1.

1 Origin of the report

Now a days, education is not just limited to books and classrooms. In todays world, education is the tool to understand the real world and apply knowledge for the betterment of the society as well as business. From education, the theoretical knowledge are obtained from courses of study, which is only the half way of the subject matter. Practical knowledge has no alternative. The perfect coordination between theory and practice is of paramount importance. Therefore, an opportunity is offered by Centre for Postgraduate Studies, Bangladesh Institute of Bank Management, for its MBM students to get practical experience from October 02, 2011 to December 15, 2011, known as Practical orientation in bank. For this, my study was placed in Bangladesh Krishi Bank. This paper entitled Practical Orientation Report on Objectives and Achievements Bangladesh Krishi Bank, originated to fulfill the partial requirement of 3rd Term, MBM Program. For this program, each student is attached with a bank. I have completed my practical orientation at Bangladesh Krishi Bank, Mirpur Branch. After completion, I had to prepare this report under the supervision of Mr. Abed Ali, Faculty member, BIBM, Mirpur, Dhaka.

1.2 Objectives of the Study

1. To present an overview of Bangladesh Krishi Bank (BKB) 2. To analyze objectives of the BKB 3. To analyze the achievements of BKB. 4. To recommend suggestions for the successful achievement of its objectives.

1.3 Methodology
For preparing this paper, I used both Secondary and Primary data.

Primary Sources:
The primary data collected from direct interview with officials of BKB, Mirpur branch and BKB head office. The information also collected from interview.

Secondary Source:
Credit manual of Bangladesh Krishi Bank (1983) Different circulars issued by credit division of Bangladesh Krishi bank. Annual reports of Bangladesh Krishi Bank (2004-08) Different circulars issued by Bangladesh Bank. Annual report of Bangladesh Bank (2004-08). Bangladesh Bank Quarterly (2004-08). Bangladesh Krishi Bank order 1973 (President's Order No 27 of 1973).

1.4 Limitation of the study

The main problem faced in preparing the paper was the inadequacy and lack of availability of required data. This report is an overall view of objectives of BKB according to which it was formed and its achievement in five years from financial year 2003-04 to 2007-08. However, there are some limitations for preparing this report. Firstly limitation of time, only 10 week is not enough to get a clear picture about the bank, which has 972 branches. Secondly, Annual Report of 2008-09 and 2009-10 are yet to be published. Therefore, 2009 to 2010 period is not included in the report due to unavailability of published data.

2. An overview of Bangladesh Krishi Bank 2.1 Introduction

Bangladesh Krishi Bank (BKB) established under the Bangladesh Krishi Bank Order 1973 (President's Order No 27 of 1973). BKB is a banking Company under the Banking Company Act-1991. The primary objective of BKB is to provide credit facilities to the farmers for the development of agriculture i.e. Crop production, Fish culture, Animal Husbandry etc, entrepreneurs engaged in development of agro-based and cottage industries. The Bank started commercial functioning since 1977 to generate more loanable fund from the idle rural and urban savings and invest them for the betterment of our economy. The Bank operates its function through its 972 branches (except Rajshahi Division). It has 16 foreign exchange (Authorized dealer) branches. In the field level, the Bank has 9 Divisional, 29 Chief Regional and 24 Regional offices for close supervision of the branch activities. For smooth operation, as a part of internal control and compliance system, the bank has also 63 audit offices of which 9 at Divisional and 54 at Regional levels. In the Head Office, the Bank has 4 Divisions headed by General Managers, 28 Departments and a Training Institute headed by Deputy General Managers. A General Manager heads Local Principal Office of BKB. The existing strength of Bank's work force is 9430 against the approved strength of 13680 as on 31 December 2010.

2.2 Mission Statement

To create employment opportunities through income generating activities. To empower the rural women to establish their own rights. To improve the living standard of the rural people. 3

To alleviate poverty of the poor people. To make easy access to institutional credit facilities and resources. To mobilize rural savings. To make optimum utilization of rural resources. Areas in productive/economic activities. To engage rural people in development process of the country. To eliminate exploitation done by the moneylenders.

2.2 Vision and Values

I. To establish Bangladesh Krishi Bank as a role model in the banking sector of Bangladesh. II. To meet the needs of customers.

3. Objectives and functions of Bangladesh Krishi Bank

The major occupation of the people of Bangladesh is "Krishi. Krishi is a Bengali word which means "Agriculture". About 85% of the population depends directly or indirectly on agriculture. Agriculture is the single largest producing sector of the economy in the country. The performance of this sector has an overwhelming impact on major macroeconomic objectives like employment generation, poverty alleviation, human resources development and food security. Therefore, the proper development of the country is not possible without the proper development of its agricultural sector. In this respect, the banking system acts as a major contributor for the development of this agricultural sector. In a developing country like Bangladesh, the banking system, as a whole, plays a vital role in the progress of its economic development. A bank, in fact, is just like the heart in the economic structure and the capital provided by bank is just like the blood in it. As it already mentioned that, the economy of Bangladesh is mainly dominated by agriculture and lack of finance to the agricultural sector, will slow the growth of the economy. Loan facility provided by the bank works as an incentive to the producer to increase production. Keeping this in mind, for the purpose of the development of agricultural sector, the Government of Bangladesh has established two specialized banksnamely: Bangladesh Krishi Bank (BKB) and Rajshahi Krishi Unnayan Bank (RAKUB). BKB is continuously trying to provide support for the advancement and development of the agricultural sector of the country except Rajshahi Division. First, they are promoting savings, mostly from middle and lower middle class of urban and rural people.

Secondly, the bank promotes investment in different sectors of agriculture, industry and trade. Bangladesh Krishi Bank (BKB) was established by the Bangladesh Krishi Bank Order, 1973(presidents order no. 27 of 1973), dated March 31, 1973 and a banking company under the Bank Companies Act-1991. According to the Bangladesh Krishi Bank Order, 1973 whereas it is expedient to establish a krishi bank to provide credit facilities to agriculturists and persons engaged in cottage industries and to provide for the vesting in that bank of the undertakings of the agricultural development bank of Bangladesh and for matters connected therewith or incidental thereto; Now, therefore, in pursuance of paragraph 3 of the fourth schedule to the constitution of the Peoples Republic of Bangladesh, and in exercise of all powers enabling him in that behalf, the president is pleased to make the following order:1. (1) This Order may be called the Bangladesh Krishi Bank Order, 1973. (2) It extends to the whole of Bangladesh except the Rajshahi Division. The words Bangladesh except the Rajshahi Division in the order was substituted for the word Bangladesh by section 35 of the Rajshahi Krishi Unnayan Bank Ordinance,1986 (Ordinance No. LVIII of 1986). The functions and objectives of BKB also specified in the order. Section 15and 16 of the order specifies the functions of BKB. According to these sections the objectives and functions of BKB are 15(1) The Bank shall provide credit in cash or in kind and credit facilities including the hiring and renting of anything which it may advance by way of loan and the provision for ware housing facilities, for such term and subject to such conditions as may be prescribed by rules, to agriculturists for the purpose of agriculture and to persons

engaged in cottage and other allied industries in rural as well as urban areas for the purpose of such industries as may carry on and transact the several kinds of business hereinafter, specified, that is to say,(a) the accepting of money on deposit; (b) the borrowing of money for the purposes of the Bank's business against the security of its assets or otherwise; (c) the issuing and selling of bonds and debentures; (d) for the purpose of securing loans and advances made by the Bank, accepting pledge, mortgage, hypothecation or assignment to the Bank of any kind of movable and immovable property or unconditional Bank guarantee of a scheduled bank or drawing, accepting, discounting, buying and selling or rediscounting bills of exchange and promissory notes bearing two or more good signatures, one of which shall be that of a scheduled bank or other negotiable instruments: Provided that where a loan not exceeding two thousand taka in the aggregate is made to an individual agriculturist, it may be secured by a bond with one or more sureties as the Bank may deem necessary if such agriculturist makes an agreement with the Bank creating a charge on any of his specified property to secure the performance of the stipulations of the bond; (e) the buying, stocking and supplying on credit, of seeds, agricultural machinery, implements and equipments, fertilizers and chemicals and any other material used in agriculture and acting as agent for any organization for such goods; (f) the subscribing to the debentures, being debentures repayable within a period

not exceeding ten years of anybody corporate concerned with agriculture or the financing of agriculture, the financing of cottage and other allied industries in rural as well as urban areas; (g) the custody of gold ornaments, jewels, securities, saving certificates, title deeds and other valuable articles and the collection of the proceeds, whether principal, interest or dividends of any such securities or saving certificates; (h) the administration of estates for any purpose whether as executor, transferee or otherwise; (i) the paying, receiving, collecting and remitting of money and securities; (j) the acquiring, maintaining and transferring of all movable and immovable property, including residential premises, for carrying on its business; (k) the taking over of business, including the capital, assets and liabilities of any other Bank or financial corporation, with the previous approval of the Government; (l) the guaranteeing against the security of agricultural property of loans granted by scheduled banks; (m) the opening of accounts or the making of any agency arrangement with, and the acting as agent or correspondent of, any Bank or financial corporation; (n) the investing of its funds in Government securities as a purely temporary measure: Provided that the investment of fund exceeding fifty lakhs of taka shall not be made except with the prior approval of the Government;

(o) the selling and realizing of all properties, whether movable or immovable, which may in any way come into the possession of the Bank in satisfaction or part satisfaction of any of its claim and the acquisition and the holding of, and generally the dealing with, any right, title or interest in any property, movable or immovable, which may be the Bank's security; (p) generally the doing of all such acts and things as may be necessary, incidental or conducive to the attainment of the object of the Bank. (2) Notwithstanding anything in clause (1), any loan guaranteed by the Government may be made without any specific security. 16. The Bank may undertake, if necessary, in collaboration and consultation with official or non-official agencies,(a) any research on agricultural credit, marketing or agricultural products, agricultural credit to co-operative societies, cottage industries and other allied industries in rural as well as urban areas, and other allied subject, and the establishment of research institutions in that connection; and (b) the provision of training facilities, including the establishment of training institutions, for the benefit of its personnel and that of co-operative societies and other bodies corporate which may have financial relations with the Bank.

4. Product and Services of Bangladesh Krishi Bank The Bank carries out its activities through its 972 branches (except Rajshahi Division). It has 16 foreign exchange (Authorized dealer) branches. In the field level, the Bank has 9 Divisional, 29 Chief Regional and 24 Regional offices for close supervision of the branch activities. For smooth operation, as a part of internal control and compliance system, the bank has also 63 audit offices of which 9 at Divisional and 54 at Regional levels. In the Head Office, the Bank has 4 Divisions headed by General Managers, 28 Departments and a Training Institute headed by Deputy General Managers. A General Manager heads Local Principal Office of BKB. The existing strength of Bank's work force is 9430 against the approved strength of 13680 as on 31 December 2010. With these branch network and work force, the bank provides various deposit, Credit, and Foreign exchange products.

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Fig: Organogram of BKB

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4.1 Deposit Products and Services of Bangladesh Krishi Bank

Name of Account Current Deposit Account Special Notice Deposit Account --(SND) ----Period Rate of Interest 0.00% -4.00%

(a) For less than 100.00 Crore (b) For 100.00 Crore and above Savings Bank Account

Fixed Deposit Account

Receipt

--5.00% --Urban 5.00% --Rural 7.00% From 3(three) months and above but less than 6(six) 8.50% months (FDR) From 6(six) months and above but less than 1(one) 9.00% year 1(one) year and above but less than 2(two) years 9.50% 2(two) years and above but less than 3(three) years 10.00% 10 yrs 15.00% * Deposit Pension Scheme 20 yrs 15.00% * Savings Pension Scheme 5 yrs 10 yrs 5 yrs 7yrs 1-12 yrs 5 yrs 10.00% 12.00% 6.50% 9.00% 0.00% 6.00% 1.00% Higher Savings Rate 5.00% 5.50% 6.00% 6.50% 7.00% 7.25%

Time Deposits (BKB own products) Teachers Savings Scheme BKB Savings Scheme ** Hajj Deposit Scheme Small Savings Scheme Krishan-Krishani Deposit --Scheme 5 yrs Monthly Contributory Deposit 7 yrs 10 yrs Education Savings Scheme 7 yrs Monthly Benefit Deposit 10 yrs 15 yrs

than

* Information furnished for existing customers who opened their DPS account before 1994 and SPS Account before 2001-02 respectively. Opening opportunity of both the accounts had already been discontinued. ** Bangladesh Krishi Bank shall bear source tax/excise duties against Hajj Deposit Scheme Account on behalf of the individual depositor. Table-3.1. Deposit product and services along with interest rate (Source: BKB website) In Savings Bank Account BKB provide 5% interest in urban area whereas 7% in rural areas to make savings more attractive in the rural areas and to channelize the idle fund of rural areas in mainstream banking. Moreover, the bank provides 1.00% higher than savings rate in Krishan-Krishani Deposit Scheme to attract the farmers in banking and

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habituate the farmers in banking. If the farmers habituated with banking, they can be able to deposit a significant amount of money and use the fund as well as relatively low cost bank credit. With a large rural bank branch network the bank is able to reach a large number of rural people and work for the betterment of agriculture. 4.1.1 Account opening procedure: BKB opens accounts for various types of customers considering various legal aspects involved in opening and operation of these accounts. BKB deals with the following types of deposit customers:

Individual / Joint. Proprietorship Firms Partnership Firms Limited Companies Clubs and Associations Trusts Executors and Administrators Cooperative Societies

The actual formalities will differ depending on the type of the customer. Certain formalities are common to all. These are
1. 2.

BKB ensures that the customer is competent to contract. The banker obtains an account opening form, which is properly filled in all respects by the account holder.

3.

The banker obtains his specimen signature for verification in future of his signature in cheques, etc., signed by him.

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4.

After the formalities are over, the banker issues a cheque book to the customer, indicating his account number and supplies Pay-in Slip books for making deposits.

5.

The banker also obtains the photographs of the depositors/account holders and proof of identity like copy of National ID card/passport / driving license / employee ID card / ward commissioners certificate / U.P chairmans certificate and proof of residence like electricity / Telephone / Municipal bills etc., and also transaction profile of the account holder to comply with recent KYC guidelines.

6.

Introduction: To identify the person for whom the account is being opened must be introduced to BKB.

Introduction is necessary to comply with NI Act. At present, all accounts, whether current or savings have to be introduced. Introduction also serves the purpose of obtaining legal protection under Section 131 of the N.I. Act, so that the banker is not liable for negligence while opening the account. BKB accepts introductions from account holders with a satisfactory account, a confirmed Officer/employee of the bank and locally well-known person.

Accounts in the name of Individuals:

The account opening form is dully filled in by the customer including KYC and TP along with necessary documents and proper introduction. The banker ensures that the account is opened with cash and not with a cheque, draft payable by some other bank or branch.

Joint accounts:

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A joint account is an account opened by two or more persons and account opening form is signed by all the joint account holders. The names, addresses and other details of all of them are also written on the account opening form. The account holders also indicate how the account is to be operated. A joint account is in the name of two persons can be operated by both jointly or by the survivor, by both jointly, by either or survivor, by former or survivor.

Partnership Account:
BKB opens Partnership firms account in the name of the firm, not in the name of an individual partner. Banker gets a written request from all the partners for jointly opening an account. Banker goes through the partnership deed and carefully studies the objectives, capital, borrowing power, and instructions as to the operation of the accounts of the firm such as any partners right to stop payment of a cheque issued by any of the partners.

Company's Account:
While opening A/cs of companies BKB obtains & examine the following documents: 1. Certificate of Incorporation 2. Certificate of Commencement of business (In case of Public Limited Co.) 3. Memorandum & Article of Association 4. List & address of all Directors 5. Board's Resolution to open the accounts & the names of the person authorized to operate the account signed by the chairman of the Board of Directors. 6. Balance Sheet. 7. Mandate regarding opening and operation of the A/C

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Trust Account:
Papers required by BKB to open Trust Account: 1. Trust Deed copy for scrutiny of the rules regarding the opening and operation of deposit account. 2. Resolution for opening account by trustee Board stating BKBs name. 3. List of Trustees & signed Mandate. 4. Resolution regarding operation of account. 5. Dully filled in Account opening Form (AOF), Specimen signature card (SSC), Cheque Requisition Form.

4.2 Credit Programs of Bangladesh Krishi Bank

BKB finances the following 7(seven) priority sectors, namely: Crop, Fisheries, Live Stock, Farm and Irrigation Equipment, Agro based Industrial Project, S M E, Continuous Loan (Working Capital and Cash Credit) and Micro Credit (Small Loan)

Crop Loan:
Out of total annual allocation of Loan portfolio, 60% earmarked for Crop financing. The Credit program covers all the seasonal crops produced in the country. The loan disbursed as per norms set by the Bangladesh Bank. The rate of interest for this sector is 8%. The rate of interest may however, vary from time to time. Both the landowner and sharecroppers are normally the target group for this loan. Marginal farmers are also eligible for the loan. Crop loan is sanctioned on annual basis and Credit passbook is issued to each borrower.

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Fisheries Loan:
To accelerate fish production BKB provides loan for excavation and re-excavation of ponds, development of marshy lands, establishment of fish hatcheries and new fisheries projects. The Loans are given in the following sub sectors: White Fish:
o o o

Fish culture in existing pond/tank Fish culture by re-excavation of old/derelict tank/tank Fish culture by excavation of new tank/tank

Shrimp culture (Marine, Brackish water and sweet water Culture)

o o o o

Shrimp culture in traditional system (Bagda or Tiger Shrimp) Shrimp culture in scientific system Shrimp culture in semi-intensive method Prawn culture in sweet water (Galda)

This loan is given mainly in coastal areas for developed technology based shrimp culture. Fish & Shrimp hatchery (fingerlings production)
o o

Fingerlings production in sweet water Shrimp fingerlings production (fingerlings of commercially

profitable technology)

Live Stock Loan:

Live stock sector plays an important role in the development of agriculture. BKB provides loan for Bullock, Milch Cow, Goatery, Beef fattening and other draft animals. It is a Medium Term Loan.

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Beef Fattening Program:

With a view to creating self-employment for the poor and un-employed people of the country, the bank has introduced a new program titled "Beef Fattening". Objectives of the program:
a) b) c) d)

Create self-employment opportunity for poor and un-employed people. Meet national deficit of animal protein. Bring positive change in the attitude of the people through training. Ensure participation of bank officials in the program and increase their sense of duty and consciousness.

Main Aspects of the program:

a) b) c) d) e)

Purely supervised credit. The bank officials giving guarantee are responsible for recovery of loan. Each borrower will get maximum Tk. 25,000/-for 5 calves ( each Tk. 5,000/-) Loan is collateral free. Repayable within one year.

Continuous Loan:
The bank provides continuous loan for different types of activities as cash credit/working capital loan on short-term basis. Continuous loan is given for processing, preservation and marketing of agricultural products.

Agro Equipment & Farm Machinery Loan:

With the Changing scenario mechanized, one is replacing the traditional agricultural system. In order to meet up the changing demand of this sector, BKB offers credit facilities for both production and marketing of different agricultural equipment and

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farm machinery including irrigation equipment. All sorts of irrigation equipments like tractor, power tiller, shallow and deep tube well are eligible under the sector.

Agro Processing Industries

As an agricultural country, different types of crops and fruits produced here. Moreover, recently sectors like poultry, dairy, fisheries have flourished enormously. There is enough scope for export of these items through processing mechanism and value addition. The agro-based industries are Poultry farm, Dairy farm, Food processing plant, Fish freezing/Processing Industries etc. Reputed local businesspersons and prospective foreign investors are highly acceptable and encourage to the bank for establishment of any sorts of agro-processing industries in Bangladesh. Project under joint venture as well as direct foreign investors are especially encouraged.

Poultry Farm:

Poultry broiler farm Poultry layer farm Poultry (broiler/layer) hatchery Poultry farm related/dependent project

Dairy Farm:

Milk production Milk collection, milk processing (ghee, butter, pasteurized milk etc production) and marketing

Food Processing Project:

Fruit based food preparation, processing, preservation & marketing

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Flour, bread & biscuit vermicelli, noodles, chips., chanachur, corn flakes, potato flakes, French fry, popcorn, baby food, starch etc

Juice, jam, jelly, tomato ketchup, sauce, pickle etc production & marketing Spices processing Different types oil mill, dal mill etc Small processing industry at farm level Dehydrated fruit canning, packaging, preservation & marketing

Exportable Items:

Fish processing Freezing plant Dehydration plant (for dry fish processing) Salting and Dehydration of Jew fish. Leather process & leather based products item Vegetables

Import Substitutes:

Leather and Leather Goods Fish net/net thread production Garments accessories (garments allied industry like washing plant, packaging etc)

Organic fertilizer, mixed fertilizer, urea super granules etc production & marketing

Insecticides production Bio-pesticide, neem based pesticide production

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SME Financing by Bangladesh Krishi Bank:

Bangladesh Krishi Bank has recently introduced the SME policy strategies and financing norms in accordance with the industrial policy 2005 and Bangladesh Bank's Prudential Regulation to assist in the achievement of Millennium Development Goals (MDGs) set by the government. BKB started SME financing since October 2007. Booster Sectors of Small and Medium Enterprise (SMEs) are:

Electronics & Electrical Software Development Light engineering and metalworking Agro-processing/agri-business/plantation agriculture/specialist farming/tissueculture and related business.

Leather making and leather goods Knitwear and readymade garments Plastics & other synthetics Healthcare and diagnostics Educational Services Pharmaceuticals/cosmetics/toiletries Electronics & Electrical Fashion-rich personal effects, wear and consumption goods

Credit Facility:

Small Enterprises : Tk. 2.00 lakh to 50.00 lakh Medium Enterprises : Tk. 51.00 lakh to 500.00 lakh

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Interest Rate:

Small Enterprises : 12.50% Medium Enterprises : 12.50% Working Capital : 13.00%

Repayment:

EMI (equal monthly installment) maximum for five years and working capital for 1(one) year.

4.2.1 Procedure of credit disbursement

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The entire process of BKBs credit disbursement shown in the following flow chart: Application from the Credit Applicant Obtaining CIB Report Collection of Documents Scrutinizing Documents Analysis of Collected Information Legal Opinion if required Sanctioning of Credit at Branch Level Sanctioning at regional credit committee Head Office Credit Committee Sanction Advice Collection of Charge Documents Disbursement of Loan

Application from the Credit Applicant:

A loan procedure formally starts with a loan application from a client. It starts from the branch level. Branch receives application from client in prescribed format for a loan facility. In the application client mentions what type of credit facility he/she wants from the bank including his/her personal and business information. Branch Manager or the Officer-in-charge of the credit department conducts the initial interview with the customer.

Conducting preliminary study:

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1. Borrowers application 2. Reports in confidence regarding the state of business of the intending borrower through available means 3. Borrowers own mode of dealings 4. Statements of accounts of the borrower with own and other banks 5. Statements of assets and liabilities (in detail) 6. Balance sheet / profit & loss accounts for three years 7. Memorandum & articles of association 8. Certificate of commencement of business in case of public limited company 9. Trade license, TIN and VAT registration certificate

Interview of the applicant:

Interview of the applicant covers following points: a) Purpose of credit facility b) Total investment in this business c) Applicants stake in the business d) Amount of credit facility required e) Experience in the business f) Present & future prospect of the applicants business g) Period of advance required for h) Source of repayment i) Applicants previous banker ,if any j) Present liabilities with any other branch of the same bank or other bank

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k) Securities offered against advances from other branch of the same bank or other bank l) Proposed margin against the credit m) Security offered against the proposed credit n) Type of charge to be created against the proposed security o) Terms of repayment.

Selection of borrower:
Before final selection of the borrower it credit officer ensures1. The applicants character, capacity of loan repayment, collateral offered by him and his capital in the business and CRG score is acceptable 3. Purpose of financial accommodation is genuine 5. Valuation of Collateral security offered by enlisted valuer to ensure the quality of easy marketability and ensures sufficient margin to cover the credit facility. 6. Period for which the credit sought is allowable. 7. Repayment arrangement is acceptable. 8. Means, standing and respectability of the applicant and the guarantors (if any) are satisfactory. 9. Credit worthiness of the applicant 10. Location of the business is good. 11. Confidential opinion obtained from (a) Other banks (b) Head Office and/or branches. 12. Clean CIB report obtained from Bangladesh Bank

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4.2.2 Sanction procedure:

Before sanction, sanctioning authority analyze status of applicant, creditworthiness, liabilities, project viability from technical, financial, economic, marketing and management point of view. When security finalized and the sanctioning authority is satisfied, they proceed for sanction of credit facility. According to BKBs credit manualLoan should ordinarily be given in kind, preferable through banks approved supplier/ dealer or the Government sponsored agencies or semi-Government input supplier. a) Purpose like acquiring tractor, power tiller, shallow tube-well, deep tube-well, low lift pumps, hand pumps, rice husking machines, wheat milling machine, sprayer, weeders, tea garden factory machinery plant and machinery of agro industries should as a rule be made available through approved supplier. The manager should be satisfied about correct supply to the borrower. Inputs for crop viz. fertilizer, water charges, insecticides and seeds should be released through approved agency. b) Borrowers are free to make selection of machineries or materials required by them out of a loan as well as the approved supplying agency. While selecting a tractor, tiller, STW, LLP the brand maker must be a standardized by the ministry of Agriculture. In respect of other machinery and equipment before sanction, the sanctioning authority should satisfy him about its available possible price after sale serving facilities etc. For approval of loan proposal branch forward the loan proposal along with the following documents: i) A copy of loan application.

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ii) iii) iv)

End-use report of other loan (s) Appraisal report (signed copy) Managers opinion on loan Economics and cash flow justify the additional loan.

It is the responsibility of the manager to fully scrutinize the object of the loan, genuineness of the applicant, feasibility of the scheme as well as the adequacy of security.

4.2.3 Validity of sanction:

Soon after sanction of a term loan, the manager takes appropriate steps for compliance of loan stipulations by the applicants(s) and, thereafter, obtains prescribed documentation (s) for release of loan. Before release of a loan, where necessary, nonencumbrance certificate in respect of security land/building should filed by the applicant(s),within a period of three months from the date of issue of sanction letter. Where foreign currency loan has been sanctioned,, the applicant/sponsor is to be open a Letter of credit through a BKB foreign exchange Branch for accruing goods within three months from the date of issue of sanction letter unless specified otherwise. If an applicant does not show any interest to comply with the loan stipulation, return a copy of sanction letter accepting the loan and executed documents within two months from the date of sanction, a notice should be sent to him by post under certificate of posting requesting him to complete the formalities within the date so specified an start utilizing the loan. Without any positive response, after three months from the date of issues of sanction letter, the sanction should be deemed to have lapsed. The sanction letter should be cancelled with intimation to the applicant and the regional manager. A cancelled sanction letter can not be re-validated by the manager without the approval

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from an authority one step above the level of sanctioning authority subject to deposit of loan fee afresh.

4.2.4 Security and documentation:

Document creates a legal relationship between bank and borrower. As a result if one party is affected then the other party can go to court and make suit against the other party. The security and documentation of loans and advances done by Bangladesh Krishi Banks respective branch complete the documentation procedure and collect necessary security. The security accepted for loan are: i) ii) iii) iv) v) vi) Fixed deposit receipt issued by any branch of the bank. Balance in other deposits account with the approval of Head office. Govt. promissory Notes. ICB unit Certificates. Life Insurance policies. Land

Requirements for loan documentation:

i) Demand promissory (DP) note ii) Letter of arrangement iii) Letter of acceptance iv) Revival letter vi) Declaration on oath vii) Passport size photograph viii) Nationality certificate vii) Other necessary paper in accordance with sanction letter.

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4.2.5 Loan recovery:

For prompt recovery follow up, it is essential to have a forward diary containing briefs about all term loan cases- ledger folio, borrowers name, due date for recovery and amount due for recovery. Due date register is a handy guidebook for the manager for starts for his recovery work. BKB follows the following ways to recover the loans i) Persuasive measure ii) Coercive / legal measure

Persuasive measure:
In the persuasive measure the following procedure are follow. 1. Issue of demand notice: On the opening day of each month, the manager consult the due date register, where due dates of all terms loans are available. He directs the ledger keepers to prepare demand notice, one month before the due dates, in respect of loans of the branch where loan installment will be due. In the mailing address, name of the borrowers father or husband, as the case may be given for facility of easy delivery by the local postman. The demand notice is issued under a certificate of posting. 2. Legal notice: BKB sends Legal notice to those borrowers who have not repaid any amount towards his due in spite of demand notice. The legal notice should be sent under registered/ acknowledgement due. An office copy of legal notice kept for future record. If the legal notice received back undelivered, the envelope stored in the relevant loan file of the borrower without opening.

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3. Spot collections: The field staffs of BKB go around the village and unions with defaulted borrowers list, contract all of them, and remind them about loan repayment. Each field staff must contracts 50-100 defaulters in a month and collect loan repayment installment. On receipt of outstation recovery, an officer receipt issued to the loanee. Loan collection without issuance of official receipt is strictly forbidden in BKBs rule. 4. Recovery camps: In the peak recovery season, if the manager consider that deployment of more men in the field will augment his recovery and achieve the desire goal he may utilize the services of the branch staff members and put them in the recovery work. While organizing spot camps, branch deploys fields staffs at least 2/3 days ahead before the date of campaign for spot collection so that they can make house- to house visit and ensure maximum collection on the spot. The field staff should carry with them defaulters and borrowers list for the purpose.

Coercive measure/legal measures:

i) Lodgement of certificate case according to PDR Act 1913 ii) Sale of mortgaged property according to BKB Rules 1982 iii) Take over of company /project according to BKB Rules 1983 iv) File suit according to Artho Rin Adalat Ain -2003

4.3 International Banking Of Bangladesh Krishi Bank

Bangladesh Krishi Bank (BKB) has been engaged in Foreign Exchange Business since 1980. It deals in all kinds of export, import, remittance and other sorts of foreign exchange business. BKB has 200 major correspondent banks globally and maintain 30

sufficient number of Nostro accounts in various foreign currencies with different leading banks in important business centers of the world. BKB has taken a massive foreign exchange programs to increase business. Import of capital machinery and raw materials for agro-processing industries and export of agricultural products, foreign remittance & all sorts of foreign exchange transactions and services are provided by BKB.

4.3.1 Products and Services:

Letter of Credit (LC) Bill purchase/Discount Export Credit (Pre Shipment & Post Shipment) Remittance (Inward, Outward) Collection, Purchase and Sale of Foreign Currency and Travelers Cheques. Maintenance of Student education file Guarantees in Foreign Currency. Foreign Currency accounts. NFCD (Non-Resident Foreign Currency Deposit) A/C. RFCD (Resident Foreign Currency Deposit) A/C. Forward Contracts. Correspondent Banking Relations. Taka Drawing Arrangement. Dealing Room. S.W.I.F.T. (Society for Worldwide Interbank Financial Telecommunication).

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Import Finance:
BKB deals in all kinds of Documentary Credit operation under different credit Lines/Aid/Loan/Grants/cash etc. BKB finances the following import sectors of the economy: Products and Services:

All kinds of Capital Machineries for the development of economy giving special emphasis on Agro based industries/Ready made Garments industries and imports substitute industries.

Import of all kinds of industrial Raw Materials for the industries. Any other improved items and specially items directed by the government.

Export Finance
BKB supports exports of any kind giving special emphasis on the following
1.

Financial assistance to all kinds of export oriented industry and other products specially export of fruits & vegetables.

2.

Offers Concessional rate of interest for Export Finance.

Does all activities in exports, such as:

Export bill negotiation /Purchase/Collection. Helps the export firms for getting export incentive. Financial support for materializing the export order.

Foreign Remittance:
BKB plays an important role in the field of foreign remittances. Most of the BKB branches located at the remote areas of rural Bangladesh. The Bangladeshi people working abroad and their relatives in the country maintain bank accounts with BKB

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branches. Bank has an arrangement to allow Bangladeshi people working abroad to send their foreign currencies to their relatives at home. Necessary steps have been taken to widen this sector so that the Bank can serve more people and collect more remittances.

S.W.I.F.T. (Society for Worldwide Interbank Financial Telecommunication):

Bangladesh Krishi Bank is now a proud member of SWIFT. It is connected with modern international financial tele communication system. L/C advising/transferring and quick transfers of remittances as well as other financial correspondences have become very easy & speedy with the installation of SWIFT. Bangladesh Krishi Bank's SWIFT BIC IS "BKBABDDH"

Dealing Room:
BKB is actively operate treasury operation i.e. dealing room operation in its International Department, Head Office, Dhaka to transact foreign currency trading in Inter Bank FC market both at home and abroad

Foreign exchanges activities:

BKB extends its service to the travelers by endorsement of cash foreign currencies/travelers cheque in passports. BKB renders Hajj services to the pilgrims which is 3rd highest in the banking sector. BKB deals in spot and forward sale and purchase of foreign currency in local inter-bank market.

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5. Success of Bangladesh Krishi Bank 5.1 Success of Bangladesh Krishi Bank in number of branches
No. of Branches Urban Rural Total 2003-2004 130 (14%) 799 (86%) 929 Financial Year 2004-2005 2005-2006 2006-2007 130 (14%) 134 (15%) 130 (14%) 808 (86%) 808 (85%) 818 (86%) 938 942 948

2007-2008 130 (14%) 818 (86%) 948

Table: 5.1. Number of branches of BKB (Source: Compiled from issues of Annual Reports of Bangladesh Krishi Bank) Table: 5.1. Shows the number branches from financial year 2003-04 to 2007-08. BKB has a huge branch network that increased each year in the period. Most of the branches are rural (86%) so BKB can reach a large number of rural people and serve them to improve their living by agro-based activities.

5.2 Success of Bangladesh Krishi Bank in Deposit Mobilization

Deposit Mobilization (Figure in Crore Taka) Type of Deposit Term Savings Current Others Total 2003-2004 2221.76 1628.70 296.11 809.23 4955.80 2004-2005 2447.99 1733.66 345.74 1028.62 5556.01 Financial Year 2005-2006 2006-2007 2580.49 3174.21 2035.28 2257.26 426.72 456.59 1298.79 1218.85 6341.28 7106.91 2007-2008 3638.74 2421.85 549.34 1341.77 7951.70

Table: 5.2 Deposit mobilization by BKB (Source: Compiled from issues of Annual Reports of Bangladesh Krishi Bank)

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Table: 5.2 Shows the growth of deposits from financial year 2003-04 to 2007-08 and during the period every year deposits of BKB had increased from the previous year. The deposits of BKB in 2007-08 were 160.45% of 2003-04 deposits. 5.3 Success of Bangladesh Krishi Bank in Loan disbursement Sector Crop Fisheries Livestock Agricultural Equipments Agro based industry Working Capital Socio Economic activities Others Total Sector wise Loan Disbursement (Figure in Crore Taka) Financial Year 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 1024.27 1009.01 1254.76 1406.51 1431.48 70 92.48 160.74 207.73 282.85 152.41 172.12 190.54 202.98 226.3 13.88 71.61 412.59 68.16 150.22 1963.14 15.19 254.82 489.62 58.86 187.54 2279.64 21.45 376.88 724.74 57.02 254.55 3040.68 31.76 468.88 707.43 54.51 133.99 3213.79 28.74 181.45 948.83 53.43 288.46 3441.54

Table: 5.3 Sector wise Loan disbursement by BKB (Source: Compiled from issues of Annual Reports of Bangladesh Krishi Bank) Table: 5.3 Shows in the period financial year 2003-04 to 2007-08 crop loan was the major part of loan portfolio and increased every year except in 2004-2005. However, percentage of crop loan in total loan portfolio decreased from 54.18% in 2003-04 to 41.6% in 2007-2008. Working capital loan during the period increased remarkably in the loan portfolio, from 21% in 2003-04 to 27% in 2007-08 and in 2007-08, it was 230% of 2003-04s amount.

5.4 Share of Bangladesh Krishi Bank in Agricultural Credit Disbursement

BKB's share in Agricultural Credit Disbursement (Figure in Billion Taka)

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Agricultural Credit Disbursement Total Disbursement Disbursed by BKB % Disbursed by BKB

Financial Year 2003-2004 40.40 19.60 48.51 2004-2005 49.57 22.8 46.00 2005-2006 54.96 26.64 48.47 2006-2007 52.93 27.45 51.86 2007-2008 61.67 32.96 53.45

Table: 5.4 BKB's share in Agricultural Credit Disbursement (Source: Compiled from issues of Annual Reports of Bangladesh Bank, Bangladesh Krishi Bank and Bangladesh Bank Quarterly) Table: 5.4 shows BKBs share in agricultural Credit Disbursement which is around 50% of total agricultural Credit Disbursement during the period financial year 2003-04 to 2007-08. In 2003-04 it was 48.51% and in 2007-08 it stands 53.45% of total agricultural Credit disbursement in Bangladesh.

5.5 Success of Bangladesh Krishi Bank in Loan Recovery

Type of Loan Unclassified Classified Financial Year (Figure in Crore Taka) 2004-2005 2005-2006 2006-2007 3661.76 2478.79 4227.97 2762.03 5100.39 2744

2003-2004 3158.02 2439.98

2007-2008 6556.66 2357.52

Table: 5.5 Loan recovery by BKB (Source: Compiled from different issues of Annual Reports of Bangladesh Krishi Bank) Table: 5.5 shows mixed trend of loan recovery in the period. Unclassified loan recovery increased steadily in the period and in 2007-2008 it was 207% of 2003-2004. However, classified loan recovery increased up to 2005-06 then decreased and in 2007-2008 it

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was 82.46 crore less than that in 2003-04. BKB arrange Shuvo Halkhata, Modhumela, Nabannomela, Mohacamp to recover classified loans.

5.6 Success of Bangladesh Krishi Bank in Foreign Exchange & Foreign Trade
Foreign Exchange & Foreign Trade (Figure in crore Taka) Financial Year 2003-2004 2004-2005 2005-2006 2006-2007 557.27 1218.29 1677.21 1683.06 481.92 563.14 756.77 908.56 157.22 27.09 245.42 11.45 327.97 12.84 529.54 10.09

Import Export Inward Remittance Outward Remittance

2007-2008 1813 1084.45 687.78 9.46

Table: 5.6 Foreign Exchange & Foreign Trade (Source: Compiled from different issues of Annual Reports of Bangladesh Krishi Bank) Table: 5.6 shows remarkable growth of BKB in all sectors Foreign Exchange & Foreign Trade. Export and inward remittance, two important element of economic development increased steadily each year in the period from financial year 2003-04 to 2007-08. Import also increased steadily and outward remittance decreased gradually. Import, Export and inward remittance in 2007-08 was 325%, 225%, and 437% respectively that of 2003-04s amount.

6. Recommendations
Recommendation to ensure profitability and achievement of its objectives are:

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1.

Reduction of classified loan: BKB must go forward with the target to recover the classified loan which stands to 2357 crore in financial year 2007-08. This huge amount of nonperforming loan reduces its profitability.

2.

Motivation of employees: BKBs employee work in some such branches where communication is very poor. Moreover, they are not getting competitive remuneration. In these situation employees must be motivated for working in such conditions.

3.

Automation: BKBs must go full ahead for automation. Banking industry is now very competitive and without automation, it will not be possible to sustain in future.

4. 5. 6. 7.

Development of new attractive product and services Increase the percentage of low cost deposit in the deposit mix. Development of skilled workforce Recruitment of new employee: To overcome the shortage of workforce BKB must recruit new employees. The existing strength of Bank's employee is 9430 against the approved strength of 13680 as on 31 December 2010.

7. Conclusion

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Profit and loss alone cannot measure the success of BKB. The success of BKB lies in its huge rural branch network through which it serves a large number of farmers and agribusiness. BKB serves in many areas where any other bank will not go due to lack of profitability. BKB proudly states it as Gram banglar gono manusher bank. BKB is a fully state owned bank and established to finance agricultural activities including agribusiness. BKB disburses around 50% of total agricultural credit in the country. It brings villagers to the banking channel and helps them to create savings for future use. It also ensures payment of remittance through banking channel in rural areas. It helps government to disburse subsidies through banking channel in rural area such as subsidies on oil used for irrigation and fertilizer. Therefore, BKB is successful in attaining its objectives and Asian banking award is the recognition of its success. However, BKB should try to reduce its cost of fund, classified loan and come out of the circle of loss.

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