This report focus on Analysis of Foreign Exchange Banking Services of BASIC Bank Limited. This report gives a clear idea while dealings with foreign exchange banking to understand how the services are rendered. Other objectives are to identify the documents used in foreign trade of BASIC Bank and appraise export, import and remittance of the bank. Finally identify problems of foreign exchange banking of the selected bank and suggest suggestions for improvement of foreign banking of the bank.
Background of The Study
Any academic course of the study has a great value when it has practical application in the real life. Only a lot of theoretical knowledge will be little important unless it is applicable in the practical life. So we need proper application of our knowledge to get some benefit from our theoretical knowledge to make it more fruitful when we engage ourselves in such field to make proper use of our theoretical knowledge in our practical life, only then we come to know about the benefit of the theoretical knowledge. Such an application is made possible through internship. When theoretical knowledge is obtained from a course of study it is only the half way of the subject matter. Internship implies the full application of the methods and procedures through rich acquired knowledge of subject matter can be fruitfully applied in our daily life. Such a procedure of practical application is known as internship. The case study is titled “Analysis of Foreign Exchange Banking Services of The BASIC Bank Limited”.
OBJECTIVES OF THE STUDY
(i) Main Objectives:
- The main objective of the study is to highlight on the major documents used by BASIC Bank Ltd. While dealings with foreign exchange banking to understand how the services are rendered.
(ii) Specific Objectives:
- To identify the documents used in foreign trade of BASIC Bank Ltd.
- To appraise export, import & remittance of the same bank.
- To identify problems of foreign exchange banking of the selected bank.
- To suggest suggestions for improvement of foreign banking of the given bank.
Major features of these branches are:
- Fully computerized accounts maintenance.
- Well decorated air conditioned facilities.
- A fully operational computer network which is currently being implemented. The work of Local Area Network (LAN) and Wide Area Network (WAN) installation having reliable and secured communication between the branches and the Head Office is in progress to facilitate any Branch Banking and ATM Services.
- Money counting machine for making cash transactions easy and prompt.
- Fifteen out of twenty six branches are authorized dealers of foreign exchange. This facilitates speedy disposal of transaction of export and import trade.
BASIC Bank Limited has a well diversified pool of human resources which is composed of people with high academic background. Also, there is a positive demographic characteristic – most employees are comparatively young in age yet mature in experience. As of December 2003 the total employee strength is 523. The strength is 435 excluding the menial staff. BASIC Bank Limited has been investing its resources with a view to developing an efficient and professional work force. Two approaches are mainly used in this regard.
A. Industrial Credit
Outstanding at year end
BASIC Bank’s services are directed towards the entrepreneurs in the small industries sector. A small industry, as per Industrial policy 1999 approved by the Cabinet, has been defined as an industrial undertaking whose total fixed investment is less than Tk.100 million.
The industrial loan reflected a significant growth of 23.91 percent over the previous year. Total outstanding industrial loans including term and working capital stood at Taka 17,226.40 million at the end of 2008 compared to Taka 13,901.40 million of 2007. Total outstanding term loan stood at Taka 6,206.75 million as on December 31, 2008 compared to Taka 5,055.58 million in 2007 reflecting a growth of 22.77 percent. The outstanding working capital finance extended to industrial units stood at Taka 11,784.08 million at the end of the reporting period compared to Taka 9,525.98 million in 2007. Growth rate here was 23.70 percent. BASIC Bank’s services are specially directed towards promotion and development of small industries. Its exposure to small and medium industries sector accounted for 56.52 percent of the total loans and advances. During the year total of 87 projects were sanctioned term loan. Out of which 26 were new and the rest were under BMRE of the existing projects. As on 31 December 2008, 801 projects were in the portfolio of the bank. The textile sector including garments being one of the major contributors to national economy dominated the loan portfolio of the Bank. Other sectors financed include engineering; food and allied industries; chemicals, pharmaceuticals and allied industries; paper, board, printing and packaging; glass; ceramic; and other non-metallic goods and jute products. Recovery rate of project loan was 90.81 percent.
B. Commercial Credit:
The Bank also supports development of trade, business and other commercial activities in the country. It covers the full range of services to the exporters and importers extending various facilities such as cash credit, export cash credit, packing credit, short term loans, local and foreign bills purchase facilities. As on December 31, 2008 total outstanding commercial loans stood at Taka 9,278.26 million Compared to Taka 7,681.74 million in 2007.
(Source: Annual Report 2008, BASIC Bank Ltd.)
C. Micro Credit:
BASIC Bank launched a Micro Credit Scheme in 1994. Micro Credit Scheme provides for the poor for generation of employment and income on a sustainable basis particularly in urban and suburban areas. The Bank follows three systems of credit delivery. These are:
- Lending to the NGOs who on-lend to their members. At present there are 15 such NGOs.
- Lending direct to the targets groups or ultimate borrowers under the Bank’s own management.
- Lending direct to the member-borrowers and NGOs providing nonfinancial services like group formation and monitoring and supervision on exchange for a supervision fee.
At the end of 2008, total amount of Taka 764.46 million remained outstanding as against Taka 680.13 million in 2007. Recovery rate during this period remained at a satisfactory level of 98.00 percent.
(source: Annual Report 2007, BASIC Bank Ltd.)
The bank achieved substantial growth in export in 2008 and the performance of the bank in import business was also satisfactory. The Bank handled total export business of Taka 27,359.77 million and import business of Taka 22,270.87 million in 2008. The export and import business grew by 28.65 percent and 32.60 percent respectively. Major items of exports were garments, jute products, textile, leather etc. Items of import included mainly industrial raw materials, garments accessories, capital machinery, food items and other essential commodities.
The Bank become a proud member of SWIFT (Society for Worldwide Interbank Financial Telecommunication) that would pave the way to achieving uninterrupted communication related to banking for international trade business and fund transfer.
BASIC Bank Limited
Credit Rating Report (Entity Rating)
|Year||Long Term||Short Term|
Credit Rating Information and Services Limited (CRISL) has assigned AA- (pronounced as double A minus) rating in the long term and ST-1 rating in the short term to the Bank for the year 2008
Banks rated AA- in the long term are adjudged to be of high quality, offer higher safety and have high credit quality. This level of rating indicates a corporate entity with a sound credit profile and without significant problems. Risks are modest and may vary slightly from time to time because of economic conditions Banks rated ST-1 in the short term are considered as the highest certainty of timely payment. Short-term liquidity including internal fund generation is very strong and access to alternative sources of funds is outstanding. Safety is almost like risk free Government short-term obligations
General banking is the starting point of all the banking operations. It is the department, which provides day-to-day services to the customers Main Functions of general banking department are the followings:
- Accounts Opening Section
- Accounts Section.
- Local Remittance Section
- Collection And Clearing
- Cash Section
ACCOUNTS OPENING SECTION
Bank is a financial intermediary, which mobilizes fund from surplus unit and allocates it to deficit unit. Surplus unit means the people who have surplus money and willingness to save. Deficit unit means the people who need money for industry, trade, business, or for personal use but don’t have sufficient money of their own for such purposes. Bank mobilizes the fund by accepting deposits from depositors and allocates the fund by providing loan to borrower.
Banker-customer relationship begins with the opening of an account by the customer. Opening of an account binds the same into a contractual relationship. But the selection of customer is very crucial. In fact, fraud and forgery of all kinds start by opening of an account by the customer (s). So, the bank takes extra care in its selection. One of the basic functions of commercial banks is to accept deposits. For accepting deposits both demand and time, BASIC Bank (Shanti Nagar Branch) offers the following types of accounts-
TYPES OF ACCOUNTS WITH TERMS AND CONDITIONS
This part covers only following types of accounts-
- Savings Bank Account
- Current Account
- Short Term Deposit (STD) Account
SAVINGS BANK ACCOUNT
This deposit is primarily for small-scale savers. Hence, there is a restriction on withdrawals in a week. Heavy withdrawals are permitted only against prior notice. Some Important Points are as follows-
As per BB instruction 90% of SB deposits are treated as time liability and 10% of it as demand liability
a. Minimum opening deposit of 5000/= is required;
Interest is paid on this account. BASIC offers a reasonable rate of interest for SB A/C.
c. Generally, banks require a 7-day prior notice if the total amount of one or more withdrawals on any date exceeds 25% of the balance of the account unless is given.
d. The number of withdrawals over period of time is limited. Only two withdrawals are permitted per week. If there are more than two withdrawals are made in a week, no interest will be paid on rest amount for that month.
e. Generally householders, individuals and other small-scale savers are the clients of this account.
Current account is purely a demand deposit account. There is no restriction on withdrawing money from the account. It is basically justified when funds are to be collected and money is to be paid at frequent interval. It is most suitable for private individuals, traders, merchants, importers and exporters, mill and factory owners, limited company’s etc. Some Important Characteristics are as follows-
a. A minimum balance of TK.5000 has to be maintained.
b. CD accounts are unproductive in nature as banks loanable fund is concerned. Sufficient fund has to be kept in liquid form, as current deposits are demand liability.
c. Thus huge portion of this fund become non-performing. For this reason banks do not pay any interest to CD Accountholders.
d. There is no restriction on the number and the amount of withdrawals from a current account.
STD (SHORT TERM DEPOSIT) ACCOUNT
Normally various big companies, organizations, Government Departments keep money in STD account. Frequent withdrawal is discouraged and requires prior notice. In BASIC, customers usually give an instruction that their current account will be debited whenever its deposited amount crosses a certain limit and this amount will be transferred to the STD account
COMMON FORMALITIES REQUIRED FOR EVERY ACCOUNT
- Duly filled up Account Opening Form.
- Introducer’s signature on Account Opening Form to be verified by Manager under full signature.
- Two copies of passport size photograph of account opener(s) duly attested by the introducer.
Accounts department maintains all records of transactions and all types of statement. At the end of transaction hour all concerned section sends vouchers of transactions to this department. Accounts department compares all figures/ amount, contents of transactions with supplementary statement prepared by computer. If any discrepancy arises regarding any transaction then this department reports to the concerned department. Following are the activities of accounts department:
- To record all transaction in the cash book.
- To record all transaction in the cash book.
- To prepare daily, weekly, monthly, half-yearly and yearly fund position.
- To prepare all kinds of statements related to Bangladesh Bank, Head office and National Board of Revenue (NBR).
- To prepare monthly salary statement, provident fund statement and administrative expenditure statement.
- To make charges for different types of duty.
LOCAL REMITTANCE SECTION
Cash remitting from one place to another is risky. So, Banks remit funds on behalf of the customer (s) to save them from any awkward happening through network of their branches. There are three modes of remitting funds. These are–
- Pay Order (PO)
- Demand draft (DD)
- Telegraphic Transfer (TT)
- Call Deposit Receipt (CDR).
PAY ORDER (PO)
Pay order is an instrument, used to remit fund within a clearing zone. Unlike cheque, there is no possibility of dishonoring PO. The PO can only be encashed through the branch that has issued the instrument.
PAY ORDER ISSUING PROCESS
For issuing a PO, following formalities are to be maintained. These are-
- Duly filled up the application form by the customer.
- Deposit money either in cash or by cheque with necessary charges.
- Prepare the instrument and make necessary entries in the Bills Payable Register where payee’s name, date, PO no. etc are noted.
- Deliver the instrument to the customer after scrutinized and approved by authority by taking signature of the customer on the counterpart.
DEMAND DRAFT (DD)
DD is called ‘Banker’s Draft’. It is an instrument, issued by a particular branch, drawn on another branch of the same bank, instructing to pay a certain sum of money. It is very popular instrument for remitting fund from one corner of a country to another.
If DD amount is more than Tk.50000/=, a test code is given on IBCA. The a/c treatments will be-
When DD is issued:
H/O A/C ‘X’ branch…………………………Credit
Income A/c commission………………..……Credit.
TELEGRAPHIC TRANSFER (TT)
Sometimes the remitter of the funds requires fund immediately. In that case, the banker is requested to remit the funds telegraphically. Different modes are Telegram, Telephone, Telex and Fax. Telegraphic Transfer is the most rapid and convenient but expensive method. The drawer and the payee should have accounts with BASIC bank. TT is issued against cash, cheque, and letter of instruction.
COLLECTION AND CLEARING SECTION
Customers do pay and receives bill from their counter party as a result of transaction. BASIC Bank Limited collects the bills on behalf of their customers. Collection mechanisms in BASIC Bank are clearing, Outward Bill For Collection, Inward Bills for Collection.
When the bill is within the range of the clearinghouse it is sent for collection through clearing section. As far as safety is concerned customers get crossed cheque for the transaction Crossed check can’t be encashed from the counter; rather it has to be collected through banking channel i.e., clearing. If a client of BASIC Bank received a check of another bank which is located within the clearing range and deposit the instrument in his account at BASIC Bank. Then BASIC Bank will collect the money through clearing house. After received the check BASIC Bank will credit client account. However, the amount is credited in the customer a/c but he will not get the money until the check is honored.
Cash is the lifeblood of all financial activities. Cash section is a very sensitive point of the branch. This section deals with all types of negotiable instruments and it includes vault, used as the store of cash, instruments. The vault is insured up to Tk.20 lac. Insured amount yet to be enhanced to Tk. 40 lac. Operation of this section begins when the banking hour starts. Cash officer begins his/her transaction with taking money from the vault, known as the opening cash balance. Vault is kept in a more secured place. The amount of opening cash balance is entered into a register. After whole days’ transaction, the surplus money remains in the cash counter is put back in the vault and known as the closing balance. The main functions of this section are-
- Cash Receipt
- Cash Payment
Cash receipt procedure is given below-
i. The depositor first fills up the Deposit-in-Sl
ii. Depositor deposits the money.
iii. Officer receives the money, counts and then enters in the Cash Receipt Register, and finally signs with seal and dates the deposit-in-slip.
Some important check points for making the payment are as follows-
E n d o r s e m e n t
Endorsement is done by putting signature of the drawer on the back of the negotiable instrument for the purpose of negotiation. By ‘blank endorsement’, an order instrument is made as ‘bearer’
Generally two types of crossing are practiced, namely- General Crossing and Special Crossing. Basically it gives a direction to the paying bank not to pay the check amount over the counter. General crossing includes ‘A/C payee’ crossing only. Drawing two parallel and transverse lines do it. On the other hand, special crossing is like general crossing but in addition bank name is also mentioned. This gives the direction to the same to pay the check only to the banker, whose name appears in the crossing or to his agent.
Foreign Exchange- its meaning and definition:
Foreign exchange refers to the process or mechanism by which the currency of one country is converted into the currency of another country. Foreign exchange is the means and methods by which rights to wealth in a country’s currency are converted into rights to wealth in another country’s currency. In banks when we talk of foreign exchange, we refer to the general mechanism by which a bank converts currency of one country into that of another. Foreign trade gives rise to foreign exchange. Modern banks facilitate trade and commerce by rendering valuable services to the business community. Apart from providing appropriate mechanism for making payments arising out of trade transactions, the banks gear the machinery of commerce, especially in case of international commerce, by acting as a useful link between the buyer and the seller, who are often too far away from and too unfamiliar with each other. According to foreign exchange regulation act 1947, “Anything that conveys the right to wealth in another country is foreign exchange”. Foreign exchange department plays significant roles through providing different services for the customers. Opening or issuing letters of credit is one or the important services provided by the banks.
Export Section :
Foreign Exchange Regulation Act, 1947 nobody can export by post and otherwise than by post any goods either directly or indirectly to any place outside Bangladesh, unless a declaration is furnished by the exporter to the collector of customs or to such other person as the Bangladesh Bank (BB) may specify in this behalf that foreign exchange representing the full export value of the goods has been or will be disposed of in a manner and within a period specified by BB.
Bangladesh exports a large quantity of goods and services to foreign households. Readymade textile garments (both knitted and woven), Jute, Jute-made products, frozen shrimps, tea are the main goods that Bangladeshi exporters exports to foreign countries. Garments sector is the largest sector that exports the lion share of the country’s export. Bangladesh exports most of its readymade garments products to U.S.A and European Community (EC) countries. Bangladesh exports about 40% of its readymade garments products to U.S.A. Most of the exporters who export BASIC Bank are readymade garment exporters. They open export L/Cs here to export their goods, which they open against the import L/Cs opened by their foreign importers.
SCRUTINY AND NEGOTIATION OF EXPORT BILL
Bank deals with documents not with goods. The bankers are to ascertain that the documents are strictly as per terms of L/C. Before negotiation of the export Bill the bankers are to scrutinize and examine each and every document’s with care. Negligence on that part of the bankers may result in non repatriation or delay in realization of export proceeds are incorrect documents may put the importers abroad into unnecessary troubles.
The scrutiny of the Bill of Exchange (Draft) and other related documents should ensure that.
- The documents are presented for negotiation before the expiry of the relative credit.
- The amount does not exceed the amount available under the credit.
- All the documents stipulated in the L/C are submitted.
- The corrections and alteration are properly authenticated in all documents.
Import Section :
Imports are foreign goods and services purchased by consumers, firms & Governments in Bangladesh. To import, a person should be competent to be a ‘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.
BASIC Bank checks the documents. The usual documents are,-
ii. Bill of lading
iii. Certificate of origin iv. Packing list
v. Weight list
vi. Shipping advice
vii. Non-negotiable copy of bill of lading viii. Bill of exchange
i Pre-shipment inspection report
j. Shipment certificate
The person/Body who requests the bank (opening bank) to issue the letter of credit. As per instruction and on behalf of applicant, the bank opens L/C in line with the terms and condition of the seller contract between the buyer and the seller.
Opening /Issuing Bank:
The Bank which open /issue letter of credit on behalf of the applicant/importer. Issuing bank obligation is to make payment against presentation of documents drawn strictly as per terms of the L/C.
Advising /Notifying Bank:
The Bank through which the L/C is advised / forward to the beneficiary (exporter). The responsibility of advising bank is to communicate the L/C to the beneficiary after checking the authority of the credit. It acts as an agent of the issuing bank without having any engagement on their part.
Beneficiary of the L/C is the party in whose favor the letter of credit is issued. Usually they are the seller or exporter
The Bank which under instruction the letter of credit adds confirmation of making payment in addition to the issuing Bank. It is done at the request of the issuing having arrangement with them. This confirmation constitutes a definite undertaking on the part of confirming bank in addition to that of issuing bank.
Negotiating Bank is the bank, which negotiates the bill and pays the amount of the beneficiary. The advising bank and the negotiating bank may or may not be the same. Sometimes it can also be confirming bank.
BILL OF LADING/ AIRWAY BILL ETC (TRANSPORT DOCUMENTS)
- Full set of B/L not submitted.
- B/L is not drawn or endorsed to the Order of BASIC BANK LTD.
- “Shipped on Board”, “Freight Prepaid” or “Freight Collect” etc. notations are not marked on the B/L.
- B/L not indicate the name and the capacity of the party i.e. carrier or master, on whose behalf the agent is signing the B/L.
- Shipped on Board Notation not showing name of Pre-carriage vessel/intended vessel.
- Shipped on Board Notation not showing port of loading and vessel name (In case B/L indicates a place of receipt or taking in charge different from the port of loading.)
- Short Form B/L
- Charter party B/L
- Description of goods in B/L not agree with that of Invoice, B/E & P/L
- Alterations in B/L not authenticated.
- Loaded on Deck.
- B/L bearing clauses or notations expressly declaring defective condition of the goods and / or the packages.
- N.N. Documents not forwarded to buyers or forwarded beyond L/C terms.
- Inadequate number of Invoice, Packing List, B/L & Others submitted.
- Short shipment Certificate not submitted.
It is to be scrutinized to ensure the following:
- The Invoice is addressed to the Importer.
- The full description of merchandise must be given in the invoice strictly as per L/C.
- The price, quality, quantity, etc. must be as per L/C.
- The Invoice must be language in the language of L/C.
- No other charges are permissible in the Invoice beyond the stipulation on the L/C.
- The amount of draft and Invoice must be same and within the L/C value.
- If L/C calls for consular invoice, then the beneficiary’s invoice is not sufficient.
- Number of Invoice will be submitted as per L/C.
- The shipping mark and number of packing list shown in the B/L must be identical with those given in the Invoice and other documents.
- The Invoice value must not be less than the value declared in EXP Forms.
- Invoice amount must be correct on the basis of price, quantity as per L/C.
- Invoice amount, indicate sale terms/ Income terms VIZ FOB, CFR, CIF etc.
- Consular Invoice must be stamped by the local consulate/embassy of the country to which the goods are imported.
Beneficiary statement, VISA/Export License issued by EPB, Certificate of Origin, Weight Certificate, Packing List, Inspection Certificate.
Certificate of analysis, quality certificate, MCD duly signed and any other documents required by L/C each of these certificates/documents conform to the goods invoice and are relevant to L/C.
Negotiating Bank will check the above documents whether it is as per L/C or not. If Negotiating Bank find everything in order or as per export L/C, bank will negotiate the document and will disburse the generated fund as per Banks norms.
If the Negotiating Bank will find any discrepancies in the documents they will send the documents on collection or they can negotiate under reserve by the request of the exporter or they can seek permission/Negotiation authority from issuing Bank to allow Negotiating Bank to negotiate the documents despite the discrepancies. L/C issuing Bank will inform the matter to buyer, if the buyer accepts the discrepancies mentioned by Negotiating Bank, issuing bank will authorize the Negotiating bank to negotiate the discrepant documents.
Normally negotiating Bank will send the documents on collection basis mainly for the following discrepancies:
- L/C expired;
- Late shipment;
- Late presentation;
- L/C overdrawn;
- Unit price differ between L/C and Commercial Invoice;
- Consignee Name and address differ between L/C and other documents;
- Discrepancies in B/L;
- Any other Major discrepancies.
Foreign Remittance Section:
The basic function of this department are outward and inward remittance of foreign exchange from one country to another country. In the process of providing this remittance service, it sells and buys foreign currency. The conversion of one currency into another takes place at an agreed rate of exchange, in where the banker quotes, one for buying and another for selling. In such transactions the foreign currencies are like any other commodities offered for sales and purchase, the cost (convention value) being paid by the buyer in home currency, the legal tender.
Workings of this department:
Overall supervision of Foreign Remit. Dept.
- Foreign TT payment & Purchase of F. Drafts, preparations of F.B.P. (Foreign Bill Purchased).
- Issuance of outward TT & FDR
- Issuance of proceed responding certificate (PRC).
- Foreign Collection, Bangladesh Bank Clearing Check Collection, which comes from all branch of BASIC Bank Limited.
- Withdrawal from F.C. A/C.
- Encashment of T.C. & Cash Dollar and Sterling Pound.
- Deduction of Tax and VAT. On behalf of Bangladesh Bank.
- Preparation of related statements including convertible Taka Accounts.
- Preparation of IBCA & IBDA and Balancing of Collection and other special assignment as desired by Department in charge.
- Balancing of Account Statements.
- Compliance of audit & inspection.
- Statement of all related works submitted to Bangladesh Bank.
Inward Foreign Remittance:
Inward remittance covers purchase of foreign currency in the form of foreign T.T., D.D, T.C. and bills 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 Form-C.
Outward Foreign Remittance:
Outward remittance covers sales of foreign currency through issuing foreign T.T. Drafts, Travelers Check etc. as well as sell of foreign exchange under L/C and against import bills retired. Sale of foreign exchange is reported to Exchange control Department of Bangladesh Bank on form T/M.
Foreign exchange means foreign currency and includes all deposits, credits and balances payable in foreign currency as well as foreign currency instruments such as Drafts, T.C.s, bill of exchange, and Letters of Credit Payable in any Foreign Currency. All foreign exchange transactions in Bangladesh are subject to exchange control regulation of Bangladesh Bank.
Foreign Remittance Department deals with the following instruments:
|Sell||Bank sells Dollar/Pound for using in abroad by the purchaser. The maximum amount of such sell is mentioned in the Bangladesh Bank publication of ‘Convertibility of Taka for Currency Transactions in Bangladesh.|
|Purchase||Bank can purchase dollar from resident and non – resident Bangladeshi and Foreigner. Most dollars purchased comes from realization of Export Bill of Exchange.|
|Outward TT||It remits fund by tested TT via its foreign correspondence bank in which it is maintaining its NOSTRO Account.|
|It also makes payment according to telegraphic message of its foreign correspondence bank from the|
The following Documents are used in Import:
- Bill of lading
- Certificate of origin
- Packing list
- Weight list
- Shipping advice
- Non-negotiable copy of bill of lading
- Bill of lading
- Certificate of origin
The following documents are used in Foreign Remittance:
- Certificate of origin
- Remittance application
- ID card
Performance of Foreign Exchange Business of BASIC Bank Limited
The following table shows year-wise performance of foreign exchange operations consisting item-wised income generating avenues. All the figures show positive growth which generally signals foreign exchange business as a profitable business in Bangladesh. Within all the income avenues, income from exchange gain shows highest figure in taka value. Growth rate here was 48.92%. Income from Letter of Credit and Letter of Guarantee were the second and the third largest among the income avenues respectively.
Income from foreign exchange business of BASIC Bank limited
|Foreign bill Purchased||460,581||360,461||654,329||628,965|
|Local bill Purchased||3,833,860||4,485,557||8,646,784||9,041,451|
|Letter of Guarantee||14,160,897||21,397,445||23,360,370||39,869,621|
|Letter of Credit||66,555,289||75,284,688||96,433,989||106,869,561|
|Bills for Collection||2,846,448||4,078,047||8,747,327||10,792,897|
commission on sale of
|(B) Exchange gain (Profit on exchange trading)||129,977,023||114,610,826||149,640,436||222,845,221|
Corporate Social responsibility (CSR)
Today, Corporate Social Responsibility (CSR) is a fundamental part of business. The notion of CSR is gaining fast acceptance globally as every business should have its contribution voluntarily to the society, to its customers, to employee, to the communities and to the environment. CSR is an obligation beyond statutory obligation and BASIC Bank Ltd. Believes that such obligation paves the opportunity to build better relationship with all stakeholders. BASIC Bank Limited a state owned scheduled bank, adjudged as one of the soundest banks in Bangladesh is running on slogan “Serving People for Progress”. The slogan manifests the commitment of the bank to comply its social responsibility. Recognizing the importance of CSR and being a socially responsible organization BASIC Ban took some initiatives stated below:
The bank is unique in its object. It is statutorily obligated towards the promotion and development of small and medium industrial sector. As per mandate of memorandam. 50% of loan able fund of the bank also put emphasis on the interests of stakeholders, give due consideration to sustainable development of communities and environment issues in all aspect of its operation.
SPORTS AND CULTURE
As part of corporate social responsibility the bank engage itself in sponsoring sports. The bank sponsored “26th and 27th National Junior Chess Championship” and “ Inter-district National Women Handball Tournament-2007”.
BASIC Bank provide donation to people affected by natural calamities. In 2007 the bank contributed Tk.25.00 lac as donation to the Chief Adviser’s Relief & welfare fund for the flood affected people. Another Tk.25.00 lac of donation was made to the Chief Adviser’s relief & welfare fund for SIDR affected people.
BASIC Bank patronizes meritorious students. “BASIC Bank gold Medal” was introduced by the bank for the meritorious students of the department of banking, University of Dhaka. Besides BASIC Bank has been accommodating internship facility for the fresh and meritorious graduates from public and private universities and different business school to give them on job and practical experience about banking. Such program helps the participants to choice and plan their carried more confidently. In 2008 a total of 144 students were given same facility.
As a part of CSR contribution BASIC Bank is adopting environmentally responsible practice in its operation. In its business operation BASIC Bank always consider the effects of bank’s financed projects on environment. This issue is included as a part project appraisal.
Fuel driven vehicles are a major cause of air pollution and fuel procurement is a major source of expenditure of foreign currencies. Keeping these dual issues in mind we have been financing 23 CNG refueling projects of which 09 in 2008. These projects are environment friendly, pollution free and saving foreign currencies.
PROFESSIONAL DEVELOPMENT & ACHIEVING EMPLOYEE SATISFACTION
Efficient human resources are real capital of an institution and professional development is a must for banking career. Banking environment is changing regularly, employees have to face new challenges and compliance issues are getting momentum. To attain sustaince issues are getting momentum. To attain sustainable growth employees must gain regular training and education. To strengthen the capacity and sharpen the skills and productivity of our employees to face these changing situation and new challenges, we regularly arrange training on professional and contemporary banking issue. The bank recognizes the valuable contribution of its employees made to the bank. BASIC Bank invests substantial amount in training and its training institute arrange regular training program and seminar to strengthen the knowledge, competence and expertise of the employee to face challenges in this steeply competitive market. Besides a good number of employees were also attended training, workshop and seminar organize by different organization at home and abroad on various issues. In 2008 we trained total 556 employees of our bank of which 11 was trained abroad.
Staff welfare is an issue that receives topmost importance in BASIC Bank Ltd. Has a benevolent fund. Along with giving retirement benefit another objective of the fund is contributing for humanitarian works. The bank sanction grant from this fund for treatment of its employees and their dependents. BASIC Bank has introduced a Superannuation fund instead of attractive retirement benefit for the employees. Deserving candidates are also given promotion and increment regular. We are also contemplating to introduce performance awards.
Employee satisfaction is a key indicator of the attitude of the employee towards their work environment. So the bank always tries to give its employees healthy, clean and congenial atmosphere in the work place.
Apart from above the bank sponsored Baishakhi Fair-1415 to encourage development of small and Cottage Industries by contributing Tk. 3,00,000.00. The bank also sponsored th alumni get together of English department Alumni Association, University of Dhaka by contributing Tk.50, 000.00 only. The 10th anniversary program of American Alumni Association was also sponsored by the bank by contributing Tk.50, 000.00 only.
The bank is also committed to perform the following activities in the coming days as a part of its responsibility to the society.
- Important product and service that promote sustainability and reduce adverse environmental impact.
- Offer high value added products and service
- Forest unrestricted work working atmosphere showing equal respect for all casts and creeds and irrespective of gender.
- Arranging vocational training for the unemployed
- Ensure that all of our projects have Effluent Treatment plant(ETP)
The performance of BASIC Bank Limited has been satisfactory since its inception in respect of all the measurement parameters.
The total assets of the Bank increased to Taka 46,651.53 million at the end 2008 from Taka 38,773.91 million in the previous year. The growth rate was 20.31 percent. Deposit rose from Taka 31,947.98 million in 2007 to Taka 38,368.23 million in 2008 showing a growth rate of 20.09 percent. Loans and advances stood at Taka 27,269.13 million as on December 31, 2008 against Taka 22,263.35 million at the end of 2007, recording a growth rate of 22.48 percent compared to 23.86 percent in the previous year. All out efforts were made to improve the recovery rate and control non-performing loans and advances. Although the recovery rate of project loans remained stable in the neighborhood of 96 percent the proportion of non- performing loans to total loans increased to 3.25 percent in 2008 from 3.70 percent in 2007. Emphasis on the maintenance of quality of assets remained the centerpiece of the Bank’s business strategy.
Year 2008 was a period of high growth in loans and advances with 22.48 percent increase compared to 23.86 percent increase in 2007. Growth of industrial finance was moderate and loans to small and medium industries were 23.91 percent of total loans and advances. The industrial loan of Tk. 17226.40 million was distributed among 13 sectors. Textile sector registered the highest concentration being 36.24 percent of industrial loans and 23.59 percent of total loans. Textile sector is followed by: food & allied industries – 13.73 percent of industrial loans and 8.94 percent of total loans, chemical & allied industries – 12.97 percent of industrial loans and 8.44 percent of total loans and engineering – 11.44 percent of industrial loans and 7.45 percent of total loans.
This is a well-established statement that practical situations always differ from theoretical explanation. During my internship priod with BASIC Bank Limited almost all the desks have been observed. And I have found theory deviates from the practice more or less though three months are not enough time to find out all the discrepancy between theory and practice. Among all experiences some noticeable observations are described below:
The officers were mostly courteous, friendly in nature and eager to help despite the tremendous workload. As a 100% Government owned bank, BASIC Bank is trying it’s best to extend their service to the public.
A very working environment was remaining in the BASIC Bank Ltd., (Shanti Nagar Branch). During my long relationship with (Shanti Nagar Branch), it is found that the (Shanti Nagar Branch) provides all kinds of commercial banking services to its customers. Foreign Exchange department rendering all the services related to international trade and remittance.
It is well established that theory without practice is blind. During the practical orientation I have observed the function of General Banking, Foreign Exchange, and Credit department of BASIC Bank which will help me a lot to understand the overall banking.
Out of the above discussion a conclusion can be drawn after saying that, the present customer dealing procedure is quite well at this moment. The computerized transaction makes the system efficient and effective.
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