CHAPTER III

General Banking
General Banking is the primary and basic part of the bank. It is very important part of the bank.
which is interrelated with department of the bank. Under the general banking, bank provides
different types of saving scheme. There are five individual departments in general banking,
which are:

Clearing
Remittance

Cash General Account Opening

Banking

Accounts

Account Opening Section

This section deals with opening of different types of accounts. It is deals with issuing of
checkbooks and different deposits books to the different accounts openers. A customer can open
different types of accounts through this department such as:
 Current Account
 Saving Account
 Fixed Deposit Account
 Short Term Deposit(STD)Account
 Monthly Saving Scheme
 Monthly Benefit Saving Scheme
 Double Benefit Scheme
Current Account
 A current account is a running account with amounts being paid in to and drawn out of
the account continuously.
 Funds in the current deposit accounts shall be payable on demand.
 Current accounts are generally opened by business man, public institutions, corporate
bodies and other organizations whose banking transactions are numerous and frequent.
 Interest on current deposit balances shall not be allowed.
Rules for Account Opening
 The account can only be opened with the introduction of any acceptable client/ current
account holder of the Bank. In order to open Current Account, a minimum amount of Tk.
500/= is to be deposited and   the minimum balance with minimum amount of Govt. tax
is to be maintained in the account. The Bank reserves the authority to return cheque, if
otherwise.
 Withdrawal may be made through the cheques supplied by the Bank. In that case all
articles of Negotiable Instrument Act are applied.
 Incidental charge @ Tk.100 half yearly basis is deducted from the account where
minimum balance is not maintained. Closing charge @Tk.100.00 will be realised while
closing the account.
 For the first chequebook, the customer has to apply   in a specified form (F-6) and then
for new chequebook the customer shall have to apply through the requisition slip
supplied with the previous chequebook.  
 The customer has to count the pages of the chequebook at the time of receiving the same.
The book   should be maintained safely so that no cheque may be misused or stolen or
destroyed. The Bank will not be responsible for any forgery if occurred by the stolen
cheque(s).  
 The account holder shall have to use the specimen signature put in the Bank while
withdraw money and in case of other correspondence with the Bank. In order to change
the specimen signature put earlier the operator shall have to apply in writing before well
in time.
 The bank usually allots separate A/c. Nos. to different A/c. holders. The depositors have
to mention name and No. of the account while fill-up the deposit slips for depositing the
 cash/cheque and obtain receipt duly signed by the authorised bank officials. The cheque
to be deposited should be marked ‘Crossed’ i.e. A/c. Payee/ & co. etc. in the proper place
of the cheque. If the deposited cheque(s) etc. is/are returned unpaid to the bank,
charge/commission will be realised as per norms.
 The Bank records the instruction of ‘Stop Payment` with care. But the Bank will not be
held responsible if any fraudulent withdrawal is/are made through stopped cheque(s). 
 The Bank supplies statement of account every month. 
 The bank has right to deduct any account to realise necessary expenditure/postal charge.
Moreover, any tax imposed by the Govt. will be deducted from the account.
 The Bank preserves the right to close the account without showing any cause. 
 The changed address (if applicable) should be informed to the Branch immediately. The
bank makes correspondence with the customer through postal services. The Bank will not
be held responsible if any letter (cheque/Bill) is not delivered in time or not delivered at
all.
 In case of joint account, if any of the A/c. holders expired the operation in the account
will be stopped just after getting report and balance in that account will be paid as per
norms to the heirs of the deceased and the alive A/c. holder(s); if there is any outstanding
investment liabilities, the alive account holder/heirs of the deceased is/are bound to adjust
the same.
 The Bank consciously sums up the credit/debit of the account. If any amount is
credited /debited through mistake, Bank can re-write the balance.  
 The unused cheque(s)   must be returned   to the Bank at the time of closing of the
account. 
 The account holder(s) can select nominee's) to receive the balance of the account in case
of death of the account holder. 
 In case of death of the account holder, the nominee's) has to submit the following
papers/documents in support of his/their nomination to receive the balance of the
concerned account:
 Death Certificate regarding death of the account holder.
  Certificate from 2 (two) valued clients of the Bank or 2 (two) officers of the Bank or the
Chairman/Ward Commissioner of the Union Parishad/Municipality in support of the
identification of the nominee's).
 Attested Passport size photographs of the nominee's.
 Indemnity Bond (C.F.-12) duly executed by the nominee's) under sureties of 2 (two)
valued clients each good for the amount and acceptable to the Bank.
 The Bank reserves the authority to change, develop or reform/modify the rules of the
account any time and the client is bound to abide by the same.
Requirements for the different types of account holders are discussed below:

Proprietorship Firm
There is a different account opening from for proprietor ship firm provided by the FSBL. For this
account, a customer must need to submit the following papers with the form:
Enclose Documents for Proprietorship Account
 Introduction of the A/C.
 Two photographs of the signatories duly attested by the introducer.
 Copy of valid trade license.
 Seal of the concern.
Partnership Firm
There is a account opening for, for partnership firm. Introduction for running an account is given
in this form
Enclose Documents for Partnership Account
 Introduction of the A/c.
 Two photographs of the signatories duly attested by the introducer.
 Partnership letter duly signed by all partners.
 Partnership deed duly certified by notary public.
 Registration (if any).
 Seal of the concern.
 Updates trade license.
Limited Company
An account opening form usr for limited company. There are two kinds of limited company,
public limited and private limited company. The bank always takes precautions for opening this
type of accounts. Several documents submitted by the clients, which should be checked carefully
by the bank to be legally in a safe position.
Enclose Documents for Limited Co. Account:
Introduction of the A/c
 Two photographs of the signatories duly attested by the introducer.
 Signature and seal of the client.
 Trade License.
 Certified copy of memorandum and articles of association.
 Certificate of incorporation.
 Board Resolution for opening A/C dully certified by the chairman/managing director.
 List of directors along with designation & specimen signature.
 Latest certified copy of form – XII (to be certified by registrar of joint stock company).
 Certificate from the registrar of joint stock co. is entitled to commence business (in case
of public Ltd. Co).
 Certificate from Board of Investment (in case of joint venture or foreign co.).
 Work permit order from Ministry of Industry.(In case of Foreign Nation).
 Joint venture agreement (in case of joint venture)
Club Society
The following documents duly completed shall be obtained from the customer at the time of
current deposit account of Association/Club/Charity/Trust/Society etc.
Enclose Documents for Societies/Club Account.
 Introduction of the A/C
 Two photographs of the signatories duly attested by the introducer.
 Board Resolution for Opening A/C duly certified by president/secretary.
 List of existing managing committee.
 Registration (if any)
 Seal
 By laws.
Saving Account:

 Savings account is mainly meant for non trading customers who have some potential
savings and who do not have numerous transactions entering there account.
 Interest on savings bank accounts shall be allowed at the rates as advised by Bangladesh
Bank from time to time.
 Generally salaried class of the lower and middle income group, small traders and farmers
mainly open such accounts.
 Savings bank accounts in the name of trading concern (be it proprietorship, firm or joint
stock co.) can be opened for placing their special funds such as provident fund, etc. but
they can not open savings bank accounts for conducting trade.
 No savings bank account shall be allowed to be overdrawn.
 Individual savings purposes open this type of account. Savings bank account also
requires proper introduction. Deposits are made through deposit slips and withdrawals are
made through printed cheques supplied while opening the account. No new account can
be opened with cheque only but there must be some initial cash deposits. As per existing
rules, a depositor can withdraw from his SB account not more than twice in a week. This
type of account earns profit on weighted rate. Profit on SB account is calculated on
minimum monthly balance and the profit so earn is credited to the account half yearly in
June and December each year. If cash withdrawals are made violating the aforesaid
prescribed limit, no profit is to be paid on such account for that month in which the
default takes place. These SB account rules are subject to changes from time to live.
Statement of account is to be dispatched to the account holder on quarterly basis or the
customer may request for.
For opening of this type of accounts the following requirements are necessary:
 Photograph attested by the introducer.
 An introducer of first security bank. Introducer can be SB or CD account holder.
 For joint accounts, signatures of all the account holders are necessary.
The objectives and principles of the savings policy are:
 To encourage people to save for self and for the country as a whole.
 To develop a sustained savings habit among the people.
 To mobilize deposits through the operation of the following accounts :
Fixed Deposit:

 Fixed Deposit accounts shall be opened for a fixed period, varying from 3 months to 3
years and above and are payable at a fixed date of maturity.
 Interest on fixed deposit accounts shall be paid at rates fixed by Bangladesh Bank from
time to time, depending on their period of maturity.
 Each time a fixed deposit account is opened, it shall be considered as a separate contract
and various deposits in the name of the same depositor or in the name of the members of
the same family shall not treated as one deposit.
 There are deposits, which are made with the bank for a fixed period specified in advance.
The bank do not maintain the cash reserves against these deposits and therefore. The
bank offers higher rate of interest on such deposits. These deposits generally constitute
50% or more of the total deposits. Usually customers are allowed to open this account for
a certain period and the rate of interest varies in accordance with the terms of the deposit.
Short Term Deposit
 The Deposits held in this account shall be payable on short notice.
 The deposits may be accepted for the period and rates of interests fixed by Bangladesh
Bank form time to time.
 Interest shall be paid only at expiry of the term for each day held.
Chart of interest on deposit
Sl. No. Particulars Rate of Interest
01 Savings Deposit 7.50%
02 Short Term Deposit 5.25%
03 Fixed Deposit
a) 1(one) Month 8.50%
b) 3(three) Month 8.75%
c)6(six) Month 9.25%
d)1(one) Year 9.75%
e)2(two) Year 10.25%
f)3(three) Year 10.50%

Monthly Savings Scheme

 It is a project of FSBL, which is a scheme like DPS. The saving term is: 5, 8, 10 years
 Monthly installment rate Tk: 500/-, 1000/- and 5000/-
Monthly installment deposit
 Installment must be made within 10 of each month. In case of holidays the deposit
amount is to be on the following day.
 Advance deposit of installment is acceptable.
 Delayed Payment Charge : 5% of installment; Min TK 10/-

Rules
 A form has to be filled at the time of opening the account. No introduction is attested
photographs are advised.
 The depositor can select any of the installment amounts which cannot be subsequently
changed.
 A single person can open than one account for saving under several interest rates.
 The government tax will be deducted from the interest accumulated in this scheme.
 If the investor wants to withdraw the investment before 5 years, he/she will get the
benefit at rate of Savings, but before 6 six months the investor will lose all benefits
 The investor could avail 80% credit against his/her investment.
 Standing instruction is allowed. Standing instruction charge - TK. 10
Chart of monthly installment and amount after term

Duration Monthly Monthly Monthly Monthly

Installment Installment Installment Installment
250/- 500/- 1000/- 5000/-
5 years 19,307/- 38,614/- 77,229/- 3,86,147/-
8 years 36,166/- 72,331/- 1,44,664/- 7,23,319/-
10 years 50,402/-s 1,00,804/- 2,01,608/- 10,08,042/-

Monthly Benefit Scheme

Minimum Deposit: TK. 25000/-.
 Term : Minimum 5 years
 Account may be opened any date of the month.
  Higher monthly income for higher deposits
Rules
 An account is to be opened by filling up a form.
 The bank will provide to the customer a deposit receipt after opening the account. This
receipt is non-transferable.
 Monthly benefit will be credited in the Party's Savings Account in the following month
within.
 If the investor wants to withdraw the investment before 5 years, he/she will get the
benefit at rate of Savings, but before 6 six months the investor will lose all benefits.
 The investor has to open one Savings Account in the branch.
 The investor could avail 80% credit against his/her investment.
 The client will pay the Government taxes, if necessary.
Investment Amount Benefit
Deposit Account Income
Tk25,000/- 250/-
Tk50,000/- 500/-
Tk1,00,000/- 1,000/-
Tk2,00,000/- 2,000/-
TK5,00,000/- 5,000/-
Tk10,00,000/- 10,000/-

Double Benefit Deposit Scheme

Saving helps to build up capital and is the prime source of business investment in a country.
Investment takes the country towards industrialization, which eventually creates wealth. That is
why savings is treated as the very foundation of development. To save, FSBL offers Double
Benefit Deposit Scheme.

Terms & Condition of the scheme

 Minimum Deposit Tk: 10000/-
 The period of deposit is for seven years.
 If the investor wants to withdraw the investment before 7 years, he/she will get the
benefit at rate of Savings, but before 1(one) years the investor will lose all benefits.
 The investor could avail 80% credit against his/her investment.
  In case of death of the depositor, before the term, the deposit (at the rate of saving) will
be given to the nominee. In the absence of succession certificate.
 In case of issuing a duplicate deposit receipt the rules of issuing duplicate receipt of Term
Deposit will be applicable.
 The client will pay the Government taxes, if necessary.
Some examples are given in the table below. Any amount can be deposited in multiples of Tk.
10000/-
Deposit Term Payable at maturity Payable amount
10,000/- 7years Double 20,000/-
25,000/- 7years Double 50,000/-
50,000/- 7years Double 1,00,000/-
1,00,000/- 7years Double 2,00,000/-
2,00,000/- 7years Double 4,00,000/-
5,00,000/- 7years Double 10,00,000/-

Duplicate Cheques book

A new Cheques book can be issued to a customer in lieu of lost. But the account holder should
have to approach personally to the bank with application or letter of indemnity in the prescribed
Performa agreeing to indemnify the bank for the lost cheques book. Fresh cheques book in lieu
of the lost one should be issued after verifying the signature of the account holder from the
specimen signature card only prior approval of the manager / sub-Manager of the branch.
Cheque series number of the new cheques book must be record in the ledger card/ signature card
as usual. Entries number of the lost cheques book must be recorded in the “stop payment”
register and caution should be exercised to guard against any fraudulent payment.

Closing of Accounts
A customer may close out his A/C at any time by submitting an application to the branch. The
customer should be asked to draw the final cheques for the amount standing to the credit of his
A/C less the amount of closing and/or other incidental charges and surrender the unused cheques.
The A/C should be debited for the account closing charges etc. and an authorized officer of the
branch should destroy unused cheques leaves.
In case of joint A/C the application for closing the a/c should be singed by the entire joint a/c
holder, even if the a/c is operated by either of them. The last cheques fir withdrawal of the
available balance in the a/c should also be singed by all the jointly holders.
Local Remittance Department
Cash remitting from one place to another is risky. So, Banks remit funds on behalf of the
customer(s) to save them from any awkward happening through network of their branches. There
are three modes of remitting funds. These are –
 Pay Order (PO)
 Demand Draft (DD)
 Telegraphic Transfer (TT)
Pay Order (PO)
Pay order is an instrument, used to remit fund within a clearing zone. Unlike cheque, there is no
possibility of dishonoring PO. The PO can only be encashed through the branch that has issued
the instrument.

PO Working Procedure, shows in a Flow Chart:

r has an account with FSBL and fills up the relevant form with a credit voucher
Purchase the PO in favor of a person or company

Deposit the PO in his account with FSBL or another Bank by the beneficiary
If any Account with FSBL
Collecting Bank sends an IBDA

If Deposit to another bank

Payee’s account credited with collecting Banker
The collecting Banker presents the PO to paying Banker through clearing house

Payee’s account credited with

collecting Banker

For issuing a PO, following formalities are to be maintained -

 Duly filled up the application form by the customer.
 Deposit money either in cash or by cheque with necessary charges.
 Prepare the instrument and make necessary entries in the Bills Payable Register where
payee’s name, date, PO no. etc are noted.
 Deliver the instrument to the customer after scrutinized and approved by authority by
taking signature of the customer on the counterpart.
Accounting Entry for Pay Order
Date Particulars Dr Cr
Drawer’s/Issuer’s A/C Dr Xxxx
Bills Payable(PO) A/C Cr xxxx
Income A/C Commission Cr xxxx
Income A/C Postage Cr xxxx

Payment order is a current liability on the part of bank, which is required to be discharged by the
beneficiaries against payment in cash or through an account.

Modes of Purchasing Pay Order

 By cash
  By account
 By transfer of money.
Payment of Pay Order
As the PO issued by the bank is crossed one it is not paid over the counter. On the contrary, this
amount is transferred to the payees’ account. To transfer the amount the payee must duly stamp
the PO. The a/c treatments will be-
Date Particulars Dr Cr
Bills Payable A/C xxxx
Dr xxxx
HO A/C ‘Y’ Branch
Cr

Note: Before payment is made, it is duty for issuing bank to examine whether endorsement was
given by the collecting bank or not. If not, dishonor the instrument and marking the instrument
‘Endorsement Requirement’.

The Payee deposits it to Collecting Bank sends the P.O. to the

his Collecting Banker issuing Bank through clearing house

The Payee deposits it to Collecting Bank sends the P.O. to the

his Collecting Banker issuing Bank through clearing house

Cancellation of PO
The following procedure is followed to refund the pay order by cancellation:
 Submit written request to refund the pay order attaching therewith the original PO.
 Verify purchaser’s signature with the original application form on record.
 Manager/ authorized person’s prior permission is required before refunding the amount
of pay order.
 Pay order should be affixed with a stamp ‘cancelled’ under proper authentication and the
authorized officer’s signature on the pay order.
 No charge is created for cancellation. Refund only the pay order amount.
 The original entries are to be reversed with proper narration.
 Record the cancelled pay order in the Pay Order Issue Register.
Loss of Pay Order
 If the instrument is lost, the holder is asked to fulfill the following requirements-
 Holder should inform the bank immediately.
 Record a GD (General Diary) in the nearest Police Station.
 Furnish an Indemnity Bond.
 On fulfilling the above requirements, First Security Bank s Ltd. is then issued a duplicate
pay order and marked ‘In lieu of’. Banker will also mark ‘stop payment’ on the Bills
Payable Register.
Collection of Pay Order
If the payee is a customer of Mohakhali Branch, he will deposit it for collection. Then the branch
gives necessary endorsement as a collecting bank. Then the instrument places the issuing bank
through clearing house.
PO Charge
FROM TO CMMISSION

TK. 1.00 TK. 1000.00 TK. 15.00

TK. 1001.00 TK. 1,00,000 TK. 25.00
TK. 1,00,001 TK. 5,00,000 TK. 50
TK. 5,00,000 ABOVE TK. 100

VAT @ 15% of the commission will be charged.

Demand Draft (DD)
DD is called ‘Banker’s Draft’. It is an instrument, issued by a particular branch, drawn on
another branch of the same bank, instructing to pay a certain sum of money. It is very popular
instrument for remitting fund from one corner of a country to another. DD is issued in favor of a
customer who maintains an a/c with FSBL Mohakhali Branch. It can be issued against Cash or
Cheque. If DD amount is more than Tk. 50,000/=, a test code is given on IBCA. The a/c
treatments will be-

When DD Is Issued
Date Particulars Dr Cr
Cash/Customer A/C Dr Xxxx
H/O A/C ‘X’ Branch Cr xxx
Income A/C Commission Cr xxx
 After giving these entries an Inter Bank Credit Advice (IBCA) is prepared which contains the
controlling number, depicted that the branch is credited to whom it is issued. An IBCA implies
the following entries
Date Particulars Dr Cr
H/O A/C Issuing Branch xxxx
Dr Xxxx
Drawn on Branch
Cr
DD Working Procedure: Shows in a Flow Chart

Applicant has an A/C with First

He fills
Security DD isLtd.
up theBank handed
relevant formover
withthea customer where paying
credit voucher for theBank
Bankis mentioned and payment will be made from another Bank

If DD comes to the Bank on which it

AnisIBCA
drawn,
along
thewith
Bankphotocopy
honors it of DD is sent to the paying Bank

Payment Process of DD
After receiving the instrument, the IBCA lodgment is done by the branch. Necessary entries are
given in DD Inward Register. Controlling number of the IBCA should match with the serial
number of this register. The following accounting entries are made in following cases -
When IBCA Comes

Date Particulars Dr Cr
H/OA/C Issuing Brach Dr xxxx
DD Payable A/C Cr Xxx

When Instrument Comes

Date Particulars Dr Cr
DD Payable A/c Dr xxxx
Customer A/C Cr Xxx

If Advice Does Not Come but Instrument Comes

Date Particulars Dr Cr
 Suspense A/c Dr xxxx
Party A/C Cr Xxx

When Advice Comes

Date Particulars Dr Cr
H/OA/c Issuing Branch Dr xxxx
Suspense A/c Cr Xxx
The banker even on receiving instructions from the remitter cannot stop the payment of the
instrument. Stop payment can be done in the following cases –
Loss of Draft before Endorsement: In this case, “Draft reported to be lost, payee’s endorsement
requires verification” is marked
Loss of Draft after Endorsement: In this case, the branch first satisfies itself about the claimant
and the endorsement in his favor.
Cancellation of DD
To cancel an issued DD, the client has to submit an application. Issuing branch then sends an
Inter Branch Debit Advice (I.B.D.A.) to the drawn branch against previously issued Inter Branch
Credit Advice (IBCA). After that the following entries are given-

Date Particulars Dr Cr
H/O A/C drawn on branch Dr xxxx
Party A/C Cr Xxx

Issuing Duplicate DD
If the customer wants a duplicate DD, he then is asked to do the following formalities-
 Throwing an application immediately by the original DD holder.
 Making a General Diary (GD) in the nearest Police Station.
 Furnishing an Indemnity Bond.
 Put a ‘CAUTION’ mark in the register.
 Inform to the Head Office by the issuing branch.
 Inform all the branches by the HO for stop payment.
 Issue a new DD (Put the same DD no. and mark DUPLICATE).
DD Charge
AMOUNT OF DEMAND ORDER COMMISSION
PER 1,000.00 TK. 1.5.00
PER 10,000.00 TK. 15.00
PRE 1,00,000.00 TK. 150.00
MINIMUMCHARGE TK. 25.00

VAT @ 15% of the commission will be charged.

Telegraphic Transfer (T.T.)

Sometimes the remitter of the funds requires fund immediately. In that case, the banker is
requested to remit the funds telegraphically. Different modes are Telegram, Telephone, Telex,
Fax. Telegraphic Transfer is the most rapid and convenient but expensive method. The drawer
and the payee should have accounts with First Security Bank Ltd. TT is issued against cash,
cheque, and letter of instruction.

Flow Chart Shows How TT Works (Outward)

 Applicant fills up the relevant form with a credit voucher
Text of(Income
telex is written
A/C) fororthe
theBank
relevant information along with
Applicant has an account with FSBL Test code is sent to the payee Bank through fax or telephone.

Another 2 copies of the text is sent through courier to the Payee’s Bank

One copy
The reconciliation department reconciles two copies andfrom drawer’s
detects the Bank
fraudand
or another
forgery from
if anyPayee’s Bank are sent to the reconciliation department of HO

Payee’s account credited Before that the Payee’s Bank decodes the test and if test is agreed

Procedure for Issuing TT

Following procedure is followed for issuing a TT:
 Deposit money by the customer along with application form.
 In receipt of money a cost memo is given to the customer containing TT serial number
which informs the awaiting party of the paying branch by the customer.
 Tested telex message is prepared where TT serial number, notifying party’s name is
mentioned.
 The telex department confirms transmission of the message.

Necessary entry is given to the ‘TT Outgoing Register’. Entries are as follows-
Date Particulars Dr Cr
Cash /Respective A/C (issuer) Dr xxxx
H/O A/C Paying branch Cr Xxxx
Income A/C (Commission) Cr Xxx

Procedure for Incoming TT

After receiving the telex, it is authenticated by tested. TT serial number is verified with the ‘TT
Incoming–Concern Branch’ Register. Voucher is released in this regard giving the following
accounting entries-
Date Particulars Dr Cr
H/O A/C Paying branch Dr xxxx
Customer A/C Cr Xxx

TT Charge
AMOUNT OF DEMAND ORDER COMMISSION
PER 1,000.00 TK. 1.5.00
PER 10,000.00 TK. 15.00
PRE 1,00,000.00 TK. 150.00
MINIMUMCHARGE TK. 25.00

VAT @ 15% of the commission will be charged.

Telegraphic charge Tk. 30/= (Fixed)

Collection and Clearing Section

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.
After that, the following entries are given and a debit voucher is prepared-
Date Particulars Dr Cr
Balance with Bangladesh Bank Dr Xxxx
Customer A/C Cr Xxx

Flow Chart Showing Collection Procedure

 ‘Received’ seal is stamped on the counterfoil of the pay-in-slip.

Special Crossing in favor of Cheques-receiving branch is affixed on the Cheques.

NIKASH Posting is made and gives code no.

Segregate Cheques from Pay-in-slip.

Give respective endorsement.

Gets total from NIKASH2 and also get total from Pay-in-slip.

If both are same, sort the cheques according to banks.

Get all the schedules from NIKASH2

Affix schedules to the corresponding Bank’s cheques.

Receiving Cheques for Collection

In First Security Bank Ltd., cheques of its customers are received for collection from other
banks. In case of receiving cheques, following points should be checked very carefully-
 The check should not carry a date older than the receiving date for more than 6 months.
In that case it will be a ‘Stale Check’. Again the check should not be a ‘Post dated’ one.
 The amount both in words and figures of the pay-in-slip should be the same and also it
should be in conformity with the check’s amount both in figures and words.
 The name mentioned both in the check and the pay-in-slip should be the same.
 The check must be crossed.
 Collecting banker must check whether endorsement is done properly or not.

ENDORSEMENT IN CASE OF
 Payee’s A/C will be credited on Bills for
realization Collection

Types of Bills for Collection

 Outward Bills for Collection
 Inward Bills for Collection.
Outward Bills for Collection (OBC)
If the bill is beyond the clearing range then it is collected by OBC mechanism. Customer
deposits cheques, drafts etc. for collection, attaching with their deposit slip. Instruments outside
the clearing range are collected through OBC mechanism. A customer of First Security Bank
Bangladesh Ltd. Mohakhali Branch is depositing a check say of Janata Bank, Dagub viaha
branch, Fani, Now as a collecting bank, Mohakhali Branch will perform the following tasks-

Procedure of OBC
 Depositing the Cheques along with deposit-slip.
 Crossing of cheques are done indicating Mohakhali Br. as a collecting bank.
 Endorsement “Payee’s A/C will be credited on realization” is given.
 Entries are given in the Outward Clearing Register.
 Collecting bank can collect it either by its branch or by the drawer’s bank. They will
forward the bill to that particular branch. OBC number will give on the forwarding letter.
Now following procedures will take place in case of the following two cases.

Bills Collected Through Branch

Collecting branch will receive an I.B.C.A. from that particular branch. Accounting treatment
from collecting branch’s point of view will be-
Date Particulars Dr Cr
HO A/C Concerned Branch Dr xxxx
Customer A/C Cr Xxx

Income A/C on Comm./Pos. Cr Xxx

The Process Of Collection Is Described Below:

If the bill is drawn on First Security Bank Ltd. Mohakhali Branch –
  Bills are sent to that branch through mail or courier;
 Branch collects the bills and sends an IBCA to that Branch;
 Depositor’s account is credited.
If the bill is drawn on another Bank and there is a branch of FSBL –
 Branch sends the bill direct to the branch of FSBL by OBC schedule.
 Request them to send the proceeds by IBCA and collect the bill.
 That branch of FSBL can collect the through clearing house arrangement exists there.
If the bill is drawn on another bank but there is no branch of FSBL –
 Bill is directly sent to that Bank
 Request them to send a draft in favor of this bank by an OBC schedule.
 That bank sends a DD mentioning the Paying Bank
 Then the bill is collected through clearing house process.

Balance Sheet Effect

 OBC creates asset and liabilities simultaneously for bank. When send for collection, it is
bank’s liability and as well as customer’s liability i.e., banks asset.
 Liability head Bills for collection being bills receivable as per contra
 Asset head Bills receivable being bills for collection as per contra.
Date Particulars Dr Cr
Customers Liability A/C Dr Xxxx
Bankers Liability A/C Cr Xxx
After realization (Even if dishonored)

Date Particulars Dr Cr
Banker’s Liability A/C Dr Xxxx
Customer Liability A/C Cr Xxx

After realization the contra is settled. This item is a stock variable of balance sheet at a particular
date.
Balancing
Balancing is done on the banker’s liability account. The year end balance is shown on balance
sheet.
Inward Bills for Collection (IBC)

When the banks collect bills as an agent of the collecting branch, the system 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. Next steps are as follows-
 Entry in the IBC register
 An IBC number is given on the bill.
 Endorsement given- “Our branch endorsement confirmed”
 The instrument is sent for clearing.

Accounting Entries
Date Particulars Dr Cr
Clearing Dr Xxxx
Miscellaneous Creditor A/C OBC Cr Xxx
If Honored, the accounting treatment will be -
Date Particulars Dr Cr
Miscellaneous Creditor A/C OBC Xxxx
Dr Xxx

HO Collecting branch A/C

Cr
An IBCA is dispatched in this regard -
Date Particulars Dr Cr
HO A/C Agent Branch Dr Xxxx
HO A/C Collection Branch Cr Xxx
If Dishonored, the instrument is returned to the collecting branch along with a return memo.
Clearing
According to the Article 37(2) of Bangladesh Bank Order, 1972, the banks which are a member
of the clearing house are called as Scheduled Banks. The scheduled banks clear the cheques
drawn upon one another through the clearing house. This is an arrangement by the central bank
where everyday the representative of the member banks sits to clear the cheques. For clearing
there is a department in every Bank. This department receives cheques, drafts and like
 instruments from its customers for the purpose of collection with a deposit slip over the counter
crediting their accounts. Clearing of cheque is done through the clearing house in Bangladesh
Bank. Everyday the first hour starts at 10:00 a.m. and returns house at 5:00 p.m.
Types of Cheques For Clearing
 Inward Clearing Cheques
 Outward Clearing Cheques

Inward Clearing Bills

It refers the instument drawn on First Security Bank Ltd. Mohakhali Branch Limited, received
from other banks in the clearing house by their representative(s). Settlement process is shown on
the below-

Settlement Process of Inward Clearing Bills

ollected from other banks through clearing house by Main Branch Drawn on Branch sends the bills to FSBL Mohakhali Branch with an IBDA
Main
BB debits the A/C of Main Br. Maintained with BB.
FSB L Mohakhali Br.

FSBL Mohakhali Branch debits customer’s respective A/C

Accounting Entry Passed By This Branch

Date Particulars Dr Cr
Respective A/C Xxxx
Dr Xxx

Head Office A/C (Main Br)

Cr

If cheques are returned, First Security Bank Ltd. Mohakhali Branch passes an IBDA to Main
Branch. Then the necessary accounting entries will be-
Date Particulars Dr Cr
HO A/C Main Br Dr Xxxx
Respective A/C Cr Xxx
 Outward Clearing Bills
It refers the instruments drawn on the other banks received by I First Security Bank Ltd.
Mohakhali Branch. They are of three kinds as follows -
Cheques drawn on another branch of FSBL. The settlement process –

Cheques are directly sent toOBC

the received along
respective the instrument by the respective branch
branch Entry passed in OBC register of that branch

When IBCA comes, customer’s account is credited .

IBCA is sent from that branch to this branch.

Cheques drawn on another Bank which is situated within clearing house area.

Mohakhalui Branch collects cheques

IBDA These
along with bills billstoare
are sent sent to clearing
Mohakhali Branch . house from Mohakhali Br. through Main Branch

Depositor’s account is credited with FSBL Mohakhali Branch.

Cash Section
Cash is the lifeblood of all financial activities. Cash section is a very sensitive point of the
branch. This section deals with all types of negotiable instruments and it includes vault, used as
the store of cash, instruments. The vault is insured up to Tk. 20 lac. Insured amount yet to be
enhanced to Tk. 40 lac. Operation of this section begins when the banking hour starts. Cash
officer begins his/her transaction with taking money from the vault, known as the opening cash
balance. Vault is kept in a more secured place. The amount of opening cash balance is entered
into a register. After whole days’ transaction, the surplus money remains in the cash counter is
put back in the vault and known as the closing balance. If the cash stock goes beyond this limit,
the excess cash is then transferred to First Security Bank Ltd. main branch. The main functions
of this section are -
 Cash Receipt
 Cash Payment
Cash Receipt
Cash Receipt Procedure
Cash receipt procedure is given below –
 The depositor first fills up the Deposit-in-Slip.
 Depositor deposits the money.
 Officer receives the money, counts and then enters in the Cash Receipt Register, and
finally signs with seal and dates the deposit-in-slip.
 Slip is then passed to another officer, who enters the receipt details like serial no, amount,
etc. in his register, signs the slip and keeps the banks’ part of the slip. Other part is given
to the depositor.
 At the end of the day, entries are cross checked with the register kept at the cash counter
to see whether the transactions are correct or not.
Accounting Treatment
When cash is received, the following entries are made-
Date Particulars Dr Cr
Cash A/C Dr Xxxx
Party A/C Cr Xxx

Cash Payment
Some important check points for making the payment are as follows -
Endorsement
Endorsement is done by putting signature of the drawer on the back of the negotiable instrument
for the purpose of negotiation. By ‘blank endorsement’, an order instrument is made as ‘bearer’.
First Security Ban Ltd. limited endorses the instrument in the following ways-

ENDORSEMENT IN CASE OF
Payee’s A/C credited Pay to Mr. X
Received payment Pay to FSBL., Mr. X
Payee’s A/C credited
Payee’s A/C credited Pay to Mr. X , FSBL
Crossing
Generally two types of crossing are practiced, namely- General Crossing and Special Crossing.
Basically it gives a direction to the paying bank not to pay the check amount over the counter.
General crossing includes ‘A/C payee’ crossing only. Drawing two parallel and transverse lines
do it. On the other hand, special crossing is like general crossing but in addition bank name is
also mentioned. This gives the direction to the same to pay the check only to the banker, whose
name appears in the crossing or to his agent.
Cash Payment Procedure
Cash payment procedure is given below –
 Customer first deposits the check(s) to the cash section. Authorized individual checks
whether it is materially altered, proper endorsed, crossed or not. Being satisfied the total
requirements; he passes it to the computer for checking the balance. Operator verifies the
check leaf security no. If matched, then operator signs. Otherwise noticed to the
individual for stop payment;
 Authorized officer is then verified the signature with the Specimen Signature Card (SSC);
 Send the instrument to the computer section once again for posting;
 Cash officer is then asked the bearer to sign on the back of the instrument. At the same he
just enters the payment details in his register and pays the money to the bearer;
 At the end of the day, this information must be tallied with computer postings to ensure
the correctness of payment.
Accounting treatment –
When cash is paid, the following entries are made -
Date Particulars Dr Cr
Party A/C Dr Xxxx
Cash A/C Cr Xxx
Dishonor a Cheque
If the Cheques is dishonored, First Security Bank Ltd. sends a memorandum (cheque return
memo) to the customer stating the reason in the following way –
 Refer to drawer.
 Not arranged for.
 Effects not cleared. May be presented again.
 Exceeds arrangements.
  Full cover not received.
 Payment stopped by drawer.
 ---- ---- ---- ---- Payee’s endorsement irregular/ illegible/ required.
 ---- ---- ---- ---- Payee’s endorsement irregular/ require Bank’s confirmation.
 Drawer’s signature differs/ required.
 Alteration in date/ figures/ words requires drawer’s full signature.
 Cheque is post dated/ out of date/ mutilated.
 Amount in words and figures differs.
 Crossed cheque must be presented through a bank.
 Clearing stamp required/ requires cancellation.
 Addition to Bank’s discharge should be authenticated.
 Cheque crossed “Account Payee Only”
 Collecting Bank’s discharge irregular/ required.
 If the check is dishonored due to insufficiency of funds, First Security Bank Ltd. charges
Tk. 10/= as penalty.
Accounts Section
Accounts department maintains all records of transactions and all types of statement. At the end
of transaction hour all concerned section sends vouchers of transactions to this department.
Accounts department compares all figures/ amounts, contents of transactions with supplementary
statement prepared by computer. If any discrepancy arises regarding any transaction then this
department reports to the concerned department. Following are the activities of accounts
department:
 To record all transaction in the cash book.
 To prepare daily, weekly, monthly, half-yearly and yearly fund position.
 To prepare all kinds of statements related to Bangladesh Bank, Head office and National
Board of Revenue (NBR).
 To prepare monthly salary statement, provident fund statement and administrative
expenditure statement.
 To make charges for different types of duty.
Different Types of Statements Prepared By The Branch
Bangladesh Bank Related Statements:
  Weekly fund position (CRR-4% and SLR-16%)
 Monthly sector corporation
 Monthly Schedule Bank Statements-1 (SBS-1)
 Quarterly Schedule Bank Statements-2 (SBS-2)
 Quarterly statement of exchange of torn/ dirty notes
 Half-yearly Schedule Bank Statements-3 (SBS-3)
 Half-yearly deposit insurance pension scheme

Head Office Related Statements

 Daily reconciliation statement
 Weekly & monthly statement of affairs with income, expenditure & subsidiaries
 Monthly comparative statement
 Half-yearly statement of privilege creditors
 Half-yearly detailed statement of sundry debtors
 Half-yearly & yearly statement of sundry creditors
 Half-yearly statement of other assets
 Half-yearly statement of suspense A/C
 Six column basis data sheet (deposit, loans, gross income & exp., net profit/ loss)

National Board Of Revenue (NBR) Related Statements

 Monthly challan regarding VAT
 Monthly progress report
 Quarterly challan regarding Income Tax of staff
 Half-yearly challan regarding 10% source tax on interest of deposits
 Half-yearly and yearly statement of fixed assets
 Yearly challan of excise duty.