fund. The bank’s current capital adequacy ratio is 9.96%. In spite of complex business environment and default culture, quantum of classified loan in the bank is very insignificant and stood at less than 0.96%.

Prime Bank Ltd., since its beginning has attached more importance in technology integration. In order to retain competitive edge, investment in technology is always a top agenda and under constant focus. The past performance gives an indication of strength.

Whatever the transaction and customers need, PBL has tried to build long-term relationship. It is through these relationships that PBL has come to understand its customers and build value for them. Special counters are usually opened to meet the service demand of customers during heavy customers flow. Prime Bank limited believes that it gives its customers a world-class banking service through an IT based network of 47 branches.

OBJECTIVE OF THE BANK

Prime Bank limited is designed to provide commercial investment bank services to all type of customers ranging from small entrepreneurs to big business firms. In this regard, it gives emphasize on the priority sector of the economy like industry, housing and self- employment. Besides, the bank aims to provide different customer friendly deposit and loan products to fulfill the banking needs of the individual customers.                                      

THE VISION OF THE BANK

To be the best Private Commercial Bank in Bangladesh in terms of efficiency, capital adequacy, asset quality, sound management and profitability having strong liquidity.

MISSION OF THE BANK

  • To build Prime Bank Limited into an efficient, market driven, customer focused institution with good corporate governance structure.
  • Continuous improvement in business policies and procedures through integration of technology at all levels.

 THE STRATEGIC PRIORITIES OF THE BANK

To have sustained growth, broaden and improve range of products and services in all areas of banking activities with the aim to add increased value to shareholders investment and offer highest possible benefits to the customers.

 CORE VALUES OF THE BANK

For the customers:

To become most caring Bank – by providing the most courteous and efficient service in all area of business.

For the Employees:

By promoting the well – being of the members of the staff.

For the Shareholders:

By ensuring fair return on their investment through generating stable profit.

For the Community:

By assuming the Bank’s role as a socially responsible corporate entity in a tangible manner through close adherence to national policies and objective

CORPORATE INFORMATION OF PRIME BANK LIMITED

1.Year of incorporation

2. Branch of the PBL.

3. Authorized capital.

4. Paid-up capital.

5. Chairman of the Board of Director

6. Managing Director of the Bank 1999

19

Tk. 1000.00 million
Tk 313.87 million
Mr. Azam J. Chowdhury
M. Shahjahan Bhuiyan

             Table 01: Corporate Information of Prime Bank Limited

MANAGEMENT And Organizational Structure

A. Management

 The management of the bank is vested on aboard of directors, for overall supervision and directions on policy matters by the board. The power of general supervision and control of the affairs of the bank is exercise by the president and the managing director of the bank who is the chief executive. The Board of Directors is: –

Board of Directors

 

Mr. Azam J. Chowdhury       – Chairman
Shahnaz Quashem               – Vice Chairperson
Hasina Khan                         – Vice Chairperson

 

Mohammed Aminul Hoque
Quazi Sirazul Islam
Capt. Imam Anwar Hossain
Qazi Saleemul Huq
Razia Rahman
Ferdousi Islam
Nafis Sikder
Saheda Pervin Trisha
Mahanur Ummel Ara
Maksudur Rahman Sarkar

 

 M. Shahjahan Bhuiyan   – Managing    Director

 

 

MANAGEMENT TEAM

M. Shahjahan Bhuiyan   –   Managing Director
Mr. Erfanuddin Ahmed – Senior Executive Vice President

Operations, Credit & ITMr. Aminul Islam – Senior Executive Vice PresidentHR & Company SecretaryMr. S. M. Shamsul Alam – Senior Executive Vice PresidentZonal Head (Dhaka)Mr. S. M. Khorshed Alam – Senior Executive Vice PresidentZonal Head (Chittagong)Mr. Tanweer Rahim – Executive Vice PresidentMarketingMr. Irteza Reza Chowdhury – Executive Vice PresidentInternational DivisionMr. Nasirul Hossain – Senior Vice PresidentCreditMr. Md. Azhar Ali Miah – Senior Vice PresidentAudit & Internal ControlMr. Md. Ashrafuddin Ahmed – First Vice PresidentBoard SecretariatMr. Asadul Karim – First Vice PresidentFinancial ControlMr. S.M. Jahangir Akhter – Assistant Vice PresidentInformation & Communication Tech.Mr. Md. Zia Arfin – Assistant Vice PresidentCorrespondence BankingSyed Nazimuddin  – Senior Vice PresidentManager, Scotia BranchMr. A.H.J. Rahman – Senior Vice PresidentManager, Gulshan BranchMr. Swapan Das Gupta – Senior Vice PresidentManager, Khatunganj BranchMr. M. M. A.  Moquit – Senior Vice PresidentManager, Principal Office Branch  Mr. A.K.M. Shahnawaj – Vice PresidentManager, MCB Sk. Mujib Road BranchMr. Md. Arfan Ali – Vice PresidentManager, MCB Banani BranchMr. Rafiqul Hasan – Vice PresidentManager, Mitford BranchMr. Md. Sazzad Hossain – Vice PresidentManager, Uttara BranchMr. Maruf Mohammed Ahsan  –  Vice PresidentManager, North South Road  BranchMr. Mohammad Borhan Uddin – Vice PresidentManager, MCB Dilkusha BranchMr. A. K. M. Shaiful Islam Chowdhury – First Vice PresidentManager, CDA Avenue BranchSyed Iltefath Hussain – First Vice PresidentManager, Corporate BranchMr. Syed Shafqat Rabbi – First Assistant Vice PresidentManager, Sylhet Main BranchMr. K. S. A. Ansari – Senior Executive OfficerManager, Ashulia BranchMr. Md. Anisur  Rahman – Executive OfficerManager, Tarail BranchMr. Md. Moniruzzaman – Executive OfficerManager, Malkhanagar Branch

 

Management Hierarchy

Non Performing Asset to Total Loans

Non performing assets are income generating assets, including loans, which are past due for 90 days or more. If this ratio rises, the bank’s exposure to credit risk grows and there is a possibility of bank failure. In case of Prime Bank, the non performing asset to total loan ratio is  1.52% (1.48% in 2006 & 1.98% in 2008). Though the credit risk of the bank is still within control, the ratio is rising. It gives a red signal to the credit performance of the bank.

 Provision for Loan Losses to Total Loans

There is a Bangladesh Bank requirement to maintain a provision for unforeseen loan losses. Prime Bank had a provision for loan losses to total loan ratio of 1.39% in 2009 (0.55% in 2007 and 0.39% in 2008).

LIQUIDITY MEASURES

 Net Loan to Total Asset

Net loans (total loans minus the provision for loan loss) to total assets were 57% in 2007, 63% in 2008 and 67% in2009. It shows the loan amount has increased by 17.5% during this period which means the bank’s total asset has increased though it is maintaining a growth in its loan rather than keeping it in cash and balance.

Cash & Balance with other banks and FIs to Total Assets

Total cash and balance with other banks and financial institutions of Prime Bank as a percentage of total assets was 21.36% in 2007, 17.73% in 2008 and 15.10% in 2009. This shows a decrease of 40% during this period. Although this weakens the bank’s liquidity position, it also increases the bank’s earning capability.

 SOLVENCY (OR DEFAULT) RISK MEASURES

Equity Capital to Total Asset

Capital account of a bank absorbs losses if the bank happens to have large bad loans in the portfolio. Such a ratio of equity capital to total asset shows how much cushion the depositors have against the assets of a bank. For Prime Bank, this ratio is around 7% (7.99% in 2007, 7.61% in 2008 and 7.35% in 2009). This small ‘cushion’ poses a risk of default for the bank.

 Equity Capital to Risk Asset

This ratio reflects how well current bank capital covers potential losses from those assets most likely to decline in value. The ratio of equity capital to risk asset for Prime Bank was 13.86% in 2007, 12.03% in 2008 and 10.8% in 2009. As the ratio is decreasing, the risk of potential losses from risky assets is increasing.

 HR DIVISION

The Human Resource Division performs the activities related to administration and personnel. The main functions of HRD are:

  • Selection and recruitment of new personnel
  • Appropriate placement of human resources
  • Maintain the detail about transfer, promotion and leave of personnel
  • Training and development of human resource

BRANCH NETWORK OF PRIME BANK LIMITED

 Prime Bank Limited expanded and consolidated its customer base in both of its core business and retail banking. As up to the period the bank retained its lead by increasing the network of branches to the tune of 46 Branch’s up to 31st December, 2009 shown in figure as follows.

Prime Bank Limited At A Glance

Particulars

2005

2006

2007

2008

2009

Income Statement
Interest Income

1620

2159

2641

3446

5199

Interest Expense

1055

1408

1616

2271

3698

Net Interest Income

565

751

1025

1175

1500

Non-interest Income

631

841

946

1232

1732

Non-interest Expense

448

591

824

886

1101

Net Non-interest Income

183

250

121

346

631

Profit before provision and tax

748

1001

1146

1520

2131

Provision for loans and assets

51

232

82

320

390

Profit after provision before tax

697

770

1064

1201

1741

Tax including deferred tax

279

394

452

633

689

Profit after tax

418

375

612

568

1052

Balance Sheet
Authorized Capital

1000

1000

1000

4000

4000

Paid-up Capital

600

700

1000

1400

1750

Total Shareholder’s equity

1526

1732

2240

2808

3860

Deposits

16482

20483

28069

36022

54724

Long-term liabilities

5350

7052

7371

11406

16877

Loans and advances

12687

16492

23220

31916

45010

Investments

1996

2750

3084

3940

7844

Property, Plant and Equipment

219

256

322

372

412

Earning Assets

15125

19335

27131

36727

55458

Net current assets

437

583

(1299)

31

5286

Total assets

19359

24249

32362

41506

60899

Current ratio

1.00

0.96

1.06

1.00

0.88

Debt equity ratio

8.56%

8%

7%

7%

7%

Table 03: prime bank limited at a glance

PROFIT/LOSS RESULTS

The interest income of the bank has increased by 24.97% (which is obvious since the loan amount has increased in 2009). In 2009, interest income was Tk.2158 million whereas the interest expense was Tk.1407 million thus the net interest income was Tk.751 million, with an increase of 24.76% from the previous year.

The operating expense of the bank has been quite stable. There were not too much of deviation from the previous year. The total operating expense in 2008 was Tk.824 million compared to Tk. 592 million in 2009. The Profit before tax of the bank has increased by 10.49%. However, the Net Profit after tax was decreased by 10.28% from 2007 to 2008. Due to the increase of corporate income tax on the financial institutions from 40% to 45%, the profit after tax has shrunk a little bit compared to the previous years.

CHAPTER 03

GENERAL ACTIVITIES OF THE ORGANIZATION

general Banking

Procedure for Opening of Accounts:

Before opening of a current or savings account, the following formalities must be completed by the customer,

  1.         i.            Application on the prescribed form
  2.       ii.            Furnishing photographs
  3.     iii.            Introduction by an account holder
  4.     iv.            Putting specimen signatures in the specimen card
  5.       v.            Mandate, if necessary
  6.     vi.            After fulfilling the above formalities, Prime Bank provides the customer a pay-in-slip book and a cheque book.

 In case of Joint account (two or more persons)-

  1.         i.            Operational instruction of the account
  2.       ii.            Signature(s)

In case of Partnership Firm-

  1.         i.            Partner’s signature
  2.       ii.            Partner’s name-

The following formalities along with the documents are to be completed before opening an account. –

      Two copies of photograph of the Account Holder(s) duly attested by the Introducer.

      Account to be introduced properly.

      Introducer’s signature on Account Opening Form to be verified by an officer under full signature,

      Letter of thanks to Account Holder(s) and Introducer to be sent under registered post,

      In case of joint account, operational instructions are to be signed by the Joint Account Holders.

In case of Proprietorship Firm-

  1.         i.            Declaration of Proprietorship
  2.       ii.            Trade License from Municipality
  3.     iii.            Account Agreement Form
  4.     iv.            Mandate if Operation by third party is to be allowed,

In case of Limited Company-

  1.         i.            Certified true copy of the Memorandum & Articles of Association of the company,
  2.       ii.            Certificate of Incorporation of the company for inspection and return with a duly certified photocopy for bank’s records,
  3.     iii.            Certificate from the Registrar of the Joint Stock Companies that the company is entitled to commence business (in case of Public limited Co. for inspection and return) along with a duly certified photocopy for Bank’s records,
  4.     iv.            Latest copy of company’s Income Statement,
  5.       v.            Extract of Resolution of the Board, General Meeting of the company for opening the account and authorization for its operation duly certified by the Chairman/ Managing Director of the company,
  6.     vi.            List of Directors with addresses (a latest photocopy of the form-xii),
  7.   vii.            Authorized signature,
  8. Name.

 General conditions of governing Current/ Savings Account-

  1.         i.            Minimum Balance to be maintained in current account Tk. 2,000/- and in Savings account Tk. 1,000/-.
  2.       ii.            A suitable instruction by an introducer acceptable to the Bank is required prior to opening an account.
  3.     iii.            Recent photographs of the Account openers duly attested by the Introducer must be produced.

Issue of Duplicate Cheque Book:

Duplicate cheque book in lieu of lost one should be issued only when an A/C holder personally approaches the bank with an application in the prescribed preformed agreeing to indemnify the bank for the lost cheque book. Fresh cheque book in lieu of lost one should be issued after verification of the signature of the A/C holder from the specimen signature card and on realization of required excise duty only with prior approval of manager of the Branch. Cheque series number of the new cheque book should be recorded in ledger card and signature card as usual. Series number of lost cheque book should be recorded in the stop payment register and caution should be exercised to guard against fraudulent payment.

Closing of an Account:

The closing of an account may happen,

  • If the customer is desirous to close the account
  • If bank finds that the account is inoperative for a long duration.
  • If Garnishee Order is issued by the court on Prime bank.

To close the account, the cheque book is to be returned to the bank. Prime bank takes all the charges by debiting the account and the remaining balance is then paid to the customer. Necessary entries are given to the account closing register and computer.

The success of a company depends exclusively on the products and services it offers with a reasonable price compared to the competitors. It is the main source to attract consumers.

DIFFERENT PRODUCT

(a) Deposit products

PBL offers attractive savings schemes so that customers are interested in saving money in this bank. The bank is also offering reasonable interest rate on the deposits to attract consumers to save. Prime Bank Ltd. has the following products under the deposit scheme.

Contributory Savings Scheme (CSS): It is a savings scheme where a person gets the opportunity to build up savings by contributing monthly installments and receives a fixed amount of money at the end of a specified term. PBL pays 15% interest rate on this savings scheme.

Installment

Tk. 100

Tk. 250

Tk. 500

Tk. 1,000

Term

Amount Payable at Maturity (Taka)

5 years

8,000

20,000

40,000

80,000

8 years

15,000

37,500

75,000

1,50,000

10 years

20,000

50,000

1,00,000

2,00,000

                                               Table 4: CSS

  • Special Deposit Scheme (SDS): It is a scheme where deposit installment is issued for the full amount payable after a specified period against deposit of a certain amount.

Term

Initial Deposit (Taka)

Value Payable at maturity (Taka)

5 years

1,00,000

1,65,000

7 years

1,00,000

2,00,000

10 years

1,00,000

3,00,000

                                             Table 05: SDS

  • Fixed Deposit Scheme: It is a scheme where the deposit is kept for a fixed term or period. PBL offers the following service in this regard:

Sl. No.

TERM

INTEREST RATE

1

30 days

8.75 %

2

3 months

9.00 %

3

6 months

9.25 %

4

1 year

9.5  %

5

2 years

10.00 %

6

3 years and above

10.50 %

                                  Table 6: Fixed Deposit Scheme

  • Monthly Benefit Deposit Scheme: It is a scheme where the depositors get a fixed amount of profit every month without interrupting the principal amount.  The scheme is for minimum Tk. 1 Lac for a 5 year period with an interest rate of 11%.
  • Education Savings Scheme (ESS): This scheme provided by PBL gives a unique opportunity to the parents to make a future provision for the educational expense of their children when they would enter into educational institutes, out of the benefit of a small amount of savings with the bank. PBL offers 12.5% of interest rate on this scheme.

Term

Initial Deposit (Taka)

Lump sum amount payable at maturity

Amount of Education allowance per month
(6 Years)

7 years

25,000

55,000

1,000

10 years

25,000

77,000

1,500

 15 years

25,000

1,36,000

2,500

20 years

25,000

2,40,000

4,500

                                                 Table 07: ESS

  • Savings Account: The bank has savings or current account where no interest is given to the customer.
  • Other Services: Prime Bank Ltd. also offers other accounts regarding the remittance section. These are, Foreign Currency Deposit Account, Non Resident Taka account, Non Resident Currency Deposit Account and Multi Currency account.
Deposit Rate
Particulars Rate
Short Term Deposit
    a) Below Tk.1 crore4.00%
    b) Tk.1 crore to Tk.5 crore4.00%
    c) Tk.5 crore and above4.00%
Savings Deposit
    a) Below Tk.20 Lac6.00%
    b) Tk.20 Lac and above6.00%
Fixed Deposit
    a) 1 month6.50%
    b) 3 months8.00%
    c) 6 months8.25%
    d) 1 year and above8.50%

                                            Table 08: Deposit Rates

(b) Loan Products

There are several loan products offered by PBL. The loan and advances is mainly of two types, General Loan and Consumer Credit Scheme. The general loan includes both industrial and individual loan. All the loan products are discussed below:

  • General Loan Scheme: This type of loan is classified into individual and industrial loans.
  • Consumer Credit Scheme (CCS): In order to provide financial assistance to the limited income group of people, this scheme is beneficiary.

Item

Loan Limit   (Lac)

Client’s own Contribution  (Min.)

Time Limit (Years)

Car, Station Wagon

40.00

10%

5

Recondition Car, Station Wagon

15.00

10%

4

Photocopier

1.00

20%

1

Others

1.00

10%

2

Table 09: CCS income

  • Lease Financing: It is one of the convenient long term source of acquiring capital machinery and equipment, where a client is given the opportunity to have a right to use an asset, for an agreed period of time, against the payment of rent. The major advantage it has is to use an asset without buying it.
  • Small and Medium Enterprise: It is a scheme offered by PBL to provide credit facilities to small and medium size entrepreneurs located in urban and sub-urban areas, to encourage new and educated young entrepreneurs to undertake productive ventures, to assist potential entrepreneurs to take part in economic activities, etc. The loan ceiling is Tk.2.5 Lac for small enterprise and Tk.7.5 Lac for medium enterprise. Interest rate charged is around 15%.
  • House Building Loan Scheme: These loans are allowed to individuals or enterprises for construction of house.
  • Hire Purchase: Hire Purchase is a type of installment credit under which the Hire Purchase agrees to take the goods on hire at a stated rental.
  • Advance against share: In order to contribute to the development of the Capital Market of the country Prime Bank Limited extends credit facilities against pledge of Shares to the individuals as well as to the Member of DSE & CSE.

Remittance Department                 

Remittance refers to the send or receipt of money from one place to another place. Foreign remittance refers that the exchange of money between two countries or among several countries. This is mainly occurred through banking institution. Prime Bank Limited is not beyond this. It performs the remittance function with different countries. It maintains the foreign remittance in the following form:

  • Inward Remittance.
  • Outward Remittance.

ward Remittance

Inward remittance covers purchase of foreign currency in the form of foreign Telegraphic Transfer (T.T), Demand Draft (DD) and Bills & Travelers Cheque, Export Bill etc. sent from abroad favoring a beneficiary in Bangladesh, purchase of foreign exchange is to be reported to Exchange Control Department of Bangladesh Bank on from – letter of Credit (L/C). Basically, these are the formal channels of receiving inward remittance. A local bank also receives indenting commission of local firm also comes under purview of inward remittance.Outward remittance covers sales of foreign Currency by Authorized Dealer (AD) or Formal Channel through issuing foreign Telegraphic Transfer (T.T), Demand Drafts (D.D), Traveler’s Cheque etc. as well as sell of foreign exchange under L/C and against Import Bills retired. The Authorized Dealers have to demonstrate utmost caution to ensure that foreign currencies remitted or released by them are used only for the purposes for which they are released. Most outward remittance is approved by the authorized dealer on behalf of Bangladesh Bank.

Outward Remittance may be made for following purposes-

      Travel

      Medical Treatment

      Educational purpose

      Attending Seminar

      Balance Amount of Foreign Currency Account

      Profit of Foreign Companied

      Technical Assistance

      Letter of Credit (L/C) payment

      Fair, Exhibition for export promotion.

Remittance Transfer Channels

Foreign Remittance can be transferred in two ways –

Formal Channel:

Fund transfer from one country to another country through official channels, i.e. banking channel, post office and other private service channels, such as – Western Union Money Transfer, Neon Money Order, Money Exchanger etc.

The Legitimate purposes of moving money abroad through formal channel are –

  To invest

  To Lend

  To meet Trading/Personal Obligations

  To safeguard assets against theft or seizure by repressive regimes

Informal Channel:

Fund transfer from one country to another country through hand by hand or over telephone in an unofficial channel like – “Hundi”. Experts state that remittance collected

 by informal “Hundi” rings are used to finance illegal trade and transaction. Terrorist financing is also made by this sort of channel   

Criminals use informal channel for moving money abroad because of –

      Dealing in arms & ammunitions

      Drug trafficking

      Financing terrorists’ activities

      Evasion of exchange regulations/control

      Evasion of taxation

      Disguise or remove proceeds of threat/fraud/bribe

      Making blackmail payments

      Paying random for Kidnappers

Income of the Bank in Foreign Exchange Sector

      Commission on opening a BTB L/C which is determined on the basis of “Bills for Collection” selling rate.

      0.45% commission on the deferred L/C for 120 days & .30% commission on the deferred L/C for 90 days if the applicant bank accepts the bill for payment (ABP) in respect of its applicant.

      Tk.500 for shipping guarantee to the customs department of the port if the applicant wants to discharge the imported products before receiving the documents related to export. The bank acts as a guarantor taking all responsibilities related to payments.

      7-10% interest rate on packing credit.

Clearing Department

1. UNDERSTANDING:

Prime bank is a scheduled Bank. According to the Article 37(2) of Bangladesh Bank Order, 1972, the banks which are the member of the –“Clearing-House” are called as Scheduled Banks. The scheduled banks clear the cheques drawn upon one another through the Clearing-House. This is an arrangement by the central bank where everyday the representative of the member banks gathers to clear the cheque. The place where the banks meet and settle their dues is called the Clearing-House. The Clearing-House sits for two times a working day.

 2. THINGS ARE DONE HERE:

The following things are done in this department:

      Pass outward instruments to the Clearing-House.

      Pass inward instruments to respective department.

      Return instruments in case of dishonor.

      Prepare IBCA or IBDA for the respective branch and HO.

The following entries are given if the cheque is honored,

Customer A/C                                               Debit

Prime bank General A/C                                                       Credit

Prime bank Principal Branch clears its cheque through the Head Office as well as the cheque of other branches, because it is only permitted. The other branches send the instruments through I.B.C.A. Prime bank Principal Branch acts as an agent in this case.

For this the concerned branch gives the following entries,

 Bank General A/C                                       Debit

Customers A/C                                                                      Credit.

If the instrument is dishonored, the instrument is returned to the concerned branch through I.B.C.A. along with the following entries,

Incase of return (For Inward instruments):

 Bank General A/C                           Debit

Customers A/C                                                                      Credit

In case of return (For Outward instruments):

Customer A/C                                               Debit

 Bank General A/C                                                   Credit.

Incase of returning an instrument the respective officer usually looks for following reasons, Account closed: –

      Insufficient fund

      Not arranged for

      Payment stopped

      Refer to drawer

      Effects not cleared may be presented again

      Amount in words and figures differs

      Drawer’s signature differs, etc.

Receiving Cheque for Collection:

In Prime bank, cheques of its customers are received for collection from other banks. In case of receiving cheque, following points should be checked very carefully-

  1. The cheque should not carry a date older than the receiving date for more than 6 months. In that case it will be a ‘stale cheque’ and it will not be allowed for collection. Again the date of the check should not be more than 1 day forwards than the receiving date.
  2. The amount in figures and words in both sides of the pay-in-slip should be same and it should also be same with the amount mentioned in figures and words in the cheque.
  3. The name mentioned in the cheque should be same in both sides of the pay-in-slip and it should be the same with the name mentioned in the cheque.
  4. The check must be crossed

CASH SECTION

The cash department deals with all types of negotiable instruments, cash and other instruments and treated as a sensitive section of the bank. Now a day in modern banking cash department serves the following services –

  1. Receipt and Payment of Cash.
  2. Balancing, Checking and safe custody of Cash.
  3. Inter-Branch Remittance of Cash.
  4. Maintenance of Accounts with Bangladesh Bank/Other Banks.
  5. Insurance of cash.
  6. Manage Excess or shortage of cash, mutilated defective notes.

 RECEIPT OF CASH:

Cash may be deposited either by deposit slip for SB/CD/CC accounts or other credit voucher like single credit voucher, pay order/draft/TT application forms. Branches shall ensure the following:

Cash receiving officer shall check the deposit slip/ credit voucher/ application form as to its title of the account, number and amount in words and figures.

The cash currency notes shall be counted physically/ by cash counties machines as per denominations of the currency notes on the back of the voucher/ deposit slip. The officer will enter the particulars in the cash receiving register and sign on the related deposit slip/ voucher and affix Cash received stamp with date. He shall write the amount in words and figures in red ink across the deposit slip/ voucher/ application form in token of receipt of the money. He shall send the register along with the deposit slip/ voucher for singing on the same and authenticating the receipt in the register by the in-charge of the department.

      The officer in-charge shall retain the original of deposit slip and other vouchers and send them to respective desk for posting/actions. The duplicate voucher shall be handed over to the depositor/client.

      At the close of the business the cash receiving officer shall add all the entries in the register and if agreed with the actual cash received by him, shall hand over the register for checking by officer-in-charge.

      Receiving Cash officer will hand over the Cash to the entire cash in-charge duly checked by him.

 PAYMENT OF CASH:

Cash payment of different instruments is made in cash section. Procedure of Cash Payment against cheque is discussed under elaborately. Cash Payment of cheque includes few steps:

      First of all the clients come to the counter with the check and give it to the officer in charge there. The officer checks whether there are two signatures on the back of the cheque and checks his balance in the computer. After that the officer will give it to the cash in charge.

      Then the cash in charge verifies the signature from the signature card and permits the officer in computer to debit the client’s account by giving posting. A posted seal with teller number is given.

      Then the cheque is given to the teller person and he after checking everything asks the drawer to give another signature on the back of the cheque.

      If the signature matches with the one given previously then the teller will make payment keeping the paying cheque with him while writing the denomination on the back of the cheque.

BALANCING, CHECKING AND SAFE CUSTODY OF CASH:

      At the close of business when cash receiving and payment registers are balanced. The cash balance book is written and agreed with cash in hand. The book is signed jointly by the cash officer and the supervising officer/manager.

      Cash position Memo is written including details of denomination on the reverse. The memo shall be signed by the Cash officer and Checking Officer.

      Vault register shall be written with details of denominations and the checking officer shall initial the register.

      In presence of the checking officer the loose cash box is closed and the bundles are placed in the safe inside strong room together with box and the keys are applied.

      The Cash Position memo is sent to Account department for balancing of accounts of there Brace.

 DEPOSIT SELECTION

1. Accepting Deposits

Accepting deposits is one of the two classic functions of commercial banks. Most of the commercial banks view with one another in tapping the savings of the public by means of different kinds of deposits. Almost everyday a new kind of deposits is being introduced. Incase of Prime bank the deposits that are accepted may be classified into-

a)      Demand Deposits

b)      Time Deposits

c)      Scheme Deposits

1. a. Demand Deposits

These deposits are withdrawn-able without notice, e.g. current deposits. Prime bank accepts demand deposits through the opening of-

                    i.            Current Account *(CD)

                  ii.            Savings Account *(SB)

                iii.            Short Term Deposit *(STD)

 1. b. Time Deposit Account

The amount in this a/c is payable only after stipulated time. The following accounts are under time deposit a/c:

  1. 3 (Three) months @ 9.75%
  2. 6 (Six) months @ 10.00%
  3. 1 (One) Year @ 11.25%

 1. c. Scheme Deposits 

With the growth of middle classes and other classes of people having a monthly and regular source of income, Prime bank has come up with a scheme named Scheme Deposit.

The following accounts are under Scheme deposit a/c:       

  1.         i.            Monthly savings Scheme (MSS)
  2.       ii.            Monthly Income Scheme (MIS)
  3.     iii.            Super Savings Scheme (SSS)
  4.     iv.            Multi Plus Savings Scheme (MPSS)

 ACCOUNT SECTION:

Account section records day to day transaction of the branch including deposit inflow-outflow, daily expanses and gives focus what are need for establishment of the branch means photocopy paper, ink, shelf, desk etc. This section prepares statement daily, weekly, monthly, semi-yearly and yearly.

This department also is called financial control department. In banking business transaction are done every day is their transaction are to be recorded properly and systematically as the banks deal with the depositors money. Any deviation in proper recording many hamper public confidence and bank has to suffer a lot otherwise. Improver recording of transaction will lead to the mismatch in the debit side and the credit side. To avoid these mishaps the bank provides a separate department whose function is to check the mistake is passing voucher on wrong entries or fraud or forgery.

LOAN AND ADVANCE

Bangladesh is a small thriving country, where majority of the population endure a substandard life. These ordinary people cannot even afford to buy essential products. In such context Prime Bank Ltd. has started its Consumer Credit Scheme (CCS) in 1995.

Though PBL was not the first bank to come with the concept of CCS but at present it is one of the supreme banks that offer the most beneficial CCS to its consumer. This scheme recognizes and provides necessary finance to help the “Under Served” limited income group who needs access to formal credit to purchase consumer durables and improve their standard of living. CCS has been quite successful since its inception. It is worthwhile to mention that in Nov 2009 outstanding under CCS stand Tk. 1223809 involving 11836 customers which indicates a tremendous potential of the scheme. The rate of recovery under the scheme is excellent and exceeds 95%. More over, it has been possible to reach the height of the market image and reputation of bank because of the CCS, which covers wide segment of people belonging to fixed income group. On the other hand , in present day world, banking is moving toward retail banking based on supervise credit.

OBJECTIVE OF CCS:

Prime Objectives:

      To bring credit service not only to the rich class people but also to the limited income  group towards buying utility product.

      To provide financial assistance to limited earner group to raise their standard of living.

      To contribute in socio-economic development of the country.

Other objectives:

      Increase the number of beneficiaries through CCS program.

      Increase relationship network of the bank.

      To popularize bank’s product among the people.

Eligibility for CCS loan:

To be eligible for CCS loan different banks have different criteria. Most of the banks offer this loan to the following professionals:

      a)Age Limited 25-60 years.

      b)Government Organizations.

      c)Semi-Government and Autonomous Organizations.

      d)Banks, Insurance Companies, multinational Companies.

      e)Armed force, BDR, Police & Ansar.

      f)University, College and Schools.

      g)Locally established and Renounced Public Limited Companies.

      h)Professional like, Doctor, Engineer, Lawyer, Architect, Journalist, Chartered i)Accountant and self-employed person.

Product of consumer credit:

Retail credit scheme is designed with components like ;

A)Personal loan (Secured) , B)Personal loan (unsecured)

A) Personal Loan(Secured):

Eligible: Any person having CD/SB Account.

Margin: Best effort basis. Accrued interest to be served quarterly.

Limit: As per delegation of power circulated from time to time.

Security: Lien on FDR, Deposit and other savings instruments duly discharged and lie ed with letter of authority to in cash in case of default.

Rate of interest: In case of FDR 2-3% above FDR interest rate. In case of other deposit 15% per annum with a quarterly rest.

Period: Maximum 12 (twelve) months.

  1. Personal Loan Scheme(Unsecured):

Personal loan can be segregated under the following categories:

a)Consumer credit( Household durables), b)Car Loan

c) Doctors Loan, d) Advance against salary

e)Any purpose loan

 a)Consumer credit( Household durables):

Under this head, loan will be sanctioned against guarantee of third parties acceptable to the bank or pledge of FDR, Savings instrument of Banks and assignment of salary where applicable.

Purpose: For purchasing of the following items:

      Motor Cycle

      Personal Computer

      Photocopier/ Fax Machine

      Television

      Mobile Phone set

      Refrigerator

      Audio Video Equipment

      Other home electric appliance

      Furniture

      Any other household durables.

The loan limit , down payment and period of loans are given below:

Name of the ItemLoan LimitDown Payment

(Minimum)Period of LoanMotor CycleTk. 1,00,000.0010%2 YearsPersonalComputer/LapTopTk. 1,00,000.0010%2 YearsPhotocopier/Fax MachineTk. 1,00,000.0010%1 YearsOther itemsTk. 3,00,000.0010%3 Tears

Table : 10 Loan Limit

Rate of Interest           :         15%  p.a.

Service Charge           :         1% on loan amount

Risk Fund                   :         1% on loan amount

Age Limit                   :         Between 25 to 60 years.

Instead of down payment , the customer shall have the option to avail loan for the full amount of quotation. In that case the customer has to provide lien on FDR/other financial instruments up to 50% of the loan amount, interest rate shall be reduced by 1% and personal guarantee shall be waived.

Sanctioning Authority:  The delegation of business power for sanction/approval of retail credit by the Credit Committee and the RCC will be as under:

Under this head , loan will be sanctioned against guarantee of third parties acceptable to the bank/lien on FDR/any other financial instrument.

The loan limit, down payment and period of loan are given below.

Name of the ItemLoan Limit (Maximum)Down payment

(Minimum)Period of Loan

(Maximum)New  VehiclesTk.40,00,000.00 for Luxury Vehicles10%5 YearsReconditioned VehiclesTk.15,00,000.0010%4 Years

Table : 11 Sanction authority

Rate of Interest               :            15% p.a

Service Charge               :            1% on Loan amount

Risk Fund                       :            1% on loan amount

Age Limit                       :            Between 25 to 60 years

Instead of down payment , the customer shall have the option to avail loan for the full amount of quotation. In that case the customer has to provide lien on FDR/other financial instruments up to 50% of the loan amount, interest rate shall be reduced by 1% and personal guarantee shall be waived.

Sanctioning Authority:  The delegation of business power for sanction/approval of retail credit by the Credit Committee and the RCC will be as under:

Name of the ItemLoan LimitRetail Credit CommitteeHead office CreditCommittee

(Recommended by RCC)New  VehiclesTk.40,00,000.00 for Luxury VehiclesUp to Tk.20,00,000.00Full LimitReconditioned VehiclesTk.15,00,000.00Up to Tk.8,00,000.00Full Limit

Table 12: RCC

c) Doctors’ Credit Scheme:

Eligibility:

      Bangladeshi Citizen

      Minimum a Graduate in medical science

      Allopathic Medical Practitioners

      Adequate cash flow to service the loan.

Purpose: To set up chamber medical store with necessary medical equipments to make them self employed.

Loan Ceiling : The loan amount may range from Tk. 1,00,000/- to Tk. 10,00,000/- depending on types and requirements of doctors.

  • Fresh FCPS & MBBS Doctors/dentists                    :    Maximum Tk. 5.00 lac
  • Specialist Doctors having FCPS or a past-graduate :    Maximum Tk. 10.00 lac

      Degree & Specialization in a particular area of treatment such as Medicine Specialist, Eye

Specialist having 5 years experience as specialist.

Period                       :     5 & 4 Years

Interest                      :     15% p.a with quarterly rest

Service Charge         :     1% on loan amount

Risk Fund                 :     1% on loan amount

Age Limit                 :     Between 25 to 60 years.

Invoice/Quotation : Invoices or quotation for purchasing medical equipments duly Verified by the Banks officer is required.

The loan limit, down payment & period of loans are given below:

Type of the Customer/BorrowerLoan LimitDown Payment

(Minimum)Period of Loan

(Maximum)Fresh FCPS & MBBS Doctors/DentistsTk.5,00,000.0010%5 YearsSpecialized DoctorsTk.10,00,000.0010%5 Years

Table : 13 Invoice

Instead of down payment , the customer shall have the option to avail loan for the full amount of quotation. In that case the customer has to provide lien on FDR/other financial instruments upto 50% of the loan amount, interest rate shall be reduced by 1% and personal guarantee shall be waived.

Sanctioning Authority:  The delegation of business power for sanction/approval of retail credit by the Credit Committee and the RCC will be as under:

Type of the Customer/BorrowerLoan LimitRetail Credit CommitteeHead office Credit Committee

(Recommended by RCC)Fresh FCPS & MBBS Doctors/DentistsTk.5,00,000.00Up to Tk.3.00 lacFull LimitSpecialized DoctorsTk.10,00,000.00Up to Tk.5.00 lacFull Limit

Table 14 : RCC Authority

d) Advance against salary:

Sanctioning Authority:  The delegation of business power for sanction/approval of retail credit by the Credit Committee and the RCC will be as under:

Name of the ItemLoan LimitRetail Credit CommitteeHead office CreditCommittee

(Recommended by RCC)Advance against salaryTk. 3.00 lacTk.1.50 lacFull Limit

Table : 15 Advance against salary

          Period                       :      2 Years

         Interest                      :     15% p.a

         Service Charge         :     1% on loan amount

         Risk Fund                 :     1% on loan amount

         Age Limit                 :     Between 25 to 60 years.

d)     Any Purpose Loan

Any purpose loan is meant to meet the emergency need of money for any purpose not compatible to any products of Retail Credit Scheme.

Name of the ItemLoan LimitRetail Credit Committee
Any acceptable purposeTk. 1,00,000.00Full Limit

Table : 16 Any purpose loan

         Period                       :      2 Years

         Interest                      :     15% p.a with monthly rest

         Service Charge         :     1% on loan amount

         Risk Fund                 :     1% on loan amount

         Age Limit                 :     Between 25 to 60 years.

With a view to enhance the volume of business under Retail Credit Unit , marketing & recovery task of the scheme shall be given to Outsourced People/Agent. Till Outsourced People are engaged, the Retail Credit Unit shall carry out the work by In-house people.

 LOAN SANCTIONING PROCESS:

The marketing officers of Retail Credit Unit will pursue the prospective customers to sell retail credit products. The intending customer will submit their loan applications either direct to the Retail Credit Unit or to any of the nearest branches of Prime Bank Limited as convenient. After receiving the Application from the customer , the branches shall forward the same to the Retail Credit Unit immediately. After receiving the loan application from the branch, the officers of Retail Credit Unit will do inspection & verification thereof regarding the particulars of the prospective customers & guarantors & apply all due diligence for approval or decline of the proposal. If the proposal approved by the committee, the Unit will issue sanction advice to the respective branches ( as desired by the customer) advising for disbursement of the loan after completing all documentation and obtaining required cheques. The Retail Credit Unit as well as the branches shall maintain a sanctioning and declining register in the computer.

Monitoring and recovery:

After disbursement of loans , the branch shall diaries the date of payment of monthly installment. The branches will place cheques as usual manner for recovery of due installments. They shall issue remainder to the customers before 10 days of due date of installment. If any customer fails to deposit on due date 2nd  remainder shall be given.

After 7 days 3rd remainder shall be given. If installment is not deposited, the branch shall arrange for visiting the customer personally. If any loans under the schemes become problematic / classified only then the branch shall refer the case to Retail Credit Unit for taking necessary steps.

CREDIT RISK MEASURES

Non Performing Asset to Total Loans

Non performing assets are income generating assets, including loans, which are past due for 90 days or more. If this ratio rises, the bank’s exposure to credit risk grows and there is a possibility of bank failure. In case of Prime Bank, the non performing asset to total loan ratio is  1.52% (1.48 in 2007 & 1.98% in 2008). Though the credit risk of the bank is still within control, the ratio is rising. It gives a red signal to the credit performance of the bank.

Provision for Loan Losses to Total Loans

There is a Bangladesh Bank requirement to maintain a provision for unforeseen loan losses. Prime Bank had a provision for loan losses to total loan ratio of 1.39% in 2009 (0.55% in 2007 and 0.39% in 2008).

Liquidity measures

Net Loan to Total Asset

Net loans (total loans minus the provision for loan loss) to total assets were 57% in 2007, 63% in 2008 and 67% in2009. It shows the loan amount has increased by 17.5% during this period which means the bank’s total asset has increased though it is maintaining a growth in its loan rather than keeping it in cash and balance.

Cash & Balance with other banks and FIs to Total Assets

Total cash and balance with other banks and financial institutions of Prime Bank as a percentage of total assets was 21.36% in 2007, 17.73% in 2008 and 15.10% in 2009. This shows a decrease of 40% during this period. Although this weakens the bank’s liquidity position, it also increases the bank’s earning capability.

Solvency (or default) risk measures

Equity Capital to Total Asset

Capital account of a bank absorbs losses if the bank happens to have large bad loans in the portfolio. Such a ratio of equity capital to total asset shows how much cushion the depositors have against the assets of a bank. For Prime Bank, this ratio is around 7% (7.99% in 2007, 7.61% in 2008 and 7.35% in 2009). This small ‘cushion’ poses a risk of default for the bank.

Equity Capital to Risk Asset

This ratio reflects how well current bank capital covers potential losses from those assets most likely to decline in value. The ratio of equity capital to risk asset for Prime Bank was 13.86% in 2007, 12.03% in 2008 and 10.8% in 2009. As the ratio is decreasing, the risk of potential losses from risky assets is increasing.

Foreign Exchange

understanding foreign exchange mechanism

a. Foreign Exchange:

 Foreign Exchange means exchange of foreign currency between two countries. If we consider ‘Foreign Exchange’ as a subject, then it means all kinds of transaction related to foreign currency. In other words, foreign exchange deals with foreign financial transactions.  

b. Necessity of foreign exchange:

 No country is self-sufficient in this world. Everyone is, more or less, dependent on another, for goods or services. Say, Bangladesh has cheap manpower whereas Saudi Arabia has cheap petroleum. So Bangladesh is dependent on Saudi Arabia for petroleum and Saudi Arabia is dependent on Bangladesh for cheap manpower. People of one country are going to abroad for Education, Medical service etc. Thus there is exchange of foreign currency.

c. Activities of foreign exchange:

 There are three kinds of foreign exchange transaction:

  1. 1.      Import.
  2. 2.      Export.
  3. 3.      Remittance.

Regulations For Foreign Exchange

a. Local Regulations:

Our foreign exchange transactions are being controlled by the following rules & regulation.

      Foreign Exchange Regulation Act 1947.

      Bangladesh Bank issues foreign exchange circular from time to time to control the export, import & remittance business.

      Ministries of commerce issues export & import policy giving basic formalities for import & export business.

      Sometime CCI&E issues public notice for any kind of change in foreign exchange transaction.

      Bangladesh bank published two volumes in 1996. This is compilation of the instructions to be followed by the authorized dealers in transitions relation to foreign exchange.

b. International regulations of foreign exchange:

There are also some international organizations, influencing our foreign exchange transactions. Few of them are discussed below:

      International Chamber of Commerce (ICC) is a worldwide non-governmental organization of thousands of companies. It was founded in 1919. ICC has issued some publications like UCPDC, URC, & URR etc, which are being followed by all the member countries. There is also an international court of arbitration to solve the international business disputes.

      World Trade Organization (W.T.O) is another international trade organization established in 1995. General Agreement on Tariff & Trade (GATT) was established in 1948, after completion of it’s 8th round; the organization has been abolished & replaced by W.T.O. This organization has vital role in international trade, through its 124 member countries.

Foreign Exchange Mechanism

Foreign exchange department plays significant roles through providing different services for the customer. Facilitating the trade with foreign country is the most important among those services the key instrument which facilitates this trade is L/C (Letter of Credit).

a. Letter of Credit:

Letter of Credit may be defined as an arrangement or guarantee issued by a bank at the request of the customer to make payment to or order of the beneficiary or authorized another bank to effect such payment or to pay, accept or negotiate such bill of exchange against stipulated documents, provided that the terms and conditions of the L/C are complied with.

b. The Advising Bank:

It is the bank in the Exporter’s (Normally the exporter’s bank), which is usually the foreign correspondent of Importer’s bank through which the L/C is advised to the supplier. If the intermediary bank simply advises/notifies the L/C to the exporter without any obligation on its part, it is called “Advising Bank”.

c. The Confirming Bank:

If the Advising Bank also adds its own undertaking to honor the credit while advising the same to the beneficiary, he becomes the Confirming Bank, in addition, becomes liable to pay for documents in conformity with the L/C’s terms and conditions.

 d. The Negotiating Bank:

The Bank that negotiates the bill of exporter drawn under the credit is known as Negotiating Bank. If the advising bank is also authorized to negotiate the bill drawn by the exporter, he becomes the Negotiating Bank.

e. The Accepting Bank:

A Bank that accepts time or unasked drafts on behalf of the importer is called an Accepting Bank. The Issuing Bank can also be the Accepting Bank.

 f. The Paying Bank and the Reimbursing Bank:

If the Issuing Bank does not maintain any account with a bank that will be negotiating the documents under a L/C, then arrangement is made to reimburse the negotiating bank for the amount to be paid under from some other bank with which the Issuing Bank maintains his account. The latter bank is known as Reimbursing Bank.

g. Foreign Exchange Mechanism:

 Import Department

a. Understanding:

Imports are foreign goods and services purchased by consumers, firms, & Governments in Bangladesh. The importers are asked by their exporters to open letter of credits so that their payment against goods is ensured.

b. Classification of importers:

Goods are being imported for personal use, commercial purpose or industrial use. So, there are three kinds of importers such as:

  1. 1.      Personal importer: if the importer is insisting to import goods from the abroad for his need this importer called personal importer.
  2. 2.      Commercial importer: if the importer is insisting to import goods for commercial purpose then it is called commercial importer.
  3. 3.      Industrial importer: if the importer is insisting to import goods for industrial purpose then it is called Industrial importer.

c. Import Policy:

Under the import and export control Act, 1950 the Government of Bangladesh formulates the Import policy through Ministry of Commerce.

The existing Import policy (1997-02) has come into effect from June 14, 1998 to June 30, 2002. (It can be reviewed every year if needed)

Main Features of Import Policy

 A. Different import policy

      Import facility up to $2000 for actual user (for self consumption, not for sale) without permission, $2000-5000, and approval of regional controller of import & export (CI&E). Above $5000, approval of Chief Controller of Import $ Export (CCI&E).

      Import facility on the basis of direct payment on foreign countries.

      Import under L/C, L/C must be irrevocable. Import above $5000-L/C is required. But in case of perishable items like food up to $7500 transported by road L/C is not required.

      Import without opening of any L/C:

  1. 1.      Books, Magazine, Publication.
  2. 2.      Import up to $5000 in case of payment from Bangladesh.
  3. 3.      Import under foreign aid.
  4. 4.      Import of “International chemical Reference” by Pharmaceutical companies with prior approval of Drug Administration.

      Government sector bodies can import without any license, permit & IRC.

      Commercial import by cash payment only.

d. Import Procedure:

To import through Prime bank, a customer requires-

(i)                 Bank account

(ii)               Import Registration Certificate (IRC)

(iii)             Tax Paying Identification Number

(iv)             Proforma-Invoice Indent

(v)               Membership Certificate

(vi)             LCA (Letter of Credit Authorization) form duly attested

(vii)           One set of IMP Form

(viii)         Insurance Cover note with money receipt

 e. Import Mechanism:

To import, a person should be competent to be ‘Importer’. According to Import and Export Control Act, 1950, the Office Of Chief Controller Of Import and Export provides the registration (IRC) to the importer. After obtaining this person’s has to secure a letter of credit authorization (LCA) from Bangladesh Bank. And then a person becomes a qualified importer. He is the person who requests or instructs the opening bank to open an L/C. He is also called opener or applicant of the credit.

f. Things, which are done here:

The following things are done in this department:

      Total supervision of Import Department (Cash/Back to Back L/C).

      Foreign Correspondence related to above.

      Payment of Back-to-Back L/C and endorsement of Export L/C against payment.

      Follow-up of Back-to-Back overdue bills.

      Correspondence regarding Back-to-Back L/C and Cash L/C.

      Maintenance of Due Date Diary.

      Maintenance & record of related L/C Documents.

      Audit Compliance.

      Matching of Bill of Entry with IMP, follow-up of pending Bill of Entry Quarterly Statement.

      Batch Checking.

      L/C opening/ Amendment (Back to Back L/C).

      Endorsement of Export L/C when opening.

      Batch checking.

      Balancing of L/C Contingent Liability 9Back to Back L/C).

      Follow-up of Sub-judicial bills and maintaining liaison with Head Office and Foreign Correspondent.

      All correspondence related to Back-to-Back L/C with Head Office and Foreign Correspondent.

      Supervision of checking, Lodgment and retirement of Import documents under Back-to-Back L/C.

      Issuance of Certificate and attestation of papers/documents of garments clients as required by BGME, EPB & other regulatory bodies.

      Checking, lodgment, retirement of Import documents under Back-to-Back L/C.

      Issuance of Shipping Guarantee (Back to Back L/C).

      IMP Form Fill-up (Cash L/C).

      Inform negotiating Bank about maturity date of Back-to-Back L/C.

      Quarterly statements for Bonded ware House.

      Balancing of Accepted Liability.

      Statement of outstanding accepted import bills under Back-to-Back L/C.

      L/C opening and Amendment of Cash L/C (and Inland L/C).

      Maintenance and record of Passbook and IRC.

      Maintenance & Record of related L/C (s) & Documents.

      Credit Report.

      Statement of IRC Renewal fees to CCI&E.

      Preparation of monthly foreign exchange business position.

      L/C Lodgment (Cash).

      Checking of Cash L/C documents.

      L/C Retirement.

      LCA Issue.

      BLC Statement.

      Differed Payment (Cash).

      Follow-up of outstanding BLC.

      Correspondent (Cash L/C).

      Proof Sheet of LC Margin and Contingent Liability (Cash L/C).

      Issuance of shipping guarantees (cash) IMP forms fill-up (cash).

Prime Bank Limited

Some are parts:

Consumer Banking of Prime Bank Limited (Part 1)

Consumer Banking of Prime Bank Limited (Part 2)