1. How the word ’Bank’ has been originated?

The word, ‘bank’ is said to have derived from the French word ‘Banco’, or ‘Bancus’ or ‘Banc’ or
‘Banque’ which means, a ‘bench’. In fact, the early Jews in Lombardy transacted their banking
business by sitting on benches. When their business failed, the benches were broken and hence, the
word ‘bankrupt’ came into vogue. But, Macleod in his book, ‘Theory and practice of banking’ has
expressed a different view. According to him, the money changers never called ‘Benchieri’ in the
Middle Ages. So, this derivation may be a mere conjecture.
2. What is money? What are the primary functions of money?

Money is anything that is generally acceptable as a means of payment in the settlement of all
transactions, including debt. General acceptability as a means of payment or as a medium of
exchange is the unique feature of money. What makes money is the belief held by everyone that it
will be accepted as such by all others in the economy. Money, commonly defined, comprises coins
and paper currency and demand deposits of banks.
The primary and unique function of money is that of acting as a medium of exchange. A
characteristic that will help separate money from other (near-money or non-money) assets. It is this
function alone which can help identify money as money.
Money customarily serves as a common unit of account or measure of value in terms of which the
values of all goods and services are expressed.
Money also serves as a standard or unit in terms of deferred or future payments are stated. This
applies to payments of interest, rents, salaries, pensions, insurance premium, etc. In a money-using
system, the bulk of deferred payments are stipulated in money terms.
Money also serves as a store of value, i.e., members of public can hold their wealth in form of
money. This function is derived from the use of money as medium of exchange in a two-fold
manner.
3. What is a measure of money supply?

A single measure of money supply defined as the sum of currency and demand deposits, both held
by the public, we call it the narrow measure of money supply (M 1). A ‘broader’ measure of money
supply (M2) is defined empirically as money narrowly defined plus the time deposits of banks held
by the public.
Supply of Money is the total stock of money of various forms at a particular point of time. There are
two common measures of money supply: Narrow Money (M1), Broad Money (M2).
M1 = Currency outside Banks + Dd. deposits of the banking system.
M2 = M1 + Time deposits of the banking system. Demand for and supply of money will interact
and determine price of money, known as interest rate.

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 4. Demand Deposits and Time Deposits
In monetary analysis, only a two-fold classification of bank deposits into (a) demand deposits and
(b) time deposits is made. Demand deposits are defined as deposits payable on demand through
cheque or otherwise. It is only demand deposits which serve as a medium of exchange. All other
deposits which are not payable on demand and on which cheques cannot be drawn have fixed term
to maturity. They are, therefore, called time deposits.
5. What is Financial System?
The financial system of any country is an arrangement of financial organization and financial laws in
such a way that leads to the development of the economy. Like any other system in a country, the
financial system takes care of the financial health of any country. Any decision regarding finances is
passed through this system. Proper functioning of the financial system is an indicator of the financial
health of any economy. Major components of any financial system are the central bank, financial
ministries and few authorized financial agents.
6. Overview of Financial System of Bangladesh
The financial system of Bangladesh is comprised of three broad fragmented sectors. The sectors
have been categorized in accordance with their degree of regulation.
(a) Formal Sector: The formal sector includes all regulated institutions like Banks, Non-Bank
Financial Institutions (FIs), Insurance Companies, Capital Market Intermediaries like Brokerage
Houses, Merchant Banks etc.; Micro Finance Institutions (MFIs).
(b) Semi-Formal Sector: The semi formal sector includes those institutions which are regulated
otherwise but do not fall under the jurisdiction of Central Bank, Insurance Authority, Securities and
Exchange Commission or any other enacted financial regulator. This sector is mainly represented by
Specialized Financial Institutions like House Building Finance Corporation (HBFC), Palli Karma
Sahayak Foundation (PKSF), Samabay Bank, Grameen Bank etc., Non Governmental Organizations
(NGOs and discrete government programs.
(c) Informal Sector: The informal sector includes private intermediaries which are completely
unregulated
7. What is Financial Intermediation?

Financial intermediation is a productive activity in which an institutional unit incurs liabilities on its
own account for the purpose of acquiring financial assets by engaging in financial transactions on
the market; the role of financial intermediaries is to channel funds from lenders to borrowers by
intermediating between them.
Financial Intermediaries (FIs) are institutions or firms that mediate or stand between ultimate lenders
and ultimate borrowers or between those with budget surpluses and those who wish to run budget
deficits. The examples are banks, insurance companies, unit trusts (or mutual funds), investment
companies, provident funds, etc. the central function of all FIs is to collect surpluses (savings) of other
economic units and to lend them on to deficit spenders.

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 8. Financial System of Bangladesh: Basic Concepts

Finance is the provision of fund from surplus economic units to deficit economic units. Two types of
finance: direct and indirect. The financial system is a set of institutional arrangements through which
financial surpluses in the economy are mobilized from surplus units and transferred to deficit
spenders. The main constituents of any financial system are: financial institutions/ intermediaries,
financial instruments and financial markets.
The modern name of financial institution is Financial Intermediary (FI), because it mediates or
stands between ultimate borrowers and ultimate lenders. Financial institutions are generally
classified under two main heads: a) banks and b) non-bank financial intermediaries/
institutions. All so-called commercial and specialized banks are clubbed under Banking Financial
Institutions (BFIs). The investment / merchant banks, leasing companies, house finance companies
etc. are included under non-bank financial institutions (NBFIs).
9. Commercial Banking and Functions of Commercial Banks in our country

A commercial bank is a financial institution that provides services, such as accepting deposits,
giving business loans, mortgage lending including other ancillary services. The functions of
commercial banks are now wide and diverse. The primary functions of commercial bank
are:

(i) Accepting of Deposit

(ii) Lending of Money
(iii) Agency Services:
(iv) Banker Functioning as Trustee
(v) Financing in Foreign Trade
(vi) Purchase and Sale of Foreign Exchange
(i) Lockers for the safe custody of valuable assets of their customers
(ii) Banks give guarantee for their customers against commission.
(iii) Banks advise their clients relating to investment decisions as specialist
(iv) Banks issue letters of credit.
10. What is Central Bank?
The Central Bank is the supreme monetary and banking authority. According to De Cock, “a central
bank is a bank which constitutes the apex of the monetary and banking structure." In the statutes of
Bank for International Settlement (BIS), a central bank is defined as "the bank in any country to
which has been entrusted the duty of regulating the volume of currency and credit in that country."

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11. What are functions of Central Bank?
The major functions of central bank are as follows:
(i) Note issuance
(ii) Banker to the Government
(iii) Banker's Bank
(iv) Clearing House Operation
(v) Lender of the last Resort
(vi) Foreign Exchange Operations
(vii) Controller of Credit
(viii) Open market operations
(ix) Banking Supervision
(x) Developmental Functions

12. Difference between Bank and Non Bank Financial Institutions (NBFI)

(a) Bank is an organization that accepts customer cash deposits and then provides financial services
like bank accounts, loans etc. NBFI is an organization that does not accept savings deposits but can
accept Term Deposits and provides some financial services except bank accounts.

(b) Commercial banks have the ability to generate multiple expansion of credit. The non-bank
intermediaries do not have such ability. They simply mobilize Term Deposit for investment.

(c) Bank generally deals with short-term loans in the money market, whereas the nonbank
intermediaries mostly deal with all types of loans i.e., short-term, medium-term and long term loans.

(d) Bank can open LC on the other hand NBFI cannot open letter of credit.

(e) Bank can deal with foreign currency but NBFI cannot deal with foreign currency.

(f) Bank can provide over the counter service (cash receipt and payment) on the other hand NBFI
cannot offer over the counter service.

13. Banker Customer Relationship

Basically a banker-customer relationship starts with the opening of an account in a bank. Bank
accounts are opened basically in relation to Contract Act, 1872. Persons having competency to enter
into a contract may open an account with the bank. Any dispute between the two parties can be
settled only on the basis of the nature of the existing relationship.
(i) Debtor and Creditor
(ii) Creditor and Debtor
(iii) Principal and Agent:
(iv) Trustee and beneficiary
(v) Bailee and Bailor
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 (vi) Lessor and Lessee
(vii) To maintain secrecy of customer’s accounts and Right of Set-off

14. What is Lien?

Lien is the right of the creditor to retain possession of the goods and securities owned by the debtor
until the debt due from the later is paid. S/he however, does not have the right to sell the goods. The
creditor can only retain the goods/property till the realization of the debt. Lien may be particular or
general.
A particular lien confers a right to retain the goods in respect of a particular debt involved in
connection with a particular transaction.
A general lien confers a right to retain goods not only in respect of debts incurred in connection
with a particular transaction but also in respect of any general balance arising out of the general
dealing between the two parties.

Bankers Lien an enforceable right of a bank to hold in its possession any money or property
belonging to a customer and to apply it to the repayment of any outstanding debt owed to the bank,
provided that, to the bank's knowledge, such property is not part of a trust fund or is not

15. Termination of Banker–Customer Relationship

As long as there is some sort of a deposit account, the relationship would continue. However, the
relationship may be terminated on the following happenings:
 Customer’s Request
 Unclaimed Deposit Account
 Death of customer
 Insanity of the customer
 Insolvency of the customer
 Undesirable customer
 Attachment order issued by the income Tax authorities
 On receipt of Garnishee Order
16. What are the documents required in case of death of a customer?
The following are the documents needed while releasing the fund to the heirs of the Deceased
Account Holder. Depending upon the circumstances the branches will advise the heirs to submit the
relevant documents are required by the bank.
a) The Death Certificate issued by the Hospital Authority.
b) The Certificate issued by the Chairman of Union Council or Ward Commissioner

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c) Graveyard Certificate.
d) Succession Certificate issued by the Court
e) Passport of the successors or any other proof their respective identity ( If any)
f) Affidavit or Notary Public submitted by the heirs.
g) Marriage certificate issued from Marriage Register’s Office (in case of spouse).
h) Indemnity from the successors or Guarantee from third party.
i) The payment order may be issued in favor of the payee(s)
j) Others, if any.
17. What is Mandate?
A bank account holder has a primary right to operate upon his/her account maintained with the
particular bank. No person other than the account holder can order the bank to debit his/her account
(except a competent court). A mandate is an authority given by the account holder in favour of a
third person to do certain acts on his/her behalf. This is issued by an account holder with a direction
to his/her banker authorizing the person to operate the account on his/her behalf.
18. Define Power of Attorney
It is a document executed by one person called donor or principal in favor of another person called
done or agent to act on behalf of the former strictly as per authority given in the document. Power of
Attorney is of two types
i) Specific i.e. power given for a specific purpose
ii) General i.e. general authority to operate on behalf of the donor for a length of time.
19. What is Garnishee Order?

Garnishee order refers to the order issued by a court attaching the funds of the judgment debtor (i.e.,
the customer) in the hands of a third party (i.e., the banker). The term ‘garnishee’ refers to the person
who has been served with the order. This Garnishee proceeding comprises of two steps. As a first
step ‘Garnishee Order Nisi’ will be issued. ’Nisi’ means ‘unless’. In other words, this order gives an
opportunity to the banker to prove that this order could not be enforced.

20. Dormant Accounts

A dormant account refers to an account that has shown no activities such as deposits and
withdrawals for a long period of time. In course of business many savings and current accounts
become inoperative for many reasons. Such inoperative accounts are marked as ‘Dormant accounts’
if there have been no customer initiated deposits and/or withdrawals in accounts for a period of

6
1(one) year generally or for a period as may be fixed by the individual banks. All accounts (except
proprietorship, partnership concern, limited companies joint stock companies, other business
organizations, local authorities, semi-government and government institutions) in the system which
have not been operated for such a long time will be treated as “Dormant account” and shall be
marked as “Dormant” in the system and also Account Opening Form.
21. Requirements for opening a bank account.
(a) Electricity Bill; (b) Gas bill; (c) Telephone bill; (d) WASA Bill; (e) Certificate of Employer; ( f)
TIN/ BIN Certificate; (g) Holding Tax Receipt (from the City Corporation/ Municipality) (h)
Specimen Signature Card (i) Photographs of the account holder and nominee (j) Other necessary
documents depending on the nature of the customer.
22. Documents required for Limited liability Company
1. Completed Account Opening Form and KYC.
2. Certificate of Incorporation issued by RJSC.
3. Memorandum and Article of Association issued by RJSC.
4. Resolution of the Board to open account andit’s operations (Quorum of the meeting to be
fulfilled).
5. List of the directors / Form XII.
6. Valid Trade License.
7. Photo IDs (NID / Passport) of all the signatories & any director with 20% or more
8. For Public Limited Company Certificate of Commencement of
Business from the RJSC is required
23. Documents required for Partnership firm.
1. Completed Account Opening Form and KYC.
2. Certificate of incorporation issued by RJSC(if registered)
3. Partnership Deed (all pages of the deed to be signed by all the partners).
4. List of the partners / Form 1 issued by RJSC.
5. Resolution of the partners to open account andit’s operations (Quorum of the meeting to be
fulfilled).
6. Valid Trade License.
7. Photo IDs (NID / Passport) of all the signatories & partners.
8. Personal Information Form (PIF) along with recent photographs of all the signatories.
24. Accounts of Minors

The following terms & conditions shall be followed in maintaining & operating minor account:
a) The date of birth of the minor and the date when s/he attains majority will be recorded.
b) Before authorizing a legal guardian to open an account in the name of a minor, the appointment
order issued by Court in his/her name should be examined, and a copy thereof retained.

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c) In case the guardian dies before the minor attains majority having a joint account or to be
operated by the guardian only, the money should be paid by the bank to the minor
on attaining majority or to some person appointed by the court as his guardian.
d) If the minor dies, the amount of his/her credit balance is to be paid to his/her next successor on
the production of a valid succession letter.

25. Stop Payments of cheques

(a) In the following cases the payment against any cheque can be stopped:
(b) The Drawer can stop its payment.
(c) The payment may be stopped by the competent Court through Garnishi Order.
(d) The operation in the account may be stopped by the Income Tax Department or any other
competent authority of the Government of Bangladesh.
(e) If any cheque reported lost by the holder, holder in due course, payee, endorsee or bearer of the
instrument.
(f) The Bank can make stop payment in any account if the account holder has got any liability with
the Bank.
26. What is Negotiable Instrument?

A negotiable instrument is a piece of paper which entitles a person to a sum of money and which is
transferable from person to person by mere delivery or by endorsement and delivery. The person to
whom it is so transferred becomes entitled to the money and also to the right to further transfer
it. ‘Negotiable’ means transferable by delivery and ‘Instrument’ means a written document by which
a right is created in favor of a person/some person such as cheque, bill of exchange, promissory note,

27. What are the features of Negotiable Instruments?

Therefore, to identify negotiable instruments the characteristics of negotiable instruments under N.I.
Act, 1881 are clarified as follows:

a) The instruments like money are transferable from hand to hand by way of negotiation.
b) The instruments like money are transferable from hand to hand for value and are used for
settlement of debt.
c) The transferee's title is not affected due to transferor's defective title if the transferee can prove
himself/herself as holder in due course.
d) The title of the Holder in due course does not affect for defective title of his/her prior holders due
to fraud, forgery etc.

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e) The Holder in due course is entitled to sue in his/her own name against all the prior parties to
realize proceeds of the instruments.

28. What is Promissory Note?

‘A Promissory Note is an instrument in writing containing an unconditional undertaking signed

by the maker, to pay a certain sum of money only to, or to order of a certain person, or to the
bearer of the instrument’.- Sec.4. The person who makes the promise to pay is called the Maker.
He is the debtor and must sign the instrument. The person who will get the money (the creditor).
29. Essential Elements of Promissory Note

(a) The instrument must be in writing.

(b) The instrument must be signed by the maker of it.

(c) The instrument must contain a promise to pay. The promise to pay must be expressed. It
cannot be implied or inferred. A mere acknowledge of indebtedness is not enough.

(d) The maker of the instrument must be certain and definite.

(e) A Promissory Note must be stamped according to the Stamp Act.

(f) The sum of money to be paid must be certain.

(g) The payment must be in the legal tender money of the country.

(h) The money must be payable to a definite person or according to his/her order.

(i) The promissory note may be payable on demand or after a certain definite period of time.
30. What is Bill of Exchange?

‘A Bill of Exchange is an instrument in writing containing an unconditional order, signed by the

maker, directing a certain person to pay a certain sum of money only to, or to the order of a certain
person or to the bearer of the instrument ’. Sec.5.

The maker of a bill of exchange is called the drawer. The person who is directed to pay is called the
drawee. The person who will receive the money is called the payee. When the payee has custody of
the bill, he/she is called the Holder. It is the duty of the Holder to present the bill to the drawee for
his/her acceptance. The drawee signifies his/her acceptance by signing on the bill. After such
signature the drawee becomes the Acceptor.

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 31. What are the essential elements of a Bill of Exchange?
(a) The instrument must be in writing.
(b) The instrument must be signed by the by the drawer.
(c) The instrument must contain an order to pay, which is to be expressed and unconditional.
(d) The drawer, drawee and the payee must be certain and definite individuals.
(e) The amount of money to be paid must be certain.
(f) The payment must be in the legal tender money of the country.
(g) The money must be payable to a definite person or according to his/her order.
(h) A bill of exchange must be properly stamped.
(i) The bill may be made payable on demand or after a definite period of time.

32. Comparison between Promissory Notes & Bill of Exchange

(a) Number of parties: In a promissory note there are two parties- the maker and the payee. In a bill
of exchange there are three parties- the drawer, the drawee and the payee.
(b) Promise and order: In a promissory note there is a promise to pay. In a bill of exchange there is
an order to pay.
(c) Acceptance: A promissory note is signed by the person liable to pay; therefore, no acceptance is
necessary. A bill of exchange, except in certain cases, requires to be accepted by the drawee before it
is binding upon him/her.
(d) Liability: The maker of a promissory note is primarily liable on the instrument. The drawer of a
bill is liable only when the drawee does not accept the instrument or pay the money due.
(e) Relationship: In a promissory note the maker stands in an immediate relationship to the payee.
In a bill of exchange a drawer stands in immediate relationship with the acceptor and not to the
payee.
(f) Notice: In case of non-payment or non-acceptance of a bill, notice must be given to all persons
liable to pay. This is called the notice of dishonour. In case of a promissory note, notice of dishonour
to the maker is not necessary.
(g) Protest: In case of dishonour, a foreign bill must be protested if such a protest is necessary
according to the law of the place where it is drawn. In case of dishonour of a promissory note,
protest is not necessary.
33. What is Cheque?

A 'Cheque' is a bill of exchange drawn on a specified banker and not expressed to be payable
otherwise than on demand. A cheque is a document of great importance in the business world. It can

10
pass from one hand to another easily and so it has become a popular mode of payment. A cheque is
the most commercial and safe method of money transaction because the transfer cost is very low and
also the possibility of loss is minimum.

34. What are features of a Cheque?

(a) The instrument must be in writing.

(b) The instrument must be signed by the drawer.
(c) The instrument must contain an order to pay, which is to be expressed and unconditional.
(d) The amount of money to be paid must be certain.
(e) The payment must be legal tender money.
(f) A cheque may be payable to bearer or to order but in either case must be payable on demand.
35. Types of Cheque

Undated Cheque: Undated cheques are not honoured in practice since the drawee bank would be
unable to know if it is stale.
Post- dated Cheque: A cheque which bears of future date is called a Post- dated Cheque. The
drawee bank will not pay a post-dated cheque till the date thereon arrives.
Ante-dated cheque: The date of a cheque which has already surpassed but it has not become stale
as yet.
Stale Cheque: It is the practice in our country not to honor cheques presents for payment after the
expiry of six calendar months from their dates.

36. Parties to a Cheque:

(a) Drawer: The account holder who orders the bank to pay money from his/her account is called
the drawer of the cheque.
(b) Payee: In a cheque, the drawer writes the name of the person to whom money is to be paid. The
person so stated is called the Payee of the cheque.
(c) Drawee: In a cheque, the bank which is ordered to pay the money from the depositor's account is
called the drawee of a cheque.
37. Comparison between Cheque & Bill of Exchange

As per the definition of the Act every cheque has to be bill of exchange. However, the converse is

11
not true that is every bill of exchange is not necessarily a cheque. The essential differences between
the two instruments are:
Drawee: A Cheque is always drawn on a banker, whereas a bill of exchange need not necessarily be
drawn on a banker.
Playability: A Cheque is always payable on demand whereas, a bill of exchange may be payable on
demand or may be payable on a future date. If a bill is payable on a future date, it is called a usance
bill.
Maturity: A usance Bill of Exchange has to be accepted and while calculating the date of maturity
of the usance bill of exchange, three days of grace are given. A cheque is always payable on
demand.
Crossing: Cheques can be crossed; a bill of exchange cannot be crossed.
Notice of Dishonor: When a cheque is dishonored, no notice of dishonor need be given to the
drawer. When a bill of exchange is dishonored, notice of dishonor is to be given to the
38. Significance of Crossing
(a) A person, who is not entitled to receive its payment, is prevented from getting the cheque
encashed at the counter of the paying banker.
(b) It makes more difficult to obtain the proceeds of a stolen cheque (because a crossed cheque must
be collected through a bank account).
(c) It increases the time available for discovering the theft and stopping payment.
(d) Where the cheque was paid in, the thief and or his accomplice may be traced back to the
collecting banker.
39. General Crossing and Special Crossing

General Crossing: As per Section-123 of N.I Act, 1881 provides- Where a cheque bears across its
face an addition of the words “and company” or any abbreviation thereof, between two parallel
transverse lines, or of two parallel transverse lines simply either with or without the words ‘not
negotiable’, that addition shall be deemed a crossing and the cheque shall be deemed to be crossed
generally.

Special Crossing : As per Section-124 of N.I Act, 1881 provides- Where a cheque across its face an
addition of the name of a banker, either with or without the words ‘not negotiable’ that addition shall
be deemed a crossing and the cheque shall be deemed to be crossed specially, and to be crossed to
that banker.

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40. Holder and Holder in due course

The holder of a promissory note, bill of exchange or cheque means the payee or endorsee who is in
possession of it. The person legally entitled to receive the money due on the instrument is called the
holder.
'Holder in due course' means any person who for consideration becomes the possessor of a
promissory note, bill of exchange or cheque if payable to bearer or the payee or endorsee thereof, if
payable to order, before it became overdue, without notice that the title of the person from whom he
derived his own title was defective.
41. Payment in due Course (Section 10):

Payment in due course means payment in accordance with the apparent tenor of the instrument in
good faith and without negligence to any person in possession thereof under circumstances, which
do not afford a reasonable ground for believing that he is not entitled to receive payment of the
amount therein mentioned. If the payment is made in due course the drawee of the cheque (the
Banker) is discharged from all liabilities that may arise from making the payment.

42. Circumstances for Dishonor of Cheques

When a cheque is drawn properly and there is sufficient fund in the customer account, to honour the
cheque is the primary obligation of a bank. Circumstances under which, cheques are returned are
detailed here under:
(i) Insufficient Fund
(ii) Amount in figure and word differ
(iii) Cheque is undated / post dated / stale
(iv) Drawer's Signature differs/requires
(v) Payment stopped by the Drawer
(vi) Crossed cheque must be presented through bank
(vii) Mutilated cheque
(viii) Alternation in date / figure / words require drawer's full signature:

43. Loss or Destruction of Cheque Book or Cheque Leaf

(a) In case of Loss or destruction of any Cheque Book containing unused Cheque leaf, the Client
shall inform the Bank immediately. The client shall confirm the matter with a written request later
on.
(b) The Branch after getting the intimation over telephone or written application shall make Stop
Payment of those cheques immediately by giving relevant command in the Equation.
(c) The stop payment of these checks shall be checked by the Branch Manager / BSM
(d) The loss or destruction of any Cheque Book shall be entered in the Stop Payment Register.

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44. Responsibilities of paying banker.

Paying banker is a Banker on whom a cheque is drawn should pay the cheque when it is presented
for payment.
(i) This cheque paying function is a distinguished one of a banker.
(ii) This obligation has been imposed on him by sec. 31 of the NI. Act, 1881.
(iii) A banker is bound to honour his customer’s cheque, to the extent of the funds available and the
existence of no legal bar to payment.
(iii) Again, for making payment the cheque must be in order and it must be duly presented for
payment at the branch where the account is kept.
(iv) The paying banker should use reasonable care and diligence in paying a cheque, so as to;
abstain from any action likely to damage his customer’s credit.
(v) lf the paying banker wrongfully dishonors a cheque, he will be asked to pay heavy damages.
(vi) At the same time, if he makes payment in a hurry, even when there is no sufficient balance, the
banker will not be allowed to debit the customer’s account. If he does so, it will amount to
sanctioning of overdraft without prior arrangement, and, later on, the customer can claim it as
precedent and compel the banker to pay cheques in the absence of sufficient balance. Banker’s
position is very precarious and is in between the devil and the deep sea.

45. Responsibilities of collecting banker.

(i) The check should have been crossed generally or especially to the bank.
(ii) The bank should have collected such cheque for a customer as an agent for collection and not
as a holder for a value.
(iii) The proceeds of the collected cheque are credited to only to the account of the payee
or to the account of endorsee if endorsement on the instrument is regular.
(iv)The collecting banker must have acted in good faith. Here ’good faith’ means banker had no
reasonable ground to believe that the customer is not entitled to receive payment of the
amount therein mentioned.
(v) The collecting banker should have acted without negligence. ’Without negligence’ means the
account of the customer on whose behalf cheque is collected, is opened with proper
compliance of KYC norms such as verification of identity proof and address proof before
opening the account.
(vi) The collecting banker who received payment based on the electronic image of truncated
cheque should have verified the apparent genuineness of the cheque in his possession with
due diligence and ordinary care to ensure the prima facie genuineness of the instrument.

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46. Bangladesh Electronic Funds Transfer Network (BEFTN)

The Bangladesh Electronic Funds Transfer Network (BEFTN) will operate as a processing and
delivery center providing for the distribution and settlement of electronic credit and debit
instructions among all participating banks. This Network will operate in a real‐time batch processing
mode. All payment transactions will be calculated into a single multilateral netting figure for each
individual bank. Final settlement will take place using accounts that are maintained with Bangladesh
Bank.

47. Participants in BEFTN

(a) Originator. The Originator is the entity that agrees to initiate EFT entries into the network
according to an arrangement with a receiver.
(b) Originating Bank (OB): The originating bank is the bank which receives payment instructions
from its client (the originator) and forwards the entry to the BEFTN.
(c) Bangladesh Electronic Funds Transfer Network (EFT Operator): BEFTN is the central
clearing facility, operated by Bangladesh Bank that receives entries from OB
(d) Receiving Bank (RB): The receiving bank is the bank that will receive EFT entries from
BEFTN and post the entries to the account of its depositors (Receivers).
(e) Receiver: A receiver is a person/organization who has authorized an Originator to transmit an
EFT entry to the account of the receiver maintained with the Receiving Bank (RB).
(f) Correspondent Bank: In some cases an Originator, Originating Bank or Receiving Bank may
choose to use the services of a Correspondent Bank for all or part of the process of handling EFT
entries.
48. Real Time Gross Settlement (RTGS)

A RTGS system is a gross settlement system of money or securities in which both processing and
final settlement of funds transfer instructions can take place continuously (i.e., in real time). It will
enable instant settlement of high value local currency transactions as well as government securities
and foreign currency based transactions. As it is a gross settlement system, transfers are settled
individually, i.e., without netting debits against credits. An RTGS system can thus be characterized
as a fund transfer system that is able to provide continuous intraday finality for individual transfers.
In RTGS or large-value funds transfer system, the transmission and processing of payment messages
are typically automated or electronic, while settlement takes place in central bank funds.

49. Value Date Clearing

(a) When an outward clearing instrument is posted in the system, the amount lay at the account as
un-cleared balance.

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(b) Based on type of clearing, the instrument has a maturity date i.e. date when the instrument is
supposed to honor through clearing house.

(c) If the instrument is not return by the drawee. Bank, on the maturity date the instrument amount is
accumulated with available balance at the account level as cleared fund after running Value date
clearing process in the system.

50. Same Day Clearing

Bangladesh Bank, introduced another clearing house named “Same Day Clearing” for quick clearing
High Value instruments. This clearing house deals with instruments drawn on Branches of different
Banks and for the instrument amount Tk. 5.00 lac and above. As regards clearing house timing for
presenting instrument the detailed guidelines is to be followed.

51. Holder for Value

A holder for value is someone who has given something of value in exchange for a negotiable
instrument. A collecting banker acting as a holder for value enjoys the rights as holder in due course.

 A bank may undertake to collect a cheque as an agent to the holder thereof.

 The collecting banker incurs a fiduciary responsibility to account for and pay the money to
his principal.
 Thus, the collecting banker credits the customer’s account with the amount of the cheque
after the amount is actually realized from the drawee-bank.

52. Remittance of Funds:

A remittance is money that is sent from one party to another. Broadly speaking, any payment of an
invoice or a bill can be called a remittance. Remittance is a process to transfer fund from one place
to another through banking channel. Remittance contributes significantly to the Bank’s business and
to Bangladesh’s Socio-Economic development. They have a multiplier effect, not only for the family
members but also for the people in general.

53. Payment Order (PO)

Pay order is a financial instrument which is issued by the bank on customer's behalf giving an order
to pay a particular amount to a particular person. Payment orders are not negotiable. A Pay Order is
an order drawn by a bank upon itself to make payment of the amount mentioned therein to the
named payee. The Pay Order carries the primary liability of the issuing bank for payment and must
make its payment to the payee or some other person named by the payee. The Pay Order cannot be
cancelled or its payment cannot be stopped without the consent of the beneficiary.

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 a) Realize charges for duplicate PO as per schedule of charges from the customer. No other
financial entry is needed to pass for the PO amount.
b) Properly preserve customer’s application and indemnity in the respective files and record
duplicate issuance in respective column in the EBA system. Duplicate PO can be issued only
from Home Branch where PO was initially issued.

54. Impact of Remittance on National Economy

In Bangladesh, remittance is one of the most important economic variables in recent times as it
impacts economic growth, helps balance payments, increases foreign exchange reserves, enhances
national savings, and increases the velocity of money. Remittance has contributed around 35% of
export earnings for about two decades. Moreover, it is more significant than foreign aid and thus
helps in lessening dependence on foreign aid remittance gets momentum in recent times in
Bangladesh and is the second largest sector of foreign currency earnings after the garment; sector. If
the cost of imported raw materials is deducted from the foreign currency earnings of the garments
sector, than it becomes the largest sector of foreign currency earnings.

55. Cash Management

In a banking institution, the term Cash Management refers to the day-to-day administration of
managing cash inflows and outflows. Because of the multitude of cash transactions on a daily basis,
they must be managed. The ultimate goal of cash management is to maximize liquidity and minimize
the cost of funds. Cash is a most important, liquid and risky asset of a bank. The main functions of
the cash department are related to receiving and payment of cash. Functions of cash department at
branch level are very much important. Excess/short of cash leads to a branch in a risky position.
Another risky position is transportation of cash and other valuables. So, officials responsible for
dealing in cash and cash departmental functions should be very much careful, vigilant and prudent in
both receiving and payment of cash over the counter. In determining quantity to be maintained as
cash is very important function at branch level. If cash keeps in hand larger than actual needs, branch
loses interest on that excess portion. On the other hand, if cash falls short of requirement, branch
may find in an embarrassing position. No doubt, officers at branch level are responsible for
maintaining overall cash management and other related activities thereto.

55. Some Important Terms as per “Notes Refund Regulation –2012”

(a) "Altered Note" means a note in which an alteration has been made in the number, signature or
value or in any other respect;

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(b) "Charred Note" means a note which is burnt or having sign of burn partially or wholly;

(c) "Damp Note" means a note which is wet partly or fully, or so weak that the note(s) can be
easily broken or torn when counted or handled;

(d) "Deformed and Decomposed Note" means a note which has been deformed or disfigured or
vitiated or decomposed by anyway or by writing with ink or other materials on the note(s);

(e) "Half Note" means half of a note which has been divided vertically or horizontally through or
near the centre. A note formed by joining one half, which is identifiable, to another half, which
is not identifiable as belonging to the note to which first mentioned half belongs , will not be
accepted as a single note but will be treated as two half notes;

(f) "Mismatched note" means a note formed by joining a half note of one note to a half note of
another note.

(g) "Mutilated note" means a note of which a portion is missing or a note which is composed of
pieces, provided that the note presented is clearly more than half a note in area and that if the
note is composed of pieces of a note joined together, each piece is, in the opinion of Prescribed
Officer, identifiable as the part of the same note.

56. Evening Banking

Evening banking is an extended banking service after regular banking time. Specific services are
offered during that banking hours and some selected branches are permitted for these services.
Evening banking facilities for accepting deposits can be offered to the customers only if the Branch
concerned is allowed by Bangladesh Bank to operate Evening banking business. Separate Teller’s
Cash Proof Sheet should be maintained in duplicate for recording Evening banking receipts.

57. Definition of Bank Locker

Locker service offered by the Banks gives customers a completely secured facility for safekeeping of
his/her valuable items, confidential documents and other valuables against from any unfortunate
incident. Locker Service is available in most of the Branches in urban areas. A locker is a small,
usually narrow storage compartment. Bank lockers are relatively safe for a person to store valuables
for a period of time. Bank Lockers are small boxes kept in a room that is guarded heavily and has
solid iron doors or concrete walls around it. To open the locker a pair of keys is needed, one key is
with the bank and the other is with the customer. Both keys have to be used together to open the
locker. The locker facility is also called as safe custody. The relationship of the bank and the locker

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holder is that of a lessor and lessee, or in simple words that of an owner and a tenant. Each customer
is charged an annual fee for holding the locker with the bank.

58. Reasons to use a Safe Deposit Locker

(a) To ensure enhanced security and confidentiality.
(b) Customer’s items are protected from fire, flood or other natural disasters at home
(c) Customer’s items are protected from theft at home
(d) Customer’s items are protected from being lost or misplaced
(e) Customer’s family members will know where to find your important paper.
59. Items to Keep in a Safe Deposit Locker
 Copy of will
 Copy of insurance policies
 Titles to house and cars
 Banking documents
 Important papers
 Expensive jewelry stones.

60. Some Issues Related to Locker Service

For availing locker facility, the customer must maintain account with the Bank.
• Locker holder shall not use the Locker for storage of liquid, perishable items, chemicals, fire
arms, explosive, narcotics, offensive or any unlawful items.
• The lockers which were inoperative for 10 (ten) years and above must be broken open as per
clause 35 of the Bank Company Act 1991.
• Bank shall obtain Corporate Insurance coverage for all the rented lockers. Information about
minimum and maximum amount of loss to be covered under insurance policy must be properly
conveyed to locker Holders.
61. Loss of Key by the Renter
Loss of key is a very delicate issue. If a key is lost, the lessee should notify the Branch with a copy
of General Diary (GD) from local police station without delay. When the key of a locker is lost, the
lock must be broken to open the locker in the presence of the Lessee under advice to Head Office,
the cost of which must be borne by the Lessee. Two keys are used for operating a locker, - one of

19
which is delivered to the hirer for keeping under his custody, while the other known as Master key,
is retained by the Branch under the custody of Manager/ Branch Service Manager during the day and
kept in an iron safe in the vault overnight. For opening a locker the Master key is used in conjunction
with the Customer’s key.
62. Nomination for Return of Articles kept in Safe Custody with the Bank
As per Section 105 of the Bank Company Act, 1991, the Leasee/ Renter of a Locker may nominate a
person to whom in the event of the death of the person leaving the article in the safe custody; such
articles may be returned by the Bank. The nomination may be cancelled by the Leasee / Renter at
any time. As per Section 107 of the Bank Company Act, 1991, the Leasee/ Renter may nominate a
person to whom the contents of the safety lockers held with the Bank shall be released in the event
of the death of the person. In the event of death of the hirer, the contents of the locker should be
delivered only to the legal heirs of the deceased client on production of a valid Succession
Certificate from a Court of Law after obtaining legal opinion from Legal Adviser/Retainer where
nomination was not made by the renter.

63. Prize bond

Prize Bond a public savings scheme was introduced by the government of Bangladesh in 1974 with a
view to mobilizing domestic resources and providing incentive to the small savers. The first issue of
prize bond was of 10-taka denomination, which was introduced in June 1974. Up to June 1995, 82
series of 10-taka prize bonds were put on sale and the progressive net sale of the bond These bonds
are in fact government debt and on behalf of the government, Bangladesh bank is responsible for
entire management of the scheme. Bangladesh Bank on behalf of National Savings Bureau issues
Prize Bond of Tk.100/- denomination. These are available from offices of Bangladesh Bank,
Scheduled Banks, Post Office and National Savings Bureau Office. These Bonds are non-interest
bearing. But prizes are available in the draws held every three months.
64. Sanchaya Patras

Sanchayapatra is a savings certificate issued by the government of Bangladesh. It is a debt of the

government from the people. It was first issued in 1972 to motivate people to save money, collect
scattered small savings, and use the savings to mitigate national budget deficiencies. The National
Savings Bureau (JatioSanchaya Bureau), Government of the People’s Republic of Bangladesh issues
different types of interest bearing SanchayaPatras (Savings Certificates and Bonds) to the individuals
and institutions. These are available from Bangladesh Bank, Scheduled Banks, Post Office and
National Savings Bureau Office. As a scheduled Bank and part of ancillary business AB Bank
Limited sells SanchayaPatras. Different types of SanchayaPatras and Bonds are issued by the
National Savings Bureau, Government of People’s Republic of Bangladesh, they are:
(a) Five Years Bangladesh SanchayaPatras

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(b) 3-Monthly Profit basis Sanchayapatra
(c) Certificate for gratuity and pension fund.
(d) Poribar Sanchayapatra

65. Safe Keeping of SanchayaPatras

(a) Sanchayapatra can only be purchased in person from offices of National Savings Bureaus, post
offices, Bangladesh Bank, and some designated banks.
(b) To purchase a Sanchayapatra, the necessary paperwork must be completed, and the required
documents must be presented to the local office. This will result in two computer-generated
vouchers. The first voucher can be used to pay by cash or cheque. The bank will then issue a
confirmation voucher. This, along with the first voucher, must be submitted to the office to
receive the Sanchayapatra. If a cheque is used, a token will be given, and the Sanchayapatra will
only be released once the money has been transferred.

(c) The daily issue / sale of SanchayaPatra shall be deducted from the previous day’s and initialed
by the Dealing Officer and countersigned by the Manager / Branch Service Manager /
Designated Officer.

(d) The Manager / Branch Service Manager shall make surprise checking of SanchayaPatra.

(e) The SanchayaPatras which are issued to the purchasers, but not yet delivered, should also be kept
inside the Vault.

(f) Sanchayapatra is a long-term investment option with a maturity period of up to 5 years.

Therefore, it is important to plan an investment strategy accordingly and choose the type of
Sanchayapatra that best suits respective financial goals.

66. Requirements to buy Sanchayapatra

The requirements to buy sanchaypatra are:
(a) 2 copies of passport size photos of the buyer
(b) 2 copies of passport size photos of the nominee (attested by the buyer)
(c) 1 photocopy of the NID of both the buyer and the nominee
(d) 1 photocopy of a bank cheque of the buyer
Sanchayapatra worth more than 1 lac taka, a copy of your e-TIN certificate will also be required, and
the amount will have to be deposited through a cheque. For pensioner sanchayapatra, documents
regarding pension or gratuity are required. Birth certificates will be required in place of NIDs for
minors.

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  Some Important Banking Issues

1. Customer Service

Quality customer service in the banking sector is highly essential. Customer service is the most
important duty of the banking operations. Prompt and efficient service will develop good public
relations, reduce complaints and increase business. Customer service should be projected as a
priority objective of a bank along with its profitability, growth and social responsibility and
therefore the Managing Authority of each bank should have direct involvement with customer
service quality. With this end in view each bank shall form a separate framework for customer
services and complaint management. With a view to strengthening the corporate governance
structure of the bank and also to bring about improvement in the quality of customer
services of the Banks, each bank/FI shall constitute.

2. Code of Conduct for Customer Service

(a) People - The team who serve the customers.

(b) Premises - The location from which bankers serve and communicate with customers and
colleagues.

(c) Papers - The documents which are used to provide and receive information.

(d) Processes -The operation processes that enable bankers to delight customers.

(e) Practices - The way in which bankers interact with customers.

3. Money Laundering Prevention Act 2012

It is the process by which proceeds from a criminal activity are disguised to conceal their illicit
origins. Basically, money laundering involves the proceeds of criminally derived property rather
than the property itself. Money launderers send illicit funds through legal channels in order to
conceal their criminal origins. As per Money Laundering Prevention Act, 2012 (section 2(FA))
“Money laundering” means –

(i) knowingly moving, converting, or transferring proceeds of crime or property involved in an

offence for the following purposes:-

4. Anti-terrorism Act, 2009:

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Terrorist financing provides funds for terrorist activity. The main objective of terrorist activity is to
intimidate a population or compel a government to do something by killing, seriously harming or
endangering one or more persons; causing substantial property damage that is likely to seriously
harm one or more persons; or seriously interfering with or disrupting essential services, facilities or
systems.

4. Business Continuity Plan (BCP): A business continuity plan is a document that explains the
actions you should take before, during and after unexpected events and situations. It is designed to
help to identify, prevent or reduce risks where possible and to prepare for the risks that are out of our
control. Critical services or products are those that must be delivered to ensure survival, avoid causing
injury, and meet legal or other obligations of an organization.
A Business Continuity Plan includes: Plans, measures and arrangements to ensure the continuous
delivery of critical services and products, which permits the organization to recover its facility, data
and assets. Identification of necessary resources to support business continuity, including personnel,
information, equipment, financial allocations, legal
5. Vault Management: A bank vault is a secure space where money, valuables, records, and
documents are stored. It is intended to protect their contents from theft, unauthorized use, fire,
natural disasters, and other threats, much like a safe.
Issues in Vault Management

(a) Locking: The twelve bolt are secured by two independent high grade dual control. Unpick able
special key locks. These locks have ten levers each and provided with stainless steel keys in
duplicate.

(b) Fire Protection: The door is lined with 55mm layer of non-conducting, fire resisting material.

(c) Automatic Relocking Device: It comes into operation if a lock is dislodged by explosives or
attacked by other means. The door remains firmly closed no matter what the nature of the attack may
be.

(b) Safe/Vault: Cash must be kept in iron Safe. The safe must be fire and burglar resistant. Size of
the safe will be selected as per need of the branch. Several vaults may be used as per necessity but
size of the vault must be the specified size either small or big.
6. Key Holders’ Responsibility
(a) Members of the staff, especially the key holders shall vary the time and route to reach the Branch
as far as possible.
(b) After closing of vault / strong room the key holders shall not leave Branch premises together.
They will vary the time and route of leaving.

23
(c) The key holders while holding the keys will avoid traveling in the same vehicle / transport.
(d) He shall not hand over the same to any officer without recording it in the Key Register.
(e) Loss of keys if any shall immediately be informed of the police and the Head Office.
(g) The key holders shall always be extra cautious while carrying the Safe / Strong Room keys.

7. Insurance Coverage
(a) An insurance file shall be opened and maintained for cash on counter, cash in vault and
cash in transit.
(b) The cash held with counter, in safe and in transit must be insured by the Branch to protect
Bank’s pecuniary/financial interest.
(c) The Cash Officers shall never exceed the counter limit and after a certain interval they will
keep the excess amount in the vault.
(d) When the Branch cash exceeds the vault limit, the excess amount must be remitted to
Principal Branch in case of Dhaka and in other cities/towns the excess cash shall be
deposited with designated/feeding Branch or with Sonali Bank or other Banks as per
arrangements.
(e) While cash is sent from one branch to another or from one of our Branches to other bank
the insurance limit for cash in transit shall not be exceeded.
(f) The cash or other valuables must be sent through armed guarded vehicles.
(g) In special circumstances where the overnight cash holding is expected to be abnormally high
and the excess cannot be remitted to Principal Branch/Feeding Branch or other banks in that
case a temporary overnight insurance limit can be arranged through Head Office. Branches are
advised to contact Head Office in this regard.

8. Bank Archive means where all written and electronic material belonging to, or held by, the Bank
for its official activities used to store and index Images and associated information, including MICR
line information, item sequence number, and full audit trail information, for necessary retention and
accessibility.
9. Magnetic Ink Character Recognition (MICR) means the machine recognition of numeric data
printed with magnetically charged ink. MICR (magnetic ink character recognition) is a technology
invented in the 1950s that's used to verify the legitimacy or originality of checks and other paper
documents. Special ink, which is sensitive to magnetic fields, is used to print certain characters on
the original documents. The MICR line is the sequence of numbers and characters that appear at the
bottom of a check. It consists of three number sets: the bank routing number, the account number

24
and the check number. The order of number sets is country-specific. These three sets of numbers act
as unique identifiers for the check and the person who signs it.

10. Virtual Bank means a financial institution that handles all transactions via the Web, e-mail,
mobile check deposit and ATM machines. A virtual bank, also known as an online bank or Internet
bank, is a financial institution that operates entirely online. It provides a digital platform for
customers to perform banking activities such as opening accounts, making transactions, and
accessing various financial products.
11. Mobile Banking is a service provided by a bank or other financial institution that allows its
customers to conduct some financial transactions remotely using a mobile phone. Mobile banking is
an online banking service provided by banks to their existing customers to access their banking
account for carrying out a myriad of transactions using a mobile device, including smartphone and
tablet, whenever users are connected to the internet.
12. Financial Inclusion Financial inclusion means that individuals and businesses have access to
useful and affordable financial products and services that meet their needs – transactions, payments,
savings, credit and insurance – delivered in a responsible and sustainable way. Financial inclusion or
inclusive financing is the delivery of financial services at affordable costs to sections of
disadvantaged and low-income segments of society, in contrast to financial exclusion where those
services are not available or affordable. In Bangladesh, half of all adults who can work do not have a
bank account. Women make up more than half of them. Financial inclusion means that people and
businesses can get good financial products and services that meet their needs at affordable prices.

13. Social Banking Social banking is banking concerned with the social and environmental impacts
of its investments and loans “Social Banking” describes banking and related financial services
whose main objective is to contribute to the development of people and planet, today and in the
future. First and foremost, this means simultaneously taking into account the social, environmental,
governance, and economic impacts of activities on all levels, with the aim of reducing their negative
and increasing their positive effects on the common good. Social Banking means banking with the
purpose of creating positive impact on society. It is not only about avoiding negative impact. In this
context, money and profit are not ends in themselves but means to achieve the above objective.

14. Relationship Banking is a concept that moves beyond transactional banking into something
more Relationship banking succeeds when it focuses on the individual. It is a strategy used by banks
to strengthen customer loyalty and provide a single point of service for a range of different products
and services. It is a strategy used by banks to enhance their profitability. They accomplish this by
cross-selling financial products and services to strengthen their relationships with customers and
increase customer loyalty.
15. Corporate Social Responsibility Corporate social responsibility (CSR) is a self-regulating
business model that helps a company be socially accountable to itself, its stakeholders, and the
25
public. By practicing corporate social responsibility, also called corporate citizenship, companies can
be conscious of the kind of impact they are having on all aspects of society, including economic,
social, and environment. It is a management concept that describes how a company contributes to
the well-being of communities and society through environmental and social measures. CSR plays a
crucial role in how brands are perceived by customers and their target audience. It may also help
attract employees and investors who prioritize the CSR goals a company has identified. CSR is a
corporation's initiatives to assess and take responsibility for the company's effects on environmental
and social wellbeing.
16. Priority Banking Privilege Banking is a specialized, prioritized, and dedicated service providing
channel for the top-notch customers. Priority banking is relatively new in the Bangladesh context. In
this form of banking, the bank identifies its priority customers and some special benefits are
provided to these customers by the bank.

17. Transaction Profile (TP): Each account must be associated with transaction profile by the
customer by putting his / her signature in the uniform TP form (as prescribed by Bangladesh Bank).
The objective of TP is to monitor transactions, Focus on high- risk customers and also transactions
inconsistent with TP. Transaction profile will be revised on completion of 06 month considering
actual transaction. Transaction Profile shows the overall picture of assumed transaction of a valued
customer of Bank.

18. Suspicious Transaction Reporting: Suspicious transaction may include- transaction

inconsistent with TP, transaction structured to avoid, transaction unusual for the type of business,
transaction having no reasonable explanation, etc. Identification of suspicious transaction through-
monitoring of transactions, clients contact, third party information etc.

19. Cash Transaction Reporting (CTR): Comply CTR for multiple cash transactions within one
day exceeding threshold limit (10 and above10 lac) on monthly basis CTR is applicable for Cash deposit,

Cash withdrawal, Cash remittance/ On-line deposit.

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