Report on Deposit Activity of National Bank Ltd

Background of the Report

After completing my MBA from STAMFORD UNIVERSITYBANGLADESH. I wanted to do Internship in a reputed Bank that would be helpful for my future professional career. I got the opportunity to perform my internship in the NATIONAL BANK LIMITED. I worked in BABUBAZAR BRANCH. Since I worked here I used the chance fully. It was a three months long practical orientation program. This report is originated as the requirement of National Bank Ltd.

 Generally by the word “Bank” we can easily understand that the financial institution deals with money. But there are different types of banks like. Central Banks, Commercial Banks. Savings Banks, Investment Banks, Industrial Banks, Cooperative Banks etc. But when we use the term “Bank” without any prefix, or qualification. It refers to the ‘Commercial Banks’. Commercial Banks are the primary contributors to the economy of a country. So we can say Commercial banks is a profit-making institution that holds the deposits of individuals & business in checking & savings accounts and then uses these funds to make loans For these people and the government is very much dependent of these banks as the financial intermediary. As, banks are profit-earning concern; they collect deposit at the lowest possible cost and provide loans and advances at higher cost. The differences between two are the profit for the bank.

Banking sector is expanding its hand in different financial events every day, at the same time the banking process is becoming faster, easier and the banking arena is becoming wider. As the demand for better service increases day by day, they are coming with different innovative ideas & products. In order to survive in the competitive field of the banking sector, all banking organizations are looking for better service opportunities to provide their fellow clients. As a result, it has become essential for every person to have some idea on the bank and banking procedure.

Internship program is essential for every student, especially for the students of Business studies which helps them to know the real life situation. For this reason a student takes the internship program at the last stage of the master’s degree, to launch a career with some practical experience.

Deregulation of interest rates, raising competition from bank and non-bank competitors and continuing development of innovative ways to provide financial services are all contributing to a growing interest in evaluating bank performance. Various groups of individuals are particularly interested in evaluating bank performance.

First, bank shareholders are directly affected by bank performance. Investors take advantage of bank information to develop expectations concerning future performance that can be used to price common shares appropriately.

Second, bank management traditionally is evaluated on the basis of how well the bank performs relative to previous years and compared with similar banks. Hence, employees’ salaries and promotions are frequently tied to the performance of the banks. Bankers also need to be informed the condition of other banks with which they have dealings.

Third, regulators concerned about the safety and soundness of the banking system and the preservation of public confidence, monitor banks using on-site examinations and computer oriented “early warning systems” to keep track on bank performance.

Fourth, depositors may be interested in how well the bank is doing, especially if they hold deposits in excess of the insured amount and must depend on the bank’s funds for their continued operations.

Fifth, and last, the business community and public should be concerned about their bank’s performance to the extent that their economic prosperity is linked to the success or failure of their bank.

 1.4 Methodology

 Research approaches and techniques to be applied to conduct systematic and smooth completion of the whole assignment up to the submission of research report along with the suggestion were as follows:

  1. My first task was to prepare a comprehensive research program covering all aspect of the National Bank Ltd.
  2. Work out a rationale systematic selection procedure as per available information & standard sampling method, which are considered to be reliable base for giving my recommendation about the population parameter.
  3. Discuss with cardholders and merchants about the master card. Complete the assignment by specified time and submission of research report by the following procedure.
  4. Collect available management policy, guidelines, project document and necessary dates from credit card division of National Bank Ltd.

 A.   Data Collection

 In order to accomplish the successfully completion of the report and to form an opinion on the research along with the necessary recommendations for solving the problem adequate data and information are necessary for the effective termination of the research work.

 B.    Study sample

I have to be design sampling in accordance with International Auditing Guideline # 19. Dhaka city was divided form the viewpoint of commercial area. There are 6 commercial area and one hundred cardholders ware selected (randomly) from Dhaka for sample survey.

 C.   Instrument to be used

Questionnaire method was followed for data collection. In case of data collection, I was follow individual basis either in interview or in filling up the questionnaire. That means I was visit cardholders and merchants to collect data.D.   Processing data and Prepare report

a)     Registration of field in instrument: After the data collection data should be register in a book.

b)    Packages to be used: Some computer packages were used in the study. These are:

  • Microsoft word: Ms Word used for word processing and to write my report.
  • Ø Microsoft excel: Ms excel was used for analyzing of data.

c)     Data was verified, which have already entered in computer.

d)    Find out the recommendation and prepare report.

1.5 Limitation of the study

There were several constrains while preparing this report. Only 12 weeks were not sufficient to visit all the desks of the division. So some desk were remained unvisited moreover some officers in some desk were found non-cooperative. Such desks remain unexposed. The division also refuses to provide on its performance, especially on commission earned. The division provides only information of two years; it is not sufficient for this report. It is also not possible to go the depth of each activities of credit card division because of time limitation. Therefore, it very difficult to carry out the whole analysis.

The National Bank Limited

The National Bank Limited (NBL) has a prolonged and glorious heritage in the banking industry in Bangladesh. It is the pioneer in the local private commercial was inaugurated on March 1983 under the supervision of Bangladesh Bank. A glorious fact of the National Bank Limited is its approval as first private commercial bank from Bangladesh Bank in our country.

 Economic development activities in the post liberation period required service from private commercial Banks. To fulfill this demand as well as to improve the commercial banking ser-vice in Bangladesh, the National Bank Limited emerged as a private limited company. The National Bank Limited is a remarkable addition to the private sector branch banking in Bangladesh. Aiming at offering commercial banking service to the customer’s door around the country, the National Bank Limited established 100 branches up to this year. This is the highest number for any private commercial bank operating in Bangladesh. This organization achieve customer’s confidence immediately its establishment in domestic and international markets.

 NBL took participation in Nepal Arab Bank Limited, Nepal in 1995.Under a technical service agreement, NBL is extending management service’s to NBIL, in 1997. Bank opened a representative office in Yangoon, Myanmar. NBL is proud to be, first private Bank in Bangladesh who introduce credit card (Master Card) both local and international. The Bank has made agreement with Western Union Remittance services for speedy transfer of money allover the world.

 The National Bank limited provides financing in capital market, Credit line and project financing, investment counseling, Underwriting any guarantee, Port folio management etc along with traditional banking service, Sanchay Prokalpo and Bonus Deposit scheme are- – praiseworthy banking service for the middle and lower income group. Recently, this organization has taken operational decision of two projects: Consumer Credit scheme and Credit Card marketing to widen its service and customer base. The National Bank Limited is always emphasizing the improvement of banking service and betterment of living standard of the general people of Bangladesh.

 

2.1 Vision

The vision of the National Bank Limited is to develop Bangladesh’s economy by profitable investment of public money and build up their confidence to the private institution.

2.2 Mission

The missions of the National Bank are as follows:

  • Ø We aim to come one of the leading Banks in Bangladesh by our prudence, fair and quality of operation.
  • We intend to meet the needs of our clients and enhance our profitability by creating corporate culture.
  • We believe in strong capitalization.
  • Ø We aim to ensure our competitive advantages by upgrading banking technology and information system.
  • We maintain high standard of corporate and business Seth’s.
  • Ø We provided high quality financial services to strengthen the well being and success of individual, industries and business communities.
  • Ø We intend to plat more important role in the economic development of Bangladesh and its finical relations with the rest of the world by interlining both domestic and international l operations.

2. 3 Objective & Goals

  • Ø NBL is always ready to maintain the highest quality of services by upgrading banking technology prudence management banking and by applying high standard of business ethics through its established commitment and heritage.
  • Ø The objective of NBL is not only earn profit but also to keep the social commitment and to ensure its co-operation to the person of all level, to the businessman, industrialist -especially who are engaged in establishing large scale industry by consortium and the agro-based export oriented medium and small industries by self inspiration.
  • Ø NBL is committed to ensure its contribution to national economy by increasing its profitability through professional and disciplined growth strategy for its customer and by creating corporate culture in international banking area.
  • Ø NBL believes in building up strong-based capitalization of the country.
  • Ø NBL is the first and largest private bank is committed to continue its endeavor by rapidly increasing the investment of honorable shareholders into assets.
  • NBL has been working from the very beginnings to ensure the best uses of its creativity, well disciplined, well manage and perfect growth.
  • Ø NBL is playing a vital role in socio-economic development of Bangladesh by was of linkage with rest of the world by developing worldwide network in domestic and international operation.
  • Ø NBL is preoccupied to encourage the investors for purchasing its share by creating the opportunity of long-term investment and increasing the value of share through prosperity as developed by day.
  • Ø NBL is committed to continue its activities in the new horizon of business with a view to developing services oriented industry and culture of morality and its maintenance in banking.

2.4 Management structure of National Bank Ltd.

In 2001 National Bank Limited made commendable progress in all business, like deposit, credit, fund management, investment, foreign remittance, credit card & foreign exchange related business. Bank has expended business activities as holding previously & parallel by diversification its investment to a new product.  As a major financier remarkable portion of total exports of the country. The total assets of the bank were Tk.  48732.1 million as on 31st December 2001, which is higher than Tk. 1584.02 million than the previous year. This is the sign of good management. The management processes are as follows:

Planning:

The strategic planning approach in NBL is top-down. Top management formulates strategy at the corporate level, and then it is transmitted through the division to the individual objectives. Board of directors or Executive committee usually takes the decision. In this process lower level manager are detached in making process, even brainstorming of lower level manager is absent in decision-making and planning process.

Organizing:

Organizing of the National Bank Limited is based on Departmentalization. The organization is divided into twelve departments headed by Executive vice President or Senior Vice President. In the National Bank Limited the whole operation is centralized and authority is delegated by written guidelines. These guidelines are:

  • Ø Operational manual approved by Head Office, where each aspect or banking operation is elaborately defined.
  • Ø Advance manual including advances limit for different management level.
  • Ø Bad and doubtful recovery manual.
  • Ø Code of conduct.
  • Foreign banking guidelines.
  • Ø Central bank directives.

Different management position holders in departments and branches practice their authorized power in different cases with administrative loophole.

Staffing:

Entry-level recruitment process of the National Bank Limited is conducted in three ways.   One way is recruitment of probationary officer. Each probationary officer has one year probation period. After completion of probation period the officer joins as officer grade III (b). The career path of probationary officer is headed toward different management positions. Second way of recruitment is to recruit non-probationary officer who joins as an assistant officer. The career path of an assistant officer is lengthier than probationary officer. The third way of recruitment is recruitment of staff and sub-staff such as typist, messenger, driver, guard, attendant, cleaner and other lower level positions. Promotion policy of NBL is basically based on seniority basis. Sometimes, employees are promoted to the higher position for their outstanding performance. However, it is found that the average length of a position held by an employee is around five years.

 ­­­­

Controlling

The bank has strict control over its all-organizational activities. The Bangladesh Bank directives indicate some control measures. The central bank conducts credit inspection by a team. The National Bank Limited has audit and inspection department to take controlling measures in internal operations. Audit and inspection team send to the branches now and then and is responsible for preparing report that will be submitted to the chief Administration to take necessary actions.

 Organogram of NBL

Organizational Structure and Department

Organizational setup of the National bank Limited is consisting of three organizational domains. Firstly the central top management, which contains Board of Directors, Managing Director, Additional Managing Director and Deputy Managing director, Major responsibilities of this are to take central decision and transmit it to the second step. Secondly, Central executive level management, which contains executive vice president, senior vice president, vice president and Assistant vice president. Major responsibilities of this part are to supervise and control division/ department. Thirdly, branch operation management, Which contains branch manager and other mid/ lower level management. Major responsibilities of this part are to the 75 branches of this bank and report to the Head office from time to time.

2.5 Highlights on 2001

Despite monetary and economic crisis in the whole world due terrorist attack in USA in 11th September 2001, the over all growth trend of the bank continued in 2001 during the year under review considerable progress was achieved in deposit of loans and advances and foreign trade. The predominance in the field of foreign remittance was also satisfactory. These factors contributed to consolidate the bank’s financial position.

Capital and Reserve fund:

The authorized capital of the bank is Tk. 1000.00 million and raid-up capital of the bank remained static TK.430.27 million. However, reserve of tl1e bank stood f'”~: TK.l.271.56 million, which was TK.1126.20 million as on 31-12-2000 showing an increase  12.9%.

 

Board of Directors

Board of directors consists of 19 directors, Chairman and Management Director. Form the list of the directors of the board it will be seen that the bank has high officials compare to other bank.

Profit

In 2001 NBL earned profit of Tk. 1016.64 million, which is higher the previous Year by 92.48 million.

Deposits and Advances:

Deposits of the bank raised Tk. 236i6.28 million in 2000 from Tk. 24896.64 million of the previous year revealing an increase of Tk. 1280.36 million with a growth rate of 5.42%. Such increases result from increased fixed deposits and savings. The total advance (:s of the bank stood at Tk. 20200.64 million as 01131-12-2001 in comparison to Tk. 18553.66 million in the last year with a growth rate of8.87%.

 Dividend:

The board of director recommends 30% cash dividend from profit of2001 of the shareholder.

 Import:

In 2001, NBL handled import business worth Tk. 20773.20 million as against Tk.  2420.04 million in the previous year.

 Export:

In 2001 total export was Tk. 22071.00 million, which is higher by Tk. 22420.04 million from the previous year.

 Fixed Assets:

The fixed assets of the rose to Tk. 797.81 million in 2001 from Tk. 485.64  million of  2000 The bank  owns a ten-storied building in KDA C/A, khulna, a five-storied building in Rampura, Dhaka and commercial valuable land Kawran Bazar and at Agrabd CA Chittagong.

Book value and Earning Per Share:

The book value of share stands at rflc.395.52. The change was in positive terms in comparison to 2000, Earning per share fell Tk.63.78 in 2001.fron1 Tk.53.13 and the change comparison to 2000.

Consortium Financing:

To the country industrialized a large amount of money should invest. It is a challenge of 21st century for any individual bank it is very hard and risky to face the challenge. The bank is giving credit facilities in productive and priority sectors with the policy guidelines of its own and Bangladesh Bank, side by side the bank has invested in large-scale industries in consortium with other bank. Among these with the notable private sectors- E TV, Pepsi-cola, Pacific Bangladesh Telecom limited, ApolloHospital, etc.

Sources and Uses of Fund:

The major source of bank’s fund is deposits and also borrowing from Bangladesh Bank and call loan form different banks. The bank used major portion of this fund for investment in loans and advances.

Rural credit program:

NBL has been working intensively in collaboration with Borindra Multipurpose   Development Authority (BMDA) by conducting rural credit program particularly in Rajshahi and the northern part of the country in general. In the last 10 years bank has distributed the credit for Tk.69.8 million amongst the 10291 customers. The recovery of loan in this project is 95%. Irl2001, Bank has distributed the loan for TK.7.00 million. Moreover, NBL has been- – participating in Agro Based Industries and Teleological Development Project  Loan (ATDP) financed by USAID since 1996, NBL has got the fund Tk.140.00 million as agriculture credit from that ATDP project and along With its respective fund the bank has distributed the  total amount to the sub- sector through selective branches in 2001.

Training and Training Institute:

The bank continued to endeavor in building up a efficient and knowledge workforce through imparting in service modern banking training. For this, Bank developed a training institute in Shaymoli in 1987 for its own to train-up its employees. During the years under review 225 employees attained training programs arranged by the training institute of the bank. In every batch, 25 trainees can attain in training program with residential facilities. Up to 2001 from the beginning of the institute 3283 employees have trained-up.

2.6 Expansion of Customer Service

Saving Insurance Scheme (SIS)

NBL is going on with contribution to perform social commitment inspire of being profit based commercial bank of which saving insurance is one of them. Under this scheme the depositor shall enjoy death risk twice the amount of the deposit on his/ her normal death and trice the deposit amount on the depositor’s accidental death. Apart from death risk cover the depositor shall get usual rate of interest as prescribed for this amount.

Under this scheme, the beneficiary get equal the deposit in case of natural death of the account holder whereas in the event of accidental death of the account holder the beneficiary will receive twice the deposit. As for example if a customer picks up easy class (Tk. 50000/-) he/ she will get Tk. 50000/- for natural death and Tk. 100000/- for accidental death apart from his/ her deposited amount and interest.


Class
DepositNormal Death Benefit

(Including own Deposit)

Accidental Death Benefit (Including own Deposit)
Easy 50000/-100000/-150000/-
Convenient 100000/-200000/-300000
Classic 200000/-400000/-600000/-
Standard500000/-1000000/-1500000/-

 

Monthly Saving Scheme (MSS)

This scheme is specially designed for the benefit of the limited income group member. Monthly saving scheme is welfare of the bank. Under this scheme the depositor shall get the amount of Tk. 40100/- and Tk. 1125000/- depositing Tk. 500/- per month for the duration of 5 years or 10 years respectively and in the same way depositor get Tk. 80100/-and Tk. 224500/- for depositing Tk.1000/- per month for the duration of 5 years and 10 years respectively.

Monthly Installment Return after 5 year Return after 10 year
500.0040100.00112500.00
1000.0080100.00224500.00

Western Union Money Transfer

Joining the world largest money transfer service, NBL has introduced Bangladesh to the fastest track of money remittance. Western Union is a Very familiar name in the world of money transfer for sending speedy money from one country to another country in a few minutes. NBL has made an arrangement with Western Union Remittance Services, which has over 127 years experience for speedy remittance or money with more than 140 countries, Now NBL is on line to establish trade and communication with the prime international banking companies of the world. As a result NBL will be able to build a strong root in international banking horizon. Bank has been drawing arrangement with well conversant money transfer service agency “Western Union”. It has a full time arrangement for speedy transfer of money all over the world.

Credit Card Activities:

National Bank Limited is the first local bank that introduced credit card: Master Card in Bangladesh in both local and international market in 1997. Master Card captured 35% of credit card through the world. However present market analysis reflects that a large number of people whose average income ranges in above Tk.10000 are using the credit card. Credit card division is continuing there all possible efforts for the participation in the globalize Master Card Program and the number of users of the credit cards huge been increasing day by day.

During the year the bank has ousted a profit of Tk. 96.70 million from credit card business. NBL also get licenses from international brand Visa Card, very soon, it will lunched.

NBL ATM Service:

National bank limited introduced ATM service to its customer. The card will enable to save our valued customers from any kind of predicament in emergency situation and time consuming formalities. NBL ATM card will give our distinguished clients the opportunity to withdraw cash at any time, even in holidays, 24 hours a day a week.

NBL Commitment to the society:

NBL always shows a strong and positive commitment to the services of the society. IN 1998, the bank donated Tk. 5.50 million to prime minister Relief fund for the flood- affected people of Bangladesh.

 

General Banking

  1. opening section (set numbering)
  2. Deposit section
  3. Cash section
  4. Remittance section
  5. Clearing section
  6. Accounts section

3.1Acc

In NBL Motijheel Branch, the following departments are under general banking section:

Account Opening section

Account opening is the gateway for clients to enter into business with bank. It is the foundation of banker customer relationship. This is one of the most important sections of a branch, because by opening accounts bank mobilizes funds for investment. Various rules and regulations are maintained and various documents are taken while opening an account. A customer can open different types of accounts through this department. Such as:

Account opening procedure

Step 1The account should be properly introduced by Any one of the following:

ü An existing Current Account holder of the Bank.

ü Officials of the Bank not below the rank of an Assistant officer.

ü A respectable person of the locality well known to the manager/Sub-Manager of the Branch concerned.

Step 2Receiving filled up application in bank’s prescribed form mentioning what type of account is desired to be opened.
Step 3ü The form is filled up by the applicant himself / herself.

ü Two copies of passport size photographs from individual are taken; in case of firms photographs of all partners are taken.

ü Applicants must submit required documents

ü Application must sign specimen signature sheet and give mandate.

ü Introducer’s signature and accounts number – verified by legal officer.

Step 4Authorized Officer accepts the application.
Step 5Minimum balance is deposited – only cash is accepted.
Step 6Account is opened and a Cheque book and pay-in-slip book is given.

3.2Documents required for opening account

  Individual /Joint Account:

  1. Introduction of the account.
  2. Tow photographs of the signatories duly attested by the introducer.
  3. Identity (copy of passport).
  4. Joint Declaration Form (For joint a/c only).
  5. Employee’s Certificate (in case of service holder).

  Partnership Account:

  1. Introduction of the account.
  2. Two photographs of the signatories duly attested by the introducer.
  3. Valid copy of Trade License.
  4. Rubber stamp.
  5. TIN number certificate.
  6. Identity (Copy of passport).
  7. Permission letter from DC/Magistrate (in case of newspaper)

  Limited company:

  1. Introduction of the account.
  2. Two photographs of the signatories duly attested by the Introducer.
  3. Valid copy of Trade License.
  4. Board resolution of opening A/C duly certified by the Chairman/Managing Director.
  5. Certificate of Incorporation.
  6. Certificate of Commencement (In case of Public limited company).
  7. Certified (joint stock) true copy of the Memorandum and Article of Association of the Company duly attested by Chairman or Managing Director.
  8. List of directors along with designation & specimen signature.
  9. Latest certified copy of Form – xii (to be certified by register of joint stock companies) (In case of Directorship change).
  10. Rubber Stamp (Seal with designation of each person)
  11. Certificate of registration

(In case of Insurance Company – Obtained from department of Insurance form the Peoples Republic of BD.)

Club / societies account:

  1. Introduction of the account.
  2. Two photographs for Opening A/C duly certified by President/Secretary.
  3. Board Resolution for Opening A/C duly certified by President/Secretary.
  4. List of Existing Managing Committee.
  5. Registration (if any).
  6. Rubber Stamp.
  7. Permission letter from Bureau of N.G.O. (In case of N.G.O. A/C).

3.3Deposit Section

Deposit is the lifeblood of a bank. From the history and origin of the banking system. We know that deposit collection is the main function of a bank.

Accepting deposits

The deposits that are accepted by NBL like other banks may be classified in to,-

a) Demand Deposits

b) Time Deposits

Demand deposits

These deposits are withdrawn able without notice, e.g. current deposits. National Bank Limited accepts demand deposits through the opening of

a) Current account

b) Savings account

c) Call deposits from the fellow bankers

Time deposits

A deposit which is payable at a fixed date or after a period of notice is a time deposit. National Bank Limited accepts time deposits through Fixed Deposit Receipt (FDR), Short Term Deposit (STD) and Beard Certificate Deposit (BCD) etc. While accepting these deposits, a contract is done between the bank and the customer. When the banker opens an account in the name of a customer, there arises a contract between the two. This contract will be valid one only when both the parties are competent to enter into contracts. As account opening initiates the fundamental relationship & since the banker has to deal with different kinds of persons with different legal status, National Bank Limited officials remain very much careful about the competency of the customers.

Cash Section

Banks, as a financial institution, accept surplus money from the people as deposit and give them opportunity to withdraw the same by check, etc. But amount the banking activities, cash department play an important role. It does the main function of a commercial bank i. e, receiving the deposit and paying the cash on demand. As this department deals directly with the customers, the reputation of the bank depends much on it. The functions of a cash department are described bellow:

 

3.4Functions of Cash Department

Cash Payment
  1. Cash payment is made only against Cheque
  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 Cheque
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

3.5Allocation of currency

Local carrying cash money is troublesome and risky, that’s why money can be transferred from one place to another through banking channel. This is called remittance. Remittances of funds are one of the most important aspects of the Commercial Banks in rendering services to its customers.

3.6 Types of Remittances

ü Between banks and non banks customer

ü Between banks in the same country

ü Between banks in the different centers.

ü Between banks and central bank in the same country

ü Between central bank of different customers.

The main instruments used by the NBL of remittance of funds are

ü payment order (PO)

ü Demand Draft (DD)

ü Telegraphic Transfer (TT)

So the basic three types of local remittances are discussed below

Points

Pay Order

Demand Draft

TT

Explanation

Pay order gives the payee the right to claim payment from the issuing bankDemand Draft is an order of issuing bank on another branch of the same bank to pay specified sum of money to payee on demand.Issuing branch requests another branch to pay specified money to the specific payee on demand by  Telegraph/ Telephone

Payment from

payment from issuing branch onlyPayment from ordered branchPayment from ordered branch

Generally used to Remit fund

Within the clearinghouse area of issuing branch.Outside the clearinghouse area of issuing branch. Payee can also be the purchaser.Anywhere in the country

Payment Process of the paying bank

payment is made through clearing
  1. Confirm that the DD is not forged one.
  2. Confirm with sent advice
  3. Check the ‘Test Code’
  4. Make payment
  5. Confirm issuing branch
  6. Confirm Payee A/C
  7. Confirm amount
  8. Make payment
  9. Receive advice

Charge

Only CommissionCommission + telex chargeCommission +

telephone

 

Western Union Money Transfer

Joining the world largest money transfer service, NBL has introduced Bangladesh to the fastest track of money remittance. Western Union is a Very familiar name in the world of money transfer for sending speedy money from one country to another country in a few minutes. NBL has made an arrangement with Western Union Remittance Services, which has over 127 years experience for speedy remittance or money with more than 140 countries, Now NBL is on line to establish trade and communication with the prime international banking companies of the world. As a result NBL will be able to build a strong root in international banking horizon. Bank has been drawing arrangement with well conversant money transfer service agency “Western Union”. It has a full time arrangement for speedy transfer of money all over the world.

3.7 Clearing Section

Cheque, Pay Order (P.O), Demand Draft (D.D.) Collection of amount of other banks on behalf of its customer are a basic function of a Clearing Department.

  • Clearing:

Clearing is a system by which a bank can collect customers fund from one bank to another through clearing house.

  • Clearing House:

Clearing House is a place where the representatives of different banks get together to receive and deliver cheques with another banks.

  • Member of clearing House:

National Bank LTD is a scheduled Bank. According to the Article 37(2) of Bangladesh Bank Order, 1972, the banks, which are the member of the clearinghouse, are called as Scheduled Banks. The scheduled banks clear the Cheque drawn upon one another through the clearinghouse.

  • Types of Clearing:

A) Outward Clearing: When the Branches of a Bank receive Cheque form its customers drawn on the other Banks within the local clearing zone for collection through Clearing House, it is Outward Clearing.

B) Inward Clearing: When the Banks receive cheques drawn on them from other Banks in the Clearing House it is Inward Clearing.

  • Types of clearing house: There are two type of clearing house: Those are

1) Normal clearing house

2) Same day clearing house

Normal clearing house

          1) 1st house: 1st house normally stands at 10 am to 11 am

2) 2nd house: 2nd house normally stands after 3 p.m. and it is known as return house.

Same day clearing house

          1) 1st house: 1st house normally stands at 11 a.m. to 12 pm

2) 2nd house: 2nd house normally after 2 p.m. and it is known as return house.

  • Who will deposit cheques for Clearing: Only the regular customers i.e. who have Savings, Current, STD & Loa Account in the Bank can deposit cheques for collection of fund through clearing house.
  • Precaution at the time of cheques receiving for Clearing, Collection of LBC, OBC & Transfer:
  1. Name of the account holder same in the Cheque & deposit slip.,
  2. Amount in The cheque & deposit slip must be same in words & in figure
  3. Date in cheque may be on or before (but not more than six months back) clearing house date.
  4. Bank & Branch name of the cheque, its number & date in the Deposit slip.
  5. Cheque must be signed.
  6. Signature for confirmation of date, amount in words / in figure Cutting & Mutilation of cheque.
  7. Cheque should be crossed (not for bearer cheque).
  8. Account number in the deposit slip must be clear.
  9. Depositor’s signature in the deposit slip.

3.7(A) Return House

Return House means 2nd house where the representatives of the Bank meet after 3 p.m. to receive and deliver dishonored cheques, which place in the 1st Clearing House.

Cheques may be dishonored for any one of the following reasons:

1)    Insufficient fund.

2)    Amount in figure and word differs.

3)    Cheques out of date/ post- dated.

4)    Payment stopped by the drawer.

5)    ………………Payee’s endorsement irregular/ illegible / required.

6)    Drawer’s signature differs / required.

7)    Crossed cheque to be presented through a bank.

8)    Other specific reasons not mentioned above.

The dishonored cheque entry in the Return Register & the party is informed about it. Party’s signature required in the return register to deliver the dishonor cheque. After duration, the return cheque is sent to the party’s mailing address with Return Memo.

  • Responsibility of the concerned officer for the Clearing Cheque:

1)    Crossing of the cheque.

2)    (Computer) posting of the cheque.

3)    Clearing seal & proper endorsement of the cheque.

4)    Separation of cheque from deposit slip.

5)    Sorting of cheque 1st bank wise and then on branch wise.

6)    Computer print 1st Clearing House computer validation sheet.

7)    Examine computer validation sheet with the deposit slip to justify the computer posting.

8)    Copy of computer posting in the floppy disk.

3.7(B) Bills Collection

In modern banking the mechanism has become complex as far as smooth transaction and safety is concerned. Customer does pay and receive bill from their counterpart as a result of transaction. Commercial bank’s duty is to collect bills on behalf of their customer.

Types of Bills for Collection

          I. Outward Bills for Collection (OBC)

          ii. Inward Bills for Collection (IBC)

3.7(b)(1) OBC

OBC means Outward Bills for Collection. OBC exists with different branches of different banks outside the local clearinghouse.

Normally two types of OBC:

          1) OBC with different branches of other banks

          2) OBC with different branches of the same bank

 

Procedure of OBC

          1) Entry in the OBC register.

          2) Put OBC number in the cheque.

3) “Crossing seal” on the left corner of the cheque & “payees account will be credited on realization” seal on the back of the cheque with signature of the concerned officer.

4) Dispatch the OBC cheque with forwarding.

5) Reserve the photocopy of the cheque, carbon copy of the forwarding and deposit slip of the cheque in the OBC file.

3.7(b)(2) IBC

IBC means Inward Bills for Collection. When the banks collect bills as an agent of the collecting branch, the sys tem is known as IBC. In this case the bank will work as an agent of the collection bank. The branch receives a forwarding letter and the bill.

 

Procedure of IBC:

  1. IBC against OBC: To receive the OBC cheque first we have to give entry in the IBC Register. The IBC number should put on the forwarding of the OBC with date.
  2. Deposit of OBC amount: OBC cheque amount is put into the “sundry deposit sundry Creditors account”, prepare debit & credit vouch of it. If the OBC cheque is honored, send credit advice (IBCA) with signature & advice number of the concern branch for the OBC amount.
  3. If the OBC cheque is dishonored, the concerned branch is informed about it.
  4. Again place in the clearing house or send the OBC cheque with Return Memo to the issuing branch according to their information.

3.8Accounts section

Accounts Department is called as the nerve Center of the bank. In banking business, transactions are done every day and these transactions are to be recorded properly and systematically as the banks deal with the depositors’ money. Improper recording of transactions will lead to the mismatch in the debit side and in the credit side. To avoid these mishaps, the bank provides a separate department; whose function is to check the mistakes in passing vouchers or wrong entries or fraud of forgery. This department is called as Accounts Department. If any discrepancy arises regarding any transaction this department repot to the concerned department. Besides these, the branch has to prepare some internal statements as well as some statutory statements, which are to be submitted to the Central Bank and the Head Office. This department prepares all these statements.

3.8(a)Workings of this department

  • Recording the transactions in the cashbook.
  • Recording the transactions in general and subsidiary ledger.
  • Preparing the daily position of the branch comprising of deposit and cash.
  • Preparing the daily Statement of Affairs showing all the assets and liability of the branch as per General Ledger and Subsidiary Ledger separately.
  • Making payment of all the expenses of the branch.
  • Recording inters branch fund transfer and providing accounting treatment in this regard.
  • Preparing the monthly salary statements for the employees.
  • Preparing the weekly position for the branch which is sent to the Head Office to maintain Cash Reserve Requirement (C.R.R)
  • Preparing the monthly position for the branch which is sent to the Head Office to maintain Statutory Liquidity Requirement (S.L.R)
  • Make charges for different types of duties.
  • Preparing the budget for the branch by fixing the target regarding profit and deposit so as to take necessary steps to generate and mobilize deposit.
  • Checking of Transaction List.
  • Recording of the vouchers in the Voucher Register
  • Packing of the correct vouchers according to the debit voucher and the credit voucher.

 

Loans And Advances

4.1Types of Investments

The different types of Investments and Investment that NBL offers are as follows:

  1. Secured Overdraft (SOD)
  2. Investment against Imported Merchandise (LIM)
  3. Investment against Trust Receipt (LTR)
  4. Payment Against Document (PAD)
  5. HouseBuilding Investment
  6. House Building Investment (staff)
  7. Term Investment.
  8. Investment (general)
  9. Bank Guarantee

10. Export Cash Credit

11. Cash Credit (Hypo)

12. Cash Credit (Hypo)

13. Foreign Documentary Bill Purchase (FDBP)

14. Local Documentary Bill Purchase (LDBP)

4.1(a)Secured Overdraft (SOD)

It is a continues advance facility. By this agreement, the banker allows his customer to overdraft his current account up to his credit limits sanctioned by the bank. The profit is charged on the amount, which he withdraws, not on the sanctioned amount. NBL sanctions SOD against different security.

SOD (general)

Advance allowed to individual/ firms against financial obligation (i.e. lien on FDR/PSP/BSP/ insurance policy share etc.) This may or may not be a continuous Credit.

SOD (Others)

Investment allowed against assignment of work order or execution of contractual works falls under this head. This advance is generally allowed for a definite period and specific purpose i.e. It is not a continuous credit. It falls under the category “others”.

 

SOD (Export)

Advance allowed for purchasing foreign currency for payment against L/Cs (Back to Back) where the exports do not materialize before the import payment. This is also an advance of temporary period that is known as export finance and under the category “commercial lending”.

4.1(b) LIM (Investment against Imported Merchandise)

Investment allowed for retirement of shipping documents and release of goods imported through L/C taking effective control over the goods by pledge in go downs under Banks lock & key fall under this type of advance. This is also a temporary advance connected with import, which is known as post-import financing, falls under the category “Commercial lending”.

 

4.1(c) LTR (Investment against trust receipt)

Advance allowed for retirement of shipping documents, release of goods imported through L/C falls under trust with the arrangement that sale proceed should be deposited to liquidate within a given period. This is also a temporary advance connected with import, which a known as post-import financing, falls under the category “commercial lending”.

4.1(d) PAD (Payment against document)

Payment made by the Bank against lodgment of shipping documents of gods imported through L/C falls under this head. It is an interim advance connected with import and is generally liquidated against payments usually made by the party fort retirement of the documents for release of imported goods from the customer’s authority. It falls under the category “commercial Bank”.


4.1(e) House building Investment (General)

Investments allowed to individual/ enterprise construction of house (residential or commercial) fall under this of advance. The amount is repayable by monthly installment within a specified period. Investment is known as Investment (HBL-GEN).

  • Introduction:

House building Investment is one of the common credit pokiness of banking sector. There was only one institution in our country, which is specified in HBFC, Bangladesh House Building Finance Corporation. Now days, besides this bank many commercial banks and Leasing Company provides house-building Investment to the customers.

  • Profit rate:

Profit rate may changes from time to time depending on the market profit rate. From the customer point of view this changes have an adverse impact on the customers. Some times if thy have to bear a higher profit one he principal amount which causes a great burden on them.

  • Made of repayment:

The Investment shall be adjusted by monthly installment basis. The repayment will start from 6 (Six) months, of the date of first disbursement (it may change according to the terms and conditions of the agreement).

  • Collateral:

The land and the contraction on the land are normally given as collateral. It may changes:

  • The documents to be obtained:
  1. DP note.
  2. Letter of disbursement
  3. Letter of installment.
  4. Letter of guarantee.
  5. Letter of under taking.
  6. Letter of agreement.
  7. Irrevocable general power of attorney.
  8. Memorandum of deposit of title deed.
  9. Any other documents if considered

4.1(f) House building Investments (staff)

Investment allowed to the Bank employees for purchase/construction of house shall be known as Staff Investment (HBFC-STAFF).

4.1(g) Term Investment

National Bank considers the Investments, which are sanctioned for more than one year as term Investment. Under this facility, an enterprise is financed form the starting to its finishing. i.e. from installation to its production.

4.1(h) Investment (General)

Short term and long term Investments allowed to individual/firms/industries for a specific purpose but a definite period and generally repayable by the installments fall under this head. These types of lending are mainly allowed to accommodate financing under the categories.

          a) Large and Medium Scale Industries.

b) Small and Cottage Industries, Very often term financing for agriculture and others are also included here.

4.1(i) Bank Guarantee

The bank is very often requested by his customer to issue guarantees on their behalf to a third party- committing to make an unconditional payment of certain amount of money to the third party, if the customer (on whose behalf it gives guarantee) becomes liable, or creates any loss or damage to the third party.

 

4.1(j) Export cash credit (ECC)

Financial accommodation allowed to customer for exports of goods falls under this head is categorized as “Export Credit”. The Investment must be liquidated out of export proceeds within 18 days

 

4.1(k) Cash Credit (Hypothecation)

The mortgage of movable property for securing Investment is called hypothecation. Hypothecation is a legal transaction whereby goods are made available to the lending banker as security for a debt without transferring either the property in the goods or either possession. The banker has only equitable charge on stocks, which practically means nothing. Since the goods always remain in the physical possession of the borrower, there is much risk to the bank. So, it is granted to parties of undoubted means with the highest integrity.

4.1(l) Cash Credit (Pledge)

Bailer in this case is called the “Paw nor” and the bailee is called the “Pawnee”. In a contract of pledge, Paw nor must deliver the goods pledged to the Pawnee either actually or constructively. Transfer of possession in the judicial sense is essential in the valid pledge. In case of pledge, the bank acquire the possession of the goods or a right to hold goods until the repayment for credit with a special right to sell after due notice to the borrower in the event of non-repayment.

  • The formalities for Opening cash credit:

The intending cash credit holder should submit the following documents and being fulfill properly:

  1. Stock report, Rent receipt.
  2. Trade license.
  3. Up to date income tax clearing certificate.
  4. Charge documents
  5. Letter of continuity
  6. Letter of arrangement
  7. DP (Demand Promissory) note.
  8. Letter of guarantee
  9. Letter lien

10. Limit sanctions advice.

11. Non-encumbrance certificate

Observing the documents the bank authority prepares a CC proposal from that contains the following information.

 

  • Nature of business.
  • Banking with National Bank Ltd.
  • Transaction with CD account by the client.
  • Allied deposit with SB/STD account.
  • Number of adjustment (S) (applicable only for renewal of CC)
  • Recycling: It is the ration of total credit summation to the limit. If the ration is higher it is better from banker’s point of view.
  • Turn over in the account.

Based on the above-mention information the dealing officer of the Investments and Investment department prepares recommendation about the prospect of granting the CC Investment to the Client.

4.1(m) Foreign Documentary Bill Purchased (FDBP):

Payment made to a customer through purchase/negotiation of a foreign documentary bills falls under this head. This temporary advance is adjustable from the proceeds of the shipping/export documents. Its falls under the category “Export Credit”.

4.1(n) Local Documentary Bill Purchased (LDBP):

Payment made against documents representing sell of goods to local export oriented industries, which are deemed as exports, and which are denominated in Local currency/foreign currency falls under this head. The bill of exchange is held as the primary security. The client submits the unasked bill and the bank discounts it. This temporary liability is adjustable from the proceeds of the bills.

4.2 Investment Classification

Investment classification is a process by which the risk or loss potential associated with the Investment accounts of a bank on a particular date is identified and quantified to measure accurately the level of reserves to be maintained by the bank to provide for the probable loss on account those risky Investment.

Like other banks, all types of Investments of National Bank fall into following four scales:

  • Unclassified: Repayment is regular.
  • Substandard: Repayment is stopped or irregular but has responsible prospect of improvement.
  • Doubtful debt: Unlikely to be repaid but special collection efforts may result in partial recovery.

Bad/Loss: Very little chance of recovery.

4.2.1Creation of charges for securing investment:

For the safety of Investment, bank requires security from the Investment so that it can recover the Investment by selling security if borrower fails to repay. Creation of a charge means making it available as a cover for an advance. The method of charging should be ledger, perfect and complete. Importance of charging security:

  • Protection of profit’
  • Ensuring the recovery of the money lent
  • Provision against unexpected change
  • Commitment of the borrower

4.2.2Securities:

To make the Investment secured, charging sufficient security on the credit facilities is very important. The banker cannot afford to take the risk of non-recovery of the money lent. National Bank charges the following two types of security.

  1. Primary security: These are the security taken by the ownership of the items for which bank provides the facility.
  2. Collateral security: Collateral securities refer to the securities deposited by the third party to secure the advance for the borrower in narrow sense. In wider sense, it denotes any type of security on which the bank has a personal right of action on the debtor in respect of the advance.

4.2.3Modes of Charging Security:

There are different modes of charging the bank exercises security:

 1.     Pledge:

Pledge in the bailment of the goods as security for payment of a debt or performance of a promise. A pledge may be in respect of goods including stocks and share as well as documents of title to goods such as railway receipt, bills of lading, dock warrants etc. duly endorsed in bank’s favor.

 2.     Hypothecation:

In case of hypothecation the possession and the ownership of the goods both rest the borrower. The borrower to the banker creates an equitable charge on the security. The borrower does this by executing a document known as Agreement of Hypothecation in favor of the lending bank.

 3.     Lien:

Lien is the right of the banker to retain the goods of the borrower until the Investment is repaid. The banker’s lien is general lien. A banker can retain all securities in his possession till all claims against the concern person are satisfied.

 4.     Mortgage:

According to section (58) of the Transfer of Property, Act, 1882 mortgage is the “Transfer of a profit in specific immovable property for the purpose of secreting the payment of money advanced or to be advanced by way of Investment, existing or future debt or the performance of an engagement which may give rise to a pecuniary liability”. In this case the mortgagor dose not transfer the ownership of the specific immovable property to the mortgagee only transfers some of his rights as an owner. The banker exercises the equitable mortgage.

 

Analyzing of NBL Performance with financial ratios

Ratio Analysis

Ratio analysis is a powerful tool of financial analysis. A ratio is defined as the indicated quotient of two mathematical impressions and as the relationship between two or more things. In financial analysis, a ratio is used as benchmark for evaluating the financial position and performance of a firm. We are describing some ratios for the measurement of the performance of the bank.

Profit Ratio

 1.     Return on Equity (ROE)

The rate of return on equity is a good condition last five years. ROE indicates the rate of return on equity capital. Generally bank stockholders prefer ROE to be high. Here, ROE is increased last four years, but last year’s ROE indicates lower than previous year. It is possible, however, that an increase in ROE indicates increased bank’s risk.

 

Return on Equity (%) = Net Income/Total Equity Capital*100

Year

Net Income (In Tk.)

Total Equity Capital

ROE (%)

1999

788500

2581888.77

30.53

2000

2286200

3241190.04

70.54

2001

2744400

3308687.04

82.94

2002

1461900

3604555.39

40.55

2003

881200

3666895.56

24.03

From the table we can see that ROE of NBL increasing except 2003. ROE of NBL were 30.79%, 70.54%, 82.94%, 40.55%, and 24.03% in the year 1999, 2000, 2001, 2002 and 2003 respectively. ROE has been increased as Net Income of the Bank has been increased over the years.

 2.     Return on Asset

The rate of return on assets (ROA) measures the ability of management to utilize the real and financial resources of the bank to generate returns. ROA is most commonly used to evaluate bank management.

Return on Asset = Net Income/Total Asset*100

Year

Net Income (In Tk.)

Total Assets

ROA (%)

1999

78,8500

36,545,2800

1.21

2000

228,6200

47,148,0800

1.48

2001

274,4400

48,732,1000

1.56

2002

146,1900

45,719,1300

2.58

2003

88,1200

47,929,5700

2.61

From the table we can see that ROA of NBL has been increased and decreased over the year from 1999 to 2003. Both ROA and TA of NBL over the last five years.

Net Profit Margin

Net profit margin ratio establishes a relationship between net income and operating income that indicates management efficiency in providing services, administrating     and selling the product. It reminds us that bank can increase their earnings and their returns to their stockholders by successfully controlling expenses and maximizing revenues.

Net Profit Margin = Net Income/ Operating Revenues*100

Year

Net Income

Operating Revenues

Net Profit Margin (%)

1999

78,8500

5936394

13.28

2000

228,6200

178201875

1.28

2001

274,44000

416072285

6.59

2002

146,19000

683963080

2.13

2003

88,120000

679432070

12.96

Asset Utilization

The asset utilization ratio represents the ability of management to employ asset effectively to generate revenue. The more income generated per Taka of assets, the more profitable is the bank.

Asset utilization = Operating Revenue/ Total Asset

Year

Operating Revenues

Total Assets

Asset utilization

1999

5936394

36,545,2800

0.01

2000

178201875

47,148,0800

0.37

2001

416072285

48,732,1000

0.85

2002

683963080

45,719,1300

1.49

2003

679432070

47,929,5700

1.41

 

Unraveling Profit

1st Formula: The relationship between the ROE and ROA can be expressed by the following formula-

                        ROE = ROA * Equity Multiplier

Net Income/ Total Equity = Net Income/ Total Assets* Total assets/ Total Equity

This formula shows that ROE as the product of ROA and a ratio indicating the extent to which the bank is using financial leverage, known as the equity ( or leverage) multiplier

Year

ROA (%)

Equity Multiplier

ROE (%)

1999

1.21

14.15

17.12

2000

1.48

14.54

20.33

2001

1.56

14.72

29.86

2002

2.58

12.68

33.69

2003

2.61

13.07

34.11

2nd Formula: Another useful formula for unraveling profit ratio is as follow        

ROE = Profit Margin* Asset Utilization* Equity Multiplier

Net Income/Total Equity = Net Income/ operating Revenue*Operating                                                                                                              

                                             Revenue/Total Assets *Total Assets/Total Equity

 

This formula breaks down ROA into product of profit margin and asset utilization. Together these two ratios enable the bank analyst to gain insight into the derivation of ROA.

Year

Net Profit Margin (%)

Asset utilization

Equity Multiplier

ROE (%)

1999

13.28

0.01

14.15

30.53

2000

1.28

0.37

14.54

70.54

2001

6.59

0.85

14.72

82.94

2002

2.13

1.49

12.68

40.55

2003

12.96

1.41

13.07

24.03

 

EPS-Earning per share or EPS indicates how much Taka per share earns.

         EPS = Net Income/ No. Of shares

Year

Net Income (In Tk.)

No. Of  Share

EPS (Tk.)

1999

78,850000

430273250

0.18

2000

228,620000

430273250

0.53

2001

274,440000

430273250

0.63

2002

146,190000

430273250

0.34

2003

88,120000

430273250

0.20

We can see from the table that EPS of NBL has increasing since 2001 and decreasing 2002 & 2003. EPS indicates profit of the bank. In 1999, it was profit only 0.18; but in 2000 & 2001 it was increasing 0.53 & 0.63. But next two years it was decreasing 0.34 & 0.20.

Net Interest Margin

Net Interest Margin measures the net return on the bank’s earning assets.

Net Interest Margin = Net Interest Income/ Average Earning Assets

Year

Net interest Income

Average Earning Assets

Net Interest Margin (%)

1999

199446574

2832451056

7.04

2000

204733395

1603789542

12.76

2001

2057444277

2870616342

71.67

2002

214358977

1703202877

12.58

2003

234230989

1460551083

16.03

 

Risk Ratio

Provision for Loan Losses

This ratio measures the proportion of total operating income that goes to pay for the investment loss.

 

Provision for Loss Ratio = Provision for Loan Loss/ Total Loan & Leases

Year

Provision for Loan Losses

Total Loan & Leases

Provision for Loss Ratio (%)

1999

600,000,000

18,698,654,785

3.20

2000

610,000,000

19,589,691,541

3.11

2001

616,000,000

20,200,636,731

0.30

2002

620,000,000

21,677,960,687

2.86

2003

650,000,000

22,257,150,000

2.92

From the above table we can see Profit for Loan Losses of NBL. In 1999, it was 3.11. PLLL of NBL has been decreasing from the year 2000 to 2003. The bank takes PLLL ratio low, as its recovery rate is very high.

Loan Ratio –

The loan ratio indicates the extent to which assets are devoted to loan as opposed to other assets.

Loan Ratio = Total Loan /Total Assets

 

Year

Loans

Total Assets

Loan Ratio(%)

1999

18,698,654,785

36,545,280,000

51.16

2000

19,589,691,541

47,148,080,000

41.54

2001

20,200,636,731

48,732,100,000

41.45

2002

21,677,960,687

45,719,130,000

47.41

2003

22,257,150,000

47,929,570,000

46.43

From the table we can see that Loans and Advances Ratio of the bank has been increasing and decreasing. As bank generate its major portion of income from interest income. So, bank generates its major portion of income from interest income. So, bank has to disburse more Loans and Advances for maximizing their income. In the year 2003, the bank engaged 61.39% of its TA in loans and advances.

Interest Expense Ratio

Interest Expense Ratio reveals how much interest expenses needed for the bank compared to its TA. The lower the ratio indicates the better performance of the bank.

Year

Interest Expense

Total Assets

Interest Expense Ratio(%)

1999

1,320,789,100

36,545,280,000

3.61

2000

1,350,691,442

47,148,080,000

2.86

2001

1,486,691,442

48,732,100,000

3.05

2002

1,623,175,670

45,719,130,000

3.55

2003

1,801,186,051

47,929,570,000

3.75

   The table shows that the Interest Expense Ratio of NBL has been increasing.

Wages & Salaries Ratio-

This ratio indicates how much expenses required regarding Wages & Salaries to TA of a bank. Lower the ratio indicates that the bank has been performing well.

Year

Wages & Salaries

Total Assets

Wages & Salaries Ratio (%)

1999

300,566,100

36,545,280,000

0.82

2000

399,888,100

47,148,080,000

0.84

2001

486,335,427

48,732,100,000

0.99

2002

529,271,513

45,719,130,000

1.15

2003

555,990,256

47,929,570,000

1.16

We can see that the NBL has been performing badly, as the ratio of the bank has been increasing from the year 1999 to 2003.

 

Occupancy Ratio

Occupancy Ratio indicates the occupancy expenses of the Bank to its total assets. The lower ratio indicates better performance of the bank.

Year

Occupancy

Total Assets

Occupancy Ratio (%)

1999

75,895,100

36,545,280,000

0.20

2000

76,987,100

47,148,080,000

0.16

2001

79,656,977

48,732,100,000

0.16

2002

85,015,468

45,719,130,000

0.18

2003

84,430,658

47,929,570,000

0.17

We can see that the NBL has been lowering its occupancy ratio. So, the bank’s performance is better than the previous years comparing to the year 2003.

Other Expenses Ratio-

Cash Ratio-

Cash ratio is measured by dividing cash by total assets of the bank.

Year

Cash

Total Assets

Cash Ratio (%)

1999

1,988,784,969

36,545,280,000

54.41

2000

2,066,774,122

47,148,080,000

56.66

2001

2,073,718,685

48,732,100,000

42.55

2002

2,417,617,968

45,719,130,000

46.63

2003

2,589,899,555

47,929,570,000

54.03

Other Ratio

Tax Rate –

The tax exposure of the bank can be assessed by the following ratio

Tax rate (%) = Total tax paid/ Net income Before Tax *100

 

Year

Total Taxes Paid

Net Income Before Tax

Tax rate (%)

1999

124,740,000

203,590,000

61.27

2000

105,130,000

333,750,000

31.49

2001

126,200,000

400,640,000

31.49

2002

104,130,000

250,320,000

41.59

2003

247,970,000

336,090,000

73.78

We can see that the tax rate of NBL is 61.27% in 1999. But the rate is lower in 2000 to2002- 31.49%, 31.49% & 41.59. But the rate is very high in 2003-73.78.

 

Deposit to capital Ratio

This ratio measures Taka of deposit of per Taka capital.

Deposit to Capital Ratio = Deposit/ Total Capital

 

Year

Total Deposit

Total Shareholders Equity

Ratio (times)

1999

20,258,720,000

1,495,895,002

13.54

2000

23,616,280,000

1,504,789,564

15.89

2001

24,896,640,000

1,572,752,012

15.56

2002

26,327,260,000

1,628,372,451

16.16

2003

27,762,120,000

1,635,873,211

16.97

Deposit to capital ratio of NBL has been increasing over the years. It was 13.54times in the year 1999 and 16.97 times in the year 2003. That means the deposit of the bank has been increasing much more than its equity capital.

Deposit to Employee Ratio-

This ratio indicates how much Taka is deposited by each employee in the bank. Higher the ratio indicates the better the position of the banks.

Year

Total Deposit

Number of employees

Ratio (times)

1999

20,258,720,000

1868

10845130

2000

23,616,280,000

2025

11662360

2001

24,896,640,000

2073

12009956

2002

26,327,260,000

2171

12126789

2003

27,762,120,000

2185

12705775

The table reveals that each employee of NBL mobilized deposit of TK. 10845130 in the year 1999 and it has been increased to TK. 12705775 in the year 2003. This indicates the better performance of the bank.

Invest to Deposit Ratio-

The ratio indicates that how much Taka is invested to total deposit.

Year

Total Investment

Total Deposit

Ratio (times)

1999

2371350000

20,258,720,000

0.117

2000

2626620000

23,616,280,000

0.111

2001

2891970000

24,896,640,000

0.116

2002

3839600000

26,327,260,000

0.145

2003

4044200000

27,762,120,000

0.1456

                                                                                          NBL Credit Card

      NBL Power Card

6.1. Credit Card Division

Carrying of cash is not so safe in today’s world. There is always a chance of losing or hijacking of cash. On the other hand, the desire to purchase any desired item of one may not be fulfilled for the want of cash at the time of that willingness. To remove these problems, credit card has been introduced which is very popular to face the mentioned problems.

6.1.1 What is Credit Card?

It is a card (usually plastic) that assures a seller that the person using it has a satisfactory credit rating and that the issuer will see to it that the seller receives payment for the merchandise delivered.

6.1.2 NBL & Credit Card

NBL is the first local bank, which introduced credit card & MasterCard in Bangladesh in both local and international market in 1997. MasterCard captured 35% of credit card through the world. However present market analysis reflects that a large number of people whose average income ranges in above Tk.l0000 are using the credit card. Credit card division is continuing their all-possible efforts for the participation in the globalizes MasterCard program. The number of users of the credit cards is increasing day by day. During the year 2004 the bank has got a profit of Tk.104.25 million from credit card business. NBL also has got the licenses from international brand Visa Card and very soon, it will be launched in the country.

6.1.3 Types of Credit Card

National Bank Limited offers mainly two type of credit card according to the geographical area. These are Local credit card and International credit card. According to the level of income the local and international credit cards are divided into two categories viz. Gold card and Silver card. These types of credit cards are described below:

(a) Local credit card

Local credit card is valid only in Bangladesh. Out side Bangladesh, the card is invalid. Local card are two types. They are Gold local card and Silver local card. The card limit of gold local card is Tk.50000 to Tk. 100000 and silver local card is below Tk.50000.

(b) International Credit Card

International credit card is valid mainly outside Bangladesh. But for the payment of roaming facilities for GrameenPhone, cardholders can use International Credit Card in Bangladesh. International credit cards are of two types. These are gold international credit card and silver international credit card. The card limit of gold international credit card is $ 2000 to $4000 and silver international credit card below $2000.

6.1.4 Yearly Charges on credit card

National Bank Limited receive card fee for new card and renew card from the cardholder. The rate of card fee for new card and renew card are the same. In case of new card the bank receives the card fee with the next month’s bill. The rates of card fee are given in below:

Table: Yearly charges on credit card

Type of cardCard fee
International Gold CardUS$70.00
International Silver cardUS$ 35.00
Local Gold cardTk.2000.00
Local Silver CardTk.1200.00

                                                * Source: National Bank brochure 2005

 

6.1.5 Documentation for a credit card

Any person whose monthly income is over 10000 can be a credit card holder of NBL. The requirements of a card are:

For Local card

  • The fulfillment of the application form.
  • 2 copies of photographs. (If supplementary card is taken then 2 copies of photographs of the nominee).
  • TIN certificate.
  • A security. (MSS, SDS or FDR as lien).
  • Charge documents.

 

For International card

  • The fulfillment of the application form.
  • 2 copies of photographs. (If supplementary card is taken then 2 copies photographs of the nominee).                                                                                               
  • TIN certificate.
  • A security. (MSS, SDS or FDR as lien).
  • Charge documents.
  • The photocopy of passport.

6.1.6 Billing of a credit card

National Bank Limited offers the cardholder 15 to 45 days credit facilities. For the proper billing the bank divided the cardholder into three cycles. These are 0 cycle, 3 cycle and 5cycle. In 0 cycle hill are prepare and send to the cardholder 1st day or every month and last date of payment is 15th day of the month. In 3cycle bill are prepare and send to the cardholder 3rd day of every month and last date of payment is 18th day of the month. In 5cycle bill are prepare and send to the cardholder 5th day of every month and last date of payment is 20th day of the month. The cardholder can pay the bill any branch of the National Bank. If any cardholder fails to pay the bill within the last date then he/she must pay 2% monthly interest and his/her card stop automatically.  But if the cardholder pay minimum bill (10% of the bill) then he/she must pay the interest on the balancing amount and can use the card as usual. On the other hand, if the card holder withdraws any cash amount from the ATM booth (maximum limit is 20% of card limit) a monthly charge of 2.5% is to be charged from the date of withdraw. In that case the card holder will not get the 45 days credit payment facility.

 

NBL ATM Service

National bank limited introduced ATM service to its customer. The card will enable to save our valued customers from any kind of predicament in emergency situation and time consuming formalities. NBL ATM card will give our distinguished clients the opportunity to withdraw cash at any time, even in holidays, 24 hours a day a week.

NBL Commitment to the society

NBL always shows a strong and positive commitment to the services of the society. IN 1998, the bank donated Tk. 5.50 million to prime minister relief fund for the flood- affected people of Bangladesh.

SWOT Analysis

SWOT analysis is the detailed study of an organization’s exposure and potential in perspective of its strength, weakness, opportunity and threat. This facilitates the organization to make their existing line of performance and also foresee the future to improve their performance in comparison to their competitors. As though this tool, an organization can also study its current position, it can also be considered as an important tool for making changes in the strategic management of the organization.

Strengths:

National Bank Limited has already established a favorable reputation in the banking industry of the country. It is one of the leading private sector commercial banks in Bangladesh. The bank has already shown a tremendous growth in the profits and deposits sector.

National Bank Limited has already achieved a high growth rate accompanied by an impressive profit growth rate in 2001. The number of deposits and the loans and advances are also increasing rapidly.

National Bank has the reputation of being the provider of good quality services too its, potential customers.

Weakness:

The main important thing is that the bank has no clear mission statement and strategic plan. The banks not have any long-term strategies of whether it wants to focus on retail banking or become a corporate bank. The path of the future should be determined now with a strong feasible strategic plan.

The bank failed to provide a strong quality-recruitment policy in the lower and some mid level position. As a result the services of the bank seem to be Deus in the present days.

The poor service quality has become a major problem for the bank. The quality of the service at National Bank is not higher than the Dhaka Bank, Prime Bank or Dutch Bangla Bank etc. So the bank has to compete with the multinational Bank located here.

Some of the job in National Bank has no growth or advisement path. So lack of motivation exists in persons filling those positions. This is a weakness of National Bank that it is having a group of unsatisfied employees.

In terms of promotional sector, National Bank has to more emphasized on the. They have to follow aggressive marketing campaign.

Opportunity:

In order to reduce the business risk, National Bank has to expand their business portfolio. The management can consider options of starting merchant banking or diversify into leasing and insurance sector.

The activity in the secondary financial market has direct impact on the primary financial market. Banks operate in the primary financial market. Investment in the secondary market governs the national economic activity. Activity in the national economy controls the business of the bank.

Opportunity in retail banking lies in the fact that the countries increased population is gradually learning to adopt consumer finance. The bulk of our population is middle class. Deferent types of retail lending products have great appeal to this class. So a wide variety of retail lending products has a very large and easily pregnable market.

A large number of private banks coming into the market in the recent time. In this competitive environment National Bank must expand its product line to enhance its sustainable competitive advantage. In that product line, they can introduce the ATM to compete with the local and the foreign bank. They can introduce credit card and debit card system for their potential customer.

In addition of those things, National Bank can introduce special corporate scheme for the corporate customer or officer who have an income level higher form the service holed. At the same time, they can introduce scheme or loan for various service holders. And the scheme should be separate according to the professions, such as engineers, lawyers, doctors, etc.

Threats:

All sustain multinational banks and upcoming foreign, private banks posse’s enormous threats to National Bank Limited. If that happens the intensity of competition will rise further and banks will have to develop strategies to compete against an on slough of foreign the banks.

The default risks of all terms of loan have to be minimizing in order to sustain in the financial market. Because default risk leads the organization towards to bankrupt. National Bank has to remain vigilant about this problem so that proactive strategies are talent to minimize this problem if not elimination.

The low compensation package of the employees from mid level to lower level position threats the employee motivation. As a result, good quality employees leave the organization and it effects the organization as a whole.

RECOMMENDATION

Although the bank is making a huge amount of profit and gencratil1g a large volume of deposit, based on my working experience at Nationa1 13ank limited, Credit card division, I would like to put up the following recommendations.

            Prospects: how to Achieve?

v Credit card division should increase their marketing activities and for these the will formulate a card marketing group and the remuneration of the member of the group will semi variable. That’s means they get a fixed salary and get commission for every card.

v  The division should maintain a card marketing strategy. They must identify which type of people get preference in issuing card, like as bankers, exporters, importers, government high officials.

v The bank may circulate student credit card and the card limit will be Tk. 5000.

v  The may sort out the cardholder who paid their payment regular and issue another credit card to their spouse without any security

v To increase the number of cardholder the bank may decrease the annual fee and interest.

v  Credit card division should improve their customer service

            Challenges: how to face these?

v To avoid telecommunication problem the bank should follow modern telecommunication system.

v Bank may encourage the business firm to establish fixed price shopping center.

v  Because of different type of merchant commission rate may be different according merchant’s type of business.

v Bank should concentrate on quickly merchant payment. For this bank may use computerized system in preparing pay order

 

Conclusion

During the 12 weeks internship program at NBL, almost all the desk has been observed more or less. Gaining knowledge of practical banking and to compare this practical knowledge with theoretical knowledge. Though all departments and sections are covered in the internship program, it is not possible to go to the depth or each activities of division because of time limitation. So, objectives of this internship program have not been fulfilled with complete satisfaction. However, highest effort has been given to achieve the objectives the internship program.