The main objective of this report is to know about the Loan and Advances And Foreign Exchange activities of Uttara Bank Limited, report also focus on evaluating the performance of the bank. Other objectives are to identify the usages of modern technology in different operation and represent what types of analysis the bank undertakes for its financial events. Finally identify the main problems that the bank is facing and recommend on how the problems can be fixed.
The main objective of this report is to know about the Loan & Advances And Foreign Exchange activities activities and evaluating the performance of the bank and also to find out the ultimate solution to solve all of the problems that the bank is facing. That will cover mainly account opening and closing department, foreign remittance department of UBL and some basic accounting practice of the Bank.
- To represent an overview of Loan & Advances And Foreign Exchange activities and basic accounting practice.
- To find out the difference of academic and real life accounting practice those are practiced in the bank.
- To know the tasks of different department of the bank.
- To know how the bank is concerned about the changing environment.
- To understand about day to day operations of the bank.
- To realize how the customers are behaved in different situation.
- To identify the usages of modern technology in different operation.
- To identify how the bank is careful to segregate the duties & responsibilities of all employees.
- To represent what types of analysis the bank undertakes for its financial events.
- To know about the culture that the bank follows.
- To find out where the bank was and where the bank is standing at present time.
- To identify the main problems that the bank is facing.
- To recommend on how the problems can be fixed.
Uttara Bank Limited:
Uttara Bank Limited is one of the largest and oldest private commercial Bank of Bangladesh. The Bank was formally known as the Eastern Banking Corporation Limited which started journey on & from 28/ 1/1965. From that period of time, it has been expanding its operation with years of experience to serve the clients as well as the country. Now with 207 branches it has created a strong network in Bangladesh. Besides, to create a strong connection with the globe 600 affiliates are active to support the Bank.
Capital & reserve fund:
Authorized capital of the bank remained at taka 1,000.0 million during the year of 2007 where paid-up-capital has been raised to taka 399.3 million from taka 199.7 million in the year of 2006. The reserve fund of the Bank also increased to taka 2,054.2 million during the year.
Bangladesh Bank sets the capital adequacy ratio of a private commercial Bank as 10% where UBL has 10.5 %. Capital adequacy of the bank is measured by the ratio of Bank’s capital to risk weighted assets. So, it is indicating sound capital adequacy of the Bank.
Improvement of assets:
In the year of 2007, total assets of the Bank raised at 52,860.3 million that was 16.9% more than previous year. The achievement was because of the sector wise improvement of loans & advances, investment, cash & reserve balance kept with Bangladesh Bank.
Collection of deposits:
In the financial year of 2007, deposit of UBL increased by 10.74 percent. With the incremental rate of deposit collection, the Bank was very strict to abide by the Money Laundering Prevention Act 2002.
Risk Management of UBL:
The main goal of any financial institution is to maximize its return. This often comes, however, at the cost of increased risk. Bangladesh Bank has identified five core risks of management of Banks and has provided necessary guidelines for prevention thereof.
The five core risks are:
- Credit Risk Management;
- Asset Liability management;
- Foreign Risk management;
- Prevention of Money Laundering;
- Internal control & Compliance.
Credit risk management:
Credit risk arises because of the possibility that promised cash flows on financial claims held by any financial institution, such as loans or bonds, will not be paid in full or more specifically, it is the risk that the promised cash flows from loans and securities held by financial institutions may not be paid in full. To minimize the credit risk, UBL follows the lending policy as directed from the Bangladesh Bank & the Government. The assessment process of loan application commences from the branch level by Relationship Managers (RM) through zonal office and ends at the “Credit risk management approval unit”. In line with lending policy of the Bank, CRM unit examines the proposal from different perspectives. Then if the proposal is found business worthy, CRM unit places it to the credit committee.
Asset Liability Management:
For the purpose of asset liability management, UBL formed “Assets Liability Management Committee (ALCOM) with the combination of following members-
- Managing Director & CEO;
- Additional Managing Director;
- Deputy Managing Director;
- Head of treasury;
- Head of MIS & computer division;
- Head of marketing division;
- Head of credit & Head of central accounts.
Asset Liability Committee (ALCO) get together at least once in a month to review mainly about the aspects of economic & money market status, different risks like transfer pricing risk, risks related to interest rate on deposits and advances, liquidity risk relating to the balance sheet and various important issues.
Foreign exchange risk management:
Foreign exchange risk is the risk that exchange rate changes can affect the value of a financial institution’s assets and liabilities located abroad. To reduce this category of risk, a strong management system control is required. The front office of the Bank’s treasury department continues to determine foreign exchange rate & tries to reduce the associated risk while the back office settles all foreign exchange transactions & reconciliation.
Prevention of money laundering:
UBL has started training program for anti money laundering campaign. It’s also maintaining “Know Your Customer (KYC)” form while opening an account & Transaction Profile (TP) that’s helpful for illegal transfer of money. The Bank takes all needful steps to prevent money laundering as per the instruction of Bangladesh Bank. The bank has a designed chief compliance officer at head office and compliance officer at branches who work independently to review & verify various accounts & transactions.
Internal Control & compliance:
Effective information system is the key to ensure effective internal control system that exists in UBL. “Internal Control & Compliance Division” undertakes periodical and special audit of the branches & departments of head office to review all operations. The newly established “Internal Control and Compliance Manual” was put into effect in the year of 2007.
Accounts offered by UBL:
- Any Bangladeshi National residing home or abroad may open savings account with UBL.
- The account may be opened in single/joint name.
- The account holder may nominate his nominee in this account.
- The nominee can get the balance amount without submitting succession certificate after the death of account holder.
Things to concentrate :
- Minimum amount to be kept in account : BDT 1,000.00
- Cheque-book facility at negligible cost.
- Opportunity to apply for – safe deposit locker facility
- Collect foreign remittance in both T.C. & Taka draft.
- Transfer of fund on standing instruction arrangement
- Collection of cheques through clearing house.
- Issuance of Payment Order / Call Deposit.
Things to be carried on & special guidelines to open SB Account
- Account opening form delivered by UBL.
- The account opening form and signature card are to be filled in and duly signed.
- Two copies passport size photographs of the account holder.
- Photograph of nominee (if any) duly attested by the account holder.
- Photocopy of the 1st 7 pages of the passport for non-resident Bangladeshi national.
- Signature in the account opening form/card must be same with the signature of the passport.
- Details have been discussed in chapter three.
Government, semi government, autonomous organizations and an individual may open STD Account with UBL. The Bank offers attractive & competitive rate of interest in STD Account. But, 7 days notice is required to withdraw large amount from the STD Account.
- Any Bangladeshi national residing home or abroad may open FDR with UBL.
- FDR may be opened single/joint name for a period of 3, 6, 12, 24 and 36 months.
- UBL offers attractive/competitive rate of interest in FDR.
- Details have been discussed in chapter three.
Foreign Currency Account
For private individual/firm/organization-
- Any person/firm/organization who earns foreign currency can open Foreign Currency Account with UBL.
- Payments in foreign currency may be made freely abroad from this account and local payment in BDT may also be made from this account.
- Bank pay interest provided the accounts are maintained in the form of term deposit for minimum period of 90 days.
- The account opening form and signature card are to be filled in and duly signed.
- Two copies passport size photographs of the account holder duly attested by remitter’s Bank/Embassies
- Photo copies of the first 7 pages of the passport duly attested by the remitters bank/exchange
For Bangladeshi Nationals Working and earning abroad-
- No initial deposit is required.
- A/c holder may nominate his nominee to operate the account.
- The account holder can freely transfer entire amount in foreign currency anywhere he chooses or can convert into Bangladesh Taka currency.
- Funds from this account may also be issued to the account holder up to his entitlement for the purpose of his foreign travels in usual manner.
- The account opening form and signature card to be filled in and duly signed.
- Two copies passport size photographs of the account holder are required to carry.
- Copies of employer’s certificate/work permit are also required.
- One copy of the passport size photograph of the nominee if any to be attested by the account holder.
- Photocopies of the first 7 pages of the passport of the account holder to be carried.
Non-Resident Foreign Currency Deposit Account (NFCD)
- All non-resident Bangladesh nationals and persons of Bangladesh origin including those having dual nationality ordinarily residing abroad may open this account with any ‘Authorized Dealer (AD)’ branches of Uttara Bank Ltd.
- The NFCD account may be opened in single/joint name for a period of 1, 3, 6, 12 months.
- This account may be maintained as long as account holder desires.
- On maturity the account holder can encase it in local currency or can transfer the amount including accrued interest anywhere he likes.
- Initial deposit US$ 1000 or GBP 500 sterling or equivalent currency.
- The account offers attractive interest Payable in foreign and tax free.
- The account with accrued interest can be renewed either of the instruction of the account holder or be renewed automatically if there is no instruction otherwise.
- No interest is given o n premature encashment.
- The account opening form and signature card to be filled in and duly signed.
- Two copies passport size photographs of the account holder to be carried.
- Photocopies of the first 7 pages of the passport duly attested by the remitters bank/exchange companies having drawing arrangement with UBL or by Bangladesh Mission
Resident Foreign Currency Deposit Account (RFCD)
- Persons ordinarily resident in Bangladesh may open and maintain RFCD Account with foreign exchange brought in at the time of his return from travel abroad.
- Any amount brought in with declaration to customs authorities in the form FMJ and up to US$ 5000 brought in without any declaration can be deposited in this account.
- Balance in this account can be freely transferred abroad.
- Funds from this account may also be issued to the account holder for the purpose of his foreign travels in the usual manner.
- Interest in foreign currency is paid in this account if the deposits are for a term of not less than one month and the balance is not less than US$ 1000 or GBP 500 or its equivalent.
- The account opening form and signature card to be filled in and duly signed.
- Two copies of passport size photograph of the account holder are the must.
- Photocopies of the passport and the relevant pages showing evidences of traveling abroad are compulsory.
Implementation of BASEL-2:
Bangladesh bank is going to implement BASEL-2 by the year of 2009 & already the Bank has taken various steps on the ground of international banking settlement guideline on risk weighted capital & made it compulsory to get themselves credit rated by a ‘Credit Rating Agency (CRA)’ approved by Bangladesh Bank. This credit rating will have to be updated in each & every year. UBL has its own training institute where with the help of “Credit Rating Information & Service Ltd. (CRISL)” the Bank made a workshop in the last financial year on this important issue.
Credit rating of UBL:
UBL has made an agreement with CRISL to get required credit ratings as per the instruction of Bangladesh bank vide BRPD circular no. 06 dated on July 05, 2006. CRISL assigned BBB+ (pronounced as triple B plus) to Uttara Bank Limited in the long term and ST-3 rating in the short term. The rating has been done on the basis of Bank’s fundamentals such-
- Diversified ownership;
- Wide branch network;
- Experienced to management;
- Diversified product lines;
- Low human resource turnover;
- Cautious investment policy;
- Satisfactory non funded business etc.
One of the major functions of ‘Treasury Department’ is the proper utilization of surplus fund through maintenance of ‘Cash Reserve Requirement (CRR) and ‘Statutory Liquidity Reserve (SLR)’. The functions of this department in recent years are as under-
- Treasury division operates in order to achieve the function of treasury bills and bonds, commercial securities, purchase and sale of the same in the secondary market.
- Treasury function of UBL concentrates on local money market operations, which included primarily on term investment of surplus funds and inter bank lending and borrowing at call.
- Money market department of Bank’s treasury division is working efficiently with the products of Repo and Reserve Repo.
- The Bank continues maintenance of the latest financial service products Reuters-3000 Xtra and Reuters Dealing System (RDS) for collecting accurate information of rapid changing of international money market with Bank’s own international dealing room.
- Money market operations, foreign exchange dealings, asset liability management and other fixed income product constitute the function of treasury.
- Treasury functions of the Bank operate in the light of core risk management guidelines issued by the Bangladesh Bank and finance & policy existing in the country.
Audit and Inspection:
In order to identify lapses and regulations in the field level and also to take corrective measures the Bank has separated audit & inspection unit under internal control and compliance division. This unit conducts audit & inspects of the branches both on regular & surprise basis based on some specific guidelines. Besides, the zonal heads of the Bank conducts their inspection of the branches under their control on quarterly basis. UBL has also formed an audit committee of board of directors in compliance with Bangladesh Bank guidelines comprising three members of the board to review various audit / inspection and compliance activities at regular intervals.
Overall Performance of UBL:
|Paid up Capital||798.6||399.3||199.7||99.8||99.8|
|Net Profit After tax||1,138||409.5||248.8||142.6||100.6|
|Total Off Balance Sheet Exposure||8,806.9||8,830.5||7,428.5||8,538.8||7,883.6|
|Earning Per Share (EPS)||142.56||102.56||124.59||142.83||100.73|
|Market Value Per Share||3,393.75||4,854.75||2,312.25||2,811.00||2,373.75|
|Price Earning Ratio||23.81||47.34||18.56||19.68||23.57|
|Book Value Per Share||437.88||573.73||957.66||1,694.54||1,571.71|
|Return On Asset (ROA)||1.95%||0.77%||0.55%||0.34%||0.25%|
|Return On Equity (ROE)||30.86%||16.69%||11.93%||7.65%||5.78%|
|Return On Investment (ROI)||7.48%||6.37%||5.83%||–||–|
Earning per share (2008) = of ordinary shares outstanding / Net profit after tax
(409,535,557 / 3,993,296) = 142.56 Taka
Earning Per Share (EPS)
Earning per share has been calculated in accordance with BAS-33: “Earning per Share (EPS)”
Market Value per share (2008) = 3,393.75 Taka
Market Value per Share
- Book Value per Share (2008) = 88 Taka
Book Value per Share
- Price Earning Ratio (2008) = (Price of Stock / EPS) = (4854.75/102.56) = 23.81
Price Earning Ratio
Operating Performance Ratio:
- ROA (2008) = (Net Profit/ Total Asset) = (409,535,557/52,860,332,730) = 1.95%
Return on Asset
- Return on Equity (2008) = (Net profit/ Total Share Holders Equity)
= (409,535,557/2,453,557,156) = 30.86%
Return on Equity (ROE)
- Return on Investment (2008) = (Income from Investment/Total Investment)
= (920, 833194.3 / 14, 455, 780134) = 7.48%
Account Opening & Closing Department:
Account opening is the first task of Loan & Advances And Foreign Exchange activities of UBL. The bank offers different varieties of account for the variety of preference of customers like the following:
- Current Account
- Savings Account (SB)
- Loan Account
Opening of Current A/C:
To open a current account, following rules are maintained by UBL:
- Any adult and mentally sound person can open the current account in the single or multiple forms.
- Any client can not open more than one current account of his/her own in any branch.
- There is no obligation to deposit and to withdraw money from the current account.
- To open a current account initial deposit of taka 2000 (Two Thousand Taka) is compulsory. If the current balance of any current account falls below 2000 taka, bank can claim 100 ( One Hundred) taka as incidental charge in the month of June and December.
- Bank will collect tax on the balance of the account of the account holder as per the government rules.
- The amount of taka 100 ( One hundred) will be deducted from the bank account as account running cost at the time of closing any bank account.
- Bank can close the account and take any necessary steps any time without any notice if any account is proven unsatisfactory to the bank.
- It is to be clearly mentioned, if the account is run by more than one person, the nature to run the account or the applicability of single or multiple signatures.
- Bank can take the responsibility to collect the money of payee a/c cheque, draft, dividend warrant etc. To deposit all of the cheque, draft, pay order, all are to be crossed signed.
- To withdraw money from the bank account the account holder can only use the cheque only issued by the same branch of the account.
- If the cheque is refused for the low balance of the account, bank can charge 25 (twenty five) taka as penalty.
- The account holder must provide the sample signature to the bank and it must be used in each document issued to the bank.
- To open a bank a/c, two copies of passport size photograph is the must.
- Current account can not be identified by the SB a/c holder or any employee of the Bank.
- Any account holder or multiple a/c holders can select one nominee if they want.
- All mentioned rules and regulation can be changed or modified any time.
Opening of SB Account:
To open a SB account, following rules are maintained by the bank:
- Any person who is adult and mentally sound can open and maintain a SB (Savings Bank a/c) with the head of single or multiple users. The guardian of the minor child can open the SB a/c with the favor of them.
- Any club, association or any organization can open a SB a/c by providing the article of association of their organization.
- Any illiterate person can also open a SB a/c in the bank. But such account holder must be present at the time of withdrawing money from their bank a/c.
- There should be proper identification by any account holder who has the a/c in the same branch and his account number and account name should be properly filled up in the SB opening form with her/his valid signature that is used to run the bank account.
- More than one account in any branch is not permitted. But the guardian or the parents of minor child can open more SB a/c for their children in the bank.
- For each and every a/c, a separate account number will be given that must be used for depositing, withdrawing or other banking activities when required.
- An account holder can deposit money in his/ her SB a/c more than one time as he/she wants.
- Minimum deposit of 1000 (One Thousand) taka is the must to open a SB account. Bank can close any SB account if the balance drops to less than 1000 taka.
- A client can withdraw and deposit money only through specific cheque book and deposit book issued by the bank only.
An account can be closed as per the application of the authorized account holder or any reasonable cause held by account holder & realized by the Bank. If the real account holder needs to close his/her or their account, in case of joint account, an application with valid signature that was used to open and to run the account is the prerequisite to deliver to the manager of the bank of certain branch. Then the manager will take certain steps to stop the applied account within the earliest possible time. But a certain amount of money can be charged as miscellaneous income, service charge & 15% vat on such income and service charge.
Remittance Department of UBL:
UBL has the outstanding performance to provide the remittance service. With all of the Middle East countries, it also provides money to the responding parties from Malaysia, Brunei, Indonesia, South Korea, Australia, Canada, Spain, Maldives, Germany, Japan, Singapore, United States of America, United Kingdom, Greece, Cyprus, Italy, France, south Africa & all countries of Africa, North America, South America and all of the countries of the world within the shortest possible time. The most common banking corporations & exchange companies who work as intermediaries to transfer money are BFEC, AN EXP, WSIC, DALIL, KWTASIA, HAMDAN, KSIC, OEXKT, H.EX, AEC, ALFARDAN, SLNIC, CTY, ANB, ALMOUDI, ALRAJHI, ALRAJHIC etc. It takes only several hours to deposit the remittance in the account of clients as per request.
UBL provides money also to them, who don’t have any account in any branch of the bank against remittance from the organization like Money gram, Express Money, Wall street etc. In this case, clients can withdraw money just after receiving remittance message in any working day of bank. To get the cash taka, National ID card or any other ID card with photograph is required. But if these are not available, clients can withdraw money showing the cheque book maintained by them in any other bank. But bank will verify the address & other information enclosed in the remittance message.
Money Gram (MGRM) Money Transfer:
UBL has the agreement of MGRM system. Through this system the customers who have not any account in the bank can also collect money from any branch of UBL in Bangladesh. The computer generated system allows the bank to pay the money within the earliest possible time to provide better service for the clients. This system has the ability to remove any corruption as bank provides the money only getting a secret reference number. If the reference number matches with the original message sent from the HO ID (Head Office International Division), money is paid to the clients. Once the message is printed in any branch, such computer generated system will not show the message elsewhere in any branch of BD.
On the other hand, UBL takes the attested copy of National ID card or passport or any other valid ID card against payment & customers are to fill up the MGRM form correctly. Clients can take the money in cash or can deposit the amount in the account number of the bank. But, to do that the account holder needs to write an application mentioning all of his /her account information to the manager of that branch. The manager checks the application and allows depositing the money of MGRM to the applied account number. Now, to deposit the money to the applied account number, following accounting procedure are followed:
- Preparing the debit & credit vouchers
- Keeping the proper entries in the transfer scroll
- Making proper transfer seal with date in the vouchers.
- Providing all authorized signature
- And finally, updating such transfer in the computer.
Telegraphic Transfer (TT):
UBL provides the opportunity to transfer money through TT within few minutes in any parts of BD where it has the branch. It also receives TT message from HO ID to remit foreign currency via TT. To remit money from branch to branch within BD, customers need to fill up the request form mentioning the following:
- Date & amount of BDT to be remitted with exchange or commission & telephone charge.
- Exchange is BDT 25 for 1 to 25000 taka
- Above BDT 25000, One taka per thousand
- Telephone charge is BDT 25 per TT
- Account name & account number of the favoring Party
- Responding branch name
Details of the applicant enclosing-
- Full name & detailed/ Contact address
- Phone number & applicants signature
After that required amount of cash needs to be deposited in the cash counter with 15% vat on it. Getting the complete request form the authorized officer takes the real tasks to remit money in the mentioned favoring branch & following things are done-
- Find out the ultimate TT number from TT payable register
- TT number is enclosed in the request form
- Proper authorization from few departments
- Phone call to the responding branch
- Identify both branch through secret identification name & number
- Secret test number is matched in both branch & Phone call is done
- Query from responding branch if the test does matches
- Giving entry in the TT payable register
Responding Advice for TT:
With the voucher used in the responding branch, responding advice is also used for further procedure. Responding Advice of TT Transaction containing 3 (Three) copies have the following parts that must be filled up correctly by the authorized officer that includes:
- Originating Branch Name
- Originating TT Transaction No. of 8 (Eight) Digit
- Originating Branch Code
- Responding Branch Name
- Branch Code
- Transaction Code
- TT Number
- Original Date
- Name Of Payee
- A/C No.
- Amount in figure & words
- Signature of the Manager & authorized Officer
Three copies of responding advice are normally filled up through using the carbon paper & three copies are sent to different branch & departments mentioned below:
- The Originating copy is to be mailed with responding schedule F-89 (Revised) to head office- reconciliation department.
- Duplicate copy is to be mailed to originating branch as confirming of payment of mentioned TT.
- The Triplicate copy is to be retained by the branch as official record.
Significant Accounting Policies Followed By UBL:
Basis of Accounting:
The financial statements of UBL are prepared according to the First schedule of the Bank companies Act 1991 as amended under sub section 38 (4) of the Act, Bangladesh Bank circulars, Bangladesh Accounting standards, the companies act 1994, the securities and Exchange Rules 1987 and other regulations applicable in Bangladesh on a going concern basis under historical cost concept (without considering the effects of inflation).
Presentation of Financial statements:
The financial statements are presented in compliance with the provisions of the Bangladesh Accounting Standards (BAS) along with the guidelines, forms and formats provided by the Bangladesh Bank through BRPR circular no. 14 dated 25 June 2003.
Basis of Consolidation:
A separate set of records for consolidating the statement of affairs and income and expenditure statement of the branches are maintained at Head Office of the Bank based on which financial statements have been prepared.
Use of Estimates and Judgments:
To prepare the financial statements, the management of UBL sometimes makes judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. So it may happen that actual results differ from those estimates. Estimates and underlying assumptions are reviewed on a ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected.
Fixed assets and depreciation:
All fixed assets are stated at cost less accumulated depreciation as per BAS-16 “Property, Plant and Equipment.” From the year 2005 the Bank has changed its policy of stating fixed assets at cost less accumulated depreciation from the previous years written down value method. Depreciation is charged for the year at the following annual rates on reducing balance method with the exception of motor vehicles on which straight-line method is applied.
Particulars of assets Depreciation Rate
Furniture and Fixtures 10.00%
Electric supplies, Gas installation etc 20.00%
Motor Vehicle To write off within 5 years
Provision for Taxation
Provision for Taxation has been made as per rates prescribed in Finance Act, 2006 and section 82 of the Income Tax Ordinance 1984 on the profit made by the bank after considering taxable add backs of income and disallowances of expenditures.
Retirement benefits to the employees
Bank follows some specific rules to provide retirement benefits to the employees. Provident fund benefits are given to the eligible staffs of the bank in accordance with the locally registered provident fund rules. The fund is approved and recognized by the NBR & all confirmed employees of the Bank are eligible to participate in the fund. UBL has also formed a gratuity fund which is operated by a separate board of trustees of the Bank from august 2007.Bank has made provision against gratuity fund during this year as per BAS – 19. Recognition of the gratuity trust rules of the Bank by the National Board of Revenue (NBR) is under process.
The revenue during the year is recognized as follows which satisfy all conditions of revenue recognition as prescribed by BAS 18 “Revenue.”
- Interest is calculated on daily product on unclassified loan and advances but charged & accounted for quarterly on accrual basis. In terms of the of the BAS-18 “Revenue”, the interest income is recognized on the accrual basis.
- Commission and discounts on bills purchased & discounted are recognized at the time of realization.
- Income on investments is recognized on accrual basis.
- Dividend income on shares is recognized at the time when it is realized.
- In terms of the provisions of the BAS-1 “presentation of the financial statements” interest and other expenses are recognized on accrual basis.
Loan & Advancres:
In 2008 Uttara Bank Ltd. registered a steady growth in the credit portfolio posting a growth of 30.42 percent. Total loans and advances of the bank stood at Tk .37, 141.3 million during the year 2008 as compared to Tk 28,477.4 million of the previous year. Average loan per branch stood at Tk 179.4 million. The bank is handling its loan disbursement action more smoothly by implementing separation of responsibilities among loan risk assessment, lending decisions and monitoring functions with a view to improving the quality and soundness of loan portfolio. Sector wise allocation of advances reveals a well diversified portfolio of the bank with balanced exposure in different sectors.
Sector wise position of Loans & advances:
UBL achieved tremendous success to provide loans & advances in 2007 that had the growth rate of 13.17 percent. The Bank had the loans & advances in the sector of agriculture, industrial lending as term basis & as working capital, commercial lending in export, import & internal trade, special loan in the sector of consumer credit scheme (Uttaran), personal loan scheme, small business loan scheme, & Uttaran House Repairing and Renovation scheme, housing loan as general house building loan & staff house building loan, lease financing & bills discounted and purchased in Bangladesh & outside Bangladesh. Considering these entire mentioned sector, total loans & advances in the financial year of 2007 28,477.4 taka in million in both public & private sector. The sector wise position of loans & advances for the year ended of 2007 is detailed in the following:
Sector wise position of loans & advances as on 31-12-2008
|Sectors of loan & advances||Public/Nationalized||Private||Total|
|2.Industrial Lending (Term)|
a) Large & Medium
b) Small & Cottage
|3. Industrial Lending (Working capital)|
a) Large & Medium
b) Small & Cottage
c) Internal Trade
a) Consumer Credit Scheme (Uttaran)
b) Personal Loan Scheme
c) Small Business Loan Scheme
d) UHRR Scheme
a) General House Building Loan
b) Staff House Building Loan
|9.Bills Discounted & Purchased|
|Total: Loan & Advances||10.5||37,130.8||37,141.3|
Special Loan Scheme:
UBL provides special loan scheme only in the private sector. Special loan scheme includes the following heads-
- Personal Loan Scheme;
- Uttaran House Building repairing and Renovation Scheme.
- Consumer Credit Scheme (Uttaran);
- Small Business Loan Scheme;
Personal Loan Scheme:
UBL offers special loan scheme for the service holder for the purpose of marriage, medical services, education for their children etc. who find it difficult to meet all of these expenses properly. The Bank provides this special loan only to the salaried officials in the head of “Personal Loan Scheme of Salaried Officials”.
- Purpose of the loan:
The main purpose of the loan is to give support to the limited wage earner officials to run their life properly.
Under this head, the Bank provides loan to the salaried officials for the following aspects:
- To meet own or dependent expenses for marriage ;
- To provide emergency medical & operation expenses;
- To pay educational expenses for admission, books, tuition fees etc. for their children;
- Other expenses recognized & accepted by the Bank.
Things to remember:
- Maximum amount of BDT 1, 00,000 is paid under this scheme with the interest rate of 16.5% compounded quarterly;
- Repayment must be under the Bank’s specific period but not more than 3 years;
- Documents related to applicant’s job to prove him, two copies passport size photographs & photograph of nominee (if any) duly attested by the account holder is required to get the loan.
Uttaran House Building repairing and Renovation Scheme:
UBL provides loan for repairing & renovation of building for the period of one to eight years. Special features of this scheme are:
- The loan is for one to eight years;
- Minimum amount of loan is BDT 1,00,000 & not more than BDT 25,00,000;
- Loans repayment are collected as monthly installment;
- Installment must be paid between 1 to 10th day of the month;
- Bank charges 14% interest rate on this scheme;
- Two percent interest rate is applicable for any late payment as penalty;
- Installment must be paid in cheque.
Consumer Credit Scheme (Uttaran):
UBL has been providing ‘Uttaran Consumer Credit Scheme’ from the year of 1996.
Following heads are included under this scheme-
- Baby Taxi, Tempo/Microbus (For self employed persons)
- Cellular Telephone.
- Motor cycle/car- New or re-conditioned.
- Refrigerator/ Deep Freeze.
- Personal Computer/ UPS/ Printer/ Type writer
- Sewing Machine.
- House hold furniture- Wooden & Steel.
- Television/ VCR /VCP/VCD
- Radio/ Two-in-one/ Three – in – one
- Air-Conditioner/ Water Cooler/ Water Pump
- Washing Machine.
- Dish Antenna.
- Electric Fan- Ceiling/ Pedestal/ Table.
- Kitchen articles such as Oven, Micro-oven, Toaster, Pressure Cooker etc.
Things to remember :
- Documents related to applicant’s job, two copies of passport size photographs & Photograph of nominee (if any) duly attested by the account holder is required to get the loan;
- No collateral security is required;
- Simple rate of interest is charged;
- 5% incentive on total interest is charged;
- Quick sanction is applied;
- Maximum Loan amount BDT 3,00,000;
Performance of the Loan & Advances
Loans, Cash Credit and Over drafts
Bills discounted and Purchased
Net Loans & Advances
|Total Loans & Advances|
Maturity grouping of loans & advances
|Loans & advances|
Receivable on Demand
Upto 1 month
Over 1 month but not more than 3 months
Over 3 month but not more than 1 year
Over 1 year but not more than 5 months
Over 5 year
|Bills Discounted and Purchased|
Payable within 1 month
Over 1 month but not more than 3 months
Over 3 month but not more than 6 months
6 months or more
Loans & advances on the basis of significant concentration
|Allied Concerns of Directors|
Employees’ of the bank
Geographical area basis loans & advances
Foreign Exchange Activities:
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 Exchange Department (FED) is the international department Bangladesh Bank issues license to scheduled banks to deal with foreign exchange. These banks are known as Authorized Dealers. If the branch is authorized dealer in foreign exchange market, it can remit foreign exchange from local country to foreign countries. So UTTARA Bank Ltd, Principal branch is an authorized dealer.
There are three kinds of foreign exchange transaction:
To import, a person should be competent to be and 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. In an international business environment, buyers and sellers are generally unknown to each other. So seller of goods always seeks security for the payment of his exported goods. Bank gives export guarantee that it will pay for the goods on behalf of the buyer if the buyer does not pay. This guarantee is called Letter of Credit. Thus the contract between importer and exporter is given a legal shape by the banker by ‘Letter of Credit’.
Import Registration Certificate (IRC)
The first thing one need to carry on a business of import is called Import Registration Certificate. But registration is not required for import goods, which do not involved remittance of foreign exchange like medicine; reading materials etc. can be imported without registration by the users within monetary limit. Documents to be required for Import Registration Certificate are as follows —
- Income Registration Certificate
- Nationality Certificate
- Certificate from Chambers of Commerce and Industry Registered Trade
- Bank Solvency Certificate
- Copy of Trade License
- Requisite fees
Function of Import Section
The form IMP contains the followings—
- Name and address of the Authorized dealers.
- Amount of remittance to be permitted (i.e./C amount)
- LCA form no. Date and value in Taka.
- Description of goods.
- Invoice value in foreign currency, (i.e./C amount)
- Country of origin.
- Port of shipment.
- Name of steamer / Airline
- Port of importation.
- Indenter’s name and address.
- Indenter’s registration number with CCI & E and Bangladesh Bank.
- Full name and address of the applicant
Letter of Credit
A letter of credit is a letter issued by a bank (known as the opening or the issuing bank) at the instance of its customer (known as the opener) addressed to a person (beneficiary) undertaking that the bills drawn by the beneficiary will be duly honored by it (opening bank) provided certain conditions mentioned in the letter gave been complied with.
Parties to the L/C
|Importer||Who applies for L/C|
|Issuing Bank||It is the bank which opens/issues a L/C on behalf of the importer.|
|Confirming Bank||It is the bank, which adds its confirmation to the credit and it, is done at the request of issuing bank. Confirming bank may or may not be advising bank|
|Advising or Notifying Bank||It is the bank through which the L/C is advised to the exporters. This bank is actually situated in exporter’s country. It may also assume the role of confirming and / or negotiating bank depending upon the condition of the credit.|
|Negotiating Bank||It 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.|
|Accepting Bank||It is the bank on which the bill will be drawn (as per condition of the credit). Usually it is the issuing bank|
|Reimbursing Bank||It is the bank, which would reimburse the negotiating bank after getting payment – instructions from issuing bank.|
Steps for import L/C Operation
Step 1 – Registration with CCI&E
- For engaging in international trade, even trader must be first registered with the Chief Controller of Import and Export.
- By paying specified registration fees to the CCI&E- the trader will get IRC/ERC (Import/Export Registration Certificate), to open L/C with bank, this IRC is must.
Step 2 – Determination terms of credit
- The terms of the letter of credit are depending upon the contract between the importer and exporter. The terms of the credit specify the amount of credit, name and address of the beneficiary and opener, tenor of the bill of exchange-period and mode of shipment and of destination, nature of credit, expiry date name and number of sets of shipping documents etc.
Step 3 – Proposal for Opening of L/C
To have an import LC limit an importer submits an application to department to UTTARA Bank Ltd. The proposal contains the following particulars:
- Full particulars of the bank account
- Nature of business
- Required amount of limit
- Payment terms and conditions
- Goods to be imported
- Offered security
- Repayment schedule
Step 4 – Application by importer to the banker to open letter of credit
- For opening L/C, the importer is required to fill up a prescribed application form provided by the banker along with the following documents:
|1. L/C Application form||7. Authority to debit account|
|2. Filled up LCA form||8. Filled up amendment request Form|
|3. Demand Promissory Note||9. IMP form|
|4. pro-forma invoice||10. Insurance cover note and money receipt|
|5. Tax Identification number||11. Membership certificate|
|6. Import registration certificate||12. Rate fluctuation undertaking|
Step 5 – Opening of L/C by the bank for the opener:
- Taking filled up application form from the importer.
- Collects credit report of exporter from exporter’s country through his foreign correspondence there.
- Opening bank then issues credit by air mail/TELEX/SWIFT followed by L/C advice as asked by the opener through his foreign correspondent or branch as the case may be, at the place of beneficiary. The advising bank advises the L/C to the beneficiary on his own form where it is addressed to him or merely hand over the original L/C to the beneficiary if it is so addressed.
Step 6 – Shipment of goods and lodgment of documents by exporter:
Then exporter ships the goods to the destination of the importer country and sends the documents to the L/C opening bank through his negotiating bank. Generally the following documents are sent to the Opening Banker with L/C:
|1. Bill of Exchange||6. Packing List|
|2. Bill of Lading||7. Advice Details of Shipment|
|3. Commercial Invoice||8. Pre-shipment Inspection Certificate|
|4. Certificate of Origin||9. Vessel Particular|
|5. A certificate stating that each packet contains the description of goods over the packet.||10.Shipment Certificate|
Step 7 – Lodgment of Documents by the opening Bank from the negotiating bank:
After receiving the documents, the opening banker scrutinizes the documents. If any discrepancy found, it informs the importer. If importer accepts the fault, then opening bankers call importer retiring the document. At this time many thing can happen. These are indicated in the following:
- Discrepancy found but the importer accepts – No problem occurs in lodgment.
- Discrepancy found and importer not agreed to accept – In this case, importer protest and send back all the documents to the exporter and request his to make in the specified manner. Here banker is not bound to pay because the documents send by exporter is not in accordance with the terms of L/C.
- Documents are OK but importer is willing to retire the documents – In this case bank is obligated to pay the price of exported goods. Since importer did not pay for bill of exchange, this payment by bank is one kind of credit to the importer and this credit in banking is known as PAD.
- Everything is O.K. but importer fails to clear goods from the port and request bank to clear– In this case banks clear the goods and takes delivery of the same by paying customs duty and sales tax etc. So, this expenditure is debited to the importer’s account and in banking it is called LIM.
Step 8 – Retirement
The importer receives the intimation and gives necessary instruction to the bank for retirement of the import bills or for the disposal of the shipping document to clear the imported goods from the customs authority. The importer may instruct the bank to retire the documents by debiting his account with the bank or may ask for LTR (Loan against Trust Receipt).
RISK IN FOREIGN EXCHANGE BUSINESS
Foreign Exchange Business involves the following risks:
- Risk of non-delivery of goods: May not be delivered to the buyer due to some mishaps frauds or any other reason.
- Risk of receiving sub-standard goods: Till the time the goods are received under a shipment none can be sure of the quality of the goods involved.
- Risk of nonpayment: Buyer may fail to honor his commitments.
- Risk of frauds in goods: Contracted to buy cement but got sand. The above risks trade common to inland trade as also the foreign trade. There are some risk which are peculiar to foreign exchange business.
- Exchange risk: Exchange of currencies can cause loss to some parties – seller or buyer due to the inherent risk of exchange rate fluctuation.
- Failure of foreign banks: It may be possible that the foreign bank may not be able to pay the equivalent due to bank failures.
- Sudden changes in policies: This is referred to as political risk. Exchange control regulation, import export policies and trade regulation are changed overnight which will put the parties in difficulties.
Historical performance OF UBL
Here is a sum of historical performance of UBL:
|Figure in Million Tk.|
|08.||Profit before Tax and Provision||2,098.1||1,143.7||866.8||782.6|
|09.||Profit after Tax and Provision||1,138.5||409.5||248.8||142.6|
|10.||Earnings per Share||142.56||102.56||124.59||142.83|
|11.||Dividend||Bonus 100%||Bonus 26%||Bonus 35%||Bonus 20%|
|12.||Number of Employees||3,476||3,476||3,505||3,265|
|13.||Number of Branches||207||207||201||198|
Finding of the Report:
- UBL has not yet provided modern and advanced banking service all over the country. While competitors are expanding their operations with a wide range of technology, UBL is providing the banking service on a traditional basis. Even the Bank has not yet introduced the Online Banking Services. Customers are not getting the opportunity of using ATM to deposit & withdraw money. As a result, the services like 24 hours banking stands out of reach.
- Internal control system of the Bank is not quite satisfactory. The employees of one department frequently work or are called to work in another department. Even, sometimes they are seen to change their tables to work in other tables. But they are not actually responsible to do the task of others. Consequently, they blame another employee when any problem exists. Besides, fourth class employees are seen to prepare some vouchers of charges account for entertainment, stationary items, conveyance etc. for which they were sent outside. As a result, it is obvious to create fraud and error. Completeness of daily records is sometimes dependent on the willingness of the employees.
- Employee behavior with the customers sometimes reaches out of acceptance. In every week, it is obvious that some customers are raising their voice loudly for misunderstanding with some employees or such event occurs because of making delay to provide services.
- The Bank is only focusing on some common analysis of its financial statements like price earning ratio, advance deposit ratio, return on assets, return on equity etc. But, making strategies focusing on some few analyses is not enough in the present market place. The Bank is operating in Bangladesh for about 44 years since its origin. So, it had the opportunity to establish its image as a star.
- HR practice of the Bank allows recruiting some of the employees who are not sometimes fit for the organiation. Employees are not properly trained to speak in formal language & hence some of them forget that they are in the office while speaking. Some employees in each of the branches are employed in the accounting department but they have not the background of accounting. As a result, their basic knowledge is not that much strong in the relevant areas though they can solve all of their problems because of training.
The study of Uttara Bank Ltd’s foreign exchange activities has revealed the following about the bank-
- The bank is performing in the bottom-line compared to its competitors
- They haven’t developed any ATM & Online services which is the main reason for customers’ dissatisfaction to the bank
- Foreign remittance inflows & outflows are very poor compared to other selected banks
- The bank has a biasness in HRD which unwelcome female workforce in the bank
- The employees of the bank lack of skills & excellence because of recruiting system’s instability & lack of transparency
- The software that the bank is using is very unsophisticated & hampers operations very often
- The bank normally target the lower segment of the market & those who are not used to sophisticated banking service because of illiteracy
- The bank is heavily depended on deposit schemes for doing business
- The IT infrastructure is not satisfactory; they don’t have a usable website
- In foreign exchange department it is required to communicate with foreign banks frequently and quickly. To make the process easy modem communication media for example e-mail, Fax and win fax, Internet etc. should be used more frequently. But the bank doesn’t have mass use of this medium of communication.
- In some cases the number of employee engaged in rendering specific services is insufficient.
- Employees are exposed to customer excessively which is an obstacle in systematic and prompt service.
In accordance with my practical experience & knowledge gained from working in UBL for two months in Loan & Advances And Foreign Exchange activities activities, I would like to recommend the followings:
- UBL should develop the modern & advanced banking all over the country that can impress its clients. If the Bank can not implement the modern banking system, it would not be possible for the bank to make competition with other banks in the most competitive marketplace.
- Customers want the facilities of online banking. But the bank has not yet introduced the online banking & that’s why the service ought to be introduced as early as possible to ensure customer satisfaction.
- Behaviors with the clients made by the employees are not enough to satisfy the clients & hence the Bank should increase the customer satisfaction level with smiling face. The employees ought to be careful that if the customers are behaved well, they will come again to take services.
- Accounting procedure of the bank is based on traditional system though accounting software has been introduced in all of the branches. It takes time to write & to prepare different vouchers & to give entry in different registers by hand. So, bank should develop the accounting process from the manual to computerize in all aspects. Bank should also focus on more analyses of its financial statements.
- Customers want to get the money of their clearing cheques quickly. But if the Bank makes delay of several days, it will create a bad impression against the Bank. So, Clearing cheques ought to be sent to the local office to collection in proper time without making any delay.
- If an employee of one department works in another department frequently, internal control system of the Bank will be hampered. So, Segregation of duties & responsibilities in all departments should be properly ensured in all aspects.
- Website of UBL is not that much rich to know about different value added services & hence the site should be enriched & updated time to time. UBL should make decision considering that it can work as an advertisement tools for the Bank.
- UBL should take care of its head office to make people impressed at the first sight. If the outlook of the Bank can not be changed, customer will recognize it as a backward Bank.
- Human Resource is the life of any organization. The success of any organization depends on its employees. But, if the employees are not that much qualified, success will no longer exist. Keeping the thought in mind, UBL should reform the HR policy & recruit new young qualified HR personals.
UBL is a traditional banking & financial services organization operating in Bangladesh for about 44 years since origin. The total number of correspondents & agents of the Bank was 686 as on 31-12-2007 which was increased by 38 over that of the previous year. At the same time the Bank is handling foreign remittance business through 55 exchange houses & operating local operation through 207 branches. I had the opportunity to work for this Bank during my internship program. I was placed at different departments of UBL at Hatkhola branch, Hatkhola. During this time I got the chance to observe the overall activities of a branch commencing from account opening to account closing. I also got the scope to act together with high officials and was informed about their prospects & perceptions about the Bank’s services. During my interaction with the employees & customers, I understood that there is the existence of customer dissatisfaction in some cases. The Bank is developing its Loan & Advances And Foreign Exchange activities activities & accounting system day by day with changing industry situation but the rate of change of such speed needs to be increased. The Bank has the opportunity to develop a leadership position in the industry but new significant strategy ought to be made.
Finally, I would like to say that this internship at UBL has developed my practical knowledge of Business Administration & made my BBA education more realistic. I got the scope to apply various tools & concepts in this report that I learned in my education of last four years. The concepts & tools used in this report were not only from accounting & finance related courses but also from management, marketing, human resource & other courses. I desire all the best for the Bank.
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