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Commercial Activities of National Bank Limited

Chapter- 1

Introduction & Background Of The Study

Five Year’s Performance at a Glance

(Taka in million)

Particulars 2001 2002 2003 2004 2005Authorizes capital 1000 1000 1000 1000 1000Paid-up Capital 430.27 430.27 430.27 516.33 619.59Reserve Fund 1142.48 1198.70 1270.63 1346.00 2115.03Deposits 24896.64 26276.26 27762.12 28973.40 32984.05Advances 20200.64 21677.96 22257.15 23129.65 27020.21Investment 2892.00 3839.60 4044.20 4374.17 3564.82Import Business 20773.20 19245.70 19264.50 22028.30 31648.20Export Business 22071.00 17771.20 16341.80 17105.30 21344.28remittance income 4979.80 6458.10 7637.50 9035.50 13618.20Gross Income 3288.00 3343.60 3622.30 3715.20 4202.52

Gross Expenditure 2271.36 2473.20 2677.20 2980.06 3351.20 Profit before tax 400.64 250.32 336.09 484.21 581.12 Profit after tax 274.44 142.19 88.12 170.02 271.67Fixed Assets 797.81 878.50 889.60 895.40 1431.23total assets 48732.10 45719.10 47929.57 48024.96 55046.13        ( in Taka )book value per share

365.52 378.59 395.31 360.68 441.36

market value per share

287.28 238.86 226.61 475.25 746.50

earning per share 63.78 33.98 17.07 27.44 43.85dividend 30% 20% 20%

bonus share

20% bonus share

30% bonus share

        in Number Number of foreign corresponds

328 358 358 410 391

Number of Employees

2073 2171 2185 2133 2184

Number of shareholders

9052 9521 9276 9491 9564

Number of branches

75 76 76 76 76

1.1 Scope of the study:

The scope of the study on “Commercial Activities of National Bank Limited” is enjoying an eminent image is vast and it is hardly possible to become familiarized with the total operation of the Bank decently within a short period of time. In this report we have tried to focus on the Commercial Activities of the Bank. Therefore, we had limited my scope within all the applications of those. To make it a complete report we had to perform our tasks in a routine way. The scope of the report encompasses the areas covered by the organization part, Evaluation part, an Analysis part. Maximum endeavor has been carried out to focus on the total Commercial Banking Operations conducting the bank, which has included in the project and evaluation part. The organization part started with the history of National Bank Limited and end with ultimate activities of the National Bank.

Chapter-2

Company Information

2.1 Company profile:

National Bank Limited has its prosperous past, glorious present, prospective future and under processing projects and activities. Established as the first private sector Bank fully owned by Bangladeshi entrepreneurs, NBL has been flourishing as the largest private sector Bank with the passage of time after facing many stress and strain. The member of the board of directors is creative businessman and leading industrialist of the country. To keep pace with time and in harmony with national and international economic activities and for rendering all modern services, NBL, as a financial institution automated all its branches with computer network in accordance with the competitive commercial demand of time. Moreover, considering its forth-coming future the infrastructure of the Bank has been rearranging. The expectation of all class businessman, entrepreneurs and general public is much more to NBL. Keeping the target in mind NBL has taken preparation to open new branches by the year 2007.

The emergence of National Bank Ltd. in the private sector is an important event in the Banking arena of Bangladesh. When the nation was in the grip of severe recession, Govt. took the farsighted decision to allow in the private sector to revive the economy of the country. Several dynamic entrepreneurs came forward for establishing a bank with a motto to revitalize the economy of the country.

National Bank Limited was born as the first hundred percent Bangladeshi owned Bank in the private sector. From the very inception it is the firm determination of National Bank Limited to play a vital role in the national economy. We are determined to bring back the long forgotten taste of banking services and flavors. We want to serve each one promptly and with a sense of dedication and dignity.

The then President of the People's Republic of Bangladesh Justice Ahsanuddin Chowdhury inaugurated the bank formally on March 28, 1983 but the first branch at 48, Dilkusha Commercial Area, Dhaka started commercial operation on March 23, 1983. The 2nd Branch was opened on 11th May 1983 at Khatungonj, Chittagong.

At present, NBL has been carrying on business through its 92 branches spread all over the country. Besides, the Bank has drawing arrangement with 415 correspondents in 75 countries of the world as well as with 32 overseas Exchange Companies. NBL was the first domestic bank to establish agency arrangement with the world famous Western Union in order to facilitate quick and safe remittance of the valuable foreign exchanges earned by the expatriate Bangladeshi nationals. NBL was also the first among domestic banks to introduce international Master Card in Bangladesh. In the meantime, NBL has also introduced the Visa Card and Power Card. The Bank has in its use the latest information technology services of SWIFT and REUTERS. NBL has been continuing its small credit program for disbursement of collateral free agricultural loans among the poor farmers of Barindra area in Rajshahi district for improving their lot. Alongside banking activities, NBL is actively involved in sports and games as well as in various Socio-Cultural activities. Up to September 2006, the total number of workforce of NBL stood at 2239, which include 1689 officers and executives and 550 staff.

Since the very beginning, the Bank exerted much emphasis on overseas operation and handled a sizeable quantum of homebound foreign remittance. The Bank established extensive drawing arrangement network with Banks and Exchange Companies located in important countries of the world. Expatriates Bangladeshi wage earners residing in those countries can now easily remit their hard-earned money to the country with confidence, safety and speed.

The year 2006 marked the addition of yet another golden stair in the chronicle of NBL’s success story. Compared to 2005, Foreign exchange business of the Bank increased by 34.40% to Tk. 5186 crore, of which export, import and remittance business increased by 34.16%, 31.27% and 56.50% respectively. Total assets of the Bank stood at Tk. 4483 crore on 30.09.2006.

Our Bank invested 25% equity in Gulf Overseas Exchange Company LLC, a joint venture Exchange Company in Oman, operating since November, 1985 under the management of our Bank. The Bank received Riyal Omani 11875 equivalent to Tk.2.10 million as dividend for the year 2006.

Now NBL is on line to establish trade and communication with the Prime International banking companies of the world. As a result NBL will be able to build a strong root in international banking horizon. Bank has been drawing arrangement with well conversant money transfer service agency "Western Union". It has a full time arrangement for speedy transfer of money all over the world.

Banking is not only a profit-oriented commercial institution but it has a public base and social commitment. Admitting this true NBL is going on with its diversified banking activities. NBL introduced National Bank Monthly Savings Scheme (NMS), Special Deposit Scheme, Consumer's Credit Scheme and NBL Housing Loan, NBL Small Business Loan, Small House Loan Scheme, Festival Small Business loan etc. to combine the people of lower and middle-income group.

Inspired by its social obligation and commitment and responsibility, NBL has been running a School and College up to Class XII solely on its own guardianship. From the very inception, this institution has been maintaining a good track record of results at the SSC and HSC Examinations. Conducted by an well-educated and trained team of teachers, reputation of this institution has been increasing day-by-day as a result of their relentless and sincere endeavor. Transparency and accountability of a financial institution is reflected in its Annual Report containing its Balance Sheet and Profit & Loss Account. In recognition of this, NBL was awarded Crest in 1999 and 2000, and Certificate of Appreciation in 2001 by the Institute of Chartered Accountants of Bangladesh.A team of highly qualified and experienced professionals headed by the Managing Director of the Bank who has vast banking experience operates bank and at the top there is an efficient Board of Directors for making policies.

2.2 VisionEstablishing ourselves firmly at home and abroad as a front representative bank Of Bangladesh by ensuring highest standard of clientele services though best application of modern information technology and making due contribution to the national economy is our cherished vision.

2.3 Mission

Efforts for expansion of our activities at home and abroad by adding new dimensions to our business strategy are being continued unabated. Alongside, we are also putting highest priority to cost control, transparency, accountability, good governance, improved clientele service as well as to our commitment to serve the society, through which we want to get closer and closer to the people of all strata .wining an everlasting seat in the hearts of people as a caring companion in uplifting their living standard through continuous up gradation and diversification

We intend to plat more important role in the economic development of Bangladesh and its finical relations with the rest of the world by interlining both domestic and international 1 operations.

2. 4 Functions of National bank Ltd:

• To maintain all types of deposit A/Cs.• To make investment.• To conduct of foreign exchange business.• To conduct other Banking services.

• To conduct social welfare activities.• To work for continues business innovation and improvements.• To build up strong-based capitalization of the country. To ensure the best uses of its creativity, well disciplined, well manages and perfect growth.

2.5 Management structure of National Bank Ltd.

In 2005 National Bank Limited made commendable progress in all business, like deposit, credit, fund management, investment, foreign remittance, credit card & foreign exchange related business. Bank has expended business activities as holding previously & parallel by diversification its investment to a new product. As a major financier remarkable portion of total exports of the country. The total assets of the bank were Tk 55046.13 million as on 31st December 2005, which is higher than Tk. 7021.17 million than the previous year. This is the sign of good management. The management processes are as follows:

Planning:The strategic planning approach in NBL is top-down. Top management formulates strategy at the corporate level, and then it is transmitted through the division to the individual objectives. Board of directors or Executive committee usually takes the decision. In this process lower level manager are detached in making process, even brainstorming of lower level manager is absent in decision-making and planning process.

Organizing:Organizing of the National Bank Limited is based on Departmentalization. The organization is divided into twelve departments headed by Executive vice President or Senior Vice President. In the National Bank Limited the whole operation is centralized and authority is delegated by written guidelines. These guidelines are:

Operational manual approved by Head Office, where each aspect or banking operation is elaborately defined. Advance manual including advances limit for different management level. Bad and doubtful recovery manual. Code of conduct. Foreign banking guidelines. Central bank directives.

Different management position holders in departments and branches practice their authorized power in different cases with administrative loophole.

Staffing:Entry-level recruitment process of the National Bank Limited is conducted in three ways. One way is recruitment of probationary officer. Each probationary officer has one-year probation period. After completion of probation period the officer joins as officer grade III (b). The career path of probationary officer is headed toward different management positions. Second way of recruitment is to recruit non-probationary officer who joins as a assistant officer. The career path of an assistant officer is lengthier than probationary officer.

The third way of recruitment is recruitment of staff and sub-staff such as typist,messenger, driver, guard, attendant, cleaner and other lower level positions. Promotion policy of NBL is basically based on seniority basis. Sometimes, employees are promoted to the higher position for their outstanding performance. However, it is found that the average length of a position held by an employee is around five years.

Controlling:The bank has strict control over its all-organizational activities. The Bangladesh Bank directives indicate some control measures. Audits and inspection are conducted by different parties to check whether the bank implement these control system properly or not. The central bank conducts credit inspection by a team. The National Bank Limited has audit and inspection department to take controlling measures in internal operations. Audit and inspection team send to the branches now and then and is responsible for preparing report that will be submitted to the chief Administration to take necessary actions.

2.6 Organizational Structure and Department:Organizational setup of the National bank Limited is consisting of three organizational domains. Firstly the central top management, which contains Board of Directors, Managing Director, Additional Managing Director and Deputy Managing director, Major responsibilities of this are to take central decision and transmit it to the second step.

Secondly, Central executive level management, which contains executive vice president, senior vice president, vice president and Assistant vice president. Major responsibilities of this part are to supervise and control division Department.

Thirdly, branch operation management, which contains branch manager and other mid lower level management. Major responsibilities of this part are to the 92 branches of this bank and report to the Head office from time to time..

2.6 .1 Organogram of NBL

Table-1

Board of Directors

MS. PARVEEN HAQUE SIKDER : Chairperson

MRS HELENA RAHMAN : Director

MR. A. B. TAJUL ISLAM : Director

MR. ZAKARIA TAHER : Director

MR. SHAHADAT HOSSAIN (SALIM) : Director

MR. M. G. MURTAZA : Director

MR. LT. COL. (RETD.) MD. AZIZUL ASHRAF, PSC : Director

MR. A. M. NURUL ISLAM : Director

MR. SALIM RAHMAN : Director

MR. S. M. SHAMEEM IQBAL : Director

PROF. MAHBUB AHMED : Director

CAPT. ABU SAYEED MONIR : Director

MR. M. AMINUZZAMAN : Managing Director & CEO

2.7 National Bank FoundationNBL is a vibrant and promising bank. Its activities are not limited only to business and financial matters. Out of social responsibility, NBL has extended its support for expansion of educated in the country. With this objective, the National Bank Foundation was formed in 1989. Under the financial assistance of this Foundation, the National Bank Public School and College was established at Moghbazar in Dhaka.

2.8 Sports and Cultural ActivitiesSince its inception, NBL has been playing a pioneering role in sponsoring sports and games in the country. NBL was the sponsor of Metropolis Football League and Senior Division Football League last year. Besides, NBL extended substantial patronization to Bangladesh Olympic Association and Bangladesh volleyball Federation in 2003.The Bank never hesitates to extend its helping hands to the people as in the days of crisis so also in the cheerful happy moments of cultural events.

2.9 Present trends of the bank:

At present, NBL has been carrying on business through its 92 branches spread all over the country. Besides, the Bank has drawing arrangement with 415 correspondents in 75 countries of the world as well as with 32 overseas Exchange Companies. NBL was the first domestic bank to establish agency arrangement with the world famous Western Union in order to facilitate quick and safe remittance of the valuable foreign exchanges earned by the expatriate Bangladeshi nationals. NBL was also the first among domestic banks to introduce international Master Card in Bangladesh. In the meantime, NBL has also introduced the Visa Card and Power Card. The Bank has in its use the latest information technology services of SWIFT and REUTERS.

Chairman

Director (MD)

Deputy Managing Director (DMD)

Executive Vince President (EVP)

Senior Vice president (SVP)

Vice president (VP)

Assistant Vice president (AVP)

Executive Level Officer level

Junior Officer

Grade -III (B) Officer

Grade –III(A) Officer

Grade -III Officer

Grade -II Officer

Grade -I Officer

Figure-1

As a first generation private commercial bank of Bangladesh, National Bank Ltd. could do more for the development of nation’s economy. But it was not fully successful. This bank is also a victim of default culture. Bangladesh Bank declared this bank as a problem in 1997 for unlimited stuck-up loan. The bank could not declared dividend and opened branch in the year 1996 and 1997. Market value of shares was reduced to TK 65.25 for each TK 100 share in that time.

Under the direct supervision of Bangladesh Bank the situation of the bank was improved in the next two years. The classified loan was reduced to a tolerable position. Net profit before tax of the bank jumped to TK 396 per share in the year 1999.The bank achieved highest operating profit of TK 945.09 million in 2003 among 22 private commercial banks in Bangladesh. Bangladesh bank has satisfied to the performance of the bank and discharged it from problem bank obligation in the year 2000 the bank opened 10 new branches in different places of Bangladesh after realizing from problem bank.

Many new private commercial banks came to the banking sector. Competition has also been increased, These banks attached the market share of National bank Ltd. They have been taken employees of the bank by offering attractive salary. As a result overall performance of the bank again started to decrease.

The classified loan of the bank has increased in 2005 than 2001. The total amount of classified loan is Tk 1907.62million as on 1-12-2005 which is 7.06% of total loans and advances.The percentage of classified loan to advances (2001-2005) is shown in bellow:

(Tk in million)Year Amount Total loans & advances %2001 5686.52 20200.64 28.152002 6252.3 21677.96 28.842003 5592.51 22257.15 25.132004 3987.52 23129.65 17.242005 1907.62 27020.21 7.06

Table -2

Chart-1

0

10

20

30

2001 2002 2003 2004 2005

The Percentage of Classification loan to Advance

%

The bank could not recover its classified loans although it relieved from problem bank.

2.10 Capital & Reserve fund:Authorized capital of the National Bank Ltd. is 100.00 crore and paid-up-capital is 61.96 cores which is increased from the preceding year compare to Tk 10.33 cores. Reserve fund increased by Tk 10 crore to Tk 80.62 crore during the year under report .Total equity of the bank stood at Tk 273.46 crore at the end of December 2005 as compared to Tk 186.23 crore at the end of previous year .the rate of increase was 46.84%.

Chart- 2

1142.48 1198.70 1270.63 1346.00

2115.03

0

500

1000

1500

2000

2500

Taka

in m

illio

n

2001 2002 2003 2004 2005

Capital & Reserve

Authorizes capital

Paid-up Capital

Reserve Fund

2.11 Bank’s Own share

National bank Ltd. started its January in 1983 with a paid-up-capital of Tk 4.40 crore and 19 owner shareholders. At present, paid up capital of the bank has increased to 43.03 crore which is casting a beginning impact in improving liquidity situation in the capital market. Till 31 December 2003, the bank has opened a total of 18,490 share portfolio

Chart-3

0.00100.00200.00300.00400.00500.00600.00700.00800.00

In ta

ka

2001 2002 2003 2004 2005Year

Book Value Per Share

book value per share market value per share

Chart-4

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

2001 2002 2003 2004 2005

earning per share

earning per share

2.12 Deposits& Advances:The deposit of the bank was Tk. 2897.34 corer as on 3 1-12-2004. It was Tk. 3298.40 crore in the year 2005. The growth rate of deposit is 13.84% in the year 2005.

Chart-5

Deposit and Advances

0

500010000

15000

20000

2500030000

35000

2001 2002 2003 2004 2005

Taka

in m

illio

n

Deposits

Advances

2.13 Dividend:The bank has been maintaining a stable dividend policy since 1998. The market of share was in a good position during the last six years. The board of directors bank declared 30% Bonus Share dividend for the year 2005.The dividend paid since 2001-2005 is as follows : Table-3

Year 2001 2002 2003 2004 2005

Dividend 30% Cash

20% Cash 20% Bonus Share

20% Bonus Share

30% Bonus Share

0%

5%

10%

15%

20%

25%

30%

In %

2001 2002 2003 2004 2005

dividend

dividend

chart- 6

2.14 Sources and uses of Fund:The main working forces of financial and commercial organization are fund. Bangladesh financial institutions collect fund from different sources and make profit through utilization of this fund. Earning of Maximum profit and holding of minimum liquidity a financial institution depended on its efficient fund management. The main sources of fund are as follows:

1. Paid-up-capital2. Reserve fund3. Deposit4. Borrowings5. Borrowing from Bangladesh bank

chart- 7

Source of fund

1.61%5.51%

85.90%

1.52%5.46%

Paid-up Capital Reserve Fund Deposits & other account

Borrow ings other liabilities

Under different heads and borrowing from different banks through REPO. In according with provision of Bangladesh Bank, 5% of total demand & time liabilities are kept as CRR in current account with the Bangladesh bank, while 13% of the liabilities are maintained in different approved securities (Bills, Bonds, and Debenture etc.) foreign currencies. The rest of the fund is utilized as loans and advance investments in profitable outlets.

National Bank Ltd. is conscious about use fund properly. It keeps necessary cash and securities to maintain CRR and SLR under instruction of Bangladesh Bank. Funds are invested in economic activities of Bangladesh as loan And advances. It uses its surplus fund in call money Market and different banks with higher profit.

Uses of fund

70.36%

9.28%

13.02%1.98%3.73%1.63%

Loans & Advances Investment Cash & Bank money

Call money Fixed Assets Other Assets

chart- 8

2.15 Bank’s Profit:

The last five (2001-2005) years profit position of the bank is as follows: Table-4 Year Operating Profit Net profit before tax2001 1016.63 400.642002 870.32 250.322003 945.09 336.092004 735.1 484.22005 851.3 581.1

There is an increasing trend of operating profit of the bank till the year 2000. But it was largely increased in the year 2001 and again declined by million in the year 2002. Then operating profit is increasing in the year 2003 to 2005.

chart- 9

0200400600800

10001200

2001 2002 2003 2004 2005

Operating Profit & Net profit Before Tax

Operating Profit Net profit before tax

2.15 Training and Training Institute:The bank continued to endeavor in building up a efficient and knowledge workforce through imparting in service modem banking training. For this, Bank developed a training institute in shamoli in 1987 for its own to train-up its employees. During the years under review 225 employees attained training programs arranged by the training institute of the bank. In every batch, 25 trainees can attain in training program with residential facilities. Up to 2001 from the beginning of the institute 3283 employees have trained-up.

2.16 Consumer services Expansion Program of National bank LtdPresent age is the age of competition. A good number of new private commercial banks came to banking sector in Bangladesh during the last decade. Foreign banks (Standard chartered, American Express, HSBC, city NA, etc) also conduct banking business in Bangladesh very

successfully. These new generation banks introduced many attractable products for customers. National Bank Ltd. is also introduced many products to attract customers.

The products introduced during the last five years are as follows:A. Monthly savings SchemeB. E-Cash! ATM cardC. Consumer credit schemeD. Western union money transferE. SWIFT ServicesNow a days NBL introduced a new product Name “Power Card”.

A. Monthly Savings Scheme: It is an attractable savings project for limited income group. National bank Ltd. got quickresponse in this project. A depositor can deposit 500-10000Taka monthly for 5-8 years. The return is as follows:

In TakaMonthlyInstallment

Return after 3years 9.00%

Return after 5years 9.25%

Return after 8years 9.50%

500 20,627 3 7,896 70,8491000 41,255 75,791 1,41,6972000 82,510 1,51,583 2,83,3943000 1,23,765 2,27,374 4,25,0914000 1,65,020 3,03,166 5,66,7885000 2,06,274 3,78,957 7,57,91410000 4,12,549 7,08,485 14,16,970

B. E- Cash! ATM CARD : ATM service is the dynamic process of electronic technology in modem banking. National bank Ltd. has elevated services to the highest standard by bringing Electronic banking (E Banking) and ATM services at the doorstep of clients. To day the entire banking system has been undergoing is evolution change in providing improved services to the clients. One of ATM has made the lifestyle of our clients much easier and comfortable. The note able characteristics of ATM are:Payment facility for 24 hours a dayArrangement for payment of billsInstant inquiryMultiple location facility Dhaka, Chittagong, and Sylhet

C. Consumer credit Scheme:National Bank’s consumer credit scheme gives a great opportunity to buy house and office items on easy installments. This scheme gives an advantage of part payment to cope with high price tags of many necessary home and office appliances. A consumer is the ultimate user of a good. Thus” Consumer credit” is the credit, which directly comes into the use of consumer.

Objectives of Consumer Credit Scheme:The Objectives of Consumer Credit Scheme of National Bank Ltd. is as follows:1. To bring the credit facility to wide range of customers.2. To provide financial assistance to the limited income group people toward buying utility products.3. To help the professionals to raise their living standard.4. To participate in the socio-economic development of the country.

Goods and services under the scheme:Under the “Consumer Credit Scheme” NBL grants pecuniary help for the following goods and services.• Private car and station wagon new and reconditioned.• Refrigerator and deep fridge.• Air cooler, Air condition, Room-heater, Water Purifier.• Sewing machine.• Photocopier.• Generator.• Other goods that are not mentioned above but are considered essential.

D. SWIFT Services:NBL is one of the first few Bangladesh Banks to obtain membership of SWIFT (Society for World Inter-bank Telecommunication). SWIFT is a members’ owned cooperative which a first and accurate communication network for financial transaction such as Letter of credit, Fund Transfer etc. By being a member of SWIFT, the bank has opened up possibilities for uninterrupted connectivity with over 5700 user institutions in 150 countries all over the world.

2.17- Pictures of Small loan Project of National Bank Ltd

Chapter 4

General banking department

General banking department is the heart of all banking activities. This is the busiest and important department of a branch, because funds are mobilized, cash transactions are made; clearing, remittance and accounting activities are done here. Since bank is confined to provide the

services everyday, general banking is also known as retail banking. In NBL Dhanmondi Branch, the following departments are under general banking section:

1. Account opening section2. Deposit section3. Cash section4. Remittance section5. Clearing section6. Credit card section7. Loans & Advances Section8. Accounts section9. Western Union Money Transfer Section10. Dispatch

3.1 Account Opening section:

Account opening is the gateway for clients to enter into business with bank. It is the foun dation of banker customer relationship. This is one of the most important sections of a branch, because by opening accounts bank mobilizes funds for investment. Various rules and regulations are maintained and various documents are taken while opening an accountAccount opening procedure:

Step 1 The account should be properly introduced by Any one of the following:

An existing Current Account holder of the Bank. Officials of the Bank not below the rank of an Assistant officer. A respectable person of the locality well known to the manager

/Sub- Manager of the Branch concernedStep 2 Receiving filled up application in bank’s prescribed form mentioning what

type of account is desired to be opened.Step 3 The form is filled up by the applicant himself / herself.

Two copies of passport size photographs from individual are taken, in case of firms photographs of all partners are taken.

Applicants must submit required documents Application must sign specimen signature sheet and give mandate Introducer’s signature and accounts number - verified by legal

officer. Step 4 Authorized Officer accepts the application.Step 5 Minimum balance is deposited - only cash is accepted.

A customer can open different types of accounts through this department. Such as:

Documents required for opening account:

i Individual/Joint Account:1. Introduction of the account.2. Tow photographs of the signatories duly attested by the introducer.3. Identity (copy of passport).4. Joint Declaration Form (For joint a/c only).5. Employee’s Certificate (in case of service holder).

Partnership Account:1. Introduction of the account.2. Two photographs of the signatories duly attested by the introducer.3. Valid copy of Trade License.4. Rubber stamp.5. TIN number certificate.6. Identity (Copy of passport).7. Permission letter from DC/Magistrate (in case of newspaper)

Limited company:1. Introduction of the account.2. Two photographs of the signatories duly attested by the Introducer.3. Valid copy of Trade License.4. Board resolution of opening A/C duly certified by the Chairman/Managing Director.5. Certificate of Incorporation.6. Certificate of Commencement (In case of Public limited company).7. Certified (joint stock) true copy of the Memorandum and Article of Association of the Company duly attested by Chairman or Managing Director.8. List of directors along with designation & specimen signature.9. Latest certified copy of Form - xii (to be certified by register of joint stock companies) (In case of Directorship change).10. Rubber Stamp (Seal with designation of each person)11. Certificate of registration (In case of Insurance Company -. Obtainedfrom department of Insurance form the Peoples Republic of BD.)

Club / societies account:

1. Introduction of the account.2. Two photographs for Opening A/C duly certified by President/Secretary.3. Board Resolution for Opening A/C duly certified by President/Secretary.4. List of Existing Managing Committee.5. Registration (if any).6. Rubber Stamp.7. Permission letter from Bureau of N.G.O. (In case of N.GO. A/C).

Issuing Cheque BookThere are three type ,of cheque book in the National Bank ltd. those are:•Ten leaves cheque book: -Ten leaves cheque book use only for savings account. Twenty leaves cheque book: -Twenty leaves cheque book is use for current account.Fifty leaves cheque book: - Filly leaves cheque book use for current account but this is provided those depositors who are loyal customer or those whose transaction has done randomly.

Chequebook issue to a new account holderNew account holder has to fill up an application form that is provided by NBL. After verifying depositor signature the authorized officer put branch seal and put his signature then dale, name of the account holder, account number, cheque number are recorded in the register book. When all this function is successfully completed the client gets his cheque book and put his signature on the register book.

Cheque book issue to existing account holderWhen a existing deposit holder wants to withdraw a new cheque book then he should be give a requisition slip to the bank which he get from previous cheque book then authorized officer verifying deposit holder signature. After verifying signature authorized officer put breach seal, and his signature on new cheque book then date, name of account, account number, cheque no, are recorded in the register book then client get his cheque book and put his signature on the register book.

In the case of lost Cheque-bookIt has been observed that when the account holder has lost a cheque book, then account holder must have filled an indemnity bond that has been authorized by the introducer.

3.2 Deposit Section

Deposit is the lifeblood of a bank. From the history and origin of the banking system. We know that deposit collection is the main function of a bank.

Accepting deposits:The deposits that are accepted by NBL like other banks may be classified in to,a) Demand Depositsb) Time Deposits

Demand deposits:These deposits are withdrawn able without notice, e.g. current deposits. National Bank Limited accepts demand deposits through the opening of,a) Current accountb) Savings accountc) Call deposits from the fellow bankers

Time deposits:A deposit which is payable at a fixed date or after a period of notice is a time deposit. National Bank Limited accepts time deposits through Fixed Deposit Receipt (FDR), Short Term Deposit (STD) and Beared Certificate Deposit (BCD) etc.

While accepting these deposits, a contract is done between the bank and the customer. When the banker opens an account in the name of a customer, there arises a contract between the two. This contract will be valid one only when both the parties are competent to enter into contracts. As account opening initiates the fundamental relationship & since the banker has to deal with different kinds of persons with different legal status, National Bank Limited officials remain very much careful about the competency of the customers.

3.3 Cash Section

Banks, as a financial institution, accept surplus money from the people as deposit and give them opportunity to withdraw the same by check, etc. But amount the banking activities, cash department play an important role. It does the main function of a commercial bank i. e, receiving the deposit and paying the cash on demand. As this department deals directly with the customers, the reputation of the bank depends much on it. The functions of a cash department are described bellow:

Table-7:

Functions of Cash Department:

Cash Payment 1. Cash payment is made only against Check2. this is the unique function of the banking system which is known as “payment on demand”.3. It makes payment only against its printed valid Check

Cash Receipt 1. It receives deposits from the depositors in form of cash2. So it is the “mobilization unit” of the banking system3.It collects money only its receipts forms

Cash receiving

When customers want to deposit his money then he deposited it by pay slip in the cash counter. After receiving money and pay slip from client, officer done following functions which is arrange at sequentially:

Officer ensure that all the writing on pay slip have been right. & Then count money and write denomination in the backside of the pay slip. Then officer put cash receive seal on the carbon copy of the pay slip. Officer put his signature on the carbon copy pay slipThen register in cash receive register book, following give a format of cash receiving register book: In cash receive seal contains some components which are as follows:

National Bank Ltd. Name of Bank Dhanmondi Branch Branch nameDate Date Cash paymentWhen depositor wants to withdraw his money then he present or order cheque for withdrawing cash from cash counter. At first deposit holder present his cheque on the computer desk. Then the authorized officer checks that cheque and amount has been balance in his account. When every things right then the amount has been debited from the depositor account on which the cheque has been drawn. If there is any doubt in the signature which has been appeared on the specimen signature card has verified. When every thing ok then payment seal put on the cheque

Then bearer has signed on the back side of the cheque and authorized officer made payment. The authorized officer must have to maintain cash payment register. Following give the components of cash payment register book:Cheque numberAccount numberPayment amountAuthorized signaturePayment date.

Transaction cash moneyAt the beginning of the banking our in charge of cash department provides some money from the vault to the counter officer for meet clients demand. Cash department in charge keep record that amount. At the end of the banking hour balance must be adjust with recorded transaction. At last the received balance and payment must be equal with the balance on the receiving and payment register book.

Vault requirementEvery branch of National lank Limited has ability to maintain five million taka in their vault to meet their daily transaction. Because every vault has an insurance premium which limit is five million taka. If any branches need more then five million taka then branch bring it from principle branch or the nearest branch of National Bank Ltd.

Cash balance bookIn cash balance book keep record of that cash has maintained by the incharge. In cash balance book opening balance have to be always the previous days closing balance. At the end of the banking hour all receives have to be added with opening balance then deducted all his payment from the total balance. Remaining balance has continued as the opening balance of next transactions day.

Evening bankingEvening banking hour begin after original banking hour. This evening banking hour begin from 3pm to 5 pm..

Different types of notesThere are different types of notes has contained in banking system which as follows:• Non-issue note• Torn note• Solid note

3.4 Remittance Section:

Local carrying cash money is troublesome and risky, that’s why money can be transferred from one place to another through banking channel. This is called remittance. Remittances of funds are one of the most important aspects of the Commercial Banks in rendering services to its customers.Remittance means transfer of money from one place to another. It is one of the safest ways to transfer money from one place to another. National bank ltd has 91 brunches so they have strong network through whole country and they can easily remit money most of the districts with in the country.

For transferring money National bank ltd offers different instruments such as:• Telegraphic transfer (TT)• Pay order (PO)• Demand draft (DD))• Pay slip

Type of remittance: Between banks and non banks customer Between banks in the same country Between banks in the different centers. Between banks and central bank in the same country Between central bank of different customers.

Points Pay Order Demand Draft TT

Explanation Pay order gives the Demand Draft is an Issuing branch

payee the right to claim payment from the issuing bank

order of issuing bank on another branch of the same bank to pay specified sum of money to payee on demand.

requests anotherbranch to pay specified money to the specific payee on demand by Telegraphy Telephone

Payment from Payment fromIssuing branch

Payment from ordered branch

Payment from ordered branch

Generallyused to Remitfund

Within the clearinghouse area of issuing branch

Outside the clearinghouse area of issuing branch. Payee can also be the purchaser.

Anywhere in the country

PaymentProcess of thepaying bank

payment is made through clearing

1. Confirm that the DD is not forged one.2. Confirm with sent advice3. Check the ‘Test Code’4. Make payment

1. Confirm issuing branch2. Confirm Payee AIC3. Confirm amount4. Make payment5. Receive advice

Charge Only Commission Commission + telex charge

Commission + telephone

3.4- 1Telegraphic transfer (TT)Telegraphic transfer (TT) is the quickest and self way of transferring money from one destiny to another destiny. It is done by telephone massage, telex massage. T he message is authenticated by prefixing of suffixing a cheque cypher. A cheque chyper for any remittance is worked out on test key table and a code block which is allowed only authorized officer.

Elements of the test code for TT:Code for amountCode for dateCode for branch`This test code is generally given by the authorized officer because it is confidential.

Requirements for sending TT :

1) TT incoming & 2) TT outgoing

Procedure for sending TT:

When client want to transfer money from NBL, Dhanmondi branch to NRL,Agrabadbranch (suppose) then following ways he should follow :At first collect TT form from remittance division•Deposit money in cash department which he mentioned in TT form.•Client should have account in National at Dhanmondi branch and sending place. C1ient should paid commission, VAT and telex chargeThen client collect cost memo from remittance division, this cost memo work as an evidence in favor of client.The authorized officer put test code and registers it in the TT payment register book then authorized officer send massage to the Agrabad branch by telephone or telex. This massage contains Client account number, test number, amount,

Commission of TT:• Up to 25000 commissions is 25 takaAbove 25000, for every one thousand pay one taka as commission.VAT: - 15% of commissionsTelex charge: - It is always 40 taka3.4-2 Pay order (P0)Pay order is an order by an issuing branch or bank upon client for made payment of the amount mentioned there in that named pay on according to client order. Pay order issued only for local payment.Commission: For issuing pay order client should pay 10 take as commission and 2 taka for VAT.Procedure for cancel pay order: It has been seen that usually pay order cancel in two certain situation which is as follows:-

Situation one:-When client issued any pay order in the name of any payee. If payee does not accept the pay order then payee put his seal and signature back side on the payorder then payee returns to the client. The client of the pay order has deposited it on his account after that authorized officer issue one debit and credit voucher. Debit voucher: - pay order accountsCredit voucher: - clients account

Situation two:-

If clients wants to cancel his pay order before submitted then have to submit as application for deposited that pay order amount to his account. In this client should paid cancellation charges. Which as follows:Up to 500 taka charge 10 taka•Above 500 taka charge 25 taka

3.4-3 Demand draft (DD) *

1)DD incoming & 2) DD outgoing

Requirements for sending DD:Procedure for sending DD: When client want to transfer money from NBL, Dhanmondi branch to NRL,Agrabadbranch (suppose) then following ways he should follow :At first collect DD form from remittance division•Deposit money in cash department which he mentioned in DD form.•Client should have account in National at Dhanmondi branch and sending place. C1ient should paid commission, VAT .Then client collect cost memo from remittance division, this cost memo work as an evidence in favor of client.The authorized officer put test code and registers it in the DD payment register book then authorized officer send massage to the Agrabad branch by telephone or telex. This massage contains Client account number, test number, amount.

Characteristics of demand draft (DD):• It is drawn on one branch upon another branch of’ the same bank• Its payment cans only that whose name is mentioned in the pay orders.Commission:-Up to 25000 taka commission 25 takaAbove 25000 taka every one thousand carry 1 takaVAT: - VAT is 15% of commission.

3.4-4 Pay slipPay slip is used only bank internal payment purpose such as different types bills payment.

3.5 Clearing Section :

Cheque, Pay Order (P.O), Demand Draft (D.D.) Collection of amount of other banks on behalf of its customer are a basic function of a Clearing Department.

3.5.1 Clearing:Clearing is a system by which a bank can collect customers fund from one bank to another through clearing house.

3.5.2 Clearing House:Clearing House is a place where the representatives of different banks get together to receive and deliver check with another banks.

3.5.3 Member of clearing House:NATIONAL Bank LTD is a scheduled Bank. According to the Article 3 7(2) of Bangladesh Bank Order, 1972, the banks, which are the member of the clearinghouse, are called as Scheduled Banks. The scheduled banks clear the cheque drawn upon one another through the clearinghouse.

3.5.4 Types of Clearing:3.5.4(A) Outward Clearing: When the Branches of a Bank receive cheque form its customers drawn on the other Banks within the local clearing zone for collection through Clearing House, it is Outward Clearing.

3.5.4(B) Inward Clearing: When the Banks receive check drawn on them from other Banks in the Clearing House it is Inward Clearing.

3.5.5 Types of clearing house: There are two type of clearing house: Those are1) Normal clearing house2) Same day clearing house

3.5.5(1) Normal clearing house:1) 1st house: 1st house normally stands at 10 am to 11 am2) 2nd house: 2m1 house normally stands after 3 p.m. and it is known as return house.

3.5.5(1) Same day clearing house:

1) 1st house: l house normally stands at 11 a.m. to 12 pm

2) 2nd ’ house: 2nd ’ house normally after 2 p.m. and it is known as return house.

• Who will deposit cheque for Clearing: Only the regular customers i.e. who have Savings, Current, STD & Loan Account in the Bank can deposit cheque for collection of fund through clearing house.• Precaution at the time of cheque receiving for Clearing, Collection of LBC, OBC &

Transfer:1. Name of the account holder same in the cheque & deposit slip.,2. Amount in The cheque & deposit slip must be same in words & in figure3. Date in cheque may be on or before (but not more than six months back) clearing house date.4. Bank & Branch name of the cheque, it’s number & date in the Deposit slip.

5. Cheque must be signed.6. Signature for confirmation of date, amount in words / in figure Cutting & Mutilation of cheque.7. Cheque should be crossed (not for bearer cheque).8. Account number in the deposit slip must be clear.9. Depositor’s signature in the deposit slip.

Clearing DivisionNBL, Dhanmondi branch receive cheque, demand draft, pay order from their clients for clearing. It has been seen that when the instrument of other banks have deposited in the NBL; Dhanmondi branch , then the officer has to check the particulars of the credit voucher ,he ensure that giving instrument and credit voucher account number , amount should be same. When officer receive any instrument he should ensure that instrument issuing date should not exceed six months. When every thing ok then authorized officer put a received seal on the carbon copy of credit voucher, then authorized officer put a cross seal on that instrument. Cross seal as like as follows:— National Bank Ltd

Dhanmondi After receipt of instruments the authorized officer examines following things:a) The paying bank is another bank, which is situated with in Dhaka city.b) The paying bank is another branch of National bank, which is situated in Dhaka city.c) The paying bank is situated outside of Dhaka city its may be another bank or another branch of NBL

a) When the paying bank is another bank, which is situated with in Dhaka city.

When the authorized officer examines that the instruments paying bank is another bank which is situated in Dhaka city then officer put an endorsement seal opposite side of instruments and in this case clearing process made by clearing house.

Endorsement components:Received payment and payees account credited for National Bank Ltd, Dhanmondi Breach, Dhaka.Before send instruments in the clearing house the authorized officer put a seal on the front side of the instrument, which is as like: National Bank LtdDhanmondi branchClearing dateClearing House

Then authorized officer has been slotting or arranging those instruments and put serial number. Then officer has give entry in the computer according bank name. branch name, cheque no, account number, cheque serial number, issuing date and amount of those instrument. Then officer made a schedule paper which contains instruments particulars and total figures. All this functions has been done by special software. Then send them to the local principle office (NBL, Dilkusha branch) for clearing and credit voucher send to the cash department of Mahibugli branch for crediting parties account. Before clearing process parties account yet not credited.

When authorized officer send instruments for clearing, he made one debit and credit voucher. This is as follows:

After clearing process some instruments is made cleared and some instrument might be retune. Then local principle office sends a credit advice and all instruments those have been send for clearing.

When Dhanmondi branch get advice and instruments then authorized officer made following voucher:-

After receiving credit advice Dhanmondi branch authorized officer has to respond on the credit advice’ (IBCA) send by local office. IBCA bears the documents of the total amount of instruments received by the local office from Dhanmondi branch. IBCA has described that NBL Dhanmondi branch general accounts have credited.

Return ChequeIn the time of clearing process some instruments might be returned. If client wantsto get back their return cheque then authorized officer issue a debit voucher, which is as follows:-

And this debit voucher posted on cash departments computer by debating parties account

Debit head: sundry Assets clearing Adjustment A/CNarration:- Being the amount .. . .of clearing instrument sent for collection.Credit head: - Parties account

Credit head:- S/A clearing Adjustment A/CNarration:- being the amount ... No of clearing Instrument send for collection now realizedThe whole clearing process takes time three working days.

Debit head:- Parties accountNarration:- Being the amount return on cheque no drown on. .(Name of drawn Bank) return on paid

Debit head: - CIBTA Dilkusha (local principle office)Narration:. - being the amount no clearing instrument send for collection and honored expect return unpaid.

In the case of replacement

If client wants to replace their return cheque for clearing then authorized officer put another endorsement seal on the back of that instrument. Endorsement as follows: -First payee’s endorsement confirmed and account credited andsecond payee’s account credited for National Bank Ltd, Dhanmondi Then Branch, and Dhaka. He issues a credit voucher which is as follows:

b) When the paying bank is another branch of National bank ltd. which is situated in Dhaka city

When any cheque is deposit on NBL, Dhanmondi branch which is drown on another branch of NBL, which is situated in Dhaka city. For clearing cheque it required local bills for collection (LBC). How LBC has done that functions is given below which is arranged at sequentially:• At first authorized officer put an endorsement seal on the backside of that instrument. Endorsement as follows: - (Payee’s account will be credited on realization for National bank Limited, Dhanmondi Branch, Dhaka.)

Put LBC seal and give serial number Recorded in the register with serial number, amount, branch name, and account holder name. Send a forwarding letter with cheque to the particular branch. Following a given a format forwarding letter. Then the carbon copy of the forwarding letter is stippled with credit voucher

When Mirpur br’ .i get this instrument then his functions are give below at sequentiallyofficer put an IBC( inward bank collection) seal on the instrument Put a serial number and register in IBC register book IBC register book contains IBC no, TRC no, particulars of that instrument, date of payment, advice no After clearing that instrument Mirpur Branch send a credit advice to the Dhanmondi branch. Following is given the components of credit Advice

Credit head: - CIBTA, Dhanmondi Branch, Dhaka

Narration: - being the amount of your LBC No

When Dhanmondi 238/04 paid vide our IBC No branch get credit advice then authorized officer credited parties account in Dhanmondi branch. At last IBC no and advice no are register in LBC register book.

d) When the paying bank is situated out side of Dhaka its may be another bank or another branch of National Bank Limited.

When any cheque received by National bank, Dhanmondi branch but it drawn on another bank or another branch of National bank which is situated out side of Dhaka city then it must be OBC (other bank collection). How OBC function has done that given below at sequentially:

Give an endorsement seal on the back side of that cheque. Endorsement asFollows:( Payee’s account will be credited on realization for National bank ltd, Dhanmondi Branch, Dhaka.)

Put OBC seal and BOC serial number Entry in the OBC register with OBC no , name of account, drawn on. cheque no, amount. Send a forwarding letter with the cheque of that drawn bank. Following are given a format of forwarding letter: Then the carbon copy of the forwarding letter is stippled with credit voucher &issue a contra voucher which as is Follows:—

Debit head:- Bills for lodged Narration:- Being the amount our OBC no 38/07 sent for collection Credit head:- Bills for collection

After clearing the cheque by the standard bank send a credit advice to the Dhanmondi branch, Dhaka. Credit advice is as follows: Credit head: - C1BTA, Dhanmondi Branch, DhakaNarration: - being the amounts of your OBC No 38/07.paid vide our IBC No

After receiving credit advice from Stranded bank, NBL,Dhanmondi branch officerReverse the previous issued contra voucher. which is as follows:

Debit head:- Bills for collectionNarration:- Being the amount your OBC no 38/07 sent for collection now realizedCredit head:- Bills for lodged

After reverse the contra voucher authorized officer issue three credit voucher and one credit voucher which is as Follows:—

Debit head:— parties’ accountCredit head:- Income commission on k/ICredit head:- income account postageCredit head:- sundry deposit VAT

At last all this documents such as, credit advice no, IBC no, payment date, commission amount, postage, VAT must he recorded in OBC register.

•Commission calculation for OBC:

Limit Charge

Credit head:- Parties accountNarration:- being the amount ...cheque no drawn on dated...sent for collection.

Up to Tk 25000 @. 15% Min Tk 10Up to Tk 100000 @ .15% Min Tk. 50Up to Tk 500000. l0% Min tk.150over Tk 500000 .05% Min Tk. 600Maximum Tk 1200

VAT calculation:- VAT always 15% on commissionPostage:- postage a1ways fixed 40 taka..3.5.6 Return house:Return House means 2 houses where the representatives of the Bank meet after 3 p.m. to receive and deliver dishonored cheque, which place in the Clearing I-louse.Cheque may be dishonored for any one of the following reasons:1) Insufficient fund.2) Amount in figure and word differs.3) Cheque out of date! Post- dated.4) Payment stopped by the drawer.5) Payee’s endorsement irregular! Illegible I required.6) Drawer’s signature differs required.7) Crossed cheque to be presented through a bank.8) Other specific reasons not mentioned above.The dishonor cheque entry in the Return Register & the party is informed about it. Party’s signature required in the return register to deliver the dishonor cheque. After duration, the return cheque is sent to the party’s mailing address with Return Memo.

Responsibility of the concerned officer for the Clearing Cheque:1) Crossing of the cheque.2) (Computer) posting of the cheque.3) Clearing seal & proper endorsement of the cheque.4) Separation of cheque from deposit slip.5) Sorting of cheque 1St bank wise and then on branch wise.6) Computer print Clearing House computer validation sheet.7) Examine computer validation sheet with the deposit slip to justify the computer posting.8) Copy of computer posting in the floppy disk.

3.5.7 Bills Collection:In modern banking the mechanism has become complex as far as smooth transaction and safety is concerned. Customer does pay and receive bill from their counterpart as a result of transaction. Commercial bank’s duty is to collect bills on behalf of their customer.

3.5.8 Types of Bills for Collectiona) Outward Bills for Collection (OBC)b) Inward Bills for Collection (IBC)

3.5.8. (a) What is OBC?OBC means Outward Bills for Collection. OBC exists with different branches of differentbanks outside the local clearinghouse. Normally two types of OBC:1) OBC with different branches of other banks2) OBC with different branches of the same bank

Procedure of OBC:1) Entry in the OBC register.2) Put OBC number in the cheque.3) “Crossing seal” on the left corner of the cheque & “payees account will be Credited on realization” seal on the back of the cheque with signature of the Concerned officer.4) Dispatch the OBC cheque with forwarding.5) Reserve the photocopy of the cheque, carbon copy of the forwarding and depositSlip of the cheque in the OBC file.

3.5.8 (b) Inward bills for collection (IBC)When the banks collect bills as an agent of the collecting branch, the system is known asIBC. In this case the bank will work as an agent of the collection bank. The branch receives a forwarding letter and the bill.

Procedure of IBC:1. IBC against OBC: To receive the OBC cheque first we have to give entry in the IBC Register. The IBC number should put on the forwarding of the OBC with date.2. Deposit of OBC amount: OBC cheque amount is put into the “sundry deposit sundry Creditors account”, prepare debit & credit vouch of it. If the OBC cheque is honored, send credit advice (IBCA) with signature & advice number of the concern branch for the OBC amount.3. If the OBC cheque is dishonored, the concerned branch is informed about it.4. Again place in the clearing house or send the OBC cheque with Return Memo to the issuing branch according to their information.

3.6 Credit Card SectionCarrying of cash is not so safe in today’s world. There is always a chance of losing or hijacking of cash. On the other hand, the desire to purchase any desired item of one may not be fulfilled for the want of cash at the time of that willingness. To remove these problems, credit card has been introduced which is very popular to face the mentioned problems.

3.6.1 What is Credit Card?

It is a card (usually plastic) that assures a seller that the person using it has a satisfactory credit rating and that the issuer will see to it that the seller receives payment for the merchandise delivered.

3.6.2 NBL & Credit CardNBL is the first local bank, which introduced credit card & MasterCard in Bangladesh in both local and international market in 1997. MasterCard captured 35% of credit card through the world. However present market analysis reflects that a large number of people whose average income ranges in above Tk.l0000 are using the credit card. Credit card division is continuing their all-possible efforts for the participation in the globalize MasterCard program. The number of users of the credit cards is increasing day by day. During the year 2004 the bank has got a profit of Tk.104.25 million from credit card business. NBL also has got the licenses from international brand Visa Card and very soon, it will be launched in the country

3.6.3 Types of Credit Card

National Bank Limited offers mainly two type of credit card according to the geographical area. These are Local credit card and International credit card. According to the level of income the local and international credit cards are divided into two categories viz. Gold card and Silver card. These types of credit cards are described below:

(a) Local credit card:Local credit card is valid only in Bangladesh. Out side Bangladesh, the card is invalid. Local card are two types. They are Gold local card and Silver local card. The card limit of gold local card is Tk.50000 to Tk. 100000 and silver local card is below Tk,50000.

(b) International Credit Card:International credit card is valid mainly outside Bangladesh. But for the payment of roaming facilities for Grameen phone, cardholders can use international credit card in Bangladesh. International credit cards are of two types. These are gold international credit card and silver international credit card. The card limit of gold international credit card is $ 2000 to $4000 and silver international credit card below $2000.

3.6.4 Yearly Charges on credit cardNational Bank Limited receive card fee for new card and renew card from the cardholder.The rate of card fee for new card and renew card are the same, In case of new card the bank receives the card fee with the next month’s bill. The rate of card fee are given in below:

Yearly charges on credit card

Type of card Local InternationalGold card Tk.2000.00 US$70.00Silver Card Tk.1200.00 US$ 35.00

Source: National Bank brochure 2005

3.6.5 Documentation for a credit cardAny person whose monthly income is over 10000 can be a credit card holder of NBL. The requirements of a card are:

For Local card:1. The fulfillment of the application form.2. 2 copies of photographs. (If supplementary card is taken then 2 copies of photographs of the nominee).3. TIN certificate.4. A security. (MSS, SDS or FDR as lien).5. Charge documents.

For International card:1. The fulfillment of the application form.2. 2 copies of photographs. (If supplementary card is taken then 2 copies photographs of the nominee).3. TIN certificate.4. A security. (MSS, SDS or FDR as lien).5. Charge documents.6. The photocopy of passport.

3.6.6 Billing of a credit card

National Bank Limited offers the cardholder 15 to 45 days credit facilities. For the proper billing the bank divided the cardholder into three cycles. These are 0 cycle, 3 cycle and 5cycle.

In 0 cycle bill are prepare and send to the cardholder 1st day or every month and last date of payment is 15th day of the month. In 3cycle bill are prepare and send to the cardholder 3rd day of every month and last date of payment is 181h day of the month. 5cycle bill are prepare and send to the cardholder 5th day of every month and last date of payment is 20th day of the month.

The cardholder can pay the bill any branch of the National Bank. If any cardholder fails to pay the bill within the last date then he/she must pay 2% monthly interest and his/her card stop automatically.

But if the cardholder pay minimum bill (10% of the bill) then he/she must pay the interest on the balancing amount and can use the card as usual. On the other hand, if the card holder withdraws any cash amount from the ATM booth (maximum limit is 20% of card limit) a monthly charge of 2.5% is to be charged from the date of withdraw. In that case the cardholder will not get the 45 days credit payment facility.

ATM card

ATM means automated teller machine. NBL ATM card give opportunity to their customer that they can withdraw their money at any time, any days even holidays. By using ATM subscriber can give various utility bill such as telephone, gas, electricity bills etc. actually ATM card is a debit card.charges for ATM card: -ATM card holders have to pay 1000 taka annually and in the case of’ card lost subscriber also pay additional 300 taka.

3.7 Loans & Advances Section

This is the survival unit of the bank. The reason is, until and unless the success of this section, the survival is a big question. This is the main earning unit of the bank. Banks accepts deposits from the depositors in condition of providing interest to the depositors in condition of providing interest to them. Now the question is how bank provides interest to their clients. The simple answer is — interest from advances. The bank provides interest to the borrowers because:• To earn interest from borrowers and give depositors the interests get back. The rest are the profit of the bank.• To accelerate economic development.• To meet the interest groups.

Credit is a continuous process. Recovery of one credit gives rise to another credit. In this process of revolving funds, bank earns income in the form of interest. A bank can invest its fund in many ways. Bank provides loans and advances to traders, businessmen and industrialists. Moreover, nature of credit may differ in terms of security requirement, disbursement provision, terms and conditions etc.

Bank often uses loans and advances as an alternative to one another. But, academically this concept is incorrect. Academically, Advances is the combination such items where loans is a part only. For this credit section of the banks is known as advance section.

Advance division is heart for any bank. A big portion of income of the National bank Ltd is comes from this advance division. This income comes from different Types of investment of depository money. Investment decision is the most important which is taken by the management of the National bank lid. NBL advance division plays a vital role for economical development.

NBL has an investment committee they are responsible following things:•To ensure the cash liquidity requirement and can this cash liquidity meetTo identify new investment portfolio and this is profitable for the National bank.•To examine banks deposit, investment and identify their surplus money. They should be active for recovery their substandard, doubtful and bed loan.•They should be take short-term investment but this investment return is comparably high.They should aware about market study and existing portfolio of investment.•They should aware to identify new sources of investment.

NBL invests in two ways which is• Head office investment• Branch investment

Head office investment: Bangladesh bank has a regulation that every commercial bank should reserve 15% of their total depository money in central bank. Head investments are two types. Such as they invest in treasury bills, prize bond, share, debenture etc.They purchase securities for liquidity purpose. The largest portion of security investment is in government obligation. They invest in short term government securities. This type of investment risk is zero and market risk is low.((Figure in Crore)Year 2001 2002 2003 2004 2005Investment 289.20 383.96 404.42 437.42 391.51

Own investment by the National Bank Ltd last fives executive five years:

Branch investment: Branch invests indifferent sectors and they have no limitation for selecting investment sector but they should responsible for selecting profitable sector. Breach makes their investment to the general public, bank employees, business men, and some cases in securities market. More then 70% investment money comes from deposited money.

3.7.1 Types of AdvancesIt is not possible to discuss all these types of advances in details in this report but an attempt has been made to analyze the basic difference and characteristics of these advances all in the following manner:Types of loan : By the nature of loans are three types. Following describe different types of loan by a structure

Current or continuous loan:Current loan is also cal1ed revolving credit. Current loan holder can withdraw or deposit money in his account in several times with in the loan period. If loan holder wants to renew his loan amount then it can be done with the authorization of the bank. Current loan duration time is one year and interest is charged by quart lay basis. End of the duration period loan holder must have to pay loan amount with the interest. Current loan is two types:Cash credit (CC)Security over draft (SOD)End of the duration loan holder must have to pay loan amount with interest rate. Risk fund and service charge is not needed for cash credit. Collateral security is essential for cash credit Cash credit is offer for those peoples whose need working capital or there is a Shortage in their capital.

Cash credit (CC) also two types:Cash credit (hypothecation)Cash credit (Pledge)

Cash credit (Hypo) In the case of cash credit (Hypo) the borrower sign a letter of hypothecation and physical possession of the goods are control by the borrower but borrower binding himself to the national bank ltd at Malibugh branch. In the case of CC(hypo) bank always prefer legal equitable mortgage of properties (land, building) as a collateral securities.

Charge documents for Cash credit (Hypo):Promissory note (DP note)Letter a of arrangementLetter of continuityLetter of hypothecationLetter of guarantee.

Cash credit (pledge)In the ease of cash credit (pledge) loan is issue against the security of goods its may be finished goods or row materials. When borrower wants CC (pledge) then he has to singe a letter of pledge. Where the physical possession of that goods pledge under NBL, Malibugh branch control but ownership with borrowers. In this case the goods are stored in bank store and a caretaker is joining for take care of that goods. This caretaker salary bears by the borrowers.

Charge documents for cash credit (pledge):Promissory note (DP note)Letter of arrangementLetter of continuityLetter of pledgeLetter of guarantee.

Secured over draft (SOD)Nature of secured over draft (SOD):SOD loan issue against FDR or Work order duration of loan is one yearBank issue letter of lies if loan is against FDRSOD loan is offer for those persons whose need money to meet his financial obligationSecured over draft (SOD) loan are two types:

1) SOD (G) against work order:basis of bills receivable. When SOD issued against work order party gives the power of attorney for draw the cheques. SOD against work order loan involves three parties such as bank, loan holder, and work giver. Bills receivable calculation following ways:(Total value of work- (17.5% of work value+ cheque receive)}= bills receivable.Charge documents for SOD against work order:Promissory note (DP note)Letter of arrangement

LoanCurrent loan

Demand loan

Term loan

Cash credit SOD

Hypo Pledge

Import Export

CCS

HBL

LTR

PAD

general FO(bid bond)

IDBP

ABPFDBP

PC

Car Loan

EHBL

LIM

Letter of continuityLetter of guarantee.

2) SOD (Bid Bond ) SOD (Rid Bond) is gives for those borrowers who want to participating an\ bid for collect work. In SOD Bid Bond payment is making by the pay order. If borrower gets that work then interest is charger of that amount. If borrower does not get that work then he deposit that amount which he has issued by pay order.Charge documents for SOD (Bid Bond): Promissory note (DP note) Letter of arrangement Letter of continuity Letter of guarantee. Letter of disbursement SOD against FDR:Some times NBL give SOD loan against FDR. In this case the loan amount is 80% of FDR account. In SOD against FDR interest rate is 3% more then FDR interest rate. This loan is more secured then other types of loan. In the case of SOD loan against FDR party gives power to the bank if borrower unable to pay loan amount then bank can withdrawn his loan amount from parties FDR account.

Demand loanIt has been seen [hat demand loan usually used in import export purpose.Following are given different types of demand loan:Import related loanFor encourages our import business National bank offer following loan facility for import purpose: LTR (loan against trust receive)PAD (purchase against document)LIM (loan against import merchandise)

For encourages our export NBL ,offers following loan facility for expor t: IDBP (inland documentary bills purchased)FDBP (foreign documentary bills purchased)PC (Packing credit)ABP (accepted bills for payment)Term loanTerm loan holder can withdraw his loan amount in several times but he should be repayment with a specific date and installment basis .national bank offer different types of term loans for general public, businessmen, or employees. Different types of term loan as follows: —Consumer credit scheme (CCS)Employees house building loan (EHBL)House building loan (HBL)Car loan

3.7.1(D) Employee Loan:For the betterment of its own employees NBL provides loans. The branch managers and executives get this facility. Repayment is adjusted from their monthly salary on an equal monthly installment. 10% of basic is contributed by employee in every month. The staffs can also take loan, which is known as Staff Loan against Provident Fund (SPF). The repayment is adjusted from their monthly salary. 10% of basic is also contributed to the PF by the bank.

Employees house building loan (EHBL)The employee of NBL can take house-building loan from bank but the range of loan amount depends on person’s designations. Simple interest rate is charge on employee’s house building loan and interest rate is 8%.House building loan (HBL)National bank provide house-building loan for their target groups. In the case ofHBL interest rate is 14.5%. For HBL loan bank keep land as a collateral securityfor their safety.

3.7.1(E) Consumer Credit Scheme : National Bank’s Consumer Credit Scheme gives a great opportunity to buy household and office items on easy installments. This scheme gives the advantage of part payment to cope with the high price tags of many necessary home and office appliances.To lead a better life NBL provides this credit to consumers to purchase household items as Television, Refrigerator, Personal Computer, Furniture, Car etc. The people with fixed income get this credit. It is a 24 to 48 installment system of 14% interest. The amount allowed to the borrower is 10000/- to 300000/-.

3.7.1(A) Overdraft:Overdrafts are those drawings, which are allowed by the banker in excess of the balance in account up to a specified amount for definite period. It is given to the businessmen to increase their business activities. There are two forms of overdrafts:

• SOD (Secured Overdraft).• Loan General. (LG)Any deposit in the SOD account is treated as repayment of overdraft. The features of SOD are:* The interest rate is 14%.* The interest starts from the date of first withdrawal.* Only businessmen can open this and he has to be a current account holder of the respective branch of NBL.The security that is kept against the SOD loan are generally FDR, SDS, MSS etc.

3.7.1(B) Cash Credit (CC):

It is one type of current account. The difference between them is that current account is intended to be an account with credit balance and the CC is an account for drawing in advance.Operation of cash credit is same as that of overdraft. The purpose of cash credit is to meet working capital needs of traders and industrialists. It is given through the Cash Credit (CC) account.

3.7.1(C): Inland Bills Purchased (IBP):Bank purchases two types of Inland Bill — Clean Bill and Documentary Bill. • Clean Bill:Clean bill are those that requires no payment for documents cheque, Demand Draft, Telegraphic Transfer, and Mail transfer.• Documentary Bills:Documentary bills are those which require related documents for payments like Bills of Exchange, Railway/Shipment receipt and invoice etc. This bill is often created in businesses and bank purchases these before their maturity. Thus, purchases of these bills are one kind of credit to these before their maturity. As bank purchases these bills on behalf of the business so it is one kind of credit to those businesses. After maturity, bank presents it to the drawee for encashment.

Classification loanLoan can be classified into three types. Which is as follows:Sub stranded (SS) loan: — Sub stranded is that types of loan which does not collect last six months.Doubt full loan: - When loam amount doesn’t collect last nine months.Bad loan: — Bad loan is that types of loan which there is no change to repayment. Badloan create when any outstanding loan doesn’t collect last one year.

Provision for classified loanSub stranded (SS): For sub stranded loan provision must be keep 20% of outstanding loan amount.Doubt full loan: For doubt full loan provision must be keep 50% of outstanding loan amount.Bad loan: In the case of bad loan provision must be keep 100% of outstanding bad loan.

Write offOne account can be write-off without absolving the borrower from the payment of the loan. It is done only to make the banks account or recorded showing better.

3.7.2 Creation of charges for securing LoansFor the safety of the loan, bank requires security from the borrower so that it can recover the loan by selling security if borrower fails to repay. Creation of charge means making it available as a cover for an advance. The method of charging should be legal, perfect and complete. Securities are charges in order to:* Protection of interest.* Ensuring the recovery of the money lent.* Provision against unexpected change.* Commitment of the borrower.

A brief description about the securities that is kept against the loans is described below:3.7.2(A): Primary Security: Security deposited the borrower himself to the loan such as — FDR, Cash, and MSS.

3.7.2(B) Collateral Security: • Narrow Sense — security deposited by a third party to secure the advances for the borrower.• Wider sense — any types of security on which the creditor has a personal right of action on the debtor in respect of advance common method of charging security and their nature of security.

3.7.2C) Lien:It is the right of the banker to hold the debtor’s property until the debt is discharged — generally retained by the bank in its own custody or to the hands of the third party with lien marked. The third party cannot discharge it without the permission of the bank. In case of need bank needs permission of the court to sell the property.

3.7.2 (B) Assignment:Borrower transfers the right of property or debt to the bank. Life Insurance Policy, supply bills, book debt of the borrower can be assigned.

3.7.2 (E) Pledge:It is one kind of lien but the bank enjoys more rights on it. In this case, physical transfer of the goods is must to the bank. Bank can sell the property without the intervention of the court in case of default on loan.

3.7.2 (F) Mortgage:Mortgage is the transfer of special movable property — like land, building, plant etc. Most common type of mortgage is legal mortgage in which ownership is transferred to the bank by registration of the mortgage deed.Another method called equitable mortgage is also used in bank for creation of charges. Registration is not required. In both the cases, the mortgaged property is retained in hand of the property.

3.7.3 Principles of sound lendingIn order to secure a balance between liquidity Profitability, and security, NBL following principles of sound lending:

3.7.3(a) Liquidity:While lending adequate care is taken to ensure the liquidity of the lien item. In this case, NBL choose such securities, which possess such liquidity.When banker sanctioning any loan then they should ensure the liquidity position of National Bank Limited.

3.7.3(b) Safety:

National Bank exercises the lending function only it is safe and the risk factor is adequately mitigated and covered. Safety depends upon the security offered by the borrower.Safety is the most important for sanctioning loan. At the time of repayment borrower may be not able to pay the loan amount. For that reasons when bank sanctioning loan they should take collateral security from the borrowers.

3.7.3(c) Diversity of risk : Bank should not invest in one or two sector. If it is happened then their investment risk is higher then market risk. Bank should maintain investment portfolios for reducing their risk. In this case when one investment make loss another investment will cover that loss. In order to minimize the risk, National Bank invests its fund in different industries of different industries situated in different regions of the country.

3.7.3(D) Adequate Yield:From the commercial point of view, National Bank considers sufficient yield of return while financing a project.Banker should select those investment which interest rate is higher then savings interest rate.

3.7.3 (E) Productive Purpose:National Bank exercises its lending function only on productive purpose.

3.7.3 (F) National or Social Interest:National Bank also considers national aspect of any project while financing. They take utmost care so that the project cannot be determined to the society as well as to the nation.

3.7.3 (G) Security : - Banker should be aware in the selections of security for their loan. They should properly evaluate the value of security it should not less then or equal of loan amount. When bank take any land, building as a collateral security then banker should checking CS , SA, RS porcha.

3.7.4 Selection of BorrowerIn lending, the most important step is the selection of the borrower. Due, to the asymmetric information and moral hazard, banks have to suffer a lot due to the classified loans and advances, which weakens the financial soundness of the bank. If the selection of the borrower is correct, that is the borrower is a good character, capital and capacity or Reliability, resourceful and responsible the bank can easily get the return from them. This point of view, NBL follows the following procedures:

3.7.4(a) Studying past track record:After getting a application for a loan the past record of the applicant is carefully studied. Generally such studies includes -i. Account balances and past transactionsii. Credit report from other banksiii. Information of the industry by studying market feasibilityiv. Financial statements (balance sheet, cash flow statement, and income statement). If the borrower is a sole proprietor then the single entry accounting treatment is converted into double entry system.v. If the amount is more then TK. 10 lacs then report from credit information bureau of Bangladesh Bank is collected.

3.7.4(b) Borrower analysis:Borrower analysis is based on 5-c’s (character, capital, capacity, collateral, creditworthiness) and 3-r (responsibility, reliability and resourcefulness). It follows that the bank forms a rational judgment about the integrity of the borrower, which should be undoubted.

3.7.4(c) Credit approval procedure:After receiving the application from the client, National Bank Limited prepares a CreditLine Proposal (CLP) and forwards the same to the Head Office to place before Head OfficeCredit Committee (HOCC) for approval. It includes-o Request for credit limit of customer.o Project profile! Profile of business.o Copy of trade license duty attested.o Copy of T I N certificate.o Certificate copy of Memorandum & Articles of Association, certificate of incorporation, certificate of commencement of business, Resolution of the Board, Partnership Deed (where applicable).o 3 years balance sheet and profit & loss account.o Personal net worth statement of the owner! Directors! Partners etco Valuation certificate of the collateral security in bank’s form with photograph of the security.o CIB enquiry form duly filled in (for proposal of above 10 lacs).o Credit report from other banks.o Stock report duly verified.o Indent! Performa invoice! Quotation. & Statement of accounts.

3.7.5 DocumentationDocumentation can be described as the process of technique of obtaining the relevant documents. In spite of the fact, that banker leads credit to a borrower after inquiring the character, capital, capacity, collateral, creditworthiness of the borrower NBL obtains proper documents executed from the borrower, and he must obtain proper documents executed from the borrower to protect him against willful defaults. Documentation contains the precise terms of granting loans and thereby serve as important evidence in the law courts if the circumstances so desire. Charge documents as required by the different types of advances are mentioned below:

3.7.5(a) Loan:o Letter of arrangement.o Letter of disbursement.o Letter of partnership (firm) or Board of resolution (Limited companies).o Letter of pledge.

o Letter of hypothecation.o Letter of lien and ownership.o Letter of credit for packing credit.o Letter of lien. (in case advance against FDR).o Letter of lien and transfer authority.o Legal documents for mortgage of property.o Copy of sanction letter mentioning detail of terms and condition dulyAcknowledge by the borrower.o Trust receipt.o DPNote.(Demand promissory note)

3.7.5 (b) Overdraft:o Letter of partnership.o Letter of arrangement.o Letter of continuity.o Letter of lien.o Letter of lien and ownership/share transfer form (in case of advance against share).o Letter of lien and transfer authority.o Legal documents for mortgage of property.o D P Note.( Demand promissory note)

3.7.5 (c) Cash Credit:o Letter of partnership (partnership firm) or Board of resolution (in case of limitedcompany).o Letter of arrangement.o Letter of continuity.o Letter of hypothecation. (In case of CC).o Legal documents for mortgage of property.o Letter of pledge or arrangement of pledge.o D P note.( Demand promissory note).

3.7.5(d) Bills Purchased:o Letter of partnership (partnership firm) or Board of resolution (in case of limited company).o Letter of arrangement.o Letter of acceptance, where it calls for acceptance by the drawee.o Letter of hypothecation of bill.

3.8 Accounts sectionAccounts Department is called as the nerve Center of the bank. In banking business, transactions are done every day and these transactions are to be recorded properly and systematically as the banks deal with the depositors’ money. Improper recording of transactions will lead to the mismatch in the debit side and in the credit side.

To avoid these mishaps, the bank provides a separate department; whose function is to check the mistakes in passing vouchers or wrong entries or fraud of forgery. This department is called as Accounts Department. If any discrepancy arises regarding any transaction this department repot to the concerned department.Besides these, the branch has to prepare some internal statements as well as some statutory statements, which are to be submitted to the Central Bank and the Head Office.

This department prepares all these statements. Workings of this department:

• Recording the transactions in the cash book.• Recording the transactions in general and subsidiary ledger.• Preparing the daily position of the branch comprising of deposit and cash.• Preparing the daily Statement of Affairs showing all the assets and liability of the branch as per General Ledger and Subsidiary Ledger separately.• Making payment of all the expenses of the branch.• Recording inters branch fund transfer and providing accounting treatment in this regard.• Preparing the monthly salary statements for the employees.• Preparing the weekly position for the branch which is sent to the Head Office to maintain Cash Reserve Requirement (C.R.R)• Preparing the monthly position for the branch which is sent to the Head Office to maintain Statutory Liquidity Requirement (S,L.R)• Make charges for different types of duties.• Preparing the budget for the branch by fixing the target regarding profit and deposit so as to take necessary steps to generate and mobilize deposit.• Checking of Transaction List.• Recording of the vouchers in the Voucher Register• Packing of the correct vouchers according to the debit voucher and the credit voucher.• Prepare advice• Prepare incomes and expenditures statement• All administrative workWhen accounts officer receive any types of voucher then he has to identify whether it are

Clearing, Cash, Transfer.Clearing: When accounts officer receive clearing voucher then he send it to the clearing division.Cash: When accounts officer receive cash voucher then payment made by clients.

Transfer: When accounts officer receive transfer voucher that means this amount should be transfer of account head to another account head. In this case accounts officer register it in register hook before computer posting. Before register this voucher in register book officer put a serial number that is register in register book. In transfer register book contains debit and credit side, particulars and amount. End of banking hour accounts officer calculate the transferred amount and debit balance and credit balance should he equal and he make sure that the debit balance and credit balance of transfer, clearing and cash position should be same figure.Every day accounts division prepared daily statement affairs and send them to the every department.

3.9 Western Union Money Transfer Section

National bank Ltd. signed an agreement with the Western Union Financial services, USA in 1993. Millions of people from different parts of the world are sending money with confidence to their near and dear through the western union has the most modern technology for remitting money within quiets possible time from any part of the world through their more than 170000 representatives in 190 countries and regions has established a unique money transfer system with western union of. Through an online computer systems finds can be instantly of the world . 114.9million dollar was remitted to this bank through this organization during the year 2005 .NBL brought a substantial amount of foreign exchanges in to the country through the western union in 2005, which is 79% higher than that of 2004

The western union is a globally reputed name in money transfer services and data exchange forever 150 years. Western union has continued its tradition of possessing the latest technology and handling wide scale remittances.

Payment of remittance by expatriate Bangladeshis through the western union are being made at 92 branches of NBL. These branches are connected with the on-line computer system of the western union.

The special feature of services is as follows:Fast : Remits money in minutesSafe : World class security systemEasy : Over 2,00,000 agent locations across 200Countries and territories worldwideReliable : Trusted by millions for over 150 years.

• To preserve the par value of the Bangladesh Taka (currency);• To promote and maintain a high level of production, employment and real income in Bangladesh; and• To foster growth and development of the country’s productive resources for the national interest.

Reconciliation:The reconciliation division collects the CIBTA (computerized inter bank transaction advice) related voucher. Foreign exchange division take seine voucher which is related to-their division and rest of the vouchers are supposed to make advice. l3etbre written advice, accounts officer slotting those vouchers according to IBCA (inter branch credit advice) IBDA (inter branch debit advice) responding and originating wise.. When all are complete then those are posting in computer and take a print of originating and responding sheet and make extract.

Dispatch:The main function et dispatch division is dispatching all types of documents such as OBC, LBC, and different types of letter, different advice. Beside dispatch division receives letter and documents, which are may be coming from head office, all other branches of National Bank Ltd. other banks, negotiation and opening bank (incase of Import and Export) in the name of National Bank Ltd. Dhanmondi branch. Following arc given a graph which shown the activities are done by dispatch division: DispatchIn ward mail Out word mail By courier, DHL/Fed EX ,Register post The officer engaged in the dispatch division maintain two types of mail, which is

Inward mail

Outward mail

Inward mailWhen officer receives any letter or documents from out side of the branch then he done following function which is arrange at sequentially:. First put receive seal on that letter or document Put a serial numberRegister in the inward register book with receiving date.

Outward mail- it is necessary to dispatch any types of letter or document out side of the Dhanmondi branch the dispatch officer done following job which are arrange sequentially: - Put serial number Register on outward mail register book with dateOutward dispatch is three ways, such as:

By courier service: - Courier services are use when documents or letters dispatch to other breeches of National Bank Ltd. it has been seen that courier services payment has made by monthly basis.

DHL/ Fed Ex: - These types of courier services are use when foreign documents or letter are dispatch. Its payment also made by monthly basis. Register post: — Register post is use when any types of confidential or important documents are dispatch. Register poses use for keeping evidence.Dispatch officer always maintain petty cash account to full fill the dispatch division requirements, which name is: Suspense A/C Advance against postage”At the beginning of the month dispatch officer withdraws money from bank by’ issuing a debit voucher for the payment of dispatching bills. At the end of the month he calculate his total expanse, if his debit amount has surplus after all expanses then he refund it to the bank by a credit voucher.

Foreign exchange operation of National Bank LimitedFrom the starting of National Bank Ltd. it has taken a principle to involve in the foreign exchange operation and that Continuation now there are 30 branches of The National Bank Ltd operating foreign exchange operation which is authorized by the Bangladesh bank. Now National Bank has 328 correspondents with 181 first class banks of 65 countries whole over the world. National Bank tries to increase their foreign exchange

Chapter-4

Bangladesh Banking Sector

4.1 Commercial BankCommercial Bank is an intermediary profit making institution. On the hand, the bank, which deals with money and money’s worth with a view to earn profit, is known as commercial bank. Mainly, commercial bank receives deposit from surplus group and provide loan to the deficit group.Commercial banks play a dynamic role in the economic development of a nation. It may not be exaggeration to assert that without the evolution of commercial banks in the 18th and I 9 centuries industrial revolution would not have occurred in the Europe. it is equally true that without the development of sound commercial bank, underdeveloped countries can not hope to join the group of advanced countries.Sayers have remarked that the banking system as a whole had an important influence on the tempo of economic activity.Schumpeter, the first modern economist, regarded the banking system as one of the two key agents (the other being entrepreneurship) in the whole process of development.

4.2 Importance of a Commercial BankA bank is indispensable for the smooth working of the economic activities in a modern community. In Stephenson’s words, “ Bankers are the custodians and distributors of the liquid capital, which is the life blood of our commercial and industrial activities.”

Creation of purchasing power: Commercial bank creates purchasing power in the form of cheques, bills of drafts. This economizes the use of precious metals. Money thus created by a bank facilitates the economic activities of the people ad directly contributes to the economic development of the country.

Increase the Mobility of Money: Commercial Banks bring lenders and borrowers together and help movement from one place to another. Thus, they increase the supply of money where it is relatively scarce and decrease the supply in a place where its supply is more.Encourages Saving: Commercial bank encourages the people to save by paying interest for their deposits. It collects small savings scattered all over the country. Thus, a bank helps the growth of capital and economic development of a country.international Trade: Commercial bank finances the international trade of a country. Development of a country is largely dependent on her international trade. By facilitating the international payment with least expense and frictions a bank helps the economic development of the country.

Make the resources of country more productive: Commercial bank encourages savings and investments and thus the resources of a country become more productive. In this way a bank contributes to the economic prosperity and the general welfare of the nations as a whole.

Keeps the credit structure of the country stable: The Commercial banking system keeps the whole industrial and commercial credit structure of the country stable. In absence of the stability credit structure economic development is not possible.

4.3 Economic Development:Economy of every country is developing. There is not a single country so far, and there will never be, where it can authoritatively be said that the chances of further growth have exhausted. The economy of every country aims at a substantial increase in its productive power and better levels of living for it s people. Mainly economic development may be defined as a process whereby an economy’s real national income is carried on from a lower to a higher plank over a long period. The process of economic development needs development of capital resources besides other structural changes like improvement in skill and efficiency of manpower, better organization, better health, education etc. The problems of economic growth of developed and underdeveloped nations are common, but the dimensions are different. The underdeveloped countries have virtually to start from plinth where as the developed countries have to maintain and accelerate the progress already achieved.

4.4 Scenario of Banking of BangladeshThe banking system of Bangladesh has grown over the years under branch banking system. Structurally it is composed of three distinct categories of institutions namely, Central Bank (Bangladesh Bank), Commercial Banks and Development bank / specialized Financial Institutions. Before liberation of Bangladesh in 1971, the total banking system was private owned, urban-based and profit oriented. But after the liberation, the government of Bangladesh nationalized all the banks operating in Bangladesh in 1972, excepting a few foreign bank branches.

It was due to the economic policy of Pakistan government that we were having a privatized banking structure, till the independence of Bangladesh in 1971. After the separation from Pakistan the party which came to power was politically committed to adopt such an economic policy would ensure social control and ownership of large industries, banks, insurance companies etc. Moreover, the ownership of these enterprises (Including Bank) was largely controlled by the west Pakistani entrepreneurs who left Bangladesh after its independence. Therefore, under such a situation, Bangladesh govt. had no other alternative but to take up the control and nationalize the enterprises including the banks.

Following nationalization, the govt. also reorganized then existing commercial banks in to 6 distinct new banks in the following manner in terms of the Bangladesh Banks (Nationalization) Order, 1972.

After the nationalization of banks in 1972, it was expected that the banks would play there due role for protecting social interest and the economic development process of the country and thus reverse the trend as set in before the liberalization. Though Bangladesh Bank Order, 1972, did not specifically spell out the objectives ol the nationalization of banks, but considering the discontentment prevailing during Pakistan period and the basic principles of the country, which were constitutionally established in 1972. After that the commercial banking in l3angladesh underwent a rapid transformation.

The number of

branches increased from a total of’ 1,116 in December 1972 to 3678 in December 1982 and ultimately to 4,072 in December 1986. The nominal deposits of the commercial Banks expanded from a level of Tk. 96,354 million in December 1972 to Tk. 107,518 million in December 1986, and Tk. 446,816 million in December 2000. At the same time, their nominal advance registered an upward movement from Tk. 4,251 million in December, 1972 to Tk. 38,138 million in December, 1982 Tk 80,391 million in December 1986 and finally to Tic 320,634 million in December 2000.

During the transformation, the Nationalized Commercial Banks (NCBs) were expected to abandon profit-orientation and urban-based Character and instead to accept rural-based development character. Besides performing their traditional limitations, the NCBs were also required to participate in the development finance activities like providing credit to agriculture sector and non-farm activities, expanding branches in rural areas, widening their range of service etc. It was observed that while performing their duties, the customer services of NCBs deteriorated to some extent, specially in urban areas and so also their profits and profitability.

4.5 Generations of Private Commercial Banks in Bangladesh

To describe the gradual development of Private Commercial Banks operating in Bangladesh for a long period of time, I divided them into four generations such as:

2.5.1 First Generation: (1982-1990)Banks EstablishedArab Bangladesh Bank Limited 19821FIC Bank Limited 1982National Bank Limited 1983Islami Bank Bangladesh Limited 1983Pubali Bank Limited 1983The city Bank Limited 1983United Commercial Bank Limited 1983Uttara Bank Limited 1983Al Baraka Bank Bangladesh Limited 1987Total = 09 Banks

4.5.2 Second Generation: (1990-1996)Banks EstablishedEastern Bank Limited 1992NCC Bank Limited 1993Prime Bank Limited 1995Al Arafa Islami Bank Limited 1995Dhaka Bank Limited 1995Duch Bangla Bank Limited 1996Social Investment Bank Limited 1996Southeast Bank Limited 1996Total = 08 Banks

4.5.3 Third Generation: (1996-2000)Banks EstablishedBangladesh Commercial Bank Limited 1998Bank Asia Limited 1999FXIM Bank Limited 1999First Security Bank Limited 1999Mercantile Bank Limited 1999One Bank Limited 1999

Mutual Trust Bank Limited 1999The Trust Bank Limited 1999The Premier Bank Limited 1999Standard Bank Limited 1999Total = 09 Banks

4.5.4 Fourth Generation: (1982-1990)Banks EstablishedJumuna Bank Limited 1982Shahajala Islami Bank Limited 1982Total = 02 Banks

From the above generations of Commercial Banks Total 29 private Commercial Banks are operating in Bangladesh till date.

4.6Nationalized Commercial Banks (NCBs)According to Table 2.01, the banking sector in Bangladesh is dominated by the four NCBs that held 46.5% of industry assets as of year-end 2001. The names of four NCBs are shown in Appendix C. In spite of some decline in recent years, the country’s banking system continues to be dominated by the NCBs. At the end of year 2001, the NCBs accounted for 50.93% of overall banking sector deposits. They are able to dominate deposit taking through extensive branch networks. As a group, they are operating with 3,608 branches spread out throughout the country (Table 2.01).

4.7 Government owned Specialized BanksThe five governments owned specialized banks (Appendix C) are called DevelopmentFinancial Institutions (DFIs). They held 9.5% of industry assets (Table 2.01) comprised largely of loans to the target sectors such as agriculture, industry etc., which play key role for the development of the country. They have to rely on refinance credit exclusively from Bangladesh Bank.

4. 8 Private Commercial Banks (PCBs)As of year-end 2001, the PCBs held 37.2% of industry assets and 36.58% of overall banking sector deposits. As a group, they are operating with 1,331 branches spread out throughout the country (Table 2.01). 1-lowever, most of the branches are located in urban areas. The financial performance of PCBs conducted by the Bangladesh Bank was far better than that of NCBs in the financial year of 2001 (Bangladesh Bank Annual Report 2001- 2002).

4. 9 Foreign Commercial Banks (FCBs)The FCBs are also playing a significant role to reconstruct the financial sector in Bangladesh. At the end of year 2001, the FCBs held 7.8 percent of industry assets and 6.85 percent of overall banking sector deposits. As a group, they are operating with only 34 branches spread out exclusively in urban areas (Table 2.01). The financial performance of PCBs is also far better than that of NCBs and that of PCBs as well (Bangladesh Bank Annual Report 2001-2002).

4. 10 ATM and Online Banking FacilitiesBangladesh banking sector is not yet able to introduce the ATM and online banking facilities for its customers. However, only two foreign banks (Standard Chartered Bank and The Hong Kong and Shanghai Banking Corporation Ltd.) provide the ATM facility in Bangladesh but no bank including these two foreign banks is able to provide online banking services in Bangladesh.

SWOT Analysis of National Bank Ltd

SWOT Analysis:

SWOT analysis is the detailed study of an organization’s exposure and potential in perspective of its strength, weakness, opportunity and threat. This facilitates the organization to make their existing line of performance and also foresee the future to improve their performance in comparison to their competitors. As though this tool, an organization can also study its current position, it can also be considered as an important tool for making changes in the strategic management of the organization.

StrengthsNational Bank Limited has already established a favorable reputation in the banking industry of the country. It is one of the leading private sector commercial banks in Bangladesh. The bank has already shown a tremendous growth in the profits and deposits sector.

National Bank Limited has already achieved a high growth rate accompanied by an impressive profit growth rate in 2001. The number of deposits and the loans and advances are also increasing rapidly.National Bank has the reputation of being the provider of good quality services too its, potential customers.

Modern technology & computer:NBL has well decorated with modern equipment and facilities.For the speedy service to the customer NBL has installed money –counting mechine in teller counter .The bank has computerize banking operation under the software

Weakness:The main important thing is that the bank has no clear mission statement and strategic plan. The banks not have any long-term strategies of whether it wants to focus on retail banking or become a corporate bank. The path of the future should be determined now with a strong feasible strategic plan.The bank failed to provide a strong quality-recruitment policy in the lower and some mid level position. As a result the services of the bank seem to be Deus in the present days.

The poor service quality has become a major problem for the bank. The quality of the service at National Bank is higher than the Dhaka Bank, Prime Bank or Dutch Bangla Bank etc. But the bank has to compete with the multinational Bank located here.Some of the job in National Bank has no growth or advisement path. So lack of motivation exists in persons filling those positions. This is a weakness of National Bank that it is having a group of unsatisfied employees.

In terms of promotional sector, National Bank has to more emphasized on the. They have to follow aggressive marketing campaign.

Opportunity:Business diversification:In order to reduce the business risk, National Bank has to expand their business portfolio. The management can consider options of starting merchant banking or diversify into leasing and insurance sector. The activity in the secondary financial market has direct impact on the primary financial market. Banks operate in the primary financial market. Investment in the secondary market governs the national economic activity. Activity in the national economy controls the business of the bank.

Opportunity in retail banking lies in the fact that the country’s increased population is gradually learning to adopt consumer finance. The bulk of our population is middle class. Deferent types of retail lending products have great appeal to this class. So a wide variety of retail lending products has a very large and easily pregnable market.

A large number of private banks coming into the market in the recent time. In this competitive environment National Bank must expand its product line to enhance its sustainable competitive advantage. In addition o f those things, National Bank can introduce special corporate scheme for the corporate customer or officer who have an income level higher form the service holed. At the same time, they can introduce scheme or loan for various service holders. And the scheme should be separate according to the professions, such as engineers, lawyers, doctors, etc.

Threats:

Increasing competitionAll sustain multinational banks and upcoming foreign, private banks posse’s enormous threats to National Bank Limited. If that happens the intensity of competition will use further and banks will have to develop strategies to compete against an on slough of foreign the banks.

Default culture:The default risks of all terms of loan have to be minimizing in order to sustain in the financial market. Because default risk leads the organization towards to bankrupt.

National Bank has to remain vigilant about this problem so that proactive strategies are talent to minimize this problem if not elimination. The low compensation package of the employees from mid level to lower level position threats the employee motivation. As a result, good quality employees leave the organization and it effects the organization as a whole.

Recommendation

General Banking Department:

• If the enter general Banking system is fully computerized then they satisfy the customerby provide fast service.• If they establish networking system with their branches then it can easily transfer datawithin short time.• If they cancel the introducer system then they can collect more deposit through newaccount and it also satisfied the customer.

Loan and Advance Department:

• Try to avoid giving loan the political person who had bad reputation of loan repaying.• Evaluate the securities value properly to avid the risk of loan recovery. The punishmentsystem should be established to discourage the unlawful activities of employee.• Bangladesh Bank should more active to provide CIB report.

Foreign Exchange Department:

In Foreign Exchange Department it is require communicating with foreign bank frequently and quickly. To make the process easy and quick the whole system should be computerized and modern communication media for example e-mail, fax, Internet should be used.

Other Problem:• National Bank should give more attention to advertisement to create more attraction among their customer, which is collect, more deposit and increase investment scope.

ACRONYMS

A/C____ AccountAD - Authorized DealerB/L — Bill of LadingBB Bangladesh BankBOE Bill of ExchangeCCI & E Chief Controller of Import & ExportCFR Cost & FreightCIB Credit Information BureauCIF Cost Insurance & FreightDD Demand DraftDP Note Demand Promissory NoteEPB Export promotion BureauEXP Export Form

FC Foreign CurrencyFDD Foreign Demand DraftFOB Free On boardHS Code Harmonized system of coding Inward Bills for CollectionIBC Inward bills for CollectionIBCA Inter Branch Credit AdviceIBDA Inter Branch Debit AdviceIMP Import FormIRC Import Registration CertificateL/C Letter of Credit —LCAF Letter of Credit Authorization Form013C Outward bills for CollectionP0 Payment OrderPSI Pre Shipment InspectionSWIFT Society for Worldwide Inter bank FinancialTC Travelers chequeTIN Tax Identification NumberYR Truck ReceiptTT Telegraphic TransferSTD Short Term Deposit

Conclusion:

National bank Ltd. has established goodwill through innovative products and services. It has many problems but is followed very sincerely the rules, regulations and advice of Bangladesh bank during the last ten years. Technological development has opened up a new dimension in the development creative products, efficient services and customer satisfaction. National Bank Ltd. must cope with this technological advancement to retain its present status. Many new generation private commercial banks have already introduced Online banking. But National Bank Ltd. Could not established it till now. The bank must take initiative to established on-line banking.

The bank has an experienced and educated managing Director. The other directors of the bank are also young and educated. Their innovative idea will help to create new opportunities for the bank. But their creative ideas could not be implemented if the attitude of the employees is not changed. The executives, officers and staffs must be trained to changed their negative attitude towards new concept of banking.

Reference & Bibliography

1. Commercial Banking- The Management of Risk- Donald R. Fraser- Benton E. Gup- James W, Kolari2. Commercial bank Management- Peter S. Rose3. Annual Report of National bank Ltd. 2004-20054. Annual Report of 2003 of Islami bank Ltd, IFIC Bank Ltd, Pubali bank Ltd. Prime Bank Ltd.5. Magazine Bank- Bima April 20046. The Bank companies Act (Act XIV of 1991)- Md. Tariqul Islam Khan7. Internet- www.nblbd.com8.

Glossary

Bank Banker BankingCustomerFinantial IntermediariesPromissary noteBill of exchangeChequeHolderPayback PeriodSimple ratePeriodic rateNet present valueIRRCost of capital Privet placementFinancial MarketGDP(Gross Domestic Product)Money marketEarning Growth ROE Analysing Return on EquityInterest Rate

Balance sheet

AppendixDepository institutions:The financial institutions which take deposit from the surplus units & provide credits to the deficit units are called Depository institutions. Example – Bank

Bank: history - Banco - A tall bench, Bangladesh have 48 bank.

Bank: A financial institution which is permitted under license from central bank to except deposit & to carry out other business described in the license is called bank.From the practical view point by the term bank it is meant those financial institutions which run their business in the purview of banking company’s act 1991.

Types of banking system :1. Unit banking - USA system, no branch, one unit maintain by themselves. Activities are independent. 2. Branch banking - UK system, Have head office, and many branches and all are controlled by head office. Inter dependent.

Types of BankingGroup A:

1. Central Bank 2. Commercial Bank3. Specialized Bank

Group B1. Scheduled Bank 2. Unscheduled Bank 3.

Commercial Bank: The financial institutions which take deposit & provide credits to the trades & commences are called commercial bank.

Specialized Bank: The bank which are introduce in order to perform some specialized jobs (Industrialization, agricultural development) are called specialized bank. BKB, RAKUB, BSB, BSRS,

Products/business activities/Functions of a Bank *1. Deposit collections2. Providing loans3. Leasing4. Hire purchase5. Bills discounting/ rediscounting6. Portfolio manager7. Information flower

Bank1. Bank can do the over counter business.2. Bank can take any type of deposit.3. Cost of fund is comparatively low.4. SLR is 18%5. Capital requirement Tk.100 crs6. Bank have cheque book.7. Bank can run the foreign exchange Business.

Capital requirements for a bankThe capital requirements for a bank is 9% its risk weighted assets or Tk.100 crs which is higher. For a new bank Tk. 100 crs

Types of capital1- Core/ TIER-1 capital (At least4.5%) , Components :

a. paid up capitalb. Statutory reservesc. General reservesd. Retained earningse. Share Premium

2- Supplementary / TIER-2 capital (At best 4.5%) Components: a. General Provision (1% of unclassified loans & leases)b. Asset reevaluationc. Preference shared.

Formula for determining the capital adequacy for a bank

Capital adequacy = [ Total Capital ÷ Total R.W.A ] x 100Here R.W.A = Risk weighted assetIf the result of the above formula is 9% or more, then the bank will have adequate capital otherwise not.

Leasing :

Leasing is a contract between two parties (Lessor & Lesee) to use a particular asset for specified time period in exchange of benefits.In leasing ownership of the asset is not transferred to the user.

Lessor : Owner of the asset.

Lesee : User of the asset.

Hire Purchases : Like leasing hire purchases is also a contract between two parties. But the difference between leasing and hire purchase lie with the points,

1. In leasing ownership of the asset remains with the lessor, but incase of hire purchases ownership of the asset is transferred to the users.2. Time period for leasing is more than that of hire purchases.3.

Factoring : Factoring is a contract between factor (FIs) and the supplies. Where the supplies assign the accounts receivable to the factor and the message of this assignment is to be informed to debtors in writing.The reverse phenomenon / mechanism of this factoring is called reveres factoring, where contract is established between factor & debtor.

Cheque: A negotiable instrument which is used to express an unconditional order of the depositor to the banker is called cheque.

Parties in a cheque:1) Drawer – Depositor.2) Drawee – Banker.3) Payee – Money taker from the bank.4)

Chequing Instrument / Financial Asset :The instrument which can be deposited and withdrawn with the help of a cheque is called chequing instrument. Example: Bank deposit.

On demand instrument: The instrument which can be withdrawn immediately (without passing any time) is called on demand instrument.

Convertibility: The property for which a financial asset can be converted from one form to another form is called convertibility.

Currency:The property for which a financial asset can be expressed in a particular currency medium of exchange is called currency.

Price of financial asset: The summation of all the present values of the cash flows generated by a particular financial asset is called the price of that financial asset.

The price of a financial asset is denoted by “ P ” and expressed by the following equation:

P = CF1 / (1+r) + CF2 / (1+r)² +…. + CFN / (1+r)N

= ∑ CFN / (1+r)N

Where,CF = Cash flow, N = Term to maturity, r = Appropriate discount rate

Appropriate discount rate (r) *The rate of return which is expected to have by an investor to make any investment in a financial asset is called appropriate discount rate / required rate of return / market rate of return / required yield.It is denoted by the “ r ” and expressed by the following equation; r = RR + IP + DP + MP + LP + EP Where,

RR = Real rate of return IP = Inflation premium DP = Default risk premium MP = Maturity premium LP = Liquidity premiumEP = Foreign exchange rate risk premium

Foreign CurrencyCurrency other then home currency is called foreign currency.

Bank rateThe rate of interest at which central bank lend money to the commercial bank is called bank rate. At present bank rate is 5%.

At present bank rate 5%, in what situation bank rate will be 4% and 6%, explain.:For 4% : When Bangladesh bank lends money at the rate of 4%, to the commercial bank. The reasons behind, when Bangladesh bank feel commercial bank suffer more liquidity problem then Bangladesh bank reduce bank rate to decrease investment to the bank. For 6% : When Bangladesh bank feel commercial bank need liquid money then Bangladesh bank increase bank rate. For that reason general public influenced to invest money in to the bank.

SLR (Statutory liquidity reserve)The portion of total demand & time liabilities of bank & other financial institutions is to be kept in the form of liquidity asset obligatory is called SLR.

At present SLR is 18%, For Islamic Bank SLR is 10%, For specialized bank SLR is 0%

At present SLR is 18%, in what situation SLR will be 15% and 20%, explain.

When central bank feel other banks are faced sort of liquidity then central bank reduce SLR, Again if liquidity is surplus central bank increase SLR.

CRR (Cash Reserve Requirement)The portion of SLR which is to be kept in the form of cash with Bangladesh bank is called CRR. At present CRR is 5%.

Formula for determining the liquidity of Bank *Liquidity = [ SLR / Total demand & time liabilities ] x 100If the result of the above formula 18% or more, then the bank has adequate liquidity or not.

Open market operationThe process in which central bank buys & sells securities through the financial market is called open market operation.Being a central bank Bangladesh bank is performing this function through the tools.

REPO ( repurchases agreement) Reveres REPO

REPO: The process in which Bangladesh bank buys the securities from the participant is called REPO. In REPO participant commit to repurchase the securities at higher price at some future date. The difference between original price & repurchase price is the income to the Bangladesh bank & cost to the participant. ( Bank & NBFIs )

Reverse REPO : The process in which central bank sales securities to the participants making committing to repurchases it at some higher price at some future date is called reverse REPO.The difference between original price & repurchase price is the cost of Bangladesh bank & income to participants, through reverse REPO, Bangladesh bank sucks up excess liquidity of participants.

Moral Suasion: It is an indirect and old fashion tool used by the developing counties central bank monetary policy formulation.

Supervision: The process through which central bank monitors the activities of the other bank and financial institution is called supervision or inspection. There are two types of supervision,

1. Off side : Mainly table work, without field inspection.2. On side : Physical inspection.

- Compressive: Regular basis.- Special : For special reason.

Bangladesh banks:CAMEL rating

C = Capital adequacyA = Asset qualityM = ManagementE = EarningsL = LiquidityS = Sensitivity to market risk.

* Bangladesh government has 75 accounts in the Bangladesh bank *

Assets: Those possessions of a business organization which have some present value and from which future benefit can be obtained are called assets. Like; Land, Building etc.

Liability: Obligations of the business to the outsiders.

Owners Equity: Obligations of the business to the stockholders or owners.

Balance sheet: A financial statement showing the position of assets, liabilities and equities on a particular date of a particular business is called balance sheet.Basic equation of Accounting:Asset = Liabilities + Owner equity / Stock holder equity

Financial institutions * The business organization is deals with financial assets or instruments are called financial institutions. From the view point our country by the term financial institutions it is meant those organizations which run their business in the purview of financial institutions act 1993.Order : exam. Bangladesh Bank order 1972.Ordinance : exam. Security and exchange commotion 1993. Act : Overviews of financial institutions act 1993Act no. 27 in 1993It was passed by the parliament and approved by the president on dated 30th September 1993, but it was affected on dated 16th July 1993.There are 51 sections and number of subsections in this act.

Financial Intermediaries *The financial institutions which transform the financial assets from one form to another form are called financial intermediaries.Example: Banks

Asset liability management (ALM) for financial institutions Financial institutions are the “spread” business i.e. they buy money and sell money.Spread : Difference between borrowing rate and lending rate. (lending rate – borrowing rate) R2 = Interest rateR1 = Borrowing rateAnd it must be R2 > R1

Liquid asset : The assets which can easily be converted into cash with minimum depreciation of its original value are called liquid assets.

Liquidity : By the term liquidity it is meant such a position of a financial institution in which it is capable of meeting up its current liabilities with its current assets.I.e. liquidity represents the solvency of a financial institution.

Liquidity Management : In order to manage the liquidity a compromise is to be made among the following parameters, 1) Profitability 2) Liquidity3) Safety4)

Liquidity Measurement: For measuring the liquidity of financial institution following parameters are used,1) Net working capital = Current Assets – Current Liabilities

= CA - CL Decision: If the result of the above formula is positive (+) then it means that the organization has liquidity to some extend.

2) Current Ratio = Current Asset ÷ Current Liabilities = CA / CL

Decision: Industry average = 2 : 13) Quick ratio or Acid test = (Total Current Asset – inventory) ÷ (Total Current Liabilities) = (TCA – Inventory) ÷ TCL

Decision: Industry average = 1 : 1

Nature of liability in financial institutions *Key words :

1) Cash outlays 2) Timing

Four types of liabilities 1: When cash outlays and timing, both are known. Example: DPS2: When cash outlays is known but timing is unknown. Example: Life insurance.3: When cash outlays is unknown but timing is known. Example: DPS@ different rate4: When cash outlays and timing, both are unknown. Example: Automobile insurance.

Profitability Ratio analysis for Financial institutions1. ROA = [ Profit after tax / Total assets ] x 1002. ROE = [ Profit after tax / Total Equity ] x 100

Financial innovation :The process of bringing changes in the product line, operating procedures, regulation guideline for the financial institution is called financial innovation.Example: Introduction of factory.

Asset securitization: The process of introducing the securities backed by the assets of a financial institution is called assts securitization.The process in which the financial institution pulls its assets and issues securities backed by those assets is called assets securitization.For asset securitization prior permeation is to be taken from the central bank. In this process more than one organization can take part together.

National Bank LimitedBalance Sheet as at 31 December 2006

2006PROPERTY AND ASSETS Taka

CashCash in hand (including foreign currencies) 717,820,399 Balances with Bangladesh Bank and its agent bank (s) 2,408,857,773 (including foreign currencies) 3,126,678,172

Balances with other Banks and Financial InstitutionsIn Bangladesh 1,174,661,533 Outside Bangladesh 243,451,390

1,418,112,923

Money at call and short notice 1,210,000,000

Investments 5,730,384,026 Government 1,286,674,335 Others 4,443,709,691

Loans and advancesLoans, cash credits, overdrafts, etc. 29,619,598,166 Bills purchased & discounted 3,090,077,784

32,709,675,950

Fixed assets including land, buildings, furniture and fixtures 1,627,288,541 Other assets 973,904,622 Non-banking assets - TOTAL ASSETS 46,796,044,234

CAPITAL AND LIABILITIESBorrowings from Other Banks, Financial Institutions and Agent 678,543,199

Deposits and other accounts: Current Deposits and other accounts, etc 6,178,409,300 Bills payable 665,728,459 Savings Bank Deposits 10,023,258,132 Fixed Deposits 15,502,105,700 Term Deposits 7,965,541,733 Bearer Certificates of Deposits 15,825,000

40,350,868,324 Other liabilities 2,492,373,280 TOTAL LIABILITIES 43,521,784,803 Shareholders' EquityShare CapitalIssued, subscribed and fully paid up capital 805,471,524 Statutory reserve 806,240,084 General reserve 482,723,327 Other reserve 770,353,375 Profit and loss account-Retained Earning 409,471,121 TOTAL SHAREHOLDERS' EQUITY 3,274,259,431 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 46,796,044,234

Continued....

2006Note Taka

OFF BALANCE SHEET ITEMS:

Contingent LiabilitiesAcceptances and endorsements - Letters of Guarantees 3,548,941,816 Irrevocable letters of credit 12,513,112,183 Bills for collection 3,053,071,910 Other liabilities (Bad & Loss) -

19,115,125,909 Other Contingent LiabilitiesValue of Bangladesh Sanchaya Patra on hand 622,629,000 Value of travelers' cheques on hand -

622,629,000 Total Contingent Liabilities 19,737,754,909

Other commitmentsLease rental commitments - Documentary Credits and short term trade -related transactions - Forward assets purchased and forward deposits placed - Undrawn note issuance and revolving facilities - Undrawn formal standby facilities, credit lines and other commitments - Spot and forward foreign exchange rate contracts - Other exchange contracts -

- Claims against the Bank not acknowledged as debt -

- Total off Balance Sheet items 19,737,754,909