An appraisal of customer service Of the IFIC bank
(3.1) an Appraisal of Customer Service of IFIC Bank:
Customer service is the most vital factor for any organization. When this question comes about a bank than it becomes more important because a bank is directly involves with its customer. To run the business safe and soundly a Bank must have to maintain a good relation with each and every customer.
Basically a bank provides cash deposit service, utility bills payment service, small finances, corporate or business finance services, loan related services etc. IFIC Bank also provides all this kinds of services for its customers.
IFIC Bank has got that much qualified service team who can provide the best service to the customers and can make the customer a satisfied one.
(3.2) Products & Service :
• Auto Loan
• Consumer Loan
• Easy Loan
• Porua Loan
• Flexi Loan
• Thikana Loan
• Possession Loan
• Retail Loan
Fulfil Your Dream with IFIC
Pension Savings Scheme:
Empower yourself for a secure and prosperous future with IFIC PSS. Partnership for a prosperous and secure future.
Under this Scheme you can open a deposit scheme for Tk.500, Tk.1000, Tk.2000 and Tk.5000 per month for 3 or 5 years whichever suits you.
You can make the deposit within 10th of each month (In case of holiday the next working day).
You can get Loan up to 80% of the deposited amount
You can receive the entire deposit amount with interest at one go or receive a pension
on a monthly basis at a desirable amount of your monthly installments.
If you fail to deposit monthly installments continuously for 3 consecutive months your account will become automatically inoperative. But, it can be revalidated on the 4th month on receiving all outstanding installments along with a written application. You will be given two(2) opportunities during the 3 years scheme and three(3) opportunities during the 5 years scheme to avail this option.
You can pay installments by transferring from your CD/SB account maintained with the concerned branch.
Installments may also be paid in advance.
You can close the account at any time by a written application*.
Monthly installments to PSS will qualify as investments in yearly Income Tax return.
Rules and Regulations:
The applicant has to be +18 years of age.
On failure of 4th consecutive monthly installment the account will be fully closed automatically.
* If the applicant want to close the account before maturity the following rules will be followed:
a) have to pay Tk.200 as service charge
b) If the account is closed within one year, only principal amount will be paid.
c) If the account is closed after one year, only principal amount along with interest at saving rate/PSS rate (whichever is lower) prevailing on the date of closure of the account will be paid.
(3.4)Banks Major Functional Departments & Others Activities:
General banking Division:
There are different types of accounts provided by IFIC Bank for considering the highest benefit of the customers. Such as Savings account (SB), current account (CD), Short term deposit (STD), fixed deposit receipt (FDR) etc are offered by this department. General banking is the heart of banking activities. Total banking procedure start with this department. General banking department perform the core function of bank operation and it is known as “Retail Banking”. They take the deposits from the customer and meet their demand for cash honoring their checks. It opens new accounts, remit funds, issues bank draft and pay order. Account opening section, Remittance, Checks clearing, Cash, FDR, Accounts section are part of general banking.
General Credit Division
A wide range of products and services, such as different type of loans are offered by this department. It faces continuous challenge from the local private banks, which mainly specializes in the consumer banking. As a result, it has to develop new products and services to ease the competition on a continuous basis. The approval is mainly based on the risk analysis of the corporate clients done by the Corporate Banking division.
Finance and Accounts Division
This department performs the following activities:
Sources of finance
Administration, audit and back office operation.
Salary & Provident Fund
Taking care of taxation and financial control of the Bank.
Decision making related to administrative activities
Recovery of stuck-up loans is a major concern for the bank. This division helps general credit and project finance divisions to recover the loans and take legal action against those creditors. Some time there is some usual recovery. Recovery from written off loans goes to income account of the bank.
Project Finance Division
IFIC Bank’s corporate clients mainly comprise the top local and multinational companies operating in Bangladesh. The main objective of this department is to build and maintain positive relationships with their clients. As a result, each and every company is assigned a Relationship Manager, who maintains regular contacts with clients. Moreover, this department offers the following facilities to its clients:
Bonds and Guarantees, etc.
The foreign exchange and money market operation of the IFIC Bank is broad. Exotic currencies happen to be one of its specials areas of strength. A 24 hour-service is provided to customers in Bangladesh through the Bank’s network of dealing centers placed in the principal of the world. The Bank’s treasury specializes in offering solutions to who wish to manage interest rate and currency exposures that result from trade, investment and financing activities of other dynamic economies of the region.
Internal Control & Compliance
Banking involves high risk, the presence of effective internal control system, corporate governance, transparency and accountability is vital to ensure smooth operation of the bank. The internal control is the process affected to provide reasonable assurance for the achievement of the objectives of the bank, the reliability of financial reporting and compliance with applicable laws, regulation and internal policies.
Audit & Inspection Division
This division helps the bank accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes. It also assists development of the process for smooth operation of various department and branches, detect major deficiencies in the branches, review the activities and organizational structure of the internal audit function.
Foreign Trade Division
All the overseas branches are under the control of this division, the regularly communicate with those branches and solve problem of those branches.
It basically handles all promotional campaign, branding both consumer and corporate products and services for IFIC bank.
In Bangladesh local banking laws regulate and rules set by the Ministry of Finance and Bangladesh Bank is handling by this division. Law division has to take care of are:
Any kind of legal issues
Compliance advisory service
(3.5) Account Opening Section:
This section opens Current Deposit (CD), Savings account (SB), Short term deposit (STD), Fixes deposit receipt (FDR). Most vital work starts from here as selection of customer is very important for the bank success and failure. If the account holder do money laundering through this account than the bank will be legally responsible for that and bank has to answer to Bangladesh bank or customer may occur fraud and forgery by this account and thus destroy goodwill of bank’s. In branch account opening officer follow some rules which are guided by IFIC Bank manual and senior opening form signature is must in this case. Manager’s signature is must on every account opening form as permission for opening the account.
(3.6)Target Customer of IFIC Bank Banani Branch:
Individual person Public limited company
Sole proprietorship firm Government Organization
Partnership firm Semi Government Organization
Private limited company Bank employee
(3.7) Types of Accounts:
Deposit is life-blood of a commercial bank. Since commercial bank deals with other people’s money, without deposit there is no business for the commercial bank. Accepting deposit is one of the main functions of commercial bank. IFIC bank’s deposits can be broadly classified as follows:
(a) Current Account:
Current Account is most suitable for private, individuals, traders, merchants, importers and exporters, mill and factory owner etc. For opening of a current minimum deposit of TK. 2000.00 is required along with introductory reference. No interest is given the current account deposited money. One can enjoy maximum flexibility and convenience when s/he opens a current account with IFIC bank limited. This account offers:
Any number of transactions a day
Free check book
Statement of account at any desired frequency
Statement by fax on demand
(b) Savings Account:
The saving account is primarily for small-scale savers. The main objective of this account promotion is thrift. Hence, there is restriction on withdrawals are permitted only against prior,
Minimum amount of TK. 1000.00 is required as initial deposit.
Frequent withdrawal is not encouraged.
7 days is required for withdrawal of large amount
The rate of interest is 6.00 % against SB account.
(c) Short-Term Deposit (STD) Account:
In short term deposit account, the deposit should be kept for at least six month to get the interest. The STD account is a very important class of account in this bank. The minimum amount of balance has to be maintained with STD account is TK. 25000 Interest is given at a rate of 4.5 percent which is less than savings account. Normally various big companies, organizations, government departments keep money in STD account. For this type of account, frequent withdrawal is discouraged. Deposit should be kept for at least seven days to get interest. Prior notice is required for the withdrawal of money from STD account. The account holder must give seven days before the withdrawal that is why STD is also called ‘Seven days notice’ current account.
(d) Fixed Deposit Receipt (FDR):
Fixed period specified in advance. These deposits are time deposit. Normally the money on a fixed deposit is not repayable before the maturity date of a fixed period. At the time of opening the deposit account, the banker issued a receipt acknowledging the receipt of money on deposit account. It is popularly known as FDR. An interest rate ranging from 10.50 percent to 11.50 percent is offered depending on different amount and tenure of deposit. Fixed deposits are the deposits in which an amount of cash is deposited in bank.
(e) Business account:
To open an account for Sole Proprietorship, Limited company account, Partnership Company the applicants are required to bring all the materials that have mentioned before. Extra required materials for business accounts is Trade license, TIN number and for partnership & ltd. Company partnership deed is required.
(3.8) Transfer of an account to another Branch:
Sometimes the customer wants to transfer his account to another branch due to various reasons. IFIC Bank, Banani Branch, also gives this kind of facility to the customer. In this case, they will have to submit an application to the branch manager stating the reasons. The officer verifies the signature and finds out the balance of the account holder. The holder also submits the rest check leaves along with the application. Then the officer issues an Inter Branch Credit Advice (IBCA) to that branch and a debit voucher with the balance of deposit in that account. He also sends the account opening form and specimen signature card to that new branch. The new branch officer verifies the customer signature with account opening form supplied to him. The amount mentioned in the (IBCA) considered as the initial deposit of the new branch.
(3.9) Cheque book & ATM Service:
The customer service department helps the customer to collect new cheque book as per customer demands. Most of the time customer came to stop a payment of signed cheque by them. Than the customer service offer stop the cheque payment by analyzing the fact. The cheque only can be stopped in two circumstances, if the customer lost the cheque or if the cheque is being stolen. Unless this two circumstances the service provider can not stop the cheque payment. Except this things service officer takes order for new cheque book for the customers. Usually it takes two working days to collect a new cheque book. This is all about cheque book queries.
There are different services for ATM card users like they can apply for new ATM card. The customer can apply for the lost ATM card. The bank for free of charge provides an ATM if its normally being expired. If the customer somehow damages the card than there is a replacement fee of BDT 300 taka to collect a new ATM card and also customer can collect their captured card after 24 hours from customer service department without any fees. Customer can collect their captured ATM card from their nearest branch. This is all about ATM services.
(3.10) Closing Procedure of an account:
For two reasons account can be closed –
By Banker: banker has the right to close the account if the customer does not maintain any transaction six years and the balance is become lower than the minimum balance.
By Customer: if the customer wants to close his account he will write an application to the manager and the manager give the proper instruction to the officer then close the account.
Firstly, the concerned customer has to apply for closing his/her account. Then to close the account the Cheque book is to be returned to the bank. After charging the account closing charge the Manager will close the account. Closing charges are as follows:
For below 6 months 100 tk.
For over 6 months 200 tk.
The rest amount of money laid in the respective account is paid to the customer by a payment order. In case of payment order certain commissions and vat are cut off from the account.
(3.11) Locker service:
IFIC bank’s locker service allows a customer to keep their valuable in a safe and secured place and access the same at their convenient time.
Locker service offers the following facilities to its customer:
1. Friendly and personalized services from the locker custodian.
2. Complete privacy: A locker holder can operate the locker in private environment.
3. Convenient location of locker complexes.
4. Complete safety and security: Locker complexes have the best available security features such as:
5. Alert, round the clock security guard.
6. Strong, heat-resistant steel lockers lodged in reinforced concrete steel vaults for maximum protection.
7. Sophisticated anti-burglary alarm system.
8. Highly advanced smoke-sensor devices placed all over the ceiling backed by the fire fighting equipments.
9. Protection against varying weather conditions.
But this service is unavailable on weekends and government holidays.
Available locker size and charges:
Type Charges (Yearly)
Small BDT 2500
Medium BDT 2750
Large BDT 3500
Any one can open the locker service account. He/She has to deposited 1000/ and need 2 copies passport size picture for opening this account.
(3.12) Purchase of Sanchaya patra on behalf of a customer:
IFIC Bank is providing the free service for the account holders by purchasing Sanchaya patra on behalf of the customer. If an account holder wants to purchase Sanchaya patra than he or she can apply directly from any branch of IFIC Bank. The fund will be automatically transferred from the account as much as the customer wants to purchase based on the government rules and regulations. The customer can encase this security to refund purpose. The customer also can deposit coupon interest into their account very easily. The bank collects the coupon interest for the customer.
(3.13) Different types of Queries:
Many customer come to the branch with different types of queries. Most of the common queries are given below:
1) To know the account opening process.
2) To know about loan facilities.
3) To know about the account position.
4) To know the balance.
5) To know about any fund transfer.
6) Enquiry about lost cheque, lost ATM card.
7) To know about any returned cheque information.
8) How to operate the ATM machine.
9) About different charges for different activities regarding account/ card services.
These are the most common queries of the customer. Queries vary according to situation or any other instances.
(3.14) Cash Section:
Cash department is the most vital and sensitive organ of the branch as it deals with all kinds of cash transactions. This department starts the day with cash in vault. Each day some cash that is opening cash balance are transferred to the cash officers from the cash vault. Net figure of this cash receipts and payments are added to the opening cash balance. The figure is called closing balance. This closing balance is then added to the vault. And this is the final cash balance figure for the bank at the end of any particular day.
(3.15) Functions of Cash Department:
Cash Payment 1. Cash payment is made only against check
2. This is the unique function of the banking system which is
known as payment on demand
3. It makes payment only against its printed valid check
Cash receipt 1. It receives deposits from the depositors in form of cash
2. So it is the mobilization unit of the banking system
3. It collects money only its receipts forms
Cash payment or check cancellation process
Step 1 Receiving Check by the employee in the cash counter
Step 2 Verification of the followings by the cash Officer in the computer section
1. Date of the check (it is presented within 6 month from issue date)
2. Issued from this branch
3. Amounts in figure and sentence written does not differ
4. Signature of the drawer does not differ
5. Check is not torn or mutilated
Step 3 Gives pay cash seal and sends to the payment counter
Step 4 Payment officer makes payment
(3.16) Books Maintained by this Section:
Vault Register Cash balance at the end of a day is recorded in this book which is kept in the vault.
Cash Receipt Register Cash receipt in whole of the day is recorded here
Cash Payment Register Cash payments are made in a day are entered here
Rough Vault Register Cash calculation for final entry in vault register is done here, as error and correction here is not acceptable in vault book or balance book.
Cash Balance Book Balance here is compared with vault register. If no difference is found, indicates no error.
(3.17) Cheque Clearing and Remittance Department:
This department receives cheque from its depositors for the purpose of collection by a deposit slip over the counter crediting their account. Clearing of cheque is done through the clearinghouse in Bangladesh bank. Everyday the first house starts at 9 a.m. and returns house at 5 p.m.
The main objective of clearing and remittance department is to provide an extra facility to the customer other than cash receipt and payment. We can divide this department into two parts. One is Clearing & Transfer Delivery section, and the other one is Local Remittance section. In IFIC Bank, Banani Branch, there are three employees, working in this department. I am trying to present my findings in the following parts regarding these two sections.
(3.18) Inward Transfer Delivery:
For payment of Bills presented to a particular branch of the Bank through another branch of the Bank, the procedures are the same as those applicable to Inward Clearing. The only exception is that there are no clearing house formalities. The concerned branches of the Bank directly deal with Inter-branch clearing.
(3.19) Outward Transfer Delivery:
For collecting of Bills by a particular branch of the Bank, drawn on another branch of the Bank the procedures are the same as those applicable to Outward Clearing. The only exception is that there are no clearing house formalities. The concerned branches of the Bank directly deal with Inter-branch clearing.
(3.20) General Instruction on Clearing:
Step 1 The returns of the outward clearing/ transfer delivery are received by the branch in the same manner as the inward clearing/ transfer delivery (Return of Instruments).
Step 2 Depositor’s account is debited with the amount of the instrument.
Step 3 The instrument together with the Check Returning Memo in Bank’s form is sent to the depositor with covering memo immediately.
Step 4 The instrument together with the Check Returning Memo is sent to the department concerned if lodged by them.
Step 5 It the instrument is to be re-lodged, a credit voucher is prepared and attached with it and the instrument is presented again.
Step 6 The instruments returned unpaid by the various departments are received in the Clearing Department attached with Memo in standard form and entered in the Register (Inward Clearing Transfer Delivery).
Step 7 The returns of inward clearing/ transfer delivery are sent by the branch in the same manner as the outward clearing/ transfer delivery.
Step 8 The credit voucher is not posted unless the relative instrument is paid (Internal Transfer).
Step 9 If the instrument is returned, the entry is cancelled and initialed in the Transfer Book.
Step 10 The instrument together with the Check Returned Memo is sent to the depositor covering memo through Dispatch Department.
Step 11 If the amount of the advice received is less than the amount of the instrument received or the amount of the advice sent is more than the amount of the instrument delivered, the excess amount is sent to the Bank concerned by a Pay Order and the following entries are passed (Difference in Clearing):
Debit: Sundry Deposit A/C- Difference in clearing Credit: Bills Payable A/C- Pay Order issued
Step 12 If the amount of the advice received is more than the amount of the instruments received or the amount of the advice sent is less than the amount of the instruments delivered, the following entry is passed and the entry is reversed when the Pay Order is received. Debit: Sundry Asset A/C- Clearing Adjustment
Step 13 When an instrument is presented in special clearing on request of the customer, the instrument is stamped and suitably endorsed (Special Clearing).
Such instruments should invariably be drawn on Bank with whom the main branch maintains account (Bangladesh Bank & Sonali Bank).
Step15 Branch sends the instrument duly entered in Outward Clearing Register and Sub-main Schedule to the branch representing the Clearing 1 louse (When representing branch maintains A/C).
Step 16 Branch representing the Clearing Mouse sends the instruments to the drawee Bank duly entered in Pay-in-Slip of the Bank for credit of the proceeds in the account maintained with them.
Step 17 On receipt of the information of credit of the proceeds from the drawee Bank, the branch representing Clearing House then sends an Inter Branch Credit Advice (IBCA) to the branch concerned.
Step 18 Where instruments drawn on Banks other than those, with whom the branch, representing Clearing House does not maintain account, Pay Order/ Bangladesh Bank Check issued by the drawee Bank in payment of the instrument are lodged in clearing.
Bank’s Locker service is also delivered from this department. In IFIC Bank, Banani Branch, this department is maintained by two officers.
(3.21) Local Remittance:
Sending money from one place to another place for the customer is another important service of banks. And this service is an important part of country’s payment system. For this service, people, especially businessmen can transfer funds from one place to another place very quickly. There are five kinds of techniques for remitting money from one place to another place. These are:
1) Demand Draft
2) Pay Order
3) Telegraphic Transfer
4) Telephone Transfer
5) Mail Transfer – Time consuming and not frequently used
IFIC Bank Ltd. earns a huge amount of money by selling several customer services. The IFIC Bank Ltd. offers the following services to its customer:
Demand Draft (DD):
DD is the most popular instrument of remitting fund. It is an order to pay money drawn by one branch of a bank upon another branch of the same bank for a particular sum of money which is payable to order and demand.
Commission of DD as under:
Postal charge 10/=
Amount of DD Commission (TK)
Minimum charge 25
Payment Order (PO):
A payment order is an instrument from one branch to another of the same bank to pay specified sum of money to the person named therein of his order. Unlike cheque, there is no possibility of dishonoring pay order because before issuing bank takes our money of the pay order in advance.
Amount of DD Commission (TK)
TK 0 to TK. 1000 10
TK. 1000 to TK. 100000 25
TK 100000 to TK 500000 50
Above TK. 500000 100
Telegraphic Transfer (TT):
TT is the fastest means of money transfer between two branches of the same bank. The formalities of TT is as same as MT, there are taken some extra charge for telephone. Telegraphic and Telephone transfer are almost the same, both are them are known as TT in short. IFIC bank helps people transfer their money from one district to another in the quickest possible time at the lowest service charge.
(3.22) Advance Department:
Banking is essentially a business dealing with money and credit. Like over other business activity, Banks are profit oriented. It depends mainly on how much profit they can make. Profit is the yardstick for the bank to move on. They work as reserves of “savings’ of the community and also as lenders or investors for trade business and industry. A bank invests its funds in many ways to earn income. The bulk of its income is derived from loans and advances.
Banks give loans and advances to traders, businesspersons and Industrialists against the security of some assets or on the basis of the personal security of the borrower. This is the survival unit of the bank because until and unless the success of this section the survival is a question to every bank. If this section is not properly working the bank may become bankrupt. This is important because this is the earning unit of the bank. Banks are accepting deposits from the depositors in condition of providing interest to them as well as safe keeping their interest. Now the question may gradually arise how the bank will provide interest to the clients and the simple answer is advance. Why the bank provides advances to the borrowers –
To earn interest from the borrowers and give the depositors interest back
To accelerate economic development by providing different industrial as well as agricultural advances
To create employment by providing industrial loans
To pay the employees as well as meeting the interest groups
Credit is continuous process. Recovery of one credit gives rise to another credit. In this process of revolving of funds, bank earns income in the form of interest. A bank can invest its fund in many ways. Bank makes loans and advances to traders, businessmen, and industrialists. Moreover nature of credit may differ in terms of Security requirement, disbursement provision, terms and conditions etc.
Bank often uses loans and advances as an alternative to one another. But academically this concept is incorrect. Academically Advances is the combination such items where loans is a part only. For this credit section of the banks is known as advance section. It is the main profit source of the Bank. Banking business is like all other profit-oriented business. It depends mainly on how much profit they can make. Profit is the yardstick for the bank to move on. Banking is a business that deals only with money and credit. Banks are profit oriented. They invest their fund in many to earn income. Huge amount of income derives from loans and advances. Banks makes loans and advances to traders, businessman and industrialists against the security.
(3.23) Processing of loan and advances:
Applicant applies for the loan in the prescribed form of bank.
Getting Credit Information:
1. Personal investigation
2. Confidential report from other bank head office/ Branch/ Chamber of the Commerce.
3. CIB report from Central Bank
(3.24) Information Collection:
The loans and advance department gets a form filled by the party seeking a lot of information. The information is listed below:
1. Name and address (present and permanent)
2. Constitution or status of the business
3. Particulars of properties, partners and directors
4. Background and business experience
5. Particulars of personal assets, names of subsidiaries, percentage of share holding and nature of business
6. Details of liabilities in name of borrowers, in names of any directors
7. Financial statement for the last three years
8. Nature and details of business/ products
9. Details of requested credit facilities
10. Details of securities offered
11. Other relevant information
12. Proposed debt equity ratio.
(3.25) Relevant matter of Document checked before sanctioning any Loan:
There must be an account of the person want to take loan. The account must transact for not less than 3 months to 6 months. Otherwise the loan will not be sanctioned.
After checking the duration of account than the transaction made by the account holder must be checked. The debit credit position must be also checked, because it is related with future dealings of the borrower.
The purpose for what the loan is taken by the borrower is another important matter to see and check. Whether the purpose is business or else must be checked with its marketability. Because there is risk of fraud and forgery by the borrower by seeing one purpose in cash of ding any illegal business.
The banker should check through security whether it is enough or not.
(3.26) Proper Supervision of the Project:
If such provision is kept in the sanction contracts the bank officials go the project area and observe how loan is utilized. Of no such close to supervise the loan is added, even the bank can see the performance of the project.
(3.27) Loan Recovery:
In general the loans are repaid in installment. Some loans are repaid all at a time. If any loan is not repaid in usual cause to action legal procedure is followed to recover the money.
(3.28) Documentation of the loan:
These are the most common documents for creation of above mentioned charges and for other formalities of sanctioning loan.
1. Demand promissory note: Here, the borrower promises to pay the loan as and when demand by bank to repay the loan.
2. Letter of arrangement.
3. Letter of continuity.
4. Letter of hypothecation of goods and capital machinery.
5. Stock Report: This report is used for CD and CC. In this report, information about the quality and quantity of goods hypothecated furnished.
6. Memorandum of deposit to title of property duly signed by the owners of the property with resolution of Board of Directors of the company owning the landed property.
7. Personal guarantee of the owners of the property.
8. Guarantee of the all directors of the company.
9. Resolution of the board of director to borrow fund to execute documents and completes other formalities.
10. Letter of Disclaimer: By this letter, the borrower withdraws his all claim on the claim of the property/ goods lined/ mortgaged.
11. Form no. 18/19 for filling charges with the register of joint stock companies under relevant section.
12. Tax paying certificate.
13. Letter of installment.
(3.29) Forms of Advance:
Bank generally offers different kinds of credit facilities to their customer. They are in different forms with different categories. The credit facilities may be broadly classified into four categories. They are as follows:
2. Cash credit
4. Bills purchased and discount
In case of loan, the banker advances a lump sum for a certain period at an agreed rate of interest. The entire amount is paid an occasion either in cash or by credit in this current account, which he can draw at any time. Loan may be demand loan or a term loan. Advance made in a lump sum repayment either on fixed installment basis or in lump sum on subsequent debit except by way of interest, incidental charge, etc. is called a loan.
Types of loans:
The different types of loan that banks give to his party are as following:
House building loan
Staff house building loan
Loan against trust receipt
Staff loan against PF (Provident Fund)
LIM (Loan against Imported Merchandise)
Loan general/Demand loan
Before give loan credit department has to do certain functions. First they have to send CIB to Bangladesh Bank, Lending Risk Analysis, and Issuance of Bank Guarantee after completion of these jobs if the result is positive than officer can sanction loan.
Cash credit is given through cash credit amount. Cash credit amount is basically a current account, however a little different exist between them. The distinction between a current account and cash credit account is that the former is intended to be an account with credit balance and the letter and account for drawing of advances. Operation of cash credit is same as that of overdraft. The purpose of cash credit is to meet working capital need of traders, farmers and industrialists.
Overdraft is that advance which is allowed on current account operated upon by check. The customer may be sanctioned a certain limit within which he can overdraw his current A/C within a certain period The customer can withdrawals or deposits any numbers of within his limit. Bank gives overdraft in following two ways:
SOD (secured overdraft)
Secured Overdraft (SOD)
Secured overdraft is a continuous credit facility to the customer of the bank. This kind of credit facility is given on following security:
Various kind of Sanchay Patras
FDR (fixed deposit receipts)
ICB unit certificate
If any customer wants to get SOD facility from the Bank, he has to submit an application to the Bank manager It must be done in prescribed form of the bank. After getting application form bank made an office note. In this note bank officer write down the following things:
Nature of limit
Extent of limit
Rate of interest rate
SOD limit for FDR, BSB, PSP, ICB unit certificate:
Two care from branch level
Above from head office
SOD limit for different kinds share:
20 lac from branch label
If it is more then 2.0 lac, the branch has to take approved from head office
For share bank can sanction 70% credit facility for “A” grade share and 60% for “B” grade share. In case of SOD on share the last six months average value or present value, which one is higher, is considered.
SOD on Work Order:
If any party wants to get SOD facility from the bank after getting work order, he has to submit an application with reliable security mention there In past time bank give SOD facility without any collateral security . But now bank do not give any SOD facility against work order If bank see that all of his papers are eligible for getting SOD facility, bank asks him to give a power of attorney to the bank for receiving all kinds of payment for the work. He can get up to 50%of the amount of the work that he has to done. But he has to submit his collateral security for that. He gets 50% SOD facility against his collateral security. After getting power of attorney bank sends a request letter to the authority by which the work has been issued. Then that authority sends a letter to the bank that they will make all of the payment of the party through the bank. After getting the letter the bank credits the SOD amount to the customer’s current account. When bank gets payment from the authority, they make a ratio and cut off their amount from that payment.
The following charge documents arc taken from the customer:
D.P (promissory note) note: Three types
1) Single DP note
2) Joint DP note
3) Joint and several DP note
Letter of arrangement
Letter of continuity
Letter of lien for advances against share, stocks and security.
Cash Credit (CC):
Cash credit is the favorite mode of borrowing by traders, industrialist etc. for meeting their working capital. Cash credit is a kind of continuous overdraft. In banking system cash credit is given for two purposes. The purposes are as following:
It is a favorite mode of advance for the customer. For cash credit facility bank allow a limit for his customer. The customer can make continuous transaction with in that limit. CC is given for one year. After one year the customer can renew his CC facility.
For CC facility interest is counted daily basis. That means customer has to only that amount of interest which is outstanding in his CC account. Interest is cut off from customer current in tram wise.
Mode of security:
For CC banks take two type of security. These are as following:
In branch level bank cannot give more then 30 lac taka to his customer. But if bank want, they can give more then 30 lacs. The branch has to get approval from head office of the bank.
For giving CC bank takes following charge document:
1. DP note
2. Letter of arrangement
. 3. Letter of continuity
4. Letter of hypothecation of goods
5. Stock of goods report
6. Personal guarantee of all the director of the company
7. Deed on additional charge on the fixed assets of the company
8. Form for filling charge with register of joint stock companies
9. Resolution of board of directors
10. Insurance policy for stock
In CC facility bank only allow 50% credit facility of the stock that the customer has been pledge or -hypothecation. Bank gives CC only for one year. After one year customer has to renewal it.
Bills purchases and discounted:
Banks grant advances to their customers by discounting bill of exchange or pro-note.
Security against Advances:
The different types of securities that offered to a banker are as follows:
A. Immovable Property
B. Movable Property.
1. Pratirakshay Sanchay Patra, Bangladesh Sanchay Patra, ICB unit
2. Certificates, wage earner development bond.
3. Fixed deposit receipt.
4. Shares quoted in the Dhaka Stock Exchange and Chittagong Stock Exchange.
5. Pledge of Goods, produce.
6. Hypothecation of goods, produce and machinery.
7. Fixed assets of manufacturing unit.
8. Shipping documents.
(3.30) Modes of Charging Security:
A lien is right of banker to hold the debtor’s property until the debt is discharged, bank generally retain the assets in his own custody but sometimes this goods is in the hand of third party with lien marked. When it is in the hand of third party, the third party cannot discharge it without the permission of bank. Lien gives banker the right to retain the property not the right to sell. Lien can be made on movable goods only such as raw materials finished goods, shares, debentures etc.
Pledge is also like lien but here bank enjoys more right. Bank can sell the property without the intervention of any court, in case of default on loan, but for such selling proper notice must be given to the debtor. To create pledge, physical of goods to the bank is must.
In this charge creation method, physically the goods remained in the hand of debtor. But the documents of title of goods are handed over to the banker. The method is also called equitable charge. Since the goods are in the hand of borrower, bank inspects the goods regularly to judge its quality and quantity for the maximum safety of loan.
Mortgage is transfer of an interest in specific immovable property. Mortgage is created on the immovable property like land, building, plant etc. most common type of mortgage is legal mortgage in which ownership is transferred to the bank by registration of the mortgage deed. Another method called equitable mortgage is also used in bank for creation of charge. Here mere deposit of title to goods is sufficient for creation of charge. Registration is not required. In both the case, the mortgaged property is retained in the bank of borrower.
(3.31)Advanced Against Fixed Deposit Receipts:
1. Fixed Deposit Receipt
Advance against Fixed Deposit Receipt will be subject to credit restrictions imposed from time to time by Head Office/ Bangladesh Bank. Scrutinize the Fixed Deposit Receipts with regard to the following points:
i. The fixed Deposit Receipt is not in the name of a minor.
ii. The depositor on revenue stamp of adequate value discharges in hand his signature is verified.
iii. Creation of liability on Fixed Deposit issued in joint names by any one of the depositors is irregular.
iv. It the deposit receipt is offered as a security for allowing advances, a letter of line shall be obtained from the depositors, on the appropriate form.
v. If the deposit receipt has been issued by the branch-allowing advance, line against that specific deposit receipt to be marked in the fixed deposit register of the branch.
vi. The discharged receipt, the letter of lien duly verified by the issuing branch and the letter confirming registration of the lien on the deposit receipts shall be kept along with other documents under safe custody of the bank.
vii. Lien on the partial amount of deposit shall not be accepted.
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