CHAPTER-1

INTRODUCTION

1.1 Introduction 1.2 Background of the Study 1.3 Objective of the Study 1.4 Methodology of the Report 1.5 Limitation

1.1 INTRODUCTION Banks are become more important to the economy as a whole and to local communities. Certainly banks can be identified by the functions (service or role) they perform in the economy. Bank is a financial intermediary accepting deposits and granting loans; offers the widest menu of services of any financial institution. Financial Institution perform the essential economic function of channeling funds from people who have saved surplus funds by spending less than their income to people who have a shortage of funds because they wish to spend more than their income. The channeling of fund from savers to spenders is so important to the economy because people who save are frequently not the same people who have profitable investment opportunities available to them. The absence of financial market individual lender and investor/ borrower can not get together. Without a financial market it is hard transfer funds from savers to investors/borrower. Financial intermediaries i.e. Depository Institutions like Commercial Banks, Savings and Loan Associations, and Credit Institution. It mainly consists of export, import and other foreign remittance. Direct Investment, export, import and foreign remittance etc play an important role in a developing economy. There is a great opportunity to invest the foreign remittance, which also comes from "wage earners" working abroad, in several prospective investing fields like energy sector, telecommunication, information technology etc in our economy. Commercial Banks raise funds primarily by issuing checkable deposits (deposits on which checks can be written), saving deposits (deposits that are payable on demand but do not allow their owner to write checks), and time deposits (deposits with fixed terms to maturity). They than use these funds to make commercial, consumers and mortgage loans and to buy Government securities and municipal bonds. 1.2 BACKGROUND OF THE STUDY MBA Program conducted by the University of Chittagong is a very much theoretical and practical oriented program in the arena of business and non-business financial sector. Since,

the students of the program were engaged with very much theoretical course work. For my academic curriculum purposes I have completed my Internship Program. The sole aim of the Internship Program is to blend our academic knowledge with that of practical ones and give us an insight into the Management of organization in real life situations. As a part of practical orientation program I was attached to AB Bank, North South Road Branch for two month. On completion of the practical orientation program it was supported to me to prepare and submit a report of such program. The report comprising with the organizational overview, operation of Banking in the different section such as General Banking, Loans & Advances, Foreign Exchange and Briefly analysis the performance of the Branch. Finally the report has been concluded with some recommendations. It is expected that the report will highlight the task performed and experienced gained during the practical orientation program. 1.3 OBJECTIVE OF THE STUDY The first objective of writing this report is to fulfill the partial requirements of the M.B.A program. Other objective of the report is to familiarize with the operation in the Banking arena including Management overview of bank and analysis of banking operation in different section. Import & export and credit facilities provided by the bank in Foreign Trade. More especially the objectives of the study are: To highlight on the profile of AB Bank of Bangladesh Ltd. To examine the general banking functions. To examine the activities of the loans and advanced department. To evaluate the performance of AB Bank. To recommend some corrective measures to resolve the problem.

1.4 METHODOLOGY OF THE STUDY This study focuses on the overall banking activities of the commercial bank. The objective of the report is to see how several departments of the bank are working. In order to fulfill the objective data have been collected from deferent sources specially focuses on the three major broad areas like general banking, loan and advances and foreign exchange. For the accuracy of the information I have physically visited and discussed with executives and top level management of AB bank about their philosophy, working procedures, management

system and decision making process of the banks. The details of the work plan are furnished below: Data collection method Relevant data for this report has been collected primarily by direct investigations of different records, papers, documents etc. operational process and different concerned personnel. The interviews were administered by formal and informal discussion. No structured questionnaire has been used. Information regarding office activities of the bank has been collected through consulting bank records and discussion with office personnel. Data sources The information and data for this report have been collected from both the secondary sources. primary and

Data Processing Data collected from secondary sources have been processed manually and qualitative approach has been used throughout the study. Data analysis and interpretation Qualitative approach has been adopted for data analysis and interpretation taking the processed data as the base. So the report relies primarily on an analytical judgment and critical reasoning. 1.5 LIMITATION OF THE STUDY Objective of the practical orientation program is to have practical exposure for the students. Our tenure was for two month only, which was somehow not sufficient. After working whole day in the office it was very much difficult, if not impossible to study again the theoretical aspects of banking. For the lack of our practical knowledge, some shortcoming may be available in the paper. The bank has naturally shown us some indifference connecting its most confidential information. The executives of Arab Bangladesh Bank Limited were too busy to spare time for the internee. The duration of my internship program is only 2 months. The allocated time is not sufficient for us to gather knowledge and to make the study a complete and fruitful one.

Chapter 2

LITERATURE REVIEW

2.1 Introduction 2.2 Overview of the Banking industry and its Operation 2.3 Overview of MBL 2.3.1 At a Glance of MBL

ghj

Chapter-02
2.1 Introduction The purpose of banking is to ensure transfer of money from surplus unit to deficit units. Bank in all countries work as the as the repository of money. The owners look for safety and amount of interest for their deposits with Banks. Entrepreneurs try to obtain money from the banks as working capital and for long-term investment. These entrepreneurs welcome effective and forward-looking advice for investment. Banking sector thus owe a great to the deposit holders on the hand and the entrepreneurs on the other. They are expected to play the role of friend, philosopher, and guide for the deposit holders and the entrepreneurs. 2.2 Overview of Bank Industry Bank is very old institution that is contributing toward the development of any economy and is treated as an important service industry in modern world. Now a day the function of bank is not limited to with in the same geographical limit of any country. Due to globalization and free market economy, this industry is facing severe competition in any country and implementation of WTO will further increase competition. The overall performance of Bank does not only depend upon the banking industry itself but also on the performance of economy where it is operating. The Banking sector in Bangladesh is different from the banking sector as seen in developed countries. This is one of the major service sectors in Bangladesh economy and can be divided mainly in to four categories- Nationalized Bank, Local Private Bank, Specialized Financial Institutions and Foreign Banks. However, the journey of private commercial banks is not very older than two decades. At present, there are 49 schedule banks operating in Bangladesh. Of these, 4 are nationalized, 5 are specialized, 30 are local private commercial and 10 are foreign commercial banks. The performance of these banks differs widely within same group and individually. Banking industry in Bangladesh is very competitive due to existence of different types of banking

such nationalized, private and foreign.

2.3 The Banking Sector in Bangladesh:

The development process of a country largely depends upon its economic activities. Banking is a powerful medium among other spheres of modern socio-economic activities for bringing about socio-economic changes in a developing country like Bangladesh. Three different sectors like Agricultural, Commerce and Industry provide the bulk of a countrys wealth. The nourishment of these three is only possible through an adequate banking facility. The banking service facilitates these three to be integrated in a concerted way. For a rapid economic growth a fully developed economic system can provide the necessary boost. The whole economy of a country linked up with its banking system. Domestic banks can be divided into four main groups: Nationalized Commercial Banks (NCBs); Private banks established in the early 1980s; and private banks established in 1999: 2.3.1 Nationalized Commercial Banks (NCBs) In general terms; NCBs are large, operationally inefficient and technically insolvent. They are used as vehicles of government directed lending. These banks enjoy an enormous and stable customer deposit base, which provides a cheap source of funding. In addition, most large government related business is routed through these banks; 2.3.2 Private Banks, 1980s- set up to service the sectors not being addressed by the larger NCBs. Not subject to state directed lending but have generally suffered from related lending to directors and their extended families; 2.3.3 Private banks, 1995 six new licenses were granted. These are the better-managed banks with strong capital base and good asset quality and under a much-improved regulatory regime. All the banks clustered in this group have successfully raised capital from secondary market and all the shares are now traded in the stock exchange at premium. 2.3.4 New private sector banks. Ten new banks have been granted licenses over the year 1999. While some bankers complain that the country is over-banked, the more commonly held view, including that of the World Bank, is that there is adequate scope for these banks to survive given currently untapped gaps in the market, fat in existing interest margins (currently circa 5%), and efficiency/ service level disparities. It is estimated that up to 70%

Traditional Bank Specialized Bank and Credit Agents Bangladesh Bank

tionalized bank Commercial Bank

BSBL Co-operative Banks PSC CCBL

of the Bangladeshi economy remains un-banked. While this appears to imply that the newer banks may move downstream in terms of asset quality but in reality the last two sets of new banks are successfully Private Bank Foreign Bank competing with NCBs and Foreign banks on the top end market segment. Banking Operation under BB Islamic Bank

BKB

RAKUB

BSB

BSRS

BASIC

Grameen Bank Karmasanghtan Ansar-VDP Unnayan Bank Bank

Sources: Chowdhry, L.R. (2002, 2nd edition), A Text Book On Banker Advances Some words used as a abbreviate form in the diagram are: BKB RAKUBBSBBangladesh Krishi Bank Rajshahi Krishi Unnayan Bank Bangladesh Shilpa Bank

BSRSBASICBSBLCCBLPCS-

Bangladesh Shilpa Rin Shangshta Bangladesh Small Industries & Commerce. Bangladesh Samabaya Bank Ltd. Central Co-operative Bank Ltd. Primary Cooperative Socites.

2.4 BACKGROUND OF THE AB BANK AB Bank Ltd. started its operation on 31st december3rd 1981 as a public limited company under Companies Act 1913, subsequently replaced by The Companies Act 1994, and governed by The Banking Companies Act 1991. The Bank went for public issue of its shares on 28 December 1983 and its shares are listed with Dhaka Stock Exchange and Chittagong Stock Exchange for trading ABBL has 73 branches all over Bangladesh including 1 Islamic Banking branch, 1 overseas branch at Mumbai, India and 2 representative offices each in London and Myanmar. The bank has a subsidiary company, AB International Finance Ltd, incorporated in Honkong. It is the first private commercial Bank in Bangladesh. With general commercial banking AB Bank plays an important role and contribution toward conducting business in the countries exports and imports. Providing financial assistance to business communities & exporters and importers, and for functioning as the principal financial institution for coordinating the working of institutions engaged in financing export and import of goods and services with the view to promoting the countrys international trade and for matters connected there with or incidental there to. Thus, AB Bank is the apex body in respect of Export and import finance. AB Bank provides loan for extending export and establishing alternative imported industry very easy condition. To the commercial banks, AB bank offer refinances and rediscount facilities against export advances made by them. To the banks overseas, AB Bank offers re-lending facilities to enable them to finance imports from Bangladesh. For these reasonable causes the establishment of AB Bank is a new emergence of the banking function. It is governed by the banking companies act. 1991.

2.4.1 Vision Statement

"To be the trendsetter for innovative banking with excellence & perfection" 2.4.2 Mission Statement "To be the best performing bank in the country"

2.4.3 CORPORATE MISSION OF THE AB BANK 1.To receive, borrow or raise money on deposit, loan or otherwise, upon such terms as the company may approve and to give guarantees and indemnities in respect of all debts and contacts. 2.To establish maintain, carryon, transact and undertake all kinds of investment, merchant and financial business, including underwriting, managing and distributing the issue of stocks, shares bonds, debentures, import permits other securities directly or thorough jointly with one or more banks or financial institution. 3.To carry on the business of dealers in foreign exchange including buying and selling of foreign exchange, dealing in foreign currency notes, granting and issuing of letters of credits, travelers cheques, circular notes and negotiating, and discounting of export documents and all other matters related to foreign exchange business. 4.To carry on the business of buying and selling gold and other valuable species. 5.To provide for safe deposit vaults and safe custody of valuables of all kinds. 6.To act as agents for the sale and purchase of any stocks, shares or securities or for any other monetary or mercantile transaction. 7.To form, manage, join or subscribe to any syndicate, or any holding company or trust to carry on business of an investment trust company. 8.To act as official liquidator and receiver. 9.To conduct the business of banking in its branches and abroad. 10.To act as executors and trustees of wills, settlements and trust deeds of any kind made by customers and other matters related thereto. 2.4.4 CORPORATE INFORMATION AT A GLANCE * Name of the bank : Status : Date of Incorporation : Inauguration of the North South Road Branch AB Bank of Bangladesh Limited Public Limited company: 31December, 1981. : 26th July , 1994.

enior Assistant Executive Vice PRESIDENT & MD CHAIRMAN Senior Executive Vice President Vice President Vice President President VICE CHAIRMAN

Head Office: BCIC Bhaban, 30-31, or Executive Officer Senior Principle Officer Senior officer Junior Officer Dilkusha Commercial Area, Dhaka Chairman : M. Wahidul Haque Managing Director : Kaiser A Chowdhury Manager of North South Road Branch : Mr.Asish Kumar Debnath. Authorized Capital : TK.1000 Million Paid up Capital : TK. 719.76 Million Directors : 13 Number of branches : 73 Deposit : Tk. 37,361.44 Million Loan : Tk. 31,384.63 Million Number of Employees : 1525 * (Information as per last Annual Report 2008) 2.4.5 Organization Chart:

2.4.6 Operating Performance

Board of Directors of AB Bank Limited (ABBL) takes immense pleasure in presenting the 25th Annual Report of the Bank to you. It is also the privilege of the Board to present the audited accounts of the Bank for the year ended 31st December, 2006 and the Auditors' Report thereon. Your Bank reached a milestone on 12th of April, 2007 when AB reached 27 years of its journey which started with a single Branch operation at Karwan Bazar, Dhaka way back in 1982. AB being the pioneer in private sector banking in Bangladesh will be the first to achieve this milestone. Over the years, your Bank has contributed in many ways towards development of the private sector banking in the country. Many of the big industries in different fields of the economy has AB's name attached and your Bank remains a proud development partner of these industrial houses over the years. AB thrived on customer service and relationship banking which brought new dimensions to this particular service sector and many more new entrants to banking sector followed AB. AB's Sponsors set a vision for the Bank which reads: "To be the Trendsetter for innovative banking with excellence and perfection". Throughout these 27 years your Bank raised the bar for itself through services, initiatives, products, customer support and performance towards that visionary path. At the beginning of the year 2005, Board took the mission for the year as "a year of consolidation and growth". In line with that, year 2006 was identified to be the year of "financial re-structuring and growth". Sponsors of the Bank remain committed to take AB into next higher level of banking on a strong financial footing and with appropriate systems and processes in place. Being a financial institution, your Bank is exposed to the entire gamut of economic developments and activities both within and outside the country. Hence to start with, we will throw some brief insights in to the economic scenario of the year 2006.

2.4.7 ABBL at a Glance: Year 2008

Million Taka December 31

2008 2007 % Change Gross Interest Income 7,366.85 5,269.90 39.79 Net Interest Income 2,030.69 1,439.28 41.09 Operating Profit (PBP & T) 4,298.39 3,325.29 29.26 Net Operating Profit (PBT) 3,600.62 2,817.99 27.77 Profit after Tax (PAT) 2,300.62 1,903.49 20.86 Deposits 68,560.47 53,375.35 28.45

Loans & Advances 56,708.77 40,915.35 38.60 Total assets 84,053.61 63,549.86 32.26 Shareholders' Equity 6,722.51 4,511.59 49.01 NIM% 2.75 2.58

Non Interest Income to Operating Income (%) 66.98 69.09

Cost Income Ratio 62.57 28.59

Return on Equity - ROE (%) 40.96 42.19

Return on Assets - ROA (%) 3.12 3.41

Advance Deposit Ratio (%) 82.71 76.66

Capital Adequacy Ratio 12.84 10.75

NPL as % of Advances 2.99 4.31

Earnings per Share (Tk.) 103.18 85.37

CHAPTER 03 GENERAL BANKING

3.1 INTRODUCTION One of the vital departments is General Banking, Comprises accounts, remittance, account opening, inward and outward collection. Meeting customers satisfaction through faster and better service is the key mission of the General Banking Department. General banking is the heart of total banking system. Through this section bank has to receive and disburse money, to develop banker customer relationship by opening different types of account and providing prompt services to the customers. This department collects money from the depositor and uses these deposits to earn profit.

3.2 FUNCTIONS OF GENERAL BANKING: The functions of general banking department of AB Bank of Bangladesh Ltd. are as follows: 1.Maintenance of different types Deposit A/C: Saving Accounts Fixed Deposits Other Saving Schemes Current Accounts Short Term Deposits

2.Opening different types of accounts. 3.Receipts & payment of cash. 4.Handling transfer transactions. 5.Operations of clearing house. 6.Maintenance of accounts with Bangladesh Bank & other banks. 7.Collection of Cheques & Bills. 8.Issue and payment of Demand Drafts, Telegraphic Transfers, Online Transfers & Payment Orders. 9.Maintenance of Safe Deposit Lockers. 10.Maintenance of Internal Accounts of the banks. 11.Reporting to the Head Office about daily position of the bank. 12.Saving record of all transactions in computer. 13.Closing and transfer of different types of accounts. 14.Keeping good relation with valued customer. 15.Providing necessary support to the customers. 3.3 SECTIONS OF GENERAL BANKING: During my practical orientation in AB Bank, North South Road Branch, it came to the observation that general banking section is divided with four areas. These are: Account opening section Remittance section Bills and clearing section Cash section Mail receive and dispatch section

3.3.1 Account Opening Section: One of the vital sections under general Banking is the account opening section. Banker customer relationship begins through this section. Various tasks are performed in this section. Such as: Opening of different types of account. Issue of checkbook. Transfer and closing of account. Enquiry of account. Checking The Signature of the client. Fill up Expected Transaction Profile (ETP) and Know Your Customer (KYC) form 3.4 Various types of account offered by AB Bank: AB Bank offers various types of account to its different types of customer. These are as follows: Current deposit (CD) account Savings bank (SB) account Short term deposit (STD) account. Fixed deposit (FDR) 3.4.1 Current Deposit (CD) Account: A current account is an account, which is generally opened by business people for their convenience. A current account is a running and active account, which may be operated upon any number of times during a working day. There is no restriction on the number & amount withdrawals from current a/c. It does not earn any interest. It has the following properties: Opening Amount/ Initial Deposit Service Charge (yearly) Minimum Balance Requirement Tk. 10000 Tk. 575 Tk. 5,000

3.4.2 Savings Bank (SB) Account: This deposit is intended primarily for small-scale savers. The main object of this account is

promotion of thrift. Savings account is meant for those who want to save a certain amount of their income and earn interest on that for future needs. All features are more or less like that of CD a/c except for some restriction that is imposed by the bank. Number of withdrawals over a period of time is limited. . This A/C mainly opens on person name. SB account has the following properties: 4Opening Amount/ Initial Deposit 5Service Charge (yearly) 6Minimum Balance Requirement Tk. 10,000 Tk. 300.00 Tk. 10,000

7Interest rate 6% 8One cannot withdraw money more than two times in a week. 9The withdrawing amount is not to exceed 25% of the total balance. 10If customer withdraws money more than twice in a week than no interest is given to customers on his account. 3.4.3 Fixed Deposit Receipt (FDR) Account: In this category are included the deposit with the bank for a fixed period which is specified at the time of making the deposit. A fixed deposit is repayable on the expiry of a specified period, chosen by the depositor to suit his purpose and to enable him to get back money as and when he needs it. The fixed deposit may be made for 3 months, 6 months, 1 year, 2 year or 3 year. As the date of repayment of fixed deposit is determined in advance, the banker need not keep more cash reserves against it and can utilize such amount more profitably. The banker therefore offers higher rate of interest on such deposits. Fixed deposit has grown in importance and popularity in our country during recent years. When a matured FDR is withdrawn, the principle amount along with the interest amount (deducting 15% tax from the total) is paid to the client. Table 3.1: The rate of interest and the terms of the Fixed Deposit receipt Term Interest rate (Up to Tk 1,00,000 Interest rate (Above Tk 1 month 9.50% 9.50% 3 months 11.00% 12.00 6 months 11.50% 12.25% 1 Year 11.50% 25.50% 2 years 12.50% 3 Years and above 12.50% & Above

12.50% & 12.50% Above

5,00,000

3.4.4 Short Term Deposit (STD): It is a deposit account opened by customer where customer deposited money for short period. Customer can draw money after giving short notice. This account holder enjoys the same facilities of CD account including receiving interest on his deposited money. Interest rate of STD is less than the interest rate of SB account. account has the following properties: Opening Amount/ Initial Deposit Service Charge (yearly) Minimum Balance Requirement Interest rate Tk. 50000 Tk. 575 Tk. 50000 4%

3.5 Various types of Savings Schemes offered by AB Bank: AB Bank offers various types of Savings Schemes to its different types of customer. These are as follows: Monthly Savings Scheme (MSDS). Monthly Income Scheme (MIS). Super Savings Scheme (SSS). Multi Plus Super Savings Scheme (MPSS).

3.5.1 Monthly Savings Deposit Scheme (MSDS): Small savings can formulate large deposit. Savings increases mental power of a man, form capital and increases the confidence of a depositor. AB Bank introduces a saving scheme with high profit for the purpose of increases saving mentality. In this savings scheme one can deposit money in every month and will get a handsome amount of money at the end of certain period. The amount of savings/deposits as per monthly installment and period is shown in below: Monthly Savings Deposit Scheme. Table 3.2: The installment amount, tenure and matured value. Monthly Deposit Money (Tk) Payment after 05 (Five) years Payment after 10 (ten) years

500.00 1000.00 1500.00 2000.00 2500.00 3000.00 3500.00 4000.00 4500.00 5000.00

38,388.00 76,776.00 1,15,164.00 1,53,552.00 1,91,940.00 2,30,328.00 2,68,716.00 3,07,104.00 3,45,492.00 3,83,880.00

94,786.00 1,89,572.00 2,84,358.00 3,79,144.00 4,73,930.00 5,68,716.00 6,63,502.00 7,58,288.00 8,53,074.00 9,47,860.00

3.5.2 Monthly Incomes Schemes (MIS): In this type of scheme one can invest certain amount of money for certain period of time for receiving a steady return after every certain period of time. Lowest amount of investment is Tk. 1,00,000 and the period of this scheme is 3 years. The amount of money invest should be the multiple of 1,00,000. Table 3.3: Income Per Deposited Amount Deposit Amount (Tk.) 1,00,000.00 2,00,000.00 4,00,000.00 3.5.3 Super Savings Scheme (SSS): Savings helps to build up capital and capital 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 create more awareness motivates people to save. AB Bank offers Supers Savings Scheme. The client will get double amount of his principle amount after maturity. Minimum Amount Required Tk. 5000 The amount should be the multiple of 10,000 4000.00 Income (Tk.) 1000.00 2000.00

The amount should be double after 6 years Tax rate is 10%

3.5.4 Multi Plus Savings Scheme (MPSS): Under this scheme the amount will be doubled in 11 years term. Compound interest rate is counted. The amount multiples three times after 10 years. It has the same properties as like as Supers Savings Scheme. 3.6 DOCUMENTS TO BE OBTAINED FOR DIFFERENT TYPES OF ACCOUNT: When anyone comes to open an account he has to submit some documents to the banker. Different types of document needs for different customer. Some common documents require for all types of account are: Introducer recommendation. Specimen signature card. Account opening agreement form. Two copies of Photograph of account holder and two copies of nominee (if any). Deposit slips book. Chequebook requisition slip. Letter of mandate authorizing another person to operate the account on behalf of the account holder. Certain types of documents are needed for special customers. These are: 3.6.1 Proprietorship Account: Document requires for proprietorship business to open an account are: Introducers with account number. Valid trade license from City Corporation, Attested copy should be submitted. Tax Identification certificate. Nationality certificate from local authority. 3.6.2 Partnership Account: Documents to be obtained for opening an account of partnership firm are: Trades license or board resolution. Deeds of partnership signed by all partners. Two copies photograph of each partner. Partnership resolution signed by all partners to open account. Resolution must indicate authorized person who operates the account. 3.6.3 Limited Company Account:

Document required for Limited Company account to open an account are: Memorandum and Articles of Association of Company. Resolution of Board of Director. Certificate of incorporation. Certificate of commencement of business in case of public limited company. List of director. Two copies of passport size photograph of account operators. Others: name director s with signature, minutes of board of director. 3.7 REMITTANCE SECTION The major function of commercial Banks is mobilization of fund. Other than this, banks provide supplementary services to its clients. Clients need to remit money from one place to another for their business or other purposes. Banks fulfill this need of customers by means of remittance service. Money can be remitted domestically or internationally, which known as local remittance and foreign remittance. There are three ways of transferring fund domestically. The modes of transferring funds are: Pay- Order (PO). Demand Draft (DD). Mail Transfer (MT). Online Transfer. 3.7.1 Payment Order / Pay Order (P.O) This is an instrument issued by the branch of a bank for enabling the Customer/Purchaser to pay certain amount of money to the order of a certain person/firm/organization/office within the same clearinghouse area of the pay order-issuing branch. Characteristics of P.O: 1The issuing branch and paying branch are same. 2Application for payment within the clearinghouse area of the issuing branch. 3This may be open or can be crossed. Procedure of Issuing Payment Order: 1Obtain P.O. application from duly filled in and signed by the Purchaser. 2Receive the amount in cash/transfer with commission amount. 3Issue Pay Order. 4Enter in Pay Order register.

3.7.2 Demand Draft (D.D) This is an instrument through which customers money is remitted to another person/firm/organization in outside the clearinghouse area from a branch of one bank to an outstation branch of the same bank or to a branch of another bank (with prior arrangement between that banks with the issuing branch). This is an order instrument in which the issuing branch gives instruction to the payee/drawer branch to pay certain amount of money to the order of certain person/firm/organization. Commission, vat and postage are charged for issuing DD. Example: - To transfer money from Chittagong to Dhaka. Procedure for issuing D.D.: 1Obtain D.D. application from duly filled in and signed by the purchaser. 2Receive the amount in cash/transfer with prescribed commission and postage amount. 3Issue the D.D. duly in and signed by the authorized officer. 4Insert test number (where applicable) 5Enter in the D.D. issue register. 6Issue advices to the payee branch. Charge for Demand Draft: 1Minimum amount for a DD is TK. 25. 2Commission is the 0.10% of the DD amount. 3Vat is TK. 15% on the commission amount. For quickest remittance customer use this means to transfer money from one place to another place. Within 10 minutes beneficiary will get the amount.

CHAPTER 04 LOANS AND ADVANCES

4.1 INTRODUCTION The banking sector in Bangladesh plays an important role towards economic growth of the country. The successful running of a banking business as well as the economic development of a country depends upon how effectively the funds of a bank are utilized. The study mainly focuses on this issue. To analyze different methods and mechanism of investment of bank funds under AB Bank is the objective of this study. The bank mainly accumulate its

funds from the capital it invests in the business, from the depositor and from call money, a part of these funds are kept as mandatory reserve in Bangladesh Bank, invested in fixed assets and the rest are invested in Loans & Advances. These loans and advances are provided to the deficit unit of the society to remove constrains of the borrower. The two main functions of a bank are to borrow money from public by accepting deposit and lending it to the public for the development of trade, commerce, industry and agriculture. Banks give some interest to depositors for deposit and take higher interest for lending. The margin is the banks profit. So, lending is by far the most important function of modern bank. The strength of a bank is, thus, primarily judged by the soundness of its advances. A wise and prudent policy in regard to advances is considered an important factor inspiring confidence in the depositors and prospective customers of a bank. Advances not only play an important part in gross earnings of bank, but also promote the economic development of the country. All types of business activity includes trade, industry and agriculture have to depend on bank finance in one form to offer. Bank by channeling accumulate savings of the nation into productive uses, help both the depositors and the borrowers. 4.2 CREDIT SCHEME. AB disburses advances in two broad areas. These are industrial credit and commercial credit scheme.

4.2.1 Industrial credit: Industrial credits are given for industrial purpose. The sector where some process involves is called industry, such as shape of material. Industry can be two types: 1. Manufacturing industry- Cement, steel factory etc. 2. Service industry- Hotel, transport, etc. Industrial credit is given for two purposes: Term loan - fixed assets financing. Working capital - current assets financing. 4.2.2 Commercial Credit: Commercial credits are given for trading purpose where no process involved. AB Bank

lends support towards development of trade, business and other commercial activities in the country. 4.3 Forms of Loans and Advances: The making of loans and advances has always been prominent and profitable function of a bank. Sanctioning credit to customers and others out of the funds at its deposal is one of the principle services of a modern bank. Advances by AB Bank are made in different forms. Such as: Overdraft Term loan Bills Portfolio Packing Credit Bank Guarantee Commercial Loan 4.3.1 Overdraft (OD): The overdraft is a kind of advances always on a current account operated upon by cheque. The customer may be sanctioned a certain limit upon which he can overdraw his current account within a stipulated period. Here, withdrawal or deposits can be made any number of times of the convenience of the borrower provided the total amount withdrawn does not, at any time exceed the agreed limit. Interest is calculated and charged only on the actual debit balance on daily (produced) basis. While in a current account cheques are honored if the balance is in credit, the OD arrangement enables a customer to draw over and above his own balance up to the extent of the limit stipulated. It is essential that a letter of continuity must be obtained in case of OD account. The letter makes the customer liable to the final balance of his account by confirming the intervening debits and credits in his account. Interest rates for OD are 13.50% or interest rate of the Financial Paper (FDR etc.) plus 2%. AB Bank has the following types of OD: SOD against financial obligation SOD against FDR SOD general

 Others 4.3.2 Term Loan: The loan which, is repayable in fixed fixture date, is called term loan. This loan is made to large well-established business enterprise for financing capital expenditure. Businessman requires this loan for purchase or renovation of funds, buildings, and factory sheds, and machinery etc. the loan is to be repaid for according to a scheme of repayment by installments. Installments may be monthly, quarterly, semiannually, annually depending on type of loan. This type of is given for long term, mid term, short term and requires large investment. Market study and environment is necessary before allowing such loan. ABBL charges 13% /14% interest for such loan. 4.3.3 Staff Loan: AB provides loan facilities to its employees. Interest rates vary on the nature and objective of loan. Basically staff loan is disbursed for staff house building purpose and household consumption. In case of staff loan repayment procedure is followed on monthly basis. 4.3.4 Bills Portfolio: Bank can allow credit to customers in the way of purchasing and discounting bills. When client submit bills, a margin (covering also the interest on the loan) amount is deducted from the face value of the bill and the rest is provided to the client .Bills can be local or foreign. This may be clean or documentary. Documentary bill is supported by various documents such as -- Local Bill Purchase supported by Documents [LBP (D)] Foreign Bill Purchase supported by Documents [FBP (D)] 4.3.5 Packing Credit: Packing Credit (P.C.) is provided to the client against confirmed export orders (Export L/C) covering maximum 90% of the value of the order. As the name implies this type of loan is provided to procure & process the raw materials for making finished goods to be exported. This loan is provided at reduced interest rate as per Bangladesh Banks instruction. However, Bank can avail refinance subsidy from Bangladesh Bank to compensate the reduced interest rate. The packing credit is adjusted through the export proceeds. The Export

L/C becomes primary security for the loan. The loan is sometimes collateralized by equitable mortgage of property. In any case Export Finance Guarantee from Sadharan Bima Corporation has to be obtained before the lain is disbursed. Interest rate is 13% 4.3.6 Bank Guarantee: Bank Guarantee is also a non-funded facility provided to the client. Bank on behalf of the client undertakes to pay agreed amount of money at certain time if client fails in due performance. Bank Guarantee is generally provided in Lieu of earnest money for bidding in tender by the client (Bid Bond) or as guarantee for due performance of contracted work (Performance Guarantee). AB Bank generally provides guarantee facility for maximum one year. Usually 10% - 25% margin is obtained from the client against the guarantee amount. 4.3.7 Commercial Loan: This type of credit facilities is mainly related to post import financing. It is given for short period. BLC, LIM, LTR are fall in this category. The details are as follows: 4.3.8 Bills Under Letter Of Credit (BLC): This means Bills Under Letter Of credit. After getting documents from negotiating bankopening bank informs importer for clear the documents and bank creates a loan account. 30 days are allowed for this type of loan. Bank charge interest @ 13% in this credit facility. The Bank that establishes the letter of credit is bound to honor its commitment to pay for import bills when these are presented for payment, if drawn strictly in terms of the letter of credit. The foreign correspondent, who negotiates the documents, gets payment as per stipulated reimbursement terms of the L/C to the debit of the account of the L./C opening banks F. C account. The opening bank lodge the shipping documents in their books and responds to the debit advice originated by foreign correspondent to the debit of Bills under Letter of Credit ( payment against documents (PAD)) account. In fact, the amount stands as advance to the importer, which is adjusted by delivery of documents against payment, or by allowing post import finance such as LIM or LTR. Loan Against Imported Merchandise (Lim): This is connected with import facilities. As per pre-arrangement or under forced situation when the client is unable torture the LC documents, bank then clear the imported goods

from the customs and store it in banks warehouse. LIM is given for maximum 60days within which customer has to adjust liability and take delivery of the imported goods from the banks custody. Bank charges interest @ 13% on this credit facility. The bank through its approved clearing agent clears the merchandise. The advance is adjusted by delivering the goods against payment by the importer. The documents remain with the Bank. Loan Against Trust Receipts (Ltr): This is also post-import finance facility. This type of facility is given to creditworthy and selective customer. In LTR goods are sent to the customers go-down after clear from Port. Customer has to adjust liability within 90 days or the days determined by the client and banker of taking such facility. Bank charge interest @ 14% for this credit facility. 4.4 Procedures of Loan Sanction and Disbursement Bank follows some necessary steps to sanction loan to borrower. This procedure mainly applicable for sanctioning and disbursing term loan although other advancing procedures are also follows nearly the same procedure. 4.4.1 Documents required for procuring Loan Proposal: Following are the client should supply the documents: a. TIN certificate of the client. b. Bank statement for last two years. c. Up to date trade license. d. Present liability position of the company and owners. e. Name and Address of the Sister concern f. Export and Import performance. g. Personal information in a prescribed from. h. Balance sheet for the last three years i. Memorandum & Article of association signed by the Managing Director j. Profile of directors or partners. 4.4.2 Credit Investigation and Loan Appraisal: After getting Loan application from the customer, bank started appraisal of the loan.

For this bank First collect necessary information about the client. And then with help of this information bank appraisal the loan application. Collection Of Credit Information: For the purpose of assessing the creditworthiness of a borrower a banker has to collect the above-mentioned information from a number of sources. Every bank maintains a Credit investigation department at its head office and main offices in larger cities to collect information regarding the financial position of its borrowers. At other centers, branch mangers perform credit investigation. The credit information is collected through borrower analysis, market report, exchange credit information amongst banks etc. Loan appraisal: With the help of the above information the bank appraise the loan proposal by the following points: 1Credit Worthiness of the client on the basis of 5 Cs. i) Capital, ii) Character, iii) Capacity, iv) Control and v) Collateral 2Background of the Clients family. 3Nature and scope of the business of client. 4Market reputation of the client. 5Turnover of the business of client. 6 Dealings of client with the bank and turnover in clients bank account. 7Clients business experience. 8Worth & property of the client. 9Location of business/firm/industry. 10Amount and Purpose of the loan. 11Turn over of the sister concern (if any).

4.5 Retail Banking

4.5.1 Unsecured Loans

Product Name Personal Loan Target Customer Employees of reputed Local Corporate, MNCs, NGOs, Airlines, Private Universities, Schools and Colleges, International Aid Agencies and UN bodies, Government Employees, Selfemployed Professionals (Doctors, Engineers, Chartered Accountants, Architects, Consultants), Businessmen. Purpose Marriages in the family, Purchase of office equipment / accessories, Purchase of miscellaneous household appliances, Purchase of Personal Computers, Purchase of audiovideo equipment, Purchase of furniture. Loan Amount Minimum Tk. 25,000.00 Maximum Tk. 5,00,000.00 Charges Application fee: Tk. 500.00 Processing fee: 1% on the approved loan amount or Tk. 2000.00 whichever is higher Tenor Min 12 months Max 36 months Rate of Interest 14.50% p.a. - 17.50% p.a. Security Hypothecation of the product to be purchased. Two personal guarantees (as per our list of eligible guarantors) Product Name Auto Loan Target Customer Employees of reputed Local Corporate, MNCs, NGOs, Airlines, Private Universities, Schools and Colleges, International Aid Agencies and UN bodies, Government Employees, Selfemployed Professionals (Doctors, Engineers, Chartered Accountants, Architects, Consultants), Businessmen Purpose To purchase Brand new vehicle, non-registered reconditioned vehicle

Loan Amount 70% for the brand new car 60% for the reconditioned car but must not exceed BDT 10,00,000.00 Charges Application fee: Tk. 500.00 Processing fee: 1% on the approved loan amount or Tk. 5000.00 whichever is higher Tenor For Reconditioned Car: Max 36 months For Brand new Car: Max 60 months Rate of Interest 14.50% p.a. - 17.50% p.a. Security Hypothecation of the vehicle to be purchased. Two personal guarantees (as per our list of eligible guarantors) Product Name Easy Loan (For Executives) Target Customer The loan is specially designed for salaried people who are employed in different reputed companies Purpose Marriages in the family, Purchase of office equipment / accessories, Purchase of miscellaneous household appliances, Purchase of Personal Computers, Purchase of audiovideo equipment, Purchase of furniture, Advance rental payment, Trips abroad, Admission/Education fee of Children etc. Loan Amount Minimum Tk. 50,000.00 Maximum Tk. 3,00,000.00 Charges Application fee: Tk. 500.00 Processing fee: 1% on the approved loan amount or Tk. 1000.00 whichever is higher Tenor Min 12 months Max 36 months

Rate of Interest 16.00% p.a. Security Letter of confirmation from the employer. One personal guarantee (as per our list of eligible guarantors) Product Name Gold Grace - Jewellery Loan Target Customer Both female & male employees may apply viz. employees of reputed Banks & Leasing companies, reputed Local Corporate, MNCs, NGOs, Airlines, Private Universities, Schools and Colleges, International Aid Agencies and UN bodies. Government Employees. Selfemployed Professionals (Doctors, Engineers, Chartered Accountants, Architects, Consultants). Businessmen with a reliable regular source of income. Purpose To purchase ornaments/Jewellery for personal use Loan Amount Minimum Tk. 50,000.00 Maximum Tk. 3,00,000.00 Charges Application fee: Tk. 500.00 Processing fee: 1% on the approved loan amount or Tk. 1000.00 whichever is higher Tenor Min 12 months Max 36 months Rate of Interest 16.00% p.a. Security Letter of confirmation from the employer. Personal guarantee from the parents and spouse (if married) Product Name House/Office Furnishing/Renovation Loan Target Customer Expatriate Bangladeshi nationals who are in business or service holders. Employees of

reputed Banks & Leasing companies, reputed Local Corporate, MNCs, NGOs, Airlines, Private Universities, Schools and Colleges, International Aid Agencies and UN bodies. Government Employees. Self-employed Professionals (Doctors, Engineers, Chartered Accountants, Architects, Consultants). Reputed and highly respectable Businessmen with a reliable source of income Purpose House/Office Furnishing/ Renovation, For interior decoration / Titles Stones, Electrical fittings, wooden cabinets / Overall furnishing and all types of House/Office Renovation, purchase/furnishing of apartments etc. Loan Amount Minimum Tk. 1,00,000.00 Maximum Tk. 10,00,000.00 Charges Application fee: Tk. 500.00 Processing fee: 1% on the approved loan amount or Tk. 2000.00 whichever is higher Tenor Min 12 months Max 48 months Rate of Interest 16.50% p.a. Security Title deed of the House/Office to be furnished/renovated along with memorandum of deposit of title deed duly supported by a notarized power of attorney to be kept by the bank as a matter of comfort. Two personal guarantees (as per our list of eligible guarantors). Registered mortgaged of the property if the loan amount is more than Tk. 5.00 lac Product Name Staff Loan Target Customer All permanent employees of ABBL Purpose Marriages in the family, Purchase of office equipment / accessories, Purchase of miscellaneous household appliances, Purchase of Personal Computers, Purchase of audiovideo equipment, Purchase of furniture Loan Amount According to the debt burden ration and other criteria

Charges Processing fee: 1% on the approved loan amount Tenor Min 12 months Max 36 months Rate of Interest 15.50% p.a. Security Hypothecation of the product to be purchased Product Name Education Loan Target Customer Students Criteria: Students of reputed Educational Institutes, such as Public & Private Universities, Medical Colleges & Engineering Institute. Undergraduate & Post graduate Level Professionals degrees (Chartered Accountants (CA), Cost & management Accountants (CMA), Marine, MBM, MBA) Doctorate degree (PhD), FCPS etc. Occupation: Student Minimum Age: 17 years Maximum Age: 40 years Educational Qualification: Minimum HSC/A-Level Pass. Parents Criteria: Service Holder: Individuals with ranks equivalent to Senior Assistant Secretary or higher would qualify guarantor Bank officials (Equivalent to Senior Principal Officer of NCBs, AVP / Branch Manager of Local and Foreign banks) and Department Head of Multinational Company or established Local Corporate. Guarantors must be accepted by the Branch Manager / Head Office. Businessman: Well reputed and widely respected Self-employed professionals Purpose To Financially Assist The Parents: Admission/Education Fees, Semester Fees, Study abroad Loan Amount Minimum Tk. 50,000.00 Maximum Tk. 3,00,000.00

Charges Application fee: Tk. 500.00 Processing fee: 1% on the approved loan amount or Tk. 1000.00 whichever is higher Tenor Min 12 months Max 36 months Rate of Interest 14.50% p.a. - 16.00% p.a. Security One personal guarantees (as per our list of eligible guarantors) 4.5.2 Secured Loans: Product Name Personal Loan Target Customer All Clients of ABBL Purpose To meet personal requirement of fund Loan Amount Maximum 95% of the present value of the security Charges Processing fee: Tk. 1000.00 Tenor Min 12 months Max 36 months Rate of Interest 13.50% p.a. - 16.50% p.a. (subject to type of the security). 2% spread must be maintained in case of own bank FDR Security Lien over FDR, BSP, ICB Unit Certificate, RFCD, NFCD, CD account(s) etc. One personal guarantee in case of third party cash collateral (as per our list of eligible guarantors)

Plastic product Furniture : Wooden & Metal Ink Product Name Personal Overdraft Target Customer All Clients of ABBL Paint Printing & Packaging Wire & Cable Aluminum

Cement and Lime Plaster Purpose To meet personal requirement of fund Loan Amount Maximum 95% of the present value of the security Charges Processing fee: Tk. 1000.00 Tenor Revolving with annual review Rate of Interest 13.50% p.a. - 16.50% p.a. (subject to type of the security). 2% spread must be maintained in case of own bank FDR Security Lien over FDR, BSP, ICB Unit Certificate, RFCD, NFCD, CD account(s) etc. One personal guarantee in case of third party cash collateral (as per our list of eligible guarantors)

4.6 SME Loan

Considering the volume, role and contribution of the SMEs, in the last two decades AB Bank has been patronizing this sector by extending credit facilities of different types and tenor. As of now 54% of the banks total loan portfolio is segmented to the SMEs which deserve all out attention in our plans, projections and forecasting. As such the bank has emphasized on the following issues:

To provide the best services to the SME sector To increase the SME portfolio of ABBL significantly To improve the quality of ABBLs portfolio

SME Sectors in which AB Bank has participated so far:

Agro machinery

Poultry Animal Feed Dairy Product Fruit Preservation Hotel & Restaurants Garments Accessories Leather products

4.7 Loan Disbursement Loan is allowed for a single purpose where the entire amount may be required at a time or in a number of installments within a period of short span. After disbursement of the entire loan amount, there will be only repayment by the borrower. A loan once repaid in full or in part, cannot be drawn again by the borrower. Entire amount of loan is debited to the loan A/C in the name of the customer and is paid to him through his STD/CD Account. Some times loan amounts are disbursed in dash. 4.8 Follow up and recovery of the Loan: After disbursement of lone to a client it is the sole duty of the disbursing branch to follow up loan, whether it is properly utilized or not. So report on development and submit the same to the manager/sanctioning authority. If loans properly follow up by the disbursing branch, then the risk of default will minimize.

4.8 Large Loan & Project Finance

In order to cater the demand of client AB Bank has segmented its portfolio in terms of loan size. As per this segmentation any loan over Tk. 10.00 Crore falls under the purview of Large Loan Unit. In AB Bank, there is also a separate Project Finance unit who evaluate the business. The unit is entrusted to handle the portfolio in a focused manner. AB Bank is always in fore front to support establishment of new projects of diverse nature which will help to broaden the manufacturing arena vis--vis to generate to employment. At the moment AB Bank s exposure in Large Loan & Project Finance portfolio is distributed in the following sectors:

SL Sector 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Agro- Business Cement Power, Glass Consumer Products Edible Oil Engineering & Construction Financial Institution Food & Beverage Hotel Health Care Printing & Packaging Real Estate Micro-finance Export RMG & Backward Linkage Ship Breaking Steel Telecom & Computer Accessories Trading Total ( including syndicated exposure) Less Syndicated Exposure Total Large Loan & Project Finance portfolio without syndicated exposure

ABBL Exposure (Limit) (Fig. in Lac Tk.) 12,717.56 38,691.92 21,855.00 36,057.53 18,106.42 1,414.70 27,044.24 2,505.26 3,928.62 11,867.61 10,451.49 5,763.15 9,441.63 94,826.13 18,029.20 42,824.97 11,479.89 77,579.89 444,585.21 51,560.29 3930,24.92

Financing at Pre-shipment stage: Pre-shipment credit covers credit facilities extended to the exporters by the commercial banks at the pre-shipment stage i.e. prior to the actual shipment of goods for export. Credit can be allowed for the following purposes: Cash for local procurements and meeting related expenses Procuring and processing raw materials Packing and transporting of goods for export

Payment of Insurance premium Inspection fees Freight charges etc. Pre-shipment credit facilities are essentially a short-term credit, which is to be liquidated by negotiation/purchase of export bills covering the particular shipment. Pre-shipment credit facilities can be allowed against irrecoverable letter of credit of a good foreign Bank considering the credit worthiness of the exporters. Pre-shipment credit is allowed in the following forms: 1.Export Cash Credit (Hypothecation) 2.Export Cash Credit (Pledge) 3.Export credit against trust receipt 4.Packing credit 5.Back to Back letter of Credit Back to Back letter of Credit (Inland) Back to Back letter of Credit (Import)

1. Export Cash Credit (Hypothecation): Such credit facility is allowed to the credit worthy exporters for procuring and processing of goods or raw materials into finished goods for export against hypothecation of stock of raw materials into finished goods for export against hypothecation of stock of raw materials/goods-in-process/finished goods meant for export. Normally collateral securities are obtained in case of such facility. 2. Export Cash Credit (Pledge): Such a credit facility is allowed against pledge of exportable goods or raw materials. Sometimes collateral securities may be obtained which may depend on the quality of goods pledged generally. 3. Export Credit against Trust receipts: Such a credit is allowed to a credit worthy exporters against exportable goods where retaining the goods under banks pledge. The exporter by signing the stamped trust receipt holds the goods in trust on behalf of the bank. Collateral security is generally obtained. 4. Packing Credit: Such advance is provided to the exporter against: Lien on the Export L/C Copy of Invoice The security of Railway Receipt/Steamer Receipt/Barge Receipt/Truck Receipt evidencing transportation of the goods to the port. Undertaking of the C&F agent entrusted with the task of arranging shipment to the effect that they shall hold the goods under the lien of the Bank. Insurance Coverage.

CHAPTER 5
FOREIGN EXCHANGE 3.1 INTRODUCTION Commercial bank collects the ideal saving from the people and supplies them into productive channels. The success of a commercial bank depends on how successfully it can be mobilizing saving and advance short and long term credit to business community. In addition to deposit mobilization and credit management, commercial bank as well as AB Bank of Bangladesh Limited deals in foreign exchange, which includes remittance of currency and financing, exports and imports. Foreign exchange dealing is one of the main functions of the bank and it generates a significant portions a banks income. Foreign Trade is one of the most important segments of Bank Business. With the changes of time international trade is diversifying gradually. Modern banks (like ABBL) are playing significant role in foreign trade. Foreign trade Comprises of Import & Export business. A lot of work relating to export and import are done by banks. While performing those tasks bank should be very much cautious as lot of complexities are there. Foreign trading is strictly controlled by the Bangladesh Bank. Therefore a deviation or mistake will cost bank a more. Dealing in foreign trading needs a lot of concentration, accuracy and technical know how as any mistake or malpractice may lead to disaster for a Banks Business. Personnel should posses the above qualities to work in this arena. 5.2 Summery of Foreign Exchange Procedure: The buyer and the seller conclude a sales contract providing for payment by documentary credit. The buyer instructs his bank-the issuing bank to issue a credit in favor of the seller (beneficiary). The issuing bank asks another bank of the seller, to advise or confirm the credit. The advising or confirming bank informs the seller that the credit has been issued.

As soon as the seller receives the credit and is satisfied that he can meet its terms and conditions, he is in a position to load the goods and dispatch them. The seller then sends the documents evidencing the shipment to the bank where the credit is available (the nominated bank). This may be the issuing bank, or the confirming bank or a bank named in the credit as the paying, accepting or the negotiating bank. If the credit allows for negotiation by any bank there will not be negotiates bank and documents be sent to any bank willing to negotiate. The bank checks the documents against the credit. If the documents meet the requirements of the credit, the bank will pay, accept or negotiate according to the terms of the credit. In the case of a credit available by negotiation, the issuing bank or the confirming bank will negotiate without recourse. Any other bank including the advising bank if it has not confirmed the credit, which negotiates, will do so with recourse. The bank, if other than the issuing bank, sends the documents to the issuing bank. The issuing banks checks the documents & if they meet the credit requirements, either Effects payment in accordance with the terms of the credit, either to the seller if he sends the documents directly to the issuing bank or to the bank that has made funds available to him in anticipation, or Reimburses in the pre-agreed manner the confirming bank or any bank that has paid accepted or negotiated under the credit. When the documents have been checked by the issuing bank and found to meet the credit requirements, they are released to the buyer upon payment of the amount due or upon other terms agreed between him and the issuing bank. The buyer sends the transport document to the carrier who will then proceed to deliver the goods.

Export Import Process:

Payments

Advising Beneficiary Processing Documents Collecting payments Payments

Processing Documents L/C application

o Parties to a Letter of Credit: There are a number of parties involved in a L/C and the rights & obligations of the different involve parties also differ from each other. The involved parties can be named below: Importer / Buyer Opening / Issuing Bank Exporter / Seller / Beneficiary Advising / Notifying Bank Confirming Bank Negotiating Bank Paying / Reimbursing Bank. Importer / Buyer is the person who requests/ instructs the opening bank to open a L / C. He is also called Opener or Applicant of the credit.

Opening / Issuing Bank is the bank which opens / issues an L/C on behalf of the importer. It is also called the importers / buyers bank. Exporter / Seller / Beneficiary is the party in whose favour the L/c is advised to the exporter. It is the bank situated in the exporting country and it may be branch of the opening bank or a correspondent bank. It may also assume the role of confirming and / or negotiating bank depending upon the conditions of the credit. Confirming Bank is a bank, which adds its confirmation to the credit, and it is done at the request of the issuing bank. The confirming bank may or may not be the advising bank. Negotiating Bank is the bank, which negotiates the bill and pays the amount to the beneficiary. It has to carefully scrutinize the documentary credit before negotiation in order to see whether the documents apparently are in order or not. The advising bank and the negotiating bank may not or may not be one and the same. Sometimes it can also be the confirming bank. Paying / Reimbursing Bank is the bank or whom the bill will be drawn ( as per conditions of the credit ). It is nominated in the credit to make payments against stipulated documents complying with the terms of the credit. It may or may not be the issuing bank. Operations of Documentary Letters of Credit: The following five major steps are involved in the operation of a documentary letter of credit: Issuing Advising Amendment (if necessary) Presentation Settlement Issuing a Letter of Credit: Before issuing an L / C, the buyer and seller located in different countries, concludes a sales contract providing for payment by documentary credit. As per requirement of the seller, the buyer then instructs the bank - the issuing bank - to issue a credit in favour of the seller (beneficiary). Instruction / Application for issuing a credit should be made by the buyer

(importer) in the issuing banks standard form. The credit application which contains the full details or the proposed credit Also serves as an agreement between the bank and the buyer. After being convinced about the necessary conditions contained in the application form and sufficient conditions to be fulfilled by the buyer for opening a credit, the opening bank then proceeds for opening the credit to be addressed to the beneficiary. Advising a Letter of Credit: Advising through a bank is a proof of apparent authenticity of the credit to the seller. The process of advising a credit consists of forwarding the original credit to the beneficiary to whom it is addressed. Before forwarding, the advising bank has to verify the signature (s) of the officer (s) of the opening bank and ensure that the terms and conditions of the credit are not in violation of the existing exchange control regulations and other regulations relating to export. In such act of advising, the advising, the advising bank does not undertake any liability.

Amendment of Credit: Parties involved in a L / C, particularly the seller and the buyer, can not always satisfy the terms and conditions in full as expected due to some obvious and genuine reasons. In such a situation, the credit should be amended. In case of revocable credit, it can be amended or canceled by the issuing bank at any moment and without prior notice to the beneficiary. But in case of irrevocable credit, it can neither be amended nor canceled without the agreement of the issuing bank, the confirming bank (if any) and the beneficiary. Presentation of Documents: The seller being satisfied with the terms and conditions of the credit proceed to dispatch the required goods to the buyer and after that, has to present the documents evidencing dispatching of goods to the negotiating bank on or before the stipulated expiry date of the credit. After receiving all the documents, the negotiating bank then checks the documents against the credit. If the documents are found in order, the bank will pay, accept or negotiate to the issuing bank. The issuing bank also checks the documents and if they are found as per

credit requirements, either Effects payment, or Reimburses in the pre-agreed manner. Settlement: Settlement means fulfilling the commitment of issuing bank in regard to effecting payment subject to satisfying the credit terms fully. This settlement may be done under three separate arrangements as stipulated in the credit. These are: a) Settlement by Payment: Here the seller presents the documents to the paying and the bank then scrutinizes the documents. If satisfied, the paying bank makes payment to the beneficiary and in case this bank is other then the issuing bank is satisfied with the requirements, is obtained by the paying bank from the issuing bank. b) Settlement by Acceptance: Under this arrangement, the seller submits the documents evidencing the shipment to the accepting bank accompanied by a draft drawn on the bank (where credit is available) at the specified tenor. After being satisfied with the documents, the bank accepts the documents and the draft and if it is a bank other than the issuing bank, then sends the documents to the issuing bank stating that it has accepted the draft and at maturity the reimbursement will be obtained in the pre-agreed manner. c) Settlement by Negotiation: This settlement procedure starts with the submission of documents by the seller to the negotiating bank accompanied by a draft drawn on the buyer or any other drawee, at sight or at the tenor, as specified in the credit. After scrutinizing that the documents meet the credit requirements, the bank may negotiate the draft. This bank, if other than the issuing bank, then sends the documents and the draft to the issuing bank. As usual, reimbursement will be obtained in the pre-agreed manner. 5.3 Types of Fign Exchange Limit Sanctioned by Commercial Banks

Foreign Exchange Limits can be the following categories:

Letter of Guarantee. Export Business. Import Business. Foreign Exchange Remittance.

5.3.1 GUARANTEE A guarantee is an irrevocable undertaking to pay in case of a certain eventuality. Guarantee serves as a protection against losses, which may occur if anyone of the party fails to fulfill his/her contractual obligations. Coverage is also required if one partner make advance performance of some kind i.e.; a down payment before he/she has obtained the relevant counter performance form his/her partner. According to contract act-1872 under section 126 guarantees can be defined as a contract to perform the promise or discharge the liability of third person in case of his default. The promise to pay is usually unconditional and must be honored by the guarantees on first demand. A guarantee is usually for a specified time period.

Letter of Guarantee: Inland and Foreign Export Performance bonds Backed by Counter Guarantee of party Backed by ECGS cover Fully secured (backed by 100% cash margin) Fully secured by approved securities. Partly secured (with minimum cash margin of say 25%) Unsecured guarantees (with a margin less than 25%) Deferred Payment Guarantees (DPG) (Fully secures by collateral)

Different sort of guarantees: A. Tender guarantee/bid bond/Tender bond The tender guarantee assures the tender that tenders shall uphold the conditions of his tender during the period of the offer as binding and that he/she will also sign the contract in the event of the order being granted. A demand can be made under a tender guarantee if the beneficiary provides a written statement that the tendered failed to comply with one of the

above conditions. B. Performance Guarantee: A performance guarantee expires on completion of the delivery or performance. Beneficiaries find that as a guarantee, the contract will be fulfilled in every respect and can retain the guarantee as per provision for long time. Including a clause stating that the supplier can claim under the guarantee, by presenting an acceptance certificate signed by the buyer can counteract this. C. Down payment Guarantee Down payment guarantee assures to the importer that his down payment or advance payment will be refunded if the exporter fails to comply in full or in part with his contractual obligations. D. Warranty Guarantee In most cases, it is not possible for the importer to check immediately the quality of the goods he has ordered and received. A warranty guarantee provides a security that within the specified period he will receive a certain amount if the goods are not the agreed quality specifications and the exporter does not honour his obligations to remove discrepancies, defects or repair damage. E. Payment Guarantee Through the payment guarantee, the buyers bank undertakes to pay the seller if the buyer defaults, the seller ensures compliance with the terms of payment and thus the purchase price will be paid. 5.4 Export Business (Financing) and Procedures Export brings the foreign currency in the economy. Higher the export higher the reserve of foreign currency. The export section of AB is engaged with various export-related activities for the encouraging the exporter. The major function of this section is comprises with purchase, collection and negotiate the export bill, provide the exporter in export financing and helps the exporter in different issues. A person desired to export should make application to obtain ERC (Export Registration Certificate) from CCI&E. Then the person should step in to a bank along with ERC to obtain EXP from the bank. He must submit: Trade license.

 ERC. Membership Certificate from chamber of commerce. 5.4.1 Presentation of Documents to the Bank: The exporters by exporting of goods to the importing countries submit the related export documents to the branch for realization of the export proceeds. As per Guidelines for Foreign Exchange Transactions (GFET), all exports must be made through EXP forms which must be submitted with other export documents by the exporter within 14 days from the shipment of goods. Besides EXP the other documents usually constitutes a full set of export documents are: Bill of exchange or Draft. Commercial Invoice Transport Documents such as- Bill of Lading/Airway bill/ Truck receipt/Railway receipt etc. Packing list Inspection certificate Country of origin Export License Bill of Exit Freight Certificate (if on CFR basis).

In addition to the above the importer of goods of the importing country may ask for submitting additional documents as per their requirements which must be mentioned in the export LC. If so, the exporter must submit such documents with the full set of export documents to the authorized dealing branch. 5.4.2 Security of Documents: Upon receipt of export documents from the exporter at the authorized

dealing branch, the concerned officer of the AD branch must check the documents whether it is drawn and prepared as per terms and conditions of the respective export LC and also as per instructions and guidelines of Bangladesh Bank. It must be ensured that the same are exactly as required for by the credit and are not on their face inconsistent with one another and that the documents be presented to the bank as quickly as possible and, in any case, within the validity of the credit and within the period of time specified or applicable. 5.4.3 Processing and Negotiating of Export documents: The issuing Banks undertaking under a letter of credit to pay, accept or negotiate is conditional to presentation of the documents, which are strictly as per the terms and conditions of the credit. The term Negotiation is broadly defined as the giving of value and can be applied to transaction of any tenor (sight or usance). The issuing bank must reimburse the banks which negotiates drafts and documents drawn under its documentary credit. The credit may be made freely negotiable with any bank, or negotiation may be restricted to a bank nominated by the issuing bank. If the credit is unconfirmed, the negotiating bank will only offer to give value if it is prepared to accept the payment risk of the issuing bank for the tenor of the drafts. If it agrees to negotiate it may do so with recourse, it may reserve the right to ask for its money back if payment is not received from the issuing bank as expected. If the credit is confirmed, the confirming bank undertakes to negotiate compliant documents upon presentation and without recourse to the exporter or to bona fide holders (usually other negotiating bank). When the negotiating bank gives value, it does not receive immediate value it self. Consequently the negotiating bank deducts interest/cost from its payment to cover the period between paying

the exporter and receiving payment from the issuing bank. The negotiating bank goes through the terms and conditions of the LC. If the conditions of the LC are acceptable then the bank checks the following things: Draft and other documents attached there under the forwarding schedule of the client. Check Letter of credit and corresponding file to ascertain obligation of the branch to negotiate or pay. Detail security of draft, commercial invoice, transport document, certificate of origin, insurance document, pre-shipment inspection and other documents as per stipulations of the letter of credit. Confirm that documents are properly endorsed to the order of bank Allocate bill number to each draft and supportive documents. List discrepancies (if any) and refer to the Manager, Export and remitting branch. Drawing against the letter of credit to be noted- for partial/full drawing endorse on the reverse of the letter of credit. Necessary accounting entries are passed through vouchers. Vouchers are checked and signed by the authorized officers. Makes necessary entries into the register and subsidiaries. Sends original documents to issuing bank, endorsed, indicating dispatched applicable). Files the copies of documents in due order. After realization of export proceeds, foreign currencies are converted into BDT where needed. After realizing the charges rest amounts are credited to the proper a/c and necessary adjustments are done. All the necessary vouchers are prepared and posted into computer for general ledger update. instruction and claim reimbursement (where

5.5 Export LC Advise: LCs are advised under the AB banks standard cover letter. If the incoming telex/SWIFT states full details to follow or words to that effect, the banks advice to beneficiary must state Pre-advise clearly. In case of mail confirmations where a pre-advice by telex/SWIFT has been received, the bank must check the terms of the LC to ensure that the terms are consistent. In case of any deviation a message are sent to the issuing bank and the beneficiary is advised suitably. Where the LC is received by SWIFT/telex, special instructions under bank to bank information are examined by the bank. The bank has to be very careful to avoid any duplication. One copy of the advising is given to the beneficiary and one is kept as an office copy in the bank. 5.6 Discrepancy Handling: In an LC, if there is any missing of any documents or other things, which was required by the importer according to the conditions of the LC, this is called the discrepancy of the LC. Then the importer or its issuing bank can claim a charge for the discrepancy from the exporter. Any discrepancy is brought to the notice of the Manager, Export and the instructions given by the incumbent to be followed meticulously. Pre-fact approval of the competent authority is obtained to negotiate, accept or pay draft drawn under the letter of credit where discrepancies exist in the stipulated documents. Appropriate Letter of indemnity is obtained from the beneficiary or the presenter. In this situation the payment is made under reserve. The opening bank is informed accordingly in the forwarding schedule accompanying the documents and draft and openers

approval to this effect is solicited. The reserve has to be lifted upon receipt of confirmation of honoring of the drawing under the letter of credit.

5.7 Back to back letter of Credit: Operation of BBLC: Before opening B.B.L.C credit report on the applicant, the supplier / beneficiary and on the buyer of R.M.G. to be prepared (Credit report on the beneficiary of the B.B.L.C. is not a must if the L/C limit does not exceed TK. 5 Lac). Report from CIB of BB is to be obtained and LRA is to be prepared. If necessary B.B.L.C may be opened up to the extent of 75% of F.O.B value of export L/C in case of both woven and knit garments. Where FOB value exceeds US$ 60/ dozen and cutting and making charges not less than US$ 12 per dozen, back to back L/C may be opened up to 80% and 85 % of FOB value of export L/C for quota and non quota category (of woven ready made garments respectively). B.B.L.C up to 805 of F.O.B value for all children items may be opened. B.B.L.C may be opened on usage basis covering usage period of not more than 120 days and interest for usage period shall not exceed L.I.B.O.R. The production capacity of the factory and the time gap available between the shipment date (of export L/C) and expected arrival date of raw materials must be examined carefully to ascertain whether the garment products can be exported within the shipment validity to avoid stock lot. Branch will obtain pre and post shipment Export credit guarantee from Sadharan Bima Corporation to safe guards the banks interest. Adequate insurance policy covering the risk of fire, R.S.D. (Riot, Strike and Damage), flood, cyclone and burglary should be obtained from the bonded warehouse and the factory. On receipt of import bills drawn under B.B.L.C, the branch will examine the documents very carefully and must inform the negotiating bank over telex about the discrepancy if found within 7 banking days following the day of receipt of the documents. The importer must also be notified as to discrepancies if the documents comply all the terms and conditions of B.B.L.C. acceptance is

communicated to negotiating bank fixing up the maturity date for payment of import bills without delay. Branch will arrange clearance of imported consignment by deputing suitable banks representative to escort the consignment from the port up to the factory premises. Goods to be cleared through a C&F agent nominated by the garments industry and approved by the bank. During the course of production, the branch will exercise close supervision and control over manufacturing process. If the goods become stock lot the matter should be advised to National Board of Revenue (N.B.R) and Bangladesh Bank immediately. 5.7.1 Paper / Documents Required For Opening BBLC Master L/C Valid Import Registration Certificate (IRC) and Export Registration Certificate (ERC) issued by C.C.I & E. L/C application form and L.C.A. form duly filled in and signed. Performa Invoice and Indent. Insurance cover note with money receipt. Duly signed IMP form. 5.7.2 Back to Back Letter of Credit (Inland): Such facility is allowed to the exporter who received export letter of credit from overseas buyer but is not the actual producer/manufacturer of the goods for export. In such a case, the bank at the request of the exporter opens Inland letter of credit in favour of the actual producer within the country. The inland letter of credit on the strength of export letter of credit must confirm to the terms and conditions of the export letter of credit with the following exceptions: Name of the beneficiary will be actual supplier. L/C value will be less than that of the export letter of credit i.e. less margin of profit of the exporter. Period of validity will be earlier than the expiry of the export L/C 5.7.3 Back to Back Letter of Credit (Import):

Where permitted by CCI & E and Bangladesh Bank, Back-to-Back L/C can be opened in favour of foreign supplier for import of raw materials for manufacture 5.7.4 Papers and Documents required for opening of BB LCs: LC application Form Master LC Proforma Invoice or indent Valid Bonded Ware House License Valid IRC & ERC Insurance Cover Note with Money Receipt IMP form LCAF duly filled in CIB Report Quota allocation letter for quota item Trade License Textile permission issued by the Ministry of Textile, and any other documents which are required as per relevant policies, guidelines and notification of the government.

5.8 Foreign Bills Purchased (FBP)/ Discounted: After shipment, exporters gather all documents as per terms of export LC, and then submit it at the bank for purchase. Bank, as negotiating bank, checks the documents as per LC terms and in the context of UCPDC and GFET of Bangladesh Bank and takes following actions: If the documents on the face of it are as per LC terms, then the Bank negotiates the documents. In case of Sight LC bill proceeds are credited to the exporters account immediately (FBP created). In case of usance LC bill discounted and proceeds credited to exporters account. If the exporter had already taken BB (Back to Back) LC facilities, the respective amounts are set off or accounted for before crediting residue amount to exporters account.

5.8.1 Internal (Local) Bills Purchased (IBP)/ Discounted: In the there are also lots of documents which are purchased or discounted between the internal/local companies of our countries. In this case the following terms are ensured by the bank: Letter of Credit of Banks are to be verified properly to ascertain the genuineness All bills drawn under the letter of credit should be received/ sent through registered post or recognized courier service/messenger/client.

Track record of the drawer should be assessed carefully. Integrity, credit worthiness and repayment capacity of the drawer are also to be assessed.

Acceptance of the reputed drawee should only be accepted and its genuineness be ascertained.

There is an interest from the date of purchase up to the date of maturity on amount of the bill purchased is to be collected by the bank.

Any refund of interest (in case of realization of proceed prior to the maturity date) requires approval of the competent authority.

If the maturity date is over but the payment is not made by the exporter, then it becomes an overdue and the interest rate is increased. The bank has to inform the client about their overdue and overdue charges are realized by the bank. Even after this the payment is not made then the bank has to send a letter to BAFEDA (Bangladesh Foreign Exchange Dealers Association).

Periodic balance of register/ ledger/ subsidiaries to be done, checked by the authorized officer and verified by the Manager, Export.

5.9 Import Procedure

In import procedure bank issues Documentary Credit (DC) on behalf of importer. A Documentary Credit is a definite undertaking given by the issuing bank at the request of a customer (Applicant) or on its own

behalf to make payments to a beneficiary/exporter subject to submission of stipulated documents provided all terms and conditions of the credit are complied with. 5.9.1 Parties of a Documentary Credit: Importer / Buyer / Applicant The Beneficiary / Exporter / Seller The issuing bank The Advising bank The Negotiating bank The confirming bank The Paying bank / The Reimbursing bank

5.9.2 Issuance of a Documentary Credit: At the time of issuing DC the following precautions should be taken: The client, on whose behalf the credit is issued, should have the following characteristics: Account Holder of this Bank Good impression for transaction Integrity Credit Worthiness

5.9.3 Common Documents in Letter of Credit Transactions: a. Draft

b. Commercial Invoice c. Marine Bill of Lading d. Airway Bill e. Railway Receipt f. Insurance Policy g. Certificate of Origin h. Certificate of Manufacture i. Inspection Certificate j. Packing List 5.9.4 Lodgment of Documents: At the time of Lodgment the following care should be taken for security: Whether the documents are as per LC terms Checklist enclosed with the LC should be carefully followed In case of any discrepancy, the message should be passed to the negotiating bank not later than seventh banking days following the day of receipt of the documents. Transaction vouchers should be passed as per requirements.

5.9.5 Principles in terms of opening Import Letter of Credit: In terms of opening an import letter of credit the following principles and processes are to be followed: Importer must be registered with the CCI & E, valid Import Registration Certificate (IRC) must be presented to the LC issuing bank according to the current Import Policy Order of the Government.

 All imports except few cases, requires Letter of Credit Authorization Form (LCAF) to be approved by the authorized dealer or the central bank. All imports into Bangladesh must be covered by ITC schedule (HS CODE/Commodity codes which are unique globally) in force in the country. In terms of issuing any letter of credit, all relevant provisions of the current Import Policy Order, Guidelines for Foreign Exchange Transactions, and other circulars, notifications and instructions issued by the concerned regulatory authority from time to time must be very carefully noted by the Bank. In case of opening Back to Back letter of credit against lien on export letter of credit/ contract, the related letter of credit /contract has to be scrutinized carefully to check whether they are acceptable as per criteria according to relevant government rules and credit norms of the bank. The related export letter of credit/contract has to be marked lien to the opening bank of the export letter of credit and the concerned opening bank must authenticate Swift or tested telex or by signed letter in this authentication. Payment of back to back letter of credit has, invariably, to be made from export proceeds. Default cases are to be referred to the appropriate authority for decision before due date of payment. Applicant of the credit, in every case, will be notified of the arrival of the import bill and the shipment under the credit.

 Document checking officer have to review the date of arrival of the vessels carrying the goods shipped / dispatched under the credit. Quick appropriate steps are taken to protect the goods to the credit in order to protect interest of the bank. Insurance coverage is an important aspect to look into.

5.10 . Negotiation of Document under letter of Credit: Under this arrangement, after the goods are shipped, the exporter submits the concerned documents to the negotiating bank for negotiation. The documents should be negotiated strictly in accordance with the terms and conditions and within the period mentioned in the letter of credit.

Advances against Bills for collection:

If an exporter fails to get the documents negotiated by the bank, he has to take resort to alternative course of obtaining advance from the banks against the security of export bills surrendered for collection. In such a case, banks may give advance to the extent of certain percentage of the value of goods depending upon the standing of the exporter and importer, nature of the good etc. Year Wise Advances against Bills for collection Position (North South Road Branch) (Amount in Million Tk.) Year Local Document Bills Purchase Foreign Document Bills Purchase Total 2006 12 As on audit 997.02 As on audit 304558.49 09 249.25 258.25 2005

Chapter 6

SWOT ANALYSIS OF AB BANK LTD Strength 1. Wide image 2. Excellent management 3. High commitment of customer and qualified & experienced human 4. resources 5. Sophisticated automated system has been introduced 6. Bank has many attractive schemes. 7. Well furnished & air conditioned Bank. 8. Govt. has banned Jatiya Sanchay Patra Weakness 1. Heavily depends on Head Office for decision making. 2. All branches are not equally not well decorative

1. 2. 3. 4.

Opportunities Increasing demand of customer finance Investment potential of Bangladesh Relationship management Introduction of Online Banking throughout all branches within Bangladesh.

1. 2. 3. 4.

Threats Some Commercial & foreign bank as well as private bank. Similar type of retail banking products. Certain Bangladesh Bank rules and regulation. Customer awareness of pricing & services.

CHAPTER 7

OVERALL PERFORMANCE OF AB BANK ARE SHOWN BY MEANS OF GRAPHICAL REPRESENTATION: Total equity from year 2004 up to 2008 Equit y 1600 1400 1200 1000 800 600 400 200 0

Million T

2004

2005

2006 ar

2007

2008 Ye

Operating Profit
800 600 400 200 0 2004 2005 2006 2007 2008 Million T

Year

Operating Profit (PAT)

300 250 200 150 100 50 0 2004 2005 2006 2007 2008 Million T

CAR % 12 10 8 6 4 2 0 2002 Standard Maintained

2003

2004

2005

2006

2007

2008

Dopos it 30000 25000 20000 15000 10000 5000 0 Million T

2004

2005

2006

2007

2008

Classified Loan 30 25 20 15 10 5 0 2002 CL

2003

2004

2005

2006

2007

2008

Deposit Mix

FDR Savings CD Others

25000 20000 15000 10000 5000 0 2004 2005

Loans &Advance Advances

Million T

2006

2007

2008

Sectoral Credit Portfolio

Others Agriculture Industry & Credit Export Trade Finance Financial Institution Retail Loan Infrastuctural

Indudtry & Infrastructural Credit

R eal Estate T rasport P rint & P ackaging C ement F ood & B everage Iron &Steel T extile & R M G Others

Expor t
14000 12000 10000 8000 6000 4000 2000 0 2004 2005 2006 2007 2008

Million T

Year Remittanc e
120 100 80 60 40 20 0 2004 2005 2006 2007 2008 Million T

Asset Utilization 80 70 60 50 40 30 20 10 0

Asset Utilization

2004

2005

2006

2007

2008

EP S 70 60 50 40 30 20 10 0

EPS

2004

2005

2006

2007

2008

BVP S 300 250 200 150 100 50 0 2004 2005 2006 2007 2008 BVPS

Profit and Loss Statement for the year ended 31 December 2008 Amounts in Taka Year ended Year ended 31 Dec. 2008 31 Dec. 2007

Operating Income Interest income Interest paid on deposits, borrowings, etc. Net interest income Investment income Commission, exchange and brokerage Other income Total operating income (a) Operating expenses Salary and allowances Rent, taxes, insurance, electricity, etc. Legal expenses Postage, stamps, telecommunication, etc Stationery, printing, advertisement, etc. Chief executives salary and fees Directors fees Auditors fees Charges on loan losses Depreciation and repair of Banks assets Other expenses Total operating expenses (b) Profit before provision (c=a-b) Provision against loans and advances Provision for diminution in value of investments Other provision Total provision (d) Total profit before taxation (c-d) Provision for taxation Net profit after taxation Appropriations Statutory reserve General reserve Dividends, etc. Retained surplus Earnings per share (EPS)

2,262,947,768 2,051,741,482 (1,571,542,000) (1,540,836,908) 691,405,768 510,904,574 317,472,805 408,397,598 486,441,224 436,425,432 82,178,472 104,629,887 886,092,501 1,577,498,269 466,373,810 142,943,673 769,621 28,528,866 23,404,603 4,691,609 977,171 445,250 -53,051,297 101,284,907 822,470,807 755,027,462 212,111,511 -135,462,343 347,573,854 407,453,608 245,000,000 162,453,608 81,490,722 --81,490,722 80,962,886 31.26 949,452,917 1,460,357,491 417,050,639 158,053,602 646,267 30,048,192 19,637,226 2,900,000 1,154,382 255,000 307,655,000 51,837,050 111,053,534 1,100,290,892 360,066,599 170,000,000 --170,000,000 190,066,599 100,000,000 90,066,599 38,013,320 --38,013,320 52,053,279 18.19

Balance Sheet at 31 December 2008 Amounts in Taka At At 31 Dec. 2008 31 Dec. 2007 Property and Assets Cash In hand (including foreign currencies) Balance with Bangladesh Bank and its agent bank(s) (Including foreign currencies) Balance with other banks and financial institutions In Bangladesh Outside Bangladesh Money at call and on short notice Investments Government Others Loans and advances Loans, cash credits, overdrafts, etc. Bills purchased and discounted Fixed assets including premises, furniture and fixtures Other assets Non-banking assets Total assets Liabilities and capital Liabilities Borrowings from other banks, financial institutions, and agents Deposits and other accounts Current deposits Other demand deposits Bills payable Savings bank deposits Short term deposits Fixed deposits Bearer certificates of deposits Other deposits Other liabilities Total liabilities Capital/Shareholders Equity Paid-up capital 1,935,415,308 447,609,426 1,487,805,882 540,799,380 58,756,465 482,042,915 389,841,183 4,060,946,942 3,275,356,000 785,590,942 21,384,633,900 20,494,759,758 889,874,142 370,056,970 4,383,708,872 -33,065,402,555 1,910,530,448 27,361,442,154 3,438,832,415 1,389,662,491 545,669,598 6,949,853,081 2,258,788,337 12,127,312,542 127,493,553 523,830,137 2,266,550,116 31,538,522,718 2,910,258,213 424,564,899 2,485,693,314 994,140,941 15,815,086 978,325,855 437,497,085 6,738,151,765 6,379,123,400 359,028,365 17,008,497,469 16,567,561,650 440,935,819 276,665,125 4,148,268,828 -32,513,479,426 761,463,419 28,299,226,744 3,418,474,830 1,120,874,616 573,560,403 6,343,878,618 2,070,763,039 13,802,702,710 126,412,684 842,559,843 2,209,212,488 31,269,902,651

519,763,600 650,203,611 176,127,054

495,012,900 556,311,769 67,678,720

Statutory reserve Other reserve Retained earnings Total Shareholders Equity Total liabilities and Shareholders Equity

180,785,572 1,526,879,837 33,065,402,555

124,573,386 1,243,576,775 32,513,479,426

CHAPTER 06 RECOMMENDATION: In order to competitive advantage and to deliver quality service, to management should try to modify the services: Rectify the existing problem: 1The synergy of dedicated manpower, technology, and market opportunity can lead the organization to achieve the goal, a bank must establish and adhere to adequate of loan provision & reserve. 2AB Bank should train up their Branch personnel about all sort of information regarding SWIFT and its services. 3Due to lack of proper knowledge about the operation procedure and services provided by the SWIFT, certain customer are facing problem, as they have to wait for certain time to get service and sometimes personnel are not being able to operate SWIFT without any confusion. They are not fully independent of handling SWIFT. Officials training are the solution to this problem. 4AB Bank should always monitor the performance of its competitors in the field of foreign trade. 5Mercantile Bank Ltd. Standard Bank Ltd. Mutual Trust Bank Ltd. Premier Bank Ltd. First Security Bank Ltd. Eastern Bank Ltd. Bank Asia Ltd. and Dhaka Bank Ltd. and all other private banks are emerging competitors of AB Bank. They should continuously strive and introduce new products and services as access card. ATM with future improved quality service. 6For customer convenience in foreign exchange department of AB Bank Ltd. should provide more personnel to deliver faster service to their honorable customer. 7It seems to me that day to day customers operation is increasing individual employee has to handle different types of job. But that is pocking a back for an employee. As a result it might be happen any big mistake by the employee and service is also time consuming and customer has to suffer for his situation. May be it would the reason for employees de-motivation as well as the customers dissatisfaction. 8ABBL should focus on their promotional activities. 9The should also focus on the marketing aspects to let customers know about their product and offering and more promotion should be given to attract new customer 10ABBL must develop electronic banking system to modernize the service. Technological advantage of a bank ensuring its competitive edge in the market place

can only be achieved by efficient manpower. It is market share to reduce its operating cost and to generate new revenue. Electronic banking system also allows increased access to the financial system by its customers. Some other important factor that should be focused on the development process: 11Time consumed at service level should be minimized at optimum level. 12Evaluate customers needs from their perspective and explain locally the shortcomings. 13 Customer convenience should receive priority over other. 14Improve office atmosphere to give customers better feeling. 15Use appropriate techniques in evaluating customers need professionally. 16To deliver quality service top management should try to mitigate the gap between customers expectation and employees perception.

BIBLIOGRAPHY:

1Annual Report of AB Bank Ltd. 2006,2007,2008. 2Annual audited report of ABBL - 2009, North South Road Branch. 3Article Trade Hongkong and Shanghai Banking Corporation Limited (HSBC) 4What the Banker Does Abul Hashem 5Ali Md. Manboob Foreign Remittance. 6Journals of Bangladesh Institute of Bank Management. 7Mr. Ahamed Nasiruddin Precaution to be taken at the time of opening letter of credit. 8Ali Md. Mahboob Import Financing 9International Business & Multinational Enterprises Robert Brookeson. 10Credit Management Bangladesh Institute of Bank Management. 11Article International Business Management. Mark Humble 12www.abbank.com.bd 13www.google.com

-The End-