Professional Documents
Culture Documents
Submitted To:
Submitted by:
S.M.Aminul Islam,
PG:02-12-06-005,
Faculty of Business Studies
State University of Bangladesh
Date of Submission: 4th September 2008
Subject: Submission of internship report titled Fund Management System and General
Banking Practice of National Bank Limited.
Sir,
It is my great pleasure to submit you the internship report on the above-mentioned topic
as directed by you. Through this report I have tried to depict a vivid picture of the Fund
Management System and General Banking Practice of National Bank Limited.
I have tried to my best to make this report as comprehensive and informative as possible
within the time allowed for me and I enthusiastically look forward upon you to consider
and evaluate my efforts. It is worthwhile to mention that there might be some errors and
mistakes in my report due to my limited knowledge and due to various constraints for
which I beg your apology. I shell be obliged to clarify any matter or to provide any
further information regarding this report on your kind supervision.
Thanking you,
Sincerely yours,
S. M. Aminul Islam
Department of Business Studies
State University of Bangladesh
Preface
This report is the ending stone of our MBA Program and has the aim to enhance the
capability to study in the field of practical organizational arena. The MBA Program under
the State University of Bangladesh is the ambition of theoretical and practical knowledge.
In this theory we went across the different aspects of operation of administration. There
we have got the idea about business strategy, policy, risk, competency factors,
management capabilities, and problems in operating administration and day-to-day
business functions along with the premedical measures for some problems etc. As
consequences of such gathering we are to acquire the practical knowledge ourselves in
any organizational environment. Moreover the cope with the technological advances in
industrial and commercial development in this current world of globalization the
capability of executive must be enhance with a view to make themselves efficient and
effective in the execution of his duty and responsibilities they are assigned for.
The student of MBA program is to conduct an internship program under an institution for
certain period of time so that they can justify the practicality of the theoretical knowledge
they have learned in their academic classes.
Since the program is providing a huge benefits for the students, this program is to be
structured in a more organized way and to get the supreme benefit from such program the
time dimension is to be enhanced as the organization is a new environment for every one
and to be settled there it takes few days and for which the students are deprived of getting
practical knowledge which they have gone for. But it is damn true that this program of
course provide a great help in building career on the basis of their academic knowledge.
Acknowledgement
At the beginning I want to pay my homage to the almighty Allah who made me capable
to continue my everyday tasks both inside and outside the workplace during the whole
period of my internship program. After ward I want to pay my deepest gratitude to Mr.
Raihanul Hassan, Lecturer of Business Department, Business Faculty of the State
University of Bangladesh, the supervisor of me.
If I don’t mention some names of the staffs of National Bank Limited, Motijheelr branch,
my acknowledgement will be uncompleted. In this part I am highly grateful to Mr.
Immarat Hossin; SPO; Mrs Tasmin Afsana SO of EXIM Bank and Mr. Ziaul Haque AVP
of National Bank who helped me to get this opportunity to conduct my internship in
NBL. I was under the supervision of Mr. Abdur Rahim Vice President and manager, Mr
Mustafizur Rahaman (Late) SPO, MrsTamanna Naznee, SO; Mrs.Shahanaz Parven JO of
Motijheel branch of National Bank Limited.
In account opening section, I want to give thanks Dilara Zaman and Jobaida Rahman for
providing me a lot of information about the general banking system of National Bank
Limited and guidelines to prepare this report.
I also say thanks some clients of NBL who has provided me necessary support by
expressing their opinion about NBL’s services.
Successful completion of any course requires support from various people. I have been
fortunate to get the guidance and supervision of my teachers, friends, National Bank
Officials and others.
ACRONYMS
A/C Account
AD Authorized Dealer
B/L Bill of Lading
BB Bangladesh Bank
BOE Bill of Exchange
CCI & E Chief Controller of Import & Export
CFR Cost & Freight
CIB Credit Information Bureau
CIF Cost Insurance & Freight
DD Demand Draft
DP Note Demand Promissory Note
EPB Export promotion Bureau
EXP Export Form
FC Foreign Currency
FDD Foreign Demand Draft
FOB Free On board
HS Code Harmonized System of Coding
IBC Inward Bills for Collection
IBCA Inter Branch Credit Advice
IBDA Inter Branch Debit Advice
IMP Import Form
IRC Import Registration Certificate
L/C Letter of Credit
LCAF Letter of Credit Authorization Form
OBC Outward bills for Collection
PO Payment Order
PSI Pre Shipment Inspection
SWIFT Society for Worldwide Inter Bank Financial
TC Travelers Cheque
TIN Tax Identification Number
TR Truck Receipt
TT Telegraphic Transfer
STD Short Term Deposit
Table of Contents
List of Charts
No Topics Page
1 Organism of NBL
Procedure and journals for Pay Order
2
3 Procedure and journals for Demand Draft
4 Management chart of day to day cash in bank
5 Planning of bank capital
6 Factors determining working reserve
7 Factors determining secondary reserve
8 Loan administration Structure
9 Steps in loan analysis
10 View points of credit analysis
List of Tables
No Topics Page
1 Capital structure
2 Products and services
3 Special deposit scheme
4 Savings insurance schema
5 Monthly savings scheme
6 Account opening procedure
7 Yearly charge on credit card
8 Sources of fund
9 Application of fund
10 Credit risk determining ratio
11 Liquidity risk determining ratio
12 Interest rate risk determining ratio
13 Capital risk determining ratio
14 Operating risk determining ratio
15 Indicators of success
16 Demand for and supply of capital adequacy
17 List of capital instrument
18 Capital adequacy ratio
Executive Summary
The internship report is divided into two parts the organizational part and the project part.
The organizational part includes the company profile, company background, nature of
business, vision mission, goals, objectives, capital structure, organization and
management structure, products and services, human resources, market and target
customers, organizational strategy. The project part consists of analysis of the fund
Management System of National bank Limited. From this analysis of fund management
system, I am tried to find out some recommendation issues that might be an accurate way
to overcome the drawbacks of National Bank Limited.
Chapter-1
Introduction & Background of
the study
Theoretical knowledge does not make a person perfect. To implement the academic
knowledge, practical knowledge related to it, is important. A perfect consideration
between theory and practice is important in the context of modern business world. In
order to resolve the dichotomy between theory and practice, the State University of
Bangladesh arranges internship program as a partial completion of MBA program. This
program is necessary for every student to complete his or her academic degree. Internship
program brings students closer to the business theory and practical and thereby help them
to substantiate their knowledge so that they can prepare themselves to start a successful
career.
Under the internship program, every student is assigned to an organization with a view to
acquire practical knowledge. After taking practical knowledge, each student is required to
prepare a report on the selected organization under the guideline of his/ her assigned
teacher.
As a participant in this program, I was place at National Bank Limited, Motijheel branch
that is well reputed for trade and commerce in Dhaka city, for a period of three months.
This report basically deals with the fund management system of National Bank Limited
covering the areas like General Banking, capital management, liquidity management,
credit management, reserve management etc.
Literature Review
There are numerous research reports on the different activities and programs of National
Bank Limited. Again, there are more studies on NBL’s service expansion program. The
human resource department arranges different research program to identify its problems
and inefficiencies. And by this way it tries to resolve their problems to provide excellent
services to its customers.
Beside that every year a number of students of different universities conduct their
internship program in different branches of National Bank Limited. After the completion
of their internship program they submit a report on their study to the Senior Vice
President of Human Resource Department, Head Office, National Bank Limited. In their
reports they flash out some recent problems and draw some recommendations about what
the management of NBL should do to resolve these problems.
Like every year a number of students conducted their internship program in NBL in the
year of 2007. Among them a student of American International University-Bangladesh,
named Md. Mobarak Hossain, mentioned in his report that the absence of online banking
system in NBL is the main constraint of its success. The top management should start the
online banking system as soon as possible if it wants to reach at the desired position. The
top management has already taken the necessary steps to start online banking system. It
can be expected that the customers of NBL will get the online banking service from the
next year.
Another student of Dhaka University named Fahima Bushra students of MBA Program
work on the Foreign Exchange Management of NBL in the last year. In her report she
mentioned that the information technology of NBL is poor and the management should
take necessary steps to improve its information technology. Because of this inefficiency
managers required to do a lot of duplication work. Now the top managers of NBL try to
ensure all types of technological support in their all branches.
Chapter-3
3.2. Population:
The report has prepared on general banking practice and fund management system of
National Bank Limited. Therefore, for the purpose of the study, all the branches of
National Bank Limited have been considered as the population of the study.
a) Observation method.
b) Interview method.
Organizational Profile
4.1. Historical Background:
National bank Ltd is the first and major private sector commercial bank in Bangladesh
fully owned by the Bangladeshi Entrepreneurs. The Bank started its operation from 23 rd
March 1983. As a result of the collective effects of the some eminent bankers, of failure
in playing due to role in mobilizing small savings of the teeming millions and providing
improved clients services to them in our country, the Government gave right decision to
allow establishing banks in private sector. National Bank Limited was born as the first
hundred percent Bangladeshi owned Bank in the private sector. From the very inception
it is the firm determination of National Bank Limited to play a vital role in the national
economy. It is determined to bring bank the long forgotten taste of banking services and
flavors. It wants to serve each one promptly and with a sense of dedication and dignity.
NBL prudently and boldly faced the challenges of various adverse situations prevailing in
the post independence Bangladesh and has now established it self as one of the most
successful bank of the country. People in all regions can easily avail of the services of
NBL through its 98 branches spread all over the country. Besides, the bank has been
smoothly conducting its overseas activities with utmost efficiency through its 358
correspondents in 67 countries of the world. NBL has drawing with 18 overseas exchange
houses including the gulf overseas exchange. In order to provide modern banking
services to satisfy the demand of the country and the people, all branches of the bank
have been brought under computer network. It is able to reach with lighting speed the
hard-earned foreign exchanges of non-resident Bangladeshis to their near and dear ones
at home through the world renewed Western union. The bank maintains round the clock
communication with the external world using the latest information technology services
of SWIFT and REUTERS. In order to give improved and risk free banking services to the
valuable clients, all arrangements for launching line banking are its final stage.
Since the very beginning the bank extended much emphasis on overseas operation and
handled a sizeable quantum of homebound foreign remittance. The Bank established
extensive drawing arrangement network with Banks and Exchange companies, located in
important countries of the world. Expatriates Bangladeshi wage earners residing in those
countries can now easily remit their hard earned money to the country with confidence
safety and speed.
NBL has been able to create a special image at home and abroad by introducing different
banking products in accordance with the expectations requirements of people of the
country. NBL was the pioneer bank to allow back-to-back LC facility without any margin
to the entrepreneurs of garment industry during the Eighties, thereby helping the industry
thrive to its present position. This has not only contributed to enrich of the country’s
foreign exchange reserves, but also opened employment opportunities for a large
numbers of labor force of the country. As a pioneer in this sector, NBL’s name will
remain in golden letters.
NBL has been the pioneer in promoting readymade garment industries and still is the
single largest financier in this sector. In the early 80’s when garment industry in
Bangladesh was experiencing a process of trial, the bank foresights the bright prospect of
this sector and extend finance to the deserving and promising entrepreneurs. It provided
them with financial support including market information and advice and today the
garment sector constitutes about 66% of the total export of the country.
NBL is the first bank to introduce international Master Card in Bangladesh, which has
facilitated the users to get benefit to different facilities in home and abroad. NBL is the
first among private sector banks, which has set an uncommon precedence of extending
fully, supervised collateral agriculture credit in the brained area of Rajshahi district to
help small farmers to grow.
The wise directions and guidance of a prudent and versatile Board of directors and
concerted efforts of a team of well-qualified and professionally heightened executives
and officials have brought an extraordinary distinctiveness for the bank. Above two
thousand dedicated executives, offers and staffs’ working day and night to serve its
customers satisfactorily. Through strong commitment base, the bank has introduced new
products like Credit card. E-cash. The popularity of the bank has gained momentum with
quick money transfer arrangement anywhere in world in association with Western
Union’s U.S.A
a)General Banking
4.4. Vision:
The main vision of the National Bank Limited is to develop the economy of Bangladesh
by profitable investment of public money and build up their confidence to the private
institution. To ensuring highest standard of clientele services through best operation of
latest information, technology, making due contribution to the national economy and
establishing ourselves firmly at home and abroad as a front ranking bank of the country is
our cherished vision.
4.5. Mission:
The missions of the National Bank are as follows: The aim of NBL is to become one of
the leading Banks in Bangladesh by its prudence, fair and quality of operation.
1Its effort for expansion of its activities in home and abroad by adding new
dimension to its banking services is contributed unabated.
2It is also putting highest priority in ensuring transparency, accountability, and
improved clientele services as well as to its commitment to serve the society
through which it wants to get closer and closer to the people.
3Its goal is to act as a caring companion in uplifting the national economic standard
through continuous gradation and diversification of its clientele services in line
with national and international requirement
4It intends to meet the needs of its clients and enhance its profitability by creating
corporate culture.
5It believes in strong capitalization.
6Its aim is to ensure its competitive advantages by upgrading banking technology and
information system.
7It maintains high standard of corporate and business Seth's. It provides high quality
financial services to strengthen the well being and success of individual,
industries and business communities.
4.6. Objectives:
The objectives of National Bank are mentioned below:
Core Capital:
Paid up capital 804,741,524
Statutory reserve 806,240,084
General reserve 482,723,327
Retained earning as per profit and 409,471,121
loss account
Supplementary Capital:
1% general provision 307,425,523
Exchange Equalization account 41,371,514
Other reserve 385,176,688
Total 3,237,879,790
4.11. National Bank Foundation:
Keeping the view the great objective of contributing to expansion of education and
welfare of the society, the National Bank Foundation was set up in 1989. With financial
assistance of the Foundation, The National Bank Public School and College has been
established in Moghbazar Dhaka. There are a total of 820 students studying in the school
section from class 1st to 10th, while there are 120 students at the college section. In 2006,
a total of 70 students appeared at the SSC Examination, of which 87% came out
successful. In the college section, a total of 90 students appeared at the HSC
Examination, of which 81% came out successful.
4.14 1. Planning:
4.14.2. Organizing:
4.14.3. Staffing:
Entry-level recruitment process of the National Bank Limited is conducted in three ways.
One way is recruitment of probationary officer. Each probationary officer has one-year
probation period. After completion of probation period the officer joins as officer grade
III (b). The career path of probationary officer is headed toward different management
positions. Second way of recruitment is to recruit non-probationary officer who joins as a
assistant officer. The career path of an assistant officer is lengthier than probationary
officer. The third way of recruitment is recruitment of staff and sub-staff such as typist,
Messenger, driver, guard, attendant, cleaner and other lower level positions. Promotion
policy of NBL is basically based on seniority basis. Sometimes, employees are promoted
to the higher position for their outstanding perfoffi1ance. However, it is found that the
average length of a position held by an employee is around five years.
4.14.4. Controlling:
The bank has strict control over its all-organizational activities. The Bangladesh Bank
directives indicate some control measures. Audits and inspection are conducted by
different parties to check whether the bank implement these control system properly or
not. The central bank conducts credit inspection by a team. The National Bank Limited
has audit and inspection department to take controlling measures in internal operations.
Audit and inspection team send to the branches now and then and is responsible for
preparing report that will be submitted to the chief Administration to take necessary
actions.
“Buying home appliances? Get them through our Consumer Credit Scheme.”
National Bank's Consumer Credit Scheme gives you a great opportunity to buy
household and office items on easy installments. This scheme gives you the advantage of
part payment to cope with the high price tags of many necessary home and office
appliances.
Television, Refrigerator, VCR, Personal Computer, Photocopier, Washing Machine,
Furniture, Microwave Oven, Car, and a number of other expensive items are now within
your buying range. With this scheme NBL makes better living possible for people living
on fixed income. Customers can buy those home and office equipment's without over
taxing their budget.
For most of the people on fixed income the opportunity to supplement their monthly
earning is a golden one. And NBL Special Deposit Scheme gives a customer just that.
Under this scheme, customers can deposit money for a term of 5 years. The deposited
money is fully refundable at the expiry of the term. At the same time, during the term
period they can enjoy a monthly profit corresponding to their deposited amount. As for
instance, under this scheme a deposit of Tk.55,000/- gives a monthly income of Tk.500/-.
This scheme is specially designed for the benefit of the limited income group members.
This helps to accrue small monthly savings into a significant sum at the end of the term.
So, after the expiry of the term period the depositor will have a sizeable amount to relish
on.
Through its Credit Card. National Bank Limited has not only initiated a new scheme but
also brought a new life style concept in Bangladesh. Now the dangers and the worries of
carrying cash money are memories of the past.
Credit Card comes in both local and international forms, giving the client power to buy
all over the World. Now enjoy the conveniences and advantages of Credit Card as you
step into the new millennium.
National Bank Limited has introduced ATM service to its Customers. The card will
enable to save our valued customers from any kind of predicament in emergency
situation and time consuming formalities. NBL ATM Card will give our distinguished
Clients the opportunity to withdraw cash at any time, even in holidays, 24 hours a day, 7
days a week.
Joining with the world's largest money transfer service "Western Union", NBL has
introduced Bangladesh to the faster track of money remittance. Now money transfer
between Bangladesh and any other part of the globe is safer and faster than ever before.
This simple transfer system, being on line eliminates the complex process and makes it
easy and convenient for both the sender and the receiver. Through NBL - Western Union
Money Transfer Service, your money will reach its destination within a few minutes.
“Worried about the future? NBL has just the scheme for you”
This is an uncertain World and the threatening silhouettes of future catastrophes are
always looming around. This NBL scheme gives your family protection against the
insecurities of the world. This scheme is the first of its kind in Bangladesh. It combines
the benefits of regular savings and insurance scheme, so, you get the usual rate of interest
on the deposited amount while you enjoy the protection of a comprehensive insurance
coverage. Under this scheme, the beneficiaries will get equal the deposit in case of
natural death of the account holder whereas in the event of accidental death of the
account holder the beneficiaries will receive twice the deposit. As for example, if a
customer picks up Easy Class (Tk.50,000/-) he/she will get Tk.50,000/- for natural death
and Tk.1,00,000/- for accidental death apart from his/her deposited amount and interest.
The products introduced during the last five years are as follows:
1Monthly Savings Scheme.
2E-Cash/ATM card.
3Consumer Credit Scheme.
4SWIFT Services.
5Power Card.
National Bank’s consumer credit scheme gives a great opportunity to buy house and
office items on easy installments. This scheme gives an advantage of part payment to
cope with high price tags of many necessary home and office appliances. A consumer is
the ultimate user of a good. Thus “Consumer credit” is the credit, which directly comes
into the use of consumer.
In Bangladesh, NBL has first introduced the power card. The use of power card is very
easy and the cost of transactions is very low. So anybody can use it like cash to do their
daily transaction.
Chapter-5
General Banking
General banking department is the heart of all banking activities .All other departments
are linked with this department. It also plays a vital role in deposit mobilization of the
branch. National Bank Limited provides different types of accounts, locker facilities,
special types of saving scheme and flexibilities of remittance under general banking.
This department performs the general function of banking. In National Bank Ltd. for
performing the operation of this department a good number of people are allotted. The
general banking department of National Bank (Motijheel Branch) consists of the
following section:
1.Dispatch section
2.Accounts opening section
3.Cash Management section
4.Remittance section
5.Deposit section
6.Clearing section
7.Credit Card section
8.Loans & Advances Section
9.Western Union Money Transfer section
10.Accounts section
•Partnership Account:
1.Introduction of the account.
2.Two photographs of the signatories duly attested by the introducer.
3.Valid copy of Trade License.
4.Rubber stamp.
5.TIN number certificate.
6.Identity (Copy of passport).
7.Permission letter from DC/Magistrate (in case of newspaper)
•Limited company:
1.Introduction of the account.
2.Two photographs of the signatories duly attested by the Introducer.
3.Valid copy of Trade License.
4.Board resolution of opening A/C duly certified by the Chairman/Managing
Director.
5.Certificate of Incorporation.
6.Certificate of Commencement (In case of Public limited company).
7.Certified (joint stock) true copy of the Memorandum and Article of Association of
the Company duly attested by Chairman or Managing Director.
2.List of directors along with designation & specimen signature.
3.Latest certified copy of Form - xii (to be certified by register of joint stock
companies) (In case of Directorship change).
4.Rubber Stamp (Seal with designation of each person)
5.Certificate of registration (In case of Insurance Company – Obtained from
department of Insurance form the Peoples Republic of BD.)
1. Receipt of deposit.
2. Making payment to the customers.
3. Management of vault of the branch.
This section receives deposit or funds from the customer and the collection procedure as
follows:
1At first the amount is counted and if ok then verified the purity of the note paid if
there is any confusion of the teller.
2If the cash notes are satisfactorily sound then the teller marked in color the amount in
word over the deposit slip.
3At last the receiving officer/ teller signed the deposit slip and by the sign of the
authorized officer the deposit of fund finished in favor of a customer.
4In case of received of clearing cheque, the cheque is scrutinized at first whether the
cheque is authenticated as per the NI Act. If satisfied then a crossing is marked so
that this cheque never been enchased over the cash counter
5Then the amount is kept apparently deposited in the customers account and the
cheque proceeds to the clearinghouse accordingly.
The cash section also manages the vault of the branch. The manager of cash section is
the in charge of the necessary liquid money in the vault for the payment of the customer.
In this regard, there is specific guideline from the central bank for the limit of the
amount such as:
The deposits that are accepted by NBL like other banks may be classified into two types.
These are:
a) Demand Deposits
b) Time Deposits
a) Demand deposits:
These deposits are withdrawn able without notice, e.g. current deposits. National Bank
Limited accepts demand deposits through the opening of, -
o Current account
o Savings account
o Call deposits from the fellow bankers
b) Time deposits:
A deposit which is payable at a fixed date or after a period of notice is a time deposit.
National Bank Limited accepts time deposits through Fixed Deposit Receipt (FDR),
Short Term Deposit (STD) and Bewared Certificate Deposit (BCD) etc. While accepting
these deposits, a contract is done between the bank and the customer. When the banker
opens an account in the name of a customer, a contract arises between them. This
contract will be valid one only when both the parties are competent to enter into contract.
As account opening initiates the fundamental relationship & since the banker has to deal
with different kinds of persons with different legal status, National Bank Limited officials
remain very much careful about the competency of the customers.
5.6.1. Clearing:
Clearing is a system by which a bank can collect customers fund from one bank to
another through clearing house.
Transfer:
1.Precaution at the time of cheque receiving for Clearing, Collection of LBC, and
OBC & Name of the account holder same in the cheque & deposit slip.
2.Amount in The cheque & deposit slip must be same in words & in figure
3.Date in cheque may be on or before (but not more than six months back) clearing
house date.
4.Bank & Branch name of the cheque, its number & date in the Deposit slip.
5.Cheque must be signed.
6.Signature for confirmation of date, amount in words / in figure Cutting &
Mutilation of cheque.
7.Cheque should be crossed (not for bearer cheque).
8.Account number in the deposit slip must be clear.
9.Depositor's signature in the deposit slip.
Return House means 2nd house where the representatives of the Bank meet after 3 p.m. to
receive and deliver dishonored cheque, which place in the 1st Clearing House. Cheque
may be dishonored for any one of the following reasons:
1)Insufficient fund.
2)Amount in figure and word differs.
3)Cheque out of date/ post- dated.
4)Payment stopped by the drawer.
5)Payee's endorsement irregular/ illegible / required.
6)Drawer's signature differs / required.
7)Crossed cheque to be presented through a bank.
8)Other specific reasons not mentioned above.
The dishonor cheque entry in the Return Register & the party is informed about it. Party's
signature required in the return register to deliver the dishonor cheque. After duration, the
return cheque is sent to the party's mailing address with Return Memo.
In modern banking the mechanism has become complex as far as smooth transaction and
safety is concerned. Customer does pay and receive bill from their counterpart as a result
of transaction. Commercial bank's duty is to collect bills on behalf of their customer.
Procedure of OBC:
1) Entry in the OBC register.
2) Put OBC number in the cheque.
3) "Crossing seal" on the left corner of the cheque & "payees account will be
credited on realization" seal on the back of the cheque with signature of the
concerned officer.
4) Dispatch the OBC cheque with forwarding.
5) Reserve the photocopy of the cheque, carbon copy of the forwarding and
deposit slip of the cheque in the OBC file.
Procedure of IBC:
1.IBC against OBC: To receive the OBC cheque first we have to give entry in the
IBC Register. The IBC number should put on the forwarding of the OBC with
date.
2.Deposit of OBC amount: OBC cheque amount is put into the "sundry deposit
sundry Creditors account", prepare debit & credit vouch of it. If the OBC cheque
is honored, send credit advice (IBCA) with signature & advice number of the
concern branch for the OBC amount.
3.If the OBC cheque is dishonored, the concerned branch is informed about it.
4.Again place in the clearing house or send the OBC cheque with Return Memo to the
issuing branch according to their information.
1To earn interest from borrowers and give depositors the interests get back. The
rest are the profit of the bank.
2To accelerate economic development.
3To meet the interest groups.
Credit is a continuous process. Recovery of one credit gives rise to another credit. In this
process of revolving funds, bank earns income in the form of interest. A bank can invest
its fund in many ways. Bank provides loans and advances to traders, businessmen and
industrialists. Moreover, nature of credit may differ in terms of security requirement,
disbursement provision, terms and conditions etc.
Bank often uses loans and advances as an alternative to one another. But, academically
this concept is incorrect. Academically, Advances is the combination such items where
loans is a part only. For this credit section of the banks is known as advance section.
Any deposit in the SOD account is treated as repayment of overdraft. The features of
SOD are:
The interest rate is 14%.
The interest starts from the date of first withdrawal.
Only businessmen can open this and he has to be a current account
holder of the respective branch of NBL.
The security that is kept against the SOD loan are generally FDR, SDS, MSS etc.
\Clean Bill:
Clean bill are those that requires no payment for documents cheques, Demand Draft,
Telegraphic Transfer, and Mail transfer.
Documentary Bills:
Documentary bills are those that require related documents for payments like Bills of
Exchange, Railway/ Shipment receipt and invoice etc. This bill is often created in
businesses and bank purchases these before their maturity. Thus, purchases of these bills
are one kind of credit to these before their maturity. As bank purchases these bills on
behalf of the business so it is one kind of credit to those businesses. After maturity, bank
presents it to the drawer for encashment.
5.8.1. (D) Employee Loan:
For the betterment of its own employees NBL provides loans. The branch managers and
executives get this facility. Repayment is adjusted from their monthly salary on an equal
monthly installment. 10% of basic salary is contributed by employee in every month. The
staffs can also take loan, which is known as Staff Loan against Provident Fund (SPF).
The repayment is adjusted from their monthly salary. 10% of basic is also contributed to
the PF by the bank.
A brief description about the securities that is kept against the loans is described below:
Security deposited the borrower himself to the loan such as – FDR, Cash, MSS.
1Narrow Sense – security deposited by a third party to secure the advances for the
borrower.
2Wider sense – any types of security on which the creditor has a personal right of
action on the debtor in respect of advance common method of charging security
and their nature of security.
Another method called equitable mortgage is also used in bank for creation of charges.
Registration is not required. In both the cases, the mortgaged property is retained in hand
of the property.
5.8.3 Principles of sound lending:
In order to secure a balance between liquidity Profitability, and security, NBL following
principles of sound lending:
5.8.3. (A) Liquidity
While lending, adequate care is taken to ensure the liquidity of the lien item. In this case,
NBL choose such securities, which possess such liquidity.
5.8.3. (B) Safety
National Bank exercises the lending function only it is safe and the risk factor is
adequately mitigated and covered. Safety depends upon the security offered by the
borrower.
5.8.3. (C) Diversity
In order to minimize the risk, National Bank invests its fund in different industries of
different industries situated in different regions of the country.
5.8.3. (D) Yield
From the commercial point of view, National Bank considers sufficient yield of return
while financing a project.
5.8.3 (E) Productive Purpose
National Bank exercises its lending function only on productive purpose.
After getting an application for a loan the past record of the applicant is carefully
studied. Generally such studies includes -
i.Account balances and past transactions
ii.Credit report from other banks
iii.Information of the industry by studying market feasibility
iv.Financial statements (balance sheet, cash flow statement, and income
statement). If the borrower is a sole proprietor then the single entry accounting
treatment is converted into double entry system.
v.If the amount is more then TK. 10 lac then report from credit information
bureau of Bangladesh Bank is collected.
5.8.4(B) Borrower analysis
Borrower analysis is based on 5-c’s (character, capital, capacity, collateral,
creditworthiness) and 3-r (responsibility, reliability and resourcefulness). It follows that
the bank forms a rational judgment about the integrity of the borrower which should be
undoubted.
5.8.4. (C) Credit approval procedure
After receiving the application from the client, National Bank Limited prepares a Credit
Line Proposal (CLP) and forwards the same to the Head Office to place before Head
Office Credit Committee (HOCC) for approval. It includes-
1Request for credit limit of customer.
2Project profile/ profile of business.
3Copy of trade license duty attested.
4Copy of T I N certificate.
5Certificate copy of Memorandum & Articles of Association, certificate of
incorporation, certificate of commencement of business, Resolution of the
Board, Partnership Deed (where applicable).
63 years balance sheet and profit & loss account.
7Personal net worth statement of the owner/ directors/partners etc
8Valuation certificate of the collateral security in bank’s form with photograph of
the security.
9CIB enquiry form duly filled in (for proposal of above 10 lac).
10Credit report from other banks.
11Stock report duly verified.
12Indent/ Performa invoice/Quotation.
13Statement of accounts.
5.8.5. Documentation:
Documentation can be described as the process of technique of obtaining the relevant
documents. In spite of the fact, that banker leads credit to a borrower after inquiring the
character, capital, capacity, collateral, creditworthiness of the borrower NBL obtains
proper documents executed from the borrower, and he must obtain proper documents
executed from the borrower to protect him against willful defaults. Documentation
contains the precise terms of granting loans and thereby serve as important evidence in
the law courts if the circumstances so desire. Charge documents as required by the
different types of advances are mentioned below:
5.8.5(A) Loan:
1Letter of arrangement.
2Letter of disbursement.
3Letter of partnership (firm) or Board of resolution (Limited companies).
4Letter of pledge.
5Letter of hypothecation.
6Letter of lien and ownership.
7Letter of credit for packing credit.
8Letter of lien. (in case advance against FDR).
9Letter of lien and transfer authority.
10Legal documents for mortgage of property.
11Copy of sanction letter mentioning detail of terms and condition duly
acknowledge by the borrower.
12Trust receipt.
13D P Note.
3.8.5 (B) Overdraft
Letter of partnership.
Letter of arrangement.
Letter of continuity.
Letter of lien.
Letter of lien and ownership/share transfer form (in case of advance against
share).
Letter of lien and transfer authority.
Legal documents for mortgage of property.
D P Note.
Chapter-6
Fund Management System
CRR in current account with Bangladesh Bank (on which no interest is received) and the
rest 13% are maintained in different approved securities, treasury bills, bonds, debentures
and foreign currencies. In utilizing its resources, the bank keeps in view the need for
maintaining required liquidity and earning maximum profit through lending and
investing.
Loans and
Application Of funds advances
Investment
Fixed assets
Other assets
6.1.2. Function of NBL as collector of bank fund:
A) Capital
Capital is the first source of each bank’s fund. NBL was incorporated under the Registrar
of Joint Stock Companies on 15th March, 1983 as the first private sector bank of the
country with an authorized capital of Tk. 10 corer and a paid up capital of Tk. 4.4 corer.
With an initial public offering of Tk.3.60 corer, the bank was enlisted with the Dhaka
Stock Exchange in 1985. The authorized capital of National Bank increased by Tk. 145
corers to 245 corers in 2006. Through right share issues on 4(four) occasions and bonus
share on 8 (eight) occasions, paid up capital of the bank now stands at Tk.80.55 corer,
which we believe to have been playing a significant role in easing the liquidity problem
in the capital market.
B) Deposit
Deposit is the main source of a bank’s fund. Despite the adverse impact of high prices of
oil and other essential commodities in the international market, phasing out of the MFA,
soaring inflation in the domestic economy and labor and political interest in the country,
National Bank Limited has been able to maintain its trend of growth in 2006. Total
deposits mobilized by NBL in 2006 stood at Tk. 4035.08 core, which is higher by Tk.
736.68 corer or 22.33% than in 2005. This has been possible as a result of proper
directions and guidance of a prudent and farsighted Board of Directors, timely adaptation
of appropriate measures under changing condition in the economy, strict observance of
risk management principles, close review and analyzing of money and capital market
conditions, intensive supervision, strengthening of internal control and, above all,
relentless efforts of a team efficient workplace under the leadership of a worthy
Managing Director. In order to keep the growth continues, priority is given to the
mobilization of costless and low cost deposits. Deposit resources are raised by
undertaking special saving mobilization programmers at different intervals through the
year.
Types of deposits
C) Borrowed funds:
Sometimes bank faces liquidity crisis. To handle this type of problem NB borrows funds
from other banks or resources. This type borrowed fund may be short or long term. Long
term borrowed fund may use as capital.
Therefore National Bank Limited like other banks do the following functions:
1 Investment function.
2 Lending function.
3 Cash assets function:
4 Cash in vault.
5 Items in the process of collection.
6 Balance with the central bank.
7 Balance with the other bank.
8 Other function.
National Bank Limited also runs profit and loss basis like other business enterprise. It
means that NBL is able to provide more dividends to the shareholders as a good bank.
Like other enterprises, banks NBL face some risk. As long as it can minimize its risks, it
can maximize its profits.
For the purpose of evaluating performance, managers of NBL determine some ratios
related to a particular risk .The list of these ratios and the present condition of NBL in
these ratios are given below:
It is important to identify a successful bank for banking. Successful bank means those
banks that have a low loan risk, good profitability and sound liquidity position. For
understanding whether a bank is successful or not, bank’s one year performance is
compared with previous year performance. This process is generally known as ratio
analysis. Some of these ratios and present condition of NBL in these cases are given
below:
“The ability to convert assets into cash with little risk of loss of principle value”
--------------------Grade and Spencer
“An individual bank liquidity is the ability to pay depositors on demand, disburse loan
installments as committed and make other payments when due.”
-------------------------------A.R. Khan
Supply of liquidity means the source of fund from which bank get the supply of fund on
demand.
The nature of demand for the liquidity of NBL’s funds and supply of liquidity is given
below:
3REPO.
4Deposit with other bank.
5Bond and notes issued by local government.
6Debenture of government organization.
7Resale of banker acceptances in local secondary market.
8Short term commercial debenture.
These deposits have an impact on the banks investment and lending policy. So, banks try
to increase their deposits by offering attractive package to the depositors. Depositors have
their own choice that is changing with time. With this change the banks introduce new
deposit collection policy. These activities of bank related with deposit are known as
deposit management.
of the employee.
a.Acquire the physical plant and basic necessities needed to render banking services.
b.Act as one of the source s of funds for loan and investment.
c.Protect the uninsured depositors in the events of insolvency and liquidation.
d.Act as an unanticipated loss restraint.
e.Serve as a regulatory restraint.
1. Generate preformed balance sheets and income statements for the bank.
2. Assume / select a dividend layout.
3. Analyze the cost and benefit of alternative source of external capital.
Financing plan
Cost of fund minimization
Adequacy is a relative term. Adequacy of capital is not same for all banks. It differs from
bank to bank. Capital adequacy of a National Bank depended on the following subjects:
Every bank maintains some required reserve funds to meet some specific requirements of
Central Bank and to fulfill the condition of Banking Law. National Bank Limited has
maintaining the following reserve funds:
Like any other bank, NBL has deposited a portion of its total deposit at Central Bank and
also a portion in its own vault with the knowledge of Central Bank.
1Cash in hand.
2Balance with central bank.
3Demand deposit with other banks
(B) Function of Primary Reserve:
• It protects the bank from possible liquidity crisis.
• It plays the role of first line of defense.
• It enables the bank to satisfy depositors claim instantaneous.
• It enables the bank to perform the expected on the community.
• It enables the bank to meet the establishment expenses.
Statutory reserve:
It is one kind of stature cash reserves which are maintained by the order of Central Bank
on the basis of deposits. At present the normal rate is 9% in Bangladesh. It varies from
country to country.
Working reserve:
It is the excess reserve out of the statutory reserve kept in Central Bank on current
account as cash or cash equivalent. At present the normal rate of working reserve is 18%.
All the factors, on which the amount of working reserve depends, can be divided into two
groups. These are:
1Internal factors
2External factors
NBL maintain secondary reserve to protect liquidity for forecast able cash need as well as
more remote contingencies. NBL maintains the following secondary reserve
1Treasury bills
2Short term securities
Secondary reserve is not keep in cash. But this type of reserve can easily convert into
liquid assets at any time. This reserve is considered as assets on the basis of some
condition. These conditions are as follows:
1Convertibility.
2Low risk.
3Yield.
Secondary reserve must be convertible into cash in a short time. Before making
investment in secondary reserve, the management of NBL gives the highest attention in
the fact that it will make no loss at the time of return. The turn value must be greater or at
least equal.
0100090000037800000002001c0000000000040000000301080005000
0000b0200000000050000000c02ba050807040000002e0118001c0000
00fb021000070000000000bc02000000000102022253797374656d000
508070000f2ad0000985c110004ee8339888020000c020000040000002
------------------------------------------------------------6. Loan Management
“A loan policy indicates the use of the fund collected from the bank shareholders and the
depositors.”
Loan policy is essential for the bank in order to attain its objectives and to serve the
people.
0100090000037800000002001c0000000000040000000301080005000
0000b0200000000050000000c02ba050807040000002e0118001c0000
00fb021000070000000000bc02000000000102022253797374656d000
508070000f2ad0000985c110004ee8339888020000c020000040000002
d01000004000000020101001c000000fb02ceff0000000000009001000
000000440001254696d6573204e657720526f6d616e00000000000000
00000000000000000000040000002d010100050000000902000000020
d000000320a2d00000001000400000000000807b70520fd1600040000
002d010000030000000000
0100090000037800000002001c00000000000400000003010800050000000b020000000
0050000000c02ba050807040000002e0118001c000000fb021000070000000000bc02000
000000102022253797374656d000508070000f2ad0000985c110004ee8339888020000c0
20000040000002d01000004000000020101001c000000fb02ceff00000000000090010000
PARSAR
5 R’s CAMPARI 5 C’s
P=Purpose
A=Amount
1. Responsibilities C=Character 1. Character
R=Reason
2. Reliability A=Amount 2. Capacity
A= Ability of payment
3. Respectability M=Means 3. Capital
S= Source of payment
4. Resources P=Purpose 4. Collateral
R= Risk
5. Return possibility A=Accountability 5. Condition
View points of credit analysis:
R= Risk
I=Insurance
Officers consider the following factors before sectioning loan to any party:
1Background of the applicant regarding loan and financial performance.
2Ability of using the loan and also the character of the applicant.
3Ability of the applicant to return the loan.
4If the applicant faces any problem during the planning, evaluate the performance of
his existing capital.
5National and international factors that have influence on the applicant on his ability
to return at present and planning situation.
6Elements of special risk- that may influence to recover the loan
6.6.5. Documents of loan:
0100090000037800000002001c00000000000400000003010800050000000b0200000000
050000000c02ba050807040000002e0118001c000000fb021000070000000000bc020000
00000102022253797374656d000508070000f2ad0000985c110004ee8339888020000c02
0000040000002d01000004000000020101001c000000fb02ceff000000000000900100000
0000440001254696d6573204e657720526f6d616e0000000000000000000000000000000
000040000002d010100050000000902000000020d000000320a2d0000000100040000000
0000807b70520fd1600040000002d010000030000000000
0100090000037800000002001c00000000000400000003010800050000000b020000000
Chapter-7
Chapter-8
The organization does not have a diversified range of products & services. Still the bank
is not fully computerized. Manual registers are used in some cases. However, the income
of the business is still heavily dependent upon its share on the retail market. It caters less
the corporate market than the SCB. This may leave it vulnerable if for any reason its
market share erodes. The retail sector is very price sensitive. But it pay very less interest
than other banks. So, if they found higher interest rate offering by other private banks of
Bangladesh then they will loose customers. It has less promotion campaign than the other
bank, because they believe brand value is the top promoting entity for the company.
NBL has a goodwill that it provides different banking services to the people with a
minimum cost and cut a very little charge on its transactions. Although it already has 100
branches to provide services to its customers, it also has the opportunity to build up more
branches to make more convenient for the customers. The banking business of NBL and
its other social activities have increased day by day. Sophisticate customer service
scheme of the NBL more preferable to customers than other banks. Products & services
development offers NBL many opportunities. There is the opportunity to develop
products and services such as insurance business & huge investment in capital market etc.
Such high value items will tend to have associated with them, high profits. There are also
global marketing events that can be utilized to support the brand such as the sports &
other cultural activities.
NBL is exposed to the international nature of trade. It has to deals in different currencies
and so costs and margins are not stable over long periods of time. Such an exposure could
mean that NBL may be doing banking business at a loss. The new technology emerges to
protecting the currency value & use options for better credit rate earnings. The market for
banking sector is very competitive. The model developed by NBL to be world’s local
bank is now commonly used and to an extent is no longer a basis for sustainable
competitive advantage. Competitors are developing alternative brands to take away the
market share of NBL. The roles and regulation of the government and conventional laws
of Bangladesh are also act as threats for the growth of banking business development in
Bangladesh.
NBL has to expose its international nature of trade more efficiently. It has to recover
costs and maintains margins over long periods of time. The new technology has to use to
protecting the currency value & use options for better credit rate earnings. NBL has to
come to with other sort of criterion that’s why the competitor have to fight very long to
copy that exposure. NBL has to give a better deal in the banking fees & charges for the
customers for the retail banking sector.
NBL has to focus equally to both ranges of customers either retail or corporate. It has to
build up a proper strategy that’s why the corporate customers can be interested to open
more of corporate account in NBL. NBL also has to give higher interest rate for various
products & services to gain more market share in banking business. They have to
advertise their brand name more .They can sponsor their name for various social
activities which will bring up NBL value more to the local customers. They can also
make social awareness to the local customers.
1Political.
2Economic.
3Social.
4Technological.
NBL considers the PEST analysis very important to understand better the local
environment before beginning the marketing process. NBL’s environmental analysis is a
continuous process.
The political arena has a huge influence upon the regulation of NBL’s businesses. We
can consider the following aspects-
1The political environment is not stable, so as the banking sector. Though the
business activity is wholly regulated by Bangladesh Bank, in a country like
Bangladesh, NBL’s banking activity is depending on the political culture of
Bangladesh.
2Government policy influence laws that regulate NBL’s business.
3The government's position on marketing ethics, culture & religion is totally based on
custom & culture of Bangladesh. So, NBL is following that custom.
Recommendations And
Conclusions
Recommendations:
I have some points to focus which will help the bank to improve the efficiency as well as
the quality of work. The points are as follows:
1Management should set proper planning for its operations of each and every work
for the whole bank as well as all branches of NBL.
3As the top management has decided to start online banking system, necessary steps
should be taken to make this decision implement as soon as possible.
4As NBL is a service providing organization, it should introduce new and dynamic
services to serve the people and capture the target market
9It also tries to avoid duplication in any case through accuracy and efficiency.
12And most of all ensure proper communication with head office and other branches.
Conclusion:
I acknowledged different banking functions and day to bay banking operation on my way
to complete this internship.
Now a day banking sector is more competitive. To achieve a proper reward about
performance, it is essential to satisfy its customer by providing them different valuable
and dynamic services. Because a satisfied customer will talk to others about the services
those he/she is very justifiable enjoying and a satisfied customers statement is
more effective than a thousand of commercial advertisement. People depend on the
people – is the mode of human civilization. Therefore, the importance to satisfy customer
is increasing day by day in the private commercial sector especially in the private banks.
As all the activities those are required to provide valuable services to its customers to
make them satisfy, are related with the fund management system, NBL is so much careful
about its fund management system. NBL always gives its highest attention in monitoring
and managing the bank fund, which is consists of fund, capital, reserve, deposit, loan and
advance. At present NBL is successful in effectively and efficiently managing these vital
issues. In spite of that, in order to keep its success continue and reach at the pinnacle of
success it, its managers, board of directors and employee must have the comprehensive
and clear idea about the reserve, fund, loan, capital, deposit and liquidity regarding the
smooth control of bank and continue its vital operation toward country’s economic
development.
References
Books:
1David A. Decenzo, Stephen P. Robins; Human Resource Management; 17th Ed. Pg.
2Hemple, George H; Bank Management; 9th Ed. pg.
Website:
1www.nbl.com
2www.bangladeshbank.org.bd.