Report on Study of Branch Banking of Arab Bangladesh Bank Limited
Subject: Business, Marketing | Topics:

Introduction

Placement or internship program is an indispensable part of BBA (Bachelor of Business Administration) program, Institu of Business Studies (IBS), Darul Ihsan University, that bridge the gap between the theoretical knowledge and practical situation. I was assigned to the Arab Bangladesh Bank Ltd. (ABBL) at Motijheel Branch, Dhaka to take the real banking experience in order to reinforce knowledge acquired so far from the BBA program. In this internship program each student selects a project for study, completes the study and prepares a report with recommendation for solution of the problem. This report is tentatively prepared to complete my BBA program and assigned by Eng. Firoz Ahmed.
1.2 The Topic And Its Important
I was asked to work on branch banking specially on general banking in the Arab Bangladesh Bank Ltd. (ABBL) at Motijheel Branch, Dhaka. Bank plays an important role in the business sectors and in the industrialization of a country. Banks take deposits from the customers against interest and lend it to the borrowers against interest for a time being. To perform these functions bank has to do a lot of works such as deposits collection, loans and advances appraisal and management system, foreign exchange transactions, general banking etc. Hence these issues of banking have been selected for study. The banks works within some conceptual frameworks such as GAAP & IAS, which are guidelines of the whole process. So the application of GAAP & IAS in the preparation of financial statements is very important.
1.3 Objective of The Study
The objective of the report is to have a real life exposure in the banking sector. It will help to develop my knowledge in banking sector. To prepare the report on the Study of branch banking- A case study of Arab Bangladesh Bank Ltd. (ABBL) especially on branch banking, a observation is closely involved with the fulfillment of 4 months (1st March to 30th June) fulltime internship program on the Motijheel branch to acquire knowledge about the every day banking operation.

Followings are the Objectives of the study:
To acquire knowledge about the branch banking specially on general banking in the Arab Bangladesh Bank Ltd. (ABBL) at Motijheel Branch, Dhaka.
To practically expose with banking activities performed daily by the bank.
To analyze the feature of all kind of service provided by the Arab Bangladesh Bank Ltd. (ABBL).
To develop an assessment of different kind of service offer by the Bank to its customer.
To identify the problem areas of my study.
To assess financial strength and weakness of Arab Bangladesh Bank Ltd. (ABBL).
To recommend for overcoming the problem.
To consider the strength, weakness, opportunity and threats of the bank, which may helpful for the improvements of banks from existing condition.
The recommendations about the Do’s and Don’ts of the banking activities, which leads to the development of banks.
1.4 Scope
The scope of this report is limited to assess the practical functioning of the banking activities. This report will cover the branch banking specially the general banking of the Arab Bangladesh Bank Ltd. (ABBL).
1.5 Methodology
Soon after the placement of internship program to Arab Bangladesh Bank Ltd. (ABBL). for practical exposed with the theoretical knowledge. The whole work is done by the supervision of the Company Secretary & EVV Md. Badrul Haque Khan, Officers, and help from bank staffs. The study has been undertaken in the following manner:

1. Regular attendance in the office and having a practical orientation.
2. Discussion with the officials and sometimes with Company Secretary.
3. Compliance test on the basis of existing rules and procedure in execution of banking operations.
4. Determining the further analysis required to pin point problem areas, the additional information needed and its sources.
5. To collect additional information needed through discussion and interviews with enterprise employees, examination of rerecords and data available at the offices of the bank.
6. A methodology for the assistant was developed for carrying out the assignment.
1.6 Source of Data Collection
Primary Source: –
Primary data are those, which are collected by survey or study for specific purpose. I have collected primary data through the following ways-

Discussion and interviews with enterprise employees, examination of rerecords and data available at the offices of the bank.
Collection of relevant information from various departments when I worked.
Discussion with the existing and new customer, which is another dimension of experience.

Secondary source

Collection of relevant information from various journals, financial magazine, research report, newsletter, statement of affairs (Motijheel Branch).
Annual Report of the Arab Bangladesh Bank Ltd. (ABBL), 2004.
Text Books.
The web site of the bank.

1.7 Study Period
The internship with Arab Bangladesh Bank Ltd. (ABBL) at Motijheel Branch is part of my BBA program that duration is 1st July to 1st October, 2004 by the decision of university. This attentively three-month internship helps me to achieve objective of the study.
1.8 Limitations
Every study of this type has some limitations. The topic of my study also has faced some limitations. I have faced a few impediments and restriction while conducting the study, which may be termed as limitations. These are as follows: –

1. Insufficient Data: It is very difficult to collect recent data, which is very essential for interpretation of report.
2. Sufficient books, publications, facts and figures are not available in bank or information may secrete that are not disclosed to the students.
3. Arab Bangladesh Bank Ltd. (ABBL) did not provide any kind of pay and allowance for the period of internship, which is very unethical.
4. Although I have put best efforts to meet the report objective however due to short period of time the detail information gathered may not possible.
5. Though all the top management and staffs of Arab Bangladesh Bank Ltd. (ABBL) at Motijheel Branch are very helpful but entry level management not helpful because of their lack of experience, negative ego, poor knowledge about the internship program, so they didn’t able to help the way I needed. Many times they could not answer to my quarries. Entry-level management tries to avoid internship personal whatever may be unintentional manner. Instead, they suggest me be more attentive to their work i.e., to help them more than I did.
6. Finally, my personal scantiness of knowledge especially in research, studies and banking activities.

CHAPTER TWO

Profile of Arab Bangladesh Bank Ltd (ABBL).
2.1 Legal Form And History:
Arab Bangladesh Bank Limited, the first private sector Bank under Joint Venture with Dubai Bank Limited, UAE incorporated in Bangladesh on 31st December 1981 and started its operation with effect from April 12, 1982.
Dubai Bank Limited (name subsequently changed to Union Bank of the Middleast Limited) decided to off-load their investment in Arab Bangladesh Bank Limited with a view to concentrate their activities in the UAE in early part of 1987 and in terms of Articles 23A and 23B of the Articles of Association of the Company and with the necessary approval of the relevant authorities, the shares held by them in the Bank were sold and transferred to Group “A” Shareholders, i.e. Bangladeshi Sponsor Shareholders.
At present the Authorized Capital and the Equity (Paid up Capital and Reserve) of the Bank are BDT. 800.00 million and BDT. 1105.32 million respectively. The Sponsor-Shareholders hold 50% of the Share Capital, the General Public Shareholders hold 49.30% and the rest 0.70% Shares are held by the Government of the People’s Republic of Bangladesh. However, no individual sponsor share holder of AB Bank holds more then 10% of its total shares.
Since beginning, the Bank acquired confidence and trust of the public and business houses by rendering high quality services in different areas of banking operations, professional competence and employment of the state of art technology.
During the last 21 years, Arab Bangladesh Bank Limited has opened 68 Branches in different Business Centers of the country, one foreign Branch in Mumbai, India, two Representative Offices in London and Yangon, Myanmar respectively and also established a wholly owned Subsidiary Finance Company in Hong Kong in the name of AB International Finance Limited. To facilitate cross border trade and payment related services, the Bank has correspondent relationship with over 220 international banks of repute across 58 countries of the World.
Arab Bangladesh Bank Limited, the premier sector Bank of the country is making headway with a mark of sustainable growth. The overall performance indicates mark of improvement with Deposit reaching BDT. 28,130.00 million, which is precisely 14% higher than the preceding year. On the Advance side, the Bank has been able to achieve 5% increase, thereby raising a total portfolio to BDT. 19,910.00 million, which places the Bank in the top tier of private sector commercial banks of the country.
On account of Foreign Trade, the Bank made a significant headway in respect of import, export and inflow of foreign exchange remittances from abroad.
2.2 Objectives of The Bank
The objectives of the banks are as follows:
Give maximum benefits to the customers and the shareholders.
Expand the economic sector and reach the service to the common people.
Ensuring the maximum utilization of human resources through increasing the efficiency.
Increasing the saving tendency among the different level of people of the society.
Increasing the confidence of traders through making the transaction easier.
Determining the need of the customer and supply short and long-term financial assistance.
Proper stewardship and utilization of resources.
Participate in the various weal-fear activities of the country.
Making capital market more effective through its presence.
Maximum utilization of information technology and relate the customers in banking activities.
Strengthening the discipline in bank management and giving the customers best service through establishing long-term relation.
Earning a handsome growth in the economy through participating in various social activities and in trade and commerce.
Increasing the goodwill of the bank in home and abroad.

2.3 Nature of The Business
The officers of Arab Bangladesh Bank Limited serve for all banking needs of the customer. As a commercial bank, it is proving a wide range of savings and credit programs, retail banking services with the support of modern technology and professional management including its traditional banking business.

Board of Directors
________________________________________

Chairman
Faisal M. Khan

Vice-Chairman
Sajedur Seraj

Directors
Syed Golam Kibria
Golam Sarwar
S.M. Salahuddin
Mohammad Tipu Sultan
D.S. Faisal Hyder

President & Managing Director
Kaiser A. Chowdhury
Phone: 9560312 (Pabx)

Company Secretary
Mr. Badrul Haque Khan, FCA
Phone: 9570872 (Direct)
Pabx: 9560312

________________________________________Executive Committee of ABBL
________________________________________
The Executive Committee constituted with the following Members:
1. Mr. Sajedur Seraj, Vice-Chairman, Board of Directors Chairman
2. Mr. Faisal M. Khan, Chairman, do Member
3. Mr. Syed Golam Kibria, Director, do Member
4. Mr. Golam Sarwar, Director, do Member
5. Mr. S.M. Salahuddin, Director, do Member
6. Mr. Mohammad Tipu Sultan, Director, do Member
7. Mr. D.S. Faisal Hyder, Director, do Member
8. Mr. Kaiser A., President & Managing Director, do Member

________________________________________
Audit Committee of the Directors of ABBL
________________________________________
Audit Committee of the Board constituted with the following Members:
a. Mr. Faisal M. Khan, Chairman, : Chairman
b. Mr. Mohammad Tipu Sultan, FCA, Director, : Member
c. Mr. D.S. Faisal Hyder, Director, : Member
d. Mr. Badrul Haque Khan, Company Secy. : Member-Secretary

2.4 Vision & Mission

Vision Statement
________________________________________
To be the trendsetter for innovative banking with excellence and perfection
________________________________________

Mission Statement
________________________________________
To be the best performing bank in the country and the region.
________________________________________

Goal of the Bank
________________________________________
To exceed customer expectations through innovative financial products & services and establish a strong presence to recognize shareholders’ expectations and optimise their rewards through dedicated workforce.
________________________________________

Long term Goal
________________________________________
Keeping ahead of other competitors in productivity and profitability.
________________________________________

Short term Goal
________________________________________
To attain budgetary targets fixed in each area of business

2.
2.5FINANCIAL RESULTS OF THE BANK

Total Assets: Tk. 32,969 Million
The total assets of the Bank increased to Tk. 32,969 million in 2003 against Tk. 31,919 million in 2002 registering an increase of 3% over the preceding year.
Year-wise growth is shown in the following table and chart:
(Tk.in million)
Items 1999 2000 2001 2002 2003
Volume 18,408 22,139 25,352 31,919 32,969
Growth in volume – 3,730 3,213 6,567 1,050
Growth in % – 20.27 14.51 25.90 3.29

2.6 Deposit
AB Bank Deposit: Tk.27, 260 Million
Total deposit increased to Tk. 27,260 million as on 31st December, 2003 from Tk. 25,525 million of the previous year indicating an increase of 6.80% compared to the previous year.
Time Deposits being the main component, constituted 52% of the total deposit mix followed by Savings and Demand Deposit, which were 30% and 18% respectively.

The following table and chart show the growth of deposit and deposit mix:
Items 1999 2000 2001 2002 2003
Volume 13,625 16,596 19,410 25,525 27,260
Growth in volume – 2,971 2,814 6,115 1,735
Growth in % – 21.81 16.96 31.50 6.80

AB Bank Credit/Deposit Ratio
The credit/deposit ratio of the Bank, excluding the inter bank deposit stands at 77% at the end of December 2003, compared to 84% at the end of December 2002.

2.7 Advances
AB Bank Sector- wise break-up of Loans & Advances
(Tk.in million)

(Tk.in million)

Sector20032002Growth in
Volume%
Agriculture2458(34)(59)
Large & Medium Scale Industry2,9844,105(1,121)(27)
Working Capital5,1474,0831,06426
Export Finance88845043897%
Commercial Lending2,5818,259(5,678)(69)
Small & Cottage Industries1215863109
Others8,6902,4646,226253
Total20,43519,4779585

Following is the graphical presentation of sector-wise distribution of loans & advances:

Classified Loans and Advances

The following table and graph shows the trend of the classified loans and advances of the Bank during the last five years:
(Tk.in million)

(Tk.in million)

Items

1999

2000

2001

2002

2003

Volume

3,058

2,942

2,537

4,819

3,934

Growth in volume

(116)

(405)

2,282

(885)

Growth in %

(3.79)

(13.77)

89.95

(18.36)

2.8 Investments Over The Year
AB Bank Investment: Tk. 3,336 Million

The size of the investment portfolio in 2003 stood at Tk. 3,336 million compared to Tk. 3,219 million in 2002, indicating an increase of 4%. Maximum investment was on Government Sector involving Tk. 2,903 million.

The following table and chart shows the year-wise growth of investment:
(Tk.in million)

(Tk.in million)

Items19992000200120022003
Volume2,1132,4302,7043,2193,336
Growth in volume317274515117
Growth in %15.0011.2819.053.63

The portfolio comprises of Treasury Bills, Bonds, Debentures, Shares and Prize Bonds. Component of investment as on 31.12.2003 were as follows:
(Million Taka)

(Million Taka)

Particulars

Amount

Treasury Bills

2,925

Debenture & Bonds

156

Shares

252

Prize Bond

3

Total

3,336

Literature Review
3.1 What Is Bank?
The functional definition of Bank is that “it is a financial institution which accepts money from its customers as deposits and gives money as loan to the borrowers.” According to a prominent economist R.S.Sayers, “a bank is an institution whose debts are widely accepted in settlement of other people’s debt to each other.” Another economist C.Cross defined, “a bank is a financial intermediary – a dealer in loans and debts.”
3.2 Development of Modern Banking Institution
With the gradual development of the banking system throughout the world, the organized and modern banking institutions came into existence names of some of which are given below:

Year of establishmentName of bankSpecial feature
1171The bank of VeniceFirst organized bank of the world.
1178The bank of son GeorgioThe discoverer of America Mr. Columbus was the first customer of this bank.
1584The Banco di RialtoFirst public bank started in Venice which did business both in the deposit and exchange breaches.
1556The bank of Sweden

 

It is the state bank of Sweden. This bank has the credit of having invented bank notes.
1656The Risk bank of Sweden 
1694The bank of England 
1800The bank of FranceThis is central bank of France & and it was established by Napoleon.
1834

 

London Joint Stock Bank Union Bank of England London Country Bank 

3.3 Banking Sector In Bangladesh
At the moment financial sector reform programmers are underway. Private Banks and insurance companies with few exceptions are functioning creditably. Uttara, Pubali and Rupali Banks which were formally owned by the GOB were privatized. Shadaran Bima Corporation’s (General Insurance) 49% shares are contemplated to be off loaded in the local stock markets soon.

Bangladesh pursues a liberal market economy. Bangladesh Bank is the apex bank of the country responsible for promoting healthy growth and development of the banking system. Banks and insurance companies, both in the private and public sectors, are operating freely and contributing to the economy. Foreign banks like American Express Bank, Standard Chartered Bank, ANZ Grindlays Bank, Indosuez Bank, etc. function in Bangladesh through their branches.
There are other specialized financial institutions like the Bangladesh Shilpa Bank (Industrial Bank), Bangladesh Shilpa Rin Sangstha (Industrial credit organization), Krishi (Agriculture) Bank, House Building Finance Corporation, Grameen (Rural) Bank and several cooperative banks. The Industrial Promotion and Development Corporation (IPDC) of Bangladesh and the Investment Corporation of Bangladesh (ICB) provide equity support to public limited companies in the private sector. The government has recently replaced the Controller of Capital Issues by establishing a full fledged Securities and Exchange Commission with enhanced power for the growth and development of the Securities market in Bangladesh. Liberal fiscal policy has resulted in the highest forex reserve.

During the last three years a number of steps have been taken to strengthen the country’s banking system. These include improvement of the regulatory environment. Enforcement of loan classification guidelines and recapitalization of nationalized commercial banks. Over the past two years, there has been a massive infusion of taka 32,000 million in the NCBs in the shape of government bonds to make up for capital and provisioning shortfalls.
The commercial banks are now diversifying and strengthening their portfolio. They have increased term lending. Up to April 1994 they have sanctioned term loans totaling taka 10,260 million. Disbursement agricultural loans stood at taka 9,660 million 31 % increase over the same period in 1993. NCBs have introduced loan programmers in off-farm and agro-based activities. NCBs, BSB and BSR have been able to rehabilitate 471 sick industrial units which have created 21,000 new jobs.
The government is keen to correct and remedy failures and imperfection in the financial markets. A small credit guarantee scheme has been introduced, to assist new entrepreneurs who can receive loan of taka 2.5 million without any collateral. To enlarge the activities of Grameen Bank, which serves the poor, particularly the women in the rural areas, the government has provided guarantee against loans amounting to taka 4,650 million in 1993-94 in addition to taka 1000 million provided directly by the Bangladesh Bank. In the fiscal year 1994-95 the government has already committed to Grameen Bank to provide loan guarantee for an additional amount of taka 3850 million.

The reforms of financial sector and trade liberalization are being complemented by appropriate forex regime. An active exchange rate policy to maintain the competitiveness of the economy is being followed in the backdrop of the Uruguay Round Multilateral Trade Agreements and particularly, the gradual merger of Multi-fiber arrangement into the GATT the exchange rate will be closely monitored. Taka has been made convertible on all international current transactions. Company laws have been reformed for boosting private investment.
Bangladesh has accepted the obligations of Article VIII of IMF Articles of Agreement which means removal of all restrictions on making payments and transfers for current international transactions. By accepting these obligations, Bangladesh has given a clear signal to the international community that it would pursue sound economic policies, and thereby create a congenial climate for investment.
3.4 The Banking System
The banking system at independence consisted of two branch offices of the former State Bank of Pakistan and seventeen large commercial banks, two of which were controlled by Bangladeshi interests and three by foreigners other than West Pakistanis. There were fourteen smaller commercial banks. Virtually all banking services were concentrated in urban areas. The newly independent government immediately designated the Dhaka branch of the State Bank of Pakistan as the central bank and renamed it the Bangladesh Bank. The bank was responsible for regulating currency, controlling credit and monetary policy, and administering exchange control and the official foreign exchange reserves. The Bangladesh government initially nationalized the entire domestic banking system and proceeded to reorganize and rename the various banks. Foreign-owned banks were permitted to continue doing business in Bangladesh. The insurance business was also nationalized and became a source of potential investment funds. Cooperative credit systems and postal savings offices handled service to small individual and rural accounts. The new banking system succeeded in establishing reasonably efficient procedures for managing credit and foreign exchange. The primary function of the credit system throughout the 1970s was to finance trade and the public sector, which together absorbed 75 percent of total advances.

The government’s encouragement during the late 1970s and early 1980s of agricultural development and private industry brought changes in lending strategies. Managed by the Bangladesh Krishi Bank, a specialized agricultural banking institution, lending to farmers and fishermen dramatically expanded. The number of rural bank branches doubled between 1977 and 1985, to more than 3,330. Denationalization and private industrial growth led the Bangladesh Bank and the World Bank to focus their lending on the emerging private manufacturing sector. Scheduled bank advances to private agriculture, as a percentage of sectoral GDP, rose from 2 percent in FY 1979 to 11 percent in FY 1987, while advances to private manufacturing rose from 13 percent to 53 percent.

The transformation of finance priorities has brought with it problems in administration. No sound project-appraisal system was in place to identify viable borrowers and projects. Lending institutions did not have adequate autonomy to choose borrowers and projects and were often instructed by the political authorities. In addition, the incentive system for the banks stressed disbursements rather than recoveries, and the accounting and debt collection systems were inadequate to deal with the problems of loan recovery. It became more common for borrowers to default on loans than to repay them; the lending system was simply disbursing grant assistance to private individuals who qualified for loans more for political than for economic reasons. The rate of recovery on agricultural loans was only 27 percent in FY 1986, and the rate on industrial loans was even worse. As a result of this poor showing, major donors applied pressure to induce the government and banks to take firmer action to strengthen internal bank management and credit discipline. As a consequence, recovery rates began to improve in 1987. The National Commission on Money, Credit, and Banking recommended broad structural changes in Bangladesh’s system of financial intermediation early in 1987, many of which were built into a three-year compensatory financing facility signed by Bangladesh with the IMF in February 1987.

One major exception to the management problems of Bangladeshi banks was the Grameen Bank, begun as a government project in 1976 and established in 1983 as an independent bank. In the late 1980s, the bank continued to provide financial resources to the poor on reasonable terms and to generate productive self-employment without external assistance. Its customers were landless persons who took small loans for all types of economic activities, including housing. About 70 percent of the borrowers were women, who were otherwise not much represented in institutional finance. Collective rural enterprises also could borrow from the Grameen Bank for investments in tube wells, rice and oil mills, and power looms and for leasing land for joint cultivation. The average loan by the Grameen Bank in the mid-1980s was around Tk2,000 (US$65), and the maximum was just Tk18,000 (for construction of a tin-roof house). Repayment terms were 4 percent for rural housing and 8.5 percent for normal lending operations.

The Grameen Bank extended collateral-free loans to 200,000 landless people in its first 10 years. Most of its customers had never dealt with formal lending institutions before. The most remarkable accomplishment was the phenomenal recovery rate; amid the prevailing pattern of bad debts throughout the Bangladeshi banking system, only 4 percent of Grameen Bank loans were overdue. The bank had from the outset applied a specialized system of intensive credit supervision that set it apart from others. Its success, though still on a rather small scale, provided hope that it could continue to grow and that it could be replicated or adapted to other development-related priorities. The Grameen Bank was expanding rapidly, planning to have 500 branches throughout the country by the late 1980s.

Beginning in late 1985, the government pursued a tight monetary policy aimed at limiting the growth of domestic private credit and government borrowing from the banking system. The policy was largely successful in reducing the growth of the money supply and total domestic credit. Net credit to the government actually declined in FY 1986. The problem of credit recovery remained a threat to monetary stability, responsible for serious resource misallocation and harsh inequities. Although the government had begun effective measures to improve financial discipline, the draconian contraction of credit availability contained the risk of inadvertently discouraging new economic activity.

Foreign exchange reserves at the end of FY 1986 were US$476 million, equivalent to slightly more than 2 months worth of imports. This represented a 20-percent increase of reserves over the previous year, largely the result of higher remittances by Bangladeshi workers abroad. The country also reduced imports by about 10 percent to US$2.4 billion. Because of Bangladesh’s status as a least developed country receiving concessional loans, private creditors accounted for only about 6 percent of outstanding public debt. The external public debt was US$6.4 billion, and annual debt service payments were US$467 million at the end of FY 1997.
3.5 International Banks
The World Bank has taken the lead in addressing some of the most deep-seated structural constraints in Bangladesh’s economy by providing productive employment for those without assets, promoting economic opportunities for women, and addressing the social and economic inadequacies of education, health, nutrition, and population programs. Among aid projects were the Irrigation Management Programme, which supports drainage and flood control as well as the introduction of pumps and drills; support for maintenance of the nation’s more than 43,000 primary schools (including repairs to existing buildings, additions to accommodate larger numbers of pupils, and construction of new schools where needed); and the 500,000-ton Ashuganj fertilizer complex, utilizing domestic natural gas, which came on stream in 1981. The World Bank has made loans to Bangladesh only from its “soft window,” the International Development Association. These interest-free loans provide for a 10-year grace period before repayment of principal begins and a 40-year repayment schedule, with the addition of a service charge of 1.5 percent.
The Asian Development Bank was the second largest donor, after the International Development Association, to Bangladesh’s development in the 1980s. As of the end of 1985, the Bank had approved 66 loans totaling US$1.8 billion. In 1985 alone, the bank approved loans of US$212.3 million for 6 new projects (down from US$306.8 million for 4 projects the year before). In addition, the bank provided local currency financing of US$59.8 million for 3 projects, co financing of US$10.5 million to projects with other donors, and a program loan of US$39 million for provision of fertilizer. About half of the Asian Development Bank’s financing has gone to agriculture and agro-industry. The 1985 package, for example, included a livestock development project intended to increase food production and improve rural incomes through expansion of veterinary services and livestock nutrition. In 1987 the Asian Development Bank approved a technical assistance grant (co financed by the Norwegian government) to explore the feasibility of growing rubber trees commercially in Bangladesh. The Asian Development Bank also has been active in the development of natural gas. In 1987 the bank approved a US$74 million loan for construction and extension of natural gas transmission and distribution pipelines to 5 districts in eastern Bangladesh. The loan was intended to cover 71 percent of project costs, including all of the foreign exchange requirements for the project. The bank has also supported transportation projects (development and improvement of feeder roads between local markets and primary roads, inland waterways, and railroads) and social welfare schemes for population control, health, and education.
3.6 Banking Companies Ordinance
The banking companies ordinance was promulgated on the 7th June, 1962. This has been adopted in Bangladesh and is applicable to the banking companies only. Nothing of this ordinance shall apply to a co-operative bank registered under the co-operative Securities act.
Main forms of business of Banking Companies:
 Borrowing, raising or taking up money.
 The lending or advancing of money either upon or without security.
 Dealing in securities and investment.
 Other business.
3.7 Negotiable Instrument Act
The negotiable instrument act, 1881 is the legislative enactment of the law relating to three classes of negotiable instruments namely: Promissory Notes, Bill of exchange and Cheque, which are in common bank use in the monetary instructions. It came into force on 1st March, 1882.
The law relating to negotiable instruments is not the law of our country or of one nation. It is the law of the bank world in general. It consist of “certain principles of equity usages of trade, which general convenience and commonsense of justice had established to regulate the dealing in merchants and marines in all the commercial countries of the civilized world.
3.8 Banking Systems In Bangladesh
The banking system in the world is mainly two types, such as “Unit banking” and “Branch banking or British banking”. In unit banking system, there will not be more than one branch of a bank. Such types of banks are mostly available in the different states of USA. In the branch banking or British banking system, there will be a few banks with their head offices in the city, which have a network of branches throughout the country. In Bangladesh the Branch or British banking system exists.
3.9 Categories of Banks
In our country, there are four types banks exist. Such as:
3.9.1 Central Bank
Bangladesh bank is the central bank of Bangladesh. It was formally come in to being by a temporary presidential order. After the liberation of Bangladesh, the else while deputy governors office of the state Bank of Pakistan in Dhaka entrusted with responsibilities of performing the rule of full-fledged central on 16th December, 1971.The Bangladesh bank order 1972 and banking companies ordinance govern the power of a functions of Bangladesh bank.

3.9.2 Commercial Banks
Nationalized Commercial Banks:
Now we have three Nationalized Commercial Bank in Bangladesh. The Nationalized Commercial Banks are Sonali bank, Janata bank and Agrani bank.
Private Commercial Bank:
There are a lot of private commercial banks in Bangladesh. Such as Rupali bank Ltd., Uttara Bank Ltd., Arab Bangladesh Bank Ltd., Dhaka bank ltd., National Bank Ltd., National Credit and Commerce Bank Ltd., IFIC Bank Ltd., Prime Bank Ltd., Islami Bank, The City Bank Ltd., Dutch- Bangladesh Bank Ltd., Social Investment bank Ltd, BASIC Bank, Eastern Bank Ltd., EXIM Bank Ltd., Premier Bank Ltd., Southeast Bank Ltd., Mutual Trust Bank Ltd., First Security Bank Ltd., One Bank Ltd., Bank Asia etc.
3.9.3 Specialized Banks/ Development Banks
In Bangladesh some specialized development banks are working for our economic development. The banks are World Bank, Asian development Bank, Bangladesh Shilpo Bank, and other Financial Institutions.
3.9.4 Specialized Institutions
There are some specialized financial institutes are in Bangladesh. These institutes are working for establishment a communication between the surplus saving units and deficit saving units like leasing firms, Insurance organizations, Merchant Banks etc. The prominent merchant banks are IDLC, Uttar Finance and Investment Limited, Mutual securities Ltd, Finix group etc.
3.10 What Is Branch Banking?
Branch banking system is such a system, where so many branches operate their business under a central office. In that system a corporate head office operates and directed the activities of all its branches. The origin of branch banking system is in U.K., so sometimes it is called as British Banking System.
Professor Mclead says that, “Branch banking system is that system of banking which controls and maintains many branches either inside the country or in abroad.”
Professor J.L.Hanson says that, “Branch banking means, a banking system with a small number of banks each with a large number of branches”.
So, it can be conclude that branch banking system is such a system where the operation and control of so many braches in within or outside the country is carried out by a central head office.
3.11 Features of Branch Banking
1. Existence of branch office
2. Branches by the same name
3. Good relationship with central banks
4. Control of branches by central head office
5. Autonomy in Branch administration
6. Formulation of policy is govern by central head office
7. Equality in interest in all branches
8. Loan is sanctioned by head office, after approval by head office branch bank is able to give loan.
9. Personnel administration is organized and operates by head office.
10. It operates on a basis of large scale, so it has huge capital and affect in the economy is significant.
3.12 Advantages of Branch Banking
1. Large scale organization
2. Formation of huge capital
3. Dynamism in capital
4. Scope of risk distribution
5. Advantages of liquidity
6. Efficient management
7. Training facility
8. Equality in interest rates in all branches
9. Role in foreign trade
10. Efficient banking services
11. Provision of transfer of money
12. Adopting of proper banking policies
13. Good relationship with the central bank
14. More employment opportunity
15. Development of service
16. Publicity
17. People’s confidence
18. Contribution in the economy
3.13 Disadvantages of Branch Banking
1. l. Problem in management due to the distance of one branch to another.
2. Delay in decision making
3. Indifference to local needs
4. Delay in giving loan
5. Monopolistic tendency
6. Extra expenses
7. Corruption and fraud
8. Absence of direct relationship
9. Taking the liabilities of other’s failure
10. Effect of abolishment
3.14 The Major Functions of Branch Banking Are
 Accounts opening;
 Inward and outwards mails;
 Receipts and payments of cash;
 Clearing and remittance bills;
 Giving loans and advances;
 Foreign exchange transactions.
3.15 The Banker-Customer Relationship
The Banker-Customer relationship is essentially a debtor-creditor contractual relationship. This relationship may be divided into two categories.
a. Legal relationship
b. Behavioral relationship
After the contractual relationship is established between the banker and customer, they have to abide by some implied conditions of the contract as well as practices of the bank.
Some of the conditions and practices are as follows:
• Customer is to use Cheque books while demanding payment from his account.
• Customer should keep cheque books in his safe custody.
• Customer must inform the bank on time for any loss of cheque leaf or cheque books.
• Customer while depositing money of presenting cheque, they must do that during business hour of the bank.
• Banker also should give necessary banking advice and help to the customer in various banking activities.
3.16 Rights of A Customer
1. Right to deposit money in his A/C on time.
2. Right to demand repayment by issuing cheque of written order properly in proper time and place.
3. Right to get pass book/statement of A/C
4. Right to stop payment on his cheque.
5. Right to give standing instructions.
6. Right to claim interest of his deposit balance in the interest bearing account
7. Right to have secrecy of his account.
8. Right to claim damages of any loss and for defamation due to wrongful/willful dishonor of cheque by bank.
9. Right to demand the proceeds of the instrument deposited for collection and collected accordingly.
10. Right to claim money paid by bank from his A/C wrongly or payment is not made in due courses.
11. Right to return deposit if not in proper manner and time.
12. Right to return the cheque if not drown properly or in time of for some other reason.
13. Right to debit customer’s A/C for any charges, interest and commission if recoverable.
14. Right to lien, right of set off etc.
3.17 Duties & Obligations of A Banker
1Must credit the deposited the amount to the customer’s A/C.
2Must honor cheque if otherwise in order.
3Must supply pass book/statement of A/C as demanded.
4Must abide by the stop payment order.
5Must abide by the instructions.
6Must pay/Credit interest as per rule.
7Must maintain secrecy of customer’s A/C if the banker’s not bound to disclose it under certain conditions.
8Must compensate the loss.
9Must collect the proceeds of the instrument in customer’s A/C and honor the cheque drown against the amount.
10Payment should be made in due courses in good faith and without negligence.
11Must deposit the amount properly and in time.
12Must demand payment by issuing cheque or written order properly.
13Must pay the bank charges, interest and commission if payable.
14Must abide by the low.

GENERAL BANKING
Introduction
General Banking is the starting point of all banking operation. It is a combination of activities of different sections.
General banking has 5(five) section in the bank. These sections are as follows:
(a) Dispatch
(b) Accounts Opening Section.
(c) Cash section.
(d) Clearing Section.
(e) Remittance Section.
(f) Accounts Section.
(g) Foreign Exchange
(h) Others
4.1 Dispatch
4.1.1 Inward And Outwards Mails
Inward and outwards mails is said to be Dispatch. It includes all correspondence, letters, statements and returns and telegrams. This dispatch is also known as Mail. The dispatch is primary divide into two categories:
Inward: It means what are receives form the outside.
Out Word: It means what are sent to the outside.
This dispatch also divided into-
(a) Ordinary,
(b) Registered and
(c) Local.
Every correspondence should have an office copy and one additional copy which is to be retained in the Master file of the office.

4.2 Accounts Opening Section
Accounts opening section can be referred as the door to enter in to the banking transaction for the customer. The relation that exists between the banker and the depositor is defined as debtor and creditor. The bank is to bound to make repayment there of by an equal amount on demand or at notice or at the end of the specific period with or without interest depending on the nature of the deposits.
It is the fundamental function of a bank. Bank Account is such account where the person is able to transact with the bank for a definite purpose. According to Dictionary of Banking and Finance, “Bank account is a contractual agreement between a bank and its customer, allowing the customer to use bank services for a fee. Accounts may be established in the name of individual or firms.

4.2.1 Objectives or Necessities of Opening Bank Account:
1. Safety preservations;
2. Creation of savings attitude;
3. Facilities of risk less income;
4. Formation of national capital;
5. Economic development;
6. Establishment of social securities;
7. Getting banking services.

4.2.2 Procedure of Opening Bank Account
The nature of bank accounts are:
1. Current account
2. Savings account
3. Fixed account.

4.2.3 Methods of Opening Current Account or Savings Account
Step 1: Collection of application form;
Step 2: Fill-up of the application form;
Step 3: Introduction of the new account opener by an existing account holder;
Step 4: Enclosing documents with application form:
• For an individual: Passport size photograph (l or more copies)
• For sole-proprietorship business: Trade License
• For partnership business: Trade License, Letter of Deed, Name and address of the directors;
• For a co-operative society: Trade License; Rules and Regulations; Resolution of the responsible person(s) who will direct and operate the accounts.
• For a company: Memorandum of Association, Articles of Association, Registration form, attested copies of certificate of commencement, Resolution of the responsible person(s) who will direct and operate the accounts.
Step 5: Submission of the application form;
Step 6: Fill-up the specimen signature card;
Step 7: Collecting deposit receipt and paying primary deposit;
Step 8: Receiving Check Book;

4.2.4 Methods of Opening Fixed Account
Step 1: Collection, Fill-up, and Submission of application form;
Step 2: Collecting fixed deposit receipt;

4.2.5 Requirements for opening an Accounting
(a) For savings Bank (SB) A / C:
Photograph of the individual.
Application on the prescribe form.
Initial Deposit.
(b) For current Account:
1. For An individual:
Photograph of the individual.
Trade License.
Application in bank’s prescribed form.
Initial Deposit.
2. For Partnership Firms:
Trade License.
Application in bank’s prescribed form.
Initial Deposit.
Partnership agreement.
3. For Joint stock Co.:
Registration certification from Register of joint stock Co.
Application in bank’s prescribed form.
Initial Deposit.
Memorandum of Articles.
List of Director.
Certificate of incorporation.
Power of attorney.

4.2.6 Issue of Cheque Book
A client having a saving A/C or a current A/C needs cheque book to maintain his transactions. A cheque book for saving A/C has 10 pages and cheque book for current A/C has 20 pages and 50 pages. A cheque book is issued against the respective account after submission of the attached requisition slip in the cheque book.

4.2.7 Issue of Fixed Deposit Receipt (FDR)
ABBL issues FDR for different length of time, such as –for 3 months, 6 months, months, & 12 months. Interest rates also vary for the time being. Interest rates for different times are shown below-

Types of Deposit

Rate of Interest

  Fixed Deposit (Time Deposits)
a. 3(three) Months
b. 6(six) Months
c. 1(One) Year to
2(Two) Years

  8.50%
8.75
9.50

Note: Rate may be negotiated.
4.3 Cash Section
Cash department is the most important and sensitive section of any branch that deals with all kinds of cash transactions. All cash receipts and payments are made through this department.
Money deposited in cash by the constituents at the cash counter of the bank excluding that of government transaction is known as Bank Receipt (Cash). Different types of forms are used for cash deposits for different types of accounts. Banks payment includes all kinds of payments excluding those of treasure section. Extreme precautions must be taken at all levels through, which instruments like cheques, drafts, etc. is disposed of. All the instruments received at the general banking counter will be preliminary checked by the dealing officer who will enter the instruments in the respective ledger.
Cash deposit is for – savings deposits, Current deposits, Utilities bills, Loan repayment, Amount for DD, PO, Amount for L/C margin (for import) etc.
On the other hand, cash disbursement (pay out) is for – cash withdrawals from savings account, Current account, disburse loan amount etc.
4.4 Clearing Section
This department receives cheques from its depositors for the purpose of collection in their accounts. An officer is assigned for receiving cheques by a deposit slip over the counter. The officer makes a LBC (local Bills for Collection) advice or OBC (Outward Bills for collection) advice to the respective banks and sends the collected cheques to the clearinghouse of Bangladesh Bank for collection.
4.5 Remittence
This function of the banker obviates the individual difficult and the hazards in transportation of physical cash form one place to another. Against deposit of the requisite funds and the payments of the remittance charges the banker undertakes to make the equivalent amount available at a particular place to a named person or his order within or outside the country as per instruction of the remitter. Transferring money within the country is known as local remittance and beyond the national boundary is known as foreign remittance.

Remittance can be made through – Demand Draft (DD), Pay Order (PO), Telegraphic Transfer (TT).
4.6 Accounts Section
4.6.1 Establishment
This section deals with employees’ salary and allowances, many types of internal expenses such as purchase of stationeries, equipments, machineries and payment of labor cost and employees conveyance etc. In case of leave of absence employee collects prescribed form from this section.
4.6.2 Accounts
This section is related with all departments. All types of books and records are related to the branch’s internal or external income and expenditure and financial performances are maintained here. Computer programs are used in this section to prepare posting of entries and preparing statements.

The following books are maintained here
Daily Financial Position.
Clearing.
Cash.
General Ledger Books.
Daily Statement Of Affairs
Daily Cash Book.
Credit and Debit supplementary for current deposit and savings accounts.
Supplementary of sundry assets.
Supplementary of Incomes and Expenditures.
Accounts section also prepare budget performance for every next year and prepare some periodic statements for the bank Head Office.

4.7 Loans And Advances
Loan and advance is one of the most important functions of a commercial bank. It is the main source of income of any commercial bank. Sometime branch banks are requested by the clients to take loans or advances, then bank send the necessary documents to the head office for approving it.
According to prof. Hanson “ when a bank makes an advance to a customer whether by overdraft or loan account is called bank credit”.
According to Oxford Dictionary of Business “A specified sum of money lent by a bank to a customer, usually for a specified time at a specified rate of interest is called bank loan or bank advance”.

Loans and advances are very important department for every bank. In this section, bank decides how they use their fund and sources. Banks make loans and advances to individuals, businessmen and industrialists. Moreover nature of credit may differ in terms of security requirement, disbursement provision, terms and conditions etc. Credit is a continuous process. Major part of a bank’s income is derived from credit.

4.7.1 Types of Loans & Advances
There are two types of loans and advances. They are-
(i) Term loan.
(ii) Continuous loan.

Term loans are for fixed time period. They don’t have time extension facilities. But continuous loans are treated as advances and they are sanctioned for one year only and renewed for the each following year when it is expired.

Depending on the various nature of financing, all the advances (lending) activities have been brought under the following major heads-

1. Cash credit (CC)
2. Secured Overdraft (SOD)
3. Consumer Credit Scheme (CCS)
4. Loan (ADB)
5. Loans (General)
6. House Building Loan (Staff)
7. House Building Loan (General)
8. Car Loan
9. Loans Against Import Merchandise (LIM)
10. Loans Against Packing Craft
11. Inland Bills Purchased (IBP)
12. Payment Against Documents (PAD)
13. Foreign Documents Bills Purchased (FDBP)
14. Local Documents Bills Purchased (LDBP)

4.7.2 Cash Credit (CC)
Cash Credit (CC) is a continuous process of loans & advances. It starts from the approval and continues till a limit and has an expiry date. Cash Credit account is basically a current account and transactions are continued with the account.

Bank provides 2 (two) types of Cash Credit (CC) facilities:-
(a) Cash Credit (Hypothecation) and
(b) Cash Credit (Pledges).

(A) Cash Credit (Hypothecation):
Advances allows to firms for trading as well as wholesale purpose or to industries to meet up the working capital requirements for smooth running of business against hypothecation of goods as primary security. The custody of the goods remains with the Customer.
(B) Cash Credit (Pledge):

Cash Credit (pledge) is sanctioned against pledge of goods. By signing the letter of pledge, the borrower surrenders the physical possession of the goods under the bank’s effective control as security for payment of bank dues. The pledge creates an implied lien in favor of the bank on the under lying merchandise. Generally no collateral is asked for grant such a credit.
4.7.3 Secured Overdraft (SOD)
Advances allowed to the individuals or firms against their financial obligations. Customers take SOD facility under lien of FDR, PSP etc. Lien must be made by specific bank margin. This may or may not be a continuous credit.
Advances also allowed against assignment of work order for execution of contractual works. It is generally allowed for a definite period and for specific purpose. It is not a continuous credit.

4.7.4 Consumer Credit Scheme (CCS)
In this scheme, bank finance to fixed income group people to purchase durable goods to raise their living standard. The approval of this loan depends on the nature of the borrower’s income and status. This loan allowed on a short term against personal guarantee by the customer and a renowned person. The loan is repayable by monthly installment within a fixed period.

4.7.5 Loan (General)
Short term, Medium term and Long term loans are allowed to individuals or firms for a specific purpose and for a definite period of time. Under this head, loans are repayable on installment basis as per terms and conditions with the bank.
4.7.6 House Building Loan (General)
This type of loans allowed to individuals or enterprises for construction of house, like residential and/or commercial basis. The installment is made by monthly or as per agreement with the bank but within a specific period.
4.7.7 Loan Against Import Merchandise (LIM)
This is a temporary advance connected with import. Advances allowed for retirement of shipping documents and release of goods imported through L/C taking effective control over goods by pledge in warehouse under bank’s lock and key.

4.7.8 Payment Against Documents (PAD)
Payment made by the bank against of shipping documents of goods imported through L/C. It is a temporary advance connected with import and is generally liquidated against payments usually made by the party for retirement of the documents for release of imported goods from the customer’s authority. It is also known as commercial lending.
4.7.9 Loan Against Packing Credit (PC)
This advance is connected with export. The condition is on the Export Cash Credit (ECC). It is a Credit against specific L/C for processing of packing of goods to be exported.
4.7.10 Foreign Documents Bills Purchased (FDBP)
It is export credit and temporary advance is adjustable from the proceeds of the shipping documents. Payment made to through purchase or negotiation of foreign documentary bills.
4.7.11 Local Documents Bills 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 or foreign currency.

4.8 Benefits of Loans & Advances:
Bank earns 2 (two) types of income –
I. Funded Income, &
II. Non-funded Income.
Selection of A Borrower:
Selection of the borrower is very much important for lending. Due to the Asymmetric information and moral hazard, banks have to suffer a lot due to the classified loans and advances, which weakens the financial soundness of the bank. If the selection of the borrower is right in terms of borrower’s character, capability, reliability and responsibility, the bank can easily get the return from the lending. Moreover, monitoring is easier for the banker.
4.9 Arab Bangladesh Bank Follows The Following Procedures To Select A Borrower:
1. Studying Past Track Record:
After getting an application for any loans or advances, the credit offers studies first the past record of the applicant. The study includes-
Account balances and nature of previous transactions.
Credit report from other banks.
Proposed industry by studying market feasibility.
Financial statement.

4.10 Report From Credit Information Bureau (Cib) Of Bangladesh Bank:
This report represents that the party does not have any liability with other banks.
4.10.1 Business Analysis:
Business analysis is done by the officer / officers of the bank in terms of market acceptability of the goods and services, market share and location of the business.
4.10.2 Credit Approval:
The credit approval process is governed by the bank credit Policy framework that can be summarized as follows-
4.10.3 Credit Evaluation Principles-
Credit evaluation is needed for every level of approval. The lending risk analysis tool containing analysis of both the business and security risk provides overall ratings of risk in a particular loan.
(B) Lending Risk Analysis (Lra)-
The most pertinent and prime part of the process is assessment of risk is the LRA. In this part, work is done through analyze the business risk and security risk in a matrix derived out of 8 (eight) segment of the business:
Supplies Risk.
Sales Risk.
Performance Risk.
Resilience Risk.
Management Competence Risk.
Management Integrity Risk.
Security Control Risk.
Security Cover Risk.
The lending Risk (LR) analysis provides four kinds of lending risk decision marks:
Good.
Acceptable.
Marginal.
Poor.
The acceptance or rejection of the proposal depends on the analysis of LRA. Because in the preparation of LRA, it requires the cash flow statement, balance sheet and some other important documents of the business.

4.10.4 For Cash Credit (Cc):
Office note.
Top sheet of LRA.
CIB report
Credit Appraisal Report.
Limit sanction / Renewal Advice.
Party’s declaration form.
Letter of hypothecation (in case of hypothecation of goods).
Letter of pledge (In case of pledge of goods).
Borrower’s personal summary.
Personal guarantee.
Value of stock.
Borrower’s personal net worth summary.
Legal documents of mortgage property.
4.10.5 For Loan (General):
Office note.
Letter of arrangement.
Letter of lien and ownership transfer form.
Regd. Irrevocable Power of Attorney.
Limit sanction / Renewal Advice.
Letter of Authority.
Legal documents for mortgage property.
Personal Guarantee.
All required documents should be obtained before or after any advance disbursement. Authorized officer of the branch should ensure the documents and recommend sanctioning the loan amount proposed for.
4.11 Loan Disbursement:
The amount of loans and advances can be disbursed at a time or in installment as per requirement depending on the status and progress of proposed investment area.
4.12 Credit Monitoring And Reviw:
The branch manager has the responsibility to monitor the overall
profile and risk aspect of the credit portfolio in accordance with the criteria set down in the Bank credit policy.

Periodic review and follow-up should ensure the following things-
Turnover, repayments etc. of the borrowing accounts during the period have been satisfactory.
Borrower’s business is being satisfactory.
Earnings of the accounts are cost effective.
Flow of fund is satisfactory.
Periodic evaluation of the portfolio advances.

4.13 Classfication Of Loans & Advances Recovary:
The classification of credit arises when advances are becomes stuck up for a longer Period of time. The responsibility for review and classification of credit starts at branch level with the Branch credit management committee and finally the credit Division of Head office.

The following features are present should be classified:
Past due principal and interest or other receivable payment for 6(six) months or more as prescribed by Bangladesh Bank.
Signature decrease in the value of collateral securities.
ncorrect information supplied by the borrower.
Bankrupt of the borrower.
nfavorable bank / trade report of the borrower.
Any information that forebodes a future problem or affects the borrower credit worthiness.

5 Types Of The Classification:
The classification of stuck-up loans and advances are as follows:
(a) Unclassified Loans
(b) Sub-Standard loan / advance.
(c) Doubtful Debts.
(d) Bad loan / Bad Debts

(a) Sub-Standard Loan / Advances-
This classification contains accounts where irregularities have occurred but they are temporary in nature. These accounts will require close supervision by the management to ensure that situation does not deteriorate further.
(b) Doubtful Debts-
This classification contains debts where doubt exists over the full recoverability of the principal interest. A loss is anticipated and it is not possible to quantify the extent of that loss. Management is required to pursue such debt with the utmost resolution to either avoid or minimize the bank’s losses.

(C) Bad Loan / Debts-
These facilities are considered to un-collectable or worthless even after all security has been exhausted and all the steps become failure.

It is the responsibility of the Branch Credit Management Committee to timely identify and try to take necessary steps to avoid classification of any facility.

Classified loans weaken bank’s profitability and its soundness of financial position. Once loan is classified, the Branch Manager must work with the Credit Committee to develop an action plan for restoring the facility to acceptable credit standards.

4.8 Foreign Exchange
4.8.1 Letter of Credit (L/C)
etter of Credit (L/C) can be defined as a “Credit Contract” whereby the buyer’s bank is committed (on be half of the buyer) to place an agreed amount of money at the seller’s disposal under some agreed conditions within a particular date. The letter of credit is called “Documentary Letter of Credit”.
Back – to – Back Credit:
The back-to-back credit is a new credit opened on the basis of an original credit in favor of another beneficiary. Under to back to back concept, the seller as the beneficiary of the first credit offers it as “Security” to the advising bank for the issuance of the second credit. The beneficiary of the back-to-back credit may be located inside or outside the original beneficiary’s country.
Anticipatory Credit:
The anticipatory credit makes provision for pre-shipment payments, to the beneficiary in anticipation of his effecting the shipment as per L/C conditions.
4.8.2 Types of L/C
A credit may be either – (i) Revocable,
Or (ii) Irrevocable.
The credit, therefore, should clearly indicate whether it is revocable or irrevocable. In he absence of such indication the credit shall be deemed to be irrevocable.
4.8.3 Parties of L/C:
There are at least 4 (four) parties involved in a L/C. they are –
Importer / Buyer.
Opening / Issuing Bank.
Advising / Notifying Bank.
Exporter / Seller / Beneficiary.
Besides these, some other parties or banks may be involved. They are –
Confirming Bank.
Negotiating Bank.
Paying / Reimbursing Bank.

4.8.4 L/C Opening Formalities
a) Application in company’s pad.
b) Original IRC (to be retained by the original Bank)
c) Photocopy of Trade License
d) Photocopy of T.I.N Certificate
e) Photocopy of Membership Certificate of Chamber of Commerce & Industry.
f) Photograph to the applicant.
g) Minimum 3 (three) copies of Proforma Invoice / Indent.

After completing the above formalities, then the following documents should be prepared –
(i) Letter of Credit Authorization (LCA) Form.
(ii) IMP form.
(iii) Insurance cover note with Premium Paid Money Receipt.
(iv) A set of charge document consisting of:
Demand Promissory Note (DP Note)
Letter of arrangement.
Letter of continuity.
Letter of guarantee.

4.8.5 Flow Chart Import Procedure

No

4.8.6 Flow Chart Export Procedure

4.8.7 Lodgement of L/C
Bank receives the documents which includes:
Bill of Lading, Truck Receipt / Railway Receipt / Airway Bill with shipping mark.
Bill of Exchange.
Packing List.
Inspection Certificate.
Certificate of origin of goods.
Consular Certificate.
4.8.8 Retirement of L/C:
When the import or export procedure becomes complete by payment or receives the value of the goods or services mentioned on the L/C, then the particular file becomes closed. This is called the retirement of the L/C.

Chapter Four
Merchant Banking Operation
Bringing an idea into life and benefiting the community, as a whole is what progress, development, and prosperity are all about. We here at AB Bank, believe that the spirit of the entrepreneur is what drives the wheel of progress and development. We know that the key to national development is the growth of your financial assets in the capital market. As your savings grow, so does the nation. We here atBringing an idea into life and benefiting the community, as a whole is what progress, development, and prosperity are all about. We here at AB Bank, believe that the spirit of the entrepreneur is what drives the wheel of progress and development. We know that the key to national development is the growth of your financial assets in the capital market. As your savings grow, so does the nation. We here at AB Bank, the nation’s first private bank with more than 20 years of know- how, have been working relentlessly at the forefront of wealth-creation through our commercial banking operations.
At the advent of the new millennium, AB Bank has expanded its service horizon toward investment banking with an important object: to better cater to our customers’ needs by offering a comprehensive range of financial solutions staring from debt, to equity through public offering. We have come out with a diverse range of portfolio investment products, suiting your investment needs, being offered for the first time in our country.
We here at AB Bank, understand as entrepreneurs the stability; trust, innovation, and creativity fellow entrepreneurs need for the consolidation and growth of your investments and endeavors to prosper. The highly skilled professionals in our Merchant Banking Wing with its state of the art integrated computerized system, are always ready to put their vision and knowledge at the service of your success. Why?
Because we here at AB Bank, measure success one satisfied customer at a time.
AB, the nation’s first private bank with more than 20 years of know- how, have been working relentlessly at the forefront of wealth-creation through our commercial banking operations.
At the advent of the new millennium, AB Bank has expanded its service horizon toward investment banking with an important object: to better cater to our customers’ needs by offering a comprehensive range of financial solutions staring from debt, to equity through public offering. We have come out with a diverse range of portfolio investment products, suiting your investment needs, being offered for the first time in our country.
We here at AB Bank, understand as entrepreneurs the stability; trust, innovation, and creativity fellow entrepreneurs need for the consolidation and growth of your investments and endeavors to prosper. The highly skilled professionals in our Merchant Banking Wing with its state of the art integrated computerized system, are always ready to put their vision and knowledge at the service of your success. Why?
Because we here at AB Bank, measure success one satisfied customer at a time.

Activities of the Merchant Banking Wing (MBW) of Arab Bangladesh Bank Limited
In order to broaden the base of our investment, Arab Bangladesh Bank Limited launched its merchant banking operations in the year 2003, being the first among commercial banks in the private sector to take the lead. Its main functions are : (a) Portfolio Manager (b) Underwriter and (c) Issue Manager.
The Merchant Baking Wing (MBW) of the Bank has completed its first year of operations. The activities of MBW have grown significantly and we have achieved notable progress. As of 31st December 2003, the MBW achieved a Net Profit of Tk. 31.25 million.
Summarized position of Merchant Banking Operations as of 31st December 2003
MBW has been offering the following services to its clients: Investors’ Discretionary Account (IDA) and Bank’s Discretionary Account (BDA). The IDAs are operated on the basis of clients’ instructions whereas the BDAs are operated by the Bank. Since our clientele base is expanding rapidly, we are planning to install additional trading terminals and plasma screens, at the lounge of the trading floor, with a view to attracting potential investors, we are also planning to market a variety of attractive products, including Profit or Loss Sharing (PLS) Account, to cater to the section of investors with religious outlook.

The summarized position of the Portfolio Accounts is given below:
(Tk.in million)
Account Type Number of Portfolio Accounts Deposit Investment Made
IDA 284 110 272
BDA 108 147 175
Total 392 257 447

The break-up of total income of the MBW for the year 2003 is furnished below:

It was a great pleasure for me to have exposure in National Bank Ltd.(NBL) at Elephant Road Branch. Because without practical exposure it could not be no longer possible for me to compare the theory with practice and it is well estublished that without practice theory is build.I have ovserved the functions of branch banking especially general banking in this practical orientation. During the 3(three) months internship programe in National Bank Ltd.(NBL) at Elephant Road Branch all all the desks have been observed more or less. This helps me a lot to acquire knowledge of practical banking and compare this knowledge with theory gathered from the BBA programe. Though all the departments and sections are covered at the time of internship it is not possiable to go to the depth of each activities of branch banking beause of various constrains. So, objectives of this internship programe have not fulfilled with complete satisfaction. However, highest effort has been given to achieve the objective of the internship programe. During the internship it is found that the branch provides all types of conventional banking services as well as some specialized financial activities to the economy. So National Bank Ltd.(NBL) is playing a vital role for the growth of th national economy.

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