general banking activities and loan disbursement and recovery of rakub

Department of Finance and Banking 1

CHAPTER ONE

INTRODUCTION OF INTERNSHIP

1.1. Introduction:

We are the students of the University of Rajshahi, Department of Finance

and Banking. According to the rules of Rajshahi University (in BBA) we

were sent in some organizations to acquire some practical knowledge that

is called internship.

As a student of Finance and Banking we are to complete our internship

program mainly on Financial organization; Banking sector are given

preference here. This time for internship we were divided in some groups,

eight students in a group were sent in Rajshahi Krishi Unnayan Bank,

Greater Road Kajihata branch to complete our internship. We were given

90 days to complete our internship program which was not enough to get

overall practical knowledge on banking sector. But as a student of

Finance and Banking we tried hard to get on over all idea on banking

sector from RAKUB.

We are very much grateful to our honorable teacher, Zubair Ahmed,

Assistant General Manager of Greater Road Kajihata Branch of

RAKUB, other officials and workers who helped us in many ways during

the whole period of our internship program.


1.2. What does Internship mean:

Practical training is necessary to achieve complete knowledge about

something. Learning of the in and outs of the practical experience

engaging on the basis of activities is called internship.

In another word, practical training or internship means to acquire

knowledge and information investigating organization.

Internship is an assigned work performed usually at the end of the BBA

course curriculum. The goal of internship is to apply one’s theoretical

knowledge in practical fields. Thus internship is a pragmatic program of

achieving practical experience by engaging oneself in different

organizations. From the above discussion, it can be concluded that

internship is the way to acquire practical experience through working in

the practical field.

1.3. Importance of Internship:

An internship provides the student with a greater understanding of

career demands and qualifications. It allows the students to understanding

the connection between what is studied and how it is applied in the world

of work. Practical work increases our real knowledge. At the end of our

theoretical study, we are working for practical training.

Thus it enhances the student knowledge. Internship program is the way of

implementing the theoretical knowledge practically.

However, the importance of internship is stated as follows:

Practice makes a man perfect-truthfulness of such can be

achieved practical training.

Internship program helps to increase the quality and

effectiveness of the trainer.


It mentally prepares for their professions.

It acts as guideline during the service period.

Perfect conception about business / accounting procedure in

various industries and business concern may easily be earned.

To innovate new techniques of management.

To enact different policies for the over all development of the

institutions.

To make the skill labor.

It facilitates thinking about problem of apply my theoretical

knowledge in the field of action.

By internship program students can under and limitations,

shortages and tractability of their knowledge and thereby can

take necessary action for removing these limitation and

shortages.

Last of all we can say that, one should importance of an internship

program.

1.4. Objectives of the study:

The objective of internship is to earn practical experience about

definite subject. It helps to achieve practical knowledge and experience.

The main objective of internship training is to discover answer to

questions through the application of considerable procedures.

Main objectives are given below:

To know the functions or service to customers.

To understand administrative structure of RAKUB.


To know in what types of project financing by RAKUB.

To understand loan sanctioning procedure along with general

banking system of RAKUB.

To identified problems faced by both the bank and the clients

in loan management.

To Put some suggestions on the basis of the findings of

internship program to improve the existing situation.

To implement the knowledge of practical training in the post

service life.

1.5. Scope of the Study:

It has been mentioned earlier, the main focus of the study is

“Performance of Loan Disbursement and Recovery” of Rajshahi Krishi

Unnayan Bank (RAKUB),with special reference to Greater Road

Kajihata Branch, Rajshahi . The report gives an overview of Rajshahi

Krishi Unnayan Bank. There is an one elaborate chapter on RAKUB’s

loan Recovery performance . This study will also present some problems

and recommendation to solve those problems of Rajshahi Krishi Unnayan

Bank.

1.6. Methods of Data Collection:

Methodology is a systematic procedure, which is used to solve a

problem easily in a practical area. It covers collection, measuring,

analyzing and interpreting of data to lead decision i.e. methodology

includes why a study we have been undertaken.


There are two sources of data one is Primary source of data and

another is Secondary source of data. I have used both the sources for

collecting data.

1.6.1. Primary data collection Method

Primary data was collected from Rajshahi Krishi Unnayan Bank.

To prepare a report, I have collected data and information by following

way:

1.6.1. a) Questionnaire method

To collect information for my practical training at first, I made a

questionnaire with the help of my honorable supervisor. After preparing

the questionnaire I collected the information and data from the officers,

personnel and other concerned people of my targeted bank.

1.6.1. b) Interview Method

I have collected the information and data through interview. I have taken

interview of the officers, executives and supervisors and they all

responded all of questions friendly.

1.6.1. c) Observation Method

I was present physically in every department of Rajshahi Krishi Unnayan

Bank, Greater Road Kajihata Branch for the purpose my internship

training period and observe all the functions. From this observation and

with the help of my practical knowledge, I have collected some

information and data about the bank.


1.6.2. Secondary Data Collection Method

The only source of secondary data was official record of bank. Others

sources of secondary data are as follows:

i) Annual reports of RAKUB

ii) Periodical Published by RAKUB

iii) Various books, entitles, leaflets, compilations etc. regarding

general banking functions, special savings scheme, foreign

exchange operation and credit policies.

iv) My diary maintained while undergoing the practical

orientations.

v) Some published and unpublished research report.

vi) Books, magazines and papers.

vii) Business and technical journals .

viii) Public records and statistics.

ix) Documents.

1.7. Limitation of the Study:

There is no doubt that practical training is essential to acquire a complete

knowledge in related fields. But it can not achieve easily. There are some

problems in this activity, which are as:

Observation of activities is a difficult task.

As secrecy of rules and regulation in accounting is must for

every institution, the concerned data & information are not

always be presented to others.


Another problem is lack of necessary elements and aspects

practically becomes difficult.

It needs sufficient financial support, but we can not get this

support.

Time of data collection was not sufficient. The total time

period of the orientation was a weeklong working days. It was

very short time to complete this internship program properly.

So I had to conduct with all functions within short time.

As secrecy of accounting is a must for an institution. The

concerned data and information are not always mutually

presented to evaluate the institution.

The given time is not enough for this program becomes. For

this reason, this program needs at least three months


CHAPTER TWO

RAJSHAHI KRISHI UNNAYAN BANK

2.1. Introduction:

The name of the institution is Rajshahi Krishi Unnayan Bank (RAKUB).As the largest development partner in the northwest region Rajshahi Krishi Unnayan Bank aims at overall development of the farmers and all the sectors and sub-sectors of agriculture in this region. Besides catering to agricultural credit, financing agri-business and agro-based industries and poverty alleviation programs the bank performs commercial banking functions.

Rajshahi Krishi Unnayan Bank (RAKUB), a state owned financial institution established under the president order no. 58 of 1986 the bank started functioning on March 15, 1987. RAKUB took over the operations under (Bangladesh Krishi Unnayan Bank) BKB within the administrative division of Rajshahi along with its assets and liabilities.

To overcome the problems and improve the condition of the poor, RAKUB was established in 1987. RAKUB is playing a vital role both in agricultural and development as well as eradication of poverty. Especially RAKUB is the largest source of agricultural credit in Rajshahi Division.

The north-west region comprises of 16 districts of entire Rajshahi and Rangpur administrative division with on area of 34,513 Sq. km. and estimated population of about 28 million. The region is the driest and poorest area with a high population density and low rate urbanization (13%) while property is consented in the country side with 59% of the rural population suffering from various degrees of deprivation.


2.2. Historical Background of RAKUB:

Rajshahi Division is considered to be a vital area in respect to country agriculture productivity. This area contributes more than 30% to the food grain production of Bangladesh. In adequate access to credit among other resources is crucial barrier to the farmer’s of the improve upon their productivity. What is needed is unlimited and sustainable flow of credit to improve them against low productivity. For this reason, Rajshahi Krishi Unnayan Bank was established.

2.2.1. British Period:

In the British regime, the people of bangle was included in the

“Dadon” business of indigenous landlord, moneylender etc. As a result,

all the belongings of the farmers were sold in the bid and they had to stay

with much difficulty. In this circumstances Shar-e-Bangla. A.K. Fazlul

Haque established “Rin Salishi Board” for the sack of farmers.

As a result, many farmers who were engaged with the exploitation by the

moneylenders and landlords, breathed with peace.

2.2.2. Pakistan Period:

In 1947 the Indian sub-continent was freed from the British

colonial rule and in the Indian sub-continent originated by the two

independent states namely India and Pakistan. Bangladesh was indicated

as East Pakistan as a part of Pakistan. In 1952 Pakistan government

established “Agricultural Development Finance Corporation” (ADFC) to

disburse loan in agriculture sector.


Pakistan government realized the importance of agro-loan and

agricultural production, established a financial institution named

“Pakistan Krishi Bank”. Pakistan Krishi Bank started its operations from

1958. This two state owned financial institution merged in 1962 and

established a new financial institution named “Pakistan Agriculture

Development Bank” (ADBP). This institution provides state facilities to

the farmers in many ways.

2.2.3. Bangladesh period:

The evolution of Bangladesh made through the “Great Liberation

War” on 16 December in 1971. After independence of Bangladesh

“Pakistan Krishi Unnayan Bank” was renamed as “Bangladesh Krishi

Unnayan Bank”.

The president’s ordinance number – 27, in 1973, “Pakistan Krishi

Unnayan Bank” renamed Bangladesh Krishi Unnayan Bank. After the

evolution of Bangladesh and with the time being, various organizations

are working independently and freely. For that reason the consciousness

of people is increased. The creation of Water Development Board,

Bangladesh Rice Research Institution, Rural Electrification Board, and

other necessary institutions are made. Control of flood, rice of new

quality and introduction of other high yielding crops and the increasing

demand d of its, institutional loan demand of farmers increased. In the

earlier time people were not familiar with bank loan or institutional loan,

for that reason they lend from their relatives and friends. But now bank

offer various types of loan to the farmers and they are somewhat bank


oriented now. But it becomes very difficult for some limited banks to

meet up the multiple demand of loan specially crop loan.

Since Bangladesh is an agro-based country; the demand for the

loan of Krishi Bank has been increased remarkably. It becomes very

difficult for a Dhaka based head office of Krishi Bank to manage agro-

loan in the remote areas of the country. For this reason, government felt

to decentralize the Krishi Bank in the divisional areas and Rajshahi

division was the first choice. The Northern areas of Bangladesh were not

developed in comparison with other areas of Bangladesh; it is one of the

main reasons of establishing RAKUB. Rajshahi Krishi Unnayan Bank

was established in 1986 with the ordinance number 58 of the president.

RAKUB started its operations from 15 March 1988.

2.2.4 Present Condition:

Institutional agricultural credit plays a crucial role in the modernization of

agriculture. Adequate flow of credit can remove the financial constraints

of the farmers and provide the incentive to adopt new technologies that

would otherwise be more slowly accepted. Credit facilities also help the

process of commercialization of subsistence agriculture. RAKUB realized

this situation and performed their job tremendously. Development of

agro-based industries, self-employment, solving unemployment

problems, providing money from expansion of socio-economic activities

and provide consultancy are the main objective of establishing RAKUB.

After the construction of Jamuna Multipurpose Bridge, this

responsibility has been increased tremendously. In the very beginning of

RAKUB, the number of branches wasTk. 253 core. Now the number of


branches is 365. At his outset of bank, the credit balance was Tk 610

crores and now credit balance is Tk.2067.27 core. For the well being of

all industries farmers in the northwest region in Bangladesh, RAKUB is

continuing relentless efforts and taking more than one hundred and seven

loan programs.

2.3. Economical Impotance of Rajshahi and Rangpur division:

Rajshahi and Rangpur division is popularly termed as the granary

of Bangladesh. The area is noted for aromatic and fine rice production

which has got a growing demand in export market. Besides the area is

noted for fruits and vegetables. More than 50 percent of the country's

potato production comes from Rajshahi and Rangpur division. Besides

flood-free land the adaphic and agro-climatic condition is suitable for

commercial seed production for cereals, potatoes, pulses and a number of

vegetable crops.

The seed production processing and marketing business have got both

domestic demands as well as export potentials.

The area is particularly suitable for rearing black Bengal goats noted for

highly demandable goatskin and high quality mutton. Once it gets going

the mutton of black Bengal goats can harness the world market.

The region is also famous for production of high quality beef and milk

which have immense potential for value added processing. Rajshahi is

still an unexplored area for establishment of poultry hatchery and fish

grow-outs and fish processing.


Rangpur Division was proclaimed as Bangladesh's seventh division on

January 25th, 2010, prior to which it was part of the Rajshahi Division. It

has been created with greater Rangur and Dinajpur regions. Rangpur

division is the northernmost division of Bangladesh. The major cities in

the division includes Rangpur, Dinajpur and Saidpur. The city of Saidpur

has the only airport in the division.

Rajshahi and Rangpur division is characterized by cheap labour force and

excellent rail and road communication infrastructure. Two airports in the

area take only 30-40 minutes to communicate with the capital city,

Dhaka.


2.4. RAJSHAHI KRISHI UNNAYAN BANK AT A GLANCE:

1. Establishment Date : 15th March 1987.

2. Location of Head office : Kazihata, Grater Road, Rajshahi.

3. Authorized capital : Tk 750 core.

4. Region of RAKUB : All regions in the Rajshahi and

Rangpur division.

5. Area : Rajshahi and Rangpur Division.

6. Extent : 34,513 Square kilometer.

7. No. Of District : 16

8. Thana : 128

9. Municipalities : 57

10. Unions : 1092

11. Total population : 35 million

12. Total number of families : 5.10 million

13. Number of farm families : 3.20 million

14. Training institute : 1


2.5. Objectives of RAKUB:

The main goals of RAKUB are as follows:

To provide Loan and Advance facilities for all kinds of

agricultural and agro- based economic activities keeping in

view the needs of small and marginal farmers.

To promote cottage and other allied industries in rural and urban

areas.

To assist farmers in adopting appropriate technologies under

the Bank's supervision.

To earn a normal profit for meeting the operational

expenses, building of reserve and expansion of activities to

cover wider geographical area.

To extend counseling and advisory services to the

borrowers/ entrepreneurs etc. in utilizing Loan and Advance

facilities of the Bank.

Provide credit facilities for agricultural development of poor

farmers.

To provide credit facilities for the socio economical

development of poor farmers.

To save money as deposit (Hajj Saving, Education Saving,

Rural Pension Saving and others) for future expenditure or

needs.

To provide credit facilities for creating self independence. To provide credit facilities for creating small firm as

Livestock & Poultry, Fishery, Hatchery.

To encourage the small entrepreneurship via providing credit

facilities.


To increase income and remove poverty of the people of

Bangladesh.

To supply Agricultural inputs and service to the

entrepreneur.

To develop and create employment opportunities.

2.6. Functions of RAKUB:

As the largest development partner in the Northwest region, RAKUB aims at overall development of farmers and all the sectors and sub-sectors of agriculture in this region. Besides, catering to agricultural Loan and Advance financing, agro-business and agro-based industries and poverty alleviation programs the bank performs ancillary banking functions.

2.7. Management:

A seven-member Board of Directors is entrusted with the responsibility of policy formulation for promotion of growth in agriculture leading to economic development of the country through agricultural Loan and Advance support. The government appoints all the directors of the board. Also an executive committee constituted by the Chairman and two other directors including the Managing Director is there for taking emergency decisions. The Managing Director is the chief executive of the Bank.

2.8. Organizational Structure:

The Head Office of the bank is stationed at Rajshahi. The branch-network comprises 365 branches including one in Dhaka. One General Manager's office at Rangpur, eighteen zonal offices stationed in district headquarters control branches under them. There are 18 independent regional audit offices under direct control of the head office for conducting regular audit in branches as well as in zonal offices.


The bank has a training institute located at Rajshahi. Total workforce of 3364 as on 30-04-2011 was composed of 1497 officers and 1867 other staffs. Regional offices stationed in district headquarters control branches under them.

2.9.1 Head Office:

The head office of RAKUB is located at 280 km far from capital

city Dhaka, North-west divisional city Rajshahi. All operation is control

by head office. The Managing Director is assisted by the three following

functional divisions. Each headed by a General Manager:

Administration and Accounts Division.

Operation Division.

The three divisions further divided into 12 departments are as follows:

2.9.1. a) Administration and Accounts Department:

Personnel Department Common Services Department Central Accounts Department-I Central Accounts Department-II

2.9.1. b) Operation Division:

Branches control Department.

Loans and Advances Department-I

Loans and Advances Department-II

Research and Development Department.

Budget and Expenditure Control Department.


2.9.1. c) Audit and Recovery Division:

Loan Recovery Department-I

Loan Recovery Department-II

Audit and Inspection Department

A Deputy General Manager is the head of the each division.

2.9.2 Supervision and control:

The zonal offices are headed by Deputy General Managers while

Regional offices by Assistant General Managers.

2.9.3 Vigilance:

The functions of the Audit offices are to keep the branches regular.

The Audit offices accomplish auditing of the branches on half-yearly

basis Regional Audit offices are directly controlled by the audit and

Inspection Department of the head office and by no way influenced by

the local Regional on zonal offices.

2.9.4 Training Institute:

The only training Institute at Rajshahi Imparts training to the junior and

mid-level officers and other staff according to the annual training

program designed on such subjects of professional interest as

management of Loan and Advance and accounts, Commercial banking,

audit and inspection etc


2.9.5 Branch Network:

Table-1 Region wise total branches (Up to May- 2011)

Rajshahi 23

Naogaon 29

Natore 20

Chapai Nawabgonj 16

Bogra (North) 18

Bogra (South) 17

Pabna 24

Sirajganj 22

Jaipurhat 15

Rangpur 26

Gaibandha 24

Nilphamari 20

Kurrigram 20

Lalmonirhat 17

Dinajpur (North) 17

Dinajpur (South) 18

Thakurgoan 19

Panchagarh 18

Dhaka 1

L.P.O. (Rajshahi) 1

Total 365


Source: Personnel Department of RAKUB.

2.10. Employee summary (up to April-2012):

Designation Authorized Exist

1.Managing Directors (MD) 01 01

2.Deputy Managing Directors (DMD) 01 01

3.General Manager (GM) 03 03

4. Deputy General Manager(DGM) 36 21

5.Assistant general Manager(AGM) 66 55

6.Senior Principal officer(SPO) 147 125

7.Principal officer(PO) 336 225

8.Senior officer(SO) 620 360

9.Officer 900 706

Total Officer 2110 1497

10.Other Employee 2126 1867

Total 4236 3364

Source: Personnel Department of RAKUB.


2.11. Capital and it sources:

RAKUB is a governmental banking institute. So the main sources

of

Capital are government fund.Details are as follows(up to 30 June-2010)-

1) Authorized capita : Tk.750 core.

2) Paid up capital : Tk.570 core.

3) Reserve capital : Tk.20.85 core.

4) Deposit from customers : Tk.2067.27 core.

5) Loan disbursement : Tk.1060.12 core. 6) Recovered loan : Tk.992.46 core.


CHAPTER THREE

INTRODUCTION TO RAKUB GREATER ROAD KAJIHATA BRANCH

2.1. Establishment of Greater Road Kajihata Branch:

Greater Road Kajihata Branch, RAKUB started its operation in 20th

November 2011. Before this branch Local Principal Office maintained its

operation at this location which got license in 1995. Local Principal

Office has transferred its operation Nawdapara at present.

The bank not only caters the need of agricultural credit, finances agri-

business and agro-based industries and poverty alleviation programs, side

by side the bank performs commercial banking functions in its area of

interest.

The Greater Road Kajihata Branch of RAKUB, Rajshahi performs all

traditional banking functions including deposit mobilization and lending.

2.2. Role of RAKUB, Greater Road Kajihata Branch:

Rajshahi Krishi Unnayan Bank (RAKUB), Greater Road Kajihata Branch

has been playing a vital role for the development of the agriculture in

north-west region. Although Greater Road Kajihata Branch of RAKUB is

specialized of agriculture loan but the general commercial activities of

this bank is very much wide.The main role of Greater Road Kajihata

Branch of RAKUB is to develop the agro-based industries, self-


employment, solving the unemployment problem and supply of money

for the expansion of socio-economic activities.

2.3. Activities of RAKUB, Greater Road Kajihata Branch:

Banking business is primarily concerned with the activities of

deposit collection and loan disbursement. RAKUB is not different from

these activities.

The main activities of Greater Road Kajihata Branch of RAKUB are as

follows:

i). Deposit collection and mobilization and

ii). Loan disbursement and recovery


2.4. Employees of Greater Road Kajihata Branch:

There are 11 employees at Greater Road Kajihata Branch and their designations are as follows:

Table: No. of Employees of Greater Road Kajihata Branch.

Sl.

No.

Designation No. of

employees

Responsibilities

1 Assistant General

Manager

1 Overall management

2 Senior Principal

Officer

1 Loan disbursement, supervision,

legal action, loan appraisal to

project, industrial loan,

recommendation of each credit.

3 Senior Officer 4 RSCP

4 Officer 2 Different statement, deed

preparation and official

activities.

5 Cashier 1 Cash transaction

6 Data Entry

Operator

1 Entrance of Data

7 Peon 1 Miscellaneous

Source: Greater Road Kajihata Branch, RAKUB.


2.5. Organizational Structure of Greater Road Kajihata Branch,

RAKUB:

Cashier

Data Entry Operator

Peon

Assistant General

Manager

Senior Principal Officer

Senior Officer

Officer


2.6 RAKUB, Greater Road Kajihata Branch at a glance (As on 30

April, 2012)

Establishment: 20th November, 2011

Location: Rajshahi City Corporation

Number of Wards: 10

Target of Deposit: 5 crore tk (Upto 30th June, 2012)

Achievement of Deposit: 2 crore 61 lakhs 89 thousand tk (upto 30

April, 2012)

Target of Loan Disbursement: 4 crore tk (Upto 30th June, 2012)

Achievement of Loan Disbursement: 59 lakhs 25 thousand tk (upto

30 April, 2012)

Loan recovery: Not yet started (It will started from July, 2012)

Number of employees: 11

Contant number of the branch: 0721-810482


CHAPTER FOUR

GENERAL BANKING FUNCTIONS OF RAKUB, GREATER

ROAD KAJIHATA BRANCH

3.1. Introduction:

RAKUB combines the role of a specialized bank for rural credit and that

of a commercial bank. Like commercial bank, it performs functions such

as acceptance of deposits, remittance of fund, granting of working capital

finance to agricultural processing and trading units. The overall object is

to generate employment and increase income of farmers and rural people

and faster agricultural development leading to economic development of

the country.

3.2. Types of Services:

As a largest development partner in the northwest region, Rajshahi Krishi

Unnayan Bank aims at overall development of the farmers and all the

sectors and sub-sectors of agriculture credit, financing agri-business and

agro-base industries and poverty alleviation program. The bank performs

commercial banking functions. The bank performs to their customer

mainly the following services:

i. Loan services

ii. Deposit services

iii. Commercial services

i. Loan Services:


Bank’s loan portfolio has been classified under the following major

heads.

a) Short term loan: It is payable within 5-6 months loan period to

1year. These loans are.

All kinds of crop loans.

Socio-economic development activities.

Working capital loan agriculture based industries.

b) Medium term loan: It is repayable above 1 year but below 5

years. These types of loans are:

Land development

Bullocks for cultivator

Dairy farm

Poultry

Raising herds

Small irrigation projects

Development of agriculture based

Industries according to the chart

c) Long term loan: All loans repayable above 5 years are called

long term loans. These type of loans are:

Farm and irrigation machineries

Tea garden development

Agro-based industries


Forestry

Infrastructure development.

ii. Deposit Services:

The different Classes of customers can open different kinds of deposit

accounts. All the various deposit accounts have different feathers and

phenomenon.

a) Current Account:

Current accounts are normally opened for business/organization. No

interest is given on this A/C. In RAKUB, initial deposit is Tk. 1000 to

open a current account. Here the A/C holders can deposit or withdraw

money as many time as they want during the office hours.

b) Saving Accounts:

Saving accounts are opened for the customer except companies or firm

and co-operative society. If the bank is satisfied by observing the

registration and constitution of co-operative society then it can open

savings A/C. RAKUB gives interest @ 5.00%-7.00%per annum.

Minimum initial deposit is Tk. 500 and this amount must maintain

always. The depositors can deposit money in their account as many times

as they want but in a week, they are allowed to withdraw only Tk. ¼ of

the balance in the A/C and the highest limit of withdrawal in a week is

Tk. 100000. If anybody wants to withdraw more than ¼, i.e. 25% or Tk.

25000 in a week, the customer has to give a written notice 7 days ago to

bank.


c) STD (Short Term Deposit) A/C:

STD A/C is opened for company, firm, and Government administrative

body like TNO. STD A/C is operated like current A/C. If 7 days ago a

written notice is placed to the bank in every withdrawal, then the bank

gives interest 4% per annum.

d) Deposit Pension Scheme (DPS):

In this Savings Scheme a person is given an opportunity to build up

savings by contributing monthly installment for getting an attractive fine

amount at the end of the specified term. The size of monthly installments

is Tk. 100, Tk. 200, Tk. 300, Tk. 400 and Tk. 500, which is to be

deposited within 1st week in each month. In this case compound rate of

interest is charged.

e) RAKUB Double Money Skim (RDMS):

RDMS is a special product of this bank. RAKUB has some savings

schemes to motivate the people for saving. In this case RDMS is regarded

as the special product of this bank. Here in 6.5 years the money will be

doubled. Minimum amount of deposit is 50000 tk.

f) RAKUB Daily Profit Account (RDP):

Here minimum amount should be 20000 taka.

g) RAKUB Triple Money Skim (RTMS):

Here in 11 years the money will be tripled. Minimum amount of deposit

is 25000 tk.


3.2.1 The following table shows the various deposits and their interest

rates at a glance:

Deposit categories Interest rate

Current deposit Nil

Saving deposit (City Area) 5.00%

Saving deposit (Urban Area) 7.00

FDR

from 1 months to below 3 months

from 3 months to below 6 months

from 6 months to below 1 year

from 1 year to below 2 years

from 2 years to below 3 years

7.00%

7.50%

8.00%

8.25%

8.50%

DPS 13%

STD 4.00%

iii. Commercial Services:

The bank gives the commercial services by DD, TT, MT and LC etc. For

these services they take a fixed interest. This is a source of income.

RAKUB gives their customers the facility to remit fund form one place to

another. The people who are not customers can also enjoy this facility.


3.3. Opening an Account:

To its customers RAKUB gives opportunity to open an account

like other banks.

The following things are considered to open an account:

I. Observing whether the application form is properly filled in.

II. Getting a preserving specimen signature of a customer.

III. Taking initial deposit in cash.

Special types of account: Basically a person whose age is 18 years or

more can be competent to open an account with the bank. But there are

some special types of account holder like joint account, minor account

illiterate person account, blind person account, Deaf and dumb account

etc. These accounts are opened by following various conditions.

3.3.1. Who cannot open an account?

The following parties can never open an account with the bank:

I. The person who is still bankrupt.

II. The person whose mind is unsound.

III. The person who is totally mad.


3.3.2. Account opening procedure:

To open an account, an individual has to carry out the following

formalities:

Once these formalities are carried out in appropriate manner, the

applicant is issued a checkbook and considered as a valid account holder

of the bank.

Obtain an application form

Submit the completed form to the concerned officer

Face a brief interview

Sign the specimen signature card

Deposit of money and

Get counter-folio of the payment slip


3.3.3. In case of joint accounts, the applicant must furnish the

following information:

i) Name of the parties who will be operated the account and

signed checks.

ii) At the event of death of either or any of the account holders,

how the balance will be paid and to whom the securities (if any)

will be delivered. The documentary requirements are almost the

same as individual accounts. Account opening form and the

special instruction must be signed by all the joint account

holders to signify their consent.

iii) If the client is a private or public limited company, the company

has to give a description about the type of the account and the

operation of the account. Specimen signature of the people who

are authorized to open and operate the account and the source of

their authority.

3.3.4. Account closing procedure:

In order to close an account, the account holder has to place written

application. After getting application, the bank will deduct service

charges at an amount of Tk. 200 and Tk. 300 against savings and current

deposit respectively as closing fee from the balance and the rest of the

money is given to the customers.


3.4. General function of cash department:

Cash payments:

For convenience, the cash payment (cheque honoring) procedure is

illustrated by a flowchart as under:

COUNTER

Customer places the check to the ledger officer (LO). The LO receives the check, enters its particulars in a register and issues the customer a token.

The LO now verifies the ledger of the customer. If the customer’s account position is okay, he passes the check to the second officer (SO).

The SO compares the customer’s signature given on the check with that on the signature card kept in his custody. If the signature is okay then he makes an entry of the check in another register and cancels it by signing across the check.

Once the check is cancelled that is okay for payment it is brought to the cashier by a peon.

Cashier enters the amount of the check in the cash register and pays the appropriate amount to the customer.

At the end of banking hour, a trail balance is prepared from the registers and all the registers are compared with one another.


3.4.1. Cash Receipt:

Customer’s deposits are received in this section of bank. Then the amount

received is credited to the customer’s A/C in the ledger book. The

formalities that are followed to receive a customer’s deposit (cash) in the

cash receipt section are stated in the following flow chart:-

COUNTER

Customer places this cash and deposit slip before the respective officer at the counter.

After receiving the cash and deposit slip, the officer makes an entry to scroll register book. Then the deposit slip and cash are placed before cashier.

The cashier counts this amount of money first and then makes an entry to another register book. The book is generally called cash book.

Then the cashier passes the cashbook and deposit slip to the second officer.

After verifying the deposit slip, the second officer returns the counter-folio of the deposit slip to the customer and keeps the other position in his custody.

At the end of banking hour, trial balance is prepared from that cash receipt register.


3.5. Customer services:

RAKUB earns a huge amount of money by selling several

customer services. The Greater Road Kajihata Branch of RAKUB offers

the following customer services:

Customer

services

Money transfer

Customers check collection

Customers’ bills collection

DD

MT

TT

PO

Advice

Same Bank

Other Banks

Electricity Bills

Water Bills

Telephone Bills


3.5.1. The descriptions of these instruments are as under:

i) DD (Demand Draft):

DD is the most popular instrument of remitting fund. It is an order

to pay money drawn by one branch of a bank upon another branch of the

same bank for a particular sum of money which is payable to order on

demand. Test number is placed on DD. If the number of issuer bank and

reimburse bank becomes the same only then the specified amount of

money on DD is paid to the customer. The commission for DD is 10%

for any amount of TK. and the minimum commission is TK. 30.

ii) MT (Mail Transfer):

MT is another mode of remitting fund and it is same to DD but

here the customer is not provided any papers but a receipt. The bank

sends the MT papers under its own responsibility to the respective

branch. In order to cash MT, the payee must maintain an account with the

bank. The commission for MT is 10% for any amount of TK. and the

minimum commission is TK. 30.

iii) TT (Telegraphic Transfer):

Telegraphic transfer is the quickest method of remitting fund from

one place to another. By this procedure, no instrument is sent to the

paying branch, message is sent-only over telephone or telex and the

paying branch supplies payments after having message. The commission

for TT is 10% for any amount of TK. and the minimum commission is

TK. 30.


iv) PO (Payment Order):

Payment order is a written document. The PO can be enhanced on

that branch from where it is issued. Several supplier organizations use

this PO. Here no account is needed to open with the bank. It is issued

locally. Generally, the contractors and suppliers use this instrument. The

commission for PO is TK.20 for TK.1000, TK.30 for TK.100000, TK.50

for above TK.100000 to below TK.500000, TK.100 for above

TK.500000.

v) Advice:

It is simply the making of adjustment between debit and credit.

Here no cash remittance has done. RAKUB can transact among its

various branches with the help of such advice.


3.6. Accounting system of RAKUB, Greater Road Kajihata Branch:

Transaction

Clearing

Voucher

Record in register

Posting in ledger

Cash Transfer

Supplementary sheet preparation

Summary preparation

Cash com day book preparation

General ledger posting

Affairs front page

Subsidiary ledger posting

Affairs back page


CHAPTER FIVE

LOAN DISBURSEMENT

According to ordinance of RAKUB 1986, it was established in the

administrative area of Rajshahi division. It operates banking activities to

increase agricultural production, to develop overall economic condition,

to develop small and cottage industries, to develop agro-based industries,

and to improve socio-economic activities.

4.1. Loan Areas:

RAKUB provide loan both agro-based and non-farming sector. There are

nine main loan areas of RAKUB; out of nine loan areas it gives

preference on the following loan areas.

a) Crop Production;

The Bank finances for production of all the summer and winter crops,

horticulture & nursery etc. High yielding and high value crops and seeds

production is particularly encouraged. Crop sub-sector alone occupies

60% of the lending budget of the Bank.

b) Fishery:

The Bank attaches importance to use scientific method and modern

technology in fish cultivation. It extends adequate credit support for

excavation and re-excavation of ponds, round the year cultivation of

species, which have rapid growth, cultivation of sweet water prawn and


other fishes. The Bank makes use of expertise of the concerned

government agencies for bringing more ponds/water bodies under

cultivation and increasing productivity.

c) Livestock & Poultry:

The Bank extends credit facilities for systematic and commercial

livestock farming which includes dairy, beef-fattening, poultry, raising

and setting up of hatcheries which in turn is expected to increase

production of milk, meet and eggs, the main source of protein. As the

marginal and small farmers’ access to mechanized farming is restrained

by want of cash and collateral, the bank has a big lending window of draft

animals for cultivation of land, transportation of agricultural produces and

other farming activities.

d) Irrigation Equipment & Farm Machinery:

In today's technology-based farming of high yielding and high-value

crops, mechanization of cultivation, irrigation and pest-control is

indispensable. To cope with the situation financing power tillers, tractors,

tube wells, power-pumps, and fertilizer and pesticide application devices.

e) Agro-industry & Agri-business:

The operational jurisdiction of the Bank is noted for its agricultural

potentials. The Bank pays due importance to setting up agro-industries

for preservation, processing and marketing of agricultural produces

having backward linkage with basic sub-sectors of crop, fishery, livestock


and forestation. Manufacturing and marketing of agricultural implements

are also encouraged. Agro-industries for import sub situation are specially

encouraged by offering moderate terms of financing.

f) Poverty alleviation:

The poverty-stricken area of north-west Bangladesh is characterized by

comparatively lower rate of savings, inadequate capital accumulation and

slim employment opportunities. The existing collateral-based banking

system is also of little use in respect of extending support to the millions

of landless people. To address the problem, the Bank has been financing

collateral-free micro-credit for income and employment generation

through its poverty alleviation credit programs.

4.2. RAKUB also provides some loan to their customer:

These are as:

Consumers' Credit (District & Upazila Branches)

Service-holders' Credit (District & Upazila Branches)

Small Traders' Credit(All Branches)


4.3. Term Wise loan disbursement:

Bank disburse loan in various term wise, such as small, medium and long

term.

Short Term: Short-term loan is repayable from 5-6 months

to 1 year

Medium Term: Medium term loan is repayable within 5

years.

Long term: Long-term loan is repayable above 5 years.

4.4. Selection of Borrower:

Selection of borrower is the important factor in loan disbursement. The

following subject matter should be considered in loan disbursement.

Citizen of Bangladesh

Adult

Ability to utilize loan

Not defaulter

The registrar of Joint Stock Company must register limited

company.

In case of co-operation society, the registrar of co-operative

society must be registered it.

Not bankrupt or not unsound minded.

When Bank select borrower closely consider the following four “P”

P = Person

P = Purpose

P = Profitability


P = property / security

Borrower apply for sanctioning loan by the prescribed form, which is

provided by the bank and bank rates predetermined fees, then borrower

submit application form along with fees. The rate of loan application

form fees of RAKUB is as follows:

Source: Loans and Advances Department-I, RAKUB.

4.5. Interest Rates:

Sectors Interest Rate Crops 10.00%

Fisheries 12.50%-13.00% Livestock 11.00%-13.00%

Agro Industry 12.00% Cash Credit 13.00%-15.00%

Poverty alleviation 6.00%-14.00% Firm Machinery 12.00%

Source: RAKUB website

4.6. Loan Case Investigation:

Loan applicant must submit necessary papers along with loan application.

After submitting necessary papers, responsible officer take some step

against loan application. Loan officer investigate the information of loan

application to go to the spot and evaluate loan application consciously.

Amount of Loan Rate of Application Fee

TK 1000 to TK 6000 TK 15

TK 6001 to TK 100000 3%

Above TK 100000 TK 200 Plus TK 1 for per thousand


Loan case evaluation officer scrutinize the necessary papers and

documents of security and he /she will go to the local land office.

4.7. Forecasting:

There are three types of forecasting form of RAKUB. Loan officer write

a report about project appraisal. Loan forecasting or loan evaluation is

very important. In the time of forecasting, loan officer considered the

amount of loan, sources of equipment in case of equipment loan, and the

availability of equipment, project viability in case of project loan, suitable

use of loan etc. apart from this loan officer attached income and

expenditure statement, cash payment and receiving statement with the

forecasting report.

4.8. Loan disbursement:

On the basis of forecasting statement the responsible officer investigate

the actual need of loan. If loan officer satisfied to the loan proposal he /

she may sanction loan. Before sanction of loan, making necessary papers

correctly is essential. According to condition of loan sanction, loan

officer made necessary documents such as: mortgage paper,

hypothecations papers, pledged agreement, SP note etc. Bank disburse

loan in various ways, such as: cash, purchase receipt, or installment. In

case of installment loan bank investigate the past installment and

experience of the borrower.


4.9. Table-1: Loan disbursement of Greater Road Kajihata Branch of RAKUB from November 20, 2011 to March 31, 2012

Month Deposit Collection

(TK in lakh.)

Loan Disbursement

(TK in lakh.) December,2011 68.44 No loan had sanctioned

previously. From LPO branch two loans had

transferred. Cash Credit purpose 3.64

January,2012 58.65 4.00

February,2012 20.38 23.75

March,2012 114.42 27.86

Source: Greater Road Kajihata Branch, RAKUB

4.10. Problems of Loan disbursement:

Greater Road Kajihata Branch of RAKUB faced the following problems

in disbursing crop loan –

i. Loans are not sanctioned in proper head and real lone due to

political influence

ii. Lack of proper mortgage against loan.

iii. Deficiency of adequate human resource.

iv. Lack of real loaner.

v. Insufficient fund of the bank.

vi. Loons are not disbursed properly as a result of the dishonesty of

the officers.

vii. Inflexibility of the government policies in disbursing loan.

viii. Wants of sound guarantor.


CHAPTER SIX

LOAN RECOVERY OF RAKUB

When bank or other financial institution currency disburses to another

organization or people, then this currency regained from loaner, it is

called recovery. Greater Road Kajihata Branch of RAKUB loans disburse

to the loanee regained this money. Greater Road Kajihata Branch of

RAKUB loan recovered under two bases:

1. Unclassified loan

2. Classified loan

5.1.1. Unclassified loan:

When half or more than half of the total loan is repaid within the due

dates by the borrower thus that is called unclassified loan.The duration of

time in which the loan will be treated as unclassified is less than 12

months from sanctioning loan.

5.1.2. Classified loan:

When more than half of the total loan or total is unpaid/due over the due

date then that loan is called classified loan. Classified loan is not being

repaid on time and has been designated a troubled asset.

Classified loans are three types-


Substandard loan:

A substandard loan is one that is inadequately protected by the current

sound worth and paying capacity of the oblige or of the collateral

pledged. Loans classified as substandard have a well-defined weakness or

weaknesses that jeopardized the liquidation of the debt.

A loan will be classified as substandard after a period of 12 months from

the due date.

Doubtful loan:

A loan where full repayment is questionable and uncertain. Degree of

repayment of loans in question range from a complete loss to uncertain

loss unless corrective actions are taken. Doubtful loans are usually non-

performing loans on which interest is overdue and full collection of

principal is uncertain.

A loan will be classified as doubtful after a period of 36 months from the

due date.

Bad debt:

Loans classified as bad debt are considered uncollectible and shall be

listed at 100 percent potential loss.

A loan will be classified as bad debt after a period of 60 months from the

due date.


5.2. Loan Recovery procedure:

The important tasks of branch manager Greater Road Kajihata Branch is

to recover the outstanding loans. The main responsibility of branch

manager and field supervisor to recover the outstanding loans in Greater

Road Kajihata Branch. The branch manager gets sounds planning and

makes policy to recover the loan. Thus recoverable all loan are to be

timely. The loss recovery procedure is divided into several steps. There as

follows:

Loan recovery:

Greater Road Kajihata Branch makes a schedule to recover the

outstanding loan. There are several schedules to pay of difference types

of loans.

a) Schedule to pay of crops loan are fixed according to

Bangladesh bank and rules.

b) Different schedule to pay loan for various objectives.

c) For project loan, schedule to loan are to be adjusted,

when production are start commercially.

d) For working capital loan, loan to be paid in due time.

Statement of loan:

The statement of loans plays a vital role to make a loan recovery; it is an

initial instrument for office and field. Name and address of borrowers are

in this statement. This statement is prepared for village and union. This

statement is prepared at the beginning of financial year. It mentions that it

is helpful for disbursement loan.


Various types of notice:

There are various types of notice to recovery of loan, which are serially

set to the borrower. These are Demand notice, Legal Notice, Special

Notice, Field recovery, Loan Recovery camp, Co-operation of UP

chairman and Case filing.

5.3. Rules of Recovery:

Greater Road Kajihata Branch Loan recovery from loanee is installment

system, installment system are as:

Weekly

Fortnightly

Monthly

5.4. Causes of Defaulter:

The loanee cannot pay due time in various causes:

Natural calamity destroy the crops, for this reason the loanee

unable to pay loan in due time.

Greater Road Kajihata Branch cannot take proper steps

against the loanee for influential man.

The loanee cannot use the loan in proper way.

The loanee do not pay loan in more time willingly.


5.4.1Greater Road Kajihata Branch takes some step against

Defaulter:

When a lone default to pay loan the Greater Road Kajihata Branch takes

some step against loanee:

First they issued Demand notice to loanee.

If the loanee not pay loan, then branch issue legal notice.

Again lone failure to pay loan, branch issue special notice.

After all loanee default to pay loan then branch case filling

against loanee.

In this way Greater Road Kajihata Branch recovers loan by court. If any

sector continuously goes for losses, branch does not shut down the sector.

Greater Road Kajihata Branch again refinances that sector and

encourages to the loanee.

As it is a new branch which is started it’s journey from 20th November,

2011 the loan recovery is not started yet. Loan disbursement is running

on and loan recovery will be started after June, 2012.

5.5. Problems of loan Recovery:

Loanee cannot utilize loan properly, as a result they fail to repay

loan.

Many people of Bangladesh live in village and they are ignorant

to use the loan.

Weakness of supervisor for supervising loan.

Weakness of taking step against loanee by bank.

Political pressure is a common phenomenon in recovery of loan


CHAPTER SEVEN

RECOMMENDATION AND CONCLUSION

6.1. Limitation of the study:

Rajshahi Krishi Unnayan bank plays an important role in developing the

agricultural sector as well as poverty alleviation and socio-economic

development of the Rajshahi and Rangpur Division. The activities of this

bank are widely dispersed, but I have time constraint which was

prevention to acquire complete and sufficient knowledge about the role of

Rajshahi Krishi Unnayan bank. Due to the shortage of time, it is not

possible for me to collect the all data about this Bank. But I have tried my

best to prepare this report properly and effectively.

6.2. Problems Identification:

In common eyes, it would be seemed that the bank has no problems and

running well recent years. But being physically presented at the bank

during 15-day internship and having discussed the different staffs about

farming loan management, I observed the following unavoidable

problems.

1. Fund diversion.

2. Political pressure: Due to pressure of local political leader the

bank cannot determine proper borrowers for distribution

loan.They create always-unnecessary influence in determining

borrowers.

3. Shortage of efficient credit personnel.

4. Lack of legal action by the banks against defaulters.


5. Inadequate training facilities for credit officers and their

qualifications.

6. Lack of proper mortgage against loan.

7. Lack of real loanee.

8. Insufficient fund of the bank.

9. Lack of sound guarantor.

10. Sometime the loan-less recovery show their unwillingness to

pay the loan in order to have various advantages form the

government.

11. If loan disbursement is not in accurate time, borrowers will not

be able to use that loan in particular sector, As a result loan

recovery will be impossible.

12. The notice are not issued just time, for this reason some time the

recovery of loan is disturbed.

13. Lack of proper planning and inefficient-fund management.

14. Lack of proper supervision.

15. Loan is not paid through proper assessment.

6.3. Recommendation:

In this study, I have tried to observe various aspects of loan disbursement and recovery system with different analysis of this bank. For survival, a bank should run in the profitable basis. A bank can’t make profit due to various problems mentioned before. These aged problems could not be solved overnight. However, I have mentioned some recommendations here to be followed in order to get relief from acute problems. Recommendations are given below:

As the student of Finance and Banking, I can say strongly that

project’s viability depends on only its sound analysis. If

analysis of a project is accurate, it will provide profits. So,

before disbursement of loan, the bank should be sure that the

conducted analysis is accurate.


Most of the loans become default loan just after disbursement.

Its prime ground is lack of supervision. Here, it is mentionable

that supervision means personal contact with the loanee. Most

of the loanees are illiterate, if they are well supervised, they

must show their responsibility of repaying the loan. So,

supervision is a vital factor.

The bank should be more needful in recovery of classified and

unclassified loan.

Deposit mobilizations have to be increased.

In Bangladesh, political influence a bank’s decision about

giving loan. To avoid such political pressure, the bank could

keep a “written loan policy”.

Training makes a man perfect. The staff could be given training

about their respective business at regular basis.

In the age of modern technology, the bank should be

computerized to ease the accounting process and increase

customer services.

Loan classification and provision should be revised on the basis

of national economic condition.

As a specialized bank, RAKUB have to recruit efficient

personnel

Last but not least, the bank should strictly follow the various

programs adopted by RAKUB.


6.4. Conclusion:

A bank is basically a service-oriented institution. It acts in financial inter-mediation process. Banks collect deposits at low rate of interest and lend the collected money at a higher rate of interest to cover it operational expenses and then make profit. In this process, if loans are stuck-up, the entire process gets jeopardized.

This branch has not yet produced better performance in recovering those loans given to small borrowers because this branch started it’s journey from 20th November, 2011 and will start recovery from July, 2012. The branch should take care of this very important aspect of banking for its smooth survival in the coming days.