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Short Assignment-1

Submitted To:

D.R. KARMAKER

MD. ZAKIR HOSSAIN

Bangladesh Institute of Bank Management

Submitted By:

Date of Submission: 16th

February, 2014.


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Central Bank: The Guardian of Scheduled Banks.

Bangladesh Bank (BB), as the central bank, has legal authority to supervise and regulate all

scheduled banks and non-bank financial institutions. It performs the traditional central banking

roles of note issuance and of being the banker to the government and banks. Given some broad

policy goals and objectives,

Formulates and implements monetary policy, Manages foreign exchange reserves and Lays down prudential regulations and Conduct monitoring thereof.

For the banks, Central Bank is the Primary regulator, who governs the activities of banks. In

addition Tax authority, Registrar of Joint Stock Company, Ministry of Finance etc. are different

types of regulatory bodies whose directives have significant impact of banks business.

Whereas, it is necessary to establish a central bank in Bangladesh to manage the Monetary and

credit system of Bangladesh with a view to stabilizing d domestic- monetary value and

maintaining a competitive external par value of the Bangladesh Taka towards fostering growth

and development of countrys productive resources in the best national interest.

Now, therefore, in pursuance of the proclamation of independence of Bangladesh, read with the

Provisional Constitution of Bangladesh Order, 1972, and in exercise of all powers

Banks in one form or another have been subject to the following non exhaustive list of

regulatory provisions:

1) restrictions on branching and new entry;

2) restrictions on pricing (interest rate controls and other controls on prices or fees);

3) line-of-business restrictions and regulations on ownership linkages among financial

institutions;


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4) restrictions on the portfolio of assets that banks can hold (such as requirements to hold certain

types of securities or requirements and/or not to hold other securities, including requirements not

to hold the control of non financial companies);

5) compulsory deposit insurance (or informal deposit insurance, in the form of an expectation

that government will bail out depositors in the event of insolvency);

6) capital-adequacy requirements;

7) reserve requirements (requirements to hold a certain quantity of the liabilities of the central

bank);

8) requirements to direct credit to favored sectors or enterprises (in the form of either formalrules, or informal government pressure);

9) expectations that, in the event of difficulty, banks will receive assistance in the form of

lender of last resort;

10) special rules concerning mergers (not always subject to a competition standard) or failing

banks (e.g., liquidation, winding up, insolvency, composition or analogous proceedings in the

banking sector);

11) other rules affecting cooperation within the banking sector (e.g., with respect to payment

systems).

In recent years regulation in banking has become less pervasive and has shifted from

structural regulation to other more market oriented forms of regulation. As a consequence

competition has come to play a very important role in the allocation of credit and in the

improvement of financial services. The capital requirements framework created in the context ofthe Basel committee paved the way to the development of stronger competition in banking. It is

unquestionable that all over the world banks now face greater competition both from new

entrants in the banking sector and from other financial companies.


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. Competition authorities have not been much involved in the process of liberalization of

banking. Moreover, in several countries the enforcement of antitrust rules until very recently has

not been applicable to banking because of sectored exceptions.

. In this light, the purpose of this report is:

to assist policy makers and enforcement authorities (in their competition advocacy function) in

their efforts to promote competition oriented regulatory reform in banking;

to assist policy-makers and enforcement authorities (in their competition advocacy function) in

promoting an environment where competition law is fully applicable to banking and where there

is an appropriate institutional setting to that end; and

to assist competition enforcement authorities in the enforcement of competition law in this

sector, with a special emphasis on merger control.

Issuance of Cheque Book.

Issuance of Cheque Book:Cheque Book is issued only after opening an account with a bank. As a practice, cheque book is

generally issued after depositing mandatory minimum balance in the account. Cheque books

shall only be issued at the request of the account holder through banks prescribed requisition

slip.

Precautions/Steps to be taken for Issuance of Cheque Book:a) The signature of the account holder in the cheque requisition slip must be verified with the

specimen signature held with the bank;

b) First cheque book should preferably handed over to the account holder;c) Cheque book may also be handed over to persons other than the account holder only upon

proper authorization by the account holder;


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d) All subsequent cheque books will only be issued against centerfold;e) Particulars of cheque issued must be entered into the Cheque Issue Register and recipient of

cheque book should acknowledge such receipt in the space provided for the same. The

issuance has to be authenticated in the register by the issuing official and Manager/Sub-

Manager jointly;

f) The running un-issued cheque books and cheque books issued but not delivered, should behandeled very carefully by the concerned department and must balance at the end of days

work. During days work such cheque books shall be kept under lock and key in a small steel

box and the box be kept at a place not easily visible from outside. At the end of days work,

the box must be sent to the vault;

g) Cheque series of all issued cheque book shall be entered into the computer system against therespective account. Upon entry, cheque requisition slip shall be marked posted and initialed

by concerned official. The printout should be checked and authenticated.

Stop Payment against Lost/Stolen Cheque Book.

Normally the payment of a leaf of Cheque Book cannot be stopped by the bank as it goes against

its own commitment in favor of a third party. However stop payment instructions can only beissued by the issuing branch in special circumstances at the request of the Account Holder in

case of a lost or stolen Cheque only. In such cases extreme caution should be exercised both by

the issuing and the drawee branch. To stop payment of a Cheque the Account Holder has to

come up with a written application to inform the respective branch about the lost/stolen Cheque

Book. But if he/she cannot come up immediately with the written application then he/she must

inform the respective branch over phone or by mail and the branch officials mark Caution Mark

to that particular account so that any sort of transaction with that Cheque Book could be

prevented. But the Account Holder must come as soon as possible with the written application to

settle down the issue.

Loss of Cheque Book:


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Upon clients written information regarding loss of cheque book, new cheque book may be

issued after obtaining proper indemnity (as per Head Office proforma) from the client. Following

steps must be taken before issuing new cheque book in lieu of lost one:

a) Clients notification letter regarding loss of cheque bookshould be stamped with time &date seal immediately after its receipt;

b) Unused cheque series of the lost cheque book must be marked with Stop Payment in thecomputer system against the respective account;

c) Stop Payment should be marked in the appropriate register;d) Cash department should be notified regarding the lost cheque series of the respective

account;

If any cheque from the lost cheque series is presented over the counter, it should be immediately

notified to the Manager. If a cheque from the lost cheque series is honoured/paid before clients

notification of loss of the same is received, bank will not be held liable for doing so. But in case

of reverse scenario, bank will be held liable for making payment.

Note: Stop Payment Order can only be revoked by the account holder in writing.

Principles of Sound Lending.

Sound lending is the process of evaluating credit risk and the principles of sound lending are:

1. Safety: Lending function will be exercised only when it is safe and that the risk factor isadequately mitigated and covered.

2. Security: Since risk factors are involved, security coverage has to be taken before aparticular lending.

3. Liquidity: While lending, adequate care has to be taken so that the liquidity is notcompromised.

4. Profitability: From the commercial point of view, all loans and advances must havesufficient yield or return.


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5. Diversity: The loan portfolio should be diverse and concentration of lending in oneparticular sector should be avoided.

6. Productive purpose: Lending function will only be used for productive purpose or sector.End use of the fund to be ensured.

7. National / Social interest: While lending, the national and social aspects must be takencare of. No loan is to be given for a purpose which is detrimental to the society.

Handling of Deceased Accounts.

Following points must be followed in case of Handling of a Deceased Account;

The death of account holder terminates the contractual relationship between his/her andthe Bank.

The Bank may receive a formal notice of the account holders death but if, in themeantime, an announcement of the account holders death appears in the newspaper or

information is received from any other reliable source, it should be considered sufficient

notice.

A notation Deceased A/C should be prominently made a top of the AOF and SpecimenSignature Card, indicating the source of information and the date of death.

The account of the deceased account holder should not be operated upon or the balancetransferred to any other branch under the instructions of any executor or administrator or

any claimant, until all the formalities have been complied with and head Office

permission is obtained.

On receipt of probate/letter of administration /succession Certificate along with the deathcertificate, the balance may be paid by issuing payment order(s) in favor of the

Beneficiaries and the account should be closed.

Upon the death of one of the a/c holder of a joint a/c, the balance of which is repayable tothe survivors, the operation of a/c will continue but the survivor or the survivors should

be requested to transfer the balance into a new a/c in his/her or their own names and fresh

a/c opening form etc. should be obtained.


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When the balance is not repayable to the survivor(s), the operation of the a/c must bestopped.

Payment of balance to the nominee of the deceased a/c:

Savings Bank A/C: Interest on the balance of savings bank a/c will be paid upto the date of

withdrawal/closing of the accounts as admissible under savings bank a/c rules,

irrespective of the date of expiry of the depositor.

Term Deposit A/C: Premature Encashment: In such cases deposit should be deemed to have been

made upto the date of withdrawal and not upto the date of death. Interest

should be paid and recovery of penal interest made in accordance with

prevalent instructions regarding premature encashment.

Encashment at Maturity: Interest should be paid upto the date of Maturity atthe rate applicable for the relevant FDR.

Encashment beyond Maturity: Interest upto to the period of maturity shouldbe paid at the rate applicable for the relevant FDR. Interest for the period

beyond the date of maturity upto the date of withdrawal should be paid at the

rate applicable for the savings Bank A/C with checking facility.

Loan A/C:


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Banks may charge interest on loan a/c till liquidation of outstanding bank dues. The

banks are advised to pursue with the successors to adjust the loan a/c at the earliest to

avoid accumulation of interest burden.

Documents Required: The following documents are required to release fund to thesuccessors/nominees of the Deceased A/C holder:

The death certificate issued by the hospital authority. The Certificate issued by the police station. The certificate issued by the chairman of Union Council or Ward

Commissioner with or without citing the name of the successors.

Death Certificate issued by any other competent authority. Graveyard Certificate. Succession Certificate issued by the Court. Selection of payee out of present successor by the court. Passport of the successors or National ID Card or any other proof their

respective identity.

Affidavit or Notary Public submitted by the successor. Marriage certificate issued from Marriage registers Office (in case of

spouse).

Indemnity from the successors or Guarantee from third party. The payment order any be issued in favor of the successor. Others, if any.