1

IX
INTRODUCTION

Introduction

IX.01 Background (THE INTERNSHIP) We the students of Masters of Business Administration (M.B.A) study the subject's related to business including Accounting, Management, Finance, Marketing, Mathematics, Social and cultural status and little about science and technology. The schools of business at home and abroad try to familiarize each student as they move comfortably in the business environment. But only the theoretical study in the class rooms is not enough rather a practical experience and the only means of practical experience is internship program. In the business environment at home & abroad there are lots of financial institution, business firms, and industries which provide this facility towards us. If we could not get this facility of internship then a wide gaps will take place between our study and experience. I think this is an extremely valuable asset for us. We the students of business do this usually for there months. In our country there are many banks particularly the esteemed private sector banks, and elite business firms provide this. In this respect I have done my internship at IFIC bank ltd. the one of the most renowned private bank in Bangladesh. I am thankful to IFIC Bank for this. IX.02 Objectives The objectives of the reports is to provide a general description of the branch banking an exposure of practices of different banking activities in IFIC Bank Ltd.. relevant rules, regulations, theories and practices for banking. IX.03 Significance IFIC BANK LTD. is one of leading private commercial banks of the country. Through it has 62 branches all over the country, it is performing banking activities very successfully. To mobilize funds from surplus units and deploy funds to deficit units, the bank is playing a great role in the economic development of the country. IFIC BANK LTD. is one of the key players of countrys economic development. IX.04 Scope The report covers different departments of IFIC BANK LTD., Malibagh Branch like General Banking, Loans and Advance & Foreign Exchange etc. It also presents a brief scenario of IFIC BANK LTD in total.

3 IX.05 Time Schedule : I have worked in different desks of IFIC BANK LTD., Malibagh Branch. This branch did not give any hard and fast schedule for me. I have maintained the following self-prepared schedule in this bank.

DEPARTMENT
1. Loans & Advance 2. Foreign Exchange 3. General Banking IX.06 Methodology :

TIME
About 1 (one) month. About 1 (one) month. About 1/2 (half) month.

I interviewed the branch incumbent, department in charges, officers and clients. I have observed the activities of the people of different desks, I did also observed the practice of the branchs Management. I have reviewed the Annual Reports 1999, 2000 & 2001, 2002 of IFIC BANK LTD., Bank Companies Act-1991, Negotiable Instrument Act-1881. I have also reviewed Different Publications regarding banking functions, foreign exchange operation, credit policies, and Practical Orientation Dairy Maintained by me. -This report is formatted into five segments (a) (b) (c) (d) (e) (f) The Introduction The Organizational Profile Overall Banking Operation Human Resource Development In IFIC Bank. Performance Measurement Analytical Study and Recommendation

-In this report the banking operation has been looked into as far as possible and a performance measurement has been done by using different ratios and diagrams. IX.07 The limitations of the report This is my first report. I am not aware of the format and writing style of the report. I think" this is the main reason why some limitations have been recognized here. But the reports submitted to IFIC Bank academic section's library by the internees student of various universitys worked as guideline to prepare this report. I have also used reliable sources of information by using some text book, the manual etc. I have tried to do the performance measurement by using the data published in annual report 2001. So I think the main limitations of this report are - Lack of experience to prepare a report. -Lack of clear knowledge of different ratios. -Lack of information.

I F I C B A N K AT A S K E T C H

HISTORICAL BACKGROUND OF IFIC BANK LTD.

International Finance Investment and Commerce Bank Limited "IFIC Bank" came in to existence In 1976 as a joint venture between the Government of Bangladesh and sponsors In the private sector with the objective of working as a finance company within the country and setting up joint venture banks/financial Institutions abroad. IFIC was Incorporated as a public limited company with an authorized capital of Tk. 20 core and paid up capital of Tk.10 core. IFIC commenced Its operation on February 28,1977 with a Subscribed capital of Tk.5 core, contributed by leading private sector entrepreneurs In the country. the Government held 49 percent shares and the rest 51 percent were held by the sponsors and general public. But, In 1983 when the Government allowed banks In the private sector IFIC was converted Into a full-fledged commercial bank. the Investment company has transformed Into banking company In June 13,1983 and started activities from June 24,1983 through Its Motijheel Branch. At the very beginning the 60 percent share are owned by private entrepreneur and 40 percent are owned by Govt. at the end of 1984 the authorized capital was 10 core and the paid up capital was 7crore 15 lacs Taka only. Annual report as on 1983. the ownership of non Govt. sector is included1. Mr. Jahurul Islam, Chairman. 2. Salman F. Rahman, Vice-Chairman. 3. A.M. Aga Usuf. 4. Syed. Mohsen Ali. 5. Mr. Ahmadul Kabir. Owner of "Dainic Shangbad".

PRESENT OWNERSHIP STRUCTURE

The government of the peoples' Republic of Bangladesh now holds 35 percent of share capital of the bank. Leading Industrialists of the country having vast experience In the field of trade and commerce own 34 percent of the share capital and the rest Is held by the general public.

6 MISSION OF IFIC BANK

To establish and conduct all types of banking financial investment and trust business in Bangladesh and abroad. To carry on any business relating to wage earners scheme as may be allowed by Bangladesh Bank from time to time including maintaining of foreign currency accounts and any other matter related there to. To contract or negotiate all kinds of loan. To form, promote, organize, assist, participate or aid in forming, promoting or organizing any company or others. To encourage, sponsor and facilitate participation of private capital in financial, industrial or commercial investment. To purchase or otherwise acquire, undertake the whole or any part in the business. To take part in the formation, management, supervision or control of the business or operations of any company.

PRESENT CAPITAL AND RESERVE

IFIC Bank has been consistently maintaining the Capital Adequacy Ratio, as prescribed by Bangladesh Bank. This has been possible by a policy of building up both capital and reserves. It started with an Authorized and Paid-up Capital of Tk. 100 million and Tk. 63.20 million respectively in 1983 which stand at Tk. 500 million and Tk. 406.39 million respectively in 2003.
CREDIT POLICY AND PORTFOLIO

IFIC Bank follows the credit policy within the framework of three main objectives namely, maintenance and improvement of quality assets, recovery on time and building up an efficient customer oriented credit delivery system.. The portfolio includes working capital financing, project financing, import-export financing and domestic trade financing etc. the continued to extend working capital facilities to customers to ensure smooth and uninterrupted operation of their business. At the same time, it expanded project financing portfolio to meet the growth demands of the economy for long term finance in a depressed capital market. So far the Bank has financed 295 projects. Among them 48 projects were financed during 2003 amounting to Tk. 1205.60 million. The Bank also participates in

7 Syndicate Financing and so far has disbursed Tk. 1000 million in 10 projects. The bank successfully handled two credit lines viz-IDA credit No.2340 and ADB loan No.1070 BAN (SF) with recovery rate of 100% and 87% respectively. Under these programs the Bank sanctioned loans of Tk.428.00 million to as 53 units.

NEW PRODUCTS

IFIC Bank has been successfully providing in the recent years a good number of new products besides so called traditional services to meet the increasing demands of the clients and the members of the public. Some of them are: Visa Credit cards, ATMs, Phone Banking, Pension Saving Scheme, Death Risk Benefit Scheme, Consumer Credit Scheme, Education Plan.

JOINT VENTURE ABROAD

Bank of Maldives limited (BML) IFIC Bank limited has established a joint venture in the name of Bank of Maldives limited at Male in the republic of Maldives right in 1983 i.e. 20 years ago. This is the first National Bank of Maldives. The ownership composition is 60:40 percent. The Government of Maldives own 60% sharer and the 40% sharer are owned by IFIC Bank limited. Oman-Bangladesh exchange company (LLC) To help remittance of more the 30,000 Bangladesh wage Earners living in Omen. The bank has established an exchange house-OMAN BANGLADESH EXCHANGE COMPANY (LLC) in the Sultanate of Oman in collaboration with Omani nationals OBEC has seven branches. Nepal Bangladesh bank Ltd. _, This is the first joint venture bank between two countries. In December 1993 the bank establish a joint venture with 50% equity in Nepal. The bank comes into operation in June 1994.

8
OVERSEAS BRANCH

The bank has a branch in Karachi in Pakistan which has started operations in early 1987. Within the short span of its operations the branch procured sizeable business subsequently. The bank opened its second branch at Lahore in 1993. Bath the branches enjoy reputation and good will in Pakistan and have been operating profitably.

BRANCH NETWORK (DOMESTIC)

The branches of the Bank cover all the important trading and commercial centers in Bangladesh. As of date, it has 62 branches within Bangladesh. All the branches are equipped with computers in addition to modern facilities, logistics and professionally competent manpower.

BOARD OF DIRECTORS

Unlike others bank in the private sector, Board of directors of this bank is an unique combination of both private and Govt. sector experience. Currently it consist nine (9) directors, of them four represent the sponsors and general public and four senior officials in the rank and status of Join secretary/ Additional secretary represent the government. The Managing Director is the ex-officio director of the board.

9 Here enclosed the current list of Board of Directors of IFI C Bank Ltd.

SL NO. 1.

NAME OF OFFICER Mr. Manzurul Islam Chairman Islam Group 125/A, Motijheel C.A Dhaka. Mr. Shafiul Islam Chairman Navana Group 125/A, Motijheel C.A. Dhaka. Maj. Gen. (Rtd) Dr. AR. Khan Chief Consultant BARDEM Shahbag Dhaka. Mr. Abdul Hamid Chowdhury Chairman C.A. Hamid Group of Companies 33, Road-4, Block-F. Banani, Dhaka. Mr. Mohammad Delwar Husain Member National Board of Revenue Govt. of Bangladesh Dhaka. Mr. Habib Abu Ibrahim Vice Chairman Export promotion Bureau Chamber Building Dhaka. Dr. Chowdhury Saleh Ahmed Director General Momtoring Cen Ministry of Finance Govt. of Bangladesh Bangladesh Secretariat Dhaka. Mr. Nazrul Islam Divisional Commissioner Sylhet. Mr. Ataul Haq Managing Director

DESIGNATION Chairman

2.

Director

3.

Director

4. ' 5.

Director

Director -

'

6.

Director

7.

Director

\ Director

8.

9.

Managing Director

Management Hierarchy

MANAGING DIRECTOR (MD) DEPUTY MANAGING DIRECTOR (DMD) EXECUTIVE VICE PRESIDENT (EVP) SENIOR VICE PRESIDENT (SVP) VICE PRESIDENT (VP) SENIOR ASSISTANT VICE PRESIDENT (SAVP) ASSISTANT VICE PRESIDENT (AVP) SENIOR PRINCIPLE OFFICER (SPO) PRINCILE OFFICER (PO) SENIOR OFFICER (SO) OFFICER

XI

CHAPTER-03

ORVERALL BANKING OPERATIONS OF IFIC BANK LTD.

SL.NO 1 2 3

PARTICULARS GENERAL BANKING LOAN & ADVANCE FOREIGN EXCHANGE

PAGE NO. 12-27 28-38 39-58

XI-0l GENERAL BANKING

SI. No. XI-01 XI-1.02 XI-1.03.1 XI-01.03.02 XIII-01.03.03 XIII-01.03.04 XIII-01.03.05 XIII-01.03.06 XIII -01. 03.07 XIII.01.03.08 XIII-01.03.09 XIII -01. 03.10 XIII-01.04 XIII-01.04.01 XIII-0 1.04.02 XIII-01.05 XIII-01.05.01 XIII-01.05.02 XIII -01. 05.03

PARTICULARS Introduction Functions Accounts Opening Section Types of Accounts Operational nature of Accounts Accounts Opening Process Issuing Cheque Book Dormant A/C Transfer A/C Closing of A/C Portrait of Deposits of IFIC Malibagh Br. Kinds of Account holders Cash Section Functions of cash section Books maintains by this section Local remittance Demand draft (DD) Pay Order (PO) Telegraphic foreface (TT) Test Arrangement Clearing Section Types of Cheques for Clearing Accounts Section Establishment Section Locker Facility

PAGE 13 13 13 13 14-16 16 17 18 18 18 18 19 19 19 20 20 21-22 23 24-26 26 26 27 27 27 27

XIII -01.06 XIII -01.07 XIII-01.07.01 XIII-01.08 XIII-01.09 XIII-01.10

XI.1

Introduction

During my practical orientation I was placed in IFIC Bank Limited. First I was placed in Malibagh Branch. I have completed General Banking and some exposure in Advance in this branch. General Banking is the starting point and main function of all the banking operations it is the department which provides day-to-day service to the customers. Everyday it collects deposit from the customers by allowing broking interest rate, meets their demand for cash by honoring Cheques and lend it to the customers against ending interest rate. Lending interest rate in higher than borrowing interest rate, this is the profit for the bank. XI.1.2 Functions of this department This department maintains following functions. Accounts opening section. Cash section Remittance section. Clearing section. Accounts section. Establishment.
XI.1.3.1 Accounts Opening Section

This section opens different types of account for their valued customers. Selection of customer is very important for the bank because banks success and failure largely depends on their customers. If customers are bad they creates fraud and forgery by their account with bank and, this destroys the good will of the banks. So, this section takes extreme caution in selecting its valued customer.
XI.1.3.2 Types of Accounts

Accounts can be classified into two types: Operative Account Non-Operative Accounts PSS AlC Current Deposit Account MIS A/C Savings Deposit Account FDR AlC SOD AlC

STD AlC

XI.1.3.3 Operational Nature of Accounts

Current Deposit Accounts (CD account) - A current account may be opened by any individual, firm, company, club, associates, etc.
Bank: may, however, refuse without assigning any reasons to open current account to any body. - Minimum balance of Tk. 5000 while open. - No current account will be opened with Cheques. - Fund in the current deposit account shall be payable on demand. - Minimum balance to be maintained of Tk. 1000. - If minimum balance falls then incidental charges of Tk. 50 will be realized half is early. - No interest is payable on the balance of CD.

- In case of closing of current account Tk. 100 is to be realized against incidental charges.
Saving Deposit Accounts (SB account)
- 6.5% interest is provided to depositors. - The minimum amount of balance to be maintained with this type of account is Tk. 2000 - A depositor can withdraw two times in a week for more withdrawal depositors are not entitled for any interest. - To withdraw above Tk. 20,000 the depositors has to notice. - No savings account will be allowed to be overdrawn. Short term deposit (SID A/C) . . - Generally opened by big business firm. - Interest depends on the amount deposited. - Minimum amount of balance has to be maintained with STD account is Tk 2 lacs, while open - Interest is given at a rate of 4%

- Minimum amount is Tk 5000 must be maintained. Pension Savings Scheme (PSS) - This is a scheme to make the
customer introduced to the banking system under this schemes the customers are to pay a certain of money at monthly interval up to a period of 5 to 10 years and after the period they will get the returns along with the full interest earned during the period and the principal amount. Most of the clients under this scheme are middle crass and lower middle class people - Generally opened by small sever. - Minimum Amount Tk 500 and minimum Tk 2000

- Interest rate 9.00%

- Maturity 5 to 10 years.

PSS 5 years Monthly installment Principal amount 500 36,265 1000 72,530 2000 1,45,060

Bonus 1500 3000 6000 '

With Bonus 37,765 75,530 1,51,060

Liquidation of PSS - In case of premature encashment if the period is below 1 year then no interest will be provide. - ff above 1 year interest will be given @ Savings.

Monthly Income Scheme (MIS) - This is another attractive scheme offered by this bank under this scheme the depositors an:
to deposit a fixed amount to the bank' and for their fixed amount they are entitled to earn :; monthly payment from the bank. This is an attractive scheme for the retired person. This i_ also a kind of FDR, but here the interest is given monthly to the customers the deposit will b_ 50,000, 10,00,000, 1,50,000 respectively. - The rate of interest is 10.80% - Maturity is 05 years. Liquidation of MIS

- 200 bank charge for premature encashment as out access duty.

- Closing before 6 months no benefit will be providing. - Preen casement between 6 months to 1 year interest are provide according to savings rate. - Pre encashment between 1 to 3 years savings interest are provide 0.50 + saving rate - Pre encashment between 3 to 5 years. Interests are providing 1.00+saving rate.

Fixed Deposit Reserve (FDR)

- FDR is neither transferable nor negotiable.

- It can be opened by all. - Provided 7.50% - 8.25% interest. - Interest rate very on principal amount. - The deposited principal amounts have not fixed by the Bank. - One can deposit any sum of amount under fixed deposit reserve. - In case of with drawl before maturity the previous maturity period is considered to pa: interest according to savings interest rate 6.5% it is known as pre matured en-casement.

Interest rate have been rated by the Management of IFIC Bank on FDR have given below Maturity period 3 months 6 months 1 year 2 year 3 year Rate of interest 7.5% 8.00% 8.25% 8.25% 8.25%

Liquidation of FDR - Only the account holder himself and the authorized person can liquid the FDR after maturity. - In case of joint name authentication from both is necessary. - If demand before maturity the last expired duration is considered to pay interest.

XI.1.3.4 Account

opening process

Step l- Receiving filled up application in bank's prescribed form mentioning what type of account is desired to be opened. Stop 2- The form is failed up by the applicant. Step 3-Two copies of passport sized photographs for individual and in case of firm's photographs of all partners are necessary. Step 4-Applicant must submit required document. Step 5-Applicant must sign specimen signature sheet and give mandate. Step 6-Introducer's signature and accounts number verified. Step 7- Authorized officer accepts the application Step 8- Minimum balance is deposited only cash is acceptable. Step 9- Account is opened and deposit slip and a cheque book has given.

Account Opening Procedure in a flow chart :

He/she is required to fill up the specimen signature card Applicant fills up the relevant application form in the prescribed manner. For individual introduction is needed by an account holder

The authorized officer scrutinizes the introduction and examine the documents submit

Account is opened

Issuance of deposit slip and the deposit must be made in cash. No cheque or draft is acceptable to the Bank

After depositing the cash one cheque book is issued

XI.1.3.5 Issuing Cheque books to the customers

The bank issues 10 leaves cheque book for savings account and 20, 50 and 100 leaves cheque books for current account. To complete the issuing of cheque books a customer has to fill up the requisition form for cheque books. Then a new cheque book will be filled up by the account number of the customer. The requisition slips are maintained and recorded in a register as voucher.

XI.1.3.6 Dormant account If any account is inoperative for more then one year is called dormant account. To operate this accounts manager's permission is necessary.
XI.1.3.7 Transfer of Account

Account holder may transfer his account from one branch to another branch. For this he must apply to the manager of the branch where he is maintaining his account. Then the manager sends a request to the manager of the branch where the account holder wants to transfer his account for opening the account. XI.1.3.8 Closing of Account To close an account parties may be request to send an application along with the unused leaves of the cheque book. On receipt of the application the following steps are taken. i) The signature of the account holder is verified. ii) The number of the unused cheque leaves shall be noted therefore. iii) Debiting the incidental charges to the account. iv) The account holder is advised to draw the remaining balance. XI.1.3.9 Portrait of Deposits of IFIC Malibagh Br.
(Fig. in Thousand)

Type of account
CD SB STD FDR PSS MIS

No. of account
521 2090 13 204 745 01

Amount in Tk.
22,349 10,0,144 279 1,20,109 32,618 100

Portrait of Accounts
Portrait Portraitof ofAccounts Deposits
2500 140000

Portrait of Deposits

120000 2000 100000 1500 80000 60000 1000 40000 500 20000
00 CD CD SB SB STD STD FDR No. of Accounts Amount in Tk. PSS FDR MIS PSS

XI.1.3.10 Kinds of Account Holders Branch may open accounts of the following categories of depositors: 1) Individuals - Individuals are adult persons of 18 years age or more who are competent to enter into contracts. 2) Joint accounts - More than one adults jointly or adult with minor(s) may constitute joint accounts. 3) Sole Proprietorship concern - A business trading concern owned by a single adult person is sole proprietorship concern. 4) Partnership firms - A business concern owned and managed by more than one persons which may be registered or not registered is a partnership firm. 5) Private limited - A body corporate formed and registered under companies Act 1994, with limited members. 6) Public limited - A body corporate formed & registered under companies Act 1994 with limited liability of the shareholders and with no upper ceiling of shareholding both certificate of incorporation and certificate of commencement has given by registrar. 7) Trusts - Trusts are created by trust deed in accordance with the law. 8) LIQUIDATORS - Liquidators are appointed by court of law for companies going into liquidation. 9) EXECUTORS - Executors are appointed by a deceased himself before his death by "with" to settle the accounts of the person after his death. 10) Club/Associations/Societies - There are organizations created & registered or not registered under societies registration act. 11) Co-operatives - There are corporate bodies registered under societies registration Act or companies Act or the co-operative societies Act. 12) Non-Govt. Organization - NGOs are voluntary organizations created & registered and society's registration Act or co-operative societies Act. 13) Non-Trading concern - These are organization registered under societies registration Act or companies Act or co-operative societies Act. XI.1.4 Cash Section Cash department is the most vital and sensitive organ of a branch as it deals with all kinds of cash transactions. This department starts the day with cash in vault. Each day some cash i.e. opening cash balance are transferred to the cash officers from the cash vault. Net figure of this cash receipts and payments are added to the opening cash balance. The figure is called closing balance. This closing balance is then added to the vault. And this is the final cash balance figure for the bank at the end of any particular day. XI.1.4.1 Functions of cash department -Cash payment -Cheque cancellation process -Cash receipt

 Cash payment Cash payment is made only against cheque. This is the unique functions of the backing system which is known as "payment on demand" . It makes payment only against its printed valid cheque. Cheque cancellation process Receiving cheque by the employee in the cash counter and verification of the following by the cash officer in the computer section: i) Date ofthe cheque. (it is presented within 6 month from issue date) ii) Issued from this branch. iii) An amount in figure and in word does not differ. iv) Cheque is not torn or mutilated. Then gives pay cash seal and sends to the payment counter and payment office makes payment. Cash receipt . Another important function of this department is receipt of cash. Depositors deposit money in the account through this section by deposit slip. i) It receives deposit from depositors in from of cash. ii) So it is the "mobilization unit" of the banking system. iii) It collects money only its receipts from. iv) It receives cash for issuing pay order TT, DD. XI.1.4.2 Books maintained by this section: i) Vault register: It keeps accounts of cash balance in vault at the bank. ii) Cash receipt register: Cash receipt in whole of the day is recorded here. iii) Cash payment register: Cash payments are made in a day are entries here. iv) Rough vault register: Cash collection for final entry in vault registers done here, as any error and correction is not acceptable. v) Cash balance book: Balance here is compared with vault register. If no deference is found, indicate no error and omission. XI.1.5 Local Remittance Sending money from one place to another place for the customer is another important service of the bank. This service is an important part of transaction system. In this service system, people, especially businessman can transfer funds from one place to another place easily. There are three kinds of technique for remitting money from one place to another these are -Demand draft (DD) -Pay order (PO) -Telegraphic Transfer (TT)

XI.1.5.1 Demand Draft (DD) DD is an order of issuing branch on another branch of the same bank to pay specified sum of money to payee on demand. It is generally issued when customer wants to remit money in any place i.e. outside or the clearing house area of issuing branch. Payee can be the purchaser himself or another mentioned in the DD. It is safe technique of transferring money from one place to another. Payment process of the paying bank: -Test confirmation if the DD value is more then Tk. 25,000.00 -Confirm that the DD is not forged one. -Confirm with sent advice. -Make payment.

Commission and charges of DD: Postal charge Tk. 15.00 + commission 0.10% + 15% Vat on commission. How DD Works : If DD comes to the Bank on which it is drawn, the Bank honors it. An IBCA along with photocopy of DD is sent to the paying Bank (An advice to paying Banker) DD is handed to the customer where paying Bank is mentioned and payment will be made from another Bank Applicant fills up the relevant form with a credit voucher (income A/C) for the Bank The applicant should have A/C with IFIC

Cancellation of DD: Step - I : Application is writing to the manager of the account maintaining branch. Step - 2 : Verification of specimen signature. Step - 3 : Journal posting for incoming: -Bills payable DD payable Dr. - IFIC General AIC Cr Journal posting for outgoing: -IFIC general A/C -Party A/C Send a letter to paying bank Dr. Cr.

Step - 4 :

XI.1.5.2 Pay Order (P.O) Pay order gives the right to claim from the issuing ban1e A payment is an instrument from one branch the another branch of the bank to pay a specific sum of money. Unlike cheque there is no possibility of dishonoring because before issuing pay order the bank takes money in advance. There are three reasons behind use of P.O: Remitting Purpose Advice to Pay Payment against bill submitted to the bank. Pay Order consists of three parties: - Beneficiary - Applicant - Counter Part. Commission and charges of P.O: Amount of P.O Up to TK. 100,000 100,001 to 500,000 Above 500,000 Commission on Remittance 25 50 100 15% VAT on Commission 4 8 25

Payment Process of Paying Bank: Payment is made through clearing.

Payment of Pay Order : An the PO issued by the bank is crossed one it is not paid over the counter. On the contrary the amount is transferred to the payees account. To transfer the amount the payee must duly stamp the PO. The payee deposits it to his Collecting Banker Payment is given and is registered in incoming payment of P.O Book.

Collecting Bank sends the P.O. to the issuing Bank through clearing house arrangement The Pay Order is passed and cancelled in the deposit section.

Cancellation of P. 0: Step-I: Application writes to the manager of the account maintaining branch. Step-2: Verification of specimen signature. Encasement of P.O: To encashment of that P.O. the payee of the instrument deposits the P.O. to his bank. The bank sends the pay order to the issuing bank through clearing. Then the P. O. is passed through the deposit section and the P. O. is send back to the clearing house again and later the amount of P.O. credited to payees account. Flow Chart of P.O.-How It Works : He purchased the P.O. in favor of a person or company Purchaser has an account with IFIC and fill up the relevant from with a credit voucher

The beneficiary deposits the PO in his account with IFIC or another Bank Collecting Banker sends an IBDA The collecting Banker presents the PO to paying Banker through clearing house If any A/C with IFIC BANK(the collecting Banker)

Payees account is credited with collecting Banker

Payees account credited with collecting Banker

XI.1.5.3 Telegraphic Transfer (TT) Issuing branch requests to another branch to pay specified sum of money to a specific person on demand by telegraph or telex or telephone. Transfer of fund by TT is the rapid and Convenient but expensive method.

TT (Issue): Customer fills up the TT form and pays the amount along with commission in cash or by cheque. The respected officer issues a cost memo after receiving the TT form with payment seal, then sign it and at last give it to the customer. Next a TT confirmation slip is issued and its entry is given in the TT issue register. A test number is also put on the face of the slip. Two authorized officer signs this slip. The respective officer transfers the message to the drawee branch mentioning the amount, name of the payee, name of the issuing branch, date, test number and his her power of attorney (P.A.) number. The confirmation slip is send by post. How TT Works (Outward) :

Applicant fills up the relevant form with a credit voucher (Income A/C) for the Bank Applicant has an account with IFIC Bank

Text of telex is written or the relevant information along with Test code is sent to the payee Bank through fax or telephone

Another 2 copies of the text are sent through courier to the Payees Bank.

The reconciliation departments reconcile two copies and detect the fraud or forgery if any Then one copy from drawers Bank and another from Payees Bank are sent to the reconciliation department of local office. Before that the Payees Bank decode the test and if test is agreed

Payees account credited

Payment Process of TT: Step-I: Test confirmation Step-2: Confirm issuing branch Step-3: Confirm payee's account. Step-4: Confirm amount Step-5: Make payment Step-6: Advice sends to the Head Office for reconciliation. Commission and Charges of TT: -Telephone or Telex charge TK.30. -Commission of Principal amount. -15% VAT on commission. Entry for TT a) On Issuing of TT : 1. Cash / Respective A/C (issuer) -------------- Dr. IFIC BANKGeneral A/C ---------------------------- Cr. (Principal amount) Income A/C-postage -------------------------- -------Cr. Income A/C-Commission on TT ---------------- --Cr. 2. IFIC BANKGeneral A/C -------------------------- Dr. Bills Payable A/C-TT Payable ------------------- Cr. b) On Payment of TT

Bills Payable A/C TT Payable ---------------------- Dr. Party A/C --------------------------------------- Cr. XI.1.6 Test Arrangement of TT & DD Test is the security code by decoding which any branch can be sure that the TT or DD is not forged one. Only the authorized officers know the test code. Each bank maintains secret code for this. That is the test arrangement is the combination of different secret codes.

XI.1.7 Clearing Section This section receives all kinds of cheque in favor of the valued client for clearing on the part of their banking services. After receiving cheque it is necessary to endorse it and cross it specially. Clearing of cheque is done through the clearing house in Bangladesh Bank. - 1 st clearing - 2nd clearing

XI.1.7.1 Types of cheque for clearing There are four types of cheque for clearing: 1) Inward clearing cheque. 2) Outward clearing cheque. 3) Inward bills for collection. 4) Outward bills for collection. Inward clearing cheque It refers the instruments drawn on IFIC bank received by other banks in the clearing house from the representative of other bank. Outward bills for collection When our branch sends Cheques to other branch ofIFIC bank is called OBC. Accounting treatment of this process: IFIC general (Sender's Branch) Dr. Depositor's A/C Cr. Inward bills for collection (lEC) There are two types of clearing, firstly cheque collects from the other branch of IFIC banle These Cheques are settled by sending mCA i.e. debiting depositors account and crediting sender's branch account. . Secondly cheque collects from another bank outside the clearing house. These cheque are settled debiting depositors account and sending DD or TT in favor of senders bank. Outward Clearing Cheque Cheque drawn of another branch of IFIC bank are called Outward Clearing Cheque. These types of cheque are directly sent to the respective branch and request them to send IBCA. XI.1.8 Accounts section This is obviously an independent and unique department, which works as the composition of all the departments of the branch. This section is fully computerized. So the conventional large ledger and journal books are not kept like the some nationalized bank. It receives the vouchers from all departments and prepares the subsidiaries and maintains accounts. XI.1.9 Establishment section This section deals with employees salary, many types of internal expenses such as purchases of stationary, equipment, machinery, payment of labor cost and convence. In case of leave of absence employee collects prescribed form from this section. XI.1.10 Locker facilities Locker facility is available in this branch. Generally people keep their valuable ornaments in the locker. Lockers are three sizes one are small and other are middle and big. If any body want to open a locker s/he has to pay rent Tk. 1800 for big size, Tk. 2500 for large and Tk. 1200 for small size annually. Any individual can open a locker.

XII-02

LOAN & ADVANCE

SL.NO XII-02.01 XII-02.02 XII-02.03 XII-02.04 XII-02.05 XII -02.06 XII-02.07 XII-02.08 XII-02.09

PARTICULARS Introduction Types of Advance Nature of Different Types of Advance Securities Against Advance Which Advance Against which Securities Process of Loan Sanction Portrait of Advance Division of IFIC BANK, Malibagh Br. Classification of Loan Lending Risk Analysis (LRA)

Page No. 29 29 30-32 33 33 34 35 36-37 38

XII.2.1 Introduction This is the survival unit of a bank because until and unless the success of this section is a question to every bank. If this section is not properly working, the bank it self may become bankrupt. This is important because this is the earning unit of the bank. Banks are accepting deposits from the depositors in condition of providing interest to them as well as safe keeping their deposits. Now the question may gradually arise how the bank will provide interest to the clients and the simple answer is advance. We often use loans and advances as an alternative to one another. But academically this concept is incorrect. Advance is the combination of such items where loan is a part only for this credit section of the bank. XII.2.2 Types of Advance All loan and advance that are provided by this bank can be categorized into there heads according to the nature and characteristics of each product:

ADVANCE

Continuous Loan Loan General Term Loan

Figure shows the different types of advances

XII.2.3 Nature of Different Types of Advance Cash Credit HYPOTHECATION (CC HYPO) Cash credit is given through the cash credit account. Cash credit is an active and running account where deposit and withdrawals may be made frequently. The debit balance of the account on any day can not exceed the agreed limit. Instrument HYPOTHECATION DEED. 50% margin requires to open a CC account. (varies) Operation of cash credit is same as that of overdraft the purpose of cash credit is to meet working capital needs of traders, farmers, and industrialist. It is granted only the first class parties. It is charged against a property where neither the ownership nor the possession is passed to the bank. Cash Credit PLEDGE The nature, operational work, and characteristics of CC- PLEDGE in as same as CCHYPO. CC.PLEDGE in different from CC-HYPO only from the securities or business goods against the loan amount. It is charged against properties where the ownership may remain to the borrower but the possession is passed to the bank. Instrument - Pledge Deed. Secured Overdraft (SOD) Overdrafts are those drawings, which are allowed by the banks in excess of the balance in the current account up to a specified amount for definite period as arranged for. Generally it is given to the businessmen to increase their business activities. Usually provide against FDR, PSS, i.e. financial obligation or any primary securities. The interest charges from the date of first withdraw. Interest is calculated and charged only on the actual debit balance on daily product basis. Balance of OD account are fluctuates The interest rate of SOD is 3% above of FDR interest rate if the FDR is in our Bank.
If the FDR is in other bank then the interest r1te is 14.50%

Industries Loan It is a term loan. It is given for three (3) years at equal installment. Grass period is allowed of this types of loan. Grass period is the period that require to earn visible returns. Others loan Loan provided for other purpose which is productive and less risk rather industrial sector are treated as others loan. The terms and conditions of these types of loan are same as industry loan. House Building Loan This loan is give for the construction of building house. It is gives for three (3) years at equal monthly installment. This loan is not provides frequently. Staff House Building Loan (SHBL) 120 times of BASIC salary is provided as SHBL. Bank rate + 1 % interest is charged to the loan amount. Repaymeilt adjusted from their monthly salary. Repayment is made at equal monthly installment. Consumes Credit Scheme Under this scheme credit is given to the customer to purchase necessary and luxury commodities like computer, motor vehicle, television, refrigerator, music system sewing machine, furniture etc. Other then the employee it is given to the valuable client. It is a 24,36,48 installment system @ 15.50% interest. Stuff loan against Provident Fund (SLPF) 10% of basic in contributed by employee Repayment is adjusted from their on they salary. Maximum sanction from PF. Loan against PSS This loan is provides against PSS fund. 80% are given of the PSS fund. This is 100% secured for the bank.

Payment Against Document (PAD) The importers are to open letter of credit through any bank for importing goods. Most of the time they are to extend credit to the importers if not prohibited by Bangladesh bank. This loan creates, on receipt of shipping documents from the negotiating bank, is transferred and lodged to PAD. PAD is associated with import and import financing. The bank opening letter of credit is bound to honor its commitment to pass for import bills when these are presented for payment provided that it is drawn strictly in terms of the letter of credit, in fact the amount their sends advanced on behalf of the importer. Loan against imported Merchandise (LIM) In many cases, a bank has to clear the goods imported under letter of credit at the request of the borrower. When the importer does not come forward to retire the documents inspire of repeated reminders bank has on forced circumstances to clear the imported consignment on arrival of the same to avoid demurrage at the port which adds to the burden of commitment. When the importer fails to retire the documents or request for clearance of goods, the outstanding under PAD is transferred to LIM account. After clearance, consignments are taken delivery by the importer on full payment of bank's liability. Normally part delivery is not allowed while on LIM A/C. when the delivery in part

is desired by the importer, the LIM is converted into cash credit account retaining proper margin and executing charge documents, the delivery is effected themselves on
obtaining pro rate payment. Trust Receipts (TR) This is an arrangement under which credit is allowed against trust receipts and imported or exportable goods remain in the custody of the importer or exporter but he is to execute a stamped trust receipt in favor of the bank where a declaration is made that goods imported or bought with the bank's financial assistance are held by him in trust for the bank. . Export Cash Credit (ECC) ECC are extended to an export to facilitate the export of goods & commodities for which there is export letter of credit or contract on hand. It is a pre-shipment & short term credit to be liquidated out of the proceeds of export documents which include negotiation or purchase of export documents.

XII.2.4 Securities against Advances The following securities are to be obtained by the branches depending on the nature of advances while allowing secured advances to the parties. - Pratirakshya Sanchay Patra, Bangladesh Sanchay Patra, ICB unit certificates, Wage Earner Development Bond - Fixed Deposit Receipt issued by any branch of IFIC Bank Limited. - Shares quoted in the Dhaka Stock Exchange Limited - Pledge of goods and produce - Hypothecation of goods, produce and machinery - Immovable property - Fixed assets of a manufacturing unit Cheques, Drafts, Pay Order, Railway Receipts, Steamer Receipts, Burge Receipts of the Govt. or Corporations Shipping document XII.2.5 Which Advances Against Which Securities All securities are not suitable for all types of advances. Each security has its own suitability. Specific securities to be obtained by the branches while allowing advance are shown below against the types of advances: Types of advances Loans Securities Lien of various kinds of Sanchay Patras, Govt. Securities, and Shares quoted in the Stock Exchange, Debentures, Fixed Deposit Receipts, Pledge of gold/Gold ornaments, hypothecation of vehicles. Collateral of immovable properties. Sanchay Patra, Non-resident for deposit (NFCD), shares, debt. Promissory notes, fixed deposit, insurance policies, gold etc. Pledge or hypothecation of stock, produced merchandise. The bill itself. Shipping document for imports. Pledge of imported merchandise. Trust receipt obtained in lieu of trustees. Pledge or hypothecation of goods receipts. Shipping document for exports.

Overdraft

Cash Credits Inland bills purchase (IBP) PAD IM TR

ECC
Foreign Bills Purchase

XII.2.6 Process of Loan Section Step-1 : Sanctioning by the competent authority A secured advance may be grant to a party only after getting a limit sectioned from the competent authority. Step-2 : Loan/Advance Proposal For obtaining a loan/advance the party must make an application in standard form in writing to the branch where he maintains his operative account. After receiving the application from the party, the branch manager will take immediate steps to compile report regarding the party based on the following sources of information: Personal investigation Confidential supports from Other banks, Chamber of commerce CIB from Bangladesh bank as the earnable. Treading account P/C, B/S. M/A if' any and other documents submitted by the party. The average balance and the present maintained in the account. The nature of operations during the last six months and the date of opening account. Step-3 : Preparation of limit proposals The branch, may prepare a limit proposal after being fully satisfied with the following points: Step-4 Step-5 The financial position of the party. Purpose for which advance is required. Nature of securities offered. The payment arrangement.

: Renewal Proposal. : Approval by Head Office and Branch responsible. Limit proposal sent to HO. Sanction/reject Receive the limit section advice.

Step-6 Step-7

: Disbursement of loan. : Loan monitoring and administration.

XII.2.7 Portrait of advance division of IFIC Malibagh Branch

Tk. In Thousand Particulars Term loan (industries) Term loan (other) SHBL House Building Loan SOD CCS CC (HYPO) CC (PLEDGE) ECC Loan against PF Loan against PSS FDBP IDBP LIM PAD (Cash) PAD (Force) PAD Inland PAD EDF Loan against TR Grand Total As per Statement of affairs as on Nov, 10, 2004. No. of Acc 10 05 11 03 18 96 23 07 04 46 80 131 19 48 06 10 18 12 586 Amount in Tk. 123737 101208 9697 1694 64848 9184 181466 220446 18400 6423 1961 80046 3111 486922 12188 11443 16748 48940 96780 1439670

XII.2.8 Classification of Loan (CL) Advance may classified or unclassified are determine on the basis of regularity of loan recovery. ASSESSMENT OF LOAN & ADVANCE CLASIFIED (IRREGULAR)

CLASSIFIED
(IRREGULAR)

UNCLASSIFIED
(REGULAR)

SUBSTANDARD

DOUBTFUL

BAD LOAN

Figure: Shows the

Classification or 1oan

Unclassified Loan: the repayment of advance which have regularity are called unc1assifiec advance. This is a clean loan that is these is no overdue installment or not the expire due date.

Classified: The repayments of advance which have no regularity are classified. That means which are irregular in nature, overdue installment of payment, and expire the due date. There are three standards of classification: Sub Standard Doubtful

Malibagh Branch. Nature Of CL UC BL DF SS Total CL No of Account 322 NIL 05 49 376 54

Bad LoanAs per summery sheet as at 09.11.2004 IFIC Bank,

Amount in TK. Outstanding 39887 NIL 522 2555 42964 3077

Interest Suspense Not applicable NIL 48 _ 48 48

Eligible Security 937732 NIL NIL NIL 937732 NIL,

Base for Provisio n NIL NIL NIL NIL

Required Provision 1% 100% 50% 20%

Eligible security - For land and building 50%. - Financial obligation 100%. Interest suspense

- Total balance of interest against classified loan.

Base for provision - Formula: Outstanding - Interest surpasses - Eligible security - In case of unclassified advance the base for provision should kept 1 % of the total outstanding amount. - In case of bad loan the base for provision should kept 100% of the total outstanding amount

- In case of doubtful loan the base for provision should kept 50% of the total
outstanding amount. - In case of sub standards loan the base for provision should kept 20% the total outstanding amount.
Basically this standards of classification are depends on the expansion of time. There are separate systems of classification for each type of loan. Each banking institution have develop there own system of loan classification. At !FIC Bank Ltd. Malibagh branch, what I have seen in the advance division that classification of loan is a system of observation rather to measure of classify the credits which has provided by this bank.

XII.2.9 Lending Risk Analysis (LRA) LRA is the combination of analysis of various types of risks that may occur while a loan have sanctioned. This is an analysis of the measurement of performance of a company or individuals. When a loan have been provided by the bank then all types of risks have to calculate. This is not easy to express all the pros and corns of LRA are not possible in this report. Before sanctioning a loan it is necessary to analyze the LRA. IFIC Bank has formatted this analysis which contains several sheets of analysis to identify the strength and weakness and the repayment probability of the lending. Here shows the simple flow chart of LRA where considering the business risk, company risk, industry and management risk in the following:

LENDING RISK ANALYSIS

Business Risk
Supply Risk

Industry Risk Industry Risk

Sales Risk Company Risk Performance Risk Company Reliance Risk

Mgt. Competence Risk

Management Risk Mgt. Integrity Mgt. Competence Risk

Security Control Risk

Security Risk
Security Cover Risk

Figure: Shows the Components that analyzed in the LRA

FOREIGN EXCHANGE

SL. NO. XIII-03.0 1 XIII-03.02 XIII-03.03 XIII-03.04 XIII-03.05.01 XIII-03.05.02 XIII-03.06 XIII-03.06.01 XIII-03.06.02 XIII-03.06.03 XIII-03.06.04 XIII-03.06.05 XIII-03.06.06 XIII-03.06.07 XIII-03.06.08 XIII-03.06.09 XIII-03.07 XIII-03.07.01 XIII-03.07.02 XIII-03.07.03 XIII-03.07.04 XIII-03.07.05 XIII-03.07.06 XIII-03.07.07 XIII-03.07.08 XIII-03.08 XIII-03.08.01 XIII-03.08.02 XIII-03.09

PARTICULARS Introduction Administration of foreign exchange in bangle Authorized Dealers Handling of foreign exchanges of IFIC Bank Types of Letter of credit Nature of different types of L/C Import Section Import Procedures Proposal for Opening L/C The L/C Application form The Letter of Credit Authorization form The IMP form Securitization of L/C Application Accounting Treatment in case of L/C Opening Amendment of L/C Adding Confirmation Export Section & Export Financial Back to Back L/C Payment for Back to Back L/C Export L/C Formalities of Export L/C Procedure for FDBP Settlement of Local Bill Modes of Payment for Export Bills Under L/C Test key arrangement Foreign Remittance FDD Endorsements of US$ in passport Student File Open

PAGE 40 40 40 40-41 42 42-44 45 45 46 46 47 47 48 48 49 49 50 51 52 52 53 54 54 55 56 56 57 58 58

XIII-03.01: Introduction A person living in Dhaka city can make payment to another in Chittagong with money or by Cheques on any bank of the country. Such payments do not present any problems. But things are different when the debtor and the creditor live in different country. When a trader from Dhaka city imports goods from New York, the payment involves certain complication. The Dhaka man can pay in taka but taka is of no use to New York exporter. There must be some means of changing taka into dollar. Obviously the intervention of a third party is required. So there is a need for a foreign exchange mechanism. Foreign exchange refers to the process or mechanism by which the currency of one country is converted into the currency of another country. Foreign exchange is the means and methods by which rights to wealth in a country's currency are converted into rights to wealth in another country's currency. -L.R. CHOWDHURY In terms of foreign exchange regulation Act 1947, as adapted in Bangladesh, foreign exchange means foreign currency and includes all deposits. credits and balances payable in foreign currency as well as all foreign currency instruments such as, drafts, travelers Cheques, and bills of exchange in any foreign country. XIII-03.02: Administration of Foreign Exchange in Bangladesh The statute for administration of foreign currency in Bangladesh is the foreign exchange regulation Act, 1947 as adapted in Bangladesh. Under this Act, the responsibility and authority of administration of foreign exchange is vested by the government with the Bangladesh bank. While the Bangladesh bank has full authority to administer foreign exchange in Bangladesh, it cannot do so by itself. This is not possible for Bangladesh bank to deal with a large number of exporters and importers individually. Therefore, provision has been made in the act, enabling the Bangladesh bank to delegate its powers of functions to authorized dealers. XIII-03.03: Authorized Dealers (AD) In administering exchange control and foreign trade, Central Bank of the country (Bangladesh Bank) authorizes few branches of commercial banks to deal in foreign exchange. These branches are known as Authorized Dealers. They act as an agent of the Central Bank and work under the Foreign Exchange Regulations Act-1947 and Guidelines for Foreign Exchange Transactions-Volume 1 & 2 prescribed by Bangladesh Bank. XII-03.04: Handling of Foreign Exchange at IFIC Bank The IFIC Bank deals with foreign exchange with goodwill for a long time. It is handling of foreign exchange closer to twenty (20) years. Nowadays 16 branches of this bank are authorized to deal foreign exchange by Bangladesh Bank.

IFIC BANK offers two types of credit facilities to its customers. Such asa) Funded Credit and b) Non Funded Credit a) Funded Credit : The credit facilities in which the fund of the bank is directly invested is known as funded credit. Such as-Cash Credit, Secured Overdraft act. b) Non Funded Credit:

The credit facilities in which banks funds are not directly invested are known as non-funded credit. Such as-Letter of Credit (L/C), Guarantee etc. Letter of Credit / Documentary Credit (L/Cs) is the key player in the foreign exchange business. With the globalization of economy. International trade has become quite competitive. Timely payment for exports and quicker delivery of goods is, therefore, a prerequisite for successful international trade operation. Growing complexity of international trade, separation of commercial parties across the globe etc. underlined the need for evolving a system that balances between the expectations of the seller and the buyer. Documentary Credit has emerged as a vital system of trade payment, and fulfilled the requisite commercial need. This system substantially reduces payment-related risks for both exporter and importer. Thus the letter of credit is the classic form of international export payment, especially in trade between distant partners. Payment, acceptance or negotiation of the credit is made by the bank upon presentation by the seller of stipulated documents (e.g., bill of lading, invoice, inspection certificate).

DOCUMENTARY CREDIT / LETTER OF CREDIT (L/Cs):

Documentary Credit or letter of credit is nothing but an arrangement whereby a bank (issuing bank) acting at the request and on the instruction of a customer (the applicant) or on its own behalf undertakes to make payment to or to the order of a third party (the

beneficiary) or to accept and pay bills of exchange (draft) drawn by the beneficiary, or authorize another bank to negotiate against stipulated documents provided the terms and conditions to the credit are complied. Thus, Documentary Credits are akin to bank guarantees. In popular language, they are known as Letters of credit (L/Cs). Bank guarantees are, however, issued to cover situation of non-performance whereas documentary credits are issued on behalf of the buyer to cover situation of performance, i.e., the issuing bank agrees to make payment to the beneficiary one he surrenders the requisite complying documents.

XII-03.05.1: Types of Letter of Credit

TYPES of L/C

Revocable Irrevocable

Non-transferable

Sight L/C
Deferred L/C

Transferable

The figure shows the different types of L/C

XIII-03.05.02: Nature of Different types of L/C Revocable Credits Irrevocable Credits : A revocable credit is one which can be amended or cancelled by the issuing banker at any time without prior notice. : An irrevocable letter of credit contains an absolute

Transferable Credit Non-transferable Credit Sight L/C Deferred L/C

undertaking on the part of the issuing bank to accept. : The main theme of this type of credit is transferable i.e. if the exporters can not able to supply the goods then. they can transfer it to others. : These types of credit can not be transferable. : In international business this types of credit is most preferable. The main theme of this credit is the payment is properly secured. : A maturity period specified there. The payment is made on between the maturity periods.

The Buyer Sales Contract

Reimbursing Agreement The Buyer The Issuing Bank The Seller

Documentary Credit Agreement

The Beneficiary The Issuing Bank

Law of L/C

BANK AS A PARTY OF DOCUMENTARY CREDIT : Parties to the documentary credit are-an issuing bank, an advising bank, a confirming bank, a reimbursing bank or a negotiating banks. Issuing Bank : The Issuing Bank or the Opening Bank is one which issues the credit, i.e., undertakes, independent of the undertaking of the applicant, to make payment provided the terms and conditions of the credit have been complied with. The payment may be at sight if the credit provides for sight payment, or at maturity dates if the credit provides for deferred payment. Especially the issuing bank should satisfy himself on the credit worthiness of the applicant. The credit application must be in accordance with the Uniform Customs and practices for Documentary Credit (UCPDC)- ICC publication no. 500 edition of 1993.

Advising Bank: The Advising Bank advises the credit to the beneficiary authenticating the genuineness of the credit. The advising bank is generally situated in the country/place of the beneficiary. Issuing Bank (Bangladesh)

Reimbursing Bank (Japan)

Advising Bank
Negotiating Bank
(Singapore) (Singapore)

Confirming Bank : A Confirming Bank is one which adds its guarantee to the credit opened by another bank, thereby undertaking the responsibility of payment / negotiation / acceptance under the credit in addition to that of the issuing bank. A confirming bank normally does so if requested by the issuing bank. When the creditworthiness of the issuing bank is in doubt, beneficiarys bank may request the issuing bank to give additional confirmation by another bank. It is said, Add Confirmation in practice. Negotiating Bank : A Negotiating Bank is the bank nominated or authorized by the issuing bank to pay, to incur a deferred payment liability, to accept drafts or to negotiate the credit.

Reimbursing Bank : A Reimbursing Bank is the bank authorized to honor the reimbursement claims in settlement of negotiation / acceptance / payment lodged with it by the negotiating bank or accepting bank. It is normally the bank with which the issuing bank has account from which payment is to be made. Reimbursement claims in foreign exchange business is settled by the Uniform Rules for Reimbursement (URR)-ICC publication no. 525. The Foreign Exchange Department is mainly divided into three sections. Such as1. Import Section 2. Export Section & 3. Remittance Section The import Section deals with L/C in the perspective of the importers and the Export Section deals with L/C in the perspective of the exporters.

IFIC BANK LIMITED

Foreign Exchange
Department

Export Section Import Section Remittance Section

XIII-03.06: Import Section Import is the flow of goods and services purchased form one country to another. Hence, import of merchandise essentially involves two things: bringing of goods physically into the country and remittance of foreign exchange towards the cost of the merchandise and services connected with this to the importer. In case of import, the importers are asked by their exporters to open letters of credit so that their payment against goods is ensured.

Importer

Public Sector (Govt. Organs. & Corpns. Private Sector

Actual Users

Commercial (finished products Industrial (raw materials, machinerys

Fig : Types of Importers

XIII-03.06.01: IMPORT PROCEDURES : An importer is required to submit the following documents in order to get a license to import through IFIC BANK Malibagh Br. A bank account with the branch Import Registration Certificate (IRC) Tax Payers Identification Number (TIN) Performa Invoice / Indent Membership certificate from a recognized Chamber of Commerce & Industry or Town Association or registered Trade Association. Letter of Credit Authorization (LAC) Form properly filled in quintuplicate signed by the importer. L/C Application duly signed by the importer. One set of IMP Form. Insurance Cover Note with money receipt. VAT Registration Certificate (for Commercial Importers) In case of public Sector, attested photocopy of allocation letter issued by the allocation authority, Administrative Ministry or Division specifying the source, amount, purpose, validity and other terms and conditions against the imports. Any such documents as may be required as per instruction issued/to are issued by the Chief Controller of Imports & Exports (CCI&E) from time to time. On receipt of the LCA Form and the other documents, the branch officials carefully scrutinize the documents and lodge the same in their respective registration books and duly verify the signature of the importer put on the LCA Form.

To import, a person should be competent to be an importer. The office of the Chief Controller of Imports & Exports (CCI&E) provides the registration (IRC) to the importer. After obtaining the IRC, the person has to secure a Letter of Credit Authorization (LCA) registration from the Registration Unit of Bangladesh Bank. After getting the LCA registration, a person becomes a qualified importer. He is the person who requests or instructs the opening bank to open an L/C. He is also called the Opener or Applicant of the credit. XIII-03.06.02: Proposal For Opening Of L/C In case of an L/C of a small amount only the prescribed application form, i.e., the LCA Form is enough to open an L/C. But when the L/C amount is reasonably high or where the party intends to avail a credit facility, then the importer needs to submit an application to the Foreign Exchange Department for getting a limit of the L/C amount. The salient features of the application are Full particulars of the bank account Nature of business Required amount of limit Payment terms and conditions Goods to be imported Offered security Repayment schedule XIII-03.06.03: The L/C Application Form : L/C Application form is a sort of an agreement between customer and bank on the basis of which the letter of credit is opened. IFIC BANK Malibagh Branch provides a printed form for opening of L/C to the importer. A special adhesive stamp of value Tk. 150 is affixed on the form in accordance with Stamp Act in force. While opening, the stamp is cancelled. Usually the importer expresses his decision to open the L/C quoting the amount of margin in percentage (Some L/Cs are opened for 100% margin).

Requirements of L/C Opening . Applicant must hold a current deposit (CD) account in the Bank. He must have a trade license of import Tax Identification number (TIN) Vat certificate. Membership certificate. Import registration certificate (IRC) for industrial or commercial. An importer must ensure the above requirements while he is going to issue a L/C with any bank to import some thing form another country.

XIII-03.06.04: The Letter Of Credit Authorization Form (Lcaf) The Letter of Credit Authorization Form (LCAF) is the form prescribed for the authorization of opening letter of credit/payment against importer and used in lieu of import license. The authorized dealers are empowered to issue LCA Forms to the importers as per basis of licensing of the import Policy Order in force to allow import into Bangladesh. If foreign exchange is intended to be bought from the Bangladesh Bank against an LCAF, it has to be registered with Bangladesh Banks Registration Unit located in the concerned area office of CCI&E. The LCA Forms available with authorized dealers are issued in set of five (05) copies each. First Copy is exchange control copy, which is used for opening of LC and effecting remittance. Second Copy is the custom purpose copy, which is used for clearance of imported goods from custom authority. Triplicate and Quadruplicate Copy of LCAF are to be sent to concerned area of CCI&F office by authorized dealer/Registration Unit of Bangladesh Bank. Quintuplicate Copy is kept as office copy by authorized dealer/Registration Unit. The Letter of Credit Authorization Form (LCAF) contains the following details(1) Name and address of the importer. (2) IRC no. and year of renewal. (3) Amount of L/C applied for (both in figure and in word). (4) Description of item(s) to be imported. (5) Import Trade Certificate (ITC) Number / Harmonized System of Code (HS Code Number. XIII-03.06.05: The imp form : The IMP Form contains the followings Name and address of the Authorized Dealer.

Amount of remittance to be permitted (i.e., L/C amount). LCA Form number, date, value in Tk. Description of goods, quantity. Invoice value in foreign currency (i.e., L/C amount) Country of origin. Port of shipment. Name of steamer/airline (i.e., by road/by ship/by air etc.) Port of importation. Indentors name and address. Indentors registration number with CCI&E and Bangladesh Bank. Full name and address of the applicant.

Registration number of the applicant with CCI&E Type of LCF i.e. Commercial or Industrial.

XIII-03.06.06: Scrutinization of l/c application : On receipt of L/C application, the branch officials scrutinize the same very carefully giving emphasis to the following points1. L/C application is stamped (as per Govt. Stamp Rule) as it is a guarantee of payment. 2. All information mentioned in different columns have been furnished; 3. The items to be imported are eligible according to import entitleemnt; 4. If L/C is opened against indent, Bangladesh Banks permission, valid registration, authority to issue indent by indentor are to be checked; 5. The terms and conditions stipulated in the L/C application are consistent with the Bangladesh Bank Foreign Exchange Guidelines, Import Trade Regulations, UCPDC etc; 6. The amount and description of merchandise are relevant to LCAF and proforma invoice/ indent / purchase order; 7. Survey Report or Certificate in case of old machinery; 8. Carrying vessel is not of Israel or Serbia, Montenegro, Iraq, Israel & Afghanistan; 9. Certificate declaring that the item is in operation not more than 5 years in case of car.

XIII-03.06.07: Accounting Treatment in Case of L/C Opening As soon as L/C is opened, the bank accepts a liability on behalf of the importer to make payment against the credit. Provided that the shipment is made within the period and other term, and conditions as per L/Care complied with, naturally, bank has to pass an entry in L/C liability ledger and also in the general ledger to show its actual liability accepted on L/C. A liability voucher in passed as under: Contingent liability voucher Customer's liability on L/C Dr. Bank's liability on LIC Cr.

 Margin and bank charge Margin, Commission, Postage and Cable Charge are recovered from the party by passing entries as under: Parties AIC Dr. Margin AlC on LIC. Cr. All charges on LIC Cr. Transmission of L/C In international trade, receipt of L/C by cable, telex, fax is preferred by all. In that case the whole text of L/C is to be transmitted to the advising bank. Transmission Process of IFIC Bank The transmission process of L/C of IFIC Bank are much more advance. They are sending all foreign L/C to the advising bank through SWIFT. SWIFT- Society for World Wide Inter Bank Tale Communication. This is a system of inter bank transaction. Every bank or other financial institutions must get the membership of SWIFT to share the information. This is a system of communication where further confirmation will not require. XIII-03.06.08: Amendment of l/c : The letter of credit opened by a bank may need to amendment. If the supplier finds. that the terms of the credit cannot be complied with in full, he would arrange for necessary amendments by the opener before the goods have shipped. These amendments must be advised by the opening bank to the supplier through advising bank. Some time the opener also may like to amend the credit after it has been advised.

XIII-03.06.09: Adding confirmation : Sometimes beneficiary or supplier of the goods insists the importer for adding confirmation to L/Cs or to issue L/Cs with add confirmation. In that case, at the request of the importer, the Issuing Bank requests the Advising Bank or any third bank to add their confirmation to the L/C. Normally, add confirmation charge is borne by the beneficiary and the confirmation charge differs from bank to bank.

XIII-03.06.10: Lodegment & retirement of shipping documents: On scrutiny, if it is found that the document drawn in conformity with the terms of the credit, i.e., the documents are in order, this Branch lodges the documents in PAD (Payment Against Documents) and the following accounting treatments are given-

PAD A/C --------------------------------------------------- Dr. IFIC BANK General A/c (at HO prescribed rate) ---Cr. Exchange A/C ---------------------------------------Cr.

The reversal entries are as follow Bankers Liability --------------------------------- Dr. Customers Liability ------------------------------ Cr. (When lodgment is passed) After passing the lodgment vouchers, the shipping documents are then stamped with PAD Number and entered in the PAD Register. Intimation is given to the customer calling on the banks counter requesting retirement of the shipping documents. The retirement vouchers are as follows L/C Margin A/C ------------------------------------------------ Dr. Partys A/C ----------------------------------------------------- Dr. PAD A/C -------------------------------------------------------- Cr. Interest / Commission A/C ----------------------------------- Cr. P & T Charges A/C -------------------------------------------- Cr. After passing the retirement vouchers, endorsement is made on the back of the Bill of Exchange as Received Payment and the Bill of Lading endorsed to the effect Please deliver to the order of M/S -----, under two authorized signatures of the banks officers (P.A. Holder). Then the documents are delivered to the importer.

XIII-03.07: Export Section & Export Financing : In the Export Section, two (02) types of L/Cs are handled in this branch1) Back-to-Back L/C; and 2) Export L/C Export financing can be done in two ways. These are: 1) Pre-shipment Financing; 2) Post-shipment Financing.

Pre-shipment financing can be done by opening of back-to-back L/C and Packing Cash Credit (PCC). In case of pre-shipment financing, about 90% is financed by the bank. Of that portion, about 75% is for back-to-back L/C and 10% is for packing cash credit. Financing in Back to Back L/C changes according to the products i.e. Normal fabric, Flannel fabric, Woven fabric etc. Example of post-shipment financing by bank is Foreign Documentary Bills for Purchase (FDBP).

XIII-03.07.01: Back to Back L/C: In case of a Back-to-Back letter of credit, a new L/C (an import L/C) is opened on the basis of an original L/C (an export L/C). Under the Back-to-Back concept, the seller as the beneficiary it as a security to the Advising Bank. The beneficiary of the back-to-back L/C may be located inside or outside the original beneficiarys country. In case of a back-to-back L/C, no cash security (no margin) is taken by the bank; bank liens the first L/C (the master L/C). In case of a back-to-back L/C, the drawn bill is usage/time bill. Papers/documents required for opening of back-to-back L/C are as follows Master L/C Valid Import Registration Certificate (IRC) and Export Registration Certificate (ERC) L/C Application and LCAF duly filled in and signed Proforma Invoice or Indent Insurance Cover Note with money receipt IMP Form duly signed In addition to the above documents, the following papers/documents are also required to export oriented garment industries while requesting for opening of backto-back letter of credit Textile Permission Valid Bonded Warehouse License Quota Allocation Letter issued by the Export Promotion Bureau (EPB) in favor of the applicant for quota items. A permission from Bangladesh Garments Manufacturers & Exporters Association (BGMEA).

In case the factory premises is a rented one, Letter of Disclaimer duly executed by the owners of the house / premises to be submitted. A checklist to open back-to-back L/C is as follows-

Applicant is registered with CCI&E and has bonded warehouse license. The master L/C has adequate validity period and has no defective clause L/C value shall not exceed the admissible percentage of net FOB value of relative Master L/C Usage Period will be up to 180 days.

Flow Chart for back-to-back L/C

Check the credit limit

Prepare offering sheet if regular credit line is not available

Mark lien on the Master L/C

Issue the L/C

XIII-03.07.02: Payment for back to back L/C: In case of back-to-back L/C for 30,60,90,120 & 180 days of maturity period, deferred payment is made. Payment is given after realizing export proceeds from the L/C Issuing Bank. For Garments Sector, the duration can be maximum 180 days. For importing machinery items or capital goods for 360 days Back to Back L/C can be opened.

XIII-03.07.03: Export L/C : The other type of L/C facility offered by this Branch is Export L/C. Bangladesh exports a large quantity of goods and services to other countries. Readymade garments (both knitted and woven), jute, jute-made products, frozen shrimps, tea are the main goods that Bangladeshi exporters export to foreign countries. Garments Sector is the largest sector that exports the lion share of the countrys export. Bangladesh exports most of its readymade garments products of USA and European Community (EC) countries. Bangladesh exports about 40% of its readymade garments products to USA. Most of the exporters who export through this Branch are readymade garment exporters.

XIII-03.07.04: Formalities for export L/C The export trade of the country is regulated by the Imports & Exports (Control) Act, 1950. There are a number of formalities that an exporter has to fulfill before and after shipment of goods. These formalities or procedures are enumerated as follows

Export Registration Certificate (ERC) : The exports from Bangladesh are subject to export trade control exercised by the Ministry of Commerce through Chief Controller of Imports & Exports (CCI&E). No exporter is allowed to export any commodity permissible for export from Bangladesh unless he is registered with CCI&E and holds valid ERC. The ERC is required to be renewed every year. The ERC number is to be incorporated on EXP Forms and others documents connected with exports. The EXP Form: After having the registration, the exporter applies to this Branch with the Trade License, ERC and the Certificate from the concerned Government Organization to get the EXP Form. If the branch is satisfied, an EXP Form is issued to the exporter. Securing the Order : Upon registration, the exporter may proceed to secure the export order. This can be done by contracting the buyers directly through correspondence. Signing of the Contract : While making a contract, the following points are to be mentioned: (a) description of the goods, (b) quantity of the commodity, (e) price of the commodity, (d) shipment, (e) insurance and marks, (f) inspection, and (g) arbitration. Procuring the Materials : After making the deal and on having the L/C opened in this favor, the next step for the exporter is set about the task of procuring or manufacturing the contracted merchandise. Registration of Sale : This is needed when the proposed items to be exported are raw jute and jute-made goods. Shipment of Goods : The following documents are normally involved at the stage of shipment: (a) EXP From, (b) photocopy of registration certificate, (c) photocopy of contract, (d) photocopy of the L/C, (e) customs copy of ERF Form for shipment of jute-made goods and EPC Form for raw jute, (f) freight certificate from the bank in case of payment of the freight if the port of lading is involved, (g) railway receipt, berg receipt or truck receipt, (h) shipping instructions, and (i) insurance policy.

The following points should be looked for The terms of the L/C are in conformity with those of the contract. The L/C is an irrevocable one, preferably confirmed by the Advising Bank. The L/C allows sufficient time for shipment and a reasonable time for registration. If the exporter wants the L/C to be transferable, advisable, he should ensure those stipulations are specially mentioned in the L/C. At last, the exporter submits all these documents along with a Letter of Indemnity to this branch for negotiation. An officer scrutinizes all the documents. If the documents are clean one, the branch purchases the documents on the basis of banker-customer relationship. This is know as Foreign Documentary Bills for Purchase.

XIII-03.07.05: Procedure for FDBP : After purchasing the documents the following entries are made FDBP A/C ------------------------------------------------- Dr. Liabilities A/C ------------------------------------------------- Cr. Charges A/C --------------------------------------------------- Cr. Exporters A/C ------------------------------------------------ Cr. (Before realization of proceeds)

IFIC BANK General A/C (ID, Head Office) ------------------------------- Dr. FDBP A/C ----------------------------------------------------- Cr. Charges A/C --------------------------------------------------- Cr. Exporters A/C ----------------------------------------------- Cr. (Adjustment after realization of proceeds) The FDBP Register is maintained for recording all the particulars.

XIII-03.07.06: Settlement of local bill : The settlement of local bills is done in the following ways The customer submits the L/C to the branch along with the documents to negotiate. The branch officials scrutinize the documents to ensure the conformity with the terms and conditions. The documents are then forwarded to the L/C Opening Bank. The L/C Issuing Bank gives the acceptance and forwards an acceptance letter. Payment is given to the customer on either by collection basis or by purchasing the document. The following accounting treatments are made for the purchasing of local bill Local Bill Purchase ---------------------------------------------------- Dr. Partys A/C -------------------------------------------------------------- Cr. Commission ------------------------------------------------------------- Cr. Interest A/C ------------------------------------------------------------- Cr. A local bill purchase register is maintained to record the acceptance of the Issuing Bank. Until the acceptance is obtained, the record is dept in a Collection Register.

XIII-03.07.07: Modes Of Payment For Export Bills Under L/C: The most common methods of payment under a L/C are as followsAt Sight Payment : In At Sight Payment, the bank pays the stipulated sum immediately against the exporters presentation of the documents.

At Sight Payment Credit

Deferred Payment Credit

Payment methods under L/C

Negotiation Payment Credit

Acceptance Payment Credit

Deferred Payment : In deferred payment, the bank agrees to pay on a specified future date or event, after presentation of the export documents. No bill of Exchange is involved. In this branch, the payment is given to the party at the rate of 30,60,90,180,360 days rate as the case may be. But the Head Office is paid under T.T. Clean Rate. The difference between the two rates is the exchange margin for the branch.

Negotiation Credit: In Negotiation Credit, the export has to present a bill of exchange payable to him in addition to other documents that the bank negotiates. Acceptance Credit: In Acceptance Credit, the exporter presents a bill of exchange payable to him and drawn at the agreed tenor (that is, on a specified future date or event) on the bank that is to accept it. The bank signs its acceptance on the bill and returns it to the exporter. The exporter can then represent it for payment on maturity. Alternatively he can discount it in order to obtain immediate payment.

XIII-03.07.08: Test key arrangement : Test Key Arrangement is a secret code maintained by the banks for the authentication for their telex messages. It is a systematic procedure by which a test number is given and the person to whom this number is given can easily authenticate the same test number by maintaining that same procedure. IFIC BANK Malibagh Branch has test key arrangements with so many banks for the authentication of L/C messages and for the transfer of funds.

XIII-03.08: FOREIGN REMITTANCE : Foreign remittance means purchase and sale of freely convertible foreign currencies as admissible Foreign Exchange Regulations Act-1947 and Guidelines For Foreign Exchange Transaction-VOL. 1 & 2 of the country. Purchase of foreign currencies constitutes inward foreign remittance and sale of foreign currencies constitutes outward foreign remittance. So we see that there are two types of Foreign Remittance: Foreign Outward Remittance. Foreign Inward Remittance.

Mode of Outwards Remittance : Foreign Telegraphic Transfer (FTT). Foreign Mail Transfer (FMT).

Foreign Demand Drafts (FDD). Travelers Cheque (TC). Foreign Currency Notes. Mode of Inward Remittance Telegraphic Transfer (TT). Mail Transfer (MT). Mail Transfer (MT). Foreign Demand Drafts (FDD). Payment Order (PO). Travelers Cheque (TC). Foreign Currency Notes.

Telegraphic Transfer (TT) Telegraphic Transfer refers to the payment instruction by tested telex/cable or authenticated fax by bank in abroad on an inland bank (local/foreign bank). Normally foreign banks, with which corresponding banking relationship / drawing prevails, send T.T.

XIII-03.08.01: Foreign Demand Draft (FDD)

The foreign bank/exchange company on local bank usually issues Foreign Demand Draft. It is an order to pay a certain sum to a certain person or as his instruction, issued by the bank on its overseas branch or on its correspondent bank. The demand draft is handed over to the purchaser who sends it to the beneficiary. The beneficiary obtains payment on presentation to the bank on which the draft is drawn.

Encashment of FDD may take place in two waysPurchase, Sending for collection.

XIII-03.08.02: Endorsements of us$ in passport : IFIC BANK endorses US Dollars (USD), Great Britain Pound (GBP) in passports. To endorse US Dollar, the client has to apply in the prescribed form (TM Form). The following entries are given in this regard, Cash or Customer A/C Dr. Cr.

Foreign Currency on Hand (Dollar Special)

XIII-03.09: Student file open : As we know that Bangladesh Taka is not fully convertible. Only current account not capital account of our currency is convertible. But in case of students who studied abroad can take any amount for their study cost. Thus IFIC BANK Malibagh Branch opens student file to remit the costs to the respective institutes on behalf of the student subject to scrutinizing the appropriate documents issued from the registrar.

XII

HUMAN RESOURCE DEVELOPMENT

Human Resources Development (HRD) activities aim at fulfilling the Bank's Mission. One of our four major missions of IFIC is to: "Provide service to their clients with the help of a skilled and dedicated workforce whose creative talents, innovative actions and competitive edge make their position unique in giving quality service to all institutions and individuals that they care for." Skilled and dedicated workforce with creative talents, innovative actions are not always readily available. Appreciating the scarcity of such manpower, the Bank /Tom the very beginning laid importance to HRD that conceptually includes activities like: pre-recruitment drill, recruitment, induction training in the Academy, job rotation, placement and posting, reward and promotion. All these activities are planned by the Bank in an integrated way aiming at manpower with required technical, managerial, human and conceptual skills. Management of IFIC Bank not only appreciates the need of skills required for day to day banking but also realizes the need for skills to meet the global and national financial and economic environments that are changing fast. Meeting the needs of new skills arising out of Financial Sector Reforms Programme (FSRP) is also a major concern of the management. THE ACADEMY At the very beginning, the Bank laid a foundation by setting up an Academy at Head Office under Human Resource Development Division to develop human resource internally. Equipped with a professional library, modem training aids, professional faculty and other facilities, the Academy of the Bank is a leading one among the Banks in private sector. The Academy regularly conducts foundation courses, specialized courses and seminars in different areas of banking to take care of the professional banking needs. In addition, officers are regularly sent to Bangladesh Institute of Bank Management (BI8M) and Bangladesh Bank Training Academy for professional training. Sending officers abroad for higher training is a regular feature. A Research Department also works in aid of HRD and other operational areas. The Academy has to its credit the experience of conducting several courses for the officers of the Bank of Maldives (BML) and Nepal-Bangladesh Bank Limited. In addition, it built up the training system for the Bank of Maldives Limited. The Bank is now undertaking steps to build up training system for Nepal-Bangladesh Bank Limited. ACADEMY OBJECTIVES IFIC Bank Academy, established in 1983 as an in-house training institution, takes care of the training need of the employees of the Bank. The objectives of the Academy are to: make available skilled and dedicated workforce within shortest possible time by reducing time required for on-the-job training;

 develop understanding about law and practice of banking through foundation training; impart technical skill to the operational level officers through case studies/practical exercises/demonstration/project visit for efficient desk operations; develop analytical & decision making skills of the officers; develop understanding about human/conceptual skill and organizational culture; impart managerial skills to groom future Executives and to keep existing Executives up-. to-date with national and international environment. TYPES OF PROGRAMMES For fresher, Foundation Courses on elementary knowledge of banking are organised. Specialised Courses on the areas like Credit, Foreign Exchange, Accounts, Inspection, Marketing etc. are meant for officials working in those areas. Senior level courses are run on specific knowledge area. Certain courses are a blend of different knowledge areas. APPROACHES TO TEACHING The Academy holds need-based training courses/workshops/seminars etc. which are finalised by HRD Division in consultation with various departments and senior Executives at Head Office. Training inputs are constantly reviewed/modified for achieving the Bank's objectives. Methods in training include: discussionllecture/workshop/case study/games/role play/ film show/simulation/group work & presentation/project visit and so on. ON-THE-JOB TRAINING Foundation courses have to parts: theoretical training in the academy and job rotation. The officers on probation are required to under go both in a period if one year. During this period three phased training is provided. On the theoretical training in, say, General Banking the officers required to under go under go rotation in General Banking activities under the supervision of the HRDD. Similar process is followed in case of Credit and foreign Exchange.

XIII

PERFORMANCE ANALYSIS Financial Statement

INTERNATIONAL FINANCE INVESTMENT AND COMMERCE BANK LTD. TAKA IN MILLION PARTICULARS YEARS

SL . No . 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22

1997 Authorized capital Paid-up capital Reserve & Surplus Shareholder's Equity Deposit Credit Total Income Total Expenditure Net Profit Before Tax Net Profit After Tax Tot1 Assets Fixed Assets No. of Shareholders Current Assets Total Liabilities Cash Balance With Other Bank Money at Call Investment Premises & Fixed Assets Others Assets Borrowing From Other Bank 5 0 0 279.35 393.00 672.35 15623.9 4 10494.8 0 1422.37 1215.33 207.04 124.22 17648.1 2 252.15 4 8 4 1 17395.9 7 -

1998 500 279.35 533.54 812.89 16793. 49 11199. 80 1545.8 0 1329.5 8 216.22 140.54 19214. 85 238.86 5156 18975. 99 26175. 81 -

1999 500 279.35 683.73 963.08 17312. 09 11475. 23 1777.9 2 1546.8 6 231.06 150.19 25671. 53 282.06 5356 25389. 47 27249. 99 -

2000 500 279.35 827.98 1107.3 3 16577. 52 17312. 79 1874.0 2 1631.8 6 242.16 157.40 26417. 12 316.04 5522 26101. 08 25451. 13 1603.1 1 1750.2 1 1407.2 6 3241.1 1 140.72 961.91 1590.2 4

2001 500 406.39 622.53 1028.9 2 17616. 68 18189. 70 2173.9 6 1925.9 6 248.00 161.20 27258. 65 315.87 5862 26942. 75 26229. 73 5228.5 9 1157.2 7 1335.0 0 721.42 126.42 500.24 1190.6 5

2002 500 406.39 623.98 1030.3 7 18719. 20 19502. 70 2136.6 3 1685.4 3 451.20 270.72 27332. 90 123.77 5862 27209. 13 27806. 68 2407.8 2 230.51 670.00 4239.8 8 141.50 599.61 1913.1 8

23

Others Liabilities

7283.3 6

7422.3 9

7358.5 0

Note: The Above data has been collected from the Annual Report 200 I, the provisional figure 2002 and Balance Sheet. The Current Assets have calculated by deducting the fixed assets from the total assets. The Deposit is the Current Liability of a bank. The credit figure is the advance of a bank. The figure of the year of2002 has been audited but not yet published. The tax for the year of 2002 have assumed here @ 60%.

Ratio Analysis Current Ratio Measures Formula : It shows a firms ability cover it's current liability with it's current assets. : Current Assets Current Liability

Debt to equity Ratio Measures : Ratio that shows the extent to which the finn is financed by debt. Formula : Total debt -;- Share Holder's Equity Debt to Total Asset Ratio Measures : It highlights the relative importance of debt financing to the firm by showing th, percentage of the firms assets that are supported by debt financing. Formula : Total debt -;- Total Assets

Net Profit Margin Measures : Measures the profitability with respect to sales lincome generated in one unit 01 money. Formula : Net Profit After Tax -;- Total Income

Return on Investment (ROI) Measures : Measures overall effectiveness in generating profits with available assets, earning power invested capital. Formula : Net Profit After Tax -;- Total Assets

Return on Equity (ROE) Measures : Measures earning power on share holder's book value investment. Formula : Net Profit After Tax -;- Share Holder's Equity
SI. No 01 02 International Finance Investment And Commerce Bank Ltd. RATIOS YEARS 1997 1998 1999 2000 2001 Current 1.11 1.13 1.47 1.57 1.53 Ratio Debt to 32.20 28.29 22.98 25.49 Equity Ratio Debt to 1.362 1.061 0.963 0.962 Total Assets Ratio Net Profit 0.087 0.090 0.084 0.083 0.074 Margin Return on 0 .007 0.007 0.006 0.006 0.006 Investment I (ROI)

2002 1.45

03

04 05

0.097 0.010

06

Return on Equity (ROE)

0.184

0.1 72

0.155

0.142

0.156

0.263

Oct: Trend Analysis

Until now, I have introduced various financial ratios, explaining their uses in analysis. In addition to financial ratio analysis, it is often useful to express balance sheet and income statement items as percentages. The percentages can be related to totals or some base year. Called common size analysis and index analysis, respectively, the evaluation of levels and trends in financial statement percentages over time affords the analyst insight into the underlying improvement or deterioration in financial condition and performance. These two new types of analysis are extremely helpful in comparing firm, whose data differ significantly in size because every item on the financial statements gets placed or a relative or standardized, basis. In common size analysis, we express the various components of a balance sheet as percentage: of the total assets of the company. In addition, this can be done for the income statement, but here these analysis are expressed only on the basis of balance sheet items. Common size analysis is an analysis of percentage financial statement where all balance sheet items are divided by the total assets and total liabilities. Index analysis: An analysis of percentage financial statements where all balance sheet or income statement figure for a base year equal to 100.00 percent and subsequent financial statement item_ are expressed as percentage of their values in the base year.
OS: Trend Analysis of IFIC Bank Ltd.

International Finance Investment And Commerce Bank Ltd. Taka In Million Particulars Regular size Assets Cash Balance with other bank Money at Call Investment Loan & Advance Premises & Fixed Assets Others Assets 961.9 1 500.24 599.61 ' 3.64 1.83 2.19 100.0 52.00 62.33 2000 1603. 11 1750. 21 I 1407. 26 324 I.I 1 17312 .79 140.7 2 2001 5228.5 9 1157.2 7 1335. 00 721.42 18189. 70 126.42 2002 2407.8 2 230.51 Years Common Size % 200 2000 2002 1 19.] 6.07 8.80 8 6.63 4.25 0.84 Index Size % 2000 100.0 0 100.0 0 100.0 0 100.0 0 100.0 0 100.0 0 2001 326.15 66.12 '2002 150.20 13.17

670.00 4239.8 8

5.33 12.27

4.90 2.65 66.7 3 0.46

2.00 15.5 1 70.1 5 0.51

94.86 22.26 105.06 89.84

47.61 130.81 112.65 100.55

19502.70' 65.53 141.50 0.53

Total Assets LiabilityCapital Borrowing from other Bank Deposits Other liability Total liability

26417 .12

27258. 65

27332. 90

100.0 0

100. 00

100. 00

100.0 0

103.18

103.4 7

1590. 24 16577 .52 7283. 36 25451 .13

1190.6 5 17616. 68 7422.3 9 26229. 73

1321.3 7 18719. 20 7353. 50 27806. 68

6.25

4.54 67.1 6 28.3 0 100. 00

4.75 68.8 1 26.4 4 100, 00

100.0 0 100.0 0 100.0 0 100.0 0

74.87

83.09

65.13 28.62 100.0 0

106.27 101.91 103.06

112.92 100.96 109.25

SOWT

ANALYSIS

OF
IFIC BANK LTD.
During my internship period in IFIC Bank at Malibagh I found some aspects relating to the Banks strength, opportunity, weakness and threats which are more or less present in almost every branches, I think affecting the Banks performance in total. Which are explained through SWOT analysis below: Strength Found that a good image about the Bank has been created among the customers through careful and quality services Skilled and excellent management staff is its focal strength. Quality services through modern sophisticated automated system. Qualified and knowledgeable Human Resource. Bad employee-management relation in some cases. Weakness The prime weakness I found lack of motivation of workers originating from managements mal-practices, partiality, inter personnel clash, unsatisfied grievances etc. Absence of teamwork because of subtle interpersonal clash.

$ $ $

Opportunity Vast opportunity for expansion and customer finance

Threats Few non-baking organization snatching away few banking services like- some transport authorities are engaged in money transportation.

Potentials for investment in different sectors increasing rapidly in Bangladesh. Opportunity to serve quality service through the usage of updated technology.

Stepping of new banking organization with highly updated sophisticated automated servicing system and products. Introduction of certain harder banking rules and regulation. Customer awareness of pricing and services

Analytical Study The current ratio simply calculated by dividing the current asset by the current liabilities. If the current asset is increase then the current ratio is increase too. If the current asset decreases then the ratio is also decrease. And it shows the ability to cover current liability with it's current assets. Here the current asset has calculated by deducting the fixed asset from the total asset. The deposit has treated the current liability of a bank. Here analyze the current ratio of !FIC Bank using six years data from 1997 to 2002. It can be said that the recovery of current liability is much better and satisfactory and stable. The increase and deterioration trend of current ratio i..,' quite consistence. This is good for a bank or any undertakings. Debt to equity ratio shows the extent to which the firm is financed by debt. Debt to equity ratio simply calculated by dividing the total debt by the shareholders equity. This ratio tells us that what portion of finance is provided by the shareholders and what portion is provided by the creditors. Creditors would generally like this ratio to be low, because while the ratio is lower the portion of shareholders equity will be higher. Then the creditor's liability will be reduced. The debt to total assets ratio is derived by dividing a firm's total debt by its total assets. This ratio serves a similar purpose to the debt to equity ratio. This ratio detects that percent of the firms assets are finance with debt while the remaining of the financing . comes from others sources of equity. In short, the higher the debt to total assets ratio, the greater the financial risk the lower this ratio the lower the financial risk. In case of IF1C Bank Ltd. the trends of six years (1997 to 2002) of debt to total asset ratio is satisfactory. But this trend are changing and improving. The management of this bank should handle it carefully and always try to lower this ratio as well as the financial risk. The net profit margin ratio measures the profitability of any organization. We can verify the profitability of a business by using this ratio. The ratio shows the net income of one unit of total income. In analysis the six years net profit margin ratio of IF1C bank, 1 found that it pay 60% to 65% taxes to the government of People's Republic of Bangladesh. The net profit before tax (NPBT) of six years from ]997 to 2002 is consistent but in the year of 2002 it has increased significantly. The ratio of return on investment (ROI) measures overall effectiveness in generating profit with available assets. If we analyze the six years from1997 to 2002 we will see that the RO1 is growing consistently of IFIC bank. Because its total assets as well as net income after tax (NIAT) are increasing. This is good for bonk and the economy of the country.

The ratio of return on equity measures the earning power on shareholders book value investment. The trends of return on equity (ROE) is growing, the reason is that the NIAT and the shareholders equity has increased over the six years from 1997 to 2002. So the ratio of ROE is moving upward. Here presented the trend analysis by using two new types of analysis. The common size method. Index method These are much helpful to realize the performance or trends of a business undertaking. In this study these two analyses have been used only on balance sheet items. In common size the total assets and the total liabilities are present @ 100% and all the B/S items are divided by total assets and total liabilities and multiply with 100 to show percentage. (Each balance sheet components + total assets / total liabilities) x 100 This is not easy to realize the contribution of each B/S items on total of the business. This is the method how we can realize it promptly. In case of 1FIC bank limited here I saw that the loan and advance or credit which is the account receivable of a bank is closer to three fourth -3/4. which will be the main reason of money crisis while the bank may need to finance at its crucial moments. And in the liabilities a big portion is captured by the deposits which are the current liabilities of a bank is also much closer to three fourth -%. . The index method of trend analysis represents another side of IFIC bank Ltd. It shows a consistence and steady growth which is really respectable and honorable in the private sector banking as well as Bangladesh economy.

FINDINGS

@ Hopefully the management decided to provide fully computerized services that will booster services of the bank. @ When a joint stock company comes to open an account if the company happens to be an existing one, the banker should demand copies of the balance sheet and profit & loss account, which will reflect the financial growth of the company and its soundness, But in practice companies and the bankers as well don't even bother. @ Few officers of the bank are competent. Even though many of them simply know the working procedure of what they are doing but don't know the philosophy behind doing those and some are inefficient to serve the customer. @ Project loan requires testing of feasibility of project and judging the marketability of the product. It requires infusion of knowledge of both the fields-marketing and banking. But the bank has hardly any person with this kind of ability. @ Officers of the desk, where workload is very high, hardly get the chance to go out for development purpose and always feel that their duties for the organization would not be evaluated unless they can show a good amount of deposit collection against their name.

RECOMMENDATION

In order to get competitive advantage and to deliver quality service, top management should try to modify the services. The synergy of dedicated manpower, technology, market opportunity can lead the organization to achieve the goal, a bank must establish and adhere to adequate of loan provision and reserve. IFIC Bank should train up their branch personnel about all sort of information regarding SWIFT and its service. Due to lack of proper knowledge about the operation procedures and services provided to the customers by SWIFT, certain customers are facing problem, as they have to wait for certain tin1e to get service. and sometimes personnel are not being able to operate SWIFT without any confusion. They are not fully independent of handling SWIFT. Official training is the solution to this problem. IFIC Bank should always monitor the performance of its competitors in the field of Foreign Trade. Mercantile Bank Ltd. Standard Bank Ltd. Mutual Trust Bank Ltd. Premier Bank Ltd. First Security Bank Ltd. Eastern Bank Ltd. Bank Asia Ltd. and Dhaka Bank Ltd. and all other private banks are emerging competitors of IFIC Bank. They should continuously strive and try .to introduce new products and services as access card. A TM with future improved quality services. For customer's convenience in Foreign Exchange Department of IFIC Bank Ltd. should provide more personnel to deliver faster services to their honorable customer. It seems to me that day-by-day customers operation is increasing, individual employee has to handle different types of job. But that is pocking a back for an employee. As a result it might be happen any big mistake by the employee and service is also timed consuming and customer has to suffer for this situation. May be it would be the reason for employee's demotivation as well as the customer's dissatisfaction. IFIC Bank Ltd. should focus on their promotional activities.

 They should also focus on the marketing aspects to let customers know about their products and offerings and more promotion should be given to attract new customer. IFIC Bank Ltd. must develop electronic banking system to moderate the service. Technological advantage of a bank ensuring its competitive edge in the market place can only be achieved by efficient manpower. It is market share to reduce its operating cost and to generate new revenue. Electronic banking system also allows increased access to the financial system by its customers. Few other important factor that should be focused on the development process: @ Evaluate customer's needs from their persp0ective and explain locally the shortcomings. @ Customer's convenience should receive priority over other. @ Improve office atmosphere to give customers better feeling. @ Time consumed at service level should be minimized at optimum level. @ Use of effective management information systems. @ Use appropriate techniques in evaluating customer need professionally. @ To deliver quality service top management should try to mitigate the gap between customer's expectation and employee's perception.

FEW SUGGESTATIONS
I. The bank can offer to its customer better service if all of its departments are computerized and incorporated under Local Area Network (LAN) II. At the entry position the bank should enroll more expertise people to augment quality services. III. Nowadays-conventional banking concept is outmoded. Now banks are offering more ancillary services like credit card, on line services and many others. IFIC Bank Ltd. should differentiate its services adopting the modern facilities. _IV. Bank is providing both internal and external training for the officers but bank should be scrupulous about the training facilities so that official can implicate this in their job. V. People are very choosy about environment now a day_ so bank premises should be well decorated and IHC Bank Ltd. should look into the matter very seriously. VI. Bank should provide advances towards the true entrepreneur with reconsidering conventional system of security and collateral, moreover, the whole process should be completed within an acceptable time.

CONCLUSION
Form the learning and experience point of view I can say that I really enjoyed my internship period in IFIC Bank Ltd. at Malibagh Br. from the very first day. I am confident that this 3 three months internship program will definitely help me to realize my further carrier in the job market. Performance analysis of a bank is not so sufficient to measure and express perfectly within this short time of my internship period. But it is a great opportunity for me to get used to with the operational environment of commercial banking of IFIC Bank. I have tried by soul to incorporate the necessary relevant information in my report. Top management of IFIC should conduct a comprehensive study or survey on the branches performance, its managements performance and the employees performance and their motivation as well. Few loyal committed customer base, lack of modern and effective technology or facilities, not enough skilled employee in some sector, considering all of these very important factors. IFIC Bank should always try to improve their service level in every terms. The marketing department should think freshly about their marketing objectives and practices. Rapid changes can quickly make yesterday's wining strategies out of date. As a developing private bank in Bangladesh, IFIC Bank shouldn't allow their client to get dissatisfied with their service. They have their competitors who actively striving to take the advantages in every side. During the course of my practical orientation I have tried to learn the practical banking to relate it with my theoretical knowledge, what I have gathered and going to acquire from various courses.

BIBLIOGRAPHY

My daily - Daily Notebook, written during the orientation program. IFIC BANK LTD., Working Manual for different department. Import Policy, 1997-2002, published by Ministry of Commerce, Bangladesh Secretariat, Dhaka. Annual report 2002, IFIC BANK LTD. Business of Banking - Dr. R.M. Debnath. A Text Book on Foreign Exchange- L.R. Chowdhury. Special Project Report- Published by IFIC Bank

TABLE OF CONTENTS

SI. No. I II III IV V VI VII VIII IX X XI XI01 XI02 XI03 XII XIII XIV XV

PARTICULARS 1st Cover Page 2nd Cover Page Letter of Submission Letter of Placement as Internee Letter of Joining as Internee Dedication Acknowledgement Executive Summery Introduction The Organization Profile Overall Banking Operations of IFIC General Banking Loan & Advance Foreign Exchange Human Resources Development Performance Analysis & Recommendation Conclusion Bibliography

PAG E I II III IV V VI VII VIII 1 4 11-58 12-27 28-38 39-58 59-61 62-72 73 74